2Q2016 Northern & Central New Jersey Industrial Report 48-50 Station Road, Cranbury Leased by Wayfair.com 2Q2016 Overview Industrial Report Overview Prologis CEO Hamid Moghadam said in their Q2 earnings call, “the big drivers of [warehouse] demand are consumption fueled by e-commerce and reconfiguration of the supply chain. Those are the real biggies now that global trade has reached the saturation point.” One change in supply chain logistics is the opening of a third set of locks at the Panama Canal. On June 26th, the new locks were opened, which allows ships as large as 13,000 TEU’s (twenty-foot equivalent units) through the canal. The first ship to visit any East Coast port after passing through the new locks was the MOL Benefactor, a 10,100 TEU ship, which docked at GCT USA in Bayonne. The average vessel size calling on Port of New York/New Jersey today is 5,000 TEU’s. Currently, at the Port of New York/ New Jersey, the neo Panamax ships can only call on GCT USA . At the end of 2017, once the Bayonne Bridge is raised, Port Newark and Port Elizabeth will also be able to handle the larger ships. The flow of goods through the port will be a function of the state of the economy. In June, the Federal Reserve kept interest rates steady in a sign that the economy was not ready to absorb a rate hike in part due to Brexit, the United Kingdom referendum on leaving the European Union, which caused some uncertainty in the markets. It appears that although Britain will face short term issues with leaving the EU, it will not greatly affect the industrial real estate market in the United States. There may be additional capital flowing from outside the EU into Class A real estate in select US cities, but it will be short term in nature. The Federal Reserve is more confident of an interest-rate increase before the end of the year, and maybe as soon as September, as financial markets have stabilized after Britain’s vote to leave the European Union and the economy shows signs of strengthening. Trends 2Q2016 ASKING RATE LEASING Scott K. Perkins, SIOR, CCIM Industrial Council Chairman NET ABSORPTION VACANCY Numbers are compared to 1Q2016 Northern & Central 2Q 2016 Submarkets Industrial Report Sussex Hamburg Franklin West Milford Hardwick Mahwah Montvale Wanaque Newton Sparta Ridgewood Kinnelon Norwood Hopatcong Wayne Tenay Montville Totowa Hackettstown Paramus Boonton Clifton Dover Hackensack Budd West Englewood Lake Parsippany Orange Randolph Rutherford Secaucus Long Valley Morristown Newark Jersey City Union Cokesbury Scotch Elizabeth Bayonne Bedminister Plains Linden Lebanon Warren & Sussex Warren Rahway Carteret Route 46/23/3 Corridor Avenel Somerville Edison Northern Bergen County Flemington Central Bergen County East South Brunswick Amboy Meadowlands Suburban Essex Princeton Jamesburg Cranbury Robbinsville Morris Region Hamilton Port Freehold Hunterdon Trenton Somerset Exit 10/12 Brunswick/Exit 9 Exit 8A Exit 7A Northern & Central 2Q 2016 Overview Industrial Report County Overview: Total Vacant Total Vacant Total Net Total SF RBA Under Total Average Total RBA Available SF Available % Absorption Leased Construction Asking Rate NJ Overall 650,291,179 35,347,790 5.40% 1,758,011 7,385,801 4,430,362 $6.16 Middlesex 183,669,315 7,571,141 4.10% 1,361,719 4,029,338 2,203,437 $5.80 Bergen 91,347,397 6,437,075 7.00% (262,821) 682,198 638,438 $7.43 Hudson 82,183,006 4,379,174 5.30% 777,976 643,587 635,821 $7.42 Essex 65,153,825 2,730,115 4.20% 79,028 332,962 0 $6.37 Union 60,262,637 3,066,854 5.10% (134,251) 738,822 869,451 $6.36 Passaic 53,512,932 2,673,124 5.00% 232,503 205,528 0 $6.08 Morris 39,806,980 2,450,644 6.20% (362,809) 296,981 53,215 $6.34 Mercer 31,602,074 3,596,570 11.40% (110,785) 105,490 30,000 $4.04 Somerset 27,383,965 1,033,705 3.80% 356,345 251,470 0 $5.82 Hunterdon 6,436,486 313,141 4.90% (25,810) 65,825 0 $3.81 Warren 6,433,506 741,617 11.50% (162,034) 33,600 0 $4.79 Sussex 2,499,056 354,630 14.20% 8,950 0 0 $4.94 Orange, NY 26,435,613 1,695,026 6.40% (3,912) 128,514 658,000 $5.04 Rockland, NY 14,513,331 765,558 5.30% (66,356) 75,219 0 $8.08 Submarket Overview: Total Vacant Total Vacant Total Net Total SF RBA Under Total Average Total RBA Available SF Available % Absorption Leased Construction Asking Rate Ports 132,999,218 