U.S.

Research Report
INDUSTRIAL MARKET OUTLOOK
Q1 2018

U.S. Industrial Market Continues to Perform

Well with Record Low Vacancies and Record
High Asking Rents
James Breeze, National Director of Industrial Research | USA

Featured Highlights Market Indicators

Relative to Prior Quarter
>> The U.S. industrial sector continues to perform exceptionally well, with robust net Q1 2018 Q2 2018*
absorption, rent growth, construction and occupancy, all fueled by the continued
VACANCY
growth of e-commerce and a solid U.S. economy.
NET ABSORPTION
>> E-commerce sales grew 16.4% in Q1 2018 compared with the same time last year
and now represents 10.5% of total non auto retail sales. E-commerce will be a CONSTRUCTION
driving force in industrial real estate for the foreseeable future.
RENTAL RATE**
>> The national industrial vacancy rate remained at an all-time low of 5.1% for the
second consecutive quarter despite nearly 53 million square feet of new supply * Projected
** Warehouse rents
completing in the first quarter of 2018.
>> Product under construction remained very high at 231 million square feet,
the second-greatest quarterly level on record. Despite the large amount of
development slated to hit the market in the next year, if net absorption stays at Summary Statistics | Q1 2018
U.S. Industrial Market
its current level, vacancies would increase 30 basis points (BPS) over its current
mark. Vacancy Rate 5.1%
>> Tightening markets and new, higher-quality Class A industrial space hitting the Change From Q1 2017 -0.3%
market, drove up asking rents for warehouse/distribution space to $5.46 per Markets With Lower 68.4%
square foot per year in Q1 2018, 5% higher than the same time last year and the Vacancies Compared With Q1 2017
highest asking rent on record. Q1 2018 Net Absorption (MSF) 49.0
>> Essential indicators for industrial real estate, including loaded inbound container Markets With Positive 80.6%
volumes and intermodal rail volume, continue to move in a positive direction. U.S. Absorption
seaports are booming, with nearly all major locations posting year-over-year
Q1 2018 New Supply from 52.7
increases in loaded inbound container volumes. Rail traffic also remains robust as Construction (MSF)
year-to-date volumes are up more than 2% compared with the previous year.
New Supply to Inventory 0.35%
>> The Southern U.S. industrial market was the top region of choice for occupier
expansion in Q1 2018. Over 46% of the total net absorption in the U.S. occurred Under Construction (MSF) 231.1
in the region, despite having only 31% of the existing warehouse stock. Three of ASKING RENTS
the top five markets for net absorption in the country were in the region (Atlanta, PER SQUARE FOOT PER YEAR
Savannah and Greenville-Spartanburg-Anderson). Average Warehouse/Distribution $5.46
>> Growth in investor demand for industrial properties continues to surpass all Center
other property types. Nearly $21 billion in industrial assets were purchased in the Average Manufacturing Space $5.15
first quarter of 2018, 11% higher than the same period a year ago, while overall Average Flex Space $11.71
demand for commercial real estate fell. Thanks to two large transactions, portfolio
sales increased by a whopping 84% while individual sales grew by 11% compared
with the previous year.
The U.S. industrial market continues to perform well in the first remain strong into 2018, look for industrial demand from
quarter with just under 50 million square feet absorbed, the 32nd manufacturers to increase in the coming quarters and push up
consecutive quarter of positive net absorption. Continued positive demand in markets with robust manufacturing capabilities including
absorption kept vacancy rates at an all-time low of 5.1% for the Grand Rapids, Cincinnati, Huntsville and Birmingham.
second consecutive quarter, despite nearly 53 million square feet of
A major headwind arising in the industrial market is labor
new construction hitting the market. Robust demand and record
availability. With the U.S. economy near full employment and the
low vacancies put upward pressure on asking rental rates which
industrial market needing more workers due to consumer shifts to
finished first quarter at a record high $5.46 per square foot per
e-commerce, intensifying warehouse demand, and many occupiers,
year (NNN) for warehouse/distribution space. In previous cycles,
are having difficulty finding adequate labor. This trend could have a
higher asking rates ultimately reduced demand. However, in this
negative effect on markets with a shortage of industrial labor and
cycle the importance of securing well-placed, modern distribution
could be a boon to markets with an adequate trained labor force in
centers because of e-commerce, coupled with higher transportation
the coming quarters.
costs, have rendered rising asking rates less pertinent. Eventually,
asking rents will increase to a level where demand will be impacted, A Long but Moderate Recovery Picks Up
but the market has yet to reach this point.
in 2018
U.S. Industrial Market Our economic expansion is now at 106 months and, come June,
Q1 2016 to Q1 2018
will become the second-longest in our nation’s history, moving past
100,000,000 6.2% the go-go 1960s. However, this expansion is marked by its
moderation as much as its length. Real GDP has grown less than
90,000,000
6.0%
80,000,000
5.8%
70,000,000

5.6%
20% so far in this cycle and jobs by just 13%. For perspective, in
60,000,000

50,000,000 5.4% the 1960s expansion, GDP grew 53% and jobs by 33%.
40,000,000
5.2%
30,000,000

