Cw industrial real estate forecast 2013 2016

WAREHOUSE/DISTRIBUTION

MONTH 2012

INDUSTRIAL MARKET REVIEW

MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

ECONOMIC OUTLOOK

UNITED STATES

REAL ESTATE FORECASTINDUSTRIAL

A Cushman & Wakefield Research Marketbeat Publication2013-2016

ECONOMIC OUTLOOK


WAREHOUSE / DISTRIBUTION

MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

1

-6%

-4%

-2%

0%

2%

4%

2006 2008 2010 2012 F 2014 F 2016 F

Yr-Yr % Job Growth Yr-Yr % Pt. Vacancy

70

78

85

93

100

108

2006 2008 2010 2012 2014 2016

Inde

x (2

007=

100,

SA

)

$0.5

$0.8

$1.1

$1.4

$1.7

$2.0

2006 2007 2008 2009 2010 2011 3Q12

Ch

ain

ed U

.S.-

$ in

Tri

llio

ns

Goods Imports Goods Exports

ECONOMIC OUTLOOK

Driven by a high level of uncertainty the U.S. economy remains stuck in low gear and is unlikely to experience any significant uptick until late in 2013. However, once economic growth begins to accelerate in 2014 and 2015, the U.S. is expected to experience a period of strong expansion as consumers and businesses unleash demand that has been building up for the past several years. The result will be a surge in demand for goods that is the lifeblood of the industrial sector.

Near-term uncertainty. U.S. businesses and consumers remained cautious as they waited to see how the government addressed the so-called “fiscal cliff” (tax increases and government spending cuts scheduled to go into effect on January 1) and the negotiations to increase the debt ceiling. We expect the compromise that included both tax revenue increases and adjustments to spending to be a drag on the economy early in 2013.

The situation in Europe will also have an impact. With much of the euro zone continuing to experience anemic growth, demand for U.S. exports will remain soft in 2013. Confidence will be strained by ongoing negotiations on how to resolve the EU fiscal crisis, yet there is a growing consensus that solutions will be found and that the euro zone will emerge intact. However, because of the complex politics involved, and with Germany and Italy heading into elections, little improvement is expected to take shape until later in the year.

Strong pent-up demand. On the assumption that the fiscal challenges will be resolved as the year progresses and as confidence enters the picture again, U.S. businesses and consumers will start taking more risks. Once this shift occurs, it is likely to act as a catalyst for stronger spending growth throughout the U.S. economy. On the consumer side, an aging inventory of cars, appliances and many other durable goods has created a deep well of pent-up demand. Once consumers gain confidence, they will inevitably act on that demand and increase spending. The housing sector is also slowly improving and expected to rebound by 2014. Finally, as businesses shift from a cautious to more aggressive stance, hiring will increase and investment in machinery and equipment, which ground to a halt in the second half of 2012, will take off. The result will be a revival of demand for goods leading to higher manufacturing production and greater demand for imports and transportation services. Export growth will follow, though not fully until growth in Europe recovers, most likely in late 2014 or 2015.

Sights on 2014. For these reasons, we expect the U.S. economy to continue growing at a modest pace through most of 2013, with Gross Domestic Product expanding by roughly 2.0%. As the U.S. and euro zone debt issues are finally resolved, uncertainty will slowly recede and risk taking will increase, leading to strong growth in 2014.

VACANCY DECLINES VS. JOB GROWTH

Source: Cushman & Wakefield Research; Moody’s Analytics

MANUFACTURING PRODUCTION

Source: Moody’s Analytics

U.S. TRADE

Source: U.S. Bureau of Economic Analysis

2013-2016 UNITED STATESINDUSTRIAL REAL ESTATE FORECAST

ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

2

0%

12%

24%

36%

48%

60%

Silicon Valley SF Peninsula Los Angeles Miami Houston

Agg

rega

te A

ppre

ciat

ion

-5%

-4%

-3%

-2%

-1%

0%

Oakland Phoenix New Jersey Central

Dallas Chicago

Agg

rega

te P

erce

ntag

e Po

int

Chan

ge

INDUSTRIAL MARKET REVIEW: BUILDING MOMENTUM

Market fundamentals continued to strengthen in 2012, posting the third year in a row of declining vacancies. Overall vacancy rate fell to 8.5% in the third quarter, down 1.8 percentage points from year end 2009. The west region markets of Greater Los Angeles and Orange County reported the lowest vacancy rates in the nation. The Inland Empire, which dominates the big-box market, posted a 0.7 percentage point year-over-year drop in overall vacancy. The Midwest also performed well with every industrial market in the region seeing vacancies fall in the past year.

Among the top markets, Dallas/Fort Worth saw the largest drop in overall vacancy in 2012, plunging 2.2 percentage points to 10.6%. On the East Coast, New Jersey’s overall vacancy fell 0.9 percentage points year-over-year to its current rate of 8.9%. A dramatic drop was also seen in Central New Jersey, where vacancy fell 1.9 percentage points to 8.1%.

