LINEUP

TODAYS
MASTER OF CEREMONIES

The world is changing rapidly and a deep commitment to nimbleness, flexibility, and execution has the potential to spur big gains for Oregons mid-valley economy Jason Brandt

]
CEO

JASON BRANDT

JASON BRANDT

CD REDDING CONSTRUCTION

CORY REDDING

CHAD FREEMAN
SEDCOR

CHAMBER OF COMMERCE
DON COLEMAN
WELLS FARGO
The Salem Area Chamber of Commerce is here to serve the needs of the business community in the Mid-Willamette Valley. With over 1,200 businesses that employ approximately 35,000 throughout the region, we take our work seriously and approach it with passion. This organization is about innovation and relevance. An all-star cast of prominent business community leaders and professional staff are here at your disposal. Our goal is simple - to make you more successful in the pursuit of your business objectives. We want to see you succeed and will challenge you, as we do ourselves, to reach that next level of excellence in your field of work. Face-to-face contact with your business associates and customers, networking with peers, developing relationships, and supporting those with whom you do business is what doing business is all about whether you employ five, or five hundred.

Salem AREA

CHRIS FISCHER, ccim

SPERRY VAN NESS

SAALFELD GRIGGS pc

MARK SHIPMAN

CURT ARTHUR, sior

SPERRY VAN NESS

FISCHER HAYES & ASSOCIATES, p.c.

TONK FISCHER
MAILING ADDRESS: 1110 Commercial St. N.E., Salem, OR 97301 LOCATION: Corner of Market and Commercial Street PHONE: 503-581-1466 FAX: 503-581-0972

JENNIFER MARTIN, ccim

SPERRY VAN NESS

Building Customer Satisfaction

]
President
TOTAL PROJECT COST BREAKDOWN

CORY REDDING

CD REDDING
CONSTRUCTION
AVERAGE CONSTRUCTION COSTS
TENANT IMPROVEMENTS
8,000 SF Professional office 2,000 SF Professional office 5,000 SF Warehouse and office 1,500 SF Medical 1,500 SF Restaurant 1,500 SF Retail $56 - $66 $62 - $72 $50 - $60 $73 - $83 $49 - $59 $41 - $51

BUILDING TYPES
OFFICE 15,000 SF Professional office remodel 10,000 SF New medical office with full build out 5,000 SF New professional office with full build out INDUSTRIAL 100,000 SF Warehouse and production facility 50,000 SF New cold storage warehouse 30,000 SF New concrete tilt-up flex building 20,000 SF New pre-engineered metal building shell & slab RETAIL 10,000 SF New retail center with warm shell $130 - $140 $54 - $64 $99 - $109 $64 - $74 $16 - $26 $47 - $57 $190 - $200 $130 - $140

COMPONENTS OF HARD CONSTRUCTION COSTS

CHAD FREEMAN
president

cfreeman@sedcor.com

MARKET UPDATE

INDUSTRIAL

2013

MILL CREEK CORPORATE CENTER

INDUSTRIAL SALES
YEAR
2012 2011 2010 2009 2008 2007 2006 2005

VOLUME
$9,474,498 $1,540,000 $5,241,000 $1,318,998 $11,400,000 $14,420,400 $25,746,992 $7,084,700

Leverage the strength of our Public/Private partnerships, aggressively retaining and attracting high value jobs and capital investment, while providing member services that support business success in Marion and Polk Counties.
Source: SEDCOR

MISSION STATEMENT

INDUSTRIAL LEASING
450,000 SF 400,000 SF 350,000 SF 300,000 SF 250,000 SF 200,000 SF 150,000 SF 156,851 sf 30,000 SF 27,000 SF 24,000 SF 21,000 SF 18,000 SF 15,000 SF 12,000 SF 9,000 SF 430,208 sf 216,468 sf 29,772 sf 10,308 sf 7,129 sf 6,000 SF 3,000 SF
Source: WVMLS

SEDCOR is a private membershipdriven organization leading efforts to develop the economy in the Mid- Willamette region. SEDCOR is currently working with a portfolio of companies evaluating projects to potentially invest over $144m in the local economy. If made, these investments are expected to add approximately 1,600 jobs to the region. These projects include companies looking at expansion and recruitment within the Salem region.

