INDUSTRIAL MARKET REPORT 1Q INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS ECONOMY: During 1Q16, real GDP increased at an annualized rate of 0.8% (second estimate), compared to 1.4% growth during the fourth quarter. Total payroll jobs rose by 628,000 during the first quarter, mostly a result of employment gains in retail trade, construction, and health care. The unemployment rate for the quarter was unchanged at 5.0%, and this measure has shown little movement since August. ABSORPTION: Nationally, net absorption dipped during 1Q16 to 46.4 msf, which was a decrease of 35.1 msf from the previous quarter, but up 6.4 msf from a year ago. Prepared by: SUPPLY: During this quarter, construction activity remained flat at 207.6 msf. As a percentage of inventory, it is still minimal at 1.0%, unchanged from the previous quarter. Construction starts for 1Q16 totaled 35.4 msf, down 14.0 msf from last quarter and up 4.0 msf from a year ago. PNC s footprint markets accounted for 33.8% of the space underway. VACANCY: The national industrial vacancy rate ended the quarter at 6.2%, a 10 bps decrease sequentially and 70 bps annually. The national rate is now 420 bps below this cycle s high of 10.4%. Of the 142 industrial markets that we monitor, 117 had lower vacancy rates than a year ago (five more than 4Q15). RENTS: The average industrial rent grew during the first quarter and is now 3.0% above its prior peak in late. This quarter, it rose $0.11/sf (1.8%) sequentially and is up $0.34/sf (5.7%) annually to $6.36/sf. For 1Q16, all ten of the nation s top industrial markets experienced annual rental growth. The San Francisco Bay Area had the largest increase at 11.6%, and the metro s average rent of $14.41/sf is well above the national figure. Jeffrey S. Moses Real Estate Market Analytics PNC 1600 Market Street Philadelphia, PA 19103 (215) 585-6173 Jeffrey.Moses@pnc.com CAPITALIZATION RATES: Institutional quality sales volume decreased from 4Q15 s $24.1 billion to $10.8 billion. During the quarter, warehouse properties accounted for $5.6 billion of the volume (52.0%), but were down $9.1 billion from a year ago. Flex property sales totaled $5.2 billion, up 16.0% from the prior year. Cap rates for the flex and warehouse sectors moderated on a quarterly basis, but have improved on an annual basis per PwC. Despite recent monetary policy tightening and increased macroeconomic volatility cap rates have remained stable in the industrial sector. PNC and PNC Bank are registered service marks of The PNC Financial Services Group, Inc. PNC Bank and certain of its affiliates, including PNC TC, LLC, an SEC registered investment advisor wholly-owned by PNC Bank, do business as PNC Real Estate. PNC Real Estate provides commercial real estate financing and related services. Through its Tax Credit Capital segment, PNC Real Estate provides lending services, equity investments and equity investment services relating to low income housing tax credit ( LIHTC ) and preservation investments. PNC TC, LLC provides investment advisory services to funds sponsored by PNC Real Estate for LIHTC and preservation investments. Registration with the SEC does not imply a certain level of skill or training. This material does not constitute an offer to sell or a solicitation of an offer to buy any investment product. This document is for general informational purposes only and is not intended as specific advice or recommendations. The information contained herein is gathered from public sources believed by PNC to be accurate and reliable at time of publication, but neither PNC nor any of its affiliates is providing any guaranty or warranty as to the accuracy, completeness or reliability of that information or of the conclusions presented in this document. Forecasts and other forward looking statements are based on current expectations and serve as an indication of what may occur. In addition, markets do change. Given the inherent uncertainties and risks associated with forecasts and forward looking statements, actual events and results may differ materially from those reflected or contemplated. Opinions expressed herein are subject to change without notice. The information set forth herein does not constitute legal, tax or accounting advice. You should obtain such advice from your own counsel or accountant. Any reliance upon the information provided herein is solely and exclusively at your own risk. The PNC Financial Services Group, Inc. All rights reserved.
