Industrial Market Continued to Grow and Strengthen in 2015

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1 Research & Forecast Report GREENVILLE, SC INDUSTRIAL Q4 205 Industrial Market Continued to Grow and Strengthen in 205 Jessica Rahal Research Coordinator South Carolina Key Takeaways >> The Greenville/Spartanburg industrial market continued to strengthen through 205, ending the fourth quarter with declined vacancy, higher rental rates and new construction. >> Capital investments continue to flow into the region from new and existing companies. >> The region meets key site selection criteria defined by Area Development Magazine. >> Industrial employment is on the rise as the Southeast embraces a manufacturing renaissance. >> The market is poised for further development and growth in 206. Market Indicators Relative to prior period Q4 205 Q 206* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Key Site Selection Factors Attract Companies to the Region In today s transforming industrial market, manufacturers and distributors are attracted to the Greenville/Spartanburg region for its accessibility to and from other markets at a time when transportation costs are increasing. A recent corporate site selection survey by Area Development Magazine ranked highway accessibility the top location factor in facility planning. Transportation costs are making up a growing portion of operating expenses, and thus highway accessibility is outweighing real estate costs in site selection, specifically for distribution centers. Efficient logistics and supply chain optimization are growing increasingly important as firms look for ways to cut operating costs. The Greenville/Spartanburg region has received significant attention from several distribution centers and third-party logistics providers, attracting investments from Techtronic Industries, Colgate-Palmolive, Dollar Tree, Rite Aid and Kenco Logistics Services over the past year. The Interstate 85 (I-85) corridor runs through the region, connecting it to major markets such as Charlotte, NC and Atlanta, GA, among others. The region is a 2.5-hour drive to the Port of Charleston, which is also accessible via Norfolk Southern Rail and the South Carolina Inland Port. Summary Statistics Market Industrial Flex 8.0% Change From Q Absorption Q4 205 Greenville Industrial Market Vacancy Rate (basis points) (Thousand Square Feet) Under Construction (Million Square Feet) Industrial Asking Rents NNN Market $3.27 Greenville $3.49 Spartanburg $3.7

2 Market Conditions Demand for space is strong throughout the market resulting in strong leasing velocity and positive net absorption. The Greenville/ Spartanburg industrial market continued to improve through 205, which ended with a total vacancy rate of for the combined industrial and flex market, down from 7.8% one year ago and 8.4% two years ago. The market has welcomed significant activity during recent years and is tighter than it was in 200 when the vacancy rate was 0.2%. Manufacturers and distributors benefit from the region s connectivity to other markets as well as the region s talented labor force and available speculative buildings. Interest in the market is strong as both domestic and foreign firms look for space. The market is oftentimes finding itself among top potential sites for new facilities, competing with markets such as Atlanta, GA and Charlotte, NC. Industrial Market Industrial space continues to be absorbed in the Greenville/ Spartanburg industrial market, which ended 205 with a total vacancy rate of, down from 7.7% one year ago and 0.0% in 200. Greenville, Spartanburg and Anderson counties account for 87.8% of the region s industrial inventory and reported vacancy rates of 7.8%, 8.0% and 5.