GREATER ATLANTA BIG BOX / BULK DISTRIBUTION MARKET REPORT. Fall 2017 Preview

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1 GREATER ATLANTA BIG BOX / BULK DISTRIBUTION MARKET REPORT Fall 2017 Preview

2 Fall 2017 Preview Bulk Distribution Centers Defined as: 200,000+ Square Feet 20 Clear Ceilings and Above Minimal Office Build-Out Available in 90 Days or Less Snapshot Data Based on availabilities contained in this report, as of 08/08/17 Contiguous space over 200,000 SF Last Update (Spring Preview 2017) Current Level (Fall Preview 2017) Number of Buildings: 41 Number of Buildings: 46 RBA: 17,027,570 SF RBA: 21,840,652 SF *Avg Building Age (yrs): 17.2 *Avg Building Age (yrs): YTD Deliveries 25,250,708 SF 2017 YTD Deliveries 9,033,774 SF Direct Average Rate $3.65/nnn Direct Average Rate $3.38/nnn Sublet Average Rate $3.25/nnn Sublet Average Rate $3.25/nnn Total Average Rate $3.63/nnn Total Average Rate $3.37/nnn Report Analytics The Fall 2017 Preview Big Box Industrial report provides you with updates and changes to the availability of the buildings that contain 200,000 square feet or more since our 2017 Spring Preview Edition, the status of the Atlanta industrial market, trends and forecasts. Notable Lease Transactions Property Name Address Submarket Tenant SF Lease Type Owens Corning 8095 McLarin Rd South Atlanta Owens Corning 1,044,288 Renewal Lambert Farms Logistics Park King Mill Rd South Atlanta Lindt 1,004,400 New Pendergass 85 Logistics Ctr King Mill Rd Northeast Atlanta Kubota 398,785 New Hartman III 600 Hartman Industrial Ct I-20 W/Douglasville Keystone Automotive 350,819 Renewal Southfield 5165 Kennedy Rd South Atlanta All South Warehouse 297,000 Renewal *Lee Atlanta Deal Notable Sales Transactions Big Box Inventory & Transaction Summary Data Address Submarket Buyer Seller SF Sales / PSF 5000 Bohannon Rd South Atlanta TA Realty Associates Core5 Industrial Partners 873,800 $62.0 M / $ McLarin Rd South Atlanta Clarion Partners USAA Real Estate Company 1,044,288 $54.8 M / $ Third Flag Pky I-20 W/Douglasville Blackstone Real Estate High Street Realty Company 344,932 $20.5 M / $ Greenwood Industrial Ct South Atlanta Exeter Property Group Starwood Property Trust 455,000 $14.7 M / $32 1

3 Lee & Associates - Big Box Industrial Report Q Atlanta Overall Industrial Market Report 6,127,566 SF Q2 Q1 Net Absorption 6,704,331 SF 6.8% Q2 Q1 Vacancy 7.5% 4,686,730 SF Q2 Leasing Activity 16,963,258 SF Under Construction 6,960,252 SF New Supply Delivered $4.49 SF Average Asking Rent (per year) $53.00 SF Average Sales per SF $343 M 154 Sales Transactions = The Atlanta Industrial market ended Q2 with 6,127,566 SF of net absorption, bringing YTD absorption to 12,831,897 SF. The vacancy rate decreased this quarter to 6.8%. Lease activity increased this quarter nearly 4.7M SF. Construction activity decreased to 16,963,258 SF under construction in the Atlanta market due to the vast increase in delivered buildings. Delivered SF increased more than four-fold this quarter. Rental rates remained at $4.49 SF. The largest industrial sales transaction for the quarter was 8095 McLarin Rd, a 1,044,288 SF industrial building that sold for $41.91 PSF. Q had $343 Million in transaction volume; a total of 154 sales. Source: Bureau of Labor Statistics, Georgia State University Economic Forecasting Center, Bureau of Economic Analysis lee-associates.com/atlanta 2

