Absorption Positive But Slower in the Second Half of the Year; Premier Properties Thriving While Less Functional Buildings Languish

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1 Q INDUSTRIAL MINNEAPOLIS-ST. PAUL INDUSTRIAL MARKET REPORT Absorption Positive But Slower in the Second Half of the Year; Premier Properties Thriving While Less Functional Buildings Languish MARKET INDICATORS Q VACANCY AND ABSORPTION TRENDS There was 231,000 square feet of positive absorption in the Minneapolis-St. Paul Industrial market during Quarter Four of This brings the 2013 total absorption to 1,714,437 with 1,161,683 square feet absorbed in the first half and 552,754 square feet absorbed during the second half. Vacancy ticked down to 9.1 percent from 9.2 percent in Quarter Three and compares to 10.5 percent at year-end SF Absorbed VACANCY NET ABSORPTION RENTAL RATE VACANCY Percent Vacant 20% 15% 13.1% 12.5% 10.4% 11.5% 10.4% 10.5% 9% 9.1% 10% 8.6% 5% YTD NET ABSORPTION 2,782,090 3,000,000 1,410,063 2,000,000 1,369,692 1,677,707 1,355,744 1,261, ,877 1,000,000 0 (1,000,000) (928,872) (2,000,000) (2,430,461) (3,000,000) Rates are increasing and concessions are decreasing. In office showroom properties, landlords are signing leases with tenants at rates that are at or near quoted rates. There are buildings where landlords are achieving rates of $10 per square foot for office space and $5 per square foot for warehouse space. These instances are limited to well-located, efficient and functional properties and are due to this lack of available space for users requiring 100,000 square feet or more. For tenants needing between 10,000 and 25,000 square feet there are still numerous office showroom space options. DEVELOPMENT The lack of large blocks of space in functional, well-located properties is triggering speculative development. Developers are scrambling to keep up with demand among large users requiring 150,000 square feet or more. Opus has 200,000 square feet under construction in Shakopee at Valley Park Business, and United Properties began construction on a 140,800 square foot speculative flex property in Chanhassen with 24 clear ceiling heights. Scannell Properties is planning to break ground in the Second Quarter on a 71,000 square foot speculative property at 1475 Commerce Drive in Mendota Heights and First Industrial plans to begin construction this spring on two buildings in Brooklyn Park at Interstate North. There are dwindling options for industrial land in prime areas. Future industrial development will likely be concentrated in redevelopment of infill sites. This type of development requires expertise in cleaning up environmental issues and structuring the financial situation so that rental income covers higher costs of demolition and remediation. Speculative development will continue to be predominantly bulk warehouse or office warehouse properties with ceiling heights of 24 and above. Speculative office showroom development is not as plausible since developers take a higher risk to build higher-cost product unless they have a tenant signed on to lease the space at a rental rate that sustains the higher costs.

2 Industrial Market Overview (cont.) SF Absorbed Q4 ABSORPTION 400, , ,788 0 (52,821) (49,511) (200,000) 24, ,765 MANUFACTURING On the manufacturing front, heavy manufacturing companies saw an increase in orders towards the end of 2013 and there is optimism in the sector that this will continue into According to the Institute of Supply Management, economic activity in the manufacturing sector expanded in December for the seventh consecutive month. Creighton University s Mid-America Business Conditions Index reported very strong growth for firms in the durable goods manufacturing industry in Minnesota. (400,000) Airport/South of the River Minneapolis North Southwest St. Paul East West/ Northwest FUTURE TRENDS Prime space will continue to be in demand going forward and the lack of functional