No Where To Grow. ALBUQUERQUE, NM Q Retail. Research & Forecast Report. Key Takeaways. Market Indicators Relative to prior period

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1 Research & Forecast Report ALBUQUERQUE, NM Q2 20 Retail No Where To Grow Key Takeaways > > Supply of anchor spaces becoming scarce > > Renovations help to alleviate lack of new projects > > New projects pre-leasing but yet to break ground Over the last few years the retail market is one of the top performing commercial real estate sectors in Albuquerque. Since the beginning of 20 vacancy decreased by a healthy three hundred basis points. A limited number of major new projects quelled supply and enabled absorption of existing inventory. Several new projects delivered right before the great recession began in 2008 were the main beneficiaries. Since then existing vacant anchor spaces were steadily leased up as choices were limited. New projects delivered primarily consisted of unanchored strip centers and free-standing buildings. Projects currently under construction consist of power and community centers in the Rio Rancho and the South Valley submarkets. Momentum is beginning to slow down as most of the spaces in Rio Rancho s Enchanted Hills and the South Valley s Las Estancias are leased up. Several renovation projects of existing centers are underway. Most of these have less than 100,000 square feet of total space available. The construction pipeline is fairly robust with several new projects slated for the Rio Rancho, West Mesa, and South Valley submarkets. They are, however, in the pre-leasing phases and have yet to reach the minimum threshold of space leased necessary to start construction. Development of free-standing restaurants on pad sites at existing centers is providing some relief to the shortage of restaurant spaces for new national concepts. Market Indicators Relative to prior period VACANCY NET ABSORPTION RENTAL RATE * Projected, relative to prior period Summary Statistics, Q2 20 OVERALL NEIGHBORHOOD STRIP Vacancy Rate 6.3% 10.0% 8.2% Change from Q1 20 (Basis Points) Absorption (Square Feet) 6,068,347 (6,829) ASKING RENTS Annual Per Square-Foot Q2 20 FORECAST Q3 20* $.81 $.30 Quarterly Change 0.1% 0.7% Year-Over-Year Change 4.2% 0.1% Some older strip centers are beginning to see a small increase in activity. The increase is being driven by non-traditional retail users such as medical, dental, and even office users discovering values in retail centers.

2 Forecast The number of existing tenants actually making moves rather than renewing at their current locations should become more common. This trading spaces strategy will likely occur primarily for tenants who are in larger spaces over 10,000 square feet. A primary driver will be tenants giving back unused shadow spaces. The challenge for some landlords will be the ability to economically reconfigure the spaces into smaller suites that have the required amenities such as kitchens, conference rooms, and network infrastructure. Acquisition activity is expected to remain strong throughout 20, especially for owner occupants. The trend will be supported by attractive financing terms available to owner occupants and a growing number of landlords of older buildings that have prolonged vacancies. The net effect should be fewer buildings competing for tenants with many landlords listing properties both for sale and for lease. Several large vacant office buildings are strongly being considered for renovations. Interest in the Albuquerque Metropolitan market for office investments should remain very strong. Demand will grow as investors seeking to diversify risk and improve returns by acquiring assets in secondary tertiary markets with capitalization rates generally 100 to 200 basis points higher compared to those in larger primary markets. New construction should slowly be entering the conversation again after nearly a ten year hiatus. A lack of functional spaces with modern amenities over 30,000 square feet will drive more projects being considered. New projects will likely be build-to-suit for single-users taking at least 30,000 square feet of space with the remaining spaces being more speculative in nature. Overall office vacancy will generally remain at current levels over the new two quarters as job and organic growth offset some of the new spaces hitting the market. Downtown, North I-25, and Uptown submarkets are likely to garner the majority of interest and deals moving into RECENT TRANSACTIONS LEASING ACTIVITY LESSEE/BUYER TYPE LESSOR/SELLER PROPERTY SIZE SF Ruth s Chris Steak House leased HUB Acquisition Trust 6600 Indian School Rd NE 9,708 Sprouts Farmers Market leased Stavroula Limited Partnership 710 Central Ave SE 25,743 Petsense leased Louisiana Plaza Partners 7200 Montgomery Blvd NE 6,600 2 Research & Forecast Report Q2 20 Albuquerque Retail Colliers International

3 VACANCY Quarterly 10% 9% 8% 7% 6% Vacancy COMPLETION VS. ABSORPTION Yearly 300(in Thousands of SF) Absorption Completions RATES Yearly (per SF, Triple Net) $18 $16 $ $ $10 Neighborhood Strip Community VACANCY BY SUBMARKET 30% 25% 20% % 10% 5% *** - Q3- data displayed. 0% Cottonwood Downtown Far NE NE Heights North I-25 North Valley Rio Rancho SE Heights South Valley University Uptown West Mesa Overall 3 Research & Forecast Report Q2 20 Albuquerque Retail Colliers International

