1Q 2018 DFW Industrial Market Brief

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

1Q18 Property Pictured Above: Carter Distribution Center, 6633-6657 Oak Grove Road, Fort Worth, Texas

DFW INDUSTRIAL MARKET BRIEF 1Q 2018

TABLE OF CONTENTS 1. DALLAS/FORT WORTH INDUSTRIAL SUBMARKETS & EXPERTS

1 2 3

2. OVERALL DALLAS/FORT WORTH INDUSTRIAL MARKET

A. Industrial Trends & Transactions

B. Facts and Figures

2. 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

3

HLC SUBMARKET COVERAGE

DFW

HLC DFW INDUSTRIAL MARKET EXPERTS

JIM BRICE

MATT CARTHEY

CANON SHOULTS

JOHN GORMAN

JOSH BARNES

DONNIE ROHDE

ANDREW GILBERT

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Partner mcarthey@hlfortworth.com 817.710.1111

Managing Principal cshoults@hldallas.com 972.280.8328

Principal jgorman@hldallas.com 214.920.9800

Principal jbarnes@hldallas.com 972.280.8353

Market Director drohde@hlfortworth.com 817.710.7058

Market Associate agilbert@hldallas.com 972.280.8312

BEN WALLACE

JAKE NEAL

THOMAS GRAFTON

CLAY BALCH

GEORGE JENNINGS

KEATON DUHON

MADDY CANTY

Market Associate bwallace@hldallas.com 972.421.1966

Market Associate jneal@hlfortworth.com 817.284.5555

Market Associate tgrafton@hlfortworth.com 817.632.6152

Brokerage Services Associate cbalch@hldallas.com 972.421.1956

Market Associate gjennings@hlfortworth.com 817.632.6151

Market Associate kduhon@hlfortworth.com 817.284.5555

Market Analyst mcanty@hldallas.com 972.280.8325

5

HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

1,412,506

9,340,088

4,188,874

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.2%

6.7%

7.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

7,094,648

10,576,129

13,402,928

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

24,124,364

21,065,845

21,150,140

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,890,143

7,912,279

11,412,653

The DFW industrial market continues to be one of the strongest industrial markets in the country and a top four choice for national logistics distribution. Despite CoStar reporting 1Q 2018 absorption of only 1.4 million square feet, the overall industrial market vacancy declined from 6.7% to 6.2%.

Accordingly, actual absorption should have been reported at approximately 3.5 million square feet. (variations may be attributed to time of reporting) Q1 2018 deliveries totaled 2.9 million SF, substantially less than previous quarters. Between build-to-suits and speculative development, the market has approximately 24 million SF under construction. This activity encompasses the sub markets of North Fort Worth, South Dallas, GSW, Northwest Dallas, Northeast Dallas and DFW Airport. South Dallas notably accounts for approximately 7.2 million square feet of the total construction activity. Albeit a healthy overall market at 6.2% vacancy, investment capital should observe isolated submarket trends whereby the current construction / absorption ratio is favoring new construction outpacing net absorption. However, given the lack of available portfolio dispositions, speculative development will likely remain strong in the coming year for the DFW market as capital sources continue to accept leasing risk to obtain lower basis positions and build to a yield rather than competing for inferior product with record low cap rates.

The majority of submarkets for 2018 should remain in single digit vacancy rates. However, submarkets such as South Dallas and GSW are reporting double digit vacancy in bulk warehouse as new construction has outpaced net absorption.

Rental rates are stabilized under favorable conditions although concessions are more prominent from new development projects. Dallas is one of the top four regional distribution hubs in the country, yet the supply / demand equilibrium may have been exceeded in certain submarkets requiring a tapering of select new construction.

HLC DFW

INDUSTRIAL TRENDS & TRANSACTIONS TRENDS & TRANSACTIONS Industrial product continues to be in high demand for institutional investment including foreign sources of capital seeking to invest in the US economy.

Speculative development remains at a historical peak due to the lack of acquisition opportunities and capital sources seeking alternative basis positions to “retail” pricing resulting from high demand and historically low cap rates.

Due to continued population growth and consumer demand, E-commerce groups and third-party logistics providers continue to be a driving force in the demand of bulk warehouse for fulfillment centers.

Rental abatement has been re-established as a norm in 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. However, leases that have previously experienced substantive rent increases (leases signed in 2015) may have stabilized base rents albeit still subject to annualized rent increases upon expiration.

TOP LEASE TRANSACTIONS • Tellworks leased 722,733 SF from Invesco at 4101 Research Boulevard (Parc 20/360 Building 1).

