CoStar Industrial Statistics. M i d - Y e a r Minneapolis Industrial Market

Transcription

1 CoStar Industrial Statistics M i d - Y e a r

2 Mid-Year 2017 Minneapolis Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets 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 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 Chisago County Market East Market Isanti County Market Midway Market Minneapolis Market North Central Market Northwest Market Pierce County Market Sherburne County Market South Central Market Southwest Market St Croix County Market St Paul Market Stearns County Market Wright County Market 2017 CoStar Group, Inc. CoStar Industrial Statistics A

3 Minneapolis Mid-Year 2017 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 95.6 billion square feet of coverage in 4.4 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 2017 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 2017 CoStar Group, Inc.

4 Mid-Year 2017 Minneapolis 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. : 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 2017 CoStar Group, Inc. CoStar Industrial Statistics C

5 Minneapolis Mid-Year 2017 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 2017 CoStar Group, Inc.

6 Overview Mid-Year 2017 Minneapolis Minneapolis s Decreases to 4.1% Net Absorption Positive 412,245 SF in the Quarter The Minneapolis Industrial market ended the second quarter 2017 with a vacancy rate of 4.1%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 412,245 square feet in the second quarter. Vacant sublease space decreased in the quarter, ending the quarter at 733,598 square feet. Rental rates ended the second quarter at $6.63, a decrease over the previous quarter. A total of five buildings delivered to the market in the quarter totaling 310,084 square feet, with 1,632,600 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Minneapolis Industrial market was positive 412,245 square feet in the second quarter That compares to negative (169,489) square feet in the first quarter 2017, positive 1,237,572 square feet in the fourth quarter 2016, and positive 2,160,401 square feet in the third quarter Tenants moving out of large blocks of space in 2017 include: Wirsbo Co moving out of (226,100) square feet at th St W, Bay Island Coffee moving out of (184,940) square feet at Circle Star Business Center, and Quill Health Care moving out of (146,118) square feet at 8500 N Wyoming Ave. Tenants moving into large blocks of space in 2017 include: El Dorado Packaging, Inc. moving into 172,581 square feet at th St W, Spears Manufacturing moving into 142,680 square feet at Dayton Distribution Center I-Spec, and Intereum, Inc. moving into 134,384 square feet at Waterford Innovation Center. The Flex building market recorded net absorption of negative (58,302) square feet in the second quarter 2017, compared to negative (189,722) square feet in the first quarter 2017, positive 444,543 in the fourth quarter 2016, and positive 270,279 in the third quarter The Warehouse building market recorded net absorption of positive 470,547 square feet in the second quarter 2017 compared to positive 20,233 square feet in the first quarter 2017, positive 793,029 in the fourth quarter 2016, and positive 1,890,122 in the third quarter The Industrial vacancy rate in the Minneapolis market area decreased to 4.1% at the end of the second quarter The vacancy rate was 4.2% at the end of the first quarter 2017, 4.1% at the end of the fourth quarter 2016, and 4.2% at the end of the third quarter Flex projects reported a vacancy rate of 6.1% at the end of the second quarter 2017, 6.1% at the end of the first quarter 2017, 5.8% at the end of the fourth quarter 2016, and 5.9% at the end of the third quarter Warehouse projects reported a vacancy rate of 3.6% at the end of the second quarter 2017, 3.7% at the end of first quarter 2017, 3.6% at the end of the fourth quarter 2016, and 3.8% at the end of the third quarter Largest Lease Signings The largest lease signings occurring in 2017 included: the 250,000-square-foot lease signed by Arrowhead Electrical at Blaine Preserve Business Park Bldg III in the North Central market; the 104,818-square-foot deal signed by VStar Entertainment Rates by Building Type % Flex Warehouse Total Market 10% Rate 8% 6% 4% 2% 0% q q q q q q q q q 2017 CoStar Group, Inc. CoStar Industrial Statistics 1

