Retail Market Rings in the New Year with Strong Momentum

Research & Forecast Report GREENVILLE, SC RETAIL Q1 2016 Retail Market Rings in the New Year with Strong Momentum Jessica Rahal Director of Research South Carolina Key Takeaways > > The vacancy rate for the Greenville, SC retail market is declining as retailer interest throughout the market remains strong. > > Asking rental rates are climbing as new product delivers and demand for space is robust. > > Downtown Greenville remains the focal point of the market for many retailers, but the suburban submarkets are also welcoming significant activity. > > The market s outlook is positive and will likely see continued growth. Healthy Demand for Space Contributes to Tight Market Retailers are showing robust interest in the Greenville/Spartanburg, South Carolina retail market, contributing to declining vacancy rates. The first quarter of 2016 came to a close with a total vacancy rate of 11.7%, down from 11.9% the previous quarter and 12.7% one year ago. The vacancy rate has been steadily decreasing over recent quarters but does not accurately depict true market conditions as much of the activity has been occurring in smaller, non-anchored centers that are not included in the tracked inventory. Market Indicators Relative to prior period Q1 2016 Q2 2016* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Average Asking Rental Rates (NNN) Greenville/Spartanburg, SC Retail Market $5.40 $6.41 $7.96 $9.34 $11.64 $12.61 Retailers are expressing a desire to locate at prime intersections with high visibility and traffic counts. As a result, the vacancy rates in these retail corridors are very low and quality space is difficult to find. In an effort to meet the demand for space, the market has welcomed several redevelopments and new construction projects. Rising land costs, construction costs and competition among retailers are collectively contributing to higher rental rates. Anchor Jr Anchor Shop Space Q1-15 Q1-16 Asking rental rates for shop space in the market averaged $12.61 triple net per square foot (NNN PSF) at the end of the first quarter of 2016, up from $12.53 NNN PSF the previous quarter and $11.64

NNN PSF one year ago. The Woodruff Road retail corridor is home to the highest suburban asking rental rates with asking rental rates for shop space averaging $34.02 NNN PSF. The submarket is home to Magnolia Park, the redevelopment of the former Greenville Mall that has been successfully attracting retailers looking for space in the market. Magnolia Park is home to Cabela s, Dave & Busters, Toys R Us, Babies R Us, Nordstrom Rack, Bad Daddy s Burger Bar, and Grimaldi s Pizzeria, among others. Atlanta-based Tin Lizzy s Cantina and Tucanos Brazilian Grill will be opening soon at the center. Haywood Road Corridor Maintains Popularity among Retailers Magnolia Park was the driving force behind the shift of retailers from Haywood Road to Woodruff Road late in 2014. At the time, retailers such as Babies R Us and Pier 1 Imports chose to close their Haywood Road locations and relocate to Magnolia Park on Woodruff Road. Since then, Haywood Road has seen new life with several retailers using the recently vacated space as an entryway into the market. > > Performance Bicycle plans to open its first South Carolina store at The Gallery Shopping Center located at 535 Haywood Road. The retailer will join Conn s and Gabriel Brothers who backfilled the former Steve and Barry s and Babies R Us spaces at the center. > > The Cheesecake Factory plans to open on May 31st at the former Panera Bread location at Haywood Mall. The location will be the restaurant s first in South Carolina. The 8,560 square-foot restaurant will include patios inside and outside the mall. Panera opened in an outparcel space last year. Downtown Greenville Keeps Heating Up Greenville s downtown was recently ranked the #3 Best Downtown by Liveability.com. The area is booming with residential and retail activity. Restaurants and retailers continue to invest in the submarket and are thriving off a growing residential and tourism base. New retailers are expected to make appearances throughout the year. > > Virginia-based Lou Lou Boutique recently opened its doors to customers at 201 N. Main Street. The retailer s 1,828 square-foot store offers jewelry, handbags, scarves and hats, among other items. The first South Carolina location opened in Charleston late last year. > > Cantina 76, a Mexican restaurant with two Columbia, SC locations, plans to open at ONE City Plaza early this summer. The restaurant plans to occupy the former Rare Steakhouse location and is expected to open upon completion of interior renovations. > > The Beach Company s Main + Stone development recently welcomed its first residents. The development features 293 apartment units and 20,900 square feet of retail space. Two Total Vacancy Rate (%) Greenville/Spartanburg, SC Retail Market 12.7% Q1-15 Main + Stone Source: The Beach Company 11.9% Q4-15 11.7% Q1-16 Shop Space Average Asking Rental Rates (NNN) Select Retail Submarkets Pelham Road West Spartanburg Hayood - Pleasantburg Greer Woodruff Road $13.03 $14.07 $15.15 $18.22 $34.02 2 South Carolina Research & Forecast Report Q1 2016 Greenville Retail Colliers International

