NATIONAL INDUSTRIAL MARKET ANALYSIS

VALUATION & ADVISORY

NATIONAL INDUSTRIAL MARKET ANALYSIS THIRD QUARTER 2020

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INTRODUCTIONOVERVIEWPrior to the current market disruption brought on by the COVID-19 pandemic, the U.S. economy had officially begun its eleventh consecutive year of growth in the second half of 2019; a new record for the longest economic expansion in history. Economic growth beat market expectations during the fourth quarter of 2019, and the unemployment rate hit a 50-year low at 3.5%. However, it was estimated that over 29.2 million people were collecting unemployment as of mid-August, translating to an 18.3% unemployment rate based on a total workforce of 160 million.

The U.S. economy has endured the largest decline since the advent of modern statistics. An advance estimate released by the Bureau of Economic Analysis (BEA) indicates that GDP declined by an annualized rate of 32.9% for the second quarter, the largest drop in economic activity in the U.S. topping both the Great Depression (negative 28.6%) and the Great Recession (negative 19.1%). This second quarter decline in GDP followed a 5% drop in activity during the first quarter, which was the largest decline since fourth quarter 2008. Consumer spending, which traditionally accounts for more than two-thirds of the U.S. economic activity, made up 25% of the second quarter GDP drop.

Consumer confidence surged in September after decreasing in August, as the percentage of consumers expecting business conditions to improve over the next six months rose to 37.1%. The index now stands at 101.8, up from 86.3 in August. Following an 8.7% increase in May, consumer spending has continued to increase, albeit at a diminishing pace. Consumer spending increased 6.5% in June, 1.5% in July, and 1% in August, as the economic impact from the stimulus checks began to wane.

As we proceed through the final quarter of 2020, the prospect of a new fiscal stimulus package remains cloudy, as policymakers disagree on key elements of a new bill. Economists foresee a double-dip downturn if another fiscal aid package doesn’t come soon. A forecast from Oxford Economics’ weekly economic update estimates a 34% annualized growth in GDP in the third quarter of 2020, bolstered by a 40% annualized rise in consumer spending. However, the firm cautions that economic momentum has softened considerably entering the fourth quarter, as the rising virus case rates will likely result in a renewed deterioration in the health situation which will likely weigh on the economy in the weeks ahead. Oxford Economics forecasts a 5% annualized growth in GDP in the fourth quarter of 2020 under the assumption that additional fiscal aid is provided to households. If no fiscal aid deal is reached, real GDP is likely to grow less than 3% in the fourth quarter leaving the economy exposed to headwinds going into 2021.


NATIONAL INDUSTRIAL MARKET ANALYSIS


THIRD QUARTER 2020

The following economic indicators provide additional insight on the overall U.S. Industrial Market:

• The U.S. Commerce Department advanced statistics reported for the month of September 2020 seasonally adjusted year-over-year retail sales increased 5.4% compared to 2019 and the estimate of U.S. retail sales month-over-month increased 1.9% since August. Third quarter 2020, auto sales and their components increased 7.5% year-over-year and during this interval, clothing and clothing accessories store sales decreased 18.8%, food services and drinking places sales decreased 16.5%, and electronics & appliance store sales decreased 5.4%. As people shifted to on-line shopping during the pandemic, however, e-commerce/non-store retail sales increased 23.4% over sales of a year ago, while sales at food and beverage stores increased 10.4%, sales at general merchandise stores increased 2.8%, and sales at building materials & garden equipment and supplies dealers increased 17.2%.

• In November 2020, the Institute for Supply Management reported that their survey of U.S. supply executives indicated that the manufacturing sector expanded in October in anticipation of more lockdowns and stay-at-home orders as COVID-19 cases were beginning another surge. New orders in the manufacturing sector increased 7.7 percentage points compared to the previous month to 67.9%, while production increased two percentage points from the previous month to 63%,

while employment increased 3.6 percentage points to 53.2%. Finally, the overall Purchasing Managers Index (PMI) for the manufacturing sector increased 3.9 percentage points from the previous month to 59.3% in October 2020; a PMI above 50% over a period of time indicates expansion within this sector. The food, beverage & tobacco sector noted “Increased production due to stores stocking up for the second wave of COVID-19.” An additional comment from a participant in the fabricated metal products sector stated “…continue to see increases in customer demand. We still are not back to pre-COVID-19 levels but are continually improving.” And another in machinery noted that “Business is almost back to normal levels; however, customers are still cautious with capital spending.” A report from computer and electronic products sector noted that “COVID-19 continues to have an effect on supplier support and operations, more from a decreased labor perspective rather than unavailable material.”

NATIONAL INDUSTRIAL MARKET STATISTICSDemonstrating resilience amongst the economic instability caused by the COVID-19 pandemic, the U.S. industrial market further accelerated through the first three quarters of 2020, primarily due to sustained growth in demand from e-commerce. In the third quarter this market absorbed 62.1 million square feet (msf), the strongest quarter this year and the year-to-date total of more than 159 msf of absorption, a 0.7% decrease from the more than 160 msf reported through third quarter 2019.