large blocks of space will be the main impetus behind new construction leading to build-to-suit and speculative development. Landlords at less functional space with lower ceiling heights and inferior locations will continue to offer aggressive rates to attract tenants. Rates at prime properties will continue to increase. Limited options for purchase by users will push prices upward. ST. PAUL EAST > The vacancy rate in the St. Paul East submarket is 7.2 percent, and absorption was 24,779, with 2013 absorption totaling 376,202 square feet. > Superior Logistics leased 83,472 square feet at MSP Midway Industrial #13 in St. Paul. > ValStone bought Energy Park Corporate in St. Paul for $9.5 million square feet. SIGNIFICANT LEASE AND Superior Logistics MSP Midway Industrial Park # Territorial Rd St. Paul 83,472 Sojos Inc. Kasota Industrial II 500 Kasota Ave Minneapolis 13,232 BUILDING ADDRESS CITY BUYER SELLER PRICE PRICE PSF... SIZE (SF) Hudson Road Hudson Rd Woodbury Energy Park Corporate 1260 Energy Lane St. Paul ValStone RTC Manufacturing Building 1777 Oakdale Ave West St. Paul 900 Montreal Circle 900 Montreal Circle St. Paul Midland Plastics Summit Brewing Co. Navigator Real Estate Group SZB Enterprises LLC Twin City Tile & Marble $14,800,000 $ ,732 $9,500,000 $95 100,364 $3,200,000 $35 92,607 $2,290,000 $78 29, Cope Ave E 1255 Cope Ave E Maplewood HAF Equipment Premier Bank $950,000 $47 20,300

3 MINNEAPOLIS NORTH > The vacancy rate in the Minneapolis North submarket is 8.6 percent up slightly from quarter three when the vacancy rate was 8.4 percent. > After absorbing 538,035 square feet in the first three quarters of 2013, the submarket posted a negative number in the fourth quarter of 52,821. Overall absorption for the year was still strong at 485,214. > There is strong investor interest in well-located, functional warehouse space. Space Real Estate bought three properties at Arden Hills Gateway and Arden Hills Commerce from Cornerstone Real Estate Advisors. The property is 100 percent leased. > Trammell Crow completed construction on a 185,470 square foot speculative building, Midtown Business in Roseville. The property has 32 ceiling heights. Arden Hills Commerce SIGNIFICANT LEASE AND St. Jude Medical 2305 Walnut St Walnut St Roseville 185,000 BUILDING ADDRESS CITY BUYER SELLER PRICE PRICE PSF... SIZE (SF) Arden Hills Gateway 4300 Round Lake Blvd Arden Hills Arden Hills Commerce 1987 Gateway Blvd Arden Hills Oakdale Interstate Hale Ave Oakdale 655 County Road E W 655 County Road E W Shoreview Space Real Estate Space Real Estate LSS Family Investment Co. LLC Keg House Arts Building Ave NE Minneapolis Domus Development th Ave SE th Ave SE Minneapolis 1101 Plymouth Ave N 1101 Plymouth Ave N Minneapolis Swervo Development Corp. Minneapolis Public Schools Cornerstone Real Estate Advisors Cornerstone Real Estate Advisors $15,000,000 $97 154,264 $10,200,000 $98 104,532 $10,800,000 $ ,600 PaR Systems $6,610,000 $57 116,000 MasterDevelopment Services $3,180,000 $64 50,000 Curwood Inc. $3,000,000 $15 200,000 Lowell Zitloff $2,670,000 $30 89,729 Twin Lakes Corporate Arthur St Roseville TL III LLC Ryan Companies $1,749,000 $50 34, Baltimore St NE 9983 Baltimore St NE Blaine Finzer Roller Inc Central Ave NE Central Ave NE Jim & Peggy Marciniak $1,650,000 $53 30,951 Minneapolis First & First LLC Morton Lent $975,000 $24 41,040

4 SOUTHWEST > The vacancy rate in the Southwest submarket is 10.9 percent, up from Quarter Three when vacancy was 10.6 percent. > Quarter Four absorption was negative at 49,511 square feet and overall absorption for 2013 was negative at 193,286 > Boyd Medical signed a lease for 22,219 square feet at 9801 West 69th Street in Eden Prairie. > Shutterfly will be moving into a 217,000 square foot property developed by Ryan Companies at Dean Lakes Business Park. > Also in Shakopee, Opus is building a 200,000 square foot speculative office warehouse building at Valley Park Business, Scannell Properties