Colliers International | Highlights | North America | Office | Q1 2011 · 2014-04-04 · Q1 2013 | INDUSTRIAL N.A. INDUSTRIAL MARKET SUMMARY STATISTICS, Q1 2013 US Q1 2013 US Q2 2013*

Blind SpotsEight innings into a “perfect game,” what could go wrong in this environment of low interest rates, vacancy and cap rates?

HIGHLIGHTSNORTH AMERICA

WWW.COLLIERS.COM

Q1 2013 | INDUSTRIAL

N.A. INDUSTRIAL MARKETSUMMARY STATISTICS, Q1 2013

US Q1

2013

US Q2

2013*

Canada Q1

2013

Canada Q2

2013*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE**

*Projected, relative to prior period**Warehouse rents

MARKET INDICATORSRelative to prior period

US CAN NA

VACANCY RATE (%) 8.68 4.13 8.20

Change from Q4 2012 (%) -0.21 -0.12 -0.20

ABSORPTION (MSF) 47.4 3.1 50.5

NEW CONSTRUCTION (MSF) 18.1 1.9 19.9

UNDER CONSTRUCTION (MSF) 61.8 13.8 75.6

ASKING RENTS PER SF (USD/CAD) US CAN NA

Average Warehouse/Distribution Center 4.77 7.62 5.21

Change from Q4 2012 (%) 1.58 0.81 1.29

K.C. CONWAY Chief Economist | USA

KEY TAKEAWAYS

• Can the “perfect game” continue into the ninth? For the eighth straight quarter, the North American vacancy rate declined in the 77 markets tracked by Colliers. Q1 vacancy is down 20 basis points to 8.20% (8.68% among the primary 65 U.S. markets and 4.13% among the 12 primary Canadian markets).

• Check your “blind spots.” We weigh some potentially overlooked risks to industrial’s stellar performance, including cap rate compression, due diligence risk, and increased construction activity. See “Blind Spots” on page 9 for the full list.

• Absorption remains strong vs. job growth. Despite anemic job growth below 200,000 per month, demand for industrial warehouse space and modern distribution centers remains strong. On the heels of nearly 71 MSF of net absorption in Q4 2012, the market absorbed another 50.5 MSF in Q1 2013.

Sq. Ft. By Region

Absorption Per Market (SF)q4 '12 - q1 '13

6,000,000

3,000,000

600,000

-600,000

-3,000,000

-6,000,000

4 billion

2 billion

400 mil

Occupied Sq. Ft.

Vacant Sq. Ft.

NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q1 2013

P. 2 | COLLIERS INTERNATIONAL

HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA

• Inland MSAs outpacing port markets in absorption. Other than Los Angeles, the leadership in warehouse leasing is coming from the inland distribution markets. The top five markets for net absorption in Q1 2013 were Chicago, LA, Atlanta, Detroit and Cincinnati.

• New Supply is picking up, but is neither excessive nor speculative. New industrial construction this quarter increased by one-third to 40.6 MSF. But put in perspective, this is less than quarterly average net absorption from Q1 2012 to Q1 2013 (45 MSF). And, more than half of this new space is pre-leased or build-to-suit distribution centers for major retailers and manufacturers.

• Cap rates continue to compress and warehouse prices rise due to increasing investor demand for warehouses. As institutional investors become anxious about the multifamily market and take note of industrial’s perfect game in the making, demand for modern warehouse properties in core port and inland distribution markets is on the rise.

The “Perfect Game”Over the last two years, North American industrial warehouse markets have pitched a “perfect game” through the eighth inning, to use a baseball analogy. The property type has seen eight successive quarters of declining vacancy rates, with net absorption outpacing new supply more than 2:1. Recognizing that Canadian markets account for only 10 percent of the North American warehouse space—and these 12 markets have maintained a stable vacancy rate of approximately 5% with relatively no new supply— the improvement in these metrics has largely occurred in the primary 65 U.S. warehouse markets. Here’s what that looks like:

Any time economic growth and commercial real estate performance are disconnected, it usually ends badly when we find that we all had a blind spot for some artificial stimulus. Prior to 1987, it was an historic change in

And industrial warehouse isn’t doing it alone: other property types on the commercial real estate “team” are backing up the industrial pitcher with all-star numbers in key supply and demand metrics, resulting in cap rate compression to record-low levels. And U.S. equities have turned in an even stronger performance: The Standard & Poor’s (S&P) 500 index is up an astonishing 800 percent from its 2009/2010 lows, and 17 percent this year alone.

10.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.68

10.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.68

8.25 pt

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013

Vaca

ncy

%

Absorption MSF Completions MSF Vacancy %

U.S. INDUSTRIAL WAREHOUSE PERFORMANCE | PAST NINE QUARTERS

-10-8-6-4-20246

3.6

Q1 2011 - Q2 2013

31.7

-1.8

-3.7

-8.9

-5.3

1.3 1.4

4

2.3 2.2 2.6 2.4

0.1

2.51.3

21.3

3.14.1

-0.3

0.4

2.5

2008 2010 2012

2008 2010 2012

Hardly a “perfect performance” for U.S. economic growth...more

like a roller coaster.

UNITED STATES GDP GROWTH RATE (% CHANGE)

SOURCE: www.tradingeconomics.com | Bureau of Economic Analysis

So, as the pitcher takes the mound in the ninth, we wonder if he can close out the perfect game. We do our best not to jinx him by thinking of what might go wrong, but sometimes we can’t help ourselves. A USA Today article by Adam Shell (“With stocks this hot, why worry?”), published as this report was going to press, assessed concerns over whether the stock price eruption is another bubble, or solidly rational. Bloomberg published a similar piece on the paradox of how sustained good news makes us nervous, and gave a “Worry List” of economic factors that could reverse the seemingly vertical trend in stock values.

Jinx or no, these are reasonable concerns given how real estate values across all asset classes—industrial especially—have climbed in a relatively short period. So, what are the potential “blind spots” that conceal risks to industrial’s perfect game?

The Economy GDP, Jobs and Industrial Warehouse Demand

Let’s start with a quick review of key industrial economic measures to understand the plot behind this historic performance so far.

U.S. GDP and industrial real estate have been out of sync since the 2008-2009 financial crisis. This decoupling is contrary to all previous U.S. economic recoveries. Every time GDP has appeared poised for a momentous upward trend in the past three years, it collapses back in the next one to three quarters, to just 0.1%–1.3%. And this roller-coaster ride of economic activity is despite record liquidity infusions into the U.S. economy by our central bank, the Federal Reserve. What does this pattern in GDP mean for U.S. industrial real estate?

Should we be concerned? Yes—but for the near term it may not matter. However, in the long run it matters a lot.

Visitor 0 0 0 0 0 0 0 0Home 0 0 0 0 0 0 0 0

00


COLLIERS INTERNATIONAL | P. 3

the tax laws that ended investors’ ability to use real estate losses to offset gains in other investments, which in turn led to an S&L and real estate crisis. Pre-2007, the artificial stimulus was easy credit for housing and commercial real estate (subprime and securitizable, financially engineered mortgage-products), which overstimulated housing construction, elevated home ownership rates and lifted CRE values to record levels—until it all came crashing back to Earth.

Today, our government and central bank are playing a game of chicken, pitting the Federal Reserve’s zero-interest rate monetary policy against accelerating fiscal deficits in Congress, which hopes to reach top speed (i.e., full employment) before both vehicles collide. Investors and asset prices are caught in the middle, and the natural response is to jump out of the way. This flight from bonds, sovereign debt, and cash will end badly with a thing called inflation. This explains why industrial and other commercial real estate assets are thriving in a weak GDP environment as investors look for a safe haven from fiscal deficits and inflationary monetary policy.

