Charleston: The Southeast s New Manufacturing Center

Research & Forecast Report GREENVILLE, CHARLESTON, SC INDUSTRIAL Q3 Q1 2017 2016 Charleston: The Southeast s New Manufacturing Center Ron Anderson Vice President of Administration South Carolina Key Takeaways > > Regional manufacturing is expanding rapidly. Manufacturing Growing in Charleston Market Indicators Relative to prior period VACANCY Q1 2017 Q2 2017* In the larger national context of the United States, manufacturing employment has been in decline for several decades. In 2000, 17.3 million people were employed by manufacturers in the U.S. Today, 12.4 million people are employed across the country, a 28 percent decrease. In contrast, the Charleston area has increased manufacturing employment over the same period. According to the Bureau of Labor Statistics, approximately 22,700 people were employed in manufacturing in 2000 and 26,600 today a 17 percent increase. More manufacturers are relocating to or expanding in Charleston, and the region is building a larger and stronger labor pool. How has Charleston bucked the national trend? It comes down to several key factors: access to the Port of Charleston, the ability to attract skilled labor from outside the region, competitive state incentives, a coordinated and proactive state and local economic development effort and clusters of suppliers and industries that create a diverse and synergetic manufacturing sector. In a rapidly globalizing economy, port cities have a distinct advantage over their inland competitors; Charleston is no different. The Port of Charleston provides access to international markets and companies hoping to reach U.S. markets, and the combination of the Port and major infrastructure in the region, including multiple interstates and railways, means that Charleston can be a gateway to much of the eastern United States. Charleston has utilized this advantage to attract many manufacturers like Mercedes, Boeing and Volvo. Mercedes originally shipped vehicles into the U.S. in parts (kits) and assembled them for national distribution, utilizing the benefits of a foreign trade zone. Many other companies likewise located in the market to minimize the distance from their production facility to the point of entry or exit from the country. With the nation and region approaching full employment, an acute shortage of skilled labor has developed. Charleston has met this challenge by creating the conditions that attract the needed workers NET ABSORPTION CONSTRUCTION RENTAL RATE** Note: Construction is the change in Under Construction. *Projected **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents. Summary Statistics Q1 2017 Charleston Industrial Market Industrial Vacancy Rate 4.8% Change From Q4 2016 (basis points) Absorption (Thousand Square Feet) New Construction (Thousand Square Feet) Under Construction (Million Square Feet) *New construction is newly delivered buildings Asking Rents Per Square Foot Per Year NNN 33 433.17 170 1.9 Market $5.02 Flex $11.98 Warehouse $4.87 Manufacturing $3.94 Change From Q4 2016 15.9%

to the market. Since 2010, nearly 12,500 people a year, or 35 people a day, have moved into the area largely to fill thousands of jobs. When combined with a relatively low median home price of $261,000, a large pipeline of entitled single family home sites, good public schools and low taxes, the outlook for future growth is strong. Another reason manufacturing is growing in Charleston is a robust and effective economic development effort. The South Carolina Department of Commerce and the Charleston Regional Development Alliance have successfully coordinated their efforts to create a package of state and local incentives to attract targeted industries. Charleston and South Carolina also have five growing clusters of manufacturers that create a self-reinforcing network of workers and suppliers to the benefit of existing and potential manufacturers. > > Initially attracted by BMW, a large network of original automotive equipment manufacturers has been attracted to the state and region to supply the automotive facilities constructed throughout the