2012 EOY Industrial-Office

2012 IndustrIal & OffIce Market repOrt
Baltimore/Washington, DC CorriDor
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MARYLAND
HOWARD
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ANNE ARUNDEL
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2012 YEAR END REVIEW

IN THIS ISSUE:
INDUSTRIAL MARKET OVERVIEW OFFICE MARKET OVERVIEW 2 4 5
Economic uncErtainty rElatEd to sEquEstration, job growth and national financial dEbatE causing companiEs to dEfEr rEal EstatE dEcisions Despite the election outcome, businesses find it extremely difficult
INDUSTRIAL REPORT
HOWARD COUNTY MAP Howard County U.S. Route 1 Corridor Columbia ANNE ARUNDEL COUNTY MAP Anne Arundel County BWI Marley Neck/Glen Burnie Odenton PRINCE GEORGES COUNTY MAP Prince Georges County Inner Beltway Outer Beltway Northern Prince Georges County 6 7 8 9 10 11 12 13 14 15 16 17 18 19
to make decisions affecting the short or long-term future of their companies when they have uncertainty about economic conditions. Uncertainty impacts hiring, the purchase of new equipment, inventory and real estate decisions including signing a lease or purchasing a building. Both nationally and throughout the Baltimore-Washington, D.C. Corridor marketplace, the heavy feeling of uncertainty remains fueled by the anticipated sequestration, pending outcome of the Fiscal Cliff, the unsettled European markets, the direction of the job market, and a solution to the national debt. This overwhelming theme is causing companies and organizations to freeze up, access the situation and defer real estate situations until more clarity is defined. Other factors related to commercial real estate are contributing to the collective decision to hit the pause button, such as the renewed popularity of telecommuting, job sharing, cloud commuting and collaborated office space environments as well as the renewed emphasis on New Urbanism and reliance on modes of public transportation. Pessimistic conditions are mirrored in the investment sales sector as potential buyers predict depressed or flat rental rates and prolonged leasing periods. Many forecast that improvement is
31 32
OFFICE REPORT
HOWARD COUNTY MAP Howard County Columbia North Columbia South Columbia Town Center ANNE ARUNDEL COUNTY MAP Anne Arundel County Annapolis BWI Corridor 20 21 22 23 24 25 26 27 28 29 30
RESIDENTIAL LAND INVESTMENT OVERVIEW PARAGON, SIOR, CCIM & NAI KLNB SERVICES THE NAI KLNB TEAM
not expected to occur until 2015 or 2016. There remains investor interest among bulk warehouse, institutional-quality office buildings in core markets, grocery-anchored retail and multi-family housing. Apartments are the shining star among all real estate product types. Conversely, there are also many reasons to be optimistic about 2013, especially within this marketplace which time and again has

proven to be extremely resilient, with an extended track record of success. Our proximity to the Federal Government, the just-concluded BRAC expansion at Fort Meade, overall industry diversity and the emerging cyber-security initiatives remain powerful economic drivers. These reasons include: Minimization of sequestration: An anticipated 10% spending cut in the federal budget including the Department of Defense would inflict a painful dent in the Maryland economy, including all real estate sectors. There exists behind-the-scenes lobbying efforts to reduce these cuts and its relative impact on our region. Rapid resolution of the Fiscal Cliff: As of this writing, negotiations were also in play to minimize the effect of the so-called Fiscal Cliff related to payroll tax cuts and Bush tax cuts that are projected to remove approximately $700 billion from our countrys economy. A quick resolution would start 2013 off on the right note. Continued growth of cyber-security initiatives: Commercial real estate activities - particularly surrounding Fort Meade in Anne Arundel County - are centered around emerging cyber-security initiatives, with this sector viewed as the knight in shining armor and replacement to BRAC expansion. Numerous local universities have initiated cyber-security curriculum, adding additional optimism about long-term prospects. Intelligence Community contracts: More than $500 million worth of contracts for Intelligence Community work, much of this emanating from the Annapolis Junction Revenue Support Field Office, is expected to flow into the States economy. The commercial real estate industry is expected to be a major beneficiary. The commercial real estate sector is still keeping its eye on other trends and situations with potential significant impact on our business. This includes the formation or reduction of jobs in the State of Maryland (which is always a primary indicator in the direction of our industry); office space downsizing and the conversion of office space to a collaborated environment causing smaller footprints; and the shift to cloud commuting which creates less demand for on-site computer server rooms. The only truly thing certain about the state of commercial real estate and the investment sales marketplace in the State of Maryland is its uncertainty. And, because businesses abhor these conditions, a state of paralysis has set in. Like everything else in life this too will pass and we can expect the overall economic might of the Baltimore-Washington Corridor to keep this region on the relative top-end of the national real estate barometer.
3
BALTIMORE-WASHINGTON CORRIDOR 2012 Industrial Market Overview

COUNTIES & SUBMARKETS
MARKET HOWARD COUNTY Total Bulk Total Office/Warehouse Total Flex U.S. Route 1 Corridor Bulk Office/Warehouse Flex Columbia Bulk Office/Warehouse Flex ANNE ARUNDEL COUNTY Total Bulk Total Office/Warehouse Total Flex BWI Bulk Office/Warehouse Flex Marley Neck/Glen Burnie Bulk Office/Warehouse Flex Odenton Bulk Office/Warehouse Flex PRINCE GEORGES COUNTY Total Bulk Total Office/Warehouse Total Flex P.G. County Inner Beltway Bulk Office/Warehouse Flex P.G. County Outer Beltway Bulk Office/Warehouse Flex Northern P.G. County Bulk Office/Warehouse Flex 47 93 162 3,355,434 4,724,051 5,411,119 275,160 583,437 763,035 8.2% 12.3% 14.1% 172,743 29,714 20,651 $6.83 $7.03 $7.88 0 0 0 36 32 134 4,128,011 2,192,290 7,378,572 452,350 198,917 1,093,195 11.0% 9.1% 14.9% 139,101 58,829 376,779 $6.82 $6.69 $5.84 69,567 0 0 153 220 294 13,030,937 11,061,555 7,992,507 1,252,322 961,201 673,725 9.6% 8.7% 8.4% 684,431 418,108 (117,951) $5.53 $6.00 $6.56 0 0 0 236 346 589 20,514,382 18,045,423 20,788,975 1,979,821 1,743,555 2,484,725 9.7% 9.7% 11.9% 996,275 517,941 335,999 $5.90 $6.09 $6.13 69,567 0 0 12 7 11 1,800,000 142,000 535,000 620,000 31,680 184,200 34.4% 22.4% 34.4% (216,000) (31,680) (156,100) $4.25 $5.95 $6.95 0 0 0 31 26 41 5,585,000 1,194,000 1,398,000 233,000 151,000 69,000 4.2% 12.7% 4.9% (128,000) (11,000) 47,000 $4.15 $4.25 $5.45 0 0 0 45 32 74 6,261,316 2,078,137 3,093,868 1,025,465 332,600 449,707 16.4% 16.0% 14.5% 67,871 65,685 43,291 $5.98 $5.87 $9.47 0 0 0 110 92 231 14,800,000 5,393,000 9,600,000 1,817,000 650,000 998,000 12.2% 12.1% 10.6% 14,000 60,500 337,000 $4.45 $4.95 $5.75 0 0 0 24 42 114 4,330,228 2,459,953 4,734,185 720,118 372,722 626,372 16.6% 15.2% 13.2% 108,347 16,613 (16,029) $4.10 $8.50 $11.50 0 0 0 136 157 20 18,539,682 7,083,390 703,971 2,728,493 867,536 93,678 14.5% 11.8% 13.3% 111,557 (197,151) (23,320) $5.15 $5.72 $7.33 0 0 0 160 199 134 22,869,910 9,543,343 5,438,156 3,448,611 1,240,258 720,050 14.9% 12.7% 13.2% 219,904 (180,538) (39,349) $4.63 $7.11 $9.42 0 0 0 # OF BUILDINGS RBA TOTAL VACANT (SF) TOTAL VACANCY RATE % ABSORPTION RENTAL RATE PSF (AVERAGE) CONSTRUCTION COMPLETIONS (SF)
BALTIMORE-WASHINGTON CORRIDOR 2012 Office Market Overview

COUNTIES & SUBMARKETS
MARKET HOWARD COUNTY Total Class A Total Class B Columbia North Class A Class B Columbia South Class A Class B Columbia Town Center Class A Class B ANNE ARUNDEL COUNTY Total Class A Total Class B Annapolis Class A Class B BWI Corridor Class A Class B 48 53 5,763,490 2,657,695 603,861 500,597 10.0% 18.8% 260,000 (24,000) $28.00 $21.00 207,830 0 32 96 2,099,024 2,801,662 233,324 305,746 11.2% 10.9% 19,140 11,943 $30.00 $24.75 0 0 93 247 8,532,092 7,675,301 972,518 1,046,154 11.4% 13.7% 304,838 (13,054) $27.84 $21.43 207,830 0 15 20 1,692,593 855,848 176,131 120,774 10.4% 14.1% 104,115 10,903 $24.05 $22.77 0 0 40 102 4,341,322 4,459,591 890,444 582,001 20.5% 13.0% 58,911 21,416 $25.14 $22.39 110,000 42,620 10 36 747,483 1,288,656 157,114 125,611 21.0% 9.8% (37,123) 84,717 $24.42 $23.09 0 68,779 67 236 6,851,798 8,902,928 1,110,103 951,113 # OF BUILDINGS RBA TOTAL VACANT (SF) TOTAL VACANCY RATE % 16.2% 10.6% ABSORPTION RENTAL RATE PSF (AVERAGE) $24.76 $22.00 CONSTRUCTION COMPLETIONS (SF) 110,000 161,399
108,242 168,635
Office Building Criteria: Rentable building area equal to or greater than 10,000 gross square feet; multi-story and single story buildings. Vacancy rates are based on existing office space that is currently unoccupied; however, lease documentation may exist for all or a portion of such space.
HOWARD COUNTY
Industrial Submarket Map
Carroll County Frederick County
70 144
32
Baltimore County
70 144
COLUMBIA
97
32
ELLICOTT CITY
howard county
Montgomery County
CLARKSVILLE
29 32
100
ELKRIDGE
108
95 29 1
LAUREL JESSUP Anne Arundel County
SUBMARKETS US ROUTE 1 CORRIDOR COLUMBIA
Prince Georges County
MARKET OVERVIEW Overall, Howard Countys industrial market remained relatively flat for 2012. Industrial vacancy remained at 14.3% with a slight negative absorption of +40,000 square feet. Class A and B space continues to have a respectable tenant velocity with accompanying leases executed. Several of those are indicated on the following page. However, the Class C product will continue to lag the overall vacancy primarily due to lower ceilings and inadequate loading. Owner occupied sales continue to be very strong primarily due to the availability of funds. There were ample lender programs available to those who purchased during 2012 as well as the Small Business Administration 504 loan. Several lenders offered interest rates below 4%. While many developers would like to deliver industrial product in Howard County in 2013, there remains very little industrial property that can be developed based on current market rents. With few engineered sites that have become available, rental rates would need to exceed $6.25 per square foot, NNN. MARKET OUTLOOK Due to the lack of development, the Class A space vacancy rate will continue to be in the single digits with Class B and C space in the low teens. Class A rates will remain in the $5.00 to $6.00 per square foot, NNN, range. We will see at times a 30% differential between Class A and C industrial space as the Class C space becomes more difficult to lease over time. Our expectation will be that Class C buildings will see redevelopment in the relatively near future as development costs continue to increase.
HOWARD COUNTY
HOWARD COUNTY
Industrial
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 160 3,416,511
Howard 32,100County Industrial Vacancy Rate
Office/Warehouse 199 1,208,854 31,404 1,240,258 9,543,343 12.7% .03% (180,538) $7.11
2008 2009 2010 2011 2012
Flex 134 522,918
Absorption
Sublease Vacant (SF) Total Vacant (SF) Total Existing RBA (SF)
12/26/12
197,132 720,050 5,438,156 9.6% 3.6% (39,349) $9.42 0

