Colliers NA Industrial 2013Q2

K.C. CONWAY Chief Economist | USA

KEY TAKEAWAYS

North America is still working on the railroad. Railroad hiring in June grew for the fifth consecutive month, the highest level of total railroad employment (164,659 jobs) since July 2008. Manufacturing and warehousing contributed a combined 26,000 jobs to the disappointing 162,000 net jobs created in August.

What could derail industrials recovery? For the ninth consecutive quarter, the aggregate North American vacancy rate declined for the 77 markets tracked by Colliers. Q2 vacancy is down 2 basis points to 8.18% (8.63% among the primary 65 U.S. markets and 4.37% among the 12 primary Canadian markets) despite the addition of 23.7 MSF of new supply.

Both the PMI and Rail Time Indicators show that 2H 2013 will remain strong for manufacturing and industrial activity. Augusts PMI of 55.7 was the highest since June 2011, and YTD 2013.

Absorption remains strong despite sub-200K monthly job growth. On the heels of nearly 71 MSF of net absorption in Q4 2012, the market absorbed another 92 MSF in 1H 2013 (50.5 MSF in Q1 and 41.5 MSF in Q2.)

Global GDP forecasts are below trend. The IMFs 2H 2013 GDP forecasts for both Emerging Markets and Advanced Economies appear to be flattening. Lack of robust global GDP growth may impact U.S. industrial real estate as early as 1H 2014.

Leadership in warehouse leasing continues to come from the inland distribution markets. Six of the top 10 MSAs for Q2 absorption were inland distribution or emerging inland port markets (Atlanta, Dallas, Denver, etc.). Los Angeles and Jacksonville, FL, were the only port markets in the top 10 for Q2 2013.

New supply continues to increase, but is neither excessive nor speculative. According to Dodge Pipeline, new industrial construction in Q2 increased 28% to 52 MSF. However, this level of new supply is approximately the quarterly average net absorption since Q1 2012 (45 MSF), and more than half is pre-leased or build-to-suit distribution centers for major retailers and manufacturers (Amazon, Nike, Ross, etc.)

Still working on the Railroad all the live-long day

HIGHLIGHTSNORTH AMERICA

WWW.COLLIERS.COM

Q2 2013 | INDUSTRIAL

N.A. INDUSTRIAL MARKETSUMMARY STATISTICS, Q2 2013

US Q2

2013

US Q3

2013*

Canada Q2

2013

Canada Q3

2013*

VACANCY

NET ABSORPTION CONSTRUCTION

RENTAL RATE**

*Projected, relative to prior period**Warehouse rents

MARKET INDICATORSRelative to prior period

US CAN NA

VACANCY RATE (%)* 8.63 4.37 8.18

Change from Q1 2013 (%) -0.20 0.24 -0.15

ABSORPTION (MSF) 42.0 -0.5 41.5

NEW CONSTRUCTION (MSF) 17.9 5.8 23.7

UNDER CONSTRUCTION (MSF) 74.3 11.7 86.0

*As a result of an inventory re-classification of certain property sub-types, 1Q13 and 2Q13 vacancy rates were adjusted in Q2.

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

Average Warehouse/Distribution Center

4.81 7.73 5.27

Change from Q1 2013 (%) 1.12 1.47 1.20

Ive been working on the railroad

All the live-long day.

Ive been working on the railroad

Just to pass the time away.

Cant you hear the whistle blowing,

Rise up so early in the morn;

Cant you hear the captain shouting,

Dinah, blow your horn!

HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA

Still working on the railroad all the live-long day

Few areas of the U.S. economy have turned in as consistent a recovery since 2009 as the rail-road industry. Whereas the overall labor market has sputtered, unable to produce even 200,000 net new jobs per month (198,000 per month in 1H 2013and only 148,000 per month from June to August), railroad employment has been consistently adding jobs. Railroad employment in June saw its fifth consecutive month of growth, and reached its highest total165,000since July 2008.

P. 3 | COLLIERS INTERNATIONAL

135,000

140,000

145,000

150,000

155,000

160,000

165,000

170,000

2006 2007 2008 2009 2010 2011 2012 2013

May 2013 to June 2013: +220

CLASS I RAILROAD EMPLOYMENT | JAN 2006JUNE 2013

Increases of approx. 1,000 employees after Jan. 2013 reflect acquisition of two large railroads by a Class I railroad. Data not seasonally adjusted. | SOURCE: Surface Transportation Board

949698

100102104106108110112114

2010 2011 2012 2013

EMPLOYMENT | JAN 2010JUNE 2013 (JAN 2010 = 100)

SOURCE: Surface Transportation Board, Bureau of Labor Statistics

Class I Railroad Employment vs. Employment for All U.S. Industries

Sq. Ft. By Region

Absorption Per Market (SF)q1 '13 - q2 '13

4,600,000

2,300,000

460,000

-460,000

-2,300,000

-4,600,000

4 billion

2 billion

400 mil

Occupied Sq. Ft.

Vacant Sq. Ft.

NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q2 2013


COLLIERS INTERNATIONAL | P. 4

INTERMODAL TRAFFIC | CONTAINERS & TRAILERS

Month Current Year Previous Year Percent Change

June 2012 248,999 236,714 5.2%

July 2012 236,515 223,910 5.6%

August 2012 246,194 235,969 4.3%

September 2012 246,118 237,397 3.7%

October 2012 246,695 242,953 1.5%

November 2012 233,649 230,769 1.2%

December 2012 222,001 218,328 1.7%

January 2013 233,726 222,065 5.3%

February 2013 245,770 222,462 10.5%

March 2013 233,302 232,087 0.5%

April 2013 240,505 236,742 1.6%

May 2013 242,823 235,665 3.0%

June 2013 252,347 248,999 1.3%

July 2013 243,725 237,859 2.5%

SOURCE: AAR Rail Time Indicators

150,000

200,000

250,000

300,000

2009 2010 2011 2012 2013

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

AVERAGE WEEKLY U.S. RAIL INTERMODAL TRAFFIC

Data are weekly average originations for each month, excluding U.S. operations of CN and CP, and reflect revisions to original reporting. | SOURCE: AAR Weekly Rail Traffic

-10

-8

-6

-4

-2

0

2

4

6

2.71.5 2

-2.7-2

-8.3

-5.4-5.4

-0.4-0.4

1.3

3.93.9

1.6

3.93.9

-1.3-1.3

2.8 2.82.8 2.83.23.2

1.41.4

4.94.93.73.7

1.2

2.82.8

0.11.1

2.52.5

1H 101H 11

1H 121H 13

UNITED STATES GDP GROWTH RATE (% CHANGE)

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

And if these employment statistics are not enough to switch your thinking to the other side of the track (you know, the growth track), consider the increases in traffic:

Total intermodal traffic has shown year-over year growth every month since December 2009 (44 consecutive months), and is up 4.3 percent for 1H 2013. This is a direct result of growth in manufacturing and exports.

