Tight Vacancies Lead to Robust Development · U.S. Research Report INDUSTRIAL MARKET OUTLOOK Q2 2017 Tight Vacancies Lead to Robust Development James Breeze, National Director of

U.S. Research ReportINDUSTRIAL MARKET OUTLOOKQ2 2017

Tight Vacancies Lead to Robust Development James Breeze, National Director of Industrial Research | USA

Featured Highlights > U.S. e-commerce sales grew 16% in Q2 2017 compared with the same time last year and now represent 9% of total retail sales. E-commerce will continue to be a driving force for industrial real estate in 2017.

> The national industrial vacancy rate remained at just 5.4% for the second consecutive quarter — the lowest rate on record despite 109 million square feet of new supply completing in the first half of 2017.

> Product under construction remained high at 216 million square feet, the second-highest quarterly level on record. Accordingly, vacancies could rise modestly in coming quarters if absorption does not keep pace.

> Tightening markets and new, higher-quality Class A industrial space drove up asking rents to $6.15 per square foot per year in Q2 2017, 9.5% higher than the same time last year. With new development slated to maintain the activity level seen in 2016, the increased amounts of newer Class A product hitting the market will likely keep rents at record highs in the coming quarters.

> While fundamentals for big-box facilities (those larger than 200,000 square feet) remain strong, many occupiers are shifting toward “lean distribution.” Lean distribution focuses on quickly getting products to the end user and requires smaller warehouses closer to large population centers or transportation hubs. This is creating significant demand for industrial product between 50,000 square feet and 200,000 square feet in many markets across the U.S.

> Investor demand for industrial properties is growing, making industrial the only major real estate sector to post year-over-year sales growth in Q2 2017. More than $30.1 billion in industrial assets were purchased in the first half of 2017, 10% higher than in the first half of 2016. Demand remains the most robust in secondary and tertiary markets, which both posted year-over-year sales growth of more than 15% for the first half of the year.

Summary Statistics | Q2 2017 U.S. Industrial Market

Vacancy Rate 5.4%

Change From Q2 2016 -0.6%

Markets With Lower Vacancies Compared With Q2 2016

82.0%

Midyear 2017 Absorption (MSF) 113.7

Markets With Positive Absorption

90.7%

Midyear New Supply (MSF) 109.0

New Supply to Inventory 0.7%

Under Construction (MSF) 216.4

ASKING RENTS PER SQUARE FOOT PER YEAR

Average Warehouse/Distribution Center

$5.26

Average Manufacturing Space $5.56

Average Flex Space $11.55

Market IndicatorsRelative to Prior Quarter

Q2 2017

Q3 2017*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE**

* Projected** Warehouse rents

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2 U.S. Research Report | Q2 2017 | Industrial Market Outlook | Colliers International

U.S. Industrial Market Q2 2016 to Q2 2017

Source: Colliers International

U.S. Industrial Indicators | July 2017

INDEXSERIES INDEX

(JUL. 2017)

SERIES INDEX (JUN. 2017)

PERCENTAGE POINT

CHANGEDIRECTION RATE OF

CHANGETREND*

(MONTHS)

PMI® 56.3 57.8 -1.5 Growing Slower 11

New Orders 60.4 63.5 -3.1 Growing Slower 11

Production 60.6 62.4 -1.8 Growing Slower 11

Employment 55.2 57.2 -2.0 Growing Slower 10

Supplier Deliveries 55.4 57.0 -1.6 Slowing Slower 15

Inventories 50.0 49.0 1.0 Unchanged From Contracting 1

Customers' Inventories 49.0 50.5 -1.5 Too Low From Too

High 1

Prices 62.0 55.0 7.0 Increasing Faster 17

Backlog of Orders 55.0 57.0 -2.0 Growing Slower 6

Exports 57.5 59.5 -2.0 Growing Slower 17

Imports 56.0 54 2.0 Growing Faster 6

Overall Economy Growing Slower 98

Manufacturing Sector Growing Slower 11

*Number of months moving in current directionSource: ISM

While not at the record leasing levels set in 2016, the U.S. industrial market posted its 29th consecutive quarter of positive absorption in Q2 2017. Robust demand from e-commerce and third-party logistics (3PL) users led to 51.6 million square feet of net absorption in Q2, bringing the year-to-date total to 113.7 million square feet and keeping the overall vacancy rate at an all-time-record low of 5.4% for the second consecutive quarter. While net absorption in the second quarter was the lowest since Q2 2014, it was still higher than the quarterly average since 2010 (46.7 million square feet).

