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The Treasure Valley offi ce market started and ended 2011 with positive momentum due to sustained interest from local, regional, and national users. After a small increase in Q3, vacancy declined .7% in the fi nal six months of 2011 and ended the year at 17.2%, down 2.2% from a year ago. A number of local business parks saw vacancy reductions over the previous three months. The Boise Research Cen-ter experienced a decline in vacancy from 35% to 13.7% during the fourth quarter of 2011. This decline in vacancy was underscored by the sale of the Advantage Building (32,862 SF) in late December. Sales activity of vacant offi ce buildings to owner-users picked up dramatically in 2011, and bank owned offi ce building inventory has sub-stantially declined over the past 12 months. Anticipation remains extremely high for 8th & Main, an 18 story, Class-A building in the heart of downtown Boise. The interest level has been so great that 3 stories have been added to the original plan, and over 100,000 square feet have already been committed to by offi ce tenants for occupancy begin-ning in early 2014. Construction on 8th & Main will start on schedule in mid-2012.

Overview

Colliers International tracks 17.6 million square feet of space in 863 offi ce buildings 5,000 square feet or larg-er in ten diff erent submarkets throughout Ada and Can-yon Counties. The resurgence of the Boise Research Center located in the West Bench Submarket, has helped to provide optimism to the offi ce market. The four build-ings listed below represent some of the more notable transactions within the Boise Research Center in the last quarter of 2011:

Inventory & Vacancy

Syringa Networks purchased the Genesis Building (47,940 square feet)

Sybase subleased at LaSalle Place (16,830 square feet)

CRI Advantage Inc. leased at Solitude Building (5,730 square feet)

M&C Stanley, LLC purchased the Advantage Build-ing (32,862 square feet)

YEAR-END 2011

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OFFICE MARKET REVIEW RETAIL STATISTICS

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OFFICE STATISTICS

Vacancy rates remain relatively stable beyond the Boise Research Center with the Meridian submarket recording the largest vacancy decrease, approximately 4% to 21.4% currently.

Asking rates have increased for the past two quarters, furthering optimism about the market throughout the Treasure Valley. At Mid-Year 2011, the overall average full service asking rate was $15.61. In Q3 the average went up

Full Service Asking Rates & Comp Rents

The Treasure Valley offi ce market will continue to improve during 2012, with a slight reduction in off ered leasing incentives over the course of the next 12 months. Rental rates are expected to increase modestly during 2012, and the trend of owner-user purchases will likely continue. Downtown Boise will continue to remain strong, with most other submarkets experiencing an improvement over the coming year.

Outlook

ten cents to $15.71; it currently sits at $15.79. The aver-age asking rate for Class A offi ce space in Q4 was $17.54.

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As has been the case all year, grocery stores remain on the forefront of the retail market for the Treasure Val-ley. Whole Foods broke ground in downtown Boise, Rosauers is under construction on Eagle Road and Fred Meyer is near completion in Meridian. There are other grocers who will announce new stores in 2012. Shop space in the “A” locations is becoming scarce. Vacancies along Eagle Road, downtown and at the mall area are in the mid single digits.

Overview

Colliers International currently tracks 17.9 million SF of retail inventory in the Treasure Valley, in buildings and retail centers 5,000 square feet and above (excluding the Boise Towne Square Mall). Vacancy has remained stable throughout 2011, going down 0.2% from the third to fourth quarter, ending at 12.3% across the Treasure Valley. The sharpest decline in vacancy occurred in the Northwest submarket where Goodwill recently leased 33,672 square feet of retail space at the Northgate Shopping Center. This large lease reduced the vacancy rate by 5% in the North-west submarket. The Southwest market has been anoth-er bright spot with a vacancy rate of 7.2%. With optimal locations in such high demand there have been a few negative spots.

Inventory and Vacancy

YEAR-END 2011

RETAIL MARKET REVIEW INDUSTRIAL STATISTICS

Other areas of optimism include quick serve restau-rants (QSR’s), with the announcement that Chick-Fil-A will be expanding on its recent market entry at BSU. Several other QSR’s are looking to either enter or expand in the market. Recent notable leases signed include Nordstrom Rack, Gordmans, and Big Al’s. Discounters continue to be prominent in the market and are the most active tenants as they look to expand their presence in the Treasure Valley. New regional and national tenants are looking towards the Boise Towne Square Mall and Ea-gle Road for sites. Chipotle Mexican Grill, for example, recently opened its fi rst Treasure Valley store across the street from the mall on Milwaukee, while Big Al’s landed on Eagle Road.

