KNOWLEDGE REPORTIndustrial Research & Forecast Report Q4 2017Colliers International | Greater Cincinnati

Market IndicatorsRelative to prior period

Q4 2017

Q1 2018*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE**

* Projected, relative to prior period** Warehouse rents

MARKET STATSAT A GLANCE

Demand for Industrial Space Surges

ABSORPTION (SF)

630,941

MARKET ASKING RENT

UNDER CONSTRUCTION (SF)

VACANCY RATE

4.2% $4.19

4.5 M

> ABSORPTION The Cincinnati industrial market recorded positive net absorption of 630,941 square feet during the final quarter of 2017, bringing the year-to-date total to 5.1 million square feet. While not matching the torrid pace of the first half of the year, the momentum continues as evidenced by the growing number of tenant requirements in the market. At the end of 2016, tenant demand totaled over 10 million square feet, leading to the near record occupancy gain early in 2017. Tenant demand has spiked again. As of year-end, tenant requirements totaled 11 million square feet suggesting high levels of net absorption and decreasing vacancy during the first two quarters of 2018.

> VACANCY The overall market vacancy rate has increased slightly each of the past three quarters, but the current reading of 4.2 percent is still 50 basis points below its level at the end of 2016. The bulk warehouse and warehouse/distribution sectors both recorded increases in vacancy to 5.6 percent and 5.2 percent, respectively, due to the addition of new inventory. The supply of available freestanding industrial buildings remains tight, but steady as the vacancy rate for this sector has stabilized at the 4.2 percent level over the past 12 months.

> RENTAL RATES The average overall market weighted asking rental rate is $4.19 per square foot, triple net, slightly down from last quarter, but 5.1 percent higher than 12 months ago. Asking rates for bulk warehouse average $3.88 per square feet, a year-over-year increase of 5.4 percent. Bulk warehouse rates have increased by an average of 8.2 percent annually over the past five years. These rent gains have allowed developers to re-visit sites that were ruled too costly in the past, opening up additional land in a site-constrained market.

Bulk’s smaller sister product, warehouse/distribution, is in high demand as well with average asking rents increasing by 17.1 percent, year-over-year, to $4.25 per square foot. Freestanding, light industrial buildings are in short supply and rents have responded accordingly. Currently averaging $4.60 per square foot, an annual increase of 13.5 percent, rent growth may spur speculative construction activity in this sector in the near future.

> CONSTRUCTION Since the end of the recession, newly completed projects total 16.6 million square feet, while net absorption has equaled roughly 30 million square feet. During this timeframe, vacancy plummeted by over six percentage points. Immediately following the recession, developers took a very cautious approach to speculative construction for a number of years. As demand continued to outpace new supply, construction activity accelerated, reaching a 10 year high of 4.6 million square feet in 2016. An additional 3.6 million square feet was delivered during 2017. Based on the current construction pipeline, it is expected that 4.5 million square feet of new product will be delivered in 2018.

Summary & OutlookE-commerce is by far the number one driver of the Cincinnati industrial market during the current expansion cycle. The market benefits from the advanced manufacturing and automotive sectors as well, but the majority of activity is focused on modern big box logistics space. The $1.5 billion Amazon Prime Air hub, which was announced early in 2017, is not yet under construction, but Amazon has initiated operations in a partnership with DHL sharing their facilities at the Greater Cincinnati/Northern Kentucky International Airport (CVG).

This has led to CVG being named the fastest-growing cargo airport in the United States and ranked sixth in North America for cargo operations. When completed in 2020, the Amazon Prime Air project will total 3.3 million square feet on 900 acres leased from CVG, support more than 100 Amazon Prime Air Cargo planes and employee 2,700 people. To date, one Amazon retailer has committed to space in the Northern Kentucky market, but it is likely more will follow as Amazon’s operations accelerate. Increased activity will benefit both the industrial and office markets as partners, e-retailers, vendors and suppliers choose to locate in close proximity to the e-commerce giant.