Consumers are the key demand driver for industrial real estate. While spending levels have cooled somewhat, they were still solid through the first half of 2017. Along with robust job growth, this should continue to fuel industrial demand through the second half of 2017. E-commerce sales also continue to grow at a rate faster than traditional retail sales, pushing industrial occupiers to modernize supply chains to better service consumers and lower overall costs.

The manufacturing sector continues to post robust fundamentals. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) remained strong at 56.3 in July. The index has been in expansionary territory for 11 consecutive months. New orders, a key figure in the forecasting of manufacturing demand, finished July at a solid 60.4. With manufacturing output projected to remain strong in the second half of 2017 and the trend of reshoring continuing, look for industrial demand from manufacturers to increase in the coming quarters.

Going forward, it appears that the risks of policy shifts that could harm U.S. trade have dissipated for the short term, meaning container volumes at U.S. seaports will likely remain robust for the remainder of 2017. The newly started NAFTA negotiations do bear watching, although any changes to the trade pact will not go into effect until 2018. We are also watching for implications of the “Section 301” investigation against China concerning possible violations of U.S. intellectual property rights. Yet as with NAFTA, any repercussions are likely a year or more away.

A new headwind rising in the industrial market is labor availability. With the U.S. economy near full employment and the industrial market needing more workers due to shifts in e-commerce, many occupiers are having difficulty finding adequate labor. This trend could have a negative effect on occupier expansion plans in the coming quarters. Despite this, import levels are strong, manufacturing is on the rise and the U.S. economy remains solid, all of which points to strong industrial fundamentals for the foreseeable future.

5.1%

5.2%

5.3%

5.4%

5.5%

5.6%

5.7%

5.8%

5.9%

6.0%

0

10

20

30

40

50

60

70

80

90

Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

MSF

New Supply Absorption Vacancy Rate (%)


Moderate Economic Expansion Continues but Is SlowingAs we begin the second half of the year, the U.S. economy is continuing a familiar pattern: tepid growth in the first quarter, faster growth in the second quarter and moderate growth for the year overall. Preliminary second quarter GDP estimates came in at 2.6%, faster than the revised 1.2% in Q1 2017. The consensus forecast calls for growth for all of 2017 to be 2.2% — slightly better than the 1.5% registered last year, but hardly robust by historical standards.

Job growth remains solid and will continue to fuel the industrial market in the coming quarters. Job growth averaged an impressive 220,000 jobs per month in June and July, after averaging only 134,000 in the prior three months. Yet since peaking in 2014, growth has been slowly trending downward. Absent a significant economic turnaround beyond that expected by most economists, it seems the strongest job growth — and space absorption — of this cycle is likely behind us.

Aside from jobs, most of the recent data has been below expectations: Retail sales, consumer confidence, housing starts, durable goods orders and inflation all dropped in the recent reports. On a more positive note, global GDP continues to strengthen. Growth in developing and advanced nations alike has been sluggish in recent years. But the International Monetary Fund (IMF) has been raising its global GDP forecast due to improving international trade, investment and manufacturing — all of which should eventually be positive for the U.S. economy.

Meanwhile, economists and investors are waiting for more definitive policy direction out of Washington, D.C. regarding taxes and regulation that could help bolster growth prospects. With Congress out for summer recess, few expect significant progress until the late fall.

