State Of The U.S. Industrial Market: 2017 Q2 5 . Consensus Expectations Coming Back Down To Earth . Wall Street Journal Economists Survey GDP Results* Sources: WSJ Economists Survey;

page 1

State Of The U.S. Industrial Market: 2017 Q2 © Copyright 2017 CoStar Realty Information, Inc. No reproduction or distribution without permission. The following information includes projections and analyses that are based on various assumptions by CoStar concerning future events and circumstances, as well as historical and current data maintained in CoStar’s database, obtained from public sources or provided by proprietary sources. Actual results may vary materially from the projections presented. The information in this presentation speaks only as of the date(s) referenced and is provided ‘as is’. CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of merchantability and fitness for a particular purpose. You should not construe any of the information herein as investment, tax, accounting or legal advice.

page 2

Economy

page 3

Corporate Profit Growth Trending Up Corporate Profits And Business Investment Growth (Y/Y)

30-Jun-5730-Sep-5731-Dec-5731-Mar-5830-Jun-5830-Sep-5831-Dec-5831-Mar-5930-Jun-5930-Sep-5931-Dec-5931-Mar-6030-Jun-6030-Sep-6031-Dec-6031-Mar-61

Sources: Moody's Analytics; Federal Reserve; BEA; CoStar Portfolio Strategy As of 17Q2

(30%)

(20%)

(10%)

0%

10%

20%

30%

(70%)

(50%)

(30%)

(10%)

10%

30%

50%

70%

55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15

Corporate Profits Business Investment In Equipment

Corporate Profit Growth (Y/Y) Business Investment Growth (Y/Y)

page 4

Manufacturing Bouncing Back ISM Indices And GDP Growth

12/31/20141/31/20152/28/20153/31/20154/30/20155/31/20156/30/20157/31/20158/31/20159/30/2015

10/31/201511/30/201512/31/2015

1/31/20162/29/20163/31/20164/30/20165/31/20166/30/2016

Sources: Moody's Analytics; ISM; BEA; CoStar Portfolio Strategy As of August 2017

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

30

35

40

45

50

55

60

65

70

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

GDP ISM Non Manufacturing ISM Manufacturing

ISM Index, SA GDP Growth (Annualized)

page 5

Consensus Expectations Coming Back Down To Earth Wall Street Journal Economists Survey GDP Results*

Sources: WSJ Economists Survey; CoStar Portfolio Strategy As of June 2017* Survey Includes Economists from nearly 80 organizations.

2.3%

2.4%

2.0%

1.9%

2.0%

2.1%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%Ju

n-15

Aug-

15

Oct

-15

Dec

-15

Feb-

16

Apr-

16

Jun-

16

Aug-

16

Oct

-16

Dec

-16

Feb-

17

Apr-

17

Jun-

17

2017 Expectation 2018 Expectation 2019 Expectation

Consensus GDP Growth Expectation

Post-ElectionBumps

page 6

U.S. Poised For Stronger Growth Contributions To Real GDP Growth

20002001200220032004200520062007200820092010

Sources: Moody's Analytics; BEA; CoStar Portfolio Strategy As of July 2017

(0.3%)

(2.8%)

2.5%1.6% 2.2%

1.7%2.4%

2.6%

1.6%2.4%

2.8%

2.1%

1.4%2.1%

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

08 09 10 11 12 13 14 15 16 17 18 19 20 21

Consumption Business Investment Residential InvestmentChange in Inventories Government Net ExportsTotal GDP

Contribution to Real GDP Growth

page 7

Cyclical Employment Growth Appears To Have Peaked Employment Growth & Total Employment

3/31/20136/30/2013

Sources: Moody's Analytics; Conference Board; BLS; CoStar Portfolio Strategy As of 17Q2

100

110

120

130

140

150

160

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20

Total Employment Growth Employment

Employment Growth (Y/Y) Total Employment (Millions)

Peak In Job Growth

page 8

Time For A Raise Wage Growth & Unemployment Rate

1/31/20012/28/20013/31/20014/30/20015/31/20016/30/20017/31/20018/31/20019/30/2001

