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BIG-BOX Market Report 2016 Mid-Year Review & Outlook North America Report INDUSTRIAL LOGISTICS & TRANSPORTATION SOLUTIONS

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Page 1: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

BIG-BOXMarket Report

2016 Mid-Year Review & Outlook

North America Report

INDUSTRIAL LOGISTICS& TRANSPORTATION SOLUTIONS

Page 2: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

2 A Colliers International publication

We are pleased to present the second edition of our Big-Box Market Report. This report, produced by Colliers International’s Logistics & Transportation Solutions Group, covers big-box activity for the first half of 2016. While 2015 was one of the strongest years ever for industrial real estate, 2016’s activity to date is astounding!

In this report, we will take a look at the activity and trends in North America’s six major distribution markets:

> Atlanta, GA > Chicago, IL > Dallas, TX > Greater Los Angeles, CA > New Jersey, Lehigh Valley/Eastern PA > Toronto, ON

Our 70 members in North America, London and Mexico are hand-picked for their knowledge, experience and commitment to adding supply chain expertise to their real estate transaction management skills.

In 2016, Colliers’ Logistics & Transportation Solutions brokers have toured the Port of Virginia, the Port of Rotterdam, the BNSF intermodal yard in Memphis, FedEx’s world headquarters and have held a joint conference in Amsterdam with our European counterparts.

Our goal is to provide thought leadership and supply chain knowledge that helps our investor clients grow their portfolios and our occupier clients understand the market dynamics that affect their location choices and market rents. We trust this report will help you formulate your business strategy. Please let us know if you have any questions or feedback.

Best regards,

JACK ROSENBERGNational LeaderLogistics & Transportation Solutions Group

DWIGHT HOTCHKISSNational Director Industrial | USA

A NOTE FROM OUR LEADERS

JAMES BREEZENational DirectorIndustrial Research | USA

Page 3: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

32016 Mid-Year Review & Outlook | Big-Box Market Report

Service in Motion 5

North American Overview 6

North America Market Reports

1. Atlanta, GA 8

2. Chicago, IL 9

3. Dallas, TX 10

4. Greater Los Angeles, CA 11

5. New Jersey, Lehigh Valley/Eastern PA 12

6. Toronto, ON 13

How can we help you?

Speak to one of our property experts today.

[email protected]

[email protected]

Strategic advice

Make fully informed decisions.

[email protected]

Learn about Colliers

Visit our website to explore the ways we can accelerate your success.

www.colliers.com

Contents> What constitutes a

big-box building?• 300,000 SF or larger industrial buildings• Primarily used for distribution• Ceiling heights of 28’ clear or greater• Pre-cast or tilt-up concrete construction

Page 4: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

4 A Colliers International publication

>The Colliers Logistics & Transportation Solutions Group understandsthat doing business in an interconnected world requires creative, long-term, dynamic real estate decisions. Our industry experts work as a team to integrate transportation insight, real estate expertise and effective market research into a single platform.

Page 5: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

52016 Mid-Year Review & Outlook | Big-Box Market Report

Service in MotionColliers’ Logistics & Transportation Solutions Group delivers advisory,brokerage and management services to domestic and international clients,targeting the expanding relationship between goods movement and realestate.

Our industry specialists understand the issues that shape and drive the transportation industry: skyrocketing energy, transportation, and laborcosts; heightened security needs; stringent environmental requirements;and profound changes in global supply chains. Our experience, talent and insight, helps us address these issues through flexible and efficient industrial real estate solutions.

Whether researching new advances or issues, participating in industryorganizations, or taking the lead in trade conferences, our specialistsimmerse themselves in the business of the transportation industry and connect Colliers to the global transportation community.

Built upon the principles of specialization and innovation—coupled with a global reach and local knowledge—Colliers’ Logistics & Transportation Solutions Group delivers high-impact results thanks to our expertise in logistics and commercial real estate.

More

SIOR membersthan any o ther f i rm in the U.S.

510professionalsin the U.S.

Ranked in the top

3in the U.S.for industrial

volume -Real Capital

Analytics

COLLIERS INDUSTRIAL

Page 6: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

6 A Colliers International publication

Industrial real estate throughout North America is thriving with higher effective rents, strong leasing activity and vigorous development. Demand for industrial real estate is no more evident than in the big-box segment. Retailers, wholesalers and third-party logistics companies are consolidating multiple warehouses into larger state-of-the-art facilities located near population centers, ports and other major intermodal facilities. This consolidation is part of an overall supply chain overhaul to cut costs and more importantly meet the needs from the fastest growing demand driver in North America: e-commerce.

