1Q 2017 DFW Industrial Market Brief

DFW INDUSTRIAL MARKET BRIEF

1Q2017

DFW INDUSTRIAL MARKET BRIEF 1Q2017

TABLE OF CONTENTS

1. DALLAS/FORT WORTH INDUSTRIAL TEAM

1 2 3 4

2. DALLAS/FORT WORTH INDUSTRIAL SUBMARKETS

2. OVERALL DALLAS/FORT WORTH INDUSTRIAL MARKET

A. Dallas/Fort Worth Overall Industrial Market Overview

B. Facts and Figures

3. SUBMARKET INTELLIGENCE

A. Great Southwest/Arlington

B. C. D. E. F. G.

DFW Airport Northeast Dallas South Dallas Northwest Dallas North Fort Worth South Fort Worth

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

HLC INDUSTRIAL DALLAS/FORT WORTH

TEAM

JIM BRICE

Partner mcarthey@hlfortworth.com 817.710.1111

JOSHUA BARNES

ANDREW GILBERT

Marketing Director jbarnes@hldallas.com 972.280.8353

GEORGE JENNINGS

Marketing Associate gjennings@hlfortworth.com 817.632.6151

1

MATT CARTHEY

Partner - Texas Leasing jbrice@hldallas.com 972.280.8328

CANON SHOULTS

JOHN GORMAN

Principal jgorman@hldallas.com 214.920.9800

Marketing Director drhode@hlfortworth.com 817.710.7058

CLAY BALCH

MATT MCWILLIAMS

GRANT WHITTLE

Marketing Associate agilbert@hldallas.com 972.381.8312

Marketing Associate cbalch@hldallas.com 972.421.1956

Marketing Associate mmcwilliams@hldallas.com 972.280.8325

JAKE NEAL

THOMAS GRAFTON

BEN WALLACE

Marketing Associate jneal@hlfortworth.com 817.284.5555

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

DONNIE RHODE

Managing Principal cshoults@hldallas.com 972.280.8328

Marketing Associate tgrafton@hlfortworth.com 817.632.6152

Marketing Analyst bwallace@hldallas.com 972.421.1966

Marketing Associate gwhittle@hldallas.com 972.381.3219

VICTORIA JOHNSON

Senior Marketing Coordinator vjohnson@hldallas.com 972.280.8305

HLC INDUSTRIAL DALLAS/FORT WORTH

SUBMARKETS

HLC SQUARE FOOTAGE BY SUBMARKET

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

2

HLC INDUSTRIAL DALLAS/FORT WORTH

TRENDS AND TRANSACTIONS HLC OUTLOOK The DFW industrial market remains one of the strongest industrial markets in the country and a top four choice for national logistics distribution. The overall industrial market persists with a single digit vacancy rate of 6.8%. Leasing activity in DFW remained strong posting 8.69 M square feet.

Between build-to-suits and speculative development, the market currently has approximately 18.59 million SF under construction. This activity encompasses the sub markets of North Fort Worth, South Dallas, GSW, Northwest Dallas, Northeast Dallas and DFW Airport. 7.57 million SF was delivered throughout the market in the First Quarter of 2017.

Speculative development will remain strong over the next 12 months in the DFW market as capital sources accept leasing risk to obtain lower basis positions and build to a yield rather than competing for inferior product with record low cap rates.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

4,947,396

5,574,706

6,306,337

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.8%

6.6%

6.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

8,691,006

14,229,814

12,603,568

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

18,595,216

20,673,531

22,676,964

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

7,574,099

6,704,305

4,164,732

from new development projects. Dallas remains as one of the top regional distribution hubs in the country yet will seek to establish a new equilibrium between supply and demand.

As 2017 continues, vacancy rates should remain in single digits albeit increasing as new construction has begun to outpace net absorption in select submarkets. Rental rates are stabilized under favorable conditions although concessions have been been more prominent

TRENDS & TRANSACTIONS • Industrial product remains in high demand for institutional investment.

