The CoStar Retail Report. T h i r d Q u a r t e r Inland Empire Retail Market

Transcription

1 The CoStar Retail Report T h i r d Q u a r t e r

2 Third Quarter 2015 Inland Empire Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets & Submarkets Inventory & Development Analysis Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Building Type & Market Figures at a Glance by Building Type & Submarket Historical Figures at a Glance Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Analysis of Individual CoStar Submarket Clusters Inland Empire East Market Inland Empire West Market 2015 CoStar Group, Inc. The CoStar Retail Report A

3 Inland Empire Third Quarter 2015 Methodology The CoStar Retail Report calculates Retail statistics using CoStar Group's base of existing, under construction and under renovation Retail buildings in each given metropolitan area. All Retail building types are included, including Community Center, Freestanding Retail, Neighborhood Center, Power Center, Regional Mall, Specialty Center and Unanchored Strip Center, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates reported in the CoStar Retail Report are calculated using Triple Net (NNN) rental rates. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2015 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc L ST NW Washington, DC (800) NASDAQ: CSGP B The CoStar Retail Report 2015 CoStar Group, Inc.

4 Third Quarter 2015 Inland Empire Terms & Definitions Anchor Tenant: A large national or regional retailer that serves as a primary draw for a shopping center; a store strategically located in a retail property in order to enhance, bring attention to, or increase traffic at the property. Sometimes called a destination tenant, usually these tenants lease at least 25,000 SF. Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). Community Center: A shopping center development that has a total square footage between 100, ,000 SF. Generally will have 2-3 large anchored tenants, but not department store anchors. Community Center typically offers a wider range of apparel and other soft goods than the Neighborhood Center. Among the more common anchors are supermarkets and super drugstores. Community Center tenants sometime contain retailers selling such items as apparel, home improvement/furnishings, toys, electronics or sporting goods. The center is usually configured as a strip, in a straight line, or an L or U shape. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. : The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Freestanding Retail: Single tenant building with a retail tenant. Examples include video stores, fast food restaurant, etc. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. General Retail: Typically are single tenant freestanding generalpurpose commercial buildings with parking. Many single retail buildings fall into this use code, especially when they don t meet any of the more detailed use code descriptions. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Lifestyle Center: An upscale, specialty retail, main street concept shopping center. An open center, usually without anchors, about 300,000 SF GLA or larger, located near affluent neighborhoods, includes upscale retail, trendy restaurants and entertainment retail. Nicely landscaped with convenient parking located close to the stores. Mall: The combined retail center types of Lifestyle Center, Regional Mall and Super Regional Mall. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Neighborhood Center: Provides for the sales of convenience goods (food, drugs, etc.) and personal services (laundry, dry cleaning, etc.) for day-to-day living needs of the immediate neighborhood with a supermarket being the principal tenant. In theory, the typical GLA is 50,000 square feet. In practice, the GLA may range from 30,000 to 100,000 square feet. Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Outlet Center: Usually located in a rural or occasionally in a tourist location, an Outlet Center consists of manufacturer s outlet stores selling their own brands at a discount. 50, ,000 SF. An Outlet Center does not have to be anchored. A strip configuration is most common, although some are enclosed malls and others can be arranged in a village cluster. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Power Center: The center typically consists of several freestanding (unconnected) anchors and only a minimum amount of small specialty tenants. 250, ,000 SF. A Power Center is dominated by several large anchors, including discount department stores, offprice stores, warehouse clubs, or "category killers," i.e., stores that offer tremendous selection in a particular merchandise category at low prices. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate 2015 CoStar Group, Inc. The CoStar Retail Report C

