CBRE Global Research and Consulting

U.S. Industrial MarketView Q2 2012

LEASE RATE $5.46

NET ABSORPTION26.4 MSF

THE FIGHT FOR CLASS A SPACE ACCELERATES

CONSTRUCTION COMPLETIONS5.2 MSF

AVAILABILITY RATE13.2%

Executive Summary

• Despitealacklustermacroeconomicenvironment,industrialleasingvelocityhasimprovedasuserstrytolock-incurrentlyfavorablerentandleaseterms.

• Industrialdemandwillsoftenoverthenextseveralquarters,inlinewithslowingU.S.andglobalgrowth,afalteringmanufacturingsectorandshrinkinginternationaltrade.

• UserdemandforClassAspacewillcontinuetodrivedownavailabilityrates,leadingtoupwardpressureonleaserates.Constructionactivityisback,includingbothbuild-to-suitandspeculativeprojectsacrosssomeofthenation’slargestindustrialmarkets.

• LowinterestratesandthelimitedsupplyofClassAindustrialproductforsalewillcontinuetodrivecapratesdowninthenearterm.

• IndustrialrealestateperformancecontinuestorecoverassignaledbytheNCREIFPropertyIndex.Industrialrealestatedeliveredanannualizedtotalreturnof13.4%duringQ12012,inlinewiththeoverallindex.

INDUSTRIAL LEASING ACTIVITY: More active than underlying economic trends would suggestDespiteanumberofmajorglobaleconomicheadwindsandaU.S.economythatisfastlosingmomentum,industrialleasingremainedsurprisinglyactiveacrossmostmarketsduringthepastquarter.TheU.S.industrialmarketcontinuedtoshowsignsofrecovery,withthenationalindustrialavailabilityratedroppingby20basispoints(bps)to13.2%inthesecondquarterof2012.Occupiershavebeguntomoveoffthesidelines,seekinglongertermleasestotakeadvantageoflowercompetitiverents,whichareexpectedtorise.“Extendandblend”usertransactionscontinue,butlandlordsaregettingpricingpowerbackasindustrialmarketconditionsimprove.Anumberofindustrialusersarealsoconsideringtheownershipoptiongivenrecord-lowinterestrates.

Warehousedemandwasthemaindriverforspaceslargerthan100,000sq.ft.

Tenantsareupgrading,relocatingfromClassBtoClassAspace,butoptionsaregettingtighter.Manufacturingspacerequirementswerealsoontherise,particularlyinthesoutheasternandnortheasternU.S.markets,dueinparttotheU.S.“manufacturingrenaissance.”

Theprospectforindustrialdemandoverthenextfewmonthswilllikelybeflat,however,givenweakeningheadlineeconomicindicators.U.S.economicdatahasbeendisappointing,leadingtofurtherdownwardrevisionstogrowth.Theoveralleconomy,consumerspending,internationaltradeandthebroadermanufacturingsectorareamongthekeydriversofindustrialdemand,withallpointingtoasoftpatchthroughatleastthenextquarter.

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0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

Q4Consumer Spending Real GDP

Annual Percent Change (%)

Forecast

1%

0%

1%

2%

3%

4%

5%

6%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Total Trade (L) Growth % (R)

Total Trade ($ Billions) Annual Percent Change (%)

2010

Q120

10Q2

2010

Q320

10Q4

2011

Q120

11Q2

2011

Q320

11Q4

2012

Q120

12Q2

2012

Q320

12Q4

2013

Q120

13Q2

2013

Q320

13Q4

Forecast

Source: IHS Global Insight, Interim Forecast, July 2012 Source: IHS Global Insight, Interim Forecast, July 2012

Source: Institute for Supply Management

M1 20

09

M3 20

09

M5 20

09

M7 20

09

M9 20

09

M11

2009

M1 2

010

M3 2

010

M5 20

10

M7 2

010

M9 2

010

M11 2

010

M1 20

11

M3 2

011

M5 2

011

M7 2

011

M9 2

011

M11 2

011

M1 2

012

M3 20

12

M5 2

0120

10

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30

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50

60

70

TheU.S.economyandindustrialsectorhavebeguntofeelthebruntoftheslowdowninglobalgrowth,whichoriginatedinEuropebuthasnowspreadtoLatinAmericaandAsia.U.S.trade,whichisthesumofimportsandexports,slowedduringthesecondquarterandisexpectedtoactuallydeclineinthethirdquarter.

