CoStar Industrial Statistics. T h i r d Q u a r t e r Phoenix Industrial Market

Transcription

1 CoStar Industrial Statistics T h i r d Q u a r t e r

2 Third Quarter 2017 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 Northeast Market Northwest Market Southeast Market Southwest Market 2017 CoStar Group, Inc. CoStar Industrial Statistics A

3 Phoenix Third Quarter 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 Third Quarter 2017 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 2017 CoStar Group, Inc. CoStar Industrial Statistics C

5 Phoenix Third Quarter 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. Vacancy 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 Third Quarter 2017 Phoenix Phoenix s Vacancy Decreases to 8.9% Net Absorption Positive 2,414,335 SF in the Quarter The Phoenix Industrial market ended the third quarter 2017 with a vacancy rate of 8.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 2,414,335 square feet in the third quarter. Vacant sublease space increased in the quarter, ending the quarter at 858,139 square feet. Rental rates ended the third quarter at $7.23, an increase over the previous quarter. A total of seven buildings delivered to the market in the quarter totaling 1,703,716 square feet, with 4,497,501 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Phoenix Industrial market was positive 2,414,335 square feet in the third quarter That compares to positive 1,315,080 square feet in the second quarter 2017, positive 3,079,357 square feet in the first quarter 2017, and positive 2,595,021 square feet in the fourth quarter The Flex building market recorded net absorption of positive 77,334 square feet in the third quarter 2017, compared to positive 127,086 square feet in the second quarter 2017, negative (73,592) in the first quarter 2017, and positive 198,602 in the fourth quarter The Warehouse building market recorded net absorption of positive 2,337,001 square feet in the third quarter 2017 compared to positive 1,187,994 square feet in the second quarter 2017, positive 3,152,949 in the first quarter 2017, and positive 2,396,419 in the fourth quarter Vacancy The Industrial vacancy rate in the Phoenix market area decreased to 8.9% at the end of the third quarter The vacancy rate was 9.2% at the end of the second quarter 2017, 9.4% at the end of the first quarter 2017, and 9.7% at the end of the fourth quarter Flex projects reported a vacancy rate of 12.9% at the end of the third quarter 2017, 13.1% at the end of the second quarter 2017, 13.3% at the end of the first quarter 2017, and 12.5% at the end of the fourth quarter Warehouse projects reported a vacancy rate of 8.4% at the end of the third quarter 2017, 8.8% at the end of second quarter 2017, 8.9% at the end of the first quarter 2017, and 9.4% at the end of the fourth quarter Largest Lease Signings The largest lease signings occurring in 2017 included: the 618,350-square-foot lease signed by UPS at W Sells St - PV/303 - Bldg A in the Northwest market; the 473,209-squarefoot deal signed by Amazon at 5333 W Lower Buckeye Rd in the Southwest market; and the 261,880-square-foot lease signed by Essendant, Inc. at 1500 S 71st Ave - Liberty Logistics Center II - Bldg 3 in the Southwest market. Sublease Vacancy The amount of vacant sublease space in the Phoenix market increased to 858,139 square feet by the end of the third quarter 2017, from 853,880 square feet at the end of the second quarter There was 1,068,792 square feet vacant at the end of the first quarter 2017 and 1,447,232 square feet at the end of the fourth quarter Phoenix s Flex projects reported vacant sublease space of 106,577 square feet at the end of third quarter 2017, up Vacancy Rates by Building Type % Flex Warehouse Total Market 20% Vacancy Rate 15% 10% 5% 0% q q q q q q q q q q q q q q q q 2017 CoStar Group, Inc. CoStar Industrial Statistics 1

