ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 QUICK STATS Direct Vacancy 2.3% Overall Vacancy 2.7% Lease Rate NNN $.91 Gross Absorption Under Construction MARKET TRENDS Current Quarter 4,283,991 SF 963,138 SF Change from Last Quarter Year Overall Vacancy Rental Rates Gross Absorption Under Construction INDUSTRIAL SUMMARY & OUTLOOK The Orange industrial market witnessed vacancy rates remain unchanged during the quarter, remaining at 2.7%. Average asking rents increased 5.8%, year over year, moving from $.86nnn to $.91nnn. Gross absorption finished the quarter with 4.3 million square feet of activity, while net absorption gained 39, square feet of occupied space. Under construction activity decreased during the quarter with 963, square feet currently underway, as the market delivered 77, square feet of new space for the year. Unemployment rates declined from 3.5% to 2.8%, year over year, and is well below California (4.2%) and the U.S. at 3.9%. The industrial market continues to see available supply remain at extremely low levels, and while new construction has recently been at higher levels, it still has not been able to keep pace with strong demand, resulting in vacancy remaining near all-time lows and rental rates still rising rapidly. Demand for industrial space will continue to be driven by domestic and global consumption levels. In 217, the Los Angeles and Long Beach Port container traffic recorded its highest container total ever with 16.89 million TEU s, up 8% from 216 and 7% higher than its second highest year during 26. The investment and sale market for industrial real estate in Orange remains extremely strong, as total transaction volume reached a record high in 216 with $1.3 billion, and was followed up by $1.1 billion in 217, its second highest total. Median prices in 217 increased 13.3%, year over year and remain at an all-time high of $24 PSF. The capital markets remain solid with plenty of liquidity, but we expect interest rates to continue to rise in the coming year. The overall industrial market remains a landlord controlled market, and we expect vacancy to remain in the 2% to 3% range, with rents expected to rise another 4% to 6% in the coming year. VACANCY & NET ABSORPTION ECONOMIC STATS Current Month Previous Year 2,, 1,5, 7.% 6.% Dec. 17 Dec. 16 Unemployment 2.8% 3.5% Rate (MSA) Change in # +6,7 +23,6 Of Jobs (MSA) % Change for +.4% +1.5% Jobs (MSA) 1,, 5, (5,) (1,,) (1,5,) 5.% 4.% 3.% 2.% 1.%.% Net Absorption SF Overall Vacancy
ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 VACANCY RENTAL RATES & TIME ON THE MARKET 7.% $1. 9. 6.% 5.% 4.% $.9 $.8 $.7 8. 7. 6. 5. 3.% 2.% 1.% $.6 $.5 $.4 4. 3. 2. 1..% $.3. Direct Vacancy Overall Vacancy Avg. Rent (NNN) Time to Lease (Months) Overall vacancy rates (including sublease space) were unchanged during the quarter, remaining at 2.7%. Of the four major submarkets within the Orange industrial market, the North submarket ended the quarter with the lowest total vacancy of 1.9%, followed by the West at 2.6%, South at 3.2%, and the submarket finishing the quarter at 3.6%. Since the fourth quarter of 216, overall vacancy has increased from 2.4% to 2.7%, but still remains near its lowest level in more than a decade. ABSORPTION Standard industrial asking rents increased 5.8%, year over year, moving from $.86nnn to $.91nnn. Of the four major submarkets within the Orange market, the South submarket ended the quarter with the highest standard industrial rental rate of $1.6nnn, followed by the at $.93nnn, the West at $.87nnn, and the North submarket finishing the quarter at $.82nnn. Average industrial asking rents increased 2.3% during the quarter, moving from $.89nnn to $.91nnn, while the median time to lease was unchanged at 2.9 months. CONSTRUCTION ACTIVITY 7,, 1,4, 6,, 1,2, 5,, 4,, 3,, 2,, 1,, (1,,) 1,, 8, 6, 4, 2, (2,,) Net Absorption SF Gross Absorption SF SF Newly Completed SF Under Construction Gross absorption finished with 4.3 million square feet of activity during the quarter, down 1% from the previous quarter, but higher by 4% compared to a year ago. Net absorption finished the quarter in positive territory, gaining 391, square feet of occupied space. During 216, the market gained 1.7 million square feet, after gaining 4.4 million square feet during 215. In 214, the market gained 4.1 million square feet, after gaining 3.9 million square feet during 213. Overall activity and demand still remains strong, and we expect demand to remain at similar levels in the coming quarters. As new supply is delivered, we expect it to be absorbed very quickly. Under construction activity moved lower during the quarter, with 963, square feet currently underway, as the market delivered 77, square feet of new space for the year. In 216, the market added 815, square feet, after delivering 1. million square feet during 215, 1.2 million square feet in 214, and 51, square feet in 213. During the past five years, the market has averaged approximately 86, square feet of new deliveries, annually. Construction activity should continue to level off in the coming quarters, as available land for industrial development remains low, along with high land values and rising construction costs, making new development more challenging.
ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 MARKET SNAPSHOT Total Direct Direct Total Vacant Vacancy Inventory Vacant Vacancy w/ Sublet with Sublet SUBMARKETS Square Footage Square Footage Rate Square Footage Rate 79,418,159 2,793,179 3.5% 2,86,514 3.6% North 126,494,77 2,323,754 1.8% 2,429,56 1.9% South 45,129,715 1,133,249 2.5% 1,426,177 3.2% West 48,626,74 688,736 1.4% 1,239,965 2.6% Orange Totals 299,668,655 6,938,918 2.3% 7,955,712 2.7% Industrial Market Inventory 4.% Industrial Vacancy Rates South 15% West 16% 27% 3.5% 3.% 2.5% 2.% North 42% 1.5% 1.%.5%.% North South West Direct Vacancy Vacancy with Sublet Average Average Square Feet Square Feet Gross Absorption Industrial R&D / Flex Built in Under Square Feet SUBMARKETS Rent Rent 217 Construction Current Quarter $.93 $1.28 51,45 1,11,157 North $.82 $1.14 613,826 963,138 1,75,38 South $1.6 $1.35 736,95 West $.87 $1.2 41,668 74,576 Orange Totals $.91 $1.22 76,944 963,138 4,283,991 $1.6 $1.4 $1.2 $1. $.8 $.6 $.4 $.2 $. Industrial Rental Rates North Average Industrial Rent South West Orange Totals Average R&D / Flex Rent 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, New Construction Activity North Square Feet Built in 217 South West Orange Totals Square Feet Under Construction
ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 SOUTHERN CALIFORNIA INDUSTRIAL SALES TREND ANALYSIS TOTAL SALES TRANSACTIONS Market 28 29 21 211 212 213 214 215 216 217 LA 99 523 79 1,43 1,442 1,195 1,346 1,59 1,49 1,723 Orange 216 163 21 278 445 399 35 435 47 51 Inland Empire 389 293 288 383 56 57 594 679 646 848 Ventura 65 59 53 83 92 1 19 111 137 131 Totals 1,579 1,38 1,26 1,787 2,539 2,264 2,399 2,815 2,662 3,23 TOTAL TRANSACTION DOLLAR VALUE (MILLIONS) Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA $2,9.7 $855. $1,238.9 $1,564.7 $2,145.2 $2,31.2 $2,297.7 $3,255.2 $2,947.6 $3,46.7 Orange $525.4 $268.7 $425.3 $622.4 $646.1 $856.6 $96.6 $97.3 $1,269.3 $1,137.4 Inland Empire $1,315.6 $61.1 $879.4 $1,2.2 $94.1 $1,289.8 $1,488.8 $1,571. $1,396.4 $1,944. Ventura $19. $41.7 $13.4 $16. $191.3 $117.5 $217.8 $152.9 $198.4 $221.2 Totals $4,4.7 $1,775.5 $2,647. $3,295.3 $3,886.7 $4,295.1 $4,965. $5,886.3 $5,811.7 $6,79.3 TOTAL SQUARE FEET SOLD Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA 21,54,775 12,72,239 22,111,368 21,441,991 32,187,47 23,536,52 23,69,595 32,79,793 23,877,886 29,429,84 Orange 3,876,845 3,227,465 4,642,255 6,932,955 9,112,749 9,451,638 9,421,962 8,91,899 8,791,77 8,915,84 Inland Empire 2,3,636 12,127,851 19,912,668 18,246,26 18,677,764 23,322,756 22,993,923 21,78,64 15,61,71 2,829,822 Ventura 1,334,814 446,275 1,217,138 1,386,321 3,496,396 1,669,355 3,123,237 1,85,294 2,79,797 2,767,523 Totals 46,27,7 28,53,83 47,883,429 48,7,293 63,474,379 57,98,269 59,229,717 64,612,626 5,981,1 61,942,953 AVERAGE PRICE / SF Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA $119.13 $93.17 $72.12 $97.74 $96.81 $11.18 $114.27 $131.77 $151.36 $157.36 Orange $157.9 $124.68 $12.72 $12.64 $11.4 $18.89 $129.56 $152.2 $163.78 $169.95 Inland