Presented to:

INDUSTRIAL MARKET OVERVIEW

March 10, 2016

2

• National Industrial Market

• Chicago Industrial Market

• Chicago Industrial Submarkets

• Broker Q&A

Table of Contents 

National Industrial Market

4 Source: CoStar, NGKF

U.S. Industrial MarketVacancy Still Falling

5%

6%

7%

8%

9%

10%

11%

12%

13%

-150

-100

-50

0

50

100

150

200

250

'00 '05 '10 '15

% V

acan

t

SF A

bsor

bed/

Com

plet

ed (m

illio

ns)

SF Absorbed SF Completed % Vacant

Absorption of 216M SF in 2015 is the most since at leas 2000.

Absorption has exceeded completions every year since 2010.

Over past five years, absorption = 797M SF, completions = 469M SF.

Vacancy lowest since 2000-Q4.

5

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

Source: CoStar, NGKF

Industrial Pipeline Low But Ramping UpSF Under Construction as % of Inventory, End of Quarter

Construction ended Q4 at 179.5M SF, close to pre-recession peak of 182.3M SF in 2007-Q3.

Inland Empire led all markets with 26.8M SF underway, followed by Dallas with 20.7M SF, Atlanta with 18.3M SF and Chicago with 9.8M SF.

As % of inventory, construction was highest in Inland Empire at 5.4% versus U.S. average of 1.3%. Chicago was down the list at 0.9% (24th place).

Recessions

6 Source: CoStar, NGKF

$4.00

$4.20

$4.40

$4.60

$4.80

$5.00

$5.20

$5.40

$5.60

$5.80

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Rent Almost at New PeakAsking Rent/SF, NNN, for Space Available End of Quarter

Asking rent ended Q4 at $5.68, one cent below prior peak of $5.69 in 2008-Q1.

Rents rose at double-digit pace last year in seven markets, led by Oakland-East Bay @ 18.5%. Five of the seven markets are in California. Other two are Nashville and Long Island.

Recessions

7

-1% 1% 3% 5% 7% 9% 11% 13% 15%

Los Angeles

Orange Co., CA

Elkhart/Goshen, IN

Denver

Long Island

Inland Empire, CA

Miami

San Diego

Seattle

Houston

Salt Lake City

Portland

Palm Beach

South Bend, IN

Oakland/East Bay

Kansas City

Minneapolis

Austin

Columbus

Cincinnati

Nashville

Detroit

San Antonio

Broward Co., FL

U.S. Average

Lowest

0% 5% 10% 15%

Raleigh/Durham

Milwaukee

St. Louis

Dallas

Orlando

Fresno

Cleveland

Tampa Bay

Central PA

Las Vegas

Chicago

Atlanta

Jacksonville

Silicon Valley

Pittsburgh

Indianapolis

Charlotte

Philadelphia

Washington, DC

Boston

Baltimore

Memphis

Sacramento

Northern NJ

Phoenix

Highest

Source: CoStar, NGKF

Industrial Vacancy Rates by Market 2015-Q4Los Angeles Lowest, Phoenix Highest

8

$0 $5 $10 $15 $20

Silicon Valley

San Diego

Orange Co., CA

Oakland/East Bay

Long Island

Portland

Austin

Palm Beach

Washington, DC

Broward Co., FL

Denver

Los Angeles

Seattle

Boston

Las Vegas

Miami

Phoenix

Houston

Northern NJ

Minneapolis

U.S. Average

Raleigh/Durham

San Antonio

Orlando

Inland Empire, CA

Highest

$0 $2 $4 $6

Baltimore

Sacramento

Salt Lake City

Dallas

Chicago

Philadelphia

Pittsburgh

Fresno

Detroit

Tampa Bay

Milwaukee

Kansas City

Atlanta

Jacksonville

Nashville

St. Louis

Central PA

Cleveland

Charlotte

Indianapolis

Cincinnati

Columbus

South Bend, IN

Memphis

Elkhart/Goshen, IN

Lowest

Source: CoStar, NGKF

Industrial Asking Rates by Market 2015-Q4“Cheap” Chicago Rents Related to Size, Age

