The CoStar Industrial Report

Transcription

1 The CoStar Industrial Report M I D - Y E A R

2 MID-YEAR 2013 COLORADO SPRINGS Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets Inventory & Development Analysis Inventory & Development Analysis Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Building Type & Market Historical Figures at a Glance Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters CBD Market Greater CBD Market North Market Northeast Market Northwest Market Southeast Market Southwest Market Teller County Market 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A

3 COLORADO SPRINGS MID-YEAR 2013 Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Group's base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2013 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

4 MID-YEAR 2013 COLORADO SPRINGS Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are buildingtype specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C

5 COLORADO SPRINGS MID-YEAR 2013 Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

6 OVERVIEW MID-YEAR 2013 COLORADO SPRINGS Colorado Springs s Vacancy Decreases to 8.8% Net Absorption Positive 149,174 SF in the Quarter The Colorado Springs Industrial market ended the second quarter 2013 with a vacancy rate of 8.8%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 149,174 square feet in the second quarter. Vacant sublease space remained unchanged in the quarter, ending at 99,028 square feet. Rental rates ended the second quarter at $5.97, a decrease over the previous quarter. There was 158,100 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Colorado Springs Industrial market was positive 149,174 square feet in the second quarter That compares to positive 120,766 square feet in the first quarter 2013, positive 465,666 square feet in the fourth quarter, and positive 147,297 square feet in the third quarter. The Flex building market recorded net absorption of positive 66,985 square feet in the second quarter 2013, compared to positive 21,668 square feet in the first quarter 2013, positive 261,061 in the fourth quarter, and negative (18,414) in the third quarter. The Warehouse building market recorded net absorption of positive 82,189 square feet in the second quarter 2013 compared to positive 99,098 square feet in the first quarter 2013, positive 204,605 in the fourth quarter, and positive 165,711 in the third quarter. Vacancy The Industrial vacancy rate in the Colorado Springs market area decreased to 8.8% at the end of the second quarter The vacancy rate was 9.3% at the end of the first quarter 2013, 9.6% at the end of the fourth quarter, and 10.4% at the end of the third quarter. Flex projects reported a vacancy rate of 12.5% at the end of the second quarter 2013, 13.6% at the end of the first quarter 2013, 13.9% at the end of the fourth quarter, and 15.2% at the end of the third quarter. Warehouse projects reported a vacancy rate of 8.0% at the end of the second quarter 2013, 8.3% at the end of first quarter 2013, 8.6% at the end of the fourth quarter, and 9.4% at the end of the third quarter. Largest Lease Signings The largest lease signings occurring in 2013 included: the 85,319-square-foot lease signed by High Performance Engineering, Inc. at ArrowsWest Building I in the Northwest market; the 34,200-square-foot deal signed by Aeroflex Rad at 5030 Centennial Blvd in the Northwest market; and the 24,000- square-foot lease signed by K & H Manufacturing CO at Airport Business Center - Bldg A in the Southeast market. Sublease Vacancy The amount of vacant sublease space in the Colorado Springs market stayed the same at 99,028 square feet by the end of the second quarter 2013, from 99,028 square feet at the end of the first quarter There was 120,886 square feet vacant at the end of the fourth quarter and 120,886 square feet at the end of the third quarter. Colorado Springs s Flex projects reported vacant sublease space of 23,915 square feet at the end of second quarter 2013, Vacancy Rates by Building Type % Flex Warehouse Total Market 18% 16% 14% Vacancy Rate 12% 10% 8% 6% 4% 2% 0% COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1

