(425) 974-4000 www.pacif ic-re.com SEATTLE | BELLEVUE | TACOMA | PORTLAND

Eastside & Northend Industrial/Flex Market

2Q’11 PUGET SOUND MARKET REPORT

The Eastside and Northend industrial markets continue to show

signs of slow stabilization.

Although Eastside vacancy rates improved slightly over first

quarter they continue to remain stubbornly high compared to

last year.

The Northend market is following a similar path, with only

slight improvements over one year ago.

The moderate increase in Northend activity can be attributed

primarily to renewed Boeing production. The Eastside market

sector will begin to realize larger gains when there is significant

improvement in the residential, commercial and building trade

industries; however, technology and small manufacturing

companies are showing signs of strength.

The flex markets are still weak, with both the Eastside and

Northend markets experiencing only a slight improvement over

the last quarter. Absorption has been moving into positive

territory, which is a welcomed trend in this sluggish market

sector.

Looking forward to the third and fourth quarters of 2011, the

Northend market should see increased tenant activity. On the

shoulders of last quarter’s tanker contract awarded to Boeing

the aerospace giant has also announced a ramp up in airplane

manufacturing across the board. The surge in production will

have a positive impact on those companies that are located

nearby and provide support services to this manufacturing

powerhouse.

In late June the Port of Everett celebrated its 1,000th barge

carrying aerospace parts for the 747, 767 and 777 models, a sign

that Boeing is on a steady course to raise its plane output.

As tenant demand increases and space options decrease, the

Northend should see a rise in rents and decline in concessions

to balance the supply to demand ratio.

Similarly, the Eastside is poised for improving tenant activity

as the economy continues to gain momentum. Several large

tenants, including Saltworks, are expanding operations in the

Woodinville market, which will help contribute to positive

growth in that submarket.

EASTSIDE AND NORTHEND INDUSTRIAL/FLEX SUBMARKETS MAP

STEADY MARKET

5

5

405

SEATTLEBELLEVUE

90

520

WestSeattle

EVERETT

MONROE

LYNNWOOD

BOTHELL

WOODINVILLE

ISSAQUAH

BELLEVUE

KIRKLAND REDMOND

MU

KILT

EO

Lake

Was

hing

ton

Pug

et S

ound

LEGEND

Eastside Industrial Submarket

Northend Industrial Submarket

(425) 974-4000 www.pacif ic-re.com SEATTLE | BELLEVUE | TACOMA | PORTLAND

Eastside and Northend Industrial Market

2Q’11 PUGET SOUND MARKET REPORT

Market Area 2Q’10 3Q’10 4Q’10 2010 1Q’11 2Q’11

Bothell - (17,096) (2,998) (20,094) (10,000) 7,000

Woodinville 48,213 (60,658) 33,796 21,351 27,517 2,492

Kirkland 1,019 48,200 (3,878) 45,341 (5,480) 13,556

Monroe 15,646 26,925 2,318 44,889 (4,917) 2,200

Redmond (41,961) (34,139) 4,878 (71,222) 1,148 1,342

Bellevue 52,599 (17,922) (43,489) (8,812) (98,691) 60,696

Issaquah (2,540) - 2,190 (350) (2,757) 4,588

EASTSIDE INDUSTRIAL 72,976 (54,690) (7,183) 11,103 (93,180) 91,874

Everett 111,190 54,107 110,737 276,034 (15,353) 52,709

Mukilteo (26,092) (124,594) 8,333 (142,353) 30,651 (641)

Lynnwood 10,202 (4,977) 15,165 20,390 (14,442) (4,933)

NORTHEND INDUSTRIAL 95,300 (75,464) 134,235 154,071 856 47,135

Historical Leasing Activity Historical Total AbsorptionMarket Area 2010-Leases 2010-SF YTD 2011-Leases YTD 2011-SF

Bothell 2 24,311 2 9,000

Woodinville 46 313,272 24 176,007

Kirkland 18 98,863 3 15,385

Monroe 13 94,970 4 23,615

Redmond 20 115,136 11 201,172

Bellevue 29 221,443 11 81,918

Issaquah 5 18,220 2 6,140

EASTSIDE INDUSTRIAL 133 886,215 57 513,237

Everett 39 643,109 10 113,221

Mukilteo 9 31,970 3 23,137

Lynnwood 14 60,244 3 12,932

NORTHEND INDUSTRIAL 62 735,323 16 149,290

Historical Total VacancyMarket Area 2004 2005 2006 2007 2008 2009 2Q’10 3Q’10 4Q’10 1Q’11 2Q’11

