Forecast Vacancy Net Absorption Construction Rental Rate Vacancy Rate 1.7% Change from Q3 17 (Basis Points) -2 BPS Net Absorption 394,4 Construction Completions 191,7 Average Asking Rent Change from Q3 17 V & Ventura County Industrial Market $.7 P NNN $.1 P NNN Y.O.Y. Change (%) 1.4% 12-mo Employment Growth (%) 12-mo Actual Employment Change Construction Manufacturing Transportation, Trade & Utilities 6.2% -1.% -.2% +8,2-3,5-1,4
SAN FERNANDO VALLEY & VENTURA COUNTY INDUSTRIAL Vacancy > Vacancy decreased 2 basis points to 1.7%. > Vacancy remains tightest in the Simi Valley/Moorpark area at.9% and highest in the Santa Clarita Valley at 4.3%. > FORECAST: There remains 757, of space under construction, which will likely increase the vacancy rate in future quarters. Absorption and Leasing Activity > Industrial demand was positive 394,4 for the quarter. > Sales and leasing activity totaled 1,495,6 this quarter. This was broken out into 11 sales (59,7 ) and 28 leases (985,9 ). > FORECAST: Future quarters will likely see more net absorption as new, larger buildings under construction come to market. Rental Rates > Average asking rents increased $.1 P NNN to $.7. Asking rents have surpassed their peak of $.68 P NNN which was seen in late 27. > Asking rents were highest in the Conejo Valley, Central San Fernando Valley and East San Fernando Valley at $.89 P NNN and lowest in West Ventura County at $.6 P NNN. > FORECAST: Rents will continue to rise in future quarters but increases will not be uniform. The discrepancy between rents in Los Angeles and Ventura Counties will likely increase in future quarters as asking rents are rising faster in Los Angeles County compared to Ventura County. Historical Vacancy v. Rents V & Ventura County, $ P PER MONTH (NNN) Net Absorption by Submarket V & Ventura County, $.75 $.7 $.65 $.6 $.55 $.5 $.45 $.4 35, 3, 25, 2, 15, 1, 5, (5,) (1,) (15,) RENTS VACANCY 4Q13 4Q14 4Q15 4Q16 4Q17 (85,8) WEST VENTURA COUNTY (37,8) SANTA CLARITA VALLEY CENTRAL VALLEY 11,4 CONEJO VALLEY 6,8 SIMI VALLEY/MOORPARK 162,2 WEST VALLEY 5% 4% 4% 3% 3% 2% 2% 1% 1% % % VACANT (TOTAL) 283,6 Historical Sales & Leasing Activity V & Ventura County, Q4 213-217 EAST VALLEY 3,, 2,5, 2,, 1,5, 1,, 5, 4Q13 4Q14 4Q15 4Q16 4Q17 2
SAN FERNANDO VALLEY & VENTURA COUNTY INDUSTRIAL Construction > There was 191,7 added to the base this quarter while 757, of space remains under construction. > FORECAST: Many of the existing buildings in the San Fernando Valley are ill-suited for modern distribution or e-commerce tenants. This will start to change as new development begins addressing the needs of modern industrial tenants. The next few years will bring an increased supply of competitive space to the San Fernando Valley. Historical Net Absorption & Construction Completions V & Ventura County, Q4 213-217 9, 8, 7, 6, 5, 4, NET ABSORPTION CONSTRUCTION COMPLETIONS 3, Investment Trends > Capitalization rates continued to tighten in Los Angeles County, averaging 4.6% in the final quarter of 217. > Sales prices fell over the quarter to $147 P. The fourth quarter saw a reduction in the number of deals as pending sales have been pushed to the following year. > FORECAST: The full impact of the GOP tax bill looks to place new deductions for pass-through entities and make value-add strategies even more appealing. This will benefit real estate investment vechicles and will likely lead to a flood of private capital into commercial real estate in the following years. 2, 1, 4Q13 4Q14 4Q15 4Q16 4Q17 Investment Trends Chart Los Angeles County Q4 13-17 7.% 6.% 5.% 4.% Average Price Per sf Average Cap Rate $18 $16 $14 $12 $1 Outlook 3.% 2.% $8 $6 $4 > The San Fernando Valley is at the tail end of a building boom. Tight market conditions and rising rents are leading to a much needed increase in supply. As these newly completed buildings are leased up, we expect to see increased investor activity on these newly leased buildings. 1.%.% 3Q13 3Q14 3Q15 3Q16 3Q17 $2 $ > For industrial users looking to find the ideal space to meet their needs, they will likely have to expand their industrial footprint by taking additional space in soon to be constructed speculative buildings or in build to suit projects, as quality space remains hard to find in this market. > Other alternatives for industrial space include the Tejon Commerce Center which is less then one hour north of the San Fernando Valley. Unemployment Rate Los Angeles County November 217 4.7% 4.6% 4.6% 4.5% 4.4% 4.3% 4.2% 4.1% 4.1% 4.1% 4.% 3.9% 3.8% United States California Los Angeles County 3
