Industrial Outlook. United States Q1 2016

Transcription

1 Industrial Outlook United States Q1 216

2 U.S. vacancy (6.2 percent) is on par with 2 s record low and new construction leasing is increasingly shaping overall absorption activity. Although fundamentals remain strong, will new supply get ahead of leasing activity in some of the nation s construction-heavy markets? 2

3 Table of contents United States industrial market 4 United States industrial property clock 8 United States industrial weather map 9 United States industrial rankings 1 Local U.S. industrial markets Atlanta 13 Baltimore 14 Boston 15 Broward 16 Central Valley 17 Charlotte 18 Chicago 19 Cincinnati 2 Cleveland 21 Columbus 22 Dallas / Fort Worth 23 Denver 24 Detroit 25 East Bay / Oakland 26 Greensboro / Winston-Salem 27 Hampton Roads 28 Houston 29 Indianapolis 3 Inland Empire 31 Jacksonville 32 Kansas City 33 Las Vegas 34 Long Island 35 Los Angeles 36 Memphis 37 Miami 38 Milwaukee 39 Minneapolis / St. Paul 4 Nashville 41 New Jersey 42 North Bay 43 Orange County 44 Orlando 45 Palm Beach 46 Philadelphia / Central PA 47 Phoenix 48 Pittsburgh 49 Portland 5 Reno / Sparks 51 Richmond 52 Sacramento 53 Salt Lake City 54 San Antonio 55 San Diego 56 San Francisco Mid-Peninsula 57 Seattle-Bellevue 58 South Bay / Silicon Valley 59 St. Louis 6 Tampa Bay 61 Washington, DC 62 Contacts 64 3

4 United States industrial market Total United States Type Total stock (s.f.) Total vacancy Total availability YTD net absorption YTD const. deliveries Q1 216 avg. rent Y-Y rent % change Warehouse & distribution 8,561,524,46 6.4% 9.5% 43,741,222 44,841,997 $ % Manufacturing 3,524,145, % 8.4% 8,413,136 3,618,761 $ % Special purpose 86,476, % 8.4% 17,34 321,212 $ % Totals 12,172,146, % 9.2% 52,324,662 48,781,97 $ % Warehouse leasing activity remained strong in most markets as 215 s momentum carried over into the first quarter of 216. Vacancy rates were extremely tight in many of the nation s markets. Nationally, there were around 2, blocks of 1, square feet and greater warehouse space available by the end of the quarter, but nearly half of these were in mid-198s vintage product or older which continues to underscore tenant demand for buildings with more modern features. New construction, as a result, is on the rise to give tenants a few more quality space options. Even though development volumes are increasing, quarterly net absorption was 7.3 percent higher than new construction in the first quarter of 216. This caused the U.S. vacancy rate to drop 1 basis points from year-end 215. After 24 consecutive quarters of net absorption gains, vacancy is now at a 16-year low. While we are in a slower growth economy compared to last year, leading indicators that favor warehouse space, such as increasing retail sales, home sales and a low unemployment rate, are healthy. This benefits overall tenant demand and will help push additional rent growth. With market fundamentals remaining strong, U.S. absorption is on track to outpace new construction for the seventh straight year. Yet, soft spots are emerging in some of the nation s construction-heavy markets: Vacancies in some larger size segments could ebb and flow with leasing activity as new speculative product comes online. Key takeaways Quarterly net absorption was up 6.6 percent from one year ago, while new construction deliveries increased 37.7 percent compared to one year ago. First quarter s speculative deliveries totaled 37.5 million square feet, up percent from the first quarter of 215. Twenty-four percent of the quarter s spec deliveries were leased by completion. Spec deliveries may have skyrocketed from one year ago, but the percentage of it preleased has remained generally steady since 214: New supply may be increasing, but so has the leasing of it prior to delivery. The U.S. total vacancy rate is 5 basis points lower than one year ago. Overall tenant requirements presently exceed the current speculative construction pipeline in most of the nation s major warehouse markets. Although, this is not the case in all size segments. Leasing activity is anticipated to be steady in 216, and more spec development will likely cause U.S. vacancy to hover in the low-6s through year-end. 4

5 United States industrial market Vacancy is at a 16-year low; quality product is limited The vacancy rate for the first quarter of 216 was 6.2 percent-lower than the previous cycle s low point of 7.4 percent in early 28. Net absorption has been positive for six years running and warehouse asking rents have increased for five years straight. Given how tight vacancy is, select larger blocks of available Class A modern space choices remain limited. Out with the old, in with the new Leasing in facilities built in or after 214 is increasingly driving overall leasing activity. New space move-ins comprised 44. percent of 214 net absorption (221 million square feet) and 59. percent of the 215 total (231 million square feet). They comprised 78. percent of overall absorption activity during the first quarter of 216 (52.3 million square feet). First quarter net absorption was dominated by move-in s into facilities that were built in the last 27 months* Q1'16 78% Net absorption from facilities built 214+ Net absorption from facilities older than % 59% 221 m.s.f. in net absorption 231 m.s.f. in net absorption New space move-ins into facilities built 214+ comprised 78% of total absorption activity (52.3 m.s.f. in all) (s.f. in millions) *includes speculative, build-to-suit and owner-built facilities Approximately 38. percent of first quarter s absorption activity came from five markets: Atlanta (5.3 million square feet in net occupancy gains), Chicago (5.2 million square feet), Inland Empire (3.6 million square feet), Dallas / Fort Worth (2.2 million square feet) and Central Pennsylvania (2.2 million square feet). Active construction in these markets totaled 85.7 million square feet by the end of the quarter, which represents 48. percent of the nation s total (178.4 million square feet) across 51 U.S. markets. Both leasing activity and new development remains concentrated in and around the nation s major population centers, and while leasing fundamentals are healthy new supply may get ahead of leasing activity in certain size segments. Size does matter Overall tenant requirements presently exceed the current speculative construction pipeline in most of the nation s major warehouse markets. Many of these markets have been red hot in recent years, but there appears to be a little cooling in some size segments. Conversely, other size segments are beginning to heat up. This varies market-to-market, but here are examples for Dallas / Fort Worth and the Inland Empire, which led the nation in active speculative construction during the quarter. Inland Empire: New supply between 6, and 8, square feet is outpacing tenant requirements. On the other hand, demand for space under 4, square feet is pronounced, and rents in this size segment have increased to a level where new construction pencils out. Dallas / Fort Worth: New supply is heavy in the 25,- to 499,999- square-foot segment, while demand is very active in product between 1, and 249,999 square feet. Fortunately, industrial development is fairly nimble with the average warehouse facility taking 9-12 months to complete; developers can cease future groundbreakings if a certain size segment is over-built. There is also the option of dividing a newly built space into two smaller units a workaround that may better align with a given market s demand pipeline. Active tenant demand continues to exceed new construction in major markets (Based on their current spec pipeline relative to tenant demand) (s.f. in millions) Available: Under construction spec space Total market vacancy Inland Empire DFW Chicago Central PA Atlanta * Warehouse & distribution facilities in excess of 1, s.f. Active tenant demand DFW is the exception, however. Vacancy will likely fluctuate as leasing activity catches up with new supply additions 4.1% 6.5% 7.1% 8.3% 7.8% 5

6 More spec development Speculative construction, compared to two years ago, is very pronounced in Atlanta (9.5 million square feet in the first quarter of 216 versus 55, square feet in the first quarter of 214) and Philadelphia / Central PA (8.6 million square feet versus 1.8 million square feet). It was up roughly 1. percent in Dallas / Fort Worth (21.9 million square feet) and Chicago (6.7 million square feet), and volumes are generally consistent in the Inland Empire (14.3 million square feet) over the same time period. Although vacancy rates are tight in these markets and demand is healthy, there will likely be a time gap between when new supply delivers and when it becomes leased. More product will be introduced at a swifter pace than it has in recent years in many of these markets. This is especially true in the big-box segment (5, square feet and greater), which comprises 49.4 percent of these markets collective spec construction. Rent growth may slow if larger spec product delivers vacant Annual U.S. warehouse asking rent growth of 4.5 percent is expected this year, which is marginally slower than 215 s year-over-year gain of 5.4 percent. The five aforementioned markets contain nearly 3. percent of the nation s billion square feet in stock, and new product that delivers vacant could moderate rent increases. In Atlanta, for instance, annual warehouse asking rent growth of 7.3 percent occurred during the first quarter, while a conservative forecast calls for 3. percent annual growth by year-end 216 as more spec construction comes online. What does the future hold for the U.S.? Speculative construction deliveries are increasing across the country, but remain concentrated in and around the nation s major warehouse markets. Spec deliveries are expected to total 131. million square feet this year, which marks a 13.9 percent increase from 215, and even though new supply is increasing the U.S. vacancy rate is anticipated to remain in the low-6s through year-end. Net absorption has averaged 56.1 million square feet per quarter from 214 through the first quarter of 216, and this average will likely remain generally consistent over the next nine months: Warehouse tenant demand is anticipated to remain strong and net absorption (29 million square feet is expected this year) will almost certainly outpace new supply for the seventh year in a row. U.S. net absorption in Q1 16 was up 6.6% from one year ago Vacancy will likely hover in the low-6 s through year-end; new spec construction will likely be well-received Q1 net absorption Q2-Q4 (s.f. in millions) f 12.% 1.% 8.% 6.% 4.% 2.%.% (Vacancy) 6

7 Some highlights from around the country Atlanta After a slowdown in new construction deliveries in the fourth quarter of 215, 216 had a strong start, with 6.1 million square feet in new supply added in the first quarter. This represents nearly 6. percent of 215's annual total. Chicago User demand continues to escalate as tenants seek to expand their Midwest distribution footprint. During the quarter, three of Chicago's largest availabilities were leased, leading to even greater user competition for big-box space. Dallas / Fort Worth Supply and demand were largely in balance during the quarter, but the construction pipeline set a new historical high. More product is signaling a rise in the vacancy rate ahead, creating a shift more toward neutral conditions over the next year (217) and is expected to tip the market into tenant-favorable conditions in 218. East Bay / Oakland Vacancy sits at 2.4 percent and will likely remain low due to limited, quality product. Many tenants are starting to take note of cheaper alternatives in the North Bay and Central Valley. Houston Available sublease space is on the rise, while preleasing of under construction spec buildings is minimal. Developers are hitting the pause button on new groundbreakings, especially in the over-developed North and Northwest submarkets. Indianapolis Bulk distribution space accounted for 51.6 percent of net absorption and 89.9 percent of new construction during the quarter. Inland Empire Small building construction is back in a big way: 26 facilities under 1, square feet were underway during the quarter, while there were 18 in the 1,- to 399,999-square-foot segment. Los Angeles Los Angeles had the lowest vacancy rate in the country at 1.1 percent. Its port-adjacent South Bay submarket was at a record-low.7 percent. Miami Sixty-five percent of tracked tenant requirements are looking to expand their footprints most are circling the Medley and Airport West submarkets. New Jersey Class A leasing activity continued at a feverish pace as tenants committed to newly constructed product throughout Northern and Central New Jersey. More speculative groundbreaking is expected in the months ahead. Philadelphia / Central Pennsylvania 3PLs and e-commerce tenants are very active in the market. Class A and B vacancy rates are very tight, and the 8.6 million square feet in new speculative construction set for delivery this year will give tenants a few more modern space options. Portland Strong leasing activity has pushed vacancy to a new record low (3.6 percent). The development pipeline is full and the market should see the addition of 2.5 million square feet in new supply in 216. Seattle Both leasing and development activity are at levels that far exceed anything in recent history. Tenant demand is not showing any signs of slowing down, and rental rates already higher than pre-recession rates will continue to increase. Lowest vacancy Highest annual net absorption (s.f.) Highest under construction (s.f.) Los Angeles 1.1% Atlanta 5,267,11 Dallas / Fort Worth 24,346,148 Orange County 1.5% Chicago 5,221,996 Chicago 16,887,442 East Bay / Oakland 2.4% Dallas / Fort Worth 3,91,49 Inland Empire 15,954,783 Long Island 2.6% Inland Empire 3,623,126 Atlanta 15,264,172 Denver 3.2% Nashville 2,277,34 Philadelphia / Central PA 13,255,376 Portland 3.6% North Bay 2,261,696 Houston 1,194,43 7

8 East Bay / Oakland, South Bay / Silicon Valley SF Mid-Peninsula Dallas / Fort Worth Central New Jersey, Central Valley, Chicago, Denver, Hampton Roads, Houston, Los Angeles, Northern New Jersey, Philadelphia / Harrisburg, Sacramento, San Antonio Inland Empire, North Bay, Orange County, Portland, Richmond, San Diego, Seattle / Bellevue, United States Atlanta, Indianapolis, Long Island Baltimore, Memphis, Minneapolis / St. Paul, Nashville, Salt Lake City, St. Louis, Tampa Bay, Washington DC Columbus, Kansas City, Las Vegas, Miami-Dade, Orlando, Pittsburgh, Reno Peaking market Rising market Falling market Bottoming market Boston, Cincinnati, Cleveland, Milwaukee, Phoenix Charlotte, Detroit, Greensboro / Winston-Salem Broward County / Fort Lauderdale, Jacksonville Palm Beach Moving clockwise Holding steady Moving counter-clockwise Reading the clock The JLL industrial property clock illustrates where each market sits within its real estate cycle. Markets generally move clockwise around the dial, with those markets on the left side generally facing more landlordfavorable environments, whereas those on the right experience generally tenant-favorable conditions. At the end of the first quarter of 216, the U.S. aggregate moved clockwise to the 9:3 mark, in the peaking market quadrant. All markets are rising, meaning landlords are increasingly gaining leverage across the country. Rent growth is prevalent and speculative construction is becoming more widespread in terms of both geography and size segments. Fundamentals tightened in 27 of 51 local markets this quarter. Currently, conditions are starting to/increasingly peaking in 25 of the nation s markets. Rents in the Class A sector have firmed and are increasing in all U.S. markets. As the big-box logistics sector in primary and secondary markets continues to tighten, we continue to see some spillover into demand and pricing for quality Class B product as long as the pace at which new speculative deliveries are added remain controlled we expect this dynamic to increase, and based on current tenant requirements and economic indicators this will likely be the case for most markets in 216. Expect markets to continue their progressive clockwise moves, while the overall U.S. position gradually climbs. 8

9 United States industrial weather map Rents growing (greater than 1.5% growth year-over-year) Rents stagnant (between -.5% and 1.5% year-over-year) Rents falling (greater than.5% decline year-over-year) Average rental % change year-over-year* Average rental % change quarter-over-quarter Please note: Weather imagery indicates only the direction of movement of rental prices in a particular market and is not designed to indicate favorable or unfavorable conditions for a specific leasing perspective. 9

10 United States industrial rankings Total inventory (millions of s.f.) rates Chicago Los Angeles Philadelphia / Central PA Dallas / Fort Worth Atlanta Inland Empire Detroit Houston Northern New Jersey Cleveland Seattle Kansas City Central New Jersey Charlotte Phoenix Cincinnati / Dayton Columbus Orange County (California) St. Louis Indianapolis Memphis Greensboro / Winston-Salem Nashville Denver Tampa Bay Minneapolis / St. Paul Salt Lake City Miami-Dade Milwaukee Portland Baltimore Boston Pittsburgh Sacramento San Diego Long Island East Bay / Oakland Orlando Central Valley (California) Las Vegas Washington DC San Antonio Jacksonville Broward County Richmond Reno / Sparks Hampton Roads North Bay (California) Silicon Valley / South Bay Palm Beach SF Mid-Peninsula , 1,2 Pittsburgh Boston Phoenix Reno / Sparks Cleveland Sacramento Charlotte Detroit Baltimore Philadelphia / Central PA Memphis Indianapolis Atlanta Washington DC Jacksonville Orlando Richmond Tampa Bay Chicago Las Vegas Dallas / Fort Worth Broward County Hampton Roads Columbus St. Louis San Antonio Northern New Jersey Minneapolis / St. Paul Central New Jersey Kansas City Houston Nashville Salt Lake City Greensboro / Winston-Salem Palm Beach Cincinnati / Dayton Silicon Valley / South Bay Milwaukee San Diego Miami-Dade Central Valley (California) Inland Empire Seattle North Bay (California) SF Mid-Peninsula Portland Denver Long Island East Bay / Oakland Orange County (California) Los Angeles -2.% 3.% 8.% 1

11 Year-over-year rent changes SF Mid-Peninsula Silicon Valley / South Bay Denver Nashville Boston San Diego Inland Empire Los Angeles Chicago Sacramento Greensboro / Winston-Salem Orange County (California) Northern New Jersey Richmond Las Vegas Atlanta Hampton Roads East Bay / Oakland Orlando Broward County Charlotte Phoenix Detroit Seattle Memphis Baltimore Tampa Bay Salt Lake City Cleveland Minneapolis / St. Paul Dallas / Fort Worth Washington DC St. Louis Cincinnati / Dayton Kansas City Columbus Central New Jersey Philadelphia / Central PA Reno / Sparks Portland Jacksonville Milwaukee Central Valley (California) Miami-Dade Indianapolis San Antonio Palm Beach Pittsburgh Houston North Bay (California) Long Island -2.%.% 2.% 4.% YTD 216 net absorption (millions of s.f.) Atlanta Chicago Dallas / Fort Worth Inland Empire Nashville North Bay (California) Philadelphia / Central PA Phoenix Columbus Memphis Los Angeles Indianapolis Central Valley (California) Detroit Minneapolis / St. Paul Northern New Jersey Seattle Jacksonville East Bay / Oakland Miami-Dade Greensboro / Winston-Salem Orlando Cleveland Silicon Valley / South Bay San Antonio Pittsburgh Houston St. Louis Tampa Bay Baltimore Portland Washington DC Orange County (California) Richmond Cincinnati / Dayton Las Vegas SF Mid-Peninsula Denver Central New Jersey Milwaukee Broward County Palm Beach Kansas City Sacramento Salt Lake City San Diego Boston Reno / Sparks Charlotte Hampton Roads Long Island (2.)