Other markets reporting significant declines in overall vacancy rates year-over-year included Nashville (down 3.2 percentage points), Oakland (down 1.6 percentage points) and Seattle (down 1.5 percentage points). Notably, of the 74 industrial markets tracked by Cushman & Wakefield and our Alliance partners, only ten markets recorded year-over-year vacancy rate increases.

The appetite for well-located industrial product will remain strong. The demand for industrial real estate is rising across the country, especially around ports on the East and West Coasts. Demand is strongest in Los Angeles, Miami and New York-New Jersey.

The growth of e-commerce is having significant impact on the industrial market as the trend towards bigger and more efficient distribution centers has resulted in a shortage of class A warehouse space over 500,000 sf in the nation’s logistics hubs. Users are also looking for industrial sites near UPS and FedEx stations.

With the growth of U.S. exports, especially to markets in Asia (mainly China and Southeast Asia), inland ports are becoming a critical part of supply chain dynamics in the U.S. While many of the existing inland ports are located in the Midwest, including Chicago, Memphis, St. Louis and Kansas City, a number of new locations will be developed such as the 4,000-acre Florida Inland Port in St. Lucie, which is being engineered specifically in preparation for the Panama Canal expansion, and the 580-acre Port Arizona in Casa Grande, which will become the first inland port to serve the top two ports in the nation — the ports of Los Angeles and Long Beach. Given the level of demand and general lack of new product, seaport cities and major logistics hubs will remain strong performers.

TOP 5 METROS VACANCY DECLINES (2011-2016)

Source: Cushman & Wakefield Research

TOP 5 METROS RENT GROWTH (2011-2016)



ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

3

Recovering

LA

ND

LO

RD

FA

VO

RA

BL

ET

EN

AN

T F

AV

OR

AB

LE

Slow Growth Accelerating

Downturn

PhiladelphiaPhoenix

Silicon Valley

Inland Empire

Oakland

Houston

Orange County

Miami

New Jersey North

New Jersey CentralAtlanta

Denver

PortlandLos Angeles

Dallas

Boston

SF Peninsula

Chicago

WAREHOUSE/DISTRIBUTION: CONSTRUCTION INCREASING

Demand for high-quality, class A warehouse/distribution space will drive a ramp-up in construction. Warehouse vacancy is at its lowest rate in four years, declining ten quarters in a row after peaking in the first quarter of 2010. The strong market demand for high-quality class A space has led to short supply, which in turn has resulted in constrained market activity and absorption in some markets.

Due to the shortage of class A distribution facilities, several large tenants, including Amazon, PetSmart, Home Depot and Unilever, are pursuing build-to-suit developments. We are also seeing an increase in the number of speculative projects, particularly in the Inland Empire and the PA I-81/I-78 Distribution Corridor. Top West Coast markets have the lowest vacancy rates in the country, thanks to strong export trade volumes in southern California and the tech sector in northern California. Land constraints and the functional obsolescence of older facilities should spur more redevelopment and retrofitting of existing facilities in coming years, and the top markets will command a premium for these types of projects.

Infrastructure improvements will bolster port cities. The federal Department of Transportation TIGER grants have allowed many coastal port cities like Houston, Savannah, Norfolk and Miami to make significant investments to accommodate the growing need for intermodal container and high-capacity transload facilities expected upon completion of the Panama Canal expansion in 2014.

Meanwhile, infrastructure improvements in certain regional markets are expected to bolster warehouse leasing activity. These include port improvements in Pittsburgh to increase access to aggregates used in hydraulic fracturing and the construction of a new bridge between Detroit and Windsor, Ontario, to improve accessibility between the U.S. and Canada. In Southern California, the Long Beach Board of Harbor Commissioners approved a $649.5-million contract for the design and construction of a replacement for the Port of Long Beach’s Gerald Desmond Bridge. Construction of the new bridge, which will start in 2013 and is scheduled for completion in 2016, will ease traffic congestion and improve safety.

WAREHOUSE / DISTRIBUTION MARKET RENT GROWTH CYCLE GRAPH (2011-2016)

Rent growth slowing Still landlord favorable but growth is down from peak

Rent still elevated but falling from top of market cycle Falling rents promise future opportunity for tenants

Rent at or near bottom of market cycle Ideal for tenants leasing or seeking to lease property

Rent growth accelerating Ideal for owners of property


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ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

4

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

$4.00

$4.30

$4.60

$4.90

$5.20

$5.50

2006 2008 2010 2012F 2014F 2016F

Per S

quar

e Fo

ot / Y

ear

Overall Rent Overall Vacancy

RENT VS. VACANCY


-100

-50

0

50

100

150

2006 2008 2010 2012F 2014F 2016F

Mill

ion

Squa

re F

eet

Absorption New Construction

SUPPLY & DEMAND TRENDS


Continuing supply chain efficiencies will strengthen secondary and tertiary markets. Many retailers are spending almost as much capital on new distribution centers and logistics technology as they are on new store openings. Leasing activity grew most significantly over the last year in the primary markets of Chicago, Dallas, PA I-81/I-78 Distribution Corridor and Atlanta, but also in secondary markets. Secondary markets, including Kansas City, Miami and Houston, are leading the charge with large investments in intermodal capacity to accommodate the movement of freight via several modes of transportation. While these markets do not have the consumer population of the more traditional distribution markets like the Inland Empire or the PA I-81/I-78 Distribution Corridor, they are starting to attract distribution business because of their logistics and labor assets.

