Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
CI_SmartStreets_Corridors_MarketStudyCommericalIndustrial
West Side Corridors Retail, Office and Industrial Market Analysis South Bend, Indiana Prepared for: The City of South Bend Prepared by: Gibbs Planning Group 1 April 2014 TABLE OF CONTENTS EXECUTIVE SUMMARY RETAIL MARKET STUDY Figure 1: West Side Corridors Study Area ................................................................................... 1 Executive Summary .................................................................................................................... 1 Trade Area Boundaries ................................................................................................................ 2 Figure 2: West Side Corridors Primary Trade Area .................................................................... 2 Trade Area Demographics ........................................................................................................... 3 Table 1: Demographic Characteristics Table ............................................................................... 3 Table 2: 2013 & 2018 Supportable Retail .................................................................................... 4 Assumptions ................................................................................................................................ 4 Limits of Study ............................................................................................................................. 4 OFFICE MARKET STUDY Figure 1: West Side Corridors Study Area ................................................................................... 1 Executive Summary .................................................................................................................... 1 Employment ................................................................................................................................. 1 Figure 2: Projected Employment Levels Graph .......................................................................... 2 Greater South Bend Office Sub Market ....................................................................................... 2 Figure 3: Vacancy Rate vs. Quoted Rents Graph ........................................................................ 3 Study Area Office Space Demand ............................................................................................... 3 Figure 4: Office Space Demand Chart ......................................................................................... 4 Limits of Study ............................................................................................................................. 4 APPENDIX Workplace & Employment Summary CoStar Office Report: South Bend/Mishawaka Office Market INDUSTRIAL MARKET STUDY Figure 1: West Side Corridors Study Area ................................................................................... 1 Executive Summary .................................................................................................................... 1 Employment ................................................................................................................................. 1 Figure 2: Projected Employment Levels Graph .......................................................................... 2 Greater South Bend Industrial Space Sub Market ....................................................................... 2 Figure 3: Vacancy Rate vs. Quoted Rents Graph ........................................................................ 3 Study Area Industrial Space Demand .......................................................................................... 3 Figure 4: Industrial Space Demand Chart .................................................................................... 4 Limits of Study ............................................................................................................................. 4 APPENDIX Workplace & Employment Summary CoStar Office Report: South Bend/Mishawaka Office Market West Side Corridors Retail, Office and Industrial Market Study Gibbs Planning Group, Inc. 01 April 2014 West Side Corridors, South Bend, Indiana RETAIL, OFFICE AND INDUSTRIAL MARKET STUDY Gibbs Planning Group, Inc. 01 April 2014 The West Side Corridors study area can presently support additional retail and office development. Executive Summary This study finds that the West Side Corridors study area has an existing demand for 62,000 square feet (sf) of additional retail development, 5,000 sf of additional office development and no demonstrated demand for additional industrial space. The retail demand could be absorbed by existing businesses in the study area or with the opening of 20-25 new restaurants and retailers producing up to $18.0 million in new retail sales. By 2019, this demand could increase to capture approximately $20.1 million in consumer expenditure. Class B office demand will grow to support 52,000 sf of new office development by 2019. By 2024, due to job growth and the obsolescence of existing space, the West Side Corridors could support an additional 58,700 sf of office, totaling 110,700 sf over the ten-year period. While there is presently no demand for new industrial space in the study area and none expected by 2019, 12,000 sf of new space will be viable by 2024, solely because of industrial building inventory becoming functionally obsolete over the next 10 years Please find below a summary of the statistically supportable retail in 2014, 2019 & 2024: Uses 2014 2019 2024 Retail 62,000 sf 62,000 sf 62,000 sf Office 5,000 sf 52,000 sf 110,700 sf Industrial N/A N/A 12,000 sf West Side Corridors Retail Market Study 1. Gibbs Planning Group, Inc. 01 April 2014 West Side Corridors, South Bend, Indiana RETAIL MARKET STUDY Gibbs Planning Group, Inc. 01 April 2014 Figure 1: The West Side Corridors study area can presently support an additional 62,000 sf of retail and restaurant development. Executive Summary This study finds that West Side Corridors study area has an existing demand for 62,000 square feet (sf) of additional retail development producing up to $18.0 million in sales. By 2018, due to household income growth and economic development within the study area, this demand will likely generate up to $20.1 million in gross sales. This new retail would be absorbed by existing businesses or with the opening of new retailers and restaurants including: 3-4 full-service and limited-service restaurants, a retailer carrying department store merchandise, a pharmacy, a furniture and home furnishings store, 1-2 specialty food services and several other retail offerings. Please find below a summary of the statistically supportable retail in 2013 & 2018: 13,700 sf Full-Service and Limited-Service Restaurants 12,400 sf Department Store Merchandise 7,200 sf Pharmacy 7,100 sf Special Food Services 3,900 sf Miscellaneous Store Retailers 3,700 sf Apparel and Shoe Store(s) 3,300 sf Furniture and Home Furnishings Store 2,300 sf Sporting Goods & Hobby Store 2,200 sf Specialty Food Stores 1,400 sf Hardware and Lawn & Garden Supply Store 1,400 sf Electronics Store 1,200 sf Bar, Brewery or Pub 1,200 sf Book & Music Store 1,000 sf Gift Store 62,000 sf Total Supportable Retail West Side Corridors Retail Market Study 2. Gibbs Planning Group, Inc. 1 April 2014 Trade Area Boundaries This study estimates that the West Side Corridors study area has an approximate two to six-mile primary trade area, limited by Interstate-80 to the north, Downtown South Bend/Main Street to the east, and the more rural areas to the west and south, which could account for approximately 60 to70 percent of the new retail’s households (shown below in blue). The remainder of retail sales captured by new and existing retailers in the study area will likely be drawn from consumers living within the city of South Bend. Figure 2: The West Side Corridors study area has an approximate two to six- mile Primary Trade Area (shown in blue). Due to its geographical location, the West Side Corridors study area is surrounded by four main regional routes: Interstate-80, St. Joseph Valley Parkway, Western Avenue (SR-2) and Main Street, all of which carry at least 20,000 cars per day. Locally, Western Avenue, Colfax Avenue/Orange Street and Lincoln Way are the primary east-west routes, while Mayflower Road, Bendix Drive, Olive Street and Chapin Street carry motorists north and south. Centrally located within these regional routes, and well-served by local roads, nearly every resident and daytime employee of the primary trade area and the City of South Bend can reach the study site within a 15-minute drive time. This advantageous location and access to over 55,000 primary trade area residents create the captive effect necessary for new retailers to enter the market or existing retailers to expand their local presence. Existing concentrations of retail within the study area include the Belleville Center anchored by Kroger, Western Avenue Plaza anchored by Martin’s Super Market and several stand-alone West Side Corridors Retail Market Study 3. Gibbs Planning Group, Inc. 1 April 2014 retailers located on primary local routes. Regional shopping destinations include: Erskine Village, a 500,000 sf shopping center featuring Target, Famous Footwear, Old Navy, Dress Barn and several other retailers; and University Park Mall, an 820,000 sf enclosed shopping mall anchored by Macy’s, JC Penny, Barnes and Noble and Sears. Additionally, Meijer, Target and Walmart each have locations within five miles of the study area. Trade Area Demographics The West Side Corridors primary trade area includes 55,100 people and is expected to decrease to 54,900 by 2018, at an annual rate of -0.08 percent. Current 2013 households include 20,100 declining to 20,000 by 2018, at an annual rate of -0.08 percent. The primary trade area’s 2013 average household income is $45,000 and is estimated to increase to $51,400 by 2018. Median household income in the trade area in 2013 is $34,300 and estimated to increase to $38,900 by 2018. Moreover, 14.7 percent of the households earn above $75,000 per year. The average household size of 2.65 persons in 2013 is expected to remain the same by 2018; the 2013 median age is 33.8 years old. Figure 3: Demographic Characteristics Demographic Characteristic Primary Trade Area South Bend, IN 2013 Population 55,100 100,300 2013 Households 20,100 39,400 2018 Population 54,900 99,800 2013-2018 Annual Growth Rate -0.08% -0.11% 2013 Average Household Income $45,000 $45,000 2018 Average Household Income $51,400 $51,800 2013 Median Household Income $34,300 $32,800 2018 Median Household Income $38,900 $37,000 % Households w. incomes $75,000 or higher 14.7% 14.3% % Bachelor’s Degree 9.6% 12.3% % Graduate or Professional Degree 5.3% 8.8% Average Household Size 2.65 2.48 Median Age 33.8 33.8 Figure 3: Key demographic characteristics of the West Side Corridors Primary Trade Area and South Bend, Indiana. The demographic characteristics and trends of the primary trade area closely resemble those found in South Bend, Indiana. The City of South Bend includes 100,300 people and 39,400 households. The former is projected to decrease at an annual rate of -0.11 percent, and the latter projected to decline at an annual rate of -0.12 percent to 2018, when South Bend’s projected population will be 99,800 with 39,100 households. Average household income in 2013 for South Bend is $45,000, estimated to grow to $51,800 by 2018; median household income in 2013 is $32,800, estimated to grow to $37,000. More than 14 percent of the total trade area’s population earned more than $75,000 annually in 2013. Average household size is 2.48 persons, projected to hold steady through 2018; the 2013 median age is 33.8 years old. West Side Corridors Retail Market Study 4. Gibbs Planning Group, Inc. 1 April 2014 Figure 4: 2013 & 2018 Supportable Retail Table Figure 4: The West Side Corridors Primary Trade Area has demand for over 62,000 sf of new retail and restaurants. Assumptions The projections of this study are based on the following assumptions: No other major retail centers are planned or proposed at this time and, as such, no other retail is assumed in our sales forecasts. No other major retail will be developed within the trade area of the subject site. The region’s economy will stabilize at normal or above normal ranges of employment, inflation, retail demand and growth. The new retail development will be planned, designed, built, leased and managed as a walkable town center, to the best shopping center industry practices of the American Planning Association, Congress for the New Urbanism, International Council of Shopping Centers and The Urban Land