OC4Q16 Fourth Quarter 216 MARKET REPORT Orange County Industrial SOLID FINISH & CONTINUED OPTIMISM. 216 finished on a high note for landlords, as sustained tenant demand brought vacancy down to 2., sending lease rates up over 1 from a year ago. The trend positive net absorption continued with 956,313 square feet in the fourth quarter, more than double that the third quarter. Large blocks space (more than 1, square feet) dominated, as third party logistics companies and e-commerce related firms compete for direct access to Orange County s diverse and affluent population. We expect job growth to continue (37, jobs in 217) and construction activity to increase to satisfy the surge in tenant and buyer demand. 7% VACANCY VS. AVERAGE ASKING LEASE RATE $.81 $1.5 $.9 $.75 $.6 VACANCY. Orange County s industrial vacancy rate held near the record low 2. in the fourth quarter and we expect to see this drop even further. Landlords will continue to have leverage in this competitive market, resulting in higher lease rates and fewer concessions. As a tenant, limited choices will result in longer timeframes for expansions or relocations and f market transactions will become more common. Tenants will need to give themselves ample time prior to their lease expiration so that an informed decision can be made. A limited and shrinking inventory quality buildings will continue to be a significant hurdle for tenants in 217 and reaction time will be critical. $.45 $.3 2. % $.15 $. 27 28 29 21 211 212 213 214 215 216 217 218 VACANCY: Total Space Divided by Total Existing Inventory AVERAGE ASKING LEASE RATE: NNN / SF / Month LEASE RATES. rental rates continue to climb, a trend we have been witnessing since 211. The average asking triple-net lease rate checked in at $.81 NNN per square foot per month, up over 1 or $.12 per square foot from fourth quarter 215. As interest rates rise, making purchasing a building less attractive as an alternative to leasing, expect even more upward pressure on lease rates in 217. SF Millions 18 TRANSACTION VOLUME & 2,25 SALES PRICES. The Orange County industrial market s average asking price at the end the fourth quarter 216 came in at $236 per square foot (average price tracks 1, square foot buildings and above). While sale prices vary greatly depending on the size the building and an average sale price needs to be taken with a grain salt, this represents an increase nearly 2 over a year ago. As interest rates move up we expect to see more modest levels appreciation in 217. 16 14 12 1 8 6 1,598 2, 1,75 1,5 1,25 1, 75 TRANSACTION ACTIVITY. Orange County s total leasing and sale activity in the fourth quarter totaled approximately 4.9 million square feet, up 21. over 215. Expansion in the logistics, e-commerce, and R&D / manufacturing sectors continue to lead the way. Major lease transactions include: Berger Transfer s lease 12, square feet in Fullerton, Ramp Logistics taking down 1, square feet in the Irvine Spectrum and Precision Logistics subleasing 5,6 square feet in Brea. 4 2 27 28 29 21 211 212 213 214 215 216 SALES LEASES 5 25 Market Statistics Change Over Last Quarter 4Q 216 3Q 216 4Q 215 % Change Over Last Year DOWN 2. 2.3 2.4-16.4 UP 4. 3.7 4.59% -12.6 Lease UP $.81 $.8 $.69 17.39% Sale Price UP $235.97 $234.6 $189.18 24.7 Sale & Lease Transactions DOWN 4,97,914 5,983,47 4,5,671 21.1 UP 3,211,311 2,932,336 3,4,872 5. POSITIVE 956,313 421,748 88,86 N/A
