Industrial Outlook. United States Q4 2015

Transcription

1 Industrial Outlook United States Q4 215

2 Fourth quarter s vacancy rate was at a 15-year low, quality warehouse space was limited and the pipeline of tenants in the market was healthy. Increased speculative construction will give tenants leasing options in

3 Table of contents Overview of JLL logistics and industrial services 4 United States 5 United States industrial market 6 United States industrial property clock 9 United States industrial weather map 1 United States industrial rankings 11 Local U.S. industrial markets Atlanta 14 Baltimore 15 Boston 16 Broward 17 Central Valley 18 Charlotte 19 Chicago 2 Cincinnati 21 Cleveland 22 Columbus 23 Dallas / Fort Worth 24 Denver 25 Detroit 26 East Bay / Oakland 27 Greensboro / Winston-Salem 28 Hampton Roads 29 Houston 3 Indianapolis 31 Inland Empire 32 Jacksonville 33 Kansas City 34 Las Vegas 35 Long Island 36 Los Angeles 37 Memphis 38 Miami 39 Milwaukee 4 Minneapolis / St. Paul 41 Nashville 42 New Jersey 43 North Bay 44 Orange County 45 Orlando 46 Palm Beach 47 Philadelphia / Central PA 48 Phoenix 49 Pittsburgh 5 Portland 51 Reno / Sparks 52 Richmond 53 Sacramento 54 Salt Lake City 55 San Antonio 56 San Diego 57 Seattle-Bellevue 58 South Bay / Silicon Valley 59 St. Louis 6 Tampa Bay 61 Washington, DC 62 Contacts 64 3

4 Overview of JLL logistics and industrial services From manufacturing plants to around-the-clock distribution centers, industrial real estate is the backbone of the global economy. Today s financial and competitive pressures demand that your industrial property whether leased or owned delivers maximum flexibility and efficiency. Our logistics and industrial professionals understand the current business environment and offer innovative, profitable strategies for supply chain optimization, site selection, sales, leasing, acquisition, financing, construction, project management, and property and facility management of industrial properties and portfolios. Our experts know all of the issues that impact your industrial real estate decisions and apply proven best practices to address such challenges as skyrocketing energy, transportation, and labor costs; heightened security needs; tough new environmental requirements; and profound changes in global supply chains. Because of the depth of our in-house talent, we can quickly assemble just the right team for your particular need. Regardless of the size and scope of the assignment, you ll have a single point of contact who manages all service delivery and is responsible for producing the measurable results that are agreed to up front. More than 3 JLL professionals cover the top 5 industrial markets in the United States and 7 more are at work in major industrial markets around the globe. In 215, JLL logistics and industrial services completed more than 3,38 transactions comprising over 22 million square feet of space at a value of more than $6.9 billion. 4

5 United States industrial market Total United States Type Total stock (s.f.) Total vacancy Total availability YTD net absorption YTD completions Q4 215 avg. rent Y-Y rent % change Warehouse & distribution 8,719,913, % 1.1% 199,135, ,182,664 $ % Manufacturing 3,232,814,87 5.6% 7.8% 29,998,42 1,976,24 $ % Special purpose 235,9, % 7.7% 2,74,751 13,13 $ % Totals 12,187,738,84 6.4% 9.4% 231,29,16 177,288,998 $ % With vacancy presently at a 15-year low, there remains a lack of functional, efficient, modern space on the market, and developers are responding with more speculative construction. By year-end 215, for instance, under construction spec projects totaled 115. million square feet, up 25. percent from 214. This increase aside, the development environment remains controlled since current demand exceeds spec construction by more than a ratio of 2 to 1, on a square footage basis. 1 Leasing activity is anticipated to be steady in 216, and more spec development will likely slow but not stop a decline in U.S. vacancy. Markets such as Dallas/Fort Worth, Inland Empire, Atlanta, Philadelphia/Central Pennsylvania and Chicago large markets where spec building is currently heavily concentrated can be somewhat prone to quarterly vacancy fluctuations as some new product delivers without tenants in place. This is especially true for the big-box segment (warehouses in excess of 5, square feet), which comprises nearly half of the nation s active spec construction. Fortunately, demand in this size segment continues to exceed supply in most markets. Key takeaways The U.S. total vacancy rate of 6.4 percent is 6 basis points lower than year-end 214. It is 12 basis points lower than last cycle s trough, which was reached in the first quarter of 28. Annual net absorption was 3.4 percent higher than new construction in 215. Forty-six of 5 U.S. markets posted absorption gains during the quarter. All markets had annual gains for the year. Warehouse asking rents were up 5.4 percent from the fourth quarter of 214, some markets where vacancies are well below the national average are anticipated to post double-digit gains in 216. Product currently under construction totaled million square feet, up 18.7 percent from one year ago. Approximately 39.5 percent is preleased. 1: This ratio is based on total active demand; it does not factor in potential lease renewals 5

6 (s.f. in millions) (s.f. in millions) United States industrial market Market conditions remain healthy Net absorption was strong in the final quarter of 215 with 66.3 million square feet, well outpacing the 54.1-million-square-foot quarterly average from 24 to early 28 (last cycle s boom years). For the year, annual absorption totaled million square feet (the second highest in volumes since 26), and exceeded million square feet in new construction deliveries. Absorption has exceeded construction deliveries since s vacancy marked a 15-year low Deliveries Net absorption Vacancy Compared to year-end 214, net absorption was up 4.5 percent annually in 215, while construction deliveries increased 24.8 percent and vacancy (6.4 percent) was down 6 basis points. Absorption has been positive for 23-straight quarters and all market fundamentals given the aforementioned year-over-year changes remain strong. Rent growth, in turn, accelerated: The average asking warehouse rent had a 5.4 percent annual increase in 215, outpacing 214 s 4.5 percent gain. Still a controlled development environment 12% 1% Another healthy year of leasing demand is expected throughout 216 even as speculative development continues to ramp up. Speculative deliveries totaled 115. million square feet in 215, up 47.3 percent when compared to Although development volumes have increased, preleasing was at the same level in 215 as it was in 214 with an average of roughly 26. percent of spec space leased by the time of delivery. Steady leasing activity, even in the wake of higher spec construction, should keep most markets pushing toward equilibrium over the course of the next year. 8% 6% 4% 2% % Speculative construction volumes, however, are increasing Preleasing of spec construction is at the same level in 215 (if not a little higher) Available on delivery Q1 214 Q2 214 Q3 214 Q4 214 With national vacancy presently at a 15-year low, and with strong levels of tenants still active in the market in 216, speculative development should give tenants a few more modern leasing opportunities. When surveying the big-box segment (warehouses in excess of 5, square feet), for instance, current demand surpasses Class A supply in markets such as Seattle-Bellevue, East Bay / Oakland, Los Angeles, Inland Empire, Phoenix, Dallas / Fort Worth, St. Louis, Memphis, Nashville, St. Louis, Chicago, Cincinnati, New Jersey and Philadelphia / Central Pennsylvania. More development via spec construction or build-to-suits is anticipated in these markets. Additional rent growth on the horizon Q1 215 Leased on delivery Q2 215 Q3 215 Q4 215 Fourteen of 5 U.S. markets had an average vacancy rate below 5. percent at the end of the fourth quarter, while a few were below 4. percent. At these low levels of vacancy, tenants have few expansion or relocation options, and this puts upward pressure on average rents. This includes West Coast markets such as Los Angeles (with a vacancy rate of 2.2 percent) and Oakland/East Bay (3.3 percent), which also had annual warehouse rent increases of 9.8 percent and 13. percent, respectively. Rent growth is expected to drive value in 216 in many U.S. markets; even with an increase in new construction, overall rent growth is forecasted at 4.5 percent for the year. Some markets where vacancies are especially tight are expected to again post double-digit gains. 2: New construction spec deliveries totaled 115. million square feet in 215. Coincidentally, under construction spec projects had the same total by year-end. 6

7 Domestic consumption is still favorable Absorption is forecasted to remain positive in 216 with ongoing leasing velocity across nearly every U.S. market. Many economic indicators point to strong growth in the next year. During 215, for instance, imported TEUs were expected to be up 5.4 percent from 214, while retail sales (excluding gasoline) had a 4.6 percent increase over the same time period. The outlook for 216 calls for a 5.5 percent import gain 3 and a 4. percent uptick in retail sales 4. Despite this anticipated growth, domestic manufacturing is expected to face additional challenges in 216, based on the current strength of the U.S. dollar, malaise in emerging global economies and the subsequent pullback in global demand for U.S. exports. 216: By the numbers Warehouse leasing demand will remain strong, and absorption levels should continue to outpace spec construction in 216. However, the gap between absorption and deliveries is expected to narrow as more speculative projects deliver: Net absorption was 3.4 percent higher than deliveries in 215, and is expected to remain only 7. percent higher in 216. This is expected to have a flattening effect on the decline of the nation s vacancy rate over the course of the year, which is slated to finish 216 at 6.2 percent, essentially flat when compared to the end of 215. Now and then By the end of next year, this cycle s (29-216f) anticipated net absorption will total million square feet, while new construction will reach million square feet. Absorption will exceed construction by a factor of nearly 1.3x. During the last cycle (23-28) net absorption totaled 1.38 billion square feet, while deliveries were just under 1.5 billion square feet. There is still plenty of room for new development this cycle based on the current pipeline of tenants in the market. Absorption will continue to outweigh deliveries in m.s.f. in absorption 29 m.s.f. in absorption* Absorption exceeded construction by 54 m.s.f. 177 m.s.f. in new construction* 6.4% vacancy (down 6 bps YoY) Warehouse asking rents were up 5.4% The gap will narrow: 14 m.s.f. 195 m.s.f. in new construction* 6.2% vacancy (down 2 bps YoY) Warehouse asking rents expected to increase 4.5% *115. m.s.f. in spec deliveries in 215; 13.7 m.s.f. is anticipated in f 3: Source: Journal of Commerce 4: Source: Kiplinger 7

8 S o m e h i g h l i g h t s f r o m a r o u n d t h e c o u n t r y A t l a n t a dropped to 7.8 percent by year-end 215 the lowest it has been since 21. B a l t i m o r e Nearly 1. million square feet was under construction in the fourth quarter. Of this, 8. percent was preleased; expect Baltimore to experience an uptick in absorption in the first half of 216 as new product delivers and tenants take occupancy. C e n t r a l V a l l e y Fourth quarter s vacancy rate (4.8 percent) was 44 basis points lower than last cycle s trough (26). Speculative construction is expected to pick up in 216, providing additional options to users in the market. C h a r l o t t e Vacancy is hovering near the single-digits despite new speculative deliveries. The development pipeline (after surging to over 2. million square feet earlier in the year) has now slowed to sustainable levels. C h i c a g o Two leases in excess of 1. million square feet were signed in 215, while a third build-to-suit was pending. D a l l a s / F o r t W o r t h Net absorption reached a near-record high in 215 with just over 18 million square feet. It was slightly outpaced, however, by nearly 2 million square feet in new construction deliveries. H o u s t o n Consolidations and bankruptcies in the oil and gas industry will cause absorption and development totals to weaken in 216. I n d i a n a p o l i s Quality warehouse space options in the 5,- to 15,-square-foot segment are becoming more difficult to find; speculative groundbreakings will continue to increase. I n l a n d E m p i r e Development activity will be full speed ahead in 216 with 18.6 million square feet of product under construction by year-end 215. With 18. million square feet in net absorption forecasted for the year, vacancy should hold steady. L o s A n g e l e s Los Angeles had the lowest vacancy rate in the country at 2.2 percent; rents of Class A and B assets are now setting new market highs. M i a m i The local industrial market is undoubtedly benefitting from a surge in residential and retail development going up in South Florida. N e w J e r s e y Net absorption during the fourth quarter comprised 52. percent of total net absorption for the year as several tenants moved into new big-box facilities. P h i l a d e l p h i a / C e n t r a l P e n n s y l v a n i a Speculative construction is beginning to ease supply imbalances, particularly in the Central Pennsylvania and Lehigh Valley submarkets. S e a t t l e Many companies especially e-commerce occupiers are closely evaluating cubic space and column spacing to determine if a given facility has the necessary dimensions to accommodate automated systems. Lowest vacancy Highest annual net absorption (s.f.) Highest under construction (s.f.) Long Island 2.2% Chicago 21,74,722 Dallas / Fort Worth 19,73,947 Los Angeles 2.2% Inland Empire 2,813,56 Atlanta 19,66,627 Orange County (California) 2.7% Dallas / Fort Worth 18,27,73 Inland Empire 18,583,439 East Bay / Oakland 3.3% Atlanta 15,728,111 Chicago 12,782,4 Denver 3.5% Philadelphia / Central PA 12,95,47 Philadelphia / Central PA 11,278,24 Seattle 3.6% Los Angeles 12,224,855 Houston 8,581,537 8

9 Oakland / East Bay, Silicon Valley / South Bay Dallas / Fort Worth, Hampton Roads, Houston, Philadelphia / Central PA, Sacramento, San Antonio Central New Jersey, Central Valley, Los Angeles, Orange County Denver, Inland Empire, North Bay, Northern New Jersey, Portland, Richmond, San Diego Indianapolis, Salt Lake City, Seattle / Bellevue, United States Atlanta, Chicago, Long Island, Memphis, Minneapolis / St. Paul, Nashville Baltimore, Charlotte, Columbus, Miami-Dade, Pittsburgh, Reno, St. Louis, Tampa Bay, Washington DC Peaking market Rising market Falling market Bottoming market Boston, Cincinnati, Cleveland, Kansas City, Las Vegas, Milwaukee, Orlando, Phoenix Broward County / Fort Lauderdale, Detroit, Greensboro / Winston-Salem, 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 fourth quarter of 215, the U.S. aggregate remained at the 9:15 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 are peaking in 23 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 speculative deliveries 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. 9

10 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. 1

11 United States industrial rankings Total inventory (millions of s.f.) rates Chicago Philadelphia / Harrisburg Los Angeles Dallas / Fort Worth Atlanta Inland Empire Detroit Houston Northern New Jersey Cleveland Seattle Kansas City Central New Jersey Charlotte Phoenix Indianapolis Cincinnati / Dayton Memphis Columbus St. Louis Greensboro / Winston-Salem Nashville Denver Orange County Tampa Bay Minneapolis / St. Paul Salt Lake City Miami Milwaukee Portland Sacramento Baltimore Boston Pittsburgh San Diego Long Island Central Valley East Bay / Oakland Orlando Las Vegas Washington DC Jacksonville San Antonio Broward Richmond Reno / Sparks South Bay / Silicon Valley Hampton Roads North Bay Palm Beach , 1,2 Pittsburgh Boston Charlotte Phoenix Sacramento Cleveland Reno / Sparks Detroit Baltimore Philadelphia / Harrisburg Jacksonville Washington DC Orlando Indianapolis Memphis Atlanta Tampa Bay Richmond Northern New Jersey Nashville Las Vegas Broward San Antonio North Bay Chicago South Bay / Silicon Valley Dallas / Fort Worth Central New Jersey Minneapolis / St. Paul St. Louis Hampton Roads Kansas City Columbus Greensboro / Winston-Salem Inland Empire Milwaukee Salt Lake City Central Valley Miami Palm Beach Cincinnati / Dayton Houston San Diego Portland Seattle Denver East Bay / Oakland Orange County Los Angeles Long Island.% 2.% 4.% 6.% 8.% 1.% 12.% 11

