The CoStar Industrial Report Y e a r - E n d 2 0 1 5
Year-End 2015 Phoenix Table of Contents Table of Contents................................................................. A Methodology...................................................................... B Terms & Definitions................................................................ C Market Highlights & Overview........................................................ 1 CoStar Markets & Submarkets........................................................ 4 Inventory & Development Analysis..................................................... 5 Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance................................................................. 9 Figures at a Glance by Building Type & Market Figures at a Glance by Building Type & Submarket Historical Figures at a Glance Leasing Activity Analysis............................................................ 13 Select Top Lease Transactions Sales Activity Analysis.............................................................. 15 Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters........................................ 17 Airport Market Northeast Market Northwest Market Southeast Market Southwest Market 2016 CoStar Group, Inc. The CoStar Industrial Report A
Phoenix Year-End 2015 Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Group's base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multitenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. The quoted rental rate is exclusive of the expense pass through associated with the rent. For information on subscribing to CoStar s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com Copyright 2016 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 1331 L ST NW Washington, DC 20005 (800) 204-5960 www.costar.com NASDAQ: CSGP B The CoStar Industrial Report 2016 CoStar Group, Inc.
Year-End 2015 Phoenix Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-ofa-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. 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. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different 2016 CoStar Group, Inc. The CoStar Industrial Report C
Phoenix Year-End 2015 tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: Buildings in a state of construction, up until they receive their certificate of occupancy. In order for CoStar to consider a building under construction, the site must have a concrete foundation in place. Abbreviated UC. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D The CoStar Industrial Report 2016 CoStar Group, Inc.
Overview Year-End 2015 Phoenix Phoenix s Vacancy Decreases to 10.7% Net Absorption Positive 3,211,718 SF in the Quarter The Phoenix Industrial market ended the fourth quarter 2015 with a vacancy rate of 10.7%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 3,211,718 square feet in the fourth quarter. Vacant sublease space increased in the quarter, ending the quarter at 1,400,488 square feet. Rental rates ended the fourth quarter at $6.74, an increase over the previous quarter. A total of eight buildings delivered to the market in the quarter totaling 708,850 square feet, with 3,760,329 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Phoenix Industrial market was positive 3,211,718 square feet in the fourth quarter 2015. That compares to positive 1,377,488 square feet in the third quarter 2015, positive 571,336 square feet in the second quarter 2015, and positive 1,877,204 square feet in the first quarter 2015. The Flex building market recorded net absorption of positive 1,134,131 square feet in the fourth quarter 2015, compared to positive 50,340 square feet in the third quarter 2015, positive 247,325 in the second quarter 2015, and negative (351,811) in the first quarter 2015. The Warehouse building market recorded net absorption of positive 2,077,587 square feet in the fourth quarter 2015 compared to positive 1,327,148 square feet in the third quarter 2015, positive 324,011 in the second quarter 2015, and positive 2,229,015 in the first quarter 2015. Vacancy The Industrial vacancy rate in the Phoenix market area decreased to 10.7% at the end of the fourth quarter 2015. The vacancy rate was 11.6% at the end of the third quarter 2015, 11.9% at the end of the second quarter 2015, and 11.7% at the end of the first quarter 2015. Flex projects reported a vacancy rate of 14.2% at the end of the fourth quarter 2015, 17.6% at the end of the third quarter 2015, 17.7% at the end of the second quarter 2015, and 18.4% at the end of the first quarter 2015. Warehouse projects reported a vacancy rate of 10.3% at the end of the fourth quarter 2015, 10.9% at the end of third quarter 2015, 11.2% at the end of the second quarter 2015, and 10.9% at the end of the first quarter 2015. Largest Lease Signings The largest lease signings occurring in 2015 included: the 593,600-square-foot lease signed by Tuesday Morning at 563 S 63rd Ave in the Southwest market; the 552,330-square-foot deal signed by Menlo Logistics at 7037 W Van Buren St in the Southwest market; and the 545,176-square-foot lease signed by Aligned Energy at 2500 W Union Hills Dr in the Northwest market. Sublease Vacancy The amount of vacant sublease space in the Phoenix market increased to 1,400,488 square feet by the end of the fourth quarter 2015, from 1,366,895 square feet at the end of the third quarter 2015. There was 1,412,613 square feet vacant Vacancy Rates by Building Type 1999-2015 30% Flex Warehouse Total Market 25% Vacancy Rate 20% 15% 10% 5% 0% 1999 4q 2000 4q 2001 4q 2002 4q 2003 4q 2004 4q 2005 4q 2006 4q 2007 4q 2008 4q 2009 4q 2010 4q 2011 4q 2012 4q 2013 4q 2014 4q 20154 2016 CoStar Group, Inc. The CoStar Industrial Report 1