is building a 175,000 square foot warehouse and R&D facility for TE Connectivity, and Anderson-KM Buildings is building a 175,000 square foot building for Trystar Inc. SIGNIFICANT LEASE AND Boyd Medical Bouvin Enterprises Building 9801 West 69th St W Eden Prairie 22,219 AVNET Inv. Penn American 2740 American Blvd West Bloomington 21,776 BUILDING ADDRESS CITY BUYER SELLER PRICE PRICE PSF SIZE (SF) Rowland Pond I & II Rowland Rd Minnetonka Technology Park Golden Triangle Dr Eden Prairie Bury Drive Bury Dr Eden Prairie 7400 Flying Cloud Dr 7400 Flying Cloud Dr Eden Prairie Three Buildings in the Stone Arch II Industrial Portfolio 5121, 5251, 5275 Edina Industrial Blvd $12,900,000 $ ,709 $9,600,000 $107 89,672 $7,800,000 $106 73,278 $3,400,000 $106 32,137 Edina JGM Properties Hoyt Properties $4,300,000 $55 78,333 WEST/NORTHWEST > The vacancy rate in the West/Northwest submarket is 8.6 percent, down from 9.0 percent at Quarter Three. > There was 161,765 square feet of absorption during Quarter Four absorption was 684,398 square feet, the highest amount of any of the submarkets we track. > The Excelsior Group purchased a multitenant office showroom property in Plymouth for $14.42 million. Continental, at 2300 Berkshire Lane, is fully leased. > purchased a billion fund from Cabot. All of the five Minneapolis-St. Paul properties in the fund are located in the West/Northwest submarket. The five properties total 438,222 square feet of space. > Progressive Converting leased 121,225 square feet at Northwest Distribution in New Hope. > Kinghorn Construction built a 150,000 square foot building for Clam Corporation at Brockton Lane in Rogers. > In other construction activity, the following properties are under construction in the West/Northwest submarket: Graco will occupy 227,054 square feet built by Liberty Property at Liberty Industrial Park Diamond Lake in Rogers, Ryan Companies is building a 181,000 square foot office and manufacturing facility in Brooklyn Park for Olympus Surgical Technologies America, and Ryan is also building a 120,400 square foot headquarters expansion for Upsher-Smith in Maple Grove.

5 WEST/NORTHWEST SIGNIFICANT LEASE AND Progressive Converting Northwest Distribution Winnetka Ave N New Hope 121,225 King Solutions Inc. Liberty Industrial Park at Diamond Lake Wilfred Lane Rogers 56,200 St. Jude Medical MBA Building D Deveau Place Minnetonka 39,386 St. Jude Medical PEDCO Building Deveau Place Minnetonka 34,590 Hardwoods Specialty Products US Liberty Industrial Park at Diamond Lake Wilfred Lane Rogers 28,360 BUILDING ADDRESS CITY BUYER SELLER PRICE PRICE PSF SIZE (SF) Nathan Lane Nathan Lane Plymouth Northwest Boulevard 2905 Northwest Business Campus II 2905 Northwest Blvd Plymouth 2800 Campus Dr Plymouth 7550 Meridian Cir 7550 Meridian Cir Osseo th Avenue North th Avenue North Plymouth Xenium Lane Xenium Lane Plymouth Lone Oak Commerce Trenton Commerce Bass Creek Business Hopkins Industrial 1550 Building Hopkins Industrial 1600 Building 917 Lone Oak Rd Eagan 5905 Trenton Ln N Plymouth 6055 Nathan Ln N Plymouth 1515 S 6th St Hopkins th St S Hopkins Continental 2300 Berkshire Plymouth The Excelsior Group 8098 Excelsior Blvd 8098 Excelsior Blvd Hopkins Ugoretz 8098 LLC Three Buildings in the Stone Arch II Industrial Portfolio Winnetka Distribution $21,100,000 $247 85,528 $9,100,000 $107 84,765 $7,000,000 $107 65,624 $5,300,000 $106 49,827 $5,300,000 $106 50,021 $2,700,000 $109 24,800 Cabot Properties $11,000,000 $82 134,004 Cabot Properties $7,800,000 $78 100,384 Cabot Properties $7,700,000 $77 99,658 Cabot Properties $4,800,000 $78 61,859 Cabot Properties $3,300,000 $77 43,135 Bankers Life and Casualty Continental Property Group $14,400,000 $59 245,000 $9,135,000 $28 330, K-Tel Drive Minnetonka JGM Properties Hoyt Properties $5,750,000 $45 126, Winnetka Ave N New Hope WDC LLC Andrews Inc. $4,200,000 $35 121, County Road County Road 6 Plymouth th Avenue North th Avenue North Plymouth Industrial Circle NE Industrial Circle NE Elk River 8901 Wyoming Ave N 8901 Wyoming Ave N Palmer Lake Plaza 6850 Shingle Creek Pkwy Brooklyn Park Brooklyn Gilmore Lake LLC Alvin E Mcquinn Revocable Elk River Industrial Development LLC Sentinel Products Inc. Log House Foods Inc. $2,875,000 $47 60,789 Opportunity Advisors $2,000,000 $18 109,175 First National Bank of Elk River $1,875,000 $33 56,418 Maranda Properties LP $1,500,000 $43 34,876 Lariat Cos. Palmer Lake Plaza LLC $1,335,000 $9 143, Fremont Ave. N. 241 Fremont Ave. N. Minneapolis Seven+ LLC Patrick Sullivan $900,000 $36 24,924

