Picked Over. ALBUQUERQUE, NM Q Industrial. Research & Forecast Report. Key Takeaways. Market Indicators Relative to prior period

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1 Research & Forecast Report ALBUQUERQUE, NM Q4 20 Industrial Picked Over Key Takeaways > > Owner user acquisitions strong > > Supply tightens > > New construction projects gaining more momentum The appetite to purchase remained strong with sales activity accounting for the majority of space absorbed. Nearly 90,000 square feet was purchased this quarter by owner occupants. The biggest two were a 35,000 square-foot general industrial building that was acquired in the North I-25 submarket by a remodeling contractor and a 36,500 square-foot warehouse was purchased in the South Valley by a moving company. Both buildings were previously vacant. Leasing activity was strong for smaller spaces below 10,000 square feet. During the quarter smaller spaces contributed almost 34,000 square feet of total space absorbed. The supply of smaller spaces is much more robust compared to larger spaces over 20,000 square feet and was able to provide more options for growing demand. Most new activity occurred in the desirable North I-25 submarket. The on-going challenge of finding spaces larger than 20,000 square feet has not relented. The majority of supply consists of older spaces that typically have less desirable attributes such as low clear height ceilings. Market Indicators Relative to prior period VACANCY NET ABSORPTION RENTAL RATE * Projected, relative to prior period Summary Statistics, Q4 20 OVERALL GENERAL INDUSTRIAL WAREHOUSE/ DISTRIBUTION Vacancy Rate 6.4% 4.1% 7.5% Change from Q3 20 (Basis Points) Absorption (Square Feet) 95,336 47,494 66,442 ASKING RENTS Annual Per Square-Foot Q4 20 FORECAST Q1 2016* $6.55 $5.10 Quarterly Change -0.9% -0.6% Year-Over-Year Change -3.0% -8.3% The market is still concurrently both a landlord s and tenant s market. Newer buildings with more modern amenities and larger spaces are generally in the landlord s favor given the limited supply. Older buildings with low ceiling heights are considered a tenant s market given the abundant supply of choices. Non-traditional users, like charter school, fitness centers, and brew pubs have now become a permanent part of the industrial tenant mix. Total deal volume for 20 was just over 90,000 square feet of space. Users like these are helping to deal with the large supply of obsolete spaces. A new entrant to the list is licensed growers of medical cannabis. Twelve new licenses were just awarded during the quarter and should contribute positive absorption in the first quarter of 2016.

2 Asking rates are still trending downward since the majority of available spaces on the market are typically in older, obsolete buildings. The pricing power for newer or quality buildings is more robust but was offset by a lack of larger tenants in the market. Forecast Demand for larger spaces with modern amenities should increase especially for warehouse and distribution properties. As modern logistic systems evolve themes like consolidating facilities or outsourcing logistic operations to third party firms is becoming more common. The strongest demand will likely occur in the North I-25 and West Mesa submarkets. New speculative construction starts should begin gaining more momentum heading into The challenge will be reaching the pre-leasing threshold to trigger starting the projects with asking lease rates well above market averages. Look for this to occur as the probability increases for a large distribution node to be needed for the region. The majority of new construction starts should take place in build-to-suit or owner developed projects spurred on by lower land prices and attractive financing options. Demand to purchase properties is expected to remain vibrant for both investors and owner occupants. According to Real Capital Analytics the pace of industrial investment transaction volume is slowing down but has already reached 90 percent of 20 s total volume in the third quarter. This should stabilize capitalization rates moving into A limited supply of investment offerings locally, however, could cause further compression of capitalization rates locally as investors seek to diversify risks in secondary markets like Albuquerque. Users seeking purchase options should experience an abundant supply of older properties priced competitively. The challenge will be factoring in the renovation costs which can typically be higher than the acquisition costs on a per square-foot basis. Asking rates for older inventory should continue to experience downward pressure. Discounts will be required in order to attract interest. Conversely, pricing power in more modern facilities is likely to begin growing slowly as more tenants enter the market. RECENT TRANSACTIONS LEASING ACTIVITY LESSEE/BUYER TYPE LESSOR/SELLER PROPERTY SIZE SF On Broadway Partners, LLC purchased TW Investment, LLC 2525 Broadway Blvd SE 36,500 Dream Remodeling purchased Aegon USA Realty Advisors, LLC 5520 Midway Park Pl NE 34,844 Blueline Rental, LLC leased Private Investors nd St NW 23,800 E2 Properties, LLC purchased Private Investors 2100 Osuna Rd NE 18,000 Instutute of Community Wellness & Athletics, LLC leased Comanche Road, LLC 2420 Comanche Rd NE 11,838 2 Research & Forecast Report Q4 20 Albuquerque Industrial Colliers International