LEASE RATES. Anticipate asking rents to increase by an annualized average to reach a level $.83 per square foot by the end the second quarter 217. Forecast VACANCY. With limited new product coming online and tenants electing to recommit or to renew in larger blocks space, expect vacancy rates to remain below 2. well into 217. OVERALL. As we kick f 217, most investors feel that industrial, as an asset class, has a significant tail wind and is somewhat insulated from a potential correction given our sound fundamentals and the diverse nature our industrial base. Expect modest growth in business investment and the resultant job creation. With the housing market approaching full recovery and household net worth at an all-time high, expect consumer spending to continue to fuel our local industrial market. With a record low vacancy rate, strong tenant and buyer demand, and significant barriers to entry from a development standpoint, we expect 217 to be reminiscent 216 as lease rates continue to climb. CONSTRUCTION. During the fourth quarter 216, only three industrial buildings, totaling 274,187 square feet, are under construction in the entire Orange County market. Even though the market is craving new, Class A product, Orange County is simply short on industrial land. With limited infill parcels now approaching $5 per square foot in some cases, do not expect any significant construction in the coming months. The most noteworthy project in the queue is Western Realco s proposed redevelopment the Beckman Coulter site in Fullerton (approximately 1 million square feet Class A industrial on 45 acres). Expect to see more adaptive reuse and value-add projects instead development from the ground up. Investors will continue to purchase older, less functional properties at a discount to replacement cost and attempt to improve their function, ultimately taking advantage a strong leasing market to generate their desired return (e.g., LBA s recent $65 million purchase the 45, square foot Toshiba Campus in Irvine). SF Millions 4 3 2 1-1 -2 NEW DELIVERIES & NET ABSORPTION VS. AVAILABILITY RATE 4. 1 9% % - - AVAILABILITY. The availability rate, or ratio available space (being marketed) to total rentable area in the region came in at 4., a 58 basis point drop from a year ago. The five-year average in Orange County is, so recent compression would indicate a further increase in lease rates will be following. -3-4 -5 27 28 29 21 211 212 213 214 215 216 NEW DELIVERIES: New Construction Delivered to the Market NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date -9% -1-1 ABSORPTION. absorption for Orange County was a positive 956,313 square feet in fourth quarter 216 and nearly 2.5 million square feet for the year. This level absorption is well above Orange County s five-year annual average 1.7 million square feet. In the fourth quarter North and Central County experienced the highest levels absorption. Significant Transactions Sales * Voit Real Estate Services Deal Property Address Submarket Sale Price Buyer Seller 132 W. Collins Ave. - 5 Properties Orange 91,134 $12,, CIP Real Estate * Antoyan Enterprises * 83 Challenger St. Brea 54,475 $1,15, IBG