33,337
3,448,611
22,869,910 25%
20% 14.9% 15% .01%
Construction
Vacancy Rate Direct % Vacancy Rate Sublease % Net Absorption (SF)
219,904 $4.63
0% 5%
10%
Asking Rents
Average Rental Rate (NNN)

Howard County Industrial 2012 Completed Construction SF 12/26/12 Market Inventory
0 82,000
Absorption
2013 Planned Construction SF

Howard County Industrial Vacancy Rate
12/26/12
115,000
Absorption (SF)
Vacancy Rate (%)

25% 20% 15% 10% 5% Bulk Office/Whs Flex
60 25 15
0% 2008 2009 Average Asking Rental Rate
2010
2011
2012
300 200 100 0 -100 -200 -300 -400 Howard -500 Industrial County -600 Market -700 Inventory 2008 2009
thousands
12/26/12
2010 2011 2012
Average Rental Rate PSF, NNN

$14.00
Market Inventory (%)

15%
Absorption $12.00
$10.00 $8.00
HOWARD COUNTY
300 200 100 $4.00 0 -100 $2.00 -200 $0.00 -300 -400 -500 -600 -700
$6.00
thousands
25%
60% Bulk Office/Whs Flex
2008
2009
2010
2011
2012
2008
2009
2010
2011
SIGNIFICANT ACTIVITY Bulk

2012
Office/Whs Flex
SELECTED LEASING TRANSACTIONS Tenant Address BMG Metals 6945 San Tomas Road Rapid Response 8705 Bollman Place Parts Channel Inc 10650 Riggs Hill Road Valley Relocation 8155 Stayton Drive Ryder Integrated Logistics 8240 Preston Court My Office Products 8750 Larkin Road Prestige Beverage 6735 Business Parkeay Creative Recycling Systems 7090 Troy Hill Drive
60 25 15
SF Class/ Product 72,240 Average Asking Rental Rate Class B, Bulk 72,000 Class B, Bulk 58,710 Class B, Bulk 53,185 $14.00 Class B, Bulk 46,555 Class B, Bulk $12.00 42,545 Class B, Bulk 40,500 $10.00 Class A, Bulk 41,600 Class A, Bulk
$8.00
Average Rental Rate PSF $4.36, NNN $4.55, NNN $4.67, NNN $3.95, NNN $5.75, NNN $4.56, NNN $4.95, NNN $5.15, NNN
Howard County - Industrial
US ROUTE 1 CORRIDOR
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 136 2,696,393 32,100 2,728,493
US Route 1 Industrial
Office/Warehouse 157 836,132 31,404 867,536 7,083,390 11.8% .04% (197,151) $5.72 0
2008 2009 2010 2011 2012
Flex 20 88,158 5,520

12/10/12
Absorption
93,678 703,971 12.5% 0.8% (23,320) $7.33 0 33,337
Vacancy % 18,539,682
Construction
14.5%
16% 14% .02% 12% 10%
111,557 8% $5.15 4%
12/10/12
6%
Asking Rents

US Route 1 Industrial 2012 Completed Construction SF Market Inventory
2% 0%
2013 Planned Construction SF US Route 1 Industrial

Vacancy %
12/10/12
82,000
Net Absorption
0
Absorption (SF)
Vacancy Rate (%)

14% 12% 10% 8% 6% 4% 2% 0% Bulk Office/Whs2008 Flex
70 27 2009 3
thousands
16%
2010
2011
2012
500 400 300 200 100 0 -100 -200 -300 -400 US Route 1 Industrial -500 2008 2009 Market Inventory
12/10/12
2010
2011
2012
Average Asking Rental Rate (PSF)
Average Net Absorption

$10.00 $9.00 $8.00 500 $7.00 400 $6.00 $5.00
Rental Rate PSF, NNN

3% 27% 70% Bulk Office/Whs Flex
thousands
300 200 $4.00 100 $3.00 0 $2.00 -100 $1.00 -200 $0.00 -300 -400 -500
2008
2009
2010
2011
2012
HOWARD COUNTY
2008
2009
2010
2011
Bulk SIGNIFICANT ACTIVITY Office/Whs Flex
2012
SELECTED BUILDING SALES - INVESTMENT Address Size Price US Central Portfolio 65 Prop. $770,000,000 7481 Coca Cola Drive 456,500 SF $40,644,173 7075-7081 Oakland Mills Rd 444,765 $20,700,000 7125 Troy Hill Drive 30,000 SF $6,768,446 SELECTED BUILDING SALES - USER Address Size Price 7010 Troy Hill Road 30,000 $4,000,000 6650 Santa Barbara Road 40,700 $2,700,000 9620 & 9630 Gerwig Lane 61,320 $2,500,000 7410 Coca Cola Drive 3,883 $688,000 8
70 27 3
Price PSF Varies $89.03 $46.54 $103.04
Product Buyer Average Asking Rental Rate (PSF) Industrial Whs $10.00 Whs $9.00 Whs
$8.00 $7.00
Blackstone R.E. Partners VI Industrial Income Trust TA Associates Realty Terreno Realty Corporation
Seller Dexus Prop. Group Lincoln Property Co. Emory Properties Ryan Commercial Seller Brandy, LLC Lynott & Lynott Emory Properties Mid Atlantic Beauty
Price PSF Product $6.00 Whs/Showroom $133.33 $5.00 $66.34 Flex $4.00 $40.77 Whs $3.00 $177.18 Whs/Condo
$2.00 $1.00
Buyer FESCO Emergency Sales S&H Flooring Metropolitan Rolling Door Joseph Gagnier
Howard County - Industrial
COLUMBIA
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 24 720,118 0 720,118
Vacancy % Columbia Industrial
Office/Warehouse 42 372,722 0 372,722 2,459,953 15.2% 0% 16,613 $9.50

2008 2009 2010
Flex 114 434,760 191,612
Absorption
12/10/12
626,372 4,734,185 9.2% 4% (16,029) $11.50
4,330,228
45% 16.6% 40% 35% 25% 15%
Construction
0% 30% 108,347 20%

10% $4.10
Asking Rents
Average Rental Rate (NNN) 2012 Completed Construction SF Market Inventory 2013 Industrial Construction SF Columbia Planned
Vacancy %
Columbia Industrial
1/3/13
5%
0 0% 0
02011
2012
0
0
12/10/12
115,000
Absorption (SF)
Vacancy Rate (%)

45% 40% 35% 30% 25% 20% 15% 10% Bulk 5% Office/Whs Flex 0%
Net Absorption (SF)
38 21 41
Average Asking Rental Rate (PSF)
2008
2009
2010
2011
2012
600 400 200 0 -200 -400 -600 -800 Columbia Industrial -1,000 -1,200 2008 Market Inventory
thousands
1/3/13
2009 2010 2011 2012

$14.00
Net Absorption (SF)

$12.00 $10.00
600 400 200 $6.00 0 $4.00-200 -400 $2.00-600 $0.00-800 -1,0002008 2009 2010 2011 2012 -1,200 2008 2009 2010 2011 2012
$8.00
thousands
41%
38%
21%
Bulk Office/Whs Flex
HOWARD COUNTY
SIGNIFICANT ACTIVITY
Asking Date TBD 2013 4Q Average Asking Rental Rate3Q TBD 2013 (PSF) TBD 2013 3Q TBD 2013 2Q TBD$14.00 2013 3Q $6.75, NNN 2013 1Q
$12.00 $10.00 $8.00
Bulk Office/Whs Flex Rent PSF 38 21 41 Delivery
2013 PLANNED CONSTRUCTION Address SF Product 8235 Patuxent Range Road 250,000 Bulk Dorsey Run Road 200,000 Bulk Snowden River Parkway 115,000 Off/Whs 7221 Montevideo Road 33,337 Flex 8810 Corridor Road 32,000 Off/Whs 7587 Montevideo Road 25-80,000 Whs BUILDINGS DELIVERED IN 2012 - NONE REPORTED
Owner/Developer Chesapeak R.E. Group FODay Weiland Sanford Companies Gaulin Properties LLC Corridor Road, LLC Exeter
SELECTED LAND SALES - INVESTMENT - NONE REPORTED
ANNE ARUNDEL COUNTY

MARKET OVERVIEW Although the mind-set of the general industrial real estate market remained cautious, transactional activity in the Anne Arundel submarket was quite positive. Vacancy rates lowered this year, settling in at just under 11% at the end of 2012, while net absorption went into significant positive territory for the first time in several years, with more than 400,000 square feet in gains. Several firms, including Mohawk, Rommel Engineering, and Advantage Flooring either expanded into or renewed their commitment to Anne Arundel County in 2012. Anne Arundel County remains one of the strongest commercial real estate markets within the Baltimore Metropolitan Area due its diverse economic base, excellent transportation network and proximity to both Baltimore and Washington. The county has a strong median household income of just over $82,000 and the current unemployment rate is under the national average at 5.6%. The Department of Defense continues to be its single largest employer and BWI Airport, which continues to set records for passenger traffic, is going through a major $100 million expansion including security improvements, passenger amenities and larger commercial space. MARKET OUTLOOK Anne Arundel maintains a strong mix of economic drivers, including the federal government, BWI Airport, and the expanding fields of medical, technical and security fields, and these drivers moved the county forward in 2012. We believe these strengths will continue to pay dividends for commercial real estate in 2013, as companies maintain efforts to strengthen their balance sheets and business improves throughout the region. Although there will be some initial caution in the early part of 2013 due to potential expiration of the Bush tax cuts and the impending fiscal cliff, the flow of business should pick up once these issues have been resolved. The county made significant strides in 2012 due to the addition of jobs and income through the BRAC initiative, expansion of BWI, and the growth of many of its home grown companies, 27 of which have been named among the fastest growing in the country. There continues to be very little new speculative industrial construction and that will further stabilize rental rates, reduce vacancy and increase annual absorption in 2013.
Baltimore
2
Howard County HANOVER BWI 97 AIRPORT
100
175 295 FORT MEADE SEVERN
GLEN BURNIE
97
ODENTON 32
PASADENA SEVERNA PARK
2 50
CROFTON
50
ANNAPOLIS
To Chesapeake Bay Bridge
214 2
SUBMARKETS
ke B ay
BWI AIRPORT MARLEY NECK/ GLEN BURNIE ODENTON
Calvert County
annE arundEl county

