Increased statewide industrial investment is expected in 2018

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1 Research & Forecast Report SOUTH CAROLINA INDUSTRIAL Q Increased statewide industrial investment is expected in 2018 Crystal Baker Research Coordinator South Carolina Key Takeaways > > As South Carolina quickly becomes a main industrial hub, increased leasing and sale activity will follow. > > The Tax Cuts and Jobs Act may allow for increased industrial investment. Market Conditions South Carolina is a flurry of industrial activity. As the plans of an expanding Port of Charleston come to fruition and logistics infrastructure improvements begin, global companies continue to locate and invest in South Carolina. There are positive changes to be seen throughout the state. South Carolina was ranked #2 on the 2017 Top States for Doing Business commentary by Area Development magazine, in addition to being awarded a 2017 Silver Shovel Award in the States with 3 to 5 Million Population category. The Shovel Awards are awarded to states that are compiling healthy and impressive rosters of projects and announcements, expansions and new facilities. With these nationwide honors, it is easy to see why business is picking up across South Carolina Market Recap The Port of Charleston annual cargo shipment totals set a record during 2017, moving more cargo boxes through the port last year than ever before in its 75 year history. The inland port in Greer, SC is also reporting a record number of shipments, a 20.4% increase over the shipments handled during This positive environment for world-class companies to move to South Carolina and add employment will enhance the appeal of statewide industrial real estate market. The South Carolina industrial market consists of 6,606 industrial buildings totaling million square feet, and experienced 4.07 million square feet of absorption during The overall vacancy rate ended the year at 8.62%, and the triple net average asking rental rate rose to $3.73 per square foot during the fourth quarter of Market Indicators Relative to prior period Q Q1 2018* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Summary Statistics Q Industrial Market Vacancy Rate 8.62% Change From Q (basis points) Absorption (Million 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 Market $3.73 Change From Q % Flex $8.16 Manufacturing $3.17 Warehouse $3.80

2 Q Industrial Market Summary Statistics South Carolina SUBMARKET BUILDINGS AUGUSTA AIKEN (SOUTH CAROLINA PORTION) INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) NET ABSORPTION RENTAL RATE (PSF/YR) Flex/R&D 1 11, Manufacturing 37 5,569, , , % 107,900 $1.76 Warehouse 77 4,252, , , % 11,013 $3.31 Augusta Aiken Total 115 9,833,230 1,446,648-1,446, % 118,913 $2.84 CHARLESTON Flex/R&D 86 3,738, , , % 9,552 $7.53 Manufacturing ,347,769 1,103,067-1,103, % -3,151 $4.76 Warehouse ,548,394 2,564, ,283 2,777, % -348,650 $4.96 Charleston Total 1,011 48,634,745 3,843, ,283 4,056, % -342,249 $4.99 CHARLOTTE (SOUTH CAROLINA PORTION) Flex/R&D 9 251, Manufacturing ,324, , ,622 1,244, % -122,344 $3.72 Warehouse ,851,057 2,011,626-2,011, % -25,987 $6.30 Charlotte Total ,427,814 2,895, ,622 3,256, % -148,331 $5.89 COLUMBIA Flex/R&D 73 1,930, ,561 7, , % 20,622 $9.20 Manufacturing ,721,151 2,502, ,250 2,604, % 73,435 $3.00 Warehouse ,620,499 3,623,867 80,739 3,704, % 69,653 $3.52 Columbia Total 1,264 67,272,474 6,443, ,239 6,622, % 163,710 $3.51 FLORENCE MYRTLE BEACH Flex/R&D 6 69,662 2,450-2, % - $7.31 Manufacturing ,017,063 2,067,758 57,120 2,124, % 1,332 $2.13 Warehouse ,879,666 2,783,619-2,783, % 55,160 $2.86 Florence Myrtle Beach Total ,966,391 4,853,827 57,120 4,910, % 56,492 $2.49 GREENVILLE SPARTANBURG ANDERSON Flex/R&D 147 4,392, ,332 5, , % -65,392 $7.75 Manufacturing ,519, , , % 579,489 $4.35 Warehouse 2, ,544,447 11,041,051 1,214,351 12,255, % 309,115 $3.66 Greenville Spartanburg Anderson Total SAVANNAH (SOUTH CAROLINA PORTION) 2, ,456,554 12,413,664 1,219,661 3,633, % 823,212 $3.83 Flex/R&D 3 60,000 6,500-6, % - - Manufacturing 34 4,830, , , % - $3.50 Warehouse 187 4,836, , , % 60,697 $3.72 Savannah Total 224 9,726, , , % 60,697 $3.68 MARKET TOTALS 6, ,317,857 32,450,516 2,039,925 34,490, % 732,444 $3.73 Source: Colliers International, CoStar In January 2017, Colliers International benchmarked its industrial data set statewide. The new standard for collection is all industrial buildings 10,000 square feet or larger that can be readily adapted to an alternative industrial use. All properties were placed into a revised set of markets and submarkets and divided into three categories. Warehouse/Distribution, a facility primarily used for the storage or distribution or both of materials, goods and merchandise. Manufacturing, a facility used for the conversion, fabrication or assembly of raw or partly wrought materials into products or goods. Flex/R&D, a building designed to be used in a variety of ways with at least 30% of the rentable building area used as office. It is usually located in an industrial park setting. Specialized flex buildings can include service centers, showrooms, offices, warehouses and more. Due to the adjustments of the building inventory, comparison of data included in previously published market reports should be avoided. 2 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