480 Acres of flat, shovelready land, from $2.50/SF Turn key development opportunities Employment center zoning for industries such as manufacturing and distribution Enterprise zone with 3 to 5 year property tax abatement for eligible firms locating on Phase 1C. Expedited and concurrent permitting where construction could occur in less than 180 days. Wetland and environmental permitting complete 100 Acres of open space/natural area

While the volume of leasing dramatically improved in 2012, this number is deceiving. More than half of this volume was in two shortterm leases to both Kettle Chips and Norpac (6 months) and in Kettles eventual expansion within the same building. The last time an industrial user signed a lease for more than 40,000 SF in a new building (to the user), for more than a one year lease, was 2009.

100,000 SF 50,000 SF

VACANCY VACANCY

RENTS RENTS

CONSTRUCTION CONSTRUCTION

ABSORBTION ABSORPTION

2010

2011

2012

2010

2011

2012

VOLUME OF LEASING

AVG. TRANSACTION SIZE

2012 2012 2013 2013

Source: Sperry Van Ness Commercial Advisors, LLC

The lack of largescale industrial leasing activity, combined with strict bank underwriting, will hamper significant new development for the next couple of years. That being said, the cost of capital is so low it is expected one or more owner-users will look to build in 2013-2014. Some of these projects may include additional square footage offered for lease.

NOTEWORTHY PROJECTS

The vacancy factor, which finished at 12.8% in 2011, will finish 2012 at 12.3% based upon no new construction activity and modest gains in leasing activity. The average asking rent for leases closed in 2012 was $.33/SF per month, modified gross. Final effective rents were likely far below that amount because of continued concessions. With leasing activity still well below pre-recession levels, we have seen many landlords reducing asking rents in above average facilities to as low as $.23/SF, modified gross to attract the few tenants that are in the market.

2065 MADRONA AVE SE

FORMER LOOSE ENDS

Sold to: Gilgamesh Campus, LLC Price: $1,075,000 Notes: 17,476 SF on 2.78 acres

1746 OXFORD STREET SE, SALEM

FORMER SENECA FACILITY

Leased to: Kettle Foods Size: 118,000 SF Notes: Expansion from 60,000

3950 FAIRVIEW INDUSTRIAL DR SE

FORMER SUMCO SOUTH

Sold to: Local Investor Price: $5,967,500 Notes: 189,376 SF on 10.5 acres

Consistent commercial real estate leadership

We have enjoyed a long term relationship with Wells Fargo - they have been a smart, consistent, reliable provider of credit to us in good and bad markets. Mark Burnham Real Estate Investor

DON COLEMAN
Senior Vice President

WELLS FARGO
Wells Fargo Commercial Real Estate consistently looks to serve experienced investors and developers seeking short/medium term financing to acquire, construct, expand or reposition commercial real estate. We provide a full spectrum of construction and interim financing options. Below are sizing guidelines, not absolutes, for the particular property types: PROPERTY TYPE
MULTI-FAMILY SELF STORAGE RETAIL/OFFICE/INDUSTRIAL
Hampton Inn Salem

DEBT YIELD*
10% 10% 11% 12%

Largest commercial real estate lender in the U.S. with a strong local presence in Salem and all of Oregon.
Construction loans Secured lines of credit Repositioning/rehab lending Mini-perm loans Interim/bridge loans Term loans Acquisition Interest rate swaps Don Coleman 503-945-2366 don.coleman@wellsfargo.com Tara Stevenson 503-945-2376 tara.stevenson@wellsfargo.com Jennifer Tyler 503-945-2413 jennifer.tyler@wellsfargo.com

