INDUSTRIALREAL ESTATE FORECASTUNITED STATES                                                                     MONTH 2012...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES2013-2016                                                                                                    ...
UNITED STATES              2013-2016                                                                                      ...
UNITED STATES              2013-2016                                                                                      ...
C&W INDUSTRIAL FORECAST 2013
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C&W INDUSTRIAL FORECAST 2013

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C&W INDUSTRIAL FORECAST 2013

  1. 1. INDUSTRIALREAL ESTATE FORECASTUNITED STATES MONTH 2012 2013-2016A Cushman & Wakefield Research Marketbeat Publication ECONOMIC OUTLOOK INDUSTRIAL MARKET REVIEW WAREHOUSE/DISTRIBUTION MANUFACTURING FLEX SPACE MARKET PROJECTIONS
  2. 2. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTECONOMIC OUTLOOKDriven by a high level of uncertainty the U.S. economy Strong pent-up demand. On the assumption that the ECONOMICremains stuck in low gear and is unlikely to experience any fiscal challenges will be resolved as the year OUTLOOKsignificant uptick until late in 2013. However, once progresses and as confidence enters the picture again,economic growth begins to accelerate in 2014 and U.S. businesses and consumers will start taking more2015, the U.S. is expected to experience a period of risks. Once this shift occurs, it is likely to act as astrong expansion as consumers and businesses catalyst for stronger spending growth throughout the INDUSTRIALunleash demand that has been building up for the past U.S. economy. On the consumer side, an aging MARKET REVIEWseveral years. The result will be a surge in demand for inventory of cars, appliances and many other durablegoods that is the lifeblood of the industrial sector. goods has created a deep well of pent-up demand. Once consumers gain confidence, they will inevitablyNear-term uncertainty. U.S. businesses and consumers act on that demand and increase spending. Theremained cautious as they waited to see how the housing sector is also slowly improving and expected WAREHOUSE / DISTRIBUTIONgovernment addressed the so-called “fiscal cliff” (tax to rebound by 2014. Finally, as businesses shift from aincreases and government spending cuts scheduled to cautious to more aggressive stance, hiring will increasego into effect on January 1) and the negotiations to and investment in machinery and equipment, whichincrease the debt ceiling. We expect the compromise ground to a halt in the second half of 2012, will takethat included both tax revenue increases and off. The result will be a revival of demand for goods MANUFACTURINGadjustments to spending to be a drag on the economy leading to higher manufacturing production andearly in 2013. greater demand for imports and transportationThe situation in Europe will also have an impact. With services. Export growth will follow, though not fullymuch of the euro zone continuing to experience until growth in Europe recovers, most likely in lateanemic growth, demand for U.S. exports will remain 2014 or 2015. FLEX SPACEsoft in 2013. Confidence will be strained by ongoing Sights on 2014. For these reasons, we expect the U.S.negotiations on how to resolve the EU fiscal crisis, yet economy to continue growing at a modest pacethere is a growing consensus that solutions will be through most of 2013, with Gross Domestic Productfound and that the euro zone will emerge intact. expanding by roughly 2.0%. As the U.S. and euro zoneHowever, because of the complex politics involved, debt issues are finally resolved, uncertainty will slowly MARKETand with Germany and Italy heading into elections, PROJECTIONS recede and risk taking will increase, leading to stronglittle improvement is expected to take shape until growth in 2014.later in the year. U.S. TRADE MANUFACTURING PRODUCTION VACANCY DECLINES VS. JOB GROWTH $2.0 108 4% $1.7 100 2% Chained U.S.-$ in Trillions Index (2007=100, SA) $1.4 93 0% $1.1 85 -2% $0.8 -4% 78 -6% $0.5 70 2006 2008 2010 2012 F 2014 F 2016 F 2006 2007 2008 2009 2010 2011 3Q12 2006 2008 2010 2012 2014 2016 Goods Imports Goods Exports Yr-Yr % Job Growth Yr-Yr % Pt. Vacancy Source: U.S. Bureau of Economic Analysis Source: Moody’s Analytics Source: ushman Wakefield Research; Moody’s Analytics C 1