The other half of the story, though, is more encouraging: on-shoring, or the return of manufacturing that left the U.S. over the past three decades. This manufacturing renaissance in the U.S. is due to many factors: patent protection, cheap and reliable energy, and technology and robotics that enable 80+ percent automation of factories. Automation

60.0%44.4%

33.3%

61.9%

33.3%50.0% 47.1%

0%

20%

40%

60%

80%

100%

Midwest Northeast South West Canada U.S. N.A.

Expand Hold Steady Contract

8.3% 1.4%

40.0%55.6%

66.7%

38.1%

58.3%

50.0% 51.4%

8.3% 1.4%

40.0%55.6%

66.7%

38.1%

58.3%

50.0% 51.4%

OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...?

80.0% 77.8%55.6%

71.4%

33.3%

69.0% 62.9%

80.0% 77.8%

55.6%71.4%

33.3%

69.0% 62.9%

10.0% 22.2%44.4%

23.8%

50.0%

27.6% 31.4%

10.0% 4.8%16.7%

3.4% 5.7%

10.0% 22.2%44.4%

23.8%

50.0%

27.6% 31.4%

10.0% 4.8%16.7%

3.4% 5.7%

0%

20%

40%

60%

80%

100%


Down Same Up

3-MONTH FORECAST FOR VACANCY LEVELS (relative to current quarter)

1.7%

8.3%

2.9%

63.8%

41.7%

60.0%

12.1%

8.3%

11.4%

22.4%

25.0%

22.9%

16.7%

2.9%

0% 20% 40% 60% 80% 100%

U.S.

Canada

N.A.

Declining Bottoming No Clear Direction Increasing Peaking

63.8%

41.7%

60.0%

8.88 pt

1.7%

8.3%

2.9%

CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET

4.8% 8.3% 1.7% 2.9%4.8% 8.3% 1.7% 2.9%

60.0%

33.3%44.4% 33.3%

75.0%

41.4% 47.1%60.0%

33.3%44.4% 33.3%

75.0%

41.4% 47.1%

40.0%

66.7% 55.6% 61.9%

16.7%

56.9% 50.0%

0%

20%

40%

60%

80%

100%


Down Same Up

3-MONTH FORECAST FOR RENTS (relative to current quarter)

*Excluding renewals

has reduced the importance of the labor cost issue in manufacturer’s calculations. What’s more, retailers and manufacturers are realizing that they need to make substantial capital investments in their supply-chain infrastructure to capitalize on new manufacturing efficiencies, and to accommodate growth in e-commerce activity of 3–4 times today’s levels, or 10% of gross retail sales.

In other words, the good news for industrial real estate is that it’s not just an artificial stimulus driving this performance. Since automation allows us to produce goods for consumption by the global community— particularly LATAM, Russia and non-Eurozone Europe—without significant job creation, we can expect sub-trend GDP growth in perpetuity. Here again, the Fed’s monetary policy and U.S. fiscal deficits will eventually end badly.

The Institute for Supply Management’s (ISM) monthly Purchasing Managers’ Index (PMI) documents manufacturing expansion during a four-year period of sub-trend (i.e., below 3%) GDP and employment growth. Over the course of the past 15 years, the PMI has dipped below 50 for a period of 6 months or more only twice: i) in 2001 following Y2K and the onset of a brief technology recession, and after the 9/11 attacks; and ii) Winter 2008 to Summer 2009, during the financial crisis. Since then, manufacturing activity has expanded for 47 consecutive months.

% of Reporting Markets






PURCHASING MANAGERS’ INDEX | HISTORICAL DATA (>50 INDICATES EXPANDING MANUFACTURING ECONOMY)

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2013 53.1 54.2 51.3 50.7

2012 53.7 51.9 53.3 54.1 52.5 50.2 50.5 50.7 51.6 51.7 49.9 50.2

2011 59.2 59.6 59.3 59.4 53.5 55.8 52.3 53.2 53.2 51.5 52.3 52.9

2010 56.6 55.7 59.3 58.9 57.8 56.1 56.4 57.8 56.5 57.3 58.2 57.3

2009 34.9 35.5 36.0 39.5 41.7 45.8 49.9 53.5 54.4 56.0 54.4 55.3

2008 50.3 47.6 48.3 48.8 48.8 49.8 50.0 49.2 44.8 38.9 36.5 33.1

2007 49.5 51.9 50.7 52.6 52.5 52.6 52.4 50.9 51.0 51.1 50.5 49.0

2006 55.0 55.8 54.3 55.2 53.7 52.0 53.0 53.7 52.2 51.4 50.3 51.4

2005 56.8 55.5 55.2 52.2 50.8 52.4 52.8 52.4 56.8 57.2 56.7 55.1

2004 60.8 59.9 60.6 60.6 61.4 60.5 59.9 58.5 57.4 56.3 56.2 57.2

2003 51.3 48.8 46.3 46.1 49.0 49.0 51.0 53.2 52.4 55.2 58.4 60.1

2002 47.5 50.7 52.4 52.4 53.1 53.6 50.2 50.3 50.5 49.0 48.5 51.6

2001 42.3 42.1 43.1 42.7 41.3 43.2 43.5 46.3 46.2 40.8 44.1 45.3

2000 56.7 55.8 54.9 54.7 53.2 51.4 52.5 49.9 49.7 48.7 48.5 43.9

1999 50.6 51.7 52.4 52.3 54.3 55.8 53.6 54.8 57.0 57.2 58.1 57.8

1998 53.8 52.9 52.9 52.2 50.9 48.9 49.2 49.3 48.7 48.7 48.2 46.8

SOURCE: Institute of Supply Management

And, the most recent ISM PMI report shows continued growth in new orders, manufacturing employment, and manufactured exports.

MANUFACTURING AT A GLANCE | APRIL 2013

INDEXSERIES INDEXAPRIL

SERIES INDEXMARCH

CHANGE(%) DIRECTION RATE OF

CHANGETREND*

(MONTHS)

PMI™ 50.7 51.3 -0.6 Growing Slower 5

New Orders 52.3 51.4 +0.9 Growing Faster 4

Production 53.5 52.2 +1.3 Growing Faster 8

Employment 50.2 54.2 -4.0 Growing Slower 43

Supplier Deliveries 50.9 49.4 +1.5 Slowing From Faster 1

Inventories 46.5 49.5 -3.0 Contracting Faster 2

Customers' Inventories 44.5 47.5 -3.0 Too Low Faster 17

Prices 50.0 54.5 -4.5 Unchanged From Increasing 1

Backlog of Orders 53.0 51.0 +2.0 Growing Faster 3

Exports 54.0 56.0 -2.0 Growing Slower 5

Imports 55.0 54.0 +1.0 Growing Faster 3

OVERALL ECONOMY Growing Slower 47

Manufacturing Sector Growing Slower 5

SOURCE: Institute of Supply Management

What ISM Survey Respondents Are Saying About Industry SPRING 2013

“Production is still strong; several new projects to support alternative energy.” (Primary Metals)

“Automotive demand remains firm.” (Fabricated Metal Products)

“Business continues at a steady pace.” (Machinery)

“General business conditions and industrial markets remain strong.” (Transportation Equipment)

“Seasonal pick-up underway in the office furniture industry.” (Furniture & Related Products)

“Overall, volume is steady. Q1 sales volume is lower than projected.” (Chemical Products)



US CAN NA

Vacancy Rate

Q4 2012 8.89% 4.25% 8.40%

Q1 2013 8.68% 4.13% 8.20%

Quarter over Quarter Change

(basis points) -21 -12 -20

NORTH AMERICAN INDUSTRIAL OVERVIEW | Q1 2013

MEASURE NORTH AMERICA CANADA UNITED STATES WEST/MIDWEST SOUTH NORTHEAST

# of Markets 77 12 65 35 21 9

Inventory (MSF) 16,276.8 1,721.3 14,555.6 8,095.2 4,219.8 2,240.6

% of N.A. Inventory 100.0 10.6 89.4 49.7 25.9 13.8

New Supply (Q1-2013 MSF) 19.9 1.9 18.1 9.7 5.7 2.6

% of N.A. New Supply 100.0 9.4 90.6 48.5 28.8 13.3

Vacancy (%) 8.20 4.13 8.68 8.04 9.44 9.56

Absorption (MSF) 50.5 3.1 47.4 29.7 13.4 4.2

% of N.A. Absorption 100.0 6.2 93.8 58.9 26.6 8.4

Leadership Markets Absorption: Toronto, Calgary

and Vancouver

Absorption, Top 5: Chicago, LA,

Atlanta, Detroit and Cincinnati

Absorption, Midwest Top 5:

Chicago, Detroit, Cincinnati,

Cleveland and Kansas City.

