Q3 2021CAPITAL MARKETSREPORTRETAIL | OFFICE | INDUSTRIAL

Mid-Atlantic Region

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Commercial Real Estate Services klnb.com

*Market data for this report was sourced from CoStar.

Springfield Plaza (Giant)Location: Springfield, VABuyer: Signet PropertiesSeller: Finmarc ManagementPrice: $39,750,000PSF: $523

Notable Market Transactions Sales Volume & Market Sale Price/SF

Sales Volume Price/SF United States Price/SF

FORECAST

SALE

S V

OLU

ME

MA

RKET

SA

LE P

RICE

/SF

$360

$340

$320

$300

$280

$260

$240

$220

$200

$180

$1.8B

$1.6B

$1.4B

$1.2B

$1B

$800M

$600M

$400M

$200M

$02625242322212019181716

Twinbrooke Shopping CentreLocation: Fairfax, VABuyer: Federal RealtySeller: Chantilly Park AssociatesPrice: $33,800,000PSF: $313

1937-1947 14th StreetLocation: Washington, D.C.Buyer: Premier ManagementSeller: 14th St RE HoldingsPrice: $12,500,000PSF: $870

Trends Q3 2021

Retail SpotlightQ3 2021 Capital Markets

Q3 2021, fueled by warm weather and pent-up consumer spending, proved to be a bright-spot for retail tenants despite the impending risk of the COVID Delta Variant. Retail real estate has seen a steady increase in investor spending in single tenant, strip, and grocery anchored centers in the mid-Atlantic since the onset of the coronavirus pandemic, which had virtually halted property sales. For the first time since Q2 2020, there was positive 12 Mo Sales Volume Growth with Q3 2021 sales volume approaching $450M. The total number of retail transactions held relatively consistent with historical averages at 152, and an anticipated uptick in sales transactions is expected as the new year approaches and investors look to effectuate 1031 exchanges prior to year-end.

The largest transaction of Q3 traded hands in late September, consisting of eight retail properties in Washington, D.C., Northern Virginia, and Maryland. The 700,000 SF WashREIT portfolio garnered a $168M purchase price from a partnership between Rosenthal Properties and Westbrook Partners, headquartered in Vienna, VA and New York, NY respectively. Planning an intensive capital improvement program and revitalized leasing effort, the purchasers intend to increase the occupancy and curb appeal of the portfolio, which is well positioned in established geographic areas with high barriers to entry.

$445MSales Volume

152# of Sales

$315Avg Price PSF

1.8MSF Sold

6.6%Avg Cap Rate

Commercial Real Estate Services klnb.com

*Market data for this report was sourced from CoStar.

Office SpotlightQ3 2021 Capital Markets

Notable Market Transactions Sales Volume & Market Sale Price/SF$420

$400

$380

$360

$340

$320

$300

$280

$3.5B

$3B

$2.5B

$2B

$1.5B

$1B

$500M

$0

SALE

S V

OLU

ME

MA

RKET

SA

LE P

RICE

/SF

FORECAST

Sales Volume Price/SF United States Price/SF2625242322212019181716

Wash REIT Office PortfolioLocation: Washington, D.C. & Metro DCBuyer: Brookfield Asset ManagementSeller: Wash REITPrice: $766,000,000PSF: $323

L’Enfant Plaza OfficeLocation: Millersville, MDBuyer: Deka ImmobilienSeller: JBG Smith PropertiesPrice: $166,500,000PSF: $773

Sequoia PlazaLocation: Arlington, VABuyer: PRP Investment ManagementSeller: Boyd WattersonPrice: $204,410,000PSF: $554

Trends Q3 2021

The diversity of Washington’s office market resulted in mixed performance across the three geographical boundaries. In the District of Columbia, landlords face a leasing environment in which office tenants take space in new trophy buildings and give back space in older buildings. In suburban Maryland, the I-270 biotechnology corridor has seen explosive growth. From Bethesda to Frederick, federal funding from the Department of Health and Human Services has been a shot in the arm for life science companies. In Northern Virginia, it is the expansions of Silicon Valley technology firms to Crystal City, Rosslyn, Tysons, Reston, and Herndon that are buffering the worsts of COVID-19-related economic weakness.

A global pandemic was enough to slow down robust deal velocity in Washington. Over the past few years, Washington’s office market was clearing $8 billion annually in deal volume. Last year came in at about half that level, though most of that activity came from a strong fourth quarter. Investors and lenders are feeling more bullish in today’s economic environment, but transaction activity has yet to return to pre-pandemic levels. Washington’s office market remains one of the most liquid in the country over the past 12 months, as it provides a stable tenant base, with upside provided by agency-anchored headquarters throughout the metro. Brookfield’s nearly $800 million purchase of the WashREIT office portfolio demonstrates the opposing strategies being implemented in Washington’s capital markets.