New leasing activity remained in excess of 100 msf for the 19th quarter in a row at more than 155.2 msf. This brought the year-to-date total to more than 454.9 msf, an increase of 2.6% year-over-year. Currently the U.S. market is on pace to close 2020 with more than 500 msf of new leasing activity seen for the sixth consecutive year. More than half of the U.S. markets tracked by Cushman & Wakefield, 43 of 80, posted year-over-year increases in new leasing activity. A key driver stimulating this level of activity are digital sales, which generated a continued increase in e-commerce leasing, as well as third-party logistics providers occupying warehouse/distribution space. New leasing activity in logistics space accounted for 234.4 msf, which represents 86.3% of all new leasing activity across all product types in third quarter 2020.

Two trends stand out as further evidence that demand for industrial space remains strong, even in uncertain times. First, third quarter 2020 marked three quarters in a row of more than 45 msf of positive absorption. And second, without some significant change, annual market leasing is on pace to exceed the record leasing from 2019.




THIRD QUARTER 2020

The following details our recent assessment of the U.S. Industrial Market:

• Year-to-date through third quarter 2020 deliveries of new industrial capacity totaled nearly 250.3 msf which was an 8.1% increase compared to 12 months prior. While in third quarter 2020 the market received nearly 88.6 msf, a 17.9% increase over the more than 75.1 msf this market received in third quarter 2019. Recent supply continued to outpace overall demand by a little over 91 msf at third quarter 2020, as expected; however, vacancy rates generally remained tight across U.S. industrial markets.

• Of the 80 markets tracked by Cushman & Wakefield, 46 markets received more than one msf of new industrial capacity in the first half of 2020. Nine of these markets, Dallas/Fort Worth, Houston, the Inland Empire, Atlanta, the Pennsylvania I-81 & I-78 Distribution Corridor, Chicago, Columbus, Memphis and Indianapolis each received more than 10 msf of new industrial space, accounting for 54.3% of all

The following table presents a snapshot of U.S. Industrial Market Statistics:

UNITED STATES INDUSTRIAL MARKETALL MARKETS (INCLUDES ALLIANCE OFFICES)

Employment Indicators

Q32019

Q32020

Y-O-YChange

12 MonthForecast

Total NonfarmEmployment 151.5M 140.2M -7.5%

IndustrialEmployment 33.2M 30.1M -9.4%

Unemployment 3.7% 8.8% +5.1pp

MarketIndicators

Q32019

Q32020

Y-O-YChange

12 MonthForecast

Overall Vacancy 4.8% 5.3% +0.5pp

Overall Net Absorption (msf/ytd)

160.1 159 -0.7%

Under Construction (msf)

338.4 340.9 0.7%

Overall Asking Rents (psf) $6.50 $6.63 2%

Source: U.S. Bureau of Labor Statistics

Source: Cushman & Wakefield Research, compiled by Valuation & Advisory




THIRD QUARTER 2020

NATIONAL INDUSTRIAL MARKET 2011-2020

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 20

Vac

ancy

Rat

e

Quo

ted

Ren

t (p

sf)

Overall Quoted Rates (Total Ind) Vacancy (Total Ind)

Source: Cushman & Wakefield Research; compiled by Valuation & AdvisoryNote: Includes all industrial property types

completions in the U.S. industrial market through the close of third quarter 2020. During this period, these nine markets also accounted for more than 60% of market net absorption which indicates this new supply remains generally concentrated in markets with consistently strong demand.

• Active Industrial development reached a record 340.9 msf peak for this market in the second quarter and 93.6%, or 319 msf, will be in the warehouse/distribution sector. Despite the brief pause developers took in the second quarter, the pipeline subsequently expanded 8.3% and approximately one percent over 12 months prior, which held the previous record for largest active industrial pipeline this market experienced. The South continued with the most square footage under construction, with 143.8 msf, or 42.2% at third quarter 2020. Though the pipeline may look as though it is showing the possibility of oversupply, the ratio between speculative and build-to-suit space tells a different story. At third quarter 2020, the industrial market had only 61.9% or 211.1 msf of speculative space under construction, leaving build-to-suit activity at 38.1% or 129.9 msf, which is a much more conservative pipeline ratio than we have seen in recent quarters. Just under 40% of the industrial space under construction is pre-leased. The

remainder of the available pipeline has enough new supply to provide occupiers with additional options for growth but not so much as to drastically shift the vacancy rate, derail rent growth or undermine asset values.

• The U.S. industrial vacancy rate in the third quarter of 2020 registered a 20-basis point increase from the previous quarter to 5.3%. This rate remains 40 basis points below the market five-year average of 5.7% for all product types. Despite increasing year-over-year by 50 basis points, this market welcomes new quality industrial capacity. The rise in vacancy has alleviated some of the pressure on supply-constrained markets, but certainly not all. The tightest U.S. markets continued to be Orange County, Central New Jersey, Nashville, Savannah, Los Angeles, Philadelphia and Hampton Roads, all of which reported vacancy rates below three percent in third quarter 2020. More broadly, overall vacancy rates remained lowest in the West and Northeast regions at 4.5% and 4.9%, respectively.

U.S. industrial rents increased year-over-year in third quarter 2020 by two percent to $6.63 per square foot (psf), while warehouse/distribution rents rose 4.9% during the same period to $6.10 psf.

