Overall Industrial Market Off to Solid First Quarter; Flex Market Rebounding

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1 Research & Forecast Report RALEIGH-DURHAM INDUSTRIAL Overall Industrial Market Off to Solid First Quarter; Flex Market Rebounding Emily Bostic Research Analyst Raleigh-Durham Key Takeaways > > The Triangle s overall industrial market remained resilient in the first quarter of Excellent job and population growth with ongoing tenant demand has created a favorable market for landlords, particularly in the warehouse sector. > > As of March 2017, Wake County added 3,270 jobs in 54 new and expanding companies, creating a total investment of $$91.4M. The unemployment rate remained low, reporting at 4.2% as of the end of March > > The Triangle flex market reported negative 234,301 square feet of net absorption during the first quarter. Stiefel Laboratories vacated over 150,000 SF in the Research Triangle Park submarket during the first quarter. The Research Triangle Park flex market continues to rebound and stabilize after the downsizing of GlaxoSmithKline s 1.3M square foot Research Triangle Park campus in > > The warehouse market s total net absorption reached 117,986 square feet at the close of the first quarter 2017 in the Triangle. Johnston County continues to report the highest net absorption with over 88,000 SF that was occupied at the end of the first quarter. > > In the first quarter, the Raleigh-Durham market produced $321.6M in total volume of 5 industrial property sales with an average per square foot price of $ > > One of the largest transactions of the quarter was the sale of the Peden Steel facility in the US 1 Capital Boulevard submarket. The Peden Steel property, which covers almost 19 acres, sold for $10M. Colliers Raleigh-Durham represented the owner of the property in the transaction. Market Indicators Relative to prior period NET ABSORPTION CONSTRUCTION RENTAL Summary Statistics Regional Industrial Market Raleigh Durham Flex Market Raleigh Durham Market Total Square Feet 24,805,964 38,291,147 Vacancy Rate 11.2% 4.3% Change From Q (basis points) Q1 17 Net Absorption (Square Feet) Under Construction (Square Feet) Deliveries (Square Feet) Asking Rents Per Square Foot Per Year Raleigh-Durham Q Raleigh-Durham 3.1% 0.4 (234,301) 117, ,642 21, ,500 Average Quoted $13.81 FSG $5.30 NNN Change from Q $0.56 $0.27

2 Absorption & Leasing Activity > > Total net absorption for the warehouse market reached 117,986 square feet at the close of the first quarter Johnston County led the warehouse sector in total net absorption with over 88,000 SF that was occupied at the close of the first quarter. The East Raleigh submarket didn t fall far behind, posting first quarter net absorption totals of 52,100 SF. > > The US 1 Capital Boulevard submarket experienced the most positive flex absorption at the close of the first quarter with over 15,000 total square feet absorbed. The Triangle flex market experienced negative net absorption during the first quarter. The total net absorption in the Triangle s flex market was reported at (243,301). > > The largest tenant gain in the Triangle s industrial market during the first quarter was Milleniam Print Group s occupancy of 84,000 SF at Liberty Ridge II in the submarket. SRS Distribution occupied over 32,000 SF at Regent Place, located in the submarket. Overall Historical Absorption and Vacancy 2,500,000 2,000,000 1,500,000 1,000, , ,000 Absorption Vacancy Source: Colliers Research, CoStar Group 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Vacancy & Availability > > The overall industrial vacancy rate in the Raleigh-Durham market for the first quarter was reported at 7.0% with just over 4.4 million SF of total inventory reporting vacant. > > Over 2.7 million SF of flex space was reported vacant during the first quarter of The flex vacancy rate of 11.2% continues to stabilize after the downsizing of GlaxoSmithKline s Research Triangle Park campus in The flex market has reported negative absorption for four consecutive quarters, but should stabilize throughout 2017 and > > In the first quarter, 1.6 million SF of warehouse space was reported vacant, resulting in a 4.3% vacancy rate. The Research Triangle Park submarket reported the highest warehouse vacancy rate at 7.7% Triangle Vacancy by Industrial Property Type Bulk Vacancy= 8.3% Bulk: 6.6% Vacancy= : % Source: Colliers Research, CoStar Group Flex Vacancy= Flex: 11.2% 8.3% Flex Bulk Rental Rates > > The average rental rate for the overall industrial market was $9.36 per square foot at the end of the first quarter 2017, which represents a $0.99 increase since the end of the first quarter > > The average full service rental rate in the Triangle s flex sector was $13.81 per square foot, up from $13.16 reported at the beginning of > > The overall NNN rental rate in the Triangle s warehouse sector was $5.30 up $0.27 from the first quarter of Triangle warehouse rents have been on a steady increase since the Great Recession. The Glenwood Creedmoor submarket reported the highest average NNN rents during the first quarter at $9.38. Average Asking Rates by Market Type $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $- Q Q Q Q Q Flex Bulk Source: Colliers Research, CoStar Group 2 Raleigh-Durham Research Report Industrial Market Colliers International

3 MARKET COMPARISONS OVERALL MARKET # BLDS EXISTING INVENTORY (%) Q Q1 17 NET ABSORPTION DELIVERIES UNDER AVG CONSTRUCTION RENTAL MARKET BREAKDOWN Flex ,805,964 2,783, (243,301) 21,000 0 $ ,3,797 1,651, , , ,642 $5.29 Bulk 91 14,982, , (21,745) 126, ,642 $4.96 NOTABLE LEASE TRANSACTIONS TENANT SUBMARKET SIZE TYPE DEAL TYPE Millenium Print Group Liberty Ridge II 84,000 SRS Distribution Regent Place 32,320 BioAgilytix Commercial Park West 21,000 Flex Colony Tire 3116 Capital Boulevard US 1 Capital Blvd. 20,280 Shred-Tech Distribution 4701 Trademark Drive Northeast Wake County 20,125 NOTABLE DEVELOPMENT PROJECTS SUBMARKET SIZE PRELEASE % STATUS Greenfield North East Raleigh 151,642 0% Under Construction Q Eastgate 5 East Raleigh 150,000 0% Under Construction Q Stirrup Creek 112,6 100% Under Construction Q Liberty Ridge II 126, % Delivered Hinton Oaks II East Raleigh 120,000 35% Delivered 3 Raleigh-Durham Research Report Industrial Market Colliers International DELIVERY DATE TYPE