4 Fall 2017 Preview South Atlanta 2160 Anvil Block Road Ellenwood, GA ,421 SF 441,796 SF $3.35 PSF 36 clear Year Built: Lake Mirror Place Forest Park, GA ,500 SF on 15.8 Acres 417,500 SF clear Year Built: 1962/Reno Lawrence Ave East Point, GA ,500 SF on 22.7 Acres 538,500 SF $3.85 PSF NNN Year Built: Logistics Center Dr Fairburn, GA ,625 SF on 184 Acres 495,625 SF $3.75 PSF NNN 36 clear Year Built: Mount Zion Road Morrow, GA ,461 SF on 24.7 Acres 514,461 SF $2.50 PSF NNN 22 clear Year Built: Old Dixie Hwy Forest Park, GA ,000 SF on Acres 540,000 SF $2.45 PSF NNN 20 clear Year Built: 1961/Reno 1965 S Fulton Pkwy & Stonewall Atlanta, GA ,039,570 SF on 325 Acres 1,039,570 SF 40 clear Year Built: Southmeadow Pky Atlanta, GA ,918 SF on Acres 98,483 SF Witheld 28 clear Year Built: E Southmeadow Pky Atlanta, GA ,125 SF on Acres 400,125 SF 36 clear Year Built:

5 Lee & Associates - Big Box Industrial Report South Atlanta 2750 Sullivan Road College Park, GA ,541 SF on 17 Acres 205,541 SF clear Year Built: 1972/Reno Declaration Dr McDonough, GA ,300 SF on 61 Acres 759,300 SF $2.95 PSF Year Built: Greenwood Ct McDonough, GA ,000 SF on 27.9 Acres 504,000SF Year Built: clear 200 Eagles Landing Pkwy Stockbridge, GA ,000 SF on 29.6 Acres 399,177 SF $2.75-$3.15 PSF 30 clear Year Built: Eagles Landing Pkwy Stockbridge, GA ,000 SF on 30.6 Acres 324,000 SF $2.75 PSF 24 clear Year Built: Southpark Blvd Ellenwood, GA ,200 SF on Acres 451,200 SF Year Built: Greenwood Ind. Court McDonough, GA ,000 SF on Acres 455,000 SF Year Built: Greenwood Ind. Pkwy McDonough, GA ,961 SF on Acres 490,961 SF $3.15 PSF 28 clear Year Built: Westridge Pkwy McDonough, GA ,551 SF on Acres 612,551 SF $3.45 PSF NNN 36 clear Year Built: 2017 lee-associates.com/atlanta 4

6 Fall 2017 Preview South Atlanta 1357 Highway 155 S-Bldg600 McDonough, GA ,503 SF on Acres 267,503 SF Year Built: Greenwood Ind. Pkwy McDonough, GA ,000 SF on Acres 867,000 SF $3.25 PSF NNN Year Built: Highway 155 S McDonough, GA ,455 SF on Acres 211,455 SF Year Built: 2016 Northwest 700 Hudson Road Griffin, GA ,120 SF on Acres 218,120 SF Year Built: Cassville White Road Cartersville, GA ,200 SF on 34 Acres 265,200 SF 30 clear Year Built: Cass White Road NE White, GA ,036,000 SF on 74 Acres 370,000 SF $3.50 PSF Year Built: 2016 I-20 East LEASED Alcovy Road Covington, GA Year Built: ,064 SF on Acres 302,064 SF $1.00-$3.65 PSF clear 3475 International Park Dr SE Atlanta, GA ,846 SF on Acres 386,846 SF clear Year Built: 1984/ Reno Hugh Howell Road Tucker, GA Year Built: ,000 SF on Acres 293,000 SF For Sale/ $2.85 PSF NNN clear 5

7 Lee & Associates - Big Box Industrial Report I-20 West / Fulton 6150 Xavier Dr SW Atlanta, GA ,432 SF on Acres 363,427 SF $7.50 PSF NNN 24 clear Year Built: 1972/ Reno Kendall Park Lane Atlanta, GA ,600 SF on Acres 408,600 SF Year Built: Terminus Dr Lithia Springs, GA ,000 SF on Acres 527,000 SF Year Built: Hartman Road Austell, GA ,620 SF on Acres 354,620 SF Year Built: Interstate West Pkwy Austell, GA ,440 SF on 67.62Acres 781,440 SF 36 clear Year Built: Maxham Road Lithia Springs, GA ,000 SF on Acres 247,000 SF 30 clear Year Built: Powder Springs Dallas Road Powder Springs, GA Year Built: 350,000 SF on 25 Acres 350,000 SF $2.50 PSF NNN 30 clear N/A Call us for: Detailed survey of options meeting your needs Lease review, analysis, or abstracting Acquisition/Disposition strategies NEARLY 70 YEARS OF EXPERIENCE ON YOUR SIDE! lee-associates.com/atlanta 6

