Flight to quality and tightening market fundamentals fuel prime rent growth across all regions

Transcription

1 2018 GLOBAL INDUSTRIAL & LOGISTICS PRIME RENTS Flight to quality and tightening market fundamentals fuel prime rent growth across all regions CBRE RESEARCH

2 Executive Summary Prime rent growth accelerates worldwide Achievable rents for prime industrial & logistics (I&L) space in global hub markets increased 3.2% year-over-year in Q1 2018, due in large part to strong occupier demand for warehouse space. This was up from 2.2% annual growth at the same time last year. Of the 71 global hubs tracked by CBRE Research, 49 recorded an annual increase in prime rents, 11 had decreases and 11 had no changes. Supply-constrained Americas coastal hubs sustain exceptional year-over-year growth With a vacancy rate of 1.6% and a relative lack of high-quality Class A product, Vancouver registered an all-time-high 29.1% year-over-year growth in prime I&L rent in Q1. In the U.S., Oakland and Seattle also saw robust prime rent growth at 14.0% and 13.4%, respectively. All of these industrial hubs are experiencing limited supply and strong demand from I&L users, including third-party logistics (3PL), food & beverage, building supplies and consumer goods. Economic expansion and population growth drive demand in APAC Year-over-year prime rent growth in Asia Pacific (APAC) was relatively strong in Q1 at 2.2%, compared with 1.4% growth a year ago. Seventeen of the 27 APAC markets tracked by CBRE Research had prime rent growth, while nine recorded decreases and one had no change. Major hubs in China (Beijing, +19.8%), Australia (Melbourne, +5.5) and New Zealand (Auckland, +5.5%) topped the list of growth markets, where improving economic conditions, positive demographic trends, soaring construction costs and land scarcity have put upward pressure on prime rents. Prime rent growth accelerates in major European hubs European markets had an overall average rate of growth of 4.3% in Q1, up from 1.2% a year earlier. Budapest and London achieved the highest rise in prime rents at 11.1% and 10.0%, respectively. There are several factors causing prime rent growth in Western Europe. E-commerce continues to drive demand for warehouse space, but the market is increasingly facing supply constraints, which in turn is driving rent appreciation. Furthermore, some markets are experiencing soaring construction costs, labor shortages and resultant wage inflation, in addition to competition from other land uses CBRE, Inc.

3 The 10 Fastest Growing Markets (Ranked by the annual change (%) in prime taking rent in the local unit per annum as of Q1 2018) Vancouver 29.1% 2 Beijing 19.8% 3 Oakland 14.0% 4 Seattle 13.4% 5 Budapest 11.1% 6 London 10.0% 7 New Jersey 9.5% 8 Tilburg/Eindhoven/Venlo 9.5% 9 Paris 8.3% 10 Manchester/Liverpool 8.0% Source: CBRE Research, Q CBRE, Inc.

4 The 10 Most Expensive Markets (Ranked on a U.S.$ per sq. ft. per annum basis; foreign exchange rate as of 3/31/18) Hong Kong $30.99 London $22.35 Greater Tokyo $19.96 Shanghai $10.51 Stockholm $ Singapore $10.16 Oakland $9.96 Beijing $9.78 Munich $9.62 Sydney $9.61 Source: CBRE Research, Q CBRE, Inc.

5 Introduction Despite an uncertain geopolitical environment, the global economy continues to support a strong I&L sector in major hubs worldwide. The International Monetary Fund (IMF) estimates that world GDP growth strengthened in 2017 to 3.8% (half a percentage point higher than in 2016 and the strongest since 2011), boosted by global trade and investment recovery in advanced economies. U.S. real GDP growth was 2.3% in 2017, up from 1.5% in 2016, according to the IMF. The major drivers of supply-chain demand consumer consumption, business inventories and industrial production all showed measured growth in Q The U.S. unemployment rate was 3.8% its lowest level in 17 years. With the fastest wage growth since 2009, consumer confidence is near its highest level since As expected with such strong Omnichannel retail and the growth of e-commerce have been the primary drivers of demand during this cycle. Financial conditions remain supportive of real estate, despite the recent volatility in equity markets and increases in bond yields following signs of inflation in advanced economies. With broadbased momentum and expectations of sizable economic growth in the United States, global economic growth is now projected at 3.9% this year and next, which is a slight increase from the previous forecast. In the Americas, supply chain and e-commerce dynamics have fueled rent growth at different rates across the region. The U.S. and Canada have led the way, with users aggressively leasing space in response to both persistent economic growth and the structural shifts brought about by e-commerce. This has led to record-low vacancy rates and record-high rents in virtually all markets in both countries. consumer sentiment, consumption rates have hit their highest levels since the 2008 recession. This is especially positive for the industrial market, as consumption is highly correlated to demand for warehouse and logistics real estate. In Latin America, after several years of uncertainty, the markets are beginning to stabilize. One year ago, Mexican markets were in flux in the expectation of trade disruption following the U.S. presidential election. Despite this, the country s GDP grew by 2.0% in The major manufacturing and distribution hubs both on the U.S. border and in the interior of the country recovered quickly. Meanwhile, Brazil is slowly emerging from a deep recession that has significantly impacted user demand, with GDP growing by 1.0% in Demand in Brazil São Paulo in particular likely will be stimulated by heightened export activity and growing local consumption as the economy improves CBRE, Inc.

