RETAIL GREATER LOS ANGELES BASIN MARKET REPORT Continues To Witness Decreasing Vacancy Rates MARKET INDICATORS - VACANCY 6. NET ABSORPTION 588,800 CONSTRUCTION 3,312,470 RENTAL RATE $2.04 P NNN UNEMPLOYMENT LA 7. OC 4. IE 6. EXECUTIVE SUMMARY During the first quarter of 2015, the Los Angeles Basin retail market fundamentals continue to remain positive. The Los Angeles Basin retail market recorded positive net absorption of 588,800 square feet (). The Los Angeles and Orange County markets recorded positive tenant movement compared to last quarter while the Inland Empire demand remained flat at 9. vacancy. Los Angeles County vacancy rate decreased 10 basis points to 5.0% recording 372,600 of net absorption and Orange County vacancy rate decreased 30 basis points to 4. recording 193,600 of net absorption. The vacancy rate for the overall region decreased to 6., a drop of 10 basis points from the previous quarter recording and an overall net absorption of 588,800. A longer historical perspective shows that the vacancy rate a year ago stood at 6.. The weighted average asking rental rate decreased to $2.04 per square foot (P), per month, triple net (NNN) from the previous quarter s rate of $2.06 P NNN. Orange County continues to dominate the average asking rental rate in the region, recording at $2.51 P NNN as Inland Empire remains to be the lowest at a average asking rental rate of $1.52 P NNN. MARKET TRENDS - >> The overall total vacancy rate for the region decreased to 6. >> Weighted average asking rental rate decreased to $2.04 per square foot NNN >> There was positive demand with 588,800 net absorption >> Construction completions decreased to 168,906 HISTORICAL VACANCY VS RENTS Q1 2011 - $ P PER MONTH (NNN) RENTS VACANCY $2.55 $2.45 $2.35 $2.25 $2.15 $2.05 $1.95 $1.85 $1.75 1Q11 1Q12 1Q13 1Q14 1Q15 % VACANT (TOTAL) HISTORICAL NET ABSORPTION & CONSTRUCTION COMPLETIONS Q1 2011-1,400,000 1,000,000 600,000 () (600,000) (1,000,000) ABSORPTION CONSTRUCTION COMPLETIONS 1Q11 1Q12 1Q13 1Q14 1Q15 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters. www.colliers.com/greaterlosangeles
MARKET REPORT RETAIL LOS ANGELES BASIN The Los Angeles County retail market recorded the largest amount of absorption in the LA Basin during first quarter at 372,600. Asking rental rates decrease by $0.01 to $2.45 P NNN. The average asking rental rate was brought down by decreasing average rates for power centers and single tenant buildings. Currently, there is a total of 1,929,399 of retail under construction in Los Angeles County. The largest property currently being built is the Village At Westfield Topanga in Woodland Hills which is scheduled to be completed by the third quarter of next year. A lease transaction of note in the Los Angeles County market was Haggen leasing 57,644 at 6240 Foothill Blvd in Tujunga. GREATER LOS ANGELES DEMOGRAPHICS >> POPULATION: 18,577,818 (2015 Estimate) 19,348,242 (2020 Projection) 4.1 (Growth 2015-2020) $80,493 (Average) $57,862 (Median) LOS ANGELES BASIN >> JOB GROWTH: 3. (past 12 months) >> UNEMPLOYMENT RATE: 6. (as of February 2015) The Inland Empire retail market activity was essentially flat during the first quarter. Overall positive net absorption recorded 22,600 square feet for the quarter. The total vacancy rate remained at 9. compared to last quarter. Average asking rents decreased by 4. to $1.41 P NNN. Lifestyle/theme-festival centers had the highest average asking rental rate of $2.07 P NNN, while strip centers had the lowest at $1.22 P NNN. There is currently 324,057 Inland Empire. The largest property at 185,000 Orange County recorded net absorption at 193,600 for first quarter. vacancy decreased to 4. from 5.0%. There was slight movement of asking rents in all categories. The overall average asking rental rate decreased in first quarter of 2015 to $2.51 P NNN from $2.58 P NNN last quarter. There is approximately 1,059,014 of retail space under construction in Orange County. The largest property currently being built is The Source Lifestyle Center in Buena Park, which includes 400,000 square feet of retail space. The project Walmart Supercenter being built in Perris. Also, leasing activity in first quarter of 2015 remained positive as Big Country leased 59,085 at 295 E Caroline St in San Bernardino. VACANCY BY PROPERTY TYPE 11% 12% 10% 11% 5.2% % VACANT 4. 