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Demand for farm land continues to rise as investors anchoring their portfolios and farmers expanding their operations seek buying opportunities. Farm land prices range from $4,000 to $6,000 per acre with a few sales reported in the past year at $6,500 and $7,000 per acre. Farm ground acquisitions in the Treasure Valley have primarily been focused on 80 acre and larger parcels. The higher land prices have led to higher farm rents and a farm land bubble is likely. Cap rates have been reduced to 5% in the most recent round of farm land buying. Price-buying opportunities exist in farm ground acquisitions on less effi cient, smaller parcels.

Overview

Multifamily land remains steady with good activity, how-ever current multifamily land prices are slightly higher than they need to be in order to make projects feasible. This creates a challenge for investors looking to cash in on the multi-family “boom” that has hit in the past couple of years.

Ada County distressed residential subdivision lots have become builder inventory in the past few years. The majority of Ada County vacant developed lots (and many in Canyon County) have been picked over and picked up by builders and/or their land bankers.

Supply and Demand

The big land story of 2011 is the September sale of Legacy in Eagle. Legacy consists of 211 buildable lots, 26 existing homes, and 409.22 acres of bare land. It sold at 80% of the asking price, higher than anticipated, within 60 days of the property going to the market. There were eight bidders for the property, indicating that quality develop-ment land remains in high demand.

Both Ada and Canyon County experienced an increase in total home sales year to date, with Ada at 5,763 and Canyon at 2,815 at the time of this report. While total home sales showed modest gains from the previous year, new home sales fell in both counties. Ada County new home permits were down 20%, and Canyon Coun-ty new home permits were down 55%. Average new construction home prices increased in both counties.

In 2012 land for residential development will remain fl at with demand continuing at a slow pace. Residential lots held by banks following foreclosure will continue to move into the hands of investors and builders at a steady rate at below-replacement-cost prices. Commercial land activ-ity will continue to move steadily as retail, industrial and offi ce users continue to expand and relocate. Speculative development and building will continue at current very-low levels on existing fi nished commercial and residential pads in 2012, just as they did in 2011.

Outlook

Overall asking rates fell to $13.25 across the Treasure Valley in the fourth quarter, down from $13.32 at mid-year, while overall actual lease rates averaged $13.19. The trend of restaurant space being in high demand has driven built out restaurant space rents to increase, including the Boise Spectrum Restaurant space leasing at a 50% higher rate than its asking price. Tenants continue to increase the length of their leases with terms currently averaging over 55 months compared to an average of 36 months just two years ago.

Triple Net Asking Rates and Comp Rents

Across the Treasure Valley retail space had positive absorption of 207,895 square feet. The only negative sub-market for retail absorption in 2011 was the Central Bench, which experienced -17,897 square feet of absorption. This negative absorption is due in large part to the continued vacancies in the Overland Park Shopping Center, which currently has 40,224 square feet available. Canyon County

Net Absorption

Landlord concessions will continue to be less favorable for tenants. Class A space will continue to remain in high demand, and the possibility of development may become a reality in the next 12 months. Fast food and quick serve restaurants will target Broadway, Eagle Road, and the Mall for their newest units. Big Box tenants will look to down-size stores as national tenants such as Best Buy are look-ing to be as small as 5,000 square feet, a dramatic change in their current store models. With rents remaining low, Boise will remain an attractive marketplace to both new and existing national and regional tenants.

Outlook

showed positive absorption of 81,934 square feet this year, largely attributed to the former Sam’s Club building sale (134,059 square feet). Submarkets with the great-est absorption included West Bench with +37,172 square feet, and the Northwest showing +32,045 square feet.

YEAR-END 2011

LAND MARKET REVIEW

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The Treasure Valley industrial market continues to be stable, which adds credibility to the belief that we are at the bottom of the market. Asking lease rates remained stable throughout 2011, ending the year at $.48/SF, with overall vacancy rising only 0.5% for the year. Interest in high quality buildings in prime locations rose in 2011 with tenants willing to sign longer term leases of fi ve years or more.

