IEWVC O M M E R C I A L R E A L E S TAT E Q U A R T E R L Y

Volume 14

Number 4

OCTOBER 2009

Denver Office Market ActivityBy Lauren Douglas Director of Research

The Denver commercial office market posted negative absorption in each of the first three quarters of this year, and 2009 is on track to post the first full-year negative absorption since 2002. The overall market posted absorption of negative 103,312 square feet in 3Q09, which represents modest contraction compared to last quarter’s negative 440,620 square feet. Year-to-date absorption totals negative 1,196,978 square feet. Overall vacancy rose to 19.52 percent from 16.18 percent at 3Q08.

The Central Business District submarket ended the quarter with continued contraction, posting quarterly absorption of negative 133,916 square feet, and vacancy increased to 17.70 percent. The Southeast Suburban submarket finished the quarter flat with moderate positive absorption of 31,199 square feet. This stability was driven largely by Cricket’s large move-in at Village Center Station. Vacancy stands at 20.41 percent.

For the first three quarters of 2009, median asking rates decreased in most submarkets. However, concessions such as rent abatement have become common, and effective rates have deteriorated even more dramatically than face rates.

Given the frozen capital market and subsequent limited inventory, Denver’s investment sales market has literally ground to a halt in 2009. Year-to-date sales stand at a mere 916,388 square feet for a total of $158,767,000. The development pipeline has diminished to 1.4 million square feet under construction. Village Center Station I delivered this quarter with anchor tenants Cricket Communications and Holland & Hart occupying 58 percent of the 200,174-square-foot project.

The rate of erosion in the office market has slowed from the beginning of 2009, giving rise to the hope that the Denver commercial market has found this cycle’s bottom. Denver continues to garner national accolades for its economic resilience, positive business climate and quality of life while maintaining its solid market fundamentals that are the envy of many other major markets. With attractive fundamentals to draw and retain talent and a strong tenant mix with significant concentrations of high-growth industries, Denver is well-positioned for a strong and fast recovery.

Job growth key to commercial real estate recoveryRoger Simpson and Jared Leabch

When the recession hit in 2007, and Colorado’s economy stayed strong, some economists warned our time would come. “Just wait,” they said. And indeed, they were right, to a certain degree.

Although it took almost a full year after the nation officially entered recession, Colorado employers began significant layoffs by September 2008, as businesses downsized or closed altogether.

Since then, Denver has lost tens of thousands of jobs, and commercial real estate transactions have dwindled. Recent reports show we’re still better off than most cities, though, and according to a recent Moody forecast, Colorado could be among the first states to recover from this recession. September’s drop in state unemployment claims seems to

support this belief, along with the reported 8,094 jobs already created or saved with the promise of $5.48 billion from the American Recovery and Reinvestment Act of 2009. And that’s not all. In September, Forbes named Colorado fourth overall in its 2009 “Best States for Business” list, based on labor supply, quality of life, economic climate, and growth potential.

With these recent positive rankings and one of the nation’s most favorable tax climates, Colorado is attracting new businesses even in the midst of the economic downturn. More companies mean more jobs and more employees, which in turn drives the need for more space. As real estate transactions pick up speed to accommodate this growth, business confidence will rise, lending current tenants and landlords the assurance they need to make crucial space decisions they’ve been holding off on for the past year. The result? A surge in commercial real estate activity.

Of course, all of this is speculation, but one thing seems unanimous: Colorado is a pretty good place to be right now. And all signs point to it getting even better. Just wait.

-4,000,000

-2,000,000

0

2,000,000

4,000,000

5.00%

9.00%

13.00%

17.00%

21.00%

25.00%

20002001

20022003

20042005

20062007

2008

Supply Absorption Vacancy

3Q09

Vaca

ncy

Source: Ross Research Services

Squa

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Office Market

Roger Simpson

Frederick Ross company

MARKET PERSPECTIVE

Jared Leabch

IEWV 2

commer cial real estate

Frederick Ross company

IEWVIn this issueOffice Market Activity ............................ 1

Real Estate Transactions ..................... 3

Real Estate Opportunities .................... 4

Apartment Market Activity..................... 6

People .................................................. 7

Industrial Market Activity....................... 8

Retail Market Activity ............................ 8

The VIEW is the region’s most comprehensive commercial real estate newsletter for over a decade.

