First QuarterMarket Review

COLLIERS IDAHO

BOISE NAMPA

2012

755 WEST FRONT STREET, SUITE 300 BOISE, IDAHO 83702 208 345 9000 www.colliers.com

1

ADA and CANYON COUNTY SUBMARKETS

VACANCY RATE vs BOISE MSA UNEMPLOYMENT RATE25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Industrial

Unemployment Rate

Office

Retail

MY 2006 YE 2006 MY 2007 YE 2007 MY 2008 YE 2008 MY 2009 YE 2009 MY 2010 YE 2010 MY 2011 YE 2011 Q1 2012

OFFICE Q1 REVIEW

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OFFICE VACANCY & ASKING RATES2006 - to Present

Asking RateVacancy

$14.00

$14.50

$15.00

$15.50

$16.00

$16.50

$17.00

$17.50

$18.00

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

MY

06

YE

06

MY

07

YE

07

MY

08

YE

08

MY

09

YE

09

MY

10

YE

10

MY

11

YE

11

Q1

12

LEASE RATES

VACANCY RATES

YEAYEAR QUARTEQUARTERChange from lastChange from last:

OFFICE TRENDSOFFICE TRENDS Q1 2012

LEASE TRANSACTION DATLEASE TRANSACTION DATAA Q1 2012Meridian 20,297 SF$21.57 $21.57 FSFS class A

Southwest 1,982 SF$15.81 $15.81 FSEFSEJ class ANampa 1,622 SF$14.32 $14.32 MGMG class B

Central Bench 2,451 SF$9.00 $9.00 FSEFSEJ class BDowntown 2,239 SF$19.52 $19.52 FSEFSEJ class A

Overview

The theme of the offi ce market has so far been positive in 2012, with varying activity and movement in vacancy and asking rates in different submarkets. Leasing activity has been scattered across the Treasure Valley, but vacancy as a whole has declined to its lowest levels since 2009, currently sitting at 16.5%, down from 17.2% at the end of 2011.

Vacancy rates showed varying trends based on submarkets:

Meridian showed very positive movement, with vacancy decreasing to 18.7%, down from 21.4% at year end 2011.

The Eagle Capital building was the strongest single building in terms of leases executed, with four separate transactions totaling 8,553 square feet leased.

Vacancy downtown has decreased in the beginning of 2012, sitting currently at 11.6%, down from 12.4% three months ago.

Average asking rates market-wide declined to $15.58 full service, a down-turn from $15.79 full service at the same point at the end of 2011. Quality space in prime locations such as Downtown Boise and Meridian is becoming scarce, as the Treasure Valley continues to fi eld national tenant interest, driven strongly by smaller leases downtown, and large call center space in Meridian.

Asking Rates

Downtown Boise average rates rose to $15.64 full service from $15.52 full service at year end, with Class A rates moving up to an average of $19.08 full service, from $18.80 full service in the same time period.

There were also signifi cant projects completed this quarter. A 16,000 square foot offi ce building on the corner of 2nd and Broadway in Meridian, owned and occupied by COMPASS and Valley Regional Transit was recently completed. Also completed was the 120,000 square foot anchor at the new St. Luke’s Nampa Medical Plaza, to be occupied largely by Saltzer Medical Group, with an emergency room and imaging center moving in over the next couple of months.

Meridian overall average rates rose to $18.39 full service from $18.08 full service, as Meridian continues to be a prime target for tenants such

Several submarkets did have decreased asking rates, includ-ing Canyon County (down $.34 PSF to $13.75 full service), the Southwest submarket (down $.58 PSF to $17.37 full service), and the Southeast submarket (down $.68 PSF to $17.04 full service).

as call centers needing large offi ce space, not available Downtown with the exception of the 8th & Main building currently under con-struction. These rates are moving closer to asking rates in prime locations, providing owners optimism moving forward.

