Industrial Real Estate Development Market

Tony Chiarello Senior Vice President

Development Market

Tony Chiarello, Senior Vice President, Customer Development, AMB Property Corporation (Moderator)

Mike Peters, First Vice President, ProLogis

Steve Callaway, Senior Vice President, Director of Customer Development, AMB Property Corporation

Topics in Industrial Real EstateTopics in Industrial Real Estate1. Expansion into Emerging Global Markets2 Inland Ports and Distribution2. Inland Ports and Distribution3. Trends in Building Design4 Sustainability4. Sustainability5. Site Selection

1. Expansion into Emerging Global Markets1. Expansion into Emerging Global MarketsMajor retailers expanding footprint to new global markets creating domestic distribution needs.creating domestic distribution needs.Export based consolidation and distribution centersEmerging markets and emerging strategies drive flexible g g g g gsolutions

ChinaIndiaMexicoBrazilBrazilChileEastern Europep

2. Inland Ports and Distribution2. Inland Ports and DistributionThe growth drivers for Inland PortsKey benefits of Inland PortsKey benefits of Inland PortsLocations – now and future

2. Inland Ports and Distribution Macro Drivers and Trends

900

Macro Drivers and TrendsAnnual Container Cargo Growth – Projected 8-10%

History Forecast

600

700

800

s)

400

500

600

TEU

s (m

illio

ns Container Volume Expected to More Than Double Over Next Decade

2006 TEUs 2016 TEU Increases

200

300

400Asia 210 +200 million

Europe 72 +85 million

N. America 50 +50 million

0

100

1995 2000 2005 2010 2015

TEUs= twenty feet equivalent units Source: Containerisation International

Rest of World 50 +80 million

Total 381 ~800 million

1995 2000 2005 2010 2015

2. Inland Ports and DistributionInfrastructure ChallengesInfrastructure Challenges

Container imports are expected to double by 2020

2557

SEATTLE

1,776

4,39644%

1 798

2,557

From 1970 to 2003, vehicle travel on highways rose by 161%

TACOMA

2,0433,382

1 8095,566

4,47815,835

NY/NJ

144.5%

253.6%

1,798

rose by 161% but road mileage only increased by 6%

OAKLAND

LA/LONG BEACH13,101

59,420

1 6629,420

1,860

6,639

1,809

CHARLESTON

VIRGINIA65.5%

353.6%

466 8%

256.9%

207.7%

Congestion costs US$ 63 billion in wasted time & fuel

1,4376,165

1,662

1,0102,152HOUSTON

MIAMI

SAVANNAH329%

113.1%

466.8%

Rail freight tonnage is expected to increase

2004 Volumes (‘000 TEUs)

2020 Volumes (‘000 TEUs)by 50% by 2020 2020 Volumes ( 000 TEUs)

2. Inland Ports and Distribution Rail Investment & CapacityInvestment & Capacity

Rail industry invested $9 bil in 2007 in improvements and

i U f $5 7 bil i Growth in Trains per Day 2005-2035

expansion – Up from $5.7 bil in 2002

2035 d l

p y

2035 expected volumes represent an increase of at least 30-80 trains per day and up to 80-200 trains per day on main corridors from per day on main corridors from USWC

C t f i t d d t Source: Cambridge Systematics IncCost of improvements needed to accommodate expected 2035 demand estimated at $148 bil –Class I share being $135 bil

Source: Cambridge Systematics, Inc.

Class I share being $135 bil

2. Inland Ports and DistributionCommodity Mix for Class I RailroadsCommodity Mix for Class I Railroads

Agriculture

Seven key commodities, with Intermodal being h l i f Agriculture

7%

Auto5%

Lumber6%

Other5%

the largest in terms of volume

Coal19%

M l

Chemicals9%

Class I Railroads

Intermodal38%

Metals11%

• Burlington Northern SantaFe

• Union Pacific• Norfolk Southern 38%• Norfolk Southern• CSX• Canadian National• Canadian PacificCanadian Pacific

2. Inland Ports and Distribution Sustainability & Security ProgramsSustainability & Security Programs

TWICRequires background checks, including proof of legal residency. q g , g p g yEstimated 22% will not apply for TWIC card implemented

Clean Air Action Plan - Environmental Cargo Fee$35/TEU effective 6/2008 - Expected to raise $1.6 billion$15/TEU effective 1/2009 - Expected to raise $1.4 billion

Clean Trucks ProgramC ea uc s og aReduce pollution by banning old trucks in phases – all trucks meeting fed standards by 2012Harbor trucking only by specially licensed firms with own driversHarbor trucking only by specially licensed firms with own driversModern trucks cost $100,000+ - ports will subsidize up to 80% Cost of retiring old trucks is estimated at $2 billion