The following graph presents rental rates compared to vacancy rates from 2011 through third quarter 2020:


NATIONAL INDUSTRIAL MARKET ANALYSISTHIRD QUARTER 2020

The following table presents the current U.S. Industrial Market Statistics by Individual Markets:

INDUSTRIAL MARKET STATISTICS BY MARKETUNITED STATES - THIRD QUARTER 2020

Market/Submarket InventoryOverall

Vacancy Rate

YTD Leasing Activity

Under Construction

YTD Construction Completions

YTD Overall

Absorption

Overall Weighted AverageNet Rental Rate*

Overall W/D MF

Atlanta, GA 637,201,314 7.2% 25,981,768 16,364,569 14,770,143 12,116,961 $4.61 $4.22 $5.14

Austin, TX 43,976,360 7.0% 3,222,055 6,180,152 1,248,043 457,423 $10.57 $9.65 N/A

Baltimore, MD 219,625,577 6.6% 5,972,726 1,785,236 5,150,963 4,761,496 $6.98 $6.62 N/A

Binghamton, NY** 17,763,825 11.0% 182,260 0 0 184,602 $4.72 $4.22 $4.88

Birmingham, AL** 14,570,638 6.4% 478,121 3,124,000 0 27,864 $5.03 $4.46 N/A

Boise, ID** 42,232,868 3.4% 924,021 3,397,782 773,904 769,931 $7.62 $6.77 $8.03

Boston, MA 176,736,430 4.7% 3,166,832 2,696,600 1,217,650 2,194,962 $9.32 $7.79 $8.70

Buffalo, NY** 109,187,653 11.0% 819,827 631,000 117,000 (453,324) $6.50 $6.00 $4.95

Central Valley CA 142,433,814 7.2% 5,546,691 3,560,944 1,694,693 200,751 $6.16 $6.77 $4.64

Charleston, SC** 80,145,289 7.4% 2,058,931 2,067,195 2,588,939 759,966 $5.68 $5.59 $5.61

Charlotte, NC 160,778,796 8.3% 5,312,756 2,079,668 3,644,620 1,099,452 $5.30 $4.77 $5.91

Chicago, IL 1,176,574,869 5.6% 25,782,129 20,042,916 14,235,064 9,408,958 $5.37 $5.04 $5.27

Cincinnati, OH 298,561,583 4.8% 6,066,782 5,783,074 4,279,360 2,164,176 $4.53 $4.47 $3.74

Cleveland, OH** 511,410,994 3.8% 3,807,849 2,864,841 1,872,109 (1,183,804) $4.00 $3.80 $0.00

Colorado Springs** 34,269,195 6.0% 388,754 4,151,894 93,352 38,254 $9.54 $9.83 $10.15

Columbus, OH 274,249,511 5.5% 7,212,940 7,455,549 10,855,262 3,607,729 $4.16 $4.09 $3.56

Dallas/Ft. Worth, TX 798,406,640 6.5% 23,799,885 23,798,668 22,910,609 21,024,403 $5.03 $4.38 $3.96

Denver, CO 243,904,763 6.2% 5,239,378 5,939,381 3,318,142 2,137,621 $9.01 $7.56 $9.03

Detroit, MI 545,940,299 3.3% 5,777,002 5,834,001 724,798 (989,892) $6.43 $5.89 $5.61

El Paso, TX** 57,337,952 5.6% 1,504,635 2,564,961 70,560 253,151 $4.85 $4.85 $5.00

Fort Myers/Naples FL** 37,137,391 3.4% 689,418 541,500 168,500 7,632 $8.74 $8.87 $10.91

Fredericksburg, VA** 14,028,689 3.5% 243,138 632,690 0 142,786 $6.20 $6.45 $4.74

Ft. Lauderdale, FL 87,538,543 7.6% 2,500,332 2,964,717 1,512,130 (5,240) $9.72 $9.29 $10.63

Greenville, SC** 226,708,989 6.9% 2,379,987 2,330,171 3,883,831 (1,113,157) $4.01 $3.88 $3.89

Hampton Roads, VA** 101,647,732 2.9% 454,272 4,542,000 590,000 1,423,825 $5.79 $5.47 $6.04

Hartford, CT 94,500,300 4.2% 204,609 12,000 0 753,035 $5.59 $5.64 $5.18

Houston, TX 450,824,953 10.6% 18,172,872 16,935,082 21,836,926 7,710,650 $6.05 $5.75 $6.72

Indianapolis, IN 284,118,362 5.3% 13,636,168 9,084,404 10,308,176 6,250,244 $4.64 $4.26 $4.08

Inland Empire CA 562,520,154 3.5% 33,421,897 17,322,297 15,834,046 14,441,850 $8.61 $8.65 $8.37

Jacksonville, FL 102,368,842 6.9% 3,701,903 2,122,890 2,668,858 1,485,941 $5.31 $4.99 $5.07

Kansas City, MO 231,711,157 5.6% 9,041,817 7,944,821 4,087,859 4,869,217 $4.25 $3.83 $3.98

Lakeland, FL 35,815,553 9.1% 2,321,730 1,814,138 2,281,852 1,436,227 $5.31 $5.28 N/A

Las Vegas, NV 127,548,309 5.2% 6,147,028 6,309,157 4,094,863 2,982,895 $9.49 $8.90 $7.87

Long Island, NY 131,558,495 4.4% 2,842,929 677,579 220,610 111,245 $11.13 $10.67 $11.60