OTHER ROSS PUBLICATIONS:

The Ross Hot Sheet highlights significant current leasing opportunities.

The Ross Transactions In Review highlights recent Ross transactions.

Ross publishes quarterly Market Reports for office, industrial and retail markets in Denver and Boulder.

Contact the editor to subscribe to Ross publications.

Frederick Ross Company717 17th Street, Suite 2000

Denver, Colorado 80202

phone 303.892.1111 • fax 303.892.6338 email info@frederickross.com

www.frederickross.com

editor Rachel Chin email rchin@frederickross.com

Commercial real estate transactions are complicated. This is the time for more, not less. You need the power and the pull of the full-service leader. Frederick Ross Company.

There are timeswhen more issimply better.

Brokerage • Management

Research • Marketing

Financial Analysis • Consulting

Development/Capital

HOT SHEETHot Sheet listings represent select Ross opportunities. Contact us for complete sale and lease listings.

full serviceSublease available now on 38th fl oorFurniture available1 large confer

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Fun, creative atmosphere in the heart of LoDoHistoric space with lots of nearby amenitiesOn 16th Street Mall near Union Station

Contact Darrin Revious or Colleen Minde

8410-8472 Federal Blvd., Westminster

Signaled intersecti•

EAST BANKSHOPPINGCENTER

E QUINCY AVE

SPA

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SON

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ENTITLED AND READY FOR DEVELOPMENT

THE ROSS HOT SHEETHot Sheet listings represent select Ross opportunities. Contact us for complete sale and lease listings.

W E E K O FNOVEMBER 17, 2008

PLUG-AND-PLAY SUBLEASE5970 Greenwood Plaza Boulevard, Greenwood Village

8,000 - 18,475 RSF available immediatelySublease rate: $13.00/SFPhones, cabling and furnitureFlexible space confi gurationsBoard room for 12 people, training room for 20 people and large eat-in kitchenElevator identitySublease term through March 31, 2011Common conference room in building

Contact Andrew Blaustein or Jamie Gard

QWEST BUILDING: 38TH FLOOR SUITE1801 California Street, Suite 3840, Denver, CO

2,011 SF available now

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HISTORIC OFFICE SPACE ABOVE JET1612 Wazee Street, Denver

2,685-4,045 SF suites and 150-300 SF executive suitesLease rate: $25.00/SF full serviceFun, creative atmosphere in the heart of LoDoHistoric space with lots of nearby amenitiesOn 16th Street Mall near Union Station

Contact Darrin Revious or Colleen Minde

SUMMIT SQUARE SHOPPING CENTER8410-8472 Federal Blvd., Westminster

1,200-1,473 SF availableInline lease rate: $15.00-17.00/SF NNNJoin Safeway, Wells Fargo,

h f Hi h 36 d 2 il f I 25

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DEVELOPMENT

Transactions ReviewAURORA FACILITY FOR NEW PLANTOmaha-based steel company, Drake-Williams Steel, Inc. (DW Steel) purchased a 52,000-square-foot facility last month with plans to open its first ever Colorado manufacturing plant. The

industrial property, situated at 20400 East 26th Avenue in Aurora, has 12 acres of fenced yard and sold for $3 million. Ross represented DW Steel in this

industrial transaction.Ross representatives: Tyler Reed, Chris Nordling, Pete Wycoff

OSWEGO CREATIVE TO OPEN NEW FFICE IN GOLDENswego Creative, a full-rvice advertising and rketing agency, recently chased 1000 10th Street Golden with plans to occupy next . Shallow Bay Properties LLC5 967

