National Airport-Area Office-Warehouse
Rental Rate Survey
Ed Riggins, CCIMExecutive Vice President
ACI-NA March 29, 2007
The 7-10-Year Real Estate Cycle
Low
vacancies
Increasing prices
and rents
Accelerated new
construction
Oversupply
High
vacancies
Declining prices,
rents, construction
Absorption of
excess supply
City Inclusion Criteria
• Heavy cargo traffic per ACI
• Presence of airport related functions per D&B
• forwarders
• expedited truckers
• airline parts suppliers
Survey Property Criteria
• 3 properties per city – average of net asking rates
• 4th quarter data collection
• Dock high truck doors
• Off airport-owned property but, w/in 5 miles
• Sized for hypothetical user
• 20,000 sq. ft.
• 20% office finish
2007 Rental Rate Survey Results
$2.53
$3.77
$4.00
$4.50
$4.70
$5.20
$5.45
$5.60
$5.67
$5.92
$6.20
$6.65
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00
20 MEM - Memphis
19 SDF - L'ville
18 IND - Indy
17 MSP - Minn
16 ATL - Atlanta
15 CVG Cincy
14 DTW -Detroit
13 IAH - Houston
12 DIA - Denver
11 DFW - Dallas
10 OAK - Oakland
AVG - Average
$6.65
$6.73
$6.92
$6.95
$8.28
$8.79
$9.32
$10.42
$10.83
$11.12
$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00
AVG - Average
9 EWR - Newark
8 PHL - Philly
7 MIA - Miami
6 SEA - Seattle
5 SFO - San Fran
4 ORD - Chicago
3 JFK - New York
2 BOS - Boston
1 LAX - LA
2007 Rental Rate Survey Results
2001 – 2007 National Average
Year-By-Year Comparison
$6.73
$6.32
$6.26
$6.05
$6.14
$6.36
$6.65
$6.36
$5.60 $5.80 $6.00 $6.20 $6.40 $6.60 $6.80
2001
2002
2003
2004
2005
2006
2007
7-Yr. Avg.
Lessons Learned
• Subleases at 20-50% off in 2001-2002 for 18-24
months
• Some new development by 2004-2005.
• Expenses now 10-25% of rental costs
• Leases “more net” – mgt. fees, roof/parking repair,
etc.
• Free rent still preferred to rate reduction
• Cap rates down from 9-10% on 2000 to 5-6% now
• For tenants - More time = more choices = more
leverage
How Properties Are Valued
Net Income
Sales PriceCapitalization Rate=
How Properties Are Valued
$6.5 per sq. ft
$100 per sq. ft
6.5% =
How Properties Are Valued
$6.5 per sq. ft
$108 per sq. ft
…this goes up
If this goes down…
6.0% =
The 7-10 Year Real Estate Cycle
Low
vacancies
Increasing prices
and rents
Accelerated new
construction
OversupplyHigh
vacancies
Declining prices,
rents, construction
Absorption of
excess supply
Didn’t happenDidn’t happen
The 7-10 Year Real Estate Cycle
Here Now?Here Now?
Low
vacancies
Increasing prices
and rents
Accelerated new
construction
OversupplyHigh
vacancies
Declining prices,
rents, construction
Absorption of
excess supply