7 Minneapolis Mid-Year 2017 Overview Group at Northern Stacks IV in the North Central market; and the 96,470-square-foot lease signed by US Venture at Plymouth Point Business Center in the Northwest market. Sublease The amount of vacant sublease space in the Minneapolis market decreased to 733,598 square feet by the end of the second quarter 2017, from 903,207 square feet at the end of the first quarter There was 817,044 square feet vacant at the end of the fourth quarter 2016 and 834,436 square feet at the end of the third quarter Minneapolis s Flex projects reported vacant sublease space of 125,021 square feet at the end of second quarter 2017, down from the 192,655 square feet reported at the end of the first quarter There were 211,389 square feet of sublease space vacant at the end of the fourth quarter 2016, and 204,148 square feet at the end of the third quarter Warehouse projects reported decreased vacant sublease space from the first quarter 2017 to the second quarter Sublease vacancy went from 710,552 square feet to 608,577 square feet during that time. There was 605,655 square feet at the end of the fourth quarter 2016, and 630,288 square feet at the end of the third quarter Rental Rates The average quoted asking rental rate for available Industrial space was $6.63 per square foot per year at the end of the second quarter 2017 in the Minneapolis market area. This represented a 0.3% decrease in quoted rental rates from the end of the first quarter 2017, when rents were reported at $6.65 per square foot. The average quoted rate within the Flex sector was $8.69 per square foot at the end of the second quarter 2017, while Warehouse rates stood at $6.01. At the end of the first quarter 2017, Flex rates were $8.72 per square foot, and Warehouse rates were $5.99. U.S. Comparison Past 8 Quarters Rate 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Minneapolis United States q Deliveries and Construction During the second quarter 2017, five buildings totaling 310,084 square feet were completed in the Minneapolis market area. This compares to three buildings totaling 232,143 square feet that were completed in the first quarter 2017, six buildings totaling 717,320 square feet completed in the fourth quarter 2016, and 1,920,904 square feet in nine buildings completed in the third quarter There were 1,632,600 square feet of Industrial space under construction at the end of the second quarter Some of the notable 2017 deliveries include: Waterford Innovation Center, a 134,384-square-foot facility that delivered in second quarter 2017 and is now 100% occupied, and Northern Stacks III, a 133,200-square-foot building that delivered in second quarter 2017 and is now 73% occupied. The largest projects underway at the end of second quarter 2017 were Gateway South 2, a 437,000-square-foot building with 19% of its space pre-leased, and Blaine Preserve Business Park Bldg III, a 250,000-square-foot facility that is 100% preleased. Inventory Total Industrial inventory in the Minneapolis market area amounted to 385,786,544 square feet in 9,884 buildings as of the end of the second quarter The Flex sector consisted of 77,319,147 square feet in 1,834 projects. The Warehouse sector consisted of 308,467,397 square feet in 8,050 buildings. Within the Industrial market there were 834 owner-occupied buildings accounting for 66,567,888 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Minneapolis industrial sales figures fell during the first quarter 2017 in terms of dollar volume compared to the fourth quarter of In the first quarter, 43 industrial transactions closed with a total volume of $107,440,932. The 43 buildings totaled 1,922,040 square feet and the average price per square foot equated to $55.90 per square foot. That compares to 46 transactions totaling $271,722,999 in the fourth quarter. The total square footage was 4,358,171 for an average price per square foot of $ Total year-to-date industrial building sales activity in 2017 is up compared to the previous year. In the first three months of 2017, the market saw 43 industrial sales transactions with a total volume of $107,440,932. The price per square foot has averaged $55.90 this year. In the first three months of 2016, the market posted 39 transactions with a total volume of $87,346,425. The price per square foot averaged $ Cap rates have been lower in 2017, averaging 7.59%, compared to the first three months of last year when they averaged 8.47%. 2 CoStar Industrial Statistics 2017 CoStar Group, Inc.