4 NET ABSORPTION ASKING RENT SUBMARKET TOTAL SF VACANT SF VACANCY AVAILABLE % CURRENT QTR YEAR TO DATE CONSTRUCTION SF NEIGHBORHOOD POWER Cottonwood 4,116,871 7, % 3.7% 4,045 (1,800) - $.28 $20.00 Downtown 6,694 8, % 18.1% , Far Northeast Heights 3,966, , % 9.2% 4,039 36,055 - $16. - North I-25 3,273,804 1, % 4.6% (40,033) 1,2 - $ North Valley 1,000,058 86, % 7.3% - (2,100) Northeast Heights 4,357, , % 5.5% (4,2) 93,070 - $ Rio Rancho 2,026,243 2, % 9.3% 2,450 (16,335) 1,561 $.26 - South Valley 1,108, , % 26.0% (10,200) ,740 $.16 - Southeast Heights 2,943, , % 9.5% 43,253 (5,249) - $ University 1,040,804 45, % 5.0% $ Uptown 2,276, , % 3.6% - 10, West Mesa 2,1,010 78, % 5.1% 5, $19.86 $.00 Total 28,841,068 1,823, % 7.2% 6, , ,855 $.81 $16.20 ASKING RENT BY PROPERTY TYPE TOTAL SF VACANT SF VACANCY AVAILABLE % CURRENT QTR YEAR TO DATE CONSTRUCTION SF RENT Community 2,256,7 5, % 8.3% - (2,400) - $17.87 Free-standing 8,450,186 7, % 3.6% 2,250-47,000 $.76 Neighborhood 7,105, , % 10.0%, ,510 - $.81 Power 1,294,062 42, % 0.7% (2,700) 2,700 0,561 $16.20 Showroom 2,043,801 18, % 3.7% $9.52 Specialty/Theme 219,876 31,556.4% 0.0% - 6,958 - $44.50 Strip 4,976, , % 9.5% (6,829) 7,955 61,294 $.30 Super Regional 2,190, , % 9.5% - (1,800) $42.90 Urban Retail 304,442 81, % 31.0% - - $.48 Total 28,841,068 1,823, % 7.2% 6, , ,855 $.73 Office inventory includes all multi-tenant and single tenant buildings at least 10,000 square feet. Owner-occupied, government and medical buildings are not included if total space occupied is 75 percent or greater. Asking rates are full service gross on a per square-foot annual basis. Available space includes all vacant space and occupied space currently on the market. Colliers International makes no guarantees, warranties or representations as to the completeness or accuracy thereof. 4 Research & Forecast Report Q2 20 Albuquerque Retail Colliers International

5 Retail Brokers Bob Feinberg SENIOR VICE PRESIDENT PRINCIPAL DIR Tom Jones, CCIM SENIOR VICE PRESIDENT PRINCIPAL DIR Terrie Hertweck, CCIM VICE PRESIDENT DIR Rosser Knee VICE PRESIDENT DIR Ed Anlian, CCIM SENIOR ASSOCIATE Ben Perich ASSOCIATE Brandon Saylor ASSOCIATE DIR DIR DIR Research & Forecast Report Q2 20 Albuquerque Retail Colliers International

6 Albuquerque LOCAL COMPANY PROFILE Colliers International in New Mexico accelerates the success of our clients through our extensive industry experience, superior market knowledge throughout the state and a thorough understanding of the complexities associated with real estate transactions. As a market leader in New Mexico for over 25 years, our local team of over 50 real estate advisors and employees provides every client extensive commercial real estate industry experience. We offer expertise in the full spectrum of transaction services, specializing in office, investment, industrial, retail, land and multi housing properties. The professionals in our office hold numerous prestigious industry designations, including CCIM, SIOR and CPM. An Accredited Management Organization (AMO), our Property Management division provides comprehensive property management services for all types of real estate properties. Through our experience, education and integrity, we greatly enhance the value of our clients real estate assets. As an acknowledged leader in the field of Receivership Services, Colliers International in New Mexico has built a reputation for maintaining cost efficient operations and delivering superior levels of service to our customers and clients. We provide our clients with market research, analysis, mapping and demographics that are unmatched in New Mexico. On a quarterly basis since 1999, we have collected detailed market information on over 1,700 buildings totaling over 77 million square feet. Our extensive building inventory database includes photos and detailed property data, ensuring that we capitalize on trends and activity affecting commercial real estate decisions. Using industry leading software, ArcGIS, our research division can provide a wide variety of maps, reports, aerials and graphs showing key information required by clients to make location decisions. SPECIALTIES Office Retail Industrial Multi-Family Business Brokerage Property Management Tax Protest Receiverships Research Mapping 6 Research & Forecast Report Q2 20 Albuquerque Retail Colliers International

7 Albuquerque Ken Schaefer Director of Research 2424 Louisiana Blvd NE Albuquerque, NM TEL FAX Copyright 20 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International 2424 Louisiana Blvd. NE Suite colliers.com