8.1% 9. 10% 5. 8. 6. 5. 3.0% 2% 1% COLLIERS INTERNATIONAL 0% 1% 2% LIFESTYLE/THEME FESTIVAL CENTERS 0% % VACANT VACANCY BY MARKET P. 2 challenges in securing any significant tenants. of new retail inventory under construction in the >> HOUSEHOLD INCOME: is expected to be completed by first quarter of 2016. However, this property has had initial
MARKET REPORT RETAIL LOS ANGELES BASIN RETAIL OVERVIEW EXISTING PROPERTIES VACANCY ABSORPTION CONSTRUCTION RENTS Market/ Property Type Inventory Vacancy Vacancy Prior Qtr Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rates 24,141,839 5.0% 5.0% (5,000) (5,000) 0 0 $3.46 14,138,903 5. 5. 41,500 41,500 0 0 $2.76 LIFESTYLE/THEME-FESTIVAL CENTERS 4,889,033 3.0% 2. (3,200) (3,200) 0 1,353,584 $2.47 78,958,928 6. 6. 99,300 99,300 56,496 294,451 $2.36 30,774,215 7. 7.2% (7,800) (7,800) 7,015 103,932 $2.02 77,464,212 2. 2. 247,800 247,800 45,995 177,432 $2.41 SUBTOTAL 230,367,130 5.0% 5.1% 372,600 372,600 109,506 1,929,399 $2.45 11,795,749 4. 5. 60,100 60,100 0 0 $3.94 7,710,767 4.1% 4. 58,500 58,500 0 0 $2.89 LIFESTYLE/THEME-FESTIVAL CENTERS 3,085,551 8.2% 9.2% 29,200 29,200 0 952,870 $3.49 45,217,110 6.1% 6.1% 8,800 8,800 8,400 106,144 $2.29 10,513,819 6. 6. (17,200) (17,200) 0 0 $1.91 25,061,360 1.2% 1. 54,200 54,200 0 0 $1.96 SUBTOTAL 103,384,356 4. 5.0% 193,600 193,600 8,400 1,059,014 $2.51 11,199,030 5. 6.2% 40,000 40,000 0 0 $1.71 10,280,677 10.2% 9. (60,700) (60,700) 0 0 $1.78 LIFESTYLE/THEME-FESTIVAL CENTERS 2,263,158 8.0% 8.0% (400) (400) 0 0 $2.07 52,621,998 14.0% 14.0% 44,800 44,800 51,000 313,732 $1.36 12,414,635 11. 11. (19,000) (19,000) 0 10,325 $1.40 43,413,605 4. 4. 17,900 17,900 0 0 $1.22 SUBTOTAL 132,193,103 9. 9. 22,600 22,600 51,000 324,057 $1.41 LA BASIN TOTAL 47,136,618 5.2% 5. 95,100 95,100 0 0 $3.11 32,130,347 6. 6. 39,300 39,300 0 0 $2.29 LIFESTYLE/THEME-FESTIVAL CENTERS 10,237,742 5. 5. 25,600 25,600 0 2,306,454 $2.79 176,798,036 8. 8. 152,900 152,900 115,896 714,327 $1.87 53,702,669 8.2% 8.1% (44,000) (44,000) 7,015 114,257 $1.80 145,939,177 2. 3.0% 319,900 319,900 45,995 177,432 $1.81 TOTAL 465,944,589 6. 6. 588,800 588,800 168,906 3,312,470 $2.04 COLLIERS INTERNATIONAL P. 3
MARKET REPORT RETAIL LOS ANGELES BASIN NET ABSORPTION BY MARKET NET ABSORPTION BY PROPERTY TYPE >> Five 400,000 out of the six property types recorded positive net absoprtion 372,600 350,000 300,000 319,900 250,000 300,000 >> Shopping center landlords continue to try to keep up with shopper expectations 193,600 150,000 100,000 50,000 25,600 39,300 73,600 95,100 152,900 100,000 0 22,600 LOS ANGELES COUNTY 0 LIFESTYLE/THEME - FESTIVAL CENTERS OUTLOOK Per the Chapman Economic Forecast, California current economic conditions index is at a slight increase at 105.2 reported in February 2015. Steady job growth and lower gasoline prices are all supporting consumers positive attitude towards current economic conditions. First quarter did witness a slow down in the overall U.S economy due to East Coast weather conditions and West Coast port strikes. However, real GDP growth is expected to be strong rising to 2. in 2015 and 3.0% in 2016. Consumer spending, income and job growth are all growing solidly. MARKET DESCRIPTION The Greater Los Angeles retail market is comprised of 465.9 million square feet of multi-tenant shopping centers and single tenant properties. Community/neighborhood centers