20,000,000
5.0% But perhaps the bigger story is not only that this cycle still soldiers
10,000,000
4.8%
on, but that it even shows sign of accelerating modestly.
0 4.6%
Q1 2016 Q2 2016 Q3 2016 Q4 2016

New Supply
Q1 2017

Absorption
Q2 2017

Vac Rate (%)

Q3 2017 Q4 2017 Q1 2018
Economists polled by the Wall Street Journal predict GDP will grow
Source: Colliers International by 2.8% for all of 2018, which would rank as the strongest annual
growth since 2015. Several factors are contributing:
Essential indicators for industrial real estate — including loaded
inbound container volumes and intermodal rail volume — continue
U.S. Economic Indicators
to move in a positive direction. Loaded inbound container volumes
GDP
increased in nearly all major seaports in the first quarter of 2018 Q1 2018 + 2.3%
(most recent data available). Rail trafficis also experiencing solid Q4 2017 + 2.9%
growth, with total annual volumes up more than 2% at the end of PMI
April. Occupiers are using rail for inland transportation at a greater April 2018 PMI 57.3%, up 1.8%
April 2018 PMI®
rate because of its more economic cost structure compared with from April 2017
RAIL TIME INDICATORS
truck transportation. As rail traffic continues to increase, so will the
demand in major rail hubs including Chicago, Kansas City, St. Louis Total Railcar Traffic + 0.6% since April 2017

and the Shenandoah Valley. Finally, hiring for industrial related Intermodal Traffic + 5.8% since April 2017
employees, including curriers and warehouse workers, expanded
yet again with the two industries adding a combined 20,400 jobs in Sources: BEA, ISM, AAR

the first quarter of 2018. > Synchronized global growth: For the first time since 2010, the
The manufacturing sector also continues to post robust global economy has been growing at potential, with all major
fundamentals. The Institute for Supply Management’s Purchasing regions participating. Though the U.S. economy is not
Managers’ Index remained strong at 57.3 in October. The index has fundamentally export driven, there’s no doubt that our nation
been in expansionary territory for 20 consecutive months. New grows faster when we have strong trading partners.
orders, a key figure in the forecasting of manufacturing demand, > Strong business investment: Business investment, which had
finished April at a solid 61.2, the 28th straight month in been lagging earlier in this cycle, picked up significantly last year,
expansionary territory. With manufacturing output projected to likely in anticipation of tax reform and regulatory relief.

2 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

> Government stimulus: Oxford Economics estimates that last Looking forward, we expect economic growth will begin to fade by
year’s tax cuts will add 0.4 percentage points to GDP this year, mid next year, as the impacts of this year’s government stimulus
while the increase in federal government spending from the new begin to fade, and growth in several leading nations also slows. And
budget will add another 0.2 percentage points. then there’s the recent trade skirmishes, which threaten the
synchronized global growth. To be sure, the announced tariffs and
Nonetheless, first quarter growth looks to be the weakest of any
related measures are relatively trivial in the context of our
quarter since last year at this time – another hallmark of this
economy. But these skirmishes could spread and escalate into
economic cycle. GDP grew at an estimated 2.3% in the first
full-scale trade wars, with significant downside risks to both the
quarter, well shy of the 3.1% average for the last three quarters of
U.S. and global economy.
2017.
Finally, with inflation and wage growth both now nearing target
U.S. Manufacturing Indicators | April 2018 ranges, the Fed is moving more aggressively this year and next, to
SERIES SERIES PERCENTAGE-
RATE OF TREND*
cool the economy with rate hikes — likely three to four hikes (of
INDEX INDEX INDEX POINT DIRECTION
(APRIL 2018) (MARCH 2018) CHANGE
CHANGE (MONTHS) 0.25% each) this year followed by several next year. The Fed’s
PMI ® 57.3 59.3 -2.0 Growing Slower 20
initial hikes in late 2015 and 2016 had little impact on long-term
interest rates. But rates are now moving up more significantly and
New Orders 61.2 61.9 -0.7 Growing Slower 28
by next year may approach the point at which they start to choke
Production 57.2 61.0 -3.8 Growing Slower 20 off both business investment and consumer spending on capital
Employment 54.2 57.3 -3.1 Growing Slower 19 items like automobiles and houses. All of which means, we should
Supplier expect GDP to start slowing in 2019 and 2020 especially.
61.1 60.6 0.5 Slowing Faster 19
Deliveries
Inventories 52.9 55.5 -2.6 Growing Slower 4 In summary, 2018 looks to be a better year than the last two, with
Customers' relatively strong drivers for property demand. But property markets
44.3 42.0 2.3 Too Low Slower 19
Inventories will face increasing headwinds in 2019, and beyond, as job growth
Prices 79.3 78.1 1.2 Increasing Faster 26
continues to slow while interest rates rise, slowing economic
Backlog of
62.0 59.8 2.2 Growing Faster 15 growth and making real estate more expensive to acquire.
Orders
Exports 57.7 58.7 -1.0 Growing Slower 26

