San Fernando Valley and

Santa Clarita Valley Industrial and Office Markets

David H. Young, SIORSenior Vice President

NAI Capital 818 742 1651

dyoung@naicapital.com

23rd Annual Real Estate Market Review & Forecast

Presented to:

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126

126

5

Newhall

Canyon Country

Santa ClaritaValencia

Stevenson Ranch

Van Nuys

CanogaPark

Northridge

Chatsworth

Sun Valley

Pacoima

BurbankGlendale

Map not to scale

Sylmar

NorthHollywood

Panorama

5

5

5

210

405

101 101

27

118

170

134

ChatsworthReservoir

West Hills

Winnetka

Reseda LakeBalboa

PorterRanch

GranadaHills

NorthHills

Arleta

ValleyGlen

MissionHills

Lakeview Terrace

Hanson Dam

Shadow Hills

Sunland

Tujunga

TarzanaEncino

SepulvedaBasin

Sherman OaksStudio

City

TolucaLake

Woodland Hills

SanFernando

Calabasas

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126

126

5

Newhall

Canyon Country

Santa Clarita

Valencia

Stevenson Ranch

Van Nuys

Northridge

Chatsworth

Sun Valley

Pacoima

Burbank

Glendale

Sylmar

NorthHollywood

Panorama

5

5

210

405

101 101

27

118

170

134

ChatsworthReservoir

West HillsWinnetka

Reseda LakeBalboa

PorterRanch

GranadaHills

NorthHills

Arleta

ValleyGlen

MissionHills

Lakeview Terrace

Hanson Dam

Shadow Hills

Sunland

Tujunga

TarzanaEncino

SepulvedaBasin

Sherman Oaks StudioCity

TolucaLake

SanFernando

Woodland Hills

CanogaPark

West• Calabasas• Canoga Park• Chatsworth• Northridge• Reseda• Tarzana• Woodland Hills

Central• North Hills• Panorama City• Sepulveda• Van Nuys

East• Arleta• Burbank• Glendale• Mission Hills• North Hollywood• Pacoima• San Fernando• Sun Valley• Sunland• Sylmar• Tujunga

San Fernando Valley• Canyon Country• Newhall• Santa Clarita• Stevenson Ranch• Valencia

Santa Clarita Valley

Industrial Market Area Map

naicapital.com

Sub-MarketExisting Total Inventory RBA

(SF)

Under Construction

(SF)

Total Available

(SF)

Total Available

(%)

Total Vacancy

(%)

YTD Leasing Volume (SF)

Ytd Sales Volume

(SF)

Average Asking Rent $ NNN

Average Sale Price/Sf

West 28,099,210 0 1,351,421 4.8% 3.3% 1,069,865 904,220 $0.76 $237.09

Central 19,368,904 0 457,857 2.4% 1.0% 595,574 539,450 $0.75 $180.00

East 59,023,078 28,620 1,937,949 3.3% 1.7% 1,769,746 1,833,259 $0.76 $199.88

SFV Total 106,491,192 28,620 3,747,227 3.5% 2.0% 3,435,185 3,285,029 $0.76 $161.78

Santa Clarita Valley

19,782,638 0 1,265,368 6.4% 2.7% 1,144,589 521,514 $0.61 $115.97

Sub-MarketExisting Total Inventory RBA

(SF)

Under Construction

(SF)

Total Available

(SF)

Total Available

(%)

Total Vacancy

(%)

YTD Leasing Volume (SF)

YTD Sales Volume

(SF)

Average Asking Rent $ NNN

Average Sale Price/SF

SFV Total 44,959,780 122,978 6,428,235 14.3% 10.6% 3,110,219 1,838,384 $2.25 $185.81

2015 Year-end Statistics

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San Fernando Valley / Santa Clarita Valley Industrial & Office Markets

Office

Industrial

San Fernando Valley Industrial Market

Average Asking Rent and Vacancy | All Industrial Space

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• The vacancy rate for the San Fernando Valley industrial market declined to a historic low of 2.0% in the fourth quarter of 2015.

• The vacancy rate was below 3.0% for all of 2015. The last time the vacancy rate was at 2.0% was in the first quarter of 2007.

