JLL Research

Cincinnati | Q1 2017

Industrial Outlook

JLL Research

An in-depth look at the Cincinnati industrial market. Analysis includes leasing, sales, construction and employment.

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

2013 2014 2015 2016 YTD 2017

Average asking rents ($/s.f.)

Q1 2017

Insight

The Cincinnati industrial market has been in rapid expansion mode since 2012. This growth has left many in the industry questioning whether or not the market has reached its peak or if it is in the “9th inning” of the cycle. The first quarter answered those questions as the market saw historic quarterly absorption in addition to the largest announcement made in the market’s history with Amazon’s air cargo hub. Positive absorption in the quarter was driven by full building users leasing or purchasing the few quality available blocks of space in the already tight market.

The signed deals spanned multiple submarkets from Northern Kentucky to Monroe, displaying the strength of the overall market. Hayneedle leased IDI Gazeley’s 994,000-square-foot building at Park North in Monroe, while Kroger purchased Van Trust’s 674,000-square-foot speculative building on Mt. Zion Road. Following the air cargo announcement, Amazon renewed its lease in Litton Lane 2 and leased Litton Lane 1 from Duke Realty, totaling 1.4 million square feet. Multiple full building users remain in the market leading developers to move forward on development sites to answer the demand.

OutlookThe Cincinnati market has found success through its strategic location to 60 percent of the U.S. population within 500 miles as well as its proximity to distribution hubs throughout the Midwest. The introduction of Amazon’s 3.0-million-square-foot, $1.5 billion air cargo hub is another feather in the market’s cap and one that will have an immediate and lasting impact on the market as a whole. As demand in the market strengthens, developers will battle a tightening supply of available land and will look to outlying submarkets for development sites.

Fundamentals Forecast

YTD net absorption 2,625,368 s.f. ▲Under construction 2,848,268 s.f. ▲Total vacancy 3.2% ▼Average asking rent (gross) $4.13 p.s.f. ▲Concessions Falling ▼

0

2,000,000

4,000,000

6,000,000

2013 2014 2015 2016 YTD

2017

Supply and demand (s.f.) Net absorptionDeliveries

Industrial market kicks off 2017 with quarter for the ages

6.4%5.3%

4.4% 4.2%3.2%

2013 2014 2015 2016 2017

Total vacancy

• Northern Kentucky landed its biggest win to date with Amazon’s investment of $1.5 billion for an Amazon Prime Air hub at CVG.

• Multiple full-building users leased or purchased newly constructed properties in the first quarter, leaving only one newly delivered space over 500,000 square feet available.

• Developers are scrambling to break ground on greenfield sites in the furthermost southern and northern submarkets to meet demand for large quality blocks of space.

Cincinnati Industrial Outlook

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

Inventory

(s.f.)

Quarterly

total net

absorption

(s.f.)

YTD

total net

absorption

(s.f.)

YTD

total net

absorption

(% of stock)

Total

vacancy

(%)

Total

availability

(%)

Average

total asking

rent

($ p.s.f.)

Quarterly

completions

(s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)

Market Totals

Warehouse & Distribution 167,184,152 1,608,353 1,608,353 1.0% 3.2% 5.3% $3.80 678,224 678,224 2,780,484

Manufacturing 69,026,741 13,732 13,732 0.0% 2.1% 3.1% $2.84 0 0 0

Total Industrial 236,210,893 1,622,085 1,622,085 0.7% 2.9% 4.7% $3.61 678,224 678,224 2,780,484

Flex / R&D 11,932,167 -30,524 -32,917 -0.3% 10.7% 14.2% $6.65 0 0 0

Submarkets

Airport

Warehouse & Distribution 26,325,443 632,843 632,843 2.4% 1.6% 5.5% $4.19 0 0 1,062,658

Manufacturing 2,147,532 -56,000 -56,000 -2.6% 2.6% 2.6% $5.25 0 0 0

Total Industrial 28,472,975 576,843 576,843 2.0% 1.7% 5.3% $4.24 0 0 1,062,658

Flex / R&D 1,069,751 -3,116 -3,116 -0.3% 4.1% 13.3% $5.08 0 0 0

Blue Ash

Warehouse & Distribution 8,627,252 -16,876 -16,876 -0.2% 8.0% 9.6% $4.17 534,560 534,560 0

