INDUSTRIAL MARKET REPORT Raleigh-Durham

Raleigh-Durham CSA Industrial Market Q4 2020 The Raleigh-Durham industrial market is booming. The COVID-19 pandemic has unquestionably boosted (1) demand for industrial real estate from both occupiers Industrial Market Q4 QOQ YOY and investors. Our survey of Class A and Class B industrial Market Indicators facilities shows a vacant availability of 1.53% at year-end; a 32% decrease year over year, and 79% below the average Vacant Available % - Direct 1.53% vacancy rate of 7.3% of the last 10 years. Currently, only WA Asking Rent - Direct $6.13 20 out of the 273 buildings in our survey have vacant available space, comprised of 22 spaces of an average of Net Absorption - Direct SF 788,429 63,900 square feet. Under Construction - SF 1,266,912 The market (1) showed 3.66 million square feet of positive A quarterly rent change of +/-1% or less is deemed to be flat. A quarterly vacancy rate change of ±10 basis points or less is deemed to be flat. net absorption for the year. Leasing velocity in 2020 While the square footage is included in our numbers, it should be noted that the exceeded 2019’s transaction volume by 24%. The region’s 2.54 million square foot distribution center in Garner represents an anomaly average direct asking rent is $6.13 currently, representing in building size in this market. The distribution center was under construction Q1 2019 and delivered Q3 2020. a 3.8% increase year over year and a 66% increase over five years. Supply and Demand Over 3.9 million square feet of industrial space was added to the market during 2020 and fully leased by year-end, including the 2.54 million square foot Amazon distribution center in Garner. Facilities now under construction include eleven light industrial and warehouse buildings ranging from 30,000 to 280,000 square feet, each a build- to-suit or spec project with delivery dates in Q1 and Q2 2021. Combined, the 1.26 million square feet now under construction is 61% pre-leased.

Industrial had become a popular asset class even pre- pandemic; population growth and e-commerce being key drivers in our region’s industrial growth for the past several years. The onset of COVID related lockdowns, however, brought a massive surge in online purchases requiring timely delivery. Inventory levels of essential goods are increasing, driving demand for more warehouse space. Percent Vacant Available

Demand for industrial space won’t be slowing any time soon. E-commerce opportunities are growing while vacancies remain at record lows. This market environment is favorable to both build-to-suit and spec projects. Industrial parks under development are tracking for completion years ahead of schedule. Representative examples include Eastgate 540 in Knightdale, Garner Business Park 70 in Garner, and Merritt Capital Business Park in Wake Forest. “Success is where preparation and opportunity meet.” 1) Class A and Class B non-owner-occupied industrial properties of 50,000 SF or greater - Bobby Unser

APG ADVISORS 1201 Edwards Mill Rd, Ste 300 Raleigh, NC 27607 www.apgcre.com Q4 2020 INDUSTRIAL REPORT

Warehouse and Distribution Facility Sales Job Creators Twelve individual industrial properties of an average of Amazon added three facilities to the Raleigh Durham 176,200 square feet sold in 2020 for a combined $203.5 CSA during 2020: the massive 2.54 million square foot million, or $96.23 per square foot. The 2020 sales volume distribution center in southeast Wake County, and two exceeded that seen in 2019 by 13.5%. fulfilment centers with a combined 586,000 square feet in RTP/I-40 Corridor. The new facilities are expected to Notable 2020 transactions include: create over 3,000 jobs for the region.

• A 133,000 square foot distribution center situated on NC Commerce also announced multiple incentivized 20 acres at 1400 No. Greenfield Pkwy in Garner was industrial projects for the Triangle this year; a combined sold in Q4 for $40.9 million, or $307.71 per square foot. investment of over $815 million, bringing an estimated 2,250 jobs. Associated Job Development Investment At the time of sale, the property was 100% leased to Grants approved for these projects total $33.8M. Golden State Foods Corp with 19 years remaining on the lease. Seller: Chicago-based Oak Street Real Estate Capital. Buyer: -based Realty Income Corp. Pharmaceuticals • A 410,000 square foot distribution center situated 462 Jobs on 31.5 acres at 1275 Person Street in Durham was $474M Investment Use: Manufacturing Facility sold in Q4 for $51 million; $124.39 per square foot. Eli Lilly Completed in Q2 2020, the distribution center is one of five industrial buildings, new or planned, in the E-Commerce 900,000 square foot Regional Commerce Center. 3,385 Jobs At the time of sale, the property was 100% leased Use: Warehouse and to Amazon; one of three delivery stations opened Distribution by Amazon across the Triangle this year. Seller: -based Scannell Properties. Buyer: New York-based Kohlberg Kravis Roberts & Company. Life Science 300 Jobs • A 150,000 square foot warehouse situated at $351M Investment 2301-2337 Hwy 70 in Garner, the first of four light Use: Lab and Logistics industrial and warehouse buildings being developed speculatively by AI. Neyer in the Garner Business Quick Serve Restaurant Park 70, was sold in Q4 for $16.5 million, or $110 per 160 Jobs square foot. Seller: -based AI. Neyer. Buyer: $52M Investment Boston-based STAG Industrial. The park’s site plan Use: Manufacturing Facility calls for three additional buildings; two at 120,000 square feet each, and one at 285,000 square feet. Advanced Manufacturing In addition, a portfolio sale of note closed in Q1: 150 Jobs Prologis Inc., the global leader in logistics real estate, $50M Investment completed its all-stock acquisition of Liberty Property Use: Expanded Manufacturing Trust for $13.0 billion, including the assumption of debt. The acquisition comprised 108 million square feet of existing logistics facilities; 4.9 million square Life Science feet of logistics development in process; 1,748 acres of 200 Jobs land for future logistics development with build-out $75M Investment potential of 20.5 million square feet; and a 3.8 million Use: Manufacturing Facility square foot office portfolio. The portfolio included a total of 605 existing industrial, flex and office properties, including thirteen industrial properties local to RDU: has been named the 2020 State of the Year, for its success in winning projects that create new • Liberty Ridge Industrial Park in Durham comprised of jobs and large capital investments. four warehouse buildings totaling 457,500-square-feet; Economic Development Partnership of North Carolina • Five warehouse properties totaling 705,365 (“EDPNC”) has been ranked the best state-level economic square feet in Imperial Center in Durham; and development organization in the country.