• Speculative development is at a historical peak as capital sources seek alternative basis positions to “retail” acquisitions resulting from high demand and historically low cap rates.

• Due to continued population growth and consumer demand, E-commerce groups remain a driving force in the demand of bulk warehouse for fulfillment centers.

• Rental abatement has reentered the market as Landlords 1) seek to maximize property valuations through face rate and rent growth 2) second generation space seeks to remain competitive with new development and 3) new development under construction seeks to secure a tenant base prior to additional projects breaking ground.

• Since 2010, depending on the size of the transaction, rental rates have increased 20%-30% with 2%-4% annual escalations accepted by the market.

TOP LEASE TRANSACTIONS • Container Store leased 1,211,000 SF from Duke Realty at 500 Freeport Parkway • C&S Wholesale Grocer leased 355,577 SF from GLP at 777 Freeport Parkway • Geodi leased 228,952 SF from Liberty Property Trust at 951 Valley View Lane

3

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

• University Furniture leased 227,023 SF from Exeter at 2149 S Jupiter Road • Chep Pallets leased 199,750 SF from Amstar at 1201 Big Town Boulevard • Automann leased 166,941 SF from Barings at 931 West Bardin Road • Wasserstrom leased 164,656 SF from DRA at 2701 Sout Shiloh Road • Continental Tire leased 164,500 SF from Duke at 4003 Gifford Street

TOP HLC LEASE TRANSACTIONS • DIAB renewed 195,500 SF from TA Associates at 8700 Autobahn Drive • Central Garden & Pet Company renewed 120,000 from TA Associates at 4038 Rock Quarry Road • Sub-Zero Group, Inc. leased 119,239 SF from PFG at 3400 North Houston School Road • Elong International USA leased 97,446 SF from Frontier Equity at 1200 Crosby Road

HLC Deal

HLC Deal

HLC Deal

HLC Deal

HLC INDUSTRIAL DALLAS/FORT WORTH

FACTS AND FIGURES

CONSTRUCTION - OVERALL DFW

VACANCY - OVERALL DFW

30,000,000

8.0%

7.40%

6.80% 7.0%

6.6%

7.0%

25,000,000

6.0%

20,000,000

5.0%

15,000,000

4.0%

3.0%

10,000,000

2.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Total Vacancy

Q3 15

Q4 15

Q1 16

Direct Vacancy

Q2 16

Q3 16

5,000,000

1.0%

0.2%

0.1%

Q4 16

0.0%

Q1 17

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Q4 15

Under Construction

Sublet Vacancy

ABSORPTION - OVERALL DFW

Q1 16

Q2 16

Q3 16

Q4 16

0

Q1 17

Delivered Inventory

OVERVIEW - OVERALL DFW 20,000,000

8.0%

12,000,000

18,000,000

10,000,000

16,000,000 14,000,000

8,000,000

12,000,000 10,000,000

6,000,000

7.0%

8,000,000

4,000,000

6,000,000 4,000,000

2,000,000

2,000,000

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Leasing Activity

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

6.0%

0

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Total Net Absorption

Existing Inventory

Vacancy

Vacancy

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

0

Deliveries

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

DFW Airport

600

70,521,348

3,635,451

3,875,761

5.5%

1,219,401

1,112,170

2,067,046

1,898,792

East Dallas

578

40,591,201

2,430,049

2,430,049

6.0%

(17,266)

0

344,000

54,101

1,054

99,349,979

8,159,326

8,477,079

8.5%

326,137

2,379,935

2,084,701

2,036,035

North Fort Worth

555

79,810,333

5,645,423

5,953,834

7.5%

1,419,937

586,274

4,672,989

1,655,235

Northeast Dallas

1,388

99,811,020

5,841,781

6,470,536

6.5%

328,204

1,158,570

2,196,886

843,032

Northwest Dallas

1,293

101,287,950

5,707,085

5,890,427

5.8%

192,728

144,350

2,493,773

1,102,275

640

85,029,285

8,236,544

8,301,444

9.8%

1,046,594

1,655,559

4,037,088

305,133

South Fort Worth

1,268

70,912,349

2,664,006

2,717,606

3.8%

(148,890)

