Beaver Run Resort Breckenridge, CO August 9, 2013...Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 US...

ICSC Rocky Mountain Idea Exchange | Breckenridge 2013

Market knowledge. Insight on trends. Expert forecasts.

Beaver Run ResortBreckenridge, CO

August 9, 2013



Garrick BrownDirector of ResearchCassidy Turley Northern California andChainLinks Retail Advisors National Retail

Today’s Topics

Macro-Economic OutlookColorado SnapshotsThe Macro Retail Landscape

For Research Reports and Weekly Retail Commentary email me!

[email protected]@Cassidyturley.com

2013/2014 Macro Economic Outlook

Policy vs. Housing

U.S. GDP: It’s A 2% Recovery

Source: U.S. Bureau of Economic Analysis

Q1 13 Q2 13

Contributions to GDP:

Consumption

Investment

Gov’t

Net Exports

Inventories

2.4

1.2

-0.97

-0.21

0.6

2.0

0.5

-1.0

-0.3

0.2

GDP TrackerQ2 20132.5%

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

7%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Q1 13

Q2 13

Real GDP Growth

2.5%

GDP w/o Gov’t Drag = 3.4%

Real Estate Boom

3.5%3.1%

2.7% 1.0%

SO FAR…

GDP Forecast2012 2013 Annual

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014US EconomyReal GDP Growth, % 2.0 1.3 3.1 0.4 2.5 1.4 3.1 2.7 2.2 2.5 3.6Job Growth, ths. 771 451 409 537 554 412 451 484 2,168 1,919 2,230Office‐using Job Growth, ths. 231 172 129 138 114 104 109 117 670 464 541Unemployment Rate 8.3 8.2 8.0 7.8 7.8 7.7 7.6 7.6 8.1 7.7 7.2Retail Services Growth, % 6.5 ‐0.6 5.3 6.1 3.8 5.6 4.7 8.0 4.3 5.5 6.0Inflation, % 2.5 0.8 2.3 2.1 1.9 2.1 2.2 2.2 1.9 2.1 2.9CCI 68 65 65 70 73 75 78 80 67 77 85Fed Funds Rate 0.1 0.2 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.110‐year Gov't Bond 2.0 1.8 1.6 1.7 1.9 2.1 2.2 2.4 1.8 2.1 3.1ISM Manufacturing Index 53.0 52.3 50.9 50.6 53 54 55 55 51.7 54 57West Texas Intermediate 103 93 92 88 89 92 95 97 94 93 95Office SectorNet Absorption, msf 7.20 13.81 7.18 20.01 8.2 13.1 11.8 16.8 48.2 50.0 60.3Vacancy 16.0% 15.8% 15.7% 15.4% 15.3% 15.2% 15.0% 14.9% 15.7% 15.1% 14.3%Asking Rents $21.65 $21.72 $21.72 $21.69 $21.83 $21.92 $22.02 $22.13 $21.70 $21.98 $22.42Industrial SectorNet Absorption, msf 19.12 20.36 24.62 40.89 18.4 21.3 24.8 34.7 105.0 99.2 108.1Vacancy 9.3% 9.3% 9.1% 8.9% 8.8% 8.6% 8.4% 8.3% 9.1% 8.5% 7.9%Asking Rents $5.05 $5.04 $5.04 $5.00 $5.03 $5.06 $5.09 $5.12 $5.03 $5.07 $5.12Retail SectorNet Absorption, msf 3.47 2.27 1.50 2.29 3.7 4.6 2.1 3.5 9.5 13.8 16.0 Vacancy 10.9% 10.8% 10.8% 10.7% 10.6% 10.4% 10.4% 10.3% 10.8% 10.4% 10.1%Asking Rents $19.00 $19.03 $19.05 $19.08 $19.09 $19.11 $19.12 $19.14 $19.04 $19.12 $19.17 Apartment SectorNet Absorption, ths. sf 36.02 32.03 25.10 46.99 25.0 31.0 43.3 42.7 140.1 142.0 159.8Vacancy 5.0% 4.8% 4.7% 4.5% 4.5% 4.5% 4.4% 4.4% 4.8% 4.5% 4.5%Asking Rents $1,070 $1,082 $1,091 $1,097 $1,104 $1,122 $1,127 $1,136 $1,085 $1,122 $1,160