• Two distribution plus two warehouse facilities, a combined 528,000 square feet, at Keystone Industrial Park in Morrisville.

Sources: The Raleigh-Durham industrial report reflects statistics calculated using CoStar and APG Advisors’ internal database of existing and under construction properties. Additional information sources include MetroStudy, Real Capital Analytics, Economic Development Partnership of North Carolina, NC Commerce, and Research Triangle Regional Partnership.

All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Q4 2020 INDUSTRIAL REPORT

Land Sales Land transactions of note include: • AI. Neyer’s proposed Freedom Industrial Park is situated on 27.5 acres in East Raleigh. The land was acquired over three transactions in Q1 totaling $3.3 million, or $120,175 per acre. • Merritt TW Crossing, a flex building park now under construction in Durham, is situated on 51.3 acres at 3102 S. Miami Blvd. Merritt Properties purchased the land in Q1 for $3.1 million, or $60,429 per acre. • Merritt Capital Business Park, now under construction, is situated on 74.2 acres at 0 Ligon Mill Road in Wake Forest. Merritt Properties purchased the land in Q1 for $3,458,500, or $46,429 per acre. We will provide additional land sales data and trends in APG Advisor’s upcoming Land Report. Watch for that later in Q1 2021.

Activity by Submarket

Net Average Direct Total Net Avg. Direct Market Absorption Submarket Bldgs. Building Total RBA(1) Vacant Vacant Absorption Asking Rate(2) Rate(3) Direct Size SF Available % Available % Direct YTD Q4 2020

RTP - I-40 Corridor 97 139,447 13,526,390 $5.63 $6.59 0.30 0.30 807,878 608,730

SW Wake 14 186,919 2,616,868 $7.61 $6.63 0.40 0.40 35,000 45,000

North Durham 7 100,719 705,034 - $7.79 0.00 0.00 - -

Johnston County 24 203,510 4,884,246 $3.25 $4.68 3.20 3.20 5,200 187,500

East Wake 69 155,986 10,763,015 $5.87 $6.98 3.60 3.60 (45,932) 2,832,636

North Wake 30 104,687 3,140,600 $6.50 $6.94 0.20 0.20 - 4,220

Western Counties 14 210,335 2,944,690 $3.90 $4.52 0.00 0.00 - -

Franklin County 19 88,842 1,687,994 $8.00 $5.56 0.80 0.80 (13,717) (13,717)

Combined Totals 274 146,967 40,268,837 $6.13 $6.32 1.53 1.53 788,429 3,664,369

(1) Class A & B Industrial buildings of 50K SF or greater, non-owner occupied, non-government. (2) Weighted Average Asking Rents based on current availability (3) Costar derived Market Rents are modeled gross asking rents, informed by current asking rents and lease comps; taking into consideration the entire inventory rather than current availabilities only.

Net Average Direct Total Net Avg. Direct Market Absorption Submarket Bldgs. Building Total RBA(4) Vacant Vacant Absorption Asking Rate(2) Rate(3) Direct Size SF Available % Available % Direct YTD Q4 2020

All Industrial 1,893 39,616 74,993,563 $6.24 $6.84 2.70 2.70 853,538 2,944,552 Inventory (4)

(4) All CSA Non-Owner Occupied Industrial Buildings (no building class or minimum SF applied)

All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Q4 2020 INDUSTRIAL REPORT

The TOP 3’s of 2020

Sales - Individual Buildings (ranked by sales) Sales Price Price/SF Durham: 1275 Person St $51.0M $124.39

Garner: 1400 N. Greenfield Pkwy $40.9M $307.71

Garner: 2301-2337 US Hwy 70 $16.5M $110.00 Industrial Parks Under Construction Total Sq. Ft. Price/SF Eastgate 540, Knightdale 980,000 Trinity Partners Regional Commerce Center, Durham 900,000 Scannell Properties Garner Business Park, Garner 688,940 Al Neyer

