Houston s industrial market added 11.2M SF of new inventory and absorbed 9M SF in 2018

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1 Research & Forecast Report HOUSTON INDUSTRIAL Houston s industrial market added 11.2M SF of new inventory and absorbed 9M SF in 2018 Lisa Bridges Director of Market Research Houston Houston s industrial market continues to expand, adding 1.9M SF to its inventory in the fourth quarter, pushing the year-end total to 11.2M SF in 114 buildings. There are another 85 buildings with 11.9M SF of space under construction and scheduled to deliver in Some of the tenants that have or will be occupying the new inventory include Grocers Supply, MRC Global, Valvoline, Conn s HomePlus, PBP Plastic Bagging & Packaging and AIV Inc. Not all of the new construction is pre-leased which might increase the vacancy rate if it is not leased before delivery, but Houston s industrial market is healthy and the average vacancy rate decreased 10 basis points over the quarter from 5.6% to 5.5%. Houston s net absorption decreased by 200,000 SF over the quarter from 2.7M SF to 2.5M SF and finished the year with a total of 9.0M SF of positive net absorption. A vast majority of the leasing activity can be attributed to an expanding population driven by job growth which increases consumer spending and demand for logistics and distribution hubs. The rate of Houston s job growth increased by 3.7% over the year according to data recently released by the US Bureau of Labor Statistics. The Houston MSA created 114,400 jobs (not seasonally adjusted) between November 2017 and November 2018, growing faster than the during the same time period. Employment sectors with the most substantial growth include support activities for mining which grew by 11.7% over the year, the construction sector which increased by 10.8%, and durable goods manufacturing which was up by 9.0% over the year. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Industrial Market Q Q Vacancy Rate 5.1% 5.6% 5.5% Net Absorption (SF) 1.0M 2.7M 2.5M New Construction (SF) 0.8M 4.5M 1.9M Under Construction (SF) 10.1M 11.3M 11.9M Asking Rents Per Square Foot Per Year (NNN) Annual Change Quarterly Change Quarterly Forecast* Average $6.92 $7.32 $7.54 Warehouse/Distribution $6.53 $6.94 $7.09 Flex/Service $10.01 $9.72 $9.21 Tech/R&D $10.07 $10.69 $10.23 Share or view online at colliers.com/houston

2 Vacancy & Availability Houston s average industrial vacancy increased 40 basis points on an annual basis from 5.1% in Q to 5.5% in, and decreased 10 basis points on a quarterly basis from 5.6% in Q At the end of the fourth quarter, Houston had 29.6 million SF of vacant industrial space for direct lease, and an additional 1.6 million SF of vacant sublease space. Among the major industrial corridors, the Northeast Corridor had the lowest vacancy rate at 3.5%, followed by the South Corridor at 3.9%. The submarket with the largest percentage of vacant space is the North Corridor which had a 7.1% vacancy rate. Absorption & Demand Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 11/17 11/18 HOUSTON 4.4% 3.8% TEXAS 3.8% 3.5% 3.9% 3.5% Annual Change JOB GROWTH # of Jobs Added HOUSTON 3.7% 114.4K Houston s industrial market posted 2.5 million SF of positive net absorption in the fourth quarter, pushing the year-end total to 9.0M SF. Some of the tenants that relocated or expanded include Polytex Fibers, Goodman Manufacturing, Veritiv Operating Company, United States Postal Service, Lowes and Kitchen Cabinet Distributors. TEXAS 3.9% 360.0K 1.7% 2.5M The majority of fourth quarter positive net absorption occurred in the Northwest Corridor which recorded 2.0M SF of space absorbed. The Northeast, Southeast and Southwest Corridors also recorded positive net absorption in the fourth quarter The submarket with the highest amount of negative absorption was the Inner Loop Corridor, which posted 191,779 SF of negative net absorption. NO. OF PROPERTIES: Rental Rates According to CoStar, our data service provider, Houston s citywide average quoted industrial rental rate for all product types increased from $7.32 per SF NNN to $7.54 per SF NNN over the quarter. According to Colliers internal data, actual lease transactions are in the $4.68 $5.16 per SF NNN range for newer bulk industrial spaces, while flex rates range from $7.20 to $10.80 per SF NNN depending on the existing improvements or the allowance provided for tenant improvements and the age, and location of the property. Sales Activity Source: Real Capital Analytics M SF: $87 AVERAGE $/SF: 6.4% AVERAGE CAP RATE: Change in Sales (Year over Year) Houston 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% -50.0% % According to CoStar, the average quoted NNN rental rates by property type are as follows: $7.09 per SF for Warehouse Distribution space; $9.21 per SF for Flex/ Service space; with Tech/R&D space averaging $10.23 per SF. Q4 '13 Q4 '14 Q4 '15 Q4 '16 Q4 '17 Q4 '18 Average Price Per SF Houston $100 $90 $80 $70 $60 $50 $40 Q4 '14 Q4 '15 Q4 '16 Q4 '17 Q4 '18 Average CAP Rate Houston 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% Q4 '14 2 Houston Research & Forecast Report Industrial Colliers International Q4 '15 Q4 '16 Q4 '17 Q4 '18

