2015 Continues With Strong Industrial Demand & Increased Build To Suit Activity

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1 industrial INLAND EMPIRE market report 2015 Continues With Strong Industrial Demand & Increased Build To Suit Activity MARKET indicators - VACANCY 4.3% AVAILABILITY 6.2% NET ABSORPTION 6.9 Million CONSTRUCTION 16.9 Million RENTAL RATE $0.45 P NNN UNEMPLOYMENT 6.4% Market overview The Inland Empire industrial demand remains strong with net absorption totaling positive 6,929,200 square feet (), the 23rd consecutive quarter of positive net absorption. This is on pace to surpass the 14.5 million reported for all of Gross absorption recorded 13,397,400 giving the market a year-to-date total of 23.0 million, which is on pace to surpass the 36.2 million reported for all of Currently, demand is keeping pace with supply as the vacancy rate decreased 10 basis points to 4.3% despite the addition of 6.5 million of construction completions this quarter. The Inland Empire is in the midst of another large construction boom as economic conditions have continued to improve. Over the past 12 months there has been 20.9 million of new construction completions. During this time, the vacancy rate has remained stable and rents have continued to rise will see further gains in absorption and increased construction, especially for build to suit buildings composed of 500,000 and above. MARKET trends - >> Net absorption at 6.9 million for the quarter and 12.2 million for the year HISTORICAL VACANCY VS RENTS Q RENTS VACANCY $ % HISTORICAL net absorption & Construction COMPLETIONS Q NET ABSORPTION CONSTRUCTION COMPLETIONS >> Construction activity at 16.9 million and 6.5 million is added to the base this quarter >> Weighted average asking rental rate increases to $0.45 P $ P PER MONTH (NNN) $0.45 $0.35 $ % 16% 14% 12% 10% 8% 6% 4% % VACANT (TOTAL) (MILLIONS) % 1.0 $0.25 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 0% 0.0 2Q11 2Q12 2Q13 2Q14 2Q15 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters.

2 market Report industrial INLAND EMPIRe inland empire DEMOGRAPHICS >> Population: 4,431,306 (2015 Estimate) 4,643,200 (2020 Projection) 4.8% (Growth ) >> Household income: $67,872 (Average) $51,888 (Median) >> Job growth: 3.5% (past 12 months) >> Unemployment rate: 6.4% (as of May 2015) VACANCY The total vacancy rate decreased 10 basis points to 4.3% and the total availability rate decreased to 6.2%. Vacancy rates have remained flat over the past four quarters as industrial demand has been keeping pace with construction completions. Barring any sudden changes in demand, vacancy should remain stable as much of the development currently taking place is for build to suit projects. Next quarter there is expected to be 3.5 million of construction completions, of which 1.8 million is already pre-leased. Vacancy remains tight for buildings in the West Inland Empire at 2.5%. This is especially true for smaller buildings 10,000 to 40,000, which has a vacancy rate of only 0.7%. The vacancy rate was highest for buildings over 500,000 at 6.5%, down 70 basis points from the 7.2% reported in the previous quarter. It should also be noted that this quarter there was 4.4 million of construction completions in this size segment, which increased the base in this size range by 310 basis points in a single quarter. NET ABSORPTION In, the market recorded positive net absorption of 6,929,200, the 23rd consecutive quarter of positive net absorption gains. Net absorption remains high as construction activity has allowed supply to keep pace with the demand for modern Class A buildings. Nearly every size segment has reported positive net absorption this quarter, with 