Los Angeles, CA 988,481,256 2.6% 26,543,734 3,997,515 2,637,511 (4,393,853) $11.28 $10.75 $10.94

Louisville, KY** 169,827,573 4.1% 5,891,100 4,937,727 2,981,038 4,356,580 $4.14 $4.13 $3.30

Memphis, TN** 259,482,879 6.7% 4,367,529 16,310,577 10,346,463 2,608,707 $3.42 $3.25 $3.70

Miami, FL 157,999,258 4.8% 4,965,321 3,521,066 1,406,112 1,361,189 $8.56 $8.26 $7.14

Milwaukee, WI** 206,746,754 5.0% 2,081,440 4,531,982 1,504,115 961,819 $4.42 $4.25 $4.37

Minneapolis, MN 118,196,964 7.6% 4,832,071 1,390,064 1,599,488 1,860,384 $5.10 $4.88 N/A

Nashville, TN 220,642,042 2.4% 5,217,471 5,840,036 2,498,379 4,467,932 $6.49 $9.66 $3.30

New Haven, CT 47,730,069 3.8% 175,294 0 0 (156,910) $6.54 $5.90 $5.71

New Jersey - Central 358,997,399 2.4% 9,896,722 5,445,973 6,744,249 4,805,970 $8.85 $8.61 $6.79

New Jersey - Northern 288,111,657 3.7% 7,387,682 1,556,313 1,379,029 1,475,162 $9.98 $9.82 $7.51

Northern VA 60,303,308 6.1% 582,596 367,000 0 423,557 $11.31 $9.63 N/A

NY Outer Boroughs 137,034,977 4.5% 3,762,854 3,698,147 193,800 322,108 $21.03 $20.82 N/A

Oakland/East Bay CA 212,462,503 5.5% 7,984,694 3,477,068 2,368,142 620,958 $11.91 $10.62 $13.87

Omaha, NE** 93,535,523 3.1% 681,325 523,627 810,181 296,796 $6.40 $5.75 $5.00

Orange County CA 260,046,708 2.2% 6,125,102 703,655 596,838 (394,114) $12.20 $11.91 $11.33

Orlando, FL 117,771,674 8.8% 4,453,319 2,156,850 3,926,822 2,641,962 $6.94 $6.29 $8.15

Palm Beach County, FL 37,807,548 3.5% 809,284 1,970,301 346,405 329,445 $10.43 $9.65 $8.35

Pennsylvania I-81/I-78 Distribution Corridor 317,900,198 7.5% 15,674,661 16,243,394 14,713,117 18,297,261 $5.01 $5.01 N/A

Philadelphia, PA 155,940,048 2.8% 7,715,694 7,552,417 2,852,055 4,981,551 $6.08 $6.12 $5.88

Phoenix, AZ 336,384,664 7.9% 5,271,806 10,050,068 9,774,815 7,753,594 $7.49 $6.22 $7.80

Pittsburgh, PA** 185,298,256 6.7% 669,207 1,560,055 409,000 (497,857) $6.11 $6.00 $4.99

Portland, OR 209,380,734 3.9% 4,290,608 1,889,640 1,158,779 590,856 $9.13 $7.95 $8.10

Providence, RI** 77,727,305 0.1% 51,515 0 0 51,515 $4.85 $4.70 N/A

Puget Sound - Eastside 62,701,653 3.2% 1,629,926 514,386 510,495 175,075 $15.94 $11.35 $13.95

Raleigh/Durham, NC 47,019,782 3.4% 863,578 893,233 493,000 (517,292) $10.50 $6.26 N/A

Reno, NV** 100,876,642 5.4% 4,189,905 1,564,969 1,800,675 1,485,372 $5.28 $4.80 $5.76

Richmond, VA** 94,812,568 3.5% 1,852,257 3,169,180 1,517,613 951,679 $4.67 $4.84 $4.36

Roanoke, VA** 51,743,987 6.6% 326,887 0 0 114,602 $4.30 $3.87 $6.68

Rochester, NY** 73,551,473 6.5% 210,195 0 0 512,871 $5.40 $4.00 $4.75

Sacramento, CA 143,010,549 5.1% 3,282,903 4,649,790 1,168,440 (1,052,177) $6.60 $6.84 $5.52

Salt Lake City, UT 141,479,660 4.8% 4,952,143 4,930,181 4,348,914 3,077,192 $6.34 $6.18 $6.23

San Antonio, TX** 55,335,457 7.2% 1,082,897 1,370,648 2,081,106 1,816,485 $5.41 $5.23 N/A

San Diego, CA 164,257,647 5.5% 3,610,596 4,858,491 980,334 (399,415) $13.10 $10.77 $13.65

San Francisco North Bay, CA 31,322,295 5.2% 833,064 195,045 0 (150,472) $14.23 $13.69 $14.87

San Francisco Peninsula, CA 41,546,330 5.8% 567,194 0 0 (948,563) $18.34 $17.47 $22.53

Santa Clara County (San Jose), CA 86,646,859 4.1% 3,455,856 650,650 727,227 (262,825) $14.16 $12.24 $16.58

Savannah, GA** 78,898,891 2.5% 2,252,206 8,718,604 3,785,687 4,651,595 $5.08 $4.77 N/A

