Las Vegas Research & Forecast Report Q2 2016

Las Vegas Economic Review

Glossary Industrial Definitions Incubator:

Multi-tenant buildings without dock-high loading doors that have a parking ratio lower than 3.5/1,000 square feet and bay sizes lower than 3,500 square feet.

Light Distribution:

Multi- or single-tenant buildings that include dock-high loading doors and have bay sizes of less than 15,000 square feet.

Light Industrial:

Multi- or single-tenant buildings without dock-high loading doors that have a parking ratio lower than 3.5/1,000 square feet and, in the case of multi-tenant buildings, bay sizes of at least 3,500 square feet.

Flex:

Multi- or single-tenant buildings without dock-high loading doors with parking ratios in excess of 3.5/1,000 square feet.

Warehouse/Distribution:

Multi- or single-tenant buildings that include dock-high loading doors and have bay sizes of at least 15,000 square feet.

Office Definitions Class A Office:

Buildings with steel frame construction, high end exterior finish, distinctive lobbies featuring upgraded finishes, amenities including on-site security, state-of-the-art communications and data infrastructure and covered parking. Class A buildings are usually multi-story.

Class B Office:

Buildings with steel frame, reinforced concrete or concrete tilt-up construction. Class B buildings contain common bathrooms and hallways, and their lobbies may have granite and hardwood detailing. Class B buildings are often multi-story.

Class C Office:

Buildings of wood frame construction. Class C buildings are often garden-style and are built around courtyards.

Retail Definitions Community Center:

Retail centers anchored by supermarkets, drug stores and discount department stores. Tenants include offprice retailers selling apparel, home improvements/furnishings, toys, electronics or sporting goods.

Neighborhood Center:

Retail centers anchored by supermarkets and drug stores. Neighborhood centers are intended for convenience shopping for day-to-day needs of consumers.

Power Center:

Retail centers dominated by several large anchors including discount department stores, off-price stores, warehouse clubs or “category killers”. Power centers generally inline space.

Strip Center:

Unanchored retail centers that are 20,000 SF in size or larger.

Multifamily Definitions Class A Multifamily:

Buildings constructed in the last 5 years

Class B/C Multifamily:

Buildings constructed more than 5 years ago

General Definitions Vacant SF:

Space in a building that is unoccupied and offered for lease by the owner of the company.

Sublease SF:

Space in a building that is offered for sublease by the primary tenant. This space may or may not be occupied.

Net Absorption:

Difference in occupied square footage from one period to another.

2

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Table of Contents Economic Review Is the Light Yellow or Red? There are signs that the economy, nationally and globally, and perhaps locally, is slowing. But does this slowing predicate a recession, or just the economy catching its breath?

4

Industrial Review Industrial Slows Down, But Does Not Stop Strong net absorption and rental rate growth in 2015 stimulated new development in 2016.

8

Office Review Office Improves at a Slower Pace Southern Nevada’s office market extended its recovery in the second quarter of 2016, again posting positive net absorption.

14

Retail Review Retail Softens Last quarter, we noted that Southern Nevada’s retail market appeared to be back in growth mode, with strong net absorption and five quarters of decreasing vacancy. Oh, what a difference a quarter makes – though fortunately not an immense difference.

19

Multifamily Multifamily Back on Track According to statistics provided by REIS, multifamily vacancy in Southern Nevada decreased in the first quarter of 2016 (the most recent quarter of available data) after uncharacteristically increasing last quarter.

25

Medical Office Medical Office Continues to Struggle Southern Nevada’s medical office market got off to a bad start in 2016, with two quarters of worsening net absorption and rising vacancy.

30

Hospitality The Streak Continues At mid-year, 2016 is proving that Las Vegas’ winning streak is not over yet.

35

Land Land Market Improves The second quarter of 2016 saw land sales, in terms of acreage sold, continue to increase.

40

This report and other research materials may be found on our website at www.colliers.com/LasVegas. This quarterly report is a research document of Colliers International | Las Vegas. Questions related to information herein should be directed to the Research Department at +1 702 836 3781. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. ©2015 Colliers International

3

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | ECONOMIC REVIEW Q2 2016

Is the Light Yellow or Red? There are signs that the economy, nationally and globally, and perhaps locally, is slowing. But does this slowing predicate a recession, or just the economy catching its breath? The current consensus appears to be for slightly slower global and U.S. growth through 2017, with the possibility of recession in 2018 or 2019. Southern Nevada, which came a bit late to the recovery party, should be able to extend growth through 2018.

Recovery Index (Year -Over-Year)

Clark County Economic Data Recovery Index (Year-Over-Year)

140.0 Jan 2005 = 100

Year Ago

Current

919.1

938.7

Visitor Volume YTD (April 2016)

13.7 MM

14.4 MM

Gaming Revenue YTD (April 2016)

$3.2 BB

$3.2 BB

Taxable Sales YTD (March 2015)

$9.4 BB

$9.4 BB

91.0%

91.0%

Jobs (1000s) (May 2016)

120.0

100.0

80.0

60.0

40.0

Commercial Occupancy (Q2-2016)

20.0

0.0 New Home Sales

Commercial Occupancy

Gaming Revenue Apr 2015

Visitor Volume

In-Migration Employment Taxable Sales Port Traffic LA Apr 2016

Recovery Index

Source: The Center for Business & Economic Research, UNLV; Colliers International

Unemployment in the Las Vegas-Paradise MSA stood at 6.4 percent in May 2016, down from 6.6 percent in May 2015. The national unemployment figure was 4.7 percent in May 2016, down from 5.5 percent in May 2015. The national labor force participation rate dropped to 62.6 percent in May 2016, a 0.3 point decrease from May 2015.

Employment Change (April 2015 - April 2016) Employment Change (Apr 2015 - Apr 2016) Trade/Transportation/Utilities

7,800

Construction

6,200

Health Care/Social Assistance

5,800

Government

2,800

Since May 2015, total employment in Southern Nevada increased by 19,600 jobs, far fewer than the 34,200 jobs that were added between May 2014 and May 2015. This suggests slowing employment growth in Southern Nevada. On a year-over-year basis, the majority of new jobs were in trade, transportation and warehousing (+7,800 jobs), construction (+6,200 jobs) and healthcare and social assistance (+5,800 jobs). Job expansions were also experienced in the government (+2,800 jobs), education (+1,300 jobs), leisure and hospitality (+600 jobs), manufacturing (+200 jobs), natural resources (+100 jobs) and other services (+100 jobs) sectors. Job losses occurred in information (-200 jobs), financial activities (-1,000 jobs), and professional and business services (-4,100 jobs). Leisure and hospitality hiring will probably remain light through the remainder of 2016, as hospitality development is expected to remain light. In 2015, job growth was dominated by the leisure and hospitality and construction sectors. In 2017, it appears to be dominated by trade, transportation and construction jobs (probably good for industrial and retail real estate), health care jobs and more public sector-oriented government and education jobs.

1,300 600

Manufacturing

200

Natural Resources

100

Other Services

100

Information

-200

Financial Activities

-1,000

Professional/Business Services

-4,100

-6,000

-4,000

-2,000

2,000

4,000

6,000

8,000

10,000

Southern Nevada Commercial Real Estate Recovery Index (Jan 2::5 = 1::) 12:.:

The Old Growth Rate

11:.:

1::.:

9:.:

8:.:

The New Growth Rate

7:.:

6:.: Oct 2:15

Feb 2:15

Jun 2:14

Oct 2:13

Feb 2:13

Jun 2:12

Oct 2:11

Feb 2:11

Jun 2:1:

Oct 2::9

Feb 2::9

Jun 2::8

Oct 2::7

Feb 2::7

Jun 2::6

Oct 2::5

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Feb 2::5

Jun 2::4

Oct 2::3

Feb 2::3

Jun 2::2

Oct 2::1

Feb 2::1

Jun 2:::

Oct 1999

Feb 1999

Jun 1998

Oct 1997

Feb 1997

Southern Nevada was among the fastest growing metropolitan areas in the United States in the decades that preceded the Great Recession, but population growth during the Not-So-Great Recovery has been slow. Factors for this slowing included a less vibrant job market, which is now improving, and millions of Americans with mortgage problems who were therefore unable to sell their homes and move west. According to data provided by the Nevada Department of Motor Vehicles, the average number of out-of-state driver’s licenses turned in each month was 5,130 in 2015. This was lower than the average of 5,324 licenses per month turned in in 2014 and 5,481 licenses per month turned in in 2013. The initial bounce back in growth experienced in 2013 from the lows of 2011 and 2012 appears to have reversed itself back into a slow slide. So far in 2016, the average was 5,479 per month, much closer to the recent peak experienced in 2013. That improving job market might be the factor in generating higher immigration to Southern Nevada. Electric meter hookups measured

5

0

Southern Nevada Commercial Real Estate Recovery Index Colliers International

Jun 1996

While the current construction employment of 56,400 jobs lags well behind the 111,300 construction jobs the Valley had in August of 2006, it has expanded quite a bit since the low of 34,800 construction jobs in early 2012. The industrial and multifamily sectors continue to be the key real estate stimulators of new construction in the Valley, though infrastructure really remains the king in terms of creating new construction jobs in Southern Nevada. Important infrastructure projects are planned to continue for the next year at least, Project Neon being foremost among them. The coming years will also see construction at the Cadence MPC in Henderson and the ResortsWorld resort on the Las Vegas “Strip”, as well as additional industrial, multifamily and retail projects.

Education Leisure/Hospitality

by the NV Energy show a steady climb over the past several years, indicating that the population is growing, and though at a slower pace than before the Great Recession, at an increased pace since the darkest days of that recession. New home sales have been slowly improving over the past three years, though they remain below the peak monthly total of 763 in August 2013. The median price for new homes has been steadily rising over the past three years, and this might be to blame for the lackluster sales; home sellers cannot generate the profits they need at a lower price, and Southern Nevada buyers find that price difficult to pay. As a result, existing home sales have been stronger than new homes sales over the past three years, and occupancy of multifamily properties has been more impressive yet, leading to the recent “boomlet” in multifamily development. Visitor volume and gaming revenue continued to see improvement in Southern Nevada in 2016, with visitor volume being the more impressive of the two measures. While monthly visitor volume was hitting new highs, gaming revenue continues to lag behind the peaks recorded in 2007/2008. That being said, gaming revenue does continue to improve, and a diversification of the resort revenue stream has also taken place. Taxable sales for “Amusement, Gambling, and Recreation Industries” has shown an average monthly growth rate of 28.7 percent over the past three years. That being said, Southern Nevada’s hospitality industry is perhaps more exposed to the global

economy that other local industries, so trouble globally could translate into slower growth for local hospitality over the next two years. Commercial real estate investment sales volume in 2015 reached $1.65 billion in 230 sales totaling 9.6 million square feet at an average price per square foot (ppsf) of $172.42. Compare this to 2014, when sales volume ended the year at $1.36 billion in 280 sales totaling 9.1 million square feet at an average ppsf of $149.47. This shows a small shift to larger property sales in 2015 than in 2014, and confirms that commercial investment sales have now recovered from the Great Recession. So far in 2016, investment sales volume was $396 million in 83 sales totaling 2.8 million square feet at an average ppsf of $143.79. This is lower sales volume than in the first two quarters of 2014 and 2015. Sale volume growth in 2015 was highest for single-tenant retail properties (+43 percent) and shopping centers (+24.2 percent), but was also positive for office properties (+13.9 percent) and industrial properties (+8.5 percent). Modest rate hikes by the Fed could reduce commercial real estate investment activity slightly in 2016 compared to 2015. Cap rates averaged 7.4 percent in 2015, and are averaging 7.7 percent so far in 2016.

The Shops at Crystals | 3720 South Las Vegas Boulevard

6

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Economic Statistics Las Vegas – Second Quarter 2016 TYPE

2015 AVERAGE

QUARTERLY GROWTH

141,365,000

143,692,200

141,960,167

0.4%

1.8%

1.2%

5.4%

4.9%

5.3%

2.0%

-7.4%

-7.3%

920,000

915,500

930,480

916,992

1.8%

2.3%

1.5%

6.1%

6.5%

6.9%

6.1%

6.8%

-6.2%

-11.6%

-10.0%

55,100

53,300

50,900

54,720

50,875

3.4%

8.3%

7.6%

283,200

276,100

287,100

280,700

281,983

2.6%

-1.4%

-0.5%

JANUARY-16

APRIL-15

143,915,000

143,318,000

5.0%

4.9%

936,100

ANNUAL GROWTH

2015 TO 2016 GROWTH (AVERAGE)

2016 AVERAGE

APRIL-16

EMPLOYMENT DATA U.S. Employment U.S. Unemployment Rate Las Vegas MSA Employment Las Vegas MSA Unemployment Rate Las Vegas MSA Construction Employment Las Vegas MSA Hospitality Employment HOUSING/CONSTRUCTION DATA New Home Sales New Home Median Price Existing Home Sales Existing Home Median Price Residential Permits Residential Permit Value Commercial Permits Commercial Permit Value

503

382

449

537

564

31.7%

12.0%

-4.8%

$325,307

$309,177

$305,704

$317,006

$310,451

5.2%

6.4%

2.1% -4.4%

2,818

1,879

2,753

2,460

2,573

50.0%

2.4%

$220,600

$219,000

$212,568

$221,840

$214,068

0.7%

3.8%

3.6%

1,254

737

786

1,338

884

70.1%

59.5%

51.3%

$130,203,566

$96,569,230

$94,993,403

$139,044,519

$102,255,895

34.8%

37.1%

36.0%

32

23

29

34

27

39.1%

10.3%

24.4%

$47,040,225

$34,404,001

$58,401,961

$1,554,040

$45,905,940

36.7%

-19.5%

-96.6%

HOSPITALITY DATA Visitor Volume Gaming Revenue Room Inventory

3,840,822

3,471,734

3,540,229

3,592,771

3,526,018

10.6%

8.5%

1.9%

$752,817,141

$810,532,000

$783,239,000

$805,836,535

$801,371,923

-7.1%

-3.9%

0.6% 0.3%

149,262

149,213

151,236

149,250

148,862

0.0%

-1.3%

Hotel/Motel Occupancy

89.7%

84.7%

88.8%

88.4%

87.7%

5.9%

1.0%

0.7%

Passengers (McCarran Int'l Airport)

3,912,116

3,551,697

3,769,869

3,745,498

3,778,734

10.1%

3.8%

-0.9%

Convention Attendance

575,981

767,726

501,392

655,053

475,859

-25.0%

14.9%

37.7%

The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.

Recovery Index The recovery index managed six straight months of growth, from June 2015 to November 2015, before taking a small dip in December 2015. The index has been noisier since then, but the overall trend has been negative. Since hitting a high of 99.9 in January 2016 (100 would indicate parity with January 2005), the index has slipped to 99.2 in April 2016; not a calamitous drop, but frustrating when so close to the promised land. Either way, one could say that the economy has largely recovered to its pre-boom level in 2005, and it took just over a decade to do it. A return to the pre-boom days of 2005 is, however, purely numeric. Southern Nevada’s economy now may look something like its younger self, but there are significant differences as well. Some measures of the local economy have exceeded their 2005 levels, such as gaming revenue (which peaked in 2007), employment (with the notable exception of construction employment), and taxable sales. Likewise, migration into Southern Nevada is much lower now than it was in the early 2000’s, as are new home sales. The local economy is now more dependent on its hospitality sector than it used to be – not exactly the change that many local business people and politicians were hoping for.

7

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | INDUSTRIAL Q2 2016

Industrial Slows Down, But Does Not Stop >> Net absorption dropped in the second quarter of 2016 >> Net absorption was higher than new completions, though >> This sent vacancy down, while asking rates took a step back

Economic Indicators INDUSTRIAL

RESIDENTIAL

Employment

Strong net absorption and rental rate growth in 2015 stimulated new development in 2016. After two quarters of expanding inventory, Southern Nevada is finding that demand, while remaining positive, is beginning to soften. Net absorption was 833,697 square feet in the second quarter of 2016, lower than in the first quarter. Vacancy fell to 5.5 percent, a very healthy vacancy rate. The weighted average asking rate, which had been on the rise since the second quarter of 2014, decreased to $0.62 per square foot (psf) on a triple net (NNN) basis.