U.S. Economic Indicators GDP

Q2 2017 +2.6%

Q1 2017 +1.2%

ISM

July 2017 PMI® 56.3, up 3.7 pctg. pts. since July 2016

RAIL TIME INDICATORS

Total Railcar Traffic +5.1% since July 2016

Intermodal Traffic +3.2% since July 2016

Sources: BEA, ISM, AAR


Top 30 Markets: Absorption YTD

1H 2017 Absorption (SF)1.10M 12.84M

1.10M 4.00M

6.00M 8.00M

10.00M 12.84M

Sacramento, CA1.84M

Los Angeles, CA1.92M

Inland Empire, CA8.20M

Phoenix, AZ4.15M

Las Vegas, NV3.80M

Kansas City, MO-KS3.64M

Dallas-Ft. Worth, TX9.30M

Houston, TX3.10M

Grand Rapids, MI1.86M

Atlanta, GA12.84M

Indianapolis, IN2.97M

Cincinnati, OH4.33M

Greenville-Spartanburg-Anderson, SC1.80M

Philadelphia, PA5.27M

Central New Jersey3.06M

Dayton, OH1.10M

Baltimore, MD3.00M

Norfolk, VA1.24M

Charlotte, NC1.93M

Stockton, CA2.46M

Chicago, IL9.96M

Minneapolis-St. Paul, MN1.29M

Savannah, GA1.21M

Columbia, SC1.30M

Northern New Jersey1.26M

Hartford, CT1.73M

Boston, MA1.75M

Cleveland, OH1.83M

Lehigh Valley2.27M

Tampa Bay, FL1.40M

Top 30 Markets: Absorption in 1H 2017

Vacancy Remains Tight Despite a Drop in Net AbsorptionU.S. e-commerce sales rose an impressive 16% in Q2 2017 compared with the same time last year and now represent 9% of total retail sales. The continued surge in e-commerce sales and the need to get products to consumers quickly while minimizing supply chain costs are forcing retailers and wholesalers into modern facilities and rapidly changing supply chain strategy.

The housing market also remains a significant demand driver for industrial real estate, as companies seek to locate facilities near growing populations. According to the National Association of Realtors, existing home sales are strong and grew 1% in the first half of 2017 compared with the same time last year. In the western part of the country, existing home sales have grown by 2.5% over this time period. One of the western U.S. industrial markets taking advantage of strong housing fundamentals was a market hit hardest from the subprime mortgage meltdown: Las Vegas. Las Vegas has experienced significant growth in the first half of 2017 because of a strong housing market, with nearly 4 million square feet of positive industrial absorption. This absorption is equal to 3% of its total inventory, making it the top industrial growth market in the country for the first half of 2017.

Robust demand for goods kept the overall industrial vacancy rate at 5.4% for the second consecutive quarter, the lowest vacancy rate on record. In Q2 2017, vacancies fell in 82% of the markets we track compared with the same time one year ago. Overall net absorption was positive for the 29th consecutive quarter but dropped to 51.6 million square feet in the second quarter, the lowest amount for a quarter since Q2 2014. The drop in absorption can be attributed to multiple factors including a lack of supply in some markets and a shift in demand from larger big-box products to smaller warehouses in others. While absorption dropped significantly, it remained above the average quarterly absorption since 2010 (46.7 million square feet).

Development remains strong in core industrial markets, with Dallas-Fort Worth leading the way with more than 14 million square feet completed for the first half of 2017. The Inland Empire, which continues to post robust fundamentals, has the most product under construction at a whopping 23 million square feet. At nearly 109 million square feet completed, overall new construction was slightly off last year’s pace, marking an 11% decline compared to Q1 2016. However, development appears set to pick up pace in the coming quarters with 216 million square feet currently under construction — the second-highest amount on record.


The second key trend is a shift in occupier focus toward lean distribution, a trend that focuses on quick distribution enabled by warehouse locations closer to the end consumer. This shift is increasing demand for smaller warehouse spaces near large population centers and will likely continue to heighten demand for product in the 50,000 square feet to 200,000 square feet size range.

A headwind to look out for in the coming quarters is labor availability. The Bureau of Labor Statistics estimates that over the past year, warehouse jobs have increased by 97,000 nationwide. Occupier demand for labor in modern fulfillment centers combined with an economy at or near full employment could delay or lower size requirements in the coming quarters and have a negative effect on occupancy growth. While the availability of labor will gain in importance in industrial site selection, look for the use of automation and other technologies to increase as a way of combating labor shortages throughout the country.

All in all, U.S. industrial real estate remained very solid in the first half of 2017 and fundamentals are expected to stay strong with low vacancies, higher rents and robust activity for the second part of the year.

Industrial Real Estate Stands Out in Sales GrowthIndustrial sales volume was robust for the first half of 2017, increasing by 10% compared with the same time one year ago. Industrial was the only product type to post year-over-year sales volume gains, according to Real Capital Analytics.

Deal activity totaled $30.1 billion for the first half of 2017. The growth in sales volume was seen across the board, with single-building sales up 12% and portfolio sales up 8% from the first half of 2016. Sales growth remains the strongest in secondary and tertiary locations, up 20% and 17% respectively since the first half of 2016. At midyear 2017, investment sales for primary core markets were down 9% compared with the same time last year. However, this is not because of a lack of demand but rather a lack of available product to purchase. This, along with strong fundamentals in secondary and tertiary markets, has sent investors into these markets at a growing rate.

Capitalization rates have stabilized for industrial product but remain near historic lows. The cap rate for the sector overall stood at 6.9% in Q2 2017, only up 0.1% from the previous five quarters. Cap rates for warehouse space are on par with the overall average, finishing Q2 2017 at 6.8% while the cap rate for flex assets averaged 6.9%. Both rates remain similar to 2016 rates and at or near all-time lows.