12 Local U.S. industrial markets 12

13 Atlanta Large tenant demand pushing market Development pipeline soaring, speculative dominating After weather delays at the end of 215, new deliveries boomed this quarter, totaling 6.1 million square feet, representing nearly 6. percent of the previous year's total. Of the 3.9 million square feet of speculative construction to deliver this quarter alone, over 5. percent is preleased. The largest of the new speculative spaces is a 1.1-million-square-foot warehouse, occupied this quarter by Google. The Northwest submarket especially is seeing a jump in delivery numbers. Only two buildings in the submarket delivered from 21 to 215, while this quarter s deliveries boosted to five, with more under way; construction along with as paper and packaging are two of the most active industries. Development:historic, under construction, and proposed 2 M 15 M 1 M 5 M Q1 215 M BTS Spec Unknown Q2 215 Q3 215 Q4 215 Q1 216 Proposed Under construction Tight Class A big-box market Amid the high amount of new deliveries, demand for big-box, Class A product is steadily increasing, with only positive annual absorption since 21 for spaces sized 5, square feet and larger. Thus, even though construction is seemingly abundant, tenant requirements of this large-size subset outweigh available new deliveries and space under construction by nearly two million square feet. This large, Class A space is increasingly necessary for modern tenant requirements, including the two largest occupancies of this quarter; Google and Smuckers, who took 1.1 million square feet and 1. million square feet, respectively, of the highest quality warehouse and distribution supply. Net absorption and availability, spaces sized 5, s.f. plus Absorption Availability 1 M 25.% 8 M 2.% 6 M 15.% 4 M 2 M 1.% M 5.% -2 M.% YTD 216 Q1 exhibits strong large block activity Activity for large blocks, sized 25, square feet and larger, went into overdrive this quarter with three new leases, eight deliveries and seven moveins. Along with Google s and Smuckers large block occupancy, other movement includes Williams-Sonoma signing a new 1.1 million-square-foot lease; Surya Carpets delivering their 1. million-square-foot distribution facility, occupying about half of that space; and Trammell Crow delivering a nearly 9,-squarefoot speculative building. With this level of activity, expect the availabilities in the new space to become leased and occupied soon. Large block movement 3. M.8 M 2.2 M 1.9 M Delivery New lease Move-in Move-in & delivery 5,276,11 YTD net absorption (s.f.) 3,551,398 YTD leasing activity (s.f.) +19,, Active tenant requirements (s.f.) 7.8% 6,77,482 YTD new deliveries (s.f.) 13,234,172 W&D under construction (s.f.) $3.61 Average rental rate (p.s.f.) 7.8% 12-month rent growth 13

14 Baltimore Modest growth fuels near-record-low vacancies Existing tenant expansions fuel absorption The Baltimore market experienced healthy growth with 588,11 square feet of absorption in the first quarter of 216. The relatively strong amount of absorption, fueled by an expanding existing tenant base, pushed vacancy rates down to a new 1-year low of 8.8 percent. Notable leases during the quarter included Oldcastle BuildingEnvelope taking down 38, square feet at 6675 Amberton Drive, a pair of leases taking down nearly 95, square feet at 7465 Candlewood Road, and Harmon Home taking occupancy of 8, square feet at 194 Park 1 Drive. Rental rates begin to level as large blocks remain vacant Rental rates in the Baltimore market have seen modest growth in the first quarter across all building classes, with little to no change in the more modern Class A product. This is largely because the market has not seen many new entrants, but rather modest expansion from its existing tenant base, which will likely push landlords to provide more competitive rates during the remainder of the year. These competitive rates may begin to shift market dynamics in favor of the tenant in select submarkets. With 26 available blocks of space over 1, square feet available, the Baltimore market will likely rely on these new tenants to drive rental rate growth. Construction on the verge of outpacing absorption Construction in the Baltimore market has begun to outpace absorption despite nearly 9. percent of new construction in the market being preleased, the majority of which are build-to-suits. It is likely that construction will slow in the latter half of 216 as modern product becomes increasingly more abundant. Nearly 1.7 million square feet of modern, functional product built after 21 remains vacant. Build-to-suits currently under construction include FedEx s 36,-square-foot building at Tradepoint Atlantic, Cefalu s 16,-squarefoot warehouse on Assateague Drive, and Coastal Sunbelt s 24,-squarefoot warehouse at 91 Whiskey Bottom road, all of which are set to deliver in the second quarter. Historical vacancy 15.% 1.% 5.% 1.% 1.3% 11.7% 11.3% 1.8% 1.1% 1.5% 9.7% 9.4% 8.8%.% YTD 216 Available blocks of modern, functional space ,-249,999 s.f. 25,-499,999 s.f. >5, s.f. Vacancy in modern industrial facilities 1,651,896 s.f. Vacancy in buildings over 3, square feet built after ,562,384 Total inventory (s.f.) 8.8% Overall vacancy 588,11 Quarterly net absorption (s.f.) 588,11 YTD net absorption (s.f.) $5.12 Direct average asking rent $1.49 Flex R&D average asking rent 878, % Total preleased 14

15 Boston A fiery start to the year for Boston s industrial market Industrial fundamentals paint a bright picture in Greater Boston The market for industrial space in Greater Boston experienced further tightening in the first quarter of the year. Overall vacancy fell 6 basis points during the quarter to 12.2 percent. Vacancy in the market has been on a steady decline since 211. Much of the market s strength can be attributed to improving industrial fundamentals, particularly relating to job growth in industrial-using sectors. Employment in trade, transportation and utilities grew by 2,75 jobs during the trailing 12 months. Construction employment saw an even more impressive 8,6 jobs added over that same period. Overall, the past five years have seen over 46, industrial-using jobs created in Greater Boston. It is not surprising that this time period has seen an associated vacancy decline of 4.9 percentage points. Industrial overall vacancy 18.% 16.% 17.4% 17.4% 16.8% 17.1% 17.2% 14.% 16.% 14.4% 12.% 12.8% 12.8% 12.2% 1.% YTD 216 Healthy activity in the first quarter of 216 The first quarter saw six different leases signed for spaces over 1, square feet. The largest industrial lease signing of the quarter was a renewal by Entegris Inc. in Billerica; the high-tech manufacturer renewed on 175,88 square feet at 129 Concord Road. Another notable renewal was that of HD Supply at 1 Meadow Street in Boston. The industrial distribution company stayed in 152, square feet. The largest warehouse sale of the quarter goes to Calare Properties at 25 Tucker Drive in Leominster. Calare Properties sold the 588,-square-foot property to James R. Wiersma for $31.5 million. Calare, after acquiring the 588,-square-foot property vacant in 212, signed a lease with Affordable Interior Systems (AIS) for 41,316 square feet in March 214. AIS later expanded into the balance of the building, and the asset has been at 1 percent occupancy since May 215. $6.17 $6.27 Warehouse & distribution direct average asking rent (p.s.f.) $7. $6.5 $6.21 $6.3 $6. $5.79 $5.73 $5.67 $5.62 $5.64 $5.73 $ YTD 216 Current conditions Outlook With yields on office product at cyclical lows, capital markets fundamentals have shifted in favor of industrial assets. This has led to industrial sales volume over the past 12 months of $2.3 billion. That is more than double the 12-month total for this time last year and marks the most industrial activity ever seen in Greater Boston. With a construction pipeline that is 79. percent preleased, demand for industrial space in Greater Boston should continue to outpace supply, making 216 an exciting time for owners of industrial assets. Landlord leverage Warehouse & Distribution Manufacturing Flex/R&D Peaking market Rising market Falling market Bottoming market Tenant leverage 182,83,149 Total inventory (s.f.) 12.2% Overall vacancy $6.3 Warehouse average direct asking rent (p.s.f.) 1.4% Quarterly warehouse rent growth $6.93 Class A warehouse average direct asking rent (p.s.f.) 7.4% Class A warehouse direct vacancy $5.99 Manufacturing average direct asking rent (p.s.f.) 227,215 YTD net absorption (s.f.) 15

16 Broward Leasing slows to start the year, but fundamentals continue strengthening Southern portion of the county continue being in-demand Currently, over 48.7 percent of tracked tenants touring the market are eyeing either Southwest or Southeast Broward. Further, these two submarkets also accounted for 21.6 percent of all absorption gains in 215. In addition, 45. percent of all leasing activity in 215 occurred within these two submarkets, which should help drive vacancy in the southern portion of the county. The submarkets are favorable to tenants due to their proximity to Miami-Dade County, transportation access and, particularly in the case of Southwest Broward, the inventory of newer product. Absorption gains within these submarkets, which totaled nearly 188, square feet, were offset by lackluster demand in Central Broward. Tenant occupations keep pace with construction Since the beginning of 212, when no new product came online, absorption has significantly outpaced new inventory by more than 2-to-1. The beginning of 216 has followed suit, with tenants taking 177,3 square feet compared with 13,5 square feet of new product delivered in the first quarter. This trend will likely continue through the year, as current tracked requirements also outnumber product under construction by nearly double. The constrained development pipeline has helped rent growth, which is up 8. percent from one year ago. Southern Broward submarkets remain in demand 36.9% Net absorption has outpaced deliveries since 212 3,, 2,, 1,, 14.4% 3.7% 18.% Net absorption SE Broward West Broward New construction deliveries SW Broward Other YTD 216 Planned construction activity in Northeast Broward dominates pipeline While tenants have increasingly been eyeing Southeast Broward, developers are betting on Northeast Broward s future. There is currently over 38, square feet of product under construction in Northeast Broward, or roughly two-thirds of the industrial construction occurring in Broward. New product will be welcomed in the submarket, as half of the buildings in the submarket (of over 8.6 million square feet) were built before Further, there is less than 93, square feet available in buildings constructed since 2, which is 44. percent of all available space in Northeast Broward. Northeast Broward primed to increase inventory 38, s.f. Of product under construction in NE Broward 238,8 Available for sublease (s.f.) 6.5% Direct vacancy 91,12,3 Total inventory (s.f.) 975,6 YTD leasing activity (s.f.) 13,5 YTD construction completions (s.f.) 572,2 1,121, Total tenant requirements (s.f.) $7.47 Average asking rent (p.s.f.) 16

17 Central Valley Two big-box spaces completed in the first quarter Bay Area market heat is boosting the Central Valley Product and land constraints in the Bay Area have driven up demand for industrial real estate in the Central Valley. Tenants and buyers are searching for availability of larger contiguous quality product, at the same time trying to reduce real estate costs. Quality warehousing and distribution space is available at a discount compared to the East Bay market. The Central Valley s close proximity to dense consumer populations in the Bay Area and the Northern California region have drawn significant regional distribution requirements. Demand: number of requirements by size 2 1, - 299,999 s.f. 3 3, - 499,999 s.f. 5, - 749,999 s.f. 1 75, - 999,999 s.f. 15 >1,, s.f. Available big-box space options are few A lack of existing available product is slowing transaction activity. The market has only three existing, available spaces that are 5, square feet or greater and there are currently five tenants seeking spaces above 5, square feet. The current demand is prompting developers to start projects in the Central Valley. Development was at a standstill from 29 to 215, resulting in a market that has not been overbuilt. Since larger users have limited options, deal volume has not kept pace with the number of companies seeking space. Additionally developers have seen demand for second-generation space rise as Class A availability has been reduced. Available quality blocks of space: Warehouse & distribution inventory (includes Class A & B-caliber inventory) # of blocks 1 Existing Under construction , - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. New developments and deliveries New construction completions totaled 1,745, square feet in the first quarter of 216, which is well above 215 s first quarter, with 257, square feet of construction delivered. Since 215, there have been eight completed new developments. This trend will continue with the 1,61,25 square feet currently under construction that will add to the seven existing availabilities that are in the 25,-plus-square-foot category. Asking rates, fueled by developers pricing uptick on new deliveries, will continue to increase as new supply is delivered to the market. Average sale pricing $45.7 per s.f. Average sale price for industrial asset during the first quarter 6,255, Active requirements (s.f.) 5 Existing blocks of space 25K+ s.f. 5.6% Total availability rate $.35 Class A distribution rent (p.s.f., mo.) 1,581,559 YTD 216 net absorption (s.f.) 1,581,559 Quarterly net absorption (s.f.) 1,61,25 2 # of completions this quarter 17

18 Charlotte Development pipeline healthy to open 216 Rental rates rise as vacancy tightens As demand continues to grow for quality available space in the Charlotte market, landlords will have leverage in regard to asking rental rates. The first quarter of 216 s average asking rental rate was $3.56 per square foot, up from $.24 one year ago when the average asking rate was $3.32 per square foot. Asking rates are currently at an all-time high; this, coupled with tightening vacancy, helps warrant the large amount of development in today s construction pipeline. Asking rental rates increased year-over-year $4. $3.5 $3. $2.5 $ YTD 216 Construction shows no sign of slowing down With multiple big-block developments occurring in the market, tenants will need to have an organized real estate plan in order to secure premier space. The steady decline of the market s vacancy rate in recent years validates this. Two of the three highlighted projects, Ridge Creek West II and Steele Creek 6, are located in the State Line submarket. Notable projects under construction Absorption slow out of the gate in 216 After strong positive absorption in 215, absorption slowed in the opening months of 216, by posting a loss of 181,63 square feet. Given that vacancy stays low and new product coming online finds tenants relatively quickly, absorption is expected to pick back up in the second quarter of 216. Absorption lost speed in Q ,, 5,, - (5,,) YTD ,44,69 Total inventory (s.f.) 9.2% 1,47, Tenant requirements (s.f.) 6,3,7 Planned construction (s.f.) $3.56 Direct average asking rent (p.s.f.) 7.2% 12-month rent growth 3,82, % Total preleased 18

19 Chicago Robust first quarter signals a strong start to 216 Chicago s market fundamentals on track Chicago started of the year on the right track as several freshly inked big-box transactions continued to drive leasing activity, placing even greater pressure on Class A inventory. In Monee, Hankook Tires signed with Venture One and DRA Advisors for 718, square feet in the former Michelin Tire space at 2585 S Ridgeland Avenue. Hankook is expanding out of a 4,-square-foot building it has outgrown at 1 Veterans Parkway in Bolingbrook. As Michelin vacates to a 1.7 million-square-foot buildto-suit in RidgePort Logistics Center, VentureOne was able to backfill the building with zero downtime on the market. Along the I-355 Corridor in ML Realty s Heritage Crossings Business Park, two notable leases were signed, accounting for 9, square feet of absorption. RJW Transport entered into a 1-year agreement to lease ML s 512,-square-foot spec building, which delivered late last year. Just next door, ML secured LG in a prelease of another 363,-square-foot speculative building, which is scheduled for delivery in September. As the first large users to commit to space along the I-355 Toll Road, these two deals marked a new milestone for the frontier marketplace. In Northern Lake County two significant Class A availabilities are coming off the market. CenterPoint properties inked Handi-foil in the 213,-square-foot former TaChen manufacturing building at 565 CenterPoint Court in Gurnee, and Globe Corp signed HomeWerks to 19, square feet at Albrecht Court in Lake Bluff. Globe Corp is rumored to have a lease pending on the remaining 65, square feet in the 254,-square-foot building. In the North DuPage submarket, Prinova Ingredients signed a short-term lease for 1, square feet at 71 Kimberly Drive. Prinova is active in the marketplace for a 3,- to 35,-square-foot build-to-suit project. Sales recap The largest portfolio to trade hands was TA Associates' sale of the Yorkbrook Business Park, an 18-building flex and light industrial park on Eisenhower Lane in Lombard. The park, which stands 91. percent occupied, was acquired by Venture One for $36,975, or $5.22 per square foot. In Joliet, Midwest Warehouse purchased the 575,-squarefoot Speedway Distribution Center at 3451 S. Chicago Street from Molto Properties for just under $48 per square foot. Approximately 29, square feet of the building will be occupied by Otis Elevator through 219. Midwest intends to use the balance of the space for their 3PL operations. In the Carlow Corporate Center in Bolingbrook, Universal Laminating and Converting bought a 113,-square-foot recently completed speculative building at 91 Carlow Drive from Northern Builders. Northern preleased 35, square feet to Braun s Express before completing the quasi user/investment sale. Notable leases Tenant name: submarket Deal type Size (s.f.) Hankook Tire: I-57 New lease 718,761 RJW Transport: I-55 New lease 512,265 OHL/Ghirardelli: I-55 New lease 382,388 LG Electronics: I-55 New lease 363,224 Notable sales Buyer Net absorption and vacancy Seller Bldg(s) s.f. $ Price per s.f. Prudential Bridge Development 1 588, $82.88 Midwest Warehouse Molto 1 575,24 $47.75 Universal Laminating & Converting Northern Builders 1 113,135 $88.5 Venture One: 9.5% TA Associates ,275 $5.22 (s.f.) 2,, 1,, Net absorption -1,, YTD % 1.% 5.%.% 5.2 M Quarterly net absorption (s.f.) 7.1% Available spaces over 1M s.f. 2 Available existing Class A distribution spaces over 5, s.f M 2.56 M YTD construction completions (s.f.) $4.79 Average asking rent (p.s.f.) 4.85% RREEF Gary Ave Portfolio cap rate 19

