DFW Industrial Marketview

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MARKETVIEW

Dallas/Fort Worth Industrial, Q4 2018 Demand tops 20 million sq. ft. for third consecutive year.

6.0% 14,513,927 SF 8,273,325 SF 7,108,176 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter. MSF Vacancy Rate (%) 30 7

15 6

0 5 2013 2014 2015 2016 2017 2018 Total Net Absorption Delivered Construction Construction Starts Total Vacancy

Source: CBRE Research, Q4 2018.

SUPPLY AND DEMAND REMAIN BALANCED PRODUCT PIPELINE CONTRACTS SUBSTANTIALLY

MARKET-WIDE VACANCY RATE REMAINS SNUG

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q4 2018 Q4 2018 2018 Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 76,537,446 7,143,995 9.3 4,981,889 6.5 5,496,992 7.2 1,021,613 1,093,964 2,816,521

East Dallas 36,711,061 3,247,617 8.8 1,640,650 4.5 1,674,582 4.6 455,405 421,473 323,735

Northeast Dallas 98,857,581 7,721,313 7.8 4,920,189 5.0 5,634,661 5.7 749,356 666,538 1,314,114

Northwest Dallas 110,278,941 6,873,465 6.2 4,158,527 3.8 4,433,034 4.0 360,646 333,645 1,007,725

South Dallas 77,278,616 13,465,000 17.4 12,086,981 15.6 12,226,952 15.8 1,206,291 1,254,279 5,847,155

South Stemmons 116,757,096 7,800,940 6.7 4,460,334 3.8 4,759,216 4.1 (375,470) (376,688) (1,290,388)

Great SW/Arlington 111,266,798 8,018,274 7.2 5,043,620 4.5 5,140,768 4.6 2,566,998 2,601,478 7,293,671

North Ft. Worth 86,756,177 6,851,203 7.9 4,999,167 5.8 5,057,167 5.8 347,594 327,594 2,382,231

South Ft. Worth 70,871,099 4,297,564 6.1 2,541,191 3.6 2,654,191 3.7 800,196 785,893 1,523,597

DALLAS TOTALS 516,420,741 46,252,330 9.0 32,248,570 6.2 34,225,437 6.6 3,417,841 3,393,211 10,018,862

FT.WORTH TOTALS 268,894,074 19,167,041 7.1 12,583,978 4.7 12,852,126 4.8 3,714,788 3,714,965 11,199,499

MARKET TOTALS 785,314,815 65,419,371 8.3 44,832,548 5.7 47,077,563 6.0 7,132,629 7,108,176 21,218,361

Source: CBRE Research, Q4 2018.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Dematic Synergy Crossing Fort Worth North Fort Worth 707,000

2 Nobel Cotton 1011 Isuzu Pkwy Grand Prairie Great Southwest/Arlington 470,000

3 Smart Warehousing Alliance Center North 15 Fort Worth North Fort Worth 269,500

4 KGP Logistics 801 Industrial Blvd Grapevine DFW Airport 204,600

5 Chase Industries Liberty Park GSW North Building 1 Irving Great Southwest/Arlington 172,000

Source: CBRE Research, Q4 2018.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 LBA Realty Portfolio Sale Coppell DFW Airport 557,000

2 Brookfield Asset Management Portfolio Sale Multiple Multiple 369,000

3 Owner/User 3100 Eagle Pkwy Fort Worth North Fort Worth 151,000

4 Alpine Century Center LLC 2211 Century Center Blvd Irving Great Southwest/Arlington 121,000

5 Finial Group Westmoreland Business Center Dallas South Dallas 85,500

Source: Real Capital Analytics, Q4 2018.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2018 Under Qtr. 2018 Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 382 57,836,035 7.4 4,139,420 7.2 7.9 1,155,458 1,116,906 2,440,848 2,016,000 2,726,177 4,100,907 W DFW/Grapevine 310 18,701,411 2.4 842,469 4.5 4.8 (133,845) (22,942) 375,673 43,000 - 646,796 DFW Airport Total 692 76,537,446 9.7 4,981,889 6.5 7.2 1,021,613 1,093,964 2,816,521 2,059,000 2,726,177 4,747,703 East Dallas Central E Dallas 408 16,907,109 2.2 361,505 2.1 2.2 (29,132) (43,982) 29,677 - - - East Dallas/Mesquite 284 19,803,952 2.5 1,279,145 6.5 6.6 484,537 465,455 294,058 1,623,230 487,200 587,226 East Dallas Total 692 36,711,061 4.7 1,640,650 4.5 4.6 455,405 421,473 323,735 1,623,230 487,200 587,226 Northeast Dallas Allen/McKinney 189 11,576,864 1.5 522,123 4.5 4.6 (62,878) (62,878) 24,456 190,176 202,270 366,857 NE Dallas/Garland 847 48,345,635 6.2 2,467,014 5.1 6.3 689,933 674,533 900,951 248,825 764,400 764,400 Plano 346 19,123,072 2.4 891,391 4.7 5.1 129,803 65,504 348,754 242,701 234,908 234,908 Richardson 300 16,813,826 2.1 1,010,981 6.0 6.2 18,378 15,259 45,873 434,640 - - Rockwall 54 2,998,184 0.4 28,680 1.0 1.0 (25,880) (25,880) (5,920) 700,000 - - Northeast Dallas Total 1,736 98,857,581 12.6 4,920,189 5.0 5.7 749,356 666,538 1,314,114 1,816,342 1,201,578 1,366,165 Northwest Dallas Denton 175 10,705,234 1.4 291,779 2.7 3.0 10,288 10,288 65,179 - 169,469 169,469 Lewisville 231 26,638,926 3.4 613,692 2.3 2.3 536,470 536,470 1,002,139 1,041,280 470,000 763,682 Metropolitan/Addison 439 20,453,181 2.6 1,432,674 7.0 7.3 3,388 (12,756) (469,619) - - - N Stemmons/Valwood 657 49,636,115 6.3 1,789,382 3.6 3.9 (194,325) (205,182) 431,026 768,996 - 235,900 NW Dallas Outlying 24 2,845,485 0.4 31,000 1.1 1.1 4,825 4,825 (21,000) - - - Northwest Dallas Total 1,526 110,278,941 14.0 4,158,527 3.8 4.0 360,646 333,645 1,007,725 1,810,276 639,469 1,169,051 South Dallas Red Bird/Airport 190 19,677,387 2.5 536,127 2.7 2.7 225,980 225,980 (3,379) - 100,360 154,960 SE Dallas/I-45 254 39,805,722 5.1 8,447,953 21.2 21.2 1,404,387 1,452,375 4,559,874 - 1,200,356 6,583,690 SW Dallas/US 67 153 17,795,507 2.3 3,102,901 17.4 18.2 (424,076) (424,076) 1,290,660 - - 1,300,000 South Dallas Total 597 77,278,616 9.8 12,086,981 15.6 15.8 1,206,291 1,254,279 5,847,155 - 1,300,716 8,038,650 South Stemmons East Brookhollow 188 8,510,381 1.1 158,482 1.9 1.9 (39,114) (39,114) (27,551) - - - E Hines North 624 20,173,510 2.6 458,198 2.3 2.7 (24,994) (16,514) (139,282) - - - Eastern Lonestar/Tpke 288 24,974,013 3.2 1,327,178 5.3 6.0 254,853 268,053 (521,468) 855,000 - - North Trinity 392 10,417,683 1.3 629,830 6.0 6.1 (47,410) (49,710) (187,323) - - - West Brookhollow 977 39,163,344 5.0 766,857 2.0 2.0 64,079 45,431 (91,734) - - - W Hines North 191 6,642,481 0.8 154,039 2.3 2.3 53,381 51,431 (102,795) - - - Western Lonestar/Tpke 96 6,875,684 0.9 965,750 14.0 14.0 (636,265) (636,265) (220,235) - - 189,200 South Stemmons Total 2,756 116,757,096 14.9 4,460,334 3.8 4.1 (375,470) (376,688) (1,290,388) 855,000 - 189,200 Great SW/Arlington Arlington 401 22,258,928 2.8 1,332,061 6.0 6.0 372,028 372,028 1,699,488 - 110,468 110,468 Lower Great Southwest 422 36,985,923 4.7 836,171 2.3 2.3 80,618 80,618 1,521,176 - 271,794 1,984,926 Upper Great Southwest 503 52,021,947 6.6 2,875,388 5.5 5.7 2,114,352 2,148,832 4,073,007 1,992,849 494,518 1,196,518 Great SW/Arlington Total 1,326 111,266,798 14.2 5,043,620 4.5 4.6 2,566,998 2,601,478 7,293,671 1,992,849 876,780 3,291,912 North Fort Worth Meacham Fld/Fossil Creek 399 41,587,770 5.3 1,957,717 4.7 4.8 232,556 232,556 323,802 500,029 491,000 1,267,205 NE Tarrant Alliance 209 40,972,296 5.2 2,976,450 7.3 7.3 140,038 120,038 1,881,629 3,099,456 550,405 2,449,562 West Tarrant 61 4,196,111 0.5 65,000 1.5 1.5 (25,000) (25,000) 176,800 - - 90,000 North Fort Worth Total 669 86,756,177 11.0 4,999,167 5.8 5.8 347,594 327,594 2,382,231 3,599,485 1,041,405 3,806,767 South Fort Worth East Fort Worth 611 23,033,874 2.9 922,651 4.0 4.3 (15,179) (40,179) 302,253 - - - Mansfield 80 4,014,312 0.5 3,760 0.1 0.1 - - 143,116 - - - N Central Fort Worth 291 10,032,750 1.3 234,790 2.3 2.3 (8,784) (8,784) (84,810) - - - S Central Tarrant County 261 22,635,186 2.9 1,002,345 4.4 4.4 826,309 837,006 1,322,423 757,745 - 287,261 S Central Fort Worth 250 9,284,204 1.2 143,524 1.5 1.5 8,150 8,150 (66,397) - - - SW Tarrant 75 1,870,773 0.2 234,121 12.5 15.0 (10,300) (10,300) (92,988) - - - South Fort Worth Total 1,568 70,871,099 9.0 2,541,191 3.6 3.7 800,196 785,893 1,523,597 757,745 - 287,261 Dallas Total 7,999 516,420,741 65.8 32,248,570 6.2 6.6 3,417,841 3,393,211 10,018,862 8,163,848 6,355,140 16,097,995 Fort Worth Total 3,563 268,894,074 34.2 12,583,978 4.7 4.8 3,714,788 3,714,965 11,199,499 6,350,079 1,918,185 7,385,940 Dallas/Fort Worth Total 11,562 785,314,815 100.0 44,832,548 5.7 6.0 7,132,629 7,108,176 21,218,361 14,513,927 8,273,325 23,483,935 Source: CBRE Research, Q4 2018.

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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW

Dallas/Fort Worth Industrial, Q3 2018 Equilibrium defines the state of the DFW industrial market.

6.0% 20,681,490 SF 6,457,289 SF 4,190,845 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter. MSF Vacancy Rate (%) 30 7

15 6

0 5 2013 2014 2015 2016 2017 YTD 2018 Total Net Absorption Delivered Construction Construction Starts Total Vacancy

Source: CBRE Research, Q3 2018.

SUPPLY AND DEMAND REMAIN BALANCED LABOR IS A CRITICAL DECISION FOR OCCUPIERS

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q3 2018 Q3 2018 2018 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 73,502,027 6,239,805 8.5 3,277,325 4.5 3,864,779 5.3 454,196 301,497 1,722,557

East Dallas 36,129,023 3,276,827 9.1 2,028,481 5.6 2,028,481 5.6 223,237 243,987 (97,738)

Northeast Dallas 97,533,719 7,392,181 7.6 4,515,703 4.6 5,147,357 5.3 39,733 153,240 647,576

Northwest Dallas 109,796,363 6,647,039 6.1 3,958,385 3.6 4,205,891 3.8 335,667 316,146 674,080

South Dallas 75,960,690 13,598,900 17.9 10,960,699 14.4 12,193,305 16.1 1,254,124 1,114,153 4,592,876

South Stemmons 116,756,129 8,515,542 7.3 4,207,292 3.6 4,504,956 3.9 (356,255) (480,817) (913,700)

Great SW/Arlington 110,390,484 8,081,601 7.3 6,555,888 5.9 6,687,516 6.1 816,636 1,705,022 4,692,193

North Ft. Worth 85,622,575 6,081,862 7.1 4,383,628 5.1 4,421,628 5.2 537,382 510,382 2,054,637

South Ft. Worth 71,132,416 4,327,766 6.1 3,527,977 5.0 3,626,674 5.1 343,535 327,235 737,704

DALLAS TOTALS 509,677,951 45,670,294 9.0 28,947,885 5.7 31,944,769 6.3 1,950,702 1,648,206 6,625,651

FT.WORTH TOTALS 267,145,475 18,491,229 6.9 14,467,493 5.4 14,735,818 5.5 1,697,553 2,542,639 7,484,534

MARKET TOTALS 776,823,426 64,161,523 8.3 43,415,378 5.6 46,680,587 6.0 3,648,255 4,190,845 14,110,185

Source: CBRE Research, Q3 2018.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Mars Candy Build-to-Suit in Passport Business Park DFW Airport DFW Airport 1,500,000

2 Quest Window Systems 1720 S Jupiter Rd Garland Northeast Dallas 327,600

3 Vistaprint 9900 Bonnie View Rd Dallas South Dallas 322,000

4 American Hotel Register 3801 S 20th Ave Euless DFW Airport 227,924

5 Better Home Products 600 109th St Arlington Great Southwest/Arlington 179,875

Source: CBRE Research, Q3 2018.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 Cohen Asset Management 3801 Pinnacle Point Dr Dallas South Stemmons 1,350,000

2 MPI Group LLC 3800 Railport Pkwy Midlothian South Dallas 826,000

3 Blackstone Mercantile Center 35/820 Fort Worth North Fort Worth 657,043

4 Stonelake Capital Partners 1850 Westpark Dr Grand Prairie Great Southwest/Arlington 425,870

5 Morgan Stanley Ridge Railhead Industrial Park Building 2 Fort Worth North Fort Worth 343,720

Source: Real Capital Analytics, Q3 2018.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2018 YTD Under Qtr. 2018 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 375 54,804,190 7.1 2,568,701 4.7 5.4 167,102 173,473 1,323,942 3,239,435 193,935 1,374,730 W DFW/Grapevine 310 18,697,837 2.4 708,624 3.8 4.7 287,094 128,024 398,615 - 646,796 646,796 DFW Airport Total 685 73,502,027 9.5 3,277,325 4.5 5.3 454,196 301,497 1,722,557 3,239,435 840,731 2,021,526 East Dallas Central E Dallas 409 16,804,681 2.2 332,373 2.0 2.0 32,530 45,780 73,659 - - - East Dallas/Mesquite 285 19,324,342 2.5 1,696,108 8.8 8.8 190,707 198,207 (171,397) 2,591,950 100,026 100,026 East Dallas Total 694 36,129,023 4.7 2,028,481 5.6 5.6 223,237 243,987 (97,738) 2,591,950 100,026 100,026 Northeast Dallas Allen/McKinney 188 11,332,608 1.5 256,975 2.3 2.3 39,346 39,346 87,334 317,446 - 164,587 NE Dallas/Garland 844 47,530,236 6.1 2,392,547 5.0 6.3 1,801 66,151 226,418 1,013,225 - - Plano 345 18,870,045 2.4 786,286 4.2 4.3 (10,761) 46,283 283,250 234,948 - - Richardson 300 16,813,826 2.2 1,077,095 6.4 6.6 (8,753) (16,640) 30,614 - - - Rockwall 54 2,987,004 0.4 2,800 0.1 0.1 18,100 18,100 19,960 700,000 - - Northeast Dallas Total 1,731 97,533,719 12.6 4,515,703 4.6 5.3 39,733 153,240 647,576 2,265,619 - 164,587 Northwest Dallas Denton 175 10,584,216 1.4 132,598 1.3 1.6 73,989 73,989 54,891 169,469 - - Lewisville 230 26,179,402 3.4 758,843 2.9 2.9 153,963 159,505 465,669 1,411,280 14,994 293,682 Metropolitan/Addison 441 20,509,525 2.6 1,436,062 7.0 7.3 (253,811) (271,415) (456,863) - - - N Stemmons/Valwood 657 49,677,735 6.4 1,595,057 3.2 3.5 375,551 368,092 636,208 825,096 235,900 235,900 NW Dallas Outlying 24 2,845,485 0.4 35,825 1.3 1.3 (14,025) (14,025) (25,825) - - - Northwest Dallas Total 1,527 109,796,363 14.1 3,958,385 3.6 3.8 335,667 316,146 674,080 2,405,845 250,894 529,582 South Dallas Red Bird/Airport 189 19,547,027 2.5 661,747 3.4 3.4 (140,328) (140,328) (229,359) 100,360 54,600 54,600 SE Dallas/I-45 251 38,605,366 5.0 7,607,337 19.7 22.5 1,251,446 1,251,446 3,107,499 1,438,800 2,176,178 5,383,334 SW Dallas/US 67 153 17,808,297 2.3 2,691,615 15.1 15.9 143,006 3,035 1,714,736 - - 1,300,000 South Dallas Total 593 75,960,690 9.8 10,960,699 14.4 16.1 1,254,124 1,114,153 4,592,876 1,539,160 2,230,778 6,737,934 South Stemmons East Brookhollow 189 8,559,693 1.1 119,368 1.4 1.4 6,560 6,560 11,563 - - - E Hines North 624 20,185,783 2.6 433,204 2.1 2.6 (15,927) (15,927) (122,768) - - - Eastern Lonestar/Tpke 288 24,974,628 3.2 1,582,031 6.3 7.1 (233,112) (424,168) (789,521) 1,281,714 - - North Trinity 392 10,417,433 1.3 582,420 5.6 5.6 21,738 23,263 (137,613) - - - West Brookhollow 978 39,092,927 5.0 830,936 2.1 2.1 (76,128) (21,271) (137,165) - - - W Hines North 192 6,649,981 0.9 329,848 5.0 5.0 (153,201) (143,089) (154,226) - - - Western Lonestar/Tpke 96 6,875,684 0.9 329,485 4.8 4.8 93,815 93,815 416,030 - - 189,200 South Stemmons Total 2,759 116,756,129 15.0 4,207,292 3.6 3.9 (356,255) (480,817) (913,700) 1,281,714 - 189,200 Great SW/Arlington Arlington 399 21,876,666 2.8 1,321,827 6.0 6.1 (9,286) 21,100 1,327,460 - - - Lower Great Southwest 422 36,983,771 4.8 916,789 2.5 2.5 1,108,123 1,966,123 1,440,558 271,794 1,200,000 1,713,132 Upper Great Southwest 502 51,530,047 6.6 4,317,272 8.4 8.6 (282,201) (282,201) 1,924,175 2,487,367 - 702,000 Great SW/Arlington Total 1,323 110,390,484 14.2 6,555,888 5.9 6.1 816,636 1,705,022 4,692,193 2,759,161 1,200,000 2,415,132 North Fort Worth Meacham Fld/Fossil Creek 397 41,097,019 5.3 1,699,273 4.1 4.2 59,611 32,611 91,246 891,000 432,485 776,205 NE Tarrant Alliance 207 40,329,445 5.2 2,644,355 6.6 6.6 417,771 417,771 1,761,591 2,949,861 1,402,375 1,899,157 West Tarrant 61 4,196,111 0.5 40,000 1.0 1.0 60,000 60,000 201,800 - - 90,000 North Fort Worth Total 665 85,622,575 11.0 4,383,628 5.1 5.2 537,382 510,382 2,054,637 3,840,861 1,834,860 2,765,362 South Fort Worth East Fort Worth 613 23,068,219 3.0 907,472 3.9 4.1 502,031 471,731 342,432 - - - Mansfield 80 4,014,312 0.5 3,760 0.1 0.1 4,176 4,176 143,116 - - - N Central Fort Worth 292 10,225,139 1.3 402,906 3.9 3.9 (29,637) (29,637) (76,026) - - - S Central Tarrant County 262 22,647,186 2.9 1,828,654 8.1 8.1 (145,978) (131,978) 485,417 757,745 - 287,261 S Central Fort Worth 251 9,305,379 1.2 161,364 1.7 1.7 (1,244) (1,244) (74,547) - - - SW Tarrant 75 1,872,181 0.2 223,821 12.0 14.4 14,187 14,187 (82,688) - - - South Fort Worth Total 1,573 71,132,416 9.2 3,527,977 5.0 5.1 343,535 327,235 737,704 757,745 - 287,261 Dallas Total 7,989 509,677,951 65.6 28,947,885 5.7 6.3 1,950,702 1,648,206 6,625,651 13,323,723 3,422,429 9,742,855 Fort Worth Total 3,561 267,145,475 34.4 14,467,493 5.4 5.5 1,697,553 2,542,639 7,484,534 7,357,767 3,034,860 5,467,755 Dallas/Fort Worth Total 11,550 776,823,426 100.0 43,415,378 5.6 6.0 3,648,255 4,190,845 14,110,185 20,681,490 6,457,289 15,210,610 Source: CBRE Research, Q3 2018.

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Dallas/Fort Worth Industrial, Q2 2018 Construction hits highwater mark as vacancy stays snug.

Vacancy Under Construction Completions Net Absorption 5.8% 22,282,426 SF 6,432,612 SF 5,980,988 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 30 12 11 25 10 20 9 15 8 7 10 6 5 5 0 4 2013 2014 2015 2016 2017 YTD 2018

Total Net Absorption Delivered Construction Construction Starts Total Vacancy

Source: CBRE Research, Q2 2018.

CONSTRUCTION REACHES NEW HIGH NORTH TEXAS IS A TOP FIVE U.S. LOGISTICS MARKET This past 90 days marks more than two and a half The Metroplex remains a premier destination for years of consecutive quarterly positive net industrial occupiers and investors. For occupiers, absorption for the Dallas/Fort Worth industrial the market offers a favorable business and taxation market. The construction pipeline has grown to environment, and for investors the region has nearly 22.3 million sq. ft. with 7.9 million sq. ft. in exceptional fundamentals, making it the second new starts tracked in Q2 2018 alone, with more most desirable market for investment in the than two-thirds of starts this quarter in either the Western Hemisphere, according to the Americas DFW Airport or North Fort Worth submarkets. Investor Intentions Survey 2018, produced by CBRE Deliveries totaled 6.4 million sq. ft. and were Research. Industrial remained the preferred asset 54.8% pre-committed. Over 100 million sq. ft. in type in 2018, with 50% of respondents calling it space has been added to DFW industrial since the most attractive sector to target for investment 2013, yet vacancy still rests at a tight 5.8%. Rock purchase in 2018. The local economy remains bottom vacancy along with a high level of strong, adding 55,500 jobs in the first five months completions suggest exceedingly robust occupier of 2018, an annualized rate of 3.7%, according to demand. Year-to-date absorption was just under 10 the Federal Reserve Bank of Dallas. DFW’s widely million sq. ft., inline with mid-year absorption recognized job and residential growth is powering levels seen over the past three years. investor interest in addition to vibrant economic fundamentals in the near and long-term outlook.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q2 2018 Q2 2018 2018 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 72,473,651 6,530,476 9.0 2,987,552 4.1 3,422,307 4.7 776,990 632,184 1,421,060

East Dallas 36,035,488 3,339,055 9.3 2,164,692 6.0 2,185,442 6.1 (303,481) (310,981) (341,725)

Northeast Dallas 97,488,864 7,038,790 7.2 4,579,806 4.7 5,324,967 5.5 45,142 (21,374) 494,336

Northwest Dallas 109,355,302 7,015,242 6.4 4,059,941 3.7 4,351,696 4.0 471,102 422,588 357,934

South Dallas 73,806,539 13,301,312 18.0 9,984,045 13.5 11,076,680 15.0 2,975,138 2,927,150 3,478,723

South Stemmons 116,808,958 8,779,244 7.5 3,918,763 3.4 4,091,865 3.5 (116,013) (211,684) (432,883)

Great SW/Arlington 108,989,061 10,348,927 9.5 6,235,819 5.7 7,255,833 6.7 2,667,648 1,799,148 2,987,171

North Ft. Worth 83,865,296 4,666,054 5.6 3,007,878 3.6 3,018,878 3.6 602,052 591,052 1,544,255

South Ft. Worth 71,242,209 5,105,084 7.2 3,881,938 5.4 3,964,335 5.6 112,790 152,905 410,469

DALLAS TOTALS 505,968,802 46,004,119 9.1 27,694,799 5.5 30,452,957 6.0 3,848,878 3,437,883 4,977,445

FT.WORTH TOTALS 264,096,566 20,120,065 7.6 13,125,635 5.0 14,239,046 5.4 3,382,490 2,543,105 4,941,895

MARKET TOTALS 770,065,368 66,124,184 8.6 40,820,434 5.3 44,692,003 5.8 7,231,368 5,980,988 9,919,340

Source: CBRE Research, Q2 2018.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Elements International Group 2250 Skyline Rd Mesquite East Dallas 487,200

2 PPG 1001 Lakeside Pkwy Lewisville Northwest Dallas 450,000

3 VMInnovations 1200 W Wintergreen Rd Hutchins South Dallas 416,891

4 Rent the Runway 1111 Bardin Road Arlington Great Southwest/Arlington 319,200

5 Toyota Motor Sales Inc 1825 Midway Rd Lewisville Northwest Dallas 121,188

Source: CBRE Research, Q2 2018.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 John Hancock 300 Gateway Parkway Roanoke North Fort Worth 602,000

2 Hard Six Holdings 1501 Kings Rd Garland Northeast Dallas 265,885

3 Hines DFW East Logistics Center Irving DFW Airport 259,555

4 Owner Occupier 1820 North Josey Lane Carrollton Northwest Dallas 197,748

5 Agellan Capital Partners 10425 Plano Road Dallas Northeast Dallas 155,324

Source: Real Capital Analytics, Q2 2018.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2018 YTD Under Qtr. 2018 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 373 54,418,232 7.1 2,541,868 4.7 5.4 603,998 459,192 1,150,469 3,433,370 - 1,180,795 W DFW/Grapevine 307 18,055,419 2.3 445,684 2.5 2.5 172,992 172,992 270,591 646,796 - - DFW Airport Total 680 72,473,651 9.4 2,987,552 4.1 4.7 776,990 632,184 1,421,060 4,080,166 - 1,180,795 East Dallas Central E Dallas 411 16,811,172 2.2 377,903 2.2 2.3 (11,207) (11,207) 27,879 - - - East Dallas/Mesquite 283 19,224,316 2.5 1,786,789 9.3 9.3 (292,274) (299,774) (369,604) 2,530,216 - - East Dallas Total 694 36,035,488 4.7 2,164,692 6.0 6.1 (303,481) (310,981) (341,725) 2,530,216 - - Northeast Dallas Allen/McKinney 192 11,383,887 1.5 303,094 2.7 2.7 130,513 121,958 47,988 317,446 164,587 164,587 NE Dallas/Garland 846 47,577,441 6.2 2,411,945 5.1 6.4 (160,162) (196,918) 160,267 764,400 - - Plano 345 18,785,671 2.4 775,525 4.1 4.5 117,651 98,851 236,967 284,948 - - Richardson 300 16,754,861 2.2 1,068,342 6.4 6.5 (40,060) (42,465) 47,254 - - - Rockwall 54 2,987,004 0.4 20,900 0.7 0.7 (2,800) (2,800) 1,860 700,000 - - Northeast Dallas Total 1,737 97,488,864 12.7 4,579,806 4.7 5.5 45,142 (21,374) 494,336 2,066,794 164,587 164,587 Northwest Dallas Denton 175 10,584,216 1.4 206,587 2.0 2.3 (11,398) (11,398) (19,098) 169,469 - - Lewisville 229 26,164,102 3.4 914,595 3.5 3.5 298,751 298,751 306,164 484,994 278,688 278,688 Metropolitan/Addison 441 20,381,393 2.6 1,182,251 5.8 6.0 (134,154) (111,226) (185,448) - - - N Stemmons/Valwood 655 49,380,106 6.4 1,734,708 3.5 4.0 317,903 246,461 268,116 909,820 - - NW Dallas Outlying 24 2,845,485 0.4 21,800 0.8 0.8 - - (11,800) - - - Northwest Dallas Total 1,524 109,355,302 14.2 4,059,941 3.7 4.0 471,102 422,588 357,934 1,564,283 278,688 278,688 South Dallas Red Bird/Airport 188 19,492,427 2.5 466,819 2.4 2.4 4,555 4,555 (89,031) 154,960 - - SE Dallas/I-45 248 36,403,315 4.7 6,682,605 18.4 21.4 1,374,638 1,326,650 1,856,053 3,377,300 3,077,156 3,207,156 SW Dallas/US 67 153 17,910,797 2.3 2,834,621 15.8 15.8 1,595,945 1,595,945 1,711,701 - 1,300,000 1,300,000 South Dallas Total 589 73,806,539 9.6 9,984,045 13.5 15.0 2,975,138 2,927,150 3,478,723 3,532,260 4,377,156 4,507,156 South Stemmons East Brookhollow 189 8,559,693 1.1 125,928 1.5 1.5 9,436 9,436 5,003 - - - E Hines North 625 20,185,655 2.6 485,003 2.4 2.9 (42,366) (140,883) (106,841) - - - Eastern Lonestar/Tpke 288 24,975,991 3.2 1,348,919 5.4 5.4 (295,722) (295,722) (365,353) - - - North Trinity 393 10,427,933 1.4 604,158 5.8 5.8 (79,631) (78,331) (160,876) - - - West Brookhollow 979 39,099,622 5.1 754,808 1.9 2.1 (34,488) (22,830) (115,894) - - - W Hines North 192 6,684,380 0.9 176,647 2.6 2.8 4,543 (5,569) (11,137) - - - Western Lonestar/Tpke 96 6,875,684 0.9 423,300 6.2 6.2 322,215 322,215 322,215 - 189,200 189,200 South Stemmons Total 2,762 116,808,958 15.2 3,918,763 3.4 3.5 (116,013) (211,684) (432,883) - 189,200 189,200 Great SW/Arlington Arlington 399 21,887,666 2.8 1,312,541 6.0 6.2 1,344,302 1,344,302 1,306,360 - - - Lower Great Southwest 421 35,752,623 4.6 824,912 2.3 4.7 (2,804) (860,804) (525,565) 1,471,794 - 513,132 Upper Great Southwest 502 51,348,772 6.7 4,098,366 8.0 8.2 1,326,150 1,315,650 2,206,376 1,361,192 702,000 702,000 Great SW/Arlington Total 1,322 108,989,061 14.2 6,235,819 5.7 6.7 2,667,648 1,799,148 2,987,171 2,832,986 702,000 1,215,132 North Fort Worth Meacham Fld/Fossil Creek 396 40,639,753 5.3 1,326,399 3.3 3.3 (107,037) (118,037) 58,635 1,323,485 343,720 343,720 NE Tarrant Alliance 205 39,017,432 5.1 1,581,479 4.1 4.1 619,089 619,089 1,343,820 4,352,236 - 496,782 West Tarrant 62 4,208,111 0.5 100,000 2.4 2.4 90,000 90,000 141,800 - 90,000 90,000 North Fort Worth Total 663 83,865,296 10.9 3,007,878 3.6 3.6 602,052 591,052 1,544,255 5,675,721 433,720 930,502 South Fort Worth East Fort Worth 614 23,150,597 3.0 1,409,503 6.1 6.1 (35,890) 12,225 (129,299) - - - Mansfield 80 4,014,312 0.5 7,936 0.2 0.2 10,000 10,000 138,940 - - - N Central Fort Worth 293 10,231,226 1.3 383,695 3.8 3.8 (28,494) (28,494) (46,389) - - - S Central Tarrant County 263 22,642,114 2.9 1,682,676 7.4 7.5 254,079 246,079 617,395 - 287,261 - 287,261 S Central Fort Worth 252 9,329,279 1.2 160,120 1.7 1.7 16,163 16,163 (73,303) - - - SW Tarrant 75 1,874,681 0.2 238,008 12.7 15.2 (103,068) (103,068) (96,875) - - - South Fort Worth Total 1,577 71,242,209 9.3 3,881,938 5.4 5.6 112,790 152,905 410,469 - 287,261 - 287,261 Dallas Total 7,986 505,968,802 65.7 27,694,799 5.5 6.0 3,848,878 3,437,883 4,977,445 13,773,719 5,009,631 6,320,426 Fort Worth Total 3,562 264,096,566 34.3 13,125,635 5.0 5.4 3,382,490 2,543,105 4,941,895 8,508,707 1,422,981 2,432,895 Dallas/Fort Worth Total 11,548 770,065,368 100.0 40,820,434 5.3 5.8 7,231,368 5,980,988 9,919,340 22,282,426 6,432,612 8,753,321 Source: CBRE Research, Q2 2018.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/research-and-reports. Lauren Paris Team Lead +1 214 9796587 [email protected]

Miller Hamrick Research Analyst +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q1 2018 Vacancy dropped to 5.8% following record deliveries

Vacancy Under Construction Completions Net Absorption 5.8% 19,349,111 SF 2,320,709 SF 3,938,352 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 24 12 11 19 10 14 9

9 8 7 4 6 (1) 5 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Total Net Absorption Under Construction Delivered Construction Total Vacancy

Source: CBRE Research, Q1 2018.