represent the most amount of space (3) among the different property types. The market attracts both affordable retailers and high-end stores due to a population that demands a wide variety of stores. High median income households and strong population growth contribute to make this region attractive to retailers. WEIGHTED AVERAGE ASKING LEASE RATES BY MARKET WEIGHTED AVERAGE ASKING LEASE RATES BY PROPERTY TYPE $ P PER MONTH (NNN) $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.25 $1.00 $2.46 LOS ANGELES COUNTY $2.68 $ P PER MONTH (NNN) $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.00 $1.80 $1.81 $1.87 $2.29 $2.79 LIFESTYLE/THEME - FESTIVAL CENTERS $3.11 P. 4 COLLIERS INTERNATIONAL
MARKET REPORT RETAIL LOS ANGELES BASIN DEFINITIONS OF KEY TERMS USED IN THIS REPORT Anchor Tenant: A large national or regional retailer that serves as a primary draw for a shopping center. Capitalization (Cap) Rate: A calculation that shows the relationship between one year s net operating income and the current market value of a property. Is calculated by dividing the annual net operating income by the sales price. Community Center: Typically has a total square footage between 100,000-350,000 square feet. Often will have 2-3 large anchored tenants, which include supermarkets and drugstores. Other tenants may include retailers that sell items such as apparel, home improvement/furnishings, toys, electronics, or sporting goods. Direct Vacancy: Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Lifestyle Center: An upscale specialty store shopping center that has a total square footage between 150,000-500,000 square feet. The center usually has an outdoor setting with dining and entetainment. Neighborhood Center: Focuses on retailers that sell convenience items and personal services. The center will often have a supermarket as an anchor tenant. The size range is 30,000-300,000 square feet. Theme/Festival Center: Predominantly has a unifying theme based on tenants and architectural design. Focuses on restaurants and entertainment while appealing to tourists. The size range is 80,000-250,000 square feet. Single Tenant Free Standing Building: Retail building occupied by only one tenant. Space Added (Net): square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Strip Center: An attached row of stores or service outlets while usually being less than 30,000 square feet. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on triple net rents, which excludes costs associated with taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per square foot basis. Technical Note: Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 >> $2.3 billion in annual revenue >> 1.7 billion square feet under management >> Over 16,200 professionals UNITED STATES: Greater Los Angeles Headquarters Office License No. 01908231 865 S. Figueroa Street, Suite 3500 Los Angeles, CA 90017 TEL +1 213 627 1214 FAX +1 213 327 3200 PUPIL, MARTIN President, West Region HOLLINGSWORTH, JOHN Executive Managing Director MUMPER, HANS Executive Managing Director RESEARCH ANALYSTS MATTESON, CAITLIN Research Director GALVIN, THOMAS R. Regional Analyst WONG, CHRISTOPHER Regional Analyst Power Center: The center often consists of several freestanding anchors with a minimum number of small tenants. The size of the property is typically between 250,000-600,000 square feet. The anchor tenants are usually discount department stores, off-price stores, and warehouse clubs. Regional/SuperRegional Mall: Provides shopping goods, general merchandise, apparel, and furniture. Often consists of multiple department stores. Regional Malls usually are between 400,000-800,000 square feet, and Super Regional Malls typically are greater than 800,000 square feet. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/greaterlosangeles. Accelerating success. www.colliers.com/marketname