19,000

174,000

179,857

South Stemmons

2,056

113,018,672

7,844,729

7,877,869

7.0%

580,551

518,241

524,733

616,546

Totals

9,432

760,332,137

50,164,394

51,994,605

6.8%

4,947,396

7,574,099

18,595,216

8,691,006

Market

Great SW/Arlington

South Dallas

Source: CoStar 2017 1Q Industrial Report

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

4

SUBMARKET INTELLIGENCE

GREAT SOUTHWEST/ARLINGTON HLC OUTLOOK The Great Southwest submarket began the year delivering several projects that were under construction, posting 2,397,935 SF of deliveries in Q1 alone. Leasing activity and velocity remained consistent, posting over 2M SF of leasing activity. However, with the large increase of newly delivered product; the vacancy rate has increased from 6.7% (Q4 2016) to 8.4%. As 2017 continues, we expect this vacancy rate to return to lower levels as tenants absorb additional product. Moving forward landlords should expect rental rates to hold steady and include annual rent escalations of 2% to 4% (depending on the size of the lease). However, the market is starting to see a rise in free rent concessions as the market becomes more competitive due to additional product supply.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

VITAL STATS

Absorption

9.0%

3,000,000

2,500,000

8.0%

2,000,000 7.0% 1,500,000 6.0% 1,000,000

5.0%

4.0%

500,000

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Absorption

Q2 15

Q3 15

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

0

vs. Prev. Qtr

vs. 12 Mths Ago

326,137

1,506,634

614,402

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.5%

6.7%

4.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,036,035

1,818,916

1,738,988

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,084,701

4,264,511

4,748,697

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,379,935

1,657,634

743,183

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS

NEW DEVELOPMENTS

• Automann leased 166,941 SF from Barings at 931 West Bardin Road

• Arlington Commerce Center/Bldg E - 1,004,400 SF spec with Exeter

• JELD-WIN renewed 175,000 SF from Liberty Property Trust at 2510 West Main Street

• Park 20/360 – 4 building development 1,262,040 SF spec with Invesco

• Geodis Logistics leased 228,952 SF from Liberty Property Trust at 951 Valley View Lane

• Parc GSW – 682,491 SF spec with Clarion

• UPS leased 1,004,400 SF from Exeter Property Group at 2320 East Bardin Road • Ever Flow bought 263,380 SF from Exeter Property Group at 2300 East Bardin Rd

DEALS ON THE MARKET • Core Markets Logistics Portfolio – 301,953 SF of the overall 5,972,461 SF was located in GSW; High Street Realty Company was the seller and Blackstone was the buyer.

• TA Realty Fund IX Portfolio – 169,280 SF of the multi city fund sale was located in GSW; TA Realty was the seller and Brookfield was the buyer.

• CentrePort Bldg. 1 & 2 – 270,762 & 430,759 SF spec with Hillwood • 1460 Avenue S – 83,125 SF spec with Port Logistics Realty • Trinity Crossing – 2 building development (144,187 and 178,655 SF) spec with Cabot

LARGE EXISTING VACANCIES • 950 East Avenue K – 487,752 SF • Parc GSW – 450,340 SF • 1400 North Highway 360 – 437,000 SF • 1950 West Bardin Road – 430,188 SF • 1111 West Bardin Road – 420,000 SF • 510 West Trinity Boulevard – 343,200 SF

5

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

SUBMARKET INTELLIGENCE

DFW AIRPORT

HLC OUTLOOK The DFW Airport market opened 2017 strong by decreasing vacancy throughout the market from 5.7% to a historic low of 5.5%. The market had positive absorption of 1,219,401 SF. The overall leasing activity across the DFW Airport market has been strong with 1,898,792 SF being leased. Development remained strong with approximately 2 million SF under construction. With limited supply of fee simple land coupled with rising construction costs, speculative developments have been quoting $3.75 - $4.50 NNN for bulk warehouses.