2014 GDP GROWTH3.6%

BACK TO “NORMAL”

Upward Bias: Equities

2000

4000

6000

8000

10000

12000

14000

16000

105000

155000

205000

255000

305000

355000

405000

455000

Apr 1

993

Feb 1994

Dec 199

4Oct 199

5Au

g 19

96Jun 1997

Apr 1

998

Feb 1999

Dec 199

9Oct 200

0Au

g 20

01Jun 2002

Apr 2

003

Feb 2004

Dec 200

4Oct 200

5Au

g 20

06Jun 2007

Apr 2

008

Feb 2009

Dec 200

9Oct 201

0Au

g 20

11Jun 2012

Apr 2

013

Value of Private non‐residential, (Mil. $, SAAR) DJIA 30 Industries

Stocks Rise, CRE Follows Suit

Source: Moody’s, Cassidy Turley

2.3 Trillion Dollars$

Rising PE Ratios:

Better business growth

More profits

More jobs More real estate demand

60

65

70

75

80

85

Feb‐13 Mar‐13 Apr‐13 May‐13 Jun‐13

Consum

er Con

fiden

ce In

dex, 1985=100, SA Expected

Actual

Confidence at Recovery High

Expect More..

$

JOBS BUSINESS

17% 12%

April – May 2013 Source: The Conference Board

Higher taxes

Cyprus crisis

Sequester

Previous Recovery High = 72 (Feb 2011)

Risks on the Decline

Probability the U.S. will bein recession in 6 months, %

9

20

22

24

26

28

30

32

34

36

38

Oct‐12 Nov‐12 Dec‐12 Jan‐13 Feb‐13 Mar‐13 Apr‐13

‐4

‐2

0

2

4

6

8

Recession GDP Growth, %

U.S. Business Cycles:Average Expansion = 8 years

8 yrs. 10 yrs. 6 yrs.

Source: Moody’s Analytics; U.S. Bureau of Economic Analysis

78%

Momentum TrackerJob Growth: April 2013 vs. April 2012, % Change

Momentum TrackerHouston 4.1% Indianapolis 1.5%Salt Lake City 4.0% Orlando 1.4%Austin 3.7% Portland 1.4%Nashville 3.5% Oakland 1.4%Tampa 3.4% Boston 1.3%Dallas 2.9% San Antonio 1.3%Bismarck 2.9% Newark 1.3%San Jose 2.7% Philadelphia 1.1%San Francisco 2.6% Sacramento 1.0%Denver 2.6% Raleigh 1.0%Louisville 2.6% Cincinnati 1.0%Phoenix 2.3% Worcester 1.0%Seattle 2.3% Chicago 0.9%Las Vegas 2.3% Pittsburgh 0.9%Charlotte 2.2% DC Metro 0.8%San Diego 2.1% Kansas City 0.6%Atlanta 2.0% Memphis 0.6%Edison 2.0% St. Louis 0.5%Oklahoma City 2.0% New Orleans 0.5%Los Angeles 1.9% Milwaukee 0.1%Baltimore 1.9% Detroit 0.1%Minneapolis 1.7% Cleveland ‐0.1%Riverside 1.7% Dayton ‐0.5%

Represent the changein ranking since 2011.

Source: Bureau of Labor Statistics

Salt Lake CityTampaDenver

LouisvillePhoenixAtlanta

Baltimore

378 Metros281 Job Gains

Still… A Summer Swoon?

Source: Bureau of Labor Statistics

Job growth starts the year strong then sputters

20112011 20122012 2013201320102010

Jan - May

Jun - SeptJun - Sept

Jan - May

Jun - Sept

Jan - May

Jun - Sept

Jan - Apr

Japanese Tsunami

Arab Spring S&P

Downgrade Greek Bailout

Extreme Weather

Fiscal Cliff

851k

‐261k

889k

570k

899k

543k

783k

Price of Policy Changes/Sequester

$0.9

$1.0

$1.1

$1.2

$1.3

$1.4

$1.5

$1.6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Discretionary Spending No Sequester Sequester pulled back

Discretionary Spending, trillions

Recovery Act

Stimulus fades

Debt ceiling deal Aug 2011 - reduced spending by $1 trillion over next 10 years

Sequester implemented March 1, 2013

Source: White House, Cassidy Turley

2014 last year of decline for discretionary spending

Cuts: Pain Beyond the Majors

Drop in Federal Employment since 2011, % chg.