3 SOUTH CAROLINA SUBMARKETS 1. Augusta Aiken 2. Charleston 3. Charlotte 4. Columbia 5. Florence Myrtle Beach 6. Greenville Spartanburg Anderson 7. Savannah Statewide Sales Transactions NAME ADDRESS COUNTY SIZE PRICE PRICE PSF BUYER DATE Leeds Park (Portfolio of 3 properties) 4500 Leeds Avenue Charleston 1,051,902 $42,000,000 $39.93 LRC Properties Nov-17 Magna Distribution Center 3052 Moore Duncan Highway Spartanburg 229,950 $18,453,016 $ United Salad Co. Oct-17 Midway Logistic II 825 Bistline Drive Lexington 200,000 $10,000,000 $50.00 STAG Industrial Nov Milacron Drive Greenville 182,534 $5,400,000 $ SE Main, LLC Dec Shaw Street Greenville 130,000 $2,900,676 $22.31 Enigma Corporation Dec-17 FedEx Distribution Center 1892 Anfield Road Charleston 121,683 $21,872,170 $ Monmouth Real Estate Investment Company Perry Avenue Greenville 63,365 $2,150,000 $33.94 The Furman Company, Inc. Interstate Centre Chris Drive Lexington 42,122 $1,550,000 $36.80 Performance Strength Designs, Inc Chrome Drive Greenville 34,080 $1,450,000 $42.55 Walter Panagakos Nov E. Boundary Street Lexington 30,000 $1,000,000 $33.33 Rainbow International of Columbia Nov-17 Oct-17 Oct-17 Nov-17 Statewide Lease Transactions NAME ADDRESS COUNTY SIZE TENANT DATE Gibbons Road Cherokee 422,000 The Recon Group Nov Luken Road Berkeley 101,750 Continental Terminals Inc. Oct Arco Lane Charleston 62,221 Wyse Logistics, Inc. Oct Rutherford Road Greenville 50,000 Playground Equipment Oct-17 Inland Port Greer Monthly Rail Moves November ,465 January 2017 March 2017 May 2017 July 2017 September 2017 November ,593 11,669 12,702 7,011 10,648 7,308 Sources: South Carolina Ports Authority, Colliers International 3 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

