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CBRE <br />MARKETVI <br />EW MINNEAPOLIS/ST. PAUL INDUSTRIAL <br />Investors <br />Return of Capital to Minneapolis High Finish <br />Spreads between low finish industrial properties <br />and high finish remain attractive providing <br />encouragement to new capital showing there is <br />room for additional cap rate compression <br />remaining in flex product. 2013 and 2014 flex sale <br />volume totaled nearly $300 million — the highest <br />volumes since 2005. CBRE expects another $200 <br />million in flex sales to close in 2015. Assets and <br />portfolios acquired in 2013 and 2014 experienced <br />near term leasing success with better than <br />expected renewal rates and robust activity on <br />vacancies. The largest portfolio sale in Q2 2015 <br />was the acquisition of two flex buildings for $19.2 <br />million by Eagle Ridge Partners in Bloomington. <br />Expect multiple high finishing offering in the 2nd <br />half of 2015. <br />Increased Demand for Infill Locations <br />Investment demand has increased for Class B <br />industrial properties with clear heights ranging <br />from 14' to 20'. Even as cap rates have continued <br />to compress, investors have been attracted to <br />limited amounts of supply, increasing user <br />demand, and pricing below replacement costs. <br />Figure 6: Top Sale Transactions <br />Figure 5: Spec vs. Built -to -Suit <br />3500 <br />3000 <br />2500 <br />,,, 2000 <br />1500 <br />1000 <br />500 <br />0 <br />• BTS <br />• Spec <br />2010 2011 2012 2013 2014 2015 <br />YTD <br />Source: CBRE Research, Q2 2015. <br />New Construction Pricing <br />As spec development becomes stabilized, <br />CBRE expects several core industrial <br />offering coming to the market. Most of <br />the core buyers for the Minneapolis <br />market will need more education on the <br />cost of new construction and the resulting <br />rents. CBRE expects core industrial <br />offering to surpass $100 per sq. ft. in the <br />next 6 months. <br />Property Buyer <br />Sale Price/ Size (Sq. Ft.) City Transaction Type <br />9401 & 9555 James Ave S <br />Eagle Ridge Partners LLC 519.2 M/ 230,000 <br />Bloomington <br />Investment Sale <br />2685 Long Lake Rd <br />LSREF4 Rebound LLC 518.4 M/ 128,443 Roseville <br />Investment Sale <br />9464-9496 Hemlock Ln N <br />11701-11741 95th Ave N <br />11751-11787 95th Ave N <br />Interstate Partners LLC 59.1 M/ 163,336 <br />Maple Grove Investment Sale <br />121 S 12th Ave Shamrock Development <br />58.3 M/ 121,780 <br />Minneapolis Investment Sale <br />11611 Business Park Blvd Eagles Partners IV LLC <br />S7M/188,828 <br />Champlin User Sale <br />Source: CBRE Research, 022015. <br />Q2 2015 CBRE Research © 2015 CBRE, Inc. 1 4 <br />