Imports 57.8 59.7 -1.9 Growing Slower 15

Overall Economy Growing Slower 108

Manufacturing Sector Growing Slower 20

*Number of months moving in current direction

Source: ISM

U.S. Industrial Overview | Q1 2018

UNITED STATES WEST MIDWEST SOUTH NORTHEAST

Inventory (MSF) 15,019,812,495 3,992,846,190 4,331,212,496 4,553,709,014 2,142,044,795,

% of U.S. Inventory 100% 26.6% 28.8% 30.3% 14.3%
Q1 2018 New Supply 52,656,771 23,003,209 11,240,412 23,275,876 4,791,196
% of U.S. Q1 2018 New Supply 100% 25.9% 21.3% 43.7% 9.1%
Q1 2018 Absorption (MSF) 48,718,033 9,903,078 11,437,021 22,507,154 4,870,780
% of U.S. Q1 2018 Absorption 100% 20.3% 23.5% 46.2% 10.0%
YTD Vacancy Rate 5.1% 3.8% 5.4% 5.8% 5.5%
Source: Colliers International

3 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 Top 30 Markets: Absorption in Q1 2018

New Hampshire
Milwaukee Columbus Markets
1.1M 1.6M 1.0M

Boston
0.9M
Sacramento Pittsburgh
1.9M Chicago
4.5M 0.7M
Philadelphia
0.8M
Kansas City Cincinnati
1.5M 1.8M
Denver
0.8M Central New Jersey
Las Vegas St. Louis 1.7M
East Bay 0.7M Huntsville
0.7M
0.6M 0.6M
Memphis Charlotte
Fresno 1.9M 0.8M Shenandoah Valley/
0.7M I-81 Corridor
Phoenix
Dallas-Fort Worth 1.2M
1.2M
2.3M
Atlanta Columbia
3.8M 1.0M
Savannah
Inland Empire 2.8M
3.5M

Greenville/Spartanburg
Anderson
Houston 2.8M
1.9M
Tampa Bay Orlando
1.3M 1.0M

YTD Absorption (SF)

0.6M 4.5M

0.5M
1.0M
2.0M
3.0M
≥ 4.0M

The Southern U.S. Industrial Markets
Dominate Q1 Activity
U.S. e-commerce sales rose an impressive 16.4% in Q1 2018
compared with the same time last year and now represent 10.5% of
total non-auto retail sales. The continued surge in online sales and
the need to get products to consumers quickly while minimizing
supply chain costs are forcing retailers and wholesalers into more
facilities and rapidly changing supply chain strategy. These changes
will be a major contributor to industrial real estate demand for the
foreseeable future.
Development remains strong in core industrial markets throughout
the U.S., with Atlanta leading the way at nearly 7 million square
feet completed in first quarter. Dallas-Fort Worth, which continues
to post robust fundamentals, has the most product under
construction at 24 million square feet. Nearly 53 million square feet
of new construction has been completed in Q1 2018, the lowest
amount of quarterly development since Q1 2016. However,
development appears set to pick up pace in the coming quarters
with 231 million square feet currently under construction — the
second-highest amount on record. Despite the large amount of new
development slated to hit the market in the next year, if net
absorption stays at its current pace, overall vacancies would
increase 30 basis points (bps) from its current level.
Despite robust new development, the overall industrial vacancy rate
remained at 5.1% in the first quarter, the lowest vacancy rate on
record. Vacancies fell in 59% of the markets we track compared
with the previous quarter. A majority of the vacancy declines in the
first quarter occurred in emerging secondary and tertiary markets,
where absorption continues to outpace new speculative supply
from development. Net absorption was positive for the 32nd
consecutive quarter at nearly 50 million square feet. Continued
positive net absorption can be attributed to multiple factors, one of
which includes strong big box demand in core markets. Chicago
was the top market for overall net absorption in the first quarter at
4.5 MSF. Occupier demand for big box space as well as rising
interest in final mile distribution contributed to the robust demand.

