09 3 quarter retail report

CommerCe CrG | th ird Quarter - 20 09 | retail market review

COMMERCE CRG is a regional real estate firm dedicated firstand foremost to our clients. With the industry’s premier

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RETAIL MARKET INDICATORS

Change Since

Current 3Q09 3Q08

Vacancy 12.74%

Lease Rates $1.92 NNN

Net Absorption * (2.5 million)

Construction N/A

*The arrows are trend indicators over the specified time period, and do not represent a positive or negative value. (e.g., absorption could be negative but still represent a positive trend over a specified period.)

LAS VEGASRETAIL MARKET OVERVIEW

AT A GLANCE

Vacancy Rates Reached New HighsOverall vacancy rates reached another high during the quarter at 12.74%. This is a 3.25% jump from second quarter 2009 and a 6.74% raise from a year ago. Freestanding product type is showing the highest vacancy rates at 21.92%. Vacancy increases during the year were impacted by several store closings due to the current economic conditions.

Rents Remained StableAs Landlords are faced with a “Tenant” market, they are seeing many retailers renegotiating for lower rents and asking for more concessions as their leases come up for renewal. Negotiations like these and more up-front incentives help stabilize and even lower the overall average lease rates. Currently, the Las Vegas market is showing annual averages lease rates at $23.04 per square feet (psf). This is a drop from last quarter at $23.64 psf and higher of a drop from a year ago when rates where at $26.16 psf.

Challenging Outlook for Las Vegas ContinuesLooking forward, the retail sector is expected to continue to face challenges posed by a troubled employment market, low consumer confidence levels and a still struggling housing market. Vacancy rates are expected to continue upward into the foreseeable future. The task of identifying tenants who have a need for space in some of the larger units and filling more than 6.9 million square feet of available product will be difficult

in the next year.

RETAIL MARKET OVERVIEW

By end of third quarter, vacancies reached new highs with approximately 6.9 million square feet of available product coming online. This equates to a 12.74% vacancy factor. Above-average vacancies were noted in the Southwest (19.43%), North Las Vegas (16.70%), Nellis (15.40%) submarkets. By product type Strip Centers (21.87%) and Freestanding (21.92%) retail buildings posted the highest vacancies at the end of the quarter as discretionary spending pulled back, further impacting the viability of small business owners. The retailers that are pulling through the recession have enjoyed the current vacancy. The old time saying “location, location, location” really means something right now to the retailers that can make the move to more premier locations as rental rates are lowered and become more affordable.

According to a report in Time magazine the new rage in retail leasing is something called “pop-up shops.” Pop-up stores, or temporary retail outlets, are one way for landlords to fill an ever growing amount of retail vacancy. According to Mike Kraus, “pop-ups are an opportunity for both entrepreneurs and big brands to make some money without having to worry about the overhead of a five-year lease.” Pop-ups are not just for mom

and pop operations. According to the report Toys “R” Us is looking to replace the former KB Toys, by opening 350 holiday express toy outlets during the holiday season. Other retails that have dabbled in the pop-up concept include American Eagle, Gap, JC Penny, Ann Taylor and Gucci. With long vacancy times Landlords are looking for some part time foot traffic and retailers gain opportunities to create buzz on special products and/ or short term sales during important shopping months.

Pricing (Average Asking Rents)

Weak consumer spending and troubled employment is forcing many businesses to close and the demand for retail space is shrinking. This activity has lowered the average asking rents around the valley. Average asking rents witness a decline to $1.92 per sf/mo NNN during 3rd quarter 2009, which was slightly below the $1.97 per sf/mo NNN reported in the preceding quarter (Q2 2009) and further below the $2.18 per sf/mo NNN reported one year ago. The amount of product available at year-end represented an all-time high, which will likely contribute to continue softening in retail prices.