Properties, LLC Kazemi* 141 Jefferson St. - Land Sale Anaheim 213,444 $1,, EMC Associates* Klein Investment Family* 122-124 N. Simon Cir. - 4 Properties Anaheim 66,1 $9,65, Wohl Investment Company * CKBP, LLC * 1975-1985 Placentia Ave. Costa Mesa 31,276 $6,2, Placentia Equities Westside Clayton Management* Leases * Voit Real Estate Services Deal Property Address Submarket Transaction Date Tenant Owner 31 S. Susan St. Santa Ana 19,987 Oct-216 Sinature Party Rentals APG OCIC, LLC 14-142 S. Manhattan Ave. Fullerton 12,298 Nov-216 Berger Transfer & Storage Richard Bracamonte 83 Challenger St. Brea 54,475 Oct-216 Life Science Outsourcing, Inc. * IBG Properties, LLC * 131 N. Gilbert St. Fullerton 37,362 Nov-216 Salvage Traders, Inc. * JYL Investments, Inc. * 3233 W. Castor St. Santa Ana 37,69 Dec-216 P & P Imports* Tau H. Ripley Trust VOIT REAL ESTATE SERVICES 2
4Q216 4Q216 Lease 4Q216 216 4Q216 216 North County Anaheim 1,82 44,16,75 2, 476,437 1.8% 1,49,99 2.38% $.77 $231.34 1,443 771,42 285,22 2,49,562 Brea 329 12,95,131 656,812 5.4 699,343 5.78% $.69 $24.7 9,539 (48,178) 15,539 413,375 Buena Park 232 13,432,448 26,426. 544,676 4. $1.25 $149. 43,295 124,755 69,721 282,893 Fullerton 444 19,136,8 181,69 741,539 3.87% 52,369 2.7 $.66 $21.19 (11,869) (166,892) 386,538 629,182 La Habra 198 3,554,152 976,754 31,757.89% 72,24 2. $.79 $219.47 15,22 12,211 23,58 71,6 Orange 737 13,623,16 11,281.7 328,794 2.4 $.85 $198.77 (2,923) 77,14 146,19 45,552 Placentia 218 4,65,379 26,92.6 38,72.9 $. $29.5 3,75 32,318 2,195 189,397 Yorba Linda 52 992,35 21,98 2.2 93,533 9.4 $. $217.57 (11,365) (21,3) 15,273 25,461 North County Total 4,3 111,59,981 181,69 1,176,754 2,83,152 1.88% 3,347,584 3. $.73 $222.34 56,45 781,366 1,97,184 4,57,482 West County Cypress 96 4,198,819.% 587,46 13.99% $.89 $169. 225,164 242,459 237,864 462,76 Garden Grove 478 12,66,745 141,513 1.17% 516,233 4.28% $.75 $21.73 27,396 55,52 142,54 677,881 Huntington Beach 681 14,179,21 41,668 141,457 1.% 363,995 2.57% $.79 $211.29 32,367 222,864 427,218 99,97 La Palma 16 1,774,689.% 131,28 7. $.63 $. 7,2 111,934 7,2 186,934 Los Alamitos 97 2,384,18 15,315.6 46,779 1.9 $. $261.93 (12,435) (11,847) 2,88 17,628 Seal Beach 15 991,653.% 88,57 8.9 $. $. Stanton 174 1,799,426.% 19,392 1.8% $.85 $222.72 7,382 21,62 38,733 Westminster 138 2,313,932 23,593 1. 1,756.4 $. $. (14,57) 22,565 25,36 122,126 West County Total 1,695 39,78,654 41,668 321,878.8 1,764,42 4.4 $.74 $29.21 624,17 643,495 926,314 2,415,978 Airport Area Costa Mesa 412 7,456,31 366,461 4.9 426,827 5.7 $1.27 $315.8 (23,29) (37,747) 3,417 239,981 Fountain Valley 186 3,86,385 73,2 64,61 1.6 127,48 3. $.95 $. 57,788 137,479 81,676 449,146 Irvine 317 12,523,568 51,45 343,51 2.7 639,619 5.1 $.91 $29.86 (56,794) 15,541 188,715 66,791 Newport Beach 49 584,258.%.% $. $. 627 6,326 Santa Ana 1,569 29,933,943 385,845 1.29% 1,144,98 3.8 $.79 $21.8 366,97 416,38 65,54 1,56,943 Tustin 115 4,541,598 39,951 8.6 371,457 8.18% $.71 $253.28 13,681 (228,284) 38,823 226,755 Airport Area Total 2,648 58,9,62 51,45 73,2 1,55,369 2.6 2,71,291 4. $.82 $287.73 358,355 438,996 944,685 3,89,942 South County Aliso Viejo 17 668,427.% 6,.9% $. $. 2,18 41,787 Foothill Ranch 68 3,575,58 245,628 6.87% 334,169 9.3 $.88 $271.81 (25,353) (175,77) 5,55 379,574 Irvine Spectrum 212 9,871,64 139,148 1.4 619,88 6.28% $.86 $313.75 52,826 64,594 146,586 31,822 Laguna Beach 16 8,431 15, 3,28 4.8% 3,28 4.8% $. $. 