Absorption, West

Top 3: LA, Phoenix and Seattle.

Absorption, Top 5: Atlanta, Memphis (#1 Air Cargo in world), Charlotte

(housing recovery), Jacksonville and

Houston (key port markets).

Leasing activity, Top 3: Baltimore

(newest post- Panamax port),

Philadelphia (energy) and

Pittsburgh.

Laggard Markets Absorption: Montreal and Waterloo (net negative in Q1

2013)

Vacancy: Halifax, Waterloo and

Ottawa (above 5%).

VACANCYVacancy continues to decline in North American warehouse markets— in U.S. markets at twice the pace of Canadian markets, due to greater oversupply and on-shoring of U.S. manufacturing. From a regional perspective, Canada has the lowest average vacancy rate in North America at 4.13 percent (down 12 basis points from Q4 2012), and the Northeast U.S. has the highest vacancy rate at 9.56 percent (down 11 basis points from Q4 2012). The West and Midwest are the only two regions in the U.S. with vacancy rates below the 8.7 percent national average.

Behind the Statistics & Beyond the Basics

Scope of Colliers Industrial Outlook Report: Colliers monitors industrial property conditions in 77 North American markets from Miami to Montreal, totaling 16.3 billion square feet of inventory. Approximately 90 percent (14.6 billion square feet) of this inventory is located in the United States.

The West and Midwest regions constitute approximately half of North American industrial warehouse space (8.1 billion square feet); combined, they also account for approximately 60% of the annual net leasing activity in North America. The South is the next-largest region, with 4.2 billion square feet, or 26% of North American industrial warehouse space. The expansion of the Panama Canal—and the addition of at least five more post-Panamax ports to the East and Gulf coasts—will only enhance the market share of key inland and port distribution markets in the Southeast and Southwest by 2015. With respect to the numbers for Q1 2013, the table below tells the story:

---------------------------------------------------------------------------------------------------------

--------------



Millions -1.0 -0.5 0.0 0.5 1.0 1.5

Toronto, ONCalgary, AB

Vancouver, BCEdmonton, AB

Ottawa, ONRegina, SK

Saskatoon, SKVictoria, BCHalifax, NS

Winnipeg, MBWaterloo Region, ON

Montreal, QC

ABSORPTION (SF) | CANADIAN MARKETS | Q1 2013

-2.0 0.0 2.0 4.0 6.0 8.0

New Jersey – Northern

New Jersey – Central

Savannah, GA

Indianapolis, IN

Dallas-Ft. Worth, TX

Los Angeles – Inland Empire, CA

Los Angeles, CA

Detroit, MI

Atlanta, GA

Chicago, IL

Millions

ABSORPTION (SF) | SELECT U.S. MARKETS | Q1 2013

TOP 23 NORTH AMERICAN INDUSTRIAL MARKETS WITH VACANCY BELOW NORTH AMERICAN AVERAGE

VACANCY RANKING MSA

Q1 2013 VACANCY RATE (%)

MARKET PROFILE

1

CANA

DA Vancouver 3.5 3rd largest Canadian industrial market

2 Toronto 3.9 Largest Canadian industrial market

3 Montreal 4.5 2nd largest Canadian industrial market

4 Calgary 4.7 4th largest Canadian industrial market

5

UNIT

ED S

TATE

S Honolulu 3.6 Top-20 North American port

6 Los Angeles 3.9 Busiest North American TEU container port

7 Orange County 4.9 –

8 Houston 4.9 Busiest Gulf Coast port

9 Long Island 5.4 Port of New York influence

10 Seattle 5.7 Top-10 North American port market

11 Kansas City 6.1 Top-10 North American intermodal rail

12 Indianapolis 6.4 Developing intermodal link to California

13 Milwaukee 6.5 Key Great Lakes region port

14 Miami 6.6 Top-20 North American port to Latin America

15 Portland 6.8Top-20 North American port – autos and agriculture

16 Grand Rapids 7.1 Proximity to Great Lakes ports & rail

17 L.A. Inland Empire 7.2 Top-5 intermodal rail facility

18 Denver 7.3 Top-10 intermodal rail & air cargo

19 Columbus, Ohio 7.8 Top-5 air cargo market; link to port of Virginia

20 Cincinnati 8.1 Intermodal and rail linkage to Canada

21 San Francisco Peninsula 8.2 Vital West Coast port market

22 Cleveland, Ohio 8.4 Great Lakes and auto manufacturing influence

23 New Jersey (Northern) 8.4 Port of New York influence

#5–#23 are the 19 U.S. markets with a vacancy rate < U.S. average of 8.7%

ABSORPTIONIt would have been a tall order for North American first-quarter warehouse absorption to equal or exceed the 71 MSF achieved in Q4 2012. 2012’s net industrial absorption was the best since the 2008–2009 financial crisis, and Q4 net absorption accounted for 45 percent of CY 2012 net leasing activity in aggregate.

However, despite the headwinds of the unresolved Fiscal Cliff, the deferred International Longshoremen’s Association (ILA) strike along the East and Gulf coasts, and more deterioration in Europe, Q1 2013 absorption turned in a solid performance. Approximately 50 MSF of warehouse space was absorbed—94% in the primary 65 U.S. warehouse markets. Which markets outperformed and why?

As revealed by year-end vacancy statistics, there is a strong correlation to port and intermodal markets, with three wrinkles:

• Detroit, Cleveland and Kansas City (influenced by the auto recovery)

• Charlotte & Phoenix (influenced by the housing recovery), and

• Baltimore (the newer of only two East Coast post-Panamax ports, along with the Port of Virginia)



From a regional perspective, net absorption is strongest in the Midwest (17.5MSF) and South (13.4 MSF), led by Chicago, Detroit and Cincinnati in the Midwest, and Atlanta, Memphis and Charlotte, NC, in the South. Los Angeles, Phoenix and Seattle experienced the most net leasing activity in Q1 along the West Coast, and Baltimore has taken over leadership in the Northeast as America’s newest post-Panamax port, followed by Philadelphia with energy trading activity along the Delaware River.

Inland markets this quarter outpaced port markets in absorption. The top 5 markets with respect to net absorption in Q1 2013 were:

Looking forward to 2013, delayed delivery of new space under construction is the only significant obstacle to industrial leasing activity in key port and intermodal markets such as Los Angeles, Seattle, Houston and Memphis. These markets can’t complete new space fast enough to meet demand, and market forces will likely result in disproportionately high 2H 2013 net leasing activity, as was the case in 2012.

