Raleigh-Durham Demand Finally Catching Up With New Supply; More Deliveries to Come

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1 Research Report RALEIGH-DURHAM INDUSTRIAL Q Raleigh-Durham Demand Finally Catching Up With New Supply; More Deliveries to Come Key Takeaways > > The demand for industrial space in the Raleigh-Durham market is finally catching up to, and in some cases, outpacing construction deliveries, creating an overall decrease in vacancy levels and increasing rents. The 796,000+ square feet absorbed compared to the 370,000 square delivered created an overall industrial vacancy rate of 5.8%. > > First quarter investment activity in Raleigh-Durham s industrial market held steady. Investment deal volume totalled $98.6M in 11 properties of over 2.1M square feet. The average square foot price was reported at $ > > As of February 2018, the Triangle unemployment rate was reported at 4.0%, 0.1% lower than the national unemployment rate. Wake County added 4,259 jobs (in 14 new companies and 46 expanding companies) adding a total investment of $38.3M from October 2017 to March > > The U.S. unemployment rate was reported at 4.1%, the lowest rate in over 15 years. Jobs and import/export trades have recorded positive results across the country with no signs of slowing. Consumer confidence coupled with continued wage growth will prove to be especially positive for the Triangle s industrial market. > > E-commerce sales are growing at impressive rates, up 16% in 2017, however, labor shortages and trade policies could prove to inhibit the industrial markets growth in Market Indicators Relative to prior period NET ABSORPTION RENTAL Summary Statistics Q Industrial Market Raleigh Durham Flex Market Raleigh Durham Warehouse Market Total Square Feet 26,878,871 45,566,562 Vacancy Rate 10.7% 3.0% Change From Q (percentage points) Total Net Absorption Under Construction Deliveries Asking Rents Per Square Foot Per Year Raleigh-Durham Q Raleigh-Durham Q % 0.6% 5, , , ,580 25, ,300 Average Quoted $13.85 FSG $5.77 NNN Change from Q $0.41 $0.39

2 Absorption & Leasing Activity > > Total net absorption was reported at 790,854 square feet in the warehouse market while flex absorption finally climbed out of the negative to reach 5,877 square feet of positive net demand. After two years of negative absorption in the Triangle, the flex market is finally recovering. > > The Southern Wake County submarket led the Triangle warehouse sector with positive net absorption of 131,827 square feet. Key leases signed in the first quarter include Andrew and Hamilton s 68,347 square foot lease at Beltline Center and an undisclosed tenant at 400 EastRidge in Perimeter Park for over 55,000 square feet. > > Other notable activity includes Best Buy s 57,120-square-foot lease at the new Liberty III industrial building in the RTP I-40 submarket. Vacancy & Availability > > The overall flex vacancy decreased in the first quarter to 10.7%. Total available space in the flex market is just over 2.8M square feet. > > Over 1.3 million square feet of warehouse space was reported vacant at the close of the first quarter, creating a slight decrease in the vacancy rate. Over 345,000 square feet of warehouse distribution space was delivered at the end of the first quarter. As more supply hits the Triangle market throughout 2018, vacancy and absorption totals will fluctuate. Rental Rates > > The average asking rental rate for the Triangle flex market increased to $13.85 per square foot at the end of the first quarter, up $0.41 from > > The average asking rate in the Triangle s warehouse sector was $5.77 per square foot, up from $5.38 in the previous year s first quarter. NOTABLE DEVELOPMENT PROJECTS Q Q Absorption and Vacancy Triangle Warehouse 350, , , , , ,000 50, Q Q Q Q Q1-50, , ,000 Net Absorption SF Total Vacant Percent % Total Q Absorption and Vacancy Triangle Flex 200, , ,000 50, , Q Q Q Q Q1-100, , , , ,000 Net Absorption SF Total Vacant Percent % Total 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 12% 10% 8% 6% 4% 2% 0% SUBMARKET SIZE PRELEASE % STATUS DELIVERY / START DATE TYPE Patriot Park Research Triangle Park 163,000 0% Under Construction Q Warehouse Patriot Park Bldg. 2 Research Triangle Park 159,600 0% Under Construction Q Warehouse Oakwood Business Center Orange County 160,000 0% Proposed Unknown Warehouse Greenfield North Southern Wake County 149,000 0% Proposed Unknown Warehouse Grifols Plasma Plant Johnston County 142, % Under Construction Q Warehouse Alexander Industrial Park Research Triangle Park 133, % Under Construction Q Warehouse Hinton Oaks III NE Wake County 120,000 0% Proposed Q Warehouse 1051 Goodworth Southern Wake County 70, % Under Construction Q Flex 2 Raleigh-Durham Research Report Q Industrial Market Colliers International