SUPPLY AND DEMAND REMAIN IN EQUILIBRIUM CONSUMER GOODS AND LOGISTICS DRIVE DEMAND Q1 2018 marks the 30th consecutive quarter of Unsurprisingly, third party logistics companies positive net absorption for the Dallas/Fort Worth (3PLs), consumer goods suppliers, and e- industrial market. Following a year of record commerce outfits led demand during Q1 2018. deliveries, just 2.3 million sq. ft. was added to the These three key industries, driven by the market during Q1 2018, with over 50% of this Metroplex’s booming population, have been space pre-committed. With 3.9 million sq. ft. taken absolute juggernauts this cycle in terms of driving by occupiers during Q1 2018, along with the demand for industrial space. Population growth removal of the Vought Airplane Factory, which drives demand for warehouse space, and accounted for over 3 million sq. ft. of functionally Dallas/Fort Worth is predicted to have an average obsolete space, the vacancy rate dropped 64 basis annual residential growth rate of 1.9% over the points (bps) over the quarter to sit at 5.8% by the next five years, or 391 new people per day. end of March. The supply pipeline remained flat, Additionally, increased adoption of automation with 19.3 million sq. ft. of active projects observed and increased sophistication of industrial product at the end of Q1 2018. The pre-committed rate of has led to larger super-regional distribution 45% for under construction product remained well centers. The geographic location of Dallas/Fort above historic levels, which have averaged around Worth, which is at the center of the Sun Belt and is 30% throughout this cycle. The South’s largest urban agglomeration, is a prime location for this type of development.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q1 2018 Q1 2018 2018 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 72,472,058 6,100,555 8.4 3,767,595 5.2 4,057,544 5.6 882,690 788,876 788,876

East Dallas 36,575,988 3,616,066 9.9 1,861,211 5.1 1,874,461 5.1 (27,494) (30,744) (30,744)

Northeast Dallas 97,349,704 7,550,636 7.8 4,410,860 4.5 5,089,505 5.2 529,695 515,710 515,710

Northwest Dallas 109,303,033 6,794,546 6.2 4,194,809 3.8 4,457,239 4.1 63,540 (64,654) (64,654)

South Dallas 69,007,059 10,021,814 14.5 9,613,884 13.9 9,613,884 13.9 551,573 551,573 551,573

South Stemmons 116,931,024 7,717,644 6.6 3,731,557 3.2 3,808,988 3.3 (226,015) (221,199) (221,199)

Great SW/Arlington 108,668,490 10,727,354 9.9 8,181,644 7.5 8,294,406 7.6 1,142,982 1,188,023 1,188,023

North Ft. Worth 83,504,482 5,238,301 6.3 3,433,324 4.1 3,433,324 4.1 942,203 953,203 953,203

South Ft. Worth 71,130,376 5,046,706 7.1 3,745,666 5.3 3,868,178 5.4 262,579 257,564 257,564

DALLAS TOTALS 501,638,866 41,801,261 8.3 27,579,916 5.5 28,901,621 5.8 1,773,989 1,539,562 1,539,562

FT.WORTH TOTALS 263,303,348 21,012,361 8.0 15,360,634 5.8 15,595,908 5.9 2,347,764 2,398,790 2,398,790

MARKET TOTALS 764,942,214 62,813,622 8.2 42,940,550 5.6 44,497,529 5.8 4,121,753 3,938,352 3,938,352

Source: CBRE Research, Q1 2018.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Tellworks Communications Park 20/360 Building 1 Arlington Great Southwest/Arlington 722,733

2 Exel Logistics 13601 Independence Pkwy Fort Worth North Fort Worth 409,914

3 ProPac 1400 N Hwy 360 Grand Prairie Great Southwest/Arlington 349,421

4 Dart Warehouse Wildlife Commerce Park Building 5 Grand Prairie Great Southwest/Arlington 342,526

5 Vira Insight Majestic Airport Center Building 6 Lewisville Northwest Dallas 329,060

Source: CBRE Research, Q1 2018.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 2020 Singleton Blvd LLC 2020 Singleton Blvd Dallas South Stemmons 472,284

2 LBA Realty 500 Airline Dr Coppell DFW Airport 467,766

3 Family Trust 4949 Joseph Hardin Dr Dallas South Dallas 276,000

4 Entrada Partners 7301 Ambassador Row Dallas South Stemmons 242,310

5 Vahid Properties LLC 2603 Technology Dr Plano Northeast Dallas 189,955

Source: Real Capital Analytics, Q1 2018.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2018 YTD Under Qtr. 2018 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 373 54,407,659 7.1 3,145,866 5.8 6.3 779,477 691,277 691,277 461,330 1,180,795 1,180,795 W DFW/Grapevine 308 18,064,399 2.4 621,729 3.4 3.5 103,213 97,599 97,599 646,796 - - DFW Airport Total 681 72,472,058 9.5 3,767,595 5.2 5.6 882,690 788,876 788,876 1,108,126 1,180,795 1,180,795 East Dallas Central E Dallas 414 17,311,853 2.3 366,696 2.1 2.2 42,336 39,086 39,086 - - - East Dallas/Mesquite 284 19,264,135 2.5 1,494,515 7.8 7.8 (69,830) (69,830) (69,830) 1,464,456 - - East Dallas Total 698 36,575,988 4.8 1,861,211 5.1 5.1 (27,494) (30,744) (30,744) 1,464,456 - - Northeast Dallas Allen/McKinney 191 11,191,386 1.5 269,020 2.4 2.4 (73,970) (73,970) (73,970) 342,270 - - NE Dallas/Garland 846 47,592,734 6.2 2,192,857 4.6 5.9 371,718 357,185 357,185 764,400 - - Plano 347 18,825,435 2.5 899,176 4.8 5.1 123,054 138,116 138,116 284,948 - - Richardson 302 16,772,620 2.2 1,031,707 6.2 6.2 104,233 89,719 89,719 - - - Rockwall 54 2,967,529 0.4 18,100 0.6 0.6 4,660 4,660 4,660 - - - Northeast Dallas Total 1,740 97,349,704 12.7 4,410,860 4.5 5.2 529,695 515,710 515,710 1,391,618 - - Northwest Dallas Denton 176 10,576,693 1.4 195,189 1.8 2.2 (7,700) (7,700) (7,700) - - - Lewisville 225 25,374,854 3.3 605,598 2.4 2.4 7,413 7,413 7,413 763,682 - - Metropolitan/Addison 442 20,485,910 2.7 990,551 4.8 5.2 1,644 (74,222) (74,222) - - - N Stemmons/Valwood 658 50,009,291 6.5 2,381,671 4.8 5.1 73,983 21,655 21,655 235,900 - - NW Dallas Outlying 25 2,856,285 0.4 21,800 0.8 0.8 (11,800) (11,800) (11,800) - - - Northwest Dallas Total 1,526 109,303,033 14.3 4,194,809 3.8 4.1 63,540 (64,654) (64,654) 999,582 - - South Dallas Red Bird/Airport 188 19,492,373 2.5 471,374 2.4 2.4 (93,586) (93,586) (93,586) 154,960 - - SE Dallas/I-45 245 33,334,971 4.4 6,024,734 18.1 18.1 529,403 529,403 529,403 6,451,176 130,000 130,000 SW Dallas/US 67 151 16,179,715 2.1 3,117,776 19.3 19.3 115,756 115,756 115,756 1,300,000 - - South Dallas Total 584 69,007,059 9.0 9,613,884 13.9 13.9 551,573 551,573 551,573 7,906,136 130,000 130,000 South Stemmons East Brookhollow 190 8,571,111 1.1 135,364 1.6 1.6 (4,433) (4,433) (4,433) - - - E Hines North 625 20,097,381 2.6 442,637 2.2 2.2 26,542 34,042 34,042 - - - Eastern Lonestar/Tpke 291 25,022,164 3.3 1,053,197 4.2 4.2 (86,660) (69,631) (69,631) - - - North Trinity 393 10,413,842 1.4 524,527 5.0 5.1 (94,552) (82,545) (82,545) - - - West Brookhollow 981 39,138,172 5.1 720,320 1.8 2.0 (56,689) (93,064) (93,064) - - - W Hines North 192 6,684,380 0.9 181,190 2.7 2.7 (10,223) (5,568) (5,568) - - - Western Lonestar/Tpke 96 7,003,974 0.9 674,322 9.6 9.6 ------South Stemmons Total 2,768 116,931,024 15.3 3,731,557 3.2 3.3 (226,015) (221,199) (221,199) - - - Great SW/Arlington Arlington 394 20,346,598 2.7 1,556,528 7.7 7.8 (41,079) (37,942) (37,942) - - - Lower Great Southwest 427 37,707,176 4.9 1,897,887 5.0 5.0 270,174 335,239 335,239 1,200,000 513,132 513,132 Upper Great Southwest 504 50,614,716 6.6 4,727,229 9.3 9.6 913,887 890,726 890,726 1,598,075 - - Great SW/Arlington Total 1,325 108,668,490 14.2 8,181,644 7.5 7.7 1,142,982 1,188,023 1,188,023 2,798,075 513,132 513,132 North Fort Worth Meacham Fld/Fossil Creek 394 39,583,191 5.2 1,139,474 2.9 2.9 165,672 176,672 176,672 1,667,205 - - NE Tarrant Alliance 208 39,803,180 5.2 2,193,850 5.5 5.5 724,731 724,731 724,731 1,636,652 496,782 496,782 West Tarrant 61 4,118,111 0.5 100,000 2.4 2.4 51,800 51,800 51,800 90,000 - - North Fort Worth Total 663 83,504,482 10.9 3,433,324 4.1 4.1 942,203 953,203 953,203 3,393,857 496,782 496,782 South Fort Worth East Fort Worth 615 23,135,852 3.0 1,373,613 5.9 6.2 (134,009) (141,524) (141,524) - - - Mansfield 81 4,026,356 0.5 18,818 0.5 0.5 128,940 128,940 128,940 - - - N Central Fort Worth 293 10,264,373 1.3 355,201 3.5 3.5 (17,895) (17,895) (17,895) - - - S Central Tarrant County 261 22,420,366 2.9 1,648,612 7.4 7.4 371,316 371,316 371,316 287,261 - - S Central Fort Worth 256 9,408,748 1.2 214,482 2.3 2.3 (89,466) (89,466) (89,466) - - - SW Tarrant 75 1,874,681 0.2 134,940 7.2 9.7 3,693 6,193 6,193 - - - South Fort Worth Total 1,581 71,130,376 9.3 3,745,666 5.3 5.4 262,579 257,564 257,564 287,261 - - Dallas Total 7,997 501,638,866 65.6 27,579,916 5.5 5.8 1,773,989 1,539,562 1,539,562 12,869,918 1,310,795 1,310,795 Fort Worth Total 3,569 263,303,348 34.4 15,360,634 5.8 5.9 2,347,764 2,398,790 2,398,790 6,479,193 1,009,914 1,009,914 Dallas/Fort Worth Total 11,566 764,942,214 100.0 42,940,550 5.6 5.8 4,121,753 3,938,352 3,938,352 19,349,111 2,320,709 2,320,709 Source: CBRE Research, Q1 2018.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Analyst +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q4 2017 Market record: 26.8 million sq. ft. delivered in 2017

Vacancy Under Construction Completions Net Absorption 6.4% 19,157,532 SF 7,923,937 SF 4,547,505 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 24 12 11 19 10 14 9

9 8 7 4 6 (1) 5 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Total Net Absorption Under Construction Delivered Construction Total Vacancy

Source: CBRE Research, Q4 2017.

YEAR ENDED WITH A SURGE IN LEASING ACTIVITY BUILD-TO-SUIT CONSTRUCTION PICKS UP Q4 2017 marks the 29th consecutive 90-day period Deliveries in 2017 totaled 26.8 million sq. ft., of positive net absorption. The annual industrial breaking the record set last year for annual absorption in Dallas/Fort Worth surged to over construction completions. Since 2010, 96.6 million 20.6 million sq. ft. Despite the relatively fainter sq. ft. has been delivered to the market, slightly absorption in the first two quarters, yearly demand more than the entire Austin and San Antonio was the second-highest of the current cycle and industrial markets combined. The industrial fourth-highest of all annual absorption tracked by product pipeline widened to 19.2 million sq. ft. CBRE Research with data from the early 1990s. during Q4 2017. The majority of the starts in Q4 Third party logistics groups (3PLs) and consumer 2017 were attributable to build-to-suits (BTS), with goods companies led tenant demand this quarter, 4.6 million sq. ft. of newly started BTS activity in accounting for over half of the top 25 move-ins of South Dallas alone. Market-wide, BTS projects Q4 2017. Market experts say DFW will see more account for 50% of all active industrial distribution center consolidation into larger development, the highest ratio of BTS to regional and super-regional hubs. Being located speculative construction seen this cycle. The adjacent to or near third party logistics groups increase in BTS activity is not unexpected as such as FedEx, UPS and additional fulfillment distribution centers have become more service providers is now a major factor in real sophisticated to meet specific occupier needs. estate decision making for industrial tenants.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q4 2017 Q4 2017 2017 Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 71,370,995 5,695,188 8.0 3,469,490 4.9 3,732,244 5.2 101,224 126,276 2,051,707

East Dallas 36,271,745 2,761,444 7.6 1,833,717 5.1 1,843,717 5.1 117,261 227,561 708,463

Northeast Dallas 97,527,670 7,806,758 8.0 5,054,134 5.2 5,718,794 5.9 1,078,688 1,033,997 1,046,946

Northwest Dallas 108,689,981 6,788,121 6.2 4,405,493 4.1 4,539,729 4.2 501,470 567,589 2,995,680

South Dallas 68,819,169 10,651,361 15.5 10,035,457 14.6 10,035,457 14.6 389,883 406,520 3,609,125

South Stemmons 120,799,622 10,704,915 8.9 6,435,865 5.3 6,558,893 5.4 338,131 287,419 1,221,125

Great SW/Arlington 108,700,741 12,047,574 11.1 8,721,996 8.0 8,918,551 8.2 1,428,987 1,423,721 4,091,849

North Ft. Worth 83,043,489 4,989,643 6.0 3,798,745 4.6 3,860,145 4.6 1,296,254 1,302,254 6,033,150

South Ft. Worth 71,227,828 5,345,533 7.5 4,054,868 5.7 4,172,365 5.9 (784,335) (827,832) (1,095,582)

DALLAS TOTALS 503,479,182 44,407,787 8.8 31,234,156 6.2 32,428,834 6.4 2,526,657 2,649,362 11,633,046

FT.WORTH TOTALS 262,972,058 22,382,750 8.5 16,575,609 6.3 16,951,061 6.4 1,940,906 1,898,143 9,029,417

MARKET TOTALS 766,451,240 66,790,537 8.7 47,809,765 6.2 49,379,895 6.4 4,467,563 4,547,505 20,662,463

Source: CBRE Research, Q4 2017.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 3M 300 Gateway Pkwy Roanoke North Fort Worth 603,050

2 Stonecrop Technologies 3737 Miller Rd Garland Northeast Dallas 472,200

3 Electrolux 2935 Danieldale Rd Lancaster South Dallas 343,421

4 Woods Distribution Solutions 2900 Meacham Blvd Fort Worth North Fort Worth 250,000

5 Ecolab 2101 Reeves Pl Fort Worth South Fort Worth 192,000

Source: CBRE Research, Q4 2017.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 Confidential Eagle Park 20/35 DeSoto South Dallas 454,408

2 New Mountain Capital ESAB Denton Denton Northwest Dallas 422,819

3 International Airport Centers Cardinal Health Distribution Center Grand Prairie Great Southwest/Arlington 361,690

4 Confidential Railhead Industrial Park Building 1 Fort Worth North Fort Worth 299,000

5 High Street Realty Las Colinas Distribution Center Irving DFW Airport 260,040

Source: Real Capital Analytics, Q4 2017.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2017 YTD Under Qtr. 2017 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 371 53,243,696 6.9 2,744,548 5.2 5.6 41,278 64,980 1,560,751 1,374,730 - 1,605,738 W DFW/Grapevine 310 18,127,299 2.4 724,942 4.0 4.0 59,946 61,296 490,956 646,796 347,042 347,042 DFW Airport Total 681 71,370,995 9.3 3,469,490 4.9 5.2 101,224 126,276 2,051,707 2,021,526 347,042 1,952,780 East Dallas - Central E Dallas 417 17,338,896 2.3 409,032 2.4 2.4 (3,174) 2,326 240,150 - - 344,400 East Dallas/Mesquite 284 18,932,849 2.5 1,424,685 7.5 7.5 120,435 225,235 468,313 877,230 - - East Dallas Total 701 36,271,745 4.7 1,833,717 5.1 5.1 117,261 227,561 708,463 877,230 - 344,400 Northeast Dallas Allen/McKinney 192 11,262,406 1.5 195,050 1.7 1.7 102,692 102,692 165,030 342,270 68,000 113,120 NE Dallas/Garland 846 47,679,019 6.2 2,747,304 5.8 7.0 601,670 590,733 764,848 764,400 818,000 1,225,350 Plano 348 18,844,135 2.5 1,022,230 5.4 5.8 73,360 39,606 (67,902) - - 23,750 Richardson 302 16,774,581 2.2 1,066,790 6.4 6.4 (69,299) (69,299) (192,295) - - - Rockwall 54 2,967,529 0.4 22,760 0.8 0.8 370,265 370,265 377,265 - 370,025 370,025 Northeast Dallas Total 1,742 97,527,670 12.7 5,054,134 5.2 5.9 1,078,688 1,033,997 1,046,946 1,106,670 1,256,025 1,732,245 Northwest Dallas Denton 176 10,576,693 1.4 187,489 1.8 2.1 39,998 39,998 969,745 - - 1,017,400 Lewisville 225 25,372,709 3.3 734,769 2.9 2.9 374,577 388,016 1,151,021 748,994 322,981 806,331 Metropolitan/Addison 445 20,587,442 2.7 1,017,581 4.9 5.0 (38,831) (38,691) (61,147) - - - N Stemmons/Valwood 659 49,293,032 6.4 2,455,654 5.0 5.2 125,726 178,266 902,861 234,904 285,788 976,888 NW Dallas Outlying 25 2,860,105 0.4 10,000 0.3 0.3 - - 33,200 - - - Northwest Dallas Total 1,530 108,689,981 14.2 4,405,493 4.1 4.2 501,470 567,589 2,995,680 983,898 608,769 2,800,619 South Dallas Red Bird/Airport 188 19,440,636 2.5 377,788 1.9 1.9 (11,604) 5,033 640,334 - - 663,000 SE Dallas/I-45 244 33,204,971 4.3 6,424,137 19.3 19.3 103,750 103,750 2,426,592 6,545,176 1,654,940 4,493,762 SW Dallas/US 67 151 16,173,562 2.1 3,233,532 20.0 20.0 297,737 297,737 542,199 1,300,000 948,392 1,098,392 South Dallas Total 583 68,819,169 9.0 10,035,457 14.6 14.6 389,883 406,520 3,609,125 7,845,176 2,603,332 6,255,154 South Stemmons East Brookhollow 190 8,572,011 1.1 130,931 1.5 1.5 (15,231) (15,231) 3,028 - - - E Hines North 627 20,137,493 2.6 469,179 2.3 2.4 13,229 53,729 103,589 - - - Eastern Lonestar/Tpke 292 25,038,164 3.3 812,459 3.2 3.5 39,439 (13,771) 476,629 - - 518,241 North Trinity 394 10,435,832 1.4 429,975 4.1 4.3 (17,631) (29,638) 8,384 - - - West Brookhollow 984 39,855,227 5.2 663,631 1.7 1.8 69,283 47,943 44,482 - - - W Hines North 192 6,684,380 0.9 170,967 2.6 2.6 84,542 79,887 130,613 - - - Western Lonestar/Tpke 97 10,076,515 1.3 3,758,723 37.3 37.3 164,500 164,500 454,400 - 792,240 1,042,240 South Stemmons Total 2,776 120,799,622 15.8 6,435,865 5.3 5.4 338,131 287,419 1,221,125 - 792,240 1,560,481 Great SW/Arlington Arlington 394 20,320,089 2.7 1,476,697 7.3 7.5 754,258 751,121 2,125,599 - 301,000 2,368,766 Lower Great Southwest 425 37,279,604 4.9 1,654,929 4.4 4.6 56,027 66,027 356,625 1,713,132 743,840 743,840 Upper Great Southwest 506 51,101,048 6.7 5,590,370 10.9 11.1 618,702 606,573 1,609,625 702,000 83,125 4,006,654 Great SW/Arlington Total 1,325 108,700,741 14.2 8,721,996 8.0 8.2 1,428,987 1,423,721 4,091,849 2,415,132 1,127,965 7,119,260 North Fort Worth Meacham Fld/Fossil Creek 395 39,618,980 5.2 1,225,146 3.1 3.2 708,511 714,511 1,778,009 1,397,205 600,000 1,257,043 NE Tarrant Alliance 207 39,306,398 5.1 2,421,799 6.2 6.2 587,743 587,743 4,293,065 2,133,434 - 3,061,275 West Tarrant 61 4,118,111 0.5 151,800 3.7 3.7 - - (37,924) 90,000 - 100,000 North Fort Worth Total 663 83,043,489 10.8 3,798,745 4.6 4.6 1,296,254 1,302,254 6,033,150 3,620,639 600,000 4,418,318 South Fort Worth East Fort Worth 616 23,152,631 3.0 1,279,604 5.5 5.7 39,494 (1,306) 87,332 - 100,000 100,000 Mansfield 81 4,026,356 0.5 147,758 3.7 3.7 (7,516) (7,516) 31,882 - - - N Central Fort Worth 294 10,278,114 1.3 337,306 3.3 3.3 (22,823) (22,823) 97,327 - - - S Central Tarrant County 262 22,426,366 2.9 2,022,428 9.0 9.1 (788,152) (790,849) (1,319,334) 287,261 488,564 488,564 S Central Fort Worth 258 9,469,305 1.2 129,139 1.4 1.4 4,049 4,049 175,605 - - - SW Tarrant 75 1,875,056 0.2 138,633 7.4 10.0 (9,387) (9,387) (168,394) - - - South Fort Worth Total 1,586 71,227,828 9.3 4,054,868 5.7 5.9 (784,335) (827,832) (1,095,582) 287,261 588,564 588,564 Dallas Total 8,013 503,479,182 65.7 31,234,156 6.2 6.4 2,526,657 2,649,362 11,633,046 12,834,500 5,607,408 14,645,679 Fort Worth Total 3,574 262,972,058 34.3 16,575,609 6.3 6.4 1,940,906 1,898,143 9,029,417 6,323,032 2,316,529 12,126,142 Dallas/Fort Worth Total 11,587 766,451,240 100.0 47,809,765 6.2 6.4 4,467,563 4,547,505 20,662,463 19,157,532 7,923,937 26,771,821 Source: CBRE Research, Q4 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q3 2017 Market in top gear – Q3 2017 demand nears 8.2M sq. ft.

Vacancy Under Construction Completions Net Absorption 6.2% 16,425,574 SF 4,964,255 SF 8,193,820 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 24 12 11 19 10 14 9

9 8 7 4 6 (1) 5 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Total Net Absorption Under Construction Delivered Construction Total Vacancy

Source: CBRE Research, Q3 2017.

E-COMMERCE RE-ENERGIZED LEASING STRONGER PRELEASED RATES FOR NEW BUILDINGS Q3 2017 marks the 28th consecutive period of Buildings delivered in Q3 2017 were 60.3% positive net absorption. While the absorption of preleased and accounted for over one third of the the first two quarters was fainter than the quarterly absorption; an indication of healthy blockbuster quarters of the past two years, demand in the market and an improvement over industrial demand roared back this past quarter to Q4 2016 and Q1 2017 when market deliveries were nearly 8.2 million sq. ft., which is the second- preleased at only 22.2% and 36.5%, respectively. highest absorption observed this cycle after Q3 The overall amount of industrial space under 2016 when 8.9 million sq. ft. was taken down by construction in DFW continued to decline and is tenants in Dallas/Fort Worth. The majority of now observed to be around 16.4 million sq. ft. This absorption can be attributed to consumer goods, e- was still firmly in the top markets for building commerce and logistics companies this quarter. activity, but could be a sign that developers are Q3 2017 was marked by large move-ins, with 43.5% holding back a bit to let the existing vacant space of absorption due to the largest five tenant move- occupy. Notably, only 6.3% of these active ins, which were all from the aforementioned construction projects are attributable to REITs, as categories. Consequently, vacancy fell 56 basis many have tabled planned projects in Dallas/Fort points to 6.2% as tenants are taking down empty Worth, particularly in South Dallas and Great newer spaces that had caused recent rises in the Southwest/Arlington where a combined 27.6 rate. million sq. ft. has been delivered since 2015.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q3 2017 Q3 2017 2017 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 71,260,677 5,368,608 7.5 3,231,391 4.5 3,519,197 4.9 1,662,673 1,474,571 1,925,431

East Dallas 36,385,828 2,594,747 7.2 1,954,244 5.4 2,074,544 5.7 306,306 196,006 480,902

Northeast Dallas 96,641,361 7,938,803 8.0 4,989,503 5.2 5,609,472 5.8 261,514 345,636 12,949

Northwest Dallas 108,355,764 7,449,269 7.0 4,490,984 4.1 4,691,339 4.3 719,059 743,433 2,428,091

South Dallas 66,214,521 9,022,379 13.3 7,822,008 11.8 7,838,645 11.8 1,157,225 1,157,225 3,202,605

South Stemmons 119,986,140 9,710,872 8.2 6,085,291 5.1 6,132,223 5.1 (15,435) (65,606) 933,706

Great SW / Arlington 107,574,697 11,513,059 10.7 9,289,445 8.6 9,447,354 8.8 1,662,001 1,684,530 2,668,128

North Ft. Worth 82,527,740 5,868,096 9.8 4,588,763 5.6 4,656,163 5.6 2,970,843 2,970,843 4,730,896

South Ft. Worth 70,921,113 4,978,888 5.7 2,732,183 3.9 2,806,183 4.0 (317,218) (312,818) (267,750)

DALLAS TOTALS 498,844,291 42,084,678 8.4 28,573,421 5.7 29,865,420 6.0 4,091,342 3,851,265 8,983,684

FT.WORTH TOTALS 261,023,550 22,360,043 9.6 16,610,391 6.4 16,909,700 6.5 4,315,626 4,342,555 7,131,274

MARKET TOTALS 759,867,841 64,444,721 9.0 45,183,812 5.9 46,775,120 6.2 8,406,968 8,193,820 16,114,958

Source: CBRE Research, Q3 2017.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Wayfair.com BTS NEC N I35 E & Wintergreen Rd Lancaster South Dallas 874,000

2 Haier Wildlife Commerce Park Building 6 Grand Prairie Great Southwest/Arlington 703,000

3 S&S Active Wear 4800 N Sylvania Rd Fort Worth North Fort Worth 493,000

4 Allen Distribution 4250 Dale Earnhardt Way Fort Worth North Fort Worth 349,000

5 XPO Logistics 400 Dividend Dr Coppell DFW Airport 263,000

Source: CBRE Research, Q3 2017.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 Stockbridge 751 Port America PL Grapevine DFW Airport 717,000

2 Flex-N-Gate 2250 W Bardin Rd Grand Prairie Great Southwest/Arlington 430,000

3 Lexington Realty 4005 I-30 Grand Prairie South Stemmons 215,000

4 Stonelake Capital Partners 3401 Garden Brook Dr Dallas Northwest Dallas 134,000

5 Cohen Asset Management 701 S International Rd Garland Northeast Dallas 124,000

Source: Real Capital Analytics, Q3 2017.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2017 YTD Under Qtr. 2017 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 374 53,502,235 7.0 2,793,545 5.2 5.7 1,541,134 1,353,032 1,495,771 1,180,795 256,748 1,605,738 W DFW/Grapevine 308 17,758,442 2.3 437,846 2.5 2.5 121,539 121,539 429,660 347,042 - - DFW Airport Total 682 71,260,677 9.4 3,231,391 4.5 4.9 1,662,673 1,474,571 1,925,431 1,527,837 256,748 1,605,738 East Dallas Central E Dallas 422 17,446,979 2.3 409,124 2.3 2.4 272,887 267,387 237,824 - 344,400 344,400 East Dallas/Mesquite 284 18,938,849 2.5 1,545,120 8.2 8.7 33,419 (71,381) 243,078 - - - East Dallas Total 706 36,385,828 4.8 1,954,244 5.4 5.7 306,306 196,006 480,902 - 344,400 344,400 Northeast Dallas Allen/McKinney 192 11,541,739 1.5 229,742 2.0 2.0 (21,098) (21,098) 62,338 208,000 - 45,120 NE Dallas/Garland 844 46,896,386 6.2 2,643,680 5.6 6.9 217,016 311,089 174,115 818,000 - 407,350 Plano 348 18,844,135 2.5 1,095,590 5.8 6.0 72,506 62,555 (107,508) - - 23,750 Richardson 302 16,761,353 2.2 997,491 6.0 6.0 (11,760) (11,760) (122,996) - - - Rockwall 53 2,597,748 0.3 23,000 0.9 0.9 4,850 4,850 7,000 370,025 - - Northeast Dallas Total 1,739 96,641,361 12.7 4,989,503 5.2 5.8 261,514 345,636 12,949 1,396,025 - 476,220 Northwest Dallas Denton 176 10,576,693 1.4 227,487 2.2 2.5 (14,350) (47,850) 929,747 - - 1,017,400 Lewisville 222 25,050,475 3.3 786,365 3.1 3.2 193,677 193,677 763,005 792,981 - 483,350 Metropolitan/Addison 447 20,723,324 2.7 1,171,540 5.7 5.7 (112,975) (67,269) (22,456) - - - N Stemmons/Valwood 658 48,981,177 6.4 2,295,592 4.7 5.0 652,707 664,875 724,595 285,788 330,100 691,100 NW Dallas Outlying 27 3,024,095 0.4 10,000 0.3 0.3 - - 33,200 - - - Northwest Dallas Total 1,530 108,355,764 14.3 4,490,984 4.1 4.3 719,059 743,433 2,428,091 1,078,769 330,100 2,191,850 South Dallas Red Bird/Airport 188 19,440,636 2.6 366,184 1.9 2.0 2,660 2,660 635,301 - - 663,000 SE Dallas/I-45 242 31,548,715 4.2 4,872,947 15.4 15.4 996,295 996,295 2,322,842 3,596,216 1,367,089 2,838,822 SW Dallas/US 67 150 15,225,170 2.0 2,582,877 17.0 17.0 158,270 158,270 244,462 948,392 150,000 150,000 South Dallas Total 580 66,214,521 8.7 7,822,008 11.8 11.8 1,157,225 1,157,225 3,202,605 4,544,608 1,517,089 3,651,822 South Stemmons East Brookhollow 192 8,650,162 1.1 193,851 2.2 2.2 8,125 8,125 18,259 - - - E Hines North 626 20,068,215 2.6 482,408 2.4 2.6 12,199 (35,801) 49,860 - - - Eastern Lonestar/Tpke 294 25,104,324 3.3 877,282 3.5 3.4 (9,326) (13,926) 490,400 - - 518,241 North Trinity 395 10,451,467 1.4 412,344 3.9 4.0 24,388 26,817 38,022 - - - West Brookhollow 988 39,995,942 5.3 732,914 1.8 1.9 (61,106) (61,106) (3,461) - - - W Hines North 193 6,714,262 0.9 255,509 3.8 3.8 10,285 10,285 50,726 - - - Western Lonestar/Tpke 94 9,001,768 1.2 3,130,983 34.8 34.8 - - 289,900 792,240 - 250,000 South Stemmons Total 2,782 119,986,140 15.8 6,085,291 5.1 5.1 (15,435) (65,606) 933,706 792,240 - 768,241 Great SW/Arlington Arlington 393 20,019,089 2.6 2,026,013 10.1 10.3 1,046,635 1,076,635 1,374,478 301,000 1,044,000 2,067,766 Lower Great Southwest 423 36,535,841 4.8 1,009,466 2.8 3.0 515,456 526,456 290,598 2,456,972 - - Upper Great Southwest 505 51,019,767 6.7 6,253,966 12.3 12.4 99,910 81,439 1,003,052 785,125 102,375 3,923,529 Great SW/Arlington Total 1,321 107,574,697 14.2 9,289,445 8.6 8.8 1,662,001 1,684,530 2,668,128 3,543,097 1,146,375 5,991,295 North Fort Worth Meacham Fld/Fossil Creek 395 39,047,744 5.1 1,333,657 3.4 3.6 1,126,824 1,126,824 1,063,498 821,000 657,043 657,043 NE Tarrant Alliance 208 39,366,552 5.2 3,103,306 7.9 7.9 1,895,819 1,895,819 3,705,322 2,133,434 712,500 3,061,275 West Tarrant 61 4,113,444 0.5 151,800 3.7 3.7 (51,800) (51,800) (37,924) - - 100,000 North Fort Worth Total 664 82,527,740 10.9 4,588,763 5.6 5.6 2,970,843 2,970,843 4,730,896 2,954,434 1,369,543 3,818,318 South Fort Worth East Fort Worth 616 23,113,483 3.0 1,219,098 5.3 5.3 63,265 67,665 88,638 100,000 - - Mansfield 81 4,026,356 0.5 140,242 3.5 3.5 (664) (664) 39,398 - - - N Central Fort Worth 298 10,361,515 1.4 322,322 3.1 3.1 (17,479) (17,479) 120,150 - - - S Central Tarrant County 261 21,972,317 2.9 788,087 3.6 3.7 (276,890) (276,890) (528,485) 488,564 - - S Central Fort Worth 259 9,536,873 1.3 133,188 1.4 1.4 (250) (250) 171,556 - - - SW Tarrant 76 1,910,569 0.3 129,246 6.8 9.3 (85,200) (85,200) (159,007) - - - South Fort Worth Total 1,591 70,921,113 9.3 2,732,183 3.9 4.0 (317,218) (312,818) (267,750) 588,564 - - Dallas Total 8,019 498,844,291 65.6 28,573,421 5.7 6.0 4,091,342 3,851,265 8,983,684 9,339,479 2,448,337 9,038,271 Fort Worth Total 3,576 261,023,550 34.4 16,610,391 6.4 6.5 4,315,626 4,342,555 7,131,274 7,086,095 2,515,918 9,809,613 Dallas/Fort Worth Total 11,595 759,867,841 100.0 45,183,812 5.9 6.2 8,406,968 8,193,820 16,114,958 16,425,574 4,964,255 18,847,884 Source: CBRE Research, Q3 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q2 2017 Back to basics — Metroplex fundamentals remain strong

Vacancy Under Construction Completions Net Absorption 6.7% 17,222,789 SF 4,062,959 SF 2,648,013 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 24 12 11 19 10 14 9

9 8 7 4 6 (1) 5 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Total Net Absorption Under Construction Delivered Construction Total Vacancy

Source: CBRE Research, Q2 2017.