Development, absorption and rental rate increases are all directly correlated to e-commerce demand. In many ways, including supply chain management, e-commerce is still in its infancy. Distributors are evaluating locations, inventory levels and building amenities necessary to quench demand from consumers who are putting a premium on the rapid delivery of goods.

Even with robust activity in core markets, projects under construction have declined over two consecutive quarters to 62.2 million square feet (MSF), a 12.4% drop from year-end 2015. Demand for big-boxes is not likely to end any time soon as many markets are reporting a record number of tenants in the market. This demand, along with restrained development, is expected to lower vacancy rates, raise effective rents and keep absorption positive for the foreseeable future.

Market Report

NORTH AMERICA2016 Mid-Year

NET EFFECTIVE RENT

$4.77CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES

300,000–499,999 SF 1082/93500,000–749,999 SF 468/41750,000+ SF 358/23

> Demand for big-boxes remains exceptionally strong with only 157 of the 1,908 existing buildings fully vacant.

> A record 98 big-boxes totaling 60.0 MSF were added to the inventory in the past 12 months.

> 53.7 MSF were leased in the first half of 2016, up 10.7% from this time last year.

> Effective rents for the first half of 2016 were up 13.1% compared with the same period a year ago to $4.77 per square foot/year net lease (PSF/YR NNN).

> 44.1 MSF were completed in the first half of 2016 (57.9%

speculative) versus 61.0 MSF in all of 2015.

> Strong interest from institutional capital kept capitalization rates (cap rates) low at 5.5%.

> Demand is expected to continue to outpace supply, creating lower vacancies, higher effective rents and positive absorption for the foreseeable future.

BIG-BOX MARKET INDICATORS

KEY TAKEAWAYS

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

Q2 2015 Q1 2016 Q2 2016

# of Buildings 1,810 1,874 1,908

Total Inventory (SF) 1,008,350,305 1,043,544,127 1,068,343,493

Under Construction 55,778,631 64,435,981 62,177,642

Construction Deliveries 19,745,399 20,322,199 23,820,970

Vacancy Rate (%) 7.0% 7.3% 7.4%

Leasing Activity (SF) 29,033,383 24,058,183 29,718,204

Net Absorption (SF) 21,211,913 18,840,123 20,677,913

Net Effective Rent $4.22 $4.81 $4.66

NORT

H A

MER

ICA

0.0

10.0

20.0

30.0

40.0

National

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

14.8

0.6

34.9

25.6

6.5 2.6

26.1

18.6

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

$3.23

$4.77

7.7%

5.0%

Page 7: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

Updated March 2015

ATLANTA, GAAvg. Rental Rate: $3.02Big-Box Vacancies: 45

Big-Box Vacancy Rate: 11.5%Net Absorption: 3,840,395 SF

TORONTO, ONAvg. Rental Rate: $6.53Big-Box Vacancies: 10

Big-Box Vacancy Rate: 5.5%Net Absorption: -162,147 SF

CHICAGO, ILAvg. Rental Rate: $4.37Big-Box Vacancies: 16

Big-Box Vacancy Rate: 7.5%Net Absorption: 3,607,828 SF

NEW JERSEY, LEHIGH VALLEY/EASTERN PA

Avg. Rental Rate: $5.34Big-Box Vacancies: 17

Big-Box Vacancy Rate: 9.0%Net Absorption: 4,956,747 SF

DALLAS, TXAvg. Rental Rate: $3.46Big-Box Vacancies: 40

Big-Box Vacancy Rate: 11.6%Net Absorption: 1,610,090 SF

GREATER LOS ANGELES, CAAvg. Rental Rate: $5.26Big-Box Vacancies: 29

Big-Box Vacancy Rate: 4.8%Net Absorption: 6,825,000 SF

Colliers Office Locations

Featured Distribution Markets

Updated March 2015

Q2

Q2

Q2

Q2

Q2

Q2

BIG-BOX MARKET INDICATORS

SnapshotMAJOR NORTH AMERICAN

DISTRIBUTION MARKETS

Page 8: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

8 A Colliers International publication

ATLA

NTA

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

BIG-BOX MARKET INDICATORS KEY TAKEAWAYS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