5 Inland Empire Third Quarter 2015 of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Regional Mall: Provides shopping goods, general merchandise, apparel, and furniture, and home furnishings in full depth and variety. It is built around the full-line department store with a minimum GLA of 100,000 square feet, as the major drawing power. For even greater comparative shopping, two, three, or more department stores may be included. In theory a regional center has a GLA of 400,000 square feet, and may range from 300,000 to more than 1,000,000 square feet. Regional centers in excess of 750,000 square feet GLA with three or more department stores are considered Super Regional. (See also: Super Regional Mall). Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Shopping Center: The combined retail center types of Community Center, Neighborhood Center and Strip Center. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Specialty Center: The combined retail center types of Airport Retail, Outlet Center and Theme/Festival Center. Sports & Entertainment: A facility suited for recreational activities, including: Amusement Facility, Aquatic Facility/Swimming Pool, Bowling Alley, Casino/Gaming Facility, Equestrian Center/Stable, Fitness, Court and Spa Facility, Golf Related, Racetrack, Skating Rink, Ski Resort, Sports Arena/Stadium, and Theatre/Performing Art Facility. Strip Center: A strip center is an attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores. Open canopies may connect the storefronts, but a strip center does not have enclosed walkways linking the stores. A strip center may be configured in a straight line, or have an "L" or "U" shape. Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Super Regional Mall: Similar to a regional mall, but because of its larger size, a super regional mall has more anchors, a deeper selection of merchandise, and draws from a larger population base. As with regional malls, the typical configuration is as an enclosed mall, frequently with multiple levels (See also: Regional Mall). Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Theme/Festival Center: These centers typically employ a unifying theme that is carried out by the individual shops in their architectural design and, to an extent, in their merchandise. Sometimes the biggest appeal of these centers is to tourists; they can be anchored by restaurants and entertainment facilities. These centers, generally located in urban areas, tend to be adapted from older, sometimes historic, buildings, and can be part of mixed-use projects. 80, ,000 SF. Under Construction: Buildings in a state of construction, up until they receive their certificate of occupancy. In order for CoStar to consider a building under construction, the site must have a concrete foundation in place. Abbreviated UC. Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D The CoStar Retail Report 2015 CoStar Group, Inc.

6 Overview Third Quarter 2015 Inland Empire Inland Empire s Stays at 8.3% Net Absorption Positive 304,203 SF in the Quarter The Inland Empire retail market did not experience much change in market conditions in the third quarter The vacancy rate went from 8.3% in the previous quarter to 8.3% in the current quarter. Net absorption was positive 304,203 square feet, and vacant sublease space decreased by (32,957) square feet. Quoted rental rates increased from second quarter 2015 levels, ending at $16.17 per square foot per year. A total of 9 retail buildings with 289,157 square feet of retail space were delivered to the market in the quarter, with 423,605 square feet still under construction at the end of the quarter. Net Absorption Retail net absorption was moderate in Inland Empire third quarter 2015, with positive 304,203 square feet absorbed in the quarter. In second quarter 2015, net absorption was positive 366,704 square feet, while in first quarter 2015, absorption came in at negative (31,255) square feet. In fourth quarter 2014, positive 375,521 square feet was absorbed in the market. Tenants moving out of large blocks of space in 2015 include: Albertson s moving out of 64,603 square feet at 8850 Foothill Blvd; Albertson s moving out of 50,544 square feet at Colonies Crossroads; and Vons moving out of 43,615 square feet at Palms to Pines West. Tenants moving into large blocks of space in 2015 include: Hobby Lobby moving into 50,009 square feet at San Bernardino Ave; Haggen moving into 50,000 square feet at 4200 Chino Hills Pky; and LA Fitness moving into 45,000 square feet at Magnolia Ave. Inland Empire s retail vacancy experienced no change in the third quarter 2015, ending the quarter at 8.3%. Over the past four quarters, the market has seen no change in the vacancy rate, with the rate going from 8.3% in the fourth quarter 2014, to 8.3% at the end of the first quarter 2015, 8.3% at the end of the second quarter 2015, to 8.3% in the current quarter. The amount of vacant sublease space in the Inland Empire market has trended down over the past four quarters. At the end of the fourth quarter 2014, there were 587,493 square feet of vacant sublease space. Currently, there are 578,431 square feet vacant in the market. Largest Lease Signings The largest lease signings occurring in 2015 included: the 59,095-square-foot-lease signed by Big Country at The Club Center - Bldg B; the 50,000-square-foot-deal signed by Haggen at 4200 Chino Hills Pky; and the 45,000-square-footlease signed by LA Fitness at Magnolia Ave. Rental Rates Average quoted asking rental rates in the Inland Empire retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended the third quarter 2015 at $16.17 per square foot per year. That compares to $16.08 per square foot in the second quarter 2015, and $15.97 per square foot at the end of the fourth quarter This represents a 0.6% increase in rental rates in the current quarter, and a 1.24% increase from four quarters ago. Rates by Building Type % Power Center Specialty Center General Retail Shopping Center Mall Total Market 26% 21% 16% 11% 6% 1% q q q q q q q q q q 2015 CoStar Group, Inc. The CoStar Retail Report 1