Figure 1: U.S. Economy Downshifts Figure 2: U.S. International Trade Activity

Figure 3: ISM Surprised to the Downside (ISM Purchasing Managers’ Index [Diffusion index, SA])

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facilitatethetransportationofoilandgasforexports.

Theexpansionofe-retailerscontinuestofueltheneedforwarehouseanddistributionspace.Amazon,theleaderine-retailing,continuestopushforlargerfacilitiesclosetolargemetropolitanareastodecreasedeliverytimes.Astraditionalretailersgrowtheire-retailerstrategies,itwilllikelyincreasedemandforwarehousespaceandshrinktheneedfortraditionalbricks-and-mortarretail,whichistypically10to20timesthecostofawarehousefacility.

TheISMmanufacturingindex,agreatdemand-sideproxyforindustrialrealestate,cameinwellbelowexpectations.TheJuneISMmanufacturingindexslumpedto49.7,thefirstsub-50readingsinceJuly2009.Theforward-lookingdetailsofthesurveywerealsoweak,withbothnewordersandexportorderscominginbelow50asglobalheadwindsappeartobeexertinggreaterpressureontheU.S.industrialsector.ThedipintheISMsuggeststhatthedownshiftinthemanufacturingsectormaybeaccelerating.Themanufacturingdatahadbeenweak,butuntilnowtheISMindexhadlookedbetterthaneithermanufacturingoutputordurablegoodsorders.TheISMsurvey’sdetailssuggestthatthefactoryslowdownwillcontinuethroughatleastthenextfewmonths.

Domesticdemandforlocalgoodshasalsodecreasedoverthepastfewmonthsduetothecontinuedstrugglesinthehousingsectorandweaker-than-anticipatedjobgrowth.AsilverliningforconsumerspendingandtheU.S.economy,however,hasbeenthedeclineincommodityandenergypricesglobally.IntheU.S.,itisestimatedthataone-centdeclineinretailgasolinepricesequatestoroughly$1billionineconomy-widetaxcuts.Thelowerpriceofoilwillprovideafloorunderconsumerspendingandlikelycausedomesticconsumptiontoincreasemoderatelyasconsumersnowhaveahigherlevelofdisposableincome.Thechallengeremainswithbothconsumerandbusinessconfidencelevels;thishasresultedincautiousspendingandinvestmentfrombothsides.

Longer-term,however,weexpectthedriversofindustrialdemandtoshifttoamorepositivetrajectorygivensecularchangesintheglobaleconomy.U.S.manufacturingcompaniescontinuetobenefitfromtherelativelylowervalueoftheU.S.dollar.AcceleratingwageratesinAsiaandhighertransportationcostsarealsofosteringa“manufacturingrenaissance”intheU.S.Overthepastfewmonthstherehavebeenafew

announcementsofnewmanufacturingplants,especiallyinthetransportationsector,inthesouthernU.S.markets.Thesecompanieshavebeendrawnbycompetitivelaborcosts,theavailabilityofrealestateatcompetitiverates,andtheavailabilityofaskilledandhighlyproductiveworkforce.Partofthere-shoringofmanufacturingtotheU.S.hasbeendrivenbytheneedsoftheconsumers,thetimelydeliveryofproducttotheconsumerandthedemandforcustomproductssuchasaspecificcolorordesign.Althoughwiththerecentincreaseindemand,manufacturerswillincreasetheutilizationratesofexistingfacilitiesbeforeseekingadditionalspace.Recentannouncementsinclude:

•Airbus’newassemblyplant—tobebuiltinMobile,Alabama—isscheduledtobecompletedin2015,a$600millioninvestment.

•Fordisadding1,800jobsinLouisville,Kentucky,addingathirdshiftinthefallof2012.

