Industrial Outlook. Indianapolis Q for Indy industrial market

Transcription

1 Industrial Outlook Indianapolis Q4 216 Recordbreaking year for Indy industrial market

2 Industrial Overview Indianapolis Q4 216 The Indianapolis industrial market consists of million square feet with a million square foot warehouse/distribution inventory, a 42.6 million square foot manufacturing inventory and a 2.5 million square foot special purpose inventory. There is an additional 13.5 million square foot inventory of flex product. The industrial market is comprised of the following submarkets: Boone County, Hamilton County, Hancock County, Hendricks County, Johnson County and Marion County (CBD, East, North/Northeast, Northwest, South/Southeast and West/Southwest). Fourth Quarter 216 Statistics Total Inventory Quarterly Net Absorption YTD Net Absorption Vacancy Rate Average Total Asking Rent 211,457,511 sf 1,237,523 sf 7,958,11 sf 6.9% $3.49 psf Trends (Q over Q) Vacancy Rate Concessions Rental Rates New Construction

3 Industrial Insight Indianapolis Q4 216 Industrial market grows at historic rate in 216 Net absorption reaches new historical high The Indianapolis industrial market wrapped up a record-breaking year with 1.2 million square feet of absorption in the fourth quarter. This brings the year-end total to eight million square feet, the highest level of occupancy growth the market has ever achieved in a single year. This growth was far reaching as every industrial property type achieved positive absorption this year. Meanwhile, 1 of the 11 tracked industrial submarkets grew in 216 with the Northwest being the lone exception. Look for the market to continue growing next year as speculative construction will bring several more quality options to the market at competitive pricing. Historical net absorption 8,, 7,958,11 6,, 5,222,25 4,, 3,261,796 2,, 1,612, , Speculative construction dominates construction landscape Historic levels of net absorption combined with low vacancy (6. percent) led to an influx of speculative development this year. While only a modest 1.6 million square feet of speculative space was delivered in 216, another 4.6 million square feet remains under construction with an additional 1.6 million currently slated to break ground in 217. Demand for this space is evident as nearly 6. percent of the speculative space completed in 216 has already been leased. Restricted availability also led to a rise in build-to-suit and owner-user construction as 2.1 million square feet was completed this year while 1.8 million square feet remains in the pipeline. 216 construction snapshot 8,, Completed Under construction Planned 6,, 4,, 2,, Speculative Build-to-Suit Owner-user Sale activity doubles over previous year Nearly 7 industrial sales closed in 216. This more than doubles last year when only 3 sales transactions occurred. Investors, in particular, noticed Indianapolis high level of occupancy growth and low vacancy. Investment activity accounted for 62. percent of all sales transactions closed this year. Look for investor interest to remain high in 217 as Indianapolis continues to be a major player in the emerging e-commerce industry. Sales activity occurs at elevated rate $682 million Total industrial sales volume in ,457,511 Total inventory 6.% Total vacancy 1,237,523 Q4 216 net absorption 7,958,11 YTD net absorption $3.49 Direct average asking rent.8% 12-month rent growth 5,921,274 Total under construction 3,676,299 YTD completions *Significant alterations to our tracked inventory and submarkets were made in the first quarter, rendering statistical results that diverge from the recent historical trend.

4 Current conditions Available quality blocks of space: Warehouse & distribution inventory (includes Class A & B-caliber inventory) Landlord leverage Indianapolis Peaking market Rising market Falling market Bottoming market Tenant leverage # of blocks , - 249,999 s.f. 2 Existing Under construction/planned , - 499,999 s.f. 7 2 > 5, s.f. Notable lease transactions this quarter Tenant Name Deal Type Size Hewlett-Packard Company Renewal 419,46 Quaker Sales & Distributing, Inc. Lease 382,664 Veritiv Operating Company Lease 317,22 Medline Industries, Inc. Renewal 26, Notable sales this quarter Project Buyer Size 221 S Franklin Real Capital Solutions (investment) 823,988 Corporate Center North Shear Property Group (investment) 7, W 35 North GLP US (investment) 456, Park 1 Building 9 United Parcel Service (user) 184,8 Inmar, Inc. Lease 217,8 Georgetown Commerce Park I & II ; CoStar Georgetown Commerce Park, LLC. (investment) 146,9 Overview of demand Demand: Warehouse & distribution tenant requirements E-commerce/logistics driving tenant demand Currently, there is approximately 13.1 million square feet of active tenant requirements seeking industrial space within the Indianapolis MSA. The majority of this tenant demand continues to be driven by the e-commerce and logistics and distribution sectors. In fact, Indianapolis is a Top-1 market nationally for the number of e-commerce transactions closed not only during the past 24 months, but going back as far as 21 when data first started being collected. Look for this trend to continue due to Indianapolis central location, big box availability and affordable lease rates. # of tenants , - 249,999 s.f , - 499,999 s.f. 8 > 5, s.f. Overview of vacancy Historical vacancy rates Vacancy remains near historical lows Despite a slight uptick during the fourth quarter due to the completion of speculative construction, overall industrial vacancy in Indianapolis remains at its lowest level since 212. In fact, vacancy is currently 2.5 percentage points lower than this same time last year. With over six million square feet of additional speculative construction currently in the pipeline, vacancy is likely to rise in 217. However, tenant demand warrants the addition of this new inventory. As a result, the market is not in danger of being overbuilt in the near term. 1.% 8.% 8.7% 8.4% 6.% 6.9% 4.% 5.7% 6.% 2.%.%

