Lexington coins a new identity

Research & Forecast Report COLUMBIA, SC RETAIL Q4 2017 Lexington coins a new identity Crystal Baker Research Coordinator South Carolina Key Takeaways > > Average triple net core area rental rates slowly increase. > > Lexington will draw new retailers and consumers in 2018. 2017 Market Recap Over the past year Columbia s retail market overall posted a net negative annual absorption of 68,327 and the core area shopping centers (please see definitions on Page 2 of this report) posted a net negative annual absorption of 67,966 square feet. However, the average triple net shop space rental rate rose to $21.64 per square foot, a 6.50% increase over the core area rent during the fourth quarter of 2016. The shopping centers located in non-core area shopping centers ended the year with the triple net average shop space rent decreasing slightly to $11.44 per square foot compared to $11.98 per square foot one year ago. Urban retail average triple net rent also rose to $23.00 per square foot. Market Conditions Lexington is a trendy new hotspot This year the Lexington submarket is expected to draw new retailers to accommodate the housing boom, and complement the swanky nightlife scene forming along the Town of Lexington Main Street. Since the addition of the Icehouse Amphitheater in 2016, Lexington s Main Street began a transformation. Now customers can stroll alongside brick-lined streets and choose from a plethora of eclectic cuisine and craft beer options in unique restaurant atmospheres. The Town of Lexington has a mix of both classic favorites and new attractions along Main Street, including distinctive restaurants such as: Private Property, offering southern fare; The Mediterranean Cafe, which serves traditional Mediterranean cuisine; Libby s, which has been serving Lexington comfort foods for over 8 years; Cribb s Sandwich and Sweet Shop, offering decadent desserts and sandwiches; and The Haven Coffee House, an in-house bean roasting coffee shop. Furthermore, the Lexington community is anxiously awaiting the early 2018 opening Market Indicators Relative to prior period Q4 2017 Q1 2018 VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE** Note: Construction is the change in Under Construction. **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents. Summary Statistics Q4 2017 Columbia Retail Market Core Non-Core Vacancy Rate 6.23% 13.62% Change From Q4 2016 (basis points) Absorption (Thousand Square Feet) New Construction (Thousand Square Feet) Under Construction (Thousand Square Feet) Asking Rents Per Square Foot Per Year -265-101 -2.7 4.9 50 20 - - Core Non-Core Shopping Center Shop Space $21.64 $11.44 Change From Q4 2016 6.50% -4.51% Urban Retail $23.00 -

of four additional restaurants along Main Street. Alodias Cucina Italiana at 101 W. Main Street and Cafe Strudel at 309 S. Lake Drive are both long-time Columbia favorites at other locations. Bodhi Thai at 126 E. Main Street is new to the Town of Lexington and will open in a redeveloped bank building complete with a vault which has been converted to a wine cellar. Finally, O Hara s Public House will be a quaint Irish Pub located at 131 E. Main Street. Also, just across Highway 378, interesting cuisine awaits with the addition of Beer & Brothers, a California-style Mexican restaurant, and charming favorites such as The Flight Deck, Papa Gio s Pizzeria and Arkos. With the rebirth of the social scene in Lexington, additional retailers will want to join in and reap the benefits of increased Lexington foot traffic and the draw of Columbia residents traveling to experience the renewed Lexington atmosphere. Shopping Centers Overall, the shopping center market posted a net negative absorption of 35,805 this quarter and shopping center vacancy rose to 10.16%; however, there were an additional 70,000 square feet of retail space added to the Columbia market. Lowe s Foods added 50,000 square feet of core area space at Lexington Square on Sunset Boulevard, and 20,000 square feet of non-core area space is now available for lease at Killian s Crossing in Building A. Average triple net core area rental rates ended the year at $21.64 per square foot, while non-core area rental rates were $11.44 per square foot. Urban Retail There are 1.93 million square feet of urban retail in Columbia in six distinct urban areas. Overall vacancy remained steady at 11.2% at year end, and triple net average rental rates rose to $23.00 per square foot. Five Points had the lowest vacancy, with 8.3% vacancy, followed by the Vista, with 9.8% vacancy. Main Street (CBD) had 18.1% vacancy. Northeast Columbia The Northeast Columbia submarket has 3.9 million square feet of retail space and is the largest of all of the Columbia submarket sectors. Overall Northeast market vacancy rose to 11.01%. Core area shop space was lower at 8.25%, with 173,289 square feet of vacant space; likewise, the non-core area retail vacancy rate rose to 14.15%. The average triple net weighted rent was considerably higher at $16.71 per square foot this quarter, and Northeast core area space average rental rates increased to $19.73 per square foot. Harbison & St. Andrews The Harbison & St. Andrews submarket has 3.6 million square feet of retail space, making it the second largest submarket in Columbia. Definitions This report includes two distinct types of data. Shopping Center Retail is defined as all retail shopping centers except for regional shopping centers that are 20,000 square feet or larger, designed to accommodate at least one anchor or junior anchor tenant. This is further divided into core and non-core retail nodes. A core retail center is in an amalgamation that draws shoppers from across the region. It will have a mix of anchor, junior anchor and shop space tenants and will include a variety of food service and soft goods retailers that exist only in core retail markets. A non-core retail center will be one that is located at the edge of a submarket. It is generally designed with a single retail anchor and attracts shoppers from the surrounding neighborhoods only. Anchor space is typically 25,000 square feet or greater and is designed to accommodate a single tenant. Junior anchor space is typically 10,000 to 25,000 square feet and is designed for a single tenant. It can anchor a shopping center but is generally paired with an anchor and shop space. Shop space is typically less than 10,000 square feet and is generally attached to a center with an anchor, junior anchor or both. Urban Retail is defined as a street-oriented retail district where the primary way the tenant approaches the property is as a pedestrian. It typically has a mix of luxury retailers not found in traditional shopping centers and is found in urban locations. It is usually the street level or first level of a multistory building in a highly urbanized area. Average Asking Rental Rates Core Shop Space Village at Sandhills Columbia, SC Source:CoStar Q4 2016 2016 Q4 2017 $20.32 $20.41 $21.64 Q3 2017 2 South Carolina Research & Forecast Report Q4 2017 Columbia Retail Colliers International

