Kent Valley Insider 4Q Market Report. Arie Salomon, SIOR, CCIM Principal

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1 Market Report 4Q 2014 Valley Insider Arie Salomon, SIOR, CCIM Principal Jeff Forsberg, CCIM Principal Taylor Hoff Vice President Channing Associate Vice President Patty Bell Licensed Assistant to Arie Salomon, SIOR, CCIM & Jeff Forsberg, CCIM

2 4Q 2014 Valley Insider Quick Stats VACANCY 5.22% LEASE RATES $0.384 TOTAL ABSORPTION Average Shell Asking Rates CLASS A Change from last CURRENT Yr. Qtr. 675,112 UNDER CONSTRUCTION 8,964,668 CLASS B 5,000-15,000 SF $0.428 $ ,001-30,000 SF $0.394 $ ,001-60,000 SF $0.375 $ ,001+ SF $0.371 $0.338 What a year 2014 turned out to be. By our nature, we here at the Valley Insider tend to be fairly conservative in our outlook and take on the market. We have been around long enough to know that the market is typically never as good or as bad as most people think it is. Well, our risk adverse nature is being tested, as there is a lot to like about Last quarter and last year, we saw an unprecedented jump in prices for both leases and properties for sale. Peak pricing? It s hard to argue otherwise with shell rates on Class A properties over $0.40 per square foot and cap rates averaging mid 5%. That, coupled with 2.2 million square feet of annual positive absorption and the rosy outlook of the Seattle and US economy, makes us practically oozing with confidence. Six years after the financial system nearly sank us, our market has never been better, and we are not alone in our exuberance as some are predicting that the US economy will grow in 2015 at its fastest pace in a decade. The economy is expected to expand 3.1% this year, accelerating from the 2.2% growth in Plunging oil prices, which have been cut roughly in half since summer, are a big reason for the optimism. In some areas of the country, Submarket Total RBA (SF) Direct Vacant (SF) Direct Vacant (%) Sublease (SF) Total Vacant w/ Sublease Total Vacant w/ Sublease RENTON 8,941, , % - 283, % SEATAC 2,967, , % - 144, % TUKWILA 11,775, , % - 410, % KENT 47,014,044 2,792, % 177,871 2,970, % AUBURN 21,322, , % 92, , % SUMNER 15,486,293 1,554, % 256,804 1,811, % TOTAL 107,507,773 5,611, % 527,667 6,139, %

gasoline prices have slipped below $2.00 per gallon. Job growth is accelerating. Washington State s unemployment rate was 6.

Last quarter, we saw a number of significant transactions drive our numbers (listed below). First, it s clear that demand is definitely up.

What isn t reported yet are a number of pending deals that will drive absorption and alleviate some of the concern about over supply.

There are currently two out of state ecommerce deals looking for between 650,000 Blocks of Available Space 200,000+ SF Available

(8,792 SF Office) COMMENCEMENT 11/01/2015 Algona Seattle Business Center Polar Identity 72,000 SF (14,412 SF Office) COMMENCEMENT 05/01/2015

39,690 SF (1,097 SF Office) COMMENCEMENT 12/15/2014 Renton Greenriver Corporate Park Khong-Guan Corporation 30,402 SF (3,875 SF Office)

23,384 SF (9,512 SF Office) COMMENCEMENT 01/01/2015 Renton 20,000-49,000 SF Available Vacancy & Net Absorption 1,000,000 800,000 600,000

Center Reflexxion Automotive 19,200 SF (1,545 SF Office) COMMENCEMENT 06/01/2015 212th Business Park Moosoo 17,220 SF (3,493 SF Office)

