q4 2012 columbus retail market trends

retail trends reportGreater Columbus reGion

www.colliers.com/columbus

Expansion Lifts Market Out of RecoveryColumbus reGion overviewthe Columbus retail market recorded its third consecutive quarter of strong positive absorption with 108,252 square feet, adding to the recent trend that ten of the last eleven quarters having seen positive net absorption. the largest leases signed this quarter were nordstrom rack leasing 36,250 square feet at 3670-3772 easton Way, and star lanes leasing 35,000 square feet at 8655 lyra drive in the northeast submarket. Both of these deals made the list of the top three largest lease transactions of 2012, along with Big lots leasing 35,000 square feet at the Hill road plaza in the third quarter.

ForeCasts and reFleCtions• after being one of the most hard hit sectors during the downturn, the retail property sector continued a

strong recovery in 2012. Grocery anchored retail properties, especially in urban locations, were one of the hottest investments. Giant eagle’s transition highlighted the quarter as its 116,129 square foot grocery store at 4747 sawmill road sold for $22.4 million ($193 per square foot), and its 67,000 square foot store at 1451 5th avenue sold for $6.7 million ($99 per square foot).

• the construction outlook continues to improve as over 170,000 square feet of new space broke ground in the past ninety days. the Columbus market will see moderate to high new construction in 2013. the big story for the past quarter was the completion of the fully leased 22,789 square foot, Commons at Clark Hall located at 73-109 north Hamilton road.

• Cabela’s, a large outdoor retailer, continues construction on its 80,000 square foot store that will employ 175 full and part-time employees. the store will open the beginning of March.

market indiCators

rental rates ConverGe, biG box dipsasking rates

Q4

2012

Q1

2013*

vaCanCy

net absorption

ConstruCtion

rental rates — — *projected change to following quarter

Q4 2012 | Retail

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Anchored Strip Neighborhood Community Big Box

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

(800,000) (600,000) (400,000) (200,000)

- 200,000 400,000 600,000 800,000

1,000,000 1,200,000

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Vaca

ncy

Rate

Com

plet

ions

and

Abs

orpt

ions

Completions Absorption Vacancy Rate

vaCanCy rate over Completions and absorptionsrental rates

the average asking rental rates for Big Box has dipped to $5.92, from its previous high of $6.51. anchored strip and neighborhood centers rates have met around the $11.45 mark. the region posted positive results during the fourth quarter of 2012, with vacancy rates decreasing to 10.1 percent from 10.2 percent.

Fundamentalsthree sources are helpful when gauging retail consumer activity: the consumer confidence index, a weekly poll conducted by Gallup, and the Beige Book produced by the Federal reserve Bank semi-quarterly.

the consumer confidence index is produced by the Conference Board and is a survey of how confident consumers are in the current economic conditions by their spending and saving habits. the Conference Board Consumer Confidence index, which had declined slightly in november, posted another decrease in december. the index now stands at 65.1, down from 71.5 in november. the expectations index declined sharply to 66.5 from 80.9. the present situation index increased to 62.8 from 57.4 last month. the sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff.

Gallup’s consumer spending measure tracks the average dollar amount americans report spending or charging on a daily basis, not counting the purchase of a home, motor vehicle, or normal household bills. over the three month period between october and december, the 14-day rolling average rose from $76 to $83 with a high of $90 during the week leading up to Christmas. that is up from $73 in november and the highest monthly figure Gallup has reported since december

2008. it is also the first reading above the $80 mark since the 2008-2009 recession.

the Cleveland Federal reserve reports on consumer spending twice a quarter in the Beige Book, and data comes from qualitative surveys of retailers in the fourth district, which includes Columbus. total retail sales increased 0.5 percent in december, following a 0.4 percent increase in november. a significant chunk of that growth over the past two months has been driven by autos sales. excluding autos, retail sales increased 0.3 percent in december and fell 0.1 percent in november. still, over the past 12 months, the growth rate in overall sales (up 4.7 percent) is outpacing the ex-autos trend (4.1 percent).

