Q12011 Columbus Retail Market Report

RETAIL TRENDS REPORTGREATER COLUMBUS REGION

www.colliers.com/columbus

Connect FourCOLUMBUS REGION OVERVIEWThe Columbus retail market finished the first quarter 2011 with a sizable positive absorption of 198,898 square feet. This marks the fourth consecutive quarter of positive absorption for retail space. The retail market is strengthening regionally and nationally with the National Association for Business Economics reporting that more companies than at any time since 1994 reported sales gains in the first quarter. In December, the employment rate was at 7.7 percent but has since picked up to 8.5 percent in January and then dipped to 8.2 percent. Consumers are sure to be out in force as employment continues steady upward trends. Continued on page 2...

FORECASTS AND REFLECTIONS

• The retail vacancy rate improved from 11.9 percent by 4 basis points to 11.5 percent. The retail market has experienced a year of positive absorption.

• The 56,000-square-foot big box, Hobby Lobby has been completed at Polaris shopping Mall. Phase one of the Grandview Yard construction project has been completed.

• Through two years of the recession there

were only two quarters with significant negative absorption. Since the recovery began there have been no quarters with negative absorption. The Columbus retail market was very resilient in the past three years.

RENTAL RATES

Average asking rental rates increased in strip, community, and power property types. There was a significant increase in the average asking rental rate for properties of the power subtype because a few properties are no longer listing very low teaser rates, which is a good sign for the market.

MARKET INDICATORS

ERRATIC BEHAVIORAsking Rates

Q1

2011

Q2

2011*

VACANCY

NET ABSORPTION

CONSTRUCTION — —

RENTAL RATES — *Projected change to following quarter

Q1 2011 | RETAIL

$8.00

$10.00

$12.00

$14.00

$16.00

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

Rental Rates

Strip Neighborhood Community

10.5%

11.0%

11.5%

12.0%

12.5%

13.0%

13.5%

‐800,000

‐600,000

‐400,000

‐200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

Vacancy Ra

te

Completions and

Absorptions

Completions Absorption Vacancy Rate

VACANCY RATE OVER COMPLETIONS AND ABSORPTIONS

LANDLORDSLandlords are not out of the woods yet but they may be able to see the forest for the trees. Leasing has been strong in most markets for most quarters in the past year. While there are enough tenants to get the market moving there isn’t enough for competition to spark an increase in asking rental rates.

TENANTSSales are increasing generally across the board but the danger of having to pass on the increased agricultural and transportation costs to consumers may slow decisions to move into new markets.

Credit remains tough but the capital faucet locally for small businesses has been loosened with local banks committing to small business lending. Job growth in the region has been good.

MARKET ACTIVITYThe story for the quarter is quieter than average market activity. Market Volume Activity is the absolute value of the absorption in each building and it gives us a measure of how much space is

in transition. The market in the first quarter experienced slightly more than 420,000 square feet of square footage in transition. This is less than the first quarter numbers for 2008-10 by an average of 150,000 square feet. This means the loss of retail tenants has slowed significantly from third quarter 2010 to first quarter 2011.

CONSTRUCTIONMenard’s construction on Morse Road will be completed in early second quarter 2011. The Kingsdale Shopping Center in Upper Arlington in the Northwest submarket is wrapping up the final phases of construction and renovation and should begin leasing the new strip space.

New construction began in late 2010 for a 44,000-square-foot Rave movie theatre next to the 55,000-square -foot Hobby Lobby Project in Grove City. The construction of Hobby Lobby was completed in Polaris.

The Columbus retail market includes 11 suburban submarkets and the Central Business District. A total inventory of 55 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 SALES PRICE / SF TYPE

2700 Corporate Exchange

Drive

Jan 2011 $9,550,000.00 174,737 $54.65 Hotel

2631 Morse Road Feb 2011 $1,212,500.00 37,500 $32.33 Commercial

1309 St James Lutheran

Way

Jan 2011 $1,237,000.00 34,192 $36.18 Strip Center

2885 Gender Road Jan 2011 $1,500,000.00 33,146 $45.25 Free-standing

3506 Gender Road Jan 2011 $1,320,000.00 11,197 $117.89 Free-standing

LEASE ACTIVITY

PROPERTY ADDRESS LESSOR LESSEE LEASE SF ASKING PRICE / SF (NNN) TYPE

6644-6804 Perimeter

Loop Road

DDR CONTINENTAL L P Giant Eagle 19,154 N/A Neighborhood Center

1800-1942 W. Henderson

Road

Suburban Centers Inc Volunteers of America 18,281 $12.00 Strip Center

1627-1787 Olentangy

River Road

Lennox Town Center

Limited

Bravo Italian Eatery 9,000 N/A Power Center

8457-8497 Sancus

Boulevard

Polaris Sancus Retail Llc Title Boxing Club 7,034 $12.50 Neighborhood Center

3861 Park Mill Run Drive CNL INCOME & GROWTH

FUND VII LTD

Lunada 6,894 $12.50 Free-standing

Delaware County

Pickaway County

Union County

Madison County

Licking County

Fairfield County

North / Northeast

SoutheastSouthwest

Northwest

CBD

P. 2 | COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT | Q1 2011 | RETAIL | GREATER COLUMBUS REGION

DATA SET

The retail statistics are derived from a data set comprising all 20,000 square foot and above buildings in the Columbus MSA.