4 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

The Southern U.S. dominated activity in Q1 2018, evidenced by
nearly 23 million square feet of net absorption, 46% of the total net
absorption in the U.S., despite having just 31% of the existing stock.
Occupiers continue to move into the market because of the region’s
growing population and significant logistics advantages. At the time
of this report, over 111 million people lived in the southern region,
the most of any region in the country, and this expected to grow by
6.4% over the next five years, the most of any region.
The South also boasts a plethora of logistics options from the
ground, sea, and air. The ports of Houston, Charleston, Virginia and
Savannah are four of the five fastest growing seaports in the
country with loaded twenty-foot equivalent units (TEU) growing by
an average of 9.1% in 2017. The region offers a multitude of inland
ports in strategic markets including Greenville, SC; Memphis, TN;
the I-4 Corridor in Florida and the Shenandoah Valley in Virginia.
The region finished Q1 2018 with three of the top five markets in
the country for overall net absorption including Atlanta (#2),
Savannah (#4), and Greenville-Spartanburg-Anderson (#5). It is
particularly impressive that Savannah and Spartanburg are in the
top five nationally because both markets have less than 200 million
square feet of existing inventory, yet they absorbed more space
than much larger markets in other regions of the country.
Industrial Real Estate Stands Out in Sales
Growth
Sales growth remains strong in secondary and tertiary locations, up
13% and 9% respectively compared with this time last year.
Investors continue to pour into these markets because of the
availability of product to purchase and a significant increase in
occupier demand, resulting in lower vacancies and higher asking
rents. Core market sales improved by 8% in Q1 2018, despite
constant concerns of a lack of available supply to purchase. The
two aforementioned portfolio sales were a major reason for the
increase in sales activity in core markets in first quarter. The
Midwest U.S. experienced the largest year-over-year sales volume
growth of 47%, thanks to strong activity in Chicago — which led the
nation in sales volume — as well as emerging industrial markets in
Minneapolis/St. Paul, Kansas City, Indianapolis and St Louis, who all
experienced significant year-over-year sales volume growth.
In line with the moderation in price growth seen in the previous two
years, the compression in capitalization rates (cap rate) has slowed
as well. Cap rates for the sector overall stood at 6.6% in the first
quarter, down 30 bps from a year ago. Cap rates for flex assets
also fell over 20 bps year over year to hit 6.7% for the quarter,
while warehouse cap rates fell 30 bps year over year to hit 6.5%.
Top 5 MSAs* in Q1 2018: Transaction Volume
Chicago $1,184 million
Los Angeles $954 million
Inland Empire $905 million

Industrial sales volume was again robust this quarter with an Dallas $853 million
impressive 11% increase in year-to-date sales compared with this
NYC Boroughs $563 million
time last year. Industrial was the only commercial product type to
*Metropolitan Statistical Area
post year-over-year sales volume gains, with office product sales Source: Colliers International
volume dropping 12% and retail sales volume dropping 31% in the
first quarter according to Real Capital Analytics. Portfolio sales Top 5 MSAs* in Q1 2018: Net Absorption
experienced a robust quarter, increasing 44% compared with the
Chicago 4.5 MSF
previous year, thanks to two large purchases including the Nesta
buyout of GLP and the Blackstone acquisition of a Cabot Industrial Atlanta 3.8 MSF

Properties portfolio. While these two sales were a major driver in Inland Empire 3.5 MSF
industrial sales volume, individual sales also continued to climb,
Savannah 2.8 MSF
increasing 10% compared with the previous year.
Greenville-Spartanburg-Anderson 2.8 MSF

*Metropolitan Statistical Area

Source: Colliers International

5 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

What’s Ahead for Industrial Real Estate?
The industrial sector should continue to benefit from supply chain
modernization brought on by e-commerce demand for the
foreseeable future. While regional big box distribution demand will
remain strong, the product type with the most interest for the
remainder of 2018 will be final-mile urban warehousing — the final
leg in the distribution chain where goods are stored for delivery to
end consumers. Occupiers need to solve the final mile and as such
will be looking to move into highly populated areas at a greater clip.
Accordingly, look for redevelopments of older manufacturing and
warehouse buildings to increase. Tearing down functionally-
obsolete office buildings to replace them with modern distribution
centers in urban infill locations will be on the uptick as well.
The continued shift to more localized distribution — the deployment
of more warehouses in more locations to get products to
consumers quickly — has increased activity in many emerging
secondary markets with seaports and inland ports as well as in
places with growing population centers such as Phoenix, Las
Vegas, Indianapolis, Memphis, Savannah and Greenville. Look for
this trend to expand into even more markets as occupiers increase
their footprints in these strategic markets to better serve their
customers.
6 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International
Despite the fear of future trade wars war with China, at this time
cargo volumes at U.S. ports are expected to remain strong and
heighten demand for warehousing near these locations. NAFTA
negotiations continue and the potential long-term effects on U.S.
trade policy will be important to monitor — although any impact
from the renegotiation will not take effect until later into 2018 or
2019.
Another potential headwind is labor availability. Occupier demand
for labor in modern fulfillment centers combined with an economy
at or near full employment could delay or lower size requirements
in the coming quarters or shift requirements to markets with more
ample labor. While the availability of labor will gain in importance in
industrial site selection, look for the use of automation and other
technologies to increase as a way of combating labor shortages
throughout the country.
All in all, U.S. industrial real estate continued its positive
momentum in the first quarter and fundamentals are expected to
stay strong with record low vacancies, record high asking rents and
robust activity in the coming quarters.
Supplemental Data: Largest 20 Markets

Vacancy vs. Absorption Q1 2018 Warehouse Rent History & Outlook

by Port Location and Region Rent Outlook Over Next 12 Months

8.0%
Port Location $12.00 Port Location Rent Outlook
Region
Eastern US Midwest Eastern US Up
Great Lakes Northeast Phoenix
Great Lakes Same Silicon Valley
1.2M $11.00
Gulf Coast South Gulf Coast
7.0% Inland West Inland
Atlanta
West Coast 3.8M
West Coast
Kansas City
1.5M $10.00
No port Memphis Chicago No port
1.9M 4.5M

6.0%
$9.00
Dallas-Fort Worth
Indianapolis 2.3M
0.6M Los Angeles

$8.00
Philadelphia Houston
Cleveland 1.9M Northern New Jersey
5.0% Median 0.2M 0.8M