HOSPITALITY
*Debt yield defined as stabilized NOI divided by loan amount

All construction loans are full recourse to the sponsor with pricing based on 30 day LIBOR. Spreads are determined based on property type and financial capacity of the sponsor. Our typical range is 3.0% to 3.5%. Loantocost and loantovalue are indicative of the debt yield above. A 10% debt yield will typically drive equity of 15% with loantovalues in the range of 70%. As the debt yield increases so does the equity. Wells Fargos underwriting can be defined as People, Credit and Real Estate. We are relationship driven and our vision is We want to satisfy all our customers financial needs and help them succeed financially. For the right person and project, Wells Fargo is your source for a consistent supply of capital to help you accomplish your vision.

wellsfargo.com/realestate
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. MC-5391

CHRIS FISCHER, ccim

senior advisor

chris.fischer@svn.com

INVESTMENT & MULTIFAMILY

2013

REGIONAL CAP RATES & 10 Yr TREASURY

Multifamily and investments have not followed the same path this year. Quality inventory for investment properties has driven cap rates down, with continued investor demand and favorable lending rates. Multifamily projects coming to the market are largely B quality or distressed assets, which puts upward pressure on cap rates. This drives values down despite lending opportunities.
9% 8% 7% 6% 5% 4% 3% 2% 1%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

investments
non multifamily

multifamily

2012 RECAP
In 2 012 h igh quality supply drove prices up and low quality supply drove prices down. In spite of relatively flat rents in the multifamily market, due to decreased vacancy and Landlords increased tenant bill-backs, net operating income was up. Buyers of all investment types were plentiful, but were seeking only quality projects, either in terms of investment quality or ag gressive pricing. Fewer buyers today are willing to take on moderate risk for moderate return. Moderate risk needs to be met with high upside potential, and high-risk properties require even more upside potential return in today s market.
2012 was a year driven once again by yield. Multifamily continues to be the investors darling, and dominates sales nationally. National investors continued looking toward smaller markets to achieve yield. However in both multifamily and traditional investments, lack of quality supply hinders transactional volume in Salem and surrounding areas.
multifamily

MARKET UPDATE

10 year ust

Source: Powell Valuation Inc and Sperry Van Ness Commercial Advisors, LLC

MULTIFAMILY SALES
30 27 24 21 18
Source: Powell Valuation Inc

2013 PREDICTION
Based on current trends, lending rates are expected to remain widely unchanged. This leaves opportunity for investors to continue to capitalize on positive leverage. The question remains, Will sales lag like last year? If there isnt quality inventory available for sale, we will continue to

15 12 9 6 3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

see modest movement. Owners are still playing close-to-the-chest, hoping for a stronger rebound before selling. However, our analysis points toward this being an excellent time for owners to sell, based on continued downward pressure on cap rates across most investments.

MULTIFAMILY
CURRENT VACANCY - In 2012, vacancy continued to drop, which lead the way for savvy investors to capitalize on the growing demand. With healthy vacancy hovering closer to 5%, it is clear that our demand outweighs supply. Assuming a market of 20,000 units, with vacancy at 3%, that is 600 units available, in a market that should have 1,000 units available. This shows there is immediate room for 400 units, which is supported by the increase in development in 2012.

NOTEWORTHY PROJECTS

Transaction volume declined significantly in 2012, and the exact cause is difficult to pinpoint. There were investors in the market and favorable lending terms, so a lack of inventory is likely the main cause. Although Portlands sales volume was down as well, it was much less significant than the valley.

Salem Center Mall Sold to: Gregory Greenfield & Associates Price: $43.5 Million Notes: 76% ltv at 4.8%, 61 mo. term

Good Samaritan | Corvallis, OR Sold To: Private Buyer Price: $2,990,000 Cap: 6.4% Notes: 1031 Exchange, 3 year firm term remaining

Oil Can Henrys | Salem, OR Sold To: Portland Buyer Price: $1,215,000 Cap: 6.95% Notes: 15 Year firm term remaining, sold above asking price

CAP RATES

INTEREST RATES

# OF TRANS.

DEVELOPMENT

2012 MULTIFAMILY 2012 INVESTMENT

Source: Sperry Van Ness Commercial Advisors, LLC

Brooktree Apartments | Salem, OR Sold to: Private Buyer Price: $2,250,000 Cap: 7.06% Notes: 44 Units, at $51,136 per unit