These railroad employment and intermodal traffic metrics mean more demand for U.S. industrial warehouse space, which has translated into a ninth consecutive quarter of improving occupancy, absorption and rental rates for North American industrial real estateespecially in the U.S., where vacancy compressed another 20 basis points to 8.63%, despite the addition of another 17.9 MSF of space. Dont be so quick to believe those Federal Reserve Bank district manufacturing surveys created from anec-dotal information collected from statistically invalid samplings of manufac-turers. Believe what is occurring on the railroads all the live-long day. The Association of American Railroads (AAR) counts it all every month and publishes the findings in Rail Time Indicators, the best forward-looking monthly industrial report you can find. Why use survey data when you can access robust primary data?

Beyond AARs Rail Time Indicators, other economic measuressuch as GDP and the Institute for Supply Managements Purchasing Managers Index (PMI)indicate that growth in 2H 2013 growth will be volatile and probab ly weaker, due to the return of uncertainty.

Lets start with GDP, which is on another roller coaster ride. The Advance Estimate of Q1 GDP was 2.4%, which was finally revised to a disappoint-ing 1.1%. The Advance Estimate for Q2 was just 1.7%, but then underwent an initial revised estimate at the end of August upward to a surprising 2.5%. Q2 GDP wont be finalized until September 26. However, given the troubling August jobs report, and the horrific track record of Bureau of Economic Analysis (BEA) in guesstimating GDP, the only certainty is that Q2 GDP will be anything but the BEAs 2.5% forecast. The relevant take-away from GDP is the trend, that suggests that U.S. GDP is slipping back to an anemic level on par with 2H 2009, or even 2H 2012when the looming uncertainty of the elections, sequestration, budget cuts, and the implemen-tation of tax increases and Obamacare sucked the life out of business and consumer confidence. The latest report on GDP also notes that the weak-ness in economic growth is most pronounced in declining government ex-penditures at the federal, state and municipal levels. This will only intensify with Congress at an impasse with the White House over deficit spending and further tax increases.



In addition, the International Monetary Fund (IMF) has lowered its forecast for 2013 Global GDP Growth to approximately 3%. The IMFs updated July 2013 global GDP forecast, stratified for Emerging Markets (like those in LATAM) and Advanced Economies (such as the United States, Europe and Japan), shows a flattening trend for both.

SOURCE: Institute of Supply Management

MONTH PMI MONTH PMIAug 2013 55.7 Feb 2013 54.2Jul 2013 55.4 Jan 2013 53.1Jun 2013 50.9 Dec 2013 50.2May 2013 49.0 Nov 2012 49.9Apr 2013 50.7 Oct 2012 51.7Mar 2013 51.3 Sep 2012 51.6

Average for 12 Months: 52.0 (High: 55.7 | Low: 49.0)

8.3% 1.4%

40.9%66.7%

55.6% 60.0%66.7%

54.2% 56.3%

59.1%33.3%

44.4% 40.0%25.0%

45.8% 42.3%

8.3% 1.4%

40.9% 66.7%

55.6% 60.0% 66.7%

54.2% 56.3%

59.1% 33.3%

44.4% 40.0% 25.0%

45.8% 42.3%

0%10%20%30%40%50%60%70%80%90%

100%

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

Contract Holding Steady Expand

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

*Excluding renewals % of Reporting Markets

80.0% 77.8%66.7%

81.8%

25.0%

76.3% 67.6%

10.0% 22.2% 33.3% 9.1%

58.3%

18.6% 25.4%

10.0% 9.1% 16.7%5.1% 7.0%

80.0% 77.8% 66.7%

81.8%

25.0%

76.3% 67.6%

10.0% 22.2% 33.3% 9.1%

58.3%

18.6% 25.4%

10.0% 9.1% 16.7% 5.1% 7.0%

0%10%20%30%40%50%60%70%80%90%

100%

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

Down Same Up

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

% of Reporting Markets

8.3%

1.7%

2.8%

10.2%

8.5%

33.3%

25.4%

26.8%

41.7%

61.0%

57.7%

16.7%

1.7%

4.2%

8.3%

1.7%

2.8%

10.2%

8.5%

33.3%

25.4%

26.8%

41.7%

61.0%

57.7%

16.7%

1.7%

4.2%

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

Canada

U.S.

N.A.

Declining Bottoming No Clear Direction Increasing Peaking

CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET


10.0% 1.7% 1.4%

50.0%

33.3%

61.1%

18.2%

83.3%

39.0% 46.5%

40.0%66.7%

38.9%

81.8%

16.7%

59.3% 52.1%

10.0% 1.7% 1.4%

50.0%

33.3%

61.1%

18.2%

83.3%

39.0% 46.5%

40.0% 66.7%

38.9%

81.8%

16.7%

59.3% 52.1%

0%10%20%30%40%50%60%70%80%90%

100%

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

Down Same Up

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


-1

0

1

2

3

4

5

6

7

2011 2012 2013

Advanced economies World Emerging market and developing economies

GLOBAL GDP GROWTH | % QUARTER OVER QUARTER, ANNUALIZED

SOURCE: IMF staff estimates

At some point the absence of more robust global GDP growth will begin to impact U.S. industrial real estate. This is most likely to occur in 1H 2014 as all but U.S. energy and agricultural exports see lower demand from Emerging Markets and Advanced Economies alike. All those companies that have on-shored their manufacturing (or are in the process of doing so), may be hard-hit in 2014 by anemic global GDP and higher interest rates caused by tapering off of quantitative easing by the Federal reserve.

The closely watched PMI is another key economic metric for industrial real estate. Like Rail Time Indicators, the PMI is encouraging. It, too, is indicating reason for optimism in 2H 2013: After a disappointing reading below 50 in May, the PMI has rebounded over the summer, with three consecutive readings above 50. Augusts 55.7 measure is the highest reading in 2013, and the highest since June 2011.



MANUFACTURING AT A GLANCE | APRIL 2013

INDEX SERIES INDEXAPRILSERIES INDEX

MARCHCHANGE

(%) DIRECTIONRATE

OF CHANGETREND*

(MONTHS)

PMI 55.7 55.4 +0.3 Growing Faster 3

New Orders 63.2 58.3 +4.9 Growing Faster 4

Production 62.4 65.0 -2.6 Growing Slower 3

Employment 53.3 54.4 -1.1 Growing Slower 2

Supplier Deliveries 52.3 52.1 +0.2 Slowing Faster 2

Inventories 47.5 47.0 +0.5 Contracting Slower 2

Customers' Inventories 42.5 47.5 -5.0 Too Low Faster 21

Prices 54.0 49.0 +5.0 Increasing From Decreasing 1

Backlog of Orders 46.5 45.0 +1.5 Contracting Slower 4

Exports 55.5 53.5 +2.0 Growing Faster 9

Imports 58.0 57.5 +0.5 Growing Faster 7

OVERALL ECONOMY Growing Faster 51

Manufacturing Sector Growing Faster 3

*Number of months moving in current direction | SOURCE: Institute of Supply Management

Aside from the macro PMI measure, the detail behind it is revealing. The latest reading for August showed growth in several key areas, such as new orders, production and employment. It also indicated that inventories were contracting (meaning that wholesalers and retailers will need to re-stock prior to the holiday shopping season), and exports were still growing. This later item adds weight to the view that Europe may have bottomed, and LATAM is still experiencing robust growth.