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 2 ECONOMY This section discusses quarterly changes and trends occurring within the economy and supply chain components that influence industrial space demand. GDP & EMPLOYMENT During 1Q16, real GDP decreased at an annualized rate of 0.8% (second estimate), compared to growth of 1.4% for the fourth quarter. Contributing to reduced performance this quarter was business investment declining at 6.2%, the sharpest drop since the second quarter of. Consumer spending was also down, having only grown at 1.9%, compared to 2.4% the previous quarter. A strong dollar and weakness overseas further eroded the GDP figure due to depressed demand for U.S. exports. This was the seventh time in the past nine quarters that trade was a drag on the overall GDP growth, as reported by the Wall Street Journal after the figure was released. Total payroll jobs rose by 628,000 during the quarter, mostly a result of employment gains in retail trade, construction, and health care, which offset losses in manufacturing and mining. The average monthly payroll job gain during the quarter was 209,000, compared to 228,000 per month in and 243,000 per month in. The unemployment rate was unchanged during the quarter at 5.0%, and this measure has shown little movement since August. PRODUCTION ACTIVITY All of the production metrics showed improvement during the quarter. The Empire Survey (blue line) reflected that business activity steadied. After seven months in negative territory, the general business conditions index increased 5.6 points from December to end the quarter at 0.6. Indices for the six-month outlook indicated that conditions are expected to improve. The index for future new ordered advanced 13.6 points to 38.9, the highest level in more than a year. The Philadelphia Business Outlook (orange line) also posted its first positive reading in seven months, ending the quarter at 12.4 (up from -10.2). The future general activity index was up by 4.7 points to 28.8, the highest reading for the index in four months. The Institute of Supply Management s Purchase Managers Index (green line) ended the quarter at 51.8, a 380 bps increase from December. A reading above 50 indicates expansion within the manufacturing sector and the index returned to this level for the first time in the last six months. Industries related to the industrial sector that were responsible for the improvement included furniture and related products, plastics and rubber products, paper products, fabricated metal products, and computer and electronic products.
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 3 During the quarter, industrial production declined at an annual rate of 2.2%, which is a continuation of the decline from last quarter. Among durable goods, decreases for automotive products and miscellaneous goods were slightly offset by gains for home electronics, appliances, and furniture. Manufacturing capacity utilization (orange line) remained flat during the quarter at 75.7% and is now 270 bps below its historical average. According to PNC Economics, Industrial Production grew by 0.3% in, and is expected to remain flat for. 15% 5% 0% -5% - -15% CAPACITY UTILIZATION (R) INDUSTRIAL PRODUCTION Y/Y % Chg (L) PRODUCTION ACTIVITY 90% 80% 70% 60% 50% 40% 30% 20% INVENTORY AND TRANSPORT During 1Q16, the Business Inventory to Sales ratio (blue line) was unchanged from last quarter at 1.4. Bloated inventories are still the issue, as the pile-up of unsold goods across U.S. retail chains is a challenge to make up for weak sales during the quarter. Decreased consumer demand for discretionary purchases has the potential to further add to the problem. Air freight (orange line) through February, declined 7.8% annually, compared to an annual decrease of 2.0% for 4Q15. The International Air Transport Association (IATA) reported that the annual decline in volumes in the first quarter was driven by North American and Asia Pacific carriers, who both had strong boosts to transpacific air freight during the U.S. west coast seaport disruption in early. TRADE Trading activity among major U.S. partners (Europe, Canada, Mexico, and China) was mixed in the first quarter. The trade deficit (green line) decreased by $4.3B to $40.4B in 1Q16. During the quarter, exports (blue line) decreased by $3.7B, while imports declined by $7.9B (orange line). According to IATA in the March Air Freight Market Analysis, the comparative strength of the U.S. economy and the strong dollar may help to support inbound freight volumes for North American carriers over the rest of the year (imports to the U.S. have resumed their upward trend in recent months). However, a strong dollar keeps exports under pressure, which may constrain outbound freight demand. -20% -25% 2000 2001 Recession 03/01-11/01 2002 2003 2004 2005 2006 2007 Sources: Federal Reserve, Moody's Analytics, PNC Real Estate Market Analytics 30% 20% 0% - -20% -30% 2004 2005 2006 2007 Recession 12/07-6/09 Recession 12/07-06/09 Sources: Bureau of Transportation Statistics, Department of Commerce, PNC Real Estate Market Analytics 0% BUSINESS INVENTORY SALES & AIR FREIGHT (ALL US CARRIERS) BUSINESS INVENTORY/SALES (R) AIR FREIGHT Y/Y % CHANGE (L) 1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 4 INDUSTRIAL MARKET FUNDAMENTALS As discussed in the Economy Section, the key industrial space drivers have reflected lukewarm and varied performance. Despite mixed signals from the economy, the industrial sector remains in-check, with declining vacancy and increased rents, while new construction still represents a low percentage of inventory (1.0%). Please refer to the Appendix for additional data on PNC s 22 Footprint Markets, which represent approximately 37.0% of the nation s industrial space and include five of the nation s largest industrial markets (Atlanta, Chicago, Detroit, Northern New Jersey, and Philadelphia). ABSORPTION Quarterly industrial space demand (warehouse and flex-space) on a national basis dipped during 1Q16 to 46.4 msf, which was a decrease of 35.1 msf from the previous quarter, but an increase of 6.4 msf from a year ago. An observation since is that the first quarter period is typically lower than the fourth quarter, most likely due to seasonality effects. Flex space demand declined by 61.0% since the previous quarter, while warehouse demand slipped 40.4%. Deliveries were down in the flex sector by 61.5%, and by 10.1% in warehouse space. The Wall Street Journal and CBRE both reported during the quarter that e-commerce continues to be a demand driver for warehouse space, as the rapid growth of online sales is pushing up demand and prices for industrial sites closer to population centers. Retail sales, particularly for goods purchased online are growing, while sales at brick-and-mortar stores are declining. The nation s 10 largest industrial markets started with 63.4 msf of leasing, accounting for almost 39.0% of the national total. Large distribution markets that have shown strong performance include Chicago, Dallas/Ft. Worth, Northern New Jersey, Atlanta, and the Inland Empire. Metros with weaker performance compared to a year ago include Houston (due to continued declines in the energy sector) and Los Angeles. In Los Angeles, submarkets that experienced large move-outs included Lower San Gabriel Valley (924,260 sf), Commerce Area Industrial (387,574 sf), and San Fernando Valley West (254,746 sf). Chicago Philadelphia Los Angeles Dallas/Ft Worth Northern New Jersey Atlanta Detroit Houston Inland Empire SF Bay Area (2.1) 1Q16 vs. 1Q15 YTD NET ABSORPTION 10 LARGEST MARKETS 1Q16 1Q15 Sources: CoStar, PNC Real Estate Market Analytics 0.9 0.9 1.2 2.6 2.3 2.5 2.3 1.9 1.4 2.2 1.5 1.8 (3.0) (1.0) 1.0 3.0 5.0 7.0 2.7 3.1 3.4 3.7 3.7 3.8 5.6 PNC s 22 footprint markets accounted for 29.3 msf of the nation s net absorption during 1Q16, with nearly all reporting positive readings (the exception was Charlotte). Large industrial footprint markets that registered the strongest absorption (over 2.0 msf) included Atlanta, Chicago, Detroit, Northern New Jersey, and Philadelphia. Smaller metros that showed noticeable absorption figures (between 1.0 and 2.0 msf) were Baltimore, Cleveland, Columbus, Indianapolis, Louisville, Nashville, and Washington, DC.
