Industrial Outlook. Speculative construction is up; the Midwest and Southeast lead absorption gains. North America. Q2 2013

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1 Industrial North America. Q Speculative construction is up; the Midwest and Southeast lead gains Speculative construction is increasing and becoming more prevalent in logistics corridors, with future announcements anticipated in a handful of secondary markets. Tenant requirements are largely focused in the Midwest, Northeast and Southeast regions whose rates still exceed the national average. As a result, these regions are poised to appreciate in the quarters ahead. 3PLs, consumer goods and large retail firms are driving leasing activity across Greater Toronto. In Montréal, tenants preference for modern, single-tenant facilities continues to apply upward pressure on asking rents. Roughly a third of Mexico s exports are automotive-related.

2 Current groundbreakings will not sufficiently address present demand requirements for modern space. This will lead to additional speculative and build-tosuit.

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4 4 North America Industrial Q Jones Lang LaSalle In this report This report provides an overview of supply and demand conditions, as well as detailed and brief analyses of major industrial markets in the United States, Canada and Mexico. Our professional research department is dedicated to producing information and insights that help our clients understand dynamic real estate market trends and guide critical decision making for investors and occupiers. In this report 4 Overview of Jones Lang LaSalle s logistics and industrial services 5 United States 7 United States economy 8 United States industrial market 10 United States industrial capital markets 12 United States industrial property clock 14 United States industrial weather map 15 United States industrial rankings 16 Atlanta 19 Austin 20 Baltimore 21 Boston 22 Broward County / Fort Lauderdale 23 Central New Jersey 24 Central Valley, California 25 Charlotte 26 Chicago 27 Cincinnati / Dayton 28 Cleveland 29 Columbus 30 Dallas / Fort Worth 31 Denver 32 Detroit 33 Hampton Roads 34 Houston 35 Inland Empire 37 Kansas City 38 Las Vegas 39 Los Angeles 40 Memphis 41 Miami-Dade 42 Minneapolis / St. Paul 43 Northern New Jersey 44 Oakland / East Bay 45 Orange County 46 Orlando 47 Palm Beach 48 Philadelphia / Harrisburg 49 Phoenix 50 Pittsburgh 51 Portland 52 Reno/Sparks 53 Richmond 54 Sacramento 55 Salt Lake City 56 San Antonio 57 San Diego 58 Seattle 59 South Bay / Silicon Valley 60 St. Louis 61 Tampa Bay 62 Washington, DC 63 Canada 65 Greater Toronto 66 Montréal 67 Mexico 68 Mexico industrial property clock 71 Mexico market 72 Report contacts 75

5 5 North America Industrial Q Jones Lang LaSalle Overview of Jones Lang LaSalle s logistics and industrial services From manufacturing plants to around-the-clock distribution centers, industrial real estate is the backbone of the global economy. Today s financial and competitive pressures demand that your industrial property, whether leased or owned, delivers maximum flexibility and efficiency. Our logistics and industrial professionals understand the current business environment and offer innovative, profitable strategies for supply chain optimization, site selection, sales, leasing, acquisition, financing, construction, project management, and property and facility management of industrial properties and portfolios. More than 250 Jones Lang LaSalle professionals cover the top 50 industrial markets in the United States, Canada and Mexico and 360 more are at work in major industrial markets around the globe. In 2012, Jones Lang LaSalle logistics and industrial services completed more than 2,360 transactions comprising over 179 million square feet of space at a value of more than $4.5 billion. Our experts know all the issues that impact your industrial real estate decisions and apply proven best practices to address Seattle such challenges as skyrocketing energy, transportation, and labor costs; heightened security needs; tough new environmental Portland Minneapolis Cincinnati Cleveland Columbus Boston requirements; and profound s in global supply chains. Because of our depth of in-house talent, we can quickly assemble the right team for your particular need. Regardless of the size and scope of the assignment, you will have a single point of contact who manages all service delivery and is responsible for producing measurable results that are agreed to up front. Reno Sacramento Stockton Bay Area Las Vegas Los Angeles Inland Empire Phoenix Orange County San Diego Denver Kansas City Dallas/Forth Worth Detroit Chicago Indianapolis St. Louis Memphis Pittsburgh Atlanta NYC/Long Island Philadelphia New Jersey Baltimore/DC Richmond Hampton Roads Raleigh Charlotte Austin San Antonio Houston Tampa Jacksonville Orlando West Palm Beach Miami

6 6 North America Industrial Q Jones Lang LaSalle United States

7 7 North America Industrial Q Jones Lang LaSalle United States United States Manufacturing 1,758,974, % 15.9% 2,059,564 $ % 0.4% Consistent net gains in gateway markets, the spillover effect to secondary markets, a dwindling supply of larger blocks of Class A space and build-to-suit activity is capturing the attention of speculative developers. Increasing, though at a measured pace: rents are still off from their peaks in most regions and the lessons developers learned from over-building during the last cycle s peak linger. Second quarter s rate was 8.3 percent, down 210 basis points from the recession s high, while net was positive for the 13th consecutive quarter with 37.1 million square feet. Retail-related (chiefly consumer goods distributors) and logistics companies created the bulk of momentum. construction activity finished the quarter at 81.7 million square feet, up 102 percent from this time last year. Approximately 57.8 percent of product underway is preleased. Gateway markets with access to population centers continue to see momentum, while there is a progressive spillover to secondary markets as well. Year-to-date 42 of 48 tracked markets have recorded positive net gains. On the investment side, warehouses remain the product of choice and sales activity has shifted to the Midwest, Northeast and Southeast. Key takeaways stock availability Q Q avg. rent industrial 11,932,205, % 12.4% 37,097,393 $ % 2.3% Leased industrial 8,134,955, % 15.8% 33,364,372 $ % 2.3% Warehouse & distribution 6,025,160, % 15.9% 30,604,023 $ % 2.4% Vacancy rate 8.3%, down from 10.4%, the recession's high. Net positive for the 13th consecutive quarter. 10.4% 8.3% Construction activity 82 m.s.f. 58% preleased Speculative construction is rising Current groundbreakings will not sufficiently address present demand requirements for modern space. Where are the space-eaters? 1/2 More than of Q2 net came from the Southeast & Midwest. Chicago led all markets. 6 Year-to-date 42 of 48 markets are in the black with positive net. 42 Chicago Net remains consistent; new deliveries met with tenant demand translated to gains. Construction activity is up 102 percent compared to this time last year. Tenant requirements for modern space exceed this new supply-to-be; this will prompt additional build-to-suit projects. Build-to-suit s are generally common in markets with rates above 10 percent; in tighter markets, speculative product is underway. Tenant demand is spilling over into secondary markets; notably those with intermodal rail connections. A gradual recovery in the housing market, manufacturing output and foreign trade will benefit industrial real estate. Class B inventory is increasingly finding tenants. Warehouse sales in the Northeast, Midwest and Southeast had the largest year-over-year gains. Capital markets $ $ $ $ $ $ $ $ $ $ $ $ $ $

8 8 North America Industrial Q Jones Lang LaSalle United States economy Second quarter GDP is faint, historical revisions made The advance estimate of GDP growth in the second quarter increased a modest 1.7 percent while the first quarter s number was revised to 1.1 percent. Slow and steady is the recurring theme, with second quarter s estimate shaped by positive contributions from personal consumption expenditures, exports, nonresidential fixed investment, private inventory investment and residential investment. This, in turn, was levied against federal government spending and growing import volumes (which are a subtraction in the calculation). housing stars a sector that is traditionally volatile and has shown recent signs of overbuilding but also speaks to an overarching theme. Namely, single-family home builders are wary of increasing activity too quickly after experiencing the fallout of the industry s crash in recent years. Assuming buying volumes remain consistent, constrained will drive existing inventories down, and this will elevate median prices. This, in turn, may affect future sale volumes. New home sales and median prices On closer examination, consumer expenditures increased 1.8 percent during the quarter slower 520,000 New Home Sales Median Sales Price $300,000 than first quarter s 2.3 percent while, within this fold, durable goods sales grew by 6.5 percent and 470,000 $280,000 nondurable goods increased by 2.0 percent. The auto sector has been a solid performer with total 420,000 vehicle sales up 1.7 percent from the first quarter and 8.2 percent from one year ago. 370,000 $260,000 Of note however are the downward revisions to real output. Downward revisions have been made to the past four quarters, suggesting underlying growth is flat-to-minimal at best, and the culprit lies with the sequester: Washington continues to debate future fiscal policy, higher taxes remain and government spending are tugging on gains. Though, there is good news for the latter: government expenditures dropped by 1.5 percent during the quarter, after an 8.4 percent contraction three months prior. Subsequent declines in spending are anticipated in the second half of the year and the ongoing housing recovery will boost positive momentum, assuming the Federal Reserve remains wary on future interest rate hikes. Housing on the mend, but New home sales totaled 497,000 units in June, up 38 percent from one year ago, while the median sales price was $249,700, up 7.0 percent over the same timeline. Prompted by a low (though slowly increasing) 30-year fixed mortgage rate, buyers are entering the market. And this is leading to good demand for consumer goods, furniture, home improvement items and fixtures all of which benefit demand for industrial real estate. June s housing starts, while up 10.4 percent from twelve months prior, were down 9.9 percent, from May with 836,000 units. This decline was largely influenced by a substantial drop in multifamily $240, ,000 $220, , ,000 $200,000 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Source: U.S. Department of Commerce: Census Bureau Manufacturing on the upswing Economic activity in the manufacturing sector expanded in July for the second consecutive month, and the overall economy grew for the 50th consecutive month, according to the nation s supply executives in July s Manufacturing ISM Report on Business. The Purchasing Manger s Index was at 55.4 percent, the highest of the year; anything above 50 indicates the sector is expanding. According to the report new orders production and employment are up 11.6 percent and 5.7 percent, respectively. Of the 18 manufacturing industries polled, 13 reported growth in July, with notable industries such as furniture & related products; wood products; appliances & components; and computer & electronic products showing gains. An uptick in home sales helps account for this demand. New orders for durable goods were up 3.9 percent and 10.8 percent when compared to one month and twelve months prior.

9 9 North America Industrial Q Jones Lang LaSalle Inflation up in June, still tame U.S. inflation in June jumped by the biggest amount in four months as consumers paid higher prices for groceries, gas, clothing, new cars and other items. Although the Consumer Price Index, a primary measure of inflation, rose half a percentage point in the course of a month, inflation is still tame at 1.8 percent. It is anticipated to finish the year at 2.0 percent given manufacturing s gradual uptick, homes sales, faint employment gains, modest business spending and retail sales projection. The Federal Reserve will not scale backs its massive quantitative easing program in the immediate future, meaning interest rates are expected to remain low. ISM Manufacturing: PMI Composite Index Expansion Contraction Source: Institute for Supply Management U.S. total retail sales vs. e-commerce sales 32.0% 28.0% 24.0% 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% -4.0% -8.0% 30.2% Retail Sales, Annual Change e-commerce, Annual Change 28.0% 27.0% 25.6% 24.0% 23.8% 20.2% 16.2% 16.4% 16.2% 6.1% 6.5% 7.5% 4.4% 5.4% 5.5% 2.9% 2.4% 3.3% 3.5% 2.4% 5.3% -1.2% -7.1% Source: U.S. Department of Commerce: Census Bureau

10 10 North America Industrial Q Jones Lang LaSalle United States industrial market It started in the west West Coast markets, as a collective whole, continue to outpace the nation in terms of rent growth and tightening rates. By region, average asking rental rates for warehouse space in Southern California and the Northwest have increased 4.9 percent compared to one year ago. This, in turn, is prompting new. The Inland Empire presently leads the nation in construction activity with a mix of build-to-suit and speculative where total construction activity finished the quarter with 11.5 million square feet, up 164 percent over the same timeline. Preleasing is strong and effective rental rates in the big box segment are expected to see annual appreciation of 8 percent by year-end. And momentum of this kind is beginning to spread to other logistics corridors such as Dallas / Fort Worth, Chicago, New Jersey and Atlanta; all major markets with speculative construction underway. There is also a trickledown effect to other distribution hubs such as Indianapolis, Kansas City and Memphis, with groundbreaking announcements likely in California s Central Valley, Columbus and Pittsburgh. Some highlights from around the country: Atlanta The market is less tenant-favorable. Landlords are pulling back on concession packages, including tenant improvement allowances and abated rent. Chicago More activity is coming from consumer electronics firms and furniture companies, indicating households are making big-ticket purchases. Dallas / Fort Worth Even with some speculative underway, demand for larger blocks of space will exceed this new supply. Rental rates will increase over the near term. Inland Empire Speculative groundbreakings are increasing, preleasing remains strong and tenants weighing the bidding wars to lease new space, while with a desire to have a Southern California address are increasingly opting for build-to-suits. Sacramento Small and medium-sized businesses are more active; an increase in new space requirements and touring activity is a telling sign they are gaining confidence in the broader economy. Charlotte While demand for large blocks of contiguous space remains, activity is trickling down to smaller availabilities, including the 15,000- to 40,000-square-foot size category. Active demand in the east Tenant requirements in excess of 100,000 square feet totaled million square feet across the country by mid-year. Although space needs are down by 16 million square feet from this time last year, the number of active tenants in the market is up. The average space requirement is also smaller: good news as it relates to industrial s measured recovery. By geography, the Midwest leads with 50.5 million square feet, followed by the Northeast (with 45.4 million square feet) and the Southeast (with 27.5 million square feet) regions with markets whose rates are collectively above the national average. This will in the coming quarters as available blocks of space find tenants. Southeast and Midwest lead net More than half of second quarter s 37.1 million square feet recorded in net activity came from the Southeast and Midwest. And, individually, the Southeast barely led the Midwest. Absorption is in the black for 13th consecutive quarter Q Q Q Source: Jones Lang LaSalle Net Absorption (SF in millions) Q Q Q Q Q Q Q Q Vacancy Rate Q Q Chicago, home to with the country s largest inland port, led all U.S. markets with 5.8 million square feet, up 268 percent from one year ago. Large leases signed by consumer electronics and home furnishing and logistics firms propelled much of this activity. construction activity stood at 3.9 million square feet, up 58 percent from one year prior, while there are 15 speculative projects planned or underway that will add over 6.0 million square feet in the coming quarters. Pricing in high-volume Q Q Q Q Q Q Q Q Q Q Q % 11% 10% 9% 8% 7% 6%

11 11 North America Industrial Q Jones Lang LaSalle 42 of 48 markets are in positive territory Net as a % of stock 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% Average asking rental rates for warehouse space in the Southeast and the Midwest have increased 2.3 percent and 1.1 percent, respectively, compared to one year ago. As blocks of space find tenants, these figures will increase over time; investors, aware of this, are eyeing product in these regions. Although speculative construction is back, current groundbreakings will not sufficiently address present demand requirements for modern space. This will lead to tenants competing for quality spaces (which will elevate rents in core markets), exploring Class B options, considering smaller spaces, opting for build-to-suits or negotiating renewals. It will also cause demand spillover to secondary markets. Source: Jones Lang LaSalle submarkets is on par with pre-recessionary values, and the market wide rate nearly mirrors the U.S. average. Northeast markets trailed all other regions during the quarter, but this will : the demand pipeline is well-stocked and new deliveries in New Jersey and Philadelphia will elevate the region s collective. Atlanta ranked second at the market-level with 4.0 million square feet of net, up 60 percent from twelve months ago. Leasing momentum is being driven by retail-related tenants and third party logistics providers, which have caused the market wide rate to steadily decline and end the quarter at 12.4 percent. This, in turn, is giving landlords more leverage. construction activity finished the quarter at 3.4 million square feet, up 121 percent from this time last year. Nearly 1.0 million square feet of speculative product was underway. U.S. industrial market fundamentals in Q Vacancy dropped 10 basis points to 8.3 percent Demand is consistent and becoming more diverse across size segments Quarterly net posted 37.1 million square feet It nearly parallels activity recorded one year ago Average asking rents increased to $4.45 per square foot Up 2.4 percent from one year ago; West Coast regions led in gains Of the 81.7 million square feet under construction, 57.8 percent is preleased Speculative is on the rise in logistics corridors New deliveries totaled 17.2 million square feet over the quarter 61.3 percent of this was preleased (and past deliveries are finding tenants) Second quarter sales totaled $5.4 billion, up 3.2 percent from a year ago Buyers, once focused on the West, are looking elsewhere for opportunities Markets with the... lowest total Houston 4.1% Los Angeles 4.6% Salt Lake City 4.7% Seattle 5.3% Minneapolis 5.4% NYC / Long Island 5.5% Markets with the... highest total Sacramento 12.8% Atlanta 12.4% Memphis 12.4% Detroit 12.3% Charlotte 12.2% Las Vegas 12.1% Markets with the... highest Chicago 5.8M Atlanta 4.0M Dallas 3.2M Inland Empire 3.2M Sacramento 1.7M Charlotte 1.6M

12 12 North America Industrial Q Jones Lang LaSalle United States industrial capital markets Sales of warehouse and manufacturing product totaled $5.4 billion during the second quarter, down 3.2 percent from one year ago. Approximately 377 properties were sold, totaling 95.5 million square feet and trading at an average price of $56.51 per square foot, up 8.9 percent from one year ago, with an average cap rate of 7.4 percent. Prices continue to appreciate, especially in the warehouse segment, as investors consider B-product to increase their yields; Class A facilities remain popular choices, though cap rates have declined and competition can be fierce among buyers. Private capital is dominating the buyer landscape, comprising 46 percent of year-to-date acquisitions, while REITs follow with 20 percent of activity. U.S. CMBS issuance hit $8.5 billion in April, marking its strongest monthly total since 2007 a jump linked to heightened competition among lenders and cheaper bond pricing that have rendered large-loan CMBS leans more competitive against loans from more common multi-borrower conduits. This momentum may soon however as the Federal Reserve curbs stimulus efforts as the economy exhibits signs of improvement. This will complicate efforts by banks to sell new deals and make it more costly for landlords to refinance loans. REITs, while active in the first half of the year, are expected to curtail future acquisitions amid speculation the Federal Reserve will reduce bond purchases, which have kept borrowing costs low. U.S. Industrial Portfolio, 83 percent of the properties are based in California (primarily Northern California). The sale includes 58 tenants across 16 industrial parks. Blackstone likes the Mid-Atlantic and Midwest The Blackstone Group s Blackstone Real Estate Partners VII purchased a 23-property portfolio spanning Maryland and Virginia from First Potomac Realty Trust. The 4.0-million-square-foot portfolio traded for $241.5 million ($59.70 per square foot), with a collective occupancy of 82 percent. With the exception of a few buildings, the majority of this sale was comprised of B-caliber inventory. The pro form cap rate is estimated to be 7.3 to 7.5 percent. In another move, the Blackstone Group acquired a 15-property portfolio from Ares Commercial Real Estate. Thirteen buildings are located in Chicago, while two are based in Milwaukee. They total 2.2 million square feet, have a collective 90 percent occupancy rate and sold for an estimated $110.5 million ($51.24 per square foot). Similar to the above transaction, most of the buildings are Class B facilities. Pricing continues to ascend Activity from the north Cross-border capital flow accounts for 6 percent of present buying activity, and, by country of Billions $14 $12 Volume Price p.s.f. $65 $60 origination, Canada presently leads other nations. In one of the quarter s larger transaction, WPT Industrial REIT, a newly formed Canadian REIT, closed on its initial public offering and acquisition of a portfolio owned by Welsh Property Trust. The portfolio consists of 39 buildings, totaling 8.6 million square feet in the following states: Georgia, Wisconsin, Minnesota, Florida, Ohio, Kentucky, Kansas, $10 $8 $6 $4 $55 $50 $45 Illinois, North Carolina, South Carolina and Indianapolis. Valued at $435.7 million, the weighted portfolio occupancy was 96.3 percent. The pro forma cap rate was 7.3 percent, based on the first year s estimated net operating income. $2 $0 $40 $35 AEW eyes the west coast Source: Jones Lang LaSalle AEW Capital Management LP bought a 50 percent stake in a 30-building portfolio, totaling 5.3 million square feet, from LBA Realty for $249.4 million ($46.31 per square foot). Known as the Western