7 COLORADO SPRINGS MID-YEAR 2013 OVERVIEW from the 23,915 square feet reported at the end of the first quarter There were 45,773 square feet of sublease space vacant at the end of the fourth quarter, and 45,773 square feet at the end of the third quarter. Warehouse projects reported no vacant sublease space from the first quarter 2013 to the second quarter Sublease vacancy went from 75,113 square feet to 75,113 square feet during that time. There was 75,113 square feet at the end of the fourth quarter, and 75,113 square feet at the end of the third quarter. Rental Rates The average quoted asking rental rate for available Industrial space was $5.97 per square foot per year at the end of the second quarter 2013 in the Colorado Springs market area. This represented a 3.4% decrease in quoted rental rates from the end of the first quarter 2013, when rents were reported at $6.18 per square foot. The average quoted rate within the Flex sector was $7.17 per square foot at the end of the second quarter 2013, while Warehouse rates stood at $5.74. At the end of the first quarter 2013, Flex rates were $7.23 per square foot, and Warehouse rates were $5.93. Deliveries and Construction During the second quarter 2013, no new space was completed in the Colorado Springs market area. This compares to 0 buildings totaling 0 square feet that were completed in the first quarter 2013, one building totaling 210,000 square feet completed in the fourth quarter, and 125,060 square feet in one building completed in the third quarter. There were 158,100 square feet of Industrial space under construction at the end of the second quarter The largest projects underway at the end of second quarter 2013 were 1350 Bellprat View, a 155,220-square-foot building with 100% of its space pre-leased, and 3130 N Hancock Ave, a 2,880-square-foot facility that is 39% pre-leased. U.S. Vacancy Comparison Past 8 Quarters Inventory Total Industrial inventory in the Colorado Springs market area amounted to 34,155,867 square feet in 1,859 buildings as of the end of the second quarter The Flex sector consisted of 6,335,691 square feet in 256 projects. The Warehouse sector consisted of 27,820,176 square feet in 1,603 buildings. Within the Industrial market there were 47 owner-occupied buildings accounting for 3,529,678 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Colorado Springs industrial sales figures fell during the first quarter 2013 in terms of dollar volume compared to the fourth quarter of. In the first quarter, four industrial transactions closed with a total volume of $8,185,000. The four buildings totaled 205,940 square feet and the average price per square foot equated to $39.74 per square foot. That compares to three transactions totaling $18,437,000 in the fourth quarter. The total square footage was 147,413 for an average price per square foot of $ Total year-to-date industrial building sales activity in 2013 is up compared to the previous year. In the first three months of 2013, the market saw four industrial sales transactions with a total volume of $8,185,000. The price per square foot has averaged $39.74 this year. In the first three months of, the market posted one transaction with a total volume of $2,400,000. The price per square foot averaged $ Cap rates have been lower in 2013, averaging 7.50%, compared to the first three months of last year when they averaged 9.80%. One of the largest transactions that has occurred within the last four quarters in the Colorado Springs market is the sale of Taylor Farms in Colorado Springs. This 83,616-square-foot industrial building sold for $15,200,000, or $ per square foot. The property sold on 12/20/, at a 7.50% cap rate. Reports compiled by: Ethan Reed CoStar Senior Research Manager. 12.0% Colorado Springs United States 1% Vacancy Rate 8.0% 6.0% 4.0% 2.0% % Source: CoStar Property 2 THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

8 MARKETS MID-YEAR 2013 COLORADO SPRINGS CoStar Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters CBD Ind Greater CBD Ind North Ind Northeast Ind Northwest Ind Southeast Ind Southwest Ind Teller County Ind 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3

9 COLORADO SPRINGS MID-YEAR 2013 INVENTORY & DEVELOPMENT Historical Deliveries Deliveries Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA Market Under Construction Inventory Average Bldg Size # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Northeast Ind 1 155, ,220 10% 29, ,220 North Ind 1 2,880 1, % 17,522 2,880 Teller County Ind % 13,122 0 Greater CBD Ind % 11,330 0 CBD Ind % 12,259 0 Northwest Ind % 34,995 0 Southeast Ind % 15,741 0 Southwest Ind % 14,418 0 Totals 2 158, , % 18,373 79,050 Recent Deliveries Leased & Un-Leased SF in Deliveries Since Leased Un-Leased Millions of SF THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

10 INVENTORY & DEVELOPMENT MID-YEAR 2013 COLORADO SPRINGS Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 0.3 Construction Starts Deliveries Millions of SF Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF % $ ,000 SF - 99,999 SF % $ ,000 SF - 249,999 SF % $ ,000 SF - 499,999 SF % $0 0 0 >= 500,000 SF % $0 0 0 Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA No 2013 Deliveries Currently Under Construction By Building Type By Tenancy Type 2% 81% 19% 50% 50% 98% Multi Single Flex Warehouse Multi Single 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5