the Federal reserve Bank of Cleveland reports at least once a quarter in the Federal reserve’s Beige Book about the construction activity in the fourth district, which includes the Columbus Metropolitan statistical area (Msa). at the beginning of december, the Beige Book reported new multi-family construction spending increased 0.5 percent, and is up 45.9 percent year-over-year. private nonresidential construction spending decreased 0.7 percent over the month to $294.5 billion and is up 8.2 percent year-over-year. the only positive sectors were transportation and communication, with monthly gains of 3.4 and 2.8 percent, respectively.

the Columbus retail market includes 11 suburban submarkets and the Central Business district. this includes a total inventory of 60 million square feet of space with only 1 million of that space in the CBd.

update new supply, absorption and vacancy rates

sales aCtivity

property address sales date sale priCe size sF Grantor Grantee

priCe

/ sF type submarket

4747 sawmill rd 11/6/12 $22,400,000 116,129 echo Continental Hilliard llC retail properties of america $193 Big Box northwest

1451 W. 5th ave 12/13/12 $6,650,000 67,000 Broadview Company llC Kohr royer Griffith inc. $99 Big Box southwest

4889 Chatterton road 11/28/2012 $1,234,468 48,856 Gd C associates dembena llC $25 neighborhood Center southeast

5662 Broad street 10/24/2012 $3,300,000 28,538 Viking partners Galloway llC FidC XX llC $116 neighborhood Center northwest

5536 Hamilton road 10/04/2012 $1,605,000 19,546 retail properties ltd Gosula estates ltd $82 Conv/strip Center northeast

5236-72 Cleveland avenue 10/09/2012 $670,000 17,000 retail properties ltd Marion investment Company $40 Conv/strip Center northeast

6320 e. Main street 10/26/2012 $4,800,000 14,668 reynoldsburg W investment llC reynoldsburg Wag llC $327 Freestanding southeast

1144 norton road 11/06/2012 $730,000 13,344 anchor l investment i ltd potts land investments llC $55 Conv/strip Center southwest

4345 Cleveland avenue 11/20/2012 $400,000 11,500 Cityvilla investments llC Mt sinai Church of God $35 General northeast

4784 n. High street 10/24/2012 $635,000 10,933 GnWlaaC real estate Holding llC saha properties llC $58 Freestanding northwest

Delaware County

Pickaway County

Union County

Madison County

Licking County

Fairfield County

North / Northeast

SoutheastSouthwest

Northwest

CBD

lease aCtiVity

property address lease sF total size lessee askinG priCe type submarket

3670-3772 easton Way 36,250 506,911 nordstrom rack - power Center northeast

8655-8669 lyra drive 35,074 41,889 polaris entertainment partners - anchored strip Center northeast

10-128 dillmont drive 18,900 106,832 planet Fitness $14 neighborhood Center northwest

1627-1735 n. Memorial drive 8,598 179,487 Veterans administration $12 power Center Fairfield

3670-3772 easton Way 8,000 506,911 tilly's - power Center northeast

3596-3694 e. Main street 7,153 12,000 deals and steals $10 neighborhood Center northeast

7107 e. Main street 6,560 6,560 Buyback entertainment $10 Freestanding southeast

8269-8333 lazelle road 6,400 28,000 royalty Child Care Center $13 Conv/strip Center northeast

p. 2 | Colliers international

ReseaRch & foRecast RepoRt | Q4 2012 | Retail | GReateR Columbus ReGion

employment

Unemployment is a reasonably low 5.5 percent in Columbus, and theprivate sector is gaining momentum. Unemployment dropped from 7.3percent to 5.5 percent, 180 basis points, in 2012

update market Comparisons

retail market

net absorption Construction asking rental rates

submarket total sF vacant sF vacancy % Current Quarter year-to-date Current Completions neighborhood power