6 In the eurozone, real GDP growth was 2.3% in 2017, up from 1.7% in An acceleration of consumer spending is driving regional I&L markets. As the handling of products ordered online requires up to three times more space than a conventional sale, e-commerce has been a major driver of logistics real estate demand. In the U.K., about one-third of all logistics take-up can be attributed to online sales fulfillment, with Germany, France, Spain and other key markets in the region catching up quickly. Asia Pacific registered stellar economic growth of 4.7%, according to Oxford Economics, and is expected to grow at a similar pace in China registered 6.8% GDP growth last year, exceeding expectations. In Japan, an economy that had been struggling with falling prices and sluggish growth for decades is now in expansion quality, well-located logistics real estate is justified and is not expected to wane anytime soon. Despite massive user demand in the major logistics hubs worldwide, developers have exercised discipline. This is partly due to the difficulty in obtaining suitable sites to accommodate either large hubs or focused local distribution nodes. On one hand, this has left occupiers with little choice and rapidly rising occupancy costs. This has somewhat removed the risk of oversupply. Nowhere is this trend more evident than in the U.S., where completions have trailed demand for 28 of the past 30 quarters since Q Construction in the U.S. is increasing, however, with delivery levels just below previous cycle peaks and a construction pipeline that indicates another year at this level. Consumer requirements for speedy service have forced everyone in the retail supply chain manufacturers, suppliers, distributors and retailers to carry more inventory in more locations. mode. The construction sector helped drive strong demand in Australia s industrial economy, with construction gross value added (GVA) rising by 4.9% last year, fueled by high levels of infrastructure spending. In Singapore, the government began tightening monetary policy on the back of solid economic growth, marking the first monetary tightening since Omnichannel retail and the growth of e-commerce have been the primary drivers of demand during this cycle. Consumer requirements for speedy service have forced everyone in the retail supply chain manufacturers, suppliers, distributors and retailers to carry more inventory in more locations. Last-mile delivery has been a key focus, generating greater requirements for urban logistics space, such as multi-story warehouses in densely populated areas. Although the current economic cycle is well-advanced, e-commerce and omnichannel retailing is still at an early stage of development. E-commerce sales have grown 15.2% annually since 2010 in the U.S., with total retail sales rising 9.4% annually in Q from 7.8% just two years earlier. Thus, demand for high- The outlook for European markets is similar. Construction of new distribution space has accelerated since 2015, with most developments being built-to-suit projects rather than speculative. Further growth in development activity is currently hampered by growing supply constraints. Given the structural shifts impacting the I&L sector, along with the supply and demand fundamentals, it is not surprising that prime rents increased by 3.2% globally year-over-year in Q1, up from 2.2% a year earlier. Sixty-nine percent of the markets surveyed by CBRE Research registered positive growth in this period, up from 60% in Land-constrained markets continue to command a significant rent premium over other markets. These include Hong Kong ($30.99 per sq. ft.), London ($22.35) and Greater Tokyo ($19.96). Of the top-10 most-expensive markets, nine are in EMEA or APAC. However, four of the top-10 growth markets are in the Americas (Vancouver, Oakland, Seattle and New Jersey) metro areas that are experiencing tightening fundamentals amid strong demographics and e-commerce growth CBRE, Inc.

