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302 COMMERCE SQUARE BOULEVARD302 Commerce Square Blvd • Burlington, NJ 08016

Offering Memorandum

1

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

Confidentiality and DisclaimerThe information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap andshould not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverifiedinformation to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough duediligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, thefuture projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's orasbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or anytenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable;however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these mattersand makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all ofthe information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.

Non-Endorsement NoticeMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or nameis not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, orcommercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

302 COMMERCE SQUARE BOULEVARDBurlington, NJACT ID Z0300645

2

P R E S E N T E D B Y

Brian HoseyBrokerNew Jersey OfficeTel: (201) 742-6150Fax: (201) [email protected]: NJ 1434917

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TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01Offering Summary

Regional Map

Local Map

Aerial Photo

Site Plan

FINANCIAL ANALYSIS 02Tenant Summary

Lease Expiration Summary

Operating Statement

Notes

Pricing Detail

Acquisition Financing

MARKET COMPARABLES 03Sales Comparables

Lease Comparables

MARKET OVERVIEW 04Market Analysis

Demographic Analysis

302 COMMERCE SQUARE BOULEVARD

4


5

INVESTMENT

OVERVIEW


#

OFFERING SUMMARY

6

EXECUTIVE SUMMARY

EXPENSES

PRO FORMA $/SF

Real Estate Taxes $108,099 $1.30

Total Expenses $108,099 $1.30

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2018 Estimate Pop 7,351 76,439 179,664

2010 Census Pop 7,160 75,823 178,417

2018 Estimate HH 2,726 28,326 66,402

2010 Census HH 2,662 28,139 66,009

Median HH Income $49,712 $57,842 $62,771

Per Capita Income $26,642 $28,833 $30,173

Average HH Income $71,502 $77,272 $81,358

VITAL DATA

PRO FORMA

Price $3,100,000 CAP Rate 6.66%

Down Payment 30% / $930,000 Net Operating Income $206,397

Loan Amount $2,170,000 Net Cash Flow After Debt Service 22.19% / $206,397

Loan Type Proposed New Total Return 22.19% / $206,397

Interest Rate / Amortization 0% / 0 Years

Rentable SF 83,000

Price/SF $37.35

Current Occupancy 100%

Year Built 1969

Lot Size 8.19 acre(s)


OFFERING SUMMARY

Approximately 83,000 SF Industrial/Flex Property in Burlington County

Municipally Owned and Managed Property

969 Office/Industrial/Recreation Center Construction with 1999 Renovation

Easy Access to I-95, I-295, Route 130 and the Delaware River

INVESTMENT HIGHLIGHTS

Marcus & Millichap is pleased to present 302 Commerce Square Boulevard in Burlington New Jersey. The approximately 83,000 SF vacant,Class B, Industrial/Flex building was built in 1969 and renovated in 1999. Located in the Delaware Valley with easy access to Philadelphia,the Delaware River, and more than 10% of the national population within a 90-minute drive along I-95 and other regional corridors, this 8.19-acre property presents compelling upside with historically low 5.5% market vacancy. Located approximately a half mile away from the NJentrance of the Burlington-Bristol Bridge. 1-minute walk to the Burlington South Light Rail Station. Median Household Income $63,450 in 1-mile Radius.

INVESTMENT OVERVIEW

7


#

PROPERTY SUMMARY

OFFERING SUMMARY

THE OFFERING

Property 302 Commerce Square Boulevard

Price $3,100,000

Property Address 302 Commerce Square Blvd, Burlington, NJ

Assessors Parcel Number 05-00001-0000-00003

Zoning I-1 Industrial Districts

SITE DESCRIPTION

Number of Floors 1

Year Built/Renovated 1969

Rentable Square Feet 83,000

Ownership Fee Simple

Parcel Size 8.19 acre(s)

Parking 100+ Parking Spaces

Intersection/Cross Street Burlington Bristol Bridge

UTILITIES

Gas Natural Gas

Electric City

Water City

Sewer City

CONSTRUCTION

Foundation Concrete

Framing Metal

Exterior Metal

Parking Surface Paved

Ceiling Height 30'

Roll-Up Doors 4 - 8x10

Floor to Floor Height 28'

Sprinkler System Wet

8

MECHANICAL

Fire Protection Sprinkler System

Power 480V

REGIONAL MAP


9

LOCAL MAP


10

AERIAL PHOTO


11


12


13


14


15


16


17


18


19


20


21


22


23


24

SITE PLAN


25


26

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


27

TENANT SUMMARY

OPERATING STATEMENT

FINANCIAL ANALYSIS


PRICING DETAIL

28

MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIES

MMCC—our fully integrated, dedicated financing arm—is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms.

We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of financing options.

Our dedicated, knowledgeable experts understand the challenges of financingand work tirelessly to resolve all potential issues to the benefit of our clients.

National platform operating

within the firm’s brokerage offices

$6.24 billion total national

volume in 2018

Access to more capital sources than any other

firm in the industry

Optimum financing solutions to enhance value

Our ability to enhance buyer pool by expanding finance options

Our ability to enhance seller control

• Through buyer qualification support

• Our ability to manage buyers finance expectations

• Ability to monitor and manage buyer/lender progress, insuring timely, predictable closings

• By relying on a world class set of debt/equity sources and presenting a tightly underwritten credit file

WHY MMCC?