20 Cincinnati Market strengthens as it awaits new product Large deals boost market while giants await The market continues to make positive absorption gains due to the high leasing velocity of the 1,- to 25,-square-foot size range. With the current shortage of 5,-square-foot and greater spaces available in the market, tenants continue to fill smaller boxes across the market. These users are filling local and regional needs, while the users looking for a national presence and larger footprint choose neighboring markets such as Columbus, Indianapolis and Eastern Pennsylvania. Despite the tightening in the market due to a lack of supply, the outlook for leasing activity in 216 is positive. Leases signed greater than 1, s.f.* 2,, 1,5, 1,, 5, Total s.f. leased Number of transactions Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 *Analysis does not include BTS leases Lack of available large blocks continues to tighten modern bulk market Increased tenant demand in the market has driven rents up and the vacancy rate down over the last eight quarters despite a shortage of newly constructed modern bulk product. The lack of supply has shifted negotiating power in the landlords' favor and decreased the size of leases signed. As landlords react and begin to develop new blocks of space, it is projected there will be a change in the current trend of users and footprint. With the upcoming availability of modern bulk warehouse space in the market, a shift is projected from regional retail and automotive users toward distribution centers serving a larger portion of the country. Large available blocks, by building status # of blocks 8 Existing Spec Planned construction Spec Under construction 4 25, 499,999 s.f. 5, - 75, s.f. >75, s.f. New announcements add to robust development pipeline In the first quarter of 216, four new speculative development projects were announced in Florence, Blue Ash and West Chester, combining for over 1.2 million square feet. The announcements took place during an already historic time for industrial development in Cincinnati, with over 3.1 million square feet of space currently under construction at the end of 215. The projects further enforce developers confidence in the market and pent-up demand created by the shortage of supply. With the influx of product coming online in 216 and into 217, vacancy rates are projected to increase and the market is expected to shift back to tenant-favorable. Construction projects announced in the first quarter Property Landlord Bldg s.f. 19 Kenwood Schuermann Properties 529,42 Ted Bushelman CVG VanTrust 4, 114 Regina Graeter Way Paddock Rd LLC 188,8 Port Union Commerce Park Bldg E Becknell Industrial 138,75 $3.74 Average total asking rent (p.s.f.) 4.8% 3,455,815 1,2, Planned construction (s.f.) Quarterly const. completions (s.f.) 434,214 Quarterly net absorption (s.f.) 434,214 YTD net absorption (s.f.) 234,46,465 Market size (s.f.) 2

21 Cleveland Market strengthens as demand outpaces supply Market fundamentals tighten as Cleveland s manufacturing base trends up Cleveland s industrial property sector continues to strengthen on the back of solid economic growth. Between 199 and 215, gross regional product in northeast Ohio increased 17. percent, while productivity increased an astounding 92. percent. Furthermore, exports have increased 4. percent from pre-recession levels. The economic gains experienced by the region have led to increased demand from industrial users. Industrial availability has decreased significantly in recent years and now sits in the single digits. Meanwhile, asking rents have recorded healthy gains as the industrial market has moved toward equilibrium. Market rents and availability $4. Asking rent ($ p.s.f.) Availability (%) $3.6 $ Q1 216, Team NEO 13.% 1.% 7.% Despite elevated construction levels, demand outpaces supply additions Construction remains elevated across the region as developers work to keep pace with tenant demand, particularly for modern bulk space. The efficiencies gained through the column spacings and clear heights offered in modern bulk product more than offset the rent premiums tenants incur. This is particularly true when tax abatement and other economic incentives are taken into consideration. Nearly 2. million square feet is expected to pass through the development pipeline in 216. While the majority of this space is built-to-suit and owner-user development, more than 5, square feet is speculative. Supply and demand (m.s.f.) 4.5 Deliveries Net absorption Q1 216 Sales activity in Q1 is a mix of owner-user and investment transactions Capital markets activity in the first quarter totaled a little more than $23.2 million and involved roughly 55, square feet of industrial property. Approximately half of the transaction value (and half of the square footage) was identified as owner-user transactions, while the balance was identified as investment sales. Owner-user transactions had an average sales price of $36 per square foot, while investment sales had an average sales price of $42 per square foot. The top trade of the quarter went to Cedarbrook Management, which acquired a 41,184-square-foot flex building for $4.7 million, or $89 per square foot. Capital markets activity Sales volume $8 Total sales volume ($M) Average sales price ($ p.s.f.) $6 $4 $2 $ Q4 214 Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 $8 $55 $3 Average price 31,954,49 Total availability (s.f.) 9.6% Total availability 699,562 YTD total net absorption (s.f.).2% Net absorption (as a % of stock) $3.81 Total average asking rent (p.s.f.) 5.% 12-month asking rent growth 349,412 1,147,766 YTD construction completions (s.f.) 21

22 Columbus Increased leasing activity driven by logistics users Columbus remains a top destination for logistics users Since January 215 logistics users have leased over 2.5 million square feet of industrial space in the Columbus market. Columbus has remained a desirable destination for this segment due to Rickenbacker Inland Port s access to road, rail and air transportation. Logistics users of all sizes are establishing operations in Columbus, with leases ranging from 5, to over 1. million square feet. Not only have tenant size requirements remained wide ranging, but the locations have as well. Logistics users have entered submarkets across Columbus to boost their strategic location, further solidifying the market s place as a premier destination for this segment. Strategic location of Columbus market 47.% of the U.S. population lives within a 1-hour drive Foreign capital pours in as investment activity heats up Cross-border capital accounted for 46. percent of total investment in the Columbus market in 215. Foreign investment activity was led by a joint venture acquisition of the Exeter property group portfolio, consisting of 57.8 million square feet in 25 U.S. markets, including 12 properties in Columbus. The two groups, the Abu Dhabi Investment Authority and the Public Sector Pension Investment Board of Canada, acquired the Columbus properties for $239.5 million. This trend shows investor confidence in the market as cross-border capital accounted for less than 5. percent of capital flows in both 213 and 214. Foreign capital investment flows over the last 12 months Regional Breakdown 24% 39% Americas Asia Pacific EMEA 37%, Real Capital Analytics Amazon jobs will boost already robust industrial employment sector In the fourth quarter of 215, online retailer Amazon announced two new fulfillment centers in Columbus. The fulfillment centers, located in Etna Township and Obetz, will create roughly 2, jobs in the Columbus market. Columbus diverse industrial base continues to benefit from a strong employment base and low business costs, and employment growth is projected to continue in the region throughout 216. While Amazon s hiring will provide a significant boost to warehouse employment, manufacturing employment has also benefitted from low gas prices. This trend has allowed auto and parts manufacturers in the market to hire employees at an accelerated pace. Industrial employment trends (12-month change, s) Trade, Transportation & Utilities -15. Manufacturing Other Services -25. Mining, Logging & Construction YTD 216 $3.62 Average total asking rent (p.s.f.) 6.3% 3,482,117 1,2, Planned construction (s.f.) 93,22 Quarterly completions (s.f.) 1,79,212 Quarterly net absorption (s.f.) 1,79,212 YTD net absorption (s.f.) 24,45,988 Market size (s.f.) 22

23 Dallas / Fort Worth Demand healthy, construction pipeline grows Net absorption remains high, but construction outpaces it Net absorption was a healthy 3.9 million square feet in the first quarter of 216. Due to new construction deliveries, the total vacancy rate moved up slightly to 6.5 percent, which is well below the market norm. Most submarket have extremely low vacancy rates, making them strongly landlord favorable. Only two submarkets (North Fort Worth and South Dallas) have vacancy rates in the double digits and this is due to recent elevated construction levels., by submarket S Stemmons GSW NE Dallas NW Dallas S Fort Worth E Dallas DFW Airport N Fort Worth S Dallas 2.2% 4.2% 5.4% 5.4% 5.8% 7.7% 9.2% 1.8% 11.%.% 2.% 4.% 6.% 8.% 1.% 12.% Construction pipeline is above the historic norm, as spec construction reaches new high for the market Of the 24.3 million square feet under way, only 9.9 percent is built-to-suit, but with preleasing on speculative construction as well, 28.7 percent of the construction pipeline is accounted for. Construction is heavily concentrated in three submarkets: South Dallas (33. percent), GSW/Arlington (24. percent) and North Fort Worth (24. percent). Construction pipeline, by submarket 33.% 2.3% 3.% 9.6% 3.2% 24.4% 24.% DFW Airport N Fort Worth NW Dallas S Stemmons GSW/Arlington NE Dallas S Dallas Record absorption needed to keep pace with construction pipeline New supply and demand were largely in balance for the first quarter, but with the construction pipeline reaching a new high for the market, the market is expected to begin shifting toward neutral conditions over the next year (217). The rising vacancy is expected to relieve some of the strong upward pressure on rates, with effective rates leveling out over the next few quarters. Over the past year, rates have increased 4.5 percent. At this point in the cycle, rates on bulk distribution have flattened out, with most of the rate pressure taking place on the more midsized shallow bay product. Unaccounted-for spec space set for delivery 17,3, s.f. (Unaccounted-for spec pipeline under way) 711,638 Vacant sublease space (s.f.) 6.4% Direct vacancy 22,575, Active tenant requirements (s.f.) 43,444,434 Proposed construction (s.f.) 9.1% vs. 9.9% Spec construction vs. BTS 4.5% 12-month rent growth 24,346, % Total preleased 23

24 Denver A slight softening provides a more sustainable future Denver steady activity in foreign investment Foreign investors have taken a keen interest in the Denver industrial market in recent years, with over $268 million invested in 23 properties in 215 alone. During the first quarter of 216, Mitsubishi was involved in two deals in the I- 7/East submarket, lending over $8.1 million in financing costs. Denver offers investors a greater opportunity than coastal markets due to its favorable price points, coupled with a diversified sector composition and overall economic stability. These market fundamentals produce higher yields that will continue to attract foreign investors as they are priced out of other substantially more expensive markets with lower returns. Five years of cross-border investments in Denver (in millions) $3 $264.4 $25 $2 $15 $1 $75.9 $45.4 $37.5 $5 $18.6 $ Singapore Canada China Switzerland Hong Kong Construction remains strong and attracts new tenants The I-7/East submarket remains the leading area for industrial construction in Denver metro as developers take advantage of cheaper land prices and the availability of large tracts. Developers and investors have cautiously navigated the delicate balance between supply and demand in previous years in order to prevent overbuilding the market to combat a potential economic slowdown. This heedful thinking discouraged companies from expanding distribution networks in Denver during and immediately after the recession. However, with the influx of people moving to Denver, developers are now more willing than before to build large-block distribution centers to meet the demands of national and international companies wanting to establish or grow their presence in the market. Decrease in oil prices influences increase in sublease space The unsteadiness of the oil and gas industry has caused companies to reassess their real estate strategy, including those companies with operations in the Denver-Julesburg Basin. Vacant sublease space is at the highest level since 212, measuring at 636,857 square feet. The Northeast and Weld County submarkets are most heavily influenced by the energy sector and account for 43. percent of all vacant sublease space currently on the market. This amount of sublease space presents an opportunity for those tenants that require flexible terms and wish to be in a certain geography but couldn t previously afford it. Healthy mix of tenants in the market (s.f.) 45, Manufacturing 598, Logistics & distribution 34, Construction materials 558, Tech, media, & communications 47, Food & beverage 53, E-commerce Historical vacant sublease space (s.f.) 8, 6, 666,76 4, 577,32 586,29 636, ,936 2, Q1 212 Q1 213 Q1 214 Q1 215 Q % 4.5% Total availability 273,756 Quarterly total net absorption (s.f.).1% Net absorption (as a % of stock) 1,127,141 YTD leasing activity (s.f.) 92,285 YTD construction completions (s.f.) 3,19, % Total preleased 24

25 Detroit Detroit industrial continues to improve Michigan industrial evolves with disruption Michigan s industrial market is garnering the most interest from those who recognize the automobile industry is ripe for a disruption. Think driverless cars. Detroit is already more symbiotic with Silicon Valley than some give it credit for. There are more lines of code in the average car than in virtually every other computer system in the world. The big question is whether or not Michigan has the homegrown talent to fill these new advanced jobs, and if not, will the city and surrounding areas be attractive enough to pique the interest of those looking at the area for well-paying jobs? Get while the getting is good Sensing a shift in economic sentiment and increased demand for industrial properties in the market, opportunistic owners are looking to exit through disposition for pre-recession prices. Average asking rents for the first quarter of 216 were $4.5 per square foot, up 6.1 percent year-over-year. Many still feel the necessary asking rate to justify speculative construction is closer to $5.. The Macomb County submarket and the Airport/I-275 Corridor are especially high demand areas, with availability rates of 5.9 percent and 9.1 percent, respectively. Overall, total availability decreased 17.7 percent year-over-year to 9. percent. Look for strong speculative construction activity to continue in the I- 96 corridor and several bulk distribution projects slated to break ground before the end of 216. Industrial employment trends (12-month change, s) Trade, Transportation & Utilities Manufacturing Other Services Mining, Logging & Construction Rents continue to rise $5. Airport W&D Total W&D Macomb W&D $4.5 $4. $3.5 $ YTD 216 Detroit s industrial continues to attract demand Those looking to enter Detroit s industrial property sector are finding an environment that is similar to the U.S. industrial market as a whole high demand and not enough quality supply. There is no denying Michigan s importance to the supply chain due to its proximity to Canada and to the buying power of the region. This goes to explain why Detroit along with Inland Empire, Dallas Fort Worth, Atlanta, Chicago and Philadelphia accounted for 34.1 percent of industrial demand. However, there is reason for caution, as the potential weakening of the U.S. manufacturing sector, a decline in exports and slowing growth in China may negatively impact the market going forward. Absorption remains positive as availability declines 4,, Total availability Quarterly absorption 3,, 2,, 1,, Q1 215 Q2 215 Q3 215 Q4 215 YTD % 1.% 5.%.% 41,216,15 Total availability (s.f.) 9.% Total availability rate 1,358,317 YTD total net absorption (s.f.).3% Net absorption (as a % stock) $4.5 Average asking rental rate (p.s.f.) 6.1% 12-month asking rent growth 1,44, ,951 YTD construction completions (s.f.) 25

26 East Bay / Oakland Bay Area starts 216 strong and continues to heat up Port activity exceeds levels in 214, prior to labor disputes, signaling both recovery and overall growth Total container volume at the Port of Oakland increased by 54.2 percent yearover-year in February 216, totaling 188,139 TEUs. Both a strong U.S. dollar and the solidified labor contracts contributed to the growth in port activity. The longterm future also looks bright; the redistribution of Ports America s cargo business and shipment activity to other terminals will fuel more concentrated revenue growth and enhance future capabilities for infrastructure/system modernizations. Meanwhile, some container freight stations in immediate proximity to the port anticipate increases in container storage rates this year, which could potentially trigger searches for space elsewhere. Available quality blocks of space: Warehouse & distribution inventory (includes Class A & B caliber inventory) # of blocks Existing Under construction 1 1, - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. 4 Continued increases in demand drive market-leading land values Tenant demand for space continues to exceed the market s capacity, jumping approximately 2. million square feet from this time last year. With vacancy at 2.4 percent, and availability just under 6. percent, developers are attuned to the market s opportunities over 7.7 million square feet of proposed or planned projects sit in the pipeline. Prominent sales this quarter to Lennar and Prologis in Fremont and Oakland, respectively, marked all-time highs in price per square foot, signs that the East Bay market is continuing to heat up. Tenants in the market current demand (s.f.) 695, Hold Touring Negotiations 7,265, 55, Development & new deliveries With at least 1 active requirements targeting space at a minimum of 25, square feet throughout the East Bay, the future absorption of the Prologis Silicon Valley Logistics Park in Fremont seems promising. Overall, there are approximately 4.3 million square feet of projects currently under construction, all of which are expected to deliver during 216. Major projects in the pipeline include the LDK Ventures LLC proposed 77,8-square-foot distribution center in Richmond, and the American Realty Advisors planned 8,-square-foot distribution center in Fremont. Industrial product in the pipeline (s.f.) 7,76,787 Total planned and proposed projects as of Q1 216 (s.f.) $.63 Class A distribution asking rate (p.s.f.) 7.3% 12-month asking rent growth 98,391 YTD net absorption (s.f.) 1,27,672 YTD leasing activity (s.f.) 7,265, Active requirements (s.f.) Existing blocks of space 25K+ s.f. 4,271,25 YTD construction completions (s.f.) 26