southeast. BMW, Daimler and Volvo are in the state, while six other automotive plants are within an eight-hour drive of the market (Volkswagen, General Motors and Nissan in Tennessee, Kia in Georgia, Mercedes, Hyundai and Honda in Alabama). > > Boeing in Charleston, Gulfstream in Savannah and Lockheed in Greenville anchor the aerospace cluster. Many of their suppliers that have located nearby provide services and materials for their production and maintenance facilities. > > Food processing facilities have a large presence in the state and region. They convert and package raw food for distribution and consumption, drawing specialized plastics and paper manufacturers to the region. > > The state is the nation s largest producer of tires. Michelin dominates the industry, with ten plants and a three-millionsquare-foot distribution center. Continental, Giti, Bridgestone and Trelleborg also have at least one plant or distribution center in the state. This generates further demand for rubber, steel and the specialized fabrics needed in tire production. > > There is also a plastics and specialty chemical manufacturing cluster in South Carolina, with a presence in Charleston. This evolved from the historic dominance of the textile industry in the state, which began incorporating specialized chemicals into products in the 1950s. In summary, the manufacturing growth in Charleston is not just a random happenstance, but the result of specific factors and deliberate moves by the region to stoke that growth. The region can attract the workforce to fill the jobs, provides a relatively inexpensive location to operate and has a network of similar industries and suppliers. Most importantly, it has the Port of Charleston, giving it access to global markets. These factors not only explain Charleston s growth but prove that the manufacturing in the area will remain strong in the coming years, independent of national trends. Significant Transactions Strong activity from institutional investors in the market at the end of 2016 is expected to continue throughout 2017. Sales > > 4349 Corporate Road, a 110,180-square-foot building in the North Charleston submarket, sold to 7379 Corporate Road, LLC for $6.4 million. > > Sanders Brothers Construction Company purchased 5 Corporate Parkway, a 40,750-square-foot building in Berkeley County, for $3,225,000. > > Omni Industrial Campus was purchased by Charleston Omni 1, LLC for $9,036,900. The campus will consist of five industrial buildings ranging from 169,000 to 587,720 square feet. > > C Level Investments bought three buildings at the corner of Jedburg Road and Hodge Road for $2 million. The three buildings totaled 36,700 square feet and are located in the Summerville submarket. Leases > > Key Logistics Solutions, LLC leased 157,320 square feet at 4597 Appian Way in North Charleston. > > Victoria Albert leased 52,000 square feet at 4269 Crosspoint Drive in North Charleston. > > The Inspectors, LLC leased 50,000 square feet at 1950 Hanahan Road in North Charleston. > > Murray Supply Company leased 49,600 square feet at 2509 Clements Ferry Road in the Clements Ferry Submarket. Capital Investments In 2016, $1.5 billion in capital investments and at least 1,797 new jobs were announced in the Charleston industrial market. More than $113 million in capital investments and 957 jobs have been announced in the market between January and May 2017. Q1 2017 Capital Investments Charleston, SC COMPANY TYPE INVESTMENT JOBS COUNTY Sundaram-Clayton Limited New $50,000,000 130 Dorchester Carver Companies Expansion $13,000,000 22 Charleston KION North America Corp. Expansion $5,700,000 50 Dorchester Auto Truck Group New $1,000,000 50 Dorchester Scout Boats Expansion $10,900,000 370 Dorchester NCGS, Inc. New $10,000,000 80 Charleston Booz Allen Hamilton Expansion $10,000,000 90 Berkeley Mid-States Packaging, Inc. New $5,200,000 30 Charleston Alcami Corp. Expansion $5,000,000 30 Charleston Wagner Systems Inc. New $2,300,000 30 Charleston Source: SC Commerce, Charleston Regional Business Alliance 2 South Carolina Research & Forecast Report Q1 2017 Charleston Industrial Colliers International

