The Post-Panamax Era Has Arrived

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1 Research & Forecast Report COLUMBIA, SC INDUSTRIAL Q The Post-Panamax Era Has Arrived Bryana Mistretta Research Coordinator South Carolina Key Takeaways > > The first post-panamax ship travelled through the Panama Canal Expansion. > > The Richland County Transportation Improvement Program (CTIP) will improve roads that are heavily trafficked and are key to the transportation of industrial goods through Columbia. > > Strong prospect activity in the third quarter is expected to lead to more speculative development in Bigger Port. Bigger Ships. The Panama Canal Expansion is now open, allowing for larger and heavier post-panamax ships to travel through the locks. The Panama Canal offers access to global markets, and the Port of Charleston is a big player in increasing accessibility through East Coast shipping routes. In September 2016, the Water Resources Development Act passed the U.S. House of Representatives, allowing the Charleston Harbor Deepening Project to move forward. The state has funded $300 million to the project and the South Carolina Port Authority says the project is on track to be completed by Once deepened, the entrance to the harbor will be 54 feet deep and the harbor 52 feet deep. The Port of Charleston already has the deepest harbor on the East Coast, but can currently only accept post-panamax ships during high tide. The deepening will allow these longer, wider and heavier ships to access the port around the clock. Charleston will be the only East Coast port able to accept calls from post-panamax III ships carrying at full capacity (16,000 TEU). Heavier cranes and stronger infrastructure are also being added to the Port of Charleston to accommodate the larger capacity of these new Panamax and post-panamax ships, which can hold between 12,000 and 16,000 TEU compared to Panamax ships, which can hold up to 5,000 TEU. Other competing Eastern seaboard ports are following after the Port of Charleston to deepen their channels as well, but they will not be as deep upon completion or deliver before the Charleston Harbor Deepening Project. Market Indicators Relative to prior period VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE** Summary Statistics Q Columbia Industrial Industrial Vacancy Rate 7.4% Change From Q (basis points) Absorption (Thousands Square Feet) New Construction (Thousand Square Feet) Under Construction (Million Square Feet) *New construction is newly delivered buildings Asking Rents NNN Per Square Foot Per Year Q Q4 2016* Note: Construction is the change in Under Construction. *Projected **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents Market $3.28 Change From Q % Change From Q %

2 To take full advantage of its competitive position, the Inland Port in Dillon is planned for a location 160 miles North of the Port of Charleston, off Interstate 95 near the North Carolina border. The port will ease traffic as well as accommodate the growing volume at the Port of Charleston by way of a Class 1 CSX rail line. The port is expected to begin construction in the first quarter of 2017 and be completed by the end of the year. The port will have a direct effect on activity and occupancy in the northeast portion of the state, referred to as the Pee Dee area. Expansion of the Panama Canal, the deepening of the Port of Charleston and the planned Inland Port in Dillon will effectively draw in new investors to the region. Road Improvements Spur Growth Road enhancements throughout Columbia will spur growth in the regional industrial market. Richland County has funded a Transportation Improvement Program (CTIP) that will extend and widen heavily-trafficked roads, allowing industrial users to efficiently and quickly move goods to market. The widening projects will vastly increase the amount of industrial land in the county and make it more attractive to industrial developers and investors considering the Columbia market. The roads chosen for the CTIP were ranked on a point system based on public safety (attained from accident data), the potential for economic development, the expense versus the budget of the project and the status of the project design and funding. Roads with substantial industrial use or appropriate zoning to be widened include Clemson Road, Bluff Road, Shop Road and Atlas Road, with most completed in phases over the next four years. In addition, Shop Road will be expanded in two phases. The first phase will be a four lane road extending Shop Road by one mile from Pineview Road to Longwood Road. The second phase of the Shop Road extension will be four lanes wide and extend the road another 3.25 miles from Longwood Road to Garners Ferry Road. > > Clemson Road will be widened to five lanes from Old Clemson Road to Sparkleberry Crossing, a 2.21-mile stretch. This will link the Richland 10 industrial park to Interstate 20. > > Bluff Road will be widened to five lanes for 2.63 miles from Interstate 77 to Rosewood Drive. > > Shop Road, which runs parallel to Bluff Road, will also be widened to five lanes along the 3.15 miles stretching from Interstate 77 to George Rogers Boulevard. > > Atlas Road, which runs perpendicular to Bluff and Shop Roads, will be widened to three and five lanes from Bluff Road to Garners Ferry Road, a 2.82-mile stretch. > > Pineview Road is currently a two-lane road that runs perpendicular to Bluff Road and Shop Road. Pineview Road will be widened to five lanes from Bluff Road to Garners Ferry and to three lanes between Metal Park Drive and Shop Road, a mile stretch bisecting the new extension of Shop Road. Port of Charleston is putting together all of the pieces needed to become tomorrow s L.A.-Long Beach. -K.C. Conway, SunTrust Economist Inland Port Greer Port of Charleston Charleston Source: South Carolina Ports Authority Source: South Carolina Ports Authority 2 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