Bothell 18.8% 18.1% 13.6% 2.8% 0.3% 2.2% 2.1% 2.1% 0.0% 0.8% 0.2%

Woodinville 14.1% 11.9% 8.1% 4.9% 4.6% 10.9% 10.2% 11.3% 10.7% 10.2% 9.9%

Kirkland 32.0% 12.7% 3.1% 10.8% 3.7% 14.4% 13.7% 10.7% 10.9% 11.3% 10.4%

Monroe 3.6% 3.6% 8.1% 10.4% 8.9% 24.2% 24.8% 23.1% 23.0% 23.3% 22.5%

Redmond 10.2% 9.5% 5.0% 3.9% 4.3% 8.9% 9.0% 9.9% 9.7% 9.7% 9.6%

Bellevue 6.5% 4.1% 22.2% 12.2% 5.2% 5.4% 2.0% 2.7% 4.2% 7.5% 5.5%

Issaquah 42.2% 32.5% 22.5% 10.1% 6.4% 6.9% 7.0% 7.0% 6.7% 7.0% 6.4%

EASTSIDE INDUSTRIAL 13.9% 10.4% 10.3% 7.4% 4.7% 10.2% 9.4% 9.8% 9.8% 10.5% 9.4%

Everett 18.0% 15.9% 18.7% 9.2% 11.2% 15.7% 14.9% 14.2% 12.8% 13.0% 11.7%

Mukilteo 17.2% 16.0% 13.9% 10.8% 9.4% 11.6% 14.6% 20.2% 19.8% 18.4% 18.4%

Lynnwood 6.7% 12.0% 7.0% 7.0% 4.8% 7.5% 6.9% 7.1% 6.3% 7.1% 7.4%

NORTHEND INDUSTRIAL 16.0% 15.3% 15.8% 9.1% 9.9% 13.7% 13.6% 14.2% 13.1% 13.1% 12.3% Prio

r ye

ars

as o

f 4

Q*

5 y

ear

dea

l

The Eastside industrial market is comprised of seven submarkets, 447

properties and totals just over 17 million square feet. The Northend

industrial market has a total of 295 properties spanning three submarkets

and totals just over 12 million square feet. Both markets outpaced the

first quarter, moving well into positive net absorption territory. Overall

vacancy rates trended in the same direction, with the Eastside finishing

at 9.4% and the Northend finishing just above 12%.

Eastside and Northend Industrial OverviewINVENTORY ABSORPTION AVERAGE RENT & EXPENSES CONCESSIONS

Market Area Buildings SF Direct Vacancy Sublet Vacancy Total Vacancy 2Q Absorption YTD Shell Office Free Rent

Bothell 32 1,210,694 0.2% 0.0% 0.2% 7,000 (3,000) $0.50-$0.60 $1.00-$1.20 4-6 months

Woodinville 136 5,385,289 9.9% 0.0% 9.9% 2,492 30,009 $0.45-$0.60 $0.95-$1.20 4-6 months

Kirkland 43 1,576,880 9.1% 1.3% 10.4% 13,556 8,076 $0.45-$0.60 $0.95-$1.25 4-5 months

Monroe 48 1,591,296 20.2% 2.3% 22.5% 2,200 (2,717) $0.40-$0.55 $0.95-$1.15 4-7 months

Redmond 105 3,856,247 9.1% 0.5% 9.6% 1,342 2,490 $0.50-$0.60 $1.00-$1.25 3-6 months

Bellevue 68 2,883,008 5.5% 0.0% 5.5% 60,696 (37,995) $0.50-$0.65 $1.10-$1.25 3-5 months

Issaquah 15 731,980 6.4% 0.0% 6.4% 4,588 1,831 $0.50-$0.65 $1.10-$1.25 3-6 months

EASTSIDE INDUSTRIAL 447 17,235,394 9.0% 0.4% 9.4% 91,874 (1,306) $0.45-$0.65 $0.95-$1.25 3-7 months

Everett 176 8,234,876 11.4% 0.3% 11.7% 52,709 37,356 $0.45-$0.60 $1.10-$1.25 3-6 months

Mukilteo 59 2,208,128 18.4% 0.0% 18.4% (641) 30,010 $0.50-$0.65 $1.10-$1.25 3-6 months

Lynnwood 60 1,686,432 6.6% 0.8% 7.4% (4,933) (19,375) $0.50-$0.65 $1.10-$1.25 3-6 months

NORTHEND INDUSTRIAL 295 12,129,436 12.0% 0.3% 12.3% 47,135 47,991 $0.45-$0.65 $1.10-$1.25 3-6 months

HISTORICAL VACANCY RATES

2005 2007 2009 20112006 2008 2010

18.0%

NORTHEND

EASTSIDE

14.0%

0.0%

8.0%

6.0%

4.0%

2.0%

16.0%

10.0%

12.0%