10
Ch esa pe a
ANNE ARUNDEL COUNTY

Industrial
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 110 1,653,000 164,000
Anne Arundel County Industrial Vacancy Rate
Office/Warehouse 92 650,000 0 650,000 5,393,000 12.1% 0%

2008 2009 2010 2011
Flex 231 982,000
Absorption
12/10/12
16,000 998,000 9,600,000 10.4% 0.2% 337,000 $5.75 0

0
1,817,000
16% 14%
14,800,000 11.1%
12% 10% 8% 6% 4% 2%
Construction
Vacancy Rate Direct % Vacancy Rate Sublease % Net Absorption Industrial Anne Arundel County (SF)
1.1%
12/10/1214,000 0%
60,500
2012
Asking Rents
Market Inventory Average Rental Rate (NNN)
$4.45
12/10/12
$4.95 0 0
Absorption (SF)
2012 Completed Construction SF

Anne Arundel County Industrial
2013 Planned Construction SF Vacancy Rate

Vacancy Rate (%)
250,000
Absorption
thousands
16% 14% 12% 10% 8% 6%
400 300 200 100 0
-100 Anne Arundel County Industrial
Bulk 2% Office/Whs Flex 0%
4%
49 18 33
2009 2010 2011 2012
Market Inventory -300

-400 -500 2008 2009 2010 2011 2012
-200
1/18/13
2008
Average Asking Rental Rate

$12.00 $10.00 $8.00 $6.00 $4.00 $2.00
33%
49%
Absorption
18% Bulk Office/Whs Flex
thousands
$0.00
400 300 200 0

2008 2009 2010 2011 2012
ANNE ARUNDEL COUNTY 100 SELECTED LEASING TRANSACTIONS -100 Tenant -200 Powercon -300 NB Handy Company Terrys Tire Town -400 Grid One Solutions -500 Beyond The Label 2008 Sotech Solara Flooring Group Lighthouse Church Eastern Antenna Alignment
Address SF Bulk Office/Whs 1731 Midway Road 75,000 Flex 7495 Race Road 69,564 1780 Crossroads Drive 45,000 6711 Baymeadow Drive 42,000 7600 Energy Parkway 2012 33,748 2009 2010 2011 12011 Guilford Road 18,184 12011 Guilford Road 10,400 100 Langley Road 7,000 7609 Energy Parkway 3,970 Product Bulk Bulk Bulk Flex O/W O/W O/W Flex Flex Avg Rental Rate PSF $4.00, NNN $5.75, NNN $5.00, NNN $4.50, NNN $4.75, NNN $5.75, NNN $6.00, NNN $6.50, NNN $6.25, NNN
49 18 33
11
Anne Arundel County - Industrial
BWI AIRPORT
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 45 861,249 164,216Industrial BWI Airport 1,025,465 6,261,316 25% 13.8% 20%
15% 2.6% 10% 5% 0% Vacancy Rate
Office/Warehouse 32 332,600 0
12/17/12
Flex 74 436,867 12,840 449,707 3,093,868 14.1% 0.4% 43,291 $9.47
Absorption
332,600 2,078,137 16.0% 0% 65,685 $5.87
Construction
67,871 $5.98 0 250,000

Net Absorption 2008 2009 2010
Asking Rents

BWI 2012Airport Industrial Completed Construction12/17/12 SF Market Inventory
2011
2012
0
51,120
BWI Airport Industrial Vacancy Rate

Vacancy Rate (%)
20% 15% 10%
Bulk Office/Whs 5% Flex 55 18 27
12/17/12
0
Absorption (SF)
thousands
25%
200 100 0 -100
2008 2009 Average Asking Rental Rate
0%
BWI Airport Industrial

2010 2011 2012
-200
12/17/12
2010 2011 2012
Market Inventory
2008
2009

$10.00 $9.00 Net Absorption $8.00 $7.00 $6.00
thousands
200 100 0
2008 2009 2010 2011 2012
$5.00 $4.00 $3.00 $2.00 $1.00 $0.00
-100 -200
ANNE ARUNDEL COUNTY

Address
2008
2009
2010
2011 2012 SIGNIFICANT
ACTIVITY Bulk
Office/Whs Flex
SELECTED BUILDING SALES - INVESTMENT

SF Price Price PSF
55 18 27
Product
Buyer
Seller
7462 Candlewood Rd 375,344 7621 Energy Parkway 222,636 7463 New Ridge Road 198,369 7495 Race Road 125,000 SELECTED BUILDING SALES - USER
Address SF
$23,695,000 $15,225,000 $11,650,000 $8,250.000

Price
$63 $68 $59 $66

Price PSF
Bulk Teachers Insurance Bulk ITT Brandon Wood Average Asking Rental Rate Bulk ITT Brandon BWI Ctr II Bulk Exeter Properties
$10.00 $9.00 O/W
COPT High St. Equity Bavar Prop Group Preston Derbry LLC
Seller
Product
Buyer
7240 Standard Drive 7135 Standard Drive 701 Pittman Road
30,175 10,783 10,985
$1,837,500 $1,310,000 $1,300,000
$61 $121 $118
O/W $8.00
$7.00 $6.00
Bulk
Advantage Flooring Tidewater Glazing Nova Services
Groco Trugreen Landcare J. Lomma Inc
MARLEY NECK/GLEN BURNIE

FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 31 233,000
Marley Neck/Glen Burnie Industrial
Office/Warehouse 26 151,000 0 151,000 1,194,000 12.7% 0% (11,000) $4.25

2008 2009 2010 2011 2012
Flex 41 69,000
Absorption
12/10/12
0 69,000 1,398,000 4.9% 0% 47,000 $5.45 0

0
233,000 Vacancy Rate 5,585,000 4.2% 12% 0% 8%

4% 2% 0% 10% 6% (128,000) 14%
Construction
Asking Rents
Average Rental Industrial (NNN) Rate Marley Neck/Glen Burnie

Market Inventory 2012 Completed Construction SF
12/10/12
$4.15 0

Vacancy Rate
Marley Neck/Glen Burnie Industrial
12/10/12
0
Absorption
0
Absorption (SF)
Vacancy Rate (%)

12% 10% 8% 6% 4% 2%
Bulk 0% Office/Whs Flex 69 14 17
thousands
14%
100 50 0 -50
Marley -100 Neck/Glen Burnie Industrial

2009 2010 2011 2012
12/10/12
2008
Market Inventory -150 2008
2009
2010
2011
2012

$8.00 Absorption $7.00 $6.00

thousands
$5.00 $4.00
100
$3.00 50 $2.00 $1.00 $0.00
0
2009 2010 2011 2012
-50 2008
-100
ANNE ARUNDEL COUNTY SELECTED LAND SALES Address 3366 Fort Meade Road 400 S. Royal Lane (3 parcels) Brandon Woods *
-150
2008
2009
2010
2011
Bulk SIGNIFICANT ACTIVITY Office/Whs 2012 Flex
69 14 17
INVESTMENT Size Price 20 AC $2,500,000 31.3 AC $14,840,000 10 AC $275,000
Price/Acre $125,000 $473,819 $27,500
Average Product Asking Rental Rate Buyer Comml/Ind Tischer Family Trust Industrial Liberty Property Trust $8.00 Industrial CD Resource Ct., LLC
$7.00 $6.00 $5.00
Seller 3366 Laurel Fort Meade Cabot Properties Coach AM Group Holdings
SELECTED LAND SALES - USER - NONE REPORTED * Denotes bankruptcy sale.
$4.00 $3.00 $2.00
13
ODENTON
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 12 542,000 78,000 620,000 Vacancy Rate 1,800,000 30.1% 35% 4.3% 25% (216,000) 15% $4.25 5% 0 0
Net Absorption
0% 2008 2009 2010 10% 20% 30% 40%
Office/Warehouse 7 16,400 15,280 31,680

12/14/12
Flex 11 184,200 0 184,200 535,000 34.4% 0 (156,100) $6.95
Absorption
Odenton Industrial
142,000 11.6% 10.8% (31,680) $5.95

2011
Construction
Asking Rents
Average Rental Rate (NNN) 2012 Completed Construction SF

Odenton Planned Industrial 2013 Inventory Construction SF Market Vacancy Rate
Odenton Industrial 12/14/12
2012
0
0
12/14/12
0
Absorption (SF)
Vacancy Rate (%)

40% 35% 30% 25% 20% 15% 10% 5% Bulk Office/Whs 0% Flex
73 6 21
thousands
100 0 -100 -200 -300
Odenton Industrial -400

2009 2010 2011 2012
12/14/12
2008
Market Inventory
2008 2009 2010 2011 2012

Net Absorption
$9.00 $8.00 $7.00 $10.00

thousands
$6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00
100 0
-100 -200 -300 -400

2008 2009 2010 2011 2012
ANNE ARUNDEL COUNTY
2008 2009 2010 2011 2012
Bulk SIGNIFICANT ACTIVITY
Office/Whs Flex
73 6 21
BUILDINGS DELIVERED IN 2012 - NONE REPORTED 2013 PLANNED CONSTRUCTION Address SF New Ridge Road 250,000 Product Bulk
Asking Rent PSF $10.00 TBD

$9.00 $8.00 $7.00
Delivery Date 4Q 2013
Owner/Developer Liberty Property Trust
14
$6.00 $5.00 $4.00
PRINCE GEORGES COUNTY

