Commercial Real Estate Market Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at NAR Midyear Legislative Meetings Washington, D.C. May 12, 2011

1. Commercial Real Estate Market Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at NAR Midyear Legislative Meetings Washington, D.C. May 12, 2011

2. Moderate GDP Growth

3. Total Job Gains(in millions from 12 month ago)

4. Jobs: Private vs. Public(index = 1 in 1990) 1990s Federal Government Job Cuts

5. Federal Budget Surplus/Deficit

6. Federal Government Spending/Revenue

7. Private Sector Construction (Minimal new inventory addition helps vacancy rate to fall) Value Put-in-Place in $ million

8. U-Turn in Commercial Sales(for properties valued at $2.5 million or higher) RESEARCH

9. REALTORS® Commercial Market Survey RESEARCH

10. REALTORS® Commercial Sales Trend Modestly Getting Better RESEARCH

11. Commercial Debt CMBS Markets RESEARCH

12. Commercial Lending RESEARCH

13. REALTORS® Commercial Lending Survey RESEARCH

14. REALTORS® Commercial Lending Survey RESEARCH

15. Commercial Equity Markets RESEARCH

16. Commercial Price Index RESEARCH

17. Commercial Distress RESEARCH

18. REALTOR® Commercial Market Survey on Price RESEARCH

19. Cap Rates(Steady Apartment and Swinging Office) RESEARCH

20. U.S. Treasury Yields(1% point rise in blended interest rate will mean $2 trillion in extra government outlay over the next 10 years)

21. Office Fundamentals RESEARCH

22. Office Rents RESEARCH

23. Financial Activity and Professional Business Service Job Gains(in thousands from 12 month ago)

24. Office Vacancies RESEARCH

25. Industrial Fundamentals RESEARCH

26. Industrial Rents RESEARCH

27. Wholesale Inventory Bouncing Back (Value in $ million)

28. Industrial Vacancies RESEARCH

29. Retail Fundamentals RESEARCH

30. Retail Rents RESEARCH

31. Retail Sales Bouncing Back(% change from 12 month ago; excluding autos/parts)

32. Sluggish Retail Sector Job Gains(in thousands from 12 month ago)

33. Retail Vacancies RESEARCH

34. Sluggish Wholesale Trade Job Gains(in thousands from 12 month ago)

35. Multifamily Fundamentals RESEARCH

36. Multifamily Rents RESEARCH

37. Renter Households In million

38. Multifamily Vacancies RESEARCH

40. No overbuilding … increased absorption means falling vacancy

41. Real estate hedge play from inflation

42. But interest rates will be rising

43. Refinancing in 5 years ? … be prepared

45. Commercial Market Forecast