Closed 1,678 debt and equity

financings in 2018

ACQUISITION FINANCING


29


30

MARKET

COMPARABLES


SALES COMPARABLES MAP

31

302 COMMERCE SQUARE BOULEVARD(SUBJECT)

1750 Woodhaven Dr

220 Rittenhouse Cir

1211 Ford Rd

Keystone Industrial Park

East Gate Center

Budge Bldg

SALES COMPARABLES

1

2

3

4

5

6

32

PROPERTY NAME302 COMMERCE SQUARE BOULEVARD

SALES COMPARABLES

Avg. $47.13

$0.00

$5.80

$11.60

$17.40

$23.20

$29.00

$34.80

$40.60

$46.40

$52.20

$58.00

CommerceSquare -City of

Burlington

1750Woodhaven

Dr

220Rittenhouse

Cir

1211Ford Rd

KeystoneIndustrial

Park

East GateCenter

Budge Bldg

Average Price Per Square Foot

SALES COMPARABLES SALES COMPS AVG

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1

rentpropertyaddress1

rentpropertyname1


rentpropertyname1


33

SALES COMPARABLES

Asking Price $3,100,000

Price/SF $37.35

Year Built 1969

Occupancy 100%

Divisible True

Rentable SF 83,000

Occupancy 0%

Parking Ratio 1.62

Divisible Multi-Tenant

Power 480V

Clear Height 28

Percentage of Office 15-20%

COMMERCE SQUARE - CITY OF BURLINGTON

302 Commerce Square Blvd, Burlington, NJ, 080161

Close of Escrow 10/1/2017

Days On Market 1042

Sales Price $3,800,000

Rentable SF 80,918

Price/SF $46.96

Year Built 1975

Occupancy 50%

Parking Ratio 1.62

Divisible Multi-Tenant

Power 400a/120-240v 3p

Clear Height 16

Percentage of Office 5.00%

NOTESThe property was around 50% leased at the time but other than vacancy had no other conditions that impacted price (deferred maintenance or debt assumption). The seller is getting out of owning industrial product.

1750 WOODHAVEN DR1750 Woodhaven Dr, Bensalem, PA, 19020

2



Rentable SF 100,800

Price/SF $49.11

Year Built 1975

Occupancy 52%

Parking Ratio 1.02/1,000 SF

Divisible Mulit-Tenant

Power 3,000a/480v Heavy

Clear Height 21-23


NOTESOn March 21, 2017 the 100,800-sf industrial property at 220 Rittenhouse Circle was sold in an owner/user transaction for $4,950,000 or $49.11/sf. At the time of sale, it was a vacant, class-B warehouse that first delivered in 1975. Currently listed for Sale.

220 RITTENHOUSE CIR220 Rittenhouse Cir, Bristol, PA, 19007

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


34

SALES COMPARABLES

NOTESA.T. Chadwick Company, Inc sold the 103,421 square foot industrial building to Northeast Building Products Corp for $5,300,000, or about $51 per square foot.

0.0% Leased at Sale. The new owner plans to occupy the entire facility.

3



Rentable SF 103,421

Price/SF $51.25

Year Built 1970

Occupancy 1%

Parking Ratio 1.22

Power 500-2,000a/240-480v Heavy Utilit

Clear Height 18


1211 FORD RD1211 Ford Rd, Bensalem, PA, 19020

4



Rentable SF 53,696

Price/SF $37.25

Year Built 1981

Occupancy 1%


Divisible Yes

Power 2,000a/480v 3p Heavy

Clear Height 25


NOTESOn 7/1/19, the 48,745 SF industrial building located at 180 Rittenhouse Circle sold for $2,000,000. The property is part of the Keystone Industrial Park in Bristol, PA. According to the buyers, they purchased it as a redevelopment project. 0.0% Leased at Sale

KEYSTONE INDUSTRIAL PARK180 Rittenhouse Cir, Bristol, PA, 19007

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Rentable SF 129,175

Price/SF $56.90

Year Built 1974

Occupancy 1%

Divisible Yes

Power 1,600a/480v 3p Heavy

Clear Height 21'6" - 22'6"

NOTESFanda Corporation sold the 129,175-SF industrial building in Mount Laurel, MJ to Bluewater Spe Llc for $7,350,000, or approximately $56.90 price per square foot.

EAST GATE CENTER901 Pleasant Valley Ave, Mount Laurel, NJ, 08054

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


35

SALES COMPARABLES

NOTESLKQ Corporation sold the 65,744 square foot warehouse to Vesey Capital LLC for $2,715,000, or about $41 per square foot.The building was purchased as an investment. The building was vacant when it traded.

6



Rentable SF 65,744

Price/SF $41.30

Year Built 1973


Divisible Yes

Power 2,000a/480v Heavy

Clear Height 17


BUDGE BLDG1005 Sherman Ave, Pennsauken, NJ, 08110

8


LEASE COMPARABLES MAP

302 COMMERCE SQUARE BOULEVARD(SUBJECT)

Commerce Dr

Haines Industrial Center

Georges Rd - SB-138

Bristol Commerce Center

Stults Rd

Station Rd - Building 1

Bucks County Business Pk

Bunzl Distribution Inc.