7 Phoenix Third Quarter 2017 Overview from the 83,288 square feet reported at the end of the second quarter There were 181,494 square feet of sublease space vacant at the end of the first quarter 2017, and 176,413 square feet at the end of the fourth quarter Warehouse projects reported decreased vacant sublease space from the second quarter 2017 to the third quarter Sublease vacancy went from 770,592 square feet to 751,562 square feet during that time. There was 887,298 square feet at the end of the first quarter 2017, and 1,270,819 square feet at the end of the fourth quarter Rental Rates The average quoted asking rental rate for available Industrial space was $7.23 per square foot per year at the end of the third quarter 2017 in the Phoenix market area. This represented a 2.7% increase in quoted rental rates from the end of the second quarter 2017, when rents were reported at $7.04 per square foot. The average quoted rate within the Flex sector was $12.70 per square foot at the end of the third quarter 2017, while Warehouse rates stood at $6.43. At the end of the second quarter 2017, Flex rates were $13.00 per square foot, and Warehouse rates were $6.21. Deliveries and Construction During the third quarter 2017, seven buildings totaling 1,703,716 square feet were completed in the Phoenix market area. This compares to 12 buildings totaling 912,204 square feet that were completed in the second quarter 2017, 13 buildings totaling 2,241,095 square feet completed in the first quarter 2017, and 1,010,577 square feet in six buildings completed in the fourth quarter There were 4,497,501 square feet of Industrial space under construction at the end of the third quarter Some of the notable 2017 deliveries include: 7101 N Glen Harbor Blvd - Conair, a 1,000,000-square-foot facility that U.S. Vacancy Comparison Past 9 Quarters Vacancy Rate 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Phoenix United States delivered in third quarter 2017 and is now 100% occupied, and W Sells St - PV/303 - Bldg A, a 618,350-square-foot building that delivered in first quarter 2017 and is now 100% occupied. The largest projects underway at the end of third quarter 2017 were PV/303 - Bldg B, a 640,000-square-foot building with 0% of its space pre-leased, and W Commerce Dr - Opus Goodyear Crossing, a 540,349-square-foot facility that is 0% pre-leased. Inventory Total Industrial inventory in the Phoenix market area amounted to 321,499,567 square feet in 10,117 buildings as of the end of the third quarter The Flex sector consisted of 33,677,716 square feet in 1,159 projects. The Warehouse sector consisted of 287,821,851 square feet in 8,958 buildings. Within the Industrial market there were 2,139 owner-occupied buildings accounting for 93,007,021 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 second quarter 2017 in terms of dollar volume compared to the first quarter of In the second quarter, 45 industrial transactions closed with a total volume of $228,388,515. The 45 buildings totaled 2,719,169 square feet and the average price per square foot equated to $83.99 per square foot. That compares to 48 transactions totaling $196,819,915 in the first quarter. The total square footage was 2,561,397 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 six months of 2017, the market saw 93 industrial sales transactions with a total volume of $425,208,430. The price per square foot has averaged $80.52 this year. In the first six months of 2016, the market posted 93 transactions with a total volume of $408,580,785. The price per square foot averaged $ Cap rates have been lower in 2017, averaging 6.85%, compared to the first six months of last year when they averaged 7.57%. One of the largest transactions that has occurred within the last four quarters in the Phoenix market is the sale of Buckeye Logistics Center - Amazon in Phoenix. This 1,009,351- square-foot industrial building sold for $74,750,000, or $74.06 per square foot. The property sold on 7/26/2016. Reports compiled by: Adam Jarrett, CoStar Senior Research Manager. 0.0% q q q q q 2 CoStar Industrial Statistics 2017 CoStar Group, Inc.

8 Markets Third Quarter 2017 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 Northeast Ind Northwest Ind Southeast Ind Southwest 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 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 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 2017 CoStar Group, Inc. CoStar Industrial Statistics 3

9 Phoenix Third Quarter 2017 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 6 2,009,862 1,019, % 69, ,977 Northwest Ind 26 1,435,475 59, % 24,128 55,211 Southeast Ind , , % 29,342 88,259 Airport Ind 1 107,580 75, % 24, ,580 Northeast Ind 1 61, % 19,744 61,992 Totals 44 4,497,501 1,778, % 31, ,216 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2013 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 8.0 Leased Un-Leased 3,000 Preleased Un-Leased 7.0 2, Millions of SF Thousands of SF 2,000 1,500 1, q q 4 CoStar Industrial Statistics 2017 CoStar Group, Inc.

