Thinking in “3-D”
GOING BEYOND TRADITIONAL 2-D (SUPPLY &
DEMAND) IS ESSENTIAL TO UNDERSTANDING
INDUSTRIAL TRENDS
HIGHLIGHT...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
P. 2 | COLLIERS INTERNATIONAL
Industrial Economic
Indicators
In the earl...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 3
The Economic Indicators
Explain the “Why”
...
P. 4 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
THE SECOND DIMENSION: PMI
Unlike GDP data ...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 5
One of the best leading indicators of empl...
P. 6 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
NORTH AMERICAN INDUSTRIAL OVERVIEW | Q4 20...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 7
US CAN NA
Q1 2013 8.83 4.13 8.33
Q2 2013 8...
P. 8 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
ABSORPTION
Q4 2014 absorption was positive...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 9
11.8%
3.4% 2.9%
18.2%
50.0%
64.7%
40.9%
44...
P. 10 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY
MARKET
...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 11
UNITED STATES | INDUSTRIAL SURVEY
MARKET
...
P. 12 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | ABSOR...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 13
UNITED STATES | INDUSTRIAL SURVEY | ABSOR...
P. 14 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | 3-MON...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 15
UNITED STATES | INDUSTRIAL SURVEY | 3-MON...
P. 16 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | RENTS...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 17
UNITED STATES | INDUSTRIAL SURVEY | RENTS...
P. 18 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
CANADA | INDUSTRIAL SURVEY | INVENTORY, N...
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 19
*Q1 data displayed for Ottawa.
**Straight...
P. 20 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 20
INDUSTRIAL...
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North American Industrial Outlook Q4 13

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Colliers International North American Industrial Outlook Q4 13

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North American Industrial Outlook Q4 13

  1. 1. Thinking in “3-D” GOING BEYOND TRADITIONAL 2-D (SUPPLY & DEMAND) IS ESSENTIAL TO UNDERSTANDING INDUSTRIAL TRENDS HIGHLIGHTS NORTH AMERICA WWW.COLLIERS.COM Q4 2013 | INDUSTRIAL N.A. INDUSTRIAL MARKET SUMMARY STATISTICS, Q4 2013 US Q4 2013 US Q1 2014* Canada Q4 2013 Canada Q1 2014* VACANCY NET ABSORPTION     CONSTRUCTION RENTAL RATE** *Projected, relative to prior period **Warehouse rents MARKET INDICATORS Relative to prior period US CAN NA VACANCY RATE (%) 8.08 4.41 7.69 Change from Q3 2013 (%) -0.25 0.17 -0.20 ABSORPTION (MSF) 52.5 2.0 54.5 NEW CONSTRUCTION (MSF) 24.3 4.6 29.0 UNDER CONSTRUCTION (MSF) 104.9 10.4 115.3 ASKING RENTS PER SF (USD/CAD) US CAN NA Average Warehouse/ Distribution Center 4.84 7.99 5.33 Change from Q3 2013 (%) 1.0 3.0 1.5 K.C. CONWAY, MAI, CRE Chief Economist | USA KEY TAKEAWAYS • Industrial investors must also go beyond the 2-D of land and sea movement of goods to a 3-D analysis of capital, physical location, and physical design. • E-commerce is inextricably linking retail and industrial real estate. Transportation efficiencies are driving the where, what, and how much of industrial warehouse space. • 3-D printing will further accelerate the convergence of retail and warehouse real estate. How will 3-D printing revolutionize where goods are manufactured, distributed and warehoused? Already we are seeing the impact of 3-D printing on shoe manufacturing. As more and more materials are made available for 3-D printing applications, a broader array of manufactured goods can be made “just in time,” in proximity to customers, with less need to store and distribute goods. How much of what we buy at a store could be made on demand and on site, to exact specifications, without the need for a finished product supply chain or distribution centers? Look out, Amazon! • North American industrial vacancy continues to decline. In the markets Colliers tracks, Q4 vacancy declined another 20 basis points to 7.69%, based on strong U.S. absorption. Vacancy in the primary 65 U.S. markets declined from 8.33% to 8.08%. The vacancy rate in Canada increased slightly from 4.25% to 4.41%, due to new supply. • U.S. industrial warehouse vacancy is lowest in the Western region at 6.50%, and second- lowest in the Midwest region at 8.01%, followed by the South (8.98%) and Northeast (9.28%). • Q4 2013 absorption was positive across all U.S. regions, and strongest in the South (17.9 MSF) and West (16.1 MSF). Q4’s 52.5 MSF of net absorption brought the U.S. total for CY2013 to 188.4 MSF. Canadian markets accounted for only 2.0 MSF of net absorption, for a North American total of 54.5 MSF net absorption in Q4 2013. • Top 5 MSAs for CY2013 absorption: Dallas, LA – Inland Empire, Chicago, Atlanta, and the Port of Los Angeles. Inland markets continue to outpace port markets in absorption, and have for the past four quarters. • Still no signs of overbuilding risk on the horizon. Although North America added 29.0 MSF of new supply in Q4 2013 (vs. 21.1 MSF in Q3), only 45% of that new supply was speculative. In CY2013, the 65 major U.S. industrial markets absorbed more than twice the new supply added (188 MSF absorbed, vs. just 80 MSF of new supply).
  2. 2. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA P. 2 | COLLIERS INTERNATIONAL Industrial Economic Indicators In the early 2000s (2002–2006), there was a noteworthy uptick in manufacturing activity in the United States. This uptick was first noted in Congress’s annual report regarding Foreign- Trade Zones (FTZs), but went relatively unno- ticed by most industry participants until the past couple of years as we emerged from the finan- cial crisis. As the graph below from the latest Congressional FTZ report shows (next update in August 2014), the U.S. resurgence in manu- facturing began around 2002. In 2009, there was a short-lived pull-back in this manufactur- ing surge, but the upward trend then resumed in 2010 and has maintained a high single-digit to low double-digit growth rate since. Sq. Ft. By Region Absorption Per Market (SF) q3 '13 - q4 '13 7,200,000 3,600,000 720,000 -720,000 -3,600,000 -7,200,000 4 billion 2 billion 400 milion Occupied Sq. Ft. Vacant Sq. Ft. 9.0% vac. 8.0% vac. NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q4 2013 SOURCE: Colliers International Industrial #1 for 2014 2009 Multifamily MeanScore Retail Hotel Office Industrial 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2010 2011 2012 2013 Source: AFIRE AFIRE | RANKING OF U.S. PROPERTY TYPES | 2014 SURVEY What is behind this manufacturing renaissance, and why is it relevant to industrial real estate? The interest among manufacturers in returning to the U.S. was initially fueled by a concern over patent protection. It wasn’t a viable business model to chase low-cost labor across the globe, only to discover that the foreign land to which you relocated your plant, equipment and proprietary systems had little regard for intellectual property rights, and would alter the product slightly and claim the output as its own. Onshoring gained momentum during the financial crisis as the Federal Reserve’s accommodative monetary policy also gave manufacturers an added currency advantage to manufacture in the United States. After all, why manufacture cars or electronics in a country with an unfavorable ex- change rate, like Japan? And then more recently, as the U.S. became the low-cost energy nation, manufacturing and transportation costs became more favorable than in Europe or Asia. The confluence of these three de- velopments has revitalized manufacturing in the U.S. 0 10 20 30 40 50 60 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Any doubt that the U.S. is becoming a manufacturing & energy export powerhouse again? Source: U.S. Foreign-Trade Zones Board FOREIGN-TRADE ZONES: EXPORTS | 1991–2011 Colliers took notice of this change from the get-go and was first of its peers to forecast that industrial real estate would be the star performer among commercial property types as far back as 2011—while the herd instinct was to stay corralled in multifamily real estate. This prediction has been vindi- cated by: i) stellar industrial property performance numbers in both CY2012 and CY2013; ii) increasing recognition of industrial real estate performance by leading industry trade groups such as the Urban Land Institute (ULI), NAIOP, and the Counselors of Real Estate; and iii) foreign investors, who— in the 2014 Association of Foreign Investors in Real Estate (AFIRE) report (see diagram above)—identified industrial real estate as their top choice for investment for the first time in a decade.