POLICY STUDIES SIGNS NEW LEASE AT HINES BUILDING, NOW 85% LEASEDPolicy Studies Inc., a leader in administrative case management services for government-funded health and human services organizations, recently leased 75,474 square feet of office space in Denver’s newest Hines development at 1515 Wynkoop Street. The company

plans to move into its new office first quarter 2010.Ross is the exclusive marketing and leasing representative for 1515 Wynkoop Street, an 8-story premier office tower in LoDo. Ross representatives: Jamie Gard,

Nathan Johnson

MULTIPLE TRANSACTIONS FOR BANK OF THE WESTSeven tran i

MANVILLE PLAZA ACTIVITYTwo recent renewals occurred at 717 17th Street in downtown Denver. NICE, a leading multi-media company renewed its lease for 30,775 square feet; and CoBiz Financial, Inc. renewed its office lease for 23,773 square feet.

Frederick Ross Company is the exclusive marketing and leasing agent for Manville Plaza. Scott Garel, also of Frederick Ross Company, represented CoBiz in this transaction.Ross representatives: Jeff Castleton,

Jamie Gard, Scott GarelROTATING ENERGY SERVICES LEASES COMMERCE CITY SPACEDenver-based Rotating Energy Services

recently leased 11,400 square feet of industrial space in Commerce Cienergy

ale and lease listings.

Transactions ReviewAUG-SEPT 2009

TEEL COMPANY PURCHASES URORA FACILITY FOR NEW PLANTmaha-based steel company, rake-Williams Steel, Inc. (DW eel) purchased a 52,000-uare-foot facility last month ith plans to open its first er Colorado manufacturing plant. The dustrial property, situated at 20400 East

6th Avenue in Aurora, has 12 acres of nced yard and sold for $3 million.

oss represented DW Steel in this dustrial transaction.

oss representatives: Tyler Reed, Chris ordling, Pete Wycoff

SWEGO CREATIVE TO OPEN NEW FFICE IN GOLDENswego Creative, a full-rvice advertising and arketing agency, recently urchased 1000 10th Street

POLICY STUDIES SIGNS NEW LEASE AT HINES BUILDING, NOW 85% LEASEDPolicy Studies Inc., a leader in administrative case management services for government-funded health and human services organizations, recently leased 75,474 square feet of office space in Denver’s newest Hines development at 1515 Wynkoop Street. The company plans to move into its new office first quarter 2010.

Ross is the exclusive marketing and leasing representative for 1515 Wynkoop Street, an 8-story premier office tower in LoDo.

Ross representatives: Jamie Gard, Nathan Johnson

MULTIPLE TRANSACTIONS FOR BANK OF THE WESTSeven transactions have occurred at

MANVILLE PLAZA ACTIVITYTwo recent renewals occurred at 717 17th Street in downtown Denver. NICE, a leading multi-media company renewed its lease for 30,775 square feet; and CoBiz Financial, Inc. renewed its office lease for 23,773 square feet.

Frederick Ross Company is the exclusive marketing and leasing agent for Manville Plaza. Scott Garel, also of Frederick Ross Company, represented CoBiz in this transaction.

Ross representatives: Jeff Castleton, Jamie Gard, Scott Garel

ROTATING ENERGY SERVICES LEASES COMMERCE CITY SPACEDenver-based Rotating Energy Services recently leased 11,400 square feet of industrial space in Commerce City. The energy company has already occupied its new space at 5303 Vasquez Boulevard.

ALES LEASES

inTransactions in Review listings represent select Ross transactions. Contact us for complete sale and lease listings.

RKET

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ORT

First Quarter 2009

T RE

PORT

First Quarter 2009

IEWV 3

Transactions

Policy Studies leases 75,474 square feet in Denver’s newest Hines development, now 85 percent leasedPolicy Studies Inc. (PSI), a leader in administrative case management services, recently leased 75,474 square feet of office space in Denver’s newest Hines development at 1515 Wynkoop Street. The company plans to move into its new office first quarter 2010.

