Research. New product, high rents CLEVELAND 1Q16 INDUSTRIAL MARKET. Current Conditions

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1 New product, high rents The Greater Cleveland industrial market absorbed 556,046 square feet in the first quarter of 2016, the 14th consecutive quarter of positive tenancy gains for the market. The positive growth moved the vacancy rate down 10 basis points from the end of 2015, to 7.. Since the start of 2014, the vacancy rate has declined 130 basis points from 8.5% in the first quarter. In fact, the vacancy rate has decreased despite more than 800,000 square feet of new product delivered over the past two years, 127,020 square feet of which delivered this quarter, further confirming the demand for quality industrial space in Greater Cleveland. Current Conditions Greater Cleveland posted its fourteenth consecutive quarter of positive net absorption Rental rates above $4.00/SF for the first time since 2007 Rental rates for newly delivered products pace the market at more than $5.00/SF Bluestone II delivered 127,020 square feet of new product to Northeast submarket As vacancy ticked down, average rental rates increased in first-quarter 2016 to $4.04/SF, up from $3.95/SF the previous quarter. Since firstquarter 2013, the average rental rate has increased $0.25/SF, led by the Southeast submarket, where rents are up $0.70/SF during the same period. This marks the first time since 2007 that the average rental rate is north of $4.00/SF, due in large part to newer product commanding $5.00/SF or greater for warehouse and distribution space. Additionally, while new product is pushing rent higher, older product is being removed from market for demolition or conversion. Market Analysis Asking Rent and Vacancy $5 $4 $3 $2 $ % In the West submarket, NRP Group has completed demolition of nearly 300,000 square feet of former industrial buildings along West 58th and West 65th Streets, where the Garfield Heights developer plans 306 apartments. A number of other vacant industrial buildings around West 65th Street are currently for sale, with developers eying the land for new apartment construction. The proximity to Lake Erie and downtown Cleveland that once made this area a hotbed for warehousing is now a major demand generator for potential residential users. Mars Electric Adds Location Mars Electric Co. agreed to move its headquarters from Willoughby to 6655 Beta Drive in Mayfield Heights, where the electrical supply wholesaler is more than doubling its size to 110,000 square feet. Mars Electric Co. is moving up to 60 employees to the new location, specifically in warehouse and operations roles. The company plans to keep its current location on Mentor Avenue for eight employees who will run the counter operations. Mayfield Village is providing a 30. payroll tax incentive to the company that will run through the next five years. In addition to the new lease signed by Mars Electric Co., Providian Medical Equipment agreed to lease 15,167 square feet at 5335 Avion Drive in Highland Heights. These moves, along with others, pushed the vacancy rate down to 8.1% in the Northeast submarket during firstquarter Overall, the submarket totaled 222,238 square feet of positive net absorption this quarter, accounting for 40. of the entire market absorption. This quarter marked the seventh consecutive quarter of positive absorption in the Northeast submarket, during which time the vacancy rate dropped 160 basis points, from 9.7%. The submarket $0 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Net Absorption Square Feet, Millions Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Market Summary Average Asking Rent (Price/SF) Vacancy (%) Current Quarter Prior Quarter Year Ago Period 12 Month Forecast Total Inventory 296MSF 296MSF 296MSF Vacancy Rate % 7.9% Quarterly Net Absorption 556, , ,993 Average Asking Rent $4.04 $3.95 $3.94 Under Construction 795, , ,960 Deliveries 127,