8 Overview Mid-Year 2017 Minneapolis One of the largest transactions that has occurred within the last four quarters in the Minneapolis market is the sale of 1105 N Xenium Ln. in Plymouth. This 899,061-square-foot industrial building sold for $62,585,000, or $69.61 per square foot. The property sold on 8/10/2016. Absorption & Deliveries Past 8 Quarters Net Absorption Deliveries Reports compiled by: Brian Lasky, CoStar Research Manager and the Minneapolis Research Team (0.5) (0.2) q 2017 CoStar Group, Inc. CoStar Industrial Statistics 3

9 Minneapolis Mid-Year 2017 Markets CoStar 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 Chisago County Ind East Ind Isanti County Ind Midway Ind Minneapolis Ind North Central Ind Northwest Ind Pierce County Ind Sherburne County Ind South Central Ind Southwest Ind St Croix County Ind St Paul Ind Stearns County Ind Wright County Ind 4 CoStar Industrial Statistics 2017 CoStar Group, Inc.

10 Inventory & development Mid-Year 2017 Minneapolis 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 North Central Ind 3 546, , % 36, ,000 Southwest Ind 3 542, , % 46, ,667 Northwest Ind 3 535, % 54, ,333 Stearns County Ind 1 9, % 26,474 9,600 St Croix County Ind % 25,975 0 South Central Ind % 43,956 0 Midway Ind % 58,911 0 Minneapolis Ind % 33,942 0 East Ind % 38,274 0 Isanti County Ind % 19,547 0 All Other % 24,568 0 Totals 10 1,632, , % 39, ,260 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2013 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 5.0 Leased Un-Leased 1,400 Preleased Un-Leased ,200 Millions of SF Thousands of SF 1, q 2017 CoStar Group, Inc. CoStar Industrial Statistics 5

11 Minneapolis Mid-Year 2017 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 2.5 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 3 42,500 42, % $ ,500 50,000 SF - 99,999 SF 2 109, , % $ , ,000 SF - 249,999 SF 3 389, , % $ , ,000 SF - 499,999 SF % $ >= 500,000 SF % $ Recent Development by Tenancy Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2017 Deliveries Currently Under Construction By Building Type By Tenancy Type 0% 0% 80% 20% 49% 51% 100% 100% Multi Single Multi Single Flex Warehouse Multi Single 6 CoStar Industrial Statistics 2017 CoStar Group, Inc.