4 Augusta Aiken (South Carolina portion) Midway Logistics II West Columbia, SC The Augusta Aiken market, consisting totaling 115 buildings of 9.8 million square feet, ended 2017 with a vacancy rate of 14.71% and posted an annual net negative absorption of 89,043 square feet. The triple net average weighted market rental rate was $2.84 per square foot. Charleston The Charleston market vacancy has risen steadily over the past year, from 4.2% during the fourth quarter of last year up to 8.34% this quarter. Meanwhile, the triple net average weighted market rental rate fluctuated up and down from the fourth quarter of 2016 and has now reached a plateau at $5.00 per square foot. The overall market absorption year-over-year was a net negative 13,352 square feet. Source: CoStar Charlotte (South Carolina portion) The South Carolina portion of the Charlotte submarket has 418 buildings and a total inventory of 35.4 million square feet. The vacancy rate in this submarket ended 2017 at 9.19% and 950,843 square feet were absorbed the fourth quarter of last year through the fourth quarter of The Charlotte industrial market has the highest triple net average asking rental rate in South Carolina at $5.89 per square foot. Clarius Building I Summerville, SC Columbia The central South Carolina industrial market finished strong this year, posting an annual absorption of 1,300,199 square feet. The triple net average market rental rate rose to $3.51 per square foot, up 8.67% from this time last year. The overall market vacancy rate was 9.84%. Industrial construction is also on the rise with 1,060,056 square feet currently under construction and an additional proposed 200,000 square feet. Port of Charleston Annual Twenty-foot Equivalent Unit Volume (in Thousands) Source: CoStar Inland 85 Logistics Center Greer, SC Fiscal Year EXPORT IMPORT EMPTY Source: South Carolina Ports Authority Source: Colliers International 4 South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

5 Florence Myrtle Beach The Florence Myrtle Beach market has a total of 624 buildings with 35.9 million square feet of industrial inventory. At the close of the fourth quarter, the overall Florence Myrtle Beach market posted an annual net negative absorption of 1.8 million square feet and the vacancy rate was 13.65%. The triple net average rental rate in this market ended the year at $2.49 per square foot. Greenville Spartanburg Anderson The Greenville Spartanburg Anderson submarket has 2,950 industrial buildings which comprise million total square feet of inventory. This submarket posted an annual net absorption of 3.6 million square feet and had an average triple net rental rate of $3.83 per square foot. The submarket vacancy rate is 7.05%. Savannah (South Carolina portion) The Savannah submarket, within South Carolina, has 224 buildings with an inventory of 9.7 million square feet. The vacancy rate was 5.80% and this submarket absorbed 156,347 square feet during The average triple net Savannah submarket rental rate was $3.68 per square foot. Notable Transactions The activity within the industrial market includes many investors; however, there are more owner-users this year than last year throughout South Carolina. Strong leasing velocity this year continued to be dominated by companies in the logistics, automotive, plastics and aerospace industries. A Charleston, SC portfolio sale consisting of 3 industrial properties within Leeds Park totaling 1,051,902 square feet sold this quarter, in addition to the South Carolina Industrial Market Conditions 4,073,829 SF 2017 Net Absorption $3.73 NNN PSF/YR Average Asking Rental Rate 8.62% Vacancy Rate 121,683-square-foot Federal Express Distribution Center, which is also in Charleston. Upstate industrial saw an uptick in transaction activity, and four industrial properties totaling 409,979 square feet sold during the fourth quarter. Also, Samsung completed its 150,000-square-foot expansion in Newberry, SC. Laguna Tools leased 50,000 square feet at 825 Bistline Drive in West Columbia, representing its first East Coast distribution center; this manufacturing facility now totals over 600,000 square feet. Construction Pipeline Under Construction > > Inland 85 Logistic Center in Greer is the largest speculative building in the market. It consists of 500,280 square feet, which is expandable to 1,186,680 square feet, and is located on 324 acres of land. > > For the 2.5 million-square-foot Michelin distribution center, located on Highway 101 in Spartanburg County, construction continues, with delivery of the first phase expected in early > > Volvo continues construction of its 2.1 million-square-foot automotive manufacturing facility in Ridgeville. > > Mercedes Sprinter Van continued construction of its 1.2 millionsquare-foot manufacturing facility in North Charleston. > > The Omni Industrial Campus has over 1,025,288 square feet currently under construction. These buildings will deliver in stages, but all are expected to be completed by the fall of > > Construction at the 818,000-square-foot China Jushi manufacturing facility in southeast Columbia continues. > > Sundarum Clayton is constructing a 660,000-square-foot manufacturing building in the Summerville market. > > Miller Valentine is constructing the 200,000-square-foot Midway III speculative warehouse in the Lexington County Industrial Park, and 25,000 square feet of this building is already leased. Completions > > Samsung completed its 150,000-square-foot expansion of the former Caterpillar plant in Newberry, SC. This manufacturing facility now totals over 600,000 square feet. > > The Fed Ex Distribution Center, located at 1892 Anfield Road in North Charleston, completed its 123,500-square-foot facility in the fourth quarter of > > Building 2 of the Atlas Commerce Center, located at 8351 Palmetto Commerce Parkway, completed 67,500-square-foot building. > > A 100,500-square-foot warehouse was completed in Dorchester County at 4756 Highway South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