East Gate Center

2001 Gehman Rd

4

7

8

9

11

20

12

14

15

16

17

13

18

10

4

7

8

9

10

1

2

3

5

6

36


LEASE COMPARABLES

37

AVERAGE OCCUPANCY

Avg. 98.60%

0

10

20

30

40

50

60

70

80

90

100


Burlington

Commerce Dr HainesIndustrialCenter

Georges Rd- SB-138

BristolCommerce

Center

Stults Rd StationRd -

Building 1

BucksCounty

Business Pk

BunzlDistribution

Inc.

East GateCenter

2001Gehman Rd


LEASE COMPARABLES

38

AVERAGE RENT PER SQUARE FOOT

Avg. $6

$0

$1

$1

$2

$3

$4

$4

$5

$6

$6

$7


Burlington

Commerce Dr HainesIndustrialCenter

Georges Rd- SB-138

BristolCommerce

Center

Stults Rd StationRd -

Building 1

BucksCounty

Business Pk

BunzlDistribution

Inc.

East GateCenter

2001Gehman Rd

PROPERTY NAME

MARKETING TEAM


LEASE COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


39

Asking Rent/SF $6.50

Year Built 1969

Occupancy 100%

Lease Type NNN

Lot Size 8.19 acre(s)

COMMERCE SQUARE - CITY OF BURLINGTON

302 Commerce Square Blvd, Burlington, NJ, 08016

1

Rentable SF 100,920


Year Built 1985

Occupancy 100%

Lease Type NNN

Lot Size 9.8


NOTES2/00: Schenkman & Kushner purchased this building along with 40 Commerce Dr and 1 S Middlesex Ave from South Middlesex Industrial Park Association for $14 million.

* 5" thick floors* Within 1 mile of Exit 8A

COMMERCE DR21 Commerce Dr, South Brunswick,, NJ, 08512

2

Rentable SF 163,588


Year Built 1978

Occupancy 100%

Lease Type NNN

Lot Size 9.35

Parking Ratio 0.38

NOTESThe Haines Center is located in Florence and Burlington Townships on over 800 acres of land and is situated at the NJ Turnpike Exit 6A. This industrial corporate park is unparalleled for its proximity and centrality to all major interstate routes such as I-95, I-295, NJ & PA Turnpikes, its solid planning, and public transportation infrastructure. These factors along with economic benefit/job creation, architectural merit and community involvement earned The Haines Center a New Good Neighbors Award from the New Jersey Business and Industry Association.

HAINES INDUSTRIAL CENTER1817 Route 130, Burlington, NJ, 8016

PROPERTY NAME

MARKETING TEAM


LEASE COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


40

Rentable SF 102,108


Year Built 1972

Occupancy 100%

Lease Type NNN

Lot Size 15


NOTEShe property is located on 15 acres with room for expansion.

December 2002: Lion Industrial Fund, a shell company of Clarion Partners, purchased this building when Clarion acquired Crow Holdings LLC.Ample parking.

3

GEORGES RD - SB-138138 Georges Rd, South Brunswick, NJ, 08810

4

Rentable SF 309,000


Year Built 2019

Occupancy 100%

Lease Type NNN

Lot Size 19.978


NOTESNewly Designated KOEZ through 2022

BRISTOL COMMERCE CENTER2401 Green Ln, Levittown, PA, 19057

5

Rentable SF 369,000


Year Built 1974

Occupancy 100%

Lease Type NNN

Lot Size 45.035


NOTESFenced Lot, Property Manager on Site Amenities: Fenced Lot, Property Manager on Site

STULTS RD83 Stults Rd, South Brunswick, NJ, 08810

PROPERTY NAME

MARKETING TEAM


LEASE COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


41

Rentable SF 812,739


Year Built 1975

Occupancy 100%

Lease Type NNN

Lot Size 60

Parking Ratio 1.00

NOTES* Parking for 375 cars and 150 trailers* 117 docks (107 with automatic levelers)* 2 rail spurs serviced by Conrail* Energy saving fluorescent lighting with reflectors* Roof: 4 ply, built-up system and a Polycan Polyester membrane* Combination masonry block and metal panels over a steel frame* High-density sprinkler rated with in-rack wet system, serviced by 1.4 million gallons of on-site water in semi-submerged tanks* Power: 1500 & 2100 KVA Substations* Expansion capability of 105,812 square feet

6

STATION RD - BUILDING 166 Station Rd, Cranbury, NJ, 08512

7

Rentable SF 102,000


Year Built 1981

Occupancy 100%

Lease Type NNN

Lot Size 7.36


NOTESFenced Lot

BUCKS COUNTY BUSINESS PK2201 Cabot Blvd W, Langhorne, NJ, 19047

8

Rentable SF 223,977


Year Built 1978

Occupancy 100%

Lease Type NNN

Lot Size 16.43


NOTESStrategic location between Exits 9 and 8A of the New Jersey Turnpike.