Permit Value

TRANSPORTATION Taxable Sales

-9.4

+48.5%

-:.1% Market Indicators

Q2 2016

Relative to prior period

Q3 2016*

Vacancy Net Absorption Completions Rental Rate

Historical Vacancy Rates and Asking Lease Rates

*Projected

Summary Statistics Q2-2015

Q1-2016

Q2-2016

Vacancy Rate

6.6%

5.6%

5.5%

Asking Rent (PSF, NNN)

$0.57

$0.65

$0.62

1,849,470

900,947

833,697

774,703

1,104,275

661,726

Q2 2016 Las Vegas Market

Net Absorption (SF) New Completions (SF)

Overall Asking Rents Previous Quarter

Current Quarter

Warehouse/Distribution

$0.53

$0.55

Light Distribution

$0.58

$0.58

Light Industrial

$0.69

$0.63

Incubator

$0.73

$0.74

Flex

$0.94

$0.83

Per Square Foot

“After two quarters of expanding inventory, Southern Nevada is finding that demand, while remaining positive, is beginning to soften.”

Southern Nevada’s industrial job market improved in April 2016 (the latest month of data available) compared with April 2015, adding 8,800 jobs in the past twelve months, 4,200 of them in the construction sector. The transportation & warehousing sector added 3,400 jobs over the past twelve months, the manufacturing sector added 900 jobs, and the wholesale sector added 300. This represented slower job growth than last quarter. Unemployment in the Las Vegas-Paradise MSA stood at 6.1 percent as of April 2016, down from 6.9 percent in April 2015. From April 2015 to April 2016, total employment in Southern Nevada has increased by 30,400 jobs. Southern Nevada’s industrial inventory expanded by 661,726 square feet in the second quarter of 2016, bringing total inventory growth in 2016 to almost 1.8 million square feet. This is the largest quarterly expansion of industrial inventory since the first half of 2008, soon after the beginning of the Great Recession. Industrial development has been on the rise over the past three years, but only now is speculative development overtaking build-to-suit development. Currently, speculative projects that are under construction total 1.9 million square feet, and are 91 percent “vacant”. Fortunately, if all of the space currently under construction is completed without additional leasing, the vacancy rate for industrial product in Southern Nevada will only rise to 7.0 percent (not counting the normal ebb and flow of vacancy in existing properties). Forward supply was approximately 8.0 million square feet in the second quarter of 2016. Warehouse/distribution product still dominates, but low vacancy and rising asking rates in the light industrial sector presage an increase in development of that product type in the future. Southern Nevada’s industrial market has now posted positive net absorption every quarter since the fourth quarter of 2012. This streak was extended in the second quarter of 2016, which posted 833,697 square feet of net absorption. This was lower than in the first quarter of 2016, and significantly lower than one year ago in the second quarter of 2015. Whether demand will continue to weaken in the remainder of 2016, or will rebound in the second half of the year is unknown. Obviously, one quarter does not indicate a trend. Gross absorption was 2.9 million square feet, an increase over last quarter reversing a three quarter trend of falling gross absorption. Net absorption was positive in four of the Valley’s seven submarkets this quarter. The highest net absorption was in Henderson (341,124 square feet), followed by Airport (298,69 square feet), Southwest (275,428 square feet) and Northwest (53,368 square feet). Negative net absorption occurred in East Las Vegas (negative 70,541 square feet), North Las Vegas (negative 37,732 square feet) and West Central (negative 26,919 square feet).

Historical Net Absorption vs. Completions

Occupancy vs. Industrial Employment

APR 2015

APR 2016

CHANGE

Construction

50,900

55,100

+ 4,200

Manufacturing

21,000

21,900

+ 900

Transportation & Warehousing

39,800

39,800

+ 3,400

Wholesale

22,000

22,000

+ 300

Source: Nevada Department of Employment, Training and Rehabilitation

Industrial vacancy declined in every quarter between the first quarter of 2012 and the fourth quarter of 2015, dropping from 14.0 percent to 5.5 percent over that period. The first quarter of 2016 saw the first increase in industrial vacancy in four years, to 5.6 percent. This quarter it fell back down to 5.5 percent. The completion of almost 1.8 million square feet of new warehouse/distribution space without significant pre-leasing in 2016 was to blame for the increase last

9

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

quarter. Given that industrial construction continues with the same lack of pre-leasing, further increases in vacancy are likely in 2016. On the bright side, this available warehouse/distribution space will make Southern Nevada well-positioned to take advantage of future expansions or entrances into the market. Several potential new tenants in the Valley were lost in 2014 and 2015 due to a lack of available space that was well-located and well-designed. The industries most active in occupying industrial space over the past twelve months were involved in wholesale (most likely serving the Resort Corridor), retail, manufacturing and services. Local companies took about 45 percent of the leased square footage we tracked over this period. Companies headquartered in the Southwest U.S. took 16 percent, while 12 percent was taken by companies from the Mid-Atlantic region and 11 percent from the Great Plains, which includes Texas. The weighted average asking lease rate for industrial space decreased to $0.62 psf NNN in the second quarter of 2016. This was $0.03 lower than one quarter ago, but still $0.05 higher than one year ago. If adjusted for inflation , the weighted average asking lease rate would be $0.46 psf NNN, a $0.04 increase from one year ago. The current asking rate, adjusted for inflation, is $0.05 lower than it was during the last economic recovery in 2004. Units leased in the

second quarter of 2016 had effective lease rates that averaged 117.3 percent of asking rates. This should indicate continued increases in asking rental rates in 2016, though actual asking rates did not increase this quarter. Higher rental rates will make new industrial developments more viable, specifically non-warehouse/distribution projects. In 2015, final industrial investment sales volume was $295.8 million in 43 sales that totaled 3.1 million square feet. The average sales price in 2015 was $96.58 psf, and the average cap rate was 7.1 percent, a slight compression from 2014’s average cap rate of 7.3 percent. Year-to-date in 2016, we have seen industrial investment sales volume of $40.8 million in eleven sales totaling 620,000 square feet. This gives us an average sales price per square foot of $65.79. Southern Nevada’s industrial market had over 1.4 million square feet of product available for sale as investments, with an average asking price of $112.64 psf, and an average cap rate of 6.4 percent. Demand for industrial space as an investment peaked in 2013, and has been declining since. Warehouse/distribution space managed to post 544,659 square feet of net absorption in the second quarter of 2016, bringing the midyear total to 992,885 square feet. This is not an especially strong level of net absorption given that it comes with almost 1.8 million

1 Using the Consumer Price Index, All Urban Consumers, West Region, Class A Cities, 1982-1984 = 100

Industrial Development Pipeline Project

Type

Submarket

Size

Pre-Leasing

Completion

Northgate Distribution Center

Warehouse/Distribution

North Las Vegas

806,000 SF

0%

Q4-2016

Henderson Freeway Crossings

Warehouse/Distribution

Henderson

363,000 SF

0%

Q4-2016

Sunpoint Business Center

Warehouse/Distribution

North Las Vegas

312,000 SF

0%

Q4-2016

Parc Post

Warehouse/Distribution

Southwest

165,000 SF

0%

Q3-2016

Cheyenne Distribution Center

Warehouse/Distribution

North Las Vegas

164,000 SF

100%

Q4-2016

Sunset 215 West

Warehouse/Distribution

Southwest

73,000 SF

0%

Q4-2016

4700 Eaker Street

Light Industrial

North Las Vegas

58,000 SF

BTS

2017

1,941,000 SF

9%

ProLogis I-15 Speedway Logistics

Warehouse/Distribution

North Las Vegas

1,129,000 SF

0%

2017

South 15 Airport Center

Warehouse/Distribution

Airport

1,086,000 SF

0%

2017

LogistiCenter at Las Vegas Blvd

Warehouse/Distribution

North Las Vegas

549,000 SF

0%

2017

Switch SuperNAP 10

Warehouse/Distribution

Southwest

500,000 SF

BTS

2017

Sunrise Distribution Center

Warehouse/Distribution

North Las Vegas

458,000 SF

BTS

2017

Blue Diamond Business Center 6

Warehouse/Distribution

Southwest

430,000 SF

0%

2017

ProLogis North 15 Freeway ½

Warehouse/Distribution

North Las Vegas

411,000 SF

0%

2017

3910 Alto Avenue

Warehouse/Distribution

North Las Vegas

337,000 SF

0%

2017

Las Vegas Digital Exchange

Warehouse/Distribution

Southwest

296,000 SF

0%

2017

Lone Mountain Corporate Center 2

Warehouse/Distribution

North Las Vegas

247,000 SF

0%

2017

Henderson Commerce Center IV

Warehouse/Distribution

Henderson

240,000 SF

0%

2017

ProLogis Beltway Distribution Center

Warehouse/Distribution

Southwest

211,000 SF

0%

2017

Henderson Freeway Crossings

Warehouse/Distribution

Henderson

90,000 SF

0%

2017

Clayton Park

Incubator

North Las Vegas

88,000 SF

0%

2017

2800 Sunset Road

Light Industrial

Airport

54,000 SF

0%

2017

6,126,000 SF

16%

Under Construction

Planned Construction

10

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

square feet of new warehouse/distribution space completed in the market. This is as much new space as was added in all of 2015, with a quarter of the net absorption. This weakening of demand is occurring with continued strong job gains in industrial sectors, which suggests that tenants that expanded in 2015 added enough space to their holdings to accommodate these new workers – in other words, the job gains are not translating into an immediate demand for more warehouse/distribution space. We think it is likely that demand will continue to decline in 2016, sending vacancy rates higher and asking rates lower by the end of the year. The light distribution sector continued to see strong demand in the second quarter of 2016, with 92,594 square feet of net absorption and no increase in inventory. This brought light distribution vacancy down to 5.7 percent. The weighted average asking rate for light distribution space decreased by $0.01 to $0.58 psf NNN. Asking rates will probably need to increase to stimulate new construction, though much of the warehouse/distribution space currently planned for the Valley could conceivably be redesigned as light distribution space if demand for that product type continues to be strong. The light industrial sector is even stronger than light distribution. Light industrial space now has a lower vacancy rate than warehouse/ distribution, at 5.0 percent, but asking rates are not on the rise. In fact, the average asking rate for light industrial space decreased by $0.06 to $0.63 psf NNN in the second quarter of 2016. Net absorption remained positive, but was lower than in the first quarter.

There are currently 58,000 square feet of light industrial product under construction in the Valley, with another 54,000 square feet planned. This does not represent a significant increase in light industrial inventory, but the reverse in rent growth experienced this quarter does not suggest that more light industrial development is eminent. The incubator and flex sectors continued to improve in the second quarter of 2016, especially flex. Flex net absorption was 113,793 square feet this quarter, compared to only 7,394 square feet of incubator net absorption. These roles were reversed in the first quarter of 2016. A tight light industrial market could push tenants into incubator and flex space over the next twelve months. Two quarters is not necessarily a trend, but it seems possible that demand for industrial space in Southern Nevada is softening. This may be a symptom of a general softening of the national economy, rather than a specific problem with Southern Nevada. Net absorption has decreased for two quarters, but remains positive. Still, higher gross absorption this quarter coupled with lower net absorption could point to the contraction of existing tenants in Southern Nevada, and thus the potential for larger problems in the quarters to come. We think net absorption will remain positive for the remainder of 2016, but will not keep up with new completions. This means vacancy could rise, perhaps to 6.0 or 6.1 percent by the end of the year.

“We think net absorption will remain positive for the remainder of 2016, but will not keep up with new completions.” - John Stater, Research & GIS Manager

Investment Sales No. Sales

2012

2013

2014

2015

2016 YTD

77

58

82

43

11

Square Feet Sold

2,488,000

5,697,000

3,063,000

3,062,000

620,000

Sales Volume

$153.4 MM

$352.9 MM

$272.7 MM

$295.8 MM

$40.8 MM

Average Price/SF

$61.11

$61.94

$89.03

$96.58

$65.79

Average Cap Rate*

8.3%

7.9%

7.3%

7.1%

7.4%

Average Sale Size (SF)

32,000

98,000

37,000

71,000

56,000

*Cap rate on industrial properties available for sale as investments

11

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Significant Industrial Sale Activity

215 NORTH LAS VEGAS

4527 Losee Road 68,826 SF - $7,643,000

NORTHWEST

95

$111.04/SF May 2016 Warehouse/Distribution

15

Coleman Airpark 68,000 SF - $6,595,000 $97.00/SF May 2016

EAST LAS VEGAS

WEST CENTRAL

Warehouse/Distribution

801 Searles Avenue 95,000 SF - $4,000,000

95

$42.00/SF June 2016 Warehouse/Distribution

215

2901 Highland Avenue

AIRPORT

306,000 SF - $12,839,000 $42.00/SF June 2016

SOUTHWEST

Light Industrial

HENDERSON

6360 South Pecos Road 48,000 SF - $4,988,000 $105.00/SF April 2016 Incubator

Lease Activity Property Name

Lease Date

Lease Term

Size

Lease Rate

Type

6650 Spencer Street

Apr 2016

60 months

76,000 SF

$0.63 NNN

Warehouse/Distribution

Arrowhead Commerce Center

Apr 2016

62 months

9,000 SF

$0.65 NNN

Light Distribution

Alexander Belmont Industrial Center

Apr 2016

36 months

8,000 SF

$0.51 NNN

Light Industrial

AirCenter South

Jun 2016

24 months

5,000 SF

$0.66 NNN

Incubator

Stephanie Beltway Centre

May 2016

75 months

28,000 SF

$1.22 NNN

Flex

12

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Industrial Market TYPE

TOTAL INVENTORY SF

DIRECT VACANT SF

DIRECT VACANCY RATE

SUBLEASE VACANCY SF

TOTAL VACANT SF

VACANCY RATE CURRENT QUARTER

NET NET WEIGHTED VACANCY RATE COMPLETIONS UNDER PLANNED ABSORPTION ABSORPTION COMPLETIONS AVG ASKING PRIOR CURRENT CONSTRUCTION CONSTRUCTION CURRENT YTD YTD SF RENTAL QUARTER QTR SF SF SF QTR SF SF RATE

AIRPORT SUBMARKET WH LD LI INC FLX Total

5,859,231 3,236,376 2,973,127 1,500,100 1,508,798 15,077,632

470,934 263,435 193,849 188,228 237,891 1,354,337

8.0% 8.1% 6.5% 12.5% 15.8% 9.0%

37,000 51,871 3,297 1,500 93,668

507,934 315,306 193,849 191,525 239,391 1,448,005

8.7% 9.7% 6.5% 12.8% 15.9% 9.6%

11.0% 9.0% 9.3% 12.2% 18.6% 11.1%

176,023 9,201 82,242 (7,991) 39,494 298,969

160,158 26,286 100,807 48,552 8,889 344,692

-

-

-

54,000 54,000

$0.68 $0.67 $0.94 $0.90 $0.96 $0.80

25,183 18,220 66,330 27,657 23,751 161,141

2.3% 3.4% 3.7% 9.8% 10.2% 4.1%

-

25,183 18,220 66,330 27,657 23,751 161,141

2.3% 3.4% 3.7% 9.8% 10.2% 4.1%

0.0% 2.2% 2.4% 10.7% 15.5% 3.1%

(25,183) (6,628) (22,448) 2,568 (18,850) (70,541)

29,729 (11,720) (11,440) 7,508 (8,574) 5,503

-

-

-

-

$0.55 $0.49 $0.55 $0.56 $0.58 $0.55

81,733 108,542 223,026 15,315 86,791 515,407

1.2% 6.6% 6.1% 3.1% 6.5% 3.7%

90,170 29,123 2,654 31,339 153,286

171,903 137,665 223,026 17,969 118,130 668,693

2.5% 8.4% 6.1% 3.6% 8.8% 4.8%

4.4% 7.3% 4.5% 4.1% 10.2% 5.3%

355,408 (7,618) (59,137) 2,288 50,183 341,124

203,593 (23,923) (23,486) 17,616 61,407 235,207

232,826 232,826

232,826 232,826

363,450 363,450

1,516,480 1,516,480

$0.57 $0.59 $0.65 $0.64 $0.90 $0.67

896,032 364,939 327,310 87,361 103,770 1,779,412

4.2% 7.2% 3.6% 12.1% 13.0% 4.8%

0 5,663 37,744 0 0 43,407

896,032 370,602 365,054 87,361 103,770 1,822,819

4.2% 7.3% 4.0% 12.1% 13.0% 4.9%

3.4% 9.2% 5.0% 8.7% 13.7% 4.9%

-164,132 51,800 81,409 -12,288 5,479 (37,732)