10/31/200111/30/200112/31/2001

1/31/20022/28/20023/31/20024/30/20025/31/20026/30/20027/31/20028/31/20029/30/2002

10/31/200211/30/200212/31/2002

1/31/2003

Sources: Bureau of Labor Statistics; Federal Reserve Bank of Atlanta; CoStar Portfolio Strategy As of 17Q2

0%

1%

2%

3%

4%

5%

6%2%

3%

4%

5%

6%

7%

8%

9%

10%

11%01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Unemployment Rate Avg. Hourly Earnings ATL Fed Wage Tracker

Avg. Hourly Wage & ATL Fed Wage TrackerUnemployment Rate (Inverted)

page 9

Strong Demand In A Slow Growth Environment Logistics/Light Industrial Demand Vs GDP

6/30/2017

345

Sources: Moody's Analytics; CoStar Portfolio Strategy As of 17Q2*Logistics And Light Industrial As Of 17Q2, GDP As Of 17Q1

0%

1%

2%

3%

4%

5%

6%

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Absorption & GDP (Y/Y)

Logistics Light industrial GDP

*

page 10

No Signs Of Slowing Annual E-Commerce Growth And % Of Retail Sales

Sources: CoStar Portfolio Strategy; U.S. Department of Commerce As of 17Q1

10.5%

(10%)

0%

10%

20%

30%

40%

50%

0%

2%

4%

6%

8%

10%

12%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

E-Commerce as a % of Total Retail Sales, ex Auto & Gas Annual % Growth

Annual Growth% Of Total Retail Sales, Ex Auto & Gas

iPhone Launched

iPad Launched

page 11

A New Trend? Retail Inventories and Sales

Sources: Moody's Analytics; CoStar Portfolio Strategy As of June '17

$0

$100

$200

$300

$400

$500

$600

$700

1.3

1.4

1.5

1.6

1.7

1.8

92 94 96 98 00 02 04 06 08 10 12 14 16

Inventories Sales I/S Ratio 2000-11 Trend 2012-Present Trend

Retail Inventories, Sales ($ Billions, Monthly, SA)I/S Ratio

page 12

Quarter In Review

page 13

Not All Boxes Are Created Equally Industrial Subtypes

Warehouse Distribution

Light ManufacturingLight Industrial

Loading Dock Clear OfficeRBA Ratio (SF/Dock) FAR Height Finish Shape

Warehouse 25K+ SF <=15K SF <= 0.5 22'+ <20% BoxDistribution 200K+ SF <=10K SF <= 0.4 28'+ <5% BoxLight Industrial <=120K SF <=15K if 25K+ SF box Any 16'+ <50% Box if <25K SFLight Manufacturing 100K-300K SF 15K+ SF Any 12'-22' <50% Any

Source: CoStar Portfolio Strategy As of 14Q2

Logistics

Light Industrial

Major Industrial Subtype Component Subtypes

Source: CoStar Portfolio Strategy As of 2017

page 14

Industrial Leads Fundamentals; Sales Are Down Key Statistics For Major U.S. Property Sectors

2017Q2 Change From Year Ago

Supply Demand Occupancy Rent Sales

Office 0.8% 1.0% 0.1% 1.7% (1%)

Retail 0.7% 0.9% 0.2% 2.1% (18%)

Apartment 2.1% 1.8% (0.2%) 2.5% (11%)

Light Industrial 0.3% 0.6% 0.3% 5.9%

Logistics 3.3% 3.7% 0.4% 6.9%(6%)

Source: CoStar Portfolio Strategy As of 17Q2*All Industrial

page 15

Vacancies Lower Than Any Point In The Last Cycle Industrial Vacancy By Building Functionality


0%

2%

4%

6%

8%

10%

12%

14%

16%

17Q2 Vacancy Previous Cycle Vacancy Trough

Vacancy

Total High

Function Low Function

page 16

Big Or Small, Keep Pushing Those Rents! Industrial Rents By Building Functionality


6.1%6.9%

5.9%

7.6% 7.6%

6.1%

8.1%7.2%

6.4% 6.3% 6.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%Total High Function