3 VACANCY Quarterly 12% 10% 8% 6% 4% Availability Vacancy COMPLETION VS. ABSORPTION Yearly 450(in Thousands of SF) Absorption Completions RATES Yearly (per SF, Triple Net) $12 $10 $8 $6 $4 R&D/Flex General Industrial Warehouse/Dist. VACANCY BY SUBMARKET 25% 20% % 10% 5% *** - Q3- data displayed. 0% Airport Downtown Far NE Mesa Del Sol North I-25 North Valley Northeast Heights Rio Rancho South Valley Southeast Heights University West Mesa Overall 3 Research & Forecast Report Q4 20 Albuquerque Industrial Colliers International

4 NET ABSORPTION ASKING RENT Submarket TOTAL SF VACANT SF VACANT % AVAILABLE % ABSORPTION YTD ABS CONSTRUCTION WH/DIST. R&D/FLEX AIRPORT 971, , %.0% - 6,000 - $4.79 $9.98 DOWNTOWN 3,6, , % 12.5% - 90,350 - $ FAR NORTHEAST HEIGHTS 171, MESA DEL SOL 639,334, % 10.5% NORTH I-25 16,042, , % 8.4% 72, ,187 42,510 $6.84 $8.30 NORTH VALLEY 1,583,838 1, % 10.3% 989 (30,296) - $6. $8.69 NORTHEAST HEIGHTS 404,707 42, %.4% - 4,160 - $ RIO RANCHO 6,091,450 3, % 2.7% 6,864 (38,626) - $ SOUTH VALLEY 2,481, ,029.3% 19.1% 36,500 42,348 - $ SOUTHEAST HEIGHTS 1,552, , % 9.8% 1,500 2,429 - $5.58 $.97 UNIVERSITY 188,761 45, % 10.1% WEST MESA 4,112,686 5, % 8.2% (23,100) 1,736 - $6.21 $6.19 TOTALS 37,386,940 2,403,8 6.4% 8.9% 95, ,288 42,510 $5.10 $9.24 ASKING RENT BY CLASS GENERAL INDUSTRIAL 18,081,1 734, % 7.8% 47,494 59,106 42,510 $6.55 R&D/FLEX 4,6, , % 11.8% 66,442 35,676 - $9.24 WAREHOUSE/DIST.,8,907 1,1, % 9.4% (18,600) 235,506 - $5.10 TOTALS 37,386,940 2,403,8 6.4% 8.9% 95, ,288 42,510 $6.34 Office inventory includes all multi-tenant and single tenant buildings at least 10,000 square feet. Owner-occupied, government and medical buildings are not included if total space occupied is 75 percent or greater. Asking rates are full service gross on a per square-foot annual basis. Available space includes all vacant space and occupied space currently on the market. Colliers International makes no guarantees, warranties or representations as to the completeness or accuracy thereof. 4 Research & Forecast Report Q4 20 Albuquerque Industrial Colliers International

5 Industrial Brokers BILL ROBERTSON Senior Vice President Principal TEL LORI ROBERTSON Associate TEL TOM FRANCHINI, CCIM Senior Associate TEL Research & Forecast Report Q4 20 Albuquerque Industrial Colliers International

6 Albuquerque LOCAL COMPANY PROFILE Colliers International in New Mexico accelerates the success of our clients through our extensive industry experience, superior market knowledge throughout the state and a thorough understanding of the complexities associated with real estate transactions. As a market leader in New Mexico for over 25 years, our local team of over 50 real estate advisors and employees provides every client extensive commercial real estate industry experience. We offer expertise in the full spectrum of transaction services, specializing in office, investment, industrial, retail, land and multi housing properties. The professionals in our office hold numerous prestigious industry designations, including CCIM, SIOR and CPM. An Accredited Management Organization (AMO), our Property Management division provides comprehensive property management services for all types of real estate properties. Through our experience, education and integrity, we greatly enhance the value of our clients real estate assets. As an acknowledged leader in the field of Receivership Services, Colliers International in New Mexico has built a reputation for maintaining cost efficient operations and delivering superior levels of service to our customers and clients. We provide our clients with market research, analysis, mapping and demographics that are unmatched in New Mexico. On a quarterly basis since 1999, we have collected detailed market information on over 1,700 buildings totaling over 77 million square feet. Our extensive building inventory database includes photos and detailed property data, ensuring that we capitalize on trends and activity affecting commercial real estate decisions. Using industry leading software, ArcGIS, our research division can provide a wide variety of maps, reports, aerials and graphs showing key information required by clients to make location decisions. SPECIALTIES Office Retail Industrial Multi-Family Business Brokerage Property Management Tax Protest Receiverships Research Mapping 6 Research & Forecast Report Q4 20 Albuquerque Industrial Colliers International

7 Albuquerque Ken Schaefer Director of Research 2424 Louisiana Blvd NE Albuquerque, NM TEL FAX Copyright 20 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 2424 Louisiana Blvd. NE Suite colliers.com