%, respectively, at year-end 205. The market absorbed approximately 742,000 square feet of industrial space during the fourth quarter of 205, contributing to a total net absorption of 2.5 million square feet for the year. Spartanburg County experienced the greatest activity during the fourth quarter and absorbed approximately 420,000 square feet of industrial space. Asking rental rates are increasing steadily as new construction delivers and space continues to be absorbed in the market. Asking rental rates for the market averaged $3.27 NNN at year-end 205, up from $3. NNN one year ago and $2.83 NNN two years ago. Greenville county is home to the most expensive industrial space with asking rental rates averaging $3.49 NNN at year-end 205, increasing from $3.28 NNN the previous year. Flex Market Activity in the Greenville/Spartanburg flex market falls behind leasing velocity and interest in the industrial market. Total net absorption for 205 was approximately 200,000 square feet with the majority of activity occurring during the fourth quarter of 205. The total vacancy rate for the flex market was down to 8.0% at year-end 205, down from 9.6% the previous quarter and 0.8% one year ago. Greenville and Spartanburg counties account for approximately 88.% of the total flex inventory and had vacancy rates of 8.0% and 8.4%, respectively, at year-end 205. Combined Industrial & Flex Markets Vacancy Rate Trends 0.2% 9.6% 9.4% Industrial Market Vacancy Rates 8.3% 7.7% 5.4% 5.3% 5.% 8.4% 8.8% 8.0% 7.8% 7.8% 7.8% Market Anderson Greenville Spartanburg Q4-3 Q4-4 Q % Q4 200 Q4 20 Q4 202 Q4 203 Q4 204 Q4 205 Industrial Market Rental Rates $2.83 $3.27 $3. $2.94 $3.00 $2.9 $2.60 $3.49 $3.28 $2.77 $3.7 $3.09 Market Anderson Greenville Spartanburg Q4-3 Q4-4 Q4-5 2 South Carolina Research & Forecast Report Q4 205 Greenville Industrial Colliers International

3 Construction Update Construction is on the rise in the region with record-level build-to-suit and speculative construction. Approximately 7 million square feet of industrial space are under construction in the Greenville/Spartanburg market. As of the third quarter, commercial building permits were almost 20% more than the same time in 204. According to Market Edge data, the value of commercial building permits at the end of the third quarter of 205 totaled $.4 billion, exceeding the 204 total of $.0 billion. > > Construction recently completed at Hillside Enterprise Park in Spartanburg County. The 55,000-square-foot speculative building, developed by Scannell Properties, is available for lease. > > Building at Logue Park in Greenville County is nearing completion. The 0,000-square-foot speculative building is being developed by Cothran Properties. > > Construction is underway at 545 Brookshire Road, a 240,000 square-foot speculative industrial building being developed in Spartanburg County by Beacon Partners. > > Johnson Development Associates are developing a 363,000 square-foot speculative facility at Flatwood Industrial Park in Spartanburg County. > > Becknell Industrial is developing a 75,000-square-foot industrial building at Wingo Park in Spartanburg County. > > Construction recently completed on a 306,000-square-foot speculative warehouse at White Horse Industrial Center. Colgate-Palmolive plans to establish a new distribution center at the facility, which was developed by Exeter Property Group and Burnham Partners. The developers plan to construct a second speculative building at the park. The building will be approximately 234,000 square feet and have a 34-foot high ceiling and cross-docking capability. > > Construction is underway on Techtronic Industries (TTi) new.3 million-square-foot light assembly and distribution facility. The company is investing $85 million and expects to create more than 200 new jobs. The build-to-suit facility is under construction at the intersection of I-85 and Highway 8 and is expected to complete by mid-year 206. > > Dollar Tree s new.5 million-square-foot distribution center is under construction at Upstate Corporate Park. The company is investing $04.4 million and plans to hire 400 employees by The presence of the South Carolina Inland Port and I-85 helped attract the company to the region. > > Rite Aid s 900,000-square-foot distribution center is under construction in Spartanburg County. The center is a consolidation of three existing distribution centers and will allow improved efficiency and easy access to Southeastern markets via I-85 and other modes of transportation. Highlighted Under Construction & Planned Speculative Developments Under Construction Logue Park (speculative) Greenville County Cothran Properties Building : 0,000 SF Building 2 (Complete): 90,000 SF 00% leased by Silvercote 545 Brookshire Road (speculative) Spartanburg County Beacon Partners 240,020 SF 3 Flatwood Industrial