Additionally, with Amazon building new one-million-square-foot distribution centers in smaller markets, such as Indiana and South Carolina, as well as five locations in Tennessee that total nearly 4.7 million square feet, it appears that the supply chain for e-commerce is headed in a new direction with more space, closer to markets.

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

First-tier distribution centers like Chicago, Atlanta and Dallas should see vacancy rates fall substantially over the next four years even as new supply is added in these markets. Chicago’s vacancy is forecast to drop by 4.6 percentage points by 2016 while Dallas’ vacancy will drop to 8.0% by 2016.

Warehouse/distribution rents should remain fairly stable through 2013, followed by stronger appreciation. Despite steady demand through 2012, rents overall remained at stubbornly low levels, partially because the recovery continues to favor newer product and because of the widening price gap between class A and class B/C space.

After marginal growth in 2013, strong appreciation is likely to kick in thereafter in most major markets. Major coastal markets with significant land constraints and relatively little new construction coming on line will be the top gainers. Southern California is expected to have the greatest jump in rental rates, with Los Angeles and Orange County’s rents growing by more than 25% in the next four years. Rent growth in similarly land-constrained markets such as Portland and Miami is also expected to be strong.

WAREHOUSE/DISTRIBUTION (CONT’D)


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

5

Recovering

TE

NA

NT

FA

VO

RA

BL

E


Downturn

Phoenix

SF Peninsula

Portland

Oakland

Silicon Valley

Houston

Orange County

Miami

New Jersey North


Philadelphia

Denver

Boston

Los Angeles

Chicago

Inland Empire

MANUFACTURING

In the United States, manufacturing steadily added jobs since early 2010, but contracted slightly in the second half of 2012. To put the setback in perspective, the Institute of Supply Management¹s monthly readings for this period still measured above 50, the threshold that signifies growth. We remain cautiously optimistic that manufacturing growth will continue in spite of persistent global and domestic economic uncertainty.

The U.S. market share of global production continues to outpace other manufacturing leaders like China and Germany. Although China’s share nearly doubled over the last five years, its rising labor and energy costs are beginning to impact sourcing decisions. Such factors were behind Apple’s decision to shift some Mac computer manufacturing operations to the U.S. from China in 2013. This $100-million investment creates a closer-to-home supply chain that will undoubtedly have a ripple effect on local economies as it attracts clusters of suppliers and workers with specialized skills.

Manufactured exports — a bright spot of the U.S. economy in recent years — are set to surge. A nation-wide initiative is underway to convince companies that it is worth bringing manufacturing back home. Illinois was the first state to launch a “Reshoring Initiative” aimed at convincing large original equipment manufac-turers (OEMs) to re-open factories in America. Its backers are working to create similar chapters in Michigan, Indiana, Ohio, Pennsylvania, New York and California.

In terms of exports, U.S. companies remain competi-tive on the global stage in the production of transpor-tation equipment, chemicals, electronics, machinery, semi-conductors and medical devices. Illinois, home to such heavy-equipment pioneers as Caterpillar and Deere & Co., has maintained its expertise in building large metal structures needed for mining, construction and agricultural equipment.

Additionally, regionalization — where manufacturing is located both onshore and offshore — is impacting location decisions, as it can significantly reduce transportation costs and enable a manufacturer to

MANUFACTURING MARKET RENT GROWTH CYCLE GRAPH (2011-2016)






Click here for next page: Manufacturing

Recovering

LA

ND

LO

RD

FA

VO

RA

BL

ET

EN

AN

T F

AV

OR

AB

LE


Downturn

PhiladelphiaPhoenix

Silicon Valley

Inland Empire

Oakland

Houston

Orange County

Miami

New Jersey North


Denver

PortlandLos Angeles

Dallas

Boston

SF Peninsula

Chicago


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

6

0%

2%

4%

6%

8%

10%

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2006 2008 2010 2012F 2014F 2016F

Per

Squ

are

Fo

ot

/ Yea

r


RENT VS. VACANCY


-36.0

-24.0

-12.0

0.0

12.0

24.0

36.0

2006 2008 2010 2012F 2014F 2016F

Mill

ion

Squ

are

Fee

t




respond faster to local-market demands — a critical need also being driven by e-commerce. Regionaliza-tion and “cluster” economic development strategies will also help to bolster markets. Major markets like Chicago, Boston, Philadelphia and New Jersey are poised to gain from such trends.