  3. 3. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTINDUSTRIAL MARKET REVIEW: BUILDING MOMENTUMMarket fundamentals continued to strengthen in 2012, The appetite for well-located industrial product will remain ECONOMICposting the third year in a row of declining vacancies. strong. The demand for industrial real estate is rising OUTLOOKOverall vacancy rate fell to 8.5% in the third quarter, across the country, especially around ports on the Eastdown 1.8 percentage points from year end 2009. The and West Coasts. Demand is strongest in Los Angeles,west region markets of Greater Los Angeles and Miami and New York-New Jersey.Orange County reported the lowest vacancy rates in INDUSTRIALthe nation. The Inland Empire, which dominates the The growth of e-commerce is having significant impact MARKET on the industrial market as the trend towards bigger REVIEWbig-box market, posted a 0.7 percentage pointyear-over-year drop in overall vacancy. The Midwest and more efficient distribution centers has resulted inalso performed well with every industrial market in a shortage of class A warehouse space over 500,000 sfthe region seeing vacancies fall in the past year. in the nation’s logistics hubs. Users are also looking for industrial sites near UPS and FedEx stations. WAREHOUSE / DISTRIBUTIONAmong the top markets, Dallas/Fort Worth saw thelargest drop in overall vacancy in 2012, plunging 2.2 With the growth of U.S. exports, especially to marketspercentage points to 10.6%. On the East Coast, New in Asia (mainly China and Southeast Asia), inland portsJersey’s overall vacancy fell 0.9 percentage points are becoming a critical part of supply chain dynamicsyear-over-year to its current rate of 8.9%. A dramatic in the U.S. While many of the existing inland ports aredrop was also seen in Central New Jersey, where located in the Midwest, including Chicago, Memphis, St. MANUFACTURINGvacancy fell 1.9 percentage points to 8.1%. Louis and Kansas City, a number of new locations will be developed such as the 4,000-acre Florida InlandOther markets reporting significant declines in overall Port in St. Lucie, which is being engineered specificallyvacancy rates year-over-year included Nashville (down in preparation for the Panama Canal expansion, and3.2 percentage points), Oakland (down 1.6 percentage the 580-acre Port Arizona in Casa Grande, which will FLEX SPACEpoints) and Seattle (down 1.5 percentage points). become the first inland port to serve the top twoNotably, of the 74 industrial markets tracked by ports in the nation — the ports of Los Angeles andCushman Wakefield and our Alliance partners, only Long Beach. Given the level of demand and generalten markets recorded year-over-year vacancy rate lack of new product, seaport cities and major logisticsincreases. hubs will remain strong performers. MARKET PROJECTIONS TOP 5 METROS VACANCY DECLINES (2011-2016) TOP 5 METROS RENT GROWTH (2011-2016) 0% 60% -1% 48% Aggregate Percentage Point Change Aggregate Appreciation -2% 36% -3% 24% -4% 12% -5% 0% Oakland Phoenix New Jersey Dallas Chicago Central Silicon Valley SF Peninsula Los Angeles Miami Houston Source: ushman Wakefield Research C Source: ushman Wakefield Research C 2
  4. 4. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTWAREHOUSE/DISTRIBUTION: CONSTRUCTION INCREASINGDemand for high-quality, class A warehouse/distribution Infrastructure improvements will bolster port cities. The ECONOMICspace will drive a ramp-up in construction. Warehouse federal Department of Transportation TIGER grants OUTLOOKvacancy is at its lowest rate in four years, declining ten have allowed many coastal port cities like Houston,quarters in a row after peaking in the first quarter of Savannah, Norfolk and Miami to make significant2010. The strong market demand for high-quality investments to accommodate the growing need forclass A space has led to short supply, which in turn has intermodal container and high-capacity transload INDUSTRIALresulted in constrained market activity and absorption facilities expected upon completion of the Panama MARKET REVIEWin some markets. Canal expansion in 2014.Due to the shortage of class A distribution facilities, Meanwhile, infrastructure improvements in certainseveral large tenants, including Amazon, PetSmart, regional markets are expected to bolster warehouseHome Depot and Unilever, are pursuing build-to-suit leasing activity. These include port improvements in WAREHOUSE / DISTRIBUTIONdevelopments. We are also seeing an increase in the Pittsburgh to increase access to aggregates used innumber of speculative projects, particularly in the hydraulic