2 managed strong positive absorption, despite a new building delivering in the first quarter. Bluestone Business Center II delivered 127,020 square feet of Class A warehouse/distribution space to the market. The high-bay facility is the second building delivered since 2014 at Bluestone in Euclid. The developer, Ray Fogg Building, hopes to replicate the success of the fist building, which was fully leased within one year of delivery. Eaton Corporation Announces Plant Closure Moving to the Southwest submarket, Eaton Corporation announced plans to close its hydraulics plant at 1000 West Bagley Road in Berea. Eaton will close its plant in fourth-quarter 2016, but layoffs will begin next quarter. The company will eliminate a total of 102 employees as part of its $400.0-million restructuring program that runs through The closure will add 80,650 square feet of industrial space to a very tight market in Eaton corporation announced plans to close its hydraulics plant The Southwest submarket boasts the lowest vacancy rate of any submarket in Greater Cleveland, finishing first-quarter 2016 at 4.5%. The submarket bounced back in the first quarter to total 29,223 square feet of positive absorption, one quarter after giving back approximately 10,000 square feet at the end of In the Southwest s largest lease transaction of the quarter, Graphic Packing International extended its 52,057-square-foot lease at Carter Street. Turning to the sales side, a number of properties sold in the Southwest submarket in the first quarter of First, 2155 Drake Road in Strongsville sold to an investor for $2,250,000 or $48.71/SF. The 46,167- square-foot building was fully leased at the time of sale through Also in the first quarter, Industrial Parkway in North Olmsted sold for $1,900,000 or $52.32/SF Construction Expected To Pick Up In 2016 The Greater Cleveland industrial market can expect more deliveries in the near future, as a number of projects are under construction or planned for the next 18 months. Included in this new construction are two large speculative buildings located in the Southwest and Southeast submarkets. First, in Strongsville, a 200,000-square-foot warehouse/distribution building on Foltz Industrial Parkway is expected to break ground in late In the Southeast, another 200,000-square-foot building, CornerStone Building II, is slated to begin construction in second-quarter The aforementioned products will bring new supply to the market while pushing rents further upward, as both 200,000-square-foot buildings advertise rental rates above $5.00/SF. Lease/User Transactions Tenant Building Submarket Type Square Feet TTI Floor Care of North America Aurora Road Southeast Renewal 138,668 Great Lakes Integrated Pin Oak Parkway Northwest Renewal 124,647 Mars Electric Co Beta Drive Northeast Direct 110,000 Custom Products Corporation Carter Street Southeast Extension 52,057 Providian Medical Equipment 5335 Avion Park Drive Northeast Direct 15,167 Select Sales Transactions Building Submarket Sale Price Price/SF Square Feet Industrial Parkway Southwest $1,900,000 $52 36, Drake Road Southwest $2,250,000 $49 46, Briar Road Downtown $1,150,000 $34 33, Progress Drive Southwest $1,864,226 $29 64, Tyler Boulevard Northeast $1,100,000 $22 50,000 2

3 Submarket Statistics Total Under Total Qtr YTD WH/Dist R&D/Flex Total Inventory Construction Vacancy Absorption Absorption Asking Rent Asking Rent Asking Rent (SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF) Downtown 75,603, ,659 11,659 $2.27 $4.39 $3.22 Northeast 48,936, % 222, ,238 $3.29 $6.95 $3.31 Northwest 23,786, ,435-5,435 $4.58 $7.96 $3.50 Southcentral 34,188, % 30,871 30,871 $4.61 $7.55 $4.97 Southeast 79,752, , , ,490 $4.63 $7.16 $5.15 Southwest 34,291,403 25, % 29,223 29,223 $4.40 $5.92 $4.72 Market 296,559, , , ,046 $3.76 $6.80 $4.04 3

4 Economic Conditions The Greater Cleveland economy continued to add more jobs in firstquarter 2016, as total payroll employment grew in February, by 0.8% year-over-year. Many of the gains are due to an uptick in hiring in the leisure and hospitality sectors. For the third consecutive quarter, the leisure and hospitality industry posted strong gains, with 3.8% growth from On the other hand, the mining, logging and construction and manufacturing sectors have contracted 10. and 3.1%, respectively, from In fact, while other industries are expected to recoup jobs lost during the Great Recession, manufacturing job growth is expected to be flat over the foreseeable future. The loss of mining, logging and construction employment is due in part to the continued uncertainty in natural gas drilling. Low crude oil prices have decreased the need for more exploratory natural gas drilling. However, low oil prices have also provided a boost to employment in the transportation and trade sector, which grew minimally year-over-year at 1.. Unemployment Rate Employment By Industry Cleveland-Elyria-Mentor % % 17.9% 7.3% 5.8% 13.3% Payroll Employment Mining, Logging, and Construction Manufacturing Trade, Transportation, and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government Seasonally Adjusted 1 8% Total Nonfarm, Not Seasonally Adjusted, 12-Month % Change 3% 1% -1% - United States United States Cleveland-Elyria-Mentor Consumer Price Index (CPI) All Items, 12-Month % Change, Not Seasonally Adjusted, = United States Cleveland-Elyria-Mentor Employment Growth by Industry Cleveland-Elyria-Mentor, Feb Month % Change Seasonally Adjusted Total Nonfarm Mining/Logging/Construction Manufacturing Trade/Transportation/Utilities Information Financial Activities Prof & Bus Services Education and Health Services Leisure and Hospitality Other Services Government

5 Cleveland 1350 Euclid Avenue Suite 300 Cleveland, OH Newmark Grubb Knight Frank United States Office Locations Gar Heintzelman Analyst Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Grubb Knight Frank Reports are also available at All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.