•MagnaSeatingofAmerica,Inc.isbuildinga140,000-sq.-ft.plantinShepherdsville,Kentucky,adding450newjobsin2012.

•AsahiForge,aJapaneseautomotivesupplier,isaddingasecondmanufacturingplantinRichmond,Kentucky,in2012.

•NissanwillincreaseproductionforthenewSentra,adding1,000newjobsinMississippi.

•GMtoadd800jobs,addingathirdshifttoitstruckplantinTexasin2012.

Thedomesticenergysectorishavingamarginalinfluenceontheindustrialsectoraswell,butthiswilllikelychangewiththefurtherdevelopmentinshale,asexistingplantsareadaptedtoaccommodatetheprocessingandtransportofthenewmaterials.Newplantsarealsobeingbuiltinportsto

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Source: CBRE Econometric Advisors

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

-100

-80

-60

-40

-20

0

20

40

60

80

2007

Q2

2007

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2007

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2008

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2008

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2008

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Q2

Completions and Absorption (MSF) Availability Rate (%)

Completions (L) Absorption (L) Availability Rate (R)

Despitethelacklustereconomicenvironment,industrialspacedemandhasbeenrelativelystable.Industrialuserscontinuetofavorhigherquality,newerspacethatcanincreaseproductivityandlowertherealestatecost.Companiesarereviewingeverythingfromtheircurrentlocations,technology,andplantlayoutofequipmenttoincreaseproductionefficiencies.Insomecasesoccupiersaremovingintonewerfacilitiesandreducingspace,comparedtotheirpriorpremises,duetotheincreaseinstoragecapacitywithhigherstackingcapabilityandamoreefficientplantlayout.Thisisdrivingthedemandbytenantstotradeuptonewer,moremodernClassAindustrialfacilities.Thesebuildingstypicallyhavehigherceilings,super-flatfloorsandhavebeenbuiltinthelasttenyears.Evenwiththenationalindustrial

availabilityrateat13.2%,thescarcityofavailablespaceinsuchbuildingsmeansthatClassAindustrialavailabilitiescontinuetoshrink,insomecasesattheexpenseofolderindustrialbuildings.

USERS UPGRADING SPACE

Figure 4: U.S. Industrial Supply and Demand

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Thelackofavailableproductrequiredbyusersisplacingupwardpressureonleaseratesforthebestspace;however,leaseratesforaverageproductremainflat.Inprimarymarkets,rentsfornewerfacilitiesareapproachingreplacementlevelsandspurringnewdevelopment.Newconstructioncontinuestoincreaseacrosskeymarketsduetothedropinavailabilityratesin2012andthelackofnewer,ClassAindustrialspace.Newconstructionfor2012hastotalednearly

11millionsq.ft.,andisontracktoexceedtheindustrialnewsupplycompletedin2011.MostofthisnewspaceconsistsofClassAdesign-buildprojects,althoughanincreaseinspeculativeconstructionprojectsacrossthecountryisemerging.PocketsofspeculativeconstructionactivityareoccurringinNorthernVirginia,Indianapolis,theInlandEmpire,OrangeCounty,SaltLakeCityandAtlanta.Manyofthesemarketshavesingle-digit

industrialavailabilityrates,withavailableClassAindustrialspacevirtuallynon-existent.Duetotheshortsupplyofnewproduct,manyoftheseprojectsareoftenpre-leased.InAtlanta,despitemanyavailablewarehouseoptions,anew630,000-sq.-ft.speculativeprojectisunderconstruction,underscoringthedemandforstate-of-the-artlargewarehouseanddistributionspace.