fracturing and the construction of a newInland Empire and the PA I-81/I-78 Distribution bridge between Detroit and Windsor, Ontario, toCorridor. Top West Coast markets have the lowest improve accessibility between the U.S. and Canada. Invacancy rates in the country, thanks to strong export Southern California, the Long Beach Board of Harbor MANUFACTURINGtrade volumes in southern California and the tech Commissioners approved a $649.5-million contractsector in northern California. Land constraints and the for the design and construction of a replacement forfunctional obsolescence of older facilities should spur the Port of Long Beach’s Gerald Desmond Bridge.more redevelopment and retrofitting of existing Construction of the new bridge, which will start infacilities in coming years, and the top markets will 2013 and is scheduled for completion in 2016, willcommand a premium for these types of projects. ease traffic congestion and improve safety. FLEX SPACE Click here for next page: Warehouse/Distribution MARKET WAREHOUSE / DISTRIBUTION MARKET RENT GROWTH CYCLE GRAPH (2011-2016) PROJECTIONS LANDLORD FAVORABLE Slow Growth Accelerating Orange County Los Angeles Portland Miami Houston Silicon Valley Dallas Inland Empire Denver Oakland Philadelphia TENANT FAVORABLE Phoenix New Jersey North SF Peninsula New Jersey Central Atlanta Chicago Boston Downturn Recovering ent growth slowing R R ent still elevated but falling Rent at or near bottom of Rent growth accelerating Still landlord favorable but from top of market cycle market cycle Ideal for owners of property growth is down from peak Falling rents promise future Ideal for tenants leasing or opportunity for tenants seeking to lease property Source: ushman Wakefield Research C 3
  5. 5. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTWAREHOUSE/DISTRIBUTION (CONT’D)Continuing supply chain efficiencies will strengthen First-tier distribution centers like Chicago, Atlanta and ECONOMIC OUTLOOKsecondary and tertiary markets. Many retailers are Dallas should see vacancy rates fall substantially overspending almost as much capital on new distribution the next four years even as new supply is added incenters and logistics technology as they are on new these markets. Chicago’s vacancy is forecast to dropstore openings. Leasing activity grew most significantly by 4.6 percentage points by 2016 while Dallas’ vacancy INDUSTRIALover the last year in the primary markets of Chicago, will drop to 8.0% by 2016. MARKETDallas, PA I-81/I-78 Distribution Corridor and Atlanta, REVIEWbut also in secondary markets. Secondary markets, Warehouse/distribution rents should remain fairly stableincluding Kansas City, Miami and Houston, are leading through 2013, followed by stronger appreciation. Despitethe charge with large investments in intermodal steady demand through 2012, rents overall remainedcapacity to accommodate the movement of freight via at stubbornly low levels, partially because the recovery WAREHOUSE /several modes of transportation. While these markets continues to favor newer product and because of the DISTRIBUTIONdo not have the consumer population of the more widening price gap between class A and class B/Ctraditional distribution markets like the Inland Empire space.or the PA I-81/I-78 Distribution Corridor, they are After marginal growth in 2013, strong appreciation isstarting to attract distribution business because of likely to kick in thereafter in most major markets.their logistics and labor assets. MANUFACTURING Major coastal markets with significant land constraintsAdditionally, with Amazon building new one-million- and relatively little new construction coming on linesquare-foot distribution centers in smaller markets, will be the top gainers. Southern California issuch as Indiana and South Carolina, as well as five expected to have the greatest jump in rental rates,locations in Tennessee that total nearly 4.7 million with Los Angeles and Orange County’s rents growing by more than 25% in the next four years. Rent growth FLEX SPACEsquare feet, it appears that the supply chain fore-commerce is headed in a new direction with more in similarly land-constrained markets such as Portlandspace, closer to markets. and Miami is also expected to be strong.Although these tertiary markets are gaining tenant MARKETinterest, the largest distribution hubs will continue to PROJECTIONSrecognize significant positive absorption through 2016. RENT VS. VACANCY SUPPLY DEMAND TRENDS $5.50 12.5% 150 $5.20 10.0% 100 Per Square Foot / Year Million Square Feet $4.90 7.5% 50 $4.60 5.0% 0 $4.30 2.5% -50 $4.00 0.0% -100 2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F Overall Rent Overall Vacancy Absorption New Construction Source: ushman Wakefield Research C Source: ushman Wakefield Research C 4