* Rail possible* 30 car + trailer parking

BUNZL DISTRIBUTION INC.27 Distribution Way, Monmouth Junction, NJ, 08852

PROPERTY NAME

MARKETING TEAM


LEASE COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


42

Rentable SF 105,450

Available SF 26,000


Year Built 1984

Occupancy 86%

Lease Type NNN

Lot Size 7.3


9

EAST GATE CENTER820 East Gate Dr, Mount Laurel, NJ, 08054

10

Rentable SF 97,200


Year Built 1989

Occupancy 100%

Lease Type NNN

Lot Size 8.32


2001 GEHMAN RD2001 Gehman Rd, Harleysville, PA, 19438


43

MARKET

OVERVIEW

MARKET OVERVIEW

OVERVIEWSOUTHERN NEW JERSEY

Southern New Jersey is home to 1.9 million residents encompassing the

counties of Burlington, Camden, Gloucester, Atlantic, Salem, Cumberland

and Cape May. Camden County is also part of the Philadelphia metro

and accounts for largest portion of the market’s population. The eastern

part of the market is largely a coastal resort area, while the western

portion has the highest population density and contains a well-developed

transportation infrastructure.

Once reliant on the agricultural industry, Southern New Jersey now has an expanding number of businesses in the professional and business services sector, consisting largely of small businesses with less than 15 workers.

The services sector employs a large portion of the labor force, forming the backbone of the local economy through hospitals, schools, hotels, business and social services, and entertainment facilities.

The region boasts a large tourism and recreation industry, especially in Atlantic City, where gaming generates billions of dollars of revenue each year.

Fortune 500 company Campbell’s Soup is headquartered in the region.

DEMOGRAPHICS

1

ECONOMY

METRO HIGHLIGHTS

* Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s Analytics; U.S. Census Bureau


DIVERSIFIED EMPLOYMENT BASEThe region’s economy is moving away from agriculture to a more diversified employment base that includes business services, hospitality and tourism.

FAA’S WILLIAM J. HUGHES TECHNICAL CENTERThe center is one of the nation’s premier aviation research, development, test and evaluation facilities. It employs engineers and technicians.

THREE DISTINCT AREAS IN ONE REGIONAtlantic and Cape May counties are tourism-based. Greater Philadelphia is the main business center in the metro, while Cumberland and Salem counties are primarily agricultural.

1.9M2018

POPULATION:

687K2018

HOUSEHOLDS:

40.42018

MEDIAN AGE:

$68,0002018 MEDIAN

HOUSEHOLD INCOME:

U.S. Median:

38.0U.S. Median:

$58,8003.3%

Growth2018-2023*:

2.5%

Growth2018-2023*:


45

PHILADELPHIA METRO AREA

Span of Robust Absorption Extends; Investors TargetWarehouses Along Major Transportation Routes

Stout market demand for strategically located space exists throughout the metro. Philadelphia’s

extensive transportation network and proximity to other major East Coast markets makes it a prime locale for

retailers and logistics firms focused on optimizing supply chains in order to provide same- or next-day

deliveries. Recent expansions by these industrial users supported the absorption of 34 million square feet

over the past four years, negating the delivery of 20 million square feet of space and reducing metro vacancy

to the low-5 percent band. Facilities along the New Jersey Turnpike have been coveted of late, with more

than 5 million square feet absorbed last year in Southern New Jersey counties. Declining availability within

these markets during 2019 will force more industrial users to look across the Delaware River to Philadelphia

and Montgomery counties, where vacancy rates rest just above the metro’s average. A boost in leasing

velocity in these areas allows metro vacancy to reach a cyclically low level, prompting additional speculative

construction proposals.

Areas of below-average pricing steer deal flow. Tight vacancy, a central location and the lowest price

points among major Mid-Atlantic markets have buyers competing for sub-$5 million Class B and C

warehouses. These assets, which will have notable NOI growth potential moving forward, are obtainable at 7

to mid-8 percent first-year returns. Various-sized warehouses near Roosevelt Boulevard and Interstate 95 in

North Philadelphia and Bucks County are in high demand while lower price points persist in these locales.

Low availability and strong asking rent growth along the New Jersey Turnpike has heightened competition for

larger properties in Burlington and Camden counties, with below-average pricing prevalent in the latter locale.

* Forecast;Sources: CoStar Group, Inc.; Real Capital Analytics


46

PHILADELPHIA METRO AREA

2019 Market Forecast

Metro employers create 35,000 positions in 2019 after bolstering staffs by

54,400 workers last year.

Delivery volume mirrors 2018. Bucks County represents a top spot for

completions this year.

Metro vacancy compresses for a seventh straight year, falling to 5.0 percent.

Last year, a decline of 10 basis points was recorded.

Positive asking rent growth persists in 2019 albeit at a more subdued pace

than las year, when an uptick of 7.6 percent was noted. At $5.59 per square

foot, the metro’s year-end rent sits 5 percent above the previous cycle’s

peak.

The recent wealth of sub-$5 million transactions in core Philadelphia and

Southern New Jersey forces some buyers to outlying Lehigh and Lancaster

counties when looking to deploy more than $10 million for larger properties.

* Forecast;Sources: CoStar Group, Inc.; Real Capital Analytics

Employment

up 1.2%

Construction

2.6 million sq. ft.