Phoenix Year-End 2015 Overview at the end of the second quarter 2015 and 1,397,875 square feet at the end of the first quarter 2015. Phoenix s Flex projects reported vacant sublease space of 196,281 square feet at the end of fourth quarter 2015, up from the 182,143 square feet reported at the end of the third quarter 2015. There were 243,122 square feet of sublease space vacant at the end of the second quarter 2015, and 203,395 square feet at the end of the first quarter 2015. Warehouse projects reported increased vacant sublease space from the third quarter 2015 to the fourth quarter 2015. Sublease vacancy went from 1,184,752 square feet to 1,204,207 square feet during that time. There were 1,169,491 square feet at the end of the second quarter 2015, and 1,194,480 square feet at the end of the first quarter 2015. Rental Rates The average quoted asking rental rate for available Industrial space was $6.74 per square foot per year at the end of the fourth quarter 2015 in the Phoenix market area. This represented a 2.0% increase in quoted rental rates from the end of the third quarter 2015, when rents were reported at $6.61 per square foot. The average quoted rate within the Flex sector was $12.09 per square foot at the end of the fourth quarter 2015, while Warehouse rates stood at $5.92. At the end of the third quarter 2015, Flex rates were $11.84 per square foot, and Warehouse rates were $5.78. Deliveries and Construction During the fourth quarter 2015, eight buildings totaling 708,850 square feet were completed in the Phoenix market area. This compares to 12 buildings totaling 972,151 square feet that were completed in the third quarter 2015, 13 buildings totaling 1,624,659 square feet completed in the second quarter 2015, and 2,078,404 square feet in 10 buildings completed in the first quarter 2015. U.S. Vacancy Comparison Past 10 Quarters Vacancy Rate 14.0% 12.0% 10.0% 8.0% 6.0% Phoenix United States There were 3,760,329 square feet of Industrial space under construction at the end of the fourth quarter 2015. Some of the notable 2015 deliveries include: 7775 W Buckeye Rd - Southwest Industrial Center - Bldg 1, a 684,420- square-foot facility that delivered in first quarter 2015 and is now 0% occupied, and 6200 W Van Buren St - 10 West Logistics Center - Bldg A, a 659,618-square-foot building that delivered in second quarter 2015 and is now 0% occupied. The largest projects underway at the end of fourth quarter 2015 were 4877 N Cotton Ln - REI Distribution Facility, a 400,000-square-foot building with 100% of its space preleased, and 13423 W Cactus Rd - IRIS USA Regional HQ, a 384,377-square-foot facility that is 100% pre-leased. Inventory Total Industrial inventory in the Phoenix market area amounted to 312,350,423 square feet in 10,007 buildings as of the end of the fourth quarter 2015. The Flex sector consisted of 33,286,825 square feet in 1,153 projects. The Warehouse sector consisted of 279,063,598 square feet in 8,854 buildings. Within the Industrial market there were 2,179 owner-occupied buildings accounting for 92,170,942 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Phoenix industrial sales figures rose during the third quarter 2015 in terms of dollar volume compared to the second quarter of 2015. In the third quarter, 49 industrial transactions closed with a total volume of $261,349,444. The 49 buildings totaled 4,000,817 square feet and the average price per square foot equated to $65.32 per square foot. That compares to 51 transactions totaling $214,685,850 in the second quarter. The total square footage was 2,688,622 for an average price per square foot of $79.85. Total year-to-date industrial building sales activity in 2015 is down compared to the previous year. In the first nine months of 2015, the market saw 135 industrial sales transactions with a total volume of $620,275,697. The price per square foot has averaged $74.42 this year. In the first nine months of 2014, the market posted 148 transactions with a total volume of $748,772,637. The price per square foot averaged $79.68. Cap rates have been higher in 2015, averaging 7.50%, compared to the first nine months of last year when they averaged 7.45%. 4.0% 2.0% 0.0% 2013 3q 2014 1q 2014 3q 2015 1q 2015 3q 2 The CoStar Industrial Report 2016 CoStar Group, Inc.
Overview Year-End 2015 Phoenix One of the largest transactions that has occurred within the last four quarters in the Phoenix market is the sale of 4550 W Watkins St in Phoenix. This 313,600-square-foot industrial building sold for $20,320,000, or $68.80 per square foot. The property sold on 7/21/2015. Absorption & Deliveries Past 10 Quarters Net Absorption Deliveries 5.0 4.5 4.5 Reports compiled by: Adam Jarrett, CoStar Senior Research Manager; Tom Summers, CoStar Research Manager. Millions SF 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.9 2.7 2.5 2.2 2.0 2.1 1.9 1.6 1.3 1.4 1.1 0.9 1.0 0.7 0.6 0.3 0.1 2013 3q 2014 1q 2014 3q 2015 1q 2015 3q 3.2 0.7 2016 CoStar Group, Inc. The CoStar Industrial Report 3
Phoenix Year-End 2015 Markets CoStar Submarket Clusters & Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters Airport Ind Northeast Ind Northwest Ind Southeast Ind Southwest Ind Submarkets North Airport Ind S Airport N of Roeser Ind S Airport S of Roeser Ind SC N of Salt River Ind SC S of Salt River Ind Central Phoenix Ind Scottsdale Airpark Ind Scottsdale/Salt River Ind Deer Vly/Pinnacle Pk Ind Glendale Ind Grand Avenue Ind N Glendale/Sun City Ind North Black Canyon Ind W Phx N of Thomas Rd Ind W Phx S of Thomas Rd Ind Chandler Airport Ind Chandler Ind Chandler N/Gilbert Ind Falcon Fld/Apache Jct Ind Mesa Ind Tempe East Ind Tempe Northwest Ind Tempe Southwest Ind Goodyear Ind SW N of Buckeye Road Ind SW S of Buckeye Road Ind Tolleson Ind 4 The CoStar Industrial Report 2016 CoStar Group, Inc.