MARKET OVERVIEW For Prince Georges County, 2012 proved to be a rebound year from the dismal performance of 2011. With the overall vacancy rate decreasing and absorption increasing throughout the county in most product types and submarkets, there is the indication that activities picked up and deals were getting done. However, this positive activity did not create an environment to stimulate new construction for one glaring reason; rental rates were eroding. Even though 2012 was an active year, much of that activity was pent up growth that had stalled during 2011 and the reduction of rental rates is what brought these deals out of their doldrums. With rent stagnating, not many new projects went forward. There is still plenty of space in new product that has remained vacant as it competes for cheaper second generation relet space. Projects at the Brickyard in Laurel, Melford in Bowie, and Steeplechase in Capitol Heights all offer virgin space for lease. The good news is when they do lease, there are institutional investors waiting to pay low cap rates to acquire these quality properties if they are available. Look at the price paid by Prologis for the purchase of 11730-11750 Baltimore Avenue in Beltsville. MARKET OUTLOOK
Calvert County
Montgomery County
198 95 1
Howard LAUREL County
SUBMARKETS INNER BELTWAY OUTER BELTWAY NORTHERN P.G. COUNTY

1
295
BELTSVILLE
197
Anne Arundel County BOWIE
495 95
GREENBELT LANHAM
HYATTSVILLE HYATTSVILLE
50
MITCHELLVILLE LARGO
WASHINGTON, DISTRICT OF COLUMBIA
LANDOVER
214
CAPITOL HEIGHTS
214
202
301
4 495 210 95 4
UPPER MARLBORO
CLINTON
IN
5
FORT WASHINGTON
301
BRANDYWINE
IA
373 210
Charles County
381
princE gEorgEs county
It looks like the new year will hobble along much like last year. With moderate growth predicted, rates will also rise moderately only because there is no growth on the supply side. Investment sales will occur as the remaining vacant product gets leased to good credit tenants which will encourage low cap rates. Institutional owners with less quality in their portfolios will seek to trim this excess. If there is any dramatic new development, it will come from the projects starting as mixeduse or adding mix to the existing commercial offerings. Konterras new Town Center will impact Northern Prince Georges with retail, office, residential and flex. Existing projects such as the Brickyard in Laurel and St. Johns Melford project in Bowie may benefit from the addition of residential to their mix which will spur on retail development and hopefully greater tenant interest in their buildings. As these projects evolve and as the economy continues to rebound, it appears that 2013 is shaping up to be a year in transition.
15
VI
RG

Industrial
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 236 1,832,432 147,390 1,979,821
Prince Georges County Industrial Vacancy Rate 20,514,382
Office/Warehouse 346 1,665,276 78,279 1,743,555

12/12/12
Flex 589 2,438,555 46,170 2,484,725 20,788,975 11.7% .2% 335,999 $6.13
Absorption
18,045,423 9.3% .4% 517,941 $6.09
Construction
9.0%
20%
.7% 16%
14% 12% 996,275 10% 8% 6% 2%
18%
Asking Rents

Market Inventory Prince Georges County Industrial 12/12/12
$5.90 4%
0% 0
2008
2009
2010
2011
0 0
2012
0
0

Prince Georges County Industrial Vacancy Rate
12/12/12
141,226
Net Absorption
Vacancy Rate (%)

20% 18% 16% 14% 12% 10% 8% 6%
Bulk 2% Off/Whs 0% Flex
Absorption (SF)
1,200 1,000 800 600 400 200 0 -200 -400 -600 Prince Georges County Industrial -800 2008 2009 2010
thousands
4%
2008 2009 Average Asking Rental Rate
33 32 35
12/12/12
2011 2012
2010
2011
2012
Market Inventory

$8.00
Net Absorption
$7.00 $6.00
thousands
$5.00 $4.00 $3.00 $2.00 $1.00 $0.00
1,200 1,000 800 600 400 200 0 -200 2008 -400 -600 -800
35%
33%
32%
2009
2010
2011
2012
2008
2009
2010
2011 2012 SIGNIFICANT
ACTIVITY
SF Class Average Asking RentalB Rate 364,562 54,000 C 32,843 C $8.00 20,000 B 12,000 B
$7.00 $6.00
Bulk Off/Whs Flex 33 32 35
SELECTED LEASING TRANSACTIONS Tenant Nash Finch Rio Grande Food Products The Life Center Adnet Systems Aries
Address 6304 Sheriff Road 8610 Cherry Lane 5610 Linda Lane 7515 Mission Drive 5633 Commerce Drive
Product Whs Whs Flex Flex Whs
Submarket Inner Beltway Northern PG Inner Beltway Northern PG Outer Beltway
16
$5.00 $4.00
Prince Georges County - Industrial
INNER BELTWAY
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 153 1,189,882 62,429 PG Inner Beltway Industrial
Vacancy Rate 1,252,311
Office/Warehouse 220 888,257 72,944 961,201 11,061,555 8.0% .7% 418,108 $6.00
2008 2009 2010 2011
Flex 294 673,725
Absorption
12/12/12
0 673,725 7,992,507 8.4% 0% (117,951) $6.56
13,030,937
25%
Construction
9.1% 20% .5% 15%

10% 684,431
Asking Rents

PG Inner Beltway 2013Inner BeltwayIndustrial Planned Construction SF PG Industrial Vacancy Rate
Market Inventory 12/12/12
$5.53
5% 0%
0
12/12/12
2012
0
0
141,226
Net Absorption
0
Absorption (SF)
Vacancy Rate (%)

20% 15% 10% 5%
Flex 0% Bulk Office/Whs 40 35 25
PG Inner
2009 2010 2011 2012
thousands
25%
2008
Market Inventory2008
800 700 600 500 400 300 200 100 0 -100 -200 Beltway -300 -400
Industrial
2009 2010 2011 2012
12/12/12

$8.00
Net Absorption
$7.00 $6.00
thousands
800 $5.00 700 $4.00 600 500 $3.00 400 $2.00 300 200 $1.00 100 $0.00 0 -100 -200 -300 -400
25% 40%
35%
2008
2009
2010
2011
2012
2008
2009
2010
2011
SIGNIFICANT ACTIVITY Flex
2012
Bulk Office/Whs
40 35 25
SELECTED BUILDING SALES Address 6340 Columbia Park Rd (3 prop) 7610 Old Landover Road 11730-11750 Baltimore Avenue 14851 Sweitzer Lane
INVESTMENTS SF Price 285,545 $27,750,000 251,227 $12,100,000 221,000 $27,000,000 84,961 $$7,000,000
Class/ Price PSF Asking Rental Buyer Average Product Rate $97.18 Flex Morgan Stanley $48.16 B/Whs Exeter Prop. Group $8.00 $122.17 A/Bulk Prologis $82.37$7.00 A/Bulk Terreno Realty Corp
$6.00 $5.00 $4.00 $3.00
Seller American Realty Advisors NPV / Direct Invest Beltsville Express LLC Kenneth Gilman
17
OUTER BELTWAY
FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 36 452,350
PG Outer Beltway Industrial Vacancy Rate
Office/Warehouse 32 198,917 0 198,917 2,192,290 9.1% 0% 58,829 $6.69

2008 2009 2010 2011 2012
Flex 134 1,059,195
Absorption
12/12/12
34,000 1,093,195 7,378,572 14.4% 0.5% 376,779 $5.84 0

0
452,350
25% 4,128,011 20% 11.0%
Construction
0%
15% 10%
139,101
5%
Asking Rents

PG Outer Beltway Industrial 12/12/12
$6.82 0% 69,567
12/12/12
2013 Planned Construction SF PG Market Inventory Outer Beltway Industrial

Vacancy Rate
0
Net Absorption
0
Absorption (SF)
Vacancy Rate (%)

thousands
25% 20% 15% 10% 5%
Bulk 0% Office/Whs 2008 Flex 30 16 2009 54
500 400 300 200 100 0
PG Outer Beltway Industrial -100

2010 2011 2012
12/12/12
-200 Market Inventory
2008 2009 2010 2011 2012
Net Absorption
$9.00 $8.00 $7.00
$10.00
thousands
$6.00
500
400 $5.00
$4.00 300 $3.00 $2.00 $1.00 $0.00
200 100 0
2008 2009 2010 2011 2012
-100 -200
2008 2009 2010 2011 2012
Bulk SIGNIFICANT ACTIVITY Office/Whs Flex
SELECTED BUILDING SALES - USER Address SF 2300 Craftsman Circle 175,000 4900 Philadelphia Way 84,000 9001 Hampton Overlook 67,776 3331 75th Avenue 10,100 BUILDINGS DELIVERED IN 2012 Address SF 8520 Pepco Place 69,567
18
Price $4,700,000 $6,500,000 $4,728,160 $825,000 Delivery Date 1Q 2012
Class/ Price PSF Product Buyer Average Asking Rental Rate $26.86 C/Whs US Electronics $77.38 A/Whs Alsco $10.00 $69.77 B/Whs G&G Outfitters $81.68 $9.00 C/Whs Dannico, LLC
$8.00 $7.00 Asking Rent PSF $6.00 Build-to-Suit User $5.00 $4.00 $3.00
30 16 54
Seller NC Ventures VI Craftman LLC The Cohen Companies Kahn Paper Co. Mitchell/Gardner Owner/Developer Mid Atlantic Construction/ Cornell Associates
Type A/Bulk
NORTHERN P.G. COUNTY

FORECAST
Vacancy Rate
STATISTICS
Building Product Number of Buildings New/Relet Vacant (SF) Bulk 47 190,199 84,961
Northern PG 275,160 Industrial Vacancy Rate
Office/Warehouse 93 578,102 5,335

12/12/12 583,437
Flex 162 750,865 12,170 763,035 5,411,119 13.9% .2% 20,651 $7.88
Absorption
3,355,434 5.7% 2.5%

15% 20% 25%
4,724,051 12.2% .1% 29,714 $7.03
Construction
172,743 10%
5% $6.83
Asking Rents
Average Rental Rate (NNN) 2012 Completed Construction SF 2013 Planned Construction SF Market Inventory Northern PG Industrial
Vacancy Rate
Northern PG Industrial 12/12/12
00%
12/12/12
2008
2009
2010
2011
0 0
2012
0
0
0
Net Absorption
Vacancy Rate (%)

20% 15% 10% 5%
Flex 0% Bulk Office/Whs 25 35 40
Absorption (SF)
200 150 100 50 0 -50 -100 -150 -200 Northern PG Industrial -250 Market Inventory 2008 2009 2010 2011 2012
thousands
25%
12/12/12
2008
2009
2010
2011
2012

$9.00 Net Absorption $8.00 $7.00
200 $5.00 150 $4.00 100 $3.00 50 $2.00 0 $1.00 -50 $0.00 -100 -150 -200 PRINCE GEORGES COUNTY -250
thousands
$6.00
25% 40% 35%
2008
2009
2010
2011
2012
SIGNIFICANT ACTIVITY Bulk

