IPD Index Statement

Q4 2009 US Quarterly Property Indicator

US commercial real estate suffers record worst fall, says IPD

Chicago, 17th February 2010: US commercial real estate suffered its worst annual
capital return on record1, according to the IPD US Quarterly Property Indicator, which
fell -23.9% in 2009, taking the total capital decline to -33.4% from December 2007
when real estate values were at their peak.

While the pace of market value decline eased over the final quarter, continued cap rate
pressure together with weakening rental fundamentals is curbing optimism that 2010 is
the year of recovery. Cap rates softened by a further 140 basis points over the year to
end 2009 at 7.1%, the highest level in six years.

Five City Analysis

In an analysis of commercial real estate in five major cities in the US, IPD shows that
New York, Washington and Chicago all suffered slightly less severe market value
write-downs than the broader US market. Conversely, the West Coast markets of LA
and San Francisco have fallen further than the national average.

US CRE: 2009 versus peak-to-trough value writedowns

0

-10

-20

-30

2009 Peak-to-trough
-40
2009

San Francisco Los Angeles New York United States Chicago Washington

Source: IPD US Quarterly Property Indicator

Over the entire peak-to-trough, New York has suffered a steeper re-pricing cycle than
the US average, falling by 34.3%. The chart above shows the five cities annual capital
return with the full peak-to-trough decline. San Francisco commercial real estate
market values declined the most over the quarter (-4.1%), the year (-27.5%) as well as
overall peak-to-trough (-39.4%). The city‟s cap rates are now equal to the national
average (7.1%).

In the five city analysis, Washington‟s market values fell 180 basis points less than the
broader US market over the full year (-22.1%) – and by 200 basis points peak-to-
trough (-31.6%). The city which delivered the shallowest quarterly market value decline
was Chicago (-2.1%).

“2010 in many ways is a crunch year for US commercial real estate, explains Simon
Fairchild, Managing Director for North America at IPD. “The „extend and pretend‟
policies banks adopted last year to stave off loan-to-value covenant breaches may
have curbed the tide of rising loan delinquencies in the short-term, but lenders and
investors need to always retain a vigilant eye on the health of real estate
fundamentals. One focus this year will be to track signs of stress in occupier markets;
particularly in cities with rising vacancy rates.”

East-West Coast Divide

Over 2009, there was a distinct geographic trend in the pace of capital depreciation,
with the East Coast outperforming the West Coast in all four main sectors – offices,
retail, industrial and apartments.

In addition, the East Coast delivered the lowest geographic capital decline,
outperforming Mid West and the South, in retail, offices and industrials. In the
apartment sector, the Mid West returned the shallowest annual capital decline. See
chart below (numbers available upon request).
 US East-West Coast annual 2009 capital returns
0

-5

-10

-15

-20

-25

-30
East West US East West US East West US East West US

Retail Offices Industrial Apartments

Source: IPD US Quarterly Property Indicator

Investment Returns
US commercial real estate income returns were robust in 2009 at 6.6%, partially
offsetting the falls in value and contributing to an annual total return of -18.7%. At the
sector level, the strongest performer was retail, which outperformed the all property
average by 390 basis points, returning -14.8%, while at the other end of the spectrum
offices underperformed the wider market by 220 basis points, delivering -20.9%. The
industrial and apartment sectors returned -20.2% and -17.0% for 2009, respectively.
Over three, five and 10 year periods, US commercial real estate has returned -4.9%,
3.3% and 6.3% per annum.

Global Comparisons
The -23.9% 2009 market value decline in US commercial real estate compares with a
-3.8% decline in the UK, buoyed by a fourth quarter rally which saw British property
markets climb by a record 8.1%. The historically stable Netherlands real estate market
fell by -5.6% over 2009, while the world‟s worst hit market, Ireland, fell -28.9%.
Canada‟s annual capital and total returns will be published on Thursday, while IPD is
to publish the annual indices for Sweden, Denmark, Austria and Finland next week.

----------------------------------------------------ENDS---------------------------------------------------

Notes to editors:
1
This takes into account IPD‟s US data, which began in 1999, and NPI, which dates
back to 1978.

The IPD US Quarterly Property Indicator monitors the trends in underlying market
value and returns of $76.5bn of assets held by the leading real estate fund managers
in the US. The methodology ensures that only assets revalued by the end of each
quarter are included. This ensures that price movements over each quarter are
accurately reflected in headline all property, sector and segment level, which is acutely
important in rapidly declining markets.

IPD is a global information business, dedicated to the objective measurement of

commercial real estate performance. As the world‟s number one provider of real
estate performance analysis for funds, investors, managers and occupiers, IPD offers
a full range of services including research, reporting, benchmarking, conferences and
indices. Operating in over 20 countries including the US, most of Europe, Japan, South
Africa, Canada, Australia and New Zealand, its indices are the basis for the developing
commercial property derivatives market, and the most authoritative measures of real
estate returns worldwide. For further information visit www.ipd.com

For further information contact:

Jani Venter, US Commercial Development at IPD
347 413 2236, jani.venter@ipd.com

James Wallace, Global Press Officer

+44 (0) 20 7336 4778, james.wallace@ipd.com