Industrial Vacancy Tumbles To 3.1% On Surging Demand

QUARTER IN REVIEW 3RD QUARTER LEE & ASSOCIATES - IRVINE / NEWPORT BEACH / ORANGE INDUSTRIAL MARKET REPORT Industrial Vacancy Tumbles To 3.1% On Surging Demand The countywide vacancy rate fell 5 basis points in the third quarter to a record low of 3.1% as intense demand for industrial space continued apace, cutting deeper into an already sparse inventory of available space across Orange County s four submarkets. Net countywide absorption of 1.1 million sq. ft. of space in was the second most for any three-month period since the recession. Slightly more than 2 million sq. ft. have been absorbed in the last two quarters. This leaves 8.5 million sq. ft. of vacant space out of the county s base of 276 million sq. ft. among 8,315 buildings of at least 1, sq. ft. in Lee & Associates quarterly survey. Companies planning for growth are adding many months to their searches for suitable space and are seeing fewer options. For now, average asking rents are 13% below the market s 28 peak. That is expected to change as many leases extended during the recession are coming up for renewal through next year. Renewal rates are up as much as 3%. Among the handful of properties that come up for sale, generally all are drawing multiple offers at prices at or near pre-recession highs. Industrial land for new development is unavailable and the total inventory of industrial space has contracted by 4.3 million sq. ft since 28, adding to upward pricing pressures. North County the county s largest submarket with 114.6 million sq. ft. of space has been one of the hottest. Its vacancy rate fell to 3.2% from 3.9% on s net absorption of 441,839 sq. ft. There are 3.6 million sq. ft. of vacant space, 4.6 million sq. ft. less than in 21. The Airport submarket with 2,51 buildings totaling 75 million sq. ft. posted 248,49 sq. ft. of net absorption in, pushing its vacancy rate to 2.6% from 3.2% in the prior quarter. About 4.4 million sq. ft. of empty space has come off the market since vacancy peaked at 8.2% in 21. Net absorption in South County was 85,894 sq. ft. in the third quarter, pushing down the vacancy rate 2 basis points to 4.4%. Vacancies among 1,261 buildings totaled 1.8 million sq. ft. on a 41.5 million-sq.-ft. inventory. Demand also has been strong for space in the small West County submarket. In, its vacancy rate fell to 2.3% from 2.8% on net absorption of 339,697 sq. ft. About 2.6 million sq. ft. have come off the 44.7-million-sq.-ft. West County s submarket in 11 quarters when vacancy was 3.5 million sq. ft. In Los Alamitos, for example, only 34,34 sq. ft. of space is available in a total inventory of 15 buildings totaling 3.7 million sq. ft. MARKET OVERVIEW (Change from last quarter) AVAILABILITY - 5.6% Up from 5.4% last quarter AVAILABILITY RATE VS VACANCY RATE VACANCY - 3.1% Down from 3.6% last quarter ABSORPTION - 1,115,92 SQ. FT. Up from 948,395 SF last quarter AVERAGE LEASE RATE - $.77 NNN Up from $.76 last quarter *All numbers are based on industrial buildings 1, sq. ft. and larger. Availability Vacancy The Orange County Industrial Market Report is published quarterly by the Lee & Associates Irvine, Newport Beach and Orange offices. C Lee & Associates, Inc. 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 18.% 15.% 12.% 9.%

