Under Construction. Rentable Area. Net Absorption. Completions. Vacancy Rate

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1 Rentable Area Vacancy Rate Net Absorption Under Construction Completions The Texas industrial market closed 217 with more than 4.6 million sq. ft. of delivered construction. The majority of this space, over 26.7 million sq. ft., was delivered in Dallas/Fort Worth. The Metroplex also posted its highest quarterly and annual construction delivery in Q Austin and El Paso saw growth with annual deliveries tripling and doubling, respectively, compared to 216. Space under construction remained strong with nearly all markets and Texas surpassing their current cycle average. State-wide industrial net absorption saw a quarterly and total annual decline. However, all markets closed Q4 217 with positive quarterly and year-to-date net absorption. Moreover, absorption during the quarter increased statewide and in Austin, Dallas, El Paso, and McAllen compared to Q4 216.

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4 Robert C. Kramp Director of Research & Analysis, Texas-Oklahoma Division E. Michelle Miller Research Operations Manager, Texas-Oklahoma Division Bradley Smith Sr. Research Analyst, Houston Miller Hamrick Research Coordinator, DFW Luke Goebel Research Coordinator, Austin Austin 5 W 2nd, Suite 17 Austin, TX 7871 Dallas 21 McKinney, Suite 7 Dallas, TX 7521 El Paso 211 N. Kansas, Suite 21 El Paso, TX 7991 Houston 28 Post Oak, Suite 23 Houston, TX 7756 McAllen 2 S. 1 th St., Suite 129 McAllen, TX 7851 San Antonio 2 Concord Plaza, Suite 8 San Antonio, TX Elisabeth Downs Research Coordinator, El Paso, McAllen elisabeth.downs@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Texas totals, including vacancy, represent aggregate data from Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Austin and San Antonio data exclude owner occupied properties, while El Paso and McAllen data exclude Flex space. CoStar supplemented data are used for the latter markets to calculate a flex space asking rate and vacancy rate. Austin and San Antonio industrial data underwent an audit during Q4 216 and Q Houston and El Paso avg. asking rate formula was adjusted in Q4 216 and Q3 217, respectively, to better reflect the weighted averages. As result, figures were updated based on the most recent available information.

5 MARKETVIEW Texas Industrial, Q3 217 Construction steady; net absorption rebounds strong Rentable Area 1,447 MSF Vacancy Rate Net Absorption Under Construction Completions 6.1% 11.2 MSF 25. MSF 8.3 MSF Figure 1: Texas Industrial Net Absorption with Vacancy Rate Primary Market Net Absorption (MSF) Houston Source: CBRE Research, Q DFW *Texas industrial aggregates the Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Arrows indicate trend from previous quarter. 8% 6% 4% 2% % Non-Primary Market Net Absorption (s SF) 12% 1% 1,8 1,6 1,4 1,2 1, YTD 217 Q3 217 Vacancy (Right Axis) Vacancy Rate (%) McAllen El Paso Austin San Antonio NET ABSORPTION POSITIVE; E-COMMERCE IN TOP 4 INDUSTRIES Texas net absorption more than doubled in Q3 217 as primary markets saw a strong rebound compared to the first half of 217. Dallas reported the largest numeric increase compared to last quarter; however, Houston saw net absorption soar more than five times larger than its previous quarter largely due to the delivery of Daikin s manufacturing facility, now the latest tilt-wall structure in existence. El Paso remained the only market to have already surpassed 216 annual net abortion. Across the board, all Texas markets reported positive net abortion and single-digit vacancy. Aggregate leasing data from top transactions across Texas markets show that 26% of year-to-date activity was attributed to demand from the distribution and logistics industry. Wholesale, food and beverage, and e- commerce together also contributed a sturdy 35% to positive movements this year. Figure 2: YTD 217 Texas Industrial Activity by Top 1 Industries Transactions (SF) 2,766,463 3,964,951 1,563,518 7,43,797 Source: CBRE Research, Q Transportation/Distribution-Logistics-3PL Wholesale Food & Beverage MFG & Processing E-Commerce-Related Direct to Consumer Machinery, Automation & Appliances MFG Other-Services Motor Vehicles & Parts MFG Building Materials & Construction MFG Warehousing/Storage Materials MFG Other Q3 217 CBRE Research 217 CBRE, Inc. 1

6 Figure 3: Texas Industrial Market Summary Source: CBRE Research, Q Q3 217 Austin Dallas/Ft. Worth El Paso Houston McAllen San Antonio Building Count 1,63 11, , Rentable Area (SF) 51,125, ,867,841 56,434, ,182,763 23,631,914 45,256,964 Vacancy Rate % Availability Rate % Absorption (Net SF) 74,252 8,193,82 162,664 2,56,7 136, ,776 Under Construction (SF) 1,235,576 16,114, ,5 5,551,18 17, 1,135,377 Delivered Construction 52,9 4,964,255 3,35,77 157,5 112,74 Warehouse & Distribution Avg. Asking Rent (NNN, $/SF, Annual) Flex Avg. Asking Rent (NNN, $/SF, Annual) Overall Avg. Asking Rent (NNN, $/SF, Annual) Figure 4: Historical Statistics by Market Overall Industrial YTD 217 AUSTIN Absorption (Net, SF) (5,877) 1,687,74 1,943,429 1,169, ,989 1,182,965 1,49, ,815 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 72, 2,3 578,19 769,74 54, 1,45,981 Vacancy Rate (%) DALLAS/FT. WORTH Absorption (Net, SF) 2,545,781 11,599,2 13,894,547 18,727,597 12,861,613 17,994,692 25,23,434 16,114,958 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 1,553,98 1,774,757 1,423,948 7,397,318 15,44,68 19,57,631 22,76,658 18,847,884 Vacancy Rate (%) EL PASO Absorption (Net, SF) (341,998) 734, ,46 (219,415) 784,961 1,577, , ,826 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 5, 12, 58, 267, , 36, Vacancy Rate (%) HOUSTON Absorption (Net, SF) 3,57,55 3,844,569 6,446,24 5,779,515 8,114,176 6,295,8 1,746,969 5,991,711 Ask Rent (NNN, Monthly $/SF) *.4 Delivered Construction (SF) 2,4,92 1,741,62 4,693,955 11,95,1 11,99,89 9,58,55 13,599,898 8,532,333 Vacancy Rate (%) MCALLEN Absorption (Net, SF) -63,663 (22,44) 222,287 (284,341) 55, ,97 1,35, ,472 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 18,3 453,12 515, 368, 1, 652, 157,5 SAN ANTONIO Vacancy Rate (%) Absorption (Net, SF) 15,581 37,78 1,255,373 2,539,97 1,217,868 1,379,21 1,613,99 988,797 Ask Rent (NNN, Monthly $/SF) *.46 Delivered Construction (SF) , , ,449 71,26 2,463,821 1,959,844 Vacancy Rate (%) El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage. Austin and San Antonio data exclude owner occupied properties. See additional comments on last page. Source: CBRE Research, Q Q3 217 CBRE Research 217 CBRE, Inc. 2