5 Industrial Statistics Indianapolis Q4 216 Inventory Quarterly total net absorption YTD total net absorption YTD total net absorption (% of stock) Total vacant Total Total available vacancy (%) Total availability (%) Average total asking rent ($ p.s.f.) Quarterly completions YTD completions Under construction Market Totals Bulk/Distribution 98,836,656 1,445,145 6,371, % 6,883,125 7.% 9,345, % $3.43 1,14,518 3,151,299 5,57,874 Mid-Sized Warehouse 67,51, ,262 1,4, % 3,36,237 5.% 5,798,22 8.6% $3.78 6, 234, 77,4 Manufacturing 42,637,962-71,36 457,71 1.1% 2,372, % 2,551,267 6.% $3.6 22, 2, Special Purpose 2,481,248 56, 89, 3.6%.%.% $ , 89, 73, Totals 211,457,511 1,237,523 7,958,11 3.8% 12,615,511 6.% 17,694, % $3.49 1,22,518 3,676,299 5,921,274 Flex/R&D 13,454,79 79, ,52 1.8% 1,159,8 8.6% 1,924, % $7.71 4, 4, Submarkets Central Business District Bulk/Distribution 1,677,442.%.%.% $3.25 Mid-Sized Warehouse 11,613,613 17, , % 384, % 823, % $2.48 Manufacturing 1,273,17-186,21-186,21-1.8% 466, % 56, % $2.69 Special Purpose 31,668.%.%.% $4.68 Totals 23,865,893-78,846 31,268.1% 85, % 1,383, % $2.65 Flex/R&D 1,393,764 41,187-2, % 71, % 98,25 7.% $9.5 East Bulk/Distribution 8,225, , , % 66, % 1,18, % $ ,5 Mid-Sized Warehouse 12,128,66-25,74 178,67 1.5% 469, % 1,16, % $3.19 Manufacturing 6,787,118.% 1,8, 26.5% 1,849, % $2.69 Special Purpose 49,673.%.%.% $3.68 Totals 27,19,91-167,278 5, % 2,876,12 1.6% 4,63, % $ ,5 Flex/R&D 97,6 1,2-4,2 -.5% 55,2 6.1% 77,88 8.5% $6.25 North/Northeast Bulk/Distribution 735,284.%.%.% $3.25 Mid-Sized Warehouse 3,44,719 4,557 61,7 2.% 59,67 2.% 79, % $4.98 Manufacturing 2,165,752 2,25 7,75.4% 9,75 4.2% 118,3 5.4% $4.8 Special Purpose.%.%.% $. Totals 5,945,755 6,87 68,82 1.2% 15, % 197, % $4.7 Flex/R&D 1,84,272 45,294 28, % 25,4 11.4% 315, % $7.71 Northwest Bulk/Distribution 8,241,941-97, % 324,68 3.9% 537, % $3.74 Mid-Sized Warehouse 14,846, ,289 11,592.1% 955,99 6.4% 1,553,3 1.5% $3.8 18, 64, Manufacturing 3,548,296-3,.% 14,822.4% 23,879.7% $3.71 2, Special Purpose 17,.%.%.% $4.68 Totals 26,743,35-138,289-86, % 1,295, % 2,114, % $ , 84, Flex/R&D 2,939,968-13,754 75, % 415, % 721, % $6.49 South/Southeast Bulk/Distribution 761,892 35,38 46, %.% 355, % $2.9 46,112 Mid-Sized Warehouse 3,187,836-21, ,927 4.% 98,22 3.1% 13,25 4.1% $5.9 Manufacturing 941,224.%.%.% $3.57 Special Purpose 27,521.%.%.% $4.68 Totals 5,98,473 14,27 533,39 1.5% 98,22 1.9% 485,85 9.5% $ ,112 Flex/R&D 46,766-7,96 6,4 1.4% 3,21.7% 3,21.7% $6.94 West/Southwest Bulk/Distribution 12,618, ,664 1,145, % 814,7 6.5% 814,7 6.5% $ , ,552 Mid-Sized Warehouse 9,831, ,319 13,462.1% 739, % 934, % $3.64 Manufacturing 9,81,889 68,8 313,8 3.2%.%.% $2.8 Special Purpose 1,235,219.%.%.% $6. Totals 33,496, ,145 1,472,88 4.4% 1,553, % 1,748, % $ , ,552 Flex/R&D 1,532,759 3,365 7, % 29, % 372, % $7.28 4, 4, Marion County totals Bulk/Distribution 32,26, ,56 1,776,84 5.5% 1,745, % 2,815, % $ , ,552 Mid-Sized Warehouse 54,652, ,6 68, % 2,77,69 5.% 4,627, % $ , 64, Manufacturing 33,526, ,16 135,34.4% 2,372, % 2,551, % $2.99 2, Special Purpose 1,91,81.%.%.% $5.51 Totals 122,34,695-13,254 2,52,2 2.1% 6,824, % 9,994, % $ , ,552 Flex/R&D 9,38,535 69, , % 959, % 1,587, % $7.33 4, 4,

