Welcome to the 2008

NC-CCIM

Triangle Market

Forecast

Triangle

Office Market

Thomas “Skip” Hill, CCIM

Vice President, Raleigh

Highwoods Properties, Inc.

Wall Street vs. Main Street

“What became clear after only a few sessions was a marked difference from the doom and gloom we hear about to what is actually happening at property level. A large number of CEO’s, across all property types

and the world, have not yet seen a significant slowdown or marked decrease in rents or

occupancies. The CEO’s are likely describing what they are seeing and however, the reality is that weaker conditions are likely or the horizon.”

Five Emerging Themes

1. Real estate fundamentals are not yet indicative of current economic uncertainty/weakness (national perspective)

2. Cap rate trajectory is unclear3. Development has shifted from a source of growth to

a source of risk4. Valuations and the impact of financial services

weakness remains uncertain5. Liquidity is king

Highwoods Triangle Division Office Profile

• 5M SF owned, leased and managed• Over 500 tenants• Mixture of Class A/Class B properties• 91.5% HIW occupancy vs. 87.1% Triangle occupancy (as of

12/31/07)• Dispositions 1.2M SF +/- (2004 – present)• Development 900K SF +/- (2004 - present)• Joint venture and wholly-owned facilities• 200 acres land holdings (develop approx. 2M SF of office)• Selectively searching for acquisitions

Skip’s Top Ten ExpectationsTriangle Office Market for 2008

10. New office developments will slow, but not stop11. Demand will slow, but will remain steady12. Triangle will continue to enjoy regional recession “insulation” (not

“immunity”)13. Government and universities to have significant impact on real

estate development14. Rental rates remain flat in 2008 but increase in 2009-201015. Free rent/concessions will continue throughout the year16. New office developers less likely to enter Triangle17. Continued trends for mixed-use/densification18. “Wait and See” year with slow progress for Triangle1. Tar Heels take the Blue Devils in the finals of NCAA

Triangle

Industrial/Flex Market

Ed Brown, CCIM, SIOR

NAI Carolantic Realty

The Triangle Industrial/Flex Market

The Triangle Industrial/Flex Market

Triangle

Retail Market

Vijay Shah, CCIM

Rivercrest Realty Investors

The Triangle Retail Market

PROJECT LOCATION AVAILABLE SF PSF RETAIL TICAM ADDRESS ANCHOR TYPE DEVELOPER NOTESPark West Village

Morrisville Office 300,000 Retail 700,000

Low 30's $5.00 Cary Pkwy and NC 54

(not yet announced)

Mixed Use Casto/1st Carolina

North Hills Expansion

Raleigh 145,000 Retail 275,000 Office

140 Hotel Rooms 400 Residential

Units and 200 CRCC units

low to mid $30's

still being formulated

Six Forks Rd. and 440

not disclosing at this time

Mixed Use Kane Realty 40% Pre Leased Renaissance Raleigh to come

East 54 Chapel Hill 60,000 $29 $4.51 Hwy 54 $ 15 501 Chapel Hill, NC

(not yet announced)

Mixed Use East/West Partners

Buckhorn Village

Chapel Hill 1.1 million early stages

early stages

Interstate 40-85 and Buckhorn Road on the western edge of the county.

Wish list: Ikea and Cabela's Outdoor Furniture

Mall/Power Center and Mixed Use

East/West Partners & Fugo

Plantation Point

Raleigh 391,132 $23 -$25 $3.40 US Hwy 1 and 540

BJ's, Circuit City, Marshalls, Dollar Tree

Retail Cypress Equities Lots of Vacancy

Waverly Place

Cary 170,000 $32-$36 $6.50 Kildaire Farm and Tryon

Whole Foods (55,000 sf)

Mixed use Zapolski & Rudd

Parkside Town Commons

Cary 700,000 Cary/RTP (not yet announced)