  3. 3. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 3 The Economic Indicators Explain the “Why” Do the leading economic indicators—GDP, PMI, job growth—support this bullish move into industrial real estate? After all, haven’t recent revisions to GDP and employment been to the downside? Hasn’t the appeal of industrial real estate been chilled by the “Frozenomics” of the brutal temperatures of this past winter, and the Federal Reserve’s decision to extract quantitative easing (QE)? A “3-D” analysis of these leading industrial indicators reveals how the bull- ish case remains strong. The fundamentals of industrial real estate are the strongest they have been in more than a decade, as the U.S. and other re- gions of the world remake their supply chains in response to growth in e- commerce, expansion of the Panama Canal, and evolution of manufacturing applications from 3-D printing technology. THE FIRST DIMENSION: GDP A year ago, Colliers correctly forecast that GDP growth would start off rather anemic (1.0–1.5 percent range) and finish strong (2.5–3.0 percent) due to the front-loaded fiscal headwinds on the calendar. And, that’s ex- actly what happened: 2013 started with 1.1 percent GDP growth in Q1 and averaged just 1.8 percent during 1H2013. GDP then accelerated in Q3 to 4.1 percent before slowing to 2.4 percent in Q4, following the government shutdown. For 2H2013, GDP averaged 3.25 percent—or the long-term av- erage rate from 1950–2012. 2014 is likely to see a similar pattern of weakness in the first half followed by strength in the second half, but for very different reasons. In 2014, Federal Reserve monetary policy will be the primary influence on GDP, as the unintended consequences of ending QE are revealed: currency crises and higher interest rates in emerging markets that suppress demand for U.S. exports. In addition, the uncharacteristically cold winter of 2014, which has busted local and state budgets for de-icing roads and snow removal, and whacked the transportation and manufacturing industries, will likely result in at least a 50- to 100-basis-point hit to GDP when the numbers are tallied. The good news is that state and local government tax receipts are trending up and should be able to absorb it; and sup- pressed retail sales, like autos, will more than likely be deferred into the second half of 2014, resulting in a much stronger GDP. The one cautionary note, though, is that 2H2013 GDP was elevated largely by a build-up in 1 Industrial #2 Last Year 2 Office #4 Last Year 3 Retail #3 Last Year 4 Multifamily #1 Last Year 5 Hotel #5 Last Year AFIRE | TOP 5 PROPERTY TYPES | 2014 SURVEY 4.1 2.4 -10 -8 -6 -4 -2 0 2 4 6 2 -2.7 -2 -8.3 -5.4-5.4 -0.4-0.4 1.3 3.93.9 1.6 3.93.9 -1.3-1.3 2.82.82.82.8 3.23.2 1.41.4 4.94.9 3.73.7 1.2 2.82.8 0.1 1.1 2.52.5 4.1 2.4 CY 2013 GDP averaged 2.5% 2008 2010 2012 2014 Source: www.tradingeconomics.com | U.S. Bureau of Economic Analysis U.S. GDP GROWTH | 2008–2013 (FEBRUARY 2014 REVISIONS) inventories that did not clear in Q4 2013. Although manufacturing will need to slow during 1H2014 (more in response to excess inventories than to “Frozenomics”), the latest revisions to GDP show that there is strength in key areas such as durable goods and fixed investment. These categories, along with strength in residential construction and automobile sales, will be accretive to GDP and industrial real estate, adding more credence to the forecast that 1H2014 GDP will be below trend but 2H2014 GDP will be robust and above trend. The Colliers forecast for GDP growth in 2014 is 2.0 percent to 2.5 percent. LINE 2ND ESTIMATE OF 2013 GDP. Q4 GDP REVISED DOWN TO 2.4%. 2011 2012 2013 1 GROSS DOMESTIC PRODUCT (GDP) 1.8 2.8 1.9 2 Personal Consumption Expenditures 2.5 2.2 2.0 3 Goods 3.4 3.3 3.6 4 Durable Goods 6.6 7.7 6.9 5 Nondurable Goods 1.9 1.4 2.0 6 Services 2.1 1.6 1.1 7 Gross Private Domestic Investment 4.9 9.5 5.5 8 Fixed Investment 6.2 8.3 4.5 9 Nonresidential 7.6 7.3 2.8 10 Structures 2.1 12.7 1.4 11 Equipment 12.7 7.6 3.1 12 Intellectual Property Products 4.4 3.4 3.4 13 Residential 0.5 12.9 12.1 U.S GDP | 2011–2013 (FEBRUARY 2014 REVISIONS) Source: AFIRE
  4. 4. P. 4 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA THE SECOND DIMENSION: PMI Unlike GDP data from the Bureau of Economic Analysis (BEA), the Institute for Supply Management’s PMI provides more specific insight into the indus- trial sector of the economy. The latest ISM data indicates that the impact of “Frozenomics” is exaggerated, and the manufacturing economy is working its way through 2H2013’s excess inventory. ISM’s January and February 2014 reports show that inventories are correcting quicker than anticipated and new orders continued to grow despite the harsh winter weather. The concerning note from the February data is that export growth appears to be slowing as the currency crises in Argentina, Turkey and other emerg- ing markets unfold. The Fed needs to walk a tightrope in 2014 between extracting QE and not tanking the economies of emerging markets which buy so much of our output. Slowing exports are a key metric to keep an eye on in 2014. MONTH PMI MONTH PMI Feb 2014 53.2 Aug 2013 56.3 Jan 2014 51.3 Jul 2013 54.9 Dec 2013 56.5 Jun 2013 52.5 Nov 2013 57.0 May 2013 50.0 Oct 2013 56.6 Apr 2013 50.0 Sep 2013 56.0 Mar 2013 51.5 AVERAGE: 53.8 HIGH: 57.0 | LOW: 50.0 PMI | PAST 12 MONTHS Source: ISM “A PMI in excess of 43.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the February PMI indicates growth for the 57th con- secutive month in the overall economy, and indicates expansion in the manufacturing sector for the ninth consecutive month. [Bradley Holcomb, ISM chair] stated, ‘The past relationship between the PMI and the overall econmy indicates that the PMI for January and February (52.3 percent) corresponds to a 3 percent increase in real gross domestic product (GDP) on an annualized basis.’” MANUFACTURING AT A GLANCE | FEBRUARY 2014 INDEX SERIES INDEX (FEB) SERIES INDEX (JAN) PERCENTAGE POINT CHANGE DIRECTION RATE OF CHANGE TREND (MONTHS) PMI 53.2 51.3 +1.9 Growing Faster 9 New Orders 54.5 51.2 +3.3 Growing Faster 9 Production 48.2 54.8 -6.6 Contracting From Growing 1 Employment 52.3 52.3 0.0 Growing Same 8 Supplier Deliveries 58.5 54.3 +4.2 Slowing Faster 9 Inventories 52.5 44.0 +8.5 Growing From Contracting 1 Customers’ Inventories 46.5 44.0 +2.5 Too Low Slower 27 Prices 60.0 60.5 -0.5 Increasing Slower 7 Backlog of Orders 52.0 48.0 +4.0 Growing From Contracting 1 Exports 53.5 54.5 -1.0 Growing Slower 15 Imports 53.5 53.5 0.0 Growing Same 13 OVERALL ECONOMY Growing Faster 57 Manufacturing Sector Growing Faster 9 THE THIRD DIMENSION: EMPLOYMENT What does employment data indicate about the health of the manufacturing, trade and transportation sectors, that directly impacts the demand for in- dustrial real estate? The three primary monthly employment reports—ADP (private industry employment), Challenger, Gray and Christmas (job cuts), and the Bureau of Labor Statistics (private and government jobs)—are saying different things. ADP and Challenger are telling us that private employment is stronger than BLS reports suggested in January and February. (In fact, it’s averaged monthly growth of 185,000 jobs over the past six months—not bad, private sector!) The BLS jobs reports are all over the map due to constant recal- culation of the Labor Participate Rate. ADP reports that private hiring has actually been pretty good despite the weather, and that some deferred hiring will likely materialize in the spring. Sep 13 0 50 100 150 200 250 300 Thousands Feb 13 M ar13 Apr13 M ay 13 Jun 13 Jul13 Aug 13 Sep 13 Oct13 Nov 13 Dec 13 Jan 14 Feb 14 198 154 124 141 190 161 151 185 184 215 215 127 139 ADP 3-month average is 152K private jobs/month ADP 6-month average is 185K private jobs/month Source: ADP, Inc; Moody’s Analytics CHANGE IN NONFARM PRIVATE EMPLOYMENT | U.S. Source: ISM
