Puget Sound Insider New Extended Version of Kent Valley Insider

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1 Puget Sound Insider New Extended Version of Valley Insider Market Report 3Q 2018 Arie Salomon, SIOR, CCIM Principal Jeff Forsberg, CCIM Principal Taylor Hoff, SIOR Partner Channing Partner Al Robertson Senior Vice President Connor Powell Senior Associate

2 3Q 2018 Puget Sound Insider Quick Stats VACANCY 2.69% SHELL LEASE RATES* Change from last CURRENT Yr. Qtr. $0.599 TOTAL ABSORPTION 1,511,893 UNDER CONSTRUCTION 5,657,535 As part of a recent Real Estate Forum, we took a deep dive into Valley Industrial rent growth and the impact on the market since the last recession (see Section A on page 3). The rates presented here are not conjecture. They are taken from actual lease comps that have been verified and compiled over the years. What they show is what we have all known for years; everything in the Seattle area is on an upward trajectory. In this vein, Third Quarter 2018 numbers didn t disappoint. Our market experienced approximately 1.5 million square feet of positive net absorption. Our vacancy remains one of the lowest in the nation at 2.69%, which is the result of a lack of developable land sites and persistent occupier demand stemming from population growth, economic strength and cargo volumes at two of the nation s busiest ports. *Rates exclude South Seattle Submarket Submarket Total RBA (SF) Direct Vacant (SF) Direct Vacant (%) Sublease (SF) Total Vacant w/ Sublease Total % Vacant w/ Sublease SEATTLE 55,415, , % 72, , % SEATAC 4,704,405 46, % 38,226 84, % TUKWILA 11,836, , % 33, , % RENTON 9,125, , % 108, , % KENT 49,316,963 1,617, % 160,929 1,778, % AUBURN 21,599, , % 14, , % SUMNER 17,731, , % 172, , % PUYALLUP 9,268,605 32, % - 32, % FIFE 12,200, , % 100, , % TACOMA 27,173,537 1,916, % 38,250 1,954, % TOTAL 218,371,919 5,869, % 739,215 6,608, %

3 Lease Activity This run, which began in March of 2009, will have lasted close to 10 years, and has created a perfect storm for institutional allocations for industrial and limited core and value-add opportunities. Our team was involved in eight of the 17 sale comps last quarter and we can personally assure you that investor appetite is more ravenous than a six-year old at a candy store. Cap rates at or below 4% on core assets is more the norm than the exception these days. The market has been remarkably resilient. But everyone knows this. The biggest question is when will it end. The lack of developable land is a growing concern that has pushed developers to pursue periphery sites they might have dismissed a decade ago. Need proof? All you must do is investigate the activity in Lacey, Centralia, Dupont and Frederickson. Developers such as O Keefe, Panattoni, Dermody, CRG and Bridge have all made big bets in these areas. Supervalu, Best Buy, Lowes, Whole Foods, DHL, and Solo Cup are just some of the big Lease Transactions Valley Auburn Auburn Auburn Fife West Park Corporate Campus Northwest Aviation Services Group LLC 9,218 SF (1,500 SF Office) COMMENCEMENT 12/01/2018 Emerald Corporate Park - Bldg A Del Monte Fresh Produce 39,900 SF (2,428 SF office) COMMENCEMENT 12/01/2018 North Auburn Logistics Raymond Handling Concepts Corp. 95,293 SF (7,500 SF office) COMMENCEMENT 11/01/2018 Prologis Park Trans-Pacific McNichols Co. 18,435 SF (809 SF office) COMMENCEMENT 06/30/2018 East Corporate Park Avery Dennison (Fasson Roll NA) 33,500 SF (2,400 SF office) COMMENCEMENT 08/01/2018 name users taking advantage of the lower rates and expansion capabilities. Nothing stays the same forever, and while Springbrook Business Park Unique Elevator Interiors, Inc. 14,534 SF (3,381 SF office) COMMENCEMENT 10/01/2018 we think this run has another year or so, we do see signs for concern. An increase in the amount of new construction being delivered in next 12 to 14 months will alleviate some rental growth. North Valley 64 Pitney Bowes 59,250 SF (5,000 SF office) COMMENCEMENT 02/01/2019 Additionally, increased construction costs, tightening labor market, higher interest rates and inflation and the emerging global trade war also will damper the outlook some. And that isn t necessarily bad. Puyallup Valley Avenue Business Park Container Graphics 6,290 SF (741 SF office) COMMENCEMENT 04/01/2019 Like any sport team, a strategic time out, a healthy pause, to catch one s breath and reassess risk and opportunities doesn t mean the end, but just a new beginning. Sumner Pacific Coast Building Valuepart Inc. 28,857 SF (2,032 Office) COMMENCEMENT 12/01/2018 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