Another area of interest for industrial development is the I-75 corridor between the northern Cincinnati suburbs and Dayton. Access to both markets’ labor supply, easy access to numerous interstate highways and located halfway between two international airports make this area an attractive option for logistics and e-commerce occupiers.

The Cincinnati region will remain a top market for logistics operations due to its transportation networks, including ground, air and water, low cost of doing business and skilled labor force. These factors will keep occupancy levels high, generate additional demand for space, provide opportunities for new construction and produce rent growth in all industrial property types.

2 Cincinnati Research & Forecast Report | Q4 2017 | Industrial Market Outlook | Colliers International

Summary Statistics Q4 2017 Cincinnati Industrial Market Cincinnati

Vacancy Rate 4.2%

Change From Q3 2017 (basis points) +10

Net Absorption (Square Feet) +630,941

Completions (Square Feet) 3,587,518

Under Construction (Square Feet) 4,473,628

Asking Rents Per Square Foot Per Year (NNN)

Overall Market $4.19

Bulk Warehouse $3.88

Warehouse/Distribution $4.25

Flex/R&D $6.17

An occupancy gain of 5.1 million square feet was recorded during 2017, driving vacancy down by 50 bps to 4.2% at year-end.

0.0%

2.0%

4.0%

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12.0%

(3,000,000)

(2,000,000)

(1,000,000)

-

1,000,000

2,000,000

3,000,000

4,000,000

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7,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Absorption Vacancy Rate

$2.00

$2.20

$2.40

$2.60

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Completions Projected

Industrial Vacancy/Absorption

The average weighted asking rental rate for bulk warehouse space has increased on average by 8.2 percent annually over the past five years and currently equals $3.88 per square foot (NNN).

0.0%

2.0%

4.0%

6.0%

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12.0%

(3,000,000)

(2,000,000)

(1,000,000)

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1,000,000

2,000,000

3,000,000

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5,000,000

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7,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Absorption Vacancy Rate

$2.00

$2.20

$2.40

$2.60

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-

500,000

1,000,000

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Completions Projected

Bulk Warehouse Rental Rates (NNN)

Sources: Colliers Research, Xceligent, CoStar, Bureau of Labor Statistics

Industrial projects totaling 3.6 million square feet were completed during 2017 and forecasts call for an additional 4.5 million square feet of new supply in 2018.

0.0%

2.0%

4.0%

6.0%

8.0%

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12.0%

(3,000,000)

(2,000,000)

(1,000,000)

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Net Absorption Vacancy Rate

$2.00

$2.20

$2.40

$2.60

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Completions Projected

Construction History

$ PS

F (F

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ross

)Sq

uare

Fee

tNe

t Abs

orpt

ion

(SF)

Vaca

ncy

Rate

(%)

3 Cincinnati Research & Forecast Report | Q4 2017 | Industrial Market Outlook | Colliers International

Construction PROPERTY NAME PROJECT SIZE SUBMARKET OWNER CLEAR HT SPEC OR BTS TARGETED COMPLETION DATE

Park North at Monroe Bldg 6 & 7 - Amazon 1,300,000 Monroe IDI Gazeley 36' BTS Q2 2018Park North at Monroe Bldg 10 755,911 Monroe IDI Gazeley 36' Spec Q1 2018Logistics One 541,250 Airport Van Trust 36' Spec Q1 2018Logistics Two 259,350 Airport Van Trust 36' Spec Q2 2018Springdale Logistics Center 230,160 Tri County Exeter 32' Spec Q2 2018Florence Logistics Center 218,400 Florence/Richwood Ridgeline Property Group 32' Spec Q2 2018Jacquemin Logistics Center II 182,257 Tri County Pizzuti 32' Spec Q1 2018Commerce Center Dr 176,000 Tri County Becknell 32' Spec Q1 2018Amazon Prime Air Hub 3,330,000 Airport TBD TBD BTS ProposedGE Park Development - 4 Bldgs 1,130,000 Tri County Strategic Capital 32'-36' TBD ProposedPark South at Richwood Bldg B 1,064,765 Florence/Richwood IDI Gazeley 36' TBD ProposedErlanger Commerce Center II 920,000 Florence/Richwood Al Neyer/Hillwood 36' TBD ProposedErlanger Commerce Center I 780,000 Florence/Richwood Al Neyer/Hillwood 36' TBD ProposedWalton Industrial Park 700,000 Florence/Richwood Pure Development 36' TBD ProposedPark South at Richwood Sites K & L 170,000 Florence/Richwood IDI Gazeley 32' TBD ProposedAviation Blvd extension Bldg 1 150,000 Airport Molto 32' TBD ProposedAviation Blvd extension Bldg 2 150,000 Airport Molto 32' TBD ProposedPark North at Monroe Bldg 3 185,775 Monroe IDI Gazeley 32' TBD Proposed