  5. 5. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 5 One of the best leading indicators of employment is job cuts. And the last three Challenger Job Cut reports show that companies are not cutting much labor. In fact, the December report showed the lowest amount of cuts since 2000: Source: Challenger, Gray & Christmas 30,000 40,000 50,000 60,000 35,000 45,000 55,000 Feb 14 Jan 14 Dec 13 Nov 13 Oct13 Sep 13 Aug 13 Jul13 Jun 13 M ay 13 Apr13 M ar13 Feb 13 Jan 13 Feb 2014: 41,835 (2nd lowest in 6 months) Announced Job Cuts Monthly, January 2013-February 2014 U.S. JOB CUTS | FEB 2014 The low level of job cuts means that GDP growth near 2.0 percent is going to result in hiring later in 2014. Companies have cut so deep over the past five years that there isn’t much left to cut, and employees are strained un- der the weight of overtime and 60- to 70-hour work weeks. So which economic sectors and real estate property types will likely benefit? Industrial will be one of the beneficiaries, but office will not—Job cuts are highest in the Financial sector and lowest in the Industrial Goods and Transportation sectors: TOP 5 SECTORS FEB 2014 YTD 1 Financial 9,791 14,608 2 Telecommunications 5,147 6,952 3 Retail 3,848 15,242 4 Food 3,022 4,101 5 Industrial Goods 2,622 4,051 TOP 5 INDUSTRIES FEB 2014 YTD 1 Retail 11,394 6,676 2 Computer 6,456 2,629 3 Financial 4,817 8,578 4 Transportation 3,072 2,761 5 Health Care/Products 2,658 2,610 U.S. JOB CUTS (AAR.org) monthly Rail Time Indicators (RTI) report, a comprehensive monthly primary data series of all that moves by rail, combined with mean- ingful metrics such as U.S. freight traffic, changes in rail car capacity and railroad employment, and growth in intermodal traffic. The latest February data shows: i) overall rail traffic trending upward in sync with GDP; ii) in- termodal volume up 1.1 percent in February 2014 compared with February 2013, despite the weather disruptions; and iii) CY2014 intermodal traffic already on track to surpass the record set in 2013. With this kind of activity on the railroads, one has to question any forecast of a systemic weakness in manufacturing and industrial real estate. COMMON-SENSE CHECKS: RAIL ACTIVITY AND INDUSTRIAL ABSORPTION The final industrial economic measures to examine are intermodal and railroad activity, along with industrial warehouse space absorption. The Cadillac of data in the first area is the Association of American Railroads’ 4% 2% 0% -2% -4% -6% 20% 10% 0% -10% -20% -30% 20102009 2011 2012 2013 GDP (left scale) Rail Traffic (right scale)* *Carloads excluding coal and grain + intermodal units. Rail traffic excludes U.S. operations of Canadian railroads. (% change year-over-year) RTI | GDP VS. RAIL TRAFFIC | 2009–2013 Source: BEA, AAR 170,000 220,000 270,000 300,000 2009 2010 2011 2012 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec RTI | AVERAGE WEEKLY U.S. RAIL INTERMODAL TRAFFIC Source: AAR Source: Challenger, Gray & Christmas Add to this perspective that in CY2013, industrial warehouse absorption was positive across all regions of North America. The U.S. continues to absorb more than two square feet of warehouse space (188 MSF in CY2013) for every one square foot of new supply added (80 MSF added during CY2013). Taken together, railroad activity, strong warehouse absorption, and declining vacancy rates (inching down toward 7.5 percent) tells us that the our bullish 3-D outlook for industrial real estate passes the common-sense test.
  6. 6. P. 6 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA NORTH AMERICAN INDUSTRIAL OVERVIEW | Q4 2013 MEASURE NORTH AMERICA CANADA UNITED STATES WEST/MIDWEST SOUTH NORTHEAST # of Markets 77 12 65 35 21 9 Inventory (Millions SF) 16,099.4 1,730.0 14,369.5 8,026.4 4,148.6 2,194.5 % of N.A. Inventory 100.0 10.7 89.3 49.9 25.8 13.6 New Supply (Millions SF) 29.0 4.6 24.3 14.3 8.0 2.1 % of N.A. New Supply 100.0 15.9 84.1 49.2 27.7 7.1 YTD New Supply (Millions SF) 95.6 15.3 80.3 43.6 29.1 7.6 % of YTD New Supply 100.0 16.0 84.0 45.6 30.5 8.0 Vacancy (%) 7.69 4.41 8.08 7.29 8.98 9.28 Absorption (Millions SF) 54.5 2.0 52.5 27.7 17.9 6.9 % of N.A. Absorption 100.0 3.6 96.4 50.8 32.9 12.6 YTD Absorption (Millions SF) 198.9 10.5 188.4 104.0 64.6 19.8 % of YTD N.A. Absorption 100.0 5.3 94.7 52.3 32.5 9.9 Leadership Markets Calgary, Toronto, and Vancouver led 2013 absorption (3.9 MSF, 3.3 MSF, and 1.6 MSF, respectively) Five lowest vacancy rates by region: West: Honolulu (2.7%), Midwest: Omaha (4.8%), South: Houston (5.2%), Northeast: Long Island (5.1%). West: Honolulu, SoCal port & Inland Empire, and Seattle have the lowest vacancy rates (2.7%–5.5%). Midwest: 6 lowest vacancy rates, all below 7%: Omaha, KC, Milwaukee, Columbus, Grand Rapids, Indianapolis. Top CY13 absorption: Dallas (17.1 MSF), Atlanta (10.7 MSF), Houston (7.0 MSF). Houston (5.2%) and Miami (6.5%) are the only two markets with vacancy rates below 7%. Philadelphia (6.9 MSF) and New Jersey – Central (5.6 MSF) were the only 2 NE markets with >5.0 MSF net absorption in CY2013. Only Long Island (5.1%) and Pittsburgh (7.6%) have vacancy rates below 8%. Laggard Markets Only Montreal, Winnipeg, and Halifax had YTD net negative absorption in 2103. Five highest vacancy rates by region: Northeast: Boston (18.8%), West: Phoenix (12.9%), South: Memphis (12.3%), Midwest: Detroit (10.7%). West: CA's Central Valley, NV and AZ markets have the highest vacancy rates (10%–13%). Midwest's highest vacancy rates (all at or above 8%): Detroit, Chicago, and St Louis. Only Birmingham had negative absorption in CY2013; Tampa was only market with <500K SF of net absorption among those markets with net positive CY2013 absorption Boston (18.8%) and Washington, DC (11.0%), are only 2 NE markets with vacancy rates >10% Boston and Hartford, CT, were only 2 NE markets w/net negative absorption in CY2013. Behind the Statistics & Beyond the Basics SCOPE OF COLLIERS INDUSTRIAL OUTLOOK REPORT Colliers monitors industrial property conditions in 77 North American markets from Miami to Montréal, totaling 16.1 billion square feet of inven- tory. Approximately 89 percent (14.3 billion square feet) of this inventory is located in the United States, and 11 percent is in 10 primary Canadian markets. Keep in mind that in 2H2013, inventory numbers declined slightly for the United States (approximately 1.5 percent or 191 MSF from inventory reported in 1H2013) due to a culling of specialty warehouse property types (such as self-storage) to align MSA inventory levels with the industry trend excluding these specialty warehouse property types from bulk and distribu- tion warehouse measures. Colliers’ warehouse inventory totals at the MSA level now correlate with other industry data sources such as CoStar. (This inventory re-alignment was not necessary for Colliers’ Canadian markets, as specialty warehouse property types were never included in our figures for these markets.) On a regional basis, the Midwest and South regions in the U.S. contain more than half the total North American warehouse space (50 percent percent, or 7.9 BSF) followed by the West at 24 percent (3.8 BSF), Northeast at 14 percent (2.2 BSF), and then Canada at 11 percent (1.7 BSF). But the rankings with respect to vacancy (Canada and West lowest at 4.4 percent and 6.5 percent, respectively, and South the highest at 9 percent) and absorption (South the highest with 17.9 MSF in Q4 2013, Canada the lowest at 2.0 MSF) are materially different from the inventory rankings. Here again, traditional “2-D” analysis, based just on supply and demand metrics such as vacancy and absorption, is insufficient. Behind the num- bers are a broad array of variables, including: i) the remaking of the U.S. supply chain in response to the growth in e-commerce; ii) expansion of the Panama Canal lock system; and iii) transition of East Coast ports from former military ports (Virginia, Charleston, and Jacksonville) to competitive post-Panamax ready commercial ports capable of competing with the dominant West Coast ports (such as Los Angeles and Long Beach). Specifics pertaining to the vital statistics by region are presented in the following table, along with context as to the leading and lagging markets within each region: Source: Colliers International