7 Inland Empire Third Quarter 2015 Overview Inventory & Construction During the third quarter 2015, nine buildings totaling 289,157 square feet were completed in the Inland Empire retail market. Over the past four quarters, a total of 1,018,572 square feet of retail space has been built in Inland Empire. In addition to the current quarter, 10 buildings with 347,788 square feet were completed in second quarter 2015, seven buildings totaling 78,107 square feet completed in first quarter 2015, and 303,520 square feet in 22 buildings completed in fourth quarter There were 423,605 square feet of retail space under construction at the end of the third quarter Some of the notable 2015 deliveries include: Super Wal- Mart Center in Perris, a 185,000-square-foot facility that delivered in third quarter 2015 and is now 100% occupied, and San Bernardino Ave, a 177,056-square-foot building that delivered in second quarter 2015 and is now 100% occupied. Total retail inventory in the Inland Empire market area amounted to 186,227,076 square feet in 15,648 buildings and 1868 centers as of the end of the third quarter Shopping Center The Shopping Center market in Inland Empire currently consists of 1792 projects with 89,122,595 square feet of retail space in 5,323 buildings. In this report the Shopping Center market is comprised of all Community Center, Neighborhood Center, and Strip Centers. After absorbing 138,384 square feet and delivering 208,521 square feet in the current quarter, the Shopping Center sector saw the vacancy rate go from 10.6% at the end of the second quarter 2015 to 10.6% this quarter. Over the past four quarters, the Shopping Center vacancy rate has gone from 10.8% at the end of the fourth quarter 2014, to 10.7% at the end of the first quarter 2015, to 10.6% at & Rent Past 9 Quarters Price in Dollars per Unit $16.20 $16.10 $16.00 $15.90 $15.80 $15.70 $15.60 Average Rental Rate Rate q q q q q 8.9% 8.8% 8.7% 8.6% 8.5% 8.4% 8.3% 8.2% 8.1% 8.0% 7.9% Rate Percentage the end of the second quarter 2015, and finally to 10.6% at the end of the current quarter. Rental rates ended the third quarter 2015 at $16.55 per square foot, up from the $16.39 they were at the end of second quarter Rental rates have trended up over the past year, going from $16.06 per square foot a year ago to their current levels. Net absorption in the Shopping Center sector has totaled 523,042 square feet over the past four quarters. In addition to the positive 138,384 square feet absorbed this quarter, positive 90,805 square feet was absorbed in the second quarter 2015, positive 128,729 square feet was absorbed in the first quarter 2015, and positive 165,124 square feet was absorbed in the fourth quarter Power Centers The Power Center average vacancy rate was 7.7% in the third quarter With positive 114,951 square feet of net absorption and 45,481 square feet in new deliveries, the vacancy rate went from 8.1% at the end of last quarter to 7.7% at the end of the third quarter. In the second quarter 2015, Power Centers absorbed positive 351,566 square feet, delivered 294,208 square feet, and the vacancy rate went from 8.6% to 8.1% over the course of the quarter. Rental started the quarter at $16.87 per square foot and ended the quarter at $17.05 per square foot. A year ago, in third quarter 2014, the vacancy rate was 7.7%. Over the past four quarters, Power Centers have absorbed a cumulative 436,154 square feet of space and delivered cumulative 472,103 square feet of space. Vacant sublease space has gone from 81,854 square feet to 36,200 square feet over that time period, and rental rates have gone from $17.92 to $ At the end of the third quarter 2015, there were 49,960 square feet under construction in the Inland Empire market. The total stock of Power Center space in Inland Empire currently sits at 18,658,853 square feet in 40 centers comprised of 517 buildings. A total of 49,960 square feet of space was under construction at the end of the third quarter General Retail Properties The General Retail sector of the market, which includes all freestanding retail buildings, except those contained within a center, reported a vacancy rate of 4.8% at the end of third quarter There was a total of 2,826,308 square feet vacant at that time. The General Retail sector in Inland Empire currently has average rental rates of $13.47 per square foot per year. There are 166,035 square feet of space under construction in this sector, with 35,155 square feet having been completed in the third quarter. In all, there are a total of 9,509 2 The CoStar Retail Report 2015 CoStar Group, Inc.