7 Regional Performance Rent growth up in EMEA & APAC, stable in the Americas In the Americas, prime I&L rents increased in the majority of markets, with exceptionally high growth in western coastal cities. Overall, prime rents in the Americas increased 3.8% year-over-year in Q1, consistent with the previous year. In the U.S., prime rent growth averaged 4.8% year-over-year in Q1, compared to 5.9% a year ago. Demand continues to outpace supply, with net absorption exceeding deliveries by 9.9% (20 million sq. ft.) in the past 12 months. In Asia Pacific, prime rent growth averaged 2.2% year-over-year in Q1, compared to 1.4% in the previous year. Seventeen of the 27 APAC markets tracked by CBRE Research registered prime rent growth, while nine had decreases and one was unchanged. Construction of new logistics facilities has been constrained in APAC, as new supply currently under construction and forecast for delivery by 2020 will either equal or fall below the five-year annual historical average. EMEA markets averaged prime rent growth of 4.3% year-over-year in Q1, up from 1.2% a year earlier. Several factors have caused this growth acceleration: rising demand from e-commerce users, soaring construction costs, labor shortages and wage inflation. Several factors have caused this growth acceleration: rising demand from e-commerce users, soaring construction costs, labor shortages and wage inflation CBRE, Inc.

8 Annual Change Breakdown Q Q THE AMERICAS EMEA APAC GLOBAL 3.8% growth in prime rent 4.3% growth in prime rent 2.2% growth in prime rent 3.2% growth in prime rent CHANGES BY MARKET THE AMERICAS EMEA APAC 18 increases 3 unchanged 1 decreases 14 increases 7 unchanged 1 decreases 17 increases 1 unchanged 9 decreases TOP 5 GROWTH MARKETS BY REGION 29.1% 19.8% 14.0% 13.4% 9.5% 6.7% 11.1% 10.0% 9.5% 8.3% 8.0% 5.5% 5.5% 5.1% 4.5% Vancouver Oakland Seattle New Jersey Inland Empire Budapest London Tilburg/Eindhoven/Venlo Paris Manchester/Liverpool Beijing Melbourne Auckland Adelaide Greater Tokyo Source: CBRE Research, Q CBRE, Inc.

9 Market Dynamics Supply constraints cause rent growth in most markets Tight supply and robust demand from supply-chain and distribution users has led to rent growth in major and emerging hubs throughout the Americas. In the U.S., for example, many markets have vacancy rates of less than 2% for prime I&L facilities. Additionally, there is increasing demand from internet fulfillment and last-mile delivery services. While there has been strong demand for and limited supply of smaller logistics facilities (less than 150,000 sq. ft.), overall there has been balanced activity in all size segments. This has resulted in low vacancy that is putting upward pressure on prime rents and driving more speculative development. With a vacancy rate of 1.6% and a lack of high-quality Class A logistics inventory, Vancouver registered an all-time-high annual rent growth of 29.1% in Q1. As of May 2018, British Columbia had the second-lowest unemployment rate of any Canadian province, and heightened infrastructure spending ($16 billion by 2025) near key logistics nodes is boosting demand. In the U.S., Oakland and Seattle also saw robust year-over-year prime rent growth of 14.0% and 13.4%, respectively, in Q1. These industrial hubs are experiencing tightening supply and strong demand from industrial users, including third-party logistics (3PL), food & beverage, building supplies and consumer goods. Other markets in the Americas that saw strong gains last year include New Jersey, Inland Empire, Miami and Houston all with prime rent growth of 5% or more. In Latin America, rent growth has been somewhat muted, with the exception of Ciudad Juarez and Bajio in Mexico, which saw increases of 3.8% and 2.5%, respectively. The dollar was particularly strong against the peso in 2017, resulting in lower development costs and perhaps a reduction in pressure to push for higher rents. Similarly, in Argentina, the economy has been hit by a strengthening dollar and higher U.S. interest rates, which has impacted logistics demand, putting downward pressure on prime rents. Also, e-commerce in Argentina has yet to reach the same maturity as the U.S. and Europe. Demand in Brazil has been quelled by a deep economic recession. Prime rents remained flat in São Paulo, but logistics demand is expected to rebound in 2018 as consumer confidence picks up and the economy improves. In Santiago, where companies have expanded their I&L footprint in expectation of a long-awaited economic recovery, vacancy declined by more than 50 basis points in 2017 and rents increased by 2.6% year-over-year. With a vacancy rate of 1.6% and a lack of high-quality Class A logistics inventory, Vancouver registered an all-time-high annual rent growth of 29.1% in Q CBRE, Inc.