12 Inventory & development Mid-Year 2017 Minneapolis 2017 CoStar Group, Inc. CoStar Industrial Statistics 7

13 Minneapolis Mid-Year 2017 Inventory & development 8 CoStar Industrial Statistics 2017 CoStar Group, Inc.

14 Figures at a Glance Mid-Year 2017 Minneapolis Flex Market Statistics Mid-Year 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Chisago County Ind 7 93,916 5,400 5, % 14, $9.64 East Ind 221 8,014, , , % (25,559) 0 0 $9.42 Isanti County Ind 6 129,771 14,800 14, % (14,800) 0 0 $0.00 Midway Ind 137 5,778, , , % 74, $9.18 Minneapolis Ind 43 2,401, , , % (66,183) 0 0 $16.62 North Central Ind ,884, , , % (90,526) 0 0 $8.55 Northwest Ind ,683, , , % (81,232) 0 0 $7.39 Pierce County Ind 1 31, % $0.00 Sherburne County Ind ,480 21,388 21, % 9, $6.00 South Central Ind ,315, , , % 50, $8.09 Southwest Ind ,306,550 1,389,315 1,426, % (63,749) 0 0 $8.65 St Croix County Ind ,928 4,296 4, % (2,296) 0 0 $8.74 St Paul Ind 105 2,937, , , % (29,878) 0 0 $8.62 Stearns County Ind ,142 25,070 25, % (20,362) 0 0 $8.90 Wright County Ind ,512 68,097 68, % (2,297) 0 0 $6.52 Totals 1,834 77,319,147 4,629,847 4,754, % (248,024) 0 0 $8.69 Warehouse Market Statistics Mid-Year 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Chisago County Ind 172 3,561,502 25,512 25, % (2,200) 0 0 $5.40 East Ind ,657, , , % 65, $6.63 Isanti County Ind 101 1,961,770 10,220 10, % 14, $6.47 Midway Ind ,849,901 1,172,432 1,248, % (122,194) 0 0 $6.61 Minneapolis Ind ,765, , , % 171, $7.10 North Central Ind 1,385 48,615, ,043 1,105, % (66,661) 133, ,000 $6.09 Northwest Ind ,135,530 3,520,976 3,794, % (49,705) 134, ,000 $6.18 Pierce County Ind 92 1,471,753 35,782 35, % (35,782) 0 0 $0.00 Sherburne County Ind 293 6,776, , , % (12,907) 0 0 $5.77 South Central Ind ,442, , , % 292, ,400 0 $5.86 Southwest Ind 1,204 53,888,461 1,856,175 1,868, % (107,683) 94, ,000 $5.70 St Croix County Ind 380 9,943, , , % 51, $5.38 St Paul Ind ,136, , , % 203, $5.86 Stearns County Ind ,575, , , % 27, ,600 $4.76 Wright County Ind 451 9,685, , , % 60,900 54,000 0 $4.95 Totals 8, ,467,397 10,561,612 11,170, % 490, ,227 1,632,600 $6.01 Total Industrial Market Statistics Mid-Year 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Chisago County Ind 179 3,655,418 30,912 30, % 12, $6.45 East Ind ,672, , , % 39, $8.18 Isanti County Ind 107 2,091,541 25,020 25, % $6.47 Midway Ind ,627,924 1,403,289 1,479, % (48,001) 0 0 $6.88 Minneapolis Ind ,166, , , % 104, $10.00 North Central Ind 1,663 60,499,432 1,624,199 1,733, % (157,187) 133, ,000 $6.72 Northwest Ind 1,203 65,819,280 4,284,592 4,611, % (130,937) 134, ,000 $6.35 Pierce County Ind 93 1,503,081 35,782 35, % (35,782) 0 0 $0.00 Sherburne County Ind 310 7,262, , , % (3,395) 0 0 $5.78 South Central Ind 1,132 49,758,528 1,418,220 1,532, % 343, ,400 0 $6.45 Southwest Ind 1,608 74,195,011 3,245,490 3,294, % (171,432) 94, ,000 $6.77 St Croix County Ind ,442, , , % 49, $5.46 St Paul Ind ,074, , , % 173, $6.37 Stearns County Ind ,858, , , % 7, ,600 $4.94 Wright County Ind ,159, , , % 58,603 54,000 0 $5.37 Totals 9, ,786,544 15,191,459 15,925, % 242, ,227 1,632,600 $ CoStar Group, Inc. CoStar Industrial Statistics 9

15 Minneapolis Mid-Year 2017 Figures at a Glance 10 CoStar Industrial Statistics 2017 CoStar Group, Inc.

16 Leasing Activity Mid-Year 2017 Minneapolis Historical Rental Rates Based on Quoted Rental Rates $10.00 Flex Warehouse Total Market $9.00 $8.00 Dollars/SF/Year $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $ 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 Minneapolis United States Minneapolis United States 5% 3% 70% 30% 14% 86% 95% 97% 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* $6.80 Minneapolis United States $ $ Dollars/SF/Year $6.20 $6.00 $5.80 $5.60 Millions $ $5.20 $ q q q q * Includes Under Construction Space 2017 CoStar Group, Inc. CoStar Industrial Statistics 11