  7. 7. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 7 US CAN NA Q1 2013 8.83 4.13 8.33 Q2 2013 8.66 4.39 8.20 Q3 2013 8.33 4.25 7.89 Q4 2013 8.08 4.41 7.69 VACANCY RATE | NORTH AMERICA VACANCY North American industrial vacancy continues to decline in markets tracked by Colliers, inching toward 7.5 percent at the beginning of 2014. In Q4 2013, the North American industrial vacancy rate declined another 20 ba- sis points from 7.89 percent to 7.69 percent. Vacancy for just the primary 65 U.S. markets declined from 8.33 percent to 8.08 percent. The decline in the overall North American industrial vacancy rate came primarily from strong absorption in the United States; in fact, the vacancy rate in Canada increased slightly from 4.25 percent to 4.41 percent, due to new supply. REGION MSA Q3 2013 VACANCY YE/Q4 2013 VACANCY 1 West Honolulu 2.6% 2.7% 2 West Los Angeles 3.0% 2.9% 3 West Bakersfield 4.1% 3.2% 4 West LA – Inland Empire 5.0% 4.2% 5 West Orange County 4.5% 4.4% 6 Midwest Omaha, NE 5.1% 4.8% 7 Northeast Long Island 5.2% 5.1% 8 South Houston 5.3% 5.2% 9 West Boise, ID 5.2% 5.3% 10 West Seattle 5.2% 5.45% WAREHOUSE MARKETS WITH THE LOWEST VACANCY RATES | U.S. U.S. industrial warehouse vacancy is lowest in the Western region at 6.50 percent, led by California markets (Port of Los Angeles at 2.94 percent; Bakersfield at 3.20 percent; and LA – Inland Empire at 4.20 percent). Warehouse vacancy is second-lowest in the Midwest, at 8.01 percent, fol- lowed by the South (8.98 percent) and Northeast (9.28 percent). In the Midwest, Omaha (4.76 percent) and Columbus (5.58 percent) have the lowest vacancy rates; Chicago continues to see improvement due to strong absorption. In the South, Houston (5.18 percent), Miami (6.47 percent), West Palm Beach, FL (7.11 percent), Columbia, SC (7.38 percent), and Dallas (7.41 percent) are the only markets with vacancy below 7.50 per- cent. In the Northeast, Long Island (5.12 percent), Pittsburgh (7.63 percent), and Northern New Jersey (8.00 percent) have the lowest vacancy rates Drilling down to the MSA level, vacancy continues to improve the most in primary port cities—especially Southern California (Los Angeles), South Florida (Miami), Texas (Houston), and inland distribution markets with large intermodal facilities, developing inland ports or a dominance in air cargo and e-commerce fulfillment (such as Atlanta, Columbus, Dallas, Indianapolis, Kansas City, Memphis). Also of note are a pair of smaller in- land markets on the rise: Greenville, SC, and Boise, ID. These are all examples of markets that are aligned with Class I railroads, have modern intermodal facilities and are connected to a post-Panamax port. These will be Tier 1 warehouse markets where both tenant and capital demand will remain the strongest. All but a few of the Q4 2013 warehouse markets with the lowest vacancy rates fall into this category heading into the First Post-Panamax Decade. Beyond the top ten (above right), nine other U.S. warehouse markets have Q4/YE 2014 vacancy rates below 7.0 percent: Columbus (5.6 percent), San Francisco Peninsula (5.7 percent), Kansas City (5.9 percent), Portland OR (6.2 percent), Oakland (6.4 percent), Milwaukee (6.46 percent), Miami (6.5 percent), Grand Rapids (6.6 percent), and Indianapolis (6.7 percent). Source: Colliers International Source: Colliers International
  8. 8. P. 8 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA ABSORPTION Q4 2014 absorption was positive across all U.S. regions, and was stron- gest in the South (17.9 MSF) and West (16.1 MSF), followed by the Midwest (11.6 MSF) and Northeast (6.8 MSF). Q4 was another quarter with more than 50 MSF of net absorption (52.5 MSF). North American CY2013 ab- sorption fell just shy of 200 MSF (199 MSF). Canadian markets accounted for only 2.0 MSF of Q4’s 54.5 MSF net absorption. The top five MSAs for CY2013 absorption were (in order) Dallas, LA – Inland Empire, Chicago, Atlanta, and the Port of Los Angeles. The stand- out markets for net absorption during CY2013 by region were Dallas, Atlanta and Houston for the South; the Port of Los Angeles, LA – Inland Empire and Las Vegas in the West; Chicago, Columbus, and Cincinnati in the Midwest; and Philadelphia, Central New Jersey and Cleveland in the Northeast. The top three standout markets for net absorption in Q4 and CY 2013 by region are below: As has been the case throughout 2013, inland markets are outpacing port markets in absorption. The top five markets with respect to net warehouse absorption the past four quarters have been predominantly inland distri- bution markets, such as Atlanta, Chicago, Columbus, Dallas, Denver, LA – Inland Empire, Memphis, and Philadelphia; the only port market in the top five is Los Angeles. Manufacturers, distributors and retailers are moving their supply chains inland to align with rail, intermodal, and air cargo for e-commerce fulfillment, as well as seeking and cost and time efficiencies due to ever growing environmental, transportation, regulatory (mainly ad- verse to trucking), and impact assessment burdens that don’t exist inland in markets such as Atlanta, Chicago, Columbus, Dallas, Denver, Greenville/ Spartanburg, Indianapolis, Kansas City and Memphis. CONSTRUCTION ACTIVITY Construction activity is growing in response to: i) improved industrial real estate metrics (occupancy, absorption, and rents); ii) added urgency to obtain modern distribution space on the part of retailers and manufacturers remaking their supply chains aligned with key post-Panamax ports, inter- modal rail facilities, and air cargo/e-commerce fulfillment paths; iii) strong investor demand for industrial real estate at a time when there is a dearth of product for sale; and iv) recognition that as much as 40 percent of North American warehouse space is functionally obsolete (low clear height, inad- equate truck courtyards, etc.) and in need of replacement with modern distribution centers with 30–36 foot clear ceiling height and modern me- chanical and electrical systems to accommodate automated conveyor and racking equipment/systems. We’ve previously posed the question, should this increase in new construction be a concern? While it’s worth monitoring in 2014, there are still no indica- tions of overbuilding risk on the horizon. Although 28.9 MSF of new supply was added throughout North America in Q4 (up one-third from 21.1 MSF in Q3 2013), only 45 percent of that new supply was speculative. Build-to-suit