6 Inventory Quarterly total net absorption YTD total net absorption YTD total net absorption (% of stock) Total vacant Total Total available vacancy (%) Total availability (%) Average total asking rent ($ p.s.f.) Quarterly completions YTD completions Under construction Boone County Bulk/Distribution 15,958,11 1,18,693 1,77, % 1,575, % 1,832, % $ ,712 1,94, ,84 Mid-Sized Warehouse 1,177,266.% 189, % 189, % $ , 135, Manufacturing 888,849 22, 22.7%.%.% $ , Special Purpose.%.%.% $. Totals 18,24,126 1,18,693 1,972,93 1.9% 1,765, % 2,22, % $ ,712 1,452,712 1,126,84 Flex/R&D 298,53 32, % 11, 3.7% 11, 3.7% $6.5 Hamilton County Bulk/Distribution 2,37,732.%.%.% $2.95 Mid-Sized Warehouse 5,43,355 14,665 39,785.7% 92, % 354, % $ ,4 Manufacturing 2,371,935 46,8 76, %.%.% $5. Special Purpose 33, 33,.%.%.% $. 33, Totals 1,143,22 61, , % 92,398.9% 354, % $ , 52,4 Flex/R&D 2,411,157-4,11 26, % 93,14 3.9% 183, % $9. Hancock County Bulk/Distribution 4,484, , , % 256, % 63, % $3.45 2,86 2,86 Mid-Sized Warehouse 1,531,827 6, 6, 3.9%.%.% $4.7 6, 6, 166,2 Manufacturing 1,62,374 9,6.6%.%.% $2.57 Special Purpose.%.%.% $. 73, Totals 7,618, , ,948 3.% 256, % 63, % $ ,86 26,86 239,2 Flex/R&D 147,949.% 11,55 7.8% 11,55 7.8% $8. Hendricks County Bulk/Distribution 37,327, ,42 1,964,97 5.3% 3,173, % 3,417, % $ ,538 2,923,518 Mid-Sized Warehouse 2,52,756 21, , % 313, % 474, % $ ,8 Manufacturing 1,114,929.%.%.% $3.46 Special Purpose 344,53 56, 56, 16.3%.%.% $ , 56, Totals 41,289,97-9,729 2,277, % 3,487, % 3,891, % $ , 823,538 3,276,318 Flex/R&D 937,383 14,1 9,617 1.% 79, % 85, % $7.6 Johnson County Bulk/Distribution 6,498,75 74, 1.8% 132, 2.% 676, 1.4% $ , 132, 23, Mid-Sized Warehouse 2,26,669 75, % 56, % 151, % $5.4 Manufacturing 3,133,426 34, 1.1%.%.% $2.2 Special Purpose 23,114.%.%.% $4.68 Totals 12,41, , % 188, % 827, % $ , 132, 23, Flex/R&D 62,525 2,8.5% 5,422.9% 44, % $9.

7 Industrial Sales Activity Report Indianapolis Q4 216 This report analyzes all industrial sales > 3, s.f. At a glance Sales activity by building type Total volume YTD Number of transactions YTD Average Class A price p.s.f. YTD Average Class A cap rate YTD Warehouse/Dist. sales volume as % of total YTD Flex/R&D sales volume as % of total YTD $681,874, $55 6.5% 61.4% 4.6% $7,, $65,, $6,, $55,, $5,, $45,, $4,, $35,, $3,, $25,, $2,, $15,, $1,, $5,, $ 14,727,36 s.f. Sum of Price ($) Sum of RBA (SF) $628,367,321 1,642,439 s.f. 1,723,835 s.f. $31,275, $21,482,566 3,18 s.f. $75, Warehouse / Distribution Flex/R&D Manufacturing Special purpose 16,, s.f. 14,, s.f. 12,, s.f. 1,, s.f. 8,, s.f. 6,, s.f. 4,, s.f. 2,, s.f. s.f. Cap rate range Core Class A Ind. Core Class A Flex Transactions details 6.-7.% Number of partial interest transactions 4 Number of foreign buyers 1 Foreign capital $ $2,, 9.-1.% Average partial interest acquired 1.% Number of domestic buyers 68 Domestic Capital $ $447,974,887 Sales volume $ by submarket Top buyers Top sellers Multiple Hendricks County West/Southwest Boone County East Northwest Johnson County $196,187,5 $149,714,153 $86,22,78 $51,6, $45,549,879 $44,282,566 $36,521, % 21.3% 6.6% 3.4% 3.5% 5.2% 4.5% 3.9% 7.% 6.6% 35.9% 22.% 2.7% 6.6% 3.4% 3.9% 5.7% 5.2% 8.% 6.6% Hancock County North/Northeast CBD Northeast Hamilton County $31,111,472 $17,69, $1,52, $8,825,625 $3,67, Biynah Industrial Properties, LLC. & Olympus Ventures, LLC. Gramercy Property Trust, Inc. Duke Realty Corporation Park Corporation Kohl's Real Capital Solutions Shear Property Group Transwestern Investment Management, LLC. Industrial Property Trust Transpacific Development Co. DCT Industrial Trust Gramercy Property Trust, Inc. Navistar Duke Realty Corporation Browning/Duke CrossLake Partners ARES Commercial Real Estate Management LNR Partners, LLC. Other Top 1 sales transactions this quarter by sales volume Building address Buyer company Seller company Size Sales price $ $ p.s.f. Sale date Biynah Industrial Properties, LLC. & Transpacific Portfolio Transpacific Development Co. 3,858,713 $164,, $43 Jan-16 Olympus Ventures, LLC Allpoints Pkwy Duke Realty Corporation Gramercy Property Trust 1,2,42 $5,4, $42 Jun Allpoints Pkwy Kohl's 131 W Bennett Pkwy Realty Income Corporation Browning/Duke Inland Private Capital Corporation 936,51 $41,693,425 $45 Aug-16 33, $37,1, $122 Sep Exploration Dr Gramercy Property Trust, Inc. DCT Portfolio Transwestern Investment Management, LLC. KTR Capital Partners 225,586 $37,, $164 Feb-16 DCT Industrial Trust 631,714 $32,187,5 $51 Jan Commerce Pkwy E Dr Industrial Property Trust ARES Commercial Real Estate Management 612, $31,264,64 $51 Jan W 35 North GLP US Hillwood 456, $31,111,472 $68 Dec Reeves Rd Legacy Investing, LLC. Founders Properties, LLC. 481,964 $28,1, $58 Jun & 73 Columbia Rd Sunbeam Properties Strategic Capital Partners 423,763 $23,93,728 $56 Jun-16