JIM BRICE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8328

VITAL STATS

Absorption 2,500,000

12.0%

11.0%

2,000,000

10.0% 1,500,000 9.0% 1,000,000 8.0% 500,000 7.0% 0

6.0%

5.0%

Q1 14

Q2 14

Q3 14

Q4 14

Absorption

Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

(500,000)

vs. Prev. Qtr

vs. 12 Mths Ago

1,219,401

1,146,422

571,031

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.5%

5.7%

8.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,898,792

3,056,299

952,963

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,067,046

3,179,216

975,584

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,112,170

204,175

700,521

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS • Container Store renewed their lease of 1,211,000 SF from Duke Realty at 500 Freeport Parkway • Crestone Group renewed their lease 70,531 SF from Prologis at 800 Industrial • Gemmy Industries renewed their lease 81,900 SF from TA Associates at 117 Wrangler Drive • C&S Wholesale Grocer leased 355,577 SF from GLP at 777 Freeport

DEALS ON THE MARKET • Longhorn Core Portfolio – 1,443,687 SF is Under Contract with Clarion; being sold by DRA located in the GSW and DFW Airport submarkets.

• Port America being sold by Cushman Wakefield – 717,094 SF in the DFW Airport Submarket owned by Prologis

• 4301 Patriot (DCT DFW Trade Center) – totaling to be 112,283 SF to be delivered July 2017 with NAI Robert Lynn • 1275 Metro Circle (Building 2) – totaling to be 108,300 SF to be delivered July 2017 with CBRE • 1215 Metroplace Drive (DFW Global Logistics Bldg. 3) – totaling to be 80,276 SF to be delivered June 2017 with CBRE

LARGE EXISTING VACANCIES • 944 W Sandy Lake Road – 604,800 SF • 850 Northlake Drive – 230,400 SF • 845 Regent Boulevard – 208,249 SF • 801 Industrial Boulevard – 204,556 SF • 1040 Trade Avenue – 166,800 SF • 100 S Royal Lane – 166,704 SF • 4500 Walnut Hill Lane – 161,782 SF

NEW DEVELOPMENTS • State Highway 121 & Freeport Parkway (Building 3 of Prologis Park 121) – totaling to be 424,080 SF to be delivered May 2017 with CBRE • 1255 Mustang Drive – totaling to be 158,466 SF to be delivered July 2017 with CBRE

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

6

SUBMARKET INTELLIGENCE

NORTHEAST AND EAST DALLAS HLC OUTLOOK The Northeast and East Dallas submarkets continued to perform steadily into 2017 with over 300,000 SF of combined absorption. We continue to see strong activity and have seen rates push past historical levels with spec warehouse and newer second generation space between 100 – 200,000 SF now being quoted between $3.75 - $4.25NNN. For higher visibility shallow bay spaces between 10-20,000 SF on Miller Road rates are reaching $5.75 - $5.95 NNN. With strong activity and a healthy amount of speculative development we anticipate that concessions should further decrease and rates should continue to increase steadily.

JOSHUA BARNES Marketing Director jbarnes@hldallas.com 972.280.8353

VITAL STATS

Absorption

10.0%

310,938

272,007

776,704

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

800,000

6.3%

5.8%

6.0%

600,000

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

897,133

2,256,552

2,500,233

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

400,000 7.0%

200,000 0

6.0% (200,000) 5.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

vs. 12 Mths Ago

1,000,000 9.0%

8.0%

vs. Prev. Qtr

1,200,000

(400,000)

2,540,886

3,415,456

1,434,616

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,158,570

269,211

212,715

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS • Kraft leased 262,266 SF from DRA at 2600 McCree Road in Garland.

• 3000 W Kingsley Road – 341,840 SF; Sublease from Apex Tools

• University Furniture leased 227,023 SF from Exeter at 2149 South Jupiter Road in Garland.