What’s Ahead for Industrial Real Estate?The industrial sector should continue to benefit from strong economic fundamentals and supply chain modernization, including a growing shift to regional distribution. With trade war fears all but disappearing in the short term, cargo volumes at U.S. ports are expected to remain strong and heighten demand for warehousing near these locations. NAFTA negotiations began in August and the potential long-term effects on U.S. trade policy will be important to monitor — although any impact from the renegotiation will not take effect until 2018.

The manufacturing sector continues to post robust fundamentals. New orders — a key figure in the forecasting of manufacturing demand — finished July at a solid 60.4, the 11th consecutive month in positive territory. With manufacturing output projected to be strong in the second half of 2017 and the trend of reshoring continuing, look for industrial demand from manufacturers to increase in the coming quarters.

Two trends will likely continue to be a boon for both urban warehousing and secondary market locations. The first is a shift to regional distribution — the deployment of more warehouses in more locations to get products to consumers quickly — which has driven activity in many secondary markets with seaports and inland ports such as Shenandoah Valley, Cincinnati, Houston, Savannah and Charleston. This should continue for the foreseeable future as occupiers are now willing to allow longer times for products to reach the U.S. via the sea in order to keep warehouses stocked and cut transportation times to customers.

*Metropolitan Statistical AreaSource: Colliers International

Top 5 MSAs* in 1H 2017: Transaction Volume

Los Angeles $2,232 million

Dallas-Fort Worth $1,646 million

Chicago $1,406 million

Northern New Jersey $1,214 million

Atlanta $1,160 million

Top 5 MSAs* in 1H 2017: Net Absorption

Atlanta 12.8 MSF

Chicago 10.0 MSF

Dallas-Fort Worth 9.3 MSF

Inland Empire 8.2 MSF

Philadelphia 7.6 MSF

*Metropolitan Statistical AreaSource: Colliers International

Supplemental Data: Largest 20 MarketsVacancy vs. Absorption By Port Location and Region

Source: Colliers Q2 2017 Industrial Survey Source: Colliers Q2 2017 Industrial survey

Q2 2017 Warehouse Rent History & OutlookRent Outlook Over Next 12 Months

Vacancy vs. YOY Change in VacancyBy Port Location and Region

Source: Colliers Q2 2017 Industrial Survey

Absorption vs. New Supply by Port Location Absorption Outlook Over Next 12 Months

Source: Colliers Q2 2017 Industrial Survey


Vacancy vs. YTD AbsorptionBy Port Location and Region

-1M 0M 1M 2M 3M 4M 5M 6M0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Q2 2

017

Vaca

ncy

Rate

Q2 2017 Absorption (SF)

Port LocationEastern U.S.Great LakesGulf CoastInlandWest CoastNo port

RegionMidwestNortheastSouthWest

Median

Median

Phoenix, AZ1.1M

Atlanta, GA6.1M

Kansas City, MO-KS1.7M

Indianapolis, IN1.3M

Chicago, IL6.3M

Dallas-Ft. Worth, TX4.8M

Philadelphia, PA1.7MHouston, TX

0.1M

Inland Empire, CA4.7MDetroit, MI

-0.8M

Los Angeles, CA0.7M

Silicon Valley, CA0.0M

New Jersey-Central0.5M

Milwaukee, WI0.2M

Cleveland, OH1.7M

Cincinnati, OH1.2M

Minneapolis-St. Paul, MN0.8MNew Jersey-Northern

-1.0M

Columbus, OH0.1M

Memphis, TN0.8M


Absorption Outlook(Over Next 12 Months)

PositiveClose to zeroNegative

Q2 2017 New Supply (SF)

Q2 2

017

Abso

rptio

n (S

F)

0M 1M 2M 3M 4M 5M 6M 7M

-1M

0M

1M

2M

3M

4M

5M

6M

8M 9M 10M 11M 12M 13M 14M

Median

Median

Chicago, IL

Dallas-Ft. Worth, TX

Philadelphia, PA

Columbus, OH

Atlanta, GA

Houston, TX

Indianapolis, IN

Kansas City, MO-KS

Detroit, MI

Silicon Valley, CAMilwaukee, WI

Phoenix, AZ

New Jersey-Central

Cincinnati, OH

Minneapolis-St. Paul, MNLos Angeles, CA

Cleveland, OH

New Jersey-Northern

Memphis, TN

Inland Empire, CA

Vacancy vs. YTD AbsorptionBy Port Location and Region

YOY Change in Vacancy (since Q2 2016)-2.0% -1.8% -1.6% -1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Q2 2