17 Minneapolis Mid-Year 2017 Leasing Activity Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2017 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 Blaine Preserve Business Park Bldg III North Central Ind 250,000 2nd Arrowhead Electrical N/A Cushman & Wakeeld/NorthMarq 2 Northern Stacks IV North Central Ind 104,818 2nd VStar Entertainment Group N/A Colliers International 3 Plymouth Point Business Center Northwest Ind 96,470 2nd US Venture N/A CBRE 4 Northpoint Industrial Center I North Central Ind 88,651 2nd Staples N/A CBRE 5 Twin Lakes IV* North Central Ind 80,000 2nd Pediatric Home Services N/A Colliers International W 76th St Southwest Ind 67,000 1st Edina Public Schools N/A Kraus-Anderson 7 Chaska Industrial Center Southwest Ind 65,000 1st RT Sales N/A Paramount Real Estate Corporation 8 NorthPark Business Center I Northwest Ind 60,032 2nd Select Comfort CBRE Cushman & Wakeeld 9 Saint Paul Industrial Properties - #37 North Central Ind 60,000 1st CPI Card Group, Inc. N/A Transwestern Nevada Ave N Northwest Ind 45,104 1st Unknown N/A SpaceNet Equities, LLC Commerce Center Northwest Ind 44,883 2nd Unknown N/A CBRE 12 Space Center Arden Hills 2* North Central Ind 40,524 1st UPS Supply Chain Solutions N/A CBRE Mendota Heights Rd South Central Ind 36,200 1st Unknown N/A CBRE 14 Winnetka Industrial Center Northwest Ind 34,580 1st Unknown N/A Catalyst Commercial Properties Hale Ave N East Ind 32,813 2nd Unknown N/A CORE Commercial Real Estate 16 Fridley Industrial Park I North Central Ind 32,340 1st Display Arts Worldwide Inc N/A CBRE N 2nd St Minneapolis Ind 28,900 1st Unknown N/A Cushman & Wakeeld Burnsville Pky W South Central Ind 26,319 1st Unknown N/A EFH Realty Advisors, Inc. 19 Metropolitan Distribution Center Northwest Ind 25,104 1st Abrasive Systems, Inc N/A Upper Midwest Management 20 Rockford - Industrial 6801 Wright County Ind 23,000 2nd Blattner Energy N/A Commercial Realty Solutions S Washington Ave Southwest Ind 22,158 1st PinPoint 360 N/A Cushman & Wakeeld Business Center Southwest Ind 21,348 2nd Vickerman s N/A 5th Street Ventures LLC Felton Ct South Central Ind 21,000 1st Unknown N/A Hebert Commercial Properties; Cerro Industrial Blvd Northwest Ind 20,450 1st Packaging Plus N/A Arrow Real Estate Corporation 25 Pioneer Creek Building Southwest Ind 20,000 1st Wiggen Water Direct Deal Copperwood Investments LLC; Antioch 26 Aspen Distribution Center Northwest Ind 19,189 2nd Unknown N/A JLL 27 Golden Triangle Ventures/Lifetouch Southwest Ind 18,949 2nd Unknown N/A CSM Corporation Lone Oak Dr South Central Ind 18,124 1st Unknown N/A Colliers International 29 Lone Oak Commerce Center South Central Ind 17,259 2nd Unknown N/A Liberty Property Trust N Granada Ln East Ind 16,824 2nd Unknown N/A Mulcahy Nickolaus Buerkle Rd East Ind 16,696 1st Unknown N/A Cushman & Wakefield/NorthMarq; Coll 32 Shingle Creek Corporate Center Northwest Ind 16,556 1st Unknown Lee & Associates Commercial Real Es 5th Street Ventures LLC 33 Pioneer Creek Building Southwest Ind 16,271 2nd Wigen Water Technologies N/A Copperwood Investments LLC 34 Apple Valley Business Campus - Phase IV South Central Ind 16,000 1st Unknown N/A Hebert Commercial Properties; Cerro NE Lincoln St North Central Ind 15,540 1st Unknown N/A Premier Commercial Properties, Inc Industrial Blvd Northwest Ind 15,500 1st Unknown N/A Arrow Real Estate Corporation N 89th Ave Northwest Ind 15,000 2nd Big Rig Reconditioning N/A Arrow Real Estate Corporation 38 Thorp Building Minneapolis Ind 14,612 1st Unknown N/A Bohm CRE, LLC Baker Rd Southwest Ind 14,589 1st Unknown N/A JLL 40 Winnetka Industrial Center Northwest Ind 14,021 1st Unknown N/A Catalyst Commercial Properties * Renewal 12 CoStar Industrial Statistics 2017 CoStar Group, Inc.