77% of net absorption taking place in buildings over 500, Unemployment The unemployment rate for the Inland Empire was 6.4 % as of May 2015, and experienced job growth of 3.5% over the last 12 months. Trade, Transportation and Utilities continued to outperform other sectors, adding 18,700 jobs over the previous 12 months. Manufacturing employment increased by 2,900 over this same time period and construction employment has increased by 5,200 jobs. VACANCY BY SUBMARKET NET ABSORPTION BY SUBMARKET % VACANT (TOTAL) 16% 14% 12% 10% 8% 6% 4% 2% 0% 2.6% 3.1% 5.8% 3.8% 7.2% 8.3% 12.7% 14.6% 0.9% 1.3% 1.9% 4.8% 2.5% (0.5) (0.01) (0.00) REDLANDS/ LOMA LINDA REDLANDS/ LOMA LINDA (MILLIONS)

3 market Report industrial INLAND EMPIRE INDUSTRIAL OVERVIEW EXISTING PROPERTIES CONSTRUCTION VACANCY AVAILABILITY ACTIVITY ABSORPTION RENTS Submarket/ Building Size Bldgs Total Inventory Completions Current Qtr Under Construction Vacancy Vacancy Prior Qtr Availability Sales Activity Number of Sales Lease Activity Number of Leases Total Gross Activity Current Qtr Total Gross Activity YTD Net Absorption Current Qtr Net Absorption YTD ,847,600 1,445,200 1,451, % 3.2% 4.5% 0 0 2,502, ,502,600 3,671,400 2,028,900 2,529,000 $ ,599,900 1,496,100 2,112, % 2.4% 5.3% 270, , ,000 2,217, ,900 1,008,900 $0.47 JURUPA VALLEY / EASTVALE ,196, , % 2.1% 2.0% , ,800 1,348, , ,800 $0.41 1,041 96,906, , , % 2.4% 3.9% 287, ,172, ,459,800 5,545, ,800 2,372,400 $ ,969, , % 6.2% 5.3% 50, ,346, ,397,500 2,727,000 1,936,200 1,829,900 $0.46 TOTAL 3, ,520,300 3,396,200 4,206, % 3.1% 4.3% 608, ,224, ,833,600 15,509,600 4,988,300 8,533,100 $ ,802, % 3.8% 4.4% 77, , , ,500-1,700 8, ,895,900 81, , % 3.0% 4.8% 275, , , ,700 73, ,200 $ ,668, ,230, % 8.7% 7.9% , , , , ,900 $ ,822,800 1,008, , % 12.2% 15.4% , , , , ,700 $0.33 REDLANDS / LOMA LINDA ,844, ,777, % 7.2% 12.3% , ,700 2,495,100-5,800 1,138, ,118,000 1,715,300 3,348, % 7.4% 17.6% 100, , , , , ,300 $ ,904, , % 2.3% 3.5% 201, , , ,200 51,800 95,500 $ ,333, ,100 3,146, % 8.3% 9.8% 439, , ,267,200 1,634, , ,200 $0.42 TOTAL 2, ,390,000 3,160,100 12,705, % 6.2% 9.0% 1,093, ,470, ,563,700 7,520,100 1,940,700 3,652,100 $ ,000-19,999 1,112 15,204, % 0.7% 2.2% 28, , , ,500-9,700 52,800 $ ,000-39, ,833, , % 0.3% 2.0% 59, , , ,000-52,200-26,400 $ ,000-69, ,718, , % 2.8% 5.1% 192, , , ,600 90,900-84,800 $ ,000-99, ,966, , % 0.8% 4.1% , , ,400-39, ,500 $ , , ,485, , , % 2.3% 5.8% 328, , ,132,700 3,846, , ,700 $ , , ,956,600 1,125, , % 3.6% 5.0% 0 0 2,767, ,767,400 4,418,200 1,946,600 2,876,200 $ , ,355,300 2,084,700 2,550, % 5.2% 3.0% 0 0 3,819, ,819,300 4,859,600 3,537,200 4,860,000 TOTAL 3, ,520,300 3,396,200 4,206, % 3.1% 4.3% 608, ,224, ,833,600 15,509, ,533,000 $ ,000-19, ,991, % 0.9% 3.6% 109, , , ,600-38,200-40,500 $ ,000-39, ,920, % 2.6% 5.2% 94, , , ,000-26,800-7,400 $ ,000-69, ,959, % 1.7% 4.7% 95, , , ,700 11,200 24,600 $ ,000-99, ,437,200 81,000 72, % 3.8% 6.4% 176, , , ,300 21, ,700 $ , , ,444, , , % 5.4% 7.7% 618, , ,188,500 1,441, , ,700 $ , , ,895, ,200 1,267, % 8.1% 14.1% ,100 10, ,600 $ , ,742,600 2,295,100 11,018, % 8.9% 10.7% 0 0 2,412, ,412,000 3,975,100 1,789,900 2,871,700 $0.34 TOTAL 2, ,390,000 3,160,000 12,705, % 6.2% 9.0% 1,093, ,470, ,563,800 7,520,200 1,940,900 3,652,400 $0.42 INLAND EMPIRE TOTAL 10,000-19,999 2,054 28,196, % 0.8% 2.8% 137, , , , ,300 $ ,000-39,999 1,294 35,754, , % 1.3% 3.4% 153, , , , ,800 $ ,000-69, ,677, , % 2.3% 4.9% 287, , ,500 1,149, ,200 $ ,000-99, ,403,200 81, , % 2.1% 5.1% 176, , ,800 1,175, ,200 $ , , ,930, , , % 3.3% 6.4% 947, ,374, ,321,200 5,287, ,400 $ , , ,851,600 1,553,400 1,900, % 4.8% 7.6% 0 0 2,767, ,767,400 4,864, ,332,800 $ , ,097,900 4,379,800 13,568, % 7.2% 7.1% 0 0 6,231, ,231,300 8,834, ,731,700 $0.33 INLAND EMPIRE TOTAL 5, ,910,300 6,556,200 16,912, % 4.4% 6.2% 1,702, ,695, ,397,400 23,029,800 6,929,200 12,185,400 $0.45 Weighted Avg Asking Lease Rates Colliers International p. 3