233,777 86,268 195,964 (4,767) 16,444 527,686

12,900 12,900

832,750 12,900 845,650

1,281,331 58,000 1,339,331

2,669,440 87,900 2,757,340

$0.44 $0.43 $0.61 $0.65 $0.59 $0.49

12,159 31,985 7,913 74,903 126,960

0.0% 24.3% 9.4% 8.0% 10.1% 8.7%

-

12,159 31,985 7,913 74,903 126,960

0.0% 24.3% 9.4% 8.0% 10.1% 8.7%

0.0% 24.3% 9.4% 7.2% 17.4% 12.4%

(29) (796) 54,193 53,368

(8,359) 2,440 (5,900) 54,215 42,396

-

-

-

-

$$0.98 $0.65 $0.87 $0.75 $0.75

973,559 234,633 542,652 112,597 175,925 2,039,366

6.6% 3.3% 5.2% 4.7% 10.4% 5.6%

14,860 170,922 8,040 3,000 3,701 200,523

988,419 405,555 550,692 115,597 179,626 2,239,889

6.7% 5.6% 5.2% 4.9% 10.7% 6.1%

5.7% 4.5% 5.6% 4.8% 9.6% 5.6%

212,543 39,839 38,417 1,335 (16,706) 275,428

365,628 115,269 76,042 28,421 (6,839) 578,521

416,000 416,000

687,525 687,525

107,347 130,580 237,927

1,436,938 1,436,938

$0.58 $0.73 $0.47 $0.71 $0.83 $0.60

17,283 54,857 418,957 182,532 16,802 690,431

0.8% 5.8% 5.3% 7.3% 10.4% 5.0%

11,334 12,178 23,512

28,617 54,857 418,957 194,710 16,802 713,943

1.3% 5.8% 5.3% 7.8% 10.4% 5.2%

0.8% 6.4% 4.6% 8.6% 10.4% 4.9%

6,000 (55,197) 22,278 (26,919)

32,600 (45,883) 7,245 6,677 639

-

-

-

-

$0.33 $0.39 $0.71 $0.67 $0.87 $0.67

2,464,724 1,056,785 1,804,109 621,603 719,833 6,667,054

4.7% 5.7% 5.0% 7.8% 11.1% 5.5%

153,364 257,579 45,784 21,129 36,540 514,396

2,618,088 1,314,364 1,849,893 642,732 756,373 7,181,450

5.0% 7.0% 5.1% 8.0% 11.7% 5.9%

4.8% 6.9% 5.3% 8.0% 13.5% 5.9%

554,659 92,594 65,257 7,394 113,793 833,697

992,885 216,421 294,444 98,675 132,219 1,734,644

648,826 12,900 661,726

1,753,101 12,900 1,766,001

1,752,128 130,580 58,000 1,940,708

5,622,858 54,000 87,900 5,764,758

$0.55 $0.58 $0.63 $0.74 $0.83 $0.62

EAST LAS VEGAS SUBMARKET 1,115,454 532,163 1,798,241 281,755 233,692 3,961,305

WH LD LI INC FLX Total

HENDERSON SUBMARKET WH LD LI INC FLX Total

6,923,114 1,634,138 3,669,606 497,448 1,341,046 14,065,352

NORTH LAS VEGAS SUBMARKET WH LD LI INC FLX Total

21,509,000 5,053,600 9,023,579 724,573 796,116 37,106,868

NORTHWEST SUBMARKET WH LD LI INC FLX Total

224,906 50,000 341,430 99,427 740,230 1,455,993

SOUTHWEST SUBMARKET WH LD LI INC FLX Total

14,858,180 7,199,416 10,497,839 2,372,501 1,685,955 36,613,891

WEST CENTRAL SUBMARKET WH LD LI INC FLX Total

2,255,565 949,515 7,913,357 2,511,825 161,527 13,791,789

MARKET TOTAL WH LD LI INC FLX Total

52,745,450 18,655,208 36,217,179 7,987,629 6,467,364 122,072,830

QUARTERLY COMPARISON AND TOTALS Q2-16

122,072,830

6,667,054

5.5%

514,396

7,181,450

5.9%

5.9%

833,697

1,734,644

661,726

1,766,001

1,940,708

5,764,758

$0.62

Q1-16

121,411,104

6,839,025

5.6%

380,928

7,219,953

5.9%

5.6%

900,947

900,947

1,104,275

1,104,275

1,446,539

5,155,620

$0.65

Q4-15 Q3-15 Q2-15 Q1-15 Q4-14

120,306,829 120,133,221 119,180,931 118,406,228 118,406,228

6,635,697 6,987,491 7,806,528 8,881,295 9,779,786

5.5% 5.8% 6.6% 7.5% 8.3%

110,304 467,329 406,957 294,896 303,740

6,746,001 7,454,820 8,213,485 9,176,191 10,083,526

5.6% 6.2% 6.9% 7.7% 8.5%

6.2% 6.9% 7.7% 8.5% 9.0%

525,402 1,771,327 1,849,470 898,491 892,946

5,044,690 4,519,288 2,747,961 898,491 3,974,231

173,608 952,290 774,703 444,520

1,900,601 1,726,993 774,703 1,079,592

2,224,326 1,689,817 1,731,785 1,633,705 862,161

4,361,662 6,390,005 5,453,451 6,665,344 3,071,639

$0.64 $0.61 $0.57 $0.57 $0.56

WH = Warehouse

13

LD = Light Distribution

LI = Light Industrial

INC = Incubator

FLX = Flex

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | OFFICE Q2 2016

Office Improves at a Slower Pace >> Southern Nevada’s office market continued to recover

Economic Indicators

>> Net absorption was higher than new completions >> The pace of the recovery might be slowing

Office

Employment

Southern Nevada’s office market extended its recovery in the second quarter of 2016, again posting positive net absorption. Vacancy remained high, but it continued to fall. Net absorption in the second quarter totaled 180,611 square feet, down from last quarter but a notable improvement from one year ago. This brought vacancy down to 16.7 percent. Completions increased this quarter over last, to 164,663 square feet. Asking rents decreased to $1.99 per square foot (psf) on a Full Service Gross (FSG) basis. Southern Nevada’s office job market improved in April 2016 (the latest month of data available) compared with April 2015, adding approximately 13,600 jobs in the past twelve months, with the largest contribution coming from the professional/business services sector (+6,300 jobs), and with the information sector dropping 500 jobs. The health care sector added 5,300 new jobs over the past year, and the financial services sector added 2,000 jobs. Unemployment in the Las Vegas-Paradise MSA stood at 6.1 percent as of April 2016, down

Historical Vacancy Rates and Asking Lease Rates

-:.7%

-30.9

Q2 2016

Q3 2016*

VACANCY NET ABSORPTION COMPLETIONS RENTAL RATE *Projected

Summary Statistics Q2 2016 Las Vegas Market

Vacancy Rate

16.0%

$1.85

15.0%

$1.80

2 Q 2016

New Completions (SF)

1 Q 2016

$1.90

4 Q 2015

17.0%

3 Q 2015

Net Absorption (SF)

2 Q 2015

$1.95

1 Q 2015

18.0%

4 Q 2014

Asking Rent (PSF, FSG)

3 Q 2014

$2.00

2 Q 2014

19.0%

“The trend of taking less space per office employee remains a headwind to office market growth…”

+2.7%

Vacancy

Q2 2016

Relative to prior period

$2.05

Asking Rental Rate

Sublease

Market Indicators

20.0%

Vacancy

Office

SF/Job

Q2-2015

Q1-2016

Q2-2016

18.5%

16.8%

16.7%

$1.91

$2.00

$1.99

82,173

375,054

180,611

-13,548

0

164,663

Overall Asking Rents Previous Quarter

Current Quarter

Class A

$2.66

$2.68

Class B

$2.04

$1.99

Class C

$1.64

$1.68

Per Square Foot

from 6.9 percent in April 2015. From April 2015 to April 2016, total employment in Southern Nevada has increased by 30,400 jobs. Office inventory expansion returned in the second quarter of 2016, after no new completions in the first quarter. New completions totaled 164,663 square feet in the second quarter. The market had 203,000 square feet of office space under construction, almost 90 percent of it being speculative construction. We think 134,000 square feet of that office space will be completed in the third quarter of 2016, with another 69,000 square feet completed in the fourth quarter. Another 421,000 square feet of office space is planned to begin construction within the next twelve months, with completion in 2017.

Historical Net Absorption vs. Completions 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 -100,000 -200,000 2 Q 2016

1 Q 2016

4 Q 2015

3 Q 2015

115,000

81.0%

110,000

80.0%

105,000

79.0%

100,000

78.0%

4 Q 2014 Office Jobs

2 Q 2016

82.0%

1 Q 2016

120,000

4 Q 2015

83.0%

3 Q 2015

125,000

2 Q 2015

84.0%

1 Q 2015

130,000

Occupancy Rate

APR 2015

APR 2016

CHANGE

10,100

10,600

- 500

42,500

44,500

+ 2,000

Professional & 120,300 Business Services

126,600

+ 6,300

56,600

61,900

+ 5,300

Information Financial Activities

Health Care

Source: Nevada Department of Employment, Training and Rehabilitation

The Valley’s lowest vacancy rate remained in Downtown, at 12.0 percent, while North Las Vegas had the Valley’s highest vacancy rate at 24.4 percent. Over the next few years, the East Las Vegas submarket should see the completion of a major expansion and renewal of the Las

15

2 Q 2015

1 Q 2015

4 Q 2014

Office vacancy decreased in three of the Valley’s eight submarkets in the second quarter of 2016, with the Downtown submarket experiencing the largest decrease (1.7 percentage points), followed by Southwest (0.9 points). The North Las Vegas submarket experienced the sharpest increase in vacancy, 1.7 points, to 24.4 percent. Large vacancy increases were also experienced in the Northwest and Henderson submarkets, and smaller decreases occurred in the West Central and East Las Vegas submarkets.

Completions

Occupancy vs. Office Employment

3 Q 2014

Positive net absorption drove the office vacancy rate down to 16.7 percent in the second quarter of 2016, despite weaker net absorption than a quarter ago, and stronger inventory expansion. Current vacancy is 1.8 percentage points lower than one year ago. At recent rates of net absorption, the office market could stabilize at 10.0 percent vacancy in approximately 3.5 years, assuming mild inventory expansion and the avoidance of an economic recession.

Net Absorption

2 Q 2014

Demand for office space over the past twelve months came primarily from manufacturing (290,547 square feet), professional and business services (202,244 square feet) and financial activities, especially mortgage and title companies (130,181 square feet). Mortgage and title companies have been stimulated by the recent expansion of the Valley’s construction industry. Manufacturing includes printing and publishing, which includes digital media like websites, hence the strong office demand of manufacturing. The trend of taking less space per office employee remains a headwind to office market growth, but Southern Nevada’s office users appear to be in expansion mode, offsetting that trend somewhat.

3 Q 2014

In the second quarter of 2016, net absorption was highest in the Downtown submarket (194,589 square feet), followed by Southwest (96,314 square feet) and Airport (19,549 square feet). All other submarkets had negative net absorption, the highest in Northwest (negative 61,350 square feet) and Henderson (negative 33,689 square feet).

2 Q 2014

-300,000

Southern Nevada’s office market had 180,611 square feet of net absorption in the second quarter of 2016, bringing net absorption at mid-year to over a half-million square feet. This was the fifth straight quarter of positive net absorption for the office market.

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Vegas Convention Center, the completion of the nearby World Resorts property on the “Strip” and the potential construction of a new stadium near UNLV. This “Midtown renaissance” should stimulate demand for office space in the East Las Vegas submarket. Vacancy in Class A office stood at 20.6 percent in the second quarter of 2016, and might dip below 20 percent by the end of the year if demand continues to improve. Year-over-year, Class B product saw vacancy decrease by 1.2 percentage points to 16.4 percent, while vacancy in Class C office decreased by 2.2 percentage points to 15.8 percent; however, on a quarter-over-quarter basis, vacancy increased this quarter for both Class B and Class C office properties. Vacancy increased this quarter in Class B and Class C office properties. The weighted average asking rental rate for office space in Southern Nevada decreased to $1.99 per square foot (psf) on a full service gross (FSG) basis in the second quarter of 2016, an $0.08 psf increase from one year ago and a $0.01 decrease from one quarter ago. The Southwest continued to boast the Valley’s highest office asking rate, at $2.22 psf FSG. This is followed by the Downtown’s $2.12 psf FSG and Northwest’s $2.08 psf FSG. The Valley’s lowest average asking rate is in the West Central submarket, at $1.66 psf FSG. Office space available for sublease decreased this quarter to 349,822 square feet, an impressive 30.9 percent decrease from one year ago. Sublease availability increased significantly in the first quarter of 2014

when Citibank’s call center in the Northwest was put on the market. It then decreased significantly last quarter with the sublease of 138,000 square feet at 8725 W Sahara Avenue to Sutherland Global Services. Fortunately, the trend has continued, as increases in available sublease space often presage weakness in overall demand for office space. The office investment sales remained subdued in the second quarter of 2016. At mid-year, sales volume totaled $47.6 million in 22 sales totaling 512,000 square feet with an average price per square foot of $92.95 and an average cap rate of 8.1 percent. The significant decrease in average price is due to the sale of a large building in the Downtown submarket at a low price per square foot. In general, investment sales in Southern Nevada are shifting to smaller buildings. In the second quarter of 2016, there was 1.6 million square feet of office space available for sale with an average asking price of $156.47 psf and an average cap rate of 7.1 percent. While Southern Nevada’s office performance this quarter is not mindstaggering wonderful, it does continue, for the most part, the positive trend we have seen for the last year. Demand may be softening, and clearly job increases are not translating into demand increases as we would expect and prefer, but the market is recovering, and is within about three years of normalizing if a national or local recession does not occur. The market is still on track to reach approximately 1.0 million square feet of net absorption in 2016, and thus on track to approach a vacancy rate of 15.0 percent by year’s end.