Empire $83.14 $54.88 $53.35 $62.4 $66.74 $7.91 $73.69 $9.36 $13.75 $116. Ventura $132.16 $13.65 $92.43 $11.31 $68.76 $84.3 $93.17 $15.72 $1.23 $17.39 Averages $17.2 $81.4 $67.79 $85.12 $88.31 $89.78 $99.83 $119.88 $136.21 $143.3 MEDIAN PRICE / SQUARE FOOT Bldg. SF 28 29 21 211 212 213 214 215 216 217 LA $14.98 $115.93 $13.97 $17.96 $18.36 $114.1 $127.19 $142. $158.46 $177.59 Orange $19.78 $15. $126.25 $125.4 $126.6 $136.89 $145. $169. $179.67 $23.87 Inland Empire $123.55 $86.85 $75.66 $7.64 $72.62 $76.33 $88.42 $1. $118.1 $125.38 Ventura $151.19 $159.57 $114.43 $14.9 $99.77 $97.1 $113.66 $124.7 $122.33 $14.46 Median Average $137.91 $18.1 $94.62 $96.13 $99.91 $12.13 $114.26 $131.7 $147.82 $162.16 MEDIAN $ PSF INCREASE Bldg. SF 29 21 211 212 213 214 215 216 217 LA -17.8% -1.3% 3.8%.4% 5.3% 11.5% 11.6% 11.6% 12.1% Orange -21.4% -15.8% -1.%.8% 8.6% 5.9% 16.6% 6.3% 13.5% Inland Empire -29.7% -12.9% -6.6% 2.8% 5.1% 15.8% 13.1% 18.% 6.2% Ventura 5.5% -28.3% -9.% -4.2% -2.7% 17.1% 9.7% -1.9% 14.8% Totals -21.6% -12.5% 1.6% 3.9% 2.2% 11.9% 14.7% 12.8% 9.7% The following information has been obtained from sources deemed reliable. While we do not doubt its accuracy, we make no warranty or representation about it. This report contains verified arms-length transactions, but excludes all portfolio sales.
Median Price PSF Annual Increase Square Footage Sold Average Price PSF Number of Transactions Transaction $ Volume (Millions) ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 SOUTHERN CALIFORNIA INDUSTRIAL SALES TREND ANALYSIS Number of Transactions Transaction Volume $ 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 $4,. $3,5. $3,. $2,5. $2,. $1,5. $1,. $5. 28 29 21 211 212 213 214 215 216 217 LA 99 523 79 1,43 1,442 1,195 1,346 1,59 1,49 1,723 Orange 216 163 21 278 445 399 35 435 47 51 Inland Empire 389 293 288 383 56 57 594 679 646 848 Ventura 65 59 53 83 92 1 19 111 137 131 35,, 3,, Square Footage Sold $. 28 29 21 211 212 213 214 215 216 217 LA $2,9.7 $855. $1,238.9 $1,564.7 $2,145.2 $2,31.2 $2,297.7 $3,255.2 $2,947.6 $3,46.7 Orange $525.4 $268.7 $425.3 $622.4 $646.1 $856.6 $96.6 $97.3 $1,269.3 $1,137.4 Inland Empire $1,315.6 $61.1 $879.4 $1,2.2 $94.1 $1,289.8 $1,488.8 $1,571. $1,396.4 $1,944. Ventura $19. $41.7 $13.4 $16. $191.3 $117.5 $217.8 $152.9 $198.4 $221.2 $18. $16. Average Price PSF 25,, 2,, $14. $12. $1. 15,, $8. 1,, 5,, $6. $4. $2. 28 29 21 211 212 213 214 215 216 217 21,54,775 12,72,239 22,111,368 21,441,991 32,187,47 23,536,52 23,69,595 32,79,793 23,877,886 29,429,84 LA Orange 3,876,845 3,227,465 4,642,255 6,932,955 9,112,749 9,451,638 9,421,962 8,91,899 8,791,77 8,915,84 Inland Empire 2,3,636 12,127,851 19,912,668 18,246,26 18,677,764 23,322,756 22,993,923 21,78,64 15,61,71 2,829,822 Ventura 1,334,814 446,275 1,217,138 1,386,321 3,496,396 1,669,355 3,123,237 1,85,294 2,79,797 2,767,523 Median Price PSF $. 