SAN FERNANDO VALLEY & VENTURA COUNTY INDUSTRIAL Market Description The San Fernando Valley and Ventura County industrial market includes 17.3 million of standard industrial space, and represents 15 percent of the total industrial space in buildings 1, square feet and greater in the Los Angeles Basin. It is a moderately mature market, with 68 percent of its space built more than 2 years ago. The market is oriented toward small- to medium-sized manufacturers and distributors, with only 29 percent of its space contained in big box buildings (1,+ ). Submarket Map RECENT TRANSACTIONS & MAJOR DEVELOPMENTS San Fernando Valley & Ventura County Industrial SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER 231-2351 Latigo, Oxnard 399,3 $42.2 Million $16 P ZDI Prudential 941 De Soto, Chatsworth 15,8 $23 Million $152 P PDX Industrial Investments Rexford Industrial Realty 37 Cohasset, Burbank 49,7 $1.6 Million $212 P Storage Etc. Duke Realty Corporation 161 Cochran, Simi Valley 41,6 $7.9 Million $19 P RSD, Inc. OMP LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 1445 Glenoaks, Pacoima 94,9 Direct - New Light Quixote Studios Xebec Development 1163 Pendleton, Sun Valley 6,1 Direct - New Distribution Home Delivery Link Xebec Development 1185 Olinda, Sun Valley 52,6 Direct - New Light Tforce Final Mile West LLC Olinda Properties 29115 Valley View, Valencia 52,1 Direct - New Distribution Accurate Freight International Airport Centers MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION Conejo Spectrum Sares Regis Group 55,378 Conejo Valley Under Construction Q1 218 Tejon Ranch Commerce Center, Tejon Ranch Tejon Ranch Company / Majestic Realty 48,48 Tejon Completed The Point, Simi Valley Overton Moore Properties 141, Simi Valley / Moorpark Completed 4
SAN FERNANDO VALLEY & VENTURA COUNTY INDUSTRIAL INDUSTRIAL OVERVIEW San Fernando Valley & Ventura County Industrial Market 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 Number of Activity Sales Lease Activity Number of Leases Total Gross Activity Current Qtr Total Gross Activity YTD Net Absorption Current Qtr Net Absorption YTD Weighted Avg Asking Lease Rates WEST VENTURA COUNTY SUBTOTAL 1,144 42,32,8 13,5 2.7% 2.5% 6.1% 13,7 1 113,6 5 127,3 1,287, (85,8) 246,8 $.6 SIMI VALLEY/MOORPARK SUBTOTAL 37 11,295,9 191,692.9%.1% 2.7% 19,7 4 88,7 1 279,4 1,244,3 6,8 913,7 $.66 SANTA CLARITA VALLEY SUBTOTAL 433 19,61,2 46,8 4.3% 4.1% 7.1% 35,8 1 173,6 3 29,4 991,9 (37,8) 157,6 $.67 CONEJO VALLEY SUBTOTAL 25 7,429,7 579,6 1.1% 1.7% 1.6% 11,4 1 11,4 134,3 11,4 (38,8) $.89 WEST SAN FERNANDO VALLEY SUBTOTAL 788 25,823,3 2.% 2.6% 3.3% 171,4 2 14,8 4 276,2 834,8 162,2 (21,2) $.79 CENTRAL SAN FERNANDO VALLEY SUBTOTAL 428 13,73,1.7%.7% 1.% 1,1 1 1,1 283,9 $.89 EAST SAN FERNANDO VALLEY SUBTOTAL 1,66 5,881,3.3%.9% 1.% 98,2 3 483,5 13 581,7 2,64,6 283,6 672,3 $.89 SAN FERNANDO VALLEY SUBTOTAL SUBTOTAL 3,269 19,747,7 191,7 1.4% 1.8% 2.5% 35,3 6 772,1 21 1,77,4 4,131,6 468,1 825,1 $.75 VENTURA COUNTY SUBTOTAL SUBTOTAL 1,672 6,13, 191,7 181,1 2.1% 1.9% 4.8% 24,4 5 213,7 7 418,1 2,79,1 58,2 1,237,1 $.63 MARKET TOTAL 1, - 19,999 2,395 33,816,.7%.8% 1.4% 45,6 3 81,9 6 127,5 866,7 41,7 (61,7) $.89 2, - 39,999 1,491 4,243,6 99,1 21,2.8%.6% 1.8% 114,8 4 137, 7 251,8 1,275,3 (1,4) 165,3 $.82 4, - 69,999 594 29,895,1 92,6 358,.7%.8% 2.6% 91,6 2 132,4 5 224, 1,2,5 72,5 38,4 $.73 7, - 99,999 2 16,489, 188,8 3.1% 4.3% 4.8% 28,4 3 28,4 869,3 28,4 432,7 $.74 1,- 249,999 24 33,73,2 3.9% 4.% 5.9% 257,7 2 324,9 5 582,6 1,929,7 52,2 678,3 $.65 25, - 499,999 28 9,376,8 1.2% 1.2% 9.% 71,3 1 71,3 632,8 483,3 $.57 5,+ 8 6,73,5 3.8% 4.3% 3.8% 3, 1 3, 66,5 3, (76,) $.66 TOTAL 4,956 17,254,2 191,7 757, 1.7% 1.9% 3.4% 59,7 11 985,9 28 1,495,6 6,84,8 394,4 1,93,3 $.7 5
SAN FERNANDO VALLEY & VENTURA COUNTY INDUSTRIAL Definitions of key terms in this report Total Rentable Square Feet: Industrial space in buildings with 1, or more of industrial space. Includes speculative as well as owner-occupied buildings. Excludes Research & Development (R&D) buildings (industrial buildings with at least 3% office build-out, 3/1 parking ratio and a high level of finish). Excludes space that is under-construction or renovation. Vacancy: Space in existing buildings that is 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. Availability: 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). Gross Activity: Square feet sold and 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. Construction Completions: 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. 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 www. colliers.com/greaterlosangeles. 396 offices in 68 countries on 6 continents United States: 153 Canada: 29 Latin America: 24 Asia Pacific: 79 EMEA: 111 UNITED STATES: V & Ventura County Office License No. 198231 1683 Ventura Suite J Encino, CA 91436 > $2.6 billion in annual revenue > 2. billion square feet under management > Over 15, professionals TEL: +1 818 95 58 FAX: +1 818 325 4 Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. HANS MUMPER Executive Managing Director Greater Los Angeles THOMAS GALVIN Research Analyst Research Services 6