WHEN DJIA TOPPED 11,000 IN Q3 2010 . . . OR THE AVAILABILITY IS DOWN, AND PRE-LEASING IS UP LAST TIME DFW HAD NEGATIVE GROWTH Following a record year for product delivery, when Q2 2017 marks the 27th consecutive period of 22.7 million sq. ft. was delivered in the DFW positive net absorption. While the recent industrial market, a quarterly record 9.8 million absorption is fainter than the blockbuster quarters sq. ft. was delivered in Q1 2017. Pre-leasing for of the past two years (and naysayers are quick to construction deliveries was only 22.2% for Q4 2016 point to signs of softening), a more clear picture and 36.5% for Q1 2017. The pre-lease rate for Q2 can be found by careful deciphering of the data. 2017 was 49.5% - more in line with long term trends seen in the market. Also, while vacancy rose Industrial absorption has remained strong another 24 basis points (BPS) from Q1 2017 to throughout this prolonged economic recovery that 6.7%, space availability decreased 13 BPS over the was more of a slow burn than a fire flash. Basics quarter to 9.0%, despite having an additional four for the Dallas/Fort Worth industrial market remain million sq. ft. delivered during Q2 2017. Pre-leased solid and North Texas continues to attract rates at or above 50%, as has largely been the case corporate relocations and individual job seekers in Dallas/Fort Worth this cycle, suggest a alike. In fact, an estimated 143,435 new residents sustainable resiliency in the market beyond chose the Metroplex during 2016, or about 393 new headline grabbing deals, and a product type that consumers per day. This expanding consumer continues to attract investors seeking consistent base is boosting area industrial metrics. and stable returns.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q2 2017 Q2 2017 2017 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 71,041,268 6,607,524 9.3 4,653,578 6.6 4,813,282 6.8 (773,313) (914,439) 450,860

East Dallas 36,112,918 2,592,014 7.2 1,923,017 5.3 1,933,017 5.4 105,409 105,409 284,896

Northeast Dallas 97,222,811 7,812,617 8.0 5,303,944 5.5 6,008,035 6.2 (52,297) (52,587) (332,687)

Northwest Dallas 108,019,179 7,543,385 7.0 4,906,934 4.5 5,131,663 4.8 880,960 720,043 1,684,658

South Dallas 64,711,314 8,629,917 13.3 7,460,709 11.5 7,477,346 11.6 1,000,555 1,048,818 2,045,380

South Stemmons 120,798,636 9,960,681 8.2 6,142,722 5.1 6,164,867 5.1 554,297 558,676 999,312

Great SW / Arlington 105,308,216 12,569,274 11.9 9,771,694 9.3 10,165,509 9.7 979,432 903,367 983,598

North Ft. Worth 80,984,549 7,975,414 9.8 6,373,895 7.9 6,441,295 8.0 174,381 206,311 1,760,053

South Ft. Worth 71,030,935 4,047,174 5.7 2,518,988 3.5 2,597,388 3.7 97,215 72,415 45,068

DALLAS TOTALS 497,906,126 43,146,138 8.7 30,390,904 6.1 31,528,210 6.3 1,715,611 1,465,920 5,132,419

FT.WORTH TOTALS 257,323,700 24,591,862 9.6 18,664,577 7.3 19,204,192 7.5 1,251,028 1,182,093 2,788,719

MARKET TOTALS 755,229,826 67,738,000 9.0 49,055,481 6.5 50,732,402 6.7 2,966,639 2,648,013 7,921,138

Source: CBRE Research, Q2 2017.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 UPS 2320 E Bardin Rd Arlington Great Southwest/Arlington 1,004,400

2 Lasko Products 1700 Meacham Blvd Fort Worth North Fort Worth 505,000

3 KidKraft 2525 Esters Blvd Dallas DFW Airport 401,572

4 Dematic Corporation 400 E Industrial Blvd Fort Worth North Fort Worth 299,000

5 Stonecrop Technologies 3901 West Miller Rd Garland Northeast Dallas 115,000

Source: CBRE Research, Q2 2017.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 Clarion Partners DRA Longhorn Industrial Portfolio Dallas/Fort Worth Market-wide 2,501,424

2 Rialto Capital Management Greenfield Partners TX Industrial Portfolio 2017 Dallas/Fort Worth Market-wide 1,697,271

3 Pure Industrial REIT DalPort Trade Center Building 1 Wilmer South Dallas 758,922

4 Dalfen America 8901 Forney Rd Dallas East Dallas 419,626

5 LBA Realty 4895 Mountain Creek Pkwy Dallas South Dallas 192,000

Source: Real Capital Analytics, Q2 2017.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2017 YTD Under Qtr. 2017 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 373 53,268,997 7.1 4,094,193 7.7 8.0 (804,400) (942,328) 142,739 1,142,748 423,720 1,348,990 W DFW/Grapevine 309 17,772,271 2.4 559,385 3.1 3.2 31,087 27,889 308,121 347,042 - - DFW Airport Total 682 71,041,268 9.4 4,653,578 6.6 6.8 (773,313) (914,439) 450,860 1,489,790 423,720 1,348,990 East Dallas Central E Dallas 423 17,174,069 2.3 344,478 2.0 2.1 (1,910) (1,910) (29,563) 344,400 - - East Dallas/Mesquite 284 18,938,849 2.5 1,578,539 8.3 8.3 107,319 107,319 314,459 - - - East Dallas Total 707 36,112,918 4.8 1,923,017 5.3 5.4 105,409 105,409 284,896 344,400 - - Northeast Dallas Allen/McKinney 193 11,567,553 1.5 208,644 1.8 1.8 72,791 72,791 83,436 208,000 45,120 45,120 NE Dallas/Garland 844 47,234,271 6.2 2,860,696 6.1 7.5 166,868 178,032 (136,974) 818,000 269,350 407,350 Plano 350 18,939,990 2.5 1,168,096 6.2 6.3 (170,682) (182,136) (170,063) - 23,750 23,750 Richardson 303 16,883,249 2.2 1,038,658 6.2 6.2 (105,424) (105,424) (111,236) - - - Rockwall 53 2,597,748 0.3 27,850 1.1 1.1 (15,850) (15,850) 2,150 370,025 - - Northeast Dallas Total 1,743 97,222,811 12.9 5,303,944 5.5 6.2 (52,297) (52,587) (332,687) 1,396,025 338,220 476,220 Northwest Dallas Denton 176 10,559,893 1.4 213,137 2.0 2.0 135,350 135,350 977,597 - 187,400 1,017,400 Lewisville 222 25,049,912 3.3 980,042 3.9 4.0 409,167 395,728 569,328 792,981 381,000 483,350 Metropolitan/Addison 450 20,803,994 2.8 1,070,245 5.1 5.4 100,459 52,113 44,813 - - - N Stemmons/Valwood 659 48,695,975 6.4 2,633,510 5.4 5.7 235,984 136,852 59,720 615,888 361,000 361,000 NW Dallas Outlying 27 2,909,405 0.4 10,000 0.3 0.3 - - 33,200 - - - Northwest Dallas Total 1,534 108,019,179 14.2 4,906,934 4.5 4.8 880,960 720,043 1,684,658 1,408,869 929,400 1,861,750 South Dallas Red Bird/Airport 188 19,440,636 2.6 368,844 1.9 2.0 3,363 51,626 632,641 - - 663,000 SE Dallas/I-45 239 30,169,429 4.0 4,500,718 14.9 14.9 980,140 980,140 1,326,547 2,802,060 - 1,471,733 SW Dallas/US 67 149 15,101,249 2.0 2,591,147 17.2 17.2 17,052 17,052 86,192 1,098,392 - - South Dallas Total 576 64,711,314 8.6 7,460,709 11.5 11.6 1,000,555 1,048,818 2,045,380 3,900,452 - 2,134,733 South Stemmons East Brookhollow 192 8,650,162 1.2 201,976 2.3 2.3 415 415 10,134 - - - E Hines North 628 20,115,237 2.7 494,607 2.5 2.5 (26,988) (26,988) 85,661 - - - Eastern Lonestar/Tpke 293 25,189,790 3.3 929,572 3.7 3.7 465,076 465,076 504,326 - 518,241 518,241 North Trinity 399 10,496,249 1.4 447,982 4.3 4.3 (98,824) (98,824) 11,205 - - - West Brookhollow 991 40,579,546 5.4 671,808 1.7 1.7 (3,390) 989 57,645 - - - W Hines North 193 6,765,884 0.9 265,794 3.9 3.9 (42,392) (42,392) 40,441 - - - Western Lonestar/Tpke 94 9,001,768 1.2 3,130,983 34.8 34.8 260,400 260,400 289,900 792,240 250,000 250,000 South Stemmons Total 2,790 120,798,636 16.0 6,142,722 5.1 5.1 554,297 558,676 999,312 792,240 768,241 768,241 Great SW/Arlington Arlington 392 18,998,838 2.5 2,028,648 10.7 11.0 429,628 429,628 297,843 677,000 19,366 1,023,766 Lower Great Southwest 423 35,384,246 4.7 1,524,922 4.3 5.1 109,057 32,992 (235,858) 2,436,972 - - Upper Great Southwest 503 50,925,132 6.6 6,218,121 12.2 12.3 440,747 440,747 921,613 185,500 1,384,012 3,821,154 Great SW/Arlington Total 1,318 105,308,216 13.9 9,771,691 9.3 9.7 979,432 903,367 983,598 3,299,472 1,403,378 4,844,920 North Fort Worth Meacham Fld/Fossil Creek 394 38,217,053 5.1 1,987,270 5.2 5.4 23,063 54,993 (63,326) 1,257,043 - - NE Tarrant Alliance 207 38,654,052 5.1 4,286,625 11.1 11.1 151,318 151,318 1,809,503 2,845,934 100,000 2,348,775 West Tarrant 61 4,113,444 0.5 100,000 2.4 2.4 - - 13,876 - 100,000 100,000 North Fort Worth Total 662 80,984,549 10.7 6,373,895 7.9 8.0 174,381 206,311 1,760,053 4,102,977 200,000 2,448,775 South Fort Worth East Fort Worth 617 23,098,274 3.1 1,282,363 5.6 5.6 33,615 22,815 20,973 - - - Mansfield 81 4,052,395 0.5 139,578 3.4 3.4 3,380 3,380 40,062 - - - N Central Fort Worth 298 10,361,515 1.4 304,843 2.9 2.9 9,804 9,804 137,629 - - - S Central Tarrant County 260 22,031,008 2.9 511,197 2.3 2.4 2,143 (11,857) (251,595) 488,564 - - S Central Fort Worth 261 9,577,174 1.3 236,961 2.5 2.5 56,273 56,273 171,806 - - - SW Tarrant 76 1,910,569 0.3 44,046 2.3 4.9 (8,000) (8,000) (73,807) - - - South Fort Worth Total 1,593 71,030,935 9.5 2,518,988 3.5 3.7 97,215 72,415 45,068 488,564 - - Dallas Total 8,032 497,906,126 65.9 30,390,904 6.1 6.3 1,715,611 1,465,920 5,132,419 9,331,776 2,459,581 6,589,934 Fort Worth Total 3,573 257,323,700 34.1 18,664,574 7.3 7.5 1,251,028 1,182,093 2,788,719 7,891,013 1,603,378 7,293,695 Dallas/Fort Worth Total 11,605 755,229,826 100.0 49,055,478 6.5 6.7 2,966,639 2,648,013 7,921,138 17,222,789 4,062,959 13,883,629 Source: CBRE Research, Q2 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q1 2017 Q1 2017 occupier demand on pace with 2016, a record year

Vacancy Under Construction Completions Net Absorption 6.5% 16,865,816 SF 9,820,670 SF 5,273,125 SF

Figure 1: DFW Industrial Market *Arrows indicate trend from previous quarter.

MSF Vacancy Rate (%) 24 12 11 19 10 14 9

9 8 7 4 6 (1) 5 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q1 2017.

Industrial occupier demand in Q1 2017 kept pace The overall DFW industrial vacancy rate rose 47 with 2016, as the Dallas/Fort Worth Industrial basis points over the previous quarter to 6.5%, due Market absorbed 5.3 million sq. ft. E-commerce to large speculative deliveries, primarily comprised and consumer goods occupiers led absorption in of large distribution buildings. Industrial property Q1 2017, a reflection of population growth in the vacancy rates increased 70 basis points to 6.5%, Metroplex. Dallas/Fort Worth is the largest urban despite posting respectable absorption just above 5 agglomeration in the south with a population of million sq. ft. Flex properties, which posted a 7.2 million people. DFW posted the highest notable 225,745 sq. ft. absorption, vacancy population growth in the U.S., adding 143,435 new decreased 60 basis points to a 6.4% vacancy rate. residents in 2016. Dallas/Fort Worth also showed PIPELINE NARROWS, DELIVERIES SET RECORD robust employment gains with 4.0% year-over-year Following a record year for product delivery, when growth through January 2017, second only to 22.7 million sq. ft. was delivered in the DFW Orlando, which grew jobs at an impressive 4.6%. industrial market, a quarterly record 9.8 million DFW continues to attract corporate relocations and sq. ft. was delivered in Q1 2017. The under individual job seekers due to its south-central construction pipeline has fallen to 16.9 million sq. location, robust transportation infrastructure, low ft. of active projects. This is the lowest amount of cost of doing business and pro business active product under construction in the market environment. since Q2 2015.

Figure 2: DFW Industrial Market Snapshot

Net Direct Total Q1 2017 Q1 2017 2017 YTD Avail. Direct Total Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) (SF) (%) (%) (SF) (SF) (SF)

DFW Airport 70,623,004 6,225,371 8.8 3,484,323 4.9 3,502,901 5.0 1,364,077 1,365,299 1,365,299

East Dallas 36,179,482 2,962,806 8.2 2,028,426 5.6 2,038,426 5.6 179,487 179,487 179,487

Northeast Dallas 97,036,156 8,371,944 8.6 4,803,412 5.0 5,459,956 5.6 (278,177) (280,100) (280,100)

Northwest Dallas 107,146,777 7,219,989 6.7 4,792,408 4.5 4,856,220 4.5 998,097 964,615 964,615

South Dallas 64,746,220 9,701,176 15.0 8,467,794 13.1 8,532,694 13.2 1,061,462 996,562 996,562

South Stemmons 120,185,624 9,481,877 7.9 5,917,361 4.9 5,943,885 4.9 362,843 440,636 440,636

Great SW / Arlington 104,256,533 12,255,290 11.8 9,128,916 8.8 9,266,669 8.9 68,475 80,231 80,231

North Ft. Worth 80,779,304 8,238,116 10.2 6,198,162 7.7 6,297,492 7.8 1,607,084 1,553,742 1,553,742

South Ft. Worth 71,338,924 4,006,769 5.6 2,758,881 3.9 2,812,481 3.9 20,953 (27,347) (27,347)

DALLAS TOTALS 495,917,263 43,963,163 8.9 29,493,724 5.9 30,334,082 6.1 3,687,789 3,666,499 3,666,499

FT.WORTH TOTALS 256,374,761 24,500,175 9.6 18,085,959 7.1 18,376,642 7.2 1,696,512 1,606,626 1,606,626

MARKET TOTALS 752,292,024 68,463,338 9.1 47,579,683 6.3 48,710,724 6.5 5,384,301 5,273,125 5,273,125

Source: CBRE Research, Q1 2017.

Figure 3: Select Lease Transactions

Tenant Building(s) City Submarket SF

1 Shippers Warehouse BTS in Prime Pointe Hutchins South Dallas 556,000

2 Quaker Sales & Distribution 1350 Chalk Hill Rd Dallas South Stemmons 518,241

3 KGP Telecommunications 9400 N Royal Ln Irving DFW Airport 335,480

4 Robinson Aerospace 13901 Aviator Way Fort Worth North Fort Worth 209,081

5 BFS Services 500 Arline Dr Coppell DFW Airport 167,820

Source: CBRE Research, Q1 2017.

Figure 4: Select Sale Transactions

Buyer Building(s) City Submarket SF

1 PNC Realty Investors Logistics Crossing I Grand Prairie Great Southwest/Arlington 667,635

2 Exeter 2900 Airport Rd Denton Northwest Dallas 392,706

3 White Wave Foods Kiest Distribution Center Dallas South Dallas 343,617

4 Private Investor 3701 Marquis Dr Garland Northeast Dallas 155,655

5 Avistone Northgate Business Park III Plano Northeast Dallas 155,494

Source: Real Capital Analytics, Q1 2017.

Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2017 YTD Under Qtr. 2017 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 372 52,846,652 7.0 2,893,851 5.5 5.5 1,086,345 1,085,067 1,085,067 1,566,468 925,270 925,270 W DFW/Grapevine 309 17,776,352 2.4 590,472 3.3 3.3 277,732 280,232 280,232 347,042 - - DFW Airport Total 681 70,623,004 9.4 3,484,323 4.9 5.0 1,364,077 1,365,299 1,365,299 1,913,510 925,270 925,270 East Dallas Central E Dallas 424 17,245,633 2.3 342,568 2.0 2.0 -27,653 -27,653 -27,653 344,400 - - East Dallas/Mesquite 284 18,933,849 2.5 1,685,858 8.9 8.9 207,140 207,140 207,140 - - - East Dallas Total 708 36,179,482 4.8 2,028,426 5.6 5.6 179,487 179,487 179,487 344,400 - - Northeast Dallas Allen/McKinney 192 11,517,371 1.5 236,315 2.1 2.1 10,645 10,645 10,645 185,120 - - NE Dallas/Garland 842 46,980,904 6.2 2,643,699 5.6 6.9 -310,006 -315,006 -315,006 1,033,350 138,000 138,000 Plano 352 19,071,361 2.5 978,164 5.1 5.4 12,073 12,073 12,073 23,750 - - Richardson 304 16,869,422 2.2 933,234 5.5 5.5 -8,889 -5,812 -5,812 - - - Rockwall 53 2,597,098 0.3 12,000 0.5 0.5 18,000 18,000 18,000 - - - Northeast Dallas Total 1,743 97,036,156 12.9 4,803,412 5.0 5.6 -278,177 -280,100 -280,100 1,242,220 138,000 138,000 Northwest Dallas Denton 175 10,327,493 1.4 161,087 1.6 1.6 839,747 842,247 842,247 187,400 830,000 830,000 Lewisville 220 24,685,870 3.3 933,209 3.8 3.8 173,600 173,600 173,600 1,173,981 102,350 102,350 Metropolitan/Addison 451 20,840,217 2.8 1,179,618 5.7 5.7 -7,300 -7,300 -7,300 - - - N Stemmons/Valwood 656 48,383,792 6.4 2,508,494 5.2 5.3 -41,150 -77,132 -77,132 1,154,792 - - NW Dallas Outlying 27 2,909,405 0.4 10,000 0.3 0.3 33,200 33,200 33,200 - - - Northwest Dallas Total 1,529 107,146,777 14.2 4,792,408 4.5 4.5 998,097 964,615 964,615 2,516,173 932,350 932,350 South Dallas Red Bird/Airport 188 19,444,780 2.6 372,207 1.9 2.2 645,915 581,015 581,015 - 663,000 663,000 SE Dallas/I-45 239 30,180,191 4.0 5,480,858 18.2 18.2 346,407 346,407 346,407 2,672,060 1,471,733 1,471,733 SW Dallas/US 67 150 15,121,249 2.0 2,614,729 17.3 17.3 69,140 69,140 69,140 995,892 - - South Dallas Total 577 64,746,220 8.6 8,467,794 13.1 13.2 1,061,462 996,562 996,562 3,667,952 2,134,733 2,134,733 South Stemmons East Brookhollow 193 8,750,294 1.2 178,623 2.0 2.0 9,719 9,719 9,719 - - - E Hines North 629 20,182,636 2.7 467,619 2.3 2.3 112,649 112,649 112,649 - - - Eastern Lonestar/Tpke 291 24,649,742 3.3 851,023 3.5 3.5 39,250 39,250 39,250 518,241 - - North Trinity 400 10,498,666 1.4 386,893 3.7 3.7 110,029 110,029 110,029 - - - West Brookhollow 991 40,586,634 5.4 668,418 1.6 1.7 54,746 56,656 56,656 - - - W Hines North 193 6,765,884 0.9 223,402 3.3 3.3 6,950 82,833 82,833 - - - Western Lonestar/Tpke 93 8,751,768 1.2 3,141,383 35.9 35.9 29,500 29,500 29,500 250,000 - - South Stemmons Total 2,790 120,185,624 16.0 5,917,361 4.9 4.9 362,843 440,636 440,636 768,241 - - Great SW/Arlington Arlington 393 19,022,575 2.5 2,476,710 13.0 13.4 -129,785 -131,785 -131,785 19,366 1,004,400 1,004,400 Lower Great Southwest 423 35,496,864 4.7 1,562,360 4.4 4.4 -268,850 -268,850 -268,850 723,840 - - Upper Great Southwest 501 49,737,094 6.6 5,089,846 10.2 10.4 467,110 480,866 480,866 1,467,137 2,437,142 2,437,142 Great SW/Arlington Total 1,317 104,256,533 13.9 9,128,916 8.8 8.9 68,475 80,231 80,231 2,210,343 3,441,542 3,441,542 North Fort Worth Meacham Fld/Fossil Creek 395 38,201,211 5.1 2,010,333 5.3 5.5 -64,977 -118,319 -118,319 1,257,043 - - NE Tarrant Alliance 207 38,564,649 5.1 4,187,829 10.9 10.9 1,658,185 1,658,185 1,658,185 2,945,934 2,248,775 2,248,775 West Tarrant 60 4,013,444 0.5 - - - 13,876 13,876 13,876 - - - North Fort Worth Total 662 80,779,304 10.7 6,198,162 7.7 7.8 1,607,084 1,553,742 1,553,742 4,202,977 2,248,775 2,248,775 South Fort Worth East Fort Worth 618 23,091,148 3.1 1,325,578 5.7 5.8 2,558 -1,842 -1,842 - - - Mansfield 81 4,052,395 0.5 142,958 3.5 3.5 36,682 36,682 36,682 - - - N Central Fort Worth 300 10,450,344 1.4 390,419 3.7 3.7 122,525 127,825 127,825 - - - S Central Tarrant County 260 22,036,095 2.9 513,340 2.3 2.3 -239,738 -239,738 -239,738 - - - S Central Fort Worth 264 9,798,373 1.3 350,540 3.6 3.6 115,533 115,533 115,533 - - - SW Tarrant 76 1,910,569 0.3 36,046 1.9 4.5 -16,607 -65,807 -65,807 - - - South Fort Worth Total 1,599 71,338,924 9.5 2,758,881 3.9 3.9 20,953 -27,347 -27,347 - - - Dallas Total 8,028 495,917,263 65.9 29,493,724 5.9 6.1 3,687,789 3,666,499 3,666,499 10,452,496 4,130,353 4,130,353 Fort Worth Total 3,578 256,374,761 34.1 18,085,959 7.1 7.2 1,696,512 1,606,626 1,606,626 6,413,320 5,690,317 5,690,317 Dallas/Fort Worth Total 11,606 752,292,024 100.0 47,579,683 6.3 6.5 5,384,301 5,273,125 5,273,125 16,865,816 9,820,670 9,820,670 Source: CBRE Research, Q1 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q4 2016 2016 best year yet; demand and construction set new high

Vacancy Rate Avg. Asking Rate Net Absorption Completions 6.0% $4.48 3.9 MSF 6.4 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 24 12

11 19 10

14 9

9 8 7 4 6

(1) 5 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q4 2016.

POPULATION GAINS DROVE DEMAND IN 2016 • Industrial occupiers in Dallas/Fort Worth took down Pull factors ranging from a prime U.S. central 3.9 million sq. ft. during Q4 2016. location to world-class cultural amenities have all • This year set new records for industrial sector contributed to make the DFW Metroplex a absorption and delivered construction. standout corporate relocation destination. The • Annual absorption totaled 25.2 million sq. ft. population in DFW is estimated to have grown by • South Dallas had the highest annual absorption with 9.9% since 2010 and is expected to grow to 7.7 5.5 million sq. ft. absorbed in 2016, followed by million people, or another 9.0%, by 2021. North Fort Worth and DFW Airport with 5.4 million Likewise, consumer goods and e-commerce sq. ft. and 3.3 million sq. ft. annual absorption, occupiers were far and away the main drivers of respectively. industrial demand in 2016. These occupiers have • Construction completions totaled 22.7 million sq. ft. taken down a variety of spaces - from big-box for the year. regional distribution centers to last-mile infill • South Dallas delivered the most new product with 8 locations. Cumulatively, the DFW market million sq. ft. of space added to the submarket. absorbed 25.2 million sq. ft. in 2016, 2.6 million sq. ft. more than the second highest recorded annual absorption which was in 1999.

Figure 2: Nominal GDP and Vacancy Rate U.S. GDP ($, in billions) Vacancy Rate (%) 18 11 17 9 16 15 7 14 5 13 3 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 U.S. GDP DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis December 2016. CBRE Research, Q4 2016.

TEXAS EMPLOYMENT IS GROWING DFW LEADING STATE ECONOMY The state economy expanded in November. According to the Federal Reserve Bank of Employers are hiring, and unemployment Dallas’ December DFW Economic Indicators continues its decline. According to the December release, Dallas/Fort Worth employment Texas Economic Indicators release from the expanded at a swift annual rate of 4.0% through Dallas Federal Reserve, statewide employment November 2016. Dallas led all other Texas grew at an annualized rate of 2.1% in November, metros with a 4.3% annualized growth rate, or outpacing the U.S. rate of 1.5%. Crude oil closed 3.2% annualized growth year-to-date. Meanwhile Fort Worth had more moderated November at $45.71 a barrel, 7.7% above year-ago year-to-date annualized employment growth levels according to Federal Reserve economists. rate of 1.5%. Employment growth is still Natural gas prices are up 20.2% year-over-year, uneven in the Metroplex. Dallas continues to despite a 15.3% price drop in November. Texas ride the tailwinds of the national economy, exports are still being hindered by low oil prices while Fort Worth remains somewhat hampered and a strong dollar. Political observers are by beleaguered oil and gas prices. speculating President–elect Trump and his Nevertheless, unemployment dipped to 4.1% administration will support favorable policy and 3.2% for Dallas and Fort Worth toward the energy industry and would therefore respectively, and both remain below the U.S. benefit the Texas economy. unemployment rate of 4.6%.

Figure 3: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total DFW Jobs U.S. Texas DFW Source: Moody’s Analytics, CBRE Research, Q4 2016.

2016 IN REVIEW, A YEAR PAR EXCELLENCE SUBMARKET SPOTLIGHT: NORTH FORT WORTH Dallas/Fort Worth’s industrial market absorbed North Fort Worth had the highest quarterly 25.2 million sq. ft. in 2016, the highest annual absorption for Q4 2016 with nearly 1.1 million sq. absorption ever tracked by CBRE Research. This ft. absorption. With 78.7 million sq. ft. of flex and demand figure is even more remarkable when the industrial space, North Fort Worth is the fifth 22.7 million sq. ft. of construction completions largest submarket in Dallas/Fort Worth and are taken into account. Despite the slight 24 basis accounts for 10.6% of the industrial space in the point increase in vacancy to 6.0% in Q4 2016, market. market-wide vacancy remains below historic Continuing the construction trend in 2016, North averages. Fort Worth had 2.9 million sq. ft. of projects

under construction as of Q4 2016, which were South Dallas had the highest annual absorption 67.8% pre-committed – the highest pre-leased with 5.5 million sq. ft. absorbed in 2016. South rate of any other submarket in DFW. In addition Dallas is typified by large footprint and high clear to projects under construction, 4.5 million sq. ft. buildings that are ideal for regional distribution was delivered in the submarket in 2016. centers. Third party logistics providers (3PLs), e- commerce, and consumer goods occupiers drove North Fort Worth, anchored by the 18,000 acre demand in the submarket in 2016. South Dallas master planned community AllianceTexas, also had the highest amount of new product benefits from a robust skilled workforce and added in 2016 at nearly 8 million sq. ft. Limited many new residential and retail developments. land availability in DFW’s infill submarkets has The submarket is also home to Alliance Fort driven developers to South Dallas where land was Worth Airport, the world’s first 100% cargo once plentiful and relatively inexpensive. Despite airport and which is also undergoing a major the increase in vacancy due to large available runway expansion. Fort Worth Alliance Airport speculative deliveries, brokers expect these posted a 16.08% increase in cargo traffic by spaces to be snapped up quickly as there are still weight from 2014 to 2015, according to the FAA. limited options for tenants – specifically in the The airport also enjoys Foreign Trade Zone status 500,000 sq. ft. and higher space segment. with U.S. Customs and Border Protection on site, and access to the nearby BNSF Railway Alliance Intermodal Facility.

Figure 4: DFW Industrial Market

Net Direct Total Q4 2016 Q4 2016 2016 Avail. Direct Total Asking Rates Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Average Annual Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) ($/SF) (SF) (%) (%) (SF) (SF) (SF)

Industrial Flex DFW Airport 69,801,925 5,809,836 8.3 3,375,306 4.8 3,465,106 5.0 4.35 8.14 440,381 455,113 3,255,739

East Dallas 36,188,665 3,563,426 9.8 2,178,826 6.0 2,188,826 6.0 4.05 9.31 226,466 236,466 248,422

Northeast Dallas 97,419,870 8,832,579 9.1 4,439,235 4.6 5,101,856 5.2 4.49 8.66 219,834 282,936 1,594,060

Northwest Dallas 106,564,249 7,379,036 6.9 4,995,847 4.7 5,075,932 4.8 4.85 8.61 413,635 351,728 2,972,807

South Dallas 62,641,331 8,743,881 14.0 7,493,894 12.0 7,493,894 12.0 3.95 8.00 327,806 327,806 5,515,930

South Stemmons 120,086,004 9,931,423 8.3 6,312,204 5.3 6,388,088 5.3 5.96 11.68 266,394 303,166 1,760,509

. Great SW / Arlington 101,191,369 10,540,271 10.4 6,171,469 6.1 6,320,978 6.2 4.00 7.16 810,933 752,170 3,246,410

North Ft. Worth 78,726,475 7,317,367 9.3 5,799,302 7.4 5,845,290 7.4 3.91 9.00 1,024,472 1,079,589 5,377,466

South Ft. Worth 71,390,251 4,597,911 6.4 2,779,834 3.9 2,785,134 3.9 3.91 6.83 65,367 71,967 1,259,091

DALLAS TOTALS 492,702,044 44,260,181 9.0 28,795,312 5.8 29,713,702 6.0 4.78 9.45 1,894,516 1,957,215 15,347,467

FT.WORTH TOTALS 251,308,095 22,455,549 8.9 14,750,605 5.9 14,951,402 5.9 3.95 7.38 1,900,772 1,903,726 9,882,967

MARKET TOTALS 744,010,139 66,715,730 9.0 43,545,917 5.9 44,665,104 6.0 4.48 8.99 3,795,288 3,860,941 25,230,434 Source: CBRE Research, Q4 2016.

Figure 5: Net Absorption and Vacancy Rate The final quarter of 2016 marked the 25th Absorption (MSF) Vacancy Rate (%) consecutive quarter of positive net absorption for 29 14 the DFW industrial market as it scored 3.9 million 12 24 sq. ft. in total absorption, contributing to the 10 19 record 25.2 million sq. ft. absorbed in 2016. 8 14 Warehouse and distribution space led quarterly 6 activity with barely under 3.8 million sq. ft. of total 9 4 net absorption, while flex space posted 70,619 sq. 4 2 ft. of total net absorption. (2) 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Deliveries for the fourth quarter totaled 6.4 million sq. ft. Pre-leasing activity was lower with 1.4 Q1 Q2 million sq. ft., or 22%, of Q4 2016 deliveries pre- Q3 Q4 committed. In comparison, Q3 2016 deliveries Total Annual Net Absorption Vacancy Rate were 57% pre-leased. An estimated 18.9 million sq. ft. is currently under construction in Dallas/Fort Source: CBRE Research, Q4 2016. Worth, down from the peak of Q1 2016 when the pipeline swelled to 21.4 million sq. ft., which was easily the highest level of construction activity ever Figure 6: Construction seen in the market. Yet market demand continues MSF to meet supply, for now. Under construction space 22 is currently 28% pre-leased, up from the 23% pre- 20 committed rate seen at the end of the third quarter 18 of 2016. South Dallas and Great 16 14 Southwest/Arlington are basically tied for the most 12 active submarkets with under construction activity, 10 with 4.9 million sq. ft. and 4.8 million sq. ft. 8 respectively under construction. This activity 6 accounts for 51.6% of the total industrial 4 development activity in DFW. 2 0 In Q4 2016, vacancy ticked upward by 24 basis

Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 points to 6.0% due to vacant speculative projects Under Construction Delivered Construction being delivered to market. The current vacancy rate Source: CBRE Research, Q4 2016. is still well below historical market averages which are around 9.0% vacancy. Demand continued to Figure 7: Vacancy Rate outpace supply for the year, despite the small uptick in vacancy seen during Q4 2016. The market % absorbed 2.5 million sq. ft. more than was 14 delivered throughout the year. Occupier demand 13 remains robust with a full pipeline of prospective 12 tenants looking at space in the market, and 11 transaction and advisory professionals expect the 10 large vacant speculative projects to be leased early 9 in 2017. 8 7 With just under 19 million sq. ft. now underway, 6 vacancy may see its course tick up even further in 5 mid- to late-2017 as even more new product delivers. Stay tuned as CBRE Research monitors

Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 this Texas-sized construction pipeline that is one of the largest in the U.S. Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q4 2016.

CAPITAL MARKETS

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well throughout 2016 and cap rates have remained at all-time lows. According to CBRE market professionals, cap rates on stabilized Class A product are currently about 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions.

CBRE has seen cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.25% and as high as 8.25% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the generally slowing rental rate growth and current amount of construction activity in the market.

Figure 8: Select Local Sale Transactions

Building(s) Submarket SF

Union Bower Business Park South Stemmons 302,848

119 Regal Row South Stemmons 230,710

Koll Coppell Business Center DFW Airport 281,000

1200 Forum Way S South Fort Worth 130,000

630 North Fwy South Fort Worth 246,000

Source: Real Capital Analytics, Q4 2016.

Figure 9: Select Local Lease Transactions

Tenant Building(s) Submarket SF

American Tire Distributors 300 Freedom Dr North Fort Worth 756,000

Chewy.com 7243 Grady Niblo Rd South Dallas 663,000

Rooms To Go 2251 E Bardin Rd Great Southwest/Arlington 234,100

CarbonLITE Recycling 4685 Mountain Creek Pkwy South Dallas 230,664

TriMark 2801 S Valley Pkwy DFW Airport 249,500

Source: CBRE Research, Q4 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q3 2016 Vacancy rate at lowest level since 2000 as market sees record occupier demand

Vacancy Rate Avg. Asking Rate Net Absorption Completions 5.8% $4.46 8.9 MSF 5.2 MSF

*Arrows indicate change from previous quarter. Figure 1: Net Absorption by Submarket

MSF 6

-1 DFW Airport East Dallas Great SW/Arlington North Ft Worth Northeast Dallas Northwest Dallas South Dallas South Ft Worth South Stemmons

Q1 2016 Q2 2016 Q3 2016 Q4 2016 2016 YTD Total Net Absorption Source: CBRE Research, Q3 2016.

DFW POPULATION GROWTH HAS HELPED • Industrial occupiers in Dallas/Fort Worth took down FUEL RECORD INDUSTRIAL DEMAND 8.9 million sq. ft. during the third quarter of 2016. As major corporations continue to relocate to North • Third quarter 2016 set the ten year record for the Texas, they bring along with them their employees, highest level of quarterly absorption. jobseekers, and ancillary service providers. An • The total vacancy rate continues to compress, down estimated 360 people move to Dallas/Fort Worth 63 basis points (bps) to 5.8%. everyday. This population boom has helped facilitate • Developers delivered 5.2 million sq. ft. of industrial the exceptional fundamentals seen in the Dallas/Fort space to the market, with three million sq. ft., or 57%, Worth industrial market. DFW has an area population pre-leased. of just over seven million, which is projected to grow • The Great Southwest/Arlington submarket has the by 9.0% through 2021, according to Nielson Claritas, highest amount of active construction, with 5.8 making it an attractive location for e-commerce and million sq. ft. under construction in the submarket. third party logistics (3PL) companies seeking to reach • South Dallas is still a hub for leasing activity, with 1.9 their customers with same-day or next-day service. In million sq. ft. absorbed during the third quarter of addition, 25 million consumers can be reached within 2016, the highest amount among the nine industrial a day’s driving time. submarkets.

Figure 2: Net Absorption, Construction and Vacancy Rate

MSF Vacancy Rate (%) 25 12

10 20

8 15

10 4

5 2

0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016

Direct Net Absorption Total Net Absorption Delivered Construction Direct Vacancy Rate

Source: CBRE Research, Q3 2016. Figure 3: Asking Rate, NNN Avg. Annual Figure 4: Construction

$/SF MSF 10 20 9 18 16 8 14 12 7 10 6 8 6 5 4 4 2 0 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016 YTD Industrial Flex/R&D Q2 2016 Under Construction Delivered Construction Source: CBRE Research, Q3 2016. Source: CBRE Research, Q3 2016.

Figure 5: Construction and Direct Vacancy Rate Figure 6: Vacancy Rates Vacancy Rate (%) MSF % 22 13 12 20 12 18 16 11 10 14 10 12 9 10 8 8 8 6 7 6 4 2 6 0 5 4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 YTD 2016 YTD Direct Vacancy Rate Total Vacancy Rate Under Construction Direct Vacancy Rate Source: CBRE Research, Q3 2016. Source: CBRE Research, Q3 2016.