7 Figure 5: Market Statistics by Product Type Warehouse & Distribution Q3 217 Absorption (Net SF) Vacancy Rate (%) Avg. Asking Rent (NNN, $/SF, Annual) Under Construction (SF) Austin -96, ,919 Dallas/Ft. Worth 8,18, ,716,574 El Paso 65, ,5 Houston 2,563, ,613,393 McAllen 65, , San Antonio 23, ,63 McAllen includes Cold Storage. Source: CBRE Research, Q Figure 6: Market Statistics by Product Type - Flex Q3 217 Absorption (Net SF) Vacancy Rate (%) Avg. Asking Rent (NNN, $/SF, Annual) Under Construction (SF) Austin 17, ,657 Dallas/Ft. Worth 175, , El Paso NA NA Houston (33,63) ,165 McAllen NA NA San Antonio 98, ,314 See additional comments on last page. Source: CBRE Research, Q Figure 7: Top Lease Transactions Q3 217 Transaction Size (SF) Tenant Address Submarket Austin 86,7 Flooring Services SW, LTD Long Vista Drive North Dallas/Ft. Worth 874, Wayfair.com NEC N I-35 & Wintergreen Rd South Dallas El Paso 68,454 Since Custom Services, Inc Rojas East Houston 6, Emser Tile Fallbrook Dr. North McAllen 96,25 ScanTech 68 S. International McAllen San Antonio 214,536 Wholesaler/ Commercial Equipment Doerr Lane Northeast Source: CBRE Research, Q Figure 8: Capital Markets and Industrial Sales Sales Volume (MSF) 3 25 Figure 9: Top Sales Transactions Q3 217 Transaction Size (SF) Austin 372,125 Buyer Principal Real Estate Investors Q1 212 Q3 212 Q1 213 Q3 213 Q1 214 Q3 214 Q1 215 Q3 215 Q1 216 Q3 216 Q1 217 Primary Markets Non-Primary Markets Source: CBRE Research, Real Capital Analytics, Q Notes: Data exclude transfers, entity-level exchanges, and partial interest sales. Non-Primary data might occasionally account for locations outside of CBRE market boundaries. Q3 217 Dallas/Ft. Worth 717, Stockbridge El Paso 148, Diversified Recycling Serv. Houston 41,993 WPT Industrial REIT McAllen 25,279 Highland Hill Texas LLC San Antonio 849,275 Confidential Source: CBRE Research, Q Q3 217 CBRE Research 217 CBRE, Inc. 3

8 CONTACTS Robert C. Kramp Director of Research & Analysis, Texas-Oklahoma Division E. Michelle Miller Research Operations Manager, Texas-Oklahoma Division Pedro Niño, Jr. Sr. Research Analyst, San Antonio Bradley Smith Sr. Research Analyst, Houston Miller Hamrick Research Coordinator, DFW CBRE OFFICES Austin 1 Congress, Suite 5 Austin, TX 7871 Dallas 21 McKinney, Suite 7 Dallas, TX 7521 El Paso 211 N. Kansas, Suite 21 El Paso, TX 7991 Houston 28 Post Oak, Suite 23 Houston, TX 7756 McAllen 2 S. 1 th St., Suite 129 McAllen, TX 7851 San Antonio 2 Concord Plaza, Suite 8 San Antonio, TX Luke Goebel Research Coordinator, Austin luke.goebel@cbre.com Elisabeth Downs Research Coordinator, El Paso, McAllen elisabeth.downs@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at NOTES: Texas totals, including vacancy, represent aggregate data from Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Austin and San Antonio data exclude owner occupied properties, while El Paso and McAllen data exclude Flex space. CoStar supplemented data are used for the latter markets to calculate a flex space asking rate and vacancy rate. Austin and San Antonio industrial data underwent an audit during Q4 216 and Q Houston (in Q4 216) and El Paso (in Q3 217) avg. asking rate formulas were adjusted to better reflect the weighted averages. As result, figures were updated based on the most recent available information. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

9 MARKETVIEW Texas Industrial, Q2 217 Consecutive construction records; leasing activity mixed Rentable Area 1,439 MSF Vacancy Rate Net Absorption Under Construction Completions 6.5% 4.5 MSF 25. MSF 8.2 MSF Figure 1: Texas Industrial Net Absorption with Vacancy Rate Primary Market Net Absorption (MSF) Houston Source: CBRE Research, Q DFW *Texas industrial aggregates the Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Arrows indicate change from previous quarter. Non-Primary Market Net Absorption ( s SF) 1,8 1,6 12% 1,4 1% 1,2 8% 1, 6% 8 4% 6 4 2% 2 % 216 YTD 217 Q2 217 Vacancy (Right Axis) McAllen El Paso Austin San Antonio Vacancy Rate (%) 13% 12% 11% 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % NON-PRIMARY DELIVERIES SOAR: NET ABSORPTION POSITIVE FOR MOST After a record quarter of construction deliveries by primary markets in Q1 217, non-primaries followed suit with a combined quarterly record of 2.6 million sq. ft. in Q Dallas reported the largest delivered amount followed by Houston and San Antonio with alike volumes. Austin and El Paso also saw substantial deliveries this quarter which influenced fundamentals. Positive move-ins increased year-to-date net absorption for most markets, El Paso already surpassed its 216 annual net absorption while San Antonio has maintained its leasing velocity at 54%. Aggregate leasing data from top transactions across all Texas markets show that 32% of year-to-date activity was attributed to demand from the distribution and logistics industry. Wholesale, food and beverage, and machinery and appliances together also contributed a strong 41% to positive movements this quarter. Figure 2: YTD 217 Texas Industrial Activity by Top 1 Industries Transactions (SF) Transportation/Distribution/Logistics-3PL Wholesale Food & Beverage MFG & Processing 8,388,459 Machinery, Automation & Appliances MFG Other-Services Warehousing/Storage 2,135,5 3,214,567 5,396,41 Motor Vehicles & Parts MFG Materials MFG Materials MFG-Plastics Life Sciences-Ag Feedstock & Chemicals Source: CBRE Research, Q Other Q2 217 CBRE Research 217 CBRE, Inc. 1

