Kent Valley Insider 1Q Market Report. Arie Salomon, SIOR, CCIM Principal

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1 Market Report 1Q Kent Valley Insider Arie Salomon, SIOR, CCIM Principal Jeff Forsberg, CCIM Principal Taylor Hoff, SIOR Partner Kent Channing Associate Vice President Al Robertson Senior Vice President Connor Powell Associate

2 1Q, Kent Valley Insider Quick Stats VACANCY 3.60% LEASE RATES $0.437 TOTAL ABSORPTION Average Shell Asking Rates CLASS A Change from last CURRENT Yr. Qtr. 907,502 UNDER CONSTRUCTION 2,526,027 CLASS B 5,000 15,000 SF $0.526 $ ,001 30,000 SF $0.469 $ ,001 60,000 SF $0.462 $ ,001+ SF $0.446 $0.403 Absorption Trends 4Q 3Q 2Q 1Q 907, ,929 1,719, ,739 1,455,654 3,859, , , ,572 1,646,923 2,893, , , , ,982 1,471,934 A pessimist is a person who tends to see the worst aspect of things or believe that the worst will happen; everyone knows one. Our Southend Industrial Group is basically full of eternal optimists with one annoying pessimist among them. That person might have stocked up on Tamiflu during the birdflu outbreak. That person might have a farm in Eastern Washington to escape in the event of the big one. Long story short, being a pessimist in brokerage is not a fun place to be. You are always prepared for the worst. You are always paranoid that the market will turn or any deal will go south. For the last three years, this pessimist has tried to make sense of this booming market, looking for any signs of a downturn. Double digit rent growth surely will stall us and our market can t absorb that much new construction, are some of the sage comments uttered. So with all that said, it is hard for a pessimist to look at First Quarter numbers and not think that we have hit the peak a record low vacancy rate at 3.60% and another quarter with close to 1 million square feet of net absorption (907,502 square feet), sale and lease rate numbers that are surging really unbelievable velocity and results, and the crazy thing is, this pessimist, despite all internal warning Submarket Total RBA (SF) Direct Vacant (SF) Direct Vacant (%) Sublease (SF) Total Vacant w/ Sublease Total Vacant w/ Sublease RENTON 8,941, , % 19, , % SEATAC 3,503, , % 296, % TUKWILA 11,836, , % 10, , % KENT 47,987,008 1,576, % 395,145 1,971, % AUBURN 21,322, , % 71, , % SUMNER 17,051,015 1,221, % 1,221, % TOTAL 110,642,122 3,978, % 496,698 4,475, %

3 Lease Activity signs going off, does not think we are done yet. The rent growth, which we figured would stall the market, hasn t seemed to hinder growth. Here is the scene we have seen played out a number of times on a standard lease renewal. Landlord delivers to Tenant their renewal terms, Tenant reacts negatively, telling the Landlord essentially it will be a cold place in hell before they accept these terms. Tenant surveys the market, then Tenant comes back and signs up at the initial offensive rate. In fact, we have realized the more tenured brokers are having a harder time with the rent growth than the tenants are. Looking at other economic indicators we see a reason for optimism. The office vacancy rate in the Seattle Region is the lowest it has been in 15 years, despite the strongest building boom since the recession. Heck, even the much ridiculed Southend Office Market looks solid with a vacancy rate at around 15 percent. Washington State added more than 10,000 new jobs in February as Recent Lease Transactions Property City Tenant Lease or Renewal Size (SF) DES MOINES CREEK BUSINESS PARK SeaTac K2 Sports Lease 170,000 PROLOGIS PORTSIDE DISTRIBUTION CTR Seattle Bartell Drugs Renewal 161,788 THE STEELE BUILDING Sumner Dometic Lease 144,162 VALLEY CENTRE CORPORATE PARK Auburn Mitco Ltd. Renewal 139,009 REXAM BUILDING Kent Rexam Beverage Can Company Renewal 130,615 DES MOINES CREEK BUSINESS PARK SeaTac PODS of Seattle, LLC Lease 101,860 IAC PORT 167 Puyallup Niagara Bottling Lease 95,600 KENT NORTH CORPORATE PARK Kent Global Transportation Lease 86,528 SUMNER NORTH Sumner Mergenthaler Transfer & Storage Lease 85,876 NORFOLK BUILDING Seattle MacDonald Miller Systems, Inc. Renewal 79,940 VAN DOREN S PROLOGIS BLDG 2 Kent Emerald City Graphics, Inc. Renewal 77,814 SALMON CREEK CORPORATE PARK Sumner CTE Logistics Lease 64,055 RAINIER CORPORATE PARK EAST Fife US Postal Service Renewal 60,650 NW CORPORATE PARK SEATTLE Seattle United Tile Corp. Lease 59,867 KENT NORTH CORPORATE PARK Kent Grainger Industrial Supply Lease 55,600 PORTSIDE INDUSTRIAL CENTER Fife Flowers Lease 55,000 NW CORPORATE PARK RENTON Renton Ferguson Fire & Fabrication, Inc. Renewal 39,600 ALDARRA CORPORATE PARK Kent Saxton and Bradley Lease 39,013 SHEPHARD PARK Kent Macrina Bakery Renewal 36,541 NW CORPORATE PARK KENT Kent Cornerstone Equipment Mgmt, Inc. Lease 36,000 DES MOINES CREEK BUSINESS PARK SeaTac Organically Grown Company Lease 35,475 DES MOINES CREEK BUSINESS PARK SeaTac Meiko America, Inc. Lease 32,410 AIRPORT COMMERCE CENTER SeaTac Lynden Air Freight, Inc. Renewal 30,363 S 200TH STREET DISTRIBUTION CENTER Kent Scan Design Furniture, Inc. Lease 30,000 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

