Cw industrial real estate forecast 2013 2016

INDUSTRIAL
REAL ESTATE FORECAST

UNITED STATES
MONTH 2012
2013-2016
A Cushman & Wakefield Research Marketbeat Publication

ECONOMIC OUTLOOK

INDUSTRIAL MARKET REVIEW

WAREHOUSE/DISTRIBUTION

MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

UNITED STATES
2013-2016 INDUSTRIAL REAL
ESTATE FORECAST

ECONOMIC OUTLOOK
Driven by a high level of uncertainty the U.S. economy Strong pent-up demand. On the assumption that the ECONOMIC
remains stuck in low gear and is unlikely to experience any fiscal challenges will be resolved as the year OUTLOOK
significant uptick until late in 2013. However, once progresses and as confidence enters the picture again,
economic growth begins to accelerate in 2014 and U.S. businesses and consumers will start taking more
2015, the U.S. is expected to experience a period of risks. Once this shift occurs, it is likely to act as a
strong expansion as consumers and businesses catalyst for stronger spending growth throughout the INDUSTRIAL
unleash demand that has been building up for the past U.S. economy. On the consumer side, an aging MARKET
REVIEW
several years. The result will be a surge in demand for inventory of cars, appliances and many other durable
goods that is the lifeblood of the industrial sector. goods has created a deep well of pent-up demand.
Once consumers gain confidence, they will inevitably
Near-term uncertainty. U.S. businesses and consumers act on that demand and increase spending. The
remained cautious as they waited to see how the housing sector is also slowly improving and expected
WAREHOUSE /
DISTRIBUTION
government addressed the so-called “fiscal cliff” (tax to rebound by 2014. Finally, as businesses shift from a
increases and government spending cuts scheduled to cautious to more aggressive stance, hiring will increase
go into effect on January 1) and the negotiations to and investment in machinery and equipment, which
increase the debt ceiling. We expect the compromise ground to a halt in the second half of 2012, will take
that included both tax revenue increases and off. The result will be a revival of demand for goods MANUFACTURING
adjustments to spending to be a drag on the economy leading to higher manufacturing production and
early in 2013. greater demand for imports and transportation
The situation in Europe will also have an impact. With services. Export growth will follow, though not fully
much of the euro zone continuing to experience until growth in Europe recovers, most likely in late
anemic growth, demand for U.S. exports will remain 2014 or 2015. FLEX SPACE
soft in 2013. Confidence will be strained by ongoing Sights on 2014. For these reasons, we expect the U.S.
negotiations on how to resolve the EU fiscal crisis, yet economy to continue growing at a modest pace
there is a growing consensus that solutions will be through most of 2013, with Gross Domestic Product
found and that the euro zone will emerge intact. expanding by roughly 2.0%. As the U.S. and euro zone
However, because of the complex politics involved, debt issues are finally resolved, uncertainty will slowly MARKET
and with Germany and Italy heading into elections, PROJECTIONS
recede and risk taking will increase, leading to strong
little improvement is expected to take shape until growth in 2014.
later in the year.

U.S. TRADE MANUFACTURING PRODUCTION VACANCY DECLINES VS. JOB GROWTH

$2.0 108 4%

$1.7 100 2%
Chained U.S.-$ in Trillions

Index (2007=100, SA)

$1.4 93 0%

$1.1 85 -2%

$0.8 -4%
78

-6%
$0.5 70
2006 2008 2010 2012 F 2014 F 2016 F
2006 2007 2008 2009 2010 2011 3Q12 2006 2008 2010 2012 2014 2016
Goods Imports Goods Exports Yr-Yr % Job Growth Yr-Yr % Pt. Vacancy

Source: U.S. Bureau of Economic Analysis Source: Moody’s Analytics Source: ushman Wakefield Research; Moody’s Analytics
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UNITED STATES
ESTATE FORECAST

INDUSTRIAL MARKET REVIEW: BUILDING MOMENTUM
Market fundamentals continued to strengthen in 2012, The appetite for well-located industrial product will remain ECONOMIC
posting the third year in a row of declining vacancies. strong. The demand for industrial real estate is rising OUTLOOK
Overall vacancy rate fell to 8.5% in the third quarter, across the country, especially around ports on the East
down 1.8 percentage points from year end 2009. The and West Coasts. Demand is strongest in Los Angeles,
west region markets of Greater Los Angeles and Miami and New York-New Jersey.
Orange County reported the lowest vacancy rates in INDUSTRIAL
the nation. The Inland Empire, which dominates the The growth of e-commerce is having significant impact MARKET
on the industrial market as the trend towards bigger REVIEW
big-box market, posted a 0.7 percentage point
year-over-year drop in overall vacancy. The Midwest and more efficient distribution centers has resulted in
also performed well with every industrial market in a shortage of class A warehouse space over 500,000 sf
the region seeing vacancies fall in the past year. in the nation’s logistics hubs. Users are also looking for
industrial sites near UPS and FedEx stations. WAREHOUSE /
DISTRIBUTION
Among the top markets, Dallas/Fort Worth saw the
largest drop in overall vacancy in 2012, plunging 2.2 With the growth of U.S. exports, especially to markets
percentage points to 10.6%. On the East Coast, New in Asia (mainly China and Southeast Asia), inland ports
Jersey’s overall vacancy fell 0.9 percentage points are becoming a critical part of supply chain dynamics
year-over-year to its current rate of 8.9%. A dramatic in the U.S. While many of the existing inland ports are
drop was also seen in Central New Jersey, where located in the Midwest, including Chicago, Memphis, St. MANUFACTURING