Houston, the third largest manufacturing center in the nation after Los Angeles and Chicago, saw its manu-facturing employment grow 4.2% in 2011 and is one the few big cities in the U.S. that can boast more manufactur-ing jobs than before the recession. Houston is forecast to have the largest manufacturing rent growth among the top markets in the U.S. with its rates expected to reach almost $6.00 psf by 2016.

Seattle has also become a prominent manufacturing hub, with employment expanding 7.9% in 2011. The aerospace sector, led by Boeing, accounted for roughly half this expansion. Since 2010, aerospace-related jobs have accounted for some 70% of its manufacturing growth. Boeing plans to lift factory output by 25% over the next 18 months. Other areas, like Orange County, CA, have seen manufacturing expansion fueled by both domestic and export demand for computer products, industrial goods and apparel.

In anticipation of better times ahead, leasing activity is gaining momentum. A total of 28.9 million square feet of manufacturing space was leased through the third quarter of 2012, with Los Angeles and Chicago leading the pack with a combined total of 9.1 million square feet. One of the biggest challenges facing manufactur-ers is the lack of quality space. It is difficult to respond to supply chain risks when manufacturing plants must be fitted out at substantial cost to a specific product group. Technological advances have also rendered many facilities functionally obsolete, opening the door for both speculative and build-to-suit construction within the next few years.

Innovation and technology are crucial components of a productivity-driven industry. Quality facilities supported by requisite infrastructure and access to needed talent will be increasingly sought after, and manufacturers will weigh a multitude of factors before finalizing location decisions. An emphasis on advanced training and development support in major manufacturing hubs, such as parts of the Midwest and Northeast, is expected to maintain stable growth in those areas. Given our expectation for accelerating growth, we see rental rates increasing in most manufacturing markets through 2016.

MANUFACTURING (CONT’D)


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

7

Recovering

LA

ND

LO

RD

FA

VO

RA

BL

ET

EN

AN

T F

AV

OR

AB

LE


Downturn

Dallas

Phoenix

SF PeninsulaPortland

Oakland

Silicon Valley

Houston

Orange County

Miami

New Jersey NorthNew Jersey Central

Atlanta

Philadelphia

DenverBoston

Los Angeles

Chicago

Inland Empire

FLEX SPACE: WEAK DEMAND; STRONG BY 2016

Demand for flex space has noticeably decreased in the past several years, but is projected to grow considerably by 2016. Until then, demand is expected to remain weak, with the overall flex market absorbing an average of 6.0 million square feet through 2014. Thereafter, however, markets such as Silicon Valley, Orange County, Denver, Dallas, Portland and Phoenix will drive demand and account for almost half of the space take up through the end of the decade. Absorption in 2016 is forecast to exceed the total accumulated in 2011 by 36.7%. In the interim, we expect demand for data centers, call centers and high-tech laboratory space to grow significantly as the economy bounces back over the next few years.

After a sharp dip in vacancy levels during 2011, Cushman & Wakefield forecasts only nominal improvement through 2014, as job growth remains lethargic. Given that the majority of tenants in the marketplace seek quality space at favorable rates, newer and higher quality flex buildings should perform better than aging buildings without renovations. The location of buildings will also play a significant role in most cases, with users

continuing to show preference for sites that offer proximity to skilled labor, accessibility to major highways or public transportation and industrial concentrations that are operationally synergistic. When 2015 arrives, the decline in vacancy rates nationally should escalate as recovery gathers momen-tum in markets like Boston, Phoenix, Orange County, Dallas and Denver.

Most markets should realize positive demand growth over the next five years. Silicon Valley is likely to lead the way, with an expected 9.0 million square feet of positive absorption in that time frame. Conversely, Northern New Jersey may experience negative net absorption due to projected slow job growth. By 2016, overall vacancy nationwide could fall to the 9.0% mark as strengthening economic conditions and limited new supply serve to push occupancy levels higher throughout the country. Our analyses suggest that northeastern markets such as Central New Jersey and Boston are likely to realize vacancy level declines ranging from 3.0 to 4.0 percentage points over the next several years. Meanwhile, Phoenix’s

FLEX MARKET RENT GROWTH CYCLE GRAPH (2011-2016)






Click here for next page: Flex Space


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

8

0%

3%

6%

9%

12%

15%

$5.00

$7.00

$9.00

$11.00

$13.00

$15.00

2006 2008 2010 2012F 2014F 2016F

Per S

quar

e Fo

ot / Y

ear


vacancy rate could fall more than 4.0 percentage points from year-end 2012 and Orange County’s vacancy rate could decrease to under 4.0%. In Silicon Valley, overall vacancy is expected to decrease moderately by 3.0 percentage points despite strong demand due to the amount of new construction expected in this market.

Year-over-year rental growth is projected to be positive at the end of 2013 (compared to year-end 2012, which is anticipated to see negative rent growth overall). 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 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 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.