HERE COMES THE SUPPLY

ThePanamaCanalhasalsoimpactedtheU.S.industrialmarketwithrespecttocompetitionbetweenEastCoastversusWestCoastports.TheracecontinuesintheeasternU.S.gatewaymarketssuchasNewYork,NewJersey,Norfolk,andMiamitoinvestcapitalinpreparingforthecompletionofthePanamaCanalexpansion.Mostoftheinvestmentcontinuestobefordredgingprojects,whichwillallowtheportstoaccommodatelargershipsaswellastheneedtoincreasetheclearanceheightofbridges.Theonlyportthatcancurrently

accommodatethepost-panamaxshipisNorfolk.ThePortAuthorityofNewYorkandNewJerseyhascommitted$1billiontoraisetheBayonneBridge,whichconnectsBayonne,NewJersey,withStatenIsland,NewYork,by64feettoallowlargershipstopass.PortspendingwillincreaseaswenearthecompletionofthePanamaCanalexpansionin2014.

Theinvestmentbenefitsforeasternportswillbeminimalintheshortterm,asthetransportationinfrastructureforgoods

inlandremainsinwesternports.Inthenearterm,itremainsmorecosteffectiveandquickerforshipperstooffloadinwesternportsandtransportgoodsviarailtomajormarketssuchasChicago.EasternportswilllikelybenefitfromincreasedcontainertrafficfromshipsusingtheSuezCanalandexpandingmarketssuchasBraziltothesouth.

THE PANAMA CANAL FACTOR

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Source: Real Capital Analytics

7.0%

7.2%

7.4%

7.6%

7.8%

8.0%

8.2%

8.4%

8.6%

8.8%

$0

$2

$4

$6

$8

$10

$12

Jan

2010

Feb

Mar

Apr

May

Jun Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

2011 2012

Industrial Transaction Volume ($ Billions) Cap Rates (%)

Industrial Transactions (L) Average Cap Rates (R)

Domesticandcross-borderinvestorscontinuetocloselymonitorindustrialsectorfundamentalsgivenfavorableleasingvelocityandthelackofClassAoptionsfornewerspace.Strongerrentalrecoveryisbeingusedinunderwritingindustrialacquisitions.Risingsalesvolumereflectsthesurgeininvestorinterest.Theindustrialcapitalmarket

trendssignalimprovingtransactionvolume,accordingtoRealCapitalAnalytics.Overthefirstfivemonthsof2012,industrialtransactionstotaled$10.3billion,a13%increaseoveryear-agolevels.Interestinindustrialpropertyhasresurfaced,asinvestorsincreasinglyeyeportfoliotransactions.Institutionalinvestors,however,continue

tofocusonClassAand/orvalue-addpropertiesinprimarymarkets.Record-lowinterestrates,combinedwithgreaterinstitutionalcapitalthanavailablesupplyofpropertiesforsale,continuetodrivedowncaprates,especiallyforbetterassets.

IndustrialrealestateperformancecontinuestorecoverassignaledbytheNCREIFPropertyIndex.Industrialrealestatedeliveredanannualizedtotalreturnof13.4%duringQ12012,inlinewiththeoverallindex.Thiswasthesecondhighestreturn,trailingonlythemulti-housingsector.Muchofthereturnhasbeenduetoasurgeinappreciationreturnsthathavebeendrivenbycapratecompressionearlierthisyear.The

westernregionoftheU.S.alsodominatesthemarketvalueofindustrialpropertiesintheNPIandassuch,thesolidperformanceofindustrialmarketsinthewestcontinuetodriveoverallindustrialperformance.

INDUSTRIAL CAPITAL MARKETS

Figure 5: Institutional Capital Targeting Industrial Assets

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Q2 2

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87Source: CBRE Research

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and

completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.