OUTLOOK

As the winter months approach the temperatures are not the only thing dropping around the valley. Turbulent debt markets and a slowing economy has finally hit the commercial real estate market. According to a Federal Reserve official, “The strong headwinds that are facing financial institutions in the United States will likely continue for some time and struggles for the commercial real estate market are far from over.” Prices of existing commercial properties have declined sharply from their record highs and will likely continue to decline. Market conditions are expected to remain sluggish all throughout 2010 as the economy works it’s way out of the recession. Also effecting a faster recovery in the retail market come from a combination of all-time low levels of consumer confidence and the highest unemployment numbers that we have seen in 26 years. The current 10.2% national unemployment rate equates to 15.7 million workers that remain jobless. According to the Labor Department “the largest job losses were in construction (down 62,000), manufacturing (down 61,000) and retail (down 40,000). Chief economist, Alan Levenson stated that “It’s not surprising to see continuing job losses in the retail sector because too many stores were built in response to overzealous consumer spending fueled by borrowing.” Although most economists report that the recession ended sometime in June, people are still afraid to spend money as unemployment keeps going up.

As the Holiday shopping season fast approaches, negative sales forecast are already hitting the news. Last year at this time retail sales fell 3.4% and this year is looking no different as shoppers continue to worry about credit card debt and sky high unemployment rates. Intense price wars and early “Black Friday” specials is the approach many retailers are taking to prepare for the Holiday season. With fewer spending dollars and a consumer mind set of buying only products that they need, Retailers will have to prepare for the holiday consumer spending war.

Looking forward, incremental job growth is anticipated to be limited, with nearly every sector pointing toward continued contraction in 2010. Income and spending levels are also likely to remain depressed, as consumers pull pack in the face of uncertainty. These conditions will force retailers to shift their business models back to the pre-boom era, a change that can be difficult to achieve. That said, opportunities for those seeking expansion or entrance into the Las Vegas market over the next several years should be attractive from a pricing perspective.

LAS VEGASRETAIL MARKET OVERVIEW

Las Vegas, Nevada | Commerce CRG Third Quarter 2009

Retail: Inventory (SF) and Vacancy Rate (%)

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q308 Q408 Q109 Q209 Q309

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Retail: Vacancy (%) and Ave. Lease Rates

$2.09$2.19$2.29

$2.03

$1.57$1.82

$1.95$2.22

$1.45

$1.62

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Central

East

Central

West

East

Green V

alley

Henders

onNellis

North Las

Veg

as

Northwes

t

Southw

est

Summerl

in

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50


No. of existing under Const. Planned Net Gross NewBldgs. SF SF SF SF rate absorption Spaced Supply Low high avg.

Central eastCommunity Centers 21 3,522,124 - - 459,114 13.04% (446,114) 5,000 - $0.75 $3.50 $1.66Freestanding 8 257,490 - - 46,016 17.87% (25,050) 5,175 - $0.99 $2.10 $1.25Neighborhood Centers 6 399,098 - - 122,022 30.57% (101,902) 4,500 - $0.75 $4.00 $2.59anchorless Strip 34 1,320,265 - - 152,271 11.53% (21,024) 83,450 - $0.65 $4.00 $1.31total 69 5,498,977 - - 779,423 14.17% (594,090) 98,125 - $0.65 $4.00 $1.62

Central westCommunity Centers 33 5,430,029 - - 595,413 10.97% (18,734) 321,268 - $0.55 $3.23 $1.57Freestanding 2 90,320 - - 4,950 5.48% (3,750) - - $0.99 $1.60 $1.30Neighborhood Centers 19 1,418,919 - - 129,745 9.14% (71,400) 26,793 - $0.90 $3.00 $1.55anchorless Strip 42 1,516,814 - - 206,224 13.60% (140,612) 3,117 - $0.50 $2.50 $1.40total 96 8,456,082 - - 936,332 11.07% (234,496) 351,178 - $0.50 $3.23 $1.45

eastCommunity Centers 18 2,884,687 - - 174,879 6.06% 418,867 453,325 47,000 $0.95 $4.50 $1.74Freestanding 3 135,336 - - 51,910 38.36% (47,748) - - $1.45 $3.25 $2.43Neighborhood Centers 3 476,680 - - 42,898 9.00% (30,234) - - $1.50 $3.35 $2.21anchorless Strip 14 488,185 - - 113,501 23.25% (40,237) 15,553 - $0.85 $2.25 $1.40total 38 3,984,888 - - 383,188 9.62% 300,648 468,878 47,000 $0.85 $4.50 $1.95