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 5 SUPPLY During the quarter, construction activity remained flat at 207.6 msf. As a percentage of inventory, it is still minimal at 1.0%, unchanged from the previous quarter. The number of markets with more than 1.0 msf of construction activity remained at 45 (markets that dropped below this threshold included Oklahoma City, Stockton/Modesto, Memphis, South Bay/San Jose, Cleveland, Baltimore, and Greensboro/Winston-Salem, while additions include Miami-Dade County, Birmingham, Savannah, Corpus Christi, Westchester/So. Conn., West Michigan, and Pittsburgh). Dallas/Fort Worth, as with the last quarter, had the largest amount of space under construction at 19.9 msf (compared to 20.6 msf last quarter). Going forward, forecasts from CBRE-EA expect completions on a national level to average 43.0 msf annually over the next four years, while figures from Reis average 75.7 msf over the same time period. Pre-leasing increased from last quarter by 220 bps to 51.9%. The nation s major industrial markets accounted for approximately 48.0% of the pipeline, down from 50.2% last quarter. The five most active markets have 76.5 msf under construction, representing 37.6% of the national total. PNC s footprint markets accounted for approximately 33.8% of the space underway, a 100 bps decrease from the prior quarter. Construction starts for 1Q16 totaled 35.4 msf, down 14.0 msf from last quarter and up 4.0 msf from a year ago. Distribution centers continue to comprise a majority of current construction, as retailers focus on the benefits of being closer to the consumer to help ensure speed of delivery and efficiency. The largest delivery for the quarter was Perris Valley Logistics Center, a 1.1 msf industrial distribution building in Perris, CA (South Riverside Submarket). The building is 100.0% leased to General Mills. CONSTRUCTION ACTIVITY (>1.0 msf) Market # Bldgs U/C (msf) % of Inv. % Leased Dallas/Ft Worth 75 19.9 2.4% 33.2% Inland Empire 65 15.6 2.8% 25.1% Philadelphia 32 14.1 1.3% 43.6% Chicago 40 14.0 1.2% 39.2% Atlanta 33 12.7 1.9% 40.5% Houston 76 12.2 2.2% 73.9% PA I-81 / I-78 / Lehigh Valley n/a 11.4 4.6% n/a Reno/Sparks 6 8.1 8.9% 85.6% Kansas City 14 5.9 2.1% 30.2% Greenville/Spartanburg 9 5.1 2.6% 95.3% Denver 35 4.8 1.7% 36.6% Tampa/St. Petersburg 12 4.2 1.5% 67.6% St. Louis 10 3.9 1.5% 50.5% Los Angeles 30 3.8 0.4% 34.5% Northern NJ 24 3.5 0.4% 34.1% Central NJ n/a 3.2 1.0% n/a Cincinnati 9 3.1 1.0% 53.5% Charleston/N. Charleston 7 3.1 4.4% 98.1% Phoenix 20 3.0 1.0% 45.3% Nashville 15 2.8 1.4% 58.0% East Bay/Oakland 7 2.8 1.1% 20.2% Boston 26 2.6 0.5% 87.6% Miami-Dade County 14 2.4 1.0% 20.9% Washington DC 21 2.3 1.0% 57.5% Louisville 12 2.2 1.1% 39.5% Des Moines 9 2.2 3.5% 96.5% Birmingham 8 2.1 1.6% 100.0% Portland 16 2.1 1.0% 47.1% San Antonio 15 2.1 1.8% 44.2% Savannah 9 2.1 4.0% 55.3% Salt Lake City 33 2.1 0.9% 21.1% Austin 22 1.9 2.0% 77.9% Madison 8 1.9 2.1% 100.0% West Michigan 8 1.9 0.6% 97.2% Detroit 18 1.8 0.3% 57.0% Charlotte 12 1.7 0.5% 53.0% Seattle 8 1.7 0.6% 24.4% Minneapolis 9 1.6 0.4% 91.8% Corpus Christi 2 1.6 7.6% 99.5% Las Vegas 10 1.6 1.3% 40.4% San Diego 14 1.5 0.8% 54.9% Columbus 8 1.3 0.5% 84.7% Buffalo/Niagara Falls 2 1.2 1.7% 100.0% Westchester/So. Connecticut 11 1.2 0.6% 91.2% Pittsburgh 17 1.1 0.4% 28.1% US TOTAL 1,105 207.6 1.0% 51.9% Source: CoStar; Cushman & Wakefield; PNC Real Estate Market Analytics Note: Bold/italicized indicates top 10 industrial market For 1Q16, CoStar indicated in their national report that deliveries totaled 43.1 msf, down 6.3 msf from the previous quarter, and up 12.4 msf from one year prior.
