Vacancy Rate UP 2.34% 2.31% 1.97% 18.78% Availability Rate UP 4.58% 4.46% 3.75% 22.13% Average Asking Lease Rate UP $0.84 $0.83 $

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1 OC4Q17 Fourth Quarter 217 MARKET REPORT Orange County Industrial 217 S DYNAMIC MARKET CONDITIONS CARRY OPTIMISM INTO 218. As we enter the ninth year economic recovery and expansion, the second longest in US history, OC s competitive and diverse industrial market continues to thrive. With demand outpacing supply across all size ranges, lease rates and sale prices have accelerated past previous highs, up 1 on average over the fourth quarter 216. While this comes as welcome news to landlords, tenants are now challenged to compete for limited and expensive opportunities with very little help from owners in the way concessions. Third-party logistics and last mile users related with e-commerce are becoming more significant players in the infill market Orange County. The overall supply chain most retailers is evolving and responding to consumer buying patterns by decreasing delivery times. Other active and expanding industries in the fourth quarter 217, still carrying momentum into 218, include food and beverage, aerospace, apparel, home improvement, medical and nutraceutical. While more established companies have already executed on expanding into larger, centralized facilities over the past several years, we are now seeing many these occupiers acquire smaller spaces (2,-, square feet) near their existing facilities to accommodate further expansion. 7% % VACANCY VS. AVERAGE ASKING LEASE RATE $ $1. $.9 $.7 $.6 $.4 $.3 $.1 The flow investment capital (foreign and domestic) targeting this region remains robust, driving prices up and cap rates down. With the new tax changes providing favorable treatment to real estate investors and corporations alike, expect overall demand and capital investment to increase in the coming quarters. VACANCY. Direct vacancy rates in the industrial market rose slightly from 2.3 in the third quarter to 2.3 in the fourth quarter 217. We are forecasting that vacancy will trend downward in 218, providing even fewer alternatives for local tenants. For tenants and buyers alike, being prepared, being able to react, and being willing to pursue f market deals will be keys for success in this competitive landscape. This tight market gives landlords the ability to push rents, extend lease terms and potentially upgrade the credit their tenants. LEASE RATES. The average asking lease rate, which incorporates all size ranges and submarkets throughout Orange County, is $.84 NNN per square foot per month, a one cent per square foot increase from last quarter and a $.9 cent per square foot increase from a year ago (1 annual increase). Tenants looking to renew leases signed in are going to experience severe sticker shock based on the supply and demand imbalance. SALE PRICES. The Orange County industrial market s average asking price at the end the fourth quarter 217 came in at just under $ per square foot (average price tracks 1, square foot buildings and larger). While sale prices vary greatly depending on the size the building and an average sale price doesn t tell the entire story, this represents an increase more than 1 from the fourth quarter 216. Even though transaction volume is down based on the lack product, interest rates are still attractive, and demand remains red hot across all size ranges. Users and investors will continue to compete in this multiple fer environment and will need to be both aggressive and creative to win out. As interest rates move up we expect to see more modest levels appreciation in 218. TRANSACTION ACTIVITY. The overall lack inventory continues to negatively impact transaction volume. Annual leasing