9

0% 5% 10% 15% 20%

Oakland/East Bay

Inland Empire, CA

Silicon Valley

San Diego

Nashville

Orange Co., CA

Long Island

Palm Beach

Jacksonville

Raleigh/Durham

Miami

Las Vegas

Milwaukee

St. Louis

Orlando

Houston

Indianapolis

Phoenix

Chicago

Columbus

Broward Co., FL

Sacramento

Memphis

Atlanta

U.S. Average

Highest

-15% -10% -5% 0% 5%

Charlotte

Tampa Bay

Central PA

Boston

Seattle

Philadelphia

Salt Lake City

Cincinnati

Baltimore

Los Angeles

Detroit

Minneapolis

Denver

Washington, DC

Northern NJ

Austin

Dallas

Elkhart/Goshen, IN

Cleveland

South Bend, IN

San Antonio

Fresno

Kansas City

Pittsburgh

Portland

Lowest

Source: CoStar, NGKF

Industrial Asking Rates % Change 2015Chicago Rent Growth Above Average

10

0 5 10 15 20

Dallas

Inland Empire, CA

Chicago

Atlanta

Detroit

Houston

Memphis

Los Angeles

Central PA

Northern NJ

Philadelphia

Phoenix

Indianapolis

Oakland/East Bay

Washington, DC

Charlotte

Seattle

San Diego

Kansas City

Columbus

Nashville

Las Vegas

Miami

Cincinnati

Denver

Million SF

Highest

0 1 2 3 4

Minneapolis

Austin

Orange Co., CA

St. Louis

Raleigh/Durham

Jacksonville

Tampa Bay

Sacramento

Broward Co., FL

Cleveland

Orlando

Long Island

San Antonio

Salt Lake City

Portland

Boston

Pittsburgh

Palm Beach

Baltimore

Silicon Valley

Elkhart/Goshen, IN

Fresno

South Bend, IN

Milwaukee

Million SF

Lowest

Source: CoStar, NGKF

Industrial Absorption by Market 2015Chicago #3… Detroit #5!

11

0 5 10 15 20 25 30

Inland Empire, CA

Dallas

Atlanta

Chicago

Houston

Central PA

Kansas City

Philadelphia

Columbus

Washington, DC

Denver

Portland

Cincinnati

St. Louis

Detroit

Northern NJ

Los Angeles

Phoenix

Charlotte

Minneapolis

Oakland/East Bay

Las Vegas

San Antonio

Tampa Bay

Baltimore

Million SF

Highest

0.0 0.5 1.0 1.5 2.0

Salt Lake City

Memphis

Nashville

Seattle

Pittsburgh

Austin

Miami

Orlando

Cleveland

Raleigh/Durham

Indianapolis

Silicon Valley

Jacksonville

Broward Co., FL

South Bend, IN

San Diego

Milwaukee

Boston

Orange Co., CA

Palm Beach

Fresno

Elkhart/Goshen, IN

Long Island

Sacramento

Million SF

Lowest

Source: CoStar, NGKF

Industrial Under Construction by Market 2015-Q4Chicago Among Highest Construction Markets

12

NGKF Industrial Momentum Index, 2015-Q4Evaluation Criteria

Factor # Factor Group Weighting

Factor Weighting Data Source

DEMOGRAPHICS 151 Pop Change 2015-2020 1 ESRI, NGKF2 Pop % Change 2015-2020 2 ESRI, NGKF3 Millennials Change 2015-2020 2 ESRI, NGKF4 Millennials % Change 2015-2020 3 ESRI, NGKF5 Bachelors Degree, 2015 2 ESRI, NGKF

ECONOMICS 156 Emp % Change From Prior Peak 3 Bureau of Labor Statistics, NGKF7 Emp % Change YoY 3 Bureau of Labor Statistics, NGKF8 Emp Change 2015-2020 2 Moody’s, NGKF9 Emp % Change 2015-2020 3 Moody's, NGKF