vacancy fell 1.9 percentage points to 8.1%. Louis and Kansas City, a number of new locations will
be developed such as the 4,000-acre Florida Inland
Other markets reporting significant declines in overall Port in St. Lucie, which is being engineered specifically
vacancy rates year-over-year included Nashville (down in preparation for the Panama Canal expansion, and
3.2 percentage points), Oakland (down 1.6 percentage the 580-acre Port Arizona in Casa Grande, which will FLEX SPACE
points) and Seattle (down 1.5 percentage points). become the first inland port to serve the top two
Notably, of the 74 industrial markets tracked by ports in the nation — the ports of Los Angeles and
Cushman Wakefield and our Alliance partners, only Long Beach. Given the level of demand and general
ten markets recorded year-over-year vacancy rate lack of new product, seaport cities and major logistics
increases. hubs will remain strong performers. MARKET
PROJECTIONS

TOP 5 METROS VACANCY DECLINES (2011-2016) TOP 5 METROS RENT GROWTH (2011-2016)

0% 60%

-1% 48%
Aggregate Percentage Point Change

Aggregate Appreciation

-2% 36%

-3% 24%

-4%
12%

-5%
0%
Oakland Phoenix New Jersey Dallas Chicago
Central Silicon Valley SF Peninsula Los Angeles Miami Houston

Source: ushman Wakefield Research
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UNITED STATES
ESTATE FORECAST

WAREHOUSE/DISTRIBUTION: CONSTRUCTION INCREASING
Demand for high-quality, class A warehouse/distribution Infrastructure improvements will bolster port cities. The ECONOMIC
space will drive a ramp-up in construction. Warehouse federal Department of Transportation TIGER grants OUTLOOK
vacancy is at its lowest rate in four years, declining ten have allowed many coastal port cities like Houston,
quarters in a row after peaking in the first quarter of Savannah, Norfolk and Miami to make significant
2010. The strong market demand for high-quality investments to accommodate the growing need for
class A space has led to short supply, which in turn has intermodal container and high-capacity transload INDUSTRIAL
resulted in constrained market activity and absorption facilities expected upon completion of the Panama MARKET
REVIEW
in some markets. Canal expansion in 2014.
Due to the shortage of class A distribution facilities, Meanwhile, infrastructure improvements in certain
several large tenants, including Amazon, PetSmart, regional markets are expected to bolster warehouse
Home Depot and Unilever, are pursuing build-to-suit leasing activity. These include port improvements in WAREHOUSE /
DISTRIBUTION
developments. We are also seeing an increase in the Pittsburgh to increase access to aggregates used in
number of speculative projects, particularly in the hydraulic fracturing and the construction of a new
Inland Empire and the PA I-81/I-78 Distribution bridge between Detroit and Windsor, Ontario, to
Corridor. Top West Coast markets have the lowest improve accessibility between the U.S. and Canada. In
vacancy rates in the country, thanks to strong export Southern California, the Long Beach Board of Harbor
MANUFACTURING
trade volumes in southern California and the tech Commissioners approved a $649.5-million contract
sector in northern California. Land constraints and the for the design and construction of a replacement for
functional obsolescence of older facilities should spur the Port of Long Beach’s Gerald Desmond Bridge.
more redevelopment and retrofitting of existing Construction of the new bridge, which will start in
facilities in coming years, and the top markets will 2013 and is scheduled for completion in 2016, will
command a premium for these types of projects. ease traffic congestion and improve safety. FLEX SPACE

Click here for next page: Warehouse/Distribution
MARKET
WAREHOUSE / DISTRIBUTION MARKET RENT GROWTH CYCLE GRAPH (2011-2016) PROJECTIONS

LANDLORD FAVORABLE
Slow Growth Accelerating

Orange County
Los Angeles
Portland
Miami
Houston
Silicon Valley
Dallas
Inland Empire
Denver
Oakland
Philadelphia
TENANT FAVORABLE

Phoenix
New Jersey North
SF Peninsula
New Jersey Central
Atlanta
Chicago
Boston

Downturn Recovering

ent growth slowing
R R
ent still elevated but falling Rent at or near bottom of
Rent growth accelerating

Still landlord favorable but from top of market cycle market cycle Ideal for owners of property
growth is down from peak Falling rents promise future Ideal for tenants leasing or
opportunity for tenants seeking to lease property