12 Year-over-year rent changes 215 net absorption (millions of s.f.) North Bay Denver Greensboro / Winston-Salem Hampton Roads Atlanta Orlando San Diego Baltimore Los Angeles Chicago Las Vegas Orange County Charlotte East Bay / Oakland Phoenix Inland Empire Tampa Bay Broward Houston Nashville Detroit Jacksonville Memphis Washington DC Sacramento Boston Dallas / Fort Worth Columbus Cleveland Salt Lake City Milwaukee Reno / Sparks Indianapolis Richmond Miami St. Louis South Bay / Silicon Valley Cincinnati / Dayton Long Island Kansas City San Antonio Minneapolis / St. Paul Northern New Jersey Philadelphia / Harrisburg Central New Jersey Palm Beach St. Louis Portland Pittsburgh Central Valley -8.%.% 8.% 16.% 24.% 32.% Chicago Inland Empire Dallas / Fort Worth Atlanta Philadelphia / Harrisburg Los Angeles Houston Memphis Seattle Phoenix Indianapolis Minneapolis / St. Paul Central New Jersey East Bay / Oakland Detroit Kansas City Portland Central Valley Charlotte Greensboro / Winston-Salem Miami Las Vegas Cincinnati / Dayton Nashville Tampa Bay Orange County San Diego Sacramento Northern New Jersey Reno / Sparks Jacksonville Washington DC St. Louis Milwaukee Baltimore Cleveland Long Island Orlando Salt Lake City Hampton Roads Richmond Broward North Bay Pittsburgh San Antonio Boston Palm Beach South Bay / Silicon Valley Columbus Denver

13 Local U.S. industrial markets 13

14 Atlanta Year-end activity points to a strong 216 Despite dip in total net absorption, leasing activity remains strong Annual total net absorption totaled 15.7 million square feet for 215, a slight decline from the previous year s total. Following two quarters of increasing demand, fourth quarter move-ins only accounted for 21.3 percent of annual total net absorption. Although this could be interpreted as a sign that demand is starting to slow, overall leasing activity remained strong, indicating continued tenant interest in the market. For example, Menlo Logistics and Exel Logistics both inked leases for 1.1 million and 987,849 square feet, respectively, during the fourth quarter. Strong leasing activity in the final quarter should be reflected in the net absorption figures over the first half of 216, as these tenants begin to take occupancy. Construction activity stalls at year-end, primarily due to weather delays Development activity continued to pick up in 215, with new deliveries exceeding 1.5 million square feet. Although initial projections suggested that the addition to inventory in 215 would exceed 18 million square feet, unfavorable weather conditions led to construction delays. Total rainfall during the fourth quarter was nearly double the 3-year average, and as a result, no new product came online. Delayed deliveries could spell big things for the beginning of 216, with a recordsetting 11.7 million square feet (25 projects) projected to be completed during the first quarter alone. Increased demand from residential building suppliers Although occupiers in the retail, e-commerce and logistics and transportation sectors remain the strongest source of demand for industrial space, other industries have had a noticeable impact on market fundamentals in recent months. As the housing market continues to recover, residential building suppliers, particularly those importing and distributing high-end stone, have been increasingly active. Tenants in this segment accounted for several significant move-ins during Q4, primarily in the I-2 West submarket. Demand from building suppliers should continue as the housing market recovers further. Annual total net absorption (in millions of square feet) Inventory currently under construction 11,736,656 s.f. expected to deliver in Q1 216 Notable stone importer and distributor Q4 move-ins 1-year average: 7.5 m.s.f Tenant name Submarket Size (s.f.) MS International I-2 West 149,386 North Georgia Granite and Marble I-2 West 111,54 GranQuartz Northeast 8, 15,728,111 YTD net absorption (s.f.) 11,214,217 YTD leasing activity (s.f.) +18,, Active tenant requirements (s.f.) 7.8% 1,567,12 YTD new deliveries 2,194,394 Planned construction (s.f) 19,66, % Total preleased 14

15 s.f. Baltimore Industrial market exceeds historical average Occupancy growth focused on the BW Corridor Healthy quarterly absorption allowed Baltimore to exceed the historical average annual net absorption of 1.7 million square feet for the second year in a row. The majority of the growth was focused in the BW Corridor, which accounted for 52.8 percent of the quarter s net absorption. The largest move-ins, however, have taken place in Baltimore County East and I-95 North. Notable leases included Sephora renewing 316,524 square feet at 4622 Mercedes Drive, RPM leasing 283, square feet at 1411 Tangier Drive and Maines Paper & Food taking down 123, square feet at 151 Perryman Drive. YTD quarterly absorption 1,5, 1,342, ,958 1,, 5, - YTD Q4 215 Southern submarket absorption Northern submarket absorption Speculative construction fueling inventory growth Despite posting healthy net absorption numbers, the Baltimore market experienced a slight increase in vacancy for the fourth quarter as construction begins to outpace absorption with over two million square feet in deliveries yearto-date. With the development pipeline swinging largely towards speculative construction over the past year, inventory has grown by over a million square feet in the quarter alone. With an additional 6, square feet of new construction expected to deliver in early 216, a robust proposed pipeline and the development of Sparrows Point underway, inventory growth shows no signs of slowing down. Notable quarterly deliverables Project Size (s.f.) Construction type 61 Chelsea Road 571,5 Speculative % preleased 483 Hollins Ferry Road 3, Speculative % preleased 723 Preston Gateway Drive 137,445 BTS 75% preleased Leasing velocity ticked upwards moving into 216 Leasing velocity continues to be strong through the fourth quarter and into the new year as new construction attracted larger tenant interest. Nearly 75, square feet has been preleased with 3, square feet being leased at Sparrows Point, and 2, square feet being taken down in new construction at the Chesapeake Commerce Center on Broening Highway. Tenant demand has come from a mix of industries including food and beverage, logistics and distribution and construction material companies. Demand: Historical leasing activity (s.f.) 4,, 3,, 2,, 1,, ,643,815 Total inventory (s.f.) 9.3% Overall vacancy 582,529 Q4 215 net absorption (s.f.) 1,731,369 YTD net absorption (s.f.) $5.13 Direct average asking rent 1.4% 12-month rent growth 928, % Total preleased 15

16 Landlord leverage Boston Larger leases, higher rents close out a strong 215 Solid micro and macro fundamentals contribute to a strong year 215 was a marked year for the Boston industrial market. The combination of high level macroeconomic trends and strong local market fundamentals has led to significant tightening in the market for industrial product. The ever changing patterns of consumer shopping behavior are greatly effecting the demand for industrial space in Greater Boston, primarily for warehouse and distribution product. As e-commerce and m-commerce (mobile commerce) continue to gain market share, light industrial users preferences are shifting towards smaller, last mile warehouses, close to urban cores, along with large regional distribution centers to service these last mile facilities. Amazon is the premier example of this trend: The e-commerce giant is clearing land to build a 1. million-square-foot distribution center in Fall River. At the same time, the company has already signed a lease in 215 for 96, square feet of space in Everett and is still in the market for roughly 25, square feet of additional space. Large block leasing activity heats up in 215 In the fourth quarter of the year: Greater Boston saw an impressive amount of leasing activity, particularly in large blocks. Ten deals were signed over 5, square feet in the quarter alone, four of which were over 1, square feet. The largest deal was signed by Instrument Laboratory, who inked a deal for 125, square feet at 18 Independence Drive in Devens. Other notable deals include Wesco s 121,7- square-foot lease at 35 Otis Street in Westborough and PODS Enterprises LLC lease for 114,348 square feet at 625 University Avenue in Norwood. When all was said and done, the market saw almost 1.2 million square feet of absorption in 215. Perhaps more impressive than that, asking rents for warehouse and distribution product in Greater Boston grew by 8.4 percent in 215. At $6.21 per square foot they are approaching their previous peak of $6.27 per square foot in 28. Outlook With an industrial vacancy rate of 12.8 percent that has fallen 4.4 percentage points since 211 and a construction pipeline that is 75. percent preleased, the market for industrial product is expected to tighten even further in 216. With limited available land for development, supply side relief is unlikely in the near future. Strong local employment trends will only add to this market tightening, making for an exciting 216 for owners of industrial product in Greater Boston. 182,11,52 Total inventory (s.f.) 12.8% Overall vacancy $6.21 Warehouse & distribution average direct asking rent 32,372 Quarterly net absorption (s.f.) Industrial overall vacancy 2.% 15.% 1.% 18.7% 17.4% 16.8% 17.4% 17.1% 17.2% 16.% 14.4% 12.8% 12.8% Warehouse & distribution direct average asking rent $8. $7. $6. $6.6 $6.17 $6.27 $ Current conditions Warehouse/ Distribution Manufacturing Flex/R&D $6.5 Manufacturing average direct asking rent 1,178,649 YTD net absorption (s.f.) $5.79 $5.73 $5.67 $5.62 $5.64 $5.73 Peaking market Rising market Falling market Bottoming market 1,68, 74.9% Total preleased $6.21 Tenant leverage 16

17 (s.f. in millions) Broward Broward s industrial market closes out strong year Southern portion of the county continues to be in demand Currently, over 48.7 percent of tracked tenants touring the market are eying either Southwest or Southeast Broward. Furthermore, 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 (over 65. percent off all new product delivered in 215 was located within these two submarkets). Southern Broward submarkets remain in demand 3.7% SE Broward SW Broward 36.9% West Broward Other 18.% 14.4% Home related and building supply companies increase presence With over 39, building permits issued this year for single family homes and multifamily/condo units, and over 5, last year, the residential development pipeline in Broward County continues to strengthen. This is helping drive industrial absorption and leasing activity largely from home related and building supply tenants. The largest lease to date was Floor and Decor, which signed a lease for 325, square feet. Additionally, specialty contractor employment continues to grow, increasing over 1. percent since November of last year, indicating more residences are undergoing renovations that were delayed due to the recession. Construction activity returns to Broward County During and immediately following the recession, industrial development in Broward County was virtually nonexistent from 29 through 212, inventory increased by only 1.1 percent. However, as vacancies began contracting, construction activity increased, and 215 delivered the most new product (1.1 million square feet) since 28. Since 213, 2.6 million square feet of inventory has been added to the supply, 44. percent of which occurred in Southwest Broward. While the volume of new deliveries is expected to taper off heading into 216, there is still over 7, square feet of product under construction. As continued trending downward, this number could rise as 216 progresses, but construction volumes are still well down from peak levels before the recession. Home related/building supply companies helping to drive leasing activity in % 9.4% 15.1% 16.% Development pipeline ramps up in Broward % 33.1% Home/Building supplies Distribution Other Retailer/wholesaler Automotive Healthcare/medical ,2 Available for sublease (s.f.) 6.6% Direct vacancy 1,111, Active tenant requirements (s.f.) 5,618,7 YTD leasing activity (s.f.) 189,6 Quarterly completions (s.f) 1,112,6 YTD completions (s.f.) 75,5 $7.4 Average asking rent (p.s.f) 17

18 # of blocks Central Valley Bay Area leakage is boosting the market 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 while at the same time reducing the real estate cost. 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 northern California region have drawn significant regional distribution requirements. Demand: number of requirements by size 1 1, - 299,999 s.f. 1 3, - 499,999 s.f. 5, - 749,999 s.f. 75, - 999,999 s.f. 7 >1,, s.f. Available big-box space options are few A lack of existing available product is slowing transaction activity. The market has only six existing, available spaces that are 25, square feet or greater, and there are currently nine tenants seeking spaces above 25, square feet. The current demand is prompting developers start projects in the Central Valley. Development was at a standstill from , resulting in a market that has not been over built. 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. New developments and deliveries New construction completions totaled 2.76 million square feet in 215, which is well above 214 s level. Since 214 there have been six completed new developments and the market has greatly surpassed 214 s deliveries. This trend will to continue with the 2.99 million square feet currently under construction that will add to the six existing availabilities that are in the more than-25, square foot category. Asking rates, fueled by developers pricing up-tick on new deliveries, will continue to increase as new supply is delivered to the market. Available quality blocks of space: warehouse & distribution inventory (includes Class A & B-caliber inventory) , - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. Average sale pricing Existing Under construction $48.47 p.s.f. Average sale price for industrial asset during the fourth quarter 5.7% Total availability rate $.32 Class B distribution rent (p.s.f., mo.) 3,931,476 YTD net absorption (s.f.) 1,599,79 Quarterly completions (s.f.) 6,832,5 Active requirements (s.f.) 6 Existing blocks of space 25 ksf+ 2,992, % vs. 21.9% Speculative vs. BTS 18

19 Charlotte Asking rates head north in the fourth quarter Asking rates end year on high note As demand continues to grow for ready available space in the Charlotte market, landlords will have leverage in regard to asking rates. The current fourth quarter average asking rent sits at $3.42 per square foot, up 25 cents per square foot from the fourth quarter of last year when the average asking rate was $3.17 per square foot. Asking rates are currently at an all time high, helping justify the large amount of construction occurring. Asking rates continue to rise $3.6 $3.4 $3.2 $3. $2.8 $ Surplus of speculative construction adds growth As absorption remains relatively strong, and asking rents rise, developers are not hesitant with breaking ground on new projects. In the development pipeline there is currently 1.6 million square feet of speculative space under construction. The speculative construction will create a competitive atmosphere for tenants looking to secure the best available space. Development continues despite surge in 214 1,591,393 s.f. Current available speculative construction Absorption losing steam to end the year While absorption does continue to lose steam, the pace at which it declines does not cause concern as vacancy remains healthy. Vacancy has been slowly ticking downwards since 21 when it reached a high of 15.6 percent. Currently vacancy is at 9. percent. As new product in the development pipeline begins to deliver, look for vacancy to rise as tenants compete to secure the best available space. Absorption losing speed in Q4 6,, 4,, 2,, ,245,577 Total inventory (s.f.) 9.% 1,394,285 Q4 215 net absorptions (s.f.) 3,915,875 YTD net absorption (s.f.) $3.42 p.s.f Direct average asking rent (p.s.f.) 7.3% 12-month rent growth 3,27,71 256,17 Total preleased (s.f.) 19

20 (s.f. in millions) Chicago Big-box activity roars back in 215 Chicago s market fundamentals on track At 6.5 percent, industrial vacancy is among the lowest observed in the past decade, implying that the market might be within range of equilibrium. The Chicago economy appears to be humming along with metro unemployment standing at 4.9 percent, the lowest rate recorded since the recession. Consumer confidence remains buoyant, driving demand for modern industrial space from consumer durables users especially in the home furnishing and appliances segment. However, according to the Federal Reserve, manufacturing production growth slowed to near zero in October and early November. Although the auto industry continued to experience solid gains, most other industries saw limited growth or reported declines in activity. In contrast, transportation activity continued to increase at a modest pace. Another bright spot in the market is the continued growth in the 3PL sector, in part driven by corporate outsourcing of bulk product handling to logistics companies. In addition, food and beverage companies have continued to exhibit strong demand for new industrial space, especially temperature controlled spaces which command a premium. Investment sales activity is robust Across the market, we are seeing an uptick in vacant presales showing that investors are willing to take on leasing risk. In addition, Class B portfolios are back since the last notable B package to trade was in 214 when Sitex Group sold 11 buildings totaling 92, square feet to Sparrowhawk for $45 million. AEW Capital Management boosted their footprint in Chicago with the acquisition of an eight building, 2 million-square-foot portfolio. The total purchase price was $28.8 million, or $46.6 per square foot, yielding 7.27 percent. Prudential is under contract to close in January on two recently delivered infill speculative shell buildings totaling 94, square feet. The larger building (588, square feet) was developed by Bridge at 555 Northwest Avenue in Northlake and is visible along the I-294 Tollway. The second, smaller building (316, square feet) was developed by Panattoni at 3348 S Pulaski Avenue along the city s I-55 food corridor. In Northwest Indiana, VentureOne and DRA Advisors acquired a 574,249-square-foot Class A building at 6515 Ameriplex Drive in Portage from TCB Development. This was one of the larger Class A availabilities in the market and VentureOne had Logistics Team in hand to immediately lease 233, square feet. This is VentureOne s third opportunistic acquisition across the border, bringing their footprint to over 1.2 million square feet in the submarket. As investors clamor for product, core plus offerings like CalSTRS and CBREI s three Tinley Park buildings, totaling 1.2 million square feet, are sure to generate multiple bids. Likewise, a different pool of buyers will be eyeing Liberty s three building Fox Valley offering which totals 525, square feet in Batavia. Notable leases Tenant name: submarket Deal type Size (s.f.) Ozburn Hessey Logistics: I-55 New 672, SC Johnson: SE Wisconsin Renewal 432, Jacobson/XPO: I-55 New 352,338 Motorola: North Kane New 3,868 Notable investment sales Buyer: Cap rate Seller Bldg(s) s.f. Net absorption and vacancy $ Price per s.f. AEW: 7.27% TA Associates 8 1,995,15 $46.6 Hackman Capital First Industrial 6 96,984 $25.14 ARA: 5.2% OPUS/USAA 1 64, $76.42 VentureOne/DRA TCB Development 1 574,249 $ Net absorption % 1.% 5.%.% 7. M Q4 215 net absorption (s.f.) 21.7 M YTD net absorption (s.f.) Available spaces over 1 MSF 11.8 M 19. M YTD completions (s.f.) $4.74 Average asking rent (p.s.f.) 6.5 % 5.4% Average Class A cap rate 2