  6. 6. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTMANUFACTURINGIn the United States, manufacturing steadily added jobs Manufactured exports — a bright spot of the U.S. ECONOMICsince early 2010, but contracted slightly in the second half economy in recent years — are set to surge. A nation- OUTLOOKof 2012. To put the setback in perspective, the wide initiative is underway to convince companies thatInstitute of Supply Management¹s monthly readings for it is worth bringing manufacturing back home. Illinoisthis period still measured above 50, the threshold that was the first state to launch a “Reshoring Initiative”signifies growth. We remain cautiously optimistic that aimed at convincing large original equipment manufac- INDUSTRIALmanufacturing growth will continue in spite of turers (OEMs) to re-open factories in America. Its MARKET REVIEWpersistent global and domestic economic uncertainty. backers are working to create similar chapters in Michigan, Indiana, Ohio, Pennsylvania, New York andThe U.S. market share of global production continues California.to outpace other manufacturing leaders like China andGermany. Although China’s share nearly doubled over In terms of exports, U.S. companies remain competi- WAREHOUSE / DISTRIBUTIONthe last five years, its rising labor and energy costs are tive on the global stage in the production of transpor-beginning to impact sourcing decisions. Such factors tation equipment, chemicals, electronics, machinery,were behind Apple’s decision to shift some Mac semi-conductors and medical devices. Illinois, home tocomputer manufacturing operations to the U.S. from such heavy-equipment pioneers as Caterpillar andChina in 2013. This $100-million investment creates a Deere Co., has maintained its expertise in building MANUFACTURINGcloser-to-home supply chain that will undoubtedly have large metal structures needed for mining, constructiona ripple effect on local economies as it attracts clusters and agricultural equipment.of suppliers and workers with specialized skills. Additionally, regionalization — where manufacturing is located both onshore and offshore — is impacting location decisions, as it can significantly reduce FLEX SPACE transportation costs and enable a manufacturer to Click here for next page: Manufacturing MANUFACTURING MARKET RENT GROWTH CYCLE GRAPH (2011-2016) MARKET PROJECTIONS LANDLORD FAVORABLE Slow Growth Slow Growth Accelerating Accelerating Philadelphia Atlanta Houston New Jersey Central Orange County Portland OrangeAngeles Los County Boston Silicon Valley Portland Miami Miami Houston Chicago Silicon Valley SF Peninsula Dallas Los Angeles Inland Empire Inland Empire Denver Oakland Denver Philadelphia TENANT FAVORABLE Phoenix TENANT FAVORABLE New Jersey North Phoenix SF Peninsula Oakland New Jersey Central Atlanta New Jersey North Chicago Boston Downturn Recovering Downturn Recovering ent growth slowing R R ent still elevated but falling Rent at or near bottom of Rent growth accelerating Still landlord favorable but from top of market cycle market cycle Ideal for owners of property growth is down from peak Falling rents promise future Ideal for tenants leasing or opportunity for tenants seeking to lease property Source: ushman Wakefield Research C 5
  7. 7. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTMANUFACTURING (CONT’D) ECONOMICrespond faster to local-market demands — a critical In anticipation of better times ahead, leasing activity is OUTLOOKneed also being driven by e-commerce. Regionaliza- gaining momentum. A total of 28.9 million square feettion and “cluster” economic development strategies of manufacturing space was leased through the thirdwill also help to bolster markets. Major markets like quarter of 2012, with Los Angeles and Chicago leadingChicago, Boston, Philadelphia and New Jersey are the pack with a combined total of 9.1 million square INDUSTRIALpoised to gain from such trends. feet. One of the biggest challenges facing manufactur- MARKET REVIEW ers is the lack of quality space. It is difficult to respondHouston, the third largest manufacturing center in to supply chain risks when manufacturing plants mustthe nation after Los Angeles and Chicago, saw its manu- be fitted out at substantial cost to a specific productfacturing employment grow 