Institute. Parking for the area is assumed adequate for the proposed uses, with easy access to the retailers in the development. Retail Category 2013 2018 Supportable Retail SF Estimated Sales/SF Estimater Retail Sales Supportable Retail SF Estimated Sales/SF Estimater Retail Sales Retailers Apparel Stores 2,621 $295 $773,207 2,621 $330 $864,943 Book & Music Stores 1,194 $250 $298,397 1,194 $282 $336,592 Department Store Merchandise 12,357 $275 $3,398,143 12,357 $308 $3,805,920 Electronics Stores 1,402 $320 $448,764 1,402 $360 $504,859 Florists 101 $230 $23,310 101 $258 $26,148 Furniture Stores 1,657 $218 $361,278 1,657 $245 $406,024 General Merchandise Stores 189 $310 $58,619 189 $345 $65,237 Gift Stores 1,055 $275 $290,222 1,055 $310 $327,160 Hardware 366 $215 $78,717 366 $240 $87,870 Home Furnishings Stores 1,642 $215 $353,051 1,642 $245 $402,314 Jewelry Stores 572 $315 $180,104 572 $355 $202,974 Lawn & Garden Supply Stores 1,294 $240 $310,472 1,294 $268 $346,693 Miscellaneous Store Retailers 2,719 $255 $693,397 2,719 $286 $777,692 Pharmacy 7,239 $333 $2,410,642 7,239 $375 $2,714,687 Shoe Stores 1,049 $288 $302,101 1,049 $234 $245,457 Specialty Food Stores 2,240 $305 $683,136 2,240 $340 $761,529 Sporting Goods & Hobby Stores 2,345 $260 $609,639 2,345 $292 $684,671 Retailer Totals 40,042 $271 $11,273,200 40,042 $298 $12,560,772 Restaurants Bars, Breweries & Pubs 1,223 $300 $366,861 1,223 $338 $413,330 Full-Service Restaurants 7,395 $330 $2,440,323 7,395 $370 $2,736,120 Limited-Service Eating Places 6,313 $305 $1,925,476 6,313 $340 $2,146,432 Special Food Services 7,075 $290 $2,051,893 7,075 $325 $2,299,535 Restaurant Totals 22,006 $306 $6,784,554 22,006 $343 $7,595,418 Retail & Restaurant Totals 62,049 $277 $18,057,753 62,049 $293 $20,156,190 West Side Corridors Retail Market Study 5. Gibbs Planning Group, Inc. 1 April 2014 Visibility of the shopping center or retail is assumed to meet industry standards, with signage as required to assure good visibility of the retailers. Limits of Study The findings of this study represent GPG’s best estimates for the amounts and types of retail tenants that should be supportable in the West Side Corridors (South Bend, Indiana) trade area by 2018. Every reasonable effort has been made to ensure that the data contained in this study reflect the most accurate and timely information possible and are believed to be reliable. It should be noted that the findings of this study are based upon generally accepted market research and business standards. It is possible that the West Side Corridors study site’s surrounding area could support lower or higher quantities of retailers and restaurants yielding lower or higher sales revenues than indicated by this study, depending on numerous factors including respective business practices and the management and design of the study area. This study is based on estimates, assumptions, and other information developed by GPG as an independent third party research effort with general knowledge of the retail industry, and consultations with the client and its representatives. This report is based on information that was current as of April 1, 2014, and GPG has not undertaken any update of its research effort since such date. This report may contain prospective financial information, estimates, or opinions that represent GPG’s view of reasonable expectations at a particular time. Such information, estimates, or opinions are not offered as predictions or assurances that a particular level of income or profit will be achieved, that particular events will occur, or that a particular price will be offered or accepted. Actual results achieved during the period covered by our market analysis may vary from those described in our report, and the variations may be material. Therefore, no warranty or representation is made by GPG that any of the projected values or results contained in this study will be achieved. This study should not be the sole basis for designing, financing, planning, and programming any business, real estate development, or public planning policy. This study is intended only for the use of the client and is void for other site locations, developers, or organizations. -End of Study - West Side Corridors Office Market Study 1. Gibbs Planning Group, Inc. 01 April 2014 West Side Corridors, South Bend, Indiana OFFICE MARKET STUDY Gibbs Planning Group, Inc. 01 April 2014 Figure 1: The West Side Corridors study area is located immediately west of Downtown South Bend, and approximately two miles southwest of the heart of the Notre Dame campus. Executive Summary This office market study finds that the West Side Corridors (Western Avenue/Lincoln Way West) study area can support an additional 5,000 square feet (sf) of new office development by the end of 2014 and up to 47,000 sf of additional office development by 2019. This report also finds that 58,700 sf of further space will be supportable by 2024, with 110,700 sf total over the next ten years. Gibbs Planning Group, Inc. (GPG) predicates these projections on a stabilized vacancy factor of 9.0 percent, a market average of 213 sf per general office employee and an annualized employment growth range of 0.25 percent to 0.50 percent. This new class B type office space will primarily serve the needs of local medical, legal, sales and financial services providers. Class A office space needs for regional or national companies will primarily be met at alternative sites in the marketplace, with superior access to the industrial and commercial centers in both the Downtown South Bend and Mishawaka submarkets. Employment Demand for additional office space in this Greater South Bend submarket is driven in part by employment growth. This area currently has an estimated 35,800 employees, of which approximately 9,700 are office workers. Employment in this office submarket is projected to climb to 36,400 by 2019, with 10,400 office workers. By 2024, the submarket is expected to support 37,400 jobs, including 11,100 requiring offices. West Side Corridors Office Market Study 2. Gibbs Planning Group, Inc. 01 April 2014 Figure 2: Employment is projected to grow by between 0.25 and 0.50 percent annually over the next 10 years. Greater South Bend Office Sub Market Demand for office space has two main components: the need for office space for local services such as dental, medical, legal and financial services; and the need for office space for non-local services, such as management for regional and national companies. Office space demand driven by public sector employment is statistically limited because of the tendency of governmental entities to meet their work place needs on civic campuses. Satellite government offices, like those required by Department of Motor Vehicles, are typically located in convenient retail locations. The Greater South Bend office submarket contains over 2.280 million sf of space in 276 buildings. This market has 103,000 sf of class A space, 942,300 sf of class B space and almost 1,240,000 sf of class C space. The Downtown South Bend secondary grouping has 3,291,000 sf, comprised of 553,000 sf of class A space, 1,191,000 sf of class B space and 1,547,000 sf of class C office space spread over 131 total buildings. The combined office vacancy rate in the Greater South Bend area at the end of the 4th quarter of 2013 was 8.5 percent, with a negative 2013 absorption of 5,700 sf. There are currently no projects under construction. The last new office space delivered to the submarket, a 14,050 sf building, came on line in the 1st quarter of 2012, The quoted rental rate has seen a decline over the last three quarters, dropping to a level of $11.15 from a recent high of of $14.32 per sf in first quarter of 2013. West Side Corridors Office Market Study 3. Gibbs Planning Group, Inc. 01 April 2014 Figure 3: Quoted Rental Rates have continued to decline in the Greater South Bend office submarket place. The second major factor in the demand for new office space is the annual functional obsolescence and retasking of class C buildings, which currently contain over 1.244 million sf of office space in the Greater South Bend trade area. An annual functional obsolescence rate ranging from 0.75 percent to 1.00 percent, representing an average building useful life of between 100 and 130 years, is used to estimate the amount of class C space that is removed from the market place. The report estimates approximately 143,000 sf of class C office space being removed from the whole submarket. West Side Corridors Study Area Office Space Demand Demand for office space has two main components: the need for office space for local services such as dental, medical, legal and financial services; and the need for office space for non-local services, such as management for regional and national companies. Office space demand driven by public sector employment is statistically limited because of the tendency of governmental entities to meet their work place needs on civic campuses. Satellite government offices, like those required by Department of Motor Vehicles, are typically located in convenient retail locations. Estimating office space gap (need or oversupply) is based on inventorying the existing office square footage in a submarket, less the current vacancy rate, quantifying and disaggregating the base employment by category, determining the number of employees who require office space by employment category, and then estimating the market office space per square foot per employee. This statistic is multiplied by the estimated job growth, a derivative of the additional need for local services and businesses that is generated by population or income increases. Therefore, the demand for office space has an indirect link to the population growth. The new demand created indirectly by population and income growth is then adjusted by a market-specific Stabilized Vacancy Factor and compared to the office space supply. Former office space inventory plus the West Side Corridors Office Market Study 4. Gibbs Planning Group, Inc. 01 April 2014 amount of new space delivered into the market, less that which is functional obsolete or demolished, is the new office space supply. For purposes of this study, the existing inventory in the Greater South Bend office submarket is 2.285 million sf. GPG estimates that through 2019, 76,300 sf (3.3 percent) of the Class C office space will become functionally obsolete. The Stabilized Vacancy Factor for the office submarket is 9.0 percent. Based on the “WorkPlace & Employment Summary: Greater South Bend Submarket” table found in the appendix of this report, the total number of 2013 employees in this office submarket is 35,800, of which 9,700 are dedicated office employees. The 2013 office space required per dedicated office worker is 213 sf per worker. The 2019 Total Office Space Market Demand for this office submarket is 2,220,000 sf, based on an annualized employment growth rate of 0.50 percent. Adjusting for the stabilized vacancy factor generates a total demand of 2,464,000 sf. GPG finds that by 2019, an additional 52,000 sf of local services office space is supportable in the West Side Corridors Study Area. The West Side Corridors study area is the prime office location in the Greater South Bend submarket, and is estimated to capture over 20 percent of the surplus office space demand potential. Office Space Demand 2014 2019 2024 Gross Office Space Demand (Greater South Bend submarket) 2,091,000 sf 2,220,000 sf 2,380,000 sf Gap Potential (Demand less Supply) (Greater South Bend submarket) 22,500 sf 231,200 sf 470,000 sf Captured Demand (Western/Lincoln Way study area) 5,000 sf 47,000 sf 53,700 sf Aggregated Captured Demand (Western/Lincoln Way study area) 5,000 sf 52,000 sf 110,700 sf Figure 4: Office space demand for Greater South Bend submarket and West Side Corridors study area. The projection for office space demand is a primary derivative of job creation. Using the statistics produced by the Indiana University Kelley School of Business, GPG forecasts a 2024 annualized employment growth rate of between 0.25 and 0.5 percent. The 10-year annualized forecast is more conservative than the State’s short-term job prediction of a 1.50 percent annual job gain for the South Bend/Mishawaka metropolitan statistical area. Based on projected job growth and a stabilized vacancy factor of 9.0 percent, GPG finds that 2,380,000 sf of primarily office space will be supportable in the study area by 2024. This level of estimated demand in 2024 will support an additional (more than 2013) 110,700 sf of office space in the West Side Corridors study area. Limits of Study The findings of this summary represent GPG’s best estimates of demand at the study site. Every reasonable effort has been made to