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UNITED STATES
ESTATE FORECAST

WAREHOUSE/DISTRIBUTION (CONT’D)

Continuing supply chain efficiencies will strengthen First-tier distribution centers like Chicago, Atlanta and ECONOMIC
OUTLOOK
secondary and tertiary markets. Many retailers are Dallas should see vacancy rates fall substantially over
spending almost as much capital on new distribution the next four years even as new supply is added in
centers and logistics technology as they are on new these markets. Chicago’s vacancy is forecast to drop
store openings. Leasing activity grew most significantly by 4.6 percentage points by 2016 while Dallas’ vacancy
INDUSTRIAL
over the last year in the primary markets of Chicago, will drop to 8.0% by 2016. MARKET
Dallas, PA I-81/I-78 Distribution Corridor and Atlanta, REVIEW
but also in secondary markets. Secondary markets, Warehouse/distribution rents should remain fairly stable
including Kansas City, Miami and Houston, are leading through 2013, followed by stronger appreciation. Despite
the charge with large investments in intermodal steady demand through 2012, rents overall remained
capacity to accommodate the movement of freight via at stubbornly low levels, partially because the recovery
WAREHOUSE /
several modes of transportation. While these markets continues to favor newer product and because of the DISTRIBUTION
do not have the consumer population of the more widening price gap between class A and class B/C
traditional distribution markets like the Inland Empire space.
or the PA I-81/I-78 Distribution Corridor, they are After marginal growth in 2013, strong appreciation is
starting to attract distribution business because of likely to kick in thereafter in most major markets.
their logistics and labor assets. MANUFACTURING
Major coastal markets with significant land constraints
Additionally, with Amazon building new one-million- and relatively little new construction coming on line
square-foot distribution centers in smaller markets, will be the top gainers. Southern California is
such as Indiana and South Carolina, as well as five expected to have the greatest jump in rental rates,
locations in Tennessee that total nearly 4.7 million with Los Angeles and Orange County’s rents growing
by more than 25% in the next four years. Rent growth FLEX SPACE
square feet, it appears that the supply chain for
e-commerce is headed in a new direction with more in similarly land-constrained markets such as Portland
space, closer to markets. and Miami is also expected to be strong.

Although these tertiary markets are gaining tenant
MARKET
interest, the largest distribution hubs will continue to PROJECTIONS
recognize significant positive absorption through 2016.

RENT VS. VACANCY SUPPLY DEMAND TRENDS

$5.50 12.5% 150

$5.20 10.0% 100
Per Square Foot / Year

Million Square Feet

$4.90 7.5% 50

$4.60 5.0% 0

$4.30 2.5% -50

$4.00 0.0% -100
2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F
Overall Rent Overall Vacancy Absorption New Construction
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UNITED STATES
ESTATE FORECAST

MANUFACTURING
In the United States, manufacturing steadily added jobs Manufactured exports — a bright spot of the U.S. ECONOMIC
since early 2010, but contracted slightly in the second half economy in recent years — are set to surge. A nation- OUTLOOK
of 2012. To put the setback in perspective, the wide initiative is underway to convince companies that
Institute of Supply Management¹s monthly readings for it is worth bringing manufacturing back home. Illinois
this period still measured above 50, the threshold that was the first state to launch a “Reshoring Initiative”
signifies growth. We remain cautiously optimistic that aimed at convincing large original equipment manufac- INDUSTRIAL
manufacturing growth will continue in spite of turers (OEMs) to re-open factories in America. Its MARKET
REVIEW
persistent global and domestic economic uncertainty. backers are working to create similar chapters in
Michigan, Indiana, Ohio, Pennsylvania, New York and
The U.S. market share of global production continues California.
to outpace other manufacturing leaders like China and
Germany. Although China’s share nearly doubled over In terms of exports, U.S. companies remain competi- WAREHOUSE /
DISTRIBUTION
the last five years, its rising labor and energy costs are tive on the global stage in the production of transpor-
beginning to impact sourcing decisions. Such factors tation equipment, chemicals, electronics, machinery,
were behind Apple’s decision to shift some Mac semi-conductors and medical devices. Illinois, home to
computer manufacturing operations to the U.S. from such heavy-equipment pioneers as Caterpillar and
China in 2013. This $100-million investment creates a Deere Co., has maintained its expertise in building
MANUFACTURING
closer-to-home supply chain that will undoubtedly have large metal structures needed for mining, construction
a ripple effect on local economies as it attracts clusters and agricultural equipment.
of suppliers and workers with specialized skills.
Additionally, regionalization — where manufacturing is
located both onshore and offshore — is impacting
location decisions, as it can significantly reduce FLEX SPACE
transportation costs and enable a manufacturer to
Click here for next page: Manufacturing