10 Figure 1: Year-over-Year Change by Prime I&L Rent Ranked by the annual change (%) in prime taking rent in the local unit per annum as of Q Rank Market % Change Country Region 1 Vancouver 29.1% Canada Americas 2 Beijing 19.8% China Asia Pacific 3 Oakland 14.0% United States Americas 4 Seattle 13.4% United States Americas 5 Budapest 11.1% Hungary EMEA 6 London 10.0% United Kingdom EMEA 7 New Jersey 9.5% United States Americas 8 Tilburg/Eindhoven/Venlo 9.5% Netherlands EMEA 9 Paris 8.3% France EMEA 10 Manchester/Liverpool 8.0% United Kingdom EMEA 11 Prague 7.8% Czech Republic EMEA 12 Inland Empire 6.7% United States Americas 13 South Florida 6.5% United States Americas 14 Milan 5.8% Italy EMEA 15 Melbourne 5.5% Australia Asia Pacific 16 Auckland 5.5% New Zealand Asia Pacific 17 Adelaide 5.1% Australia Asia Pacific 18 Houston 5.0% United States Americas 19 Greater Tokyo 4.5% Japan Asia Pacific 20 Leeds/Sheffield 4.3% United Kingdom EMEA 21 LA/Orange County 4.2% United States Americas 22 Nanjing 4.2% China Asia Pacific 23 Montreal 4.0% Canada Americas 24 Rotterdam 4.0% Netherlands EMEA 25 Sydney 3.9% Australia Asia Pacific 26 Midlands 3.8% United Kingdom EMEA 27 Barcelona 3.8% Spain EMEA 28 Ciudad Juarez 3.8% Mexico Americas 29 Wuxi 3.6% China Asia Pacific 30 Calgary 3.2% Canada Americas 31 Munich 2.9% Germany EMEA 32 Dallas/Ft. Worth 2.9% United States Americas 33 Guangzhou 2.9% China Asia Pacific 34 Stockholm 2.8% Sweden EMEA 35 Santiago 2.6% Chile Americas Rank Market % Change Country Region 36 Bajio 2.5% Mexico Americas 37 Atlanta 2.4% United States Americas 38 Shanghai 2.0% China Asia Pacific 39 Chongqing 1.9% China Asia Pacific 40 Toronto 1.7% Canada Americas 41 Frankfurt 1.6% Germany EMEA 42 Mexico City 1.6% Mexico Americas 43 Suzhou 1.5% China Asia Pacific 44 Ningbo 1.5% China Asia Pacific 45 Shenyang 0.9% China Asia Pacific 46 Seoul 0.7% Korea Asia Pacific 47 Monterrey 0.5% Mexico Americas 48 Qingdao 0.0% China Asia Pacific 49 Dalian 0.0% China Asia Pacific 50 Pennsylvania I-78/81 Corridor 0.0% United States Americas 51 Chicago 0.0% United States Americas 52 São Paulo 0.0% Brazil Americas 53 Canberra 0.0% Australia Asia Pacific 54 Madrid 0.0% Spain EMEA 55 Hamburg 0.0% Germany EMEA 56 Warsaw 0.0% Poland EMEA 57 Moscow 0.0% Russia EMEA 58 Antwerp 0.0% Belgium EMEA 59 Berlin 0.0% Germany EMEA 60 Dusseldorf/Cologne 0.0% Germany EMEA 61 Tianjin 0.0% China Asia Pacific 62 Brisbane -0.2% Australia Asia Pacific 63 Wuhan -0.2% China Asia Pacific 64 Hangzhou -0.3% China Asia Pacific 65 Hong Kong -1.3% Hong Kong Asia Pacific 66 Amsterdam -5.0% Netherlands EMEA 67 Buenos Aires -5.1% Argentina Americas 68 Chengdu -5.9% China Asia Pacific 69 Singapore -5.9% Singapore Asia Pacific 70 Shenzhen -6.1% China Asia Pacific 71 Perth -7.8% Australia Asia Pacific Ranked by 12-month % change increases as of Q Rents are based on achievable rents on net floor area basis, exclusive of taxes, expenses and service charges. Source: CBRE Research, Q China is an emerging market with large increases in completions every year. These new properties skew the spot rent. To prevent this, CBRE Research has adopted like-for-like rental growth numbers that don t include the new completions until a stabilization period CBRE, Inc.