8 Industrial Development Report Indianapolis Q4 216 This report analyzes all industrial developments under construction & new deliveries > 3, s.f. Completions in-depth 3,716,299 Total delivered YTD Total leased at delivery (%) 66.1% Total speculative at delivery 1,572,831 Total BTS at delivery 1,11,5 Total Owner-User at delivery 1,42,418 Total # of properties delivered 18 Asking rental rate (low - high NNN-based) $ $8.5 7,, 6,, 5,, 4,, 3,, 2,, 1,, New deliveries Historical deliveries Top 5 projects delivered to date Building Submarket Owner RBA Construction type Delivery date Leased at delivery (%) Project I-65 Boone County VanTrust 529,2 Speculative Q % IDS BTS Hendricks County Duke/Browning 45,738 BTS Q % Opus Development / Founders 39 Hanna Circle West / Southwest 432,631 Speculative Q1 216 % Properties, LLC. Venture Logistics South / Southeast Venture Logistics 46,112 Owner-user Q % Building 1 Boone County Becknell Industrial 323, Speculative Q % Under construction / planned 5,921,274 Under construction Under construction in-depth Total pre-leased (%) 21.8% Total speculative under construction 4,573,751 Total BTS under construction 875,923 Total Owner-user under construction 471,6 Total # of properties UC 21 Asking rental rate (low - high NNN-based) $ $4.95 7,, 6,, 5,, 4,, 3,, 2,, 1,, BTS Owner-user Speculative Planned Under construction Upcoming deliveries by year (s.f., excludes YTD completions) Top 5 projects currently under construction Building Submarket Owner RBA Construction type Delivery date Pre-leased (%) World Ameriplex Building 4 West / Southwest IDI Gazeley 912,552 Speculative Q2 217 % Allpoints at Anson Building 8 Boone County Duke/Browning 78,34 Speculative Q1 217 % GreeneParke Two Hendricks County Clarion Partners/Verus Partners 72, Speculative Q1 217 % Sunbeam 2 Hendricks County Sunbeam Development 62,37 Speculative Q1 217 % Airtech Park 1 Hendricks County Browning/Prologis 597,1 Speculative Q2 217 %

9 Employment Update Metro Indianapolis August 215 Indianapolis January % Indianapolis unemployment 2.1% Indianapolis 12-month job growth Total jobs vs. Unemployment rate Indianapolis 1,2, Total Employment Unemployment Peak: 1,24,945 jobs 1,, 12.% 1.% 4.2% Indiana unemployment 4.7% U.S. unemployment 1.3% Indiana 12-month job growth 1.5% U.S. 12-month job growth 8, 6, 4, 2, 1.8% 8.% 6.% 4.% 2.%.% The Indianapolis unemployment rate has remained stable at 3.6 percent, according to the BLS most recent estimates. The state s unemployment rate fell by 2 basis points since last month, and now sits at 4.2 percent. The rate has not been this low since July 21. Trade, Transportation & Utilities continues to be the Industrial sector with the greatest amount of job growth. Financial Activities posted the most annual growth among all sector this month, breaking Trade, Transportation & Utilities 13 month streak of the top spot. All but one sector saw annual job growth this month, which has not happened since early 215. Industrial sectors, in particular, have experienced strong growth consistently post-recession. Nationally, unemployment continued to perform well, declining by 3 basis points over the year to 4.7 percent. This came as a result of a steadily increasing workforce, marginally boosting participation, and job growth outperforming the rate of expansion in the workforce. Industrial employment trends (12-month change) Indianapolis Mining, Logging & Construction Trade, Transportation & Utilities 2. Manufacturing Other Services Industrial real estate implications Despite a few local manufacturers announcing that operations are moving to Mexico, employment in the Industrial supersectors have continued to grow in Indianapolis. As one can see in the Industrial employment trends graph, all sectors have seen growth, except for a few select months, since 212. Additionally, Trade, Transportation & Utilities has consistently been the Industrial sector with the most jobs added since 215. Unlike the case with Office supersectors, the unemployment rate does not always relate to Industrial real estate trends. While this has not seemed to be the case recently, as several companies expanded their facilities and added jobs, this may not continue in the future. With improved technology and even self-driving semi-trucks on the horizon, companies will not necessarily need to increase their workforce to amp up operations. Additionally, an increase in square footage may no longer correlate to more jobs due to increased automation in warehouses and manufacturing. Job growth/loss by sector (12-month change) Indianapolis Financial Activities Leisure & Hospitality Trade, Transportation & Utilities Educational & Health Services Government Mining and Logging Other Services Professional & Business Services Manufacturing Information 4,9 4,1 4,1 3,1 2,1 1, Number of jobs -1, 1, 2, 3, 4, 5, 6, Source: Bureau of Labor Statistics, JLL Research

