23rd Annual Triangle Commercial Real Estate Conference
January 17, 2008, RBC Center, Raleigh, NC

The Art of Progress

Chairman's Report:
sstroud@naicarolantic.com

The Art of Progress was the theme of this year's 23rd Annual Triangle Commercial Real Estate Conference, presented by NAI Carolantic Realty a few weeks ago to over 1,400 invited guests at the RBC Center in Raleigh. A detailed picture was painted on what makes this region so attractive and how to ensure great progress for years to come.

We were fortunate to have as our guest speakers, Dr. Kenneth Peacock, Chancellor of Appalachian State University and John Davis, President of NCFREE. Dr. Peacock commented on how the success of North Carolina is vitally dependent upon the strength of our college and university system. Mr. Davis provided a perspective on the decline in business allies in the North Carolina legislature, and offered "Ten Keys to Political Success for North Carolina Business." In addition, he gave his perspective on the governor's race and discussed the most influential trends in North Carolina politics, including the growing clout of union money, that will determine who will win statewide and legislative races during 2008. Mr. Davis is president of the non-partisan political research organization NCFREE and editor and analyst for the reference book, Almanac of North Carolina Politics.

Chancellor Peacock and
Jimmy Barnes with 3 NCAA
Football Trophies

At the conclusion of the Conference, guests were asked to complete a short questionnaire regarding their view of economic conditions in the US as well as in North Carolina. They were also asked if a vote were taken today for President and Governor, who would they select. The results are in and here is a reflection of the NAI Carolantic attendees:

Approximately 30% of the NAI Carolantic audience has a favorable opinion of the economic conditions in the US today. According to John Davis, the same question was asked by Gallup in a January 4-6 survey of national public opinion. The results were practically the same, with 32% saying either excellent or good. Seventy-seven percent of Americans are saying that economic conditions are getting worse, the lowest since Gallup began asking the question in the early 1990s. The reasons are likely the sub-prime mortgage crisis, increase cost of health care, rising gas prices, and considerable buzz about the potential for a recession.

Left to Right: Eric Stroud Jr., Jimmy Barnes,
Dr. Ken Peacock, Steve Stroud, and John Davis

When asked about economic conditions in North Carolina, the NAI Carolantic audience is still high on economic conditions in the state with nearly 70% saying Excellent or Good... well over double the percentage of attendees who had a positive opinion of the national economy.

When asked about the US Presidential election, the results were mixed. A total of 66.82% of the respondents voted for one of the Republican nominees while 33.18% voted for a Democrat. Among women only, 44.4% voted for a Democrat and 55.6% voted for a Republican. Among Democratic voters only, Obama garnered the most support with 50.72% while the Republicans supported McCain with a plurality of 40.28% of the vote.

If the election for Governor of NC were held today, who would get your vote? A total of 37.62% voted for a Republican candidate, 40% voted for one of the Democrats and 22.38% were undecided. Among Democratic voters only, 67.86% voted for Richard Moore. On the Republican side, 50.63% voted for Fred Smith. Among women voters only, 48.8% voted Democrat and 28.82% voted Republican, and 22.2% were undecided.

Should we limit the NC General Assembly session lengths to keep a part-time citizens' legislature, or is a full-time professional legislature in the best interest of North Carolina? Results: part-time citizens' legislature 64.82%; full-time professional legislature 35.18%.

Finally, in rating the information presented at the 23rd Annual Triangle Commercial Real Estate Conference, 97% of the respondents rated the conference as either Excellent or Good.

As in past conferences now spanning over two decades, we are proud that NAI Carolantic has been a contributing partner to the growth of the Triangle for over 35 years. We know there is a definite art to progress and we have been committed to hold our conference to provide area leaders with the statistical tools and considerations essential to shaping the community in an intelligent and informed manner.

As noted by one of our sponsors, Knowledge is Power and we want to make sure we do our part to help keep the Triangle number one in the minds of business owners around the world.

Broker Profile:

Mark Everett, Broker
meverett@naicarolantic.com

When Mr. Everett joined Carolantic in 2001, he not only brought a year of brokerage and appraisal experience with him, but also more than ten years of commercial banking experience. This combination enables Mr. Everett to go that extra mile in assisting his clients in a variety of unique financial situations such as 1031 tax free exchange opportunities. He served six years as a member of the City of Raleigh Planning Commission and held the Commission Chairmanship from June 2005-June 2006. Mr. Everett was awarded a BA in Accounting from NC State University.

NAI Carolantic Market Review & Forecast

Presented by Jimmy Barnes, SIOR, President

jbarnes@naicarolantic.com

NAI Carolantic President Jimmy Barnes reviewed the past year's commercial real estate landscape and offered Carolantic's forecast for 2008. "2007 was another solid year for commercial real estate in our region," said Barnes. "Over 5.5 million square feet of commercial space was absorbed and vacancy trended down for the office and multipurpose categories. Only the shopping center category experienced a slight rise in vacancy over 2006." Barnes also indicated the Triangle had a solid year of job growth with over 20,000 new jobs added in 2007.