13 13 North America Industrial Q Jones Lang LaSalle Pack up and go east? Year-to-date warehouse sales in the Midwest (261 properties sold) and Northeast (126 properties) are up 18 percent and 24 percent respectively, compared to one year ago. Property sales in the West, which dominated the investment landscape in 2012, are up a mere two percent over the same timeline. Tightening vacancies in the big-box segment, rent appreciation and bidding wars for desirable product elevated values and have compressed cap rates, which are now in the low 5s for quality product in Los Angeles and the Inland Empire. Such conditions have prompted buyers to look elsewhere to core markets such as Chicago (a 6.2 percent average cap rate) and Northern New Jersey (6.9 percent) where returns can be greater. What to expect in the second half of the year Buyers preference for single-tenant (stabilized with credit) net leases remains und, though price appreciation in the A-segment will shift buyers attention to B-caliber inventory. Based on the regional concentration of national tenant requirements and higher prices in the West, the Midwest, Northeast and Southwest are anticipated to record sales volume gains through the second half of the year. Warehouse sales increase in the Northeast and Midwest 25% Annual in volume Average cap rate 10% 20% 9% Annual in volume 15% 10% 5% 8% 7% 6% Average cap rate 0% -5% Northeast Midwest Southeast Mid-Atlantic West Southwest 5% 4% Source: Jones Lang LaSalle

14 14 North America Industrial Q Jones Lang LaSalle United States industrial property clock Inland Empire Peaking market Falling market Philadelphia Chicago, Los Angeles, NYC / Long Island, Orange County (California) Columbus, Dallas / Fort Worth, Houston, Indianapolis, Minneapolis / St. Paul, Richmond, Sacramento, Seattle Atlanta, Austin, Baltimore, Central New Jersey, Kansas City, Memphis, Oakland / East Bay, Phoenix, Portland, San Antonio, Silicon Valley / South Bay St. Louis, Washington DC, United States Rising market Bottoming market Las Vegas, Reno Central Valley (California), Charlotte, Cincinnati, Cleveland, Denver, Hampton Roads, Miami, Northern New Jersey, Palm Beach, Salt Lake City, Tampa Bay Boston, Broward County / Fort Lauderdale, Greensboro / Winston-Salem, Jacksonville, San Diego, Detroit, Pittsburgh, Orlando Reading the clock The Jones Lang LaSalle industrial property clock illustrates where each market sits within its real estate cycle. At the end of the second quarter of 2013, the U.S. aggregate position on the clock moved to the 7:00 mark, in the rising market quadrant. Now nearly all markets are at or past the perceived bottom of the market, although the progression around the clock and into rent growth has been slow and incremental. The two markets remaining on the right side of the clock are experiencing less dynamic market activity, but most are now coming closer to the 6:00 position. Moving clockwise Holding steady Moving counter-clockwise While rents in the class A sector have firmed and are on the rise in many of the major U.S. markets, older and less functional product is experiencing less rent growth. As the big box logistics sector in primary and secondary markets continues to tighten, we are now seeing some spillover into demand and pricing for some of the more attractive class B product as long as speculative activity remains guarded we expect this dynamic to increase. However, even for markets that are rising, there is still quite a bit of running room and few signs of overheating. Expect most markets to continue their slow clockwise move while the overall U.S. position improves as well.

15 15 North America Industrial Q Jones Lang LaSalle United States industrial weather map Rental conditions Seattle Rents growing (greater than 1.5% growth during quarter) Portland Reno Sacramento Oakland / East Bay Central Valley Silicon Valley / South Bay Los Angeles Orange County Inland Empire San Diego Las Vegas Phoenix Salt Lake City Denver Austin San Antonio Dallas Houston St. Louis Cincinnati / Dayton Richmond Atlanta Tampa Charlotte Jacksonville Orlando Palm Beach Broward County Miami-Dade Boston Northern New Jersey Philadelphia/ Minneapolis / St. Paul Detroit Harrisburg Central New Jersey Cleveland Baltimore Pittsburgh Chicago Columbus Washington, DC Hampton Roads Kansas City Memphis Indianapolis Greensboro / Winston-Salem NYC / Long Island 0 0 Rents stagnant (between -0.5% and 1.5% during quarter) Rents falling (greater than 0.5% decline during quarter) Average direct rental % year over year* Average direct rental % quarter over quarter ** Please note: weather imagery indicates only the direction of movement of rental prices in a particular market and is not designed to indicate favorable or non-favorable conditions for a specific leasing perspective

16 16 North America Industrial Q Jones Lang LaSalle United States industrial rankings inventory (millions of s.f.) Chicago Philadelphia / Harrisburg Los Angeles Atlanta Dallas / Fort Worth Houston Inland Empire Detroit Cleveland Northern New Jersey Central New Jersey Indianapolis Kansas City Orange County (California) Seattle Charlotte Phoenix Cincinnati / Dayton Minneapolis / St. Paul Greensboro / Winston- NYC / Long Island St. Louis Boston Columbus Memphis Denver Tampa Bay Salt Lake City Sacramento Portland Baltimore San Diego Pittsburgh Miami-Dade Oakland / East Bay Central Valley (California) Orlando Washington DC San Antonio Las Vegas Jacksonville Richmond Reno / Sparks Hampton Roads Broward County Silicon Valley / South Bay Austin Palm Beach ,000 1,200 rates Sacramento Atlanta Memphis Detroit Charlotte Las Vegas Reno / Sparks Phoenix Central Valley (California) Jacksonville Orlando Tampa Bay Washington DC Baltimore Richmond Boston Broward County Philadelphia / Harrisburg Central New Jersey Greensboro / Winston-Salem Cleveland Pittsburgh Oakland / East Bay Chicago Northern New Jersey San Diego Cincinnati / Dayton Silicon Valley / South Bay Austin Dallas / Fort Worth Kansas City St. Louis Palm Beach Columbus Hampton Roads Portland Miami-Dade San Antonio Indianapolis Denver Orange County (California) Inland Empire NYC / Long Island Minneapolis / St. Paul Seattle Salt Lake City Los Angeles Houston 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

17 17 North America Industrial Q Jones Lang LaSalle Y-O-Y rent s YTD net (millions of s.f.) Austin Miami-Dade Oakland / East Bay NYC / Long Island Central Valley (California) Central New Jersey Portland Northern New Jersey Los Angeles Sacramento Seattle Charlotte Houston Inland Empire Indianapolis Orange County (California) Minneapolis / St. Paul Broward County Columbus Denver Phoenix Jacksonville Washington DC Silicon Valley / South Bay Boston Atlanta Tampa Bay Chicago San Antonio San Diego Cincinnati / Dayton Baltimore Greensboro / Winston-Salem Cleveland Orlando Las Vegas Memphis Salt Lake City Dallas / Fort Worth Hampton Roads Detroit Philadelphia / Harrisburg Richmond Reno / Sparks St. Louis Kansas City Palm Beach Pittsburgh -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% Chicago Inland Empire Atlanta Dallas / Fort Worth Indianapolis Detroit Charlotte Los Angeles Kansas City Memphis Cleveland Sacramento Greensboro / Winston-Salem Seattle Cincinnati / Dayton Jacksonville Phoenix Denver Salt Lake City Columbus Richmond NYC / Long Island Houston Tampa Bay Baltimore Boston Oakland / East Bay Central Valley (California) Orlando Las Vegas Orange County (California) Central New Jersey Miami-Dade Hampton Roads Broward County Minneapolis / St. Paul St. Louis Pittsburgh Palm Beach San Antonio Washington DC San Diego Austin Portland Silicon Valley / South Bay Reno / Sparks Northern New Jersey Philadelphia / Harrisburg (2.0)

18 18 North America Industrial Q Jones Lang LaSalle United States local pages

19 19 North America Industrial Q Jones Lang LaSalle Atlanta e-commerce fulfillment Import & intermodal growth Lack of new construction Thinning Class A supply Pro-business perspective Economic wins Mid-year, Atlanta s demand for warehouse space has proven significant. Activity is attributed primarily to the 100,000- to 224,000-square-foot deals and large 500,000+ square foot new deliveries. The market s position along the real estate cycle progressed as anticipated. Barring any major headwinds, modest movement is expected throughout the remainder of 2013 and into early next year. Local economic and real estate indicators are steadily improving. growth, decreasing and consistent positive net reflect a healthy market. Those involved in the retail industry, including third party logistics providers, appear to be preparing for future demand coming down the pike. Demographic and consumer spending trends support this. The market is decreasingly tenant-favorable. Landlords are pulling back on concession packages that include allowances for tenant improvement and abated rent. Overall average asking rents are showing signs of stabilization. Significant increases in leasing velocity are not expected over the near-term. Rather, demand for space will likely move at a measured pace through the second half of the year. Activity by the smaller bread and butter tenants, those occupying 30, ,000 square feet, will increase as the region s economy continues to grow. Bulk big box warehouse space in the I-20 West, Airport/South I-85 and Northeast submarkets will continue to tighten as there are few deliveries expected near-term. Rumors of speculative construction starts continue will likely see additional announcements made. Continued increases in cargo volume at Georgia s ports will guarantee Atlanta to remain a beneficiary of import/export activity Palmour Drive Renewal: 250,000 s.f. Tenant: Kubota Manufacturing 2490 Westridge Parkway Buyer: Exeter Property Group Seller: Koch Industries $33.8M 900,640 s.f. $38 p.s.f. in jobs 5.5 m 2.0% 10.5% 8.9 m.s.f. 9.9 m.s.f N Berkeley Lake Road New Lease: 195,990 s.f. Tenant: Bailey International 2701 Moreland Avenue SE Buyer: Gramercy Capital Seller: Realterm Global $7.9M 101,220 s.f. $61 p.s.f Pelican Drive Renewal: 192,752 s.f. Tenant: Expediters International 1492 Bluegrass Lakes Parkway Buyer: Industrial Income Trust Seller: Highwoods Properties 72,000 s.f. part of portfolio sale Market stock (%) net construction industrial 506,071, % 16.6% 6,237,233 $ % 1.7% 3,436,691 3,962,799 Leased industrial 351,664, % 22.2% 6,063,589 $ % 1.0% 3,436,691 3,962,799 Warehouse & distribution 324,274, % 22.2% 6,672,887 $ % 1.3% 1,739,961 2,768,592 Manufacturing 27,389, % 23.0% -609,298 $ % -9.1% 1,696,730 1,158,207

20 20 North America Industrial Q Jones Lang LaSalle Austin High-tech sector growth Tighter rates Demand outpacing supply Economic incentives Highest nationwide job growth Corporate relocations The Austin MSA has added 32,500 jobs in the past 12 months meaning that the city now has 71,500 more jobs than its peak pre-recessionary level. Austin has had one of the highest increases in jobs in the United States year-over-year, with about 4.0 percent growth, behind only Fort Worth in percentage growth. This quarter, the Austin-Round Rock-San Marcos MSA boasted a 5.4 percent unemployment rate, declining slightly from last quarter and remaining well below the state value of 6.5 percent and the national value of 7.6 percent. Among the largest 50 metro areas in the United States, Austin has the 4 th lowest unemployment rate. The growth of the high technology sector has driven much of Austin s solid economic fundamentals in recent years. The fastest growing industry in the area is construction, increasing by 7.2 percent in the past year. The Austin industrial market has become and will continue to be a landlord-favorable marketplace throughout After a rough first quarter of negative marketwide, leasing activity picked back up in the second quarter, yielding positive of roughly 233,000 square feet. Although Austin has experienced year-to-date negative, speculative construction has started for warehouse and distribution. It is anticipated that 337,000 square feet of shell space will be delivered to the North submarket in Q Vacancy remains tight throughout Austin, pushing rental rates up further. New supply coming to the market in the next year will hopefully serve to curb some of this rate growth and bring some leverage back into the hands of the tenants Fleming Court New lease: 104,291 s.f. Tenant: Warner Brothers 7500 Metro Center Drive Buyer: Digital Realty Trust Seller: PCCP & NNN Properties $31.9M 336,599 s.f. $94 p.s.f. in jobs 1.8 m 3.8% 19.0% 0.5 m.s.f. 0.7 m.s.f Picadilly Drive New lease: 52,000 s.f. Tenant: Roger Ward North American 9900 Spectrum Drive Buyer: LegalZoom Seller: emds $21.0M 203,000 s.f. $103 p.s.f Grand Avenue Parkway New lease: 46,950 s.f. Tenant: Austin Foam Plastics N IH-35 Buyer: Karlin Seller: Stream Realty Partners $18.6M 185,500 s.f. $100 p.s.f. Market stock (%) net construction industrial 34,624, % 11.6% -37,583 $ % 12.5% 447,656 27,500 Leased industrial 25,813, % 15.6% -37,583 $ % 12.5% 447,656 27,500 Warehouse & distribution 24,240, % 15.2% -8,963 $ % 8.8% 447,656 0 Manufacturing 1,572, % 22.0% -28,620 $ % 14.3% 0 0

21 21 North America Industrial Q Jones Lang LaSalle Baltimore Tenant and investor demand for Class A product Lack of large blocks of available existing space on the market Submarkets to the north of the Port of Baltimore have led the region as several large requirements have landed in Harford County in the past quarters, which has driven strong net. After acquiring 18.6 acres from Cabot Properties in late 2012 for 250,000 square feet of speculative construction in the Baltimore/Washington Corridor, Liberty Property Trust purchased another 18-acre site in Hanover. Liberty has plans to develop a 200,000-square-foot project at the site with a planned delivery in A lack of large blocks of Class A distribution space has driven interest in sites in the northern submarkets as well. Following a relatively quiet first quarter, investment activity picked up sharply in the second quarter, especially in the Baltimore/Washington Corridor. A partnership between Mosaic Partners and New York Life Insurance Company acquired a former Giant grocery store warehouse at 7600 Assateague Drive. The warehouse sits on 60 acres, and at 775,000 square feet, is the largest unoccupied industrial space in Maryland. Baltimore continues to attract interest from large regional and super regional tenants with requirements over 200,000 square feet due to the market s proximity to large population centers and strong labor pool Perryman Road New lease: 87,960 s.f. Tenant: Zenith Global Logistics in jobs 2.7 m 2.1% 11.0% 1.7 m.s.f. 1.8 m.s.f Business Parkway New lease: 84,000 s.f. Tenant: Creative Recycling 7605 Dorsey Run Road Renewal: 38,000 s.f. Tenant: Victory Packaging New construction should enter the pipeline as developers move forward on speculative projects and tenants look to build-to-suit options for their requirements. The market should continue to gradually tighten in the coming quarters as developers potentially break ground on speculative projects, especially in Harford and Cecil County Assateague Drive Buyer: Mosaic Realty Partners Seller: Warex Jessup LLC $33.1M 775,000 s.f. $43 p.s.f. 4 Center Drive Buyer: SK Realty Management Seller: CBRE Global Investors $19.3M 345,600 s.f. $56 p.s.f Portal Street Buyer: Belt s Realty Services Seller: First Industrial Realty Trust $7.2M 171,000 s.f. $42 p.s.f. Market stock (%) net construction industrial 149,652, % 15.3% 1,081,619 $ % 1.1% 82, ,000 Leased industrial 107,173, % 19.3% 1,149,384 $ % 0.2% 82, ,000 Warehouse & distribution 93,230, % 19.2% 1,177,639 $ % 2.2% 82, ,000 Manufacturing 9,497, % 22.2% -25,345 $ % -9.3% 0 0

22 22 North America Industrial Q Jones Lang LaSalle Boston Uneven economic recovery Manufacturing starting to pick up Retail sector remains key market driver Newer buildings outperforming Much of the market s leasing activity can be credited to the growth of companies in the third party logistics field. Tighe Logistics, an integrated warehousing and transportation firm, expanded into Woburn this quarter despite its 255,468-square-foot presence on the south shore and Kiva, a maker of robots that move items around warehouses, added to its already existing footprint in North Reading. The expansion of these two companies correlates with the increasing regionalization and localization of supply chain logistics operations throughout the United States. As large retailers, such as Amazon, continue to regionalize their distribution networks in order to hasten their delivery schedule for clients, demand for companies such as Tighe and Kiva has grown considerably. (MA, 2011) in jobs 6.6 m 1.9% 14.4% 0.2 m.s.f. 0.6 m.s.f. Continued rent growth suggests that industrial market conditions are strengthening and industrial landlords are now beginning to feel the benefits of the region s improved economic conditions. The market s recovery is likely to remain fragmented as continues to fall in the North submarket, while the South submarket still struggles to regain its footing in the wake of the Great Recession. Several large users are purported to be seeking industrial space in the region with requirements over 500,000 square feet. Any such larger user has the potential to quickly tighten supply and set the new standard for industrial rents in the Greater Boston Area. The rebirth in high-tech manufacturing across the United States may begin to place an increased demand on manufacturing space in the suburban submarkets surrounding Boston. 40 Fordham Road New lease: 163,000 s.f. Tenant: GotBooks 175 Kenneth Welch Drive Buyer: AR Capital Seller: Sycamore Partners $36.7M 933,000 s.f. $39 p.s.f. 44 Campanelli New Lease: 110,000 s.f. Tenant: Artisan Industries 15 Liberty Way Buyer: 15 Liberty Way, LLC Seller: Campanelli $4.3M 92,420 s.f. $47 p.s.f. 485 Wildwood New Lease: 70,000 s.f. Tenant: Tighe Logistics 40 Federal Street Buyer: 40 Federal Street Realty, LLC Seller: General Electric, Co. $4.0M 64,628 s.f. $62 p.s.f. Market stock (%) net construction industrial 219,508, % 16.0% 1,050,611 $ % 1.8% 0 0 Leased industrial 157,164, % 19.9% 890,057 $ % 3.0% 0 0 Warehouse & distribution 105,856, % 18.9% 603,925 $ % 4.8% 0 0 Manufacturing 51,307, % 22.0% 286,132 $ % -2.4% 0 0

23 23 North America Industrial Q Jones Lang LaSalle Broward County / Fort Lauderdale Business assistance / Incentives by local government Cheaper real estate Rebound in housing market New developer influx Active owner-user market The year-to-date net at the close of the second quarter was 594,239 square feet, tightening the from the previous quarter. There was 796,000 square feet in new leases executed in Broward, up 157,000 square feet from the previous quarter. Average asking rents have risen 2.8 percent year over year, but declined by 1.1 percent from the previous quarter. Construction activity picked up in the second quarter as 282,000 square feet of spec was recorded. Additionally, Weeks Robinson is building a 202,000-square-foot distribution center, which is 50.0 percent leased by Restoration Hardware. Bridge Development purchased 15.5 acres from Sam Jazayri in Dania Beach for $7.5 million and plans on using the site for industrial. We expect leasing activity to pick up as the year progresses as tenants look to take advantage of a closing window of opportunity and lock in favorable lease terms. We anticipate a significant amount of this leasing activity will be renewals. With over 15 acres of land purchased in the second quarter and as fewer big box Class A spaces are available in the market for lease, more spec is anticipated in the next few quarters. Due to the current strong demand for premier space, the higher-quality and well-located properties will experience lower vacancies. The rebound in the housing market in South Florida will likely impact Broward County, leading to a higher demand for home building supply companies, HVAC distributors, and consumer goods Flamingo Road New lease: 183,000 s.f. Tenant: Floor and Décor International Parkway Buyer: Industrial Income Trust Seller: Cobalt Capital Partners $39.3M 400,000 s.f. $98 p.s.f. in jobs 1.8 m 1.9% 8.1% 0.3 m.s.f. 0.4 m.s.f NE 12 th Avenue New lease: 101,000 s.f. Tenant: Restoration Hardware International Parkway Buyer: LIT Industrial LP Seller: Stiles West Associates LTD $12.5M 132,000 s.f. $95 p.s.f Miramar Parkway New lease: 35,000 s.f. Tenant: Mercury Marine 2740 SW Collins Road Buyer: Bridge Development Seller: Sam Jazayri $ 7.5M 675,000 s.f. $11 p.s.f. Market stock (%) net construction industrial 59,555, % 14.8% 594,239 $ % 2.8% 282,000 0 Leased industrial 46,155, % 18.1% 647,658 $ % -4.6% 282,000 0 Warehouse & distribution 42,109, % 17.6% 391,297 $ % 3.9% 282,000 0 Manufacturing 4,046, % 23.7% 256,361 $ % -11.7% 0 0