Vacancy

down 10 bps

Rent

up 2.4%

Investment


47

2019 PRICING AND VALUATION TRENDS

Yield Range Offers Compelling Options For Investors;

Most Metros Demonstrate Strong Elevated Yields

* 2008-2018 Average annualized appreciation in prices per square foot** Price per square foot for industrial properties $1 million and greaterSources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics


48

2019 PRICING AND VALUATION TRENDS

Pricing and Valuation Trends Summary

Ten-year appreciation favors high-growth markets. Benchmarked from the end of

2008 as the U.S. economy began its rapid tumble into recession, many markets’

industrial prices declined several years more before recovering. Dallas/Fort Worth and

Houston are two markets that experienced a much softer downturn, allowing strong

price appreciation during the growth cycle while maintaining first-year yields higher than

the national rate. Denver leads all markets in appreciation while the nation’s two largest

cities, New York City and Los Angeles, have also posted robust value gains, reflecting

substantive economic growth. Midwestern metros registered marginal appreciation in

industrial prices as their recovery began later in the growth cycle than coastal or

gateway markets.

Smaller metros boast elevated returns. Competitive bidding in secondary and tertiary

markets has pushed up prices above their pre-recession levels, yet many still have the

opportunity to rise at a similar pace as large port markets and major interior distribution

hub metros. As prices climb, these markets’ industrial assets trade with cap rates higher

than the U.S. rate. Comparatively, many primary coastal metros and gateway cities

offer lower first-year returns that have witnessed strong appreciation over the past 10

years, including Seattle-Tacoma and Oakland.

Average Price per Square Foot

(Alphabetical order within each segment)


49

2019 NATIONAL INDUSTRIAL PROPERTY INDEX

Regional Distribution Centers and Ports Head Index;

Elevated Vacancy Keeps Metros From Moving Up

Los Angeles retains top spot, reshuffling ensues. Southern California markets dominate the top 10 in this year’s Index. Twin Ports Los

Angeles is one of the busiest ports in the world and the metro also has an expansive manufacturing base, underpinning a robust industrial

sector. Solid absorption of space has kept vacancy in Los Angeles the lowest in the nation for five consecutive years. The movement of goods

from the ports to markets throughout the world as well as expanding e-commerce demand have produced a vibrant distribution and logistics

sector in neighboring Orange County (#4) and Riverside-San Bernardino (#8). Tightening vacancy and the greatest rent growth among metros

in the Index propelled Northern New Jersey (#2) onto the second rung. Detroit (#3) benefits from new autonomous vehicle technology that is

spurring additional space needs for automobile manufacturers and their suppliers. Newcomer to the index, Minneapolis-St. Paul (#5) debuts in

the fifth position, as the metro’s diverse economy and position as a distribution hub for the Upper Midwest produce steady absorption and rent

growth. Rounding out the top 10 slots are Seattle-Tacoma (#6), Cleveland (#7), Oakland (#9) and Tampa-St. Petersburg (#10).

Biggest Index movers. Milwaukee (#13) registered the greatest improvement in the 2019 NIPI, leaping six rungs. Strong manufacturing hiring

and minimal new inventory will fill existing space, dropping vacancy and boosting rents. Cleveland (#7) and Atlanta (#14) followed, each

climbing four spots. A slow delivery pipeline in Cleveland will keep vacancy well below the national level, moving rents higher, while the growth

in e-commerce demand and steady absorption in Atlanta will produce outsized rent advances. Elevated vacancy that is stifling rent growth is a

trend in markets with the largest declines and those sitting near the bottom of the NIPI. Dallas/Fort Worth (#23) and New York City (#24) each

fell seven rungs to remain in the bottom half of the Index, while Baltimore lost two notches to land at the bottom of this year’s rankings.

Index Methodology

The NIPI ranks 32 major industrial markets based upon a series of 12-month, forward-looking economic and supply-and-demand variables.

Markets are ranked based on their cumulative weighted-average scores for various indicators, including projected employment growth,

vacancy level and change, construction, and rents. Weighing both the forecasts and incremental change over the next year, the Index is

designed to indicate relative supply-and-demand conditions at the market level.

Users of the Index are cautioned to be aware of several important considerations. First, the NIPI is not designed to predict the performance of

individual investments. A carefully chosen property in a bottom-ranked market could easily outperform a poor choice in a top-ranked market.

Second, the NIPI is a snapshot of a one-year time horizon. A market facing difficulties in the near term may provide excellent long-term

prospects, and vice versa. Third, a market’s ranking may fall from one year to the next even if its fundamentals are improving. Also, the NIPI is

an ordinal index, and differences in rankings should be carefully interpreted. A top-ranked market is not necessarily twice as good as the

second-ranked market, nor is it 10 times better than the 10th-ranked market.

* Through 3Q 2018


50

NATIONAL ECONOMY

Rising Wages Sustain Consumption in 2019;

Growth Solid Despite Moderating Momentum

Wages continue to climb as firms compete for talent. With help from a tight labor market, economic

growth will extend into 2019. Organizations will add 2 million workers to payrolls this year, keeping the

nation’s unemployment rate near 4 percent. Though many companies are eager to expand employment

bases, a lack of qualified workers may inhibit them from filling open positions. In an effort to attract quality

talent, firms will bolster compensation packages, supporting an uptick in wage growth after annual increases

in the mid-2 percent band were witnessed regularly during the past few years. Rising wages should become

more prevalent as the year progresses, translating to relatively active spending habits and encouraging

retailers to keep inventories elevated. Additionally, many companies are aiming to beat potential tariffs by

bringing spring merchandise into the country early, putting pressure on warehouses and other storage

facilities to maintain heightened levels of imports.

