Good Year, Poor Quarter

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1 Q RETAIL LAS VEGAS NEVADA RESEARCH & FORECAST REPORT Good Year, Poor Quarter After nine quarters of positive net absorption, Southern Nevada s retail market fell into negative net absorption territory in the fourth quarter of This brought vacancy at the end of 2013 to 9.3 percent, a 0.3 percentage point increase from last quarter, but a 0.3 percentage point decrease from one year ago. The weighted average asking rental rate remained remarkably stable at $1.36 per square foot (psf) on a triple net (NNN) basis. MARKET INDICATORS Q4-13 Q1-14 PROJECTED According to the Nevada Department of Employment, Training & Rehabilitation, retail employment in the Las Vegas MSA increased between October 2012 and October 2013, from 98,800 retail employees to 104,800 retail employees, an increase of 6,000 jobs. Health and personal care stores and food and beverage stores each added 400 jobs over the past twelve months while general merchandise and clothing stores added 1,500 jobs over that same period. Unemployment in the Las Vegas-Paradise MSA stood at 9.4 percent as of October 2013, down from 10.3 percent in October Since October 2012, total employment in Southern Nevada has increased by only 6,700 jobs, the majority in the professional and business services and trade, transportation and utilities. On a year-over-year basis, the leisure and hospitality sector actually lost 2,100 jobs in October NET ABSORPTION CONSTRUCTION RENTAL CLARK COUNTY ECONOMIC DATA Clark County s taxable retail sales in the third quarter of 2013 totaled $5.4 billion, better than the $5.1 billion of taxable retail sales recorded in the third quarter of The largest quarterly increases were in food services and drinking places (10.2 percent increase), home furnishings (8.7 percent increase, and not surprising given increases in home sales) and hobby and sporting goods stores (6 percent increase). Taxable retail sales only fell in gasoline stations, where taxable sales decreased by 3 percent. In the third quarter of 2013, retail taxable retail sales increased to $53,156 per retail employee, and retail taxable sales per occupied square foot of retail space increased to $133 per square foot. HISTORICAL S AND ASKING LEASE S Jobs (1000s) (Oct.) % $1.70 Visitor Volume (Oct. YTD) 33.7 MM 33.6MM Gaming Revenue (Oct. YTD) $8.0 BB $7.9 BB Taxable Sales (Sept. YTD) Commercial Occupancy (Q4) $24.6 BB $23.5 BB 87.0% 84.6% 10.0% 8.0% 6.0% 4.0% 2.0% $1.60 $1.50 $1.40 $1.30 $1.20 We think Southern Nevada s retail market will continue its slow and steady recovery in John M. Stater Colliers, Research & GIS Manager SOURCE: THE CENTER FOR BUSINESS & ECONOMIC RESEARCH, UNLV 0.0% 1 Q Q Q Q Q Q Q Q 2013 $1.10 Vacancy Asking Rental Rate

2 NORTHWEST MARKET SUMMARY Q4-13 Q3-13 Q4-12 Vacancy Rate 9.3% 9.0% 9.6% Asking Rent (P, NNN) Net Absorption () New Completions () 95 SOUTHWEST 215 WEST CENTRAL 215 NORTH LAS VEGAS DOWN TOWN RESORT CORRIDOR UNIVERSITY EAST NORTHEAST HENDERSON $1.36 $1.36 $ ,947 81, ,731 8, No new significant suburban anchored retail product was completed in This respite from construction began in the second quarter of 2012, and has given the retail market almost two full years to absorb existing vacant product, driving vacancy rates down from 11.2 percent to 9.3 percent. Three traditional anchored retail centers (one being a third phase of development in an existing center) began construction in the latter half of 2013, totaling 343,000 square feet of speculative retail space. All should be completed in Retail vacancy in Southern Nevada had been on the decline for nine consecutive quarters before increasing by 0.3 percentage points this quarter to 9.3 percent. Its meteoric rise from 3.8 percent to 11.8 percent between the third quarter of 2007 and the second quarter of 2011 has been followed by a slow glide downward. Over the past decade, retail vacancy has