Walnut Creek Downtown

Retail Market OverviewFourth Quarter 2016

Negative Absorption for First Time in Two Years

Walnut Creek Downtown | Retail Market OverviewFourth Quarter 2016

Retail Area Total SF Vacant SF Vacancy Rate

Broadway Plaza 921,950 19,742 2.1%

Historic Downtown 576,096 47,174 8.2%

West of California 183,710 27,214 14.8%

Plaza Escuela/Talbots 170,835 15,500 9.1%

Target 141,558 0 0.0%

East of Broadway 118,595 0 0.0%

Olympia Place 105,332 0 0.0%

The Corners 92,354 0 0.0%

North of Civic 99,668 0 0.0%

Main Street Plaza 79,378 5,118 6.4%

South of Newell 62,319 0 0.0%

Newell Promenade 75,457 18,365 24.3%

Total 2,627,252 133,113 5.1%

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6

Retail Trade Areas5

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1

87

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Q4 2016: SummaryOverall vacancy in Downtown Walnut Creek rose from 4.8% to 5.1% during Q4, continuing to reach its highest level in five years. For the first time since Q4 2014, Downtown Walnut Creek experienced negative net absorp-tion of 4,048 SF. Although this is a substantial difference from Q3’s positive net absorption of 105,576 SF, Q3’s positive net absorption was largely the result of the 132,623 SF in new inventory coming online at Broadway Plaza. Excluding the new Broadway Plaza inventory that came online, the rest of Downtown Walnut Creek actually experienced negative net absorption of 27,047 SF in Q3.Downtown Walnut Creek has continued to experience negative net absorption outside of Broadway Plaza for the sec-ond straight quarter, however the downtown Walnut Creek occupancy rate remains healthy at 94.90%.

Vacancy in Historic Downtown continued increased from 5.1% to 8.2%, while vacancy in New Downtown south of Mt. Diablo Boulevard slightly increased from 4.22% to 5.56%. The Historic Downtown’s share of overall vacancy increased in Q4, rising from 28% to 35%. Q4’s increase in vacancy and negative net absorption in Downtown Walnut Creek can be attributed to the increasing rental rates and the relocation of existing downtown retailers to Broadway Plaza. In Q4 2016, H&M relocated to Broadway Plaza from their previous downtown location on Mt. Diablo, leaving behind a 26,074 SF vacant space. The market rent set by premium retailers located at the Broadway Plaza and the surrounding buildings located on Mt. Diablo and N. Main St have made downtown Walnut Creek a high barrier to entry submarket.

The Downtown Walnut Creek retail market experienced an increase in total vacancy rising from 127,018 SF to 133,113 SF in Q4. The vacancy rate has risen largely due to the lack of leasing activity in Q4, as well as the relocation of H&M. Broadway Plaza experienced the most activity during Q4. Major retailers that have opened new locations at Broadway Plaza this past quarter include: H&M, Zara, True Food Kitchen, and Kendra Scott. Phase III of Broadway Plaza’s expansion project will begin in Q1 2017, with Apple’s new store slated to open in the Summer of 2018.

0%

1%

2%

3%

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5%

6%

0

20,000

40,000

60,000

80,000

100,000

3.1 3.5 3.6 3.1 2.8 2.6 2.7 2.9 3.3 3.3 3.4 3.1 3.1 3.8 4.8 5.1

Overall WC Downtown Vacancy Rate

Q11

3

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

Q41

5

Q11

6

Q21

6

Q31

6

Q41

6

2013 2014 2015 2016

Walnut Creek Downtown | Retail Market OverviewFourth Quarter 2016

Walnut Creek’s Retail Market

The Walnut Creek retail market is the

premier shopping destination in the

East Bay and home to a wide variety of

premium branded retailers. Tiffany & Co.,

Neiman Marcus, Nordstrom, Coach, Crate

& Barrel, Banana Republic, Talbots, Apple

and numerous other best-of-class retailers

serve the entire East Bay market from stores

located in this unique, open air retail landscape

that mixes successful restaurant, retail and

entertainment destinations.

Downtown Walnut Creek offers a rare mixture

of newer retail centers and an historic shopping

district that blend seamlessly.

$140

$120

$100

$80

$60

$40

$20

$0

Broa

dway

Pla

za

Hist

oric

Dow

ntow

n

Subu

rban

Wal

nut C

reek

Rental RatesKey Findings from the Retail Sector

� Downtown Walnut Creek experienced negative net absorption of

4,048 SF during the fourth quarter

� Overall vacancy rose from 4.8 to 5.1%

� Downtown Walnut Creek has experienced negative net absorption

for the first time since Q4 2014

� Q4’s negative net absorption was largely due to slow leasing activity

and H&M’s relocation to Broadway Plaza

� H&M, Kendra Scott, Zara, and True Food Kitchen all opened at Broad-

way Plaza in Q4

� Broadway Plaza’s expansion project will continue in Q12017 as they

begin Phase III of the project

Walnut Creek Downtown | Retail Market OverviewFourth Quarter 2016

Vacancy Rate vs Available (SF)Vacancy Rate vs Absorption (SF)

