Inland Empire Industrial

www.cbre.com/research Second Quarter 2011

Quick Stats The 2011 year-to-date gross absorption now equals 14.3 The Inland Empire’s availability rate dropped from 12.8% million square feet with the second quarter contributing last quarter to currently stand at 12.2%. Partially due to the Change from last 6.2 million square feet to the total. The Inland Empire East increased activity, the Inland Empire East’s availability rate Current Yr. Qtr. generated a healthy amount of activity with 3.3 million square dropped quarter-over-quarter from 14.9% to 13.1% while feet. Razor Corporation leased a 599,654 square-foot building the West experienced a slight increase from 11.5% to 11.7%. Vacancy 6.3% in Rialto which helped boost activity in the East submarket Approximately 3.8 million square feet of new available product this quarter. Other notable deals that occurred in the East End came onto the market in the Inland Empire West this quarter Lease Rates $0.33 include a 449,040 square-foot building sold to Ross Stores in contributing to the rise in the availability rate. The vacancy rate Riverside and a 409,802 square-foot building leased to Hand in the Inland Empire dropped minimally from 6.4% last quarter Net Absorption* 2.7 MSF Express in Corona. The Inland Empire West brought in 2.9 to 6.3% this quarter. Vacancy in the East declined from 8.3% million square feet of gross activity this quarter which includes to 7.6% while vacancy in the West slightly increased from Completed the sale of a 402,539 square-foot building to Anna’s Linens in 5.2% to now stand at 5.5%. Overall, user activity for space less 520,000 Construction Fontana. Overall, gross activity in the Inland Empire is down 1.9 than 100,000 square feet is beginning to pick up. Of the 77 million square feet year-over-year. However, the year-to-date deals made this quarter, 60 were below 100,000 square feet, * The arrows are trend indicators over the net absorption is on par with the second quarter of 2010 at 5.9 30 of which occurred in space 10,000 – 19,999 square feet. specified time period and do not represent a positive or negative value. (e.g., absorption could million square feet. The Inland Empire generated 2.7 million be negative, but still represent a positive trend square feet of positive net absorption this quarter. The Inland Speculative development is beginning to pick up in the Inland over a specified period.) Empire East brought in1.5 million square feet of net absorption Empire with 1.3 million square feet currently under construction. representing a year-over-year increase of 708,695 square feet TA Realty Advisors broke ground on a 697,578 square-foot building in Perris and Watson Land Company is completing a Hot Topics while the Inland Empire West contributed the remaining 1.2 million square feet to the total net absorption. 616,542 square-foot building in Redlands. In addition, Carson plans to break ground on a 400,000 square-foot building in • With the second quarter generating Statistics through the month of May show that port activity has Chino. Other developers such as Hillwood, CatStrs and ProLogis 2.7 million square feet of positive net increased year-over-year at the Ports of Los Angeles and Long are contemplating breaking ground in the Inland Empire West absorption the year-to-date total now Beach. Imports are up nearly 6% at the Port of Los Angeles as well. equals 5.9 million square feet. compared to May of last year. Overall, the Port of Los Angeles moved 692,933 twenty-foot equivalent container units (TEUs) There is still a significant amount of investment capital seeking • The Inland Empire produced 6.2 million in the month of May compared to 689,421 in May of 2010. core, net-leased and value-add industrial assets in the Inland square feet of gross activity bringing Import activity has increased 4% at the Port of Long Beach Empire. Cap rates for net leased, credit tenant assets moved the year-to-date total to 14.3 million year-over-year. In total, the Port of Long Beach moved nearly down below 6%. square feet. 12,000 more TEUs than May of 2010. The Los Angeles County Economic Development Corporation is expecting movement at • Both the overall vacancy and availability the ports to continue to grow this year and well into 2012. rates have decreased from last quarter. Vacancy dropped from 6.4% to 6.3% and the availability rate declined from 12.8% Vacancy Rate vs. Lease Rate Vacancy Rate 6.3% to now stand at 12.2%. Avg. Asking Lease Rate $0.33 • Construction activity is starting to pick up 10% 0.5 with 1.3 million square feet of speculative 9% 0.45 development currently under construction in the Inland Empire East. 8% 0.4

• There is still a significant amount of 7% 0.35 investment capital seeking core, net leased and value add industrial assets in 6% 0.3 the Inland Empire. 5% 0.25

4% 0.2

3% 0.15

2% 0.1

1% 0.05

0% 0 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211

© 2011, CB Richard Ellis, Inc. Inland Empire Industrial Second Quarter 2011 Page 2 Page 13.1% 11.7% 12.2% Rate % Availability © 2011, CB Richard Ellis, Inc. $0.33 $0.34 $0.33 Lease Rate Average Asking Average Asking 0 Under 1,325,472 1,325,472 Construction SF Construction