18 Sales Activity Mid-Year 2017 Minneapolis The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 9.0% Cap Rate Price/SF $170 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% $160 $150 $140 $130 $120 $110 $100 $90 Dollars/SF 2.0% q q q $80 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 April March 2017 $300 Sales Volume Price/SF $80 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $250 $200 $150 $100 $50 $70 $60 $50 $40 $30 $20 $10 Price/SF < 25,000 SF 25K-99K SF 100K-249K SF 93 1,400,999 $97,901,008 $ % 111 5,587,891 $306,228,642 $ % 24 3,383,872 $194,544,717 $ % $ q q q q $0 >250K SF 7 3,003,592 $223,420,973 $ % 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 $90 Minneapolis US 10.0% Minneapolis US $80 9.0% $70 $60 $50 $40 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% $30 4.0% $20 3.0% q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 2017 CoStar Group, Inc. CoStar Industrial Statistics 13

19 14 CoStar Industrial Statistics 2017 CoStar Group, Inc. Minneapolis Mid-Year 2017 Sales Activity

20 Deliveries, Absorption & C h i s a g o C o u n t y M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Mid-Year 2017 Minneapolis (0.005) (0.010) (0.015) (0.020) Delivered SF Absorption SF q q q q q q q q q q q q q q 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Percent Vacant Vacant Space Quoted Rental Rates 0.08 Direct SF Sublet SF $ $ Dollars/SF/Year $5.00 $4.00 $3.00 $2.00 $ $0.00 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 179 3,655,418 30, % 6, $ q 179 3,655,418 37, % 6, $ q 179 3,655,418 43, % (16,564) $ q 180 3,682,418 53, % 22, $ q 180 3,682,418 76, % (1,200) $ q 180 3,682,418 74, % 6, $ q 180 3,682,418 81, % $ q 180 3,682,418 81, % (4,788) $ q 180 3,682,418 77, % $ q 180 3,682,418 77, % $ q 180 3,682,418 77, % 4, $ q 180 3,682,418 81, % 20, $ q 180 3,682, , % $ q 180 3,682, , % 17, $ q 180 3,682, , % 4, $ q 180 3,682, , % 12, $ CoStar Group, Inc. CoStar Industrial Statistics 15

21 Minneapolis Mid-Year 2017 Deliveries, Absorption & E a s t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Delivered SF Absorption SF 6.0% % % 3.0% 2.0% Percent Vacant (0.050) 1.0% (0.100) q q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates 1.00 Direct SF Sublet SF $ $ Dollars/SF/Year $8.10 $8.00 $7.90 $ $ $7.60 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q ,672, , % (39,430) $ q ,672, , % 79, $ q ,672, , % 124, $ q ,672, , % 51, $ q ,672, , % $ q ,672, , % 30, $ q ,672, , % (20,611) 1 96, $ q ,576, , % 55, ,000 $ q ,576, , % 63, , $ q ,535, , % 5, ,000 $ q ,535, , % 81, ,000 $ q ,535,690 1,024, % 20, $ q ,535,690 1,044, % (81,564) $ q ,535, , % 20, , $ q ,498, , % (23,276) ,687 $ q ,498, , % (181,693) ,687 $ CoStar Industrial Statistics 2017 CoStar Group, Inc.

22 Deliveries, Absorption & I s a n t i C o u n t y M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Mid-Year 2017 Minneapolis Delivered SF Absorption SF 2.5% 2.0% (0.005) (0.010) (0.015) (0.020) (0.025) 1.5% 1.0% 0.5% Percent Vacant (0.030) q 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 $6.50 $6.45 $6.40 $6.35 $6.30 $6.25 $6.20 $ $ $ $6.00 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 107 2,091,541 25, % 14, $ q 107 2,091,541 39, % (14,800) $ q 107 2,091,541 25, % $ q 107 2,091,541 25, % 9, $ q 107 2,091,541 34, % (25,090) $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % $ q 107 2,091,541 9, % 6, $ q 107 2,091,541 15, % $ q 107 2,091,541 15, % 55, $ q 107 2,091,541 71, % (46,640) $ CoStar Group, Inc. CoStar Industrial Statistics 17

