Economic Overview DENVER INDUSTRIAL/FLEX MARKET MONITOR FIRST QUARTER Denver s industrial flex market vibrant during the first quarter.

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1 Economic Overview DENVER INDUSTRIAL/FLEX MARKET MONITOR FIRST QUARTER 2015 Denver s industrial flex market vibrant during the first quarter. The Denver industrial market has record high asking rental rates, record low vacancy rates, and a shortage of quality assets. Denver s economy remains one of the most dynamic in the country. Denver added 46,200 jobs during 2014, continuing the upward trend of recent years. The Metro Denver Economic Development Corporation (EDC) predicts that Denver s job growth rate for 2015 to be 3%, which translates into approximately 45,000 new jobs. According to the EDC, the supersectors that are likely to see the most growth are natural resources & construction, education and healthcare services, professional and business services, and leisure and hospitality. 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Denver Historical Job Growth During the first quarter of 2015, the unemployment rate in the Denver Metro area remained steady at 4.2%. The -4.0% -5.0% cutbacks in Colorado s energy industry due to declining oil and gas prices have not yet translated into major job losses for the state. This will not be the case for the rest of the year, as a downturn is expected in this sector. At the conclusion of the first quarter, there were a number of large oil and gas firms that announced layoffs, including WPX Energy and Noble Energy. Luckily, with Denver s diversified economy, this should not cause destabilization in the market overall. The housing market remains especially vibrant, with Denver among one of four cities in the nation to have housing prices beat prerecession pricing. Additionally, at of the conclusion of the first quarter, Denver had a record low inventory of homes on the market. There was only a quarter of the typical home inventory available for purchase, making the housing market very competitive. Adding to this, Denver ranked 6th out of the country s largest metro areas for population growth in 2014 according to a Newgeography study. As millennials continue to move to Denver in record numbers, the housing market will stay tight and the real estate industry will continue to directly benefit. Denver s unemployment rate remains lower than most of the country, at 4.2% as of February. According to the EDC, Denver experienced job growth in each supersector except information technology during Information technology is expected to post a slight increase in The Metro Denver Economic Development Corporation (EDC) predicts that Denver s job growth rate for 2015 will be approximately 3%. After reaching $92/bbl in June, West Texas Intermediate (WTI) pricing has fallen by nearly 45% to $51/bbl in December, the lowest pricing since April Job growth in 2015 is expected to occur in industries such as professional and business services, construction, education and health services, and government The professional and business services sector was the most active during 2014 in Denver, as 10,600 jobs were added, a full 4% gain. Partnership. Performance

2 Denver Industrial/Flex Market Monitor First Quarter 2015 Industrial/Flex Market Overview The Denver industrial & flex market thrived during the first quarter with record figures in vacancy and rental rates and vibrant leasing activity. Much of the success in the industrial/flex market stems from economic gain, as Denver has a 4.2% unemployment rate and steady job growth. Another contributing factor is the marijuana industry, which brought in $700 million in revenue during 2014, and 2015 s projection is approximately $1 billion. The market consists of approximately 256 million square feet (msf) with 1.6 msf under construction. ABSORPTION & DEMAND Vacancy Rates 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% YE09 YE10 YE11 YE12 YE13 YE Asking Rents $8.00 $6.00 $4.00 $2.00 YE09 YE10 YE11 YE12 YE13 YE Net Absorption 8,000,000 6,000,000 4,000,000 2,000,000 0 (2,000,000) Absorption in Denver was positive during the first quarter, coming in at almost 1 msf absorbed. This is an improvement over Q s negative absorption, and is expected to improve even further as the year progresses. Absorption for flex properties led the way, with almost 800,000 sf absorbed during the first quarter. The I-70 East submarket was the most active, with approximately 843,000 sf of both industrial and flex space absorbed, followed by Northwest at approximately 248,000 sf absorbed. Despite the overall positive absorption, certain submarkets were in the negative, such as Central (-356,324 sf), Northeast (-55,539 sf), West (-44,907 sf), and Southwest Weld County (-1,300 sf). Leasing activity was also up during the first quarter, with 2.6 msf leased during Q1, a 13% increase over last year s 2.3 msf. Industrial properties saw the most activity, with over 2 msf leased during Q1. Industrial deals include 136,400 sf leased to Nestle Waters North America, 131,458 sf leased to Tenere, 107,111 sf leased to HD Supply White Cap, and 88,575 sf leased to Priority Wire & Cable. Flex properties saw around 550,000 sf of lease deals during the quarter, including 136,701 sf leased to Fenix Outdoor Import, 66,350 sf leased to White Wave Foods Company, 51,974 sf leased to Graphic Packaging International, 21,600 sf leased to Crooked Stave CO Distributing Company, and 21,350 sf leased to Santander. NOTABLE FIRST QUARTER LEASES: Fenix Outdoor Import preleased 136,701 sf at 1900 Taylor Avenue in Louisville, and will move in August Nestle Waters North America signed a 136,400 sf new lease at Building 1 in the Mile High Business Center. They are reducing their footprint from almost 200,000 sf in the same building. Tenere signed a 131,458 sf new lease at Park 12 Hundred. occupy the space in October The Timken Company signed a 92,670 sf new lease at 4850 Moline Street. They are expanding from 32,000 sf at their current location. NOTABLE FIRST QUARTER SALES: A 5-property portfolio at Airport Distribution Center was sold to DCT Industrial Trust for $46.6 million, or $67 psf. The former Ultimate Electronics store, located at 321 West 84th Avenue, an industrial distribution building, was sold to Appliance Factory & Mattress Kingdom for $16 million, or $47 psf Grasslands Drive, a flex building, was sold to Charter Communications Operating, LLC for $8.3 million, or $98 psf. 373 Inverness Parkway, a flex r&d building, was sold to Diamond Ventures for $8.0 million, or $97 psf. The former Gold Sausage building at 2800 Walnut Street, an industrial manufacturing building, was sold to 1425 Market Street LLC. for $3.2 million, or $97 psf They will HD Supply/White Cap signed a 107,000 sf new lease at the former Sears Outlet site at 701 Osage Street.