Investment Sales Activity 2012

2013

2014

2015

2016 YTD

No. Sales

87

90

71

68

22

Square Footage

3,929,000

3,512,000

2,505,000

2,044,000

512,000

Sales Volume

$261.0 MM

$571.9 MM

$296.4 MM

$384.1 MM

$47.6 MM

Average Price/SF

$89.11

$162.83

$118.32

$187.88

$92.95

Average Cap Rate*

8.2%

7.6%

7.7%

7.5%

8.1%

Average Sale Size (SF)

34,000

39,000

35,000

30,000

23,000

*Cap rate on office properties available for sale as investments

Office Development Pipeline Project

Type

Submarket

Size (SF)

Status

Completion

Class B

Downtown

27,000

Under Construction

Q4-2016

Tivoli Village

Class A

Northwest

134,000

Under Construction

Q3-2016

The Grid

Class A

Downtown

125,000

Planned

2017

Centennial Hills Center

Class B

Northwest

124,000

Planned

2017

The Square

Class C

Southwest

80,000

Planned

2017

Pace Plaza

Class B

Southwest

42,000

Under Construction

Q4-2016

Seven Hills Plaza D

Class B

Henderson

42,000

Planned

2017

Cadence

Class C

Henderson

30,000

Planned

2017

Stone Creek Professional Plaza

Class C

Southwest

20,000

Planned

2017

Supreme Court Building Build-To-Suit Total

27,000

Speculative Total

597,000

Office Total

624,000

16

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

215

Significant Office Sale Activity

NORTH LAS VEGAS

BoA Operations Center 148,000 SF - $4,600,000

95

$31.00/SF April 2016 Class B

15

NORTHWEST

R&R Plaza

SUMMERLIN

WEST CENTRAL

EAST LAS VEGAS

DOWN TOWN

49,000 SF - $3,900,000 $80.00/SF May 2016 Class C

Corporate Center The Curve

95

22,000 SF - $5,500,000 $250.00/SF April 2016 Class B

AIRPORT

Eastern Wigwam Prof. Center

215

30,000 SF - $3,900,000 $131.00/SF

SOUTHWEST

April 2016

HENDERSON

Class C

Seven Hills Business Center 24,000 SF - $5,525,000 $227.00/SF May 2016 Class C

Lease Activity Property Name

Lease Date

Lease Term

Size

Lease Rate

Type

Venture Commerce Center

May 2016

48 months

7,000 SF

$1.49 FSG

Class B

2200 Paseo Verde Parkway

Apr 2016

38 months

5,500 SF

$2.39 MG

Class A

Law Office Building

Apr 2016

62 months

5,000 SF

$1.59 MG

Class B

3300 Saint Rose Parkway

May 2016

36 months

4,000 SF

$1.23 NNN

Class B

Shadow Quail Park

Apr 2016

12 months

3,500 SF

$1.71 MG

Class B

17

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Office Market CLASS

TOTAL DIRECT INVENTORY SF VACANT SF

DIRECT VACANCY RATE

SUBLEASE TOTAL VACANT VACANT SF SF

VACANCY RATE VACANCY CURRENT RATE PRIOR QUARTER QUARTER

NET NET COMPLETIONS UNDER PLANNED WEIGHTED ABSORPTION COMPLETIONS ABSORPTION CURRENT CONSTRUCTION CONSTRUCTION AVG ASKING CURRENT YTD SF YTD SF QTR SF SF SF RENTAL RATE QTR SF

AIRPORT SUBMARKET A B C Total

729,174 2,400,206 3,185,335 6,314,715

231,241 181,076 522,004 934,321

31.7% 7.5% 16.4% 14.8%

1,750 23,782 19,184 44,716

232,991 204,858 541,188 979,037

32.0% 8.5% 17.0% 15.5%

32.4% 9.4% 16.9% 15.9%

3,283 16,233 33 19,549

5,881 93,786 19,851 119,518

-

-

-

-

$2.82 $1.93 $1.72 $2.03

196,420 258,393 145,196 600,009

15.9% 11.1% 10.1% 12.0%

3,400 3,400

196,420 258,393 148,596 603,409

15.9% 11.1% 10.4% 12.1%

20.3% 12.4% 11.9% 14.0%

142,720 30,675 21,194 194,589

148,412 (14,338) 23,890 157,964

129,000 129,000

129,000 129,000

26,600 26,600

125,000 125,000

$2.66 $2.03 $1.53 $2.12

276,324 441,991 472,023 1,190,338

20.4% 28.7% 18.0% 21.5%

3,315 3,079 1,600 7,994

279,639 445,070 473,623 1,198,332

20.7% 28.9% 18.0% 21.7%

19.1% 29.0% 18.0% 21.3%

(18,320) 5,771 (303) (12,852)

52,015 38,077 23,659 113,751

-

-

-

-

$3.11 $1.37 $1.43 $1.80

174,845 422,220 382,932 979,997

29.9% 16.6% 17.2% 18.3%

5,000 3,450 8,450

174,845 427,220 386,382 988,447

29.9% 16.7% 17.3% 18.4%

28.7% 16.6% 16.5% 17.9%

-7,435 -4,842 -21,412 (33,689)

(8,964) (795) (964) (10,723)

-

-

-

42,000 30,000 72,000

$2.65 $2.10 $1.74 $2.06

92,771 99,588 192,359

n/a 37.8% 18.3% 24.4%

-

92,771 99,588 192,359

n/a 37.8% 18.3% 24.4%

n/a 37.6% 16.0% 22.7%

(373) (12,868) (13,241)

4,879 (31,965) (27,086)

-

-

-

-

$$1.92 $1.56 $1.73

410,812 602,264 427,570 1,440,646

22.5% 17.0% 12.8% 16.5%

1,522 30,430 4,214 36,166

412,334 632,694 431,784 1,476,812

22.6% 17.9% 12.9% 17.0%

23.3% 16.3% 12.8% 16.4%

7,140 (58,715) (9,775) (61,350)

43,093 (77,820) 16,298 (18,429)

-

-

134,003 134,003

87,000 37,100 124,100

$2.34 $2.11 $1.79 $2.08

74,161 526,566 544,521 1,145,248

8.9% 17.6% 15.5% 15.6%

10,098 28,085 14,627 52,810

84,259 554,651 559,148 1,198,058

10.2% 18.5% 15.9% 16.3%

17.5% 19.3% 15.6% 17.3%

60,690 34,050 1,574 96,314

16,582 107,722 16,723 141,027

35,663 35,663

35,663 35,663

42,000 42,000

100,040 100,040

$2.66 $2.41 $1.97 $2.22

18,803 341,551 542,377 902,731

11.9% 17.8% 18.0% 17.7%

4,420 4,420

18,803 341,551 546,797 907,151

11.9% 17.8% 18.1% 17.8%

16.0% 16.8% 18.2% 17.6%

6,358 (18,964) 3,897 (8,709)

6,358 100,385 (27,100) 79,643

-

-

-

-

$2.46 $1.85 $1.52 $1.66

1,382,606 2,866,832 3,136,211 7,385,649

20.6% 16.4% 15.8% 16.7%

16,685 90,376 50,895 157,956

1,399,291 2,957,208 3,187,106 7,543,605

20.9% 16.9% 16.0% 17.1%

22.5% 16.9% 15.9% 17.3%

194,436 3,835 (17,660) 180,611

263,377 251,896 40,392 555,665

129,000 35,663 164,663

129,000 35,663 164,663

134,003 68,600 202,603

125,000 129,000 167,140 421,140

$2.68 $1.99 $1.68 $1.99

DOWNTOWN SUBMARKET 1,232,341 2,328,682 1,431,039 4,992,062

A B C Total

EAST LAS VEGAS SUBMARKET A B C Total

1,353,083 1,542,404 2,629,026 5,524,513

HENDERSON SUBMARKET A B C Total

583,905 2,550,831 2,227,680 5,362,416

NORTH LAS VEGAS SUBMARKET A B C Total

245,696 543,389 789,085

NORTHWEST SUBMARKET A B C Total

1,825,415 3,537,640 3,341,856 8,704,911

SOUTHWEST SUBMARKET A B C Total

828,642 3,000,008 3,513,211 7,341,861

WEST CENTRAL SUBMARKET A 157,624 B 1,922,915 C 3,020,842 Total 5,101,381 MARKET TOTAL A 6,710,184 B 17,528,382 C 19,892,378 Total 44,130,944

QUARTERLY COMPARISON AND TOTALS Q2-16

44,130,944

7,385,649

16.7%

157,956

7,543,605

17.1%

17.3%

180,611

555,665

164,663

164,663

202,603

421,140

$1.99

Q1-16

43,966,281

7,401,597

16.8%

192,126

7,593,723

17.3%

18.1%

375,054

375,054

-

-

325,266

463,140

$2.00

Q4-15 Q3-15 Q2-15 Q1-15 Q4-14

43,966,281 43,842,664 43,796,014 43,809,562 43,596,674

7,776,651 7,751,653 8,107,288 8,203,009 8,611,104

17.7% 17.7% 18.5% 18.7% 19.8%

197,676 150,546 182,799 172,615 146,951

7,974,327 7,902,199 8,290,087 8,375,624 8,758,055

18.1% 18.0% 18.9% 19.1% 20.1%

18.0% 18.9% 19.1% 20.1% 19.2%

98,619 402,285 82,173 620,983 (127,244)

1,204,060 1,105,441 703,156 620,983 354,893

123,617 46,650 (13,548) 212,888 268,420

369,607 245,990 199,340 212,888 133,751

197,000 242,000 300,444 300,444 460,438

485,140 435,140 435,140 310,140 418,140

$1.97 $1.94 $1.91 $1.89 $1.90

18

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | RETAIL Q2 2016

Retail Softens

Economic Indicators RETAIL

>> Retail net absorption turned negative at mid-year

Employment

RETAIL

RETAIL

+0.8

+0.9%

SF/Job

Taxable Sales

>> This resulted in a small increase in vacancy >> The overall trend for Southern Nevada retail is still positive

+1.3% Last quarter, we noted that Southern Nevada’s retail market appeared to be back in growth mode, with strong net absorption and five quarters of decreasing vacancy. Oh, what a difference a quarter makes – though fortunately not an immense difference. The second quarter of 2016 saw negative 36,167 square feet of net absorption and retail vacancy increase one-tenth of a percentage point to 9.2 percent. This was not a dire development, but does reinforce the idea that the local retail market is back in what we might term the “normal business cycle.” The asking rental rate for retail space increased to $1.31 per square foot (psf) on a triple-net (NNN) basis.

Q2 2016

Market Indicators Q2 2016

Relative to prior period

Q3 2016*

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE *Projected

Historical Vacancy Rates and Asking Lease Rates

Summary Statistics Q2-2015

Q1-2016

Q2-2016

Vacancy Rate

9.7%

9.1%

9.2%

Asking Rent (PSF, NNN)

$1.28

$1.30

$1.31

166,145

285,353

-36,167

67,629

80,000

0

Q2 2016 Las Vegas Market 10.4%

$1.32

10.2%

$1.31

10.0%

$1.30

9.8%

$1.29

9.6%

$1.28

9.4%

$1.27

9.2%

$1.26

9.0%

$1.25

8.8%

$1.24

8.6%

$1.23

8.4%

2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016

Vacancy

$1.22

Asking Rental Rate

“Strong multifamily development in the I-215 corridor, stretching from Henderson to the Northwest, should stimulate demand for retail space over the next 12 to 24 months.”

Net Absorption (SF) New Completions (SF)

Overall Asking Rents Per Square Foot

Previous Quarter

Current Quarter

Power Center

$1.55

$1.50

Community Center

$1.21

$1.26

Neighborhood Center

$1.46

$1.43

Strip Center

$1.16

$1.17

According to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada’s retail job market took improved significantly in April 2016 (the latest month of data available) compared with January 2015, adding approximately 6,500 jobs in the past twelve months. The largest increase was in food services and drinking places (which are counted as Leisure & Hospitality jobs rather than retail), which expanded by 3,400 jobs over the past twelve months. General merchandise stores added 1,500 jobs, food and beverage stores 1,300 jobs and health and personal care stores 1,000 jobs. Unemployment in the Las Vegas-Paradise MSA stood at 6.1 percent as of April 2016, down from 6.9 percent in April 2015. From April 2015 to April 2016, total employment in Southern Nevada has increased by 30,400 jobs.

Historical Net Absorption vs. Completions 400,000 300,000 200,000 100,000 0 -100,000 -200,000 -300,000

The Nevada Department of Taxation reports that Clark County’s taxable retail sales for the first quarter of 2016 (the most recent quarter of data available) totaled $6.9 billion, up slightly from $6.7 billion in taxable retail sales recorded in the first quarter of 2015. The highest year-over-year growth in taxable retail sales in March 2016 were in gasoline stations (11.2 percent growth), food and beverage stores (11 percent growth), home furnishings (5.6 percent growth). Year-over-year taxable sales decreased in electronics and appliances stores, clothing stores and miscellaneous retail. Non-store retailers, by comparison, managed 22 percent growth year-over-year in March 2016. Taxable sales decreased by 14.2 percent for miscellaneous store retailers, 7.3 percent for electronics and appliance retailers and 7.8 percent for apparel retailers. There were no new major completions of anchored retail centers in the second quarter of 2016, but the new build-to-suit freestanding 351,000 square foot IKEA retail store in the Southwest submarket was completed. Forward supply stood at 1.7 million square feet, which would represent a healthy expansion of Southern Nevada’s retail inventory if it was all completed. Of this forward supply, 71,000 square feet is currently under construction and will probably be completed in the third quarter of 2016. Another 1.6 million square feet could potentially be completed in 2017, though an expansion of this size is unlikely. Retail inventory expansion in 2017 will probably amount to something in the neighborhood of 600,000 square feet.

2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 Net Absorption

Occupancy vs. Retail Employment 84,000

93.0%

82,000

92.0%

80,000

91.0%

78,000

90.0%

76,000

89.0%

74,000

88.0%

72,000

2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 Retail Jobs

Net absorption totaled negative 36,167 square feet in the second quarter of 2016, bringing mid-year net absorption down to 249,186 square feet. Net absorption was positive in five of the Valley’s eight submarkets, with only the Northwest, Henderson and University East submarkets posting negative net absorption. Net absorption was highest this quarter in the Northeast submarket (28,610 square feet), followed by the Downtown, North Las Vegas and West Central submarket, which each absorbed approximately 25,000 square feet. Strong multifamily development in the I-215 corridor, stretching from Henderson to the Northwest, should stimulate demand for retail space over the next 12-24 months. Gross absorption of retail product totaled just over 1.0 million square feet in the second quarter of 2016, just a bit less than in the first quarter of 2016; while gross absorption has generally been on the rise over the past ten quarters.

20

Completions

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Occupancy Rate

87.0%

Retail vacancy in Southern Nevada stood at 9.2 percent in the second quarter of 2016, an increase of 0.1 points from the first quarter of 2016 and a decrease of 0.5 points compared to the 9.7 percent recorded at the end of the second quarter of 2015. Southern Nevada’s retail market was in its second expansion since the end of the Great Recession until this quarter’s negative net absorption. Whether this is a bump in the road or a sign that the second expansion is coming to an end is impossible to say. Given that most non-real estate measures of the market appear healthy, it is possible that the expansion will resume in the third quarter of 2016. At current rates of net absorption, it would take the retail market a decade to get back to a normalized 5.0 percent vacancy rate. Among submarkets, the Valley’s highest vacancy this quarter was 13.4 percent in University East, while the lowest, 7.0 percent, was in the

adjacent Northeast submarket. All other submarkets had vacancy rates between 7.7 percent and 9.9 percent, showing remarkable consistency Valley-wide. All submarkets but Henderson and Northwest either saw vacancy decreases or remained stable in the second quarter. The average asking rental rate for retail space in Southern Nevada stood at $1.31 per square foot (psf) on a Triple-Net basis (NNN). This was $0.01 higher than in the first quarter of 2016, and $0.03 higher than one year ago. Adjusting for inflation, asking rental rates are now $0.96 psf NNN in 2002 dollars, $0.44 psf lower than in 2002. Over the past quarter, three submarkets saw asking rates increase— Northwest ($0.09 psf), Northeast ($0.06 psf) and University East ($0.04 psf). Asking rates dropped by $0.06 psf in the Southwest submarket, and by $0.05 psf in Henderson and North Las Vegas.

