• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Colliers na industrial_2013_q1_final
 

Colliers na industrial_2013_q1_final

on

  • 278 views

 

Statistics

Views

Total Views
278
Views on SlideShare
278
Embed Views
0

Actions

Likes
0
Downloads
0
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Colliers na industrial_2013_q1_final Colliers na industrial_2013_q1_final Document Transcript

    • Blind SpotsEight innings into a “perfect game,” what couldgo wrong in this environment of low interest rates,vacancy and cap rates?HIGHLIGHTSNORTH AMERICAWWW.COLLIERS.COMQ1 2013 | INDUSTRIALN.A. INDUSTRIAL MARKETSUMMARY STATISTICS, Q1 2013USQ12013USQ22013*CanadaQ12013CanadaQ22013*VACANCYNET ABSORPTION    CONSTRUCTIONRENTAL RATE***Projected, relative to prior period**Warehouse rentsMARKET INDICATORSRelative to prior periodUS CAN NAVACANCY RATE (%) 8.68 4.13 8.20Change from Q4 2012 (%) -0.21 -0.12 -0.20ABSORPTION (MSF) 47.4 3.1 50.5NEW CONSTRUCTION (MSF) 18.1 1.9 19.9UNDER CONSTRUCTION (MSF) 61.8 13.8 75.6ASKING RENTSPER SF (USD/CAD) US CAN NAAverage Warehouse/Distribution Center 4.77 7.62 5.21Change from Q4 2012 (%) 1.58 0.81 1.29K.C. CONWAY Chief Economist | USAKEY TAKEAWAYS• Can the “perfect game” continue into the ninth? For the eighth straight quarter, the NorthAmerican vacancy rate declined in the 77 markets tracked by Colliers. Q1 vacancy is down20 basis points to 8.20% (8.68% among the primary 65 U.S. markets and 4.13% among the12 primary Canadian markets).• Check your “blind spots.” We weigh some potentially overlooked risks to industrial’s stellarperformance, including cap rate compression, due diligence risk, and increased constructionactivity. See “Blind Spots” on page 9 for the full list.• Absorption remains strong vs. job growth. Despite anemic job growth below 200,000 permonth, demand for industrial warehouse space and modern distribution centers remains strong.On the heels of nearly 71 MSF of net absorption in Q4 2012, the market absorbed another50.5 MSF in Q1 2013.Sq. Ft. By RegionAbsorption Per Market (SF)q4 12 - q1 136,000,0003,000,000600,000-600,000-3,000,000-6,000,0004 billion2 billion400 milOccupied Sq. Ft.Vacant Sq. Ft.NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q1 2013
    • P. 2 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA• Inland MSAs outpacing port markets in absorption. Other than LosAngeles, the leadership in warehouse leasing is coming from theinland distribution markets. The top five markets for net absorption inQ1 2013 were Chicago, LA, Atlanta, Detroit and Cincinnati.• New Supply is picking up, but is neither excessive nor speculative.New industrial construction this quarter increased by one-third to40.6 MSF. But put in perspective, this is less than quarterly averagenet absorption from Q1 2012 to Q1 2013 (45 MSF). And, more thanhalf of this new space is pre-leased or build-to-suit distributioncenters for major retailers and manufacturers.• Cap rates continue to compress and warehouse prices rise due toincreasing investor demand for warehouses. As institutionalinvestors become anxious about the multifamily market and takenote of industrial’s perfect game in the making, demand for modernwarehouse properties in core port and inland distribution marketsis on the rise.The “Perfect Game”Over the last two years, North American industrial warehouse marketshave pitched a “perfect game” through the eighth inning, to use a baseballanalogy. The property type has seen eight successive quarters of decliningvacancy rates, with net absorption outpacing new supply more than 2:1.Recognizing that Canadian markets account for only 10 percent of theNorth American warehouse space—and these 12 markets have maintaineda stable vacancy rate of approximately 5% with relatively no new supply—the improvement in these metrics has largely occurred in the primary 65U.S. warehouse markets. Here’s what that looks like:Any time economic growth and commercial real estate performance aredisconnected, it usually ends badly when we find that we all had a blindspot for some artificial stimulus. Prior to 1987, it was an historic change inAnd industrial warehouse isn’t doing it alone: other property types onthe commercial real estate “team” are backing up the industrial pitcherwith all-star numbers in key supply and demand metrics, resulting in caprate compression to record-low levels. And U.S. equities have turned in aneven stronger performance: The Standard & Poor’s (S&P) 500 index is upan astonishing 800 percent from its 2009/2010 lows, and 17 percent thisyear alone.10.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.6810.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.688.25 pt-2.04.06.08.010.012.014.0-10.020.030.040.050.060.070.0Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013Vacancy%Absorption MSF Completions MSF Vacancy %U.S. INDUSTRIAL WAREHOUSE PERFORMANCE | PAST NINE QUARTERS-10-8-6-4-202463.6Q1 2011 - Q2 201331.7-1.8-3.7-8.9-5.31.3 1.442.3 2.2 2.6 2.40.12.51.321.33.14.1-0.30.42.52008 2010 20122008 2010 2012Hardly a “perfect performance”for U.S. economic growth...morelike a roller coaster.UNITED STATES GDP GROWTH RATE (% CHANGE)SOURCE: www.tradingeconomics.com | Bureau of Economic AnalysisSo, as the pitcher takes the mound in the ninth, we wonder if he can closeout the perfect game. We do our best not to jinx him by thinking of whatmight go wrong, but sometimes we can’t help ourselves. A USA Todayarticle by Adam Shell (“With stocks this hot, why worry?”), published asthis report was going to press, assessed concerns over whether the stockprice eruption is another bubble, or solidly rational. Bloomberg published asimilar piece on the paradox of how sustained good news makes usnervous, and gave a “Worry List” of economic factors that could reversethe seemingly vertical trend in stock values.Jinx or no, these are reasonable concerns given how real estate valuesacross all asset classes—industrial especially—have climbed in a relativelyshort period. So, what are the potential “blind spots” that conceal risksto industrial’s perfect game?The EconomyGDP, Jobs and Industrial Warehouse DemandLet’s start with a quick review of key industrial economic measures tounderstand the plot behind this historic performance so far.U.S. GDP and industrial real estate have been out of sync since the2008-2009 financial crisis. This decoupling is contrary to all previousU.S. economic recoveries. Every time GDP has appeared poised for amomentous upward trend in the past three years, it collapses back in thenext one to three quarters, to just 0.1%–1.3%. And this roller-coaster rideof economic activity is despite record liquidity infusions into the U.S.economy by our central bank, the Federal Reserve. What does this patternin GDP mean for U.S. industrial real estate?Should we be concerned? Yes—but for the near term it may not matter.However, in the long run it matters a lot.Visitor 0 0 0 0 0 0 0 0Home 0 0 0 0 0 0 0 000
