Scarcity Defines the Remainder of 2016

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1 Research & Forecast Report PLEASANTON TRI-VALLEY INDUSTRIAL Q Scarcity Defines the Remainder of 2016 > Vacancy dropped 43 percent from the previous quarter to 2.5 percent > The overall weighted average asking rate inched up to $0.72 per square foot NNN > The year started off with positive 341,824 square feet of net absorption The Tri-Valley industrial market continues to be a harder place to find warehouse and light industrial space for expanding local companies and those from outside the area that wish to relocate here. Industrial users and their brokers from the I-880 Corridor and the South Bay continue to be frustrated in their respective markets, and their migration east includes a search in the Tri-Valley. The market experienced 341,824 square feet of net absorption for the first quarter of 2016, with the majority migrating from one location at the I-580/I-680 Corridor. The industrial market dropped to 2.5 percent vacancy, which is a 43 percent reduction from the previous quarter. As mentioned last quarter, industrial brokers in the Tri-Valley region question if there will be any inventory to show prospective buyers or sellers in the year ahead. Despite the dearth of product, there is no industrial speculative development occurring for the standard 10,000-30,000 square foot users in the Tri-Valley. In the first quarter of, light industrial vacancy stood at 6.6 percent. Last quarter, that vacancy dropped to 4.8 percent. Presently, there is only 2.2 percent vacancy in light industrial, with the weighted average asking rental rate of $0.83 per square foot, triple net (NNN), versus $0.74 per square foot, NNN, one year ago. Historical Vacancy and Average Asking Rates Tri-Valley Overall 12% 10% 8% 6% 4% 2% 0% 2016 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 Vacancy Rate Weighted Average Asking The market experienced 341,824 square feet of net absorption for the first quarter of 2016, with the majority migrating from one location at the I-580/I-680 Corridor. The industrial market dropped to 2.5 percent vacancy, which is a 43 percent reduction from the previous quarter. Market Indicators - Tri-Valley Average Blue Collar Unemployment Household Income Jobs Rate 155,929 Market Trends Relative to prior period Q Q2 2016* Vacancy Net Absorption Construction Rental Rate *Projected Summary Statistics Q Tri-Valley Industrial Market 10.2% Previous Quarter Current Quarter Vacancy Rate 4.4% 2.5% Overall Asking Rate* $0.71 $0.72 Light Industrial Asking Rate* $0.83 $0.83 Whse/Dist Asking Rate* $0.47 $0.50 Net Absorption 149, ,824 Gross Absorption 237, ,936 *Asking rates are reported on a triple net monthly basis 3.6% U.S. Economic Indicators Unemployment Rate 5.0% 5.0% Labor Force Participation Rate 62.5% 63.0% Consumer Price Index 2.40% 2.40% Interest Rate - 10 Yr Treasury 2.30% 1.78% Business Confidence 99.1% 99.2% Consumer Confidence 96.5% 96.2%

