columbus retail market report 2q2011

RETAIL TRENDS REPORTGREATER COLUMBUS REGION

www.colliers.com/columbus

Growth SustainedCOLUMBUS REGION OVERVIEWThe Columbus retail market finished the second quarter 2011 with a bump in positive absorption of 30,507 square feet. This marks the fourth consecutive quarter of positive absorption for retail space. Unemployment has increased by 1.1 percent since March 2011 and this may alter consumer spending throughout the rest of the year. The strong identity of entrepreneurship and creative restraunteering remains a significant growth advantage for Columbus as new concepts are being rolled out all over the city. Continued on page 2...

FORECASTS AND REFLECTIONS

• The retail vacancy rate edged downward from 11.5 percent by 1 basis points to 11.4 percent. The retail market has experienced a full year of positive absorption and seen asking rates rise significantly over that time.

• There are a few ongoing construction projects such as a 44,000-square-foot Rave movie theatre next to the 55,000-square -foot Hobby Lobby Project in Grove City, as well as a X-square-foot Kohl’s

• One major construction project wrapped up this quarter. Menard’s completed a 240,000 square foot store completed a super store in the Northeast submarket.

• Consumers have generally been back in force. The unemployment news over the next half of the year will dictate discretionary demand as consumers have been sensitive to changes in national unemployment numbers

RENTAL RATES

Average asking rental rates decreased in strip and neighborhood but increased in community. The softening of prices this quarter was not a significant drop in the average

MARKET INDICATORS

STEADILY UPWARDAsking Rates

Q2

2011

Q3

2011*

VACANCY

NET ABSORPTION

CONSTRUCTION — —

RENTAL RATES — *Projected change to following quarter

Q2 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

2Q11

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

2Q11

Vacancy Ra

te

Completions and

Absorptions

Completions Absorption Vacancy Rate

VACANCY RATE OVER COMPLETIONS AND ABSORPTIONS

LANDLORDSLandlords are in a much better position in second quarter 2011 than second quarter 2010 as leasing has been positive throughout the year. Landlords have more options and can choose the best tenant . Depending on the capital position of the landlord, they are either on par with tenants or are still uphill with build-out and rental rate negotiations.

TENANTSTenants are spending a little more time on site selection. As the market turns, they want to be positioned for either a long or full recovery. There are a few new concepts entering the fray in multiple locations throughout the city such as a resurgence of frozen yogurt establishments.

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 second quarter experienced slightly more than 515,000 square feet of square footage in transition. This level is

double the amount of movement in second quarter 2009 and 2008, and half of the amount of second quarter 2010.

CONSTRUCTIONMenard’s construction of a 240,000-square-foot power center on Morse Road finished as expected in early second quarter 2011. New construction began in late 2010 on a 44,000-square-foot Rave movie theatre next to the 55,000-square-foot Hobby Lobby Project in Grove City. HL scheduled to open in August and Kohl’s in September. Kohl’s and Hobby Lobby will vacate their stores on W. Broad St.

Some smaller retail locations are also under construction. Tire Discounter has broken ground for a freestanding store next to Aldi’s across from Glenwood Common’s on Rte. 36/37 in Delaware. Telhio Credit Union is constructing a freestanding building will soon open on Buckeye Parkway in Grove City. In Tuttle Mall’s parking lot, a new freestanding BJ’s Restaurant & Brewhouse is under construction.

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 SIZE SF SALE PRICE SALES PRICE / SF SALES DATE SUBMARKET TYPE

650 N. State Street 77,070 $15,828,247.00 $205.37 May 2011 May 2011 Freestanding

1111-1221 Hill Road 90,780 $2,050,000.00 $22.58 April 2011 April 2011 Strip Center

3944 Powell Road 2,782 $1,905,000.00 $684.75 May 2011 May 2011 Freestanding

8 Coshocton Street 7,350 $1,100,000.00 $149.65 April 2011 April 2011 Freestanding

1207 Maple Avenue 10,029 $990,000.00 $98.71 May 2011 May 2011 Strip

LEASE ACTIVITY

PROPERTY ADDRESS LEASE SF ASKING PRICE / SF (NNN) TENANT LEASE DATE SUBMARKET TYPE

4632-4640 E. Main Street 60,000 - Rose’s May 2011 Southeast Strip

2605-2777 Northland

Plaza Drive

27,556 $8.00 (Gross) Ohio Twistars Cheerleading

Academy

June 2011 Northeast Strip

6084-6360 Busch Blvd. 13,375 - - May 2011 Northeast Neighborhood

7557 Gooding Blvd 12,000 $13.50 Pet Palace June 2011 Northeast Community

612-690 Harrisburg Pike 11,047 $5.00 Godfrey Athletics Bingo May 2011 Southwest Community

1760-1790 East Dublin

Granville Road

8,400 $10.00 Family Dollar April 2011 Northeast Strip

300-368 South Hamilton

Road

8,400 $12.00 Tuesday Morning April 2011 Northeast Strip

Delaware County

Pickaway County

Union County

Madison County

Licking County

Fairfield County

North / Northeast

SoutheastSouthwest

Northwest

CBD

P. 2 | COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT | Q2 2011 | RETAIL | GREATER COLUMBUS REGION

BIG BOX CONSTRUCTION

There have been significant leasing and growth in big box stores in the first half of the year. Rose’s took 60,000 square feet in the Southeast. Construction was completed on the massive 240,000-square-foot Menard’s and in Q1 construction was completed on the Giant Eagle Market Place in Upper Arlington. Construction began on two Hobby Lobby’s and a Kohl’s store.