activity checked in at nearly 9.36 million square feet for 217, a decrease over the previous year s total 13.2 million square feet. Sales volume also slowed, posting 8 million square feet activity compared to the 9.1 million square feet we saw in 216. On a quarterly basis volume also slipped from 4.9 million square feet in the third quarter 217 to roughly 3.2 million square feet in the fourth quarter 217. Notable lease transactions for the fourth quarter include: Southland Industries lease 27,93 square feet at Western Avenue in Garden Grove, Legacy Farm s lease 128,372 square feet at 176 W. Penhall Way in Anaheim, and Titan Footwear s lease 84,74 square feet at 1342 Graham Street in Huntington Beach. % SF Millions VACANCY: Total Space Divided by Total Existing Inventory AVERAGE ASKING LEASE RATE: NNN / SF / Month TRANSACTION VOLUME & SALES LEASES $. 2,2 2, 1,7 1, 1,2 Market Statistics 1,2 1, 7 2 Change Over Last Quarter 4Q 217 3Q 217 4Q 216 % Change Over Last Year UP % 18.78% UP 4.8% % 22.1 Lease UP $.84 $.83 $.7 12.% Sale Price UP $ $26.81 $ % Sale & Lease Transactions DOWN 3,173,92 4,972,64,491,313 (42.2) UP 2,999,68 2,891,6 3,28,326 (7.9) NEGATIVE (186,226) 147,16 6,4 N/A

2 LEASE RATES. The supply and demand imbalance will continue causing asking rents to increase by a minimum to reach a level $.87 per square foot by the end 218, with more robust increases coming in Class A buildings with modern features such as 3' warehouse clearance, ample dock-high loading, fenced yards and immediate freeway access. Forecast VACANCY. With low vacancy rates and a demand for industrial space, new users are finding it challenging to locate space and existing users are having a difficult time expanding operations. With limited new product coming online and tenants electing to recommit or to renew in larger blocks space, expect vacancy rates to remain below 2. well into 218. OVERALL. The Orange County market in 218 will be characterized by increased capital flows/investor demand, strong tenant / user activity and continued increases in sale prices and lease rates. With limited new deliveries, expect the supply and demand imbalance to remain, ultimately benefiting landlords. Users and investors will continue to target this area given its highly educated workforce and proximity to affluent households. Industrial occupiers will tend to focus more on location than function in the coming quarters given the lack product and our aging industrial base. Larger tenants with future expansion plans may start looking east to the Inland Empire to find larger blocks quality spaces at lower costs. Consumer sentiment in the market is positive, aided by a robust stock market and the new tax laws put in place to encourage both investment and job growth. CONSTRUCTION. During 217, Orange County added a total 683,73 square feet new industrial space. For perspective, the recent high point for new development was 214 when 1.17 million square feet new space was added (vacancy rates were approximately.2). Total space under construction checked in at 793,138 million square feet at the end 217. Even though the market is craving new product, Orange County is short on industrial land. The most notable new construction involves the redevelopment the former Beckman Coulter Campus in Fullerton (Western Realco, 1 million square feet on 4 acres). Expected delivery is third quarter 218 and initial interest across all size ranges has been strong. There are also smaller projects -1 acres still in the planning phases in Brea, Anaheim and Placentia. With limited infill parcels now approaching $ per square foot in some cases, do not expect any significant new construction in the coming quarters. SF Millions NEW DELIVERIES & NET ABSORPTION VS. AVAILABILITY RATE 4.8% 1 