The Post-Panamax Era Leads to Bigger Industrial Buildings In South Carolina

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1 Research & Forecast Report SOUTH CAROLINA INDUSTRIAL Q The Post-Panamax Era Leads to Bigger Industrial Buildings In South Carolina Bryana Mistretta Research Coordinator South Carolina Key Takeaways > > New industrial buildings are larger than ever. > > The first post-panamax ship travelled through the Panama Canal Expansion. > > Road improvements in the Charleston industrial market will unlock new industrial land sites. Larger Industrial Buildings to Come Increased activity in the South Carolina market from larger tenants, the construction of a larger port, the expansion of the Panama Canal and the introduction of post-panamax ships to the Port of Charleston have led to larger industrial buildings. Build-tosuit development is prominent, with seven new deliveries in the third quarter, including the one million-square-foot expansion for First Quality Tissue in Anderson County; the 251,100-square-foot facility for Phillips Pet Food and the 150,000-square-foot facility for Sterling Contract Packaging in Spartanburg County; Magna International s 165,000-square-foot facility in Greenville County; and the 118,000-square-foot expansion for Sportsman Boats in Dorchester County. Delivery of these large build-to-suit buildings at full occupancy is the primary driver of the large absorption in the market and is impacting the size of speculative development. Market Indicators Relative to prior period Q Q4 2016* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected South Carolina Industrial Inventory I-77 Corridor 31.6 million SF Midlands 82.8 million SF Over the last five years, 35 buildings over 250,000 square feet have delivered, with 19 of those since In 2007, most speculative construction was between 100,000 and 350,000 square feet. Today, developers are constructing buildings between 150,000 and 400,000 square feet but with the opportunity to expand the building by two or three times its size. The Keith Corporation s building at Charleston Trade Center is a speculative building currently under construction that will be 307,350 square feet, expandable to 923,000 square feet, and a planned building in Velocity Park in Greer will be 600,000 square feet, expandable to 1 million square feet. Additionally, construction will begin soon on a new speculative building at OMNI Industrial Campus. The building will be 587,720 square feet, much larger than the standard speculative building in the South Carolina market. South Carolina million SF Source: Colliers International, CoStar Lowcountry 35.6 million SF Upstate million SF

2 New Roads. New Industrial Sites The Post Panamax Era In Charleston, a $65 million project funded by Berkeley County, the South Carolina Transportation Bank and a grant from the South Carolina Ports Authority has begun to create a new interchange along Interstate 26 between Summerville and Jedburg. The new interchange is under construction at Sheep Island Parkway (future Exit 197), also known as Nexton Parkway, one mile west of US Highway 17 (Exit 199). As part of the project, I-26 will be widened from four to six lanes for the one mile stretch between US Highway 17 (North Main Street) and the new Sheep Island Interchange. Both the interchange and the widening are expected to be complete in December of Upon completion, the new interchange will provide two access points to the industrial sites along the corridor. To the West of I-26 along this stretch are Charleston Trade Center and Jedburg Commerce Park, and to the East are the Rockefeller Group-MeadWestvaco Foreign Trade Zone and OMNI Industrial Campus. More direct access will alleviate traffic along the one mile segment of the I-26 corridor and in turn make the Charleston Trade Center, Jedburg Commerce Park, Rockefeller - MeadWestvaco Foreign Trade Zone and OMNI Industrial Campus more viable options for prospective tenants in the Charleston Market. These sites are currently within 11 miles of Volvo, 16 miles of Daimler and 22 miles of Boeing and the North Charleston Port Terminal. North Maple Street SHEEP ISLAND INTERCHANGE - I-26 WIDENING EXIT 194 Drop Off Road OMNI Industrial Campus Red Bay Road Rockefeller Group- MeadWestvaco FTZ 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. To take full advantage of its competitive position, the South Carolina Ports Authority is planning a second Inland Port in Dillon County at a location 160 miles North of the Port of Charleston, off Interstate 95 near the North Carolina border. The port will ease truck 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. Jedburg Commerce Park Charleston Trade Center EXIT 197 Nexton Parkway EXIT 199A Existing Proposed Under Construction Industrial Park Boundary EXIT 199B 2 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

3 Charlotte Atlanta SOUTH CAROLINA IS CONNECTED Upstate I-77 Corridor Midlands Lowcountry 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 3 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