4.2% in 2011 and is one the group. Technological advances have also renderedfew big cities in the U.S. that can boast more manufactur- many facilities functionally obsolete, opening the door WAREHOUSE /ing jobs than before the recession. Houston is forecast DISTRIBUTION for both speculative and build-to-suit constructionto have the largest manufacturing rent growth among within the next few years.the top markets in the U.S. with its rates expected toreach almost $6.00 psf by 2016. Innovation and technology are crucial components of a productivity-driven industry. Quality facilities supportedSeattle has also become a prominent manufacturing by requisite infrastructure and access to needed talent MANUFACTURINGhub, with employment expanding 7.9% in 2011. The will be increasingly sought after, and manufacturersaerospace sector, led by Boeing, accounted for roughly will weigh a multitude of factors before finalizinghalf this expansion. Since 2010, aerospace-related jobs location decisions. An emphasis on advanced traininghave accounted for some 70% of its manufacturing and development support in major manufacturinggrowth. Boeing plans to lift factory output by 25% hubs, such as parts of the Midwest and Northeast, is FLEX SPACEover the next 18 months. Other areas, like Orange expected to maintain stable growth in those areas.County, CA, have seen manufacturing expansion fueled Given our expectation for accelerating growth, we seeby both domestic and export demand for computer rental rates increasing in most manufacturing marketsproducts, industrial goods and apparel. through 2016. MARKET PROJECTIONS RENT VS. VACANCY SUPPLY DEMAND TRENDS $7.00 10% 36.0 24.0 $6.00 8% Per Square Foot / Year Million Square Feet 12.0 $5.00 6% 0.0 $4.00 4% -12.0 $3.00 2% -24.0 $2.00 0% -36.0 2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F Overall Rent Overall Vacancy Absorption New Construction Source: ushman Wakefield Research C Source: ushman Wakefield Research C 6
  8. 8. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTFLEX SPACE: WEAK DEMAND; STRONG BY 2016Demand for flex space has noticeably decreased in the continuing to show preference for sites that offer ECONOMIC OUTLOOKpast several years, but is projected to grow considerably by proximity to skilled labor, accessibility to major2016. Until then, demand is expected to remain weak, highways or public transportation and industrialwith the overall flex market absorbing an average of concentrations that are operationally synergistic.6.0 million square feet through 2014. Thereafter, When 2015 arrives, the decline in vacancy rates INDUSTRIALhowever, markets such as Silicon Valley, Orange nationally should escalate as recovery gathers momen- MARKETCounty, Denver, Dallas, Portland and Phoenix will tum in markets like Boston, Phoenix, Orange County, REVIEWdrive demand and account for almost half of the space Dallas and Denver.take up through the end of the decade. Absorption in Most markets should realize positive demand growth over2016 is forecast to exceed the total accumulated in the next five years. Silicon Valley is likely to lead the WAREHOUSE /2011 by 36.7%. In the interim, we expect demand for DISTRIBUTION way, with an expected 9.0 million square feet ofdata centers, call centers and high-tech laboratory positive absorption in that time frame. Conversely,space to grow significantly as the economy bounces Northern New Jersey may experience negative netback over the next few years. absorption due to projected slow job growth. ByAfter a sharp dip in vacancy levels during 2011, Cushman 2016, overall vacancy nationwide could fall to the 9.0% MANUFACTURING Wakefield forecasts only nominal improvement through mark as strengthening economic conditions and2014, as job growth remains lethargic. Given that the limited new supply serve to push occupancy levelsmajority of tenants in the marketplace seek quality higher throughout the country. Our analyses suggestspace at favorable rates, newer and higher quality flex that northeastern markets such as Central Newbuildings should perform better than aging buildings Jersey and Boston are likely to realize vacancy level FLEX SPACEwithout renovations. The location of buildings will also declines ranging from 3.0 to 4.0 percentage pointsplay a significant role in most cases, with users over the next several years. Meanwhile, Phoenix’s Click here for next page: Flex Space MARKET FLEX MARKET RENT GROWTH CYCLE GRAPH (2011-2016) PROJECTIONS Slow Growth Accelerating LANDLORD FAVORABLE Orange County Silicon Valley Portland SF Peninsula Atlanta Miami Boston Denver Inland Empire Dallas Chicago Philadelphia Phoenix New Jersey Central TENANT FAVORABLE New Jersey North Oakland Houston Los Angeles Downturn Recovering ent growth slowing R R ent still elevated but falling Rent at or near bottom of Rent growth accelerating Still landlord favorable but from top of market cycle market cycle Ideal for owners of property growth is down from peak Falling rents promise future Ideal for tenants leasing or opportunity for tenants seeking to lease property Source: ushman Wakefield Research C 7