Inventory & development Year-End 2015 Phoenix Historical Deliveries 1982-2015 14.0 Deliveries Average Delivered SF 12.0 12.3 11.1 11.9 11.7 Millions of SF 10.0 8.0 6.0 5.4 5.4 6.7 10.0 6.9 5.1 6.1 7.8 7.9 9.9 8.9 8.5 7.5 5.5 5.3 6.8 8.9 5.9 7.2 5.4 4.0 3.4 3.6 3.9 3.3 3.1 4.0 3.0 2.0 1.7 1.9 1.4 0.0 1982 1986 1990 1994 1998 2002 2006 2010 2014 * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Southeast Ind 12 1,049,175 217,000 20.7% 29,282 87,431 Northwest Ind 6 1,004,656 784,377 78.1% 23,047 167,443 Southwest Ind 4 854,666 854,666 100.0% 68,109 213,666 Airport Ind 7 851,832 420,551 49.4% 24,513 121,690 Northeast Ind 0 0 0 0.0% 19,859 0 Totals 29 3,760,329 2,276,594 60.5% 31,213 129,667 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2011 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 8.0 Leased Un-Leased 2,000 Preleased Un-Leased 7.0 1,800 Millions of SF 6.0 5.0 4.0 3.0 2.0 1.0 Thousands of SF 1,600 1,400 1,200 1,000 800 600 400 200 0.0 2011 2013 2015 0 2016 1q 2016 3q 2016 CoStar Group, Inc. The CoStar Industrial Report 5
Phoenix Year-End 2015 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 3.5 Construction Starts Deliveries 3.0 3.0 2.9 2.9 Millions of SF 2.5 2.0 1.5 1.0 0.5 1.0 0.6 0.3 0.1 0.5 0.1 2.0 0.4 2.1 1.4 2.2 1.0 1.3 0.4 1.0 2.5 2.3 0.9 0.7 1.9 1.1 2.1 0.5 1.3 1.6 1.6 1.0 1.4 0.7 0.0 2012 1q 2013 1q 2014 1q 2015 1q Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 15 356,358 241,111 67.7% $8.57 243,365 112,993 50,000 SF - 99,999 SF 13 956,790 390,969 40.9% $7.67 353,538 603,252 100,000 SF - 249,999 SF 10 1,458,836 898,114 61.6% $6.82 1,046,911 411,925 250,000 SF - 499,999 SF 2 702,134 485,918 69.2% $4.08 316,034 386,100 >= 500,000 SF 3 1,909,946 565,908 29.6% $4.32 565,908 1,344,038 Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2015 Deliveries Currently Under Construction By Building Type By Tenancy Type 47% 53% 55% 45% 89% 11% 54% 46% Multi Single Multi Single Flex Warehouse Multi Single 6 The CoStar Industrial Report 2016 CoStar Group, Inc.
Inventory & development Year-End 2015 Phoenix 2016 CoStar Group, Inc. The CoStar Industrial Report 7
Phoenix Year-End 2015 Inventory & development 8 The CoStar Industrial Report 2016 CoStar Group, Inc.