27 Greensboro / Winston-Salem Large availabilities in the form of new development Asking rates making a jump from 214 With rental rates on an upward swing over the last year, the market is becoming increasingly landlord favorable. With the current asking rate sitting at $2.96 per square foot, up from one year ago when the rate was $2.73, rents continue to climb as new development continues to deliver at market-leading rates. With the jump of $.23 in asking rates from 215 to 216, it marks the highest annual change over the past five years. Asking rates show a strong increase $3. $2.8 $2.6 $ YTD 216 New available product on the way As asking rates continue to climb and absorption remains steady, developers will look to take advantage of the strength of the market. Based on active demand requirements, the 9, square feet in under construction activity will likely be well received by tenants. Although the pace of new announcements on future development projects has slowed, the construction pipeline looks to remain stable moving forward. Development shows growth thus far 9, s.f. Q1 216 total under construction Absorption slowing after quick ascent As expected to kick off 216, total net absorption has slowed down for the Greensboro/Winston-Salem market. Although slow out of the gate, the first quarter of 216 still generated positive 792,479 square feet in activity. With tenants seeking the best available options in the market, and new development showing large availabilities, look for absorption to pickup steam heading into the second quarter. Absorption remains steady 1,, 7,15,323 7,477,34 9,3,82 7,331,544 5,758,958 5,, 792, YTD ,79,532 Total inventory (s.f.) 5.% 792,479 YTD net absorption (s.f.).4% Net absorption (as a % of stock) $2.96 Direct average asking rent (p.s.f.) 12.8% 12-month asking rent growth 9, 17.7% Total preleased (s.f.) 27

28 Hampton Roads Development pipeline still void of spec development Upgrades at NIT will boost TEU capacity, lessen container congestion The Virginia General Assembly voted in approval in the issuance of over $35. million in state bonds, which will be used to improve and modernize Norfolk International Terminal s infrastructure. The upgrades will increase TEU capacity by nearly 7, containers, or 48.8 percent. Upgrades to the port s flagship terminal, Virginia International Gateway, were also pending approval. Hinging on the successful renegotiation of the Virginia Port Authority s existing 2-year lease, the possible 3-year extension and purchase option would make the planned $32. million expansion to the facility financially viable. Class A vacancy ticks upward, but still historically low Post-recession, the supply pipeline has not yielded any speculative development and has pushed Class A vacancy down to 3.1 percent, a seemingly large jump from the.9 percent vacancy rate recorded in the previous quarter. Due to the relatively low stock of modern, high-bay distribution product (9.2 million square feet), this increase was created by only 26,163 square feet coming back online, over half of which originated from Raytheon s 126,-square-foot downsize at 2555 Ellsmere Avenue in the Copeland submarket. Until market rents reach levels equivalent to new construction pricing, upward of $5. per square foot, triple net, developers will remain cautiously optimistic on speculative product, which may accelerate rent growth moving forward. Emser Tile s build-to-suit sustains supply pipeline The first quarter of 216 locked in another huge win for the Hampton Roads industrial market with California-based Emser Tile penning a lease for a 41,66-square-foot build-to-suit in the South Suffolk submarket. Since 211, South Suffolk has captured 8.5 percent of all new construction in the entire Hampton Roads market. This is in part due to pad-ready sites at master-planned industrial parks, the lack of available land inside the beltway, and aggressive state incentives that have made larger metros in Virginia an attractive alternative to comparable markets along the eastern seaboard. Terminal upgrades approved for Norfolk International $35 million In state-sponsored bonds issued Hampton Roads Class A warehouse & distribution vacancy (s.f. in millions) YTD 216 Historical deliveries in Hampton Roads 3 All other submarkets South Suffolk YTD 216 (s.f. in millions) % % 66,63,33 Total inventory (s.f.) 6.6% Direct vacancy -233,25 YTD net absorption (s.f.) 7.2% Total availability $4.31 NNN Direct average asking rent (p.s.f.) 3.8% 12-month net growth YTD construction completions (s.f.) 28

29 Houston Demand begins to weaken in early 216 Tenants cautious mentality seen in leasing activity Leasing activity slowed to a crawl in the quarter and began to reflect tenants more conservative nature during the uncertain market. First-quarter leasing of just over 2.1 million square feet is about one third of the 5.1 million-square-foot average that Houston s industrial market had seen over the prior 29 quarters. Additionally, the first quarter recorded nearly 1. million square feet less of leasing than the previous lowest quarter mark in 29. Leasing size also reflected a more cautious market, as the majority of leasing activity involved leases of 4, square feet and under, while only eight transactions of greater than 1, square feet were signed during the first quarter. Leasing activity 1/3 of 215 average (s.f.) 8,, 6,, 4,, 2,, YTD 216 Tightening of east-side options continues In terms of construction and development, the divide between west and east Houston grew more pronounced during the first quarter of 216. Large block availabilities within under-construction buildings in east Houston dipped to 32 options with greater than 1, square feet available. West Houston s supply, in comparison, was nearly 7 options of greater than 1, square feet that were under construction in the market. As tenant demand continues to be forecast to decrease in 216, Houston s industrial market as a whole will see an uptick in vacancy as a result of this space coming to market with no preleasing. Key submarkets continue to be impacted by space availabilities As a slowing of leasing activity combined with new sublease space additions, Houston s industrial market was negatively impacted during the first quarter. Submarkets including the North and Northwest had total availability rates rise by 1. percent on average as tenant demand in the near term shifted to the petrochemical-dominated east side. In comparison, the Southeast submarket showed a tightening availability as the area benefited from not only petrochemical companies continued expansions but also the increase in retailers and distribution centers. Under-construction leasing remains strong # of blocks Submarket availability CBD Southwest Northeast North Northwest Southeast South East Houston West Houston , - 1, s.f. 1, - 2, s.f. > 2, s.f. Q1 216 available Q1 215 available.% 2.% 4.% 6.% 8.% 1.% 12.% 14.% 16.% 2,17,111 Leasing activity (s.f.) 5.2% Direct vacancy 2,47,722 Quarterly completions (s.f.) 2,872,69 Available sublease space (s.f.) 5.3% 12-month rent growth 13,938,89 Proposed construction (s.f.) 1,194,43 635,86 Total net absorption (s.f.) 29

30 Indianapolis Solid activity to start the year for industrial market Construction activity slows After seeing nearly 12.5 million square feet of new industrial product added to the market during the past two years, it appears, at least in the early stages of 216, that developers may be taking a slight step back this year. Only 833,431 square feet of new construction was added to the market this quarter. Nearly 1.9 million square feet remains under construction, with an additional 1.1 million square feet expected to break ground later this year. While this still equates to a robust 3. million square feet of projected completions this year, it would still be about half of what was delivered in each of the last two years. This will allow time for the space already delivered to be absorbed while keeping the market from becoming overbuilt. Strong leasing activity leads to occupancy growth The industrial market absorbed nearly 1.6 million square feet during the first quarter of 216. This total matches the previous two quarters combined and is the highest single quarter of net absorption in almost a year. Nearly 15 lease transactions closed this quarter in excess of 1, square feet, 62. percent of which were new leases. The largest of these involved New York City based publisher Hachette Book Group expanding its operations in Lebanon Business Park by an additional 418,4 square feet. Hachette will now occupy close to 2. million square feet in the park spread across three buildings. New construction deliveries (s.f.) 8,, 6,419,2 5,935,864 6,, 4,, 3,493,47 2,, 1,717,59 833, YTD 216 Historical total net absorption (s.f.) 6,, 5,222,25 4,, 3,261,796 2,, 1,612, ,737 1,564, YTD 216 Investors remain sold on Indianapolis Thirteen investment transactions closed during the first quarter, totaling more than 6. million square feet of industrial product. While the majority of these transactions involved bulk distribution facilities, four flex transactions also closed this quarter along with two midsized facilities and a manufacturing building. This investor activity across all segments of the market demonstrates the overall strength of the Indianapolis industrial market. Look for investor interest to remain high in Indianapolis throughout the remainder of 216, particularly in regard to bulk distribution. Notable investment sales Project Buyer Size (s.f.) Transpacific Portfolio Biynah Industrial Properties/Olympus Ventures 3,858,713 DCT Portfolio Transwestern Investment Management 631,714 Precedent South Industrial Property Trust 612, 211,342,839 Total inventory (s.f.) 7.8% 1,564,956 YTD net absorption (s.f.).7% Absorption (as a % of stock) $3.46 Direct average asking rent (p.s.f.).3% 12-month asking rent growth 1,852,45 833,431 YTD construction completions (s.f.) *Significant alterations to our tracked inventory and submarkets were made in the first quarter, rendering statistical results that diverge from the recent historical trend. 3

31 Inland Empire Market fundamentals point to a healthy 216 E-commerce, location and land are key drivers for demand E-commerce accounts for 7.5 percent of total retail sales in the United States, but online sales are growing at a rate five times faster. In a centralized area, Inland Empire s close proximity to the ports and available land to build makes it a desirable location for current and prospective tenants. Within a 5-mile radius of Ontario, the total population is approximately 15 million people, bringing companies such as HauteLook (Nordstrom), Amazon and Wayfair closer to its customers. In addition to location, Inland Empire also has land for build-to-suit developments that can accommodate employee parking, higher clear heights and specific buildouts for e-commerce fulfillment centers. Historical vacancy rate YTD % 5.3% 5.2% 5.1% 6.2% 7.7% 1.1%.% 2.% 4.% 6.% 8.% 1.% 12.% Leasing activity up and balancing between the East and West Leasing activity remained strong in the Inland Empire, with 7.6 million square feet in new transactions. Small-box, or light industrial, accounted for nearly 78.4 percent of new activity, with 4 deals and 11 in the big-box sector. On a submarket level, IE West continues to lead the market, with approximately 4.6 million square feet leased; however, IE East s growing inventory will level the playing field in the future. Over the past five years, IE East s construction completions accounted for 4. percent of the total inventory base for buildings over 1, square feet. Renewals were also strong this quarter, which will likely pick up, as several tenants leases are set to expire. New construction will continue to shape the market Development will continue to be a major theme for the Inland Empire in 216, with groundbreakings escalating in the coming quarters. The size of buildings under construction will get smaller to accommodate for demand and lack of product in the sector. Close to 1.5 million square feet of spec space is slated to deliver in the second quarter, which will temporarily drive vacancies up. Given demand, however, vacancy should stabilize in the second half of the year. Taking rents will continue to increase and asking rents will rise to and surpass pre-recession highs. Los Angeles and Long Beach Port TEU volumes 1,, Loaded Imports Loaded Exports 8,, 6,, 4,, 2,, YTD Source: Thomson Reuters, JLL Research 216 Notable leases Tenant name Deal type Size (s.f.) Amazon Direct 1,12,639 Port Logistics (leased two buildings) Direct 885, Bradshaw International Direct 544,717 3,623,126 Quarterly net absorption (s.f.) 4.1% 1,18,396 BTS completions (s.f.) 15,954,783 Under construction (s.f.) 5,73,541 Spec construction completions (s.f.) 6,253,937 YTD construction completions (s.f.) 2.1% IE West vacancy 6.8% IE East vacancy 31

32 Jacksonville Local market conditions support continued growth Industrial-related employment gains outpace other sector employment Jacksonville s overall employment climate is improving with a 3.3 percent growth year-over-year. Additionally, employment gains in industrial-supporting jobs are outgrowing employment in professional and business services industries. This quarter, construction, manufacturing, and trade and transportation employment had 5.3 percent, 3.1 percent and 3.2 percent year-over-year gains, respectively, while the information industry lost 1.1 percent of jobs (during the same time period). Concurrently, finance (.8 percent) and professional and business (1.5 percent) employment endured a marginally flat gain year-over-year. The positive employment climate for industrial-related jobs is a supporting indicator of growing industrial demand in Jacksonville. Durable goods manufacturing industry projected to expand Manufacturing space makes up 22. percent of total industrial inventory in Jacksonville. The Greater Jacksonville region has maintained its status as one of the largest manufacturing markets in the state. Given the historically active manufacturing industry, growth in this product type is a clear sign of economic recovery. According to economic projections, durable goods manufacturing is expected to have an 8. percent increase in employment over the next eight years, a figure nearly double the statewide projection of 4.7 percent in that same time period. The potential impact is supported by the increased housing construction and demand for automobile parts, as motor vehicles remain both the largest import and export commodity product at JAXPORT, with $12. billion in value traded per year. The Westside submarket outpaces all submarket leasing activity Overall market leasing began at a strong pace this year with over 788, square feet leased, with about 38.1 percent of the total square footage leased in the Westside submarket. Tenants such as Redi Carpet, Liberty Pumps and TCI, which leased over 3, square feet at Emerik Properties 674 Broadway Avenue, contributed to the 295, square feet of activity in the Westside submarket this quarter. Along with the strong leasing climate, the Westside submarket vacancy rate is about 26 basis points below the total market rate of 7.6 percent. Given these strong fundamentals, the Westside submarket is projected to continue outpacing the total market. 181,366 Available for sublease (s.f.) 7.6% Direct vacancy 51,433 Quarterly completions (s.f.) 788,17 Quarterly leasing activity (s.f.) Job growth/loss by select industry sector (12-month change) Leisure and Hospitality Trade, Transportation, and Utilities Construction Professional and Business Services Financial Activities Manufacturing Information -1 Source: Florida DEO, JLL Research JAXPORT 215 value of top commodity exports in millions ($) $139 $129 $118 Motor vehicles (transporting $169 people) $253 Motor vehicle parts $4,35 Source: World City Trade, JLL Research Insecticides, fungicides Polyamides Chemical woodpulp Leasing activity proves Westside submarket share (number of deals) 2 1 Total market Westside YTD 216 $54.48 Average sales price (p.s.f.) 7 Quarterly transactions 9 1,3 1,8 1,5 4,3 6,2-2, 2, 4, 6, 8, 237,3 % Total preleased 32

33 Kansas City Market cools, but big 216 anticipated Despite negative net absorption, strong market velocity continues After posting positive net absorption in excess of 4.3 million square feet during 215, the Kansas City industrial market experienced negative absorption, totaling approximately 5, square feet during the first quarter of 216. The negative absorption was primarily attributed to the delivery of a 491,448-squarefoot building at Riverside Horizons that is 11. percent leased and the 45,66- square-foot building at CenterPoint Intermodal that is fully available. However, the pipeline of active requirements in excess of 1, square feet totals approximately 4. million square feet. It is anticipated that a number of these requirements will be completed during the 216 calendar year in speculative product. Over 3. million square feet of speculative construction will deliver during the remainder of 216. Vacancy rate ticks up The Kansas City industrial market vacancy rate increased slightly to 5.7 percent. Due to the continued delivery of speculative industrial buildings, this slight uptick is projected to continue across 216. However, vacancy s fluctuation during the course of 216 should be nominal due to the current balance between construction completions and active requirements in the marketplace. Another speculative building success story The largest spec development in the history of Kansas City, totaling 822,177 square feet, has secured Amazon.com to lease the entire building. Amazon plans to employ between 1,5 and 2, employees at the new, state-of-the-art fulfillment center located in Edgerton, Kansas, in the southwest quadrant of the Kansas City metro area. With this announcement, NorthPoint plans construction of two additional speculative buildings, totaling over 1.6 million square feet, at Logistics Park Kansas City. The speculative construction pipeline shows no signs of slowing down and could deliver in excess of 1. million square feet over the next 18 to 24 months. Completions vs. net absorption (s.f.) 8.% 7.% 6.% 5.% 4.% 6,, 4,, 2,, -2,, 7.6% 7.6% Notable leases Completions 6.3% 6.1% 6.1% Net absorption YTD % 5.7% YTD 216 Tenant name Deal type Size (s.f.) Amazon.com New 822,177 Sioux Chief New 24, SP Richards New 198,783 Sparhawk Laboratories Expansion 1, 1,56,911 YTD construction completions (s.f.) 5.7% $4.22 Average total asking rent (p.s.f.) 5,13, % YTD completions preleased +3 bps Vacancy is up from one year ago +3.7% 12-month asking rent growth 14.2% Total preleased 33

34 Las Vegas Spec big-box preleasing; lack of mid-bay space Spec project preleasing continues With close to 2.8 million square feet in under-construction activity in the Las Vegas valley, developers are finding success with preleasing. Prologis, for instance, leased its 232,856-square-foot Black Mountain Distribution Center #3 project in the SE/Henderson submarket with a single tenant, Core-Mark International, Inc. The project was nearing completion when the deal was signed. Panattoni also saw some success on its two-building, 416,-square-foot South Jones Corporate Park development with a 78,-square-foot lease signed by Freeman. Prologis saw tenant activity on its North 15 development by preleasing one of the two buildings. The project totals 41,64 square feet, and 215,12 square feet was committed to. The only exception to the spec development preleasing success has been the Pauls Corporation s Lone Mountain Corporate Center Phase 1 (45,731 square feet in all) that delivered this quarter as vacant. Completions vs. net absorption s.f. 4,, 3,, 2,, 1,, -1,, YTD 216 Completions Net absorption Mid-bay product availability lacking While most of the recent buzz and spec development has been focused on the bigbox market, and with a strong overall leasing market in all size categories and product types, Las Vegas has seen a shortage in the mid-bay product type. Only one developer has decided to build a project that offers smaller mid-bay industrial spaces: Harsch Investment Properties broke ground on its Harsch Henderson Commerce Center IV in the SE/Henderson submarket with a 24,-square-foot building at 451 W Warm Springs Road that will offer spaces from 17, square feet. The project will offer frontage on Warm Springs Road with rear loading. Delivery is slated for the fourth quarter of this year. Hot Las Vegas market continues to get hotter All of the new developments in 215 and the first quarter of 216 added 2,16,22 square feet to Las Vegas' industrial inventory. This, coupled with all of the leasing activity in the same period, which accounted for 3,75,2 square feet in total in total absorption, means the vacancy rate continues to drop, now at 6.5 percent, while asking rents continue to climb, up to $6.6 per square foot per year. Given current construction and leasing activity, local brokers and developers are feeling bullish and do not expect the market to slow down. 13.7% 14.2% 13.1% 12.9% 15.% 1.% 1.8% 5.% 8.6% 6.4% 6.5%.% YTD 216 Notable leases Tenant name Deal type Size (s.f.) Amazon.com New 84,22 Murray Feiss Import LLC New 27,7 Core-Mark International New 232,856 45,731 YTD construction completions (s.f.) % YTD completions preleased 6.5% -15 bps Vacancy is down from one year ago $6.6 Average total asking rent (p.s.f.) +8.% 12-month asking rent growth 2,798, % Total preleased 34