Figure 7: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2016 YTD Under Qtr. 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 362 51,709,268 7.0 2,535,506 4.9 5.0 1,545,967 1,540,021 2,744,743 1,052,496 - 971,303 W DFW/Grapevine 310 17,812,923 2.4 1,145,204 6.4 6.8 251,066 181,066 55,883 - - - DFW Airport Total 672 69,522,191 9.4 3,680,710 5.3 5.4 1,797,033 1,721,087 2,800,626 1,052,496 0 971,303 East Dallas - Central E Dallas 427 17,279,746 2.3 651,312 3.8 3.9 -76,000 -76,000 -227,952 - - - East Dallas/Mesquite 285 18,941,273 2.6 1,991,111 10.5 10.5 39,581 39,581 239,908 - - - East Dallas Total 712 36,221,019 4.9 2,642,423 7.3 7.4 -36,419 -36,419 11,956 0 0 0 Northeast Dallas Allen/McKinney 190 11,399,716 1.5 152,319 1.3 1.3 103,039 103,039 487,773 130,211 - 144,710 NE Dallas/Garland 842 45,963,217 6.2 2,462,478 5.4 6.7 350,045 89,981 409,868 407,350 - - Plano 355 19,556,505 2.7 759,540 3.9 4.4 130,682 119,000 151,349 - - 216,720 Richardson 308 17,007,834 2.3 1,020,115 6.0 6.1 53,153 84,815 265,876 - - - Rockwall 58 2,505,401 0.3 36,542 1.5 1.5 458 458 -3,742 175,000 - - Northeast Dallas Total 1,753 96,432,673 13.1 4,430,994 4.6 5.3 637,377 397,293 1,311,124 712,561 0 361,430 Northwest Dallas Denton 177 9,565,201 1.3 228,928 2.4 2.4 48,228 48,228 103,628 1,259,877 - 170,270 Lewisville 220 24,747,171 3.4 1,434,014 5.8 5.8 902,570 902,570 1,026,955 675,931 - 765,367 Metropolitan/Addison 453 20,947,383 2.8 1,104,811 5.3 5.3 185,180 185,180 260,907 - - - N Stemmons/Valwood 657 48,435,511 6.6 2,752,221 5.7 5.7 517,330 567,246 1,222,986 204,000 337,933 1,176,493 NW Dallas Outlying 27 2,908,755 0.4 33,000 1.1 1.1 -17,000 -17,000 6,603 - - - Northwest Dallas Total 1,534 106,604,021 14.4 5,552,974 5.2 5.2 1,636,308 1,686,224 2,621,079 2,139,808 337,933 2,112,130 South Dallas Red Bird/Airport 188 18,880,214 2.6 889,324 4.7 4.7 148,802 148,802 1,709,539 709,470 230,664 1,967,947 SE Dallas/I-45 234 26,612,602 3.6 2,423,462 9.1 9.1 606,405 606,405 1,704,963 1,003,733 227,230 1,480,850 SW Dallas/US 67 150 14,818,471 2.0 2,339,439 15.8 15.8 1,094,437 1,094,437 1,773,622 3,002,580 1,223,896 2,340,518 South Dallas Total 572 60,311,287 8.2 5,652,225 9.4 9.4 1,849,644 1,849,644 5,188,124 4,715,783 1,681,790 5,789,315 South Stemmons East Brookhollow 195 9,179,240 1.2 50,192 0.5 0.6 77,431 77,431 88,041 - - - E Hines North 635 20,211,731 2.7 632,201 3.1 3.1 -62,631 -38,631 205,478 - - - Eastern Lonestar/Tpke 289 24,331,466 3.3 653,668 2.7 2.7 49,397 49,397 687,084 810,441 - 259,672 North Trinity 404 10,575,679 1.4 518,802 4.9 4.9 -23,976 -23,976 881 - - 23,826 West Brookhollow 996 40,623,831 5.5 954,500 2.3 2.5 241,186 188,398 342,457 - - - W Hines North 193 6,900,690 0.9 131,645 1.9 3.0 28,065 -47,818 42,622 - - - Western Lonestar/Tpke 93 8,748,268 1.2 3,167,383 36.2 36.2 -27,900 197,598 90,780 - - - South Stemmons Total 2,805 120,570,905 16.3 6,108,391 5.1 5.2 281,572 402,399 1,457,343 810,441 0 283,498 Great SW/Arlington Arlington 392 17,642,462 2.4 981,222 5.6 5.9 71,728 71,728 -13,249 1,443,766 683,380 683,380 Lower Great Southwest 422 35,088,063 4.8 867,295 2.5 2.5 1,182,413 1,232,413 1,507,014 430,188 768,587 1,002,687 Upper Great Southwest 490 46,405,088 6.3 2,622,551 5.7 5.7 -121,918 -49,717 1,000,475 3,875,938 - 1,419,354 Great SW/Arlington Total 1,304 99,135,613 13.4 4,471,068 4.5 4.6 1,132,223 1,254,424 2,494,240 5,749,892 1,451,967 3,105,421 North Fort Worth Meacham Fld/Fossil Creek 394 37,332,607 5.1 1,777,931 4.8 5.0 1,727,856 1,626,751 2,649,620 1,430,599 1,440,000 2,724,877 NE Tarrant Alliance 205 36,562,342 5.0 4,446,378 12.2 12.2 -475,437 -475,437 1,615,807 2,248,775 286,253 945,035 West Tarrant 60 4,013,853 0.5 0 0.0 0.0 0 0 32,450 - - - North Fort Worth Total 659 77,908,802 10.6 6,224,309 8.0 8.1 1,252,419 1,151,314 4,297,877 3,679,374 1,726,253 3,669,912 South Fort Worth East Fort Worth 618 22,794,962 3.1 990,101 4.3 4.4 200,694 201,519 309,345 301,500 - - Mansfield 81 3,992,911 0.5 179,640 4.5 4.5 29,143 29,143 31,907 - - - N Central Fort Worth 303 10,511,183 1.4 495,688 4.7 4.7 -1,372 1,128 3,984 - - - S Central Tarrant County 259 22,001,810 3.0 306,219 1.4 1.4 212,000 212,000 910,569 - - - S Central Fort Worth 266 9,837,498 1.3 458,803 4.7 4.7 -853 -853 -90,281 - - - SW Tarrant 76 1,919,723 0.3 41,114 2.1 2.1 0 0 21,600 - - - South Fort Worth Total 1,603 71,058,087 9.6 2,471,565 3.5 3.5 439,612 442,937 1,187,124 301,500 0 0 Dallas Total 8,048 489,662,096 66.4 28,067,717 5.7 5.9 6,165,515 6,020,228 13,390,252 9,431,089 2,019,723 9,517,676 Fort Worth Total 3,566 248,102,502 33.6 13,166,942 5.3 5.4 2,824,254 2,848,675 7,979,241 9,730,766 3,178,220 6,775,333 Dallas/Fort Worth Total 11,614 737,764,598 100.0 41,234,659 5.6 5.8 8,989,769 8,868,903 21,369,493 19,161,855 5,197,943 16,293,009 Source: CBRE Research, Q3 2016.

Figure 8: Industrial Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2016 YTD Under Qtr. 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 244 45,437,641 7.2 1,963,500 4.3 4.4 1,530,870 1,530,870 2,732,231 1,052,496 - 971,303 W DFW/Grapevine 213 15,775,259 2.5 995,859 6.3 6.8 256,147 186,147 39,262 - - - DFW Airport Total 457 61,212,900 9.7 2,959,359 4.8 5.0 1,787,017 1,717,017 2,771,493 1,052,496 0 971,303 East Dallas Central E Dallas 292 13,856,032 2.2 492,449 3.6 3.7 -76,000 -76,000 -228,519 - - - East Dallas/Mesquite 213 16,515,110 2.6 1,181,795 7.2 7.2 29,920 29,920 226,011 - - - East Dallas Total 505 30,371,142 4.8 1,674,244 5.5 5.6 -46,080 -46,080 -2,508 0 0 0 Northeast Dallas Allen/McKinney 140 9,242,502 1.5 79,406 0.9 0.9 4,766 4,766 444,643 94,211 - 121,835 NE Dallas/Garland 536 38,326,277 6.1 2,170,730 5.7 7.2 305,366 51,466 232,132 407,350 - - Plano 193 13,698,906 2.2 434,072 3.2 3.8 104,603 87,921 97,596 - - 137,020 Richardson 82 8,636,560 1.4 120,577 1.4 1.4 -17,378 -17,378 107,205 - - - Rockwall 49 2,224,611 0.4 36,542 1.6 1.6 458 458 -5,542 - - - Northeast Dallas Total 1,000 72,128,856 11.4 2,841,327 3.9 4.9 397,815 127,233 876,034 676,561 0 258,855 Northwest Dallas Denton 141 7,817,600 1.2 183,456 2.3 2.4 48,250 48,250 129,850 1,259,877 - 170,270 Lewisville 145 22,048,255 3.5 1,043,030 4.7 4.7 876,236 876,236 1,003,177 548,931 - 765,367 Metropolitan/Addison 217 12,544,474 2.0 289,249 2.3 2.3 119,659 119,659 -2,729 - - - N Stemmons/Valwood 472 42,551,806 6.8 2,278,414 5.4 5.4 488,300 541,616 1,020,479 204,000 337,933 1,176,493 NW Dallas Outlying 26 2,891,430 0.5 33,000 1.1 1.1 -17,000 -17,000 4,540 - - - Northwest Dallas Total 1,001 87,853,565 13.9 3,827,149 4.4 4.4 1,515,445 1,568,761 2,155,317 2,012,808 337,933 2,112,130 South Dallas Red Bird/Airport 155 18,238,481 2.9 875,948 4.8 4.8 148,802 148,802 1,709,957 709,470 230,664 1,967,947 SE Dallas/I-45 193 25,701,412 4.1 2,411,398 9.4 9.4 606,405 606,405 1,668,563 1,003,733 227,230 1,480,850 SW Dallas/US 67 95 13,652,907 2.2 2,315,832 17.0 17.0 1,094,437 1,094,437 1,759,995 3002580 1,223,896 2,340,518 South Dallas Total 443 57,592,800 9.1 5,603,178 9.7 9.7 1,849,644 1,849,644 5,138,515 4,715,783 1,681,790 5,789,315 South Stemmons East Brookhollow 135 7,480,833 1.2 12,724 0.2 0.2 86,000 86,000 79,874 - - - E Hines North 407 14,583,849 2.3 389,015 2.7 2.7 -69,715 -45,715 132,655 - - - Eastern Lonestar/Tpke 235 22,620,219 3.6 550,650 2.4 2.4 55,633 55,633 702,570 810,441 - 259,672 North Trinity 253 6,025,583 1.0 209,582 3.5 3.5 -15,865 -15,865 59,051 - - 11,700 West Brookhollow 771 33,296,994 5.3 679,965 2.0 2.1 282,086 267,086 381,085 - - - W Hines North 116 4,853,488 0.8 26,521 0.5 2.1 11,877 -64,006 11,710 - - - Western Lonestar/Tpke 69 8,379,474 1.3 3,156,983 37.7 37.7 -17,500 207,998 89,080 - - - South Stemmons Total 1,986 97,240,440 15.4 5,025,440 5.2 5.3 332,516 491,131 1,456,025 810,441 0 271,372 Great SW/Arlington Arlington 299 15,103,550 2.4 841,769 5.6 6.0 70,961 70,961 37,818 1,443,766 683,380 683,380 Lower Great Southwest 317 32,263,420 5.1 715,772 2.2 2.2 1,157,286 1,207,286 1,315,343 430,188 768,587 1,002,687 Upper Great Southwest 378 42,325,570 6.7 2,042,317 4.8 4.9 -121,350 -49,169 956,664 3,875,938 - 1,419,354 Great SW/Arlington Total 994 89,692,540 14.2 3,599,858 4.0 4.1 1,106,897 1,229,078 2,309,825 5,749,892 1,451,967 3,105,421 North Fort Worth Meacham Fld/Fossil Creek 344 35,221,572 5.6 1,548,881 4.4 4.7 1,726,116 1,625,011 2,664,800 1,430,599 1,440,000 2,724,877 NE Tarrant Alliance 162 34,275,172 5.4 4,434,048 12.9 12.9 -476,937 -476,937 1,615,237 2,248,775 286,253 945,035 West Tarrant 48 3,713,021 0.6 0 0.0 0.0 0 0 28,700 - - - North Fort Worth Total 554 73,209,765 11.6 5,982,929 8.2 8.3 1,249,179 1,148,074 4,308,737 3,679,374 1,726,253 3,669,912 South Fort Worth East Fort Worth 474 18,658,725 3.0 854,791 4.6 4.6 187,182 188,007 292,099 301,500 - - Mansfield 69 3,318,512 0.5 176,260 5.3 5.3 25,700 25,700 23,205 - - - N Central Fort Worth 245 9,241,621 1.5 438,167 4.7 4.7 4,168 4,168 10,494 - - - S Central Tarrant County 205 20,266,593 3.2 230,132 1.1 1.1 189,162 189,162 908,846 - - - S Central Fort Worth 202 8,168,561 1.3 335,275 4.1 4.1 -4,703 -4,703 -83,628 - - - SW Tarrant 58 1,328,221 0.2 41,114 3.1 3.1 0 0 21,600 - - - South Fort Worth Total 1,253 60,982,233 9.7 2,075,739 3.4 3.4 401,509 402,334 1,172,616 301,500 0 0 Dallas Total 5,392 406,399,703 64.5 21,930,697 5.4 5.6 5,836,357 5,707,706 12,394,876 9,268,089 2,019,723 9,402,975 Fort Worth Total 2,801 223,884,538 35.5 11,658,526 5.2 5.3 2,757,585 2,779,486 7,791,178 9,730,766 3,178,220 6,775,333 Dallas/Fort Worth Total 8,193 630,284,241 100.0 33,589,223 5.3 5.5 8,593,942 8,487,192 20,186,054 18,998,855 5,197,943 16,178,308 Source: CBRE Research, Q3 2016.

Figure 9: Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Qtr. Qtr. 2016 YTD Under Qtr. 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 118 6,271,627 5.8 572,006 9.1 9.2 15,097 9,151 821,628 - - - W DFW/Grapevine 97 2,037,664 1.9 149,345 7.3 7.3 -5,081 -5,081 -175,213 - - - DFW Airport Total 215 8,309,291 7.7 721,351 8.7 8.8 10,016 4,070 646,415 0 0 0 East Dallas Central E Dallas 135 3,423,714 3.2 158,863 4.6 4.6 0 0 -201,189 - - - East Dallas/Mesquite 72 2,426,163 2.3 809,316 33.4 33.4 9,661 9,661 416,598 - - - East Dallas Total 207 5,849,877 5.4 968,179 16.6 16.6 9,661 9,661 215,409 0 0 0 Northeast Dallas Allen/McKinney 50 2,157,214 2.0 72,913 3.4 3.2 98,273 98,273 378,625 - - 22,875 NE Dallas/Garland 306 7,636,940 7.1 291,748 3.8 3.9 44,679 38,515 682,044 36,000 - - Plano 162 5,857,599 5.4 325,468 5.6 5.9 26,079 31,079 -2,571 - - 79,700 Richardson 226 8,371,274 7.8 899,538 10.7 11.0 70,531 102,193 162,096 - - - Rockwall 9 280,790 0.3 0 0.0 0.0 0 0 0 - - - Northeast Dallas Total 753 24,303,817 22.6 1,589,667 6.5 6.7 239,562 270,060 1,220,194 36,000 0 102,575 Northwest Dallas Denton 36 1,747,601 1.6 45,472 2.6 2.6 -22 -22 -49,090 - - - Lewisville 75 2,698,916 2.5 390,984 14.5 14.5 26,334 26,334 -107,189 127,000 - - Metropolitan/Addison 236 8,402,909 7.8 815,562 9.7 9.8 65,521 65,521 25,683 - - - N Stemmons/Valwood 185 5,883,705 5.5 473,807 8.1 8.1 29,030 25,630 665,876 - - - NW Dallas Outlying 1 17,325 0.0 0 0.0 0.0 0 0 21,563 - - - Northwest Dallas Total 533 18,750,456 17.4 1,725,825 9.2 9.3 120,863 117,463 556,843 127,000 0 0 South Dallas Red Bird/Airport 33 641,733 0.6 13,376 2.1 2.1 0 0 484,470 - - - SE Dallas/I-45 41 911,190 0.8 12,064 1.3 1.3 0 0 77,880 - - - SW Dallas/US 67 55 1,165,564 1.1 23,607 2.0 2.0 0 0 300,780 - - - South Dallas Total 129 2,718,487 2.5 49,047 1.8 1.8 0 0 863,130 0 0 0 South Stemmons East Brookhollow 60 1,698,407 1.6 37,468 2.2 2.3 -8,569 -8,569 -56,885 - - - E Hines North 228 5,627,882 5.2 243,186 4.3 4.3 7,084 7,084 143,712 - - - Eastern Lonestar/Tpke 54 1,711,247 1.6 103,018 6.0 6.0 -6,236 -6,236 604,304 - - - North Trinity 151 4,550,096 4.2 309,220 6.8 6.8 -8,111 -8,111 25,393 - - 12,126 West Brookhollow 225 7,326,837 6.8 274,535 3.7 4.3 -40,900 -78,688 56,004 - - - W Hines North 77 2,047,202 1.9 105,124 5.1 5.1 16,188 16,188 97,605 - - - Western Lonestar/Tpke 24 368,794 0.3 10,400 2.8 2.8 -10,400 -10,400 25,230 - - - South Stemmons Total 819 23,330,465 21.7 1,082,951 4.6 4.8 -50,944 -88,732 895,363 0 0 12,126 Great SW/Arlington Arlington 93 2,538,912 2.4 139,453 5.5 5.5 767 767 -114,449 - - - Lower Great Southwest 105 2,824,643 2.6 151,523 5.4 5.4 25,127 25,127 109,117 - - - Upper Great Southwest 112 4,079,518 3.8 580,234 14.2 14.3 -568 -548 540,399 - - - Great SW/Arlington Total 310 9,443,073 8.8 871,210 9.2 9.3 25,326 25,346 535,067 0 0 0 North Fort Worth Meacham Fld/Fossil Creek 50 2,111,035 2.0 229,050 10.9 10.9 1,740 1,740 291,418 - - - NE Tarrant Alliance 43 2,287,170 2.1 12,330 0.5 0.5 1,500 1,500 1,584,884 - - - West Tarrant 12 300,832 0.3 0.0 0.0 0 0 28,750 - - - North Fort Worth Total 105 4,699,037 4.4 241,380 5.1 5.1 3,240 3,240 1,905,052 0 0 0 South Fort Worth East Fort Worth 144 4,136,237 3.8 135,310 3.3 3.3 13,512 13,512 17,097 - - - Mansfield 12 674,399 0.6 3,380 0.5 0.5 3,443 3,443 19,396 - - - N Central Fort Worth 58 1,269,562 1.2 57,521 4.5 4.7 -5,540 -3,040 -2,040 - - - S Central Tarrant County 54 1,735,217 1.6 76,087 4.4 4.6 22,838 22,838 90,914 - - - S Central Fort Worth 64 1,668,937 1.6 123,528 7.4 7.4 3,850 3,850 -77,503 - - - SW Tarrant 18 591,502 0.6 0 0.0 0.0 0 0 21,600 - - - South Fort Worth Total 350 10,075,854 9.4 395,826 3.9 4.0 38,103 40,603 69,464 0 0 0 Dallas Total 2,656 83,262,393 77.5 6,137,020 7.4 7.5 329,158 312,522 4,397,354 163,000 0 114,701 Fort Worth Total 765 24,217,964 22.5 1,508,416 6.2 6.3 66,669 69,189 2,513,933 0 0 0 Dallas/Fort Worth Total 3,421 107,480,357 100.0 7,645,436 7.1 7.2 395,827 381,711 6,911,287 163,000 0 114,701 Source: CBRE Research, Q3 2016.

Dallas/Fort Worth Industrial, Q3 2016 Big D boom: industrial market sees record quarterly demand

Vacancy Rate Avg. Asking Rate Net Absorption Completions 5.8% $4.46 8.9 MSF 5.2 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 24 12

11 19 10

14 9

9 8 7 4 6

(1) 5 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q3 2016.

DFW POPULATION GROWTH HAS HELPED FUEL • Industrial occupiers in Dallas/Fort Worth took down RECORD INDUSTRIAL DEMAND 8.9 million sq. ft. during Q3 2016. As major corporations continue to relocate to • Q3 2016 set the ten year record for the highest level North Texas, they bring along with them their of quarterly absorption. employees, jobseekers, and ancillary service • The total vacancy rate continues to compress, down providers. An estimated 360 people move to 63 basis points (bps) to 5.8%. Dallas/Fort Worth everyday. This population • Developers delivered 5.2 million sq. ft. of industrial boom has helped facilitate the exceptional space to the market, with three million sq. ft., or fundamentals seen in the Dallas/Fort Worth 57%, pre-leased. industrial market. DFW has an area population of • The Great Southwest/Arlington submarket has the just over seven million, which is projected to highest amount of active construction, with 5.8 grow by 9.0% through 2021, according to Nielson million sq. ft. under construction in the submarket. Claritas, making it an attractive location for e- • South Dallas is still a hub for leasing activity, with commerce and third party logistics (3PL) 1.9 million sq. ft. absorbed during the Q3 2016, companies seeking to reach their customers with the highest amount among the nine industrial same-day or next-day service. In addition, 25 submarkets. million consumers can be reached within a day’s driving time.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 11 17 9 16 15 7 14 5 13 3 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 U.S. GDP DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis, September 2016. CBRE Research, Q3 2016.

TEXAS ECONOMY CONTINUES TO EXPAND DALLAS/FORT WORTH: BOOM TOWN USA According to the September Texas Workforce According to the Federal Reserve Bank of Commission release, Texas added a seasonally Dallas’ September DFW Economic Indicators adjusted 190,000 jobs year-over-year in August release, Dallas/Fort Worth employment 2016. This represents a 1.6% increase in jobs expanded at a swift annual rate of 4.1% through added to the state’s economy. The Texas August 2016. However, August employment unemployment rate did increase slightly over the growth was not evenly distributed throughout summer to 4.7%, but is still a stronger reading the Metroplex. While Dallas job growth was a vigorous 5.3%, employment growth in Fort than the nation’s 4.9% unemployment rate. Worth was a much more demure 1.1% year- Education and health services, and leisure and over-year increase. Job growth over the summer hospitality were the strongest performing sectors was broad across all sectors with construction each with 3.9% growth year-over-year, while and mining growing 5.2% year-over-year, likely financial activities posted a respectable 3.4% due to the construction boom in DFW growth. Manufacturing jobs contracted 3.3% according to Federal Reserve economists. So far year-over-year, a result of low oil prices and this year, Dallas has outperformed all other reduced demand for U.S. exports overseas. Texas metro areas, a testament to its diverse economy.

Figure 3: DFW Industrial Market 3Q 2016 CBRE Net Direct Total Q3 2016 Q3 2016 YTD 2016 Avail. Direct Total Asking Rates Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Average Annual Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) ($/SF) (SF) (%) (%) (SF) (SF) (SF) Industrial Flex DFW Airport 69,522,191 6,212,405 8.9 3,680,710 5.3 3,788,682 5.4 4.40 8.52 1,797,033 1,721,087 2,800,626

East Dallas 36,221,019 3,859,534 10.7 2,642,423 7.3 2,662,423 7.4 4.00 8.88 -36,419 -36,419 11,956

Northeast Dallas 96,432,673 8,966,148 9.3 4,430,994 4.6 5,156,717 5.3 4.86 8.78 637,377 397,293 1,311,124

Northwest Dallas 106,604,021 7,939,669 7.4 5,552,974 5.2 5,579,689 5.2 4.84 9.30 1,636,308 1,686,224 2,621,079

South Dallas 60,311,287 7,484,530 12.4 5,652,225 9.4 5,652,225 9.4 3.47 8.00 1,849,644 1,849,644 5,188,124

South Stemmons 120,570,905 10,186,014 8.4 6,108,391 5.1 6,249,480 5.2 5.28 11.92 281,572 402,399 1,457,343 . Great SW / Arlington 99,135,613 7,996,984 8.1 4,471,068 4.5 4,561,814 4.6 4.00 6.63 1,132,223 1,254,424 2,494,240

North Ft. Worth 77,908,802 8,623,319 11.1 6,224,309 8.0 6,325,414 8.1 4.05 9.26 1,252,419 1,151,314 4,297,877

South Ft. Worth 71,058,087 4,465,635 6.3 2,471,565 3.5 2,483,465 3.5 4.49 7.55 439,612 442,937 1,187,124

DALLAS TOTALS 489,662,096 44,648,300 9.1 28,067,717 5.7 29,089,216 5.9 4.63 9.73 6,165,515 6,020,228 13,390,252

FT.WORTH TOTALS 248,102,502 21,085,938 8.5 13,166,942 5.3 13,370,693 5.4 4.15 7.52 2,824,254 2,848,675 7,979,241

MARKET TOTALS 737,764,598 65,734,238 8.9 41,234,659 5.6 42,459,909 5.8 4.46 9.23 8,989,769 8,868,903 21,369,493 Source: CBRE Research, Q3 2016.

Figure 4: Net Absorption and Vacancy Rate Q3 2016 marked the 24th consecutive quarter of Absorption (MSF) Vacancy Rate (%) positive net absorption for the DFW industrial 24 14 market as it posted 8.9 million sq. ft. in total 12 19 absorption, and is the strongest quarterly 10 absorption since the most recent economic 14 8 recovery began. In fact, Q3 2016 had the best 9 6 quarterly absorption in the past ten years, 4 surpassing Q4 2013 by 974,955 sq. ft. which itself 4 2 saw 7.9 million sq. ft. in absorption. Warehouse (2) 0 and distribution space led quarterly activity with 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD just under 8.5 million sq. ft. of total net 2016 absorption, while flex space posted 381,711 sq. ft. Q1 Q2 of total net absorption. The submarket that posted Q3 Q4 the highest quarterly net absorption was South Total Annual Net Absorption Vacancy Rate Dallas at 1.8 million sq. ft.

Source: CBRE Research, Q3 2016. Deliveries for the third quarter totaled 5.2 million sq. ft. Pre-leasing activity remained very strong with 3.4 million sq. ft., or 57%, of Q3 2016 Figure 5: Construction deliveries pre-committed. An estimated 19.2 MSF million sq. ft. is currently under construction in 22 DFW, down from the peak of Q1 2016, which was 20 easily the highest level of construction activity ever 18 seen in the market. Yet market demand continues 16 14 to meet supply, for now. Under construction space 12 is currently 23% is pre-leased, down from the 32% 10 pre-committed rate seen at the end of the second 8 quarter of 2016. Great Southwest/Arlington 6 overtook South Dallas last quarter as the most 4 active submarket with under construction activity. 2 Currently there is 5.7 million sq. ft., or 30% of the 0 total industrial development activity in DFW, of projects under construction in the Great Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 Under Construction Delivered Construction Southwest/Arlington submarket. Source: CBRE Research, Q3 2016. In Q3 2016, vacancy continued to decline. Due to Figure 6: Vacancy Rate vigorous tenant demand, the total vacancy rate decreased by 63 bps to 5.8%. Resilient tenant % demand despite a robust delivery pipeline has 14 contributed to vacancy rate compression. Demand 13 continued to outpace supply, again, as vacancy has 12 compressed for five consecutive quarters. Also, the 11 industrial development pipeline can be turned off 10 much more quickly than other asset types due to 9 the fact that industrial product takes less time to 8 construct. 7 6 Still, with just over 19 million sq. ft. now underway, 5 vacancy may reverse its five quarter compression trend and see its course tick up later on in 2016 or

Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 2017 as more product delivers. Stay tuned as CBRE Research monitors this Texas-sized construction Flex Industrial Overall Vacancy Rate pipeline that is one of the largest in the U.S. Source: CBRE Research, Q3 2016.

CAPITAL MARKETS

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the Q3 2016 and cap rates have remained at all-time lows. According to the H1 2016 CBRE Cap Rate Survey, cap rates on stabilized Class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE has seen cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.25% and as high as 8.25% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the generally slowing rental rate growth and current construction activity.

Figure 7: Select Local Sale Transactions

Building(s) Submarket SF

1200 Lakeside Parkway Northwest Dallas 477,000

2751 Northern Cross North Fort Worth 446,000

1901 Royal Lane South Stemmons 281,000

2700 Story Road West DFW Airport 260,000

11070 Grader Place Northeast Dallas 246,000

Source: Real Capital Analytics, Q3 2016.

Figure 8: Select Local Lease Transactions

Tenant Building(s) Submarket SF

NFI 5012 W Danieldale Road South Dallas 1,128,000

Ozburn-Hessey Logistics 3845 Gifford Street South Stemmons 226,000

Ozburn-Hessey Logistics 3801-3875 La Reunion Parkway South Stemmons 191,000

SPM Flow Control 821 Railhead Road North Fort Worth 169,000

Décor Group 2301 Crown Court DFW Airport 120,000

Source: CBRE Research, Q3 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q2 2016 All eyes on construction and industrial demand keeps pace

Vacancy Rate Avg. Asking Rate Net Absorption Completions 6.4% $4.35 6.6 MSF 6.2 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 24 12

11 19 10

14 9

9 8 7 4 6

-1 5 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q2 2016.

CONSTRUCTION PIPELINE REMAINS MEASURE • Industrial occupiers in Dallas/Fort Worth took down TO WATCH IN DFW 6.6 million sq. ft. during the second quarter of An estimated 20.7 million sq. ft. of industrial 2016. product remained under construction in • Second quarter 2016 set the ten year record for the Dallas/Fort Worth, with about 32.0% of this highest level of absorption during a second quarter, product preleased. However, demand continued and is the highest quarterly absorption since the to meet this new supply. During the second fourth quarter of 2013, which saw 7.9 million sq. ft. quarter of 2016, the Metroplex absorbed 6.6 absorbed – the ten year market record. million sq. ft. while 6.2 million sq. ft. was added • Total Vacancy rate continued steady compression, to the market as newly delivered product. down 30 basis points to 6.4%. Vacancy rates continued to compress, and • Developers delivered 6.2 million sq. ft. of industrial average asking rates continued to climb, albeit at space to the market, with 3.4 million sq. ft., or gentle rates for both metrics. Industrial 55.0%, pre-leased. developers are following rooftops, and this robust • South Dallas remained as a hub of activity, with 2.6 demand is a direct result of Dallas/Fort Worth’s million sq. ft. absorbed during the second quarter of population boom – an estimated 360 people 2016. move to North Texas each day, adding to the nation’s fourth most populous metro area.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12 17 11 10 16 9 15 8 14 7 13 6 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 U.S. GDP ($, in billions) DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis, June 2016. CBRE Research, Q2 2016.

TEXAS ECONOMY CONTINUES TO EXPAND DALLAS/FORT WORTH STILL SHINES BRIGHT According to the May Texas Workforce According to the Federal Reserve Bank of Commission release, Texas added a seasonally Dallas’ June DFW Economic Indicators release, adjusted 171,800 jobs year-over-year in May 2016. Dallas/Fort Worth employment was up 2.7% This represents a 1.5% increase in jobs added to year-to-date through May 2016, which was twice the state’s economy. The Texas unemployment the national growth rate of 1.3% during the rate has held steady at 4.4% and is still a stronger same period. Unemployment in the Metroplex reading than the nation’s 4.7% unemployment remains at multiyear lows, a reflection of the region’s tight job market. The top three rate. According to the Federal Reserve Bank of contributors to job growth year-to-date remain Dallas’ June Texas Economic indicators release, financial services, education and health exports remain down – 6.5% year-over-year services, and trade, transportation and utilities through April – a result of lower oil prices, weak sectors. This group accounted for a combined global demand, and a generally strong dollar. 28,400 jobs added to the local economy. Loses Housing remains hot in the Lone Star State, with in construction and mining continued, and was the Federal Housing Finance Agency’s House down by 4.7%; or 4,000 jobs. Price Index for Texas up 7.1% year-over-year.

Figure 3: DFW Industrial Market

Net Direct Total Q2 2016 Q2 2016 YTD 2016 Avail. Direct Total Asking Rates Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Average Annual Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) ($/SF) (SF) (%) (%) (SF) (SF) (SF) Industrial Flex DFW Airport 69,508,280 7,825,894 11.3 5,408,904 7.8 5,440,930 7.8 4.33 7.82 519,399 532,753 1,079,539

East Dallas 36,268,739 3,628,848 10.0 2,519,904 6.9 2,539,904 7.0 3.57 10.10 -141,130 -141,130 48,375

Northeast Dallas 96,816,834 8,701,000 9.0 5,322,020 5.5 5,811,619 6.0 4.32 8.80 -140,371 -113,211 913,831

Northwest Dallas 106,296,082 9,152,314 8.6 6,806,449 6.4 6,883,080 6.5 4.77 8.58 631,848 715,450 934,855

South Dallas 58,676,453 7,473,182 12.7 6,084,418 10.4 6,084,418 10.4 3.72 8.00 2,518,073 2,550,473 3,338,480

South Stemmons 120,344,926 9,110,213 7.6 6,500,959 5.4 6,762,875 5.6 4.86 12.32 542,837 288,421 1,054,944

Great SW / Arlington 97,647,114 6,851,014 7.0 4,201,378 4.3 4,503,869 4.6 4.03 7.43 971,575 854,894 1,239,816

North Ft. Worth 76,489,151 9,336,807 12.2 6,010,475 7.9 6,010,475 7.9 4.24 9.26 1,229,551 1,250,151 3,146,563

South Ft. Worth 71,804,817 3,881,668 5.4 2,812,769 3.9 2,827,994 3.9 4.53 9.49 655,488 662,939 744,187

DALLAS TOTALS 487,911,314 45,891,451 9.4 32,642,654 6.7 33,522,826 6.9 4.41 9.71 3,930,656 3,832,756 7,370,024

FT.WORTH TOTALS 245,941,082 20,069,489 8.2 13,024,622 5.3 13,342,338 5.4 4.24 8.64 2,856,614 2,767,984 5,130,566

MARKET TOTALS 733,852,396 65,960,940 9.0 45,667,276 6.2 46,865,164 6.4 4.35 9.47 6,787,270 6,600,740 12,500,590 Source: CBRE Research, Q2 2016.

Figure 5: Net Absorption and Vacancy Rate The second quarter of 2016 marks the 23rd Absorption (MSF) Vacancy Rate (%) consecutive quarter of positive net absorption for 19 14 the DFW industrial market as it posted 6.6 million 12 sq. ft. in total absorption, and the strongest 14 10 absorption for a second quarter of the year since 8 9 the most recent economic recovery. In fact, the 6 second quarter of 2016 was the second best 4 4 quarterly absorption in the past ten years, after 2 fourth quarter 2013 which saw 7.9 million sq. ft. (2) 0 absorbed. Warehouse and distribution space led 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD quarterly activity with just over 5.9 million sq. ft. of 2016 total net absorption, while flex space posted Q1 Q2 713,552 sq. ft. of total net absorption. The submarket that posted the highest quarterly net Q3 Q4 absorption was South Dallas at 2.6 million sq. ft. Total Annual Net Absorption Vacancy Rate Two million sq. ft. of this absorption was due to Source: CBRE Research, Q2 2016. pre-leased deliveries.

Deliveries for the quarter totaled 6.2 million sq. ft. Figure 6: Construction Pre-leasing activity remained very strong with 3.4 MSF sq. ft., or 55.0%, of the 6.2 million sq. ft. of second 22 quarter deliveries pre-leased. An estimated 20.7 20 million sq. ft. is currently under construction in 18 DFW, down from the first quarter of 2016 which 16 14 was easily the highest level of activity ever seen in 12 the market. Yet market demand continued to meet 10 supply – of the space under construction, 32.0% is 8 pre-leased. Great Southwest/Arlington overtook 6 South Dallas this quarter as the most active 4 submarket with under construction activity, and 2 30.0% of projects under construction in DFW are 0 located in the Great Southwest/Arlington submarket. Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Under Construction Delivered Construction Source: CBRE Research, Q2 2016. In the second quarter of 2016, vacancy continued to compress. Due to robust tenant demand, the Figure 7: Vacancy Rate total vacancy rate decreased by 30 bps to 6.4%. Strong tenant demand despite an increase in % deliveries has contributed to the relatively stable 14 vacancy rate. Demand continued to outpace 13 supply - for now - as vacancy has compressed for 12 four consecutive quarters. Also, the industrial 11 development pipeline can be turned off much 10 more quickly than other asset types due to the fact 9 that industrial product takes less time to construct. 8 7 Still, with just over 20.7 million sq. ft. now 6 underway, vacancy may reverse its twelve month 5 compression and see its course tick up later on in 2016 as more product delivers. Stay tuned as CBRE

Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Research monitors this Texas-sized construction pipeline that is one of the largest in the U.S. Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q2 2016.

CAPITAL MARKETS

According to Real Capital Analytics data, the second quarter of 2016 saw a 20.0% increase in DFW sales volume from the previous quarter. Competition for well -located assets remains solid as investment activity has picked up in the second quarter of 2016.

