Fourth Quarter 2017 | Industrial The Upstate,

Supply and Demand Seeking Equilibrium

By the end of the fourth quarter of 2017, industrial vacancy rates Transportation infrastructure and utilization remain strong edged up slightly to 6.2% from 6.1% in the third quarter. As with traffic volume at the inland port continuing to exceed vacancy rates lingered in the low 6.0% range throughout 2017, projection driven by manufacturing output gains. While BMW absorption remained positive during the year, but mirrored was initially responsible the majority of that volume, it now declining deliveries of new space. Upstate asking rates have makes up less than half of that traffic. Greenville Spartanburg changed little from the previous quarter with an average of $3.22 Airport is expanding its schedule of transatlantic cargo flights, per square foot for industrial and $8.04 for flex space. By the end and construction upgrades to the cargo runway are in planning. of the fourth quarter, there was over half a million square feet The above projects should benefit from and 385 under construction comprised of spec buildings, built to suits improvements set for completion in the summer of 2019 and owner/user expansions. Sales activity was up compared to the previous year, leading to some cap rate compression. While manufacturing is a key driver to job and wage growth, concerns exist over the availability of advanced-manufacturing Announcements of capital expenditures by manufactures labor. To meet the demand for skilled labor, , continue. Among these are PSA Airlines, GE Aviation, Bosch, Greenville Technical College and Greenville County schools are Arthrex Inc., and Metromont. These production investments are developing a curriculum in conjunction with manufacturers creating a demand for additional warehousing and influencing such as BMW.. spec developments. PCCP and Panattoni are partnering on a class A warehouse complex off Highway 101 while three In addition, the newly released tax reform will impact industrial more buildings at Velocity Park are in development. Similarly, real estate. Initial study suggests that accelerated depreciation Rocker Development announced plans for a 500,000 square and treatment of pass-through entities will spur further foot logistics center in Spartanburg County. In the upstate industrial investment and adaptive re-use of legacy structures. area, Spartanburg County has the most square footage under construction.

Partnership. Performance. avisonyoung.com The Upstate, South Carolina Fourth Quarter 2017 | Industrial

Upstate Market Facts 178,863,431 sf 6.2% 10.4% $3.22 psf Inventory Vacancy Rate Available Rate Asking Rent

Submarket Indicators Anderson County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 20,686,280 20,686,280 20,636,280 20,636,280 20,636,280 Vacancy Rate 4.2% 3.7% 3.8% 4.2% 4.1% Available Rate 7.3% 7.5% 7.1% 6.5% 5.5% Asking Rent $2.52 $2.46 $2.29 $2.31 $2.62 Cherokee County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 7,458,206 7,458,206 7,458,206 7,458,206 7,458,206 Vacancy Rate 8.8% 14.9% 15.3% 15.4% 15.6% Available Rate 14.8% 21.0% 24.5% 25.2% 22.8% Asking Rent $2.71 $2.71 $2.71 2.71 $2.67 Greenville County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 63,595,060 63,223,215 63,223,215 63,179,215 62,843,477 Vacancy Rate 6.7% 6.1% 5.9% 6.2% 6.1% Available Rate 12.5% 12.0% 11.0% 9.7% 8.4% Asking Rent $3.76 $3.81 $3.73 $3.70 $3.72 Laurens County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 11,002,906 11,002,906 10,927,906 10,927,906 10,927,906 Vacancy Rate 1.6% 1.6% 1.5% 1.4% 1.4% Available Rate 3.6% 3.5% 3.3% 4.0% 3.3% Asking Rent $2.11 $2.11 $2.11 $2.08 $2.47 Pickens County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 4,931,041 4,931,041 4,931,041 4,931,041 4,931,041 Vacancy Rate 8.0% 8.0% 7.7% 7.3% 7.3% Available Rate 9.3% 9.3% 9.0% 14.5% 17.0% Asking Rent $2.18 $2.58 $2.63 $2.59 $2.60 Spartanburg County 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 71,189,938 71,095,438 70,422,988 70,251,388 70,076,388 Vacancy Rate 6.7% 6.3% 6.3% 6.7% 8.2% Available Rate 10.2% 9.4% 9.3% 9.6% 10.6% Asking Rent $3.18 $3.19 $3.28 $3.24 $3.31

Partnership. Performance. avisonyoung.com The Upstate, South Carolina Fourth Quarter 2017 | Industrial