New construction is projected to exceed 10.0 million square feet in the next several years. Markets such as Silicon Valley, San Francisco Peninsula, Portland, New Jersey and Denver are each targeting the completion of 1.0 million square feet or more of projects. Silicon Valley alone will account for more than 24% of the total new developments in the next four years. Build-to-suit projects are likely to comprise a significant portion of new development activity in some markets.

RENT VS. VACANCY


-24

-16

-8

0

8

16

24

2006 2008 2010 2012F 2014F 2016F

Mill

ion

Squa

re F

eet




FLEX SPACE (CONT’D)


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

9

0% 12% 24% 36%

Boston, MA

Chicago, IL

Atlanta, GA

New Jersey Central

SF Peninsula, CA

New Jersey North

Phoenix, AZ

Philadelphia, PA

Oakland, CA

Denver, CO

United States

Inland Empire, CA

Dallas, TX

Silicon Valley, CA

Houston, TX

Miami, Fl

Portland, OR

Los Angeles, CA

Orange County, CA

-4% -2% 0% 2%

Portland, OR

Miami, Fl

Oakland, CA

Philadelphia, PA

Orange County, CA

Denver, CO

Inland Empire, CA

Chicago, IL

United States

Los Angeles, CA

Phoenix, AZ

Boston, MA

Dallas, TX

Silicon Valley, CA

New Jersey Central

New Jersey North

Atlanta, GA

Houston, TX

SF Peninsula, CA

-30% 0% 30% 60%

Boston, MA

New Jersey Central

Atlanta, GA

Philadelphia, PA

New Jersey North

Oakland, CA

Phoenix, AZ

Dallas, TX

Denver, CO

United States

Inland Empire, CA

Los Angeles, CA

SF Peninsula, CA

Chicago, IL

Miami, Fl

Silicon Valley, CA

Orange County, CA

Portland, OR

Houston, TX

-10% -5% 0% 5%

Chicago, IL

New Jersey Central

Orange County, CA

Oakland, CA

Dallas, TX

Phoenix, AZ

United States

New Jersey North

Los Angeles, CA

Houston, TX

Atlanta, GA

Denver, CO

Boston, MA

Miami, Fl

Portland, OR

SF Peninsula, CA

Philadelphia, PA

Inland Empire, CA

Silicon Valley, CA2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA $3.38 $3.32 $3.35 $3.37 $3.41 $3.56

Boston, MA $5.17 $5.11 $5.15 $5.17 $5.19 $5.29

Chicago, IL $3.94 $3.95 $3.97 $4.03 $4.10 $4.14

Dallas, TX $3.42 $3.52 $3.61 $3.73 $3.87 $3.98

Denver, CO $4.35 $4.43 $4.46 $4.62 $4.80 $4.93

Houston, TX $4.28 $4.37 $4.53 $4.75 $5.02 $5.23

Inland Empire, CA $4.02 $4.26 $4.37 $4.54 $4.62 $4.62

Los Angeles, CA $6.18 $6.54 $6.80 $7.24 $7.77 $8.18

Miami, Fl $4.84 $5.38 $5.51 $5.71 $5.94 $6.12

New Jersey Central $4.27 $4.21 $4.25 $4.34 $4.44 $4.56

New Jersey North $5.73 $5.79 $5.84 $5.97 $6.11 $6.28

Oakland, CA $4.49 $4.57 $4.66 $4.77 $4.93 $5.00

Orange County, CA $6.31 $6.80 $7.09 $7.66 $8.27 $8.67

Philadelphia, PA $4.34 $4.38 $4.42 $4.53 $4.66 $4.79

Phoenix, AZ $5.52 $5.75 $5.84 $5.91 $5.98 $6.06

Portland, OR $4.81 $5.23 $5.40 $5.85 $6.24 $6.28

SF Peninsula, CA $9.32 $9.39 $9.51 $9.66 $9.72 $10.03

Silicon Valley, CA $5.47 $6.23 $6.31 $6.41 $6.56 $6.61

United States: C&W Markets $4.58 $4.71 $4.79 $4.91 $5.05 $5.19

RENT FORECAST

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA 11.2% 10.4% 10.3% 10.0% 9.9% 9.0%