Notable Industrial Sales | 2017PROPERTY NAME/ADDRESS SALE

DATE SALE PRICE BLDG SF BUYER SELLER BUILDING TYPE SUBMARKET

Port Union Commerce Park Bldgs 1-4 Jul-17 $102,100,000 1,646,914 Clarion Partners Founders Properties Bulk Warehouse Tri County

Park North Portfolio Dec-17 $80,000,000 1,300,827 Granite REIT IDI Bulk Warehouse Monroe/Middletown

2101-2301 E Kemper Rd Jul-17 $47,500,000 1,096,612 VEREIT Inc Gorilla Glue Inc Bulk Warehouse Tri County

251 Mount Zion Rd Feb-17 $33,812,000 674,500 The Kroger Co. VanTrust Real Estate Bulk Warehouse Florence/Richwood

Evergreen Industrial Properties Portfolio Jul-17 $31,368,833 845,061 Ivanhoe Cambridge Inc TPG Real Estate Whse/

Distribution Multiple Submarkets

8029 Dixie Hwy Jun-17 $25,869,000 191,215 IRA Capital ElmTree Funds Manufacturing Florence/Richwood

2000 & 2001 Conner Rd Jan-17 $7,700,000 140,140 Transwestern Paul Hemmer Companies Whse/Dist Airport

100 Corridor Park Dr Apr-17 $7,600,000 184,420 Gateway Tire & Service Citimark Management Co. Inc Whse/Dist Tri-County

10100 Progress Way Jan-17 $6,800,000 72,000 J.J.&W V Ltd I-74 Business Group LLC Light Industrial West

360 Gest St Mar-17 $6,600,000 79,825 H5 Data Centers WM Capital Partners Flex Central/Midtown

Notable Industrial Leases | 2017PROPERTY NAME/ADDRESS LEASE DATE LEASE SF ASKING RATE LEASE TYPE TENANT NAME BUILDING TYPE SUBMARKET

Park North at Monroe Lot 6 & 7 Aug-17 1,300,000 NNN Amazon Bulk Warehouse Monroe/Middletown

Park North at Monroe Bldg 8 Feb-17 994,013 NNN Hayneedle Bulk Warehouse Monroe/Middletown

Hebron 1 Mar-17 646,468 $3.75 NNN Amazon Bulk Warehouse Airport

Park South at Richwood Bldg I Mar-17 442,304 $3.95 NNN UPS Bulk Warehouse Florence/Richwood

3680 Langley Dr Oct-17 423,608 NNN Verst Group Logistics Bulk Warehouse Airport

8779 LeSaint Dr Jul-17 345,600 NNN UPS Bulk Warehouse Tri County

4350 Port Union Rd Mar-17 312,420 $3.50 NNN Dawson Logistics Bulk Warehouse Tri County

LogistiCenter at 275 Bldg 2 Sep-17 264,000 $4.10 NNN Amazon Bulk Warehouse Airport

Park North at Monroe Bldg 4 Jul-17 218,448 $3.55 NNN IDG Hagemeyer Bulk Warehouse Monroe/Middletown

Earhart Distribution Center I Jun-17 218,014 $3.95 NNN CEVA Logistics Bulk Warehouse Airport