10 Figure 3: Texas Industrial Market Summary Q2 217 Austin Dallas/Ft. Worth El Paso Houston McAllen San Antonio Building Count 1,62 11, , Rentable Area SF 5,968, ,229,826 56,239,873 58,8,479 23,474,414 45,151,929 Vacancy Rate % Availability Rate % Absorption (Net SF) 12,891 2,648,13 535, ,137 (34,499) 815,728 Under Construction SF 567,741 17,222, ,5 5,542, ,5 899,81 Delivered Construction 86,146 4,62,959 32, 1,533,78 1,452,849 Industrial Warehouse & Distribution Avg. Asking Rent (NNN, $/SF, Annual) Flex Avg. Asking Rent (NNN, $/SF, Annual) Overall Avg. Asking Rent (NNN, $/SF, Annual) El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage. Austin and San Antonio data exclude owner occupied properties. See additional comments on last page. Source: CBRE Research, Q Figure 4: Historical Statistics by Market Overall Industrial AUSTIN YTD 217 Absorption (Net, SF) (1,356,7) (5,877) 1,687,74 1,943,429 1,169, ,989 1,182,965 1,49, ,563 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 855,378 72, 2,3 578,19 769,74 54, 1,439,581 Vacancy Rate (%) DALLAS/FT. WORTH Absorption (Net, SF) 1,6,29 2,545,781 11,599,2 13,894,547 18,727,597 12,861,613 17,994,692 25,23,434 7,921,138 Ask Rent (NNN, Monthly $/SF) EL PASO Delivered Construction (SF) 1,373,497 1,553,98 1,774,757 1,423,948 7,397,318 15,44,68 19,57,631 22,76,658 13,883,629 Vacancy Rate (%) Absorption (Net, SF) (71,) (341,998) 734, ,46 (219,415) 784,961 1,577, , ,4 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 2, 5, 12, 58, 267, , 36, Vacancy Rate (%) HOUSTON Absorption (Net, SF) 18,218 3,57,55 3,844,569 6,446,24 5,779,515 8,114,176 6,295,8 1,746,969 3,485,11 Ask Rent (NNN, Monthly $/SF) *.39 MCALLEN Delivered Construction (SF) 5,655,252 2,4,92 1,741,62 4,693,955 11,95,1 11,99,89 9,58,55 13,599,898 5,496,626 Vacancy Rate (%) Absorption (Net, SF) 67,583-63,663 (22,44) 222,287 (284,341) 55, ,97 1,35,412 19,557 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 7, 18,3 453,12 515, 368, 1, 652, 25, Vacancy Rate (%) SAN ANTONIO Absorption (Net, SF) (8,496) 15,581 37,78 1,255,373 2,539,97 1,217,868 1,379,21 1,613,99 866,21 Ask Rent (NNN, Monthly $/SF) *.45 Delivered Construction (SF) 288, , , ,449 71,26 2,463,821 1,847,14 Vacancy Rate (%) El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage. Austin and San Antonio data exclude owner occupied properties. See additional comments on last page. Source: CBRE Research, Q Q2 217 CBRE Research 217 CBRE, Inc. 2

11 Figure 5: Market Statistics by Product Type - Industrial Q1 217 Absorption (Net SF) Vacancy Rate % Avg. Asking Rent (NNN, $/SF, Annual) Under Construction SF AUSTIN 47, ,239 DALLAS/FT. FORTH 2,75, ,513,789 EL PASO 52, ,5 HOUSTON 524, ,69,116 MCALLEN (34,499) ,5 SAN ANTONIO 786, ,63 McAllen includes Cold Storage. Source: CBRE Research, Q Figure 6: Market Statistics by Product Type - Flex Q2 217 Absorption (Net SF) Vacancy Rate % Avg. Asking Rent (NNN, $/SF, Annual) Under Construction SF AUSTIN 73, ,52 DALLAS/FT. FORTH (57,356) , EL PASO NA NA HOUSTON 67, ,8 MCALLEN NA NA SAN ANTONIO 29, ,18 See additional comments on last page. Source: CBRE Research, Q Figure 7: Top Lease Transactions Q2 217 Transaction Size (SF) Tenant Address Submarket AUSTIN 75,51 HD Supply F. M. 441 Freidrich Lane Southeast DALLAS/FT. FORTH 1,, Ghiradelli 384 N Dallas Ave South Dallas EL PASO 12, Tianhai Electric 19 Leigh Fisher Northeast HOUSTON 465,851 Kuraray America 982 Fairmont Pky Southeast MCALLEN 96,25 ScanTech 68 S. International McAllen SAN ANTONIO 147,84 Confidential - 3PL 5 Stout South Source: CBRE Research, Q Figure 8: Capital Markets and Industrial Sales Sales Volume (Millions SF) Figure 9: Top Sales Transactions Q2 217 Transaction Size (SF) Buyer AUSTIN 13,48 Greenfield Partners, LLC DALLAS/FT. FORTH 2,51,242 Clarion Partners EL PASO 564,289 Stonelake Capital Partners HOUSTON 1,88,455 Brookfield IDI Gazeley MCALLEN 18,84 Lakeside Produce Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 SAN ANTONIO 588,27 Black Creek Group (IPT) Primary Markets Non-Primary Markets Source: CBRE Research, Real Capital Analytics, Q Notes: Data exclude transfers, entity-level exchanges, and partial interest sales. Non-Primary data might occasionally account for locations outside of CBRE market boundaries. Source: CBRE Research, Q Q2 217 CBRE Research 217 CBRE, Inc. 3

