Port, Airport & Global Infrastructure (PAGI) Report United States 2015 Air cargo is a necessity for some, and an option for most

Transcription

1 Airport Outlook Port, Airport & Global Infrastructure (PAGI) Report United States 2015 Air cargo is a necessity for some, and an option for most

2 In this report Scoring overview 3 Score results 4 Air Freight and Industrial market conditions overview 5 Select top U.S. airports and property market indicators 7 In order, by IATA code Ted Stevens International Airport (ANC) 8 Hartsfield-Jackson Atlanta International Airport (ATL) 10 Dallas-Fort Worth International Airport (DFW) 12 Newark Liberty International Airport (EWR) 14 Indianapolis International Airport (IND) 16 John F. Kennedy International Airport (JFK) 18 Los Angeles International Airport (LAX) 20 Memphis International Airport (MEM) 22 Miami International Airport (MIA) 24 Oakland International Airport (OAK) 26 O Hare International Airport (ORD) 28 Louisville International Airport (SDF) 30 For more information 32 2

3 Scoring overview The PAGI was created to provide a quick snapshot of U.S. airports from the vantage point of the real estate stakeholder those who invest in, develop or occupy industrial properties in airport-centric locations. We based the index on 13 measurable performance metrics divided into two major categories: air cargo operations and real estate market factors. The resulting index is then a combination of the performance metrics and provides a subjective measure of an airport s value to JLL clients and their customers. The real estate metrics taken into consideration include the total amount of industrial real estate stock within three miles of airport boundaries, the total stock within the broader industrial market served by each airport, the vacancy of properties within the three mile buffer, the amount of available square footage within this buffer, and the rent premium (or discount) for properties within the three mile buffer compared to the broader market. For this segment of the, Chicago O Hare (ORD) d the highest, followed by Newark-Liberty (EWR) and Dallas-Fort Worth (DFW). The air cargo operations metrics are designed to capture the health and growth of the airports as well as their functionality and connectivity. Our measures the total volume of cargo traffic (measured in metric tons), short- and long-term growth in volume, flight operations capacity, runway length, the number of operational cargo airlines and the population reachable within one day s drive from the airport. Chicago O Hare (ORD) has the highest air cargo operations in our study followed by Memphis (MEM) and Louisville (SDF). To produce our final airport index, the two components are weighted and then combined. It is important to note that all individual components of the index are d by percentile; hence the s are relative to the best and worst performing airports in the group. This year s highest ranked airport is Chicago O Hare (ORD) with a of 144.6, followed by Miami (MIA) at and Los Angeles (LAX) with a Air Cargo Real Estate ORD MI A LAX MEM DFW SDF EWR IND ANC JFK OAK A T L 3

4 Score results Tier I markets Chicago, with its large population base, central geographic location, complementary rail assets and enormous industrial market, is ideal for air cargo and once again s the highest in our index. O Hare s annual cargo gain of 10.0 percent outpaced all other airports, and its industrial base of million square feet exceeds Newark Liberty s by more than 60.0 percent. With a wide diversity of carriers, in addition to the aforementioned fundamentals, tenant demand remains high. Airport submarket rents exceed the greater market s average by 24.3 percent, and infill development is under way, with DCT, Liberty Property Trust and Breenan Investment Group announcing facilities. More speculative redevelopments targeting air cargo and logistics firms are to be expected. Investors, meanwhile, will be drawn to the market s broad occupier pool. Miami kept its second spot, with a relatively unchanged. The airport handles 71.6 percent of the nation s perishable imports, in addition to hi-tech commodities, telecommunications equipment, textiles, pharmaceuticals and industrial machinery. Miami is the gatekeeper of trade between Latin America and the U.S., enhanced its infrastructure 1 and this is benefiting industrial properties. Adjacent to the airport, for instance, is an eight-building project with 1.6 million square feet of proposed space. The development will feature private access to the Florida East Coast Railway (FECR) intermodal yard, which has direct rail access to the Ports of Miami and Everglades (and the rest of the nation). It is already 68.0 percent preleased. Los Angeles, fueled by two-way trade with China, held onto its third ranking. The airport market s vacancy is the tightest of all others in this study, at 2.8 percent, while rents command a 63.5 percent premium. The local market faces the constraints of obsolete inventory (the average facility was built in 1965), and although infill development is always an option most new construction occurs farther inland. Additionally, a handful of older industrial facilities have been converted to other uses, such as office, in recent years. The airport s top air freight commodities include civilian aircraft, engines and parts; unmounted diamonds; computer chips; and cellular phones and parts. already attracted tenants ranging from automotive to machinery parts suppliers, but do not have the population totals of a Los Angeles or Chicago. They are essentially viewed as distribution hubs. Growth in their respective 10-year air cargo volumes well outpaced other airports, thanks to the aforementioned carriers. Dallas-Fort Worth s real estate was second only to Chicago, and tied with Miami; a distinction that largely comes from AllianceTexas. AllianceTexas is comprised of 18,000 acres and offers multi-modal transportation access via BNSF and UP rail lines, interstate access, FedEx s southwest regional sortation hub and, naturally, the airport. Current warehouse availabilities range from 200,000 to 1.0 million square feet and many have close proximity to DFW. The current tenant mix is diverse, ranging from consumer goods to e-commerce occupiers. DFW s air cargo was up this year after a 6.1 percent annual increase in freight volumes. Tier III markets Rounding out our final six airports are: Newark Liberty, Indianapolis, Anchorage, John F. Kennedy, Oakland and Atlanta. Newark Liberty, JFK and Atlanta had steep declines in their 10-year cargo volumes, but, conversely, large gains in their passenger volumes. The surrounding airport markets of Newark Liberty, JFK and Oakland are reminiscent of Los Angeles, in that the average building age dates back to the 1960s, and to compound matters airport rents are flat or lower than their greater market averages. Anchorage is a transshipment market and is less than 9.5 hours from 90.0 percent of the industrialized hemisphere; it has the smallest industrial stock of this study. Indianapolis, meanwhile, had flat cargo growth, and big-box speculative completions have elevated the airport market s vacancy over the past year. Greater Indianapolis, however, ended 2014 with a 6.3 percent vacancy 60 basis points lower than the national average. Tier II markets Memphis ranked fourth this year and was followed by Dallas-Fort Worth and Louisville. Memphis and Louisville s air cargo s are elevated by being world hubs for FedEx and UPS, respectively; two carriers that (when combined) handled 52.2 percent of total U.S. air freight in Both markets are evolving logistics hubs that have 1 MIA recently completed a $6.4 billion capital improvement project (one of the largest ever done by an operational U.S. airport). 4

