>> Industrial Rents Continue Upward

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1 Research & Forecast Report South Bay INDUSTRIAL Q Accelerating success. >> Industrial Rents Continue Upward Key Takeaways > Industrial rents increased $0.03 P NNN over the quarter to $0.78 P NNN. Rents have increased 13% over the last 12 months and are at their highest ever point. > Net absorption was 457,500 this quarter as the seond portion of the recently completed Brickyard project was leased. > Sales and leasing activity totaled 3,038,200 broken out into 10 sales (312,400 ) and 53 leases (2,725,800 ). > There is 1,505,400 of new space currently under construction which will finish in the next 12 months. > Vacancy has decreased 20 basis points to 0.8% the lowest recorded vacancy rate ever for the region. Market Indicators Relative to prior period Q Forecast Vacancy Net Absorption Construction Rental Rate Summary Statistics South Bay, Q Vacancy Rate 0.8% Change from Q2 16 (Basis Points) -20 BPS Net Absorption 457,500 Construction Completions 15,200 South Bay remains the premier market for distribution companies and sea and air cargo centered industrial users. It is nearly fully developed so land is incredibly scarce. Tight market conditions and a lack of larger modern space continue to be deterrents that drive tenants to neighboring markets, primarily to the east. Asking Rents South Bay, Q Average Asking Rent Change from Q1 16 $0.78 P NNN +$0.09 P NNN Y.O.Y. Change (%) +13.0% Labor Force South Bay, Q mo Employment Growth (%) 12-mo Actual Employment Change Construction Manufacturing Transportation, Trade & Utilities 0.9% -2.4% 1.1% +1,200-8,700 +8,700

2 Vacancy > The vacancy rate declined this quarter by 20 basis points to 0.8%. The vacancy rate is currently at its lowest level ever recorded. > Vacancy is tightest in the LAX / ES / Hawthorne submarket at 0.5% followed by the Torrance submarket at 0.6%. > Forecast: New supply may bring some relief in vacancy rates, but with only 1.5 million of supply on the horizon we may be see sub 1% vacancy in the South Bay for much of Absorption and Leasing Activity > Industrial demand reported 457,500 of positive net absorption this quarter. > Sales and leasing activity totaled 3,038,200 this quarter. This was broken out into 10 sales (312,400 ) and 53 leases (2,725,800 ). > Forecast: Absorption is likely to be flat for 2017 as there is little new supply hitting the market and further gains will be hard to achieve. Rental Rates > Average asking rents increased $0.03 P NNN over the quarter to end at $0.78 P NNN. Asking rents are at their highest levels ever and will continue to rise. > Even marginal space in the South Bay is getting multiple offers and tenants are having to expand their search criteria in order to find suitable space. > Forecast: Rents will continue to rise in future quarters and tenants can expect to pay a premium for all types of industrial space. Tenants who signed leases 5 years ago can expect to their rent to increase roughly 45% upon renewal. Historical Vacancy v. Rents South Bay Q $P PER MONTH (NNN) RENTS VACANCY Net Absorption by Submarket South Bay Q , , , , , ,000 0 (100,000) (200,000) (300,000) (189,300) GARDENA/HARBOR FWY (23,600) 46,000 Historical Leasing Activity South Bay Q LB/HARBOR CITIES LAX/ES/HAWTHORNE 95,400 TORRANCE 5% 4% 3% 2% 1% 0% % VACANT (TOTAL) 529,000 CARSON/COMPTON/RD