Arboretum | Salem, OR Sold to: Private Buyer Price: $2,000,000 Cap: 6.55% Notes: 23 Units, at $86,956 per unit

Meridian | Salem, OR Sold To: Killian Pacific Price: $8.5M Cap: 6.0% PROFORMA Notes: 85 units, mixed-use. Distressed loan amount, $36.2M

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From concept to realizaon, Saalfeld Griggs is equipped to help you through each step of your goal.
The Real Estate & Land Use Group at Saalfeld Griggs has extensive experience in urban and rural land use and development maers. Lawyers in the group rep resent individuals and enes in a wide variety of real property maers. The group takes pride in its ability to address issues before they become true complica ons.

From concept to realizaton, Saalfeld Griggs is equipped to help you through each step of your goal.

]
Shareholder

MARK SHIPMAN

SAALFELD
GRIGGS pc
We regularly collaborate with the other real estate and development professionals, as well as other prac ce groups within the rm, to ensure that issues in volving real property are accurately and eciently idened. With the understanding that me regularly has a direct impact on the success or failure of a pro ject, the group commits to nding the most praccal soluon to all real property and land use maers.

SIGNIFICANT 2013 LAND USE PROJECTS

PUBLIC UDC Rewrite of Salems
Development Code

PRIVATE Boise Redevelopment

Waterfront Parcel 118 Residential Apartments; 5500 SF commercial space 200 Residents in Downtown Salem 125 construction jobs $17M project Rental rates accessible to a broad range of the public New parking lot for south Riverfront Park area with extra parking (15 spaces) and landscaping at no cost to City Extension of Public Access to River/ Park (Front & State Street) Catalyst for development of the remainder of the Boise site

Significant Change Moving from a SIC based Use System to a Characteristic Based Use System Current code is SIC based, that is if a use is listed as a specifically referenced use in the allowed or conditional use list, then arguably it is allowed in the zone. If it is not specifically referenced, then it is not allowed.

Letushelpyousuccessfullycompleteyourdevelopmentprojectorrealestatetransacon. Todiscussyourupcomingprojectpleasecontact: REAL ESTATE Jim Griggs, Mark Shipman, Caleb Williams LAND USEMark Shipman, Alan Sorem, Nate Boderman CONSTRUCTIONHunter Emerick, Shannon Marnez

503.399.1070 www.sglaw.com

Under new use classification system, land uses are described by a set of descriptive characteristics that define the use. Specific proposed activities that meet the characteristics of the use are classified under that use and are regulated as such. Each use will also include common examples of activities that would fall within the North Block Parcel specific uses. When needed, Marquis Acute Rehab Center exceptions may be allowed where 38,000 SF facility an activity possesses some of the 50 new jobs in downtown Salem characteristics of one use, but may also include some characteristics of another $13M project use either allowed in this, or another Approval of second domino (ARC) for zone. Boise redevelopment critical for momentum for rest of North Block and There are some additional substantive South Block development changes, such as the new site plan review Restoration of Pringle Creek process, narrowing of variances, expansion Significant economic benefit to the of adjustments, streamlining of application downtown community (physical processes, removal of confusing/impractical and economic development from requirements,and general re-organization. construction, new business, new residents and other new spending)
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CURT ARTHUR, sior

managing director

curt.arthur@svn.com

MARKET UPDATE

OFFICE

2013

2012 RECAP
Th e news is not positive. 2012 saw the weakest market activity in more than fifteen years sending vacancy rates to their hi gh est in recorded histor y. The problem is it is difficult to pinpoint a consistent theme driving the vacancy. Multiple Sub urban Class A buildings became vacant during the past year driving that sub-market to greater than 30% vacancy. Landlords should prepare to provide concessions to drive deals in this sub-sector.

Average asking rents for the year finished at $1.59/SF, full service, up from $1.53 in 2011. Highend Class A buildings can demand $2.00-$2.45/SF but most leasing activity is in the $1.40-$1.75/SF range.