Inland Port Greer Monthly Rail Moves April 2016 8,182 June 2016 7,869 August 2016 9,932 October 2016 9,211 December 2016 9,180 February 2017 9,540 April 2017 11,125 Construction Pipeline Construction activity remains high in the Charleston market, with 3.2 million square feet under construction, 1.7 million of which is build-to-suit projects. Build-to-suits are becoming more common as large manufacturers and suppliers move to the market. The remainder is speculative buildings, several of which are set to deliver in the first half of 2017. Delivered > > Building 2 in Atlas Commerce Center completed February 2017. The speculative building is 67,500 square feet. > > Crosspoint Building 5 at Palmetto Commerce Park in the North Charleston submarket delivered April 2017. The building was developed by Childress Klein and is 273,000 square feet. Under Construction > > A 270,000-square-foot build-to-suit for Thorne Nutracentials is under construction in Omni Industrial Campus. > > Clarius has begun construction on a 587,000-square-foot speculative building in Omni Industrial Campus. > > There is currently 500,000 square feet under construction at the Volvo Cars of North America factory. The facility is expected to deliver in 2018. > > Construction is progressing on Daimler s 1.1 million-square-foot expansion to their existing facility. Market Conditions The Charleston industrial market continues to tighten. Over the past twelve months, more than 2.4 million square feet were absorbed, bringing the market vacancy rate to 4.8% from 7.5% twelve months earlier. The Charleston industrial market has the highest average asking rental rate for industrial space in South Carolina. At the end of the fourth quarter, the average asking rental rate was $4.77 per square foot per year triple net (PSF/YR NNN) for industrial space. Flex/R&D Sources: South Carolina Ports Authority, Colliers International Flex/R&D space is defined as industrial space where more than 30% of the building is utilized for office space. In Charleston, there are 3.7 million square feet of this type of space. In the first quarter of 2017, vacancy rose slightly to 3.47% with 71,000 square feet of absorption. Statewide Logistics South Carolina s logistics network is efficient, providing companies quick access to suppliers and customers through its ports, rail lines and interstates. South Carolina ports play a vital role in the continued success of the companies investing in Charleston s industrial market by expediting delivery of imports and exports, as well as reducing the cost on the transportation of goods. Total volume for the Port of Charleston at the fiscal year to date (July 2016 - December 2016) shows a 5.4% increase over the previous fiscal year. The port continues to grow as it undergoes the construction of a new terminal in North Charleston and a recently funded deepening of its harbor. Inland Port Greer is connected to the Port of Charleston via a Norfolk Southern rail line. It recorded 9,465 rail lifts in November 2016, a 55.8% increase from a year ago. The combined success of the Inland Port and increased demand within South Carolina markets has led the South Carolina Ports Authority (SCPA) to announce plans for a second inland port facility in Dillon County. South Carolina is crossed by five interstates: I-95, I-85, I-26, I-20 and I-77, creating heavy traffic that impacts the quality of the road infrastructure. A recent legislative bill signed by the government will commit $4 billion to fix the most heavily trafficked sections of South Carolina s interstates, including the intersection of I-26 and I-20 in Columbia. The completion of the improvements along these interstates will be key in the expansion of companies reliant on these routes for distribution of goods. Warehouse/Distribution Seventy percent of the industrial market is considered warehouse/ distribution space. In the first quarter of 2017, vacancy dropped to 4.86%, rents continued to rise and 273,076 square feet were absorbed. Manufacturing Port of Charleston Fiscal Year-to-Date TEU Volume 1,178,848 1,295,721 1,374,071 1,564,663 1,608,101 1,772,018 This industrial subtype is primarily used to assemble goods for sale and distribution. Vacancy in manufacturing space decreased in the first quarter from 5.31% to 5.06%. Nearly 90,00 square feet were absorbed. 2012 2013 2014 2015 2016 2017 June-April Source: South Carolina Ports Authority, Colliers International 3 South Carolina Research & Forecast Report Q1 2017 Charleston Industrial Colliers International