11 While Chinese markets dominated rent growth in the Asia Pacific region last year, significant growth is being seen across the region in Beijing (+19.8%) topped the list of highest growth markets, but other markets such as Auckland (+5.5%), Melbourne (+5.5%), Adelaide (+5.1%) and Greater Tokyo (+4.5%) came in with significant growth rates as well. The significant increase in prime rent in Beijing can be attributed to new government-imposed policies that restricted industrial land usage, removing small warehouses that could not meet security requirements. This, combined with a pronounced undersupply of I&L inventory and extremely low availability, has caused prime rents to rise dramatically year-over-year. In Auckland, soaring construction costs (8% per annum in the past Current market conditions in EMEA have triggered strong development activity, particularly in the European core markets of the U.K., Germany, France, Spain, Italy, the Netherlands, Poland and the Czech Republic. However, rising construction costs across Europe and limited availability of prime logistics space have driven up rents in the past year. This is especially true in Budapest and London, where prime rents have risen by 11.1% and 10% year-over-year, respectively. Growing retail sales, the shift to e-commerce and ongoing consolidation in the logistics sector have led to strong occupier demand in Europe, resulting in persistently tight market conditions. The weighted average vacancy rate for the European core markets remained stable at 4.7% in Q1. E-commerce has Growing retail sales, the shift to e-commerce and ongoing consolidation in the logistics sector have led to strong occupier demand in Europe, resulting in persistently tight market conditions. five years) and a flight to quality logistics facilities has driven prime rent growth. Meanwhile in Melbourne, which has the highest population growth rate in Australia, increased demand for goods has resulted in increased demand for logistics space. In Greater Tokyo, 3PLs and e-commerce companies are expanding, leading to record-high absorption gains in Q1. The Tokyo Bay Area contains most of the city s prime logistics facilities, which have outperformed the rest of the market in rental rate growth. This area benefits from a prime location, solid transportation connectivity and easy access to the local employment nodes. grown to more than 15% of total retail sales in the U.K., and the Netherlands, Germany and France are close behind. This has put upward pressure on logistics rents, as occupiers try to keep up with consumer demand. Other important factors at play are land scarcity and competition with higher-value property types, such as multifamily residential. SEGRO, a major U.K.-based industrial REIT, reports that industrial land-use loss in London was three times higher than the rate predicted in the previous London plan, which was written just five years ago. 1 As a result, more multistory logistics facilities likely will be built in London, perhaps along with a mix of uses on the same site, further driving up the cost of occupancy CBRE, Inc.