1.59

2013 PREDICTION
We are tracking 5-6 tenants with requirements of 20,000 to 75,000 SF, so 2013 is shaping up to be a much stronger year. The State of Oregon, at least three medical users, and two call centers are driving the activity. We anticipate rents on existing buildings to hold steady and vacancy to drop by 1-3%. New development will all be medical related in the coming year. Kaiser Permanente is active in the market, looking for a fourth location and seems to be focused on North Salem/Keizer. Both Salem Clinic and Silverton Health will be expanding their footprint in the market, and Mission Medical Imaging is spearheading a new four-story development at Mission and 12th Streets.

LEASING VOLUME
225,000 SF 200,000 SF 175,000 SF 150,000 SF 125,000 SF 100,000 SF 75,000 SF
Source: WVMLS

MARKET STATISTICS
As the rest of the market continues to rebound, the office market in Salem/Keizer bottomed out in 2012. Market activity was the weakest in more than fifteen years, sending vacancy rates to their highest in recorded history. The difficult thing is we have no central theme as to why. The Suburban Class A market was the hardest hit, with vacancy rates currently exceeding 30% as three buildings of more than 60,000 SF lie empty. Average asking rates actually climbed slightly for the year, finishing at $1.59/SF, per month, full service.

VACANCY
The Salem/Keizer office market finished 2012 with a vacancy of 22.1%, based on our analysis of 3,942,000 SF. The square footage surveyed increased 400,000 SF in 2012. That vacancy is up dramatically from 14% in 2011. West Salem, Medical and Class A downtown remained our healthiest sub-markets for the second year in a row because of stable supply and strong demand.

50,000 SF

Courthouse Square, the structurally condemned former home to Marion County and the Transit District, is being remodeled with an expected completion date of Spring, 2014. Downtown will see renewed occupancy but vacancies will suffer as the agencies vacate more than 75,000 SF they currently lease in the private sector.
CBD
medical

25,000 SF
2004 2005 2006 2007 2008 2009 2010 2011

2012

30.4%
suburban class a

27.7%
north

26.7%
class b

23.3%
class c

21.4% 14.8% 13.6% 11.4% 8%

south east class a west medical

Leasing activity fell to 2003 levels with slightly over 56,000 SF of new office leases finalized in 2012. We are forecasting a strong year in 2013 with more than 120,000 SF of new leases. Absorption was negative 96,000 SF.

2012 OFFICE VACANCY BY CLASS

Source: Sperry Van Ness Commercial Advisors, LLC

The one bright spot in the market is medical buildings. With singledigit vacancy and continued growth in demand, there are at least three groundup developments planned for 2013. PacTrust is building 40,000 SF on Kuebler, anchored by Salem Clinic. Silverton Health will jump into the market with a new clinic in Keizer and a significant private development will occur in 20132014 at Mission and 12th Street.

The State of Oregon, which leases approximately 25% of the office space in the market, suspended 51 negotiations on lease renewals statewide for leases of 10,000 SF or more on January 25th as they explore an Executive Order to change lease practices statewide. The goal is take advantage of the market by further reducing occupancy costs, and receive leasing concessions comparable to what is happening in the private sector. In 2013, we expect to see at least four State of Oregon needs hit the market that will require 30,000 to 100,000 or more square feet in addition to the Department of Fish & Wildlife finalizing their move out to Fairview Industrial Drive.
state
of

NOTEWORTHY PROJECTS

oregon

1750 MCGILCHRIST STREET SE

SALMON RUN

PacTrust KUEBLER PROJECT

SEC OF BATTLECREEK AND KUEBLER

Leased to: VA Medical Clinic Size: 30,000 SF Notes: Locating next door to Social Security.

Rents: $21/SF NNN Size: 15,000 SF Notes: Adjacent to Salem Clinic

1155 MISSION ST SE

NEW MEDICAL DEVELOPMENT

Timing: Delivery early 2015 Anchor: Mission Medical Imaging

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Fischer, Hayes, & Associates, P.C.