construction (as opposed to speculative building) is behind the increasing supply of warehouse space—especially in the U.S., where approximately 60 percent of the 24.3 MSF of new supply in Q4 was build-to-suit. Furthermore, the U.S. has been absorbing approximately 50 MSF of warehouse space per quarter since 2011, compared with just 20 MSF of new supply. In CY 2013, the 65 major U.S. industrial markets absorbed 188 MSF of space compared with just 80 MSF of new supply being added. In other words, the U.S. industrial markets continue to absorb more than twice the new supply being added. The regions with the most new supply added in CY2013 were the South (29.1 MSF) and Midwest (22.3 MSF), followed by the West (21.3 MSF) and Northeast (7.6 MSF). The five North American markets with the most new supply in CY2013 were Chicago (8.8 MSF), Houston (8.0 MSF), Dallas (7.3 MSF), LA – Inland Empire (5.8 MSF), and Phoenix (5.2 MSF). US CAN NA Q4 2013 52.5 MSF 2.0 MSF 54.5 MSF YTD 2013 188.4 MSF 10.4 MSF 198.8 MSF ABSORPTION | NORTH AMERICA Source: Colliers International MSA Q4 2013 NET ABSORPTION MSA CY 2013 TOTAL ABSORPTION SOUTH Dallas 7.2 MSF SOUTH Dallas 17.1 MSF Houston 2.1 MSF Atlanta 10.7 MSF Charlotte, NC 1.7 MSF Houston 7.0 MSF WEST LA – Inland Empire 5.3 MSF WEST LA – Inland Empire 15.0 MSF Phoenix 2.5 MSF Los Angeles 9.8 MSF Los Angeles 1.3 MSF Las Vegas 3.6 MSF MIDWEST Chicago 3.1 MSF MIDWEST Chicago 12.7 MSF Columbus, OH 2.3 MSF Columbus, OH 5.1 MSF Kansas City MO-KS 0.9 MSF Cincinnati 4.0 MSF NORTHEAST Philadelphia 2.3 MSF NORTHEAST Philadelphia 6.9 MSF Central New Jersey 1.9 MSF Central New Jersey 5.6 MSF Washington, DC 1.1 MSF Washington, DC 2.7 MSF TOP 3 MARKETS BY REGION | ABSORPTION | U.S. Source: Colliers International
  9. 9. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 9 11.8% 3.4% 2.9% 18.2% 50.0% 64.7% 40.9% 44.8% 72.7% 49.3% 81.8% 50.0% 23.5% 59.1% 51.7% 27.3% 47.8% 11.8% 3.4% 2.9% 18.2% 50.0% 64.7% 40.9% 44.8% 72.7% 49.3% 81.8% 50.0% 23.5% 59.1% 51.7% 27.3% 47.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Contract Holding Steady Expand M idw est Northeast South W est Canada U.S. N.A. OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...? *Excluding renewals % of reporting markets 72.7% 75.0% 66.7% 63.6% 18.2% 67.8% 60.0% 18.2% 12.5% 33.3% 36.4% 54.5% 28.8% 32.9% 9.1% 12.5% 27.3% 3.4% 7.1% 72.7% 75.0% 66.7% 63.6% 18.2% 67.8% 60.0% 18.2% 12.5% 33.3% 36.4% 54.5% 28.8% 32.9% 9.1% 12.5% 27.3% 3.4% 7.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% M idw est Northeast South W est Canada U.S. N.A. Down Same Up 3-MONTH FORECAST FOR VACANCY LEVELS (relative to current quarter) % of reporting markets 1.7% 9.1% 2.9% 8.5% 7.1% 22.0% 45.5% 25.7% 62.7% 27.3% 57.1% 5.1% 18.2% 7.1% 1.7% 9.1% 2.9% 8.5% 7.1% 22.0% 45.5% 25.7% 62.7% 27.3% 57.1% 5.1% 18.2% 7.1% 0% 20% 40% 60% 80% 100% U.S. Canada N.A. Declining Bottoming No Clear Direction Increasing Peaking CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET % of reporting markets 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% M idw est Northeast South W est Canada U.S. N.A. 5.6% 1.7% 1.4% 45.5% 37.5% 38.9% 31.8% 63.6% 37.3% 41.4% 54.5% 62.5% 55.6% 68.2% 36.4% 61.0% 57.1% 5.6% 1.7% 1.4% 45.5% 37.5% 38.9% 31.8% 63.6% 37.3% 41.4% 54.5% 62.5% 55.6% 68.2% 36.4% 61.0% 57.1% Down Same Up 3-MONTH FORECAST FOR RENTS (relative to current quarter) % of reporting markets Conclusion Think 3-D! Whether it is anticipating the changes to come in manufacturing and warehousing with just-in-time, to-exact- specification, on-site manufacturing from 3-D printing and e-commerce, or thinking beyond the traditional two dimensions (supply and demand) of real estate analysis, thinking 3-D is essential to understanding the “Why” behind industrial development and investment trends in North America on the eve of the First Post-Panamax Decade (2015–2025). Investors and developers that think beyond the 2-D land and sea movement of goods to a more robust 3-D analysis consisting of capital (interest rates, cap rates and IRRs), physical location (proximity and connectivity to ports, intermodal facilities and e-commerce fulfillment), and physical design (clear ceiling heights of 30–36 feet, larger truck courtyards, etc.) will be rewarded with higher yielding assets in less volatile markets. Why? The answer is because e-commerce is inextricably linking retail and industrial real estate—and transportation efficiencies are driving the where (location), what (physi- cal design), and how much (investment) industrial warehouse space is needed. Source: Colliers International
  10. 10. P. 10 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA UNITED STATES | INDUSTRIAL SURVEY MARKET INVENTORY DEC. 31, 2013 (SF) Q4 2013 NEW SUPPLY (SF) YEAR-TO-DATE NEW SUPPLY (SF) CURRENTLY UNDER CONSTRUCTION (SF) NORTHEAST Baltimore, MD 223,672,824 174,287 1,387,027 30,120 Boston, MA 151,813,772 269,676 400,031 1,186,000 Hartford, CT 95,613,351 - - 25,747 Long Island, NY 156,329,998 - - 592,698 New Jersey – Central 346,088,143 63,846 813,846 - New Jersey – Northern* 366,830,742 216,253 216,253 - Philadelphia, PA 413,578,215 917,300 3,096,830 3,598,963 Pittsburgh, PA 172,970,559 71,000 291,513 878,307 Washington, DC 267,560,236 411,698 1,397,754 1,489,271 Northeast Total 2,194,457,840 2,060,214 7,603,254 7,208,408 SOUTH Atlanta, GA 615,376,189 353,400 4,252,513 4,884,856 Birmingham, AL 109,682,848 0 0 542,000 Charleston, SC 32,838,481 80,000 696,000 300,000 Charlotte, NC 322,662,534 101,932 611,180 230,905 Columbia, SC 38,851,763 0 0 1,688,500 Dallas-Ft. Worth, TX 730,032,865 3,098,259 7,310,809 7,764,133 Ft. Lauderdale-Broward, FL 110,073,937 122,175 473,789 687,535 Greenville/Spartanburg, SC 178,450,887 156,056 156,056 626,719 Houston, TX 483,638,295 2,170,623 8,045,817 4,447,149 Jacksonville, FL 122,763,661 0 101,770 0 Little Rock, AR 45,125,192 18,376 18,376 0 Louisville, KY 172,216,826 175,000 596,640 0 Memphis, TN 221,442,804 672,206 2,842,098 1,821,232 Miami, FL 209,360,512 318,788 1,818,914 1,010,819 Nashville, TN 112,559,484 0 0 2,086,660 Orlando, FL 131,487,967 0 245,000 1,394,258 Raleigh, NC 110,125,672 0 68,040 233,246 Richmond, VA 110,166,681 0 700,344 90,400 Savannah, GA 45,302,300 681,000 881,000 450,000 Tampa Bay, FL 196,247,216 0 206,019 1,149,378 West Palm Beach, FL 50,167,093 86,400 107,300 719,524 South Total 4,148,573,207 8,034,215 29,131,665 30,127,314 * Q3 data displayed for Northern New Jersey