Boston, MA 17.9% 19.0% 18.8% 17.9% 16.9% 16.3%

Chicago, IL 12.6% 11.4% 10.8% 9.5% 7.8% 6.8%

Dallas, TX 11.9% 10.0% 9.2% 8.8% 8.1% 8.0%

Denver, CO 6.4% 5.2% 5.0% 4.7% 4.4% 4.3%

Houston, TX 8.1% 7.3% 7.0% 7.1% 6.7% 5.8%

Inland Empire, CA 8.0% 7.0% 6.1% 7.5% 9.0% 9.6%

Los Angeles, CA 4.8% 4.4% 4.0% 3.6% 3.2% 2.4%

Miami, Fl 8.0% 7.0% 7.7% 7.5% 7.3% 7.1%

New Jersey Central 10.4% 7.7% 6.9% 6.4% 5.9% 5.4%

New Jersey North 9.6% 10.1% 9.8% 9.3% 8.1% 7.3%

Oakland, CA 9.6% 6.7% 6.6% 6.2% 5.7% 5.4%

Orange County, CA 7.5% 5.3% 4.9% 4.1% 3.4% 3.0%

Philadelphia, PA 6.8% 6.8% 7.7% 7.8% 7.9% 7.7%

Phoenix, AZ 13.2% 12.1% 11.5% 10.8% 9.9% 9.5%

Portland, OR 6.2% 7.7% 7.1% 6.9% 6.6% 6.0%

SF Peninsula, CA 6.4% 7.9% 7.9% 7.7% 7.3% 7.2%

Silicon Valley, CA 6.1% 8.0% 8.8% 9.7% 10.1% 9.4%

United States: C&W Markets 9.5% 8.6% 8.3% 7.8% 7.4% 6.9%

VACANCY FORECAST DECLINE RANKING2011-2016

GROWTH RANKING2011-2016


MANUFACTURING

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA $3.41 $3.31 $3.31 $3.27 $3.24 $3.24

Boston, MA $5.51 $4.89 $4.82 $4.81 $4.82 $4.86

Chicago, IL $3.67 $3.86 $3.89 $4.06 $4.22 $4.34

Dallas, TX $3.35 $3.39 $3.45 $3.49 $3.56 $3.69

Denver, CO $4.44 $4.21 $4.22 $4.59 $4.88 $4.97

Houston, TX $3.93 $4.99 $5.10 $5.35 $5.59 $5.93

Inland Empire, CA $4.64 $4.84 $4.91 $5.09 $5.27 $5.33

Los Angeles, CA $5.50 $5.65 $5.59 $5.88 $6.21 $6.40

Miami, Fl $3.94 $4.36 $4.46 $4.58 $4.72 $4.84


New Jersey North $4.70 $4.73 $4.73 $4.77 $4.81 $4.82

Oakland, CA $5.75 $5.93 $5.86 $6.00 $6.16 $6.17

Orange County, CA $7.26 $7.77 $7.98 $8.44 $8.91 $9.15

Philadelphia, PA $4.15 $3.75 $3.83 $3.86 $3.98 $4.08

Phoenix, AZ $5.52 $5.64 $5.74 $5.76 $5.93 $6.02

Portland, OR $4.19 $4.90 $4.96 $5.09 $5.25 $5.38

SF Peninsula, CA $7.77 $8.29 $8.30 $8.44 $8.77 $9.08



RENT FORECAST

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA 3.5% 4.4% 4.5% 4.9% 4.8% 4.3%

