>> Demand Remains Strong As Vacancy Falls

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1 Research & Forecast Report ORANGE COUNTY INDUSTRIAL Q Accelerating success. >> Demand Remains Strong As Vacancy Falls Key Takeaways > The vacancy rate decreased by 20 basis points to 2.5% this quarter. Vacancy stood at 2.8% one year ago. > Due to decreasing vacancy rates, asking rents increased to $0.84 PSF NNN, a 13.5% increase from one year ago. > Industrial demand was positive, recording 305,100 square feet (SF) of net absorption. > One project completed construction with only 195,500 SF remaining under construction. > As market conditions remain tight and quality industrial space remains scarce, asking rental rates are expected to rise by another 10% to 15% by the end of Market Indicators Relative to prior period Q Forecast Vacancy Net Absorption Construction Rental Rate Summary Statistics Orange County, Q Vacancy Rate 2.5% Change from Q1 17 (Basis Points) Net Absorption Construction Completions Under Construction -20 BPS 305,100SF 181,100 SF 232,600 SF Orange County Industrial Market The Orange County industrial market closed mid-year on a positive note as net absorption recorded positive 305,100 SF. There is a strong demand for new industrial buildings as developers are challenged with finding available infill sites. Industrial product is expected to continue depleting due to many properties being sold as land for multifamily redevelopment or converted to creative office space. Asking Rents Orange County, Q Orange County Industrial Market Average Asking Rent $0.84 NNN Change from Q1 17 $0.04 Y.O.Y. Change (%) 13.5% Orange County Labor Force Orange County, Q The industrial market has evolved to handle niche technology hub industries and specialty retail. The market is focused on smaller value-add manufacturing buildings that have a large R&D component. As such, rents for industrial space tend to be higher in Orange County compared to neighboring markets. 12-mo Employment Growth (%) 12-mo Actual Employment Change Construction Manufacturing Transportation, Trade & Utilities 3.8% -2.2% -1.1% +3,700-3,400-3,000

2 Vacancy > In second quarter, total vacancy rate decreased 20 basis points from last quarter to 2.5%. > Space remains scarce in Orange County, with the availability rate hovering at 3.8%. > Vacancy is tightest for buildings ranging between 1-9,999 SF at 1.5% and buildings 70,000-99,999 SF have the highest vacancy rate at 3.2%. > FORECAST: With only 195,500 SF of space remaining under construction and strong industrial demand remains, vacancy rates are expected to remain at historic low levels. Historical Vacancy v. Rents O.C. Market Q $ PSF PER MONTH (NNN) $0.90 Rents Vacancy 6% $0.85 5% $0.80 4% $0.75 3% $0.70 2% $0.65 $0.60 1% % VACANT Absorption and Leasing Activity > The Orange County industrial market recorded positive net absorption of 305,100 SF. $0.55 2Q13 2Q14 2Q15 2Q16 2Q17 0% > North County recorded the largest amount of positive net absorption at 313,000 SF while the West County reported the lowest amount at negative -269,300 SF of space this quarter. The negative absorption stems from ilad, Inc. moving from Cypress and relocating their operations to Fontana. Net Absorption by Submarket O.C. Market Q , , ,000 > Among the direct new leases signed this quarter were Amazon taking another 238,270 SF at 6400 Valley View in Buena Park and Primary Color Systems signing 187,500 SF at Holder St in Cypress. > FORECAST: Net absorption is expected to flatten as new inventory remains scarce. SQUARE FEET 200, ,000 0 (100,000) 48, ,800 (200,000) Rental Rates > The weighted average asking rental rate for Orange County recorded at $0.84 per square foot (PSF) NNN, up 13.5% from the $0.74 PSF NNN reported one year ago. > Rents have steadily risen over the past three years as industrial tenant supply options remain limited. > Average asking rates were highest in the South County submarket at $0.99 PSF NNN and lowest in the West County submarket at $0.79 PSF NNN. > FORECAST: Tenant demand for industrial space is strong and supply is limited. Asking rental rates will continue to trend upward by 10% to 15% by the end of (300,000) (269,300) WEST AIRPORT SOUTH NORTH Historical Sales & Leasing Activity O.C. Market Q SQUARE FEET 5,500,000 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 2Q13 2Q14 2Q15 2Q16 2Q17 2

