NORTHERN VIRGINIA 3Q11

YOUR CITY HERE INDUSTRIAL REPORT 1Q11

Overview
According to the Federal Reserve Bank of Richmond, the Northern Virginia unemployment rate rose slightly since July, up 0.2 percentage points to 4.8%. Despite the increase, it is still 0.3 percentage points lower than this time last year. In Virginia, information services have taken the biggest hit, contracting by 6.4% since July and nearly 10% from the third quarter of 2010. Despite poor job performance in the third quarter, with the national unemployment rate at 9.1%, Northern Virginia continues to be a favorable region. Manufacturing employment in the Northern Virginia region also continued its decline, dropping another 0.5 percentage points from last quarter. Despite this downward trend, manufacturing output actually increased by 0.8 percentage points from last quarter but still remains down 1.6 percentage points from where it was this time last year.

Leasing and Sales Activity

Leasing activity continues to decline, showing a significant decrease since last quarter and much lower than where it was at this time last year. Some highlights for the quarter include Target Corporations renewal for 26,140 sf at 430-440 South Pickett Street while the largest new deal inked this quarter was Autocraft Body and Paint, Inc taking 20,301 sf at 6009 Farrington Avenue. In September, a joint venture between Area Property Partners and Adler Realty Services LLC, purchased the first phase of WRITs Washington D.C. areas industrial portfolio. The first phase consisted of 40 industrial buildings and was purchased for $235.8 million. Of the 40 properties sold, 26 of them were in the Northern Virginia region. The rest of the portfolio should settle in the fourth quarter. The immense interest the sale of this portfolio received from potential buyers indicates the Northern Virginia industrial market is stable and that investors believe in its future profitability.

Outlook
BRAC related movements could help boost the flex and industrial market in Northern Virginia. The FBI is poised to take occupancy at Mission Ridge in early 2012 which should bring several new government contractors to the Route 28 region. Springfield also stands to benefit from the BRAC movements with large tenants such as the National Geospatial Intelligence Agency (NGA) moving into the area. Additionally, the extension of the Silver Line will also help advance this region as the new infrastructure combined with the proximity to Dulles Airport provides ideal market conditions for manufacturers and suppliers. The construction pipeline seems to have life after all. Two new buildings broke ground at the end of the quarter at the Gateway Distribution Center. The two ProLogis buildings, with a combined 171,197 sf of spec warehouse/distribution space, signify that perhaps the market is getting ready for increased demand. Additionally, two projects are set to deliver in the fourth quarter. CGRs Dulles Trade Center II is poised to deliver 49,776 sf of warehouse speculative space to the Route 28 North submarket at the end of October, and the New Boston Funds 178,178 sf build-to-suit project for Rockwell Collins should be completed sometime this November.

Statistical Overview
Overall vacancy declined in the third quarter, continuing its trend from previous quarters. Although the change was less than half a percentage point, the total overall vacancy is down 0.8 percentage points from the same time last year. Third quarter absorption was lower than last quarter, but remained positive. Additionally, at 254,947 square feet (sf), year-to-date overall net absorption has vastly improved over the negative 465,757 sf it was after the third quarter in 2010. The average direct net rental rate continued to creep up this quarter, ending at $10.07 per square foot (psf), $0.30 psf greater than third quarter 2010. The average net rent in the office services sector declined slightly from last quarter, down $0.06 psf, but is still $0.33 psf higher than this time last year. The minor fall was not enough to cause the overall industrial rents to drop. The warehouse/distribution average net rental rate rose $0.14 psf from last quarter as rents are at their highest level since the first quarter of 2010.

Stats on the Go
3Q10 3Q11 Y-o-Y Change 12 month Forecast
17.5

Under Construction vs. Completions

Und er Con stru cti on Comp letio ns

Overall Rental vs. Vacancy Rates

R ental Rate $20 .0 0 $15 .0 0

psf/yr

Vaca ncy Rate 20 .0 % 15 .0 % 10 .0 % 5.0% 0.0%

Overall Vacancy Direct Asking Rents YTD Leasing Activity (sf)