3,28 Laguna Hills 75 1,88,167 8,752.8% 37,495 3.4 $1.9 $247.5 (7,8) 35,518 22,75 126,381 Laguna Niguel 2 279,95.%.% $. $. 1,6 1,6 Lake Forest 189 4,125,248 345,986 8.39% 38,86 7.49% $.85 $238.67 (88,11) (124,55) 17,376 263,884 Mission Viejo 31 48,246 2,31.48% 1,297.27% $. $. (1,297) 4,965 1,13 27,945 Rancho Santa Margarita 1 1,599,727 1,88.6 19,2 6.8 $.82 $. 11,754 (1,88) 21,842 29,812 San Clemente 157 1,972,234 39,447 2.% 141,794 7.19% $1.16 $311.99 (18,187) (6,571) 2,979 129,871 San Juan Capistrano 43 915,2 13,833 1.5 9,288 1. $. $265.54 (6,756) (4,23) 7,77 31,68 South County Total 928 24,655,743 15, 88,472 3.28% 1,571,29 6.37% $.88 $287.73 (82,14) (194,37) 243,128 1,337,636 Orange County Total 9,31 234,324,44 274,187 1,264,954 4,763,871 2. 9,393,36 4. $.81 $235.97 956,313 1,669,55 3,211,311 11,351,38 Less than 9,999 3,282 19,928,727 166,636.8 319,477 1. $1.11 $269.93 15,334 25,456 196,98 762,521 1,-19,999 3,134 43,286,511 15, 675,963 1.5 1,17,98 2.7 $1.4 $211.43 (182,35) (168,9) 465,463 1,745,637 2,-29,999 1,18 28,9,252 359,562 1.28% 84,355 2.8 $.93 $196.38 93,142 14,11 358,344 1,377,237 3,-39,999 492 16,722,42 73,2 475,821 2.8 715,17 4.28% $.8 $26.59 (164,171) (136,837) 149,57 776,982 4,-49,999 295 12,952,231 41,668 129,652 216,42 1.67% 321,766 2.48% $.88 $191.99 (34,564) (62,545) 98,643 411,28 5,-74,999 377 22,698,998 51,45 241,365 1. 881,82 3.88% $.77 $185.4 22,44 149,165 53,143 1,182,976 75,-99,999 165 14,149,755 78,523 46,952 2.88% 86,174 5.7% $.77 $157.73 115,114 16,912 125,114 46,581 1,-149,999 184 21,599,715 246,938 369,195 1.7 953,149 4.4 $.73 $154.21 413,252 71,84 55,921 1,971,847 15,-199,999 7 11,823,38 181,69 163,64 1.38% 42,842 3.4 $.77 $. 272,775 828,873 445,539 1,192,358 2,-299,999 71 16,877,775 412,22 426,989 2.5 1,231,339 7. $.7 $. (135,84) (131,958) 19,89 454,831 3, Plus 51 26,195,18 39,439 1,261,742 4.8 1,787,125 6.8 $.68 $. 343,217 299,289 343,217 1,15,4 Orange County Total 9,31 234,324,44 274,187 1,264,954 4,763,871 2. 9,393,36 4. $.81 $235.97 956,313 1,669,55 3,211,311 11,351,38 Lease rates are on a triple-net basis. VOIT REAL ESTATE SERVICES 3
NORTH ORANGE COUNTY In the fourth quarter 216, the North Orange County industrial market consisted 4,3 buildings totaling 111,59,981 square feet and had an availability rate 3., which shows an increase from the previous quarter s figure 2.77%. VACANCY & AVAILABILITY RATE NET ABSORPTION 1,, 9, 8, 7, 3. 6, 5, 4, 3, 1.88% 2, 1, % 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 2,, 2 2,, 1 1,8, 18 1,8, 9 1,6, 16 1,6, 8 1,4, 136 14 1,4, 63 7 1,2, 12 1,2, 6 1,, 1 1,, 5 8, 8 8, 4 6, 6 6, 3 4, 4 4, 2 2, 2 2, 1 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES 4Q216 4Q216 Lease 4Q216 216 4Q216 216 North Totals Less than 9,999 1,318 8,357,178 51,476.6 113,357 1.3 $. $249.75 62,768 27,81 145,531 421,124 1,-19,999 1,395 19,265,525 366,338 1.9% 569,393 2.9 $.94 $2.38 (14,327) (133,93) 181,758 684,382 2,-29,999 515 12,214,863 141,74 1.1 323,26 2.6 $.85 $198.67 (43,71) (23,845) 94,56 441,219 3,-39,999 226 7,631,44 131,927 1.7 334,55 4.38% $.79 $253.94 (41,152) (1,343) 61,123 319,516 4,-49,999 133 5,836,679 129,652 54,15.9 158,97 2.7 $.89 $. (33,133) (47,986) 57,267 95,671 5,-74,999 18 1,81,293.