4 market Report industrial INLAND EMPIRe >> 3,500,000 of new completions within the next quarter >> Industrial demand remains positive while balance between supply and demand has led to flat vacancy rates CONSTRUCTION In, there was 6,556,200 of new construction completions added to the base. There is also 16,912,200 of construction activity, of which 3,750,000 has already been leased or sold. Construction has remained steady with increased build-to-suit construction activity. Next quarter will see the completion of 3.5 million. ACTIVITY Net absorption was positive 6,929,200 feet for the quarter. Gross absorption (a combination of leasing and sales activity) this quarter was 13,397,400 square feet broken down into 29 sales totaling 1,702,300 and 87 leases totaling 11,695,100. Year-to-date gross absorption (23.0 million ) is on pace to surpass the 36.2 million recorded for all of Large leases signed this quarter include Kimberly Clark renewing 699,400 of space in Redlands and FP Stores moving into 579,700 of newly constructed space in Perris. Other deals include Serta Bedding moving into 532,900 of space in Moreno Valley and New Balance renewing on 504,500 of space in Ontario. Larger user sales this quarter include Ampur purchasing 201,300 of space in Corona for $20 million ($100 P) and Triple S California Logistics purchasing a 132,500 building for $12 million ($91 P) in Fontana. The largest investment sale this quarter was Liberty Property Trust purchasing the Jasmine Distribution Center, a 410,000 building in Fontana, for $36,750,000 ($90 P). This deal was done at a 5.17% cap rate and was on the market for less then one month before closing. rental rates The weighted average asking rental rate increased $0.01 P NNN to end at $0.45 P NNN. Rents have been rising since bottoming out at $0.30 P NNN in late 2010 and have hit their peak of $0.45 P which was last seen in late WEIGHTED AVERAGE ASKING LEASE RATES TOTAL GROSS ACTIVITY BY SUBMARKET $0.60 $0.52 $0.51 3,000,000 2,500,000 2,502,600 2,459,800 2,397,500 $ P PER MONTH (NNN) $0.50 $0.30 $0.34 $0.33 $0.42 $0.43 $0.44 $0.41 $0.48 $0.47 $0.46 2,000,000 1,500,000 1,000, , , , , , , , ,500 1,267, , ,800 REDLANDS/ LOMA LINDA REDLANDS / LOMA LINDA

5 market Report industrial INLAND EMPIRE OUTLOOK Industrial demand in the Inland Empire is closely linked to international trade and most of the demand comes from large, multi-national companies who are upgrading their industrial space to more efficient and modern buildings. Such space is scarce, especially in infill areas of Southern California, and companies that are unable to find such spaces in their existing infill markets will have to expand their operations further east into the Inland Empire. Market description The Inland Empire is comprised of million square feet and represents 27 percent of the total industrial space in the Los Angeles Basin for buildings 10,000 square feet and greater. Considered the premier big-box market in Southern California, approximately 72 percent of the space in this market is in buildings 100,000 square feet and greater. The vast majority (88%) of its space was built in the past 20 years. The Inland Empire continues to attract large distributors, warehousers, E-commerce companies and logistics firms seeking to consolidate their operations into large, state-of-the-art facilities. HISTORICAL GROSS ACTIVITY Q UNEMPLOYMENT RATE United States, California & Inland Empire May 2015 (MILLIONS) Q11 2Q12 2Q13 2Q14 2Q15 6.6% 6.4% 6.2% 6.0% 5.8% 5.6% 5.4% 