CoStar Industrial Statistics. F i r s t Q u a r t e r Phoenix Industrial Market

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1 CoStar Industrial Statistics F i r s t Q u a r t e r

2 First Quarter 2018 Phoenix Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets & Submarkets Inventory & Development Analysis Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Building Type & Market Figures at a Glance by Building Type & Submarket Historical Figures at a Glance Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters Airport Market North Outlying Market Northeast Market Northwest Market Northwest Outlying Market Pinal County Market Southeast Market Southwest Market Southwest Outlying Market 2018 CoStar Group, Inc. CoStar Industrial Statistics A

3 Phoenix First Quarter 2018 Methodology The CoStar Industrial Statistics calculates Industrial statistics using CoStar Group's base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Group's global database includes approximately 119 billion square feet of coverage in 5.4 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2018 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B CoStar Industrial Statistics 2018 CoStar Group, Inc.

4 First Quarter 2018 Phoenix Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-ofa-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different 2018 CoStar Group, Inc. CoStar Industrial Statistics C

5 Phoenix First Quarter 2018 tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: Buildings in a state of construction, up until they receive their certificate of occupancy. In order for CoStar to consider a building under construction, the site must have a concrete foundation in place. Abbreviated UC. Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D CoStar Industrial Statistics 2018 CoStar Group, Inc.

6 Overview First Quarter 2018 Phoenix Phoenix s Decreases to 7.2% Net Absorption Positive 1,323,625 SF in the Quarter The Phoenix Industrial market ended the first quarter 2018 with a vacancy rate of 7.2%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,323,625 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 811,726 square feet. Rental rates ended the first quarter at $7.28, an increase over the previous quarter. A total of 12 buildings delivered to the market in the quarter totaling 746,200 square feet, with 6,630,296 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Phoenix Industrial market was positive 1,323,625 square feet in the first quarter That compares to positive 3,586,501 square feet in the fourth quarter 2017, positive 2,801,530 square feet in the third quarter 2017, and positive 1,487,198 square feet in the second quarter Tenants moving into large blocks of space in 2018 include: Footprint Manufacturing moving into 131,796 square feet at Park Lucero Phase II - Building F, QEP moving into 122,622 square feet at W Van Buren St, and United Solutions moving into 120,700 square feet at AZ/60 - Building 2. The Flex building market recorded net absorption of positive 106,032 square feet in the first quarter 2018, compared to positive 115,255 square feet in the fourth quarter 2017, negative (2,497) in the third quarter 2017, and positive 129,367 in the second quarter The Warehouse building market recorded net absorption of positive 1,217,593 square feet in the first quarter 2018 compared to positive 3,471,246 square feet in the fourth quarter 2017, positive 2,804,027 in the third quarter 2017, and positive 1,357,831 in the second quarter The Industrial vacancy rate in the Phoenix market area decreased to 7.2% at the end of the first quarter The vacancy rate was 7.4% at the end of the fourth quarter 2017, 7.9% at the end of the third quarter 2017, and 8.2% at the end of the second quarter Flex projects reported a vacancy rate of 11.4% at the end of the first quarter 2018, 11.7% at the end of the fourth quarter 2017, 12.0% at the end of the third quarter 2017, and 12.0% at the end of the second quarter Warehouse projects reported a vacancy rate of 6.8% at the end of the first quarter 2018, 7.0% at the end of fourth quarter 2017, 7.5% at the end of the third quarter 2017, and 7.8% at the end of the second quarter Largest Lease Signings The largest lease signings occurring in 2018 included: the 800,000-square-foot lease signed by Chewy.com at Chewy.com Distribution in the Southwest market; the 437,234- square-foot deal signed by Living Spaces Furniture at Living Spaces in the Southwest market; and the 122,622-square-foot lease signed by QEP at W Van Buren St in the Southwest market. Sublease The amount of vacant sublease space in the Phoenix market increased to 811,726 square feet by the end of the first quarter 2018, from 803,193 square feet at the end of the fourth Rates by Building Type % Flex Warehouse Total Market 20% Rate 15% 10% 5% 0% q q q q q q q q q q q q q q q q 2018 CoStar Group, Inc. CoStar Industrial Statistics 1