Overview

Colliers International tracks approximately 34.7 million square feet of industrial space in the Treasure Valley. While the overall vacancy rate across the Trea-sure Valley is at 11.4%, the industrial-heavy submarkets of the Airport, Central Bench, Garden City, and Southeast Boise have a Class ‘A’ vacancy rate of 8%. The Downtown Periphery submarket showed a positive trend, decreasing in vacancy by 1.3% in the last half of 2011. Slight increases in other submarkets throughout Ada County, and a vacancy increase of about 1% in Canyon County, brought vacan-cy up slightly to 11.4%, from 11.2% at mid-year, and from 10.9% compared to this time last year. Several notable transactions from the past three months include a sale of a 75,600 square foot building in West Bench, Critical Systems Incorporated purchasing a 28,024 square foot building in Southwest Boise, and a 15,410 square foot lease by Modern Welding & Machine in the Airport District in Boise.

Inventory and Vacancy

The Northside submarket is Canyon County’s largest industrial market, and has seen some negative movement. In the second half of 2011, there was -44,891 square feet of absorption in the Northside submarket, bringing the total to -112,455 for 2011. On a positive note, however, even with the increased vacancy, rates remain relatively high with an average rate of $0.40 in 2011. There are a limited amount of offi ce and retail buildings in the North-side submarket, and we have seen little change in their status as landlords have negotiated to keep tenants in existing leases.

Northside Nampa

Southside Nampa has remained stable in 2011 with the ex-ception of retail. Retail vacancy rose from 7.6% to 11% in the last quarter of 2011 due to the addition of over 20,000 square feet of leasable space to the market. The vacancy rate would have climbed even higher if not for the 13,956

South Nampa

Several transactions occurred in the Karcher submarket in the latter half of 2011, including a logistic services com-pany which leased 13,500 square feet of industrial space on Elder Street to expand its facilities, and a wood product distributor which leased 7,800 square feet of industrial space in the Sundance Business Park. There is also new construction in the Karcher submarket, including the 7,000 square foot Texas Roadhouse opening this spring, and the planned construction of a 6,000-7,000 retail building just to the north of Texas Roadhouse. The recently completed 120,000 square foot St. Luke’s Nampa Medical Plaza is the fi rst of several buildings to be constructed on the new campus in Karcher, developed by the Gardner Company.

Karcher

square feet leased by Razzle Dazzle College of Hair Design in October. The industrial sector has remained stagnant, and the offi ce market saw a moderate vacancy increase of 0.3% in the last half of 2011 to fi nish the year at 7.6%.

YEAR-END 2011

INDUSTRIAL MARKET REVIEW

Several Treasure Valley businesses expanded in 2011, including Redball, LLC leasing an additional 13,500 square feet of industrial space. The Treasure Valley has also received increased interest from out of state companies looking to acquire manufacturing and warehouse space in the Valley. These companies cited southern Idaho’s accessibility to the western United States, energy costs and business friendly environment as some of the reasons they identifi ed the Treasure Valley.

Activity in the industrial land market continues to increase as there were more industrial purchases and sales this year than there were the last two years: 25 sales in 2011, 23 sales in 2010, and 18 sales in 2009.

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Asking rates have remained stable, with the average Treasure Valley industrial asking rate currently at $.48/SF NNN. Average asking rates for all classes of NNN prop-erty have remained between $.45/SF and $.49/SF dating back to Q2 of 2010. Actual NNN rates have made a mod-est one cent increase this year to an average of $.34/SF NNN at year-end. Landlord concessions for Class B and C properties remain generous, as landlords attempt to fi nd new tenants, and retain current tenants. Both the West Bench and Central Bench submarkets had the most leasing activity in the fourth quarter, highlighted with four 10,000+ square feet warehouse transactions with fi ve year leases and rates ranging from $.32/SF to $.38/SF NNN.

Triple Net Asking Rates and Comp Rents

Despite an overall absorption rate of -83,279 square feet for the fourth quarter, overall absorption ended 2011 at +126,978 square feet for 2011. While overall absorption was positive, several submarkets had negative absorption this

Net Absorption

The industrial market should remain stable and improve slightly in 2012. Overall asking rates will remain around $.48/SF NNN, however if demand in Class ‘A’ space remains high, asking rates for this product type will rise due to the lack of available product. Vacancy should decrease, as the bottom of the market has likely been reached, and the trend of signing leases of fi ve years or more will continue to climb. The cost of debt remains low and optimal for borrowers, which will result in an increase in industrial sales throughout the Treasure Valley as well.

