US CAPITAL TRENDS INDUSTRIAL

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1 MAY 18 US CAPITAL TRENDS INDUSTRIAL Deal activity for the industrial sector suffered a setback in May but volume is still up sharply for the year. Sales volume is well ahead of the pace set in 2016 and 2017, though the peaks of 2015 are still a little distant. $4.5b -29% 10.8% Transaction volume YOY volume change YOY price change $b Monthly Transaction Volume & Pricing Entity Portfolio Individual RCA CPPI Ind It is not clear yet if this monthly decline is a function of caution finally coming to the industrial market, or a change in where the market is transacting. The industrial sector has been one bright spot in the commercial property market over the last year. As expectations on interest rate increases led investors to underwrite new acquisitions with more caution, deal volume fell in many other sectors. Looking at deal activity by market tier, it is the larger markets where the slowdown was the most pronounced. Deal volume fell 48% YOY in the 6 Major Metros but 15% YOY in the secondary and tertiary markets. For the year to date, deal activity is still ahead of last year for these smaller markets. 150% 100% 50% 0% -50% Year-Over-Year Volume Change This unequal growth for the year has led to revisions to historical trends. Last month we reported that deal volume had fallen 11% YOY for April but this decline has been revised to a 24% YOY increase in activity. The Exeter Mapletree US Industrial portfolio closed in April but with so many of the assets located in smaller, less informationally-efficient markets, details on the transaction only came to light recently. -100% 8.0% Cap Rates All Industrial Warehouse Flex The decline in deal volume for May is a story for both flex and warehouse assets. On a percentage basis flex assets fell more, down 49% YOY. Warehouse assets dropped 22%. 7.5% Cap rates continue to compress for the industrial sector. Cap rates overall were down 40 bps from a year earlier to hit 6.4% in May. The average warehouse cap rate stood at 6.4% versus 6.6% for flex assets. 7.0% 6.5% '13 '14 '15 '16 '17 '18 12-mth trailing cap rates In This Issue: We look at the cap rate trends, top buyers and sellers, and investor composition in the industrial single tenant market Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed or warranted; subject to future revision. 1

2 01Q4 US CAPITAL TRENDS INDUSTRIAL Trends in the Single Tenant Market Single tenant industrial properties are most often investments based on a net leased structure which makes the cash flows from these assets an attractive bond alternative. Uncertainty on interest rates may cause challenges for these investments. 10.0% Single Tenant Cap Rates Multi Tenant The Federal Reserve raised the fed funds rate in mid- June and has signaled an intention to raise rates two additional times this year. This action is creating an expectation that bond rates will be increasing. 9.0% 8.0% Net leases to single tenants avoid some leasing market risks but also do not give as much upside to investors. A buildup of inflationary pressure is leading to the Fed action and if both inflation and the 10yr UST push up higher than the current levels, investors looking at such single tenant industrial investments will likely want higher cap rates before investing. 7.0% 6.0% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 12-mth trailing cap rates Still, one should not expect a one-to-one increase in single tenant cap rates and the 10yr UST. The forces driving interest rate increases should reduce the cash flow risks presented by the occupiers of single tenant assets. The spread between these rates should narrow if ongoing interest rate increases are a function of stronger economic growth. The average single tenant industrial cap rate stood at 6.3% in Q1 18, but some of the most notable deals posted much lower cap rates. Amazon and FedEx are two important pieces of e-commerce infrastructure and over the last 12 months such assets have achieved cap rates that look more like the levels one might see for CBD offices in places like Manhattan and San Francisco. Buyer Composition Past 12 Mths Single Tenant Multi Tenant 4% 13% 10% 11% 36% 22% 21% 19% 22% User/Other Private Listed/REITs Institutional/Fund Cross-Border 41% Top Single Tenant Players Past 12 Mths Major Single Tenants Buyers Sellers Notable Deal Activity Past 12 Mths Property Location SF $/sf Cap Rate Amazon Distribution Center North East, MD 1,150, % Amazon Distribution Ctr DFW6 Coppell, TX 1,100, % Amazon Distribution Lebanon, TN 1,016, % FedEx San Jose, CA 206, % FedEx Ground - Durham Durham, NC 236, % FedEx Ground Sorting Facility Wayne, NJ 163, % FedEx Miami Miami, FL 103, % Blackstone Caisse de Depot Brennan Invmt Group BREIT National Retail Props Gramercy Plymouth Industrial REIT CDH Fund Mapletree Commercial LBA Realty Cabot Properties TPG Capital Exeter DRA Advisors Westcore Properties Pure Industrial RE Trust Global Securitizn Svcs Brennan Invmt Group Scannell Properties Carter Validus MC REIT I By number of properties; does not include properties bought or sold strictly for occupancy 2