MANUFACTURING MARKET RENT GROWTH CYCLE GRAPH (2011-2016)
MARKET
PROJECTIONS

LANDLORD FAVORABLE
Slow Growth
Slow Growth Accelerating
Accelerating
Philadelphia
Atlanta Houston
New Jersey Central Orange County
Portland
OrangeAngeles
Los County
Boston Silicon Valley
Portland
Miami
Miami
Houston
Chicago
Silicon Valley
SF Peninsula
Dallas
Los Angeles
Inland Empire
Inland Empire
Denver
Oakland
Denver
Philadelphia
TENANT FAVORABLE

Phoenix
TENANT FAVORABLE

New Jersey North
Phoenix
SF Peninsula
Oakland
New Jersey Central
Atlanta
New Jersey North
Chicago
Boston

Downturn Recovering
Downturn Recovering

ent growth slowing
R R


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UNITED STATES
ESTATE FORECAST

MANUFACTURING (CONT’D)
ECONOMIC
respond faster to local-market demands — a critical In anticipation of better times ahead, leasing activity is OUTLOOK
need also being driven by e-commerce. Regionaliza- gaining momentum. A total of 28.9 million square feet
tion and “cluster” economic development strategies of manufacturing space was leased through the third
will also help to bolster markets. Major markets like quarter of 2012, with Los Angeles and Chicago leading
Chicago, Boston, Philadelphia and New Jersey are the pack with a combined total of 9.1 million square INDUSTRIAL
poised to gain from such trends. feet. One of the biggest challenges facing manufactur- MARKET
REVIEW
ers is the lack of quality space. It is difficult to respond
Houston, the third largest manufacturing center in to supply chain risks when manufacturing plants must
the nation after Los Angeles and Chicago, saw its manu- be fitted out at substantial cost to a specific product
facturing employment grow 4.2% in 2011 and is one the group. Technological advances have also rendered
few big cities in the U.S. that can boast more manufactur- many facilities functionally obsolete, opening the door WAREHOUSE /
ing jobs than before the recession. Houston is forecast DISTRIBUTION
for both speculative and build-to-suit construction
to have the largest manufacturing rent growth among within the next few years.
the top markets in the U.S. with its rates expected to
reach almost $6.00 psf by 2016. Innovation and technology are crucial components of a
productivity-driven industry. Quality facilities supported
Seattle has also become a prominent manufacturing by requisite infrastructure and access to needed talent MANUFACTURING
hub, with employment expanding 7.9% in 2011. The will be increasingly sought after, and manufacturers
aerospace sector, led by Boeing, accounted for roughly will weigh a multitude of factors before finalizing
half this expansion. Since 2010, aerospace-related jobs location decisions. An emphasis on advanced training
have accounted for some 70% of its manufacturing and development support in major manufacturing
growth. Boeing plans to lift factory output by 25% hubs, such as parts of the Midwest and Northeast, is FLEX SPACE
over the next 18 months. Other areas, like Orange expected to maintain stable growth in those areas.
County, CA, have seen manufacturing expansion fueled Given our expectation for accelerating growth, we see
by both domestic and export demand for computer rental rates increasing in most manufacturing markets
products, industrial goods and apparel. through 2016.
MARKET
PROJECTIONS


$7.00 10% 36.0

24.0
$6.00 8%

Million Square Feet

12.0
$5.00 6%
0.0
$4.00 4%
-12.0

$3.00 2%
-24.0

$2.00 0% -36.0
2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F


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UNITED STATES
ESTATE FORECAST

FLEX SPACE: WEAK DEMAND; STRONG BY 2016
Demand for flex space has noticeably decreased in the continuing to show preference for sites that offer ECONOMIC
OUTLOOK
past several years, but is projected to grow considerably by proximity to skilled labor, accessibility to major
2016. Until then, demand is expected to remain weak, highways or public transportation and industrial
with the overall flex market absorbing an average of concentrations that are operationally synergistic.
6.0 million square feet through 2014. Thereafter, When 2015 arrives, the decline in vacancy rates
INDUSTRIAL
however, markets such as Silicon Valley, Orange nationally should escalate as recovery gathers momen- MARKET
County, Denver, Dallas, Portland and Phoenix will tum in markets like Boston, Phoenix, Orange County, REVIEW
drive demand and account for almost half of the space Dallas and Denver.
take up through the end of the decade. Absorption in
Most markets should realize positive demand growth over
2016 is forecast to exceed the total accumulated in
the next five years. Silicon Valley is likely to lead the WAREHOUSE /
2011 by 36.7%. In the interim, we expect demand for DISTRIBUTION
way, with an expected 9.0 million square feet of
data centers, call centers and high-tech laboratory
positive absorption in that time frame. Conversely,
space to grow significantly as the economy bounces
Northern New Jersey may experience negative net
back over the next few years.
absorption due to projected slow job growth. By
After a sharp dip in vacancy levels during 2011, Cushman 2016, overall vacancy nationwide could fall to the 9.0% MANUFACTURING
Wakefield forecasts only nominal improvement through mark as strengthening economic conditions and
2014, as job growth remains lethargic. Given that the limited new supply serve to push occupancy levels
majority of tenants in the marketplace seek quality higher throughout the country. Our analyses suggest
space at favorable rates, newer and higher quality flex that northeastern markets such as Central New
buildings should perform better than aging buildings Jersey and Boston are likely to realize vacancy level FLEX SPACE
without renovations. The location of buildings will also declines ranging from 3.0 to 4.0 percentage points
play a significant role in most cases, with users over the next several years. Meanwhile, Phoenix’s
Click here for next page: Flex Space
MARKET
FLEX MARKET RENT GROWTH CYCLE GRAPH (2011-2016) PROJECTIONS

