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5.0. EDSR 08-09-2004 ITEM # 5. • City of Elk River MEMORANDUM TO: Economic Development Authority FROM: Heidi Steinmetz, Assistant Director of Economic Development 5 DATE: August 9, 2004 SUBJECT: Strategic Industrial Marketing Activities Update Attachments • Cymbet Financing,Star Tribune.com,July 13, 2004 • Site Work Begins on New Cambridge Industrial Park,MN Real Estate Journal,August 2004 • National Association of Industrial&Office Properties (NAIOP) 2004 Annual Industrial Market Update • Energy City Brochure,July 2004 • Health Care Costs Main MN Business Concern, The Business Journal,July 30,2004 • MN Technology Newsletter, Tech Trends,July 2004 I. Product Offering Strategy Industrial Land Issue Staff and Ehlers &Associates have received responses from the landowners of Elk River Business Park and Elk Path Business Center regarding terms of a master development agreement. They have indicated interest in participating in a master development agreement with the EDA for the development of their industrial/business park property. Staff has sent the revised Contract for Initial Sale and Development to the landowners' for their consideration and is following up with their questions. Business Incubator K-Netica Incubator tenant,Joe Roushar of K-Netica is requesting a 6-month lease extension. There is a separate memo regarding this issue. LapTwo Technology Corporation Incubator tenant,Rob Henningsgard of LapTwo Technology Corporation will be in attendance at the September EDA meeting to provide a company update in addition to a 110 potential 6-month lease extension request. LapTwo's sublease expires on September 22, 2004. Strategic Industrial Marketing Activities Update August 9,2004 Page 2 of 3 • Cymbet The attached article indicates that Cymbet recently received$10 million in venture capital. Semi Annual Incubator Report Incubator consultant Harlan Jacobs will also be in attendance at the September meeting to provide his semi-annual Incubator report. I I. Competitive Strategy The attached article provides details on Cambridge's new industrial park. Cambridge is not considered a key competitor in the EDA's Strategic Industrial Marketing Plan,however the plan was completed before the State of MN developed its Job Opportunity Building Zone (JOBZ) Program. JOBZ zones provide tax exemptions for businesses that create jobs in economically depressed areas of the state. Cambridge and Sartell are the closest JOBZ zones to Elk River. Ill. Key Account/Lead Generation Strategy In June, staff attended the National Association of Industrial& Office Properties (NAIOP) 2004 Annual Industrial Market Update event. The attached report includes market occupancy and rental information in the northwest metro, defined as far as Rogers. Staff will present the semi-annual inquiry/prospect report at the September meeting. I V. Promotions &Advertising Strategy • The advertising schedule is proceeding as planned. Nine of the sixteen scheduled ads have appeared so far this year in various publications catering to commercial real estate brokers and manufacturers. V. Public Relations Strategy Staff is working with Wolf Marketing&Media and Tammy Miller Design to prepare a direct mail piece for distribution to a targeted list of manufacturers located within the tri-county area. The piece will promote the Micro Loan Program and the Technical Assistance & Operations Consulting Program. The piece is expected to be mailed in September. Staff continues to maintain the marketing packets as changes occur in the business sites inventory,list of manufacturers, and business financing options. Staff submitted articles on Gradient Technology and Orluck Industries to the Economic Development Association of MN (EDAM) for insertion into the organization's upcoming newsletter. VI. Strategic Partnership Strategy Downtown Revitalization Project At its June 30t Special Meeting,the HRA adopted a resolution requesting that the City Council schedule a public hearing on the proposed TIF Plan for the project. Upon the HRA's request the City Council called for a public hearing on September 20, 2004 to consider adoption of the TIF Plan. Upon the adoption of the TIF Plan,it is anticipated that • the HRA will consider a final Development Agreement with MetroPlains in October. Strategic Industrial Marketing Activities Update August 9,2004 Page 3 of 3 Energy City • Attached is the July 2004 Energy City brochure. Staff worked with Tammy Miller Design and Action Committee for Energy (ACE) board member Susie Overholser of ECONAR to update the brochure. ACE has directed staff to obtain new design services for the continuation of the Energy City Web site redesign/regular maintenance. VII. Business Retention Strategy Business Retention&Expansion (BRE) Visits Staff and President Gongoll will meet with Bryan Jones of Supermats on Wednesday,August 11th for lunch. Let staff know if you would like to attend. Staff will contact EDA commissioners individually to schedule future BRE visits. Articles The attached Business Journal article provides details on the Dept. of Employment & Economic Development's (DEED) survey of 5,000 CEOs on how money should be spent on government services to businesses. The attached Tech Trends newsletter includes information on investing in a new technology, technology business news from around the state, and information on the 5S system for workplace organization and standardization. • • Printer version: Neal St. Anthony: Wave-power company ready to raise capital Page 1 of 2 startribune.com Close window • Last update: July 12,2004 at 7:54 PM Neal St. Anthony: Wave-power company ready to raise capital Neal St. Anthony Star Tribune Published July 13,2004 Mark Thomas, president of a fledgling Eden Prairie company that has an agreement to build a electrical generation plant powered by ocean waves off the coast of Humboldt County, Calif., expects to select an underwriter or venture capital company within a few weeks to raise about $4 million to finance the pilot project. Manchester Companies and Feltl & Co. are among the local firms interested, in addition to venture capital firms here and on the East Coast. As described in these pages last month, Independent Natural Resources and its engineers have developed the Seadog pump, which uses wave energy and buoyancy to pump sea water uphill to an elevated on-shore reservoir. The water is released to spin electricity-generating turbines before it returns to the ocean. Thomas acknowledged in an interview that he's had run-ins with state securities regulators in the past and said that his background will be fully disclosed in an upcoming prospectus on the deal. • "In that memo, there will be full disclosure about me, and we will be open with people," Thomas said. "I've got nothing to hide." In 1990 and as recently as 2002, Thomas consented to cease-and-desist orders issued by the Minnesota Department of Commerce over the sales of securities in Mark Allen Thomas Limited Partnership, a real estate-related entity, and Intercontinental Travel Services, a now-dormant travel company. Department investigators, alerted by disgruntled investors, alleged that in both cases Thomas sold securities that were not properly registered with the state. Thomas and his lawyers resolved both matters without enforcement hearings by agreeing to halt sales of the affected securities until they were properly registered. Although Thomas acknowledged having disgruntled investors in those businesses, he said he was not sued by other shareholders in either enterprise. If the Seadog pilot project, set to begin installation this summer, works, the next step would be building a$15 million, 200-pump system, with peak output of seven megawatts, or enough to power 7,000 homes. That could be followed by a mile-square pump system that would generate as much juice as a 750 megawatt, coal-fired plant. Cymbet financing Cymbet Corp., which raised$4.5 million in 2001, is closing out a round of about $10 million from • venture capitalists and high-end individual investors who believe in the Elk River company's ability to commercialize next-generation battery technology. http://www.startribune.com/viewers/story.php?template=print_a&story=4872781 7/14/2004 Printer version: Neal St. Anthony: Wave-power company ready to raise capital Page 2 of 2 An announcement is expected next week. • The three-year-old company, started by ex-Honeywell engineers,has developed thin-film cells that can be incorporated into any computer chip or manufacturing design, are manufactured to last the full life cycle of any product and can recharge up to 70,000 times using a inductive current, radio frequency or solar energy. According to a recent trade press article, Cymbet has successfully developed technology licensed from the Oak Ridge National Laboratory in Tennessee,patented a number of applications and is on the cusp of what could lead to early stage deals with medical-device companies, wireless communications firms, hearing aid manufacturers and others who desiresmaller,more powerful, long-lasting power sources. Open for business Veteran stockbroker and investment manager Phil Grodnick, after years with Smith Barney and Prudential Securities,has set up his own shop in the wake of Prudential's acquisition by Wachovia Securities. Grodnick, 67, and his son,Harrison, 28,have opened an office in the IDS Center and are doing business as Minneapolis Portfolio Management. They were managing just less than$200 million in client assets at Prudential/Wachovia. 