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 3the tax laws that ended investors’ ability to use real estate losses to offsetgains in other investments, which in turn led to an S&L and real estatecrisis. Pre-2007, the artificial stimulus was easy credit for housing andcommercial real estate (subprime and securitizable, financially engineeredmortgage-products), which overstimulated housing construction, elevatedhome ownership rates and lifted CRE values to record levels—until it allcame crashing back to Earth.Today, our government and central bank are playing a game of chicken,pitting the Federal Reserve’s zero-interest rate monetary policy againstaccelerating fiscal deficits in Congress, which hopes to reach top speed(i.e., full employment) before both vehicles collide. Investors and asset pricesare caught in the middle, and the natural response is to jump out of the way.This flight from bonds, sovereign debt, and cash will end badly with a thingcalled inflation. This explains why industrial and other commercial realestate assets are thriving in a weak GDP environment as investors look for asafe haven from fiscal deficits and inflationary monetary policy.The other half of the story, though, is more encouraging: on-shoring,or the return of manufacturing that left the U.S. over the past threedecades. This manufacturing renaissance in the U.S. is due to manyfactors: patent protection, cheap and reliable energy, and technology androbotics that enable 80+ percent automation of factories. Automation60.0%44.4%33.3%61.9%33.3%50.0% 47.1%0%20%40%60%80%100%Midwest Northeast South West Canada U.S. N.A.Expand Hold Steady Contract8.3% 1.4%40.0%55.6%66.7%38.1%58.3%50.0% 51.4%8.3% 1.4%40.0%55.6%66.7%38.1%58.3%50.0% 51.4%OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...?80.0% 77.8%55.6%71.4%33.3%69.0% 62.9%80.0% 77.8%55.6%71.4%33.3%69.0% 62.9%10.0%22.2%44.4%23.8%50.0%27.6%31.4%10.0% 4.8%16.7%3.4% 5.7%10.0%22.2%44.4%23.8%50.0%27.6%31.4%10.0% 4.8%16.7%3.4% 5.7%0%20%40%60%80%100%Midwest Northeast South West Canada U.S. N.A.Down Same Up3-MONTH FORECAST FOR VACANCY LEVELS (relative to current quarter)1.7%8.3%2.9%63.8%41.7%60.0%12.1%8.3%11.4%22.4%25.0%22.9%16.7%2.9%0% 20% 40% 60% 80% 100%U.S.CanadaN.A.Declining Bottoming No Clear Direction Increasing Peaking63.8%41.7%60.0%8.88 pt1.7%8.3%2.9%CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET4.8% 8.3% 1.7% 2.9%4.8% 8.3% 1.7% 2.9%60.0%33.3%44.4% 33.3%75.0%41.4%47.1%60.0%33.3%44.4% 33.3%75.0%41.4%47.1%40.0%66.7%55.6% 61.9%16.7%56.9% 50.0%0%20%40%60%80%100%Midwest Northeast South West Canada U.S. N.A.Down Same Up3-MONTH FORECAST FOR RENTS (relative to current quarter)*Excluding renewalshas reduced the importance of the labor cost issue in manufacturer’scalculations. What’s more, retailers and manufacturers are realizing thatthey need to make substantial capital investments in their supply-chaininfrastructure to capitalize on new manufacturing efficiencies, and toaccommodate growth in e-commerce activity of 3–4 times today’s levels, or10% of gross retail sales.In other words, the good news for industrial real estate is that it’s notjust an artificial stimulus driving this performance. Since automationallows us to produce goods for consumption by the global community—particularly LATAM, Russia and non-Eurozone Europe—without significantjob creation, we can expect sub-trend GDP growth in perpetuity.Here again, the Fed’s monetary policy and U.S. fiscal deficits will eventuallyend badly.The Institute for Supply Management’s (ISM) monthly PurchasingManagers’ Index (PMI) documents manufacturing expansion during afour-year period of sub-trend (i.e., below 3%) GDP and employmentgrowth. Over the course of the past 15 years, the PMI has dipped below 50for a period of 6 months or more only twice: i) in 2001 following Y2K andthe onset of a brief technology recession, and after the 9/11 attacks; and ii)Winter 2008 to Summer 2009, during the financial crisis. Since then,manufacturing activity has expanded for 47 consecutive months.% of Reporting Markets% of Reporting Markets% of Reporting Markets% of Reporting Markets
    • P. 4 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAPURCHASING MANAGERS’ INDEX | HISTORICAL DATA (>50 INDICATES EXPANDING MANUFACTURING ECONOMY)YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC2013 53.1 54.2 51.3 50.72012 53.7 51.9 53.3 54.1 52.5 50.2 50.5 50.7 51.6 51.7 49.9 50.22011 59.2 59.6 59.3 59.4 53.5 55.8 52.3 53.2 53.2 51.5 52.3 52.92010 56.6 55.7 59.3 58.9 57.8 56.1 56.4 57.8 56.5 57.3 58.2 57.32009 34.9 35.5 36.0 39.5 41.7 45.8 49.9 53.5 54.4 56.0 54.4 55.32008 50.3 47.6 48.3 48.8 48.8 49.8 50.0 49.2 44.8 38.9 36.5 33.12007 49.5 51.9 50.7 52.6 52.5 52.6 52.4 50.9 51.0 51.1 50.5 49.02006 55.0 55.8 54.3 55.2 53.7 52.0 53.0 53.7 52.2 51.4 50.3 51.42005 56.8 55.5 55.2 52.2 50.8 52.4 52.8 52.4 56.8 57.2 56.7 55.12004 60.8 59.9 60.6 60.6 61.4 60.5 59.9 58.5 57.4 56.3 56.2 57.22003 51.3 48.8 46.3 46.1 49.0 49.0 51.0 53.2 52.4 55.2 58.4 60.12002 47.5 50.7 52.4 52.4 53.1 53.6 50.2 50.3 50.5 49.0 48.5 51.62001 42.3 42.1 43.1 42.7 41.3 43.2 43.5 46.3 46.2 40.8 44.1 45.32000 56.7 55.8 54.9 54.7 53.2 51.4 52.5 49.9 49.7 48.7 48.5 43.91999 50.6 51.7 52.4 52.3 54.3 55.8 53.6 54.8 57.0 57.2 58.1 57.81998 53.8 52.9 52.9 52.2 50.9 48.9 49.2 49.3 48.7 48.7 48.2 46.8SOURCE: Institute of Supply ManagementAnd, the most recent ISM PMI report shows continued growth in new orders, manufacturing employment, and manufactured exports.MANUFACTURING AT A GLANCE | APRIL 2013INDEXSERIESINDEXAPRILSERIESINDEXMARCHCHANGE(%)DIRECTIONRATE OFCHANGETREND*(MONTHS)PMI™ 50.7 51.3 -0.6 Growing Slower 5New Orders 52.3 51.4 +0.9 Growing Faster 4Production 53.5 52.2 +1.3 Growing Faster 8Employment 50.2 54.2 -4.0 Growing Slower 43SupplierDeliveries50.9 49.4 +1.5 Slowing From Faster 1Inventories 46.5 49.5 -3.0 Contracting Faster 2CustomersInventories44.5 47.5 -3.0 Too Low Faster 17Prices 50.0 54.5 -4.5 Unchanged From Increasing 1Backlog ofOrders53.0 51.0 +2.0 Growing Faster 3Exports 54.0 56.0 -2.0 Growing Slower 5Imports 55.0 54.0 +1.0 Growing Faster 3OVERALL ECONOMY Growing Slower 47Manufacturing Sector Growing Slower 5SOURCE: Institute of Supply ManagementWhat ISM Survey RespondentsAre Saying About IndustrySPRING 2013“Production is still strong; severalnew projects to support alternativeenergy.” (Primary Metals)“Automotive demand remains firm.”(Fabricated Metal Products)“Business continues at a steadypace.” (Machinery)“General business conditions andindustrial markets remain strong.”(Transportation Equipment)“Seasonal pick-up underway inthe office furniture industry.”(Furniture & Related Products)“Overall, volume is steady.Q1 sales volume is lower thanprojected.” (Chemical Products)