Park (speculative) Spartanburg County Johnson Development Associates 363,000 SF Wingo Park (speculative) Spartanburg County Becknell Industrial 75,000 SF Techtronic Industries (build-to-suit) Anderson County.3 million SF Dollar Tree (build-to-suit) Cherokee/Spartanburg Counties.5 million SF Rite Aid (build-to-suit) Spartanburg County 900,000 SF Recently Delivered A growth in demand for space in the Upstate s tightening industrial market has spurred speculative construction throughout the region. Approximately 7 million square feet of industrial space remain under construction. Hillside Enterprise Park (speculative) Spartanburg County Scannell Properties 55,000 SF Caliber Ridge Industrial Park (speculative) Spartanburg County Liberty Property Trust 30 Caliber Ridge Drive: 56,000 SF 00% Vacant 20 Caliber Ridge Drive: 56,000 SF 20% Vacant Southchase One (speculative) Greenville County Pattillo Industrial Real Estate 205,000 SF Tenant: Tower International White Horse Industrial Center (speculative) Greenville County Burnham Partners LLC and Exeter Property Group 306,000 SF Tenant: Colgate-Palmolive 6 3 South Carolina Research & Forecast Report Q4 205 Greenville Industrial Colliers International

4 Recent Investments & Expansions More than $880 million worth of investments were announced in 205 for the Greenville/Spartanburg market from new and existing companies, a testament to the region s attractiveness. > > Auriga Polymers, Inc., a subsidiary of Indorma Ventures Public Company Limited, is investing more than $35 million in its Spartanburg County plant. > > Asten Johnson, Inc. is investing $32 million on new equipment at its Laurens County plant. > > Haemonetics Corporation is investing approximately $20 million and creating 40 new jobs over the next five years. The company is expanding its existing operations by 3,000 square feet and upgrading equipment. > > Brawo USA is investing $8 million and adding 30 jobs to its existing facility at Hunter Industrial Park in Laurens County. > > Rochling Automotive plans to invest $5.8 million to increase production capacity at its Spartanburg County facility. > > Reinicke Athens, Inc. is investing an additional $5.5 million to expand its new Laurens County facility, bringing the company s total investment to $0 million. The new facility is under construction at Owings Industrial Park. > > SAGE Automotive Interiors plans to invest $5 million to expand its existing Greenville County operations. > > Earth s Creation, USA plans to invest $2.8 million and establish operations in Greenville County. The vitamin manufacturer is relocating from Miami-Dade County in Florida and plans to create 44 new jobs in Greenville. The manufacturer will occupy a new 99,000-square-foot facility. > > Lakeside Steel and Machine is investing $2.5 million and creating 3 new jobs in an expansion of its Anderson County facility. > > Palmetto Engineering recently announced plans to expand its presence in Anderson County by investing $.2 million and creating 25 new jobs. Automotive-Related Firms Among Top Investments of 205 Some of the largest investments of 205 came from automotiverelated manufacturers and suppliers as the region s automotive cluster grows. > > Mitsubishi Polyster Film Inc. announced plans earlier this year to invest $00 million and expand its Greer, SC manufacturing facility in Greenville County. > > Global automotive supplier Magna International plans to invest $50.8 million and create 53 new jobs in an expansion of its existing Greenville County plant. The manufacturer plans to move into a new 65,000-square foot facility at Matrix Park. > > Tier-one automotive supplier, Tower International, is establishing its first South Carolina plant in Greenville County. The supplier plans to invest $44 million and create 30 new jobs. The manufacturer is leasing a new 205,000-square-foot speculative industrial building, Southchase One, developed by Pattillo Industrial Real Estate. The manufacturer was considering sites in neighboring states but chose Greenville County for its available speculative buildings and proximity to customers. > > Draxlmaier, a top automotive supplier, is expanding its Spartanburg County plant, investing more than $35 million and creating 94 new jobs over the next five years. The tierone