NUMBER OF LEASES EXECUTED FOR THE QUARTER BY SUBMARKET # of Deals DIRECT LEASE SUBLEASE 25 225 2 175 15 125 1 75 5 25 North County West County Airport Area South County Outlying OC WIDE NET ABSORPTION Sq. Ft. 1,3, 1,1, 9, 7, 5, 3, 1, -1, -3, -5, INCLUDING SUBLET SPACE 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 UNEMPLOYMENT RATE 1 9.5% 9.% 8.5% 8.% 7.5% 7.% 6.5% 5.5% 5.% 4.5% 4.% Source: EDD YTD NET ABSORPTION Sq. Ft. 1,1, 1,, 9, 8, 7, 6, 5, 4, 3, 2, 1, -1, -2, BY SUBMARKET, INCLUDING SUBLET SPACE AREA California Orange County 8/14 9/14 1/14 11/14 12/14 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 OC VACANCY RATE BY SUBMARKET - INCLUDING SUBLET SPACE VACANCY RATE BY QUARTER 8.% 7.% 5.% 4.4% 4.% 3.2% 2.3% 2.6% 2.% 1.% North County West County Airport Area South County Outlying OC 5.5% 5.% 4.5% 4.% 3.5% 2.5% 2.% 1.5% 1.%.5% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15

AVERAGE NNN LEASE RATE BY SUBMARKET AVERAGE NNN LEASE RATES BY QUARTER NNN $1.3 $1.1 $.9 $.8 $.6 $.4 $.2 $. AREA OC COMPLETED LEE & ASSOCIATES TRANSACTIONS NNN $.75 $.7 $.65 $.6 $.55 $.5 $.45 $.4 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 12131 Western Garden Grove, CA Lease Transactions 3Q 15 PROPERTY SF TENANT LANDLORD REPRESENTING BROKERS 12131 Western Garden Grove, CA 17332 Gothard Huntington Beach, CA 5541 Mosher Avenue Tustin, CA 17332 Gothard Huntington Beach, CA 175, Haringa Inc. dba Premier Packaging Money Mailer Holding Group 5541 Mosher Avenue Tustin, CA David Newton represented the Landlord and Phillip DeRousse & Chuck Noble represented the Tenant. 94,572 Restaurant Depot, LLC Gothard HB, LLC Dale Camera, Jason Helmick & Jim Snyder represented the Tenant. 53,842 Provenza Floors Container Supply Jim Snyder & Matt Durkin represented the Tenant. 4th Street Ontario, CA 1493 E. Alondra La Mirada, CA 62 E. Dyer Road Santa Ana, CA Sale Transactions 3Q 15 PROPERTY SF BUYER SELLER REPRESENTING BROKERS 4th Street Ontario, CA 1493 E. Alondra La Mirada, CA 62 E. Dyer Road Santa Ana, CA 149 Acres SRG Acquisitions, LLC Craig Development Chuck Noble, John Hatzis & Dave Hunsaker represented the Seller. 135,169 LeftBank Art LBA Realty Jeff Bischofberger & Ryan Swanson represented the Buyer. 43, Carson Farris DAE Property, LLC John Collins & Tom West represented the Seller.

BY CITY Bldg Count SF RBA Available Avail. Total Vac. Direct SF Direct Vac. Net YTD Net SF Avail SF Avg Asking Lease SF Under Construction Aliso Viejo 57 1,736,94 13,388 5,88 2.9% 5,88 2.9% 4,936 6,846 25,13 - - $1.16 NNN - - Anaheim 1,442 45,891,92 2,61,835 5.6% 1,547,858 3.4% 1,547,858 3.4% 45,962 174,92 141,358 - - $.69 NNN 481,821 Brea 298 12,336,972 695,238 5.5% 246,953 2.% 234,495 1.9% (4,856) 316,384 18,458 12,458 $.62 NNN 367,194 Buena Park 23 14,115,465 538,191 3.8% 241,176 1.7% 241,176 1.7% 363,39 431,456 15, - - $.55 NNN - - Capistrano Beach 1 35,486 - - - - - - - - - - - - - - - - - - - - - - - - Costa Mesa 391 1,761,677 36,371 2.8% 12,216 1.1% 11,849.9% 83,24 273,76 29,78 18,367 $.93 NNN - - Cypress 12 6,532,313 443,398 6.8% 235,62 3.6% 235,62 3.6% 213,769 252,22 3,329 - - $.78 NNN - - Dana Point 1 12, 2,16 17.6% 2,16 17.6% 2,16 17.6% - - 261 - - - - - - - - Foothill Ranch 5 3,59,548 422,67 11.8% 15,563 4.2% 15,563 4.2% 7,2 18,744 152,833 - - $.91 NNN - - Fountain Valley 24 4,952,241 164,746 3.2% 52,967 1.1% 52,967 1.1% (29,861) (23,547) - - - - $.79 NNN 172,713 Fullerton 352 17,825,311 1,159,322 6.5% 747,813 4.2% 747,813 4.2% (28,291) (415,58) 27,84 - - $.55 NNN - - Garden Grove 38 12,857,999 1,45,63 8.1% 348,92 2.7% 348,92 2.7% (57,588) 112,529 216,238 - - $.63 NNN - - Huntington Beach 549 15,575,575 884,317 5.7% 323,278 2.1% 291,648 1.9% 247,661 161,389 92,36 31,63 $.63 NNN - - Irvine 1,31 38,738,323 2,613,143 6.7% 1,536,11 4.