In addition to the new Policy Studies lease, two more companies have recently signed on as tenants at the property, bringing the building to 85 percent leased: Black Hills Exploration, an energy company,

leased 47,000 square feet, and law firm Poisinelli Shughart PC leased 38,000 square feet. Both companies plan to move in later this year.

Jamie Gard and Nathan Johnson of Frederick Ross Company are the exclusive marketing and leasing representatives for 1515 Wynkoop Street, a premier eight-story, 285,217-square-foot office building located in the heart of Denver’s LoDo neighborhood.

Jump Street expands to ArizonaDenver-based Jump Street, an indoor trampoline park and family fun center, recently expanded its operations with a new lease of 25,944 square feet of retail space in Warner Commerce Park, 455 East Warner Road in Chandler, Arizona. This newly-opened center is Jump Street’s first non-Colorado location.

Mike Quinlan, Susan Karsh and Frank Griffin of Frederick Ross Company represented Jump Street in this transaction, as well as its last transaction for 41,949 square feet at 10081 West Bowles Avenue in Littleton. The original Jump Street is located off I-25 in Thornton.

Steel company purchases $3 million Aurora facility for new factory in one of the largest industrial sales in 2009Omaha-based steel company, Drake-Williams Steel, Inc. (DW Steel) recently purchased a 52,000-square-foot facility with plans to open its first-ever Colorado manufacturing plant. The industrial property, situated at 20400 East 26th Avenue in Aurora, has 12 acres of fenced yard and sold for $3 million.

At $57.69 per-square-foot, this transaction is one of the largest industrial sales of 2009.

Tyler Reed, Chris Nordling and Pete Wycoff of Frederick Ross Company represented DW Steel in this transaction. Contact them for additional information.

IEWV 4

opportunities

Concord Business Center Buildings One & Two now complete, Building Three with 6 month deliveryTwo newly constructed industrial buildings are now complete and ready for immediate occupancy, with a third building fully designed and permitted for 6-month delivery at Concord Business Center. Building One at 8585 Concord Center Drive offers 55,680 square feet, Building Two at 13310 James E. Casey offers 19,756 square feet, and Building Three at 1330 James E. Casey offers 71,278 square feet, all available for lease. These properties are ideally located in Concord Business Center, a 100-acre mixed-use business park situated between County Line Road and E-470, just south of Centennial Airport.

IBC Holdings owns 40 acres at Concord Business Center, including the above properties. Dave Lee and Jason Addlesperger of Frederick Ross Company are the exclusive listing representatives for over 450,000 square feet of existing, under construction, and planned IBC properties in the Denver Metro area.

West side user/investment opportunity at 605 Parfet Street605 Parfet Street in Lakewood is now available for sale, presenting an excellent user/investment opportunity on the West side. Located on the southeast corner of 6th Avenue and Parfet Street, with unparalleled visibility to 6th Avenue, this property offers 21,263 square feet of Class B office space, with existing tenants already in place.

Currently 50 percent leased to two tenants, this 2-story building provides a unique opportunity for a buyer to be an owner-occupant or for an investor to reap the benefit of potential upside.

Robert Bruce, Roger Simpson and Jared Leabch of Frederick Ross Company have been retained as the exclusive listing representatives for 605 Parfet Street. Contact them for additional information.

Rare high-rise space available at Granite TowerA rare, full-floor high-rise space with 19,200 rentable square feet is now available for multi-tenant occupancy in the heart of Denver’s Central Business District. This 30th floor space at 1099 18th Street offers build-to-suit tenant improvements and incredible panoramic views, along with spectacular recent building upgrades and renovations.

Nathan Johnson, Pete Staab and Jamie Gard of Frederick Ross Company are the exclusive listing and marketing representatives for Granite Tower, which currently offers a total of 38,567 square feet available for lease. Contact these brokers for additional information about the property.