Single Tenant Retail

2012

2013

2014

2015

2016 YTD

No. Sales

25

49

63

58

30

Square Footage Sold

319,000

868,000

551,000

838,000

299,000

Sales Volume

$78.2 MM

$146.0 MM

$192.3 MM

$274.8 MM

$68.0 MM

Average Price/SF

$244.81

$168.23

$348.70

$327.81

$277.75

Average Sale Size (SF)

13,000

18,000

9,000

14,000

10,000

7.2%

7.2%

7.7%

Cap Rate Shopping Center Retail

2012

2013

2014

2015

2016 YTD

No. Sales

30

48

61

61

20

Square Footage Sold

1,781,000

3,892,000

2,888,000

3,635,000

1,356,000

Sales Volume

$194.0 MM

$378.4 MM

$561.1 MM

$697.0 MM

$243.3 MM

Average Price/SF

$108.90

$97.21

$194.28

$191.77

$179.50

Average Sale Size (SF)

59,000

81,000

47,000

60,000

68,000

8.9%

7.7%

7.2%

Cap Rate

Retail Development Pipeline Project

Type

Submarket

Size (SF)

Completion

Decatur 215 (Decatur & I-215)

Community

Northwest

52,000

Q3-2016

Upscale Retail Plaza (Rainbow & Warm Springs)

Strip

Southwest

19,000

Q3-2016

Under Construction Total

71,000

St Rose Square (St Rose & Amigo)

Neighborhood

Henderson

466,000

2017

The Edge (Blue Diamond & Buffalo)

Community

Southwest

296,000

2017

Cadence Village Center (Lake Mead & Warm Springs)

Neighborhood

Henderson

153,000

2017

Silverado Promenade (Las Vegas & Silverado Ranch)

Neighborhood

University East

130,000

2017

Union Village (Galleria & Gibson)

Strip

Henderson

125,000

2017

Caroline’s Court (Durango & El Capitan)

Community

Northwest

119,000

2017

DCs Plaza (Durango & Farm)

Neighborhood

Northwest

73,000

2017

Silverado Ranch Boulevard (Silverado Ranch & Bermuda)

Strip

University East

66,000

2017

Blue Diamond Ranch II (Blue Diamond & Decatur)

Strip

Southwest

53,000

2017

Buffalo Plaza (Buffalo & Warm Springs)

Strip

Southwest

53,000

2017

1540 W Sunset Road

Strip Strip Strip

Southwest University East Northwest

42,000 41,000 31,000

2017 2017 2017

Sahara Crossing (Maryland & Sahara) Centennial Hills Center (Durango & Grand Montecito) Planned Construction Total

21

1,648,000

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Since the first quarter of 2016, power centers saw their average asking rate decrease by $0.05 psf and neighborhood centers saw a similar decrease of $0.03 psf. Community centers posted an increase in average asking rates of $0.05 psf, while rates in strip centers increased by $0.01 psf. Shopping center investment sales volume so far in 2016 was $243.3 million in twenty sales totaling 1.4 million square feet. This puts the Valley on pace to have a strong showing in 2016, but not as strong as in 2014 or 2015. The average sales price so far in 2016 was $176.50 psf, and the average cap rate was 7.2 percent. Single-tenant retail investment sales volume so far in 2016 was $68.0 million in thirty sales totaling 299,000 square feet. The average sales price was $227.75 psf, and the average cap rate was 7.7 percent. While this puts Southern Nevada on pace to exceed the number of single-tenant investment sales in 2015, sales volume and square footage is well below levels seen in 2014 and 2015. Retailers slated to enter Southern Nevada or expanding in the Valley include Chick-Fil-A, which began work on its first two locations in Southern Nevada, Paul Mitchell, Discount Tire, Lolo’s Chicken & Waffles, PDQ Chicken, Café Rio, Five Guys Burger & Fries, Black Bear Diner, Wingnutz, Pei Wei, and Cheeseburger Cheeseburger. Target is introducing a new Target Express concept to compete with Dollar General or Walgreens, though no locations have yet been announced in Southern Nevada. Walmart is planning locations at Durango & Hualapai and Boulder & Russell, and Smith’s Marketplace, a 125,000 square foot concept, looking into putting stores in the Cadence MPC and Skye Canyon. Since the end of the Great Recession, Southern Nevada’s retail market has posted two expansions. Its second expansion, which began in the fourth quarter of 2014 and may have ended this quarter, if this quarter’s negative net absorption continues into next quarter. Taxable retail sales and retail employment growth continued to be strong in the second quarter of 2016, so there is no reason that retail might resume its expansion in the third quarter of 2016.

“… there is no reason that retail might resume its expansion in the third quarter of 2016.” - John Stater, Research & GIS Manager | Las Vegas

Households (2015)

Ave. HH Income (2015)

Occupied Retail Space (2015 Average)

Occupied Retail Space (2016 Projected)

Downtown

36,500

$37,500

1,940,000

1,949,000

Henderson

107,100

$78,000

9,237,000

9,779,000

North Las Vegas

71,600

$62,000

5,552,000

5,993,000

Northeast

78,600

$50,400

3,099,000

3,237,000

Northwest

149,400

$74,200

12,557,000

13,199,000

Southwest

91,100

$75,900

7,644,000

8,421,000

University East

104,200

$54,200

7,597,000

7,905,000

West Central

54,600

$49,000

6,208,000

6,298,000

Source of Demographic Data: Claritas

22

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

215

Significant Retail Sale Activity

NORTH LAS VEGAS

Lone Mountain Plaza 62,000 SF - $4,000,000

95

$65.00/SF

NORTHWEST

April 2016 Single Tenant

15 10010 West Cheyenne Avenue 9,000 SF - $3,950,000

NORTHEAST LAS VEGAS

WEST CENTRAL

$439.00/SF May 2016

DOWN TOWN

Multi-Tenant

Vegas Plaza 51,000 SF - $9,800,000

95

$192.00/SF April 2016

UNIVERSITY AIRPORT

Multi-Tenant

Paseo Verde Plaza 57,000 SF - $17,200,000

215

$304.00/SF May 2016

HENDERSON

SOUTHWEST

Multi-Tenant

9925 South Eastern Avenue

RESORT CORRIDOR

7,400 SF - $5,000,000 $672.00/SF May 2016 Redevelopment

Lease Activity Property Name

Tenant

Lease Date

Lease Term

Size

Lease Rate

Type

Aliante Marketplace

Rivas Mexican Grill

Apr 2016

60 months

1,800 SF

$1.97 NNN

Neighborhood

Canyon Lakes

Fones Gone Wild

May 2016

39 months

1,600 SF

$1.07 NNN

Neighborhood

Pecos Wigwam Retail

Canine Bodywork

Jun 2016

60 months

1,400 SF

$0.84 NNN

Strip Retail

Blue Diamond Marketplace

Foxred57

Apr 2016

60 months

1,400 SF

$2.07 NNN

Strip Retail

Rhodes Ranch Town Center

Haircuts for Kids

Apr 2016

64 months

1,400 SF

$1.84 NNN

Neighborhood

23

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Retail Market TYPE

TOTAL INVENTORY SF

DIRECT VACANT SF

DIRECT VACANCY RATE

SUBLEASE VACANT SF

TOTAL VACANT SF

VACANCY RATE CURRENT QUARTER

NET VACANCY RATE ABSORPTION PRIOR CURRENT QUARTER QTR SF

NET WEIGHTED COMPLETIONS UNDER PLANNED ABSORPTION COMPLETIONS AVG ASKING CURRENT CONSTRUCTION CONSTRUCTION YTD YTD SF RENTAL QTR SF SF SF SF RATE

DOWNTOWN PC CC NC SC Total

607,055 518,070 1,022,022 2,147,147

79,375 55,647 58,904 193,926

n/a 13.1% 10.7% 5.8% 9.0%

-

79,375 55,647 58,904 193,926

n/a 13.1% 10.7% 5.8% 9.0%

n/a 12.9% 10.5% 8.4% 10.2%

(1,325) (1,440) 27,345 24,580

(22,164) (1,440) 12,946 (10,658)

-

-

-

40,500 40,500

$$1.33 $1.01 $1.41 $1.24

2,896,215 2,646,472 2,930,045 1,886,098 10,358,830

179,998 162,496 345,469 235,977 923,940

6.2% 6.1% 11.8% 12.5% 8.9%

189,143 1,452 189,143

179,998 162,496 534,612 237,429 1,113,083

6.2% 6.1% 18.2% 12.6% 10.7%

7.0% 5.7% 18.7% 11.9% 10.9%

21,403 (11,932) (18,850) (14,669) (24,048)

77,926 (18,074) (38,835) 7,678 28,695

-

-

-

465,909 166,745 632,654

$1.79 $1.49 $1.38 $1.18 $1.36

774,065 2,311,384 1,806,524 1,286,206 6,178,179

31,571 179,878 136,379 226,675 574,503

4.1% 7.8% 7.5% 17.6% 9.3%

1,505 1,505

31,571 181,383 136,379 226,675 576,008

4.1% 7.8% 7.5% 17.6% 9.3%

4.1% 8.2% 7.9% 18.3% 9.7%

8,779 7,238 8,562 24,579

6,590 6,114 (11,867) 41,707 42,544

-

-

-

-

$1.50 $1.38 $1.57 $1.11 $1.26

1,295,615 1,306,795 770,933 3,373,343

66,660 76,907 91,915 235,482

n/a 5.1% 5.9% 11.9% 7.0%

18,614 62,301 80,915

85,274 139,208 91,915 316,397

n/a 6.6% 10.7% 11.9% 9.4%

n/a 8.3% 11.2% 11.8% 10.2%

21,719 7,770 (879) 28,610

13,042 25,243 (48,097) (9,812)

-

-

-

-

$$1.40 $1.49 $0.84 $1.10

221,713 137,465 408,219 277,304 1,044,701

n/a 3.2% 11.2% 11.1% 7.7%

73,059 30,861 103,920

221,713 210,524 439,080 277,304 1,148,621

7.0% 4.8% 12.1% 11.1% 8.4%

7.1% 4.7% 9.8% 9.8% 7.5%

2,767 (4,915) (83,766) (34,465) (120,379)

15,953 60,017 (52,943) (24,843) (1,816)

-

-

52,000 52,000

118,982 72,550 31,000 222,532

$1.59 $1.46 $1.40 $1.31 $1.37

42,596 210,257 170,245 235,923 659,021

4.5% 8.0% 7.4% 9.5% 7.9%

2,882 2,882

42,596 210,257 173,127 235,923 661,903

4.5% 8.0% 7.5% 9.5% 7.9%

0.7% 8.5% 7.6% 10.9% 8.1%

(42,596) 11,744 4,733 34,196 8,077

(42,596) 18,797 70,922 42,317 89,440

-

80,000 80,000

-

296,000 105,224 401,224

$1.42 $1.62 $1.83 $1.39 $1.59

149,526 344,571 130,421 552,288 1,176,806

12.4% 12.5% 6.7% 19.2% 13.4%

20,855 115,560 6,200 136,415

149,526 365,426 245,981 558,488 1,313,221

12.4% 13.2% 12.6% 19.4% 14.9%

11.9% 14.3% 12.8% 18.2% 14.9%

(5,053) 34,545 5,056 (36,350) (1,802)

(4,053) 83,189 21,694 (69,495) 31,335

-

-

-

129,588 65,851 195,439

$1.26 $0.85 $1.29 $1.10 $1.11

141,871 229,979 116,480 201,299 689,629

12.5% 12.0% 6.6% 9.3% 9.9%

96,267 96,267

141,871 229,979 212,747 201,299 785,896

12.5% 12.0% 12.1% 9.3% 11.3%

12.6% 13.5% 10.5% 10.3% 11.6%

1,150 27,718 (27,978) 23,326 24,216

3,265 51,763 (22,468) 46,898 79,458

-

-

-

-

$1.25 $1.09 $1.31 $1.06 $1.04

767,275 1,410,681 1,439,767 1,880,285 5,498,008

7.6% 7.6% 8.9% 12.5% 9.2%

114,033 497,014 7,652 618,699

767,275 1,524,714 1,936,781 1,887,937 6,116,707

7.6% 8.2% 11.9% 12.6% 10.2%

7.4% 8.7% 11.5% 12.7% 10.2%

(22,329) 86,333 (107,237) 7,066 (36,167)

57,085 192,684 (9,694) 9,111 249,186

-

80,000 80,000

52,000 52,000

414,982 668,047 409,320 1,492,349

$1.50 $1.26 $1.43 $1.17 $1.26

9.2% 618,699 9.1% 653,842 9.5% 629,228 9.6% 579,499 9.7% 675,838 9.9% 623,327 10.2% 295,068 CC = Community Center

6,116,707 6,115,683 6,296,422 6,306,283 6,487,931 6,533,936 6,387,617

10.2% 10.2% 10.2% 10.5% 10.5% 10.6% 10.6% 10.9% 10.9% 11.0% 11.0% 10.7% 10.7% 10.3% NC = Neighborhood Center

(36,167) 285,353 89,390 140,309 166,145 181,940 (207,920)

249,186 285,353 577,784 488,394 348,085 181,940 132,843

80,000 80,000 152,429 122,629 67,629 0 300,213

52,000 242,402 270,402 209,588 184,588 122,629 122,629

1,492,349 466,083 710,023 452,095 224,550 468,883 564,865

$1.26 $1.30 $1.31 $1.27 $1.28 $1.26 $1.26

HENDERSON PC CC NC SC Total

NORTH LAS VEGAS PC CC NC SC Total NORTHEAST PC CC NC SC Total

NORTHWEST PC CC NC SC Total

3,171,110 4,349,146 3,639,506 2,489,462 13,649,224

SOUTHWEST PC CC NC SC Total

944,314 2,616,421 2,303,100 2,487,961 8,351,796

UNIVERSITY EAST PC CC NC SC Total

1,210,223 2,761,146 1,953,965 2,880,036 8,805,370

WEST CENTRAL PC CC NC SC Total

1,138,224 1,910,276 1,756,947 2,170,564 6,976,011

MARKET TOTAL PC CC NC SC Total

10,134,151 18,497,515 16,214,952 14,993,282 59,839,900

QUARTERLY COMPARISON AND TOTALS Q2-16 59,839,900 Q1-16 59,839,900 Q4-15 59,759,900 Q3-15 59,730,100 Q2-15 59,675,100 Q1-15 59,607,471 Q4-14 59,607,471 PC = Power Center

24

5,498,008 5,461,841 5,667,194 5,726,784 5,812,093 5,910,609 6,092,549

0 80,000 29,800 55,000 67,629 0 49,895 SC = Strip Center

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | MULTIFAMILY Q2 2016

Multifamily Back on Track >> Multifamily vacancy saw a sizable decrease in the first quarter of 2016 >> New development in the market continued, and accelerated compared to 2015

Economic Indicators ELECTRIC

THIRTY YEAR

NEW HOME

Meter Hookups

Mortgage Rate

Median Price

>> Asking rates continued to increase -0.2

According to statistics provided by REIS, multifamily vacancy in Southern Nevada decreased in the first quarter of 2016 (the most recent quarter of available data) after uncharacteristically increasing last quarter. Vacancy stood at 4.2 percent in the first quarter, 0.6 percentage points lower than in the fourth quarter of 2015, and 0.9 percentage points lower than in the first quarter of 2015. Class A properties were 5.0 percent vacant in the first quarter, 0.4 percentage points lower than last quarter. Class B/C properties were 3.4 percent vacant, 0.8 percentage points lower than last quarter. The decrease in vacancy suggests that new product being introduced to the market is being absorbed without difficulty—good news for developers with product under construction.

+3.1%

+1.5%

Points

Market Indicators Q1 2016

Relative to prior period

Q2 2016*

VACANCY NET ABSORPTION COMPLETIONS RENTAL RATE *Projected

Historical Vacancy Rates and Rental Rates

Summary Statistics

Vacancy vs Rents $940

6.00%

$920

5.00%

$900

4.00%

$880

3.00%

$860

2.00%

$840

1.00%

$820

0.00%

1 Q 2014 2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 Vacancy Rate

Q1-2015

Q4-2015

Q1-2016

Vacancy Rate

5.1%

4.8%

4.2%

Rent (Per Unit)

$889

$911

$918

Net Absorption YTD (Units)

742

1,788

854

New Completions YTD (Units)

270

1,794

473

Q2 2016 Las Vegas Market

7.00%

$800

Average Rental Rate

“… additional households, approximately 43 percent of them renters, need a place to live, and getting into a home, even a resale, remains expensive.”

Overall Asking Rents Per Unit Per Month

Class A Class B/C

Previous Quarter

Current Quarter

$1,038

$1,046

$790

$797

All multifamily submarkets had positive net absorption in the first quarter of 2016, with both the Northwest/Southwest and Henderson submarkets being particularly strong. Both of those submarkets are experiencing significant development of new multifamily, making their strong performance especially good news. East Las Vegas also experienced very high net absorption, of 139 units quarter-over-quarter. Demand was weakest in North Las Vegas, University and West Central.

Historical Net Absorption vs. Completions Net Absorption vs. Completions 900 800 700 600

Three new multifamily projects were completed in the first quarter of 2016. Two were located in Henderson, the other one in the Northwest/ Southwest submarket. They totaled 473 units, and represented almost double the new construction in the first quarter of 2015. Another 2,239 units were under construction and will be completed by the end of 2016 and early 2017. Developers have 621 units planned to begin construction within the next twelve months.

500 400 300 200 100 0

1 Q 2014 2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 Net Absorption (Units)

The average asking rent for multifamily was $918 per unit in the first quarter of 2016, increasing by $29 psf year-over-year, and by $7 per unit since last quarter. Class A properties saw asking rates increase by $8 per unit, while Class B/C properties saw a $7 per unit increase in asking rents. New development, and thus increased supply, coupled with increases in asking rents suggests that the aforementioned new supply will be absorbed readily by the market.