4 Southend Industrial Team Local Knowledge, Global Reach people continue to flock to King County. Our unemployment rate is 5.8% in the state but only 5.2% in King county. Condo demand in Let us show you what we can do! the region is rising faster than the supply and While we are experts in the local Kent Valley industrial market, we have a national and global reach through the NAI Global network that can tackle any commercial real estate need. Sale Lease the shortage of homes available for sale in the Seattle region is now stretching beyond King County. Is it any wonder that tenants are accepting the rent growth when home sales jumped by 20.7% in just one year? The median home sales price in Seattle was a staggering $640,000 last month. The other interesting aspect of our market is 36,459 SF the growth potential. Land is a finite resource Bensenville, IL 33,440 SF Romulus, MI 183,435 SF 396,000 SF Fernley, NV 135,890 SF Hazelton, PA Brownsburg, IN 180,608 SF Ontario, CA 7,500 SF San Diego, CA 110,660 SF DeSoto, TX in every market; the Kent Valley has typically been more limited than most because of land use restrictions, topography and wetland issues. Some veteran brokers will tell you we have been out of land for years, but funny how a good market can change that. Looking at 9,404 SF Honolulu, HI our construction report, we list eight large sites that two years ago were nonexistent but have Our clients choose us for their national business because they trust our ability to manage the sale or leasing process. We ask the right questions, and we interview to find the right local broker to help; we put our client s longterm interest above our own. We are still a local, independentlyowned firm, but with our NAI Global platform, we are part of something much bigger. presented themselves as viable construction opportunities moving forward. Investment activity remains flat not because people do not want to buy, but because people do not want to sell. What will I trade into?, is a rallying chant for owners everywhere. Our group was successful in helping facilitate two significant sales in the past two months. First, we helped Principal Financial Group acquire the 111,147 square foot Bargreeen Ellingson Building in Fife for $9.2 million. We also recently

5 Sale Activity helped facilitate the $31.6 million sale to IPT of four Prologis buildings in Kent. Next quarter, the Panattoni/LaSalle sale of the Titan and Apollo buildings in Sumner will draw substantial interest. Given location, age and long term leases in place we expect a sub 5 percent cap rate on those assets. Springbrook, Opus Park 167 and Tukwila Commerce Center will all trade at good numbers as well. So where does this leave us? Ask the same question last year and our group said we were at a nine or 10 on a scale of 110. But all indications seem to point to another year or two of good times so how do we rate any higher? Well as anyone familiar with the immortal film Spinal Tap knows, when faced with such obstacles, we can always put it up to 11. Fife 70 East Emerald Corporate Park, Bldg E Recent Sale Transactions Sale Date Sale Price Property Name City Building Size Year Built Buyer Company 04/13/ $3,300,000 NW Gourmet Food Products Seattle 27, Milliman Art, LLC 04/06/ $21,908,754 Opus Park 167 Auburn 173, Industrial Property Trust 02/19/ $21,900,000 Emerald Corporate Park, Bldg E Auburn 152, CenterPoint Properties 02/08/ $9,210,000 Fife 70 East Fife 111, Principal Financial Group 01/25/ $6,500,000 Grainger Industrial Supply Seattle 35, Terreno Realty Group 01/21/ $4,347,828 Auburn West Valley, Bldg B Auburn 34,432 Bixby Land Company 01/20/ $2,100,000 Lynch Industrial, Bldg 2 Kent 19, Breedt Production Tooling & Design 01/07/ $8,300,000 K&N Meats Building Renton 70, B&L Trading, LLC 01/07/ $4,850,000 CBM Building Kent 78, Matson Group, LLC THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