Market Report

ATLANTA, GAQ2 2016

Tenant Size (SF) Address City Lease TypeWilliams-Sonoma 1,074,596 11510 Lewis Braselton Blvd. Braselton New LeaseWayfair.com 846,496 130 Distribution Dr. McDonough New LeaseNestle 782,565 1 Nestle Ct. McDonough Renewal

NET EFFECTIVE RENT

$3.02 CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 85/26500,000–749,999 SF 40/13750,000+ SF 34/6

Q2 2015 Q1 2016 Q2 2016

# of Buildings 140 154 159

Total Inventory (SF) 78,247,949 87,815,833 91,115,714

Under Construction 13,101,306 8,580,876 8,955,922

Construction Deliveries 2,348,640 5,600,614 3,299,881

Vacancy Rate (%) 7.0% 12.6% 11.5%

Leasing Activity (SF) 3,740,542 1,743,563 2,523,364

Net Absorption (SF) 3,708,347 3,125,839 3,840,395

Net Effective Rent $2.87 $3.00 $3.02

> Atlanta big-box fundamentals are thriving with strong leasing and absorption brought on by increased demand from retailers and wholesalers.

> There are 159 existing big-boxes in Atlanta totaling 91.1 MSF.

> An impressive 19 big-boxes totaling 12.9 MSF were added to the inventory the past 12 months.

> Effective rents increased to $3.02 PSF/YR NNN, a post-recession high.

> There were nearly 7.0 MSF of net absorption in the first half of 2016.

> 8.9 MSF were completed in the first half of 2016 (66.1% speculative)—much higher than the 6.1 MSF completed in all of 2015.

> Cap rates continue to decline, finishing mid-year at 5.6%.

> Despite robust development and higher vacancies, demand is expected to keep leasing high and absorption positive for the foreseeable future.

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

Buyer Size (SF) Address City Sale Type Sale Price (PSF)Deutsche Bank AG 1,129,750 212 Bohannon Rd. Fairburn Investor $77M ($68.58)Industrial Property Trust 711,124 2700 Barrett Lakes Blvd. Kennesaw Investor $41M ($57.87)Clarion Partners 653,484 600 Riverside Pkwy. Lithia Springs Investor $41M ($62.15)

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

Page 9: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

92016 Mid-Year Review & Outlook | Big-Box Market Report

CHICAGO

BIG-BOX MARKET INDICATORS

Market Report

CHICAGO, ILQ2 2016

NET EFFECTIVE RENT

$4.37 CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 159/12500,000–749,999 SF 76/4750,000+ SF 50/0

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

KEY TAKEAWAYS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

Tenant Size (SF) Address City Lease TypeMars Candy 1,388,000 4005 Cedar Creek Dr. Elwood New LeaseDiageo North America 800,000 1701 Remington Blvd. Bolingbrook RenewalAmazon.com 767,161 1125 Remington Blvd. Romeoville New Lease

BIG-BOX MARKET INDICATORS

Q2 2015 Q1 2016 Q2 2016

# of Buildings 268 278 285

Total Inventory (SF) 149,442,958 155,916,473 160,038,023

Under Construction 6,963,786 8,853,001 11,666,732

Construction Deliveries 4,044,806 2,619,641 4,121,550

Vacancy Rate (%) 9.3% 7.4% 7.5%

Leasing Activity (SF) 5,167,268 2,905,515 2,930,521

Net Absorption (SF) 4,877,780 4,170,998 3,607,828

Net Effective Rent $3.58 $3.97 $4.37

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

Buyer Size (SF) Address City Sale Type Sale Price (PSF)Hillwood Investment 915,643 18801 Oak Park Ave. Tinley Park Investor $45M ($48.87)Heitman 665,549 8601 & 8701 W 47th St. McCook Investor $60M ($90.00)PGIM Real Estate 588,233 525 Northwest Ave. Northlake Investor $49M ($82.88)

> The Chicago metropolitan market continued to thrive with wholesaler and e-commerce expansion driving demand.

> There are 285 existing big-boxes in Chicago totaling 160.0 MSF.

> 17 big-boxes totaling 10.6 MSF were added to inventory in the past 12 months.