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the first quarter of 2016 and cap rates have remained at all-time lows. According to the second half 2015 CBRE Cap Rate Survey, cap rates on class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE has seen a cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.0% and as high as 8.0% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the slowing rental rate growth and construction activity. Figure 8: Select Local Sale Transactions

Building(s) Submarket SF

6601 Oak Grove Rd South Fort Worth 615,000

Riverpoint Commerce Center Great Southwest/Arlington 602,800

6445 Will Rogers Blvd South Fort Worth 585,000

Gateway East Business Park Northeast Dallas 517,500

7301 Trinity Blvd South Fort Worth 448,500

Source: Real Capital Analytics, CBRE Research, Q2 2016.

Figure 9: Select Local Lease Transactions

Tenant Building(s) Submarket SF

Rheem* 1875 Waters Ridge Dr Northwest Dallas 650,000

Mother Parkers Tea & Coffee 1101 Everman Pkwy South Fort Worth 417,600

MARS Petcare* 2200 Danieldale Rd South Dallas 393,900

FedEx Ground 3901 Adler Rd South Stemmons 362,500

Marco Company 1000 Terminal Rd Great Southwest/Arlington 318,000

*Renewal Source: CBRE Research, Q2 2016.

Dallas/Fort Worth Industrial, Q2 2016 Dallas/Fort Worth industrial market continues to set records

Vacancy Rate Avg. Asking Rate Net Absorption Completions 6.4% $4.35 6.6 MSF 6.2 MSF

*Arrows indicate change from previous quarter. Figure 1: Net Absorption by Submarket

MSF 4

-1 DFW Airport East Dallas Great SW/Arlington North Ft Worth Northeast Dallas Northwest Dallas South Dallas South Ft Worth South Stemmons

Q1 2016 Q2 2016 Q3 2016 Q4 2016 2016 YTD Total Net Absorption Source: CBRE Research, Q2 2016.

CONSTRUCTION PIPELINE REMAINS • Industrial occupiers in Dallas/Fort Worth took down MEASURE TO WATCH IN DFW 6.6 million sq. ft. during the second quarter of 2016. An estimated 20.7 million sq. ft. of industrial product • Second quarter 2016 set the ten year record for the remained under construction in Dallas/Fort Worth, highest level of absorption during a second quarter, with about 32.0% of this product preleased. However, and is the highest quarterly absorption since the demand continued to meet this new supply. During fourth quarter of 2013, which saw 7.9 million sq. ft. the second quarter of 2016, the Metroplex absorbed absorbed – the ten year market record. 6.6 million sq. ft. while 6.2 million sq. ft. was added to • Total Vacancy rate continued steady compression, the market as newly delivered product. Vacancy rates down 30 basis points to 6.4%. continued to compress, and average asking rates • Developers delivered 6.2 million sq. ft. of industrial continued to climb, albeit at gentle rates for both space to the market, with 3.4 million sq. ft., or metrics. Industrial developers are following rooftops, 55.0%, pre-leased. and this robust demand is a direct result of Dallas/Fort • South Dallas remained as a hub of activity, with 2.6 Worth’s population boom – an estimated 360 people million sq. ft. absorbed during the second quarter of move to North Texas each day, adding to the nation’s 2016. fourth most populous metro area.

Figure 2: Net Absorption, Construction and Vacancy Rate

MSF Vacancy Rate (%) 25 12

10 20

8 15

10 4

5 2

0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016

Direct Net Absorption Total Net Absorption Delivered Construction Direct Vacancy Rate Source: CBRE Research, Q2 2016. Figure 3: Asking Rate, NNN Avg. Annual Figure 4: Construction

$/SF MSF 10 20 9 18 16 8 14 12 7 10 6 8 6 5 4 4 2 0 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Industrial Flex/R&D Q2 2016 Under Construction Delivered Construction Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.

Figure 5: Construction and Direct Vacancy Rate Figure 6: Vacancy Rates Vacancy Rate (%) MSF % 22 13 12 20 12 18 10 16 11 14 10 8 12 9 10 6 8 8 4 6 7 4 2 2 6 0 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 YTD 2016 Direct Vacancy Rate Total Vacancy Rate Under Construction Direct Vacancy Rate Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.

Figure 7: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Q2 2016 Q2 2016 2016 YTD Under Q2 2016 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 361 51,837,144 7.1 4,012,634 7.7 7.8 426,582 439,936 1,204,722 747,553 107,782 971,303 W DFW/Grapevine 310 17,671,136 2.4 1,396,270 7.9 7.9 92,817 92,817 -125,183 DFW Airport Total 671 69,508,280 9.5 5,408,904 7.8 7.8 519,399 532,753 1,079,539 747,553 107,782 971,303 East Dallas Central E Dallas 428 17,327,446 2.4 575,312 3.3 3.4 33,804 33,804 -151,952 East Dallas/Mesquite 285 18,941,293 2.6 1,944,592 10.3 10.3 -174,934 -174,934 200,327 East Dallas Total 713 36,268,739 4.9 2,519,904 6.9 7.0 -141,130 -141,130 48,375 Northeast Dallas Allen/McKinney 188 11,399,003 1.6 252,898 2.2 2.2 175,845 175,845 384,734 130,211 144,710 144,710 NE Dallas/Garland 843 45,961,858 6.3 2,874,972 6.3 7.0 -345,013 -278,743 319,887 407,350 Plano 357 19,648,760 2.7 962,222 4.9 5.4 -28,830 -64,863 32,349 216,720 Richardson 316 17,430,012 2.4 1,194,928 6.9 7.1 63,627 60,550 181,061 Rockwall 58 2,377,201 0.3 37,000 1.6 1.6 -6,000 -6,000 -4,200 175,000 Northeast Dallas Total 1,762 96,816,834 13.2 5,322,020 5.5 6.0 -140,371 -113,211 913,831 712,561 144,710 361,430 Northwest Dallas Denton 176 9,565,201 1.3 277,156 2.9 2.9 68,350 86,668 55,400 1,259,877 170,270 170,270 Lewisville 222 24,775,341 3.4 2,336,584 9.4 9.4 269,008 269,008 124,385 675,931 345,787 765,367 Metropolitan/Addison 453 20,948,568 2.9 1,289,991 6.2 6.2 234,696 271,096 75,727 N Stemmons/Valwood 655 48,098,217 6.6 2,886,718 6.0 6.1 55,691 84,575 655,740 541,933 838,560 NW Dallas Outlying 27 2,908,755 0.4 16,000 0.6 0.6 4,103 4,103 23,603 Northwest Dallas Total 1,533 106,296,082 14.5 6,806,449 6.4 6.5 631,848 715,450 934,855 2,477,741 516,057 1,774,197 South Dallas Red Bird/Airport 187 18,672,506 2.5 807,462 4.3 4.3 1,075,849 1,075,849 1,560,737 947,817 1,066,420 1,737,283 SE Dallas/I-45 226 25,185,476 3.4 1,843,080 7.3 7.3 1,060,478 1,092,878 1,098,558 4,226,476 1,253,620 1,253,620 SW Dallas/US 67 148 14,818,471 2.0 3,433,876 23.2 23.2 381,746 381,746 679,185 1,116,622 1,116,622 South Dallas Total 561 58,676,453 8.0 6,084,418 10.4 10.4 2,518,073 2,550,473 3,338,480 5,174,293 3,436,662 4,107,525 South Stemmons East Brookhollow 198 9,240,587 1.3 188,383 2.0 2.1 50,776 49,558 10,610 E Hines North 635 20,211,948 2.8 569,570 2.8 2.9 197,912 173,912 244,109 Eastern Lonestar/Tpke 290 24,354,472 3.3 726,183 3.0 3.0 27,897 27,897 637,687 292,200 259,672 North Trinity 407 10,655,264 1.5 508,076 4.8 4.8 87,894 87,894 24,857 23,826 West Brookhollow 997 40,463,325 5.5 1,209,554 3.0 3.0 53,383 49,683 154,059 W Hines North 193 6,897,321 0.9 159,710 2.3 2.3 24,525 24,525 90,440 Western Lonestar/Tpke 93 8,522,009 1.2 3,139,483 36.8 39.5 100,450 -125,048 -106,818 South Stemmons Total 2,813 120,344,926 16.4 6,500,959 5.4 5.6 542,837 288,421 1,054,944 292,200 283,498 Great SW/Arlington Arlington 391 16,971,082 2.3 369,570 2.2 2.6 -135,684 -62,851 -84,977 1,122,746 Lower Great Southwest 420 34,339,153 4.7 1,281,121 3.7 4.1 496,535 356,991 274,601 1,198,775 234,100 234,100 Upper Great Southwest 485 46,336,879 6.3 2,550,687 5.5 5.7 610,724 560,754 1,050,192 3,874,946 1,175,354 1,419,354 Great SW/Arlington Total 1,296 97,647,114 13.3 4,201,378 4.3 4.6 971,575 854,894 1,239,816 6,196,467 1,409,454 1,653,454 North Fort Worth Meacham Fld/Fossil Creek 392 36,202,224 4.9 2,065,787 5.7 5.7 720,671 741,271 1,022,869 2,270,599 608,617 1,284,877 NE Tarrant Alliance 203 36,273,074 4.9 3,944,688 10.9 10.9 501,430 501,430 2,091,244 2,535,028 658,782 West Tarrant 60 4,013,853 0.5 0 0.0 0.0 7,450 7,450 32,450 North Fort Worth Total 655 76,489,151 10.4 6,010,475 7.9 7.9 1,229,551 1,250,151 3,146,563 4,805,627 608,617 1,943,659 South Fort Worth East Fort Worth 620 22,924,971 3.1 1,190,795 5.2 5.2 73,338 84,789 107,826 301,500 Mansfield 81 3,993,511 0.5 168,705 4.2 4.2 -6,542 -6,542 2,764 N Central Fort Worth 304 10,529,043 1.4 494,316 4.7 4.7 10,326 10,326 2,856 S Central Tarrant County 262 22,113,710 3.0 518,219 2.3 2.4 611,204 607,204 698,569 S Central Fort Worth 266 10,323,859 1.4 399,620 3.9 3.9 -32,838 -32,838 -89,428 SW Tarrant 76 1,919,723 0.3 41,114 2.1 2.1 0 0 21,600 South Fort Worth Total 1,609 71,804,817 9.8 2,812,769 3.9 3.9 655,488 662,939 744,187 301,500 Dallas Total 8,053 487,911,314 66.5 32,642,654 6.7 6.9 3,930,656 3,832,756 7,370,024 9,404,348 4,205,211 7,497,953 Fort Worth Total 3,560 245,941,082 33.5 13,024,622 5.3 5.4 2,856,614 2,767,984 5,130,566 11,303,594 2,018,071 3,597,113 Dallas/Fort Worth Total 11,613 733,852,396 100.0 45,667,276 6.2 6.4 6,787,270 6,600,740 12,500,590 20,707,942 6,223,282 11,095,066 Source: CBRE Research, Q2 2016.

Figure 8: Industrial Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Q2 2016 Q2 2016 2016 YTD Under Q2 2016 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 242 45,460,986 7.3 3,425,531 7.5 7.6 401,056 414,410 1,201,361 747,553 107,782 971,303 W DFW/Grapevine 212 15,620,068 2.5 1,252,006 8.0 8.0 58,032 58,032 -146,885 DFW Airport Total 454 61,081,054 9.8 4,677,537 7.7 7.7 459,088 472,442 1,054,476 747,553 107,782 971,303 East Dallas Central E Dallas 289 13,783,108 2.2 416,449 3.0 3.1 41,237 41,237 -152,519 East Dallas/Mesquite 212 16,393,638 2.6 1,125,615 6.9 6.9 -192,890 -192,890 196,091 East Dallas Total 501 30,176,746 4.8 1,542,064 5.1 5.1 -151,653 -151,653 43,572 Northeast Dallas Allen/McKinney 139 9,241,334 1.5 84,172 0.9 0.9 167,685 167,685 439,877 94,211 121,835 121,835 NE Dallas/Garland 533 37,913,293 6.1 2,427,011 6.4 7.3 -437,073 -370,803 180,666 407,350 Plano 192 13,542,331 2.2 482,043 3.6 4.1 20,264 -10,769 9,675 137,020 Richardson 83 8,666,632 1.4 103,199 1.2 1.2 62,615 62,615 124,583 Rockwall 49 2,096,411 0.3 37,000 1.8 1.8 -6,000 -6,000 -6,000 175,000 Northeast Dallas Total 996 71,460,001 11.5 3,133,425 4.4 5.0 -192,509 -157,272 748,801 676,561 121,835 258,855 Northwest Dallas Denton 140 7,817,600 1.3 231,706 3.0 3.0 90,350 108,668 81,600 1,259,877 170,270 170,270 Lewisville 143 22,029,134 3.5 1,919,266 8.7 8.7 264,736 264,736 126,941 548,931 345,787 765,367 Metropolitan/Addison 217 12,545,677 2.0 408,908 3.3 3.3 57,873 94,273 -122,388 N Stemmons/Valwood 468 42,205,636 6.8 2,360,345 5.6 5.8 -67,288 -38,404 478,863 541,933 838,560 NW Dallas Outlying 26 2,891,430 0.5 16,000 0.6 0.6 2,040 2,040 21,540 Northwest Dallas Total 994 87,489,477 14.0 4,936,225 5.6 5.7 347,711 431,313 586,556 2,350,741 516,057 1,774,197 South Dallas Red Bird/Airport 152 17,912,406 2.9 794,086 4.4 4.4 1,076,267 1,076,267 1,561,155 947,817 1,066,420 1,737,283 SE Dallas/I-45 185 24,274,286 3.9 1,831,016 7.5 7.5 1,038,578 1,038,578 1,062,158 4,226,476 1,253,620 1,253,620 SW Dallas/US 67 92 13,524,382 2.2 3,410,269 25.2 25.2 373,262 373,262 665,558 1,116,622 1,116,622 South Dallas Total 429 55,711,074 8.9 6,035,371 10.8 10.8 2,488,107 2,488,107 3,288,871 5,174,293 3,436,662 4,107,525 South Stemmons East Brookhollow 136 7,479,762 1.2 159,484 2.1 2.1 45,874 45,874 -6,126 E Hines North 405 14,521,794 2.3 319,300 2.2 2.4 131,827 107,827 178,370 Eastern Lonestar/Tpke 234 22,613,955 3.6 629,401 2.8 2.8 32,147 32,147 646,937 292,200 259,672 North Trinity 251 6,013,304 1.0 193,717 3.2 3.2 64,653 64,653 74,916 11,700 West Brookhollow 768 32,930,184 5.3 948,051 2.9 2.9 16,995 14,495 113,999 W Hines North 115 4,834,137 0.8 38,398 0.8 0.8 9,412 9,412 75,716 Western Lonestar/Tpke 66 7,892,615 1.3 3,139,483 39.8 42.6 85,700 -139,798 -118,918 South Stemmons Total 1,975 96,285,751 15.4 5,427,834 5.6 5.9 386,608 134,610 964,894 292,200 271,372 Great SW/Arlington Arlington 298 14,432,170 2.3 229,350 1.6 2.0 -63,222 9,611 -33,143 1,122,746 Lower Great Southwest 315 31,514,880 5.1 1,104,471 3.5 3.9 330,073 190,529 108,057 1,198,775 234,100 234,100 Upper Great Southwest 373 42,259,236 6.8 1,971,021 4.7 4.9 585,270 512,820 1,005,833 3,874,946 1,175,354 1,419,354 Great SW/Arlington Total 986 88,206,286 14.1 3,304,842 3.7 4.1 852,121 712,960 1,080,747 6,196,467 1,409,454 1,653,454 North Fort Worth Meacham Fld/Fossil Creek 342 34,091,189 5.5 1,834,997 5.4 5.4 725,091 745,691 1,039,789 2,270,599 608,617 1,284,877 NE Tarrant Alliance 160 33,988,216 5.4 3,930,858 11.6 11.6 505,110 505,110 2,092,174 2,535,028 658,782 West Tarrant 48 3,713,021 0.6 0 0.0 0.0 3,700 3,700 28,700 North Fort Worth Total 550 71,792,426 11.5 5,765,855 8.0 8.0 1,233,901 1,254,501 3,160,663 4,805,627 608,617 1,943,659 South Fort Worth East Fort Worth 476 18,788,734 3.0 1,041,973 5.5 5.6 81,197 92,648 104,092 301,500 Mansfield 69 3,318,512 0.5 161,882 4.9 4.9 -12,495 -12,495 -2,495 N Central Fort Worth 246 9,259,481 1.5 442,335 4.8 4.8 7,826 7,826 6,326 S Central Tarrant County 208 20,378,493 3.3 419,294 2.1 2.1 629,406 629,406 719,684 S Central Fort Worth 201 8,637,289 1.4 254,609 2.9 2.9 -15,205 -15,205 -78,925 SW Tarrant 58 1,328,221 0.2 41,114 3.1 3.1 0 0 21,600 South Fort Worth Total 1,258 61,710,730 9.9 2,361,207 3.8 3.8 690,729 702,180 770,282 301,500 Dallas Total 5,349 402,204,103 64.5 25,752,456 6.4 6.6 3,337,352 3,217,547 6,687,170 9,241,348 4,182,336 7,383,252 Fort Worth Total 2,794 221,709,442 35.5 11,431,904 5.2 5.3 2,776,751 2,669,641 5,011,692 11,303,594 2,018,071 3,597,113 Dallas/Fort Worth Total 8,143 623,913,545 100.0 37,184,360 6.0 6.1 6,114,103 5,887,188 11,698,862 20,544,942 6,200,407 10,980,365 Source: CBRE Research, Q2 2016.

Figure 9: Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF) Bldg. Total % of Direct Direct Total Q2 2016 Q2 2016 2016 YTD Under Q2 2016 2016 YTD Area Count (SF) Market (SF) (%) (%) Direct Total Total Const. Deliveries Deliveries DFW Airport E DFW/Las Colinas 119 6,376,158 6.1 587,103 9.2 9.2 25,526 25,526 812,477 W DFW/Grapevine 98 2,051,068 1.9 144,264 7.0 7.0 34,785 34,785 -170,132 DFW Airport Total 217 8,427,226 8.0 731,367 8.7 8.7 60,311 60,311 642,345 East Dallas 0.0 Central E Dallas 139 3,544,338 3.4 158,863 4.5 4.8 -7,433 -7,433 -201,189 East Dallas/Mesquite 73 2,547,655 2.4 818,977 32.1 32.1 17,956 17,956 406,937 East Dallas Total 212 6,091,993 5.8 977,840 16.1 16.2 10,523 10,523 205,748 Northeast Dallas Allen/McKinney 49 2,157,669 2.1 168,726 7.8 7.8 8,160 8,160 280,352 36,000 22,875 22,875 NE Dallas/Garland 310 8,048,565 7.6 447,961 5.6 5.6 92,060 92,060 643,529 Plano 165 6,106,429 5.8 480,179 7.9 8.2 -49,094 -54,094 -33,650 79,700 Richardson 233 8,763,380 8.3 1,091,729 12.5 13.0 1,012 -2,065 59,903 Rockwall 9 280,790 0.3 0.0 0.0 0 0 Northeast Dallas Total 766 25,356,833 24.1 2,188,595 8.6 8.9 52,138 44,061 950,134 36,000 22,875 102,575 Northwest Dallas Denton 36 1,747,601 1.7 45,450 2.6 2.6 -22,000 -22,000 -49,068 Lewisville 79 2,746,207 2.6 417,318 15.2 15.2 4,272 4,272 -133,523 127,000 Metropolitan/Addison 236 8,402,891 8.0 881,083 10.5 10.6 176,823 176,823 -39,838 N Stemmons/Valwood 187 5,892,581 5.6 526,373 8.9 8.9 122,979 122,979 640,246 NW Dallas Outlying 1 17,325 0.0 0.0 0.0 2,063 2,063 21,563 Northwest Dallas Total 539 18,806,605 17.9 1,870,224 9.9 10.0 284,137 284,137 439,380 127,000 South Dallas Red Bird/Airport 35 760,100 0.7 13,376 1.8 1.8 -418 -418 484,470 SE Dallas/I-45 41 911,190 0.9 12,064 1.3 1.3 21,900 54,300 77,880 SW Dallas/US 67 56 1,294,089 1.2 23,607 1.8 1.8 8,484 8,484 300,780 South Dallas Total 132 2,965,379 2.8 49,047 1.7 1.7 29,966 62,366 863,130 South Stemmons East Brookhollow 62 1,760,825 1.7 28,899 1.6 1.7 4,902 3,684 -48,316 E Hines North 230 5,690,154 5.4 250,270 4.4 4.4 66,085 66,085 136,628 Eastern Lonestar/Tpke 56 1,740,517 1.7 96,782 5.6 5.6 -4,250 -4,250 610,540 North Trinity 156 4,641,960 4.4 314,359 6.8 6.8 23,241 23,241 33,504 12,126 West Brookhollow 229 7,533,141 7.2 261,503 3.5 3.5 36,388 35,188 134,692 W Hines North 78 2,063,184 2.0 121,312 5.9 5.9 15,113 15,113 81,417 Western Lonestar/Tpke 27 629,394 0.6 0.0 0.0 14,750 14,750 35,630 South Stemmons Total 838 24,059,175 22.9 1,073,125 4.5 4.5 156,229 153,811 984,095 12,126 Great SW/Arlington Arlington 93 2,538,912 2.4 140,220 5.5 5.5 -72,462 -72,462 -115,216 Lower Great Southwest 105 2,824,273 2.7 176,650 6.3 6.3 166,462 166,462 83,990 Upper Great Southwest 112 4,077,643 3.9 579,666 14.2 14.3 25,454 47,934 540,947 Great SW/Arlington Total 310 9,440,828 9.0 896,536 9.5 9.5 119,454 141,934 509,721 North Fort Worth Meacham Fld/Fossil Creek 50 2,111,035 2.0 230,790 10.9 10.9 -4,420 -4,420 289,678 NE Tarrant Alliance 43 2,284,858 2.2 13,830 0.6 0.6 -3,680 -3,680 1,583,384 West Tarrant 12 300,832 0.3 0.0 0.0 3,750 3,750 28,750 North Fort Worth Total 105 4,696,725 4.5 244,620 5.2 5.2 -4,350 -4,350 1,901,812 South Fort Worth East Fort Worth 144 4,136,237 3.9 148,822 3.6 3.6 -7,859 -7,859 3,585 Mansfield 12 674,999 0.6 6,823 1.0 1.0 5,953 5,953 15,953 N Central Fort Worth 58 1,269,562 1.2 51,981 4.1 4.5 2,500 2,500 1,000 S Central Tarrant County 54 1,735,217 1.6 98,925 5.7 5.9 -18,202 -22,202 68,076 S Central Fort Worth 65 1,686,570 1.6 145,011 8.6 8.6 -17,633 -17,633 -81,353 SW Tarrant 18 591,502 0.6 0.0 0.0 0 0 21,600 South Fort Worth Total 351 10,094,087 9.6 451,562 4.5 4.6 -35,241 -39,241 28,861 Dallas Total 2,704 85,707,211 81.4 6,890,198 8.0 8.1 593,304 615,209 4,084,832 163,000 22,875 114,701 Fort Worth Total 766 19,534,915 18.6 1,348,098 6.9 7.0 84,213 102,693 2,444,744 000 Dallas/Fort Worth Total 3,470 105,242,126 100.0 8,238,296 7.8 7.9 677,517 717,902 6,529,576 163,000 22,875 114,701 Source: CBRE Research, Q2 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas/Fort Worth Industrial, Q1 2016 Construction volume is Big D measure to watch in 2016

Vacancy Rate Avg. Asking Rate Net Absorption Completions 6.7% $4.33 5.9 MSF 4.9 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12

19 11 10 14 9

9 8

7 4 6

-1 5 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q1 2016.

• Dallas/Fort Worth’s industrial market saw occupiers 3PLs AND E-COMMERCE DRIVING DEMAND take down 5.9 million sq. ft. in the past 90 days. Third party logistics companies (3PLs) and e-commerce • This makes Q1 2016 absorption the second-highest are making Dallas/Fort Worth’s one of the nation’s level first quarter absorption in DFW since July global supply chain’s contenders as these occupiers 2009, a high-water mark since during the economic represented 2.4 million sq. ft., or 40.7% of this quarter’s recovery. absorption, while e-commerce fulfillment centers • Q1 2016 saw 4.9 million sq. ft. in deliveries, with accounted for two million sq. ft., or about 35.3% during 53% of deliveries pre-leased. the same 90-day time-span. Clearly the tidal shift in the • An estimated 21.4 million sq. ft. of space remains way Americans shop has changed the way retailers get under construction, with 42% of this space pre- goods to their customers and Dallas/Fort Worth is in the leased. nation’s transportation's crosshairs where the industrial • 3PL and e-commerce occupiers are the market’s market continues to benefit from this trend. A juggernauts this year, accounting for 76% of total geographic central U.S. location and its own population net absorption to-date, a direct result of Big D’s density of nearly seven million residents make it a population boom. premier location for 3PL and e-commerce occupiers and the construction pipeline is trailing Metroplex rooftops.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12

17 11 10 16 9 15 8 14 7 13 6 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

U.S. GDP ($, in billions) DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis, March 2016. CBRE Research, Q1 2016.

DESPITE OIL GLUT, TEXAS ECONOMY IS GROWING METROPLEX SEEING UNEVEN JOBS GROWTH According to the Federal Reserve Bank of Dallas’ latest According to the Federal Reserve Bank of Dallas’ March Texas Economic Indicators release, the state’s economy DFW Economic Indicators release, Dallas employment was maintained positive job growth at a 2.4% annualized growth up 4.3% year-over-year in January, while Fort Worth saw rate in January, outpacing the nation’s growth of 1.5%, by only 0.4% growth during the same period. Although Dallas is nearly a full percentage point. Unemployment dipped to not immune entirely to the impact of low oil prices, it will 4.5% from 4.6% where the state’s rate remains below the likely continue to see net positive job gains and out perform U.S. of 4.9%. The sector experiencing the most rapid the state average in 2016 according to Federal Reserve expansion in January was financial activities with an eyebrow economists. Fort Worth, which has more exposure to mining raising 8.2% expansion. To no surprise, the state’s exports and energy than Dallas, has seen weaker job growth. declined 5.7% during the Q4 2015 representing a 7.8% However, concentrations of area manufacturing, specifically contraction from a year ago as there continues to be related to defense and government contracts, provide many weakness in machinery and coal and petroleum products higher paying jobs that seem stable in near-term forecasts. which plunged by more than 15% each during the final 90 days of last year, according to Federal Reserve economists.

Figure 3: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Total DFW Jobs U.S. Texas DFW Source: Bureau of Labor Statistics, CBRE Research, Q1 2016.

MANUFACTORING RELOCATION DESTINATION U.S. CROSSROADS: NORTH TEXAS PRIMARY TRANSPORTATION & LOGISTICS HUB Kubota Tractor Corp., a Japan-based manufacturer of farm and construction equipment, recently Demand for industrial space in Dallas/Fort Worth began construction of its new U.S. headquarters in is driven by the region’s economic output and Grapevine which will comprise a 125,000 sq. ft. also by its physical location and the presence of office and a 68,000 sq. ft. R&D facility with room to several physical trade transportation networks of expand. This relocation from Southern California road, rail and air cargo routes. will ultimately bring 400 new jobs to North Texas. Adjacent to Kubota, Mercedes–Benz began clearing Four major interstates converge in the Metroplex, its own site for a new regional 254,000 sq. ft. Parts providing direct access to the U.S. - Mexican Distribution Center (PDC) to support spare parts Border and ports on the Gulf Coast. Three of the distribution for its dealer network. The facility will nation’s Class I rail operators have a total of five also include a 59,000 sq. ft. Learning & intermodal facilities in North Texas. Fort Worth’s Performance Center (LPC), a high-tech training Alliance Airport, which is also home to FedEx’s facility for southwest Mercedes-Benz dealership southwest hub, saw a year-over-year increase in technicians. cargo volume of 4.9% from 2013 to 2014 according to the FAA. Meanwhile, DFW Airport, There are several automobile manufacturers with a the region’s gateway to the world and the 10th presence in Dallas/Fort Worth. BMW has a regional busiest airport in the U.S. by cargo weight, saw a parts distribution facility in South Dallas, while 2.6% increase in cargo moved during the same General Motors has a site in Arlington that manufactures large SUVs. Lower gasoline prices time period. has translated into increased demand for larger vehicles, and GM is investing $1.4 billion to expand Dallas/Fort Worth’s central U.S. location, pro- the Arlington plant by one million sq. ft., the business environment, world-class international largest such investment by General Motors in the airport, and its population of nearly seven million U.S. (the Southern United States’ largest urban agglomeration) lends itself to being a major logistics hub on a global scale.

Figure 4: DFW Industrial Market

Net Direct Total Q1 2016 Q1 2016 YTD 2016 Avail. Direct Total Asking Rates Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Average Annual Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) ($/SF) (SF) (%) (%) (SF) (SF) (SF) Industrial Flex

DFW Airport 69,609,335 7,926,868 11.4 5,959,629 8.6 5,716,960 8.6 4.24 8.60 531,786 546,786 546,786

East Dallas 36,385,255 3,989,457 11.0 3,198,058 7.0 2,529,312 7.0 3.44 8.30 189,505 189,505 189,505

Northeast Dallas 96,567,981 9,802,432 10.2 6,715,042 5.4 5,202,925 5.9 4.88 8.47 1,106,450 1,027,042 1,027,042

Northwest Dallas 105,733,447 10,091,315 9.5 7,510,855 6.8 7,166,740 6.9 4.48 8.76 257,039 219,405 219,405

South Dallas 55,323,209 6,433,861 11.6 4,810,417 9.8 5,400,892 9.8 3.57 8.00 788,007 788,007 788,007

South Stemmons 120,961,548 10,759,467 8.9 7,973,226 5.8 7,072,372 5.9 5.39 11.17 756,517 766,523 766,523

Great SW / Arlington 96,431,206 7,311,395 7.6 4,608,513 4.3 4,116,245 4.5 4.04 6.54 485,831 384,922 384,922

North Ft. Worth 75,875,562 9,875,695 13.0 7,983,482 8.7 6,631,409 8.8 3.59 9.26 1,896,412 1,896,412 1,896,412

South Ft. Worth 71,972,158 4,394,743 6.1 3,074,031 4.8 3,425,882 4.8 4.28 6.00 70,448 81,248 81,248

DALLAS TOTALS 484,580,775 49,003,400 10.1 36,404,033 6.9 33,331,870 7.0 4.54 9.26 3,629,304 3,537,268 3,537,268

FT.WORTH TOTALS 244,278,926 21,581,833 8.8 15,666,026 5.8 14,173,536 5.9 3.96 6.84 2,452,691 2,362,582 2,362,582

MARKET TOTALS 728,859,701 70,585,233 9.7 52,070,059 6.5 47,505,406 6.7 4.33 8.72 6,081,995 5,899,850 5,899,850

Source: CBRE Research, Q1 2016.

Figure 5: Net Absorption and Vacancy Rate Q1 2016 marks the 22nd consecutive quarter of Absorption (MSF) Vacancy Rate positive net absorption for the DFW industrial 19 14 market as it posted 5.9 million sq. ft. in total 12 absorption, and the second highest for a first 14 10 quarter of the year since the most recent economic 8 9 recovery. Warehouse and distribution space led 6 quarterly activity with just over 5.8 million sq. ft. of 4 4 total net absorption, while flex space posted 2 88,176 sq. ft. of total net absorption. The (2) 0 submarket that posted the highest Q1 2016 net 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD absorption was North Fort Worth at 1.9 million sq. 2016 ft. Just over one million sq. ft. of the North Fort Q1 Q2 Worth absorption was due to an e-commerce fulfillment center that had taken occupancy in the Q3 Q4 Alliance area during the quarter. Total Annual Net Absorption Vacancy Rate

Source: CBRE Research, Q1 2016. Deliveries for the quarter totaled 4.9 million sq. ft. Pre-leasing activity remained very strong with 2,577,672 sq. ft., or 53%, of the 4.9 million sq. ft. of Figure 6: Construction Q1 deliveries preleased. An estimated 21.4 million MSF sq. ft. is currently under construction in DFW, 20 easily the highest level of activity ever seen in the 18 market. Yet market demand continues to meet 16 supply – of the space under construction, 42% is 14 pre-leased. South Dallas remains popular among 12 developers with 38.7% of under construction space 10 located in the submarket. 8 6 4 In Q1 2016, vacancy continued to compress. Due to 2 robust tenant demand, particularly from e- 0 commerce and third party logistics (3PL) users, the vacancy rate decreased by 9 bps to 6.7 %. Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Under Construction Delivered Construction Strong tenant demand despite an increase in Source: CBRE Research, Q1 2016. deliveries has contributed to the relatively stable vacancy. Demand is outpacing supply - for now - as Figure 7: Vacancy Rate vacancy has compressed for three consecutive quarters. Also, the industrial development pipeline % can be turned off much more quickly than other 14 asset types due to the fact that industrial product 13 takes less time to construct. 12 11 Still, with just over 21.4 million sq. ft. now 10 underway – less than half pre-leased – vacancy may 9 reverse its nine month compression and see its 8 course tick up later on in 2016 as more product 7 delivers. Stay tuned as CBRE Research monitors 6 this Texas-sized construction pipeline that is one of 5 the largest in the U.S. Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016

Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q1 2016.

CAPITAL MARKETS

According to Real Capital Analytics data, Q1 2016 saw private buyers as the most active with 45% of DFW sales volume. Institutional buyers followed with 36% of the sales volume. Dallas/Fort Worth figures are on par with the total U.S. trends, considering these two groups of buyers were also the most active nationally.

Strong fundamentals continue to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the first quarter of 2016 and cap rates have remained at all-time lows. According to the second half 2015 CBRE Cap Rate Survey, cap rates on class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions but CBRE has seen a slight increase in cap rates among some class B assets, and are priced near 5.75%-6.25% according to the most recent CBRE Cap Rate Survey. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the slowing rental rate growth and construction activity.

Figure 8: Select Local Sale Transactions

Building(s) Submarket SF

1303 W Pioneer Pkwy Great Southwest / Arlington 860,445

2722 S Jupiter Rd Northeast Dallas 420,200

15101 Grand River Rd Great Southwest / Arlington 327,000

150 Turtle Creek Blvd South Stemmons 159,938

Source: Real Capital Analytics, CBRE Research, Q1 2016.

Figure 9: Select Local Lease Transactions

Tenant Building(s) Submarket SF

Bed Bath & Beyond 2900 S Valley Pkwy Northwest Dallas 800,000

Mission Foods 2404 W Pioneer Pkwy Great Southwest / Arlington 766,000

Nestlé* 13600 Independence Pkwy North Fort Worth 524,000

At Home 4040 Forrest Ln Northeast Dallas 352,076

OHL 2010 January Ln Great Southwest / Arlington 347,015

Office Depot 2220 N State Hwy 360 Great Southwest / Arlington 295,000

*Renewal Source: CBRE Research, Q1 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas / Fort Worth Industrial, Q4 2015 Occupiers and Developers topping out new DFW records

Vacancy Rate Avg. Asking Rate Net Absorption Completions 6.8% $4.32 5,255,300 2,698,065

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12 19 11

14 10

9 9 8

7 4 6

-1 5 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q4 2015.

EXECUTIVE SUMMARY E-COMMERCE: DRIVING OCCUPIER DEMAND • Dallas / Fort Worth year-to-date absorption totaled The convergence of technology and real estate cannot be 18 million sq. ft. understated: it affects the way real estate is studied • 2015 absorption was the second-highest level through the proliferation of “Big Data,” but also which experienced in the DFW market since the most companies are occupying it and how. According to the recent economic recovery. U.S. Census Bureau, Q3 2015 e-commerce sales were • Q4 2015 saw 2.7 million sq. ft. in deliveries, with estimated to have increased 15.1% year-over-year, and year-to-date deliveries totaling 19.6 million sq. ft. e-commerce accounted for 7.4% of total sales. Occupier • 2015 saw the highest amount of deliveries to the demand is ultimately customer driven, and the American Dallas / Fort Worth industrial market since the consumer now expects next-day, if not same-day, delivery economic recovery. of their online purchases. This shift in consumer patterns • An estimated 19.7 million sq. ft. of space remains has led to greater industrial demand, more industrial under construction, with 36% of this space pre- infill development, and increased sophistication of leased. industrial buildings. And with nearly 40 million sq. ft. of demand and new construction this past year and next, DFW’s industrial sector seems at the heart of it all.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12

17 11 10 16 9 15 8 14 7 13 6 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q3 2015

U.S. GDP ($, in billions) DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis, December 2015. CBRE Research, Q4 2015.