Boston, MA 20.5% 21.0% 20.8% 20.2% 19.6% 19.4%

Chicago, IL 6.4% 6.1% 6.0% 5.5% 4.9% 4.5%

Dallas, TX 9.1% 11.8% 11.1% 10.5% 9.4% 8.2%

Denver, CO 7.8% 6.8% 7.3% 6.6% 6.0% 5.6%

Houston, TX 3.8% 5.1% 5.2% 5.1% 4.8% 5.2%

Inland Empire, CA 7.9% 7.1% 6.9% 6.6% 6.2% 5.9%

Los Angeles, CA 5.1% 5.2% 5.0% 4.7% 4.3% 3.9%

Miami, Fl 10.3% 7.5% 7.5% 7.2% 6.9% 6.7%


New Jersey North 7.5% 7.4% 8.1% 8.2% 8.0% 7.8%

Oakland, CA 7.9% 6.4% 6.3% 5.8% 5.1% 4.9%

Orange County, CA 4.4% 3.8% 3.6% 3.1% 2.6% 2.1%

Philadelphia, PA 6.7% 6.9% 7.1% 4.8% 4.6% 4.0%

Phoenix, AZ 9.3% 9.8% 9.6% 9.1% 8.4% 8.2%

Portland, OR 6.6% 5.2% 4.2% 4.1% 3.5% 2.8%

SF Peninsula, CA 6.0% 8.9% 8.5% 7.9% 7.7% 7.5%





INDUSTRIAL MARKET PROJECTIONS

Click here for next page: Industrial Market Projections


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

10

-4% -2% 0% 2%

Chicago, IL

Dallas, TX

New Jersey Central

Phoenix, AZ

Oakland, CA

Orange County, CA

Silicon Valley, CA

Los Angeles, CA

United States

Inland Empire, CA

Denver, CO

Atlanta, GA

Boston, MA

New Jersey North

Miami, Fl

Houston, TX

Portland, OR

Philadelphia, PA

SF Peninsula, CA

-40% 0% 40% 80%

Atlanta, GA

Portland, OR

Orange County, CA

Los Angeles, CA

Houston, TX

Oakland, CA

New Jersey North

New Jersey Central

Phoenix, AZ

Philadelphia, PA

United States

Chicago, IL

Dallas, TX

Inland Empire, CA

Denver, CO

Boston, MA

Miami, Fl

SF Peninsula, CA

Silicon Valley, CA

-30% 0% 30% 60%

Atlanta, GA

Boston, MA

Inland Empire, CA

Phoenix, AZ

Philadelphia, PA

Chicago, IL

New Jersey North

United States

Oakland, CA

Dallas, TX

Denver, CO

Portland, OR

New Jersey Central

Orange County, CA

Houston, TX

Miami, Fl

Los Angeles, CA

SF Peninsula, CA

Silicon Valley, CA

-8% -4% 0% 4%

Phoenix, AZ

Silicon Valley, CA

Chicago, IL

Orange County, CA

Dallas, TX

Boston, MA

United States

Miami, Fl

Denver, CO

Oakland, CA

Inland Empire, CA

Atlanta, GA

Philadelphia, PA

New Jersey Central

Los Angeles, CA

New Jersey North

Houston, TX

SF Peninsula, CA

Portland, OR2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA $7.58 $7.02 $6.71 $6.38 $6.31 $6.56

Boston, MA $8.14 $8.13 $8.29 $8.51 $9.11 $9.36

Chicago, IL $8.44 $8.90 $8.87 $8.96 $9.07 $9.25

Dallas, TX $7.37 $7.43 $7.56 $7.65 $7.83 $8.10

Denver, CO $8.67 $8.62 $8.85 $9.28 $9.70 $9.93

Houston, TX $7.04 $6.75 $6.84 $6.91 $7.11 $7.29

Inland Empire, CA $8.62 $8.82 $8.95 $9.20 $9.54 $9.82

Los Angeles, CA $9.53 $9.31 $9.46 $9.47 $9.55 $9.69

Miami, Fl $8.27 $8.59 $8.75 $8.97 $9.49 $10.15


New Jersey North $8.63 $9.01 $9.11 $9.10 $9.05 $9.17

Oakland, CA $8.26 $8.33 $8.37 $8.47 $8.55 $8.67

Orange County, CA $11.14 $10.95 $10.93 $11.01 $11.09 $11.07

Philadelphia, PA $7.82 $7.93 $7.92 $8.11 $8.31 $8.51

Phoenix, AZ $10.93 $11.04 $11.18 $11.28 $11.36 $11.73

Portland, OR $9.75 $8.22 $8.18 $8.49 $8.54 $8.74

SF Peninsula, CA $19.18 $21.36 $21.90 $23.10 $24.57 $25.99



RENT FORECAST

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA 12.3% 12.7% 12.7% 12.0% 11.5% 11.0%

Boston, MA 15.4% 16.7% 16.7% 15.2% 13.7% 12.8%

Chicago, IL 13.0% 10.3% 10.6% 9.8% 9.1% 8.3%

Dallas, TX 13.9% 14.0% 13.7% 13.0% 12.0% 11.3%

Denver, CO 11.3% 10.8% 10.6% 10.2% 9.7% 9.8%

Houston, TX 11.3% 11.8% 12.5% 13.4% 13.7% 13.1%

Inland Empire, CA 8.1% 7.8% 7.4% 7.6% 7.4% 6.8%

Los Angeles, CA 4.7% 5.0% 4.8% 4.8% 4.8% 4.7%

Miami, Fl 5.7% 4.7% 4.3% 4.1% 4.4% 3.7%


New Jersey North 11.3% 11.4% 12.1% 12.8% 12.8% 12.7%

Oakland, CA 12.5% 13.0% 13.0% 12.2% 11.3% 11.0%

Orange County, CA 7.6% 7.6% 6.9% 5.6% 4.7% 3.7%

Philadelphia, PA 7.9% 7.2% 6.7% 6.9% 7.0% 6.6%

Phoenix, AZ 16.7% 14.5% 13.7% 12.5% 11.3% 10.4%

Portland, OR 6.0% 11.7% 11.5% 11.7% 10.9% 9.8%

SF Peninsula, CA 6.2% 7.5% 9.8% 8.8% 9.2% 8.9%





FLEX SPACE

TOTAL MARKET

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA $3.74 $3.59 $3.53 $3.44 $3.44 $3.60