• Professional Packaging leased 349,421 SF from Black Creek Group at 1400 N Highway 360 (GSW 360 Global Logistics Park).

• Vira Insight leased 329,060 SF from Majestic at 2701 S. Valley Parkway.

• Hollander leased 322,215 SF with Crow Holdings

Industrial at 2615 Gifford Street (MacArthur Crossing).

• Parish Hare leased 232,151 SF from Jackson Shaw at NWQ Conflans Road & Highway 161.

• Best Inc leased 214,649 SF from Trammell Crow Company at 39324 I-20.

TOP HLC LEASE TRANSACTIONS • An undisclosed company leased 174,684 SF at 6657 Oak Grove (Carter Industrial Park) from Crow Holdings.

HLC Deal

• Professional Installation Network renewed their lease

HLC Deal

of 152,160 SF with Brookfield Properties at 9001-9015 Sterling Street.

• Sunrise Wood Designs signed a new lease of 135,405 SF from TA Associates at 8801 Autobahn Drive (Stoneridge 7).

• Geomet Recycling signed a lease with Sealy expanding into 52,305 SF to total 136,716 SF at 11420 Mathis Street in Farmers Branch.

• Fagan Logistics renewed their 72,121 SF lease with ATCAP Partners at 1430 Bradley Lane in Carrollton.

• Texas Star Warehouse & Distribution renewed their 146,464 SF lease at 5200 E Grand Avenue with Frontier Equity.

HLC Deal

HLC Deal

HLC Deal

HLC Deal

HLC DFW FACTS & FIGURES

Market

Existing Inventory

# Bldgs.

Total RBA

OVERALL DFW

7.5%

12,000,000

10,000,000

8,000,000

7.0%

Vacancy

Direct SF

Total SF

Vac. %

6,000,000

4,000,000

6.5%

2,000,000

DFW Airport East Dallas Great SW/Arlington Henderson County

614

72,956,710

3,980,187

4,401,176

6.0%

598

42,492,897

2,576,600

2,576,600

6.1%

1,087

104,993,500

8,033,187

9,106,317

8.7%

17

1,186,131

29,387

29,387

2.5%

0

6.0% Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Absorption

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Deliveries

Q1 18

Vacancy

VACANCY - OVERALL DFW

8.0%

7.30%

North Fort Worth

641

87,694,417

3,738,191

3,738,191

4.3%

Northeast Dallas

1,474

104,492,549

5,645,426

6,320,520

6.0%

Northwest Dallas

1,327

106,291,479

4,431,255

4,787,859

4.5%

27

3,355,095

47,920

47,920

1.4%

NW Dallas Outlying South Dallas

665

91,188,337

10,658,559

10,895,151

11.9%

South Fort Worth

1,399

77,682,915

4,055,002

4,160,539

5.4%

South Stemmons

2,097

109,836,528

3,744,916

3,987,235

3.6%

Totals

9,946

802,170,558

46,940,630

50,050,895

6.2%

6.20%

7.2%

7.0% 6.0%

5.9%

5.0% 4.0% 3.0% 2.0% 1.0%

0.40%

0.20%

0.0% Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Direct

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Sublet

Q1 18

Total

ABSORPTION - OVERALL DFW 20,000,000 18,000,000

Market DFW Airport East Dallas

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

(60,342)

325,795

3,518,110

999,350

(444,665)

0

1,364,430

89,131

16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000

Great SW/Arlington

(285,498)

0

3,273,572

1,668,626

Henderson County

0

0

0

0

North Fort Worth

1,371,029

785,500

4,485,958

326,230

Northeast Dallas

894,248

117,000

1,729,528

547,477

Northwest Dallas

(185,987)

0

1,333,675

1,395,892

148,614

0

0

6,600

NW Dallas Outlying

0 Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Total Net

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Leasing Activity

CONSTRUCTION - OVERALL DFW 30,000,000

25,000,000

20,000,000

15,000,000

South Dallas

(111,042)

1,078,380

7,281,215

621,760

South Fort Worth

78,341

17,550

815,661

540,780

South Stemmons

7,808

565,918

322,215

898,802

Totals

1,412,506

2,890,143

24,124,364

7,094,648 Source: CoStar 2018 1Q Industrial Report

10,000,000

5,000,000

0 Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Delivered Inventory

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Under Construction

7

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

14 YEARS

HLC OUTLOOK

CRE EXPERIENCE

The Great Southwest submarket consists of 105 million SF, and per CoStar reporting experienced negative absorption of 285,498 SF during the first quarter of 2018. Leasing activity and velocity were strong during Q1 2018 with 1.67 million SF of leasing activity. Significant GSW leases contributing to the leasing activity include Tellworks Communications (722K SF), Parish Hare Electric Supply (232K SF), and Professional Packaging (349K SF). GSW reported no new completions of the 3.2 million SF of product currently under construction. Despite CoStar reporting negative absorption, the Q1 2018 vacancy rate stayed unchanged versus Q4 2017 at a relatively healthy 8.7%. As we head into 2018, we expect this vacancy rate to return to lower levels as tenants absorb additional product and new development begins to taper.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(285,498)