TEXAS ECONOMY SEES MODEST GROWTH IN WAKE YET NORTH TEXAS STILL SEES SWIFT GROWTH OF 70% PRICE SLUMP IN CRUDE OIL The Dallas / Fort Worth Economy continued to expand at a According to the Federal Reserve Bank of Dallas’s December relatively rapid pace with 3% annual employment growth, per Texas Economic Indicators release, the Texas Economy the Federal Reserve Bank of Dallas’s December DFW managed to maintain positive job growth at a 1.3% Economic Indicators release. Comparatively, the U.S annualized growth rate year-to-date through November employment growth was 1.8 % and Texas has slowed to despite the bad headlines from the oil patch. Still, 1.3% annual growth. The strongest sectors locally: education unemployment edged up to 4.6% from 4.4%. No surprise and health services; leisure and hospitality, and trade, that oil and gas experienced the largest job losses with a transportation and utilities with 5.4%, 5.5%, and 4.7% 17.5% employment contraction year-to-date (through employment growth year-to-date through November, November). The sector that has experienced the most rapid respectively. Interestingly, employment growth has been expansion has been education and health services at 4.3% uneven in the Metroplex. Through November, annual new growth. Texas exports declined 3.8% in October, which jobs grew in Dallas by 4.1% while Fort Worth etched out only represents a 6.6% decrease in exports year-over-year. a mere 20 bps. However, overall unemployment in Dallas / Weakness in Texas exports is a result of lower oil prices and Fort Worth remains at historic lows suggesting a tightening a strong dollar, according to Federal Reserve economists. in the labor market and demand for new workers.

Figure 3: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Total DFW Jobs U.S. Texas DFW Source: Bureau of Labor Statistics, CBRE Research, Q4 2015.

DALLAS/FORT WORTH ECONOMIC UPDATE: INDUSTRIAL MARKET IS MAJOR U.S. CORPORATE EXPANSION, HOUSING ADD LIFT TRANSPORTATION & LOGISTICS HUB

DFW’s industrial market continues to benefit from Demand for industrial space in Dallas / Fort positive national and local market robust Worth is driven not only by the region’s fundamentals. Despite low oil prices and the economic output but also by its physical location contraction of the oil and gas sector, DFW appears and the presence of several transportation well hedged due to the region’s diverse economy, networks. which shows its heft in that were its own country, the Metroplex’s economic output would rank it Four major interstates converge in the Metroplex, 23rd in the world, just behind Taiwan. Much of providing direct access to the U.S. - Mexican this output is doubtlessly due to the 21 Fortune 500 Border and ports on the Gulf Coast. Three of the companies headquartered in North Texas, not to nation’s Class I rail operators have a total of five mention several high profile corporate relocations intermodal facilities in North Texas. Fort Worth’s that are done or in the pipeline. Alliance Airport, which is also home to FedEx’s Southwest hub, saw a year-over-year increase in According to the Federal Reserve Bank of Dallas’s cargo volume of 4.85% from 2013 to 2014 December DFW Economic Indicators release, according to the FAA. Meanwhile, DFW Airport, home prices in the Metroplex continue to trend the region’s gateway to the world and the 10th upward, appreciating 11% in Dallas and 8.6% in busiest airport in the U.S. by cargo weight, saw a Fort Worth year-over-year. Single family and 2.55% increase in cargo moved during the same multifamily starts have both increased with single time period. family permits up 26% and multifamily permits up 31.2% year-over-year. Residential construction Dallas / Fort Worth’s central U.S. location, pro- however, for the time being, has managed to stay business environment, world-class international ahead of demand as apartment rents have also airport, and its population of nearly 7 million (the been trending upward. Southern United States’ largest urban agglomeration) lends itself to being a major logistics hub on a global scale.

Figure 4: DFW Industrial Market

Net Direct Total Q3 2015 Q3 2015 2015 Avail. Direct Total Asking Rates Rentable Available Vacancy Vacancy Direct Net Total Net Total Market Rate Vacancy Vacancy Average Annual Area (SF) Rate Rate Absorption Absorption Absorption (%) (SF) (SF) ($/SF) (SF) (%) (%) (SF) (SF) (SF) Industrial Flex

DFW Airport 68,646,480 7,802,003 11.4 6,196,435 8.2 5,716,960 8.3 4.78 9.01 1,185,421 1,458,871 1,716,942

East Dallas 36,434,613 3,780,575 10.4 3,198,058 7.8 2,862,524 7.9 3.11 10.56 361,774 341,774 96,169

Northeast Dallas 96,624,444 9,637,228 10.0 6,715,042 6.1 6,079,939 6.3 4.57 8.50 209,901 197,641 1,398,023

Northwest Dallas 104,452,033 9,834,071 9.4 7,510,855 5.8 6,149,075 5.9 4.63 8.80 1,011,327 1,063,545 4,684,923

South Dallas 54,667,346 5,937,262 10.9 4,810,417 9.7 5,308,088 9.7 3.32 8.00 870,003 870,003 4,989,389

South Stemmons 120,942,629 11,180,919 9.2 7,973,226 6.2 7,566,606 6.3 4.73 10.32 417,626 412,415 2,133,223

Great SW / Arlington 96,304,623 7,552,598 7.8 4,608,513 4.6 4,561,320 4.7 4.03 6.53 531,165 560,554 2,667,581

North Ft. Worth 74,879,102 8,466,469 11.3 7,983,482 9.6 7,200,170 9.6 3.56 9.26 141,028 141,028 95,774

South Ft. Worth 71,937,216 5,677,210 7.9 3,074,031 4.9 3,563,063 5.0 3.88 10.13 209,620 209,469 212,668

DALLAS TOTALS 481,767,545 48,172,058 10.0 36,404,033 6.9 33,683,192 7.0 4.38 9.26 4,056,052 4,344,249 15,018,669

FT.WORTH TOTALS 243,120,941 21,696,277 8.9 15,666,026 6.2 15,324,553 6.3 3.84 8.56 881,813 911,051 2,976,023

MARKET TOTALS 724,888,486 69,868,335 9.6 52,070,059 6.7 49,007,745 6.8 4.32 8.87 4,937,865 5,255,300 17,994,692

Source: CBRE Research, Q4 2015.

Figure 5: Net Absorption and Vacancy Rate Q4 2015 marks the 21st consecutive quarter of Absorption (MSF) Vacancy Rate positive net absorption for the DFW industrial 19 14 market as it posted 5.3 million sq. ft. in total 12 market absorption. With the three previous 14 10 quarters’ impressive combined 12.7 million sq. ft. 8 9 of absorption, the year-to-date total reached just 6 under 18 million sq. ft., eclipsing 2014 absorption. 4 4 In fact, 2015 had the second-strongest absorption 2 since the economic recovery, and only 750,000 sq. (2) 0 ft. short of the 18.7 million sq. ft. market all-time 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD record absorption experienced in 2013. Warehouse 2015 and distribution space led quarterly activity with Q1 Q2 just over 5 million sq. ft. of total net absorption, while flex space also posted 200,000 sq. ft. of total Q3 Q4 net absorption. The submarket that posted the Total Annual Net Absorption Vacancy Rate highest Q4 2015 net absorption was DFW Airport at Source: CBRE Research, Q4 2015. 1.5 million sq. ft.

Figure 6: Construction Deliveries for the quarter totaled 2.7 million sq. ft., bringing year-to-date deliveries to 19.6 million sq. MSF ft., easily the highest amount delivered to market 20 since the economic downturn. Pre-leasing activity 18 remained strong with 930,000, or 34%, of the 2.7 16 million sq. ft. of Q4 deliveries preleased. For 2015 14 deliveries, the pre-leased rate averaged 45%. An 12 estimated 19.7 million sq. ft. is currently under 10 construction in the market. Of this under 8 construction space, 36 % is pre-leased. South 6 Dallas remains popular among developers with 4 32.7 % of under construction space located in the 2 submarket. 0

Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 In Q4 2015, vacancy continued to compress. Due to Under Construction Delivered Construction robust tenant demand, particularly from e- Source: CBRE Research, Q4 2015. commerce and third party logistics (3PL) users, the vacancy rate decreased by 50 bps to 6.8 % - Figure 7: Vacancy Rate effectively undoing the uptick in vacancy rates seen earlier in the year. % 14 Strong tenant demand despite an increase in 13 deliveries has contributed to the relatively stable 12 vacancy. Demand is outpacing supply - for now - as 11 vacancy has compressed for two consecutive 10 quarters. Also, the industrial development pipeline 9 can be turned off much more quickly than other 8 asset types due to the fact that industrial product 7 takes less time to construction. Still, with nearly 6 20 million sq. ft. now underway – less than half 5 pre-leased – vacancy may reverse its six month compression and see its course northbound in

Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 2016 as the product delivers. Stay tuned.

Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q4 2015.

CAPITAL MARKETS

The capital markets landscape in Dallas / Fort Worth Q4 2015 based on trailing 12-month data reported by Real Capital Analytics. The median cap rate for Dallas / Fort Worth was slightly higher, at 7.3%, compared to the national median of 6.8%. These cap rates are based on deals that have been confirmed, approximated or assumed by local professionals and gathered by Real Capital Analytics. Q4 2015 saw cross-border buyers as the most active with 41% of DFW sales volume. Institutional buyers followed with 26% of the sales volume. Dallas / Fort Worth figures are on par with the total U.S. trends, considering international buyers accounted for 36% of national industrial sales volume.

Treasury rates have seen a slight increase - and are likely to go higher if stock indexes become much more bearish during 2016 but will still remain very low, providing buyers with a continued attractive lending environment. Strong fundamentals continue to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Investor interest is now covering the full spectrum of asset quality and location. For the best quality assets in the best locations, cap rates on Class A, multi- tenant product are below the previous low water mark from 2007 as investors are continuing to project rental rate growth over the next three years. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE analysts expect institutional investor activity to remain strong but cap rate compression to level off slightly given the slowing rental rate recovery, construction activity, and rise in interest rates.

Figure 8: Select Local CBRE Sale Transactions Building(s) Submarket SF

Core DFW Portfolio Dallas / Fort Worth 989,878

River Park 1000 & DFW Airport Dallas / Fort Worth 547,179

Turnpike Industrial Portfolio South Stemmons 529103

Prime Industrial Portfolio Dallas / Fort Worth 318,240

Source: CBRE Research, Q4 2015.

Figure 9: Select Local CBRE Lease Transactions

Tenant Building(s) Submarket SF

Niagara Bottling 4685 Mountain Creek Pkwy South Dallas 630,000

Samsung Electronics America 400 Dividend Dr DFW Airport 552,225

WorldPac 1700 Lakeside Pkwy Northwest Dallas 462,779

Standard Motor Products* 1801 Waters Ridge Northwest Dallas 415,000

Excel Inc 15001 Heritage Pkwy North Fort Worth 391,744

*Renewal Source: CBRE Research, Q4 2015.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/researchgateway. Lauren Paris Senior Research Analyst +1 214 9796587 [email protected]

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas / Fort Worth Industrial, Q3 2015 Demand year-to-date near 2014’s total

Vacancy Rate Avg. Asking Rate Net Absorption Completions 7.3% $4.31 2,568,639 4,403,103

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12 19 11

14 10

9 9 8

7 4 6

-1 5 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q3 2015.

20TH CONSECUTIVE QUARTER POSITIVE LOCATION: LONGTERM OCCUPIER DRIVER DEMAND GROWTH DFW’s location and its population of nearly 7 million, the Q3 2015 absorption was 2.6 million sq. ft., yielding a Southern United States’ largest urban agglomeration, year-to-date total of nearly 12.7 million sq. ft. lends itself to being a major distribution hub on a

national scale. Four major interstates converge in the VACANCY REMAINS LEVEL Metroplex, providing direct access to the U.S. - Mexican While the overall net absorption for the third quarter Border and ports on the Gulf Coast. Three of the nation’s was less impressive than the previous two quarters of Class I rail operators have a total of five intermodal 2015, Q3 deliveries were nearly 47% preleased. The facilities in North Texas. Fort Worth Alliance Airport, direct and total vacancy rates as of end of Q3 2015 sat which is also home to FedEx’s Southwest hub, saw a at 7.2% and 7.3%, respectively, a slight 5 basis point year-over-year increase in cargo volume of 4.85% from (bps) decrease from the previous quarter. 2013 to 2014 according to the FAA. Meanwhile DFW Airport, the regions’ gateway to the world and the 10th busiest airport in the U.S. by cargo weight, saw a 2.55% increase in cargo moved during the same time period.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12 17 11 10 16 9 15 8 14 7 13 6 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 GDP ($, in billions) DFW Industrial Vacancy Rate

Source: U.S. Bureau of Economic Analysis, September 2015. CBRE Research, Q3 2015.

REAL GDP CONTINUES TO EXPERIENCE GAINS INSPITE OF CRUDE OIL PRICE SLUMP, TEXAS North Texas and DFW’s south central location at the ECONOMY HOLDS STEADY convergence points of several interstates and railroads According to the Federal Reserve Bank of Dallas’ Texas lends itself to being a strong distribution hub, and the Manufacturing Outlook Survey, overall factory activity region’s industrial market continues to be a beneficiary of was essentially unchanged in September. The production strong national GDP growth over the past few years. After index, a key measure of manufacturing conditions in the a third revision, real GDP experienced an increase of state, remained near zero at 0.9 suggesting that output 0.6% growth for the first quarter, and the national gross stabilized for a second consecutive month following domestic product increased 3.9% during the second several months of declines. Texas’ economy continues to quarter of 2015. According to the Bureau of Economic add jobs, and local and state unemployment is still below Analysis the acceleration in real GDP was primarily due the U.S. level. The most pronounced employment rally for to increases in personal consumption expenditures and the quarter was the construction industry, which grew at exports, while imports decreased during the same period. an 8.8% annualized rate in July after several months of An uptick in state and local government spending declines, most likely a result of the extended rainy season partially offset decreases in federal government spending experienced earlier in the year that delayed many to help bolster national GDP growth for 2015. already-planned construction projects.

Figure 3: DFW Industrial Market Net Direct Total Q3 2015 Q3 2015 2015 YTD Asking Rates Rentable Avail. Direct Vacancy Total Vacancy Direct Net Total Net Total Area Available Rate Vacancy Rate Vacancy Rate Average Annual Absorption Absorption Absorption Market (SF) (SF) (%) (SF) (%) (SF) (%) ($/SF) (SF) (SF) (SF) Industrial Flex DFW Airport 68,846,614 9,821,677 14.3 6,196,435 9.0 6,530,265 9.5 4.40 7.95 134,054 229,179 258,071 East Dallas 36,440,547 4,214,230 11.6 3,198,058 8.8 3,198,058 8.8 3.41 8.96 486,873 486,873 -245,605 Northeast Dallas 97,655,126 10,734,260 11.0 6,715,042 6.9 7,125,103 7.3 4.62 8.03 -428,587 -738,655 1,200,382 Northwest Dallas 104,609,462 10,367,738 9.9 7,510,855 7.2 7,685,672 7.3 4.48 8.00 584,112 447,188 3,621,378 South Dallas 53,345,148 6,802,027 12.8 4,810,417 9.0 4,842,817 9.1 3.41 8.00 1,457,189 1,457,189 4,119,386 South Stemmons 121,193,081 10,028,618 8.3 7,973,226 6.6 7,985,521 6.6 4.87 10.26 438,130 428,010 1,720,808

Great SW / Arlington 95,956,673 7,715,934 8.0 4,608,513 4.8 4,739,402 4.9 4.15 6.11 630,634 620,634 2,107,027 North Ft. Worth 75,371,204 9,283,446 12.3 7,983,482 10.6 8,004,082 10.6 3.60 9.26 -425,286 -445,886 -45,254 South Ft. Worth 71,813,152 5,404,027 7.5 3,074,031 4.3 3,107,356 4.3 3.58 5.66 114,132 84,107 3,199 DALLAS TOTALS 482,089,978 51,968,550 10.8 36,404,033 7.6 37,367,436 7.8 4.68 8.68 2,671,771 2,309,784 10,674,420 FT.WORTH TOTALS 243,141,029 22,403,407 9.2 15,666,026 6.4 15,850,840 6.5 3.81 6.57 319,480 258,855 2,064,972

MARKET TOTALS 725,231,007 74,371,957 10.3 52,070,059 7.2 53,218,276 7.3 4.31 8.14 2,991,251 2,568,639 12,739,392

Source: CBRE Research, Q3 2015.

UNEMPLOYMENT RATE

Annual seasonally-adjusted, nonfarm employment Underpinning DFW’s historically strong labor growth in DFW was 3.2% from August 2014 to market trends, the region contains an ample August 2015 for a net increase of 104,100 jobs. supply of well-educated workers and has Simultaneously, the unemployment rate in DFW maintained strong population growth, both of fell approximately 10 bps from Q2 2015 to 3.8% at which contribute to the area's healthy economy. the end of July 2015. Meanwhile, the collective DFW has an estimated population of 6.9 million, Texas unemployment rate decreased by 20 bps, the Southern United States’ largest urban effectively undoing the unemployment increase agglomeration, and a 33% increase since 2000. seen during Q2 2015. Texas and DFW are still According to Claritas, the DFW population is outpacing the U.S. which recorded a 5.1% projected to add another 500,000 residents over unemployment rate for August 2015. Indicative of a the next five years, to reach 7.4 million residents stronger economy, both Texas and DFW have by 2020. This five-year growth rate of 7.1% consistently outperformed the national outpaces the national growth rate of 3.5% for the unemployment rate since January of 2007. same timeframe.

Figure 4: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Total DFW Jobs U.S. Texas DFW

Source: Bureau of Labor Statistics, CBRE Research, Q3 2015.

Figure 5: Net Absorption and Vacancy Rate Q3 2015 marks the 20th consecutive quarter of Absorption (MSF) Vacancy Rate 19 14 positive net absorption for the DFW industrial 12 market as it posted 2.6 million sq. ft. in total 14 10 market absorption. With the two previous 8 quarters’ impressive combined 10.2 million sq. ft. 9 6 of absorption, the year-to-date total reached just 4 4 over 12.7 million sq. ft., putting 2015 year-to-date a 2 mere 115,795 sq. ft. away from the total absorption (2) 0 level for all of 2014. Due to DFW’s focus on 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015 fulfillment centers and logistics, it’s no surprise that warehouse/distribution space led quarterly Q1 Q2 activity with 2.5 million sq. ft. of net absorption, Q3 Q4 while flex space also posted a modest 55,570 sq. ft. Total Annual Net Absorption Vacancy Rate of total net absorption. The submarket that posted Source: CBRE Research, Q3 2015. the highest Q3 2015 net absorption was once again South Dallas at 1.4 million sq. ft. Figure 6: Construction MSF Deliveries for the quarter totaled 4.4 million sq. ft., 20 higher than the amount of completions from last 18 quarter, but only a little more than half of Q1 2015 16 when DFW posted the highest amount of quarterly 14 12 new inventory in CBRE’s tracked history. Preleasing 10 activity remained steady with 2 million of the 4.4 8 million sq. ft., or 47%, of Q3 deliveries preleased. 6 Despite the robust volume of deliveries so far for 4 2 2015, the pipeline remains strong with 18.4 million 0 sq. ft. currently under construction. The pre- leased rate for space under construction decreased

Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 from 36% in Q2 2015 to 26% in Q3 2015, as a result Under Construction Delivered Construction of large preleased deliveries. However, a healthy 4.8 Source: CBRE Research, Q3 2015. million sq. ft. under construction is preleased. Figure 7: Vacancy Rate

% 14 In Q3 2015, the vacancy rate continued to flatten. 13 Due to robust tenant demand, particularly from e- 12 commerce and third party logistics (3PL) users, the 11 total vacancy rate has experienced a leveling out 10 following an uptick seen in vacancy over the last 9 three quarters. In fact, the vacancy rate decreased 8 by 5 bps to 7.3% but remained relatively 7 unchanged overall. The stable vacancy rate can be 6 attributed to strong tenant demand despite large 5 vacant deliveries and a handful of large space consolidations and some industrial users users Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 exiting the Dallas/Fort Worth market completely. Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q3 2015.

The capital markets landscape in DFW continues to display strong velocity based on trailing 12- month data reported by Real Capital Analytics. In Q3 2015, DFW recorded a 46% increase in sales volume and 42% rise in transacted square footage, at $2.98 billion and 54.4 million sq. ft., respectively, for the prior 12 month period through Q3 2015.

Foreign and institutional capital remains the most active buyer type for 2015 year-to-date, comprising 33% and 37% of DFW total sales volume respectively compared to 31% and 17% nationally.

Both investment volume and leasing activity continue to benefit from DFW's location and status as an inland port.

Figure 8: Select CBRE Institutional Sale Transactions

Building(s) Submarket SF

Prologis Park 20/35 South Dallas 3,406,594

Texas Industrial Portfolio Multiple 938,679

Frank ford Trade Center Northwest Dallas 562,243

1415 N Cockrell Hill South Stemmons 318,240

Winzer Distribution Facility Northeast Dallas 119,107

Source: CBRE Research, Q3 2015.

Figure 9: Select Lease Transactions

Tenant Building(s) Submarket SF

Confidential e-Commerce User Alliance Center North 2 North Fort Worth 1,002,620

Falken Tire Wildlife Commerce Park 3 Great Southwest/Arlington 540,000

Farmer’s Brothers Coffee NEC I-35 & SH 114 North Fort Worth 537,000

Kuhne + Nagel 2555 S Valley Pwky Northwest Dallas 529,155

Ashley Furniture 5151 Samuell Blvd East Dallas 442,000

Daimler Trucks North America RiverPoint Commerce Center Great Southwest / Arlington 271,777

Source: CBRE Research, Q3 2015.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/researchgateway. Lauren Paris Senior Research Analyst +1 214 9796587 [email protected]

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

Dallas / Fort Worth Industrial, Q2 2015 Occupier demand stakes 15- year record; new construction follows suit

Vacancy Rate Avg. Asking Rate Net Absorption Completions 7.4% 4.11 $/SF 4.2 MSF 3.8 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12 19 11

14 10

9 9 8

7 4 6

(1) 5 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q2 2015.

DFW POSTS POSITIVE ABSORPTION FOR DALLAS/FORT WORTH BENEFITS FROM 19TH CONSECUTIVE QUARTER STRONG DEMOGRAPHICS AND LOCATION For the 19th straight quarter, the DFW Metroplex posted positive DFW’s supply of well-educated workers and strong net absorption. Q2 2015 absorption was 4.2 million sq. ft., population growth make it an attractive market for yielding a year-to-date total of nearly 10.2 million sq. ft., the employers. With a current estimated population of 6.8 highest mid-year absorption for DFW since 2000. million, the Metroplex is the largest metropolitan area in

Texas and the fourth largest in the U.S. DFW serves as a VACANCY RATES REMAIN RELATIVELY FLAT regional and national hub for logistics and distribution During Q2 2015, vacancy within newly delivered on global supply chains due to its central location and projects resulted in a slight increase in overall vacancy, status as an inland port. In turn, North Texas provides albeit a relatively flat change. The direct and total businesses a logistical advantage because of its vacancy rates as of mid-year 2015 sat at 7.3% and accessibility to other dense metros by rail, truck, and air. 7.4%, respectively.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12 17 11 10 16 9 15 8 14 7 13 6 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 GDP ($, in billions) DFW Industrial Vacancy Rate

Source: U.S. Bureau of Economic Analysis, June 2015. CBRE Research, Q2 2015.

REAL GDP REVISED UPWARD, RESULTING IN INDICES INDICATE CONTRACTION, OUTLOOK MORE SMALLER ANNUALIZED DECLINE OPTIMISTIC DFW has benefitted from strong GDP growth at the The Texas Manufacturing Outlook Survey conducted by national level in recent years. Based on the Bureau of the Federal Reserve Bank of Dallas reported the June Economic Analysis' third estimate for Q1 2015 real GDP production index as the fourth consecutive month of growth nationally, overall economic activity experienced contraction. Despite the stall in growth, the June index of a small decline at an annualized rate of -0.2%, although -6.5 was 52% higher than the previous month. The this is an upward revision from initial estimates. This stall capacity utilization and shipments indices also reflected in growth was attributed to severe winter weather, muted upward movement over the month, suggesting the rate of foreign demand and reduced activity in the energy decline may be slowing. Some survey respondents industry. The upward revision was predominantly driven reported oil price uncertainty and weather conditions as by personal consumption expenditures, along with factors of the recent decline in various categories. nonresidential fixed investment, residential investment, However, expectations for future business activity edged inventories and state and local government purchases. up from 4.9 to 8.1, with positive indices for future production at 35.2, future capacity utilization at 31.7 and future company outlook at 13.4.

Figure 3: DFW Industrial Market Net Direct Total Q2 2015 Q2 2015 2015 YTD Asking Rates Rentable Avail. Direct Vacancy Total Vacancy Direct Net Total Net Total Area Available Rate Vacancy Rate Vacancy Rate Average Annual Absorption Absorption Absorption Market (SF) (SF) (%) (SF) (%) (SF) (%) ($/SF) (SF) (SF) (SF) Industrial Flex DFW Airport 68,402,746 9,047,151 13.2 5,838,679 8.5 6,267,634 9.2 4.35 8.39 112,591 -187,364 28,892 East Dallas 36,487,432 4,881,346 13.4 3,684,931 10.1 3,684,931 10.1 3.42 12.39 -1,023,350 -1,015,350 -732,478 Northeast Dallas 97,134,632 10,233,576 10.5 5,785,699 6.0 5,885,692 6.1 4.24 7.75 395,102 399,856 1,939,037 Northwest Dallas 104,374,224 10,334,338 9.9 7,892,472 7.6 7,930,365 7.6 4.38 6.61 1,188,083 1,287,900 3,174,190 South Dallas 52,514,313 6,334,247 12.1 5,279,041 10.1 5,311,441 10.1 3.38 6.02 2,677,264 2,677,264 2,662,197 South Stemmons 121,440,805 12,200,569 10.0 8,550,356 7.0 8,552,531 7.0 4.83 9.71 64,926 89,088 1,292,798

Great SW / Arlington 95,260,657 8,402,411 8.8 4,918,896 5.2 4,959,560 5.2 4.23 6.39 200,305 235,456 1,486,393 North Ft. Worth 75,301,955 9,471,841 12.6 7,456,818 9.9 7,456,818 9.9 3.72 9.26 875,885 875,885 400,632 South Ft. Worth 72,154,925 5,056,570 7.0 3,236,163 4.5 3,239,463 4.5 3.77 5.66 -177,806 -178,606 -80,908 DALLAS TOTALS 480,354,152 53,031,227 11.0 37,031,178 7.7 37,632,594 7.8 4.26 8.36 3,414,616 3,251,394 8,364,636 FT.WORTH TOTALS 242,717,537 22,930,822 9.5 15,611,877 6.4 15,655,841 6.5 3.93 6.68 898,384 932,735 1,806,117

MARKET TOTALS 723,071,689 75,962,049 10.5 52,643,055 7.3 53,288,435 7.4 4.11 8.25 4,313,000 4,184,129 10,170,753

Source: CBRE Research, Q2 2015.

UNEMPLOYMENT RATE

Annual seasonally adjusted, nonfarm employment Underpinning DFW’s historically strong labor growth in DFW was 3.2% from May 2014 to May market trends, the region encompasses an ample 2015 for a net increase of 103,800 jobs. supply of well-educated workers and has Simultaneously, the unemployment rate in DFW maintained strong population growth, both fell approximately 10 bps from Q1 2015 to 3.9% at contributing to the area's healthy economy. DFW the end of May 2015. Meanwhile, the collective has an estimated population of 6.9 million, a 33% Texas unemployment rate increased by 10 bps, the increase from 2000. According to Claritas, the first monthly increase for the state since August DFW population is projected to add another 2009. Texas and DFW are still outpacing the U.S. 500,000 residents over the next five years, to reach which recorded a 5.5% unemployment rate for May 7.4 million residents by 2020. This five-year 2015. Indicative of a stronger economy, both Texas growth rate of 7.1% outpaces the national growth and DFW have consistently outperformed the rate of 3.5% for the same timeframe. national unemployment rate since January of 2007.

Figure 4: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

USA Texas DFW Total DFW Jobs

Source: Bureau of Labor Statistics, CBRE Research, Q2 2015.

Q2 2015 CBRE Research 3 MARKETVIEW DALLAS / FORT WORTH INDUSTRIAL

Figure 5: Net Absorption and Vacancy Rate Q2 2015 marks the 19th consecutive quarter of Absorption (MSF) Vacancy Rate positive net absorption for the DFW industrial 14 19 market as it posted 4.2 million sq. ft. in total 12 market absorption. Combined with last quarter’s 14 10 even more considerable growth, the year-to-date 8 9 6 total reached just under 10.2 million sq. ft., a mid- year absorption total not exceeded in DFW since 4 4 2 2000. Once again, warehouse/distribution space (2) 0 led quarterly activity with 3.7 million sq. ft. of net 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD absorption, while flex space also posted a positive 2015 figure of 532,532 sq. ft. The submarket that posted Q1 Q2 the highest Q2 2015 net absorption was South Q3 Q4 Dallas at 2.7 million sq. ft. Northwest Dallas also Total Annual Net Absorption Vacancy Rate had a significant quarterly absorption figure, at 1.3 million sq. ft. Source: CBRE Research, Q2 2015.

Figure 6: Construction Deliveries totaled 3.8 million sq. ft. in Q2 2015, less MSF than half the amount of completions from last 20 18 quarter, when DFW posted the highest amount of 16 quarterly new inventory in CBRE’s tracked history. 14 The most notable pre-leased delivery in Q2 2015 12 was Georgia Pacific’s 1.6 million sq. ft. build-to- 10 8 suit in Hutchins, which falls within the South 6 Dallas submarket. Because of the fewer deliveries 4 and steady amount of starts, the under 2 construction pipeline remained relatively flat over 0 the quarter, totaling just over 14 million sq. ft. of projects underway. The pre-leased rate for space Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Under Construction Delivered Construction under construction rose from 20% in Q1 2015 to Source: CBRE Research, Q2 2015. 36% in Q2 2015.

Figure 7: Vacancy Rate

% Because of the continuation of speculative 14 completions, the total vacancy rate has 13 experienced an uptick over the last three quarters. 12 In Q2 2015, this increase was marginal as the 11 vacancy rate rose by only 2 bps to a mid-year level 10 of 7.4%. The most improved vacancy rate was in 9 8 Northwest Dallas where vacancy decreased by 140 7 bps to sit at 5.3% at quarter end, followed by South 6 Dallas, with a vacancy reduction of 120 bps and 5 mid-year rate of 10.1%. Five of the nine submarkets experienced a decline in vacancy from Q1 2015 to

Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q2 2015. Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q2 2015.

The capital markets landscape in DFW through Q2 2015. In fact, there is nearly 5 times continued to display strong velocity based on as much capital in the market pursuing trailing 12-month data reported by Real Capital industrial acquisitions compared to available Analytics. In Q2 2015, DFW recorded a 23% properties on the market. increase in sales volume and 42% rise in transacted square footage, at $2.7 billion and 52 Investor interest is now covering the full million sq. ft., respectively, for the prior 12 spectrum of asset quality and location. Cap rates month period through Q2 2015. on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the Foreign capital remains the most active buyer next three years. CBRE expects institutional type for 2015 year-to-date, comprising 56% of investors to continue the trend of activity and DFW total sales volume compared to 42% of the pricing throughout 2015, with pricing remaining national metric. aggressive due to the relative lack of quality product on the market.

Healthy demand for industrial assets (across all Both investment volume and leasing activity geographies and product types) continued continue to benefit from DFW's status as an inland port. Figure 8: Select Sale Transactions

Buyer/Seller Building(s) Submarket SF

Confidential / Hillwood Commerce 45 South Dallas 1,500,830

Confidential / Clarion Pioneer 360 Great SW/Arlington 1,163,465

Confidential / Sealy Companies Texas Industrial Portfolio (Dallas Portion) Multiple 938, 679

Cabot Properties / Duke Texas Dugan Portfolio Multiple 762, 631

Undisclosed / High Street Realty Company, LLC GSW & Alliance Industrial Portfolio Great SW/Arlington 739,701

LaSalle / Hines REIT DFW Trade Center DFW Airport 643,429 Source: CBRE Research, Q2 2015

Figure 9: Select Lease Transactions

Tenant Building(s) Submarket SF

Kimberly-Clark Mountain Creek Business Center South Dallas 874,160

NFI ProLogis Park 20/35 South Dallas 653,582

R.R. Donnelley Trammell Crow Penn Distribution Center South Dallas 514,950

Menlo Logistics* 14900 Frye Road Great Southwest/Arlington 494,938

Ozburn-Hessey Logistics* 101 Sunridge Boulevard South Dallas 336,000

Owens & Minor* 550 Lakeside Parkway Northwest Dallas 223,332

Source: CBRE Research, Q2 2015 *Renewal

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/researchgateway. Lauren Paris Senior Research Analyst +1 214 9796587 [email protected]

Dallas / Fort Worth Industrial, Q1 2015 Q1 2015 saw DFW industrial deliver over 8.6 million sq. ft.

Vacancy Rate Avg. Asking Rate Net Absorption Completions 7.3% 4.17 $/SF 6.0 MSF 8.6 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12 19 11

14 10

9 9 8

7 4 6

(1) 5 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Total Net Absorption Under Construction Delivered Construction Total Vacancy Source: CBRE Research, Q1 2015.

VACANCY RATES RISE DALLAS/FORT WORTH BENEFITS FROM STRONG During Q1 2015, vacancy within newly delivered DEMOGRAPHICS AND LOCATION DFW’s supply of well-educated workers and strong projects resulted in an increase in overall vacancy. Both population growth make it an attractive market for the direct and total vacancy rates rose by 50 basis points employers. With a current estimated population of 6.8 (bps) and 40 basis points (bps) respectively to sit at million, the Metroplex is the largest MSA in Texas and the 7.3%. fourth largest in the United States. Located centrally, DFW is situated to act as a regional and national logistics and DFW POSTS POSITIVE ABSORPTION FOR 18TH distribution hub. In turn, this location provides businesses CONSECUTIVE QUARTER a logistical advantage because of its accessibility to other For the 18th straight quarter, the DFW Metroplex has markets by rail, truck, and air. posted positive net absorption. Q1 2015 net absorption was 6.0 million sq. ft. compared to 2.3 million sq. ft. in Q4 2014.

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 12 17 11 10 16 9 15 8 14 7 13 6 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

GDP ($, in billions) DFW Industrial Vacancy Rate Source: U.S. Bureau of Economic Analysis, December 2014. CBRE Research, Q1 2015.

REAL GDP INCREASED AGAIN INDICES REMAINED FLAT WITH OPTIMISTIC OUTLOOK DFW has benefitted from strong GDP growth. Per the According to the Texas Manufacturing Outlook Survey, Bureau of Economic Analysis' second estimate for Q4 conducted by the Federal Reserve Bank of Dallas, 2014 real GDP growth, overall economic activity manufacturing conditions in the first quarter experienced increased by 2.2% annualized quarterly rate. Initial no growth for the second consecutive month. While the estimates had placed fourth quarter growth at 2.6%, but production index for February of 2015 remained positive private inventory investments did not increase as much as at 0.7, new orders decreased by 12.2%. This lack of anticipated. Additionally, nonresidential fixed investment growth stems primarily from manufacturing seasonality increased further than expected. GDP increases in the and the effects of oil prices on various manufacturing fourth quarter were primarily due to positive contributions industries. Historically, the first quarter averages lower from personal consumption expenditures, nonresidential production and new order indices. Despite staid growth, fixed investment, state and local government spending, February 2015 witnessed both forward looking indicators private inventory investment and residential fixed increasing with a higher future company outlook index, at investment. 11.8 compared last month at 2.5, and general business activity, at 5.5 compared to last month at -6.4 implying growth into later 2015.