Manufacturing 2,524,938 0 0 0.0% 0.0% 3.9% $3.00 0 0 0

Total Industrial 11,152,190 -16,876 -16,876 -0.2% 6.2% 8.3% $4.04 534,560 534,560 0

Flex / R&D 1,719,749 -16,409 -16,409 -1.0% 7.0% 9.6% $6.81 0 0 0

Campbell County

Warehouse & Distribution 2,235,913 0 0 0.0% 2.8% 2.9% $5.99 0 0 0

Manufacturing 1,045,402 0 0 0.0% 0.0% 0.0% - 0 0 0

Total Industrial 3,281,315 0 0 0.0% 1.9% 2.0% $5.99 0 0 0

Flex / R&D 567,895 -4,988 -7,381 -1.3% 0.0% 0.0% - 0 0 0

Central / Midtown

Warehouse & Distribution 29,656,818 12,712 12,712 0.0% 2.6% 4.1% $3.97 0 0 173,262

Manufacturing 15,040,484 -37,665 -37,665 -0.3% 1.7% 2.7% $2.75 0 0 0

Total Industrial 44,697,302 -24,953 -24,953 -0.1% 2.3% 3.7% $3.66 0 0 173,262

Flex / R&D 824,506 46,258 46,258 5.6% 30.4% 31.2% $8.72 0 0 0

Covington

Warehouse & Distribution 3,176,777 23,000 23,000 0.7% 1.9% 1.9% $4.16 0 0 0

Manufacturing 779,862 0 0 0.0% 0.0% 0.0% - 0 0 0

Total Industrial 3,956,639 23,000 23,000 0.6% 1.5% 1.5% $4.16 0 0 0

Flex / R&D 20,000 0 0 0.0% 0.0% 0.0% $5.25 0 0 0

East

Warehouse & Distribution 5,660,129 -75,880 -75,880 -1.3% 2.3% 2.3% $3.96 0 0 0

Manufacturing 5,487,999 0 0 0.0% 12.3% 16.6% $2.50 0 0 0

Total Industrial 11,148,128 -75,880 -75,880 -0.7% 7.2% 9.4% $2.71 0 0 0

Flex / R&D 1,188,181 -6,000 -6,000 -0.5% 15.9% 19.7% $7.24 0 0 0

Florence / Richwood

Warehouse & Distribution 12,237,632 949,500 949,500 7.8% 2.0% 4.3% $3.51 0 0 0

Manufacturing 8,214,941 -9,200 -9,200 -0.1% 1.0% 1.4% $3.65 0 0 0

Total Industrial 20,452,573 940,300 940,300 4.6% 1.6% 3.2% $3.54 0 0 0

Flex / R&D 795,699 -4,925 -4,925 -0.6% 6.5% 12.2% $4.92 0 0 0

Q1 2017

Statistics

Cincinnati Industrial Outlook

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

Inventory

(s.f.)

Quarterly

total net

absorption

(s.f.)

YTD

total net

absorption

(s.f.)

YTD

total net

absorption

(% of stock)

Total

vacancy

(%)

Total

availability

(%)

Average

total asking

rent

($ p.s.f.)

Quarterly

completions

(s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)

Submarkets (continued)

Hamilton

Warehouse & Distribution 6,209,488 0 0 0.0% 11.8% 12.0% $2.81 0 0 788,564

Manufacturing 1,741,094 0 0 0.0% 7.4% 7.4% $2.25 0 0 0

Total Industrial 7,950,582 0 0 0.0% 10.8% 11.0% $2.73 0 0 788,564

Flex / R&D 200,200 0 0 0.0% 0.7% 0.7% $6.60 0 0 0

I-71 Corridor

Warehouse & Distribution 4,785,348 -1,400 -1,400 0.0% 1.6% 2.1% $4.23 0 0 0

Manufacturing 4,695,416 116,597 116,597 2.5% 3.5% 3.5% $2.75 0 0 0

Total Industrial 9,480,764 115,197 115,197 1.2% 2.5% 2.8% $3.31 0 0 0

Flex / R&D 518,639 0 0 0.0% 17.6% 17.9% $7.25 0 0 0

Monroe / Middletown

Warehouse & Distribution 10,475,292 48,120 48,120 0.5% 3.6% 6.3% $3.75 143,664 143,664 756,000