  11. 11. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 11 UNITED STATES | INDUSTRIAL SURVEY MARKET INVENTORY DEC. 31, 2013 (SF) Q4 2013 NEW SUPPLY (SF) YEAR-TO-DATE NEW SUPPLY (SF) CURRENTLY UNDER CONSTRUCTION (SF) MIDWEST Chicago, IL 1,315,748,886 4,027,126 8,841,787 9,800,982 Cincinnati, OH 244,809,912 0 1,250,563 3,000,000 Cleveland, OH 474,495,740 43,808 116,422 214,965 Columbus, OH 214,218,178 675,000 2,315,486 2,654,000 Detroit, MI* 531,466,219 0 0 0 Grand Rapids, MI 112,672,885 110,000 381,380 574,800 Indianapolis, IN 278,220,337 1,374,290 3,606,377 3,584,414 Kansas City, MO-KS 236,680,236 347,000 2,059,040 3,310,961 Milwaukee, WI 224,190,004 581,543 1,136,350 777,500 Minneapolis-St. Paul, MN 243,837,035 600,407 2,022,870 1,285,254 Omaha, NE 67,811,967 0 46,702 593,531 St. Louis, MO 269,217,579 0 527,094 727,500 Midwest Total 4,213,368,978 7,759,174 22,304,071 26,523,907 WEST Albuquerque, NM 37,147,447 219,000 219,000 0 Bakersfield, CA 33,919,077 62,985 403,953 2,108,731 Boise, ID** 45,483,695 0 297,067 0 Denver, CO 215,414,847 0 1,081,024 2,563,129 Fairfield, CA 46,355,753 0 48,133 586,591 Fresno, CA* 48,600,000 0 0 0 Honolulu, HI 40,372,428 0 0 0 Las Vegas, NV 113,594,775 65,628 813,948 610,147 Los Angeles, CA 430,970,500 2,603,500 5,852,400 17,889,800 Los Angeles – Inland Empire, CA 896,082,715 494,100 1,927,200 2,212,085 Oakland, CA 141,658,055 0 0 949,365 Orange County, CA 183,230,500 209,700 491,600 0 Phoenix, AZ 275,913,459 2,465,477 5,190,681 4,048,425 Pleasanton/Tri-Valley, CA 16,425,488 0 0 0 Portland, OR 191,988,539 0 483,538 2,416,185 Reno, NV 81,929,299 0 19,035 524,800 Sacramento, CA 161,688,889 0 201,211 280,242 San Diego, CA 187,177,180 0 357,283 398,407 San Francisco Peninsula, CA 40,873,397 0 79,476 0 San Jose/Silicon Valley, CA 249,939,618 371,245 371,245 1,171,396 Seattle/Puget Sound, WA 261,174,899 0 1,914,813 3,409,989 Stockton/San Joaquin County, CA 95,615,825 0 1,547,353 1,900,160 Walnut Creek, CA 17,511,763 0 0 0 West Total 3,813,068,148 6,491,635 21,298,960 41,069,452 U.S. TOTALS 14,369,468,173 24,345,238 80,337,950 104,929,081 (continued) * Q3 data displayed for Detroit, Fresno ** Boise tracks 5,000+ SF in Ada County and 2,500+ SF in Canyon County
  12. 12. P. 12 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY MARKET ABSORPTION Q4 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) VACANCY RATE SEP. 30, 2013 (%) VACANCY RATE DEC. 31, 2013 (%) NORTHEAST Baltimore, MD 329,190 1,198,644 9.86 9.47 Boston, MA -1,164,519 -1,095,012 17.85 18.76 Hartford, CT 59,825 -376,153 9.29 9.22 Long Island, NY 143,612 1,659,911 5.21 5.12 New Jersey – Central 1,917,171 5,659,735 8.88 8.33 New Jersey – Northern* 1,883,982 1,821,144 8.46 8.00 Philadelphia, PA 2,265,628 6,947,161 9.15 8.81 Pittsburgh, PA 352,815 1,180,844 7.85 7.63 Washington, DC 1,096,098 2,778,377 11.28 11.01 Northeast Total 6,883,802 19,774,651 9.55 9.28 SOUTH Atlanta, GA 1,333,272 10,753,140 12.19 12.02 Birmingham, AL -94,387 -97,837 8.97 9.06 Charleston, SC 464,053 1,137,712 9.54 8.34 Charlotte, NC 1,649,466 6,651,131 12.26 11.77 Columbia, SC -121,900 680,017 7.06 7.38 Dallas-Ft. Worth, TX 7,191,270 17,105,148 8.03 7.41 Ft. Lauderdale-Broward, FL 588,474 1,735,361 9.00 8.59 Greenville/Spartanburg, SC 329,405 1,257,381 8.88 8.78 Houston, TX 2,058,205 7,024,157 5.25 5.18 Jacksonville, FL -6,508 1,526,230 9.22 9.22 Little Rock, AR 403,568 613,782 11.20 10.09 Louisville, KY 252,561 506,393 7.70 7.64 Memphis, TN -659,567 3,333,364 11.75 12.32 Miami, FL 316,278 2,469,746 6.48 6.47 Nashville, TN 558,724 725,579 8.98 8.49 Orlando, FL 420,479 1,644,036 10.08 9.76 Raleigh, NC 521,637 882,431 10.09 9.62 Richmond, VA 971,175 3,538,409 9.86 9.17 Savannah, GA 1,522,659 2,046,943 11.06 9.03 Tampa Bay, FL -71,921 127,148 10.29 10.33 West Palm Beach, FL 302,191 955,447 7.56 7.11 South Total 17,929,134 64,615,718 9.25 8.98 * Q3 data displayed for Northern New Jersey
  13. 13. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 13 UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY MARKET ABSORPTION Q4 2013 (SF) ABSORPTION YEAR-TO-DATE (SF) VACANCY RATE SEP. 30, 2013 (%) VACANCY RATE DEC. 31, 2013 (%) MIDWEST Chicago, IL 3,153,323 12,760,948 8.80 8.70 Cincinnati, OH 813,036 4,031,677 7.88 7.55 Cleveland, OH 354,141 3,892,005 7.94 7.96 Columbus, OH 2,287,901 5,156,281 6.35 5.58 Detroit, MI* 1,282,356 4,459,020 10.93 10.69 Grand Rapids, MI 522,717 1,034,648 6.94 6.57 Indianapolis, IN 864,155 1,015,863 6.80 6.74 Kansas City, MO-KS 874,562 3,737,945 6.09 5.86 Milwaukee, WI 643,615 2,843,310 6.50 6.46 Minneapolis-St. Paul, MN 111,545 3,339,560 7.74 7.69 Omaha, NE 36,835 267,389 5.06 4.76 St. Louis, MO 627,965 1,714,669 8.17 7.99 Midwest Total 11,572,151 44,253,315 8.18 8.01 WEST Albuquerque, NM 444,096 581,836 9.89 9.34 Bakersfield, CA 350,442 365,314 4.06 3.20 Boise, ID -35,153 1,236,392 5.23 5.31 Denver, CO 1,033,799 2,914,568 6.61 5.46 Fairfield, CA 286,287 1,752,731 8.08 7.44 Fresno, CA* 0 300,000 8.64 8.64 Honolulu, HI -36,308 375,959 2.63 2.71 Las Vegas, NV 697,659 3,629,095 12.56 12.00 Los Angeles, CA 1,312,000 9,869,800 3.03 2.94 Los Angeles – Inland Empire, CA 5,329,100 14,955,700 4.99 4.20 Oakland, CA 715,091 2,769,786 6.86 6.35 Orange County, CA 601,200 1,771,000 4.48 4.41 Phoenix, AZ 2,573,698 3,445,245 13.13 12.90 Pleasanton/Tri-Valley, CA 55,496 559,414 6.40 6.06 Portland, OR 968,606 1,226,219 6.74 6.24 Reno, NV 210,663 438,378 10.81 10.55 Sacramento, CA 178,208 1,699,200 12.91 12.80 San Diego, CA 698,435 2,673,053 8.84 8.47 San Francisco Peninsula, CA 580,042 1,530,922 7.29 5.65 San Jose/Silicon Valley, CA 91,287 3,525,241 9.10 9.06 Seattle/Puget Sound, WA -136,206 1,456,392 5.21 5.45 Stockton/San Joaquin County, CA 230,865 2,433,526 11.76 11.52 Walnut Creek, CA -9,507 286,838 7.75 7.81 West Total 16,139,800 59,796,609 6.82 6.50 U.S. TOTALS 52,524,887 188,440,293 8.33 8.08 (continued) *Q3 data displayed for Detroit, Fresno
  14. 14. P. 14 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA UNITED STATES | INDUSTRIAL SURVEY | 3-MONTH FORECASTS, SALES PRICE & CAP RATES MARKET SALES PRICE (USD PSF) MEDIAN CAP RATE (%) VACANCY FORECAST (3 MONTHS) ABSORPTION FORECAST (3 MONTHS) RENT FORECAST (3 MONTHS) NORTHEAST Baltimore, MD 55.01 6.19    Boston, MA 71.00 6.50  Hartford, CT 38.00 8.50  Long Island, NY 72.85 8.00    New Jersey – Central 59.76 7.00   New Jersey – Northern* 43.37 7.00 n/a n/a n/a Philadelphia, PA 68.33 7.10    Pittsburgh, PA 50.00 7.75    Washington, DC 65.38 6.24    Northeast Average** 58.19 7.14 SOUTH Atlanta, GA 38.81 8.00    Birmingham, AL Close to zero Charleston, SC 46.00 7.50    Columbia, SC 37.00    Dallas-Ft. Worth, TX 51.00 7.20    Ft. Lauderdale-Broward, FL 70.00  Greenville/Spartanburg, SC    Houston, TX 65.00   Jacksonville, FL 41.00 10.10 Close to zero Little Rock, AR 65.45 9.00 Close to zero Memphis, TN    Miami, FL 95.00   Nashville, TN 45.00 7.50    Orlando, FL 50.00 7.50    Richmond, VA 32.00   Savannah, GA 34.00 8.50    Tampa Bay, FL 29.81 8.50    West Palm Beach, FL 68.00 8.00 Close to zero South Average** 51.20 8.18 * Q3 data displayed for Northern New Jersey **Straight averages used NOTE: Forecasts are for Warehouse/Distribution space.
  15. 15. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 15 UNITED STATES | INDUSTRIAL SURVEY | 3-MONTH FORECASTS, SALES PRICE & CAP RATES MARKET SALES PRICE (USD PSF) MEDIAN CAP RATE (%) VACANCY FORECAST (3 MONTHS) ABSORPTION FORECAST (3 MONTHS) RENT FORECAST (3 MONTHS) MIDWEST Chicago, IL 53.00 6.15   Cincinnati, OH 35.00 8.25  Cleveland, OH   Columbus, OH 26.88   Detroit, MI* 12.50 n/a n/a n/a Grand Rapids, MI 37.91 8.10    Indianapolis, IN 53.50 6.75    Kansas City, MO-KS 31.50  Close to zero Milwaukee, WI 50.00 8.75   Minneapolis-St. Paul, MN 55.00    Omaha, NE    Midwest Average** 39.48 7.60   WEST Albuquerque, NM 86.00 7.85  Bakersfield, CA 38.00 10.00  Boise, ID 51.61  Denver, CO 63.35 8.31   Fairfield, CA    Fresno, CA* 42.00 9.00 Close to zero Honolulu, HI    Las Vegas, NV    Los Angeles, CA 94.59 6.50 Close to zero  Los Angeles - Inland Empire, CA 78.00 6.55    Oakland, CA 80.00 6.50    Orange County, CA 119.00 6.18 Close to zero  Phoenix, AZ 66.00 8.30    Pleasanton/Tri-Valley, CA 80.00 6.25 Close to zero Portland, OR 89.71 6.12    Sacramento, CA 42.02 7.58   San Diego, CA 107.74    San Francisco Peninsula, CA 275.00 7.00    San Jose/Silicon Valley, CA 129.00 6.00    Seattle/Puget Sound, WA 73.00 6.10    Stockton/San Joaquin County, CA   Walnut Creek, CA    West Average** 89.12 7.22 U.S. AVERAGE** 63.24 7.50 (continued) * Q3 data displayed for Detroit, Fresno **Straight averages used NOTE: Forecasts are for Warehouse/Distribution space.