Change in Rent (Y/Y)Low Function

page 17

Distribution Buildings Capturing Majority Of Absorption Industrial Net Absorption By Building Functionality


0

5

10

15

20

25

30

35

40

45

50

17Q2

Net Absorption (MSF)

Total High

FunctionLow

Function

page 18

Industrial Deliveries - All Distribution Industrial Deliveries By Building Functionality


0

5

10

15

20

25

30

35

40

45

50

17Q2

Delivered RBA (MSF)

Total High

FunctionLow

Function

page 19

Record Rent Growth In Many Markets Y/Y Rent Growth

BestRank

151413121110

987654321

WorstRank

949596979899


8.9%

9.0%

9.2%

9.6%

9.8%

10.1%

10.4%

10.4%

11.4%

11.5%

11.7%

13.2%

13.2%

13.4%

15.9%

0% 10% 20%

Las VegasAtlanta

SacramentoNashvilleMemphis

Los AngelesNashville

SeattleInland Empire

SacramentoEast Bay

SeattleLong Island

Inland EmpireEast Bay

Strongest Rent Growth

3.1%

3.0%

3.0%

2.9%

2.7%

2.5%

2.4%

2.4%

2.3%

1.7%

1.6%

1.5%

0.8%

0.5%

(0.7%)

(4%) 0% 4%

RichmondWashington DCMilwaukeeSaint LouisChicagoChicagoMilwaukeeOklahoma CityIndianapolisClevelandHoustonKansas CityClevelandKansas CityHouston

Weakest Rent Growth

Logistics Light Industrial

page 20

Biggest Occupancy Swings In Logistics Q/Q Change In Occupancy (Bps)

BestRank

151413121110

987654321

WorstRank

949596979899

100


6163677879

8798105109115116129

154189

239

0 200 400

Northern NJPittsburgh

Salt Lake CityNorfolkAtlanta

JacksonvilleJacksonville

San DiegoBaltimore

NorfolkBaltimore

Las VegasCincinnati

Columbus OHSalt Lake City

Strongest Occupancy Chg

(35)(36)(43)(55)

(89)(95)(96)

(103)(105)(106)

(122)(126)

(172)(248)(249)

(500) (250) 0

TampaSan JoseKansas CitySan AntonioIndianapolisMiamiOrlandoSan FranciscoLehigh ValleyPalm BeachWashington DCLas VegasAustinHarrisburgNashville

Weakest Occupancy Chg


page 21

Super-Regional Logistics Hubs Lead In Absorption 2017Q2 Net Absorption


(0.12)

(0.25)(0.25)

(0.31)

(0.39)

(0.52)

(0.13)(0.15)(0.17)(0.20)

(0.36)(0.37)(0.39)

(0.45)

(1.25)

(2.0) (1.0) 0.0

San JoseLos AngelesMemphisSaint LouisMiamiBostonOrange CountyNorthern NJLas VegasSan FranciscoKansas CityIndianapolisHoustonHarrisburgNashville

Weakest Absorption (MSF)

0.61.11.21.21.21.41.51.51.92.4

1.43.7

4.96.06.2

0 5 10

PhoenixSeattle

CharlotteSalt Lake City

PhiladelphiaBaltimoreMemphis

Saint LouisKansas City

CincinnatiColumbus OH

DallasChicago

AtlantaInland Empire

Strongest Absorption (MSF)


page 22

Top Deliveries – No Surprises 17Q2 Deliveries By Metro

BestRank

181716151413121110987654321


0.80.9

1.01.01.01.11.1

1.21.31.31.3

1.61.7

1.93.0

3.45.4

6.4

0 1 2 3 4 5 6 7

OrlandoIndianapolisPhiladelphia

CharlotteHouston

SeattleDenver

NashvilleHarrisburg

Lehigh ValleyMiami

MemphisKansas CitySaint Louis

DallasAtlanta

ChicagoInland Empire

Delivered RBA (MSF)


page 23

Construction Becoming More Widespread Industrial Markets With Most Logistics Starts In 17Q2

