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Ma~c~ A~uu.~rs~s (continued) space in the Salem CBD was surveyed in November and December of 1999. Vacancy levels were found to be consistent with the levels reported by the January 1999 survey. Currently, there are no retail projects under construction, however there are several potenfial projects. They include the Odd Fellows building, directly west of the Marion County Courthouse, the EOFF electric properfy on Front Street and properfy advertised as "build-to- suit"2 at the northwest corner of Commercial Street and Ferry Street. As of the date of this report there are no specific plans for retail development. Demand - Vacancy levels through 1999 indicate flat market conditions. In addition, average asking rents on an annual basis are basically flat at $8.40 per square foot triple net3 since 1997, according to the Spencer Powell 8~ Associates survey. This includes both new and mature retail space. Conclusion - In considering stable vacancy rates and flat rents, the retail sector of the Salem CBD appears to be in a state of equilibrium. Additional evidence is the lack of new retail construction. Overall, it appears that market conditions for retail development are moderate at best. OFFICE Supply -Existing supply includes nearly 900,000 square feet of office space in the CBD, exclusive of owner-occupied and state-occupied buildings. C. Spencer Powell & Associates surveyed the CBD office market and reported 429,109 square feet of Class A space in 13 buildings with vacancy of 4.4%. This is the highest Class A vacancy since 1992 and represents a significant jump from 1998's 0.86%. The only known developing supply is the Centennial Bank Building located at the southwest comer of Commercial Street and Ferry Street. The project will add 17,859 square feet to the Class A office supply. However, the majority of the space has been pre-leased. Potential supply includes two speculative projects, Three Oaks Professional Center on 12~h Street with 11,000 square feet, and a"build-to-suit" medical office proposed for the comer of 13'h Street and Lee Street. However, each has been put on hold until the market strengthens. Additional projects include the Odd Fellows building directly west of the Marion County Courthouse, the EOFF electric properfy on Front Street and a properfy advertised as "build-to-suit" at the northwest corner of Commercial Street and Ferry Street. Finally, office building plons for the old Union Street Piao site ot the comer of Capitol Street ond the Union and 12+h Street alignment are on hold pending improved market conditions. Demand - Increasing vacancies tend to indicate slowing demand for office space in the CBD. According to the Spencer Powell 8~ Associates Office Survey, average rents in Class A buildings are $17.76 per square foot annually, ranging from $15.00 to $20.04 on a full service4 expense structure. This is down from $18.38 per square foot in 1998. Conclusion - At the present time, there appea~s to be a slight oversupply of office space in the CBD. In addition, the number of potential projects further weakens the office outlook. Decreasing rents also indicate slightly unbalanced market conditions. Overall, the CBD office market is somewhat soft when considering the viability of speculative projects. P99239 PALMER, GROr~ 8~ Pien<a, INC. 19