6 AIRPORT/SOUTH OF THE RIVER > The vacancy rate in the Airport/South of the River submarket was 10.6 percent, down from 11.7 percent in Quarter Three. > Absorption was 146,788 square feet, picking up after a slow third quarter when only 1,170 square feet of absorption occurred. Absorption for the year was 325,179 square feet. > Pack-Rat leased 42,143 square feet at Interstate Distribution in Burnsville. > Xpress Global Systems signed a lease for 22,065 square feet at Armstrong Business in Eagan > Miso will be moving into Boulder Lakes Business Park, a 60,000 square foot building in Eagan developed by Interstate. > Meritex Enterprises bought the 172,849 square foot Aldrin Building in Eagan for $8.85 million. The property was previously leased by Uline, who is moving their operations to a new building in Hudson Wisconsin. Aldrin Building SIGNIFICANT LEASE AND Pack-Rat, LLC Interstate Distribution 701 Lady Bird Ln Burnsville 42,143 Xpress Global Systems, Inc. Armstrong Business I 990 Lone Oak Rd Eagan 22,065 BUILDING ADDRESS CITY BUYER SELLER PRICE PRICE PSF SIZE (SF) Aldrin Building 985 Aldrin Dr Eagan Meritex Enterprises 3045 Highway Highway 13 Eagan Building Materials Outlet Aldrin Drive Ltd. hip Sowles Properties & Valley Building Products $8,900,000 $51 172,849 $3,500,000 $28 127, W. Service Rd 2845 W. Service Rd Eagan CJ Spray Inc. Karbank Real Estate Co. $2,350,000 $59 39,634 Larc Industrial V 1350 Larc Industrial Blvd Burnsville Atrix International Inc. Wrightwood Capital $1,080,000 $47 22,880

7 Market Statistics SUBMARKET TOTAL SF DIRECT VACANT SF % VACANT DIRECT SUBLEASE VACANT SF % VACANT W/SUBLEASE LOW-HIGH QUOTED RATES Q ABSORPTION 2013 ABSORPTION AIRPORT/SOUTH OF THE RIVER Bulk Warehouse 5,365, , % % $4.21-$8.27 (3,604) 150,959 Office Showroom 3,372, , % 6, % $4.63-$ ,737 87,474 Office Warehouse 9,183, , % 107, % $4.46-$ ,655 86,746 Totals: 17,921,696 1,908, % 114, % $4.47-$ , ,179 MINNEAPOLIS NORTH Bulk Warehouse 5,170, , % 20, % $4.44-$8.63 (19,557) 84,639 Office Showroom 4,345, , % 10, % $5.15-$9.47 5,608 25,117 Office Warehouse 17,186,581 1,200, % 46, % $4.72-$8.38 (38,872) 375,458 Totals: 26,702,680 2,298, % 76, % $4.81-$8.67 (52,821) 485,214 SOUTHWEST Bulk Warehouse 5,408, , % 30, % $4.31-$8.82 (77,700) (44,367) Office Showroom 7,204,138 1,202, % 110, % $5.45-$9.51 (40,045) (88,459) Office Warehouse 15,144,466 1,472, % 94, % $5.04-$ ,234 (60,460) Totals: 27,757,064 3,034, % 234, % $5.15-$9.17 (49,511) (193,286) ST. PAUL EAST Bulk Warehouse 9,041, , % 40, % $4.54-$ , ,018 Office Showroom 2,743, , % 9, % $5.00-$9.81 (86,136) (98,994) Office Warehouse 12,259, , % 102, % $4.91-$9.31 (23,601) 272,178 Totals: 24,044,594 1,737, % 152, % $4.86-$ , ,202 WEST/NORTHWEST Bulk Warehouse 14,230,458 1,416, % 430, % $4.37-$ , ,722 Office Showroom 5,654, , % 47, % $4.91-$ ,132 15,961 Office Warehouse 21,600,554 1,423, % 39, % $4.91-$ , ,715 Totals: 41,485,603 3,560, % 516, % $4.80-$ , ,398 TOTAL ALL MARKETS Bulk Warehouse 39,216,533 3,587, % 520, % $4.37-$ , ,971 Office Showroom 23,320,544 3,402, % 184, % $5.10-$9.35 (18,704) (58,901) Office Warehouse 75,374,560 5,550, % 390, % $4.84-$ ,350 1,043,637 Totals: 137,911,637 12,540, % 1,095, % $4.84-$ ,000 1,677,707 The above table is summarized data on multi-tenant industrial buildings greater than 20,000 square feet. Not included are single-tenant or owner-occupied buildings.