SEATTLE249,079 SF10.3%$6.49

SAN JOSE243,759 SF13.5%$11.42

PHOENIX275,326 SF15.0%$6.84

DENVER223,929 SF7.8%$6.21

CHICAGO1,188,170 SF9.7%$3.99

COLUMBUS208,190 SF12.6%$3.04

INDIANAPOLIS238,848 SF9.1%$4.28

DETROIT511,766 SF11.9%$4.47CLEVELAND290,783 SF8.3%$4.59

MILWAUKEE226,563 SF

11.8%$3.76

ST. LOUIS222,407 SF

14.9%$4.34

ATLANTA551,590 SF18.8%$3.29

NEW JERSEYCENTRAL395,459 SF10.4%$4.37

PHILADELPHIA401,433 SF12.5%$3.86

BALTIMORE153,169 SF15.5%$4.79

NEW JERSEYNORTHERN409,442 SF10.1%$6.11

MIAMI211,710 SF9.3%$4.68

HOUSTON448,767 SF9.2%$3.91

SAN DIEGO200,759 SF

15.0%$10.32

LOSANGELES

993,073 SF6.8%$6.52

INLANDEMPIRE403,354 SF11.8%$4.08

ORANGECOUNTY252,457 SF7.4%$7.56

DALLAS/FT. WORTH721,121 SF13.4%$3.70

KANSASCITY233,654 SF12.3%$4.53

MINNEAPOLIS/ST. PAUL

326,839 SF10.2%$4.70

CINCINNATI267,221 SF9.5%$3.79

SEATTLE249,079 SF10.3%$6.49

SAN JOSE243,759 SF13.5%$11.42

PHOENIX275,326 SF15.0%$6.84

DENVER223,929 SF7.8%$6.21

CHICAGO1,188,170 SF9.7%$3.99

COLUMBUS208,190 SF12.6%$3.04

INDIANAPOLIS238,848 SF9.1%$4.28

DETROIT511,766 SF11.9%$4.47CLEVELAND290,783 SF8.3%$4.59

MILWAUKEE226,563 SF

11.8%$3.76

ST. LOUIS222,407 SF

14.9%$4.34

ATLANTA551,590 SF18.8%$3.29

NEW JERSEYCENTRAL395,459 SF10.4%$4.37

PHILADELPHIA401,433 SF12.5%$3.86

BALTIMORE153,169 SF15.5%$4.79

NEW JERSEYNORTHERN409,442 SF10.1%$6.11

MIAMI211,710 SF9.3%$4.68

HOUSTON448,767 SF9.2%$3.91

SAN DIEGO200,759 SF

15.0%$10.32

LOSANGELES

993,073 SF6.8%$6.52

INLANDEMPIRE403,354 SF11.8%$4.08

ORANGECOUNTY252,457 SF7.4%$7.56

DALLAS/FT. WORTH721,121 SF13.4%$3.70

KANSASCITY233,654 SF12.3%$4.53

MINNEAPOLIS/ST. PAUL

326,839 SF10.2%$4.70

CINCINNATI267,221 SF9.5%$3.79

1,000,000,000 SF

200,000,000 SF

MARKETSTOCK (SF x 1000)AVAILABILITY RATENNN ASKING RENT

*The arrows indicate a trend and do not represent a positive or negative value for the underlying statistic (e.g., net absorption could be negative, but still represent a positive trend over the time period).

Figure 6: 25 Largest Industrial Markets - Q2 2012

The national availability rate masks regional performance. According to second quarter figures, west coast markets such as Los Angeles (6.8%) and Orange County (7.4%) are reporting lower industrial availability rates than any other market. By contrast, east coast markets such as Stamford (25.9%), Boston (20.9%) and Atlanta (18.8%) report among the highest industrial availability rates in the nation. Industrial markets in older east coast cities suffer from a higher degree of older and obsolete product.

From a regional perspective, the largest increases in absorption occurred in Chicago, the Inland Empire and New Jersey, respectively, and were mostly driven by the demand in Class A industrial warehouse and distribution space.

REGIONAL OVERVIEW: SUPER-REGIONAL DISTRIBUTION CENTERS OUTPERFORM

Q2 2012 Current QoQ YoY

Availability Rate 13.2% i i

Lease Rate $5.46 h h

Net Absorption* 26.4 MSF i i

Construction Completions 5.2 MSF i i

NATIONAL QUICK STATS

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IndustrialavailabilityinCentralNewJerseyremainedflatat10.4%,whereasavailabilitydecreased40bpsto10.1%inNorthernNewJerseyduringthesameperiod.TheaverageaskingleaserateforindustrialpropertyinNewJerseyincreasedduringthesecondquarterforthefirsttimeinthepastfouryears.Thestate’saskingleaserateisstill$1.07belowitspeakratesetinQ22008,althoughthatgapisexpectedtotighten,especiallyforClassAindustrialspace.