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 5US CAN NAVacancy RateQ4 2012 8.89% 4.25% 8.40%Q1 2013 8.68% 4.13% 8.20%Quarter over Quarter Change(basis points) -21 -12 -20NORTH AMERICAN INDUSTRIAL OVERVIEW | Q1 2013MEASURE NORTH AMERICA CANADA UNITED STATES WEST/MIDWEST SOUTH NORTHEAST# of Markets 77 12 65 35 21 9Inventory (MSF) 16,276.8 1,721.3 14,555.6 8,095.2 4,219.8 2,240.6% of N.A. Inventory 100.0 10.6 89.4 49.7 25.9 13.8New Supply (Q1-2013 MSF) 19.9 1.9 18.1 9.7 5.7 2.6% of N.A. New Supply 100.0 9.4 90.6 48.5 28.8 13.3Vacancy (%) 8.20 4.13 8.68 8.04 9.44 9.56Absorption (MSF) 50.5 3.1 47.4 29.7 13.4 4.2% of N.A. Absorption 100.0 6.2 93.8 58.9 26.6 8.4Leadership Markets Absorption:Toronto, Calgaryand VancouverAbsorption, Top5: Chicago, LA,Atlanta, Detroit andCincinnatiAbsorption,Midwest Top 5:Chicago, Detroit,Cincinnati,Cleveland andKansas City.Absorption, WestTop 3: LA, Phoenixand Seattle.Absorption, Top 5:Atlanta, Memphis(#1 Air Cargo inworld), Charlotte(housing recovery),Jacksonville andHouston (key portmarkets).Leasing activity,Top 3: Baltimore(newest post-Panamax port),Philadelphia(energy) andPittsburgh.Laggard Markets Absorption:Montreal andWaterloo (netnegative in Q12013)Vacancy: Halifax,Waterloo andOttawa (above 5%).VACANCYVacancy continues to decline in North American warehouse markets—in U.S. markets at twice the pace of Canadian markets, due to greateroversupply and on-shoring of U.S. manufacturing. From a regionalperspective, Canada has the lowest average vacancy rate in North Americaat 4.13 percent (down 12 basis points from Q4 2012), and the NortheastU.S. has the highest vacancy rate at 9.56 percent (down 11 basis pointsfrom Q4 2012). The West and Midwest are the only two regions in the U.S.with vacancy rates below the 8.7 percent national average.Behind the Statistics& Beyond the BasicsScope of Colliers Industrial Outlook Report: Colliers monitors industrialproperty conditions in 77 North American markets from Miami to Montreal,totaling 16.3 billion square feet of inventory. Approximately 90 percent(14.6 billion square feet) of this inventory is located in the United States.The West and Midwest regions constitute approximately half of NorthAmerican industrial warehouse space (8.1 billion square feet); combined,they also account for approximately 60% of the annual net leasingactivity in North America. The South is the next-largest region, with4.2 billion square feet, or 26% of North American industrial warehousespace. The expansion of the Panama Canal—and the addition of at leastfive more post-Panamax ports to the East and Gulf coasts—will onlyenhance the market share of key inland and port distribution markets inthe Southeast and Southwest by 2015. With respect to the numbers forQ1 2013, the table below tells the story:-----------------------------------------------------------------------------------------------------------------------
    • P. 6 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAMillions-1.0 -0.5 0.0 0.5 1.0 1.5Toronto, ONCalgary, ABVancouver, BCEdmonton, ABOttawa, ONRegina, SKSaskatoon, SKVictoria, BCHalifax, NSWinnipeg, MBWaterloo Region, ONMontreal, QCABSORPTION (SF) | CANADIAN MARKETS | Q1 2013-2.0 0.0 2.0 4.0 6.0 8.0New Jersey – NorthernNew Jersey – CentralSavannah, GAIndianapolis, INDallas-Ft. Worth, TXLos Angeles – Inland Empire, CALos Angeles, CADetroit, MIAtlanta, GAChicago, ILMillionsABSORPTION (SF) | SELECT U.S. MARKETS | Q1 2013TOP 23 NORTH AMERICAN INDUSTRIAL MARKETS WITHVACANCY BELOW NORTH AMERICAN AVERAGEVACANCYRANKINGMSAQ1 2013VACANCYRATE (%)MARKETPROFILE1CANADAVancouver 3.53rd largest Canadianindustrial market2 Toronto 3.9Largest Canadianindustrial market3 Montreal 4.52nd largest Canadianindustrial market4 Calgary 4.74th largest Canadianindustrial market5UNITEDSTATESHonolulu 3.6Top-20 North Americanport6 Los Angeles 3.9Busiest North AmericanTEU container port7 Orange County 4.9 –8 Houston 4.9BusiestGulf Coast port9 Long Island 5.4Port of New Yorkinfluence10 Seattle 5.7Top-10 North Americanport market11 Kansas City 6.1Top-10 North Americanintermodal rail12 Indianapolis 6.4Developing intermodallink to California13 Milwaukee 6.5Key Great Lakes regionport14 Miami 6.6Top-20 North Americanport to Latin America15 Portland 6.8Top-20 North Americanport – autos andagriculture16 Grand Rapids 7.1Proximity to Great Lakesports & rail17 L.A. Inland Empire 7.2Top-5 intermodal railfacility18 Denver 7.3Top-10 intermodal rail &air cargo19 Columbus, Ohio 7.8Top-5 air cargo market;link to port of Virginia20 Cincinnati 8.1Intermodal and raillinkage to Canada21 San Francisco Peninsula 8.2Vital West Coast portmarket22 Cleveland, Ohio 8.4Great Lakes and automanufacturing influence23 New Jersey (Northern) 8.4Port of New Yorkinfluence#5–#23 are the 19 U.S. markets with a vacancy rate < U.S. average of 8.7%ABSORPTIONIt would have been a tall order for North American first-quarter warehouseabsorption to equal or exceed the 71 MSF achieved in Q4 2012. 2012’s netindustrial absorption was the best since the 2008–2009 financial crisis,and Q4 net absorption accounted for 45 percent of CY 2012 net leasingactivity in aggregate.However, despite the headwinds of the unresolved Fiscal Cliff, the deferredInternational Longshoremen’s Association (ILA) strike along the East andGulf coasts, and more deterioration in Europe, Q1 2013 absorption turnedin a solid performance. Approximately 50 MSF of warehouse space wasabsorbed—94% in the primary 65 U.S. warehouse markets. Which marketsoutperformed and why?As revealed by year-end vacancy statistics, there is a strong correlation toport and intermodal markets, with three wrinkles:• Detroit, Cleveland and Kansas City (influenced by the auto recovery)• Charlotte & Phoenix (influenced by the housing recovery), and• Baltimore (the newer of only two East Coast post-Panamax ports,along with the Port of Virginia)
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 7From a regional perspective, net absorption is strongest in the Midwest(17.5MSF) and South (13.4 MSF), led by Chicago, Detroit and Cincinnatiin the Midwest, and Atlanta, Memphis and Charlotte, NC, in the South.Los Angeles, Phoenix and Seattle experienced the most net leasingactivity in Q1 along the West Coast, and Baltimore has taken over leadershipin the Northeast as America’s newest post-Panamax port, followed byPhiladelphia with energy trading activity along the Delaware River.Inland markets this quarter outpaced port markets in absorption. The top5 markets with respect to net absorption in Q1 2013 were:Looking forward to 2013, delayed delivery of new space under constructionis the only significant obstacle to industrial leasing activity in key port andintermodal markets such as Los Angeles, Seattle, Houston and Memphis.These markets can’t complete new space fast enough to meet demand, andmarket forces will likely result in disproportionately high 2H 2013 netleasing activity, as was the case in 2012.CONSTRUCTION ACTIVITYFinally, eight innings into a perfect game, the bullpen is warming up asnew construction activity on the rise. Although there is a dearth ofproduct for sale, an estimated 40% of existing U.S. warehouse space isfunctionally obsolete (less than 30-foot clear height, etc.). There is addedurgency on the part of retailers and manufacturers to occupy or buildmodern 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 atyear-end 2012 to 40.6 MSF. The ten states with the most warehouse anddistribution center space under construction are Texas (7.0 MSF), NewJersey (4.9 MSF), Georgia (3.6 MSF), Illinois (3.1 