  16. 16. P. 16 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF DECEMBER 2013 MARKET WAREHOUSE/DISTRIBUTION SPACE (USD PSF) BULK SPACE (USD PSF) FLEX/SERVICE SPACE (USD PSF) TECH/R&D SPACE (USD PSF) NORTHEAST Baltimore, MD 4.64 4.42 11.25 Boston, MA 6.15 5.31 6.52 11.53 Hartford, CT 3.97 5.78 7.66 6.50 Long Island, NY 9.30 17.05 New Jersey – Central 4.98 4.52 11.44 New Jersey – Northern* 5.92 5.95 10.39 Philadelphia, PA 4.25 4.18 7.25 11.00 Pittsburgh, PA 4.44 4.44 11.81 11.81 Washington, DC 6.89 5.70 11.78 15.06 Northeast Average** 5.62 5.04 10.57 11.18 SOUTH Atlanta, GA 3.23 3.00 7.27 9.73 Birmingham, AL 3.40 3.25 8.22 Charleston, SC 3.85 4.30 6.25 16.25 Charlotte, NC 3.28 3.39 8.61 Columbia, SC 3.48 2.95 8.17 Dallas-Ft. Worth, TX 3.30 2.75 7.25 8.60 Ft. Lauderdale-Broward, FL*** 6.32 5.94 11.26 13.88 Greenville/Spartanburg, SC 2.83 2.90 6.80 Houston, TX 5.54 4.57 9.30 14.25 Jacksonville, FL 3.81 3.55 8.45 Little Rock, AR 2.87 2.77 7.35 Louisville, KY 3.56 3.42 6.94 6.00 Memphis, TN 2.46 2.65 4.99 9.50 Miami, FL*** 8.26 7.59 10.63 12.00 Nashville, TN 3.20 3.01 8.00 7.50 Orlando, FL*** 4.50 4.31 8.82 8.55 Raleigh, NC 3.87 4.51 10.33 Richmond, VA 3.48 3.47 7.38 8.92 Savannah, GA 3.95 3.75 7.00 10.00 Tampa Bay, FL 4.40 4.30 7.20 5.83 West Palm Beach, FL*** 7.03 6.22 11.18 10.00 South Average** 4.12 3.93 8.16 10.07 *Q3 Data displayed for Northern New Jersey **Straight averages used. ***Rents reported reflect blended average of all industrial service types (triple net, modified gross, etc.)
  17. 17. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 17 UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF DECEMBER 2013 MARKET WAREHOUSE/DISTRIBUTION SPACE (USD PSF) BULK SPACE (USD PSF) FLEX/SERVICE SPACE (USD PSF) TECH/R&D SPACE (USD PSF) MIDWEST Chicago, IL 4.43 3.06 8.21 Cincinnati, OH 3.26 2.89 5.92 5.92 Cleveland, OH 3.37 2.90 8.30 3.22 Columbus, OH 2.75 2.75 5.05 5.05 Detroit, MI* 3.73 3.62 7.42 7.47 Grand Rapids, MI 3.31 3.31 4.30 4.30 Indianapolis, IN 4.50 3.28 6.65 Kansas City, MO-KS 4.27 3.53 8.89 7.36 Milwaukee, WI 4.75 3.95 5.80 Minneapolis-St. Paul, MN 4.53 4.53 6.76 7.10 Omaha, NE 3.96 4.57 7.12 4.85 St. Louis, MO*** 3.76 3.74 7.69 Midwest Average** 3.89 3.51 6.84 5.66 WEST Albuquerque, NM 5.46 4.27 8.75 8.75 Bakersfield, CA 4.00 3.42 8.00 Boise, ID 5.10 6.36 6.54 Denver, CO 4.93 4.28 9.33 9.29 Fairfield, CA 4.84 5.61 7.09 8.12 Fresno, CA* 3.84 3.60 4.80 5.50 Honolulu, HI 11.88 Las Vegas, NV 4.92 4.34 6.24 9.72 Los Angeles, CA 6.55 6.25 9.69 12.69 Los Angeles – Inland Empire, CA 4.80 4.57 7.19 7.99 Oakland, CA 4.80 5.40 6.48 8.64 Orange County, CA 7.37 6.95 13.09 13.95 Phoenix, AZ 5.45 4.51 11.00 10.83 Pleasanton/Tri-Valley, CA 5.16 4.64 Portland, OR 5.21 5.27 9.97 10.86 Reno, NV 3.93 3.30 7.90 Sacramento, CA 3.72 3.48 8.78 5.52 San Diego, CA 8.04 7.08 10.44 15.12 San Francisco Peninsula, CA 10.80 10.80 22.92 22.92 San Jose/Silicon Valley, CA 6.60 6.16 9.24 16.32 Seattle/Puget Sound, WA 6.18 5.29 13.68 Stockton/San Joaquin County, CA 3.96 6.12 8.16 Walnut Creek, CA 3.00 13.44 West Average** 5.68 5.28 9.36 11.05 U.S. AVERAGE** 4.84 4.44 8.64 9.77 (continued) *Q3 Data displayed for Detroit, Fresno **Straight averages used. ***Rents reported reflect blended average of all industrial service types (triple net, modified gross, etc.)