Cincinnati-4.8%Cincinnati-4.8%

Chicago-3.7%Chicago-3.7%

Dallas-2.8%Dallas-2.8%

New York-2.5%New York-2.5%

DC Metro-2.2%DC Metro-2.2%

Minneapolis-4.3%Minneapolis-4.3%

Phoenix-1.9%Phoenix-1.9%

Detroit-3.5%Detroit-3.5%

Naples, FL-15.3%Naples, FL-15.3%

Corvallis, OR-15.3%Corvallis, OR-15.3%

Longview, TX-16.9%Longview, TX-16.9%

Boulder, CO-6.5%Boulder, CO-6.5%

Mount Vernon, WA-19.0%Mount Vernon, WA-19.0%

Hickory, NC-15.2%Hickory, NC-15.2%

Great Falls, MT-8.9%Great Falls, MT-8.9%

Wichita, KS-10.3%Wichita, KS-10.3%

Idaho Falls, ID-10.6%Idaho Falls, ID-10.6%

Gadsden, AL-45.0%Gadsden, AL-45.0%

Oshkosh, WI-19.4%Oshkosh, WI-19.4%

Victoria, TX-16.3%Victoria, TX-16.3%

Napa, CA-38.0%Napa, CA-38.0%

Provo, UT-7.9%Provo, UT-7.9%San Francisco

-4.5%San Francisco-4.5%

San Diego0%San Diego0%

Metro Area

Micro Metro

Source; Bureau of Labor Statistics

Monetary Stimulus

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

U.S. Monetary Base (U.S. $bil., LHS)

End of QE1

End of QE2

QE3

Federal Reserve buying $40 billion in treasury securities each month

Source: U.S. Board of Governors of the Federal Reserve System

QE3 Debate is Good News

But QE3 will most likely last through 2013

Housing is Finally Back!

Upward Bias: Housing

Source: Cassidy Turley

• Home sales are highest in 6 years

• Home prices rising at a rate of 10%

• Housing starts expected to double over next 2 years

Housing Surge

125

127

129

131

133

135

137

139

141

143

2011Q42012Q12012Q22012Q32012Q42013Q1

Case‐Shiller, U.S. Home Price Index

Economic Impact

Housing adds 80 bps to GDP Growth in Q1; residential investment added 30bps wealth effect added 50 bps

1%

33% of GDP Growth in Q1 is Linked to Housing

Impact On CRE

Spen

ding

• Spending: Every $1 increase in home values boosts consumer spending by 10 cents

• Economic Growth: Housing contributes 1% to GDP during recoveries

• Job Growth: Legal, financing, construction, insurance, warehousing – all link to housing

Job

Gro

wth

Dem

and

F O R E C A S T

3 Million Units

0

500

1,000

1,500

2,000

2,500

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Annual Household Formation

33% of GDP Growth in Q1 is Linked to Housing

Source: National Association of Homebuilders, Census Bureau, Cassidy Turley Research

3.5 Million Units of Pent-Up Demand

20 Year Average

1.2 Million

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

‐10,000

40,000

90,000

140,000

190,000

240,000

200020012002200320042005200620072008200920102011201220132014201520162017

Recession Net Absorption, # units New Supply (# units)

Renter Household Formation Vacancy Rate, %

Multifamily Market is Underbuilt

Source: Reis; NBER

Forecast1 Home = 3.05 Jobs

But Housing Will Trump Policy

Colorado Snapshot

Public Vs. FEDERAL Private Sector Job Dependence Clearly Visible…

Unemployment RateJune 2013

Colorado 7.0%

Boulder 6.1%

Fort Collins 6.2%

Denver 7.3%

Grand Junction 9.0%

Colorado Springs 9.1%

Pueblo 10.5%

60,000 New Jobs Added Over Last Year!