8 Fall 2017 Preview Northeast 200 Thomas Parkway Jefferson, GA ,640 SF on 53 Acres 458,640 SF 36 clear Year Built: Broadmoor Blvd Buford, GA ,048 SF 492,048 SF 36 clear Year Built: Horizon Ridge Ct Suwanee, GA ,643 SF on Acres 222,643 SF $3.70 PSF NNN 28 clear Year Built: Mill Center Pkwy Buford, GA ,480 SF on Acres 301,320 SF $3.50 PSF NNN Year Built: Possum Creek Rd Jefferson, GA ,569 SF on Acres 250,569 SF $4.10 PSF NNN Year Built: Bonnie Valentine Way Pendergrass, GA ,525 SF on Acres 371,525 SF $3.25 PSF Year Built: Hog Mountain Road Jefferson, GA ,134 SF on Acres 459,134 SF $3.25 PSF Year Built: Logistics Center Pky Jefferson, GA ,712 SF on Acres 216,384 SF 36 clear Year Built: Raco Parkway Pendergrass, GA ,004,400 SF on 61 Acres 486,000 SF $3.25 PSF Year Built:

9 Lee & Associates - Big Box Industrial Report Northeast 4245 International Blvd Norcross, GA ,200 SF on 10.5 Acres 249,200 SF 23 clear Year Built: Northeast Expressway Doraville, GA, Year Built: ,200 SF on 9.6 Acres 225,200 SF $8,107,200 SF/ clear 4971 Golden Pkwy Buford, GA ,000 SF on Acres 300,000 SF $3.75 PSF Year Built: 2016 Atlanta Industrial Development Current Development 2017 Completed Development 54% of current development is Speculative of product is 40% preleased or BTS 2.83M 2016 first generation space not leased (SF) 46% of current development is Build-to-Suit SF absorption 1.87M 4.56M of new space in first generation delivered space not leased (SF) 32 total projects under construction totaling 16.9 M SF Buildings delivered 16 YTD 2017, totaling 7.54M 7.5 Million SF total first generation delivered space not leased (SF) lee-associates.com/atlanta 8

10 Fall 2017 Preview Market Activity Square Footage Activity in the Submarkets Active Industries by SF in the Market Active Industries by Deals in the Market Percentage of Prospects by Size & Range Percentage of Prospects by Size Range E-Fulfillment Manufacturing 13% 4% 50K or Less Retailers/Wholesalers Transportation/Logistics less than 2%: Agri/Mining/Utilities, Business Services, Communications, Constructions, Government, Medical, Personal Services 100% 63% 25% 40% 24% 20% 12% Between 50K-100K Between 100K-250K Between 250K-500K Greater than 500K The Real Estate Cycle Peaking Market Vacancy below stable levels and approaching cyclical low Rental rates hover around or above replacement costs and continue to rise Increase in new speculative construction Rising Market Vacancy decreases from high to below stable levels Rental rates rise form cyclical lows toward replacement costs Demand increase and supply is limited Falling Market Vacancy increases to above stable levels Rental rates fall from cyclical highs rapidly Demand decreases while new construction continues to deliver No new construction starts Bottoming Market Vacancy rises above stable levels and approaches cyclical high Rental rates fall below replacement costs to cyclical lows Supply ahead of demand and new 9