3 Denver Industrial/Flex Market Monitor First Quarter 2015 VACANCY & AVAILABILITY The vacancy rate continued to fall during the first quarter for a record low- 3.6% vacant overall, down from 5% in Q Industrial buildings are very tight, with a 2.6% vacancy rate overall. There are a number of industrial submarkets with vacancy under 2%, such as Southwest Weld County (0.8%), Northeast (1%), Central (1.5%), and West (1.5%). Flex vacancy overall is at 8.6%, with the lowest vacancy rates in the Central and Northeast submarkets, both at 3.2% vacant. The availability rate of the industrial & flex market demonstrates the competitiveness of the market. The five year average availability rate is 11%, and the current 6.6% available is well below, having dropped rapidly for 3 consecutive years will remain aggressive and landlords will continue to have the upper hand. Submarkets with the highest availability rates are the Southeast, with 11.2%, Northwest at 10.7%, and North with 8%. The tightest markets are the Northeast with 1.8%, and Central and West submarkets at 4%. RENTAL RATES Asking rental rates are climbing rapidly, as Q1 s $7.47 is up 10% from last year s $6.79 and is a record high for the market. This climb started in Q when the average rental rate was $5.58, and has not dropped in the quarters since, averaging about a 2% increase each quarter. The climbing rental rates are expected to continue throughout the remainder of the year due to the marijuana industry growth and the surge of interest in the area. over Q and flex properties are $9.87, which is a 3% increase over last year. CONSTRUCTION Construction activity was slower than last year, with approximately 1.6 msf under construction at the conclusion of the quarter. Three properties delivered during Q1 totaling approximately 580,000 sf and as of the conclusion of the quarter were 28% leased. In the coming quarters of 2015, there are a number of proposed properties scheduled to break ground and 1.6 msf will deliver by the end of the year, which will help alleviate some of the tightness in the market. Noteworthy properties that will deliver by the end of the year include Building 5 at Enterprise Business Center at Stapleton, a 466,540 sf industrial distrution building; Building 21 at Gateway Park, a 347,840 sf industrial warehouse building; 5501 Havana Street, a 249,300 sf industrial warhouse building; and 1960 Cherry Street, a 59,137 sf flex building. Of the buildings set to deliver by year end, only approximately 21% is preleased. The Southeast submarket has the highest overall asking rent, coming in at $9.57 during Q1. The first quarter s average rental rates for industrial properties was $6.32, a huge 15% increase 5,000,000 DENVER HISTORICAL CONSTRUCTION ACTIVITY 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , Delivered Under Construction - 3 -