• 10300 Sanden Drive – 267,690 SF

• Chep leased 199,750 SF from Amstar at 1201 Big Town Road in Dallas.

• 3310 West Kingsley Road – 218,787 SF

• Wasserstrom leased 164,656 SF from DRA at 2701 South Shiloh Road.

• Total Sweetnerners leases 135,323 SF from Huntington at 3800 Regency Crest Drive in Garland.

HLC Deal

DEALS ON THE MARKET • Eastpoint 1 being sold by Cushman Wakefield – 419,626 SF in Mesquite; owned by Sentinel • Forty Thirty Forest being sold by JLL – 678,354 SF in Garland; owned by Dollar Flowers

NEW DEVELOPMENTS • R3600 Leon Drive – 494,000 SF spec building by IDI Gazeley; rear load with 107 trailer parks and 32’ clear height; to be delivered mid 2017 • Miller Road – 270,016 SF spec building by DCT Industrial; rear load with 64 trailer parks and 32’ clear height; to be delivered mid 2017 7

LARGE EXISTING VACANCIES

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

• 1201 Big Town – 308,750 SF • 2901 West Kingsley Road – 253,900 SF; Sublease from IDQ • 2525 South Shiloh Road – 192,720 SF

SUBMARKET INTELLIGENCE

SOUTH DALLAS

HLC OUTLOOK

South Dallas Industrial submarket as surveyed is 117M SF and is now 8.1% vacant which is 0.2% lower than reported in 4thQ 2017. New construction is simply outpacing absorption. Although other leases were pending only one reasonably sized new lease (209K SF) was signed in 1st Quarter 2017. Albeit a stalled quarter the minimal activity was positive unlike the 4th Q 2016 which was negative absorption due to new developments outpacing leasing activity. In the 1stQ 2017 South Dallas delivered 2,173,800 sf of new bulk warehouse most notably the 1,003,733 SF two building spec in SouthPointe 20/35 (Interstate 20). South Dallas still has 5.85M SF remaining under construction. As expected, the southern corridors along I-20, I-35, and I-45 will continue to produce new opportunities for development but, the equilibrium needle between supply and demand is going to remain volatile as opportunity encounters overbuilding.

JOHN GORMAN Principal jgorman@hldallas.com 214.920.9800

VITAL STATS

Absorption

10.0%

8.0%

1,046,594

(193,354)

790,770

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.1%

8.3%

7.3%

2,400,000 2,000,000 1,600,000 4.0%

1,200,000 800,000

2.0%

400,000 0

0.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

vs. 12 Mths Ago

3,200,000 2,800,000

6.0%

vs. Prev. Qtr

3,600,000

(400,000)

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

305,133

1,503,894

432,481

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,850,000

4,394,298

8,544,943

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,173,800

2,168,448

249,640

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS • DC Logistics 209,104 SF from USAA at 201 S. Interstate 45

DEALS ON THE MARKET • Dallas Core Distribution Portfolio – 1,544,840 SF two building project (Ulta & Kimberly-Clark) located in Mountain Creek, ProLogis is the seller.

• Mountain Creek Distribution Center II with Crow Holdings is the seller– 663,000 SF.

NEW DEVELOPMENTS • Crossroads Trade Center Bld. 3 – 948,392 SFspec with Clarion/ Hillwood (Interstate 35) • Copeland Commercial – 900,043 SF at 3535 North Houston School Road • Core 5 Industrial – 754,897 SF spec with Core 5 at 1200 W. Wintergreen Road (Interstate 45) • LogistiCenter at Dallas – 620,038 SF spec with Dermody Properties on Bonnie View Road

LARGE EXISTING VACANCIES • Southport Parkway, Bld 1 - 1,075,260 SF spec SouthPort Logistics Park (Interstate 45) • SouthPointe 20/35 – 1,003,733 SF spec with Clarion (660,312 sf & 343,421 sf ) • VanTrust (DalParc I-20 Logistics) – 920,275 SF with VanTrust on Dallas Avenue • 4601 Langdon Road (Commerce 20) – 488,565 SF spec with Hillwood • Park 20 – 468,300 SF with Huntington Industrial Partners on Houston School Road • Centre Park Blvd. (Eagle Park 20/35)- 454,408 SF spec with Ridgeline Property Group • 2425 West Danieldale Road – 399,971 SF with TA Realty Associates.