2 The light industrial market absorbed a net 262,573 square feet, which is 47 percent more net square feet absorbed than the entire year in. With virtually nothing available in Pleasanton and Dublin, Livermore will continue to be the go to market for manufacturing and light industrial companies for the remainder of Historical Vacancy and Average Asking Rates Tri-Valley Light Industrial 10% $1.00 8% $0.90 The warehouse sector was 21.8 percent vacant in the beginning of 2012; presently, warehouse in the Tri-Valley is down to 2.8 percent. Net absorption was 79,259 square feet, with average asking rents of $0.50 per square foot, NNN. Interestingly, average asking rents during the same period in were a penny more, though the vacancy was 3.4 percentage points higher than where it sits today. Similar to the light industrial market, there is virtually no warehouse space available in Dublin or Pleasanton. Livermore has only 201,715 square feet of warehouse space remaining, and despite the Bentall Kennedy/ Trammell Crow buildings currently under construction in Livermore, there are few, if any, options left for most warehouse users looking to expand or relocate. 6% 4% 2% 0% Vacancy Rate 2016 Weighted Average Asking $0.80 $0.70 $0.60 $0.50 Dublin/Pleasanton Light Industrial Available Space by Square Foot Range The industrial story of this quarter is the lease-up of 6400 Sierra Court, in Dublin, by the Covington Group of Southern California. This building (formerly Chevron) has been renovated by Covington to include new grade level doors, tenant improvements and other building/yard improvements that have attracted a variety of users. Leases include: K-1 Speed, Inc. (48,066 square feet); AMP Printing (102,688 square feet); and Pace Supply Corporation (38,694 square feet). Covington has a 16,000 square foot space remaining with some yard attached, and they are asking $1.05 per square foot, industrial gross. With this space off the market, Dublin will be 100 percent leased up to both industrial and warehouse users. 12% 21% 14% 17% 36% 0-5,000 5,001-10,000 10,001-20,000 20,001-50,000 50,001 - Above The Pleasanton industrial market was relatively quiet, with 37,255 square feet absorption. The Dublin San Ramon Services District purchased a 27,345 square foot, light industrial building from Johnson Drive Holdings I, LLC (Nearon Development). This building will act as their headquarters and provide other services to the Water and Sewer District. The other major story in Pleasanton is the City s attempt to develop the Johnson Drive Economic Development Zone ( JDEDZ ) at the northwest corner of Johnson Drive and Stoneridge Drive, fronting I-680. The City is proposing to put a big box store (i.e., Costco) and a gas station along Johnson Drive, along with hotels and other retail. Citizens For Planned Growth is a group of local business owners, tenants and others in the area who are collecting signatures to put an initiative on the ballot to eliminate the size of any retailer locating in the JDEDZ greater than 50,000 square feet. Their concerns include traffic and air quality degradation. As of the end of the first quarter of 2016, there was only 18,447 square feet of light industrial space available, in Pleasanton, with an average asking rate of $1.10 per square foot, NNN. Historical Net Absorption and Gross Absorption 600, , , , , , , Net Absorption Gross Absorption 2 Tri-Valley Research & Forecast Report Q Industrial Colliers International

3 Livermore Light Industrial/Warehouse Walls being tilted at The Oaks Logistics Center The heart of the Tri-Valley s industrial market lies in Livermore, where the entire industrial market only has 392,140 square feet remaining to lease. This represents a record low vacancy rate of 3.0 percent across both the industrial and warehouse markets, with a weighted average asking rental rate of $0.56 per square foot, NNN. Gillig Corporation has broken ground for their new headquarters/manufacturing campus of over 636,000 square feet, and they expect this project to be completed by September There will be over 800 employees at this location. Also located in The Oaks Logistics Center, south of the Livermore Airport, the Bentall Kennedy/Trammell Crow s addition of 1.3 million square feet of state-of-the-art warehouse space is very active with large industrial users now negotiating on leases that expect to be signed prior to completion. The largest building (635,533 square feet) will be leased to a large internet retail company that is absorbing large blocks of state-of-the-art warehouse/distribution space in the areas for same day delivery. The developer expects to sign all buildings on long term leases, with rental rates and other concessions very close to asking. These buildings will be completed by the end of next quarter. Livermore will continue to be the go to market for manufacturing and light industrial companies for the remainder of There were virtually no sales that occurred in Livermore during the first quarter of There were 115,121 square feet of net absorption that occurred during that time. Significant transactions included: 6262 Patterson Pass Road (37,092 square feet leased to Kenco Logistics Services); 174 Lawrence Drive (26,100 square feet leased to Advance International, Inc.); 161 South Vasco Road (27,763 square feet leased to Nuprodx, Inc.); and 7041 Las Positas Road (36,545 square feet of refrigerated space leased to Seaside Refrigerated Transport). There are some industrial land sales occurring in the area to owner/ users or those looking for build-to-suit; the sales of industrial land are in the $8.00-$10.00 per square foot range. What Lies Ahead Tenant Demand in the Tri-Valley 31.6% 1.0% 3.6% 0.7% Looking ahead, there is not much room for vacancy rates to fall further in The cost of industrial land, industrial permits and fees, and the construction of a new shell industrial building in the Tri-Valley cannot be justified by the existing rents and those needed to lease this kind of speculative product. Thus, given the normal supply/demand pressures, we expect rental rates and sales prices to continue to rise and vacancy rates to fall. The drift of industrial users coming through the Tri-Valley from the South Bay, I-880 Corridor and the Peninsula will continue to take them over the Altamont to the Central Valley and beyond. Transportation, Logistics, Distribution Retail: General Engineering & Construction 63.1% Technology Healthcare & Medical Devices 3 Tri-Valley Research & Forecast Report Q Industrial Colliers International