3 Leasing Activity Houston s industrial leasing activity decreased 39% over the quarter from 7.0M SF in Q to 4.3M SF in. Most of the transactions consisted of leases for 75,000 SF or less; however, there were several larger deals that occurred. The table below highlights some of the larger transactions that closed in. Industrial Lease Transactions over 50,000 SF BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE 1302 Wharton Weems Blvd East-Southeast Far 472,000 Valvoline 1,3 Oct AmeriPort Pkwy East-Southeast Far 225,500 NT Logistics 1 Oct New Century Drive East-Southeast Far 137,500 Packwell 2 Oct Langfield Rd Northwest Inner Loop 71,566 Chamberlain Roofing 1 Nov W Fuqua St Southwest Far 70,740 Blue Line 1 Oct-18 1 Direct/New 2 Renewal/Extension 3 Colliers International Transaction Under Construction Currently, 11.3M SF of industrial space is under construction in Houston and 42% of this space is pre-leased. The largest project under construction is a 727,600-SF BTS distribution warehouse for Grocers Supply Company which is being developed by Liberty Property Trust. Below is a partial list of buildings currently under construction. Industrial Under Construction - 250,000 SF or greater BUSINESS PARK/ADDRESS SUBMARKET RBA % LEASED DEVELOPER/CONTRACTOR DELIVERY DATE BUILDING DESCRIPTION Woodham Dr North Hardy Toll Rd 727, % Liberty Property Trust Apr-19 BTS for Grocers Supply 1401 N Rankin Rd North Hardy Toll Road 656, % Liberty Property Trust Jun-19 BTS for Conn s HomePlus 1302 Wharton Weems Blvd - B2 East-Southeast Far 600, % Liberty Property Trust Feb-19 Spec Distribution 5055 E Grand Parkway S East-Southeast Far 519, % Trammell Crow Co Jun-19 BTS for PBP 611 S Cravens Rd Southwest Far 477,355 0% Transwestern Mar-19 Spec Distribution Underwood Port Logistics Center Underwood Rd East-Southeast Far 404,160 0% Triten Real Estate Partners Carlyle Group Feb-19 Spec Distribution Fallbrook Pines Business Park Hwy 290/Tomball Pky 368,467 0% TrammellCrowCompany Jan-19 Spec Warehouse 30 Esplanade Blvd Bldg G North Outer Loop 351,400 0% IDI Logistics Oct-19 Spec Warehouse Victory Commerce Center East-Southeast Far 349,050 0% Crow Holdings Industrial Mar-19 Spec Distribution Point North Three North Hardy Toll Road 337,700 0% Duke Realty Corporation May-19 Spec Warehouse Northwest Lake Dr Northwest Outliers 320, % KDW Mar-19 BTS for AIV Inc. Fallbrook Pines Business Park Hwy 290/Tomball Pky 291,606 0% TrammellCrowCompany Jan-19 Spec Distribution Thompson 10 Logistics Center East-Southeast Far 260,148 0% Investment & Development Ventures LLC Mar-19 Spec Warehouse 1901 Wharton Weems Blvd - B1 East-Southeast Far 252,924 0% Liberty Property Trust Jun-19 Spec Warehouse 3 Houston Research & Forecast Report Industrial Colliers International