3 Construction > During second quarter there was one project totaling 181,100 SF delivered to the market at 4150 N Palm St in Fullerton. > There are two buildings currently under construction totaling 232,600 SF. The projects are expected to be completed by the second half of > FORECAST: Industrial development is a challenge in Orange County as many industrial properties and development sites are converted to residential and other commercial uses. Investment Trends > Investment volume for industrial properties decreased by 3.8% compared to midyear Sales volume recorded at $143.5 million compared to $286.4 million last quarter. > Investors are expected to remain bullish in the Orange County market as available supply remains limited. > Investment sales prices have increased by 26% compared to this time last year currently averaging $184 PSF. > FORECAST: With minimal federal interest rate (1.16%) increases and investors looking for development opportunities, investment activity is expected to remain steady through Outlook The Orange County industrial market continues to move forward with positive momentum. With minimal increase in available supply, asking rental rates have climbed above 2008 peak values of $0.78-$0.80 PSF NNN. Despite positive market fundamentals, tenants are struggling to find future space options to meet their needs given the lack of available inventory. Historical Net Absorption & Construction Completions Q SQUARE FEET 1,000, , , ,000 - (250,000) (500,000) (750,000) (1,000,000) Investment Trends Chart $ $ $ $ $ $ $80.00 $60.00 $40.00 $20.00 $0.00 Net Absorption Completions 2Q13 2Q14 2Q15 2Q16 2Q $/PSF Cap Rate Unemployment Rate U.S., C.A. & O.C. May % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 4.0% 4.1% 4.2% 3.2% 2.0% 0.0% UNITED STATES CALIFORNIA ORANGE COUNTY 3

4 Market Description The Orange County industrial market is a large market comprised of million SF representing 17% of the total industrial space in the greater Los Angeles Basin. Most of the space (68%) is in small to medium sized buildings, with the balance in big box space (100,00+ SF). The market includes many mid-sized manufacturers and distributors from a wide array of industries, including information, technology, electronics, food, apparel and communications. These firms pay a premium to be in the midst of Orange County's highly educated labor force and concentration of high-end firms and distributors. Submarket Map RECENT TRANSACTIONS & MAJOR DEVELOPMENTS Orange County Industrial Market Q SALES ACTIVITY PROPERTY ADDRESS SIZE SF SALE PRICE PRICE PSF BUYER SELLER 1650 Sunflower Ave, Costa Mesa 112,000 SF $33.4 Million $298 PSF BLT Enterprises Sovereign Capital 5455 E La Palma Ave, Anaheim 127,100 SF $15.9 Million $125 PSF Calton Corporation Clarion Partners Artesia Blvd, Buena Park 103,400 SF $15.0 Million $145 PSF Brumleu Investments Henry Cohen S Lewis St, Anaheim 135,600 SF $24.7 Million $182 PSF Zuma Forest Place Associates 1311 Orangethorpe, Fullerton 15,200 SF $2.4 Million $159 PSF Mojave Capital Management Gallrado LLC LEASING ACTIVITY PROPERTY ADDRESS LEASED SF LEASE TYPE BLDG TYPE LESSEE LESSOR 6400 Valley View, Buena Park 238,270 SF Direct - New Distribution Amazon Catellus Development Group Holder St, Cypress 187,500 SF Direct - New Distribution Primary Color Systems Stockbridge Towne Centre Dr, Foothill Ranch 130,700 SF Direct - New Distribution SeneGence International LBA Realty 2100 E Valencia Dr, Fullerton 112,700 SF Direct - New Distribution California Hi-Lites MetLife Knott Ave, Buena Park 102,400 SF Direct - New Distribution Flexport MCDC MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SF SUBMARKET STATUS ESTIMATED COMPLETION 1710 S Anaheim Blvd, Anaheim Panattoni Development 144,000 SF Airport Area Under Construction 4Q Deere Ave, Irvine West Wing Corporation 51,450 SF Airport Area Under Construction 3Q