21 # of blocks Cincinnati Market closes year strong despite limited product Leasing activity driven by mid-sized users Due to a lack of large available blocks of space, leasing activity has been driven by users looking for 75,-15, square feet of space. The fourth quarter continued that trend as leasing ramped up in that size range and large blocks of space remained under construction. This trend can be attributed to a shortage of flat ground to build on compared to neighboring markets such as Columbus and Indianapolis. As a logistics and e-commerce hub, Cincinnati continues to see high levels of demand from companies looking to capitalize on the market s strategic location and proximity to the majority of the U.S population. Leasing is projected to shift to larger users in 216 as speculative construction delivers. Fourth quarter leasing velocity over 1, square feet (# of leases) (s.f.) 2 # of leases s.f. 9, 15 6, 1 3, 5 1, to 24,999 25, to 49,999 5, to 99,999 1, to 124,999 Construction firing on all cylinders After completing over 2.1 million square feet of warehouse space in the fourth quarter of 215, the market currently has over 3.1 million square feet of warehouse space under construction with delivery dates starting in the second quarter of 216. While Florence/Richwood is experiencing the highest levels of development, projects are underway in each of Cincinnati s northern submarkets into Monroe. Speculative development and build-to-suits have fueled construction activity to the highest level in the last six years. With tenant demand and development in the market, 216 is poised for a record year of leasing transactions. Notable projects under construction Wayfair LogistiCenter 442,34 898,56 Duke World Park 3 674,5 Park North Monroe Bldg 8 129,6 993,951 Park 536 Park South at Richwood Building I Available blocks on the way Large available blocks were at historically low levels in the fourth quarter. As stated above, this trend will reverse starting in the second quarter of 216 with the delivery of speculative development space. The amount of construction activity currently underway forecasts 216 to be a year of leasing which is tenant favorable and led by larger users. Construction is most rampant in northern Kentucky and the northern Ohio submarkets, providing tenants with multiple opportunities to best fit their needs. Available blocks planned for 216 by submarket , - 249,999 s.f. Florence/Richwood Monroe Tri-County Blue Ash Airport 25, - 499,999 s.f. 5, - 75, s.f. >75, s.f. $3.71 Average total asking rent 4.4% 3, ,5, Planned construction (s.f.) 2,114,275 Quarterly completions (s.f.) 61,84 Quarterly net absorption (s.f.) 3,39,356 YTD net absorption (s.f.) 863,586 Available for sublease (s.f.) 21

22 Cleveland Tenant demand strengthens, investor interest grows Investment sales are up; however, owner-user transactions still dominate Cleveland has seen a notable increase in industrial investment sales. Top trades in 215 included Triple Net Acquisitions purchase of 545 Bishop Road and STAG Industrial s purchase of 1261 East Highland Road, both of which traded at $6 per square foot. However, despite this uptick in investment sales, small and mid-cap companies seeking owner occupancy continued to make up the bulk of capital markets activity in the region. Recent owner-user sales of note are highlighted in the matrix to the right. Across all transaction types, the median industrial sales price in Cleveland in 215 was $52 per square foot. Select 215 owner-user sales Burns Industrial Equipment 8155 Roll & Hold Parkway; 61, s.f. $3,5,; $57 p.s.f Interior Supply 9456 Freeway Drive; 56, s.f. $2,775,; $5 p.s.f. Supply Side USA 112 West 13 th Street; 1, s.f. $3,551,35; $35 p.s.f. Kenda Rubber Industrial Company 581 Mayfair Road; 49, s.f. $1,5,; $3 p.s.f. Demand continues to outpace construction, despite elevated levels 215 deliveries topped 1. million square feet for the first time in seven years, still, 216 levels are projected to push even higher, topping out at 1.4 million square feet. This product is predominately warehouse and distribution space (69. percent). It is also predominately owner-user or build-to-suit (75.1 percent). While the majority of the development pipeline is preassigned space, it is important to note that speculative development has increased substantially in the last 36 months. In addition to the 334, square feet delivered in 215, an additional 115, square feet is set the deliver in 216. The shale effect: Cleveland s polymers industry will see benefits Cleveland stands to reap long-term benefits from the Utica and Marcellus activity, despite the current downturn in the oil and gas industry. The natural gas extracted from these fields contains relatively high levels of ethane, which is a feedstock for the polymers industry once converted into polyethylene. Downstream players are set to capitalize on these ethane reserves, with up to four ethylene cracker facilities proposed in the Appalachian region. With immediate access to large amounts of low-cost polyethylene, Cleveland is set to further solidify itself as the leading polymers region in the United States. Past and projected industrial deliveries (m.s.f.) Ohio polymer industry stats #1 state for employment in polymers #2, Team NEO state for GDP of polymers 31,71,724 Total availability (s.f.) 9.6% Total availability 1,73,617 YTD total net absorption (s.f.).5% YTD total net absorption $3.78 YTD average asking rent 6.2% YOY rent growth 1,38,178 1,341,75 YTD completions (s.f.) 22

23 Columbus Logistics remains market catalyst to end 215 Southeast submarket lands large users in fourth quarter The southeast submarket ended the year with strong leasing activity as logistic users flocked to Groveport. Saddle Creek Logistics led the charge for Groveport, signing a lease for over 1. million square feet in Northpoint Development s recently delivered Groveport Park 1. Other logistics leases executed in the fourth quarter included Exel Inc. at Creekside I for 144,433 square feet and Kenco Logistics at Rickenbacker 8 for 229,446 square feet. The southeastern submarket has remained a desirable destination for logistics users due to its close proximity to interstate, rail and air. Groveport I lands huge tenant to end the year 1,1,344 s.f. Saddle Creek Logistics at Groveport Park I Major speculative and build-to-suit development still under construction The fourth quarter ended with significant speculative development under construction in the Southeast submarket including CenterPoint #6, Duke Building 482 and Creekside XX. Together these southeastern developments account for more than 1.2 million square feet, of which roughly 2.6 percent is preleased. In addition to the speculative development underway, Amazon announced plans for two fulfillment centers in Etna and Obetz; combining for over 1.8 million square feet. BASF signed a 1-year lease for a build-to-suit with Duke Realty for 421,2 square feet at Rickenbacker Global Logistics Park. The construction activity in the market speaks volumes of tenant demand for industrial space in the market. Notable projects under construction 722, ,53 482,22 421,2 268,96 658,323 1,1,344, Bureau of Labor Statistics CenterPoint#6 Duke Bldg 482 Creekside XX Goveport I Prologis Etna Bldg 6 BASF Rickenbacker Prologis Etna Bldg 7 Licking vacancies distort absorption picture While leasing in the southeastern portion of the market remained red hot, Licking and the southwestern submarket saw a number of significant vacancies in the fourth quarter. A total of over 1.37 million square feet was vacated in Licking by four large users, a substantial blow to the eastern county. The southwestern submarket was vacated by two large users, Decision One and Innotrac Corporation, which combined totaled over 786, square feet. The large blocks of space now available for lease have the potential to generate significant leasing activity in Licking and the southwestern submarket in 216. Licking large blocks vacated by square feet (s.f. in thousands) Thirty One Gifts Forced Air Units Mansfield Warehousing & Distribution Meritor $3.76 Average total asking rent 5.8% 3,763,532 1,8, Planned construction (s.f.) 495,76 Quarterly completions (s.f.) -39,287 Quarterly net absorption (s.f.) -35,264 YTD net absorption (s.f.) 24,45,988 Market size (s.f.) 23

24 Dallas / Fort Worth Leasing activity high; rate pressure remains strong Absorption near record levels for the year, rent pressure persists Net absorption reached a near record high in 215 with just over 18 million square feet absorbed throughout the year. This elevated demand, however, was below the almost 2 million square feet of space delivered to the market for the same time period. The total vacancy rate stands at 6.4 percent, up from 214, but still well below the market norm. For the fourth quarter, net absorption was extremely high at 6.6 million square feet. Much of this absorption was attributed to tenants taking occupancy on new construction that was delivered to the market over the past two years. Rents, which are at all-time highs, increased 4.5 percent over the past year. by submarket DFW Airport E Dallas GSW N Fort Worth NE Dallas NW Dallas S Dallas S Fort Worth S Stemmons 3.3% 6.4% 5.3% 5.4% 5.2% 5.3% 8.1% 8.8% 11.6%.% 2.% 4.% 6.% 8.% 1.% 12.% 14.% Construction pipeline is above the historic norm, though built-to-suit versus spec is largely in line with the historic patterns Built-to-suit projects typically make up roughly 19 percent of the construction pipeline for the market, which is right in line with the typical 2 percent historic average. Construction is heavily concentrated in three submarkets: South Dallas (35 percent of active construction), GSW/Arlington (23 percent) and North Fort Worth (22 percent). Construction pipeline by submarket 1% 2% DFW Airport 23% 35% N Fort Worth NW Dallas 22% 12% S Stemmons 4% GSW/Arlington NE Dallas S Dallas Record absorption needed to keep pace with construction pipeline With 19.7 million square feet currently underway, and additional projects announced but not yet started, the total vacancy rate is expected to rise moderately over the next year as absorption would need to break record highs to keep pace with the current level of construction activity. The rising vacancy is expected to relieve some of the strong upward pressure on rents, with effective rates leveling out over the next few quarters. Over the past year, rents have increased 4.5 percent; they are expected to rise an additional 3. percent over the next year. Rates forecasted to increase further past previous high 3.% Forecasted one year rate increase 626,671 Vacant sublease space (s.f.) 6.2% Direct vacancy 18,685, Active tenant requirements (s.f.) 4,656,337 Proposed construction (s.f.) 81% vs. 19% Spec construction vs. BTS 4.5% 12-month rent growth 19,73, % Total preleased 24

25 Denver New construction provides relief in tight market New construction preleasing leveling off Immediately following the recession, user demand in Denver began to build rapidly. Because the market was not overbuilt when the downturn struck, available options grew incredibly sparse during this time. As vacancy decreased, landlords gained leverage and pushed rental rates, creating (and justifying) the need for new, speculative development. During construction, and sometimes even prior to groundbreaking, tenants were devouring available space in new buildings, and preleasing levels soared to near 7. percent. Today, demand, while still robust, has somewhat stabilized, essentially erasing the need to rush to lease space in new buildings. Preleasing has normalized to 21.7 percent. Preleasing 21.7% of under construction space is preleased Kmart vacates nearly 1.2 million square feet in Northeast submarket During the fourth quarter, Kmart vacated its distribution center at E Bromley Lane in the Northeast submarket, leaving 1.1 million square feet empty in Denver s second-largest industrial building. Still occupying space in the building is Sears, which leases the remainder of the 1.3 million square-foot building. This contraction caused overall quarterly net absorption to swing into negative territory. Without this move-out, fourth quarter net absorption would have measured 135,6 square feet, and 215 annual net absorption would have surpassed 1.3 million square feet. Absorption is expected to remain positive in the coming quarters, with this past October through December being an anomaly. Rent growth still at near-record levels; rises for fourth consecutive year At $7.3 per square foot, Denver s average total rental rate closed the quarter at its highest level ever. Annual growth, once again, was remarkably strong during 215, measuring a gain of 17.4 percent during the last 12 months and on the heels of a 18.1 percent increase in 214. Rates have grown by an incredible 55.5 percent, or $2.51 p.s.f., since this cycle s trough in 211 of $4.52 p.s.f. Going forward, rates are expected to increase for the foreseeable future, breaking even more records for this market. However, the torrid pace of rent escalation is likely to taper as new supply eventually catches up to demand. Net absorption, by year (s.f.) 5,, 4,, 3,, 2,, 1,, -1,, Historic rental rate growth: year-over-year % -4.4% -4.7% 3.3%.6% 3.1% 8.6% without Kmart move-out 17.4% 18.1% -1.% -5.%.% 5.% 1.% 15.% 2.% 3.5% +3 bps Year-over-year change in vacancy -1,2,47 Q4 215 total net absorption (s.f.) 19,913 YTD net absorption (s.f.) 1,68,693 Q4 leasing activity (s.f.) 46,977 Q4 construction completions (s.f.) 3,2, % Total preleased 25

26 Detroit Detroit industrial stagnant but awaiting a boom Industrial market needs a risk taker The time has come for Detroit to show its industrial prowess again. Dilemmas exist, however. There is significant demand for quality space and not enough new supply to satisfy it, case in point, total availability is 9.3 percent. What may be good for tenants in the form of low asking rates, which are $4.42 per square foot, may be frustrating for the market as a whole. Developers are hesitant to start speculative construction with rents still below $5. per square foot. Thus, we have an underserved market with pent up demand. The question is, when will a developer see enough upside to take on large scale speculative construction? Ground up completions versus average asking rents Completions (s.f.) Average asking rents $4.5 2,, 1,5, $4. 1,, 5, $ Detroit s strategic advantage is its location A 144-acre Sterling Heights land development is just one investment fueling rapid industrial growth in southeastern Michigan. State and local officials are researching a $1.6 billion plan that could make Detroit the new logistics capital of the Midwest. In addition to the major economic growth this would offer, a potential of 22, long-term jobs in Michigan (with up to 8, right here in Detroit) could be created. The chart to the right highlights Detroit s location advantage and companies ability to reach 5 million plus people in a drive time of six hours. Clustering together has economic and innovative advantages Detroit is seeking to restore manufacturing capacity and jobs at the I-94 Industrial Park near the junction of I-94 and I-75 and the American Axle & Manufacturing headquarters. Manufacturers are interested in the I-94 Industrial Park because of its proximity to highways and existing infrastructure. Companies are coming to the realization that clustering together has immeasurable economic and innovative advantages. Lear Corporation is demonstrating that it believes in Detroit by investing in downtown offices and doubling down on its investment in Detroit by establishing a new manufacturing plant in the next two years, thus it is leading by example. Detroit s geographic advantage, Google Maps City of Detroit submarket fundamentals 3% 2% 1% 12 miles 24 miles 36 miles Total availability Asking rents % $3.2 $3. $2.8 $2.6 42,236,414 Total availability (s.f.) 9.3% Total availability 4,434,386 YTD total net absorption (s.f.) 1.% YTD total net absorption $4.42 YTD average asking rent 9.5% YOY rent growth 1,864,53 1,348, YTD completions (s.f.) 26

27 # of blocks East Bay / Oakland Bay Area poised for another strong year in 216 Holiday consumer demand drives port activity fourth quarter Port activity continued improving from the slowdown earlier this year as retailers built up their inventories to prepare for the holiday season; containerized import volume increased 8.7 percent, year-over-year as of November 215. However, availability of quality warehouse stock within immediate proximity of the port remains at historically low levels, with Class A options in Oakland sitting at.6 percent availability. Notably, two projects in the pipeline, Centerpoint Properties Seaport Logistics Complex and Prologis s Oakland Trade and Logistics Center, will add +/-1 million square feet and 677,8 square feet of new warehouse space, respectively, providing additional port-centric industrial product by the end of 216 and mid-217. Available quality blocks of space: warehouse & distribution inventory (includes Class A & B caliber inventory) Existing Under construction 1 1, - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. 4 Land values continue to rise across the Bay Area, supported by strong tenant demand and high rental rates The growth in tenant demand for high-quality industrial space, yet limited supply of available product, has driven rental rates up throughout the East Bay. As developers aim to fill this niche and meet demand, available parcels in the region have become hot commodities. Land values continue to rise with sales averaging $25 per square foot during 215, the highest since 29. Market activity suggests that developers will be able to continue achieving underwriting assumptions at these prices, and even potentially in 216. Average land sale values (per s.f.) $3 $25 $2 $15 $1 $5 $ $ $12 $7 $2 $28 $13 $ $15 $18 $19 $ Development & new deliveries Developers prioritization of office and residential/mixed-use in the South Bay has continued to push industrial activity north into the East Bay. Currently, 4.3 million square feet of construction is in the pipeline, all of which is expected to deliver during 216. The activity is largely occurring in less land-constrained submarkets such as Livermore (1.3 million square feet) and Fremont (9, square feet). While approximately 19.5 percent (838, square feet) is preleased to Tesla and Gillig Bus Company, the remaining product is available. Strong demand drives speculative projects, as indicated by the 7.7 million square feet of planned industrial projects. $.59 Class A distribution asking rent 7.4% YOY rent growth 4,853,224 YTD net absorption (s.f.) 8.923,818 YTD leasing activity (s.f.) Preleasing of new construction Of the 3.7 million square feet that has been delivered since 214, the projects have been 86 percent preleased and have driven rental rates up by 13.7 percent. 8,275, Active requirements (s.f.) 1 Existing block of space 25 k.s.f.+ 86% 4,297,922 1,96,799 YTD completions (s.f.) 27