Average Warehouse/Distribution Rent 2018 Q1

Silicon Valley
0.5M Cincinnati
1.8M $7.00
Vacancy Rate 2018 Q1

Northern New Jersey Minneapolis-St. Paul

-1.2M 0.3M Inland Empire
Inland Empire Central New Jersey
Milwaukee 3.5M Houston Phoenix
4.0% 1.1M
$6.00
Columbus
1.6M

Philadelphia
$5.00 Detroit Median
Detroit
-1.1M Central New Jersey Chicago
3.0% 1.7M
Dallas-Fort Worth Milwaukee
Kansas City

$4.00 Atlanta

Cincinnati
Cleveland
Indianapolis
Columbus
2.0% $3.00
Memphis

Los Angeles $2.00

0.4M
1.0%

$1.00

0.0% Median Median

$0.00
-1.0M 0.0M 1.0M 2.0M 3.0M 4.0M -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
2018 Q1 Absorption (SF) YOY Change in Warehouse/Distribution Rent (since 2017 Q1)

Source: Colliers Q1 2018 Industrial Survey Source: Colliers Q1 2018 Industrial survey

Vacancy vs. YOY Change in Vacancy Absorption vs. YTD New Supply by Port Location
By Port Location and Region Absorption Outlook Over Next 12 Months

11.0%
Port Location Vacancy Outlook Port Location Absorption Outlook
Eastern US (Over next 12 mos.) 4.5M Eastern US (Over the Next 12 mos.)
Chicago
10.0% Up Positive
Great Lakes Great Lakes
Gulf Coast Same Gulf Coast Close to zero
4.0M
Inland Down Inland
9.0% Atlanta
West Coast West Coast
3.5M
Inland Empire
No port No port
8.0%
3.0M
Phoenix
7.0%
2.5M
Atlanta Kansas City
Memphis Chicago
Dallas-Fort Worth
6.0% 2.0M Memphis Houston
2018 Q1 Absorption (SF)

Dallas-Fort Worth

Indianapolis Cincinnati Central New Jersey

Vacancy Rate 2018 Q1

Median Philadelphia Silicon Valley Houston Cleveland 1.5M Columbus

5.0% Kansas City Median

Cincinnati
Minneapolis-St. Paul Northern New Jersey
Milwaukee Phoenix
Inland Empire 1.0M
4.0% Milwaukee
Philadelphia
Columbus
Silicon Valley
0.5M Indianapolis Los Angeles
Detroit
3.0% Central New Jersey Minneapolis-St. Paul
Cleveland
0.0M

2.0%
-0.5M
Los Angeles
1.0%
-1.0M

Northern New Jersey Detroit

0.0% -1.5M

-1.0% -2.0M

-2.5M
-2.0% Median
Median

-4.0M -3.0M -2.0M -1.0M 0.0M 1.0M 2.0M 3.0M 4.0M 5.0M 6.0M 7.0M
-1.8% -1.5% -1.2% -0.9% -0.6% -0.3% 0.0% 0.3% 0.6% 0.9% 1.2% 1.5%
YOY Change in Vacancy (since 2017 Q1) 2018 YTD New Supply (SF)

Source: Colliers Q1 2018 Industrial Survey Source: Colliers Q1 2018 Industrial Survey

7 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Inventory, New Supply, Under Construction
INVENTORY TOTAL NEW SUPPLY
MARKET TOTAL UNDER CONSTRUCTION (SF)
Q! 2018 (SF) Q1 2018 (SF)

NORTHEAST
Baltimore, MD 209,678,862 889,700 5,965,380
Boston, MA 148,064,548 0 1,105,000
Hartford, CT 110,122,623 0 525,000
New Hampshire 64,609,528 0 240,000
New York City Metro 811,011,547 3,038,429 14,176,103
> Central New Jersey 320,964,594 2,538,702 8,359,437
> Long Island 131,904,612 0 87,319
> Northern New Jersey 358,142,341 499,727 5,729,347
Philadelphia-Lehigh Valley, PA 448,711,176 292,402 8,480,657
Pittsburgh, PA 137,173,734 99,250 146,996
Washington, D.C. 212,672,777 471,415 1,573,137
Northeast Total 2,142,044,795 4,791,196 32,212,273
SOUTH
Atlanta, GA 697,549,956 6,961,854 14,767,871
Augusta-Aiken, GA 9,870,730 0 40,000
Austin, TX 51,573,894 0 1,329,027
Birmingham, AL 127,762,233 0 112,500
Charleston, SC 49,358,097 463,700 1,891,495
Charlotte, NC 211,458,394 1,552,822 4,350,548
Columbia, SC 67,707,056 42,000 1,029,657
Dallas-Fort Worth, TX 817,845,734 2,916,643 24,018,345
Florence-Myrtle Beach, SC 35,978,569 0 0
Greenville-Spartanburg-Anderson, SC 195,124,294 663,365 6,218,780
Houston, TX 559,004,038 2,101,533 9,266,194
Huntsville, AL 52,972,123 0 645,200
Jacksonville, FL 128,623,806 107,237 368,205
Little Rock, AR 244,620,205 1,944,593 4,264,142
Memphis, TN 199,715,022 740,000 3,712,877
Nashville, TN 71,517,925 0 0
Norfolk, VA 142,178,949 818,226 783,398
Orlando, FL 65,072,538 136,500 159,600
Raleigh-Durham, NC 76,326,511 95,000 0
Richmond, VA 66,829,908 1,419,000 8,092,495
Savannah, GA 92,541,891 1,074,273 2,361,000
Shenandoah Valley-I-81 Corridor 377,769,069 1,417,672 4,238,629
South Florida 110,170,428 781,979 1,130,848
> Fort Lauderdale 214,609,490 635,693 2,951,200
> Miami 52,989,151 0 156,581
> Palm Beach 212,308,072 548,791 4,146,773
Tampa Bay, FL 210,860,407 2,356,233 3,029,136
South Total 4,553,709,014 23,003,209 91,796,736
Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

