2015 Year End | Industrial Research & Forecast Report EASTERN PENNSYLVANIA SOUTHERN NEW JERSEY DELAWARE

MARKET INDICATORS PA/NJ/DE PA/NJ/DE Demand > Supply Relative to prior period Q2 2015 Q2 2016* VACANCY

Regional Overview NET ABSORPTION

CONSTRUCTION > The regional vacancy rate decreased to 7.7 percent during the last two quarters of 2015. RENTAL RATE > Net absorption, at 13.9 million square feet, lagged slightly behind *Projected Arrows compare current period to the previous period and forecast 2014’s total, but was still back to pre-recession levels. the next period. > Asking rents increased by 1.0 percent in the last two quarters and NEW SUPPLY, VACANCY AND ABSORPTION was up 4.0 percent from 2014. MSF Vacancy 20 20% > There was 13.7 million square feet under construction, of which 68 percent was speculative. Developers were able to obtain financing for spec projects and are acquiring additional sites. 15 15% > Strong demand and reduced availability have driven investors to

consider lesser-quality assets. Mega-deals for investment fund 10 10% portfolios changed the ownership landscape in 2015.

The regional industrial market had a strong finish to 2015. Demand 5 5% kept pace with 5.7 million square feet of completed spec projects. Third party logistics companies and e-commerce retailers were 0 0% active. “Last Mile” delivery requirements are likely to increase in 10 11 12 13 14 15 2016. Absorption Construction Vacancy Rate New bulk deliveries should alleviate the space constraints for tenants requiring over 100,000 square feet. However, with additional bulk CONSTRUCTION DELIVERIES 14 deliveries in the first half of 2016, there may be a temporary over- Build-to-SuitBuild-to-Suit SpeculativeSpeculative supply until demand catches up. Quality space choices for companies 12 seeking between 25,000 to 80,000 square feet are limited in most submarkets, particularly buildings for sale. 10

Asking rents increased in all submarkets. Free rent decreased and 8 the spread between asking and signing rents narrowed. Additionally, 6 annual rent escalations were trending upward. While 2.0 percent Completed

annual rent increases for signed deals was still the norm, 2.5 to 3.0 MSF 4 percent escalations were becoming more prevalent.

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0 10 11 12 13 14 15 Recent Transactions Q3 and Q4 2015

NOTABLE SALES ACTIVITY

PROPERTY ADDRESS LOCATION BUYER SIZE SF SALES PRICE / SF TYPE 234 Walnut Bottom Road Southern I-81/I-83 CBRE Global Investors LTD 1,495,720 $55.49 Investor 560 Merrimac Avenue New Castle County Circle Industrial 1,015,740 $89.59 Investor 2 Liz Way Northeast PA Northstar Commercial-ALTO RE 618,850 $33.93 Investor 200 Birch Creek Road Southern New Jersey Principal Real Estate Investors LLC 597,232 $57.22 Investor 330-399 S Warminster Road Montgomery County Nouri Chaya 419,047 $50.41 Investor 10 Franklin Valley Road Northeast PA Crystal Window & Door Systems, Ltd. 336,500 $14.86 User 515 N Zarfoss Drive Southern I-81/I-83 Industrial Property Trust 312,769 $52.75 Investor 35 E Park Drive Southern New Jersey Cabot Properties, Inc. 302,372 $77.72 Investor 201 Elizabeth Street Southern New Jersey Modern Recycled Spaces 273,602 $31.07 Developer 9355 Blue Grass Road Philadelphia County Gramercy Property Trust, Inc. 255,336 $102.22 Investor 3360 Industrial Road Southern I-81/I-83 Norfolk Southern 210,000 $35.71 User 2400 Continental Boulevard Chester County Hayden Real Estate Investments 207,725 $67.28 Investor 435 School Lane Montgomery County Brennan Investment Group 167,666 $78.84 Investor 9820 Blue Grass Road Philadelphia County Marano Trucking 160,000 $21.88 User 3100 Charlotte Avenue Lehigh Valley Erwin Industries, Inc. 151,857 $13.17 User 435 Independence Avenue Southern I-81/I-83 High Street Realty Company, LLC 150,000 $77.40 Investor 38 Hatfield Pike Montgomery County Lansdale Warehouse Co, Inc. 150,000 $38.00 Investor 50 Heller Road Southern New Jersey National Delivery Systems 131,000 $37.50 User 260 Hansen Access Road Montgomery County Exeter Property Group 126,250 $49.11 Investor 1200 Ferry Avenue Southern New Jersey Contemporary Graphics 124,700 $40.90 User 524 Imperial Court Bucks County Immobili LLC 121,232 $54.44 Investor 820 East Gate Drive Southern New Jersey Chief Realty 105,450 $44.00 Investor