% 1,477,827 3.8% 191,592 (218,783) 376,427 58,274 $.94 NNN 45,32 La Habra 13 3,714,511 63,341 17.% 633,136 17.% 633,136 17.% (8,43) 3,928 - - - - $.83 NNN - - La Palma 17 1,859,689 168,88 9.% 93,88 5.% 93,88 5.% (93,88) (93,88) - - - - $.56 NNN - - Ladera Ranch 1 21,784 - - - - - - - - - - - - - - - - - - - - - - - - Laguna Beach 3 51,768 3,28 6.3% 3,28 6.3% 3,28 6.3% 3,28 3,28 - - - - - - - - Laguna Hills 111 2,23,856 136,25 6.2% 8,339 3.6% 8,339 3.6% (4,578) 9,69 - - - - $1.3 NNN - - Laguna Niguel 41 815,71 19,862 2.4% 13,591 1.7% 13,591 1.7% (6,76) 6,62 - - - - - - - - Laguna Woods 1 2,178 - - - - - - - - - - - - - - - - - - - - - - - - Lake Forest 182 5,55,312 52,473 1.3% 443,68 8.8% 425,353 8.4% (29,349) (179,591) 94,226 17,715 $.86 NNN - - Los Alamitos 15 3,67,964 34,34 1.1% 3,926 1.% 3,926 1.% 15,726 159,931 - - - - $.68 NNN - - Mission Viejo 57 1,329,13 52,188 3.9% 4,96 3,244 2.3% (9,254) (6,86) 3,156 9,852 $.99 NNN - - Newport Beach 47 1,73,351 36,17 3.4% 32,47 32,47 (1,928) (22,899) - - - - - - - - Orange 568 14,252,717 229,83 1.6% 168,3 1.2% 168,3 1.2% 45,416 49,459 8,884 - - $.89 NNN - - Placentia 17 4,227,557 6,867 1.4% 26,368.6% 26,368.6% 34,155 26,86 - - - - $.77 NNN - - Rancho Santa Margarita 84 2,72,871 86,826 3.2% 44,571 1.6% 44,571 1.6% 7 (36,416) 9,954 - - $.92 NNN - - San Clemente 12 2,757,312 18,89 3.9% 115,699 4.2% 46,294 1.7% 8,385 18,27 35,326 69,45 $.97 NNN - - San Juan Capistrano 78 1,762,915 74,368 4.2% 56,437 3.2% 54,287 3.1% 25,572 34,777 2,15 2,15 $1.13 NNN - - Santa Ana 1,125 31,877,867 1,92,431 745,815 2.3% 725,79 2.3% (12,55) 244,283 285,418 2,16 $.73 NNN 12,1 Seal Beach 13 975,959 64, 6.6% - - - - - - - - - - - - - - - - $.73 NNN - - Stanton 72 1,359,159 21,8 1.6% 8,3.6% 8,3.6% (6,2) 6,558 - - - - - - - - Tustin 188 7,466,18 494,758 6.6% 259,473 3.5% 254,154 3.4% 67,84 219,531 13,647 5,319 $.72 NNN - - Westminster 84 2,421,59 99,887 4.1% 9,25.4% 9,25.4% 19,417 2,71 - - - - $.65 NNN - - Yorba Linda 84 2,244,482 75,935 3.4% 73,685 3.3% 63,766 2.8% 3,493 31,837 - - 9,919 $1.5 NNN - - Orange County Totals 8,315 276,241,354 15,433,6 5.6% 8,481,875 3.1% 8,226,68 3.5% 1,115,92 1,595,93 1,695,731 255,195 $.77 NNN 1,79,13 Bldg Count SF RBA Available Avail. Total Vac. Direct SF Direct Vac. Net YTD Net SF Avail SF Avg Asking Lease SF Under Construction BY AREA North Orange County 3,219 114,598,935 6,1,451 5.2% 3,684,992 3.2% 3,662,615 3.2% 441,839 645,958 356,459 22,377 $.64 NNN 849,15 West Orange County 1,323 44,687,76 2,553,424 5.7% 1,49,346 2.3% 1,17,716 2.3% 339,697 62,51 311,927 31,63 $.67 NNN - - Airport Area 2,51 75,52,568 3,822,83 4.8% 1,933,396 2.6% 1,873,14 2.5% 248,49 446,785 361,136 6,292 $.77 NNN 184,813 South Orange County 1,261 41,475,23 3,56,48 7.4% 1,814,141 4.4% 1,673,245 4.% 85,894 (99,71) 666,29 14,896 $1. NNN 45,32 Outlying Orange County 2 426,888 - - - - - - - - - - - - - - - - - - - - - - - - Orange County Totals 8,315 276,241,354 15,433,6 5.6% 8,481,875 3.1% 8,226,68 3.5% 1,115,92 1,595,93 1,695,731 255,195 $.77 NNN 1,79,13

