The Industrial Market Cooled Off in Q1

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1 Research & Forecast Report Long Island industrial MARKET Q The Industrial Market Cooled Off in Q1 Rose Liu Director of Finance & Research Long Island Takeaways > > Long Island industrial market slowed in Q which had the strongest year of 2015 since the recession. Long Island s unemployment rate was among the lowest in New York State despite a small increase to 4.5% from 4.1% in Q GDP growth slid to 1.40% in Q4 but it was better than the estimated and the stronger consumer spending boosted the growth of GDP. Long Island gas prices were on the rise at the end of Q1, which pushed the prices up to $2.11 with a 8.5 cent increase per gallon on average. Manufacturing and production grew and expanded first time in the past seven months. With the positive momentum carrying forward into 2016, the Long Island industrial market is expected to grow steadily despite a slowdown in the beginning of the year. > > The Long Island industrial vacancy rate was on par with Q4 2015, residing at 3.6%. The vacancy rate stabilized at 4.7% in Nassau County and 3.0% in Suffolk County. > > The asking rentals cooled off and continued to drop to $9.68 per square foot (psf) triple net (NNN) in Q1. > > Long Island net absorption totaled 80,815 square feet (sf) in Q1, a major slump from 505,947 sf in Q yet posting spikes of 52.8% or higher from a year ago. > > Likewise, leasing activity showed a slower pace with a big drop to 461,169 sf in Q1 from in excess of 1.5 million sf in the last quarter. The leasing activity in Q1 accounted for only one fourth of a year ago. Market Indicators Relative to prior period VACANCY NET ABSORPTION Summary Statistics Q Long Island Industrial Market Nassau Suffolk Long Island* Vacancy Rate 4.7% 3.0% 3.6% Change From Q (basis points) Net Absorption (Thousand Square Feet) Vacancy Rate (Warehouses) Vacancy Rate (Flex Buildings) Asking Rents Per Square Foot Per Year Nassau Q Nassau Q2 2016* Suffolk Q % 2.9% 3.5% 4.2% 3.8% 4.0% Suffolk Q2 2016* CONSTRUCTION RENTAL RATE** Note: *Projected **Rental rates for current quarter are for suburban area. Suburban $10.55 $8.66 $9.68 Change From Q % -5.7% -4.0% Suburban Warehouses $10.42 $9.31 $10.00 Suburban Flex Buildings $15.96 $7.08 $7.83 *Long Island Industrial Market refers to Nassau & Suffolk Counties; 10,000 square feet and above

2 Gross Domestic Product (GDP): Percentage Change From Preceding Period Unemployment Trends - Nassau & Suffolk GDP % Change Quarter-over-Quarter Unemployed in Thousands % Change % Unemployment Rate 7.60% 5.90% 5.07% 4.50% 8% 7% 6% 5% 4% 3% 2% 1% 0% (1.00) Source: US Department of Commerce Vacancy > > The inventory ending March 31 posted million square feet, Suffolk County with million square feet, Nassau County with 51.7 million square feet. In line with Q4 2015, the Long Island vacancy rate stabilized at 3.6%, which was the lowest in the past 20 years. The vacancy rate stayed the same at 4.7% in Nassau County. The Long Island flex buildings continued to outperform with the vacancy rate declining 20 bps to 4.0% in Q1. The vacancy rate for warehouses however was on par with the last quarter, averaging 3.5%. > > Vacancy rates declined in submarkets, led by the Eastern Nassau Submarket, which dropped 30 bps to 4.2%. The Western Nassau submarket added more spaces pushing the vacancy rate up to 2.1%, 100 bps higher than Q The Central Nassau submarket had the highest vacancy rate with a small increase of 10 bps to 4.3%. With the current trend of companies relocating from Brooklyn and Queens, the vacancy rate is expected to continue the momentum and dip into the lowest levels in Source: NYS Department of Labor Rental Rate > > With the spike of rental rate peaking at $10.17 psf NNN in Q in the past 20 years, the rate continued the downward trend, dropping to $10.08 psf NNN in Q and then dipping to $9.68 psf NNN in Q In the meanwhile, the average rental rate in Nassau County posted a quarterly decrease of 1.4% but increased 4.15% on a yearly basis. The Suffolk County rental rate was pushed down to $8.66 psf NNN in Q1, a 5.7% decrease from Q4 2015, and a 4.73% decrease year-over-year. Rental rates for warehouses stabilized at $10.00 psf. > > The rental rates varied in different submarkets, dominated by the Western Nassau and the Central Nassau submarkets with the highest average asking rates at $11.93 psf and $11.39 psf respectively. The rental rate in the Western Suffolk submarket has climbed steadily quarter-over-quarter, up to $7.63 psf, which was still the lowest amongst all other submarkets. The averaging asking rental rate in the Central Suffolk submarket declined by 9.4% to $8.56 psf in Q1. The Suffolk industrial market is most desirable for manufacturing/industrial companies looking for larger spaces and lower rents as well as IDA incentives to receive real estate tax credits. Update Vacancy Rates, Asking Rents, & Absorption Vacancy Rates Average Asking Rents Net Absorption (in Thousands) 1Q16 4Q15 Western Nassau Central Nassau Southern Nassau Eastern Nassau Western Suffolk Southwestern Suffolk Central Suffolk 0.0% 2.0% 4.0% 6.0% Western Nassau Central Nassau Southern Nassau Eastern Nassau Western Suffolk Southwestern Suffolk Central Suffolk $0 $10 $20 Western Nassau Central Nassau Southern Nassau Eastern Nassau Western Suffolk Southwestern Suffolk Central Suffolk (100) Source: CoStar & Colliers International Research 2 Long Island Research & Forecast Report Q Long Island Colliers International