4 Construction Pipeline Construction activity remains high in the South Carolina market. Developers are building larger speculative buildings, many with room to expand. Build-to-suits and expansions from existing tenants are also popular with seven deliveries this quarter and several more set to deliver by the end of the year. Recently Delivered > > Mankiewicz Coatings completed their $25 million, 90,000-square-foot facility this quarter in Berkeley County. > > The 118,000-square-foot expansion of the Sportsman Boats manufacturing facility is now complete in Dorchester County. > > Construction of 2011 Broadbank Court completed this quarter. The distribution building is 46,800 square feet located in the Pine Hill Business Campus in Dorchester County. > > After a $2.5 million investment, Protective Packaging s 60,000-square-foot expansion to their facility at 255 Standard Warehouse Road in Kershaw County completed this quarter. > > The 1,000,000-square-foot expansion at the First Quality Tissue facility in Anderson County is now complete. > > A 234,000-square-foot building delivered in the White Horse Industrial Center in Greenville County. > > Magna International s 165,000-square-foot facility in Augusta Grove industrial park in Greenville County is complete. > > The 150,000-square-foot build-to-suit for Sterling Contract Packaging in Spartanburg County completed this quarter. The facility will allow the company to consolidate their three locations. > > Construction at 3085 Highway 101 South in Spartanburg County is now complete. The flex building is 12,000 square feet, fully occupied by JGR. > > 151 Corporate Drive, a 52,000-square-foot flex building in Spartanburg County delivered this quarter. Pec Tec is occupying 32,000 square feet of the building. > > The 363,000-square-foot, second building in Flatwood Industrial Park is now complete in Spartanburg County. > > The 251,100-square-foot facility for Phillips Pet Food, delivered this quarter at Wingo Park in Spartanburg County. A 101,200 and a 314,500-square-foot building are planned for the park. Sportsman Boats Expansion Dorchester County Under Construction > > Construction at the Volvo Cars of North America factory in Berkeley County has been underway for a year. In 2015, Volvo Cars announced a $500 million investment to create 2,000 new jobs in the Charleston industrial market. The facility will be 2.3 million square feet and is expected to deliver at the end of Once complete, it will produce 100,000 cars and $4.8 billion in economic output each year. > > The 396,000-square-foot paint hangar for The Boeing Company is nearly complete at 5300 International Boulevard in Charleston County. The facility will be finished by the end of the year. > > The 82,500-square-foot expansion of the Google Data Center in Berkeley County is expected to be completed by the end of > > The first building of the Charleston Trade Center in Berkeley County is expected to deliver by the end of Once complete, the building will be 307,350 square feet, providing the leasee future expansion to 923,000 square feet. > > Brookwood Capital Partners are developing three industrial buildings at Airport Commerce Center in Charleston County set to deliver the first quarter of Building 300 is a 100,000- square-foot build-to-suit for American Tire. Buildings 100 and 200 will be 144,000 and 154,000 square feet respectively. > > Construction of the 67,500-square-foot, Building Two at Atlas Commerce Center in Berkeley County is nearly complete. > > Liberty Property Trust broke ground on a 171,600-squarefoot warehouse at the new Caliber North industrial park in Spartanburg County. > > Jon McClure, a private developer, is developing a 75,000-squarefoot speculative building in Clinton 26 Commerce Park. A 100,000-square-foot pad site was also recently completed in the park located along Highway 72. > > 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 Flatwood Industrial Park Spartanburg County Source: CoStar Source: Johnson Development Associates, Inc. 4 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