  9. 9. UNITED STATES2013-2016 INDUSTRIAL REAL ESTATE FORECASTFLEX SPACE (CONT’D) ECONOMICvacancy rate could fall more than 4.0 percentage New construction is projected to exceed 10.0 million OUTLOOKpoints from year-end 2012 and Orange County’s square feet in the next several years. Markets such asvacancy rate could decrease to under 4.0%. In Silicon Silicon Valley, San Francisco Peninsula, Portland, NewValley, overall vacancy is expected to decrease Jersey and Denver are each targeting the completionmoderately by 3.0 percentage points despite strong of 1.0 million square feet or more of projects. Silicon INDUSTRIAL MARKETdemand due to the amount of new construction Valley alone will account for more than 24% of the REVIEWexpected in this market. total new developments in the next four years. Build-to-suit projects are likely to comprise aYear-over-year rental growth is projected to be positive significant portion of new development activity inat the end of 2013 (compared to year-end 2012, which some markets. WAREHOUSE /is anticipated to see negative rent growth overall). DISTRIBUTIONCushman Wakefield expects rents to increase by4.0% annually on average through 2016. Markets inCalifornia are projected to experience sharp rentescalations in the next five years. San Francisco MANUFACTURINGPeninsula and Silicon Valley are expected to see rentsclimb in excess of 20%, with San Francisco Peninsula’srental rate reaching $25.99 per square foot by 2016.This will be mainly due to the declining vacancy andintensifying demand. Meanwhile, Miami should see its FLEX SPACEaverage asking rent for flex space climb to $10.15 persquare foot, a 18.1% increase over 2012. At the sametime, a lack of new and higher quality space in theNew Jersey and Chicago markets will prevent rentsfrom improving markedly. MARKET PROJECTIONS RENT VS. VACANCY SUPPLY DEMAND TRENDS $15.00 15% 24 16 $13.00 12% Per Square Foot / Year Million Square Feet 8 $11.00 9% 0 $9.00 6% -8 $7.00 3% -16 $5.00 0% -24 2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F Overall Rent Overall Vacancy Absorption New Construction Source: ushman Wakefield Research C Source: ushman Wakefield Research C 8
  10. 10. UNITED STATES 2013-2016 INDUSTRIAL REAL ESTATE FORECASTINDUSTRIAL MARKET PROJECTIONS WAREHOUSE / DISTRIBUTION ECONOMIC OUTLOOK RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING 2011-2016 2011-2016 2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F Silicon Valley, CA Atlanta, GA $3.38 $3.32 $3.35 $3.37 $3.41 $3.56 Orange County, CA Atlanta, GA 11.2% 10.4% 10.3% 10.0% 9.9% 9.0% Inland Empire, CA Boston, MA $5.17 $5.11 $5.15 $5.17 $5.19 $5.29 Los Angeles, CA Boston, MA 17.9% 19.0% 18.8% 17.9% 16.9% 16.3% INDUSTRIAL Philadelphia, PA Chicago, IL $3.94 $3.95 $3.97 $4.03 $4.10 $4.14 Portland, OR Chicago, IL 12.6% 11.4% 10.8% 9.5% 7.8% 6.8% SF Peninsula, CA MARKET Dallas, TX $3.42 $3.52 $3.61 $3.73 $3.87 $3.98 Miami, Fl Dallas, TX 11.9% 10.0% 9.2% 8.8% 8.1% 8.0% REVIEW Portland, OR Denver, CO $4.35 $4.43 $4.46 $4.62 $4.80 $4.93 Houston, TX Denver, CO 6.4% 5.2% 5.0% 4.7% 4.4% 4.3% Miami, Fl Silicon Valley, CA Houston, TX $4.28 $4.37 $4.53 $4.75 $5.02 $5.23 Houston, TX 8.1% 7.3% 7.0% 7.1% 6.7% 5.8% Boston, MA Dallas, TX Inland Empire, CA $4.02 $4.26 $4.37 $4.54 $4.62 $4.62 Inland Empire, CA 8.0% 7.0% 6.1% 7.5% 9.0% 9.6% Inland Empire, CA Denver, CO Los Angeles, CA $6.18 $6.54 $6.80 $7.24 $7.77 $8.18 Los Angeles, CA 4.8% 4.4% 4.0% 3.6% 3.2% 2.4% United States Atlanta, GA WAREHOUSE / Miami, Fl $4.84 $5.38 $5.51 $5.71 $5.94 $6.12 Miami, Fl 8.0% 7.0% 7.7% 7.5% 7.3% 7.1% DISTRIBUTION Denver, CO Houston, TX New Jersey Central $4.27 $4.21 $4.25 $4.34 $4.44 $4.56 New Jersey Central 10.4% 7.7% 6.9% 6.4% 5.9% 5.4% Oakland, CA Los Angeles, CA New Jersey North $5.73 $5.79 $5.84 $5.97 $6.11 $6.28 New Jersey North 9.6% 10.1% 9.8% 9.3% 8.1% 7.3% Philadelphia, PA New Jersey North Oakland, CA $4.49 $4.57 $4.66 $4.77 $4.93 $5.00 Oakland, CA 9.6% 6.7% 6.6% 6.2% 5.7% 