2,054,731

423,431

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.7%

8.5%

8.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,668,626

2,605,917

2,511,551

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,273,572

2,691,518

3,841,664

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

2,062,138

2,927,927

VITAL STATS

9.0%

3,000,000

2,500,000 8.0% 2,000,000 7.0%

TOP LEASE TRANSACTIONS • Tellworks Communications leased 722,733 SF from Ridge Development/Invesco at 4101 Research Drive/Park Twenty Three-Sixty Building 1 • Parish Hare Electric Supply leased 232,151 SF from Jackson Shaw/Clarion at 4921 Conflans Road – Parc GSW – Building B • Professional Packaging leased 349,421 SF from Black Creek Group at 1400 N Highway 360 – Building 2/GSW 360 Global Logistics Park • OmniSource United leased 71,534 SF from Ridge Development/Invesco at 3750 S Watson Road/Park Twenty Three-Sixty • C2 Wireless & Accessories leased 65,200 SF from TSW at 3275 Trinity Boulevard/Riverpark 1100

1,500,000

1,000,000

6.0%

500,000 5.0% 0

(500,000)

4.0% Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

NEW DEVELOPMENTS • 2911 S Great Southwest Parkway – 271,794 SF spec with La Salle/Stream Realty Partners • Parc Southwest/5250-5251 Frye Road – 292,997 SF spec with GID/Jackson Shaw • Sovereign Road & Amon Carter Boulevard/ CentrePort IV – 494,518 SF spec with Hillwood • 2525 E Abram Street/General Motors Assembly Plant Expansion – 1,000,000 SF

• 2251 E Bardin Road – 365,000 SF spec by Liberty Property Trust and leased by FedEx • 949 W Oakdale Road – 401,557 SF spec with PLR • 2401 N Belt Line Road/Wildlife 6 – 832,000 SF spec with Crow Holdings Industrial and leased by Haier Appliances

LARGE EXISTING VACANCIES • 1303 W Pioneer Parkway/161 Pioneer Distribution Center – Restoration Hardware Sublease – 858,000 SF • 950 E Avenue K/GSW 360 Global Logistics Park – 487,752 SF • 1011 Isuzu Parkway/Regency II – 470,000 SF • NWQ Conflans Road & Highway 360/Parc GSW – Building A – 450,340 SF • 14200 FAA Boulevard/CentrePort II – 430,759 SF • 1111 W Bardin Road/Cooper I-20 – 420,000 SF • 3120 N Great Southwest Parkway/GSW Gateway IV – 312,314 SF • 2710 N Forum Drive – 301,000 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

25+ YEARS

The DFW Airport market vacancy rate increased slightly over the past quarter from 5.5% to 6.0%. The increase in vacancy rate is coupled with (60,342) SF of absorption through Q1 2018. These numbers can be attributed to development remaining strong with approximately 3.5 million SF under construction. Stream, Bandera, Copeland Commercial, Prologis, DCT and Perot Development are the developers with the 3.5 million under construction. Trammell Crow Company has 144 acres in Passport Park with two buildings totaling 1.8 million square feet with dirt work to begin at the start of the 3rd quarter. Rental rates have remained strong ranging from $3.85 -$8.00 for bulk distribution and shallow bay product. Rental abatements range from 2 months to 7 months depending on renewal versus new speculative deals and the size of the lease transaction.

Tenant Improvements costs remain high because of continued increases in construction costs. DFW Airport market continues to be one of the top three markets in the Metroplex and the new product being delivered will perform well.

CRE EXPERIENCE JIM BRICE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Absorption

vs. Prev. Qtr

(60,342)

1,496,947

361,636

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.5%

6.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

999,350

1,095,476

2,803,726

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,518,110

1,166,526

1,922,581

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,274,942

1,189,735

DEALS ON THE MARKET • Skyway Business Center – 66,504 SF owned by

VITAL STATS

11.0%

Valley Parkway • Professional Installation Network, Inc leased 152,160 SF from Brookfield Properties at 9001-9015 Sterling Street.

