Welcome to the 2008 NC-CCIM Triangle Market Forecast

Welcome to the 2008 NC-CCIM Triangle Market Forecast

Triangle Office Market Thomas “Skip” Hill, CCIM Vice President, Raleigh Highwoods Properties, Inc.

Wall Street vs. Main Street “What became clear after only a few sessions was a marked difference from the doom and gloom we hear about to what is actually happening at property level. A large number of CEO’s, across all property types and the world, have not yet seen a significant slowdown or marked decrease in rents or occupancies. The CEO’s are likely describing what they are seeing and however, the reality is that weaker conditions are likely or the horizon. ”

Five Emerging Themes 1. Real estate fundamentals are not yet indicative of current economic uncertainty/weakness (national perspective) 2. Cap rate trajectory is unclear 3. Development has shifted from a source of growth to a source of risk 4. Valuations and the impact of financial services weakness remains uncertain 5. Liquidity is king

Highwoods Triangle Division Office Profile • • • 5 M SF owned, leased and managed Over 500 tenants Mixture of Class A/Class B properties 91. 5% HIW occupancy vs. 87. 1% Triangle occupancy (as of 12/31/07) Dispositions 1. 2 M SF +/- (2004 – present) Development 900 K SF +/- (2004 - present) Joint venture and wholly-owned facilities 200 acres land holdings (develop approx. 2 M SF of office) Selectively searching for acquisitions

Skip’s Top Ten Expectations Triangle Office Market for 2008 10. New office developments will slow, but not stop 9. Demand will slow, but will remain steady 8. Triangle will continue to enjoy regional recession “insulation” (not “immunity”) 7. Government and universities to have significant impact on real estate development 6. Rental rates remain flat in 2008 but increase in 2009 -2010 5. Free rent/concessions will continue throughout the year 4. New office developers less likely to enter Triangle 3. Continued trends for mixed-use/densification 2. “Wait and See” year with slow progress for Triangle 1. Tar Heels take the Blue Devils in the finals of NCAA

Triangle Industrial/Flex Market Ed Brown, CCIM, SIOR NAI Carolantic Realty

The Triangle Industrial/Flex Market

The Triangle Industrial/Flex Market

Triangle Retail Market Vijay Shah, CCIM Rivercrest Realty Investors

The Triangle Retail Market New Proposed Mixed-Use Centers PROJECT LOCATION Park West Morrisville Village North Hills Raleigh Expansion East 54 Chapel Hill Buckhorn Village Chapel Hill Plantation Raleigh Point Waverly Cary Place Parkside Cary Town Commons Broadstone Apex Station AVAILABLE SF PSF RETAIL TICAM ADDRESS ANCHOR TYPE DEVELOPER NOTES Office 300, 000 Low 30's $5. 00 Cary Pkwy and (not yet Mixed Use Casto/1 st Retail 700, 000 NC 54 announced) Carolina 145, 000 Retail low to mid still being Six Forks Rd. not disclosing Mixed Use Kane Realty 40% Pre Leased 275, 000 Office $30's formulated and 440 at this time Renaissance 140 Hotel Raleigh to come Rooms 400 Residential Units and 200 CRCC units 60, 000 $29 $4. 51 Hwy 54 $ 15 (not yet Mixed Use East/West 501 Chapel Hill, announced) Partners NC 1. 1 million early Interstate 40 -85 Wish list: Ikea Mall/Powe East/West stages and Buckhorn and Cabela's r Center Partners & Road on the Outdoor and Mixed Fugo western edge of Furniture Use the county. 391, 132 $23 -$25 $3. 40 US Hwy 1 and BJ's, Circuit Retail Cypress 540 City, Marshalls, Equities Lots of Dollar Tree Vacancy 170, 000 $32 -$36 $6. 50 Kildaire Farm Whole Foods Mixed use Zapolski & and Tryon (55, 000 sf) Rudd 700, 000 Cary/RTP (not yet Mixed use Kite Fall 09 announced) Development 350, 000 Rt 55 and Hwy 1 Super Wal. Mart Mixed use Kite Development

The Triangle Retail Market New Retailers Retailer Type Location Sq. footage Other Badcock Furniture Garner 20, 000 sf Trader Joe's Grocery Chapel Hill, Cary 20, 000 sf Fresh Market Expansion Grocery Chapel Hill, Cary 18 -25, 000 sf Bloom Grocery Raleigh, Wake Forest 38 -40, 000 sf Similar to Whole Foods, subsidiary of Food Lion HH Gregg Appliance & Electronics Raleigh 28 -35, 000 sf Martin & Osa Clothing Crabtree Valley Mall - Raleigh Spin-off of American Eagle Bankruptcies Hollywood Video/ Movie Gallery Friedman's Jewelers The Sharper Image Zales Jewelers New Restaurants Fleming's Prime Steakhouse Crabtree Valley Mall The Original Soup. Man Fast Casual Raleigh and Durham Franchise Crabtree Valley Mall Mc. Cormick & Schmick's Seafood Lillian Vernon

The Triangle Retail Market Triangle Retail Supply and Demand Trends Triangle Retail Vacancy Trends Triangle Average Retail Rents by Submarket

Triangle Multifamily Market Jim Scofield, SIOR JBMRA/Sperry Van Ness International

The Triangle Apartment Market 90, 878 Units Property Age Breakdown

Apartment Operations Vacancy by Submarket 16. 00% 14. 00% 12. 00% 10. 00% 8. 00% 6. 00% 4. 00% 2. 00% 0. 00% 12. 00% 10. 00% 8. 00% 6. 00% 4. 00% 2. 00% pe x ha pe N or l. H th ill N D or ur th ha w m es t. W So ut ak h e D ur ha N or m th W ak e C N ar or bo th ea ro So st ut W hw a es ke t. W So ak ut e h W ak e /A C lle vi ris ill or H C ar Triangle Wake Durham Orange y/ M Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 sb or ou gh 0. 00% Concessions % Annual Rent Growth $9, 600/Unit Average Annual Rent ($800/mo) $3, 250/Unit Average Annual Expenses

Apartment Development Completions 2007 Completions 2008 Under Construction & Planned Vacancy Concessions

Apartment Investments Average CAP Rate Total Apartment Sales $/Unit National Averages

INVESTMENTS Salvatore “Sam” Di. Franco, CCIM, SIOR, CEA The One Source for Commercial Real Estate

Wanted: Value add, income producing, upside potential with credit tenants, under market rental rates in great locations? Instead of: Over priced, empty / partially leased, under performing junk…. . There are not any fire sales for good commercial properties

2007 Record Year for Triangle Real Estate • • Office Multi Family Retail Industrial Total Increase of 49% over 2006 $ 977 M $ 991 M $ 620 M $ 483 M $ 3, 071 B

2008 Outlook • Debt market has changed the players • Supply and demand • Buyers’ capacity and sellers’ expectations to reset • Cap rates no longer compressing • 1031 / New administration? • More fundamental and less financial engineering

Commercial Real Estate Fundamentals Still Healthy • Credit concerns rooted in the sub-prime residential problems • Commercial delinquencies < 1% • Cash and equity buyers will benefit • Foreign investors (4 X) active in US • Quality, location and operations will dictate value

STOP: Reading the newspapers STOP: Watching the business news START: Enjoying the resiliency of the Triangle market and all it has to offer UNDERSTAND CRE continues to outperform the stock market and remains an attractive investment vehicle due to its stability and opportunity for diversification

Thank You!