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C)O a) c F.".° U a) a)O = Q o c � s .'. fl �. vi._-c U E-+ o Q a3 N w -o.'. ct ... u c ., . -• ' r0NA I r NATIONAL ASSOCIATION OF INDUSTRIAL AND OFFICE PROPERTIES MINNESOTA CHAPTER 2004 ANNUAL INDUSTRIAL mA RKET UPDATE (' ) ,, .,.. . , ... . . ( ) _ . .. ..... , .,.. 04, • . 1, NAIOP MINNESOTA CHAPTER NATIONAL ASSOCIATION OF INDUSTRIAL AND OFFICE PROPERTIES To: Attendees of the Minnesota Chapter of NAIOP 2004 Industrial Market Update Program From: Kent Carlson NAIOP 2004 Minnesota Chapter President Date: June 15,2004 On behalf of the NAIOP Program Committee and the Industrial Market Update panel,I'm proud to welcome you to the 2004 Industrial Market Update Report,a comprehensive overview of the Twin Cities industrial market. We are fortunate to have the best and the brightest in today's Twin Cities industrial marketplace presenting this information. They have contributed many hours of collecting and reviewing data as well as editing and rehearsing their presentation to provide you with the very best information available.Please join me in thanking: • Tony Del Dotto,United Properties � Airport South Eric Batiza,Welsh Companies St.Paul East Nathan Arnold,CB Richard Ellis - Southwest Jay Chmieleski,Welsh Companies - Minneapolis North Joe Gearen,Equity Commercial Services - Northwest Danny Queenan,Ryan Companies - Moderator Please consider contacting these individuals if you have opportunities or questions related to the Twin Cities industrial market. Their contact information can be found on the following page of this report. This program could not have happened without the hard work of several other contributors. Special thanks to Tom Shaver of Liberty Property Trust,Craig Patterson of Opus Corporation,Chris Willson of First Industrial Realty Trust and Cory Miller of Griffin Companies for their involvement in this update.Also,thanks to Maura Carland of United Properties for preparing the graphics for today's presentation. I would also like to thank MNCAR,especially Jim Mayland,for providing the data as they have so successfully done in years past. On behalf of NAIOP,I extend our thanks and appreciation to all contributors for their time and commitment. Sincerely, Kent M. Carlson NAIOP Minnesota Chapter President • 4248 Park Glen Road, Minneapolis, MN 55416•Ph:(952)928-4647•Fax:(952)929-1318•www.NAIOPMN.org • 2004 Industrial Market Update PRESENTATION OF UPDATED MARKET OCCUPANCY AND RENTAL INFORMATION FEATURING UPDATES ON: Airport South Tony Del Dotto • United Properties � . ,:*," (952) 893-8893 • tdeldotto@uproperties.com • 0 St. Paul East ill," Eric Batiza • Welsh Companies (612) 373-2286 •• ebatiza@WelshCo.com ` TONY DEL DOTTO JAY CHMIELESKI Southwest Nathan Arnold • CB Richard Ellis (952) 924-4855 • nathan.arnold@cbre.com ,:,:47, 7' • Minneapolis North Jay Chmieleski • Welsh Companies ERIC BATIZA (952) 897-7801 • jchmieleski@welshco.com JOE GEAREN Northwest Joe Gearen • Equity Commercial Services ea (952) 897-7801 • jgearen@equitycommercial.com Moderator : NATHAN ARNOLD Danny Q`ueenan • Ryan Companies DANNY QUEENAN (612) 492-4366 • daniel.queenan@ryancompanies.com 1 �n National Association of IndustrialData Compliments of: N41 A I O P and Office Properties NI N C A u 4248 Park Glen Road ER MINNESOTA CHAPTER Minneapolis, MN 55416 NATIONAL ASSOCIATION (9552) 928-4647 istA OF INDUSTRIAL AND \ / fax Comm ri • (952) 929-1318 ax ss,ficiAiioN OFFICE PROPERTIES www.naiopmn.org REALTORS' TABLE OF CONTENTS • Table of Contents 1 Ground Rules & Definitions 2 Total Market 5 2004 Market Overview 11 2000 — 2004 Historical Overview 12 . Airport South 13 St. Paul East 19 Southwest 25 Minneapolis North 31 Northwest 37 Minneapolis-St. Paul Demographics 43 Click Here for Print Version • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 1 GROUND RULES & DEFINITIONS GROUND RULES • Multi-tenant office warehouse, office showroom, and bulk warehouse buildings in excess of 25,000 square feet. Single tenant leased properties that were developed on a build-to-suit basis,and that would not function well as multi-tenant properties, are not included in this report. Owner occupied properties are also not included in this report. • Rental rates are based on quoted net rates exclusive of transaction costs. Actual effective rates will vary. • Expenses are quoted as an estimate for the 2004 calendar year. DEFINITIONS • Existing Projects—Building shell construction completed prior to May 1,2003. • • New Projects—Building shell construction completed between May 1,2003 and May 1,2004. • Current Universe—combined Existing Projects and New Projects as of May 1,2004. • Under Construction—Projects under construction as of May 1,2004. • Planned Projects—Projects with a greater than 50%probability of construction commencement prior to December 31,2004. PROFILE OF PROJECT TYPES Typical Clear Ceiling Office or Project Type Tenant Size Height Bay Depth Showroom Office Warehouse 7,000 S.. Ft. + 16—24 Ft. 120— 160 Ft. 10%-40% Office Showroom 3,000 S..Ft. + 12— 16 Ft. 80— 120 Ft. 25%-75% Bulk Warehouse 20,000 S .Ft. + 20+Ft. 160—200 Ft. 0%- 10% • 2 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE i- g 7 • ccO. • Z • , . ,. rp '" "fi''`r ._�, I r' ":,/:,'•,ter . • ,.s .%I E:) Z,r st,4': ..b}'. ... ., «...... W .. � iJ'.: ' ., :"ice. "„'"^^...,��„ a�,-I gg ^yy ..S..:A t•-,,i-oli . , ,',,,,7:„-,liNiillritt-,,,..:D. .4,,.i. TN 'i ' V 047;. . • '' ',-.. 7 ‘:•.,4:,,.. ; , -,+*.; ,z, : G fir K •4' .t' '' .,i, ..k.; Wit - '1' ,„i( r'7. � *--,,'.'....„7.:-- ",' Nz,!•.,'.N f .2 : - ....- 7wiiii:-. . - -*et..imaii- . * '1 ., ;',.:4*.;.,..':. : ..",,,,,F. '"''',' . : • .-:,'" ,„,s:,...,*!,:.;;;,..?‘•! ci., K :x fir,•5: w .i"> _ ''—''' '--..t''s---';',:-;:.l'771 '•7 CI --1. '-' '''':.,V:, ;::.t.''•'* -.' "...* •- *'' 4' , '1/4: .):,-..:, '• •,--. -„rl.ii 1-- Y�.., r � � v`r. .? n li #01. . 4 11111111t Iti 14 / ,i)„..,,..:. 4.---:;1:;,...,,r NT- „ 1. t, c '. moi) t} a mumorir* • 00, 3 r. ,.., OK Com~ »' < {ri "`..i / k;.,µ i ..w rw,s • {-., '€,,' 1r .`. i ce i :m t},-., 0 TOTAL MARKET • SIGNIFICANT EVENTS AND TRENDS • The overall vacancy rate decreased from 11.8% to 11.6% marking a second consecutive year of downward movement following 13.5% vacancy in 2002. • Net absorption decreased to 878,198 square feet from last year's report, however this statistic should be considered in conjunction with the following: o Office warehouse net absorption was over 700,000 square feet o Office showroom net absorption soared above 800,000 square feet o These positive absorption categories were not aided given a negative net 4110 absorption of 650,000 square feet reported in bulk warehouse • The "for sale" market continued to be active • 6 buildings are underway totaling approximately 400,000 square feet. 25 buildings are planned totaling approximately 2,700,000 square feet. • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 5 TOTAL MARKET i NET ABSORPTION TRENDS 4,999,472 5,000,000 iii 4,137,046 4,000,000 r,': c,184,164 3,040,491 w3,000,000 ' ,580,519 L g 2,000,000 1,539,835 878 19: 1,000,000 394,498 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20%- 15°A i 0%15%' 13.5% • C +a 11.8% v 10%J 8.1 o ,,,,, 11.6% +4 10.8/o aJ a) 5.4% 8.6% 9 3° p" 5°ro5.7/0._.._6.3% 0% / l l l l l l l / l l l 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NEW PROJECTS 5,000,000 4,000,000 r0 in N N cu 3,000,000 IIM r Noeto••d r` b ~^ 07Iit ,Nry O 01Vw[� p1NR� 2,000,000 `�O^' � r T. � _ o0 C. ,4 r-,_7' ., N O pO - rA O O sl., ,.ti 00 rl r M r` et cm^�0) N N N N '~ O M~=O 1A O `00 ; = O O 00 C _ ii) i0 Nr ..7 " ' '1 '4 N %N O NN % 1,000,000 00"v, -- _ 1II o:a '"` 71O�- _ v _ _ B—©, 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ■Bulk Warehouse 11Office Warehouse 0 Office Showroom 6 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE TOTAL MARKET - COMBINED III CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 110,499,147 97,867,703 12,631,444 11.4% 714,198 New Projects 423,250 164,000 259,250 61.3% 164,000 Current Universe 110,922,397 98,031,703 12,890,694 11.6% 878,198 FUTURE PROJECTS HISTORICAL Total Number Of NET ABSORPTION (Sq.Ft.) Projects Under Construction 341,000 5 8,000,000 Planned Projects 2,870,146 26 Future Projects 3,211,146 31 `.