CBd 1,102,826 51,399 4.7% - 1,200 71,735 11,000 $12.00 -

FairField 3,960,854 396,341 10.0% (182) 73,082 - - $14.31 $11.67

liCKinG 3,960,108 291,895 7.4% 15,083 75,040 - - $13.00 $11.81

Madison 214,406 18,772 8.8% 6,340 (15,827) - - - -

nortH delaWare 2,190,769 139,920 6.4% (2,638) (37) - - - $13.00

nortHeast 16,909,033 868,116 5.1% 67,095 80,065 25,640 22,789 $14.02 $14.11

nortHWest 13,185,712 1,200,784 9.1% 18,052 (42,060) 147,500 - $11.05 $15.27

piCKaWay 656,177 6,150 1.0% - - - - $8.50 -

soUtHeast 10,036,965 1,482,722 14.8% 6,625 (52,756) - - $8.90 $11.42

soUtHWest 7,092,147 1,547,148 21.9% 10,557 66,034 92,000 - $10.12 $7.78

Union 1,161,503 79,725 6.9% - (33,786) - - - $16.00

totals 60,494,500 6,082,972 10.1% 108,252 150,955 336,875 33,789 $11.40 $12.21


property type total sF vacant sF vacancy % Current Quarter year-to-date Current Completions (nnn)anCHored strip Center 11,984,834 1,398,078 11.7% 38,097 74,029 83,140 - $11.49

BiG BoX 7,635,821 813,021 10.6% 1,200 69,105 172,000 - $5.92

CoMMUnity 4,140,660 577,099 13.9% 4,310 (37,287) - - $10.58

ConV/strip Ctr 3,553,440 301,380 8.5% 11,304 31,097 - 22,789 $12.01

FreestandinG 4,019,270 275,680 6.9% 36,761 57,811 71,735 - $10.51

neiGHBorHood 5,469,160 751,538 13.7% 8,204 22,739 10,000 - $11.40

poWer 15,943,693 1,205,906 7.6% 14,716 (34,419) - - $12.21

reGional Ctr 663,236 136,200 20.5% - - - - $10.22

strip 133,012 33,320 25.1% - (33,320) - - $12.35

sUpr reG Ctr 6,431,125 590,750 9.2% - - - - $12.03

UrBan retail 520,249 - 0.0% - 1,200 - 11,000 -

totals 60,494,500 6,082,972 10.1% 108,252 150,955 336,875 33,789 $11.10

Quarterly Comparison and totals


Quarter, year total sF vacant sF vacancy % Current Quarter year-to-date Current Completions neighborhood powerQ3, 2012 60,494,500 6,198,833 10.2 41,157 39,054 231,000 180,000 $11.82 $11.68

Q2, 2012 60,288,465 6,522,146 10.8 110,275 (4,478) 352,789 - $12.35 $12.03

Q1, 2012 60,288,465 6,632,421 11.0 (112,378) (112,378) 280,000 - $10.80 $11.07

Q4, 2011 60,288,465 6,523,775 10.8 187,621 489,194 70,000 27,000 $11.66 $12.93


Colliers international | p. 3

Cbdthe Central Business district (CBd) absorption remains flat, but activity is sure to increase in the coming quarters as more multi-family construction projects begin and are completed, opening the way for new retail opportunities. Construction continues on nearly 1,500 new units: Flats on Vine ii (120), the Goodale (174), liberty place phase ii (200), Columbus Commons (300), Harrison park (108), aston place (59), liberty Crossing ii (200), and neighborhood launch apartments (260).

norththe north submarkets include northwest, northeast, and north delaware. the northwest submarket saw 18,052 square feet of positive absorption from a large vacancy filled at 64 Wilson Bridge road in the Worthington square. the following retailers signed leases in the revitalized mall this past quarter: pies and pints (4,500 square feet), Farmers Market (4,071), learning express (2,731), simply Baby (2,065), Face Forward (1,908), Modealise (1,791), Montero native art (1,788), nattie Cakes (1,089), and Big shot sportswear (907). planet Fitness signed an 18,900 square foot lease at 10 dillmont drive.

