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ADA and CANYON COUNTY SUBMARKETS

OFFICE Q3 REVIEW

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Office Vacancy rose slightly in the third quarter, to 20.3% overall.Meridian led all submarkets in total amount of space leased, with 74,437square feet (9 transactions), followed by Central Bench at 29,930square feet leased (7 transactions), and Downtown at 22,081 squarefeet (11 transactions). The West Bench, Eagle, and Southeastsubmarkets all had minimal activity in the office market during Q3;however, there are a few sizeable companies looking to transact in Q4in these areas.

Notable Q3 sales transactions of office property included:

In Q3, a new Class 'A' Office and Retail development wasannounced by the Gardner Company for Boise’s DowntownCore. 8th and Main will be comprised of 253,000 square feetof retail and office space, and will include three stories of park-ing. This building is planned for construction Spring of 2012,and will be open for tenants in 2014. This is exciting news forBoise. Zion’s Bank wil l be the anchor tenant for thisdevelopment.

In the fourth quarter, we predict slight overall improvement inthe market, led by Downtown and Meridian submarkets.Tenants currently seeking space seem to want longer termsthan those in the market six to twelve months ago. We expectlease rates to flatten and then begin to rise at some point inthe next twelve months.

Significant lease transactions in Q3 included: Power Engineers expand-ing and taking an additional 15,311 square feet in Sundance'sSilverstone Business Campus in Meridian, and Balsam Brands leas-ing 26,374 square feet in Rafanelli and Nahas' project at StratfordCenter. Balsam Brands is a new business to Idaho and is expected tocreate 75 jobs over the next 12 months.

The sale of an 8,351 square foot off ice/condo at 301 S.Capitol Boulevard previously occupied by the Idaho Association ofRealtors.

A 4,305 square foot stand-alone office sold at 503 S.Americana.

The sale of a 2,430 square foot office condominium sold inEagle to an owner occupant.

RETAIL Q3 REVIEW

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In all, there were 29 retail transactions in Boise's submarkets inthe third quarter. The West Bench submarket was the mostactive, with 30,410 square feet leased, including a 12,905 squarefoot shop space leased to Vets4Success (thrift store). Othersubmarkets with strong market presence include Meridian (17%of market transactions), Northwest (14% of market transaction),and Southwest (14% of market transactions). Leasing was mini-mal in Downtown and Garden City. Several new tenants havecommitted to moving to Boise such as Tai Pan Trading Post(30,000+ square feet), Gordman's (50,000+ square feet), Chipotle,and Chick-Fil-A. These will provide an even higher demand for

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The predominant theme regarding vacancy in the third quarter of2011 is the lack of class 'A' product available. Prospectivetenants looking for quality retail space in prime locations such asEagle Road and the Mall area are having trouble findinglocations to match their needs. While overall vacancy remainsstagnant, quality space is compressing at a much higher rate.The lack of development over the past four years is catching upwith us as new retailers struggle to find the right fit. Tenants arebeing forced to be patient, as few are settling for less thandesirable locations. It is not uncommon for a retailer's search totake well over a year before they find the right setting. By inlarge, it is regional and national restaurant concepts searchingfor class 'A' settings. Discounters along with restaurants remainthe most active categories of tenants, with preexisting restaurantspace especially in high demand.

Colliers tracks slightly over 18 million square feet of retail space,and currently shows 2,389,560 square feet on the market.Vacancy as a whole has increased this last quarter by .8% through-out the Treasure Valley, though individual submarkets have shownpositive signs. Eagle vacancy dropped 6% from Q2 to Q3, withGarden City, Meridian, North End, and the Northwest all showingsome positive improvement. Asking rates inched up slightlythroughout the Treasure Valley, moving from $13.32 at the end ofQ2 to $13.34 in Q3, the same rate found at the end of Q1.

Looking forward, the influx of grocery stores and the competitionthey create will make an interesting story. Whole Foods andRosauer's are two new concepts entering our market, and we arehearing more rumors that Wal Mart's neighborhood concept couldland shortly. Fred Meyer is under construction on Chinden, and aWal Mart Super Center on Ten Mile should break ground soon.These grocers will spur new development surrounding their loca-tions and in turn, help us find class 'A' locations for our clients.

prime retail space. Sales remain stagnant, with the exception ofa few smaller transactions such as the 6,860 square foot retailbuilding at 1301 S. Capitol Boulevard, occupied by Papa Joe's.

INDUSTRIAL Q3 REVIEW

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Q3 was devoid of any significantly sized lease transactions. Thelargest lease in Canyon County was Red Ball of Idaho, expand-ing by 13,500 square feet to total out at 22,500 square feet, onNorth Elder Street in Nampa. Transactions in Ada Countyincluded a 10,444 square foot flex building sold to J&M Land on

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The industrial market has remained steady so far this year. Leaserates continue to stabilize, but it is still a tenant's market in whichlandlords offer concessions to qualified tenants. Vacancy rateshave had little movement in 2011, shifting slightly from 10.9% atthe beginning of the year, to 11.2% mid-year, and currently are at10.4%. This trend looks to continue in the near future. Mostconstruction trades are still struggling, and there is minimalinterest from outside companies relocating or expanding into theTreasure Valley. There is a shortage of available large industrialwarehouses, as well as vacant class 'A' industrial space. Thesetwo driving factors, along with more owner-users looking topurchase rather than lease, could spark more speculativedevelopment in 2012.

Ann Morrison Park Drive. ASML US, Inc. leased 9,960 squarefeet in the Airport submarket, and Sletton Construction purchaseda building on 1.3 acres, also in the Airport submarket. Thenumber of transaction consummated per submarkets was fairlyconsistent. Average asking rate for industrial space was $.48NNN per square foot, with effective rates over the lease term ondone deals dropping below that average due to the incorporationof free rent. Free rent offered by landlords is generally one monthper year on the lease term. Tenant improvement dollars are stillavailable from property owners for credit-worthy tenants.

Looking forward, there is a more positive attitude amongindustrial businesses than there has been in the past couple ofyears, but continued uncertainty concerning the economy remainson the forefront of the minds of the business owners. Withreduced lease rates, owners are not willing to sell their buildingsas investments. The lower lease rates devalue a building in theeyes of an investor. Therefore, property owners will continueworking to improve the income of their properties.

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Q3 STATISTICS

COLLIERS IDAHO

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