4 Market Summary Houston Industrial Market Statistical Summary MARKET RENTABLE AREA DIRECT VACANT SF DIRECT RATE SUBLET VACANT SF SUBLET RATE VACANT SF RATE 4Q18 NET ABSORP- TION 3Q18 NET ABSORP- TION 4Q18 COMPLE- TIONS SF UNDER CONSTRUC- TION Houston Total 573,004,825 29,629, % 1,600, % 31,229, % 2,518,384 2,672,498 1,896,704 11,893,477 CBD-NW Inner Loop 11,627, , % 25, % 755, % 53,837 (279,464) 0 0 Downtown 31,251,917 1,327, % 99, % 1,427, % (288,169) (149,554) 0 0 North Inner Loop 4,866, , % 0 0.0% 327, % (45,744) (4,920) 0 0 Southwest Inner Loop 7,003, , % 0 0.0% 227, % 88,297 (46,882) 0 0 INNER LOOP CORRIDOR 54,748,856 2,611, % 125, % 2,737, % (191,779) (480,820) 0 0 North Fwy/Tomball 25,614,750 2,452, % 207, % 2,660, % (54,044) 373,822 36,000 1,459,937 Pky North Hardy Toll Rd 34,838,970 1,981, % 101, % 2,083, % 162, , ,885,509 North Outer Loop 22,244, , % 28, % 863, % (27,640) (44,203) 106, ,400 The Woodlands/ 17,694,430 1,437, % 93, % 1,530, % (145,529) (23,970) 60,200 89,000 Conroe NORTH CORRIDOR 100,392,859 6,705, % 431, % 7,137, % (65,213) 548, ,200 3,785,846 Northeast Hwy 321 1,487,866 1, % 0 0.0% 1, % (1,200) 51, Northeast Hwy 90 18,449, , % 0 0.0% 544, % 21,867 (183,050) 25, ,000 Northeast I-10 4,091,145 57, % 6, % 63, % 12,500 (5,060) 0 0 Northeast Inner Loop 11,994, , % 27, % 637, % (16,020) (320,628) 0 0 NORTHEAST CORRIDOR 36,022,378 1,212, % 33, % 1,246, % 17,147 (457,138) 25, ,000 Hwy 290/Tomball Pky 23,130,165 1,404, % 149, % 1,554, % 418,717 (164,093) 302, ,511 Northwest Hwy 6 11,477,214 1,104, % 0 0.0% 1,104, % (105,882) 343, ,891 48,800 Northwest Inner Loop 61,033,599 3,294, % 220, % 3,515, % 98,124 24, ,166 Northwest Near 18,351, , % 45, % 810, % 156,495 56, Northwest Outliers 24,532,176 1,425, % 36, % 1,461, % 906, , ,795 1,723,180 West Outer Loop 26,120,681 1,179, % 45, % 1,224, % 539,761 (13,555) 0 0 NORTHWEST CORRIDOR 164,645,398 9,173, % 496, % 9,670, % 2,013, , ,595 2,753,657 South Highway 35 35,423,197 1,238, % 68, % 1,307, % (39,328) 116,617 20,000 45,765 South Inner Loop 12,616, , % 6, % 554, % (10,030) (19,321) 0 0 SOUTH CORRIDOR 48,039,265 1,786, % 75, % 1,861, % (49,358) 97,296 20,000 45,765 East I-10 Outer Loop 13,507, , % 0 0.0% 259, % 66,168 36,000 10,000 0 East-Southeast Far 66,640,843 4,128, % 271, % 4,399, % 329,956 1,202, ,909 3,966,229 Southeast Outer Loop 17,367, , % 17, % 431, % (18,612) 340, SOUTHEAST CORRIDOR 97,515,464 4,801, % 289, % 5,090, % 377,512 1,578, ,909 3,966,229 Highway 59/Highway 23,592,912 1,083, % 102, % 1,186, % 226, , , Southwest Far 12,886, , % 7, % 853, % 96,526 21, ,980 Southwest Outer Loop 13,348, , % 3, % 781, % 49,460 47, Sugar Land/Ft Bend Co SOUTHWEST CORRIDOR 21,812, , % 34, % 665, % 43, , ,640,605 3,338, % 148, % 3,487, % 416, , ,980 4 Houston Research & Forecast Report Industrial Colliers International

5 Q4 Houston Industrial 2018 Highlights INDUSTRIAL INVENTORY 573M SF DISTRIBUTION: 14% MANUFACTURING: 17% R&D: 1% SERVICE/FLEX 1% WAREHOUSE: 60% OTHER: 7% NEW CONSTRUCTION (DELIVERIES) 138% ANNUAL INCREASE Q Q Q M SF 1.7M SF Q M SF 3.1M SF 4.5M SF 5.5% 11.9M SF $7.54/SF UNDER CONSTRUCTION AVG. RENTAL RATE LEASING ACTIVITY 53% ANNUAL DECREASE Q Q Q Q M SF 6.1M SF 7.0M SF 7.0M SF 9.2M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/houston 5 North American Research & Forecast Report Q Office Market Outlook Colliers International

6 ADVANTAGE Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. Colliers is led by an experienced leadership team with a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years. HOTEL M ULT IFA M ILY HEA LTHCA RE RE TA IL L A ND OFF ICE IND USTRIA L COMMERCIAL REAL ESTATE SECTORS REPRESENTED Our philosophy revolves around the fact that the best possible results come from linking our global enterprise with local advisors who understand your business, your market, and how to integrate real estate into a successful business strategy. $116B TRANSACTION VALUE 2B SF UNDER MANAGEMENT $2.7B IN REVENUE 413 OFFICES 15,400 PROFESSIONALS SIOR 340 ACCREDITED MEMBERS 6 C O L L I E RQ4 S 2018 I N T E R N Industrial A T I O N A L GColliers L O B A LInternational LOCATIONS Houston Research & Forecast Report 69 COUNTRIES