11 COLORADO SPRINGS MID-YEAR 2013 INVENTORY & DEVELOPMENT 6 THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

12 FIGURES AT A GLANCE MID-YEAR 2013 COLORADO SPRINGS Flex Market Statistics Mid-Year 2013 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD Ind 3 42, % 10, $4.50 Greater CBD Ind ,562 22,820 22, % 3, $8.81 North Ind ,405 40,168 40, % (35,943) 0 0 $6.86 Northeast Ind ,766 99,552 99, % 10, $11.04 Northwest Ind 55 2,466, , , % 103, $6.41 Southeast Ind 80 1,556, , , % (2,461) 0 0 $6.39 Southwest Ind ,785 5,720 5, % 6, $7.37 Teller County Ind 4 68,388 7,354 7, % (7,354) 0 0 $5.99 Totals 256 6,335, , , % 88, $7.17 Warehouse Market Statistics Mid-Year 2013 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD Ind ,079 62,122 62, % 8, $5.77 Greater CBD Ind 126 1,306,697 61,209 61, % 17, $5.95 North Ind 261 4,652, , , % (19,071) 0 2,880 $5.53 Northeast Ind 89 2,138,768 21,701 21, % (1,160) 0 155,220 $8.26 Northwest Ind 155 4,882,432 1,077,029 1,077, % 53, $5.13 Southeast Ind ,074, , , % 117, $5.53 Southwest Ind 140 2,212,051 24,735 24, % 4, $6.38 Teller County Ind ,568 1,100 1, % $5.49 Totals 1,603 27,820,176 2,142,619 2,217, % 181, ,100 $5.74 Total Industrial Market Statistics Mid-Year 2013 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD Ind ,585 62,122 62, % 18, $5.60 Greater CBD Ind 137 1,552,259 84,029 84, % 21, $6.26 North Ind 301 5,274, , , % (55,014) 0 2,880 $5.61 Northeast Ind 101 2,931, , , % 9, ,220 $8.84 Northwest Ind 210 7,349,006 1,399,283 1,409, % 156, $5.34 Southeast Ind ,631,636 1,007,433 1,096, % 115, $5.69 Southwest Ind 191 2,753,836 30,455 30, % 11, $6.50 Teller County Ind ,956 8,454 8, % (7,354) 0 0 $5.76 Totals 1,859 34,155,867 2,912,443 3,011, % 269, ,100 $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7

13 COLORADO SPRINGS MID-YEAR 2013 FIGURES AT A GLANCE Flex Market Statistics Mid-Year 2013 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates ,335, , , % 66, $ ,335, , , % 21, $ ,335, , , % 261, , $ ,125, , , % (18,414) ,000 $ ,127, , , % ,000 $ ,127, , , % 19, ,000 $ ,127, , , % (971) ,000 $ ,127, , , % 46, $ ,127, , , % 50, $ ,127, ,860 1,033, % (29,777) $ ,127, ,083 1,003, % 54, $ ,127,851 1,015,693 1,058, % 53, $ ,127,851 1,062,159 1,112, % 32, $ ,127,851 1,086,270 1,144, % (2,594) $ ,127,851 1,097,947 1,142, % (121,969) $ ,127,851 1,007,671 1,020, % (75,499) 3 41, $7.83 Quoted Warehouse Market Statistics Mid-Year 2013 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates ,603 27,820,176 2,142,619 2,217, % 82, ,100 $ ,603 27,820,176 2,224,808 2,299, % 99, ,220 $5.93 1,603 27,820,176 2,323,906 2,399, % 204, ,220 $5.89 1,603 27,820,176 2,528,511 2,603, % 165, , $5.88 1,602 27,695,116 2,569,162 2,644, % 70, ,060 $5.79 1,602 27,695,116 2,643,008 2,714, % (77,603) 1 22, ,060 $5.97 1,601 27,673,020 2,490,309 2,615, % (53,904) ,096 $6.03 1,601 27,673,020 2,436,405 2,561, % 150, , ,096 $6.09 1,600 27,648,985 2,562,508 2,687, % 88, ,035 $6.12 1,600 27,648,985 2,651,233 2,776,146 1% 126, ,035 $ ,600 27,648,985 2,776,209 2,902, % 274, $ ,600 27,648,985 3,050,238 3,176, % 182, $ ,600 27,648,985 3,250,002 3,358, % 113, , $ ,599 27,637,357 3,319,099 3,460, % 18, , ,628 $ ,597 27,622,861 3,325,809 3,465, % (121,600) 9 103, ,124 $ ,588 27,519,573 3,044,546 3,240, % (948,237) 9 107, ,380 $6.34 Quoted Total Industrial Market Statistics Mid-Year 2013 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates ,859 34,155,867 2,912,443 3,011, % 149, ,100 $ ,859 34,155,867 3,061,617 3,160, % 120, ,220 $6.18 1,859 34,155,867 3,160,525 3,281, % 465, , ,220 $6.13 1,858 33,945,867 3,416,191 3,537, % 147, , ,000 $6.12 1,858 33,822,967 3,434,847 3,561, % 71, ,060 $6.03 1,858 33,822,967 3,509,675 3,633, % (58,349) 1 22, ,060 $6.07 1,857 33,800,871 3,376,230 3,552, % (54,875) ,096 $6.12 1,857 33,800,871 3,335,355 3,497, % 196, , ,096 $6.20 1,856 33,776,836 3,500,027 3,670, % 139, ,035 $6.24 1,856 33,776,836 3,642,093 3,809, % 96, ,035 $ ,856 33,776,836 3,737,292 3,906, % 328, $ ,856 33,776,836 4,065,931 4,234, % 235, $ ,856 33,776,836 4,312,161 4,470, % 146, , $ ,855 33,765,208 4,405,369 4,605, % 16, , ,628 $ ,853 33,750,712 4,423,756 4,607, % (243,569) 9 103, ,124 $ ,844 33,647,424 4,052,217 4,260, % (1,023,736) , ,380 $6.76 Quoted 8 THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