12 CONTACTS Robert C. Kramp Director of Research & Analysis, Texas-Oklahoma Division E. Michelle Miller Research Operations Manager, Texas-Oklahoma Division Pedro Niño, Jr. Sr. Research Analyst, San Antonio Bradley Smith Research Analyst, Houston Miller Hamrick Research Coordinator, DFW CBRE OFFICES Austin 1 Congress, Suite 5 Austin, TX 7871 Dallas 21 McKinney, Suite 7 Dallas, TX 7521 El Paso 211 N. Kansas, Suite 21 El Paso, TX 7991 Houston 28 Post Oak, Suite 23 Houston, TX 7756 McAllen 2 S. 1 th St., Suite 129 McAllen, TX 7851 San Antonio 2 Concord Plaza, Suite 8 San Antonio, TX Luke Goebel Research Coordinator, Austin luke.goebel@cbre.com Elisabeth Downs Research Coordinator, El Paso, McAllen elisabeth.downs@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at *NOTES: Texas totals, including vacancy, represent aggregate data from Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Austin and San Antonio data exclude owner occupied properties, while El Paso and McAllen data exclude Flex space. CoStar supplemented data are used for the latter markets to calculate a flex space asking rate and vacancy rate. Austin and San Antonio industrial data underwent an audit during Q4 216 and Q Houston avg. asking rate formula was adjusted in Q4 216 to better reflect the weighted averages. As result, figures were updated based on the most recent available information. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

13 MARKETVIEW Texas Industrial, Q1 217 Texas-wide positive net absorption sets tone for 217 Vacancy Rate Net Absorption Under Construction Completions 6.2% 8.7 MSF 26. MSF 14.7 MSF Figure 1: Texas Industrial Net Absorption with Vacancy Rate Primary Market Net Absorption (MSF) Houston Source: CBRE Research, Q DFW *Texas industrial aggregates the Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Arrows indicate change from previous quarter. Non-Primary Market Net Absorption ( s SF) 1,8 1,6 12% 1,4 1% 1,2 8% 1, 6% 8 4% 6 4 2% 2 % 216 YTD 217 Q1 217 Vacancy (Right Axis) McAllen Austin El Paso San Antonio Vacancy Rate (%) 13% 12% 11% 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % LOGISTICS AND CONSUMER RELATED DEMAND TOP ACTIVITY, NEW CONSTRUCTION TAKES A BREATHER Figure 2: YTD 217 Texas Industrial Activity by Top 1 Industries Transactions (SF) Transportation/Distribution/Logistics-3PL While all markets contributed positively, Houston and Dallas anchored increases in net absorption at 44% and 37% above last quarter, respectively. Aggregate leasing data from top transactions across all Texas markets show that activity was attributed largely to, 47% in Q1 217, demand from the distribution and logistics industry. Wholesale, machinery and appliances, and food and beverage together also contributed a robust 25% to positive movements this quarter. Within new development, all markets (except San Antonio) saw a small drop in their new construction pipeline as Q1 217 delivered a substantial amount of new industrial product. The slowing of new starts could once again begin compressing vacancy rates which have recently moved up despite positive market net absorption. 5,11, , 1,182,183 Source: CBRE Research, Q Wholesale Machinery, Automation & Appliances MFG Food & Beverage MFG & Processing Warehousing/Storage Motor Vehicles & Parts MFG Other-Repair Life Sciences-Ag Feedstock & Chemicals Life Sciences-Medical Device MFG Other-Services Other Q1 217 CBRE Research 217 CBRE, Inc. 1

14 Figure 3: Texas Industrial Market Summary Q1 217 Austin Dallas/Ft. Worth El Paso Houston McAllen San Antonio Building Count 1,49 11, , Rentable Area SF 5,252, ,292,24 56,281,425 56,383,545 23,483,191 43,591,243 Vacancy Rate % Availability Rate % Absorption (Net SF) 144,672 5,273, ,991 3,59,874 54,56 5,293 Under Construction SF 1,9,716 16,865, , 5,222, ,5 2,89,17 Delivered Construction 579,435 9,82,67 4, 3,963,548 25, 34,291 Industrial Warehouse & Distribution Avg. Asking Rent (NNN, $/SF, Annual) Flex Avg. Asking Rent (NNN, $/SF, Annual) Overall Avg. Asking Rent (NNN, $/SF, Annual) El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage. Austin and San Antonio data exclude owner occupied properties. See additional comments on last page. Source: CBRE Research, Q Figure 4: Historical Statistics by Market Overall Industrial YTD 217 AUSTIN Absorption (Net, SF) (1,356,7) (5,877) 1,687,74 1,943,429 1,169, ,989 1,182,965 1,49, ,672 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 855,378 72, 2,3 578,19 769,74 54, 579,435 Vacancy Rate (%) DALLAS/FT. WORTH Absorption (Net, SF) 1,6,29 2,545,781 11,599,2 13,894,547 18,727,597 12,861,613 17,994,692 25,23,434 5,273,125 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 1,373,497 1,553,98 1,774,757 1,423,948 7,397,318 15,44,68 19,57,631 22,76,658 9,82,67 Vacancy Rate (%) EL PASO Absorption (Net, SF) (71,) (341,998) 734, ,46 (219,415) 784,961 1,577, , ,991 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 2, 5, 12, 58, 267, , 4, Vacancy Rate (%) HOUSTON Absorption (Net, SF) 18,218 3,57,55 3,844,569 6,446,24 5,779,515 8,114,176 6,295,8 1,746,969 3,59,874 Ask Rent (NNN, Monthly $/SF) *.39 Delivered Construction (SF) 5,655,252 2,4,92 1,741,62 4,693,955 11,95,1 11,99,89 9,58,55 13,599,898 3,963,548 Vacancy Rate (%) MCALLEN Absorption (Net, SF) 67,583-63,663 (22,44) 222,287 (284,341) 55, ,97 1,35,412 54,56 Ask Rent (NNN, Monthly $/SF) Delivered Construction (SF) 7, 18,3 453,12 515, 368, 1, 652, 25, Vacancy Rate (%) SAN ANTONIO Absorption (Net, SF) (8,496) 15,581 37,78 1,255,373 2,539,97 1,217,868 1,379,21 1,613,99 5,293 Ask Rent (NNN, Monthly $/SF) *.45 Delivered Construction (SF) 288, , , ,449 71,26 2,463,821 34,291 Vacancy Rate (%) El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage. Austin and San Antonio data exclude owner occupied properties. See additional comments on last page. Source: CBRE Research, Q Q1 217 CBRE Research 217 CBRE, Inc. 2