28 s.f. Greensboro / Winston-Salem Asking rental rates continue to climb Asking rates making jump from 214 With rental rates on an upward swing over the last year, the market is becoming increasingly landlord favorable. The current asking rate is $3.2 per square foot, breaking the $3. per square foot ceiling and up from a year ago when the rate sat at $2.6 per square foot.. With the jump of 42 cents per square foot in asking rates from , it marks the highest change from year-to-year across the past five years. Asking rates show a strong increase $3.2 $3. $2.8 $2.6 $2.4 $ 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. With 49, square feet of the 1. million square feet under construction preleased, demand is heavy in the Greensboro/Winston-Salem market. Although the pace of announcements on new projects has slowed, the pipeline looks to remain steady moving forward. Development shows growth thus far 1,21,24 s.f. Q4 speculative construction Absorption slowing after quick ascent After hitting a high-water mark of 1.4 million square feet in 214, absorption is beginning to lose steam in 215. With year-to-date absorption at 3.7 million square feet and fourth quarter absorption totaling 1.1 million square feet, there continues to be consistent activity in the market from a tenant standpoint. With tenants looking to secure the best available space, and just over 1. million square feet in the development pipeline, demand should remain steady in the foreseeable future. Absorption slowing in first half of 215 6,, 5,612,944 4,, 3,691,43 2,, 1,61,135 1,181,814 1,523, ,937,223 Total inventory (s.f.) 5.5% 1,175,374 Q4 total net absorption (s.f.) 3,691,43 YTD net absorption (s.f.) $3.2 Direct average asking rent (p.s.f.) 13.9% 12-month rent growth 1,21,24 49, Total preleased (s.f.) 28

29 TEUs x 1 Millions Hampton Roads Class A vacancy rate falls to historic low No speculative construction pushes Class A vacancy to record low Class A vacancy for warehouse fell to record lows after Huntington Ingalls leased 3 and 5 West Park Lane in Hampton. With only 555,48 square feet delivered year to date, and no speculative construction on the horizon, a large user's only alternative to new construction was Class B product, which carried a vacancy rate of 1.3 percent at the end of 215. The largest block of space still resides at 26 International Parkway in the Lynnhaven submarket and accounts for 31. percent (639,536 square feet) of all vacant Class B space in the Hampton Roads market. Class A availability rate for warehouse and distribution.6% Class A warehouse & distribution availability rate Foreign capital seeps in as portfolio sales rise In 215, 3.7 million square feet traded in Hampton Roads with 39.7 percent involved with foreign capital. The largest take down was the Canadian Pension Plan Investment Board s (CPPIB) 1.6 percent partial interest sale of Government Logistics Properties (GLP) local portfolio of nine buildings totaling 1.3 million square feet. U.S. capital was active with Duke Realty s 51-property portfolio trade to Pennsylvania-based Exeter Realty for $27 million. A total of three assets were located in Hampton Roads, tallying 466, square feet and sold with an allocated per-square-foot value of $ Investment sale volume (sales $2. million and above) $3 $2 $1 $61.1 $26.8 $5.4 $1.7 $17.6 $2.9 $4.6 $ $214.5 Import/Export TEU growth slows to 1.4 percent Overall TEU volume increased by 6.5 percent over 214 levels, but empty containers accounted for the bulk of TEU growth. Regardless of a slow down in volume and the seemingly minimal impact the port has on the surrounding industrial real estate market, the ability to access the Port of Virginia was a significant driver for new-to-market entrants this year and a pending big-box requirement that will likely come to fruition in 216. TEU volume at Port of Virginia Empties Imports Exports ,55,326 Total inventory (s.f.) 6.2% Direct vacancy 31,645 Q4 215 net absorption (s.f.) 1,59,549 YTD net absorption (s.f.) $4.59 NNN Direct average asking rent 12.5% 12-month net growth 58, 555,48 YTD deliveries (s.f.) 29

30 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 # of blocks Houston Houston closes 215 and begins an uneasy 216 M&A activity during 215 impacting industrial market Despite the announcement of several large M&A actions and a declining energy sector, Houston s industrial market performed well in 215. Most of the impact from oil and M&A activity was on the manufacturing front as several oil field services companies closed secondary facilities to reduce costs. Out of the 2.3 million square feet of sublease space on the market, the majority concerns the oil-related companies that are seeking to right-size their real estate needs. We anticipate this trend will continue as the effect of low oil prices manifests itself in the marketplace. On the other hand, the industrial distribution market did not flinch at $4 oil. Despite early fears of a slow 215, the only real impact of oil prices was psychological in nature, as many landlords showed an eagerness to lock in occupancy by offering more aggressive leasing incentives to qualified tenants. Magnifying landlords aggressiveness was the fact that tenants had more options to choose from than in recent years past. Scarcity of large block Class B space within the markets While rents stabilized in first-generation/class A buildings because of new delivery and competition, savvy landlords took advantage of the lack of competing inventory in second-generation/class B buildings to push rental rates by 1 25 percent. Tenants that have historically enjoyed the lower rent that Class B buildings offer can potentially move to Class A options for just a slight premium, which might cause flight to quality in 216. Fourth quarter absorption one-tenth of overall year For the Houston industrial market, the last three months of 215 capped a declining 12 month period in terms of absorption, with less than one-tenth of the year s 8.5 million square feet taking place from October to December. This negative trend in absorption, together with an additional nearly 2. million square feet of completions during the same time period, is causing the recent trend of increases in vacancy to continue. As the calendar changes to 216, Houston s industrial market will need a combination of increased leasing activity and a halt to new projects in order to bring the market back in balance. 1,113,885 Leasing activity (s.f.) 4.8% Direct vacancy 1,884,2 Quarterly completions (s.f.) 2,297,461 Available sublease space (s.f.) Sublease space arrives to market in 215 2,5, 2,, 1,5, 1,, 5, Flight to Class B space seen Vacancy begins slow climb as absorption slows 5.% -5.% Absorption Class A 22 Vacancy Class B , - 1, s.f. 1, - 2, s.f. > 2, s.f. 9.6% 12-month rent growth 12,759,15 Proposed construction (s.f.) (2) (4) (s.f. in millions) 8,581, ,81 Total net absorption (s.f.) 3

31 Indianapolis Industrial market continues to grow Construction continues at an elevated rate Nearly 6. million square feet of new construction came online in 215. This came on the heels of 6.4 million square feet of new construction last year. This two year total is the highest level of construction the market has seen in nearly 1 years. More construction is on the way in 216 as 2.3 million square feet remains under construction with an additional 6, square feet expected to break ground by April. Demand for this new space remains high as roughly 4. percent of the construction completed this year was leased at delivery. Approximately 45. percent of the current construction projects slated for delivery next year have already been preleased. New construction deliveries (s.f.) 8,, 6,419,2 5,932,812 6,, 4,, 3,58,865 2,, 1,717,59 42, Absorption surpasses last year s total amid strong leasing activity More than 2 new leases were signed in 215 in excess of 1, square feet. Additionally, there were over 2 renewals also signed this year by tenants occupying 1, square feet or greater. This solid level of industrial activity within the Indianapolis MSA enabled net absorption to increase for the fourth consecutive year. It also helped keep vacancy at a modest 8.2 percent despite the introduction of over 4.2 million square feet of speculative space to the market. Historical total net absorption (s.f.) 8,, 6,95,855 6,, 5,244,775 4,77,672 4,21,499 4,, 2,882,121 2,, Investment activity continues Strong market fundamentals within the Indianapolis industrial market led to solid investment activity this year. Sixteen transactions closed in 215 totaling more than 13 million square feet. Exeter Property Group was the most active investor as the Philadelphia-based real estate investment management firm had a hand in five separate Indianapolis transactions (four as the buyer, one as the seller) this year. Brennan Investment Group and Industrial Property Trust also completed multiple investment transactions. Notable investment sales Project Buyer Size (s.f.) Exeter/Abu Dhabi/PSP Portfolio Abu Dhabi/PSP/Exeter 1,968,47 Airwest 8 Industrial Property Trust 321,627 Airwest 1 Industrial Property Trust 134, ,14,84 Total inventory (s.f.) 8.2% 468,75 Q4 215 net absorption (s.f.) 5,244,775 YTD net absorption (s.f.) $3.53 Direct average asking rent 7.3% 12-month rent growth 2,293,46 5,932,812 YTD completions (s.f.) 31

32 Inland Empire Organic growth continues with unwavering demand Speculative construction leads exceptional year in deliverables Development figures remain robust with 2 million square feet added to the market inventory, bringing total stock to nearly 5 million square feet on par with Atlanta and Dallas. 215 marked a record year for speculative building completions, accounting for 79.6 percent of total construction, the highest since 26. At year end, there was 17.4 million square feet under construction, which was split evenly between big-box (5, square feet and above) and small-box (1,-499, square feet), with approximately 18-2 buildings in each category. Despite the high demand in quality product, developers should be cautious of buildings between the 6,-8,-square-foot size range. Speculative development is outpacing demand in this segment; however, most of these buildings are designed to be easily divisible. E-commerce and the 1. million square foot user Market fundamentals remained strong in the Inland Empire with strong leasing activity and occupancy gains. Year-to-date lease transactions reached nearly 41.5 million square feet and positive net absorption of 2.8 million square feet was recorded. There are potentially 1 deals, including pending leases, over 1. million square feet that are slated to close within 18 months. Historically, that s equivalent to all deals over 1. million square feet done between , or roughly eight years of absorption transacted in the span of five quarters. Vacancy rate, by year % 2.% 4.% 6.% 8.% 1.% 12.% 14.% Los Angeles and Long Beach Port TEU volumes 1,, 7,5, 5,, 2,5, 5.3% 5.2% 5.1% 6.2% Loaded Imports Source: Thomson Reuters, JLL Research 7.7% 1.1% Loaded Exports 12.7% A bright future Economic indicators point to a healthy 216 in the Inland Empire with a 2.4 percent growth in jobs over a 12-month period. Growth in the area has dramatically changed over the last 2 years and is expected to continue due to the high housing costs in neighboring Los Angeles and Orange County areas. Estimates suggests the Inland Empire will add approximately 3, more people in the area every five years between Look for demand in housing-related industries to increase as permits are expected to double over the next 18 months. Notable leases Tenant name Deal type Size (s.f.) General Mills Direct 1,547,342 Black & Decker Direct 97,747 Wayfair, LLC Direct 783,47 6,697,144 Quarterly net absorption (s.f.) 5.3% 79.6% vs. 2.4% Speculative vs. BTS completions 17,447,87 Under construction (s.f.) 6,599,354 Quarterly leasing activity (s.f.) 2,311,369 YTD construction completions (s.f.) 2.9% IE West vacancy 7.6% IE East vacancy 32

33 Jacksonville Jacksonville vacancy reached a 6-year low JAXPORT s motor vehicle imports lead trade commodity growth The Port of Jacksonville (JAXPORT) is one of the leading ports in the state, and ranked 39th in total trade, nationally. In 215, the port s trade volume increased 4. percent from 214 to a $21.9 billion trade value. While growth in values imported has increased and widened the trade deficit, an increase of commodities imported translates to more demand of warehouse space. JAXPORT s largest trade commodity is motor vehicles, with a current yearly trade value of $11.8 billion. This year, Japan, the port s largest trade partner, in terms of value, experienced a 9.7 percent increase to $5.3 billion, providing a positive outlook for potential vehicle imports. JAXPORT year-over-year commodity imports fluctuations (%) Furniture parts 9.9% Commercial vehicles 9.% Gasoline and other fuels -3.3% Travel goods -2.3% Motor vehicles 61.7% Source: World City Trade, JLL Research Build-to-suit deliveries outpace speculative development This year s strong development pipeline was supported by major build-to-suit projects, particularly of big-box warehouse spaces of 1, square feet and larger. Build-to-suit projects made up 93.2 percent of total delivered product this year, including notable tenants such as FedEx Ground and Ecolab, which combined delivered over 4, square feet of industrial space to the local market. Concentrated in North Jacksonville and the Westside submarkets, which have an additional 747, square feet of active construction, development will continue as local demand for new industrial space remains. Employment growth projections prove positive for local manufacturing industry Making up 22. percent of total industrial inventory, Jacksonville has maintained its status as one of the largest manufacturing markets in the state. With over 51, square feet of manufacturing product in the pipeline, supply and demand for space are currently at equilibrium. At the same time, local economic projections show a 5.3 percent growth of employment in production occupations and a 3.1 percent growth of food processing jobs over the next eight years. The strong operating climate will continue to sustain a growing manufacturing industry in Jacksonville. 215 Build-to-suit deliveries Tenant Building type Submarket Size (s.f.) Ecolab Manufacturing North Jacksonville 127, GE Oil and Gas Manufacturing Westside 51,4 FedEx Ground Warehouse Riverside 297,6 Manufacturing-related jobs projected 8-year growth 2.% 1.%.% 3.1% Food processing workers 11.9% Assemblers and fabricators Source: Florida DEO, JLL Research 6.5% 15.3% Metal workers Woodworkers and plastic workers 5.2% Plant and systems operators 72,58 Available for sublease (s.f.) 555,693 Quarterly completions (s.f.) $63.71 Average sales price (p.s.f) 747, % Direct vacancy 423,15 Quarterly leasing activity (s.f.) 6, Planned construction (s.f) 68.3% Total preleased 33

34 s.f. Kansas City Market fundamentals remain strong Completions and positive net absorption trend continues Leasing velocity remains strong for the Kansas City industrial sector, as evidenced by positive net absorption of over 1.7 million square feet in the fourth quarter to finish 215. Despite an increased number of new deliveries throughout 215, positive net absorption continued to show signs of strong tenant demand. The largest speculative construction projects include LPKC Inland XIV by NorthPoint totaling 822,364 square feet, Lone Elm 716 by VanTrust totaling 716, square feet and Lone Elm Logistics by Odyssey totaling 496,15 square feet. Vacancy rate anticipated to remain stable Although vacancy rates declined slightly to end 215, the upcoming delivery of over 5. million square feet of new product will most likely increase the vacancy rate. However, it is anticipated that vacancy rate will not fluctuate dramatically during 216 as new space is absorbed. Several local operations have commenced expansions which continues to keep the vacancy rate stable. For example, Garmin recently announced a new 712,842-square-foot warehouse and manufacturing building. In addition, Hallmark recently relocated an operation back to the Kansas City metro area and absorbed over 6, square feet. Finally, Sioux Chief is underway with an additional 596,-square-foot building. Although the recent economic slump in China and falling oil prices have not yet negatively impacted the Kansas City industrial market, time will tell if this has a long term adverse effect on vacancy rates during 216. Speculative buildings continue to experience success The largest move-ins of the quarter occurred at I-35 Logistics Park, which finally takes the occupancy rate of this speculative building delivered in March 213 to over 8. percent. Other significant speculative building deliveries during 215 include: LPKC Inland XI totaling 765,154 square feet (1. percent leased to Kubota Tractor Corporation) LPKC Inland XII totaling 657,354 square feet (88. percent leased to Jet.com and Excel Industries), as well as Kaw Point totaling 396,879 square feet and (43. percent leased to Ozburn-Hessey Logistics, Vitex, Inc.) Plastic Packaging Technologies. Completions vs. net absorption 8.% 7.% 6.% 5.% 6,, Completions Net absorption 4,, 2,, -2,, % 7.7% 7.% 6.4% 6.3% 6.2% 5.8% 4.% Notable leases Tenant name Deal type Size (s.f.) S&S Activewear, LLC New 473,974 Pratt Industries New 16,188 Commonwealth, Inc. New 11,567 Kansas City Steak Company New 1,65 3,292,877 YTD construction completions (s.f.) 59.1% YTD completions preleased 5.8% -4 bps Vacancy is down from one year ago $4.11 Average total asking rent ($ p.s.f.) +2.5% Asking rent YOY growth 5,442,58 1.3% Total preleased 34