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 6 VACANCY The national industrial (warehouse and flexspace) vacancy rate continued to improve, ending the quarter at 6.2%, which was a decrease of 10 bps sequentially and 70 bps annually. The national rate is now 420 bps below this cycle s 10.4% peak. Forecasted national trends for industrial vacancy from REIS should average a level of 7.8% over the next four years, while CBRE-EA predicts 10.0% (from current levels of 8.2% and 9.2%, respectively). 15% 14% 13% 12% 11% 9% 8% INDUSTRIAL VACANCY RATES CoStar Flex Vacancy CoStar Warehouse Vacancy CBRE-EA Overall Vacancy Reis Overall Vacancy Warehouse vacancy (blue line) is currently at 5.9%, a decrease of 10 bps from the previous quarter and down 60 bps from the prior year. Flex-space (orange line) decreased 20 bps sequentially and 130 bps annually to 8.7%. 7% 6% 5% Sources: CoStar, CBRE-EA, Reis, PNC Real Estate Market Analytics 2017 2018 The number of markets with lower vacancy rates increased slightly from last quarter. Of the 142 industrial markets that we monitor, 117 had lower vacancy rates from a year ago (compared to 112 from 4Q15). A non-top 10 market with a drop in vacancy was Las Vegas (3.0%), where absorption has totaled 3.3 msf over the past four quarters. Within the market, the biggest lease for the quarter was Core-Mark International, Inc. signing 233,000 sf in the Southeast Las Vegas/Henderson submarket. The nation s 10 largest industrial markets had an average vacancy rate 20 bps below the national rate. The only major market with higher vacancy than a year ago is Houston. Detroit had the largest decrease in vacancy (240 bps), followed by the San Francisco Bay Area (140 bps). The theme surrounding Detroit s notable decreases in vacancy for the past few quarters is increased demand, coupled with not enough quality supply. The Inland Empire remained flat at 5.2%. The average weighted vacancy rate within PNC s 22 footprint markets was 6.8%, down 22 bps sequentially and 89 bps annually. Nashville had the largest quarterly decline, dropping 131 bps, followed by Louisville at 70 bps. Vacancy increased in Raleigh/Durham (26 bps), though the market is still healthy at 6.5% (absorption for the quarter was 12,300 sf, with eight buildings delivering totaling 295,000 sf). Mobile has consistently underperformed the footprint markets at a high vacancy of 11.1%, though this is down 22 bps from last quarter and 137 bps from one year prior. Markets with vacancies below the national average include Birmingham, Cincinnati, Cleveland, Columbus, Detroit, Louisville, Milwaukee, Nashville, Pittsburgh, and Raleigh/Durham.
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 7 RENTS The average industrial (flex-space and warehouse) rent grew during the first quarter, and is now 3.0% above the prior peak in late. This quarter, it rose $0.11/sf (1.8%) sequentially and is up $0.34/sf (5.7%) annually to $6.36/sf. National industrial rent growth is expected to average 0.7% annually through 2019, according to CBRE-EA, while REIS indicates 3.3% growth estimates. Compared to the prior quarter, flex-space rent increased to $12.36/sf, with rent growth climbing from 4Q15 s 0.6% to 0.7%. Warehouse space rent growth rose 90 bps to 2.1%, ending the quarter at $5.51, up from $5.39 in 4Q15. According to a CBRE viewpoint from the first quarter, rental rates for prime warehouse space in the U.S. jumped 9.9% in over the previous year, as retailers and distribution companies acquire scarce facilities near import gateways and population centers. The nation s ten largest industrial markets all posted annual rent growth for the first quarter of. The San Francisco Bay Area had the largest increase at 11.6%, a continuation from 4Q15, raising the metro s average rent to $14.41/sf, well above the national figure. Houston lagged during the quarter, most likely due to the loss of jobs and income from falling oil costs. 