Manufacturing 6,976,617 0 0 0.0% 1.2% 1.2% $2.25 0 0 0

Total Industrial 17,451,909 48,120 48,120 0.3% 2.6% 4.3% $3.59 143,664 143,664 756,000

Flex / R&D 46,900 0 0 0.0% 0.0% 0.0% - 0 0 0

Tri-County

Warehouse & Distribution 45,864,137 30,640 30,640 0.1% 3.0% 5.1% $3.78 0 0 0

Manufacturing 9,107,941 0 0 0.0% 0.0% 1.7% $4.11 0 0 0

Total Industrial 54,972,078 30,640 30,640 0.1% 2.5% 4.5% $3.80 0 0 0

Flex / R&D 4,087,159 -55,064 -55,064 -1.3% 11.0% 14.7% $6.29 0 0 0

West

Warehouse & Distribution 4,151,072 -21,976 -21,976 -0.5% 5.0% 6.3% $3.85 0 0 0

Manufacturing 708,242 0 0 0.0% 0.0% 0.0% - 0 0 0

Totals 4,859,314 -21,976 -21,976 -0.5% 4.2% 5.4% $3.85 0 0 0

Flex/R&D 313,780 1,200 1,200 0.4% 14.0% 14.0% $6.91 0 0 0

Woodlawn / Evendale

Warehouse & Distribution 7,778,851 27,670 27,670 0.4% 2.0% 6.2% $3.33 0 0 0

Manufacturing 10,556,273 0 0 0.0% 0.0% 0.0% - 0 0 0

Totals 18,335,124 27,670 27,670 0.2% 0.8% 2.6% $3.33 0 0 0

Flex/R&D 579,708 12,520 12,520 2.2% 6.5% 9.7% $4.65 0 0 0

Q1 2017

Statistics

Cincinnati Industrial Outlook

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

Q1 2017

Construction

Cincinnati Industrial Outlook

Address: Union Centre Blvd & Seward Rd.Square feet: 477,360Tenant: TBDOwner: NorthpointBuilding type: Warehouse Construction type: Speculative

Est. completion: Q2 2017

Address: 251-299 Exploration Dr.Square feet: 756,000 Tenant: TBD

Owner: IDI GazeleyBuilding type: Warehouse Construction type: Speculative

Est. completion: Q4 2017

Address: Litton Ln.Square feet: 589,193 Tenant: TBDOwner: HillwoodBuilding type: Warehouse Construction type: Speculative

Est. completion: Q2 2017

Est. completion: Q2 2017

Address: 3501 Pt. Pleasant Rd.Square feet: 264,000 Tenant: TBDOwner: DermodyBuilding type: Warehouse Construction type: Speculative

Completed: Q1 2017

Address: 675 Gateway Blvd. Square feet: 143,664Tenant: TBD

Owner: IDI GazeleyBuilding type: Warehouse Construction type: Speculative

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

Q1 2017

Sales

Cincinnati Office Outlook

This report analyzes all industrial sales > 30,000 s.f.

$176,615,423

28

$68

-

70.5%

14.6%

5.75-6% 0 - $6,726,547

7.5-8% 0.0% 28 $128,933,142

Top 10 sales transactions this quarter

Size (s.f.) $ p.s.f. Sale date

605,586 $49 Jan-17

296,950 $71 Jun-16

345,600 $59 Dec-16

189,040 $80 Jun-16

325,350 $45 Mar-16

502,041 $25 Jan-17

72,000 $95 Jan-17

98,724 $58 Jan-17

245,154 $23 Feb-16

85,564 $57 Feb-16

Sales activity by building type

Transactions details

Number of partial interest

transactions

Top sellers (s.f.)Top buyers (s.f.)

Number of domestic

buyers

Foreign capital $

Average partial interest

acquired

Number of foreign buyers

Domestic Capital $

Average Class A price p.s.f. YTD

At a glance

Total volume YTD

Number of transactions YTD

Average Class A cap rate YTD

Sales volume $ by submarket

Warehouse/Dist. sales volume as

% of total YTD

Flex/R&D sales volume as % of

total YTD

Cap rate range

Core Class A Ind.