35 s.f. Las Vegas Solid 215 leading to even stronger 216 Fourth quarter activity caps off an impressive 215 Net absorption across warehouse and distribution and manufacturing facilities totaled nearly 667, square feet during the quarter, and topped 3.5 million square feet for the year an amount not reached since the very height of the market in 26. Thus far, new construction has been barely keeping up with demand. Almost 1.5 million square feet delivered in 215 and all of it was preleased prior to completion. Over 8.5 million square feet of industrial product is either under construction or planned to break ground in 216, and developers are still scrambling to secure additional development sites. That amount of planned industrial development has never been seen in Las Vegas. Yes, 215 was the year when most doubts as to whether the Las Vegas industrial market was truly recovering were put to rest. Competition for blocks of space over 1, square feet remains fierce Recent preleasing activity of the 382,-square-foot LogistiCenter (Dermody) and 163,-square-foot Cheyenne Distribution Center (Prologis) highlight the ongoing lack of available product over 1, square feet in the Las Vegas Valley. Despite over 4. million square feet of big-box product in the pipeline for 216 delivery, vacancy for this size product is at less than 1.5 percent, offering few options for an increasing amount of users, mostly e-commerce, retail distribution and local service industry. The tight market is putting upward pressure on monthly lease rates, which are pushing over $.4 per square foot on a NNN-basis in the NE/North Las Vegas submarket, which is where most of today s development is occurring. Completions vs. net absorption 2.% 15.% 4,, 3,, 2,, 1,, -1,, Completions Net absorption % 14.% 14.5% 13.4% 13.1% 11.% 5.% 8.9% 6.7%.% could easily top 215 The amount of new construction of big-box projects slated for delivery in 216, and planned for 217, is unprecedented. To put it in perspective, over 4. million square feet of industrial buildings in excess of 1, square feet are planned for completion in 216. That is almost three times as much as was completed in 215, and almost twice as much as was delivered in the prior cycle s peak years (26 and 27). This raises the question if Las Vegas might face potential over-building; no doubt, this is on the mind of every market-player currently with equipment on a site turning dirt. Still, there are no signs of anyone slowing down. Notable leases Tenant name Deal type Size (s.f.) Priority Wire & Cable New 233,169 Premium Waters New 163,79 Cosmopolitan Renewal 121,875 1,428,558 YTD completions (s.f.) 83.7% YTD completions preleased 6.7% -22 bps Vacancy is down from one year ago $6.52 Average total asking rent ($ p.s.f.) +8.3% Asking rent YOY growth 1,869, % Total preleased 35

36 Long Island Influx of new tenants drives industrial demand Limited inventory exerts upward pressure on sale prices A limited supply of quality buildings for sale remained the biggest challenge for potential buyers in Nassau and Suffolk counties. The progressive tightening of the Long Island industrial market will maintain upward pressure on sale prices for quality industrial properties, with the average sales price in Nassau and Suffolk counties rising to $78. per square foot this year, up from $74.96 per square foot in 214. Many quality industrial buildings in prime locations sold for over $1. per square foot. Among the user sales completed during the fourth quarter was Quaker Sugar Co. s purchase of a 167,754-square-foot warehouse building at 1 Andrews Rd. in Hicksville for $16. million and Trophy Depot s purchase of a 122,85-square-foot facility at 4 Rabro Dr. in Hauppauge for $9. million. Persistent demand drives Suffolk vacancy rate lower As Suffolk County saw an uptick in leasing velocity toward the end of the year, vacancy rates fell to 1.8 percent this quarter, a full 2 basis points lower than the previous year. After posting 111,5 square feet of positive net absorption three months ago, the Central Suffolk submarket boasted leading quarterly absorption figures of 26,895 square feet. Among the latest transactions completed was Carr Business Systems Inc. s leasing of 6, square feet at 5 Commack Road in Commack and R Too Worldwide Inc. s leasing of 4,765 square feet at 1186 Babylon Farmingdale Road in Lindenhurst. Dwindling Brooklyn/Queens industrial inventory drives tenants east The rapid gentrification of Brooklyn and Queens neighborhoods continues to drive industrial tenants east into Nassau and Suffolk counties as the conversion of industrial product to residential and retail uses displaces industrial occupiers in the boroughs. This shift in demand, along with lack of available land parcels in Long Island, will place additional downward pressures on the vacancy rate. Among the borough s migrants this year are Quaker Sugar Co., which moved its operations from a single-story 27,-square-foot industrial building in Brooklyn to a 167,754-square-foot warehouse building in Hicksville, and Flushing- based company Coline Cabinetry, which purchased a 51,-square-foot building in Hauppauge. Nassau and Suffolk average sale price (p.s.f.) $8 $7 $78. $74.96 $71.8 $6 $61.72 $61.68 $5 $ Suffolk overall industrial vacancy trends 4.% 3.8% 3.5% 3.1% 2.% 2.4% 1.8%.% 214 Q1 215 Q2 215 Q3 215 Q4 215 Tenant Relocations from Brooklyn/ Queens Tenant name Destination submarket Size (s.f.) Quaker Sugar Co. Hicksville Coline Cabinetry Hauppauge 51, Reiko Wireless Commack 28, 117,661,54 Total industrial inventory (s.f.) 2.2% Overall vacancy 559,42 Q4 215 net absorption (s.f.) 1,67,129 YTD net absorption (s.f.) $1.54 Overall average asking rent (p.s.f.) 6.5% 12-month rent growth 38, 68.4% Total preleased 36

37 Los Angeles Supply constraints point to a strong 216 Demand outweighs supply Despite the uncertainty stemming from stories of a slowing Chinese economy and a volatile trading market, Los Angeles industrial market fundamentals remained strong in the fourth quarter. Vacancy dropped another 3 basis points from last quarter to record lows and Class A availability became nearly nonexistent in most areas of the market. The market continues to be heavily slanted in flavor of landlords, who are pushing sale prices and rents for both Class A and B product to new peak levels. As a result, developers have pushed forward on more speculative construction. Absorption is still outpacing new completions, however. Although demand for smaller facilities remains very strong, new constructions has been concentrated on product over 1, square feet. A shortage of big-box space, escalating land prices and rising construction costs are all contributing factors to this trend Annual historical vacancy rates % 2.8% 2.6% 3.3%.% 1.% 2.% 3.% 4.% 5.% 6.%. Buildings 1, square feet and larger. Includes under construction buildings. Current availability rates, by submarket 3.9% 4.5% 5.% 5.3% 5.5% 5.1% Concessions on lease negotiations are shrinking Leasing activity remains strong in all sizes and classes of industrial product, although competition for Class A space has reached new-found levels. It is becoming less uncommon for active sellers to receive multiple offers with terms that meet or exceed the original asking price for industrial facilities. Landlords continue to benefit from these current healthy market conditions as evidenced by dwindling lease concessions. Two months of free rent on a 5-year lease is now the expectation, as opposed to the standard five months just a few years ago. Additionally, landlords are attempting to reinstate CPI-based rent increases every 3 months, with percent annually. Healthy market fundamentals will carry over to 216 Los Angeles industrial vacancy rate is the lowest in the nation, and rent growth is pronounced. The market will likely remain very competitive through 216 driven by strong tenant demand and limited inventory. Although, there is lack of land for new new development, LA has a large inventory of buildings built before the 198s, which offers an opportunity to redevelop older properties to meet tenants demand for modern new space. 4.4% 5.1% LA North LA Central Mid-Counties 3.7% South Bay 2.7% 5.8% San Gabriel Valley. Buildings 1, square feet and larger. Includes under construction buildings. Notable leases Tenant name Deal type Size (s.f.) Puma North America, Inc. Expansion 67,292 Furniture of America Sublease 35, Chiquita Brands International New 25, ,46,791 Inventory (s.f.) 4,278,8 3,38,166 Quarterly net absorption (s.f.) 9% vs. 1% Spec construction vs. design-builds 2.2% rate 2,956,836 YTD completions (s.f.) 4.5% Total availability rate $.67 Avg total asking rent (p.s.f., monthly) 37

38 s.f. Memphis Absorption drives vacancy down Positive growth continues in the market throughout 215 With nearly 2. million square feet of positive net absorption in the fourth quarter, Memphis 215 year end total topped nearly 8.2 million square feet. 215 marked a banner year as it was the highest annual absorption gain in the last decade. 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. Completions vs. net absorption 1,, Completions 7,5, 5,, 2,5, Net absorption Demand is exceeding available supply; landlords have the leverage With absorption significantly outpacing new construction completions, Memphis is in short supply of Class A product. 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 all user sizes, and the market began to favor landlords over 18 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 will increase in the first quarter of 216 and throughout the year. Speculative construction outpaces build-to-suit construction Approximately 77. percent of facilities currently under construction are being built on a speculative basis. Most active, big-box tenant requirements are only considering existing product, which is mainly due to tight timing for their occupancy needs. Build-to-suit projects will continue to occur, but they will mostly comprise of facilities in excess of 1. million square feet, or for highlyspecialized requirements % 12.% 12.8% 12.6% 12.4% 12.6% 12.% 1.% 1.5% 8.% 7.9% 6.% Notable leases Tenant name Deal type Size (s.f.) Technicolor Renewal 64, Nike New 439, DunAn Precision New 16, 2,383,69 YTD completions (s.f.) 97.9% YTD completions preleased 7.9% -26 bps Vacancy is down from one year ago $2.68 Average total asking rent ($ p.s.f.) +5.5% Asking rent YOY growth 1,781, % Total preleased 38

39 s.f. in thds. Tenant requirements (s.f. in thds.) Miami Foreign capital New developer influx Population growth Industrial market has strongest post-recession year Economic cornerstones propelling industrial real estate South Florida s economy is heavily reliant on tourism and in migration/housing and both are experiencing strong years. Last year Greater Miami saw a record number of visitors, and the population has continually been on the rise since the end of the recession; as a result, the industrial market has benefited by demand driven by businesses catering to these needs. Nearly half of this year s leasing activity to date (3, square feet and up) has been comprised of retailers and building supply companies. Other significant industries such as aviation and distribution have also helped the tightening in the industrial market. Construction and local consumption comprise half of activity 4% 5% 7% 18% 4% 4% Home/building supplies 28% 31% Transportation/logistics/distribution Retailer/wholesaler Other Aviation Automotive Marine Marketing Majority of requirements comprise expansions or relocations Of the touring tenants currently being tracked, the vast majority of tenants currently located in the market and looking to expand their footprint, while newto-market tenants remain scarce. Of the 2.3 million square feet of requirements, 27.7 percent comprise expansion activity, while another 48.4 percent of requirements are seeking to relocate within the market, but remain stable in terms of their footprint. Therefore, only 23.9 percent of tracked square footage represents new-to-market requirements, all of which are retail distributors and/or e-commerce tenants. Future demand projected to come from organic growth 1,5 1, 5 1, Stable Expansion New-to-market New deliveries hit post-recession high in 215, but down from previous cycle In 215, over 2. million square feet of inventory was added to the industrial stock in Miami-Dade County, the highest yearly figure since before the recession took hold at the end of 27. However, compared with the six years leading up to the recession, construction figures are lagging during the recovery. From 22-27, 11.6 million square feet was delivered, or 7.2 percent of stock. Comparatively, only 6.8 million square feet, or 3.9 percent of total stock, has been added since 21. However, during this cycle, construction has severely lagged absorption. In aggregate, tenants have taken 17.6 million square feet since 21, compared to 14.1 million square feet pre-recession. 4.7% 7.8% Total availability 2,34,5 Active tenant requirements (s.f.) 1,671,6 Q4 215 leasing activity (s.f.) Robust development pipeline lags previous cycle 3, 2, 1, million YTD total net absorption (s.f.) 4.4% YOY rent growth 1,372,4 2,69, YTD deliveries (s.f.) 39

40 PMI Index Milwaukee Sales activity stands out in the fourth quarter Economic overview The Milwaukee industrial market remains strong through the final months of 215; however, global headwinds are affecting some key local institutions. Marquette s December 215 ISM Manufacturing Report has registered an index of (representing negative territory for the 9th straight month). While December was a slow month with volatile demand, 215 business at the aggregate was up 18. percent from 214. This trend is predicted to continue into the near future. A slumping mining industry is affecting global manufacturers like Caterpillar. They announced this fall that the Oak Creek facility will close and those jobs will be shifted to an existing facility in South Milwaukee. The South Milwaukee plant is home to the Surface Mining and Technology group and will be upgraded in the next three years. Significant local highway infrastructure improvements continue to move forward including the I-94 North South Corridor. The biggest project is the $1.7 billion dollar overhaul of the 4- year old Zoo Interchange which is currently the busiest interchange in the state. Leasing activity The southeastern industrial market continues to exhibit signs of a healthy leasing market. Vacancy in the fourth quarter of 215 dropped from 5. percent to 4.6 percent with positive absorption of over 65, square feet. Tenant demand continues to be most evident in Class A and B markets ranging from 5, 1, square feet. There are three notable leases this quarter. First, AllStates Trucking came to terms on a new lease for 12,55 square feet at 12 S. Reinhart Drive, bringing Liberty s newest spec building in Oak Creek to full occupancy. Second, EmbedTek took 5, square feet at the newly completed 237 W. Bluemound Road in Bluemound Corporate Park I. Finally, Milwaukee Tool leased 5, square feet in Waukesha at 911 Empire Drive. Sales overview Although increased activity in self storage redevelopments continues to trend, The SE Wisconsin industrial market continues to see a lack of available quality inventory. Some of the most notable sales include Becknell Industrial and UBS purchasing two buildings: 441 North 132nd Street in Butler and 47 Ironwood Drive in Franklin at a 6.67 percent cap. Both properties were owned as part of Westminster Capital s Fund VII. The Village of Menomonee Falls sold a 381,-square-foot former Kohl s DC to CH Coakley, a locally based moving and storage company for $19. per square foot. John Arcuri sold four buildings at S 114th Street to STAG Industrial, totaling 243,35 square feet for $9.9 million. Total jobs vs. unemployment rate 8, 78, 76, 74, 72, 7, 68, Source: Bureau of Labor Statistic ISM National & Milwaukee Comparison Source: Institute for Supply Management, Marquette Univ Notable sales Source: Real Capital Analytics ISM - National versus Milwaukee Milwaukee National 12.% 1.% 8.% 6.% 4.% 2.%.% Address Size (s.f.) Sale Price/p.s.f. 345 W Saint Paul Avenue 94, $13.1 M / $ West Forest Hill Avenue 296,432 $7. M / $ S 114 th Street 243,35 $9.9 M / $ N Teutonia Avenue 138,87 $3.1M / $ W Basswood Drive 126, $6.4 M/ $ Milwaukee December ISM reading 4.6% 1,949,912 YTD total net absorption (s.f.) 1,796, new deliveries 4.4% November unemployment rate -2.6% YOY MFG employment $5.5 Average asking price (p.s.f.) 567,7 Under construction (s.f.) 4