REAL ESTATE 7010 Vacancy Change Past 4 Quarters (bps) 2 CoStar, NGKF11 Rent Change Past 4 Quarters 3 CoStar, NGKF12 Absorption as % of Occupied SF 2 CoStar, NGKF13 Construction as % of Total SF 3 CoStar, NGKF

13

RANK CITY

1 Inland Empire, CA

2 Austin

3 Atlanta

4 Las Vegas

5 Dallas

6 Oakland/East Bay

7 Raleigh/Durham

8 San Diego

9 Houston

10 Nashville

11 Phoenix

NGKF Industrial Momentum Index, 2015-Q4What’s Hot, What’s Not

RANK CITY

12 Memphis

13 Denver

14 Jacksonville

15 Orlando

16 Silicon Valley

17 Columbus

18 Broward Co., FL

19 Charlotte

20 San Antonio

21 Washington, DC

22 Miami

RANK CITY

23 Detroit

24 Indianapolis

25 Central PA

26 Orange Co., CA

27 Tampa Bay

28 Seattle

29 Chicago

30 Salt Lake City

31 Cincinnati

32 Kansas City

33 St. Louis

RANK CITY

34 Sacramento

35 Minneapolis

36 Boston

37 Northern NJ

38 Philadelphia

39 Baltimore

40 Los Angeles

41 Portland

42 Milwaukee

43 Cleveland

44 Pittsburgh

14

0

100

200

300

400

500

600

700

800

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

'01 '03 '05 '07 '09 '11 '13 '15

Quarterly Cap Rates & Spread to 10-Year Treasury Yield

Cap Rate (L axis) Spread (R axis)

Cap Rate BPS

$0

$5

$10

$15

$20

$25

'01 '03 '05 '07 '09 '11 '13 '15

Industrial Investment by Year

Billions

Industrial Sales Rising, Cap Rates Sinking2015 Sales Up 30%, Cap Rate Down 40 BPS from 2014

Source: Real Capital Analytics, NGKF

Chicago Industrial Market

16

Source: NGKF

4%

6%

8%

10%

12%

14%

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15

Average Asking Rent (Price/SF) Vacancy (%)

Asking Rent and Vacancy

-3

-1

1

3

5

7

4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15

Net AbsorptionSquare Feet, Millions

• Demand has shown sustained improvement since the recession in 2009. During that time, 70.3 million square feet of absorption has brought vacancy down 410 basis points to a near-historic low of 7.9%.

• As a result of this demand and a robust investment environment, rents have increased 15.3% since 2012 to $4.97/SF.

Market Conditions Chicago, IL 

17

Source: NGKF

• A majority of the market activity has been driven by demand for general industrial and warehouse/distribution properties.

• That has become more pronounced for warehouse/distribution facilities in the past year

• The market’s smallest properties have been the most vulnerable to economic swings.

• Large properties experienced the greatest growth in absorption in 2015.

-5

0

5

10

15

20

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SF m

illio

ns

General industrial Incubator R&D/Flex Warehouse/Distribution

-13

-8

-3

2

7

12

17

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SF m

illio

ns

0-499,000 500-749,000 750,000-999,000 1 million+

Annual absorption by property type Annual absorption by property size

Market Segmentation Chicago, IL 

18

Source: NGKF

4%

6%

8%

10%

12%

14%

0.0

1.5

3.0

4.5

6.0

7.5

4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15

Deliveries (SF) Vacancy Rate (%)

Construction deliveries & vacancySquare Feet, Millions

• To keep up with demand, the market has added 44.6 million square feet of new supply since 2010, an expansion of 6.8%.

• Even with this growth in inventory, demand is still outpacing supply and the market has tightened by 350 basis points during that time.

• 6.1 million SF delivered in Q4

New Construction Chicago, IL 

19

• 2016 Pipeline

• 3.2 million SF will come online this quarter

• 12.9 million SF will break ground in 2016

84%

16%

Q1 Deliveries

SpeculativeBuild-to-Suit

69%

29%

2%

2016 Pipeline

SpeculativeBuild-to-suitBuilding addition

Construction PipelineChicago, IL 

Chicago Industrial Submarkets

21

Source: NGKF

• O’Hare’s proximity to the airport and access to most of the region’s major interstates has made it extremely popular in recent years.