14.6%

14.7%

0.1pp

14.0

$9.77

$10.07

3.1%

msf

10.5 7.0 3.5

$10 .0 0 $5 .0 0

1,194,498 834,557

-30.1%

0.0 200 7 2 008 20 09 201 0 2 011 YTD

$0 .0 0 2 007 20 08 2 009 20 10 3Q11

NORTHERN VIRGINIA INDUSTRIAL REPORT 3Q11

Market/Submarket Statistics
Submarke t Springfield/ I-95 Route 28 South Route 28 North Manassas Fle x Springfield/ I-95 Route 28 South Route 28 North Manassas Ware house /Distribution Inve ntory 6,143,036 5,743,403 6,329,804 861,168 19,077,429 11,770,052 3,766,977 8,027,528 2,237,748 25,802,305 O ve rall Vacancy Rate 13.7% 16.3% 16.3% 32.5% 16.2% 13.3% 13.0% 14.3% 14.1% 13.7% YTD Le asing Activity 131,632 173,912 47,402 0 352,946 118,525 104,168 258,918 0 481,611 YTD Use r Sale s Activity 0 0 0 0 0 0 0 0 0 0 Unde r Construction 0 0 178,178 0 0 0 0 220,957 0 0 YTD YTD Construction Dire ct Ne t Comple tions Absorption 0 0 0 0 0 0 0 0 124,800 124,800 33,085 55,549 87,004 7,079 182,717 (101,063) 199,948 (42,286) 44,787 101,386 YTD O ve rall Ne t Absorption 39,383 76,278 89,504 7,079 212,244 (55,240) 199,124 (145,968) 44,757 42,703 Dire ct We ighte d Ave rage Ne t Re ntal Rate *
HT MF OS W/ D

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

N/A $14.31 N/A $11.81 N/A $9.62

N/A N/A N/A N/A N/A $8.95 $8.02 $8.16 $7.58 $8.46 O S/WD

N/A $11.10 N/A $11.79 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Springfield/ I-95 Route 28 South Route 28 North Manassas TO TAL

17,913,088 9,510,380 14,357,332 3,098,934 44,879,734

13.5% 15.0% 15.2% 19.3% 14.7%

250,157 278,080 306,320 0 834,557

0 0 0 0 0

0 0 399,135 0 399,135

0 0 0 124,800 124,800

(67,978) 255,497 44,718 51,866 284,103

(15,857) 275,402 (56,464) 51,866 254,947

N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A

N/A $11.11 N/A $10.10 N/A N/A $8.94 $9.50

N/A $10.07

* Rental rates reflect asking $psf/year.

HT = High T ech MF=Manufacturing OS = Office Service W/D = Warehouse/Distribution

Market Highlights
SIGNIFICANT 3Q11 LEASE TRANSACTIONS
BUILDING
430-440 South Pickett St* 6308 Gravel Ave* 13870-13912 Park Center Rd* 6009 Farrington Ave

SUBMARKET
Springfield/I-95 Springfield/I-95 Route 28 South Springfield/I-95

TENANT
Target Corporation

SQUARE FEET
26,140 26,030 24,242 20,301

PROPERTY TYPE
Warehouse/Distribution Warehouse/Distribution Warehouse/Distribution Warehouse/Distribution

Beltway M overs Associates, Inc. Total Truck Transport Autocraft Body and Paint, Inc.

* Renewal not included in leasing activity statistics

SIGNIFICANT 3Q11 SALE TRANSACTIONS

BUILDING
WRIT Industrial Portfolio Phase I* 7215 Lockport Place

SUBMARKET
N/A Springfield/I-95

BUYER
Area Property & Alder Realty GKE LLC

SQUARE FEET
1,169,675 20,000

PURCHASE PRICE
$148,700,000 $3,300,000

*Reflects only Virginina portion of Portfolio

SIGNIFICANT 3Q11 CONSTRUCTION COMPLETIONS

BUILDING
N/A

SUBMARKET

MAJOR TENANT

SQUARE FEET

COMPLETION DATE

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION

BUILDING 22640 Davis Dr 23550 Pebble Run Pl
Gateway Distribution Center Building I

SUBMARKET Route 28 North Route 28 North

Route 28 North

MAJOR TENANT Rockwell Collins N/A

N/A N/A

SQUARE FEET 178,178 49,776

88,731 82,466

COMPLETION DATE 4Q11 4Q11

1Q13 1Q13

Gateway Distribution Center Building II Route 28 North

Cushman & Wakefield of Virginia 1600 Tysons Boulevard, 4th Floor, McLean, VA 22102 (703) 448-1200

www.cushmanwakefield.com

* The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2011 Cushman & Wakefield, Inc. All rights reserved.