LEE-ASSOCIATES.COM/RESEARCH Q4 2020 MARKET REPORTS FEATURED MARKET REPORTS THE LEE ADVANTAGE Every Lee & Associates office delivers world-class service to an array of regional, national, and international clients - from small businesses and local investors to major corporate users and institutional investors. Our professionals combine the latest technology, resources, and market intelligence with their experience, expertise, and commitment to superior service to optimize client results. WHAT SETS US APART? Since 1979, Lee & Associates has reimagined the way that commercial real estate companies should be structured. Each Lee & Associates office is owned and operated by its professionals. As shareholders of the company, this separates us from our competition and creates one common goal; to provide seamless, consistent execution and value- driven market-to-market services to our clients. SERVICES TO MEET THE NEEDS OF OUR CLIENTS Lee & Associates’ offices offer a broad array of real estate services tailored to meet the needs of the company’s clients in each of the markets it operates, including commercial real estate brokerage, integrated services, and construction services. With specialty practice groups in each of these disciplines, our professionals regularly collaborate to make sure they are providing their clients with the most advanced, up-to-date market technology and information. LOCAL EXPERTISE INTERNATIONAL REACH With offices in 60+ markets across North America and a strategic international alliance with Gerald Eve, Lee & Associates has the ability to deliver first-class services to our clients both locally and internationally. Q4 2020 INDUSTRIAL OVERVIEW 2020 GROWTH SOARS ON E-COMMERCE DEMAND FEATURED REPORTS Driven by pandemic-fueled e-commerce sales, 2020 tenant expansion outpaced last year’s total after • AZ, Phoenix a fourth-quarter surge in demand by companies seeking additional warehouse and distribution space • BC, Vancouver to improve supply-chain efficiencies. There were a net 99.2 million SF of industrial space absorbed in • CA, East Bay Q4 – the strongest quarter on record – and 203.7 million SF absorbed for the year, a 27% increase over • CA, Inland Empire East 2019’s net growth. An array of evidence supports the consensus that the lockdown was an accelerant • CA, Inland Empire West that gave several trends in commercial real estate a push. Despite damage to the labor market, national • CA, LA - Central and world economies, companies positioned for e-commerce have won a dramatically increased share • CA, LA - North • CA, LA - San Gabriel Valley of total sales. Consequently, skyrocketing online sales have intensified already-strong demand in key • CA, LA - South Bay - Port Markets markets for big-box and last-mile distribution facilities. • CA, LA - West • CA, Orange County Record-setting inbound cargo is straining U.S. ports, and officials nationwide are steaming ahead with • CA, Stockton / Central Valley expansion plans. As the year ended, dozens of container ships were anchored off the Los Angeles-Long • CA, Stockton Beach port complex waiting weeks for berths and with more ships arriving daily. • CO, Denver • FL, Fort Myers Amazon’s growth represents 10% of all leasing volume, but Target, Walmart