3 gasoline prices have slipped below $2.00 per gallon. Job growth is accelerating. Washington State s unemployment rate was 6.2% in November with employers are on track to have added the most jobs in 15 years in Last quarter, we saw a number of significant transactions drive our numbers (listed below). First, it s clear that demand is definitely up. The industrial market has seen significant activity over the past several quarters. What isn t reported yet are a number of pending deals that will drive absorption and alleviate some of the concern about over supply. Office Depot, Kimberly Clark, Hotel Registry, Orbit Logistics, Penske and others are all set to sign new leases this year. There are currently two out of state ecommerce deals looking for between 650,000 Blocks of Available Space 200,000+ SF Available 100, ,999 SF Available 50,000-99,999 SF Available Lease Transactions Valley Lease Activity DCT 840 Algona Tim s Cascade Chips 97,690 SF (8,792 SF Office) COMMENCEMENT 11/01/2015 Algona Seattle Business Center Polar Identity 72,000 SF (14,412 SF Office) COMMENCEMENT 05/01/2015 DCT White River Corporate Center CTE Logistics 62,895 SF (2,800 SF Office) COMMENCEMENT 06/01/2015 Sumner Monster Road Building New Flyer 39,690 SF (1,097 SF Office) COMMENCEMENT 12/15/2014 Renton Greenriver Corporate Park Khong-Guan Corporation 30,402 SF (3,875 SF Office) COMMENCEMENT 10/01/2014 Oaksdale Commerce Center - Bldg W4 Cummins Northwest Inc. 23,384 SF (9,512 SF Office) COMMENCEMENT 01/01/2015 Renton 20,000-49,000 SF Available Vacancy & Net Absorption 1,000, , , , , , , Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 8% 7% 6% 5% 4% 3% 2% 1% 0% Seattle Business Center Reflexxion Automotive 19,200 SF (1,545 SF Office) COMMENCEMENT 06/01/ th Business Park Moosoo 17,220 SF (3,493 SF Office) COMMENCEMENT 07/01/2014 West 224th Interstate Restoration LLC 5,824 SF (1,566 SF Office) COMMENCEMENT 10/01/2014 Net Absorption % Vacant 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.

Sale Transactions Valley Sale Activity Southcenter South - Building N 32,256 SF / 2.

12 Acres YEAR BUILT 1996 SALE PRICE $11,600,000 Puyallup SOLD 12/03/2014 West Valley Industrial Park 69,683 SF / 4.

60 Acres YEAR BUILT 1982 SALE PRICE $14,405,000 SOLD 11/26/2014 Boeing Plant 231,980 SF / 24.

54 Acres YEAR BUILT 1996 SALE PRICE $7,850,000 Aburn SOLD 11/13/2014 Puget Sound Building 157,515 SF / 5.

19 Acres YEAR BUILT 1985 SALE PRICE $4,052,000 SOLD 11/11/2014 167 Distribution Centre 444,633 SF / 19.

Even though fuel pricing is down, good luck finding space in South Seattle, where vacancy is an absurd 2% and pricing is close to $0.

The only issue with investment sales is lack of product. Last quarter, our team was involved in three significant sales.

This single tenant warehouse/ manufacturing building garnered great interest and traded at a 5.96% cap rate.

Gramercy Property Trust was thrilled to acquire a long term tenant in this functional building.

4 Sale Transactions Valley Sale Activity Southcenter South - Building N 32,256 SF / 2.18 Acres YEAR BUILT 1978 SALE PRICE $3,350,000 Tukwila SOLD 12/19/2014 Saint-Gobain Abrasives Building 108,644 SF / 8.12 Acres YEAR BUILT 1996 SALE PRICE $11,600,000 Puyallup SOLD 12/03/2014 West Valley Industrial Park 69,683 SF / 4.04 Acres YEAR BUILT 1978 SALE PRICE $5,873,055 SOLD 11/26/2014 Lincoln Distribution Center 169,635 SF / 9.60 Acres YEAR BUILT 1982 SALE PRICE $14,405,000 SOLD 11/26/2014 Boeing Plant 231,980 SF / Acres YEAR BUILT 1943 SALE PRICE $31,900,000 Seattle SOLD 11/18/2014 LMI Aerospace Building 80,000 SF / 4.54 Acres YEAR BUILT 1996 SALE PRICE $7,850,000 Aburn SOLD 11/13/2014 Puget Sound Building 157,515 SF / 5.01 Acres YEAR BUILT 1965 SALE PRICE $16,400,000 Seattle SOLD 11/12/2014 Raleigh American Building 46,167 SF / 2.19 Acres YEAR BUILT 1985 SALE PRICE $4,052,000 SOLD 11/11/ Distribution Centre 444,633 SF / Acres YEAR BUILT 1985 SALE PRICE $19,300,000 SOLD 11/03/2014 to 1 million square feet each kicking tires in our market. Even though fuel pricing is down, good luck finding space in South Seattle, where vacancy is an absurd 2% and pricing is close to $0.60 per square foot shell. The Valley is benefiting from that tightening as we are seeing some South Seattle companies forced to expand in our market. The only issue with investment sales is lack of product. Last quarter, our team was involved in three significant sales. IPT purchased the 80,000 square foot LMI Building in Auburn for $7.85 million. This single tenant warehouse/ manufacturing building garnered great interest and traded at a 5.96% cap rate. We also sold the 108,644 square foot Saint-Gobain Abrasives Building in Puyallup for $11.6 million. Gramercy Property Trust was thrilled to acquire a long term tenant in this functional building. Finally, we helped in the sale by Capstone of the 106,910 square foot S. 216th Building in. Part of a lease/sale option in 2009, the building was ultimately acquired by Terreno for $9.21 million. The long and short of it is there has never been a better time to sell. We believe that there is a window of 8-14 months left before activity starts to slow down again; don t wait if you are thinking of selling. There are still concerns about over development which will not go away until we see some of the bigger buildings taken off the market. The downside of fast growth is the Federal Reserve will likely raise interest rates in Also, the West Coast ports will enter the new year with the same congestion problems and labor uncertainty that plagued them for much of The International Longshore and Warehouse Union have been in contract negotiations since May without resolution.