Slow Growth Accelerating LANDLORD FAVORABLE

Orange County Silicon Valley
Portland
SF Peninsula
Atlanta
Miami
Boston
Denver
Inland Empire
Dallas
Chicago
Philadelphia
Phoenix
New Jersey Central
TENANT FAVORABLE

New Jersey North
Oakland
Houston
Los Angeles

Downturn Recovering
ent growth slowing
R R


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UNITED STATES
ESTATE FORECAST

FLEX SPACE (CONT’D)
ECONOMIC
vacancy rate could fall more than 4.0 percentage New construction is projected to exceed 10.0 million OUTLOOK
points from year-end 2012 and Orange County’s square feet in the next several years. Markets such as
vacancy rate could decrease to under 4.0%. In Silicon Silicon Valley, San Francisco Peninsula, Portland, New
Valley, overall vacancy is expected to decrease Jersey and Denver are each targeting the completion
moderately by 3.0 percentage points despite strong of 1.0 million square feet or more of projects. Silicon INDUSTRIAL
MARKET
demand due to the amount of new construction Valley alone will account for more than 24% of the REVIEW
expected in this market. total new developments in the next four years.
Build-to-suit projects are likely to comprise a
Year-over-year rental growth is projected to be positive
significant portion of new development activity in
at the end of 2013 (compared to year-end 2012, which
some markets. WAREHOUSE /
is anticipated to see negative rent growth overall). DISTRIBUTION
Cushman Wakefield expects rents to increase by
4.0% annually on average through 2016. Markets in
California are projected to experience sharp rent
escalations in the next five years. San Francisco
MANUFACTURING
Peninsula and Silicon Valley are expected to see rents
climb in excess of 20%, with San Francisco Peninsula’s
rental rate reaching $25.99 per square foot by 2016.
This will be mainly due to the declining vacancy and
intensifying demand. Meanwhile, Miami should see its
FLEX SPACE
average asking rent for flex space climb to $10.15 per
square foot, a 18.1% increase over 2012. At the same
time, a lack of new and higher quality space in the
New Jersey and Chicago markets will prevent rents
from improving markedly. MARKET
PROJECTIONS