8 Market Statistics (EXPANDED MARKET) SUBMARKET TOTAL SF DIRECT VACANT SF % VACANT DIRECT SUBLEASE VACANT SF % VACANT W/SUBLEASE LOW-HIGH QUOTED RATES Q ABSORPTION 2013 ABSORPTION AIRPORT/SOUTH OF THE RIVER Bulk Warehouse 17,193,880 1,322, % 57, % $4.73-$8.54 (37,324) 7,605 Office Showroom 4,387, , % 6, % $4.60-$ , ,829 Office Warehouse 10,824, , % 133, % $4.45-$ , ,670 Totals: 32,405,902 2,557, % 198, % $4.57-$ , ,104 MINNEAPOLIS NORTH Bulk Warehouse 20,541, , % 20, % $4.56-$ , ,705 Office Showroom 5,997, , % 10, % $5.07-$9.27 5,608 40,761 Office Warehouse 19,494,939 1,222, % 46, % $4.72-$8.38 (38,872) 804,183 Totals: 46,033,947 2,688, % 76, % $4.77-$ ,652 1,282,649 SOUTHWEST Bulk Warehouse 22,454,432 1,938, % 192, % $4.38-$8.87 (1,063,454) (181,412) Office Showroom 8,761,738 1,266, % 110, % $5.44-$9.57 (88,745) (79,606) Office Warehouse 18,044,664 1,575, % 113, % $5.07-$ ,273 (30,832) Totals: 49,260,834 4,780, % 416, % $5.10-$9.18 (1,081,926) (291,850) ST. PAUL EAST Bulk Warehouse 19,698, , % 40, % $4.85-$ , ,230 Office Showroom 4,333, , % 9, % $4.83-$9.99 (86,136) (98,994) Office Warehouse 20,691, , % 137, % $4.95-$9.19 (11,201) 405,216 Totals: 44,723,571 1,972, % 187, % $4.90-$ , ,452 WEST/NORTHWEST Bulk Warehouse 37,688,205 2,417, % 832, % $4.38-$ , ,204 Office Showroom 8,056, , % 47, % $4.89-$ ,132 13,918 Office Warehouse 25,667,783 1,606, % 224, % $4.84-$ , ,786 Totals: 71,412,781 4,760, % 1,103, % $4.71-$ ,491 1,018,908 TOTAL ALL MARKETS Bulk Warehouse 117,576,875 7,146, % 1,142, % $4.53-$8.61 (485,937) 1,087,332 Office Showroom 31,537,129 3,703, % 184, % $5.06-$9.39 (55,404) 908 Office Warehouse 94,723,031 5,909, % 655, % $4.82-$ ,589 1,835,023 Totals: 243,837,035 16,759, % 1,982, % $4.81-$8.88 (304,752) 2,923,263 The above table is summarized data on multi- and single-tenant industrial buildings greater than 10,000 square feet. Owner-occupied properties are also included. 482 offices in 62 countries $2 billion USD in annual revenue 13,500 professionals and staff 1.2 billion* square feet under management $71 billion USD in total transaction value * Together, Colliers International and FirstService manage 2.51 billion square feet of property - second largest in the world. Minneapolis-St. Paul 4350 Baker Road, Suite 400 Minnetonka, MN DIRECT Accelerating success.