The unemployment rate in the Inland Empire was 13.2% in May, down 13.2% in May, down The unemployment rate in the Inland Empire was unemployment an with compares This April. in 13.4% revised a from States during the rate of 11.7% for California and 9.1% for the United in Riverside County same period. The unemployment rate was 13.3% and 13.2% in San Bernardino County. 1,900 by decreased employment nonfarm total May and April Between reported a to reach 1,108,800 jobs. Despite this decline, Manufacturing goods accounted Durable month-over gain with the addition of 1,000 jobs. jobs while non-durable for all of the job growth in this sector, up 1,100 goods declined 100 jobs. The overall vacancy rate dropped from 6.4% to 6.3% quarter-over-quarter. vacancy rate dropped from The overall The Inland Empire East submarket experienced a decline in vacancy this quarter West Empire Inland the of 7.6% while rate current from 8.3% to the dropping submarket increased slightly from 5.2% to 5.5%. quarter-over-quarter a experienced also rate availability Empire’s Inland The decline, decreasing from 12.8% to 12.2%. The Inland Empire East’s the since has been it level lowest the is 13.1% which now is rate availability last quarter’sfrom increased minimally end West 2007.The quarter of third rate of 11.5% to now stand at 11.7%. 1,529,161 1,169,667 2Q11 2,698,828 2Q 2011 Net 2Q 2011 Net Absorption SF Absorption 9.1% 6.3% 13.2% 11.7% 12.2% Q211 1Q11 7.6% 5.5% 6.3% Rate % Vacancy Vacancy Q111 Vacancy Availability California United States Inland Empire 4Q10 Q410 Area Rentable 152,659,457 242,556,762 395,216,219 3Q10 Q310 Q210 2Q10 Inland Empire East Inland Empire West Market Total Market Submarket Market Statistics Market 8% 6% 4% 2% 0% Vacancy & Availability Rate Vacancy 18% 16% 14% 12% 10% Unemployment 8.0% 6.0% 4.0% 2.0% 14.0% 16.0% 12.0% 10.0% Inland Empire Industrial Second Quarter 2011 Page 3 Page © 2011, CB Richard Ellis, Inc. Due to the lack of supply for buildings greater than 500,000 square feet three currently are There up. pick to starting is development speculative the Inland Empire East totaling buildings under construction in speculative quarter’sThis feet. square million 1.3 one construction consists of completed build-to-suit in Riverside totaling 520,000 square feet. The Inland Empire generated 2.7 million square feet of positive net absorption absorption net of positive feet square 2.7 million generated Empire Inland The The feet. square 5.9 million to total year-to-date the bringing quarter this indicating square feet to the total, East Inland Empire 1.5 million contributed the up made end West The year-over-year. increase foot square 708,165 a quarter’s million square feet to the remaining 1.2 total. with the square feet now equals 14.3 million The year-to-date gross activity Empire square feet to the total. The Inland million second quarter adding 6.2 square feet East total bringing in 3.3 million made up the majority of the the quarter the Inland Empire West ended while of gross activity this quarter with 2.9 million square feet. at $0.33 triple net for the to remain rate continues asking lease The overall $0.34 triple from East dropped Empire Inland The quarter. consecutive fourth a quarter- experienced net to $0.33 the Inland Empire West triple net while triple net. over-quarter increase of $0.01 to now stand at $0.34 $0.33 Q211 520,000 Q211 1,325,472 2,698,828 6,150,074 2Q11 Q111 Q111 Gross Activity Net Absorption Under Construction Completed Construction Q410 Q410 Q310 Q310 Q210 Q210 Q310 Q410 Q111 Q211 Q210 0 0 Lease Rate $0.30 $0.31 $0.32 $0.33 $0.34 $0.35 Construction Activity 800,000 600,000 400,000 200,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Net Absorption & Gross Activity & Gross Net Absorption 10,000,000 1,400,000 1,200,000 1,000,000 Inland Empire Industrial Top Lease Transactions

Size (Sq. Ft.) Tenant Submarket Deal Type

Exp./ 844,150 Smuckers Inland Empire East Renewal 599,654 Razor Inland Empire East New 409,802 Hand Express, LLC Inland Empire East New 408,252 Distribution Alternative Inland Empire West New

Asking Lease Rate InlandSubmarket Empire, Map CA Office Submarkets Average of Asking Lease Rates for each property weighted by the associated Available Space. Includes Direct Available Space unless otherwise LOSLOS ANGELESANGELES SanSanSan Bernardino BernardinoBernardino National NationalNational Forest ForestForest COUNTY SANSANSAN BERNARDINOBERNARDINO indicated COUNTY Completions Rentable Building Area completed during the LaLa VerneVerne FontanaFontana Highland Upland RanchoRancho CucamongaCucamonga RialtoRialto period SanSan Claremont West End BernardinoBernardino Market Coverage