° 6,000,000 .c NET ABSORPTION(Years Ended April 30) dIs w o Annual Net Percent of ,ti 4,000,000 — Absorption Occupied - _ Year (Sq.Ft.) Square Feet 2000 4,137,046 5.8 2,000,000 1 2001 1,539,835 2.1 III 2002 394,498 0.4 2003 3,040,491 3.0 0 JUL —At 2004 878,198 0.9 2000 2001 2002 2003 2004 Five Year Average 1,998,014 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 926 0 1—9,999 168 908,109 10,000—24,999 135 2,146,256 25,000—49,999 73 2,519,441 50,000—99,999 38 2,711,325 100,000+ 15 2,555,484 Total* 1355 10,840,615 *One block of space per project,may not reflect total vacancy.Not all projects reporting I argest Contiguous Space figures. • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 7 TOTAL MARKET - OFFICE WAREHOUSE 0 CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 57,523,942 50,763,907 6,760,035 11.8% 706,840 New Projects 100,000 0 100,000 100.0% 0 Current Universe 57,623,942 50,763,907 6,860,035 11.9% 706,840 FUTURE PROJECTS Total Number Of HISTORICAL (Sq.Ft.) Projects NET ABSORPTION Under Construction 0 0 4,000,000 Planned Projects 900,000 9 Future Projects 900,000 9 3,000,000 ,r O, O, NET ABSORPTION(Years Ended April 30) a. GO o o N 4) N L... Vo -- Annual Net Percent of L 2,000,000 m N O Absorption Occupied . N m � � o0 • Year (Sq.Ft) Square Feet O 2000 1,607,699 4.5 1,000,000 _ 2001 1,120,736 3.0 • 2002 605,572 1.1 2003 1,678,694 2.9 0 AL 1 J 1 ;1 2004 706,840 1.4 2000 2001 2002 2003 2004 Five Year Average 1,143,908 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 546 0 1—9,999 92 476,219 10,000—24,999 72 1,140,809 25,000—49,999 44 1,508,305 50,000—99,999 20 1,364,128 100,000+ 7 964,174 Total* 781 5,453,635 RENT SUMMARY Average Low - High Office Rent $8.63 $5.00 - $14.00 Warehouse Rent $4.22 $2.00 - $6.00 Blended Net Rent(Assuming 20%Office) $5.10 Taxes&Op.Exp. $2.70 $1.13 - $7.90 • *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. 8 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE TOTAL MARKET - OFFICE SHOWROOM III CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 21,122,221 19,202,610 1,919,611 9.1% 659,988 New Projects 323,250 164,000 159,250 49.3% 164,000 Current Universe 19,366,610 2,078,861 9.7% 823,988 FUTURE PROJECTS HISTORICAL Total Number Of NET ABSORPTION (Sq.Ft.) Projects - Under Construction 341,000 5 1,600,000 0 Planned Projects 902,942 11 N Future Projects 1,243,942 16 G 1,200,000 Go a enNET ABSORPTION(Years Ended April 30) t,, 800,000mi ry Annual Net Percent of E. Absorption Occupied Year (Sq.Ft.) Square Feet 400,000 g, 2000 1214,002 7.3 2001 46,609 0.3 0 2002 388,197 2.10 i 1 J J J yJ 2003 115,298 0.7 2000 2001 2002 2003 2004 2004 823,988 4.3 Five Year Average 517,619 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 195 0 1—9,999 67 387,222 10,000—24,999 44 694,760 25,000—49,999 9 328,076 50,000—99,999 4 313,067 100,000+ 1 104,262 Total* 320 1,827,387 RENT SUMMARY Average Low - High Office Rent $9.15 $6.50 - $14.00 Warehouse Rent $4.50 $3.50 - $6.75 Blended Net Rent(Assuming 50%Office) $6.83 Taxes&Op.Exp. $3.61 $1.25 - $9.14 • •One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 9 TOTAL MARKET - BULK WAREHOUSE 111 CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 31,852,984 27,901,186 3,951,798 12.4% (652,630) New Projects 0 0 0 0.0% 0 Current Universe 31,852,984 27,901,186 3,951,798 12.4% (652,630) FUTURE PROJECTS HISTORICAL Total Number Of NET ABSORPTION (Sq.Ft.) Projects Under Construction 0 0 3,000,000 Planned Projects 1,067,204 6 er Future Projects 1,067,204 6 °� 2,000,000 NET ABSORPTION(Years Ended April 30) .. 4111. w i, er 1 — Annual Net Percent of d 1,000,000 N N Absorption Occupied j M ill i o Year (Sq.Ft) Square Feet ' 2000 1,315,345 6.9 0 A _Jrt; 1 2001 372,490 1.9 1 II2002 (599,271) (2.3) 2003 1,246,499 4.8 -1,000,000 2003 (652,630) 2.32000 2001 2002 2003 2004 Five Year Average 336,487 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 185 0 1—9,999 9 44,668 10,000—24,999 19 310,687 25,000—49,999 20 683,060 50,000—99,999 14 1,034,130 100,000+ 8 1,619,617 Total* 255 3,692,162 RENT SUMMARY Average Low - High Office Rent $8.30 $6.50 - $10.25 Warehouse Rent $3.92 $2.25 - $5.75 Blended Net Rent(Assuming 6% Office) $4.18 Taxes&Op.Exp. $2.15 $0.78 - $6.71 • *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures 10 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 2004 MARKET OVERVIEW CURRENT PERCENT TOTAL ANNUAL NET MARKET AREA UNIVERSE OF TOTAL VACANT PERCENT ABSORPTION YEAR (Sq.Ft.) MARKET (Sq.Ft.) VACANT (Sq.Ft.) Northwest 2004 28,130,865 25.4% 3,036,507 10.8% 1,090,527 2003 29,341,241 25.8% 4,274,892 14.6% 266,271 Minneapolis,North 2004 21,347,960 19.2% 1,798,340 8.4% 313,637 2003 20,707,961 18.2% 1,769,623 8.5% 1,009,438 St.Paul,East 2004 19,779,163 17.8% 1,995,313 10.1% 136,781 2003 21,162,694 18.6% 1,679,668 7.9% 1,207,957 Airport,South 2004 17,318,060 15.7% 2,797,055 16.2% (621,003) 2003 20,100,185 17.7% 2,810,390 14.0% 232,044 Southwest 2004 24,346,349 21.9% 3,263,479 13.4% (41,774) 2003 22,433,610 19.7% 2,832,786 12.6% 324,781 TOTAL MARKET 2004 110,922,397 100.0% 12,890,694 11.6% 878,198 2003 113,745,691 100.0% 13,367,359 11.8% 3,040,491 • 2004 JNTET ABSORPTION BY MARKET AREA 1500000 1,090,527 1000000 " w 500000 313,637 136,781 (41,744) -500000 (621,003) / -1000000 .nest 1 o'Ckb ifkt S000 46' k6( 0' S�4�� oto, S°�). 1*e�4 • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 11 2000 - 2004 HISTORICAL OVERVIEW** 5 Year Market Area 2000 2001 2002 2003 2004 Average Northwest Current Universe: 19,668,811 20,479,078 29,814,384 29,341,241 28,130,865 Total Vacant: 1,830,407 2,418,071 4,432,886 4,274,892 3,036,507 Percent Vacant: 9.3% 11.8% 14.5% 14.6% 10.8% Net Absorption: 1,486,356 1,184 230,415 266,271 1,090,527 614,951 Minneapolis,North Current Universe: 15,375,651 15,655,384 22,364,581 20,707,961 21,347,960 Total Vacant: 1,782,573 1,203,210 2,748,167 1,769,623 1,798,340 Percent Vacant: 11.6% 7.7% 12.0% 8.5% 8.4% Net Absorption: 165,166 939,256 270,608 1,009,438 313,637 539,621 St.Paul,East Current Universe: 13,880,786 14,768,786 20,306,597 21,162,694 19,455,913 Total Vacant: 710,469 1,131,816 2,655,184 1,679,668 1,995,313 Percent Vacant: 5.1% 7.7% 13.0% 7.9% 10.1% Net Absorption: 799,499 465,126 (412,246) 1,207,957 136,781 439,423 Airport,South Current Universe: 11,911,405 12,125,074 21,042,793 20,100,185 17,318,060 Total Vacant: 1,534,844 1,824,459 2,700,538 2,810,390 2,797,055 Percent Vacant: 12.9% 15.0% 12.8% 14.0% 16.2% Net Absorption: 754,077 (181,658) 665,408 232,044 (621,003) 169,774 Southwest Current Universe: 17,585,838 18,949,420 22,882,210 22,433,610 24,346,349 Total Vacant: 1,420,225 2,251,067 3,332,574 2,832,786 3,263,479 Percent Vacant: 8.1% 11.9% 14.4% 12.6% 13.4% Net Absorption: 931,948 315,927 (359,687) 324,781 (41,744) 234,245 TOTAL MARKET Current Universe: 78,034,568 81,977,742 117,956,040 113,745,691 110,922,397 Total Vacant: 7,278,518 8,828,623 15,869,349 13,367,359 12,890,694 Percent Vacant: 9.3% 10.8% 13.5% 11.8% 11.6% Net Absorption: 4,137,046 1,539,835 394,498 3,040,491 878,198 1,998,014 **During 2002,the Minnesota Chapter of the NAIOP formed an alliance with the Minnesota Commercial Association of Realtors (MNCAR)for the purpose of gathering current market data. MNCAR operates a data exchange network that is widely used in the Twin Cities marketplace. The greater participation in the MNCAR data exchange network has resulted in additional properties