9% % ABSORPTION. absorption for the county posted a negative 186,226 square feet for the fourth quarter 217, giving the industrial market a total 69,448 square feet negative absorption for the year. The Airport Area experienced the biggest swing in 217 with a 3. vacancy rate and a negative 687,938 square feet absorption. This increase in available space is largely due to the Royalty Carpets spaces coming online, adding 7, square feet supply to the submarket % -1 ECONOMY. The unemployment rate in Orange County was 2.8% in November 217, down from a revised 3. in October 217, and below the year-ago estimate 3.7%. Orange County trails only the Silicon Valley and San Diego with its number tech-related jobs. The manufacturing sector is expanding slowly, confined primarily to high value-add sectors like aerospace and medical. Lower value-add jobs are leaving the area or being replaced by automation NEW DELIVERIES: New Construction Delivered to the Market NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date - Significant Transactions Sales * Voit Real Estate Services Deal Property Address Submarket Sale Price Buyer Seller 1 E Dyer Rd. Santa Ana 414,38 $4,8, MDD Partners LP 1 Dyer Property Owner, LLC 41 N. Palm Fullerton 181,69 $32,92,42 Independent Trading Company Western Realco / AEW Gillette Ave. Irvine 127,49 $28,, Intracorp Companies Greenlaw Partners 3142 Avenida De La Banderas Rancho Santa Margarita 88,672 $16,, Applied Medical Car Sound Exhaust 631 Orangethorpe Ave. Buena Park 1, $3,11, Natureware, Inc. * Ham Family Trust * Leases * Voit Real Estate Services Deal Property Address Submarket Transaction Date Tenant Owner Western Ave. Garden Grove 27,93 Oct-217 Southland Industries Rexford Industrial-Western * 176 W. Penhall Way Anaheim 128,372 Dec-217 Legacy Farms The Carson Companies 12 Valencia Ave. Tustin 12, Dec-217 B Braun Medical, LLC GLP US Management, LLP 69 Darin Way Sublease Cypress 63,792 Nov-217 Natureware, Inc. * Sika Corporation 337 Freedom Ave. Orange 49,1 Oct-217 SecurityBase.com Mission Plaza Properties * VOIT REAL ESTATE SERVICES 2

3 4Q217 4Q217 Lease 4Q Q Airport Area Costa Mesa 423 7,72,2 136,47 1.8% 213, $.8 $394.1 (11,87) 33,162 97, ,64 Fountain Valley 186 3,87,24 73,2 4,28 1.% 23,9.28% $. $. 31,912 34,84 4, ,64 Irvine ,192, ,4.3 99, $.79 $ (148,389) (14,97) 14,373 89,124 Newport Beach 48 72,94 17, , $. $. 2, (17,723) 4,934 1,134 Santa Ana 1,72 29,67,43 27, ,1 3.28% 1,31, % $.83 $ (1,828) (626,2) 317,87 1,242,43 Tustin 114 4,432, , , $.68 $ (1,2) 42,9 14,947 Airport Area Total 2,67 8,33,336 6,891 2,6, ,432,927.89% $.8 $29.24 (142,862) (687,938) 61,462 2,24,916 North County Anaheim 1,831 44,863,396 46, , % $.91 $ ,88 194,279 67,7 1,626,788 Brea 33 12,12,763 28, ,86 3.% $.82 $28.77 (6,64) 48,214 8,81 798,836 Buena Park ,43,64 16,466.79% 1,414, $.86 $ (36,732) (36,13) 111, ,87 Fullerton ,488,94 793,138 42, 37,76 1.9% 344, % $.3 $22.2 7,96 17, ,38 1,366,1 La Habra 198 3,493,12 36,63 1.% 31,331.9% $. $ ,341 (2,173) 33,273 98,2 Orange ,67, , , % $.79 $ ,41 (19,4) 191,34 499,769 Placentia 218 4,9,672 4, , $. $ ,22 (18,617) 49,242 12,717 Yorba Linda 2 992,941 24, , $. $28. (12,789) (2,172) 1,19 83,49 North County Total 4,44 112,16, ,138 42, 1,76, ,64, $.8 $ , ,27 1,486,126 4,896,1 South County Aliso Viejo ,132.% 19, % $1.21 $. 19,68 19,68 19,68 19,68 Foothill Ranch 68 3,,33 27, , % $.7 $. (63,737) 38,238 7, 149,774 Irvine Spectrum 213 9,923,732 4, % 1,1, % $.96 $ (182,24) (292,342) 14,1 391,727 Laguna Beach 19 91,3 1, , $. $. (8,231) (12,76) 89 Laguna Hills 73 1,4,287 9,91.9% 1,6 1.4 $1.2 $ (2,98) 17,36 44,82 Laguna Niguel 2 279,9.%.% $. $. Lake Forest 189 4,132,24 124, , $1.1 $ , ,713 4,9 414,377 Mission Viejo 3 462,48 14, , $. $. (4,226) (12,68) 4,67 Rancho Santa Margarita 12 1,632,41.