7 Phoenix First Quarter 2018 Overview quarter There was 581,918 square feet vacant at the end of the third quarter 2017 and 571,078 square feet at the end of the second quarter Phoenix s Flex projects reported vacant sublease space of 171,550 square feet at the end of first quarter 2018, down from the 182,892 square feet reported at the end of the fourth quarter There were 106,577 square feet of sublease space vacant at the end of the third quarter 2017, and 83,288 square feet at the end of the second quarter Warehouse projects reported increased vacant sublease space from the fourth quarter 2017 to the first quarter Sublease vacancy went from 620,301 square feet to 640,176 square feet during that time. There was 475,341 square feet at the end of the third quarter 2017, and 487,790 square feet at the end of the second quarter Rental Rates The average quoted asking rental rate for available Industrial space was $7.28 per square foot per year at the end of the first quarter 2018 in the Phoenix market area. This represented a 0.8% increase in quoted rental rates from the end of the fourth quarter 2017, when rents were reported at $7.22 per square foot. The average quoted rate within the Flex sector was $12.85 per square foot at the end of the first quarter 2018, while Warehouse rates stood at $6.50. At the end of the fourth quarter 2017, Flex rates were $12.72 per square foot, and Warehouse rates were $6.48. Deliveries and Construction During the first quarter 2018, 12 buildings totaling 746,200 square feet were completed in the Phoenix market area. This compares to 18 buildings totaling 1,717,464 square feet that were completed in the fourth quarter 2017, seven buildings totaling 1,943,721 square feet completed in the third quarter 2017, and 909,326 square feet in 12 buildings completed in the U.S. Comparison Past 7 Quarters Rate 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% Phoenix United States second quarter There were 6,630,296 square feet of Industrial space under construction at the end of the first quarter Some of the notable 2018 deliveries include: Parc Pinnacle, a 155,025-square-foot facility that delivered in first quarter 2018 and is now 0% occupied, and Kyrene 202 Business Park - Building V, a 102,040-square-foot building that delivered in first quarter 2018 and is now 66% occupied. The largest projects underway at the end of first quarter 2018 were TEN - Warehouse 1, a 1,100,000-square-foot building with 0% of its space pre-leased, and Lincoln 40 Logistics, a 901,700-square-foot facility that is 0% pre-leased. Inventory Total Industrial inventory in the Phoenix market area amounted to 335,043,221 square feet in 10,756 buildings as of the end of the first quarter The Flex sector consisted of 33,865,441 square feet in 1,193 projects. The Warehouse sector consisted of 301,177,780 square feet in 9,563 buildings. Within the Industrial market there were 2,206 owner-occupied buildings accounting for 97,486,473 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Phoenix industrial sales figures rose during the fourth quarter 2017 in terms of dollar volume compared to the third quarter of In the fourth quarter, 46 industrial transactions closed with a total volume of $312,032,276. The 46 buildings totaled 4,056,671 square feet and the average price per square foot equated to $76.92 per square foot. That compares to 47 transactions totaling $235,827,730 in the third quarter. The total square footage was 2,477,349 for an average price per square foot of $ Total year-to-date industrial building sales activity in 2017 is down compared to the previous year. In the twelve months of 2017, the market saw 187 industrial sales transactions with a total volume of $1,012,068,436. The price per square foot has averaged $81.78 this year. In the twelve months of 2016, the market posted 173 transactions with a total volume of $1,145,458,216. The price per square foot averaged $ Cap rates have been lower in 2017, averaging 6.82%, compared to the twelve months of last year when they averaged 7.34%. Reports compiled by: Brian Lasky, Research Manager. 3.0% 2.0% 1.0% 0.0% q 2 CoStar Industrial Statistics 2018 CoStar Group, Inc.