15 Figure 5: Market Statistics by Product Type - Industrial Q1 217 Absorption (Net SF) Vacancy Rate % Avg. Asking Rent (NNN, $/SF, Annual) Under Construction SF AUSTIN 159, ,6 DALLAS/FT. FORTH 5,47, ,928,946 EL PASO 76, , HOUSTON 2,583, ,28,593 MCALLEN (43,492) ,5 SAN ANTONIO 1, ,811,999 McAllen includes Cold Storage. Source: CBRE Research, Q Figure 6: Market Statistics by Product Type - Flex Q1 217 Absorption (Net SF) Vacancy Rate % Avg. Asking Rent (NNN, $/SF, Annual) Under Construction SF AUSTIN (14,433) ,116 DALLAS/FT. FORTH 225, ,87 EL PASO NA NA HOUSTON (17,767) ,5 MCALLEN NA NA SAN ANTONIO (5395) See additional comments on last page. Source: CBRE Research, Q Figure 7: Top Lease Transactions Q1 217 Transaction Size (SF) Tenant Address Submarket AUSTIN 94, Superconductor Technologies 911 Wall St Northeast DALLAS/FT. FORTH 1,4,4 UPS 232 E Bardin Rd Great Southwest/Arlington EL PASO 42, Logex Xpert Logistics 846 Gran Vista Dr East HOUSTON 33,281 Gulf Winds Int'l 1755 Federal Rd Southeast MCALLEN 52,5 Interlink Trade Service 431 West Military Hwy McAllen SAN ANTONIO 147,84 Confidential - 3PL 5 Stout South Source: CBRE Research, Q Figure 8: Capital Markets and Industrial Sales Figure 9: Top Sales Transactions Sales Volume (Millions SF) Jan 216 Feb 216 Mar 216 Apr 216 May 216 Jun 216 Jul 216 Aug 216 Sep 216 Oct 216 Nov 216 Dec 216 Jan 217 Feb 217 Mar 217 Q1 217 Transaction Size (SF) Buyer AUSTIN 592,143 World Class Capital Group DALLAS/FT. FORTH 1,52,38 Global Logistics Properties EL PASO 1,56 Republic Beverage HOUSTON 2,167,994 Hines MCALLEN 97,548 CI Logistics SAN ANTONIO 128,646 BJ Services Primary Markets Non-Primary Markets Source: CBRE Research, Real Capital Analytics, Q Notes: Data exclude transfers, entity-level exchanges, and partial interest sales. Non-Primary data might occasionally account for locations outside of CBRE market boundaries. Source: CBRE Research, Q Q1 217 CBRE Research 217 CBRE, Inc. 3

16 CONTACTS Robert C. Kramp Director of Research & Analysis, Texas-Oklahoma Division E. Michelle Miller Research Operations Manager, Texas-Oklahoma Division Pedro Niño, Jr. Sr. Research Analyst, San Antonio Bradley Smith Research Analyst, Houston Miller Hamrick Research Coordinator, DFW CBRE OFFICES Austin 1 Congress, Suite 5 Austin, TX 7871 Dallas 21 McKinney, Suite 7 Dallas, TX 7521 El Paso 211 N. Kansas, Suite 21 El Paso, TX 7991 Houston 28 Post Oak, Suite 23 Houston, TX 7756 McAllen 2 S. 1 th St., Suite 129 McAllen, TX 7851 San Antonio 2 Concord Plaza, Suite 8 San Antonio, TX Luke Goebel Research Coordinator, Austin luke.goebel@cbre.com Elisabeth Downs Research Coordinator, El Paso, McAllen elisabeth.downs@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at *NOTES: Texas totals, including vacancy, represent aggregate data from Austin, Dallas/Ft. Worth, El Paso, Houston, McAllen, and San Antonio markets. Austin and San Antonio data exclude owner occupied properties, while El Paso and McAllen data exclude Flex space. Costar supplemented data are used for the latter markets to calculate a flex space asking rate and vacancy rate. Austin and San Antonio industrial data underwent an audit during Q4 216 and Q Houston avg. asking rate formula was adjusted in Q4 216 to better reflect the weighted averages. As result, figures were updated based on the most recent available information. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

17 MARKETVIEW Texas Industrial, Q4 216 Total annual demand well above 215 total, anchored by logistics Vacancy Rate 5.8% Net Absorption 6.1 MSF Under Construction 28. MSF Completions 8. MSF Texas industrial aggregates the Austin, Dallas/Ft. Worth, El Paso, Houston, and McAllen markets. Arrows indicate change from previous quarter. AUSTIN Austin finished 216 with citywide industrial vacancy reaching 7.3%, a low unseen since the late-199s, with four submarkets having vacancy under 3.% and citywide warehouse vacancy 6.% with flex warehouse 9.4%. DALLAS/FT. WORTH This year set new records for industrial sector absorption and delivered construction. Annual absorption totaled 25.2 million sq. ft. EL PASO Net absorption remained in positive territory after a soft previous quarter and negative figures in Q2 216 for the first time in 2 years. Overall industrial vacancy remained flat at 8.8%. HOUSTON It appears reasonable to conclude that the worst of the downturn is now behind Houston, and the road to a steady recovery has begun. Net absorption in the overall market was sanguine, with over 2.1 million sq. ft. of positive net absorption. MCALLEN Annual net absorption for 216 is the highest in the current cycle and nearly double the previous high of 686,335 sq. ft. in 211. Market vacancy fell by 247 basis points (bps) year-over-year. Figure 1: 216 Texas Industrial Activity by Top 1 Industries Transactions (SF) 4,452,319 Source: CBRE Research, Q ,783,25 6,237,888 Transportation/Distribution/Logistics Wholesale Food & Beverage MFG & Processing Warehousing/Storage Building Materials & Construction MFG Machinery, Automation & Appliances MFG E-Commerce-Related Direct to Consumer Other-Services Motor Vehicles & Parts MFG Materials MFG Other Logistics and Expanding Demographics Continue Fueling Industrial Activity Aggregate leasing data from top transactions across all Texas markets indicate robust demand. Consumer goods manufacturing, light manufacturing, and transportation and logistics continue to be robust demand drivers for the state, supported by increasing retail supply chain operations and expanding demographics, specially within the Texas triangle. These industries together comprised over 5.% of space-use demand in 216. Active logistic and consumer good manufacturing sectors continue to support the development of Texas as a major logistic hub and hotbed for trade expansion. Q4 216 CBRE Research 217 CBRE, Inc. 1