Specializing in helping closely-held and family-owned businesses achieve financial goals and objectives

]
President
ACTUAL 2013 COMMENTS

TONK FISCHER

FISCHER HAYES
& ASSOCIATES, p.c.
DESCRIPTION

CHANGES IN THE FEDERAL TAX RATES

OLD 2012 PREDICTED FOR 2013

GIFTING ISSUES

ESTATE TAX EXEMPTION TOP ESTATE RATE LIFE-TIME GIFTING ANNUAL EXCLUDED GIFTS

$5.12M 35% $5.12M $13,000 N/A 35%

$1.0M 55% $1.0M $14,000 > $250K TI 39.6% + 3.8%1 (43.4%)

$5.25M 40% $5.25M $14,000

> $450K TI

ESTATE

The perceived need to do major gifts in 2012 to save inheritance taxes is gone. Now we will tend to keep assets if married and under $10 million in assets to get the basis step up unless an asset might appreciate greatly. Kevin Mannix is working on another Oregon inheritance tax repeal.

income tax minimization | retirement planning business consulting | litigation support QuickBooks | financial statement assurance management consulting | business valuations

NEW TAX RATES FOR ORDINARY INCOME

DEFINITION OF "WEALTHY" TOP INCOME RATES

39.6% + 3.8% + 1%2 + 1-3%3

(45.4% - 47.4%)

My apologies to participants who were deemed wealthy on Dec. 31 but arent now. At least your tax bracket is lower. A long overdue fix which adds more certainty to yearend planning.

AMT

AMT TOP CAPITAL GAIN RATE QUALIFIED DIVIDENDS BONUS DEPRECIATION SECTION 179

ANNUAL PATCH 15% 20% + 3.8%1 (23.8%) 39.6% + 3.8%1 (43.4%) 0 $25,000
1 2

PERMANENT PATCH 20% + 3.8%1 + 1%2 + 1-3%3 20% + 3.8%1 + 1%2 + 1-3%3
(25.8%- 27.8%)

CAPITAL GAINS / QUALIFIED DIVIDENDS

(25.8% - 27.8%) A big tax hit to investors.

15%

Section 1031 Exchanges will become more popular.

3295 Triangle Drive SE, Ste 200 Salem OR 97302-4580 | Phone: 503-378-0220 | www.fhapc.com

IMMEDIATE WRITE OFFS

50% $139,000

50% thru 12/31/13 $500,000 for 2012 & 2013

Bonus Depreciation works with brand new assets with a life of 20 yrs or less. With Sec 179 at $500K, not a big change to small businesses unless they are farmers; i.e. a 20 yr farm building.

CONCLUSION: The changes werent nearly as bad as they could have been. Federal Capital Gains went up as much as 60%. Married couples with estates under $10 million and 1031 facilitators are the big winners with these changes.

obamacare 3.8% non-tax on passive income effective phase out of itemized deductions 3 effective phase out of personal exemptions

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JENNIFER MARTIN, ccim

senior advisor

jennifer.martin@svn.com

MARKET UPDATE

RETAIL

20% 15% 10% 5%

2010 2010 2010 2010 2010 2012 2012 2012 2012 2011 2011 2011 2011 2011

2010

2012 RECAP
2012 felt better than 2011, and better than the current vacancy numbers demonstrate. Of all the properties tracked in the survey, 35 properties lowered vacancy and only 14 increased vacancy. This is good news. However, 29 properties with vacancy did not change their occupancy at all in 2012. Some of these properties, such as the former Six Ultra Lounge, Home & Dining Collections, Parrots, and GI Joes have been vacant for so long, there appear to be more than normal market forces affecting these continued vacancies.

The annual NNN lease rate provided to Big Lots for their relocation on Lancaster Drive. This deal makes the building worth just over half (on a per SF basis) of what two vacant Lancaster buildings sold for in 2010. This lease rate is less than average warehouse rates.