10 News on the street Indianapolis businesses expanding, contracting, etc. Hachette Book Group Publishing: Expanding The book publisher and distributor will add up to 13 new jobs in Lebanon after expanding by more than 4, square feet earlier this year. The new employees will be spread across its three Boone County facilities. Avept Inc. Distribution: Expanding Avept Inc. announced plans to spend over $6 million to open a warehouse in Brownsburg. The parts distributor will employ up to 118 people by 219. Life Science Logistics Logistics: Expanding The company spent $3 million to expand its pharmaceutical and medical device distribution warehouse in Brownsburg this year. The project has already allowed the firm to hire 3 additional workers in 216 with plans to add even more this year. In total, Life Science Logistics expects to create 1 jobs. Rexnord Corp. Manufacturing: Contracting Rexnord Corp. confirmed plans to shut down its Indianapolis bearings plant and move operations to Mexico. The plant employed about 35 people. Brybelly Holdings Inc. e-commerce: Expanding The company is investing $1 million into a new distribution center in Mount Comfort and will create 7 jobs over the next 1 years. Red Bull Distribution Co. Food & Beverage: Expanding The distributor of Red Bull products is leasing new distribution space in Marion and Hamilton counties, creating nearly 4 jobs. Employment statistics Indianapolis Total non-farm employment November 214 November 215 November 216 1,16,8 1.5% 1,34,9 1.4% 1,56,5 2.1% Unemployment rate 5.5% 4.2% 3.6% Indianapolis supersectors November 214 November 215 November 216 Mining, Logging & Construction 45,6-2.4% 47,5 4.2% 48,7 2.5% Manufacturing 89,8 2.5% 89,9.1% 9,5.7% Trade, Transportation, & Utilities 215,.5% 221,4 3.% 225,5 1.9% Information 16,5-1.2% 16, -3.% 15,7-1.9% Financial Activities 61,9 1.8% 62,9 1.6% 67,8 7.8% Professional & Business Services 167,8 5.5% 166,3 -.9% 167,2.5% Educational & Health Services 144,7 -.4% 149,9 3.6% 153, 2.1% Leisure & Hospitality 11,7 2.4% 14,9 3.1% 19, 3.9% Other Services 43,8 1.9% 44,5 1.6% 45,4 2.% Government 13,.2% 131,6 1.2% 133,7 1.6% Industry stratification Indianapolis 4.6% 4.3% 1.5% Trade, transportation and Utilities 21.3% 6.4% 8.6% 1.3% 15.8% 12.7% 14.5% Professional and Business Services Educational and Health Services Government Leisure and Hospitality Manufacturing Financial Activities Mining, Logging and construction Other Services Information

11 Industrial Insight Bulk/Distribution Q4 216 Bulk/Distribution drives industrial activity Quarter in review The bulk/distribution segment of the Indianapolis industrial market saw a record year, posting over 6.3 million square feet in positive net absorption. This is almost 6. percent greater than last year s total and accounts for 8. percent of occupancy growth in the Indianapolis metro this year for all product types. Nearly 3.4 million square feet in leasing velocity occurred this quarter alone. This is over two times greater than last quarter. Top deals signed this quarter include Hewlett-Packard Company (42,-square-foot renewal at 752 Georgetown Road), Quaker Sales & Distributing, Inc. (38,-square-foot lease in World Ameriplex), and Veritiv Operating Company (317,-square-foot lease in Airwest Business Park). Historical net absorption 8,, 6,371,495 6,, 4,41,858 4,, 3,36,65 2,, 98,451 1,375, Historical vacancy rates Developers have taken notice of this increased demand as five million square feet of bulk/distribution product is currently under construction. The large majority of this is speculative in nature (9.4 percent of bulk product under construction). Additionally, if all projects currently in the pipeline actually finish in 217, then new bulk/distribution deliveries will be at a record level of over seven million square feet. With approximately 11 million square feet of active tenant requirements currently looking for 1, square feet or greater of industrial space in metro Indianapolis, the market is not at the immediate risk of being overbuilt. 15.% 1.% 5.%.% 1.6% 1.3% 5.5% 6.9% 7.% Outlook Bulk/distribution shows no signs of slowing down in the coming year. Over two million square feet of space is already slated to be taken down in 217 by companies such as Kohl s, Indiana University Health, Ken s Foods, and Wurth Service Supply, Inc. to name a few. With potentially record levels of new product coming to the market as a whole, options will remain plentiful for companies looking to locate in Indianapolis. Look for investor interest to follow. Historical new construction deliveries 8,, 5,871,198 6,, 4,, 2,71,992 2,, 1,349,212 5,94,62 3,151, ,836,656 Total inventory 1,445,145 Q4 216 net absorption $3.43 Direct average asking rent 5,57,874 Total under construction 7.% Total vacancy 6,371,495 YTD net absorption 4.% 12-month rent growth 15.9% Total preleased