18 TEXAS PAYROLL GROWTH AGAIN ABOVE U.S.; UNEMPLOYMENT SLIGHTLY ABOVE U.S. RATE Total nonfarm employment across the state saw an annual growth of 1.8%, or 21,2 jobs, in December 216. The reported growth in December was a third consecutive month above the reported national employment growth. This signals an improving labor market in Texas. Despite the resiliency of certain employment sectors, such as the service sector, Texas employment is still being dragged by manufacturing which is beleaguered by energy prices and a strong dollar putting a crimp into exports. However, December saw Texas manufacturing jobs contact at the slowest rate since July 215. Dallas-Fort Worth and McAllen are the stand out markets at 3.3% and 3.2% annual job growth, respectively. These markets saw the most impressive job growth of any of the industrial employment sector. Wholesale trade was up nearly double digits in DFW while McAllen was resilient in transportation and warehousing employment. CBRE Research continues to closely track the Houston MSA labor market given its economic exposure to energy prices. Data show that during the trailing 12-month period Houston grew by.5% or 14,4 jobs. Although yearover-year growth continued to decelerate, it remained positive and appears to be leveling off as Houston has managed to relocate some of the displaced in other industries. Figure 2: Industrial Employment Breakdown, December 216 ( s) Industry Austin- Round Rock Dallas-Fort Worth- Arlington El Paso Houston- The Woodlands- Sugar Land McAllen- Edinburg-Mission Texas Manufacturing Y-o-Y Growth (%) (4.).5 (4.7) (2.) (1.6) (1.7) Transportation and Utilities Y-o-Y Growth (%) (1.7) 2.1 (.8) Wholesale Trade Y-o-Y Growth (%) (1.5) Total Industrial ,955.4 Y-o-Y Growth (%) (.) 3.4 (1.2) (1.6) 1. (.7) Source: Bureau of Labor Statistics, Moody s Analytics Seasonally Adjusted, CBRE Research, February 217. Figure 3: Metropolitan Industrial Employment Primary Market Employment ( s) Non-Primary Market Employment ( s) Dallas- Fort Worth- Arlington Houston- The Woodlands- Sugar Land Austin- Round Rock El Paso Manufacturing Transportation and Utilities Wholesale trade McAllen- Edinburg- Mission Source: Bureau of Labor Statistics, Moody s Analytics Seasonally Adjusted, CBRE Research, February 216. Q4 216 CBRE Research 217 CBRE, Inc. 2

19 ROBUST NET ABSORPTION EXCEEDS SAME PERIOD LAST YEAR AUSTIN: 216 proved to be another strong year for the market, again surpassing 1 million sq. ft. of total absorption. Flex properties claimed victory this year as the most desirable product type, absorbing 613,278 sq. ft.; warehouse absorption accounted for 436,261 sq. ft. DALLAS/FT. WORTH: The final quarter of 216 marked the 25th consecutive quarter of positive net absorption for the DFW industrial market as it scored 3.9 million sq. ft. in total absorption, contributing to the record 25.2 million sq. ft. absorbed in 216. Distribution space led quarterly activity with barely under 3.8 million sq. ft. of total net absorption, while flex space posted 7,619 sq. ft. of total net absorption. EL PASO: Net absorption remained in positive territory in Q4 216, due mostly to activity in the Northeast and East submarkets. One large vacancy of roughly 24, sq. ft. nearly offset progressive leasing activity, but was not enough after a pick-up in space absorption. The overall market vacancy rate was flat quarter-over-quarter, but remained 1 basis points (bps) below the Q4 215 vacancy rate. HOUSTON: Net absorption in the overall market was sanguine, with over 2.1 million sq. ft. of positive net absorption in conjunction with a conservative development pipeline led to a 14 basis point (bps) decrease in vacancy, now down to 5.1%. MCALLEN: Q4 216 produced positive net absorption after a strong first three quarters of 216. Total transactions left Q4 216 net absorption at 1, sq. ft., and were just enough to offset this quarters vacancies. At the end of Q4 216, the market reached well above all annual levels in net absorption during the current cycle. This year-to date net absorption of 1.4 million sq. ft. has been largely fuelled by Class A space demand. Figure 4: Net Absorption Primary Market Absorption (MSF) DFW Non-Primary Market Absorption ( s SF) 1,6 1,4 1,2 1, Source: CBRE Research, Q Figure 5: Vacancy Rates Houston El Paso Austin McAllen Vacancy (%) Q4 Austin DFW El Paso Houston McAllen Source: CBRE Research, Q Figure 6: Availability Rates 216 Availability (%) Q4 Austin DFW El Paso 216 Houston McAllen Source: CBRE Research, Q Q4 216 CBRE Research 217 CBRE, Inc. 3