Green valleyCommunity Centers 33 6,422,389 - - 485,648 7.56% (113,807) 86,492 - $0.90 $4.00 $2.04Freestanding 4 189,929 - - 55,446 29.19% (27,275) 17,086 - $0.99 $1.85 $1.61Neighborhood Centers 20 2,019,865 - - 312,719 15.48% (85,915) 107,805 276,000 $1.00 $3.50 $1.87anchorless Strip 21 740,566 - - 181,335 24.49% (24,879) 55,102 24,336 $0.40 $4.00 $1.77total 78 9,372,749 - - 1,035,148 11.04% (251,876) 266,485 300,336 $0.40 $4.00 $1.82

HendersonCommunity Centers 9 1,713,893 - - 211,208 12.32% (146,142) 6,725 32,175 $1.00 $4.00 $2.07Freestanding 3 115,059 - - - 0.00% - - - Neighborhood Centers 3 295,539 - - 7,400 2.50% (4,100) - - $1.75 $2.25 $2.06anchorless Strip 3 191,977 - - 33,452 17.43% 38,569 50,921 40,401 $0.75 $3.50 $2.53total 18 2,316,468 - - 252,060 10.88% (111,673) 57,646 72,576 $0.75 $4.00 $2.22

NellisCommunity Centers 8 1,235,823 - - 66,588 5.39% 41,278 54,341 - $0.85 $2.55 $1.53Freestanding 3 170,340 - - 38,535 22.62% (16,135) 20,000 - $0.83 $2.12 $1.35Neighborhood Centers 11 809,449 - - 213,330 26.35% (195,034) 1,666 - $0.75 $3.75 $1.94anchorless Strip 15 458,204 - - 93,288 20.36% (10,392) 27,841 - $0.50 $3.50 $1.46total 37 2,673,816 - - 411,741 15.40% (180,283) 103,848 - $0.50 $3.75 $1.57

North las vegasCommunity Centers 24 4,817,384 - - 726,631 15.08% (461,295) 27,125 999,812 $0.99 $4.00 $2.31Freestanding 1 22,200 - - 22,200 100.00% (9,800) - - $2.00 $2.00 $2.00Neighborhood Centers 18 1,566,598 - - 238,989 15.26% (40,458) 98,308 - $0.99 $5.00 $2.00anchorless Strip 10 381,727 - - 145,810 38.20% (126,600) 7,954 - $0.49 $3.50 $1.82total 53 6,787,909 - - 1,133,630 16.70% (638,153) 133,387 999,812 $0.49 $5.00 $2.03

NorthwestCommunity Centers 18 3,580,766 - - 284,993 7.96% (107,931) 27,000 - $0.80 $3.75 $2.22Freestanding - - - - - #diV/0! - - - Neighborhood Centers 12 792,754 - - 195,269 24.63% (133,665) 24,337 152,380 $0.99 $4.00 $2.25anchorless Strip 5 162,572 - - 16,461 10.13% (13,061) 1,000 - $1.00 $3.25 $2.39total 35 4,536,092 - - 496,723 10.95% (254,657) 52,337 152,380 $0.80 $4.00 $2.29

SouthwestCommunity Centers 18 3,947,674 - - 605,583 15.34% (311,448) 5,142 - $1.00 $4.00 $2.27Freestanding 1 25,300 - - 1,500 5.93% (1,500) - - $2.25 $2.25 $2.25Neighborhood Centers 11 1,046,156 - - 93,322 8.92% 11,154 48,607 159,300 $1.25 $3.25 $2.26anchorless Strip 44 1,631,441 - - 590,877 36.22% (311,750) 64,414 - $0.99 $5.00 $1.96total 74 6,650,571 - - 1,291,282 19.42% (613,544) 118,163 159,300 $0.99 $5.00 $2.19

SummerlinCommunity Centers 17 3,253,457 - - 126,489 3.89% 33,105 75,223 - $0.75 $5.00 $2.55Freestanding - - - - - 0.00% - - - Neighborhood Centers 9 602,605 - - 40,507 6.72% (19,173) 4,613 - $0.40 $3.25 $2.15anchorless Strip 12 384,521 - - 57,934 15.07% (32,758) 13,594 - $1.00 $3.25 $1.57total 38 4,240,583 - - 224,930 5.30% (18,826) 93,430 - $0.40 $5.00 $2.09

las vegas totalCommunity Centers 199 36,808,226 - - 3,736,546 10.15% (1,112,221) 1,061,641 1,078,987 $0.55 $5.00 $2.00Freestanding 25 1,005,974 - - 220,557 21.92% (131,258) 42,261 - $0.83 $3.25 $1.74Neighborhood Centers 112 9,427,663 - - 1,396,201 14.81% (670,727) 316,629 587,680 $0.40 $5.00 $2.09anchorless Strip 200 7,276,272 - - 1,591,153 21.87% (682,744) 322,946 64,737 $0.40 $5.00 $1.76total 536 54,518,135 - - 6,944,457 12.74% (2,596,950) 1,743,477 1,731,404 $0.40 $5.00 $1.92