Figures at a Glance Year-End 2015 Phoenix Flex Market Statistics Year-End 2015 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 160 5,229,614 963,352 984,005 18.8% (70,770) 0 245,000 $12.47 Northeast Ind 237 5,299,854 619,224 619,224 11.7% 48,223 23,200 0 $12.97 Northwest Ind 255 6,416,844 652,405 652,405 10.2% 644,518 0 0 $11.86 Southeast Ind 467 14,952,809 2,009,572 2,185,200 14.6% 459,869 237,000 234,140 $11.87 Southwest Ind 34 1,387,704 269,981 269,981 19.5% (1,855) 0 0 $7.75 Totals 1,153 33,286,825 4,514,534 4,710,815 14.2% 1,079,985 260,200 479,140 $12.09 Warehouse Market Statistics Year-End 2015 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 1,898 45,217,720 3,915,969 4,144,786 9.2% 829,280 474,002 606,832 $6.82 Northeast Ind 596 11,242,866 738,914 786,820 7.0% 48,506 0 0 $9.62 Northwest Ind 2,281 52,029,084 3,190,695 3,236,579 6.2% 846,347 438,858 1,004,656 $6.53 Southeast Ind 2,753 79,333,724 8,079,092 8,382,083 10.6% 1,683,173 1,386,377 815,035 $6.75 Southwest Ind 1,326 91,240,204 11,664,473 12,243,082 13.4% 2,550,455 2,824,627 854,666 $4.52 Totals 8,854 279,063,598 27,589,143 28,793,350 10.3% 5,957,761 5,123,864 3,281,189 $5.92 Total Industrial Market Statistics Year-End 2015 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 2,058 50,447,334 4,879,321 5,128,791 10.2% 758,510 474,002 851,832 $7.60 Northeast Ind 833 16,542,720 1,358,138 1,406,044 8.5% 96,729 23,200 0 $11.12 Northwest Ind 2,536 58,445,928 3,843,100 3,888,984 6.7% 1,490,865 438,858 1,004,656 $7.65 Southeast Ind 3,220 94,286,533 10,088,664 10,567,283 11.2% 2,143,042 1,623,377 1,049,175 $7.72 Southwest Ind 1,360 92,627,908 11,934,454 12,513,063 13.5% 2,548,600 2,824,627 854,666 $4.54 Totals 10,007 312,350,423 32,103,677 33,504,165 10.7% 7,037,746 5,384,064 3,760,329 $6.74 2016 CoStar Group, Inc. The CoStar Industrial Report 9
Phoenix Year-End 2015 Figures at a Glance Flex Submarket Statistics Year-End 2015 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 56 977,278 73,557 73,557 7.5% (4,629) 23,200 0 $10.29 Chandler Airport Ind 10 675,257 326,750 326,750 48.4% (3,383) 0 57,140 $16.10 Chandler Ind 70 3,479,194 597,531 660,286 19.0% 122,626 0 105,000 $11.27 Chandler N/Gilbert Ind 101 2,547,285 317,816 317,816 12.5% 133,725 0 0 $12.19 Deer Vly/Pinnacle Pk Ind 85 3,346,174 211,435 211,435 6.3% 562,526 0 0 $13.09 Falcon Fld/Apache Jct Ind 32 499,866 63,772 63,772 12.8% 43,361 0 0 $9.67 Glendale Ind 11 320,339 45,250 45,250 14.1% 1,764 0 0 $11.06 Goodyear Ind 10 196,019 3,000 3,000 1.5% (3,000) 0 0 $8.21 Grand Avenue Ind 23 160,977 5,160 5,160 3.2% 1,206 0 0 $12.77 Mesa Ind 41 439,668 23,732 23,732 5.4% (7,937) 0 0 $8.78 N Glendale/Sun City Ind 25 481,450 54,127 54,127 11.2% 34,490 0 0 $8.46 North Airport Ind 45 1,746,509 281,304 299,857 17.2% 26,137 0 0 $11.19 North Black Canyon Ind 64 1,280,072 316,732 316,732 24.7% (19,411) 0 0 $9.47 S Airport N of Roeser Ind 61 2,495,469 546,577 546,577 21.9% (106,422) 0 0 $12.41 S Airport S of Roeser Ind 10 123,480 0 0 0.0% 7,568 0 0 $0.00 SC N of Salt River Ind 40 836,080 135,471 137,571 16.5% 1,947 0 245,000 $15.34 SC S of Salt River Ind 4 28,076 0 0 0.0% 0 0 0 $0.00 Scottsdale Airpark Ind 112 2,503,300 413,267 413,267 16.5% 29,176 0 0 $12.76 Scottsdale/Salt River Ind 69 1,819,276 132,400 132,400 7.3% 23,676 0 0 $14.29 SW N of Buckeye Road Ind 9 267,669 0 0 0.0% 0 0 0 $0.00 SW S of Buckeye Road Ind 6 341,444 215,889 215,889 63.2% (6,250) 0 0 $0.00 Tempe East Ind 41 954,959 33,071 145,944 15.3% 67,436 237,000 72,000 $10.77 Tempe Northwest Ind 79 2,607,466 188,635 188,635 7.2% 74,197 0 0 $13.27 Tempe Southwest Ind 93 3,749,114 458,265 458,265 12.2% 29,844 0 0 $11.55 Tolleson Ind 9 582,572 51,092 51,092 8.8% 7,395 0 0 $7.45 W Phx N of Thomas Rd Ind 39 741,481 8,400 8,400 1.1% 64,543 0 0 $5.35 W Phx S of Thomas Rd Ind 8 