CentralNewJerseycontinuestoattractthemajorityofdemandfornewspace,mostlyconsistingofthirdpartylogisticsaswellasconsumerproductscompanies.ActivityattheportsofNew

Threenewconstructionprojectsamountingto1.17millionsq.ft.brokegroundduringQ22012.Morethanhalfofthesenewstartsarebeingbuiltonspeculativedevelopmentandtherecentincreaseinnewconstructionispushinglandpriceshigher.

YorkandNewJerseyremainsstrong,addingtothedemandforwarehouseanddistributionspace.InthenorthernportionofNewJersey,theMeadowlandssubmarketcontinuestoattractsignificanttenantdemandwithitshighconcentrationofindustrialspaceincloseproximitytoNewYorkCity.

Ascomparedtojustafewquartersago,industrialconstructionactivityinNewJerseyispickingup,duetoincreasingdemandandlimitednumberofoptionsforlarge,modernindustrialusers.FourindustrialbuildingswerecompletedinQ22012:threebuild-to-suitprojectstotaling652,155sq.ft.andone101,600-sq.-ft.speculativeproject.

NEW JERSEY

GREATER LOS ANGELES

TheGreaterLosAngelesindustrialavailabilityratefellto6.8%,a10bpsdecreasefromthepreviousquarter;thisrepresentsoneofthelowestratesintheU.S.Theincreasedvolumeofportactivityhascreatedanevengreaterneedfordistributionspaceforlargerandmoremoderndistributionfacilitiesofover100,000sq.ft.Inaddition,therehasbeenanincreaseindemandforindustrialspaceunder50,000sq.ft.,mainlycomingfromsmallstart-upcompanies.

TheInlandEmpireisdominatingmarketactivityinSouthernCalifornia,aslarge

ClassAdistributioncentersareinhighdemandbylogisticscompaniesandretailerslookingtoexpanddistributioncapabilities.Activitylevelsareveryhighinthe100,000-sq.-ft.category.ThebulkofconstructionactivityinSouthernCaliforniaisalsooccurringintheInlandEmpire,with7.3millionsq.ft.currentlyunderconstruction(thehighestfiguresincepre-recession),ofwhich38%—or2.8millionsq.ft.—isspeculativeconstruction.

InLosAngelesCounty,Commerce,SouthBayandSanFernandohavebeenparticularlystrong,withdemandfrom

bothmanufacturingcompaniesandwholesalers.Themostactivesizerangeisbetween50,000sq.ft.and75,000sq.ft.—infact,approximately63%ofQ22012activitywasbetween10,000sq.ft.and100,000sq.ft.AlthoughconstructionisfairlyactiveinLosAngelesCounty,with1.8millionsq.ft.,themarkethasnotexperiencedthesamegrowththattheInlandEmpireiswitnessing.However,duringthenextsixto12months,thelackofClassAindustrialspacewilllikelyspuranincreasedvolumeofconstruction,includingspeculativeprojects.

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Source: CBRE Research

*Percentage point change Source: CBRE Research

DALLAS

CHICAGO

ATLANTA

TheindustrialavailabilityrateremainedflatinDallasat13.4%forQ22012.Mostoftherecentdemandhasbeenfromretailersforwarehouseanddistributionbuildings.HomeDepotrecentlyoccupiedalargeblockofspace,andKohl’swillbeopeningafacilitylaterthisyear.Themostactivesubmarket,GreatSouthwest/Arlington,postedthelargestamountofabsorptioninthefirsthalfof2012,at2.8millionsq.ft.total.

Chicago’sindustrialmarketcontinuestorecover,withtheavailabilityratedecreasingto9.7%,achangeof40bpsfromthepreviousquarter.Threeoutofthetop10dealswerepaper-relatedcompanies(KimberlyClarkat716,318sq.ft.;DomtarPaperwith453,364sq.ft.;andInternationalPaperat316,000sq.ft.).Machinery,metalanddurablegoodsalsohadstrongshowingsduringthesecondquarter.TheFarSWsuburbanmarketinChicago(alsoknownastheI-55corridor)dominatedleasingactivityduringQ22012,withmorethan1.7millionsq.ft.ofactivity.Thisaccountedfor24%ofallleasingactivitythatoccurredinQ22012.Thissubmarkethasnewerbigboxproduct,lowerleaseratesandeasyaccesstoexpressways,whichwillkeepitintenants’favorfortheforeseeablefuture.