Seventh Fastest Job Growth in the Nation Since Recession

Employment Heating Up…Employment Increased by 2.7% Over Past Year

Employment 12 Month Change +/‐

Construction 8.0%

Leisure & Hospitality 5.5%

Professional & Business Services 4.6%

Education & Health Services 2.9%

Government 2.0%

Other Services 1.7%

Trade, Transportation & Utilities 0.9%

Manufacturing 0.8%

Construction Exploding… 75% of Gains in Last Three Months

Rocky Mountain Highs

1. Strong Economic Growth—Statewide GDP Currently at 2.1% but Upward Revision Expected

2. Strong Job Growth3. In-Migration (70k People Moved to

Colorado over Past Year)4. Local Housing Didn’t Take Major Hits

During Downturn but Poised for More Growth

5. More Construction Jobs Coming = Lower Unemployment = Virtuous Cycle

Denver Emerging

Hottest of the Second Tier Retail Markets

2013 Retail Big Picture

Tech Changes Everything

2013 Macro Economic Outlook

“We Always Over Estimate the Change That Will Occur Over the Next Two Years and Underestimate the Change That Will Occur in the Next Ten.”

Bill Gates, The Road Ahead1996

CRE Demand Metrics

0

20

40

60

80

100

120

140

160

Retail (msf) Office (msf) Industrial (msf) Apartment (000's)

2013 AnnualizedPre-recession Average

Net Absorption in 2013 vs. Pre-recession Annual Averages

CRE Demand Metrics

Source: Cassidy Turley, Reis

Industrial Space is the Winner!

Occupancy Growth

MSF (Q4-2012)

MSF (Q1-2013)

“Big Box” on FireWhat’s Hot? Bulk Warehouse!

• Newly built• 250k or larger• 28’ ceiling heights or greater

• ESFR sprinkler system

• Multiple loading points

• Near interstates

New Bulk Warehouse

Anatomy of Mega Bulk…

Bigger is Better…

Mega Bulk Warehouse Product (Combo Distribution/E-Commerce Fulfillment Centers) Driving Demand. The Old Bulk Warehouse The New Bulk Warehouse

D.C. to Supply 20 or More Stores D.C. to Supply 20 or More Stores/Fulfillment Center to Handle 20,000+ Daily Direct Orders

100,000 SF + 300,000 SF +

Located near Interstates, Rail or Ports Located near Interstates, Rail or Ports and Generally MUST be Near UPS or FedEx Hubs

Heavier Load Floors/24’ Clear or More Even Heavier Load Floors/32’ Clear or More

Sprinkler Systems/HVAC a PLUS ESFR/HVAC a NECESSITY

20 or More Dock Doors & Cross‐Dock Capabilities a PLUS

Cross‐Dock Capabilities and 50+ Dock Doors a NECESSITY

Extra Land for Trucks/Parking a PLUS Extra Land to Support 1,000 Workers or More and Extra Truck Parking a NECESSITY

The Amazon Effect

$50B in Sales 2012• Amazon Products = 50%

Beta testing same day delivery in 10 select markets• Likely to launch limited

national within next 12 months

Typical Size of one DC = 1MSF

Currently Occupancy DC = 50MSF

2016 Occupancy DC = 90MSF

Distribution Center Footprint

CRE Demand Metrics

0

20

40

60

80

100

120

140

160

Retail (msf) Office (msf) Industrial (msf) Apartment (000's)

2013 AnnualizedPre-recession Average

Net Absorption in 2013 vs. Pre-recession Annual Averages

CRE Demand Metrics

Source: Cassidy Turley, Reis

E-CommerceAnnual Retail Sales Growth

Excludes motor vehicles, gas stations, food and beverage stores, health & personal care, food services & drink places.

Source: Citi Research; Department of Commerce

1,777

1,877 1,9152,014 2,105

2,189

143 165 190 221 254 292

-5%

0%

5%

10%

15%

20%

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014

Y/Y

Cha

nge

%

Gro

wth

in $

B

U.S. Retail U.S. Online Retail Retail % Change Online % Change

Online vs. Traditional

Impact of Smartphones & Tablets

Source: ???

U.S. Online Retail Sales

Source: ????