Seattle, WA 233,506,437 5.9% 6,661,444 7,164,852 2,978,936 (4,712,671) $9.28 $8.56 $9.80

Southern New Hampshire 49,726,696 6.2% 86,070 0 0 (130,178) $6.81 $6.84 $4.93

St. Louis, MO 254,063,504 5.7% 4,671,918 2,278,027 2,318,610 1,089,696 $4.72 $4.46 $4.55

St. Petersburg/Clearwater, FL 36,524,675 6.2% 930,101 209,047 60,000 65,004 $7.33 $5.96 $5.36

Suburban MD 49,427,100 7.3% 966,942 276,000 0 319,981 $10.75 $9.19 N/A

Syracuse, NY** 42,619,995 5.7% 528,819 4,042,500 40,000 231,633 $4.66 $5.09 $4.11

Tampa, FL 75,273,627 7.5% 3,319,961 3,981,959 2,072,547 1,590,534 $6.59 $5.65 $7.96

Tucson, AZ** 44,267,210 7.3% 571,624 0 32,000 (397,419) $6.41 $5.99 $5.14

Tulsa, OK** 79,768,699 3.0% 1,083,853 193,058 80,420 (335,860) $5.23 $5.48 $4.51

Northeast 2,264,384,776 4.9% 53,375,170 44,115,978 27,886,510 32,683,646 $7.76 $7.88 $5.62

Midwest 3,995,109,520 5.0% 83,591,441 67,733,306 52,595,022 28,335,323 $4.96 $4.58 $4.96

South 4,660,752,326 6.5% 137,759,831 143,762,923 114,921,566 76,435,480 $5.69 $5.24 $5.28

West 4,209,280,250 4.5% 131,638,368 85,327,765 54,892,106 21,562,840 $9.42 $8.61 $10.00

United States 15,129,526,872 5.3% 406,364,810 340,939,972 250,295,204 159,017,289 $6.63 $6.10 $6.79

** C&W Alliance Office * RENTAL RATES REFLECT ASKING $PSF/YEAR MF = MANUFACTURING W/D = WAREHOUSE/DISTRIBUTION

Source: Cushman & Wakefield Research; compiled by Valuation & Advisory




THIRD QUARTER 2020

The following graphic presents historical annual Overall Net Absorption in the U.S. Industrial Market from 2011 through 2019 and compares year-to-date third quarter absorption in 2019 to 2020:

UNITED STATES INDUSTRIAL MARKET | OVERALL NET ABSORPTION

129.9

196.6

186.2

265.8

268.0

284.5 248.8

287.8 239.8

160.1

159.0

0

50

100

150

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350

2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 19 Q3 20

Mill

ion

Sq

uare

Fee

t

Warehouse69%

O�ce Service22%

Manufacturing6%

High-Tech3%

COMPOSITION OF THE NATIONAL U.S. INDUSTRIAL MARKETQ3 2020

Cushman & Wakefield’s industrial data is comprised of High-Tech, Manufacturing, Office Service, and Warehouse space, all of which displayed slightly unique patterns in recent years. The overall vacancy rate of warehouse facilities increased 60 basis points in the previous 12-month period to 5.8% in third quarter 2020, while the vacancy rate of manufacturing facilities increased 60 basis points during this same period to 3.6%. Concurrently, warehouse rental rates increased 3.5% to $6.10 psf by third quarter 2020, while asking rents for manufacturing space increased 2.1% to $6.79 psf net over the same time period.

Source: Cushman & Wakefield Research; compiled by Valuation & Advisory“New Series Statistics”




THIRD QUARTER 2020

The following graphs detail industrial vacancy and rental rates from 2011 through third quarter 2020:

NATIONAL INDUSTRIAL MARKET | WAREHOUSE AND MANUFACTURING: 2011- 2020

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

3.5

4

4.5

5

5.5

6

6.5

2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 20

Vac

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Quoted Rates (WH) Quoted Rates (Manf) Vacancy (WH) Vacancy (Manf)

By third quarter of 2020, the overall vacancy rate in the High-Tech sector of the market remained unchanged from third quarter 2019 at 5.4%, while the vacancy rate for the Office Service sector dropped 20 basis points over the same period to 6%. Over the previous 12-month period, rental rates in the High-Tech sector decreased 4.7% to $12.11 psf net, while rental rates in the Office Service sector decreased 1.5% year-over-year third quarter 2020, to a reported weighted average rental rate $9.70 psf net.

NATIONAL INDUSTRIAL MARKET | HIGH TECH AND OFFICE SERVICE: 2011- 2020

0.0%

2.0%

4.0%

6.0%

8.0%

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12.0%

14.0%

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2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 20

Vac

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Quoted Rates (HT) Quoted Rates (OS) Vacancy (HT) Vacancy (OS)






THIRD QUARTER 2020

The following graphic presents a comparison of historical Construction Completions and Overall Vacancy Rates in the U.S. Warehouse/Distribution Market from 2011 through third quarter 2020:

UNITED STATES INDUSTRIAL MARKET | CONSTRUCTION COMPLETION VS. OVERALL VACANCY RATES

38.912889

07

67.9

014

4

87.0224

39

145.9

7634

179.69219

9

235.964581

245.110

315

287.56629

8

250.29

5204

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

10.5%

0

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2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 20