5 Notable Transactions Market Conditions Strong leasing velocity led to the net absorption of nearly 4 million square feet of industrial and flex space across the state. Transaction velocity is expected to continue through the remainder of the year. Sales > > 2838 Grandview Drive in Greenville County, a 226,000-squarefoot building occupied by Executive Cabinetry, was purchased by AIC Ventures for $6.5 million, or $28.76 PSF. > > 111 Southchase Boulevard, a 168,000-square-foot building in Greenville County sold to STAG Industrial Holdings as part of a $30 million, three-property portfolio. > > Exeter Property Group purchased 52 Bruce Road, a 131,500-square-foot building occupied by Nissan for $11.1 million and 4611 Dairy Drive, a 222,900-square-foot building occupied by Multi-Pack Solutions for $13.1 million. > > Matrix Parkway, a 71,800-square-foot building, sold to MDH Partners as part of a 9-building portfolio sale. The building was purchased for $1.6 million. > > Augusta Grove-Greenville LLC, a joint venture between The TPA Group and Appian Investments, purchased the 1,100-acre Matrix Industrial Park, now Augusta Grove, off of Interstate 185. The development began 15 years ago and has 13 sites totaling 709 acres available. > > 115 Windhill Road, a 23,000-square-foot industrial building in Richland County sold for $725,000, or $31.52 PSF. > > The two industrial buildings located at 5801 North Rhett are a combined 500,000 square feet of warehouse space with rail access. CenterPoint Properties purchased both buildings for $29 million, or $58.00 PSF. Leases > > Zinus leased 473,000 square feet at 1125 Newton Way, a former Piggly Wiggly distribution center in Berkeley County. > > Cassique Warehouse and Packaging leased 130,700 square feet at 2701 Azalea drive in Charleston County this quarter. > > Elite Logistics leased 126,000 square feet at Legacy Park West in York County. > > Baier & Michels USA Inc. leased 77,000 square feet in the Brookfield South Business Park in Greenville County. > > Meyer Tool, Inc announced a $6 million investment and leased 71,000 square feet at 7640 Pelham Road in Greenville County. > > DAA Draexlmaier leased 197,000 square feet at 285 Parkway East in Hillside Industrial Park in Spartanburg County. > > Brose North America invested $6 million and leased 77,000 square feet at Hillside Enterprise Park in Spartanburg County. > > Hardy Corporation leased 41,600 square feet this quarter at 2413 Leaphart Road in Lexington County The South Carolina industrial market has seen the absorption of 10.5 million square feet this year, ending the third quarter with a vacancy rate of 7.4%. The average asking rental rate for industrial space is $3.65 per square foot per year triple net (PSF/YR NNN) and $3.83 PSF/YR NNN for combined industrial and flex spaces. Charleston The third quarter ended with more than one million square feet of net absorption, bringing the market vacancy rate to 6.1% from 8.4% last quarter. Charleston has the highest average asking rental rate for industrial space in South Carolina at $4.85 PSF/YR NNN. Only a year ago, the average asking rental rate was $4.52 PSF/YR NNN. Columbia A large number of small leases this quarter contributed to a market absorption of 720,600 square feet and a vacancy rate of 7.4%, down from 8.2% at the end of the second quarter. High prospect activity is expected to lower the vacancy rate by the end of the year. The average asking rental rate for industrial space remains steady at $3.27 PSF/YR NNN, a 4.8% increase from two years ago. Greenville Robust leasing activity led to the absorption of more than two million square feet in the eight upstate counties. In spite of this, the vacancy rate for industrial space was 7.1% at the end of the third quarter, slightly higher than the 6.9% vacancy rate of a year ago primarily due to new construction. The average asking rental rate was $3.37 PSF/YR NNN, a small increase from the average asking rental rate of $3.32 PSF/YR NNN at the end of the second quarter. South Carolina Industrial Market Conditions YTD Net Absorption Average Asking Rental Rate 10.5 million SF $3.83 NNN PSF/YR Vacancy Rate 7.4% 5 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

6 Q Industrial Market Summary Statistics South Carolina COUNTY BUILDINGS INVENTORY (SF) DIRECT VACANT (SF) SUBLEASE VACANT (SF) TOTAL VACANT (SF) TOTAL VACANCY RATE (%) Q NET ABSORPTION (SF) LOWCOUNTRY COUNTIES Berkeley County ,256, % 660,333 Charleston County , % 271,998 Dorchester County , % 121,000 Lowcountry Total % 1,053,331 MIDLANDS COUNTIES Aiken County 63 10,356, , , % 157,628 Calhoun County 9 562, ,200 Clarendon County 9 695, , , % 0 Darlington County 21 3,565, , , % 0 Fairfield County 15 2,342, , , % 0 Florence County 110 8,608, , , % 116,500 Kershaw County 46 7,921, , , % -11,000 Lee County 8 823, Lexington County ,396, , , % -17,806 Newberry County 17 2,485, ,800 Orangeburg County 74 7,609, , , % 111,048 Richland County ,102,035 2,232,417 9,550 2,241, % 390,694 Saluda County 3 400, , , % 0 Sumter County 56 5,165, , , % -54,400 Midlands Total 1,015 83,036,305 6,238,255 9,550 6,247, % 720,664 UPSTATE COUNTIES Anderson County ,600,269 1,137,202-1,137, % 2,270,709 Cherokee County 67 7,452,713 1,291,975-1,291, % -551,183 Greenville County 1,327 74,416,513 4,731,536 5,280 4,736, % 121,096 Laurens County 83 11,078,126 61,928-61, % 0 Oconee County 54 4,365, , , % 145,910 Pickens County 89 5,553, , , % -22,195 Spartanburg County ,863,451 6,630,385 1,550 6,631, % 180,368 Union County 27 3,890,010 95,020-95, % 0 Upstate Total 2, ,220,161 14,545,652 6,830 14,552, % 2,144,705 I-77 CORRIDOR Chester County 43 5,998,244 1,753, ,210 1,989, % 12,000 Lancaster County 64 5,208,536 1,078,689-1,078, % 0 York County ,304, ,064 6, , % 52,589 I-77 Corridor Total ,511,419 3,221, ,210 3,463, % 64,589 MARKET TOTALS 4, ,309,955 26,145, ,850 26,438, % 3,983,289 Source: Colliers International, CoStar Port of Charleston Inland Port Terminal 6 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