• Blackhorse leased 65,000 SF from ML Realty at 501 Southwestern Boulevard

HLC Deal

6.0%

325,795

TOP LEASE TRANSACTIONS • Vira Insight leased 329,060 from Majestic at 2701 S

vs. 12 Mths Ago

2,500,000

10.0%

2,000,000

9.0%

1,500,000

8.0%

1,000,000

7.0%

500,000

6.0%

0

Hartman Property Photo: Prologis Park 121, Prologis

5.0%

(500,000) Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

NEW DEVELOPMENTS • Gateway Logistics Center – five (5) building development totaling 1,409,400 SF being developed by Bandera Ventures • DFW Commerce Center Building 1 – 1,000,584 SF building being developed by Copeland Commercial • International Logistics Center – three (3) building development totaling 646,796 SF to be delivered August 2018. The development is owned by Cabot • DCT Freeport West 2 & 3 – two (2) building DCT development totaling 193,935 SF to be delivered June 2018 • Logistics Center 7 – 74,375 SF building being developed by Perot Development.

• Prologis Park 121 – Building 5B totaling 125,520 SF being developed by Prologis

LARGE EXISTING VACANCIES • 944 W Sandy Lake Road – 604,800 SF • 2800 Valley View Lane – 294,795 SF • 2450 Esters Boulevard – 213,392 SF • 801 Industrial Boulevard – 204,556 SF

SUBMARKET INTELLIGENCE NORTHEAST & EAST DALLAS

11+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The Northeast and East Dallas submarkets continued to perform steadily with another consecutive quarter of positive absorption.

We continue to see strong activity and have seen rates push past historical levels, and they continue to gradually increase.

Spec warehouse and newer second-generation space between 100–200,000 SF is now being quoted between $4.05– $4.75 NNN. Construction has increased considerably over the last 12 months with more announcements on the way.

Activity remains strong throughout the market as Landlords of new construction are consistently putting out proposals during the early phases of construction. We expect concessions to remain low and rates to steadily increase throughout these markets.

JOSH BARNES

Principal jbarnes@hldallas.com 972.280.8353

TOP LEASE TRANSACTIONS • Texas Star Warehouse & Distribution renewed their 146,464 SF lease at 5200 E Grand Avenue with Frontier Equity • Col Met leased 80,000 SF at 3353 N Miller Park Drive with Clarion • Varsity leased 84,000 SF at 640 Shiloh Road from Trident Capital • Daryl Flood Logistics leased 72,722 SF at 10665 Sanden Drive with DCT Industrial • Midwest Veterinary Supply renewed their 42,728 SF lease at 11220 & 11240 Grader Street from Rialto Capital Management • Crown Technical Systems leased 32,056 SF at 2350 Crist Road from ATCAP Partners

HLC Deal

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

449,593

1,262,979

(116,665)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.1%

6.3%

6.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

636,608

1,740,239

1,675,841

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

3,093,958

2,335,808

2,627,140

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

117,000

1,273,500

1,108,792

VITAL STATS

8.0%

1,400,000 1,200,000 1,000,000 800,000

7.0%

600,000 400,000 200,000 6.0%

0 (200,000) (400,000)

5.0%

(600,000) Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

DEALS ON THE MARKET • Technology Business Campus is being sold by HFF – 142,050 SF five building project owned by JG Heritage TBC, Ltd. • Northgate II being sold by Stream - 193,931 SF building owned by PS Business Parks • Berkeley Portfolio being sold by HFF – 1.6 million SF portfolio in DFW/Atlanta; 4 buildings totaling 121,924 SF • Northgate II being sold by HFF – 213,481 SF four building project on Miller Road and Markison Road; owned by Clarion • Kingsley Transit Center being sold by HLC – 347,822 SF two building project at 3310-3422 Kingsley Road; owned

by Clarion

HLC Deal

NEW DEVELOPMENTS • 1601 South Shiloh Road – two buildings totaling 248,825 SF by Huntington Industrial Partners • 1200 South Jupiter Road – three building spec development totaling 764,400 SF to deliver mid-2018 by Langford Property Company • 4000 E Scyene Road (Ashley Furniture Building) – 877,230 SF to deliver August 2018 • I-75/Wilmeth – 202,270 SF spec building to deliver mid2018 by Hunt Southwest • 2200 Trade Center – 487,200 SF spec building to deliver late 2018 by IDI

HLC Deal

LARGE EXISTING VACANCIES • 3800 Leon Road – 494,000 SF • 5151 Samuell Boulevard – 442,035 SF; space to be vacated by Ashley Furniture • 8901 Forney Road – 419,626 SF • 3310-3422 West Kingsley – 347,822 SF; two building project • 3000 West Kingsley – 341,840 SF; sublease by Apex Tools • 2901 West Kingsley – 253,900 SF • 5200 E Grand Avenue – 339,479 SF

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

For the first quarter of 2018, Northwest Dallas continued to prove to be one of the strongest submarkets in the Dallas/Fort Worth Metroplex. The submarket posted a 4.5% vacancy rate, which is near the same rate as the end of year 2017 (4.4%).