35 Long Island Leasing in Nassau County pulls vacancy to new low Dearth of large blocks of space leads to slowdown in user sales activity Industrial properties in Long Island maintained a stable average sale price as potential buyers competed for quality buildings. After escalating to $74.96 per square foot in 214, the average sale price in Nassau and Suffolk counties stood at $77. per square foot in the first quarter of 216. User sales activity among larger tenants declined due to limited options to house operations, while investment sales activity increased. Among the largest sale transactions this quarter was Certified Laboratories purchase of 65 Marcus Road, a 6,- square-foot distribution center in Melville, for $6.8 million, or $113. per square foot. Persistent demand drives Nassau vacancy rate lower The Nassau County industrial market saw an uptick in leasing velocity in the first quarter, which pulled vacancy rates down to 3.7 percent 3 basis points lower than in year-end 215 and 15 basis points lower than just one year ago. The Western Nassau submarket registered the lowest vacancy rate in Nassau County at 2.7 percent, with the Central/Eastern Nassau submarket following with 3.8 percent. The leading lease transaction of the quarter was retailer Amazon s signing of 156,-square-foot lease at 21 Grumman Road in Bethpage with owner Steel Equities. This property was previously owned by Goya Foods. Nassau and Suffolk average sale price (p.s.f.) $8 $7 $78. $74.96 $71.8 $77. $6 $61.72 $61.68 $5 $ Q1 216 Nassau overall industrial vacancy trends 6.% 4.% 5.2% 4.7% 4.4% 4.% 3.7% 2.%.% Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 Chemical manufacturing places 2 nd in industry growth rate The expanding chemical manufacturing industry in Long Island is the largest out of the 1 regions in the state and has the second fastest employment growth rate (after the food and beverage industry) at 2.2 percent over the time period. This activity is heavily concentrated in the pharmaceutical and nutraceutical manufacturing subsector, which has rapidly become one of the primary drivers of leasing activity in Hauppauge over the course of recent years. Despite the burgeoning market fueling demand, pharmaceutical companies face the issue of attracting and retaining jobs among the younger workforce. As companies expand east into Suffolk County, the need for affordable housing is becoming crucial to sustained growth. 114,763,837 Total industrial inventory (s.f.) 2.6% -43,77 YTD net absorption (s.f.) 5.6% Total availability Fastest growing industries in Long Island from 29 to 214 Food & beverage Chemical mfg. Electrical equipment mfg. Social assistance Personal and laundry services, NYS Department of Labor $1.8 Overall average asking rent (p.s.f.) -.8% 12-month asking rent growth 2.2% 2.% 12.% 22.% 449, % Total preleased 35

36 Los Angeles A lack of options is putting pressure on users Industrial activity still going strong The U.S. economy showed little indication of slowing as stability continues to draw foreign investment into gateway markets like Los Angeles with a keen eye on industrial real estate. As a result, the Los Angeles industrial market remained very competitive through the first quarter of 216, driven by strong demand and limited available inventory. Vacancy reached its lowest level ever, while average rents have increased by 11. percent year-over-year. Rents are expected to rise by another 6. percent at the end of the year as the market gets tighter and demand continues to grow. These market conditions have pushed tenants to consider early renewals to avoid higher rents. Lack of space leading to tenant renewals Tenants who come to the market seeking space will quickly understand the tight conditions and competitive environment due to the lack of available space options. Consequently, it is becoming more common to consider earlier renewals just to secure their future needs. Five of the top 1 deals in the first quarter were renewals with at least 6-month commitments. As competition for available quality space tightens with each quarter, expectations for tenant concessions are diminishing; tenants are seeing less in free rent and tenant improvement allowances as leverage favors landlords. Annual historical vacancy rates YTD % 1.% 2.% 3.% 4.% 5.% 6.%. Buildings 1, square feet and larger. Includes under-construction buildings. Current availability rate, by submarket 3.% 2.4% 3.2% LA North LA Central 2.6% 1.1% 4.4% 2.2% 3.3% 2.6% 2.8% 3.9% Mid-Counties South Bay 4.5% 5.% 5.3% 5.1% 5.5% San Gabriel Valley. Buildings 1, square feet and larger. Includes under-construction buildings. New deliveries are unable to satisfy the growing demand The industrial market s momentum will keep on chugging along throughout 216 in the Los Angeles Basin. Tight conditions, coupled with strong demand, point to the need for more development in 216 in places where the opportunity to build is feasible. Additionally, the growing presence of e-commerce users in the market adds to the already strong demand for quality available facilities. With only 4. million square feet of industrial projects currently under way along with sustained demand all indications point to requirements exceeding deliveries and the overall environment becoming increasingly competitive. Notable leases Tenant name Deal type Size (s.f.) G.P.R. Logistics, LLC Renewal 322,817 Forward AIR Renewal 253,354 Kenko Group New 185,6 8,987,53 Inventory (s.f.) 4,8,687 1,611,383 Quarterly net absorption (s.f.) 8.% vs. 2.% Spec construction vs. design-builds 1.1% rate 717,682 YTD construction completions (s.f.) 3.2% Total availability rate $.7 Avg. total asking rent (p.s.f., mo.) 36

37 Memphis Absorption drives vacancy down Positive growth continues in the market in early 216 With over 1.6 million square feet of positive net absorption in the first quarter, 216 looks to have another solid year coming on the heels of 215 s banner year. 215 marked the highest annual absorption gain ever for the Memphis market. In addition to healthy tenant demand, there is significant capital chasing quality assets in the market. New-to-market domestic and foreign capital is growing through large portfolio acquisitions and recapitalizations. Demand is exceeding available supply; landlords have the leverage With absorption keeping up with new construction completions, Memphis is in short supply of Class A product and Class B is also in limited supply. Substantial absorption over the past two years in the small- and mid-box segments has created a very healthy market from top to bottom. Tenant demand remains strong in mid- to small sizes, and the market began to favor landlords 24 months ago both are anticipated to hold true in the years to come. With net absorption outpacing new completions for the past three years, increased speculative construction is warranted. Developers, unsurprisingly, remain bullish on the market, and while we saw a temporary lull in new product deliveries in 215 the pipeline of new spec deliveries increased in the first quarter of 216 and should have a healthy pipeline of deliveries in the second half of 216. Market shifts to build-to-suit construction from speculative in Q1 While three spec buildings were delivered in the first quarter of 216, totaling almost 1.4 million square feet, there are no remaining buildings currently under construction on a spec basis. One large 1.5 million-square-foot build-to-suit kicked off for TBC Corporation in Fayette County. Due to the lowest vacancy in the market s history and strong tenant demand, new spec construction is warranted, and it will pick back up next quarter and throughout the remainder of 216. Completions vs. net absorption (s.f.) 15,, Completions Net absorption 1,, 5,, YTD % 14.2% 13.9% 14.1% 13.5% 1.% 11.8% 5.% 8.% 8.%.% YTD 216 Notable leases Tenant name Deal type Size (s.f.) TBC Corp BTS 1,5,24 Nike New 78,532 PFSweb New 275,4 1,781,513 YTD completions (s.f.) 22.9% YTD completions leased on delivery 8.% -2 bps Vacancy is down from one year ago $2.7 Average total asking rent (p.s.f.) +5.9% 12-month rent asking rent growth 1,5,24 % is speculative product 37

38 Miami Foreign capital New developer influx Population growth Momentum from 215 continues to start the year Increased PortMiami activity helps occupancy gains Last year, PortMiami saw a 1-year high in TEU volumes, breaking the 1. million TEU mark for the first time, which represented a 15. percent increase. This surge in TEU volume correlated with a 1 basis point occupancy increase year-over-year. So far this year, PortMiami has averaged 89,1 TEUs, 5. percent higher than the trailing five-month average. As such, we expect PortMiami TEU volumes to finish the year slightly higher than last year. If this correlation holds true, the market should have a similar year; however, with many speculative projects being delivered that are not significantly preleased, occupancy rate gains may be muted despite strong market dynamics. Estimated TEU volume likely in line with record 215 figure TEUs in Thousands 1,2 TEUs Occupancy 98.% % 9.% 86.% Occupancy Majority of requirements comprise expansions or relocations Of the touring tenants currently being tracked, the vast majority of tenants are currently located in the market and looking to expand their footprint, while newto-market tenants remain scarce. Of the 2.7 million square feet of requirements, 68.1 percent comprise expansion activity. The number of new-to-market tenants has decreased compared to last year (11.2 percent of current requirements are new-to-market, compared with 23.9 percent at the end of 215). That 83.5 percent of expansion activity is through organic growth within the market bodes well for the local economy. Further, with the local economy expected to grow throughout the year, expansion activity should continue among existing tenants. Future demand projected to come from organic growth reqs. (s.f. in thousands) 2, 1,5 1, 1, Stable Expansion New-to-market After a record high in 215, development pipeline continues growing Speculative warehouse and distribution development continued this quarter, with over 95, square feet delivered. Going back to the start of 215, just over 3. million square feet has come online; further, upon delivery that product was only 41. percent preleased, demonstrating developers' confidence in the market. There is an additional 1.8 million square feet currently under construction the vast majority of which is under way in Medley with very little preleasing. Still, despite the robust development pipeline, construction and planned projects are more or less in line with demand, as tenants occupied nearly 9, square feet of inventory this quarter and 3.3 million square feet over the previous four quarters. 5.% 7.9% Total availability 18.5 M Total inventory (s.f.) 1.1 M YTD leasing activity (s.f.) Development on pace to surpass last year s eight-year high s.f. in thousands 3, 2, 1, 887,9 YTD total net absorption (s.f.) 2.7 M Active tenant requirements (s.f.) 1.8 M 951, YTD construction completions 38

39 Milwaukee Business expansions propel Milwaukee industrial Economic overview While a majority of the uptick in Milwaukee Metro unemployment over the last few months can be attributed to service providers, mining and manufacturing industries have also displayed slight stagnation. Although the manufacturing sector experienced a negative 12-month growth rate of just -.2 percent, a look into other metrics completes the story. For manufacturing production workers, average weekly hours have increased by 3.1 percent over 215, yet average hourly wages have decreased by 2.7 percent. While it would be preliminary to suggest a substitution between additional jobs and overtime from current employees, it will be interesting to see what implications employment movements in this sector have on industrial development in the region. 12-month employment growth 4.% 3.% 2.% 1.%.% -1.% Source: BLS, MMAC Mining Construction Manufacturing Trade, Trans, Utilities Avg. weekly hours +3.1% Avg. hourly earnings -2.7% Leasing activity Pieper Electric committed to a new lease with Luterbach Properties for 82,387 square feet at 5475 S Westridge Court in New Berlin. Avanti Wind Systems will be relocating from 515 Towne into 67,544 square feet at W Forest Home Avenue in the North Cape Industrial Park. In Jackson, Rytec Inc. leased 56, square feet at N169 W211 Meadow Lane from Quality Stamping & Tube. Paragon Development Systems has leased roughly 5, square feet at 3965 Hwy 16 as it relocates and expands within Oconomowoc following the sale of its warehouse facility at 1823 Executive Drive. Notable leases Address Size (s.f.) Transaction type 5475 S Westridge Court, New Berlin 82,387 New lease W Forest Home Avenue, Franklin 67,544 New lease 2965 Hwy 16, Oconomowoc 5, New lease Investment sales overview Rudebusch sold a newly developed 2,-square-foot FedEx Ground build-to-suit in Menomonee Falls to single-tenant investor Cole Real Estate for just shy of $1 persquare-foot. The shell of the building was completed in fall 215 and the building sale was recorded on February 24 as FedEx took occupancy following the installation of package sortation infrastructure. Chicago-based aggregator Brennan Investment Group acquired the 119,4, square-foot Bradley Commerce Center from Complete Warehouse & Distribution for $5.25 million. The multitenant building has 45, square feet of available space. Another Chicago-based investor, AIC Ventures, acquired a fully leased 78,-square-foot single-tenant building at 47 N 129th Street in Butler from National Equity Trust for $4.6 million. The building is fully occupied by MacArthur Corp, which utilizes the abundant outdoor yard space for storage and distribution of building products. Source: Xceligent Notable investment sales Address Size (s.f.) Price per s.f. County Line Road, Menomonee Falls 2, $ W Parkland Court, Milwaukee 119,4 $ N. 129th Street, Butler 78, $58.97 Source: Real Capital Analytics 5.% 8.% Total availability 235,445 YTD construction completions (s.f.) 149,156 YTD net absorption (s.f.) $8.8 Asking rent (p.s.f.) 3.9% Quarterly rent growth 447, M Total inventory (s.f.) 39

40 Minneapolis / St. Paul Bulk warehouse space is getting leased in bulk Leasing activity overview Unusually large absorption of over 1. million square feet of bulk space was recorded in the first quarter of 216 due to a normalization of tenant demand and newly delivered space from the end of 215 being well-received. Although office showroom and warehouse and distribution space experienced some negative absorption, strong absorption through the rest of 216 is to be expected in flex and distribution facility types as well. Bulk warehouse leasing highlights include transportation-service leader Ruan at Kinghorn Logistics Hub; cleaning equipment manufacturer Nilfisk at North Cross Business Park Building 2; automobile tire supplier Tire Rack at 375 Long Lake Road; and distributor Bunzl at the Ultra Pac Building. All of the above occurred in either the Northwest or Northeast submarkets, speaking to their advantageous proximity to Minneapolis and St. Paul firms and easy interstate access. While the quarter saw some strong leasing activity, large newly built warehouse and distribution facilities like CSM Corporation s North Star Distribution in Rogers and Liberty s Dayton Distribution Center I remain fully vacant. Regardless, brokers are confident about leasing prospects in the I-94/169 corridor as the second quarter and warmer weather approach. Sales overview Early 216 saw a healthy amount of portfolio sales with an 11-building transaction still pending. Minneapolis-based Talon Real Estate is in the process of purchasing nearly all flex buildings from Connecticut-based Greenfield Acquisition Partners for a sum of $81. million (averaging about $96. per square foot). Among completed non-portfolio sales, the total year-to-date value is nearly $164. million. The bulk of the inventory that sold is Class B warehouse and distribution space. The City of Minneapolis closed on its acquisition of the Roof Depot Distribution Center in February, one of the largest industrial sale footprints year-to-date. The property, a 7.6-acre site at th Street East, sold for $6.8 million. The city plans to relocate its Department of Public Works to the location. Property clock, by submarket Landlord leverage Rising Southwest market Southeast Northeast East by submarket.% NW SW SE E NE 12-month change in industrial employment, Jan Dec % 1.% 5.% -5. Source: BLS 11.2% 1.5% 9.4% 8.3% Peaking market Mining, Logging & Construction Manufacturing Falling market 6.9% 6.3% Bottoming market Northwest Q4 215 Q % 1.9% 7.5% 6.9% Tenant leverage Trade, Transportation & Utilities Other Services *job change in thousands 8.3% rate 1,54,415 Total vacant (s.f.) 2,811,277 YTD total net absorption (s.f.) 2.1% Net absorption (as a % of stock) $6.79 Average rental rate (p.s.f.) $57.43 Average sales price (p.s.f.) 1,985,326 3,244,15 YTD construction completions (s.f.) 4