10 Inventory & development Third Quarter 2017 Phoenix Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 3.5 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 9 155,533 76, % $ ,008 97,525 50,000 SF - 99,999 SF , , % $ , , ,000 SF - 249,999 SF 8 1,295, , % $ , , ,000 SF - 499,999 SF 3 1,080, , % $ , ,608 >= 500,000 SF 2 1,618,350 1,618, % $4.32 1,618,350 0 Recent Development by Tenancy Existing Inventory 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 52% 14% 10% 53% 47% 48% 90% 86% Multi Single Multi Single Flex Warehouse Multi Single 2017 CoStar Group, Inc. CoStar Industrial Statistics 5

11 Phoenix Third Quarter 2017 Inventory & development 6 CoStar Industrial Statistics 2017 CoStar Group, Inc.

12 Inventory & development Third Quarter 2017 Phoenix 2017 CoStar Group, Inc. CoStar Industrial Statistics 7

13 Phoenix Third Quarter 2017 Figures at a Glance Flex Market Statistics Third Quarter 2017 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 152 5,517,172 1,236,529 1,242, % 69, ,634 0 $13.09 Northeast Ind 241 5,292, , , % 17, $13.73 Northwest Ind 254 6,237, , , % 13, ,000 $10.53 Southeast Ind ,288,320 1,903,655 1,991, % (54,685) 101,470 0 $12.76 Southwest Ind 34 1,342, , , % 85, $8.77 Totals 1,159 33,677,716 4,226,940 4,333, % 130, ,104 48,000 $12.70 Warehouse Market Statistics Third Quarter 2017 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 1,933 46,163,845 4,234,388 4,399, % 1,128, , ,580 $7.08 Northeast Ind ,174, , , % 12, ,532 61,992 $10.97 Northwest Ind 2,315 55,748,369 3,511,418 3,549, % 1,372,001 1,909,365 1,387,475 $6.98 Southeast Ind 2,773 80,101,550 7,191,158 7,614, % 673, , ,592 $7.47 Southwest Ind 1,344 94,633,629 7,919,781 8,012, % 3,491,775 1,594,462 2,009,862 $4.92 Totals 8, ,821,851 23,564,434 24,315, % 6,677,944 4,539,911 4,449,501 $6.43 Total Industrial Market Statistics Third Quarter 2017 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 2,085 51,681,017 5,470,917 5,642, % 1,198, , ,580 $8.12 Northeast Ind ,466,619 1,128,614 1,164, % 29, ,532 61,992 $12.14 Northwest Ind 2,569 61,985,920 4,046,653 4,094, % 1,385,161 1,909,365 1,435,475 $7.28 Southeast Ind 3,251 95,389,870 9,094,813 9,605, % 618, , ,592 $8.65 Southwest Ind 1,378 95,976,141 8,050,377 8,143, % 3,577,079 1,594,462 2,009,862 $4.95 Totals 10, ,499,567 27,791,374 28,649, % 6,808,772 4,857,015 4,497,501 $ CoStar Industrial Statistics 2017 CoStar Group, Inc.