28 29 21 211 212 213 214 215 216 217 LA $119.13 $93.17 $72.12 $97.74 $96.81 $11.18 $114.27 $131.77 $151.36 $157.36 Orange $157.9 $124.68 $12.72 $12.64 $11.4 $18.89 $129.56 $152.2 $163.78 $169.95 Inland Empire $83.14 $54.88 $53.35 $62.4 $66.74 $7.91 $73.69 $9.36 $13.75 $116. Ventura $132.16 $13.65 $92.43 $11.31 $68.76 $84.3 $93.17 $15.72 $1.23 $17.39 % Change Median Price PSF $225. $2. $175. $15. $125. 3.% 2.% 1.%.% $1. $75. $5. $25. $. 28 29 21 211 212 213 214 215 216 217 LA $14.98 $115.93 $13.97 $17.96 $18.36 $114.1 $127.19 $142. $158.46 $177.59 Orange $19.78 $15. $126.25 $125.4 $126.6 $136.89 $145. $169. $179.67 $23.87 Inland Empire $123.55 $86.85 $75.66 $7.64 $72.62 $76.33 $88.42 $1. $118.1 $125.38 Ventura $151.19 $159.57 $114.43 $14.9 $99.77 $97.1 $113.66 $124.7 $122.33 $14.46-1.% -2.% -3.% -4.% 29 21 211 212 213 214 215 216 217 LA -17.8% -1.3% 3.8%.4% 5.3% 11.5% 11.6% 11.6% 12.1% Orange -21.4% -15.8% -1.%.8% 8.6% 5.9% 16.6% 6.3% 13.5% Inland Empire -29.7% -12.9% -6.6% 2.8% 5.1% 15.8% 13.1% 18.% 6.2% Ventura 5.5% -28.3% -9.% -4.2% -2.7% 17.1% 9.7% -1.9% 14.8%
ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 PORTS OF LONG BEACH & LOS ANGELES HISTORICAL CONTAINER STATS & TRENDS Quarter & Year Loaded Inbound (Imports) Loaded Outbound (Exports) Total Loaded Empties Total Containers % Change (Prior Qtr.) % Change (Prior Yr.) % Change (Prior 2 Yrs.) 4Q 217 2,236,512 864,951 3,11,463 1,329,531 4,43,994-2.% 6.7% 14.3% 3Q 217 2,339,73 811,292 3,15,365 1,372,386 4,522,752 1.1% 11.4% 6.% 2Q 217 2,117,463 826,178 2,943,641 1,163,392 4,17,33 7.3% 7.4% 5.% 1Q 217 1,886,23 868,29 2,754,259 1,72,668 3,826,927-7.9% 6.5% 1.1% 4Q 216 2,87,498 879,267 2,966,765 1,186,955 4,153,72 2.3% 7.1% 12.4% 3Q 216 2,99,2 853,33 2,952,233 1,17,223 4,59,456 6.1% -4.8% 7.6% 2Q 216 2,96,446 856,215 2,818,94 1,7,246 3,825,34 6.5% -2.2% 3.4% 1Q 216 2,94,859 845,44 2,598,231 995,27 3,593,438-7.3% 3.4% -.1% 4Q 215 1,991,444 826,65 2,736,45 1,14,516 3,876,965-9.1% 4.9% 1.4% 3Q 215 1,817,161 844,562 2,661,724 1,284,213 4,265,623 9.% 13.% 7.1% 2Q 215 1,754,371 812,98 2,567,351 1,82,394 3,913,298 12.6% 5.8% 2.1% 1Q 215 1,89,18 789,51 2,598,231 878,445 3,476,676-5.9% -3.4% -3.3% 4Q 214 1,931,724 759,835 2,691,559 1,4,845 3,696,44-2.% -3.4%.3% 3Q 214 1,928,187 757,74 2,685,261 1,88,28 3,773,541 2.% -5.2% -2.8% 2Q 214 1,949,84 787,366 2,736,45 963,69 3,7,59 2.8% -3.4% 5.1% 1Q 214 2,37,574 779,934 2,817,58 78,456 3,597,965-5.9%.1% 15.5% 4Q 213 2,138,563 795,898 2,934,461 89,168 3,824,629-3.9% 3.8% 22.6% 3Q 213 2,168,57 812,93 2,981,41 1,,38 3,981,718 3.9% 2.6% 16.% 2Q 213 2,128,54 834,75 2,963,254 868,882 3,832,136 6.6% 8.9% 6.5% 1Q 213 2,38,181 84,821 2,879,3 716,573 3,595,576-2.4% 15.5%.2% Ports of Long Beach & Los Angeles Historical Container Stats Container Trade in TEUs* 5,, 4,5, 4,, 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 29 29 29 29 21 21 21 21 211 211 211 211 212 212 212 212 213 2132 13213 214 214 214 214 215 215 215 215216 216 216 216217 217 217 217 Loaded Inbound (Imports) Loaded Outbound (Exports) Empties