5 The air freight industry and industrial market conditions Air freight volumes get a boost Global air cargo realized a 4.5 percent annual increase in 2014 and the forecast calls for 5.0 percent growth in Of the 12 airports in this study year-over-year growth was up 2.8 percent. This comes on the heels of global GDP s measured acceleration since 2010, and some retailers contending with congestion issues at West Coast ports through the 2014 holiday season, and well into the first half of 2015 utilizing air freight. LAX and O Hare s cargo numbers had big annual jumps in December, for instance, to the tune of 8.5 and 12.9 percent, respectively. This was a sharp contrast to December 2013, when their figures were down 4.8 and marginally up 3.0 percent, respectively. Long-term freight projections appear to be less favorable, however, since speed-to-market benefits are offset by higher costs: Air freight is typically 4-5x more expensive than truck transport, and 12-16x that of ocean vessels. 2 Although world trade is growing at a swifter pace than air cargo demand, its relevance is irrefutable: While air freight comprises only 1.0 percent of international trade volume, it encompasses 35.0 percent of the value of commodities ($6.8 trillion in all) being shipped throughout the global supply chain. IATA code 10-year cargo fluctuation Airport market size Airport average building construction date Airport rent premium Airport 5-year deliveries Anchorage ANC 7.5% 3,834, % 0 Atlanta ATL -30.3% 41,684, % 544,020 Dallas-Fort Worth DFW -14.7% 58,554, % 11,986,192 Newark- Liberty EWR -28.7% 62,431, % 3,043,624 Indianapolis IND 18.2% 60,976, % 13,685,036 New York- Kennedy JFK -23.8% 10,108, % 263,590 Los Angeles LAX 4.6% 15,730, % 200,000 Memphis MEM 19.8% 60,292, % 0 Miami MIA 19.3% 61,614, % 1,680,356 Oakland OAK -19.7% 19,843, % 1,609,450 Chicago O'Hare ORD -6.4% 100,919, % 2,832,450 Louisville SDF 31.8% 30,238, % 2,194,598 Vacancy exceeds the national average; rent premiums vary Existing industrial stock within a 3-mile radius of the 12 airports cited in this study totaled million square feet, or just 4.5 percent of the nation s total inventory. The overall vacancy was 8.9 percent by year-end 2014, or 200 basis points higher than the U.S. average a gap attributed to a 10-year drop-off in freight volumes at Atlanta, Newark Liberty, John F. Kennedy and Oakland, and the subsequent impact on their corresponding industrial markets. Vacancies in these four markets exceed their respective greater market average, while rents are either at or well below overall averages. The opposite holds true for Los Angeles and Miami; two other airports located in major population centers. Los Angeles 10-year volume was up 4.6 percent and airport industrial rents commanded a 63.5 percent premium, while Miami had 19.3 percent volume-growth with rents 33.8 percent above market. O Hare is something of an outlier in this freight-torent correlation: While freight volume had a 6.4 percent, 10-year decline, airport-near rents were 24.3 percent higher than greater Chicago s average. Of all the airports in this study, however, O Hare had the biggest increase in year-over-year volume with 10.0 percent growth. Future volume increases are anticipated, given DHL Global Forwarding s recent completion of a 491,000-square-foot container station in O Hare s cargo zone. It is DHL s largest freight forwarding facility in the world, and one of eight certified Life Sciences Station operating in the U.S. Construction minimal, aside from DFW and Indianapolis Industrial building activity over the past five years has been limited, on account of land scarcity around many of the airports, with the exception Dallas-Fort Worth and Indianapolis. DFW is located within AllianceTexas, which features 6,000 acres of commercial-zoned land plus the transportation options cited earlier. Approximately 12.0 million square feet has been built within a 3-mile radius of the airport since Indianapolis, meanwhile, added 13.7 million square feet over the same time period and offers rail connections to Canada s Port of Prince Rupert a smaller Plan B to West Coast seaports. 3 The IRR-CN rail line also circumvents Joliet (the nation s busiest inland port) which is prone to heavy congestion during peak shipping months. Like DFW, Indianapolis also has numerous parcel delivery centers. 2 Source: World Bank. 3 Prince Rupert s has an annual TEU capacity of 850,000 units, however. Source: Journal of Commerce. 5