41 Nashville Strong market conditions continue More speculative development announced and under way Panattoni continues to lead the pack for speculative development with close to 2. million square feet under construction between CentrePointe Distribution Park and Skyline Distribution Park. Huntington Industrial is under way with 172, square feet to deliver next quarter at Southpark Business Center. Clarion announced that it will soon start on 144, square feet at Three Oaks. Holladay Properties announced that it will begin the first phase of a 9-acre development by Nashville International Airport, starting with approximately 2, square feet. It could potentially deliver approximately 75, square feet in all. Completions vs. net absorption s.f. 6,, 4,, 2,, -2,, -4,, Completions Net absorption YTD 216 The vacancy rate and asking rate correlation continues Even with the increase in speculative construction deliveries, vacancy rates continue to trend down. Nearly every industrial submarket is showing vacancy rates below 6. percent, with some dropping below 4. percent and even 2. percent, in the case of the East Industrial submarket. Asking rental rates continue to rise as the vacancy rate drops. With the exception of the bulk product, nearly all classes of industrial inventory are above asking rates of $4. NNN, with rates approaching $6. to $7. NNN in the IBD, East and Southwest submarkets. Prologis fills up fast The first Class A industrial speculative development to break ground in 215 was a two-building development in the Southeast submarket by Prologis, which included 148,5 square feet and 151,2 square feet, respectively, named CentrePointe 3 & 4. As of this report s writing, Prologis successfully preleased the entire development prior to delivery to three tenants: Streetside Classics, Interline Brands and Veritiv Corporation. 15.% 1.% 11.% 1.4% 5.% 9.2% 8.4% 7.% 6.2% 5.2%.% YTD 216 Notable leases Tenant name Deal type Size (s.f.) Hill s Pet Nutrition Renewal 24,912 Veritiv Corporation New 151,2 Interline Brands, Inc. New 98,7 23,349 YTD construction completions (s.f.) 5.2% $4.1 Average total asking rent (p.s.f.) 2,413, % YTD completions leased -16 bps Vacancy is down from one year ago +13.3% 12-month asking rent growth 66.1% Total preleased 41

42 New Jersey Stout industrial demand drives vacancy lower Class A leasing activity in high gear With vacancy falling to 5.9 percent in Northern and Central New Jersey, big-box leasing activity remained in high gear at the end of the first quarter. Leasing activity on Class A quality assets saw continued strength as tenants sought out newer and higher clear-height facilities. Further expanding in the Exit 12 submarket, Amazon signed a lease with Prologis for 89,762 square feet at 38 Middlesex Avenue in Carteret, bringing its total footprint in the submarket to 2.9 million square feet. As result of this fervent Class A leasing activity, developers continue to break ground on speculative projects around the state to meet the demand. More than 2.9 million square feet was under construction at the end of the first quarter, with more than 1. million square feet expected to break ground in the second quarter. Industrial construction activity continues to escalate Fueled by Class A leasing activity and intensifying industrial demand, construction across all size segments has amplified in 216 as developer optimism continues to increase. Most notably, Bridge Development Partners broke ground on another of its speculative development projects. The 488,8- square-foot facility located in South Brunswick broke ground at the beginning of the year and is expected to be delivered before the end of 216. River Terminal Development also began construction of a 189,-square-foot speculative project within the Port submarket, where the vacancy rates had plummeted 26 basis points over the past 24 months. Morris County industrial benefits from improving demand As a result of fervent demand for industrial product across Northern New Jersey, vacancies in many secondary industrial markets had fallen near their all-time lows. During 215, the Morris County industrial submarket, which is made up of 37.5 million square feet of industrial space, had bucked the trend with vacancy remaining near 8.5 percent. However, a flurry of leasing activity late last year resulted in a wave of net absorption, which drove the submarket s vacancy rate below 7. percent for the first time since the Great Recession. Contributing to Morris County s performance this year was 1 Cory Road in Morristown and 35 Melanie Lane in Whippany, where more than 15, square feet was absorbed in the first quarter of 216, representing more than 25. percent of the submarket s absorption for the year. Class A leasing activity Tenant name Deal type Size (s.f.) Amazon New 89,762 Fabuwood New 76,83 FedEx Smartpost New 695, Blue Apron New 494,395 Construction activity # of blocks Completed projects Under construction Expected to break ground in <1, s.f. 1,-5, s.f. >5, s.f. Morris County vacancy rate 11.% 9.% 7.% 8.9% 9.% 8.1% 8.5% 5.% 6.7% 3.% YTD ,211,91 Total market size (s.f.) 5.9% 2,911,886 Under construction (s.f.) 1,853,563 Speculative construction (s.f.) 1,351,145 YTD net absorption (s.f.) 1,342,629 $6.76 NNJ average asking rent (p.s.f.) $ YTD construction completions (s.f.) CNJ average asking rent (p.s.f.)

43 North Bay Tenants and developers seeking out the North Bay Overflow of Bay Area tenant demand continues to strengthen North Bay s industrial market The spillover of tenant demand from peripheral Bay Area markets continues to fuel activity in the North Bay. Demand for industrial space is high, with about 3.9 million square feet of active requirements targeting the market. Additionally, institutional buyers are increasingly taking notice of the area, a major shift for a market that has historically consisted of almost entirely local/regional developers and tenants. Vacancy has been declining since 29 and currently sits at 3.7 percent overall, comparable to the 3.8 percent at year-end 215. Tenant demand drives development activity The increased tenant demand and tightened availability has driven major development opportunities in the region. The Napa Valley Logistics Center in American Canyon delivered this quarter, consisting of 646, square feet of warehouse and distribution space. Although the space is not yet leased, the facility has attracted substantial tenant interest and will likely be fully leased by nextquarter. Currently, there is an estimated 6. million square feetof proposed projects in the pipeline, a testament to developers optimism about the market, all of which is concentrated in Napa and Solano Counties. North Bay historical vacancy rates (%) 15.% 1.% 5.%.% Vacancy rate Tenant demand for space in the North Bay (s.f.) 3.7% YTD 216 3,937,5 s.f. Active requirements Range in rental rates can be attributed to unique submarket industries Industrial activity in the North Bay can be characterized by a range of core industries, unique to each submarket. While the wine industry dominates industrial activity in Napa County, spinoff industries such as food and beverage and cork suppliers locate nearby. The market s monthly average asking rent was $.45 per square foot overall, although insulated and conditioned space in the Napa and Sonoma submarkets are notably higher than those in Solano $.69 and $.87 per square foot compared with $.41 per square foot, respectively. Meanwhile, Marin County is a tertiary industrial submarket consisting of smaller spaces that are often blended with retail services. Recently, e-commerce has started to grow roots in Solano County, further diversifying the market s drivers. $.45 North Bay avg. asking warehouse rent (p.s.f.) 3.7% North Bay overall vacancy 61,458,641 North Bay inventory (s.f.) 6.% North Bay overall availability North Bay market inventory (s.f.) 7,, 6,, 5,, 4,, YTD , YTD construction completions (s.f.) 128,758 Industrial product under construction (s.f.) 43

44 Orange County Market fundamentals grow to start 216 Rental rates inch closer to the market peak From 211 through 215, Orange County recorded five consecutive years of positive net absorption. This trend continued in the first quarter of 216, with the market experiencing 495,534 square feet in occupancy gains. Due to the positive demand for space and lack of quality, available space, market-wide average asking rental rates are heading toward the market peak level reached in mid- 28. In several cases, rental rates for Class A properties have already met or exceeded peak pricing, with landlords and tenants understanding there is a lack of space alternatives. Rental rate appreciation, year-over-year 2.% 1.%.% 1.8% 7.4% 6.9% 8.1% 1.% -1.% 1.4% -1.9% 1.9% -2.% -13.7% -14.3% YTD 216 Vacancy reaches record low Continued competition among industrial users pushed vacancy down 2 basis points in the first quarter to 1.5 percent, with Orange County remaining one of the tightest markets in the nation. Vacancy declined 1 basis points over the last 12 months and has dropped 41 basis points since the end of 21. Despite the delivery of new buildings to the market, supply is unable to keep up with tenant demand. As business operations change, a greater number of tenants are bifurcating operations to separate logistical space from manufacturing assembly and corporate office functions. The bigger picture Orange County is a constrained infill industrial market with demand considerably outpacing supply. Strong economic growth is putting pressure on companies to keep up with client demand. In order to accomplish this feat, businesses are continuing to innovate manufacturing, fulfillment and logistical processes. Firms from the consumer goods industry as well as food & beverage have been particularly active in the market. In 216, locating available space will remain a challenge as many tenants elect to sign early renewals. Vacancy rates, year-over-year YTD Notable leases 1.5% 1.7% 3.% 3.4% 4.3% 4.5% 5.6% 2.9% 3.2% 5.6%.% 1.% 2.% 3.% 4.% 5.% 6.% Tenant name Deal type Size (s.f.) C&D Zodiac New 28,46 L&L Foods Holdings New 27,74 Brentwood Home, LLC New 156,96 278,365,86 Inventory with flex (s.f.) 1.5% 3,145, Active tenant requirements (s.f.) 1,241,668 Planned construction (s.f.) 539,97 YTD construction completion (s.f.) 1% Spec construction (% of comp.) % Total preleased 44

45 Orlando Vacancy reaches an eight-year low given strong market Location supports Orlando as a local logistics and distribution hub Orlando s centralized location within the state provides a competitive advantage, in terms of logistics and distribution, as it supports efficiency in quicker transportation to the growing consumer base. Given these strategic advantages for Orlando, logistics and distribution firms are increasing activity in the market with over 19.2 percent of leases signed this quarter a significant increase from last year s figure of 6.8 percent of total leasing activity. The outlook for continued leasing of logistics and distribution tenants remains strong, especially with the development of the Intermodal Logistics Center in Winter Haven, which features 7.9 million square feet of planned distribution space. User industry types show logistics firms as leading occupier 3.2% Retailers/wholesalers 17.8% 31.1% Logistics and distribution 21.% 26.8% Manufacturing Business services Agri/mining/utilities Hotel-related users will intensify warehouse demand This year, employment in the leisure and hospitality industry increased 5.5 percent, with a 9.1 percent increase in the food service industry during that same time period. Employment growth in this industry stems from the strong occupancy rate, which increased 3.3 percent year-over-year to 75.7 percent. With 26 hotels in the pipeline, Orlando s hotel market is expected to increase 3. percent within two years. This will directly impact the local warehouse market as tenants such as hotel linen suppliers, construction firms, and maintenance supporting companies in the hotel supply chain will provide an increase in demand for warehouse spaces especially in South Orlando. Tightening vacancy caused by long-term demand and lack of inventory This quarter, vacancy reached an eight-year low at 7.5 percent, a 5 basis point drop quarter-over-quarter and a 7 basis point drop year-over-year. Despite a slower quarter, in terms of leasing activity, over the past year, the amount of space leased increased by 4. percent year-over-year, with that figure nearly doubling in more active submarkets like Southeast Orange. As new-to-market firms like e-commerce tenants, who are attracted to the growing customer base, locate to Orlando, the supply of space becomes more constrained. Additionally, these firms require updated warehouse features such as ESFR sprinklers and higher clear heights, intensifying demand within new product warehouse spaces. The vacancy rate is projected to continue to drop as demand grows given the lack of inventory in the market. Hotel-supporting industries recent lease transactions Tenant Location Square feet Mattress Firm Southeast Orange 154,7 Sherwood Southeast Southeast Orange 154,7 Hotelier Linen Services Southeast Orange 51,4 Recent leasing activity supports dropping vacancy rate Vacancy rate (%) 15.% 1.% 5.%.% 214 Q1 Leasing activity (s.f.) 214 Q2 214 Q3 214 Q4 215 Q1 215 Q2 Vacant percent total 2,5, 2,, 1,5, 1,, 5, 215 Q3 215 Q4 216 Q1.7% YTD net absorption (as % of stock) 7.5% 2,885, Active tenant requirements (s.f.) 7,15,8 Planned construction (s.f.) 794, Quarterly leasing activity (s.f.) 52 Total quarterly deals 1,358, % Total preleased 45

46 Palm Beach Palm Beach County continues strengthening Palm Beach County starts 216 on a positive note In 215, absorption increased 59.6 percent compared to the previous year, as tenants took occupancy of over 1.1 million square feet of space, the highest level in over 1 years. The start to 216 continued the positive absorption trend, as tenants took occupancy of nearly 15, square feet, much of which occurred in the West Palm Beach submarket. The market has experienced 17 consecutive quarters of positive absorption. Still, vacancy ticked upward slightly due to the delivery of speculative projects, which is a good sign of developers having confidence in the market after near-stagnant development in the previous five years. Absorption streak continues in the first quarter of 216 1,5. 1,. 5.. (5.) (1,.) (1,5.) YTD 216 (jobs in thousands) Rent growth continues in the market The market has experienced strong rent growth, and rents have reached record high levels. Rents have consistently risen since the middle of 215 and are up 2.5 percent year-over-year. This is despite a 2 basis point increase in vacancy from year-end 215. Regardless, vacancy has trended downward over the longer term and is down 21 basis points since the start of 214. The strongest rent growth occurred in the North Palm Beach submarket, where rents have grown nearly 7. percent year-over-year. Despite slight uptick in vacancy, rents continue to rise $8.5 $8. $7.5 $7. $ Q2 213 Q3 213 Q4 Direct average rate 214 Q1 214 Q2 214 Q3 214 Q4 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 8.% 6.% 4.% 2.%.% Market sees robust sales volume to start the year Following an eight-year high for sales in 215, which saw nearly $15 million in property trades, this year started with over $83 million in transaction activity, putting 216 on track to surpass last year s high. A good deal of this volume was included in portfolio sales. Nearly 2. percent of all transaction volume occurred when Prologis sold a 19-property portfolio to Adler Kawa Real Estate Advisors. The increased sales activity, similar to the return of industrial development in Palm Beach County, is a positive sign for the market s improvement going forward in 216. Sales volume continues increasing amid improving market $3 $2 $1 $ YTD 216 Millions 5.% 8.% Total availability 235,445 YTD construction completions (s.f.) 149,156 YTD net absorption (s.f.) $8.8 Average asking rent (p.s.f.) 3.9% Quarterly rent growth 447, million Total inventory (s.f.) 46

47 Philadelphia / Central Pennsylvania Developers focus on Philadelphia s prime locations Speculative development activity accelerates Construction activity continues to be one of the prime drivers of the Philadelphia industrial market. Availabilities and vacancies are at all-time lows, encouraging speculative construction to address the needs of 28,495, square feet of active tenant requirements. Speculative construction accounted for 82. percent of all construction activity in the fourth quarter in 215 but has declined to 63.1 percent due to several new deliveries. We anticipate that speculative activity will continue to lead the market in comparison to build-to-suits, as 1.4 million square feet of speculative construction is expected to break ground in the next 12 months. While demand continues to be strong, a large volume of construction has delivered vacant this year (81.5 percent), likely causing market conditions to shift to tenant favorable by 218 due to the large increase of Class A inventory in the market. Landlords push rents higher New construction continues to deliver at peak asking rates. The average asking rate at the seven speculative buildings delivering in the market so far this year is $4.68 per square foot. Landlords are confident that strong demand will continue to keep the market competitive for well-located, high-quality product in the next 12 months, particularly as total tenant requirements increased 21. percent since the end of last quarter. There is anticipation that rents will start to level off as early as 217 due to the large volume of speculative construction. Difficult entry to market New construction has created opportunities for outside investors in a market that has otherwise been difficult to enter. While 22,844,345 square feet of deliveries and active construction have occurred in Central PA and the Lehigh Valley since 215, planned construction indicates that the I-81 Corridor will see new momentum as outside investors capitalize on opportunities to develop on welllocated sites. Notable investment sales in the quarter include Bentall Kennedy s purchase of 13 Commerce Drive, a 247,41-square-foot distribution warehouse that sold for $24 million and AEW Capital Management s purchase of a 785,4- square-foot warehouse at 325 S Salem Church Road for $6 million. 14,261,665 Available (s.f.) 8.3% Vacancy 28,495, Active tenant requirements (s.f.) 25,544,96 Planned construction (s.f.) Vacancy slightly declines in Q1, market lows return 1.% 9.5% 9.% 9.5% 8.5% 8.9% 9.% 8.7% 8.% 8.4% 8.5% 8.3% 7.5% YTD 216 Available space (% of inventory) 16.% 15.% 14.% 13.% 12.% 11.% YTD 216 Notable leases Tenant name Deal type Size (s.f.) Amazon New 613,92 Samsung Electronics New 5,4 Behr Paints New 241,852 Ready-Pac Renewal 154, % vs. 25.5% Spec construction vs. design-builds $4.65 Class A asking rent (p.s.f.) 13,255, % Total preleased 47

48 Phoenix Balanced growth continues into the new year Construction-related companies lead charge of midsized users Although Phoenix has recovered all of the jobs lost during the recession, the construction employment sector is still more than 8, jobs away from its previous peak. Construction-related companies represented a significant portion of midsized activity in the market, but unlike previous cycles, economic recovery is not dependent on the success of single-family construction. An impressive 7,2 construction jobs have been added since the first quarter of 215, and as multifamily and commercial construction continue to grow in the Phoenix metro area, new employment growth in the construction sector is expected to translate into healthy absorption gains. Historical Q1 Phoenix metro construction employment 125, 1, 75, Source: Bureau of Labor Statistics Balanced recovery in the Southeast Valley with small user activity During previous economic cycles in the Phoenix market, recoveries were marked by large, institutional users taking advantage of declining rental rates to lease large blocks of space. Now that the worst of the recession is well behind us, the Southeast Valley has seen a much more balanced recovery, including large, midsized, and small, local users. Over 1. million square feet of leases were signed in the first quarter, and with only a few renewals over 1, square feet, leasing activity in the first quarter was largely composed of small deals under 5, square feet. Southeast Valley leasing activity Of all leases signed in the Southeast Valley in the first quarter of 216, more than threequarters of the deals were less than 5, square feet. 77% Southwest Valley landlords optimistic that large users will land in 216 After averaging nearly 675, square feet of net absorption per quarter in 215, the Southwest Valley saw a healthy bump in the first quarter of 216, recording over 83, square feet of net absorption. Institutional users have always looked to the Southwest Valley for big-box space that meets regional distribution needs, and there are currently over 13. million square feet of tenants in the market evaluating, touring or negotiating for space in the submarket. With plenty of existing large blocks of space still available in addition to ample land for development, landlords are confident that the dominoes will begin to fall. Southwest Valley tenants in the market Tenant name Deal type Size (s.f.) Project Eagle Multimarket 8, Project Oak BTS/Purchase 7, Project Redwood Multimarket 6, 9.7% 12.3% Total availability 1,782,895 Q1 total absorption (s.f.) 2,5,5 Planned construction (s.f.) 2,11,826 Total construction completions (s.f.) 2,399, % Total preleased 56.% vs. 44.% Spec construction vs. design-builds 48

