RETAIL PANEL: HOW ARE YOU ADAPTING

IN A TRANSFORMING WORLD?

Thursday May 10, 2018

INDUSTRY MEDIA PARTNER:

Thank you to our 2018 corporate partners

Moderator

Senior Vice President, Retail Canada & Business DevelopmentSVP Triovest

John Crombie

Panelists and Retail Industry Leaders:

Maryanne McDougald Senior Vice PresidentFirst Capital Realty Management Services

Jeff RossSenior Vice President, Leasing and Tenant CoordinationRioCan

John GiddingsVP Retail ManagementOxford Properties

The Future of Retail in a Transforming World … How Are You Adapting?

Prepared by:

John G. CrombieSenior Vice President, Retail Leasing Canada Triovest Realty Advisors Inc.jcrombie@triovest.com416-471-5416

This report contains information available to the public and has been relied upon by Triovest Realty Advisors on the basis that it is accurate and complete. Triovest Realty Advisors accepts noresponsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same issubmitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.Triovest Realty Advisors, Brokerage - 2018

May 10th 2018

Prepared for:

BOMA Toronto

Future of Retail in a Transforming WorldOverview of the Canadian Retail Real Estate Market

RETAIL SALES 2017 E-COMMERCE 2017 INVESTMENT SALES FOR RETAIL 2017

YE Estimated at $588 Billion (up about 7%) Estimated at $38.7 Billion (6.5%) YE Estimated at $8.3 Billion

RETAIL IN CANADA – YE 2017

Source: Colliers Research / eMarketer / Morguard & CBRE

RETAIL IN CANADARETAIL SPACE IN CANADA

✓ 611 million SF of Shopping Centres (total of 3,742)

✓ 238 million SF of Power Centres

✓ 100+ million SF of Street Front Retail (38m in Toronto)

TOTAL SQUARE FOOTAGE BY SHOPPING CENTRE RETAIL TYPE:

SHOPPING CENTRE PER SQUARE FOOT BY CAPITA:

RETAIL IN CANADARETAILERS IN CANADA

✓ Top 100 Retailers in Canada control over 76% of the non-

automotive sales

✓ 50% of Canada’s leading retailers are foreign owned and

operated (largely US)

✓ An estimated 50% of all luxury retail sales are driven by

tourism.

TOTAL NATIONAL SQUARE FEET BY RETAIL SECTOR IN CANADA

MAJOR RETAIL CHAINS PER SQUARE FEET PER CAPITA BY CITY

Future of Retail in a Transforming WorldSTRENGTHS OF THE CANADIAN MARKET

RETAIL MARKET - STRENGTHS

CONSUMER CONFIDENCE: REACHING NEW HIGHS QUALITY INVESTORS: 12% OF PENSIONS IN CRE PRODUCTIVITY: $767 PSF/ANNUM (+1.5%)

Sources: OECD / CBRE Research / ICSC Research

RETAIL MARKET - STRENGTHSPOPULATION GROWTH: UP ACROSS CANADA INVENTORY IN BALANCE: 5.3M SF NEW IN 2017 TOURISM: UP 15% IN CANADA IN 2016

Sources: Environics / CBRE Research / Statscan Moneris

Future of Retail in a Transforming WorldWEAKNESSES OF THE CANADIAN MARKET

RETAIL MARKET - WEAKNESSESCONSUMER DEBT: ALL TIME HIGH MINIMUM WAGE: INCREASING TO $15 MORE VACANCY: TARGET NOW SEARS 20M+ SF

Future of Retail in a Transforming WorldSome Fundamental Changes Happening in Retail

RETAIL CHANGESNEW CONSUMER MARKET: 6 GENERATIONS

RETAIL CHANGESYOUNGER CONSUMERS: WANT EXPERIENCE OVER PRODUCTS

E-COMMERCE THREAT: MALL RISK MAP FOR 2020

Source: Green Street Advisors - 2016

RETAIL CHANGES

RETAIL CHANGESAMAZON THREAT: THE ELEPHANT IN THE ROOM

Source: Emarketer Inc / Bloomberg

RETAIL CHANGESE-COMMERCE STILL EARLY STAGES: PROJECTED DEVELOPMENT

MASSIVE U.S. STORE CLOSURES: 2017 & 2018 (YTD)

Source: Fung Global Retail & Technology / Company Reports

Three Principal takeaways:

1. Weak demand for apparel

persists.

2. Pure-play retailing is

fashionable again.