Q1 2017 Industrial Market Summary Statistics Charleston, SC MARKET BERKELEY COUNTY BUILDINGS INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) NET ABSORPTION Manufacturing 6 95,349 0 0 0 0.00% 0 Warehouse/Distribution 4 241,707 0 0 0 0.00% 0 Berkeley County Total 10 337,056 0 0 0 0.00% 0 CHARLESTON-PENINSULA Flex/R&D 4 150,611 10,000 0 10,000 6.64% -10,000 Manufacturing 5 250,106 0 0 0 0.00% 0 Warehouse/Distribution 48 824,496 14,750 0 14,750 1.79% -11,950 CHARLESTON-PENINSULA TOTAL 57 1,225,213 24,750 0 24,750 2.02% -21,950 Clements Ferry Flex/R&D 14 369,863 28,325 0 28,325 7.66% 12,526 Manufacturing 8 412,329 0 0 0 0.00% 0 Warehouse/Distribution 81 4,837,161 570,968 0 570,968 11.80% 47,760 CLEMENTS FERRY TOTAL 103 5,619,353 599,293 0 599,293 10.66% 60,286 Goose Creek/ Moncks Corner Flex/R&D 10 1,341,915 0 0 0 0.00% 82,502 Manufacturing 12 2,533,049 240,000 0 240,000 9.47% 0 Warehouse/Distribution 43 1,782,095 2,400 0 2,400 0.13% 92,635 GOOSE CREEK/ MONCKS CORNER TOTAL 65 5,657,059 242,400 0 242,400 4.28% 175,137 Hanahan/ North Rhett Flex/R&D 3 66,374 3,302 0 3,302 4.97% 9,690 Manufacturing 6 753,309 0 0 0 0.00% 0 Warehouse/Distribution 37 3,569,184 348,611 0 348,611 9.77% 27,000 HANAHAN/ NORTH RHETT TOTAL 46 4,388,867 351,913 0 351,913 8.02% 36,690 North Charleston Flex/R&D 33 1,088,152 18,500 0 18,500 1.70% -12,300 Manufacturing 48 3,801,230 275,452 0 275,452 7.25% 86,048 Warehouse/Distribution 390 13,405,822 621,991 29,965 651,956 4.86% 126,511 NORTH CHARLESTON TOTAL 471 18,295,204 915,943 29,965 945,908 5.17% 200,259 Summerville Flex/R&D 5 152,698 4,000 0 4,000 2.62% 0 Manufacturing 35 2,219,853 4,055 0 4,055 0.18% 3,481 Warehouse/Distribution 121 7,632,374 8,880 0 8,880 0.12% -8,880 SUMMERVILLE TOTAL 161 10,004,925 16,935 0 16,935 0.17% -5,399 Other Submarkets Flex/R&D 13 562,726 52,820 12,710 65,530 11.65% -11,250 Manufacturing 7 209,542 0 0 0 0.00% 0 Warehouse/Distribution 60 882,400 16,036 0 16,036 1.82% 0 OTHER SUBMARKETS 80 1,654,668 68,856 12,710 81,566 4.93% -11,250 Market Total Flex/R&D 82 3,732,339 116,947 12,710 129,657 3.47% 71,168 Manufacturing 127 10,274,767 519,507 0 519,507 5.06% 89,529 Warehouse/Distribution 784 33,175,239 1,583,636 29,965 1,613,601 4.86% 273,076 MARKET TOTAL 993 47,182,345 2,220,090 42,675 2,262,765 4.80% 433,773 Source: CoStar, Colliers International In January 2017, Colliers International benchmarked its industrial data set statewide. The new standard for collection is all industrial buildings 10,000 square feet or larger that can be readily adapted to an alternative industrial use. All properties were placed into a revised set of markets and submarkets and divided into three categories. Warehouse/Distribution, a facility primarily used for the storage or distribution or both of materials, goods and merchandise. Manufacturing, a facility used for the conversion, fabrication or assembly of raw or partly wrought materials into products or goods. Flex/R&D, a building designed to be used in a variety of ways with at least 30% of the rentable building area used as office. It is usually located in an industrial park setting. Specialized flex buildings can include service centers, showrooms, offices, warehouses and more. Due to the adjustments of the building inventory, comparison of data included in previously published market reports should be avoided. 4 South Carolina Research & Forecast Report Q1 2017 Charleston Industrial Colliers International