Q4 2017 Retail Market Summary Statistics ANCHOR SPACE (GREATER THAN 25,000 SF) JR. ANCHOR SPACE (10,000 SF- 25,000 SF) SHOP SPACE (LESS THAN 10,000 SF) SHOPPING CENTER MARKET INVENTORY (SF) VACANCY RATE (%) VACANT (SF) ASKING RENT (NNN) VACANT (SF) ASKING RENT (NNN) VACANT (SF) ASKING RENT (NNN) CAYCE/WEST COLUMBIA Core 276,970 6.30% - - 16,051 $12.00 1,400 $13.00 Non Core 935,984 26.27% 69,252 $5.00 65,889 $7.04 110,711 $10.25 Cayce/West Columbia Total 1,212,954 21.71% 69,252 $5.00 81,940 $8.01 112,111 $10.28 DOWNTOWN Non Core 144,812 2.49% - - - - 3,600 $25.00 Downtown Total 144,812 2.49% - - - - 3,600 $25.00 GOLDEN TRIANGLE Core 1,247,294 1.38% - - - - 17,186 $24.04 Golden Triangle Total 1,247,294 1.38% - - - - 17,186 $24.04 HARBISON/ST. ANDREWS Core 1,325,084 11.15% 61,785-36,000-50,023 $32.00 Non Core 2,274,847 12.97% 86,005-19,500-189,555 $9.66 Harbison/St. Andrews Total 3,599,931 12.30% 147,790-55,500-239,578 $11.13 LEXINGTON Core 1,210,105 2.33% - - - - 28,219 $24.35 Non Core 518,162 9.81% 33,218-10,800 $15.00 6,836 $17.70 Lexington Total 1,728,267 4.58% 33,218-10,800 $15.00 35,055 $22.61 NORTH COLUMBIA Non Core 353,774 16.58% - - - - 58,654 $7.93 North Columbia Total 353,774 16.58% - - - - 58,654 $7.93 NORTHEAST COLUMBIA Core 2,100,049 8.25% - - - - 173,289 $19.73 Non Core 1,849,817 14.15% 96,343 $8.44 39,320 $9.75 126,098 $14.83 Northeast Columbia Total 3,919,366 11.01% 96,343 $8.44 39,320 $9.75 299,387 $16.71 SOUTHEAST COLUMBIA Non Core 900,419 3.82% - - 18,000 16.,400 $14.33 Southeast Columbia Total 900,419 3.82% - - 18,000 16,400 $14.33 Core vs. Non Core Core 6,159,502 6.23% 61,785-52,051 $12.00 270,117 $21.64 Non Core 6,977,815 13.62% 284,818 $7.50 153,509 $8.44 511,854 $11.44 Total Shopping Center Market 13,137,317 10.16% 346,603 $7.50 205,560 $8.96 781,971 $13.64 URBAN RETAIL Main Street (CBD) 369,170 18.1% $25.00 Vista 709,490 9.8% $30.00 Five Points 481,784 8.3% $25.00 Other 375,749 10.5% $12.00 Total Urban Retail 1,936,193 11.2% $23.00 3 South Carolina Research & Forecast Report Q4 2017 Columbia Retail Colliers International

