Los Angeles Industrial Market Update 3Q16

Central LA & South Bay SpecialistC.J. COLLINSLA Industrial Team424.329.7507 | 949.212.3249 cellLic. #01949979ccollins@voitco.com

Positive Momentum ContinuesThe Los Angeles industrial market continues to be one of the most desirable, and therefore tightest, markets in the country. Driven primarily by the Ports of LA/Long Beach, logistics and e-commerce operators compete with one another for the very few available options in a nearly 720 million square foot base. With the lowest vacancy rate in the country (approximately 1.98%) and among the highest industrial rents, companies looking to expand are now being forced to seek alternatives further east in the Inland Empire, where modern buildings are available at substantially lower rents.

OverallThe Los Angeles industrial market is well positioned for continued growth as e-commerce further impacts consumer buying patterns and the regional distribution of goods. Proximity to the ports and direct access to one of the largest population centers in the country are huge strategic advantages. Los Angeles will continue to be among the tightest industrial markets in the United States, resulting in steady rent growth.

ForecastConstructionWhile opportunities are scarce given the lack of available land, submarkets like the South Bay are quite active, with 11 buildings totaling just over 2.3 million square feet currently underway on a spec basis. In total, more than 4.95 million square feet is under construction in Los Angeles's industrial market, a majority of its catering to larger distributors (200,000 SF and larger).

EmploymentLos Angeles is starting the year with strong gains in Professional and Business Services, with 605,700 employed in this sector, a gain of 12,700 new jobs (2.1%) on a quarterly basis. Education and Health Services, which employs 772,300, gained a remarkable 36,200 new jobs (4.9%) pointing to a healthy overall employment picture for greater LA. It will also be interesting to see how the increase in minimum wage impacts greater LA as we enter the second half of 2016, although the impact will probably be slow to develop.

Lease RatesExpect lease rates to continue to climb, with the largest gains in newer, Class A product. Asking rates are already past their previous 2007-2008 peak and we expect 6-10% annualized growth in the coming year.

Vacancy

While hard to predict a drop in an already low 1.98% vacancy rate, we expect to see this fi gure decrease approximately 10 basis points, to around 1.88% by the end of the second quarter of 2017, based on current activity levels.

Market ComparisonsLand Pricing and Lease Rate

SOUTH BAYBase: 186,056,800 SF

Vacancy: 2.89%

Asking Lease Rate: $0.68 NNN

Land Value: $25-39 PSF

CENTRAL LABase: 262,028,955 SF +Vacancy: 2.80% -

Asking Lease Rate: $0.69 NNN +Land Value: $30-35 PSF +

MID COUNTIESBase: 113,488,991 SF -

Vacancy: 2.38% -

Asking Lease Rate: $0.65 NNN -

Land Value: $25-30 PSF =

SAN GABRIEL VALLEYBase: 157,613,185 SF -

Vacancy: 2.77% -

Asking Lease Rate: $0.62 NNN -

Land Value: $25-35 PSF =

ORANGE COUNTYBase: 232,348,371 SF +Vacancy: 2.95% +Asking Lease Rate: $0.65 NNN -

Land Value: $30-38 PSF =

INLAND EMPIRE WESTBase: 264,486,053 SF +Vacancy: 3.24% +Asking Lease Rate (≥ 50,000 SF): $0.40 NNN +

Land Value: $8-13 PSF (2-7 Acres)$12-20 PSF (≥ 8 Acres) -

INLAND EMPIRE EASTBase: 197,152,879 SF +Vacancy: 6.75% +Asking Lease Rate (≥ 50,000 SF): $0.38 NNN -

Land Value: $4-8 PSF (2-7 Acres)$6-15 PSF (≥ 8 Acres)

-

SAN DIEGO COUNTYBase: 144,295,347 SF -

Vacancy: 4.70% +Asking Lease Rate: $0.75 NNN -

Land Value: $15-30 PSF -

Market HighlightsTransaction ActivityDemand for quality distribution space in LA will have not slowed down. The third Quarter is no exception as 10.11 million square feet of total transactions (Sale and Lease) took place, down from just over 12 million last quarter. With such a limited number of available options, the supply and demand imbalance continues to limit overall activity. Notable activity this quarter includes UPS leasing 520,000 square feet in Compton (Brickyard; $44 million lease), American Cargo Express, Inc. leasing 220,000 square feet in Cerritos and Beston Shoes taking over 150,000 square feet in City of Industry.VacancyLos Angeles fi nished the quarter with one of the lowest vaacancy rates in the nation at 1.98%, down from an already low 2.04% in the second quarter. 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 expansion or relocation and "off market" transactions will become more common.AvailabilityDirect / sublease space being marketed fi nished the quarter at 3.95%, up 11 basis points from the previous quarter and down 26 basis points from a year ago. Many companies are taking the proactive step of offering their current space for sublease as they consider larger expansion opportunities.Lease RatesThe average asking lease rate came in at $0.78 IG per square foot per month, a two cent per square foot increase from last quarter and a seven cent per square foot increase when compared to the $0.71 from a year ago (a 9.86% annual increase). While averges are tough to rely on in LA given the disparity between Class A options and older, functionally obsolete properties, expect this trent of strong rent growth to continue.Sales ActivityProperty Address City SF Sale Price Buyer Seller