41 Landlord leverage Minneapolis / St. Paul E-retail distribution drives 215 development Leasing activity overview The Minneapolis-St. Paul industrial market saw less tenant activity in the fourth quarter, and there were few lease comps in the 2,- to 4,-square-foot range, which is typically the sweet spot for end-of-year deals. However, as macroeconomic conditions pick up, business-to-consumer retail is seeing strong growth, particularly for companies with a substantial online presence. Duke Realty is building a 134,384-square-foot office and showroom building in Plymouth for furniture dealer Intereum Inc. Construction will begin this spring and is estimated to finish by March 217. Duke has been especially active in the Minneapolis-St. Paul industrial market, delivering new build-to-suit projects for furniture retailers Room & Board and Blu Dot within the last year. Eden Prairie-based retailer Bluestem Brands will move 75 employees one mile south of their current location in early 216. The company recently signed a lease for Supervalu s former headquarters, a 345,-square-foot building in Eden Prairie's Golden Triangle Innovation Center at 775 Flying Cloud Drive. The building is owned by Pennsylvania-based Liberty Property Trust and is located across the street from the future Golden Triangle station on the Southwest Light Rail Transit line, well poised to attract new headquarters employees seeking an easy transit commute. Sales overview The most lucrative deal of fourth quarter, at $14 million, was Fairbridge Properties sale of their 261,85-square-foot flex/research and development facility. The newly renovated space at Evergreen Boulevard in Coon Rapids was sold as part of a 131 exchange for tenancy in common. The site is home to Honeywell Aerospace and MEDRAD Inc. Liberty bought a 197,956-square-foot fully vacant warehouse facility at 5651 Innovation Blvd. from Opus for just over $11 million. The deal keeps Liberty s equity flowing and provides an opportunity to develop more attractive rental rates and terms for potential tenants. Opus built the speculative facility in 214, but it has remained vacant since. JLL Property Clock, by submarket 12% 1% 8% 6% 4% 2% % 12 month change in industrial employment, Jan-Oct Source: BLS 1.5% Southwest Southeast Northeast 9.4% Peaking market Rising market East 6.9% Falling market Bottoming market Northwest 1.9% 7.5% NW SW SE E NE Mining, Logging & Construction Trade, Transportation & Utilities Manufacturing Other Services Tenant leverage 8.3% rate 9+ Tenants in the market 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 completions (s.f.) 41

42 s.f. Nashville Year ends with a very active fourth quarter Construction completions and more speculative development There were some notable construction completions this quarter. The largest of the bunch was the delivery of the 1. million-square-foot Under Armour Distribution House by Panattoni in their Beckwith Farms development in Wilson County. Also in Wilson County, FedEx Ground completed their 314,-squarefoot facility just down the street from Beckwith Farms. Firearm manufacturer Beretta USA completed their 158,-square-foot manufacturing facility in Gallatin. Panattoni continues to lead the pack for speculative development with close to 2. million-square feet under construction between CentrePointe Distribution Park and the recently announced Skyline Distribution Park. Completions vs. net absorption Completions Net absorption 6,, 4,, 2,, -2,, ,, Demand continues to outpace inventory Vacancy rates continue to trend down. Availability of quality existing buildings has become very slim. Speculative development is already starting to see some early success in preleasing. Most notably is Conn s HomePlus preleasing of 38,56 square feet in Panattoni s first of two 61,52-square-foot buildings in the CentrePointe Distribution Park. Prologis has preleased a portion of their first 15,-square-foot spec building in CentrePointe and is well underway on their second 15,-square-foot building in an effort to fulfill the needs of tenants looking for space in the 5,- to 15,-square-foot-range, which is in high demand. 15.% 11.5% 9.2% 1.% 1.9% 9.6% 8.9% 5.% 7.5% 6.7%.% Leasing activity In addition to the Conn s lease at CentrePointe, another large lease was completed in the Southeast submarket when Sinomax committed to 55, square feet at the former Whirlpool Distribution Center located ate 1714 JP Hennessy Drive. Communications Test Design, Inc. expanded their footprint in the Wilson County submarket with a new lease of 43,75 square feet at Pattillo s 78 Eastgate Boulevard. Notable leases Tenant name Deal type Size (s.f.) Sinomax New 55, Communications Test Design, Inc. New 43,75 Conn s New 38,56 1,64,41 YTD construction completions (s.f.) 6.7% $3.68 Average total asking rent ($ p.s.f.) 2,472, 93.% YTD completions preleased -8 bps Vacancy is down from one year ago +6.5% Asking rent YOY growth 17.4% Total preleased 42

43 USD in Billions New Jersey 215 finishes the year stronger than ever Fourth quarter net absorption reaches highest level of all time Key lease signings in Central New Jersey made the fourth quarter of 215 by far the most impressive of the year. Net absorption in the final quarter of 215 comprised 52. percent of total absorption in 215. Fourth quarter absorption was magnified by two notable lease signings at Exit 12 and Exit 1; the largest of the two being List Logistics lease of 571, square feet at 75 Mill Road in Edison. This speculatively constructed asset was built in 213 and is owned by a group of investors who are advised by J.P Morgan Asset Management. Of similar size was Serta s lease of 46, square feet at 5 Bryla Street in Carteret. The mattress company plans to use the facility for both manufacturing and distribution of its products. Further bolstering absorption for the quarter was Amazon taking occupancy of more than 1. million square feet leased this spring. Absorption by quarter in % 15.6% 52.% 2.8% Q4 Q2 Q3 Q1 Speculative development intensifies in the final quarter of 215 In the midst of one of Northern and Central New Jersey s best years in terms of leasing activity, speculative construction has further intensified. Construction starts in the fourth quarter of 215 reached 1.3 million square feet. At year-end, a total of 3.2 million square feet was under construction, of which 75.7 percent is being built on a speculative basis. With all of these projects expected to deliver over the next 12 months, and more speculative projects expected to break ground shortly, vacancy rates could see renewed upward pressure as large amounts of supply hit the market in 216. However, it is worth noting that Northern and Central New Jersey have seen nearly 4. million square feet of Class A leasing volume in the past six months, and if demand continues at such a feverish pace, additional speculative construction may be needed to keep up with current demand. Foreign investment and large portfolio sales drive transaction volume Investors focus hit a watershed moment in late 214 with the announcement of Blackstone selling its industrial portfolio and operating company IndCor to Singapore's sovereign wealth funds GIC/GIP. As a result of the shift in investor sentiment, the number of foreign buyers looking to place capital in U.S. based industrial real estate increased substantially. Consequently, large portfolio sales and overall investment sale volume increased tremendously in 215. The New Jersey industrial market reached $9. billion in total sales volume for warehouse product, representing a 56.1 percent increase over the previous year, and a 118. percent increase over the 1-year historical average. Construction activity 3,228,48 s.f. Under construction at year-end Total industrial transaction volume in USD $1, $8, $6, $4, $2, $ ,28,797 Total market size (s.f.) 6.5% 3,228,48 Under construction (s.f.) 2,445,292 Speculative construction (s.f.) 7,478,763 YTD net absorption (s.f.) 23,543,879 YTD leasing activity (s.f.) $6.24 NNJ average asking rent (p.s.f.) $5.27 CNJ average asking rent (p.s.f.) 43

44 North Bay Affordable alternatives attract Bay Area tenants Overview of vacancy and absorption Although historically a market solely comprised of local/regional developers and tenants, institutional buyers have begun to take interest in the North Bay. The heightened rental rates in neighboring Bay Area markets, and the lack of suitable product types, has shifted tenant attention to the North Bay as a more affordable alternative that remains within the strategic regional location of the Bay Area. Absorption increased 23 percent year-over-year, as the North Bay ended 215 with total net absorption of approximately 1.4 million square feet. Vacancy sits at 6.5 percent, continuing a 5-year trend of declines. Annual net absorption, by year (s.f.) 3,, 2,, 1,, -1,, Overview of asking rental rates The wine industry and related spinoff industries, such as labelers, cork suppliers, and food and beverage companies, drive the North Bay industrial market. The monthly overall average asking rent of $.54 across all submarkets is derived from the wide range in variation among submarkets. Rents in Napa/Sonoma are substantially higher ($.68), for instance, due to tenants requirements of insulated and conditioned warehouses for case wine storage; while asking rates in Solano County East are much lower ($.43) as wine-related industries do not need the same high-quality product type., by year 15.% 1.% 11.5% 1.7% 11.4% 1.7% 1.3% 9.2% 5.% 8.% 6.8% 6.5%.% Overview of development activity Industrial developers delivered over 2. million square feet of product in 215, and about 6 percent of it was preleased. The Napa Logistics Center hosts the majority of the market s available space at nearly 647, square feet, and with 21 requirements for spaces over 1, square feet, there seems to be strong potential for the high-quality product s absorption. Developers are attuned to the market s tenant demand as indicated by the 6. million square feet of proposed product in the pipeline. Construction deliveries, by year (s.f.) 2,5, 2,, 1,5, 1,, 5, $.53 Warehouse asking rent (monthly) $.6 Manufacturing asking rent (monthly) 2,6,941 YTD construction deliveries (s.f.) 449,887 Historical yearly deliveries (s.f.) 9.8% Historical average vacancy 961,858 Historical yearly absorption (s.f.) 1.3 million Total population 3.6% Year-over-year rent growth 44

45 Orange County Vacancy reaches historic low at year-end Rental rates increase from positive demand Following the recession-laden years, Orange County has recorded five consecutive years of positive net absorption. The 477,155 square feet of occupancy gains in the fourth quarter brought the 215 total to 2.5 million square feet. Thanks to the continued positive demand for space, market-wide average asking rental rates are well on their way towards the market peak level reached in 28. In several cases, rental rates for Class A properties have already matched peak pricing with landlords and tenants understanding there is a lack of supply in the market. Competition for space heats up Strong competition among industrial users pushed down vacancy 4 basis points in the fourth quarter to 2.7 percent, with Orange County remaining one of the tightest markets in the nation. Vacancy declined 14 basis points in 215 and has dropped 39 basis points since 21 when the vacancy rate peaked at 6.6 percent. Although over 2. million square feet of new construction has been delivered to the market during the last two years, there remains a lack of available supply for industrial users. Due to the dearth of available space, corporate tenants are placing heavier emphasis on landlords who own portfolios in order to better protect their existing space position and for more favorable future expansion opportunities. The bigger picture Orange County remains an extremely constrained industrial market with demand significantly outpacing supply. Strong economic growth is putting pressure on companies to keep up with client demand. Due to the growing economy, demand for third party logistics (3PLs) firms has been on the rise with many signing new client accounts at a fast pace. As a result of these trends, many industrial users are in a position to expand their industrial footprint. In addition to the size of usable space, users are placing heavy emphasis on the functionality of their real estate, as space requirements become more sophisticated. Rental rate appreciation year-over-year 2% 1% % -1% 6.7% 1.8% -2% -13.7% -14.3% Vacancy rate, by year Notable leases 1.4% 2.7% -1.9% 1.9% 4.% 4.4% 4.2% 3.9% 3.9% 7.4% 6.9% 8.1% 5.3% 5.5% 6.6% 6.6%.% 1.% 2.% 3.% 4.% 5.% 6.% 7.% Tenant name Deal type Size (s.f.) Kawasaki Motors New 23,231 South Coast Baking New 113,5 Phillips Pet Supply New 18, ,346,869 Inventory w/ flex (s.f.) 2.7% 3,55, Active tenant requirements (s.f.) 261,668 Planned construction (s.f.) 1% Spec construction 1,11,85 12-month new completion (s.f) 539, % Total preleased 45

46 Orlando Strong economic conditions prove market acceleration Local convention center growth serves as industrial driver As one of Orlando s largest economic drivers, the Orange County Convention Center (OCCC) has an estimated $1.9 billion annual impact serving as the second most attended convention center in the nation. With over 1.1 million attendees this year, the OCCC experienced a 3.3 percent growth in visitors. This heightened convention activity is driving convention supply firms demand for warehouse space specifically in the Southeast Orange submarket. In 215, 69, square feet of industrial space was leased to convention supply tenants, most of which signed in Southeast Orange. Compared to 214, only one convention supply tenant leased industrial space. Retail development supports warehouse demand Orlando s retail industry is among the strongest in the nation, supported by the 62. million tourists per year, as well as a growing local population. Retail tenants drive significant demand for warehouse space as the industry continues to expand with over 516, square feet of retail space under construction. This year, over 386, square feet of warehouse space was leased to retail tenants like JJ Haines and Company, Inc. who are occupying over 137, square feet in the Northwest Orange submarket. Compared to 214, demand for warehouse space from retail related tenants increased by 153, square feet, specifically in Southwest and Northwest Orange submarkets. 215 Convention supply firm leasing activity Tenant Location Square feet Freeman Expositions Southeast Orange 451,8 Shepard Exposition Services Southeast Orange 99,1 Arata Expositions Southwest Orange 58,2 Local retail activity index year-over-year change Source: Orlando EDC, JLL Research 12.5% Local retail activity yearly growth Build-to-suit development activity strengthens The year ended with a greater amount of build-to-suit versus speculative projects under construction; roughly 92.5 percent of development activity comprised builtto-suits. The appeal of these developments over speculative projects is driven by the increasing cost of construction materials and labor. As construction resources, particularly labor being utilized by the I-4 project, is reduced in Orlando, costs increase. In order to combat the scarcity of construction labor costs, local developers and owners are finding stability in build-to-suit projects. As local development across the city continues to expand, build-to-suit warehouse projects will continue to dominate the pipeline, especially with strong tenant demand in big-box warehouse space of product greater than 1, square feet. 1.5% YTD net absorption as a % of stock 8.% 2,63, Active tenant requirements (s.f.) 6,, Planned construction (s.f.) Tenant demand supports construction deliveries (s.f.) 2,, 1,5, 432,8 Quarterly completions (s.f) 57 Total deals in the quarter 1,734,4 1,457,986 1,, 5, 415, ,731 67, ,158, % Under construction leased (s.f) 46

47 (millions) (s.f. in thousands) Palm Beach Palm Beach County continues strengthening Palm Beach County closes year with record absorption gains Compared to 214, absorption increased 59.6 percent in 215, as tenants took occupancy of over 1.1 million square feet of space, the highest level in over ten years. Over 8. percent of this absorption occurred in the West Palm Beach submarket, where Aldi moved into 65, square feet in the beginning of the year. Although this one tenant comprised nearly 6. percent of all absorption gains throughout the year, every submarket in the County experienced positive absorption, driving vacancy to 4.6 percent, the lowest its been since before the recession. Absorption reaches 1-year high 1,5 1, , -1, Rents are on the rise as vacancy trends downward Since the start of 213, asking rents countywide have grown 7.6 percent in aggregate to $7.79 per square foot (NNN); however, this figure is still nearly $2. per square foot below peak levels seen before the recession. Also in that time, vacancy has declined from 7.9 percent to 4.6 percent though there was a slight uptick to start the year with the delivery of nearly 75, square feet. That added an additional 1.8 percent to the total inventory countywide, and the market has absorbed 2.8 percent of total stock year-to-date. As such, construction is not keeping pace with demand. Vacancy trends down as rents continue upward trend $8. $7.5 $7. $ Q1 Q2 213 Q3 Direct average rate 213 Q4 214 Q1 214 Q2 214 Q3 214 Q4 215 Q1 215 Q Q3 Q4 1.% 8.% 6.% 4.% 2.%.% Sales volume reaches eight year high Sales volume in Palm Beach County for industrial product reached an eight year high in 215, which saw nearly $15 million in property trades. This figure represents a 1.7 percent increase from the previous year. Further, over the previous two years, as vacancy has trended downward, the market saw more sales volume than in total. With an average price per square foot of just under $71., pricing has increased four years in a row and resulted in the highest per square foot average since 29, when buildings traded for an average of $75. per square foot. Sales volume continues increasing amidst improving market $25 $2 $15 $1 $5 $ % 8.5% Total availability 745,6 YTD completions (s.f.) 1,17,9 YTD total absorption (s.f.) $7.79 Asking rent (p.s.f.) 1.5% Quarterly rent growth 997,5 1,92,9 Planned construction (s.f.) 47