Outlook

year, including the Central Bench and Southeast Boise sub- markets, with -43,126 square feet absorption and –23,566 square feet absorption, respectively. Though Meridian had a slow fourth quarter, in 2011 its total absorption was +27,226 square feet. Positive submarkets include the Air-port, at +69,229 square feet absorption YTD, and the West Bench submarket at +30,922 square feet absorption YTD.

YEAR-END 2011

CANYON COUNTY MARKET REVIEW

Canyon County ended 2011 with upward momentum in commercial real estate. High demand for restaurant space has trickled over from Ada County, and Canyon County has seen an increase in restaurant users requiring space. There has also been an increase in Class A pad site activity. Multi-Family sales have risen in part to a 10.3% unemployment rate in Canyon County (compared with the national unemployment rate of 8.5%), which had reduced home ownership. There should be an increase in land sales, as large acreage has come full circle, and what was once development ground has gone back to farmland.

Overview

The Caldwell submarket has had very few changes in the past 12 months. Year to date, offi ce vacancy has de-creased from 11.3% to 6%, and asking rates have dropped from $15.50 this time last year, to $13.86. Local busi-nesses have been able to take advantage of these lower rates, accounting for the decrease in vacancy. The retail market remains stagnant, with vacancy rates and asking rates remaining nearly identical over the past six months,

Caldwell

Offi ce vacancy in Downtown Nampa has decreased only slightly, ending 2011 at 5%, just below the 6% mid-year vacancy rate. Retail vacancy space has remained at a low level, currently only 1.4% in buildings 5,000 SF or greater. Tenants looking to move to downtown Nampa can expect to see rates increase as long as vacancy remains low. Industrial space in downtown Nampa remains only available for sublease.

Downtown Nampa

The Idaho Center showed a spike in offi ce vacancy due to a single new listing in the market, an 18,200 square foot of-fi ce space availability on East Flamingo Avenue. This new availability brought an increase of 7.1% vacancy from mid year to the submarket, ending 2011 at 14.9%. The retail and industrial sectors showed slight vacancy decreases.

Idaho Center

at 9.6% and $9.63, respectively. Industrial space in Caldwell has shown a slight vacancy increase, moving up from 5.1% to 5.9% in the last six months.

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In 2011 buyers continued to seek either core trophy assets at a premium, or traumatized assets at a deep discount. The continued interest in this type on investment, referred to as “Trophies or Trash,” has caused the presentation of new, distressed properties to slow nationally. With the reduced amount of product becoming available, there is a forecasted improvement and deal-fl ow on “Middle-ground” assets outside of the “Trophies and Trash” categories.

Overview / National Sales Activity

While total sales for investment property as a whole for 2011 were increased over 2010, the end of the year saw a slow in the trend. November sales totaled $11.0 billion, the fi rst year over year decline in any month since 2009. Apartments were the only type of property which had a positive swing in November.

Multi-Family housing has become a popular investment, with rolling 12 month total sales volume showing an increase every quarter since mid-year 2009. Accord-ing to Real Capital Analytic’s data, transaction volume for Q4 2011, including pending transactions, currently sits at $153.8 million. Compared with the third quarter of 2011, that is over a 16% increase for the quarter.

The Boise investment market, however, is seeing sluggish volume, and users are taking advantage of distressed opportunities. There were several signifi cant transactions in the fourth quarter of 2011 including the sale of the 303-unit former DoubleTree Riverside Hotel, where the new ownership group is planning $1 million in renovations on the 14.5 acre property in an eff ort to reinvigorate the hotel. The sale of the former Macy’s Building in downtown Boise also took place in the fourth quarter of 2011, and is scheduled to be renovated into aff ordable downtown housing.

The Local Market

The Boise market has seen more creativity and partici-pation between users and investors teaming up to solve problems with empty buildings. These types of deals generally allow the buyer to purchase property for less on a per square foot basis than traditional investment pur-chases. Several of these types of transactions occurred in Boise in 2011. These include the Flowerama Building and Plantation Shopping Center, both of which are located along State Street. Investors are showing more tolerance for risk-taking with more hands-on involvement in projects.

There are several indications that point toward a stronger market in 2012. Overall improvement in income on existing properties, sales volume, investor appetite, and lending appetite, are all positive signs that Boise will show resurgence in the investment market in 2012. Investors looking to obtain property outside the core trading areas in Boise will have to get creative with their uses, or con-tinue to view them as a long term asset with lower returns until the market can begin to support properties in outlying locations.

