NEW JERSEYINDUSTRIAL MARKETFIRST QUARTER 2017

REAL ESTATE OUTLOOK

TRENDLINES

5-YEAR TREND CURRENT QUARTER

VACANCY

5.1%Strongest quarter since Q4 2015

ABSORPTION

1.8 million SF16 consecutive positive quarters

RENTAL R ATE

$6.98 PSFRapidly approaching $7.00 PSF

UNDER CONSTRUCTION

10.3 million SF1.8 million SF delivered

AVER AGE INDUSTRIAL SALE PRICE

$95.00 PSFOutlook remains strong

JOB GROW TH

+35,500 jobsWidespread private sector growth

Vacancy constrains to 17-year low New construction spreads throughout the region

Reshoring prompting manufacturing comeback

ECONOMY

Ports trying to keep pace with e-commerceE-commerce sales continue to rise in the United States. During 2016, total e-commerce sales increased by more than 15% and accounted for 8.1% of total retail sales. This is considerable growth from 7.3% in 2015. While major retailers are feeling the adverse effects of e-commerce, the industrial market continues to thrive as product is shipped directly from the warehouse to the consumer. In addition, the manufacturing sector is resurging as the latest Institute of Supply Management (ISM) report continues to show increased new orders and production. Perhaps more importantly, labor is growing as several companies are bringing jobs back to the U.S. as part of the Reshoring Initiative.

Following consecutive years of record growth, the Port of New York and New Jersey’s cargo volume for 2016 finished slightly below the record-setting 2015 level. Upgrades continue to be made at the ports while the Bayonne Bridge “Raise the Roadway” project, designed to accommodate larger container ships, took a major step as its newly elevated roadway opened to drivers in February. In addition, U.S. consumer confidence is currently at its highest level since December of 2000, which is a good sign for the growing retail and wholesale sectors.

VACANCY

Robust leasing further constricts marketFollowing another quarter of strong occupancy gains, the vacancy rate in New Jersey’s industrial market reached its lowest level in nearly 17 years. As of Q1 2017, 5.1% of space remains vacant, compared to 5.5% the previous quarter, the market’s strongest quarterly improvement since Q4 2015. In addition, the current figure represents a robust improvement of 1.4 percentage points from 6.5% 12 months ago. For tenants seeking new space, there is 10.3 million square feet of industrial space currently under construction in New Jersey, though more than half of it is preleased. Secondary options have also come available as some large blocks were returned to the market during the quarter.

2 REAL ESTATE OUTLOOK NEW JERSEY INDUSTRIAL MARKET Q1 2017

NEW JERSEY INDUSTRIAL MARKETFIRST QUARTER 2017

CONSUMER SPENDING GROWTH

PURCHASING MANAGERS INDEX

11 14 15 16 17131207 08 09 10

UNITED STATES

25

50

0

75

PORT VOLUME

PORT OF NEW YORK / NEW JERSEY MILLION TEUs

12 15 16 17*141307 08 09 10 11

6

0

8

4

2

SOURCE: The Port Authority of New York and New Jersey*As of February

SOURCE: Institute of Supply Management

SOURCE: US Dept of Commerce

UNITED STATES

11 15 16 1714131207 08 09 10

0%

-3.50%

3.50%

-1.75%

1.75%

ABSORPTION

Tenants prefer new constructionThe State continues to be the target of industrial leasing activity. As of Q1 2017, New Jersey has experienced 16 consecutive quarters of positive net absorption. Moreover, for the third consecutive quarter, more than 10 million square feet was absorbed over a 12-month period, a feat that hadn’t been achieved since 2003. While tenants are leasing space throughout the State, the most active submarkets during the past 12 months include Exit 8A, Exit 10/Edison and the Meadowlands. Companies in the retail/wholesale and transportation/logistics sectors continue to drive demand while the manufacturing industry is gaining steam. While manufacturing growth is surely a positive, the State needs to continue addressing the issues of a shortage of qualified workers within the industry.

Ten leases greater than 150,000 square feet were signed during the first quarter, including five new leases, four of which are in newly constructed properties. Eight of the top 10 deals signed were located in central New Jersey, including the top three which are varied by industry. Target signed the largest lease of the quarter, inking a deal to occupy 718,219 square-feet of speculative construction at BridgePort Logistics Center in Perth Amboy. Developer Bridge Development Partners has revived that formerly contaminated site, which is near Exit 11 of the New Jersey Turnpike. Target is in the process of redesigning its stores partly in an effort to drive its digital growth.