11 Lee & Associates - Big Box Industrial Report Logistics Market Snapshot June 2017 US Market Rail Trucking Air Freight Ocean Freight Warehouse Distribution Import Volumes Expert Volumes Railroad News Clips Trucking Volume Truckload Freight US Truck & Trailer Orders Trucking News Clips Air Cargo Traffic Atlanta Air Cargo Traffic Port of Savannah Port of Brunswick Industrial Vacancy Warehouse Rent Rates In May 2017, the U.S. imported $194.7 billion of cargo, decreasing 0.31% from April. The May imports of capital goods ($52.8 billion) were the highest on record. (Source: US Census) In May 2017, the U.S. exported $127.2 billion of cargo, increasing 0.24% from April. The May exports to South Korea ($4.5 billion) were the highest on record. (Source: US Census) The Building Rail Access for Customers and the Economy (BRACE) Act, introduced in March of this year, has achieved majority support in Congress. The BRACE Act includes language to make the Railroad Track Maintenance Tax Credit, also known as the 45G Tax Credit, permanent (the tax credit expired December 31, 2016). Under the terms of the credit a short line railroad must invest one dollar for every 50 cents in credit up to a credit cap equivalent to $3,500 per mile of track. Since it was implemented in 2005, the tax credit has enabled short line and regional railroads to invest $4 billion in infrastructure, assisting the nation s 603 short line railroads in upgrading track and bridges. (Source: Railway Age) The ATA s seasonally adjusted For-Hire Truck Tonnage Index was in June 2017, a decrease of 4.3% from the previous month and an increase of 1.32% from June According to the ATA, despite the month-over-month decline, they still expect moderate growth going forward as key sectors of the economy continue to improve slowly. (Source: American Trucking Associations Trucking.org) The spot market for truckload-freight available for pick-up in June increased 2,200 basis points compared to the previous month, and was 9,000 basis points higher year-over-year. Truck capacity decreased 1,100 basis points for the month, and decreased 80 basis points year-over-year. (Source: DAT Trendlines Preliminary data for heavy-duty Class 8 trucks net orders in North America were 17,600 units in June 2017, an increase of 7.8% from May and 38% higher year-over-year. According to FTR, it is assumed that most of the June orders are for Q4 delivery enabling OEMs to maintain their current build rates throughout the year. The Class 8 market continues to perform at a steady pace and is consistent with summer s seasonal trends. Final June 2017 net trailer orders came in at 18,900 units, up 13.8% from May and up 58.8% from June According to FTR, June trailer orders were above expectations, with most segments moderately exceeding their May totals. Backlogs are decreasing, but that s due to the high build rates rather than lower orders. Production was the highest since July (Source: FTR Transportation Intelligence ftrintel.com) Earlier this month a bill was filed in the House of Representatives that would delay the compliance date of the federal government s electronic logging device (ELD) mandate by two years. The change, if enacted, would give carriers until December 2019 to switch from paper logs to an electronic logging device. The introduction of the bill came a day after a House panel recommended that the Department of Transportation study whether a full or targeted delay of the mandate is needed. Both developments signal that efforts to engage Congress on the issue have gained traction. In a report, members of the House cited the burden placed on smaller carriers, like owner-operators, and questions surrounding enforcement and technological concerns as reasons to delay the ELD mandate. (Source: TruckersNews.com) Global air freight traffic in May 2017 increased by 12.7% year-over-year. This pace is more than three times the five-year average growth rate (3.8%) and the strongest start to a year since (Source: IATA.org) In May 2017, Hartsfield-Jackson Atlanta International Airport transported 5455,915 metric tons of cargo, a 3.12% increase from the previous month and a 7.58% increase year-over-year. (Source: HJAIA) The Port of Savannah moved 337,710 TEUs in June 2017, a 3.54% decrease from the previous month, but 17.11% higher year-over-year, and the busiest June in GPA s history. June capped off a record fiscal year for the Georgia Port Authority. In FY17, the GPA moved an all-time high 3.85 million TEUs, an increase of 6.7% over the previous year. In the last half of FY17 alone, the Port of Savannah handled 1.99 million TEUs, for a growth rate of 11.6% over the same period in FY2016. Also during FY17, the GPA moved 33.4 million tons of cargo across all terminals, setting another all-time high record and an increase of 8.3% over FY2016. (Source: GPA) At Colonel s Island, 200+ acres are in the design or development stages, bringing auto processing space to 547 acres. Twenty-four of 50 acres purchased by Mercedes Benz were paved in May. Another 168 acres will be completed between mid-july and November, of which 124 acres have been leased. Previously, 20 acres for vehicle processing were completed and leased to Wallenius Wilhelmsen Logistics. The long-term plan is to add another 510 acres on the island s south side to support auto processing, doubling the capacity for cars and heavy machinery in Brunswick. (Source: GPA) The nationwide vacancy rate was 5.4% at the end of the first quarter in 2017, the lowest level in nearly 30 years. It is down from 5.7% in Q and 6.1% in Q The industrial vacancy rate in Savannah, GA was 3.0% in Q1 of 2017, unchanged compared to Q (Source: NGKF, Cushman & Wakefield) In Q1 2017, the average asking rent in the U.S. was $6.12/SF, up 1.9% from Q4+ 7.1% from Q1 2016, the strongest year-over-year increase in the current cycle. Average asking rent in Atlanta was $4.38/SF. (Source: NGKF) lee-associates.com/atlanta 10