12 Figure 2: Prime Logistics Rent - Most Expensive Ranked by prime taking rent in US$ per sq. ft. per annum as of Q Rank Market Rent Country Region 1 Hong Kong $30.99 Hong Kong Asia Pacific 2 London $22.35 United Kingdom EMEA 3 Greater Tokyo $19.96 Japan Asia Pacific 4 Shanghai $10.51 China Asia Pacific 5 Stockholm $10.29 Sweden EMEA 6 Singapore $10.16 Singapore Asia Pacific 7 Oakland $9.96 United States Americas 8 Beijing $9.78 China Asia Pacific 9 Munich $9.62 Germany EMEA 10 Sydney $9.61 Australia Asia Pacific 11 Midlands $9.46 United Kingdom EMEA 12 Manchester/Liverpool $9.46 United Kingdom EMEA 13 Barcelona $9.28 Spain EMEA 14 Auckland $9.21 New Zealand Asia Pacific 15 Shenzhen $9.08 China Asia Pacific 16 LA/Orange County $8.88 United States Americas 17 Frankfurt $8.66 Germany EMEA 18 Seoul $8.62 Korea Asia Pacific 19 Leeds/Sheffield $8.41 United Kingdom EMEA 20 New Jersey $8.26 United States Americas 21 Brisbane $8.14 Australia Asia Pacific 22 Hamburg $7.97 Germany EMEA 23 Canberra $7.78 Australia Asia Pacific 24 Buenos Aires $7.60 Argentina Americas 25 Vancouver $7.56 Canada Americas 26 Seattle $7.56 United States Americas 27 Guangzhou $7.55 China Asia Pacific 28 Suzhou $7.55 China Asia Pacific 29 South Florida $7.49 United States Americas 30 Rotterdam $7.45 Netherlands EMEA 31 Paris $7.45 France EMEA 32 Dusseldorf/Cologne $7.42 Germany EMEA 33 Madrid $7.22 Spain EMEA 34 Perth $6.89 Australia Asia Pacific 35 Budapest $6.87 Hungary EMEA Rank Market Rent Country Region 36 Prague $6.67 Czech Republic EMEA 37 Adelaide $6.66 Australia Asia Pacific 38 Tilburg/Eindhoven/Venlo $6.59 Netherlands EMEA 39 Amsterdam $6.53 Netherlands EMEA 40 Moscow $6.50 Russia EMEA 41 Berlin $6.39 Germany EMEA 42 Hangzhou $6.33 China Asia Pacific 43 Wuhan $6.31 China Asia Pacific 44 Milan $6.30 Italy EMEA 45 Santiago $6.25 Chile Americas 46 Calgary $6.20 Canada Americas 47 Ningbo $6.10 China Asia Pacific 48 Melbourne $6.02 Australia Asia Pacific 49 Chongqing $5.92 China Asia Pacific 50 Chengdu $5.86 China Asia Pacific 51 Inland Empire $5.76 United States Americas 52 Mexico City $5.74 Mexico Americas 53 São Paulo $5.74 Brazil Americas 54 Tianjin $5.69 China Asia Pacific 55 Pennsylvania I-78/81 Corridor $5.50 United States Americas 56 Warsaw $5.50 Poland EMEA 57 Shenyang $5.46 China Asia Pacific 58 Wuxi $5.42 China Asia Pacific 59 Nanjing $5.34 China Asia Pacific 60 Dalian $5.17 China Asia Pacific 61 Antwerp $5.15 Belgium EMEA 62 Ciudad Juarez $5.13 Mexico Americas 63 Montreal $5.04 Canada Americas 64 Toronto $5.04 Canada Americas 65 Qingdao $4.79 China Asia Pacific 66 Houston $4.79 United States Americas 67 Chicago $4.75 United States Americas 68 Monterrey $4.64 Mexico Americas 69 Bajio $4.61 Mexico Americas 70 Atlanta $3.88 United States Americas 71 Dallas/Ft. Worth $3.88 United States Americas Rents are based on achievable rents on net floor area basis, exclusive of taxes, expenses and service charges. Source: CBRE Research, Q CBRE, Inc.

13 Industrial & Logistics Hubs to Watch India rapidly rising; strong demand in Dublin; Louisville heats up CBRE Research chose one market in each global region, which was not included in the ranking system within this report. They are worth mentioning, as the industrial & logistics sectors in these hubs are expanding and rents are expected to rise in the near term. Asia Pacific Bangalore The Indian government implemented a goods & services tax (GST) in July 2017, which is expected to have a significant impact on warehousing. A CBRE survey indicated that nearly two-thirds of respondents believed the implementation of GST is positive for their overall business operations, reducing operating costs and enabling occupiers to consolidate their smaller logistics facilities and expand their footprint around major consumption centers. Leasing activity reached an all-time high of approximately 17 million sq. ft. last year, and the leasing momentum is expected to continue in The overall demand for warehouse space was primarily driven by demand from 3PLs, engineering and manufacturing, fast moving consumer goods (FMCG) and e-commerce companies, largely concentrated in Bangalore, Delhi-NCR and Chennai. Logistics space in Bangalore is highly sought-after, particularly in the West corridor (Mysore Road, Tumkur Road) which accounted for nearly 70% of the total transactions. Although a few projects were completed in H1 2017, supply of quality logistics facilities in Bangalore remains limited despite rapid growth in demand. Nonetheless, this emerging hub is expected to see more modern stock in the future, as several land acquisitions have recently taken place for I&L development. EMEA Dublin Formerly known as the Celtic Tiger for its robust economic growth from the mid-1990s to 2008, Ireland has recovered from its recessionary downturn and is on the rise again. The Irish economy grew by 7.3% last year, three times faster than the wider euro area, according to EU Commission estimates. In Dublin, a scarcity of modern I&L facilities along key road corridors continues to hamper occupiers. However, now that prime industrial rents in the capital have breached the 100-persq.-m. mark, a small number of new speculative developments are under construction, while others are being planned. New development will in time alleviate the supply pressures that have characterized this sector of the market over recent years. However, in the interim, prime headline rents, which currently average per sq. m. ($11.71 per sq. ft.), will continue to increase, with an additional 7% increase anticipated by year-end Furthermore, with Brexit looming in the U.K., many companies are considering moving their distribution network to Dublin, which will result in heightened demand for industrial & logistics real estate over the coming years. The Americas Louisville Louisville, Kentucky benefits from a centralized location that is within a two-hour flight to 75% of the U.S. population and a four-hour flight to 95% a key advantage to ensure speedy distribution of goods. Louisville is home to Worldport, United Parcel Service s largest air facility, which processes an average of 1.6 million packages a day and is a magnet for U.S. distribution operations of other companies. Looking ahead, Louisville will become even more relevant as technology develops. A recent CBRE Research study of the potential impact of autonomous trucking on U.S. markets ranked Louisville first in population potentially served by self-driving trucks. In Q1 2018, Louisville recorded nearly 1.7 million sq. ft. of net absorption, and average asking rents increased by 6.1%. Thus, the near- and long-term prospects for logistics demand in Louisville are promising CBRE, Inc.