Developers (ranked by industrial sq ft delivered) Total Sq. Ft. Investor Group Hillwood Development Corp 2,541,106 Private Scannell Properties 670,000 Private Duke Realty Corporation 248,920 Public REIT

Sellers (ranked by total sq. ft.) Sales Price Price/SF 1,690,865 Public REIT Ares Real Estate Management Holdings 576,000 Public - Independent Scannell Properties 410,000 Private

Buyers (ranked by total sq. ft.) Total Sq. Ft. Investor Group Prologis, Inc 1,690,865 Public REIT TPG Global, LLC 576,000 Private Kohhlberg Kravis Roberts & Co 410,000 Institutional

Industrial Landlords (ranked by total sq. ft.) Total Sq. Ft. # Industrial Bldgs Hillwood Development Corp 2,541,106 1 Duke Realty 2,939,456 22 Prologis, Inc 1,690,865 13 STAG Industrial, Inc 1,267,376 5

Under Construction Est. Property Property Submarket Estimated % City R BA Asking Name Address Name Delivery Pre-Leased Rent

Eastgate 540, Building 5 360 Spectrum Dr Knightdale East Wake Q1 2021 280,000 85.0% $6.50

Patriot Park 3 5 National Way Durham RTP/I-40 Corridor Q1 2021 187,500 100.0% $6.50

Patriot Park 4 47 National Way Durham RTP/I-40 Corridor Q1 2021 187,312 100.0% $6.50

Eastgate 540, Building 6 370 Spectrum Dr Knightdale East Wake Q2 2021 159,600 100.0% $6.50

Merritt Capital Business Park Ligon Mill Rd Wake Forest North Wake Q2 2021 452,500 0.0% Undisclosed ** 7 buildings of 30k to 140k SF

Total Square Feet 1,266,912

All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Q4 2020 INDUSTRIAL REPORT

North Carolina

The state’s infrastructure, favorable regulatory environment, corporate tax structure, performance-based incentive programs, energy availability and cost, and competitive labor environment have all earned North Carolina accolades and rankings among the best in the United States for doing business.

North Carolina’s extensive highway system, four international airports, two deep water seaports, and the largest consolidated rail system in the U.S. provide efficient access to both domestic and global markets. Its prime location along the eastern seaboard puts almost half the U.S. population within a day’s drive.

North Carolina has 67 four-year colleges and universities, of which the 25 largest saw a combined undergraduate enrollment of 227,350 and total enrollment of 293,865 in 2019. North Carolina enrolls over 800,000 students at 58 community colleges, which offer some of the most comprehensive vocational and technical programs in the United States.

Top 10 # #10 (Wake County) # 5 # Global # Top Tech 8 1 Most Educated # in the Nation Emerging State in the 5 Talent 9 Ecosystems South Atlantic Markets for Talent for Workforce Hottest Labor Recession Attraction Development Market Resistant City

Raleigh-Durham Metro Region

Higher education is considered the cornerstone of the Raleigh-Durham metro region. Three tier-one research universities, twelve additional colleges and universities, and the largest community college in the state, Wake Tech, are all a major contributor to the region’s high-performance workforce. Companies relocate and expand here because of the quality and depth of the existing talent pool and the pipeline of graduates coming from these educational facilities.

The Raleigh-Durham CSA consistently ranks among the nation’s best economies year after year. Wake County’s biggest industries – government, education and healthcare – are virtually recession proof. Research Triangle Park is one of the most prominent R&D parks in the United States, and home to over 300 companies that employ 65,000 workers and contractors. Durham is in the midst of an entrepreneurial boom and among the highest ranked in the nation as a growing hub for tech talent.

Advanced manufacturing is a key target industry for our region. There are currently over 190 advanced manufacturing companies operating here, which collectively employ over 12,500 people with average annual earnings of $86,000. Among the largest manufacturing and distribution sites in the area are those operated by Apex Tool Group, Caterpillar, Cree, Novo Nordisk, Grifols, Sysco Corporation, Amazon, Becton Dickinson, and U.S. Foods.

“Our wide variety of talent attracts a wide variety of industries. Once known for tobacco and textiles, North Carolina has evolved to become a global force, one driven by knowledge-based industries.” - The Economic Development Partnership of North Carolina

All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Reidsville

Henderson

North Durham

BURLINGTON Franklin County

40 GREENSBORO Graham GRANVILLE CO. 85 85 WAKE CO 1 . FRANKLIN CO DURHAM WAKE CO . 501 . 40 147 Wake Forest .

RTP - I-40 Corridor North Wake County CHAPEL HILL DURHAMWAKE CO. CO

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Carrboro 540 Tarboro

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ORANGE CO. Western Counties DURHAM CO TRIANGLE International PARK Airport

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CHATHAM CO. 64 40 421 1 Apex 64 Wilson Asheboro Garner SW Wake County

40

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WAKE CO..

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40

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David Adams MJ Parker President Research Analyst 919 582 3110 919 582 3136 [email protected] [email protected]