$15.00 15% 24

16
$13.00 12%

Million Square Feet

8
$11.00 9%
0
$9.00 6%
-8

$7.00 3%
-16

$5.00 0% -24
2006 2008 2010 2012F 2014F 2016F 2006 2008 2010 2012F 2014F 2016F

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ESTATE FORECAST

INDUSTRIAL MARKET PROJECTIONS
WAREHOUSE / DISTRIBUTION ECONOMIC
OUTLOOK
RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING
2011-2016 2011-2016
2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F Silicon Valley, CA
Atlanta, GA $3.38 $3.32 $3.35 $3.37 $3.41 $3.56 Orange County, CA Atlanta, GA 11.2% 10.4% 10.3% 10.0% 9.9% 9.0%
Inland Empire, CA
Boston, MA $5.17 $5.11 $5.15 $5.17 $5.19 $5.29 Los Angeles, CA Boston, MA 17.9% 19.0% 18.8% 17.9% 16.9% 16.3% INDUSTRIAL
Philadelphia, PA
Chicago, IL $3.94 $3.95 $3.97 $4.03 $4.10 $4.14 Portland, OR Chicago, IL 12.6% 11.4% 10.8% 9.5% 7.8% 6.8%
SF Peninsula, CA
MARKET
Dallas, TX $3.42 $3.52 $3.61 $3.73 $3.87 $3.98 Miami, Fl Dallas, TX 11.9% 10.0% 9.2% 8.8% 8.1% 8.0% REVIEW
Portland, OR
Denver, CO $4.35 $4.43 $4.46 $4.62 $4.80 $4.93 Houston, TX Denver, CO 6.4% 5.2% 5.0% 4.7% 4.4% 4.3% Miami, Fl
Silicon Valley, CA
Houston, TX $4.28 $4.37 $4.53 $4.75 $5.02 $5.23 Houston, TX 8.1% 7.3% 7.0% 7.1% 6.7% 5.8%
Boston, MA
Dallas, TX
Inland Empire, CA $4.02 $4.26 $4.37 $4.54 $4.62 $4.62 Inland Empire, CA 8.0% 7.0% 6.1% 7.5% 9.0% 9.6%
Inland Empire, CA Denver, CO
Los Angeles, CA $6.18 $6.54 $6.80 $7.24 $7.77 $8.18 Los Angeles, CA 4.8% 4.4% 4.0% 3.6% 3.2% 2.4%
United States Atlanta, GA WAREHOUSE /
Miami, Fl $4.84 $5.38 $5.51 $5.71 $5.94 $6.12 Miami, Fl 8.0% 7.0% 7.7% 7.5% 7.3% 7.1% DISTRIBUTION
Denver, CO Houston, TX
New Jersey Central $4.27 $4.21 $4.25 $4.34 $4.44 $4.56 New Jersey Central 10.4% 7.7% 6.9% 6.4% 5.9% 5.4%
Oakland, CA Los Angeles, CA
New Jersey North $5.73 $5.79 $5.84 $5.97 $6.11 $6.28 New Jersey North 9.6% 10.1% 9.8% 9.3% 8.1% 7.3%
Philadelphia, PA New Jersey North
Oakland, CA $4.49 $4.57 $4.66 $4.77 $4.93 $5.00 Oakland, CA 9.6% 6.7% 6.6% 6.2% 5.7% 5.4%
Phoenix, AZ United States
Orange County, CA $6.31 $6.80 $7.09 $7.66 $8.27 $8.67 Orange County, CA 7.5% 5.3% 4.9% 4.1% 3.4% 3.0%
New Jersey North Phoenix, AZ
Philadelphia, PA $4.34 $4.38 $4.42 $4.53 $4.66 $4.79 SF Peninsula, CA
Philadelphia, PA 6.8% 6.8% 7.7% 7.8% 7.9% 7.7%
Dallas, TX
Phoenix, AZ $5.52 $5.75 $5.84 $5.91 $5.98 $6.06 Phoenix, AZ 13.2% 12.1% 11.5% 10.8% 9.9% 9.5% MANUFACTURING
New Jersey Central Oakland, CA
Portland, OR $4.81 $5.23 $5.40 $5.85 $6.24 $6.28 Atlanta, GA Portland, OR 6.2% 7.7% 7.1% 6.9% 6.6% 6.0%
Orange County, CA
SF Peninsula, CA $9.32 $9.39 $9.51 $9.66 $9.72 $10.03 Chicago, IL SF Peninsula, CA 6.4% 7.9% 7.9% 7.7% 7.3% 7.2%
New Jersey Central
Silicon Valley, CA $5.47 $6.23 $6.31 $6.41 $6.56 $6.61 Boston, MA Silicon Valley, CA 6.1% 8.0% 8.8% 9.7% 10.1% 9.4%
Chicago, IL
United States: United States:
$4.58 $4.71 $4.79 $4.91 $5.05 $5.19 9.5% 8.6% 8.3% 7.8% 7.4% 6.9%
CW Markets 0% 12% 24% 36% CW Markets
-10% -5% 0% 5%
FLEX SPACE

MANUFACTURING

RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING MARKET
2011-2016 2011-2016
PROJECTIONS
2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F SF Peninsula, CA
Houston, TX
Atlanta, GA $3.41 $3.31 $3.31 $3.27 $3.24 $3.24 Atlanta, GA 3.5% 4.4% 4.5% 4.9% 4.8% 4.3%
Portland, OR Houston, TX
Boston, MA $5.51 $4.89 $4.82 $4.81 $4.82 $4.86 Boston, MA 20.5% 21.0% 20.8% 20.2% 19.6% 19.4%
Orange County, CA Atlanta, GA
Chicago, IL $3.67 $3.86 $3.89 $4.06 $4.22 $4.34 Chicago, IL 6.4% 6.1% 6.0% 5.5% 4.9% 4.5%
Silicon Valley, CA New Jersey North
Dallas, TX $3.35 $3.39 $3.45 $3.49 $3.56 $3.69 Dallas, TX 9.1% 11.8% 11.1% 10.5% 9.4% 8.2% New Jersey Central
Miami, Fl
Denver, CO $4.44 $4.21 $4.22 $4.59 $4.88 $4.97 Denver, CO 7.8% 6.8% 7.3% 6.6% 6.0% 5.6%
Chicago, IL Silicon Valley, CA
Houston, TX $3.93 $4.99 $5.10 $5.35 $5.59 $5.93 Houston, TX 3.8% 5.1% 5.2% 5.1% 4.8% 5.2%
SF Peninsula, CA Dallas, TX
Inland Empire, CA $4.64 $4.84 $4.91 $5.09 $5.27 $5.33 Inland Empire, CA 7.9% 7.1% 6.9% 6.6% 6.2% 5.9%
Los Angeles, CA Boston, MA
Inland Empire, CA Phoenix, AZ
Miami, Fl $3.94 $4.36 $4.46 $4.58 $4.72 $4.84 Miami, Fl 10.3% 7.5% 7.5% 7.2% 6.9% 6.7%
United States Los Angeles, CA
Denver, CO United States
Dallas, TX Chicago, IL
Phoenix, AZ Inland Empire, CA
Oakland, CA Denver, CO
Philadelphia, PA $4.15 $3.75 $3.83 $3.86 $3.98 $4.08 Philadelphia, PA 6.7% 6.9% 7.1% 4.8% 4.6% 4.0%
New Jersey North Orange County, CA
Phoenix, AZ $5.52 $5.64 $5.74 $5.76 $5.93 $6.02 Phoenix, AZ 9.3% 9.8% 9.6% 9.1% 8.4% 8.2%
Philadelphia, PA Philadelphia, PA
Portland, OR $4.19 $4.90 $4.96 $5.09 $5.25 $5.38 Portland, OR 6.6% 5.2% 4.2% 4.1% 3.5% 2.8%
Atlanta, GA Oakland, CA
SF Peninsula, CA $7.77 $8.29 $8.30 $8.44 $8.77 $9.08 SF Peninsula, CA 6.0% 8.9% 8.5% 7.9% 7.7% 7.5%
New Jersey Central Miami, Fl
Silicon Valley, CA $8.37 $8.89 $9.10 $9.65 $10.24 $10.51 Silicon Valley, CA 5.9% 6.1% 5.2% 5.0% 5.5% 5.2%
Boston, MA Portland, OR
United States: United States:
$4.92 $5.05 $5.09 $5.23 $5.41 $5.56 6.9% 6.6% 6.5% 6.0% 5.5% 5.2%
CW Markets CW Markets
-30% 0% 30% 60% -4% -2% 0% 2%