Outlook

YEAR-END 2011

INVESTMENT MARKET REVIEW

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In 2011 buyers continued to seek either core trophy assets at a premium, or traumatized assets at a deep discount. The continued interest in this type on investment, referred to as “Trophies or Trash,” has caused the presentation of new, distressed properties to slow nationally. With the reduced amount of product becoming available, there is a forecasted improvement and deal-fl ow on “Middle-ground” assets outside of the “Trophies and Trash” categories.

Overview / National Sales Activity

While total sales for investment property as a whole for 2011 were increased over 2010, the end of the year saw a slow in the trend. November sales totaled $11.0 billion, the fi rst year over year decline in any month since 2009. Apartments were the only type of property which had a positive swing in November.

Multi-Family housing has become a popular investment, with rolling 12 month total sales volume showing an increase every quarter since mid-year 2009. Accord-ing to Real Capital Analytic’s data, transaction volume for Q4 2011, including pending transactions, currently sits at $153.8 million. Compared with the third quarter of 2011, that is over a 16% increase for the quarter.

The Boise investment market, however, is seeing sluggish volume, and users are taking advantage of distressed opportunities. There were several signifi cant transactions in the fourth quarter of 2011 including the sale of the 303-unit former DoubleTree Riverside Hotel, where the new ownership group is planning $1 million in renovations on the 14.5 acre property in an eff ort to reinvigorate the hotel. The sale of the former Macy’s Building in downtown Boise also took place in the fourth quarter of 2011, and is scheduled to be renovated into aff ordable downtown housing.

The Local Market

The Boise market has seen more creativity and partici-pation between users and investors teaming up to solve problems with empty buildings. These types of deals generally allow the buyer to purchase property for less on a per square foot basis than traditional investment pur-chases. Several of these types of transactions occurred in Boise in 2011. These include the Flowerama Building and Plantation Shopping Center, both of which are located along State Street. Investors are showing more tolerance for risk-taking with more hands-on involvement in projects.

There are several indications that point toward a stronger market in 2012. Overall improvement in income on existing properties, sales volume, investor appetite, and lending appetite, are all positive signs that Boise will show resurgence in the investment market in 2012. Investors looking to obtain property outside the core trading areas in Boise will have to get creative with their uses, or con-tinue to view them as a long term asset with lower returns until the market can begin to support properties in outlying locations.

Outlook

YEAR-END 2011

INVESTMENT MARKET REVIEW

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Asking rates have remained stable, with the average Treasure Valley industrial asking rate currently at $.48/SF NNN. Average asking rates for all classes of NNN prop-erty have remained between $.45/SF and $.49/SF dating back to Q2 of 2010. Actual NNN rates have made a mod-est one cent increase this year to an average of $.34/SF NNN at year-end. Landlord concessions for Class B and C properties remain generous, as landlords attempt to fi nd new tenants, and retain current tenants. Both the West Bench and Central Bench submarkets had the most leasing activity in the fourth quarter, highlighted with four 10,000+ square feet warehouse transactions with fi ve year leases and rates ranging from $.32/SF to $.38/SF NNN.

Triple Net Asking Rates and Comp Rents

Despite an overall absorption rate of -83,279 square feet for the fourth quarter, overall absorption ended 2011 at +126,978 square feet for 2011. While overall absorption was positive, several submarkets had negative absorption this

Net Absorption

The industrial market should remain stable and improve slightly in 2012. Overall asking rates will remain around $.48/SF NNN, however if demand in Class ‘A’ space remains high, asking rates for this product type will rise due to the lack of available product. Vacancy should decrease, as the bottom of the market has likely been reached, and the trend of signing leases of fi ve years or more will continue to climb. The cost of debt remains low and optimal for borrowers, which will result in an increase in industrial sales throughout the Treasure Valley as well.

Outlook

year, including the Central Bench and Southeast Boise sub- markets, with -43,126 square feet absorption and –23,566 square feet absorption, respectively. Though Meridian had a slow fourth quarter, in 2011 its total absorption was +27,226 square feet. Positive submarkets include the Air-port, at +69,229 square feet absorption YTD, and the West Bench submarket at +30,922 square feet absorption YTD.

YEAR-END 2011

CANYON COUNTY MARKET REVIEW

Canyon County ended 2011 with upward momentum in commercial real estate. High demand for restaurant space has trickled over from Ada County, and Canyon County has seen an increase in restaurant users requiring space. There has also been an increase in Class A pad site activity. Multi-Family sales have risen in part to a 10.3% unemployment rate in Canyon County (compared with the national unemployment rate of 8.5%), which had reduced home ownership. There should be an increase in land sales, as large acreage has come full circle, and what was once development ground has gone back to farmland.