4 Sale Transactions Valley Sale Activity Gates Buildings 286,500 SF YEAR BUILT 1981 SALE PRICE $30,500,000 Auburn SOLD 10/01/2018 Orca Bay Seafoods Building 76,900 SF YEAR BUILT 1977 SALE PRICE $10,020,000 Renton SOLD 10/01/2018 Tacoma Fixture Bldg 98,300 SF YEAR BUILT 1949 SALE PRICE $7,150,000 Fife SOLD 09/28/2018 Van Doren s - Tandem Electric Bldg 11,002 SF YEAR BUILT 1981 SALE PRICE $1,720,000 SOLD 09/28/2018 Northstream Fostoria - Bldg F 27,496 SF YEAR BUILT 1981 SALE PRICE $3,750,000 Tukwila SOLD 09/25/2018 Mill Creek Ventures Bldg 19,917 SF YEAR BUILT 2005 SALE PRICE $2,880,000 Sumner SOLD 09/13/2018 Section A - Shell Rates 50, ,000 SF Class A & B Shell Rate Average Term (Years) Free Rent (Months) Free Rent Ratio 2008 $ $ $ $ $ $ $ $ $ $ $ Shell Rate Class A Class B Average Term (Years) Free Rent (Months) Free Rent Ratio 2008 $ Seattle Seattle Pepsi Plant 207,254 SF YEAR BUILT 1950 SALE PRICE $65,000,000 SOLD 09/06/2018 Georgetown Site 40,256 SF YEAR BUILT 1960 SALE PRICE $9,550,000 SOLD 09/05/2018 Sears Warehouse 294,912 SF YEAR BUILT 1981 SALE PRICE $49,000,000 SOLD 09/04/ $ $ $ $ $ $ $ $ $ $

5 Construction Costs Breakdown SHELL $45.00 $75.00 OFFICE $90.00 $ SITE WORK $5.50 $6.50 SOFT COSTS $11.50 $13.20 LAND COSTS $11.00 $25.00 TOTAL COSTS $ $ ,000 SF Building Size 4,000 SF Office Size 5 Acres Site Size What is Currently Available? Call for details & pricing Valley Centre Corp Park, Bldg 4 52,816 SF (1,415 SF office) 17 DH / 1 GL & 30 clear FOR LEASE Fennel Creek Industrial Park 100,000 SF (BTS office) DH / GL & 30 clear FOR LEASE Auburn Bonney Lake Sumner IPT Sumner DC 229,016 SF 48 DH / 2 GL FOR LEASE FALL 2018 Van Doren 228th 228,907 SF (28,267 SF office) 25 DH / 3 GL & 30 clear FOR LEASE NW Pump Building 24,303 SF (8,595 SF office) 2 DH / 3 GL & 25 clear FOR LEASE Pacific Hwy S 27,000 SF (14,500 SF office) 5 DH / 1 GL & 24 clear FOR SALE OR LEASE SeaTac Salmon Creek Corporate Park 19,600 SF (dead storage) 4 DH / 30 clear FOR SUBLEASE HySecurity Building 27,815 SF (7,260 SF office) 4 DH / 1 GL & 24 clear FOR SALE OR LEASE Benaroya Industrial Site 2+ Acres Zoned I, Shovel Ready FOR SALE Sumner Fife THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