3 FLEX SUBMARKET COMPARISONS Q SUBMARKET NAME # BLDS EXISTING INVENTORY (%) NET ABSORPTION DELIVERIES UNDER AVG RENTAL (FULL SERVICE) Cary 65 1,408,917 32, (8,342) 0 0 $11.74 Downtown Durham ,862 12, , $13.94 Downtown Raleigh 4 92, $ East Raleigh , $11.99 Glenwood Creedmoor 66 1,101,331 35, (10,110) 0 0 $8.81 Johnston County ,469 5, (65,547) 0 0 $8.65 North Durham ,785 88, (2,328) 0 0 $11.95 Northeast Wake County 51 2,423, , (2,422) 0 0 $13.70 Orange County ,890 83, ,000 $8.08 Research Triangle Park 92 6,412,677 1,626, (57,681) 0 0 $19.13 RTP I ,119, , , $12.68 Six Forks Falls of Neuse ,009 12, , $9.72 South Durham ,938 21, (1,024) 0 0 $11.22 Southern Wake County 141 3,425,223 60, ,463 25, ,400 $11.36 US 1 Capital Blvd ,125, , , $12.12 West Raleigh 56 1,504,894 26, , $12.16 FLEX S ,878,871 2,882, ,877 25, ,400 $13.85 WAREHOUSE SUBMARKET COMPARISONS Q SUBMARKET NAME # BLDS EXISTING INVENTORY % NET ABSORPTION DELIVERIES UNDER Cary 21 1,271, $4.75 Downtown Durham 36 1,149,556 7, (7,988) 0 0 $4.50 Downtown Raleigh 8 211, $ East Raleigh 47 1,472, , $7.45 Glenwood Creedmoor 72 1,640,075 4, , $7.84 Johnston County 100 4,461, , , $3.67 North Durham 44 1,597,018 37, $4.38 Northeast Wake County 114 5,001, , , $5.94 Orange County , $6.00 Research Triangle Park 68 7,979, , , , ,580 $5.84 RTP I ,340,196 68, (17,748) 0 0 $6.56 Six Forks Falls of Neuse 58 2,473,843 9, , $8.29 South Durham 65 3,112, , $3.74 Southern Wake County 196 7,143, , , ,000 $5.57 US 1 Capital Blvd. 78 3,070,261 46, , $6.71 West Raleigh 45 1,176,311 14, (1,450) 0 0 $8.19 AVG RENTAL (NNN) WAREHOUSE S 1,020 45,566,562 1,345, , , ,580 $ Raleigh-Durham Research Report Q Industrial Market Colliers International

4 NOTABLE LEASE TRANSACTIONS Q TENANT SUBMARKET SIZE TYPE DEAL TYPE Undisclosed Whilden Industrial Centre Research Triangle Park 155,572 Warehouse New Maintenance Supply Research TriCenter South Research Triangle Park 83,119 Warehouse New Andrews & Hamilton Beltline Center Southern Wake County 68,347 Warehouse New Stier Supply Keystone RTP I-40 62,400 Warehouse New Best Buy Liberty Ridge III Research Triangle Park 57,120 Warehouse New Undisclosed 825 Management Way Southern Wake County 47,000 Warehouse New Renesas Electronics Venture Center RTP I-40 38,822 Flex New RedBull Perimeter Park RTP I-40 32,058 Flex Renewal Elite Express Logistics 6221 Westgate Glenwood Creedmoor 28,000 Warehouse New Morring Moving 3301 Jones Sausage Road Southern Wake County 24,000 Warehouse New Lambert Cable 3321 Hobby Court Northeast Wake County 15,540 Warehouse New Construction & Investment Activity > > Overall industrial deliveries totalled 370,300 square feet at the close of the first quarter of There is over 818,000 square feet of warehouse and flex product under construction, at approximately 23% pre-leased. > > First quarter investment activity in Raleigh-Durham s industrial sector held steady. Investment deal volume totalled $98.6M in 11 properties of over 2.1M square feet. The average square foot price was reported at $27.00 for the first quarter. > > Notable transactions from the first quarter include the portfolio sale of four Meridian flex buildings and two buildings at TriCenter North, both in the RTP I-40 and Research Triangle Park submarkets. The Investcorp NC Portfolio includes both office and flex properties that sold in March of 2018 for a total of $95.8M in over 560,000 total square feet and a reported 7.0% capitalization rate. Accesso Partners joint ventured with Torchlight Investors to purchase the portfolio from Investcorp and American RE Partners. The eight-property portfolio was 91% occupied at the time of the sale. NOTABLE INVESTMENT SALES Q SUBMARKET TYPE SIZE SALES PRICE (MILLIONS) PRICE/SF BUYER Investcorp NC Portfolio RTP I-40 Flex 329,052 $48.0 $146 Accesso Partners TriCenter North III & IV Research Triangle Park Warehouse 272,400 $16.8 $62 Dalfen America FedEx Ship Center US 1 Capital Blvd Warehouse 96,054 $10.0 $104 Philip R. Wood 410 Gregson Drive Cary Flex 30,380 $7.7 $253 Gregson Developers Regional Commerce Center South Durham Warehouse 1.32M $6.7 $5 Scannell Properties 2101 Harrod Street US 1 Capital Blvd Warehouse 70,108 $3.4 $48 Harrod Associates 2420 Reliance Avenue Southern Wake Cty Flex 28,181 $3.3 $117 Gary Wang 6321 Angus Drive Glenwood Creedmoor Flex 30,100 $2.8 $ Reliance 4 Raleigh-Durham Research Report Q Industrial Market Colliers International

5 413 offices in 69 countries United States: 145 Canada: 28 Latin America: 23 Asia: 39 EMEA: 131 ANZ: 47 $2.7 billion in annual revenue INDUSTRIAL SERVICES CONTACT: Lee Holder Senior Vice President Raleigh-Durham Dennis Eaton Senior Vice President Raleigh -Durham David Stroud Vice President Raleigh-Durham David Batten Vice President Raleigh-Durham billion square feet under management 15,400 professionals and staff About Colliers International Colliers International is a global leader in commercial real estate services, with more than 16,300 professionals operating out of 502 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate occupiers, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. Colliers International has been recognized and ranked by the International Association of Outsourcing Professionals Global Outsourcing 100 for 10 consecutive years, more than any other real estate services firm. colliers.com/rdu Copyright 2017 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.