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% The average rent in PNC s footprint markets grew about 10 bps quicker than the national rate, increasing 1.4% to $4.95/sf, up $0.07/sf from the previous quarter. Raleigh/Durham had the biggest yearly increase, growing 21.1% to $6.40 (up from $6.17). Population growth and a high concentration of technology and life science companies has resulted in expansion in Raleigh/Durham s industrial market. The region has averaged employment gains of 21,300 jobs annually, and this figure is expected to increase to 25,000 according to estimates from Moody s Analytics. No footprint markets reported annual decreases. Sources: CoStar, CBRE-EA, Reis, PNC Real Estate Market Analytics INDUSTRIAL RENTAL RATE GROWTH CoStar Flex Rent Growth CoStar Warehouse Rent Growth CBRE-EA Overall Rent Growth Reis Overall Rent Growth 2017 2018 2019
INDUSTRIAL SECTOR REMAINS IN-CHECK AS ECONOMY GIVES MIXED SIGNALS 8 TRANSACTION VOLUME/PRICING Institutional quality sales volume, according to Real Capital Analytics (RCA) data, decreased from 4Q15 s $24.1 billion to $10.8 billion. During the quarter, warehouse properties accounted for $5.6 billion of the volume (52.0%), but were down $9.1 billion from a year ago. Flex property sales totaled $5.2 billion, up 16.0% from the prior year, largely influenced by Blackstone s buyout of BioMed Realty Trust, which included a number of flex properties, as reported by RCA. Despite the overall decline, the level of activity is elevated for a first quarter reading, and equal to the volume seen in 2007. R&D/Tech was a bright spot, gaining 240.0% YOY on sales of $2.6 billion of total sales. Two of the three industrial Moody s/rca Commercial Property Price Indices (CPPI) continued their upward trend in 1Q16. The all industrial markets (blue line), increased 0.8% to 168.9, while the major markets (green line) decreased 0.9% to 184.42, and non-major markets (grey line) rose 2.0% to 156.7. $ Billions $30 $25 $20 $15 $10 $5 $- Volume > $5 million CPPI - All Ind. Mkts CPPI - Major Ind. Mkts CPPI - Non-Major Ind. Mkts Note: Major Industrial Markets are Boston, Chicago, Washington DC, New York, San Francisco, and Los Angeles Sources: Real Capital Analytics, PNC Real Estate Market Analytics INDUSTRIAL CPPI & TRANSACTION VOLUME 220 200 180 160 140 120 100 Capitalization Rates Industrial Warehouse - United States Through First Quarter Cap rates for the flex and warehouse sectors moderated on a quarterly basis, but have improved on an annual basis per PwC. Despite recent monetary policy tightening and increased macroeconomic volatility, cap rates have remained stable in the industrial sector. A lack of institutional-grade industrial assets will continue to foster improvements in valuation throughout per JLL s 1Q16 Industrial Outlook. Looking ahead, the high pricing coupled with increases in the short-term rate could lead to some softening in this sector. Investors surveyed by PwC note that there a wide array of concerns including oversupply and turbulent macroeconomic conditions, leading investors to deploy more conservative underwriting standards when pursuing acquisitions. 