Building OneBuilding One

Building ThreeBuilding Three

Building TwoBuilding Two

IEWV 5

OPPORTUNITIES

Desirable plug-n-play full floor available in City Center: the original TOD siteAn exceptional lease opportunity exists for the entire 13th floor at 717 17th Street. This plug-n-play space offers 23,773 rentable square feet, with furniture included. Ideally situated in downtown Denver’s Central Business District, the building features a newly renovated lobby and modernized elevators with renovated cabs. Together with 707 17th Street, this property makes up Denver City Center, the original transit-oriented development, adjacent to both north and southbound light rail stops, with multiple amenities, including Wall Street Deli, Starbucks©, Marriott©, Allie’s American Grille and a fitness center.

Jeff Castleton and Jamie Gard of Frederick Ross Company are the exclusive marketing and leasing representatives for City Center, which currently offers a total of 351,951 square feet available for lease.

Flexible suites available at Westpark Office CenterThis 86,000-square-foot office complex at 8461, 8471, 8501 and 8601 Turnpike Drive in Westminster now offers 373-4,571 rentable-square-foot suites for lease. With on-site management, and local ownership, this business park easily accommodates growing tenants. Highly visible and with easy access to Highway 36 via Sheridan Boulevard, this property offers ample parking, monument signage, and great access to retail amenities.

Roger Simpson and Jared Leabch are the listing representatives for Westpark Office Center. Contact them for additional information.

38th Street properties offer control of large blocks of contiguous space in BoulderFour multi-tenant office/flex and R&D buildings are now for sale on 38th Street in Boulder, offering excellent income potential and the opportunity to control several of the largest blocks of contiguous space currently available in the City of Boulder.

1685 38th Street is a 100,176-square-foot two-story executive office, R&D and warehouse building, completed in 1978 and currently partially occupied.

1715 38th Street is a two-story office building with approximately 17,680 square feet, renovated in 2004 and currently occupied.

1745 38th Street is a two-story office building with approximately 24,000 square feet, renovated in 2004 and currently 100 percent vacant.

1775 38th Street is a two-story office building with approximately 13,965 square feet, currently 100 percent leased.

Scott Garel of Frederick Ross Company and Becky Gamble of Dean Callan & Company have been retained as the exclusive listing representatives for all four multi-tenant office/flex and R&D buildings. Contact them for details.

84618461 84718471

8601860185018501

IEWV 6

It is a common trend for renters to pull back during times of economic difficulty by moving in with a roommate(s) or back in with their parents or other family members. As a result, the priorities of the rental population change, leading to a negative slide in occupancy. This has been the case for five consecutive quarters, as vacancies increased to a high of 9 percent in the 2nd

quarter of 2009. But as the metro area maintained relative stability throughout the current recession, demand for rental housing has grown, showing the first signs of life in over a year as vacancies during the 3rd quarter of 2009 fell dramatically.

During the 3rd quarter, vacancy fell to an average of 7.4 percent, representing an improvement of nearly 20 percent over the previous quarter. Renters in the 3rd quarter absorbed an astonishing 6,010 units, even as 1,528 units of new construction were added to the market, making it one of the largest single quarter absorption numbers ever recorded in metro Denver. This is a key sign that the apartment market in Denver is positioned for growth as low vacancies will inevitably lead to rent growth year over year. In fact, rents in the 3rd quarter did just that, improving by 1 percent over the previous quarter as they increased from $1.02 per-square-foot during the 2nd quarter to $1.03 per-square-foot.

Looking forward, Denver’s apartment market is positioned to thrive as the dynamics of its economy and population continue to diversify. The population is growing

and becoming younger, and new employers are flocking to the area, bringing thousands of jobs. With an already small supply of available units and a development market unable to attain the capital necessary to finance new apartment construction, the demand for rental product will continue to grow and lead to positive operational growth across the entire metro area.

The 3rd quarter of 2009 proved to be a breakthrough quarter for the Denver apartment market. The sharp drop in vacancy and massive absorption during the three-month period is a strong sign that a swift recovery is just ahead. Denver is poised to experience the same success that apartment owners enjoyed during the decade of the 1990’s when Denver’s apartment market was one of the top in the country.