Overview

The Caldwell submarket has had very few changes in the past 12 months. Year to date, offi ce vacancy has de-creased from 11.3% to 6%, and asking rates have dropped from $15.50 this time last year, to $13.86. Local busi-nesses have been able to take advantage of these lower rates, accounting for the decrease in vacancy. The retail market remains stagnant, with vacancy rates and asking rates remaining nearly identical over the past six months,

Caldwell

Offi ce vacancy in Downtown Nampa has decreased only slightly, ending 2011 at 5%, just below the 6% mid-year vacancy rate. Retail vacancy space has remained at a low level, currently only 1.4% in buildings 5,000 SF or greater. Tenants looking to move to downtown Nampa can expect to see rates increase as long as vacancy remains low. Industrial space in downtown Nampa remains only available for sublease.

Downtown Nampa

The Idaho Center showed a spike in offi ce vacancy due to a single new listing in the market, an 18,200 square foot of-fi ce space availability on East Flamingo Avenue. This new availability brought an increase of 7.1% vacancy from mid year to the submarket, ending 2011 at 14.9%. The retail and industrial sectors showed slight vacancy decreases.

Idaho Center

at 9.6% and $9.63, respectively. Industrial space in Caldwell has shown a slight vacancy increase, moving up from 5.1% to 5.9% in the last six months.

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The Treasure Valley industrial market continues to be stable, which adds credibility to the belief that we are at the bottom of the market. Asking lease rates remained stable throughout 2011, ending the year at $.48/SF, with overall vacancy rising only 0.5% for the year. Interest in high quality buildings in prime locations rose in 2011 with tenants willing to sign longer term leases of fi ve years or more.

Overview

Colliers International tracks approximately 34.7 million square feet of industrial space in the Treasure Valley. While the overall vacancy rate across the Trea-sure Valley is at 11.4%, the industrial-heavy submarkets of the Airport, Central Bench, Garden City, and Southeast Boise have a Class ‘A’ vacancy rate of 8%. The Downtown Periphery submarket showed a positive trend, decreasing in vacancy by 1.3% in the last half of 2011. Slight increases in other submarkets throughout Ada County, and a vacancy increase of about 1% in Canyon County, brought vacan-cy up slightly to 11.4%, from 11.2% at mid-year, and from 10.9% compared to this time last year. Several notable transactions from the past three months include a sale of a 75,600 square foot building in West Bench, Critical Systems Incorporated purchasing a 28,024 square foot building in Southwest Boise, and a 15,410 square foot lease by Modern Welding & Machine in the Airport District in Boise.

Inventory and Vacancy

The Northside submarket is Canyon County’s largest industrial market, and has seen some negative movement. In the second half of 2011, there was -44,891 square feet of absorption in the Northside submarket, bringing the total to -112,455 for 2011. On a positive note, however, even with the increased vacancy, rates remain relatively high with an average rate of $0.40 in 2011. There are a limited amount of offi ce and retail buildings in the North-side submarket, and we have seen little change in their status as landlords have negotiated to keep tenants in existing leases.

Northside Nampa

Southside Nampa has remained stable in 2011 with the ex-ception of retail. Retail vacancy rose from 7.6% to 11% in the last quarter of 2011 due to the addition of over 20,000 square feet of leasable space to the market. The vacancy rate would have climbed even higher if not for the 13,956

South Nampa

Several transactions occurred in the Karcher submarket in the latter half of 2011, including a logistic services com-pany which leased 13,500 square feet of industrial space on Elder Street to expand its facilities, and a wood product distributor which leased 7,800 square feet of industrial space in the Sundance Business Park. There is also new construction in the Karcher submarket, including the 7,000 square foot Texas Roadhouse opening this spring, and the planned construction of a 6,000-7,000 retail building just to the north of Texas Roadhouse. The recently completed 120,000 square foot St. Luke’s Nampa Medical Plaza is the fi rst of several buildings to be constructed on the new campus in Karcher, developed by the Gardner Company.

Karcher

square feet leased by Razzle Dazzle College of Hair Design in October. The industrial sector has remained stagnant, and the offi ce market saw a moderate vacancy increase of 0.3% in the last half of 2011 to fi nish the year at 7.6%.