• 220 Danieldale Road – 382,288 SF with Bradford Companies • 39324 Interstate 20- 308,379 SF spec with Trammell Crow/ Prudential

• SouthPort Logistics Park – 394,860 SF spec (Interstate 45) • Intermodal Business Center – 120,960 SF spec at Interstate 45 and Wintergreen Road

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

8

SUBMARKET INTELLIGENCE

NORTHWEST DALLAS

HLC OUTLOOK Over the past quarter, Northwest Dallas continued to prove to be one of the strongest submarkets in Dallas. The submarket posted a 5.8% vacancy rate which was a slight improvement over Q4 2016 (5.9%). Billingsley’s Mercer Business Park and ProLogis’ Valwood Corporate Park are the two development highlights as the quality sites to develop are diminishing in Northwest Dallas. As the market continues to tighten, expect rates to continue to rise and rent concessions to continue to diminish. All indicators point to the market continuing to remain strong through 2017.

ANDREW GILBERT Marketing Associate agilbert@hldallas.com 972.381.8312

VITAL STATS

Absorption 2,000,000

10.0%

9.0%

1,500,000

8.0%

1,000,000

7.0%

500,000

6.0%

5.0%

0

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Deliveries

Q3 16

Q4 16

Q1 17

(500,000)

vs. Prev. Qtr

vs. 12 Mths Ago

192,728

802,228

698,576

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.8%

5.9%

6.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,102,275

1,912,729

2,811,418

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,493,773

2,308,023

2,822,205

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

144,350

534,598

539,850

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS

• Elong International USA leased 97,446 SF from Frontier Equity at 1200-1210 Crosby Road • Montana West leased 50,000 SF from Billingsley at 12925 North Stemmons Freeway • Temperatsure leased 37,783 SF from Stonelake at 2205 Hutton Drive.

• YRC Leased 32,000 SF from EastGroup at 1536 Hutton Drive

HLC Deal

DEALS ON THE MARKET

• Hutton Court Commerce Center – Owned by Mountain West.

The building is 52,613 SF located in Northwest Dallas.

• 1410 Dunn Drive – Owned by EGW Utilities. The building is 47,040 SF located at Crosby and Hutton.

• Dallas Industrial Portfolio – 1.7M SF across the DFW market with 2115 Valley View and 2115 Belt Line location in NW Dallas.

NEW DEVELOPMENTS

• 1310 Electronics (Valwood Corporate Center) – 2 buildings totaling to 517,518 SF to be delivered September 2017 with Prologis • 1900 Lakeway Drive – 130,400 SF to be delivered June 2017 with Lincoln Advisory Group • Mercer Business Park Building 4 – 330,100 SF to be delivered November 2017 with Billingsley

9

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

LARGE EXISTING VACANCIES • • • • •

2701 S Valley Parkway (Building 6)- 329,060 SF 2900 S Valley Parkway (Building 5) – 222,686 SF 700 Lakeside Parkway – 168,988 SF 514 Bennett Lane – 165,705 SF 1001 W Crosby – 135,950 SF

SUBMARKET INTELLIGENCE

SOUTH STEMMONS

HLC OUTLOOK Through the first quarter of 2017, the South Stemmons industrial submarket posted a 2.4% vacancy rate. There continues to be a strong amount of leasing activity throughout the submarket for tenants between 10 – 50,000 square feet. Absorption for Q1 totaled a positive 412,000 SF which this number is expected to grow due to the lack of developments in the submarket. As 2017 continues, rental rates are expected to continue to increase as the submarket becomes tighter and tenants are continuing to relocate north on I-35 from the spike in rental rates in the Design District. Since 2013, rents in the submarket have increased 25% for space under 50,000 SF. This is a key statistic as this size encompasses the majority of spaces in the submarket. Rental rates for 50,000 SF deals have increased into the high $3/SF range and rates for 10,000 SF are now reaching $5.00/SF start rates. 20-25,000 SF are creeping up into the low $4’s. I expect this trend to continue throughout 2017.