8 Markets First Quarter 2018 Phoenix CoStar Submarket Clusters & Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters Airport Ind North Outlying Ind Northeast Ind Northwest Ind Northwest Outlying Ind Pinal County Ind Southeast Ind Southwest Ind Southwest Outlying Ind Submarkets North Airport Ind S Airport N of Roeser Ind S Airport S of Roeser Ind SC N of Salt River Ind SC S of Salt River Ind North Outlying Ind Central Phoenix Ind Scottsdale Airpark Ind Scottsdale/Salt River Ind Deer Vly/Pinnacle Pk Ind Glendale Ind Grand Avenue Ind N Glendale/Sun City Ind North Black Canyon Ind W Phx N of Thomas Rd Ind W Phx S of Thomas Rd Ind Northwest Outlying Ind Pinal County Ind Chandler Airport Ind Chandler Ind Chandler N/Gilbert Ind Falcon Fld/Apache Jct Ind Mesa Ind Tempe East Ind Tempe Northwest Ind Tempe Southwest Ind Goodyear Ind SW N of Buckeye Road Ind SW S of Buckeye Road Ind Tolleson Ind Southwest Outlying Ind 2018 CoStar Group, Inc. CoStar Industrial Statistics 3

9 Phoenix First Quarter 2018 Inventory & development Historical Deliveries Deliveries Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Southwest Ind 8 4,294, , % 68, ,757 Northwest Ind 13 1,173, , % 23,910 90,304 Southeast Ind 12 1,006, , % 29,139 83,854 Pinal County Ind 1 108, , % 25, ,535 Airport Ind 1 47,500 47, % 24,328 47,500 North Outlying Ind % 10,211 0 Northeast Ind % 18,894 0 Northwest Outlying Ind % 12,913 0 Southwest Outlying Ind % 33,208 0 Totals 35 6,630,296 1,805, % 31, ,437 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2014 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 8.0 Leased Un-Leased 4,500 Preleased Un-Leased 7.0 4, ,500 Millions of SF Thousands of SF 3,000 2,500 2,000 1, , q q 4 CoStar Industrial Statistics 2018 CoStar Group, Inc.

10 Inventory & development First Quarter 2018 Phoenix Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 3.0 Construction Starts Deliveries Millions of SF q q q q Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 6 222, , % $ 0 222,114 50,000 SF - 99,999 SF 4 267,021 25, % $ , ,000 SF - 249,999 SF 2 257,065 67, % $ , ,000 SF - 499,999 SF % $ 0 0 >= 500,000 SF % $ 0 0 Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2018 Deliveries Currently Under Construction By Building Type By Tenancy Type 0% 20% 10% 53% 47% 100% 80% 90% Multi Single Multi Single Flex Warehouse Multi Single 2018 CoStar Group, Inc. CoStar Industrial Statistics 5