MSF), Pennsylvania (2.7MSF), Ohio (2.3 MSF), Arizona (2.0 MSF), Florida (1.8 MSF), Utah (1.8MSF), and California (1.2 MSF). [Source: Dodge Pipeline, Q1 2013]In our search for blind spots, should this steep increase in newconstruction be one such metric to monitor? While it’s worth tracking overthe next 3–5 quarters, investors and developers can take comfort in twokey metrics that put this construction activity in proper perspective. First,40.6 MSF of construction is less than the average quarterly net absorptionover the previous four quarters; that is, leasing activity is outpacing newconstruction underway four to one. Second, more than half of this newconstruction is pre-leased or build-to-suit for owner occupancy by largeretailers and manufacturers. National retailers such as Amazon, DollarTree, Family Dollar, FedEx, Home Depot, L’Oreal, Publix, O’Reilly AutoParts, Restoration Hardware, Target, Tractor Supply and Whole Foods areconstructing in excess of 20 MSF of modern distribution and logisticscenters from coast to coast. Here’s a sampling of these projects in the tenstates with the most new construction activity:1 Chicago 6.0 MSF2 Los Angeles 4.3 MSF(2.05 MSF from Inland Empire)3 Atlanta 3.0 MSF4 Detroit 2.3 MSF(Right-to-work is paying dividends in Michigan)5 Cincinnati 2.1 MSFRounding out the top ten this quarter are Cleveland (1.9 MSF); Memphis,Kansas City and Charlotte (each with 1.7 MSF); and Baltimore (1.5 MSF).Why haven’t the big hitters (fiscal uncertainty, unemployment and laborunrest) ended industrial’s perfect game? Because development and leasingactivity is fueled by distributors, manufacturers, retailers and shippers thatneed to re-engineer their supply chains to gain efficiencies required in thepost-Panamax era, just two years away. Seven of the top ten U.S. marketsfor both Q1 2013 and CY 2012 absorption were top-ten North Americanport or intermodal industrial marketsMSA Q1 2013 (MSF) MSA CY 2012 (MSF)1Chicago(INTERMODAL)6.0 Chicago13.438(INTERMODAL)2Los Angeles(PORT + INLAND)4.3Dallas/Ft. Worth9.728(INTERMODAL)3Atlanta(INTERMODAL)3.0 Detroit9.169(AUTO-RECOVERY)4Detroit(AUTO RECOVERY)2.3Los Angeles –Inland Empire8.470(INTERMODAL)5Cincinnati(MANUFACTURING)2.1Los Angeles –Coastal8.375(PORT)6Cleveland (AUTO+ GREAT LAKES)1.9 Atlanta7.400(INTERMODAL)7Kansas City(INERMODAL)1.7 Houston6.245(PORT)8Memphis(#1 AIR CARGO)1.7 Phoenix5.137(HOUSING RECOVERY)9Charlotte, NC(HOUSING)1.7 Columbus4.916(AIR CARGO)10Baltimore-NewPPMX Port1.5 Seattle3.916(PORT)STATENEWWAREHOUSECONSTRUCTION (MSF)LARGESTDISTRIBUTION CENTERSUNDER CONSTRUCTIONTexas 7.0Amazon: three 1.0+ MSF centers inDallas and San AntonioRestoration Hardware: 850,000 SF in GrandPrairie (Dallas, TX)L’Oreal: 500,000 SF in suburban DallasNew Jersey 4.9 Amazon: 1.0MSF in TrentonGeorgia 3.6Home Depot: 1.0 MSF in AtlantaTractor Supply: 700,000 SF in Macon(Atlanta area)Illinois 3.1 Trader Joe’s: 800,000 SF in ChicagoPennsylvania 2.7 PetSmart and Dollar GeneralOhio 2.3 Tween: 750,000 SF Arizona 2.0American Furniture: 632,000 SF outsidePhoenixFlorida 1.8Publix and O’Reilly Auto Parts:Orlando and Lakeland
    • P. 8 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAENGINEERING NEWS-RECORD’S CONSTRUCTION COST INDEXYEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG2013 9437 9453 9456 9484 9516 95422012 9176 9198 9268 9273 9290 9291 9324 9351 9341 9376 9398 9412 93082011 8938 8998 9011 9027 9035 9053 9080 9088 9116 9147 9173 9172 90702010 8660 8672 8671 8677 8761 8055 8844 8837 8836 8921 8951 8952 87992009 8549 8533 8534 8528 8574 8578 8566 8564 8586 8596 8592 8641 85702008 8090 8094 8109 8112 8141 8185 8293 8362 8557 8623 8602 8551 83102007 7880 7880 7856 7865 7942 7939 7959 8007 8050 8045 8092 8089 79662006 7660 7689 7692 7695 7691 7700 7721 7722 7763 7883 7911 7888 77512005 7297 7298 7309 7355 7398 7415 7422 7479 7540 7563 7630 7647 74462004 6825 6862 6957 7017 7065 7109 7126 7188 7298 7314 7312 7308 71152003 6581 6640 6627 6635 6642 6694 6695 6733 6741 6771 6794 6782 66942002 6462 6462 6502 6480 6512 6532 6605 6592 6589 6579 6578 6563 65382001 6281 6272 6279 6286 6288 6318 6404 6389 6391 6397 6410 6390 63432000 6130 6160 6202 6201 6233 6238 6225 6233 6224 6259 6266 6283 6221INDEX METHODOLOGY: 200 hours of common labor at the 20-city average of common labor rates, plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated20-city price from 1996, plus 1.128 tons of portland cement at the 20-city price, plus 1,088 board-ft of 2x4 lumber at the 20-city price.Despite the uptick in new warehouse and distribution center constructionin Q1, over-building risk remains low given the scarcity of debt capital forspeculative construction by banks, and the limited amount of speculativewarehouse construction underway. If net absorption were to slip overthe next three quarters, and new projects increased in each succeedingquarter by the same amount as in Q1 2013, over-building would becomea concern in 2014.One danger that spans all commercial property types is rising constructioncosts. Because Colliers has elevated this item in prior Outlook reports,it should come as no surprise that construction costs never actuallydeclined during the 2008–2009 financial crisis and ensuing recession. Asdocumented in Engineering News-Record’s Construction Cost Index,construction costs have risen nearly 20% since Spring 2007, and are upan additional 2.7% in June 2013 over June 2012. Investors and developersconsidering new construction investments should budget construction costincreases at double the Consumer Price Index (CPI) for 2H 2013 and2014, due to pressures on labor and materials.CONSTRUCTION COSTSThe CCI annual escalation rate inched up to 2.7% in June from 2.4% in May and 2.0% in March.20-CITY: 1913 = 100JUNE 2013INDEX VALUE% CHANGEMONTH% CHANGEYEARConstruction Cost 9542.33 +0.3 +2.7Common Labor 20236.18 +0.3 +2.8Wage $/Hour 38.45 +0.3 +2.8Source: Engineering News-RecordWAREHOUSE TRANSACTION ACTIVITYAccording to Real Capital Analytics and the Colliers’ Q1 Broker Survey,Q1 2013 saw approximately $7.0 billion of industrial real estatetransactions, of which $4.8 billion was spent on acquiring pure warehouseproperties. Although that volume was a 16% increase over aggregateQ1 2012 industrial property transactions, there was a 41% increasein warehouse property sales alone. Clearly, investment capital has anincreased appetite for warehouse properties.While some observations from the transaction data were predictable—such as the predominance of sales activity in key Western markets likeLos Angeles (nearly $1.0 billion in total warehouse transactions)—otherobservations are contrary to recent activity. In particular, the volume ofproperty sales in secondary and tertiary MSAs ($4.0 billion) outpacedthose located in core/primary MSAs ($3.0 billion). With anxiety growingover whether the multifamily market is overheating, and industrial realestate continuing its perfect game quarter after quarter, transactionactivity will remain robust for warehouse properties. The only limitingconstraint is likely to be a dearth of assets and portfolios for sale.