3 Prospect Activity Leads to Development Prospect activity in the Columbia industrial market increased dramatically between the second and third quarter, with urgency to sign long-term leases. This activity will likely lead to high leasing velocity in the fourth quarter, driving absorption and occupancy even higher. Industrial space in Lexington County has the most demand, with many leases taking place before the buildings are made available to the market. The year-to-date net absorption is 1.2 million square feet, leading to a market vacancy rate of 7.4%. Absorption in Aiken, Clarendon, Florence, Orangeburg and Richland Counties can be attributed to the rapid decrease in market vacancy. The activity in these markets has left more small industrial buildings available and limited the options for large industrial space. Prospective tenants in the market are looking for Bulk logistics buildings, those 100,000 square feet or larger with 21-foot ceiling clearance heights. With a vacancy rate of 9.2%, only a few buildings in Richland County and Lexington County are available to prospective tenants. The demand for large industrial space will be met by future development of speculative buildings, developed buildings or build-to-suits. Since Hurricane Matthew, several disaster relief non-profits have scrambled to find short-term leases for large warehouse space to store donated items and to aid in the rebuilding of the affected areas. These tenants will lead to temporary decreases in market vacancy until their services are no longer needed in the market. 120 Pine Plains Lexington County Source: Colliers International Significant Transactions The 720,600 square feet of net absorption this quarter can be attributed to several new companies leasing space in the Columbia industrial market. > > 115 Windhill Road, a 23,000-square-foot industrial building in Richland County sold for $725,000, or $31.52 PSF. > > Copart of Connecticut renewed their lease of nearly 80,800 square feet at 120 Pine Plains Road in Lexington County. > > Hardy Corporation leased 41,600 square feet this quarter at 2413 Leaphart Road in Lexington County Protective Packaging Expansion Kershaw County Source: Costar Construction Pipeline Construction activity is currently limited to build-to-suit and expansion projects, but the market is expected to see new speculative development over the next twelve months. The vacancy rate for bulk logistics buildings is expected to decrease due to the increased interest in the market from tenants urgent to lease large spaces quickly. Third Quarter Deliveries > > Protective Packaging recently announced a $2.5 million investment. A 60,000-square-foot expansion to their facility at 255 Standard Warehouse Road in Kershaw County completed this quarter. Under Construction > > Husqvarna s 513,000-square-foot expansion at 172 Old Elloree Road is nearing completion in Orangeburg County. The facility is expected to be completed by the end of > > Sensor Electronic Technology s 20,000-square-foot expansion at 10 Atlas Court remains under construction in Richland County. The expansion is set to deliver in the fourth quarter of > > The 720,000-square-foot expansion to the Continental Tires facility at 1805 Highway 521 South in Sumter County will be complete in the first quarter of Investments & Expansion Between January and September of 2016, $392 million in capital investments and 549 new jobs have been announced in the Midlands region. West Fraser, a Canadian wood and paper products company, announced a $33.0 million expansion of their facility in Newberry County in October. Pro Pac, also a wood and paper products company, announced a $2.5 million expansion to their Kershaw County facility in June, which completed this quarter. Other industries expanding in the market are automotive, alternative energy and plastics and rubber. 3 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