14 Methodology & Definitions Methodology This report outlines rents for prime industrial & logistics facilities in 71 global hubs in the Americas, Asia Pacific and EMEA as of Q CBRE launched the inaugural report in May Data in this analysis is derived from achievable rents, exclusive of taxes, expenses and service charges. Top market rent was gathered based on industrial distribution space of the highest quality and specification, and in the best location within each industrial hub. Before capturing the rent data, a set of guidelines was established to make an even comparison of the hubs. The key variables for prime logistics buildings include: Facilities greater than 100,000 sq. ft./10,000 sq. m. in size Clear ceiling height greater than feet/8-10 meters) Office-to-industrial space ratio of no more than 10% Loading dock ratio of 1 dock: 10,000 sq. ft./1,000 sq. m. or less Building must be purpose-built for logistics and distribution (manufacturing facilities not included) Each market has its own set of criteria for prime logistics space, and therefore the appropriate building size, specifications and loading dock ratio varies by market.* Explanation of Columns Percentage Change (Figure 1): Documents the rate of change in local rents over the preceding 12 months. These changes are calculated on the basis of local currency values to avoid distortions from exchange rate fluctuations. Prime Rent (Figure 2): The rent quoted is the typical achievable rent from logistics properties aligning with our key variables. Rents are expressed as the face rates, without accounting for any tenant incentives that may be necessary to achieve them. Regional and Global Percent Changes Aggregated changes in rents both at the global and regional level are based on a weighted average of the rent change in the individual cities per local currency to avoid foreign exchange fluctuations. The weighting for each city is based on Functional Urban Areas as defined by OECD. For non-oecd countries, we use Oxford Economics to forecast the city size. For Oakland, Inland Empire, Bajio, New Jersey and many of the Chinese markets, we made some additional assumptions. Terms and Definitions The Global Industrial & Logistics Prime Rents survey provides a snapshot of achievable net rental rates for high-quality, Class A logistics space in traditional and emerging global hubs. Since industrial lease rates can vary substantially in each market and vary by transaction, this data provides comparative benchmarks only. * Some markets deviate from this criteria, such as New Zealand: size > 1,500 sq. m.; Hong Kong: clear ceiling height > 4 m., Hong Kong: cargo-lift access buildings have lower throughput; Tokyo: clear ceiling height > 5.5 m.; Tokyo: loading dock ratio 1 dock: 1,300 sq. m.; China: loading dock ratio 1 dock: 1,300 sq. m CBRE, Inc.

15 Contacts Industrial & Logistics Research David Egan Head of Industrial & Logistics Research, Global Machiel Wolters Head of Industrial & Logistics Research, EMEA Liz Hung Associate Director CBRE Research Leadership Richard Barkham, Ph.D. Chief Economist, Global Neil Blake, Ph.D. Head of Forecasting and Analytics, Global Henry Chin, Ph.D. Head of Research, Asia Pacific Spencer G. Levy Head of Research & Senior Economic Advisor, Americas Jos Tromp Head of Research, EMEA Matthew Walaszek Senior Research Analyst, Global Industrial & Logistics To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.