Looking Forward

Looking ahead, Colliers expects vacancy rates to decrease which will cause asking rates to correspondingly rise. Tertiary markets such as the Southeast and Southwest contain quality offi ce space not in the most desirable locations, and tenants will begin driving down vacancy and driving up asking rates in those submarkets. Speculative development will remain low, especially in the downtown Boise area as developers will sit on the sidelines to see how well the 8th & Main building is received in terms of leasing activity.

RETAIL Q1 REVIEW

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Vacancy throughout the valley has decreased by .5% in 2012 to 11.8%, and rents have begun to rise, moving from $13.25 NNN PSF aver-age to $13.63 NNN PSF. Along with this positive news for landlords, tenants remain in a friendly market as well, with average rental rates well below the national average of $15.51 NNN PSF.

Overview

The retail sector carried positive momentum over from the end of last year and into the beginning of 2012. With rents still favorable for tenants, national and local retailers have continued to look at the Treasure Valley for both expansion and market entry.

RETAIL VACANCY & ASKING RATES2006 - to Present

Asking RateVacancy

$10.00

$11.00

$12.00

$13.00

$14.00

$15.00

$16.00

$17.00

$18.00

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

MY

06

YE

06

MY

07

YE

07

MY

08

YE

08

MY

09

YE

09

MY

10

YE

10

MY

11

YE

11

Q1

12

LEASE RATES

VACANCY RATES

YEAYEAR QUARTEQUARTERChange from lastChange from last:

RETAIL TRENDSRETAIL TRENDS Q1 2012

LEASE TRANSACTION DATLEASE TRANSACTION DATAA Q1 2012

Meridian 1,250 SF$17.50$17.50 NNNNNUnanchored

Shops

West Bench 20,522 SF$11.00$11.00 NNNNN Anchor

Downtown 2,770 SF$12.00$12.00 NNNNN Mixed Use

West Bench 1,600 SF$11.99$11.99 NNNNNAnchored

Shops

Quick-Serve Restaurants continue to expand, including Jimmy John’s, Panda Express, Chipotle, Chick fi l’A, and Baja Fresh. Wal-Mart’s Neighborhood Market concept is the newest grocer to announce entry to the market. The Neighborhood Market is a small scale version of their 200,000 SF Supercenter, measuring in at approximately 40,000 SF. It is rumored that up to nine of these smaller scale Wal-Marts will be entering our market.

In contrast to these Neighborhood Market low priced stores, upscale grocery stores such as Rosauers, Whole Foods, and Vitamin Cottages’ Natural Grocers have either opened or are planned. Vitamin Cottages’ Natural Grocers recently leased and opened a 20,526 square foot store on Milwaukee St., while construction on Whole Foods on Myrtle and Broadway in downtown Boise is underway. Rosauers opened at the end of March on Eagle and Ustick.

Key Transactions

Middleton saw two signifi cant lease transactions at Middleton Village Shopping center; a 9,633 square foot Family Dollar and an 12,043 SF Kings, a variety market.

The West Bench and Meridian submarkets combined to account for about 30% of leasing activity market wide in terms of leases, led by the aforementioned 20,526 SF Natural Grocers lease. Space on high traffi c streets such as Fairview, Milwaukee, Eagle, and Chinden saw the most interest, and quality space on these high traffi c areas is scarce with around 3% vacancy. CenterCal’s Meridian Towne Center on Eagle and Fairview will be a welcome addition to tenants looking to secure quality a location in a tight market. Tenants include PetCo, TJ Maxx, Nike Outlet, Gordman’s, Gap Outlet, and Chick Fil’ A.

Asking Rates

Average asking rates throughout Ada County rose to $13.72 NNN (up from $13.25 NNN year end 2011), and Canyon County saw an increase in rates to $12.76 NNN (up from $11.79 NNN year end 2011).These two upswings have brought rates throughout the valley up from $13.25 to $13.63, the highest they’ve been in nearly two years. Average asking rate decreases of note included the West Bench (decreased $.14 to $14.00 NNN), and the Central Bench (decreased $.7 to $11.94 NNN).