CONSTRUCTION ACTIVITYFinally, eight innings into a perfect game, the bullpen is warming up as new construction activity on the rise. Although there is a dearth of product for sale, an estimated 40% of existing U.S. warehouse space is functionally obsolete (less than 30-foot clear height, etc.). There is added urgency on the part of retailers and manufacturers to occupy or build modern distribution facilities aligned with key post-Panamax ports, intermodal rail facilities, and air cargo/e-commerce fulfillment paths. In Q1, new construction activity increased by 27 percent, from 32 MSF at year-end 2012 to 40.6 MSF. The ten states with the most warehouse and distribution center space under construction are Texas (7.0 MSF), New Jersey (4.9 MSF), Georgia (3.6 MSF), Illinois (3.1 MSF), Pennsylvania (2.7 MSF), Ohio (2.3 MSF), Arizona (2.0 MSF), Florida (1.8 MSF), Utah (1.8 MSF), and California (1.2 MSF). [Source: Dodge Pipeline, Q1 2013]

In our search for blind spots, should this steep increase in new construction be one such metric to monitor? While it’s worth tracking over the next 3–5 quarters, investors and developers can take comfort in two key metrics that put this construction activity in proper perspective. First, 40.6 MSF of construction is less than the average quarterly net absorption over the previous four quarters; that is, leasing activity is outpacing new construction underway four to one. Second, more than half of this new construction is pre-leased or build-to-suit for owner occupancy by large retailers and manufacturers. National retailers such as Amazon, Dollar Tree, Family Dollar, FedEx, Home Depot, L’Oreal, Publix, O’Reilly Auto Parts, Restoration Hardware, Target, Tractor Supply and Whole Foods are constructing in excess of 20 MSF of modern distribution and logistics centers from coast to coast. Here’s a sampling of these projects in the ten states with the most new construction activity:

1 Chicago 6.0 MSF

2 Los Angeles 4.3 MSF (2.05 MSF from Inland Empire)

3 Atlanta 3.0 MSF

4 Detroit 2.3 MSF (Right-to-work is paying dividends in Michigan)

5 Cincinnati 2.1 MSF

Rounding out the top ten this quarter are Cleveland (1.9 MSF); Memphis, Kansas City and Charlotte (each with 1.7 MSF); and Baltimore (1.5 MSF).

Why haven’t the big hitters (fiscal uncertainty, unemployment and labor unrest) ended industrial’s perfect game? Because development and leasing activity is fueled by distributors, manufacturers, retailers and shippers that need to re-engineer their supply chains to gain efficiencies required in the post-Panamax era, just two years away. Seven of the top ten U.S. markets for both Q1 2013 and CY 2012 absorption were top-ten North American port or intermodal industrial markets

MSA Q1 2013 (MSF) MSA CY 2012 (MSF)

1 Chicago(INTERMODAL) 6.0 Chicago 13.438

(INTERMODAL)

2 Los Angeles (PORT + INLAND) 4.3 Dallas/

Ft. Worth9.728

(INTERMODAL)

3 Atlanta (INTERMODAL) 3.0 Detroit 9.169

(AUTO-RECOVERY)

4 Detroit (AUTO RECOVERY) 2.3 Los Angeles –

Inland Empire8.470

(INTERMODAL)

5 Cincinnati(MANUFACTURING) 2.1 Los Angeles –

Coastal8.375

(PORT)

6 Cleveland (AUTO + GREAT LAKES) 1.9 Atlanta 7.400

(INTERMODAL)

7 Kansas City (INERMODAL) 1.7 Houston 6.245

(PORT)

8 Memphis (#1 AIR CARGO) 1.7 Phoenix 5.137

(HOUSING RECOVERY)

9 Charlotte, NC (HOUSING) 1.7 Columbus 4.916

(AIR CARGO)

10 Baltimore-New PPMX Port 1.5 Seattle 3.916

(PORT)

STATENEW

WAREHOUSE CONSTRUCTION (MSF)

LARGEST DISTRIBUTION CENTERS UNDER CONSTRUCTION

Texas 7.0

Amazon: three 1.0+ MSF centers in Dallas and San Antonio

Restoration Hardware: 850,000 SF in Grand Prairie (Dallas, TX)

L’Oreal: 500,000 SF in suburban Dallas

New Jersey 4.9 Amazon: 1.0MSF in Trenton

Georgia 3.6Home Depot: 1.0 MSF in Atlanta

Tractor Supply: 700,000 SF in Macon (Atlanta area)

Illinois 3.1 Trader Joe’s: 800,000 SF in Chicago

Pennsylvania 2.7 PetSmart and Dollar General

Ohio 2.3 Tween: 750,000 SF

Arizona 2.0 American Furniture: 632,000 SF outside Phoenix

Florida 1.8 Publix and O’Reilly Auto Parts: Orlando and Lakeland



ENGINEERING NEWS-RECORD’S CONSTRUCTION COST INDEX

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG

2013 9437 9453 9456 9484 9516 9542

2012 9176 9198 9268 9273 9290 9291 9324 9351 9341 9376 9398 9412 9308

2011 8938 8998 9011 9027 9035 9053 9080 9088 9116 9147 9173 9172 9070

2010 8660 8672 8671 8677 8761 8055 8844 8837 8836 8921 8951 8952 8799

2009 8549 8533 8534 8528 8574 8578 8566 8564 8586 8596 8592 8641 8570

2008 8090 8094 8109 8112 8141 8185 8293 8362 8557 8623 8602 8551 8310

2007 7880 7880 7856 7865 7942 7939 7959 8007 8050 8045 8092 8089 7966

2006 7660 7689 7692 7695 7691 7700 7721 7722 7763 7883 7911 7888 7751

2005 7297 7298 7309 7355 7398 7415 7422 7479 7540 7563 7630 7647 7446

2004 6825 6862 6957 7017 7065 7109 7126 7188 7298 7314 7312 7308 7115

2003 6581 6640 6627 6635 6642 6694 6695 6733 6741 6771 6794 6782 6694

2002 6462 6462 6502 6480 6512 6532 6605 6592 6589 6579 6578 6563 6538

2001 6281 6272 6279 6286 6288 6318 6404 6389 6391 6397 6410 6390 6343

2000 6130 6160 6202 6201 6233 6238 6225 6233 6224 6259 6266 6283 6221

INDEX METHODOLOGY: 200 hours of common labor at the 20-city average of common labor rates, plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated 20-city price from 1996, plus 1.128 tons of portland cement at the 20-city price, plus 1,088 board-ft of 2x4 lumber at the 20-city price.

Despite the uptick in new warehouse and distribution center construction in Q1, over-building risk remains low given the scarcity of debt capital for speculative construction by banks, and the limited amount of speculative warehouse construction underway. If net absorption were to slip over the next three quarters, and new projects increased in each succeeding quarter by the same amount as in Q1 2013, over-building would become a concern in 2014.

One danger that spans all commercial property types is rising construction costs. Because Colliers has elevated this item in prior Outlook reports, it should come as no surprise that construction costs never actually declined during the 2008–2009 financial crisis and ensuing recession. As documented in Engineering News-Record’s Construction Cost Index, construction costs have risen nearly 20% since Spring 2007, and are up an additional 2.7% in June 2013 over June 2012. Investors and developers considering new construction investments should budget construction cost increases at double the Consumer Price Index (CPI) for 2H 2013 and 2014, due to pressures on labor and materials.

CONSTRUCTION COSTSThe CCI annual escalation rate inched up to 2.7% in June from 2.4% in May and 2.0% in March.

20-CITY: 1913 = 100 JUNE 2013 INDEX VALUE

% CHANGE MONTH

% CHANGE YEAR

Construction Cost 9542.33 +0.3 +2.7

Common Labor 20236.18 +0.3 +2.8

Wage $/Hour 38.45 +0.3 +2.8

Source: Engineering News-Record

WAREHOUSE TRANSACTION ACTIVITYAccording to Real Capital Analytics and the Colliers’ Q1 Broker Survey, Q1 2013 saw approximately $7.0 billion of industrial real estate transactions, of which $4.8 billion was spent on acquiring pure warehouse properties. Although that volume was a 16% increase over aggregate Q1 2012 industrial property transactions, there was a 41% increase in warehouse property sales alone. Clearly, investment capital has an increased appetite for warehouse properties.