14 Figures at a Glance Third Quarter 2017 Phoenix Flex Submarket Statistics Third Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 56 1,028,567 49,534 49, % 37, $11.61 Chandler Airport Ind , , , % (38,475) 0 0 $15.32 Chandler Ind 70 3,857, , , % 160, ,470 0 $13.27 Chandler N/Gilbert Ind 100 2,342, , , % (34,365) 0 0 $11.28 Deer Vly/Pinnacle Pk Ind 83 3,148,900 96,238 99, % 23, $11.59 Falcon Fld/Apache Jct Ind ,265 54,634 54, % (21,175) 0 0 $9.94 Glendale Ind ,439 43,294 43, % 22, $18.35 Goodyear Ind ,053 46,580 46, % (46,580) 0 0 $8.17 Grand Avenue Ind ,393 35,852 35, % (23,302) 0 0 $11.94 Mesa Ind ,262 12,659 12, % $14.11 N Glendale/Sun City Ind ,199 32,837 39, % (8,368) 0 48,000 $8.18 North Airport Ind 41 1,689, , , % (22,400) 0 0 $11.10 North Black Canyon Ind 64 1,277, , , % 17, $9.67 S Airport N of Roeser Ind 63 2,922, , , % 99, ,634 0 $13.85 S Airport S of Roeser Ind ,258 36,673 36, % (23,483) 0 0 $10.85 SC N of Salt River Ind ,942 89,707 89, % 16, $15.55 SC S of Salt River Ind 4 28, % $0.00 Scottsdale Airpark Ind 117 2,449, , , % (23,845) 0 0 $14.64 Scottsdale/Salt River Ind 68 1,813,993 69,020 69, % 3, $13.03 SW N of Buckeye Road Ind 7 239,471 6,956 6, % (6,956) 0 0 $0.00 SW S of Buckeye Road Ind 6 341,444 60,000 60, % 149, $0.00 Tempe East Ind 46 1,268, , , % 35, $11.66 Tempe Northwest Ind 82 2,518, , , % (39,732) 0 0 $11.08 Tempe Southwest Ind 98 3,939, , , % (118,190) 0 0 $13.11 Tolleson Ind 8 503,544 17,060 17, % (10,799) 0 0 $11.76 W Phx N of Thomas Rd Ind ,681 20,660 20, % (6,756) 0 0 $6.73 W Phx S of Thomas Rd Ind 7 99,649 13,200 13, % (12,015) 0 0 $6.15 Totals 1,159 33,677,716 4,226,940 4,333, % 130, ,104 48,000 $12.70 Existing Inventory Vacancy Warehouse Submarket Statistics Third Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 244 3,129, , , % 7,403 54,372 61,992 $9.58 Chandler Airport Ind 79 2,917, , , % 297, ,585 0 $7.93 Chandler Ind ,827,024 2,894,581 2,914, % 125, ,280 $7.41 Chandler N/Gilbert Ind ,969,601 1,177,228 1,269, % 286,155 15, ,000 $7.52 Deer Vly/Pinnacle Pk Ind ,218, ,556 1,031, % 86, , ,254 $8.90 Falcon Fld/Apache Jct Ind 214 4,424, , , % 63,630 33,147 0 $8.81 Glendale Ind 112 8,722,410 1,171,578 1,171, % 1,206,327 1,684, ,221 $5.72 Goodyear Ind ,522, , , % 891, , ,349 $4.57 Grand Avenue Ind ,070, , , % 167, $5.72 Mesa Ind 422 7,114, , , % 70, $7.44 N Glendale/Sun City Ind 123 3,081, , , % (2,527) 0 0 $7.17 North Airport Ind ,669, , , % 411, $7.63 North Black Canyon Ind 187 3,302, , , % (48,574) 0 0 $8.19 S Airport N of Roeser Ind ,806,526 1,647,323 1,652, % 575, , ,580 $7.13 S Airport S of Roeser Ind 154 4,401, , , % (95,980) 0 0 $7.13 SC N of Salt River Ind ,925,823 1,087,730 1,114, % 228, $6.56 SC S of Salt River Ind 117 2,360, , , % 8, $6.98 Scottsdale Airpark Ind 252 4,406, , , % (51,659) 0 0 $11.53 Scottsdale/Salt River Ind 97 3,637, , , % 56, ,160 0 $10.78 SW N of Buckeye Road Ind ,459,275 2,314,954 2,321, % 221, ,986 $4.79 SW S of Buckeye Road Ind ,035,858 1,725,667 1,733, % 542, , ,082 $6.10 Tempe East Ind 317 5,354, , , % (596) 0 0 $7.62 Tempe Northwest Ind 265 8,575, , , % 125, $8.74 Tempe Southwest Ind ,919,036 1,339,224 1,357, % (294,603) 0 194,312 $6.45 Tolleson Ind ,615,515 3,051,562 3,127, % 1,837, , ,445 $4.58 W Phx N of Thomas Rd Ind 424 7,492, , , % 7, $5.83 W Phx S of Thomas Rd Ind 305 6,860, , , % (45,348) 0 0 $5.03 Totals 8, ,821,851 23,564,434 24,315, % 6,677,944 4,539,911 4,449,501 $6.43 Existing Inventory Vacancy 2017 CoStar Group, Inc. CoStar Industrial Statistics 9