being added to NAIOP's overall database,or"Current Universe",for 2002. NAIOP has invested considerable care in analyzing the data underlying the report to insure that the results are indicative of the conditions of the marketplace. When comparing 2002 figures to prior years the majority of the increase in square feet for a particular market is the result of capturing more of the existing buildings in the database used for analysis. • 12 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE AIRPORT, SOUTH S SIGNIFICANT EVENTS AND TRENDS • Office/Showroom vacancy rate drops to 10%, spec projects under construction • Renewal expansions and small users drive the Office/Showroom recovery • Office/Warehouse and Bulk vacancy rates have peaked, recovery is underway • New Industrial Condos are seeing strong activity • Concessions are attracting tenants from other sub-markets, activity is picking up s S 13 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE AIRPORT, SOUTH • NET ABSORPTION TRENDS 1,500,000 1,022,207 1,000,000788,632754,077 720,888 665,408 .61,462 Ga) 500,000 264,176 232,044 a) mil et V) -181,658 -500,000 -621,003 -1,000,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20%1 16.2% 15.0% S0 15%1 13.1% 12.9% u14 0% CQ 1 _I% 10% 8.0% 7 8% C. Uu, 8.2% Pr 5%1 0% / ( ( ( ( ( - ( ( ( ( ( 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NEW PROJECTS 1,200,000 1,000,000 MN 00 n 800,000 a) Mili 600,000 O tn N 00 'e al ©O00 rn 400,000 " O M N G\ 00 V, N M O 200,000 N UI " � Ilir LQ© 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 •Bulk Warehouse Office Warehouse ❑Office Showroom 14 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE AIRPORT, SOUTH - COMBINED i CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 17,218,060 14,521,005 2,697,055 15.7% (621,003) New Projects 100,000 0 100,000 100.0% 0 Current Universe 17,318,060 14,521,005 2,797,055 16.2% (621,003) FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction 144,000 2 Planned Projects 456,500 5 Future Projects 600,500 7 NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 754.077 7.3 2001 (181,658) (1.8) 1110 2002 665,408 3.6 2003 232,044 1.3 2004 (621,003) (4.3) Five Year Average 169,774 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 147 0 1—9,999 34 201,634 10,000—24,999 17 260,408 25,000—49,999 15 513,851 50,000—99,999 6 407,892 100,000+ 2 417,265 Total* 221 1,801,050 *One block of space per project may not reflect total vacancy.Not all projects reporting Ia,gest Contiguous Space figures. • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 15 AIRPORT, SOUTH - OFFICE WAREHOUSE i CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 7,637,709 6,408,821 1,228,888 16.1% (246,342) New Projects 100,000 0 100,000 100.0% 0 Current Universe 7,737,709 6,408,821 1,328,888 17.2% (246,342) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 70,000 1 Future Projects 70,000 1 Planned Projects • Southcross Commerce Center III, NET ABSORPTION(Years Ended April 30) Burnsville- 70,000 Sq. Ft. Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 606214 11.4 2001 (11,653) (0.2) • 2002 359,974 3.5 2003 31,392 0.3 2004 (246,342) 3.8 Five Year Average 147,917 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 71 0 1—9,999 10 50,088 10,000—24,999 10 156,566 25,000—49,999 7 244,660 50,000—99,999 2 131,751 100,000+ 0 0 Total* 100 583,065 RENT SUMMARY Average Low - High Office Rent $8.73 $7.00 - $13.00 Warehouse Rent $4.31 $2.95 - $5.50 Blended Net Rent(Assuming 20%Office) $5.19 Taxes&Op.Exp. $2.91 $1.75 - $7.90 . *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. 16 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE AIRPORT, SOUTH - OFFICE SHOWROOM S CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 3,848,928 3,464,678 384,250 10.0% 164,701 New Projects 0 0 0 0.0% 0 Current Universe 3,848,928 3,464,678 384,250 10.0% 164,701 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 144,000 2 • Spectrum Commerce Center, Planned Projects 90,000 2 Eagan— 100,000 Sq. Ft. Future Projects 234,000 4 • Waters V, Eagan-44,000 Sq. Ft. NET ABSORPTION(Years Ended April 30) Planned Projects • Burr Oak Tech Center, Annual Net Percent of Eagan—40,000 Sq. Ft. Absorption Occupied • Northwood Business Park II, Year (Sq.Ft) Square Feet Eagan -- 50,000 Sq.Ft. 2000 212,357 6.6 2001 34,605 1.1 • 2002 291,736 8.4 2003 45,728 1.5 2004 164,701 4.8 Five Year Average 149,825 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 38 0 1—9,999 21 133,729 10,000—24,999 6 93,272 25,000—49,999 2 74,839 50,000—99,999 0 0 100,000+ 0 0 Total* 67 301,840 RENT SUMMARY Average Low - High Office Rent $8.77 $7.50 - $12.00 Warehouse Rent $4.32 $3.50 - $6.00 Blended Net Rent(Assuming 50%Office) $6.55 Taxes&Op.Exp. $3.38 $1.80 - $5.09 . *One block of space per project,may not reflect total vacancy.Not all projects repotting Largest Contiguous Space figures. NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 17 AIRPORT, SOUTH - BULK WAREHOUSE S CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 5,731,423 4,647,506 1,083,917 18.9% (539,362) New Projects 0 0 0 0.0% 0 Current Universe 5,731,423 4,647,506 1,083,917 18.9% (539,362) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 296,500 2 Future Projects 296,500 2 Planned Projects • Cedar Bluffs Business Center, NET ABSORPTION(Years Ended April 30) Burnsville— 168,500 Sq. Ft. • JBT Building, Burnsville— Annual Net Percent of 128,000 Sq. Ft. Absorption Occupied Year (Sq.Ft) Square Feet 2000 (64,494) (3.5) • 2001 (204,610) 13,698 (14.2) 2002 0.2 2003 154,924 3.6 2004 (539,362) 11.5 Five Year Average (127,969) LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 38 0 1—9,999 3 17,817 10,000—24,999 1 10,570 25,000—49,999 6 194,652 50,000—99,999 4 276,141 100,000+ 2 417,265 Total* 54 916,445 RENT SUMMARY Average Low - High Office Rent $8.45 $7.50 - $9.50 Warehouse Rent $4.06 $3.00 - $4.50 Blended Net Rent(Assuming 6%Office) $4.32 Taxes&Op.Exp. $1.88 $1.01 - $2.45 . *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures 18 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE ST. PAUL, EAST S SIGNIFICANT EVENTS AND TRENDS • Vacancy rates have increased slightly during the last year. • St. Paul, East is still a tenant's market. • Owners are finding creative ways to reposition and fill vacated space. • Public/private partnerships are helping to redevelop Midway sites. • New and planned development is occurring in eastern portions of the market. • Smaller user sales are still going strong. S NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 19 ST. PAUL, EAST • NET ABSORPTION TRENDS 2,000,000 1,500,000 , i 1,207,957 1,000,000 799,499 614 I 6,826 0. Wm 465,126 os o040 » 500,000 250,230 000 i 36,781 74,383 412,246 0 II ysAIIIAN' I all -500,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20%-1 • 5 15%J 13.0% u 10.1% : S10% . . � c d 64•' % o a 5%J 5.1% 4.2% 0% / / f / / / / / / / / 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NEW PROJECTS 1,000,000 800,000-' N N O rl ccy, O0, OD O O Vi O N GIn � 600 UUO " "s o "' o r L p R 11 O p� 0 o O O N �, VI. a. 400,000' W o N .. M 00 O 00 00 h._s p O N O % N N b 0 O 3 p O 200,000 1O E- • o 0 000 o 0 0 0 000 Oo o 0 _ ,-:.44 '7 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ■Bulk Warehouse Office Warehouse ❑Office Showroom I 20 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE ST. PAUL, EAST - COMBINED • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 19,455,913 17,619,850 1,836,063 9.4% (27,219) New Projects 323,250 164,000 159,250 49.3% 164,000 Current Universe 19,779,163 17,783,850 1,995,313 10.1% 136,781 FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction 37,000 1 Planned Projects 325,462 4 Future Projects 362,462 5 NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 799.499 6.1 2001 465,126 3.4 • 2002 (412,246) 2.3 2003 1,207,957 6.2 2004 136,781 0.8 Five Year Average 439,423 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 144 0 1—9,999 20 91,696 10,000—24,999 13 213,031 25,000—49,999 10 323,474 50,000—99,999 7 575,693 100,000+ 3 496,960 Total* 197 1,700,854 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. • 21 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE ST. PAUL, EAST - OFFICE WAREHOUSE' • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 10,462,151 9,284,843 1,177,308 11.3% 209,596 New Projects 0 0 0 0.0% 0 Current Universe 10,462,151 9,284,843 1,177,308 11.3% 209,596 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 75,000 1 Planned Projects Future Projects 75,000 1 • Carlson Companies, Oakdale— 75,000 Sq.Ft. NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied YearS S . Feet ( q Ft) Square q 2000 301221 4.7 2001 247,043 3.7 • 2002 (154,682) (2.1) 2003 890,447 9.7 2004 209,596 2.3 Five Year Average 298,725 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 89 0 1—9,999 11 54,990 10,000—24,999 7 108,339 25,000—49,999 6 189,031 50,000—99,999 4 288,715 100,000+ 2 289,960 Total* 119 931,035 RENT SUMMARY Average Low - High Office Rent $8.61 $5.00 - $13.00 Warehouse Rent $4.00 $2.50 - $6.00 Blended Net Rent(Assuming 20%Office) $4.92 Taxes&Op.Exp. $2.51 $1.13 - $3.01 ill .One block of space per project,may not reflect total vacancy.Not all projects reporting I�rgest Contiguous Space figures. 