8 Overview Third Quarter 2015 Inland Empire buildings with 58,372,919 square feet of General Retail space in Inland Empire. Specialty Centers There are currently 13 Specialty Centers in the Inland Empire market, making up 2,134,335 square feet of retail space. In this report the Specialty Center market is comprised of Outlet Center, Airport Retail and Theme/Festival Centers. Specialty Centers in the Inland Empire market have experienced positive 19,198 square feet of net absorption in The vacancy rate currently stands at 22.7%, and rental rates average $21.65 per square foot. Malls Malls recorded net absorption of positive 27,503 square feet in the third quarter This net absorption number, combined with no new space that was built in the quarter, caused the vacancy rate to go from 6.7% a quarter ago to 6.6% at the end of the third quarter Rental rates went from $16.63 per square foot to $16.95 per square foot during that time. In this report the Mall market is comprised of 23 Lifestyle Center, Regional Mall and Super Regional Malls. Sales Activity Tallying retail building sales of 15,000 square feet or larger, Inland Empire (California) retail sales figures fell during the second quarter 2015 in terms of dollar volume compared to the first quarter of In the second quarter, 17 retail transactions closed with a total volume of $99,360,100. The 17 buildings totaled 605,665 square feet and the average price per square foot equated to $ per square foot. That compares to 21 transactions totaling $203,164,000 in the first quarter The total square footage in the first quarter was 1,123,426 square feet for an average price per square foot of $ Total retail center sales activity in 2015 was down compared to In the first six months of 2015, the market saw Absorption & Deliveries Past 9 Quarters Millions SF (0.1) Net Absorption retail sales transactions with a total volume of $302,524,100. The price per square foot averaged $ In the same first six months of 2014, the market posted 48 transactions with a total volume of $528,220,318. The price per square foot averaged $ Cap rates have been lower in 2015, averaging 6.51% compared to the same period in 2014 when they averaged 6.99%. One of the largest transactions that has occurred within the last four quarters in the Inland Empire (California) market is the sale of Inland Center Mall in San Bernardino. This 294,365 square foot retail center sold for $51,300,000, or $ per square foot. The property sold on 2/17/2015. Reports compiled by: Rory Hillenga, Research Manager; Susan Tysma and Lesley Casemero, Research Associates Deliveries 0.08 (0.03) q q q q q 2015 CoStar Group, Inc. The CoStar Retail Report 3

9 Inland Empire Third Quarter 2015 Markets CoStar Submarket Clusters & Submarkets In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Submarket Clusters Inland Empire East Inland Empire West Submarkets Coachella Valley Corona East San Bernardino Riverside South Riverside Airport Area North San Bernardino West San Bernardino 4 The CoStar Retail Report 2015 CoStar Group, Inc.

10 Inventory & development Third Quarter 2015 Inland Empire Historical Deliveries Deliveries Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction Square Footage Under Construction Inventory Average Bldg Size Market # Bldgs Total GLA Preleased SF Preleased % All Existing U/C Inland Empire East , , % 11,581 10,100 Inland Empire West ,616 92, % 12,654 12,062 Totals , , % 11,901 10,590 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2011 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 1.2 Leased Un-Leased 180 Preleased Un-Leased Millions of SF Thousands of SF T q q 2015 CoStar Group, Inc. The CoStar Retail Report 5

11 Inland Empire Third Quarter 2015 Inventory & development Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Construction Starts Deliveries Millions of SF q q q q q q q q q q q q q q q Recent Deliveries by Project Size of Year-to-Date Development Building Size # Bldgs GLA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF , , % $ , ,824 50,000 SF - 99,999 SF 1 76,056 56, % $ , ,000 SF - 249,999 SF 2 362, , % $ , , ,000 SF - 499,999 SF % $ >= 500,000 SF % $ Recent Development by Tenancy Based on GLA Developed for Single & Multi Tenant Use 2015 Deliveries Currently Under Construction Comparison Based on Total GLA Shopping Center General Retail 47% 46% 54% Power Center 53% Mall Specialty Center Multi Single Multi Single Millions of SF The CoStar Retail Report 2015 CoStar Group, Inc.