DIGGING INTO THE NORTH AMERICAN INDUSTRIAL VITAL STATSNorth American industrial warehouse markets have pitched what baseball fans would call a perfect game: nine successive quarters of declining vacancy rates, with net absorption outpacing new supply by more than 2:1.

Since Canadian markets account for only 10 percent of North American warehouse spaceand these 12 markets have maintained a stable vacancy rate of approximately 5 percent with only moderate new supplythe improvement in these North American industrial metrics is largely due to strong performance by the primary 65 U.S. warehouse markets. One wonders what can derail industrial real estate performance. In our

previous Industrial Outlook report we referenced several articles that weighed the risks posed by a potential stock price bubble, and the track ahead is far from clear. Waiting around the bend are several signs of uncertainty: Steep Grade (the pending departure of Federal Reserve Chairman Ben Bernanke and the possible impact on Fed policy), Switch Closed (the renewed congressional showdown over the deficit ceiling), and Runaway Train (instability in the Middle East). To avoid disaster, industrial real estatealong with all property typesmay have to pull into a siding during 2H 2013.



NORTH AMERICAN INDUSTRIAL OVERVIEW | Q2 2013

MEASURE NORTH AMERICA CANADA UNITED STATES WEST/ MIDWEST SOUTH NORTHEAST

# of Markets 77 12 65 35 21 9

Inventory (MSF) 16,087.0 1,722.8 14,364.2 8,027.0 4,131.2 2,206.0

% of N.A. Inventory 100% 10.7% 89.3% 49.9% 25.7% 13.7%

New Supply (Q2 2013, MSF) 23.7 5.8 17.9 9.4 7.0 1.5

% of N.A. New Supply 100% 24.5% 75.5% 39.7% 29.4% 6.4%

Vacancy (%) 8.18% 4.37% 8.63% 7.88% 9.50% 9.74%

Absorption (MSF) 41.5 (0.5) 42.0 24.1 16.2 1.7

% of N.A. Absorption 100% -1.2% 101.2% 58.0% 39.0% 4.2%

Leadership Markets Absorption: Calgary, Waterloo and Saskatoon

(All with more than 200K SF of net

absorption in Q2. Calgary led with 671K

SF of net leasng activity.)

Absorption: Inland markets (with the

exception of LA and Long Island) Atlanta (4.5

MSF); Dallas/Ft. Worth (3.8 MSF); Inland Empire

(3.6 MSF); Denver and San Jose (each with 1.8

MSF); Columbus, OH, Charlotte, Greenville, SC,

and Jacksonville (all > 1.4 MSF)

Absorption: Inland Empire (3.6 MSF); San

Jose & Denver (each with 1.8 MSF), Los

Angeles (1.65 MSF) and Columbus, OH, (1.4

MSFair cargo matters).

Absorption: Atlanta (a repeat with 4.5

MSF), DFW (3.8 MSF), Charlotte, NC, (1.75

MSF, housing recovery), and Greenville, SC, and Jacksonville (1.4 MSF,

new inland port and port strength).

Absorption: The story here is Philadelphia

(1.0 MSF, energy and the Inland Empire of the NE)

and Long Island (Hurricane Sandy

rebuild).

Laggard Markets Absorption: Toronto, Winnipeg and

Vancouver (net negative in Q2).

Vacancy: Halifax, Waterloo and Calgary

(above 5.5%).

US CAN NA

Vacancy Rate 8.63% 4.37% 8.18%

Change from Q1 2013 -0.20% 0.24% -0.15%

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 16.1 billion square feet of inventory. Approximately 89 percent (14.4 billion square feet) of this inventory is located in the United States.

Despite a comparatively small adjustment to inventory classification (see note at top right), the U.S. West and Midwest continue to constitute approximately 60 percent of North American industrial warehouse space

NOTE: Colliers Q2 U.S. inventory numbers have declined slightly from previous reports (approximately 1.5 percent, or 191 million square feet) due to a culling of specialty warehouse property types (e.g., self storage). This change aligns MSA inventory levels with industry sources, such as CoStar, that increasingly exclude specialty warehouse property from bulk and distribution warehouse measures. This adjustment was not necessary in Colliers Canadian markets.

VACANCYVacancy continues to decline in North American warehouse marketsmuch more in U.S. markets, due to a greater oversupply than in Canada and the incredible onshoring of manufacturing. From a regional perspective, Canada has the lowest average vacancy rate in North America (4.37 per-cent, up 24 basis points from Q1 2013, due primarily to new construction activity), and the Northeast U.S. continues to have the highest vacancy rate at 9.74 percent (up 18 basis points from Q1 2013). The West and Midwest

are the only two regions in the U.S. with vacancy rates below the 8.63 percent national average.

(8.0 billion square feet), and approximately 60% of annual U.S. net leasing activity. The South is the next-largest region, with 4.1 billion square feet, or 26% of North American industrial warehouse space. The expansion of the Panama Canaland 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 southeastern and southwestern U.S. by 2015. With respect to the numbers for Q2 2013, the following table tells the story:



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 4.1 3rd largest Canadian industrial market

2 Toronto 4.1 Largest Canadian industrial market

3 Montreal 4.5 2nd largest Canadian industrial market

4 Calgary 5.45 4th largest Canadian industrial market

5

UNI

TED

STAT

ES

Honolulu 3.2 Top-20 North American port

6 Los Angeles 3.5 Busiest North American TEU container port

7 Bakersfield, CA 4.4

8 Orange County, CA 4.7

9 Houston 5.1 Busiest Gulf Coast port

10 Omaha, NE 5.35

11 Seattle 5.5 PPMX port/Top-20 North American port

12 Long Island 5.5 Port of NY influence

13 Kansas City 6.1 Top-10 North American intermodal rail

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

15 Boise, ID 6.7 New to top-20 rankings for low vacancy

16 Indianapolis 6.7 Key intermodal link to Port Rupert

17 Grand Rapids 6.9 Proximity to Great Lakes ports and rail

18 Milwaukee 6.9 Key Great Lakes region port

19 Columbia, SC 7.0 Benefiting from port of Charleston

20 Oakland, CA 7.0 PPMX port/Top-20 North American port

21 Portland 7.2 Labor issues have impacted vacancy

22 Columbus, OH 7.3 Top-5 air cargo market; link to port of Virginia

23 West Palm Beach, FL 7.35 Benefitting from South Florida trade to LATAM

24 Denver 7.35 Top 10-intermodal rail & air cargo

24 San Francisco 7.4 Vital West Coast port

25 Cincinnati 7.8Key Midwest manufacturing & industrial market

26 Minneapolis 7.85Key Midwest manufacturing & industrial market

27 Pittsburgh 7.9Key Midwest manufacturing & industrial market

28 St Louis, MO 8.18 The River City is revitalized

Drilling down to the MSA level, vacancy continues to improve the most in primary port cities, and inland distribution markets with large intermodal facilities. In Canada, among the four industrial markets with at least 100 MSF of inventory, vacancy rates are lowest in Vancouver (4.09 percent, up 59 basis point from Q1), Toronto (4.11 percent; this quarters 22 basis points increase is the third in a row), Montreal (up 73 basis points, 4.49 percent, and the only large Canadian warehouse market to decline, down by 1 basis point), and Calgary (up 73 basis points to 5.45 percent, the largest increase over Q1 for large Canadian markets).