Denver’s Apartment Fundamentals take off in the 3rd QuarterBy Andy HellmanApartment Realty Advisors

Apartment Realt y advisors a Frederick R oss Company

717 17th Street, Suite 2000, Denver, CO 80202 • 303.260.4400 • infocolorado@ARAusa.com

“The sharp drop in

vacancy and massive

absorption during the

three-month period is a

strong sign that a swift

recovery is just ahead.”

MARKET PERSPECTIVE

Andy Hellman

$0.90

$0.92

$0.94

$0.96

$0.98

$1.00

$1.02

$1.04

$1.06

0.0%

2.0%

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8.0%

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14.0%

16.0%

'03Q1

'03Q2

'03Q3

'03Q4

'04Q1

'04Q2

'04Q3

'04Q4

'05Q1

'05Q2

'05Q3

'05Q4

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'06Q2

'06Q3

'06Q4

'07Q1

'07Q2

'07Q3

'07Q4

'08Q1

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'09Q2

'09Q3

Vacancy Rent/SF

Vacancy vs. Rent

Source: Apartment Realty Advisors

Vaca

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Rent

/SF

IEWV 7

INDUSTRIAL BROKERS

Jason B. Addlesperger jaddlesperger@frederickross.comPeter E. Beugg pbeugg@frederickross.com Rodney D. Foster rfoster@frederickross.comDavid K. Lee dlee@frederickross.comJeffrey Y. McClintock jmcclintock@frederickross.comMatthew Y. McClintock mmcclintock@frederickross.comTimothy J. McManus tmcmanus@frederickross.comChris A. Nordling cnordling@frederickross.comTyler Reed treed@frederickross.comTodd Snyder tsnyder@frederickross.comPeter L. Wycoff pwycoff@frederickross.com

INVESTMENT BROKERS

Todd W. Alton talton@frederickross.comWade R. Fletcher wfletcher@frederickross.comJohn J. “Packet” Lowrey jlowrey@frederickross.comStephen J. Roesinger sroesinger@frederickross.comDavid G. Tilton dtilton@frederickross.com

RETAIL BROKERS

Robert C. Bramble bbramble@frederickross.comFrank O. Griffin fgriffin@frederickross.comSusan S. Karsh skarsh@frederickross.comThomas B. Mullinix tmullinix@frederickross.comMichael J. Quinlan mquinlan@frederickross.com

OFFICE BROKERS

Andrew L. Blaustein ablaustein@frederickross.com Robert H. Bruce rbruce@frederickross.comDaniel R. Burke dburke@frederickross.com Jeffrey D. Castleton jcastleton@frederickross.comJamie A. Gard jgard@frederickross.com Scott R. Garel sgarel@frederickross.comBen Gilliam bgilliam@frederickross.comJoseph L. Heath jheath@frederickross.comNathan R. Johnson III njohnson@frederickross.comAustin A. Kane akane@frederickross.comKeith A. Krombach kkrombach@frederickross.comThomas M. Lee tlee@frederickross.com Jared Leabch jleabch@frederickross.comDonald R. Misner III dmisner@frederickross.comJudd Robertson jrobertson@frederickross.comJane Rubley Grubich jgrubich@frederickross.comRoger E. Simpson rsimpson@frederickross.com Peter M. Staab pstaab@frederickross.com Jonathan P. Tilton jtilton@frederickross.comJon Treter jtreter@frederickross.comJohn P. Tromly jtromly@frederickross.comReid M. Walsh rwalsh@frederickross.com

MANAGEMENT

John P. Box jbox@frederickross.comKevin D. Thomas kthomas@frederickross.comDebbie McLachlan dmclachlan@frederickross.comDeb Bergman dbergman@frederickross.com

PEOPLE

APARTMENT BROKERS

Doug Andrews andrews@arausa.comChris Cowan cowan@arausa.comKen Greene greene@arausa.comJeff Hawks hawks@arausa.comJustin Hunt jhunt@arausa.comTerrance Hunt hunt@arausa.com

Kevin McKenna kmckenna@arausa.comSteve O’Dell odell@arausa.comShane Ozment ozment@arausa.comJason Wine wine@arausa.com

For more than a century, Frederick Ross Company has provided unparalleled

commercial real estate services in the Denver region. Our locally-delivered comprehensive platform means one thing to our clients: confident decision making.