4 680 SAN RAMON Significant Lease & Sale Activity AMP Printing Inc Sierra Court, Dublin 80,167 Light Industrial K-1 Speed Inc Sierra Court, Dublin 48,066 Light Industrial DUBLIN LIVERMORE 580 Pace Supply Corporation 6400 Sierra Court, Dublin 38,694 Light Industrial ±25 miles to Port of Oakland PLEASANTON Advance International Inc. 174 Lawrence Drive, Livermore 26,100 Light Industrial Seaside Refrigerated Transport Las Positas Road, Livermore 36,545 Warehouse/Distribution = LEASE = SALE ±25 miles to Silicon Valley Confidential 240 South Vasco Road, Livermore February ,643 Light Industrial Nuprodx Inc. 161 South Vasco Road, Livermore January ,763 Light Industrial 6400 SIERRA COURT This building (formerly Chevron) has been renovated by Covington to include new grade level doors, tenant improvements and other building/yard improvements that have attracted a variety of users. Nearly 190,000 square feet was leased in the first quarter; only 16,000 square feet remains available. Kenco Logistics Services 6262 Patterson Pass Road, Livermore February ,092 Warehouse/Distribution Confidential* Las Positas Road, Livermore 24,150 Warehouse/Distribution Dublin San Ramon Services District 7035 Commerce Circle, Pleasanton 27,345 Light Industrial * Renewal + Sublease 4 Tri-Valley Research & Forecast Report Q Industrial Colliers International

5 Market Comparisons Tri-Valley INDUSTRIAL MARKET CLASS BLDGS TOTAL INVENTORY DIRECT VACANT DIRECT SUBLEASE VACANT SUBLEASE TOTAL VACANT CURRENT QUARTER PRIOR QUARTER NET ABSORPTION CURRENT QTR NET ABSORPTION YTD GROSS ABSORPTION YTD COMPLETIONS CURRENT QTR UNDER CONSTRUCTION WEIGHTED AVG ASKING FSG DUBLIN Lt Ind 40 1,297,559 16, % - 0.0% 16, % 15.8% 189, , , $1.00 Whse 2 259, % - 0.0% - 0.0% 0,0% $0.80 Total 42 1,557,476 16, % - 0.0% 16, % 13.2% 189, , , $1.00 LIVERMORE Lt Ind 301 6,583, , % 4, % 190, % 3.4% 35,870 35, , $0.62 Whse 50 6,493, , % - 0.0% 201, % 4.3% 79,251 79,251 64, $0.50 Total ,077, , % 4, % 392, % 3.9% 115, , , $0.56 PLEASANTON Lt Ind 126 2,248,821 18, % - 0.0% 18, % 2.5% 37,255 37,255 42, $1.10 Whse 2 487, % - 0.0% - 0.0% 0.0% $ - Total 128 2,736,226 18, % - 0.0% 18, % 2.0% 37,255 37,255 42, $1.10 MARKET TOTAL Lt Ind ,129, , % 4, % 224, % 4.8% 262, , , $0.83 Whse 54 7,241, , % - 0.0% 201, % 3.9% 79,251 79,251 64, $0.50 Total ,370, , % 4, % 426, % 4.4% 341, , , $0.72 QUARTERLY COMPARISON AND TOTALS Q ,370, , % 4, % 426, % 4.4% 341, , , $0.72 Q ,391, , % 36, % 768, % 5.4% 149, ,512 1,059,921-1,298,207 $0.71 Q ,391, , % 41, % 932, % 6.1% 125, , ,591-1,298,207 $0.67 Q ,391,991 1,057, % - 0.0% 1,057, % 6.4% 62,499 56, ,033-1,298,207 $0.67 Q ,391,991 1,096, % 23, % 1,119, % 6.4% (6,255) (6,255) 275,519-1,298,207 $ Tri-Valley Research & Forecast Report Q Industrial Colliers International

6 554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 $2.5 billion in annual revenue COLLIERS INTERNATIONAL PLEASANTON 3825 Hopyard Road, Suite 195 Pleasanton, CA USA MARKET CONTACTS: Marshall Snover Executive Managing Director CA License No marshall.snover@colliers.com Lisa Kohler Senior Research Analyst lisa.kohler@colliers.com CONTRIBUTING AUTHOR: Mark Triska, SIOR Executive Vice President 2 billion square feet under management 16,000 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,000 professionals operating from 554 offices in 66 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.