Further south down the Turnpike, in a build-to-suit transaction, Automann committed to occupy a 365,400 square feet warehouse in South Brunswick at Exit 8A, New Jersey’s hottest industrial submarket. Leading the leasing for the manufacturing sector was Virginia Dare. The manufacturer and supplier of flavors for the food and beverage industry signed to occupy a new, 206,500-square-foot property at Turnpike Exit 12 in Carteret.

Notable Lease TransactionsCOMPANY ADDRESS SQUARE FEET LEASE TYPE

Target 980 High Street, Perth Amboy 718,219 New

Automann USA 400 Docks Corner Road, South Brunswick 365,400 New

One Stop Logistics 77 Executive Ave, Edison 260,000 New

New Jersey Industrial Market Indicators

Warehouse/Distribution 529,800,751 1,792,572 1,550,405 10,296,476 5.2% 0.3% 5.2% $7.08

Manufacturing 127,868,672 0 335,018 24,353 4.6% 0.1% 4.7% $6.52

TOTAL 657,669,423 1,792,572 1,885,423 10,320,829 4.9% 0.2% 5.1% $6.98

DIRECT VACANCY

SUBMARKET INVENTORY DELIVERIES (SF)QUARTER NET ABSORPTION

YOY NET ABSORPTION

SUBLET VACANCY

TOTAL VACANCY

AVERAGE RATE PSF

Prepared by: Transwestern RBJ Page 4

REAL ESTATE OUTLOOK NEW JERSEY INDUSTRIAL MARKET Q1 2017 3

SOURCE: Name goes here

NEW JERSEY NET ABSORPTION AND VACANCY

‘14 ‘15 ‘16 ‘17‘07YEAR ‘08 ‘09 ‘10 ‘11 ‘12 ‘13

-4.0

-2.0

0

2.0

4.0

6%

9%

3%

0%

12%

NET ABSORPTION MILLION SF VACANCY

NEW JERSEY RENTAL RATES VS. CONSTRUCTION

‘15 ‘16 ‘17‘07YEAR ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14

4

8

12

$5.75

$6.50

$5.00

$7.25

UNDER CONSTRUCTION MILLION SF AVERAGE RENTAL RATE

NEW JERSEY HISTORICAL SALES TRANSACTION ACTIVITY

‘14 ‘15 ‘16 ‘17‘07YEAR ‘08 ‘09 ‘10 ‘11 ‘12 ‘13

200

400

600

800

1,000

SALES VOLUME MILLIONS $

SOURCE: CoStar

SOURCE:CoStar

SOURCE: Real Capital Analytics

RENTAL RATES

Manufacturing is having a positive impactShrinking levels of inventory continue to drive industrial rents to all-time highs. At the close of Q1 2017, rents increased in 21 of 25 submarkets versus the previous quarter. When compared year-over-year, rents were higher in 23 of 25 submarkets, 11 of which saw asking rents increase by more than $1.00 PSF. As a result, asking rents reached a new high of $6.98 PSF overall — a year-over-year growth of 14 percent. The average increased by $0.25 from $6.73 PSF the previous quarter, representing the largest quarterly rise since Q1 2016. Rents are also feeling the impact of the improving manufacturing sector. As of Q1 2017, the average asking rent for manufacturing buildings averaged $6.52 PSF, higher considerably from $4.98 PSF five years ago.

INVESTMENT MARKET

Pricing continues to riseThe rolling 12-month sales volume for industrial property in New Jersey continues to decline. However, quarterly sales volume for Q1 2017 exceeded the previous two quarters and was higher than the same quarter one year ago. The highest-priced sale occurred in the Meadowlands submarket, when Bentall Kennedy acquired a 353,349 SF industrial property from west-coast based CIM group for $73 million ($207 PSF). This transaction helped the average sale price climb for the second consecutive quarter to $95 PSF, also higher than the previous 12-month average of $88 PSF. While investment activity may be affected as a whole by rising interest rates, less caution by both buyers and lenders is anticipated for the robust industrial property market.