2008 2009 2010 2011 2012
Office/Whs Flex
2013 PLANNED CONSTRUCTION Address SF 9260 Alaking 93,789 1030 Hampton Park Blvd 48,557
25 35 40
Class/Product A / Bulk A / Bulk
Asking Rent PSF Delivery Date Average Asking Rental Rate $6.90, NNN 1Q 2013 $7.00, NNN 1Q 2013
$9.00
Owner/Developer ATAPCO ATAPCO Seller Merchants Terminal Corp
SELECTED LAND SALES - INVESTMENT Address Size Price 1811 Cabin Ranch Dr 28 AC $9,700,000
Price/AC $8.00 Product $345,000 $7.00 Bulk/Whs

$6.00 $5.00 $4.00 $3.00
Buyer Carlyle Group
19
HOWARD COUNTY
Office Submarket Map
Carroll County Frederick County
70 144
32
Baltimore County
70 144
COLUMBIA
97
32
howard county
ELLICOTT CITY
Montgomery County
CLARKSVILLE
29 32
100
ELKRIDGE
108
95 29 1
LAUREL JESSUP Anne Arundel County
SUBMARKETS COLUMBIA NORTH COLUMBIA SOUTH COLUMBIA TOWN CENTER
MARKET OVERVIEW
The overall Howard County market has continued its four year crawl back from the Great Recession of 2008. Howard County continues to be one of the leading commercial real estate markets in the state. We have seen a decrease in vacancy rates and encouraging signs of net absorption in certain submarkets of the county. New office development is being planned at Maple Lawn, a medical office building under construction at Waterloo Road, as well as planned mixed-use development in Columbia Town Center. Howard Hughes Corporation (HHC) continues to be a market mover. The company announced the acquisition of the former Ryland Homes headquarters at 70 Columbia Corporate Center and subsequently announced that Enterprise Foundation will be leasing in excess of 76,000 square feet. Whole Foods will break ground in March 2013 for a 45,000 square foot store opening in the fall of 2014 in the former Rouse Companys headquarters. Other Columbia Town Center activity includes First Potomac Realty Trust investing $7.5 million in renovations in the Merrill Lynch building and GGP pumping more than $2 million into 10 and 20 Columbia Corporate Center. The former WCI Communities site, across from The Mall in Columbia, is in the hands of developer David Costello, who will be building a multi-use project on the site.
HOWARD COUNTY
MARKET OUTLOOK
We believe 2013 will be similar to its predecessor year as several companies will take a wait and see approach relating to the fiscal cliff and sequestration issues before Congress. However, the silver lining in the marketplace will occur in investment sales which remain very strong. User sales/owner occupied real estate seems to be on a slight uptick. Interest rates remain very low for occupiers who can achieve sub 4% financing in todays market. Certain demand drivers, such as government healthcare contractors doing work for Center for Medcaid Medicare Services (CMMS), located in Woodlawn, Maryland, have to be within a 10 mile radius of CMMS. Howard County has benefitted from these subcontractors being able to stay within the 10 mile radius, and having access to a highly educated workforce and an abundance of amenities for their employees. We forecast that the absorption and rental rates should continue to rise although the abundance of this activity may occur mid-year 2013.
20
HOWARD COUNTY
Office Market
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings

Howard New/Relet Vacant (SF) County Office
Class A County Office Howard 67 Net Absorption

1/3/13 1,028,743 Vacancy Class A
Class B 236 938,829 12,284 951,113 8,902,928 10.5% .1% 168,635 $22.00 161,399
Absorption
Sublease Vacant (SF) Total Vacant (SF)
82,360 6,851,798 15% 1.2%

thousands
25% 20% 15% 10% 5%
1,110,103
Total Existing RBA (SF)

Construction
Vacancy Rate Direct %
Vacancy Rate Sublease % Net Absorption YTD (SF)0%

Asking Rents
Howard County Office Vacancy Class A
108,242
2008 2009 2010 2011 2012
Average Rental Rate (Full Service) 2012 Completed Construction SF 2013 Planned Construction SF
1/3/13 Vacancy Class B
$24.76 110,000 306,400
450 400 350 300 250 200 150 100 50 0 -50
0 2008 2009 2010 2011 2012
Class A Vacancy Rate (%)

25% 20% 15% 10% 5% 0% 2008 2009
Relet
20% 15% 10% 5% 0%
12/12/12
Class B Vacancy Rate (%)
Market Inventory

2008 2009 2010 2011 2012
12/12/12
Howard County Office Net Absorption
2010
Sublet
2011
2012
Howard County Office
Relet
Sublet
Absorption (SF)
thousands
Vacancy Class B 450
Average Rental Rate (%) PSF, FS
$30.00 $25.00 $20.00 $15.00 $10.00 $5.00
20% 15% 10% 5% 0%
400 350 300 250 200 150 100 50 0 -50
Class B 57%
Class A 43%
2008 2009 2010 2011 2012

Class A Class B
$0.00
2008
2009
2010
2011
2012
Class A Class B
43 57
Class A
2011 2012
Class B
Market Inventory 2008
2009
2010
HOWARD COUNTY SELECTED LEASING TRANSACTIONS Tenant US Government US Government Enterprise Foundation XL Health Tenable Class A 43 New Day Financial
Class B 57
Address 9055 Sterling Drive 7205 Riverwood Drive 11000 Brokenland Parkway 6514 Meadowridge Road 7021 Columbia Gateway Drive 8135 Maple Lawn Boulevard SF 153,500 115,000 76,300 68,779 65,975 51,825 Class A B A A A A
21
Howard County - Office
COLUMBIA NORTH
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF) Class A

Columbia North Office
Class B 36 115,671 9,940 125,611 1,288,656 9.0% .8% 84,717 $23.09 68,779 0 2010
Net 10 Absorption
136,028
12/10/12
Total Vacant (SF)
Class A Vacancy
thousands
Absorption
Sublease Vacant (SF) Columbia North Office Total Existing RBA (SF)
21,086 157,114 747,483 18.2% 2.8% (37,123) $24.42
120 100 80 60 40 20 0 -20 -40 -60 2008
25% 20% 15% 10% 5%
Construction
Vacancy Rate Sublease % Net Absorption YTD (SF)

Asking Rents
Average Rental Rate (Full0% Service) 2012 Completed Construction SF

2008
2009
2010
2011
2012
0 52,000
Columbia North Office Class A Vacancy
12/10/12 2013 Planned Construction SF

Class B Vacancy
2009
2011

25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012
12/10/12

25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012
12/10/12
Market Inventory
Columbia North Office Net Absorption
Relet
Sublet
Columbia North Office Average Asking Rental Rate
Relet
Sublet
Absorption (SF)
thousands

$26.00 $25.50 $25.00 $24.50 $24.00 $23.50 $23.00 $22.50 $22.00 $21.50 $21.00
Class B Vacancy 120

100 80 40 20 0 -20 -40 2008 2009 2010 2011 2012
Class B 62%
Class A 38%
25% 60 20% 15% 10%
5% -60 0%
$20.50
2008
2009
2010
2011
2012
Class A Class B
38 62
2008
2009 Class A
2010 2011 Class B
2012
Class A
Class B
Market Inventory
HOWARD COUNTY SELECTED LAND SALES Address 5904 & 5910 Waterloo Rd Columbia Overlook 3330 Rogers Avenue
Class A Class B 38 62
Size 5.69 & 3 AC 18.7 AC 24.59 AC Purchase Price $1,435,200 $5,300,000 $5,000,000 Price Per AC $252,232 $283,422 $203,334 Buyer Kinsley Construction* Chesapeake Partners Waverly R. E. Group Seller Peter Voelkel GGP, Inc. Howard Co. Gov.
22
* Denotes a joint venture with Seller.
COLUMBIA SOUTH
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF) Class A South Office Columbia 40 Absorption Net
Columbia South Office
Class B 102 500,489 81,512
772,044 890,444
Absorption
12/14/12 (revised)
Sublease Vacant (SF) Vacancy Class A Total Vacant (SF) Total Existing RBA (SF)
25% 20% 15%
118,400 4,341,322 17.8% 2.7% 58,911

2009 2010 2011 2012
Construction
Vacancy Rate Sublease % 10% Net Absorption YTD (SF) 5%

Asking Rents
Average Rental Rate (Full Service) 2008 2012 Completed Construction SF

12/14/12 (revised) 2013 Planned Construction SF
0%
$25.14 110,000 254,400
Columbia South Office Vacancy Class A
400 350 300 250 200 150 100 50 0 -50 -100
thousands
582,001 4,459,591 11.2% 1.8% 21,416 $22.39 42,620 0 2009
Vacancy Class B
2008
2010
2011

25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012
12/12/12

14% 12% 10% 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012
12/12/12
Market Inventory
Columbia South Office Net Absorption
Relet
Sublet
Columbia South Office Relet Average Asking Rental Rate
Sublet
Vacancy Class B
Absorption (SF)

$30.00 $25.00 $20.00 $15.00 $10.00 $5.00
Class B 51%
Class A 49%
14% 12% 10% 8% 6% 4% 2% 0%
400 350 300 250 200 150 100 50 0 -50 -100
thousands
2008
2009
2010
2011
2012
2012
$0.00
Class A Class B
2008 2009 2010 2011 2012
49 51
2008
Class A Class B 2009 2010 2011
Class A
Class B
Market Inventory
HOWARD COUNTY BUILDINGS DELIVERED IN 2012

Address 8160 Maple Lawn Blvd 11840 W. Market Place 6514 Meadowridge Road 8210 Wellness Way 13334 Clarksville Pike RBA SF 110,000 42,620 68,779 40,000 10,000 RBA SF 32,000 141,000 52,000 56,700 56,700
Delivery Date 6/12 11/12 3/12 3/12 3/12 Delivery Date 12/13 12/13 12/13 6/13 12/13 Class A B B B B Class B A A A A Asking Rent PSF $30.00 FS $11.50 NNN 100% Leased 100% Leased $16.00 NNN Asking Rent PSF TBD $32.50, FS $25.00, NNN $28.00 + elec. 100% Leased Owner/Developer St. John Properties St. John Properties Merritt Properties Waverly Real Estate 2515 Liberty LLC Owner/Developer Bruce Jaffe St. John Properties Kinsley Construction Abrams Development Abrams Development
2013 PLANNED CONSTRUCTION

Class A Address 49 Class B 51 8810 Corridor Road 8135 Maple Lawn Boulevard 5900 Waterloo Road 6831 Benjamin Franklin Drive 6821 Benjamin Franklin Drive
23
COLUMBIA TOWN CENTER

FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF) Class A Town Center Office Class B Columbia 172,319
12/12/12
Net Absorption
15
20 120,774 0 120,774 855,848 14.1% 0.0% 10,903 $22.77 0 0
Absorption
Sublease Vacant (SF)Columbia Town Center Office Total Vacant (SF)

Vacancy Class A

Construction
30% 25% 20%
Vacancy Rate Sublease % 15% Net Absorption YTD (SF)