In the U.S., seventeen markets have a vacancy rate below 7 percent and approximately 100 basis points below the North American average of 8.18 percent. It is also important to note that 19 of the 32 U.S. markets with vacancy rates below the 8.68% national average are top-20 North American port or top-ten inland distribution or air cargo markets with intermodal rail connecting to one or more of the seven North American Class I railroads.

ABSORPTIONOver the preceding three quarters (Q4 2012Q2 2013) an average of 54 MSF of industrial space was absorbed in North America. With Canada averaging a modest 1.5 MSF per quarter, the majority of this absorption has come from U.S. markets. In Q2, Canada experienced net negative absorption of 500,000 square feet, versus the U.S. markets which leased 42 MSF (down slightly from 47 MSF in Q1). What constitutes the weaker absorption in Q2 for both the U.S. and Canada?

In Canada, the negative absorption is attributable to the addition of new supply relative to the size of Canadian markets. The 12 primary Canadian industrial markets (1.7 billion square feet in size) added 5.8 MSF of new supply in Q2. That new supply translates to 0.34% of Canadas warehouse inventory. In contrast, the addition to new supply in the U.S. during Q2 translated to just 0.001% of existing inventory. In other words, Canada is adding new supply at a pace that is excessive for its size. In contrast, while the U.S. is also adding new supply, demand far exceeds the pace of new deliveries. The U.S. markets delivered 17.9 MSF of new warehouse space in Q2, but experienced 42.0 MSF of net leasing activity. This ratio of more than 2:1 absorption to new supply has been the norm for the U.S. ever since 2011. With 52 MSF of total new supply underway in the U.S. for delivery over the next 24 quarters and an average quarterly absorption rate of 45 million square feet, the U.S. should continue to see further decline in vacancy in 2H 2013. Overbuilding risk is not a concern in U.S. industrial markets, but it is in Canadian markets.

From a regional perspective, net absorption is strongest in the West (16.9 MSF) and South (16.1 MSF), followed by the Midwest (7.1 MSF) and then the Northeast with just 1.7 MSF. The market leadership in warehouse leasing during Q2 came from Los Angeles, San Jose and Denver in the West; Atlanta, Dallas, Charlotte and Greenville/Spartanburg SC (fueled by the new Port of Charleston Inland port) in the South; Columbus, OH (air cargo), St. Louis and Kansas City (new intermodal facility coming on line) in the Midwest; and Philadelphia (energy and Inland Empire of the Northeast), Long Island and Baltimore (newest post-Panamax port along East Coast) in the Northeast.



Rounding out the top ten this quarter are Charlotte (housing recovery); the Port of Los Angeles (1.65 MSF), Columbus, OH, (strength as an air cargo hub); Greenville/Spartanburg, SC, (influence of new Inland Port by Charleston); and Jacksonville, FL, (watch for Colliers upcoming North American Port Analysis report for the audible that the port of Jacksonville has called thats making a positive impact on industrial real estate).

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)

LOreal: 500,000 SF in suburban Dallas

New Jersey 4.9 Amazon: 1.0 MSF in Trenton

Georgia 3.6Home Depot: 1.0 MSF in Atlanta

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

Illinois 3.1 Trader Joes: 800,000 SF in Chicago

Arizona 2.0 American Furniture: 632,000 SF outside PhoenixOhio 2.8 Tween: 750,000 SF

Florida 2.7 Publix and OReilly Auto Parts: Orlando and Lakeland

Pennsylvania 0.7 PetSmart and Dollar General

MSA Q2 2013 (MSF) MSA CY 2012 (MSF)

1 Atlanta(INTERMODAL) 4.5 Chicago13.438

(INTERMODAL)

2 Dallas(INTERMODAL) 3.8 Dallas9.728

(INTERMODAL)

3 Los Angeles(INLAND EMPIRE) 3.6 Detroit9.169

(AUTO RECOVERY)

4 San Jose 1.85 Los Angeles Inland Empire8.470

(INTERMODAL)

5 Denver(INTERMODAL) 1.8Los Angeles

Coastal8.375(PORT)

6 Charlotte, NC (HOUSING) 1.75 Atlanta7.400

(INTERMODAL)

7LA Port

(#1 IN NORTH AMERICA TEU)

1.65 Houston 6.245(PORT)

8 Columbus, OH (AIR CARGO) 1.45 Phoenix5.137

(HOUSING RECOVERY)

9 Greenville, SC (INLAND PORT) 1.4 Columbus, OH4.916

(AIR CARGO)

10 Jacksonville, FL(PORT) 1.35 Seattle3.916(PORT)

TOP 10 U.S. INDUSTRIAL MARKETS | ABSORPTION | Q2 2013 VS CY 2012

As was the case in Q1 2013 and 2H 2012, Inland markets are outpacing port markets in absorption. The top 5 markets with respect to net warehouse absorption Q1 2013 versus Q2 are as follows:

CONSTRUCTION ACTIVITYFinally, after nine innings of a perfect game, new construction is picking up in response to both demand and the improved industrial real estate metrics (occupancy, absorption, and rents). Not only is there a dearth of product for sale, but an estimated 40% of existing U.S. warehouse space is functionally obsolete (less than 28-foot clear height, etc.). There is also an added urgency to obtain modern distribution space on the part of retailers and manufacturers remaking their supply chains with 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. In Q2, that increase in new supply continued with another near 25% increase in activity (24% or 52 MSF). The ten states with the most warehouse and distribution center space under construction remain Texas, New Jersey, Georgia, Illinois, Pennsylvania, Ohio, Arizona, Florida, Utah, and California (Source: Dodge Pipeline, Q1 2013).