Mill

ion

Sq

uar

e F

eet

New Construction Vacancy (Total Ind)

The following graph presents a comparison of Build-to-Suit and Speculative Development in the U.S. Industrial Market from 2011 through our 2020 forecast, based on reported active developments:

UNITED STATES INDUSTRIAL MARKET | COMPARISON OF BUILD-TO-SUIT AND SPECULATIVE DEVELOPMENT

0

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450

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F

Mill

ion

Sq

uar

e F

eet

BTS SPEC

Source: Cushman & Wakefield Research; compiled by Valuation & Advisory“New Series Statistics”

Source: Cushman & Wakefield Research; compiled by Valuation & AdvisoryExcludes Alliance Office Statistics




THIRD QUARTER 2020

NATIONAL INDUSTRIAL INVESTMENT SALES MARKETOVERALL RATESAccording to the third quarter 2020 PwC Real Estate Investor Survey edition, the average overall capitalization rate (OAR) for the national warehouse market reached a trough of 4.56% in fourth quarter 2018, and subsequently increased slightly to only 4.84% by third quarter 2020. Overall, 55% of respondents of the survey stated that the third quarter 2020 warehouse market conditions favored sellers, a notable decline, while 9% of respondents indicated the national warehouse market favored buyers and the remaining 36% of survey respondents indicated this market neither favored buyers nor sellers. The survey

noted investors generally maintained an optimistic, albeit cautious outlook while looking for buying opportunities in the national warehouse market. The survey stated that while value-added offerings pique the interest of certain buyers, an unclear economic future makes pricing such deals trickier than pricing stabilized properties. One participant stated that “we are searching for warehouse assets with a diverse mix of good credit tenants, varying lease terms, and functional amenities.” Thus, it is apparent that buyers are looking for more stable assets as opposed to value-add properties.

Note that due to inactivity in surveyed investors, the survey of the national Flex/R&D market was suspended after fourth quarter 2017.

The following graph presents national historical trends of available average overall cap rates from third quarter 2011 to third quarter 2020, as reported by the PwC Real Estate Investor Survey:

UNITED STATES INDUSTRIAL MARKET | HISTORICAL WAREHOUSE AND FLEX/R&D OVERALL CAPITALIZATION RATES

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National Warehouse National Flex/R&DSource: PwC Real Estate Investor Survey

In the more extended history of the PwC Real Estate Investor Survey the national warehouse and Flex/R&D OARs both bottomed in first quarter 2008 at an average of 6.47% and 7.47%, respectively. This was followed by rising OARs, which peaked for warehouse properties in fourth quarter 2009 at 8.80% and peaked for Flex/R&D OARs in second quarter 2010 at 9.38%. Subsequently, industrial market OARs experienced a declining trend. Although national Flex/R&D OARs decreased to 7.05% in fourth quarter 2016, their lowest point in more than seven years, this rate registered an up-tick to 7.10% in second

and third quarters 2017. As noted previously, the national warehouse market OARs reached 4.84% in third quarter 2020, a slight increase from the recent low point of 4.56% in fourth quarter 2018, which was the lowest average recorded for the warehouse market since this survey began in 2002.

Both the PwC Real Estate Investor Survey and the National Council of Real Estate Investment Fiduciaries (NCREIF) methodologies offer unique perspectives on cap rate trends. The PwC Real Estate Investor Survey




THIRD QUARTER 2020

calculates its data based on a personal survey of major institutional equity real estate market participants. In contrast, NCREIF looks at data from actual appraisals included in their benchmark property return index. The index contains quarterly performance data for unlevered investment-grade income-producing properties, owned by, or on behalf of, exempt institutions.

Despite displaying distinct rates, similar trends are apparent in both the PwC Real Estate Investor Survey and NCREIF data. According to NCREIF, cap rates declined until the end of 2008 and then increased precipitously through 2009 before they began their slow descent in 2010. As reported by NCREIF, the average warehouse cap rate has experienced a gentle decline from the fourth quarter 2011 rate of 6.02% to the third quarter 2020 rate of 4.69%. While the overall trend for OARs may remain settled near their historical low in the short term, according to NCREIF, OARs may begin to trend higher.

UNITED STATES INDUSTRIAL MARKET | HISTORICAL WAREHOUSE OVERALL CAPITALIZATION RATES

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NCREIF PwC

Source: NCREIF & PwC

Finally, the Situs Real Estate Research Corporation (RERC) Institutional Survey reported that since fourth quarter 2010 national Flex OARs ranged from a peak of 8.6% in fourth quarter 2010 to a trough of 6.5% in third quarter 2020. This reported rate was a decrease of 80 basis points over the previous 12-month period. Throughout this interval, national R&D OARs ranged from a peak of 8.1% in fourth quarter 2010 to a trough 6.4% in second and third quarter 2020, a decrease of 40 basis points year-over-year.