Figure 3: DFW Industrial Market Net Direct Total Q1 2015 Q1 2015 2015 YTD Rentable Avail. Direct Vacancy Total Vacancy Asking Rates Direct Net Total Net Total Area Available Rate Vacancy Rate Vacancy Rate Average Annual Absorption Absorption Absorption Market (SF) (SF) (%) (SF) (%) (SF) (%) ($/SF) (SF) (SF) (SF) Industrial Flex

DFW Airport 69,108,557 7,942,731 11.5 5,976,485 8.6 6,105,485 8.8 4.50 7.70 226,256 216,256 216,256 East Dallas 35,834,647 3,676,280 10.3 1,908,581 5.3 1,916,581 5.3 4.09 5.80 290,872 282,872 282,872 Northeast Dallas 97,224,541 9,788,137 10.1 6,121,454 6.3 6,226,201 6.4 4.71 7.01 1,427,902 1,539,181 1,539,181 Northwest Dallas 104,438,359 10,551,171 10.1 9,216,342 8.8 9,354,052 9.0 4.47 7.06 1,783,343 1,886,290 1,886,290 South Dallas 50,782,949 7,107,574 14.0 5,696,912 11.2 5,729,312 11.3 3.38 6.02 (15,067) (15,067) (15,067) South Stemmons 121,659,767 13,080,560 10.8 8,771,853 7.2 8,798,190 7.2 4.55 8.52 1,048,627 1,203,710 1,203,710

Great SW / Arlington 95,250,158 8,919,760 9.4 5,048,071 5.3 5,123,886 5.4 4.36 7.13 1,326,752 1,250,937 1,250,937 North Ft. Worth 73,350,309 8,788,467 12.0 6,439,463 8.8 6,439,463 8.8 3.95 9.26 (475,253) (475,253) (475,253) South Ft. Worth 72,549,798 5,879,190 8.1 3,218,357 4.4 3,220,857 4.4 3.64 5.49 95,198 97,698 97,698 DALLAS TOTALS 479,048,820 52,146,453 10.9 37,691,627 7.9 38,129,821 8.0 4.21 7.60 4,761,933 5,113,242 5,113,242 FT.WORTH TOTALS 241,149,530 23,587,417 9.8 14,705,891 6.1 14,784,206 6.1 4.07 8.38 946,697 873,382 873,382

MARKET TOTALS 720,199,085 75,733,870 10.5 52,397,513 7.3 52,914,027 7.3 4.17 8.07 5,708,630 5,986,624 5,986,624 Source: CBRE Research, Q1 2015.

UNEMPLOYMENT RATE Underpinning these strong labor market trends, DFW contains both an ample supply of well- Seasonally adjusted, annual employment growth in educated workers and has maintained strong DFW was 4.4% from December 2013 to December population growth, contributing to the area's 2014 for a net increase of 136,600 jobs. The healthy economy. DFW has an estimated unemployment rate in DFW as a result fell 20 (bps) population of 6.8 million, a 33% increase from during Q4 2014 to 4.6%. The Texas unemployment 2000. According to Claritas, the DFW population rate fell faster, which posted at 4.6%. Texas and is projected to grow further over the next five DFW are still outpacing the U.S. which recorded a years at a rate of 8.6%. Comparatively, the 5.6% unemployment rate. Indicative of the national five-year projected population growth stronger state economy, Texas and DFW have rate is only 3.5%. If employment trends continue, consistently outperformed the national DFW job growth should be able to absorb the new unemployment rate throughout the recession and influx, even as DFW market increases in recovery. population.

Figure 4: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

USA Texas DFW Total DFW Jobs

Source: CBRE Research, Q1 2015.

Q1 2015 CBRE Research 3 MARKETVIEW DALLAS / FORT WORTH INDUSTRIAL

Figure 5: Net Absorption and Vacancy Rate Q1 2015 marks the 18th consecutive quarter of Absorption (MSF) Vacancy Rate (%) positive net absorption for the DFW industrial 19 14 market. This quarter saw 6.0 million sq. f. in 12 absorption, split between existing inventory and 14 10 delivered pre-leased space. This is a remarkable 8 9 6 figure considering that over the past 9 years the average first quarter absorption is only 2.7 million 4 4 2 sq. f. If this positive absorption pace continues , (2) 0 DFW is on track for another historical year. Once 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD again, warehouse/ distribution space led activity 2015 Q1 Q2 this quarter with 5.8 million sq. f. of net absorption, while flex space also posted a positive Q3 Q4 figure of 107,192 sq. f. The submarket that posted Total Annual Net Absorption Vacancy Rate the highest quarterly net absorption was Northwest Source: CBRE Research, Q1 2015. Dallas at 1.8 million sq. f. Not too far behind was Northeast Dallas which posted a Q1 2015 figure of Figure 6: Construction 1.5 million sq. f.

MSF Deliveries totaled 8.6 million sq. f. in Q1 2015, a 20 18 46% increase from last quarter. This marks the 16 most delivered square footage in DFW in CBRE’s 14 tracked history. The most notable pre-leased 12 delivery was Nebraska Furniture Mart’s 1.3 million 10 8 sq. f. industrial space. New deliveries dropped the 6 under construction pipeline to 14.4 million sq. f. 4 Over the last year, speculative development has 2 accounted for a majority of the space underway. 0 Continuing this trend, speculative construction Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q4 2007 Q2 2010 Q4 2010 Q2 2014 Q4 2014 accounts for 82% of construction. Currently, Under Construction Delivered Construction completion of these new projects will provide Source: CBRE Research, Q1 2015. options to accommodate the needs of new, expanding and relocating operations. Figure 7: Vacancy Rate

% Despite 18 consecutive quarters of positive net 14 absorption, recent deliveries of vacant completions 13 over the last two quarters have pushed the 12 historically low direct and total vacancy rates up 11 slightly to 7.3%. The most improved vacancy rate 10 9 was in East Dallas which decreased by 270 (bps) to 8 sit at a current 5.3%. The submarkets with the 7 tightest vacancy rates remained in the western and 6 southern areas of the region. Notable is Fort 5 Worth’s overall vacancy rate of 6.6%. Q1 2009 Q3 2009 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2010 Q3 2010 Q1 2014 Q3 2014 Q1 2015

Flex Industrial Overall Vacancy Rate

Source: CBRE Research, Q1 2015.

The capital markets landscape in DFW became Investor interest is now covering the full slightly more aggressive versus last quarter spectrum of asset quality and location. Cap rates based on trailing 12-month data reported by on Class A, multi-tenant product are below the Real Capital Analytics. In Q1 2015, DFW saw the previous low water mark from 2007 as investors average price per sq. f. increase by 31%, are projecting strong rental rate growth over the whereas the national average decreased by 7%. next three years.

Healthy demand for industrial assets continued CBRE expects institutional investors to continue through Q1 2015, with nearly 5 times as much the trend of activity and pricing throughout capital in the market pursuing industrial 2015. acquisitions compared to available properties on the market. Both investment volume and leasing activity continue to benefit from DFW's status as an Q1 2015, saw foreign capital as the most active inland port. with 53% of DFW sales volume compared to 62% of national industrial sales volume.

Figure 8: Select Sale Transactions

Buyer/Seller Building(s) Submarket SF LaSalle Investment Management/Hillwood Investment Properties Commerce 45 South Dallas 1,500,000

GIC (Govt of Singapore) JV Global Logistic Properties / IndCor Properties 2802 Virgo Ln South Stemmons 164,500

Eth Investment Group LLC / MHM Redbird LLC 5050 Investment Dr South Dallas 148,402

GIC (Govt of Singapore) JV Global Logistic Properties / IndCor Properties 1100 Valwood Pkwy Northwest Dallas 141,025

Aligned Energy Holdings LLC / FG Summit LP 2800 Summit Ave Northeast Dallas 108,072

Conti Partners / NTA Holdings Ltd 1470 Avenut T Great Southwest/ Arlington 102,732

Source: CBRE Research, Q1 2015

Figure 9: Select Lease Transactions

Tenant Building(s) Submarket SF

Uline Inc 980 Bethel Rd DFW Airport 950,000

Coasters* 14801 Grand River Rd Great Southwest/Arlington 405,636

MI Windows DFW Airport North Distribution Center Northwest Dallas 400,000

Penske 730 Trinity Blvd Great Southwest/Arlington 350,000

Genco 4601 Langdon Rd South Dallas 324,984

Stitch Fix 1421 Cockrell Hill Rd South Stemmons 316,000

Source: CBRE Research, Q1 2015 *Renewal **Expansion

CONTACTS CBRE OFFICES

Lynn Cirillo CBRE Dallas Research Operations Manager 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Lauren Paris To learn more about CBRE Research, Senior Research Analyst or to access additional research reports, +1 214 9796587 please visit the Global Research Gateway [email protected] at www.cbre.com/researchgateway.

Lexi Zager Research Coordinator +1 214 9796532 [email protected]

Dallas / Fort Worth Industrial, Q4 2014 2014 saw DFW industrial deliver the most sq. ft. since 2008

Vacancy Rate Asking Rates Net Absorption Completions 6.9% 4.12 $/SF 2.3 MSF 6 MSF

*Arrows indicate change from previous quarter. Figure 1: DFW Industrial Market

MSF Vacancy Rate (%) 12 19 11

14 10

9 9 8

7 4 6

Total Net Absorption Under Construction Delivered Construction Total Vacancy

Source: U.S. Bureau of Economic Analysis, December 2014 CBRE Research, Q4 2014.

VACANCY RATES RISE the DFW industrial market demonstrate strong and During Q4 2014, the Dallas/Fort Worth Industrial continued demand.

market experienced its first uptick in vacancy in two DALLAS/FORT WORTH BENEFITS FROM STRONG years. Both the direct and total vacancy rates rose 60 DEMOGRAPHICS AND LOCATION basis points to 6.8% and 6.9% respectively, compared to DFW’s supply of well-educated workers and strong Q3 2014 figures. The vacancy rate increased primarily population growth make it a competitive demographic due to vacant delivered construction. force. With a current estimated population of 6.8 million, the Metroplex is the largest MSA in Texas and the fourth DFW POSTS POSITIVE ABSORPTION FOR 17TH largest in the United States. Located centrally, DFW is CONSECUTIVE QUARTER situated to act as a regional and national logistics and For the 17th straight quarter, the DFW Metroplex has distribution hub. In turn, this location provides businesses posted a positive net absorption. Q4 2014 net a logistical advantage because of its accessibility to other absorption was 2.3 million sq. ft. compared to 3.8 markets by both rail and truck. million sq. ft. in Q3 2014. These positive numbers for

Figure 2: Nominal GDP and Vacancy Rate GDP ($, in billions) Vacancy Rate (%) 18 GDP ($, in billions) 12 DFW Industrial Vacancy Rate 17 11 10 16 9 15 8

14 7

13 6 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Source: CBRE Research, Q4 2014.

REAL GDP INCREASED AGAIN INDICES CONTINUE TO POINT TO POSITIVE OUTLOOK The DFW industrial market saw a rising vacancy rate According to the Texas Manufacturing Outlook Survey, amid stronger GDP growth. Per the Bureau of Economic conducted by the Federal Reserve Bank of Dallas, Analysis' second estimate for Q3 2014 real GDP growth, manufacturing conditions in the fourth quarter remained overall economic activity increased by 4.6% annualized favorable. The production index for November of 2014 quarterly rate. Initial estimates had placed third quarter remained positive at 6.0, but fell from the previous 13.7 growth at 3.5%, but private inventory investments did not in October. In tandem with this metric, the new order decrease as much as anticipated. Additionally, personal index was positive for the 19th consecutive month, consumption expenditures and nonresidential fixed remaining positive at 5.6 in November from 14.2 the investment increased further than expected. GDP month prior. Overall, these indices indicate improving increases in the third quarter were primarily due to conditions for Texas manufacturing. Other forward positive contributions from personal consumption looking indicators substantiate this claim. November expenditures, nonresidential fixed investment, federal 2014 witnessed a higher future company outlook index at government spending, exports, residential fixed 23.1 compared a year ago index at 20.9, implying investment, and state and local government spending. further growth into 2015.

Figure 3: DFW Industrial Market Net Direct Total Q4 2014 Q4 2014 2014 Rentable Avail. Direct Vacancy Total Vacancy Asking Rates Direct Net Total Net Total Area Available Rate Vacancy Rate Vacancy Rate Average Annual Absorption Absorption Absorption Market (SF) (SF) (%) (SF) (%) (SF) (%) ($/SF) (SF) (SF) (SF) Industrial Flex

DFW Airport 66,272,613 5,892,229 8.9 3,534,647 5.3 3,653,647 5.5 4.85 7.65 285,925 304,275 1,557,296 East Dallas 36,448,540 4,744,018 13.0 2,917,301 8.0 2,917,301 8.0 4.09 5.80 409 409 64,060 Northeast Dallas 97,424,731 11,408,383 11.7 7,459,988 7.7 7,676,014 7.9 4.24 7.50 1,179,991 1,191,002 3,641,410 Northwest Dallas 101,555,819 10,816,916 10.7 7,526,959 7.4 7,767,616 7.6 4.34 7.02 74,297 93,963 349,392 South Dallas 50,262,629 6,079,744 12.1 5,118,593 10.2 5,150,993 10.2 3.09 6.00 167,964 167,964 3,537,359 South Stemmons 121,157,920 13,562,327 11.2 9,327,362 7.7 9,508,782 7.8 4.65 8.29 256,724 122,260 (1,653,307)

Great SW / Arlington 93,924,618 9,747,637 10.4 4,779,284 5.1 4,779,284 5.1 4.29 7.12 642,943 698,355 3,680,745 North Ft. Worth 71,555,527 6,103,524 8.5 4,038,524 5.6 4,038,524 5.6 3.99 9.26 219,914 219,914 1,573,894 South Ft. Worth 72,391,096 6,681,123 9.2 3,330,855 4.6 3,335,855 4.6 3.60 5.78 (513,231) (512,931) 110,764 DALLAS TOTALS 473,122,252 52,503,617 11.1 35,884,850 7.6 36,674,353 7.8 4.15 7.65 1,965,310 1,879,873 7,496,210 FT.WORTH TOTALS 237,871,241 22,532,284 9.5 12,148,663 5.1 12,153,663 5.1 4.04 8.36 349,626 405,338 5,365,403

MARKET TOTALS 710,993,493 75,035,901 10.6 48,033,513 6.8 48,828,016 6.9 4.12 8.11 2,314,936 2,285,211 12,861,613

Source: CBRE Research, Q4 2014.

UNEMPLOYMENT RATE Underpinning these strong labor market trends, Dallas/Fort Worth contains both an ample supply Seasonally adjusted, annual employment growth in of well-educated workers and has maintained DFW was 3.7% from October 2013 to October 2014 strong population growth, contributing to the for a net increase of 115,800 jobs. The area's healthy economy. DFW has an estimated unemployment rate in DFW as a result fell 30 basis population of 6.8 million, a 33% increase from points (bps) during the third quarter to 4.8%. DFW 2000. According to Claritas, the DFW population fell faster than the Texas unemployment rate, is projected to grow further over the next five which posted at 5.1%. Texas and DFW are still years at a rate of 8.6%. Comparatively, the outpacing the U.S. which recorded a 5.8% national five-year projected population growth unemployment rate. Indicative of the stronger state rate is only 3.5%. If employment trends continue, economy, Texas and DFW have consistently DFW job growth should be able to absorb the new outperformed the national unemployment rate influx, even as DFW market increases in throughout the recession and recovery. population.

Figure 4: Unemployment and Jobs

Unemployment Rate (%) Job Count (M) 10 4

5 3

0 2 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q3 2007 Q4 2007 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2014 Q2 2014 Q3 2014

USA Texas DFW Total DFW Jobs

Source: CBRE Research, Q4 2014.

Q4 2014 CBRE Research 3 MARKETVIEW DALLAS / FORT WORTH INDUSTRIAL

Q4 2014 marks the 17th consecutive quarter of Figure 5: Net Absorption and Vacancy Rate positive net absorption for the DFW industrial Vacancy Rate (%) Absorption (MSF) market. This quarter saw 2.3 million sq. f. in 14 19 absorption, split between existing inventory and 12 delivered pre-leased space. This quarter witnessed a 14 10 continued trend from the previous quarter in which a

8 substantial portion of absorption came from move-ins 9 in the 50,000 sq. f. to 200,000 sq. f. range. Given that 6 in 2012 and 2013 most of the absorption was 4 4 primarily from large build-to-suit and big box space, 2 this marks a departure in tenants desired space range (2) 0 and also explains the lower quarterly absorption 2006 2007 2008 2009 2010 2011 2012 2013 2014 figure, despite continued move-ins. Once again, Q1 Q2 warehouse/ distribution space led activity this quarter Q3 Q4 Total Annual Net Absorption Vacancy Rate with 2.0 million sq. f. of net absorption, while flex Source: CBRE Research, Q4 2014. space also posted a positive figure of 207,705 sq. f. The submarket that posted the most quarterly net Figure 6: Construction absorption was Northeast Dallas at 1.2 million sq. f.

MSF 20 Deliveries totaled 6.0 million sq. f. in Q4 2014, a 20% 18 increase from last quarter’s 5.0 million sq. f. This 16 marks the most completion square footage in DFW 14 since Q4 2001. Notable deliveries included two 12 10 speculative buildings totaling a million sq. f. apiece; 8 one completed in South Dallas and the other in 6 Northwest Dallas. This quarter saw under 4 construction dip back down to 17.2 million sq. f. 2 compared to last quarter’s market high total of 19.5 0 million sq. f. With a current pre-leasing figure of 33% Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q4 2007 Q2 2010 Q4 2010 Q2 2014 Q4 2014 and roughly 11 million sq. f. of users in the market, Under Construction Delivered Construction this figure is likely to rise in 2015.With supply Source: CBRE Research, Q4 2014. extremely limited across all size ranges coupled with growing demand, the completion of these projects Figure 7: Vacancy Rate will deliver much needed new space to the market. % 14 Driven down by 17 consecutive quarters of positive net 13 absorption, vacancy rates remain at historically low 12 figures. This quarter, however, saw vacancy rates rise. 11 Direct vacancy increased to 6.8% and total vacancy 10 sits one basis point higher at 6.9%. Despite continued 9 positive absorption, the vacancy rate rose as a direct 8 result of some vacant completions. The most 7 improved vacancy rate was in South Stemmons which 6 decreased by 30 basis points to sit at a current 7.7%. 5 The submarkets with the tightest vacancy rates remained in the western and southern areas of the Q1 2009 Q3 2009 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2010 Q3 2010 Q1 2014 Q3 2014 Flex Industrial Overall Vacancy Rate region. Notable are all of Fort Worth’s submarkets with an average total vacancy rate of 5.2%. Source: CBRE Research, Q4 2014.

The capital markets landscape in DFW became on the market. Treasury rates have remained low, slightly more aggressive versus last quarter providing buyers with a continued attractive based on trailing 12-month data reported by lending environment. Strong fundamentals Real Capital Analytics. The median cap rate for continue to drive absorption and low vacancy rates, DFW was slightly lower, at 6.9%, compared to especially in the interior submarkets. the national median of 7.0%. These cap rates are based on deals that have been conﬁrmed, Investor interest is now covering the full spectrum approximated or assumed by local professionals of asset quality and location. For the best quality and gathered by Real Capital Analytics. assets in the best locations, cap rates on Class A, multi-tenant product are below the previous low Q4 2014, similar to last quarter, saw private water mark from 2007 as investors are projecting buyers as the most active with 43% of DFW sales strong rental rate growth over the next three years. volume. Institutional buyers followed closely Additionally, there are active investors pursuing with 34% of the sales volume. DFW ﬁgures are both small and larger sized transactions. on par with the total U.S. trends, considering private buyers accounted for 40% of national CBRE expects institutional investors to continue industrial sales volume. the trend of activity and pricing into 2015.

Healthy demand for industrial assets continued Both investment volume and leasing activity through year-end 2014, with almost 5 times as continue to benefit from DFW's status as an much capital in the market pursuing industrial inland port. acquisitions as compared to available properties

Figure 8: Select Sale Transactions Buyer/Seller Building(s) Submarket SF James Campbell Company / Weeks Robinson Properties DFW Industrial Portfolio DFW Wide 2,034,164

Industrial Property Trust / Oakmont Industrial Group Oakmont Class A DFW Industrial DFW Wide 1,275,954

TRBP Ltd / SST Truck Co LLC 4040 Forest Ln Northeast Dallas 582,968

Hines JV AEW Capital Mgmt / Lone Star Funds 6601 N Belt Line Rd DFW Airport 404,777

Industrial Property Trust / Brookfield Asset Mgmt 14900 Trinity Blvd Great Southwest/ Arlington 310,000

Miller Creek Holdings LLC / Sears Roebuck & Co 3101 W Miller Road Northeast Dallas 293,231

Source: CBRE Research, Q4 2013

Figure 9: Select Lease Transactions

Tenant Building(s) Submarket SF Ulta Inc. Mountain Creek & I-20 South Dallas 670,000

GM 2305 W Marshall Dr Great Southwest/Arlington 667,635

Delta Logistics 4040 Forest Ln Northeast Dallas 411,576 Office Depot 735 E Trinity Blvd Great Southwest/Arlington 260,711

Exel, Inc. Nicholson Distribution Center East Dallas 211,396

Kroger 1421 North Cockrell Hill South Stemmons 145,972

Source: CBRE Research, Q4 2013

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Lynn Cirillo CBRE Dallas Research Operations Manager 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Lexi Zager Research Coordinator +1 214 9796532 [email protected]

Q3 2014 CBRE Global Research and Consulting UNDER DELIVERED TOTAL VACANCY ASKING RATES NET ABSORPTION CONSTRUCTION CONSTRUCTION UNEMPLOYMENT 6.3% $4.10 per Sq. Ft. 3.8 Million Sq. Ft. 19.5 Million Sq. Ft. 5.0 Million Sq. Ft. 5.1%

Directional arrows based on change from the previous quarter. Data reflects market totals. DFW INDUSTRIAL DELIVERS A SOLID QUARTER ONCE AGAIN. Vacancy rates stabilize Figure 1: Nominal GDP and Vacancy Rate The Dallas/Fort Worth industrial market experienced GDP stable vacancy rate conditions during Q3 2014. Both the GDP0000’s Vacancy Rate $17,500 12% direct and total vacancy rates remained the same at 6.2% and 6.3%, respectively, compared to Q2 2014 figures. 0000's The vacancy rate was flat due primarily to vacant $17,000 11% delivered construction. $16,500 DFW posts positive absorption for 16th 10% consecutive quarter $16,000 For the 16th straight quarter, the DFW Metroplex has posted a positive net absorption. Q3 2014 absorption saw a $15,500 9% substantial 3.8 million sq. ft. compared to 2.4 million sq. ft. in Q2 2014. The positive and stable numbers for the DFW $15,000 industrial market demonstrate not only the strength of the 8% market’s recovery, but also indicate future growth. $14,500

Indices point to positive outlook 7% According to the Texas Manufacturing Outlook Survey, $14,000 conducted by the Federal Reserve Bank of Dallas, manufacturing conditions in the third quarter remained $13,500 6% favorable. The production index for August of 2014 Q1 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 remained positive at 6.8, but fell from the previous 19.1 Q1 2014 Q2 2014 Q2 2014 in July. In tandem with this metric, the new order index GDP ($, in billions) DFW Industrial Vacancy Rate was positive for the 16th consecutive month, remaining Source:Source: U.S. U.S. Bureau Bureau of of Economic Economic Analysis, Analysis, September September 2014. 2014. CBRE Research, Q3 2014. positive at 2.2 in April from 13.0 the month prior. Overall, CBRE Research, Q3 2014. these indices indicate further improving conditions for Texas manufacturing. Other forward looking indicators substantiate this claim. August 2014 witnessed a high future company outlook index at 30.1 compared to July’s GDP increases in the second quarter were primarily due to positive contributions index at 24.4, implying further growth into 2014 and 2015. from personal consumption expenditures, private inventory investment, exports, nonresidential fixed investment, state and local government spending, and Real GDP increased residential fixed investment. The DFW industrial market maintained a low vacancy rate while GDP increased. The second quarter witnessed an Dallas/Fort Worth benefits from strong demographics and location increase in U.S. GDP growth. Per the Bureau of Economic DFW’s supply of well-educated workers and strong population growth make it Analysis’ second estimate for Q2 2014 real GDP growth, a competitive demographic force. With a current estimated population of 6.8 overall economic activity increased by 4.2% annualized million, the Metroplex is the largest MSA in Texas and the fourth largest in the quarterly rate. Initial estimates had originally pegged the United States. Located centrally, DFW is situated to act as a regional and national second quarter growth at 4.0%, but an increase in logistics and distribution hub. In turn, this location provides businesses a logistical nonresidential fixed investment was larger than initially advantage because of its accessibility to other markets by both rail and truck. anticipated.

© 2014, CBRE, Inc. Total Total YTD 2014 Absorption © 2014, CBRE, Inc. Q3 2014 Total Net Net Total Absorption Q3 2014 Direct Net Absorption Asking Per Sq. Ft. Per Lease Rate Annual Average Annual Average Industrial Flex Rate Total Total Vacancy Vacancy Unemployment Rate growth in DFW was Seasonally adjusted, annual employment increase of 3.7% from July 2013 to July 2014 for a net DFW as a result fell 115,500 jobs. The unemployment rate in the to 5.1%. For 10 basis points (bps) during the third quarter the same posted DFW and Texas second consecutive quarter, and DFW are still outpacing the U.S. unemployment rate. Texas which recorded a 6.2% rate. Indicative of the stronger state and DFW have consistently outperformed the Texas economy, national unemployment rate throughout the recession and recovery. Underpinning these strong labor market trends, Dallas/Fort contains both an ample supply of well-educated workers Worth and has maintained strong population growth, contributing to DFW has an estimated population healthy economy. the area’s of 6.8 million, a 33% increase from 2000. According to Claritas, the DFW population is projected to grow further over the national the next five years at a rate of 8.6%. Comparatively, five-yearpopulation growth rate is only 3.5%. If projected employment trends continue, DFW job growth should be able to absorb the new influx, even as DFW market increases in population. Total Total Vacant Vacant Sq. Ft. 000's 3,250 3,200 3,150 3,100 3,050 3,000 2,950 2,900 2,850 2,800

Rate Job Count

Direct 2013 Q3

Vacancy Vacancy

Q2 2013 2013 Q2

Q1 2014 2014 Q1

Q4 2013 2013 Q4 Q3 2013 2013 Q3

Direct Sq. Ft. 2013 Q2

Vacancy Vacancy

Q1 2013 2013 Q1

Q4 2012 2012 Q4 Q3 2012 2012 Q3

Total DFW Jobs Total Q2 2012 2012 Q2

Rate Q1 2012 2012 Q1

Q4 2011 2011 Q4

Availability

Q3 2011 2011 Q3 Q2 2011 2011 Q2

DFW

Q1 2011 2011 Q1 Q4 2010 2010 Q4

Sq. Ft. Q3 2010 2010 Q3

Available

Q2 2010 2010 Q2 Q1 2010 2010 Q1

Texas Texas

Q4 2009 2009 Q4

Q3 2009 2009 Q3 Q2 2009 2009 Q2

Area

Sq. Ft. Q1 2009 2009 Q1

236,059,031 20,649,610 8.7% 9,934,986 4.2% 9,995,698 4.2% $3.93 $8.40 2,714,887 2,784,337 4,960,065

Net Rentable 2008 Q4

USA USA

Q3 2008 2008 Q3

Q2 2008 2008 Q2

Q1 2008 2008 Q1

Q4 2007 2007 Q4

Q3 2007 2007 Q3

4% 6% 5% 8% 7% 9% 10% DALLAS TOTALSDALLAS 469,626,870 52,014,640 11.1% 33,907,453 7.2% 34,611,519 7.4% $4.19 $7.72 992,731 1,006,715 5,616,337 FT.WORTH TOTALS FT.WORTH South Ft. Worth 72,320,885 5,502,331 7.6% 2,761,674 3.8% 2,766,974 3.8% $3.51 $5.79 11,778 6,478 623,695 MARKET TOTALS 705,685,901 72,664,250 10.3% 43,842,439 6.2% 44,607,217 6.3% $4.10 $8.14 3,707,618 3,791,052 10,576,402 North Ft. Worth 69,912,040 5,617,304 8.0% 2,716,373 3.9% 2,716,373 3.9% $4.00 $9.26 1,321,662 1,331,742 1,353,980 Great SW / Arlington 93,826,106 9,529,975 10.2% 4,456,939 4.8% 4,512,351 4.8% $4.31 $7.34 1,381,447 1,446,117 2,982,390 South Stemmons 120,922,825 13,688,760 11.3% 9,630,752 8.0% 9,677,708 8.0% $4.58 $8.23 (2,205,399) (2,217,590) (1,775,567) South Dallas 48,328,472 5,217,822 10.8% 3,336,858 6.9% 3,369,258 7.0% $2.99 $6.00 1,044,953 1,044,953 3,369,395 Northwest Dallas 101,024,042 10,522,083 10.4% 6,976,272 6.9% 7,236,595 7.2% $4.27 $7.04 461,086 449,846 255,429 Northeast Dallas 97,267,522 12,433,438 12.8% 7,412,919 7.6% 7,639,956 7.9% $4.54 $7.50 1,434,894 1,436,578 2,450,408 East Dallas 36,400,340 4,193,616 11.5% 2,891,261 7.9% 2,891,261 7.9% $4.09 $5.80 (457,203) (457,203) 63,651 DFW Airport 65,683,669 5,958,921 9.1% 3,659,391 5.6% 3,796,741 5.8% $4.86 $7.59 714,400 750,131 1,253,021 Figure 3: Unemployment and Jobs Figure 2: DFW Industrial Market Figure 2: Market Unemployment Rate

Source: Bureau of Labor Statistics, September 2014.

INDUSTRIAL THIRD QUARTER THIRD INDUSTRIAL MARKETVIEW Source: CBRE Research, Q3 2014.

Q3 2014 Dallas/Fort Worth Industrial | MarketView 2 Q3 2014 Dallas/Fort Worth Industrial | MarketView 3

Q3 2014 marks the 16th consecutive quarter of positive net quarter of positive net the 16th consecutive Q3 2014 marks 3.8 million Posting the DFW industrial market. absorption for was due to the of Q3 2014 absorption sq. ft., the bulk of two large build-to-suitscompletions & for LG and Proctor and 1.4 million sq.ft respectively. Gamble at 1.2 million sq.ft continued trend from the previous This quarter witnessed a portion of absorption came from quarter in which a substantial move-ins200,000 sq. ft. range. Given in the 50,000 sq. ft. to absorption has primarily consisted that in recent quarters most of large build-to-suita departure and big box space, this marks tenants desired space range. from recent quarters in the relatively market’sConsidering the industrial seasonality, not only the strength of the market’shigh figures demonstrate indicate the sustainability of demand going but also recovery, space led activity forward. Once again, warehouse/distribution while flex this quarter with 3.3 million sq. ft. of net absorption, sq. ft. The space also posted a positive figure of 523,752 over the quarter submarket that posted the most net absorption ft. Not far was Great Southwest/Arlington at 1,446,117 sq. which Worth behind were Northeast Dallas and North Fort ft. respectively. posted 1,436,578 sq. ft. and 1,331,742 sq. an increase Deliveries totaled 5.0 million sq. ft. in Q3 2014, from last quarter’s million sq. ft. This marks the most 2.0 a majority of completion square footage since Q4 2008. With the delivery these projects initially slated as speculative projects, pre-leased rate was an impressive 73.2%. Notable pre-leased & facility and Proctor Worth North Fort deliveries included LG’s Gambles’ South Dallas build-to-suit. This quarter under At a current construction reached a new post recession high. has not been total of 19.5 million sq. ft., construction activity this robust since the late 1990s. Once again speculative has 2014 projects are leading under construction activity. decisively seen speculative projects usurp build-to-suits in terms an extremely limited supply across all With of space underway. of these size ranges and growing demand, the completion projects will deliver much needed new space to the Dallas/Fort industrial market. Worth Driven down by 16 consecutive quarters of positive net absorption, vacancy rates remain at historically low figures. The direct vacancy rate is extremely low at 6.2% and total vacancy is one basis point higher at 6.3%. The vacancy rate has stabilized for the first time in 16 quarters. This is due to one large move space out from the former highly specialized and dated Vought as well as some vacant completions. By removing this one property direct and total vacancy would have decreased further The submarkets with the tightest to 5.8% and 5.9%, respectively. vacancy rates remained in the western and southern areas of submarkets which Worth’s the region. Notable are all of Fort average a total vacancy rate of 4.2%.

Q3 2014 2014 Q3

Q2 2014 2014 Q2

11% 11% 9% 8% 7% 6% 2014 Q3 12% 10%

Q1 2014 2014 Q1

Q2 2014 2014 Q2

Q4 2013 2013 Q4

Vacancy Rate Vacancy 2014 Q1

2014 2013 Q3

Q4 2013 2013 Q4

Vacancy Rate Vacancy 2013 Q2

Q1 2013 2013 Q1 Q3 2013 2013 Q3

2013 Q4 2012 2012 Q4

Q2 2013 2013 Q2

Q3 2012 2012 Q3

Q1 2013 2013 Q1

Q2 2012 2012 Q2

2012 2012 Q4 Q1 2012 2012 Q1

Q3 2012 2012 Q3 Q4 2011 2011 Q4

Q3 2011 2011 Q3 Q2 2012 2012 Q2 Rate Overall Vacancy

2011 2011 Delivered Construction sq. ft.

Q2 2011 2011 Q2

Q1 2012 2012 Q1 Q1 2011 2011 Q1

Total Annual Net Absorption Total Q4 2011 2011 Q4 Q4 2010 2010 Q4

2010

Q3 2011 2011 Q3 Q3 2010 2010 Q3

Q2 2010 2010 Q2 Q2 2011 2011 Q2 Industrial

Q1 2010 2010 Q1

2009 2011 Q1

Q4 2009 2009 Q4

Q4 2010 2010 Q4

Q3 2009 2009 Q3

Q3 2010 Q3

Flex

Q2 2009 2009 Q2 Under Construction sq. ft. 2008

Q2 2010 2010 Q2 Q1 2009 2009 Q1

Q4 2008 2008 Q4 Q1 2010 2010 Q1

2007 2008 Q3 Q4 2009 2009 Q4

Q2 2008 2008 Q2

Q3 2009 2009 Q3

Q1 2008 2008 Q1

Q1 2009 Q2

2006 2007 Q4 Q1 2009 2009 Q1 0

2,000 8,000 6,000 4,000 3,500 8,500

10,000 16,000 14,000 12,000 20,000 18,000

18,500 13,500

(1,500) 6% 5% 8% 7% 9%

000's 000's 000's 000's 11% 10% 14% 13% 12% Figure 6: Vacancy Rates Figure 6: Vacancy Figure 5: Construction Figure 4: Net Absorption and Vacancy Rate and Vacancy Net Absorption Figure 4: Absorption Sq. Ft. Absorption Sq. Ft. Absorption Sq. Ft. 000’s Source: CBRE Research, Q3 2014. Source: CBRE Research, Q3 2014.

Source: CBRE Research, Q3 2014.