3. More retailers are facing

reality especially department

stores

RETAIL CHANGES

RETAIL CHANGESLOSS OF THE DEPARTMENT STORES: WHY LESS LOCATIONS?

Source: Green Street Advisors - 2016

OFF-PRICE RETAILERS: CONSUMER SHIFT IN APPAREL

RETAIL CHANGES

Source: Fung Global Retail & Technology / Company Reports

Future of Retail in a Transforming WorldSo What is the Future of Retail?

APOCALYPSE? THERE IS A PREDICTION THAT NEARLY 25% OF ALL SHOPPING MALLS IN U.S. WILL BE CLOSED IN THE NEXT 5 YEARS!

Source: CNN Money

Apocalypse is a silly word. It means complete destruction.

People will always need to buy stuff. Therefore, retail and

physical stores will never go away.

They will just look different.

The retail stores of the future are in front of us already. They

will be one-part Amazon, one-part Starbucks, one-part Bonobos

and one-part Ikea, shrouded in the customer-focused ethos of a

casino.

Christopher Walton, former vice president of Target Store of the Future.

FUTURE RETAIL TRENDSTHE FUTURE OF RETAIL WILL BE CUSTOMER-CENTRIC

FUTURE RETAIL TRENDSPREDICTION: MOST SUCCESSFUL SC WILL BE IN 4 CATEGORIES

Future of Retail in a Transforming WorldThe Latest Trends in Retail … Are You Adapting?

RETAIL TRENDSMALL RENOVATIONS: THE BIG IS GETTING BIGGER

RETAIL TRENDSURBAN RETAIL FORMATS: GOING SMALLER TO GROW BIGGER

RETAIL TRENDSEXPERIENCE: IT’S ALL ABOUT CREATING FUN

RETAIL TRENDSFITNESS GROWTH: A BIG WORKOUT

TORONTO, March 5, 2018 -- RioCan REIT announced today its new residential brand, RioCan

Living™, as it capitalizes on and unlocks the intrinsic value of the company’s vast portfolio of major

market properties. RioCan Living cultivates opportunities to turn selected existing retail shopping

centres into vibrant, mixed-use communities, marking RioCan’s official, and permanent, entry into

the residential market

RETAIL TRENDSMIXED USES: BUILDING RENTAL APARTMENTS ON EXISTING RETAIL

RETAIL TRENDSEXPERIENCE: FOOD & BEVERAGE AS THE NEW ANCHOR

Department stores have

been considered anchors

and key drivers of customer

visits since before the

shopping centre was

born. That is now changing.

We are observing a new

phenomenon—restaurants

and food services are

becoming the new

anchors. While this applies

to upgraded food courts in

malls, we are also seeing

many stores introduce cafés

and other forms of food

services within their

footprint. Burberry in

London, Ralph Lauren in

Paris, and Kit and Ace in

North America are all

introducing various forms of

food services to their

stores—hoping to attract

more and longer visits.

The café inside Frank & Oak’s

flagship Toronto location.

Eataly – Has locations in New York City & Chicago.

Saks Fifth Avenue Food Hall,

Toronto.

RETAIL TRENDSFOOD HALLS: TREMENDOUS GROWTH PROJECTIONS IN U.S.

Source: Cushman & Wakefield

GROCERY: BATTLE FOR “CLICK & COLLECT” BUSINESS

In Canada, online grocery shopping represents less than 1 per cent of the overall $120-billion of

annual sales, analysts estimate. But those sales are expected to rise at three to four times the rate of

those made in-store, making up 3 per cent of total sales by 2019.

Loblaw plans to add close to 100 more of

its e-commerce order pickup stores this

year to its currents 48

Source: Globe & Mail, Profitero

RETAIL TRENDS

“DINING IN” IS THE NEW “DINING OUT”

RESTAURANT DELIVERY SERVICES: US INTERNET USER

RETAIL TRENDS

RETAIL TRENDSOMNI-CHANNEL: ONLINE RETAILERS GETTING PHYSICAL

Source: Retail Insider

Toronto’s Pearson International Airport

is now home to the world’s first-ever

TripAdvisor store, and more are planned

for 2018. The retail space is a

partnership with Atlanta-based Paradies

Lagardère, which operates more than

850 stores and restaurants in 98

airports, globally.

The retail space, located in Pearson

Airport’s Terminal 1 Domestic, is as

much experiential as it is about the

products contained within. In addition to

offering travel essentials, the store

includes a large, interactive screen that

visitors can use to learn more about

Toronto and the surrounding area.