Q11

3

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

Q41

5

Q11

6

Q21

6

Q31

6

Q41

6

0%

1%

2%

3%

4%

5%

6%2013 2014 2015 2016

Q11

3

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

Q41

5

Q11

6

Q21

6

Q31

6

Q41

6

0%

1%

2%

3%

4%

5%

6%2013 2014 2015 2016

2013 2014 2015 2016

-20000

0

20000

40000

60000

80000

100000

120000

Net Absorption (SF)Q

113

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

Q41

5

Q11

6

Q21

6

Q31

6

Q41

6

Vacancy Rate Excluding Spaces 10k+ SF

0%

1%

2%

3%

4%

5%

6%

7%

8%

5.0 5.8 5.5 5.1 4.4 4.0 4.2 5.0 5.0 5.0 7.3 6.1 6.0 6.5 6.5 6.7

20142013 2015 201620142013 2015 2016

Vacancy Rate Excluding Anchors 30k+ SF

0%

1%

2%

3%

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5%

6%

7%

8%

9%

10%

4.7 5.4 5.1 4.8 4.3 4.0 4.2 4.4 5.1 5.1 5.3 4.8 4.7 5.8 8.9 7.5

Q11

3

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

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Q21

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Q31

5

Q41

5

Q11

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Q21

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Q41

6

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Q21

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Q31

3

Q41

3

Q11

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Q21

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Q31

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Q41

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Q21

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Q41

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Q11

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Q21

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Q31

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Q41

6

0

30000

60000

90000

120000

150000

Gross Absorption (SF)

20142013 2015 2016

Q11

3

Q21

3

Q31

3

Q41

3

Q11

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Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

Q41

5

Q11

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Q21

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Q31

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Q41

6

0

30000

60000

90000

120000

150000

40000

80000

120000

160000

3.1 3.5 3.6 3.1 2.8 2.6 2.7 2.9 3.3 3.3 3.4 3.1 3.1 3.8 4.8 5.1 3.1 3.5 3.6 3.1 2.8 2.6 2.7 2.9 3.3 3.3 3.4 3.1 3.1 3.8 4.8 5.1

Walnut Creek Downtown | Retail Market OverviewFourth Quarter 2016

Neighborhood Center Summary � The twelve shopping centers comprising Walnut Creek’s neighbor-

hood shopping center inventory remain near full occupancy, as Q4 finished at a 99.32% occupancy rate

� Whole Foods Market and PetSmart opened at Encina Grande in Q4

� The Orchards, Walnut Creek’s newest neighborhood center, opened at the end of Q3 2016. Located at the same intersection as Encina Grande, retailers such as Safeway, Stein Mart, Wells Fargo, Petco, Pancheros Mexican Grill, Starbucks and MOD Pizza have opened through Q3 and Q4 2016. Retailers such as CRUNCH Fitness, Burger Lounge, Jack’s Urban Eats, Elements Massage, and SafeAmerica are scheduled to open in 2017

� The market continues to remain healthy, as neighborhood center occupancy remained at 99.32%.

� Ten out of the twelve neighborhood shopping centers are at 100% occupancy

� Rent levels remain at all-time highs both in the suburban Walnut Creek market and neighboring communities

9

10

12

11

1

5

2

313

4

8

76

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5

2

3

4

8

9

10

11

12

13

7

6

Rossmoor Town Center

Citrus Marketplace

Encina Grande

Ygnacio Plaza

Geary Marketplace

Countrywood

Walgreens/BevMo Center

Trader Joes Newell Center

Palo Verdes Mall

Downtown CVS

Downtown Safeway

Downtown Whole Foods

The Orchards at Walnut Creek

Center Name

75%

80%

85%

90%

95%

100%

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

2013 2014 2015 2016

Neighborhood Center Occupancy Rate

97.9

5

98.2

3

98.9

7

98.1

2

97.3

3

98.6

5

98.3

1

98.0

6

98.7

6

98.8

7

96.9

7

97.1

3

97.1

3

99.3

2

99.3

2

Walnut Creek Downtown | Retail Market OverviewFourth Quarter 2016

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Recent Transactions

F&M Bankconsummated a 2,842 SF

five year lease at

1330 N BroadwayWalnut Creek, CA

The firm exclusivelyrepresented the lessor,

Greater Bay Development Co.,in the transaction.

THE VILLAGE S Main St & Newell Ave, Walnut Creek, CA

Scout & Molly's Boutiqueconsummated a 1,046 SF,

10-year lease at

Main Street PlazaWalnut Creek, CA

The firm exclusivelyrepresented both the lessor,

Cortese Investment Co.,and the lessee in the transaction.

Blue Mercuryconsummated a 2,965 SF,

10 year lease at

La Fiesta SquareLafayette, CA

The firm exclusivelyrepresented the lessor,

Cortese Investment Co.,in the transaction.

Smart & Finalconsummated a 645 SF,

10 year lease at

La Fiesta SquareLafayette, CA

The firm exclusively represented the lessor,

Cortese Investment Co.,in the transaction.

ABOUT THE FIRM

John Cumbelich & Associates is a San Francisco Bay Area firm that provides

commercial real estate services to Fortune 500 retailers and select owners

and developers of retail commercial properties. The firm’s expertise is in developing store networks for retailers seeking to penetrate the

Northern California marketplace, and the representation of premier power

center and lifestyle developments.

John CumbelichChief Executive Officerjohn@cumbelich.com

CA BRE #01006249

Tim SeilerPartner

tim@cumbelich.com CA BRE #01076263

Joe Kuvetakisjoe@cumbelich.com

CA BRE #01854159

Chris Miccochris@cumbelich.com

CA BRE #01393600

Marc Ninyomarc@cumbelich.com

CA BRE #01991686

Brandon Nortonbrandon@cumbelich.com

CA BRE #01985777

JOHN CUMBELICH & ASSOCIATES1330 North Broadway, Suite 200A

Walnut Creek, CA 94596

TELEPHONE 925.935.5400WWW.CUMBELICH.COM