automotive supplier manufactures interiors for premium automobiles and plastic components. The supplier is constructing a new 84,000 square-foot production and logistics facility. > > ZF Transmissions, global supplier of driveline and chassis technology, is expanding its transmission manufacturing plant in Laurens County. The company is investing $22.5 million and creating 545 new jobs to expand its manufacturing capacity. The manufacturer and supplier acquired an existing, 50,000-squarefoot facility to house its manufacturing and warehousing operations, which will be operational early in Total Capital Investment and Job Creation in the Upstate by Country of Origin (greater than $200 million) Efficient logistics and a talented labor force attract investments from all around the globe. $244 million,500 jobs $4.7 billion 7,000 jobs $3. billion $647 6,000 million jobs 565 jobs $207 million 500 jobs $.4 billion,800 jobs Over $ billion were invested in the Upstate from 200 to 205 resulting in the creation of more than 30,000 new jobs. Foreign countries with the greatest investments include Germany, Japan, France, Canada, and China. Source: Upstate SC Alliance, Colliers International 4 South Carolina Research & Forecast Report Q4 205 Greenville Industrial Colliers International

5 Q4 205 Industrial Market Summary Statistics Greenville/Spartanburg, SC MARKET INDUSTRIAL SPACE BUILDINGS INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) Q4 205 ABSORPTION AVERAGE ASKING RENTAL RATE (NNN) Anderson County 269 8,494,46 948, ,782 5.% 02,400 $2.9 Cherokee County 6 5,835,396 77, , % 0 $3.09 Greenville County,20 68,307,786 5,276,260 26,000 5,302, % 28,592 $3.49 Laurens County 75 0,927,30 56, ,057 5.% 0 $2.85 Pickens County 73 5,057, , , % 0 $2.63 Spartanburg County ,900,0 5,437, ,084 5,645,83 8.0% 420,475 $3.7 Industrial Total 2,470 79,522,688 3,283,47 234,084 3,57,23 74,467 $3.27 FLEX SPACE Anderson County 2 525,993 27, , % 0 $8.3 Cherokee County 2 34,692 2, , % 0 - Greenville County 206 4,779,080 38, , % 07,392 $7.73 Laurens County 2 38, % 0 - Pickens County 2 255,62 22, , % 2,745 - Spartanburg County 58,549,896 29, , % 9,50 $8.08 Flex Total 30 7,82, , , % 9,647 $7.87 MARKET TOTALS Anderson County 290 9,020, , ,032 5.% 02,400 $3.27 Cherokee County 63 5,870, , ,03 2.4% 0 $3.09 Greenville County,326 73,086,866 5,657,357 26,000 5,683, % 325,984 $3.73 Laurens County 77 0,965,282 56, ,057 5.% 0 $2.85 Pickens County 85 5,33, 364, ,90 6.9% 2,745 $2.7 Spartanburg County ,449,907 5,567, ,084 5,775,76 8.0% 429,985 $3.29 Market Total 2,77 86,705,663 3,856, ,084 4,090,626 86,4 $3.44 South Carolina Ports Activity continues to gain momentum at South Carolina s Port of Charleston and Inland Port in Greer. According to the South Carolina Ports Authority, the Port of Charleston handled 53,594 twenty-foot equivalent units (TEUs) in November 205, increasing 6.5% over the previous year. The Inland Port handled 6,28 rail lifts in October 205, according to the South Carolina Ports Authority. Fiscal year to date, rail lifts are nearly 60% more than the previous year. The Inland Port may potentially be expanded to a capacity of 200,000 containers per year in response to increased demand from new users such as Dollar Tree. Currently, the port has a capacity of 20,000 containers. Industrial Employment Annual Change in Industrial Employment by Month Greenville-Anderson-Mauldin, SC MSA Number of Industrial Jobs Added 3,000 2,500 2,000,500,000 Industrial employment, which is made up of manufacturing and wholesale trade employment sectors, continues to grow in the Upstate. The Greenville- Anderson-Mauldin, SC metropolitan statistical area (MSA) reported approximately 72,00 industrial jobs in October 205, a gain of 600 jobs over the previous year. The sector has been growing over recent years, but remains below the high employment levels seen in the 990s when manufacturing was strong in the region. The current manufacturing renaissance and reemergence of Southeastern manufacturing hubs will drive employment growth in the sector Jan- Jun- Nov- Apr-2 Sep-2 Source: Bureau of Labor Statistics, St. Louis Federal Reserve, Colliers International Feb-3 Jul-3 Dec-3 May-4 Oct-4 Mar-5 Aug-5 5 South Carolina Research & Forecast Report Q4 205 Greenville Industrial Colliers International