Economy to stay on solid footing as momentum begins to ebb. The U.S. economy will remain

fundamentally stable in 2019 despite consumer confidence dipping from last year’s historically high levels. All-

time highs of U.S. household wealth and disposable income will keep consumers optimistic, particularly as

several factors could threaten domestic growth moving forward. The longer-term effects of a government

shutdown remain unclear in addition to any implications from still-unresolved trade tensions. Also, weakening

international economies will weigh on U.S. economic expansion. Accounting for these factors, momentum will

ease this year, moderating GDP growth into the low- to mid-2 percent range annually. Steady growth will help

maintain positive levels of consumption, boosting property performance as retailers increase inventories to

keep pace with spending.

* Forecast


51

NATIONAL ECONOMY

2019 National Economic Outlook

Organizations sustain accelerated pace of hiring. After reaching 3 percent at the end of 2018 for the

first time in more than 10 years, wage growth is expected to remain above historical averages this year.

An exceptionally tight job market will be the primary driver of wage gains as job creation reaches 2 million

for the for the ninth year in a row. Positions in the professional and business services sector as well as

education and health services will be abundant in 2019.

Coastal warehouses impacted by trade war. Many of the nation’s major seaports are experiencing the

effects of ongoing trade tensions. Imports are coming in larger quantities as retailers order products in

advance, attempting to beat a potential hike in tariffs on goods from China in March, ultimately crowding

nearby storage facilities. U.S. tariffs of 10 percent on $200 billion worth of Chinese goods that took effect

in September 2018 are scheduled to increase to 25 percent this spring barring successful negotiations

prior to that.

Steady retail spending expected in 2019. Last year, core retail sales averaged 4.7 percent growth,

reaching peak levels last summer when expansion hit 6.0 percent. While December posted a yearly

increase of just 2.2 percent, spending is expected to stabilize this year amid a solid economic climate.

Online sales should continue to rapidly rise, further benefiting the industrial sector.


52

NATIONAL INDUSTRIAL OVERVIEW

Changing Consumer Expectations Motivating NewStrategies in the Industrial Property Sector

Last-mile delivery costs push demand toward urban industrial. The transformation of the industrial sector

has accelerated to an unheard of pace as online shopping has blurred the lines between retail and industrial

properties. Shifting consumer habits are rewiring the sector in the digital age as e-commerce sales grew by

13.5 percent last year to now account for roughly 10 percent of overall retail sales. Most retailers are

implementing omnichannel strategies to meet customer needs, bolstering demand for warehouse and

distribution space across the nation. Rising shipping and transportation costs, driven by trucking shortages,

are encouraging more companies to find space within population centers to limit distribution expenses. With

consumers expecting shorter delivery windows, companies are turning to vacated retail space in dense

residential areas while some developers are making a move toward multistory warehouses to combat

logistical challenges in the urban core.

Leasing demand driven by retailers building their online presence. Demand for industrial space climbed

past supply growth for the ninth straight year in 2018 as e-commerce and last-mile delivery motivated

companies to locate closer to the end consumer. This year, e-commerce and the related functions of the

business will once again fuel space demand, with companies like Home Depot, Kroger and Walmart

substantially growing their footprint. Home Depot is investing $1.2 billion into its supply-chain network,

intermingling online and physical retail with a greater emphasis on same-day pickup, a strategy followed by

Walmart as well. Kroger recently partnered with online supermarket Ocado as consumers increasingly

purchase their groceries online, fueling the need for grocers to expand their customer fulfillment capabilities.

With Amazon accounting for nearly half of all e-commerce sales last year, other retailers are moving quickly

to streamline their supply chain to catch up, pushing the national industrial vacancy rate to its lowest point on

record.

* ForecastSources: CoStar Group, Inc.; Real Capital Analytics


53

NATIONAL INDUSTRIAL OVERVIEW

2019 National Industrial Outlook

Developers tackle logistical hurdles with taller warehouses. Supply constraints amid exceptional

space demand in the urban center have influenced developers to bring multistory warehouses to the U.S.

for the first time, with the first of its kind rising in Seattle last year. Common in dense urban areas of

Europe and Asia, these types of warehouses allow trucks to be loaded on multiple levels, which can be

accessed by ramp. Similar projects are underway in New York City and the Bay Area as strong rental rate

growth and low vacancy in the core justify the higher construction costs. As more retailers make efforts to

close the gap between the last mile of the supply chain and the end consumer, demand for taller

warehouses in the tightest markets will grow.

Vacancy tightens further as construction eases. Developers are starting to respond to higher costs,

helping to slow deliveries this year to 210 million square feet following the completion of more than 246

million square feet in 2018. Tenant demand pushes past supply growth for the 10th consecutive year,

compressing the national industrial vacancy rate to 4.5 percent, the lowest on record. Supply constraints

support another year of healthy rent growth, climbing 4 percent this year to $7.27 per square foot after

recording a 5.4 percent increase last year.

Growing production pushes gauges higher. Expansion of the manufacturing sector raised a leading

index of activity to signal steady growth. The subsidiary gauge of new orders, a leading indicator of future

manufacturing activity, maintained a strong level, indicating a positive outlook. With a healthy outlook on

all fronts, the manufacturing sector is positioned to make contributions to the industrial property sector this

year.