12 Inventory & development Third Quarter 2015 Inland Empire 2015 CoStar Group, Inc. The CoStar Retail Report 7

13 Inland Empire Third Quarter 2015 Inventory & development 8 The CoStar Retail Report 2015 CoStar Group, Inc.

14 Figures at a Glance Third Quarter 2015 Inland Empire General Retail Market Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Inland Empire East 6,829 41,745,101 1,958,787 2,115, % (100,283) 106, ,009 $14.21 Inland Empire West 2,680 16,627, , , % 20,330 8,905 29,026 $11.78 Totals 9,509 58,372,919 2,665,131 2,826, % (79,953) 115, ,035 $13.47 Mall Market Statistics Third Quarter 2015 YTD Net YTD Under Leasing Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Activity Inland Empire East 17 11,809,562 1,006,936 1,023, % 26, ,125 $15.95 Inland Empire West 6 6,128, , , % (15,054) 0 0 $22.13 Totals 23 17,938,374 1,161,086 1,177, % 11, ,125 $16.95 Power Center Market Statistics Third Quarter 2015 YTD Net YTD Under Leasing Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Activity Inland Empire East 24 10,113, , , % 388, ,208 49,960 $18.87 Inland Empire West 16 8,545, , , % (57,894) 45,481 0 $16.02 Totals 40 18,658,853 1,407,110 1,443, % 330, ,689 49,960 $17.20 Shopping Center Market Statistics Third Quarter 2015 YTD Net YTD Under Leasing Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Activity Inland Empire East 1,218 62,264,247 6,705,612 6,925, % 289, ,751 54,895 $16.31 Inland Empire West ,858,348 2,420,839 2,565, % 68,564 26,135 91,590 $17.15 Totals 1,792 89,122,595 9,126,451 9,491, % 357, , ,485 $16.55 Specialty Center Market Statistics Third Quarter 2015 YTD Net YTD Under Leasing Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Activity Inland Empire East 8 1,299, , , % 13, $21.92 Inland Empire West 5 834, , , % 6, $21.00 Totals Total Retail Market Statistics Third Quarter 2015 YTD Net YTD Under Leasing Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Activity Inland Empire East 10, ,231,916 10,621,071 11,050, % 617, , ,989 $16.14 Inland Empire West 4,662 58,995,160 4,223,561 4,372, % 22,071 80, ,616 $16.23 Totals 15, ,227,076 14,844,632 15,423, % 639, , ,605 $ CoStar Group, Inc. The CoStar Retail Report 9

15 Inland Empire Third Quarter 2015 Figures at a Glance General Retail Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area 1,089 7,380, , , % 38,447 8,905 0 $12.34 Coachella Valley 1,230 8,045, , , % 15,689 6,282 0 $16.17 Corona 232 1,455,345 19,908 34, % (22,388) 0 0 $12.40 East San Bernardino 2,181 13,260, , , % (70,793) 18,402 0 $11.46 North San Bernardino 1,073 5,729, , , % (32,567) 0 9,026 $10.02 Riverside 2,015 10,902, , , % 23,967 55,410 99,956 $14.33 South Riverside 1,171 8,081, , , % (46,758) 26,478 37,053 $16.42 West San Bernardino 518 3,517, , , % 14, ,000 $15.61 Totals 9,509 58,372,919 2,665,131 2,826, % (79,953) 115, ,035 $13.47 Mall Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area 3 3,617,347 39,369 39, % $16.49 Coachella Valley 4 2,139, , , % 7, ,325 $12.10 Corona 1 492,404 34,627 34, % (9,563) 0 0 $27.34 East San Bernardino 2 1,892, , , % $0.00 North San Bernardino 1 667,272 5,034 5, % 1, $30.00 Riverside 8 5,557, , , % 27, ,800 $19.82 South Riverside 2 1,727,713 65,867 65, % 2, $27.00 West San Bernardino 2 1,844, , , % (16,642) 0 0 $28.75 Totals 23 17,938,374 1,161,086 1,177, % 11, ,125 $16.95 Power Center Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area 8 2,918, , , % (17,213) 0 0 $17.38 Coachella Valley 8 3,606, , , % 42, $19.33 Corona % $0.00 East San Bernardino 5 1,721, , , % 304, ,208 49,960 $15.57 North San Bernardino 3 1,629, , , % 30,049 45,481 0 $8.88 Riverside 6 2,901, , , % 39, $22.68 South Riverside 5 1,883,915 56,757 56, % 2, $16.11 West San Bernardino 5 3,997, , , % (70,730) 0 0 $19.14 Totals 40 18,658,853 1,407,110 1,443, % 330, ,689 49,960 $17.20 Shopping Center Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area ,785, , , % 109,222 14,135 0 $19.04 Coachella Valley ,163,345 1,738,001 1,762, % 79, $16.34 Corona 71 4,251, , , % 13, ,700 $19.38 East San Bernardino ,125,708 1,522,234 1,526, % 11,254 3,200 0 $13.93 North San Bernardino 209 8,812, , , % (32,760) 0 25,285 $13.55 Riverside ,284,433 1,255,436 1,379, % 85,358 22,082 10,700 $17.03 South Riverside ,438,764 1,856,213 1,921, % 100, ,469 26,495 $17.74 West San Bernardino 149 7,260, , , % (7,898) 12,000 66,305 $18.93 Totals 1,792 89,122,595 9,126,451 9,491, % 357, , ,485 $ The CoStar Retail Report 2015 CoStar Group, Inc.