ANDREW GILBERT Marketing Associate agilbert@hldallas.com 972.381.8312

VITAL STATS

Absorption 1,000,000

12.0%

800,000

600,000

10.0%

400,000

8.0%

200,000

0

6.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Absorption

Q2 15

Q3 15

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

(200,000)

vs. Prev. Qtr

vs. 12 Mths Ago

580,551

70,796

178,808

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.0%

7.1%

7.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

616,546

2,180,888

1,820,247

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

524,733

518,241

292,200

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

518,241

292,200

264,413

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS

• Cohen purchased 267,556 SF from ARA at Lombardy Distribution Center.

• Kit Composites Leased 32,400 SF at 4560 Leston in Brookhollow.

• Advantage Aviation Tech renewed their 59,970 SF lease at 201 Regal Row in Brookhollow

LARGE EXISTING VACANCIES • • • •

1108 Quaker Street – 42,874 SF 3151 Halifax – 47,080 SF 9020 Directors Row – 23,000 SF 3000 Pegasus Park Drive – 24,805 SF

• (HLC Deal) C&D Couriers and Texas Motorworx both leased 11,430 SF at 11419 Ferrell which is located off Royal Lane and Luna Road.

DEALS ON THE MARKET

• Mary Kay – Two buildings totaling 387,132 SF in West Brookhollow. Mary Kay is pursuing a Sale/Lease-back through the end of 2018.

• Plaza on Walnut Hill – 50,000 SF building on Shady Trail Berkeley Partners is selling.

• 1371-1375 Round Table – Owned by a user with 1.5 acres of land to the north. The building totals 43,500 SF.

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

10

SUBMARKET INTELLIGENCE

NORTH FORT WORTH

HLC OUTLOOK The North Fort Worth industrial submarket was able to maintain positive momentum by posting a First quarter vacancy of 7.5%, down from the 8.6% posted in the fourth quarter. Much of this can be attributed to a year-to-date net absorption figure of 1,419,937 SF which has perpetuated the growth of new developments with an additional 4,672,989 million square feet under construction. Expect to see continued positive absorption by bulk distribution users that prefer the labor pool and transit amenities North Fort Worth has to offer.

DONNIE ROHDE Marketing Director drohde@hlfortworth.com 817.710.7058

VITAL STATS

Absorption 3,000,000

12.0%

10.0%

2,000,000

8.0%

1,000,000

6.0%

0

4.0%

(1,000,000)

2.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Deliveries

Q3 16

Q4 16

Q1 17

(2,000,000)

vs. Prev. Qtr

vs. 12 Mths Ago

1,419,937

1,544,616

2,646,300

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.5%

8.6%

9.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,655,235

1,146,135

746,018

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,672,989

2,400,786

3,645,300

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

586,274

1,276,539

1,437,835

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS • 141,000 SF was leased to an Undisclosed Tenant at 16101 Three Wide Drive owned by IDI • Supply Chain Solutions leased 299,000 SF at 400 E Industrial Avenue owned by Ridge Properties • Red Bull leased 32,600 SF at 2751 Northern Cross Boulevard owned by East Group • Mattel leased 183,832 SF at 4601 Gold Spike Drive owned by Prologis

DEALS ON THE MARKET

• 2220 Delante Street – 72,700 SF multi-tenant facility with Hwy 121 visibility. Current occupancy of 100% - Five (5) tenants.

NEW DEVELOPMENTS

• Hunt Southwest is currently under construction on a 657,043 SF cross-dock facility at the south east corner of Northern Cross Boulevard and North Sylvania Avenue in Mercantile Submarket.