4 Q Industrial Market Summary Statistics Midlands, SC MARKET BUILDINGS INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) NET ABSORPTION INDUSTRIAL MARKET Aiken County 63 10,356, , , % 157,628 Calhoun County 9 562, ,200 Cayce/West Columbia 92 6,956, , , % -13,306 CBD 82 2,494, , , % 5,720 Clarendon County 8 551,926 71,600-71, % - Darlington County 21 3,565, , , % - East Columbia 55 1,960,354 16,200 2,050 18, % 10,247 Fairfield County 15 2,342, , , % - Florence County 110 8,608, , , % 116,500 Irmo/Chapin 15 1,187, Kershaw County 46 7,921, , , % -11,000 Lee County 8 823, Lexington 35 4,256,462 4,500-4, % -4,500 Newberry County 17 2,485, % 16,800 North Columbia 58 1,918, , , % 27,992 Northeast Columbia 45 5,613,770 1,109,319-1,109, % 156,162 Northwest Columbia ,101 25,900 7,500 33, % -10,000 Orangeburg County 74 7,609, , , % 111,048 Saluda County 3 400, , , % - Southeast Columbia 187 7,668, , , % 200,573 Sumter County 56 5,165, , , % -54,400 Market Total 1,014 82,892,305 6,094,255 9,550 6,103, % 720,664 Source: Colliers International, CoStar Market Conditions The year-to-date absorption for 2016 is 1.2 million square feet. A large number of small leases this quarter contributed to a market absorption of 720,600 square feet. As a result, the market vacancy rate was 7.4%, down from 8.2% at the end of the second quarter and 8.8% at the start of High prospect activity in the market is expected to bring the vacancy rate lower by the end of the year. Higher demand in the market and low vacancy rates will lead to higher asking rental rates in future quarters. The average asking rental rate for industrial space remains steady at $3.27 triple net (NNN) per square foot per year (PSF/YR), increasing by one cent since the end of the second quarter. Over the last two years, the average asking rental rate for industrial space has increased 4.8%. Richland County ended the third quarter with a vacancy rate of 11.2%, down from 13.1% last quarter. The average asking rental rate increased by 3.6% to of $3.76 NNN PSF/YR from $3.63 NNN PSF/YR a year ago. The vacancy rate in Lexington County slightly increased from 3.2% in the second quarter to 3.3% this quarter, but is down from 3.7% a year ago. The average asking rental rate was $3.90 NNN PSF/YR at the end of the third quarter, up from $3.80 NNN PSF/YR the previous quarter. Midlands Industrial Market Conditions YTD Net Absorption 1,222,128 SF $3.28 NNN PSF/YR Average Asking Rental Rate Vacancy Rate 7.4% 4 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

5 MIDLANDS IS CONNECTED Charlotte Atlanta MIDLANDS COUNTIES: 1 2 Saluda Newberry 8 9 Sumter Clarendon 3 Fairfield 10 Calhoun 4 Kershaw 11 Richland Lee Darlington Florence 12 Lexington 13 Orangeburg 14 Aiken Efficient Logistics South Carolina s efficient logistics provide companies quick access to suppliers and customers through its ports, rail lines and interstates. South Carolina ports play a vital role in the continued success of the companies investing in the Midland s industrial market by expediting delivery of imports and exports, as well as reducing the cost on the transportation of goods. Greer Inland Port Monthly Rail Moves August ,322 February ,623 August ,392 Total volume for the Port of Charleston at the fiscal year to date shows a 3.4% increase over the 2015 fiscal year to date. The Port of Charleston continues to grow with no signs of slowing down, as it undergoes the construction of a new terminal in North Charleston and a recently funded deepening of its harbor to 52 feet by The location of the inland port extends the reach of the Port of Charleston and its customers beyond South Carolina s borders. The Inland Port in Greer, South Carolina adds to the connectivity of the state by providing a direct route via a Norfolk Southern rail line to the Port of Charleston. The Inland Port recorded 9,392 rail lifts in August 2016, a 28.3% increase from a year ago. The combined success of the Inland Port and increased demand within South Carolina markets has led the South Carolina Ports Authority (SCPA) to announce plans for a second inland port facility in Dillion County. South Carolina is crossed by five interstates, I-95, I-85, I-26, I-20 and I-77, creating heavy traffic that impacts the quality of the road infrastructure. A recent legislative bill signed by the government will commit $4 billion to fix the most heavily trafficked sections of South Carolina s interstates, including the intersection of I-26 and I-20 in Columbia. The completion of the improvements along these interstates will be key in the expansion of companies reliant on these routes for distribution of goods. Sources: South Carolina Ports Authority, Colliers International Port of Charleston Fiscal Year-to-Date TEU Volume 228, , , , , , Source: South Carolina Ports Authority, Colliers International 5 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