LEASE ACTIVITY

PROPERTY ADDRESS LOCATION TENANT SIZE SF TYPE 1600 River Road Southern New Jersey H&M 739,315 New 125 N. Commerce Way Lehigh Valley C&S Wholesale Grocers 571,475 New 1900 River Road Southern New Jersey Seldat Distribution Inc. 548,631 Sublease 1620 River Road Southern New Jersey AHR Group 477,736 New 9658 West Hills Court Lehigh Valley Genco 435,218 New 100 Capital Lane Southern I-81/I-83 Allen Distribution 321,333 New 1520 Van Buren Road Lehigh Valley Inditex 283,145 New 300 Quality Circle Southern I-81/I-83 Schenker 252,000 New 200 Birch Creek Road Southern New Jersey Jet.com 230,663 New 220-230 Research Drive Northeast PA Quietflex Manufacturing Co. 217,171 New 100 Louis Parkway Southern I-81/I-83 Overstock.com 213,310 Expansion 2400 Continental Boulevard Chester County Infiana USA 207,725 Leaseback 2020 Route 130 North Southern New Jersey Subaru 188,950 Expansion 700 Allen Road Southern I-81/I-83 Schenker 181,990 Renewal 435 School Lane Montgomery County Markel Corporation 167,666 Leaseback 1520 Van Buren Road Lehigh Valley FedEx 142,569 New 800 Ships Landing Way New Castle County CEVA 125,000 New 477 N. Lewis Road Montgomery County Sears 105,250 Renewal 191 Industrial Park Drive Northeast PA Solstice Sleep Products 103,905 New

2 Research & Forecast Report | 2015 Year End | Pennsylvania, New Jersey, Delaware | Colliers International Market Comparison Update

INDUSTRIAL MARKET NET NET AVG. DIRECT SUBLET TOTAL VACANCY ABSORPTION ABSORPTION COMPLETIONS UNDER ASKING SUBMARKET INVENTORY VACANT VACANT VACANT RATE QUARTER YTD YTD CONSTRUCTION RENT Philadelphia County 77,662,359 6,202,505 19,000 6,221,505 8.0% 458,997 591,445 274,974 145,000 $4.01 Bucks County 52,439,329 3,862,595 49,887 3,912,482 7.5% 291,649 (113,642) - - $4.59 Chester County 22,818,088 1,030,429 37,702 1,068,131 4.7% 100,378 657,898 232,720 - $7.69 Delaware County 20,523,830 2,005,764 1,000 2,006,764 9.8% 299,636 556,693 175,000 247,452 $5.34 Montgomery County 52,380,382 3,718,490 452,429 4,170,919 8.0% 380,961 1,547,860 - 325,833 $5.39 SUBURBAN TOTAL 148,161,629 10,617,278 541,018 11,158,296 7.5% 1,072,624 2,648,809 407,720 573,285 $5.32

Southern NJ 104,575,401 9,685,492 516,158 10,201,650 9.8% 1,970,979 3,869,900 3,569,043 4,219,503 $4.16 Northern Delaware 24,710,093 3,338,142 39,270 3,377,412 13.7% 186,222 3,041 182,815 - $4.73 Lehigh Valley 70,475,200 3,778,400 110,865 3,889,265 5.5% (215,365) 3,021,659 4,690,515 4,215,000 $5.13 Northeast PA 84,010,115 6,541,730 - 6,541,730 7.8% 197,009 584,492 134,442 724,500 $3.59 Southern I-81/N. I-83 107,573,664 6,062,557 - 6,062,557 5.6% 427,291 3,137,216 3,867,320 3,824,826 $3.94 MARKET TOTAL 617,168,461 46,226,104 1,226,311 47,452,415 7.7% 4,097,757 13,856,562 13,126,829 13,702,114 $4.43

AVERAGE ASKING RENTS (NNN)

$6.00

$5.00

$4.00 AverageAverage PhiladelphiaPhiladelphia PAPA Suburbs Suburbs $3.00 SouthSouth Jersey Jersey NewNew Castle Castle LehighLehigh NortheastNortheast PA PA $2.00 SS I-81 I-81 I-83 I-83

$1.00

$0.00 10 11 12 13 14 15

DEFINITIONS Inventory: Flex, warehouse and manufacturing buildings over 20,000 SF or over 50,000 SF Northeast PA and Southern I-81/I-83. Vacant Space: All spaces that are physically vacant, excluding projects under construction or substantial rehabilitation. Net Absorption: The difference in physically occupied space within a given time period for a particular market. Vacancy Rate: Total vacant space divided by the total inventory. Average Asking Rent: Weighted average rent per SF, triple net. Under Construction: Counted when steel is up, not at the commencement of site work. 3 Submarket Reviews 502 offices in