14 LEASING ACTIVITY MID-YEAR 2013 COLORADO SPRINGS Historical Rental Rates Based on Quoted Rental Rates $8.00 Flex Warehouse Total Market $7.00 $6.00 Dollars/SF/Year $5.00 $4.00 $3.00 $2.00 $1.00 $ Vacancy by Available Space Type Vacancy by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Colorado Springs United States Colorado Springs United States 3% 3% 74% 26% 85% 15% 97% 97% Direct Sublet Direct Sublet Flex Warehouse Flex Warehouse U.S. Rental Rate Comparison Based on Average Quoted Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $7.00 $6.00 Colorado Springs United States Dollars/SF/Year $5.00 $4.00 $3.00 $2.00 Millions $1.00 $ * Includes Under Construction Space 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9

15 COLORADO SPRINGS MID-YEAR 2013 LEASING ACTIVITY Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2013 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 ArrowsWest Building I Northwest Ind 85,319 2nd High Performance Engineering, Inc. Sierra Commercial Real Estate Sierra Commercial Real Estate Centennial Blvd Northwest Ind 34,200 2nd Aeroflex Rad Colliers International Jones Lang LaSalle Americas, Inc N El Paso St North Ind 26,550 1st N/A N/A Olive Real Estate Group 4 Airport Business Center - Bldg A Southeast Ind 24,000 1st K & H Manufacturing CO N/A NAI Highland Commercial Group, LLC Mark Dabling Blvd Northwest Ind 21,500 1st N/A N/A Dabling Properties, LLC Forge Rd Northwest Ind 18,000 2nd N/A N/A Cameron Butcher Company Talamine Ct North Ind 17,500 1st Aaa Expo & Event Services N/A Olive Real Estate Group 8 Westech I Northwest Ind 15,656 1st N/A N/A Trend Commercial Real Estate Quail Lake Loop* Southwest Ind 14,000 1st Quantum Clean N/A N/A S Sahwatch St CBD Ind 13,527 1st Bargain Book Warehouse N/A N/A 11 Bullock s Express Southeast Ind 13,000 2nd Cabinets N/A Keller Williams Client s Choice Rea 12 Colorado Interstate Gas Greater CBD Ind 12,000 1st N/A N/A NAI Highland Commercial Group, LLC Centennial Blvd Northwest Ind 11,600 2nd N/A N/A NAI Highland Commercial Group, LLC W Garden of the Gods Rd Northwest Ind 11,000 1st N/A N/A NAI Highland Commercial Group, LLC Parachute Cir Southeast Ind 7,599 1st N/A Direct Deal Peak Commercial Properties 16 Tamarac Business Center Teller County Ind 7,588 2nd N/A N/A Peak Commercial Properties 17 Aerotech R & D Southeast Ind 6,112 1st N/A N/A Corporate Office Properties Trust, W Moreno Ave Southwest Ind 6,000 1st N/A N/A Olive Real Estate Group Northpark Dr North Ind 5,900 1st Performance Sports N/A Palmer McAllister Fillmore Ridge Heights* Northwest Ind 5,807 1st My Digital Printer Direct Deal Direct Deal 21 Westech II Northwest Ind 5,710 2nd N/A N/A Trend Commercial Real Estate N El Paso St* North Ind 5,400 1st Green Acres Granite N/A NAI Highland Commercial Group, LLC List Dr Northwest Ind 5,126 1st N/A N/A Peak Commercial Properties E Bijou St Southeast Ind 5,000 1st N/A Direct Deal Plant Medicines Colo Woolsey Hts Southeast Ind 4,945 2nd N/A N/A RE/MAX Advantage Durango Dr Southeast Ind 4,800 1st Arbor Carpet Direct Deal America 2000, Inc. 27 Warehouse Ltd. XX Southeast Ind 4,800 1st Concepts in Millwork Direct Deal America 2000, Inc. 28 Tamarac Business Center Teller County Ind 4,705 2nd N/A N/A Peak Commercial Properties Hathaway Dr Southeast Ind 4,665 2nd N/A N/A RE/MAX Advantage 30 Farmer Brothers Coffee Southwest Ind 4,511 1st N/A N/A Olive Real Estate Group Forge Rd Northwest Ind 4,500 2nd N/A N/A Cameron Butcher Company 32 Garden of the Gods Industrial Cntr Northwest Ind 4,400 2nd N/A N/A Trend Commercial Real Estate Valley St Southeast Ind 4,300 2nd N/A N/A Hoff & Leigh, Inc Northpark Dr North Ind 4,275 1st N/A N/A Peak Commercial Properties Town Center Dr Southeast Ind 4,200 2nd Colorado Springs Crossfit Direct Deal Peak Commercial Properties List Dr Northwest Ind 4,113 2nd N/A N/A Dominion Property Management N El Paso St North Ind 4,000 1st N/A N/A Cameron Butcher Company S Sierra Madre St Greater CBD Ind 3,768 1st N/A N/A Olive Real Estate Group Town Center Dr Southeast Ind 3,660 2nd Black Label Performance N/A N/A Town Center Dr Southeast Ind 3,600 2nd Hidden Treasures N/A Peak Commercial Properties * Renewal 10 THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