22 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE ST. PAUL, EAST - OFFICE SHOWROOM • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 2,183,604 2,090,927 92,677 4.2% 154,485 New Projects 323,250 164,000 159,250 49.3% 164,000 Current Universe 2,506,854 2,254,927 251,927 9.5% 318,485 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 37,000 1 • 0 Commerce Drive, Planned Projects 250,462 3 Future Projects 287,462 4 Woodbury-37,000 Sq. Ft. Planned Projects NET ABSORPTION(Years Ended April 30) • Carlson Companies, Oakdale-75,000 Sq. Ft. Annual Net Percent of • River Bend Business Park, Absorption Occupied St. Paul- 120,000 Sq. Ft. Year (Sq.Ft) Square Feet • Wang Properties, 2000 44,931 3.1 Woodbury-55,462 Sq. Ft. 2001 (14,837) (1.0) 0 2002 69,909 3.1 2003 11,874 0.5 2004 318,485 10.0 Five Year Average 86,072 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 22 0 1-9,999 7 27,596 10,000-24,999 4 63,895 25,000-49,999 1 40,000 50,000-99,999 1 98,250 100,000+ 0 0 Total* 35 229,741 RENT SUMMARY Average Low - High Office Rent $9.34 $7.75 - $12.00 Warehouse Rent $4.19 $3.75 - $4.75 Blended Net Rent(Assuming 50%Office) $6.77 Taxes&Op.Exp. $3.88 $2.25 - $9.14 • .One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 23 ST. PAUL, EAST - BULK WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 6,810,158 6,244,080 566,078 8.3% (391,300) New Projects 0 0 0 0% 0 Current Universe 6,810,158 6,244,080 566,078 8.3% (391,300) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 0 0 Future Projects 0 0 Planned Projects • None NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft) Square Feet 2000 453,347 8.6 2001 232,920 4.3 • 2002 (327,473) (4.0) 2003 305,636 3.9 2004 (391,300) 6.3 Five Year Average 54,626 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 30 0 1—9,999 2 9,110 10,000—24,999 2 40,797 25,000—49,999 3 94,443 50,000—99,999 2 188,728 100,000+ 1 207,000 Total* 40 540,078 RENT SUMMARY Average Low - High Office Rent $8.42 $7.75 - $9.50 Warehouse Rent $3.32 $2.25 - $4.70 Blended Net Rent(Assuming 6%Office) $3.63 Taxes&Op.Exp. $2.06 $0.78 - $4.45 . *One block of space per project,may not reflect total vacancy.Not all projects reporting I argest Contiguous Space figures 24 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE SOUTHWEST • SIGNIFICANT EVENTS AND TRENDS • Sales are King • Shakopee is no longer the bottom of the market • Owners are reinvesting in core assets • Growth in small companies and start-ups are on the rise • • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 25 SOUTHWEST S NET ABSORPTION TRENDS 1,500,000 ,003,828 . .r 1,000,00L 0 v a, • 500,000 360,163 315,927 324,781 c -500,000 MMMIIIMMIMINMNIMIMMIMIM 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20°%°J • 14.4% 13.4% C 15%, cs u O 10%, 7. % 9.1% 11.9% 12.6% u i. ®\ R 1% 04 a 5% 7.0% 4.1% 5.0% / / / 0% / ( / ( f f � / ( f 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NEW PROJECTS 1,200,000 © 00 °S. 1,000,000 0 0; 800,000 u a M w 600,000 cii cr 400,000 ®® 0 00 0 III ':. tel �V M V N ?��as TOM O N M ry iM N N 200,000 0 ' — , 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 26 ■Bulk Warehouse 0 Office Warehouse 0 Office Showroom UPDATE SOUTHWEST - COMBINED • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 24,346,349 21,082,870 3,263,479 13.4% (41,744) New Projects 0 0 0 0.0% 0 Current Universe 24,346,349 21,082,870 3,263,479 13.4% (41,744) FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction 0 0 Planned Projects 910,384 9 Future Projects 910,384 9 NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 931,948 5.8 2001 315,927 1.9 2002 (359,687) (1.8) 2003 324,781 1.7 2004 (41,744) (0.2) Five Year Average 234,245 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 203 0 1—9,999 49 269,073 10,000—24,999 42 669,434 25,000—49,999 15 540,366 50,000—99,999 6 441,474 100,000+ 6 1,128,352 Total* 321 3,048,699 *One block of space per project,may not reflect total vacancy.Not all projects repotting Largest Contiguous Space figures. • 27 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE SOUTHWEST - OFFICE WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 13,013,986 11,799,454 1,214,532 9.3% 651,360 New Projects 0 0 0 0.0% 0 Current Universe 13,013,986 11,799,454 1,214,532 9.3% 651,360 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction Under Construction 0 0 • None Planned Projects 280,000 3 Future Projects 280,000 3 Planned Projects • Arboretum Business Park IV, NET ABSORPTION(Years Ended April 30) Chanhassen—80,000 Sq. Ft. • Dean Lakes Project, Shakopee— Annual Net Percent of 100,000 Sq. Ft. Absorption Occupied • Eagle Creek Commerce Center III, Year (Sq.Ft) Square Feet Shakopee— 100,000 Sq. Ft. 2000 501,058 6.3 2001 66,724 0.8 11, 2002 108,350 1.0 2003 (4,534) (0.04) 2004 651,360 5.5 Five Year Average 264,592 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 130 0 1—9,999 30 166,988 10,000—24,999 21 331,768 25,000—49,999 8 270,989 50,000—99,999 3 212,418 100,000+ 1 133,000 Total* 193 1,115,163 RENT SUMMARY Average Low - High Office Rent $8.79 $6.95 - $14.00 Warehouse Rent $4.39 $3.75 - $5.50 Blended Net Rent(Assuming 20%Office) $5.27 Taxes&Op.Exp. $3.17 $1.25 - $6.76 • *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. 28 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE SOUTHWEST - OFFICE SHOWROOM le CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 6,443,320 5,813,076 630,244 9.8% 204,861 New Projects 0 0 0 0.0% 0 Current Universe 6,443,320 5,813,076 630,244 9.8% 204,861 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 377,680 4 Planned Projects Future Projects 377,680 4 • Arboretum Business Park V, Chaska—30,000 Sq. Ft. NET ABSORPTION(Years Ended April 30) • Dean Lakes Project, Shakopee— Annual Net Percent of 100,000 Sq. Ft. Absorption Occupied • Starring Lake Business Center, Year (Sq.Ft) Square Feet Eden Prairie- 169,680 sq. ft. 2000 198,825 3.5 • West Bloomington Technology 2001 143,303 2.5 Park Phase III,Bloomington_ III 2002 (250,747) (4.5) 78,000 sq. ft. 2003 (58,205) (1.1) 2004 204,861 3.5 Five Year Average 47,607 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 50 0 1—9,999 18 98,224 10,000—24,999 16 246,880 25,000—49,999 4 124,998 50,000—99,999 1 82,312 100,000+ 0 0 Total* 89 552,414 RENT SUMMARY Average Low - High Office Rent $8.79 $6.50 - $10.50 Warehouse Rent $4.40 $3.50 - $5.50 Blended Net Rent(Assuming 50%Office) $6.60 Taxes&Op.Exp. $3.56 $0.75 - $5.65 5 "One block of space per project,may not reflect total vacancy.Not all projects reporting I argest Contiguous Space figures. NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 29 SOUTHWEST - BULK WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 4,889,043 3,470,340 1,418,703 29.0% (897,965) New Projects 0 0 0 0.0% 0 Current Universe 4,889,043 3,470,340 1,418,703 29.0% (897,965) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 None Planned Projects 252,704 2 Future Projects 252,704 2Planned Projects MN Valley Distribution Center NET ABSORPTION(Years Ended April 30) Phase IV, Shakopee— 162,000 Sq. Ft. Annual Net Percent of Shenandoah Business Park I, Absorption Occupied Shakopee- 90,704 Sq. Ft. Year (Sq.Ft) Square Feet 2000 232,065 8.9 2001 105,900 3.9 410 2002 (217,290) (7.2) 2003 387,520 11.9 2004 (897,965) (25.9) Five Year Average (77,954) LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 23 0 1—9,999 1 3,861 10,000—24,999 5 90,786 25,000—49,999 3 144,379 50,000—99,999 2 146,744 100,000+ 5 995,352 Total* 39 1,381,122 RENT SUMMARY Average Low - High Office Rent $7.94 $6.50 - $8.50 Warehouse Rent $4.02 $2.95 - $5.75 Blended Net Rent(Assuming 6% Office) $4.26 Taxes&Op.Exp. $1.89 $1.13 - $3.37 5 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures 30 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE MINNEAPOLIS, NORTH • SIGNIFICANT EVENTS AND TRENDS • Vacancy rates have stabilized • Net absorption has slowed but remains positive • Developers are moving on speculative buildings • User sales continue to be a hot • JOBZ program continue to attract more companies • • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 31 MINNEAPOLIS, NORTH • NET ABSORPTION TRENDS 1,500,000 1,087,712 1,009,438 �, 1,000,000 ' d F.14 w 656,080 637,739 0 511,276 ' V `n 500,000 '' 270,934313,637 • 165,166 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20%-/ . 