86,351 11,301 11,301 13.1% (600) 0 0 $10.72 Totals 1,153 33,286,825 4,514,534 4,710,815 14.2% 1,079,985 260,200 479,140 $12.09 Existing Inventory Vacancy Warehouse Submarket Statistics Year-End 2015 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 240 3,033,409 150,014 150,014 4.9% (9,894) 0 0 $8.60 Chandler Airport Ind 68 2,242,392 385,195 385,195 17.2% 370,632 732,079 210,926 $7.85 Chandler Ind 292 17,197,868 3,014,526 3,161,526 18.4% 276,164 386,115 0 $6.63 Chandler N/Gilbert Ind 660 16,376,694 1,348,627 1,432,644 8.7% 389,909 44,000 349,109 $7.33 Deer Vly/Pinnacle Pk Ind 572 12,409,031 936,595 954,829 7.7% 293,100 285,842 220,279 $8.47 Falcon Fld/Apache Jct Ind 207 4,224,920 236,921 237,921 5.6% 11,325 11,199 0 $7.58 Glendale Ind 106 6,065,555 672,341 672,341 11.1% 161,566 0 784,377 $5.22 Goodyear Ind 149 9,797,915 837,683 1,296,522 13.2% 143,665 347,000 350,000 $4.04 Grand Avenue Ind 570 13,214,460 662,173 662,173 5.0% 327,893 146,000 0 $5.31 Mesa Ind 422 7,126,749 619,812 646,111 9.1% 63,869 212,984 0 $6.94 N Glendale/Sun City Ind 119 2,781,425 223,151 223,151 8.0% 39,538 7,016 0 $7.05 North Airport Ind 569 11,679,670 1,383,759 1,465,389 12.5% 163,067 95,380 64,014 $7.62 North Black Canyon Ind 185 3,278,742 138,646 141,696 4.3% 3,761 0 0 $8.35 S Airport N of Roeser Ind 440 12,210,034 971,164 972,863 8.0% 407,644 45,738 542,818 $6.84 S Airport S of Roeser Ind 154 4,411,270 160,105 189,405 4.3% 176,573 155,114 0 $7.51 SC N of Salt River Ind 623 14,956,634 1,367,685 1,483,873 9.9% 36,934 177,770 0 $5.96 SC S of Salt River Ind 112 1,960,112 33,256 33,256 1.7% 45,062 0 0 $4.78 Scottsdale Airpark Ind 261 4,601,338 275,231 318,895 6.9% 40,023 0 0 $11.00 Scottsdale/Salt River Ind 95 3,608,119 313,669 317,911 8.8% 18,377 0 0 $7.25 SW N of Buckeye Road Ind 674 32,703,175 3,634,756 3,634,756 11.1% 838,470 659,618 0 $4.56 SW S of Buckeye Road Ind 283 16,180,967 2,465,499 2,465,499 15.2% 329,605 0 57,000 $4.66 Tempe East Ind 320 5,629,198 287,576 306,576 5.4% 77,576 0 0 $7.33 Tempe Northwest Ind 267 8,281,349 984,619 1,005,294 12.1% 349,448 0 255,000 $6.23 Tempe Southwest Ind 517 18,254,554 1,201,816 1,206,816 6.6% 144,250 0 0 $6.11 Tolleson Ind 220 32,558,147 4,726,535 4,846,305 14.9% 1,238,715 1,818,009 447,666 $4.54 W Phx N of Thomas Rd Ind 422 7,404,791 205,154 229,754 3.1% 112,206 0 0 $5.20 W Phx S of Thomas Rd Ind 307 6,875,080 352,635 352,635 5.1% (91,717) 0 0 $5.27 Totals 8,854 279,063,598 27,589,143 28,793,350 10.3% 5,957,761 5,123,864 3,281,189 $5.92 Existing Inventory Vacancy 10 The CoStar Industrial Report 2016 CoStar Group, Inc.
Figures at a Glance Year-End 2015 Phoenix Total Industrial Submarket Statistics Year-End 2015 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 296 4,010,687 223,571 223,571 5.6% (14,523) 23,200 0 $9.25 Chandler Airport Ind 78 2,917,649 711,945 711,945 24.4% 367,249 732,079 268,066 $8.60 Chandler Ind 362 20,677,062 3,612,057 3,821,812 18.5% 398,790 386,115 105,000 $7.74 Chandler N/Gilbert Ind 761 18,923,979 1,666,443 1,750,460 9.2% 523,634 44,000 349,109 $8.07 Deer Vly/Pinnacle Pk Ind 657 15,755,205 1,148,030 1,166,264 7.4% 855,626 285,842 220,279 $10.14 Falcon Fld/Apache Jct Ind 239 4,724,786 300,693 301,693 6.4% 54,686 11,199 0 $7.83 Glendale Ind 117 6,385,894 717,591 717,591 11.2% 163,330 0 784,377 $5.66 Goodyear Ind 159 9,993,934 840,683 1,299,522 13.0% 140,665 347,000 350,000 $4.13 Grand Avenue Ind 593 13,375,437 667,333 667,333 5.0% 329,099 146,000 0 $5.41 Mesa Ind 463 7,566,417 643,544 669,843 8.9% 55,932 212,984 0 $6.96 N Glendale/Sun City Ind 144 3,262,875 277,278 277,278 8.5% 74,028 7,016 0 $7.22 North Airport Ind 614 13,426,179 1,665,063 1,765,246 13.1% 189,204 95,380 64,014 $8.22 North Black Canyon Ind 249 4,558,814 455,378 458,428 10.1% (15,650) 0 0 $8.95 S Airport N of Roeser Ind 501 14,705,503 