11 Phoenix First Quarter 2018 Inventory & development 6 CoStar Industrial Statistics 2018 CoStar Group, Inc.

12 Inventory & development First Quarter 2018 Phoenix 2018 CoStar Group, Inc. CoStar Industrial Statistics 7

13 Phoenix First Quarter 2018 Figures at a Glance Flex Market Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 163 5,601, , , % (37,687) 0 0 $12.37 North Outlying Ind % $ Northeast Ind 247 5,346, , , % 53, $13.46 Northwest Ind 255 6,263, , , % 68,484 37, ,000 $11.29 Northwest Outlying Ind % $ Pinal County Ind ,207 5,000 5, % (5,000) 0 0 $8.31 Southeast Ind ,209,368 1,815,623 1,968, % 24, $13.43 Southwest Ind 35 1,344, , , % 1, $7.91 Southwest Outlying Ind % $ Totals 1,193 33,865,441 3,702,830 3,874, % 106,032 37, ,000 $12.85 Warehouse Market Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 1,960 46,046,533 3,472,021 3,584, % 274, ,500 $7.59 North Outlying Ind , % $ Northeast Ind ,545, , , % 106, $11.00 Northwest Ind 2,373 56,573,188 3,420,541 3,483, % (1,832) 498, ,953 $6.71 Northwest Outlying Ind 3 38, % $ Pinal County Ind 356 9,444, , , % 6, ,535 $5.42 Southeast Ind 2,811 80,687,168 4,693,449 4,907, % 243, ,280 1,006,252 $7.80 Southwest Ind 1,396 96,577,501 7,083,749 7,249, % 587, ,294,056 $4.90 Southwest Outlying Ind 4 132,833 99,000 99, % $2.40 Totals 9, ,177,780 19,735,993 20,376, % 1,217, ,200 6,430,296 $6.50 Total Industrial Market Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 2,123 51,647,759 4,414,690 4,545, % 237, ,500 $8.51 North Outlying Ind , % $ Northeast Ind ,891,197 1,003,676 1,049, % 160, $12.02 Northwest Ind 2,628 62,836,265 3,836,794 3,899, % 66, ,920 1,173,953 $7.02 Northwest Outlying Ind 3 38, % $ Pinal County Ind 369 9,545, , , % 1, ,535 $5.46 Southeast Ind 3,291 95,896,536 6,509,072 6,876, % 268, ,280 1,006,252 $9.02 Southwest Ind 1,431 97,921,913 7,212,425 7,378, % 589, ,294,056 $4.92 Southwest Outlying Ind 4 132,833 99,000 99, % $2.40 Totals 10, ,043,221 23,438,823 24,250, % 1,323, ,200 6,630,296 $ CoStar Industrial Statistics 2018 CoStar Group, Inc.

14 Figures at a Glance First Quarter 2018 Phoenix Flex Submarket Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 61 1,064,517 24,621 24, % 9, $11.78 Chandler Airport Ind , , , % (62,738) 0 0 $15.97 Chandler Ind 71 3,801, , , % 11, $14.96 Chandler N/Gilbert I ,336, , , % 17, $11.20 Deer Vly/Pinnacle Pk. 84 3,228,754 66,842 66, % 72,348 37, ,000 $12.01 Falcon Fld/Apache Jc ,712 44,936 44, % 37, $9.76 Glendale Ind ,939 43,294 43, % $19.19 Goodyear Ind ,053 44,660 44, % 1, $6.75 Grand Avenue Ind ,393 32,959 32, % (5) 0 0 $12.26 Mesa Ind ,121 2,997 2, % (1,392) 0 0 $10.40 N Glendale/Sun City ,043 37,154 37, % (86) 0 0 $7.36 North Airport Ind 44 1,825, , , % 69, $11.07 North Black Canyon I. 63 1,205, , , % (11,520) 0 0 $10.36 North Outlying Ind % $ Northwest Outlying I % $ Pinal County Ind ,207 5,000 5, % (5,000) 0 0 $8.31 S Airport N of Roese. 64 2,811, , , % (146,180) 0 0 $12.83 S Airport S of Roese ,814 7,568 14, % 8, $7.80 SC N of Salt River I ,204 66,923 71, % 30, $15.17 SC S of Salt River I. 6 38, % $ Scottsdale Airpark I ,492, , , % 10, $14.08 Scottsdale/Salt Rive. 68 1,789,421 93,607 93, % 33, $12.76 Southwest Outlying I % $ SW N of Buckeye Road ,371 6,956 6, % $ SW S of Buckeye Road ,444 60,000 60, % $ Tempe East Ind 47 1,270, , , % (5,918) 0 0 $8.03 Tempe Northwest Ind 81 2,495, , , % (9,279) 0 0 $13.15 Tempe Southwest Ind 97 3,849, , , % 37, $13.03 Tolleson Ind 8 503,544 17,060 17, % $11.85 W Phx N of Thomas Rd ,481 13,432 13, % 5, $6.70 W Phx S of Thomas Rd ,249 11,373 11, % 2, $13.36 Totals 1,193 33,865,441 3,702,830 3,874, % 106,032 37, ,000 $ CoStar Group, Inc. CoStar Industrial Statistics 9