Upstate Market Overview All Submarkets 4Q17 3Q17 2Q17 1Q17 4Q16 Inventory 178,863,431 178,397,086 177,599,636 177,384,036 176,873,298 Vacancy Rate 6.2% 6.1% 6.0% 6.3% 6.8% Available Rate 10.4% 10.2% 9.9% 9.7% 9.5% Asking Rent $3.22 $3.24 $3.26 $3.21 $3.30 Net Absorption 123,787 573,692 800,744 1,407,213 1,765,847

Submarket Map

Partnership. Performance. avisonyoung.com The Upstate, South Carolina Fourth Quarter 2017 | Industrial

Vacancy Rates Asking Rents Net Absorption

10% $4.00 2,500,000 2,250,000 9% $3.50 $3.22 2,000,000 1,750,000 1,500,000 8% $3.00 1,250,000 6.2% 1,000,000 7% $2.50 750,000 500,000 250,000 123,787 6% $2.00 0 YE12 YE13 YE14 YE15 YE16 YTD17 YE12 YE13 YE14 YE15 YE16 YTD17 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Notable Lease Transactions Tenant Type Address Market SF The Recon Group Renewal 153 Gibbons Road Cherokee County 422,000 Playground Equipment Original 1801 Rutherford Road Greenville County 50,000 BMW Renewal 150 Aztec Court Spartanburg County 40,057 Original 1801 Rutherford Road Greenville County 33,000 TCI Carolina's, LLC Original 1550 International Drive Spartanburg County 30,000

Notable Sales Transactions Buyer Address Market SF Sale Price United Salad Co. 3052 Moore Duncan Hwy Spartanburg County 882,525 $18,453,016 Judson Mill Ventures, LLC 701 Easley Bridge Road Greenville County 819,000 $6,000,000 844 SE Main, LLC 805 Suburban Park Drive Greenville County 182,534 $5,400,000 Industrial Warehouse Services, Inc. 1649 Pearman Dairy Road Anderson County 530,751 $5,200,000 Welfont Investments, LLC 7 Palmetto Drive Spartanburg County 23,000 $3,932,000

Trends to Watch

Balance Labor Tax Reform Balanced supply and demand Skilled labor shortage Tax reform & industrial anticipated investments

Partnership. Performance. avisonyoung.com The Upstate, South Carolina Fourth Quarter 2017 | Industrial

Industrial Terms and Definitions Greenville Asking Rent Contact Information The dollar amount asked by landlords for available space expressed in dollars per square foot per year in most parts of the country . Industrial rents are reported Rob Howell, MBA as base rent (NNN). The asking rent for each building in the market is weighted Senior Vice President by the amount of available space in the building. This has the effect of causing 404.493.3904 [email protected] rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average asking rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual Tabitha Cooper available space to the square footage associated with rental rates on all available Associate spaces, multiplying the rental rate by that ratio, and then adding together all the 989.615.2109 [email protected] resulting numbers. Asking rental rate averages only includes Direct Space that is being offered for lease directly from the landlord or owner of a building and does not include Sublet Space that is being offered by another tenant trying to sublet a space that has already been leased.

Net Absorption The net change in physically occupied space over a period of time.

Industrial Buildings Classifications Industrial buildings are categorized as warehouse/distribution, general industrial, R&D/flex and incubator based on their physical characteristics including percent office build-out, clear height, typical bay depth, typical suite size, type of loading For more information on this report, and typical uses. please contact:

Submarkets Charlene Aydelotte Massey Submarkets are non-overlapping, contiguous geographic designations having Business Operations Manager, Researcher a cumulative sum that matches the boundaries of the Market they are located 843.725.7200 [email protected] within.

The Upstate Meghan McDuff Administrative Coordinator Although loosely defined among locals, The Upstate is the region in the 864.301.8379 westernmost part of South Carolina, which is inclusive of Anderson, Cherokee, [email protected] Greenville, Laurens, Pickens and Spartanburg counties. The city of Greenville is the largest city in region with the highest population, and is the base of most commercial activity. The cities of Spartanburg and Anderson are next in size. 511 Rhett Street, Suite Two-B Total Square Footage Greenville, South Carolina 29601 Industrial inventory includes all multi-tenant, single tenant and owner occupied buildings at least 20,000 square feet. Vacancy and Availability The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant. The availability rate is the amount of space available for lease divided by the inventory. avisonyoung.com Researcher Comments © 2018 Avison Young - South Carolina, Inc. All rights reserved. Market research data and transaction information provided by CoStar. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.