As expected and predicted, vacancy dropped in most submarkets, reported Barnes, with rental rates rising, development heating up, and investment capital and those providing the capital flooding the market. Barnes stated, however, that we need continued strong absorption in the office market in 2008 to keep up with the approximately three million square feet of construction currently underway.

2008 Forecast and Category Summaries:
Highlights of Mr. Barnes's commercial real estate presentation:

2008 Investor Outlook for Land:

• Continued interest for office land
• Large residential tracts will not see as many buyers
• Strong demand for hotel land
• Retail land still active
• Apartment sites continue to be sought after

2008 Investor Outlook for Income Property:

• Investors are proceeding with caution
• Capital still flows into the market
• Some constraints due to equity requirements
• Credit crunch, minimal lease rate growth and questionable economy lead to a slight increase in cap rates
• NNN leases with strong credit tenants, apartments and mixed-use assets become more attractive to investors

Some real estate economists give this advice to investors looking to buy property in '08: "Steer clear of markets that were hit hardest by the housing downturn." Raleigh ranked 9th in the economist's list for markets to buy real estate.

Summary:

NAI Carolantic's research showed a drop in area-wide vacancy rates in the multipurpose category from a high of 19% in 2003 to 11% for year-end 2007. This category includes warehouse, industrial and flex space. From 18% vacancy in 2003 for the office market, now down to 13% in 2007, this market has recovered. The shopping center market experienced a rise in vacancy after holding steady at 5% vacancy for four years in a row. Absorption levels are improving for the multipurpose category rising two points to 4% in 2007. The office category absorption level dropped from 5% to 4% in 2007 and the shopping center category experienced a slight drop to 1% for 2007.

For additional information, please click here.

To request a DVD of the 23rd Annual Triangle Commercial Real Estate Conference, please email: questions@naicarolantic.com and one will be sent to you at no charge.

The Outlook for Commercial Real Estate
Dr. Peter Linneman, NAI Global Economist

• The markets should be fine, except in New York City and London where there is a lot of uncertainty. We'll see solid but not spectacular absorption over the next 12 months.
• Companies in New York and London are going to reduce staff in the near term and they have no urgency to make a decision to take on more space. Rents can continue to go up due to short supply.
• Not much is trading. Property that is selling is struck at prices 10-15% lower in terms of cap rates than if they were done in Q1 of 2007.
• The rest of the country should do fine until 2009-2010. The credit markets should come back into line, but we are still 10-12 months away from normality.
• The past year was the time for debt. The next 6-8 months will be time for equity, a time to work assets. Be cautious of spec development or buying space that has a lot of rollover in 2009-2010.
• The credit crisis could actually help the industry save itself in 2009-2010 by keeping people from stretching themselves too far.

NAI Carolantic's Winning Team

Steve Stroud, SIOR
sstroud@naicarolantic.com
Presented by the Triangle Business Journal at their Annual Space Awards, Stroud was presented with the first place award for the largest land transaction for representing the buyer in two land transactions totally 413 acres sold for approximately $39 million.

Ed Brown, SIOR, CCIM
ebrown@naicarolantic.com
NAI Global named Ed Brown, to the NAI Global Elite a group comprised of the organizations's top performers and top producers. Brown qualified as a Top Performer at the Silver Elite level based on production in 2007. He was given the award at the NAI Global Convention held in Las Vegas.

Kyle Greer
kgreer@naicarolantic.com
NAI Global named Kyle Greer to the NAI Global Elite, a group comprised of the organizations' top performers and top producers. Greer qualified as a Top Performer based on production in 2007. He was given the award at the NAI Global Convention held in Las Vegas.

Company Profile:

NAI Carolantic is the Raleigh/Research Triangle area's leading commercial real estate firm.

• Eighteen Brokers with an average of ten year's experience
• Full-service Property Management Division
• Experienced Marketing & Research Division

Established in 1972, NAI Carolantic is a member firm of NAI Global, the leading international provider of commercial real estate services and solutions.

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Learn more about NAI Carolantic Realty

NAI Global:

NAI Global is pleased to announce that we are #2 in the Real Estate Forum magazine's top 100 companies in the brokerage, finance, development and ownership arenas. Four general categories were evaluated: number of offices, number of employees, last year's revenue and projected revenues for 2007, plus two that were sector specific.

With over 8,000 real estate professionals in over 375 offices in 55 countries worldwide, NAI Global serves corporate, institutional and government clients through its strategically located offices in major, secondary and tertiary markets.

Learn more about NAI Global