12 Industrial Insight Mid-Sized Warehouse Q4 216 Low vacancy leads to more BTS construction Quarter in review Despite negative absorption for the quarter, the mid-sized warehouse vacancy rate still remains at record lows at 5. percent. This is also one full percentage point below the overall industrial vacancy rate and is nearly two percentage points below last year s vacancy rate. Leasing and investment activity continued during the fourth quarter. Top lease transactions signed this quarter included Stephen F Gould Corporation (13,- square-foot lease at 475 Indianapolis Rd.), Team 36 Services (73,-squarefoot lease at 51 S. Koweba Ln.) and Amazon.com (63,-square-foot lease at 585 W 8 th St.). A few of the sales that occurred include United Parcel Service s user-purchase of Park 1 Building 9 (185, square feet), First Industrial Realty Trust s acquisition of Shadeland VI (1, square feet), and Winn Investment s acquisition of 57 W. Raymond St. (77, square feet) to name a few. This increased demand combined with limited supply has led to a spike in MSW construction heading into next year. Contrary to what is being seen with bulk/distribution product, approximately half of MSW construction is either BTS construction or expansions for companies. The only MSW projects to break ground this quarter was a 64,-square-foot BTS for RAS Development, LLC and a 3,-square-foot expansion for Duncan Supply Company, Inc. Two projects make up the remaining square footage under construction and will bring much needed speculative space to the market. They are being developed by H.S.A. (Gateway IV) and Welsh Property Trust (Plainfield Business Center 2) and are scheduled to come online late 217. Historical net absorption 1,5, 1,194,747 1,4,445 1,, 5, 294, , , Historical vacancy rates 1.% 7.7% 7.5% 7.5% 5.% 6.9% 5.%.% Historical new construction deliveries 1,, 841,82 Outlook With vacancy for MSW product at it s lowest rate in years, look for asking rates to begin to rise, especially as new speculative construction comes online. It is possible for additional speculative construction to also break ground in 217 as available supply remains constrained. With 316, square feet in new product scheduled to be completed during the first quarter of 217 and all of it preleased, the market for MSW is poised to continue growing next year. 5, 547,822 23, ,16 234, ,51,645 Total inventory 5.% Total vacancy -192,262 Q4 216 net absorption 1,4,445 YTD net absorption $3.78 Direct average asking rent -3.9% 12-month rent growth 77,4 Total under construction 51.1% Total preleased

13 Industrial Insight Boone County Q4 216 Boone County continues rapid growth Quarter in review After no occupancy growth last quarter, Boone County posted 1.2 million square feet in absorption to finish the year. This brought the county to almost two million square feet in occupancy growth for the year, nearly 75, square feet greater than the last four years combined. Additionally, Boone County was the submarket with the greatest amount of occupancy growth for the fourth quarter by a large margin (the second highest being West/Southwest in Marion County with 23, square feet). This growth was due to several tenants moving into newly completed construction. Continental Tire occupied its 741,-square-foot leased space in NorthPoint. Also, Amerisource Bergen moved into 328, square feet in Project I-65 and Telamon occupied 112, square feet in AllPoints at Anson Building 19. Strong construction activity in Boone County was a major trend for this year. In total, six projects were completed in 216 which added over 1.4 million square feet to the market. Buildings completed this quarter were Project I-65 (53, square feet) and AllPoints at Anson Building 19 (24, square feet). Four projects remain under construction. Daimler Trucks North America s 28,- square-foot BTS in AllPoints at Anson was the only project to break ground this quarter and is scheduled to be completed by mid-217. Outlook Momentum from 216 is poised to carry over into 217. Over 1.1 million square feet is under construction, with 4, square feet already preleased. Construction for Ken s Foods 339,-square-foot BTS warehouse in Lebanon Business Park is scheduled to begin in early 217 and should be completed within the same calendar year. Boone County is second to only Hendricks County in the amount of new construction delivered since 212. With an increasing number of speculative space options, easy access to rail and major interstates, and close proximity to a growing labor force, Boone County will continue to attract tenants in the coming years. Historical net absorption 3,, 2,, 1,, 44,231 12,84 1,972,93 634,72 445, Historical vacancy rates 15.% 11.5% 14.1% 9.8% 1.% 3.6% 5.%.%.% Historical new construction deliveries 2,, 1,493,766 1,452,712 1,5, 1,22,42 1,, 599,87 5, ,24,126 Total inventory 1,18,693 Q4 216 net absorption $3.71 Direct average asking rent 1,126,84 Total under construction 9.8% Total vacancy 1,972,93 YTD net absorption 13.1% 12-month rent growth 35.2% Total preleased