6 Transportation options, population and labor all count Both Dallas and Indianapolis feature multi-modal options that can be useful to help mitigate potential supply chain disruptions; proximity to large consumer bases; established warehouse labor pools and entitled land sites able to accommodate big-box development. They, in other words, are attractive options to a wide range of occupiers, ranging from consumer goods to e-commerce fulfillment. Memphis and Nashville offer multi-modal options as well, however, their population bases are thinner. Also, in the case of Nashville, companies such as UPS have struggled in the past to find seasonal employees. 4 These two markets are essentially throughput hubs, rather than destination points Air freight s benefactors Air freight s inherent costs, counterbalanced with the time-sensitive and high-value commodities that drive it, will equate to modest volume growth over the next few years. A portion of this will come from increasing global e-commerce sales and biotechnology. For the latter, the global biotechnology industry posted $288.7 billion in estimated revenues in 2014, culminating to a 5-year average increase of 10.8 percent. 5 These products are mainly targeted at diseases such as cancer, Alzheimer s, heart disease, diabetes, multiple sclerosis, AIDS and arthritis, and North America represented 41.9 percent of world sales. Biotechnology usage will grow with an aging Baby Boomer population, and, with it, the need for cold-chain storage and handling space. Industrial real estate: The bottom line Modest growth projections in air freight volumes will impact where fullservice logistics providers and freight forwarders establish their operations. In Los Angeles, for instance, traditional global logistics service providers have, in years past, moved their operations south of the airport in order to be closer to the Port of Los Angeles and Long Beach. Why? Recent port congestion issues aside, world shippers have been gradually putting less time-sensitive items onto container ships in a move to reduce costs: A central location gives them access to both LAX and the seaports to maximize their coverage. LAX s then-vacated inventory eventually found tenants that were relocating from cities to the north to access more functional inventory at competitive s. So, in a sense, LAX s vacancy aside from airport-centric users that need immediate tarmac access (such as companies forwarding perishables) was shaped by the market s greater migration patterns. The same generally holds true for other mature markets such as O Hare, Oakland, Miami and New Jersey. Airport-dependent occupiers, that import and export nonperishables generally need to be within 15 miles of the tarmac to contend with road traffic and to meet delivery windows; those that deal in perishables (such as fresh flowers and tropical fish) need to be within 3 miles of the gates. This suggests that airports with increasing volume growth are better positioned to see declining vacancies and rent increases in their industrial facilities good news for Indianapolis, Los Angeles, Memphis, Miami, and Louisville, given their respective air freight growth over the past 10 years. O Hare can be added to the list, too, as DHL s new facility increases throughput volume IBISWorld Industry Report: Global Biotechnology, July

7 Select top U.S. airports and property market indicators IATA code Cargo traffic, 2014 Cargo volume, annual change North American cargo market share, 2013 Immediate market size (m.s.f.) Population within 500 miles (millions) Current vacancy Absorption, 2014 (m.s.f.) Average asking rents (NNN) Anchorage ANC 2,423, % 9.4% % 0.0 $11.30 Atlanta ATL 601, % 2.4% % 1.4 $3.09 Dallas-Fort Worth Newark- Liberty DFW 697, % 2.3% % 2.4 $5.03 EWR 637, % 2.5% % 0.3 $6.12 Indianapolis IND 1,102, % 3.9% % 1.4 $3.59 Comments Major hubs for FedEx and UPS; serves as customs processing and refueling center Delta hub is the world s largest airline hub; busiest passenger airport in the world; major international gateway Primary and largest hub for American Airlines and primary hub for American Eagle; Asia and Europe cargo account for 80.0 percent of cargo traffic Home to FedEx s third largest cargo hub with two million square feet in operations; regional hub for United Airlines Home to FedEx's second largest cargo hub New York- Kennedy JFK 1,299, % 5.0% % 0.1 $12.44 Base of operations for JetBlue Airways; international gateway hub for American Airlines and Delta Airlines; major cargo flows from UK and Northern Europe Los Angeles LAX 2,001, % 6.8% % 0.0 $11.97 Memphis MEM 4,257, % 16.1% % 0.1 $2.38 Miami MIA 1,930, % 7.6% % -0.2 $6.96 Oakland OAK 535, % 1.9% % 0.3 $6.46 Major hub for United and American Airlines; focus city for Southwest; also international gateway for Delta Airlines; two million square feet of cargo facilities The main FedEx global SuperHub ; handles over 1,250 pure cargo flights per week Largest gateway between U.S. and Latin America; handled most international cargo in the U.S. in 2014; dominant in flower and perishable food trade Major hub for FedEx and UPS, as well as Ameriflight; Terminal 1 is undergoing a $200 million expansion and renovation Chicago O'Hare ORD 1,578, % 4.8% % 0.6 $5.42 Main hub for United Airlines; new home to DHL Global Forwarding's largest U.S. cargo facility Louisville SDF 2,293, % 8.6% % 0.2 $3.39 Worldwide air hub for UPS; also home to two airline maintenance complexes 7