The following graph compares national historical warehouse cap rate trends as reported by NCREIF and PwC:




THIRD QUARTER 2020

The following graph presents national historical Flex and R&D cap rate trends as reported by the Situs RERC Institutional Investor Survey:

UNITED STATES INDUSTRIAL MARKET | HISTORICAL FLEX AND R&D OVERALL CAPITALIZATION RATES

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National Flex National R&DSource: NCREIF & PwC

In general, investors indicate that the U.S. industrial market continues to fare better than the European, Asian, and Canadian markets. According to Real Capital Analytics (RCA), some of the most active buyers in terms of sales volume year-over-year through third quarter 2020 include: Prologis, Blackstone, Oak Street RE Capital, CalPERS, PGIM Real Estate, Black Creek Group and Clarion Partners. While the most active sellers were: Liberty Property Trust, IPT – Black Creek, Blackstone, Crow Holdings and Panattoni Development. In the largest private real-estate transaction ever, Blackstone and Blackstone REIT purchased a network of U.S. industrial warehouses from Singapore-based GLP for $18.7 billion in mid-2019. While in January 2020, Prologis, one of the world's dominant owners and builders of industrial real estate, acquired Industrial Property Trust, a REIT controlled by Black Creek Group, for $3.99 billion. In an off-market transaction, WPT Industrial REIT acquired a portfolio of 26 U.S. distribution and logistics properties totaling nine msf of gross leasable area and one 85-acre land parcel for $730 million; the seller is an affiliate of Pure Industrial Real Estate Trust. The sales price represents a going-in capitalization rate of 5.5% and a stabilized capitalization rate of 5.9%. Additionally, the acquisition portfolio contains a mix of single-tenant and multi-tenant properties located in eight US states, as well as 85 acres of developable land in Dallas, Texas, providing the REIT with the opportunity to construct up to 1.4 million additional square feet of GLA.

Prior to the arrival of the COVID-19 crisis, sales activity of industrial assets in the U.S. was expected to remain moderately healthy for quite some time. Although weakness and uncertainty cause concern across the commercial real estate spectrum, of all asset types, investors have expressed the most optimism for the industrial sector. Helping stimulate investor appetite for industrial properties is the fact that the U.S. Federal Reserve issued three quarter-point reductions throughout 2019 leaving the rate in a range between 1.5% and 1.75% at the close of October, and these rates remained unchanged through January 2020. However, in response to economic fallout from the coronavirus, the Fed issued an emergency rate cut on March 15 to range from 0 to .25%. This rate remained unchanged through November 5, 2020. It is notable that the last time the Federal Reserve dropped interest rates to this rock-bottom level was December 2008. It remained at this low level until December 2015.

SALES VOLUMEOver the past year, national industrial sales volume outperformed all other property types, but this was notably due to two one-time megadeals by Prologis. Without these transactions, which involved 450 properties, performance would have been average. Year-over-year sales volume of flex space decreased 16.1% to total nearly 161.7 msf in 2019. Then, compared to 12 months prior, year-to-date sales increased 34.6% in third quarter 2020




THIRD QUARTER 2020

to 85.4 million square feet. Sales volume in 2019 within the warehouse sector decreased 1.1% year-over-year to nearly 1.1 billion square feet, then through third quarter 2020 increased 57% compared to 12-months prior, to a total of 586.3 msf.

The following graph presents national industrial historical sales volume in square footage on an annual basis as surveyed by RCA from 2011 through 2019 and compares year-to-date third quarter sales volume in 2019 to 2020:

NATIONAL INDUSTRIAL HISTORICAL SALES VOLUME

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Flex WarehouseSource: Real Capital Analytics, compiled by C&W Valuation & AdvisoryNotes: Numbers are in Billions; Totals based on sales of properties $5.0 million +

The following graph presents national industrial historical sales volume and average capitalization rates as reported by RCA from 2011 through third quarter 2020:

UNITED STATES INDUSTRIAL MARKET | SALES VOLUME AND CAP RATES

5.0%

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llar

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ion

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Source: Real Capital Analytics, compiled by C&W Valuation & Advisory




THIRD QUARTER 2020

MOODY’S/REAL COMMERCIAL PROPERTY INDEXThe national aggregate index of all property types increased 20 basis points from August 2020 to a 10-year peak of 138.95 in September. The current rate is an increase of 1.4% from 12 months prior, and it’s notable that this current index was also 98.2% above the January 2011 trough.

The national industrial index also reached a ten-year peak in September 2020 of 147.48, an increase of 0.6% from August 2020. This was a year-over-year increase of 7.4%, and this current index is 103.8% above the May 2011 trough. Of all property types, the industrial, Office-CBD and Multi-family sectors each experienced the largest1 increase since the previous month of 0.6%, while the retail sector experienced a decrease of 0.7% and a 0.1% decrease was reported for Suburban Office properties.

The following graph displays the Monthly CPPI Index from January 2011 to March 2020:

MOODY’S/REAL COMMERCIAL PROPERTY PRICE INDEXNATIONAL AGGREGATE & NATIONAL INDUSTRIAL

60

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National All-Property Industrial

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Source: Moody’s/RCA CPPI; *October update reflects data through September 2020

1 According to the Moody’s/REAL Commercial Property Index. (CPPI) is a periodic same price change index of U.S. commercial investment properties. Developed by MIT’s Center for Real Estate in conjunction with a consortium of firms including RCA and Real Estate Analytic, LLC (REAL), the index tracks price changes based on documented prices in completed, contemporary property transactions.