8 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Inventory, New Supply, Under Construction (continued)

INVENTORY TOTAL NEW SUPPLY

MARKET TOTAL UNDER CONSTRUCTION (SF)
Q! 2018 (SF) Q1 2018 (SF)

MIDWEST
Chicago, IL 1,380,173,620 3,735,999 7,182,092
Cincinnati, OH 256,075,589 2,007,818 3,317,732
Cleveland, OH 363,028,076 386,832 4,559,755
Columbus, OH 236,374,042 283,750 4,239,673
Dayton, OH 92,731,553 106,000 1,493,344
Detroit, MI 552,572,702 733,372 5,110,671
Grand Rapids, MI 116,979,225 41,000 1,165,350
Indianapolis, IN 246,574,765 442,437 5,121,411
Kansas City, MO 258,681,951 2,170,264 4,491,719
Milwaukee, WI 268,234,350 569,000 1,365,126
Minneapolis-St. Paul, MN 252,206,288 0 1,605,027
Omaha, NE 71,591,372 0 3,359,462
St. Louis, MO 235,988,963 763,940 4,383,435
Midwest Total 4,331,212,496 11,240,412 47,394,797
WEST
Albuquerque, NM 39,550,979 0 0
Bakersfield, CA 35,126,089 23,560 0
Boise, ID 46,546,741 0 14,500
Denver, CO 241,963,843 409,382 4,509,535
Fresno, CA 50,750,767 890,312 0
Greater Los Angeles, CA 1,594,148,253 7,320,800 22,770,900
> Inland Empire 507,484,000 5,091,400 19,093,300
> Los Angeles 894,748,300 2,059,400 2,742,800
> Orange County 191,915,953 170,000 934,800
Honolulu, HI 40,323,353 0 95,881
Las Vegas, NV 131,137,686 2,393,431 1,409,523
Phoenix, AZ 294,821,081 709,200 6,224,085
Portland, OR 186,496,764 679,296 2,651,056
Reno/Sparks, NV 85,546,000 174,493 0
Sacramento, CA 147,606,100 1,554,789 975,920
San Diego, CA 189,057,028 768,677 2,811,454
San Francisco Bay Area, CA 384,939,071 3,196,451 1,193,678
> East Bay 37,701,351 648,806 128,622
> Fairfield, CA 50,448,484 1,301,117 422,417
> San Francisco Peninsula 39,318,921 0 0
> Silicon Valley 257,470,315 1,246,528 642,639
Seattle-Puget Sound, WA 272,282,632 3,471,752 4,791,527
Stockton, CA 105,883,721 3,864,295 7,653,996
West Total 3,992,846,190 13,621,954 59,494,116
U.S. TOTAL 15,019,812,495 52,656,771 230,897,922

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

9 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Absorption, Vacancy
ABSORPTION YTD VACANCY RATE VACANCY RATE
MARKET
Q1 2018 (SF) ABSORPTION Q4 2017 Q1 2018