TheindustrialavailabilityrateinAtlantaincreasedto18.8%,adifferenceof20bpsfromthepreviousquarter.Demandforwarehouseanddistributionspacefromthird-partylogisticsfirmshasincreased.BulkwarehouseClassAspaceinthecoresubmarketsofNortheastandSouthAtlantacontinuestobethemostsought-after.Thedemand

Leaseratesarestartingtoincrease,primarilyduetoashrinkingavailabilityofspace.Mostnewconstructionhasconsistedofbuild-to-suitactivity.Twospeculativeprojectswererecentlyannounced:approximately661,000sq.ft.inSouthDallasfromProLogis;and529,000sq.ft.inNorthwestDallasfromIDI.

Fornewindustrialsupply,twoprojectsbrokegroundinthesecondquarter:a239,000-sq.-ft.build-to-suitforFedEx,anda604,000-sq.-ft.speculativeproject,bothofwhichareintheFarSWsuburbansubmarket.Inaddition,therearesixprojectscurrentlyunderconstructiontotaling1.9millionsq.ft.,ofwhichtwoarespeculativeprojectswhiletheotherfourarebuild-to-suit.ThelasttimeChicagohadthismuchspeculativeconstructionwasin2008.AnincreaseindemandiscausingrentalratestoincreasemarginallywhilelandlordsareofferinglesstenantincentivesandmovingrentsupforClassAindustrialbuildings.

formodernindustrialbuildingshascausedolderproductintheFultonindustrialmarkettolagduetotheageandobsolescenceofolderindustrialbuildings.Newconstructionhasbeenlimiteduntilnow,withmostlybuild-to-suitactivitytakingplaceinsouthAtlanta.

Figure 7: Industrial Market Snapshot

Lowest Availability Rates (%)LOS ANGELES METRO 6.8ORANGE COUNTY 7.4WESTCHESTER COUNTY 7.7DENVER 7.8CLEVELAND 8.3

Highest Availability Rates (%)STAMFORD 25.9BOSTON 20.9AUSTIN 19.4ATLANTA 18.8WALNUT CREEK 18.5

Figure 8: Largest Quarterly Decreases and Increases*

Decreases in AvailabilityCOLUMBUS -2.9DETROIT -1.9ORLANDO -1.8HARTFORD -1.0BALTIMORE & STAMFORD -0.9

Increases in AvailabilityWESTCHESTER COUNTY 1.7WALNUT CREEK 1.3SAN ANTONIO 1.2JACKSONVILLE 1.0LONG ISLAND 0.8

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* Maryland Suburban and Virginia Northern represent Washington, DC area.U.S. national figures provided by CBRE Econometric Advisors (CBRE EA), all other figures compiled by CBRE Research