Looking Forward

Looking forward, positive trends will continue at a moderate rate. Rents should increase as quality space runs low and tenant activity expands. This increased activity will also bring the vacancy rate down. Speculative development will begin to take form as leasable square footage continues to dwindle. Development ground such as the recently listed Shadow Hills Square land at State and Glenwood should garner high interest, along with other strategically located parcels where lease opportunities are scarce.

INDUSTRIAL Q1 REVIEW

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As believed by landlords in the Treasure Valley, industrial tenancy and asking rates have bottomed out, as owners await for the market to recover. There are positive notes from this quarter that suggest momentum may be turning in favor of landlords.

Overview

The industrial market remains stabilized, with total vacancy inching slightly up to 11.6% in the fi rst quarter of 2012, up from 11.4% at the end of 2011. Asking rates remain fl at at $.48 NNN average, where they have been since the end of 2010.

INDUSTRIAL VACANCY & ASKING RATES2006 - to Present

Asking RateVacancy

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

YE

06

MY

07

YE

07

MY

08

YE

08

MY

09

YE

09

MY

10

YE

10

MY

11

YE

11

Q1

12

LEASE RATES

VACANCY RATES

YEAYEAR QUARTEQUARTERChange from lastChange from last:

INDUSTRIAL TRENDSINDUSTRIAL TRENDS Q1 2012

LEASE TRANSACTION DATLEASE TRANSACTION DATAA Q1 2012Caldwell 16,475 SF$.32 $.32 NNNNNN

Southwest 6,083 SF$.42$.42 NNNNNN

Meridian 4,152 SF$.27$.27 NNNNNN

West Bench 1,100 SF$.51$.51 NNNNNN

A metal manufacturer based out of Philadelphia recently purchased 12.7 acres of industrial land in Caldwell. Once operational, the new plant should bring about 100 jobs to the area. The Lactalis Cheese plant east of Nampa announced a 61,300 square foot expansion that is scheduled to be operating in 2013, and add approximately 70 additional jobs to the area. Republic Services recently announced a new recycling facility will be built at Ten Mile and Franklin in Meridian, adding temporary construction jobs and 15 permanent jobs.

Key Transactions

Johnson Thermal Systems leased 16,475 square feet of industrial space in Caldwell Aardvark Entertainment leased 10,000 square feet on Franklin Avenue in BoisePilot Freight leased 6,083 square feet of space in Boise

Asking Rates

Meridian is a desirable industrial location since it is centrally located throughout the valley, and this interest has resulted in an increase to

The Southeast submarket ended the quarter down $.04 cents from December at $.46 NNN PSF.

The Central Bench decreased $.04 cents to end the fi rst quarter of 2012 at $.56 NNN. Other submarkets showing small decreases included Eagle, Garden City, and the West Bench.

Vacancy

Several submarkets which showed modest decreases in vacancy included the Airport (decreased 1.1% to 14.2%), Garden City (de-creased .8% to 11.6%) and Meridian (decreased .3% to 13.4%).Canyon County, which comprises approximately 39% of the indus-trial square feet Colliers tracks, showed a rise in vacancy to 9.8% from 9.5% at the end of 2011.Southwest submarket showed the greatest rise in vacancy, ending the quarter at 21.4%, up from 19.5% at the end of 2011.

Looking Forward

Expect the industrial market to remain active, with tenant concessions tightening up, and rates remaining fl at in the short term. Long term, look for vacancy to trend down at a slow pace, as beyond owner-user construction, there is no speculative development in the valley and new and expanding tenants will begin to absorb existing product. Large, Class A warehouse space is low, so look for land owners to leverage their property towards meeting demand bulk warehouse tenants with new construction in the next 18-24 months. Lease rates should remain the same until enough absorption has taken place throughout the market owners can start to increase asking prices.