NORTHEAST
Baltimore, MD 197,149 197,149 7.8% 8.1%
Boston, MA 925,739 925,739 9.2% 8.6%
Hartford, CT 90,400 90,400 5.5% 5.6%
New Hampshire 969,843 969,843 7.3% 5.8%
New York City Metro 667,413 667,413 3.7% 3.8%
> Central New Jersey 1,708,854 1,708,854 3.0% 3.3%
> Long Island 129,933 129,933 3.0% 3.0%
> Northern New Jersey -1,171,374 -1,171,374 4.5% 4.7%
Philadelphia-Lehigh Valley, PA 1,188,038 1,188,038 5.4% 5.2%
Pittsburgh, PA 428,025 428,025 6.2% 5.7%
Washington, D.C. 760,013 760,013 5.2% 5.1%
Northeast Total 4,870,780 4,870,780 5.6% 5.5%
SOUTH
Atlanta, GA 3,788,489 3,788,489 6.6% 7.0%
Augusta-Aiken, GA 161,501 161,501 14.8% 13.4%
Austin, TX 404,420 404,420 6.6% 7.3%
Birmingham, AL 215,648 215,648 4.2% 4.1%
Charleston, SC -658,904 -658,904 8.4% 10.6%
Charlotte, NC 833,849 833,849 5.6% 5.7%
Columbia, SC 1,035,175 1,035,175 9.7% 8.2%
Dallas-Fort Worth, TX 2,290,668 2,290,668 6.0% 6.0%
Florence-Myrtle Beach, SC -341,660 -341,660 14.5% 14.6%
Greenville-Spartanburg-Anderson, SC 2,779,029 2,779,029 6.9% 5.8%
Houston, TX 1,878,063 1,878,063 5.3% 5.4%
Huntsville, AL 613,560 613,560 6.9% 6.8%
Jacksonville, FL 562,421 562,421 3.8% 3.4%
Memphis, TN 1,885,684 1,885,684 6.7% 6.7%
Nashville, TN 584,015 584,015 4.6% 5.1%
Norfolk, VA 68,099 68,099 4.1% 4.9%
Orlando, FL 955,177 955,177 4.5% 4.3%
Raleigh-Durham, NC 258,804 258,804 6.2% 6.1%
Richmond, VA 127,209 127,209 3.5% 4.3%
Savannah, GA 2,838,773 2,838,773 3.6% 1.4%
Shenandoah Valley-I-81 Corridor 1,194,994 1,194,994 6.4% 5.7%
South Florida -258,514 -258,514 3.8% 4.3%
> Fort Lauderdale -200,212 -200,212 3.5% 4.4%
> Miami 36,303 36,303 4.2% 4.4%
> Palm Beach -94,605 -94,605 3.0% 3.2%
Tampa Bay, FL 1,290,654 1,290,654 5.4% 5.8%
South Total 22,507,154 22,507,154 5.7% 5.8%

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

10 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Absorption, Vacancy (continued)

ABSORPTION YTD VACANCY RATE VACANCY RATE

MARKET
Q1 2018 (SF) ABSORPTION Q4 2017 Q1 2018

MIDWEST
Chicago, IL 4,465,902 4,465,902 6.8% 6.7%
Cincinnati, OH 1,771,388 1,771,388 4.2% 4.9%
Cleveland, OH 187,331 187,331 4.4% 4.8%
Columbus, OH 1,568,932 1,568,932 4.2% 4.0%
Dayton, OH 191,603 191,603 6.0% 6.8%
Detroit, MI -1,144,227 -1,144,227 3.0% 3.4%
Grand Rapids, MI 206,711 206,711 4.9% 5.3%
Indianapolis, IN 577,301 577,301 5.6% 5.5%
Kansas City, MO 1,485,785 1,485,785 6.4% 6.9%
Milwaukee, WI 1,104,224 1,104,224 4.7% 4.3%
Minneapolis-St. Paul, MN 331,613 331,613 4.8% 4.7%
Omaha, NE 15,334 15,334 3.4% 2.7%
St. Louis, MO 675,124 675,124 6.7% 6.5%
Midwest Total 11,437,021 11,437,021 5.3% 5.4%
WEST
Albuquerque, NM -40,104 -40,104 4.7% 5.1%
Bakersfield, CA -34,002 -34,002 5.4% 5.6%
Boise, ID -54,238 -54,238 2.7% 1.0%
Denver, CO 785,242 785,242 4.8% 4.6%
Fresno, CA 715,334 715,334 5.0% 5.0%
Greater Los Angeles, CA 3,828,411 3,828,411 2.5% 2.5%
> Inland Empire 3,504,400 3,504,400 4.4% 4.4%
> Los Angeles 362,100 362,100 1.4% 1.5%
> Orange County -38,089 -38,089 2.6% 2.1%
Honolulu, HI -7,143 -7,143 2.0% 2.0%
Las Vegas, NV 708,467 708,467 4.5% 5.7%
Phoenix, AZ 1,158,037 1,158,037 7.7% 7.6%
Portland, OR -1,009,397 -1,009,397 4.0% 4.9%
Reno/Sparks, NV 274,587 274,587 6.7% 6.4%
Sacramento, CA 1,902,460 1,902,460 5.9% 4.7%
San Diego, CA 540,728 540,728 4.2% 4.2%
San Francisco Bay Area, CA 518,821 518,821 4.0% 3.9%
> East Bay 606,186 606,186 2.4% 2.2%
> Fairfield, CA -465,773 -465,773 6.4% 7.1%
> San Francisco Peninsula -168,448 -168,448 1.1% 1.5%
> Silicon Valley 546,856 546,856 5.2% 4.9%
Seattle-Puget Sound, WA 284,322 284,322 3.2% 3.4%
Stockton, CA 331,553 331,553 4.8% 4.5%
West Total 9,903,078 9,903,078 3.8% 3.8%
U.S. TOTAL 48,718,033 48,718,033 5.1% 5.1%

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

11 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Average Asking NNN Rents as of Q1 2018
WAREHOUSE /
MANUFACTURING SPACE FLEX / SERVICE SPACE
MARKET DISTRIBUTION SPACE
(USD/SF/YR) (USD/SF/YR)
(USD/SF/YR)