12 Fall 2017 Preview Industrial Buildings Under Construction Largest Build to Suit Projects Under Construction as of Q Project Location Building SF Tenant Delivery 1 King Mill Rd 1,555,200 SF Lindt Q Charlie Brown 1,200,000 SF UPS Q Jackson Rd 1,200,000 SF Dollar General Q Hwy 155 S - Home Depot Fullfilment Ctr 1,000,000 SF Home Depot Q Thomas Pky - Kubota Industrial Equipment 617,865 SF Kubota Q3-17 Speculative Buildings Under Construction Over 200,000 SF - Metro Atlanta as of Q Project Location Building SF Delivery Palmetto Logistics Pky 1,054,500 Q Valentine Industrial Pky 1,021,000 Q Anvil Block Rd - Gillem Logistics Ctr, Bldg 150 1,017,000 Q Price Rd - Locust Grove Distribution Ctr 1,000,993 Q Tatum Rd - Sugart Farms Phase II 982, Lunsford Dr - Clayton Commerce Ctr 797,580 Q Distribution Dr - King Mill Distribution Park Phase II 759,495 Q Preston Blvd - I-20 West Distribution Ctr 498,487 Q Buffington Rd - Flat Shoals 85 Distribution Ctr 362,880 Q North Commerce Dr - Camp Creek ,960 Q Hwy 92 - Cherokee Business Ctr 312,500 Q Third Flag Pkwy - Cobb West Business Park 281,057 Q Blue Ridge Dr - Blue Ridge Distribution Ctr 261,106 Q Buford Mill Dr - Buford Mill Distribution Ctr, Bldg ,000 Q Twin Creeks Pky - Twin Creeks Business Ctr, Bldg ,000 Q Twin Creeks Pky - Twin Creeks Business Ctr, Bldg ,000 Q Southmeadow East Pky 230,000 Q North River Rd - Riverside West 215,540 Q

13 Lee & Associates - Big Box Industrial Report Industrial Submarkets Map lee-associates.com/atlanta 12

14 Fall 2017 Preview Industrial Submarket Data Comparison Industrial Submarkets Total Inventory Vacancy Total SF Vacancy Q2 17 Net Absorption YTD Total Under Construction Building YTD Deliveries Northwest 68,390,789 4,198, % 1,155, , ,800 $5.35 North Central 26,846,209 1,463, % 342,550 98,297 48,981 $8.35 Northeast 158,491,493 10,718, % 811,791 2,927,651 3,161,375 $5.40 St. Mountain / Snapfinger 69,635,885 3,909, % -796, ,000 - $4.49 South Atlanta 171,282,077 14,447, % 7,825,043 9,932,214 2,464,998 $3.41 I-20 West / Fulton Ind 98,592,112 6,082, % 2,977,458 2,958,596 1,872,173 $3.41 Chattahoochee / Central Atl 33,216,054 1,550, % 441,807-55,801 $7.47 Total 626,454,619 42,369, % 12,757,657 16,963,258 8,548,128 $4.49 Total Submarkets Total Inventory Vacancy Total SF Vacancy Q2 17 Net Absorption YTD Total Under Construction Building YTD Deliveries Warehouse 474,631,625 31,678, % 9,595,979 6,454,852 1,863,679 $3.99 Distribution 103,350,746 6,210, % 2,341,345 10,508,406 5,876,094 - Flex 48,472,248 4,480, % 820, ,355 $9.30 Total 626,454,619 42,369, % 12,757,657 16,963,258 8,548,128 $4.49 Asking Rent Asking Rent BUYER TYPE Q sales VACANCY percentage, 2007-YTD % 2.0% 14% 12.9% 13.9% 14.7% 13.5% 13.0% 27% 12% 10.6% 11.4% 61% 10% 8% 8.8% 7.2% 7.6% 6.8% Private User REIT/Public Institutional 6% YTD 2017 CAP RATE percentage, 2007-YTD 2017 ABSORPTION in SF, 2007-YTD % 11% 10% 10.14% M 8.42M 18.76M 12.76M 12.97M 13.78M 12.08M 9% 8% 7% 6% 7.45% 8.28% 8.39% 8.56% 8.46% 8.80% 8.28% 7.93% 8.03% 8.18% YTD M YTD 2.40M 6.16M 6.20M 13