Asking Rents
10% 5%
Average Rental Rate (Full0% Service) 2012 Completed Construction SF

2008
12/12/12 2013 Planned Construction SF
2009
2010
2011
2012
Columbia Town Center Office Vacancy Class A
120 176,131 100 1,692,59380 10.2% 60 40 0.2% 20 104,115 0 -20 $24.05 -40 0 -60 -80 0
thousands
3,812
Vacancy Class B
2008 2009 2010 2011 2012

30% 25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012

25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012
Market Inventory

12/12/12
Columbia Town Center Office
Columbia Town Center Office Relet Net Absorption

Vacancy Class B
Sublet
12/12/12
Relet
Sublet
Absorption (SF)

$26.00 $25.00 $24.00 $23.00 $22.00 $21.00 $20.00 $19.00 $18.00
Class B 34%
120 100 80 25% 60 20% 40 20 15% 0 -20 10% -40 5% -60 -80
0%
Class A 66%
thousands
2008 2009 2009 2010 2011 2012 2010 2011 2008 2012
Class A Class B
2008
2009
2010
2011
2012
Class A Class B
66 34
Class A
Class B
Market Inventory
HOWARD COUNTY
Price PSF $137.49 $140.00 $95.00 $153.54 $191.00 Price PSF $81.42 $87.12 Class Office/Flex-Varies Office-Varies A B B Class B B Buyer Greenfield Properties Archon Group Howard Hughes Corp. PRFPR North Ridge Rd Yong Yun Buyer Tecore Wireless OPS Consulting Seller Prologis Goldstar Group GGP, Inc. 2850 N Ridge Assoc Long & Foster Seller Wachovia/Wells Fargo Wachovia/Wells Fargo
SELECTED BUILDING SALES - INVESTMENT Address SF Price 20 Properties 587,000 $80,750,000 4 Properties (Lakeview) 215,662 $20,200,000 70 Columbia Corp. Center 168,647 $16,000,000 2850 N. Ridge Road 42,333 $6,500,000 9171 Baltimore Natl Pike 22,000 $4,200,000 SELECTED BUILDING SALES - USER Class A 66 Class B Address 34 SF 7030 Hi Tech Road 48,000 7050 Hi Tech Road 40,000 Price $3,910,100 $3,488,830
ANNE ARUNDEL COUNTY

Office Submarket Map
MARKET OVERVIEW The Anne Arundel County office market continues to make steady improvement within the marketplace. Both the Class A and Class B office markets experienced a decrease in vacancy rate. Compared to 2011, vacancy rates have lowered from a total (new/relet and sublease space) of 12.5% to 11.4% for Class A space and dropped from 14% to 13.7% for Class B product. Net absorption took a downturn with approximately 305,000 square feet of Class A space absorbed in 2012, compared to approximately 505,000 square feet last year. Class B changed from a positive net absorption of approximately 10,000 square feet in 2011 to a negative 13,000 square feet in 2012. Average full service, office rents for both building classes remained flat staying within the $27.84 per square foot range for Class A and in the $21.43 per square foot range for Class B. The amount of construction remained firm with nearly 208,000 square feet of Class A space completed in 2012 compared to 230,000 square feet in 2011.
50
CROFTON
Baltimore
2
Howard County
HANOVER BWI 97 AIRPORT
100
175 295
FORT MEADE SEVERN
GLEN BURNIE
97
ODENTON 32
PASADENA SEVERNA PARK
MARKET OUTLOOK Demand for office space in Anne Arundel County will continue to grow steadily as local developers, such as Greenberg Gibbons Commercial, Chesapeake Real Estate Group and Corporate Office Properties Trust, are adding new opportunities to satisfy rising demand. Still, the overall business climate remains cautious. Even though the national election took place in November, a new economic concern has emerged called the fiscal cliff. There are several laws that are set to change at midnight on December 31, 2012. The effect of these laws could result in higher taxes and increased spending cuts, resulting in higher unemployment and a possible economic recession. A lack of a resolution by Congress is likely to cause businesses to begin changing their spending in anticipation of these impending changes. In addition, the Unites States is also poised to hit the debt ceiling again within the 1st quarter of 2013. Due to these possible changes in the economy, tenants are going to protect themselves and look for short term deals or termination options. On a positive note, Anne Arundel County will continue to be an ideal location to conduct business due to its proximity to Baltimore and Washington, DC, along with the presence of BWI Thurgood Marshall Airport, the National Security Agency, and Fort Meade. Continued low interest rates, the demand by defense contractors wanting to be near Fort Meade due to the implementation of C4ISR and Cyber Command will continue to draw businesses to the county. According to the Maryland Department of Labor, Anne Arundel Countys unemployment rate has remained the same from last year at 5.6% (Nov. 2012). This is still lower than the state unemployment rate of 6.4% and the national unemployment rate of 7.7%. Compared to the rest of the state, Anne Arundel Countys office market will continue to fare well in 2013.
50
ANNAPOLIS
To Chesapeake Bay Bridge
214 2
Calvert County
annE arundEl county
Ch
esa p
ANNAPOLIS
ea
ke
BWI CORRIDOR
Ba
SUBMARKETS
25
ANNE ARUNDEL COUNTY

Office Market
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF) Class A 93 Anne Arundel County Office 920,909
12/10/12
Class B 247 1,026,917 19,237 1,046,154 7,675,301 13.4% 0.3% (13,054) $21.43 0
2008 2009
12
Absorption
Absorption
Anne Arundel County Office Vacancy Class A
51,609
thousands
972,518 600 8,532,092 500 10.8%400 0.6% 300

200 304,838

Construction
Vacancy Rate Direct % Net Absorption YTD (SF)
Vacancy Rate Sublease %
Asking Rents
Average Rental Rate (Full Service) 2012 Completed Construction SF

2008 2009 2010 2011 2012
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
$27.84100 207,830 0
-100 311,300
Anne Arundel County Office Vacancy Class A
2013 Planned Construction SF 12/10/12

Vacancy Class B
20,000
2010
2011
2012

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

16% 14% 12% 10% 8% 6% 4% 2% 0% Anne Arundel County Office 2008 2009
Market Inventory

2010 2011 2012
12/10/12
2008
2009
2010
2011
2012
Relet Anne Arundel County Office
Sublet
12/10/12
Average Rental Rate PSF (Full Service)
Relet
Sublet
Absorption Vacancy Class B
Absorption (SF)
$35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00
thousands
600 500 400 300 200 100 0 -1002008

2009 2010 2011 2012
Class B 47%
Class A 53%
16% 14% 12% 10% 8% 6% 4% 2% 0%
2008
2009
Class A
2010
Class B
2011
2012
$0.00
2008
2009
2010
2011
2012
Class A
Class B
Class A Class B
53 47
ANNE ARUNDEL COUNTY SELECTED LEASING TRANSACTIONS Tenant SAIC US Government Keyin Ventura Solutions Nationwide Insurance Habitat America
Market Inventory
Address 8193 Dorsey Run Road 410 National Business Park 7740 Milestone Parkway 2721 Technology Drive 2594 Riva Road 180 Admiral Cochrane Drive Price PSF $46 $20 SF 60,000 52,600 30,000 16,500 9,791 7,200 Product Office Office Class A A A A B A Buyer Zumot R.E. Mgmt Daljit Sawhney Avg Rental Rate PSF $30.00-$35.00, FS $37.00, FS $30.00, FS $30.00-$35.00, FS $16.00, NNN $29.50, FS Seller LNR Property Corp C-III Realty Services
SELECTED BUILDING SALES - INVESTMENT Address SF Price 839 AElkridge Landing Rd 51,000 $2,350,000 Class 53 Class B 47 7300 & 7310 Gov. Ritchie Hwy 141,000 $2,850,000
Anne Arundel County - Office
ANNAPOLIS
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF) Annapolis Office Class A 32
12/14/12 (revised)
Class B 96 300,380 5,366 305,746 2,801,662 10.7% 0.2% 11,943 $24.75 0 0
175,407 57,917 233,324
Absorption
Vacancy Class A

Construction
21% 18% 15% 12%
2,099,024 8.4% 2.8% 19,140

2008 2009 2010 2011 2012
Vacancy Rate Direct % Net Absorption YTD (SF)
Vacancy Rate Sublease % 9%

6% 3%
Asking Rents
Average Rental Rate (Full 0% Service) 2012 Completed Construction SF 2013 Planned Construction SF
12/14/12 (revised) Vacancy Class B
$30.00 0 0
Annapolis Office Vacancy Class A

21% 18% 15% 12% 9% 6% 3% 0% 2008 2009 2010 2011 2012
12% 10% 8% 6% 4% 2%

Annapolis Office Market Inventory 1/18/13

2009 2010 2011
0% Annapolis Office 2008
1/21/13 2012
Annapolis Office Net Absorption
Relet
Sublet
12/11/12
Rental Rate
Relet
Sublet
Vacancy Class B
Absorption (SF)

$35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00
160 140 120 12% 100 80 10% 60 8% 40 20 6% 0 -20 4% -40

2% 0%
thousands
Class B 57%
Class A 43%
2008
2008
2009
2010
2011
2012
2012
Class A 2009
Class B 2011 2010
2008
2009
2010
2011
2012
Class A
Class B
Class A Class B
43 57
ANNE ARUNDEL COUNTY $35.00 SELECTED BUILDING SALES - USER $25.00 Address Size $20.00 8531 Veterans Highway 19,500
$15.00 $10.00 SELECTED LAND SALES - INVESTMENT $5.00 Address Size $0.00 1351 Blair Drive 2.05 AC 2012 2008 2009 2010 2011 1296-1308 Crain Hwy 81 AC 810 Crain Highway 4.34 AC 3366 Fort Meade Road 19.96 AC $30.00
Price $3,412,500 Price $4,025,000 $3,300,000 $1,200,000 $2,500,000 Price/PSF $175.00 Price/Acre $1,963,415 $183,000 $277,000 $125,250 Product Office Condo Product Bank Branch Mixed Zoned C4 Dealership Buyer The Coordinating Ctr. Buyer Keith Sherman Hogan Cos. Unknown Tischer Family Seller SP Gateway Corp Seller H&H Rock Corp 1691 LP Thomas Taro Private Partnership
27
Anne Arundel County - Office
BWI CORRIDOR
FORECAST
Vacancy Rate
STATISTICS Building Type Number of Buildings New/Relet Vacant (SF)

BWI Corridor Office Vacancy Rate Class A
Class A
1/3/13
Class B 53 484,059 16,538 500,597 2,657,695 18.2% .6% (24,000) $21.00 0 43,000
2008 2009 2010 2011 2012
588,313 15,548 603,861
BWI Corridor Office Absorption
48
12/10
Absorption
Construction
16% 14% 12% 8% 6% 2%
10% 400 0%
300 200 100 0
10% Vacancy Rate Sublease %
Net Absorption YTD (SF) 4%