24 24 North America Industrial Q Jones Lang LaSalle Central New Jersey State incentive programs Shrinking supply of big box Class A space e-commerce distribution Cheaper operating expenses compared to Northern New Jersey The Duke Realty purchase of two Class A facilities fully leased long-term by Crate and Barrel might be a sign of things to come in the Central New Jersey capital markets space. This transaction, which comes on the heels of the large one-off Barnes & Noble transaction in Q1, may signify that the formerly sluggish Central New Jersey investment sales market may be heating up. Leasing activity was steady in Q2, resulting in nearly 700,000 square feet of positive net from Exit 12 to Exit 7A on the Turnpike Corridor. Approximately 2.7 million square feet of leases were executed in Q2, outpacing the Northern New Jersey market by approximately 300,000 square feet. In fact, given tenants recent desire for more modern, larger industrial spaces, the Central New Jersey market has experienced more gross leasing activity than the Northern New Jersey market in each quarter since Q Several large blocks of space were introduced to the market in Q2, such as the 1.0 million-square-foot warehouse presently leased by Wakefern at Exit 12, which may cause some temporary hiccups in the upcoming quarters should the spaces become vacated. Despite the market s slight rebound from a disappointing first quarter, slow, deliberate growth is still expected through year-end. The prolific leasing activity experienced in 2012 is not likely to be replicated in 2013 Q gross leases were down 2.2 million square feet year-over-year primarily due to the market s rapid tightening last year. Leasing activity is expected to remain brisk for Class A and Class B warehouses throughout the Turnpike Corridor. The performance of the speculative projects currently under construction at Exit 10 and Exit 8A will largely determine future activity throughout the market. Build-to-suit activity, highlighted by the 1.0 million square foot Amazon.com project now underway, is expected to increase through year-end with a couple closed or nearly closed deals in the pipeline. 115 Interstate Boulevard, South Brunswick New Lease: 526,400 s.f. Tenant: Tory Burch in jobs 8.9 m 1.9% 13.1% 2.4 m.s.f. 2.8 m.s.f Nixon Lane, Edison Renewal: 400,974 s.f. Tenant: DotCom Distribution 315 & 311 Half Acre Road, Cranbury 200 Middlesex Avenue, Carteret Buyer: Duke Realty Buyer: The Hampshire Companies Seller: DEKA Seller: Prologis $75.3M 949,580 s.f. $79 p.s.f. $17.0M 400,000 s.f. $43 p.s.f. 21 S. Middlesex Avenue, Monroe New lease: 204,369 s.f. Tenant: Wicked Fashions Talmadge Road, Edison Buyer: Romark Logistics Seller: Sitex Group $10.0M 243,000s.f. $41 p.s.f. Market stock (%) net construction industrial 304,707, % 14.1% 705,107 $ % 8.8% 2,020, ,000 Leased industrial 220,194, % 16.9% 219,084 $ % 9.2% 2,020, ,000 Warehouse & distribution 171,647, % 16.7% 100,562 $ % 5.4% 2,020, ,000 Manufacturing 34,262, % 17.8% 107,148 $ % -12.9% 0 0

25 25 North America Industrial Q Jones Lang LaSalle Central Valley, California Fluctuation in commodity prices Intermodal transportation links Transnational distribution Relatively business-friendly environment Proximity to the Port of Oakland Availability of entitled land Inactivity on the part of corporate occupiers held leasing activity in the Central Valley to a handful of transactions. While many of the largest corporates had already executed relocations or renewals in previous quarters, regionally focused businesses continue to exercise caution as the Central Valley begins to pull itself out of the past recession. Recognized as Northern California s regional distribution hub-of-choice, the number of large transactions in recent quarters by major blue chip companies has helped to improve underlying real estate fundamentals, including and positive net. However, asking lease rates have remained competitive compared to neighboring Bay Area distribution markets, providing incentive for occupiers who do not require proximity to the Port of Oakland to relocate out to the Central Valley. Existing supply of Class A bulk distribution space is at an all time low. As of the end of the second quarter, there were only 10 available options over 250,000 square feet across Northern California. Given the steady demand for space in this size category, it is likely that existing supply could be leased up within the next 12 months. With demand on the rise for big box distribution facilities across Northern California, contiguous blocks of available space are becoming harder to come by. The shortage of available space poses a problem for corporate operators reaching critical mass in light of the improving regional and national economic fundamentals. Limited large block availabilities are pushing corporate occupiers to begin to explore build-to-suit options to fill their growing requirements or sign short-term renewals until additional space becomes available. While speculative construction may be soon commence, tenants can expect asking lease rates to be nearly 50.0 percent higher than current levels Zephyr Street Relocation: 394,000 s.f. Tenant: Menlo Logistics 1400 Pescadero Avenue Buyer: Duke Realty Seller: USAA Real Estate $42M 657,600 s.f. $63 p.s.f. in jobs 1.2 m 2.4% 12.5% 1.7 m.s.f. 1.8 m.s.f. *s based on data compiled since Q Finch Road Expansion: 150,000 s.f. Tenant: Del Monte 736 South Mariposa Road Direct: s.f. Expansion: Budweiser Market stock (%) net construction industrial 104,215, % 14.0% 1,020,043 $ % 9.0% 2,634,441 0 Leased industrial 67,759, % 19.9% 901,327 $ % 8.3% 2,000,000 0 Warehouse & distribution 56,048, % 20.7% 873,035 $ % 8.9% 2,000,000 0 Manufacturing 7,982, % 19.2% -13,345 $ % 26.9% 0 0

26 26 North America Industrial Q Jones Lang LaSalle Charlotte Growing population is driving up demand Retailers have returned to the market Expansion of the aerospace sector Consumer products Consumer products continues to be a primary market driver in the Carolinas. Large users like Pepsi, Herbalife, Britax, Amazon, Rite Aid, Shutterfly, Snyder s Lance, Electrolux, and Ingersoll Rand, amongst others, came off the sidelines and made decisions to renew or expand before the year s end. Additionally 3PLs and freight forwarders are showing signs of increased activity. With another quarter of significant demand, rates continued to decline in the amenity-rich submarkets. As the rates tighten users are beginning to lose the leverage they held over the landlords at the beginning of the recovery. Average asking rents were steady in the market as a whole. Overall, effective rents increased three cents and 1.0 percent. While demand for large block contiguous was a major market driver throughout 2012, the activity continues to trickle down to smaller availabilities. Commerce Park, Crosspoint Center, Charlotte Distribution Center, and Brookwood Business Park all observed an increase in demand for mid-sized blocks between 15,000 square feet and 40,000 square feet. Leasing is expected to continue to increase throughout the year as the economy continues its slow, steady recovery. Growth in the small-bay arena, in particular, has picked up and should continue to grow in the latter half of Rental rates will continue to increase as metro wide rates shrink from their inflated highs of a few years ago. With only 10 large block, 100,000+ square foot availabilities, the market is well positioned for future. Due to the present demand for premier space these availabilities shouldn t stay vacant long Long Creek Business Prk Dr Renewal: 165,000 s.f. Tenant: Cooper Wiring 4140 Pleasant Road Buyer: Schmier & Feurring Properties Seller: Keith Corporation $25.0M 478,000 s.f. $53 p.s.f. in jobs 1.8 m 3.4% 11.5% 0.5 m.s.f. 1.9 m.s.f. 771 W Highway 150 East New Lease: 122,834 s.f. Tenant: Denver Global Products 2101 Westinghouse Boulevard Buyer: Beacon Partners Seller: Clarion Partners $6.0M 200,000 s.f. $30 p.s.f Bond Street New Lease: 101,400 s.f. Tenant: Polygal Inc. Market stock (%) net construction industrial 250,345, % 15.1% 1,618,371 $ % 4.2% 322, ,651 Leased industrial 188,914, % 19.0% 1,663,303 $ % 4.2% 322, ,681 Warehouse & distribution 137,849, % 15.3% 1,520,925 $ % 7.3% 322,015 0 Manufacturing 51,065, % 29.0% 142,378 $ % -7.1% 0 154,681

27 27 North America Industrial Q Jones Lang LaSalle Chicago Inland port, rail line convergence e-commerce distribution and air cargo Consumer products and household goods Availability of entitled land Uptick in speculative The second quarter of 2013 saw continued leasing velocity with the nearly 5.8 million square feet of posted bringing the overall rate just below 8.5 percent. Occupiers are making leasing commitments with a sense of urgency as they recognize that the availability rate has dropped below 13.0 percent. Increased activity has been recorded by consumer electronics firms and furniture companies indicating that households are making big-ticket purchases which they may have postponed due to the recession. Due to Chicago s sheer population volume and the ability to reach a large swath of the central part of the country by truck, consumer products companies and food users remain active in the marketplace. Five logistics firms executed renewals equating to over 1.3 million square feet of leasing activity. in jobs 9.7 m 1.3% 9.8% 9.2 m.s.f m.s.f. Over 16.0 million square feet of active tenant requirements are being tracked across the Chicago market. Modest but sustainable rental growth is predicted in the high velocity submarkets which have tightened significantly in the last 12 months. With 2.4 million square feet of product delivered thus far in 2013 and nearly 4.0 million square feet currently under construction, the pipeline remains robust. Food users and e-commerce distributors are pursuing build-to-suit projects to meet their specialized needs for efficient layouts with high ceilings and ample trailer positions and car parking. Three re projects are underway in the O Hare market totaling 420,000 square feet of space with just 20.0 percent of the space committed thus far. Supply chain alignment decisions by 3PL s due to the excellent transportation infrastructure will continue to drive the market West Crossroads Parkway New Lease: 532,560 s.f. Tenant: Peacock Engineering 702 Commerce Center Drive Buyer: Exeter Seller: Georgia Pacific $31.9M 697,000 s.f. $46 p.s.f. Woodward Avenue Union Pointe BTS New lease: 347,400 s.f. Tenant: Orbus Exhibit and Display 450 Central Avenue Buyer: Lineage Logistics Seller: Blue Vista Capital $23.5M 518,000 s.f. $45 p.s.f th Place Expansion: 314,249 s.f. Tenant: IMS 4800 S. Central Avenue Buyer: DCT Seller: Combined Warehouse $14.6M 843,000 s.f. $17 p.s.f. Market stock (%) net construction industrial 1,125,816, % 12.8% 8,872,623 $ % 1.7% 3,993, ,800 Leased industrial 714,585, % 16.7% 8,144,975 $ % 1.2% 3,993, ,800 Warehouse & distribution 431,669, % 18.4% 5,483,911 $ % 1.4% 3,993, ,800 Manufacturing 171,672, % 18.0% 2,130,996 $ % 2.0% 0 0

28 28 North America Industrial Q Jones Lang LaSalle Cincinnati / Dayton Manufacturing Healthcare and pharmaceuticals e-commerce distribution and air cargo Business-friendly municipalities Educated labor force Presence of Fortune 500 companies After peaked in 2010, alternating quarters of positive and negative net caused gradual declines, while other markets such as Indianapolis and Columbus experienced more robust demand growth. The market s shutdown in supply during 2010 and 2011 helped push down, but as market fundamentals began to tighten, new projects were added to the pipeline. Nearly 800,000 square feet of industrial space was added in 2012 and currently more than 1.1 million square feet is under construction. Asking rents are stabilizing, and incremental increases in rates will begin to surface. That said, the ability for developers to build in this market will hamper significant rent growth over the coming years. As fundamentals improve, investors are beginning to creep back into the market. With demand continuing in the black and vacancies falling, investment sales are climbing back toward normal levels and median pricing is on the rise. Stronger demand growth will lead to further compression in the short term, but market fundamentals will eventually loosen as speculative construction picks back up. The majority of demand growth over the next 12 to 24 months is expected to come from local manufacturers and will likely be concentrated in the Kentucky submarkets as the location of a UPS global hub at the Louisville International Airport provides certain logistical advantages. Build-to-suits and expansions were the only construction projects in the recent past, and they will continue to trickle in, but as the number of available large blocks of space dwindles, speculative construction is expected to pick up. Landlords have been able to stabilize rents and make modest increases in some cases, but significant gains are not expected as overall remains elevated and tenants have choices. As rent growth returns to this market, it will be more of an inflation hedge than a serious benefit to operating incomes Logistics Way New lease: 390,590 s.f. Tenant: Blue Buffalo Co. 175 Progress Place Buyer: First Highland Seller: Avon $6.5M 1.1 m.s.f. $5.89 p.s.f. in jobs 2.1 m 0.7% 8.2% 0.4 m.s.f. 0.5 m.s.f. 401 Milford Parkway New lease: 198,000 s.f. Tenant: Software Packaging 9200 Brookfield Court Buyer: GFP Alliance Florence Seller: Brookfield Office Properties $7.3M 176,000 s.f. $41.39 p.s.f Progress Drive New Lease: 113,000 s.f. Tenant: New Flyer Industries CalSTRS Cincinnati Portfolio Buyer: Hackman Capital Partners Seller: CalSTRS $15.8M 390,000 s.f. $40.43 p.s.f. Market stock (%) net construction industrial 245,284, % 9.9% 1,906,494 $ % 1.3% 1,055, ,000 Leased industrial 205,450, % 11.4% 1,539,412 $ % 0.3% 1,055,648 60,000 Warehouse & distribution 146,718, % 11.7% 689,869 $ % 0.3% 1,055,648 0 Manufacturing 47,265, % 7.9% 870,634 $ % 0.8% 0 0

29 29 North America Industrial Q Jones Lang LaSalle Cleveland Tenants look to buy quality Dwindling stock of leasable space Quality manufacturing infrastructure Low cost of doing business Energy exploration attracting investment Fundamentals continue to improve in Cleveland as manufacturing output increases and consumer spending remains on the upswing. Despite this, demand growth is still slower in Cleveland than in the other Ohio markets, as Cleveland doesn t have the draw of a national distribution hub like Columbus or even a more regionally focused one like Cincinnati. Luckily, to the metro s benefit, supply growth has been nonexistent. In fact, the last three years have been practically devoid of any significant deliveries. Absorption in Cleveland is driven mostly by locally-manufactured auto parts, machine goods and local consumption. A bounce back for these drivers has improved local demand. A negative viewpoint of Northeast Ohio from lending institutions has kept a larger number of investors away for years and a majority of the trades have been local value-add plays or single-tenant deals. That trend has stopped this past quarter with the 16-building portfolio going to Hackman Capital, and a flurry of flex buildings going to out-of-state investors. Rent s are finally starting to rise, albeit marginally, based on year-over-year fluctuations. This follows slightly negative rent growth in But even as fundamentals are headed in the right direction, landlords will have to wait a little while longer before starting to roll leases up. With limited supply in the pipeline, vacancies are expected to continue their downward trend through The metro's inventory is laden with older properties and most of the limited that will occur will be in the form of re and build-to-suits. Demand has been increasing with relative consistency since the recession ended and will continue to make small gains over the next few years. Local manufacturers are expected to drive this growth. Liquidity is expected to remain scarce in Cleveland and much of the outside investment dollars that come to Ohio will likely be directed to Columbus and Cincinnati Cochran Road New lease: 200,000 s.f. Tenant: Glazer s 16-building portfolio Buyer: Hackman Capital Seller: CALSTRS $56.0M 1.6 m.s.f. $35 p.s.f. in jobs 2.1 m -0.6% 8.8% 0.6 m.s.f. 1.3 m.s.f Eastland Road New lease: 65,000 s.f. Tenant: Allfreight Delivery LLC 1665 Enterprise Parkway Buyer: HB Chemical Corp Seller: Forest Manufacturing $3.0M 114,887 s.f. $26 p.s.f Carter Street New lease: 24,192 s.f. Tenant: Omicron Supplies Viking Parkway Buyer: Technology Recovery Group Seller: Industrial Electric Wire $2.6M 62,650 s.f. $42 p.s.f. Market stock (%) net construction industrial 395,964, % 12.5% 1,972,797 $ % 0.7% 0 0 Leased industrial 241,715, % 18.1% 1,359,019 $ % 1.3% 0 0 Warehouse & distribution 127,688, % 18.7% 461,142 $ % 2.6% 0 0 Manufacturing 98,832, % 18.9% 788,707 $ % 1.4% 0 0

30 30 North America Industrial Q Jones Lang LaSalle Columbus Strategic location within 10 hours of nearly half of U.S. population Excellent transportation network Skilled workforce and pro-business environment Relatively low lease rates As market fundamentals have improved, stability has returned to the Columbus market, turning conditions from tenant-favorable to landlord-favorable. With the local economy now churning out jobs and products above prerecession levels, investors and landlords alike have seen renewed interest in the Columbus industrial market. Net has wavered over the past two years, but overall has trended towards positive demand. In turn, has narrowed and is currently 7.0 percent. Columbus has long been a magnet for large, nationally-focused tenants because of its sizable inventory with some of the lowest costs of national warehouse markets. For example, Columbus provides significant logistical advantages, with access to major highways, two airports, and the Heartland Corridor railway system, which has an intermodal connection at Rickenbacker International Airport. With market conditions now stabilized and the favor turning to the landlords, rents are expected to tick up through the end of the year. Modest rent growth is expected, however, there is talk about the increasing potential of speculative construction for the first time in a number of years. The Columbus logistics sector competes on low costs and rents in Columbus are competitive in the U.S. supply chain industry. This affordability will remain one of the key drivers of warehouse and distribution demand in the Columbus industrial market. Future supply will be focused on build-to-suit projects. While it makes sense for tenants, the addition of this supply does hinder a tightening of the metro s fundamentals, as inventory will grow on par with demand over the next three years Rohr Road New Lease: 314,000 s.f. Tenant: Exel Global Logistics 4600 Poth Road Buyer: Columbus MBM 5 LLC Seller: Scannell Properties $16.7M 217,627 s.f. $77 p.s.f in jobs 1.8 m 8.0% 9.9% 2.0 m.s.f. 2.2 m.s.f Opus Drive New lease: 144,000 s.f. Tenant: La-Z-Boy Furniture 217 North Grant Avenue Buyer: Borror Properties Seller: Buckeye Printing $3.0M 47,300 s.f. $64 p.s.f Groveport Road New lease: 132,000 s.f. Tenant: SB Capital 4450 Poth Road Buyer: Robinson Investments Seller: Parkwood Realty $4.1M 551,025 s.f. $7 p.s.f. Market stock (%) net construction industrial 208,476, % 9.6% 1,342,871 $ % 2.6% 3,339, ,014 Leased industrial 116,591, % 15.7% 1,066,509 $ % 2.3% 1,354, ,014 Warehouse & distribution 108,989, % 15.0% 1,276,040 $ % 2.3% 1,354, ,014 Manufacturing 7,601, % 26.1% -209,531 $ % 0.9% 0 0