Completions (Units)

Sales (Units) vs. Price Per Unit Sales (Units) vs. Price Per Unit

Unemployment in the Las Vegas-Paradise MSA stood at 6.1 percent as of April 2016, down from 6.9 percent in April 2015. Unemployment has averaged 6.1 percent in 2016, compared to 6.8 percent in 2015. Notably, unemployment in the Las Vegas-Paradise MSA has been on the rise for the past two months, rebounding from a low of 5.6 percent recorded in February 2016. Since April 2015, total employment in Southern Nevada increased by 30,400 jobs, the majority of those new jobs being in education and healthcare (+9,200 jobs), retail (+6,500 jobs), professional and business services (+6,300 jobs), and construction (+4,200 jobs). The leisure & hospitality sector lost 3,900 jobs over the past twelve months, a result of resort closures that will likely persist until the completion of the Resorts World Las Vegas project.

7,000

$140,000

6,000

$120,000

5,000

$100,000

4,000

$80,000

3,000

$60,000

2,000

$40,000

1,000

$20,000 $0

4

Q 2 1 Q 010 2 201 Q 1 3 201 Q 1 4 201 Q 1 1 Q 201 1 2 201 Q 2 3 201 Q 2 4 201 Q 2 1 Q 201 2 2 201 Q 3 2 3 01 Q 3 4 201 Q 3 2 1 Q 013 2 201 Q 4 3 201 Q 4 4 201 Q 4 1 Q 201 4 2 201 Q 5 2 3 01 Q 5 4 201 Q 5 2 1 Q 01 5 20 16

0

Total Sales (Units)

Average Price Per Unit

According to data provided by the Nevada Department of Motor Vehicles, the number of out-of-state driver’s licenses turned in to the DMV since

Demographics Submarket

Estimated Households (2016)

Renter Occupied (2016)

Median Household (2016)

Average Household (2016)

Proj. Annual Growth Rental Households (2016-2021)

Downtown

49,000

65%

$31,000

2.8

170

East

80,000

44%

$42,000

2.7

337

Henderson/Southeast

153,000

37%

$62,000

2.6

793

North Las Vegas

131,000

36%

$55,000

3.1

698

Northeast

49,000

49%

$39,000

3.3

238

Northwest/Southwest

174,000

35%

$64,000

2.6

977

University

36,000

77%

$33,000

2.2

176

West Central

70,000

52%

$47,000

2.4

413

TOTAL

743,000

43%

$51,000

2.7

3,802

Source: Claritas

26

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

May 2015 was 65,054 in 2015. This is higher than during the same period from 2014 to 2015 when they reported 62,244 out-of-state licenses turned in, and suggests that population growth is showing some improvement. Since Las Vegas’s birth in 1905, population growth has been a major driver of economic growth. In the past, population growth was driven by the Valley’s low unemployment rate and retirees looking to escape the dramatic weather and high cost of living elsewhere in the United States. Multifamily sales decreased in the first quarter of 2016 compared to the fourth quarter of 2015, with 3,324 units selling at an average sales price per unit of $107,787. Initial estimates for second quarter 2016 sales are approximately 6,300 units selling at an average price per unit of $111,000. Of particular note was the sale by Camden Property Trust of a portfolio of 15 buildings comprising 4,918 units for $630 million to The Bascom Group. The reported cap rate on this portfolio sale was 5.4 percent. The average price of sales in 2016 is significantly higher than

over the past five years. The pace of sales at mid-year is higher than it was at mid-year 2015. A market selling more units at a higher price is a healthy market. When new multifamily development began in earnest in Southern Nevada, the question was how long those units would take to be absorbed, and what impact would they have on the market while they were being absorbed. Those questions are now beginning to be answered, with strong net absorption, increasing rental rates, strong sales and increasing sales prices. In other words, the multifamily market in Southern Nevada continues to be healthy. Population in Southern Nevada is again on the rise, though not at the levels it was before the Great Recession. Still, additional households, approximately 43 percent of them renters, need a place to live, and getting into a home, even a resale, remains expensive. If this trend continues, and we believe it will over the next twelve months at least, the market will remain strong.

Complex Under Construction

Submarket

Units

Elysian at Hacienda

Northwest/Southwest

466

Patrick/Durango Apartments

Northwest/Southwest

376

The Gallery

Northwest/Southwest

348

Spencer/St Rose Apartments

Henderson

348

South Beach Apartments

Northwest/Southwest

220

The Mercer

Northwest/Southwest

177

The Constellation

Northwest/Southwest

124

Vue at Centennial

Northwest/Southwest

111

Prestige Apartments

Northwest/Southwest

69

TOTAL

Sales Data

2,239

2016 YTD

2015

2014

2013

2012

Units Sold

9,468

15,408

14,019

17,808

Average Price Per Unit

$110,000

$71,836

$73,627

$75,600

Cap Rate*

n/a

7.3%

6.0%

5.7%

21,840 $65,425 7.3%

*Cap Rate Source: Real Capital Analytics, CoStar and Colliers International

Casa Sorento Club House

27

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Significant Multifamily Sales Activity

215 NORTHEAST

7075 West Gowan Road

NORTHWEST

528 Units - $59.5 MM $113,000/Unit April 2016 Year Built - 1995

15

95

9225 West Charleston Boulevard

DOWNTOWN

560 Units - $88.3 MM $157,600/Unit April 2016 Year Built - 1995

SUMMERLIN WEST

95

EAST

3295 Casey Avenue 624 Units - $69.0 MM $110,600/Unit April 2016 Year Built - 1990

Los Gatos Condominiums 400 Units - $55.7 MM

215

$139,300/Unit April 2016

HENDERSON/ GREEN VALLEY

SOUTHWEST

Year Built - 1996

Lyric 376 Units - $65.4 MM $174,000/Unit April 2016 Year Built - 2014

Sales Activity Continued Property Name

Sale Date

Units

Price

Price/Unit

Year Built

Camden Fairways Apartments

Apr 2016

320

$46.0 MM

$143,800

1990

5155 South Torrey Pines Drive

Apr 2016

315

$43.3 MM

$137,500

1992

6450 Vegas Drive

Apr 2016

368

$40.0 MM

$108,600

1993

Camden Breeze Apartments

Apr 2016

320

$39.0 MM

$121,900

1989

3540 Swenson Street

Mar 2016

556

$30.0 MM

$54,000

1973

Source: Real Capital Analytics

28

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Multifamily Market CLASS

TOTAL INVENTORY UNITS

CURRENT PRIOR QTR VACANCY RATE VACANCY RATE

NET ABSORPTION

NET ABSORPTION YTD UNITS

CURRENT QTR COMPLETIONS

27 86 113

27 86 113

-

-

-

231 231

UNDER PLANNED YTD UNIT CONSTRUCTION CONSTRUCTION COMPLETIONS UNITS UNITS

TOTAL SALES UNITS

AVERAGE PRICE PER UNIT

AVERAGE RENTAL RATE

DOWNTOWN A B/C Total

2,773 13,454 16,227

0.8% 1.3% 1.2%

1.7% 2.1% 1.9%

944 944

n/a $83,720 $83,720

$896 $749 $774

EAST LAS VEGAS 6,383

3.6%

4.1%

29

29

-

-

-

-

-

n/a

$901

8,939 15,322

2.0% 2.7%

3.3% 3.6%

109 138

109 138

-

-

-

-

257 257

$56,897 $56,897

$769 $824 $1,144

A B/C Total

HENDERSON/GREEN VALLEY A

19,883

7.0%

7.7%

115

115

383

383

348

-

308

$188,961

B/C

8,068

7.7%

8.0%

24

24

-

-

-

-

1,115

$107,650

$986

Total

27,951

7.2%

7.8%

139

139

383

383

348

-

1,423

$125,249

$1,098

12,918 9,552 22,470

5.0% 5.0% 5.0%

5.2% 5.4% 5.3%

23 44 67

23 44 67

-

-

-

-

-

n/a n/a n/a

$940 $746 $857

2,172 6,643 8,815

2.8% 4.3% 3.9%

3.5% 5.6% 5.1%

15 92 107

15 92 107

-

-

-

-

100 100

n/a $60,000 $60,000

$826 $737 $760

16,657 5,452 22,109

5.6% 2.3% 4.8%

5.7% 4.5% 5.4%

13 118 131

13 118 131

90 90

90 90

1,891 1,891

390 390

600 600

n/a $134,000 $134,000

$1,160 $1,055 $1,134

2,180 12,321 14,501

1.9% 4.3% 3.9%

1.9% 4.8% 4.4%

72 72

72 72

-

-

-

-

-

n/a n/a n/a

$968 $717 $759

5,671 6,860 12,531

2.1% 0.3% 1.1%

2.8% 1.0% 1.8%

38 49 87

38 49 87

-

-

-

-

-

n/a n/a n/a

$957 $770 $854

68,637 71,289 139,926

5.0% 3.4% 4.2%

5.4% 4.2% 4.8%

260 594 854

260 594 854

473 473

473 473

2,239 n/a 2,239

621 n/a 621

308 3,016 3,324

n/a $99,497 $107,787

$1,046 $797 $918

4.8% 4.7% 4.8% 5.1% 5.4% 5.2% 5.5%

854 264 135 647 742 370 348

854 1,788 1,524 1,389 742 1,549 1,179

473 360 324 840 270 170 -

473 1,794 1,434 1,110 270 511 341

2,239 1,826 1,216 1,617 1,617 1,617 729

621 1,345 1,704 2,222 2,222 2,222 601

3,324 5,411 3,887 2,626 3,572 3,572 3,886

$107,787 $66,933 $73,685 $77,603 $82,458 $82,458 $70,279

$918 $911 $910 $906 $889 $878 $873

NORTH LAS VEGAS A B/C Total NORTHEAST A B/C Total

NORTHWEST/SOUTHWEST A B/C Total UNIVERSITY A B/C Total WEST CENTRAL A B/C Total MARKET TOTAL A B/C Total

QUARTERLY COMPARISON AND TOTALS Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14

139,926 139,453 139,093 139,453 138,613 138,343 138,173

4.2% 4.8% 4.7% 4.8% 5.1% 5.4% 5.2%

* Most recent quarter of data Source: REIS Sales Data provided by Colliers International

29

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | MEDICAL OFFICE Q2 2016

Medical Office Continues to Struggle >> Negative net absorption continued for medical office

Economic Indicators

>> Gains made in 2015 have not been completely erased, but vacancy is back up to 17.7 percent

HEALTHCARE Employment

>> Asking rates are finally decreasing, which could stimulate demand in the second half of the year

Southern Nevada’s medical office market got off to a bad start in 2016, with two quarters of worsening net absorption and rising vacancy. At mid-year, medical office net absorption stood at negative 74,622 square feet, the majority of that coming in the second quarter. Vacancy stood at 17.7 percent, up 0.7 points from one quarter ago and 1.4 points from one year ago. The weighted average asking rental rate decreased to $2.14 per square foot (psf) on a full service gross (FSG) basis, a $0.04 drop from one quarter ago.

HEALTHCARE

MEDICAL

+22.5

-7.5%

SF/Job

Spending

+7.6%

Q2 2016

Market Indicators Q2 2016

Relative to prior period

Q3 2016*

VACANCY NET ABSORPTION COMPLETIONS

Historical Vacancy Rates and Rental Rates

RENTAL RATE *Projected

$2.15

15.0%

$2.14

14.0%

$2.13

13.0%

$2.12

12.0%

$2.11

Vacancy Rate

2 Q 2016

16.0%

1 Q 2016

$2.16

4 Q 2015

Q2 2016 Las Vegas Market

17.0%

3 Q 2015

$2.17

2 Q 2015

Summary Statistics

18.0%

1 Q 2015

$2.18

4 Q 2014

19.0%

3 Q 2014

$2.19

2 Q 2014

20.0%

Rental Rate

“…it is likely that the “new normal” for medical office space will be high vacancy for the foreseeable future.”

Q2-2015

Q1-2016

Q2-2016

16.3%

17.0%

17.7%

Asking Rent (PSF, FSG)

$2.18

$2.17

$2.14

Net Absorption YTD (SF)

73,923

-21,820

-52,802

16,000

0

0

Vacancy Rate

New Completions YTD (SF)

Overall Asking Rents Previous Quarter

Current Quarter

Class A

$2.59

$2.58

Class B

$2.23

$2.21

Class C

$1.79

$1.78

Per Square Foot

According to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada’s medical office job market improved in April 2016 (the latest month of data available) compared with April 2015, adding approximately 5,300 jobs in the past twelve months. This does not include jobs at hospitals. Employment that directly impacted medical office projects increased by approximately 1,353 jobs. Unemployment in the Las Vegas-Paradise MSA stood at 6.1 percent as of April 2016, down from 6.9 percent in April 2015; while total employment in Southern Nevada increased by 30,400 jobs during that same period.

60,000 40,000 20,000 0 -20,000 -40,000 -60,000 -80,000 -100,000 2 Q 2016

1 Q 2016

4 Q 2015

3 Q 2015

Net Absorption

Completions

Healthcare Jobs vs. Occupancy Rate 84.0%

17,000

83.5%

16,500

83.0%

16,000

82.5%

15,500

82.0%

15,000

81.5%

14,500

81.0%

14,000

80.5%

13,500

80.0%

2Q 2014

3Q 2014

4Q 2014

1Q 2015

Healthcare Jobs

The highest vacancy rates in the second quarter of 2016 were in the Southwest (36.5 percent), Downtown (22.8 percent) and North Las Vegas (20.9 percent) submarkets. Henderson continued to have the lowest vacancy rate among submarkets, with 12.5 percent vacancy. Vacancy decreased in Downtown and the Northwest in the second quarter, and increased in East Las Vegas, Henderson, North Las Vegas, Southwest and West Central. After three positive quarters of net absorption, from the fourth quarter of 2014 to the second quarter of 2015, when 187,011 square feet of net absorption took place, Southern Nevada’s medical office market has now posted four quarters of negative net absorption, giving back 103,287 square feet of that absorption. This means the market remains

31

2 Q 2015

1 Q 2015

-120,000

4 Q 2014

Vacancy in medical office space increased in the second quarter of 2016 to 17.7 percent, from 17.0 percent in the first quarter of 2016. Current vacancy is 1.4 points higher than one year ago, and has now been increasing for four straight quarters, since the third quarter of 2015. After positive performance in early 2015, Southern Nevada’s medical office market looked as though it might be on the verge of a sustained recovery, but demand for medical office has remained stubbornly low.

80,000

3 Q 2014

The last time medical office space was completed in Southern Nevada was during the second quarter of 2015, when 16,000 square feet was added to inventory. The new Henderson Hospital at Union Village is now nearly complete. When it is completed, development of 150,000 square feet of medical office and 190,000 square feet of retail space will follow, though this could still be 12-18 months away. A 211,000 square foot Class A medical office building is now under construction at Cimarron Road and Tenaya Way, and should be completed in 2017. Several new small hospitals for urgent or emergency care are planned in the valley, including the 100,000 square foot Southern Hills Emergency Hospital at Desert Inn & Fort Apache, and four small hospitals being developed by Dignity Health at Craig & Camino Al Norte, Blue Diamond & Decatur, Flamingo & I-215 and Decatur & Sahara.

100,000

2 Q 2014

According to the Nevada Department of Taxation, taxable spending on ambulatory health care services in Clark County in the first quarter of 2016 (the most recent quarter of data) totaled $18.1 million dollars. This represents a 0.2 percent increase in health care spending over the fourth quarter of 2015, and a 3.4 percent increase from the first quarter of 2015. Spending on ambulatory health care, which does not include hospitals and which has the largest impact on the medical office space, increased in 2015, but appears to be leveling off in 2016.