While some observations from the transaction data were predictable— such as the predominance of sales activity in key Western markets like Los Angeles (nearly $1.0 billion in total warehouse transactions)—other observations are contrary to recent activity. In particular, the volume of property sales in secondary and tertiary MSAs ($4.0 billion) outpaced those located in core/primary MSAs ($3.0 billion). With anxiety growing over whether the multifamily market is overheating, and industrial real estate continuing its perfect game quarter after quarter, transaction activity will remain robust for warehouse properties. The only limiting constraint is likely to be a dearth of assets and portfolios for sale.



Conclusion The Blind Spots

So, what could disrupt this “perfect game” in industrial real estate? What blind spots should we be aware of this year to avoid an ROI or NOI wreck in 2014 or 2015?

BLIND SPOT #1: Favoring functionally obsolete warehouse space over modern, in-demand, distribution centers in Post-Panamax era supply-chain markets. A significant portion of existing U.S. warehouse space is functionally obsolete (clear heights below 30 feet, less than 60-foot column spacing, etc.), or is located in markets that will not be central to the post-Panamax supply chain. Modern distribution centers need 30-foot clear ceiling height for conveyor systems, as well as connectivity to post-Panamax ports via intermodal rail and proximity to air cargo centers for e-commerce fulfillment. Distribution, logistic and e-commerce fulfillment centers along the paths linking ports, intermodal rail, and air-cargo are your geographic sign-posts and investment markers. Be careful what physical product you invest in and where. Refer to Colliers’ 1H 2013 North American Ports Outlook report at www.colliers.com/us/port-1H for more detailed information.

BLIND SPOT #2: Elevated new construction activity. Although the Q1 2013 increase in construction activity doesn’t indicate a supply-demand imbalance, this metric needs to be monitored closely over the next 4–6 quarters. Six to eight quarters ago a similar uptick in multifamily constuc-tion coincided with another “perfect game” (vacancy falling to 5%, double-digit rental increases for eight consecutive quarters, record cap rate com-pression, etc.), and today the market is anxious about overbuilding in light of 200,000+ annualized permits.

BLIND SPOT #3: Cap rate compression. Industrial has been the last commercial property type to experience cap rate compression since 2010, but it’s now catching up. The cap rates of 7%+ reported by RCA are national averages, and do not reflect the sub-6% transaction activity for portfolios or individual modern distribution buildings in key port and inland distribution markets. Colliers is seeing rates in the 5% range for these institutional warehouse properties. While cap rates can compress another 100–150 basis points from the national 7% average, the pace of this compression should be monitored. Recall that at a cap rate below 8%, it only takes a 200 basis point increase to wipe out 25% of a property’s value.

BLIND SPOT #4: Port and transportation worker strife. An ILA strike was finally averted this past quarter and a six-year dock workers contract agreed upon for the East and Gulf coast ports. It took a painful five months (October 2012 to February 2013), during which retailers and manufacturers re-routed or accelerated cargo shipments to beat changing strike deadlines. Unfortunately, this process will repeat itself for the West Coast ports at the end of 2013. And, other labor strike issues loom in trucking and ports in LATAM, Asia and Europe. The 8-day Los Angeles clerical workers strike last fall demonstrated how disruptive such stoppages can be to the flow of goods, and many port tenants now have operational clauses in their leases that provide for rent relief if cargo cannot move through the ports. Know what’s in your leases.

BLIND SPOT #5: Due diligence risk. Sellers are now commanding shorter and shorter periods of due diligence when selling properties, owing to the scarcity of available assets, and the attention that industrial’s perfect game has brought to the sector. This is one of the greatest new risks to the industrial market. In Q1 Colliers saw due diligence periods compress to 2–4 weeks for a number of warehouse transactions that either were in growth-restricted MSAs or had investment-grade tenants. This feeding frenzy for institutional-quality warehouse assets is shifting due diligence risk from the seller to the buyer. Let the buyer be prepared: have legal, inspection and environmental vendors ready to go at the drop of a contract, positioned to close in as little as two weeks.

BLIND SPOT #6: Overlooking adaptive re-use opportunities. Not all warehouse properties are created equal and not all markets can easily develop new supply to relieve demand pressures. As a result, Colliers is seeing functionally obsolete properties being acquired for adaptive re-use in growth-restricted port markets. For example, older manufacturing properties close to the market’s port facilities are being converted to distribution space in cities such as Los Angeles, San Francisco, Seattle, Miami, Charleston, and New York. Developers and investors shouldn’t overlook these adaptive reuse opportunities in this feeding frenzy to acquire assets.

In conclusion, we’re all rooting for industrial as it takes the mound for a ninth inning in Q2 2013 with a perfect game on the line. But in our excitement about higher ROIs and NOIs for our real estate assets, it’s reasonable to remember there are still dangers out there. Keep your eye on the ball, recognize the warehouse investment cycle we’ve entered, and monitor the blind spots such as the ones we’ve discussed above.



UNITED STATES | INDUSTRIAL SURVEY

MARKETINVENTORY

MAR. 31, 2013 (SF)

NEW CONSTRUCTION Q1 2013

(SF)

CURRENTLY UNDER CONSTRUCTION

(SF)

NORTHEAST

Baltimore, MD 229,098,236 1,042,000 –

Boston, MA 152,776,556 – 1,200,031

Hartford, CT 96,802,106 – 510,000

Long Island, NY 162,706,462 30,000 379,564

New Jersey – Central 353,745,719 – 1,259,244

New Jersey – Northern 374,436,831 – 1,444,817

Philadelphia, PA 412,989,387 800,280 1,994,550

Pittsburgh, PA 180,812,833 127,120 100,302

Washington, DC 277,212,243 647,686 1,673,765

Northeast Total 2,240,580,373 2,647,086 8,562,273

SOUTH

Atlanta, GA 608,874,310 10,000 5,753,055

Birmingham, AL 101,989,079 – 412,000

Charleston, SC 32,653,481 327,000 166,000

Charlotte, NC 331,567,614 238,505 940,015

Columbia, SC 37,856,194 – –

Dallas-Ft. Worth, TX 718,440,660 390,641 3,124,220

Ft. Lauderdale-Broward, FL 123,462,807 351,614 247,376

Greenville/Spartanburg, SC 184,939,773 – –

Houston, TX 485,486,002 1,108,430 2,670,272

Jacksonville, FL 123,123,887 1,162,760 91,270

Little Rock, AR 45,009,027 18,376 497,443

Louisville, KY 176,471,087 15,000 –

Memphis, TN 220,677,114 869,892 1,745,000

Miami, FL 221,182,455 871,041 619,280

Nashville, TN 113,566,903 – 1,128,500

Orlando, FL 145,323,950 – –

Raleigh, NC 118,406,504 – 20,850

Richmond, VA 113,233,363 146,572 311,730

Savannah, GA 44,621,300 200,000 681,000

Tampa Bay, FL 212,868,243 35,519 152,500

West Palm Beach, FL 60,048,254 – 20,900 South Total 4,219,802,007 5,745,350 18,581,411



UNITED STATES | INDUSTRIAL SURVEY

MARKETINVENTORY

MAR. 31, 2013 (SF)


(SF)


(SF)

MIDWEST

Chicago, IL 1,310,969,792 1,586,541 4,738,635

Cincinnati, OH 244,257,287 697,938 –

Cleveland, OH 512,363,265 – 39,685

Columbus, OH 212,366,316 90,800 1,233,303

Detroit, MI 552,701,937 116,746 –

Grand Rapids, MI 112,282,721 – 285,000

Indianapolis, IN 281,007,396 2,060,027 820,640

Kansas City, MO-KS 235,738,568 642,377 2,117,425

Milwaukee, WI 223,736,866 330,575 90,000

Minneapolis/St. Paul, MN 247,588,469 669,000 871,000

Omaha, NE 67,721,789 – 35,636

St. Louis, MO 271,993,154 642,500 958,268 Midwest Total 4,272,727,560 6,836,504 11,189,592