Billingsley recently completed their four building development at Mercer Business Park which are now 100% occupied.

Building Four at Prologis’ Valwood Corporate Park will be completed in Q2 this year, and Core5 recently broke ground on Valwood Crossings at Belt Line and Luna. Those two projects are the development highlights currently under construction in Northwest Dallas. Panattoni will be breaking ground on their 150,000 SF spec facility in May. Rates have continued to increase due to the market tightening as spaces between 50–150,000 SF are diminishing, which is the primary size range in Valwood. All indicators point to the market remaining strong throughout 2018.

ANDREW GILBERT Market Associate agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(185,987)

1,174,100

1,413,470

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.5%

4.3%

5.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,395,892

1,169,189

1,433,293

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,333,675

1,333,675

1,853,769

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

682,888

1,356,600

2,000,000

9.0%

1,500,000

8.0% 1,000,000 7.0% 500,000 6.0%

0

5.0%

(500,000)

4.0% Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

2325 E Beltline. The building totals 138,300 SF. • ML Realty purchased two buildings located at 1402 and 1406 Dunn Drive. Both buildings are 100% occupied and total 100,000 SF. • Fagan Logistics renewed their 72,121 SF lease at 1430 Bradley Lane with ATCAP Partners.

HLC Deal

• 2115 Beltline (Rudy’s Tortillas) – 356,855 SF Building on Beltline. Rudy’s occupies nearly 300,000 SF and L.E. Klein occupies the remaining portion.

NEW DEVELOPMENTS • 1310 Electronics (Valwood Corporate Center) – Building Four (235,900 SF) to deliver Q2 2018 by Prologis

• Valwood Crossings – two buildings totaling 620,000 SF to deliver Q4 2018 by Core5

VITAL STATS

10.0%

TOP LEASE TRANSACTIONS • Impact Floors purchased the building located at

Q1 18

Vacancy Source: CoStar 2018 1Q Industrial Report

DEALS ON THE MARKET • Chrysler Portfolio – Two buildings totaling nearly 450,000 SF. One building located in Carrollton at 2205 E Belt Line Road and is 255,422 SF. The second building is in St. Louis and totals 191,000 SF. Block Partners is the seller from Kansas City.

Chrysler will continue to occupy the Dallas building through 2019.

• DFW/Atlanta Portfolio – 11 buildings totaling 1.6 million SF located in DFW and Atlanta. Berkeley Capital is the seller. The portfolio is currently under contract.

• Greenfield Portfolio – Named the National Urban Logistics Portfolio with 10 of the buildings located in NW Dallas. The buildings are at the intersection of Marsh and Arapaho and total approximately 640,000 SF.

• Valwood Logistics Center – 151,176 SF to break ground in May by Panattoni

LARGE EXISTING VACANCIES • 2701 S Valley Parkway (Building 6) – 329,060 SF • 2900 S Valley Parkway (Building 5) – 222,686 SF • 2099 Valley View – 177,805 SF • 1001 W Crosby – 135,950 SF • 1900 Lakeway Drive – 130,400 SF

SUBMARKET INTELLIGENCE SOUTH DALLAS

30+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

South Dallas Industrial submarket as surveyed is 113M SF and is now 11.1% vacant which is 1.1% higher than reported in 4Q 2017. New construction continues outpacing absorption. South Dallas reported net absorption of 259,300 SF in 1Q 2018.

New construction was mitigated with 1M SF of new transactions from Hollander Sleep Products (322K SF), Best Inc. (205K SF), Sunrise Wood Designs (135K SF), Solstice Sleep (94K SF), Walmart (150K SF) iGPS Pallet (64K SF) and ABC Supply (39K SF). In 1Q 2018 South Dallas delivered 1.7M SF of new bulk warehouse. South Dallas still has 2.2M 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

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(111,042)