• The O’Hare submarket has experienced three consecutive years of strong absorption. 1.6 million square feet was absorbed in 2015 and vacancy declined 110 basis points to 6.1%.

• Vacancy down 670 basis points from its peak of 12.8% set in early-2010.

• Construction deliveries approached 1.2 million square feet in 2015, a post-recession record for the submarket. One development was completed during the fourth quarter, a 185,000-square-foot distribution facility at 340 County Line Road in Bensenville.

O’Hare Submarket  

22

Source: NGKF

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

-1.2

-0.6

0.0

0.6

1.2

1.8

2009 2010 2011 2012 2013 2014 2015

Milli

ons

Vacancy, Absorption, and Deliveries

Net Absorption Deliveries Vacancy rate

• Supply and demand fundamentals have been strong in the I-55 Corridor. Since 2011 absorption has totaled almost 7.0 million square feet and 8.0 million square feet of new stock has come online.

• In 2015 alone, over 1.8 million square feet of space came off the market and as a result, vacancy declined 90 basis points to 8.4%.

• Over 1.8M square feet is under construction all of which are being built on a speculative basis.

I‐55 Submarket 

23

Source: NGKF

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

-0.6

-0.1

0.4

0.9

1.4

1.9

2.4

2009 2010 2011 2012 2013 2014 2015

Milli

ons

Vacancy, Absorption, and Deliveries

Net Absorption Deliveries Vacancy rate

• I-80 is one of the most active industrial submarkets in Chicago. Since 2011 absorption has totaled over 10.7 million square feet and 9.6 million square feet of new stock has come online.

• In 2015 alone, an impressive 4.1 million square feet of space came off the market and as a result, vacancy declined 210 basis points to 8.3%.

• Supply is catching up with demand. In 2015, 4.3 million square feet of new space was added to the submarket’s inventory.

• Over 5.9 million square feet is under construction, 39% of the total construction stock across the market

I‐80 Submarket 

24

• The I-90 Elgin corridor, which makes up the western portion of the Northwest submarket, experienced significant growth in the latter half of 2015.

• 257,000 square feet of absorption in Q3 and Q4 2015 balanced out the negative absorption that occurred in the first half of 2015 and the year closed with a near even absorption of negative 380 square feet.

• Even with flat absorption, the addition of over 1.4 million square feet of new construction in 2015 caused the vacancy rate to increase by 220 basis points to 12.5%.

• Sales activity was strong in the final months of 2015 with a total of over 550,000 square feet, across four buildings, trading hands.

• With 410,000 square feet of product currently under construction, we can expect more supply coming online in the near term

1 2 3 4 5 6 7 8 9 101112 131415 161718 1920 212223 242526 2728

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

-0.8

-0.5

-0.2

0.1

0.4

0.7

1.0

2009 2010 2011 2012 2013 2014 2015

Mill

ions

Vacancy, Absorption, and Deliveries

Net Absorption Deliveries Vacancy

I‐90 Elgin Submarket  

25

• Since peaking at 10.0% in mid-2010, vacancy in the Southeast Wisconsin submarket has improved significantly. In the last two years alone, over 5.2 million square feet of absorption created a historically tight market where up until this quarter vacancy rose above 5.0% only once in nine quarters.

• Last quarter when three projects delivered a total of 1.6 million to the market, making a total of 5.8 million square feet of new supply in the past two years.

• With this new spec supply coming online, even with modest absorption of 22,000 square feet, the vacancy rate rose 290 basis points to 7.7% in Q4 2015.

• Healthy demand and tight conditions suggest that the market will be able to handle the new supply that has come online and as tenants consume the new space; we will see vacancy rebound in the coming quarters.

2%

4%

6%

8%

10%

12%2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3

0.0

0.8

1.6

2.4

3.2

4.0

2009 2010 2011 2012 2013 2014 2015

Milli

ons

Vacancy, Absorption, and Deliveries

Net Absorption SF Total Deliveries SF Vacant Percent Total

Southeast Wisconsin Submarket 

Broker Q&A