Figure 9: Industrial Availability - Q2 2012

NNN Asking Rate ($) Availability Rate (%)Market Region Size Rank Q2 12 Q2 12 Q1 12 Q2 11BALTIMORE 29 4.79 15.5 16.4 17.8BOSTON 30 6.45 20.9 21.3 23.1HARTFORD 41 4.76 14.9 15.9 17.2LONG ISLAND 44 8.39 14.3 13.5 15.0MARYLAND SUBURBAN* 39 8.06 15.6 16.2 16.8NEW JERSEY CENTRAL 10 4.37 10.4 10.4 12.1NEW JERSEY NORTHERN 7 6.11 10.1 10.5 10.0NORFOLK 38 4.53 12.6 12.7 11.4PHILADELPHIA 9 3.86 12.5 12.7 12.7STAMFORD 50 7.00 25.9 26.8 21.1VIRGINIA NORTHERN* 42 10.22 15.3 14.7 15.9WESTCHESTER COUNTY 51 10.74 7.7 6.0 4.5East 12.9 13.2 13.7CHICAGO 1 3.99 9.7 10.1 10.5CINCINNATI 14 3.79 9.5 10.1 10.2CLEVELAND 12 4.59 8.3 8.5 9.9COLUMBUS 24 3.04 12.6 15.5 16.1DETROIT 5 4.47 11.9 13.8 15.1INDIANAPOLIS 18 4.28 9.1 9.3 10.9KANSAS CITY 19 4.53 12.3 12.3 12.3MILWAUKEE 20 3.76 11.8 11.1 12.1MINNEAPOLIS/ST. PAUL 11 4.70 10.2 10.9 11.5ST. LOUIS 22 4.34 14.9 15.1 15.0Midwest 10.7 11.3 12.0ATLANTA 4 3.29 18.8 18.6 19.2AUSTIN 43 6.84 19.4 19.1 22.0DALLAS/FT. WORTH 3 3.70 13.4 13.4 14.7FT. LAUDERDALE 37 6.63 11.6 11.1 13.4HOUSTON 6 3.91 9.2 9.3 10.3JACKSONVILLE 36 3.98 16.5 15.5 14.7MIAMI 23 4.68 9.3 9.2 10.5NASHVILLE 28 3.78 15.6 15.3 15.1ORLANDO 34 5.00 17.5 19.3 19.5PALM BEACH 45 6.44 12.8 13.3 13.7SAN ANTONIO 48 4.88 16.7 15.5 17.8TAMPA 32 5.02 13.4 13.5 13.3South 14.0 13.9 14.9ALBUQUERQUE 46 6.50 12.0 11.7 11.4DENVER 21 6.21 7.8 8.4 9.2INLAND EMPIRE 8 4.08 11.8 12.5 12.2LAS VEGAS 35 5.74 13.5 13.2 11.4LOS ANGELES METRO 2 6.52 6.8 6.9 7.4OAKLAND 31 5.28 9.2 9.4 10.3ORANGE COUNTY 15 7.56 7.4 7.8 8.5PHOENIX 13 6.84 15.0 15.4 16.2PORTLAND 26 4.44 9.7 9.6 10.5SACRAMENTO 27 5.16 16.8 16.7 16.0SALT LAKE CITY 33 4.80 8.7 9.4 9.3SAN DIEGO 25 10.32 15.0 15.4 16.2SAN FRANCISCO PENINSULA 40 18.12 9.5 9.9 9.3SAN JOSE 17 11.42 13.5 13.7 15.2SEATTLE 16 6.49 10.3 10.7 11.8TUCSON 47 6.65 15.5 15.5 12.7WALNUT CREEK 49 7.20 18.5 17.2 17.5West 10.4 10.6 11.1UNITED STATES 13.2 13.4 14.0

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Global ReSeaRch and conSUltInG This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

dISclaIMeR

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Edward J. Schreyer, SIOR Executive Managing Director Brokerage Services, Americas CBRE t: +1 214 863 3042 e: ed.schreyer@cbre.com

Asieh Mansour, Ph.D. Head of Research, Americas and Senior Managing Director CBRE Global Research and Consulting t: +1 415 772 0258 e: asieh.mansour@cbre.com

James Costello Managing Director, Head of Americas Investment, Consulting and Strategy, CBRE Global Research and Consulting t: +1 617 912 5326 e: jim.costello@cbre.com

Raymond Wong Managing Director, COO and Industrial Specialist, Americas Research, CBRE Global Research and Consulting t: +1 416 815 2353 e: raymond.wong@cbre.com

Heather Edmonds Director, Western U.S. Research Division, CBRE Global Research and Consulting

t: +1 909 418 2090 e: heather.edmonds@cbre.com

Pamela Murphy Senior Vice President, Eastern and Central U.S. Research Divisions, CBRE Global Research and Consulting t: +1 212 984 8004 e: pamela.murphy@cbre.com

Andrea Walker Director Head of Americas Research Publications and Data, CBRE Global Research and Consulting t: +1 919 376 8608 e: andrea.walker@cbre.com

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