3 Absorption > > Long Island net absorption plunged to 80,815 sf in Q1 from its high of 929,565 sf in the past year, well below its average of 266,844 sf in the past five years. Even though the net absorption slumped significantly, it still posted a 52.8% increase from a year ago. Likewise, net absorption in Nassau County fell to 1,569 sf and Suffolk County slid to 79,246 sf. Warehouses and flex buildings recorded a combined of 425,132 sf plunge in net absorption. The Southwestern Suffolk submarket was the top performer which was the only submarket posting an improvement in net absorption of 16,340 sf. On the other end of the spectrum, the Central Suffolk submarket posted 77,820 sf of positive net absorption in Q1, much lower than the 242,503 sf absorbed in the prior quarter, yet more than doubled in Q Sale & Lease Activity > > Long Island leasing activity was on a downswing, dipping to 462,919 sf in Q1 and it was much lower than the five year average of 1.3 million sf. Nassau County industrial leasing activity made up 73.6% of the total volume. In Q1, National Packaging, a 90 year residence of the Red Hook section of Brooklyn leased 47,000 sf of industrial space at 230 Duffy Avenue in Hicksville, which was one of the prominent examples of companies migrating from the boroughs to Long Island with sprawling spaces, competitive rates and IDA (Industrial Development Agency) incentives. The five year average of Long Island industrial sale price was $72.00 psf with a sales volume of $308 million. The Q1 average sale price improved to $98.00 psf with a lower cap rate of 8.1%. A 40,000 square foot flex building situated on a 3.60 acres land was sold for $3,680,000 or $92.00 psf at 225 Rabro Drive, Hauppauge. Long Island Absorption (Square Feet, in Thousands) Leasing Activity (SF) Square Feet Long Island Industrial Net Absorption (400) (200) ,000 Nassau VS. Suffolk Industrial Leasing Activity Nassau Suffolk Average 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Source: CoStar & Colliers International Research Update Transaction Highlights industrial SALE ACTIVITY Property Address Town Submarket Size SF Sale Price 42 Windsor Place Central Islip Suffolk Western 65,000 5,200, Rabro Drive Hauppauge Suffolk Central 40,000 3,680, Central Avenue Farmingdale Nassau Eastern 38,034 3,850, Oser Avenue Hauppauge Suffolk Central 20,114 2,450,000 INDUSTRIAL LEASE ACTIVITY Outlook Property Address Town Submarket Size SF Lease Type 230 Duffy Avenue Hicksville Nassau Eastern 47,000 Relocation 177 Cantiague Rock Road Westbury Nassau Central 24,190 Lease 39 Drexel Drive Bay Shore Suffolk Western 20,240 Lease 660 Cantiague Rock Road Jericho Nassau Eastern 15,000 Lease > > Even though Long Island s industrial real estate market cooled off in the beginning of the year, the prominent momentum of 2015 made an impact on the market and it is expected to continue the trend but at a moderate and steady pace. The demand for industrial spaces still outpaced the supply and this trend will continue to dominate the market if there is not much space added. > > The Q1 vacancy rates stabilized while the average asking rates rolled back along with the decline of net absorption. It is phenomenal that more and more companies plan to move to Long Island and further east from their longstanding residences in boroughs. Overall, Long Island industrial market is expected to grow steadily with strong economic metrics. 3 Long Island Research & Forecast Report Q Long Island Colliers International