WEST

Albuquerque, NM 36,902,890 – 242,500

Bakersfield, CA 33,426,098 21,400 2,243,673

Boise, ID 35,307,608 297,067 –

Denver, CO 215,963,643 – 855,271

Fairfield, CA 46,880,086 48,133 –

Fresno, CA 48,600,000 – –

Honolulu, HI 40,071,033 – –

Las Vegas, NV 109,306,668 129,000 619,320

Los Angeles, CA 887,796,700 – 3,031,000

Los Angeles – Inland Empire, CA 421,172,500 1,528,300 4,674,600

Oakland, CA 141,540,885 – 1,092,215

Orange County, CA 182,738,900 – 183,200

Phoenix, AZ 273,317,438 445,992 5,226,079

Pleasanton/Tri-Valley, CA 16,425,448 – –

Portland, OR 202,569,690 179,000 1,884,623

Reno, NV 88,034,379 – –

Sacramento, CA 189,042,368 70,000 –

San Diego, CA 187,148,659 49,256 123,429

San Francisco Peninsula, CA 40,898,873 – 54,000

San Jose/Silicon Valley, CA 251,655,806 – 181,100

Seattle/Puget Sound, WA 261,779,846 – 2,000,000

Stockton/San Joaquin County, CA 94,105,012 56,000 1,017,353

Walnut Creek, CA 17,760,034 – – West Total 3,822,444,564 2,824,148 23,428,363

U.S. TOTALS 14,555,554,504 18,053,088 61,761,639

(continued)



UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013

MARKETABSORPTION

Q1 2013 (SF)

VACANCY RATE (%) DEC. 31, 2012

VACANCY RATE (%) MAR. 31, 2013

NORTHEAST

Baltimore, MD 1,510,126 10.13 9.88

Boston, MA 20,414 17.72 17.71

Hartford, CT (39,368) 9.19 8.72

Long Island, NY 388,313 5.69 5.44

New Jersey – Central 249,929 9.22 9.15

New Jersey – Northern (264,668) 8.35 8.42

Philadelphia, PA 1,361,398 9.83 9.68

Pittsburgh, PA 569,415 8.15 7.84

Washington, DC 438,156 10.50 10.56

Northeast Total 4,233,715 9.67 9.56SOUTH

Atlanta, GA 3,041,675 13.16 12.66

Birmingham, AL (22,649) 10.24 9.70

Charleston, SC 43,341 10.76 11.52

Charlotte, NC 1,676,930 12.06 11.62

Columbia, SC 265,246 8.78 8.08

Dallas-Ft. Worth, TX 1,159,637 9.19 9.08

Ft. Lauderdale-Broward, FL 658,619 8.33 8.06

Greenville/Spartanburg, SC 384,297 9.27 9.06

Houston, TX 1,332,391 5.03 4.97

Jacksonville, FL 1,376,050 10.08 9.81

Little Rock, AR (234,132) 11.17 11.78

Louisville, KY (749,083) 8.37 8.79

Memphis, TN 1,679,807 12.60 12.18

Miami, FL 318,612 6.41 6.56

Nashville, TN (15,157) 9.25 9.26

Orlando, FL 844,148 10.27 9.69

Raleigh, NC 369,400 9.67 9.36

Richmond, VA 123,791 10.02 10.03

Savannah, GA 256,100 11.84 11.66

Tampa Bay, FL 602,718 9.36 9.19

West Palm Beach, FL 324,515 7.28 6.74South Total 13,436,256 9.65 9.44



UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013

MARKETABSORPTION

Q1 2013 (SF)

VACANCY RATE (%) DEC. 31, 2012

VACANCY RATE (%) MAR. 31, 2013

MIDWEST

Chicago, IL 6,038,962 9.53 9.00

Cincinnati, OH 2,114,377 8.73 8.12

Cleveland, OH 1,904,625 8.73 8.35

Columbus, OH 213,265 7.78 7.75

Detroit, MI 2,308,652 11.35 10.94

Grand Rapids, MI 37,278 7.13 7.10

Indianapolis, IN 761,095 6.19 6.40

Kansas City, MO-KS 1,720,440 6.62 6.14

Milwaukee, WI 491,922 6.60 6.51

Minneapolis/St. Paul, MN 1,054,156 8.30 8.02

Omaha, NE 125,427 5.16 4.99

St. Louis, MO 687,818 8.42 8.17Midwest Total 17,458,017 8.73 8.38

WEST

Albuquerque, NM 39,363 10.25 10.21

Bakersfield, CA (308,397) 2.80 3.79

Boise, ID 858,210 9.51 7.84

Denver, CO 265,628 7.45 7.28

Fairfield, CA 52,228 10.13 10.12

Fresno, CA 100,000 9.26 9.05

Honolulu, HI 43,107 3.67 3.56

Las Vegas, NV 688,349 15.32 14.79

Los Angeles, CA 2,282,700 4.18 3.91

Los Angeles – Inland Empire, CA 2,049,800 5.93 7.21

Oakland, CA 758,594 8.23 7.70

Orange County, CA 262,200 5.10 4.97

Phoenix, AZ 1,361,244 12.58 12.22

Pleasanton/Tri-Valley, CA (38,232) 9.45 9.70

Portland, OR (7,361) 6.74 6.84

Reno, NV (250,374) 10.86 11.14

Sacramento, CA 64,404 12.72 12.72

San Diego, CA 972,570 9.92 9.43

San Francisco Peninsula, CA 537,367 9.85 8.15

San Jose/Silicon Valley, CA 1,055,828 10.73 10.16

Seattle/Puget Sound, WA 1,026,634 5.82 5.65

Stockton/San Joaquin County, CA 387,356 13.19 12.58

Walnut Creek, CA 76,751 9.78 9.35West Total 12,277,969 7.77 7.66

U.S. TOTALS 47,405,957 8.89 8.68

(continued)



UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013

MARKET SALES PRICE (USD PSF)

CAP RATE (%)

VACANCY FORECAST

(3 MONTHS)

ABSORPTION FORECAST

(3 MONTHS)RENT FORECAST

(3 MONTHS)

NORTHEAST

Baltimore, MD 53.00 7.80 Boston, MA 68.00 –

Hartford, CT 38.00 8.50

Long Island, NY 69.14 7.88

New Jersey – Central 85.00 7.20 New Jersey – Northern 92.00 6.00 Close to zero Philadelphia, PA 56.00 7.85 Pittsburgh, PA 50.00 7.75 Washington, DC 146.08 6.50 Northeast Average* 73.02 7.44 – – –SOUTH

Atlanta, GA 35.60 8.20 Birmingham, AL – – Close to zero Charleston, SC 46.00 7.50 Charlotte, NC – – – – –Columbia, SC – – Dallas-Ft. Worth, TX 55.00 7.20

Ft. Lauderdale-Broward, FL 80.00 10.00 Greenville/Spartanburg, SC – – Houston, TX 59.00 6.50

Jacksonville, FL 30.00 8.00

Little Rock, AR 65.45 9.00 Close to zeroMemphis, TN – – Miami, FL 77.00 7.15 Nashville, TN 79.00 8.00 Orlando, FL 50.00 7.50

Richmond, VA – –

Savannah, GA 34.00 8.50 Close to zeroTampa Bay, FL 37.64 8.89 West Palm Beach, FL 45.00 –

South Average* 53.36 8.04 – – –

* Straight averages used.



UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013

MARKET SALES PRICE (USD PSF)

CAP RATE (%)

VACANCY FORECAST

(3 MONTHS)

ABSORPTION FORECAST

(3 MONTHS)RENT FORECAST

(3 MONTHS)

MIDWEST

Chicago, IL 52.00 6.15

Cincinnati, OH 37.50 8.25

Cleveland, OH – – – – –Columbus, OH 32.49 – Detroit, MI 22.33 8.89

Grand Rapids, MI – – Indianapolis, IN 40.00 7.20

Kansas City, MO-KS 30.00 – Milwaukee, WI 50.00 9.00

Minneapolis/St. Paul, MN 31.22 – Omaha, NE – –

St. Louis, MO – – – – –Midwest Average* 36.94 7.90 – – –WEST

Albuquerque, NM 83.00 8.00 Close to zero

Bakersfield, CA 38.00 10.00

Boise, ID – – Denver, CO 53.00 8.00 Fairfield, CA 76.49 7.40 Fresno, CA 42.00 9.00 Honolulu, HI – – Las Vegas, NV 51.98 –

Los Angeles, CA 93.00 6.50 Close to zero Los Angeles – Inland Empire, CA 69.00 7.00 Oakland, CA 94.30 6.50 Orange County, CA 130.00 6.00

Phoenix, AZ 52.00 8.10 Pleasanton/Tri-Valley, CA – –

Portland, OR 70.00 6.50 Sacramento, CA 76.00 –

San Diego, CA 80.00 – San Francisco Peninsula, CA 250.00 7.00 San Jose/Silicon Valley, CA 105.00 6.00 Stockton/San Joaquin County, CA – – Walnut Creek, CA – – Close to zeroWest Average* 85.24 7.38 – – –

U.S. AVERAGE* 65.44 7.67 – – –

(continued)




UNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013

MARKETWAREHOUSE/DISTRIBUTION

SPACE (USD PSF)

BULK SPACE

(USD PSF)

FLEX/SERVICE SPACE

(USD PSF)

TECH/R&D SPACE

(USD PSF)

NORTHEAST

Baltimore, MD 4.74 4.93 10.99 –

Boston, MA 6.01 5.32 6.46 11.30

Hartford, CT 4.36 5.70 6.50 6.50

Long Island, NY 8.92 9.13 14.49 –

New Jersey – Central 4.62 4.12 12.19 12.19

New Jersey – Northern 6.29 5.95 9.92 12.26

Philadelphia, PA 4.25 4.15 7.00 11.00

Pittsburgh, PA 4.84 4.83 9.70 11.47

Washington, DC 6.19 5.57 11.55 15.50

Northeast Average* 5.58 5.52 9.87 11.46

SOUTH

Atlanta, GA 3.22 2.92 7.07 10.00

Birmingham, AL 3.48 4.04 7.88 –

Charleston, SC 3.85 4.30 6.25 16.25

Charlotte, NC 3.33 3.24 8.70 –

Columbia, SC 3.58 3.13 7.13 –

Dallas-Ft. Worth, TX 3.20 2.70 6.95 8.45

Ft. Lauderdale-Broward, FL 6.30 5.88 9.31 7.95

Greenville/Spartanburg, SC 2.88 2.67 7.09 –

Houston, TX 5.45 4.43 7.21 8.21

Jacksonville, FL 3.79 3.50 8.52 –

Little Rock, AR 2.68 2.74 7.35 –

Louisville, KY 3.30 3.45 7.73 –

Memphis, TN 2.51 2.59 4.78 9.50

Miami, FL 7.80 7.31 9.80 12.00

Nashville, TN 3.02 8.42 8.60 7.50

Orlando, FL 4.39 4.21 8.24 8.56

Raleigh, NC 3.74 4.17 9.94 –

Richmond, VA 3.56 3.60 7.89 9.11

Savannah, GA 3.95 3.75 7.00 10.00

Tampa Bay, FL 4.66 3.85 7.50 5.51

West Palm Beach, FL 6.82 6.18 11.03 7.00 South Average* 4.07 4.15 7.90 9.23




UNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013


SPACE (USD PSF)

BULK SPACE

(USD PSF)

FLEX/SERVICE SPACE

(USD PSF)

TECH/R&D SPACE

(USD PSF)

MIDWEST

Chicago, IL 3.85 3.48 7.31 –

Cincinnati, OH 3.11 2.73 6.22 6.22

Cleveland, OH 3.33 3.02 7.77 –

Columbus, OH 2.76 2.67 4.82 4.82

Detroit, MI 3.84 3.72 7.30 7.30

Grand Rapids, MI 3.16 3.09 4.38 4.38

Indianapolis, IN 4.47 3.25 6.69 –

Kansas City, MO-KS 4.28 3.58 8.92 7.34

Milwaukee, WI 4.28 4.08 5.13 –

Minneapolis/St. Paul, MN 4.48 – 6.25 6.92

Omaha, NE 4.88 3.47 5.85 4.04

St. Louis, MO 3.77 3.56 7.30 –

Midwest Average* 3.85 3.33 6.50 5.86

WEST

Albuquerque, NM 5.42 4.25 8.84 8.84

Bakersfield, CA 4.00 3.42 8.00 –

Boise, ID 5.21 4.29 3.79 6.00

Denver, CO 4.62 3.78 8.55 9.50 Fairfield, CA 5.45 5.57 8.32 8.42

Fresno, CA 3.60 3.36 4.80 5.50

Honolulu, HI 11.88 – – –

Las Vegas, NV 4.56 4.32 6.00 9.36

Los Angeles, CA 6.36 6.20 9.75 12.50

Los Angeles – Inland Empire, CA 4.62 4.20 7.02 7.95

Oakland, CA 4.68 4.58 6.00 8.40

Orange County, CA 6.96 6.24 12.65 13.50

Phoenix, AZ 5.19 4.35 10.71 10.63

Pleasanton/Tri-Valley, CA 5.16 4.56 – –

Portland, OR 5.59 5.24 9.39 10.24

Reno, NV 3.72 3.14 7.67 –

Sacramento, CA 3.84 3.60 8.52 8.04

San Diego, CA 8.28 7.68 10.68 14.40

San Francisco Peninsula, CA 9.72 9.72 23.28 23.28

San Jose – Silicon Valley, CA 6.42 5.91 9.14 15.65

Seattle/Puget Sound, WA 5.86 4.87 13.18 –

Stockton/San Joaquin County, CA 3.96 3.66 – 8.40

Walnut Creek, CA 2.76 3.36 – 13.56 West Average* 5.56 4.83 9.28 10.79

U.S. AVERAGE* 4.77 4.44 8.34 9.68

(continued)




CANADA | INDUSTRIAL SURVEY

MARKETINVENTORY

MAR. 31, 2013 (SF)


(SF)


(SF)

Calgary, AB 125,749,475 522,350 3,100,443 Edmonton, AB 79,421,803 200,150 1,596,770

Halifax, NS 7,604,256 7,625 135,000

Montréal, QC 348,025,640 30,000 232,740

Ottawa, ON 28,134,055 64,000 47,500

Regina, SK 16,928,786 40,000 270,000

Saskatoon, SK 21,084,000 244,000 219,000

Toronto, ON 762,336,331 70,000 6,256,003

Vancouver, BC 183,061,078 673,051 1,632,575

Victoria, BC* 8,908,924 25,000 –

Waterloo Region, ON 60,330,421 4,800 103,794 Winnipeg, MB* 79,692,082 – 245,435

CANADA TOTAL 1,721,276,851 1,880,976 13,839,260

CANADA | INDUSTRIAL SURVEY

MARKETABSORPTION

Q1 2013 (SF)

VACANCY RATE DEC. 31, 2012

VACANCY RATE MAR. 31, 2013

Calgary, AB 1,058,264 5.05 4.72Edmonton, AB 197,525 3.35 3.34

Halifax, NS – 9.65 9.65

Montréal, QC (515,943) 4.34 4.50

Ottawa, ON 133,127 5.76 5.50

Regina, SK 123,000 3.51 2.96

Saskatoon, SK 83,000 4.94 5.50

Toronto, ON 1,326,442 4.13 3.89

Vancouver, BC 1,007,205 3.68 3.50

Victoria, BC* 17,000 4.15 4.23

Waterloo Region, ON (315,880) 6.80 6.66Winnipeg, MB* – 2.97 2.97

CANADA TOTAL 3,113,740 4.25 4.13

* Data for Victoria and Winnipeg is from Q4 2012.