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 986,975 56,049 5.68 (7,956) (7,956) - - - -

FAIRFIELD 3,418,174 438,567 12.83 6,200 6,200 - - $9.89 -

LICKING 3,250,240 314,767 9.68 8,037 8,037 - - $9.43 -

MADISON 443,304 5,285 1.19 - - - - $10.00 -

NORTH DELAWARE 1,780,118 288,257 16.19 10,608 10,608 - - $12.75 -

NORTHEAST 15,137,808 1,049,418 6.93 60,263 60,263 240,000 - $13.30 $12.50

NORTHWEST 12,761,732 1,095,154 8.58 55,842 55,842 245,647 - $13.97 $20.00

PICKAWAY 694,724 10,967 1.58 - - - - $8.50 -

SOUTHEAST 9,459,758 1,331,329 14.07 29,149 29,149 109,000 - $10.51 $19.50

SOUTHWEST 6,806,523 1,799,034 26.43 38,371 38,371 - - $8.08 $22.00

UNION 1,157,257 511,02 4.42 (4,525) (4,525) - - - $18.00

TOTALS 55,896,613 6,439,929 11.52 195,989 195,989 594,647 - $11.46 $17.89


PROPERTY TYPE Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current CompletionsCOMMUNITY 8,999,075 1,184,644 13.2 18,491 216,913 - - $14.14

FREE-STANDING 7,656,757 569,248 7.4 75,446 134,374 340,000 - $9.70

NEIGHBORHOOD 17,405,444 2,467,282 14.2 (42,967) (176,097) 254,647 - $11.46

OTHER 27,000 4,610 17.1 0 (248) - - -

OUTLET 184,000 0 0.0 0 0 - - -

POWER 5,016,555 453,920 9.0 3,765 34,336 - - $17.88

REGIONAL 3,828,626 536,515 14.0 0 55,430 - - $10.97

SPECIALTY 250,000 37,938 15.2 13,316 8,523 - - -

STRIP 5,498,921 755,167 13.7 (2,743) (15,679) - - $13.32

SUPER REGIONAL 6,530,997 648,155 9.9 (7,500) 2,554 - - -

URBAN 621,975 5,545 0.9 0 14,412 - - -

TOTALS 55,896,613 6,439,929 11.52 195,989 195,989 594,647 -

QUARTERLY COMPARISON AND TOTALS


QUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions Neighborhood PowerQ4, 2010 56,019,350 6,663,024 11.9 57,808 274,518 541,647 110,000 $11.05 $12.50

Q3, 2010 56,019,350 6,720,832 12.0 236,129 216,710 595,647 176,250 $11.68 $14.57

Q2, 2010 55,843,100 6,950,296 12.4 197,025 (19,419) 771,897 - $12.71 $12.56

Q1, 2010 55,843,100 7147321 12.8 (216,444) (216,444) 727,438 - $10.84 $10.37


COLLIERS INTERNATIONAL | P. 3

CBDThe Central Business District (CBD) incurred 7,956 square feet in negative absorption and increased the vacancy rate to 5.6 percent. Notable movement downtown this quarter was the vacancy of Dunkin Donuts with Tim Horton’s at 8235 N. High Street.

NORTHThe north submarkets include Northwest, Northeast, and North Delaware. The Northeast submarket has been the strongest performing market with more than 60,000 square feet of absorption. The Northwest submarket has also been a strong performer this year with more than 55,000 square feet of positive absorption.

SOUTHThe southern submarkets are Southeast and Southwest. Following last quarter’s recovery these two submarkets performed really well. The Southeast gained 29,149 square feet and the Southwest recorded 38,371 square feet of positive absorption. The majority of net loss for the entire retail market came from these two submarkets, where together more than 160,000 square feet was vacated in first quarter 2011.

EASTThe east submarkets are Licking and Fairfield Counties. Fairfield County experienced a small uptick with 6,200 square feet of space. Licking County also experienced a small increase in absorption with 8,307 square feet.

WESTThe west submarkets include Union and Madison Counties. Low population in these submarkets means that competition between retailers is less fierce than higher populated areas of Columbus. Subsequently, the vacancy rates are low because the retail offering is already maximized relative to population. Madison County remained unchanged.

FUNDAMENTALSThe U.S. retail sector has shown good growth over the quarter. Three sources are instructive for retail consumer activity. First, the consumer confidence index, the second is a weekly poll conducted by Gallup, and the third is 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. In March, the index was 63.4 decreasing by roughly 900 basis points from 72.0 in February. In January the index had improved to 53.2 from 48.5 in December. The index was 112.5 in July 2007, six months before beginning of the recession.

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 January and March the 14-day rolling average fell from $80 to $61 with a high of $70 on March 9. The high mark of the 3-day rolling average was on March 11, the day of the first earthquake and tsunami in Japan.

The Cleveland Federal Reserve reports on consumer spending twice a quarter in the Beige Book. The data for these reports comes from qualitative surveys of retailers in the fourth district, which includes Columbus. In March, the reserve bank reported that post-holiday retail sales were generally higher than year-ago levels or ahead of plan. Some retailers said that they plan on increasing capital spending during 2011 for new stores, distribution centers, and e-business expansion, with corresponding rise in payrolls. In April, retailers reported that over the past 6 weeks sales were again generally higher than year-ago levels. Retailers had concern about increased prices from vendors, which were primarily attributed to a rise in the cost of agricultural commodities. No change in employment is expected at existing stores.

GREATER COLUMBUS REGION

Richard B. Schuen SIOR CCIMCEO | Principal | Columbus8800 Lyra DriveSuite #150Columbus, Ohio, 43240TEL +1 614 410 5612FAX +1 614 410 3312

Leslie HobbsMarketing and Research Manager8800 Lyra DriveSuite #150Columbus, Ohio, 43240TEL +1 614 410 5640FAX +1 614 410 3310

Jonathan BadgleyResearch Analyst8800 Lyra DriveSuite # 150Columbus, Ohio, 43240TEL +1 614 410 5652FAX +1 614 410 3327

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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, Wall Street Journal, Bureau of Labor Statistics, Bureau of Economic Analysis, Gallup, and the Cleveland Federal Reserve.

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