Asking Rents
BWI Corridor Office Vacancy Rate Class A
260,000 $28.00
2009 2010 2011 2012 2008
Average Rental Rate (Full0% Service) 2012 Completed Construction SF 2013 Planned Construction SF
Vacancy Rate Class B
1/3/13
207,830 311,300
thousands
20% 18%
5,763,490
500
-100

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

25% 20% 15% 10% 5% 0% 2008 BWI Corridor Office 2009 2010 2011 2012 12/10/12
Market Inventory
2008 BWI Corridor Office 2009
2010
2011
2012 12/10/12
Absorption
Relet
Sublet
Relet Average Asking Rental Rate
Sublet
Absorption (SF)
thousands

$35.00 $30.00 $25.00 $20.00 $15.00 $10.00
Class B 32% Class A 68%
500 Vacancy Rate Class B 400 300
25%
20% 200 15% 100 10% 5% 0%

0
$5.00
-100
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
$0.00
Class A Class B
2008 2009 2010 2011 2012
68 32
Class A
Class B
Class A
Class B
Market Inventory
ANNE ARUNDEL COUNTY BUILDINGS COMpLETED IN 2012

Address 8193 Dorsey Run Road 7031 Ridge Road RBA SF 120,000 87,830
Delivery Date 2/12 11/12 Asking Rent PSF $30-$35, FS $27.50 + Util. Class A A Owner/Dev. Konterra Realty, LLC Archon Group
2013 PLANNED CONSTRUCTION

Address Class 68 7799AArundel Mills Boulevard Class B 32 18 Magothy Beach Road 420 National Business Parkway
RBA SF 171,300 20,000 140,000
Delivery Date 12/13 12/13 12/13
Asking Rent PSF $28.50 + Util. $29.00, NNN $38.00, FS
Class A B A
Owner/Dev. Chesapeake R.E. Group RBP Property Acquisitions COPT
28
RESIDENTIAL LAND
The report from the trenches is that the home building market in Maryland is in recovery mode. The extent of that recovery depends entirely on the county in question. Sales in Montgomery, Howard, and parts of Anne Arundel are doing well enough to whet the appetites of builders and developers alike for new land opportunities. The same cannot be said for those few builders working in tertiary markets such as Cecil, Washington, or Dorchester Counties, where sales for single-family homes in the very low $200s are still difficult to come by. In the mid-level markets of Baltimore, Prince Georges, Charles, and Frederick Counties, builders are selling moderately priced single-family homes typically priced below $450K with all the bells and whistles; but sales are hard pressed to maintain a consistent pace of two or three homes per month. As one builder explained to me, Ill sell two houses a month in a given community. Then sales will drop off the cliff, only to begin again three months later at two sales a month for another couple of months before they stop again. In the mid-level markets, builders are forced to coax buyers into making the commitment to buy by sweetening the deal with free upgrades, incentives, and help with closing costs. The real news in residential land this year was not which builders sold the most homes in Maryland (for the umpteenth time, Ryan Homes), or which builders went out of business (none that comes to mind, after the extreme herd-culling of 2007 and 2008). No, the real news this year is how the state of Maryland has continued to make the already difficult and expensive process of land development into something akin to winning an Olympic gold medal: very challenging, very expensive, and given the odds, not very likely without a lot of help. It used to be that if a small investor wanted to make a lot of money for retirement, they simply went twenty miles out of town and bought a large parcel of ground off the main road and waited for development to reach their property. Unfortunately, that method of retirement planning no longer works. Constantly-changing regulations and restrictions on development and the ever-present threat of community opposition all combine to result in down-zoning for the subject property. In todays climate, holding land with an eye toward future development has become a highly-risky investment. Historically, the regulations governing land development have come under the jurisdiction of local government either on a county or incorporated town level with only limited input from the state. Under the OMalley administration, copious regulations and state bureaucracy have been heaped on anyone attempting to develop or build nearly anything in Maryland. OMalley claims that the regulations are his attempt to help save the Chesapeake Bay; however, I have to wonder if regulating the land development and construction industry to near death is the best way to save our bay. Long known as a difficult and expensive state in which to do business, Maryland has raised the bar to the point that it will soon be impossible to construct a moderately-priced home, inexpensive office building, or valueoriented shopping center and still comply with the myriad of new land use regulations. In fact, between the fees and regulations governing storm water management, various development impact fees imposed by counties to cover police and fire protection, new schools and expensive offsite improvement fees, we are seeing, for the first time, developers turning down otherwise good developable land because they simply cannot make their numbers work. rural tier mapping In April of 2012, the Maryland House of Representatives approved a land preservation bill, which will preserve rural land but limit how farmers/land owners may handle disposition of their land. The bill passed with a vote of 93 to 45. The bill requires county governments to establish a four-tier system for septic use, aimed at protecting agricultural lands and forests. Under the new regulations, local jurisdictions were instructed to draw their own tier maps, along the following guidelines: Tier-one areas are served by local water and sewer systems, where growth is essentially maxed out. Tier-two areas are planned growth areas where water and sewer will be extended from existing municipal water systems. Tier-three is a mix of areas that allow septic use and also prohibit major subdivisions on septic in designated areas. Tier-four is designated as protected forest lands under the bill.
The bill limits the size of major developments requiring septic systems, and it discourages rural development needing septic systems in favor of urban development, which can take advantage of public sewer systems. Farmers are rightfully concerned with the development restrictions of the new regulations, since the regulations reduce the value of land and, therefore, reduce the equity they can borrow against to buy supplies and equipment. The new bill remains unpopular with farmers, rural landowners, and developers alike. allocations for growth Just when developers thought that Maryland could not possibly implement additional rules and regulations for development, the Maryland Department of the Environment is set to launch Allocations for Growth (AfG), an offset/ trading policy designed to ensure the quantification and mitigation of nutrient pollution. The program, expected to begin on January 1, 2014, requires developers, builders, and others to offset 100% of the post-development load from every land development project. The policy not only requires complete and full offset of all nutrient pollutant loads from new projects, but existing developments where a building is altered (encompassing both the construction of an addition as well as the development of additional units or square footage of otherwise undeveloped land). The Maryland Department of the Environment (MDE) will be creating regulations that define how these pollutant loads will be calculated, as well as setting regulations governing how many offset credits developers will be required to purchase in order to fully offset the loads generated for each project. Though MDE will be setting the regulations as to how many offset credits will be required, they will not be selling offset credits; rather they will allow developers to find willing landowners within the same county or watershed to sell offset credits for nitrogen and phosphorus. The program as proposed will require the buyer to find a willing seller who is agreeable to offset land under the regulations to be imposed by the MDE. The word from the trenches is that beginning in 2014 this requirement could add as much as $40,000 to the cost of a single family home. The regulations, which are currently still a work-in-progress, will allow for one credit to equal one pound of nitrogen or phosphorus. With all the changes, 2013 will be a year that has most of us watching intently. On the one hand, we have an industry that is finally, precariously, inching its way to recovery; and on the other hand, we have new bureaucratic regulations undermining the pace of the recovery, particularly in our primary markets. With the ball and chain of government regulations holding back an otherwise regenerating land development industry, the only clear winner in 2013 may be the Chesapeake Bay. 29
Investment Overview
12/10/12
200 180 160 140 Under $10 Million 120 (Private Market) 100 The investment sales market in 2012 carried forward the themes Over $10 Million 80 of 2011. The volume of institutional investment sales this year (Institutional) 60 continues to increase and has exceeded the level seen in the last market 40 peak of 2007. Capitalization rates have continued to fall and are20 approaching 2007 levels again. 0 2007 2008 2009 2010 2011 2012 As an example, institutional buyers ofytd industrial product have
number of commercial r.E. sales
INVESTMENT OVERVIEW
That said, mid-market assets with an element of distress to them (e.g. bank owned property, note sales, short sales) are generating tremendous and sometimes irrational interest from buyers. For better or for worse (depending on where you stand), there are few troubled assets transacting in our market. There is a bottleneck of sorts from lenders. Banks are slow to write assets down to market to accept losses. The third party special services that manage and dispose of troubled securitized (CMBS) loans are overwhelmed and are in some cases taking years to take back and eventually sell distressed assets. Across the board, investor buyers have become more pessimistic about leasing prospects in 2013. Buyers are projecting rental rates to remain flat or decline for several years, and are expecting vacant space to take longer to lease. Generally, investors are projecting rental rate growth and an increase in leasing velocity, only they are expecting that trend to begin two to three years from now. The most sought after product types include bulk warehouse, institutional quality office in core markets such as the District of Columbia and affluent inside-the-Beltway suburbs, along with grocery-anchored retail and multifamily. Most out of favor today is suburban office and flex product. Investors see more downside risk in terms of rental rates and vacancy here with a likely contraction in the government coming. We see an interesting contrarian play here in buying these assets in locations that have at least some constraints to new development, are near executive housing, and where they can be bought at a dramatic discount to replacement cost. Markets to avoid are those that have seen very little historic rental rate growth over the past several decades. The volume of new properties coming to market has dropped in the second half of the year. We speculate this has something to do with the ongoing negotiations over the so-called fiscal cliff. Unfortunately, a package of tax increases and government spending cuts will not serve the economy in the WashingtonBaltimore area well. Sellers recognize this risk and are waiting Investment Overview 1/4/13 to see at least a short term resolution to the matter before taking assets to the market.
commercial real Estate sales - baltimore metropolitan area
number of commercial r.E. sales 200 180 160 140 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 2012 ytd
Over $10 Million (Institutional) Under $10 Million (Private Market)
driven the price of high quality bulk warehouse buildings to record high levels, with a few instances of buildings trading north of $100 per square foot to investors having occurred.
10% 9% 8% percentage 7% 6% 5% 4% 3% 2% 1% 0% 2007
average capitalization rate
2008
2009
2010
2011
2012 ytd
Low interest rates remain the main driver of values. Institutional investors in particular are willing to tolerate very low returns on the highest quality real estate, and even tolerate the risk of falling rental rates and rising vacancy rates, because often the worst case scenario is for them better than the alternative (i.e. leaving their cash in the bank). Private investors depend on leverage and are more reticent about taking those risks. Along with those institutional buyers, owner-occupants are proving to be excellent purchasers, being drawn into the market by very attractive bank financing with rates often down into the sub-5% range. Unfortunately, the inventory of high quality buildings suitable for owner-occupancy is limited in our market. In contrast with the institutional and owner-occupant markets, smaller investment opportunities that are stable and well-leased are not trading as frequently as in 2006-2007 and earlier. The bulk of these private market investment sales (defined here as sub-$10 million sales) have been to users or have involved some sort of distress. Conduit financing fueled a high volume of private market sales before the market turndown in late 2008. The lack of that attractive non-recourse financing today is dampening the volume of sales of stable mid-market assets that normally sell to private buyers, though we are projecting an incremental increase in the volume of sales of these types of assets in 2013.
30
Build on the power of TM our network.