NORTHEAST
Baltimore, MD $2.80 $10.64 $4.86
Boston, MA $7.01 $11.63 $6.88
Hartford, CT $4.54 $7.51 $4.60
New Hampshire $5.80 $9.09 $6.03
New York City Metro $6.47 $11.98 $8.05
> Central New Jersey $6.98 $12.39 $6.86
> Long Island $10.50 $16.58 $10.88
> Northern New Jersey $6.16 $10.58 $8.10
Philadelphia-Lehigh Valley, PA $3.94 $9.22 $5.05
Pittsburgh, PA $4.18 $9.00 $5.69
Washington, D.C. $7.52 $12.91 $8.16
Northeast Total $4.92 $11.38 $6.50
SOUTH
Atlanta, GA $3.47 $9.33 $4.04
Augusta-Aiken, GA $2.11 $3.12
Austin, TX $12.28 $8.74
Birmingham, AL $4.01 $5.33 $3.15
Charleston, SC $4.64 $6.60 $5.24
Charlotte, NC $4.89 $10.38 $5.00
Columbia, SC $3.10 $9.46 $3.66
Dallas-Fort Worth, TX $4.68 $9.65 $4.38
Florence-Myrtle Beach, SC $2.29 $7.31 $2.88
Greenville-Spartanburg-Anderson, SC $4.40 $8.13 $3.76
Houston, TX $9.34 $6.49
Huntsville, AL $6.27 $5.68 $3.82
Jacksonville, FL $9.84 $4.68
Memphis, TN $6.87 $2.97
Nashville, TN $4.22 $12.44 $5.27
Norfolk, VA $5.93 $12.28 $4.76
Orlando, FL $10.27 $5.98
Raleigh-Durham, NC $13.92 $5.41
Richmond, VA $4.40 $9.84 $4.32
Savannah, GA $4.23 $6.00 $5.22
Shenandoah Valley-I-81 Corridor $4.55 $5.22 $3.67
South Florida $9.30 $17.17 $9.85
> Fort Lauderdale $6.86 $12.89 $8.36
> Miami $21.50 $22.41 $10.59
> Palm Beach $8.75 $13.84 $8.74
Tampa Bay, FL $9.86 $5.17
South Total $4.12 $10.10 $4.95

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals. * Straight averages used

12 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Average Asking NNN Rents as of Q1 2018 (continued)

WAREHOUSE /
MANUFACTURING SPACE FLEX / SERVICE SPACE
MARKET DISTRIBUTION SPACE
(USD/SF/YR) (USD/SF/YR)
(USD/SF/YR)

MIDWEST
Chicago, IL $5.11
Cincinnati, OH $3.02 $6.52 $3.97
Cleveland, OH $3.04 $6.99 $3.83
Columbus, OH $6.20 $3.44
Dayton, OH $2.47 $4.65 $3.54
Detroit, MI $9.12 $5.33
Grand Rapids, MI $3.57 $4.93 $3.41
Indianapolis, IN $6.79 $6.85 $3.59
Kansas City, MO $4.14 $8.97 $4.53
Milwaukee, WI $4.58 $6.50 $4.76
Minneapolis-St. Paul, MN $4.85 $5.00 $4.62
Omaha, NE $3.86 $8.09 $5.41
St. Louis, MO $2.47 $6.86 $4.35
Midwest Total $3.78 $6.91 $4.67
WEST
Albuquerque, NM $6.86 $9.03 $6.97
Bakersfield, CA $9.80 $5.65
Boise, ID $6.83
Denver, CO $11.67 $7.89
Fresno, CA $2.99 $11.11 $4.92
Greater Los Angeles, CA $8.01
> Inland Empire $7.03
> Los Angeles $8.93
> Orange County $10.43
Honolulu, HI $14.63
Las Vegas, NV $9.02 $10.76 $6.79
Phoenix, AZ $6.81 $12.63 $6.59
Portland $8.41 $12.14 $7.04
Reno/Sparks $4.37
Sacramento, CA $0.49 $0.74 $0.47
San Diego, CA $11.46 $20.32 $9.86
San Francisco Bay Area, CA $11.32 $24.66 $8.79
> East Bay $10.61 $18.79 $8.78
> Fairfield, CA $8.52 $10.09 $5.54
> San Francisco Peninsula $20.67
> Silicon Valley $16.47 $24.97 $11.51
Seattle-Puget Sound, WA $8.08 $17.53 $8.95
Stockton, CA $8.40 $6.10 $5.31
West Total $9.24 $18.21 $7.16
U.S. TOTAL $5.15 $12.05 $5.46

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals. * Straight averages used

13 U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

 INDUSTRIAL SERVICES CONTACT
Pete Quinn, SIOR
National Director, Industrial | USA
+1 317 713 2107
pete.quinn@colliers.com

RESEARCH CONTACTS
James Breeze
National Director of Industrial Research | USA
+1 602 222 5184
james.breeze@colliers.com
Pete Culliney
Director of Research | USA
+1 212 716 3689
pete.culliney@colliers.com

CONTRIBUTORS
Andrew Nelson
Chief Economist | USA
Jeff Simonson
U.S. Senior Research Analyst | USA
AJ Paniagua
U.S. Research Analyst | USA

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