> Vacancy rates declined by 1.8 percentage points to 7.5% compared with this time last year.

> There were nearly 7.8 MSF in net absorption gains in the first half of 2016.

> 6.7 MSF were completed in the first half of 2016 (55.2% speculative), a majority of which were located in the I-80 Juliet Corridor.

> Cap rates for big-boxes have remained under 6.0% since 2014, finishing mid-year 2016 at 5.0%.

> Demand for modern fulfillment space is driving up effective rents to $4.17 PSF/YR NNN for the year, 9.7% higher than the 2015 average.

> The need for modern distribution facilities increased under-construction product to 11.7 MSF. Despite new development, activity is expected to keep vacancies stable for the foreseeable future.

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

Page 10: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

10 A Colliers International publication

DALL

AS

Market Report

DALLAS, TXQ2 2016

NET EFFECTIVE RENT

$3.46 CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 139/25500,000–749,999 SF 73/9750,000+ SF 32/6

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

KEY TAKEAWAYS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

Tenant Size (SF) Address City Lease TypeAmazon.com 1,041,880 15201 Heritage Pkwy. Fort Worth New LeaseWalmart 1,002,620 15191 North Beach St. Fort Worth New LeaseBed Bath and Beyond 799,460 2900 S Valley Pkwy. Lewisville New Lease

BIG-BOX MARKET INDICATORS

Q2 2015 Q1 2016 Q2 2016

# of Buildings 230 239 244

Total Inventory (SF) 121,934,250 126,275,218 128,773,377

Under Construction 5,181,777 10,015,467 9,965,629

Construction Deliveries 2,436,988 2,257,373 1,246,583

Vacancy Rate (%) 14.6% 11.2% 11.6%

Leasing Activity (SF) 3,348,067 2,186,138 4,245,280

Net Absorption (SF) 2,182,447 3,238,000 1,610,090

Net Effective Rent $3.45 $3.47 $3.46

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

Buyer Size (SF) Address City Sale Type Sale Price (PSF)CBRE Global Investors 858,500 1303 W Pioneer Pkwy. Arlington Investor $62M ($72.22)TA Realty 630,000 Mountain Creek Distr. Ctr. Dallas Investor $42M ($66.27)LaSalle Investment 602,958 3000 & 3010 Roy Orr Blvd. Lithia Springs Investor $41M ($62.15)

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

> Dallas-Ft. Worth’s central location, increased population, thriving economy and available land for development continue to drive big-box demand.

> There are 244 existing big-boxes in Dallas totaling 128.8 MSF.

> An impressive 14 big-boxes totaling 6.8 MSF were added to the inventory the past 12 months.

> 6.4 MSF were leased in the first half of 2016.

> Vacancy rates show a sharp decline of 3.0 percentage points compared with this time last year to 11.6%.

> There were more than 4.8 MSF of net absorption the first half of 2016.

> 9.5 MSF were completed in the first half of 2016 (79.0% speculative) versus 9.7 MSF in all of 2015.

> Robust demand from institutional capital kept cap rates low at 6.0%.

> With more than 30 MSF of active tenants in the market, activity is expected to increase in the coming quarters, absorbing a good portion of the new development in the region.

Page 11: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

112016 Mid-Year Review & Outlook | Big-Box Market Report

GREATER LOS ANGELES

NET EFFECTIVE RENT

$5.26 CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 403/13500,000–749,999 SF 149/9750,000+ SF 124/7

BIG-BOX MARKET INDICATORS

Market Report

GREATERLOS ANGELES, CA

Q2 2016

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

KEY TAKEAWAYS BIG-BOX MARKET INDICATORS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

Q2 2015 Q1 2016 Q2 2016

# of Buildings 631 669 676

Total Inventory (SF) 347,665,000 360,973,000 370,473,000

Under Construction 14,933,000 16,002,000 10,480,000

Construction Deliveries 6,520,000 3,504,000 9,500,000

Vacancy Rate (%) 4.4% 4.5% 4.8%

Leasing Activity (SF) 10,111,000 7,029,000 10,425,000

Net Absorption (SF) 7,737,000 3,086,000 6,825,000

Net Effective Rent $4.92 $5.10 $5.26

> Greater Los Angeles fundamentals continue to benefit from a growing population, close proximity to the ports of Los Angeles/ Long Beach and available land for modern fulfillment centers in the Inland Empire.