ensure that the data contained in this study reflect the most accurate and timely information possible, and is believed to be reliable. This study is based on estimates, assumptions and other information developed by GPG’s independent research effort, West Side Corridors Office Market Study 5. Gibbs Planning Group, Inc. 01 April 2014 general knowledge of the commercial real estate industry, market data from commercial real estate listing services, and consultations with the client and its representatives. No responsibility is assumed for inaccuracies in reporting by the client, its agent and representatives or in any other data source used in preparing or presenting this study. This report is based on information that was current as of April 1, 2014 and GPG has not undertaken any update of its research effort since such date. This report may contain prospective financial information, estimates, or opinions that represent GPG’s view of reasonable expectations at a particular time, but such information, estimates, or opinions are not offered as predictions or assurances that a precise level of income or profit will be achieved, that particular events will occur, or that a specific price will be offered or accepted. Actual results achieved during the period covered by our prospective financial analysis may vary from those described in our report, and the variations may be material. Therefore, no warranty or representation is made by GPG that any of the projected values or results contained in this study will be achieved. Actual results achieved during the period covered by our prospective financial analysis may vary from those described in our report, and the variations may be material. Therefore, no warranty or representation is made by GPG that any of the projected values or results contained in this study will be achieved. This study should not be the sole basis for programming, planning, purchasing, financing, or development of any commercial project. This study is for the use of the client for general market analysis purposes only and is void for other site locations or developers. For the purposes of this study, GPG has assumed the following: The region’s economy will stabilize at normal or above normal ranges of population, household formation and employment growth, while price and cost inflation remain at historic levels. Employment distribution is to remain constant, without a spike or decline in employment by NAICS category. Projected lease and vacancy rates, as well as product absorption models based on our proprietary econometric model of the relationship between changes in employment and population. The most current data has been gathered from STDB, US Census Bureau, ESRI, COSTAR Group, Inc., LOOPNET, and local brokerage services. -- END OF SUMMARY -- Total Businesses: Total Employees: Total Residential Population: Employee/Residential Population Ratio: Number Percent Number Percent Agriculture & Mining 143 3.5% 496 1.4% Construction 378 9.1% 2,198 6.1% Manufacturing 197 4.8% 7,381 20.6% Transportation 153 3.7% 1,667 4.7% Communication 32 0.8% 210 0.6% Electric, Gas, Water, Sanitary Services 14 0.3% 262 0.7% Wholesale Trade 225 5.4% 2,170 6.1% Retail Trade Summary 670 16.2% 7,239 20.2% Home Improvement 45 1.1% 404 1.1% General Merchandise Stores 19 0.5% 1,585 4.4% Food Stores 62 1.5% 1,000 2.8% Auto Dealers, Gas Stations, Auto Aftermarket 75 1.8% 641 1.8% Apparel & Accessory Stores 32 0.8% 199 0.6% Furniture & Home Furnishings 47 1.1% 235 0.7% Eating & Drinking Places 169 4.1% 2,164 6.0% Miscellaneous Retail 222 5.4% 1,011 2.8% Finance, Insurance, Real Estate Summary 304 7.3% 1,236 3.5% Banks, Savings & Lending Institutions 42 1.0% 309 0.9% Securities Brokers 12 0.3% 27 0.1% Insurance Carriers & Agents 67 1.6% 213 0.6% Real Estate, Holding, Other Investment Offices 182 4.4% 686 1.9% Services Summary 1,985 47.9% 10,923 30.5% Hotels & Lodging 25 0.6% 337 0.9% Automotive Services 112 2.7% 812 2.3% Motion Pictures & Amusements 103 2.5% 369 1.0% Health Services 113 2.7% 1,139 3.2% Legal Services 17 0.4% 36 0.1% Education Institutions & Libraries 61 1.5% 1,936 5.4% Other Services 1,554 37.5% 6,294 17.6% Government 43 1.0% 2,033 5.7% Totals 4,144 35,815 WorkPlace & Employment Summary Prepared by Gibbs Planning Group 4,144 BUSINESSES EMPLOYEES 35,814 98,570 0.36 Greater South Bend Office Submarket, South Bend, Indiana Gibbs Planning Group Inc., Western Ave/Lincoln Way W Office Space Study Appendix South Bend/Mishawaka Office Market Y E A R - E N D 2 0 1 3 The CoStarOffice Report South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A YEAR-END 2013 – SOUTH BEND/MISHAWAKA Table of Contents Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CoStar Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Inventory & Development Analysis Select Top Under Construction Properties Figures at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figures at a Glance by Class & Market Historical Figures at a Glance Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Select Top Lease Transactions Analysis of Individual CoStar Submarket Clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Cass County Market Downtown South Bend Market Elkhart County Market Greater South Bend Market Mishawaka Market South Bend/Mishawaka Office Market B THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C YEAR-END 2013 – SOUTH BEND/MISHAWAKA Methodology The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar Group’s entire database of existing and under construction office buildings in each metropolitan area. Included are office, office condominium, office loft, office medical, all classes and all sizes, and both multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate. © Copyright 2013 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 1331 L ST NW • Washington, DC 20005• (800) 204-5960 • www.costar.com • NASDAQ: CSGP For information on subscribing to CoStar’s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com South Bend/Mishawaka Office Market B THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C YEAR-END 2013 – SOUTH BEND/MISHAWAKA Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the ten-ant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has pur- chased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calcula-tion that reflects the relationship between one year’s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an archi- tectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fit- tings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typical-ly have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that gener- ally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepre-neurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typi- cal flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The pri- mary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease trans- action between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is commit-ted to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building- type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundar-ies of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) South Bend/Mishawaka Office Market D THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1 Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufactur-ing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the vari- ous systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a par-ticular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of eco- nomic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant’s rental obligation. Generally RBA includes a percentage of common areas including all hall- ways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of build- ings in a given time period. Seller: The individual, group, company, or entity that sells a par- ticular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delin- eate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metro- politan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construc- tion and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not avail-able. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be con- sidered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through what-ever time period is being studied. South Bend/Mishawaka Office Market D THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1 OVERVIEW South Bend/Mishawaka’s Vacancy Decreases to 8.9% Net Absorption Positive 48,458 SF in the Quarter T he South Bend/Mishawaka Office market ended the fourth quarter 2013 with a vacancy rate of 8.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 48,458 square feet in the fourth quarter. Vacant sublease space increased in the quarter, ending the quarter at 2,700 square feet. Rental rates ended the fourth quarter at $14.41, an increase over the previous quarter. There was 5,900 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall South Bend/Mishawaka office market was positive 48,458 square feet in the fourth quar- ter 2013. That compares to negative (87,139) square feet in the third quarter 2013, negative (19,477) square feet in the second quarter 2013, and negative (7,330) square feet in the first quarter 2013. Tenants moving into large blocks of space in 2013 include: UK Stars moving into 8,000 square feet at 1701 N Ironwood Dr; the Center for Hospice moving into 5,724 square feet at 4220 Edison Lakes Pky; and Afadent Dental Care moving into 5,560 square feet at 112 Ironworks Ave. The Class-A office market recorded net absorption of nega- tive (5,100) square feet in the fourth quarter 2013, compared to negative (7,986) square feet in the third quarter 2013, positive 3,975 in the second quarter 2013, and positive 5,532 in the first quarter 2013. The Class-B office market recorded net absorption of posi- tive 24,194 square feet in the fourth quarter 2013, compared to negative (66,254) square feet in the third quarter 2013, negative (26,908) in the second quarter 2013, and negative (6,562) in the first quarter 2013. The Class-C office market recorded net absorption of posi- tive 29,364 square feet in the fourth quarter 2013 compared to negative (12,899) square feet in the third quarter 2013, positive 3,456 in the second quarter 2013, and negative (6,300) in the first quarter 2013. Net absorption for South Bend/Mishawaka’s central busi- ness district was negative (2,026) square feet in the fourth quarter 2013. That compares to negative (27,978) square feet in the third quarter 2013, negative (14,115) in the second quarter 2013, and negative (12,777) in the first quarter 2013. Net absorption for the suburban markets was positive 50,484 square feet in the fourth quarter 2013. That compares to negative (59,161) square feet in third quarter 2013, negative (5,362) in the second quarter 2013, and positive 5,447 in the first quarter 2013. Vacancy The office vacancy rate in the South Bend/Mishawaka mar- ket area decreased to 8.9% at the end of the fourth quarter 2013. The vacancy rate was 9.4% at the end of the third quarter 2013, 8.5% at the end of the second quarter 2013, and 8.2% at the end of the first quarter 2013. Class-A projects reported a vacancy rate of 14.3% at the end of the fourth quarter 2013, 13.9% at the end of the third quarter 2013, 13.3% at the end of the second quarter 2013, and 13.6% at the end of the first quarter 2013. Class-B projects reported a vacancy rate of 13.6% at the end of the fourth quarter 2013, 14.3% at the end of the third quarter Vacancy Rates by Class 2007-2013 Source: CoStar Property® Absorption & Deliveries U.S. Vacancy Comparison Past 10 Quarters Past 10 Quarters Source: CoStar Property•Source: CoStar Property• 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateA B C Total Market 0.06 0.01 0.09 (0.06) (0.00) 0.03 (0.01) (0.02) (0.09) 0.05 0.00 0.00 0.01 0.00 0.01 0.00 0.00 0.00 0.00 0.00 (0.1) (0.1) (0.1) (0.0) (0.0) 0.0 0.0 0.0 0.1 0.1 0.1 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFNet Absorption Deliveries 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateSouth Bend/Mishawaka United States 2 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3 OVERVIEW 2013, 12.4% at the end of the second quarter 2013, and 11.7% at the end of the first quarter 2013. Class-C projects reported a vacancy rate of 3.3% at the end of the fourth quarter 2013, 4.0% at the end of third quarter 2013, 3.7% at the end of the second quarter 2013, and 3.7% at the end of the first quarter 2013. The overall vacancy rate in South Bend/Mishawaka’s central business district at the end of the fourth quarter 2013 increased to 8.1%. The vacancy rate was 8.0% at the end of the third quarter 2013, 7.4% at the end of the second quarter 2013, and 7.1% at the end of the first quarter 2013. The vacancy rate in the suburban markets