3 Market Table All Industrial Industrial Transactions Reported Closed Flex Warehouse All Industrial Volume Price Volume Price Volume Price YTD through May 18 $m # Props $/sf Avg Cap Rate $m # Props $/sf Avg Cap Rate $m # Props $/sf Avg Cap Rate Mid-Atlantic Midwest Northeast Southeast Southwest West Baltimore DC DC MD burbs DC VA burbs % % Philadelphia Pittsburgh Richmond/Norfolk Tertiary Mid-Atlantic % % % Total % 2, % 2, % Chicago , , Cincinnati Cleveland Columbus % % Detroit % % % Indianapolis % % Kansas City Minneapolis % % St Louis Tertiary Midwest Total % 3, % 4, % Boston % % Hartford Long Island Manhattan ,806 No NJ % % NYC Boroughs % % % Stamford Westchester Tertiary Northeast Total % 1, % 2, % Atlanta % % % Broward Charlotte Jacksonville % % Memphis Miami % % Nashville Orlando % % Palm Beach Raleigh/Durham Tampa Tertiary Southeast , % 1, % Total % 3, % 4, % Austin Dallas % % 1, % Denver % % Houston % % % Phoenix San Antonio Tertiary Southwest Total 1, % 2, % 4, % East Bay % % Inland Empire , % Las Vegas % % Los Angeles % 1, % 1, % Orange Co % % Portland Sacramento Salt Lake City San Diego San Francisco San Jose % % Seattle % % Tertiary West % 1, % Total 2, % 5, % 8, % Total Total US 7, % 23, , % 30, , % 3

4 Selected Recent Transactions Property Name SF Price Owner/Buyer Address Year Built $/sf Seller Location Notes Qualifier Broker Mid-Atlantic 2086 Corporate Center Drive W 1,369,177 $99,500, Corporate Center Dr W 2007 $73 Tobyhanna, PA Warehouse approximate Plymouth Meeting Conf Center 141,261 $39,252,600 1 IMS Dr 2010 $278 Plymouth Meeting, PA Flex approximate Mapletree Commercial from Gulf Finance House from Eastdil Secured Exeter Exeter by Midwest North Valley Commerce Center B, Reno, NV Ace Hardware RSC 534,040 $57,360, Enterprise Pkwy 2014 $107 West Jefferson, OH Warehouse approximate Granite REIT from Duke Realty Yusen Logistics 212,158 $24,734, Busse Rd 2014 $117 Elk Grove Village, IL Warehouse approximate NYK Line from Duke Realty Northeast 207 Clay Avenue 250,000 $17,400, Pond Ave 1988 $70 Middlesex, NJ Warehouse approximate Beacon Sales 84,848 $7,300, Manley St 1974 $86 West Bridgewater, MA Warehouse approximate Joseph Saadia from Cabot Properties from Silverman Group Rhino Capital Southeast Supervalu Distribution Center 787,500 $66,410, SW 12th Ave 1973 $84 Pompano Beach, FL Warehouse confirmed Fortress from Supervalu Inc Shaw Dist Cntr Northport Building C 1,001,508 $56,500, Northport Pkwy 2018 $56 Port Wentworth, GA Warehouse confirmed Griffin Capital EAR from Clayco Southwest Hub ,499 $74,000, E 64th Ave 2016 $176 Denver, CO Warehouse confirmed JP Morgan from CBRE Westfield Dev Co by Southwest Products 159,384 $15,035, N 132nd Ave 2013 $94 Surprise, AZ Warehouse approximate Pacific Acquisitions by Lee & Associates from Southwest Products by Cushman & Wakefield Ferguson Enterprises 102,080 $14,820, W Oxford Ave 1984 $145 Sheridan, CO Warehouse approximate by LBA Realty from CBRE Cadence Cap Investments West Supervalu Distribution Center 693,282 $121,000, Sheila St 1979 $175 Los Angeles, CA Warehouse confirmed Rexford Industrial REIT from Supervalu Inc North Valley Commerce Center B 1,060,723 $81,100, N Virginia St 2016 $76 Reno, NV Warehouse confirmed Prism Realty Corp by Newmark Knight Frank from Panattoni Development by JLL 4

5 Jim Costello, Senior Vice President Contact Robert M. White, Jr., Founder & President Alexis Maltin, Manager, Analytics Elizabeth Szep, Manager, Analytics Michael Savino, Analyst About Real Capital Analytics Real Capital Analytics (RCA) is the authority on the deals, the players and the trends that drive the commercial real estate investment markets. Covering all markets globally, RCA delivers timely and reliable data with unique insight into market participants, pricing and capital flows. The most active investors, lenders and advisors depend on RCA s market intelligence to formulate strategy and to source, underwrite and execute deals. An industry pioneer since 2000, RCA has offices in New York, San Jose, London and Singapore. For more information, visit: rcanalytics.com About Capital Trends Capital Trends reports analyze and interpret trends in the global real estate market using RCA s comprehensive data. US Capital Trends is a monthly edition comprising an overview of the U.S. market and separate reports on the five main property types. Asia Pacific, Europe and Global Capital Trends are published quarterly. Methodology Data based on properties and portfolios $2.5m and greater unless otherwise stated. For the most current data and even more options for analysis, visit: rcanalytics.com US Capital Trends Copyright 2018 Real Capital Analytics, Inc. All rights reserved. Data believed to be accurate but not guaranteed or warranted; subject to future revision. It is a violation to photocopy or reproduce any part of this publication, or forward it electronically, without first obtaining permission from RCA. For permission, please contact us at reports@rcanalytics.com. To obtain a corporate license for your office, contact us at service@rcanalytics.com.