>> Vacancy Increases In Third Quarter

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1 Research & Forecast Report ORANGE COUNTY INDUSTRIAL Q Accelerating success. >> Vacancy Increases In Third Quarter Key Takeaways > The vacancy rate increased 20 basis points to 2.7% during the third quarter. Vacancy stood at 2.6% one year ago. Market Indicators Relative to prior period Q Forecast > Asking rental rates increased 14.5% from one year ago to $0.87 per square foot (PSF) triple-net (NNN). Net Absorption Construction > Industrial demand recorded -82,800 squre feet (SF) of net absorption. Much of this negative demand was in the Airport Area submarket. Rental Rate > Construction activity grew during the third quarter totaling 1.3 million SF. > Though demand was negative for the quarter, market conditions remain tight and quality industrial space is scarce. Asking rental rates are expected to rise by another 10%-15% by the end of Orange County Industrial Market The Orange County industrial market closed the third quarter with net absorption recording -82,800 SF. Much of this negative movement stemmed from the Royalty Carpet Mills closure. There is strong demand for new industrial buildings as developers are challenged with finding available development opportunities. Industrial product is expected to continue depleting as many properties are being sold as multifamily redevelopment land or creative office space conversion. The industrial market has evolved to handle niche technology hub industries and specialty retail. The market is focused on smaller value-add manufacturing buildings that have a large R&D component. As such, rents for industrial space tend to be higher in Orange County compared to neighboring markets. Vacancy Summary Statistics Orange County, Q Vacancy Rate 2.7% +20 BPS Change from Q2 17 (Basis Points) Net Absorption -82,800 SF Construction Completions 51,000 SF Under Construction 1.3M SF Asking Rents Orange County, Q Orange County Industrial Market Average Asking Rent $0.87 NNN Change from Q2 17 $0.03 Y.O.Y. Change (%) 14.5% Orange County Labor Force Orange County, Q mo Employment Growth (%) 12-mo Actual Employment Change Construction Manufacturing Transportation, Trade & Utilities 6.2% -2.6% -0.3% +3,

2 Vacancy > In the third quarter the total vacancy rate increased 20 basis points from last quarter to 2.7%. > Space remains scarce in Orange County, with the availability rate hovering at 4.1%. > Vacancy is tightest for buildings ranging between 10,000-39,999 SF at 1.6%, while buildings 100,000 SF or more have the highest vacancy rate at 4.2%. > Forecast: With approximately 1.3 million SF of space under construction and strong industrial demand, vacancy rates are expected to remain at historic lows. Absorption and Leasing Activity > The Orange County industrial market recorded negative net absorption of -82,800 SF. Much of this negative absorption stemmed from the closure of Royalty Carpet Mills in the Airport Area submarket. > North County recorded the most net absorption at 391,900 SF, while the Airport Area reported the lowest at -897,500 SF in the third quarter. > Following new direct deals signed by Amazon and Primary Color Systems in the North County submarket last quarter, Shaw Industries Inc. leased 234,800 SF in Cypress and Daisy Nail Products Inc. leased 132,200 SF in Anaheim during the third quarter. > Forecast: Net absorption is expected to show positive movement in North County due to the future delivery of the Backman Business Center Development in Fullerton. Rental Rates > The weighted average asking rental rate for Orange County recorded at $0.87 PSF NNN, up 14.5% from the $0.76 reported one year ago. > Rents have steadily risen over the past three years as industrial tenant supply options remain limited. > Average asking rates were highest in the South County submarket at $0.99 PSF NNN and lowest in the West County submarket at $0.82 PSF NNN. > Forecast: Tenant demand for industrial space is strong and supply is limited. Asking rental rates are expected to trend upward by 10%-15% by the end of Historical Vacancy v. Rents O.C. Market Q $ PSF PER MONTH (NNN) Net Absorption by Submarket O.C. Market Q SQUARE FEET $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 $0.60 $ , , ,000 0 (200,000) (400,000) (600,000) (800,000) (1,000,000) 3Q13 3Q14 3Q15 3Q16 3Q17 (897,500) Rents 39,300 Vacancy 383, ,900 AIRPORT SOUTH WEST NORTH Historical Sales & Leasing Activity O.C. Market Q SQUARE FEET 5,500,000 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% % VACANT 1,000,000 3Q13 3Q14 3Q15 3Q16 3Q17 2