49 Pittsburgh Developers and investors are bullish on Pittsburgh Investment sales top headlines in the first quarter Sales volume swelled in the first quarter on the back of several high-profile trades. Capital markets activity totaled more than $55.3 million, a noticeable increase from prior quarters. The largest trade of the quarter was Monmouth Real Estate Investment Corporation s acquisition of the 125,86-square-foot General Electric global research center for additive manufacturing in Imperial, Pennsylvania. Monmouth purchased the property for $2. million, or $159 per square foot. The new structure sits on 34 acres, is expandable by another 9, square feet, and is net-leased to GE for 1 years. Capital markets activity Sales volume $6 Total sales volume ($M) Average sales price ($/s.f.) $4 $2 $ Q4 214 Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 $75 $5 $25 $ Average price Developers hear the call for new product, fill pipeline with spec projects Construction activity remained elevated into the first quarter with over 1.5 million square feet of industrial product under construction. Developers are bullish on the market, with several speculative projects currently under way. Notable spec projects include Ashley Capital s 316,-square-foot development in the Findlay Commerce Center and Al. Neyer s 252,-square-foot development in the Clinton Commerce Park. While both projects have yet to secure a tenant, they have garnered interest from large users and are projected to have leases in place before the end of the year. Development pipeline (m.s.f.) 1.8 Under construction Deliveries Q1 216 Rents hold near $5. p.s.f. while availability records further declines Despite the presence of some headwinds at the national and regional levels, the Pittsburgh industrial market continues to tighten. The average asking rent at the end of the first quarter stood at $4.91 per square foot, relatively unchanged yearover-year. Meanwhile, availability decreased to 1.8 percent, down 41 basis points year-over-year. Availability in the Class A product type remains incredibly tight, in the sub 5. percent range. While some spec construction is currently under way and will provide additional options for tenants, market conditions will remain landlord-favorable into 217. Market rents and availability $5.2 Asking rent ($ p.s.f.) Availability (%) $4.8 $4.4 $ Q % 14.% 12.% 1.% 14,64,411 Total availability (s.f.) 1.8% Total availability 636,38 YTD total net absorption (s.f.).5% Net absorption (as a % of stock) $4.91 YTD total average asking rent (p.s.f.) -.8% 12-month asking rent growth 1,526, 5, YTD construction completions (s.f.) 49

50 Portland Strong demand, supply struggling to catch up New market entrants continue to push vacancy rates to new lows Portland is catching the eye of national and international companies. The need for same-day/next-day shipping and the favorable geographic location of Portland means that Portland is perfectly situated for companies wanting to distribute throughout the Pacific Northwest. First quarter saw Bunzl, OnTrac and Logistic Insights Corp all sign new leases in excess of 1, square feet. As these large corporations establish and consolidate their distribution footprint in Portland, vacancy rates continue to drop, with Portland s first quarter vacancy setting another record low of 3.6 percent. Deliveries take a breather, construction is still expanding Deliveries of new buildings eased off of the market highs of the previous two quarters, seeing six new facilities and one renovated building deliver. These new deliveries represent 29,332 square feet of new warehouse & distribution space being added to the market, down 1,119,663 square feet from last quarter. Despite the first quarter s lull, the rest of 216 is expected to deliver a buoyant 2,2,278 square feet. Additionally, the amount of space leased on delivery rose to 71.9 percent in the first quarter of 216. Preleasing on under construction space currently stands at 51.4 percent. USPS Colwood deal is a market mover The recent purchase of 47.5 acres of the former Colwood golf course for the new 789,837-square-foot U.S. Postal Service s mail distribution center is reshaping the market. After negotiating an $88 million deal for USPS s current distribution center in Portland s Pearl District, the city was hard pressed to find an alternative site for a new mail distribution center. The City of Portland negotiated a price of $34.7 million for the Colwood property. The effect on the general industrial property market is noticeable, and the deal has taken this prime industrial development out of the market. Developers holding more challenging sites are now proceeding with their entitlement process in an effort to get product to the market. Developers, who may have waited for a build-to-suit tenant in previous cycles, are showing a willingness to move forward on speculative projects to capture tenant demand. 11,898,716 Available for lease (s.f.) 3.6% 3,373, Active tenant requirements (s.f.) 29,332 New construction deliveries (s.f.) Market vacancy 1.% 8.% 6.% 4.% 2.%.% Q1 16 New construction deliveries (s.f.) and % leased 3,, 2,4, 1,8, 1,2, 6, 6.8% 5.9% 6.7% Source: Thomson Reuters, JLL Research Notable leases 61% Tenant name Deal type Size (s.f.) Bunzl Direct 19,6 OnTrac Direct 162, Logistics Insight Corp (LINC) Direct 15, % vs. 38.5% Spec construction vs. design-builds $77.96 Average sale price (p.s.f.) 9.1% 9.2% 8.6% 7.4% 51% 61% 5.6% 4.6% 3.8% 3.6% 72% Q % 6.% 4.% 2.%.% 2,53, % Total preleased 5

51 Reno / Sparks Reno market stagnant in the first quarter Market growing while statistics remain flat The Reno market was fairly flat in the first quarter. While several large construction projects are under way, such as Tesla s 5.5 million-square-foot manufacturing facility, Dermody s project in the North Valley s market as well and Switch s Supernap of 987,64 square feet, there was not a great deal of activity. Leasing activity was flat. There are several large tenants in the market, and it remains to be seen whether any leases will be signed. Panattoni has completed its new 7,-square-foot facility and we believe is about to announce the preleasing of two 35,-square-foot buildings on the same site. There are plenty of available sites for development, meaning Reno is not running out of options to deliver new supply. While Tesla and Switch have purchased large sites in the Tahoe Reno Industrial Center, there are virtually limitless options in that area as well as Fernley, farther east. When USA Parkway is completed, this north/south connector from the State 5 Highway to Interstate 8 will provide better access and open new areas to development. Rents firm and increasing The chart to the right shows increasing vacancy, but this is due to new speculative deliveries. We expect the vacancy rate to move downward in the next few quarters. Landlords are not inclined to offer incentives or discount rent, based on present building activity. Currently, only three spaces in excess of 5, square feet are available and there are ongoing, active negotiations that may take them off of the market soon. There are only nine availabilities in the smaller 75,- to 15,-square-foot segment, and just five in excess of 25, square feet. More spec projects announced, planned Two developers, Panattoni and McKenzie, have announced spec projects to accommodate smaller (less than 5, square feet) users. The projects should deliver by the fourth quarter, and we expect them to be successful and leasedup quickly. Completions vs. net absorption (s.f.) 15.% 13.% 11.% 9.% 7.% 5.% 4,, 3,, 2,, 1,, -1,, 13.3% Notable leases Tenant name Deal type Size (s.f.) Jardin New 278, Chewy.com New 566, jet.com New 16, Completions 11.2% 1.1% 9.1% Net absorption YTD % 9.3% 9.6% YTD 216 2, YTD construction completions (s.f.) 9.6% $4.9 Average total asking rent (p.s.f.) 7,716,71 % YTD completions preleased +24 bps Vacancy is up from one year ago +1.7% 12-month asking rent growth 77.3% Total preleased 51

52 Richmond Speculative development resurfaces in 216 Speculative development returns after a 12-month hiatus After Becknell Development purchased 25 Distribution Drive and three neighboring pad sites in the second quarter of 214, the developer broke ground on one speculative distribution building this year. Totaling 216, square feet, it will be the second speculative development in the Richmond market since Liberty Property Trust delivered East Port VIII in the first quarter of 215, which remained 3. percent leased to date. One advantage of Becknell s project is the pricing; starting at $4.25 per square foot, triple net, it is below the average asking rental rate for existing Class A space ($4.7 per square foot, triple net). Richmond historical development BTS Owner-user Speculative (s.f. in millions) Additional speculative development pending into 216 There are three existing large blocks of space greater than 1, square feet available in the Richmond market. Two are located in Class B buildings and one in a Class A building off the southern I-95 Corridor. Additionally, there is another Class A block under construction, due to the reemergence of speculative development the second project in the past five years. Due to space constraints, Class A rents for existing product are rising and approaching levels of new construction, which should augment future development. Increased e-commerce and grocer demand set to inflate supply pipeline Lidl, Aldi, Publix and Wegmans have recently entered the market, creating demand for big-box distribution centers to service these new locations. The most recent announcement was Harris Teeter s decision to build a distribution center in Caroline County. The 1.5 million square-foot facility will service both the Northern Virginia and Hampton Roads stores and should deliver by 217. Additionally, as retailers' business models have shifted to service growing e- commerce demand, so have their real estate footprints. The need for larger fulfillment centers near high-density population hubs has drawn interest in Richmond's land base to construct these new facilities. Richmond s inventory of contiguous blocks (>25, s.f.) # of blocks Average block size: 71,377 s.f. I-95/I-295/Rt 1 East End/Airport Laburnum/36 Grocer/E-commerce requirements over the past 12 months Average block size: 91,871 s.f. 3.6 million square feet Existing Under construction Average block size: 176,85 s.f. 83,254,858 Total inventory (s.f.) 7.2% Direct vacancy 472,79 YTD net absorption (s.f.) 11.3% Total availability $3.73 NNN Overall direct avg. asking rent (p.s.f.) $4.7 NNN Class A direct avg. asking rent (p.s.f.) % Total preleased 52

53 Sacramento Limited supply and lack of new construction continue to drive down vacancy Tenants facelimited options across all size ranges Users seeking modern bulk distribution space face a supply-constrained landscape with few existing alternatives across Sacramento. Currently, there are only three options above 25, square feet available for lease and no new supply of this size under construction. Tenant demand, predominantly from the distribution and logistics industry, is notable in the 1,- to 15,- square-foot range. Additionally, the heavy equipment rental industry s growing footprint contributes to the increasing number of small users facing a lack of supply. High costs and fees for development in the Sacramento market contribute to a lack of needed development. This absence, along with limited space, is creating a landlord s market. Available quality blocks of space: Warehouse & distribution inventory (includes Class A & B-caliber inventory) # of blocks 2 15 Existing Under construction , - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. New developments and deliveries Three buildings in Elk Grove delivered 49,25 square feet of light industrial space this quarter, raising the number of newly constructed buildings to 12, since the beginning of 214. The Southport area of the West Sacramento submarket has been a hot spot for development, encompassing 46.9 percent of these deliveries; its accessibility to I-5, I-8, Hwy 5, and Hwy 99, in addition to its access to labor, make it an attractive location. Historically, high costs and development fees have been barriers for new construction in the market, although the 3.4 million square feet of proposed development in the pipeline indicate a potential shift away from this previous trend. Favorable financing rates continue to drive buying activity Competition in primary markets such as the Bay Area and Los Angeles have prompted investors to seek opportunities in Sacramento. As landlords have yet to pull back from selling, sales continue to rise. The recent passage of an ordinance allowing cannabis cultivation in the City of Sacramento has inundated the market with purchase requirements. Most of these target Power Inn since the submarket meets the City s requirements for the size and location of cannabis cultivation facilities. Although 216 is an election year, pent-up demand allows for a cautiously optimistic forecast, with investment activity remaining steady over the next six months. Vacancy rates by submarket Auburn/Lincoln West Sacramento Northgate Sunrise Ind Woodland Ind NE Sacramento Roseville/Rocklin Elk Grove/Laguna Power Inn McClellan Folsom/El Dorado Richards South Sacramento Downtown.% 5.% 1.% 15.% 2.% 25.% Average sale pricing 7.6% 8.4% 9.% 7.3% 7.1% 2.2% 3.4% 4.% 4.4% 5.3%6.9% 9.3% 11.6% 19.6% Overall vacancy rate is 9.4 percent $57.5 p.s.f. Average sale price for industrial assets during the first quarter $.4 Average asking rate (p.s.f., mo.) 3 # of quarterly const. completions 44,619 YTD net absorption (s.f.) 49,25 Quarterly const. completions (s.f.) 3,325, Active requirements (s.f.) 9 Existing blocks of space 25 ksf+ 36,455 $.33 Warehouse and distribution asking rental rate (p.s.f.) 53

54 Salt Lake City The crossroads of the West The Salt Lake market continues to prove it s a premier distribution hub A number of users either made new or renewed long-term commitments to Utah. However, there is minimal industrial land remaining within the Salt Lake Valley: The Great Salt Lake to the west and the Wasatch Mountains to the east limit the amount of land that can be developed. Tenants want modern, functional and efficient space Tenant requirements and distribution/retail channel shifts are demanding tailored building specifications. This has resulted in an optimistic outlook for industrial development within Utah. Investor confidence is at a record high, with major developers having staked their land positions. Tenants below 5, square feet will start to find space that meets their needs as new product is now focused on medium distribution users. Outlook Construction is expected to continue leading market activity, due in part to comparative replacement costs, functional obsolescence and tightening Class A availabilities. Construction levels in 216 are not anticipated to match 215 s record totals. However, we do expect to see approximately 2.1 million square feet delivered by the third quarter of 216. Expect vacancy rates to slightly increase, while lease rates will flatten until the new speculative projects become stabilized. Leasing volumes will continue to accelerate in 216 as confidence strengthens and tenants seek to modernize their warehouse facilities. Investment sales activity is at its peak since the recession, which will continue during 216. The challenge is finding product to purchase. This will create a compression on cap rates. Cap rates could dip below 6. percent. Growth will remain steady with manufacturing, composites, aerospace and e-commerce occupiers. Completions vs. net absorption 5,, Completions Net absorption 4,, 3,, 2,, 1,, YTD 216 s.f. 7.% 6.% 5.% 4.% 3.% 5.5% Notable leases Tenant name Deal type Size (s.f.) Sephora USA, Inc. New 1, South Shore USA New 87,745 Select Comfort Corporation New 79,5 4.8% 5.4% 4.% 4.4% 4.6% 5.% YTD ,82 YTD completions (s.f.) % YTD completions leased 5.% +6 bps Vacancy is down from one year ago $4.96 Average total asking rent (p.s.f.) +5.1% 12-month asking rent growth 1,461, % Total preleased 54

55 San Antonio Continuation of growth Vacancy down San Antonio s industrial vacancy rate ended the first quarter at 5.9 percent, down 12 basis points from 215. With nearly 8. percent of year-to-date completions leased on delivery, and 45.8 percent of under-construction facilities preleased, overall net absorption continues to outpace completions. Significant activity is occurring in the Northeast and Comal county submarkets with notable masterplanned industrial parks keeping pace with tenant demand. Much of the volume in these planned speculative developments remains to break ground but shows San Antonio is on pace to house much more inventory. Average rental rates up.2% year-over-year With decreased vacancy, strong absorption and an increase in preleased activity, the first quarter of 216 has seen asking rent increase by.2 percent year over year, and a.4 percent increase from the fourth quarter of 215. Despite the small uptick in rents, the market continues to favor tenants as landlords experience increased competition. While tenant concessions have decreased, municipal incentives are paving the way to attract tenants in the market. The average quoted asking rate for the first quarter was $5.11 and $4.77 for warehouse/distribution and manufacturing space, respectively. Expect rates to climb slightly in the coming quarters, however: High amounts of planned development remain available that should eventually counter the slight rental growth. Deliveries and construction Completions, year-to-date, totaled 52, square feet with four notable deliveries, including Lookout Road (388, square feet, fully occupied), FedEx Distribution facility (22,753 square feet, fully occupied), Building 1 of Alamo Ridge Business Park (96,324 square feet, 38. percent occupied) and Enterprise II (324,812 square feet, presently available). An additional 1.9 million square feet is currently under way, with the largest projects being 1-35 Logistics Center (397,6 square feet, presently available, set to deliver in the second quarter of 217) and Rio Nogales Drive (557, square feet, build-to-suit). Completions vs. net absorption Completions Net absorption 3,, 2,, 1,, YTD 216 s.f. 1.% 8.% 8.7% 7.9% 6.% 6.8% 6.% 5.7% 4.% 6.1% 5.9% YTD 216 Notable leases Tenant name Deal type Size (s.f.) Confidential New 196,8 Coastal Life Technologies New 134,75 Confidential New 85,8 Anemistat, Inc. New 65, 52, YTD const. completions (s.f.) 79.4% YTD completions preleased 5.9% -12 bps Vacancy is down from one year ago $5.1 Average total asking rent (p.s.f.) +.2% 12-month asking rent growth 1,955, % Total preleased 55