20333 S. Normandie Ave.* Torrance 885,435 $43,000,000 Bridge Development Partners, LLC Farmer Brothers Coffee3820 Union Pacifi c Ave.* Los Angeles 703,106 $30,038,000 REDA 99 Cents Only Store LLC13110 Louden Ln. City of Industry 168,000 $29,000,160 PNC CT Realty Investors14585 Industry Cir. La Mirada 203,850 $24,462,000 IDI Brooksfi eld TA Associates2800 Casitas Ave. Los Angeles 117,000 $22,000,000 Pan Am Equities, Inc. TD Investment Company

Lease Activity

Property Address City SF Trans. Date Tenant Owner1430 S. McKinley Ave. Compton 528,000 Sep-2016 UPS Trammell Crow2201 E. Carson St.** Carson 521,856 Aug-2016 Sony Electronics Inc. Morgan Standley & Co. Inc.2701-2705 W. El Segundo Blvd. Hawthorne 244,200 Jul-2016 Space X Karney Management Co.15927 Distribution Way Cerritos 220,000 Jul-2016 American Cargo Express, Inc. GLP US Management, LLC2652 Long Beach Ave. Los Agneles 149,738 Sep-2016 Worldwide Produce CREF LA Food LLC*

* VRES Deal / Land Deal ** Renewal

South Bay Overview 3Q16 vs. 2Q16 2Q16 3Q15 vs. 3Q15

Vacancy Rate Below 100K SF 2.35% - 2.68% 3.19% (26.33%) -

Vacancy Rate Above 100K SF 6.57% - 6.08% 6.98% (5.87%) -

Availability Rate 6.26% - 6.51% 9.72% (35.60%) -

Average Asking Lease Rate $0.46 - $0.42 $0.43 $6.98% +Sale & Lease Transactions 12,691,394 - 18,056,808 14,962,590 (15.18%) -

Gross Absoprtion 12,203,447 + 8,761,138 13,931,853 (12.41%) -

Net Absoprtion 7,241,242 + 4,876,429 7,746,799 N/A

LA IND MARKET UPDATE3Q16

2 SOUTH BAY SPECIALIST CJ COLLINS

Available Properties

CARSON: 131.593 SF3025 E. Dominguez Street

LOS ANGELES: 117,222 SF2652 Long Beach AvenueCooler/Freezer

CARSON: 93,654 SF19130 S. Figueroa Street

INDUSTRY: 59,939 SF710 Epperson DriveCooler/Freezer

VERNON: 219,877 SF4440 E. 26th Street

VERNON: 148,092 SF2615 S. Bonnie Beach Place

COMPTON: 20,000 SF730 E. 139th StreetFood Grade

CARSON: 176,031 SF20943 S. Maciel Avenue

SOUTH GATE: 18,258 SF5052 Cecelia Street

FOR L

EASE

FOR L

EASE

FOR S

ALE

FOR L

EASE

FOR S

ALE

FOR PRICING CONTACTC.J. Collins . . 424-329-7507 . . ccollins@voitco.com

FOR L

EASE

FOR L

EASE

FOR S

ALE

FOR S

ALE

FOR L

EASE

CJ COLLINS SOUTH BAY SPECIALIST 3

Recently Completed Transactions

LEASEDSEPTEMBER 20162652 Long Beach AvenueLos Angeles, CA 90058149,738 SFCooler/Freezer

LEASED SEPTEMBER 2015175 E. Manville StreetCompton, CA 9022034,179 SF

SOLD JULY 20162030-2036 Sacramento StreetLos Angeles, CA 900219,600 SF

SOLDMAY 20162646 S. Downey RoadVernon, CA 9005820,853 SF

LEASED20161701 N. Central Ave, Bldg 1Compton, CA 90059527,690 SF

SOLDSEPTEMBER 20162301 W. 120th StreetHawthorne, CA 90250319,000 SF

VOIT REAL ESTATE SERVICES1025 W. 190th Street, Suite 350Los Angeles, CA 90248

Find out how I can help you.www.LAIndustrialTeam.com

C.J. COLLINSLA Industrial Team

424.329.7507 direct949.212.3249 cellLic. #01949979ccollins@voitco.com

With over 10 years experience in commercial real estate and development, C.J. Collins is highly profi cient in all facets and sectors of the industry. C.J. has proven to be a leader in the commercial real estate market through demonstrated results in construction, property management and industrial brokerage. C.J. has specialized knowledge of Cold Storage Construction, HACCP, USDA and LA County Health Department regulations, and the Central LA to South Bay market.

■ New Facility Searches ■ Lease and Sale Representation ■ Transportation Cost Studies ■ Labor And Demographic Analysis ■ Strategic Planning

Licensed as a Real Estate Salesperson by the California Bureau of Real Estate. The information contained herein has been obtained from sources we deem reliable. While we have no reason to doubt its accuracy, we do not guarantee it. ©2016 Voit Real Estate Services, Inc. All Rights Reserved. Lic. #01333376.