017

Vaca

ncy

Rate

Median

Median


Vacancy Outlook(Over Next 12 Months)

UpSameDown

Los Angeles, CA

Phoenix, AZ

Atlanta, GA

Kansas City, MO-KSHouston, TX


Chicago, IL

Indianapolis, IN

Philadelphia, PA

Memphis, TN

Milwaukee, WI

Minneapolis-St. Paul, MNNew Jersey-Northern

New Jersey-Central

Columbus, OH

Cincinnati, OHInland Empire, CA

Cleveland, OH

0% 2% 4% 6% 8% 10% 12% 14%$0

$1

$2

$3

$4

$5

$6

$7

$8

Q2 2

017

Aver

age

War

ehou

se/D

istr

ibut

ion

Rent

(S/S

F/Ye

ar)

YOY Change in Warehouse/Distribution Rent (since Q2 2016)16% 18%

Median

Median


Rent OutlookUpSame

Indianapolis, IN

Los Angeles, CA

New Jersey-Northern

New Jersey-Central

Houston, TX

Phoenix, AZ

Philadelphia, PAKansas City, MO-KSChicago, IL

Milwaukee, WI

Memphis, TN

Atlanta, GA


Inland Empire, CA

Cincinnati, OH

Columbus, OH

Cleveland, OH


United States | Industrial Survey | Inventory, New Supply, Under Construction

MARKET INVENTORY JUN. 30, 2017 (SF)

TOTAL NEW SUPPLY YTD 2017 (SF) TOTAL UNDER CONSTRUCTION (SF)

NORTHEAST

Baltimore, MD 228,929,099 468,976 6,053,228

Boston, MA 148,137,368 0 345,000

Hartford, CT 107,961,794 0 0

New Hampshire 61,908,706 240,000 240,000

New York City Metro 808,846,186 3,675,612 14,192,768

> Central New Jersey 316,824,593 3,092,001 8,257,254

> Long Island 132,792,939 0 176,826

> Northern New Jersey 359,228,654 583,611 5,758,688

Philadelphia-Lehigh Valley, PA 441,786,917 2,751,890 5,781,477

Pittsburgh, PA 161,285,079 100,000 137,570

Washington, D.C. 194,275,122 125,180 2,505,258

Northeast Total 2,153,130,271 7,361,658 29,255,301

SOUTH

Atlanta, GA 668,027,773 4,642,002 14,246,022

Augusta-Aiken, GA 9,602,480 0 40,000

Austin, TX 54,768,235 128,630 424,612

Birmingham, AL 114,492,491 0 0

Charleston, SC 47,517,161 603,000 4,332,538

Charlotte, NC 154,690,475 451,500 2,743,453

Columbia, SC 66,556,372 0 224,000

Dallas-Fort Worth, TX 790,971,620 3,424,318 22,336,839

Florence-Myrtle Beach, SC 35,571,713 0 0

Greenville-Spartanburg-Anderson, SC 190,576,021 291,600 5,787,395

Houston, TX 543,196,122 1,519,423 4,355,931

Huntsville, AL 46,812,655 0 0

Jacksonville, MI 126,894,893 47,448 3,299,726

Little Rock, AR 46,123,404 0 333,760

Memphis, TN 239,112,261 1,563,220 3,191,340

Nashville, TN 189,164,469 731,520 817,840

Norfolk, VA 80,995,878 299,580 0

Orlando, FL 140,292,907 596,940 1,589,749

Richmond, VA 95,908,057 0 0

Savannah, GA 60,382,442 483,000 5,251,615

Shenandoah Valley-I-81 Corridor 90,675,618 100,000 2,362,273

South Florida 358,675,865 1,680,107 3,185,257

> Fort Lauderdale 106,000,595 30,000 1,303,686

> Miami 201,942,436 1,343,218 1,670,946

> Palm Beach 50,732,834 306,889 210,625

Tampa Bay, FL 209,437,498 788,207 2,678,366

South Total 4,360,446,410 17,350,495 77,200,716

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

8 U.S. Research Report | Q2 2017 | Industrial Market Outlook | Colliers International8

United States | Industrial Survey | Inventory, New Supply, Under Construction

MARKET INVENTORY JUN. 30, 2017 (SF)

TOTAL NEW SUPPLY YTD 2017 (SF) TOTAL UNDER CONSTRUCTION (SF)

