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It has been a perfect storm for Class A office buildings in the South Reno office space corridor. The first office space in Reno storm was the slowdown in housing construction, which led to home builders putting office space in Reno up for sublease. The list includes: Centex, 14,000 square feet of office space in Reno; Lennar, 14,470 square feet of office space in Reno; and Pulte, 12,000 square feet of office space in Reno. The second storm was the sub-prime melt down that led to the shutdown of MLSG, which put 25,000 square feet of office space in Reno back on the market. The third storm was the downsizing and potential closing of the Covance office, 17,000 square feet of office space in Reno for lease, and the Hartford Reno Office, 28,000 square feet of office space in Reno for lease, placing two more offices for lease in Reno up for sublease. The fourth and final storm was the new 80,000 square foot build-to-suit office for lease in Reno for Employers Insurance, which means they will be vacating 76,000 square feet office space for lease in the Thomas Creek office park.

The total impact to the South Reno office space for lease Corridor will mean 107,000 square feet of office sublease space available in Reno and 101,000 square feet of new direct office for lease space in Reno. The ultimate office vacancy rate in the South Reno Corridor will top 25% at the end of the first quarter next year. The impact will be a slowdown in any spec construction in South Reno office for lease for a couple years. Until this year, the average net absorption in the South Reno office for lease and sale Corridor was about 95,000 square feet per year. With the an¬nouncement of office for lease relocations and closings, we have over a three year supply of available office space for lease Reno in this submarket. The other office for lease in Reno submarkets have fared much better with the Meadowood office for lease and sale submarket vacancy at 9.5% and the overall Reno office for lease market at 14.3%. The overall Reno office for lease vacancy is up 1.4% from the second quarter. One bright spot is the Old Southwest Reno office for lease submarket where the vacancy rate fell from 18.7% to only 10.3%. We suspect that as the Reno office for lease and sale economy has tightened, more firms have opted for the more economical Reno office for lease space in this submarket. No matter how you cut it, this Office for lease in Reno is a market that definitely favors tenants.

In retrospect, we had similar events when the tech market crashed after the turn of the century. The fundamental reasons companies and people move to Northern Nevada, such as quality of life, Office for lease in Reno, and low taxes, have not changed. We will work our way out of this Reno office for lease slowdown and probably be a more diversified and healthy Reno office for lease and sale economy because of it.

There is only one spec Reno office for lease building of size under construction. CBRE is building a 35,000 square foot Reno office for lease, two story tilt up concrete building in Meadowood. CBRE is going to occupy one floor of the Reno office for lease, and look to lease up the re¬maining 17,500 square feet office space for lease in Reno. The new 80,000 square foot office space for lease in Reno, three story tilt up concrete build¬ing for Employers Insurance will have its walls tilted the second week of October. We have seen our Reno office for lease market switch from a spec construction to a office for lease in Reno build-to-suit market for the next three years. With the high vacancy of office space for lease in the South Reno Corridor, most banks would be leery to lend on a new spec Reno office space for lease building.

Absorption, As we now sit, the net Reno office for lease absorption for the year is a negative 86,000 square feet. This could be the first year the Northern Nevada office for lease in Reno market has a negative net absorption. Year to date, we have had negative Reno office for lease and sale net absorption in the Downtown, the South Reno office for lease Corridor, and the Airport office for lease submarkets. The Meadowood office for lease and the Old Southwest office for lease sub-markets are the only sub-markets of size showing positive net absorption. There is not a lot of activity that would indicate a significant change of Reno office for lease for the fourth quarter.

Reno office for lease rents have already started to fall as land¬lords in the South Reno Corridor are willing to make concessions to capture the few tenants out looking to lease Reno office for lease. Those tenants looking for 15,000 square feet of Reno office for lease, will have a good time playing, “Let’s Make a Deal!” We suspect Reno office for lease rents are down about ten to fifteen cents per square foot in the southern part of town. This has not had a significant impact on Downtown Reno office for lease rents, but we have seen a few firms opt to move south, where Reno office for lease rents are more appealing. Landlords will not have much pricing power for the next twelve months while trying to lease Reno office space for lease.

The third quarter Garden Reno office space for lease Market statistics mirror what we are seeing in buildings 10,000 square feet of Reno office space for lease and above. While we did see a continuation of construction totaling about 45,000 square feet of Reno office for lease we also saw space given back in the form of Reno office space sublease or direct vacancies. Our Reno office space for lease vacancy rose over a point this quarter from 16.2% to 17.3%. We anticipate this number of Reno office space for lease will reach its peak in the fourth quarter 2007. After the completion of the current projects under construction, the garden Reno office space for lease market should not see the commencement of any new projects until we see vacancy of Reno office space for lease drop to the 15% level. Despite the increase in vacancy of Reno office space for lease, owners and developers are not able to give many concessions on the pricing for Reno office for lease or for Reno office space for sale due to the overall costs of construction. Advantages of ownership of Reno office space for lease and sale are still very attractive and there are still great opportunities in the market. However, if a company is looking to lease Reno office space, some of the buildings 10,000 square feet of Reno office space for lease and above may be able to give more concessions and it may become more affordable for tenants to lease a small Reno office space for lease suite in a larger building.