31 31 North America Industrial Q Jones Lang LaSalle Dallas / Fort Worth Rising energy prices Strong population and job growth Residential home construction Healthy demand Abundance of land for future DFW recorded 3.2 million square feet of positive net in the second quarter, bringing the midyear total to an above average 5.3 million square feet. Over the last business cycle, DFW averaged between 8.0 to 10.0 million square feet of net per year. Along with the healthy leasing activity, the construction pipeline has increased significantly due largely to several large built-to-suit projects which have broken ground. Currently there is just under 7.0 million square feet underway with another 2.0 million square feet expected to begin before year end. The average price per-square-foot on investment grade properties decreased slightly over the past quarter and the volume of sales has remained low. The average price per square foot currently stands at $45, while the average cap rate is 7.4 percent. in jobs 6.6 m 2.5% 10.0% 8.0 m.s.f. 9.0 m.s.f. With the residential market heating up and strong population and job growth projected for the market over the next several years, almost all indicators point to strong demand for warehouse space for the foreseeable future. There has been limited investment-grade properties being marketed for sale. With strong pent up demand for industrial properties, sales volume is expected to increase over the next few quarters. Overall, market fundamentals continue to tighten, with the rate below the historic norm at 7.3 percent. Even with some spec underway, upward pressure on rates is expected to continue until a significant amount of new spec product is brought to the market in late 2014 or early The tightening of rents is not accurately reflected in the average asking rate, most of the rate increases have been via reductions in incentives. Face rate increases are expected once the next wave of spec hits the market in the next 12 to 24 months Frye Road New lease: 728,520 s.f. Tenant: Trader Joe s Northfield Distribution Center Buyer: Eastgroup Seller: Prologis $65.0M 791,818 s.f. $82 p.s.f South Freeway New lease : 552,600 s.f. Tenant: Sygma Network Coppell Com. and Bus. Center Buyer: Lincoln Seller: RREEF $53.7M 772,000 s.f. $69 p.s.f Park Vista Boulevard New Lease : 399,000 s.f. Tenant: Carolina Beverage Market stock (%) net construction industrial 503,432, % 12.0% 5,317,741 $ % -0.8% 6,990,370 1,587,066 Leased industrial 337,557, % 16.2% 5,172,471 $ % -0.8% 6,990,370 1,587,066 Warehouse & distribution 297,732, % 16.3% 4,656,462 $ % 0.3% 6,990,370 1,587,066 Manufacturing 24,177, % 17.8% 254,773 $ % 0.6% 0 0

32 32 North America Industrial Q Jones Lang LaSalle Denver Construction industry Energy sector Speculative Retail/e-commerce distribution Food industry Build-to-suit opportunities Demand from small/mid-sized tenants (15,000- to 40,000-square-foot range) continued to be active during the second quarter. Larger requirements (100,000-square-foot and above range) were also in demand. However, the lack of quality space available in the market continued to spark the discussions of more build-to-suit as well as new speculative opportunities. Several developers including Majestic Realty, United Properties, Prologis, IBC Holdings and Central Development have started speculative construction in the I-70/East and Southeast submarkets. It has been roughly five years since Denver has seen speculative. Average asking rents were steady while the market remained neutral as a whole. in jobs 2.9 m 1.7% 7.9% 1.5 m.s.f. 1.9 m.s.f. Leasing activity is expected to increase as the year progresses. As the market continues to tighten, tenants are expected to see increased rental rates and fewer landlord concessions, thus making the next few quarters an opportune time to lease additional space before the market shifts to landlord-favorable conditions in After four years of little to no in Denver Metro area, new construction is picking up momentum: build-to-suit and speculative construction is scheduled to break ground in the second half of While I-70/East and Southeast will still be most active, other submarkets, such as Central, are also expected to see construction activity. Second quarter s net was positive with 1.0 million square feet, up from the 359,950 square feet recorded in first quarter. With several years of slow but positive in the Denver metro area, has dropped below 6.0 percent and rental rates are still relatively low. The market is expected to see more leasing activity through the year and even more positive Florence Street New lease: 184,550 s.f. Tenant: Udi s Healthy Food South Potomac Street Buyer: I-225 Kaiohu, LLC Seller: SVN Equities LLC $16.2M 145,146 s.f. $111 p.s.f Joliet Street New lease: 81,000 s.f. Tenant: Czarnowski 3825 Walnut Street Buyer: Conscience Bay Company Seller: DPC Development $8.8M 100,000 s.f. $88 p.s.f East 33 rd Avenue Renewal: 44,160 s.f. Tenant: Mattress King Table Mountain Parkway Buyer: STAG Industrial Management Seller: General Electric Capital $8.6M 227,500 s.f. $38 p.s.f. Market stock (%) net construction industrial 200,317, % 9.0% 1,369,681 $ % 2.5% 318,766 1,207,637 Leased industrial 127,990, % 12.2% 1,341,483 $ % 1.7% 50, ,479 Warehouse & distribution 101,244, % 10.9% 984,802 $ % 6.7% 50, ,479 Manufacturing 24,184, % 17.7% 453,078 $ % -1.7% 0 0

33 33 North America Industrial Q Jones Lang LaSalle Detroit Concentration of automotive industry Growth as an international transportation hub Growth in green and advanced manufacturing Minimal supply in pipeline Absorption has been positive for the past two years, pulling vacancies down to within 2008 levels. The market has also been seeing fewer large move-outs lately, allowing the recovery to play out as the auto industry ramps up production and drives growth in the local economy. Major tenants continue to make leasing decisions in the 100,000- to 250,000-square-foot range and the prospects for net, at least in the next couple of quarters, remain solid. There are significant economic barriers to in Detroit. Even before the downturn, Detroit only saw moderate levels of speculative. As such, most of the recent construction has been build-to-suit and concentrated in Western Wayne and Macomb County. Sales activity in the Detroit industrial market has been sluggish through the first half of Large trades remain extremely rare as well as outside investment dollars. Almost all the recent investment has come from local investors and has been under the $5.0 million mark. Demand growth will continue to favor large, modern product, and when met with fewer move-outs, the result will be a continued firming of warehouse demand. This is particularly important since the larger products suffer from a significantly higher rate. With a minimal supply pipeline, marginal improvements in demand will result in a tightening of vacancies. Much of the metro s supply has fallen into obsolescence, making demolitions seem like a good option for improving fundamentals. Despite a firming of the market, vacant space is still abundant. As a result, landlords have yet to truly regain the upper hand. While rents have finally ended their decline and are expected to grow over the coming quarters, growth will be modest at best. While a firming of market fundamentals will likely coincide with continuing gradual improvements in liquidity, transaction activity is not expected to reach 2007 levels any time soon Ecorse Road New lease: 268,800 s.f. Tenant: Romulus Real Estate LLC Northwestern Highway Buyer: STAG Industrial Management Seller: KIRCO $7.2M 113,000 s.f. $63 p.s.f in jobs 4.3 m -0.9% 15.5% -0.6 m.s.f. 1.0 m.s.f Mile Road New lease 215,000 s.f. Tenant: Global Tooling Systems, Inc Ladd Road Buyer: American Expedition Vehicles Seller: BMK Investments $2.6M 80,416 s.f. $32 p.s.f 2100 Dove Street Renewal: 173,900 s.f. Tenant: Automotive Supplier Van Born Road Buyer: Milan Naren Inc. Seller: Marimba Auto, LLC $350, ,920 s.f. $1.75 p.s.f. Market stock (%) net construction industrial 421,632, % 17.4% 2,791,248 $ % -1.4% 339, ,865 Leased industrial 290,209, % 21.8% 2,832,828 $ % -0.8% 339, ,865 Warehouse & distribution 138,921, % 22.3% 1,654,446 $ % -1.9% 0 406,865 Manufacturing 129,918, % 22.7% 1,277,791 $ % 2.0% 339, ,000

34 34 North America Industrial Q Jones Lang LaSalle Hampton Roads Improving retail & wholesale sales Third largest port on the east coast Low business costs Bottomed out rental rates Developing distribution hub Deflated property values Defense contractor demand was at a standstill while 3PL firms continued to seek out expansion space. Several retailers were also shopping for large distribution build-to-suits in the Southside submarket cluster. Overall leasing activity declined in the second quarter with 382,361 square feet signed, a 49.7 percent decline from the previous quarter and a 34.6 percent decline from the second quarter of Blackstone Group s 23-property portfolio acquisition from First Potomac Realty and Trust boosted total sale volume in the second quarter. The portfolio totaled 4.1 million square feet and sold for an allocated value of $59.70 per square foot. Roughly 1.6 million square feet was located in the Hampton Roads market. No new broke ground in the second quarter, however Katoen Notie announced its intention to purchase an additional 25 acres at the former Ford assembly plant in Norfolk. Rental rates started showing appreciation with a 3.1 percent increase over the trialing three months to reach $4.41 per square foot, but declined by 1.3 percent over the past year. Short-term lease extensions will be the bulk of defense contractor leasing activity, while manufacturing and logistics firms seek longer terms. Increased port activity may drive warehouse demand with a sharp spike in 2015 when the Panama Canal expansion is completed. Larger tax revenue pools from restructured tax laws will provide much needed capital to improve the Hampton Roads neglected transit infrastructure, boosting the market s competitiveness. 550 Woodlake Drive New: 44,620 s.f. Tenant: Chugach Government Services First Potomac Portfolio Buyer: Blackstone Group Seller: First Potomac Realty Trust $241.5M 4.1 m.s.f. $60 p.s.f. in jobs 1.7 m 1.7% 7.4% 0.1 m.s.f. 0.2 m.s.f Thruston Avenue New: 43,362 s.f. Tenant: Grand Furniture Discount 1401 Precon Drive Buyer: Waterway Warehouse, LLC. Seller: BBB, LLC. $8.5M 159,720 s.f. $53 p.s.f. 814 Maxwell Road Renewal: 37,500 s.f. Tenant: Lockwood Brothers, Inc Taylor Farm Road Buyer: Medici888, LLC. Seller: Harbor Group International $2.5M 54,500 s.f. $46 p.s.f. Market stock (%) net construction industrial 65,757, % 11.2% 633,964 $ % -1.3% 0 0 Leased industrial 40,340, % 15.1% 944,679 $ % 2.5% 0 0 Warehouse & distribution 29,942, % 16.9% 973,079 $ % 1.2% 0 0 Manufacturing 10,398, % 9.8% (28,400) $ % 9.2% 0 0

35 35 North America Industrial Q Jones Lang LaSalle Houston Natural gas spot prices Port of Houston growth Increasing trade and O&G operations Tighter rates Reduced land inventory for new product Increasing population Houston s economic livelihood continues to hinge on its energy and health care emphasis. Job gains of 91,600 net for the 12-month period ending in May 2013; a 3.4 percent increase over that period. Houston gained the equivalent of San Angelo, Texas in jobs. Houston ranks #1 amongst large MSAs for wages adjusted for cost of living. The energy industry s dominance as well as improvements in the construction and real estate sectors have added more strength to Houston s solid economic fundamentals since the end of There is approximately 5.6 million square feet of planned/underway product in Houston s pipeline. in jobs 6.2 m 3.4% 4.6% 1.4 m.s.f. 4.0 m.s.f. The Houston industrial market has become and will continue to be a landlord-favorable marketplace throughout Concern remains about global economic factors that may affect the distribution requirements of major U.S. retailers. However, Houston s industrial market is well-positioned for future growth. Leasing activity remained strong through the first six months of 2013, as a dip in active oil and gas wells has yet to affect the Houston market. Vacancy rates will continue to decrease until new product s increase available inventory and catch up to demand. Continuing s in the North-Northwest-West areas of Houston s industrial markets are causing an increase in land prices to between $3.00 and $5.00 per square foot in those areas of Houston. Investment from the energy industry is expected to create over 110,000 jobs in the Port of Houston area over the next 24 months. All signs continue to point to a robust remainder of 2013 for the energy capital of the world Highway 225 New lease: 210,000 s.f. Tenant: Jacobson Warehouse 8110 Kempwood Buyer: Euro-Mid LTD Seller: Capital Commercial Investments $9.5M 407,850 s.f. $24 p.s.f. World Wide Industrial Park New lease: 215,000 s.f. Tenant: Deep Down Inc. 525 McCarty Road Buyer: Unknown Seller: Elbi of America $2.7M 109,620 s.f. $24 p.s.f Northcourt New lease: 197,136 s.f. Tenant: Computer Technology Solutions 2835 Holmes Road Buyer: Texas Pipe and Supply Seller: NOV $TBD M 300,000 s.f. $TBD p.s.f. Market stock (%) net construction industrial 436,670, % 7.4% 1,235,997 $ % 4.1% 2,144, ,724 Leased industrial 252,438, % 11.0% 1,299,194 $ % 4.2% 2,144, ,724 Warehouse & distribution 204,090, % 11.7% 1,017,923 $ % 3.0% 2,144, ,724 Manufacturing 27,997, % 12.7% 189,412 $ % 4.0% 0 0

36 36 North America Industrial Q Jones Lang LaSalle Indianapolis Fluctuation in commodity prices Intermodal transportation links e-commerce distribution and air cargo Relatively business-friendly environment New developer influx Availability of entitled land The Indianapolis metro outperformed the state in unemployment with a rate of 7.4 percent, nearly a full percentage point below the state s rate of 8.3 percent. A total of 1.7 million square feet in leases were signed during the second quarter, the majority of which were in the West/Southwest submarket. A total of 883,000 square feet of speculative construction is underway in the market. While no projects were completed in the second quarter, several projects are in the planning stage and will soon break ground. Tour activity continued to climb with active tenants in e-commerce distribution, automotive and manufacturing industries. Sales activity was highest among user sales as one investment and five user sales were closed during the quarter. Increased demand for warehouse space between 100,000 and 250,000 square feet will ramp up in the second half of the year. Absorption is expected to increase as tenants sign leases in speculative bulk buildings. Asking rates may decrease slightly if newly built buildings remain vacant and inventory grows. As investors and REITs make strategic decisions to purchase properties, sales volume will increase. The volume of land sales will continue to increase as developers and owners purchase ground with hopes of construction in the near future Whitaker Road Renewed lease: 379,322 s.f. Tenant: Ozburn-Hessey Logistics 3802 North 600 West Buyer: Hollingsworth Capital Partners Seller: Precedent Commercial $2.4M 69,850 s.f. $34 p.s.f. in jobs 1.8 m 1.2% 8.7% 4.7 m.s.f. 4.0 m.s.f Perry Road Expanded lease: 296,000 s.f. Tenant: Eby-Brown Company 2000 Executive Drive Buyer: Frontier Paper & Packaging Seller: Caterpillar, Inc. $2.3M 160,000 s.f. $14 p.s.f North Distribution Way New lease: 250,000 s.f. Tenant: Spectra Premium 6151 Olivia Lane Buyer: LAMAC, LLC Seller: Duke Realty $1.6M 99,000 s.f. $17 p.s.f. Market stock (%) net construction industrial 299,150, % 10.2% 2,744,418 $ % 3.7% 3,036,806 0 Leased industrial 275,502, % 9.4% 2,532,550 $ % 2.5% 2,996,806 0 Warehouse & distribution 207,587, % 9.1% 2,018,073 $ % 10.1% 2,827,806 0 Manufacturing 67,915, % 10.1% 514,477 $ % 2.0% 169,000 0

37 37 North America Industrial Q Jones Lang LaSalle Inland Empire Fluctuation in commodity prices Intermodal transportation links e-commerce distribution and air cargo Relatively business-friendly environment Development on the rise Availability of entitled land Speculative groundbreakings are increasing, preleasing remains strong and tenants weighing the bidding wars to lease new space, while with a desire to have a Southern California address are increasingly opting for build-to-suits. The Inland Empire leads the nation in under construction activity with 11.5 million square feet, up 164 percent from one year ago. Approximately 85.0 percent of this is speculative product. Build-to-suit activity is on the rise. This quarter, Distribution Alternatives and Minka Lighting committed to two separate leases, totaling 965,000 square feet. Three months ago, Home Depot and BMW of North America committed to 1.1 million square feet and 327,000 square feet, respectively. Tenants appear to be erring on the side of caution and are taking down buildings that are either completed or near completion to eliminate business interruption. Quarterly net activity was 3.2 million square feet, up 68.0 percent from one year ago. Warehouse asking rent rates pushed by demand for larger blocks of space are appreciating. (This comes on the heels of effective rental rates for space in excess of 400,000 square feet, which enjoyed an annual appreciation rate of 8.0 percent in 2012.) Rents for large-box spaces are back to their prerecession highs. Cap rates for desirable space are in the low 5s. Smaller businesses are becoming more active, and access to financing is propelling owner-user sales in the 25,000- to 100,000-square-foot segment. The housing market s progressive recovery will benefit industrial real estate throughout the region. Net is expected to finish the year with 16.0 million square feet. New speculative deliveries may lead to slight softening in the 500,000- to 600,000-square-foot segment. Planned construction starts total 60.0 million square feet Mission Boulevard Renewal: 763,228 s.f. Tenant: Georgia Pacific South Riverside Avenue Buyer: TIAA-CREF Seller: CBRE Investors $108.9M 1,396,495 s.f. $78 p.s.f. in jobs 4.2 m 0.7% 7.9% 12.3 m.s.f m.s.f Oleander Avenue New lease: 677,909 s.f. Tenant: DSC Logistics Inter Business Center Buyer: TA Associates Realty Seller: Behringer Harvard $40.4M 667,024 s.f. $61 p.s.f Jurupa Avenue New lease: 612,104 s.f. Tenant: Samsung Elm Avenue Buyer: Office Star Products Seller: Overton Moore Properties $33.6M 454,016 s.f. $74 p.s.f. Market stock (%) net construction industrial 422,930, % 9.6% 7,341,727 $ % 3.8% 11,511,867 1,555,156 Leased industrial 308,591, % 10.7% 8,207,657 $ % 2.9% 11,511,867 1,555,156 Warehouse & distribution 257,449, % 10.4% 7,785,498 $ % 5.4% 11,511,867 1,555,156 Manufacturing 38,669, % 12.5% 572,771 $ % 2.6% 0 0

38 38 North America Industrial Q Jones Lang LaSalle Kansas City Auto plant reinvestment BNSF Intermodal e-commerce distribution Interest in area by large DC s Lack of Class A distribution space Abundant big box land sites Industrial net continued to be positive with a second quarter total of 340,783 square feet Development of the former GM site is seeing activity from manufacturers. BNSF s intermodal facility is nearing completion and will deliver in third quarter. Developers of Logistics Park Kansas City (LPKC) are under construction on both a 500,000-square-foot speculative distribution center and a 326,650-square-foot build-to-suit. Three speculative warehouses are nearing full lease up. Two more speculative warehouse are set to begin construction before year-end Aggressive developers are quoting build-to-suit projects on less than 10-year leases. Large blocks of existing space are leasing up. in jobs 2.1 m 1.1% 7.4% 1.1 m.s.f. 1.7 m.s.f. LPKC s spec building will see strong activity. More Ford and GM suppliers will settle on locations. There will be continued interest in Kansas City by manufacturing operations. Landlords of Class B and C space will remain aggressive. There will be more speculative construction before the end of the year. Repurposing of infill sites will continue into More capital will seek opportunity in the industrial sector South Green Road New lease: 189,172 s.f. Tenant: 1A Auto 150 South Geospace Drive New lease: 155,000 s.f. Tenant: Grainger 2901 Heartland Drive New lease: 95,898 s.f. Tenant: Holland West 157 th Street Buyer: Duke Seller: USAA $35.3M 446,500 s.f. $79 p.s.f. 300 East Pence Road Buyer: Realty Income Corp. Seller: Cardinal Industrial $23.5M 500,000 s.f. $47 p.s.f Greystone Avenue Buyer: MKS Seller: SBKC Service Corp. $1.4M 100,000 s.f. $14 p.s.f. Market stock (%) net construction industrial 270,984, % 11.4% 2,013,517 $ % -2.4% 953,341 65,000 Leased industrial 165,174, % 16.5% 2,017,373 $ % 1.2% 953,341 65,000 Warehouse & distribution 129,275, % 14.9% 1,261,305 $ % -0.3% 783,341 65,000 Manufacturing 28,231, % 17.7% 728,566 $ % 1.0% 0 0