averaged 6.4 percent, giving the market three percentage points to go before reaching that average vacancy. At the current rate of decline, it could take the market two years to get to this vacancy. Among submarkets, the Valley s highest vacancy this quarter was 13.3 percent in West Central, followed by 12.6 percent in the Northeast submarket and 12.4 percent vacancy in University East. Northwest enjoyed the honor of the Valley s lowest vacancy rate at 6.4 percent. Downtown, Henderson, North Las Vegas, Northeast, and University East experienced increases in vacancy this quarter, while Northwest, Southwest and West Central saw vacancy decrease since last quarter. The average asking rental rate for retail space in Southern Nevada stood at $1.36 per square foot (psf) on a Triple-Net basis (NNN). This was the same as in the third quarter of 2013 and the fourth quarter of Average asking rents decreased in Downtown, Henderson, Northeast, Northwest, and Southwest and increased in North Las Vegas, University East and West Central. On a quarter-over-quarter basis, power center asking rates increased for the second straight quarter, decreased slightly in community centers and remained stable in neighborhood centers. Investment sales volume of shopping centers in 2013 exceeded sales volume in 2011 and In 2013, thirty-nine shopping centers totaling 3.4 million square feet sold for $321.8 million. The average sales price per square foot in 2013 was $95.91, down slightly from Investment sales of freestanding retail buildings also increased in 2013 compared to A total of thirty-three freestanding retail buildings sold, totaling 533,000 square feet, with a total sales volume of $106.6 million. The average price per square foot was $ psf in 2013, down from 2012 s $ psf. Stronger sales in 2013 were due partially to investors abandoning first tier markets for higher yields in second-tier cities like Las Vegas. Distressed 1 retail space totaled 4.9 million square feet in 2013, up slightly from the 4.8 million square feet of distressed retail in This is approximately twice as much distressed space as the Valley had in Distressed retail sales in 2013 totalled 1.4 million square feet, approximately 26 percent of the total square footage sold. LEASE & SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE LEASE PRICE SIZE LEASE TYPE Sahara Pavilion Aug months 12,000 $0.30 NNN Community Center Rainbow Springs West Jul months 9,000 $1.09 NNN Community Center Shadow Creek Marketplace Jul months 7,000 $1.29 NNN Neighborhood Center College Park Shopping Center Aug months 5,000 $0.81 NNN Community Center Grand Flamingo Parkway Jul months 4,000 $1.14 NNN Community Center SALES ACTIVITY PROPERTY ADDRESS SALES DATE SALES PRICE SIZE PRICE/ TYPE Tonopah Plaza Jul 2013 $2,240,000 31,000 $72.41 Community Center Lone Mountain Retail Jul 2013 $3,450,000 26,000 $ Strip Center The Annex Jul 2013 $1,600,000 14,000 $ Strip Center Centennial Village Jul 2013 $3,800,000 13,000 $ Freestanding Sunset Commons Jul 2013 $1,850,000 9,000 $ Strip Center P. 2 COLLIERS INTERNATIONAL

3 MARKET COMPARISONS RETAIL MARKET TYPE BLDGS TOTAL INVENTORY DIRECT VACANT DIRECT SUBLEASE SUBLEASE VACANT TOTAL VACANT CURRENT QUARTER PRIOR QUARTER NET ABSORPTION CURRENT QTR NET ABSORPTION YTD COMPLETIONS CURRENT QTR COMPLETIONS YTD UNDER CONSTRUCTION PLANNED CONSTRUCTION WEIGHTED AVG ASKING RENTAL DOWNTOWN SUBMARKET PC n/a - n/a - n/a n/a $- CC 5 687, , % - 0.0% 131, % 16.6% (18,014) (50,419) $1.04 NC 5 518, % - 0.0% - 0.0% 0.0% - 35, $- Total 10 1,205, , % - 0.0% 131, % 9.5% (18,014) (15,299) $1.04 HENDERSON SUBMARKET PC 8 2,896, , % - 0.0% 272, % 10.0% (19,516) 43, $1.63 CC 20 2,864, , % - 0.0% 251, % 8.8% 195 9, , ,089 $1.25 NC 26 2,899, , % 17, % 308, % 8.7% (55,766) 44, $1.35 Total 54 8,660, , % 17, % 832, % 9.1% (75,087) 97, , ,089 $1.41 NORTH LAS VEGAS SUBMARKET PC 2 832,000 25, % - 0.0% 25, % 3.8% 6,753 13, $1.09 CC 13 2,383, , % 56, % 272, % 