2. Inland Ports and Distribution2. Inland Ports and DistributionA single double stack train equals the capacity of 750 truckstrucks

The railroad is 2-4 times more fuel efficient on a metric ton basis than trucks

R il i 2 3 i l h k i b iRail is 2-3 times cleaner than trucks on a metric ton basis

2. Inland Ports and Distribution2. Inland Ports and DistributionGrowth of Integrated Logistics Parks

Most successful where Intermodal capability combines with a Most successful where Intermodal capability combines with a strong distribution location

BenefitsCustomers

Lower dray costs, reduced demurrage, value-added services (FTZ)

Railroads & Ocean CarriersRailroads & Ocean CarriersImproved equipment managementAbility to expand business as import volumes expand

CommunitiesLess traffic and reduced emissions at the portsFluid global trade benefits consumersFluid global trade benefits consumers

2. Inland Ports and Distribution Key Rail Hubs within the USKey Rail Hubs within the US

Key Rail Hubs: A major intermodal terminal that is served by multiple rail lines in which trailers/containers are either grounded for highway delivery or

i h d b di f i h il d d h l d d reswitched by grounding or transferring to another railroad ramp and then reloaded for further rail travel

ChicagoColumbus

Kansas City

AtlantaMemphisLA – Inland Empire

Dallas

Houston

3. Trends in Building Design3. Trends in Building Design

Average Building SizeAverage Building Size

350400

)

150200250300

hous

ands

)

050100

6 7 8 9 0 1 2 3 4 5 6 7SF

(Th

199619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Source: ProLogis analysisg y

3. Trends in Building Design (cont.)3. Trends in Building Design (cont.)Increasing Clear Height

1995 = 24’ 2008 = 32’+1995 24 2008 32 +

Column Spacing 1995 = 40’ x 40’ 2008 = 50’ x 50’

More Trailer ParkingTraditionally 1 space per 10k sf, now 2-3x for some buildings

Reduced Demand for Rail Served FacilitiesAccess to intermodal is increasingly important

Shift to fluorescent lighting and other sustainable elements

4. Sustainability4. SustainabilityLighting Upgrades

LEED Certification

Renewable Energy

Lighting UpgradesLighting Upgrades

CO2 Emissions by SectorCO2 Emissions by Sector“Buildings are the largest source of

Industry 25%

largest source of both energy consumption and

Buildings 48%

greenhouse gas emissions in America as well as

Transportation 27%

around the world.”- The American Institute of ArchitectsArchitects

Data Source: AIA & EIA data

Total Energy Consumption by Principal Building ActivityPrincipal Building Activity

250 000

300,000 Btu/SFAverage

150,000

200,000

250,000 Average

50,000

100,000

0

Food S

ervice

Inpati

ent

Food S

ales

Health

Care

Other

rder &

Safety

Lodg

ingOutp

atien

t

blic A

ssem

blyOffic

eEdu

catio

nServ

icehe

r than

Mall

)an

d Stor

age

ious W

orship

Vacan

t

Fo HPub

lic O

rd

Publi

Retail (

othe

Ware

hous

e aReli

gio

Data Source: EIA's 2003 Commercial Buildings Energy Consumption Survey

LEED CertificationLEED CertificationLeadership in Energy & Environmental Design

Possible LEED Points by Category

• Nationally accepted benchmark for the design, construction, and operation of Category

Sustainable Sites

Indoor Environmental

Innovation & Design Proces

514

15

design, construction, and operation of high performance green buildings

• Developed by the U.S. Green Building Council

Water Efficiency

Environmental Quality

5

1713

15Council

• Predominantly a U.S. based rating system

Standa ds tailo ed to a a iet of

Energy & Atmosphere

Materials & Resources

• Standards tailored to a variety of building types

Data Source: USGBC website (www.usgbc.org)

LEED Construction ItemsLEED Construction Items

LEED Certified BuildingsLEED Certified Buildings400

300

350

200

250

100

150

0

50

2000 2001 2002 2003 2004 2005 2006 Q3 2007

Renewable EnergyRenewable Energy

5. Site Selection5. Site SelectionProximity to sources of supply and customers!

Access to Transportation

Quantity and Quality of Labor

Incentives and Tax benefits

Did we mention proximity to sources of supply and customers?

Title Sponsor:Title Sponsor:

February 10- 13, 2008 ● Gaylord Palms Resort & Convention Center ● Kissimmee, Florida