15 Phoenix Third Quarter 2017 Figures at a Glance Total Industrial Submarket Statistics Third Quarter 2017 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 300 4,158, , , % 44,476 54,372 61,992 $10.38 Chandler Airport Ind 92 3,464, , , % 259, ,585 0 $10.03 Chandler Ind ,684,742 3,449,839 3,469, % 286, , ,280 $9.74 Chandler N/Gilbert Ind ,312,145 1,448,481 1,550, % 251,790 15, ,000 $8.17 Deer Vly/Pinnacle Pk Ind ,367,354 1,089,794 1,131, % 110, , ,254 $9.08 Falcon Fld/Apache Jct Ind 243 4,808, , , % 42,455 33,147 0 $9.03 Glendale Ind 124 9,044,849 1,214,872 1,214, % 1,229,068 1,684, ,221 $5.98 Goodyear Ind ,781, , , % 844, , ,349 $4.71 Grand Avenue Ind ,240, , , % 144, $6.02 Mesa Ind 462 7,544, , , % 70, $7.49 N Glendale/Sun City Ind 148 3,563, , , % (10,895) 0 48,000 $7.28 North Airport Ind ,358,628 1,331,526 1,354, % 388, $8.43 North Black Canyon Ind 251 4,579, , , % (31,182) 0 0 $8.89 S Airport N of Roeser Ind ,729,333 2,360,825 2,372, % 675, , ,580 $8.83 S Airport S of Roeser Ind 164 4,522, , , % (119,463) 0 0 $7.26 SC N of Salt River Ind ,681,765 1,177,437 1,203, % 245, $6.87 SC S of Salt River Ind 121 2,388, , , % 8, $6.98 Scottsdale Airpark Ind 369 6,856, , , % (75,504) 0 0 $12.88 Scottsdale/Salt River Ind 165 5,451, , , % 60, ,160 0 $11.74 SW N of Buckeye Road Ind ,698,746 2,321,910 2,328, % 214, ,986 $4.79 SW S of Buckeye Road Ind ,377,302 1,785,667 1,793, % 691, , ,082 $6.10 Tempe East Ind 363 6,622, , , % 35, $8.66 Tempe Northwest Ind ,094, , , % 85, $9.09 Tempe Southwest Ind ,858,292 1,834,901 1,930, % (412,793) 0 194,312 $7.99 Tolleson Ind ,119,059 3,068,622 3,144, % 1,826, , ,445 $4.60 W Phx N of Thomas Rd Ind 463 8,230, , , % 1, $5.85 W Phx S of Thomas Rd Ind 312 6,960, , , % (57,363) 0 0 $5.10 Totals 10, ,499,567 27,791,374 28,649, % 6,808,772 4,857,015 4,497,501 $7.23 Existing Inventory Vacancy 10 CoStar Industrial Statistics 2017 CoStar Group, Inc.

16 Figures at a Glance Third Quarter 2017 Phoenix 2017 CoStar Group, Inc. CoStar Industrial Statistics 11

17 Phoenix Third Quarter 2017 Leasing Activity Historical Rental Rates Based on Quoted Rental Rates $16.00 Flex Warehouse Total Market $14.00 Dollars/SF/Year $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $ q q q q q q q q Vacancy by Available Space Type Vacancy 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% 15% 14% 85% 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* Dollars/SF/Year $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 Phoenix United States Millions $ $1.00 $ q q q q q q q q 0.0 * Includes Under Construction Space 12 CoStar Industrial Statistics 2017 CoStar Group, Inc.