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9

UNITED STATES
ESTATE FORECAST

INDUSTRIAL MARKET PROJECTIONS (CONT’D)
FLEX SPACE ECONOMIC
OUTLOOK
RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING
2011-2016 2011-2016
2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F
Atlanta, GA $7.58 $7.02 $6.71 $6.38 $6.31 $6.56 Silicon Valley, CA Atlanta, GA 12.3% 12.7% 12.7% 12.0% 11.5% 11.0% Portland, OR
Boston, MA $8.14 $8.13 $8.29 $8.51 $9.11 $9.36 SF Peninsula, CA Boston, MA 15.4% 16.7% 16.7% 15.2% 13.7% 12.8% SF Peninsula, CA
INDUSTRIAL
Chicago, IL $8.44 $8.90 $8.87 $8.96 $9.07 $9.25 Miami, Fl Chicago, IL 13.0% 10.3% 10.6% 9.8% 9.1% 8.3% Houston, TX MARKET
Dallas, TX $7.37 $7.43 $7.56 $7.65 $7.83 $8.10 Boston, MA Dallas, TX 13.9% 14.0% 13.7% 13.0% 12.0% 11.3% New Jersey North REVIEW
Denver, CO $8.67 $8.62 $8.85 $9.28 $9.70 $9.93 Denver, CO Denver, CO 11.3% 10.8% 10.6% 10.2% 9.7% 9.8% Los Angeles, CA

Houston, TX $7.04 $6.75 $6.84 $6.91 $7.11 $7.29 Inland Empire, CA Houston, TX 11.3% 11.8% 12.5% 13.4% 13.7% 13.1% New Jersey Central

Inland Empire, CA $8.62 $8.82 $8.95 $9.20 $9.54 $9.82 Dallas, TX Inland Empire, CA 8.1% 7.8% 7.4% 7.6% 7.4% 6.8% Philadelphia, PA
Chicago, IL Atlanta, GA
United States Inland Empire, CA WAREHOUSE /
Miami, Fl $8.27 $8.59 $8.75 $8.97 $9.49 $10.15 Miami, Fl 5.7% 4.7% 4.3% 4.1% 4.4% 3.7% DISTRIBUTION
Philadelphia, PA Oakland, CA
Phoenix, AZ Denver, CO
New Jersey Central Miami, Fl
New Jersey North United States
Oakland, CA Boston, MA
Philadelphia, PA $7.82 $7.93 $7.92 $8.11 $8.31 $8.51 Philadelphia, PA 7.9% 7.2% 6.7% 6.9% 7.0% 6.6%
Houston, TX Dallas, TX MANUFACTURING
Phoenix, AZ $10.93 $11.04 $11.18 $11.28 $11.36 $11.73 Phoenix, AZ 16.7% 14.5% 13.7% 12.5% 11.3% 10.4%
Los Angeles, CA
Orange County, CA
Portland, OR $9.75 $8.22 $8.18 $8.49 $8.54 $8.74 Portland, OR 6.0% 11.7% 11.5% 11.7% 10.9% 9.8%
Orange County, CA
Chicago, IL
Silicon Valley, CA
Silicon Valley, CA $13.09 $15.57 $16.77 $18.80 $21.11 $22.54 Portland, OR Silicon Valley, CA 13.7% 12.0% 11.0% 10.2% 9.4% 9.0%
Phoenix, AZ
United States: Atlanta, GA United States:
$10.13 $10.38 $10.55 $10.66 $10.81 $11.06 11.6% 11.3% 11.0% 10.4% 9.8% 9.2%
-40% 0% 40% 80% -8% -4% 0% 4%
FLEX SPACE