5 EXISTING PROPERTIES CONSTRUCTION VACANCY AVAILABILITY ACTIVITY ABSORPTION RENTS Submarket/ Building Size Bldgs Total Inventory SF Completions Current Qtr SF Under Construction Vacancy Vacancy Prior Qtr SF Availability Sales Number of Activity SF Sales Lease Activity SF Number of Leases Total Gross Activity Current Qtr SF Total Gross Activity YTD SF Net Absorption Current Qtr SF Net Absorption YTD SF Weighted Avg Asking Lease Rates AIRPORT 1-9, ,776, % 0.7% 3.3% 11, , ,625 85,625 (12,100) 800 $ ,000-39,999 1,194 22,481, % 2.0% 2.9% 100, , , ,400 (600) (74,400) $ ,000-69, ,696, , % 2.3% 7.2% , , ,900 (60,100) (134,500) $ ,000-99, ,325, % 6.2% 2.3% , , ,000 11,400 (71,000) $ , ,518, % 4.7% 6.2% , ,000 (50,000) $0.72 SUBTOTAL 1,869 49,797, , % 3.1% 4.2% 111, , ,825 1,466,625 48,600 (329,100) $0.89 NORTH 1-9, ,691, % 0.7% 2.0% 27, , , ,000 (13,700) (21,400) $ ,000-39,999 1,800 33,233, % 2.6% 2.4% 246, , ,400 1,639, ,800 (105,000) $ ,000-69, ,795, % 1.2% 2.9% 90, , , ,800 (57,700) (85,200) $ ,000-99, ,888, % 1.4% 2.7% , , ,100 (53,400) (53,400) $ , ,776, , , % 3.2% 4.0% 127, , , , ,800 $0.65 SUBTOTAL 2,800 87,385, , , % 2.4% 3.0% 491, , ,106,500 2,413, , ,800 $0.78 SOUTH 1-9, ,458, % 2.4% 4.4% , ,900 38,900 (1,500) (19,400) $ ,000-39, ,529, % 2.6% 5.0% 49, , , ,397 (57,300) (61,200) $ ,000-69, ,303, % 4.9% 7.4% , ,400 78,800 49,400 7,000 $ ,000-99, ,483, % 10.6% 20.0% 83, ,600 83,600 79,400 79,400 $ , ,389, % 4.0% 2.1% , ,800 34,200 $0.80 SUBTOTAL ,164, % 3.9% 5.1% 132, , , , ,800 40,000 $0.99 WEST 1-9, ,066, % 2.1% 2.3% 34, , , ,850 1,800 3,300 $ ,000-39, ,247, % 1.6% 2.2% 106, , , ,000 (42,700) (16,200) $ ,000-69, ,158, % 2.1% 4.0% , ,200 18,960 (19,500) (62,700) $ ,000-99, ,636, % 0.0% 0.9% , , ,500 (19,800) (19,800) $ , ,754, % 0.4% 8.0% 103, , ,132 (189,100) (230,000) $0.76 SUBTOTAL 1,180 33,862, % 1.2% 4.4% 244, , ,800 1,078,442 (269,300) (325,400) $0.79 MARKET TOTAL 1-9,999 1,419 9,992, % 1.3% 2.5% 74, , , ,375 (25,500) (36,700) $ ,000-39,999 4,096 75,492, % 2.3% 2.8% 501, ,039, ,541,400 3,401,897 75,200 (256,800) $ ,000-69, ,953, , % 2.0% 4.7% 90, , , ,460 (87,900) (275,400) $ ,000-99, ,334, % 3.6% 3.8% 83, , , ,200 17,600 (64,800) $ , ,438, , , % 3.0% 4.9% 230, , , , ,000 $0.71 TOTAL 6, ,210, , , % 2.7% 3.8% 980, ,399, ,379,225 5,488, ,100 (144,700) $0.84 Note: revisions to the inventory base were made effective Q2 2017, historical data reported here reflect these revisions and may not match data reported in previous quarters. 5

6 Definitions of key terms in this report Total Rentable Square Feet: Industrial space in buildings with 1 SF or more of industrial space. Includes speculative as well as owner-occupied buildings. Excludes Research & Development (R&D) buildings (industrial buildings with at least 30% office build-out, 3/1000 parking ratio and a high level of finish). Excludes space that is under-construction or renovation. Vacancy: Space in existing buildings that is vacant and immediately available during the quarter for direct lease, for sublease or for sale, plus space that is vacant but not available for direct lease or sublease. Availability: All space that is being currently marketed for occupancy, includes space which may be currently occupied or which may be under construction or renovation. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Gross Activity: Square feet sold and leased for all known transactions completed during the quarter. Excludes lease renewals. Excludes investment sale transactions. Weighted Average Asking Rental Rates: Weighted by square feet available for direct lease. Data is based on triple net rents, and excludes expenses such as taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per SF basis. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www. colliers.com/greaterlosangeles. 396 offices in 68 countries on 6 continents United States: 153 Canada: 29 Latin America: 24 Asia Pacific: 79 EMEA: 111 > $2.6 billion in annual revenue > 2.0 billion square feet under management > Over 15,000 professionals Construction Completions: Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. UNITED STATES: Orange County Office License No Park Plaza, 12th Floor Irvine, CA CAITLIN MATTESON Research Director Research Services TEL: FAX: ROBERT CAUDILL Regional Director/O.C. 6