16 SALES ACTIVITY MID-YEAR 2013 COLORADO SPRINGS The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 12.0% Cap Rate Price/SF $140 1% $120 Cap Rate Percentage 8.0% 6.0% 4.0% $100 $80 $60 $40 Dollars/SF 2.0% $20 % $0 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From April - March 2013 Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $20 $140 Millions of Sales Volume Dollars $18 $16 $14 $12 $10 $8 $6 $4 $2 $120 $100 $80 $60 $40 $20 Price/SF < 25,000 SF ,809 $ 14,285,400 $ K-99K SF 8 413,321 $ 30,203,900 $ % 100K-249K SF 1 125,060 $ 8,311,000 $ % $ $0 >250K SF $ - - Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Industrial Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Industrial Building Sales of 15,000 SF and Larger $140 Colorado Springs US 12.0% Colorado Springs US $120 1% Dollars per SF $100 $80 $60 $40 Cap Rate Percentage 8.0% 6.0% 4.0% $20 2.0% $ % Source: CoStar COMPS Source: CoStar COMPS 2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 11

17 COLORADO SPRINGS MID-YEAR 2013 SALES ACTIVITY 12 THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

18 C B D M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE MID-YEAR 2013 COLORADO SPRINGS Deliveries, Absorption & Vacancy 20 Delivered SF Absorption SF Vacancy 25.0% 15 2% % 1% Percent Vacant (05) 5.0% (10) % Vacant Space Quoted Rental Rates 9 Direct SF Sublet SF $ $ $ Dollars/SF/Year $5.40 $5.30 $5.20 $ $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,585 62, % 2, $ ,585 64, % 16, $ ,585 80, % (2,400) $ ,585 78, % 6, $ ,585 84, % $ ,585 85, % 2, $ ,585 87, % (5,018) $ ,585 82, % $ ,585 82, % $ ,585 82, % (950) $ ,585 81, % 10, $ ,585 92, % 7, $ ,585 99, % $ ,585 99, % 3, $ , , % $ , , % $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 13

19 COLORADO SPRINGS MID-YEAR 2013 G R E A T E R C B D M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE Deliveries, Absorption & Vacancy 40 Delivered SF Absorption SF Vacancy 12.0% (10) (20) (30) (40) % 8.0% 6.0% 4.0% 2.0% % Percent Vacant Vacant Space Quoted Rental Rates 0.14 Direct SF Sublet SF $ $ Dollars/SF/Year $5.00 $4.00 $3.00 $2.00 $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,552,259 84, % 16, $ ,552, , % 5, $ ,552, , % 22, $ ,552, , % (25,389) $ ,552, , % 21, $ ,552, , % (7,037) $ ,552, , % 18, $ ,552, , % (27,300) $ ,552, , % 14, $ ,552, , % $ ,552, , % 31, $ ,552, , % (25,847) $ ,552, , % (5,253) $ ,552, , % 18, $ ,552, , % (46,630) $ ,552,259 94, % 6, $ THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