MIDWEST

Chicago, IL 1,366,156,874 8,573,665 14,767,966

Cincinnati, OH 255,812,938 1,280,560 3,970,212

Cleveland, OH 396,176,466 801,213 1,515,267

Columbus, OH 232,720,740 80,000 4,763,785

Dayton, OH 104,940,619 1,013,200 100,000

Detroit, MI 701,619,626 397,473 6,189,329

Grand Rapids, MI 116,649,626 49,080 1,219,595

Indianapolis, IN 240,279,880 1,358,266 6,330,061

Kansas City, MO 241,036,130 1,767,100 7,796,702

Milwaukee, WI 251,220,597 363,830 555,861

Minneapolis-St. Paul, MN 249,516,766 562,517 1,655,942

Omaha, NE 68,235,589 215,500 990,802

St. Louis, MO 233,485,394 1,230,391 2,360,228

Midwest Total 4,457,851,245 17,692,795 52,215,750

WEST

Albuquerque, NM 39,608,988 0 0

Bakersfield, CA 32,667,427 0 0

Boise, ID 46,395,741 112,500 56,000

Denver, CO 229,549,606 1,157,331 3,372,643

Fresno, CA 47,547,424 21,400 0

Greater Los Angeles, CA 1,476,867,168 4,505,100 28,963,734

> Inland Empire 487,846,300 3,467,200 23,202,900

> Los Angeles 796,810,468 856,800 5,565,334

> Orange County 192,210,400 181,100 195,500

Honolulu, HI 40,003,047 0 0

Las Vegas, NV 126,803,018 1,959,185 4,136,935

Phoenix, AZ 293,767,796 659,405 4,048,990

Sacramento, CA 146,658,367 0 0

San Diego, CA 189,345,706 0 769,681

San Francisco Bay Area, CA 528,034,087 1,197,313 3,212,913

> East Bay 181,948,972 795,049 2,270,908

> Fairfield, CA 49,736,416 402,264 295,901

> San Francisco Peninsula 39,365,667 0 58,000

> Silicon Valley 256,983,032 0 588,104

Seattle-Puget Sound, WA 271,254,891 660,650 5,790,703

Stockton, CA 103,368,210 451,611 6,124,845

West Total 3,571,871,476 10,724,495 56,476,444

U.S. TOTAL 14,543,299,402 53,129,443 215,148,211

(continued)



United States | Industrial Survey | Absorption, Vacancy

MARKET ABSORPTION Q2 2017 (SF)