56 San Diego New construction makes a dent in the vacancy rate Vacancy backs off of record low to start the year After reaching a record low by year-end 215, direct vacancy (then 4. percent) edged upward in the first quarter of 216. Now at 4.4 percent, the direct vacancy rate is still 15 basis points lower than the pre-recession low reached in s 5.3 percent vacancy rate was the lowest level recorded in San Diego until 215. On the heels of six consecutive annual declines in the vacancy rate, San Diego s industrial market is not likely to reach the 1-plus basis point decrease of the past four years in 216. Direct vacancy starts the year with an increase 1.% 9.7% 9.4% 9.1% 5.% 8.% 5.9% 6.3% 7.1% 7.4% 5.8% 4.% 4.4%.% YTD 216 Construction completions year-to-date surpass previous six years In the first quarter of 216, four industrial buildings, totaling 543,33 square feet, completed construction. With asking rents and occupancy rates above their prerecession peak levels, developers have ramped up construction levels. The largest building to deliver in the first-quarter was a 36,54-square-foot build-tosuit for FedEx. The other first-quarter deliveries were three speculative buildings, totaling 237,276 square feet, at Ocean Ranch Corporate Center. All four buildings are located in Oceanside. After a six-year high in Q1, new supply in 216 is far from done The industrial buildings completed in the first quarter already pushed 216 s total past the previous six years, but that total may increase by 8.1 percent by yearend if slated delivery dates of the current under-construction pipeline stay on schedule. The Ocean Ranch Corporate Center, which represented 43.7 percent of the square feet delivered in the first quarter, was developed as a speculative project. However, the project was leased by the time of delivery, with tenants taking occupancy in the second quarter. The remaining pipeline for 216 of 435,489 square feet under construction is 76.6 percent speculative development and none of those projects have announced any preleasing activity to date. This new supply will cause the market s vacancy rate to increase if it comes online without any tenants in place. 129,139 Vacant sublease (s.f.) 4.4% Direct vacancy $9.48 Direct average asking rent (p.s.f.) 12.9% 12-month asking rent growth Q1 surpassed annual construction totals of last five years (s.f. in thousands) industrial construction pipeline (s.f.) 287 4,723 YTD net absorption (s.f.) 8.2% Total availability YTD ,33 435, Under construction Completed 435, % Total preleased 56

57 San Francisco Mid-Peninsula Prime market target for e-commerce last mile No relief in sight for industrial supply crunch The absence of industrial projects in the development pipeline for the Mid- Peninsula will exacerbate the current tight market conditions. Furthermore, a significant amount of laboratory and office projects that target existing industrial buildings for redevelopment add to the problem. In fact, more than 1.3 million square feet of industrial space has been demolished since 213 to make room for new non-industrial projects; sky-high land costs make other assets with more attractive returns more desirable. These conditions have inhibited the growth of the area s industrial inventory and make it very difficult for industrial tenants to secure large blocks of space. Strong demand for last mile distribution spaces E-commerce, food processing and freight forwarding are the most prominent types of industrial tenants in the Mid-Peninsula market. The desirable demographic profile of the area and the close proximity to wealthy markets in San Francisco and Silicon Valley make industrial buildings in this area highly attractive. It is expected that demand for industrial space will grow stronger as e- commerce becomes more prominent. One way owners are anticipating this trend is by renovating and repurposing their assets, creating highly efficient distribution centers that cater to these types of tenants. Total annual net absorption (s.f.) 1,, 5, -5, -1,, Q1'16 Total annual vacancy 1.% 8.% 6.% 8.2% 8.7% 6.6% 4.% 7.3% 5.6% 4.% 5.% 2.% 3.% 2.6% 2.8% 2.4%.% Q1'16 Acquisition activity shapes up to beat 215 Last year acquisitions of industrial assets reached more than $45 million, a historical high for the Mid-Peninsula. In the first quarter of 216, transactions totaled $116 million, suggesting another strong year. This recent trend of acquisitions has spurred significant growth in valuations of industrial assets. For instance, between 213 and 215 the average price per square foot increased by 66.7 percent. Fueling the stream of acquisitions are institutional investors including Invesco, Sobrato and Prologis. Declining industrial base 1,32, s.f. Demolished industrial space in past three years $1. Avg. whse. asking rent (p.s.f., mo.) $1.7 Avg. manuf. asking rent (p.s.f., mo.) 3,452 YTD net absorption (s.f.) 242,784 Space to be demolished (s.f.) $ Average sale price (p.s.f.) 35.6% 12-month p.s.f. change $454M Total amount of acquisitions in 215 2,136,63 Total space acquired (s.f.) in

58 Seattle-Bellevue Demand continues to outpace supply Seattle continues to be one of the tightest markets in the United States Market fundamentals continue to strengthen in the Seattle-Bellevue market as strong industrial tenant demand is contributing to low vacancy. Construction is under way on several major speculative projects, and millions of square feet are in various phases of development; however, the demand for industrial space continues to outpace the increase in inventory. At just 3.7 percent, down 4 basis points year-over-year, vacancy is historically low. The vacancy rate in the Seattle cluster declined 2 basis points from 1.6 percent to an astounding 1.4 percent. With Seattle being a very land-constrained market, vacancy is expected to remain low throughout the year and leverage remains firmly in landlords favor., by submarket cluster Seattle-Bellevue 3.7% Northend 5.4% Eastside 6.% Pierce County 4.8% Kent Valley 3.% Seattle 1.4%.% 1.% 2.% 3.% 4.% 5.% 6.% 7.% Strong absorption trend continues in first quarter of 216 After a strong finish to 215, the Seattle-Bellevue market continues to experience significant positive net absorption. More than 1. million square feet was absorbed for the fourth consecutive quarter, as nearly 1.1 million square feet of space was taken down. The highest net absorption was reported in the Pierce County cluster at 495,118 square feet, followed by the Kent Valley cluster at 339,844 square feet. As a result of this rampant leasing activity and the lack of available quality warehouse and distribution spaces, landlords have been aggressively pushing rents. Strong rent growth should continue in the near future, as the supply/demand imbalance remains in place. Development activity increases to meet demand As absorption remains strong and rental rates increase, developers are not hesitating to break ground on new projects. Strong leasing and development activity are most prominent in the Southend industrial market. Even with the influx of new construction, increased demand has created a very space-constrained market. Currently, 1.7 million square feet of speculative product is under construction in the region. Strong preleasing in the form of 5, square feet proves that tenants in the market are competing to secure the best available spaces. Furthermore, the lack of developable land opportunities has pushed land prices up to $1 to $15 per square foot in the Southend industrial market. Fourth consecutive quarter with over 1.M s.f. net absorption 3,, 2,, 1,, Q1 Q3 Development continues 213 Q1 213 Q3 214 Q1 214 Q3 215 Q1 215 Q3 1,85,789 s.f. Currently under construction 216 Q1 278,815,95 Total market size (s.f.) 3.7% 1,468,254 Proposed construction (s.f.) 1,85,789 6.% 12-month rent growth 12,88, Active tenant requirements (s.f.) 1,537,19 Quarterly completions (s.f.) 1,81,97 YTD net absorption (s.f.) 58

59 South Bay / Silicon Valley Tight market conditions benefit peripheral markets Developers increase bets on high-tech manufacturing assets Tight market conditions make it difficult for tech manufacturers to stay close to highly qualified Silicon Valley employees while curbing real estate costs. Developers have identified this need and have begun bringing advanced manufacturing assets to market on a speculative basis. This type of asset is inherently riskier than other assets due to the high operating leverage they entail; however, the South Bay industrial market has the right conditions where this bet might work. The new technologies created in this region still lack a long history of proven success and will take a time before the know-how can be carried over to other markets. Strong net absorption in line with previous quarters (s.f.) 4,, 2,, -2,, YTD 216 Rapid space-use changes limits industrial large-block options In the past four quarters, more than 1.3 million square feet of industrial space has been transformed into other uses including residential, office and retail. The rapid change in space use falls within a long-term trend in which the current industrial inventory has been reduced by at least 1.5 percent since 25. In particular, developers have targeted the largest contiguous industrial spaces, leaving behind mostly scattered small pockets of industrial product. In turn, this has left a limited supply of large blocks of industrial space, which hinders the possibility to scale up any sort of industrial use beyond last mile distribution centers and experimental manufacturing. Compressed vacancy rates pushing rents higher 15.% 14.1% 1.% 11.8% 12.% 12.9% 11.2% 9.9% 8.8% 8.8% 5.% 7.9% 5.8% 4.7%.% YTD 216 First-quarter net absorption signals strong year ahead With an increase of more than 67, square feet increase in occupancy this quarter, the market has already reached 7.9 percent of total net absorption recorded in 215. As tech manufacturers and e-commerce companies start to ramp up operations, demand for industrial space is likely to peak this year, pushing rents higher and vacancy lower. Peripheral markets in the East Bay and Central Valley are also likely to benefit from a spillover effect coming out of the South Bay, supporting rent increases and new development. Limited availability of large blocks of space # of blocks Manufacturing Warehouse/Distribution , - 1, s.f. 1, - 2, s.f. > 2, s.f. $.76 Avg. whse. asking rent (p.s.f., mo.) $1.21 Avg. manuf. asking rent (p.s.f., mo.) 671,935 YTD net absorption (s.f.) 865,977 YTD leasing activity (s.f.) 1,88, Active requirements (s.f.) 19,28 Average active requirement (s.f.) 1,743,511 Under construction (s.f.) 61.3% in Fremont and Newark 59

60 St. Louis Construction cycle kicks into high gear No near-term end in sight for tech growth in the market Goods-producing employment across the region has been rising steadily for several years. The sector posted annual employment gains in 5 of the last 51 months, the longest stretch since the mid-199s. Increasing with warehouse occupancy, growth in the transportation industry continues to outpace the national average. While some operators such as Printpack, ConAgra and American Railcar are in the process of shuttering local operations, several other companies, including Diode Dynamics, Reckitt Benckiser and Weekends Only, are expanding. Goods-producing employment (in thousands of jobs) Construction pipeline continues to build Developer activity is expanding quickly across the market. A year ago only two submarkets, North County and the Metro East, had buildings under construction. That list now includes St. Louis City and St. Charles County. With a mix of buildto-suit and speculative activity, the market is expected to deliver almost 5. million square feet of product in 216. At this time last year, St. Louis had 1.5 million square feet under construction; that number has more than doubled to 4. million square feet. Renewals dominate first-quarter transactions Leasing activity was dominated by renewals and extensions to start the year as several tenants over 3, square feet chose to stay put. The largest lease this quarter came as Reckitt Benckiser signed a 714,-square-foot build-to-suit at Premier 37 in St. Charles County. The new warehouse building is expected to deliver at the end of 216. Reckitt already has a manufacturing facility in St. Charles County. Premier 37, being developed by Duke Realty, has been dormant for several years. This will be one of several new buildings along the 37 corridor delivering in the next 12 months. Projected construction deliveries in 216 (s.f.) 2,, 1,5, 1,, 1,231,788 1,45,8 1,252,78 5, 948, Q1 216 Q2 216 Q3 216 Q4 216 Leasing activity by type (leases over 3, s.f.) 25.5% Renewal/extension New/expansion 7.2% 67.3% Build-to-suit 622,452 Quarterly net absorption (s.f.) 6.1% Direct vacancy 73,347 Warehouse net absorption (s.f.) 2,28,338 Speculative construction (s.f.) 55.% vs. 45.% Spec construction vs. design-builds 4.2% 12-month rent growth 4,33, % Total preleased 6

61 Tampa Bay Substantial construction in Polk County Significant construction activity in three counties There is currently 4.2 million square feet under construction, with the majority taking place in the Polk County submarkets, specifically East Polk. The majority of current construction activity is warehouse & distribution centers, driven in large part by the growing importance of e-commerce nationally. From 28 to 215, only three buildings greater than 1, square feet delivered to Pinellas County, which is due to numerous factors, including a lack of viable vacant plots. FedEx recently broke ground on a 237,-square-foot distribution center that is expected to be delivered in early 217, which will be the first warehouse larger than 2, square feet delivered since before the recession. Construction, by county (s.f.) 4,, 3,665,12 3,, 2,, 1,, 248,5 236,976 Polk Hillsborough Pinellas Strong absorption continues in the first quarter is currently at an eight-year low, and, combined with steadily increasing rental rates, the overall market is set up for continued growth. Just less than 2.9 million square feet was absorbed in 215, and close to 95, square feet of product was delivered. The majority of the absorption during the past quarter occurred in the East Side submarket, accounting for 98. percent of all absorption. Over the past 12 months there was 2.5 million square feet of absorption, with the East Side submarket accounting for 5.5 percent of total activity. Absorption past 12 months, by submarket (s.f.) 1,5, Net absorption 1,, 5, Port expanding operations In order to keep up with increasing cargo volumes, Port Tampa Bay is in the process of installing two new cranes, which will augment the three existing cranes currently in use. These will allow the Port to service ships with up to a 9,-TEU capacity. In part of Port Tampa Bay s aggressive expansion plan, a 11-acre land parcel was recently purchased, with the land intended for cargo storage and other purposes. The Port generates almost 1, jobs and provides $8. billion in economic impact annually. Under the current leadership the Port is set up to continue to be a key economic driver moving forward. Port continues to grow 36,, Tons of cargo handled annually, Port Tampa Bay 194,3,518 Total inventory (s.f.) 6.9% 66,125 YTD net absorption (s.f.) 11.2% Total availability $4.73 Direct average asking rent (p.s.f.) 5.1% 12-month asking rent growth 4,15, ,23 YTD construction completions (s.f.) 61

62 Washington, DC Washington, DC posts healthy quarterly absorption Northern Virginia vacancy pushes lower In addition to nearly 5, square feet of space delivering preleased, Northern Virginia s overall vacancy rate fell 2 basis points in the first quarter of 216. Supply surrounding the greater Northern Virginia market continues to lag behind the consistent demand of its modern user base. Slowed leasing velocity, due in large part to restricted supply, has limited tenant options that continually come from a service-oriented user base looking to be in close proximity to the third largest MSA. Since the area has limited Class A availability across most submarkets, and an overall vacancy rate of 7.6 percent, market dynamics will remain in favor of the landlord heading into the second quarter. Northern Virginia W&D vacancy, by submarket Herndon/Reston Prince William West Greater Fairfax Dulles North Prince William East Alexandria/Arlington Dulles South Southeast Fairfax 1.7% 3.1% 4.5% 6.% 6.1% 8.5% 9.4% 13.5%.% 2.% 4.% 6.% 8.% 1.% 12.% 14.% 16.% Healthy absorption drives vacancy downward in suburban Maryland The vast majority of suburban Maryland s growth during the quarter has been focused in Frederick County and Prince George s County. The majority of these lease transactions continue to be driven by tenants upgrading from functionally challenged buildings to newer construction at higher rates. Notable leases include Washington Cash and Carry taking down 136,86 square feet at 63 Sheriff Road and Chesapeake Math and IT Academy leasing 18,378 square feet at 9822 Fallard Court. Despite heathy absorption and low vacancy, it is likely that rental rates will level out in the second quarter as newly constructed Class A product remains vacant, forcing landlords to become competitive with rates. Suburban Maryland W&D vacancy, by submarket Lanham College Park Bowie Frederick County Montgomery County Central PG Northern PG Southern PG.%.6% 4.7% 6.% 7.7% 8.5% 9.5% 1.6%.% 2.% 4.% 6.% 8.% 1.% 12.% Construction likely to slow in suburban Maryland Developers continue to push forward with speculative construction in response to Prince George s County s historically low vacancy rates and promising tenant pipeline. Suburban Maryland currently has nearly 1.2 million square feet of space under construction, 48.2 percent of which is preleased. Nearly half of the preleased space is from build-to-suits for Thompson Windows and the United States Holocaust Museum. While tenant growth remained healthy in the first quarter, new market entrants were limited and will likely cause speculative construction to slow in Prince George s County, as there is currently over 1.1 million square feet of Class A vacancy. Suburban Maryland available blocks of space # of blocks 4 Existing Under construction , - 99,999 s.f. 1, - 249,999 s.f. > 25, 9,635,952 W&D total inventory (s.f.) 7.7% W&D overall vacancy 494,129 W&D YTD net absorption (s.f.) 11.% W&D overall availability $8.7 W&D average asking rent (p.s.f.) 4.1% Quarterly asking rent growth 1,547, % Total preleased 62

63 Based on net absorption s quarterly average in recent years and still healthy U.S. consumer demand absorption will almost certainly outpace new supply again this year. 63

64 For more information, please contact: Craig S. Meyer, SIOR President Americas Industrial Brokerage License #: Dain Fedora Research Manager Americas Industrial Aaron Ahlburn Senior Vice President Director of Research Industrial & Logistics Mehtab Randhawa Research Manager Americas Industrial Benjamin Breslau Managing Director Americas Research About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 5 company with annual fee revenue of $5.2 billion and gross revenue of $6. billion, JLL has more than 28 corporate offices, operates in more than 8 countries and has a global workforce of more than 6,. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4. billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 215. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit About JLL Research JLL s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today s commercial real estate dynamics and identify tomorrow s challenges and opportunities. Our more than 4 global research professionals track and analyze economic and property trends and forecast future conditions in over 6 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc. COPYRIGHT JONES LANG LASALLE IP, INC. 216