Computer & consumer electronics

22%

Apparel & accessories

18%

Books music video

9%Auto & parts

8%

Furniture & home

furnishings7%

Health & personal care

5%

Office equipment &

supplies4%

Toys & hobby3%

Food & beverage

2%

Other22%

By Category

U.S. Chain Store Sales Up, But…

Source: ICSC

The Impact of E-Commerce

Mall Non‐Anchor Sales Productivity

Sales PSF 2011 2012 2013 YTDApparel and Shoes $357 $379 $364Women's Ready to Wear ‐ Total $285 $292 $283Women's Accessories and Specialties $543 $582 $555Men's Apparel $333 $356 $352Children's Apparel $341 $352 $299Family Apparel $358 $380 $363Women's Shoe Stores $451 $473 $546Men's Shoe Stores $509 $543 $569Family Shoe Stores $323 $337 $329Athletic Shoe Stores $360 $409 $423Children's Shoe Stores $410 $473 $458Apparel and Accessories ‐Misc. $808 $976 $925

Source: ICSC

Is Showing…


Sales PSF 2011 2012 2013 YTDFurnishings $947 $1,108 $1,189Home Furniture and Furnishings $382 $423 $401Home Entertainment and Electronics $1,487 $1,778 $1,980Other GAFO‐Type $526 $558 $573Stationery/Cards/Gifts/Novelty $306 $318 $312Books $207 $200 $141Sporting Goods/Bicycles $249 $276 $287Toys/Educational/Hobby $427 $478 $485Personal Care $645 $720 $760Jewelry $1,002 $1,053 $1,095Other GAFO‐Type‐Miscellaneous $435 $427 $417Total GAFO‐Type $437 $469 $466

Source: ICSC

On U.S. Mall Sales…


Sales PSF 2011 2012 2013 YTDFood Service $554 $579 $583Fast Food $536 $547 $535Food Court $829 $879 $881Restaurants $489 $513 $522Other Non‐GAFO Categories $265 $276 $275Specialty Food Stores $572 $624 $609Drug/HBA $523 $527 $495Personal Services $356 $360 $355Theaters $99 $99 $96Mall Entertainment $98 $99 $110TOTAL NON‐GAFO‐Type $385 $403 $407GRAND TOTAL $426 $455 $454

Source: ICSC

E-Commerce Changing Everything

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

6% 7%7% 7%

8% 8% 10% 12% 14% 16% 18%20% 22%

24% 26% 28% 30%

Likely to reach 30% of all retail sales by 2025…

Source: Deloitte

U.S. Retail E-Commerce Sales as a Portion of Total U.S. Retail Sales

Good News/Bad News

Announced Retail Store Closings

0

500

1,000

1,500

2,000

2,500

3,000

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Source: ICSC, PNC

Retail closures/failures are actually down…

Announced Retail Store Openings

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Source: ICSC, PNC

Planned openings are up…Slightly…

Who Is Growing?

Growth at the Far Ends of Economic Spectrum

Luxury Retailers Back

Discounters Exploding

Mid-Priced Retailers Shrinking (Mostly)

Growth 2013/2014

Growing Disparity in Class Translates…

2013Bottom 90%: 52.1%

Who Is Growing?

Retailers NOT Competing With Online Sales

Restaurants

Grocery/Food Related

Service Related

Growth 2013/2014

E-Commerce Impacting Retailer Growth…

17,20815,935

3,4371,655 1,052 1,016 712

Planned Unit Growth by Retail Sector (Next 12 Months)

42%

Restaurant Other Apparel Dollar Home Grocery Drug

The retail marketplace will change more in the next 5 years than it has in the past 20.

No new Rooftops to

follow

High Density Population

Higher Levels of Income

Higher Levels of

Jobs

Good Future Growth

ProspectsGrowing RetailersLooking for

“Sure Things”

What Are They Looking For?

What Are They Looking For?

CLASS A

EVERYWERE

CLASS B

DEMAND SPILLING OVER IN STRONGER MARKETS

CLASS C

Mom and Pops

Bottom Feeders

Where Are They Looking?

HOT!

WARM! MODERATE!

2013 – 2014 Retailer Growth… Hot

DECLINING

↑ Fitness/Health/Spa Concepts↑ Drug Stores↑ Thrift Stores↑ Grocery (Smaller Format Concepts)

Discount GrocersEthnic GrocersOrganic GrocersUpscale Grocers

↑ Fast Food↑ Fast Casual↑ Automotive ↑ Discounters↑ Dollar Stores

↑ Off-Price Apparel↑ Pet Supplies↑ Sporting Goods↑ Wireless Stores↑ Banks

Who’s Hot?