north-delaware saw 2,638 square feet of negative absorption this past quarter; however Golf etC signed 3,232 square feet of space at 1400 Gemini place in the Gemini place town Center.

the northeast submarket led the market in 2012, with 80,065 square feet of positive absorption, and lost no momentum this quarter after posting another 67,095 square feet of positive absorption. star lanes signed a 35,000 square foot lease to occupy the old Circuit City freestanding building at 8655 lyra drive. the Commons at Clark Hall development on the corner of north Hamilton road and Granville street was completed this quarter, adding over 22,789 square feet of positive absorption. the rusty Bucket, smash Burger, panera, Chiptole, at&t, Gahanna Vision, Menchies Frozen yogurt, and supercuts occupy the convenience strip center that recently open.

souththe southern submarkets are southeast and southwest. the southeast saw insignificant positive absorption of 6,625 square feet as five suites totaling 18,500 square feet were occupied at 6300 e. livingston avenue. the southwest submarket saw limited activity in the fourth quarter, as three deals (shihab law, Qt nails, and infinity staffing solutions) totaling 5,000 square feet filled vacancies in the West Broad plaza.

Vacancy in the southwest submarket remains the highest in the region at 22 percent. (See Page 2 for more Investment Sales Activity information)

eastthe eastern submarkets are licking and Fairfield counties. Fairfield counties absorption remained flat as a notable 8,598 square foot deal transpired at 1627-1735 north Memorial drive. the licking submarket gained 15,083 square feet of positive absorption as pink poodle Consignment Boutique and tan pro leased 1,190 square feet and 3,900 square feet respectively at southgate shopping Center in Hebron.

westthe western submarkets include Union and Madison counties. the Union submarket showed marginal change, while Madison recorded positive 6,340 square feet of absorption which is fully attributed to two deals signed in the eagleton retail Center.

market aCtivityMarket activity Volume is the sum of the absolute value of each absorption change in the market and it tells us a little more about what exactly happened to the market behind the absorption number. the Market activity Volume was more than 272,752 square feet. this is slightly below the average level of migration (302,768 square feet), meaning that retailers generally held steady with few closings.

the typical tenants seen most frequently entering the market are restaurants and food operators by a significant percentage. Fast food or fast casual restaurants are being aggressive. other types in the market include discount oriented tenants, auto parts, frozen yogurt, cell phone providers, and fitness concepts. there are currently 48 tenants looking for space between (1,000 and 10,000 square feet), and nine tenants looking for space 10,000 square feet or more.

tenants are finding operating expenses and real estate taxes continue to escalate, and ti allowance to be the biggest hurdles. With the retail leasing environment so competitive, landlords are seeing concessions to tenants as the biggest hurdle. Class a opportunities are especially competitive. another challenge is the gap in asking rates and rates sought for lease opportunities in Class B and C shopping centers. landlords are having difficultly finding good credit tenants in Class B and C centers.

Greater Columbus reGion

richard B. schuen sior CCiMCeo | principal | Columbustwo Miranova placesuite 900Columbus, ohio, 43215tel +1 614 410 5612

leslie Hobbsdirector of Marketing ohiotwo Miranova placesuite 900Columbus, ohio, 43215tel +1 614 410 5640

Jonathan schuenresearch analysttwo Miranova placesuite 900Columbus, ohio, 43215tel +1 614 437 4495

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this document/email has been prepared by Colliers international for advertising purposes. Colliers international statistics and data are audited annually and may result in revisions to previously reported quarterly and final year-end figures. sources include Columbus dispatch, Business First, Xceligent, Costar, Chain store age, Wall street Journal, Bureau of labor statistics, Bureau of economic analysis, Gallup and the Cleveland Federal reserve.

www.colliers.com/columbus

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q4 2012 columbus retail market trends

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