15 Phoenix First Quarter 2018 Figures at a Glance Warehouse Submarket Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 292 3,459, , , % 20, $9.70 Chandler Airport Ind 81 2,963, , , % 244,199 44,000 0 $7.93 Chandler Ind ,425, , , % (64,743) 166, ,368 $7.87 Chandler N/Gilbert I ,016, , , % 80, ,400 $7.62 Deer Vly/Pinnacle Pk ,809,562 1,437,322 1,470, % 28, , ,253 $8.88 Falcon Fld/Apache Jc ,405,388 95, , % 20, ,134 $8.65 Glendale Ind 115 8,656, , , % (52,985) 110, ,700 $5.34 Goodyear Ind ,326,651 1,421,392 1,421, % 57, ,701,700 $4.49 Grand Avenue Ind ,213, , , % 53, $5.66 Mesa Ind 428 7,207, , , % (71,375) 0 0 $7.75 N Glendale/Sun City ,081, , , % 34, $7.67 North Airport Ind ,662, , , % 104, ,500 $7.69 North Black Canyon I ,413, , , % (5,662) 0 0 $8.13 North Outlying Ind , % $ Northwest Outlying I. 3 38, % $ Pinal County Ind 356 9,444, , , % 6, ,535 $5.42 S Airport N of Roese ,774,173 1,504,875 1,522, % 57, $6.81 S Airport S of Roese ,413, , , % (13,933) 0 0 $7.27 SC N of Salt River I ,812, , , % 122, $9.22 SC S of Salt River I ,383, , , % 5, $6.90 Scottsdale Airpark I ,400, , , % 65, $11.39 Scottsdale/Salt Rive ,684, , , % 20, $11.19 Southwest Outlying I ,833 99,000 99, % $2.40 SW N of Buckeye Road ,622,017 1,646,433 1,709, % 138, ,340 $4.69 SW S of Buckeye Road ,576,103 1,535,100 1,535, % 94, $6.13 Tempe East Ind 328 5,396, , , % 58, ,744 $7.96 Tempe Northwest Ind 264 8,507, , , % (10,798) 0 109,606 $8.85 Tempe Southwest Ind ,764,697 1,597,329 1,636, % (12,872) 0 0 $6.91 Tolleson Ind ,052,730 2,480,824 2,583, % 296, ,024,016 $4.64 W Phx N of Thomas Rd ,512, , , % (78,567) 0 0 $5.72 W Phx S of Thomas Rd ,884, , , % 19, $5.22 Totals 9, ,177,780 19,735,993 20,376, % 1,217, ,200 6,430,296 $ CoStar Industrial Statistics 2018 CoStar Group, Inc.