4 UPDATE - MARKET STATISTICS SNAPSHOT LONG ISLAND - WAREHOUSES & FLEX BUILDINGS COUNTY VACANCY RATE AVERAGE ASKING RENTS 1Q16 4Q15 3Q15 2Q15 1Q16 4Q15 3Q15 2Q15 Nassau Total 4.7% 4.7% 5.2% 6.0% $10.55 $10.70 $11.07 $ ,451 Bldgs Lease 4.7% 4.7% 5.1% 5.9% $10.55 $10.70 $11.07 $10.33 Sublease 0.0% 0.0% 0.1% 0.1% Suffolk Total 3.0% 3.1% 3.3% 3.8% $8.66 $9.18 $9.07 $9.00 2,925 Bldgs Lease 2.9% 3.0% 3.2% 3.7% $8.66 $9.18 $9.07 $9.00 Sublease 0.1% 0.1% 0.1% 0.1% Long Island Total 3.6% 3.6% 3.9% 4.5% $9.68 $10.08 $10.17 $9.71 4,376 Bldgs Lease 3.5% 3.5% 3.8% 4.4% $9.68 $10.08 $10.17 $9.71 Sublease 0.1% 0.1% 0.1% 0.1% Warehouses - LI Total 4,050 Bldgs Lease 3.5% 3.5% 3.7% 4.3% $10.00 $9.99 $10.02 $9.54 Sublease 3.4% 3.5% 3.6% 4.2% $10.00 $9.99 $10.02 $ % 0.1% 0.1% 0.1% Flex Buildings - LI Total 326 Bldgs Lease 4.0% 4.2% 5.8% 6.8% $7.83 $15.67 $16.84 $15.73 Sublease 4.0% 4.2% 5.7% 6.6% $7.83 $15.67 $16.84 $ % 0.0% 0.2% 0.2% LONG ISLAND Q MARKET EXISTING INVENTORY (SF) march 31, 2016 VACANCY RATE OVERALL AVERAGE ASKING RENT rental rate (warehouse) rental rate (flex buildings) net absorption (sf) net absorption (sf) current quarter YTD NASSAU Western Nassau 7,582, % $11.93 $11.83 $17.25 (82,843) (82,843) Central Nassau 8,416, % $11.39 $ (3,600) (3,600) Southern Nassau 10,170, % $10.34 $ ,300 9,300 Eastern Nassau 23,249, % $10.25 $10.03 $ ,962 78,962 NASSAU TOTAL* 51,691, % $10.55 $10.42 $ ,569 1,569 SUFFOLK Western Suffolk 62,731, % $7.63 $ (44,114) (44,114) Southwestern Suffolk 9,271, % $10.79 $ ,340 16,340 Central Suffolk 28,894, % $8.56 $9.92 $ ,820 77,820 SUFFOLK TOTAL** 105,088, % $8.66 $9.31 $ ,246 79,246 LONG ISLAND TOTAL 156,780, % $9.68 $10.00 $ ,815 80,815 *Totals include all Nassau Submarkets **Totals include all Suffolk Submarkets Source: CoStar and Colliers International Research 4 Long Island Research & Forecast Report Q Long Island Colliers International

5 Featured Listings 1724 fifth avenue, bay shore +/- 392,000 SF Industrial Warehouse Building for Lease > Former Entenmann s bakery headquarters > Private sanitary sewer line > Infrastructure in place perfect for pharma or food manufacturing > Acres; 30+ Docks > Divisions possible 1 Grucci lane, brookhaven Acres of Industrial Land for Sale > Great development opportunity > Perfect location for utility company or other environmental friendly business > Lease terms open for discussion > Close proximity to LIE & Sunrise Highway 160 gary way, ronkonkoma 6,025 SF Industrial Building for Sale > Plot size: 0.48 Acres > Office space: +/- 2,500 SF > Ceiling height: +/- 17 > Built in 1992 > Zoning: Industrial I 70 dale street, west babylon +/- 8,000 SF Industrial Building for Sale > Lot size: +/ Acres > Office space: +/- 2,200 SF > Ceiling height: 14 > Loading: 2 Drives Ins > Conveniently located off of Wellwood Ave > Can be delivered with two tenants occupying 2,000 SF & 4,000 SF Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Long Island 1981 Marcus Avenue, Suite E104 Lake Success, New York colliers.com/long Island 5 North American Research & Forecast Report Q Office Market Outlook Colliers International

6 554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 Market Contact: Rose Liu Director of Finance & Research Long Island Main Ext. 555 Dir rose.liu@colliers.com $2.5 billion in annual revenue 2 billion square feet under management 16,000 professionals and staff About Colliers International Group, Inc. Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 11 consecutive years, more than any other real estate services firm. colliers.com Copyright 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.