14 Industrial Insight Hamilton County Q4 216 Space hard to come by in Hamilton County Quarter in review Hamilton County achieved occupancy growth for the third quarter in a row, posting 61, square feet of net absorption in the fourth quarter. This brings the year-end total to nearly 15, square feet. Some of the top leases signed in the submarket this quarter include Indiana Cheer Elite (43,-square-foot lease in Oakridge Industrial Park), Lapmaster (4,- square-foot lease in Saxony Park) and Red Bull Distribution Company (13,- square-foot lease in Saxony Park) to name a few. Lapmaster and Red Bull are both new entrants to the Indianapolis industrial market with the latter also leasing a second location in South/Southeastern Marion County. Historical net absorption 1,, 8, 6, 4, 2, -2, 461,732 16,31 834, ,916-7, This activity has led Hamilton County to become the most constricted industrial submarket in Indianapolis. Overall vacancy is currently below 1. percent, a new historical low for the county and more than five full percentage points below the metro average. Historical vacancy rates 15.% 11.1% 11.8% 1.% 1.7% Outlook Options will continue to be few and far between for tenants looking for anything other than mid-sized warehouse and flex space (6.5 percent and 7.6 percent availability rate respectively) in Hamilton County heading into 217. Both product types have current availability well above the county average of 3.5 percent. 5.%.% 2.%.9% As a result, companies looking to grow will have to continue exploring build-to-suit options or potentially expand current facilities. Metro Plastics Technologies, Inc. (BTS) and Noble Industries (expansion of current facility) are two companies taking this route. Others may have to consider relocation. Historical new construction deliveries 8, 6, 589,584 4, 2, 33, ,143,22 Total inventory.9% Total vacancy 61,465 Q4 216 net absorption 148,916 YTD net absorption $4.51 Direct average asking rent -12.4% 12-month rent growth 52,4 Total under construction 1.% Total preleased

15 Industrial Insight Hancock County Q4 216 Industrial market grows in Hancock County Quarter in review Hancock County saw more than 216, square feet of occupancy growth this quarter due to the completion of build-to-suit, owner-user facilities for Brybelly and Foam Craft. These two occupancies account for almost all of the net absorption achieved in 216. This is not surprising as the county currently sports one of the lowest vacancy rates in metro Indianapolis at 3.4 percent with all availability limited to a select few bulk options. As a result, more BTS construction is on the way in 217. Landsberg Orora is slated to open a 1,-square-foot mid-sized warehouse facility in Alliance Interstate Park early next year. This new facility will be near the recently completed buildings for Brybelly and Foam Craft. Meanwhile, Celadon has begun work on a new corporate campus that will include offices, dormitories, medical clinics and training facilities for drivers as well as a 73,-square-foot maintenance facility. All told, approximately 24, square feet of new industrial product is currently under construction and is 1. percent preleased. Investment activity also returned to the submarket. GLP USA purchased a 456,-square-foot bulk facility in Mount Comfort Commercial Park this quarter. The property was part of a 17-building national portfolio being sold by Hillwood. Outlook With a few land sites remaining in Hancock County for future development, BTS construction remains the top option for companies looking to locate in the submarket. However, developers continue to explore options for potential speculative development, and it remains possible that a project could break ground next year. If so, it would be the first speculative industrial facility the county has seen in almost a decade. Historical net absorption 6, 4, 2, -2, -4, Historical vacancy rates 6.% 4.% 2.%.% 4.2%.2% Historical new construction deliveries 5, 4, 3, 2, 1, 399, ,8 4.1% 472, , % 225, % , 419,52 26, ,618,657 Total inventory 3.4% Total vacancy 216,348 Q4 216 net absorption 225,948 YTD net absorption $3.52 Direct average asking rent 3.8% 12-month rent growth 239,2 Total under construction 1.% Total preleased

16 Industrial Insight Hendricks County Q4 216 Hendricks County enjoys another solid year Quarter in review Despite a relatively flat fourth quarter in terms of occupancy growth, Hendricks County still achieved 2.3 million square feet of net absorption this year. This total nearly doubles last year s mark and is only surpassed by Marion County which is comprised of six submarkets and has an inventory nearly three times the size. Some of the larger lease transactions closed this quarter include Veritiv Operating Company (317,-square-foot lease in Airwest 12), Medline Industries, Inc. (26,-square-foot renewal in Perry Road Business Park), Electronic Recyclers International (12,-square-foot lease in Airwest V) and Burlington Mattress, Inc. (11,-square-foot lease in Plainfield Business Center) to name a few. Investment activity also took place in the submarket this quarter. Gramercy Property Trust, Inc. closed on a 17-building USAA Real Estate Company national portfolio late in the year. The portfolio included two properties (281 Airwest Blvd. and 215 Stanley Rd.) located in Plainfield totaling 1.3 million square feet. Both properties were fully leased at time of sale. Outlook Vacancy in Hendricks County will begin to rise from its current rate of 8.4 percent as early as next quarter due to the expected completion of several speculative projects early next year. GreeneParke Two and Sunbeam 2 are both slated for delivery in the first quarter of 217. These two projects will add 1.3 million square feet of speculative space to the submarket. Historical net absorption 2,5, 2,, 1,5, 1,, 5, Historical vacancy rates 15.% 1.% 5.%.% 5.8% 689,757 1,473, % Historical new construction deliveries 2,23, % 1,28, % 2,277, % This is only the tip of the iceberg, as an additional 1.6 million square feet of speculative construction is currently on pace to deliver in 217. It also represents a shift by developers as only 1.6 million square feet of speculative space was delivered over the previous two years combined. However, with Hendricks County remaining a popular destination choice for active tenants in the market, the addition of this new product is needed. 6,, 4,, 2,, 3,99,614 1,86,545 1,858, ,44 823, ,289,97 Total inventory -9,729 Q4 216 net absorption $3.52 Direct average asking rent 3,276,318 Total under construction 8.4% Total vacancy 2,277,398 YTD net absorption 1.4% 12-month rent growth 9.9% Total preleased