9% 8% 7% 6% 5% 2002 2003 2004 2005 2006 2007 Sources: PwC Real Estate Investor Survey, Real Capital Analytics, American Council of Life Insurers, PNC Real Estate Market Analytics 5.52% - PwC Warehouse 4 bps, -0.7% 6.95% - RCA Warehouse 82 bps, -13.4% 7.11% -RCA Total Industrial 88 bps, -14.1% 6.21% - ACLI Industrial 27 bps, +4.2% Capitalization Rates Industrial Flex/R&D - United States Through First Quarter One of the largest industrial transactions that occurred this quarter included an entity led by Biynah Industrial Partners and Olympus Ventures acquiring a Class A industrial portfolio located in Indianapolis industrial market for $167 million ($43 PSF) from Transpacific Development Company. One of the largest property sales in 1Q16 was the RXR Realty/Westbrook Partners acquisition of the Hall Street Complex in Brooklyn, New York for $162 million (approx. $290 PSF). 9% 8% 7% 6% 5% 7.15% - PwC Flex/R&D 0 bps, 0.0% 7.34% - RCA Flex 93 bps, -14.5% 7.11% - RCA Total Industrial 88 bps, -14.1% 6.21% - ACLI Industrial 27 bps, +4.2% 2002 2003 2004 2005 2006 2007 Sources: PwC Real Estate Investor Survey, Real Capital Analytics, American Council of Life Insurers, PNC Real Estate Market Analytics
APPENDIX PNC FOOTPRINT MARKETS - INDUSTRIAL 1Q16 Market Existing Inventory Vacancy YTD Net Absorption YTD Deliveries U/C Rent Total RBA (msf) Direct (msf) Total (msf) 1Q16 % Q/Q bps Y/Y bps (msf) (msf) (msf) 1Q16 Q/Q % Y/Y % Atlanta 675.2 48.8 51.0 7.6% 11-85 3.7 6.0 12.7 $4.32 1.8% 5.7% Baltimore 236.4 21.3 21.7 9.2% -62 39 1.8 0.4 0.9 $5.85-0.9% 0.7% Birmingham 134.5 7.9 7.9 5.9% 1-186 0.1 0.0 2.1 $3.61 1.4% 2.2% Central New Jersey 293.5 19.6 20.7 7.0% -53-76 0.9 1.0 1.7 $5.66 2.2% 3.5% Charlotte 316.8 23.7 24.1 7.6% 5-162 -0.1 0.5 1.7 $4.10 4.1% 4.1% Chicago 1,169.9 80.4 82.3 7.0% -29-81 3.4 3.3 14.0 $5.69 1.9% 6.2% Cincinnati 305.1 18.1 18.6 6.1% 1 9 0.1 0.6 3.1 $3.61 0.6% 2.6% Cleveland 486.6 23.8 24.7 5.1% -36-103 1.0 1.0 0.4 $3.90 1.1% 3.8% Columbus 261.2 15.6 16.2 6.2% 19-60 1.9 1.3 1.3 $3.49 1.8% 4.4% Dayton 117.7 12.4 12.6 10.7% -52-141 0.6 0.0 0.0 $3.41 1.9% 4.9% Detroit 561.5 26.3 26.5 4.7% -59-245 2.3 0.5 1.8 $5.11 2.1% 5.4% Indianapolis 319.6 22.1 23.5 7.3% -68-94 1.2 0.3 0.8 $4.08-0.3% 1.3% Louisville 198.9 10.0 10.1 5.1% -70-149 1.3 1.2 2.2 $3.69 0.5% 1.5% Milwaukee 321.9 20.4 20.4 6.4% 7 32 0.3 0.4 0.4 $4.42-3.2% 2.3% Mobile 28.7 3.2 3.2 11.1% -22-137 0.0 0.0 0.0 $4.32-0.6% 0.7% Nashville 205.2 8.8 9.3 4.5% -131-206 1.9 0.1 2.8 $4.40 3.8% 10.1% Northern New Jersey 512.4 34.9 36.6 7.1% 0-79 3.8 1.9 1.8 $6.85 1.1% 4.7% Philadelphia 1,053.8 78.2 79.2 7.5% 2-46 2.6 3.2 14.1 $4.66 1.7% 4.2% Pittsburgh 178.3 11.0 11.1 6.2% -59-116 0.8 0.1 1.1 $5.74 4.2% 5.1% Raleigh/Durham 121.8 7.5 7.9 6.5% 26-130 0.0 0.3 0.8 $6.40 3.7% 21.1% St. Louis 263.2 17.5 17.9 6.8% 2-49 0.1 0.0 3.9 $4.17-0.2% 2.7% Washington, DC 219.1 19.2 19.5 8.9% -6-70 1.5 1.8 2.3 $9.87 0.4% 0.1% PNC FOOTPRINT TOTALS / WTD AVGS 7,981.3 530.5 545.3 6.8% -22-89 29.3 23.8 70.1 $4.95 1.4% 4.4% US TOTALS / WTD AVGS 21,650.1 1,311.1 1,350.6 6.2% -14-81 63.4 59.6 207.6 $5.83 1.3% 5.0% Note: Due to differences in CoStar's methodology, national figures differ from the long-term historical ones presented in this report. Top 10 National Industrial Markets Are Italicized Sources: CoStar; PNC Real Estate Market Analytics