* Data for Victoria and Winnipeg is from Q4 2012.



* Data for Victoria and Winnipeg is from Q4 2012.** Straight averages used.

CANADA | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013

MARKET SALES PRICE (CAD PSF)

CAP RATE (%)

VACANCY FORECAST (3 MONTHS)

ABSORPTION FORECAST (3 MONTHS)

RENT FORECAST (3 MONTHS)

Calgary, AB 170.00 6.50

Edmonton, AB 125.00 6.72

Halifax, NS – 7.25

Montréal, QC 68.00 7.25

Ottawa, ON 110.00 7.50 Close to zeroRegina, SK 130.00 7.30

Saskatoon, SK 150.00 7.15

Toronto, ON 90.00 7.30 Vancouver, BC 187.00 6.00

Victoria, BC* 170.00 7.00 Close to zero Waterloo Region, ON 66.00 7.10 Winnipeg, MB* 71.00 8.25 Close to zero

CANADA AVERAGE** 121.55 7.11

CANADA | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013


SPACE (CAD PSF)

BULK SPACE

(CAD PSF)

FLEX/SERVICE SPACE

(CAD PSF)

TECH/R&D SPACE

(CAD PSF)

Calgary, AB 8.50 7.50 12.00 12.00 Edmonton, AB 8.00 7.50 10.00 12.00

Halifax, NS 7.75 6.75 10.50 15.00

Montréal, QC 4.75 4.25 6.00 8.00

Ottawa, ON 8.25 7.50 8.50 11.00

Regina, SK 10.00 9.00 12.00 14.00

Saskatoon, SK 10.00 9.00 12.00 14.00

Toronto, ON 4.86 – – –

Vancouver, BC 7.25 7.00 9.25 14.00

Victoria, BC* 12.00 10.00 13.50 13.50

Waterloo Region, ON 4.02 3.40 7.84 7.84 Winnipeg, MB* 6.00 5.25 9.95 12.75

CANADA AVERAGE** 7.62 7.01 10.14 12.19

* Data for Victoria and Winnipeg is from Q4 2012.** Straight averages used.



INDUSTRIAL VACANCY RANKINGS | US

MARKETVACANCY RATEMAR 31, 2013

(%)Honolulu, HI 3.56Bakersfield, CA 3.79Los Angeles, CA 3.91Houston, TX 4.97Orange County, CA 4.97Omaha, NE 4.99Long Island, NY 5.44Seattle/Puget Sound, WA 5.65Kansas City, MO-KS 6.14Indianapolis, IN 6.40Milwaukee, WI 6.51Miami, FL 6.56West Palm Beach, FL 6.74Portland, OR 6.84Grand Rapids, MI 7.10Los Angeles – Inland Empire, CA 7.21Denver, CO 7.28Oakland, CA 7.70Columbus, OH 7.75Pittsburgh, PA 7.84Boise, ID 7.84Minneapolis/St. Paul, MN 8.02Ft. Lauderdale-Broward, FL 8.06Columbia, SC 8.08Cincinnati, OH 8.12San Francisco Peninsula, CA 8.15St. Louis, MO 8.17Cleveland, OH 8.35New Jersey – Northern 8.42U.S. AVERAGE 8.68Hartford, CT 8.72Louisville, KY 8.79Chicago, IL 9.00Fresno, CA 9.05Greenville/Spartanburg, SC 9.06Dallas-Ft. Worth, TX 9.08New Jersey – Central 9.15Tampa Bay, FL 9.19Nashville, TN 9.26Walnut Creek, CA 9.35Raleigh, NC 9.36San Diego, CA 9.43Philadelphia, PA 9.68Orlando, FL 9.69Pleasanton/Tri-Valley, CA 9.70Birmingham, AL 9.70Jacksonville, FL 9.81Baltimore, MD 9.88Richmond, VA 10.03Fairfield, CA 10.12San Jose/Silicon Valley, CA 10.16Albuquerque, NM 10.21Washington, DC 10.56Detroit, MI 10.94Reno, NV 11.14Charleston, SC 11.52Charlotte, NC 11.62Savannah, GA 11.66Little Rock, AR 11.78Memphis, TN 12.18Phoenix, AZ 12.22Stockton/San Joaquin County, CA 12.58Atlanta, GA 12.66Sacramento, CA 12.72Las Vegas, NV 14.79Boston, MA 17.71

INDUSTRIAL VACANCY RANKINGS | CANADA

MARKETVACANCY RATEMAR 31, 2013

(%)Regina, SK 2.96Winnipeg, MB 2.97Edmonton, AB 3.34Vancouver, BC 3.50Toronto, ON 3.89CANADA AVERAGE 4.13Victoria, BC 4.23Montréal, QC 4.50Calgary, AB 4.72Ottawa, ON 5.50Saskatoon, SK 5.50Waterloo Region, ON 6.66Halifax, NS 9.65

COLLIERS INTERNATIONAL601 Union Street, Suite 4800Seattle, WA 98101TEL +1 206 695 4200

FOR MORE INFORMATION

K.C. Conway Chief Economist | USATEL + 1 678 458 3477EMAIL [email protected]

James CookDirector of Research | USA TEL +1 602 633 4061 EMAIL [email protected]

CONTRIBUTORS

Jeff Simonson Senior Research Analyst | USA

Jennifer Macatiag Graphic Designer | USA

Cliff Plank National Director | GIS & Mapping

Aaron Finkelstein Communications Manager | USA

482 offices in 62 countries on 6 continentsUnited States: 140Canada: 42Latin America: 20Asia Pacific: 195EMEA: 85

• $2 billion in annual revenue

• 13,500 professionals and staff

• 1.12* billion square feet under management

• $71 billion USD in total transaction value*Together, Colliers International and FirstService manage 2.51 billion square feet of property— second-largest in the world.

Copyright © 2013 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.

Accelerating success.

GlossaryAbsorption – Net change in occupied space over a given period of time.

Bulk Space – Warehouse space 100,000 square feet or more with minimum ceiling heights of 24 feet. All loading is dock-height.

Flex Space – Single-story buildings having 10- to 18-foot ceilings with both floor-height and dock-height loading. Includes wide variation in office space utilization, ranging from retail and personal service, to distribution, light industrial and occasional heavy industrial use.

Inventory – Includes all existing multi- or single-tenant leased and owner-occupied industrial warehouse, light manufacturing, flex and R&D properties greater than or equal to 10,000 square feet.

New Construction – Includes completed speculative and build-to-suit construction. New construction quoted on a net basis after any demolitions or conversions.

Service Space – Single-story (or mezzanine) with 10- to 16-foot ceilings with frontage treatment on one side and dock-height loading or grade-level roll-up doors on the other. Less than 15 percent office space.

Tech/R&D – One- and two-story, 10- to 15-foot ceiling heights with up to 50 office/dry lab space (remainder in wet lab, workshop, storage and other support), with dock-height and floor-height loading.

Triple Net Rent – Includes rent payable to the landlord, and does not include additional expenses such as taxes, insurance, maintenance, janitorial and utilities. All industrial and high-tech/R&D rents in this report are quoted on an annual, triple net per square foot basis in U.S. and Canadian dollars.

Vacancy Rate – Percentage of total inventory available (both vacant and occupied) as at the survey date including direct vacant and sublease space.

Warehouse – 50,000 square feet or more with up to 15 percent office space, the balance being general warehouse space with 18- to 30-foot ceiling heights. All loading is dock-height.

Documents

Colliers International | Highlights | North America | Office | Q1 2011 · 2014-04-04 · Q1 2013 | INDUSTRIAL N.A. INDUSTRIAL MARKET SUMMARY STATISTICS, Q1 2013 US Q1 2013 US Q2 2013*