16 Figures at a Glance Third Quarter 2015 Inland Empire Specialty Center Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area 1 122,335 7,968 7, % 6, $21.00 Coachella Valley 3 358,976 54,168 54, % (31,529) 0 0 $23.13 Corona % $0.00 East San Bernardino 1 240,000 33,806 33, % (585) 0 0 $21.76 North San Bernardino 2 512, , , % $0.00 Riverside 2 95, % $0.00 South Riverside 2 606, , , % 45, $0.00 West San Bernardino 2 199, % $0.00 Totals 13 2,134, , , % 19, $21.65 Total Retail Submarket Statistics Third Quarter 2015 YTD Net YTD Under Quoted Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Area 1,901 24,824,704 1,382,111 1,450, % 137,069 23,040 0 $17.61 Coachella Valley 2,037 26,313,392 2,925,355 3,000, % 113,205 6,282 43,325 $16.34 Corona 490 6,199, , , % (18,872) 0 17,700 $19.92 East San Bernardino 2,962 29,240,324 2,860,994 3,008, % 244, ,810 49,960 $13.59 North San Bernardino 1,706 17,351,485 1,726,103 1,731, % (34,178) 45,481 34,311 $12.24 Riverside 3,129 34,740,173 2,106,677 2,232, % 175,526 77, ,456 $17.09 South Riverside 2,368 30,738,281 2,339,782 2,405, % 103, ,947 63,548 $17.60 West San Bernardino 1,055 16,818,971 1,115,347 1,190, % (80,820) 12,000 86,305 $18.98 Totals 15, ,227,076 14,844,632 15,423, % 639, , ,605 $ CoStar Group, Inc. The CoStar Retail Report 11

17 Inland Empire Third Quarter 2015 Figures at a Glance 12 The CoStar Retail Report 2015 CoStar Group, Inc.

18 Figures at a Glance Third Quarter 2015 Inland Empire 2015 CoStar Group, Inc. The CoStar Retail Report 13

19 Inland Empire Third Quarter 2015 Leasing Activity Historical Rental Rates Based on NNN Rental Rates Power Center Specialty Center General Retail Shopping Center Mall Total Market $29.00 $27.00 Dollars/SF/Year $25.00 $23.00 $21.00 $19.00 $17.00 $15.00 $ q q q q q q q q q q by Available Space Type Percent of All Vacant Space in Direct vs. Sublet by Building Type Percent of All Vacant Space by Building Type 4% Shopping Center General Retail Power Center Mall 96% Specialty Center Direct Sublet 0% 10% 20% 30% 40% 50% 60% 70% GLA By Building Type Ratio of Total GLA by Building Type Future Space Available Space Scheduled to be Available for Occupancy* Shopping Center General Retail Power Center Mall Millions Specialty Center Millions of SF q q * Includes Under Construction Spaces 14 The CoStar Retail Report 2015 CoStar Group, Inc.