BestRank

151413121110987654321


0.8 0.9 1.0 1.1 1.2 1.2

1.4 1.6 1.7

1.9 2.0

2.6 3.1

4.1 4.4

0 1 2 3 4 5 6 7 8 9

MinneapolisEdison

Portland, ORCharlotte

Northern NJPhiladelphiaLos Angeles

CincinnatiMemphisStockton

SeattleInland Empire

ChicagoAtlantaDallas

Industrial Starts (MSF)


page 24

Fundamentals

page 25

The Market Cycle Recovery, Early Expansion, Late Expansion, Contraction

OCC

RENT

OCC

RENT

OCC

RENT

OCC

RENT


Recovery Recovery Early Expansion Late Expansion ContractionOccupancyRentRetail 0 33 19 2Light Industrial 0 38 16 0Logistics 0 35 19 0Apartment 0 12 40 2Office 2 31 18 3

page 26

Palm Beach County

Kansas City

HoustonReno

Columbus OHLehigh Valley

Chicago

San Francisco

Atlanta

Northern NJEast Bay

Edison

Inland Empire

MiamiWashington, D.C.

Dallas -FW IndianapolisDetroitSan Jose

Salt Lake City

Cincinnati

Inland Empire

PhoenixChicagoDallas- FWDetroit

AtlantaLos Angeles

Northern NJSaint Louis

Edison

Lehigh ValleySan Francisco

Houston

OCC

RENT

OCC

RENT

OCC

RENT

OCC

RENT

Most Markets In Early Expansion Industrial Cycle Chart


Light Industrial Logistics

35

38

0 0

0 0

19

16

page 27

Logistics Fundamentals In Equilibrium Logistics National Index Fundamentals

End of ForecastForecast MinHistorical Avg.Recession Max


6%

7%

8%

9%

10%

11%

12%

13%

14%

(50)

0

50

100

150

200

250

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

6.5%

Avg: 10.1%

4.3%

0.9%

1.0%0.2%

1.6%2.4% 3.1%

2.2%

0.6%

4.7%2.9%

0.1%

1.9%

3.9%5.3%

6.7% 7.1%5.8%

2.8%2.0%

1.3% 0.8%

(7%)

(2%)

3%

8%

Annual Change in Demand & Supply (MSF) Vacancy & Vacancy Average

Annual Rent Growth

8.1%12.9%

page 28

Light Industrial Vacancies To Remain Low Light Industrial National Index Fundamentals

End of ForecastForecast MinHistorical Avg.Recession Max


2%

3%

4%

5%

6%

7%

8%

(80)

(60)

(40)

(20)

0

20

40

60

80

100

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

3.2%

Avg: 5.7%

5.0%

2.1%0.2% 0.7%

1.9% 2.5% 3.0%2.0%

0.7%

4.1%2.8%

0.2%

1.8%

3.6%5.1%

6.2% 6.5%5.0%

3.0% 2.4%1.7% 1.1%

(6%)(4%)(2%)

0%2%4%6%8%

Annual Change in Demand & Supply (MSF) Vacancy & Vacancy Average

Annual Rent Growth

4.0%

7.2%

page 29

Logistics Absorption Accelerating In Many Markets Logistics Absorption Compared To Recent History


Columbus

Detroit

East Bay

Harrisburg

Houston

Indianapolis

Lehigh Valley

Los Angeles

Memphis

Miami

Norfolk

Northern NJ

Orange County

Phoenix

Portland

Reno

St. Louis

Seattle

Edison

0

1

2

3

4

5

6

7

8

9

10

11

0 1 2 3 4 5 6 7 8

Avg. Absorption Past 12 Months (MSF)

Avg. Annual Net Absorption, 14Q3-16Q2 (MSF)

Logistics

Atlanta and Dallas FW

Chicago and Inland Empire

page 30

Light Ind Absorption Accelerating In Many Markets, Too Light Industrial Absorption Compared To Recent History

LimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLimLim


Atlanta

Columbus

Dallas FW

Detroit

East BayHarrisburg

Houston

Indianapolis

Inland Empire

Lehigh Valley

Los Angeles

Miami

Nashville

Norfolk

Northern NJ

Philadelphia

Phoenix

Portland

Reno

St. Louis

Seattle

Edison

0.0

0.5

1.0

1.5

2.0

2.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Avg. Absorption Past 12 Months (MSF)