* Forecast** Through January 2019Sources: CoStar Group, Inc.; Real Capital Analytics


54

U.S. CAPITAL MARKETS

Fed Eyes Slowing International Economies;Shifting Consumer Preferences Support Acquisitions

Fed adopts cautious stance. Ongoing trade disputes between the U.S. and China together with slowing

growth throughout Europe have begun to weigh on the global economy. Financial market volatility and

elevated caution have sponsored a flight to the safety of Treasurys, pushing the 10-year yield to the mid-2

percent range. While domestic economic output has moderated in recent months, the government shutdown

and waning impact of the tax cut stimulus are likely to trim forward estimates. As a result, Chairman Jerome

Powell stated that the Fed is considering an adjustment to ongoing balance sheet runoffs through quantitative

tightening and put further interest rate hikes on hold as the central bank takes a wait-and-see approach to

monetary policy. The bond market has begun to price in a much more dovish Fed, with flattening interest

rates reflecting this more cautious stance. Fed officials will likely focus on the intersection of a global growth

slowdown and continued labor market strength as they define their plans. Barring a significant economic or

political event, investors can expect interest rates to be a bit more stable this year.

E-commerce strength powering broad industrial demand. As consumer preferences shift toward more

spending online, lenders including local, regional and national banks and insurance companies have been

active. Sentiment remains upbeat, with tightening lending standards apparent only in the riskiest proposals.

High-profile distribution facilities and warehouses in urban areas remain a portfolio staple, with loan-to-value

(LTV) ratios in the 55 to 75 percent range, depending on borrower, asset and location factors. Non-core

locations and use cases typically require more nuanced financing such as mezzanine and bridge loans to

undertake capital improvements. Elevated construction in some markets has also caused a slight pullback in

willingness to lend toward additional developments, particularly in tertiary locations without a signed tenant in

place.


55

U.S. CAPITAL MARKETS

2019 Capital Markets Outlook

Inflationary pressures benign despite upbeat wage growth. Following the implementation of tariffs on

several key trading partners, core inflation has remained just above 2 percent, showing little impetus for

an uncontrolled surge. Muted inflationary pressure has given the Fed more maneuvering room,

particularly as international pressures weigh on sentiment. Meanwhile, low unemployment has sponsored

steady wage growth gains, expanding by 3.0 percent over the last year.

Monetary policy allows flexibility into potential downturn. While other central banks have maintained

ultra-low interest rates, the Federal Reserve has undertaken a much more prudent policy stance,

embarking on a series of rate increases since the fourth quarter of 2015. The current fed funds rate of 2.5

percent offers the Federal Reserve sufficient ammunition to combat potential headwinds to domestic

growth, helping to boost sentiment.

Treasurys offer arbitrage opportunities for global investors. Offering a premium of up to 200 basis

points compared with other countries, the 10-Year Treasury provides a significantly higher yield to

international investors, particularly on a risk-adjusted basis. This arbitrage has sponsored tremendous

capital inflows into U.S.-based assets, with an emphasis on Treasurys, which has suppressed interest

rates.


56

U.S. INDUSTRIAL INVESTMENT OUTLOOK

Strong Growth Prospects and Elevated Returns ExpandPool of Industrial Investors

Crowded market lifts competition for industrial properties. An abundance of equity capital expanded into

the industrial property market last year, intensifying investor competition and placing upward pressure on

asset values. Pricing across the country remains near or above all-time highs, while gateway markets like Los

Angeles are recording the tightest first-year yields and the highest prices. Robust competition among buyers

and the opportunity for higher yields are motivating institutional and private groups to enter secondary and

tertiary markets, though superior liquidity characteristics will keep most institutional buyers focused on

primary markets. Strong NOI growth will be a major focus among investors this year, lifted by sizable rent

gains across most markets. Prospects of a rising interest rate climate could also be a significant factor

affecting investor decisions, though pressures appear to be alleviated for now.

Deep pool of investors presented with an abundance of opportunities. Urban infill properties will remain

a top target among investors as e-commerce and last-mile demand push tenants closer to the end consumer.

Challenges faced in retail are providing investors with opportunities to convert vacated big-box stores into

smaller distribution centers that can serve the local market, particularly with minimal supply growth for infill

space. Port markets on the West Coast, Southeast and the New Jersey port markets will also drive deal

volume as a strong U.S. consumer and trade tensions fuel space demand. Investment activity for data

centers will remain aggressive as Microsoft, Google, Amazon and other firms rapidly grow their server farms,

boosting liquidity in key markets such as Northern Virginia, Dallas, Chicago, New York and Northern

California. Many corporations have also been motivated to sell these assets, utilizing a sale-leaseback

strategy that has become increasingly popular under recent tax reform.

* Through 3Q


57

U.S. INDUSTRIAL INVESTMENT OUTLOOK

2019 Investment Outlook

Aggressive investment activity compresses cap rates further. Higher returns in the industrial sector

spur investors to place a premium on Class A and Class B properties over replacement costs, though a

robust construction pipeline could lead sellers to be more competitive with pricing this year. The average

cap rate compressed to the upper-6 percent territory, a record low, as demand continues to outpace new

supply. Class A properties in some of the nation’s primary markets have achieved a cap rate closer to 4

percent, motivating buyers to seek higher yields in secondary and tertiary markets.