15%-/ 11.6% 12.0% U 1� r 10% Npr 4> 6.6% CO Bio(° 77% 8.5% 8.4% a 5% 5.8% 6 6% 4.8% 0% / / 1995 1996 1997 19981999 2000 2001 2002 2003 2004 NEW PROJECTS 1,200,000-' 1,000,000-s a, d 800,000-i N v =U M Wo co On 600,000-s -tn er o o o0 OCr : O o c4 400,000-" r o .o o ff; ,o M h ., , V7 N O ..O /,' n O in M M N N 0 0 C = 03'i 70 O b O ;n rb N O n 0se,�. O) ei 200,000) oo - 0 r. - oo, ,-1 o .� e o" • o u, o lico _o aO O O 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ■Bulk Warehouse D Office Warehouse ❑Office Showroom I 32 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE MINNEAPOLIS, NORTH - COMBINED • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 21,347,960 19,549,620 1,798,340 8.4% 313,637 New Projects 0 0 0 0.0% 0 Current Universe 19,549,620 1,798,340 8.4% 313,637 FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction 160,000 2 Planned Projects 114,800 2 Future Projects 274,800 4 NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 165,166 1.2 2001 939,256 6.5 2002 270,608 1.4 2003 1,009,438 5.3 2004 313,637 1.6 Five Year Average 539,621 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 198 0 1—9,999 28 143,641 10,000—24,999 28 431,002 25,000—49,999 15 539,773 50,000—99,999 8 468,618 100,000+ 0 0 Total* 277 1,583,034 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. • 33 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE MINNEAPOLIS, NORTH - OFFICE WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 13,152,773 11,911,485 1,241,288 9.4% 136,593 New Projects 0 0 0 0.0% 0 Current Universe 13,152,773 11,911,485 1,241,288 9.4% 136,593 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 35,000 1 Planned Projects Future Projects 35,000 1 • Roseville Properties, NET ABSORPTION(Years Ended April 30) Blaine—35,000 Sq.Ft. Annual Net Percent of Absorption Occupied Year (Sq.Ft) Square Feet 2000 141,563 1.7 2001 256,879 8.2 III 2002 69,985 0.5 2003 813,148 6.0 2004 136,593 1.1 Five Year Average 283,634 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 133 0 1—9,999 21 110,487 10,000—24,999 17 250,674 25,000—49,999 12 420,791 50,000—99,999 5 278,700 100,000+ 0 0 Total* 188 1,060,652 RENT SUMMARY Average Low - High Office Rent $8.60 $7.00 - $12.00 Warehouse Rent $4.14 $2.00 - $5.50 Blended Net Rent(Assuming 20%Office) $5.03 Taxes&Op.Exp. $2.45 $1.50 - $5.76 III *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. 34 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE MINNEAPOLIS NORTH OFFICE SHOWROOM • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 3,321,357 3,017,890 303,467 9.1% (125,593) New Projects 0 0 0 0.0% 0 Current Universe 3,321,357 3,017,890 303,467 9.1% (125,593) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 160,000 2 • Lexington Preserve, Planned Projects 79,800 1 Blaine—75,000 Sq. Ft. Future Projects 239,800 3 • Mark of Excellence, White Bear Lake—85,000 Sq. Ft. NET ABSORPTION(Years Ended April 30) Planned Projects Annual Net Percent of • White Oak Business Center,White Absorption Occupied Bear Lake—79,800 Sq. Ft. Year (Sq.Ft) Square FeetIII 2000 6,505 0.3 2001 (1,286) (0.06) 2002 132,559 5.3 2003 106,009 5.1 2004 (125,593) (0.04) Five Year Average 23,639 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 33 0 1—9,999 6 32,187 10,000—24,999 8 134,776 25,000—49,999 1 48,000 50,000—99,999 1 69,093 100,000+ 0 0 Total* 49 284,056 RENT SUMMARY Average Low - High Office Rent $9.94 $8.75 - $14.40 Warehouse Rent $4.94 $4.50 - $6.72 Blended Net Rent(Assuming 50%Office) $7.44 11111 Taxes&Op.Exp. $3.60 $1.75 - $6.79 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 35 MINNEAPOLIS, NORTH - BULK WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 4,873,830 4,620,245 253,585 5.2% 302,637 New Projects 0 0 0 0% 0 Current Universe 4,873,830 4,620,245 253,585 5.2% 302,637 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction Under Construction 0 0 • None Planned Projects 0 0 Future Projects 0 0 Planned Projects • None NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft) Square Feet 2000 17,098 0.6 2001 183,633 6.2 • 2002 68,064 1.7 2003 90,281 2.7 2004 302,637 7.0 Five Year Average 132,343 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 32 0 1—9,999 1 967 10,000—24,999 3 45,552 25,000—49,999 2 70,984 50,000—99,999 2 120,825 100,000+ 0 0 Total* 40 238,328 RENT SUMMARY Average Low - High Office Rent $8.25 $6.50 - $10.00 Warehouse Rent $3.62 $2.50 - $4.75 Blended Net Rent(Assuming 6%Office) $3.90 Taxes&Op.Exp. $2.20 $1.25 - $2.55 0 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures 36 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE NORTHWEST • SIGNIFICANT EVENTS AND TRENDS • Leasing activity significantly outpaces the previous 12 months. • Developers looking for land parcels, completing build to suits and converting existing buildings over to higher and better use. • True speculative development returning to the Northwest submarket. • • NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE 37 NORTHWEST • NET ABSORPTION TRENDS 2,000,000 1,486,356 1,500,000 , '' 4) 1,090,527 w °�' 1,000,000 r al 737,323 622,064 cn 500,000 66,271 1 .0,606 • 230,415 • 1,184 I 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 HISTORICAL VACANCY RATES 20%, 14.-% 14 6% 15%-/0 : ti,,,,,;, v ' 1.8% 10/0% 10.8% ,,, 0 9.3 u :.0% 8.4/0 o 0 p" ° 5.0°0 5.7% 4.6% 0% / / / / / / ( / / / / / 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NEW PROJECTS 1,200,000 M -in 1,000,000 0 C 0 00 M M 00 00 R 800,000 r — N y N Pro ErMI oi 600,0000 e = ao at o 'f) 00 )n O c cz Qe -400,000 o - iiffli ; N pMaj N ril 200,000 _ 1 p I • 0 1995 1996 1997 19981999 2000 2001 2002 2003 2004 ■Bulk Warehouse Office Warehouse ❑Office Showroom I 38 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE NORTHWEST - COMBINED • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 28,130,865 25,094,358 3,036,507 10.8% 1,090,527 New Projects 0 0 0 0.0% 0 Current Universe 25,094,358 3,036,507 10.8% 1,090,527 FUTURE PROJECTS Total Number Of (Sq.Ft.) Projects Under Construction 0 0 Planned Projects 1,063,000 6 Future Projects 1,063,000 6 NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft.) Square Feet 2000 1.486.356 8.3 2001 1,184 <0.01 • 2002 230,415 0.8 2003 266,271 1.1 2004 1,090,527 4.3 Five Year Average 614,951 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 237 0 1—9,999 37 202,065 10,000—24,999 35 572,381 25,000—49,999 18 601,977 50,000—99,999 11 817,648 100,000+ 4 537,907 Total* 342 2,731,978 *One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. • 39 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE NORTHWEST - OFFICE WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 13,257,323 11,359,304 1,898,019 14.3% (44,367) New Projects 0 0 0 0.0% 0 Current Universe 13,257,323 11,359,304 1,898,019 14.3% (44,367) FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 440,000 3 _ Future Projects 440,000 3 Planned Projects • 610 Business Center I, NET ABSORPTION(Years Ended April 30) Brooklyn Park— 100,000 Sq.Ft. • 610 Business Park, Annual Net Percent of Brooklyn Park—200,000 Sq. Ft Absorption Occupied • Crosstown North Business Year (Sq.Ft) Square Feet Center X, Brooklyn Park— 2000 57,643 0.8 140,000 Sq. Ft. 2001 61,743 0.8 • 2002 221,945 1.5 2003 (51,759) (0.3) 2004 (44,367) (0.4) Five Year Average 49,041 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 123 0 1—9,999 20 93,666 10,000—24,999 17 293,462 25,000—49,999 11 382,834 50,000—99,999 6 452,544 100,000+ 3 433,645 Total* 180 1,656,151 RENT SUMMARY Average Low - High Office Rent $8.45 $5.85 - $10.00 Warehouse Rent $4.17 $3.25 - $5.15 Blended Net Rent(Assuming 20%Office) $5.03 Taxes&Op.Exp. $2.43 $0.80 - $4.56 • "One block of space per project,may not reflect total vacancy.Not all projects reporting Largest Contiguous Space figures. 