INDUSTRIAL THIRD QUARTER THIRD INDUSTRIAL MARKETVIEW © 2014, CBRE, Inc. Sq. Ft. 737,500 282,116 148,413 142,428 140,960 224,752 185,010 149,000 146,000 145,000 101,817 Sq. Ft. 1,304,000 © 2014, CBRE, Inc. South Dallas Worth South Fort South Stemmons Northwest Dallas Northeast Dallas Submarket South Dallas Additionally, there are active investors there are active Additionally, sized small and larger pursuing both transactions. investors to CBRE expects institutional activity and pricing continue the trend of of 2014. throughout the remainder Both investment leasing volume and to activity continue DFW’sbenefit from unique status as an inland port. Submarket Worth North Fort Great Southwest/Arlington Northeast Dallas South Stemmons Great Southwest/Arlington DFW Airport 1301 Joel East Road 2102 E Union Bower Road 1001 S Jupiter Road Building(s) Drive 4444 W Ledbetter The robust demand for industrial assets demand for industrial The robust by an in 2014, buoyed has continued and some lending environment aggressive fundamental favorable industrial of the most has experienced. performance the market lows in many rates are at “all time” Vacancy sub-markets, and rental rate growth is in-fill locations. beginning to occur in of debt continues to The relatively low cost Investor pricing. be a catalyst for aggressive the full spectrum of interest now covering the best For asset quality and location. locations, cap quality assets in the best product are rates on Class A, multi-tenant below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years. Building(s) Parkway 4801 Westport Drive 1850 Westpark 2600 McCree Road Riverpark 1000 755 Regent

Figure 8: Select Lease Transactions Figure 7: Select Sale Transactions USAA Real Estate / Principal Real Estate Investors OBO CalSTRS Estate Real Estate / Principal USAA Real Capital Group (MA) / Trident Cabot Properties 201 S I-45 / 18-8 Investments LLC Generation Trade LtdCobalt Industrial REIT / Flood Flood & Smith Properties Commercial LP / Holt Lunsford Spero Partners Country Club Drive 2009 McClinton Energy Calavo Growers Distribution International Southwest of the Earth Fruit Hoya Optical 2301 W Commerce Street Tenant Logistics ATC Buyer/Seller JV Angelo Gordon Dart Container Corp / iStar Financial Source: CBRE Research, Q3 2014. *Renewal **Expansion Source: CBRE Research, Q3 2014. Q3 2014, similar to last quarter, saw private last quarter, Q3 2014, similar to with 42% of DFW buyers as the most active buyers followed sales volume. Institutional sales volume. DFW closely with 39% of the trends, U.S. figures are on par with the total considering private buyers accounted for 42% of national industrial sales volume. The capital markets landscape in DFW markets landscape The capital versus last more aggressive became slightly data on trailing 12-month quarter based The Capital Analytics. Real reported by was slightly lower, median cap rate for DFW the national median of at 6.9%, compared to are based on deals 7.1%. These cap rates approximated or that have been confirmed, and gathered assumed by local professionals Capital Analytics. by Real INDUSTRIAL THIRD QUARTER THIRD INDUSTRIAL MARKETVIEW

Q3 2014 Dallas/Fort Worth Industrial | MarketView 4 Q3 2014 Dallas/Fort Worth Industrial | MarketView 5

[email protected] Lexi Zager Research Coordinator CBRE Dallas Research McKinney Suite700 Ave, 2100 Dallas, TX 75201 6532 979 214 t: +1 e:

[email protected] Lauren Paris Senior Research Analyst CBRE Dallas Research McKinney Suite700 Ave, 2100 Dallas, TX 75201 6587 979 214 t: +1 e:

DISCLAIMER sources believed to be reliable. While we Information contained herein, including projections, has been obtained from make no guarantee, warranty or representation about it. It is your we have not verified it and do not doubt its accuracy, information is presented exclusively for use by responsibility to confirm independently its accuracy and completeness. This cannot be reproduced without prior written CBRE clients and professionals and all rights to the material are reserved and permission of CBRE.

GLOBAL RESEARCH AND CONSULTING AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around

CONTACTS please contact: MarketView, Industrial Worth For more information about this Dallas/Fort Lynn Cirillo Lynn Research Operations Manager CBRE Americas Research 2800 Oak, Post Suite 2300 Houston, TX 77056 e: [email protected] TEXAS RESEARCH FOLLOW CBRE FOLLOW © 2014, CBRE, Inc. Dallas/Fort Worth Industrial MarketView

Q2 2014 CBRE Global Research and Consulting

ASKING RATES NET ABSORPTION CONSTRUCTION DELIVERIES MV - Page 1 TOTAL VACANCY UNEMPLOYMENT DFW Industrial6.3% $4.07 Per Sq. Ft. 2.4 Million Sq. Ft. 18.5 Million Sq. Ft. 2.0 Million Sq. Ft. 5.2% Q-o-Q

DirectionalTotal Vacancy arrows basedAsking on change Rates from the previousNet Absorption quarter. Data reflects Undermarket Construction totals. Delivered Construction Unemployment Down 6.3% Up $4.07 Down 2.4 million sq. ft. Up 18.5 million sq. ft. Down 2.0 million sq. ft. Down 5.2% Q-o-Q Directional arrows based on change from the previous quarter. Data reflects market totals. DFW INDUSTRIAL ON A POSITIVE ROLL. DFW industrial on a positive roll. Vacancy rates drop further Figure 1: Nominal GDP and Vacancy The Dallas/Fort Worth Industrial market witnessed a further downtick in vacancy during Q2 2014. Both the Figure 1: Nominal GDP and Vacancy Vacancy rates drop further GDP Vacancy The Dallas/Fortdirect and Worth total Industrial vacancy market rates witnessed decreased, a further downtick to 6.2% in vacancy and during $17,500 12% Q2 2014. Both the direct and total vacancy rates decreased, to 6.2% and 6.3% respectively,6.3% compared respectively, to Q1 2014compared figures of to6.3% Q1 and 2014 6.4%. Thisfigures continued of 6.3% 0000's improvementand 6.4%. in vacancy This rates continued highlight DFW’s improvement strong market in fundamentals. vacancy rates highlight DFW’s strong market fundamentals. $17,000 11% DFW posts positive absorption for 15th $16,500 DFW postsconsecutive positive absorption quarter for 15th consecutive quarter For the 15th straight quarter, the DFW Metroplex has posted a positive net absorption. Q2 2014For absorption the 15th witnessed straight a solid quarter, 2.4 million the sq. DFW ft. While Metroplex lower than has 4.4 million posted sq. 10% ft. in Q1a 2014,positive it emphasizes net absorption. precisely how Q2 tight 2014 the market absorption has become. witnessed a $16,000 solid 2.4 million sq. ft. While lower than 4.4 million sq. ft. in Q1 2014, it emphasizes precisely how tight the market has become. $15,500 9%

PositivePositive indices persist indices persist According to the Texas Manufacturing Outlook Survey, conducted by the Federal $15,000 ReserveAccording Bank of Dallas, to the manufacturing Texas Manufacturing conditions in the secondOutlook quarter Survey, remained favorable. The production index for April 2014 rose to 24.7 from 17.1 in the previous 8% month.conducted In tandem with by this the metric, Federal the new Reserve order index Bank was ofpositive Dallas, for the twelfth consecutive month, increasing to 21.3 in April from 14.7 the month prior. Overall, these $14,500 indicesmanufacturing indicate further improving conditions conditions in thefor Texas second manufacturing. quarter Otherremained forward lookingfavorable. indicators substantiate The production this claim. indexApril 2014 for witnessed April 2014 a pleasantly rose tohigh 24.7 future company outlook index at 26.9. This marked an improvement since April 2013 by nearly 7% doublingfrom the year-over-year17.1 in the Aprilprevious company month. outlook ofIn 14.7, tandem implying with further this growth metric, into $14,000 2014 andthe 2015. new order index was positive for the twelfth consecutive month, increasing to 21.3 in April from 14.7 the month

prior. Overall, these indices indicate further improving $13,500 6% conditions for Texas manufacturing. Other forward looking Real GDP decreased marginally indicators substantiate this claim. April 2014 witnessed Q1 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 The DFW industrial market continues to show a declining vacancy rate and positive Q1 2014 Q2 2014 absorption.a pleasantly However, first high quarter future witnessed company a slight outlook decrease indexin U.S. GDP.at 26.9. Per the GDP ($, in billions, L) DFW Industrial Vacancy (R) BureauThis of Economic marked Analysis' an improvement second estimate since for Q1 April 201 real 2013 GDP growth,by nearly overall economic activity decreased by 1.0% annualized quarterly rate. Initial estimates had Source: U.S. Bureau of Economic Analysis, June 2014. originallydoubling pegged the the first year-over-year quarter growth at 0.1%,April but company decline in privateoutlook inventory of 14.7, Source: U.S. BureauCBRE of Research, Economic Analysis, Q2 2014. June 2014. investmentimplying was larger further than thegrowth first estimate into 2014 anticipated. and There 2015. was, however, a positive contribution from personal consumption expenditures, but this positivity could not wholly CBREDallas/Fort Research, Q2 Worth2014. benefits from strong demographics and location compensate for the negative contributions from exports, nonresidential fixed investment, DFW’s supply of well-educated workers and strong population growth make it a competitive demographic force. With a current state and local government, and personal consumption expenditures. estimated population of 6.7 million, the Metroplex is the largest MSA in Texas and the fourth largest in the United States. Real GDP decreased marginally Located centrally, DFW is uniquely situated to act as the perfect logistics and distribution hub. In turn, this location provides The DFW industrial market continues to show a declining negativebusinesses contributions a logistical from advantage exports, because nonresidential of its accessibility fixed to other investment, markets by bothstate rail andand truck.local vacancy rate and positive absorption. However, first quarter government, and private inventory investment. witnessed a slight decrease in U.S. GDP growth. Per the Bureau of Economic Analysis’ second estimate for Q1 Dallas/Fort Worth benefits from strong demographics and location 2014 real GDP growth, overall economic activity decreased DFW’s supply of well-educated workers and strong population growth make it by 1.0% annualized quarterly rate. Initial estimates had a competitive demographic force. With a current estimated population of 6.7 originally pegged the first quarter growth at 0.1%, but million, the Metroplex is the largest MSA in Texas and the fourth largest in the decline in private inventory investment was larger than the United States. Located centrally, DFW is uniquely situated to act as the perfect first estimate anticipated. There was, however, a positive logistics and distribution hub. In turn, this location provides businesses a logistical contribution from personal consumption expenditures, advantage because of its accessibility to other markets by both rail and truck. but this positivity could not wholly compensate for the

© 2014, CBRE, Inc. l n ta o ti p r o s 14 To Total Total 0 22,238 442,023 520,854 502,890 617,217 2 (194,417) 4,609,622 2,175,728 6,785,350 1,536,273 2,324,442 1,013,830 YTD 2014 t Ab Absorption 2 Q Ne t © 2014, CBRE, Inc. c n e o r i ti p r o s 14 D 66,499 52,295 19,955 81,595 0 119,709528,491505,608 119,709 528,491 565,810 390,121217,296476,158 390,121 213,187 528,076 375,374 488,932 52,295 81,595 (120,739) (120,739) 2 488,932 528,076 213,187 390,121 565,810 528,491 119,709 t Ab Q2 2014 (120,739) 1,869,613 2,358,545 Total Net Net Total 2 Absorption Ne Q x g n Ft. Fle ki . $7.90 $5.79 $7.68 $7.25 $5.41 $7.88 $7.40 $9.26 $5.20 $7.98 2,203,098 2,358,545 $7.50$8.47 1,827,724 1,869,613 66,499 19,955 q 375,374 476,158 217,296 390,121 505,608 528,491 119,709 As S Q2 2014 (120,739) 1,827,724 2,203,098 Direct Net e r Absorption g e P a r te a R l Ave l e a

a s i u Flex a tr n $7.50 $7.40 $8.47 $7.88 $7.98 $5.41 $7.25 $7.68 $5.79 $7.90 $5.20 $9.26 s Le u An d In Asking Per Sq. Ft. Per y Lease Rate c n $4.09 $4.22 $3.85 $4.21 $4.07 $2.99 $4.38 $4.40 $4.15 $4.62 $3.44 $3.96 a Annual Average Annual Average c te Industrial a R l Va ta To y c Rate 5.7% 6.2% 6.2% 7.5% 9.2% 6.8% 6.3% 3.8% 4.1% Total Total 7.2% 4.7% 6.3% n a Vacancy Vacancy c Ft. . q l Va S ta Unemployment Rate growth in DFW was Seasonally adjusted, annual employment net increase of 3.5% from April 2013 to April 2014 for a in DFW logically 106,800 jobs. Thus, the unemployment rate quarter to 5.2%. For fell 60 basis points (bps) during the second same Texas posted the the first time in 14 quarters, DFW and and DFW are still outpacing the U.S. unemployment rate. Texas which recorded a 6.3% rate. Indicative of the stronger state and DFW have consistently outshined the Texas economy, national unemployment rate throughout the recession and recovery. Underpinning these strong labor market trends, Dallas/Fort contains both an ample supply of well-educated workers Worth and has maintained a strong population growth, contributing to of an estimated population With healthy economy. the area’s 6.8 million, a 33% increase from 2000, DFW according to Claritas is projected to grow further at a rate of 8.6% over the the national five-year projected next five years. Comparatively, population growth rate is only 3.5%. If employment trends continue as they have been, DFW job growth should be able to absorb the new influx, even as DFW market increases in population. To an ample supply of well-educated workers and has maintained a strong 2013 to April 2014 for a net increase of 106,800 jobs. Thus, the unemployment Thus, the April 2014 for a net increase of 106,800 jobs. 2013 to to absorb the new influx, even as DFW market increases in population. rate. Texas and DFW are still outpacing the U.S. which recorded a 6.3% rate. Texas rate. Indicative of the stronger state economy, Texas and DFW have consistently Texas Indicative of the stronger state economy, Unemployment Rate For the first time in 14 quarters, DFW and Texas posted the same unemployment posted the same unemployment Texas For the first time in 14 quarters, DFW and population growth, contributing to the area's healthy economy. With an estimated population growth, contributing to the area's healthy economy. Underpinning these strong labor market trends, Dallas/Fort Worth contains both Underpinning these strong labor market trends, Dallas/Fort Worth employment trends continue as they have been, DFW job growth should be able Seasonally adjusted, annual employment growth in DFW was 3.5% from April April from Seasonally adjusted, annual employment growth in DFW was 3.5% projected to grow further at a rate of 8.6% over the next five years. Comparatively, population of 6.8 million, a 33% increase from 2000, DFW according to Claritas is the national five-year projected population growth rate is only 3.5%. If outshined the national unemployment rate throughout the recession and recovery. outshined the national unemployment rate throughout the recession and recovery. rate in DFW logically fell 60 basis points (bps) during the second quarter to 5.2%. rate in DFW logically fell 60 basis points (bps) during the second y c Total Total n Vacant Sq. Ft. a 5,323,002 7,489,012 3,014,211 7,587,881 8,989,513 2,464,058 4,079,128 2,773,452 2,848,115 c 33,623,803 10,944,569 44,568,372 te

a 000's t Va R c e r i D 3,200 3,150 3,100 3,050 3,000 2,950 2,900 2,850 2,800

Job Count y Rate 2013 Q2 5.6% 6.2% 6.1% 7.3% 9.0% 6.8% 6.0% 3.8% 4.1% 7.0% 4.6% 6.2%

Direct c

n Vacancy Vacancy a 2013 Q1

Ft. . 2013 Q4 q

t Va 2,464,058 6.8% 2,464,058 6.8% $4.15

S c

e 2013 Q3

r i D 2013 Q2

Direct Sq. Ft.

Vacancy 2013 Q1 te 5,202,920 7,454,247 2,981,811 7,338,798 8,760,792 3,906,047 2,773,452 2,838,035

2,464,058 32,905,753 10,814,407 43,720,160 a Q4 2012 2012 Q4

ty R li 2012 Q3 i

Q2 2012 2012 Q2 DFW Jobs Total la i Q1 2012 2012 Q1

Ava

8.2%

Rate 9.6% 7.6% 8.9%

10.3% 13.0% 11.5% 11.2% 12.8% 11.8% 11.8% 2011 Q4 10.9%

Availability 2011 Q3 le 2011 Q2

Ft. Q1 2011 2011 Q1 DFW 6,255,264 9.6% 3,906,047 6.0% 4,079,128 6.3% $4.62 4,305,738 11.8% 9,506,2735,668,760 10.3%5,524,489 8.2% 7.6% 5,202,920 2,838,035 5.6% 2,773,452 4.1% 5,323,002 3.8% 2,848,115 5.7% 2,773,452 4.1% 3.8% $4.22 $3.96 $3.44 la

. i

12,487,91911,256,650 12.8% 11.2% 8,760,792 7,338,798 9.0% 7.3% 8,989,513 7,587,881 9.2% 7.5% $4.40 $4.38 15,674,799 13.0% 7,454,247 6.2% 7,489,012 6.2% $4.21 5,581,793 11.5% 2,981,811 6.1% 3,014,211 6.2% $2.99 q

S 2010 Q4

Ava Q3 2010 2010 Q3

Sq. Ft.

5,581,793 2010 Q2

5,668,760 9,506,273 4,305,738 6,255,264 5,524,489 Available 55,562,163 20,699,522 76,261,685 15,674,799 11,256,650 12,487,919

Q1 2010 2010 Q1

Q4 2009 2009 Q4 Texas le

b ta 2009 Q3 a Ft.

n e

. e q 2009 Q2 Ar S

t R 64,977,094 36,451,402 97,286,470 48,547,208 92,636,130 68,741,355 72,338,431

100,746,416 468,997,462233,715,916 55,562,163 20,699,522 11.8% 8.9% 32,905,753 10,814,407 7.0% 4.6% 33,623,803 10,944,569 7.2% 4.7% $4.09 $3.85 120,988,872 702,713,378 76,261,685 10.9% 43,720,160 6.2% 44,568,372 6.3% $4.07 Area 2009 Q1

Sq. Ft. Ne 68,741,355 2008 Q4 92,636,130 48,547,208 97,286,470 36,451,402 64,977,094 72,338,431 468,997,462

233,715,916 702,713,378 120,988,872 100,746,416

Net Rentable

USA USA Q3 2008 2008 Q3

Q2 2008 2008 Q2 Q1 2008 2008 Q1

TALS Q4 2007 2007 Q4

r TALS

TALS 2007 Q3 Ma TO TH TO R

KET TO WO 9% 8% 7% 6% 5% 4% 3% 2% ALLAS 10% DFW Airport MV - Page 2 DFW Industrial Figure 2: DFW Industrial Market East Dallas Northeast Dallas Northwest Dallas South Dallas South Stemmons Great SW / Arlington North Ft. Worth South Ft. Worth Source: CBRE Research, Q2 2014. Figure 3: Unemployment and Jobs FT. MAR D North Ft. Worth Great SW / Arlington South Stemmons South Dallas Northwest Dallas Northeast Dallas East Dallas DALLAS TOTALS DALLAS DFW Airport FT.WORTH TOTALS FT.WORTH South Ft. Worth Figure 3: Unemployment and Jobs Figure 2: DFW Industrial Market Figure 2: MARKET TOTALS Source: Bureau of Labor Statistics, June 2014. Unemployment Market

Source: Bureau of Labor Statistics, June 2014.

INDUSTRIAL SECOND QUARTER SECOND INDUSTRIAL MARKETVIEW Source: CBRE Research, Q2 2014.

Q2 2014 Dallas/Fort Worth Industrial | MarketView 2 Q2 2014 Dallas/Fort Worth Industrial | MarketView 3 Q2 2014 marks the 15th consecutive quarter of positive net absorption for Q2 2014 marks the 15th consecutive 2.4 million sq. ft., the bulk of Q2 2014 the DFW industrial market. Posting of move-ins in 50,000 sq. ft. to absorption was primarily comprised that in recent quarters most absorption 200,000 sq. ft. range. Considering build-to-suit and big box space, this marks has primarily consisted of large in tenants desired space range. a departure from recent quarters the relatively high typical seasonality, Considering the industrial market's but also indicate the strength of our recovery, figures demonstrate not only forward. Once again, warehouse/ the sustainability of demand going this quarter with 2.4 million sq. ft. of net distribution space led activity of (52,701) absorption, while flex space posted a slightly negative figure The submarket that posted the most net absorption over the quarter sq. ft. Great was Northeast Dallas at 565,810 sq. ft. Not far behind were 528,000 Southwest/Arlington and East Dallas which each posted around sq. ft. positive absorption. from last Deliveries totaled 2.0 million sq. ft. in Q2 2014, a slight slowdown quarter’s 2.5 million sq. ft. Considering that most of the current impressive (spec) quarters completions had initially been slated as speculative Notable projects, the delivery pre-leased rate was an impressive 67.3%. Great Southwest/ pre-leased deliveries included William Sonoma’s South Dallas Arlington facility and the completion of Cummins Southern At a This quarter also saw under construction rev up further. build-to-suit. not been this current total of 18.5 million sq. ft., construction activity has This quarter solidified the shift towards spec robust since the late 1990s. of space projects. Spec has decisively usurped build-to-suits in terms Considering the extremely limited supply across all size ranges underway. deliver much and growing demand, the completion of these projects will industrial market. needed new space to the Dallas/Ft. Worth Driven down by 15 consecutive quarters of positive net absorption, The direct vacancy rate vacancy rates remained at historically low figures. is extremely low at 6.2% and total vacancy is not much higher at 6.3%. The submarkets with the tightest vacancy rates remained towards both the the most improved western and southern areas of the region. However, vacancy rates fell in markets on the eastern and northern parts of DFW. most improved vacancy rate after dropping 130 Notable is East Dallas’s This is due to a short term for Georgia Pacific as they basis points to 6.8%. wait for their build-to-suit to complete. Q2 2014 marks the 15th consecutive quarter of positive net absorption for Q2 2014 marks the 15th consecutive 2.4 million sq. ft., the bulk of Q2 2014 the DFW industrial market. Posting of move-ins in 50,000 sq. ft. to absorption was primarily comprised that in recent quarters most absorption 200,000 sq. ft. range. Considering build-to-suit and big box space, this marks has primarily consisted of large in tenants desired space range. a departure from recent quarters the relatively high typical seasonality, Considering the industrial market's but also indicate strength of our recovery, figures demonstrate not only the forward. Once again, warehouse/ the sustainability of demand going quarter with 2.4 million sq. ft. of net distribution space led activity this a slightly negative figure of (52,701) absorption, while flex space posted absorption over the quarter The submarket that posted the most net sq. ft. sq. ft. Not far behind were Great was Northeast Dallas at 565,810 Dallas which each posted around 528,000 Southwest/Arlington and East sq. ft. positive absorption. from last Deliveries totaled 2.0 million sq. ft. in Q2 2014, a slight slowdown quarter’s impressive 2.5 million sq. ft. Considering that most of the current (spec) quarters completions had initially been slated as speculative Notable projects, the delivery pre-leased rate was an impressive 67.3%. Great Southwest/ pre-leased deliveries included William Sonoma’s Dallas Arlington facility and the completion of Cummins Southern South At a quarter also saw under construction rev up further. This build-to-suit. been this current total of 18.5 million sq. ft., construction activity has not This quarter solidified the shift towards spec robust since the late 1990s. of space projects. Spec has decisively usurped build-to-suits in terms Considering the extremely limited supply across all size ranges underway. much and growing demand, the completion of these projects will deliver industrial market. needed new space to the Dallas/Ft. Worth Driven down by 15 consecutive quarters of positive net absorption, The direct vacancy rate vacancy rates remained at historically low figures. at 6.3%. is extremely low at 6.2% and total vacancy is not much higher The submarkets with the tightest vacancy rates remained towards both the the most improved western and southern areas of the region. However, vacancy rates fell in markets on the eastern and northern parts of DFW. most improved vacancy rate after dropping 130 Notable is East Dallas’s This is due to a short term for Georgia Pacific as they basis points to 6.8%. wait for their build-to-suit to complete. Q2 2014 marks the 15th consecutive quarter of positive net absorption for the 15th consecutive quarter of Q2 2014 marks 2.4 million sq. ft., the bulk of Q2 2014 the DFW industrial market. Posting of move-ins in 50,000 sq. ft. to absorption was primarily comprised that in recent quarters most absorption 200,000 sq. ft. range. Considering build-to-suit and big box space, this marks has primarily consisted of large in tenants desired space range. a departure from recent quarters the relatively high typical seasonality, Considering the industrial market's but also indicate strength of our recovery, figures demonstrate not only the forward. Once again, warehouse/ the sustainability of demand going quarter with 2.4 million sq. ft. of net distribution space led activity this a slightly negative figure of (52,701) absorption, while flex space posted that posted the most net absorption over the quarter The submarket sq. ft. sq. ft. Not far behind were Great was Northeast Dallas at 565,810 Dallas which each posted around 528,000 Southwest/Arlington and East sq. ft. positive absorption. from last Deliveries totaled 2.0 million sq. ft. in Q2 2014, a slight slowdown quarter’s the current impressive 2.5 million sq. ft. Considering that most of (spec) quarters completions had initially been slated as speculative Notable projects, the delivery pre-leased rate was an impressive 67.3%. Great Southwest/ pre-leased deliveries included William Sonoma’s Dallas Arlington facility and the completion of Cummins Southern South At a rev up further. This quarter also saw under construction build-to-suit. been this current total of 18.5 million sq. ft., construction activity has not the shift towards spec This quarter solidified robust since the late 1990s. of space projects. Spec has decisively usurped build-to-suits in terms Considering the extremely limited supply across all size ranges underway. much and growing demand, the completion of these projects will deliver market. industrial needed new space to the Dallas/Ft. Worth Driven down by 15 consecutive quarters of positive net absorption, The direct vacancy rate vacancy rates remained at historically low figures. at 6.3%. is extremely low at 6.2% and total vacancy is not much higher both the The submarkets with the tightest vacancy rates remained towards the most improved western and southern areas of the region. However, of DFW. vacancy rates fell in markets on the eastern and northern parts most improved vacancy rate after dropping 130 Notable is East Dallas’s This is due to a short term for Georgia Pacific as they basis points to 6.8%. wait for their build-to-suit to complete.

Q2 2014 marks the 15th consecutive quarter of positive quarter of positive marks the 15th consecutive Q2 2014 2.4 market. Posting industrial for the DFW net absorption absorption was ft., the bulk of Q2 2014 million sq. of move-insprimarily comprised in 50,000 sq. ft. to Considering that in recent 200,000 sq. ft. range. has primarily consisted of large quarters most absorption build-to-suit and big box space, this marks a departure in tenants desired space range. from recent quarters market’sConsidering the industrial typical seasonality, demonstrate not only the the relatively high figures but also indicate the strength of our recovery, going forward. Once again, sustainability of demand space led activity this quarter warehouse/ distribution of net absorption, while flex space with 2.4 million sq. ft. figure of (52,701) sq. ft. The posted a slightly negative over the submarket that posted the most net absorption sq. ft. Not far quarter was Northeast Dallas at 565,810 East Dallas behind were Great Southwest/Arlington and positive which each posted around 528,000 sq. ft. absorption. 2014, a slight Deliveries totaled 2.0 million sq. ft. in Q2 slowdown from last quarter’s impressive 2.5 million sq. ft. Considering that most of the current quarters completions had initially been slated as speculative projects, the delivery pre-leased rate was an impressive 67.3%. Notable pre-leased included William deliveries and the Great Southwest/ Arlington facility Sonoma’s build-to-completion of Cummins Southern South Dallas rev up suit. This quarter also saw under construction million sq. ft., At a current total of 18.5 further. since the construction activity has not been this robust towards late 1990s. This quarter solidified the shift usurped speculative projects. Speculative has decisively Considering build-to-suits in terms of space underway. ranges and the extremely limited supply across all size growing demand, the completion of these projects will deliver much needed new space to the Dallas/Ft. Worth industrial market. Driven down by 15 consecutive quarters of positive net absorption, vacancy rates remained at historically low figures. The direct vacancy rate is extremely low at 6.2% and total vacancy is not much higher at 6.3%. The submarkets with the tightest vacancy rates remained in the western and southern areas of the region. However, the most improved vacancy rates fell in markets on the Notable is East eastern and northern parts of DFW. Dallas’s most improved vacancy rate after dropping 130 basis points to 6.8%. This is due to a short term lease for as they wait for their South Dallas Georgia Pacific build-to-suit to complete. Q2 2014 2014 Q2

12% 11% 10% 9% 8% 7% 6%

Q2 2014 2014 Q2 Q1 2014 2014 Q1

Q2 2014 2014 Q2

12% 11% 10% 9% 8% 7% 6% 2014 Q2

Rate Q1 2014 2014 Q1

Vacancy Vacancy 2013 Q4

12% 11% 10% 9% 8% 7% 6% Q2 2014 2014 Q2

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Vacancy Vacancy 2013 Q4

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Q2 2012 2012 Q2 Rate Overall Vacancy Q2 2011 2011 Q2

Q3 2011 2011 Q3 Q2 2012 2012 Q2

2011 2011 2012 Q1

Overall Vacancy Rate Overall Vacancy

Q2 2011 2011 Q2 Delivered Construction Sq. Ft.

2011 2011

Q1 2012 Rate Overall Vacancy 2012 Q1 Q1 2011 2011 Q1

Q2 2011 2011 Q2

Delivered Construction Sq. Ft. 2012 Q1 Q4 2011 2011 Q4

Q1 2011 Delivered Construction Sq. Ft. 2011 Q1

Q4 2010 2010 Q4 Q1 2011 2011 Q1

Total Annual Net Absorption Total 2011 Q4

2010 2011 Q4 Q4 2010 2010 Q4

Total Annual Net Absorption Total 2011 Q3 Q3 2010 2010 Q3

2010 2010 Q4 Total Annual Net Absorption Total

2010 2011 Q3

Q3 2010 2010 Q3 Q3 2011 2011 Q3

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Q2 2010 2010 Q2 Industrial

Q2 2011 2011 Q2 Q2 2010 2010 Q2

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2009

Q1 2010 2010 Q1 Industrial

Q4 Q1 2011 2011 Q1

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Under Construction Sq. Ft. 2010 Q2

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Q4 2008 2008 Q4

Under Construction Sq. Ft. 2010 Q1

Q4 2008 2008 Q4

Q1 2010 2010 Q1 Q4 2008 2008 Q4

Q2 2010 Q1

2007 2008 Q3

Q2 2009 Q4

2007 2008 Q3

Q4 2009 2009 Q4 Q4 2009 2009 Q4 Q2 2008 2008 Q2

Q2 2008 2008 Q2 Q3 2009 2009 Q3

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2006 Q4 2007 2007 Q4

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0 2009 Q1 0 0

3,500 8,500 4,000 2,000 8,000 6,000 Absorption Sq. Ft. 18,500 13,500 3,500 8,500 (1,500) 3,500 8,500 Figure 6: Vacancy Rates Figure 6: Vacancy Figure 5: Construction Figure 4: Net Absorption and Vacancy Rate Net Absorption Figure 4: 9% 8% 7% 6% 5% 10,000 18,000 16,000 14,000 12,000 2,000 8,000 6,000 4,000 Absorption Sq. Ft. Absorption Sq. 000’s 4,000 2,000 8,000 6,000 Absorption Sq. Ft. Absorption Sq. 000’s 13,500 18,500 (1,500) 13,500 18,500 11% 11% 10% 14% 13% 12% (1,500) 7% 6% 5% 9% 8% 14,000 12,000 10,000 18,000 16,000 5% 8% 7% 6% 9% 12,000 10,000 18,000 16,000 14,000 Source: CBRE Research, Q2 2014. Source: CBRE Research, Q2 2014.

Source: CBRE Research, Q2 2014.

MV - Page 3 DFW Industrial

DFW Industrial MV - Page 3 DFW Industrial MV - Page 3

Figure 6: Vacancy Rates Figure 5: Construction Figure 4: Net Absorption and Vacancy Figure 4: Net Absorption

Figure 6: Vacancy Rates Figure 5: Construction

Figure 4: Net Absorption and Vacancy Figure 4: Net Absorption Figure 6: Vacancy Rates

Figure 5: Construction Figure 4: Net Absorption and Vacancy Figure 4: 844,377 555,200 554,444 400,123 389,005 309,459 310,000 230,000 200,000 146,000 135,000 Sq. Ft. Sq. Ft. 1,600,000 © 2014, CBRE, Inc. Submarket Northeast Dallas East Dallas South Stemmons DFW Airport East Dallas Northwest Dallas pricing. CBRE expects institutional investors expects institutional CBRE pricing. B space more active in the Class to become mounts to as pressure year, over the next in today’splace money market. Both investment leasing volume and to activity continue DFW’sbenefit from as an unique status inland port South Dallas DFW Airport Northwest Dallas Great Southwest/Arlington Northeast Dallas Northwest Dallas Submarket Building(s) Blvd 3000 Redbud Mesquite Business Center Commerce Center Dallas Cowboys Distribution Center 3401 Innovative Way Gillis Buildings 1 2 3 Although transaction activity remains strong, strong, activity remains Although transaction interest to closely monitor investors continue potential impact upward rates for the could have on commercial movement and debt remains available now, debt. For for a wide array of historically inexpensive cap rates at historic asset profiles, keeping submarkets, cap rates lows. In certain infill product are below on Class A, multi-tenant mark from 2007 as the previous low water strong rental rate investors are projecting three years. growth over the next investor demand While there is substantial there are limited for Class A offerings, opportunities available, creating a frenzied, competitive environment that pushes up Commerce 45 1110 Northpoint Drive Drive 351 Lakeside 610 W Trinity 2600 McCree Road Parkway 501 Lakeside Building(s)

Figure 8: Select Lease Transactions Figure 7: Select Sale Transactions Transportation Safety Administration Transportation LKQ AmCor Plastics Garden Ridge Benco Georgia Pacific Tenant Marswik Inc /LNR Partners Buyer/Seller Stockbridge / Exeter Property Group Stockbridge / Exeter Property /Brookhollow Commerce Center LP Associates Fund Realty Invesco/KBS REIT II Railroad/ Iris USA Inc Union Pacific Group / Industrial Income Trust Exeter Property *Renewal **Expansion Source: CBRE Research, Q2 2014. Source: CBRE Research, Q2 2014.

The capital markets landscape in DFW markets landscape The capital versus last more aggressive became slightly data on trailing 12-month quarter based The Capital Analytics. Real reported by was slightly lower, median cap rate for DFW the national median of at 7.2%, compared to are based on deals 7.3%. These cap rates approximated or that have been confirmed, and gathered assumed by local professionals Q2 2014, similarly Capital Analytics. by Real saw private buyers as the to last quarter, of DFW sales volume. most active with 47% with 27% of the Institutional buyers followed are on trend with sales volume. DFW figures considering private buyers the total U.S., accounted for 44% of national industrial sales volume. INDUSTRIAL SECOND QUARTER SECOND INDUSTRIAL MARKETVIEW

Q2 2014 Dallas/Fort Worth Industrial | MarketView 4 Q2 2014 Dallas/Fort Worth Industrial | MarketView 5

[email protected] Lexi Zager Research Coordinator CBRE Dallas Research McKinney Suite700 Ave, 2100 Dallas, TX 75201 6532 979 214 t: +1 e:

[email protected] Lauren Paris Senior Research Analyst CBRE Dallas Research McKinney Suite700 Ave, 2100 Dallas, TX 75201 6587 979 214 t: +1 e:

AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around

CONTACTS please contact: MarketView, Industrial Worth For more information about this Dallas/Fort Lynn Cirillo Lynn Manager Operations Research CBRE Americas Research 2800 Oak, Post Suite 2300 Houston, TX 77056 e: [email protected] TEXAS RESEARCH FOLLOW CBRE FOLLOW © 2014, CBRE, Inc.