Overbuilding risk is a natural concern that arises from such an increase in new construction activity. While its worth monitoring over the next 35 quarters, investors and developers can take comfort in two key metrics that put this construction activity in proper perspective. First, the 52 MSF of construction reported by Dodge Pipeline is only slightly more than the average quarterly net absorption over the previous four quarters (45 MSF); that is, leasing activity is outpacing new construction 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, Nike, Ross Dress for Less, Harbor Freight Tools, Dollar Tree, Family Dollar, FedEx, Home Depot, LOreal, Publix, OReilly Auto Parts, Restoration Hardware, Target, Tractor Supply and Whole Foods, are constructing in excess of 25 MSF of modern distribution and logistics cen-ters from coast to coast. Heres a sampling of these projects in the ten states with the most new construction activity:

MSA Q1 2013 (MSF) MSA Q2 2013 (MSF)

1 Chicago 6.0 Atlanta4.5

(Inland distribution, #7 air cargo market)

2 Los Angeles4.4

(Inland Empire: 2.05 MSF)

Dallas3.8

(Inland distribution, re-entering top 5)

3 Atlanta 3.0 LA-Inland Empire3.6

(5.45 MSF LA port + LA Inl)

4 Detroit 2.3(Right-to-work impact) San Jose 1.85

5 Cincinnati 2.1 Denver1.8

(Inland distribution, also moving into top 5)

Looking forward to 2014, delayed delivery of new space under construc-tion is the only significant obstacle to industrial leasing activity in key port and intermodal markets such as Los Angeles, Seattle, Houston, Memphis and Greenville, SC. These markets cant 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.



Overbuilding risk remains low despite the uptick in new warehouse and distribution center construction during 1H 2013, 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 in 2H 2013, and new projects increased at similar 25% rates per quarter, overbuilding would be 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 20082009 financial crisis and ensuing recession. As documented in Engineering News-Records Construction Cost Index, construction costs have risen nearly 20% since Spring 2007, and are up an additional 2.5% in Q2 2013 over Q1. Investors and developers considering new construction investments should budget for construction cost increases at double the Consumer Price Index (CPI) for 2H 2013 and 2014, due to pressures on labor and materials.

West Coast ILA agreement draws near. And other labor strike issues loom in trucking and ports in LATAM, Asia and Europe. The eight-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 whats in your leases.

BLIND SPOT #5: Due Diligence Risk. This is one of the greatest risks to the industrial market. 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 industrials continued performance has brought to the sector. In 1H 2013 Colliers saw due diligence periods compress to 24 weeks for several warehouse properties 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 markets 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 shouldnt overlook these adaptive reuse opportunities in this feeding frenzy to acquire new construction.

In conclusion, industrial has proven to be the Little Engine That Could over the past nine quarters, but the end of the recovery period means there are plenty of risks in store that could derail this train as it picks up steam. So keep one hand on the throttle and one hand on the brake by understanding the warehouse investment cycle weve entered, and keep your eye on the track ahead.

Conclusion: The Blind Spots

Heres an update on potential risks weve been tracking throughout the year that you should be aware of:

BLIND SPOT #1: The domestic and global risks heading into 2H 2013 are greater than they were for 1H 2013. Interest rates

have risen approximately 100 basis points this summer ,over fear of the Federal Reserve tapering its quantitative easing activity at its September FOMC meeting. And, as Asia slows and Mideast turmoil increases, the IMF has revised down to 3% its outlook for global GDP growth.

BLIND SPOT #2: 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 Analysis for more detailed information, at www.colliers.com/us/port-1H

BLIND SPOT #3: Elevated new construction activity. Although the Q1 and Q2 increases in construction activity dont indicate a

supply-demand imbalance yet, this metric needs to be monitored closely over the second half of 2013, given the double-digit increase in production. Six to eight quarters ago, a similar uptick in multifamily coincided with another perfect game (vacancy falling to 5% percent, double-digit rental increases for eight consecutive quarters, record cap rate compression, etc.), and today the market is anxious about overbuilding in light of 200,000+ annualized permits.

BLIND SPOT #4: Port and transportation worker strife. Earlier this year, an ILA strike was finally averted, and a six-year dock

workers contract agreed upon for the East and Gulf coast ports. During the painful six months of uncertainty, retailers and manufacturers re-routed or accelerated cargo shipments, and may need to start doing so again on the West Coast at the end of 2013, as the June 2014 expiration of the existing



UNITED STATES | INDUSTRIAL SURVEY

MARKETINVENTORY

JUN. 30, 2013 (SF)

Q2 2013NEW SUPPLY

(SF)

YEAR-TO-DATE NEW SUPPLY

(SF)

CURRENTLY UNDER CONSTRUCTION

(SF)

NORTHEAST

Baltimore, MD 221,822,484 119,620 1,161,620 - Boston, MA 152,836,772 35,000 35,000 1,200,031

Hartford, CT 95,613,351 - 25,747 Long Island, NY 156,537,930 - 190,000 New Jersey Central 353,745,719 - 1,259,244 New Jersey Northern 374,436,831 - 1,444,817 Philadelphia, PA 413,642,758 1,179,250 1,979,530 1,015,300

Pittsburgh, PA 172,208,978 51,571 178,691 247,731

Washington, DC 265,120,048 130,481 778,167 1,966,299

Northeast Total 2,205,964,871 1,515,922 4,133,008 7,349,169

SOUTH

Atlanta, GA 614,441,825 3,832,655 3,832,655 1,927,256

Birmingham, AL 109,682,848 542,000 Charleston, SC 32,758,481 289,000 616,000 316,000

Charlotte, NC 319,330,062 115,615 354,120 52,000 Columbia, SC 38,123,194 1,200,000

Dallas-Ft. Worth, TX 725,941,193 709,953 1,504,012 6,423,508 Ft. Lauderdale-Broward, FL 109,506,688 351,614 315,516

Greenville/Spartanburg, SC 177,644,878 156,000

Houston, TX 478,412,510 1,058,764 2,542,228 4,259,723 Jacksonville, FL 122,763,661 92,170 101,770

Little Rock, AR 45,095,202 18,376 18,376

Louisville, KY 170,832,651 15,000

Memphis, TN 218,754,141 869,892 2,417,206

Miami, FL 209,047,911 207,200 1,121,106 1,095,730 Nashville, TN 114,567,001 2,086,660 Orlando, FL 131,536,721 150,000 150,000 1,065,000 Raleigh, NC 110,892,215 20,850 20,850 26,030

Richmond, VA 109,771,478 311,730 458,302

Savannah, GA 44,621,300 200,000 1,131,000

Tampa Bay, FL 197,170,619 152,500 188,019

West Palm Beach, FL 50,339,047 20,900 South Total 4,131,233,626 6,958,813 12,343,944 23,034,529



UNITED STATES | INDUSTRIAL SURVEY

MARKETINVENTORY

JUN. 30, 2013 (SF)

Q2 2013NEW SUPPLY

(SF)

YEAR-TO-DATE NEW SUPPLY

(SF)

CURRENTLY UNDER CONSTRUCTION

(SF)

MIDWEST

Chicago, IL 1,316,302,590 2,411,337 3,997,878 4,501,811

Cincinnati, OH 244,257,287 697,938 649,000

Cleveland, OH 498,640,441 23,186 23,186 13,300

Columbus, OH 212,366,316 90,800 2,579,936

Detroit, MI 533,982,288 250,000 250,000 356,960

Grand Rapids, MI 112,564,101 281,380 281,380

Indianapolis, IN 275,349,121 52,250 2,069,560 2,207,323

Kansas City, MO-KS 235,220,776 821,000 1,520,040 1,520,040

Milwaukee, WI 224,633,066 112,116 442,691 112,000

Minneapolis/St. Paul, MN 243,653,522 111,000 780,000 828,000

Omaha, NE 67,693,440 77,302

St. Louis, MO 267,789,773 521,718 521,718 436,550 Midwest Total 4,232,452,721 4,583,987 10,675,191 13,282,222

