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Q2 2011 | INDUSTRIAL

NORTHEAST FLORIDA

RESEARCH & FORECAST REPORT

Industrial Market Summary

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OVERVIEW Nationally, the Industrial Market outpaced the performance of all other commercial real estate product types. Lack of construction of new Industrial buildings, along with solid demand in most markets, continued the modest decrease in the vacancy rate, but without a corresponding increase in the rental rates. Jacksonville follows this national trend. The Industrial vacancy rate in Jacksonville is down from 11% in the first quarter to 10.5% in the second quarter, while rental rates ended the second quarter at $4.03 per square foot, a decrease from the first quarter. Net absorption this quarter was 544,077 square feet.

MARKET INDICATORS Q2-2011

Q3-2011

New construction, both nationally and locally, will remain at very low levels and be confined to build to suit transactions for credit worthy users. Locally, this is especially true for tenants needing Class A cross dock facilities of 400,000 SF or more, where there now exist only 3 choices.

VACANCY VACANCT SUBLEASE

NET ABSORPTION RENTAL RATE

CONSTRUCTION

Any incremental increase in occupancies will immediately translate into lower vacancy rates. For the majority of landlords and investors, the best that can be expected going forward, is a modest decrease in vacancies. The Port of Jacksonville has been and will continue to be a major driver for Industrial product. JAXPORT has some major strategic initiatives for 2011. As JAXPORT plans for new facilities and grows existing business, Jacksonville’s seaport is realizing it’s potential by offering enhanced port services with diversified cargo handling and worldwide trade lanes. These initiatives include:

* Q3-11 Projections

VACANCY RATE TRENDS

12.00% 11.50% 11.00% 10.7% 10.50% 10.00%

Deepen the St. Johns River: While all of JAXPORT’s terminals enjoy direct access to the 40-foot deep, 21-mile long federal shipping channel, the U.S. Army Corps of Engineers is studying two projects to improve navigation and prepare the harbor for the larger cargo ships projected to call Jacksonville in the future.

11.6%

11.1%

11.0% 10.5%

2Q 10 3Q 10 4Q 10 1Q 11 2Q 11

Develop new port facilities: JAXPORT is planning for the development of the Hanjin Container Terminal, a new 90-acre facility to be constructed at Dames Point. Both the Hanjin terminal and the TraPac Container Terminal will offer shippers unprecented containership access between Jacksonville and parts throughout Asia, particularly as the Panama Canal’s new locks open to Post-Panamax vessels later this decade. Invest in the Port’s future: To ensure the Port’s long term viability, JAXPORT is embarking on a major capital improvement program to renovate and improve infrastructure and equipment. From new rail tracks to new cranes, JAXPORT is improving terminal facilities for port customers.

www.colliers.com/jacksonville


RESEARCH & FORECAST REPORT | Q2 2011 | INDUSTRIAL | NORTHEAST FLORIDA

Industrial Statistics 2nd Quarter 2011 Industrial Building Inventory 122,417,071 SF Vacancy Flex: 12.4% Warehouse: 10.5% Total: 10.5% Net Absorption 544,077 SF Under Construction 235,000 SF Base Triple Net Rental Averages Warehouse: $2.50-$3.90/SF Bulk Distribution:$3.00-$4.50/SF Flex:-$7.50-$12.00/SF Industrial Acreage Asking Prices $50,000/acre (raw) $100,000/acre (entitled) Shell Building Cost $48/sf (no land) Industrial Cap Rates 7% – 9% CAM Averages Warehouse: $0.90-$1.20/SF Bulk Distribution: $.80-$1.20/SF Flex: $2.25-$3.50/SF

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| COLLIERS INTERNATIONAL

NEWS AND TRENDS • CSX Corporation and the Jacksonville Port Authority plan to tap a federal transportaion funding program to get about $58 million needed to build an on-dock or near rail facility that would handle containers from the existing Asian terminal and the terminal planned nearby. The move appears to be the first public move made by the Jacksonville based railway to pursue the facility that is key to making the Port of Jacksonville competitive with major East Coast ports. The majority of Jacksonville’s competitors, including Savannah, Ga., and Charleston, SC, have one - if not two - facilities that provide on-dock or near-dock rail service to their container terminals. Source: Jacksonville Business Journal Announcements and News Around Northeast Florida: • Life Sciences: Medtronic Corporation has selected Jacksonville to build a new $14 million research and development and manufacturing facility, which will add 175 new highwage jobs. Source: Jax USA Partnership • Aviation and Aerospace: Kaman Aerospace is adding 250 jobs and has leased 100,000 square feet in Imeson Industrial Park. This will expand its helicopter parts manufacturing operations. Source: Jax USA Partnership • Logistics and Distribution: PLS Logistics is bringing a new operation to Jacksonville that is heavily IT oriented in the logistics industry and is adding 100 new jobs. Source: Jax USA Partnership • Port: Keystone and Vulcan Materials Company opened a new private port terminal that is bringing 200 new jobs and $150 million in capital investment. Source: Jax USA Partnership