8 Ted Stevens International Airport (ANC) 76.2 Air Cargo Real Estate Info on our scoring methodology: Capital investments Sluggish air cargo and passenger growth is stalling capital expenditures. As a workaround, airport officials are taking a demand-dependent approach, which will be over-hauled every five to seven years. Phase I will minimize new development and ensure current facilities are retrofitted to meet current FAA standards. The second phase, assuming airport demand grows, will optimize ANC s existing runways and consolidate its terminals, while Phase III includes upgrades and funneling some cargo to the interior city of Fairbanks. The final and fourth phase calls for a new north-south runway that would run parallel to Runway 15-33, sepad by more than 3,000 feet between runway centerlines. During poor weather, the two runways would accommodate landings and takeoffs at the same time, providing substantial additional capacity. Carrier news ANC is less than 9.5 hours from 90.0 percent of the industrialized hemisphere. The airport is ranked second in North America by air cargo traffic, and fifth in the world. FedEx, UPS and Polar Air Cargo ope major hubs for cargo heading to and from the Far East. FedEx opes the airport s largest cargo facility and can handle 13,400 packages per hour. UPS, in comparison, can cycle 5,000 parcels per hour. More than any other airport in our survey, ANC is most directly impacted by seasonality and weather. This affects everything from flight schedules and service to field and equipment maintenance and stockpiling of supplies. Market conditions Airport-near industrial real estate totals only 3.8 million square feet; the smallest of all markets highlighted in this report. Greater Anchorage s industrial base is a mere 12.1 million square feet. Vacancy in the airport-near market is only 3.9 percent second only to LAX s of 2.8 percent. Available land is virtually nonexistent, and this is partly stunting growth. Historical airport submarket conditions Asking Rental Rates 8% Availability Rate 6% 4% 2% 0% Cargo volumes versus airport market occupancy Thousands 1,800 1,500 1, Inbound Cargo Vacancy Rate Outbound Cargo $14.00 $12.00 $10.00 $8.00 $6.00 Occupancy Jul-14 Development New construction (for ANC-near spaces over 25,000 square feet) has not occurred in the past five years. The average building age in the immediate market is Outlook There are numerous global logistics inefficiencies inherent in an Anchorage location for manufacturers and distributors, which is echoed in the market s diminutive industrial base size. NNN 98% 97% 96% 95% 94% 8

9 Ted Stevens International Airport (ANC) Everts Air Cargo FedEx UPS Air Cargo FedEx Air Cargo USPS FAA Complex North Passenger Terminal Whitney Foods South Passenger Terminal Runway Highway miles Seward Homer Valdez N 800 Airport vital facts Real estate metrics Immediate market size Vacancy Availability 3.8 m.s.f. 3.9% 3.9% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 0.0 m.s.f. 0.7% $11.30 Flat- to no-growth is the near- and long-term consensus for ANC's airportnear industrial facilities. Cargo volume (thru December 2014): 2,423,156 metric tons Annual cargo volume change: -0.6% North American market share (2013): 9.4% Passenger count (thru December 2014): 5,118,635 Annual passenger volume change: 3.2% Largest cargo carriers by volume (2014): UPS, Polar Air Cargo Airways, FedEx, Atlas Air, Southern Air, Alaska Airlines Number of runways Length of longest: 3 11,584 feet Population within 500 miles: 600,000 Hub operators: Alaska Airlines, FedEx, PenAir, Polar Air Cargo, UPS 9

10 Hartsfield-Jackson Atlanta International Airport (ATL) 70.1 Air Cargo Real Estate Info on our scoring methodology: Capital investments Projected cargo usage is pushing officials and planners toward adding new and expanding current warehouse facilities, particularly in the North and South Cargo complexes. A new structure, Cargo Building C, will accommodate multiple tenants with over 125,000 of new square feet and a new truck staging area. The development is scheduled to be completed in November The airport is currently undergoing massive roadway improvements to increase the functionality of inbound traffic, with safety and convenience a high priority as well as accommodating future traffic capacity. The improvements are expected to be complete by early ATL and the USDA opened a new 16,000-square-foot facility; the only one of its kind in the Southeast, it will expedite plant import inspections safely and increase the volume of perishable cargo. Recently completed major projects include a fifth runway, the Consolidated Rental Car Agency Center, the people-moving ATL SkyTrain, expanded parking facilities and the new International Terminal. Carrier news Atlanta-based Delta Airlines is 2014 s Airline of the Year by Air Transport World magazine. The award includes excellence in leadership, innovation and strong financial discipline. Delta surpassed all other carriers in cargo handled in 2014, representing 31.4 percent of the total. FedEx and UPS saw 15.7 percent and 9.0 percent, respectively. Market conditions ATL saw a total of over 600,000 metric tons move through its facilities in 2014, a 2.4 percent decrease from the previous year; however, cargo movement is projected to increase in the coming years. Airport-near industrial facilities saw a drop in vacancy to 10.6 percent and 2014 net absorption of 1.4 million square feet more than 10.0 percent of the greater market s executed demand. Historical airport submarket conditions 20% 16% 12% 8% 4% Cargo volumes versus airport market occupancy Thousands Asking Rental Rates Availability Rate Inbound Cargo Outbound Cargo Vacancy Rate Occupancy Jul-14 $3.50 $3.25 $3.00 $2.75 $2.50 NNN 90% 89% 88% 87% 86% 85% 84% 83% 82% Development Majestic Realty delivered two buildings at their development, MAC III; Building 4 (1.0 million square feet) is a build-to-suit for Procter & Gamble, while Building 7 (560,625 square feet) is a speculative facility now occupied by Menlo Logistics. Majestic also d a new lease with Walmart at MAC IV for 1.2 million square feet. Outlook Continual improvements by the city of Atlanta s Department of Aviation bode well for the future, especially recent focus on cargo import and export practices. Cargo traffic and use of the airport is expected to increase. 10