8.7% (63,882) (65,890) $1.55 NC 16 1,806, , % 2, % 195, % 9.3% (27,028) (44,411) $1.54 Total 31 5,022, , % 59, % 493, % 8.1% (84,157) (96,308) $1.52 NORTHEAST SUBMARKET PC n/a - n/a - n/a n/a $- CC 7 1,281, , % 18, % 200, % 13.0% (33,650) (61,554) $1.12 NC 15 1,306, , % 62, % 206, % 16.3% (9,597) 56, $1.07 Total 22 2,587, , % 80, % 406, % 14.7% (43,247) (5,288) $1.10 NORTHWEST SUBMARKET PC 8 3,143, ,890 n/a 1,000 n/a 112, % 4.9% 39,972 63, ,995 - $1.66 CC 19 3,978, , % - 0.0% 197, % 5.0% 10,936 28,127 8,000 8, ,000 $1.68 NC 30 3,631, , % 152, % 532, % 15.1% 15, , $1.43 Total 57 10,754, , % 153, % 842, % 8.4% 66, ,437 8,000 8, , ,000 $1.54 SOUTHWEST SUBMARKET PC 1 944,314 36, % - 0.0% 36, % 3.9% - 49, $1.88 CC 9 3,216, , % - 0.0% 236, % 7.9% 4,143 (38,306) $1.62 NC 13 1,623, , % - 0.0% 133, % 8.5% 3,786 44, $1.75 Total 23 5,783, , % - 0.0% 406, % 7.4% 7,929 55, $1.69 UNIVERSITY EAST SUBMARKET PC 3 1,210,223 73, % - 0.0% 73, % 7.3% 14,560 20, $1.82 CC 18 2,760, , % - 0.0% 493, % 17.0% (25,413) (20,259) $1.01 NC 17 1,953, , % - 0.0% 166, % 8.3% (4,986) (40,162) $1.37 Total 38 5,924, , % - 0.0% 734, % 12.1% (15,839) (39,708) $1.17 WEST CENTRAL SUBMARKET PC 3 1,138, , % - 0.0% 215, % 17.5% (17,054) (37,495) $1.16 CC 14 1,655, , % - 0.0% 239, % 14.6% 2,600 (50,862) $1.07 NC 18 1,746, , % - 0.0% 149, % 10.0% 25,350 30, $1.52 Total 35 4,540, , % - 0.0% 604, % 13.6% 10,896 (57,629) $1.21 MARKET TOTAL PC 25 10,164, , % 1, % 737, % 7.8% 24, , ,995 - $1.51 CC ,828,525 1,947, % 75, % 2,022, % 10.1% (123,085) (250,027) 8,000 8,000 30, ,089 $1.26 NC ,486,548 1,458, % 234, % 1,693, % 10.7% (52,604) 247, $1.42 Total ,479,895 4,142, % 311, % 4,453, % 9.8% (150,974) 150,870 8,000 8, , ,089 $1.36 QUARTERLY COMPARISON AND TOTALS Q ,479,895 4,142, % 311, % 4,453, % 9.8% (150,974) 150,870 8,000 8, , ,089 $1.36 Q ,471,895 3,983, % 377, % 4,360, % 10.0% 81, , ,407 $1.36 Q ,471,895 4,065, % 379, % 4,444, % 10.3% 100, , ,407 $1.34 Q ,471,895 4,165, % 404, % 4,570, % 10.5% 119, , ,407 $1.35 Q ,471,895 4,284, % 404, % 4,689, % 10.8% 117, , , ,407 $1.36 Q ,471,895 4,402, % 381, % 4,784, % 11.5% 381, , , ,407 $1.38 PC = Power Center CC = Community Center NC = Neighborhood Center COLLIERS INTERNATIONAL P. 3

4 DEMOGRAPHICS Population (2013 estimate) Projected Annual Population Growth ( ) Occupied Retail Space (Q3-13) DOWNTOWN 111, % 1,073, % HENDERSON 207, % 7,846, % NORTH LAS VEGAS 228, % 4,588, % NORTHEAST 159, % 2,262, % NORTHWEST 378, % 10,065, % SOUTHWEST 232, % 5,377, % UNIVERSITY EAST 348, % 5,191, % WEST CENTRAL 104, % 3,936, % Occupied Retail Growth (Last 12 mo.) SALES ACTIVITY SINGLE-TENANT RETAIL No. Sales Square Footage Sold 289, , , , ,000 Sales Volume $43.2 MM $34.1 MM $62.9 MM $78.2 MM $106.6 MM Average Price/ $ $ $76.23 $ $ Average Sale Size () 32,000 17,000 30,000 13,000 16,000 RETAIL CENTERS No. Sales Square Footage Sold 297, ,000 2,393,000 1,781,000 3,355,000 Sales Volume $23.3 MM $13.3 MM $282.7 MM $194.0 MM $321.8 MM Average Price/ $78.53 $64.39 $ $ $95.91 Average Sale Size () 74,000 34,000 88,000 59,000 86,000 OCCUPANCY VS. RETAIL EMPLOYMENT 110, % HISTORICAL NET ABSORPTION VS. COMPLETIONS 500, , % 400, , % 300,000 95,000 90, % 86.0% 200, , , % -100,000 80,000 1 Q Q Q Q Q Q Q Q % -200,000 1 Q Q Q Q Q Q Q Q 2013 Retail Jobs Occupancy Rate Net Absorption Completions Three traditional anchored retail centers (one being a third phase of development in an existing center) began construction in the latter half of John M. Stater Colliers, Research & GIS Manager COLLIERS INTERNATIONAL P. 4