*Renewal or Expansion

4 Cincinnati Research & Forecast Report | Q4 2017 | Industrial Market Outlook | Colliers International

Cincinnati | Q4 2017 Industrial Submarket Data MARKET # OF

BLDGSINVENTORY

(SF)TOTAL

AVAILABLE (SF)TOTAL

VACANT (SF)TOTAL VACANCY

RATE (%)SUBLEASE

AVAILABLE (SF)QTRLY NET

ABSORPTION (SF) YTD NET

ABSORPTION (SF)AVG WTD ASKING

RATES (NNN)AIRPORT 223 30,611,594 3,352,878 2,219,106 7.2% 403,664 288,727 307,623 $4.33Bulk Warehouse 42 18,371,338 2,340,332 1,572,332 8.6% 403,664 264,000 285,248 $4.01Warehouse - Distribution 40 4,868,035 224,999 110,840 2.3% 0 5,000 191,485 $4.59Flex/R&D 21 992,611 184,403 122,190 12.3% 0 -30,273 -81,649 $6.32Light Industrial 105 4,232,078 547,144 357,744 8.5% 0 50,000 -31,461 $4.72Manufacturing 15 2,147,532 56,000 56,000 2.6% 0 0 -56,000 $5.25BLUE ASH 234 12,836,392 1,000,720 626,520 4.9% 0 -37,087 145,147 $4.08Bulk Warehouse 5 1,487,208 422,100 422,100 28.4% 0 0 112,460 $3.75Warehouse - Distribution 8 1,061,046 0 0 0.0% 0 0 0 ---Flex/R&D 38 1,552,054 113,474 97,069 6.3% 0 4,873 7,501 $8.95Light Industrial 163 6,141,146 113,351 107,351 1.7% 0 -41,960 25,186 $4.97Manufacturing 20 2,594,938 351,795 0 0.0% 0 0 0 $3.50CAMPBELL COUNTY 79 3,291,315 61,540 61,540 1.9% 0 0 2,000 ---Warehouse - Distribution 1 173,940 0 0 0.0% 0 0 0 ---Light Industrial 73 2,071,973 61,540 61,540 3.0% 0 0 2,000 ---Manufacturing 5 1,045,402 0 0 0.0% 0 0 0 ---CENTRAL/MIDTOWN 787 45,976,256 2,271,677 1,785,515 3.9% 29,446 -25,466 186,392 $4.15Bulk Warehouse 3 1,017,840 98,492 98,492 9.7% 0 0 -98,492Warehouse - Distribution 5 621,660 106,800 0 0.0% 0 0 45,000 $2.90Flex/R&D 16 877,792 223,488 197,812 22.5% 29,446 0 65,801 $5.32Light Industrial 679 28,768,480 1,507,115 1,153,429 4.0% 0 65,900 203,310 $4.24Manufacturing 84 14,690,484 335,782 335,782 2.3% 0 -91,366 -29,227 $2.25COVINGTON 73 3,892,139 98,122 98,122 2.5% 0 -28,122 -14,522 $7.07Bulk Warehouse 2 379,600 0 0 0.0% 0 0 0 ---Warehouse - Distribution 1 112,000 0 0 0.0% 0 0 0 ---Flex/R&D 1 20,000 0 0 0.0% 0 0 0 ---Light Industrial 64 2,497,477 98,122 98,122 3.9% 0 -28,122 -37,522 $7.07Manufacturing 5 883,062 0 0 0.0% 0 0 23,000 ---EAST 242 12,459,116 1,426,700 928,310 7.5% 958 108,645 64,007 $3.54Bulk Warehouse 3 952,500 239,062 0 0.0% 0 0 0 $3.50Flex/R&D 29 1,182,181 158,108 135,924 11.5% 0 16,305 6,308 $7.02Light Industrial 184 4,765,988 133,687 111,543 2.3% 958 10,340 64,006 $3.92Manufacturing 26 5,558,447 895,843 680,843 12.2% 0 82,000 -6,307 $3.07FLORENCE/RICHWOOD 177 22,751,575 772,635 505,400 2.2% 58,050 9,440 1,552,793 $4.11Bulk Warehouse 20 8,325,382 240,130 240,130 