39 39 North America Industrial Q Jones Lang LaSalle Las Vegas Service-related users (Las Vegas Strip) Low freight costs Pro-business environment & tax structure Favorable regional SW location Low natural disaster risk Right-to-work employment environment Second quarter dropped again to 12.1 percent and there are signs it could continue to fall. Quarterly net positive for the third consecutive quarter was 425,709 square feet. Notable lease transactions for the year thus far include: 303,000 square feet to Hand Air Express, 134,000 square feet to Derse Exhibits and 135,000 square feet to Shelby American. The Las Vegas industrial market appears to finally be in the midst of a recovery. If current activity carries into third quarter, there will be little doubt Las Vegas will have entered into a more sustainable long-term recovery. The current largest single availability in the market continues to be a freestanding 214,000-square-foot in the NE/North Las Vegas submarket. The lack of available, ready-to-build sites, especially over 25 acres, continues to challenge new speculative and build-to-suit. We are currently tracking approximately 2.6 million square feet of build-to-suit interest in the Las Vegas Valley with seven active prospects. Current build-to-suit projects include a 130,000-square-foot office/warehouse/r&d project on 10 acres for Shufflemaster and a 280,000-square-foot local delivery facility on 25 acres for Federal Express. A proposed 450,000-square-foot e-commerce facility in North Las Vegas has been put on hold Lamb Boulevard Direct: 303,000 s.f. Tenant: Hand Air Express in jobs 2.0 m 2.1% 8.5% 0.9 m.s.f. 1.9 m.s.f Ensworth Street Direct: 135,000 s.f. Tenant: Shelby American 5845 Wynn Road Direct: 99,997 s.f. Tenant: Shepard Exposition The market will remain very competitive throughout 2013, and, based on current and expected activity, we will see upward pressure on rates by the end of the third quarter. The rate differential between the submarkets servicing the Las Vegas Strip and the northeast submarket is beginning to stabilize and may decrease by year-end. We will not see any speculative in Developers, however, are attempting to position themselves for what is seen as an inevitable need for new big box product in West Sunset Road Buyer: Shemger Enterprises Seller: Kouretas Properties $4.5M 65,814 s.f. $68 p.s.f Commercial Way Buyer: Lake Industries Seller: LaPour Partners $3.4M 42,311 s.f. $81 p.s.f East Colton Avenue Buyer: NST Properties Seller: Leonard Rental $2.7M 79,275 s.f. $34 p.s.f. Market stock (%) net construction industrial 86,669, % 13.7% 830,156 $ % 0.4% 369, ,000 Leased industrial 71,419, % 15.8% 699,956 $ % 0.2% 369,750 0 Warehouse & distribution 62,711, % 16.6% 251,432 $ % -0.7% 369,750 0 Manufacturing 6,132, % 13.3% 127,913 $ % -2.7% 0 0

40 40 North America Industrial Q Jones Lang LaSalle Los Angeles Fluctuation in commodity prices Intermodal transportation links Third-party logistics providers Tight warehouse/distribution fundamentals Mature logistics market with trade linkages Dominant U.S. cargo port network Laden cargo volumes at Southern California s seaports totaled 5.3 million TEUs from January through June, up 3.0 percent compared to the same time period last year. Loaded imports were up 2.1 percent, while loaded exports were down 3.1 percent. Annual cargo volume is expected to grow 3.0 to 4.0 percent this year. Quarterly leasing volume totaled 7.1 million square feet, down 41.0 percent from one year ago. Net was 1.1 million square feet, a reversal from the negative 1.2 million square feet of one year ago. Functional warehouse space remained the product of choice by recording 1.8 million square feet of positive net during the quarter; manufacturing space was challenged. There are only two spaces in excess of 500,000 square feet available in the warehouse segment. construction activity was up 32.0 percent compared to one year ago. With hovering in the upper 4s, all infill submarkets have speculative construction underway. Of new, there were three warehouses in excess of 300,000 square feet product that will compete with the Inland Empire to the east. Desirable product is in short-supply. Tenants are planning ahead, submitting offers for leases starting in 2014 now. Lease renewals remain common, and some tenants are renewing for shorter terms to maximize their near-term, decision making flexibility East Conant Street New lease: 1,091,754 s.f. Tenant: Mercedes Benz in jobs 9.8 m 1.0% 4.4% 3.4 m.s.f. 3.9 m.s.f West Rosecrans Avenue New lease: 298,474 s.f. Tenant: American Logistics Intl Valley View Avenue New lease: 146,640 s.f. Tenant: Eurostar Enhancing efficiencies while mitigating costs remains the focus for many, notably retail-related, occupiers, which explains why 3PL s are and will continue to be active. Countywide home sales single-family homes and condos were up 24.0 percent during the first quarter of 2013, compared to one year ago. This will lead to good demand for consumer goods, furniture, home improvement items and fixtures Tubeway Avenue Buyer: Ryzman Family Trust Seller: ADL Property Management $17.0M 202,838 s.f. $84 p.s.f Carmenita Avenue Buyer: UNC Investment and Dev. Seller: Mt. Vernon Properties $16.4M 199,937 s.f. $82 p.s.f Louden Lane Buyer: CT Realty Investors Seller: McConnell Cabinets $6.2M 121,000 s.f. $51 p.s.f. Market stock (%) net construction industrial 644,858, % 8.3% 2,539,065 $ % 5.1% 2,896, ,116 Leased industrial 426,800, % 10.1% 2,681,787 $ % 4.8% 2,896, ,116 Warehouse & distribution 290,629, % 9.9% 3,451,203 $ % 6.2% 2,896, ,116 Manufacturing 90,703, % 11.5% -700,483 $ % 7.7% 0 0

41 41 North America Industrial Q Jones Lang LaSalle Memphis Busiest cargo airport in North America Five Class I rail lines $1.2B spent on rail infrastructure 3 rd busiest trucking corridor in U.S. 4 th largest inland port in U.S. Home to FedEx WorldHub Demand continued at a solid pace, driven by healthcare, retail and third-party logistics companies, due to Memphis being a primary logistics hub. Due to minimal supply for large blocks of Class A space, rental rates are increasing in that product type. Mid-sized space demand is increasing and rents are starting to tick up accordingly. Big box Class A space has become a landlord-favorable environment and small- to mid-sized Class A is transitioning from neutral to landlord favorable. Class B space is a tenant-favorable market for smallto mid-sized space, particularly those buildings with lower clear height and some degree of functional obsolescence. IDI is the only active speculative developer in Memphis and their risk-taking is being rewarded. They had or have 1.2 million square feet of stock that was completed in the opening months of They are currently building three spec buildings totaling 1.5 million square feet to satisfy demand for all sized space requirements. This represents the first speculative construction in over four years. Exeter, Hillwood and IIT are the most active buyers, with each acquiring 4.1 million, 3.4 million and 2.2 million square feet, respectively, over the past months East Raines Road Renewal: 600,000 s.f. Tenant: Philips Electronics in jobs 1.3 m 1.0% 12.8% 2.6 m.s.f. 3.2 m.s.f Holmes Road New Lease: 414,076 s.f. Tenant: Market TJ Maxx 5405 Hickory Hill New Leasel 223,200 s.f. Tenant: Bryce Corporation Leasing volumes will continue to accelerate over 2013 as confidence continues to strengthen. Tenants will continue to take their time in making decisions, but a tightening supply of space is creating a new sense of urgency and require them to make quicker decisions. In order to receive more competitive lease economics, tenants in the market are beginning to be more willing to enter into longer-term leases. The gap will tighten between asking and effective rates throughout There continues to be more investor demand for Class A product than supply Hacks Cross Buyer: Gramercy Property Trust Seller: Hillwood $24.6M 605,427 s.f. $41 p.s.f Outland Center Road Buyer: Huntington/AmStar Seller: Weingarten Realty $13.0M 570,000 s.f. $26 p.s.f Citation Buyer: Exeter Seller: DCT $11.3M 400,000 s.f. $28 p.s.f. Market stock (%) net construction industrial 644,858, % 8.3% 2,539,065 $ % 5.1% 2,896, ,116 Leased industrial 426,800, % 10.1% 2,681,787 $ % 4.8% 2,896, ,116 Warehouse & distribution 290,629, % 9.9% 3,451,203 $ % 6.2% 2,896, ,116 Manufacturing 90,703, % 11.5% -700,483 $ % 7.7% 0 0

42 42 North America Industrial Q Jones Lang LaSalle Miami-Dade Rebound in housing market Infrastructure improvements Growth in international trade Booming South American economies New developer influx Proximity to Panama Canal International trade continued to be a crucial factor that aided in the economic recovery of Miami-Dade. Increased shipments from the Caribbean and South America have helped drive space and occupancy gains. During the second quarter, 630,107 square feet of space was absorbed, causing to decline 0.6 percent. Consequently, asking rents have increased 4.7 percent from the previous quarter. Five spec buildings are under construction and available for lease in the Medley and Airport West submarkets. These projects will add over 1.8 million square feet to the inventory of available space; however, we anticipate that, given the heightened demand within these submarkets, a significant amount of pre-leasing will occur. Lincoln Property Company purchased Pelmad Industrial Park in the Medley submarket. The portfolio, which was sold by TA Associates, included 846,000 square feet of space. There are numerous institutional and regional developers planning (and/or already building) new warehouse space. Most is speculative but there are a few build-to-suits in the planning and construction stages. Expansion of the Panama Canal and infrastructure improvement projects at Port Miami and Miami International Airport will be the prime drivers of growth in this market. Port Miami plans on having all the infrastructure upgrades completed by mid-2015, in sync with the completion of the Panama Canal. In the next few quarters, Miami will witness an increase in net as the majority of the new tenants are expected to take occupancy of their space towards the end of this year. Rental rates are expected to gain strength for Class A product but are likely to remain flat for others. The residential housing boom in Miami-Dade will continue to boost demand for building supply companies, HVAC distributors, general contractors, and consumer goods. Other sectors that will experience growth include 3PLs, ocean freight, cruise lines and food & beverage. Market NW 123 rd Street New lease: 186,000 s.f. Tenant: OHL NW 105 th Circle Buyer: Lincoln Property Company Seller: TA Associates Realty $59.9M 846,000 s.f. $71 p.s.f. in jobs 2.6 m -0.1% 7.8% 0.2 m.s.f. 0.3 m.s.f NW 112 th Avenue Relocation: 64,000 s.f. Tenant: Tricor Braun NW 89 th Place Buyer: Terreno Realty Corp. Seller: TA Associates Realty $23.7M 307,000 s.f. $77 p.s.f NW 133 rd Street New lease: 44,000 s.f. Tenant: Pro Ag 7000 NW 25 th Street Buyer: Linux Corp. Seller: DAHRO, Inc. $6.7M 123,000 s.f. $55 p.s.f. stock (%) net construction industrial 122,405, % 10.4% 630,107 $ % 12.5% 1,854,000 0 Leased industrial 92,183, % 13.0% 403,795 $ % 16.6% 1,854,000 0 Warehouse & distribution 77,797, % 13.4% 489,700 $ % 9.8% 1,854,000 0 Manufacturing 14,386, % 10.7% -85,905 $ % 23.9% 0 0

43 43 North America Industrial Q Jones Lang LaSalle Minneapolis / St. Paul Very active medical technology community Home to 20 Fortune 500 companies Limited modern bulk space Educated and skilled workforce Active agricultural and related companies Preliminary May results released by the Bureau of Labor Statistics showed Minneapolis-St. Paul employment increasing to a total of 1.8 million jobs, the second month in a row that Minneapolis-St. Paul employment has hit a historical high-water mark, an indication that the regional economy is now in a phase of expansion. Although the pace of recovery within the industrial-using sectors lacks the magnitude of the downturn experienced from 2007 through 2010, job growth has been steady since hitting a low in February Since this time the industrial-using sectors have added 55,000 jobs in Minneapolis-St. Paul, including year-over-year job growth in each of the last 31 months. Activity has picked up across all industrial product types. The demand for high quality, Class A modern bulk space with high clear heights continues to increase while quality available options are scarce. An increasing number of land positions are being taken by developers in response to the increasing demand for modern bulk space, and speculative announcements have become increasingly common among this product type. We are currently tracking more than 1.0 million square feet of speculative bulk that is expected to begin construction over the next year across multiple submarkets, both within and outside the I loop. Class A bulk product is in short supply for investors looking to place capital, and as a result cap rates have decreased to a range of 6.25 to 6.75 for this product type in recent months. While the threat of a proposed percent warehousing tax being imposed on Minnesota businesses has created some uncertainty among employers, many are optimistic that it will be repealed. Numerous lawmakers have sought special sessions aimed at preventing the tax which is set for implementation in April of next year. We are currently tracking 50 active requirements for industrial space totaling more than 5.0 million square feet. Consumer durables, computing, communications, tech & media, food & beverage and biotech companies account for slightly more than 70 percent of the active space needs we are currently tracking. The main question going forward will be how much slack the planned speculative construction will add to the tightening industrial market Cedar Avenue New lease: 233,400 s.f. Tenant: BTD Manufacturing 2929 Long Lake Road Buyer: Auni Hldgs / Cauble Hldgs Seller: Investors Real Estate Trust $9.3M 173,000 s.f. $53 p.s.f. in jobs 3.3 m 2.1% 8.2% 1.1 m.s.f. 0.8 m.s.f Azelia Avenue N Renewal: 116,000 s.f. Tenant: Wagner Spray Tech 3500 Lyman Boulevard Buyer: ViaWest Seller: Entegris $6.8M 158,000 s.f. $42 p.s.f Rivertown Drive New lease: 56,000 s.f. Tenant: S&F Corporation th Avenue N Buyer: Onward Investors Seller: Teacher s Retirement of IL $5.5M 106,000 s.f. $51 p.s.f. Market stock (%) net construction industrial 238,032, % 10.9% 558,720 $ % 3.1% 860,000 0 Leased industrial 175,434, % 13.8% 410,266 $ % 3.1% 860,000 0 Warehouse & distribution 87,444, % 16.4% 260,789 $ % 3.9% 860,000 0 Manufacturing 73,826, % 10.8% 147,234 $ % 2.7% 0 0

44 44 North America Industrial Q Jones Lang LaSalle Northern New Jersey State incentive programs Limited available Class A stock Low supply of big box space Future Class A deliveries in the Port submarket Port re projects The investment sales market gathered steam in the second quarter as sales volumes continued to accelerate. Three particularly notable capital markets transactions took place during the quarter totaling over $172 million and 2.1 million square feet of space. Institutional investors have swarmed to stabilized properties in the Meadowlands since late 2012, regularly paying triple-digit per-square-foot purchase prices as cap rates steadily decline. While net rates and leasing volumes generally increased throughout the Northern New Jersey market after a sluggish first quarter, overall leasing volumes were still considerably lower than what was experienced at the same point in Tenant interest remains high at the Meadowlands and the Port, but with few high-cube, big-box options currently available, some larger users have chosen to relocate to the Central New Jersey submarkets along the Turnpike. Consumer non-durables, 3PLs, and food and beverage companies were the most active in the market, representing approximately 69.0 percent of the Northern New Jersey users being tracked this quarter. Flat or slow growth is expected through 2013 as the abundance of low quality assets continues to weigh down most market measures. Although the second quarter net was flat, the recent decrease in availability rates portends that increased marketwide net may be forthcoming. Capital markets activity is expected to flourish through year-end as several desirable assets and portfolios are likely to close in the near future. For example, the 989,000-square-foot Prologis Fairfalls portfolio in Fairfield and Little Falls has garnered plenty of attention from prospective purchasers. Is the Port primed for even more activity? There are only two existing Class A spaces over 100,000 square feet presently available in the submarket with roughly 1.0 million square feet of additional space being constructed on spec. The leasing activity at these sites will be paramount towards determining whether or not developers green light even more speculative construction projects. 100 Industrial Drive, Jersey City New lease: 126,672 s.f. Tenant: De Well Container 698 Route 46, Teterboro Buyer: TIAA-CREF Seller: RREEF $81.0M 616,992 s.f. $131 p.s.f in jobs 8.9 m 1.9% 10.4% -0.2 m.s.f. 0.6 m.s.f. 67 Route 46, Fairfield New lease: 79,920 s.f. Tenant: Max Finkelstein, Inc. 200 International Trade Center, Mt. Olive Buyer: Exeter Property Group Seller: JP Morgan Asset Mgmt. $59.0M 1.2 m.s.f. $49 p.s.f. 330 Washington Avenue, Carlstadt New lease: 71,106 s.f. Tenant: Visual Graphic Systems 200 Riser Road, Little Ferry Buyer: Sitex Group Seller: Mack-Cali $32.3M 286,628 s.f. $113 p.s.f. Market stock (%) net construction industrial 359,762, % 11.9% -702,029 $ % 5.9% 3,004,264 0 Leased industrial 256,950, % 15.1% -683,962 $ % 1.4% 2,389,264 0 Warehouse & distribution 185,090, % 15.2% -926,625 $ % 1.8% 3,004,264 0 Manufacturing 44,317, % 14.9% -395,327 $ % -2.6% 0 0

45 45 North America Industrial Q Jones Lang LaSalle Oakland / East Bay Food and beverage distributors Steady trade through Port of Oakland e-commerce distribution and air cargo Re-emergence of housing demand Lack of large blocks and little new Regional economic growth is fueling robust demand for industrial real estate throughout the greater East Bay. Unemployment declined for the fifth consecutive month in May, and payrolls continue to grow, expanding by 1.2 percent annually. Trade activity through the Port of Oakland was up 0.5 percent year-to-date through June compared with the same period in 2012, approaching the level of the last peak in Smaller users are much more active, as indicated by a sharp increase in tour activity for spaces smaller than 50,000 square feet. While there is an abundance of commodity space, competition among users is heating up, resulting in increased landlord leverage. Rents are approaching peak rates last seen in 2007, driving investor interest. Significant leasing activity of more than 3.0 million square feet in the first half of 2013 and an increase in tour activity points to strong net in future quarters. Investment activity is diverse, characterized by a mix of owner-user, value-add, and stable asset acquisitions Christy Street New lease: 49,336 s.f. Tenant: ARAMARK in jobs 2.6 m 1.2% 9.1% 1.7 m.s.f. 0.4 m.s.f Thornton Avenue New lease: 48,960 s.f. Tenant: Nakagawa Manufacturing Whipple Road Renewal: 39,150 s.f. Tenant: Pacific Material Handling Increased demand from the small business segment will help drive additional leasing and net activity through the remainder of the year, pushing down the overall rate as commodity space is absorbed. Asking rents for warehouse and distribution space are near previous peak levels. As a result of short supply, rents could exceed previous peak levels by Two warehouse/distribution projects, totaling more than 900,000 square feet, broke ground in the first quarter and will deliver by year-end Dumbarton Circle Buyer: Electronics for Imaging Seller: Peery-Arrillaga $21.6M 118,535 s.f. $182 p.s.f Alpine Way Buyer: DCT Industrial Seller: Don & Tomi Veneeghen $4.2M 42,000 s.f. $100 p.s.f. Market stock (%) net construction industrial 110,762, % 12.6% 1,029,482 $ % 11.1% 949,365 0 Leased industrial 92,721, % 14.2% 768,294 $ % 9.9% 949,365 0 Warehouse & distribution 65,723, % 12.1% 384,225 $ % -1.7% 949,365 0 Manufacturing 37,625, % 10.3% 511,035 $ % 5.1% 0 0

46 46 North America Industrial Q Jones Lang LaSalle Orange County Lack of large/quality blocks of space Strong activity by owner/users High demand for modern industrial space New spec in the pipeline Increasing competition for large blocks Dissipating uncertainty There are nearly no large blocks (greater than 100,000 square feet) of Class A space available in Orange County, forcing tenants to explore options in neighboring markets. This lack of supply is encouraging developers to break ground on new construction to meet the high demand for A product. Even though remains low, hovering near 5.0 percent, the Orange County industrial market once again had yet another quarter of positive net. Over the past 12 months, rental rates have shown steady increases due in part to the imbalance of supply and demand throughout the market. The Orange County economy continues to reclaim its strength, especially in the construction sector which spiked this quarter, adding 24,500 jobs over the past 12 months (6,400 of which came from the construction sector). With the economy and the manufacturing sector continuing to grow, overall sentiment is becoming increasingly positive, leading to heightened demand. This will prompt developers to substantially increase construction projects throughout the market over the next year. A large inventory of tenant requirements suggest tenant demand will continue to remain strong through the rest of the year. With minimal and availability, the majority of leasing activity will be in renewals for the remainder of the year and quarters to come. As net continues to remain positive and vacancies drop, landlords are looking to sharply increase rates. This is especially the case in hotter submarkets such as North County, which will see rent appreciation over the next year. 100 Claudina Way, Anaheim Expansion: 205,900 s.f. Tenant: Glenair 58 Discovery, Irvine Buyer: Cornerstone Real Estate Seller: LBA Realty $29.3M 127,000 s.f. $230 p.s.f. in jobs 3.0 m 1.7% 5.1% 0.5 m.s.f. 0.6 m.s.f Plaza Drive, Cypress New lease: 174,000 s.f. Tenant: Hybrid Promotions 7400 Hazard Avenue, Westminster Buyer: Clarion Partners Seller: RREEF America $26.7M 258,000 s.f. $103 p.s.f Corporate Avenue, Cypress New lease: 160,000 s.f. Tenant: Cavotec Dabico US Inc. 9 Holland, Irvine Buyer: CT Realty Investors Seller: The Brookhollow Group $17.8M 187,000 s.f. $95 p.s.f. Market stock (%) net construction industrial 257,729, % 8.2% 794,180 $ % 3.4% 1,098,909 83,078 Leased industrial 150,365, % 8.5% 589,357 $ % 6.9% 0 0 Warehouse & distribution 91,221, % 8.1% 271,475 $ % 6.2% 0 0 Manufacturing 47,516, % 10.4% 321,079 $ % 6.5% 0 0