decreased to 9.7% in the fourth quarter 2013. The vacancy rate was 10.8% at the end of the third quarter 2013, 9.5% at the end of the second quarter 2013, and 9.4% at the end of the first quarter 2013. Largest Lease Signings The largest lease signings occurring in 2013 included: the 5,900-square-foot lease signed by Harrington Orthodontics at 3410 Douglas Rd in the Mishawaka market; and the 5,724- square-foot deal signed by the Center For Hospice at 4220 Edison Lakes Pky in the Mishawaka market. Sublease Vacancy The amount of vacant sublease space in the South Bend/ Mishawaka market increased to 2,700 square feet by the end of the fourth quarter 2013, from 1,558 square feet at the end of the third quarter 2013. There was 1,558 square feet vacant at the end of the second quarter 2013 and 2,258 square feet at the end of the first quarter 2013. Rental Rates The average quoted asking rental rate for available office space, all classes, was $14.41 per square foot per year at the end of the fourth quarter 2013 in the South Bend/Mishawaka market area. This represented a 1.8% increase in quoted rental rates from the end of the third quarter 2013, when rents were reported at $14.16 per square foot. The average quoted rate within the Class-A sector was $19.54 at the end of the fourth quarter 2013, while Class-B rates stood at $14.90, and Class-C rates at $9.91. At the end of the third quarter 2013, Class-A rates were $19.42 per square foot, Class-B rates were $14.17, and Class-C rates were $10.20. The average quoted asking rental rate in South Bend/ Mishawaka’s CBD was $13.28 at the end of the fourth quarter 2013, and $15.08 in the suburban markets. In the third quarter 2013, quoted rates were $13.06 in the CBD and $15.05 in the suburbs. Deliveries and Construction During 2013 no new space was completed in the South Bend/Mishawaka market area. There were 5,900 square feet of office space under construc- tion at the end of the fourth quarter 2013. The only project under construction at the end of fourth quarter 2013 was 3410 Douglas Rd, a 5,900-square-foot build- ing. Inventory Total office inventory in the South Bend/Mishawaka market area amounted to 8,980,140 square feet in 758 buildings as of the end of the fourth quarter 2013. The Class-A office sector consisted of 1,253,972 square feet in 15 projects. There were 198 Class-B buildings totaling 3,533,504 square feet, and the Class-C sector consisted of 4,192,664 square feet in 545 buildings. Within the Office market there were 15 owner-occupied buildings accounting for 205,881 square feet of office space. Reports compiled by: Baxter Burnworth, CoStar Research Manager. Vacancy Rates by Class2007-2013 Source: CoStar Property® Absorption & Deliveries U.S. Vacancy Comparison Past 10 Quarters Past 10 Quarters Source: CoStar Property•Source: CoStar Property• 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateAB C Total Market 0.06 0.01 0.09 (0.06) (0.00) 0.03 (0.01) (0.02) (0.09) 0.05 0.00 0.00 0.010.000.01 0.00 0.00 0.00 0.00 0.00 (0.1) (0.1) (0.1) (0.0) (0.0) 0.0 0.0 0.0 0.1 0.1 0.1 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFNet AbsorptionDeliveries 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateSouth Bend/Mishawaka United States 2 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3 CoStar Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. MARKETS Submarket Clusters Cass County Downtown South Bend Elkhart County Greater South Bend Mishawaka 4 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5 Historical Deliveries 1982 - 2013 Source: CoStar Property® * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction Square Footage # Bldgs Preleased SF Preleased % All Existing U/C Mishawaka 1 5,900 100.0% 10,492 5,900 Cass County 0 0 0.0% 4,202 0 Downtown South Bend 0 0 0.0% 25,121 0 Greater South Bend 0 0 0.0% 8,279 0 Elkhart County 0 0 0.0% 10,311 0 Totals 1 5,900 100.0% 11,847 5,900 Source: CoStar Property® Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2009 Source: CoStar Property® 5,900 5,900 0 0 0 0 Market Under Construction Inventory Average Bldg Size Total RBA 0.2 0.1 0.1 0.1 0.0 0.0 0.1 0.2 0.2 0.1 0.1 0.3 0.1 0.1 0.1 0.1 0.3 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.0 0.2 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Millions of SFDeliveries Average Delivered SF 0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 2009 2010 2011 2012 2013Millions of SFLeased Un-Leased INVENTORY & DEVELOPMENT 4 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5 Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Source: CoStar Property® Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 0 0 0 0.0% $0.00 0 0 50,000 SF - 99,999 SF 0 0 0 0.0% $0.00 0 0 100,000 SF - 249,999 SF 0 0 0 0.0% $0.00 0 0 250,000 SF - 499,999 SF 0 0 0 0.0% $0.00 0 0 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 Source: CoStar Property® Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA No 2013 Deliveries Source: CoStar Property®Source: CoStar Property® Currently Under Construction By Class By Space Type 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions of SFConstruction Starts Deliveries 0% 100% Multi Single 47%14% 39% Class A Class B Class C 35% 65% Multi Single INVENTORY & DEVELOPMENT 6 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7 INVENTORY & DEVELOPMENT ����������������������������������������������������������������������� ������������������������ ���� ��������������� ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 6 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7 Class A Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 0 0 0 0 0.0% 0 0 0 $0.00 Downtown South Bend 6 553,170 5,986 8,686 1.6% (8,686) 0 0 $18.43 Elkhart County 3 182,634 22,750 22,750 12.5% 75 0 0 $14.50 Greater South Bend 2 102,796 12,757 12,757 12.4% 0 0 0 $24.00 Mishawaka 4 415,372 135,493 135,493 32.6% 5,032 0 0 $19.98 Totals 15 1,253,972 176,986 179,686 14.3% (3,579) 0 0 $19.54 Source: CoStar Property® Class B Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 7 23,040 0 0 0.0% 0 0 0 $0.00 Downtown South Bend 35 1,190,765 225,439 225,439 18.9% (44,655) 0 0 $17.15 Elkhart County 18 350,301 43,900 43,900 12.5% 5,132 0 0 $11.81 Greater South Bend 62 942,324 132,620 132,620 14.1% (21,785) 0 0 $12.42 Mishawaka 76 1,027,074 79,762 79,762 7.8% (14,222) 0 5,900 $17.53 Totals 198 3,533,504 481,721 481,721 13.6% (75,530) 0 5,900 $14.90 Source: CoStar Property® Class C Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 34 149,241 10,060 10,060 6.7% 3,874 0 0 $8.01 Downtown South Bend 90 1,546,894 35,650 35,650 2.3% (4,598) 0 0 $10.75 Elkhart County 92 632,224 23,216 23,216 3.7% (4,164) 0 0 $7.30 Greater South Bend 212 1,239,923 48,293 48,293 3.9% 16,037 0 0 $8.82 Mishawaka 117 624,382 19,553 19,553 3.1% 2,472 0 0 $11.54 Totals 545 4,192,664 136,772 136,772 3.3% 13,621 0 0 $9.91 Source: CoStar Property® Total Office Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 41 172,281 10,060 10,060 5.8% 3,874 0 0 $8.01 Downtown South Bend 131 3,290,829 267,075 269,775 8.2% (57,939) 0 0 $14.32 Elkhart County 113 1,165,159 89,866 89,866 7.7% 1,043 0 0 $11.37 Greater South Bend 276 2,285,043 193,670 193,670 8.5% (5,748) 0 0 $11.15 Mishawaka 197 2,066,828 234,808 234,808 11.4% (6,718) 0 5,900 $17.88 Totals 758 8,980,140 795,479 798,179 8.9% (65,488) 0 5,900 $14.41 Source: CoStar Property® Existing Inventory Vacancy Vacancy Existing Inventory Vacancy Existing Inventory Vacancy Existing Inventory FIGURES AT A GLANCE 8 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9 FIGURES AT A GLANCE Class A Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 15 1,253,972 176,986 179,686 14.3% (5,100) 0 0 0 0 $19.54 2013 3q 15 1,253,972 174,586 174,586 13.9% (7,986) 0 0 0 0 $19.42 2013 2q 15 1,253,972 166,600 166,600 13.3% 3,975 0 0 0 0 $18.92 2013 1q 15 1,253,972 170,575 170,575 13.6% 5,532 0 0 0 0 $19.55 2012 4q 15 1,253,972 176,107 176,107 14.0% 10,698 0 0 0 0 $19.94 2012 3q 15 1,253,972 186,805 186,805 14.9% 668 0 0 0 0 $19.43 2012 2q 15 1,253,972 187,473 187,473 15.0% 0 0 0 0 0 $18.65 2012 1q 15 1,253,972 187,473 187,473 15.0% 2,762 0 0 0 0 $19.39 2011 4q 15 1,253,972 190,235 190,235 15.2% 559 0 0 0 0 $19.69 2011 3q 15 1,253,972 190,794 190,794 15.2% 3,137 0 0 0 0 $19.33 2011 2q 15 1,253,972 193,931 193,931 15.5% (2,551) 0 0 0 0 $17.44 2011 1q 15 1,253,972 191,380 191,380 15.3% 17,213 0 0 0 0 $18.96 2010 15 1,253,972 208,593 208,593 16.6% 156 0 0 0 0 $19.09 2009 15 1,253,972 208,749 208,749 16.6% 113,247 2 255,573 0 0 $19.43 2008 13 998,399 66,423 66,423 6.7% 27,670 0 0 2 255,573 $18.02 2007 13 998,399 94,093 94,093 9.4% 83,314 1 88,500 0 0 $15.44 Source: CoStar Property® Class B Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 198 3,533,504 481,721 481,721 13.6% 24,194 0 0 1 5,900 $14.90 2013 3q 198 3,533,504 504,357 505,915 14.3% (66,254) 0 0 1 5,900 $14.17 2013 2q 198 3,533,504 438,103 439,661 12.4% (26,908) 0 0 0 0 $13.95 2013 1q 198 3,533,504 411,195 412,753 11.7% (6,562) 0 0 0 0 $14.80 2012 4q 198 3,533,504 404,633 406,191 11.5% (3,252) 0 0 0 0 $14.50 2012 3q 199 3,538,752 406,629 408,187 11.5% (1,362) 1 10,103 0 0 $13.76 2012 2q 198 3,528,649 395,164 396,722 11.2% (47,217) 1 4,100 1 10,103 $13.59 2012 1q 197 3,524,549 345,405 345,405 9.8% 10,877 1 14,050 2 14,203 $14.58 2011 4q 196 3,510,499 336,870 342,232 9.7% (23,523) 0 0 3 28,253 $15.14 2011 3q 196 3,510,499 316,847 318,709 9.1% 7,332 0 0 3 28,253 $14.30 2011 2q 196 3,510,499 324,179 326,041 9.3% 11,211 0 0 1 14,050 $14.25 2011 1q 196 3,510,499 335,390 337,252 9.6% (368) 1 2,610 0 0 $14.53 2010 195 3,507,889 332,412 334,274 9.5% 142,916 1 12,003 1 2,610 $14.62 2009 194 3,495,886 463,325 465,187 13.3% 85,079 3 154,635 1 12,003 $13.35 2008 191 3,341,251 394,090 395,631 11.8% (38,256) 3 10,148 2 108,337 $12.67 2007 188 3,331,103 345,365 347,227 10.4% 37 2 68,675 2 8,652 $12.93 Source: CoStar Property® Total Office Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 758 8,980,140 795,479 798,179 8.9% 48,458 0 0 1 5,900 $14.41 2013 3q 758 8,980,140 845,079 846,637 9.4% (87,139) 0 0 1 5,900 $14.16 2013 2q 758 8,980,140 757,940 759,498 8.5% (19,477) 0 0 0 0 $13.18 2013 1q 758 8,980,140 737,763 740,021 8.2% (7,330) 0 0 0 0 $14.98 2012 4q 758 8,980,140 729,233 732,691 8.2% 29,164 0 0 0 0 $14.07 2012 3q 759 8,985,388 765,545 767,103 8.5% (2,239) 1 10,103 0 0 $13.68 2012 2q 758 8,975,285 753,203 754,761 8.4% (61,843) 1 4,100 1 10,103 $12.70 2012 1q 757 8,971,185 688,818 688,818 7.7% 90,159 1 14,050 2 14,203 $15.27 2011 4q 756 8,957,135 759,565 764,927 8.5% 10,304 0 0 3 28,253 $14.62 2011 3q 756 8,957,135 773,369 775,231 8.7% 56,038 0 0 3 28,253 $14.13 2011 2q 756 8,957,135 829,407 831,269 9.3% (37,443) 0 0 1 14,050 $12.83 2011 1q 756 8,957,135 791,964 793,826 8.9% (31,913) 1 2,610 0 0 $15.09 2010 755 8,954,525 757,441 759,303 8.5% 250,273 1 12,003 1 2,610 $14.84 2009 754 8,942,522 978,309 997,573 11.2% 93,709 5 410,208 1 12,003 $15.69 2008 749 8,532,314 679,533 681,074 8.0% 55,866 3 10,148 4 363,910 $14.46 2007 746 8,522,166 724,930 726,792 8.5% 54,514 3 157,175 2 8,652 $13.22 Source: CoStar Property® Existing Inventory Vacancy Deliveries UC Inventory Existing Inventory Vacancy Deliveries UC Inventory Existing Inventory Vacancy Deliveries UC Inventory 8 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9 Historical Rental Rates Based on Full-Service Equivalent Rental Rates Source: CoStar Property® Vacancy by Available Space Type Vacancy by Class Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class Source: CoStar Property®Source: CoStar Property® U.S. Rental Rate Comparison Future Space Available Based on Full-Service Equivalent Rental Rates Space Scheduled to be Available for Occupancy* Source: CoStar Property®* Includes Under Construction Spaces Source: CoStar Property® South Bend/Mishawaka United States South Bend/Mishawaka United States $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/YearA B C Total Market $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/YearSouth Bend/Mishawaka United States 100% 0% Direct Sublet 4% 96% Direct Sublet 23% 60% 17% Class A Class B Class C 0.03 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2qMillions17% 49%34% Class A Class B Class C LEASING ACTIVITY 10 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” LEASING ACTIVITY Source: CoStar Property® * Renewal Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 4220 Edison Lakes Pky Mishawaka 7,750 4th N/A N/A Newmark Grubb Cressy & Everett 2 515 Park Place Cir Mishawaka 7,418 3rd N/A N/A Bradley Company 3 Three Edison Lakes Mishawaka 6,063 3rd N/A N/A Bradley Company 4 3410 Douglas Rd Mishawaka 5,900 4th Harrington Orthodontics N/A Research in Progress 5 4220 Edison Lakes Pky Mishawaka 5,724 4th Center For Hospice N/A Newmark Grubb Cressy & Everett 6 Three Edison Lakes Mishawaka 