Cross-border acquisitions climb past $15.5 billion. An attractive yield alternative when compared with

a broad range of investment options has foreign investors acquiring more industrial portfolios, diversifying

away from office and multifamily assets. A combination of low-risk and growth characteristics pushed

capital inflows by foreign entities to a record high last year, expanding into major gateway markets such

as Dallas, Los Angeles, Chicago and Atlanta.

New opportunity arises from migration to online shopping. Adaptive reuse of outdated properties is

expected to grow this year as e-commerce lifts demand for logistics space. Freestanding big-box stores

and some Class B office buildings are prime candidates for conversion due to centralized locations, clear

heights and presence of a loading dock. Investors have been active in secondary markets when looking at

conversions, realizing higher returns than are typical in primary markets.

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2018 Experian

Created on December 2019

POPULATION 1 Miles 3 Miles 5 Miles 2023 Projection

Total Population 7,322 77,183 182,023

2018 Estimate


2010 Census


2000 Census


Daytime Population

2018 Estimate 9,106 68,954 157,944

HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2023 Projection

Total Households 2,733 29,016 68,140

2018 Estimate


Average (Mean) Household Size 2.59 2.66 2.68

2010 Census


2000 Census


HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2018 Estimate

$200,000 or More 2.64% 3.43% 3.72%

$150,000 - $199,000 5.41% 5.83% 6.20%

$100,000 - $149,000 15.17% 15.42% 16.93%

$75,000 - $99,999 13.47% 14.01% 14.88%

$50,000 - $74,999 13.06% 18.22% 18.63%

$35,000 - $49,999 15.61% 14.57% 13.74%

$25,000 - $34,999 10.96% 9.11% 8.63%

$15,000 - $24,999 11.23% 9.31% 8.45%

Under $15,000 12.45% 10.09% 8.83%

Average Household Income $71,502 $77,272 $81,358

Median Household Income $49,712 $57,842 $62,771

Per Capita Income $26,642 $28,833 $30,173

POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age

2018 Estimate Total Population 7,351 76,439 179,664

Under 20 24.54% 24.17% 23.79%

20 to 34 Years 19.81% 19.68% 20.00%

35 to 39 Years 6.20% 6.28% 6.43%

40 to 49 Years 12.30% 12.77% 12.60%

50 to 64 Years 21.15% 21.39% 21.70%

Age 65+ 16.00% 15.73% 15.45%

Median Age 39.55 39.90 39.80

Population 25+ by Education Level

2018 Estimate Population Age 25+ 5,084 53,134 125,396

Elementary (0-8) 2.65% 2.80% 2.16%

Some High School (9-11) 6.80% 7.21% 6.66%

High School Graduate (12) 38.03% 40.34% 37.75%

Some College (13-15) 20.96% 20.75% 21.78%

Associate Degree Only 7.58% 7.15% 7.40%

Bachelors Degree Only 15.50% 14.40% 15.94%

Graduate Degree 7.07% 6.41% 7.43%

Time Travel to Work

Average Travel Time in Minutes 28 30 30

58

Income

In 2018, the median household income for your selected geography is$49,712, compare this to the US average which is currently $58,754.The median household income for your area has changed by 10.75%since 2000. It is estimated that the median household income in yourarea will be $57,498 five years from now, which represents a changeof 15.66% from the current year.

The current year per capita income in your area is $26,642, comparethis to the US average, which is $32,356. The current year averagehousehold income in your area is $71,502, compare this to the USaverage which is $84,609.

Population

In 2018, the population in your selected geography is 7,351. Thepopulation has changed by 3.99% since 2000. It is estimated that thepopulation in your area will be 7,322.00 five years from now, whichrepresents a change of -0.39% from the current year. The currentpopulation is 47.73% male and 52.27% female. The median age of thepopulation in your area is 39.55, compare this to the US averagewhich is 37.95. The population density in your area is 2,336.50 peopleper square mile.

Households

There are currently 2,726 households in your selected geography. Thenumber of households has changed by 1.45% since 2000. It isestimated that the number of households in your area will be 2,733five years from now, which represents a change of 0.26% from thecurrent year. The average household size in your area is 2.59persons.

Employment

In 2018, there are 3,723 employees in your selected area, this is alsoknown as the daytime population. The 2000 Census revealed that55.81% of employees are employed in white-collar occupations in thisgeography, and 43.41% are employed in blue-collar occupations. In2018, unemployment in this area is 5.91%. In 2000, the average timetraveled to work was 28.00 minutes.

Race and Ethnicity

The current year racial makeup of your selected area is as follows:59.25% White, 29.98% Black, 0.05% Native American and 3.61%Asian/Pacific Islander. Compare these to US averages which are:70.20% White, 12.89% Black, 0.19% Native American and 5.59%Asian/Pacific Islander. People of Hispanic origin are countedindependently of race.

People of Hispanic origin make up 7.77% of the current yearpopulation in your selected area. Compare this to the US average of18.01%.

PROPERTY NAME

MARKETING TEAM


Housing

The median housing value in your area was $188,461 in 2018,compare this to the US average of $201,842. In 2000, there were1,797 owner occupied housing units in your area and there were 890renter occupied housing units in your area. The median rent at thetime was $555.

Source: © 2018 Experian

DEMOGRAPHICS

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DEMOGRAPHICS

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