% 275,316 2.5 $.63 $182. 97,35 143,35 97,35 31,771 75,-99,999 71 6,56,822 78,523.% 66,177 1.9% $. $136.26 83,421 258,12 1,-149,999 91 1,715,789 246,938 167,26 1.5 4,589 3.7 $.77 $149. 157,64 312,792 157,64 692,441 15,-199,999 36 6,16,647 181,69 157,64 2.58% 16,668.27% $.75 $. (16,668) 342,38 156,96 624,793 2,-299,999 39 9,36,87 412,22 331,394 3.5 569,664 6.9% $.67 $. (112,746) (47,163) 19,89 85,473 3, Plus 26 14,714,54 39,439 681,533 4.6 52,513 3.5 $.68 $. 126,599 126,681 126,599 574,8 Total 4,3 111,59,981 181,69 1,176,754 2,83,152 1.88% 3,347,584 3. $.73 $222.34 56,45 781,366 1,97,184 4,57,482 VOIT REAL ESTATE SERVICES 4
WEST ORANGE COUNTY In the fourth quarter 216, the West Orange County industrial market consisted 1,695 buildings totaling 39,78,654 square feet and had an availability rate 4.4, which shows an increase from the previous quarter s figure 3.97%. VACANCY & AVAILABILITY RATE NET ABSORPTION 8% 7% 7, 6, 5, 4.4 4, 3, 2, 1, -1, %.8 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16-2, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1,8, 9 3, 3 1,6, 8 25, 25 1,4, 63 7 1,2, 6 2, 2 1,, 5 16 15, 15 8, 4 6, 3 1, 1 4, 2 5, 5 2, 1 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES 4Q216 4Q216 Lease 4Q216 216 4Q216 216 North Totals Less than 9,999 691 4,85,761 41,315 1. 84,412 2.7% $.92 $229.6 (16,24) 15,124 17,851 112,96 1,-19,999 561 7,442,185 51,119.69% 167,998 2.2 $. $195.7 37,655 22,916 123,444 297,18 2,-29,999 181 4,343,458 92,36 2.1 15,678 3.47% $.84 $181.61 12,546 54,329 67,631 233,318 3,-39,999 62 2,168,36 12,571 4.7 34,476 1.59% $. $169. (55,333) (6,221) 21,742 81,658 4,-49,999 5 2,181,788 41,668 12,837.59% 19,359.89% $.89 $. 4,423 46,257 17,26 154,859 5,-74,999 58 3,476,9 16,.4 16,971 4.6 $.7 $159.5 157,6 54,182 194,462 393,122 75,-99,999 3 2,574,38.% 166,7 6.4 $. $. 125,114 125,114 125,114 1,-149,999 26 3,71,141.% 5,89 1.6 $.75 $159.41 126,912 183,56 126,912 46,42 15,-199,999 14 2,323,115 6,.2 46,9 2. $.8 $. 13,28 327,42 13,28 48,42 2,-299,999 14 3,327,936.% 543,594 16.3 $.71 $. 12,641 3, Plus 8 4,713,72.% 339,117 7.19% $. $. 11,618 11,618 11,618 Total 1,695 39,78,654 41,668 321,878.8 1,764,42 4.4 $.74 $29.21 624,17 643,495 926,314 2,415,978 VOIT REAL ESTATE SERVICES 5
AIRPORT AREA In the fourth quarter 216, the Airport Orange County industrial market consisted 2,648 buildings totaling 58,9,62 square feet and had an availability rate 4., which shows an increase from previous quarter s figure 5.9%. VACANCY & AVAILABILITY RATE NET ABSORPTION 4, 3, 4. 2, 1, -1, 2.6-2, -3, -4, % 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16-5, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1,2, 18 6, 6 179 1,, 15 5, 5 8, 12 4, 4 6, 9 3, 3 4, 6 2, 2 12 2, 3 1, 1 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES 4Q216 4Q216 Lease 4Q216 216 4Q216 216 North Totals Less than 9,999 929 5,328,195 37,784.7 71,21 1.3 $1.41 $291.62 (16,898) (13,841) 9,558 119,497 1,-19,999 898 12,548,459 129,738 1. 24,616 1.9 $1.6 $232.46 (35,586) (886) 115,895 536,941 2,-29,999 349 8,311,392 64,547.78% 219,841 2.6 $.95 $25.63 122,366 92,224 162,878 459,698 3,-39,999 156 5,295,236 73,2 19,874 3. 