20 Leasing Activity Third Quarter 2015 Inland Empire Select Top Retail Leases Based on Leased Square Footage For Deals Signed in 2015 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 The Club Center - Bldg B East San Bernardino 59,095 2nd Big Country N/A CBRE Chino Hills Pky West San Bernardino 50,000 2nd Haggen N/A N/A Magnolia Ave Riverside 45,000 1st LA Fitness N/A N/A San Bernardino Rd Airport Area 43,665 2nd Chuze Fitness N/A NAI Capital Commercial 5 Palms to Pines West Coachella Valley 43,615 1st Haggen N/A N/A E Washington St East San Bernardino 43,391 2nd Just Bargain Stores, Inc. Michael Development Corp Michael Development Corp Moreno St West San Bernardino 41,200 3rd Sports Authority N/A JLL E Harriman St East San Bernardino 40,038 3rd 24 Hour Fitness N/A Colliers International E Hospitality Ln East San Bernardino 39,123 3rd LA Fitness N/A Strategic Retail Advisors Compton Ave* Corona 32,500 2nd LA Fitness N/A N/A S Riverside Ave East San Bernardino 32,000 3rd N/A N/A Golden Hills Properties LLC 12 Corona Market Place Corona 25,047 2nd Sears N/A Newmark Grubb Knight Frank 13 Bear Valley Shopping Center Riverside 24,238 2nd Smart & Final N/A N/A 14 Tri-City Promotional Center East San Bernardino 23,586 1st ALDI, Inc. N/A Strategic Retail Advisors Riverside Plz Riverside 23,342 2nd N/A N/A Savills Studley; CBRE Valley Blvd Airport Area 22,000 3rd Fallas Perdes N/A Colliers International 17 The Springs - Building B Coachella Valley 21,260 1st ALDI, Inc. N/A Venture Capital Realty, Inc Dupont St Corona 21,076 1st Rio Ranch Market N/A Direct Deal 19 Ramona Plaza South Riverside 20,034 1st N/A N/A Lee & Associates 20 Rancherias Plaza North San Bernardino 20,020 2nd 99Cent Only Stores N/A LA Commercial Real Estate Schleisman Rd Riverside 20,000 2nd Bank of America N/A N/A Central Ave West San Bernardino 19,054 2nd Ying Qian Gu & Li Hong Jiau Direct Deal Progressive Real Estate Partners Mission Blvd West San Bernardino 18,923 3rd N/A N/A RE/MAX Commercial E Highland Ave East San Bernardino 17,506 1st ALDI, Inc. N/A Progressive Real Estate Partners Highway 111 Coachella Valley 17,000 2nd ALDI, Inc. N/A Lee & Associates Foothill Blvd Airport Area 17,000 1st Crunch Fitness Pacic Equity Corp NAI Capital Commercial Day Creek Blvd* Airport Area 16,830 3rd Oce Depot Avison Young N/A 28 The Springs - Building B Coachella Valley 15,518 1st Party City N/A Charles Company S Euclid Ave Airport Area 15,200 2nd Grocery Outlet Bargain Market N/A N/A Canyon Springs Pky Riverside 14,950 3rd Guitar Center N/A Argent Retail Advisors Alessandro Blvd Riverside 14,500 1st New Christian Fellowship N/A Direct Deal S Mountain Ave West San Bernardino 14,241 2nd Grocery Outlet Bragain Market JLL N/A 33 Plaza Calle Tampico Coachella Valley 13,969 2nd Jules Market N/A Wilson Johnson S Waterman Ave East San Bernardino 13,925 1st Abbasi Auto, Inc. N/A Lee & Associates 35 West Gate Plaza - Bldgs A-D Riverside 13,500 1st 99Cent Only Stores N/A Argent Retail Advisors Central Ave West San Bernardino 13,040 1st 3 Way Thrift Store N/A NAI Capital Commercial W Highland Ave East San Bernardino 12,400 1st Dollar General N/A N/A 38 Central Court Shopping Center West San Bernardino 12,020 3rd We Mart Chino N/A NAI Capital Commercial 39 Sun City Plaza South Riverside 11,400 3rd True Value Hardware N/A CBC Sudweeks 40 Orchard Plaza - Bldg A West San Bernardino 10,422 3rd Dollar Tree N/A N/A * Renewal 2015 CoStar Group, Inc. The CoStar Retail Report 15