20 N O R T H M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE MID-YEAR 2013 COLORADO SPRINGS Deliveries, Absorption & Vacancy (20) (40) Delivered SF Absorption SF Vacancy % 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% % Percent Vacant Vacant Space Quoted Rental Rates 0.30 Direct SF Sublet SF $ Dollars/SF/Year $5.60 $5.55 $5.50 $5.45 $ $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,274, , % (23,455) ,880 $ ,274, , % (31,559) $ ,274, , % 91, $ ,274, , % 23, $ ,276, , % (18,557) $ ,276, , % 34, $ ,276, , % (32,096) $ ,276, , % 72, $ ,276, , % 12, $ ,276, , % 11, $ ,276, , % 46, $ ,276, , % 13, $ ,276, , % 32, $ ,276, , % 35, $ ,276, , % 66, , $ ,269, , % (3,251) ,258 $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 15

21 COLORADO SPRINGS MID-YEAR 2013 N O R T H E A S T M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE Deliveries, Absorption & Vacancy (50) (0.100) Delivered SF Absorption SF Vacancy % 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% % Percent Vacant Vacant Space Quoted Rental Rates 0.25 Direct SF Sublet SF $9.00 $ $ Dollars/SF/Year $8.40 $8.20 $8.00 $7.80 $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,931, , % 8, ,220 $ ,931, , % ,220 $ ,931, , % 281, , ,220 $ ,721, , % (52,306) ,000 $ ,721, , % 60, ,000 $ ,721, , % (12,240) ,000 $ ,721, , % (25,700) ,000 $ ,721, , % (1,600) $ ,721, , % (719) $ ,721, , % (5,940) $ ,721, , % (4,412) $ ,721, , % 70, $ ,721, , % (14,991) $ ,721, , % (23,293) $ ,721, , % 29, , $ ,704, , % (15,948) 1 5, ,650 $ THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.

22 N O R T H W E S T M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE MID-YEAR 2013 COLORADO SPRINGS Deliveries, Absorption & Vacancy Delivered SF Absorption SF Vacancy 24.0% (50) (0.100) (0.150) (0.200) 23.0% 22.0% 21.0% 2% 19.0% 18.0% Percent Vacant (0.250) % Vacant Space Quoted Rental Rates Direct SF Sublet SF Dollars/SF/Year $6.60 $6.40 $6.20 $6.00 $5.80 $5.60 $ $ $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,349,006 1,409, % 103, $ ,349,006 1,512, % 53, $ ,349,006 1,565, % 23, $ ,349,006 1,589, % 76, $ ,349,006 1,665, % 15, $ ,349,006 1,680, % (204,906) $ ,349,006 1,475, % 2, $ ,349,006 1,478, % 77, $ ,349,006 1,555, % 13, $ ,349,006 1,569, % $ ,349,006 1,570, % 32, $ ,349,006 1,602, % 68, $ ,349,006 1,671, % (2,927) $ ,349,006 1,668, % (35,828) $ ,349,006 1,632, % 96, $ ,349,006 1,728, % (85,030) $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 17

23 COLORADO SPRINGS MID-YEAR 2013 S O U T H E A S T M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE Deliveries, Absorption & Vacancy Delivered SF Absorption SF Vacancy 16.0% (50) % 12.0% 1% 8.0% 6.0% 4.0% 2.0% % Percent Vacant Vacant Space Quoted Rental Rates 1.40 Direct SF Sublet SF $ $ Dollars/SF/Year $5.75 $5.70 $5.65 $ $ Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates ,631,636 1,096, % 42, $ ,631,636 1,138, % 73, $ ,631,636 1,212, % 49, $ ,631,636 1,261, % 128, , $ ,506,576 1,264, % (9,525) ,060 $ ,506,576 1,254, % 131, , ,060 $ ,484,480 1,364, % (11,002) ,096 $ ,484,480 1,353,226 1% 89, , ,096 $ ,460,445 1,418, % 101, ,035 $ ,460,445 1,520, % 92, ,035 $ ,460,445 1,612, % 209, $ ,460,445 1,822, % 82, $ ,460,445 1,905, % 122, , $ ,448,817 2,015, % 2, , ,628 $ ,434,321 2,003, % (54,214) ,124 $ ,434,321 1,949, % (51,516) ,496 $ THE COSTAR INDUSTRIAL REPORT 2013 COSTAR GROUP, INC.