DECLINING

↓ Bookstores↓ Video Stores↓ Do-It-Yourself Home Stores↓ Mid-priced apparel↓ Mid-priced grocery

(particularly unionized)↓ Office Supplies↓ Stationary/Gift Shops↓ Shipping/Postal Stores↓ And Casual Dining

(Older, Struggling Concepts Shrinking)

DECLINING

2013 – 2014 Retailer Growth… Not!

Who’s Not?

And the Bad News...

Retailers Shrinking Footprints

Sharp Contraction Among Segments With Heavy E-Commerce Competition

Office Supplies

Consumer Electronics

Bookstores

Negative to Flat Growth

Mid-Priced Hard Goods

Mid-Priced, Unionized Grocery (Especially Smaller & Regional)

Garrick’s Crystal Ball…

Landlords Adapting…

Experiential Retail—Make Shopping Centers the Center of the Community

Movies

Concerts

Fashion Shows

DIY Workshops

Cooking Demos

Wine/Food Events

Yoga/Fitness

Landlords Adapting…

Omni-Channel Use of Space

Creative Use of Vacant Space—Window Shopping

Retailers Strike Back…

Experiential Retailing

Interactive Displays

More Store Events


Omni-Channel Retailing

Focusing on Building E-Commerce Platforms



In-Store Digital Touch Screens

Greater Coordination Bricks and Mortar/E-Commerce



Building Same Day Delivery Capabilities

Retailers Strike Back…Retailers Strike Back…

Tracking Consumer Behavior on Their Smartphones

Offering Free Wi-Fi and tracking it…


Omni-Channel Retailing/Experiential Retailing

Better Use of M-Commerce


Omni-Channel Retailing/Experiential Retailing

Better Use of M-CommerceBIG BROTHER

WANTS TO SELL YOU TOILET

PAPER

But What Does it Mean for Real Estate?!

CLASS B

CLASS C

CLASS A

Luxury

Mid-Price

Discount/Dollar

But What Does it Mean for Real Estate?!

MID-PRICE

DISCOUNT/DOLLAR

LUXURY

Malls… Sales of $350 PSF

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2007

2008

2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Mall Vacancy

Class A

All Others

Mall Vacancy Holding…

Big Difference Between Class

Source: Costar/Cassidy Turley Research

Feeling Good in the Neighborhood

Largely Business as Usual for Neighborhood Centers

Grocery/Drug Anchors Less Impacted by E-Commerce

Tenant Mixes Traditionally:

Restaurants

Service

Mom-and-Pop (Coming Back W/Home Values)

Continued Slow Improvement…

Slow Return of Mom and Pops Will Accelerate Pace

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

2007

2008

2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Neighborhood Center Vacancy

NeighborhoodCenter Vacancy


But Otherwise…

The New Shopping Center: More Food-Related

More Service-Oriented

More Entertainment

Mixed-use

Live at the Mall

Built-in Demos

More Office/Retail

Blending of Formats

Power Centers Must Adapt

Fewer Large Tenants Growing

Nearly ALL Single Concept Box Users Looking to Shrink

Pure Power Centers Will Need to Shift to Quasi-Neighborhood or Quasi-Lifestyle

Replace Shrinking Concepts With Food Related Retailers

But Not Down… Yet

Target/Walmart Anchored Centers Immune

Discounters Taking Vacant Boxes

NO NEW CENTERS ON MARKET

Power Center Vacancy Actually Falling…

Power Centers Adapting

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2007

2008

2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Power Center Vacancy

PowerCenterVacancy


Landlord Outlook for 2014

Continued Gradual ImprovementShortage of Class A SpaceEscalating Improvement of

Fundamentals for Neighborhood Centers

Lack of Construction/New Product Inhibit Growth in CA Coastal Markets

New Development Pick Up by Late 2014

Rental Rate Growth for Class ARental Rate Growth for Class B+Class C? Forget About It..



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Beaver Run Resort Breckenridge, CO August 9, 2013...Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 US...

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