YTD ABSORPTION

VACANCY RATE MAR. 31, 2017

VACANCY RATE JUN. 30, 2017

NORTHEAST

Baltimore, MD 2,501,515 2,997,093 9.2% 8.2%

Boston, MA 631,424 1,820,976 11.1% 10.7%

Hartford, CT 893,190 1,728,487 6.7% 5.8%

New Hampshire 478,305 1,055,613 5.8% 5.7%

New York City Metro -317,301 4,351,143 4.0% 4.4%

> Central New Jersey 556,898 3,074,434 3.4% 4.0%

> Long Island 88,536 13,870 3.8% 3.8%

> Northern New Jersey -962,735 1,262,839 4.5% 4.9%

Philadelphia-Lehigh Valley, PA 3,159,698 7,538,735 5.7% 5.6%

Pittsburgh, PA 695,890 1,094,433 6.1% 5.6%

Washington, D.C. -410,647 246,079 8.9% 9.0%

Northeast Total 7,632,074 20,832,559 6.2% 6.1%

SOUTH

Atlanta, GA 6,052,475 12,842,901 7.5% 7.2%

Augusta-Aiken, GA -396,700 58,400 9.2% 13.3%

Austin, TX -232,704 -309,086 6.2% 5.5%

Birmingham, AL 374,031 373,681 6.8% 8.0%

Charleston, SC 57,927 622,910 4.4% 5.5%

Charlotte, NC 1,025,918 1,927,266 5.5% 5.5%

Columbia, SC 981,767 1,296,160 10.5% 9.1%

Dallas-Fort Worth, TX 4,779,096 9,299,485 6.4% 6.2%

Florence-Myrtle Beach, SC -820,850 -1,086,581 9.3% 11.6%

Greenville-Spartanburg-Anderson, SC -301,825 1,803,872 6.4% 6.7%

Houston, TX 87,022 3,096,404 5.3% 5.5%

Huntsville, AL 85,086 103,536 5.6% 7.8%

Jacksonville, MI 1,075,728 766,992 5.2% 4.4%

Little Rock, AR 251,317 532,718 9.6% 10.2%

Memphis, TN 793,715 250,860 7.6% 7.6%

Nashville, TN -1,065,552 -637,259 4.3% 5.2%

Norfolk, VA 934,219 1,237,796 6.7% 4.8%

Orlando, FL 438,304 919,447 6.9% 5.3%

Richmond, VA 465,628 467,214 6.6% 5.1%

Savannah, GA 539,294 1,209,890 3.2% 2.9%

Shenandoah Valley-I-81 Corridor 178,253 1,078,101 6.9% 7.0%

South Florida 733,641 1,693,777 4.0% 4.2%

> Fort Lauderdale 274,931 703,283 4.4% 4.1%

> Miami 255,120 577,966 3.9% 4.3%

> Palm Beach 203,590 412,528 3.8% 3.9%

Tampa Bay, FL 395,794 1,398,381 6.1% 6.2%

South Total 16,431,584 38,946,865 6.2% 6.2%



United States | Industrial Survey | Absorption, Vacancy

MARKET ABSORPTION Q2 2017 (SF)

YTD ABSORPTION

VACANCY RATE MAR. 31, 2017

VACANCY RATE JUN. 30, 2017

MIDWEST

Chicago, IL 6,304,052 9,966,226 6.6% 6.7%

Cincinnati, OH 1,183,665 4,334,249 3.5% 3.9%

Cleveland, OH 1,723,417 1,834,258 4.6% 4.4%

Columbus, OH 97,296 -432,548 5.5% 5.8%

Dayton, OH 271,978 1,099,703 6.2% 6.2%

Detroit, MI -805,915 -1,348,508 3.4% 3.6%

Grand Rapids, MI 276,041 1,864,500 5.3% 5.1%

Indianapolis, IN 1,318,659 2,967,332 5.5% 5.4%

Kansas City, MO 1,666,967 3,641,769 6.0% 6.1%

Milwaukee, WI 219,043 338,156 4.4% 4.4%

Minneapolis-St. Paul, MN 765,869 1,288,996 5.3% 5.1%

Omaha, NE 211,393 328,836 3.1% 3.3%

St. Louis, MO 170,544 1,089,513 6.4% 6.9%

Midwest Total 13,403,009 26,972,482 5.2% 5.4%

WEST

Albuquerque, NM 24,124 -4,845 5.4% 5.3%

Bakersfield, CA -78,889 31,790 4.4% 3.9%

Boise, ID 230,029 148,714 2.6% 2.3%

Denver, CO 944,368 907,573 4.7% 4.7%

Fresno, CA 386,982 613,502 5.0% 4.2%

Greater Los Angeles, CA 5,734,300 9,979,800 2.3% 2.2%

> Inland Empire 4,696,600 8,201,400 4.1% 3.8%

> Los Angeles 732,600 1,923,100 1.2% 1.2%

> Orange County 305,100 -144,700 2.5% 2.5%

Honolulu, HI -87,576 -51,704 1.5% 1.7%

Las Vegas, NV 2,200,672 3,798,509 5.8% 5.5%

Phoenix, AZ 1,054,639 4,145,557 9.6% 9.5%

Sacramento, CA 506,165 1,857,168 7.9% 7.5%

San Diego, CA 546,504 1,094,697 4.9% 4.8%

San Francisco Bay Area, CA 665,664 1,884,267 4.2% 4.1%

> East Bay 238,786 424,610 2.5% 2.5%

> Fairfield, CA 266,066 1,056,873 6.3% 5.9%

> San Francisco Peninsula 81,786 34,184 2.0% 1.6%

> Silicon Valley 79,026 368,600 5.4% 5.3%

Seattle-Puget Sound, WA -123,397 366,608 2.9% 3.1%

Stockton, CA 1,985,227 2,463,932 6.3% 4.8%

West Total 13,988,812 27,235,568 4.0% 3.9%

U.S. TOTAL 51,455,479 113,987,474 5.4% 5.4%

(continued)



United States | Industrial Survey | Average Asking NNN Rents as of 1H 2017

MARKET MANUFACTURING SPACE (USD/SF/YR)

FLEX / SERVICE SPACE (USD/SF/YR)

WAREHOUSE / DISTRIBUTION SPACE

(USD/SF/YR)