16 Figures at a Glance First Quarter 2018 Phoenix Total Industrial Submarket Statistics First Quarter 2018 Existing Inventory YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 353 4,524, , , % 30, $10.48 Chandler Airport Ind 94 3,550, , , % 181,461 44,000 0 $10.41 Chandler Ind ,227,051 1,243,459 1,324, % (53,411) 166, ,368 $1 Chandler N/Gilbert I ,353,511 1,020,534 1,124, % 97, ,400 $8.22 Deer Vly/Pinnacle Pk ,038,316 1,504,164 1,537, % 101, , ,253 $9.07 Falcon Fld/Apache Jc ,798, , , % 58, ,134 $8.75 Glendale Ind 127 8,979, , , % (52,985) 110, ,700 $5.55 Goodyear Ind ,584,704 1,466,052 1,466, % 59, ,701,700 $4.56 Grand Avenue Ind ,383, , , % 53, $6.02 Mesa Ind 469 7,684, , , % (72,767) 0 0 $7.78 N Glendale/Sun City ,574, , , % 34, $7.61 North Airport Ind ,487, , , % 173, ,500 $8.51 North Black Canyon I ,619, , , % (17,182) 0 0 $9.01 North Outlying Ind , % $ Northwest Outlying I. 3 38, % $ Pinal County Ind 369 9,545, , , % 1, ,535 $5.46 S Airport N of Roese ,585,425 2,161,837 2,185, % (89,049) 0 0 $8.50 S Airport S of Roese ,558, , , % (5,168) 0 0 $7.29 SC N of Salt River I ,593, , , % 152, $9.53 SC S of Salt River I ,422, , , % 5, $6.90 Scottsdale Airpark I ,892, , , % 76, $12.66 Scottsdale/Salt Rive ,474, , , % 53, $11.70 Southwest Outlying I ,833 99,000 99, % $2.40 SW N of Buckeye Road ,863,388 1,653,389 1,716, % 138, ,340 $4.69 SW S of Buckeye Road ,917,547 1,595,100 1,595, % 94, $6.13 Tempe East Ind 375 6,666, , , % 52, ,744 $7.97 Tempe Northwest Ind ,002, , , % (20,077) 0 109,606 $9.84 Tempe Southwest Ind ,614,182 1,976,201 2,092, % 25, $8.51 Tolleson Ind ,556,274 2,497,884 2,601, % 296, ,024,016 $4.66 W Phx N of Thomas Rd ,249, , , % (72,862) 0 0 $5.74 W Phx S of Thomas Rd ,991, , , % 21, $5.48 Totals 10, ,043,221 23,438,823 24,250, % 1,323, ,200 6,630,296 $ CoStar Group, Inc. CoStar Industrial Statistics 11

17 Phoenix First Quarter 2018 Figures at a Glance 12 CoStar Industrial Statistics 2018 CoStar Group, Inc.

18 Leasing Activity First Quarter 2018 Phoenix Historical Rental Rates Based on Quoted Rental Rates $16.00 Flex Warehouse Total Market $14.00 Dollars/SF/Year $12.00 $1 $8.00 $6.00 $4.00 $2.00 $ q q q q q q q q by Available Space Type by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Phoenix United States Phoenix United States 3% 4% 16% 14% 84% 86% 97% 96% Direct Sublet Direct Sublet Flex Warehouse Flex Warehouse U.S. Rental Rate Comparison Based on Average Quoted Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $8.00 $7.00 Phoenix United States Dollars/SF/Year $6.00 $5.00 $4.00 $3.00 Millions $2.00 $1.00 $ q q q q * Includes Under Construction Space 2018 CoStar Group, Inc. CoStar Industrial Statistics 13