We provide customized solutions in:

BrokerageManagementResearchMarketingFinancial AnalysisConsultingDevelopment/Capital

The success of our clients is our paramount objective. Frederick Ross Company utilizes these services to capture value, minimize risk and maximize profits for its clients.

•••••••

Apartment Realty Advisors (ARA) is the largest privately held, full-service

investment advisory brokerage firm in the nation that focuses exclusively on the multi-housing industry. The combination of resources, unparalleled market expertise and nationwide presence in the multi-housing marketplace resulted in average annual production volume of $6.3 billion in real estate transactions since 2003. Apartment Realty Advisors of Colorado, a Frederick Ross Company, has been the top Colorado apartment brokerage since 2002.

For detailed information on ARA’s extensive multi-housing investment services, visit www.ARAusa.com.

a F r e d e r i c k R o s s C o m p a n y

IEWV 8

Denver Industrial Market Activity

Denver Retail Market ActivityBy Lauren DouglasDirector of Research

Denver’s retail market continues to be battered, and although the economy is showing signs of stabilizing, consumers have tightened their belts. The Cash for Clunkers program drove a temporary spike in retail sales, which then plummeted 1.5 percent in September, following the end of the popular rebate program. Analysts are forecasting flat holiday sales as consumers continue to seek out discounts and markdowns.

3Q09 absorption was flat, at 33,107 square feet, but without delivery of The Streets at Southglenn and the Regal Cinema at River Point, quarterly absorption would have been approximately negative 225,000 square feet. Vacancy rose to 9.15 percent, up from 7.43 percent at YE08, and 3Q09 marks the ninth consecutive quarter of vacancy increases. Median asking rates remained flat or decreased in all sectors.

Four projects delivered 859,666 square feet and a mere 292,320 square feet remain under construction. Investment

sales remain weak with year-to-date sales of 742,618 square feet for a total volume of $95,471,729. This is well below the five-year averages of 3,600,000 square feet sold and a total volume of $641,000,000.

Industrial Market

Source: Ross Research Services

Squa

re F

eet

Vaca

ncy

0

2,000,000

4,000,000

6,000,000

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Absorption VacancySupply

20002001

20022003

20042005

20062007

2008

3Q09

For more Denver market information, please contact Lauren Douglas at ldouglas@frederickross.com.

Retail Market

Source: Ross Research Services

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Absorption VacancySupply

20002001

20022003

20042005

20062007

2008

3Q09

Squa

re F

eet

Vaca

ncy

By Sue SelleAnalyst

The overall Denver industrial market continued to hold steady through third quarter, posting negative absorption of 106,383 square feet through the first three quarters of the year. Following three consecutive quarters of negative absorption, the industrial market recorded flat absorption in third quarter of 878 square feet. The High Cube Warehouse/Manufacturing market absorbed 60,647 square feet of space, while the R&D/Office Flex market recorded negative absorption of 59,769 square feet.

The overall industrial market ended third quarter with a 7.64 percent vacancy rate, which was stable from last quarter, but up compared to third quarter 2008. Vacancy rates increased for both High Cube Warehouse/Manufacturing and R&D/Office Flex uses based on year-on-year third quarter comparisons. Third quarter rental rates declined compared to last year and are expected to continue dropping through the balance of 2010.

Ross Research predicts that activity in the overall Denver industrial market will remain fairly stable in 2010. Absorption and vacancy rates are forecast to be flat, while rates will continue declining. The market is expected to moderately pick up in 2011 with positive absorption, lower vacancy rates and an uptick in rental rates.

M ARKET ACTIVIT Y