  18. 18. P. 18 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA CANADA | INDUSTRIAL SURVEY | INVENTORY, NEW SUPPLY & UNDER CONSTRUCTION MARKET INVENTORY DEC. 31, 2013 (SF) Q4 2013 NEW SUPPLY (SF) YEAR-TO-DATE NEW SUPPLY (SF) CURRENTLY UNDER CONSTRUCTION (SF) Calgary, AB 130,292,241 1,493,595 5,065,116 1,062,168 Edmonton, AB 82,268,125 368,163 1,722,429 2,266,663 Halifax, NS 7,624,537 10,200 10,200 0 Montréal, QC 348,564,380 605,000 635,000 180,000 Ottawa, ON* 28,134,055 64,000 64,000 47,500 Regina, SK 17,160,000 52,000 152,000 178,000 Saskatoon, SK 21,524,000 54,000 440,000 300,000 Toronto, ON 759,630,286 1,238,404 3,946,201 4,140,551 Vancouver, BC 185,122,410 408,838 2,734,383 2,125,457 Victoria, BC 9,001,303 0 78,790 0 Waterloo Region, ON 60,567,553 54,434 174,328 11,969 Winnipeg, MB 80,092,082 260,000 260,000 60,000 CANADA TOTALS 1,729,980,972 4,608,634 15,282,447 10,372,308 CANADA | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY MARKET ABSORPTION Q4 2013 (SF) YEAR-TO-DATE ABSORPTION (SF) VACANCY RATE SEP. 30, 2013 (%) VACANCY RATE DEC. 31, 2013 (%) Calgary, AB 1,191,518 3,960,338 5.65 5.82 Edmonton, AB 681,615 1,574,634 3.80 3.40 Halifax, NS -72,202 -100,589 10.15 11.21 Montréal, QC 83,605 -739,891 4.57 4.71 Ottawa, ON* 133,127 133,127 5.76 5.50 Regina, SK 100,000 193,000 3.51 3.21 Saskatoon, SK 120,000 537,000 4.42 4.18 Toronto, ON -722,779 3,360,820 3.68 3.99 Vancouver, BC 510,667 1,651,858 4.29 4.23 Victoria, BC 0 -33,423 4.50 4.50 Waterloo Region, ON -96,860 103,821 6.66 6.93 Winnipeg, MB 59,740 -187,592 3.45 3.69 CANADA TOTALS 1,988,431 10,453,103 4.25 4.41 *Q1 data displayed for Ottawa. 0.0 5.0 10.0 15.0 20.0 Indianapolis, IN Los Angeles, CA Atlanta, GA Savannah, GA New Jersey - Central Chicago, IL Los Angeles - Inland Empire, CA Dallas-Ft. Worth, TX Millions YTD Absorption Q4-13 Absorption ABSORPTION (SF) | SELECT U.S. MARKETS | Q4 2013 VS. YTD -2.0 0.0 2.0 4.0 6.0 Toronto, ON Waterloo Region, ON Halifax, NS Victoria, BC Winnipeg, MB Montréal, QC Regina, SK Saskatoon, SK Vancouver, BC Edmonton, AB Calgary, AB Millions YTD Absorption Q4-13 Absorption ABSORPTION (SF) | CANADIAN MARKETS | Q3 2013 VS. YTD Source: Colliers InternationalSource: Colliers International
  19. 19. HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 19 *Q1 data displayed for Ottawa. **Straight averages used NOTE: Forecasts are for Warehouse/Distribution space. CANADA | INDUSTRIAL SURVEY | FORECASTS, SALES PRICE & CAP RATES MARKET SALES PRICE (CAD PSF) MEDIAN CAP RATE (%) VACANCY FORECAST (3 MONTHS) ABSORPTION FORECAST (3 MONTHS) RENT FORECAST (3 MONTHS) Calgary, AB 160.00 7.00   Edmonton, AB 155.07 6.00   Halifax, NS  Montréal, QC 62.00 7.50 Close to zero Ottawa, ON* 110.00 7.50 n/a n/a n/a Regina, SK 190.00 7.15 Close to zero Saskatoon, SK 155.00 7.15   Toronto, ON 94.00 6.30    Vancouver, BC 180.00 5.15    Victoria, BC 195.00 7.50 Close to zero Waterloo Region, ON 76.00 Close to zero Winnipeg, MB 80.00 7.50  CANADA AVERAGES** 132.46 6.88 CANADA | INDUSTRIAL SURVEY | AVERAGE ASKING RENTS MARKET WAREHOUSE/DISTRIBUTION SPACE (CAD PSF) BULK SPACE (CAD PSF) FLEX/SERVICE SPACE (CAD PSF) TECH/R&D SPACE (CAD PSF) Calgary, AB 9.25 7.50 12.00 12.00 Edmonton, AB 8.00 7.63 10.13 16.00 Halifax, NS 8.15 10.56 10.50 15.00 Montréal, QC 4.75 4.25 6.00 8.00 Ottawa, ON* 8.25 7.50 8.50 11.00 Regina, SK 11.00 10.00 12.00 14.00 Saskatoon, SK 11.00 10.00 13.00 15.00 Toronto, ON 5.07 Vancouver, BC 8.08 7.48 9.49 14.00 Victoria, BC 11.50 10.00 13.50 13.50 Waterloo Region, ON 4.53 3.67 8.28 8.28 Winnipeg, MB 6.25 5.25 10.95 12.75 CANADA AVERAGES** 7.99 7.62 10.40 12.68
  20. 20. P. 20 | COLLIERS INTERNATIONAL HIGHLIGHTS | Q4 2013 | INDUSTRIAL | NORTH AMERICA COLLIERS INTERNATIONAL | P. 20 INDUSTRIAL VACANCY RANKINGS | US MARKET VACANCY RATE DEC. 31, 2013 (%) Honolulu, HI 2.71 Los Angeles, CA 2.94 Bakersfield, CA 3.20 Los Angeles – Inland Empire, CA 4.20 Orange County, CA 4.41 Omaha, NE 4.76 Long Island, NY 5.12 Houston, TX 5.18 Boise, ID 5.31 Seattle/Puget Sound, WA 5.45 Denver, CO 5.46 Columbus, OH 5.58 San Francisco Peninsula, CA 5.65 Kansas City, MO-KS 5.86 Pleasanton/Tri-Valley, CA 6.06 Portland, OR 6.24 Oakland, CA 6.35 Milwaukee, WI 6.46 Miami, FL 6.47 Grand Rapids, MI 6.57 Indianapolis, IN 6.74 West Palm Beach, FL 7.11 Columbia, SC 7.38 Dallas-Ft. Worth, TX 7.41 Fairfield, CA 7.44 Cincinnati, OH 7.55 Pittsburgh, PA 7.63 Louisville, KY 7.64 Minneapolis-St. Paul, MN 7.69 Walnut Creek, CA 7.81 Cleveland, OH 7.96 St. Louis, MO 7.99 New Jersey – Northern* 8.00 U.S. AVERAGE 8.08 New Jersey – Central 8.33 Charleston, SC 8.34 San Diego, CA 8.47 Nashville, TN 8.49 Ft. Lauderdale-Broward, FL 8.59 Fresno, CA* 8.64 Chicago, IL 8.70 Greenville/Spartanburg, SC 8.78 Philadelphia, PA 8.81 Savannah, GA 9.03 Birmingham, AL 9.06 San Jose/Silicon Valley, CA 9.06 Richmond, VA 9.17 Hartford, CT 9.22 Jacksonville, Fl 9.22 Albuquerque, NM 9.34 Baltimore, MD 9.47 Raleigh, NC 9.62 Orlando, FL 9.76 Little Rock, AR 10.09 Tampa Bay, FL 10.33 Reno, NV 10.55 Detroit, MI* 10.69 Washington, DC 11.01 Stockton/San Joaquin County, CA 11.52 Charlotte, NC 11.77 Las Vegas, NV 12.00 Atlanta, GA 12.02 Memphis, TN 12.32 Sacramento, CA 12.80 Phoenix, AZ 12.90 Boston, MA 18.76 INDUSTRIAL VACANCY RANKINGS | CANADA MARKET VACANCY RATE DEC. 31 2013 (%) Regina, SK 3.21 Edmonton, AB 3.40 Winnipeg, MB 3.69 Toronto, ON 3.99 Saskatoon, SK 4.18 Vancouver, BC 4.23 CANADA AVERAGE 4.41 Victoria, BC 4.50 Montréal, QC 4.71 Ottawa, ON** 5.50 Calgary, AB 5.82 Waterloo Region, ON 6.93 Halifax, NS 11.21 COLLIERS INTERNATIONAL 601 Union Street, Suite 4800 Seattle, WA 98101 TEL +1 206 695 4200 FOR MORE INFORMATION K.C. Conway Chief Economist | USA TEL + 1 678 458 3477 EMAIL kc.conway@colliers.com CONTRIBUTORS Jeff Simonson Senior Research Analyst | USA Jennifer Macatiag Graphic Designer | USA Cliff Plank National Director | GIS & Mapping Aaron Finkelstein Communications Manager | USA 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 • $2 billion in annual revenue • 13,500 professionals and staff • 1.12* billion square feet under management • $71 billion USD in total transaction value *Together, Colliers International and FirstService manage 2.51 billion square feet of property— second-largest in the world. Copyright © 2014 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Accelerating success. Glossary Absorption – Net change in occupied space over a given period of time. Bulk Space – Warehouse space 100,000 square feet or more with minimum ceiling heights of 24 feet. All loading is dock-height. Flex Space – Single-story buildings having 10- to 18-foot ceilings with both floor-height and dock-height loading. Includes wide variation in office space utilization, ranging from retail and personal service, to distribution, light industrial and occasional heavy industrial use. Inventory – Includes all existing multi- or single-tenant leased and owner-occupied industrial warehouse, light manufacturing, flex and R&D properties greater than or equal to 10,000 square feet. New Construction – Includes completed speculative and build-to-suit construction. New construction quoted on a net basis after any demolitions or conversions. Service Space – Single-story (or mezzanine) with 10- to 16-foot ceilings with frontage treatment on one side and dock-height loading or grade-level roll-up doors on the other. Less than 15 percent office space. Tech/R&D – One- and two-story, 10- to 15-foot ceiling heights with up to 50 office/dry lab space (remainder in wet lab, workshop, storage and other support), with dock-height and floor-height loading. Triple Net Rent – Includes rent payable to the landlord, and does not include additional expenses such as taxes, insurance, maintenance, janitorial and utilities. All industrial and high-tech/R&D rents in this report are quoted on an annual, triple net per square foot basis in U.S. and Canadian dollars. Vacancy Rate – Percentage of total inventory available (both vacant and occupied) as at the survey date including direct vacant and sublease space. Warehouse – 50,000 square feet or more with up to 15 percent office space, the balance being general warehouse space with 18- to 30-foot ceiling heights. All loading is dock-height. *Q3 data displayed for Detroit, Fresno, Northern New Jersey. **Q1 data displayed for Ottawa.

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