3 Construction > There was 15,200 of new supply in a single project. > There remains 1,505,400 of space currently under construction; an incredibly small amount for a million industrial market. > Development is exceedingly difficult in the South Bay as raw land, if available, will sell for a premium. > Forecast: We are on the tail end of a construction boom and new supply will trickle in for the rest of Development will remain limited to build to suit projects or creative rehabilitation of under performing space. Historical Net Absorption & Construction Completions South Bay Q NET ABSORPTION CONSTRUCTION COMPLETIONS Investment Trends 0 > Cap rates continue to remain tight in Los Angeles County, averaging 5.9% in Q > Forecast: There has been increased investor focus on fully leased industrial assets in prime infill locations. Consequently, we expect more investment sales to occur in future quarters, driving up sales prices and further compressing cap rates. Outlook > Tight market conditions are expected to persist in the South Bay industrial marketplace with vacancy rates below single digits expected in future quarters. Rents are at their highest ever levels, prompting many users to consider buying their properties, however the available inventory is insufficient to meet demand. > Land is incredibly scarce and many industrial users are having to get creative or face paying a premium to secure land for truck, car or trailer storage. Investment Trends Chart Los Angeles County Q Unemployment Rate Los Angeles County February % 4.9% 4.9% 4.8% 4.8% 4.7% 4.7% 4.6% 4.6% 8.0% 7.0% 6.0% 4.0% 3.0% 2.0% 1.0% 0.0% 4.7% Average Price Per sf Average Cap Rate 4.8% $180 $160 $140 $120 $100 $80 $60 $40 $20 United States California Los Angeles County $0 3

4 Market Description The South Bay industrial market includes million square feet, representing 16 percent of the total space in the Los Angeles Basin for buildings 10,000 square feet and greater. The market has a high concentration of firms oriented toward international trade at the Ports of Los Angeles and Long Beach, respectively, and/or with LAX airport. The South Bay is a relatively mature market, with 63 percent of its space built prior to There is a good mix of product types, with nearly half of the space (45%) in big-box space (100,000 +) and the balance (55%) in small and medium sized buildings. Submarket Map RECENT TRANSACTIONS & MAJOR DEVELOPMENTS Q SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER Susana, Rancho Dominguez 104,300 $12 Million $115 P IPT South Bay Ahmadinia MT Trust 1920 Acacia, Compton 45,300 $7.1 Million $157 P Terreno Acacia, LLC Appliance Recycling Centers Wilmington, Carson 50,000 $7.0 Million $140 P Progressive Realty Partners Artemis Pet Food, Inc th, Gardena 70,600 $6.6 Million $94 P 157th RE Management, LLC Alcoa Vernon, LLC LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 1701 Central, Compton 479,300 Direct-New Distribution Best Bey Clarion 2211 Carson, Carson 270,800 Direct-New Distribution Yusen Logistics ProLogis Maciel, Carson 176,000 Direct-New Distribution Capitol Logistics Robert Curry 2626 Vista Industrial, Compton 163,500 Direct-New Distribution CNR International ProLogis MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION Normandie, Torrance Bridge Development 512,500 Torrance Under Construction Q Conant, Long Beach Sares Regis 219,300 Long Beach Under Construction Q Conant, Long Beach Sares Regis 140,400 Long Beach Under Construction Q