6,798,256 5.10% 714,933 1,056,007 869,451 $6.49 Exit 10/12 104,028,074 4,077,772 3.90% 1,357,888 641,353 1,072,521 $6.24 Meadowlands 92,837,925 5,480,961 5.90% 12,765 903,438 995,959 $7.57 Exit 8A 60,853,898 2,330,700 3.80% 21,568 3,287,043 1,130,916 $5.24 Route 46/23/3 Corridor 53,119,045 2,633,913 5.00% 288,631 209,528 0 $6.10 Exit 7A 41,160,101 3,943,227 9.60% (27,935) 134,944 44,000 $4.66 Morris Region 37,927,984 2,386,506 6.30% (374,337) 102,981 53,215 $6.32 Somerset 27,286,103 1,018,705 3.70% 362,345 251,470 0 $5.65 Central Bergen County 27,182,349 1,897,961 7.00% (223,129) 149,618 278,300 $7.30 Suburban Essex 23,542,386 966,503 4.10% (30,663) 135,997 0 $6.41 Brunswick/Exit 9 21,920,686 1,281,956 5.80% (19,055) 100,942 0 $4.97 Northern Bergen County 21,453,665 1,459,599 6.80% (58,756) 152,509 0 $7.56 Warren & Sussex 8,932,562 1,096,247 12.30% (153,084) 33,600 0 $4.85 Hunterdon 6,360,286 313,141 4.90% (25,810) 65,825 0 $3.81 Source: CoStar 10,000 + sf - All information comes from sources deemed reliable by NAI James E. Hanson. Northern & Central 2Q 2016 Sales Industrial Sales Activity There was over 9,800,000 square feet sold in the second quarter of 2016. The average price per square foot was $63, a decrease of $10 per square foot from the previous quarter. The most activity was seen in the Ports, Morris Region, Northern Bergen County and Route 46/23/3 Corridor. Notable transactions for the quarter included 401 Cabot Drive in Hamilton,1501-1525 W Blancke Street in Linden, 111 Somogyi Court in South Plainfield and 60 Romanelli Avenue in South 401 Cabot Drive, Hamilton Hackensack. 401 Cabot Drive in Hamilton was purchased by Deutsche Asset and Wealth Management from AEW Capital Management. The 600,600 square foot warehouse/distribution property sold for $53,800,000. Colgate-Palmolive is a tenant in the building. 1501-1525 W Blancke Street in Linden sold from Tulfra Realty to Penwood Real Estate Investment Management. The 115,935 square foot industrial warehouse building is 100% occupied. Tenants include Hello Fresh and Vantage Specialty Chemicals. Penwood purchased the property for $11,593,500. 111 Somogyi Court in South Plainfield also sold this quarter. Tyler Wayne LLC purchased the 64,990 square foot building from Vision Industries Group, Inc. for $7,500,000. The property was purchased for occupancy. The company is from Alabama and is in the process 60 Romanelli Avenue, South Hackensack of expanding operations. NAI Hanson facilitated the sale of 60 Romanelli Avenue in South Hackensack. Main Event Caterers purchased the 21,500 square foot property from 60 Romanelli LLC to relocate from their space in Englewood. The property sold for $2,600,000 and will be used as a commercial kitchen. Two notable portfolio sales included a 4 building portfolio sale in Mahwah and a 2 building portfolio sale in Mount Olive. Cabot Properties purchased 100 Corporate Drive (102,269 square feet), 200 Corporate Drive (59,000 square feet), and 750 Corporate Drive (88,617 square feet) as well as 320 Route 17 (110,744 square feet) in Mahwah. The portfolio sold for $53,800,000. The portfolio sale in Mount Olive included 75,000 square feet of office and 364,462 350 Clark Drive, Mount Olive square feet of industrial located at 350 Clark Drive. The portfolio sold from North Jersey Development Group, Inc. to Commercial Realty Group for $27,125,000. Northern & Central 2Q 2016 Leasing Industrial Leasing Activity The Northern and Central New Jersey industrial market saw over 7,300,000 square feet leased in the second quarter of 2016. Vacancy continues to be on the decline while average asking rates keep rising. The vacancy rate decreased from 5.7% in the first quarter to 5.4% in the second quarter and net absorption remained positive with over 1,700,000 square feet absorbed. Average asking rates increased $0.19 per square foot from the first quarter ending the quarter at $6.16 per square foot, making it the first time in a long time that the average asking rate is above $6.00 per square foot. 48-50 Station Road, Cranbury The highest average asking rate, $7.57 per square foot, was seen in the Meadowlands submarket. This was an increase of $0.67 Northern & Central NJ per square foot from the previous quarter, which was the largest Overall Average Asking Rate vs.