PomonaPomona Mentone Includes all competitive industrial buildings Ontario LomaLoma LindaLinda Colton Grand RedlandsRedlands 10,000 square feet and greater in size. TerraceTerrace YucaipaYucaipa Glen Avon Chino EastEast EndEnd PedleyPedley Calimesa Mira Loma RubidouxRubidoux Net Absorption Chino Hills The change in Occupied Sq. Ft. during the period RiversideRiverside for all Existing properties ChinoChinoChino Hills HillsHills Norco StateStateState Park ParkPark Moreno ValleyValley Base Inventory, Base or Building Square Feet YorbaYorba LindaLinda The sum of the Rentable Building Area for all

Corona competitive properties AnaheimAnaheim Corona ORANGE RIVERSIDERIVERSIDE PerrisPerris 0 2 . 5 5 COUNTY RIVERSIDERIVERSIDE PerrisPerris Occupied Square Feet ClevelandClevelandCleveland National NationalNational M i l e s ClevelandClevelandCleveland National NationalNational COUNTY ClevelandClevelandCleveland National NationalNational COUNTY ForestForestForest Rentable Building Area less Vacant Space This map contains information from sources we believe to be reliable, but we make no representation, warranty or guaranty of its accuracy. This map is published for the use of CBRE and its clients only. Redistribution in whole or part to any third party without the prior written consent of CBRE is strictly prohibited. © 2007 CB Richard Ellis, All Rights Reserved. Sources: CBRE Mapping Services (877) 580-4674; Claritas, Inc./GDT, Inc. MapFiles\Work2007\127625.wor 1/26/2007 Inland Empire Submarket Descriptions Under Construction EAST END WEST END Buildings that have begun construction as Includes Colton, Corona, Loma Linda, Moreno Valley, Perris, Redlands, Includes Chino, Fontana, Mira Loma, Ontario, and evidenced by site excavation or foundation work, Rialto, Riverside, and San Bernardino Rancho Cucamonga and is on-going Available Space Local Offices Space being marketed to potential occupants, in Anaheim/Mid-Counties Los Angeles Downtown Palm Desert Santa Fe Springs Rentable Sq. Ft. (direct and sublease combined, 2125 E. Katella Avenue, Suite 100 355 South Grand Avenue, Suite 3100 74-770 Highway 111, Suite 101 10350 Heritage Park Drive unless otherwise indicated) Anaheim, California 92806 Los Angeles, California 90071 Indian Wells, California 92210 Santa Fe Springs, California 90670 714.939.2100 213.613.3242 760.341.5273 562.946.1541 Antelope Valley LA North - Glendale/San San Diego Central South Bay/Mid-Counties Availability Rate 42220 10th Street West, Suite 107 Fernando 4365 Executive Drive, Suite 900 990 West 190th Street Available space as a percentage of the Base Lancaster, California 93534 10 Universal City Plaza, 27th Floor San Diego, California 92121 Torrance, California 90502 661.729.6702 Universal City, California 91608 858.546.4600 310.516.2300 Inventory or Building Sq. Ft Beverly Hills 818.907.4677 San Diego Downtown Temecula 1840 Century Park East Newport Beach 350 Tenth Avenue, Suite 800 27720 Jefferson Avenue, Suite 230 Vacant Space Los Angeles, California 90067 3501 Jamboree Road, Suite 100 San Diego, California 92101 Jefferson Plaza Office Building Available Space that is physically vacant, in 310.550.2500 Newport Beach, California 92660 619.236.1231 Temecula, California 92590 Rentable Sq. Ft El Segundo 949.725.8500 San Diego North County 951.326.2900 2041 Rosecrans Avenue, Suite 300 Ontario 5740 Fleet Drive, Suite 100 Ventura County El Segundo, California 90245 4141 Inland Empire Boulevard, Suite 100 Carlsbad, California 92008 771 East Daily Drive, Suite 300 Vacancy Rate 310-765-2600 Ontario, California 91764 760.438.8500 Camarillo, California 93010 Vacant space as a percentage of the Base LA-Central 909.418.2000 Santa Barbara 805.465.1600 500 Citadel Drive, Suite 301 1332 Anacapa Street Inventory or Building Sq. Ft Commerce, California 90040 Santa Barbara, California 93101 323.838.3100 805.963.6100 For more information regarding the

© 2011 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set MarketView, please contact: than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Jill Luna, Research Manager Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit, CB Richard Ellis—Econometric Advisors. Information herein has been obtained from sources believed reliable. CB Richard Ellis While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation 4141 Inland Empire Blvd., Suite 100, Ontario, CA about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future T 909.418.2041 F 909.418.2100 performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and [email protected] cannot be reproduced without prior written permission of CB Richard Ellis.