3,963 3rd N/A N/A Bradley Company 7 221 Red Coach Dr Mishawaka 3,758 2nd N/A N/A Newmark Grubb Cressy & Everett 8 3555 Park Pl W Mishawaka 3,000 3rd N/A N/A Bradley Company 9 202 Lincolnway E Mishawaka 2,462 2nd N/A N/A Prudential One Realty 10 Wayne Place Downtown South Bend 2,350 3rd N/A N/A Bradley Company 11 Wayne Place Downtown South Bend 2,350 3rd N/A N/A Bradley Company 12 One Michiana Square Downtown South Bend 2,339 3rd N/A N/A Bradley Company 13 1921 Miami St Greater South Bend 1,800 3rd N/A N/A B&B Better Builders 14 1602 E Day Rd Mishawaka 1,706 3rd N/A N/A Buyer Brokerage, Inc 15 527 Park Place Cir Mishawaka 1,694 4th N/A N/A Bradley Company 16 One Michiana Square Downtown South Bend 1,612 3rd N/A N/A Bradley Company 17 1843 Commerce Dr Greater South Bend 1,600 1st N/A N/A Bradley Company 18 2420 Viridian Dr Greater South Bend 1,558 3rd N/A N/A Bradley Company 19 Dental Arts Building Greater South Bend 1,500 3rd N/A N/A Bradley Company 20 904 E Jefferson Blvd Greater South Bend 1,399 2nd N/A N/A Newmark Grubb Cressy & Everett 21 431 E Colfax Ave Downtown South Bend 1,361 3rd N/A N/A Bradley Company 22 2515 Bendix Dr Greater South Bend 1,327 3rd N/A N/A Bradley Company 23 516 Prairie St Downtown Elkhart 1,200 4th N/A N/A Coldwell Banker Roth Wehrly Graber 24 15479 US Highway 12 Cass County 1,000 1st N/A N/A Union Insurance 25 Key Bank Tower Downtown South Bend 929 3rd N/A N/A Bradley Company Select Top Office Leases Based on Leased Square Footage For Deals Signed in 2013 10 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” C A S S C O U N T Y M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, All Classes Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 41 172,281 10,060 5.8% 792 0 0 0 0 $8.01 2013 3q 41 172,281 10,852 6.3% 1,000 0 0 0 0 $9.51 2013 2q 41 172,281 11,852 6.9% 4,900 0 0 0 0 $9.69 2013 1q 41 172,281 16,752 9.7% (2,818) 0 0 0 0 $8.95 2012 4q 41 172,281 13,934 8.1% (3,400) 0 0 0 0 $10.37 2012 3q 41 172,281 10,534 6.1% (800) 0 0 0 0 $10.37 2012 2q 41 172,281 9,734 5.7% (2,600) 0 0 0 0 $12.00 2012 1q 41 172,281 7,134 4.1% 1,500 0 0 0 0 $9.00 2011 4q 41 172,281 8,634 5.0% (1,240) 0 0 0 0 $9.00 2011 3q 41 172,281 7,394 4.3% 708 0 0 0 0 $9.00 2011 2q 41 172,281 8,102 4.7% (7,602) 0 0 0 0 $0.00 2011 1q 41 172,281 500 0.3% 0 0 0 0 0 $0.00 2010 4q 41 172,281 500 0.3% 0 0 0 0 0 $0.00 2010 3q 41 172,281 500 0.3% 0 0 0 0 0 $0.00 2010 2q 41 172,281 500 0.3% 0 0 0 0 0 $0.00 2010 1q 41 172,281 500 0.3% 0 0 0 0 0 $0.00 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.010) (0.008) (0.006) (0.004) (0.002) 0.000 0.002 0.004 0.006 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%Percent VacantDelivered SF Absorption SF Vacancy $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.02 0.02 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 12 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” D O W N T O W N S O U T H B E N D M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, All Classes Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 131 3,290,829 269,775 8.2% 2,942 0 0 0 0 $14.32 2013 3q 131 3,290,829 272,717 8.3% (29,684) 0 0 0 0 $13.69 2013 2q 131 3,290,829 243,033 7.4% (8,100) 0 0 0 0 $13.28 2013 1q 131 3,290,829 234,933 7.1% (23,097) 0 0 0 0 $13.33 2012 4q 131 3,290,829 211,836 6.4% 22,673 0 0 0 0 $13.59 2012 3q 131 3,290,829 234,509 7.1% 4,257 0 0 0 0 $13.19 2012 2q 131 3,290,829 238,766 7.3% (72,637) 0 0 0 0 $13.34 2012 1q 131 3,290,829 166,129 5.0% 42,668 0 0 0 0 $14.23 2011 4q 131 3,290,829 208,797 6.3% 38,872 0 0 0 0 $15.04 2011 3q 131 3,290,829 247,669 7.5% 27,832 0 0 0 0 $14.01 2011 2q 131 3,290,829 275,501 8.4% (24,203) 0 0 0 0 $13.50 2011 1q 131 3,290,829 251,298 7.6% (16,114) 0 0 0 0 $13.81 2010 4q 131 3,290,829 235,184 7.1% 15,908 0 0 0 0 $14.94 2010 3q 131 3,290,829 251,092 7.6% 6,924 0 0 0 0 $13.68 2010 2q 131 3,290,829 258,016 7.8% 73,643 0 0 0 0 $13.99 2010 1q 131 3,290,829 331,659 10.1% 16,680 0 0 0 0 $14.07 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.080) (0.060) (0.040) (0.020) 0.000 0.020 0.040 0.060 0.080 0.100 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%Percent VacantDelivered SF Absorption SF Vacancy $12.60 $12.80 $13.00 $13.20 $13.40 $13.60 $13.80 $14.00 $14.20 $14.40 $14.60 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.05 0.10 0.15 0.20 0.25 0.30 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 12 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” E L K H A R T C O U N T Y M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, All Classes Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 113 1,165,159 89,866 7.7% (4,968) 0 0 0 0 $11.37 2013 3q 113 1,165,159 84,898 7.3% 1,706 0 0 0 0 $11.48 2013 2q 113 1,165,159 86,604 7.4% (6,015) 0 0 0 0 $11.48 2013 1q 113 1,165,159 80,589 6.9% 10,320 0 0 0 0 $12.78 2012 4q 113 1,165,159 90,909 7.8% 0 0 0 0 0 $11.76 2012 3q 113 1,165,159 90,909 7.8% 9,103 1 10,103 0 0 $11.53 2012 2q 112 1,155,056 89,909 7.8% (5,018) 0 0 1 10,103 $11.70 2012 1q 112 1,155,056 84,891 7.3% 39,508 0 0 1 10,103 $12.96 2011 4q 112 1,155,056 124,399 10.8% 1,300 0 0 1 10,103 $12.31 2011 3q 112 1,155,056 125,699 10.9% (9,085) 0 0 1 10,103 $12.11 2011 2q 112 1,155,056 116,614 10.1% 7,178 0 0 0 0 $11.92 2011 1q 112 1,155,056 123,792 10.7% 18,633 0 0 0 0 $12.72 2010 4q 112 1,155,056 142,425 12.3% (13,065) 0 0 0 0 $11.76 2010 3q 112 1,155,056 129,360 11.2% 3,100 0 0 0 0 $12.05 2010 2q 112 1,155,056 132,460 11.5% 25,761 0 0 0 0 $11.77 2010 1q 112 1,155,056 158,221 13.7% (356) 0 0 0 0 $10.56 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.020) (0.010) 0.000 0.010 0.020 0.030 0.040 0.050 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%Percent VacantDelivered SF Absorption SF Vacancy $10.50 $11.00 $11.50 $12.00 $12.50 $13.00 $13.50 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.07 0.08 0.08 0.08 0.08 0.08 0.09 0.09 0.09 0.09 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 14 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” G R E A T E R S O U T H B E N D M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 276 2,285,043 193,670 8.5% 27,874 0 0 0 0 $11.15 2013 3q 276 2,285,043 221,544 9.7% (15,977) 0 0 0 0 $11.86 2013 2q 276 2,285,043 205,567 9.0% (19,434) 0 0 0 0 $11.98 2013 1q 276 2,285,043 186,133 8.1% 1,789 0 0 0 0 $14.32 2012 4q 276 2,285,043 187,922 8.2% (1,042) 0 0 0 0 $11.13 2012 3q 276 2,285,043 186,880 8.2% (950) 0 0 0 0 $10.55 2012 2q 276 2,285,043 185,930 8.1% 7,238 0 0 0 0 $10.46 2012 1q 276 2,285,043 193,168 8.5% (268) 1 14,050 0 0 $13.49 2011 4q 275 2,270,993 178,850 7.9% (33,599) 0 0 1 14,050 $10.67 2011 3q 275 2,270,993 145,251 6.4% 37,168 0 0 1 14,050 $10.36 2011 2q 275 2,270,993 182,419 8.0% (7,068) 0 0 1 14,050 $10.06 2011 1q 275 2,270,993 175,351 7.7% (31,736) 0 0 0 0 $13.27 2010 4q 275 2,270,993 143,615 6.3% (8,735) 0 0 0 0 $10.76 2010 3q 275 2,270,993 134,880 5.9% (709) 0 0 0 0 $10.68 2010 2q 275 2,270,993 134,171 5.9% 10,165 0 0 0 0 $10.38 2010 1q 275 2,270,993 144,336 6.4% 52,999 0 0 0 0 $11.00 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.040) (0.030) (0.020) (0.010) 0.000 0.010 0.020 0.030 0.040 0.050 0.060 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%Percent VacantDelivered SF Absorption SF Vacancy $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.05 0.10 0.15 0.20 0.25 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 14 THE COSTAR OFFICE REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” ©2013 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Office Market MARKET HIGHLIGHTS – CLASS “A, B & C” M I S H A W A K A M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 197 2,066,828 234,808 11.4% 21,818 0 0 1 5,900 $17.88 2013 3q 197 2,066,828 256,626 12.4% (44,184) 0 0 1 5,900 $17.63 2013 2q 197 2,066,828 212,442 10.3% 9,172 0 0 0 0 $15.53 2013 1q 197 2,066,828 221,614 10.7% 6,476 0 0 0 0 $17.48 2012 4q 197 2,066,828 228,090 11.0% 10,933 0 0 0 0 $17.89 2012 3q 198 2,072,076 244,271 11.8% (13,849) 0 0 0 0 $17.75 2012 2q 198 2,072,076 230,422 11.1% 11,174 1 4,100 0 0 $15.78 2012 1q 197 2,067,976 237,496 11.5% 6,751 0 0 1 4,100 $17.81 2011 4q 197 2,067,976 244,247 11.8% 4,971 0 0 1 4,100 $18.40 2011 3q 197 2,067,976 249,218 12.1% (585) 0 0 1 4,100 $17.90 2011 2q 197 2,067,976 248,633 12.0% (5,748) 0 0 0 0 $16.13 2011 1q 197 2,067,976 242,885 11.7% (2,696) 1 2,610 0 0 $17.92 2010 4q 196 2,065,366 237,579 11.5% 54,208 0 0 1 2,610 $18.78 2010 3q 196 2,065,366 291,787 14.1% (26,031) 0 0 1 2,610 $17.35 2010 2q 196 2,065,366 265,756 12.9% 25,420 0 0 1 2,610 $13.27 2010 1q 196 2,065,366 291,176 14.1% 14,361 1 12,003 0 0 $16.96 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.060) (0.040) (0.020) 0.000 0.020 0.040 0.060 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%Percent VacantDelivered SF Absorption SF Vacancy $14.00 $14.50 $15.00 $15.50 $16.00 $16.50 $17.00 $17.50 $18.00 $18.50 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.05 0.10 0.15 0.20 0.25 0.30 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF West Side Corridors Industrial Market Study 1. Gibbs Planning Group, Inc. 01 April 2014 West Side Corridors, South Bend, Indiana INDUSTRIAL MARKET STUDY Gibbs Planning Group, Inc. 01 April 2014 Figure 1: The West Side Corridors study area is located immediately west of Downtown South Bend, and approximately two miles southwest of the heart of the Notre Dame campus. Executive Summary This industrial space market study finds that the West Side Corridors (Western Avenue/Lincoln Way West) study area cannot currently support any additional space in 2014, nor is growth supportable through 2019. However, 12,000 square feet (sf) of new space will be viable by 2024, solely because of industrial building inventory becoming functionally obsolete over the next 10 years. Gibbs Planning Group, Inc. (GPG) bases these projections on a stabilized vacancy factor of 8.25 percent, which is significantly lower than the current 10.4 percent level at a negative industrial labor annual growth rate of 0.03 percent, and a market average of 1,437 sf per general industrial sector employee. This new space should be flex space, and will primarily serve the needs of distribution, research & development, and sales-service providers. The key factors in the lack of significant demand over the next five years are: (1) a decline in industrial sector employment, and (2) absorption of existing vacant space, to get down to the stabilized vacancy rate of 8.25 percent from today’s level of 10.4 percent. Warehouse space needs for the study area will be met by the existing 17.8 million sf of warehouse space in the Greater South Bend industrial space submarket. Employment Demand for additional industrial space is driven in part by employment growth. This area currently has an estimated 35,800 employees, of which approximately 11,700 are industrial space workers. As is true in the “Midwestern Rust Belt” in general, and specifically in the South Bend/Mishawaka Metro Statistical Area, employment in manufacturing and other industrial uses is projected by the Kelly School of Business (Indiana University) to contract by 0.03 percent annually throughout West Side Corridors Industrial Market Study 2. Gibbs Planning Group, Inc. 01 April 2014 2034. GPG estimates the 2019 Greater South Bend submarket will employ about 11,650 industrial space workers, and will grow to approximately 11,600 in 2024. Figure 2: Industrial Employment is projected to decline by roughly 0.03 percent annually over the next 10 years. Greater South Bend Industrial Space Sub Market Users of industrial space have two main needs. The most common type of building is the open warehouse for local & regional businesses, such as wholesalers of retail goods, manufacturers, and service companies for part and equipment storage. The second type of industrial space is the flex space building. These versatile structures are designed to accommodate the mixed needs of office, distribution, research and/or warehousing. Flex buildings are generally one to two stories, with ceiling heights of 16 feet and overhead doors. Demand for industrial space is driven by two major factors: employment and functional obsolescence. Functional obsolescence covers a broad range of circumstances for removal of space from the market place, including: conversion to other purposes which have a higher and better value like retail or residential uses, market place requirements such as higher ceiling needs, or the environmental restriction against previously used construction materials, and the need of a very specific parcel of land for a use to which a building cannot be converted, such as a property located on a railway spur. GPG finds that all of the additional space which is projected to be needed in the industrial space market by 2024 at the subject site comes from demand created by removal of space because of functional obsolescence, at an annualized rate of 0.25 percent. This report estimates that approximately 512,000 sf of obsolete industrial space will be removed from, or retasked, in this submarket over the next 10 years. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Projected Employment Levels for Greater South Bend General Employment and Greater South Bend Industrial Sector Submarket Greater South Bend General Employment Greater South Bend Industrial Sector Jobs West Side Corridors Industrial Market Study 3. Gibbs Planning Group, Inc. 01 April 2014 The Greater South Bend industrial submarket is comprised of over 18.7 million sf of space in 396 buildings. This area has 847,000 sf of flex space contained in 41 buildings and almost 17.9 million sf of warehouse space in 355 structures. The South Bend/Mishawaka MSA encompasses 838 locations with 31.8 million sf of industrial space. The combined industrial vacancy rate in the Greater South Bend area at the end of the 4th quarter of 2013 peaked after rising six straight quarters to 10.4 percent. It has suffered through five consecutive quarters of negative absorption, including losing 243,500 sf of tenants in 2013. There are currently no projects under construction; however, two new buildings came on line in 2013, adding over 187,000 sf of new industrial space to the marketplace. Figure 3: Quoted Industrial Property Rental Rates are just off the bottom asking rates from recent history in the Greater South Bend industrial submarket place. After a brief spike in the third quarter of 2013, the quoted industrial space rental rate is at $3.17/sf, just below the four-year average of $3.18/sf. There was an estimated 1.9 million sf of vacant inventory in the submarket at the end of 2013. West Side Corridors Study Area Industrial Space Demand The estimate of the industrial space gap (need or over supply) is based on inventorying existing industrial space square footage in a submarket, less the current vacancy rate, quantifying and disaggregating the base employment by category, determining the number of employees who require industrial space by employment category, and then estimating the industrial space need per sf per employee. This statistic is multiplied by the estimated job growth, which is a derivative of the additional need for local services and businesses driven by population or income increases. Therefore, the demand for industrial space has an indirect link to the population growth (residential dwelling unit and retail space demand has a direct link to population growth). The new demand is then adjusted by a market-specific Stabilized Vacancy Factor, which in the case of the Greater South Bend industrial market is over 2.0 percent lower than current vacancy levels, and compared to the industrial space supply. Past industrial space inventory plus the amount of new $3.00 $3.10 $3.20 $3.30 $3.40 $3.50 6.0% 7.0% 8.0% 9.0% 10.0% 11.0%Quoted Rental Rate Vacancy Rate Greater South Bend Industrial Space Vacancy Rate vs Quoted Rents Vacancy Rate Quoted Rents West Side Corridors Industrial Market Study 4. Gibbs Planning Group, Inc. 01 April 2014 space delivered into the market, less that which is functional obsolete or demolished, is the projected industrial space supply. For purposes of this study, the existing inventory in the Greater South Bend industrial submarket is 18.7 million sf. GPG estimates that through 2019, 281,000 sf (1.5 percent) of the industrial space will become functionally obsolete. The Stabilized Vacancy Factor for the industrial submarket is 8.25 percent. Based on the “WorkPlace & Employment Summary: Greater South Bend Submarket” table found in the appendix of this report, the total number of 2013 employees in this industrial submarket is 35,800, of which 11,700 are industrial space employees. The 2013 industrial space required per worker is 1,437 sf per worker. The 2019 total industrial space market demand for this submarket is 16.8 million sf, based on an annualized employment growth rate of - 0.03 percent. Adjusting for the stabilized vacancy factor generates a total demand of 18.3 million sf. GPG finds that by 2019, there will be 187,000 sf oversupply of industrial space yielding a 9.0 percent vacancy rate, 0.75 percent above the stabilized vacancy factor in the West Side Corridors study area. The West Side Corridors study area is the dominant warehouse location in the Greater South Bend submarket, and contains over 17.8 million sf of the 29.2 million sf found in the South Bend/Mishawaka MSA. Its location, vehicular access and tenant mix generates a capture rate of 33 percent of the surplus industrial space demand potential in the submarket. Office Space Demand 2014 2019 2024 Gross Industrial Space Demand (Greater South Bend submarket) 18,290,000 sf 18,260,000 sf 18,200,000 sf Gap Potential (Demand less Supply) (Greater South Bend submarket) (387,000) sf (180,000) sf 36,000 sf Captured Demand (Western/Lincoln Way study area) 0 sf 0 sf 12,000 sf Aggregated Captured Demand (Western/Lincoln Way study area) 0 sf 0 sf 12,000 sf Figure 4: Industrial space demand for the Greater South Bend submarket and West Side Corridors study area. Based on projected job growth and a stabilized vacancy factor of 8.25 percent, GPG finds that 12,000 sf of flex space will be supportable in the study area by 2024. Limits of Study The findings of this summary represent GPG’s best estimates of demand at the study site. Every reasonable effort has been made to ensure that the data contained in this study reflect the most accurate and timely information possible, and is believed to be reliable. This study is based on estimates, assumptions and other information developed by GPG’s independent research effort, general knowledge of the commercial real estate industry, market data from commercial real estate listing services, and consultations with the client and its representatives. No responsibility is assumed for inaccuracies in reporting by the client, its agent and representatives or in any other data source used in preparing or presenting this study. This report is based on information that was current as of April 1, 2014 and GPG has not undertaken any update of its research effort since such date. West Side Corridors Industrial Market Study 5. Gibbs Planning Group, Inc. 01 April 2014 This report may contain prospective financial information, estimates, or opinions that represent GPG’s view of reasonable expectations at a particular time, but such information, estimates, or opinions are not offered as predictions or assurances that a precise level of income or profit will be achieved, that particular events will occur, or that a specific price will be offered or accepted. Actual results achieved during the period covered by our prospective financial analysis may vary from those described in our report, and the variations may be material. Therefore, no warranty or representation is made by GPG that any of the projected values or results contained in this study will be achieved. Actual results achieved during the period covered by our prospective financial analysis may vary from those described in our report, and the variations may be material. Therefore, no warranty or representation is made by GPG that any of the projected values or results contained in this study will be achieved. This study should not be the sole basis for programming, planning, purchasing, financing, or development of any commercial project. This study is for the use of the client for general market analysis purposes only and is void for other site locations or developers. For the purposes of this study, GPG has assumed the following: The region’s economy will stabilize at normal or above normal ranges of population, household formation and employment growth, while price and cost inflation remain at historic levels. Employment distribution is to remain constant, without a spike or decline in employment by NAICS category. Projected lease and vacancy rates, as well as product absorption models based on our proprietary econometric model of the relationship between changes in employment and population. The most current data has been gathered from STDB, US Census Bureau, ESRI, COSTAR Group, Inc., LOOPNET, and local brokerage services. -- END OF REPORT -- Total Businesses: Total Employees: Total Residential Population: Employee/Residential Population Ratio: Number Percent Number Percent Agriculture & Mining 143 3.5% 496 1.4% Construction 378 9.1% 2,198 6.1% Manufacturing 197 4.8% 7,381 20.6% Transportation 153 3.7% 1,667 4.7% Communication 32 0.8% 210 0.6% Electric, Gas, Water, Sanitary Services 14 0.3% 262 0.7% Wholesale Trade 225 5.4% 2,170 6.1% Retail Trade Summary 670 16.2% 7,239 20.2% Home Improvement 45 1.1% 404 1.1% General Merchandise Stores 19 0.5% 1,585 4.4% Food Stores 62 1.5% 1,000 2.8% Auto Dealers, Gas Stations, Auto Aftermarket 75 1.8% 641 1.8% Apparel & Accessory Stores 32 0.8% 199 0.6% Furniture & Home Furnishings 47 1.1% 235 0.7% Eating & Drinking Places 169 4.1% 2,164 6.0% Miscellaneous Retail 222 5.4% 1,011 2.8% Finance, Insurance, Real Estate Summary 304 7.3% 1,236 3.5% Banks, Savings & Lending Institutions 42 1.0% 309 0.9% Securities Brokers 12 0.3% 27 0.1% Insurance Carriers & Agents 67 1.6% 213 0.6% Real Estate, Holding, Other Investment Offices 182 4.4% 686 1.9% Services Summary 1,985 47.9% 10,923 30.5% Hotels & Lodging 25 0.6% 337 0.9% Automotive Services 112 2.7% 812 2.3% Motion Pictures & Amusements 103 2.5% 369 1.0% Health Services 113 2.7% 1,139 3.2% Legal Services 17 0.4% 36 0.1% Education Institutions & Libraries 61 1.5% 1,936 5.4% Other Services 1,554 37.5% 6,294 17.6% Government 43 1.0% 2,033 5.7% Totals 4,144 35,815 WorkPlace & Employment Summary Prepared by Gibbs Planning Group 4,144 BUSINESSES EMPLOYEES 35,814 98,570 0.36 Greater South Bend Industrial Submarket, South Bend, Indiana Gibbs Planning Group Inc., Western Ave/Lincoln Way W Industrial Space Study Appendix South Bend/Mishawaka Industrial Market Y E A R - E N D 2 0 1 3 The CoStarIndustrial Report South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A YEAR-END 2013 – SOUTH BEND/MISHAWAKA Table of Contents Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CoStar Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Inventory & Development Analysis Select Top Deliveries Figures at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figures at a Glance by Building Type & Market Historical Figures at a Glance Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Select Top Lease Transactions Analysis of Individual CoStar Submarket Clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Cass County Market Downtown South Bend Market Elkhart County Market Greater South Bend Market Mishawaka Market South Bend/Mishawaka Industrial Market B THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C YEAR-END 2013 – SOUTH BEND/MISHAWAKA Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Group's base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. © Copyright 2013 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 1331 L ST NW • Washington, DC 20005• (800) 204-5960 • www.costar.com • NASDAQ: CSGP For information on subscribing to CoStar’s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com South Bend/Mishawaka Industrial Market B THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C YEAR-END 2013 – SOUTH BEND/MISHAWAKA Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the ten-ant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has pur- chased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calcula-tion that reflects the relationship between one year’s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an archi- tectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fit- tings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typical-ly have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that gener- ally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepre-neurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typi- cal flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The pri- mary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease trans- action between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is commit-ted to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building- type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundar-ies of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) South Bend/Mishawaka Industrial Market D THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1 Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufactur-ing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the vari- ous systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a par-ticular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of eco- nomic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant’s rental obligation. Generally RBA includes a percentage of common areas including all hall- ways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of build- ings in a given time period. Seller: The individual, group, company, or entity that sells a par- ticular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delin- eate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metro- politan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construc- tion and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not avail-able. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be con- sidered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through what-ever time period is being studied. South Bend/Mishawaka Industrial Market D THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1 OVERVIEW South Bend/Mishawaka’s Vacancy Increases to 7.5% Net Absorption Negative (114,475) SF in the Quarter T he South Bend/Mishawaka Industrial market ended the fourth quarter 2013 with a vacancy rate of 7.5%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (114,475) square feet in the fourth quarter. Vacant sublease space remained unchanged in the quar- ter, ending at 2,400 square feet. Rental rates ended the fourth quarter at $3.12, a decrease over the previous quarter. There were no properties under construction at the end of the quarter. Absorption Net absorption for the overall South Bend/Mishawaka Industrial market was negative (114,475) square feet in the fourth quarter 2013. That compares to negative (53,042) square feet in the third quarter 2013, positive 514,794 square feet in the second quarter 2013, and positive 37,545 square feet in the first quarter 2013. Tenants moving into large blocks of space in 2013 include: B & B Organics moving into 13,680 square feet at 949 E 12th St, Michiana Auto Supply moving into 4,200 square feet at 244 Olive St, and Endeavor Machined Products moving into 3,000 square feet at 850 S Marietta St. The Flex building market recorded net absorption of posi- tive 10,324 square feet in the fourth quarter 2013, compared to negative (1,780) square feet in the third quarter 2013, negative (7,095) in the second quarter 2013, and positive 18,225 in the first quarter 2013. The Warehouse building market recorded net absorption of negative (124,799) square feet in the fourth quarter 2013 com- pared to negative (51,262) square feet in the third quarter 2013, positive 521,889 in the second quarter 2013, and positive 19,320 in the first quarter 2013. Vacancy The Industrial vacancy rate in the South Bend/Mishawaka market arean increased to 7.5% at the end of the fourth quarter 2013. The vacancy rate was 7.2% at the end of the third quarter 2013, 6.4% at the end of the second quarter 2013, and 8.2% at the end of the first quarter 2013. Flex projects reported a vacancy rate of 5.7% at the end of the fourth quarter 2013, 6.1% at the end of the third quarter 2013, 6.1% at the end of the second quarter 2013, and 5.8% at the end of the first quarter 2013. Warehouse projects reported a vacancy rate of 7.7% at the end of the fourth quarter 2013, 7.3% at the end of third quarter 2013, 6.6% at the end of the second quarter 2013, and 8.4% at the end of the first quarter 2013. Largest Lease Signings The largest lease signings occurring in 2013 included: the 13,680-square-foot lease signed by B & B Organics at 949 E 12th St in the Mishawaka market; the 7,658-square-foot deal signed by Accel EMS Inc at 1309 E Mckinley Ave in the Mishawaka market; and the 4,858-square-foot lease signed by Kukla at 1600 W 6th St in the Mishawaka market. Sublease Vacancy The amount of vacant sublease space in the South Bend/ Mishawaka market stayed the same at 2,400 square feet by the end of the fourth quarter 2013, from 2,400 square feet at the end of the third quarter 2013. There was 45,617 square feet vacant at the end of the second quarter 2013 and 40,817 square feet at Vacancy Rates by Building Type 2007-2013 Source: CoStar Property® Absorption & Deliveries U.S. Vacancy Comparison Past 10 Quarters Past 10 Quarters Source: CoStar Property•Source: CoStar Property• 0% 2% 4% 6% 8% 10% 12% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateFlex Warehouse Total Market (0.5) 0.0 0.1 (0.1) 0.2 (0.7) 0.0 0.5 (0.1)(0.1) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 (0.8) (0.6) (0.4) (0.2) 0.0 0.2 0.4 0.6 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFNet Absorption Deliveries 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateSouth Bend/Mishawaka United States 2 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3 OVERVIEW the end of the first quarter 2013. South Bend/Mishawaka’s Flex projects reported vacant sub- lease space of 2,400 square feet at the end of fourth quarter 2013, from the 2,400 square feet reported at the end of the third quarter 2013. There were 4,800 square feet of sublease space vacant at the end of the second quarter 2013, and no vacant sublease space at the end of the first quarter 2013. Warehouse projects reported no vacant sublease space dur- ing the third and fourth quarter 2013. There was 40,817 square feet at the end of the first and second quarter 2013. Rental Rates The average quoted asking rental rate for available Industrial space was $3.12 per square foot per year at the end of the fourth quarter 2013 in the South Bend/Mishawaka market area. This represented a 3.1% decrease in quoted rental rates from the end of the third quarter 2013, when rents were reported at $3.22 per square foot. The average quoted rate within the Flex sector was $5.39 per square foot at the end of the fourth quarter 2013, while Warehouse rates stood at $3.01. At the end of the third quarter 2013, Flex rates were $5.24 per square foot, and Warehouse rates were $3.11. Deliveries and Construction During the fourth quarter 2013, no new space was com- pleted in the South Bend/Mishawaka market area. This compares to one building totaling 157,359 square feet that were completed in the third quarter 2013, nothing completed in the second quar- ter 2013, and 30,000 square feet in one building completed in the first quarter 2013. There was no Industrial space under construction at the end of the fourth quarter 2013. Some of the notable 2013 deliveries include: The Superior, a 157,359-square-foot facility that delivered in third quarter 2013, and 3303 William Richardson Dr, a 30,000-square-foot building that delivered in first quarter 2013. Inventory Total Industrial inventory in the South Bend/Mishawaka market area amounted to 31,810,655 square feet in 838 buildings as of the end of the fourth quarter 2013. The Flex sector consisted of 2,557,912 square feet in 81 projects. The Warehouse sector consisted of 29,252,743 square feet in 757 buildings. Within the Industrial market there were 22 owner-occupied buildings accounting for 2,914,015 square feet of Industrial space. Reports compiled by: Baxter Burnworth, CoStar Research Manager. Vacancy Rates by Building Type2007-2013 Source: CoStar Property® Absorption & Deliveries U.S. Vacancy Comparison Past 10 Quarters Past 10 Quarters Source: CoStar Property•Source: CoStar Property• 0% 2% 4% 6% 8% 10% 12% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateFlex Warehouse Total Market (0.5) 0.0 0.1 (0.1) 0.2 (0.7) 0.0 0.5 (0.1)(0.1) 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.2 0.0 (0.8) (0.6) (0.4) (0.2) 0.0 0.2 0.4 0.6 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFNet AbsorptionDeliveries 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qVacancy RateSouth Bend/Mishawaka United States 2 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3 CoStar Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. MARKETS Submarket Clusters Cass County Downtown South Bend Elkhart County Greater South Bend Mishawaka 4 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5 Historical Deliveries 1982 - 2013 Source: CoStar Property® * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA # Bldgs Preleased SF Preleased % All Existing U/C Cass County 0 0 0.0% 41,794 0 Elkhart County 0 0 0.0% 18,713 0 Downtown South Bend 0 0 0.0% 52,295 0 Greater South Bend 0 0 0.0% 47,272 0 Mishawaka 0 0 0.0% 23,518 0 Totals 0 0 0.0% 37,960 0 Source: CoStar Property® Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2009 Source: CoStar Property® 0 0 0 0 0 0 Market Under Construction Inventory Average Bldg Size Total RBA 0.2 0.1 0.5 0.4 0.3 0.8 0.3 0.5 0.1 0.1 0.2 0.6 0.9 0.3 0.3 0.3 0.8 0.5 0.5 0.3 0.4 0.0 0.4 0.6 0.0 0.2 0.0 0.0 0.2 0.0 0.0 0.2 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Millions of SFDeliveries Average Delivered SF 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 2009 2010 2011 2012 2013Millions of SFLeased Un-Leased INVENTORY & DEVELOPMENT 4 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5 Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Source: CoStar Property® Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 1 30,000 24,300 81.0% $6.25 0 30,000 50,000 SF - 99,999 SF 0 0 0 0.0% $0.00 0 0 100,000 SF - 249,999 SF 1 157,359 105,431 67.0% $3.95 0 157,359 250,000 SF - 499,999 SF 0 0 0 0.0% $0.00 0 0 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 Source: CoStar Property® Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2013 Deliveries Source: CoStar Property®Source: CoStar Property® No Properties Under Construction By Building Type By Tenancy Type 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.00.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.2 0.2 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions of SFConstruction Starts Deliveries 0% 100% Multi Single 8% 92% Flex Warehouse 63% 37% Multi Single INVENTORY & DEVELOPMENT 6 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7 ������������������������������������������������������������� ������������������������ ���� ������������ ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ���� �������������������������� �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� INVENTORY & DEVELOPMENT 6 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7 Flex Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 1 8,902 0 0 0.0% 0 0 0 $0.00 Downtown South Bend 9 337,363 19,158 19,158 5.7% 1,317 0 0 $4.15 Elkhart County 3 171,819 0 0 0.0% 0 0 0 $16.67 Greater South Bend 41 847,407 87,409 89,809 10.6% 36,657 30,000 0 $5.09 Mishawaka 27 1,192,421 37,500 37,500 3.1% (18,300) 0 0 $6.33 Totals 81 2,557,912 144,067 146,467 5.7% 19,674 30,000 0 $5.39 Source: CoStar Property® Warehouse Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 67 2,833,098 68,032 68,032 2.4% 620,283 0 0 $2.37 Downtown South Bend 45 2,486,581 230,240 230,240 9.3% 525 0 0 $3.67 Elkhart County 18 221,158 0 0 0.0% 32,626 0 0 $3.66 Greater South Bend 355 17,872,391 1,847,782 1,847,782 10.3% (280,146) 157,359 0 $3.08 Mishawaka 272 5,839,515 106,948 106,948 1.8% (8,140) 0 0 $3.52 Totals 757 29,252,743 2,253,002 2,253,002 7.7% 365,148 157,359 0 $3.01 Source: CoStar Property® Total Industrial Market Statistics Year-End 2013 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Cass County 68 2,842,000 68,032 68,032 2.4% 620,283 0 0 $2.37 Downtown South Bend 54 2,823,944 249,398 249,398 8.8% 1,842 0 0 $3.70 Elkhart County 21 392,977 0 0 0.0% 32,626 0 0 $3.76 Greater South Bend 396 18,719,798 1,935,191 1,937,591 10.4% (243,489) 187,359 0 $3.17 Mishawaka 299 7,031,936 144,448 144,448 2.1% (26,440) 0 0 $3.84 Totals 838 31,810,655 2,397,069 2,399,469 7.5% 384,822 187,359 0 $3.12 Source: CoStar Property® Existing Inventory Vacancy Existing Inventory Vacancy Existing Inventory Vacancy FIGURES AT A GLANCE 8 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9 FIGURES AT A GLANCE Flex Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 81 2,557,912 144,067 146,467 5.7% 10,324 0 0 0 0 $5.39 2013 3q 81 2,557,912 154,391 156,791 6.1% (1,780) 0 0 0 0 $5.24 2013 2q 81 2,557,912 150,211 155,011 6.1% (7,095) 0 0 0 0 $5.21 2013 1q 81 2,557,912 147,916 147,916 5.8% 18,225 1 30,000 0 0 $5.16 2012 4q 80 2,527,912 136,141 136,141 5.4% (4,195) 0 0 1 30,000 $5.73 2012 3q 80 2,527,912 131,946 131,946 5.2% (7,200) 0 0 1 30,000 $5.67 2012 2q 80 2,527,912 124,746 124,746 4.9% (15,940) 0 0 0 0 $5.32 2012 1q 80 2,527,912 108,806 108,806 4.3% (2,000) 0 0 0 0 $5.38 2011 4q 80 2,527,912 106,806 106,806 4.2% (2,150) 0 0 0 0 $5.49 2011 3q 80 2,527,912 104,656 104,656 4.1% 4,269 0 0 0 0 $5.65 2011 2q 80 2,527,912 99,156 108,925 4.3% 6,096 0 0 0 0 $5.72 2011 1q 80 2,527,912 105,252 115,021 4.6% 4,450 0 0 0 0 $5.67 2010 80 2,527,912 109,702 119,471 4.7% 26,418 0 0 0 0 $5.84 2009 80 2,527,912 145,889 145,889 5.8% 12,741 0 0 0 0 $6.28 2008 80 2,527,912 158,630 158,630 6.3% 9,081 0 0 0 0 $5.62 2007 80 2,527,912 167,711 167,711 6.6% 37,150 0 0 0 0 $5.95 Source: CoStar Property® Warehouse Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 757 29,252,743 2,253,002 2,253,002 7.7% (124,799) 0 0 0 0 $3.01 2013 3q 757 29,252,743 2,128,203 2,128,203 7.3% (51,262) 1 157,359 0 0 $3.11 2013 2q 756 29,095,384 1,878,765 1,919,582 6.6% 521,889 0 0 1 157,359 $2.79 2013 1q 756 29,095,384 2,400,654 2,441,471 8.4% 19,320 0 0 1 157,359 $2.79 2012 4q 757 29,695,384 3,019,974 3,060,791 10.3% (673,716) 0 0 1 157,359 $2.85 2012 3q 757 29,695,384 2,346,258 2,387,075 8.0% 181,806 0 0 0 0 $2.82 2012 2q 757 29,695,384 2,528,064 2,568,881 8.7% (56,795) 0 0 0 0 $2.83 2012 1q 757 29,695,384 2,471,269 2,512,086 8.5% 146,762 0 0 0 0 $2.82 2011 4q 757 29,695,384 2,618,031 2,658,848 9.0% 11,217 0 0 0 0 $2.80 2011 3q 757 29,695,384 2,629,248 2,670,065 9.0% (548,285) 0 0 0 0 $2.84 2011 2q 757 29,695,384 2,121,780 2,121,780 7.1% 38,249 0 0 0 0 $2.82 2011 1q 757 29,695,384 2,160,029 2,160,029 7.3% (331,117) 0 0 0 0 $2.82 2010 757 29,695,384 1,828,912 1,828,912 6.2% 70,907 1 167,308 0 0 $2.80 2009 756 29,528,076 1,732,511 1,732,511 5.9% 84,603 1 31,819 0 0 $3.14 2008 755 29,496,257 1,785,295 1,785,295 6.1% (95,869) 1 17,800 1 31,819 $3.76 2007 754 29,478,457 1,671,626 1,671,626 5.7% 890,075 1 157,500 0 0 $3.54 Source: CoStar Property® Total Industrial Market Statistics Year-End 2013 Net Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2013 4q 838 31,810,655 2,397,069 2,399,469 7.5% (114,475) 0 0 0 0 $3.12 2013 3q 838 31,810,655 2,282,594 2,284,994 7.2% (53,042) 1 157,359 0 0 $3.22 2013 2q 837 31,653,296 2,028,976 2,074,593 6.6% 514,794 0 0 1 157,359 $2.89 2013 1q 837 31,653,296 2,548,570 2,589,387 8.2% 37,545 1 30,000 1 157,359 $2.88 2012 4q 837 32,223,296 3,156,115 3,196,932 9.9% (677,911) 0 0 2 187,359 $2.95 2012 3q 837 32,223,296 2,478,204 2,519,021 7.8% 174,606 0 0 1 30,000 $2.93 2012 2q 837 32,223,296 2,652,810 2,693,627 8.4% (72,735) 0 0 0 0 $2.93 2012 1q 837 32,223,296 2,580,075 2,620,892 8.1% 144,762 0 0 0 0 $2.91 2011 4q 837 32,223,296 2,724,837 2,765,654 8.6% 9,067 0 0 0 0 $2.89 2011 3q 837 32,223,296 2,733,904 2,774,721 8.6% (544,016) 0 0 0 0 $2.94 2011 2q 837 32,223,296 2,220,936 2,230,705 6.9% 44,345 0 0 0 0 $2.92 2011 1q 837 32,223,296 2,265,281 2,275,050 7.1% (326,667) 0 0 0 0 $2.90 2010 837 32,223,296 1,938,614 1,948,383 6.0% 97,325 1 167,308 0 0 $2.89 2009 836 32,055,988 1,878,400 1,878,400 5.9% 97,344 1 31,819 0 0 $3.24 2008 835 32,024,169 1,943,925 1,943,925 6.1% (86,788) 1 17,800 1 31,819 $3.90 2007 834 32,006,369 1,839,337 1,839,337 5.7% 927,225 1 157,500 0 0 $3.75 Source: CoStar Property® Existing Inventory Vacancy Deliveries UC Inventory Existing Inventory Vacancy Deliveries UC Inventory Existing Inventory Vacancy Deliveries UC Inventory 8 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9 Historical Rental Rates Based on Quoted Rental Rates Source: CoStar Property® Vacancy by Available Space Type Vacancy by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Source: CoStar Property®Source: CoStar Property® U.S. Rental Rate Comparison Future Space Available Based on Average Quoted Rental Rates Space Scheduled to be Available for Occupancy* Source: CoStar Property®Source: CoStar Property® * Includes Under Construction Space South Bend/Mishawaka United States South Bend/Mishawaka United States $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/YearFlex Warehouse Total Market $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/YearSouth Bend/Mishawaka United States 100% 0% Direct Sublet 2% 98% Direct Sublet 6% 94% Flex Warehouse 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.2 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2qMillions85% 15% Flex Warehouse LEASING ACTIVITY 10 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 11 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE LEASING ACTIVITY Source: CoStar Property® * Renewal Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 1827 North Bendix Drive Greater South Bend 52,758 1st N/A N/A Newmark Grubb Cressy & Everett 2 949 E 12th St Mishawaka 13,680 2nd B & B Organics N/A Newmark Grubb Cressy & Everett 3 1309 E Mckinley Ave Mishawaka 7,658 1st Accel EMS Inc N/A Newmark Grubb Cressy & Everett 4 1201 Industrial Dr Mishawaka 7,626 4th N/A N/A Newmark Grubb Cressy & Everett 5 2720 Foundation Dr Greater South Bend 7,558 2nd N/A N/A Alpha Realty 6 3225 Sugar Maple Ln Greater South Bend 6,000 4th N/A N/A Bradley Company 7 1600 W 6th St Mishawaka 4,858 2nd Kukla N/A Prudential One Realty 8 Cleveland Centre Greater South Bend 4,724 4th N/A N/A Bradley Company 9 South Olive Center Greater South Bend 4,161 2nd Hunt’s Beauty Supply N/A Al VanOverberghe 10 1335 Lincoln Way E Mishawaka 3,658 1st N/A N/A At Home Realty Group 11 2301 N Bendix Dr Greater South Bend 3,658 1st N/A N/A Bradley Company 12 The Space Place Cass County 2,000 1st N/A N/A N/A 13 2020 W 6th St Mishawaka 1,584 1st N/A N/A Rich Palicki 14 2020 W 6th St Mishawaka 1,584 1st N/A N/A Rich Palicki 15 South Olive Center Greater South Bend 1,350 1st New Image Beauty and Barber Direct Deal Al VanOverberghe Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2013 10 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 11 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE C A S S C O U N T Y M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 68 2,842,000 68,032 2.4% 0 0 0 0 0 $2.37 2013 3q 68 2,842,000 68,032 2.4% 576 0 0 0 0 $2.58 2013 2q 68 2,842,000 68,608 2.4% 624,457 0 0 0 0 $1.29 2013 1q 68 2,842,000 693,065 24.4% (4,750) 0 0 0 0 $1.34 2012 4q 68 2,842,000 688,315 24.2% 4,200 0 0 0 0 $1.61 2012 3q 68 2,842,000 692,515 24.4% 0 0 0 0 0 $1.57 2012 2q 68 2,842,000 692,515 24.4% 7,218 0 0 0 0 $1.57 2012 1q 68 2,842,000 699,733 24.6% (283) 0 0 0 0 $1.56 2011 4q 68 2,842,000 699,450 24.6% (9,842) 0 0 0 0 $1.64 2011 3q 68 2,842,000 689,608 24.3% (612,732) 0 0 0 0 $1.61 2011 2q 68 2,842,000 76,876 2.7% 783 0 0 0 0 $1.59 2011 1q 68 2,842,000 77,659 2.7% 2,100 0 0 0 0 $1.59 2010 4q 68 2,842,000 79,759 2.8% 30,200 0 0 0 0 $1.59 2010 3q 68 2,842,000 109,959 3.9% 4,500 0 0 0 0 $1.58 2010 2q 68 2,842,000 114,459 4.0% (200) 0 0 0 0 $1.74 2010 1q 68 2,842,000 114,259 4.0% (32,876) 0 0 0 0 $1.74 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.800) (0.600) (0.400) (0.200) 0.000 0.200 0.400 0.600 0.800 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%Percent VacantDelivered SF Absorption SF Vacancy $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 12 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 13 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE D O W N T O W N S O U T H B E N D M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 54 2,823,944 249,398 8.8% 1,317 0 0 0 0 $3.70 2013 3q 54 2,823,944 250,715 8.9% 525 0 0 0 0 $3.65 2013 2q 54 2,823,944 251,240 8.9% 0 0 0 0 0 $3.50 2013 1q 54 2,823,944 251,240 8.9% 0 0 0 0 0 $2.80 2012 4q 54 2,823,944 251,240 8.9% 0 0 0 0 0 $3.14 2012 3q 54 2,823,944 251,240 8.9% 0 0 0 0 0 $2.67 2012 2q 54 2,823,944 251,240 8.9% 5,800 0 0 0 0 $2.67 2012 1q 54 2,823,944 257,040 9.1% (6,280) 0 0 0 0 $2.75 2011 4q 54 2,823,944 250,760 8.9% 80,000 0 0 0 0 $2.74 2011 3q 54 2,823,944 330,760 11.7% 0 0 0 0 0 $2.75 2011 2q 54 2,823,944 330,760 11.7% 600 0 0 0 0 $2.66 2011 1q 54 2,823,944 331,360 11.7% 0 0 0 0 0 $2.45 2010 4q 54 2,823,944 331,360 11.7% 0 0 0 0 0 $2.45 2010 3q 54 2,823,944 331,360 11.7% (2,961) 0 0 0 0 $2.45 2010 2q 54 2,823,944 328,399 11.6% 8,761 0 0 0 0 $2.28 2010 1q 54 2,823,944 337,160 11.9% (63,770) 0 0 0 0 $1.99 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.080) (0.060) (0.040) (0.020) 0.000 0.020 0.040 0.060 0.080 0.100 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Percent VacantDelivered SF Absorption SF Vacancy $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.24 0.25 0.25 0.25 0.25 0.25 0.26 0.26 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 12 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 13 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE E L K H A R T C O U N T Y M A R K E T Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 21 392,977 0 0.0% 0 0 0 0 0 $3.76 2013 3q 21 392,977 0 0.0% 1,090 0 0 0 0 $3.76 2013 2q 21 392,977 1,090 0.3% 0 0 0 0 0 $3.20 2013 1q 21 392,977 1,090 0.3% 31,536 0 0 0 0 $3.29 2012 4q 21 392,977 32,626 8.3% 0 0 0 0 0 $3.29 2012 3q 21 392,977 32,626 8.3% 0 0 0 0 0 $4.00 2012 2q 21 392,977 32,626 8.3% (1,090) 0 0 0 0 $3.31 2012 1q 21 392,977 31,536 8.0% 0 0 0 0 0 $3.31 2011 4q 21 392,977 31,536 8.0% 0 0 0 0 0 $3.31 2011 3q 21 392,977 31,536 8.0% 7,000 0 0 0 0 $3.01 2011 2q 21 392,977 38,536 9.8% 0 0 0 0 0 $3.01 2011 1q 21 392,977 38,536 9.8% 0 0 0 0 0 $2.58 2010 4q 21 392,977 38,536 9.8% 0 0 0 0 0 $2.57 2010 3q 21 392,977 38,536 9.8% 2,335 0 0 0 0 $2.57 2010 2q 21 392,977 40,871 10.4% 10,854 0 0 0 0 $3.01 2010 1q 21 392,977 51,725 13.2% 8,920 0 0 0 0 $3.01 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.005) 0.000 0.005 0.010 0.015 0.020 0.025 0.030 0.035 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Percent VacantDelivered SF Absorption SF Vacancy $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.01 0.01 0.02 0.02 0.03 0.03 0.04 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 14 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 15 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE G R E A T E R S O U T H B E N D M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 396 18,719,798 1,937,591 10.4% (67,486) 0 0 0 0 $3.17 2013 3q 396 18,719,798 1,870,105 10.0% (68,705) 1 157,359 0 0 $3.26 2013 2q 395 18,562,439 1,644,041 8.9% (103,773) 0 0 1 157,359 $3.14 2013 1q 395 18,562,439 1,540,268 8.3% (3,525) 1 30,000 1 157,359 $3.14 2012 4q 394 18,532,439 1,506,743 8.1% (82,711) 0 0 2 187,359 $3.16 2012 3q 394 18,532,439 1,424,032 7.7% 152,258 0 0 1 30,000 $3.11 2012 2q 394 18,532,439 1,576,290 8.5% (87,663) 0 0 0 0 $3.13 2012 1q 394 18,532,439 1,488,627 8.0% 30,225 0 0 0 0 $3.11 2011 4q 394 18,532,439 1,518,852 8.2% (57,012) 0 0 0 0 $3.09 2011 3q 394 18,532,439 1,461,840 7.9% 60,364 0 0 0 0 $3.15 2011 2q 394 18,532,439 1,522,204 8.2% (7,719) 0 0 0 0 $3.13 2011 1q 394 18,532,439 1,514,485 8.2% (317,725) 0 0 0 0 $3.14 2010 4q 394 18,532,439 1,196,760 6.5% 222,440 1 167,308 0 0 $3.22 2010 3q 393 18,365,131 1,251,892 6.8% (74,800) 0 0 1 167,308 $3.26 2010 2q 393 18,365,131 1,177,092 6.4% 18,146 0 0 1 167,308 $3.34 2010 1q 393 18,365,131 1,195,238 6.5% 30,188 0 0 1 167,308 $3.33 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.400) (0.300) (0.200) (0.100) 0.000 0.100 0.200 0.300 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%Percent VacantDelivered SF Absorption SF Vacancy $3.00 $3.05 $3.10 $3.15 $3.20 $3.25 $3.30 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.50 1.00 1.50 2.00 2.50 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF 14 THE COSTAR INDUSTRIAL REPORT ©2013 COSTAR GROUP, INC. SOUTH BEND/MISHAWAKA – YEAR-END 2013 South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE ©2013 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 15 YEAR-END 2013 – SOUTH BEND/MISHAWAKA South Bend/Mishawaka Industrial Market MARKET HIGHLIGHTS - FLEX & WAREHOUSE M I S H A W A K A M A R K E T MARKET HIGHLIGHTS - FLEX & WAREHOUSE Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse Source: CoStar Property®Source: CoStar Property® Net Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2013 4q 299 7,031,936 144,448 2.1% (48,306) 0 0 0 0 $3.84 2013 3q 299 7,031,936 96,142 1.4% 13,472 0 0 0 0 $3.78 2013 2q 299 7,031,936 109,614 1.6% (5,890) 0 0 0 0 $3.77 2013 1q 299 7,031,936 103,724 1.5% 14,284 0 0 0 0 $3.86 2012 4q 300 7,631,936 718,008 9.4% (599,400) 0 0 0 0 $3.83 2012 3q 300 7,631,936 118,608 1.6% 22,348 0 0 0 0 $3.71 2012 2q 300 7,631,936 140,956 1.8% 3,000 0 0 0 0 $3.67 2012 1q 300 7,631,936 143,956 1.9% 121,100 0 0 0 0 $3.65 2011 4q 300 7,631,936 265,056 3.5% (4,079) 0 0 0 0 $3.72 2011 3q 300 7,631,936 260,977 3.4% 1,352 0 0 0 0 $3.73 2011 2q 300 7,631,936 262,329 3.4% 50,681 0 0 0 0 $3.82 2011 1q 300 7,631,936 313,010 4.1% (11,042) 0 0 0 0 $3.71 2010 4q 300 7,631,936 301,968 4.0% (36,132) 0 0 0 0 $3.74 2010 3q 300 7,631,936 265,836 3.5% (210) 0 0 0 0 $3.72 2010 2q 300 7,631,936 265,626 3.5% (42,000) 0 0 0 0 $3.69 2010 1q 300 7,631,936 223,626 2.9% 13,930 0 0 0 0 $3.86 Source: CoStar Property® UC InventoryDelivered InventoryExisting Inventory Vacancy (0.700) (0.600) (0.500) (0.400) (0.300) (0.200) (0.100) 0.000 0.100 0.200 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q 2011 4q 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SF0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%Percent VacantDelivered SF Absorption SF Vacancy $3.50 $3.55 $3.60 $3.65 $3.70 $3.75 $3.80 $3.85 $3.90 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qDollars/SF/Year0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4qMillions SFDirect SF Sublet SF