20 Figure 7: Overall Industrial Asking Rate, NNN. Annual $/SF Q4 216 Austin Houston DFW McAllen El Paso El Paso and McAllen figures exclude Flex Space. McAllen includes Cold Storage when available. Source: CBRE Research, Q RENTS CONTINUE UP, LARGELY IN AUSTIN AUSTIN: Citywide rents rose $.5 per sq. ft. from 215, hitting a new high of $.85 per sq. ft. for 216. The most significant increase in rental rates occurred for flex properties, jumping $.11 per sq. ft. from 215. The limited flex product available in the South submarket pulled the highest asking rate at $2.28 per sq. ft. DALLAS/FT. WORTH: This quarter overall average asking lease rates increased for industrial spaces to $4.48 per sq. ft., reflecting market sentiment that rent growth is slowing following marked gains over the past year. Vacancy in the market continued to compress, and DFW remains well below historical highs. With strong demand for space, lease rates are anticipated to continue their upward rise. EL PASO: The average asking industrial lease rate increased by $.1 to $4.16 per sq. ft. in the Q Average rents still pushed up by $.12 per sq. ft., or 3.%, compared to a year ago. Compared to Q3 216, Class A asking rates increased by $.7 or 1.6% while Class B saw a decrease of $.1 or.2%. Class B average also remained above the $4. mark for the third consecutive quarter. HOUSTON: Triple net asking rates for the overall Houston market increased by $.2 per sq. ft. per month, when taking into account the new methodology. This was driven heavily by rising asking rates in the Southeast due to the delivery of substantial quantities of new product, and by further tightening in the Northwest, Southwest, and Northeast submarkets. *See additional comments on last page. MCALLEN: Excluding cold storage, the market wide warehouse average asking lease rate increased by a 5.1% this quarter and 6.7% year-over-year to $4.16 per sq. ft. Rents remain above recessionary levels and the pick up in rents may be linked to decreasing availability of space given 216 s strong net absorption. Q4 216 saw a cold storage market-wide average leasing rate of $17.1, Q4 216 CBRE Research 217 CBRE, Inc. 4

21 CONSTRUCTION DELIVERIES WERE STRONG IN 216. DFW STILL ANCHORS VOLUME AUSTIN: Industrial construction and development picked up at the end of 216, with more than 1.6 million sq. ft. of flex and warehouse product going up throughout the city. The Southeast Austin remains the most attractive submarket for developers, with 12 projects currently being constructed there. DALLAS/FT. WORTH: Deliveries for the fourth quarter totaled 6.4 million sq. ft. Pre-leasing activity was lower with 1.4 million sq. ft., or 22%, of Q4 216 deliveries precommitted. In comparison, Q3 216 deliveries were 57% pre-leased. An estimated 18.9 million sq. ft. is currently under construction in Dallas/Fort Worth, down from the peak of Q1 216 when the pipeline swelled to 21.4 million sq. ft., which was easily the highest level of construction activity ever seen in the market. EL PASO: The supply of industrial buildings in El Paso remained unchanged as there were no new construction deliveries. Q4 216 registered the start of two build-to-suit project, a warehouse in the Lower Valley and a cold storage facility in the West submarket. The projects are expected to be completed mid 217 and will deliver roughly 3, sq. ft. of future net absorption. Work also continued on the 215, sq. ft. distribution center for FedEx as well as the other BTS warehouse project in the Lower Valley that broke ground in Q Both, are expected to deliver in early 217. HOUSTON: Q4 216 deliveries totaled 1.6 million sq. ft., with 25 of 27 total delivered projects representing warehouse and distribution space. The Southeast submarket delivered the most new buildings, with over 923,15 sq. ft. of completions, the majority of which were new warehouse product delivered in the Bay Area Business Park. The preleased rate in newly delivered construction was 61% for the quarter. MCALLEN: The supply of industrial buildings in McAllen was unchanged in Q4 216 but increased by 652, sq. ft. since Q These new industrial buildings were comprised of 482, sq. ft. of built-to-suit or owner-occupied space and 17, sq. ft. was spec. By the close of Q4 216, four active projects totaled 211,25 sq. ft. of industrial space under construction of which 65, sq. ft. is expected to be delivered occupied. Cold storage demand continued fueling new development, particularly within Pharr. Q4 216 CBRE Research 217 CBRE, Inc. 5

22 Figure 8: Top Lease Transactions Q Market Transaction Size (SF) Tenant Address Submarket AUSTIN 179,2 Triple Play Services, Inc Harris Branch Pkwy Northeast DALLAS/FT. FORTH 756, American Tire 3 Freedom Dr North Fort Worth EL PASO 1,179 Confidential - 3PL 19 Leigh Fisher Northeast HOUSTON 23,426 Anixter Inc. 74 Security Way Northwest MCALLEN 24, Confidential - Electronics 521 George McVay McAllen Source: CBRE Research, Q Figure 9: Top Sale Transactions Q4 216 Market Transaction Size (SF) Buyer Address Submarket AUSTIN 592,143 World Class Capital Group 21 Kramer Lane North DALLAS/FT. FORTH 1,44, Transpacific Development Company 56 Mark IV Pkwy North Fort Worth EL PASO 93, RVI American Insurance Co N. Resler West HOUSTON 488,314 Hewlett Packard Enterprise Cutten Rd North MCALLEN 56,312 Confidential - Investor Multi-property Sharyland Source: CBRE Research, Q Figure 1: Capital Markets and Industrial Sales Sales Volume (Millions SF) TEXAS SALES ACTIVITY STRONG: NON-PRIMARY ACCOUNTED FOR ONE FOURTH OF DOLLAR VOLUME IN Jan 216 Feb 216 Mar 216 Apr 216 May 216 Jun 216 Jul 216 Aug 216 Sep 216 Oct 216 Nov 216 Dec 216 Primary Markets Non-Primary Markets Industrial sales volume for the state totaled 15.6 million sq. ft. in Q4 216, supported by strong demand in primary markets where Dallas anchored activity. However, the Houston market saw a significant increase in transaction volume compared to the previous two quarter. Within non-primary markets, San Antonio registered the largest property trade volume at just under one million sq. ft. Notes: Data exclude transfers, entity-level exchanges, and partial interest sales. Non-Primary data might occasionally account for locations outside of CBRE market boundaries. Source: Real Capital Analytics, CBRE Research, Q Q4 216 CBRE Research 217 CBRE, Inc. 6