Core Class A Flex

20 Logistics Blvd. Gramercy Property Trust US Industrial REIT III Gateway $29,950,000

Building address Buyer company Seller company Sales price $

8611 Union Centre Blvd Procter & Gamble

5549-5585 Spellmire Dr Dalfen America Corp

8256 Union Centre Blvd Procter & Gamble

8779 Le Saint Dr Gramercy Property Trust

Cabot II OH2MO1 MO4 LLC $12,228,811

10100 Progress Way J.J. & WV Ltd. I-74 Business Group, LLC $6,855,000

4321-4649 Interstate Dr G& IX Interstate I LLC

1032 Seabrook Way MSI Properties LLC Charles J Kubicki LLC $4,898,880

3765 Port Union Rd Performance Food Group Inc Kite Holdings Ltd. $5,756,000

50 W Techne Center Dr CWCapital Asset Management Milford Park Tech Center LLC $5,666,666

Prologis

US Industrial REIT III Gateway

Prologis

Hackman Capital

$21,008,089

$20,230,000

$15,191,911

$14,674,394

$90,594,031 $53,792,192 $32,229,200

2,699,588 s.f.

1,208,615 s.f. 1,276,721 s.f.

0 s.f.

500,000 s.f.

1,000,000 s.f.

1,500,000 s.f.

2,000,000 s.f.

2,500,000 s.f.

3,000,000 s.f.

$0

$50,000,000

$100,000,000

Warehouse / Distribution Manufacturing Flex/R&D

Sum of Price ($) Sum of RBA (SF)

35%

18%12%

10%

9%

6%

5%

Other Gramercy Property Trust

G & I IX Interstate LLC G& IX Interstate I LLC

Proctor & Gamble Dalfen America Corp

CWCapital Asset Management Performance Food Group Inc

MSI Properties LLC J.J. & WV Ltd.

34%

22%

18%

9%

6%

5%

Other Cabot II OH2M01 M04 LLC

US Industrial REIT III Gateway Prologis

Hackman Capital Milford Park Tech Center LLC

Kite Holdings Ltd Charles J Kubicki LLC

I-74 Business Group, LLC

$73,639,522

$33,000,000

$21,797,624

$10,565,546

$8,745,547

$6,855,000

$6,779,000

$5,756,000

$4,649,105

$1,728,079

Tri-County

Florence/Richwood

Tri County

East

Blue Ash

West

Woodlawn/Evend…

Fairfield

Central/Midtown

Airport

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

20%

16%

15%12%

11%

10%

7%

Trade, Transportation & Utilities

Professional & Business Services

Educational & Health Services

Government

Manufacturing

Leisure & Hospitality

Financial Activities

Mining, Logging & Construction

Other Services

Information

Q1 2017

Employment

Cincinnati Industrial Outlook

4.7%U.S. unemployment

1.5%U.S. 12-month job growth

5.0%Cincinnati unemployment

1.9%Cincinnati12-month job growth

5.0%Ohio unemployment

0.8%Ohio 12-month job growth

0.0%

0.7%

1.4%

2.1%

2.8%

2013 2014 2015 2016 2017

Cincinnati U.S.

-600

-500

200

300

1,400

2,200

2,700

3,000

4,600

6,300

-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

Leisure & Hospitality

Government

Information

Other Services

Professional & Business Services

Educational & Health Services

Manufacturing

Mining, Logging & Construction

Financial Activities

Trade, Transportation & Utilities

-5.0

0.0

5.0

10.0

2013 2014 2015 2016 2017

Professional & Business Services Information

Government Financial Activities

0%

5%

10%

900,000

1,025,000

1,150,000

2013 2014 2015 2016 2017

Employment Unemployment

Employment vs. unemployment rate

Employment by industry Office employment trends (12-month change, 000s)

Job growth by sector (12-month change)

Job growth (12-month change)

Job growth by sector (12-month change)

© 2017 Jones Lang LaSalle IP, Inc.

All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

Andrew BatsonVice President, Director of Research+1 216 937 4374andrew.batson@am.jll.com

Abby ArmbrusterResearch Analyst+1 513 252 2148abby.armbruster@am.jll.com

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. AFortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

About JLL Research

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