[SPOILER ALERT] Anyone who watched Game of Thrones saw the undoing of the cocky Red Viper in

For all his glorious spins and showmanship, Oberyn s overconfidence was his undoing.

don t let your head get squashed like a melon.

396,000 SF Fernley, NV Brownsburg, IN 180,608 SF Ontario, CA 110,660 SF 7,500 SF DeSoto, TX

industrial market, we have a national and global reach through the NAI Global network that

Our clients choose us for their national business because they trust our ability to manage

We ask the right questions, and we interview to find the right local broker to help; we put

We are still a local, independently-owned firm, but with our NAI Global platform, we are part

com East Valley Distribution Center Valley Centre CP - Bldg.

SF (2,995 SF office) 60 DH/1 GL & 30 clear 14 DH/1 GL & 30 clear 5 DH/1 GL & 24 clear Auburn

SF office) 6,792-16,663 SF 15,350 SF (873 SF office) 7 DH/1 GL & 24 clear Multiple doors;

Airfreight East Park, Building 5 14,320 SF (2,257 SF Office) 12,810 SF (1,706 SF office)

5 So where does this lead us? Are we optimistic or overconfident in our assessment of the market? The distinction is important. Overconfidence promotes unreasonable and self-destructive behaviors. [SPOILER ALERT] Anyone who watched Game of Thrones saw the undoing of the cocky Red Viper in his battle with The Mountain. For all his glorious spins and showmanship, Oberyn s overconfidence was his undoing. Our advice: plunge forward in 2015 with rational humility and optimism for the future, but don t let your head get squashed like a melon. Local Knowledge, Global Reach 33,440 SF Romulus, MI 183,435 SF 135,890 SF Hazelton, PA 396,000 SF Fernley, NV Brownsburg, IN 180,608 SF Ontario, CA 110,660 SF 7,500 SF DeSoto, TX San Diego, CA Sale Lease 3,375 SF Honolulu, HI While we are experts in the local Valley industrial market, we have a national and global reach through the NAI Global network that can tackle any commercial real estate need. Our clients choose us for their national business because they trust our ability to manage the sale or leasing process. We ask the right questions, and we interview to find the right local broker to help; we put our client s long-term interest above our own. We are still a local, independently-owned firm, but with our NAI Global platform, we are part of something much bigger. What is Currently Available? Bellevue Seattle Tacoma nai-psp.com East Valley Distribution Center Valley Centre CP - Bldg. A West Valley Business Park 228,300 SF (31,588 SF office) 60,812 SF (6,484 SF office) 30,000 SF (2,995 SF office) 60 DH/1 GL & 30 clear 14 DH/1 GL & 30 clear 5 DH/1 GL & 24 clear Auburn Matson/O Neil Building Seattle Logistics 1 & 2 Lincoln Distribution Center 27,038 SF (3,510 SF office) 6,792-16,663 SF 15,350 SF (873 SF office) 7 DH/1 GL & 24 clear Multiple doors; airport location 5 DH/1GL & 24 clear SeaTac FOR SUBLEASE Centre Corporate Park Puget Sound Airfreight East Park, Building 5 14,320 SF (2,257 SF Office) 12,810 SF (1,706 SF office) 10,020 SF (2,709 SF office) 2 DH/2 GL & 24 clear 18 DH/1 GL & 18 clear 2 DH/1 GL & 24 clear FOR SUBLEASE Renton Call for details & pricing Auburn SeaTac Oakesdale Commerce Center Benaroya Sumner Storage Yard CenterPoint Storage Yard 6,822 SF (2,020 SF office) acres acres 2 GL & 16 clear Fenced, paved & lit Fenced, paved & lit FOR SALE OR LEASE Sumner 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 Construction Report Sumner, Washington - Construction E Valley Hwy E 9 4 W Valley Hwy E