23 Minneapolis Mid-Year 2017 Deliveries, Absorption & M i d w a y M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse (0.100) (0.200) (0.300) Delivered SF Absorption SF q q q q q q q q q q q q q q 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Percent Vacant Vacant Space Quoted Rental Rates Direct SF Sublet SF $7.05 $7.00 $ Dollars/SF/Year $6.90 $6.85 $6.80 $6.75 $6.70 $ $ $6.55 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q ,627,924 1,479, % (119,308) $ q ,627,924 1,360, % 71, $ q ,627,924 1,431, % (40,571) 1 190, $ q ,437,924 1,201, % 91, ,000 $ q ,437,924 1,292, % (4,656) ,000 $ q ,576,321 1,425, % (177,312) ,000 $ q ,616,350 1,288, % (3,773) $ q ,616,350 1,284, % (58,843) $ q ,636,494 1,246, % (2,845) $ q ,636,494 1,243, % (23,149) $ q ,636,494 1,220, % 177, $ q ,648,494 1,410, % 76, $ q ,648,494 1,486, % 279, $ q ,746,494 1,863, % (141,407) $ q ,746,494 1,722, % 7, $ q ,057,914 2,040, % (241,148) 1 68, $ CoStar Industrial Statistics 2017 CoStar Group, Inc.

24 Deliveries, Absorption & M i n n e a p o l i s M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Mid-Year 2017 Minneapolis (0.050) (0.100) (0.150) (0.200) (0.250) Delivered SF Absorption SF q q q q q q q q q q q q q q 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Percent Vacant Vacant Space Quoted Rental Rates 1.20 Direct SF Sublet SF $ $ Dollars/SF/Year $8.00 $6.00 $ $ $0.00 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q ,166, , % 173, $ q ,166, , % (69,087) $ q ,166, , % (21,894) $ q ,188, , % 138, $ q ,289,685 1,029, % 93, $ q ,289,685 1,123, % (61,865) $ q ,313,685 1,085, % (9,458) $ q ,313,685 1,075, % 49, $ q ,360,685 1,172, % (203,587) $ q ,360, , % (89,895) $ q ,360, , % (1,704) $ q ,360, , % 17, $ q ,402, , % 3, $ q ,402, , % (12,186) $ q ,402, , % 6, $ q ,479,714 1,011, % 121, $ CoStar Group, Inc. CoStar Industrial Statistics 19

25 Minneapolis Mid-Year 2017 Deliveries, Absorption & N o r t h C e n t r a l M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse (0.100) (0.200) Delivered SF Absorption SF q q q q q q q q q q q q q q 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Percent Vacant Vacant Space Quoted Rental Rates 2.00 Direct SF Sublet SF $ $ Dollars/SF/Year $6.70 $6.60 $6.50 $ $ $6.20 Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 1,663 60,499,432 1,733, % (45,535) 1 133, ,000 $ q 1,662 60,366,232 1,554, % (111,652) ,200 $ q 1,662 60,366,232 1,442, % 75, ,200 $ q 1,662 60,366,232 1,517, % 235, , ,200 $ q 1,660 60,221,232 1,608, % 362, , ,000 $ q 1,659 60,121,232 1,870, % 338, , ,000 $ q 1,657 60,027,932 2,116, % (460) ,300 $ q 1,657 60,027,932 2,115, % 73, ,300 $ q 1,657 60,027,932 2,189, % 92, $ q 1,657 60,027,932 2,282, % 225, , $ q 1,653 59,620,277 2,100, % 138, , ,655 $ q 1,652 59,568,927 2,188, % 227, , ,005 $ q 1,651 59,528,927 2,375, % 31, ,005 $ q 1,651 59,528,927 2,407, % 146, ,000 $ q 1,651 59,528,927 2,553, % 307, , ,000 $ q 1,649 59,152,057 2,484, % (194,740) ,870 $ CoStar Industrial Statistics 2017 CoStar Group, Inc.