OUTLOOK

Shovels everywhere Developers are trying to keep pace with demand as new product was delivered in seven out of 25 submarkets during the quarter. As of Q1 2017, property was under construction in 15 different submarkets as development has spread to the outer rings of the region’s industrial corridor. All signs point to continued growth. According to a Pew Research survey, more Americans feel positive about the economy for the first time since the economic crisis. This bodes well for maintaining continued growth at the ports. However, renegotiated trade agreements by the new Presidential administration could impact both import and export volumes.

Copyright © 2017 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar, New Jersey Department of Labor and Workforce Development, Real Capital Analytics, U.S. Bureau of Labor Statistics (BLS) and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

NEW JERSEY INDUSTRIAL MARKETFIRST QUARTER 2017

T 973.947.9200 F 973.947.9199www.transwestern.com/northeast

300 Kimball Drive, 1st FloorParsippany, NJ 07054

METHODOLOGY

The information in this report is the result of a compilation of information on industrial properties located in northern and central New Jersey. This report includes properties 10,000 square feet and larger in size.

CONTACT

Matthew DollyDirector of Research973.947.9244matthew.dolly@transwestern.com

New Jersey Industrial Market Indicators by Submarket

Bergen Central 27,289,159 278,300 360,757 154,905 5.5% 0.1% 5.7% $7.28

Bergen North 21,674,750 0 55,171 177,541 6.2% 0.7% 6.9% $8.85

Exit 7A/Trenton-I295 24,655,695 0 334,814 (1,135,325) 9.2% 0.0% 9.2% $4.01

Exit 8/Princeton-Hightstown 6,420,816 0 39,225 17,225 0.6% 0.0% 0.6% $5.43

Exit 8A 61,749,490 488,800 1,382,377 3,813,912 2.8% 0.1% 2.9% $6.49

Exit 9/Brunswick 22,159,580 0 276,358 465,145 4.9% 0.1% 5.0% $5.41

Exit 10/Edison 39,476,489 0 228,111 1,185,282 1.7% 0.5% 2.2% $7.19

Exit 11/Perth Amboy/GSP 18,706,463 354,250 26,218 247,731 7.8% 0.0% 7.9% $8.49

Exit 12/Carteret-Avenel 20,086,220 0 (529,774) 658,208 5.0% 0.0% 5.0% $6.52

Exit 13/Linden 12,238,775 0 510,132 86,015 10.0% 0.4% 10.4% $6.95

Exit 13A/Elizabeth 16,806,119 0 53,847 420,340 1.4% 0.1% 1.5% $7.27

Exit 14/Newark East 22,679,423 0 (490,319) (267,817) 4.2% 0.0% 4.2% $7.88

Fairfield 12,250,352 0 131,974 211,917 2.6% 0.0% 2.6% $7.86

Hudson Waterfront 34,167,287 0 (556,960) 548,498 7.1% 0.1% 7.2% $7.86

Meadowlands 93,303,570 0 334,133 2,022,959 4.9% 0.2% 5.1% $8.20

Monmouth 19,012,105 14,872 (146,457) 59,027 2.7% 0.0% 2.7% $7.67

Morris East 25,379,534 0 144,803 54,557 7.1% 0.3% 7.4% $7.04

Morris West 14,930,493 0 37,948 (235,803) 6.7% 0.1% 6.8% $6.09

Newark West 17,748,074 0 (74,835) 218,483 5.7% 0.2% 6.0% $7.10

Route 280/Suburban Essex 11,542,715 0 (62,491) (31,803) 4.9% 0.0% 4.9% $5.29

Route 287 West 26,110,031 370,000 (22,864) 305,583 4.2% 0.3% 4.6% $7.21

Route 46/23/3 50,918,810 164,000 (68,864) 618,415 4.6% 0.0% 4.6% $7.37

Route 22/I-78 East 20,039,882 0 (514,715) (58,851) 7.0% 0.1% 7.0% $7.48

Somerset 28,096,443 122,350 461,495 873,222 2.8% 0.6% 3.4% $6.76

Union Central 10,227,148 0 (24,661) (88,537) 6.8% 0.2% 7.0% $5.85

TOTAL 657,669,423 1,792,572 1,885,423 10,320,829 4.9% 0.2% 5.1% $6.98

SUBMARKET INVENTORY DELIVERIES (SF)QUARTER NET ABSORPTION

YOY NET ABSORPTION

DIRECT VACANCY

SUBLET VACANCY

TOTAL VACANCY

AVERAGE RATE PSF

Prepared by: Transwestern RBJ Page 1