Historical Net Absorption vs. Completions

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

2Q 2015

3Q 2015

4Q 2015

1Q 2016

Occupancy Rate

2Q 2016

13,000

slightly ahead of where it was in the third quarter of 2014, when vacancy was 18.7 percent, but only just. More importantly, medical office space’s demand woes are occurring when professional office is experiencing a sustained recovery, and despite improvements in health care employment and healthcare spending. As has been stated several times in these reports, the culprit appears to be the changing way that healthcare is being delivered, in this case through medical groups instead of independent practitioners and emergency rooms and “quick care” facilities instead of family doctors. The weighted average asking rental rate for medical office space in the second quarter of 2016 was $2.14 per square foot (psf) on a full service gross (FSG) basis. Asking rents in the second quarter of 2016 were $0.03 psf lower than one quarter ago and $0.04 lower than one year ago. Weak demand for medical office was bound to drive down asking rates, which peaked in the fourth quarter of 2015 at $2.19 psf FSG. In leases we have tracked over the past four quarters, effective lease rates for medical office leases have averaged 101.9 percent of asking lease rates, which suggests that asking rates are fairly well targeted

for current market conditions. The ratio of effective to asking rates has been declining since the second quarter of 2015, though, which makes it likely that they will continue to fall until demand increases. The lowest average asking rate for medical office space was in the West Central submarket, at $1.70 psf, followed by East Las Vegas with $1.86 psf. The Valley’s highest asking rate was in Northwest, at $2.42 psf, followed by Henderson at $2.40 psf. Lease rates increased this quarter in Downtown and the Southwest, and decreased in East Las Vegas, Henderson, North Las Vegas, Northwest and West Central. Investment sales volume of medical office so far in 2016 amounted to $9.9 million in three sales totaling 90,000 square feet, with an average sales price of $110.12 per square foot. These buildings had an average cap rate of 6.8 percent. For comparison’s sake, investment sales volume in 2015 was almost $80 million. Owner/user sales volume of medical office space so far in 2016 was $3.6 million in four sales totaling 18,393 square feet. The average sales

“No matter how you slice it, Southern Nevada’s medical office market is struggling.” - John Stater, Research & GIS Manager

price was $196.24. By contrast, owner/user sales volume in 2015 was $40.9 million in 12 sales totaling 120,543 square feet, with an average sales price of $339.03. No matter how you slice it, Southern Nevada’s medical office market is struggling. While the overall trajectory has been positive in the last couple years, the improvements have been slow and uneven. The past four quarters have been nothing but bad news, and two more quarters of poor performance could erase the progress that was made in early 2015. The problem appears to be increased competition from nonmedical office real estate, significant restructuring in the real estate needs of healthcare practitioners, and market distortions created by the Affordable Care Act. If current growth in healthcare employment and spending does not turn demand around for medical office space, then it is likely that the “new normal” for medical office space will be high vacancy for the foreseeable future.

32

Seven Hills Medical & Professional Center | 866 & 870 Seven Hills Drive

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

215

Significant Medical Office Sales Activity

NORTH LAS VEGAS

2650 North Tenaya Way 68,000 SF - $2,900,000

95

$42.61/SF

15

April 2016 Class B

NORTHWEST Coronado Medical Center 3,000 SF - $600,000

SUMMERLIN

WEST CENTRAL

EAST LAS VEGAS

DOWN TOWN

$186.40/SF May 2016 Class C

Windmill Medical Office Building 9,000 SF - $1,400,000 $161.98/SF

95

March 2016 Class C

AIRPORT

259 North Pecos Road 1,500 SF - $290,000

215

$187.10/SF May 2016

SOUTHWEST

HENDERSON

Class C

Desert Radiology Buildings 18,000 SF - $6,400,000 $354.17/SF February 2016 Class C

Significant Lease Activity Property Name

Lease Date

Lease Term

Size

Lease Rate

Tenant

Siena Pavilion

Apr 2016

36 months

4,200 SF

$1.29 NNN

Physicians

2675 E Flamingo Road

Nov 2015

63 months

3,000 SF

$0.97 MG

Retail

Seven Hills Medical Center

Feb 2016

60 months

2,400 SF

$1.08 NNN

Management

Campbell Court

Feb 2016

36 months

1,700 SF

$1.25 NNN

Diagnostics

5642 S Eastern Avenue

Feb 2016

24 months

1,100 SF

$0.90 NNN

Services

33

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Medical Office Market TYPE

TOTAL INVENTORY SF

DIRECT VACANT SF

DIRECT SUBLEASE VACANCY VACANT SF RATE

TOTAL VACANT SF

VACANCY RATE CURRENT QUARTER

VACANCY NET RATE ABSORPTION PRIOR CURRENT QUARTER QTR SF

NET COMPLETIONS UNDER PLANNED ABSORPTION COMPLETIONS CURRENT CONSTRUCTION CONSTRUCTION YTD YTD SF QTR SF SF SF SF

WEIGHTED AVG ASKING RENTAL RATE

AIRPORT SUBMARKET A B C Total

38,000 38,000

7,690 7,690

n/a n/a 20.2% 20.2%

-

7,690 7,690

n/a n/a 20.2% 20.2%

n/a n/a 33.4% 33.4%

5,000 5,000

5,000 5,000

-

-

-

-

$$$1.92 $1.92

78,738 5,018 83,756

0.0% 34.6% 6.7% 22.8%

-

78,738 5,018 83,756

0.0% 34.6% 6.7% 22.8%

0.0% 36.4% 6.7% 23.9%

3,905 3,905

(51,712) (51,712)

-

-

-

-

$$1.99 $1.74 $1.98

141,293 89,191 230,484

n/a 21.1% 14.2% 17.7%

-

141,293 89,191 230,484

n/a 21.1% 14.2% 17.7%

n/a 21.4% 11.5% 16.6%

1,851 (16,752) (14,901)

13,403 8,128 21,531

-

-

-

-

$$2.10 $1.49 $1.86

46,784 77,600 42,775 167,159

11.1% 25.1% 7.1% 12.5%

2,515 3,706 6,221

46,784 80,115 46,481 173,380

11.1% 25.9% 7.7% 13.0%

11.7% 22.1% 6.9% 11.9%

2,611 -11,701 -990 (10,080)

6,127 (20,590) (57) (14,520)

-

-

-

80,000 27,000 107,000

$3.05 $2.15 $2.15 $2.40

8,711 31,525 40,236

n/a 19.8% 21.2% 20.9%

-

8,711 31,525 40,236

n/a 19.8% 21.2% 20.9%

n/a 12.2% 21.2% 19.2%

(3,355) (3,355)

(2,911) (9,625) (12,536)

-

-

-

-

$$2.15 $2.10 $2.11

127,840 150,413 12,403 290,656

15.8% 14.6% 6.1% 14.2%

12,346 12,346

140,186 150,413 12,403 303,002

17.4% 14.6% 6.1% 14.8%

17.8% 14.1% 5.1% 14.7%

16,220 (4,817) (2,050) 9,353

30,648 (25,171) (2,050) 3,427

-

-

80,251 80,251

-

$2.54 $2.38 $1.65 $2.42

53,501 172,648 55,102 281,251

46.4% 45.3% 20.0% 36.5%

4,440 4,440

53,501 177,088 55,102 285,691

46.4% 46.5% 20.0% 37.0%

44.8% 44.1% 20.0% 35.6%

(1,902) (9,259) (154) (11,315)

(5,757) 11,629 (378) 5,494

-

-

-

-

$2.28 $2.35 $2.01 $2.27

26,431 150,702 177,133

n/a 9.1% 17.4% 15.3%

-

26,431 150,702 177,133

n/a 9.1% 17.4% 15.3%

n/a 7.3% 14.9% 13.0%

(5,141) (21,268) (26,409)

(5,141) (26,165) (31,306)

-

-

-

-

$$1.72 $1.70 $1.70

228,125 655,834 394,406 1,278,365

16.2% 22.2% 13.9% 17.7%

12,346 6,955 3,706 23,007

240,471 662,789 398,112 1,301,372

17.1% 22.4% 14.0% 18.1%

17.4% 21.5% 12.4% 17.1%

16,929 (28,517) (41,214) (52,802)

31,018 (80,493) (25,147) (74,622)

-

-

80,251 80,251

80,000 27,000 107,000

$2.58 $2.21 $1.78 $2.14

DOWNTOWN SUBMARKET A B C Total

65,000 227,301 75,131 367,432

EAST LAS VEGAS SUBMARKET A B C Total

669,264 629,240 1,298,504

HENDERSON SUBMARKET A B C Total

421,834 309,703 604,238 1,335,775

NORTH LAS VEGAS SUBMARKET A B C Total

43,921 148,668 192,589

NORTHWEST SUBMARKET A B C Total

807,173 1,031,717 202,434 2,041,324

SOUTHWEST SUBMARKET A B C Total

115,300 380,926 275,170 771,396

WEST CENTRAL SUBMARKET A B 291,027 C 867,706 Total 1,158,733 MARKET TOTAL A 1,409,307 B 2,953,859 C 2,840,587 Total 7,203,753

QUARTERLY COMPARISON AND TOTALS Q2-16

7,203,753

1,278,365

17.7%

23,007

1,301,372

18.1%

17.1%

(52,802)

(74,622)

-

-

80,251

107,000

$2.14

Q1-16

7,203,753

1,225,563

17.0%

6,955

1,232,518

17.1%

16.8%

(21,820)

(21,820)

-

-

-

291,931

$2.17

Q4-15 Q3-15 Q2-15 Q1-15 Q4-14

7,203,753 7,203,753 7,203,753 7,187,753 7,187,753

1,203,743 1,181,884 1,175,078 1,233,001 1,308,114

16.7% 16.4% 16.3% 17.2% 18.2%

8,955 22,436 20,245 15,002 15,002

1,212,698 1,204,320 1,195,323 1,248,003 1,323,116

16.8% 16.7% 16.6% 17.4% 18.4%

16.7% 16.6% 17.4% 18.4% 18.9%

(21,859) (6,806) 73,923 75,113 37,975

120,371 142,230 149,036 75,113 (94,283)

16,000 -

16,000 16,000 16,000 -

-

361,931 361,931 131,680 131,680 131,680

$2.19 $2.18 $2.18 $2.16 $2.16

34

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | HOTEL Q2 2016

The Streak Continues >> Southern Nevada remains a popular destination; visitor volume continues to be strong >> Lower room inventory is translating into better performance for existing resorts

Economic Indicators AIR

Passengers

>> Hospitality development may increase in 2017 At mid-year, 2016 is proving that Las Vegas is still on a winning streak. Visitor volume in the first five months of 2016 is an improvement over the first five months of 2015, and room occupancy, average daily room rate (ADR) and revenue per available room (RevPAR) are up as well, year-over-year. While gaming revenue continues to lag behind its peak levels in 2006/2007, it has shown improvement since the Great Recession, though not as much as we would like to see. Gaming revenue has averaged year-over-year growth of negative 0.6 percent for Clark County and negative 1.5 percent growth on the Las Vegas “Strip” so far in 2016. In April 2016, Downtown gaming revenue decreased by 13.5 percent year-over-year, and the Boulder Strip, which primarily plays host to local casino patrons, posted negative 18.9 percent gaming revenue growth.

Revenue Per Available Room (RevPar) RevPAR

$140.00 $120.00 $100.00

$60.00 $40.00 $20.00 $0.00

2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016

RevPAR

-1.2

Q2 2016

Attendance

-9.1%

+3.9%

Market Indicators Relative to prior period

Now

Future

Room Inventory Room Occupancy Average Daily Rate Revenue Per Available Room *Projected

Summary Statistics Q2 2016 Las Vegas Market

Q2-2015

Q1-2016

Q2-2016

Room Inventory

146,750

146,340

146,340

90.1%

87.9%

89.7%

Average Daily Rate

$121.06

$129.63

$130.64

Revenue Per Available Room

$109.15

$113.70

$117.18

Room Occupancy

$80.00

CONVENTION

Room inventory remained static in the second quarter, and no additional closures are planned for 2016. The 201 room Lucky Dragon, under construction in the Resort Corridor, should be completed before the end of 2016, and the 124 room Residence Inn under construction in South Las Vegas as well. These two properties would represent very mild inventory growth for Southern Nevada. The much larger Resorts World Las Vegas property is currently under construction, with completion of the first phase planned for 2017.

Sales Volume Sales Volume $2,000,000,000 $1,800,000,000 $1,600,000,000 $1,400,000,000 $1,200,000,000

Southern Nevada’s non-gaming construction boom has continued in 2016, with recent additions to Southern Nevada’s entertainment complex including Topgolf International’s four-story golf entertainment complex at the MGM Grand, a 415,085 square foot IKEA store along the I-215 Beltway, new retail fronting the Treasure Island, the Rock N Rio festival, and the 20,000 seat MGM Resorts International Arena behind New York-New York and Monte Carlo which will one day host Las Vegas’ NHL hockey franchise. Still to come are a $75 million renovation of Caesars Palace’s original Roman Tower, a new 5,000seat theatre at the Monte Carlo and a $47 million renovation of the Thomas & Mack Center. The LVCVA is currently undertaking a major expansion of the convention center to keep Southern Nevada at the forefront of convention destinations in the United States. In all, we expect approximately $4.7 billion will have been spent on Southern Nevada’s hospitality market between 2014 and the end of 2016, before another $4 billion is spent developing the first phase of Resorts World Las Vegas in 2017.

$1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $0

2 Q 2014 3 Q 2014 4 Q 20141 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016

Sales vs. Price Per Unit Sales vs. Price Per Unit

Hospitality sales appeared to be cooling in 2016 compared to the past three years. A total of 1,261 rooms sold in Southern Nevada in the first half of 2016. Sales volume in the first half of 2016 was $90.2 million and the average sales price was $72,000 per room. Final sales volume in 2015 was $1.2 billion in 14 sales totaling 8,586 units with an average sales price of $143,000 per room. 2015 saw as many rooms selling as 2014, but at a lower sales volume.

7,000

$350,000

6,000

$300,000

5,000

$250,000

4,000

$200,000

3,000

$150,000

2,000

$100,000

1,000

$50,000

0

2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 Sales (Units)

Average Price Per Unit

While Southern Nevada’s hospitality market continues to perform well, the hospitality real estate market seems to be slowing down. 2015 saw some major sales in the hospitality market, including the Las Vegas Club in Downtown and such “Strip” properties as the Riviera and Tropicana.

Market Health Data Point

2016 YTD*

2015

2014

2013

2012

Visitor Volume (Millions)

18.0

42.3

41.6

39.9

39.7

Room Occupancy

88.3

87.7%

86.8%

84.3%

84.4%

ADR

128.45

$119.94

$116.48

$110.64

$108.02

RevPAR

113.26

$105.21

$101.05

$93.27

$91.17

Convention Attendance (Millions)

3.05

5.71

5.17

5.11

4.93

Passengers McCarran Int’l (Millions)

19.1

45.3

42.9

41.8

41.7

Gaming Revenue (Clark County, Billions) 4.1

$9.6

$9.6

$10.0

$9.4

2.6

$7.5

$6.4

$6.5

$6.2

Gaming Revenue (“Strip”, Billions)

Data from Las Vegas Convention & Visitors Authority * Data from May

36

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

$0

From 2013 to 2015, Southern Nevada saw the sale of over 16,000 rooms, with a sales volume of almost $3 billion. The market now appears to be taking stock and preparing for the next phase, which may involve inventory expansion to go along with the entertainment venue expansion that has occurred since the end of the Great Recession.