18 Leasing Activity Third Quarter 2017 Phoenix 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 W Sells St Glendale Ind 618,350 1st UPS Cushman & Wakeeld CBRE W Lower Buckeye Rd SW S of Buckeye Road Ind 473,209 3rd Amazon Cushman & Wakeeld Colliers International S 71st Ave Tolleson Ind 261,880 1st Essendant, Inc. JLL Colliers International N 47th Ave SW N of Buckeye Road Ind 226,436 2nd Updike Distribution Logistics N/A JLL W Van Buren St Tolleson Ind 155,520 1st Danby Products NAI/Merin Hunter Codman, Inc. Cushman & Wakeeld W Buckeye Rd Tolleson Ind 150,000 2nd Staples N/A Medline Industries, Inc S 43rd Ave SW S of Buckeye Road Ind 117,780 1st Enclos NAI Horizon JLL W Washington St SW N of Buckeye Road Ind 116,890 3rd Aqual Carpet Recycling Commercial Properties, Inc. JLL S Roosevelt St* Tempe Southwest Ind 101,601 3rd Modern Industries Areospace Direct Deal JLL S 40th Ave SW S of Buckeye Road Ind 100,843 2nd PureCare Southwest Commercial Brokerage DAUM Commercial Real Estate S 40th Ave* SW S of Buckeye Road Ind 100,843 2nd PureCare Southwest Commercial Brokerage JLL E Elliot Rd Chandler N/Gilbert Ind 91,204 1st Amazon N/A Cushman & Wakeeld E Riverview Dr S Airport N of Roeser Ind 90,777 1st Amazon Cushman & Wakeeld JLL W Buckeye Rd Tolleson Ind 89,600 1st Propak Logistics, Inc. N/A CBRE W Fairmont Dr* Tempe Southwest Ind 83,280 2nd MXD Group DAUM Commercial Real Estate N/A S 83rd Ave Tolleson Ind 81,000 2nd Ewing Irrigation CBRE CBRE W Buckeye Rd Tolleson Ind 80,000 2nd Dicks Move-In Company N/A Medline Industries, Inc W Warner Rd* Tempe Southwest Ind 75,489 1st Circle K Stores, Inc. Cushman & Wakeeld Lee & Associates W Brill St SW N of Buckeye Road Ind 72,158 3rd Prime Time Commerce LLC West USA Commercial JLL S 36th St North Airport Ind 64,014 2nd Trademark Visual N/A Lee & Associates S 27th Ave SW N of Buckeye Road Ind 62,248 1st Hajoca CBRE CBRE N Fiesta Blvd Chandler N/Gilbert Ind 60,563 2nd United Comb & Novelty Corp. Cushman & Wakeeld JLL W Peoria Ave* North Black Canyon Ind 60,192 3rd Bay Foam Products, Inc. CBRE JLL W Buckeye Rd SW S of Buckeye Road Ind 60,000 3rd Veracity N/A Cashen Realty Advisors W Buckeye Rd SW S of Buckeye Road Ind 59,640 1st Kellogg s N/A Cashen Realty Advisors S Kyrene Rd Chandler Ind 59,256 2nd A & S Lee & Associates Colliers International S Kyrene Rd Chandler Ind 57,348 2nd Gravity Extreme Zone CBRE Colliers International W Broadway Rd Mesa Ind 54,373 2nd Walmart N/A CBRE E Auto Center Dr Chandler N/Gilbert Ind 53,739 1st Streetside Classics JLL Lee & Associates S 7th Ave SC N of Salt River Ind 52,845 3rd Petersen Aluminum Corp. Cresa Lee & Associates N 47th Ave SW N of Buckeye Road Ind 52,632 2nd Tom Auto Corridor Commercial JLL E Broadway Rd* S Airport N of Roeser Ind 50,572 1st Cereus Graphics N/A Lee & Associates N 48th Ave SW N of Buckeye Road Ind 50,250 1st Starks Logistics American Realty Brokers Harrison Properties N 67th Ave SW N of Buckeye Road Ind 48,346 1st Stampede Presentation Products Cresa JLL E Broadway Rd S Airport N of Roeser Ind 47,418 2nd HALCO Lighting JLL JLL E Germann Rd Chandler Airport Ind 46,853 1st SunStream Technology, Inc. JLL JLL W Pierce St Tolleson Ind 44,785 3rd Schneider Resources, Inc. Rein & Grossoehme JLL W Buckeye Rd Tolleson Ind 44,722 1st Basic Components, Inc. Colliers International Colliers International S 16th St S Airport N of Roeser Ind 43,733 2nd American Furniture Rental N/A CBRE W Galveston St Chandler Ind 42,790 1st Enterprise Rent-A-Car JLL; Presidio Real Estate Colliers International * Renewal 2017 CoStar Group, Inc. CoStar Industrial Statistics 13

19 Phoenix Third Quarter 2017 Sales Activity The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 7.0% Cap Rate Price/SF $350 Cap Rate Percentage 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $300 $250 $200 $150 Dollars/SF 0.0% q q q $100 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 July June 2017 $450 Sales Volume Price/SF $120 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $400 $350 $300 $250 $200 $150 $100 $50 $100 $80 $60 $40 $20 Price/SF < 25,000 SF 25K-99K SF 100K-249K SF 182 2,300,371 $233,633,768 $ % 80 3,952,717 $294,833,565 $ % 21 3,399,663 $272,776,708 $ % $ q q q q $0 >250K SF 13 7,342,844 $486,438,800 $ % 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 14 CoStar Industrial Statistics 2017 CoStar Group, Inc.