11 Hartsfield-Jackson Atlanta International Airport (ATL) North cargo facility USDA perishable complex Aircraft maintenance facility Future South Cargo expansion Food preparation & waste disposal operations Future passenger terminal or runway six North Cargo relocation and expansion Recently constructed runway five Highway miles BHM CLT MIA Real estate metrics Immediate market size Vacancy Availability 41.7 m.s.f. 10.6% 14.0% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 1.4 m.s.f. 3.5% $3.09 Greater market demand skyrocketed in 2014 with limited new supply. Another 6.3 million square feet is now under construction. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: -2.4% North American market share (2013): 2.4% 601,270 metric tons Passenger count (thru December 2014): 96,178,899 Annual passenger volume change: 1.9% Largest cargo carriers by volume (2014): Number of runways Length of longest: N Delta Air Lines, FedEx, UPS, Korean Air, Eva Airways, China Airlines, Cathay Pacific Airways 5 12,390 feet Population within 500 miles: 79,600,000 Hub operators: Delta Air Lines 11

12 Dallas-Fort Worth International Airport (DFW)) Air Cargo Real Estate Info on our scoring methodology: Capital investments DFW is one of the physically largest airports in the United States, covering 27 square miles, or 18,000 acres (12,000 acres for aviation and 6,000 acres for logistics-related commercial development). The airport has strong financials, coming in under budget in FY 2014, with record net revenue of $102 million. DFW is in the midst of a $2.3 billion Terminal Renewal & Improvement Program (planned through 2017). The FAA awarded $15 million for taxiway improvements, equipment purchase and Terminal B infrastructure. The airport raised $456 million during 2014 in three new bonds to complete terminal renovations, as well as issued three refunding bonds, saving $35 million in debt service. FY 2014 performance puts DFW as one of the lowest cost hubs of its competitive set. Dallas DART rapid rail started operations in 2014 with service from DFW through Las Colinas and into Dallas. Carrier news American Airlines is the dominant carrier at DFW and American s largest hub. Although American Airlines will ope as sepa airline, deep post-merger restructuring with USAirways is now under way. DFW opes nonstop service to 147 U.S. cities and 56 international destinations. Domestic traffic was up 4.4 percent, international was up 6.1 percent and Asia and Middle East was up more than 20.0 percent due to more carriers / routes. VivaAerobus is expected to start service to DFW from Guadalajara and Monterrey in DFW signed an agreement with Beijing Capital International Airport to enhance collaborative alliance. DFW has added 10 new airlines and 20 international destinations in the past three years. Only U.S. airport to offer automated passport control and processing for eligible international travelers. The Wright amendment repeal at DAL will enhance DFW s international business. Historical airport submarket conditions 25% 20% 15% 10% 5% 0% Cargo volumes versus airport market occupancy Thousands Inbound Cargo Asking Rental Rates Vacancy Rate Availability Rate Outbound Cargo Occupancy Jul-14 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 Market conditions Strong demand for industrial, but essentially built-out, except for land controlled by DFW. Highest submarket rent. Some deals being pushed to neighboring submarkets, like NW Dallas and nearby Coppell. Development Select sales have taken place. In 2014, IPT bought DFW Southgate (520,000 square feet) for $60 per square foot at a 6.0 percent cap, and Pier 1 s distribution center (310,000 square feet) for $54 per square foot. The 1.0 million-square-foot Logistics Center I opened in January. Developed as spec by Perot and Hillwood, the property is targeted to a global e-commerce user. LC II is expected to break ground this year. NNN 95% 90% 85% 80% 75% 70% 12

13 Dallas-Fort Worth International Airport (DFW)) North cargo facility UPS ramp DART rapid rail Hotel Grand Hyatt West Air Freight U.S. Customs West cargo facility Fire station FedEx East Air Freight Corpo Aviation ramp Central terminal facility Aircraft maintenance Delta cargo Fire station Highway miles OKC HOU SAT N Real estate metrics Immediate market size Vacancy Availability 58.6 m.s.f. 5.3% 8.6% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 2.4 m.s.f. 4.1% $5.03 DFW is expected to see healthy leasing activity over the next few quarters as some new spec construction was recently delivered on the airport's grounds. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: 6.1% North American market share (2013): 2.3% 697,334 metric tons Passenger count (thru December 2014): 63,522,823 Annual passenger volume change: 3.2% Largest cargo carriers by volume (2014): Number of runways Length of longest: UPS, American Airlines, FedEx, EVA Airways, Korean Air Lines, Cathay Pacific, China Airlines 7 13,401 feet Population within 500 miles: 46,000,000 Hub operators: American Airlines, Ameriflight, UPS 13

14 Newark Liberty International Airport (EWR) 92.4 Air Cargo Real Estate Info on our scoring methodology: Historical airport submarket conditions 16% 12% 8% Asking Rental Rates Vacancy Rate Availability Rate $7.00 $6.00 $5.00 NNN Capital investments The Port Authority of New York and New Jersey embarked on a $97.3 million rehabilitation program in early The program aims to cut down on Newark Airport s delays and heavy congestion. Completed in September, the improvements focused on improving and refurbishing Runway 4L-22R. The airport s principal runway was at the end of its useful life and was repaired, repaved and had new lighting systems installed. At 11,000 feet, it handles roughly half of all airplane movements at Newark Airport. The aforementioned capital improvements are estimated to save approximately 30 seconds per flight, amounting to $9.4 million annually in cost savings, according to Port Authority projections. Carrier news FedEx remains Newark s largest carrier, accounting for more than one half of the cargo handled by the airport each year. Market conditions The area surrounding Newark historically features some of the highest rental s in the Northern New Jersey industrial market, despite being comprised of older lower quality buildings. Leasing activity has been underwhelming compared to previous market cycles; slower market activity is due in part to tenants choosing facilities in submarkets farther down the New Jersey Turnpike that feature materially lower rental s. A wave of new speculative development has created new high water marks in terms of asking rental s, but has also raised the availability and vacancy s as many of these assets remain untenanted. Development Development throughout New Jersey remained robust with more than 8.0 million square feet being delivered in Included in that 8.0 million square feet of new deliveries was Clarion Partners 279,208-square-foot development on Dowd Avenue which was delivered in the second quarter and sits along the southern border of Newark Airport. 4% 0% Cargo volumes versus airport market occupancy Thousands Inbound Cargo Outbound Cargo Occupancy Jul-14 $4.00 $3.00 Outlook Market fundamentals appear weaker than one would expect, as large blocks of newly constructed space remain untenanted. Tenants with large space requirements continue to actively tour some of these sites. If this activity converts over the next six months, landlords and developers may become more bullish and increase rental s even further. However, high-water mark pricing on Class A facilities and heavy tax burdens continue to weigh on leasing activity as tenants opt for lower cost facilities farther down the New Jersey Turnpike. 96% 95% 94% 93% 92% 91% 14