17 Industrial Insight Johnson County Q4 216 Constricted market will soon gain relief Quarter in review The Johnson County industrial market enjoyed a strong year, posting 814, square feet of net absorption in 216. Only Hendricks County, Boone County and West/Southwest Marion County achieved a higher level of occupancy growth among the 11 tracked industrial submarkets this year. Historical net absorption 1,, 635,944 5, 226,571 77, ,636 This solid occupancy growth has led to a constricted market. Johnson County currently has the second lowest vacancy rate in metro Indianapolis at 1.6 percent even with the recent completion of 132, square feet of speculative bulk product. However, additional options appear on the horizon. -5, -113, Opus Development Company, LLC. and Scannell Properties both recently announced plans to build speculative bulk product in Greenwood. Opus plans to construct a nearly 5,-square-foot facility along N. Graham Rd. in the Greenpointe Logistics Center. Meanwhile, Scannell is considering development of an approximately 233,-square-foot distribution center next to its current 23,-square-foot build-to-suit project for Wurth Service Supply, Inc. Outlook Johnson County stands poised for growth next year. Wurth s new headquarters is expected to deliver in Fall 217. If ground is broken on the two speculative developments mentioned earlier in this report, the submarket will add almost one million square feet of new industrial inventory over the next calendar year. With demand for industrial product at an all-time high, this new inventory will be a welcome addition and go a long way towards keeping Johnson County in play for companies looking to locate a distribution center in metro Indianapolis. Historical vacancy rates 1.% 8.% 5.2% 4.6% 5.% 3.5% 1.6%.% Historical new construction deliveries 1,5, 1,241,12 1,, 5, 51,36 132, ,41,914 Total inventory Q4 216 net absorption $3.46 Direct average asking rent 23, Total under construction 1.6% Total vacancy 813,636 YTD net absorption.% 12-month rent growth 1.% Total preleased

18 Industrial Insight Marion County Q4 216 Marion County enjoys strong activity in 216 Quarter in review Despite experiencing a small amount of occupancy loss during the fourth quarter, Marion County experienced one of its strongest years, leading the Indianapolis industrial market with more than 2.5 million square feet of net absorption in 216. This more than doubles last year s total and marks the third consecutive year of occupancy growth for the county. The West/Southwest submarket continues to drive the bulk of activity within Marion County, accounting for almost 6. percent of the net absorption total. Most recently, Quaker Sales & Distributing, Inc. leased 383, square feet in World Connect Building 1 and Inmar, Inc. leased 217, square feet at 76 Rockville Rd. Both of these transactions occurred in speculative buildings delivered to the market within the past three years. More construction is on the way in 217. Nearly one million square feet is currently under construction in Marion County, almost all of which is speculative in nature. An additional 621, square feet is slated to break ground this spring as Molto Properties will make its first foray into the Indianapolis market. The Chicagoarea developer plans to deliver its first building on land purchased in World Connect at Ameriplex before the end of 217. Sale activity continued in Marion County as well. Eight investment transactions and three owner-user transactions took place in the fourth quarter. This brings the year-end total to 48 sales in the submarket (29 investment and 19 owner-user). The remaining metro Indianapolis submarkets only had 21 sale transactions in 216 (14 investment and 7 owner-user). Outlook Demand remains strong for industrial space in Marion County. With more than 1.5 million square feet of new product currently expected to deliver in 217, the submarket will be positioned to continue to meet this demand. Historical net absorption 3,, 2,52,2 2,, 1,229,12 885,117 1,, -1,, -619,171-1,157,396-2,, Historical vacancy rates 1.% 7.6% 7.5% 7.4% 6.% 5.6% 5.%.% Historical new construction deliveries 1,5, 1,, 5, 1,15,64 826, ,485 1,214, , ,34,695 Total inventory -13,254 Q4 216 net absorption $3.36 Direct average asking rent 996,552 Total under construction 5.6% Total vacancy 2,52,2 YTD net absorption.% 12-month rent growth 5.2% Total preleased

19 For more information, please contact: Mike Cagna Senior Research Analyst Brianna Marshall Research Analyst About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 5 company with annual fee revenue of $5.2 billion and gross revenue of $6. billion, JLL has more than 28 corporate offices, operates in more than 8 countries and has a global workforce of more than 6,. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4. billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 215. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit About JLL Research JLL s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today s commercial real estate dynamics and identify tomorrow s challenges and opportunities. Our more than 4 global research professionals track and analyze economic and property trends and forecast future conditions in over 6 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc. COPYRIGHT JONES LANG LASALLE IP, INC. 217