WEST

Albuquerque, NM 36,902,890 242,500

Bakersfield, CA 33,740,065 263,468 284,868 1,807,185

Boise, ID 35,779,701 297,067

Denver, CO 217,449,730 1,031,381 1,031,381 1,365,314

Fairfield, CA 46,594,360 48,133 318,402

Fresno, CA 48,600,000

Honolulu, HI 40,199,159

Las Vegas, NV 109,031,302 489,320 618,320 201,519 Los Angeles, CA 888,269,000 356,200 356,200 3,028,100

Los Angeles Inland Empire, CA 422,587,000 226,600 1,754,900 12,911,100

Oakland, CA 141,658,055 117,170 117,170 975,015

Orange County, CA 182,822,000 83,100 83,100 408,300

Phoenix, AZ 273,175,760 1,427,704 1,873,696 3,773,026

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

Portland, OR 191,206,682 142,008 441,090 1,873,838

Reno, NV 82,214,797

Sacramento, CA 175,079,859 131,211 195,000 San Diego, CA 187,080,092 160,479 209,735 59,815

San Francisco Peninsula, CA 40,937,241 38,368 38,368 58,553 San Jose/Silicon Valley, CA 251,303,594 288,100

Seattle/Puget Sound, WA 261,117,654 441,250 2,109,989

Stockton/San Joaquin County, CA 94,579,012 474,000 530,000 1,017,353

Walnut Creek, CA 17,749,076 West Total 3,794,502,477 4,809,798 8,256,489 30,633,109

U.S. TOTALS 14,364,153,695 17,868,520 35,408,632 74,299,029

(continued)



UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY

MARKETABSORPTION

Q2 2013 (SF)

VACANCY RATE MAR. 31, 2013

(%)

VACANCY RATE JUN. 30, 2013

(%)

NORTHEAST

Baltimore, MD 439,790 10.02 9.87

Boston, MA (131,178) 17.58 17.68

Hartford, CT (219,824) 8.81 9.08

Long Island, NY 744,028 6.02 5.54

New Jersey Central 249,929 9.22 9.15

New Jersey Northern (264,668) 8.35 8.42

Philadelphia, PA 1,007,515 9.69 9.70

Pittsburgh, PA 114,947 7.94 7.90

Washington, DC (212,002) 11.58 11.70

Northeast Total 1,728,537 9.76 9.74SOUTH

Atlanta, GA 4,517,579 12.79 12.60

Birmingham, AL 49,899 8.94 8.97

Charleston, SC 329,610 10.32 10.11

Charlotte, NC 1,748,347 12.95 12.43

Columbia, SC 402,250 8.03 6.97

Dallas-Ft. Worth, TX 3,783,365 8.85 8.41

Ft. Lauderdale-Broward, FL 285,229 9.41 9.15

Greenville/Spartanburg, SC 1,428,451 9.85 9.04

Houston, TX 336,116 4.98 5.12

Jacksonville, FL 1,359,652 9.99 8.95

Little Rock, AR 94,346 11.78 11.20

Louisville, KY 534,744 8.72 8.41

Memphis, TN 326,619 12.65 12.49

Miami, FL 321,462 6.71 6.63

Nashville, TN 124,320 9.18 9.12

Orlando, FL 53,820 10.42 10.38

Raleigh, NC (256,246) 10.03 10.27

Richmond, VA 1,096,748 11.24 10.49

Savannah, GA (391,696) 11.66 12.54

Tampa Bay, FL (321,642) 9.96 10.19

West Palm Beach, FL 335,723 8.00 7.34South Total 16,158,696 9.75 9.50



UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY

MARKETABSORPTION

Q2 2013 (SF)


(%)


(%)

MIDWEST

Chicago, IL 199,188 9.00 9.03

Cincinnati, OH 657,162 8.12 7.85

Cleveland, OH 380,066 8.62 8.55

Columbus, OH 1,444,523 8.00 7.32

Detroit, MI 493,882 11.42 11.37

Grand Rapids, MI 280,728 7.14 6.88

Indianapolis, IN 409,946 6.82 6.69

Kansas City, MO-KS 852,939 6.13 6.09

Milwaukee, WI 849,506 7.23 6.96

Minneapolis/St. Paul, MN 756,939 8.13 7.86

Omaha, NE (164,030) 5.08 5.35

St. Louis, MO 940,674 8.39 8.20Midwest Total 7,101,523 8.56 8.45

WEST

Albuquerque, NM 53,347 10.21 10.06

Bakersfield, CA 113,293 3.79 4.35

Boise, ID 848,996 7.84 6.69

Denver, CO 1,824,814 7.80 7.34Fairfield, CA 780,644 10.30 8.69Fresno, CA 200,000 9.05 8.64

Honolulu, HI 135,320 3.56 3.21

Las Vegas, NV 969,393 14.80 14.30

Los Angeles, CA 1,649,700 3.75 3.55

Los Angeles Inland Empire, CA 3,578,100 6.60 5.73

Oakland, CA 1,121,409 7.70 6.98

Orange County, CA 344,600 4.97 4.68

Phoenix, AZ 277,437 12.23 12.58

Pleasanton/Tri-Valley, CA 346,373 9.70 7.59

Portland, OR (627,736) 6.82 7.21

Reno, NV (145,418) 11.79 11.96

Sacramento, CA 1,224,552 13.25 12.61

San Diego, CA 347,598 9.49 9.38

San Francisco Peninsula, CA 295,862 8.20 7.43

San Jose/Silicon Valley, CA 1,845,548 10.16 9.30

Seattle/Puget Sound, WA 540,233 5.65 5.52

Stockton/San Joaquin County, CA 1,114,802 12.58 11.36

Walnut Creek, CA 128,526 9.35 8.63West Total 16,967,393 7.60 7.24

U.S. TOTALS 41,956,149 8.83 8.63

(continued)



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

MARKET SALES PRICE (USD PSF)MEDIAN

CAP RATE (%)

VACANCY FORECAST

(3 MONTHS)

ABSORPTION FORECAST

(3 MONTHS)RENT FORECAST

(3 MONTHS)

NORTHEAST

Baltimore, MD 38.55 7.00 Boston, MA 73.00 Hartford, CT 38.00 8.50 Close to zeroLong Island, NY 70.23 7.75 New Jersey Central 85.00 7.20 New Jersey Northern 92.00 6.00 Close to zero Philadelphia, PA 56.84 7.13 Pittsburgh, PA 50.00 7.75 Washington, DC 53.28 8.00 Northeast Average* 61.88 7.42

SOUTH

Atlanta, GA 45.33 8.10 Birmingham, AL Charleston, SC 46.00 7.50 Columbia, SC 32.43 Dallas-Ft. Worth, TX 55.00 7.20 Ft. Lauderdale-Broward, FL 78.75 Greenville/Spartanburg, SC Houston, TX 58.19 8.25 Jacksonville, FL 70.00 7.15 Little Rock, AR 65.45 9.00 Close to zeroMemphis, TN 28.00 Miami, FL 55.00 6.70 Nashville, TN 80.00 8.00 Orlando, FL 50.00 7.50 Richmond, VA 48.00 Savannah, GA 34.00 8.50 Tampa Bay, FL 33.67 West Palm Beach, FL South Average* 51.99 7.79

* Straight averages used.