5 (Continued from page 2.) Southern Nevada currently has 1,228,026 square feet of big-box space available in the marketplace, representing a vacancy rate of 6.4 percent at an average asking price of $0.94 psf NNN. Shop-space had a vacancy rate of 11.5 percent and an asking rate of $1.44 psf NNN. While shop-space had a higher vacancy rate than big-box in the third quarter of 2013, the big-box s hold about 30 percent of all the vacant retail space in Southern Nevada s anchored centers. Net absorption (including vacant sublease space) in big-box space over the past quarter was negative 102,475 square feet. Shop space posted negative 56,499 square feet of net absorption over the same period. Gross absorption decreased in 2013, dropping to 2,051,719 square feet from last year s 2,331,688 square feet. Gross absorption bounced between 476,000 and 655,000 square feet from late 2011 to the third quarter of 2013 before decreasing to 389,808 square feet in the fourth quarter of This drop in demand was at the heart of the increase in vacancy experienced in the retail market. New retailers slated to enter or expand in Southern Nevada include Sprouts, which is looking to open six new stores in the Valley, Wal-Mart, which has secured land along Blue Diamond, Winco, Lifetime Fitness, Glaziers, PDQ Chicken, Moe s Southwest Grill, Conn s Appliances and Las Vegas Athletic Club. The recently purchased Fresh & Easy chain has announced two closures in Southern Nevada. Blockbuster Video finally closed its remaining Southern Nevada locations in 2013 as well. Smiths is currently reinvesting millions in their existing locations in the Valley, but the Albertsons brand may be on its way out of the Valley after the chains recent purchase by investment group Cerberus Capital Management LP. Despite the fourth quarter s negative net absorption, 2013 was a generally good year for retail in Southern Nevada. Given the lack of new completions in 2013, net absorption has been quite strong. Current levels of demand for retail space, driven by improved retail taxable sales, make a return to a normalized vacancy rate a distinct possibility over the next two years. For this to happen, retail spending by locals will need to remain strong in Southern Nevada, and this could be tricky given the beating personal incomes have taken over the past five years and a renewed insistence by banks that people start paying on their mortgages again. The return of speculative construction in 2014 will set the tone of the new normal moving forward. We think Southern Nevada s retail market will continue its slow and steady recovery in ¹Includes properties that have received a notice of default and properties in different phases of the foreclosure process. 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 > $2.0 billion in annual revenue > 1.12 billion square feet under management > Over 13,500 professionals COLLIERS INTERNATIONAL LAS VEGAS 3960 Howard Hughes Parkway Suite 150 Las Vegas, NV TEL FAX MANAGING PARTNER Mike Mixer mike.mixer@colliers.com RESEARCHER John Stater john.stater@colliers.com This report and other research materials may be found on our website at This quarterly report is a research document of Colliers International Las Vegas, NV. Questions related to information herein should be directed to the Research Department at Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof Colliers International Accelerating success.

6 GLOSSARY RETAIL DEFINITIONS Community Center: Neighborhood Center: Power Center: Retail centers anchored by supermarkets, drug stores and discount department stores. Tenants include off-price retailers selling apparel, home improvements/furnishings, toys, electronics or sporting goods. Retail centers anchored by supermarkets and drug stores. Neighborhood centers are intended for convenience shopping for day-to-day needs of consumers. Retail centers dominated by several large anchors including discount department stores, offprice stores, warehouse clubs or category killers. Power centers generally inline space. GENERAL DEFINITIONS Vacant : Sublease : Net Absorption: Space in a building that is unoccupied and offered for lease by the owner of the property. Space in a building that is offered for sublease by the primary tenant. This space may or may not be occupied. Difference in occupied square footage from one period to another.