Customers can access the latest

TripAdvisor reviews and traveler photos

for nearby hotels, attractions and

restaurants.

BRICKS & MORTAR STORE WITH NO STOCK TO SELL?

Nordstrom will open its first “Nordstrom Local” store next

month in Los Angeles, testing a new model for the

fashion retailer: a small, neighborhood ‘hub’ that will have

no clothing in stock and will focus instead on digital sales,

customer service and tailoring.

Nordstrom has managed to ride a rough decade for full-

line department stores by responding to the trends that

are disrupting the retail market — developing its e-

commerce capabilities and expanding its off-price

Nordstrom Rack stores.

The Local effort, if successful, could add another

element. It’s “the first downscaling of the department

store concept,” said Neil Saunders, managing director at

GlobalData Retail.

The company says customers will be able to come to the

3,000-square-foot store in West Hollywood to meet with

“personal stylists” while drinking wine or beer, try on

clothes the stylist ordered in advance for them, and pick

up online orders the same day. They can also get a

manicure or have clothes tailored.

RETAIL TRENDS

RETAIL TRENDSEXPERIENCE: MORE HEALTH & WELLNESS IN MALLS

Source: Fung Global Retail

RETAIL TRENDSTECHNOLOGY: SMART MALLS ARE RESHAPING THE PHYSICAL SHOPPING EXPERIENCE

Source: Fung Global Retail

RETAIL TRENDSPOP UPS: WAY TO TEST PRODUCT, CREATE EXCITEMENT

AESOP at Nordstrom in Vancouver Well.ca at Shops of Don Mills, Toronto

NIKE in Vancouver IKEA in Downtown Toronto

RETAIL TRENDSBRIDGING THE GAP BETWEEN “CLICKS & BRICKS”

Source: Retail Insider

Cominar has launched an innovative multi-purpose retail

space at Mississauga’s Dixie Outlet Mall, which is free of

charge. It’s part of a trend where mall landlords are adding

space for pop-up retail and non-conventional uses to malls,

to keep things fresh and to keep customers coming back.

The new 3,100 square foot space is called The Dixie Living

Room.

Oxford Properties officially launched its in-mall multi-vendor

rotating temporary retailer initiative, called CONCEPT, at

Toronto’s Yorkdale Shopping Centre. The new space addresses

the trend of integrating pop-up retail into malls. CONCEPT

spans about 3,600 square feet. CONCEPT will change at

regular intervals, providing brands exposure to consumers in

Canada’s most productive mall, without the long-term

commitment that is typically required

RETAIL TRENDSTHINK SMALL TO BE BIG: MICRO-MALL CONCEPT

Micro-Mall’ Concept ‘RAAS’ Looks to

Expand After Initial Success

The future of retail may very well lie in the idea

of micro malls - smaller spaces created within

bigger malls that allow local and emerging

retailers the ability to set up shop in a quick

manner and develop their business. Mark

Ghermezian, part of the family that developed

West Edmonton Mall and other big

international shopping centres, helped develop

the Retail as a Service (RAAS) concept which

launched at WEM last fall. “We wanted to

create a platform that empowered and gave

relevance to emerging and local stores. We

really felt that there is a whole market of so

much talent and so much good products out

there and they’re prohibited today from

opening up a brick and mortar store,” said

Ghermezian.

Source: Retail Insider

RETAIL TRENDSRETAILERS WORKED UP: STAPLES + WORKBAR

Workbar and Staples announced a collaboration to bring Workbar spaces to Staples stores.

The first three Workbar @ Staples spaces will be located in the Danvers, Norwood and

Brighton – suburban ‘Spokes’ roughly North, West and South of Workbar’s urban Boston

‘Hubs’.

What is Workbar?

It's an innovative, communal approach to

coworking where people share the same

space. It allows you to connect and

collaborate with a diverse, talented pool of

professionals while still having the

flexibility to work the way you want.

Workbar at Staples will have three

coworking spaces in the Boston metro

area. Each location will feature a unique

mix of premium workspaces, from

conference rooms to private phone areas

to collaborative spaces. Meet, focus,

share, socialize. Get it all done.

RETAIL TRENDSWHEN CANADA LEGALIZES POT … PIZZA SALES WILL GO UP 30%

This report contains information available to the public and has been relied upon by Triovest Realty Advisors on the basis that it is accurate andcomplete. Triovest Realty Advisors accepts no responsibility if this should prove not to be the case. No warranty or representation, express orimplied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change ofprice, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.Triovest Realty Advisors, Brokerage - 2018

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