Philadelphia County 67 countries on The vacancy rate decreased to 8.0 percent during Solutions, A.B. Converters and 6 continents the third and fourth quarters of 2015. Tenants Mishimoto. These companies leased expanding within the market, like Liss Global, boosted a combined 154,291 square feet absorption. There is supply in the 100,000-square- during the second half of 2015. $2.3B in annual revenue foot-plus range, but there were few choices for Lehigh Valley, PA 1.7B square feet under management companies looking to purchase buildings from The vacancy rate hit an historically Over 16,300 professionals 50,000 to 80,000 square feet. low 2.1 percent in the 3rd quarter. The New development continued to be focused in South completion of 2.3 million square feet of Philadelphia with flex/R&D projects at the Navy Yard spec space in the 4th quarter for WuXi AppTec and Axalta’s announced increased vacancy, but only to a 175,000-square-foot project. The City is seeking a comparatively low 5.5 percent. Bulk developer for the 28-acre former Produce & Seafood demand remained strong, but the Market. Valley’s manufacturing sector showed Suburban Pennsylvania some weakness. Kraft will be shuttering Vacancy increased during the third quarter, but an 823,000-square-foot facility. decreased to 7.5 percent in the fourth quarter. Liberty Property Trust is constructing 1.7

Georgia Pacific’s move from 936,000 square feet in million square feet for Uline and a 1.2- FOUNDING GLOBAL PARTNER Quakertown resulted in the Q3 spike. With a million-square-foot spec building. On the dwindling supply of quality space, there is a premium eastern side of the Lehigh Valley, Duke’s on freestanding buildings, particularly for user 1.1 million-square-foot spec building is purchase. scheduled for early 2016 delivery. WORLD GREEN BUILDING COUNCIL More land sites are in play as developers are more Northeast Pennsylvania receptive to new projects. While bulk projects are Absorption of older-generation space still likely to go to the I-78 and I-81 corridors, there is boosted this submarket. Vacancy decreased the potential for new spec construction and last mile from 8.2 to 7.8 percent. Crystal Window & warehousing. Door Systems purchased the chronically UNITED STATES: Southern New Jersey vacant Benton Business Park, and is Colliers International | Philadelphia Southern New Jersey finished 2015 with the highest relocating manufacturing operations from level of annual absorption since 2006. Expansions New York. Philadelphia, PA (headquarters) TEL +1 215 925 4600 by existing tenants such as Simon & Schuster and Mericle Development continues to add Subaru, combined with steady leasing and user inventory at the CenterPoint Park with a Allentown, PA purchase demand kept pace with spec deliveries. 399,500-square-foot spec building and a TEL +1 610 770 3600 Four spec buildings were completed in the second 279,000-square-foot building, which has been half. Dermody’s 171,600 square feet at LogistiCenter substantially preleased by Quietflex Conshohocken, PA was fully leased at completion. Two buildings Manufacturing. TEL +1 610 684 1850 scheduled for early 2016 completion in Burlington Southern I-81 and I-83 Corridors, PA Harrisburg, PA were preleased by H&M and AHR Group. Additional Vacancy increased a full percentage point in the TEL +1 717 730 3752 spec buildings are underway at the poles of the last half of 2015. Georgia Pacific moved into its market in Burlington and Salem County. With low new 1.5-million-square-foot facility in Wilmington, DE vacancies in Central Jersey, interest in the Exit 6 and Shippensburg, but vacated space in Carlisle. In TEL +1 302 425 4000 7 areas has increased. addition, 1.6 million square feet of spec space New Castle County, DE was completed. Another 3.8 million square feet of Mount Laurel, NJ TEL +1 856 234 9300 Following a vacancy spike in the 2nd quarter, New spec space will be delivered in the first half of Castle County showed recovery during the last half. 2016, with site work commencing on an additional Absorption would have been higher, but the CEVA 957,475 square feet. ed u uc si deal in Twin Spans went to a building that was not Demand from 3PLs has remained strong, but there d n g o r p officially on the market. has been a lull in e-commerce requirements.

p r e e co w Tax incentives have been successful in attracting and po wind expanding companies such as Techmer Engineered

Colliers International Ten Penn Center 1801 Market Street, Suite 550 Philadelphia, Pennsylvania, 19103 Copyright © 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. +1 215 925 4600 While every reasonable effort has been made to ensure its accuracy, we cannot colliers.com/philadelphia 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 4containedNorth in this report.American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International