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 9ConclusionThe Blind SpotsSo, what could disrupt this “perfect game” in industrial real estate? Whatblind spots should we be aware of this year to avoid an ROI or NOI wreckin 2014 or 2015?BLIND SPOT #1: Favoring functionally obsolete warehouse spaceover modern, in-demand, distribution centers in Post-Panamax erasupply-chain markets. A significant portion of existing U.S. warehousespace is functionally obsolete (clear heights below 30 feet, less than60-foot column spacing, etc.), or is located in markets that will not becentral to the post-Panamax supply chain. Modern distribution centersneed 30-foot clear ceiling height for conveyor systems, as well asconnectivity to post-Panamax ports via intermodal rail and proximity to aircargo centers for e-commerce fulfillment. Distribution, logistic ande-commerce fulfillment centers along the paths linking ports, intermodalrail, 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 Outlook report at www.colliers.com/us/port-1Hfor more detailed information.BLIND SPOT #2: Elevated new construction activity. Although theQ1 2013 increase in construction activity doesn’t indicate a supply-demandimbalance, this metric needs to be monitored closely over the next 4–6quarters. Six to eight quarters ago a similar uptick in multifamily constuc-tion coincided with another “perfect game” (vacancy falling to 5%, double-digit rental increases for eight consecutive quarters, record cap rate com-pression, etc.), and today the market is anxious about overbuilding in lightof 200,000+ annualized permits.BLIND SPOT #3: Cap rate compression. Industrial has been the lastcommercial property type to experience cap rate compression since2010, but it’s now catching up. The cap rates of 7%+ reported by RCA arenational averages, and do not reflect the sub-6% transaction activity forportfolios or individual modern distribution buildings in key port andinland distribution markets. Colliers is seeing rates in the 5% range for theseinstitutional warehouse properties. While cap rates can compress another100–150 basis points from the national 7% average, the pace of thiscompression should be monitored. Recall that at a cap rate below 8%, it onlytakes a 200 basis point increase to wipe out 25% of a property’s value.BLIND SPOT #4: Port and transportation worker strife. An ILAstrike was finally averted this past quarter and a six-year dock workerscontract agreed upon for the East and Gulf coast ports. It took a painful fivemonths (October 2012 to February 2013), during which retailers andmanufacturers re-routed or accelerated cargo shipments to beat changingstrike deadlines. Unfortunately, this process will repeat itself for the WestCoast ports at the end of 2013. And, other labor strike issues loom intrucking and ports in LATAM, Asia and Europe. The 8-day Los Angelesclerical workers strike last fall demonstrated how disruptive suchstoppages can be to the flow of goods, and many port tenants now haveoperational clauses in their leases that provide for rent relief if cargocannot move through the ports. Know what’s in your leases.BLIND SPOT #5: Due diligence risk. Sellers are now commandingshorter and shorter periods of due diligence when selling properties,owing to the scarcity of available assets, and the attention that industrial’sperfect game has brought to the sector. This is one of the greatest newrisks to the industrial market. In Q1 Colliers saw due diligence periodscompress to 2–4 weeks for a number of warehouse transactions that eitherwere in growth-restricted MSAs or had investment-grade tenants. Thisfeeding frenzy for institutional-quality warehouse assets is shifting duediligence risk from the seller to the buyer. Let the buyer be prepared: havelegal, inspection and environmental vendors ready to go at the drop of acontract, positioned to close in as little as two weeks.BLIND SPOT #6: Overlooking adaptive re-use opportunities. Not allwarehouse properties are created equal and not all markets can easilydevelop new supply to relieve demand pressures. As a result, Colliers isseeing functionally obsolete properties being acquired for adaptive re-usein growth-restricted port markets. For example, older manufacturingproperties close to the market’s port facilities are being converted todistribution space in cities such as Los Angeles, San Francisco, Seattle,Miami, Charleston, and New York. Developers and investors shouldn’toverlook these adaptive reuse opportunities in this feeding frenzy toacquire assets.In conclusion, we’re all rooting for industrial as it takes the mound fora ninth inning in Q2 2013 with a perfect game on the line. But in ourexcitement about higher ROIs and NOIs for our real estate assets, it’sreasonable to remember there are still dangers out there. Keep your eye onthe ball, recognize the warehouse investment cycle we’ve entered, andmonitor the blind spots such as the ones we’ve discussed above.
    • P. 10 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAUNITED STATES | INDUSTRIAL SURVEYMARKETINVENTORYMAR. 31, 2013(SF)NEWCONSTRUCTION Q1 2013(SF)CURRENTLYUNDER CONSTRUCTION(SF)NORTHEASTBaltimore, MD 229,098,236 1,042,000 –Boston, MA 152,776,556 – 1,200,031Hartford, CT 96,802,106 – 510,000Long Island, NY 162,706,462 30,000 379,564New Jersey – Central 353,745,719 – 1,259,244New Jersey – Northern 374,436,831 – 1,444,817Philadelphia, PA 412,989,387 800,280 1,994,550Pittsburgh, PA 180,812,833 127,120 100,302Washington, DC 277,212,243 647,686 1,673,765Northeast Total 2,240,580,373 2,647,086 8,562,273SOUTHAtlanta, GA 608,874,310 10,000 5,753,055Birmingham, AL 101,989,079 – 412,000Charleston, SC 32,653,481 327,000 166,000Charlotte, NC 331,567,614 238,505 940,015Columbia, SC 37,856,194 – –Dallas-Ft. Worth, TX 718,440,660 390,641 3,124,220Ft. Lauderdale-Broward, FL 123,462,807 351,614 247,376Greenville/Spartanburg, SC 184,939,773 – –Houston, TX 485,486,002 1,108,430 2,670,272Jacksonville, FL 123,123,887 1,162,760 91,270Little Rock, AR 45,009,027 18,376 497,443Louisville, KY 176,471,087 15,000 –Memphis, TN 220,677,114 869,892 1,745,000Miami, FL 221,182,455 871,041 619,280Nashville, TN 113,566,903 – 1,128,500Orlando, FL 145,323,950 – –Raleigh, NC 118,406,504 – 20,850Richmond, VA 113,233,363 146,572 311,730Savannah, GA 44,621,300 200,000 681,000Tampa Bay, FL 212,868,243 35,519 152,500West Palm Beach, FL 60,048,254 – 20,900South Total 4,219,802,007 5,745,350 18,581,411