> There are 676 existing big-boxes in Greater Los Angeles totaling 370.4 MSF—by far the most in North America.

> A record-breaking 45 big-boxes totaling 22.8 MSF were added to the inventory the past 12 months.

> 17.5 MSF were leased in the first half of 2016.

> Vacancy rates remained low at only 4.8%.

> There were nearly 10.0 MSF of net absorption in the first half of 2016.

> 13.0 MSF were completed in the first half of 2016 (66.2% speculative), nearly all in the Inland Empire market.

> Cap rates finished mid-year at 4.9%, the lowest of the core North American markets.

> Unrelenting tenant demand is expected to continue to put upward pressure on effective rents, to lower vacancies and to keep absorption positive for the foreseeable future.

Tenant Size (SF) Address City Lease TypeWayfair.com 1,224,874 3300 Indian Ave. Perris New LeaseAmazon.com 1,102,639 555 Orange Show Rd. San Bernardino New LeaseAmazon.com 1,033,192 4890 Hamner Ave. Eastvale New Lease

Buyer Size (SF) Address City Sale Type Sale Price (PSF)Ashley Furniture 1,013,331 2250 Lugonia Ave. Redlands User $79M ($78.00)Goodman Birtcher 981,356 10150 Lower Azusa Rd. El Monte Investor $93M ($94.26)Clarion Partners 579,708 3900 Indian Ave. Perris Investor $50M ($86.94)

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

Page 12: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

12 A Colliers International publication

NEW

JER

SEY,

LEH

IGH

VAL

LEY/

EAST

ERN

PA

Market Report

NEW JERSEY, LEHIGH VALLEY/EASTERN PAQ2 2016

NET EFFECTIVE RENT

$5.34 CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 122/10500,000–749,999 SF 83/4750,000+ SF 73/3

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

KEY TAKEAWAYS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

BIG-BOX MARKET INDICATORS

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

> The New Jersey-Eastern Pennsylvania, and Northern Delaware markets combine to make one of the most robust, dynamic regions in the country. Demand is driven by logistics and e-commerce users looking for modern class A space near the largest population base in the country.

> There are 278 existing big-boxes in the region totaling 172.0 MSF.

> 22 big-boxes totaling 14.4 MSF were added to the inventory the past 12 months.

> There was 18.4 MSF of leasing activity in the first half of 2016— the most for a core North American market.

> There were nearly 10.2 MSF of net absorption in the first half of 2016.

> 9.4 MSF were completed in the first half of 2016, a large majority (80.2%) of it build-to-suit (BTS).

> Effective rents vary across markets averaging $7.69 PSF/YR NNN in Northern New Jersey and $5.04 PSF/YR in the Southern New Jersey/Eastern Pennsylvania markets.

> The market locations, available land for development and increased demand from the Panama Canal expansion are expected to keep fundamentals sound for the foreseeable future.

Q2 2015 Q1 2016 Q2 2016

# of Buildings 256 271 278

Total Inventory (SF) 157,662,471 167,808,464 172,030,890

Under Construction 10,293,282 15,001,196 15,125,918

Construction Deliveries 3,145,735 4,538,221 4,222,426

Vacancy Rate (%) 9.8% 9.9% 9.0%

Leasing Activity (SF) 4,002,418 9,438,056 8,959,047

Net Absorption (SF) 1,638,025 5,183,221 4,956,747

Net Effective Rent $4.32 $6.78* $5.34

Tenant Size (SF) Address City Lease TypeWayfair.com 1,240,967 48-50 Station Rd. Cranbury, NJ New LeaseAmazon.com 809,762 380 Middlesex Ave. Carteret, NJ New LeaseFabuwood Cabinetry 706,000 67-71 Blanchard St. Newark, NJ New Lease

Buyer Size (SF) Address City Sale Type Sale Price (PSF)AEW Capital Mgmt. 785,400 325 S Salem Church Rd. York, PA Investor $60M ($76.39)Watson Land 435,218 9658 West Hills Ct. New Smithville, PA Investor $43M ($99.60)Industrial Property Trust 400,596 100 Louis Pkwy. Carlisle, PA Investor $29M ($72.02)

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

*Q1 rent spike due to Fabuwood ($9.56) and Staples ($10.10) lease of class A facilities in the Meadowlands submarket.