Avg. Annual Net Absorption, 14Q3-16Q2 (MSF)

Light Industrial

Chicago

page 31

Rents Justify Speculative Construction Logistics & Light Industrial Rent & Supply Trends


$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

0

50

100

150

200

250

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

---Forecast---- Rent($/SF)

Del

iver

ies

(MSF

)

Logistics

Light Industrial

$4.50

$5.50

$6.50

$7.50

$8.50

$9.50

0102030405060708090

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

---Forecast----

Rent (Historical Trend: 1.4% | 2016 EOY Gap To Trend: 9.5%)

Rent (Historical Trend: 1.7% | 2016 EOY Gap To Trend: 7.3%)

page 32

Slight Construction Pullback In 2017 RBA Under Construction Nationwide

-101 MM SF-101

Quarter3/31/20076/30/20079/30/2007

12/31/20073/31/20086/30/20089/30/2008

12/31/20083/31/20096/30/20099/30/2009

12/31/20093/31/20106/30/20109/30/2010

12/31/20103/31/20116/30/20119/30/2011

12/31/20113/31/20126/30/20129/30/2012

12/31/20123/31/20136/30/20139/30/2013

12/31/2013

Source: CoStar Portfolio Strategy As of 17Q2*Average 2002-07

0

50

100

150

200

250

07 08 09 10 11 12 13 14 15 16 17Logistics Average* LogisticsLight Industrial Average* Light Industrial

RBA Under Construction (MSF)

page 33

Supply Poses A Threat In Several Markets Logistics UC Committed Vs UC Available

Las Vegas 7.0% 2.2 3.7 7.1%Inland Empire 5.8% 3.7 18.6 5.1%Lehigh Valley 5.8% 1.2 3.4 5.1%Jacksonville 7.3% 1.9 2.0 3.6%Cincinnati 4.2% 1.2 3.8 3.1%Dallas - Fort Worth 8.1% 4.9 12.9 3.0%Washington DC 7.8% 5.3 9.4 2.5%Portland OR 4.7% 1.0 1.8 2.4%Northern NJ 7.6% 2.5 2.1 2.2%Baltimore 8.2% 1.4 2.2 2.1%Dallas 8.2% 1.8 2.9 2.1%San Antonio 7.0% 0.1 0.9 2.1%San Jose 5.0% 0.0 0.5 2.0%Seattle 4.1% 1.0 2.3 2.0%Saint Louis 10.7% 0.5 1.9 1.9%Northern New Jersey 5.1% 1.4 1.4 1.9%Chicago 9.1% 7.1 8.1 1.9%Salt Lake City 5.0% 1.8 0.9 1.9%Phoenix 12.4% 0.5 2.0 1.7%Washington - NoVA - MD8.1% 1.6 1.2 1.7%


Metro Vacancy UC Committed UC Available UC Available As % Of Inventory

page 34

Capital Markets

page 35

Pricing Still Peaking – In Industrial And Multifamily CCRSI (Value Weighted) Index

Period3/31/19966/30/19969/30/1996

12/31/19963/31/19976/30/19979/30/1997

12/31/19973/31/19986/30/19989/30/1998

12/31/19983/31/19996/30/19999/30/1999

12/31/19993/31/20006/30/20009/30/2000

12/31/20003/31/20016/30/20019/30/2001

12/31/20013/31/20026/30/20029/30/2002

12/31/20023/31/20036/30/20039/30/2003

Source: CoStar Portfolio Strategy As of June 2017

50

75

100

125

150

175

200

225

250

275

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

U.S. Office U.S. Industrial U.S. Retail U.S. Multifamily

Commercial Repeat Sales Index (12/31/2000 = 100)

page 36

But…Growth Decelerating Change In CCRSI (Value Weighted) Index

121314/Y/Y

Source: CoStar Portfolio Strategy As of June 2017

-2.9%

2.6%

9.1%

7.3%

5.4% 5.0%

11.4%

5.0%

(7%)