4 Significant 2015 Transactions First Quarter 2015 TOP LEASES & SALES Fenix Outdoor Import s preleasing of 136,701 sf at 1900 Taylor Avenue. Nestle Waters North America s 136,400 sf new lease at Building 1 in the Mile High Business Center. Tenere s 131,458 sf new lease at Park 12 Hundred. DCT Industrial Trust s purchase of 5 properties at Airport Distribution Center for $46.6 million. Appliance Factory & Mattress Kingdom s purchase of the former Ultimate Electronics building at 321 West 84th Avenue for $16 million. Charter Communications Operating s purchase of 4810 Grasslands Drive for $8.3 million. BUILDING COMPLETIONS East 56th Avenue (392,425 sf), industrial distribution, I-70 East. Avery Brewing (95,922 sf), flex light manufacturing, Northwest. Enterprise Business Center at Stapleton Building 1 (91,961 sf), flex light manufacturing, I-70 East. Construction Forecast Developer Building RBA Completion Prologis E 19th Avenue 759,200 Proposed United Properties Enterprise Business Center, Building 5 466,540 Q EP 70, LLC Eastpark 70, Building 1 354,900 Q The Pauls Corporation Gateway Park, Building ,840 Q Prologis 5501 Havana Street 249,300 Q Etkin Johnson 1900 Taylor Avenue 136,701 Q Bedrosian Tile E 40th Avenue 135,000 Proposed Etkin Johnson 1960 Cherry Street 59,137 Q Trends to Watch Population Growth: 2015 projected growth rate 1.43 % Employment: Job gains across all sectors and unemployment rate around 4%. Active Markets: I-70 East, Central, Northwest. Market Drivers: Construction, Housing, Health Care. THE INFORMATION CONTAINED HEREIN WAS OBTAINED FROM SOURCES BELIEVED RELIABLE; HOWEVER, AVISON YOUNG MAKES NO GUARANTEES, WARRANTIES OR REPRESENTATIONS AS TO THE COMPLETENESS OR ACCURACY THEREOF. THE PRESENTATION OF THIS PROPERTY IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, OR CONDITIONS, PRIOR TO SALE OR LEASE, OR WITHDRAWAL WITHOUT NOTICE. For more information: avisonyoung.com 2015 Avison Young Northern California, LTD. All rights reserved. Sarah Carver, Research Manager sarah.carver@avisonyoung.com - 4 -

5 Market By Numbers First Quarter 2015 Industrial/Flex Market Overview Submarket Total RBA Direct Available Space Sublet Available Space Vacancy Rate Availability Rate Ind Flex Overall Ind Flex Overall Leasing Activity Net Absorption Average Asking Rent (NNN) Ind Flex Overall Central 58,636,869 2,065, , % 3.2% 1.6% 3.8% 7.0% 4.0% 469,395 (356,324) $6.16 $7.79 $6.25 i-70 East 83,238,960 5,073, , % 6.5% 3.3% 6.4% 13.6% 6.8% 1,129, ,823 $5.78 $8.50 $6.03 North 13,310,966 1,004,037 59, % 16.8% 6.0% 4.5% 23.8% 8.0% 261, ,082 $8.03 $9.74 $8.37 Northeast 12,866, ,505 3, % 3.2% 1.1% 6.2% 1.5% 1.8% 18,200 (55,539) $4.57 $12.92 $6.31 Northwest 32,933,464 2,897, , % 9.7% 6.5% 8.0% 14.5% 10.7% 383, ,856 $6.80 $9.98 $8.62 Southeast 15,956,372 1,692, , % 7.6% 5.8% 8.5% 13.9% 11.2% 200, ,076 $8.42 $10.38 $9.57 Southwest 10,782, ,109 76, % 9.8% 5.1% 3.3% 14.5% 7.8% 44,714 45,846 $5.47 $9.45 $8.81 Southwest Weld County 5,057, , % 18.6% 2.4% 6.8% 19.7% 7.9% 0 (1,300) $10.19 $10.73 $6.60 West 22,938, ,654 46, % 6.7% 2.6% 2.8% 8.5% 4.0% 88,048 (44,907) $6.69 $9.96 $8.21 Denver Market Average 255,721,634 14,995,197 1,875, % 8.6% 3.6% 5.3% 13.6% 6.6% 2,595, ,613 $6.32 $9.87 $7.47 THE INFORMATION CONTAINED HEREIN WAS OBTAINED FROM SOURCES BELIEVED RELIABLE; HOWEVER, AVISON YOUNG MAKES NO GUARANTEES, WARRANTIES OR REPRESENTATIONS AS TO THE COMPLETENESS OR ACCURACY THEREOF. THE PRESENTATION OF THIS PROPERTY IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, OR CONDITIONS, PRIOR TO SALE OR LEASE, OR WITHDRAWAL WITHOUT NOTICE