40 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE NORTHWEST - OFFICE SHOWROOM • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 5,325,012 4,816,039 508,973 9.6% 261,534 New Projects 0 0 0 0.0% 0 Current Universe 5,325,012 4,816,039 508,973 9.6% 261,534 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 105,000 1 Future Projects 105,000 1 Planned Projects • Schmidt Lake Business Center, Plymouth— 105,000 Sq. Ft. NET ABSORPTION(Years Ended April 30) Annual Net Percent of Absorption Occupied Year (Sq.Ft) Square Feet 2000 751,384 18.7 . 2001 (115,176) 144,740 (3.0) 2002 3.0 2003 9,892 0.2 2004 261,534 5.4 Five Year Average 210,475 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 52 0 1—9,999 15 95,486 10,000—24,999 10 155,937 25,000—49,999 1 40,239 50,000—99,999 1 63,412 100,000+ 1 104,262 Total* 80 459,336 RENT SUMMARY Average Low - High Office Rent $9.59 $7.00 - $12.00 Warehouse Rent $4.66 $4.25 - $6.00 Blended Net Rent(Assuming 50%Office) $7.13 Taxes&Op.Exp. $3.87 $2.22 - $5.24 • *One block of space per project,may not reflect total vacancy.Not all projects reporting J argest Contiguous Space figures. 41 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE NORTHWEST - BULK WAREHOUSE • CURRENT UNIVERSE Annual Net Total Occupied Vacant Percent Absorption (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Vacant (Sq.Ft.) Existing Projects 9,548,530 8,919,015 629,515 6.6% 873,360 New Projects 0 0 0 0% 0 Current Universe 9,548,530 8,919,015 629,515 6.6% 873,360 FUTURE PROJECTS FUTURE PROJECTS Total Number Of (Sq.Ft) Projects Under Construction Under Construction 0 0 • None Planned Projects 518,000 2 Future Projects 518,000 2 Planned Projects • Diamond Lake Industrial Center 2, NET ABSORPTION(Years Ended April 30) Rogers—259,000 Sq. Ft. • Diamond Lake Industrial Center 3, Annual Net Percent of Rogers—259,000 Sq. Ft. Absorption Occupied Year (Sq.Ft) Square Feet 2000 677,359 10.4 2001 54,617 0.8 • 2002 (136,270) (1.9) 2003 308,138 4.2 2004 873,360 9.8 Five Year Average 355,441 LARGEST CONTIGUOUS SPACE BREAKDOWN Vacancy Size Number of Square Feet Projects Square Feet 0 62 0 1—9,999 2 12,913 10,000—24,999 8 112,982 25,000—49,999 6 178,904 50,000—99,999 4 301,692 100,000+ 0 0 Total* 82 606,491 RENT SUMMARY Average Low - High Office Rent $8.42 $6.50 - $10.25 Warehouse Rent $4.13 $3.00 - $5.00 Blended Net Rent(Assuming 6%Office) $4.50 Taxes&Op.Exp. $2.56 $1.36 - $5.05 III *One block of space per project,may not reflect total vacancy.Not all projects reporting I argest Contiguous Space figures 42 NAIOP 2004 ANNUAL INDUSTRIAL MARKET UPDATE L . • : � ; § � ui r aF O' "_ ait.‘,$. D--:,--vii °'. 4 '`.,.,,. r/. ''''. y-i, 5 -_,,--_ ,..,-,-.---,..,-,A . , - 0 '� .,..1.'„° P I Iw ------4 ' . .o � .wLL 6 � Gi VN ', ! .> CC CC Cr y " I 0 4 w 7 hg C7 I. 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O C LC "" S -69 ' 0- Et b0d O�-.5 yts R y o! tUri Ct U.jqliH:t = gb -V ILL 14114•4 : 111144 0. vy 0•� •.' 7. t y F0 * OUd6,.fl - Ocal 0 a U 0 o •-,= s O ' y . v • y O cd '} Qw yeo ,+ ai cd bA5, . r,•U I ag 11 o 11 aEla1 QO .n2NO n.b , TechTrends e-Newsletter I July 2004 Page 1 of 6 \ e o a.I' � olo: 1 Print Close 0 *Tar LI a publication of , C In kfirnestiaTedulvi,Inre nc, i Volume 5, Issue 7 July 2004 0 Cover Story This issue of Tech Trends is sponsored by RMC Project Management. o .....,,,,,,__. l'i ',&., .1. ( 111t RMC Project Management is a Minnesota-based company that has been training a project managers for 12 years. Our courses were developed by Rita Mulcahy, PMP, • • the author of PMP Exam Prep. We offer a combo-class in Minneapolis, which includes the Project Management Tricks of the Trade (3-day) and PMP Exam Prep (2-day) courses. These are fast-paced intensive courses that guarantee you will • pass the PMP exam. With the class you get Rita's RMC PMP Exam Prep system— • PMP Exam Prep, PM FASTrack exam simulation software, and Hot Topics flashcards. Register today at www.rmcproject.com and use promo code EMMTMA4 to get $100 off tuition. Sign up for RMC e-mails with future classes, products and free project management tips at www.rmcproject.com. 1 A Many Happy Returns How to maximize the ROI of a new technology purchase. Looking to invest in new technology? Depending on how you go about doing so, it can be a wise move—or a business killer. Consider the case of one Twin Cities-area firm (which asked not to be identified). In the early 1990s, the 60-person company installed a new software system designed to integrate all of its back-office operations—accounting, customer databases, human resources, and the like. It was a huge and extremely expensive undertaking, but one that the company's top brass saw as an a n essential move. Their initial high hopes quickly faded, however. Once the system was up and • running—after a 10-month design and installation period (perhaps the first sign that something was wrong)—the problems started. Customers would receive multiple copies of the same bill over the course of several days. Internal files disappeared from the server, only to reappear weeks later. Security measures http://www.minnesotatechnology.org/publications/techtrends/2004/July/printVersion.asp 7/23/2004 TechTrends e-Newsletter I July 2004 Page 2 of 6 designed to protect sensitive files—such as individual employee H.R. records— routinely failed. The problems nearly sank the operation. After trying for nearly 0 , three years to salvage the system, the company finally junked it and invested in an entirely new software (from a different vendor). In short, tech-related investments are never an easy decision. Make the right • move, and you can open up a realm of new possibilities—productivity, profits, F untapped markets, and the like. Make a misstep, however, and, well, the above example offers a hint at what can happen. With that in mind, here are expert strategies and ideas to mull over before you plo w (word choice) money into invest in a new piece of software or machinery. Beware of the bells and whistles At their core, all technology purchases should be guided by existing business strategy. Do you want to improve customer service? Do you want to automate internal processes to boost efficiency? Do you want to penetrate a new market? "Make sure the technology you are contemplating aligns with strategic objectives," says MTI technology consultant Sam Gould. "Those objectives dictate what types of gains are necessary." The above company would have been wise to follow such advice. It allowed the s• software vendor to sell it a system that had a number of extraneous bells and whistles—cool features that looked seductive on paper, but which didn't necessarily • fit with the company's larger aims. At the same time, management also didn't thoroughly check out the vendor's references; they later discovered that the y supplier had only done one such project in the past and thus was largely unprepared for such a large-scale undertaking. ' Manage the project As any smart manager knows, the real work starts after you take the plunge and make the investment. A poorly planned implementation is a recipe for disaster. At If best, it can dilute the technology's benefits; at worst, it can create new problems and costs. Gould stresses the importance of determining what each component of a :: new system will provide , or and what effects it will be responsible for. "That's • where a lot of people mess up," he says. "You have to know what each piece delivers and you have to know the risk associated with each piece if it doesn't deliver." In a similar vein, it also pays to assign a capable person to oversee the project— • and make sure that he or she has the resources and time to do it right. In the case of the above firm, management gave major implementation and vendor- management responsibilities to a pair of bright, computer-savvy, but extremely busy employees—without lightening their overall work levels. The predictable go result: The employees couldn't handle the increased load, and the software implementation process bogged down. • 1 Patience matters • http://www.minnesotatechnology.org/publications/techtrends/2004/July/printVersion.asp 7/23/2004 TechTrends e-Newsletter I July 2004 Page 3 of 6 Another point to keep in mind: You may not immediately see the long-term benefits of a new