Tijuana Industrial Real Estate Update

Tijuana Industrial Real Estate 2011 Highlights:
• Slow absorption this quarter – Only 112,000 SF Net.
• Asking rents are still dropping (Class A as low as $0.29/SF !).
• Tenants are moving out of older higher priced buildings into newer buildings.
• Logistics suppliers are losing business as companies use excess capacity to store onsite.
• Tenants are turning into buyers at the low prices with low cost US financing.

Tijuana Market 2011 Overview
• Tijuana has about 53 million SF of Industrial Real Estate
• Currently available: 168 buildings down from 219 Buildings 12 months ago.
• Vacancy Rate is at 16% down from 6 months ago 17.6% down from 19% 12 months ago.
• Absorption is positive– so we are heading in the right direction – Just not very fast. We only absorbed 112,000 SF 3rd quarter. (858) 551.8000

Buildings > 100,000 SF
• 21 Buildings are available down from 25 buildings 6 months, down from 26 buildings 12 months ago and down from 28 buildings a 24 months ago.
• Average asking rent is $0.33 down from 6 months ago’s $0.38/SF NNN ($0.43/SF in 2007) Most buildings are offering free rent and other favorable terms.
• Actual rents are much lower. $0.29/SF NNN average.

Construction
• Still Very little new construction as good buildings are available for sale for much less than replacement cost.
• Example: Andrea is building a new 100,000 SF building in Otay – Has retail component making the $135/SM land price acceptable. Construction plus land cost more than $50/SF = $5 million. JVC sold for $22/SF. Asking Price for Pioneer was $6 Million = $20/SF.
• Ryerson (Metals) also built a new 80,000 SF building in El Florid