3,97 5.68% $.81 $158.8 (52,166) (74,394) 46,467 36,513 4,-49,999 84 3,682,69 57,398 1.5 57,198 1.5 $. $61.98 (1,149) (9,299) 24,116 12,358 5,-74,999 15 6,375,9 51,45 94,547 1.48% 268,777 4.2 $.87 $192.2 6,923 57,223 22,237 427,384 75,-99,999 51 4,384,459 323,312 7.37% 356,488 8.1 $.78 $173.91 (1,) (66,59) 77,455 1,-149,999 45 5,28,122 22,169 3.88% 46,169 7.8% $.73 $. 16,72 (7,52) 19,371 543,591 15,-199,999 12 2,52,735.% 339,274 16.5 $.77 $. 159,163 159,163 159,163 159,163 2,-299,999 1 2,459,389.%.% $. $. 3, Plus 9 3,254,376 45, 13.8 45, 13.8 $. $. 115, 32,817 115, 339,342 Total 2,648 58,9,62 51,45 73,2 1,55,369 2.6 2,71,291 4. $.82 $287.73 358,355 438,996 944,685 3,89,942 VOIT REAL ESTATE SERVICES 6
SOUTH ORANGE COUNTY In the fourth quarter 216, the South Orange County industrial market consisted 928 buildings totaling 24,655,743 square feet and had an availability rate 6.37%, which shows an increase from the previous quarter s figure 4.7. VACANCY & AVAILABILITY RATE NET ABSORPTION 9% 8% 7% 3, 2, 6.37% 1, 3.28% -1, % 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16-2, VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Change in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 6, 12 45, 27 5, 95 1 4, 35, 21 24 21 4, 8 3, 18 25, 15 3, 6 2, 12 2, 4 15, 9 1, 6 1, 2 5, 3 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES 4Q216 4Q216 Lease 4Q216 216 4Q216 216 North Totals Less than 9,999 344 2,157,593 36,61 1.67% 5,687 2.3 $1.16 $332.72 (14,332) (2,98) 24,4 19,84 1,-19,999 28 4,3,342 15, 128,768 3.19% 192,973 4.79% $1.8 $26.18 (44,92) (57,) 44,366 227,26 2,-29,999 135 3,22,539 61,275 1.9% 11,576 3.4 $1.25 $2.21 1,94 17,33 33,329 243,2 3,-39,999 48 1,627,78 5,449 3. 45,84 2.77% $1.18 $295. (15,52) (879) 19,725 69,295 4,-49,999 28 1,251,155 91,657 7.3 87,112 6.9 $.86 $257. (4,75) (51,517) 4,14 5,-74,999 34 2,45,715 13,818 6.39% 176,18 8. $.7 $227. (94,875) (15,59) 9,94 51,699 75,-99,999 13 1,134,166 83,64 7.37% 217,52 19.18% $.76 $163. 1,-149,999 22 2,64,663.% 95,51 3.67% $. $. 112,574 221,288 112,574 329,773 15,-199,999 8 1,34,541.%.% $. $. 2,-299,999 8 1,73,363 95,595 5.5 118,81 6.8 $.8 $. (23,94) (84,795) 266,717 3, Plus 8 3,512,886 13,29 3.7 477,495 13.59% $. $. (13,29) Total 928 24,655,743 15, 88,472 3.28% 1,571,29 6.37% $.88 $287.73 (82,14) (194,37) 243,128 1,337,636 VOIT REAL ESTATE SERVICES 7
OC4Q16 Fourth Quarter 216 MARKET REPORT Orange County Industrial Please Contact Us for Further Information Rents Heating Up OC s Industrial Market by Todd Martens VICE PRESIDENT, IRVINE The Orange County Industrial Market continued its full head steam as it closed out 216, with new highs for both lease rates and sale prices. With the vacancy rate at and scant new construction to speak, we are seeing continued tenant and buyer demand resulting in pre-recession highs in rental rates as well as all-time highs in sale pricing. Landlords continue to have leverage in this supply constrained market and concessions such as free rent and tenant improvements are severely limited. As quality alternatives are scarce, tenants are having to plan their relocations much farther in advance than they have in previous years. The nearly 3, square feet new construction currently under way across the county will likely not satisfy much the pent up demand we are currently seeing in the market. Double-digit percentage increases in rents could be a reality in 217, particularly as interest rates creep up