Delivery is expected for Q3 2017 and pre-leasing of +/- 475,000 SF expected at delivery.

• Trans-Pacific Development is currently under construction on a 712,500 SF distribution facility at the NW corner of I-35 and North Loop 820 in Fort Worth. Delivery is expected for Q3 2017.

Pre-leasing of +/- 475,000 SF expected at delivery.

• Trammell Crow has broken ground on a 3 building, 1.6 million

11

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

square foot, expansion of 35 Eagle in Alliance. The 3 buildings are expected to deliver in Q4 of 2017.

• Ironwood Realty Partners, LLC and TCRG Properties has broken ground on the first of a 5 building development at the NW corner of I-35 and Golden Triangle Boulevard. The first building will be a 496,782 SF cross-dock facility and is expected to deliver in Q4 2017. The entire development is slated for 2.8 million square feet.

LARGE EXISTING VACANCIES Alliance: • 300 Gateway Parkway – 603,050 SF • 3300 Eagle Parkway – 588,775 SF • 1400 Intermodal Parkway – 800,280 SF (UPS under contract to purchase.)

• 1624 Intermodal Parkway – 360,000 SF Railhead/Meacham/Mercantile: • 4630 North Beach Street – 187,000 SF • 4675 Railhead Road - 128,400 SF • 731 Eight Twenty Boulevard – 100,500 SF

SUBMARKET INTELLIGENCE

SOUTH FORT WORTH

HLC OUTLOOK The South Fort Worth industrial submarket posted a first quarter vacancy of 3.8%, the lowest out of all DFW submarkets.

With very little vacancy in the 50,000 SF and up size range in South Fort Worth, we anticipate seeing more new developments announced over the next year due to the lack of supply and increasing demand in South Fort Worth.

Shallow Bay product remains very strong and in high demand; posting a vacancy rate of 2.0%. This marks the lowest of all product types in the South Fort Worth submarket.

MATT CARTHEY

Partner, Shareholder mcarthey@hlfortworth.com 817.710.1111

VITAL STATS

Absorption

7.0%

(148,890)

425,357

29,746

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.8%

3.6%

5.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

179,857

354,401

1,601,220

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

200,000 0 5.0% -200,000 -400,000 4.0%

-600,000 -800,000

3.0%

Q1 14

Q2 14

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Deliveries

Q2 16

Q3 16

Q4 16

Q1 17

vs. 12 Mths Ago

600,000 400,000

6.0%

vs. Prev. Qtr

800,000

-1,000,000

174,000

193,000

213,419

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

19,000

301,500

16,575

Vacancy

Source: CoStar 2017 1Q Industrial Report

TOP LEASE TRANSACTIONS • Business Concepts leased 24,581 SF at 2220 Delante Street • Amigos Restoration leased 21,000 SF at 3414 May Street • Texas Drafts leased 15,000 SF at 120 South Sylvania Avenue

LARGE EXISTING VACANCIES • 6601 Oak Grove Road – 504,125 SF • 2101 Reeves Place – 301,500 SF

DEALS ON THE MARKET

• 1075 NW John Jones Drive – 60,000 SF is under contract to ABC Roofing and is set to close the at the end of April.

NEW DEVELOPMENTS

• TCRG Properties closed on 100 acres in South Fort Worth off Everman Parkway. Plans are to break ground in Q2 2017 on 525,000 SF. • Majestic Realty plans to break ground on approximately 236,600 SF in South Fort Worth on their Southland Business Park development in Q2 2017.

• Crow Holdings broke ground in April on 218,282 SF and 270,282 SF cross dock facilities in Carter Industrial Park.

• Hayes & Stolz Industrial Manufacturing has broken ground on a 144,000 manufacturing facility at 6500 Cirrus Drive.

DFW INDUSTRIAL MARKET BRIEF 1Q 2017

12

DALLAS

5055 Keller Springs Road Suite 300 Addison, Texas 75001 T 972.241.8300 F 972.241.7955

FORT WORTH

300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

HOUSTON

11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550