19 Phoenix First Quarter 2018 Leasing Activity Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2018 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 Chewy.com Distribution Goodyear Ind 800,000 1st Chewy.com Cushman & Wakeeld Cushman & Wakeeld 2 Living Spaces SW N of Buckeye Road Ind 437,234 1st Living Spaces Furniture N/A N/A W McDowell Rd SW N of Buckeye Road Ind 170,000 1st N/A N/A Cushman & Wakeeld W Van Buren St Tolleson Ind 122,622 1st QEP N/A Cushman & Wakeeld 5 Southwest Industrial Center - Bldg 1 Tolleson Ind 122,125 1st ThreadUP JLL JLL 6 99,017 SF Tempe Building Tempe Southwest Ind 99,017 1st Kovach Inc N/A JLL 7 Liberty Logistics Center II - Building 3 Tolleson Ind 98,723 1st Gwynnie Bee N/A Colliers International S Hibbert St* Mesa Ind 59,511 1st Roong Supply of Arizona Direct Deal Commercial Properties, Inc E University Dr S Airport N of Roeser Ind 53,100 1st Hajoca Corporation N/A Commercial Properties, Inc. 10 Wilson Street Warehouse Tempe Southwest Ind 52,540 1st Merestone Commercial Properties, Inc. Commercial Properties, Inc. 11 Broadway 101 Commerce Park I - Phase I Mesa Ind 52,208 1st N/A N/A Cushman & Wakeeld 12 Glacier Ice Services Tolleson Ind 50,625 1st Tolleson Supply Company N/A CBRE 13 AERO 46-Phase I* Chandler N/Gilbert Ind 47,621 1st Alcor Energy Solutions N/A Lee & Associates S Roosevelt St Tempe Southwest Ind 47,000 1st SAC Wireless JLL Lee & Associates 15 Corridors Industrial Park - Bldg B Deer Vly/Pinnacle Pk Ind 43,042 1st Complete Fulllmet N/A CBRE E Tierra Buena Ln Scottsdale Airpark Ind 41,789 1st N/A N/A Shell Commercial W Lodge Dr Tempe Southwest Ind 39,360 1st Stericycle, Inc. JLL Lee & Associates 18 Tempe Distribution Center - Lot 10 Tempe Dist Tempe East Ind 35,548 1st N/A N/A CBRE 19 Kyrene 202 Business Park - Building IV Chandler Ind 32,120 1st Simpson Strong Tie Newmark Knight Frank Colliers International 20 Kyrene 202 Business Park - Building III Chandler Ind 32,120 1st Talestorm Health JLL Colliers International 21 Tempe Distribution Center - Lot 10 Tempe Dist Tempe East Ind 29,471 1st N/A N/A CBRE S 54th Ave SW N of Buckeye Road Ind 25,344 1st Natural Pet Partners, LLC GPS Retail Advisors Exeter Property Group 23 Cowley Industrial Park SW N of Buckeye Road Ind 25,000 1st Assurance Relocation Systems American Realty Brokers CBRE 24 Hewson Fiesta Tech Center - Bldg A* Chandler N/Gilbert Ind 24,465 1st Orbital ATK Direct Deal Commercial Properties, Inc. 25 Freeport Center SW N of Buckeye Road Ind 21,383 1st N/A N/A Cushman & Wakeeld 26 Freeport Center SW N of Buckeye Road Ind 21,383 1st N/A N/A Cushman & Wakeeld 27 The Commons At West 10 - Bldg 1 SW N of Buckeye Road Ind 21,000 1st GBI N/A Cushman & Wakeeld 28 Pinnacle 7 Deer Vly/Pinnacle Pk Ind 20,348 1st N/A N/A CBRE 29 Park Ladera - Bldg A Deer Vly/Pinnacle Pk Ind 20,088 1st Ping N/A CBRE 30 Tempe Commerce Park Tempe Southwest Ind 20,000 1st N/A N/A JLL 31 Elliot Business Park - Bldg 1 Tempe Southwest Ind 19,729 1st N/A N/A CBRE E Jones Ave S Airport N of Roeser Ind 19,224 1st N/A Cutler Commercial Cutler Commercial 33 Grand I Grand Avenue Ind 19,200 1st N/A N/A J & S Industrial, LLC W 21st St Tempe Southwest Ind 19,000 1st N/A N/A Francisco Gamez 35 Metro East Valley Commerce Center - Chandler N/Gilbert Ind 18,561 1st Times Microwave Commercial Properties, Inc. Lee & Associates 36 Buckeye 75 Distribution Park Tolleson Ind 18,225 1st N/A N/A Lincoln Property Company 37 Kyrene Commons 1 Tempe Southwest Ind 17,792 1st N/A N/A Cushman & Wakeeld 38 First Rose Garden Center - Bldg B* Deer Vly/Pinnacle Pk Ind 17,327 1st Sonoran Doors Commercial Properties, Inc. N/A W Elliot Rd* Chandler N/Gilbert Ind 16,515 1st Sdhq N/A CBRE 40 Elliot Park-10 - Bldg 2-3 Tempe Southwest Ind 16,000 1st N/A N/A CBRE * Renewal 14 CoStar Industrial Statistics 2018 CoStar Group, Inc.