6 Market Forecast The South Carolina market is buzzing with excitement over the Port of Charleston expansion, the growing automotive manufacturing sector and the anticipation of increased global trade growth. Statewide infrastructure improvements will further strengthen the industrial market by providing viable transportation routes via interstates, railways and waterways. In addition, the most extensive change to the U.S. federal income tax laws in over three decades occurred when President Trump signed into law H.R.1, commonly referred to as the Tax Cuts and Jobs Act (TCJA). In 2018, the effect of this tax law will be widespread and will include benefits for pass-thru businesses such as limited liability companies, S corporations and partnerships, who will be able to receive tax rate deductions. While the increased tax deductions may not spur individuals to become investors, it may incentivize current investors to reinvest their tax savings in real estate. Also, corporate tax cuts will be permanent and will not fade over time like the individual and pass-thru tax cuts will; therefore, corporations will have more money to spend or use to plan future developments. Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE 2: EXPANSION PHASE 3: HYPERSUPPLY The industrial market is the fastest growing real estate sector, according to Real Capital Analytics, with a year-over-year surge of over 20%. Since South Carolina is quickly becoming an industrial hub with international interest, the industrial market can expect to see increased statewide industrial activity, lower vacancy and higher rental rates through South Carolina is connected. Various modes of transportation provide for efficient logistics and access to global and domestic markets. 85 RAIL: CSX Norfolk Southern PORTS: Port of Charleston SC Inland Port (Greer) AIR: Greenville-Spartanburg International Airport (GSP) Columbia Metropolitan Airport (CAE) Charleston International Airport (CHS) Myrtle Beach International Airport (MYR) Charlotte Douglas International Airport (CLT) South Carolina Research & Forecast Report Q South Carolina Industrial Colliers International

7 554 offices in 68 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 $2.6 billion in annual revenue 2 billion square feet under management 15,000 professionals and staff FOR MORE INFORMATION: Liz McCary Vice President Marketing South Carolina Liz.McCary@colliers.com Crystal Baker Research Coordinator South Carolina crystal.baker@colliers.com COLUMBIA INDUSTRIAL PROFESSIONALS: Chuck Salley, SIOR Dave Mathews, SIOR Colliers International Columbia 1301 Gervais Street, Suite 600 Columbia, South Carolina USA Thomas Beard GREENVILLLE ANDERSON SPARTANBURG INDUSTRIAL PROFESSIONALS: Garrett Scott Brockton Hall, MRED John Montgomergy Richard Barrett Richard Jackson Brannan Hudson 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 15,000 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 the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2018 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.