Industrial Employment Industrial employment, those jobs related to the manufacturing and wholesale trade sectors, are growing in the Charleston-North Charleston Metropolitan Statistical Area (MSA), despite a slight drop in total non-farm employment in the MSA. According to the most recent data from the Bureau of Labor Statistics, since November of 2015, 1,700 industrial jobs have been added to the MSA, 16.0% of the total number of jobs added over the same time period. Industrial employment has seen a growth from 33,300 jobs in November 2014 to 35,900 jobs in November 2016, a 7.8% growth. Robust interest in the Charleston industrial market, coupled with new capital investments, is expected to continue this upward trend for industrial employment. Market Forecast The coming quarters are expected to see continued healthy absorption as activity from new and expanding tenants and institutional investors increases. The Charleston industrial market has been limited to small industrial spaces in past quarters, but prospective tenants will begin to see more large speculative space come to market over the next six months. Additionally, continued economic development and infrastructure improvements will attract new prospects to the market. The Charleston Harbor Deepening Project will play a key role in the movement of goods throughout regional and global markets and in leveraging South Carolina as a strong industrial market to investors, developers and national and global companies. Around South Carolina Statewide investments from major employers and infrastructure improvements continue to improve the South Carolina industrial market. Columbia, South Carolina > > Asian manufacturing has been active in the region, attracted to a growing cluster of companies from the same region, a strong transportation network, low costs and a strong track record of successful foreign direct investment. Greenville, South Carolina > > The Flex/R&D market tightened substantially, with little new product in the development pipeline. New product is expected to be absorbed quickly. > > Cowpens in western Cherokee County is quickly becoming a location that developers and end users are considering due to its proximity to two intermodal facilities, direct access to Interstate 85, and several new fully-entitled industrial parks with utilities. Industrial Employment Charleston-N. Charleston MSA Number of Industrial Jobs Added (Thousands) 2,100 1,800 1,500 1,200 900 600 300 0 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Source: Bureau of Labor Statistics, St. Louis Federal Reserve, Colliers International NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION Feb-13 May-13 Aug-13 PHASE 1: RECOVERY Nov-13 Feb-14 Industrial Jobs Added May-14 Aug-14 Nov-14 Feb-15 May-15 COMMERCIAL REAL ESTATE GROWTH CYCLE Aug-15 Total Industrial Jobs Commercial Real Estate Growth Cycle: Where the market stands and where it is going. 200 Carolina Pines Richland County Nov-15 Feb-16 PHASE 3: HYPERSUPPLY May-16 PHASE 2: EXPANSION Aug-16 Nov-16 36.0 35.0 34.0 33.0 32.0 31.0 30.0 29.0 28.0 27.0 Total Industrial Employment (Thousands) For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights Source: Robert Oswald Design 5 South Carolina Research & Forecast Report Q1 2017 Charleston Industrial Colliers International

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 billion square feet under management 15,000 professionals and staff FOR MORE INFORMATION: Liz H. McCary Vice President, Marketing South Carolina +1 803 401 4269 Liz.McCary@colliers.com Ron Anderson Vice President, Administration South Carolina +1 803 401 4234 Ron.Anderson@colliers.com CHARLESTON INDUSTRIAL PROFESSIONALS: Hagood Morrison, MBA, SIOR Senior Vice President & Principal +1 843 723 4265 Hagood.Morrison@colliers.com Simons Johnson, CCIM, MCR, SIOR Principal +1 843 720 7509 Simons.Johnson@colliers.com John Beam Brokerage Associate +1 843 720 7506 John.Beam@colliers.com Peter Fennelly, MCR. SIOR, SLCR Market President +1 843 720 7500 Peter.Fennelly@colliers.com Tim Raber Brokerage Associate +1 843 518 6091 Tim.Raber@colliers.com Colliers International Charleston 25 Calhoun Street, Suite 220 Charleston, South Carolina USA +1 843 723 1202 About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 15,000 professionals operating from 396 offices in 68 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 2017 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.