15 Newark Liberty International Airport (EWR) U.S. Customs and Border Protection Police station Air cargo facilities Air cargo facilities Wide-body hangar site Terminal C Terminal B International Arrivals Terminal A USPS UPS FedEx Multitenant air cargo facility Clarion Partners new construction Dowd Avenue Route 27 airport corridor Port Newark Container Terminal Foreign-Trade Zone 49 Port Elizabeth Container Terminal Ikea development site Ikea development site Ikea development site Prologis development site 700 Kapkowski Road Prologis development site 0 North Avenue East Highway miles NYC PHI BOS N Real estate metrics Immediate market size Vacancy Availability 62.4 m.s.f. 6.7% 10.9% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 0.3 m.s.f. 0.5% $6.12 EWR's airport-near rents will remain high due to the buildings' proximity to the airport, Port Newark/Elizabeth and New York City. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: -2.0% North American market share (2013): 2.5% 637,355 metric tons Passenger count (thru December 2014): 35,600,108 Annual passenger volume change: 1.7% Largest cargo carriers by volume (2014): Number of runways Length of longest: FedEx, UPS, ABX, Cargojet, Mountain Air, Wiggins 3 11,000 feet Population within 500 miles: 92,980,628 Hub operators: United Airlines, FedEx 15

16 Indianapolis International Airport (IND) 91.5 Air Cargo Real Estate Info on our scoring methodology: Historical airport submarket conditions Asking Rental Rates 20% Availability Rate 16% 12% Vacancy Rate $3.75 $3.50 $3.25 NNN Capital investments Indianapolis International Airport completed an expansion of its solar farm toward the end of The solar farm now encompasses 75 acres and 76,000 photovoltaic solar panels. It is now the largest airport solar farm in the world. Several enhancements have been made to the IND Terminal Garage, including concrete repair, elevator rehabilitation and staircase replacement, among others. 8% 4% Cargo volumes versus airport market occupancy $3.00 $2.75 Carrier news In early 2015, Southwest Airlines added a direct IND to DAL route. Allegiant Air announced in late 2014 that it will be entering the Indianapolis market. The airline will offer nonstop flights to New Orleans, Las Vegas and several airports in Florida. Market conditions IND s airport-centric industrial submarket accounted for 1.4 million square feet of total net absorption in This accounted for 33.0 percent of the region s total net absorption (4.2 million square feet). The submarket finished 2014 with an overall vacancy of 12.1 percent. This increase over last year (8.7 percent) was due to the completion of almost 2.6 million square feet of speculative construction throughout the year. Development FedEx s second largest distribution hub is at IND, and they are constructing two more facilities, which will add more than 600,000 square feet near the airport between the two buildings. There is more than two million square feet of ongoing industrial construction currently taking place within close proximity to IND. Five million square feet of industrial product was delivered in Outlook The market for modern bulk product has shifted from landlordfavorable to tenant-favorable as current speculative construction projects have brought numerous options to the market. This is especially true within the 300,000- to 600,000-square-foot range. Look for developers to curtail speculative construction once this current round of construction is finished. This will give the market time to absorb what has been delivered over the last two years. Thousands 1,200 1, Inbound Cargo Outbound Cargo Occupancy Jul % 96% 92% 88% 84% 80% 16

17 Indianapolis International Airport (IND) Rolls-Royce operations Aviation Technology Center (Purdue University and Vincennes University) Concourse B Long-term parking lot Economy parking lot New 770,000 s.f. speculative bulk/distribution building completed Q World s largest airport solar farm completed Q USPS Passenger terminal FedEx Hub Concourse A Parking garage New entrance off I-70, only entrance to airport Highway miles CMH ORD DTW N Real estate metrics Immediate market size Vacancy Availability 70.0 m.s.f. 12.1% 14.3% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 1.4 m.s.f. 2.3% $3.59 Seventy-five percent of all U.S. businesses are within a one day's drivetime of IND. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: 0.9% North American market share (2013): 3.9% Passenger count (thru December 2014): 7,363,632 Annual passenger volume change: 2.0% Largest cargo carriers by volume (2014): Number of runways Length of longest: 1,102,241 metric tons FedEx, Cargolux Airlines International, Delta Air Lines, Southwest Airlines, Atlas Air 3 11,200 feet Population within 500 miles: 112,300,000 Hub operators: FedEx, Republic Airways 17