• The decline in vacancy was due to steady demand coming from users seeking to lease or buy industrial space.

• Sale and lease volumes saw a decline due to the shortage of available space. The demand to purchase industrial buildings outpaced the available supply for sale.

• Sale activity in 2015 declined 7.8% from 2014 due to the lack of available product for sale. However, compared to 2013 sales were up 80%.

• Lease activity totaled more than 3.2 million square feet in 2015- representing a 26.3% decrease from 2014 and a 47.7% decrease from 2013. The number of lease transactions took a hit due to extremely low vacancy rates.

• New construction did not kept pace with demand, a mere 500,000 square feet were delivered to market in 2015 of which approximately 90% has been leased.

• The vacancy rate for the Santa Clarita Valley industrial market declined to a record low in 2015, closing the year at 2.7% in the fourth quarter. The Santa Clarita Valley has never seen a vacancy rate below 3% until the second half of 2015.

• Tight market conditions in the San Fernando Valley industrial market had a spillover effect on the Santa Clarita Valley.

• In the Santa Clarita Valley, sale activity in 2015 more than doubled (up 157%) over 2014. The demand to purchase industrial buildings drove up sale activity.

• On the leasing side, activity totaled more than 800,000 square feet in 2015- representing a 32% decline from 2014. The number of lease transactions took a hit due to extremely low vacancy rates.

• There was no new construction delivered in the Santa Clarita Valley in 2015 and there is minimal space under construction (3 buildings totaling 398,220 square feet) to alter the current demand versus supply imbalance in the short term. There is approximately 1.7 million square feet of proposed construction.

• The 10.6% vacancy rate in the San Fernando Valley office market represents a decrease of 70 basis points in the fourth quarter 2015 over the prior year.

• The office vacancy rate dropped below 11.0% for the first time since 2008.

• Year to date lease activity totaled more than 3.1 million square feet representing a 4.4% increase over the same period last year. Average asking office rents closed 2015 at $2.25/SF, up 3.7% from 2014.

• Demand for office space was broad based coming from professional & business services, education & health services and entrainment industry.

2015 Year in Review

San Fernando Valley Industrial Market

San Fernando Valley Office Market

Santa Clarita Valley Industrial

naicapital.com

2015 Sale Transactions

Address 13207 Bradley Ave. 9401 De Soto Ave.

City Sylmar Chatsworth

Size 134,791 SF 150,263 SF

Sale Type Investor Investor

Sale Price $16 Million ($118.70/SF) $14 Million ($93.17/SF)

Cap Rate 5.6% N/A

Buyer Prologis Rexford Industrial Realty

Seller Bradley-Cobalt, LLC 9401 De Soto, LLC

Comment Core Real Estate Acquisition of NNN Leased InvestmentValue Add and Repositioning of Asset to

Create NNN Leased Investment

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2015 Lease Transactions

Address 7900 Nelson Road 7900 Nelson Road 11605-11611 Hart Street

City Van Nuys Van Nuys North Hollywood

Size 112,000 SF 91,082 SF 82,660

Min Clear Height 28 ft. 28 ft. 17-18 ft.

Term 120 months 100 months 120 months

Initial Base Rent $0.73 NNN $0.71 NNN $0.68 NNN

Operating Expenses $0.17/SF $0.17/SF $0.18/SF

Tenant PureTek Corp. PODS NBCUniversal

Landlord Rexford Industrial Realty Rexford Industrial Realty Selective Real Estate Investments

naicapital.com

2016 Market Forecast

Asking Rental RatesLow inventory for lease along with rising rents will continue to be the norm.

Sale PricesDemand for sale product will remain elevated due to low interest rates and probable future interest rate increases

Higher sale prices will motivate some to consider selling and then raising sales volume and pushing pricing to new heights.

ò Availability/Vacancy ratesDwindling supply, Increasing demand

ò Landlord ConcessionsLimited incentives due to strong demand and limited availability

New ConstructionRise in rents/sales to spur new construction/ redevelopment were land may be available

ò Availability/Vacancy rates The vacancy rate in the San Fernando Valley office market will continue on a downward trend.

Asking Rental Rates Average asking office rents will continue to rise in the San Fernando Valley.

naicapital.com

Industrial

Office