NORTHEAST

Baltimore, MD $4.27 $10.25 $5.20

Boston, MA $6.83 $9.94 $6.03

Hartford, CT $4.31 $7.34 $4.96

New Hampshire $5.62 $9.43 $5.67

New York City Metro $7.16 $11.25 $7.31

> Central New Jersey $6.14 $11.52 $6.29

> Long Island $10.75 $13.74 $10.11

> Northern New Jersey $6.61 $9.65 $7.32

Philadelphia-Lehigh Valley, PA $3.98 $8.93 $4.85

Pittsburgh, PA $4.02 $8.88 $5.31

Washington, D.C. $6.59 $12.33 $7.73

Northeast Total $5.37 $10.79 $6.12

SOUTH

Atlanta, GA $3.48 $8.98 $3.95

Augusta-Aiken, GA $1.54 $3.36

Austin, TX $14.08 $8.26

Birmingham, AL $6.61 $3.47

Charleston, SC $4.64 $8.56 $5.25

Charlotte, NC $2.69 $8.80 $4.86

Columbia, SC $2.96 $10.12 $3.31

Dallas-Fort Worth, TX $5.17 $9.30 $4.25

Florence-Myrtle Beach, SC $2.48 $8.50 $2.64

Greenville-Spartanburg-Anderson, SC $4.80 $8.20 $3.58

Houston, TX $10.76 $6.66

Huntsville, AL $5.80 $5.94

Jacksonville, MI $9.76 $4.16

Little Rock, AR $3.49 $1.92

Memphis, TN $6.40 $2.79

Nashville, TN $3.46 $9.14 $5.10

Norfolk, VA $5.59 $12.53 $4.64

Orlando, FL $10.08 $5.60

Richmond, VA $4.54 $9.79 $4.15

Savannah, GA $4.04 $7.00 $4.39

Shenandoah Valley-I-81 Corridor $4.07 $5.84 $3.97

South Florida $10.04 $16.80 $11.16

> Fort Lauderdale $8.67 $12.75 $8.37

> Miami $13.59 $24.87 $12.71

> Palm Beach $7.89 $11.85 $8.65

Tampa Bay, FL $8.84 $4.81

South Total $4.08 $9.54 $4.80

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.* Straight averages used


United States | Industrial Survey | Average Asking NNN Rents as of 1H 2017

MARKET MANUFACTURING SPACE (USD/SF/YR)

FLEX / SERVICE SPACE (USD/SF/YR)

WAREHOUSE / DISTRIBUTION SPACE

(USD/SF/YR)

MIDWEST

Chicago, IL $5.05

Cincinnati, OH $3.50 $6.53 $3.85

Cleveland, OH $3.02 $7.36 $4.08

Columbus, OH $6.57 $3.14

Dayton, OH $2.80 $4.62 $3.48

Detroit, MI $8.23 $5.09

Grand Rapids, MI $4.41 $4.23 $4.36

Indianapolis, IN $5.48 $6.24 $3.52

Kansas City, MO $4.30 $8.88 $4.55

Milwaukee, WI $4.70 $5.84 $4.69

Minneapolis-St. Paul, MN $5.08 $4.84 $4.81

Omaha, NE $4.79 $6.00 $4.94

St. Louis, MO $4.00 $7.03 $4.11

Midwest Total $4.17 $6.60 $4.60

WEST

Albuquerque, NM $6.46 $8.06 $6.43

Bakersfield, CA $9.58 $6.27

Boise, ID $6.08

Denver, CO $9.99 $10.65 $7.63

Fresno, CA $3.07 $10.89 $4.47

Greater Los Angeles, CA $7.52

> Inland Empire $6.44

> Los Angeles $8.25

> Orange County $10.12

Honolulu, HI $14.88

Las Vegas, NV $8.87 $11.17 $6.71

Phoenix, AZ $7.26 $12.98 $6.30

Sacramento, CA $5.56 $8.85 $4.75

San Diego, CA $10.89 $19.36 $10.95

San Francisco Bay Area, CA $10.96 $23.86 $8.48

> East Bay $10.44 $19.51 $7.50

> Fairfield, CA $7.51 $8.41 $5.98

> San Francisco Peninsula $17.54

> Silicon Valley $14.19 $24.22 $9.86

Seattle-Puget Sound, WA $7.98 $16.92 $7.23

Stockton, CA $7.83 $5.53 $4.81

West Total $8.88 $18.18 $7.02

U.S. TOTAL $5.56 $11.55 $5.26

(continued)

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.* Straight averages used

Copyright © 2017 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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INDUSTRIAL SERVICES CONTACTDwight Hotchkiss

President, Brokerage Services | USANational Director, Industrial | USA

+1 213 532 [email protected]

RESEARCH CONTACTSJames Breeze

National Director of Industrial Research | USA+1 909 937 6365

[email protected]

Pete Culliney Director of Research | Global

+1 212 716 3689 [email protected]

CONTRIBUTORSAndrew Nelson

Chief Economist | USA

Jeff Simonson U.S. Senior Research Analyst | USA

AJ Paniagua U.S. Research Analyst | USA

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