47 47 North America Industrial Q Jones Lang LaSalle Orlando Tourism Defense manufacturing and research Pharmaceutical manufacturing and distribution Homebuilders and construction e-commerce and air cargo Availability of entitled land net ended the quarter in the positive, realizing occupancy gains of 74,754 square feet. Demand growth slowed during the second quarter in the metro s property sub sectors, warehouse and distribution and manufacturing. Warehouse and distribution space saw positive occupancy gains of 192,506 square feet in the quarter, compared with 693,489 square feet gained in the first quarter. Manufacturing space lost most of the gains made in the first quarter, returning 117,752 square feet of space in the second quarter, compared with a positive 170,779 square foot gain in the first quarter. Almost a fifth of leased manufacturing space is vacant. Although demand growth over the quarter has declined, year-to-date is approaching one million square feet, pushing average asking rates slightly higher. in jobs 2.7 m 1.6% 9.2% 1.2 m.s.f. 1.7 m.s.f. As we look forward, we anticipate steady demand growth for warehouse and distribution space as overall economic conditions improve. More specifically, businesses related to the housing market will be a key driver of growth as the market strengthens. Also, growth in key labor sectors, such as trade, transportation, and utilities will drive further demand for warehouse and distribution space. Demand for manufacturing space continues to remain well below pre-recession levels, and therefore will likely remain a tenant-favorable market for the remainder of Slower growth in China and other significant U.S. trading partners will generate some headwinds for the overall manufacturing sector in the near-term, however, demand will continue to grow as the housing and auto sectors ramp up production L B Mcleod Road New Lease: 50,580 s.f. Tenant: World Electric Supply 2330 Commerce Park Drive Buyer: WCP of Palm Bay LLC Seller: Sutton Properties LLP $4.2M 115,433 s.f. $36 p.s.f Rocket Boulevard Renewal: 50,000 s.f. Tenant: MS Liquidators 1205 Sarah Street Buyer: Oasis Investments Inc. Seller: Industrial Properties Partners $2.7M 52,520 s.f. $52 p.s.f Titan Row New Lease: 35,190 s.f. Tenant: LaserShip 3438 Maggie Boulevard Buyer: Fein Commercial Prop LLP Seller: 33rd Street INDL PA $1.5M 102,800 s.f. $14 p.s.f. Market stock (%) net construction industrial 97,886, % 14.3% 939,022 $ % 0.5% 0 0 Leased industrial 67,130, % 18.7% 835,435 $ % 1.2% 0 0 Warehouse & distribution 57,148, % 17.9% 862,952 $ % 1.7% 0 0 Manufacturing 9,981, % 23.1% -27,517 $ % -0.4% 0 0

48 48 North America Industrial Q Jones Lang LaSalle Palm Beach Rebound in housing market Intermodal transportation links Cheaper real estate Relatively business-friendly environment Build-to-suit opportunities Declining unemployment rate In the second quarter, the year-to-date net was at 378,105 square feet, causing the to decline by 1.3 percent from the previous quarter; however, overall asking rents decreased by 7.1 percent, which suggests that the market is still tenant-favorable. ALDI U.S., an international grocery retail chain has broken ground on an 821,000-square-foot distribution center in Royal Palm Beach. ALDI purchased the 69-acre site for $12.8 million in October Galaxy Aviation has plans to expand facilities at the Palm Beach International Airport, adding 65,000 square feet of hangar. The project will need to be approved by the Palm Beach County Planning Commission. Tite Dri Investments purchased a 33,000-square-foot warehouse/flex building from Bam Holdings for $1.5 million in the Boynton Beach submarket. Growth sectors in Palm Beach include aviation, manufacturing, as well as tiles and furniture distributors. Smaller users (under 30,000 square feet) will continue to dominate the market to lease or purchase industrial warehouse and distribution space. Palm Beach will likely be impacted by the new transportation link with the All Aboard Florida high-speed rail service from downtown Miami to Orlando International Airport. As the local economy and housing market strengthens further, demand for warehouse space is expected to be met by home-building supply firms and furniture distributors. Demand of vacant industrial land is expected to increase in the next few quarters as the region provides plenty of opportunities for build-to-suit and major speculative projects. Speculatively planned inland port projects are expected to make progress. Transportation of cargo via rail is expected to receive a boost from both the private and public sector Park of Commerce Boulevard New lease: 24,000 s.f. Tenant: S&K Worldwide Realty, LLC 3030 Southwest 13 th Place Buyer: Tite Dri Investments Seller: Bam Holdings of Palm Beach $1.5M 33,000 s.f. $47 p.s.f. in jobs 1.3 m 1.9% 6.8% 0.1 m.s.f. 0.1 m.s.f Quantum Boulevard New lease: 18,000 s.f. Tenant: Fitnessmith Commerce Road Buyer: Larry Real Estate Holdings Seller: Scorpio Int l Properties $516K 40,000 s.f. $119 p.s.f. Duke Realty Gateway Center Renewal: 14,400 s.f. Tenant: The Parts House Market stock (%) net construction industrial 22,184, % 11.5% 378,105 $ % -4.3% 821,000 0 Leased industrial 14,602, % 15.8% 339,312 $ % 3.6% 821,000 0 Warehouse & distribution 11,608, % 15.9% 297,357 $ % 3.3% 821,000 0 Manufacturing 2,994, % 15.2% 41,955 $ % 3.9% 0 0

49 49 North America Industrial Q Jones Lang LaSalle Philadelphia / Harrisburg Significant construction activity Tenant requirements greater than 500,000 s.f. Declining blocks of Class A space availability Channel shifts from retail to e-commerce Site challenges Rising transportation and material costs Class A space is still in short supply relative to demand. Additionally, tenant requirements and distribution/retail channel shifts are increasingly demanding tailored building specifications resulting in an optimistic outlook for industrial in the region. Pricing for well located actionable land has increased to record highs and is expected to continue rising as site options dwindle and developers compete for land positions. With more than 8.5 million square feet of active construction including 2.8 million square feet in construction starts, the Philadelphia industrial market is poised to exceed last year s robust construction activity. More than 85.0 percent of active construction is pre-leased. Average quarterly demand exceeds 26.4 million square feet for the Philadelphia Market. E-commerce, manufacturing and 3PL requirements are playing ever increasing roles in the demand structure for the market. Additionally, consumer goods requirements, particularly non-durable, continue to be a driving force for market activity. Construction is expected to continue leading market activity due in part to comparative replacement costs, functional obsolescence, and tightening Class A availabilities. More than 6.7 million square feet of is anticipated to begin within the next three to six months. Further supporting this trend, several land sales throughout the quarter totaled 314 acres. The land is capable of yielding almost 3.4 million square feet of new modern distribution facilities. Expect cap rates to hit record lows as the sale of several major Class A industrial building portfolios loom on the horizon. Class A and B rental rates are expected to continue rising; particularly in some submarkets where Class A vacancies have decreased to near critical lows Route 22 New lease: 550,000 s.f. Tenant: Bridgestone Tires 400 First Avenue Buyer: Duke Realty Seller: USAA 1.0 m.s.f. $63 p.s.f. in jobs 9.7 m 8.3% 9.6% 1.8 m.s.f. 6.9 m.s.f. 40 Logistics Drive New lease: 550,000 s.f. Tenant: Menlo Logistics 5 True Temper Drive Buyer: Industrial Income Trust Seller: LNR Partners 511,760 s.f. $62 p.s.f Commerce Circle New Lease: 503,000 s.f. Tenant: One Kings Lane 6345 Brackbill Boulevard Buyer: Exeter Property Group Seller: ORIX 507,638 s.f. $47 p.s.f. Market stock (%) net construction Industrial 820,181, % 14.8% -1,313,490 $ % -1.5% 8,489,970 70,000 Leased Industrial 526,011, % 19.7% -521,581 $ % -2.2% 6,816,054 70,000 Warehouse & distribution 367,931, % 21.9% -546,256 $ % 0.2% 6,816,054 70,000 Manufacturing 110,281, % 15.0% -537,052 $ % -12.4% 0 0

50 50 North America Industrial Q Jones Lang LaSalle Phoenix Transportation links to California markets Favorable business environment Low natural disaster risk Young, affordable, qualified work force Right-to-work employment environment Large developable land inventory The industrial market experienced an unexpected turn of events as rates increased slightly and net dropped off in the second quarter. This quarter saw the market take a pause as leasing activity fell and tenants remained hesitant to commit to leases. net fell to 293,710 square feet; 1.1 million square feet was absorbed in the first quarter of this year. This drop-off can be attributed to a few large move outs as four tenants in the southwest submarket accounted for approximately 1.2 million square feet of negative net : Home Depot (376,000 square feet), Mor Furniture (323,346 square feet), Mach 1 (262,080 square feet), and Consolidated Terminals (260,140 square feet). In addition to weaker net numbers, industrial deliveries had a big impact this quarter as just over 2.0 million square feet of industrial space was delivered. Although the increased construction activity is a testament to investor confidence in the market, the problem today is the fact that only 15.0 percent of these deliveries were pre-leased. The industrial market, however, was has not completely derailed this quarter as year-to-date net still stands at 1.4 million square feet and total remains below the level seen in the second quarter of last year. Strong employment growth and recovery in the housing market has been steady over the last few quarters but has yet to fully translate into increased demand for industrial product. The majority of tenants currently signing new leases and expanding their operations are involved in the construction industry by either directly building new homes or by supporting the construction efforts. Phoenix s growth trajectory is not expected to slow anytime soon, barring any unforeseen circumstances. This growth should begin to translate into the industrial market soon, although government cut-backs, regulations and macro-economic uncertainty may prove to be obstacles too big to overcome West Roosevelt Street Renewal: 152,600 s.f. Tenant: Summit Warehouse West Broadway Road Buyer: Industrial Income Trust Seller: Lincoln Property Company $77.0M 808,409 s.f. $95 p.s.f. in jobs 4.3 m 2.7% 10.4% 4.4 m.s.f. 5.3 m.s.f South 43 rd Avenue Renewal: 117,075 s.f. Tenant: McLane Foodservice 6825 and 6913 West Buckeye Road Buyer: IIT Acquisitions LLC Seller: Principal Real Estate Investors $44.3M 684,064 s.f. $65 p.s.f South Nelson Road New lease: 95,000 s.f. Tenant: Gila River Indian Community 7885 North Glen Harbor Boulevard Buyer: Barron Lighting Group Seller: Bixby Land Company $4.5M 78,682 s.f. $57 p.s.f. Market stock (%) net construction industrial 246,232, % 14.3% 1,395,316 $ % 2.4% 3,588,026 2,027,304 Leased industrial 154,343, % 19.7% 594,904 $ % 3.0% 1,094,026 2,027,304 Warehouse & distribution 178,427, % 14.9% 750,906 $ % 2.6% 2,139,026 2,027,304 Manufacturing 55,129, % 13.5% 289,952 $ % 3.1% 1,449,000 0

51 51 North America Industrial Q Jones Lang LaSalle Pittsburgh Natural gas exploration & production Value added manufacturing Resilient healthcare & finance sector Relative strength of local economy Second quarter industrial was 8.8 percent, which may encourage speculative construction. Pressure on Class A occupiers of warehouse/distribution space mounts due to lack of available Class A space in excess of 125,000 square feet. Construction project pipeline is growing. Warehouse average asking rents inched upward in the market as a whole. Leasing volumes will remain suppressed and steady as the year progresses; a significant percentage of which will be renewals. Tenants will continue to seek flexibility to allow them to properly navigate the uncertain global economy. Lack of new industrial space will lead to increased build-to-suit activity and ongoing short-term renewals due to limited lease activity. Offering rents will continue to trend upward within key submarkets, such as the North/West, Westmoreland and Washington County. Effective rent trends during the rest of the year will be relatively und from quarter to quarter. As new construction picks up momentum in the West/North submarket, other submarkets will likely follow during Speculative construction will also break ground. Sales volume is expected to be flat, as there is limited quality product available for sale market-wide. 100 Papercraft Park New lease: 211,150 s.f. Tenant: GENCO Supply Chain in jobs 1.8 m 1.3% 11.0% 0.8 m.s.f. 0.4 m.s.f Arch Street New Lease: 85,000 s.f. Tenant: KDL Logistics 5000 Commerce Circle New Lease: 56,800 s.f. Tenant: WireCo WorldGroup 1750 Shenango Road Buyer: Centurion Investments LLC Seller: Al Neyer Inc. $20.0M 410,389 s.f. $49 p.s.f. 140 Hollywood Drive Buyer: RNC Holdings, LLC Seller: Butler County CDC $1.7M 30,000 s.f. $55 p.s.f Norbatrol Court Buyer: Sasi LLC Seller: RDE Land Co. LLC $1.7M 52,000 s.f. $33 p.s.f. Market stock (%) net construction industrial 124,111, % 12.7% 430,936 $ % -11.8% 75,000 0 Leased industrial 82,001, % 16.3% 409,639 $ % 0.0% 75,000 0 Warehouse & distribution 51,722, % 16.4% 355,513 $ % 0.5% 75,000 0 Manufacturing 25,676, % 17.4% 29,861 $ % -14.4% 0 0

52 52 North America Industrial Q Jones Lang LaSalle Portland Manufacturing industry growth Strong trade-sector economy Growing trend of regional distribution centers Diverse pool of small- and mid-size users Appetite for institutional-grade product High-tech industry concentration The Portland metro area unemployment rate was down for the fourth consecutive month; it is down 110 basis points year-over-year. The region experienced a year-over-year employment gain of 23,500 jobs its largest since before the great recession began. In percentage terms, the metro labor market expanded by 2.3 percent in the past 12 months, which is well ahead of the U.S. average of 1.7 percent. Trade, transportation and utilities added 4,200 jobs year-over-year, increasing employment by 2.1 percent. This sector is the largest employer in the region and significantly impacts the industrial market. This quarter was dominated by lease renewals and downsizes in place. A few large spaces were put back onto the market this quarter, most notably a portion Georgia Pacific s space at Rivergate Corporate Center, resulting in a net loss for the market and a bump in. This is expected to be muted as several tenants in the market fall into place over the coming months. While active construction remains limited to owner-user and specialty uses, Capstone Partners announced plans to begin speculative construction in the NE Columbia Corridor on a two-building, 500,000-square-foot distribution center in August. This will create options for tenants in the market for large blocks of high-quality distribution space since there are currently only six options available over 100,000 square feet. Though leasing activity was down during the second quarter, and net was negative, several impending transactions will help push net back into the black for the year. Industrial owners are poised to raise rents and are likely to do so in the very near future. Oregon s strong trade sector economy will continue to propel the Portland area industrial market as the cloud of the great recession recedes further into the past. RivergateCorporate Center Renewal: 402,450 s.f. Tenant: Georgia Pacific Kelly Point Distribution New Lease: 100,000 s.f. Tenant: Purina Animal Nutrition in jobs 2.2 m 2.3% 9.2% 2.8 m.s.f. 1.8 m.s.f. Alderwood Corporate Center II Renewal: 132,284 s.f. Tenant: United States Postal Service Oracle America New lease: 90,792 s.f. Tenant: Oracle America Quad Building Renewal: 131,500 s.f. Tenant: EarthLink Alderwood Corporate Center II New lease: 78,000 s.f. Tenant: OIA Global Logistics Market stock (%) net construction industrial 159,912, % 9.4% -53,865 $ % 7.0% 73, ,008 Leased industrial 125,712, % 12.3% 117,578 $ % 12.0% 73, ,008 Warehouse & distribution 105,411, % 12.6% -34,902 $ % 11.2% 73, ,008 Manufacturing 20,300, % 10.9% 152,480 $ % 8.1% 0 0

53 53 North America Industrial Q Jones Lang LaSalle Reno/Sparks Tenant-favorable market conditions Few options for large block space No speculative in the pipeline Positive year-over-year job growth Leverage slowly shifting to landlords Segmented recovery Availability varies across submarkets, but there was an overall collective improvement. TRIC softened to 10.6 percent, while Central Reno and Sparks are the softest submarkets at 13.3 percent and 3.0 percent, respectively. South Reno shed over 1.0 percent to 11.3 percent. Net losses were lower this quarter, with 150,524 square feet put back onto the market. This is an improvement from first quarter s negative 442,031 square feet. Most large block space is being quoted at an average of $3.36 per square foot, on a NNN basis. Smaller spaces from 25,000 to 100,000 square feet average $5.25 per square foot, on a NNN basis. There is one building under construction in TRIC, the majority of which is pre-leased to Randa. Rates vary based upon area, building condition, power, clear height, loading and other factors. Overall, there has been little quarter to quarter. Three of the quarter s larger transactions were leases to TREX for 337,500 square feet in Fernley and Mars Petcare for 255,000 square feet in TRIC, and Apple s purchase of 345 acres near TRIC, 7 miles East of Sparks E. Newlands, Fernley New Lease: 337,500 s.f. Tenant: TREX Industries in jobs 0.4 m 0.1% 13.2% 0.4 m.s.f. 0.6 m.s.f Industry Circle, Reno New lease: 224,000 s.f. Tenant: Diversified Distribution 4900 Ampere, Reno New Lease: 83,765 s.f. Tenant: Stajac Industries The market is projected to endure a long-bottoming cycle. There is a strong chance premiums will be paid by large users for large blocks of space, since they may have few alternatives and may require a build-to-suit at current construction costs. While construction costs are down, they are not to the level of what can be achieved leasing constructed product. There are no speculative buildings on Reno s horizon. Leverage is shifting from the hands of the tenants to those of the owners due to, costs for tenant improvements, and s in the credit markets, as well as s to the credit worthiness of tenants. Overall, Reno is likely to muddle through the next few years. Other than the unknown of big box space and macro economic s, it will remain a tenant favorable market for the next 12 months. East Sparks Buyer: Apple Computer Seller: Reno Technology Park $8.5M ac. $0.57 p.s.f. 645 Edison Way Buyer: Dan Hamilton (private) Seller: Dale McKenzie (private) $6.9M 94,482 s.f. $73 p.s.f Stead Boulevard Buyer: Sierra Packaging Seller: QuadGraphics Inc. $6.0M 181,603 s.f. $33 p.s.f. Market stock (%) net construction industrial 74,426, % 16.1% -592,555 $ % -1.9% 525,000 0 Leased industrial 54,523, % 17.8% -713,144 $ % -1.1% 525,000 0 Warehouse & distribution 46,703, % 18.0% -483,482 $ % -0.6% 525,000 0 Manufacturing 4,916, % 16.1% -592,555 $ % -1.9% 0 0