$1.8BSales Volume

219# of Sales

6.1MSF Sold

$325Avg Price PSF

6.1%Avg Cap Rate

Commercial Real Estate Services klnb.com

*Market data for this report was sourced from CoStar.

Industrial SpotlightQ3 2021 Capital Markets

Notable Market Transactions Sales Volume & Market Sale Price/SF$220

$200

$180

$160

$140

$120

$00

$40

$60

$80

SALE

S V

OLU

ME

MA

RKET

SA

LE P

RICE

/SF

FORECAST

Sales Volume Price/SF United States Price/SF

$1.8B

$1.6B

$1.4B

$1.2B

$1B

$800M

$600M

$400M

$200M

$011 12 13 14 15 16 17 18 19 20 21 22 1231 24 25 26

Featherstone Industrial ParkLocation: Woodbridge, VABuyer: Rosenthal Properties & Stockbridge Capital GroupSeller: Finmarc ManagementPrice: $104,200,000PSF: $114

716 Ritchie RoadLocation: Capitol Heights, MDBuyer: AEW Capital Management Seller: The Pinkard GroupPrice: $37,000,000PSF: $232

1 Carnegie Court 9 Jay Gould Court 65 Industrial Park DriveLocation: Waldorf, MDBuyer: Intercontinental Real Estate CorporationSeller: Kaz Brother, L.C.Price: $36,000,000PSF: $189

Trends Q3 2021

Industrial real estate is the shining star of the region’s investment sale market. Competition from institutional investors for industrial properties is in an unprecedented frenzy. Institutional quality properties are trading on average in the mid-four percent range, and in some cases dipping below four percent. Investors are counting on dramatic rent growth over the next several years to rationalize these record high prices.

A recent notable sale was AEW’s purchase of the newly-construction 160,000 SF warehouse at 716 Ritchie Road in Capitol Height for $37 million or over $230/SF. This building was roughly half leased at the time of sale.

We expect that record to be broken soon when the sale of 224,000 SF warehouse at 8511 Pepco Place settles. This modern building reportedly will transact at $260 SF. The building has a large office mezzanine; the footprint-foot price will clock in at around $290/SF.

Costar reports a robust $1.9 billion in industrial sales in the greater Washington DC market over the past twelve months. The average market capitalization rate was 6.4 percent across all industrial sales, a historic low.

$505MSales Volume

96# of Sales

4.1MSF Sold

$177Avg Price PSF

6.4%Avg Cap Rate

Commercial Real Estate Services klnb.com

In the News Q3 2021

KLNB Active Listings

Debt Market Information KLNB Recent Notable TransactionsChesterbrook Shopping CenterLocation: McLean, VABuyer: Federal RealtySeller: PrivatePrice: $32,100,000PSF: $447

North Ridge Professional CenterLocation: Ellicott City, MDBuyer: Anchor Health PropertiesSeller: Foulger PrattPrice: $9,350,000PSF: $240

7951 Angleton CourtLocation: Lorton, VABuyer: SD Holding, LLC Seller: Finmarc ManagementPrice: $11,100,000PSF: $98

RETAILBelair Edison CrossingLocation: Baltimore, MDSize: 204,659 SFStatus: Currently MarketingOccupancy: 100%Major Tenants: Food Depot, Forman Mills, Dollar General

OFFICE7404 Executive PlaceLocation: Lanham, MDSize: 77,000 SFStatus: Currently MarketingOccupancy: 97%Major Tenants: Northrop Grumman, Doctors Community Hospital

INDUSTRIAL9207 51st AvenueLocation: College Park, MDSize: 115,000 SFStatus: Redevelopment OpportunityOccupancy: N/A

RETAIL

OFFICE

INDUSTRIAL

WashREIT Sells What’s Left of its Retail Portfolio for $168M

Vienna’s Rosenthal Properties has emerged as the winning bidder for Washington Real Estate Investment Trust’s remaining retail portfolio, paying about $168 million for eight centers.

WBJ - September 2021

Shoppers are Shopping: Foot Traffic Patterns Heading into the Holidays

Foot traffic took a dive in 2020 as the COVID-19 pandemic set in and nonessential retailers closed up shop. Over the last 18 months, foot traffic has rebounded, but it’s still significantly lower than pre-pandemic levels, according to Diane Wehrle, marketing and insights director at Springboard.

Retail Leader - September 2021

$3B White Oak Project Advances; Groundbreaking Expected in 2022

A $3 billion project covering roughly 280 acres near White Oak recently obtained important approvals from the county’s Planning Board. Groundbreaking could take place in 2022.

Bethesda Magazine - September 2021

Target to Expand Pr. George’s Distribution Center Into What May be Region’s Largest

Target has filed plans to expand the former Safeway warehouse campus in Upper Marlboro. Target Corp. is awaiting Prince George’s County approval to expand a former Safeway warehouse complex in Upper Marlboro into what might be the region’s largest single-tenant logistics facility.