2.9% 0 0 1,254,304 $3.88Warehouse - Distribution 9 1,049,319 58,050 58,050 5.5% 58,050 0 -58,050 ---Flex/R&D 17 795,699 53,980 53,980 6.8% 0 9,440 -7,485 $5.27Light Industrial 87 4,810,745 268,735 1,500 0.0% 0 0 403,944 $5.36Manufacturing 44 7,770,430 151,740 151,740 2.0% 0 0 -39,920 $3.50HAMILTON 118 8,057,088 888,182 999,085 12.4% 0 115,000 396,746 $4.60Flex/R&D 11 249,734 28,422 28,422 11.4% 0 0 0 $6.60Light Industrial 91 3,998,443 730,200 841,103 21.0% 0 115,000 396,746 $3.60Manufacturing 16 3,808,911 129,560 129,560 3.4% 0 0 0 ---I-71 CORRIDOR 186 12,443,028 231,616 156,616 1.3% 2,818 -9,735 288,582 $6.35Bulk Warehouse 2 622,000 0 0 0.0% 0 0 0 ---Warehouse - Distribution 6 772,738 0 0 0.0% 0 0 0 ---Flex/R&D 14 601,251 145,016 92,516 15.4% 2,818 765 -1,315 $6.21Light Industrial 128 4,377,337 56,600 34,100 0.8% 0 19,500 39,125 $8.50Manufacturing 36 6,069,702 30,000 30,000 0.5% 0 -30,000 250,772 ---MONROE/MIDDLETOWN 221 19,324,228 607,329 586,845 3.0% 0 -8,725 1,108,197 $4.08Bulk Warehouse 10 6,005,274 204,600 204,600 3.4% 0 0 879,413 $3.85Warehouse - Distribution 11 1,324,135 143,664 143,664 10.8% 0 36,000 212,420 $4.95Flex/R&D 3 46,900 0 0 0.0% 0 0 0 ---Light Industrial 164 4,736,810 259,065 238,581 5.0% 0 -44,725 -64,725 $6.87Manufacturing 33 7,211,109 0 0 0.0% 0 0 81,089 ---TRI-COUNTY 796 61,668,635 3,455,328 2,621,453 4.3% 479,793 191,977 778,172 $4.36Bulk Warehouse 56 20,345,353 1,334,791 797,857 3.9% 252,565 169,379 477,568 $3.80Warehouse - Distribution 53 6,594,030 612,076 559,051 8.5% 0 -31,175 106,024 $4.19Flex/R&D 90 4,254,854 485,615 395,947 9.3% 26,087 50,110 32,843 $5.76Light Industrial 529 20,873,063 976,608 822,360 3.9% 201,141 3,663 135,975 $5.11Manufacturing 68 9,601,335 46,238 46,238 0.5% 0 0 25,762 $4.50WEST 158 5,410,371 100,965 78,365 1.4% 0 80,268 229,228 $8.67Bulk Warehouse 3 1,140,289 0 0 0.0% 0 0 0 ---Warehouse - Distribution 1 149,760 0 0 0.0% 0 0 149,760 ---Flex/R&D 10 313,780 44,193 44,193 14.1% 0 1,600 800 $9.50Light Industrial 135 3,098,300 56,772 34,172 1.1% 0 78,668 78,668 $4.00Manufacturing 9 708,242 0 0 0.0% 0 0 0 ---WOODLAWN/EVENDALE 254 19,003,905 491,562 249,251 1.3% 20,900 -53,981 50,335 $3.30Bulk Warehouse 2 716,400 0 0 0.0% 0 0 0 ---Warehouse - Distribution 1 109,751 0 0 0.0% 0 0 0 ---Flex/R&D 15 563,868 71,000 48,138 8.5% 0 4,474 2,009 $5.00Light Industrial 208 6,947,613 418,062 201,113 2.9% 18,400 -58,455 48,326 $2.93Manufacturing 28 10,666,273 2,500 0 0.0% 2,500 0 0 ---Grand Total 3,548 257,725,642 14,759,254 10,916,128 4.2% 995,629 630,941 5,094,700 $4.19

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