18 John F. Kennedy International Airport (JFK) 76.1 Air Cargo Real Estate Info on our scoring methodology: Capital investments Development projects taking place at JFK include a $200 million redevelopment of Terminals 5 and 6 by JetBlue Airways. Delta Air Lines is completing a $1.2 billion redevelopment and expansion of Terminals 3 and 4. The Terminal 4 expansion added nine new and seven renovated gates. It will be completed in summer The $292 million reconstruction and rehabilitation of Runway 4L-22R includes installing high-speed taxiways and widening of the runway to 200 feet for Group VI Aircraft. These renovations will be completed in The ARK at JFK, formerly Building 78, is being redeveloped into a 178,000-square-foot animal handling terminal, with about 80,000 square feet dedicated to cargo. The ARK signed a 30-year lease for 14.4 acres. Carrier news JFK s passenger traffic continues to set new passenger records and increased 5.6 percent year-over-year, while freight volumes increased 0.9 percent year-over-year. Delta represents approximately 25.0 percent of JFK s passengers, and volume increases are forecasted. Market conditions In the three-mile boundary surrounding JFK, the vacancy increased 0.6 percent year-over-year to 7.1 percent in the fourth quarter of Average rental s decreased $0.10 to $12.44 per square foot triple net. The new vacancy extends the immediate environs of the JFK market. Development The New York City Economic Development Corporation (NYCEDC) is seeking proposals from developers for the purchase or lease of a seven-acre parcel for industrial or commercial, off-tarmac use in Springfield Gardens. The NYCEDC is also marketing a four-acre parcel since early 2014, but there is limited bidder interest. Developers are reducing industrial product in Queens by converting facilities to higher and better use. The Queens industrial market has lost square footage over the past 30 years as zoning has allowed redevelopment into residential properties. Land is rare, and parking parcels rent for $7.00 to $9.00 per square foot net. Small, brand-name express hotel chains are redeveloping existing old freight warehouse sites around JFK. Historical airport submarket conditions Asking Rental Rates 17% Availability Rate 14% 11% Cargo volumes versus airport market occupancy Thousands 8% 5% 2% 1,600 1,400 1,200 1, Inbound Cargo Outbound Cargo Vacancy Rate Occupancy Jul-14 $14.00 $12.00 $10.00 $8.00 $ % 95% 94% 93% 92% 91% 90% 89%. Outlook Limited options remain in Queens for occupiers with space requirements greater than 100,000 square feet. Hence, the airport and freight industry is being driven east into the Nassau County market. Continued recovery in the JFK industrial market is expected over the next several years. Overall warehouse and manufacturing average asking rental growth in the Southwest Nassau submarket should exceed 2.0 percent in 2015, reaching more than $14.00 triple net per square foot, nearly reaching 2009 peaks of over $15.00 per square foot. Several large, big name on-tarmac tenants have leases expiring in 2015 from the original leases negotiated fifty (50) years ago between the PANYNJ and New York City. The new lease the PANYNJ negotiated with NYC now expires in These tenants now have the ability to negotiate for upgrades and financial incentives not seen on-tarmac before to their existing facilities or are in the position to move off-tarmac and negotiate in the private sector. Either direction should equate to having great influence for the upgrade and rehabilitation of older antiquated buildings both on and off the airport. NNN 18

19 John F. Kennedy International Airport (JFK) Cargo Area B Foreign-Trade Zone 111 Cargo Area A Port Authority administration building Terminal 8 Port Authority police station Terminal 1 Terminal 2 Terminal 3 7 Acre Request for Expressions of Interest Cargo Area D ARK Animal Handling Facility Cargo Area C 5.2-acre development site New Truck service center 4 Acre Request for Expressions of Interest available since 2014 Terminal 7 Terminal 6 Terminal 5 Terminal 4 Highway miles BOS PHI DC N Real estate metrics Immediate market size Vacancy Availability 10.1 m.s.f. 7.1% 11.3% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 0.1 m.s.f. 0.5% $12.44 Several on- and off-tarmac buildings will be upgraded and rehabilitated, on account of tenant lease expirations. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: 0.9% North American market share (2013): 5.0% 1,299,855 metric tons Passenger count (thru December 2014): 53,254,362 Annual passenger volume change: 5.6% Largest cargo carriers by volume (2014): Number of runways Length of longest: Delta Air Lines, FedEx, American Airlines, Cathay Pacific Airways, Korean Air Lines, China Airlines 4 14,572 feet Population within 500 miles: 90,700,000 Hub operators: JetBlue, American Airlines, Delta Air Lines, Polar Air Cargo, Kalitta Air 19