48 Philadelphia / Central Pennsylvania Landlords continue to control the market Speculative development activity accelerates Construction activity in the Greater Philadelphia market continues to play an important role due to ongoing demand for quality space, competitive replacement costs and tightening Class A and B availabilities. Between the third and fourth quarter, speculative construction grew from 79. percent of all construction activity to 82. percent, causing some concern that the market may be peaking and overheating despite strong tenant demand. While new construction throughout 215 barely kept pace with demand, end of year vacancy ticked up slightly, indicating the potential end to the current market cycle over the next few years. Short term demand remains strong, but market conditions are likely to shift to tenant favorable by 218. Vacancy ticks up slightly in Q4, still at record lows 1.% 9.5% 9.% 8.5% 8.% 9.5% 8.9% 9.% 8.7% 8.4% 8.5% 7.5% Landlords push rents higher New construction continues to deliver at peak asking rates, but landlords still have the confidence to increase asking rates on existing well-located, highquality product, particularly in Central PA and the Lehigh Valley. Continued economic growth has increased square footage demanded by tenants in the market, especially in the e-commerce sector. While vacancy rates remained relatively low, anticipated new speculative construction deliveries in 216 should help to ease pressure on rising rents, providing some tenant relief in the coming year. Available space (% of inventory) 16.% 15.% 14.% 13.% 12.% 11.% Difficult entry to market The Greater Philadelphia market is difficult for outside investors to enter due to limited trading volume, reflective of a hold mentality among investors. Such limited opportunities have investors focused on development as a means to acquisition within the market. This continues to put greater pressure on welllocated development sites in the region, forcing developers to compete for control of sites once overlooked during a time when the development pipeline had healthy inventories. Additionally, developers have begun to focus on controllable land sites with specific infrastructure or location advantages at the edges or outside of historically core locations, as well as redevelopment of obsolete facilities in core locations. 19,124,765 Available (s.f.) 8.5% 25,527,5 Active tenant requirements (s.f.) 25,653,17 Planned construction (s.f.) Notable leases Tenant name Deal type Size (s.f.) Seldat New 1,48,631 OSRAM Leaseback 526,26 Stitch Fix New 483,99 82% vs. 18% Spec construction vs. design-builds $4.54 Class A asking rent 14,691, % Leased 215 deliveries 48

49 Phoenix Market tightening as vacancy falls, rents increase Strong absorption, lots of activity in the Gilbert submarket The Gilbert submarket, situated at the far end of the Southeast Valley, is the fifthlargest submarket in Metro Phoenix. Despite its modest inventory of 16.5 million square feet, Gilbert recorded 815,336 square feet of positive absorption in 215, easily outpacing submarkets more than twice its size. While 52 percent of the submarket s absorption gains were concentrated in build-to-suit or owner-built facilities, another 34 percent came from smaller move-ins of less than 2, square feet. This healthy mix of large, institutional users and small, local tenants has given developers confidence to move forward with additional projects, with over 56, square feet of speculative space expected to deliver in 216. Gilbert s diverse mix of absorption gains 5, 4, 3, 2, 1, 463, , ,517-19,999 s.f. 2,-49, s.f. 5,+ s.f. Vacancy still falling despite speculative deliveries For the first time since the first quarter of 28, total vacancy in the Phoenix industrial market has fallen below 1 percent. After remaining flat for several quarters due to large blocks of vacant space being added with speculative deliveries, vacancy fell to 9.9 percent in the fourth quarter of 215, decreasing 6 basis points from one year prior. Strong absorption gains of approximately 5.8 million square feet in 215 (specifically in new design-builds and secondgeneration space) proved to be more than enough to outpace the nearly 5.1 million square feet of space added to the market. Total market-wide vacancy 2.% 15.% 16.1% 14.8% 1.% 13.3% 12.2% 11.% 11.6% 1.5% 8.9% 9.9% 5.% 7.%.% YTD 215 Owner-built facilities becoming more prominent than build-to-suit As the market tightens and rents continue to increase, users have begun to shift away from build-to-suits, instead opting to purchase land and build their own facilities. Of the 1.8 million square feet of design-builds delivered this year, 51 percent were build-to-suit facilities owned by a third-party investor or developer. Conversely, the remaining properties under construction do not include any build-to-suit projects, but rather 1.6 million square feet of owner-built space. Users have also taken advantage of existing facilities, resulting in a slight increase of industrial owner-user sales between Mix of property types under construction Of all industrial space currently under construction, 5.7 percent is owner-built. The remaining 49.3 percent is speculative space, with no build-to-suits under construction. 5% 31,988,823 Available space (s.f.) 9.9% 2,4,711 Q4 net absorption (s.f.) 5,867,347 YTD net absorption (s.f.) 5,97,98 YTD construction completions (s.f.) 45.8% Total completions leased 3,277, % Total preleased - under construction 49

50 (s.f. in millions) Pittsburgh Market strengthens despite downturn in energy Broad-based economic growth tightens market fundamentals further Leasing activity increased in 215 with a number of high-profile transactions. Deal flow by industry was broad based, which helped shelter the market from some of the headwinds created by energy and commodities. Additionally, the majority of tenants completing real estate transactions in 215 had stable or growing footprints, further tightening market fundamentals. Absorption in 215 totaled more than 1.3 million square feet, reducing availability in the market to 11.8 percent. The industrial market will remain landlord-favorable into 216 as limited options exist for users with requirements greater than 5, square feet. Industrial fundamentals $5.1 Asking rent Availability $4.8 $4.5 $ % 15% 1% 5% Industrial construction accelerates as deliveries are quickly absorbed Speculative construction increased significantly in 215, prompted by high levels of demand for modern warehouse product. More than 1.7 million square feet was delivered over the course of the year, with demand keeping pace, as roughly 9 percent of this product was absorbed upon delivery. This high level of activity will continue into 216 with more than 1. million square feet in planned deliveries. The majority of this activity is in the West submarket, including Ashley Capital s 316,-square-foot development at the Findlay Commerce Center and Al. Neyer s 252,-square-foot development at the Clinton Commerce Park. The downturn in energy and commodities softens industrial demand The oil and gas industry is in the midst of a downturn as international prices sit at historic lows. Rig counts in the region are down close to 5. percent year-overyear, capital expenditure budgets for 216 and 217 have been reduced significantly, and as a result, industrial space demand from the oil and gas industry has softened. The effects of the downturn have rippled through supplier industries, with U.S. Steel, Allegheny Technologies and others announcing layoffs and plant idlings in the region. Despite these setbacks, the region s industrial market remains strong, a product of its diversified economy. Development pipeline 1.8 Under construction Deliveries Annual rig counts 15 Marcellus Utica , Baker Hughes 16,2,58 Total availability (s.f.) 11.8% Total availability 1,341,164 YTD total net absorption (s.f.) 1.% YTD total net absorption $4.74 YTD average asking rates -4.4% YOY rent growth 951, 1,748,642 YTD completions (s.f.) 5

51 s.f. Portland Deliveries remain up, vacancy remains low Vacancy at an all time low, again The last two quarters of the year have seen large amounts of industrial space come online, and an increasing amount of tenant demand. This has resulted in a continued decline in the vacancy rate to 3.8 percent, 21 basis points below the previous low set in 27 of 5.9 percent. The NE Columbia Corridor, I-5 Corridor and Sunset Corridor all saw declines in vacancies despite substantial deliveries in the submarkets, while the Rivergate and Hayden Island/Swan Island submarkets saw vacancy inch up as Colgate-Palmolive and EyeLevel, Inc. exited the submarkets, respectively. Deliveries remain elevated 215 came to a strong end as both the third and fourth quarters brought in over 1. million square feet of new deliveries each, making the year s total over 2.9 million square feet of new warehouse and distribution and manufacturing space. This represents a 147 percent increase in deliveries over 214. In addition, Intel finished 1.1 million square feet of flex space, bringing year-to-date flex completions to 1.4 million square feet. Of the warehouse and distribution and manufacturing that was delivered, 6 percent was committed and 5, square feet was speculative. Investment activity continues to expand The fourth quarter saw four prominent transactions above $1 million take place in the industrial market, including two portfolio transactions combining for more that $24 million and including 16 properties in the Portland area. For the year, more that $67 million in transactions took place; nearly a 15 percent increase over the previous high-water mark set in 26 of $454 million and more than tripling the 1-year annual average of $228 million. As the fundamentals of the region s economy continue to show increasing strength, the Portland area has become more attractive to institutional and international investors. As such, international investment funds were involved on both sides of the fourth quarter portfolio transactions. Cap rates continue to compress on the industrial side with average cap rates dropping to 6.2 percent for 215. Market vacancy 1.% 8.% 9.1% 9.2% 8.6% 8.6% 6.% 7.4% 6.8% 6.7% 4.% 5.9% 5.6% 4.6% 2.% 3.8%.% Absorption and completions 3,, Absorption Completions 2,, 1,, Notable leases Tenant name Deal type Size (s.f.) LKQ New 229,141 Ashley Furniture New 168,873 Mergenthaler Transfer & Storage New 123,12 11,524,755 Available for lease (s.f.) 3.8% 4,78,68 Active tenant requirements (s.f.) 53,737 Planned construction (s.f.) 59% vs. 41% Spec construction vs. design-builds $84.59 YTD average sale price (p.s.f.) 2,94, % Total preleased 51

52 (s.f. in millions) Reno / Sparks Reno market stronger than the stats reflect Market growing while statistics remain flat The Reno market continues to grow. Several large construction projects are underway with Tesla and Switch building 5.5 million square feet and 987,64 square feet, respectively, in the Tahoe Reno Industrial Center. Both projects are expected to create additional demand for space. Leasing activity has increased, several spec projects have been successful and more development is underway. Dermody preleased 27, square feet in their new North Valleys project. They have room to construct another 9,-square-foot building and will likely wait for a tenant committal prior to groundbreaking. There are several large tenants in the market, and it remains to be seen whether any leases will be signed. Panattoni has completed grading and is under construction on a new 7,-square-foot facility and has another pad that can accommodate two 3,-square-foot buildings, or another 7,-square-foot facility. 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, further 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 are increasing The chart to the right shows increasing vacancy, but this is due to new speculative deliveries. 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 seven for 25,+. 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 be completed by the fourth quarter. We expect them to be successful and quickly leased up. 3,74,62 YTD completions (s.f.) 63.6% YTD completions preleased 9.3% +18 bps Vacancy is up from one year ago Completions vs. net absorption % 13.% 11.% 9.% 7.% 5.% Notable leases 13.6% 13.4% Tenant name Deal type Size (s.f.) Jardin New 278, Uti Logistics Renewal 271,152 jet.com New 16, $4. Average total asking rent ($ p.s.f.) +3.4% Asking rent YOY growth Completions 11.2% 1.2% Net absorption 9.1% 7.5% 9.3% ,323,71 8.8% Total preleased 52

53 Richmond New supply pipeline tapers into 216 Build to suits driving net absorption and investment sale volume Four 252,-square-foot warehouses in the I-95/I-295/Route 1 submarket were the largest source of net absorption for the Richmond market in 215, contributing 67. percent of the 1.5 million square feet recently occupied over the trailing 12 months. These hurricane-proof warehouses may boost investment sale volume in 216 as well. Currently owned by USAA, the seller of the two 1. million-square-foot Amazon facilities that traded in 213 and 214, all four assets were long term leased to a credit tenant and could draw the highest per-squarefoot pricing in the Richmond market next year. Build to suits delivered year to date 1,387,66 Square feet delivered year-to-date Additional speculative development pending into 216 In the fourth quarter, Class A vacancy fell to 3.7 percent and only one speculative distribution center totaling 129,6 square feet, Eastport VIII, was delivered in 215. Now 3. percent leased after being completed in the first quarter this year, the project commanding rental rates 15.6 percent above the Class A average served as a bellwether for other pending speculative projects that have yet to break ground, despite substantial interest from active tenants in market. With only four Class A blocks over 5, square feet, the lack of modern high-bay distribution space will be a major hurdle for tenants looking to expand within and into the Richmond market over the next four quarters. Existing Class A blocks (contiguous square feet) Class B 3 Class A , - 99,999 s.f. 1, - 199,999 s.f. > 2, s.f. Uptick in owner-user sales after a lull of activity in 214 The closing window for historically low interest rates has influenced some users to transition from leasing to owning, with over $26.4 million in owner-user sales recorded by the end of 215. The most notable transaction was Ukrop s Dress Express purchase of the former Premier Pet Building in the SWQ submarket. The 72,-square-foot warehouse and distribution center was constructed in 25 and traded for $41.67 per square foot. Historical owner-user sale volume Dollar volume in millions Average $ p.s.f. $32.8 $26.64 $14.51 $27.92 $18.11 $2.83 $3.6 $17. $27.5 $36.7 $8.6 $ ,722,182 Total inventory (s.f.) 7.1% Direct vacancy -152,145 Q4 215 net absorption (s.f.) 1,56,98 YTD net absorption (s.f.) $3.36 NNN Overall direct average asking rent $4.54 NNN Class A direct average asking rent 2, 1% Total preleased 53

54 # of blocks Sacramento Large block users face limited options for growth Large blocks of Class A space are limited Only four large blocks of Class A space above 25, square feet are available. Users seeking modern bulk distribution space face a supplyconstrained landscape with few existing alternatives across Sacramento. There are currently 11 tenants, predominately from the distribution and logistics industry, seeking blocks of space 25, square feet or larger. Small users are facing a lack of supply as well. There is a need for more industrial space that caters to smaller and medium size tenants. High construction costs and fees for development in the Sacramento market, and a lack of buildable land are among the reasons why such development has been limited on a speculative basis. New developments and deliveries Year-to-date, new speculative deliveries reached nearly 1.3 million square feet, well above 214 levels. Since 214, there have been nine completed new developments. The Southport area of the West Sacramento submarket has been a hot spot for development, encompassing the majority of these deliveries. Only one project is currently underway in the market, in Elk Grove, totaling 49,25 square feet. It is expected to deliver in the first quarter of 216. Favorable financing rates are driving buying activity, which has been on the rise since 212 Quality product is increasingly tough to find and cap rates have continued to compress. Investment sales activity in the Sacramento region continues to be strong. Transaction volume and activity have increased similar to other secondary markets. This has been driven by investors seeking opportunities outside of the overheated core markets as well as by attractive financing options. Available quality blocks of space: warehouse & distribution inventory (includes Class A & B-caliber inventory) 2 15 Vacancy rates by submarket Auburn/Lincoln South Sacramento Northgate West Sacramento Woodland Ind Sunrise Ind Power Inn Elk Grove/Laguna Roseville/Rocklin NE Sacramento Folsom/El Dorado McClellan Richards Downtown.% 5.% 1.% 15.% 2.% 25.% 3.% Average sale pricing 3 Existing , - 249,999 25, - 499,999 > 5, (s.f.) 9.8% 9.4% 9.4% 8.2% 7.1% 7.% 6.8% 6.3% 4.9% 4.2% 3.7% 2.9% Under construction 24.1% 23.5% The overall vacancy rate is 9.8 percent $73.2/sf Average sale price for industrial assets during the fourth quarter $.4 Average asking rent (p.s.f., monthly) 9.8% Overall vacancy 2,358,638 YTD net absorption (s.f.) 292,285 Quarterly completions (s.f.) 6,972,5 Active requirements (s.f.) 4 Existing blocks of space 25 ksf+ 49,25 1,257,972 YTD completions (s.f.) 54

55 (s.f.in millions) 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. Approximately 925,68 square feet of industrial product completed construction this quarter, with an additional 1.8 million square feet remaining under construction to be delivered throughout 216. Construction is expected to continue leading market activity, due in part to comparative replacement costs, functional obsolescence and tightening Class A availabilities. 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 levels in 216 will not match 215 s record totals. However, we anticipate 1.9 million square feet will be 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 continues to strengthen and tenants seek to modernize their warehouse facilities. Investment sales activity is at its peak since the recession, and this will continue in 216. The challenge is finding product to purchase. This will create a compression on cap rates, which could dip below 6. percent. Completions vs. net absorption Completions Net absorption % 6.% 4.% 6.% 5.1% 4.5% 4.5% 4.9% 4.2% 2.% 4.8%.% Notable leases Tenant name Deal type Size (s.f.) Enlinx New 418,612 Rallysport Direct New 86,38 Exel, Inc. New 185,796 2,875,622 YTD completions (s.f.) 4.% YTD completions leased 4.8% -6 bps Vacancy is down from one year ago $4.95 Average total asking rent ($ p.s.f.) +3.6% Asking rent YOY growth 1,826, % Total preleased 55