4 MARKET COMPARISONS FLEX # BLDS EXISTING INVENTORY (%) Q1 17 NET ABSORPTION DELIVERIES UNDER CONSTRUCTION AVG RENTAL (FULL SERVICE) SUBMARKET NAME Cary 58 1,239,964 26, (12,352) 0 0 $11.60 Downtown Durham , $12.00 East Raleigh ,970 11, , $13.73 Glenwood Creedmoor ,067 25, $10.29 Johnston County , $10.46 North Durham , , (28,245) 0 0 $10.28 Northeast Wake County 46 2,286, , (3,204) 0 0 $13.36 Orange County ,006 36, , $7.34 Research Triangle Park 80 6,295,607 1,614, (100,012) 0 0 $ ,810, , (90,660) 0 0 $12.15 Six Forks Falls of Neuse ,964 21, $10.26 South Durham ,848 12, (6,000) 0 0 $10.23 Southern Wake County 114 2,448, , (10,553) 21,000 0 $10.63 US 1 Capital Blvd ,949, , , $11.83 West Raleigh 56 1,601,373 30, (15,598) 0 0 $16.02 MARKET S ,805,964 2,783, (243,301) 21,000 0 $13.81 MARKET COMPARISONS WAREHOUSE # BLDS EXISTING INVENTORY % Q1 17 NET ABSORPTION DELIVERIES UNDER CONSTRUCTION AVG RENTAL (NNN) SUBMARKET NAME Cary 17 1,009, $7.50 Downtown Durham 37 1,184,710 43, , $4.50 East Raleigh 42 1,288,528 9, , $6.57 Glenwood Creedmoor 65 1,444,377 5, , $9.38 Johnston County 94 4,128,51 162, , $2.51 North Durham 35 1,366,7 99, (15,617) 0 0 $5. Northeast Wake County 103 4,166, , , $6.69 Orange County , ,0 0 0 $6.00 Research Triangle Park 57 6,528, , , ,500 0 $ ,228,804 61,9 1.9 (6,871) 0 0 $6.12 Six Forks Falls of Neuse 56 2,347,060 16, ,8 0 0 $6.86 South Durham 58 1,646,713 4, , $7.19 Southern Wake County 175 6,317, , (133,475) 0 151,642 $4.53 US 1 Capital Blvd. 67 2,511, , (20,500) 0 0 $6.07 West Raleigh 39 1,004,632 13, (1,945) 0 0 $6.88 MARKET S ,291,147 1,651, , , ,642 $ Raleigh-Durham Research Report Industrial Market Colliers International

5 Construction & Investment Activity > > In the first quarter of 2017, overall industrial deliveries totaled 205,500 square feet in buildings with an additional 151,642 square feet currently under construction. > > The most notable industrial transaction of the first quarter was the portfolio sale of the Sentinel Data Center in South Durham. The 851,544 square foot portfolio sold for $490.0M in March of The Durham flex/data center sold for $293.2M at $695 per square foot. The two properties were sold to Cyrus One from Sentinel Data Centers and the portfolio was 70% leased at the time of the sale. > > In the first quarter, the Raleigh-Durham market produced $321.6M in total volume of 5 industrial property sales with an average square foot price of $ NOTABLE INVESTMENT SALES SUBMARKET TYPE SIZE SALES PRICE PRICE/SF BUYER *Sentinel NC-1 South Durham Flex 421,544 $293,200,000 $695 Cyrus One Peden Steel US 1 Capital Blvd. 151,902 $10,000,000 $66 Grubb Ventures 4102 S. Miami Blvd. 131,4 $9,200,000 $70 Gramercy *Triangle Technology Center Downtown Durham Flex 18,491 $5,000,000 $270 The Seng Company Hughes Supply East Raleigh 68,109 $4,250,000 $62 Faulkner Haynes *Part of a portfolio sale. URLINGTON Graham Orange County North Durham TRIANGLE SUBMARKET MAP 64 CHAPEL HILL Carrboro 85 ORANGE CO. DURHAM CO. 501 South Durham CHATHAM CO. Downtown Durham DURHAM RTP / I- RESEARCH TRIANGLE PARK Apex 85 Morrisville RDU International Airport 1 64 CARY DURHAM CO. Glenwood/ Creedmoor GRANVILLE CO. Six Forks 5 4 Downtown Raleigh Falls of the Neuse Rd RALEIGH FRANKLIN CO. Wake Forest US 1 / Capital Blvd 264 Northeast Wake County Garner 1 Holly Springs Southern Wake County 70 Clayton Fuquay-Varina. JOHNSON CO. Smithfield 5 Raleigh-Durham Research Report Industrial Market Colliers International

6 396 offices in 68 countries United States: 153 Canada: 29 Latin America: 24 Asia: 36 EMEA: 111 ANZ: 43 $105 billion in annual revenue INDUSTRIAL SERVICES CONTACT: Lee Holder Senior Vice President Raleigh Dennis Eaton Vice President Raleigh REGIONAL AUTHOR: Emily W. Bostic Research Analyst, CPRC billion square feet under management 15,000 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 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.