5 INDUSTRIAL OVERVIEW Q EXISTING PROPERTIES CONSTRUCTION VACANCY AVAILABILITY ACTIVITY ABSORPTION RENTS Submarket/ Building Size Bldgs Total Inventory Completions Current Qtr Under Construction Vacancy Vacancy Prior Qtr Availability Sales Activity Number of Sales Lease Activity Number of Leases Total Gross Activity Current Qtr Total Gross Activity YTD Net Absorption Current Qtr Net Absorption YTD Weighted Avg Asking Lease Rates LAX/ES/HAWTHORNE 10,000-19, ,280, % 0.8% 1.5% ,600-12,600 $ ,000-39, ,815, % 1.3% 3.2% , ,900 93,900-11,600-11,600 $ ,000-69, ,824, % 0.4% 2.3% , ,100 20,100 20,100 20,100 $ ,000-99, ,032, % 0.0% 2.8% ,100-21,100 $ , , ,542, , % 0.0% 0.0% , ,300 61, N/A 250, , ,664, % 2.7% 0.0% , ,200 71,200 71,200 71,200 N/A 500, ,048, % 0.0% 0.0% N/A Subtotal ,207, , % 0.6% 1.4% , , ,500 46,000 46,000 $1.11 GARDENA/HARBOR FWY 10,000-19, ,115, % 0.5% 1.2% 14, , ,200 76,200 18,000 18,000 $ ,000-39, ,247, % 0.8% 1.7% $ ,000-69, ,582, % 0.6% 2.4% , ,000 10,000-77,800-77,800 $ ,000-99, ,860, , % 0.0% 0.0% , ,900 29, N/A 100, , ,397, , % 0.3% 2.7% , ,500 $ , , , % 0.0% 0.0% N/A 500, % 0.0% 0.0% N/A Subtotal ,460, , % 0.5% 1.7% 14, , , , , ,300 $0.70 TORRANCE 10,000-19, ,739, % 0.0% 1.2% ,200-11,200 $ ,000-39, ,890, , % 3.6% 5.9% , ,800 73,800 36,700 36,700 $ ,000-69, ,883, % 0.6% 0.6% $ ,000-99, ,778, % 1.1% 1.0% , ,300 36,300 31,500 31,500 $ , , ,420, % 0.6% 1.7% , , ,700 38,400 38,400 $ , , ,454, % 0.0% 3.5% $ , ,599, , % 0.0% 0.0% N/A Subtotal ,764, , % 1.0% 2.6% , , ,800 95,400 95,400 $0.76 CARSON/COMPTON/RD 10,000-19, ,585,200 15, % 0.4% 0.4% 15, , ,200 52, $ ,000-39, ,372, % 0.8% 1.7% 153, , , ,600 48,000 48,000 $ ,000-69, ,245, % 0.9% 2.5% 96, , , ,700 25,400 25,400 $ ,000-99, ,960, % 1.4% 3.1% , , ,800 40,900 40,900 $ , , ,747, , % 0.8% 3.7% , , ,000-49,600-49,600 $ , , ,455, % 5.7% 1.2% , , , , ,300 $ , ,047, % 0.0% 0.0% N/A Subtotal ,413,700 15, , % 1.5% 2.7% 264, ,012, ,277,400 2,277, , ,000 $0.79 LB/HARBOR CITIES 10,000-19, ,822, % 0.8% 2.0% , ,500 40,500-26,100-26,100 $ ,000-39, ,362, % 0.4% 2.5% 33, , ,900 65,900-17,400-17,400 $ ,000-69, ,609, % 0.4% 1.0% , ,000 20,000 20,000 20,000 $ ,000-99, ,287, % 4.7% 11.4% $ , , ,995, , % 0.9% 0.9% $ , , ,460, % 0.0% 0.0% N/A 500, ,905, % 0.0% 0.0% N/A Subtotal ,443, , % 0.8% 2.1% 33, , , ,400-23,600-23,600 $0.81 MARKET TOTAL 10,000-19, ,542,600 15, % 0.6% 1.4% 30, , , ,900-31,900-31,900 $ ,000-39, ,687, , % 1.2% 2.7% 186, , , ,200 55,700 55,700 $ ,000-69, ,145, % 0.7% 2.0% 96, , , ,800-12,300-12,300 $ ,000-99, ,918, , % 1.3% 3.1% , , ,000 51,200 51,200 $ , , ,104, , % 0.7% 2.8% , , , , ,700 $ , , ,290, % 3.3% 1.4% , , , , ,500 $ , ,600, , % 0.0% 0.0% N/A Total ,289,400 15,200 1,505, % 1.0% 2.2% 312, ,725, ,038,200 3,038, , ,500 $0.78 5

6 Definitions of key terms in this report Total Rentable Square Feet: Industrial space in buildings with 10,000 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 basis. 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. 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 UNITED STATES: South Bay Office License No Rosecrans Ave, Suite 3301 El Segundo, CA > $2.6 billion in annual revenue > 2.0 billion square feet under management > Over 15,000 professionals TEL: FAX: 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. JOHN HOLLINGSWORTH Executive Managing Director THOMAS GALVIN Research Analyst Research Services 6