Mixed use Kite Development

Fall 09

Broadstone Station

Apex 350,000 Rt 55 and Hwy 1 Super Wal-Mart

Mixed use Kite Development

New Proposed Mixed-Use Centers

The Triangle Retail Market

New Retailers

Retailer Type Location Sq. footage Other

Badcock Furniture Furniture Garner 20,000 sf

Trader Joe's Grocery Chapel Hill, Cary 20,000 sf

Fresh Market Expansion

Grocery Chapel Hill, Cary 18-25,000 sf

Bloom Grocery Raleigh, Wake Forest

38-40,000 sf Similar to Whole Foods, subsidiary of Food Lion

HH Gregg Appliance & Electronics

Raleigh 28-35,000 sf

Martin & Osa Clothing Crabtree Valley Mall - Raleigh

Spin-off of American Eagle

New Restaurants

Fleming's Prime Steakhouse

Crabtree Valley Mall

The Original SoupMan Fast Casual Raleigh and Durham Franchise

McCormick & Schmick's Seafood Crabtree Valley Mall

Bankruptcies

Hollywood Video/ Movie Gallery

Friedman's Jewelers

The Sharper Image

Zales Jewelers

Lillian Vernon

The Triangle Retail Market

Triangle Retail Vacancy Trends

Triangle Retail Supply and Demand Trends

Triangle Average Retail Rents by Submarket

Triangle

Multifamily Market

Jim Scofield, SIOR

JBMRA/Sperry Van Ness International

The Triangle Apartment Market

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

# Units

The Triangle Compared to Other Major Markets

0

50

100

150

200

250

0-99 100-249 250-499 > 500

# UNITS

Property Size Breakdown

0-99

100-249

250-499

> 500

144

109213

1996 & Newer 1980 - 1995 Before 1980

Property Age Breakdown

90,878 Units

Apartment Operations

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

0

0.5

1

1.5

2

2.5

3

% Communities Offering Concessions # Mos Free

Vacancy by Submarket

Concessions% Annual Rent Growth

$9,600/Unit Average Annual Rent ($800/mo)$3,250/Unit Average Annual Expenses

Vacancy

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

0

0.5

1

1.5

2

2.5

3

% Communities Offering Concessions # Mos Free

0

1000

2000

3000

4000

5000

6000

7000

Triangle Wake Durham Orange

Completions Under Construction Planned

0

500

1000

1500

2000

2500

3000

3500

4000

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Apartment Development

2007 Completions2008 Under Construction & Planned

Completions

Vacancy

Concessions

$469,179,528

$776,115,500

$1,086,648,500

$764,758,106

$326,407,500

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

2004 2005 2006 2007 2008 YTD

$80,762 $81,561$75,437

$64,403$66,968

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

2004 2005 2006 2007 2008 YTD

5.42%

5.86%6.54%

5.41% 5.79%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2004 2005 2006 2007 2008 YTD

Apartment Investments

Total Apartment Sales

$/Unit

Average CAP Rate

National Averages

INVESTMENTS

Salvatore “Sam” DiFranco,

CCIM, SIOR,CEA

The One Source for Commercial Real Estate

Wanted: Value add, income producing, upside potential

with credit tenants, under market rental rates in great locations?

Instead of:Over priced, empty / partially leased, under

performing junk…..

There are not any fire sales for good commercial properties

2007 Record Yearfor Triangle Real Estate

• Office

• Multi Family

• Retail

• Industrial

Total

Increase of 49% over 2006

$ 977M

$ 991M

$ 620M

$ 483M

$ 3,071B

2008 Outlook• Debt market has changed the players• Supply and demand• Buyers’ capacity and sellers’

expectations to reset• Cap rates no longer compressing• 1031 / New administration?• More fundamental and less financial

engineering

Commercial Real Estate Fundamentals Still Healthy

• Credit concerns rooted in the sub-prime residential problems

• Commercial delinquencies < 1%

• Cash and equity buyers will benefit

• Foreign investors (4X) active in US

• Quality, location and operations will dictate value

STOP: Reading the newspapersSTOP: Watching the business newsSTART: Enjoying the resiliency of the

Triangle market and all it has to offer

UNDERSTAND CRE continues to outperform the

stock market and remains an attractive investment vehicle due to its stability and opportunity for diversification

Thank You!