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 11UNITED STATES | INDUSTRIAL SURVEYMARKETINVENTORYMAR. 31, 2013(SF)NEWCONSTRUCTION Q1 2013(SF)CURRENTLYUNDER CONSTRUCTION(SF)MIDWESTChicago, IL 1,310,969,792 1,586,541 4,738,635Cincinnati, OH 244,257,287 697,938 –Cleveland, OH 512,363,265 – 39,685Columbus, OH 212,366,316 90,800 1,233,303Detroit, MI 552,701,937 116,746 –Grand Rapids, MI 112,282,721 – 285,000Indianapolis, IN 281,007,396 2,060,027 820,640Kansas City, MO-KS 235,738,568 642,377 2,117,425Milwaukee, WI 223,736,866 330,575 90,000Minneapolis/St. Paul, MN 247,588,469 669,000 871,000Omaha, NE 67,721,789 – 35,636St. Louis, MO 271,993,154 642,500 958,268Midwest Total 4,272,727,560 6,836,504 11,189,592WESTAlbuquerque, NM 36,902,890 – 242,500Bakersfield, CA 33,426,098 21,400 2,243,673Boise, ID 35,307,608 297,067 –Denver, CO 215,963,643 – 855,271Fairfield, CA 46,880,086 48,133 –Fresno, CA 48,600,000 – –Honolulu, HI 40,071,033 – –Las Vegas, NV 109,306,668 129,000 619,320Los Angeles, CA 887,796,700 – 3,031,000Los Angeles – Inland Empire, CA 421,172,500 1,528,300 4,674,600Oakland, CA 141,540,885 – 1,092,215Orange County, CA 182,738,900 – 183,200Phoenix, AZ 273,317,438 445,992 5,226,079Pleasanton/Tri-Valley, CA 16,425,448 – –Portland, OR 202,569,690 179,000 1,884,623Reno, NV 88,034,379 – –Sacramento, CA 189,042,368 70,000 –San Diego, CA 187,148,659 49,256 123,429San Francisco Peninsula, CA 40,898,873 – 54,000San Jose/Silicon Valley, CA 251,655,806 – 181,100Seattle/Puget Sound, WA 261,779,846 – 2,000,000Stockton/San Joaquin County, CA 94,105,012 56,000 1,017,353Walnut Creek, CA 17,760,034 – –West Total 3,822,444,564 2,824,148 23,428,363U.S. TOTALS 14,555,554,504 18,053,088 61,761,639(continued)
    • P. 12 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAUNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013MARKETABSORPTIONQ1 2013(SF)VACANCY RATE (%)DEC. 31, 2012VACANCY RATE (%)MAR. 31, 2013NORTHEASTBaltimore, MD 1,510,126 10.13 9.88Boston, MA 20,414 17.72 17.71Hartford, CT (39,368) 9.19 8.72Long Island, NY 388,313 5.69 5.44New Jersey – Central 249,929 9.22 9.15New Jersey – Northern (264,668) 8.35 8.42Philadelphia, PA 1,361,398 9.83 9.68Pittsburgh, PA 569,415 8.15 7.84Washington, DC 438,156 10.50 10.56Northeast Total 4,233,715 9.67 9.56SOUTHAtlanta, GA 3,041,675 13.16 12.66Birmingham, AL (22,649) 10.24 9.70Charleston, SC 43,341 10.76 11.52Charlotte, NC 1,676,930 12.06 11.62Columbia, SC 265,246 8.78 8.08Dallas-Ft. Worth, TX 1,159,637 9.19 9.08Ft. Lauderdale-Broward, FL 658,619 8.33 8.06Greenville/Spartanburg, SC 384,297 9.27 9.06Houston, TX 1,332,391 5.03 4.97Jacksonville, FL 1,376,050 10.08 9.81Little Rock, AR (234,132) 11.17 11.78Louisville, KY (749,083) 8.37 8.79Memphis, TN 1,679,807 12.60 12.18Miami, FL 318,612 6.41 6.56Nashville, TN (15,157) 9.25 9.26Orlando, FL 844,148 10.27 9.69Raleigh, NC 369,400 9.67 9.36Richmond, VA 123,791 10.02 10.03Savannah, GA 256,100 11.84 11.66Tampa Bay, FL 602,718 9.36 9.19West Palm Beach, FL 324,515 7.28 6.74South Total 13,436,256 9.65 9.44
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 13UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013MARKETABSORPTIONQ1 2013(SF)VACANCY RATE (%)DEC. 31, 2012VACANCY RATE (%)MAR. 31, 2013MIDWESTChicago, IL 6,038,962 9.53 9.00Cincinnati, OH 2,114,377 8.73 8.12Cleveland, OH 1,904,625 8.73 8.35Columbus, OH 213,265 7.78 7.75Detroit, MI 2,308,652 11.35 10.94Grand Rapids, MI 37,278 7.13 7.10Indianapolis, IN 761,095 6.19 6.40Kansas City, MO-KS 1,720,440 6.62 6.14Milwaukee, WI 491,922 6.60 6.51Minneapolis/St. Paul, MN 1,054,156 8.30 8.02Omaha, NE 125,427 5.16 4.99St. Louis, MO 687,818 8.42 8.17Midwest Total 17,458,017 8.73 8.38WESTAlbuquerque, NM 39,363 10.25 10.21Bakersfield, CA (308,397) 2.80 3.79Boise, ID 858,210 9.51 7.84Denver, CO 265,628 7.45 7.28Fairfield, CA 52,228 10.13 10.12Fresno, CA 100,000 9.26 9.05Honolulu, HI 43,107 3.67 3.56Las Vegas, NV 688,349 15.32 14.79Los Angeles, CA 2,282,700 4.18 3.91Los Angeles – Inland Empire, CA 2,049,800 5.93 7.21Oakland, CA 758,594 8.23 7.70Orange County, CA 262,200 5.10 4.97Phoenix, AZ 1,361,244 12.58 12.22Pleasanton/Tri-Valley, CA (38,232) 9.45 9.70Portland, OR (7,361) 6.74 6.84Reno, NV (250,374) 10.86 11.14Sacramento, CA 64,404 12.72 12.72San Diego, CA 972,570 9.92 9.43San Francisco Peninsula, CA 537,367 9.85 8.15San Jose/Silicon Valley, CA 1,055,828 10.73 10.16Seattle/Puget Sound, WA 1,026,634 5.82 5.65Stockton/San Joaquin County, CA 387,356 13.19 12.58Walnut Creek, CA 76,751 9.78 9.35West Total 12,277,969 7.77 7.66U.S. TOTALS 47,405,957 8.89 8.68(continued)
    • P. 14 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAUNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013MARKETSALES PRICE(USD PSF)CAP RATE(%)VACANCYFORECAST(3 MONTHS)ABSORPTIONFORECAST(3 MONTHS)RENT FORECAST(3 MONTHS)NORTHEASTBaltimore, MD 53.00 7.80   Boston, MA 68.00 –  Hartford, CT 38.00 8.50 Long Island, NY 69.14 7.88  New Jersey – Central 85.00 7.20   New Jersey – Northern 92.00 6.00 Close to zero Philadelphia, PA 56.00 7.85   Pittsburgh, PA 50.00 7.75   Washington, DC 146.08 6.50   Northeast Average* 73.02 7.44 – – –SOUTHAtlanta, GA 35.60 8.20  Birmingham, AL – – Close to zero Charleston, SC 46.00 7.50   Charlotte, NC – – – – –Columbia, SC – –   Dallas-Ft. Worth, TX 55.00 7.20 Ft. Lauderdale-Broward, FL 80.00 10.00  Greenville/Spartanburg, SC – –   Houston, TX 59.00 6.50 Jacksonville, FL 30.00 8.00 Little Rock, AR 65.45 9.00 Close to zeroMemphis, TN – –   Miami, FL 77.00 7.15   Nashville, TN 79.00 8.00   Orlando, FL 50.00 7.50  Richmond, VA – –  Savannah, GA 34.00 8.50 Close to zeroTampa Bay, FL 37.64 8.89   West Palm Beach, FL 45.00 –  South Average* 53.36 8.04 – – –* Straight averages used.