15 Lee & Associates - Big Box Industrial Report LOCAL EXPERTISE. NATIONAL REACH. WORLD CLASS. 104% increase in transaction volume over 5 years $10 billion transaction volume agents and growing nationwide At Lee & Associates our reach is national but our expertise is local market implementation. This translates into seamless, consistent execution and value driven marketto-market services. NATIONWIDE LOCATIONS Our agents understand real estate and accountability. They provide an integrated approach to leasing, operational efficiencies, capital markets, property management, valuation, disposition, development, research and consulting. We are creative strategists who provide value and custom solutions, enabling our clients to make profitable decisions. Eastern Pennsylvania, PA Cleveland, OH Columbus, OH Houston, TX Denver, CO Cleveland, OH Long Island-Queens, NY Chesapeake Region, MD Charleston, SC Edison, NJ Orlando, FL Fort Myers, FL Kansas City, KS Manhattan, NY Greenville, SC Atlanta, GA Greenwood, IN Indianapolis, IN Long Beach, CA Elmwood, NJ Boise, ID Palm Desert, CA Santa Barbara, CA Antelope Valley, CA Dallas, TX Madison, WI Oakland, CA Reno, NV San Diego, CA Ventura, CA San Luis Obispo, CA Southfield, MI Santa Maria, CA Calabasas, CA St. Louis, MO Chicago, IL Victorville, CA Temecula Valley, CA Central LA, CA Sherman Oaks, CA West LA, CA Pleasanton, CA Stockton, CA Phoenix, AZ Carlsbad, CA Industry, CA Los Angeles, CA Riverside, CA Ontario, CA Newport Beach, CA Orange, CA Irvine, CA lee-associates.com/atlanta 14

16 SUPPLY CHAIN AND LOGISTICS GROUP (SOUTHEAST U.S.) Kurt T. Unger, CCIM, SIOR Executive VP / Principal Lee Atlanta- Top Broker Office: kunger@lee-associates.com Property Management Landlord Representation Rick Tumlin, CCIM, SIOR Executive VP / Principal Lee Atlanta- #2 Broker Office: rtumlin@lee-associates.com Property Management Investment Advisory Tenant Representation Advisory & Research Tom Bryant Director Office: tbryant@lee-associates.com Land Aquisition & Disposition Capital Markets LEE & ASSOCIATES - SCLG MEMBERS OF THE FOLLOWING Warehousing Education & Research Council Lee & Associates Supply Chain & Logistics Group Society of Industrial & Office Realtors Industrial Asset Management Council Atlanta Air Cargo Association Council of Supply Chain Management Professionals National Association of Realtors (NAR) Atlanta Commercial Board of Realtors Certified Commercial Board of Realtors Stay Connected! Follow Lee & Associates Atlanta on Social Media LinkedIn About Lee & Associates In 2010, our Atlanta office joined Lee & Associates, the largest broker-owned commercial real estate sales organizations in the U.S. As a local office of this highly respected national firm, the Atlanta team capitalizes on Lee s stellar reputation to continue its paradigm of establishing long-term, client-driven relationships to develop customized solutions for every client s specific real estate requirement Lenox Road Suite 200 Atlanta, GA