Boston, MA $6.00 $5.84 $5.89 $5.92 $6.05 $6.13

Chicago, IL $4.05 $4.12 $4.15 $4.25 $4.37 $4.46

Dallas, TX $4.07 $4.20 $4.32 $4.43 $4.57 $4.68

Denver, CO $5.69 $5.64 $5.72 $6.03 $6.34 $6.54

Houston, TX $4.61 $4.84 $5.01 $5.22 $5.49 $5.74

Inland Empire, CA $4.41 $4.56 $4.68 $4.80 $4.52 $4.57

Los Angeles, CA $6.24 $6.56 $6.80 $7.21 $7.73 $8.11

Miami, Fl $4.79 $5.39 $5.51 $5.70 $5.94 $6.12


New Jersey North $5.97 $6.11 $6.18 $6.31 $6.44 $6.60

Oakland, CA $5.39 $5.71 $5.75 $5.87 $6.01 $6.08

Orange County, CA $7.59 $8.12 $8.30 $8.70 $9.14 $9.34

Philadelphia, PA $4.91 $4.85 $4.82 $5.01 $5.17 $5.31

Phoenix, AZ $6.84 $6.81 $6.88 $6.93 $7.01 $7.10

Portland, OR $5.58 $5.65 $5.81 $6.23 $6.54 $6.64

SF Peninsula, CA $12.46 $13.41 $14.53 $14.88 $15.94 $16.68



RENT FORECAST

2011 2012F 2013F 2014F 2015F 2016F

Atlanta, GA 10.7% 10.1% 10.1% 9.7% 9.6% 8.8%

Boston, MA 17.7% 18.7% 18.6% 17.6% 16.5% 15.9%

Chicago, IL 9.8% 9.0% 8.6% 7.7% 6.6% 5.8%

Dallas, TX 12.1% 10.6% 9.9% 9.4% 8.7% 8.5%

Denver, CO 7.5% 6.5% 6.5% 6.1% 5.7% 5.5%

Houston, TX 7.7% 7.4% 7.2% 7.4% 7.1% 6.4%

Inland Empire, CA 11.0% 7.0% 6.3% 7.3% 8.3% 8.7%

Los Angeles, CA 4.9% 4.6% 4.2% 3.7% 3.1% 2.5%

Miami, Fl 8.1% 7.0% 7.5% 7.2% 7.0% 6.8%


New Jersey North 9.5% 9.8% 9.8% 9.5% 8.6% 8.0%

Oakland, CA 9.2% 7.2% 7.1% 6.6% 6.0% 5.7%

Orange County, CA 6.3% 5.1% 4.8% 4.0% 3.3% 2.8%

Philadelphia, PA 7.0% 6.9% 7.4% 7.0% 7.1% 6.7%

Phoenix, AZ 12.9% 12.0% 11.4% 10.7% 9.7% 9.3%

Portland, OR 6.2% 7.6% 7.0% 6.9% 6.5% 5.8%

SF Peninsula, CA 6.3% 7.8% 8.6% 8.1% 8.0% 7.9%





INDUSTRIAL MARKET PROJECTIONS (CONT’D)


ECONOMIC OUTLOOK



MANUFACTURING

FLEX SPACE

MARKET PROJECTIONS

11

Maria T. SicolaExecutive Managing DirectorAmericas ResearchSan Francisco, CAT (415) 773-3542E [email protected]

Shannon A. Sommer ElliottDirector Research ForecastingDenver, COT (303) 813-6400E [email protected]

Tina ArambuloDirector Industrial ResearchTorrance, CAT (310) 525-1918E [email protected]

Simone Schuppan Associate Director Research Chicago, ILT (312) 470-1891 E [email protected]

A Cushman & Wakefield Research Publication

For more market intelligence and research reports, visit Cushman & Wakefield’s Knowledge Center at www.cushmanwakefield.com

Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. Founded in 1917, it has 235 offices in 60 countries and more than 14,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within five primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, investment banking, debt and equity financing; Corporate Occupier & Investor Services, including integrated real estate strategies for large corporations and property owners; Consulting Services, including business and real estate consulting; and Valuation & Advisory, including appraisals, highest and best use analysis, dispute resolution and litigation support, along with specialized expertise in various industry sectors. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

©2013 Cushman & Wakefield, Inc.

This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete.

METHODOLOGY

Cushman & Wakefield’s office and industrial market forecasts are derived utilizing least-squares regression analysis, isolating trends identified in historical occupancy and rental rate movements as they relate to other predictive factors, including employment growth, new construction and absorption tendencies.

All of our forecasts are structured to achieve a 90% confidence level, with a margin of error of (+/–) 5.0%. This approach allows us to quantify benchmark associations in an impartial, scientific and statistically significant way to help ensure we provide our clients with the best information available and on which they can lean to support future real estate decisions.

John C. Morris LeaderC&W Industrial Services, AmericasChicago, ILT (847) 518-3218 E [email protected]

Peter W. Quinn IV Executive Managing DirectorIndustrial Brokerage & Global Supply Chain SolutionsIndianapolis, IN T (317) 713-2107E [email protected]

NORTH AMERICAN INDUSTRIAL CONTACTSThe C&W Industrial Platform provides advisory and agency services to occupiers, developers and investors of industrial and distribution premises across the globe. It works with local, national and multi-national industrial clients to create seamless, consistent and tailor made industrial real estate solutions that deliver better business performance through constantly seeking to improve shareholder value and maximize cost saving opportunities.

OUR RESEARCH SERVICESCushman & Wakefield is known the world-over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world, forecasts and business issues, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. Cushman & Wakefield also provides customized studies to meet the specific information needs of owners, occupiers and investors.

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Cw industrial real estate forecast 2013 2016