and a number of major • FL, Naples general merchandisers were stepping up their leasing activity along with Home Depot and others in the • FL, South Florida home improvement sector. Radial, a competitor to Amazon, leased a 760,000-SF building southwest of • GA, Atlanta Atlanta. Amazon, however, is planning development of a multi-story facility of some 3.8 million SF in • IL, Chicago • IN, Indianapolis Pflugerville, Texas. The industrial market’s strength has not escaped the notice of developers as more • MA, Boston than 330 million SF are under construction, a record, with 93 million SF getting underway in Q3. Since • MD, Greater Baltimore deliveries will slightly exceed current demand, the national vacancy rate will tick upward to more than • MI, Detroit 6% for most of 2021. About 180 million SF are slated for delivery in the first half of 2021. Major national • MN, Minneapolis distribution markets Dallas-Fort Worth, Atlanta, Lehigh Valley, PA, San Antonio, Austin, Phoenix and • NC, Durham Southern California’s Inland Empire counties of Riverside and San Bernardino have led the way in net • NC, Raleigh • NJ, Northern & Central absorption. • OH, Cincinnati • OH, Columbus Unlike leasing volume, sales remain below the record levels seen in late 2019 through the first quarter. • ON, Toronto Institutional investors as well as REITs and other public buyers, which continue to be attracted by the • PA, Suburban Pennsylvania sector’s strong performance, emerged as the only net buyers through the third quarter. Although • SC, Charleston private equity investors also were active through the summer months, private buyers and owner/users • SC, Greenville / Spartanburg have been net sellers throughout the year. Transaction volume increased 30% in the third from Q2, • TX, Dallas / Fort Worth reaching $17 billion. Industrial’s strong fundamentals notwithstanding, cap rate are expected to trend • TX, Houston upward, and pricing momentum is anticipated to downshift from its prior year annual pace of 5% as • WA, Seattle • WI, Madison investors and lenders grow more cautious and risk premiums widen. LOWEST VACANCY RATE HIGHEST MARKET RENT / SF ANNUAL HIGHEST MARKET SALE PRICE / SF CA, San Luis Obispo 2.4% CA, Santa Barbara $22.36 PSF CA, San Diego $195 PSF FL, Naples 2.5% CA, San Luis Obispo $18.99 PSF CA, Santa Barbara $187 PSF NC, Raleigh 3.3% NY, New York $15.56 PSF CA, Orange County $169 PSF CA, Los Angeles 3.4% CA, San Diego $15.29 PSF CA, East Bay $168 PSF CA, Orange County 3.5% DC, Washington $14.86 PSF CA, Los Angeles $153 PSF U.S. Index 5.6% U.S. Index $$8.77 PSF U.S. Index $82 PSF MOST SF UNDER CONSTRUCTION LARGEST INVENTORY BY SF LOWEST MARKET CAP RATE TX, Dallas-Fort Worth 32,789,685 SF IL, Chicago 1,302,586,545 SF CA, Los Angeles 4.5% CA, Inland Empire 21,461,696 SF TX, Dallas-Fort Worth 986,545,671 SF CA, Orange County 4.6% IL, Chicago $20,763,594 SF CA, Los Angeles 937,777,030 SF CA, East Bay 4.6% GA, Atlanta 19,855,730 SF NY, New York 831,726,316 SF CA, Inland Empire 4.7% IN, Indianapolis 9,858,399 SF GA, Atlanta 749,641,020 SF WA, Seattle 4.8% U.S. Index 325,887,089 SF U.S. Index 17,117,065,556 SF U.S. Index 6.4% Q4 2020 INDUSTRIAL OVERVIEW VACANCY MARKET MARKET SALE UNDER MARKET CAP MARKET INVENTORY SF RATE RENT / SF PRICE / SF CONSTRUCTION RATE AZ, Phoenix 7.3% $8.15 $99 7,722,244 371,296,258 6.0% BC, Vancouver 2.2% $14.01 $310 2,949,622 256,214,506 4.3% CA, East Bay 6.6% $12.92 $168 2,230,939 269,308,014 4.6% CA, Inland Empire 3.8% $9.41 $113 21,461,696 675,519,550 4.7% CA, Los Angeles 3.4% $13.67 $153 4,367,905 937,777,030 4.5% CA, Orange County 3.5% $14.62 $169 341,882 301,666,359 4.6% CA, San Diego 5.5% $15.29 $195 5,629,075 198,737,479 5.2% CA, San Luis Obispo 2.4% $18.99 $139 0 8,918,991 5.5% CA, Santa Barbara 5.0% $22.36 $187 79,803 17,261,029 5.5% CA, Stockton 7.9% $5.99 $70 4,084,117 132,584,812 5.9% CA, Ventura 3.9% $11.14 $113 511,223 71,114,062 6.1% CO, Denver 6.2% $9.75 $106 5,988,583 253,240,254 5.9% DC, Washington 6.1% $14.86 $139 3,700,316 265,478,734 6.3% FL, Fort Myers 4.3% $8.88 $69 775,186 34,067,885 7.6% FL, Miami 5.3% $12.22 $130 4,302,446 250,743,494 5.3% FL, Naples 2.5% $11.06 $96 114,485 13,212,970 7.0% FL, Orlando 5.2% $8.23 $68 3,942,793 180,345,413 6.3% GA, Atlanta 5.6% $6.33 $54 19,855,730 749,641,020 6.4% ID, Boise 3.9% $7.14 $63 1,169,650 48,365,178 6.8% IL, Chicago 6.2% $7.84 $62 20,763,594 1,302,586,545 6.6% IN, Indianapolis 6.0% $5.29 $47 9,858,399 346,575,520 7.1% MA, Boston 4.9% $11.84 $105 3,241,841 346,628,953 6.3% MD, Baltimore 7.8% $7.18 $79 3,784,878 254,047,549 6.6% MI, Detroit 4.4% $6.67 $46 7,808,319 595,970,528 8.7% MN, Minneapolis 3.9% $5.73 $68 1,844,356 395,636,007 6.9% MO, Saint Louis 5.5% $7.35 $48 2,534,382 317,107,615 6.8% NC, Durham 5.1% $9.48 $76 1,609,852 43,223,359 6.8% NC, Raleigh 3.3% $9.60 $69 637,739 92,645,476 6.7% NJ, Northern New Jersey 4.4% $8.84 $99 3,250,477 239,391,408 6.3% NV, Reno 7.6% $7.80 $76 3,272,511 103,663,332 5.6% NY, Long Island 5.1% $13.68 $120 557,539 175,845,921 7.6% United States Index 5.6% $6.35 $82 325,887,089 SF 17,117,065,556 SF 6.4% Canada Index 2.8% $11.52 PSF $193.08 PSF 19,409,120 SF 1,714,532,849 SF 5.4% Q4 2020 INDUSTRIAL OVERVIEW VACANCY MARKET MARKET SALE UNDER MARKET CAP MARKET INVENTORY SF RATE RENT / SF PRICE / SF CONSTRUCTION RATE NY, New York 4.7% $15.56 $138 7,841,159 831,726,316 5.5% OH, Cincinnati 5.6% $5.39 $44 7,539,758 336,131,647 7.3% OH, Cleveland 4.9% $4.13 $30 1,025,097 350,950,923 8.1% OH, Columbus 6.1% $5.85 $43 7,098,486 315,942,565 6.8% ON, Toronto 1.7% $11.90 $204 8,371,439 841,702,798 4.8% PA, Harrisburg 7.9% $5.30 $67 2,370,238 104,223,708 5.9% PA, Lehigh Valley 5.9% $6.15 $78 9,590,090 140,486,908 6.2% PA, Philadelphia 5.2% $6.72 $65 9,254,384 559,388,116 6.6% SC, Charleston 7.5% $8.02 $64 4,903,807 89,196,346 6.7% SC, Greenville 5.4% $4.31 $40 1,986,271 132,993,513 7.7% SC, Spartanburg 10.5% $4.07 $41 181,120 101,890,163 7.7% TX, Dallas-Fort Worth 6.9% $8.15 $65 32,789,685 986,545,671 5.8% TX, Houston 8.8% $7.17 $71 8,194,852 687,567,288 5.9% WA, Seattle 5.5% $10.39 $133 7,075,450 332,834,070 4.8% WI, Madison 4.7% $6.50 $48 141,420 67,460,583 7.0% United States Index 5.6% $6.35 $82 325,887,089 SF 17,117,065,556 SF 6.4% Canada Index 2.8% $11.52 PSF $193.08 PSF 19,409,120 SF 1,714,532,849 SF 5.4% Q4 2020 PHOENIX, AZ INDUSTRIAL MARKET OVERVIEW CHRIS MCCHESNEY, Research Director The Greater Phoenix Industrial market surged to an all time high recording over 14M square feet of positive net absorption in 2020.