20 Third Quarter 2017 Phoenix 2017 CoStar Group, Inc. CoStar Industrial Statistics 15 Sales Activity

21 Phoenix Third Quarter 2017 Deliveries, Absorption & Vacancy A i r p o r t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Delivered SF Absorption SF Vacancy 14.0% Millions SF (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 q q 0.0% Vacant Space Quoted Rental Rates 7.00 Direct SF Sublet SF $8.20 $ $8.00 Millions SF Dollars/SF/Year $7.90 $7.80 $7.70 $7.60 $7.50 $7.40 $ q q q q $ q q q q Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 2,085 51,681,017 5,642, % 376, ,580 $ q 2,085 51,681,017 6,018, % 249, ,580 $ q 2,085 51,681,017 6,268, % 572, , ,580 $ q 2,080 51,053,992 6,213, % (64,607) 2 499, ,025 $ q 2,080 50,627,120 5,722, % (11,923) 3 188, ,126,797 $ q 2,079 50,490,440 5,573, % (548,216) 2 141, ,145 $ q 2,078 50,376,743 4,911, % 255, , ,543 $ q 2,076 50,078,008 4,868, % 261, , ,406 $ q 2,076 50,187,683 5,239, % 165, , ,023 $ q 2,074 50,025,434 5,242, % 34, , ,723 $ q 2,074 49,831,754 5,083, % 293, ,752 $ q 2,076 49,934,934 5,479, % 46, , ,982 $ q 2,074 49,352,078 4,942, % 360, ,551 $ q 2,074 49,352,078 5,303, % 160, ,538 $ q 2,074 49,352,078 5,463, % (120,838) $ q 2,074 49,352,078 5,343, % 254, , $ CoStar Industrial Statistics 2017 CoStar Group, Inc.

22 Deliveries, Absorption & Vacancy N o r t h e a s t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Third Quarter 2017 Phoenix Delivered SF Absorption SF Vacancy 12.0% % Millions SF (0.050) (0.100) 8.0% 6.0% 4.0% 2.0% Percent Vacant (0.150) q q q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates 1.40 Direct SF Sublet SF $ $12.00 Millions SF Dollars/SF/Year $11.50 $11.00 $10.50 $ q q q q $ q q q q Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q ,466,619 1,164, % 105, , ,992 $ q ,449,254 1,252, % 34, , ,152 $ q ,394,882 1,232, % (111,002) ,532 $ q ,394,882 1,121, % (6,469) ,372 $ q ,394,882 1,115, % 64, $ q ,394,882 1,179, % 33, $ q ,394,882 1,212, % 54, $ q ,394,882 1,267, % 89, $ q ,394,882 1,356, % 51, , $ q ,372,608 1,386, % 46, ,394 $ q ,372,608 1,432, % (29,201) ,394 $ q ,372,608 1,403, % (28,752) $ q ,372,608 1,374, % 79, $ q ,395,161 1,476, % 83, $ q ,513,030 1,678, % 53, , $ q ,494,088 1,713, % (23,732) ,942 $ CoStar Group, Inc. CoStar Industrial Statistics 17

23 Phoenix Third Quarter 2017 Deliveries, Absorption & Vacancy N o r t h w e s t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Delivered SF Absorption SF Vacancy 10.0% 9.0% 8.0% Millions SF (0.200) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Percent Vacant (0.400) q q q q q q q q q q q q q q q 0.0% Vacant Space Quoted Rental Rates 5.00 Direct SF Sublet SF $ $ $7.20 Millions SF Dollars/SF/Year $7.10 $7.00 $6.90 $6.80 $ q q q q $ q q q q Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 2,569 61,985,920 4,094, % 1,335, ,066, ,435,475 $ q 2,567 60,919,308 4,363, % 85, , ,502,247 $ q 2,566 60,901,028 4,435, % (36,391) 3 791, ,215,186 $ q 2,563 60,109,416 3,607, % 348, , ,909,365 $ q 2,562 59,741,388 3,587, % 249, ,431 $ q 2,562 59,741,388 3,837, % 485, , ,290 $ q 2,561 59,357,011 3,937, % 379, , ,405 $ q 2,557 59,217,968 4,178, % 781, , ,004,656 $ q 2,555 59,198,952 4,941, % 140, , ,295 $ q 2,554 59,518,489 5,401, % (48,431) 1 14, ,479 $ q 2,553 59,503,549 5,337, % 248, , ,403 $ q 2,550 59,319,478 5,402, % (299,122) 7 214, ,474 $ q 2,543 59,105,165 4,888, % 950, , ,324 $ q 2,537 58,434,980 5,169, % 178, , ,498 $ q 2,531 58,200,283 5,113, % 361, , ,887 $ q 2,530 58,108,267 5,383, % 423, , ,513 $ CoStar Industrial Statistics 2017 CoStar Group, Inc.