2,306,126

1,006,818

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.9%

10.8%

10.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

621,760

647,448

398,231

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

7,281,215

8,359,595

5,621,060

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,078,380

1,104,866

2,730,819

HLC Deal

VITAL STATS

13.0%

• Hollander Sleep Products leased 322,215 SF with Crow Holdings at 2615 Gifford Street off I-30 • Best Inc. leased 205,379 SF with Crow Penn at 39324 Interstate 20 • WalMart leased 150,000 SF from Glasfloss at 420 E Danieldale Road off Interstate 20 • Sunrise Wood Designs leased 135,405 SF from TA Realty at 8801 Autobahn Drive off I-20 • Solstice Sleep Products leased 94,750 SF at 1709 S Interstate 45 • iGPS leased 64,225 SF at 3900 N Dallas Avenue from AC Industrial • ABC Supply leased 39,646 SF with Texas Industrial Development at 4884 Duncanville Road

2,800,000 11.0%

TOP SALES TRANSACTIONS

9.0%

1,800,000

7.0%

• 2020 Singleton Road from Keller Logistics (seller) to GAF Family Trust (buyer) – 472,234 SF

800,000 5.0%

CONSTRUCTION DELIVERIES

3.0%

(200,000) Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

• Crossroads Trade Center Building 3 – 948,392 SF spec with Clarion/Hillwood (Interstate 35) • Morgan Stanley at 3300/3900 Cedardale Road Development of 776,629 SF

NEW DEVELOPMENTS • I-35 Logistics Crossing – 1,221,612 SF (2 Buildings 610,806 SF each) by Crow Holdings • SouthLink (Hines) - 1,044,647 SF project (expandable to 1,540,000 SF) at Bonnie View Road and Cleveland Road

LARGE EXISTING VACANCIES • Southport Parkway, Building 1 - 1,075,260 SF spec SouthPort Logistics Park (Interstate 45) • Copeland Commercial – 900,043 SF at 3535 N Houston School Road • Core 5 Industrial – 754,897 SF spec with Core 5 at 1200 W Wintergreen Road (Interstate 45) • SouthPointe 20/35 – 660,312 SF spec with Clarion • LogistiCenter at Dallas – 626,439 SF spec with Dermody Properties at 9890 Bonnie View Road • Park 20 – 468,300 SF with Huntington Industrial Partners on Houston School Road • 1240 Centre Park Boulevard (Eagle Park 20/35) – 454,408 SF spec now with Morgan Stanley

SUBMARKET INTELLIGENCE SOUTH STEMMONS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

At the end of Q1 2018, the South Stemmons industrial submarket posted a 2.6% vacancy rate and continues to be one of the strongest performing submarkets in Dallas. There is a strong amount of leasing activity throughout the submarket for tenants between 10–50,000 SF. Although absorption for Q1 totaled a negative 200,000 SF, this is due to tenants relocating from the Design District with rates continuing to rise quickly in that area. The negative absorption number is expected to reverse in 2018 due to the lack of development sites in the submarket. As 2018 begins, rental rates are expected to increase as the submarket becomes tighter and tenants are relocating north on I-35 from the spike in rental rates in the Design District. Since 2013, rents in the submarket have increased 30% 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. This trend is expected to continue throughout 2018.

ANDREW GILBERT Market Associate agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

7,808

(398,836)

(133,911)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.6%

7.3%

7.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

898,802

1,129,375

1,085,586

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

322,215

888,133

215,000

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

565,918

15,000

518,241

VITAL STATS

10.0%

1,000,000

TOP LEASE TRANSACTIONS • Prologis purchased the 200,000 SF building at 8801 Ambassador Row from Freeman, who will continue to occupy the building through mid-2019 • Geomet Recycling expanded into an additional 52,305 SF with Sealy at 11420 Mathis Street • Magpie Land sold its 43,597 SF building at 13711375 Round Table to DTC Real Estate Holdings • LS Elite signed a 30,000 SF lease at 2655 Freewood Drive in East Hines North from Keith & Ben Properties

800,000

9.0%

600,000

8.0%

400,000 7.0% 200,000 6.0% 0 5.0%

(200,000)

4.0%

(400,000)

3.0%

(600,000) Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

DEALS ON THE MARKET • DFW/Atlanta Industrial Portfolio – eleven buildings totaling 1.6 million SF with eight of the buildings located in DFW and the remaining three in Atlanta, GA. The seller is Berkeley Capital and the deal is currently under contract.

• Westwood Business Park – twelve flex buildings totaling 227,709 SF located on the Northeast corner of Royal and Luna in West Hines North.

• National Urban Logistics Portfolio – fifty-six buildings across seven logistics markets totaling

over 4.5 million SF with buildings on Mockingbird, Quebec, and Lakawana that are located in the South Stemmons submarket. Greenfield is the seller.