RESEARCH & FORECAST REPORT | Q2 2011 | INDUSTRIAL | NORTHEAST FLORIDA | SubMarket

EXISTING PROPERTIES

| VACANCY |

| CONSTRUCTION

RATES

# Bldgs

Total Inventory SF

Direct SF

Total Vacant SF

Vacancy %

YTD Net Absorption

YTD Deliveries

Under Construction SF

Quoted Rates

8

63,580

1,100

1,100

1.70%

-1,100

0

0

$7.79

FLEX Arlington

|

Beaches

13

105,236

18,792

18,792

17.90%

0

0

0

$10.96

Butler

10

4,380,436

471,837

485,972

11.10%

61,885

0

0

$8.77

Downtown

7

76,253

4,578

4,578

6.00%

0

0

0

$7.00

Mandarin

12

115,886

16,500

16,500

14.20%

23,048

0

0

$8.53

Nassau County

9

62,831

14,691

14,691

23.40%

-7,671

0

0

$3.43

Northside/Oceanway

10

272,757

25,520

25,520

9.40%

-1,040

0

0

$12.00

Orange Park (Clay)

17

381,132

67,173

67,173

18.70%

-2,896

0

0

$11.20

Riverside

45

704,379

103,291

103,291

17.60%

-9,900

0

0

$9.03

San Marco

24

368,374

58,192

58,192

15.80%

-6,600

0

0

$8.09

Southside

17

246,939

64,051

64,051

25.90%

-3,500

0

0

$8.93

St. Johns

35

488,060

67,509

67,509

13.80%

9,900

0

0

$7.63

Westside

15

292,257

10,587

10,587

3.60%

0

0

0

$5.00

TOTAL

317

7,560,520

923,821

937,956

12.40%

63,506

0

0

$8.86

WAREHOUSE Arlington

59

907,022

139,581

139,581

15.40%

2,100

0

0

$5.12

Beaches

134

1,016,744

80,298

80,298

7.90%

3,712

0

0

$8.83

Butler

402

15,302,465

2,234,128

2,234,128

14.60%

227,479

0

0

$4.27

Downtown

463

11,636,282

839,962

839,962

7.20%

-14,186

3,000

0

$2.60

Mandarin

49

1,013,898

118,560

118,560

11.70%

11,300

0

0

$5.25

Nassau County

107

3,583,357

33,996

33,996

0.09%

5,600

0

0

$3.63

Northside/Oceanway

235

19,191,112

3,089,022

3,199,902

18.8%

-167,314

280,000

0

$3.26

Orange Park (Clay)

1,119

0

0

$4.50

164

5,157,824

665,330

665,330

12.90%

Riverside

671

17,144,281

1,020,232

1,020,232

6.00%

191,982

0

235,000

$3.51

San Marco

228

4,156,222

365,237

365,237

8.80%

-22,178

0

0

$4.14

Southside

90

1,033,384

365,237

365,237

8.50%

-9,377

0

0

$7.45

St. Johns

274

4,686,906

550,565

551,559

11.80%

58,572

0

0

$4.81

Westside

516

29,787,080

2,928,262

3,024,262

10.20%

181,281

261,659

0

$3.23

3,396

114,856,551

12,254,983

12,462,857

10.90%

470,050

544,659

0

$4.68

122,417,071

13,178,804

13,400,813

10.9%

533,596

544,659

235,000

$4.03

TOTAL MARKET TOTAL

3,713

SECOND QUARTER MARKET HIGHLIGHTS SIGNIFICANT LEASE TRANSACTIONS

Building Submarket Tenant Square Feet • 12751 W. Gran Bay Pky Butler Saddlecreek 213,041 • 780 Whittaker Road Northside N/A 100,800 • 9444-9446 Florida Mining Blvd. E. Butler Synders-Lance 40,000

SIGNIFICANT SALE TRANSACTIONS

Address Submarket • 6870 Phillips Highway Southside • 10601 San Jose Boulevard Mandarin , SIGNIFICANT PROJECTS UNDER CONSTRUCTION Address Project Submarket • Waterworks Road Saft Battery Westside

Buyer Beard Equipment Hanover Holdings Lttd.