% 28, $1.1 $ ,497 1,88 29,822 9,36 San Clemente 17 1,977,4 64, % 62, % $. $23.68 (38,829) (2,18) 78,173 19,6 San Juan Capistrano ,38 13,9 1.47% 28, % $1.17 $. (3,22) 738 4,692 4,448 South County Total 93 24,679,46 8, % 1,73, $.96 $298.9 (242,) (3,87) 347,923 1,31,97 West County Cypress 99 4,262,922 18, ,748.9% $.99 $ ,69 (18,222), ,423 Garden Grove 47 11,977,23 273, % 476, % $.77 $ (63,926) (6,91) 288,161 64,47 Huntington Beach ,44,39 97,46 476, , $.81 $19. (166,26) (282,942) 17,32 689,999 La Palma 16 1,78,2 131, , % $. $. (131,) Los Alamitos 97 2,384,13 11, ,13.4 $. $. (6,416) 4,32 1,72,617 Seal Beach 1 991,63.%.% $. $. 88,7 Stanton 17 1,834,412 4,2.2 16,977.9 $. $2. 7,882 (4,2) 7,882 3,44 Westminster 138 2,314,23 3,4. 262, $. $. 19,984 2,3 26,864,817 West County Total 1,696 39,998,994 97,46 1,7, ,967, $.8 $17.4 (171,87) (62,91),97 1,977,224 Orange County Total 9,327 23,88,62 793,138 74,31,499, ,771,92 4.8% $.84 $ (186,226) (69,448) 2,999,68 1,714,116 Less than 9,999 3,322 2,17,69 312, ,7 2.27% $1.8 $289. (1,38) (122,811) 239, ,43 1,-19,999 3,134 43,298, , % 1,17, $1.9 $262.1 (6,28) 26, ,2 2,14,64 2,-29,999 1,16 28,23, , % 844, % $1.2 $197.1 (8,232) (22,796) 32,26 1,349,634 3,-39, ,71,286 73,2 168, ,9 3. $.93 $23. 2, , ,87 962,72 4,-49, ,38,344 87,62 139,46 168,6 1.29% 423,42 3. $.87 $ ,47 232, , ,16,-74, ,363, , , $.8 $ ,683 (,8) 26,191 1,19,9 7,-99, ,38,73 78,23 3, , $.8 $ , ,98 713,44 1,-199, ,11,71 1,322 1,2, % 1,979,18.79% $.71 $. (173,867) (331,8) 39,682 1,139,49 2, Plus ,27,21 21,641 27,691 1,881, ,134,34 9.% $.81 $. (289,742) (41,14) 4,21 1,971,69 Orange County Total 9,327 23,88,62 793,138 74,31,499, ,771,92 4.8% $.84 $ (186,226) (69,448) 2,999,68 1,714,116 Lease rates are on a triple-net basis. VOIT REAL ESTATE SERVICES 3

4 NORTH ORANGE COUNTY In the fourth quarter 217, the North Orange County industrial market consisted 4,44 buildings totaling 112,16,272 square feet and had an availability rate 3., which shows a decrease from the previous quarter s figure 3.. VACANCY & AVAILABILITY RATE NET ABSORPTION % 1,, 9, 8, 3. 7, 6,, 4, 3, 2, 1.4 1, % 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18-1, 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 3,, 1 2,, 8 2,, 12 1,7, 7 1,, 6 2,, 1 1,2, 76 1,, 7 1,, 4 1,, 7, 2 3, 2, 2 2, 1 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES North Totals 4Q217 4Q217 Lease 4Q Q Less than 9,999 1,323 8,37,62 88, ,2 1.8 $1. $ ,69 (37,38) 117,371 34,218 1,-19,999 1,397 19,38, , , $1.2 $ (3,177) 67,932 2,4 1,24,393 2,-29, ,288, , , % $.96 $21.8 (16,698) (7,46) 12,277 62,18 3,-39, ,636,124 (11,943) (.1) 181, % $. $21.16 (2,263) 7,814 62, ,213 4,-49, ,838,264 87,62 42, 141, , $.79 $. 11,787 4,46 73,369 24,82,-74, ,48,618 19,42 1.8% 299, $.8 $ (,4) (127,2) 42,24 273,227 7,-99, ,139,628 78,23 131, , % $.74 $. (17,819) 39,139 39,139 1,-199, ,7,129 1,322 28,61 1.8% 397,7 2.2 $. $. 8,42 226,92 471,13 81,93 2, plus 66 24,266,429 21, ,42.9 1,346,639.% $. $. 326,89 66, ,27 1,113,79 Total 4,44 112,16, ,138 42, 1,76, ,64, $.8 $ , ,27 1,486,126 4,896,1 VOIT REAL ESTATE SERVICES 4

5 WEST ORANGE COUNTY In the fourth quarter 217, the West Orange County industrial market consisted 1,696 buildings totaling 39,998,994 square feet and had an availability rate 4.9, which shows an increase from the previous quarter s figure 4.28%. VACANCY & AVAILABILITY RATE NET ABSORPTION 8% 7%, 4, 3, % , 1, -1, -2, -3, % 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17-4, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1,2, 6 7, 36 1,, 62, 3 8, 4, 24 6, , 18 4, 2 2, , 1 12, 6 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES West Totals 4Q217 4Q217 Lease 4Q Q Less than 9, ,83,92 34,3.8 61,9 1. $1.9 $ ,142 7,1 3, ,822 1,-19, ,4,1 74,222 1.% 129, % $.92 $22.96 (7,8) (12,633) 49, ,883 2,-29, ,322,1 1, , $1.2 $ (28,636) (8,824) 28,74 188,4 3,-39, ,26,846 32, % 4, % $. $187. (12,174) 69,9 9,46 14,261 4,-49, ,221,147 97,46.%,1 2.48% $.8 $ ,39 4, 1,39 1,44,-74, ,473,41 7, , $.82 $ ,64 8,2 119,44 198,622 7,-99, ,74,38.% 22,83.89% $. $. 31, 31, 238,67 1,-199,999 4,391,236 (11,326) (.2) 163,67 3. $.77 $. (119,64) 6, 2, plus 23 8,32, , ,112, % $.6 $. (32,76) (61,114) 27,93 647,3 Total 1,696 39,998,994 97,46 1,7, ,967, $.8 $17.4 (171,87) (62,91),97 1,977,224 VOIT REAL ESTATE SERVICES