3 Construction > During the third quarter, one project totaling 51,500 SF delivered to the market located at 1675 Deere Avenue in Irvine. > Three projects currently under construction totaling 1.3 million SF. The projects are expected to be completed by the end of 2017 and mid > Forecast: Industrial development is a challenge in Orange County as many industrial properties and development sites are converted to residential and other commercial uses. Investment Trends > Investment volume for industrial properties increased by 1.9% compared to one year ago. Sales volume recorded at $638.9 million compared to $627.1 million one year ago. > Investors are expected to remain bullish in the Orange County market as available supply remains limited. > Investment sales prices have decreased by 14.4% compared to this time last year, currently averaging $157 PSF. > Forecast: With minimal federal interest rate increases and investors looking for development opportunities, investment activity is expected to remain steady through Outlook Despite the drop in absorption during the third quarter, the Orange County industrial market continues to move forward with positive momentum. With minimal increase in available supply, asking rental rates have climbed above 2008 peak values of $0.78-$0.80 PSF NNN. Despite positive market fundamentals, tenants are struggling to find future space options to meet their needs given the lack of available inventory. Historical Net Absorption & Construction Completions Q SQUARE FEET 1,000, , , ,000 - (250,000) (500,000) (750,000) (1,000,000) Investment Trends Chart $ $ $ $ $ $ $80.00 $60.00 $40.00 $20.00 $0.00 Net Absorption Completions 3Q13 3Q14 3Q15 3Q16 3Q $/PSF Cap Rate Unemployment Rate U.S., C.A. & O.C. August % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 5.5% 5.4% 5.0% 4.5% 4.0% 4.5% 4.2% 3.5% 3.0% 2.5% United States California Orange County 3

4 Market Description The Orange County industrial market is a large market comprised of million SF representing 17% of the total industrial space in the greater Los Angeles Basin. Most of the space (68%) is in small to medium sized buildings, with the balance in big box space (100,00+ SF). The market includes many mid-sized manufacturers and distributors from a wide array of industries, including information, technology, electronics, food, apparel and communications. These firms pay a premium to be in the midst of Orange County's highly educated labor force and concentration of high-end firms and distributors. Submarket Map RECENT TRANSACTIONS & MAJOR DEVELOPMENTS Orange County Industrial Market Q SALES ACTIVITY PROPERTY ADDRESS SIZE SF SALE PRICE PRICE PSF BUYER SELLER 3454 E Miraloma Ave, Anaheim 300,000 SF $56.6 Million $188 PSF DCT Industrial Trust Inc. TIAA-CREF Investment Management, 500 W Warner Ave, Santa Ana 316,300 SF $41.0 Million $129 PSF LBA Realty Sears Holding Corporation Monarch St, Garden Grove 276,600 SF $27.0 Million $98 PSF Penwood RE/Western Realco Colony Northstar, Inc Barranca Pky, Irvine 69,900 SF $16.9 Million $243 PSF Gemdale USA Corporation Northern Trust Corporation Apollo Business Center, Brea 55,700 SF $8.4 Million $150 PSF Burke Real Estate Group, Inc. Kenneth Huettner LEASING ACTIVITY PROPERTY ADDRESS LEASED SF LEASE TYPE BLDG TYPE LESSEE LESSOR 6400 Valley View, Buena Park 238,270 SF Direct - New Distribution Amazon Catellus Development Group Holder St, Cypress 187,500 SF Direct - New Distribution Primary Color Systems Stockbridge Towne Centre Dr, Foothill Ranch 130,700 SF Direct - New Distribution SeneGence International LBA Realty 2100 E Valencia Dr, Fullerton 112,700 SF Direct - New Distribution California Hi-Lites MetLife Knott Ave, Buena Park 102,400 SF Direct - New Distribution Flexport MCDC MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SF SUBMARKET STATUS ESTIMATED COMPLETION Backman Business Center Development (7 Bldgs) Cardinal Development Co. 934,700 SF North County Under Construction 2Q 2018 Jellco Container, Anaheim LBA Realty 200,000 SF North County Under Construction 4Q S Anaheim Blvd, Anaheim Panattoni Development 144,000 SF Airport Area Under Construction 4Q

