St. Louis Office MarketSt. Louis Office Market

Michael J. Wolken, SIORMichael J. Wolken, SIOR

PrincipalPrincipal

Office CommitteeOffice Committee

Dennis DeSantis, SIORDennis DeSantis, SIORGateway Commercial, Gateway Commercial,

a Cushman & Wakefield a Cushman & Wakefield AllianceAllianceDave Morris, SIORDave Morris, SIOR

Gundaker CommercialGundaker CommercialScott Bazoian, SIOR Scott Bazoian, SIOR

Colliers Turley Colliers Turley Martin TuckerMartin Tucker

Lynn Schenck, SIOR Lynn Schenck, SIOR CB Richard EllisCB Richard Ellis

Office PresentationOffice Presentation

Review 2007 PredictionsReview 2007 Predictions Significant TransactionsSignificant Transactions Tenants in the MarketTenants in the Market Taxes, Tenant Improvements & TrendsTaxes, Tenant Improvements & Trends 2008 Predictions2008 Predictions

2007 Predictions2007 Predictions

Area Absorption 1.35 Million SFArea Absorption 1.35 Million SF Area Vacancy Rate DroppingArea Vacancy Rate Dropping Build-to-Suits and Health CareBuild-to-Suits and Health Care

Good to Great in 2008?Good to Great in 2008?

Large Tenants Moved in 2007Large Tenants Moved in 2007

CityPlace Six140,500 SF

40 West II Building114,000 SF

Large Tenants Moved in 2007Large Tenants Moved in 2007

1881 Pine Street110,00 SF

NorthPark90,000 SF

Large Tenants Considering Options Large Tenants Considering Options in 2008in 2008

Total potential impact – 1,000,000 SF

Tenant by Size RangeTenant by Size Range

48.9%

19.8%

11.3%

3.1%

1.1%

1.8%

14.0%

0% 20% 40% 60%

Up to 2,499 SF

2,500-4,999 SF

5,000-9,999 SF

10,000-24,999 SF

25,000-49,999 SF

50,000-74,999 SF

75,000 SF & Up

Percentage of Tenants

Tenants by Lease ExpirationTenants by Lease Expiration

16.9%

18.1%

9.3%

10.5%

3.2%

6.4%

0% 5% 10% 15% 20%

2009

2010

2011

2012

2013

2014

Percentage of Tenants

Office Employment GrowthOffice Employment Growth

Market Employment Growth Inventory Growth Difference

AtlantaAtlanta 8.9%8.9% 6.3%6.3% 2.6%2.6%

BostonBoston 7.7%7.7% 2.5%2.5% 5.2%5.2%

ChicagoChicago 7.6%7.6% 3.8%3.8% 3.8%3.8%

Dallas/Ft. WorthDallas/Ft. Worth 16.6%16.6% 6.4%6.4% 10.2%10.2%

DenverDenver 8%8% 4.3%4.3% 3.7%3.7%

Los AngelesLos Angeles 8.1%8.1% 2.2%2.2% 5.9%5.9%

New York CityNew York City 8.8%8.8% 1.5%1.5% 7.3%7.3%

Seattle/Puget SoundSeattle/Puget Sound 15%15% 4.4%4.4% 10.6%10.6%

Tampa/St. Tampa/St. PetersburgPetersburg

18.2%18.2% 8.3%8.3% 9.9%9.9%

WashingtonWashington 11.2%11.2% 9%9% 2.2%2.2%

St. Louis 7% 3.8% 3.2%

Vacancy ReportVacancy Report

SubmarketSubmarket All ClassesAll Classes Class AClass A

DowntownDowntown 18.5%18.5% 16.5%16.5%

ClaytonClayton 10%10% 6.5%6.5%

West CountyWest County 8.7%8.7% 6.2%6.2%

North CountyNorth County 17.9%17.9% 9.5%9.5%

South CountySouth County 7.5%7.5% 3.9%3.9%

St. Charles CountySt. Charles County 12%12% 7.2%7.2%

St. Louis MetroSt. Louis Metro 12%12% 9.9%9.9%

Vacancy ReportVacancy Report

2007 Absorption 1.4 Million SF2007 Absorption 1.4 Million SF 5.4 Million SF Still Vacant5.4 Million SF Still Vacant

2008 New Construction2008 New Construction

The Meridian at Brentwood180,000 SF

Lakeside Crossing Office One127,000 SF

2008 New Construction2008 New Construction

Central Park Square I100,000 SF

825 Maryville Office75,000 SF

580,000 square feet

Potential Major Office Potential Major Office Developments 2008 and BeyondDevelopments 2008 and Beyond

Ballpark VillageBallpark VillageLakeside Crossing 2Lakeside Crossing 2

Highlands IIHighlands II

Potential Clayton DevelopmentsPotential Clayton Developments

Centene SiteCentene Site Apex Oil SiteApex Oil Site Koman PropertiesKoman Properties Montgomery BankMontgomery Bank

Conrad PropertiesConrad Properties Orchard DevelopmentOrchard Development MehlmanMehlman Brown ShoeBrown Shoe

Potential new office – 1.5 – 2 million square feet

Taxes – T.I. and TrendsTaxes – T.I. and Trends

A major component of office building operating expenses is real estate A major component of office building operating expenses is real estate taxes. As a percent of the total, tenants are now paying 30% plus, including taxes. As a percent of the total, tenants are now paying 30% plus, including the surcharge. It is one of the items that erodes the value.the surcharge. It is one of the items that erodes the value.

Building Year Built 2007 Tax PSF

Bemiston TowerBemiston Tower 19821982 $640,532$640,532 $3.68$3.68

Pierre Laclede I & IIPierre Laclede I & II 1965-701965-70 $1,908,877$1,908,877 $3.30$3.30

Old Town Exec CtrOld Town Exec Ctr 1983-891983-89 $682,223$682,223 $3.69$3.69

The Plaza in ClaytonThe Plaza in Clayton 20012001 $1,900,000$1,900,000 $5.84$5.84

Five years ago, the typical tenant finish was $15 to $20 per square Five years ago, the typical tenant finish was $15 to $20 per square foot. We are now heading to $25 to $35 per square foot for new foot. We are now heading to $25 to $35 per square foot for new Class A buildings.Class A buildings.

2008 Predictions2008 Predictions

The four new projects currently under The four new projects currently under construction will be significantly leased at the construction will be significantly leased at the end of 2008.end of 2008.

The financing market will have a profound The financing market will have a profound negative effect on new office construction.negative effect on new office construction.

Speculative office is a distant memory.Speculative office is a distant memory. Barring a recession, all Classes of office Barring a recession, all Classes of office

buildings should show a decrease in their buildings should show a decrease in their vacancy.vacancy.

GoodGood

GreatGreat

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Thank YouThank You