21 Inland Empire Third Quarter 2015 Sales Activity The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates 8.0% Cap Rate Price/SF $ % $500 Cap Rate Percentage 6.0% 5.0% 4.0% 3.0% $450 $400 $350 Dollars/SF 2.0% $ % q q q $250 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Retail Building Sales of 15,000 SF and Larger Based on Retail Building Sales From July June 2015 $300 Sales Volume Price/SF $200 Bldg Size # RBA $ Volume Price/SF Cap Rate Millions of Sales Volume Dollars $250 $200 $150 $100 $50 $180 $160 $140 $120 $100 $80 $60 $40 Price/SF < 25,000 SF 291 2,302,437 $605,619,007 $ % 25K-99K SF 100K-249K SF 34 1,525,223 $218,867,100 $ % 9 1,074,312 $174,570,000 $ % $20 $0 $0 >250K SF 1 294,365 $51,300,000 $ q q q q Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Retail Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Retail Building Sales of 15,000 SF and Larger $220 Inland Empire (California) US 10.0% Inland Empire (California) US $ % Dollars per SF $180 $160 $140 $120 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% $ % $80 2.0% q q q q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 16 The CoStar Retail Report 2015 CoStar Group, Inc.

22 Third Quarter 2015 Inland Empire 2015 CoStar Group, Inc. The CoStar Retail Report 17 Sales Activity

23 Inland Empire Third Quarter 2015 Deliveries, Absorption & I n l a n d E m p i r e E a s t M a r k e t Market Highlights Class A, B & C Historical Analysis, All Classes Delivered SF Absorption SF (0.100) (0.200) (0.300) q q q q q q q q q q q q q q q 9.6% 9.4% 9.2% 9.0% 8.8% 8.6% 8.4% 8.2% Vacant Space Historical Analysis, All Classes Quoted Rental Rates Historical Analysis, All Classes Direct SF Sublet SF $ $ Dollars/SF/Year $16.00 $15.90 $ $ q q q q q q q $ q q q q Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 10, ,231,916 11,050, % 205, , ,989 $ q 10, ,000,375 11,023, % 362, , ,782 $ q 10, ,660,587 11,046, % 50, , ,286 $ q 10, ,597,385 11,033, % 290, , ,144 $ q 10, ,344,037 11,069, % 211, , ,776 $ q 10, ,540,080 11,476, % (195,802) 7 97, ,237 $ q 10, ,442,294 11,183, % 335, , ,392 $ q 10, ,174,416 11,251, % 306, , ,998 $ q 10, ,090,477 11,474, % 234, , ,304 $ q 10, ,890,768 11,508, % (21,898) 9 54, ,534 $ q 10, ,836,747 11,432, % 358, , ,954 $ q 10, ,646,226 11,601, % 173, , ,138 $ q 10, ,567,267 11,696, % 352, , ,342 $ q 10, ,232,648 11,713, % (61,640) 4 12, ,417 $ q 10, ,226,153 11,645, % 692, , ,166 $ q 10, ,127,220 12,238, % (90,800) , ,540 $ The CoStar Retail Report 2015 CoStar Group, Inc.

24 Deliveries, Absorption & I n l a n d E m p i r e W e s t M a r k e t Market Highlights Class A, B & C Historical Analysis, All Classes Delivered SF Absorption SF Third Quarter 2015 Inland Empire (0.100) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% (0.200) q q q q q q q q q q q q q q q 0.0% Vacant Space Historical Analysis, All Classes Quoted Rental Rates Historical Analysis, All Classes Direct SF Sublet SF $ $ Dollars/SF/Year $16.10 $16.00 $15.90 $ $ q q q q q q q $ q q q q Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates q 4,662 58,995,160 4,372, % 98, , ,616 $ q 4,660 58,945,368 4,421, % 4, , ,927 $ q 4,659 58,937,368 4,418, % (81,348) 3 14, ,481 $ q 4,656 58,922,463 4,322, % 85, , ,905 $ q 4,648 58,880,625 4,365, % 111, , ,743 $ q 4,644 58,850,810 4,447, % 372, , ,653 $ q 4,639 58,637,431 4,606, % 124, , ,593 $ q 4,637 58,626,611 4,719, % 161, , ,523 $ q 4,636 58,622,811 4,877, % 117, , ,162 $ q 4,632 58,586,811 4,958, % 183, , ,342 $ q 4,628 58,567,141 5,121, % 294, , ,091 $ q 4,624 58,418,268 5,267, % (78,966) 3 54, ,640 $ q 4,621 58,363,860 5,134, % 330, , ,538 $ q 4,616 57,955,348 5,056, % (72,866) 3 19, ,380 $ q 4,613 57,935,790 4,963, % 240, , ,848 $ q 4,608 57,885,203 5,154, % 72, , ,102 $ CoStar Group, Inc. The CoStar Retail Report 19