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 15UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013MARKETSALES PRICE(USD PSF)CAP RATE(%)VACANCYFORECAST(3 MONTHS)ABSORPTIONFORECAST(3 MONTHS)RENT FORECAST(3 MONTHS)MIDWESTChicago, IL 52.00 6.15 Cincinnati, OH 37.50 8.25  Cleveland, OH – – – – –Columbus, OH 32.49 –   Detroit, MI 22.33 8.89  Grand Rapids, MI – –   Indianapolis, IN 40.00 7.20  Kansas City, MO-KS 30.00 –   Milwaukee, WI 50.00 9.00  Minneapolis/St. Paul, MN 31.22 –   Omaha, NE – –  St. Louis, MO – – – – –Midwest Average* 36.94 7.90 – – –WESTAlbuquerque, NM 83.00 8.00 Close to zeroBakersfield, CA 38.00 10.00  Boise, ID – –   Denver, CO 53.00 8.00   Fairfield, CA 76.49 7.40   Fresno, CA 42.00 9.00   Honolulu, HI – –   Las Vegas, NV 51.98 –  Los Angeles, CA 93.00 6.50 Close to zero Los Angeles – Inland Empire, CA 69.00 7.00  Oakland, CA 94.30 6.50   Orange County, CA 130.00 6.00  Phoenix, AZ 52.00 8.10   Pleasanton/Tri-Valley, CA – –  Portland, OR 70.00 6.50   Sacramento, CA 76.00 – San Diego, CA 80.00 –   San Francisco Peninsula, CA 250.00 7.00  San Jose/Silicon Valley, CA 105.00 6.00   Stockton/San Joaquin County, CA – –   Walnut Creek, CA – – Close to zeroWest Average* 85.24 7.38 – – –U.S. AVERAGE* 65.44 7.67 – – –(continued)* Straight averages used.
    • P. 16 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICAUNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013MARKETWAREHOUSE/DISTRIBUTIONSPACE(USD PSF)BULKSPACE(USD PSF)FLEX/SERVICESPACE(USD PSF)TECH/R&DSPACE(USD PSF)NORTHEASTBaltimore, MD 4.74 4.93 10.99 –Boston, MA 6.01 5.32 6.46 11.30Hartford, CT 4.36 5.70 6.50 6.50Long Island, NY 8.92 9.13 14.49 –New Jersey – Central 4.62 4.12 12.19 12.19New Jersey – Northern 6.29 5.95 9.92 12.26Philadelphia, PA 4.25 4.15 7.00 11.00Pittsburgh, PA 4.84 4.83 9.70 11.47Washington, DC 6.19 5.57 11.55 15.50Northeast Average* 5.58 5.52 9.87 11.46SOUTHAtlanta, GA 3.22 2.92 7.07 10.00Birmingham, AL 3.48 4.04 7.88 –Charleston, SC 3.85 4.30 6.25 16.25Charlotte, NC 3.33 3.24 8.70 –Columbia, SC 3.58 3.13 7.13 –Dallas-Ft. Worth, TX 3.20 2.70 6.95 8.45Ft. Lauderdale-Broward, FL 6.30 5.88 9.31 7.95Greenville/Spartanburg, SC 2.88 2.67 7.09 –Houston, TX 5.45 4.43 7.21 8.21Jacksonville, FL 3.79 3.50 8.52 –Little Rock, AR 2.68 2.74 7.35 –Louisville, KY 3.30 3.45 7.73 –Memphis, TN 2.51 2.59 4.78 9.50Miami, FL 7.80 7.31 9.80 12.00Nashville, TN 3.02 8.42 8.60 7.50Orlando, FL 4.39 4.21 8.24 8.56Raleigh, NC 3.74 4.17 9.94 –Richmond, VA 3.56 3.60 7.89 9.11Savannah, GA 3.95 3.75 7.00 10.00Tampa Bay, FL 4.66 3.85 7.50 5.51West Palm Beach, FL 6.82 6.18 11.03 7.00South Average* 4.07 4.15 7.90 9.23* Straight averages used.
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 17UNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013MARKETWAREHOUSE/DISTRIBUTIONSPACE(USD PSF)BULKSPACE(USD PSF)FLEX/SERVICESPACE(USD PSF)TECH/R&DSPACE(USD PSF)MIDWESTChicago, IL 3.85 3.48 7.31 –Cincinnati, OH 3.11 2.73 6.22 6.22Cleveland, OH 3.33 3.02 7.77 –Columbus, OH 2.76 2.67 4.82 4.82Detroit, MI 3.84 3.72 7.30 7.30Grand Rapids, MI 3.16 3.09 4.38 4.38Indianapolis, IN 4.47 3.25 6.69 –Kansas City, MO-KS 4.28 3.58 8.92 7.34Milwaukee, WI 4.28 4.08 5.13 –Minneapolis/St. Paul, MN 4.48 – 6.25 6.92Omaha, NE 4.88 3.47 5.85 4.04St. Louis, MO 3.77 3.56 7.30 –Midwest Average* 3.85 3.33 6.50 5.86WESTAlbuquerque, NM 5.42 4.25 8.84 8.84Bakersfield, CA 4.00 3.42 8.00 –Boise, ID 5.21 4.29 3.79 6.00Denver, CO 4.62 3.78 8.55 9.50Fairfield, CA 5.45 5.57 8.32 8.42Fresno, CA 3.60 3.36 4.80 5.50Honolulu, HI 11.88 – – –Las Vegas, NV 4.56 4.32 6.00 9.36Los Angeles, CA 6.36 6.20 9.75 12.50Los Angeles – Inland Empire, CA 4.62 4.20 7.02 7.95Oakland, CA 4.68 4.58 6.00 8.40Orange County, CA 6.96 6.24 12.65 13.50Phoenix, AZ 5.19 4.35 10.71 10.63Pleasanton/Tri-Valley, CA 5.16 4.56 – –Portland, OR 5.59 5.24 9.39 10.24Reno, NV 3.72 3.14 7.67 –Sacramento, CA 3.84 3.60 8.52 8.04San Diego, CA 8.28 7.68 10.68 14.40San Francisco Peninsula, CA 9.72 9.72 23.28 23.28San Jose – Silicon Valley, CA 6.42 5.91 9.14 15.65Seattle/Puget Sound, WA 5.86 4.87 13.18 –Stockton/San Joaquin County, CA 3.96 3.66 – 8.40Walnut Creek, CA 2.76 3.36 – 13.56West Average* 5.56 4.83 9.28 10.79U.S. AVERAGE* 4.77 4.44 8.34 9.68(continued)* Straight averages used.
    • P. 18 | COLLIERS INTERNATIONALHIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACANADA | INDUSTRIAL SURVEYMARKETINVENTORYMAR. 31, 2013(SF)NEW CONSTRUCTIONQ1 2013(SF)CURRENTLYUNDER CONSTRUCTION(SF)Calgary, AB 125,749,475 522,350 3,100,443Edmonton, AB 79,421,803 200,150 1,596,770Halifax, NS 7,604,256 7,625 135,000Montréal, QC 348,025,640 30,000 232,740Ottawa, ON 28,134,055 64,000 47,500Regina, SK 16,928,786 40,000 270,000Saskatoon, SK 21,084,000 244,000 219,000Toronto, ON 762,336,331 70,000 6,256,003Vancouver, BC 183,061,078 673,051 1,632,575Victoria, BC* 8,908,924 25,000 –Waterloo Region, ON 60,330,421 4,800 103,794Winnipeg, MB* 79,692,082 – 245,435CANADA TOTAL 1,721,276,851 1,880,976 13,839,260CANADA | INDUSTRIAL SURVEYMARKETABSORPTIONQ1 2013(SF)VACANCY RATEDEC. 31, 2012VACANCY RATEMAR. 31, 2013Calgary, AB 1,058,264 5.05 4.72Edmonton, AB 197,525 3.35 3.34Halifax, NS – 9.65 9.65Montréal, QC (515,943) 4.34 4.50Ottawa, ON 133,127 5.76 5.50Regina, SK 123,000 3.51 2.96Saskatoon, SK 83,000 4.94 5.50Toronto, ON 1,326,442 4.13 3.89Vancouver, BC 1,007,205 3.68 3.50Victoria, BC* 17,000 4.15 4.23Waterloo Region, ON (315,880) 6.80 6.66Winnipeg, MB* – 2.97 2.97CANADA TOTAL 3,113,740 4.25 4.13* Data for Victoria and Winnipeg is from Q4 2012.* Data for Victoria and Winnipeg is from Q4 2012.