7 City Owner/Developer Property Name Status Auburn Year Built Building Size Vacancy Panattoni Development, Inc. Auburn West Valley Completed Spec ,235 34,432 American Realty Advisors Northcreek In Planning Spec , ,533 Orion Industries Orion Headquarters Completed BTS ,000 - DCT Industrial Walter E Nelsen BTS Completed BTS ,500 - Dupont Griot s Garage NW Logistics - Phase I Under Construction Spec , ,000 Fife DCT Industrial DCT Fife DC - Bldg. A Under Construction Spec , ,400 DCT Fife DC - Bldg. B Under Construction Spec , ,895 Fife 45 - North Site Under Construction Spec ,284 79,284 Fife 45 - South Site Under Construction Spec ,500 63,550 LBA/Davis Properties Portside Business Ctr. In Planning Spec , ,000 IDS Real Estate Group FedEx Benaroya - Fife In Planning BTS ,000 - Prologis Prologis Fife Port Under Construction Spec , ,000 Stryker Business Ctr. - 1 Completed Spec ,195 - Stryker Business Ctr. - 2 Under Construction BTS ,420 - Stryker Business Ctr. - 3 Completed Spec ,559 - Lakewood NW Building Corp Lakewood Industrial Park Under Construction Spec , ,300 Puyallup International Airport Centers SeaTac Seattle Sumner Panattoni/Metlife Panattoni Development, Inc. Panattoni / LaSalle IAC Port A Under Construction Spec , ,753 IAC Port B Completed Spec , ,110 Des Moines Creek BP - 1A Des Moines Creek BP - 1B Des Moines Creek BP - 1C Under Construction Spec , ,204 Under Construction Spec , ,154 Under Construction Spec , ,600 Riverton DC Under Construction Spec ,050 - Riverton DC Under Construction Spec ,930 - Apollo Building Completed Spec ,652-6 Titan Building Completed Spec , ,547 4 Panattoni / Metlife The Steele Building Under Construction Spec , , Panattoni DCT Industrial Larsen Building Under Construction Spec ,212 62,212 9 Tamarack Building Under Construction Spec , , DCT Sumner South DC Completed Spec ,930 83,540 2 DCT White River - Bldg. 2 In Planning Spec , DCT White River -Coho Completed Spec , ,644 DCT White River - Sockeye Under Construction Spec ,895 - Bob Stobie Riverside - Aaron Pckg. Under Construction BTS ,000-7 Riverside - US Fire Bldg. Completed BTS ,000 - Map 3 Prudential / Michelson Knapp Tarragon Salmon Creek - Bldg. A Under Construction Spec , , Salmon Creek - Bldg. B Under Construction Spec , ,100 Sumner CP - Cascade Under Construction Spec , ,000 5 Principal Financial Group Sumner Golf Course In Planning Spec , ,000 1 Avenue 55 / IPT Sumner West In Planning BTS , ,900 8 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 Vice President Channing Associate Vice President Patty Bell Licensed Assistant to Arie Salomon, SIOR, CCIM & Jeff Forsberg, CCIM NAI Puget Sound Properties Commercial Real Estate Services th Avenue NE Suite 340 Bellevue, Washington USA nai-psp.com

Kent Valley Insider 3Q Market Report. Arie Salomon, SIOR, CCIM Principal

Kent Valley Insider 3Q Market Report. Arie Salomon, SIOR, CCIM Principal Market Report 3Q 2016 Valley Insider Arie Salomon, SIOR, CCIM Principal +1 425 586 5636 asalomon@nai-psp.com Jeff Forsberg, CCIM Principal +1 425 586 5610 jforsberg@nai-psp.com Taylor Hoff, SIOR Partner