6 Construction Report IPT Sumner South Warehouse Completed City Developer Project Type Year AUBURN Panattoni Development, Inc. Auburn West Valley DUPONT Griot s Garage NW Logistics Phase I Fife 45 North Site IPT SUMNER Fife 45 South Site DCT Fife 225, ,000 79,284 CONCEPTUAL ELEVATION 63, ,805 DCT Fife DC Bldg B 152,325 69,080 LBA/Davis Properties Portside Business Center 485, ,400 FedEx Benaroya Fife BTS 300,000 IDS Real Estate Group Stryker Business Center 2 BTS 893,420 Panattoni Development, Inc. 212th 79,544 Lakewood Industrial Park Bldg ,300 99,100 Lakewood Industrial Park Bldg , ,300 IAC Port 167 B 254,176 Des Moines Creek BP Phase I 535,958 The Steele Building 205,850 Larsen Building 62,212 Tamarack Building 150,190 DCT Industrial DCT White River Sockeye 62,895 Bob Stobie Riverside Aaron Pckg BTS 40,000 Salmon Creek Bldg A 134,600 SeaPort Logistics 333, ,926 Prudential / Michelson Knapp Sumner CP Cascade 394, ,000 Tarragon Salmon Creek Bldg B 133,100 69,045 Avenue 55 Sumner West 120,900 Interurban Development 60,705 2,291 5,455,529 1,351,032 FIFE LAKEWOOD NW Building Corp PUYALLUP International Airport Centers SEATAC Panattoni / Metlife Panattoni / Metlife Panattoni SUMNER Tarragon TUKWILA A&B Properties TOTAL Available SF 45,235 DCT Industrial KENT Project Size (SF) SUMNER, WA DC 03/03/16 Bldg A VIEW AT ENTRY OPTION 1 119,890

7 In Planning City Developer Project Type Year Project Size & Available SF AUBURN American Realty Advisors Northcreek 248,533 DES MOINES Naylor Group WDS Cold Storage Bldg BTS ,000 FIFE KENT Dermody ,972 Trammell Crow Trammell Fife Business Park 174,085 Prologis Prologis Port Property 2nd phase 1,088,800 Avenue 55 Ave 55 Fife Development 50,000 DCT Industrial SSA Marine Site ,388 IPT Interfor Sawmill Site ,250,000 Prologis Barnier Property ,500 Exotic Metals Exotic Metal BTS BTS ,163 PUYALLUP Latitude Development Todd Bldg BTS BTS ,000 SEATTLE Prologis Prologis Seattle (3story) ,000 SUMNER Prudential / Michelson Knapp Sumner CP Glacier 53,000 Principal Financial Group Sumner Golf Course 650,000 Tarragon SeaPort Logistics Bldg B&C ,000 DCT Industrial DCT W.Valley Hwy ,616 IPT IPT Sumner South Warehouse ,900 TACOMA NewCold Orchard Industrial Center BTS ,000 TOTAL 7,462,957 Under Construction FEDERAL WAY City Developer Project Type Year FIFE PUYALLUP Project Size (SF) Available SF Preferred Freezer Preferred Freezer Bldg BTS ,000 Panattoni Enterprise Center Fife 171, ,620 Prologis Prologis Port Property 1st phase 538, ,200 International Airport Centers IAC Port 167 A 398, ,919 Avenue 55 / Cabot Puyallup West Distribution Center 170, ,592 RENTON Group Health Longacres South BTS 250,000 SEATAC Panattoni / Metlife Des Moines Creek BP Phase II 495, ,425 SUMNER DCT Industrial DCT White River Chinook 251, ,437 TOTAL 2,526,027 1,753,193 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

8 Arie Salomon, SIOR, CCIM Principal Jeff Forsberg, CCIM Principal Taylor Hoff, SIOR Partner Kent Channing Associate Vice President Al Robertson Senior Vice President Connor Powell Associate NAI Puget Sound Properties Commercial Real Estate Services th Avenue NE Suite 340 Bellevue, Washington USA naipsp.com