6 3Q18 Construction Report COMPLETED City Developer Project Type Yr Size Available Auburn LaSalle/Panattoni North Auburn Logistics Spec ,553 92,293 Panattoni Seattle Gateway Center Spec , ,290 Burien Panattoni Seattle Gateway Center 2 Spec ,200 - Naylor Group WDS Cold Storage Bldg BTS ,140 - Des Moines Panattoni Des Moines Creek BP - Phase IV Spec ,300 35,952 Panattoni Enterprise Center Fife Spec ,620 - Trammell Crow Fife I-5 Commerce Center Spec ,490 - IPT IPT Tacoma Logistics Cener Spec ,122, ,400 Benaroya New Sound Transport Bldg BTS ,000 - Fife Prologis Prologis Blair Logistics Spec , ,100 Prologis Prologis Park Tacoma - 1st phase Spec ,400 - Prologis Prologis Park Tacoma - 2nd phase Spec , ,000 Prologis Prologis Park Tacoma - UPS Spec ,195 - CenterPoint CenterPoint Yard Site Spec ,800 - Exotic Metals Exotic Metal BTS BTS ,163 - Segale Pacific Gateway / BTS BTS ,500 - Segale Pacific Gateway / P-152 Spec , ,670 Ever-West West Valley 182 Spec ,492 - Lacey Dermody Meridian Campus Spec ,028 68,028 Panattoni Lakewood-Tacoma Logistic Center Spec ,526 - Lakewood Dermody I-5 Spec ,700 - Crow Holding Puyallup Distribution Center Spec ,000 - Puyallup RSD /Davis Properties Summitt Business Park Spec ,722 39,814 Renton Group Health Longacres - South BTS ,000 - Panattoni Cummins BTS BTS ,660 - Sumner Carpinito Brothers North Country Business Park Spec ,703 - Davis Properties Penny Salsa BTS BTS ,375 - Tacoma NewCold Orchard Industrial Center BTS ,000-7,995,542 1,975,547 UNDER CONSTRUCTION City Developer Project Type Yr Size Available Auburn Prologis Prologis Park Auburn, Bldg 5 (Hudson) Spec , ,876 Bonney Lake Vector Fennel Creek Industrial Park Spec , ,000 Des Moines Trammell Crow Des Moines Creek North Spec , ,211 DuPont CRG Real Estate The DuPont - Bldg B Spec , ,900 Federal Way Panattoni Tilt 348 Spec ,233 - Fife Davis Properties Davis 70 Spec ,000 55,000 Fife Prologis Prologis Blair Logistics - Phase II Spec , ,447 Frederickson Avenue 55 Ave55 - Frederickson DC Spec ,410 96,410 Frederickson Panattoni Frederickson Pacific Indus Park - Phase I BTS ,000 -

7 Construction Report UNDER CONSTRUCTION CONT. City Developer Project Type Yr Size Available Frederickson Panattoni Panattoni Frederickson 184 Spec , ,000 Segale Pacific Gateway / Spec Spec ,546 57,546 Morgan Stanley South 234 Spec , ,000 TBD WinEstimator Site BTS ,113 24,453 Lacey IDS Real Estate Group Hogum Bay Logistics Center Spec , ,646 Pacific Panattoni Pacific Logistics South Spec , ,262 Puyallup Michelson Knutson Farms - Viking Bldg Spec , ,888 Puyallup Vector Development Nautica BC / PSE Site BTS ,000 - Seattle Prologis Prologis Georgetown Crossroads Spec , ,615 Sumner Bertch Capital 3800 Sumner Spec , ,000 Sumner IPT IPT Sumner South Warehouse Spec , ,900 Sumner Prologis Prologis 167 Landing Spec , ,616 Tacoma Avenue 55 Portside 55 BTS , ,940 Tukwila Sebco Sebco BTS Site BTS ,932-5,657,535 4,778,710 IN PLANNING CONTINUED City Developer Project Type Yr Size Available Auburn - Laredo Industrial Park Spec , ,040 Federal Way IRG East Campus Landing BTS , ,490 Fife Avenue 55 Ave55 - Fife Development Spec ,000 50,000 O Keefe / Terreno DC 192 Spec , ,200 Bridge Development Riverbend - Ellis Property Spec ,400 94,400 Lakewood Avenue 55 Southport 55 BTS ,800 80,800 Pacific Panattoni Pacific Logistic North Spec , ,894 Pacific Davis Properties The Pacific Building Spec , ,526 Seattle Prologis Prologis Sodo Warehouse Spec , ,500 Sumner Tarragon SeaPort Logistics - Bldg B&C Spec , ,000 Sumner Turbak Sumner 32 BTS ,141 47,141 Sumner First Industrial Sumner CP - Glacier Spec ,751 66,751 Sumner Principal Financial Group Sumner Golf Course Spec ,200,000 1,200,000 Sumner Avenue 55 Sumner Northwest BTS ,200 60,200 Tacoma LBA Lincoln Avenue Spec ,884 98,884 Auburn Avenue 55 Ave55 - Auburn Way BTS ,875 21,875 Auburn Avenue 55 Ave55 - West Valley BTS ,200 50,200 DuPont CRG Real Estate The DuPont - Bldg A Spec , ,488 Frederickson Panattoni Frederickson Pacific Indus Park - Phase II BTS , ,000 Lacey Bridge Development Bridge Point Lacey Spec , ,000 Lakewood Vector Development S 96th Street Bldg Spec ,500 78,500 Sumner Bridge Development Bridge Point Sumner 50 BTS ,366 54,366 5,736,255 5,736,255 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.

8 Arie Salomon, SIOR, CCIM Principal Jeff Forsberg, CCIM Principal Taylor Hoff, SIOR Partner Channing Partner Al Robertson Senior Vice President Connor Powell Senior Associate NAI Puget Sound Properties Commercial Real Estate Services th Avenue NE Suite 340 Bellevue, Washington USA nai-psp.com