Square Feet 42,000 52,300

Sale Price $6,800,000 $1,295,000

Delivery Date Fourth Quarter 2011

Square Feet Notes 235,000 Sf Owner Occupied

Price/SF $59.52 $24.76

COLLIERS INTERNATIONAL |

P. 3


RESEARCH & FORECAST REPORT | Q2 2011 | INDUSTRIAL | NORTHEAST FLORIDA

TRANSPORTATION NETWORK

SUBMARKETS

Located in northeast Florida on the Atlantic Coast, Jacksonville is a major transportation hub.

Downtown: Primarily a waterfront industrial district, Downtown’s existing inventory includes warehouse/storage and port related uses. Construction is rare as a result of little developable land. Vacancy is consistently low due to lack of new product and demand for industrial space in proximity to the port.

Jaxport: The Port of Jacksonville currently has four operational marine terminals: TraPac (Northside), Talleyrand (Downtown), and Blount Island and Dames Point (Northside). Strategically located, Jaxport is able to handle every type of cargo, and has a growing business with Latin American markets. After New York City, Jacksonville imports the second largest amount of vehicles in the country. Roads: Local access to four interstates (I-95, I-10, I-295 and I-75) provides distribution along the entire U.S. East Coast, the southern tier of the nation to the Pacific Coast, and major sections of the South and Midwest. U.S. Highways 1,17, 90 and 301 also provide a link to the nation’s markets. Rail: CSX, Norfolk Southern and Florida East Coast service the area, offering connections to the eastern United States and Canada. Air: Jacksonville International Airport (JIA) and six other regional airports open up the world to business and leisure travelers with more than 120 nonstop flights to 34 U.S. cities, along with a network of major air freight companies that move millions of pounds of air cargo through JIA each year.

Northside: Most of the Northside’s industrial activity in recent years has been taking place in three large business parks – Northpoint, Imeson International and Jacksonville Tradeport. This trend should continue, supplemented by new industrial projects on the Northside near the new TraPac Terminal. Westside: Jacksonville’s largest industrial submarket is an attractive area for large distributors and manufacturers due to existing building supply and easy road and rail access. Westside Industrial Park and Westlake Industrial Park are currently producing most of this submarket’s new warehouse and distribution space. Southside: This densely populated submarket has seen intense competition for residential/ retail land use in recent years, thereby limiting industrial development. Existing inventory consists mainly of smaller, higher office finish, multi-tenant industrial space. There is an increasing trend on the Southside toward mixeduse developments that include an industrial component. Clay/Orange Park: This submarket features mostly small industrial structures oriented toward servicing the nearby retail industry.

NOTE: Research findings contained in this report are based on the following criteria: 1.) Absorption calculations include only buildings with a certificate of occupancy. 2.) Guidelines adhere to the National Association of Industrial and Office Properties (NAIOP) and Jacksonville Chamber of Commerce/Cornerstone database standards. Due to continual updates and refinements in the historical database, some of the data in this report may not match previously published reports. Information contained in this report has been obtained from sources deemed reliable but not guaranteed. The information herein is presented without any warranty or representations as to its accuracy. Source: CoStar Group & Colliers International Northeast Florida.

512 Offices in 61 Countries on 6 Continents United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117 • $1.9

Billion in annual revenue

• 979

Million SF under management

• Over

12,000 professionals

• $59.6 Billion in Total Transaction Value

UNITED STATES: CEO/President | Northeast Florida Robert W. Selton III 1 Independent Drive Suite 2401 Jacksonville, FL, 32202 TEL +1 904 358 1206 FAX +1 904 353 4949

Researcher’s Information Hobart Joost, Jr. SIOR Guy Preston Bart Hinson Jeff Evans Phillip Parsons Ernie Saltmarsh Kimberly Norman

Information contained herein has been obtained from the owners or from other sources deemed reliable. We have no reason to doubt its accuracy but regret we cannot guarantee it. All properties subject to change or withdrawal without notice.

Accelerating success. www.colliers.com/jacksonville www.colliers.com/jacksonville


Industrial Report Q2 2011