LARGE EXISTING VACANCIES • 2606 Brenner Drive – 65,726 SF • 2025 Royal Lane – 50,027 SF • 2682 Brenner Drive – 50,580 SF • 2650 Manana – 48,000 SF • 1275-1281 Round Table – 30,839 SF

SUBMARKET INTELLIGENCE NORTH FORT WORTH

12+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The North Fort Worth industrial submarket maintained positive momentum through the first three months of 2018 by posting a Q1 vacancy of 4.3%, down slightly from the 4.9% posted at year-end 2017. The Q1 net absorption figure of 1,372,623 SF outpaced Q4 2017 by nearly 100,000 SF, which highlights the strength of the North Fort Worth market. This also confirms developer confidence as North Fort Worth currently has more than 4.5 million SF of spec developments under construction.

DONNIE ROHDE

Market Director drohde@hlfortworth.com 817.710.7058

Absorption

vs. Prev. Qtr

Similar to the 2017 calendar year, the most vibrant sector in North Fort Worth was in bulk warehousing. Nearly 98% of the overall, Q1 net absorption in North Fort Worth came from this sector alone. The overall vacancy rate has hit a near 10-year low coming in at 4.3% (only being surpassed by Q1 & Q2 of 2014 when the market had 17 million less SF than YTD.) As projects such as 35 Eagle, Synergy Crossing, Fossil Creek Crossing, and Park 820 come to completion, expect to see continued positive absorption by bulk distribution users that prefer the transit amenities North Fort Worth and Alliance have to offer.

vs. 12 Mths Ago

TOP SALES TRANSACTIONS

1,371,029

1,225,946

1,362,760

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.3%

5.0%

8.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

326,230

1,342,668

2,982,716

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,485,958

3,915,330

4,501,487

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

785,500

747,781

1,534,536

• Exeter purchased a 400,000 SF distribution warehouse at 4801 Westport Parkway, from Transpacific Development Corporation.

• Havener Companies purchased a 31,128 SF distribution warehouse at 1420 Northpark Drive from Cameo America Corporation • Dart Couriers purchased a 25,600 SF warehouse located at 5955 Eden Drive from a local owner • Burton Hill Capital RE, LLC transacted a 24,750 SF sale – leaseback at 201 Longhorn Road • Squaw Lake Holdings, Ltd. purchased a 16,417 SF flex facility at 2100 Greenwood Drive from Pebl Partnership, Ltd.

TOP LEASE TRANSACTIONS

VITAL STATS

12.0%

3,000,000

10.0%

2,000,000

8.0%

1,000,000

6.0%

0

4.0%

(1,000,000)

2.0%

(2,000,000) Q1 15

Q2 15

Q3 15

Absorption

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

• Ceva Logistics leased 300,000 SF at Synergy Crossing from TCRG Properties • Martin Brower expanded by 87,500 SF at 400 Patriot Parkway owned by JP Morgan • Blackmon Mooring renewed their lease for 63,795 SF at 2020 E 4th Street owned by Fort Capital • MEI Rigging & Crating leased 56,354 SF at NorthPoint Distribution Center from Exeter • Mattel leased 54,000 SF at 900 Terminal Road from Gramercy Property Trust HLC • Global Packaging leased 51,808 SF at 3501 Biway Street from Deal Traylor Investments • Recycling and Waste Reduction leased 27,000 SF at 992 Haltom Road from Enigma Properties, LLC

DEALS ON THE MARKET

• 35/820 Mercantile Center (Under Contract) – 657,043 SF • General Motors Distribution Center at 301 Freedom Drive – 404,450 SF • 10705 North Freeway – 101,218 SF • 1431 S Cherry Lane (Under Contract) – 100,000 SF • Alliance Gateway Data Center 2 – 88,600 SF

NEW DEVELOPMENTS • 35-Eagle Expansion – Buildings A (1,089,642 SF), H (312,733 SF), and J (234,277 SF) to deliver Q2 2018 by Trammell Crow • I-35W at Golden Triangle/Synergy Crossing – Building 200 (503,000 SF) by Ironwood Realty Partners, LLC and TCRG Properties. The entire development is slated for 2.8 million SF. • Railhead Industrial Park – 400,000 SF to deliver Q4 2018 by Andrews Distributing • Speedway Distribution Center – Building C (316,128 SF) to deliver Q2 2019 by IDI Logistics • NW corner of Loop 820 and Blue Mound Road – Building 1 (221,000 SF) to deliver Q2 2018 by Scannell Properties. Phase 2 will include 270,000 SF. • NE corner of I-35 and Loop 820 – Two buildings totalling 432,485 SF to deliver Q2 2018 by Huntington Industrial Partners • Parc North Building 5 – 100,003 SF shallow-bay facility by EastGroup Properties, Inc.