ABOUT LEE & ASSOCIATES As a group of independently owned and operated companies, Lee & Associates currently has more than 53 offices in Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Maryland, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Pennsylvania, South Carolina, Texas and Wisconsin. With a broad array of regional, national and international clients ranging from individual investors and small businesses, to large corporations and institutions Lee & Associates has successfully completed transactions with a total value of more than $9 billion last year, alone. INDUSTRIAL SERVICES Lee & Associates knows industrial real estate. Large, mid-size and small, we help clients transact their way through the intricacies of manufacturing plans, bulk warehousing/distribution facilities, specialized flex complexes, modern build-to-suit flex space and turn-key, high-tech campuses. Our industrial specialists provide skilled guidance running the gamut from facility, site and land acquisition/disposition to advisory services, sale and lease negotiations, build-to-suit analysis and planning. SUBMARKETS: Anaheim, Break, Buena Park, Fullerton, La Habra, Orange, Placentia, Yorba Linda Anaheim, Cypress, Garden Grove, Huntington Beach, La Palma, Los Alamitos, Santa Ana, Seal Beach, Stanton, Westminster Costa Mesa, Fountain Valley, Garden Grove, Irvine, Newport Beach, Santa Ana, Tustin Aliso Viejo, Capistrano Beach, Dana Point, Foothill Ranch, Irvine, Ladera Ranch, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente, San Juan Capistrano San Juan Capistrano MARKET FORECAST: UCLA s Anderson Forecast projects that California s unemployment rate will fall to 4.8% by 217, matching the expected national jobless rate. Real personal income growth statewide is estimated to be 4.6% this year, 4.5% next year and 4.2% in 217, the report said. In the last three years California has added jobs faster than all but five states and significantly outpaced Texas last year, according to the Los Angeles Times. Industrial Members of the Lee & Associates Group of Companies-Orange County Jeff Bischofberger Kurt Bruggeman Dale Camera Phil Cohen Chris Conway BJ Fell Craig Fitterer Brian Garbutt Ryan Harman Jason Helmick Mark Jerue Guy LaFerrara Nate Pivaroff Ted Rommel LEE & ASSOCIATES - IRVINE 9838 Research Drive Irvine, California 92618 (949) 727-12 LEE & ASSOCIATES - NEWPORT BEACH 1 Bayview Circle, Suite 6 Newport Beach, California 9266 (949) 724-1 Frank Adler Sean Ahern Tim Arguello Chris Barnett David Bolt Alton Burgess John Collins Chris Coyte Jim deregt Matt Durkin Bill Garrett Bob Griffin Travis Haining Jeff Hirsch Steve Jehorek LEE & ASSOCIATES - ORANGE 14 West Taft Avenue, Suite 15 Orange, California 92865 (714) 647-91 Allen Buchanan Pat Delaney Phillip DeRousse Christopher Destino Greg Diab Johnny Eubanks Ian Fewel Jeff Gahagan Brad Gilmer Tom Gilmer Tom Grant Jack Haley Chuck Hardy James Hawkins Doug Himes Mark Hintergardt Luke Hudson Elizabeth Hughes Dave Hunsaker Joel Hutak Justin Smith Brock Stryker John Suggs Ryan Swanson Todd Swanson Pat Lacey Ryan Lawler Mike Long John Martin Darin McDonald Matt McKinlay Kevin Quick Ted Sawyer Dick Silva Jim Snyder Curt Stalder Kevin Thomas Tim Walker Tom West Jedd Zaun Dan Kruse Robert Leiter Frank Mejia Bryan Miller David Newton Chuck Noble Jon Passafiume Bob Sattler Scott Seal John Son Peter Sowa David Tabata Randy Verdieck Dave Williams No warranty or representation is made to the accuracy of the foregoing information. Terms of sale or lease and availability are subject to change or withdrawal without notice.