WBJ - September 2021

More Office Properties Are Becoming Labs in Top Life Sciences Cities

Investors are eager to buy life sciences buildings—which may look like conventional office properties on the outside, but contain hard-to-find laboratory space on the inside. In about a dozen top cities where life sciences companies are located, demand is high and rents are growing quickly for lab spaces and life sciences buildings.

Wealth Management - 2021

L I F E C O M PA N I ES - F I X E D R AT E P R I C I N G

5 0 % L E V E R AG E 6 5 % - 7 5 % L E V E R AG ETERMTERM RATERATE RATERATE

5 -7 years5 -7 years 2.50% - 3.00%2.50% - 3.00% 2.75% - 3.25%2.75% - 3.25%

10 - 15 years10 - 15 years 2.75% - 3.25%2.75% - 3.25% 3.0% -3.75%3.0% -3.75%

20 - 25 years20 - 25 years 3.25% - 3.75%3.25% - 3.75% 3.75% - 4.50%3.75% - 4.50%

B A N KS - F I X E D R AT E P R I C I N G

5 0 % L E V E R AG E 6 5 % - 7 5 % L E V E R AG ETERMTERM RATERATE RATERATE

5 years5 years 2.75% -3.25%2.75% -3.25% 3.25% - 3.75%3.25% - 3.75%

10 years10 years 2.80% - 3.50%2.80% - 3.50% 3.25% - 4.0%3.25% - 4.0%

C O M M E R C I A L M O RTGAG E - B AC K E D S E C U R I T I ES ( C M B S )

< 6 5 % L E V E R AG E 7 0 % - 7 5 % L E V E R AG ETERMTERM RATERATE RATERATE

10 years10 years 2.85% - 3.25%2.85% - 3.25% 3.25% - 4.0%3.25% - 4.0%

*10 year terms only, full term IO available <65% LTV*10 year terms only, full term IO available <65% LTV

Commercial Real Estate Services klnb.com

Full suite of services including: Leasing, Management, Sales, NNN Sales, and Financing

Institutional service with local expertise

Mid-market asset focus

Unparalleled market knowledge in the mid-Atlantic

Collaborative approach to select the right team for each assignment

How We Work Together

VITO LUPORetail Investment Sales

vlupo@klnb.comO: 202-652-2334C: 561-251-7207

RETAIL

DON SCHLINESenior Vice Presidentdschline@klnb.comO: 443-632-2046C: 443-745-1625

OFFICE

CHRIS KUBLERPrincipal

ckubler@klnb.comO: 443-574-1415

INDUSTRIAL

Asset Leadership Team

KLNB’s Capital Markets Group offers acquisition, disposition, and portfolio planning strategies that are tailored to our clients’ specific needs. At KLNB, we know that real estate is often a local game that requires local expertise – which is why our advisors are dedicated to serving owners and stakeholders in the mid-Atlantic region. By utilizing a collaborative approach centered around KLNB “Asset Leaders”, we are uniquely positioned to leverage the unparalleled market knowledge of our 87 brokers specializing in all facets of the Retail, Office, and Industrial asset classes. Offering sell and buy-side representation, estate planning advisory, valuation, distressed asset, and underperforming loan sales, one of our Asset Leaders will work in partnership with you to select the right KLNB brokers to best position your real estate holdings, ensuring both short and long-term goals are realized. Our Capital Markets team, coupled with boots-on-the-ground landlord and tenant representation leasing brokers, provide a multi-disciplinary point of view on complex real estate transactions. Combined with our in-house Property Management and Financing divisions, KLNB can provide a one-stop solution to maximize the value of the asset from initial analysis through final disposition.

As each real estate asset is unique in nature, we understand that each client has specific issues relating to their properties. There is nothing more valuable than the advice of a trusted Asset Leader, with a deep team behind them. Understanding both local and national tenants, the economic intricacies of the sub-market, and the competitive real estate landscape are KLNB’s passion and the key to advising our clients.

KLNB’s Capital Markets Group offers our clients an established market leader, a deep understanding of Mid-Atlantic real estate transactions, and a work-ethic unrivaled in the Baltimore/Washington marketplace.

klnb.com

WASHINGTON, DC1130 Connecticut Ave, NW, Suite 600Washington, DC 20036202-375-7500

TYSONS, VA8065 Leesburg Pike, Suite 700Tysons, VA 22182703-268-2700

BALTIMORE, MD100 West Road, Suite 505Baltimore, MD 21204410-321-0100

COLUMBIA, MD9881 Broken Land Parkway, Suite 300Columbia, MD 21046410-290-1110

While we have no reason to doubt the accuracy of any of the information supplied, we cannot, and do not, guarantee its accuracy. All information should be independently verified prior to a purchase or lease of the property. We are not responsible for errors, omissions, misuse, or misinterpretation of information contained herein and make no warranty of any kind, express or implied, with respect to the property or any other matters.