5.4% Phoenix, AZ United States Orange County, CA $6.31 $6.80 $7.09 $7.66 $8.27 $8.67 Orange County, CA 7.5% 5.3% 4.9% 4.1% 3.4% 3.0% New Jersey North Phoenix, AZ Philadelphia, PA $4.34 $4.38 $4.42 $4.53 $4.66 $4.79 SF Peninsula, CA Philadelphia, PA 6.8% 6.8% 7.7% 7.8% 7.9% 7.7% Dallas, TX Phoenix, AZ $5.52 $5.75 $5.84 $5.91 $5.98 $6.06 Phoenix, AZ 13.2% 12.1% 11.5% 10.8% 9.9% 9.5% MANUFACTURING New Jersey Central Oakland, CA Portland, OR $4.81 $5.23 $5.40 $5.85 $6.24 $6.28 Atlanta, GA Portland, OR 6.2% 7.7% 7.1% 6.9% 6.6% 6.0% Orange County, CA SF Peninsula, CA $9.32 $9.39 $9.51 $9.66 $9.72 $10.03 Chicago, IL SF Peninsula, CA 6.4% 7.9% 7.9% 7.7% 7.3% 7.2% New Jersey Central Silicon Valley, CA $5.47 $6.23 $6.31 $6.41 $6.56 $6.61 Boston, MA Silicon Valley, CA 6.1% 8.0% 8.8% 9.7% 10.1% 9.4% Chicago, IL United States: United States: $4.58 $4.71 $4.79 $4.91 $5.05 $5.19 9.5% 8.6% 8.3% 7.8% 7.4% 6.9% CW Markets 0% 12% 24% 36% CW Markets -10% -5% 0% 5% FLEX SPACE MANUFACTURING RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING MARKET 2011-2016 2011-2016 PROJECTIONS 2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F SF Peninsula, CA Houston, TX Atlanta, GA $3.41 $3.31 $3.31 $3.27 $3.24 $3.24 Atlanta, GA 3.5% 4.4% 4.5% 4.9% 4.8% 4.3% Portland, OR Houston, TX Boston, MA $5.51 $4.89 $4.82 $4.81 $4.82 $4.86 Boston, MA 20.5% 21.0% 20.8% 20.2% 19.6% 19.4% Orange County, CA Atlanta, GA Chicago, IL $3.67 $3.86 $3.89 $4.06 $4.22 $4.34 Chicago, IL 6.4% 6.1% 6.0% 5.5% 4.9% 4.5% Silicon Valley, CA New Jersey North Dallas, TX $3.35 $3.39 $3.45 $3.49 $3.56 $3.69 Dallas, TX 9.1% 11.8% 11.1% 10.5% 9.4% 8.2% New Jersey Central Miami, Fl Denver, CO $4.44 $4.21 $4.22 $4.59 $4.88 $4.97 Denver, CO 7.8% 6.8% 7.3% 6.6% 6.0% 5.6% Chicago, IL Silicon Valley, CA Houston, TX $3.93 $4.99 $5.10 $5.35 $5.59 $5.93 Houston, TX 3.8% 5.1% 5.2% 5.1% 4.8% 5.2% SF Peninsula, CA Dallas, TX Inland Empire, CA $4.64 $4.84 $4.91 $5.09 $5.27 $5.33 Inland Empire, CA 7.9% 7.1% 6.9% 6.6% 6.2% 5.9% Los Angeles, CA Boston, MA Los Angeles, CA $5.50 $5.65 $5.59 $5.88 $6.21 $6.40 Los Angeles, CA 5.1% 5.2% 5.0% 4.7% 4.3% 3.9% Inland Empire, CA Phoenix, AZ Miami, Fl $3.94 $4.36 $4.46 $4.58 $4.72 $4.84 Miami, Fl 10.3% 7.5% 7.5% 7.2% 6.9% 6.7% United States Los Angeles, CA New Jersey Central $5.11 $4.33 $4.43 $4.54 $4.66 $4.76 New Jersey Central 5.9% 6.5% 6.5% 6.5% 6.4% 6.1% Denver, CO United States New Jersey North $4.70 $4.73 $4.73 $4.77 $4.81 $4.82 New Jersey North 7.5% 7.4% 8.1% 8.2% 8.0% 7.8% Dallas, TX Chicago, IL Oakland, CA $5.75 $5.93 $5.86 $6.00 $6.16 $6.17 Oakland, CA 7.9% 6.4% 6.3% 5.8% 5.1% 4.9% Phoenix, AZ Inland Empire, CA Orange County, CA $7.26 $7.77 $7.98 $8.44 $8.91 $9.15 Orange County, CA 4.4% 3.8% 3.6% 3.1% 2.6% 2.1% Oakland, CA Denver, CO Philadelphia, PA $4.15 $3.75 $3.83 $3.86 $3.98 $4.08 Philadelphia, PA 6.7% 6.9% 7.1% 4.8% 4.6% 4.0% New Jersey North Orange County, CA Phoenix, AZ $5.52 $5.64 $5.74 $5.76 $5.93 $6.02 Phoenix, AZ 9.3% 9.8% 9.6% 9.1% 8.4% 8.2% Philadelphia, PA Philadelphia, PA Portland, OR $4.19 $4.90 $4.96 $5.09 $5.25 $5.38 Portland, OR 6.6% 5.2% 4.2% 4.1% 3.5% 2.8% Atlanta, GA Oakland, CA SF Peninsula, CA $7.77 $8.29 $8.30 $8.44 $8.77 $9.08 SF Peninsula, CA 6.0% 8.9% 8.5% 7.9% 7.7% 7.5% New Jersey Central Miami, Fl Silicon Valley, CA $8.37 $8.89 $9.10 $9.65 $10.24 $10.51 Silicon Valley, CA 5.9% 6.1% 5.2% 5.0% 5.5% 5.2% Boston, MA Portland, OR United States: United States: $4.92 $5.05 $5.09 $5.23 $5.41 $5.56 6.9% 6.6% 6.5% 6.0% 5.5% 5.2% CW Markets CW Markets -30% 0% 30% 60% -4% -2% 0% 2% Click here for next page: Industrial Market Projections 9
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UNITED STATES 2013-2016 INDUSTRIAL REAL ESTATE FORECASTINDUSTRIAL MARKET PROJECTIONS (CONT’D) FLEX SPACE ECONOMIC OUTLOOK RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING 2011-2016 2011-2016 2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F Atlanta, GA $7.58 $7.02 $6.71 $6.38 $6.31 $6.56 Silicon Valley, CA Atlanta, GA 12.3% 12.7% 12.7% 12.0% 11.5% 11.0% Portland, OR Boston, MA $8.14 $8.13 $8.29 $8.51 $9.11 $9.36 SF Peninsula, CA Boston, MA 15.4% 16.7% 16.7% 15.2% 13.7% 12.8% SF Peninsula, CA INDUSTRIAL Chicago, IL $8.44 $8.90 $8.87 $8.96 $9.07 $9.25 Miami, Fl Chicago, IL 13.0% 10.3% 10.6% 9.8% 9.1% 8.3% Houston, TX MARKET Dallas, TX $7.37 $7.43 $7.56 $7.65 $7.83 $8.10 Boston, MA Dallas, TX 13.9% 14.0% 13.7% 13.0% 12.0% 11.3% New Jersey North REVIEW Denver, CO $8.67 $8.62 $8.85 $9.28 $9.70 $9.93 Denver, CO Denver, CO 11.3% 10.8% 10.6% 10.2% 9.7% 9.8% Los Angeles, CA Houston, TX $7.04 $6.75 $6.84 $6.91 $7.11 $7.29 Inland Empire, CA Houston, TX 11.3% 11.8% 12.5% 13.4% 13.7% 13.1% New Jersey Central Inland Empire, CA $8.62 $8.82 $8.95 $9.20 $9.54 $9.82 Dallas, TX Inland Empire, CA 8.1% 7.8% 7.4% 7.6% 7.4% 6.8% Philadelphia, PA Chicago, IL Atlanta, GA Los Angeles, CA $9.53 $9.31 $9.46 $9.47 $9.55 $9.69 Los Angeles, CA 4.7% 5.0% 4.8% 4.8% 4.8% 4.7% United States Inland Empire, CA WAREHOUSE / Miami, Fl $8.27 $8.59 $8.75 $8.97 $9.49 $10.15 Miami, Fl 5.7% 4.7% 4.3% 4.1% 4.4% 3.7% DISTRIBUTION Philadelphia, PA Oakland, CA New Jersey Central $12.84 $12.76 $13.03 $13.27 $13.55 $13.76 New Jersey Central 9.6% 12.6% 12.2% 11.2% 10.1% 9.3% Phoenix, AZ Denver, CO New Jersey North $8.63 $9.01 $9.11 $9.10 $9.05 $9.17 New Jersey North 11.3% 11.4% 12.1% 12.8% 12.8% 12.7% New Jersey Central Miami, Fl Oakland, CA $8.26 $8.33 $8.37 $8.47 $8.55 $8.67 Oakland, CA 12.5% 13.0% 13.0% 12.2% 11.3% 11.0% New Jersey North United States Orange County, CA $11.14 $10.95 $10.93 $11.01 $11.09 $11.07 Orange County, CA 7.6% 7.6% 6.9% 5.6% 4.7% 3.7% Oakland, CA Boston, MA Philadelphia, PA $7.82 $7.93 $7.92 $8.11 $8.31 $8.51 Philadelphia, PA 7.9% 7.2% 6.7% 6.9% 7.0% 6.6% Houston, TX Dallas, TX MANUFACTURING Phoenix, AZ $10.93 $11.04 $11.18 $11.28 $11.36 $11.73 Phoenix, AZ 16.7% 14.5% 13.7% 12.5% 11.3% 10.4% Los Angeles, CA Orange County, CA Portland, OR $9.75 $8.22 $8.18 $8.49 $8.54 $8.74 Portland, OR 6.0% 11.7% 11.5% 11.7% 10.9% 9.8% Orange County, CA Chicago, IL SF Peninsula, CA $19.18 $21.36 $21.90 $23.10 $24.57 $25.99 SF Peninsula, CA 6.2% 7.5% 9.8% 8.8% 9.2% 8.9% Silicon Valley, CA Silicon Valley, CA $13.09 $15.57 $16.77 $18.80 $21.11 $22.54 Portland, OR Silicon Valley, CA 13.7% 12.0% 11.0% 10.2% 9.4% 9.0% Phoenix, AZ United States: Atlanta, GA United States: $10.13 $10.38 $10.55 $10.66 $10.81 $11.06 11.6% 11.3% 11.0% 10.4% 9.8% 9.2% CW Markets CW Markets -40% 0% 40% 80% -8% -4% 0% 4% FLEX SPACE TOTAL MARKET RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING MARKET 2011-2016 2011-2016 PROJECTIONS 2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F Atlanta, GA $3.74 $3.59 $3.53 $3.44 $3.44 $3.60 Atlanta, GA 10.7% 10.1% 10.1% 9.7% 9.6% 8.8% SF Peninsula, CA Silicon Valley, CA Boston, MA $6.00 $5.84 $5.89 $5.92 $6.05 $6.13 Boston, MA 17.7% 18.7% 18.6% 17.6% 16.5% 15.9% Philadelphia, PA SF Peninsula, CA Chicago, IL $4.05 $4.12 $4.15 $4.25 $4.37 $4.46 Los Angeles, CA Chicago, IL 9.8% 9.0% 8.6% 7.7% 6.6% 5.8% Portland, OR Dallas, TX $4.07 $4.20 $4.32 $4.43 $4.57 $4.68 Miami, Fl Dallas, TX 12.1% 10.6% 9.9% 9.4% 8.7% 8.5% Houston, TX Denver, CO $5.69 $5.64 $5.72 $6.03 $6.34 $6.54 Houston, TX Denver, CO 7.5% 6.5% 6.5% 6.1% 5.7% 5.5% Miami, Fl Houston, TX $4.61 $4.84 $5.01 $5.22 $5.49 $5.74 Orange County, CA Houston, TX 7.7% 7.4% 7.2% 7.4% 7.1% 6.4% New Jersey North Inland Empire, CA $4.41 $4.56 $4.68 $4.80 $4.52 $4.57 New Jersey Central Inland Empire, CA 11.0% 7.0% 6.3% 7.3% 8.3% 8.7% Boston, MA Portland, OR Los Angeles, CA $6.24 $6.56 $6.80 $7.21 $7.73 $8.11 Los Angeles, CA 4.9% 4.6% 4.2% 3.7% 3.1% 2.5% Atlanta, GA Denver, CO Denver, CO Miami, Fl $4.79 $5.39 $5.51 $5.70 $5.94 $6.12 Miami, Fl 8.1% 7.0% 7.5% 7.2% 7.0% 6.8% Dallas, TX New Jersey Central $5.35 $5.96 $6.14 $6.23 $6.31 $6.44 New Jersey Central 9.6% 8.2% 7.5% 7.0% 6.5% 6.0% Inland Empire, CA Oakland, CA New Jersey North $5.97 $6.11 $6.18 $6.31 $6.44 $6.60 New Jersey North 9.5% 9.8% 9.8% 9.5% 8.6% 8.0% United States United States Oakland, CA $5.39 $5.71 $5.75 $5.87 $6.01 $6.08 Oakland, CA 9.2% 7.2% 7.1% 6.6% 6.0% 5.7% Los Angeles, CA New Jersey North Orange County, CA $7.59 $8.12 $8.30 $8.70 $9.14 $9.34 Chicago, IL Orange County, CA 6.3% 5.1% 4.8% 4.0% 3.3% 2.8% Silicon Valley, CA Philadelphia, PA $4.91 $4.85 $4.82 $5.01 $5.17 $5.31 Philadelphia, PA Philadelphia, PA 7.0% 6.9% 7.4% 7.0% 7.1% 6.7% Orange County, CA Phoenix, AZ $6.84 $6.81 $6.88 $6.93 $7.01 $7.10 Phoenix, AZ Phoenix, AZ 12.9% 12.0% 11.4% 10.7% 9.7% 9.3% Oakland, CA Portland, OR $5.58 $5.65 $5.81 $6.23 $6.54 $6.64 Inland Empire, CA Portland, OR 6.2% 7.6% 7.0% 6.9% 6.5% 5.8% Phoenix, AZ Boston, MA New Jersey Central SF Peninsula, CA $12.46 $13.41 $14.53 $14.88 $15.94 $16.68 SF Peninsula, CA 6.3% 7.8% 8.6% 8.1% 8.0% 7.9% Atlanta, GA Dallas, TX Silicon Valley, CA $11.69 $13.52 $14.30 $15.57 $16.93 $18.00 Silicon Valley, CA 10.8% 10.1% 9.4% 9.0% 8.7% 8.3% United States: United States: Chicago, IL $5.51 $5.69 $5.77 $5.89 $6.03 $6.19 -30% 0% 30% 60% 9.2% 8.5% 8.3% 7.8% 7.3% 6.8% CW Markets CW Markets -4% -2% 0% 2% 10

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