(2%)

3%

8%

13%

18%

16Q2 Y/Y 17Q2 Y/Y

U.S. Retail U.S. Office U.S. Multifamily U.S. Industrial

Repeat Sales Index Growth

page 37

Sales Volumes Down All Around Sales Volume By Property Type

1

21345

12345


(12.7%)(3.3%)

(19.3%)

(8.0%)

(14.0%)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Multi-Family Office Retail Industrial HospitalityLast 4-Quarters Previous 4-Quarters

U.S. Sales Volume (Billions)

page 38

CRE Pricing Off the Bond Market 10-Year Treasury and the Forward Yield Curve

Sources: Moody's Analytics; CoStar Portfolio Strategy As of Jun-17

0

1

2

3

4

5

04 06 08 10 12 14 16 18 20 22 24

14Q2 15Q2 16Q2 16Q3 16Q4 17Q1 17Q2

10-Year Treasury Rate

page 39

Interest Rate Gains To Exceed Cap Rate Gains Comparison Of 10 Year Treasury To National Cap Rates

14151515151616161617171717181818181919191920202020212121

Sources: Moody's Analytics; CoStar Portfolio Strategy As of August 2017

1%

2%

3%

4%

5%

6%

7%

8%

14 15 16 17 18 19 20 21

10 Year Treasury Light Industrial Cap Rate Logistics Cap Rates

+189 Bps By 2019

+25 Bps By 2019

+12 Bps By 2019

-2 BPs

Cap Rate/10 Year Treasury

page 40

Capital Chasing Primary Markets – Prices Up Industrial Pricing By Market Tier

3/31/20006/30/20009/30/2000

12/31/20003/31/20016/30/20019/30/2001

12/31/20013/31/20026/30/20029/30/2002

12/31/20023/31/20036/30/20039/30/2003

12/31/20033/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/2006

Source: CoStar Portfolio Strategy As of 17Q2*Three-Quarter Moving Average

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Tier I Tier II Tier III

$/SF

page 41

Most Markets Are Above Prior Peak Current Vs. Prior Peak Pricing

TiersINLALOSAORANSANFEASTDALLATLACHICNORTZZEDMIAMLEBAREADPHOEHOUSSEATDENVTAMPORLAWASHBALTPHILALLEINDICOLUMEMPKANS


Inland Empire

Los Angeles

Orange County

San Francisco

East Bay

Dallas

AtlantaChicago

Northern NJ

Edison

Miami

Austin

Salt Lake City

San Antonio

San Jose

Lebanon

Houston

New York Minus Edison

$0

$50

$100

$150

$200

$250

$300

$0 $50 $100 $150 $200


2015-17 Average Price Per SF

2006-07 Average Price Per SF

page 42

Capital Chasing Primary Markets – Cap Rates Down Industrial Cap Rates By Tier

3/31/20006/30/20009/30/2000

12/31/20003/31/20016/30/20019/30/2001

12/31/20013/31/20026/30/20029/30/2002

12/31/20023/31/20036/30/20039/30/2003

12/31/20033/31/20046/30/20049/30/2004

12/31/20043/31/20056/30/20059/30/2005

12/31/20053/31/20066/30/20069/30/2006

12/31/2006

Source: CoStar Portfolio Strategy As of 17Q2*Three-Quarter Moving Average

5%

6%

7%

8%

9%

10%

11%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


Equal-Weighted Cap Rate

page 43

Industrial Investment Opportunities Cap Rates vs. Rent Growth

Friendly NameInland EmpireLos AngelesOrange CountySan FranciscoEast BayDallas - Fort WorthAtlantaChicagoNorthern New JerseyZZ-Internal-EdisonMiamiLebanonReadingPhoenixHoustonSeattleDenverTampaOrlandoWashington - NoVA - MDBaltimorePhiladelphiaLehigh ValleyIndianapolisColumbus OHMemphisKansas City