20 Sales Activity First Quarter 2018 Phoenix The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 7.0% Cap Rate Price/SF $ % $320 Cap Rate Percentage 5.0% 4.0% 3.0% 2.0% $270 $220 $170 Dollars/SF 1.0% q q q $120 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From Jan Dec $400 Sales Volume Price/SF $100 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $350 $300 $250 $200 $150 $100 $90 $80 $70 $60 $50 $40 $30 $20 Price/SF < 25,000 SF 25K-99K SF 100K-249K SF 148 1,963,760 $230,794,126 $ % 105 5,060,885 $416,071,903 $ % 23 3,619,810 $310,128,095 $ % $50 $10 $ q q q q $0 >250K SF 6 2,679,908 $177,850,000 $ % Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Industrial Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Industrial Building Sales of 15,000 SF and Larger $100 Phoenix US 9.0% Phoenix US $95 $90 8.0% $85 $80 $75 $70 $65 Cap Rate Percentage 7.0% 6.0% 5.0% 4.0% $60 $55 3.0% $50 2.0% q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 2018 CoStar Group, Inc. CoStar Industrial Statistics 15

21 16 CoStar Industrial Statistics 2018 CoStar Group, Inc. Phoenix First Quarter 2018 Sales Activity

22 Deliveries, Absorption & A i r p o r t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse First Quarter 2018 Phoenix Delivered SF Absorption SF 14.0% (0.200) (0.400) (0.600) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Percent Vacant (0.800) q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates 7.00 Direct SF Sublet SF $ $ Dollars/SF/Year $8.20 $8.00 $7.80 $7.60 $7.40 $7.20 Existing Inventory Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 2,123 51,647,759 4,545, % 237, ,500 $ q 2,123 51,647,759 4,782, % 718, , ,500 $ q 2,122 51,540,179 5,393, % 393, ,580 $ q 2,122 51,540,179 5,787, % 280, , ,580 $ q 2,121 51,517,171 6,045, % 336, , ,588 $ q 2,117 51,105,780 5,970, % 54, , ,399 $ q 2,116 50,509,223 5,428, % (38,945) 3 189, ,080,848 $ q 2,115 50,371,479 5,251, % (549,113) 1 64, ,057,894 $ q 2,115 50,334,807 4,665, % 259, , ,267 $ q 2,114 50,205,757 4,795, % 264, , ,696 $ q 2,114 50,315,432 5,169, % 178, , ,313 $ q 2,112 50,153,183 5,186, % 34, , ,698 $ q 2,112 49,959,503 5,026, % 296, ,752 $ q 2,114 50,062,683 5,426, % (231,857) 2 326, ,982 $ q 2,113 49,757,988 4,889, % 429, ,390 $ q 2,113 49,757,988 5,319, % 162, ,377 $ CoStar Group, Inc. CoStar Industrial Statistics 17

23 Phoenix First Quarter 2018 Deliveries, Absorption & N o r t h O u t l y i n g M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Delivered SF Absorption SF 14.0% (2) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Percent Vacant (4) q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates Direct SF Sublet SF Dollars/SF/Year $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $ Existing Inventory Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q , % $ q , % $ q , % $ q , % $ q , % $ q , % $ q , % $ q , % $ q , % 10, $ q ,746 10, % 5, $ q ,746 15, % (2,000) $ q ,746 13, % $ q ,746 13, % $ q ,746 13, % $ q ,746 13, % 2, $ q ,746 15, % $ CoStar Industrial Statistics 2018 CoStar Group, Inc.