Page 13: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

132016 Mid-Year Review & Outlook | Big-Box Market Report

TORO

NTO

NET EFFECTIVE RENT

$6.53 (CAD)CURRENT BIG-BOX BY SIZE

INVENTORY/VACANCIES300,000–499,999 SF 174/7500,000–749,999 SF 47/2750,000+ SF 45/1

BIG-BOX MARKET INDICATORS

Market Report

TORONTO, ONQ2 2016

BIG-BOX HISTORICAL STATISTICS - >300,000 SF

KEY TAKEAWAYS

HIGHLIGHTED BIG-BOX LEASE TRANSACTIONS - YTD 2016

Tenant Size (SF) Address City Lease TypeRoyal Building Products 442,411 91 Royal Group Cres. Vaughan RenewalBest Buy Canada 433,960 9200 Airport Rd. Brampton RenewalKruger Products 313,500 999 Boundary Rd. Oshawa Renewal

BIG-BOX MARKET INDICATORS

Q2 2015 Q1 2016 Q2 2016

# of Buildings 285 263 266

Total Inventory (SF) 153,397,677 144,755,139 145,912,489

Under Construction 5,305,480 5,983,441 5,983,441

Construction Deliveries 1,249,230 1,157,350 1,430,530

Vacancy Rate (%) 2.8% 4.4% 5.5%

Leasing Activity (SF) 2,664,088 755,911 634,992

Net Absorption (SF) 1,068,314 8,840 -162,147

Net Effective Rent $6.20 $6.53 $6.53

HIGHLIGHTED BIG-BOX SALE TRANSACTIONS - YTD 2016

Buyer Size (SF) Address City Sale Type Sale Price (PSF)R. Degasperis & E. Zuccon, ASO 994,942 9501-9601 Hwy. No. 50 Vaughan Investor $100M ($100.51)Crombie REIT 794,000 8265 Huntington Rd. Vaughan Investor $56M ($70.87)Bentall Kennedy 568,000 12333 Airport Rd. Caledon Investor $65M ($114.33)

3.1

0.6

0.0

2.5

5.0

7.5

10.0

Chicago

0.5

3.7

1.3

6

3.0

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

$2.95 $2.78 $4.17

8.3%

5.0%

0.0

2.5

5.0

7.5

10.0

Toronto

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Atlanta

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

Dallas

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

NY

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.00%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

0.0

2.5

5.0

7.5

10.0

LA

$0.00

$2.00

$4.00

$6.00

$8.00

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0.00%

5.0%

10.00%

Taking Effective Rent (NNN)

Capitalization Rate (%)

3.6

0

9.1 8.6

0.4

10.9

4.4

3.2

0

8.8

1.93.0

0.5

7.5

7.6

10.9

2.9

3.1

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Spec Construction Deliveries (MSF)BTS Construction Deliveries (MSF)

2009 2010 2011 2012 2013 2014 2015 2016(YTD)

0

2.6

0 01.8

0

5.9

0

0

3.0

$5.40 $4.59

$6.35 7.8% 7.9%

5.5%

$2.75 $2.50 $3.02

8.1% 8.5%

5.6%

$3.29 $3.12 $3.46

8.5%

6.0%

$0.00

$6.37 6.2% 8.4%

2.9%

$4.96 $3.73

$5.26 7.5%

4.5%

4.9%

> Renewals dominated the first half of 2016 in Toronto, which lowered new leasing activity and raised vacancy rates.

> There are 266 existing big-boxes in Toronto totaling 145.2 MSF.

> Vacancy rates increased but remained low at 5.8%.

> There was 1.4 MSF of leasing activity in the first half of 2016.

> 153,307 SF of occupancy losses in the first half of 2016.

> There were 2.8 MSF were completed in the first half of 2016, all of it speculative.

> Cap rates for big-boxes continue to decline, finishing mid-year 2016 at 5.5%.

> Despite a slow start to 2016, developers are bullish on Toronto with nearly 6.0 MSF under construction.

Page 14: 2016 Mid-Year Review & Outlook BIG-BOX - colliers.com · > Cap rates continue to decline, finishing mid-year at 5.6%. > Despite robust development and higher vacancies, demand is

14 A Colliers International publication

Copyright © 2016 Colliers International.

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

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* Includes affiliates. All statistics are for 2015.