YEAR-END 2011

INDUSTRIAL MARKET REVIEW

Several Treasure Valley businesses expanded in 2011, including Redball, LLC leasing an additional 13,500 square feet of industrial space. The Treasure Valley has also received increased interest from out of state companies looking to acquire manufacturing and warehouse space in the Valley. These companies cited southern Idaho’s accessibility to the western United States, energy costs and business friendly environment as some of the reasons they identifi ed the Treasure Valley.

Activity in the industrial land market continues to increase as there were more industrial purchases and sales this year than there were the last two years: 25 sales in 2011, 23 sales in 2010, and 18 sales in 2009.

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Demand for farm land continues to rise as investors anchoring their portfolios and farmers expanding their operations seek buying opportunities. Farm land prices range from $4,000 to $6,000 per acre with a few sales reported in the past year at $6,500 and $7,000 per acre. Farm ground acquisitions in the Treasure Valley have primarily been focused on 80 acre and larger parcels. The higher land prices have led to higher farm rents and a farm land bubble is likely. Cap rates have been reduced to 5% in the most recent round of farm land buying. Price-buying opportunities exist in farm ground acquisitions on less effi cient, smaller parcels.

Overview

Multifamily land remains steady with good activity, how-ever current multifamily land prices are slightly higher than they need to be in order to make projects feasible. This creates a challenge for investors looking to cash in on the multi-family “boom” that has hit in the past couple of years.

Ada County distressed residential subdivision lots have become builder inventory in the past few years. The majority of Ada County vacant developed lots (and many in Canyon County) have been picked over and picked up by builders and/or their land bankers.

Supply and Demand

The big land story of 2011 is the September sale of Legacy in Eagle. Legacy consists of 211 buildable lots, 26 existing homes, and 409.22 acres of bare land. It sold at 80% of the asking price, higher than anticipated, within 60 days of the property going to the market. There were eight bidders for the property, indicating that quality develop-ment land remains in high demand.

Both Ada and Canyon County experienced an increase in total home sales year to date, with Ada at 5,763 and Canyon at 2,815 at the time of this report. While total home sales showed modest gains from the previous year, new home sales fell in both counties. Ada County new home permits were down 20%, and Canyon Coun-ty new home permits were down 55%. Average new construction home prices increased in both counties.

In 2012 land for residential development will remain fl at with demand continuing at a slow pace. Residential lots held by banks following foreclosure will continue to move into the hands of investors and builders at a steady rate at below-replacement-cost prices. Commercial land activ-ity will continue to move steadily as retail, industrial and offi ce users continue to expand and relocate. Speculative development and building will continue at current very-low levels on existing fi nished commercial and residential pads in 2012, just as they did in 2011.

Outlook

Overall asking rates fell to $13.25 across the Treasure Valley in the fourth quarter, down from $13.32 at mid-year, while overall actual lease rates averaged $13.19. The trend of restaurant space being in high demand has driven built out restaurant space rents to increase, including the Boise Spectrum Restaurant space leasing at a 50% higher rate than its asking price. Tenants continue to increase the length of their leases with terms currently averaging over 55 months compared to an average of 36 months just two years ago.

Triple Net Asking Rates and Comp Rents

Across the Treasure Valley retail space had positive absorption of 207,895 square feet. The only negative sub-market for retail absorption in 2011 was the Central Bench, which experienced -17,897 square feet of absorption. This negative absorption is due in large part to the continued vacancies in the Overland Park Shopping Center, which currently has 40,224 square feet available. Canyon County

Net Absorption

Landlord concessions will continue to be less favorable for tenants. Class A space will continue to remain in high demand, and the possibility of development may become a reality in the next 12 months. Fast food and quick serve restaurants will target Broadway, Eagle Road, and the Mall for their newest units. Big Box tenants will look to down-size stores as national tenants such as Best Buy are look-ing to be as small as 5,000 square feet, a dramatic change in their current store models. With rents remaining low, Boise will remain an attractive marketplace to both new and existing national and regional tenants.

Outlook

showed positive absorption of 81,934 square feet this year, largely attributed to the former Sam’s Club building sale (134,059 square feet). Submarkets with the great-est absorption included West Bench with +37,172 square feet, and the Northwest showing +32,045 square feet.