THIRD QUARTER 2020

AVERAGE SALES PRICE PER SQUARE FOOTAlthough disparities remain between the industrial subtypes, average prices of market assets are being pressured higher. In third quarter 2020 the average sales price for all industrial properties was $101.42 psf, which represents a 5.4% decrease over the previous 12-month period.

Flex properties were nearly on par with the overall average as the third quarter 2020 average sales price was $153.62 psf. That represented a 5.6% decrease over the previous year. Declines in sales of warehouse facilities fared better than the overall industrial property average, averaging $91.77 psf in third quarter 2020, a 4.4% decrease over the previous 12-months.

The following graph reflects the national industrial historical average price psf trends as surveyed by RCA:

HISTORICAL NATIONAL INDUSTRIAL | AVERAGE PRICE PER SQUARE FOOT

25

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All Industrial Flex Warehouse

Source: Real Capital Analytics, compiled by C&W Valuation & AdvisoryNotes: Totals based on sales of properties $5.0 million +

The following table presents the notable Portfolio Sale Transactions in the U.S. Industrial Market through third quarter 2020:

UNITED STATES INDUSTRIAL MARKETNotable Portfolio Sale Transactions - Third Quarter 2020

Buyer Seller Location # Props Volume ($m) ∆

1 Prologis Liberty Property Trust Worldwide 263 -

2 Prologis IPT - Black Creek Multiple, USA 187 3,909.5

3 Oak Street RE Capital Big Lots! Multiple, USA 4 725.0

4 WPT Industrial REIT Blackstone JV CDPQ Multiple, USA 25 684.6

5 Blackstone CSM Corp Multiple, USA 47 531.1

6 Mapletree Investments JV Mapletree Industrial Digital Realty North America 9 524.7 *

7 Guggenheim Partners ElmTree Funds Multiple, USA 4 457.5 *

8 Goldman Sachs Dalfen Industrial Multiple, USA 35 428.0 *

9 GIC Jamestown JV Angelo, Gordon Brooklyn, NY 16 404.4

10 BREIT CalPERS Midwest 28 391.3

∆ When prices are not known, estimated prices are used in the ranking but are not shown. Volume is adjusted pro-rata for partial interests although $/unit reflects 100% valuation. * Partial interest

Source: Real Capital Analytics & GlobeSt.com; compiled by C&W Valuation & Advisory




THIRD QUARTER 2020

NATIONAL INDUSTRIAL MARKET SUMMARYNational industrial metrics continue to remain stable as general consumer spending and the flow of domestic and international goods has begun to increase. The following details our observations regarding prospects for the U.S. Industrial Market.

• While production levels among manufacturers have been increasing, trade disputes and slowed global demand continue as an overall concern. These industries may experience additional difficulties if additional COVID-19 lockdowns are required, resulting in additional shortages of materials and supplies, a decline in customer orders, and the curtailed availability of labor. However, prospects for a trend of on-shoring U.S. production could potentially boost industrial demand over the longer term.

• U.S. economic growth faces many headwinds as a result of COVID-19, with a precipitous drop in overall demand and curtailed export prospects, both of which are expected to adversely influence the industrial warehouse sector, port operators and distribution hubs.

• Currently, millions of consumers continue to shop online, consequently storage for vast inventories of food, necessities and medical gear for the e-commerce sector has ballooned. Logistics and last-mile industrial distribution centers may experience strong continued tenant demand from operators of online fulfillment centers.

• Major logistics hubs and seaport cities may remain strong performers, as well as new facilities which may be particularly suited to the burgeoning e-commerce model. Additionally, big-box formats will remain in

favor, commanding superior rent rates in comparison to the overall warehouse market as e-commerce continues to expand.

• Net absorption is expected to remain positive through the close of 2020 with moderate levels of net occupancy anticipated within all regions and all product types.

• In the short term, rent growth may soften somewhat as leasing volume slows and vacancies are subjected to upward pressure. However, rental rate trends within the industrial sector are expected to continue to outperform competing property types.

• Supply is expected continue to outpace demand for a second year in a row in 2020. Industrial supply is likely to produce approximately 20% more space than can be absorbed, bringing quality space to the market for occupiers to consider.

• New supply will place upward pressure on overall vacancy with the rate rising 30-to-50 bps to between 5.6% and 5.8% by year-end 2020.

• Consumers continue to embrace the convenience and safety of online shopping, particularly during the COVID-19 pandemic, and as a result, e-commerce continues to drive the national logistics/industrial market. As reported by industry experts in July 2020, it is projected that as much as three-quarters of industrial leasing for the remainder of 2020 will be e-commerce-related. Discussions during the recent I.CON conference sponsored by NAIOP, the Commercial Real Estate Development Association, suggested that the massive acceleration to online shopping spurred by COVID-19 will not subside, but rather push approximately 40% of all retail sales online by 2025.

ABOUT CUSHMAN & WAKEFIELD Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries. In 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

© 2020 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

JIM MORRISSEYAmericas Regional Research Director, SMDValuation & Advisory+1 212 713 [email protected]

MICHAEL J. SCHAEFFER, MAI, FRICSExecutive Managing Director/ Regional ManagerValuation & Advisory, U.S. Industrial Practice Group Leader+1 312 470 [email protected]

DANE KENDALL Research Analyst, MidwestValuation & Advisory+1 312 470 [email protected]

NATIONAL INDUSTRIAL MARKET ANALYSIS

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