making purchasing a building less attractive. Sales pricing has eclipsed all pre- and post-recession highs. With Orange County s broad entrepreneurial base and its access to the ports Los Angeles / Long Beach, there has been a continued appetite to purchase both by investors and owner / users. Although mortgage interest rates have been on the rise recently, user demand remains strong and rates are still historically attractive. The blended SBA rate, 4., is still well below the 6.2 rate experienced in 27 / 28. However, the recent increase in rates will reduce the pool buyers somewhat, and 217 should prove to be relatively flat in terms sale prices. Industrial leasing demand remains high, especially for properties with premium attributes such as high ceilings clearance, fenced yards, true dock-high loading, and heavy power. Typically these buildings receive multiple fers and are absorbed before they formally hit the market. As rents increase, speculative development should follow on the limited infill parcels. Sale prices have been spiking in recent years and now lease rates are catching up, making these projects a bit more feasible. We don t anticipate more than another 6, square feet new industrial development in Orange County in 217, which isn t much in a 22,,+ square foot market. Tenants should prepare themselves for future rent increases, particularly in quality buildings. 216 proved to be positive in net absorption levels and we expect the same positive trend for 217. In 216 absorption was aided by several larger deals (1, square foot plus) involving Amazon, 3PL Global Logistics, Kuehne & Nagel and other logistics and e-commerce businesses attempting to effectively service Orange County s growing population. All trends are positive and predicted to remain positive, while we keep a cautious eye on future interest rate increases. Product Type MFG./DIST. Manufacturing / Distribution / Warehouse facilities with up to 29.9% fice space. Submarkets 65 West Orange 45 County North Orange County 1 NORTH Anaheim, Brea, Buena Park, Fullerton, La Habra, Orange, Placentia and Yorba Linda 5 22 91 Airport Area 55 57 57 South Orange County WEST Cypress, Garden Grove, Huntington Beach, La Palma, Los Alamitos, Seal Beach, Stanton and Westminster AIRPORT Costa Mesa, Fountain Valley, Irvine, Newport Beach, Santa Ana and Tustin 55 SOUTH Aliso Viejo, Foothill Ranch, Irvine Spectrum, Laguna Hills, Laguna Niguel, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente and San Juan Capistrano 5 John Wayne Airport 73 261 45 91 133 241 241 5 Tony Tran Market Research Analyst ttran@voitco.com www.voitco.com Anaheim, CA 714.978.788 Inland Empire, CA 99.545.8 Irvine, CA 949.851.51 Los Angeles, CA 424.329.75 This survey consists properties representing both single tenant and multi-tenant buildings. The lease rates are based on a triplenet basis. The information contained in this report is gathered from sources that are deemed reliable, but no guarantees are made as to its accuracy. This information is for Voit Real Estate Services use only and cannot legally be reproduced without prior written consent from the management Voit Real Estate Services. 217 Voit Real Estate Services, Inc. License #1991785. San Diego, CA 858.453.55 Represented in 15 Markets Nationally & Internationally.