Commerce CrGLas Vegas retail market report Q3 2009

Vacancy asking rent (NNN)inventory vacancy Demand & Supply Pricing


LAs VEgAs | RETAIL GRAPHS Las Vegas, Nevada | Commerce CRG Third Quarter 2009

Retail: Quarterly Vacancy

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q208 Q308 Q408 Q109 Q209 Q309

Retail: Quarterly Absorption (SF)

(4,000,000)

(3,000,000)

(2,000,000)

(1,000,000)

-

1,000,000

2,000,000

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q308 Q408 Q109 Q209 Q309


LAs VEgAs | RETAIL GRAPHS


Retail: Inventory (SF) and Vacancy Rate (%)

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q308 Q408 Q109 Q209 Q309

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Retail: Vacancy (%) and Ave. Lease Rates

$2.09$2.19$2.29

$2.03

$1.57$1.82

$1.95$2.22

$1.45

$1.62

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Central

East

Central

West

East

Green V

alley

Henders

onNellis

North Las

Veg

as

Northwes

t

Southw

est

Summerl

in

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50


Las Vegas Retail Overview 2005-2009 YTD

7.40%

3.90%

4.31%3.71%

12.74%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2005 2006 2007 2008 2009 YTD

$1.75 $1.92 $2.04 $2.15 $1.92

44.50 48.73 50.06 50.40 54.52

Year

Ave Lease Rate

Base * Sf Millions

Squa

re F

eet

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

Vaca

ncy

Built Vacant Inventory Vacancy


LAs VEgAs | RETAIL GRAPHS


Retail Space Vacancy Rates

Central West, 11.07%

East, 9.62%

Henderson, 10.88%Nellis, 15.40%

North Las Vegas, 16.70%

Northwest, 10.95%

Southwest, 19.42%

Summerlin, 5.30%Central East,

14.17%

Green Valley, 11.04%

Retail Vacancy by Type

Anchorless Strip, 21.87%

Community Centers, 10.15%Neighborhood

Centers, 14.81%

Freestanding, 21.92%


LAs VEgAs | RETAIL SUBMARKET MAP


COMMERCE CRg | fULL sERVICE COMMERCIAL REAL EsTATE sOLUTIOnsCommerce CRG has been among the top commercial real estate brokerage firms in the Intermountain West for 30 years. From our headquarters in Salt Lake City and offices in Provo/Orem, Park City, Clearfield and St. George, Utah and Las Vegas, Nevada we offer a full range of brokerage services, valuation and consulting, client representation and property/facility management. Our alliance with Cushman & Wakefield extends our reach worldwide.

CUshMAn & WAKEfIELd ALLIAnCEA number of Cushman & Wakefield offices, including Commerce CRG, are independently owned and connected with the company by way of an international alliance. Cushman & Wakefield concentrates on larger markets like Los Angeles and New York, and alliance members like Commerce CRG concentrate on developing secondary markets.

Together the geographic coverage is nearly universal. This enables Cushman & Wakefield to provide comprehensive services for clients with local requirements as well as for those with more expansive national or international portfolios. In either case, Cushman & Wakefield’s services are supported by the full integrated resources of the entire alliance.

Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. Founded in 1917, it has 230 offices in 58 countries and more than 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

230 Offices in 58 Countries

C&W Owned Offices

C&W Alliance/Associate Offices

AS OF MARCH 2009

Australia Adelaide* Melbourne* Sydney

China BeijingChengduGuangzhou Hong KongShanghaiShenzhen

Fiji*India Bangalore ChennaiGurgaonHyderabadKolkataMumbai – CityMumbai – Suburbs New DelhiPune

IndonesiaJakarta

JapanTokyo

MalaysiaKuala Lumpur*

New ZealandAuckland* Wellington*

PakistanKarachi*

PhilippinesManila*

Singapore South KoreaBusanSeoul

TaiwanTaipei*

ThailandBangkok*

VietnamHanoiHo Chi Minh City

Alberta Calgary Edmonton*

British ColumbiaVancouver

NewfoundlandSt. John's*

Nova ScotiaHalifax*

OntarioLondonNewmarketOttawa Toronto CentralToronto EastToronto West

Quebec Montreal CentralMontreal Suburban

ManitobaWinnipeg*

New BrunswickFredericton*Moncton*Saint John*

IsraelTel Aviv*

LebanonBeirut*

Middle East/AfricaSouth AfricaCape Town*Durban* Johannesburg*Pretoria*

United Arab EmiratesDubai

ArgentinaBuenos Aires

Brazil ManausRio de JaneiroSão Paulo

ChileSantiago*

Colombia Bogota*

Latin America

AustriaVienna*

BelgiumBrussels

BulgariaPleven*Plovdiv*Sofia*

Channel IslandsJersey*

Czech RepublicPrague

DenmarkCopenhagen*

England BirminghamLondon-City London-West EndManchesterThames Valley

FranceLyonParis

GermanyBerlinDusseldorfFrankfurtHamburgMunich

GreeceAthens

HungaryBudapest

Ireland Cork* Dublin*

Italy Bologna Milan Rome

LuxembourgLuxembourg*

MacedoniaSkopje*

The NetherlandsAmsterdam

Northern IrelandBelfast*

NorwayDrammen*Oslo*Stavanger*

PolandWarsaw

PortugalLisbon

RomaniaBucharestTimisoara

Russia Moscow

Scotland Edinburgh Glasgow

Serbia Belgrade*

Slovakia Bratislava

Spain Barcelona Madrid

Sweden Stockholm

SwitzerlandBasel* Geneva* Zurich*

TurkeyIstanbul

Canada

United States

Australia/Asia Pacific

Europe

EcuadorQuito

Mexico Ciudad JuarezGuadalajara*Mexico CityMonterrey

Peru Lima

VenezuelaCaracas

AlabamaBirmingham*MobileArizonaPhoenixTempeTucson*

CaliforniaCarlsbadInland EmpireL.A. L.A. South BayL.A. WestMarin/Sonoma CtyOaklandOrange CountySacramento San Diego - DowntownSan Diego - EastgateSan FranciscoSan JoseWalnut Creek

ColoradoColorado Springs*Denver

ConnecticutHartfordStamford

DelawareWilmington

District of ColumbiaWashington, D.C.

Florida Ft. LauderdaleFt. Myers*JacksonvilleMiami OrlandoPalm Beach Gardens Tampa

GeorgiaAtlanta

Hawaii Honolulu

Illinois Chicago Chicago Suburban

IndianaIndianapolis*

KentuckyLouisville*

MainePortland

MarylandBaltimoreBethesda

MassachusettsBoston

MichiganDetroit*Grand Rapids*Grosse PointKalamazoo*Lansing*Muskegon*

MinnesotaMinneapolisMinneapolis Suburban

MissouriKansas City*St. Louis*

NevadaLas Vegas*Reno

New HampshireManchester

New JerseyEast RutherfordEdisonMorristown

New York Albany*Binghamton*Buffalo*Corning/Elmira*IslandiaIthaca*Kingston*Melville, LIN.Y. Downtown N.Y. MidtownRochester*SyracuseSyracuse*Utica*Watertown*Westchester County

North CarolinaCharlotte*Greensboro/Winston-Salem*Raleigh/CaryRaleigh/Durham*Tarboro*

OhioCincinnati*Cleveland*Columbus*Toledo*

OregonPortland

PennsylvaniaPhiladelphiaPhiladelphia SuburbanPittsburgh*

Puerto RicoSan Juan*

South Carolina Charleston* Greenville/Spartanburg*

Tennessee Memphis*Nashville*

Texas Austin*Dallas HoustonSan Antonio*

Utah Clearfield/Ogden* Park City*Provo/Orem*Salt Lake City*St. George*

VirginiaFredicksburg*McLeanNewport News*Norfolk/Virginia Beach*Richmond*Roanoke*

WashingtonBellevue Seattle

WisconsinMilwaukee*

09 3 quarter retail report

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