1,517,741 1,519,440 10.3% 301,222 45,738 542,818 $7.88 S Airport S of Roeser Ind 164 4,534,750 160,105 189,405 4.2% 184,141 155,114 0 $7.51 SC N of Salt River Ind 663 15,792,714 1,503,156 1,621,444 10.3% 38,881 177,770 245,000 $6.75 SC S of Salt River Ind 116 1,988,188 33,256 33,256 1.7% 45,062 0 0 $4.78 Scottsdale Airpark Ind 373 7,104,638 688,498 732,162 10.3% 69,199 0 0 $11.81 Scottsdale/Salt River Ind 164 5,427,395 446,069 450,311 8.3% 42,053 0 0 $10.35 SW N of Buckeye Road Ind 683 32,970,844 3,634,756 3,634,756 11.0% 838,470 659,618 0 $4.56 SW S of Buckeye Road Ind 289 16,522,411 2,681,388 2,681,388 16.2% 323,355 0 57,000 $4.66 Tempe East Ind 361 6,584,157 320,647 452,520 6.9% 145,012 237,000 72,000 $8.20 Tempe Northwest Ind 346 10,888,815 1,173,254 1,193,929 11.0% 423,645 0 255,000 $7.60 Tempe Southwest Ind 610 22,003,668 1,660,081 1,665,081 7.6% 174,094 0 0 $7.51 Tolleson Ind 229 33,140,719 4,777,627 4,897,397 14.8% 1,246,110 1,818,009 447,666 $4.57 W Phx N of Thomas Rd Ind 461 8,146,272 213,554 238,154 2.9% 176,749 0 0 $5.21 W Phx S of Thomas Rd Ind 315 6,961,431 363,936 363,936 5.2% (92,317) 0 0 $5.39 Totals 10,007 312,350,423 32,103,677 33,504,165 10.7% 7,037,746 5,384,064 3,760,329 $6.74 Existing Inventory Vacancy 2016 CoStar Group, Inc. The CoStar Industrial Report 11
Phoenix Year-End 2015 Figures at a Glance 12 The CoStar Industrial Report 2016 CoStar Group, Inc.
Leasing Activity Year-End 2015 Phoenix Historical Rental Rates Based on Quoted Rental Rates $16.00 Flex Warehouse Total Market $14.00 Dollars/SF/Year $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 1999 4q 2001 4q 2003 4q 2005 4q 2007 4q 2009 4q 2011 4q 2013 4q 20154q Vacancy by Available Space Type Vacancy by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Phoenix United States Phoenix United States 4% 3% 14% 14% 86% 86% 96% 97% Direct Sublet Direct Sublet Flex Warehouse Flex Warehouse U.S. Rental Rate Comparison Based on Average Quoted Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $8.00 Phoenix United States 3.5 3.3 $7.00 3.0 Dollars/SF/Year $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2013 3q 2014 1q 2014 3q 2015 1q 2015 3q Millions 2.5 2.0 1.5 1.0 0.5 0.0 0.6 0.0 0.0 0.0 0.0 2016 1q 2016 3q 2017 1q * Includes Under Construction Space 2016 CoStar Group, Inc. The CoStar Industrial Report 13
Phoenix Year-End 2015 Leasing Activity Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2015 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 563 S 63rd Ave SW N of Buckeye Road Ind 593,600 1st Tuesday Morning Colliers International JLL; Liberty Property Trust 2 7037 W Van Buren St Tolleson Ind 552,330 3rd Menlo Logistics Lee & Associates Jll; Lincoln Property Company 3 2500 W Union Hills Dr Deer Vly/Pinnacle Pk Ind 545,176 1st Aligned Energy N/A N/A 4 5555 W Lower Buckeye Rd SW S of Buckeye Road Ind 365,110 3rd Stitch Fix JLL Colliers International 5 9310 W Buckeye Rd Tolleson Ind 170,000 2nd Mattress Firm DAUM Commercial; E Smith Realty Colliers International 6 4550 W Watkins St SW S of Buckeye Road Ind 131,840 3rd OMCO Solar, Inc. N/A Colliers International 7 1616 W 17th St Tempe Northwest Ind 111,349 2nd Home Depot Lee & Associates; Icon Commercial Lee & Associates 8 4001 S 38th St S Airport N of Roeser Ind 101,885 3rd The Stone Collection Colliers International Commercial Properties, Inc. 9 2021 E Jones Ave S Airport N of Roeser Ind 94,885 2nd Michael Lewis Company Cushman & Wakeeld Lee & Associates 10 2225 S 75th Ave* Tolleson Ind 93,489 4th Benson Industries NAI Horizon JLL 11 7400 W Buckeye Rd Tolleson Ind 89,600 1st Sensormatic Electronics LLC CBRE Colliers International 12 1171 N Fiesta Blvd Chandler N/Gilbert Ind 83,472 1st Ferguson HVAC Lee & Associates Myron Zimmerman Investments 13 2150 E Riverview Dr S Airport N of Roeser Ind 78,843 