Hospitality Sales* Year

Volume

Units Sold

Price/Unit

2016 YTD

$90 MM

1,261

$72,000

2015

$854 MM

7,558

$113,000

2014

$1,864 MM

7,749

$241,000

2013

$55 MM

1,129

$49,000

2012

$121 MM

2,613

$46,000

2011

$3,009 MM

7,369

$408,000

2010

$858 MM

8,883

$97,000

2009

$1,226 MM

4,913

$249,000

* Only includes properties with 100 or more units, arm’s-length sales

“Hospitality sales appeared to be cooling in 2016 compared to the past three years.” - John Stater, Research & GIS Manager

37

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Significant Hotel Sale Activity

215 NORTH LAS VEGAS

NORTHWEST

Riviera Hotel* Strip - $182,500,000

95

2,100 Units - $87,000/Unit February 2015

15

Casino Hotel

Renaissance Las Vegas Hotel Resort Corridor - $111,000,000 548 Units - $203,000/Unit

DOWNTOWN

SUMMERLIN WEST CENTRAL

July 2015 Full Service

EAST LAS VEGAS

RESORT CORRIDOR

Westin - Las Vegas Casuarina Resort Corridor - $67,000,000

95

THE “STRIP”

826 Units - $81,000/Unit January 2016 Casino Hotel

AIRPORT

215

Hooters Casino Hotel Resort Corridor - $54,000,000

HENDERSON

SOUTHWEST

696 Units - $77,000/Unit May 2015 Casino Hotel

SOUTH LAS VEGAS Tropicana Las Vegas Strip - $360,000,000 1,497 Units - $240,000/Unit December 2015 Casino Hotel

Sale Activity Continued Property Name

Sale Date

Units

Price

Price/Unit

Submarket

Property Type

Westin Lake Las Vegas

Dec 2015

493

$25,000,000

$51,000

Henderson

Full Service

Las Vegas Club Casino

Aug 2015

410

$40,000,000

$98,000

Downtown

Casino Hotel

Element Home

Apr 2016

123

$17,100,000

$139,000

Summerlin

Full Service

Holiday Home

May 2016

211

$6,500,000

$31,000

South Vegas

Full Service

Rodeway Inn

Jan 2016

101

$6,100,000

$60,000

Resort Corridor

Limited Service

* Indicates a redevelopment site

38

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Hospitality Market TOTAL INVENTORY

UNITS SOLD

SALES VOLUME

PRICE/UNIT

COMPLETIONS THIS QUARTER

COMPLETIONS YTD

PLANNED

7,589 938 8,527

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

-

CAS FS LS

79,309 7,543 581

-

$0 $0 $0

n/a n/a n/a

-

-

3,500 -

Total

87,433

-

$0

n/a

-

-

3,500

11,273 5,091 6,285 22,649

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

201 211 412

841 841

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

131 131

1,913 2,571 4,484

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

-

2,281 868 1,480 4,629

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

-

1,021 1,611 2,632

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

-

2,853 2,704 1,206 6,763

211 211

$0 $6,500,000 $0 $6,500,000

n/a $30,806 n/a n/a

-

-

124 124

1,789 123 857 2,769

123 123

$0 $17,100,000 $0 $17,100,000

n/a $139,024 n/a n/a

-

-

-

3,425 2,188 5,613

-

$0 $0 $0 $0

n/a n/a n/a n/a

-

-

-

111,453 16,329 18,558 146,340

334 334

$0 $23,600,000 $0 $23,600,000

n/a $70,659 n/a $70,659

-

-

3,701 211 255 4,167

334 927 2,241 958 2,499 2,888 128

$23,600,000 $66,590,396 $392,913,841 $151,000,000 $442,001,950 $243,075,470 $5,375,000

$70,659 $71,834 $175,330 $157,620 $176,872 $84,167 $41,992

0 0 0 -410 -2,988 -202 0

0 0 2,376 2,376 2,786 -202 1,955

4,167 4,925 3,634 3,634 4,169 4,124 4,124

TYPE

DOWNTOWN CAS FS LS Total LAS VEGAS “STRIP”

RESORT CORRIDOR CAS FS LS Total AIRPORT CAS FS LS Total EAST LAS VEGAS SUBMARKET CAS FS LS Total HENDERSON SUBMARKET CAS FS LS Total NORTH LAS VEGAS SUBMARKET CAS FS LS Total SOUTH LAS VEGAS SUBMARKET CAS FS LS Total SUMMERLIN SUBMARKET CAS FS LS Total WEST CENTRAL SUBMARKET CAS FS LS Total MARKET TOTAL CAS FS LS Total

QUARTERLY COMPARISON AND TOTALS Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14

39

146,340 146,340 146,340 146,340 146,750 149,738 149,940

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Research & Forecast Report

LAS VEGAS | LAND Q2 2016

Land Market Improves >> In 2016, more land is being sold while sales prices are falling >> Even when discounting massive industrial land sales at Apex, the average sales price for land is slowly dropping

Economic Indicators COMMERCIAL

RESIDENTIAL

COMMERCIAL

+86.0

+53.4

+77.3

Percent

Percent

Percent

Forward Supply

>> Development continues to be strong for multifamily and industrial properties, less so for single-family residential and commercial properties

The second quarter of 2016 saw land sales, in terms of acreage sold, continue to increase. Land sales in the second quarter amounted to 1,794.5 acres, bringing the total for 2016 up to 3,018.5 acres sold. This is a significant improvement over land sales in 2015. From the viewpoint of sales volume, the second quarter posted $203.5 million, up from one quarter ago and one year ago. The average sales price for land in Southern Nevada was $2.60 per square foot (psf) in the second quarter of 2016. This was down from one quarter ago, from one year ago, and the lowest price per square foot recorded in the past four years. Rather than a sign of a faltering land market, the low prices recorded in the last two quarters were due to large land sales at Apex, the heavy industrial area located to the northeast of the Las Vegas Valley. When Apex is removed from the calculations, land sold for $7.15 psf in the second quarter of 2016, down from $8.17 psf in the first quarter of 2016 and up from $6.47 psf in the second quarter of 2015. Industrial occupancy remained at 94.4 percent in second quarter of 2016. While demand for industrial product remains strong, it is being counteracted by new industrial developments. A total of 661,726 square feet of industrial space was completed in the second quarter of 2016 on 40.2 acres. An additional 7.7 million square feet of industrial space is either under construction or planned on 591.1 acres of land. During the second quarter of 2016, 1,376.4 acres of industrial land was sold, with total sales volume of $38.3 million. The average sales price of industrial land was $0.64 psf, a significant decrease from one year ago but predicated large land sales in Apex. Ignoring the sale of 1,225 acres in Apex, the average sales price of industrial land would be $1.83 psf on 152 acres sold.

Permits

Permits

Market Indicators Q2 2016

Relative to prior period

Q3 2016*

NO. SALES ACREAGE SOLD SALES VOLUME PRICE PER SQUARE FOOT *Projected

Land Sales Activity

Land Sales Activity $14.00

2,000 1,800

$12.00

1,600 $10.00

1,400 1,200

$8.00

1,000 $6.00

800 600

$4.00

400 $2.00

200 0

Q3-14

Q4-14

Q1-15 ACREAGE SOLD

Q2-15

Q3-15

Q4-15

Q1-16

PRICE PER SQ. FT.

Q2-16

$0.00

Commercial occupancy increased in the second quarter of 2016 to 87.6 percent, 1.1 percentage points higher than in the second quarter of 2015. Demand for office product in Southern Nevada appears to be increasing, while retail demand is stagnant. Speculative construction of office and anchored retail projects should remain light in 2016. A total of 165,000 square feet of commercial product was completed in the second quarter of 2016, on 19.8 acres. An additional 2.2 million square feet of commercial product is under construction or planned on 280.3 acres. Average hotel occupancy in the first four months of 2016 was 88.4 percent. Hotel occupancy has generally been on the rise over the past three years, and reductions in room inventory should keep this trend going in 2016. Over 4,900 new rooms are under construction or planned in Southern Nevada on 125.8 acres. During the second quarter of 2016, 250.1 acres of commercial land was sold. Total commercial land sales volume was $87.0 million. The average sales price of commercial land was $7.98 psf, an increase of $0.51 psf from one year ago. Development of single-family residential has lagged behind other land uses for the past three years, though multifamily development is increasing at the moment. New home sales totaled 2,036 units in the

Commercial Land Sales Activity

first four months of 2016. This is more than sold in the first four months of 2015. Residential permits totaled 4,905 in the first four months of 2016, compared to 3,379 units in the first four months of 2015. A lack of improved lots should keep development of single-family homes low for now, and it is unlikely that 2016 will see an explosion in singlefamily residential construction due to affordability issues. During the second quarter of 2016, 167.9 acres of residential land was sold. Total residential land sales volume was $78.3 million. The average sales price of residential land was $10.71 psf, a $3.54 psf increase from one year ago. While development in Southern Nevada is not booming, it is certainly recovering and growing stronger, especially in the industrial and multifamily sectors. If this continues, and speculative projects prove successful, demand for land should increase through 2016 and 2017. Single-family residential development could be the one drag on an otherwise rosy picture, though there is some anecdotal evidence to suggest that in-migration into Southern Nevada is increasing. If this turns out to be true, demand for residential land will increase as well, though possibly more for multifamily than single-family use.

Residential Land Sales Activity

Residential Land Sales Activity

Commercial Land Sales Activity

300

$16.00

250

$14.00

$12.00

800

$11.00

700

$10.00

600 200

$12.00

150

$10.00

100

$8.00

$9.00

500

$8.00 $7.00

400

$6.00

300

$5.00

200 50

0

$6.00

Q3-14

Q4-14

Q1-15

Q2-15

Q3-15

ACREAGE SOLD

Q4-15

Q1-16

Q2-16

$4.00

$4.00

100 0

$3.00 Q3-14

Q4-14

PRICE PER SQ. FT.

Q1-15

Q2-15

Q3-15

ACREAGE SOLD

Market Health

Q4-15

Q1-16

Q2-16

PRICE PER SQ. FT.

Land Sales

Data Point

2014

2015

2016

Year

Sales Volume

Acres Sold

Price/SF

Commercial Building Occupancy

86.4%

86.9%

87.6%

2016 YTD

$375.2 MM

3,018

$2.85

Industrial Building Occupancy

90.5%

94.5%

94.4%

2015

$625.9 MM

2,302

$6.24

Hotel Occupancy (Annual Average) 86.8%

87.7%

88.4%

2014

$763.2 MM

2,761

$6.35

New Home Sales (Apr)

428

449

503

2013

$613.3 MM

2,636

$5.34

Commercial Permits (Apr)

31

29

32

2012

$264.1 MM

1,374

$4.41

Residential Permits (Apr)

905

786

1,254

2011

$160.1 MM

803

$4.58

Commercial Forward Supply2 (SF) 1.57 MM

1.66 MM

2.19 MM

2010

$51.3 MM

172

$6.86

Industrial Forward Supply2 (SF)

3.93 MM

9.29 MM

7.66 MM

2009

$198.0 MM

599

$7.65

Hotel Forward Supply2 (Rooms)

4,124

3,634

4,167

Taxable Sales (Jan-Mar)

$8.6 BB

$9.2 BB

9.4 BB

Employment (Average)

874,500

908,600

928,400

1

Includes permits for industrial projects

2

Includes projects that are under construction or planned

3

Data as yet unavailable

41

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

$2.00

Significant Land Sale Activity

215 NORTHWEST

NORTH LAS VEGAS

US-93 & Interstate 15 906.1 Acres - $25,500,000

95

$0.65/SF April 2016 Industrial - Apex

15

SUMMERLIN

Cheyenne & Interstate 215

DOWNTOWN

NORTHEAST

146.6 Acres - $40,000,000 $6.27/SF March 2016 Residential - Summerlin

WEST LAS VEGAS

Far Hills & Fox Hill

95

18.6 Acres - $10,100,000

EAST LAS VEGAS

$12.51/SF May 2016 Commercial - Summerlin

AIRPORT

215

Flamingo & Hualapai 11.7 Acres - $11,690,000

SOUTHWEST

$22.96/SF March 2016 Residential - Southwest

HENDERSON Carnegie & Sunridge Heights 20.1 Acres - $10,000,000 $11.48/SF April 2016 Residential - Henderson

Land Sale Activity Continued Major Cross Streets

Sale Date

Acres

Price

Price/SF

Submarket

Land Type

Badura & Cimarron

May 2016

5.0

$4,200,000

$19.36

Southwest

Residential

Blue Diamond & Cameron

May 2016

2.4

$3,200,000

$30.64

Southwest

Commercial

Blue Diamond & Buffalo

Mar 2016

1.6

$1,800,000

$25.20

Southwest

Residential

Bermuda & Bruner

Mar 2016

108.1

$1,150,000

$0.24

Henderson

Industrial

Village Center & Trails Center

May 2016

0.6

$560,000

$20.41

Summerlin

Commercial

42

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

Market Comparisons - Las Vegas Land Market ACREAGE SOLD

SALES VOLUME

AVERAGE SALES PRICE (PER SQUARE FOOT)

SUBMARKET

SALES

AIRPORT

3

10.41

$5,010,000

$11.05

Commercial Industrial Residential

2

0.00 0.00 3.11

$0 $0 $495,000

n/a n/a $3.65

APEX

2

753.47

$4,197,020

$0.13

Commercial Industrial Residential

2 -

0.00 1,224.74 0.00

$0 $26,194,405 $0

n/a $0.49 n/a

DOWNTOWN

3

19.88

$2,965,000

$3.42

Commercial Industrial Residential

1 -

0.00 3.00 0.00

$0 $516,000 $0

n/a $3.95 n/a

EAST LAS VEGAS

1

13.83

$2,690,000

$4.47

Commercial Industrial Residential

2

0.00 0.00 8.80

$0 $0 $3,900,000

n/a n/a $10.17

HENDERSON

13

105.19

$29,130,393

$6.36

Commercial Industrial Residential

3 4 9

25.07 118.75 65.46

$10,628,200 $4,050,000 $25,065,000

$9.73 $0.78 $8.79

NORTH LAS VEGAS

14

65.34

$15,693,448

$5.51

Commercial Industrial Residential

3 5 1

5.44 27.33 1.03

$1,945,000 $7,050,001 $125,000

$8.21 $5.92 $2.79

NORTHEAST

3

5.05

$380,000

$1.73

Commercial Industrial Residential

1 1 -

5.15 2.62 0.00

$1,070,000 $450,000 $0

$4.77 $3.94 n/a

NORTHWEST

10

66.36

$25,780,750

$8.92

Commercial Industrial Residential

3 6

10.57 0.00 14.07

$4,460,000 $0 $2,068,065

$9.69 n/a $3.37

RESORT CORRIDOR

-

0.00

$0

N/A

Commercial Industrial Residential

1 -

1.14 0.00 0.00

$550,000 $0 $0

$11.08 n/a n/a

SOUTHWEST

33

134.37

$62,270,854

$10.64

Commercial Industrial Residential

12 15

33.24 0.00 68.48

$16,235,000 $0 $44,126,500

$11.21 n/a $14.79

SUMMERLIN

3

44.17

$21,725,000

$11.29

Commercial Industrial Residential

4 1

169.51 0.00 2.50

$52,095,927 $0 $245,000

$7.06 n/a $2.25

WEST LAS VEGAS

2

5.95

$1,855,000

$7.16

Commercial Industrial Residential

2

0.00 0.00 4.46

$0 $0 $2,280,000

n/a n/a $11.74

Commercial Total Industrial Total Residential Total

27 13 38

250.12 1,376.44 167.91

$86,984,127 $38,260,406 $78,304,565

$7.98 $0.64 $10.71

MARKET TOTAL

78

1,794.47

$203,549,098

$2.60

SUBTYPE TOTALS

QUARTERLY COMPARISON AND TOTALS Q2-16

78

1,794.47

$203,549,098

$2.60

Q1-16

87

1,224.02

$171,697,465

$3.22

Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14

97 92 61 92 85 87 147

610.53 467.84 324.47 899.06 787.14 560.97 672.00

$220,091,246 $143,792,608 $91,474,040 $170,589,500 $139,172,418 $122,694,458 $287,663,536

$8.28 $7.06 $6.47 $4.36 $4.06 $5.02 $9.83

43

Las Vegas Research & Forecast Report | Q2 2016 | Economic Review | Colliers International

502 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112

COLLIERS INTERNATIONAL | LAS VEGAS 3960 Howard Hughes Parkway Suite 150 Las Vegas, Nevada 89169 | USA +1 702 735 5700 www.colliers.com/lasvegas MARKET CONTACT: Mike Mixer Executive Managing Director | Las Vegas +1 702 735 5700 [email protected] John Stater Research & GIS Manager | Las Vegas +1 702 836 3781 [email protected]

$2.5

billion in annual revenue*

2.0

billion square feet under management

16,000

professionals and staff *All statistics are for 2015 and include affiliates.

About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more than any other real estate services firm.

For the latest news from Colliers, visit Colliers.com or follow us on Twitter (@Colliers) and LinkedIn. Copyright © 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.