$.50 NNN PSF asking rates, from $.48 NNN PSF in December.

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Q1 STATISTICS

2012 Q1 OFFICE SUBMARKET STATISTICS AT A GLANCE

Building/Center

Count

Inventory

(SF)

Direct

Vacant

(SF)

Sublease

Vacant

(SF)

Total

Vacant

(SF)

Vacancy

Rate

Avg. Asking

Rates

(NNN Annual)Submarket

Central Bench 99 1,847,685 331,351 0 331,351 17.9% $12.65Downtown 76 3,696,563 401,563 26,574 428,137 11.6% $15.64

Downtown Periphery 76 1,891,397 189,172 11,587 200,759 10.6% $17.73Eagle 59 725,538 200,945 0 200,945 27.7% $14.12

Meridian 136 2,400,860 417,819 31,426 449,245 18.7% $18.39North End / Northwes t

Garden City 44 556,468 103,125 0 103,125 18.5% $16.37

S outheas t 50 1,352,616 226,751 0 226,751 16.8% $17.04S outhwes t 50 872,090 178,028 0 178,028 20.4% $17.37

W es t Bench 144 2,719,396 632,115 16,260 648,375 23.8% $12.77Canyon County 144 1,657,794 163,408 0 163,408 9.9% $13.75All S ubmarkets 878 17,720,407 2,844,277 85,847 2,930,124 16.5% $15.58

2012 Q1 INDUSTRIAL SUBMARKET STATISTICS AT A GLANCE

Building

Count

Inventory

(SF)

Direct

Vacant

(SF)

Sublease

Vacant

(SF)

Total

Vacant

(SF)

Vacancy

Rate

Avg. Asking

Rates

(NNN Monthly)Submarket

Airport 88 3,308,691 442,644 25,865 468,509 14.2% $0.44Central Bench 68 1,934,376 274,006 0 274,006 14.2% $0.56

Downtown Periphery 34 771,672 32,097 0 32,097 4.2% $0.45Eagle 10 289,132 24,838 0 24,838 8.6% $0.48

Garden City 107 1,633,826 189,992 0 189,992 11.6% $0.43Meridian 138 3,314,897 444,402 0 444,402 13.4% $0.50Southeast 77 4,589,294 203,847 9,690 213,537 4.7% $0.46Southwest 85 1,451,879 268,528 41,814 310,342 21.4% $0.47

West Bench 149 3,802,392 671,186 52,920 724,106 19.0% $0.47Canyon County 340 13,744,702 1,325,632 25,689 1,351,321 9.8% $0.43Market Tota l 1,096 34,840,861 3,877,172 155,978 4,033,150 11.6% $0.48

2012 Q1 RETAIL SUBMARKET STATISTICS AT A GLANCE

Building/Center

Count

Inventory

(SF)

Direct

Vacant

(SF)

Sublease

Vacant

(SF)

Total

Vacant

(SF)

Vacancy

Rate

Avg. Asking

Rates

(NNN Annual)Submarket

Central Bench 45 1,352,066 143,220 0 143,220 10.6% $11.94Eagle 24 769,625 102,117 0 102,117 13.3% $15.27

Garden City 22 730,917 56,500 0 56,500 7.7% $10.13Meridian 87 3,352,716 203,861 0 203,861 6.1% $15.51North End 5 156,529 26,176 0 26,176 16.7% $15.90Northwest 27 577,280 95,703 7390 103,093 17.9% $11.91Southeast 40 1,348,634 221,872 0 221,872 16.5% $15.46Southwest 32 1,496,001 130,418 8820 139,238 9.3% $13.39

West Bench 85 3,425,273 435,561 1431 436,992 12.8% $14.00Canyon County 160 5,313,417 751,201 6500 757,701 14.3% $12.76Market Tota l 527 18,522,458 2,166,629 24,141 2,190,770 11.8% $13.63

COLLIERS IDAHO

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