56 (s.f. in millions) San Antonio Slowly but surely, the market is trending up Vacancy down San Antonio s industrial vacancy rate ended third quarter at 6.5 percent, down 6 basis points from 214. With 6 percent of last quarter s deliveries preleased, fourth quarter witnessed an additional 3 percent of new deliveries become occupied. As developments came to fruition, year-end market conditions continued to climb. 215 played host to several large tenants signing new leases, including Niagara Bottling, LLC for 557, square feet in Guadalupe County, O Reilly Auto Parts for 388, square feet at Titan Business Park in Selma, Person for 76,229 square feet at Green Mountain Business Park and KPG Telecommunications for 71,25 square feet at 8154 Bracken Circle. Completions vs. net absorption Completions Net absorption Average rental rates up 2.% year-over-year With decreased vacancy, strong absorption and an increase in preleased activity, 215 has seen an uptick in asking rent. The average quoted asking rate for warehouse and distribution space was $5.9 per square foot by the end of the quarter, up $.1 from a year ago. Rates should remain in check, or decline slightly, in the coming months as more construction delivers and the market comes to a short-term equilibrium. Deliveries and construction Completions, year-to-date, totaled 676,621 square feet with two notable deliveries being FedEx Distribution s facility (22,753 square feet, fully occupied) and Building 1 of Alamo Ridge Business Park (96,324 square feet, 38 percent occupied). An additional 2.1 million square feet is presently underway, with the largest projects being Lookout Road (388, square feet, fully preleased) and Enterprise Building II (324,812 square feet, presently available). Speculative development totaled 71,27 square feet, and was spread out across Green Mountain Industrial Park, University Oak Park, Rittiman Plaza and Old Pearsall Park. 1.% 8.% 9.7% 9.1% 8.3% 6.% 7.1% 6.3% 6.1% 6.5% 4.% Notable leases Tenant name Deal type Size (s.f.) Niagara Bottling New 557, O Reilly Auto Parts New 338, Pearson New 76,229 KPG Telecommunications New 71,25 676,621 YTD completions (s.f.) 6.5% $5.5 Average total asking rent ($ p.s.f.) 2,14, % YTD completions preleased -6 bps Vacancy is down from last year +2.% Asking rent YOY growth 44.9% Total preleased 56

57 (s.f. in thousands) San Diego Construction at highest level in nine years Construction pipeline at a 9-year high Rents and occupancy rates have surpassed their pre-recession peak levels. Developers have taken notice, and the current pipeline of industrial property under construction is now at the highest level since 26. Not since 28 has San Diego had even half as much under construction as the current 1. million square feet, and since then, construction levels have not surpassed a third of the current total. Scannell Properties 36,-square-foot build-to-suit for FedEx in Oceanside is the largest building under construction. Vacancy below prerecession levels Following six consecutive years of positive net absorption, totaling over 8.7 million square feet, the vacancy rate continued its steep decline. At 4. percent, the direct vacancy rate is now 169 basis points lower than the prerecession low reached in 26. The 5.3 percent vacancy rate of 21 was the lowest level recorded in San Diego until 215. Although the construction pipeline is at a 9- year high, over half of that space is preleased. The total amount of available space under construction is less than one-fourth the amount of square feet absorbed each of the past two years. Vacancy rates should remain tight in 216 despite the increased construction. Two Sports Arena industrial properties to remain industrial Two industrial properties in the Sports Arena area that were to be potentially redeveloped remained in the industrial inventory. The 85,-square-foot former Eaton building at 2727 Kurtz Street was available for nearly five years, and the property was being pursued by developers for residential conversion. In the end, the building was leased to Amazon, scuttling any redevelopment ideas. Likewise, the 373,-square-foot former Midway postal facility was on the market for a number of years and proposed as a mixed-use redevelopment. Rexford Industrial bought the property for $19.3 million during the quarter and will convert the former postal facility into a multi-tenant industrial project. Under construction: construction pipeline at 1-year high 2, 1,564 1,5 1,67 1, Direct vacancy below prerecession levels 1.% 9.7% 9.4% 9.1% 8.% 5.% 7.1% 7.4% 5.9% 6.3% 5.8% 4.%.% Potential redevelopment properties remain industrial 458, s.f. 97,36 Vacant sublease (s.f.) $9.36 Direct average asking rent 681,963 Q4 net absorption (s.f.) 1,67,161 4.% Direct vacancy 1.9% YOY rent growth 2,424,427 YTD net absorption (s.f.) 57.% Total preleased 57

58 Seattle-Bellevue 215 was a banner year for the industrial market Vacancy is lower than it s been in more than 1 years Market vacancy in the Seattle-Bellevue region dropped 8 basis points yearover-year to its current rate of 3.6 percent, which is the lowest rate in more than 1 years. Every cluster in the region Seattle, Kent Valley, Pierce County, Eastside and Northend has seen vacancy drop in the last 12 months. Vacancy in the Seattle cluster dropped 3 basis points in the fourth quarter to an astounding 1.6 percent. The Eastside market had the highest vacancy rate at 5.6 percent, which represents a decline of 1 basis points year-over-year, and still places it firmly in landlords favor. New development in the Kent Valley and Pierce County markets has been outpaced by leasing activity, which has helped to keep vacancy low. Net absorption surpasses 6. million square feet For the fifth consecutive year net absorption has surpassed 3. million square feet. More than 1.5 million square feet were taken down in the fourth quarter the third-straight quarter more than 1. million square feet was absorbed. This brought 215 s net absorption total to 6.2 million square feet the most annual absorption seen since 27. Furthermore, a staggering 15.5 million square feet of space has been taken down since 213. As a result of this strong leasing activity, rental rates continue to increase significantly, and are expected to rise through 216, particularly in the highly sought after Southend area. No end in sight for development boom The Seattle-Bellevue industrial market, which spans from Everett in the north through Lakewood in the south, has seen a construction boom over the past three years. The majority of new construction starts have been in the Southend, but the Eastside and Northend markets have also seen a recent uptick in construction starts. More than 9.2 million square feet has been added to the market since the beginning of 213, with 4.1 million square feet being added in 215 alone. An additional 2.6 million square feet is currently under construction. The overwhelming majority of development projects are speculative, with approximately 3 percent of the inventory currently preleased. 277,314,316 Total market size (s.f.) 3.6% 4,12,749 YTD deliveries (s.f.) 2,587,338 Under construction (s.f.) Historical vacancy 1.% 8.% 6.% 4.% 2.% 8.2%.% Net absorption in the last three years 7.3% 5.9% 5.5% Square feet of new product delivered 4.4% 3.6% 15,464,475 s.f. Net absorption in the region ,, 4,12,749 4,, 3,85,813 2,72,627 2,, 563, , , % YOY rent growth 4.4% Q/Q rent growth 6,29, net absorption (s.f.) 1,542,35 Quarterly net absorption (s.f.) 58

59 South Bay / Silicon Valley Migration of industrial activity northeast continues Facebook and Google s recent purchases continue driving tenant displacement and industrial migration Recent R&D purchases by tech leaders Facebook and Google have continued to fuel industrial tenant migration out of the South Bay, effectively pushing industrial activity northeast into the East Bay area. Market wide, 83 percent of South Bay s submarkets experienced less than 25, square feet of total net absorption in 215. The majority of industrial activity was concentrated solely in Fremont, which comprised 69 percent of the market s annual net absorption, or over 1.8 million square feet. Total annual absorption (s.f.) 4,, 2,, -2,, Industrial development follows demand north to Fremont The shift of the industrial core to the 88 corridor will continue as tenants and developers focus their efforts on more affordable, less land-constrained areas. Fremont s influx of industrial activity and the strong tenant demand has lowered the submarket s vacancy rate to 2.9 percent. With 926,3 square feet currently under construction (of which 31, square feet is accounted for), and another six proposed projects in the pipeline, about 1.2 million square feet of build-to-suit and speculative projects combined, available spaces will likely be leased up as they come online., by year 15.% 14.1% 1.% 11.1% 11.8% 12.% 12.9% 11.2% 9.9% 8.8% 8.8% 7.9% 5.% 5.8%.% Fourth quarter leasing activity The South Bay finished 215 with about 3.6 million square feet of annual leasing activity. During the fourth quarter, satellite maker Space Systems Loral (SSL) concluded the year with signing a lease at 1989 Little Orchard Street in San Jose. This deal marks a shift in location strategy for the company, which currently occupies multiple buildings on the Peninsula. SSL s movement to San Jose signals the appeal of more industrial-oriented areas for companies looking to accommodate growth. Declining industrial base (s.f.) 76,, 73,, 7,, 67,, Industrial base has declined 1.5% 64,, $.77 Warehouse asking rate $1.25 Manufacturing asking rent 2,626,793 YTD net absorption (s.f.) 3,584,494 YTD leasing activity (s.f.) 2,82, Active requirements (s.f.) 25.6% Share of regional requirements 1,134,129 YTD completions (s.f.) 1.5% Decline in industrial base 59

60 # of blocks St. Louis Construction activity quickly ramping up Transportation and warehousing is growing quickly With growth continuing in the market, industrial employment is at its highest level since 21. The Federal Reserve recently wrote that The transportation and warehousing sector in St. Louis continued to grow at double-digit rates the fastest in over two decades. The industry makes up 19 percent of employment across the region and will continue to play an integral role in the local economy. The potential for rail investment is in play as Burlington Northern Santa Fe (BNSF) recently purchased 15 acres at Fenton Logistics Center, the site of the former Chrysler Plant. BNSF currently has its rail hub at a much older facility in South St. Louis City. Industrial occupying employment (jobs, in thousands) , BLS Bucking the national trend Outside of the major industrial markets across the country, speculative construction is down 12.2 percent from one year ago; this is not the case in St. Louis. Compared to last year, speculative construction has increased 179 percent. With more buildings in the pipeline, the development cycle is just starting to ramp up. New developments are not just large modern bulk buildings either. Green Street is developing a 125,-square-foot building in the city, while NorthPoint Development just broke ground on a 2,-square-foot facility in North County, revitalizing Hazelwood Logistics Center. Available warehouse & distribution inventory (Class A & B) 15 2 Existing Under construction , - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. Construction driving occupancy growth Absorption reached nearly 2. million square feet in 215, bringing the total over the past two years to just under 6. million square feet. In the past several years, existing buildings leased rapidly, but construction was slow to ramp up, creating a strong demand for new product. Now that construction has started to pickup, it has become the driver of absorption. This year, new construction accounted for 9.2 percent of absorption market wide. Two speculative modern bulk distribution buildings delivered this year and were 94.4 percent leased when they came online. Absorption breakdown Of the 1.9 million square feet of absorption in 215, 9.2 percent came from new construction 9% 211,562,61 Inventory (s.f.) 5.9% 188,56 Quarterly warehouse absorption (s.f.) 1,715,546 YTD warehouse absorption (s.f.) 3,163, % Total construction preleased 1,919,5 YTD construction completions (s.f.) 4.1% Change in warehouse asking rents 6

61 # of blocks s.f. Tampa Bay Tampa Bay positioned for continued growth in 216 Strong absorption continues in final quarter of 215 After a strong fourth quarter, Tampa Bay has now seen more than 375, square feet of positive absorption for eight straight quarters. The market has averaged a robust 7.3 million square feet of leasing activity each of the past five years. The continued strong absorption can be attributed to the continual shift of consumer purchases online, as multiple regional distribution and fulfillment centers for e-commerce groups have opened in East Tampa and Polk County. With a distinct lack of existing product to service these users, more speculative and built-to-suit construction is expected. Warehouse & distribution annual absorption 6,, 4,, 2,, -2,, -4,, Most Pinellas submarkets seeing vacancies drop to all-time lows Most submarkets are seeing vacancies approach levels last seen in After a strong fourth quarter of absorption, eight of nine submarkets currently have a vacancy rate below 1. percent. The Gateway, Mid-Pinellas, North Pinellas and Manatee/Sarasota submarkets are all experiencing record low vacancies. Tenants looking around the market are feeling the squeeze since some of the vacant space is either unusable or of poor quality. Strong demand is expected to continue into 216 driving current vacancy rates even lower across the market. Submarket vacancies East Polk East Side Mid-Pinellas Manatee/Sarasota North Pinellas Gateway West Polk Westshore/Airport South Pinellas 6.5% 6.4% 5.8% 5.4% 5.% 4.8% 3.6% 9.2% 11.5%.% 2.% 4.% 6.% 8.% 1.% 12.% 14.% Source: Thomson Reuters, JLL Research Large blocks remain at a premium Leasing activity has been high in 215, especially for big block space. There are only seven Class A blocks larger than 1, square feet available across the market, down from 11 at the end of 214, with only three available in Polk County. More than 1 leases greater than 1, square feet have been signed in the past two quarters alone, primarily in West Polk, East Tampa and Westshore. More than 12 tenants are currently seeking space in excess of 1, square feet in those two submarkets alone, which current availabilities cannot accommodate, likely leading to future construction. Available Class A blocks of space: warehouse & distribution 1 8 Existing Under construction , - 249,999 s.f. 25, - 499,999 s.f. > 5, s.f. 194,58,271 Total inventory (s.f.) 6.9% 97,58 Q4 215 net absorption (s.f.) 2,862,152 YTD net absorption (s.f.) $4.76 Direct average asking rent 7.2% YOY rent growth 1,359,5 545,12 YTD delivered (s.f.) 61

62 # of blocks Washington, DC Washington, DC posts healthy annual absorption Northern Virginia vacancy pushes lower Vacancy pushed lower at the close of the year as supply continued to lag behind consistent and robust demand. With Class A availability nearly non-existent, and leasing velocity slowed due to lack of existing product, vacancy and absorption alike will be reliant on construction and preleased activity over the next year. Greater Fairfax posted the most impressive numbers where vacancy fell 12 basis points to just 4.3 percent for warehouse and distribution product. Prince William East also posted strong quarterly absorption where vacancy fell 7 basis points to 8.8 percent. Healthy absorption drives vacancy downward in Suburban Maryland Healthy fourth quarter absorption has driven vacancy down across the majority of the market. Limited supply of warehouse and distribution space continued to be the story as vacancy dropped an additional 2 basis points through the fourth quarter. This solidified a 1-year low at 8. percent. Prince George s County continued to account for the vast majority of growth with 95.9 percent of the quarterly net absorption. Despite the healthy growth, Frederick County posted negative absorption due to a very inactive quarter. The largest move outs occurred in Montgomery and Prince George s counties at 63 Sheriff Road and 1671 Industrial Drive, totaling nearly 2, square feet in negative absorption. Annual construction deliveries exceed 1.5 million square feet Development has picked up considerably in the Dulles Corridor where vacancy has dropped 3 basis points in the fourth quarter alone. A robust and consistent demand from data centers and warehouse users alike continued to fill up the limited availabilities while driving new requirements. Additional construction, both speculative and build-to-suit, have broken ground as nearly 7, square feet is set to deliver in 216, with nearly 5, square feet already preleased. Notable preleases include Raytheon taking down 156,4 square feet at 2291 Ladbrook Drive and a data center user signing on two 15,-square-foot buildto-suit buildings at 786 Wellington Road. Northern Virginia vacancy, by submarket Prince William West Prince William East Herndon/Reston Southeast Fairfax Greater Fairfax Dulles South Dulles North Alexandria/Arlington.% 2.% 4.% 6.% 8.% 1.%12.%14.%16.% Suburban Maryland vacancy, by submarket Southern PG Northern PG College Park Central PG Bowie Montgomery County Frederick County.% 5.% 1.% 15.% 2.% Northern Virginia available blocks of space % 3.% 3.9% 4.3% 5.% 6.% 7.1% 6.5% Existing 7.8% 8.2% 8.5% 8.8% 9.% 16.% Under construction 4 1 5, - 99,999 s.f. 1, - 249,999 s.f. > 25, 14.8% 96,299,283 Total inventory (s.f.) 8.% Overall vacancy 313,45 Q4 215 net absorption (s.f.) 2,31,681 YTD net absorption (s.f.) $7.75 Warehouse & dist. avg. asking rent $7.16 Manufacturing avg. asking rent 1,626, % Total preleased 62

63 National vacancy will drop closer to 6. percent, and annual warehouse rent growth of 4.5 percent is expected in

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 Senior 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. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 23 corporate offices, operates in 8 countries and has a global workforce of approximately 58,. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 214. Its investment management business, LaSalle Investment Management, has $55.3 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 a nd 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