23 CONTACTS Robert C. Kramp Director of Research & Analysis, Texas-Oklahoma Division E. Michelle Miller Research Operations Manager, Texas-Oklahoma Division Pedro Niño, Jr. Sr. Research Analyst, San Antonio Bradley Smith Research Analyst, Houston Miller Hamrick Research Coordinator, DFW CBRE OFFICES Austin 1 Congress, Suite 5 Austin, TX 7871 Dallas 21 McKinney, Suite 7 Dallas, TX 7521 El Paso 211 N. Kansas, Suite 21 El Paso, TX 7991 Houston 28 Post Oak, Suite 23 Houston, TX 7756 McAllen 2 S. 1th St., Suite 129 McAllen, TX 7851 San Antonio 2 Concord Plaza, Suite 8 San Antonio, TX Luke Goebel Research Coordinator, Austin luke.goebel@cbre.com Elisabeth Downs Research Coordinator, El Paso, McAllen elisabeth.downs@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Texas totals, including vacancy, represent aggregate data from Austin, Dallas/Fort Worth, El Paso, Houston, and McAllen markets. El Paso and McAllen data exclude Flex space. Note San Antonio industrial data is currently undergoing an audit and we expect to be once again reporting on this market by Q *Houston avg. asking rate formula was adjusted in Q4 216 to better reflect the weighted averages. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

24 MARKETVIEW Texas Industrial, Q3 216 Year-to-date demand is above 215 total, anchored by logistics Vacancy Rate 5.7% Net Absorption 14.9 MSF Under Construction 28.1 MSF Completions 12.4 MSF Texas industrial aggregates the Austin, Dallas/Ft. Worth, El Paso, Houston, and McAllen markets. Arrows indicate change from previous quarter. AUSTIN Austin finished Q3 216 with citywide industrial vacancy reaching 5.7%. These are levels not seen since the late-199 s, with three submarkets having vacancy below 3% and citywide warehouse vacancy at 4.7%. DALLAS/FT. WORTH Q3 216 set the ten year record for the highest level of quarterly absorption after industrial occupiers took down 8.9 million sq. ft., further compressing vacancy. EL PASO Net absorption returned to positive territory after seeing negative figures in the previous quarter for the first time in 2 years. The overall industrial vacancy remained steady at just below 9.%. HOUSTON Despite the Houston industrial market continuing to feel the effects of the precipitous oil price drop of 215, fundamentals and development activity remain sound at an overall vacancy of 5.3%, and the market continues to experience positive net absorption. MCALLEN Q3 216 net absorption continued the threeyear positive streak in net demand and offset the largest wave of vacancies during this market cycle. This activity pushed vacancy down further to a new cycle-low reaching 6.1%. Figure 1: YTD 216 Texas Industrial Activity by Top 1 Industries Transactions (SF) 6,58,873 3,8,413 2,819,747 Source: CBRE Research, Q ,347,954 3,619,296 Transportation/Distribution/Logistics-3PL Food & Beverage MFG & Processing Wholesale Warehousing/Storage Transportation/Distribution/Logistics Machinery, Automation & Appliances MFG E-Commerce-Related Direct to Consumer Building Materials & Construction MFG Other-Services Motor Vehicles & Parts MFG Other Logistics and Expanding Demographics Continue Fueling Industrial Activity Aggregate leasing data from top transactions across all Texas markets indicate robust demand. Consumer goods manufacturing, light manufacturing, and transportation and logistics continue to be robust demand drivers for the state, supported by increasing retail supply chain operations and expanding demographics, specially within the Texas Triangle (DFW-Austin/San Antonio-Houston). Much as in earlier 216, these industries together comprised over 3.% of space-use demand. Active logistic and consumer good manufacturing sectors continue to support the development of Texas as a major logistic hub and hotbed for trade expansion. Q3 216 CBRE Research 216 CBRE, Inc. 1

25 TEXAS PAYROLL GROWTH ON PAR WITH U.S.; UNEMPLOYMENT STILL BELOW NATIONAL RATE Total nonfarm employment across the state saw an annual growth of 1.7%, or 27,5 jobs, in October 216. The reported growth in October was a second consecutive month with growth above 2, jobs. This signals an improving labor market in Texas as statewide growth mirrored national growth. Despite the resiliency of certain employment sectors, such as the service sector, Texas employment is still being dragged by manufacturing which is beleaguered by energy prices and a strong dollar putting a crimp into exports. However, October saw positive gain in manufacturing jobs with a 2.% monthly expansion after a milder, but positive, gain in September. This is the first two-month consecutive gain in manufacturing employment since January of 215. Dallas-Fort Worth and McAllen are the stand out markets at 3.3% and 2.9% annual job growth, respectively. These markets saw the most impressive job growth of any of the industrial employment sector. Wholesale trade was up double digits in DFW while McAllen was resilient in transportation and warehousing employment. CBRE Research continues to closely track the Houston MSA labor market given its economic exposure to energy. Data show that during the trailing 12-month period Houston grew by.4% or 12,8 jobs. Although year-overyear growth continued to decelerate, it remained positive and the slowdown appears to be leveling off as Houston has managed to relocate some of the displaced manufacturing workers to other related industries. Figure 2: Industrial Employment Breakdown, October 216 ( s) Industry Austin- Round Rock Dallas-Fort Worth- Arlington El Paso Houston- The Woodlands- Sugar Land McAllen- Edinburg-Mission Texas Manufacturing Y-o-Y Growth (%) (7.4) (.9) (3.5) (2.9) (3.1) (2.3) Transportation and Warehousing Y-o-Y Growth (%) Wholesale Trade Y-o-Y Growth (%) (2.2) Total Industrial Y-o-Y Growth (%) (.8) 3.9 (.5) (1.5).8.2 Source: Bureau of Labor Statistics, Moody s Analytics Seasonally Adjusted, CBRE Research, December 216. Figure 3: Metropolitan Industrial Employment Primary Market Employment ( s) Non-Primary Market Employment ( s) Dallas- Fort Worth- Arlington Houston- The Woodlands- Sugar Land Austin- Round Rock El Paso Manufacturing Transportation and Warehousing Wholesale trade McAllen- Edinburg- Mission Source: Bureau of Labor Statistics, Moody s Analytics Seasonally Adjusted, CBRE Research, December 216. Q3 216 CBRE Research 216 CBRE, Inc. 2