7 Recent Investments and Expansions The combination of location and recurring recognitions for strong workforce, efficient logistics, and low cost of doing business encourages companies to stay and attracts new companies to the state. The market is growing quickly, with interest from companies outside of the market intensifying. Not only are external companies looking to enter the market, but existing companies are also expanding their operations. In the third quarter, there were 13 industrial projects announced totaling $442.7 million of investment and the creation of 840 new jobs in the Upstate. Additionally, $10.5 million in capital investment and 231 new jobs were announced in the Charleston market. Between January and September of 2016, $392 million in capital investments and 549 new jobs were announced in the Midlands region. Strong Industrial Employment Industrial employment, those jobs related to the manufacturing and whole sale trade sectors, is strengthening in South Carolina. According to the most recent data from the Bureau of Labor Statistics, industrial employment in South Carolina has risen to jobs, a 1.6% increase from September 2015 to September Industrial employment in South Carolina accounted for 15.1% of total non-farm employment in September The Upstate Region consisting of the combined Greenville- Anderson-Mauldin and Spartanburg, SC metropolitan statistical areas (MSAs)., accounts for 36.3% of total industrial employment in South Carolina. The Charleston - North Charleston MSA makes up 11.4% of South Carolina s total industrial employment with 35,500 industrial employees, a 3.5% increase over the last 12 months. The Columbia, South Carolina MSA contributes 15.4% to total industrial employment in South Carolina adding an additional 1,200 industrial jobs over the last 12 months. Industrial employment is expected to continue an upward trend. Market Outlook A growing port system and road improvements will continue to strengthen the South Carolina industrial market. Investment conditions are expected to continue to improve with high rental rates, moderate capitalization rates and low interest rates. Demand for space will continue to heighten as newly delivered spaces are absorbed and vacancy rates drop over the next quarter. As quality, available space dwindles in the market additional construction will be necessary to meet the demand. Long-term, the market expects positive growth from the expansion and investment of new and existing companies. Q Highlighted Capital Investments COMPANY INVESTMENT JOBS COUNTY Michelin North America Inc 270,000, Spartanburg Tower International 75,000, Greenville Yangfeng Automotive Interiors 71,000, Laurens West Fraser 33,000,000 0 Newberry stoba $7,000, Berkeley Brose North America Inc. 6,000, Spartanburg Meyer Tool 6,000, Greenville Annual Change in Industrial Employment by Month South Carolina Industrial Jobs Added Over 12 Months (Thousands) Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Source: St. Louis Federal Reserve, Bureau of Labor Statistics, Colliers International Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY Mar-13 Jun-13 PHASE 1: RECOVERY Sep-13 Dec-13 Mar-14 Industrial Jobs Added Jun-14 Sep-14 Dec-14 Mar-15 COMMERCIAL REAL ESTATE GROWTH CYCLE Jun-15 Sep-15 Total Industrial Jobs Dec-15 PHASE 2: EXPANSION Mar-16 Jun-16 Sep Total Industrial Jobs (Thousands) PHASE 4: RECESSION For more statewide commercial real estate news check out our market reports at: PHASE 3: HYPERSUPPLY 7 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

8 554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 $2.5 billion in annual revenue 2 billion square feet under management 16,000 professionals and staff 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 554 offices in 66 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 MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina Liz.McCary@colliers.com Bryana Mistretta Research Coordinator South Carolina bryana.mistretta@colliers.com CHARLESTON INDUSTRIAL PROFESSIONALS: Hagood Morrison, MBA, SIOR Simons Johnson, CCIM, MCR, SIOR John Beam Tim Raber Peter Fennelly, MCR. SIOR, SLCR Colliers International Charleston 25 Calhoun Street, Suite 220 Charleston, South Carolina USA COLUMBIA INDUSTRIAL PROFESSIONALS: Chuck Salley, SIOR Dave Mathews, SIOR Sam Myers Colliers International Columbia 1301 Gervais Street, Suite 600 Columbia, South Carolina USA GREENVILLE INDUSTRIAL PROFESSIONALS: Givens Stewart, SIOR Garrett Scott Richard Jackson Brockton Hall, MRED Richard Barrett Brannan Hudson Colliers International Greenville 55 E. Camperdown Way, Suite 200 Greenville, South Carolina USA 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.