54 54 North America Industrial Q Jones Lang LaSalle Richmond Above average state & local incentives Highly skilled, low cost labor force Developing high-tech manufacturing Low cost of living Proximity to Port of Virginia and DC Major rail and interstate hub The two Amazon facilities delivered in the third and four quarters have placed Richmond on the map for large distribution centers and generated interest from developers and investors seeking large plats of land, particularly in the East End and Hanover submarkets. Overall leasing activity declined during the second quarter as signed deals fell more in line with Richmond-sized requirements, between 10,000 and 40,000 square feet. Owner-user purchases were still widely considered in the second quarter due to a closing window of extremely low borrowing costs. No new projects broke ground in the second quarter besides Rolls Royce s 90,000-square-foot manufacturing facility in Prince George County. Several large-scale projects were also in proposal status for the second quarter. Increased port traffic and partial clarity to fiscal & political uncertainty will boost demand for industrial space in the next year. Expect increased demand from 3PL, construction and retail firms. Richmond s less competitive inventory will weigh on rental rate appreciation, as occupiers seek out more modern options and build-to-suit opportunities. New construction will be limited to build-to-suit; speculative construction may come online mid Sales volumes will be driven by portfolio sales and owner-user transactions. Historical rehabs have chipped away at the overall inventory; however, current options are limited, resulting in fewer residential and commercial re sales Shell Road Renewal: 43,210 s.f. Tenant: Magellan Systems Potomac Realty Portfolio Buyer: Blackstone Group Seller: Potomac Realty Investment $241.5M 4.1 m.s.f. $60 p.s.f. in jobs 1170 N Lakeridge Parkway Renewal: 41,540 s.f. Tenant: Mygrant Glass Company 1420 Justice Road Buyer: Stewart Moving & Storage Seller: CFB Properties, LLC. $2.6M 30,000 s.f. $85 p.s.f. 1.3 m 1.0% 8.9% 0.1 m.s.f. 0.1 m.s.f Deepwater Terminal Road Relocation: 25,000 s.f. Tenant: American Pallet Company 500 Trampton Road Buyer: Trampton Properties, LLC. Seller: to Swift Air Real Estate, LLC $2.4M 61,552 s.f. $39 p.s.f. Market stock (%) net construction industrial 78,126, % 16.2% 1,301,329 $ % -1.8% 90, ,730 Leased industrial 47,508, % 25.0% 924,719 $ % -0.7% 90, ,730 Warehouse & distribution 37,908, % 22.5% 769,406 $ % 1.4% 90, ,730 Manufacturing 9,600, % 35.1% 155,313 $ % 5.9% 0 0

55 55 North America Industrial Q Jones Lang LaSalle Sacramento Sales-, service-related users Availability of Class A product Big box demand Relatively business-friendly environment Stabilized asking lease rates Improving economic fundamentals Strong leasing activity and positive across-the-board contributed to one of the strongest growth quarters on record since Year-to-date net is just shy of 2.0 million square feet. Large corporate occupiers continue to drive demand for big blocks of available space, however, availability is growing slim. There are only four available Class A options offering 250,000 contiguous square feet or greater across the Sacramento market. Of those four, only one would be considered an ideal contender for a potential logistics or distribution user. Small- and medium-sized businesses have also been gaining steam over the past six months. An increase in new space requirements and touring activity is a telling sign these businesses are gaining confidence in broader economic fundamentals and looking to grow and expand their businesses. The uptick in positive leasing activity has led to modest increases for asking lease rates across all product types. Class A distribution rents have increased the most of the last 12 months, gaining nearly 6.0 percent from lease rates during the second quarter of While tenants continue to have the upper hand across secondary submarkets and product types, a diminishing supply of Class A space and increasing lease rates have helped landlords regain ground in primary submarkets like West Sacramento and Northgate. User sales have been a significant driver for single tenant industrial space in recent quarters, thanks to the availability of SBA financing. However, the lack of supply for stand-alone warehouse space will increasingly push many would-be buyers out of the market and into short-term leases as they wait for suitable options to become available. Growing big box demand across Northern California has caused some developers to consider the need for speculative construction; however, it is unlikely any projects will break ground in Sacramento in the next months. 280 N Pioneer Avenue Renewal:: 200,000 s.f. Tenant: Rite Aid 221 Hanson Way & 2222 East Beamer Street Buyer: E&E Linens Seller: StratREAL $32.0M 802,664 s.f. $40 p.s.f. in jobs 2.2 m 1.3% 11.9% 1.0 m.s.f. 0.8 m.s.f Tide Court Renewal: 91,445 s.f. Tenant: Euramax 8388 Rovana Circle Buyer: Carmel River Stables Seller: Westcore Properties $3.0M 72,000 s.f. $42 p.s.f Reed Avenue Relocation: 52,800 s.f. Tenant: AES Market stock (%) net construction industrial 160,523, % 15.8% 1,958,250 $ % 5.0% 0 201,211 Leased industrial 99,705, % 19.3% 469,442 $ % 5.6% 0 131,211 Warehouse & distribution 78,476, % 19.7% -132,182 $ % 6.3% 0 131,211 Manufacturing 13,739, % 20.5% 462,567 $ % 11.3% 0 0

56 56 North America Industrial Q Jones Lang LaSalle Salt Lake City Crossroads of the West I-80 and I-15 Low power rates with manufacturing e-commerce Sports and outdoor products Utah was named Forbes Best State for Business for a third straight year. This is due to companies benefiting from energy costs that are 29 percent below the national average. Also, Utah s economy has expanded at 2.3 percent a year over year the past five years. Attractive occupancy costs, affordable labor, and a low cost of living are all forces driving demand for warehouse/distribution space. Demand continued at a solid pace, driven by manufacturing, retail and third-party logistics companies. This is due to Salt Lake City being a primary logistics hub. Due to large demand for Class A bulk distribution rental rates are increasing. Flex space demand is increasing and rents are starting to tick up accordingly. Freeport West, Price Realty Group, and IIT have been active with speculative construction and their risktaking is being rewarded. They have 1.4 million square feet of recently completed stock that was 70 percent preleased upon delivery. There is minimal industrial land remaining within the Salt Lake Valley. The Great Salt Lake to the west and the Wasatch Mountains to the east limit the amount of land that can be developed. Prices in the North West Quadrant are increasing to $5.00 per square foot. IDI, Freeport West, and EJM are in good land positions to capitalize on build-to-suit activity. Leasing volumes will continue to accelerate over 2013 as confidence continues to strengthen. Tenants will continue to take their time in making decisions, however, tightening supply of space will create a new sense of urgency and require them to make quicker decisions. In order to receive more competitive lease economics, tenants in the market are beginning to be more willing to enter into longer-term leases. The gap will tighten between asking and effective rates throughout Investment sales activity is at its peak since the recession which will continue during West 1525 South New Lease: 209,107 s.f. Tenant: Sportsman s Warehouse West 300 West Buyer: IIT Acquisitions, LLC Seller: Buzz Oats $47.5M 760,266 s.f. $63 p.s.f. in jobs 1.1 m 3.1% 4.9% 2.4 m.s.f. 2.4 m.s.f South 4800 West Sublease: 173,040 s.f. Tenant: Contacts,Inc South Prosperity Road Buyer: Boeing Seller: KraftMaid $35.0M 867,494 s.f. $40 p.s.f West California Avenue Renewal: 110,697 s.f. Tenant: CarQuest 1833 South 3850 West Buyer: Blue Chip/P & J Seller: RWK Investments $7.0M 145,889 s.f. $48 p.s.f. Market stock (%) net construction industrial 176,214, % 7.7% 1,352,876 $ % -0.5% 484,500 0 Leased industrial 136,249, % 9.4% 935,110 $ % 5.1% 484,500 0 Warehouse & distribution 96,485, % 10.6% 722,504 $ % 5.1% 484,500 0 Manufacturing 30,419, % 6.2% 240,203 $ % -1.4% 0 0

57 57 North America Industrial Q Jones Lang LaSalle San Antonio Diverse, counter-cyclical business sectors Proximity to major interstate highways Corporate manufacturing activity Eagle Ford Shale activity Business-friendly environment Attractive local and state incentives Leasing The San activity Antonio has labor been market vigorous added throughout approximately the year, 12,500 with jobs in the now past down 12 months more than and is 300 growing basis at points an annual from rate the of same 1.4 percent. period last year A San new Antonio study boasted by Forbes a 5.4 named percent San unemployment Antonio the fourth rate best this city quarter, for manufacturing declining slightly jobs, from with last five-year quarter growth and remaining this sector well below topping the 11 state percent value of 6.5 percent and the national value of 7.6 percent. Construction CNNMoney recently is steady, named with only San one Antonio new the project 5 th most delivered business-friendly the third quarter city in the a country, new facility with for low an taxes and affiliate regulation of Caterpillar, cited among Inc. A its handful key attributes. of projects are slated for delivery in the next few months, and new In product May, the coming housing online market is nearly experienced 100 percent a 5-year pre-leased. high in sales volume, while pricing has seen double digit Average percentage asking rents increases rose again the in last the 12 third months. quarter, demonstrating consistent growth over the last few quarters. Leasing activity remains concentrated in the northern submarkets and outlying counties. The Eagle Ford Shale continues to drive strong, and significant vacancies in the industrial market are growing scarce. With limited availability in existing industrial projects and high preleasing requirements at most proposed s, Leasing volume tenants has grown in the throughout market are the increasingly course of the exploring year, as build-to-suit tenant confidence options. has grown in the local Amazon s market. However, massive, lease 1.2-million-square-foot concessions remain fulfillment commonplace center as in Schertz the market comprises continues the a majority slow and of steady San recovery Antonio s from current the industrial national recession. pipeline and is anticipated to complete construction at the end of Most this year. of the recent deliveries, as well as current construction, have been concentrated in the northern area of the city, where leasing and corporate activity are robust. Local activity among some industrial titans is strong, with Caterpillar, Toyota and Boeing grabbing headlines and ramping up local business in recent months. Sales volume has yet to show a significant increase, and substantial activity is not expected until early to mid-2013, at the earliest. 655 Richland Hills Drive New: 80,000 s.f. Tenant: Visionworks Rittman Industrial Park Buyer: Atlas CP Seller: DCT Industrial Trust 1,176,582 s.f. Undisclosed price in jobs 1.4 m 1.7% 8.3% 1.5 m.s.f. 1.6 m.s.f Currency Street New: 69,120 s.f. Tenant: Presidio Manufacturing Willow Springs Park Buyer: Bhch Mineral Ltd Seller: Dayton Conklin $2.4M 37,420 s.f. $64 p.s.f. Green Mountain Business Park 2 New: 48,300 s.f. Tenant: Dayhill Industries Market stock (%) net construction industrial 87,817, % 10.8% 312,863 $ % 1.6% 3,099,691 32,000 Leased industrial 67,943, % 11.3% 394,683 $ % 1.1% 3.099,691 32,000 Warehouse & distribution 44,340, % 12.0% 311,955 $ % 1.5% 2,579,691 32,000 Manufacturing 14,720, % 10.4% 144,501 $ % 3.0% 0 0

58 58 North America Industrial Q Jones Lang LaSalle San Diego Educated workforce continues to expand as region sees encouraging employment growth Lack of affordable and developable land Proximity to border encourages trade and manufacturing opportunities Smaller-box market caters to local tenant mix San Diego s recovery continues to gain momentum. Fueled by continued job creation, especially in the engineering, scientific, and R&D subsectors, the San Diego economy is picking up steam as these industrial-product users are leading the encouraging employment s. Professional and business services saw the greatest year-over gain, adding 5,600 jobs to the region. Trade, transportation, and utilities, a subsector most directly associated with industrial users, gained 2,000 jobs in the same 12- month period. Vacancy for San Diego s overall industrial market continued its decline; flex/r&d saw the greatest decrease from last quarter, falling 40 basis point to 12.9 percent. Manufacturing product saw a slight uptick in to 8.4 percent. Warehouse space continues to be of interest to many investors; nearly all of this quarter s sales were warehouse/distribution space and this optimistic trend suggests that many investors are banking on continued demand growth for these properties. With virtually no new spec in the pipeline for San Diego s industrial market, tenants will have to choose among existing properties to meet their needs. However, as firms continue to expand, occupier s growing requirements will help push rates even lower, propelling San Diego further along its road to recovery Nancy Ridge Drive Renewal: 42,158 s.f. Tenant: Freeman Decorating Services in jobs 3.1 m 1.6% 7.0% 1.2 m.s.f. 1.1 m.s.f Thornmint Road New lease: 22,246 s.f. Tenant: Bernardo Moving McGrath Commerce Center New lease: 19,614 s.f. Tenant: Upwind Solutions Overall industrial rents have not recovered to historic peak levels, but with the supply-constrained conditions and growing demand for space, especially in warehouse and manufacturing product, rents are expected to continue towards pre-recession peaks. Though the rate of recovery has been unsatisfactory for many industrial owners, basic market fundamentals such as the decreasing rate and mild increases in rents set San Diego s stage for measured growth and recovery in the next 12 to 18 months. Market Four Points Business Park Buyer: Brookwood Financial Partners Seller: Four Points Partner $21.2M 124,649 s.f. $170 p.s.f. La Pacifica I Buyer: SR Commercial Seller: La Pacifica LP, Darrell Issa $19.8M 226,220 s.f. $88 p.s.f. Palomar Airport Business Park Buyer: Focus Real Estate Seller: Oceanside Glasstile Co. $4.8M 47,762 s.f. $101 p.s.f. stock (%) net construction industrial 127,986, % 11.9% 158,478 $ % 1.5% 31,246 59,815 Leased industrial 92,367, % 14.8% 206,802 $ % 1.5% 0 0 Warehouse & distribution 65,547, % 13.2% -47,639 $ % 0.0% 31,246 0 Manufacturing 52,026, % 11.8% 107,950 $ % 5.9% 0 0

59 59 North America Industrial Q Jones Lang LaSalle Seattle Construction and manufacturing job growth Port activity and TEU volumes Strong institutional investor interest Large and medium box users Land constraints Limited recent construction The economic situation improved in the Puget Sound region during the quarter. The unemployment rate in King County dropped to 4.4 percent and the most recent employment forecast from the Puget Sound Economic Forecaster calls for employment growth of 2.8 percent in 2013, substantially higher than the growth expected nationwide. Growth is anticipated to remain at an impressive rate of 2.6 percent in Economic growth has propelled the metro area to the 23 rd strongest economy in the U.S. and in a recent report released by the U.S. Chamber of Commerce the State of Washington was ranked as the seventh-best state for starting a business with the sixth-strongest overall economic performance. Trade, transportation and utilities as well as a strong manufacturing sector are propelling the industrial market. In addition, construction has been a strong driver of economic expansion in Puget Sound within the past year. With a rebounding housing market, an abundance of large infrastructure projects as well as new office and industrial, the outlook for construction jobs in the near future looks positive. Strengthening imports and exports at the Ports of Seattle and Tacoma are helping to drive the local industrial market primarily in the aerospace, food/beverage and logistics industries. The pace of and leasing activity in the Puget Sound industrial market remained strong by the quarter s end, and tenants appetite for space remained significant. Vacancy dropped 40 basis points in the second quarter and year-to-date totals are positive in general. As a result of the tightening market, very few options currently exist for large users and many large tenants are holding off on executing new, long-term leases until new hits the market later this year and early next. The wait should not be too long however, with significant new on the horizon. Demand for state-of-the-art big box is driving construction and pre- activity, with over 5.0 million square feet currently under construction and another 1.9 million square feet expected to break ground in Developers are positioning themselves to capture build-to-suit opportunities. There are a significant number of new developers shopping the market for land and other opportunities. Market demand remains consistently strong in Seattle, with stable tenant activity from small- to midsized tenants and rising demand for Class A facilities. Vacancy is expected to level as new supply hits the market to accommodate ongoing user demand. Pacific Gateway Business Park Renewal: 265,000 s.f. Tenant: Pacific Distribution Services Northwest Corporate Park Buyer: KTR Kent Valley LLC Seller: CalSTRS $170.0M 857,700 s.f. $128 p.s.f. in jobs 3.8 m 2.5% 6.5% 2.6 m.s.f. 2.8 m.s.f. Auburn 18 New: 157,000 s.f. Tenant: Uline Reeb Millwork Buyer: Baumann Family Investment Seller: Reeb Millwork Corp $7.9M 97,373 s.f. $81 p.s.f. Oakesdale Business Campus New: 117,000 s.f. Tenant: Saddle Creek Logistics Ahlstrom Building Buyer: Morwenstow LLC Seller: Ahlstrom Properties, LLC $2.5M 21,900 s.f. $113 p.s.f. Market stock (%) net construction industrial 253,757, % 9.1% 2,048,722 $ % 4.5% 5,172,026 0 Leased industrial 164,896, % 9.7% 1,861,262 $ % 1.7% 5,172,026 0 Warehouse & distribution 133,648, % 9.5% 1,579,286 $ % 1.9% 5,172,026 0 Manufacturing 31,248, % 10.7% 281,976 $ % 2.6% 0 0

60 60 North America Industrial Q Jones Lang LaSalle South Bay / Silicon Valley Rapid employment growth Strong business environment Regional distributors Growing for-sale housing demand Local manufacturers Supported by regional distributors and local businesses, the local industrial market moves in tandem with the regional economy. Strong employment growth and one of the lowest unemployment rates in the state are boosting economic fundamentals and lending to steady demand for industrial space. Vacancy remained low at just above 7.0 percent, and it will likely remain near that level as there are few quality options for growing tenants to choose from. Leasing velocity slowed in the first half of the year for the same reason. Tenants have few spaces from which to choose, which may result in stagnant market conditions over the next few quarters. While net was positive during the first quarter, second quarter experienced more than 218,000 square feet of negative net. This was a result of several small move-outs and consolidations and not indicative of a downturn in the market. Rent growth continued at a torrid pace during the quarter. Landlords are increasing asking rates as they take advantage of low and strong demand from all industries, including high-tech. Investors are focused on flex / R&D properties in an effort to capitalize on strong high-tech industry growth. Investor interest in warehouse / distribution space has been less robust, but a few smaller sales of that property type for occupancy purposes occurred during the quarter Rogers Avenue New lease: 26,840 s.f. Tenant: Excellence Flooring in jobs 1.8 m 2.9% 8.4% 0.1 m.s.f. 0.1 m.s.f East Trimble Road New lease: 25,155 s.f. Tenant: Sanmina Montague Expressway New lease: 20,900 s.f. Tenant: Henry Avocado Healthy economic conditions should continue to boost demand from the local business segment, while more sophisticated distributors will have trouble securing appropriate space in this market. Rents will continue their upward climb, driven by steady demand and lack of available space. No new warehouse / distribution s are in the pipeline, but if demand continues at this pace, several plans could come to light in the next few quarters Madrone Parkway Buyer: Del Monaco Foods Seller: Nearon Enterprises $9.0M 126,378 s.f. $71 p.s.f Bering Drive Buyer: Robert Shibata Seller: Pomfret Estates $5.4M 62,054 s.f. $87 p.s.f. Market stock (%) net construction industrial 50,118, % 11.0% -213,689 $ % 2.1% 0 0 Leased industrial 40,180, % 13.4% -281,321 $ % 0.4% 0 0 Warehouse & distribution 28,444, % 15.9% -351,443 $ % 0.4% 0 0 Manufacturing 11,735, % 7.5% 70,152 $ % 9.9% 0 0

61 61 North America Industrial Q Jones Lang LaSalle St. Louis Consumer products companies Tight conditions in the Metro East and St. Charles County New investors 3PLs General Motors Sales activity increased in the second quarter with several owner-occupiers making purchases and one big-box facility trading. The second quarter had positive largely due to the completion of P&G s 482,000-square-foot expansion in the Metro East. Rising retail and auto sales across the country are leading to increased hiring announcements and new construction by local industrial employers. GM, FedEx and West Star Aviation have all announced expansion plans. This will be GM s second recent expansion and FedEx will operate a new FedEx ground facility. The expansions not only lead to more occupied industrial space but they also have a positive impact on the construction industry, which itself is also an occupier of industrial real estate. Large big-box spaces remain limited with only two modern bulk facilities having over 400,000 square feet vacant. In St. Charles County the modern bulk market is completely leased. Tenants searching for space in the submarket may start looking at space across the Missouri River in areas such as Earth City and Hazelwood. While the St. Louis industrial market has continued to improve, exports in the region are up 62.2 percent since Gateway Commerce Center Drive New: 297,000 s.f. Tenant: Unilever in jobs 2.8 m 0.7% 7.6% 0.4 m.s.f. 0.5 m.s.f. FedEx Building Build to Suit: 181,000 s.f. Tenant: FedEx 333 Rock Industrial Drive New lease: 123,000 s.f. Tenant: GPO Employment in industrial-occupying sectors is showing a steady increase and is being lifted by the trade, transportation and utilities sector. Mining, logging and construction is also improving and has added more jobs in 2013 than in the same period of 2012 according to the most recent data from the Bureau of Labor. Sales activity will continue to build with several bulk and modern bulk buildings trading in the second half of the year Lakeview Corporate Drive Buyer: Duke Realty Seller: USAA $25.3M 540,000 s.f. $47 p.s.f. 851 Vossbrink Buyer: Melton Machine and Control Seller: Harman International $2.9M 89,484 s.f. $32 p.s.f Cassens Drive Buyer: Wilsons Structural Steel Seller: General Electric $2.5M 41,575 s.f. $60 p.s.f. Market stock (%) net construction industrial 221,311, % 13.1% 441,246 $ % -2.0% 408, ,000 Leased industrial 119,552, % 20.5% 824,631 $ % -3.1% 0 482,000 Warehouse & distribution 90,891, % 22.6% 744,226 $ % -4.2% 0 482,000 Manufacturing 23,195, % 14.7% -12,829 $ % 7.3% 0 0