16.6%

14.5%
12.9%

14.4%

13.9%

5.1%
2012 2012 2011

central business district

salem/keizer

north

south salem

east salem

west salem

total w/o malls

2013 PREDICTION
I expect a bit of a speed bump in 2013, depending on your vantage point, but there will be bright spots: the new Natural Grocers on South Commercial, another Panera (hopefully), redevelopment of Roth/ McGilchrist in the CBD and continued absorption of newer and well-located properties. However, a number of currently vacant properties will continue to be vacant not only due to a generalized lack of tenant demand, but also because the spaces lack retail synergy or amenities, or have owners who will not respond to current market forces, either because of capital constraints or unrealistic expectations. There may be pockets of new development in response to specific tenant or owner-user demand, but it will likely be limited.

VACANCY RECAP
T h e ove ra l l va ca n c y i m p roved j u st ove r 1 % l a st yea r. Fo r t h e s eco n d ye a r i n a row, we s ee s u b s e c to rs t ren d i n g i n d i fferent d i re c t i o n s b eca u s e o f c h a n g i n g d em a n d fa c to rs . T h e 2 0 1 2 b r i g ht s p o t i s Ea st S a l em , w h e re va ca n c y d e c rea s ed 3 % . T h e C B D a n d No r t h S a l em / Kei zer a re a s b o t h i n c rea s ed va ca n c y d u e to s o m e l a rge r b u s i n e s s c l o s u re s . I n S o u t h S a l em , a l m o st h a l f t h e va ca nt s p a c e i s a c co u nted fo r i n t h e fo r m e r S afeway a n d G I J o es . We st S a l em co nt i n u es to b e h e a l t hy.

BUILDINGS
At the beginning of 2010, 12 retail spaces larger than 20,000 SF were vacant. By the end of 2012, ten of them had been backfilled. This is tremendous news, but unfortunately, it took record low rents to drive some of these deals to completion. This compromises overall investment value, which further delays feasibility of new construction, except in limited cases.

south

In South Salem, there was a tremendous amount of activity, but because of relocations, the vacancy only improved by 1.5%. There was over 20,000 SF of absorption in that trade area last year, and 15 properties improved their vacancy in 2012. Downtown continues to be plagued by some notable properties that continue to need to be redeveloped. The Metropolitan has a tenant for 2,300SF, and the Roth & McGilchrist buildings will be redeveloped in 2013. The closings of Clockworks, Petes Place and Mings have hurt vacancy.
CBD

VACANCY VACANCY

RENTS RENTS

CONSTRUCTION CONSTRUCTION

ABSORBTION ABSORPTION

2012 2012 2013 2013

Source: Sperry Van Ness Commercial Advisors, LLC

In West Salem, the market improved due to Subway locating a new store in the drive-through endcap at Edgewater Crossing which should be open later this year and Muchas Gracias opening at 710 Wallace Road.
west

The closing of Roths Fresh Market and continued vacancies of the former Circuit City and Office Depot artificially inflate the vacancy in Keizer, which increased to 12.9% in 2012. Body Renew Fitness opening at Keizer Village and Snap Fitness at Keizer Creekside were bright notes for River Road last year, as well as Paneras opening at Keizer Station.
north keizer

&

The East Salem trade area absorbed over 50,000 SF in 2012, which helped improve the vacancy rate by 3%. Planet Fitness, Big Lots and Party Mart were big contributors to the positive absorption. Very few closures in the area also helped keep the vacancy trends moving in the right direction.
east

NOTEWORTHY PROJECTS

4450 COMMERCIAL ST SE

HILFIKER SQUARE

Leased to: Weight Watchers & Tuesday Morning Sold to: Phillips Edison - 7.41% cap Notes: Closed December 2012

102-120 LIBERTY & 415 STATE STREET

ROTH MCGILCHRIST

Sold to: Salem-based LLC Price: $870,000 Notes: Multi-million dollar redevelopment - retail/residential

601 LANCASTER DRIVE NE

JIMMY JOHNS

Leased to: Redhawk RG II, LLC Size: 1,707 SF Notes: Salems second Jimmy Johns Gourmet Sandwiches

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Source: Sperry Van Ness Commercial Advisors, LLC

2013

25%

$2.82