TOTAL MARKET

RENT FORECAST GROWTH RANKING VACANCY FORECAST DECLINE RANKING MARKET
2011-2016 2011-2016
PROJECTIONS
2011 2012F 2013F 2014F 2015F 2016F 2011 2012F 2013F 2014F 2015F 2016F
Atlanta, GA $3.74 $3.59 $3.53 $3.44 $3.44 $3.60 Atlanta, GA 10.7% 10.1% 10.1% 9.7% 9.6% 8.8% SF Peninsula, CA
Silicon Valley, CA
Boston, MA $6.00 $5.84 $5.89 $5.92 $6.05 $6.13 Boston, MA 17.7% 18.7% 18.6% 17.6% 16.5% 15.9% Philadelphia, PA
SF Peninsula, CA
Chicago, IL $4.05 $4.12 $4.15 $4.25 $4.37 $4.46 Los Angeles, CA Chicago, IL 9.8% 9.0% 8.6% 7.7% 6.6% 5.8% Portland, OR
Dallas, TX $4.07 $4.20 $4.32 $4.43 $4.57 $4.68 Miami, Fl Dallas, TX 12.1% 10.6% 9.9% 9.4% 8.7% 8.5% Houston, TX
Denver, CO $5.69 $5.64 $5.72 $6.03 $6.34 $6.54 Houston, TX Denver, CO 7.5% 6.5% 6.5% 6.1% 5.7% 5.5% Miami, Fl
Houston, TX $4.61 $4.84 $5.01 $5.22 $5.49 $5.74 Orange County, CA Houston, TX 7.7% 7.4% 7.2% 7.4% 7.1% 6.4% New Jersey North

Inland Empire, CA $4.41 $4.56 $4.68 $4.80 $4.52 $4.57 New Jersey Central Inland Empire, CA 11.0% 7.0% 6.3% 7.3% 8.3% 8.7% Boston, MA
Portland, OR
Los Angeles, CA $6.24 $6.56 $6.80 $7.21 $7.73 $8.11 Los Angeles, CA 4.9% 4.6% 4.2% 3.7% 3.1% 2.5% Atlanta, GA
Denver, CO Denver, CO
Miami, Fl $4.79 $5.39 $5.51 $5.70 $5.94 $6.12 Miami, Fl 8.1% 7.0% 7.5% 7.2% 7.0% 6.8%
Dallas, TX
New Jersey Central $5.35 $5.96 $6.14 $6.23 $6.31 $6.44 New Jersey Central 9.6% 8.2% 7.5% 7.0% 6.5% 6.0% Inland Empire, CA
Oakland, CA
New Jersey North $5.97 $6.11 $6.18 $6.31 $6.44 $6.60 New Jersey North 9.5% 9.8% 9.8% 9.5% 8.6% 8.0% United States
United States
Oakland, CA $5.39 $5.71 $5.75 $5.87 $6.01 $6.08 Oakland, CA 9.2% 7.2% 7.1% 6.6% 6.0% 5.7% Los Angeles, CA
New Jersey North
Orange County, CA $7.59 $8.12 $8.30 $8.70 $9.14 $9.34 Chicago, IL Orange County, CA 6.3% 5.1% 4.8% 4.0% 3.3% 2.8% Silicon Valley, CA

Philadelphia, PA $4.91 $4.85 $4.82 $5.01 $5.17 $5.31 Philadelphia, PA Philadelphia, PA 7.0% 6.9% 7.4% 7.0% 7.1% 6.7% Orange County, CA

Phoenix, AZ $6.84 $6.81 $6.88 $6.93 $7.01 $7.10 Phoenix, AZ Phoenix, AZ 12.9% 12.0% 11.4% 10.7% 9.7% 9.3% Oakland, CA

Portland, OR $5.58 $5.65 $5.81 $6.23 $6.54 $6.64 Inland Empire, CA Portland, OR 6.2% 7.6% 7.0% 6.9% 6.5% 5.8% Phoenix, AZ
Boston, MA New Jersey Central
Atlanta, GA Dallas, TX
Silicon Valley, CA $11.69 $13.52 $14.30 $15.57 $16.93 $18.00 Silicon Valley, CA 10.8% 10.1% 9.4% 9.0% 8.7% 8.3%
United States: United States: Chicago, IL
$5.51 $5.69 $5.77 $5.89 $6.03 $6.19 -30% 0% 30% 60% 9.2% 8.5% 8.3% 7.8% 7.3% 6.8%
-4% -2% 0% 2%

10

Cw industrial real estate forecast 2013 2016

Cw industrial real estate forecast 2013 2016

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