ORANGE COUNTY INDUSTRIAL FOURTH QUARTER 217 MARKET REPORT OVERVIEW SOUTHERN CALIFORNIA MARKET MAP METHODOLOGY & TERMINOLOGY Methodology Industrial and flex (R & D) buildings that are 5, square feet and greater. Direct Vacant SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale directly from the landlord. Total Vacant W/ Sublet SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale by the landlord or for sublease by the current tenant. DAUM OFFICES LOS ANGELES, CALIFORNIA 81 S. Figueroa Street, Suite 6 Los Angeles, CA 917 213-626-911 LOS ANGELES NORTH, CALIFORNIA 2182 Burbank Boulevard, Suite 21 Woodland Hills, CA 91367 818-887-36 SANTA CLARITA VALLEY, CALIFORNIA 28494 Westinghouse Place, Suite 312 Valencia, CA 91355 661-75-2299 MID-COUNTIES, CALIFORNIA 1381 Cerritos Corporate Drive, Suite C Cerritos, CA 973 562-27-33 ORANGE COUNTY, CALIFORNIA 44 MacArthur Boulevard, Suite 95 Newport Beach, CA 9266 949-724-19 VENTURA & SANTA BARBARA, CALIFORNIA 751 Daily Drive, Suite 15 Camarillo, CA 931 85-987-8866 Direct Vacancy Rate Total vacant direct space (vacant space for lease or sale from the landlord or owner) divided by the total rentable square footage for existing buildings only. Vacancy W/ Sublet Rate Total vacant direct space and sublease space divided by the total rentable square footage for existing buildings only. 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. SAN GABRIEL VALLEY, CALIFORNIA 13181 Crossroads Pkwy. N, Suite 1 City of Industry, CA 91746 562-695-7244 SOUTH BAY, CALIFORNIA 125 W. 19th Street, Suite 42 Gardena, CA 9248 31-538-67 INLAND EMPIRE, CALIFORNIA 3595 E. Inland Empire Boulevard, Bldg. 5 Ontario, CA 91764 99-98-1234 PHOENIX ARIZONA 172 E. Highland Avenue, Suite 12 Phoenix, AZ 8516 62-957-73 The information contained in this report has been obtained from sources deemed reliable and has incorporated fourth-party data which has not been independently verified by DAUM. While we do not doubt its accuracy, DAUM makes no guarantee or warranty as to its completeness or accuracy. Due to the dynamic (constantly changing) database which DAUM uses to compile and analyze markets contained in this report, previously published statistics may vary from the data published in this report. Statistics and data have been revised to reflect changes in the following categories: existing buildings being verified and added to the database, new or revised occupancy information gathered, new construction being added to the inventory, building demolitions and renovations, as well as other factors that would necessitate revisions to the data and the properties surveyed. This methodology allows us to present the most current and up-to-date information, trend analysis and comparative statistics for this report. Net Absorption The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy (move ins) and subtracting all the negative changes in occupancy (move outs). Under Construction Planned buildings for which construction has started but have not yet been granted a Certificate of Occupancy. Planned buildings are not included. Completed in 217 New buildings with original construction completed in the year 217 and granted a Certificate of Occupancy. Renovated buildings are not included.