1st DLS Worldwide Cresa JLL 14 8590 W Buckeye Rd Tolleson Ind 76,630 2nd Medline Industries, Inc. N/A Lee & Associates 15 485 N Juniper Dr Chandler Ind 75,291 2nd DaVita RX JLL Colliers International 16 7419 S Roosevelt St Tempe Southwest Ind 75,068 3rd Consumer Cellular Capacity Commercial Group Lee & Associates 17 4929 W Van Buren St SW N of Buckeye Road Ind 74,642 2nd Walmart CBRE JLL 18 4315 W Buckeye Rd SW S of Buckeye Road Ind 74,000 2nd Pima Healthcare Kasten Long Commercial Group Cashen Realty Advisors 19 7350 N Dobson Rd Scottsdale/Salt River Ind 71,000 1st Global Trans N/A The Alter Group 20 101 N 104th Ave Tolleson Ind 67,380 1st Inventure Foods CBRE JLL 21 3839 N 35th Ave* W Phx N of Thomas Rd Ind 66,866 3rd ThemeTech Corporation N/A Sorensen & Black 22 8606 W Ludlow N Glendale/Sun City Ind 63,533 3rd Novembal USA, Inc. CBRE CBRE 23 4741 W Polk St SW N of Buckeye Road Ind 63,180 3rd N/A N/A Prologis; Colliers International 24 121 S 39th Ave SW N of Buckeye Road Ind 62,972 1st Summit Warehouse & Logistics N/A N/A 25 500 S 48th St North Airport Ind 62,880 2nd Amazon.com Cushman & Wakeeld, Inc. Lee & Associates 26 3167 W Armstrong Pl Chandler Ind 62,533 1st Kovach, Inc. N/A N/A 27 515 E Grant St SC N of Salt River Ind 62,220 4th Galvanize N/A COBE Real Estate 28 515 E Grant St SC N of Salt River Ind 60,000 4th WebPT N/A COBE Real Estate 29 219 S Mulberry St Mesa Ind 58,900 3rd Industrial Door Co. N/A Lee & Associates 30 4940 W Lower Buckeye Rd SW S of Buckeye Road Ind 57,000 4th Daikin Applied JLL CBRE 31 525 E Pinnacle Peak Rd Deer Vly/Pinnacle Pk Ind 56,826 2nd Di-Matrix NAI Horizon CBRE 32 2688 E Rose Garden Ln Central Phoenix Ind 55,312 3rd Aerostar Aerospace Manufacturing Kidder Mathews Kidder Mathews 33 1919 E University Dr* S Airport N of Roeser Ind 53,144 2nd ReCommunity Rein & Grossoehme Rein & Grossoehme 34 7612 N 74th Ave Grand Avenue Ind 51,350 2nd Tu Spas N/A Tryco Sales; Capital Realty Advisor 35 2915 E Washington St North Airport Ind 50,400 1st Beepi, Inc. Commercial Properties, Inc. Commercial Properties, Inc. 36 3100 E Broadway Rd S Airport N of Roeser Ind 50,267 2nd DialAmerica Cushman & Wakeeld, Inc. JLL 37 5 S 84th Ave Tolleson Ind 48,158 2nd Ernest Packaging Solutions Lee & Associates CBRE 38 4707 E Baseline Rd S Airport S of Roeser Ind 46,940 3rd Independent Electric Supply N/A CBRE 39 2401 W 1st St* Tempe Northwest Ind 46,674 4th Lifetree Manufacturing LLC N/A Direct Deal 40 5670 S 32nd St S Airport S of Roeser Ind 46,054 3rd LKQ Corporation CBRE; Avison Young Lee & Associates * Renewal 14 The CoStar Industrial Report 2016 CoStar Group, Inc.
Sales Activity Year-End 2015 Phoenix The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 8.0% Cap Rate Price/SF $230 7.0% $210 Cap Rate Percentage 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $190 $170 $150 $130 $110 $90 Dollars/SF 0.0% 2012 4q 2013 4q 2014 4q $70 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From Oct. 2014 - Sept. 2015 $450 Sales Volume Price/SF $120 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $400 $350 $300 $250 $200 $150 $100 $50 $100 $80 $60 $40 $20 Price/SF < 25,000 SF 25K-99K SF 100K-249K SF 331 3,120,116 $248,054,861 $ 79.50 9.20% 106 4,795,698 $362,591,538 $ 75.61 7.38% 16 2,184,327 $157,965,368 $ 72.32 6.78% $0 2012 1q 2013 1q 2014 1q 2015 1q $0 >250K SF 6 3,124,820 $215,898,349 $ 69.09 6.00% Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Industrial Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Industrial Building Sales of 15,000 SF and Larger $100 Phoenix US 10.0% Phoenix US $90 9.0% $80 $70 $60 $50 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% $40 3.0% $30 2.0% 2012 1q 2013 1q 2014 1q 2015 1q 2012 1q 2013 1q 2014 1q 2015 1q Source: CoStar COMPS Source: CoStar COMPS 2016 CoStar Group, Inc. The CoStar Industrial Report 15