The vacancy rate during the fourth quarter increased to 12.30%, up from 11.56% during the third quarter. Core area shop space vacancy was 11.15% and non-core area vacancy was 12.97%. The overall Harbison & St. Andrews market triple net average shop space rental rate ended the year at $11.13 per square foot; core area shop space averaged a high triple net weighted rent of $32.00 per square foot largely due to the weighted rent of Academy Sports, and non-core area triple net shop space rent was $9.66 per square foot. Lexington The Lexington submarket has grown to 1.7 million square feet, and this quarter, 50,000 square feet were added by Lowe s Foods. Lexington s overall market vacancy rate is 4.58%; non-core area retail space posted 9.81% vacant, while the core area has 2.33% of vacant shop space. The average triple net core area shopping center rental rate increased to $24.35 per square foot, and noncore area triple net rental rates were $17.70 per square foot during the fourth quarter of 2017. The Golden Triangle Non-Farm Jobs Added Over 12 Months Columbia, SC MSA Employment Trends 405 12,700 11,700 10,700 9,700 8,700 7,700 6,700 5,700 4,700 3,700 2,700 1,700 700-300 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Jobs Added Total Employment Source: South Carolina Bureau of Labor Statistics Village at Sandhills Columbia, SC 395 385 375 365 355 345 335 Total Non-Farm Employment (Thousands) All 1.2 million square feet of shopping centers in the Golden Triangle are considered core area, with limited space for additional development. At the end of the fourth quarter, 1.38% was vacant and average triple net shop space rental rates were $24.04 per square foot. The Golden Triangle posted a net positive quarterly absorption of 6,573 square feet. Recent Transactions Sales > > Saluda Towne Center, a 37,450-square-foot Bi-Lo-anchored shopping center located in Saluda County, sold for $2 million or $55.41 per square foot. > > In November, a Pizza Hut located at 2803 Main Street in Newberry traded for $2 million. > > Auto Zone, a 7,370-square-foot freestanding store located at 7236 Broad River Road in Irmo, sold for $1.8 million. > > A 15,230-square-foot freestanding Dollar Tree located at 2001 Rosewood Drive in Columbia was traded for $1.7 million. Leases > > Tuesday Morning leased 12,000 square feet of retail space within the shopping center located at 5336 Sunset Boulevard in Lexington. > > A lease was signed at 1001 Senate Street, commonly referred to as the Fire Station, and the owner has plans to open a French bistro. Source:CoStar Commercial Real Estate Growth Cycle: Where the market stands & where it is going. PHASE 3: HYPERSUPPLY PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 2: EXPANSION PHASE 4: RECESSION 4 South Carolina Research & Forecast Report Q4 2017 Columbia Office Colliers International

Gross Retail Sales & Employment Non-farm employment is growing within the Columbia Metropolitan Statistical Area (MSA). Per the Bureau of Labor Statistics most recent data from December 2017, the Columbia MSA had 395,500 non-farm employees. Since December 2016, 2,900 new officeusing jobs were added to the market while 300 non-farm jobs were created. Data from the South Carolina Department of Revenue says gross retail sales in the Columbia MSA reached $23.5 billion by October of 2017, a 13.97% increase from two years ago. Market Forecast As multifamily projects continue in the downtown market and foot traffic increases, urban retail will be in demand and investors will look for redevelopment projects which will interest the most downtown consumers. In addition, tenants with a desire to be located downtown are willing to pay higher rental rates in order to secure their locations. New retailers and successful shop owners looking for a spot to open a secondary location are scouring the submarkets with increased core area retail activity located near healthy housing markets such as Lexington and The Golden Triangle. The Lexington market has room to grow, but The Golden Triangle has limited space; however, due to high demand, the market vacancy in both submarkets is expected to decrease further. The Columbia retail market is headed for a positive 2018 due to a tightening market and in-demand locations. With the renewed interest in the Lexington submarket, a tightening urban retail market and The Golden Triangle s continued success, rental rates are expected to increase as the demand for retail locations intensify. Around South Carolina Charleston, SC > > Retail vacancy will decrease in the next couple of quarters as new residential developments in Berkeley County draw quality retailers to the live-work-play communities. Triple net average rent in core area shopping centers ended the year at $22.46 per square foot, while non-core area shopping center triple net rent averaged $18.87 per square foot. Greenville, SC > > Shopping center vacancy in core area properties is down to 5.74% and the triple net core area shop space rental rate is $23.17 per square foot. High-quality grocery stores are popping up in various Greenville markets and the 2018 construction of a three-story, mixed-use development, Garlington Park, which will include a Top Golf facility, is a welcome addition to the market. For additional commercial real estate news, check out our market reports at: www2.colliers.com/en/research Main Street Restaurants Town of Lexington, SC 1 MAIN STREET MAIN STREET 2 Icehouse Amphitheater 1 Catch Seafood 3 5 4 2 Mediterranean Cafe 3 Private Property 4 Libby s 5 Top Dogs 6 Keg Cowboy 7 Groucho s Deli 8 Cribb s Sandwich & Sweet Shop 6 1 4 7 9 2 8 2017 Gross Retail Sales (January-October) Columbia SC MSA Lexington County: $12.4 Billion Richland County: $9 Billion Since 2016 +2.38% 3 2017 Source: South Carolina Department of Revenue Lexington Courthouse 9 The Haven 10 11 10 Old Mill Brewpub 11 Creekside Restaurant COMING IN 2018 1 Alodia s Cucina Italiana 2 O Hara s Public House 3 Cafe Strudel 4 Bodhi Thai $23.5 Billion Jan-Oct 6 Jan-Oct Since 2015 +13.97% Jan - Oct 5 South Carolina Research & Forecast Report Q4 2017 Columbia Retail Colliers International

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