6 AIRPORT AREA In the fourth quarter 217, the Airport Orange County industrial market consisted 2,67 buildings totaling 8,33,336 square feet and had an availability rate.89%, which shows an increase from previous quarter s figure.6. VACANCY & AVAILABILITY RATE NET ABSORPTION 7%.89% 4, 3, 2, % 1, 3. -1, -2, -3, -4, -, % 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17-6, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1,2, 12 1,, 9, 4 1,, 1 8, 4 8, , 6, 3 3 6, 6, 2 4, 4 4, 3, , 2 2, 1 1, 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES Airport Totals 4Q217 4Q217 Lease 4Q Q Less than 9, ,384,9 1, % 17, $1.22 $33.6 (46,87) (81,91) 4,8 12,424 1,-19, ,67,73 21, ,44 2.9% $.97 $ (22,42) (62,929) 16,382 23,871 2,-29, ,31,278 11, , % $1.2 $197. (7) (7,36) 87,49 36,92 3,-39,999 14,23,416 73,2 128, , % $.92 $22. 47,199 8,249 4, ,162 4,-49, ,684,733.% 11, $.9 $24. 3,84 99,798 3,84 227,928,-74, ,29,72 6, ,6 2.6 $.79 $ ,1 8,778 86,1 463,2 7,-99, ,26,76 84,176 2.% 84,176 2.% $. $ ,28 14, ,28 274,7 1,-199, ,18,8 3, % 9, % $.73 $. (92,712) (191,64) 68,669 22,66 2, plus 18,43,4 27,691 79, % 1,19, $.7 $. (234,7) (647,461) 3, Total 2,67 8,33,336 6,891 2,6, ,432,927.89% $.8 $29.24 (142,862) (687,938) 61,462 2,24,916 VOIT REAL ESTATE SERVICES 6

7 SOUTH ORANGE COUNTY In the fourth quarter 217, the South Orange County industrial market consisted 93 buildings totaling 24,679,46 square feet and had an availability rate 7., which shows an increase from the previous quarter s figure 6.6. VACANCY & AVAILABILITY RATE NET ABSORPTION 9% 3, 8% 7. 2, 7% 1, % 3.47% -1, - 2, % 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17-3, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 6, 6 6, 3,, 2 4, 4 4, 2 3, 3 3, 1 2, , 1 1, 1 1, 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 4Q1 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES South Totals 4Q217 4Q217 Lease 4Q Q Less than 9, ,174,41 38, % 7, $1.4 $ ,284 (1,887) 28,467 86,966 1,-19, ,982,962 11, % 19,7 3.99% $1.21 $ ,69 33,71 68, ,417 2,-29, ,241,674 11, ,217.% $1.9 $ (34,198) (93,21) 84, 179,11 3,-39, ,627,9 18, ,617.78% $1.1 $3.,637 42,79 11,86 11,84 4,-49, ,294,2 26,94 2.% 2, % $1.1 $. (2,29) 73,919 9,641 13,873,-74, ,46,22 79, % 172, $. $227. 6,87 (21,61) 7,717 83,996 7,-99, ,118,241 84, % 84, % $.82 $. (7,494) 71,99 77,313 16,93 1,-199, ,946, , % 17, $. $. (161,7) (247,729) 129,746 2, plus 16,247, , , $.9 $. (6,91) 97,22 1, 17,789 Total 93 24,679,46 8, % 1,73, $.96 $298.9 (242,) (3,87) 347,923 1,31,97 VOIT REAL ESTATE SERVICES 7

8 OC4Q17 Fourth Quarter 217 MARKET REPORT Orange County Industrial Please Contact Us for Further Information Vibrant Conditions in 217 Provide Optimism for 218 by Seth Davenport EXECUTIVE VICE PRESIDENT, ANAHEIM 217 was another year for the record books. Rents and sale prices climbed throughout the year, driven by scant vacancy and low interest rate mortgages. Strong demand from growing businesses continued to outpace the available supply functional industrial space, which kept the playing field tipped in favor landlords and sellers. These tight market conditions caused further declines in leasing and sales activity, which was down 22. in 217. Often, there is just no place to go, forcing many business owners to forgo new acquisitions or renew existing leases. The average asking lease