LARGE EXISTING VACANCIES • • • • • • • • • •

14901 N Beach Street – 1,111,500 SF 3300 Eagle Parkway – 588,262 SF 5650 Alliance Gateway Freeway – 445,870 SF 2112 Eagle Parkway – 407,800 SF 4801 Westport Parkway – 400,000 SF 1101 I-35W – 202,000 SF 4630 N Beach Street – 187,000 SF 920 Westport Parkway – 183,908 SF 4601 Gold Spike Drive – 183,832 SF 4800 N Sylvania Road – 164,721 SF

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

16+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The South Fort Worth industrial submarket posted a vacancy of 5.4%. This is down from 5.8% in Q4 2017. As of Q1 2018, there is upwards of 4.7 million SF of proposed industrial development, of which over 1 million SF is currently under construction. However, we don’t expect the remainder of the 3.7 million SF to hit at once as Majestic, Mereken Land, Carter Foundation, Hillwood, and TCRG control most of the developable tracts. The one caveat is Hunt Southwest, who is pad-ready for a 300K SF freezer cooler building targeting food users. Current lack of supply and increasing demand doesn’t appear to be slowing down, thus fueling a fire under developers and institutional property owners alike to enter the submarket. This is highlighted by South Fort Worth’s Q1 2018 leasing activity of 540,780 SF – a figure that is up significantly from last year’s Q1 activity of 179,857 SF.

MATT CARTHEY

Partner mcarthey@hlfortworth.com 817.710.1111

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

78,341

(781,905)

(114,411)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.4%

5.4%

3.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

TOP LEASE TRANSACTIONS

540,780

845,817

496,184

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

815,661

375,260

323,649

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

17,550

751,164

46,000

HLC Deal

VITAL STATS

7.0%

800,000 600,000 400,000

6.0%

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

-600,000 -800,000 -1,000,000

3.0% Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Shallow Bay product remains very strong and in high demand posting a vacancy rate of 1.9% down from 2.3% in the fourth quarter. This marks the lowest of all product types in the South Fort Worth submarket as well as the lowest in all other DFW submarkets with the exception of south Dallas. Due to the lack of supply we expect this figure to stay steady until the beginning of 2019 when new shallow bay projects are slated to deliver.

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Industrial Report

• GeoDynamics leased 65,000 SF at 6601 Will Rogers Boulevard from Mereken Land Company • H & E Equipment subleased 23,840 SF at 104 Bearcat Road from Morrison Supply Company • North American Sealing Solutions leased 21,760 SF at 4116 Cockrell Avenue from PacVentures, Inc. • An undisclosed company leased 174,684 SF at 6657 Oak Grove (Carter Industrial Park) from Crow Holdings

DEALS ON THE MARKET • Cushman and Wakefield, on behalf of First Industrial, is marketing Midway Business Park which totals 470,559 SF. A buyer has been selected and currently in due diligence.

• HFF, on behalf of Berkeley Properties, is marking the sale of a multi-market portfolio with two of the assets residing in Southeast Fort Worth. Berry Business Center is a 223,725 SF five building project, and Village Creek Business Park is a 430,000 SF seven building project.

A buyer has been selected and is currently in due diligence.

• Turbo Business Center is marketing the sale of 990 Haltom Road, which is multi-tenant building totaling 71,000 SF • Transwestern, on behalf of Winchester Safes, is marketing the sale of a three building portfolio located

at 4801 Esco Drive. The total footprint of the buildings is 149,981 SF. • 7471 Benbrook Parkway, a 76,625 SF single tenant building, is currently under contract to a user. Transwestern is the seller.

NEW DEVELOPMENTS • Southland Business Park Phase 1 (SW Everman Parkway) – 287,261 SF to deliver June 2018 by Majestic Realty.

This will be the first of five buildings constructed, which is slated to house a little over 1.9 million SF total.

• Everman Trade Center (Everman Parkway and I-35) – four-building development totaling 457,745 SF (with buildings ranging from 56,353 SF to 217,537 SF) to deliver early Q1 2019 by Frontier Equity and TA Realty

LARGE EXISTING VACANCIES • • • • •

7220-7550 Oak Grove Road – 1,142,150 SF 6633 Oak Grove Road – 270,282 SF 6601 Oak Grove Road – 264,125 SF 1125 Joel East Road – 131,966 SF 1801 Riverbend West Drive – 101,500 SF

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