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

MARKET SALES PRICE (USD PSF)MEDIAN

CAP RATE (%)

VACANCY FORECAST

(3 MONTHS)

ABSORPTION FORECAST


(3 MONTHS)

MIDWEST

Chicago, IL 52.00 6.15 Cincinnati, OH 35.00 8.25 Columbus, OH 26.78 Detroit, MI 25.45 12.10 Grand Rapids, MI Indianapolis, IN 45.00 7.00 Close to zero Kansas City, MO-KS 31.00 Milwaukee, WI 50.00 9.00 Minneapolis/St. Paul, MN 27.76 Omaha, NE Close to zeroMidwest Average* 36.62 8.50

WEST

Albuquerque, NM 84.00 8.00 Bakersfield, CA 38.00 10.00 Boise, ID Denver, CO 58.00 8.70 Fairfield, CA 7.59 8.00 Fresno, CA 42.00 9.00 Honolulu, HI Las Vegas, NV 52.79 Los Angeles, CA 94.50 6.75 Close to zero Los Angeles Inland Empire, CA 72.00 6.70 Oakland, CA 114.94 6.00 Orange County, CA 130.00 6.00 Phoenix, AZ 62.00 8.10 Pleasanton/Tri-Valley, CA 100.40 8.25 Portland, OR 79.25 7.10 Sacramento, CA 60.20 8.03 San Diego, CA San Francisco Peninsula, CA 103.18 San Jose/Silicon Valley, CA 275.00 7.00 Seattle/Puget Sound, WA 105.00 6.00 Stockton/San Joaquin County, CA 118.55 8.00 Walnut Creek, CA West Average* 88.74 7.60 U.S. AVERAGE* 64.54 7.73

(continued)




UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013

MARKETWAREHOUSE/DISTRIBUTION

SPACE (USD PSF)

BULK SPACE

(USD PSF)

FLEX/SERVICE SPACE

(USD PSF)

TECH/R&D SPACE

(USD PSF)

NORTHEAST

Baltimore, MD 4.72 4.39 9.72

Boston, MA 6.04 5.30 6.54 11.44

Hartford, CT 4.42 4.42 6.50 6.50

Long Island, NY 8.28 10.00 16.60

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 4.34 4.34 11.58 11.58

Washington, DC 6.99 5.87 11.54 15.17

Northeast Average* 5.55 5.39 10.18 11.45

SOUTH

Atlanta, GA 3.26 2.94 7.05 10.42

Birmingham, AL 3.85 3.60 8.40

Charleston, SC 3.85 4.30 6.25 16.25

Charlotte, NC 3.38 3.20 8.77

Columbia, SC 3.54 2.93 7.41

Dallas-Ft. Worth, TX 3.20 2.70 7.00 8.50

Ft. Lauderdale-Broward, FL 6.25 5.82 9.55 7.95

Greenville/Spartanburg, SC 3.02 2.99 6.82

Houston, TX 5.38 4.44 8.10 10.77

Jacksonville, FL 3.81 3.50 8.57

Little Rock, AR 2.68 2.74 7.35

Louisville, KY 3.50 3.44 7.50 6.00

Memphis, TN 2.45 2.57 5.06 9.50

Miami, FL 8.06 7.79 10.59 12.00

Nashville, TN 3.05 7.65 8.62 7.50

Orlando, FL 4.43 4.25 8.16 8.49

Raleigh, NC 3.76 3.90 10.09

Richmond, VA 3.50 3.57 7.67 7.65

Savannah, GA 3.95 3.75 7.00 10.00

Tampa Bay, FL 4.22 3.89 7.14 5.60

West Palm Beach, FL 6.78 6.18 10.87 7.00 South Average* 4.09 4.10 8.00 9.12




UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013


SPACE (USD PSF)

BULK SPACE

(USD PSF)

FLEX/SERVICE SPACE

(USD PSF)

TECH/R&D SPACE

(USD PSF)

MIDWEST

Chicago, IL 3.92 3.38 7.14

Cincinnati, OH 3.17 2.67 6.37 6.37

Cleveland, OH 3.35 2.95 7.91

Columbus, OH 2.70 2.65 5.12 5.12

Detroit, MI 3.85 3.57 7.34 7.34

Grand Rapids, MI 3.25 3.10 4.45 4.45

Indianapolis, IN 4.40 3.20 6.75

Kansas City, MO-KS 4.27 3.56 8.94 7.36

Milwaukee, WI 4.33 3.54 5.74

Minneapolis/St. Paul, MN 4.50 6.43 7.12

Omaha, NE 4.14 5.00 6.36 6.36

St. Louis, MO 3.77 3.69 7.91

Midwest Average* 3.80 3.39 6.71 6.30

WEST

Albuquerque, NM 5.48 4.27 8.75 8.75

Bakersfield, CA 4.00 3.42 8.00

Boise, ID 4.92 4.92 6.10 5.76

Denver, CO 5.36 3.99 8.48 9.50 Fairfield, CA 5.34 5.57 8.18 8.82

Fresno, CA 3.84 3.60 4.80 5.50

Honolulu, HI 12.00

Las Vegas, NV 6.00 4.22 5.52 7.32

Los Angeles, CA 6.38 6.20 9.85 12.75

Los Angeles Inland Empire, CA 4.75 4.55 7.10 7.75

Oakland, CA 4.92 4.64 5.52 8.52

Orange County, CA 7.20 6.60 12.84 13.80

Phoenix, AZ 5.30 4.52 10.84 10.72

Pleasanton/Tri-Valley, CA 5.16 4.20

Portland, OR 5.62 5.17 9.74 10.49

Reno, NV 3.71 3.25 7.75

Sacramento, CA 4.32 4.80 8.76 4.44

San Diego, CA 8.04 7.44 10.56 14.64

San Francisco Peninsula, CA 10.32 10.32 23.40 23.40

San Jose/Silicon Valley, CA 6.48 6.01 9.00 16.20

Seattle/Puget Sound, WA 5.88 5.04 13.37

Stockton/San Joaquin County, CA 3.84 3.36 6.24 8.64

Walnut Creek, CA 2.52 13.80 West Average* 5.71 5.05 8.97 10.60

U.S. AVERAGE* 4.81 4.49 8.38 9.62

(continued)




CANADA | INDUSTRIAL SURVEY

MARKETINVENTORY

JUN. 30, 2013 (SF)

Q2 2013NEW SUPPLY

(SF)

YEAR-TO-DATENEW SUPPLY

(SF)