6 Industrial Employment Industrial employment, the combined manufacturing and wholesale trade employment sectors, are steadily increasing in the Columbia industrial market. As of August 2016, approximately 48,600 people were employed by industrial jobs in the Columbia, South Carolina Metropolitan Statistical Areas (MSA), an addition of 1,900 jobs over the last 12 months. Industrial jobs contribute 12.3% of total nonfarm employment in the Columbia, MSA and accounted for 22.9% of all new non-farm jobs added over the last year. Over the last two years, 3,600 industrial jobs have been added to the Columbia, MSA, an 8.0% increase. Market Forecast Strong prospect velocity between the second and third quarters should lead to increased absorption in the fourth quarter. The vacancy rate is expected to decrease by the end of the year as prospects in the market close on their leases. Average asking rental rates for industrial space in the Columbia market are expected to rise above the current $3.27 NNN PSF/YR average by the end of Demand in the market is increasing and expected to be met with new speculative development of industrial buildings 100,000 square feet or larger over the next year. Around South Carolina The South Carolina industrial market is strengthening, with interest from investors and global and national tenants. Large available speculative buildings in Charleston and the rapid absorption of speculative space and booming construction of build to suits in the Greenville industrial market are evident of this strength. Charleston, South Carolina > > Speculative construction in the Charleston Industrial market is much larger than speculative buildings of the past. The Charleston Trade Center currently has a 303,00-square-foot building under construction that can be expanded to 900,000 square feet. OMNI Industrial Campus in Summerville will soon begin construction of a 587,000-square-foot speculative building. Greenville, South Carolina > > Speculative buildings have been leasing quickly in the market, reasoning that the market can sustain the new speculative development in the pipeline. > > Build-to-suit development is prominent in the Upstate industrial market. Delivery of these buildings at full occupancy is the primary driver of large absorption in the market for The year-to-date net absorption for the Greenville/Spartanburg market is 6.3 million square feet, 20.9% higher than the combined year net absorption of 2014 and For more statewide commercial real estate news check out our market reports at: Industrial Employment Columbia, MSA Industrial Jobs Added (Over 12 Months) 2,700 2,400 2,100 1,800 1,500 1, Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Industrial Jobs Added Source: Bureau of Labor Statistics, St. Louis Federal Reserve, Colliers International Feb-15 May-15 Aug-15 Nov-15 Feb-16 Industrial Employment Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION OMNI Industrial Campus Dorchester County Source: WestRock Company PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE 2: EXPANSION PHASE 3: HYPERSUPPLY May-16 Aug Total Industrial Employment (Thousands) 6 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

7 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 $2.5 billion in annual revenue 2 billion square feet under management 16,000 professionals and staff FOR MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina Liz.McCary@colliers.com Bryana Mistretta Research Coordinator South Carolina bryana.mistretta@colliers.com COLUMBIA INDUSTRIAL PROFESSIONALS: Chuck Salley, SIOR Vice President & Director of Industrial Brokerage Team Chuck.Salley@colliers.com Dave Mathews, SIOR Senior Brokerage Associate Dave.Mathews@colliers.com Sam Myers Brokerage Associate Sam.Myers@colliers.com Colliers International Columbia 1301 Gervais Street, Suite 600 Columbia, South Carolina USA About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,000 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.