20 Los Angeles International Airport (LAX) Air Cargo Real Estate Info on our scoring methodology: Capital investments LAX is in the midst of a multi-billion dollar capital improvement program that will create approximately 40,000 new jobs. Key projects include the completion of the Bradley West International Terminal, Central Utility Plant Replacement, various improvements to existing terminals, a consolidated rental car facility, an automated people mover, LAX Midfield Satellite Concourse and runway safety area improvements. The $4 billion automated people mover and $1.25 billion North Midfield Satellite Concourse were approved by the airport s governing board in November 2014 and represent a major investment in addressing capacity and ground transportation congestion in and around the airport. The projects are anticipated to be completed by 2024 and 2020, respectively. Carrier news LAX ranked fourteenth in the world and fifth in the U.S. in air cargo tonnage processed in It also ranked as the sixth busiest commercial passenger airport in the world and third busiest in the U.S. Top carriers in 2014 included FedEx (a 18.6 percent market share) followed by Delta Airlines. A labor dispute and congestion at the Ports of Los Angeles and Long Beach led to an increase in air cargo traffic at LAX toward the end of 2014, as shippers looked for alternative ways to get their goods into Southern California. Cargo arrivals surged 8.4 percent year-over-year in December of Market conditions The industrial vacancy in the immediate area is 2.8 percent, 60 basis points lower than the overall Los Angeles market s average. The average asking rental is $11.97 per square foot, a $1.52 increase over last year and $4.77 higher than the Los Angeles market as a whole. Currently, there is only one available Class A option in the LAX submarket: A 215,411-square-foot facility located in the City of Hawthorne, which JLL is marketing on behalf of DCT Industrial Trust Inc. Tenant demand continues to be driven by logistics providers, consumer nondurables and food & beverage requirements. Historical airport submarket conditions 9% 6% 3% 0% Cargo volumes versus airport market occupancy Thousands 2,500 2,000 1,500 1, Asking Rental Rates Availability Rate Inbound Cargo Outbound Cargo Vacancy Rate Occupancy Jul-14 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 Development No major developments are happening in the immediate vicinity, a threemile boundary, around the airport. The three projects closest to LAX are miles away: A 221,050- square-foot build-to-suit that recently delivered in the City of Carson, and two under construction facilities in the City of Compton, totaling 166,413 square feet. Outlook With ongoing infrastructure, central plant, mobility and access improvements focused on the long-term competitiveness of LAX, and especially reducing ground transportation congestion, the airport should continue to be a top cargo destination well into the future. 98% 97% 97% 96% 96% 95% 95% NNN 20

21 Los Angeles International Airport (LAX) Intermodal Transportation Center project Tom Bradley Alteon International Boeing Terminal Co. (TBIT) project UPS International hub Midfield Satellite USDA Facility Concourse North project Cargo clearance center FedEx cargo 25th Street connector Korean Air Cargo & Japan Airlines cargo Polar Air cargo Automated People Mover project Consolidated Rental Car Facility project Terminals 1-8 Century Cargo complex UPS Airbus Cargo flight training Centurion Air Cargo American Airlines cargo project Miami Intermodal United Airlines center Qantas Freight & NCA Delta North Air Terminal Logistics cargo Central Imperial Terminal Cargo complex Eva Airways Corporation South Cargo complex - South East Terminal South Cargo complex - West N Real estate metrics Immediate market size Vacancy Availability 15.7 m.s.f. 2.8% 5.4% Net absorption thru 4Q 14 Absorption as % of stock Average asking rents (NNN) 0.0 m.s.f. -0.1% $11.97 Rents are expected to continue to rise in the next 12 months due to high demand and a supply scarcity of quality space. Airport vital facts Cargo volume (thru December 2014): Annual cargo volume change: 3.8% North American market share (2013): 6.8% 2,001,152 metric tons Passenger count (thru December 2014): 70,662,212 Annual passenger volume change: 6.0% Largest cargo carriers by volume (2014): Number of runways Length of longest: FedEx, Delta Air Lines, American Airlines, Korean Air Lines, Cathay Pacific Airways 4 12,091 feet Population within 500 miles: 45,900,000 Hub operators: American Airlines, United Airlines, Alaska Airlines, Delta Air Lines, Great Lakes Airlines, Horizon Air 21

22 Memphis International Airport (MEM) Air Cargo Real Estate Info on our scoring methodology: Capital investments The airport is ranked first in North America for total air cargo handled, and second in the world behind Hong Kong. The Memphis-Shelby County Airport Authority announced a $114 million renovation plan in 2014 that will include demolishing the largely vacant south ends of concourse A and C to allow easier aircraft access to concourse B. Carrier news Cargo volumes is MEM s selling point, and much of this can be traced to FedEx s World Hub. From Memphis, FedEx can deliver to any North American location within 24 hours and to most major global cities in 24 hours. MEM s cargo traffic was up 19.8 percent from 10 years prior. Delta shuttered its Memphis hub in 2013, citing fallen passenger demand and persistently high jet fuel prices, while other airlines have reduced flight schedules; MEM s passenger counts were down 67.4 percent from 10 years ago. Market conditions Air cargo originates and ends up on trucks and trains; Memphis offers seven highways, five railroads, a Mississippi River port and has proximity to major Midwest and East Coast markets. Additionally, Memphis does not have hurricanes, blizzards or long stints of icy weather all of which is favorable for goods movement. As e-commerce sales volumes continue to grow, activity at FedEx s World Hub will only increase. The facility is a magnet and proximity near it is a competitive advantage for distributors and suppliers. Greater Memphis posted 5.7 million square feet of net absorption in 2014, up 87.6 percent from Historical airport submarket conditions 28% 22% 16% 10% Cargo volumes versus airport market occupancy Thousands 4,500 3,000 1, Asking Rental Rates Availability Rate Inbound Cargo Outbound Cargo Vacancy Rate Occupancy Jul-14 $2.80 $2.40 $2.00 $1.60 Outlook Memphis offers access to five Class I railroads (220 trains travel through the city each day) and six rail yards with intermodal capabilities. With single system shipments to all 48 contiguous U.S. states, Alaska, Mexico and Canada, and large tracts of land available for development, Memphis industrial market will only evolve. 87% 86% 85% 84% 83% 82% 81% NNN Development Design-build construction largely influenced 2014 s net absorption; Panattoni, for instance, delivered a 1.0-million-square-foot facility for Volvo Trucks during the fourth quarter. IDI Gazeley, Prologis, Hillwood and Panattoni were the most active speculative developers in UPS is enlarging its package sorting and distribution facility next to MEM; a $70 million expansion that will boost sorting capacity by 80.0 percent to nearly 48,000 packages per hour. Construction on the company s 133,000-square-foot expansion will begin in August, with full completion slated for early