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LAND MARKET REVIEW

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As has been the case all year, grocery stores remain on the forefront of the retail market for the Treasure Val-ley. Whole Foods broke ground in downtown Boise, Rosauers is under construction on Eagle Road and Fred Meyer is near completion in Meridian. There are other grocers who will announce new stores in 2012. Shop space in the “A” locations is becoming scarce. Vacancies along Eagle Road, downtown and at the mall area are in the mid single digits.

Overview

Colliers International currently tracks 17.9 million SF of retail inventory in the Treasure Valley, in buildings and retail centers 5,000 square feet and above (excluding the Boise Towne Square Mall). Vacancy has remained stable throughout 2011, going down 0.2% from the third to fourth quarter, ending at 12.3% across the Treasure Valley. The sharpest decline in vacancy occurred in the Northwest submarket where Goodwill recently leased 33,672 square feet of retail space at the Northgate Shopping Center. This large lease reduced the vacancy rate by 5% in the North-west submarket. The Southwest market has been anoth-er bright spot with a vacancy rate of 7.2%. With optimal locations in such high demand there have been a few negative spots.

Inventory and Vacancy

YEAR-END 2011

RETAIL MARKET REVIEW INDUSTRIAL STATISTICS

Other areas of optimism include quick serve restau-rants (QSR’s), with the announcement that Chick-Fil-A will be expanding on its recent market entry at BSU. Several other QSR’s are looking to either enter or expand in the market. Recent notable leases signed include Nordstrom Rack, Gordmans, and Big Al’s. Discounters continue to be prominent in the market and are the most active tenants as they look to expand their presence in the Treasure Valley. New regional and national tenants are looking towards the Boise Towne Square Mall and Ea-gle Road for sites. Chipotle Mexican Grill, for example, recently opened its fi rst Treasure Valley store across the street from the mall on Milwaukee, while Big Al’s landed on Eagle Road.

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OFFICE STATISTICS

Vacancy rates remain relatively stable beyond the Boise Research Center with the Meridian submarket recording the largest vacancy decrease, approximately 4% to 21.4% currently.

Asking rates have increased for the past two quarters, furthering optimism about the market throughout the Treasure Valley. At Mid-Year 2011, the overall average full service asking rate was $15.61. In Q3 the average went up

Full Service Asking Rates & Comp Rents

The Treasure Valley offi ce market will continue to improve during 2012, with a slight reduction in off ered leasing incentives over the course of the next 12 months. Rental rates are expected to increase modestly during 2012, and the trend of owner-user purchases will likely continue. Downtown Boise will continue to remain strong, with most other submarkets experiencing an improvement over the coming year.

Outlook

ten cents to $15.71; it currently sits at $15.79. The aver-age asking rate for Class A offi ce space in Q4 was $17.54.

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The Treasure Valley offi ce market started and ended 2011 with positive momentum due to sustained interest from local, regional, and national users. After a small increase in Q3, vacancy declined .7% in the fi nal six months of 2011 and ended the year at 17.2%, down 2.2% from a year ago. A number of local business parks saw vacancy reductions over the previous three months. The Boise Research Cen-ter experienced a decline in vacancy from 35% to 13.7% during the fourth quarter of 2011. This decline in vacancy was underscored by the sale of the Advantage Building (32,862 SF) in late December. Sales activity of vacant offi ce buildings to owner-users picked up dramatically in 2011, and bank owned offi ce building inventory has sub-stantially declined over the past 12 months. Anticipation remains extremely high for 8th & Main, an 18 story, Class-A building in the heart of downtown Boise. The interest level has been so great that 3 stories have been added to the original plan, and over 100,000 square feet have already been committed to by offi ce tenants for occupancy begin-ning in early 2014. Construction on 8th & Main will start on schedule in mid-2012.

Overview

Colliers International tracks 17.6 million square feet of space in 863 offi ce buildings 5,000 square feet or larg-er in ten diff erent submarkets throughout Ada and Can-yon Counties. The resurgence of the Boise Research Center located in the West Bench Submarket, has helped to provide optimism to the offi ce market. The four build-ings listed below represent some of the more notable transactions within the Boise Research Center in the last quarter of 2011:

Inventory & Vacancy

Syringa Networks purchased the Genesis Building (47,940 square feet)

Sybase subleased at LaSalle Place (16,830 square feet)

CRI Advantage Inc. leased at Solitude Building (5,730 square feet)

M&C Stanley, LLC purchased the Advantage Build-ing (32,862 square feet)

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BOISE SUBMARKETS COLLIERS IDAHO