5 EXISTING PROPERTIES CONSTRUCTION VACANCY AVAILABILITY ACTIVITY ABSORPTION RENTS Submarket/ Building Size Bldgs Total Inventory SF Completions Current Qtr SF Under Construction Vacancy Vacancy Prior Qtr SF Availability Sales Number of Activity SF Sales Lease Activity SF Number of Leases Total Gross Activity Current Qtr SF Total Gross Activity YTD SF Net Absorption Current Qtr SF Net Absorption YTD SF Weighted Avg Asking Lease Rates AIRPORT 1-9, ,776, % 1.1% 4.0% 52, , , ,025 1,200 2,000 $ ,000-39,999 1,194 22,481, % 2.0% 3.0% 216, , ,600 1,345,000 6,500 (67,900) $ ,000-69, ,696,200 51, % 3.1% 4.7% 151, , , , ,700 (33,800) $ ,000-99, ,325, % 5.4% 1.8% , , ,000 51,300 (19,700) $ , ,518, % 3.8% 18.1% 316, , ,700 (1,057,200) (1,107,200) $0.74 Subtotal 1,868 49,797,300 51, % 2.9% 6.6% 736, , ,074,000 2,288,325 (897,500) (1,226,600) $0.84 NORTH 1-9, ,698, % 1.1% 1.9% 81, , , ,500 (48,400) (69,800) $ ,000-39,999 1,800 33,233, % 2.1% 2.3% 187, , ,800 2,093, ,100 85,100 $ ,000-69, ,795, , % 1.7% 3.4% 45, , , ,900 43,200 (42,000) $ ,000-99, ,888, , % 2.2% 5.4% 0 0 2, , ,800 (45,700) (99,100) $ , ,307, ,112, % 2.8% 1.8% 300, , ,202 1,104, , ,500 $0.69 Subtotal 2,802 87,922, ,278, % 2.2% 2.5% 613, ,199, ,813,302 4,226, , ,700 $0.86 SOUTH 1-9, ,458, % 2.4% 3.6% 15, , ,100 85,000 (15,800) (35,200) $ ,000-39, ,529, % 3.2% 4.2% , , ,397 62,800 1,600 $ ,000-69, ,303, % 2.8% 7.3% ,800 (7,700) (700) $ ,000-99, ,483, % 5.2% 13.2% , ,400 $ , ,389, % 1.9% 4.2% , ,200 $0.73 Subtotal ,164, % 2.7% 5.1% 15, , , ,397 39,300 79,300 $0.99 WEST 1-9, ,066, % 2.1% 2.4% 18, , , ,150 17,500 20,800 $ ,000-39, ,247, % 1.9% 2.0% 97, , , , , ,200 $ ,000-69, ,158, % 2.4% 3.3% 41, , , ,460 (48,600) (111,300) $ ,000-99, ,636, % 0.6% 0.9% ,500 63,200 43,400 $ , ,754, % 3.8% 6.7% 550, , , , ,000 (17,000) $0.77 Subtotal 1,180 33,862, % 2.6% 3.8% 709, , ,156,100 2,234, ,500 58,100 $0.82 MARKET TOTAL 1-9,999 1,418 9,999, % 1.5% 2.6% 168, , , ,675 (45,500) (82,200) $ ,000-39,999 4,096 75,492, % 2.2% 2.7% 501, , ,249,500 4,651, , ,000 $ ,000-69, ,953,400 51,000 87, % 2.3% 4.1% 238, , ,300 1,151,760 87,600 (187,800) $ ,000-99, ,334, , % 3.2% 4.2% , , ,900 68,800 4,000 $ , ,968, ,112, % 3.1% 6.0% 1,166, , ,874,402 2,380,934 (591,500) (102,500) $0.74 TOTAL 6, ,747,400 51,000 1,278, % 2.5% 4.1% 2,074, ,110, ,993,202 9,421,666 (82,800) (227,500) $0.87 Note: revisions to the inventory base were made effective Q3 2017, historical data reported here reflect these revisions and may not match data reported in previous quarters. 5

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