OUR SERVICES
Brokerage Services Tenant/Landlord Representation Buyer/Seller Representation Sales/Leasing/Subleasing Portfolio Marketing Market Reports & Opinions of Value Site Selection Analysis Market Research/Mapping/Demos Management Services Property & Asset Management Lease Consulting Services Lease Auditing/Compliance Lease Abstracting Lease Databases & Administration Lease Consulting Financial & Investment Services Investment Acquisitions & Sales Mortgage Brokerage Structured Lease Finance 1031 Exchange Services On-Line Services REALTrac Online Transaction Management NAIDirect.com Surplus Property Hosting/Marketing Market Research & News Demographic/Mapping Services LoopNet CoStar Property Builder Info Tools
Paragon Commercial Property Management, a subsidiary of KLNB, LLC, is a full-service provider of commercial real estate property and asset management services. Paragon takes a strong hands on philosophy to managing its properties. Engineers inspect each building regularly and meet constantly with its tenants and vendors. Paragon is building an organization based on a reputation for superior service and invites you to contact any of the tenants or building owners that it serves. Paragon employs six roving maintenance engineers who perform a multitude of services including all basic mechanical, electrical, plumbing and janitorial work. As a result, in many circumstances we are able to provide owners faster and less-expensive service than if a contractor had been called. Paragon can deliver the following variety of services: Property and asset management for commercial office, retail, industrial and corporate facilities projects. Assume complete day-to-day management of your facilities. Provide on-site management and technical personnel. Provide 24-hour on-call service. Maintain a comprehensive database for service calls. Maintain comprehensive budget information. Produce accurate and timely monthly reports. Maintain monthly operating expense summaries and variance reports. Set-up a program whereby all invoices related to a project are segregated. Develop a comprehensive summary of all equipment and systems located at your property. Produce a comprehensive operational manual. Design a complete preventive maintenance program summarized in an annual operational calendar. Provide a comprehensive lease administration program. For additional information please go to: www.paragoncpm.com The SOCIETY OF INDUSTRIAL AND OFFICE REALTORS is one of the leading professional commercial and industrial real estate associations. With more than 3,000 members in more than 580 cities in 26 countries, SIOR represents todays most knowledgeable, experienced, and successful commercial real estate brokerage specialists. SIOR is dedicated to the practice and maintenance of the highest professional and ethical standards. SIOR maintains a commitment to business and industry by providing outstanding professional services, publications, and educational programs.
The CCIM movement began more than 40 years ago with commercial real estate practitioners who wanted to elevate their business practices through focused education and networking opportunities. Still today, education and networking remain the cornerstones of the CCIM designation and the reason for its success. The CCIM Institute confers the CCIM designation and is an affiliate of the National Association of REALTORS (NAR). With more than 19,000 members in 33 countries and 61 chapters worldwide, the CCIM Institute has emerged as a truly global organization.
31
The NAI KLNB Team Columbia, mD

In 2012, NAI KLNB reported volume of over $1.27 billion on 989 separate real estate transactions in the leasing nvestment ffering and selling of industrial, office, land and retail product. The full-service brokerage firm operates Maryland offices in Towson and Columbia, as well as Vienna and Brambleton, Virginia, and Washington, D.C. KLNB is the mid-Atlantic representative of NAI, a network of real estate service providers serving more than 200 markets worldwide. KLNB represents NAI with a full range of brokerage, financial and investment services. In the Baltimore-Washington Corridor A RETAIL, OFFICE AND INDUSTRIAL PORTFOLIO and BWI Thurgood Marshall Airport office market, the NAI KLNB team includes:
www.klnb.com
MEADOWS BUSINESS PARK

BALTIMORE, MARYLAND
Robert Z. Smith* Industrial 443.574.1411 bsmith@klnb.com J. Allan Riorda, SIOR* Industrial 443.574.1400 ariorda@klnb.com Craig P. Morrell, SIOR* Office/Industrial 443.574.1425 cmorrell@klnb.com
James V. Caronna, SIOR* Industrial 443.632.2070 jcaronna@klnb.com
David J. Fritz, CCIM, SIOR* Office 443.574.1410 dfritz@klnb.com
Stephen J. Ferrandi* Land Sales 443.574.1430 sferrandi@klnb.com
Charles A. Breitenother Office 443.574.1422 cbreitenother@klnb.com
Robert S. Clements Industrial 443.574.1401 rclements@klnb.com
Alan M. Coppola, SIOR Office/Industrial 443.574.1404 acoppola@klnb.com
Jonathan M. Green Office/Industrial 443.574.1420 jgreen@klnb.com
Josh Halbedel Land Sales 443.574.1407 jhalbedel@klnb.com
Kate E. Jordan Office/Industrial 443.574.1429 kjordan@klnb.com
Michele D. Kornbluth, SIOR Medical/Office 443.574.1403 mkornbluth@klnb.com
Christopher B. Kubler, CCIM Investment Sales 443.574.1415 ckubler@klnb.com
Bill Martien Industrial 443.574.1414 bmartien@klnb.com
Kate M. Mirabile Marketing Coordinator 443.574.1406 kmirabile@klnb.com
Michael P. Moran Office/Industrial 443.574.1402 mmoran@klnb.com
M. Carol Mox Executive Brokerage Assistant 443.574.1405 cmox@klnb.com
Kelly L. Shinnick Graphic Designer 443.574.1431 kshinnick@klnb.com
Established in 1968, KLNB, Inc. is a full-service commercial real estate firm offering sales, leasing, development, property management and real estate investment services. The company employs more than 80 real estate professionals, including 35 principals.
* denotes principal of firm
B/W CORRIDOR OFFICE

6011 University Boulevard Suite 350 Ellicott City, Maryland 21043 Tel: (410) 290.1110 / (301) 621.5114 Fax: (410) 290.0723
VIRGINIA OFFICE I
8027 Leesburg Pike Suite 300 Vienna, Virginia 22182 Tel: (703) 288.4000 Fax: (703) 288.2999
VIRGINIA OFFICE II
42395 Ryan Road Suite 200 Brambleton, Virginia 20148 Tel: (703) 722.2700 Fax: (703) 722.2730
BALTIMORE/TOWSON OFFICE
100 West Road Suite 505 Baltimore, Maryland 21204 Tel: (410) 321.0100 Fax: (410) 321.0129
Commercial Real Estate Services, Worldwide. A division of KLNB, founded in 1968. Global Solutions. Local Expertise.
Serving the Mid-Atlantic Region Since 1968
While we have no reason to doubt the accuracy of any of the information supplied, we cannot, and do not, guarantee its accuracy. All information should be independently verified prior to a purchase or lease of the property. We are not responsible for errors, omissions, misuse, or misinterpretation of information contained herein & make no warranty of any kind, express or implied, with respect to the property or any other matters.
WASHINGTON, DC OFFICE
5225 Wisconsin Ave., N.W. Suite 600 Washington, DC 20015 Tel: (202) 375.7500 Fax: (202) 237.9850
pARAGON COMMERCIAL pROpERTY MANAGEMENT

60 West Street Suite 204 Annapolis, Maryland 21401 Tel: (410) 280.1450 Fax: (410) 280.1451 1916 Wilson Boulevard Suite 306 Arlington, VA 22201 Tel: (703) 812.0334 Fax: (703) 812.9002

2012 EOY Industrial-Office

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2012 EOY Industrial-Office

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2012 IndustrIal & OffIce Market repOrt

Global Solutions. Local Expertise.

Commercial Real Estate Services, Worldwide. A division of KLNB, founded in 1968.

2012 YEAR END REVIEW

2012 YEAR END REVIEW

BALTIMORE-WASHINGTON CORRIDOR 2012 Industrial Market Overview

BALTIMORE-WASHINGTON CORRIDOR 2012 Office Market Overview

Carroll County Frederick County

SUBMARKETS US ROUTE 1 CORRIDOR COLUMBIA

Prince Georges County

Flex 134 522,918

197,132 720,050 5,438,156 9.6% 3.6% (39,349) $9.42 0

Vacancy Rate Direct % Vacancy Rate Sublease % Net Absorption (SF)

Average Rental Rate (NNN)

2013 Planned Construction SF

Vacancy Rate (%)

0% 2008 2009 Average Asking Rental Rate

Average Rental Rate PSF, NNN

Market Inventory (%)

60% Bulk Office/Whs Flex

SIGNIFICANT ACTIVITY Bulk

Howard County - Industrial

Flex 20 88,158 5,520

93,678 703,971 12.5% 0.8% (23,320) $7.33 0 33,337

Vacancy Rate Direct % Vacancy Rate Sublease % Net Absorption (SF)

Average Rental Rate (NNN)

2013 Planned Construction SF US Route 1 Industrial

Vacancy Rate (%)

Average Asking Rental Rate (PSF)

Average Net Absorption

Rental Rate PSF, NNN

Market Inventory (%)

Bulk SIGNIFICANT ACTIVITY Office/Whs Flex

Price PSF Varies $89.03 $46.54 $103.04

Howard County - Industrial

Office/Warehouse 42 372,722 0 372,722 2,459,953 15.2% 0% 16,613 $9.50

Flex 114 434,760 191,612

626,372 4,734,185 9.2% 4% (16,029) $11.50

Vacancy Rate Direct % Vacancy Rate Sublease % Net Absorption (SF)

0% 30% 108,347 20%

Vacancy Rate (%)

Net Absorption (SF)

Average Asking Rental Rate (PSF)

Average Rental Rate PSF, NNN

Market Inventory (%)

Net Absorption (SF)

Bulk Office/Whs Flex

SELECTED LAND SALES - INVESTMENT - NONE REPORTED

ANNE ARUNDEL COUNTY

PASADENA SEVERNA PARK

To Chesapeake Bay Bridge

BWI AIRPORT MARLEY NECK/ GLEN BURNIE ODENTON

annE arundEl county

ANNE ARUNDEL COUNTY

Office/Warehouse 92 650,000 0 650,000 5,393,000 12.1% 0%

Flex 231 982,000

16,000 998,000 9,600,000 10.4% 0.2% 337,000 $5.75 0

Market Inventory Average Rental Rate (NNN)

2012 Completed Construction SF

2013 Planned Construction SF Vacancy Rate

16% 14% 12% 10% 8% 6%

400 300 200 100 0

-100 Anne Arundel County Industrial