6 206 Forecast The market is poised for continued improvement and growth in 206. Vacancy will continue to decline and rental rates will increase due to greater competition, and rising construction costs. Manufacturers and distributors will continue to select the region for their operations, benefitting from highway accessibility, the inland port and a skilled labor force. Efficient logistics will continue to drive demand for big box spaces between 500,000 and million square feet, and the market will likely welcome additional distribution centers. Ecommerce facilities will show greater interest in the market in response to shifting demographics and urgency for reducing delivery time to customers. As speculative buildings continue to be absorbed, developers and users will be challenged by limited availability of shovel-ready sites. Consequently, the market will see development extend outside of the traditional industrial corridors. Around the State A growing demand for industrial space throughout South Carolina is attributing to tightening markets and soaring rental rates, creating a need for additional industrial space. Charleston, South Carolina > > Approximately 984,000 square feet of industrial space was added to the existing inventory in 205 and an additional.5 million square feet will deliver during the first quarter of 206. > > Gerber Childrenswear plans to occupy their new distribution facility during the first quarter of 206. The 477,000-square-foot facility is located at Foreign Trade Zone, a joint-venture between The Rockefeller Group and WestRock Land Development. > > Construction is nearing completion at North Point Business Campus on North Rhett Avenue in Hanahan. The 350,856-square-foot speculative industrial building is being developed by WestRock Land Development and SunCap Property Group. Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE : RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE 2: EXPANSION PHASE 3: HYPERSUPPLY GREENVILLE/SPARTANBURG S INDUSTRIAL MARKET is moving along in the expansion phase. Rental rates, occupancy and employment are all strong and continue to increase. New construction is gaining momentum with several build-to-suit and speculative buildings under construction. Current demand has the ability to support additional construction. Gerber Childrenswear Columbia, South Carolina > > Two large manufacturers recently vacated their facilities adding over. million square feet of quality space to the available inventory. Bose vacated its former 470,000-square-foot, Class A manufacturing facility in Northeast Columbia. The facility is located on 04 acres and is expandable to one million square feet. Knauf Insulations recently vacated approximately 677,000 square feet at One Guardian Way in Fairfield County. > > Lexington County and Landmark Builders recently completed construction on a new, 20,000-square-foot speculative industrial building at Saxe Gotha Industrial Park in Lexington County. Former Bose Manufacturing Facility For more statewide commercial real estate news check out our market reports at: 6 South Carolina Research & Forecast Report Q4 205 Greenville Industrial Colliers International

7 502 offices in 67 countries on 6 continents United States: 40 Canada: 3 Latin America: 24 Asia Pacific: 99 EMEA: 08 $2.3 billion in annual revenue.7 billion square feet under management 6,300 professionals and staff FOR MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina Liz.McCary@colliers.com Jessica D. Rahal, CPRC Research Coordinator South Carolina Jessica.Rahal@colliers.com GREENVILLE INDUSTRIAL PROFESSIONALS: Givens Stewart, SIOR Principal Givens.Stewart@colliers.com Garrett Scott Brokerage Associate Garrett.Scott@colliers.com Brockton Hall, MRED Brokerage Associate Brockton.Hall@colliers.com Richard Jackson Brokerage Associate Richard.Jackson@colliers.com Richard Barrett Brokerage Associate RO.Barrett@colliers.com Colliers International Greenville 55 E. Camperdown Way, Suite 200 Greenville, 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 6,300 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 00 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 0 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 205 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.