CURRENTLY UNDERCONSTRUCTION

(SF)

Calgary, AB 127,425,545 1,676,070 2,195,420 1,545,215 Edmonton, AB 80,053,480 631,677 831,827 1,989,133

Halifax, NS 7,614,336 448,477 456,102 87,000 Montral, QC 347,959,380 180,000

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

Regina, SK 16,973,560 44,774 84,774 250,000

Saskatoon, SK 21,300,000 216,000 460,000 350,000

Toronto, ON 760,223,794 1,606,986 1,676,986 4,691,333

Vancouver, BC 184,000,129 939,051 1,612,102 2,437,810

Victoria, BC 9,001,303 78,790

Waterloo Region, ON 60,281,392 103,794 108,594 61,707 Winnipeg, MB 79,832,082 140,000 140,000 50,000

CANADA TOTALS 1,722,799,056 5,806,829 7,708,595 11,689,698

CANADA | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY

MARKETABSORPTION

Q2 2013 (SF)



Calgary, AB 671,241 4.72 5.45Edmonton, AB 39,165 3.34 4.05

Halifax, NS (28,387) 9.65 10.15

Montral, QC (26,169) 4.50 4.49

Ottawa, ON 133,127 5.76 5.50

Regina, SK (15,226) 2.96 3.30

Saskatoon, SK 276,000 5.50 5.16

Toronto, ON (1,576,682) 3.89 4.11

Vancouver, BC (174,411) 3.50 4.09

Victoria, BC (33,423) 4.23 4.50

Waterloo Region, ON 495,397 6.65 6.05Winnipeg, MB (247,332) 2.97 3.45

CANADA TOTALS (486,700) 4.13 4.37

Millions

-1.58 -0.25

-0.17 -0.03 -0.03 -0.03 -0.02

0.04 0.13

0.28 0.50

0.67 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0

Toronto, ON

Winnipeg, MB

Vancouver, BC

Victoria, BC

Halifax, NS

Montral, QC

Regina, SK

Edmonton, AB

Ottawa, ON

Saskatoon, SK

Waterloo Region, ON

Calgary, AB

ABSORPTION (SF) | CANADIAN MARKETS | Q2 2013

-0.39

0.20

0.41

0.49

1.65

3.58

3.78

4.52

-1.0 0.0 1.0 2.0 3.0 4.0 5.0

Savannah, GA

Chicago, IL

Indianapolis, IN

Detroit, MI

Los Angeles, CA

Los Angeles - Inland Empire, CA

Dallas-Ft. Worth, TX

Atlanta, GA

Millions

ABSORPTION (SF) | SELECT U.S. MARKETS | Q2 2013




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

MARKET SALES PRICE (CAD PSF)MEDIAN

CAP RATE (%)

VACANCY FORECAST (3 MONTHS)

ABSORPTION FORECAST


(3 MONTHS)

Calgary, AB 170.00 6.50 Edmonton, AB 125.00 6.72 Halifax, NS 7.25 Montral, 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 Close to zeroVictoria, BC 170.00 7.00 Close to zeroWaterloo Region, ON 66.00 7.10 Winnipeg, MB 71.00 8.25 Close to zeroCANADA AVERAGE* 121.55 7.11

CANADA | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013


SPACE (CAD PSF)

BULK SPACE

(CAD PSF)

FLEX/SERVICE SPACE

(CAD PSF)

TECH/R&D SPACE

(CAD PSF)

Calgary, AB 9.00 7.50 12.00 12.00 Edmonton, AB 8.00 7.50 10.00 12.00

Halifax, NS 7.80 7.17 10.50 15.00

Montral, QC 4.75 4.25 6.00 8.00

Ottawa, ON 8.25 7.50 8.50 11.00

Regina, SK 10.00 10.00 12.00 14.00

Saskatoon, SK 10.00 9.00 13.00 15.00

Toronto, ON 4.88

Vancouver, BC 7.76 7.30 9.50 14.00

Victoria, BC 11.50 10.00 13.50 13.50

Waterloo Region, ON 4.53 3.77 8.28 8.28 Winnipeg, MB 6.25 5.25 10.00 12.75

CANADA AVERAGE* 7.73 7.20 10.30 12.32



INDUSTRIAL VACANCY RANKINGS | US

MARKETVACANCY RATEJUN 30, 2013

(%)Honolulu, HI 3.21Los Angeles, CA 3.55Bakersfield, CA 4.35Orange County, CA 4.68Houston, TX 5.12Omaha, NE 5.35Seattle/Puget Sound, WA 5.52Long Island, NY 5.54Los Angeles - Inland Empire, CA 5.73Kansas City, MO-KS 6.09Miami, FL 6.63Boise, ID 6.69Indianapolis, IN 6.69Grand Rapids, MI 6.88Milwaukee, WI 6.96Columbia, SC 6.97Oakland, CA 6.98Portland, OR 7.21Columbus, OH 7.32West Palm Beach, FL 7.34Denver, CO 7.34San Francisco Peninsula, CA 7.43Pleasanton/Tri-Valley, CA 7.59Cincinnati, OH 7.85Minneapolis/St. Paul, MN 7.86Pittsburgh, PA 7.90St. Louis, MO 8.20Louisville, KY 8.41Dallas-Ft. Worth, TX 8.41New Jersey - Northern 8.42Cleveland, OH 8.55Walnut Creek, CA 8.63UNITED STATES AVERAGE 8.63Fresno, CA 8.64Fairfield, CA 8.69Jacksonville, FL 8.95Birmingham, AL 8.97Chicago, IL 9.03Greenville/Spartanburg, SC 9.04Hartford, CT 9.08Nashville, TN 9.12New Jersey - Central 9.15Ft. Lauderdale-Broward, FL 9.15San Jose/Silicon Valley, CA 9.30San Diego, CA 9.38Philadelphia, PA 9.70Baltimore, MD 9.87Albuquerque, NM 10.06Charleston, SC 10.11Tampa Bay, FL 10.19Raleigh, NC 10.27Orlando, FL 10.38Richmond, VA 10.49Little Rock, AR 11.20Stockton/San Joaquin County, CA 11.36Detroit, MI 11.37Washington, DC 11.70Reno, NV 11.96Charlotte, NC 12.43Memphis, TN 12.49Savannah, GA 12.54Phoenix, AZ 12.58Atlanta, GA 12.60Sacramento, CA 12.61Las Vegas, NV 14.30Boston, MA 17.68

INDUSTRIAL VACANCY RANKINGS | CANADA

MARKETVACANCY RATE JUN 30, 2013

(%)Regina, SK 3.30Winnipeg, MB 3.45Edmonton, AB 4.05Vancouver, BC 4.09Toronto, ON 4.11CANADA AVERAGE 4.37Montral, QC 4.49Victoria, BC 4.50Saskatoon, SK 5.16Calgary, AB 5.45Ottawa, ON 5.50Waterloo Region, ON 6.05Halifax, NS 10.15

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.

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Colliers NA Industrial 2013Q2

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