piece of technology. In fact, productivity may actually suffer at • g 0first, as employees navigate the hurdles associated with mastering the new equipment or software. That said, now is not the time to cut back on employee education. Jamming a technology change through with minimal or overly speedy training is a big mistake. "Most people enjoy learning something new," Gould says. "When they have this spurt of joy of learning new things, the intellectual content of their thoughts usually runs at a pretty high level too. If you capture those ideas, you are going to see that technology pay off dividends that you hadn't expected." For a more detailed look at the basics of investing in new technology, check out the Summer 2004 issue of Minnesota Technology® ['Tech Notes Technology business news from around Minnesota. Investors and employees of Morris-based Superior Industries Inc. have P purchased the stationary and portable conveyor systems manufacturer from its parent company, Astec Industries Inc., based in Chattanooga, Tenn. The $24.3 million sale closed on June 30. Founded in 1972, Superior Industries employs between 100 and 200 locally, and posts annual sales between $20 million and $50 million. Chisholm-based Smart Screen Systems Inc. (S3i) president and CEO Dr. I Daryoush Allaei accompanied Governor Tim Pawlenty on an official trade mission to Poland and the Czech Republic last month. S3i manufactures industrial ID ;,1 vibrating machinery for the mining, food, pharmaceutical, fuel, and aggregate industries. Bloomington-based achievement products producer Jostens Inc. has announced plans to close its graduation diploma plant in Red Wing in mid-October, cutting 179 jobs. According to the company, it will move remaining customer service and plant operations to Owatonna; Shelbyville, Tenn.; and Topeka, Kan. Brainerd-headquartered contract manufacturers and assemblers ATEK Cos. Have has announced their a new partnership with AbleNet Inc., a Minneapolis-based designer and manufacturer of learning products for children with disabilities. Through the partnership, the companies will produce a line of five recording and playback devices for educational use. 1 Duluth's Enventis Telecom has relocated to new offices on West Superior St., f across the street from the downtown headquarters of Allete, its parent company. Enventis, an installer of large-bandwidth voice, video, and data networks, currently employs 75 people. Anoka-based electronics manufacturing service NRI Electronics has announced plans to expand its employee base in its Aurora facilities, where it currently employs 45. The company also operates a facility in Rochester. The expanded operation in Aurora will process orders from Peoria-based heavy machinery and g engine manufacturer Caterpillar Global Inc. A III -' St. Cloud State University has received a $60,400 state grant from the Minnesota Job Skills Partnership to train 100 workers at Milaca's TriVirix Inc. plant. Purchased from Minneapolis's Medtronic Inc. in 2002, TriVirix manufactures http://www.minnesotatechnology.org/publications/techtrends/2004/July/print Version.asp 7/23/2004 TechTrends e-Newsletter I July 2004 Page 4 of 6 medical devices, including pacemaker programmers. St. Cloud State's engineering • management and manufacturing engineering students will use the grant to provide 111 on-the-job training to entry-level and advanced workers at the plant. • Zierke Built Manufacturing Inc., a Winnebago-based supplier of metal parts to the power generator industry, has announced plans to undertake a $200,000 expansion. The company will take advantage of the state's Job Opportunity Building Zone (JOBZ) program to support the project. Zierke has been in Winnebago since 1997, employing 24 workers. The company reports plans to hire six more employees by September 1. Peter Fox, general manager of Microsoft Corp.'s north central commercial district, has been elected to the Minnesota High Tech Association's board of directors. Proposed ethanol plant Granite Falls Community Ethanol of Granite Falls reports that it has surpassed its $18 million fundraising goal, due to recent stock buy-ins • from Watertown, S.D.-based ethanol plant Glacial Lakes Energy and Fagen Inc., a construction company based in Granite Falls. The firms bought 6,500 and 2,500 shares, respectively. Glacial Lakes Energy will partner with the proposed plant to operate and manage the facility. According to the company, Fagen Inc. will begin construction on the plant late this summer. Catendar 4111 MTI Technology Awareness Forum: Food Security Date: 8/12 Time: 9 a.m.-2:30 p.m. Location: Microsoft Corp., Bloomington Cost: $149 Click Here to Register • MTI Technology Awareness Forum: Business Growth—Performance Date: 9/8 Time: 9 a.m.-2:30 p.m. Location: Twin Cities metro location TBD Cost: $149 Click Here to Register MTI Technology Awareness Forum: Marketing Technology Date: 10/13 • Click Here to Register 04 MTI Technology Awareness Forum: Strategic Vendor Selection Date: 11/10 Click Here to Register' MTI Technology Awareness Forum: NASA Technology Transfer Date: 12/8 Click Here to Register • Perspectwe http://www.minnesotatechnology.org/publications/techtrends/2004/July/print Version.asp 7/23/2004 TechTrends e-Newsletter I July 2004 Page 5 of 6 The 5S System Demystified 0 III ,( Sort, standardize, sustain. See? You're more than halfway there. Still not convinced that you have time to explore and adopt lean principles? Consider the 5S system for workplace organization and standardization. It's that rarest of practices—something that delivers results almost immediately in the form of waste reduction in waste and productivity gains. Imported from Japan in the late c' 1990s, the 5S system derives its handle from five steps loosely translated as 4 • Sort • Set in Order • Shine f • Standardize • Sustain. 0 Step 1: Sort Start by separating needed elements from those unnecessary for accomplishing a designated task. Here's one way to do it: Walk through the department or shop floor armed with large, brightly colored tags. Tag anything not essential to completing the task (obsolete tools or machinery, forgotten overruns, excess waste bins, etc.). Next, have all managers and supervisors tour the space, evaluating what's been tagged, and why. Step 2: Set in Order • e Haul away the nonessentials, and rearrange machinery and production tools to maximize space and accessibility. This may involve grouping materials into tight cells that will eliminate the amount of time a product travels from one station to the next, or placing clearer, larger labels on supplies—it varies from one department to the next. Step 3: Shine o Now that everything is in its right place, clean and repair the area from top to F bottom. Doing so will reveal structural or surface imperfections, mechanical wear, `' and the like. Tending to these now will save you time and money in the long run. And never underestimate aesthetic improvements such as fresh paint—they can have a big impact on employee morale and performance. Step 4: Standardize Step back and admire what the first three steps have wrought—and pledge to keep it that way. Develop a systematic evaluation and documentation process, including maintenance schedules, cleaning procedures, and the like. k Step 5: Sustain i It happens all the time: Shortly after a housekeeping blitz, disorder and • inefficiencies creep back. This step is ongoing and cultural; top management must recognize the effort and value of the first four steps, and commit to sustaining I them. 0 http://www.minnesotatechnology.org/publications/techtrends/2004/July/printVersion.asp 7/23/2004 TechTrends e-Newsletter I July 2004 Page 6 of 6 To learn more about the 5S System and its role in lean practices, or to learn about upcoming 5S training, see http:l/www.minnesotatechno{ogy.org/businessllean.asp, • or get in touch with MTPs Lean Enterprise specialists at 612-373-2900. _.,R, ,aVI✓.sL '; ,, r. /r::i ;...f/i��� dr- i;: `w.k.°rrf :; �_-9iw,rrzc..:z✓LS.----. ':vz.:raffi'd :::.�t..d,,,..,w„zm .F`ms: vk;,.,..«.,,::...: '.�.5 `«;z a NIST Network MEP Affiliate Home I Contact Us I Site Map I Privacy Policy I Terms of Use © 1994-2004, Minnesota Technology, Inc., All rights reserved webmaster(&mntech.orq PHONE: 612-373-2900 FAX: 612-373-2901 S • http://www.minnesotatechnology.org/publications/techtrends/2004/July/printVersion.asp 7/23/2004