16 The CoStar Industrial Report 2016 CoStar Group, Inc. Phoenix Year-End 2015 Sales Activity
Deliveries, Absorption & Vacancy A i r p o r t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse Year-End 2015 Phoenix Millions SF 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 (0.100) Delivered SF Absorption SF Vacancy 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Percent Vacant (0.200) 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4q 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q 2015 4q 0.0% Vacant Space Quoted Rental Rates 5.80 Direct SF Sublet SF $7.70 $7.60 5.60 $7.50 Millions SF 5.40 5.20 5.00 4.80 4.60 Dollars/SF/Year $7.40 $7.30 $7.20 $7.10 $7.00 $6.90 $6.80 4.40 2014 1q 2014 3q 2015 1q 2015 3q $6.70 2014 1q 2014 3q 2015 1q 2015 3q Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2015 4q 2,058 50,447,334 5,128,791 10.2% 303,957 2 46,750 7 851,832 $7.60 2015 3q 2,058 50,519,359 5,504,773 10.9% 145,510 3 177,770 7 793,316 $7.35 2015 2q 2,055 50,341,589 5,472,513 10.9% 60,455 3 249,482 8 652,016 $7.26 2015 1q 2,054 50,141,939 5,333,318 10.6% 248,588 0 0 7 459,752 $7.16 2014 4q 2,055 50,235,939 5,675,906 11.3% 51,544 4 632,671 4 281,982 $7.03 2014 3q 2,053 49,653,083 5,144,594 10.4% 362,767 0 0 5 695,551 $7.07 2014 2q 2,053 49,653,083 5,507,361 11.1% 165,167 0 0 4 667,538 $7.10 2014 1q 2,053 49,653,083 5,672,528 11.4% (104,508) 0 0 0 0 $7.06 2013 4q 2,053 49,653,083 5,568,020 11.2% 257,545 1 29,819 0 0 $6.35 2013 3q 2,053 49,658,264 5,830,746 11.7% 128,513 1 4,600 1 29,819 $6.28 2013 2q 2,054 49,701,393 6,002,388 12.1% 100,685 1 30,000 2 34,419 $6.13 2013 1q 2,053 49,671,393 6,073,073 12.2% 224,355 0 0 2 34,600 $6.07 2012 4q 2,053 49,671,393 6,297,428 12.7% 118,492 1 80,000 1 30,000 $5.99 2012 3q 2,056 49,664,443 6,408,970 12.9% 195,288 0 0 1 80,000 $6.11 2012 2q 2,056 49,664,443 6,604,258 13.3% 180,094 1 20,000 1 80,000 $6.11 2012 1q 2,055 49,644,443 6,764,352 13.6% 304,376 0 0 2 100,000 $6.02 2016 CoStar Group, Inc. The CoStar Industrial Report 17
Phoenix Year-End 2015 Deliveries, Absorption & Vacancy N o r t h e a s t M a r k e t MARKET HIGHLIGHTS - Flex & Warehouse 0.150 Delivered SF Absorption SF Vacancy 16.0% 0.100 14.0% 12.0% Millions SF 0.050 0.000 10.0% 8.0% 6.0% Percent Vacant (0.050) (0.100) 4.0% 2.0% 0.0% 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4q 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q 2015 4q Vacant Space Quoted Rental Rates 2.00 Direct SF Sublet SF $11.40 1.80 $11.20 1.60 $11.00 Millions SF 1.40 1.20 1.00 0.80 0.60 0.40 0.20 Dollars/SF/Year $10.80 $10.60 $10.40 $10.20 $10.00 0.00 2014 1q 2014 3q 2015 1q 2015 3q $9.80 2014 1q 2014 3q 2015 1q 2015 3q Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2015 4q 833 16,542,720 1,406,044 8.5% 133,726 0 0 0 0 $11.12 2015 3q 833 16,542,720 1,539,770 9.3% 48,212 1 23,200 0 0 $11.12 2015 2q 833 16,520,640 1,565,902 9.5% (30,512) 0 0 1 23,200 $11.32 2015 1q 833 16,520,640 1,535,390 9.3% (54,697) 0 0 1 23,200 $11.21 2014 4q 833 16,520,640 1,480,693 9.0% (21,321) 0 0 0 0 $11.11 2014 3q 833 16,520,640 1,459,372 8.8% 85,251 0 0 0 0 $10.88 2014 2q 834 16,543,193 1,567,176 9.5% 79,150 0 0 0 0 $10.85 2014 1q 835 16,661,062 1,764,195 10.6% 13,496 1 18,942 0 0 $10.44 2013 4q 834 16,642,120 1,758,749 10.6% (15,231) 0 0 1 18,942 $10.11 2013 3q 834 16,642,120 1,743,518 10.5% 4,819 0 0 1 18,942 $10.25 2013 2q 834 16,642,120 1,748,337 10.5% 109,389 0 0 0 0 $9.78 2013 1q 834 16,642,120 1,857,726 11.2% 119,491 0 0 0 0 $9.94 2012 4q 834 16,642,120 1,977,217 11.9% 107,400 0 0 0 0 $9.69 2012 3q 834 16,642,120 2,084,617 12.5% 98,162 0 0 0 0 $9.50 2012 2q 834 16,642,120 2,182,779 13.1% 109,168 0 0 0 0 $9.48 2012 1q 834 16,642,120 2,291,947 13.8% (61,489) 1 6,000 0 0 $9.50 18 The CoStar Industrial Report 2016 CoStar Group, Inc.