rate hit $.84 NNN by year end, up 1 year over year, but quality space in prime submarkets is even more expensive. Landlords are also in position to fer little in the way tenant improvements and rent abatement that would otherwise mitigate overall occupancy costs for tenants in a more balanced market. Clearly, it is still a good time to be the owner functional industrial space anywhere in Orange County. The average asking sale price for industrial space also grew by 1 in 217, finishing the year at a record high $26 per square foot. That marks the 4th straight year double digit price appreciation. Mortgage rates on 2 year loans are still under %, despite multiple short term rate hikes by the US Federal Reserve Bank. That kept owner/user demand running well ahead supply all year, as potential sellers remained averse to the huge tax hit that would come with the disposition their assets. A Look Ahead Absent a black swan event, market dynamics are not expected to change much in 218. The availability industrial product is so thin that demand could fall by half and still be running well ahead supply. Land is scarce and expensive, which will keep the addition new inventory flowing at a trickle. Currently only one major project, the Beckman Business Park, is under construction countywide. The 8 building project in Fullerton fers state the art buildings for sale or lease from 41, to 3, square feet, but provides little relief for the vast majority Orange County businesses that occupy less space. We expect overall vacancy to remain near its current level 2. throughout the year, but some submarkets and size ranges will move even lower. Overall economic conditions have been good and may be getting better soon. US GDP growth is back on the rise, registering annualized gains more than in the final half the year, in part due to anticipation tax reform legislation, which became reality in December. The new legislation fers much lower tax rates for C corporations and pass through entities, as well as generous new expensing and depreciation rules that are designed to encourage capital investment and new job creation. How it all plays out, no one can know at this point, but one thing is for sure corporate executives and private business owners will keep more their hard earned income in 218. That points to more demand for industrial property that will drive lease rates and sales prices even higher throughout the year. Product Type MFG./DIST. Manufacturing / Distribution / Warehouse facilities with up to 29.9% fice space. Submarkets 6 West Orange 4 County North Orange County 22 NORTH Anaheim, Brea, Buena Park, Fullerton, La Habra, Orange, Placentia and Yorba Linda 91 Airport Area 7 7 WEST Cypress, Garden Grove, Huntington Beach, La Palma, Los Alamitos, Seal Beach, Stanton and Westminster AIRPORT Costa Mesa, Fountain Valley, Irvine, Newport Beach, Santa Ana and Tustin John Wayne Airport 1 73 South Orange County SOUTH Aliso Viejo, Foothill Ranch, Irvine Spectrum, Laguna Hills, Laguna Niguel, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente and San Juan Capistrano Tony Tran Regional Director Research ttran@voitco.com Anaheim, CA Carlsbad, CA Inland Empire, CA Irvine, CA Los Angeles, CA San Diego, CA This survey consists properties representing both single tenant and multi-tenant buildings. The lease rates are based on a triplenet basis. The information contained in this report is gathered from sources that are deemed reliable, but no guarantees are made as to its accuracy. This information is for Voit Real Estate Services use only and cannot legally be reproduced without prior written consent from the management Voit Real Estate Services. 218 Voit Real Estate Services, Inc. License # Represented in 1 Markets Nationally & Internationally.