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 19* Data for Victoria and Winnipeg is from Q4 2012.** Straight averages used.CANADA | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013MARKETSALES PRICE(CAD PSF)CAP RATE(%)VACANCY FORECAST(3 MONTHS)ABSORPTION FORECAST(3 MONTHS)RENT FORECAST(3 MONTHS)Calgary, AB 170.00 6.50  Edmonton, AB 125.00 6.72  Halifax, NS – 7.25  Montréal, 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  Victoria, BC* 170.00 7.00  Close to zero Waterloo Region, ON 66.00 7.10  Winnipeg, MB* 71.00 8.25 Close to zeroCANADA AVERAGE** 121.55 7.11CANADA | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013MARKETWAREHOUSE/DISTRIBUTIONSPACE(CAD PSF)BULKSPACE(CAD PSF)FLEX/SERVICESPACE(CAD PSF)TECH/R&DSPACE(CAD PSF)Calgary, AB 8.50 7.50 12.00 12.00Edmonton, AB 8.00 7.50 10.00 12.00Halifax, NS 7.75 6.75 10.50 15.00Montréal, QC 4.75 4.25 6.00 8.00Ottawa, ON 8.25 7.50 8.50 11.00Regina, SK 10.00 9.00 12.00 14.00Saskatoon, SK 10.00 9.00 12.00 14.00Toronto, ON 4.86 – – –Vancouver, BC 7.25 7.00 9.25 14.00Victoria, BC* 12.00 10.00 13.50 13.50Waterloo Region, ON 4.02 3.40 7.84 7.84Winnipeg, MB* 6.00 5.25 9.95 12.75CANADA AVERAGE** 7.62 7.01 10.14 12.19* Data for Victoria and Winnipeg is from Q4 2012.** Straight averages used.
    • HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICACOLLIERS INTERNATIONAL | P. 20INDUSTRIAL VACANCY RANKINGS | USMARKETVACANCY RATEMAR 31, 2013(%)Honolulu, HI 3.56Bakersfield, CA 3.79Los Angeles, CA 3.91Houston, TX 4.97Orange County, CA 4.97Omaha, NE 4.99Long Island, NY 5.44Seattle/Puget Sound, WA 5.65Kansas City, MO-KS 6.14Indianapolis, IN 6.40Milwaukee, WI 6.51Miami, FL 6.56West Palm Beach, FL 6.74Portland, OR 6.84Grand Rapids, MI 7.10Los Angeles – Inland Empire, CA 7.21Denver, CO 7.28Oakland, CA 7.70Columbus, OH 7.75Pittsburgh, PA 7.84Boise, ID 7.84Minneapolis/St. Paul, MN 8.02Ft. Lauderdale-Broward, FL 8.06Columbia, SC 8.08Cincinnati, OH 8.12San Francisco Peninsula, CA 8.15St. Louis, MO 8.17Cleveland, OH 8.35New Jersey – Northern 8.42U.S. AVERAGE 8.68Hartford, CT 8.72Louisville, KY 8.79Chicago, IL 9.00Fresno, CA 9.05Greenville/Spartanburg, SC 9.06Dallas-Ft. Worth, TX 9.08New Jersey – Central 9.15Tampa Bay, FL 9.19Nashville, TN 9.26Walnut Creek, CA 9.35Raleigh, NC 9.36San Diego, CA 9.43Philadelphia, PA 9.68Orlando, FL 9.69Pleasanton/Tri-Valley, CA 9.70Birmingham, AL 9.70Jacksonville, FL 9.81Baltimore, MD 9.88Richmond, VA 10.03Fairfield, CA 10.12San Jose/Silicon Valley, CA 10.16Albuquerque, NM 10.21Washington, DC 10.56Detroit, MI 10.94Reno, NV 11.14Charleston, SC 11.52Charlotte, NC 11.62Savannah, GA 11.66Little Rock, AR 11.78Memphis, TN 12.18Phoenix, AZ 12.22Stockton/San Joaquin County, CA 12.58Atlanta, GA 12.66Sacramento, CA 12.72Las Vegas, NV 14.79Boston, MA 17.71INDUSTRIAL VACANCY RANKINGS | CANADAMARKETVACANCY RATEMAR 31, 2013(%)Regina, SK 2.96Winnipeg, MB 2.97Edmonton, AB 3.34Vancouver, BC 3.50Toronto, ON 3.89CANADA AVERAGE 4.13Victoria, BC 4.23Montréal, QC 4.50Calgary, AB 4.72Ottawa, ON 5.50Saskatoon, SK 5.50Waterloo Region, ON 6.66Halifax, NS 9.65COLLIERS INTERNATIONAL601 Union Street, Suite 4800Seattle, WA 98101TEL +1 206 695 4200FOR MORE INFORMATIONK.C. ConwayChief Economist | USATEL + 1 678 458 3477EMAIL kc.conway@colliers.comJames CookDirector of Research | USATEL +1 602 633 4061EMAIL james.cook@colliers.comCONTRIBUTORSJeff SimonsonSenior Research Analyst | USAJennifer MacatiagGraphic Designer | USACliff PlankNational Director | GIS & MappingAaron FinkelsteinCommunications Manager | USA482 offices in62 countries on6 continentsUnited States: 140Canada: 42Latin America: 20Asia Pacific: 195EMEA: 85• $2 billion in annual revenue• 13,500 professionals and staff• 1.12* billion square feet undermanagement• $71 billion USD in total transactionvalue*Together, Colliers International and FirstServicemanage 2.51 billion square feet of property—second-largest in the world.Copyright © 2013 Colliers International.The information contained herein has been obtained from sourcesdeemed reliable. While every reasonable effort has been made toensure its accuracy, we cannot guarantee it. No responsibility isassumed for any inaccuracies. Readers are encouraged to consulttheir professional advisors prior to acting on any of the materialcontained in this report.Accelerating success.GlossaryAbsorption – Net change in occupied space over a givenperiod of time.Bulk Space – Warehouse space 100,000 square feetor more with minimum ceiling heights of 24 feet. Allloading is dock-height.Flex Space – Single-story buildings having 10- to18-foot ceilings with both floor-height and dock-heightloading. Includes wide variation in office spaceutilization, ranging from retail and personal service,to distribution, light industrial and occasional heavyindustrial use.Inventory – Includes all existing multi- or single-tenantleased and owner-occupied industrial warehouse, lightmanufacturing, flex and R&D properties greater than orequal to 10,000 square feet.New Construction – Includes completed speculativeand build-to-suit construction. New construction quotedon a net basis after any demolitions or conversions.Service Space – Single-story (or mezzanine) with10- to 16-foot ceilings with frontage treatment on oneside and dock-height loading or grade-level roll-updoors on the other. Less than 15 percent office space.Tech/R&D – One- and two-story, 10- to 15-foot ceilingheights with up to 50 office/dry lab space (remainder inwet lab, workshop, storage and other support), withdock-height and floor-height loading.Triple Net Rent – Includes rent payable to the landlord,and does not include additional expenses such astaxes, insurance, maintenance, janitorial and utilities. Allindustrial and high-tech/R&D rents in this report arequoted on an annual, triple net per square foot basis inU.S. and Canadian dollars.Vacancy Rate – Percentage of total inventory available(both vacant and occupied) as at the survey dateincluding direct vacant and sublease space.Warehouse – 50,000 square feet or more with up to15 percent office space, the balance being generalwarehouse space with 18- to 30-foot ceiling heights.All loading is dock-height.