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 65,370 6.6 (5,311) (13,267) - - - -

FAIRFIELD 3,418,174 405,092 11.9 33,475 39,675 - - $9.81 -

LICKING 3,250,240 308,195 9.5 6,532 14,609 - - $9.23 -

MADISON 443,304 5,285 1.2 - - - - $10.00 -

NORTH DELAWARE 1,780,118 288,434 16.2 (177) 10,431 - - $12.75 -

NORTHEAST 15,377,808 1,059,336 6.9 2,127 62,390 - 240,000 $13.59 $12.50

NORTHWEST 13,017,379 1,156,203 8.9 (64,224) (8,382) - - $13.65 $20.00

PICKAWAY 694,724 17,582 2.5 (6,615) (6,615) - - $8.50 -

SOUTHEAST 9,459,758 1,264,687 13.4 69,842 98,991 - - $10.42 $19.50

SOUTHWEST 6,806,523 1,806,426 26.5 (7,392) 30,979 109,000 - $8.14 $22.00

UNION 1,157,257 48,852 4.2 2,250 (2,275) - - - $19.65

TOTALS 56,392,260 6,425,462 11.4 30,507 226,536 109,000 240,000 $11.43 $18.31


PROPERTY TYPE Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current CompletionsCOMMUNITY 8,999,075 1,126,156 12.5 (6,766) 58,488 - - $14.01

FREE-STANDING 7,832,067 549,280 7.0 (6,500) 19,968 109,000 240,000 $9.01

NEIGHBORHOOD 17,397,813 2,415,238 13.9 (21,075) 65,378 - - $12.71

OTHER 27,000 4,610 17.1 - 4,010 - - -

OUTLET 184,000 - 0.0 - - - - -

POWER 5,272,202 426,267 8.1 30,250 27,653 - - $18.31

REGIONAL 3,828,626 439,162 11.5 98,046 97,353 - - $8.04

SPECIALTY 250,000 59,560 23.8 (5,311) (21,622) - - -

STRIP 5,448,505 755,834 13.9 (58,137) (29,037) - - $12.97

SUPER REGIONAL 6,530,997 648,155 9.9 - - - - -

URBAN 621,975 1,200 0.2 - 4,345 - - -

TOTALS 56,392,260 6,425,462 11.4 30,507 226,536 109,000 240,000 $12.55

QUARTERLY COMPARISON AND TOTALS


QUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions Neighborhood PowerQ1, 2011 55,896,613 6,439,929 11.52 195,989 195,989 336,000 255,647 $11.46 $17.89

Q4, 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


COLLIERS INTERNATIONAL | P. 3

CBDThe Central Business District (CBD) incurred 5,311 square feet in negative absorption and increased the vacancy rate by 1 percent from last quarter to 6.6 percent.

NORTHThe north submarkets include Northwest, Northeast, and North Delaware. The year to date absorption in the Northeast submarket edged up by 2,147 square feet. The Northwest submarket had been a strong performer this year but took a dip of 64,224 square feet of absorption.

SOUTHThe southern submarkets are Southeast and Southwest. The Southeast gained 69,842 square feet and was the strongest submarket. Rose’s led the surge by leasing the former Big Bear store on Main road. The Southwest recorded 7,392 square feet of negative absorption. However, the biggest story in the Southwest is the vacancy of Hobby Lobby and Kohl’s at the corner of Georgesville Road and Broad Street. Both companies are not citing the new casino as the impetus for the move, but rather that the casino wasn’t a strong enough factor to remain in that particular trade area.

EASTThe east submarkets are Licking and Fairfield Counties. Fairfield County experienced a sizable uptick with 33,475 square feet of space from a large lease of 1111 Hill Road. Licking County experienced a small increase in absorption with 6,532 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 while Union saw a small uptick in positive absorption.

FUNDAMENTALSThe U.S. retail sector had grown since March but took a dip in June. 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 April, the index was 65.4 decreasing by roughly 16 basis points from 63.8 in March. In June the index had decreased to 58.5. 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 April and June the 14-day rolling average rose from $61 to $67 with a high of $73 on June 15. The high mark of the 3-day rolling average was on June 6 at $86.

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 June, the reserve bank reported that retailers indicated an increase in sales in the low to mid single digits and that there was an increase in discretionary spending. Concerns about the rising cost of fuel and food have caused vendors to increase prices. Capital outlays remain on plan and are slightly hire than a year ago. In July, retailers reported that sales over the past 6 weeks were again generally higher than year-ago levels. For a few chains, the rate of growth was lower than expected and this was attributed mainly to inclement weather. A majority of retailers reported that they plan to expand the number of their retail outlets.

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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• 672.9 million square feet under management

• Over 10,000 professionals

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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columbus retail market report 2q2011

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