62 62 North America Industrial Q Jones Lang LaSalle Tampa Bay Increase in housing starts Hospital and medical equipment manufacturing and distribution e-commerce distribution and air cargo Intermodal transportation links Availability of entitled land net stands at a positive 1.2 million square feet, with 835,832 square feet removed from the market in the second quarter. During the quarter, 152,500 square feet of warehouse and distribution space was delivered to the market, while total warehouse and distribution space increased occupancy by 92,406 square feet. Manufacturing space explained over half of the gains in total net in the quarter, increasing occupancy levels by 743,426 square feet. These gains were mainly concentrated in the Manatee-Sarasota submarket where 533,332 square feet of manufacturing space was removed from the market. Despite declines in rental rates over the quarter, rental rates continue to post year-over-year gains, with the exception of manufacturing space. industrial space saw a 1.7 percent year-over-year increase, while total leased industrial space recognized a 2.5 percent year-over-year increase in asking rates. As housing and labor market fundamentals continue to strengthen, we expect to see further increases in leasing and sales activity for small- to medium-sized industrial spaces over the next two quarters. As businesses expand their payrolls and space requirements, this will likely increase the demand for industrial space. Build-to-suit is likely to be the dominant option going forward as demand has not picked up enough to spur spec. Wary investors will likely prefer built-to-suits in the near term as well until they gain more confidence in the overall economy. Furthermore, rental rates are still well below their 15-year average of $4.65 per square foot, as well as $1.73 per square foot below their pre-recession peak Gateland Drive Renewal: 83,200 s.f. Tenant: Land O Lakes Purina Feed LLC th Avenue North Buyer: Mdl 1 LLC Seller: Medline INDS Inc. $3.2M 107,500 s.f. $30 p.s.f. in jobs 3.4 m 2.9% 7.9% 1.9 m.s.f. 2.5 m.s.f Massaro Boulevard New lease: 44,100 s.f. Tenant: Craft Equipment 4023 Sawyer Road Buyer: 4023 Sawyer Road, LLC Seller: Brazos XX,LLC $2.6M 75,163 s.f. $35 p.s.f North U.S. Highway 301 Renewal: 34,341 s.f. Tenant: Stainless Steal Screw Co Commerce Place Buyer: Staybull Flooring LLC Seller: All Wood Furniture Center Inc. $1.0M 69,940 s.f. $15 p.s.f. Market stock (%) net construction industrial 180,557, % 15.4% 1,180,218 $ % 1.7% 0 152,500 Leased industrial 117,926, % 20.5% 1,387,204 $ % 2.5% 0 152,500 Warehouse & distribution 94,756, % 20.7% 975,665 $ % 2.0% 0 152,500 Manufacturing 23,170, % 19.4% 411,539 $ % -1.7% 0 0

63 63 North America Industrial Q Jones Lang LaSalle Washington, DC Renewed housing starts has led to demand from home builders and related tenants Data center and airport growth in the Dulles Corridor of Northern Virginia Job growth gained momentum in the second quarter with unemployment in the Washington, DC region falling to just 5.0 percent, its lowest point since Investment activity picked up in the second quarter with the closing of several portfolio sales and individual buildings. IndCorp Properties closed on a $241.5 million industrial portfolio acquisition from First Potomac Realty Trust. The portfolio spanned from Hampton Roads to Baltimore representing approximately 2.6 million square feet, with over 900,000 square feet in the Washington, DC market. Development continued to focus on Prince George s County in suburban Maryland, however, several developers are seriously considering new starts in the Dulles Corridor. A lack of Class A product and reduced demand from the federal government led to sluggish net in suburban Maryland. The lack of construction in Northern Virginia has helped to generate tight market conditions, especially in the Dulles North submarket where the rate for warehouse & distribution space has fallen to below 10.0 percent Alaking Court New lease: 92,153 s.f. Tenant: White Cap Construction in jobs 5.6 m 0.9% 13.7% 0.3 m.s.f 0.6 m.s.f 7959Wellingford Drive New: 21,880 s.f. Tenant: Potomac escrap 841 S Pickett Street New: 19,222 s.f. Tenant: Direct Path Corporation Sequestration and reduction in federal spending will likely weigh on the industrial market in the coming year due to reduced demand from the GSA and uncertainty in the federal government contractor community. Development activity in Northern Virginia and the Dulles Corridor may pick up in the coming quarters as the market continues to tighten and tenant demand remains in the pipeline John Marshall Highway Buyer: COPT Seller: First Potomac Realty Trust $17.5M 236,000 s.f. $74 p.s.f. Inglewood Tech Center Buyer: Atapco Properties Seller: New Boston Fund $17.0M 256,877 s.f. $66 p.s.f Port Royal Road Buyer: AMERCO Real Estate Seller: Oxford Life Insurance Co. $8.0M 109,000 s.f. $73 p.s.f. Market stock (%) net construction industrial 92,904, % 13.3% 188,240 $ % 2.1% 409, ,169 Leased industrial 69,218, % 16.1% 174,492 $ % 1.9% 409, ,169 Warehouse & distribution 57,020, % 16.5% 229,637 $ % 2.3% 409, ,169 Manufacturing 4,143, % 20.1% -85,892 $ % 6.3% 0 0

64 64 North America Industrial Q Jones Lang LaSalle Canada

65 65 North America Industrial Q Jones Lang LaSalle Canada Canadian economy The outlook for Canada s economy remains blurred given what we have seen thus far in Many remain optimistic as the once precarious housing market seems primed for a soft landing and the perpetual concerns in Europe and the United States have shown signs of easing. That said, many are still preaching conservatism regarding Canada s prospects as projections show GDP growth of just 1.9 percent for the remainder of the year. Optimists point to the 95,000 jobs added in May as a sign of an economy on the upswing. Economists are hopeful regarding job growth with projections calling for a 6.9 percent unemployment rate by the end of 2013 and a 6.5 percent rate by the end of Furthermore, retail sales increased by 0.1 percent in April, which represents the third straight month with no decrease in this figure. The most promising figure might be the 13.8 percent jump in housing starts in May. This seems particularly encouraging when you consider the aforementioned figure was buoyed by a 111 percent jump in Atlantic Canada and a 46 percent jump in Ontario. That said, the Canadian dollar has dipped to its lowest value in 21 months due to decreasing commodity demand, the Fed s anticipated withdrawal of quantitative easing and a rebounding American economy. Uncertainty arose this quarter regarding Mark Carney s resignation and Stephen Poloz s appointment as Governor of the BOC and its subsequent impact on monetary policy domestically. While it s too early to say with absolute certainty, early suggestions indicate no significant s should be expected. With headline CPI below the 2 percent threshold, economists predict the bank will maintain its current level of interest rates for the remainder of 2013.

66 66 North America Industrial Q Jones Lang LaSalle Greater Toronto Food manufacturing Automotive Warehousing / retail distribution centers Overall demand for industrial space in the Greater Toronto Area (GTA) cooled down in the second quarter, driving availability rates up 40 basis points to 5.0 percent. Leasing activity in the GTA continues to be driven by 3PL groups, consumer goods, and large retail firms. Despite experiencing negative this quarter, GTA West industrial net remained positive, due in part to new and extended big box deals in Milton to high-profile tenants such as Amazon, Reckitt Benkiser and RockTenn. Overall net asking rates remained relatively stable compared to last quarter, while modern product with clear heights above 32 feet continue to demand net rents above the $6.00-per-square-foot mark. There is still a considerable delta between asking rates and achieved rates. The investment market was once again dominated by activity in the GTA West, with Mississauga and Brampton alone recording volumes in excess of $260.0 million and $175.0 million, respectively. Supply is on the rise, with over 4.0 million square feet of construction to be completed by the fourth quarter of The majority of this construction is located in the GTA West. Tenants overall business sentiment seems to be to maintain lease flexibility. Tenants in the market are looking for short term deals (between 3 to 5 years) with the ability to terminate. Rental rate growth is expected to increase by 5.0 percent over the next four quarters. The slight discount of the Canadian dollar to the U.S. dollar is aiding manufacturing output and exports. We expect this recent reversal of monetary valuation to continue Peddie Road New lease: 375,241 s.f. Tenant: Amazon 100 Alfred Kuehne Boulevard Buyer: KingSett Capital Inc. Seller: Orlando Corporation $66.5M 1.0 m.s.f. $66 p.s.f. in jobs availability Value of industrial building permits (YTD) 6.0 m 0.3% 5.3% 2.9 m.s.f. $319.4M 121 Stone Ridge Road New lease: 233,343 s.f. Tenant: ATS Andlauer Transportation Services 5055 Satellite Drive Buyer: PIRET Seller: GE Capital $26.0M 151,745 s.f. $171 p.s.f. 835 Syscon Court Renewal: 111,683 s.f. Tenant: Bericap 25 Precidio Court Buyer: Ital Pasta Seller: Magna International $10.6M 131,632 s.f. $81 p.s.f. Market Submarket stock net Average net asking Largest contiguous option for lease Largest contiguous option for sale Toronto Central 265,454, % - 500,266 $ % 10.4% 531, ,090 Toronto East 46,962, % - 564,376 $ % 7.7% 313, ,281 Toronto North 176,267, % 504,775 $ % - 2.0% 306, ,958 Toronto West 365,877, % 531,975 $ % 5.3% 728, ,100 Market s 854,561, % - 27,892 $ % 5.0% 728, ,100

67 67 North America Industrial Q Jones Lang LaSalle Montréal Relocations of big firms headquarters The aerospace industry Government tax credit programs (R&D) Acquisitions in the life-science industry Major infrastructure projects Demand for premium distribution centers Greater Montréal Area (GMA) industrial fundamentals improved in the second quarter of the year. Increased leasing activity was recorded across several markets, however overall ended with negative 399,814 square feet which is still a considerable improvement when compared to the 1.6 million square feet of negative net recorded in Q The East-End and West-Island industrial submarkets strengthened slightly with increased as opposed to the Midtown North, Midtown South, Lachine and Saint-Laurent submarkets which all had reduced demand for industrial space. An increase in the industrial inventory in the GMA put pressure on the overall availability rate which rose to 7.1 percent, up from 6.8 percent in Q Demand for modern single-tenant buildings with high ceilings, 24-foot and above, and within close proximity to highways remained strong putting pressure on asking rates which rose to $5.37 per square foot net and $8.49 per square foot gross. With current low interest rates, some tenants have shifted their focus on shorter real estate commitments in anticipation of volatile interest rates. For instance, many logistics companies will likely reduce their overall risk by shortening their lease terms. Changes in the supply chain and logistics field are introducing modifications to the way that distribution centers and warehouses are designed. In the near future, tenants will look for more cost-effective space with increased ceiling heights and energy saving features. The completed extension of Highway 50 will be a key element for the industrial in the Laurentides region; the highway will provide great access to a new industrial project ($17 million) in Lachute that will have 150,000 square feet of leasable space. Tenants looking for large space with a clear height above 24 feet will continue to look at built-to-suit options off island in suburban areas Trans-Canada, Kirkland Renewal: 158,000 s.f. Tenant: Simmons Canada Inc Francis Hughes, Laval Buyer: Canada Inc. Seller: Standard Life $6.9M 95,137 s.f. $73 p.s.f. in jobs availability 2900 André, Dorval Renewal: 101,800 s.f. Tenant: La Senza Co. Ltd Trans-Canada Highway, Dorval Buyer: A. Derv Inc. Seller:1330 Trans-Canada Investment Ltd. $6.5M 86,181 s.f. $75 p.s.f. Value of building permits 4.0 m 2.1% 6.7% 0.1 m.s.f. $554M 6445 Côte-de-Liesse, Saint- Laurent Renewal: 49,546 s.f. Tenant: SECE Apparel Co. Ltd Henri-Bourassa, Saint-Laurent Buyer: Montoni Constructions Seller: Wabtec Canada Inc. $5.1M 114,260 s.f. $44.20 p.s.f. Market Submarket stock Quarterly Average net asking rent ($ p.s.f.) in net rent in net rent Largest contiguous available option for lease Largest contiguous available option for sale Montreal Midtown North 52,667, % -51,785 $ % 0.2% 180,000 56,235 Montreal Midtown South 24,940, % 46,012 $ % 2.0% 290, ,000 East End 70,267, % 96,920 $ % 6.7% 282, ,438 West Island 44,533, % -164,476 $ % -3.7% 411, ,130 Lachine 22,026, % -133,270 $ % 2.3% 318, ,152 St-Laurent 64,532, % -403,275 $ % 9.7% 327, ,000 Greater Montréal Area 315,104, % -399,814 $ % 1.5% 411, ,438

68 68 North America Industrial Q Jones Lang LaSalle Mexico

69 69 North America Industrial Q Jones Lang LaSalle Mexico Economy Mexico s 2013 Gross Domestic Product (GDP) growth forecast, stated at 3.6 percent at the beginning of the year, has since been revised to 2.0 percent. This was prompted by the moderate recovery of the U.S. economy. The annual inflation prediction is still under 4.0 percent; Mexico Central Bank reserves are stable at $165 billion, while the ex rate floated from to pesos per dollar during the second quarter. Trading for this semester entailed $185 billion in exports and $187 billion in imports. Nonoil exports totaled $160.3 billion, and manufacturing exports accounted for $152 billion. Roughly a third of manufacturing exports were automotive-related. by Volkswagen, FIAT and General Motors. Space occupancies are very high in Puebla and Toluca, and this is pushing rents up. Northeast Region Ciudad Juarez, known as one of the border cities hardest-hit by the recession and criminal activity, is now one of the fastest recovering industrial corridors. It is certain will occur in mid to address returning investor and user activity. Net has increased, and only several larger facilities over 500,000 square feet and smaller buildings are available in the market. The Energy Reform, to be presented by President Peña Nieto Government, will be announced late July after the mid-year elections. This reform is expected to boost foreign investment in oil-related businesses. Monterrey markets keep attracting businesses. The Apodaca-Guadalupe and Cienega de Flores submarkets are the most sought after due to their proximity to main highways, airport and railserved land. Bajio Region The region, comprising the states of Guanajuato, Aguascalientes, Queretaro, Jalisco and San Luis Potosí, had year-to-date net of 1.2 million square feet. Vacancy declined to 3.7 percent and, on average, rents increased $0.04 from first quarter to $4.64 per square foot. Land prices are increasing while more industrial s are breaking ground along Highways 45 and 57. Although car manufacturing is common in the region, food & beverage and consumer productsrelated facilities are also being built. Central Region Vacancy is 2.1 percent and Central Region s average rent increased $0.24 from last quarter to $5.26 per square foot. The Mexico City Metro Area has maintained a pace defined by low levels and growing rents. Speculative big box facilities are now underway by almost all developers, and they are sometimes preleased. Demand for rail-served buildings remains high, though these buildings are scarce. Car-manufacturing-related businesses are growing at Puebla and Toluca to serve plants operated The Matamoros, Reynosa and Nuevo Laredo submarkets at Tamaulipas state have begun to recover from high rates and low rents, but there are still some spaces to fill: vacancies are around 10.0 percent in these cities. Northwest Region In Tijuana, vertical s are well underway and will deliver before year-end. Nearly all of the big box groundbreakings are under long-term contracts. Tijuana s recovery should favor landlords in Nogales, upon the exit of several long-term manufactures, continued to experience some of the difficulties of being a smaller marketplace. On a positive note, Master Lock has returned some of their production operations to their second facility; the building was previously on the market for sale from Something to watch Mexican REITS (FIBRAS, Fideicomisos para Infraestructura y Bienes Raices) and CKD s (Certificados de Capital de Desarrollo), money from the Mexican Pension funds, have been very

70 70 North America Industrial Q Jones Lang LaSalle active in buying income-producing portfolios. There is a limited amount of these offerings, meaning new is the only way to grow inventory. Land prices in selected cities will go up. There is a possibility, if the Energy Reform is approved, oil-related companies will attract new businesses focused on industrial activities in non-traditional industrial submarkets. Institutional investors market share will increase as some of them have aggressively acquired existing portfolios. Northern Markets will continue to recover, especially Tijuana and Ciudad Juarez.

71 71 North America Industrial Q Jones Lang LaSalle Mexico industrial property clock Mexico City Guanajuato Guadalajara San Luís Potosí Puebla, Toluca Peaking Market Falling Market Saltillo/ Ramos A./ Derramadero Querétaro Monterrey Rising Market Bottoming Market Nuevo Laredo Aguascalientes Tijuana Chihuahua, Matamoros Nogales Juárez Reynosa Peaking markets Mexico City developers are now speeding up the construction of new big boxes, trying to match user demand, which is substantial. Intermodal and local 3PLs are growing their businesses as the local economy continues to grow. In Toluca, land has been absorbed by a number of developers and final users, which pushed land prices up. The Guanajuato, San Luís Potosí and Puebla submarkets are experiencing the growth of an expanded industrial real estate footprint. Industries, including car manufacturers, food and beverage and consumer products are launching new businesses in this area. For the Guadalajara submarket, it is steadily growing with local business; computer and technology as well as pharma and consumer product businesses are growing in the metro area of this city. Rising markets Aguascalientes industrial market activity was active with the expansion of Nissan s local car manufacturing plant. Mid-sized buildings are in high-demand. A national developer was awarded with the construction and lease for the new car manufacturing supplier park. In Querétaro, the aerospace industry continues to incentivize the construction of new buildings and industrial parks. Already established business are growing and occupying more space. Tenants new to the market are waiting for new buildings to deliver. Bottoming markets: Ciudad Juárez market experienced encouraging news with the arrival of new business in town. Still, is at high rate and rents are low, but the outlook is positive. Reynosa, Matamoros and Nuevo Laredo: These three submarkets are located at the Mexican State of Tamaulipas. Businesses are not growing in this area as they were before. Overall, is increasing and some businesses have migrated to other cities.

72 72 North America Industrial Q Jones Lang LaSalle Mexico market Market stock available YTD net Q average rent Aguascalientes 5,032, ,801 0 $3.69 Guadalajara 22,661,668 1,366,700 0 $5.07 Guanajuato 18,935, ,314 1,011,221 $4.70 Querétaro 23,516, ,343 0 $4.88 San Luís Potosí 20,380, , ,912 $4.88 Bajío Markets 90,527,205 3,050,861 1,223,133 $4.64 Mexico City 66,673,504 2,133,552 1,183,538 $6.17 Puebla 13,088, ,490 0 $4.53 Toluca 30,836, , ,583 $5.07 Central Markets 110,599,005 2,918,610 1,914,120 $5.26 Chihuahua 17,002, , ,795 $3.50 Ciudad Juárez 61,266,280 7,351, ,000 $4.00 Matamoros 17,481,917 1,500,000 80,223 $3.60 Monterrey 97,460,494 7,201,014 3,174,237 $4.56 Nogales 10,787, ,882-30,000 $4.32 Nuevo Laredo 8,665,000 1,008,707 59,076 $3.60 Reynosa 29,377,813 2,624, ,918 $4.16 Saltillo - Ramos A. 21,925, ,576 1,392,770 $4.56 Tijuana 56,170,162 5,055, ,075 $4.92 North Markets 320,137,451 27,064,329 5,744,094 $4.14 Market s 521,263,661 33,033,800 8,881,347 $4.68

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