5.2% 5.0% 4.8% 4.6% 6.4% 6.2% 5.3% United States California Inland Empire RECENT TRANSACTIONS & MAJOR DEVELOPMENTS SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER Jasmine Distribution Center, Fontana 410,100 $36.75 Million $90 P Liberty Property Trust Washington Capital Management 8432 Almeria, Fontana 132,500 $12 Million $91 P Triple-S California Logistics Almeria-Heller Property, LLC 1470 E 6th, Corona 101,500 $10.8 Million $107 P VWP RCC CT Corona th, Rancho Cucamonga 60,600 $7.1 Million $116 P California Lottery DCT 8th & Vineyard LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 1895 Marigold, Redlands 699,400 Renewal Distribution Kimberly Clark ProLogis 3900 Indian, Perris 579,700 Direct-New Distribution FP Stores JP Morgan / SRG Cactus, Moreno Valley 532,900 Direct-New Distribution Serta Bedding Company Industrial Income Trust th, Ontario 504,500 Renewal Distribution New Balance ProLogis MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION 4565 Redlands, Perris IDI 1,008,000 Perris Completed Citrus, Fontana Goodman Birtcher 639,500 Fontana Completed 2415 Locust, Rialto CapRock Partners 609,900 Rialto Completed 1508 Casmalia, Rialto CapRock Partners 428,200 Rialto Completed Colliers International p. 5

6 market Report industrial INLAND EMPIRE DEFINITIONS OF KEY TERMS USED IN THIS REPORT Total Rentable Square Feet: Industrial space in buildings with 10,000 square feet or more of industrial space. Includes speculative as well as owner-occupied buildings. Excludes Research & Development (R&D) buildings (industrial buildings with at least 30 percent office build-out, 3/1000 parking ratio and a high level of finish). Excludes space that is under-construction or renovation. Direct Vacancy: Space in existing buildings that are vacant and immediately available during the quarter for direct lease or for sale, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total Vacancy: Space in existing buildings that are vacant and immediately available during the quarter for direct lease, for sublease or for sale, plus space that is vacant but not available for direct lease or sublease. Total Available: All space that is being currently marketed for occupancy, includes space which may be currently occupied or which may be under construction or renovation. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Sales and Leasing Activity: Square feet sold or leased for all known transactions completed during the quarter. Excludes lease renewals. Excludes investment sale transactions. Weighted Average Asking Rental Rates: Weighted by square feet available for direct lease. Data is based on Triple Net rents, and excludes expenses such as taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under-Construction/Renovation: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Also includes buildings that are under going substantial renovation. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 >> $2.3 billion in annual revenue >> 1.7 billion square feet under management >> Over 16,200 professionals united states: Inland Empire Office License No E. Guasti Rd, Suite 401 Ontario, CA tel FAX BELLITTI, STEVEN J. Senior Executive Vice President COULTER, SUMMER Senior CHOU, ERIC CHANG, JACK DEVRIES, IAN Executive GILFILLAN, WHIT C. Senior HAYES, JOSH KIM, JEFFERY KIM, WILLIAM H. LEE, PETER MCKENNA, KEVIN Executive MELE, RYAN MERRILL, GREG NUNEZ, RICK R. Senior PASTOR, STEFAN PHU, TONY T. Executive REAUME, JOEY RENWICK, WILLIAM B. Senior SANDERS, SCOTT Senior SCHWARTZ, RICHARD SIGLAR, TAL Senior SMITH, BO TAYLOR, THOMAS E. Senior Executive Vice President THYS, JON H. YATES, BRAD WILBRAHAM, REID ZORN, MARK Senior Accelerating success. p. 6 Colliers International