Inland Empire

Los AngelesOrange County

San Francisco

East Bay

Dallas

Atlanta

ChicagoNorthern NJ

MiamiPhoenix

Seattle

Tampa

Orlando

Washington, DC

Lehigh Valley

Indianapolis

Memphis

Boston

Las Vegas

Detroit

Jacksonville

MilwaukeeMinneapolis

Nashville

Norfolk

Palm Beach

Portland

San Jose

Reno

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%


Pay for what you get

Average Cap Rate 2015-17

Forecast Avg. Rent Growth

Buy

Sell

Get what you pay for

page 44

Selected Top Industrial Deals – 2Q 2017

Hampshire/AEW Industrial Portfolio 7 Building Portfolio, NJ The Hampshire Companies, LLC sold the 1.218+ million square foot 7-building Industrial portfolio to AEW Capital Management for $146.85 Million ($120.55/SF) 5.25% Pro-Forma Cap Rate

Oklahoma City Industrial Portfolio 17 Building Portfolio, Oklahoma City, OK Greenfield Partners, LLC sold the 1.279+ million square foot 17-building Industrial/Flex portfolio of buildings to Sealy Strategic Equity Partners, LP for $76.433 Million ($59.77/SF). 6.17% Cap Rate

Safari Business Center 16 Building Portfolio, Ontario CA American Realty Advisors sold the 1.138+ million square foot 16-building Industrial portfolio to Rexford Industrial for $141.2 Million. ($124.06/SF). The buyer funded the acquisition with a 1031 Exchange. 4.11% Pro-Forma Cap Rate

Duke Realty Corporation Portfolio 3 Building Portfolio, Hialeah Gardens, FL Bridge Development Partners sold the 677K square foot 3-building Industrial portfolio to Duke Realty Corporation for $79.97 Million (118.15/SF).

Angelo Gordon & Co Portfolio 2 Building Portfolio, MA American Finance Trust, Inc. sold the 987k SF square foot 2-building Industrial portfolio to Angelo, Gordon, & Co. for $84.969 Million. ($86.09/SF). Both properties are fully leased to C&S Wholesale Grocers, Inc. on a NNN lease. 8.49% Cap Rate

Blackstone Industrial Portfolio 55 Building Portfolio, FL, GA, IL, PA, TX High Street Realty Company, LLC sold a 5.97+ million square foot 55-building Industrial portfolio to The Blackstone Real Estate Income Trust, Inc. for $402.136 Million. ($67.33/SF ) 6% Cap Rate; 6.2% Pro-Forma

page 45

Rene Circ, Director [email protected]

Involved in more than $15 billion of transactions Led the international expansion initiative at a public REIT, including Asia, Europe, and North & Central America Sought-after authority on investing in the U.S. industrial market Specialties: Industrial, Market Selection, Investment Structuring

Shaw Lupton, Managing Consultant [email protected]

Adjunct professor of real estate at Brandeis International Business School Co-founded Urban Land Institute Boston’s Real Estate Technology Council Specialties: Investor Communications, Office, Industrial

mailto:[email protected]


https://www.linkedin.com/in/rene-circ-502aa04



https://www.linkedin.com/in/shawlupton

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These Costar Portfolio Strategy and CoStar Risk Analytics Materials Contain Financial And Other Information From A Variety of public and proprietary sources. CoStar Group, Inc. and its affiliates (collectively, “CoStar”) have assumed and relied upon, without independent verification, the accuracy and completeness of such third party information in preparing these materials. The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by CoStar and presented herein (the “Materials”) are based on various assumptions concerning future events and circumstances, which are speculative, uncertain and subject to change without notice. You should not rely upon the Materials as predictions of future results or events, as actual results and events may differ materially. All Materials speak only as of the date referenced with respect to such data and may have materially changed since such date. CoStar has no obligation to update any of the Materials included in this document. You should not construe any of the data provided herein as investment, tax, accounting or legal advice. CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall not be held responsible for any errors in such information. Any user of the information provided herein accepts the information “AS IS” without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable. © 2017 CoStar Realty Information, Inc. No reproduction or distribution without permission.

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Documents

State Of The U.S. Industrial Market: 2017 Q2 5 . Consensus Expectations Coming Back Down To Earth . Wall Street Journal Economists Survey GDP Results* Sources: WSJ Economists Survey;