Chefs Café & Market was the first retailer to announce plans to open a store at the development. The restaurant plans to close its current location and move into 5,000 square feet at the development in May. Ji-Roz, a Greek restaurant, plans to occupy 2,500 square feet the development, and Megan Diez Salon plans to open a 1,854 square-foot salon at the complex. Both retailers expect to open this summer. > > Ink n Ivy, by North Carolina-based Bottle Cap Group, is expected to open in May. The new bar and restaurant will occupy the former Corner Pocket space on Coffee Street. The company is investing $3 million to renovate the building. Ink n Ivy will be the second Greenville restaurant for Bottle Cap Group. The group opened Brazwells Pub early this year at the former Ford s Oyster House & Cajun Kitchen space on Main Street. A third restaurant, Diner 24, is in the works. Diner 24 will be a 24-hour diner with a 50s theme. The restaurant is expected to open this fall at the former Charlie s Steakhouse location on Coffee Street. > > Biscuit Head is expected to open this summer at the new South Ridge development located at Church Street and University Ridge. > > Stone Pizza Company plans to open in July at the former Park Avenue Pub location at East Stone Avenue and the intersection of Park Avenue and East North Street. > > Charleston Cooks is closing its Greenville store, located on N. Main Street, on May 29. The store s owner is retiring and closing the Charleston location as well. The company s Columbia location closed last summer. > > Pour Taproom recently opened a location on Falls Park Drive in downtown Greenville. The tap room serves 70 craft beers, ciders and wines and has a game room and TVs. > > The 156-room Embassy Suites being built along River Street and the Reedy River is expected to be completed in August. The hotel will be home to Greenville s second Ruth s Chris Steakhouse location and UP on the Roof, a rooftop bar and lounge. Ideal Environment for Investment Sales Current market conditions provide an ideal environment for investment sales. Rising costs and declining returns in gateway markets are driving investors to seek opportunities in secondary and tertiary markets. > > The Shops at Greenridge, a 466,600 square-foot shopping center, recently traded hands for $137.1 million. The center, located on Woodruff Road close to I-85 and Magnolia Park, is home to Barnes & Noble, Dick s Sporting Goods, Best Buy, Lowe s, and PetSmart, among other national retailers. Local Economy Supports Retail Growth Job growth and retail spending are two measures that can be used to assess a retail market s health. Job creation results in greater income which translates to additional spending. That in turn is reflected in the total retail sales volume. According to the Bureau of Labor Statistics, as of February 2016, approximately 405,800 individuals were employed by a non-farm job in the Greenville-Anderson-Mauldin, SC metropolitan statistical area (MSA), 9,100 more individuals than the previous year. Employment levels are on the rise and are at historical high levels. Job creation, a stable economy and low gas prices are encouraging spending. Gross retail sales have been strong in the region, and according to the South Carolina Department of Revenue totaled $6.4 billion during the 2015 October to December holiday shopping season. The majority of sales occurred in Greenville County which saw a growth over recent holiday seasons. Gross retail sales for the county totaled more than $4.3 billion from October to December 2015, an increase of 4.2% over the previous holiday season. Greenville-Anderson-Mauldin MSA Gross Retail Sales ($) October-December Totals 2015 $6.4 billion total sales Oct - Dec +9.0% since 2012 +2.8% since 2013 Greenville County $4.3 billion +4.2% since 2014 +16.1% since 2012 City of Greer Fiscal year 2015 gross retail sales totaled $1 billion Source: South Carolina Department of Revenue, Colliers International Annual Change in Non-Farm Employment by Month Greenville-Anderson-Mauldin MSA Number of Non-Farm Jobs Added 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Source: St. Louis Federal Reserve, Bureau of Labor Statistics, Colliers International Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 3 South Carolina Research & Forecast Report Q1 2016 Greenville Retail Colliers International

Q1 2016 Retail Market Summary Statistics Greenville, SC ANCHOR SPACE (GREATER THAN 25,000 SF) JR. ANCHOR SPACE (10,000-25,000 SF) SHOP SPACE (LESS THAN 10,000 SF) MARKET BUILDINGS INVENTORY VACANCY RATE (%) VACANT ASKING RENT (NNN) VACANT ASKING RENT (NNN) VACANT ASKING RENT (NNN) Belton/Honea Path 5 260,281 10.3% 0-0 - 26,700 $4.26 Boiling Springs 8 605,386 33.4% 129,000 $4.00 0-73,090 $7.95 Cherrydale/TR 5 453,054 15.0% 0-30,100-37,810 $15.41 Clemson Boulevard 12 977,172 2.5% 0-0 - 24,083 $9.02 Clemson Pendleton 7 380,437 12.0% 34,928-0 - 10,840 $6.46 Downtown 3 169,726 1.7% 0-0 - 2,841 - Duncan/Lyman 4 219,302 27.4% 44,000-0 - 16,160 $10.00 Easley 4 541,859 25.8% 120,479 $7.00 0-19,420 $11.00 East Side 12 990,248 18.9% 128,076-0 - 59,057 $13.14 East Spartanburg 13 1,061,468 18.8% 34,928 $7.00 37,655 $4.00 126,746 $8.73 Greer 9 729,617 12.4% 22,705 $13.00 10,500-57,230 $18.22 Haywood/Pleasantburg 16 1,420,009 13.3% 78,059-47,487 $8.66 63,271 $15.15 Highway 81 3 175,362 7.5% 0-0 - 13,075 $8.50 Inman/Lyman 4 222,836 28.2% 34,928-17,500 $6.00 10,320 $7.00 Mauldin 6 410,608 2.5% 0-0 - 10,294 $13.35 Oconee 8 741,796 4.8% 0-22,400 $5.00 13,250 $10.45 Pelham Road 7 312,856 14.1% 38,083-0 - 5,940 $13.03 Pickens/Liberty 4 204,720 4.8% 0-0 - 9,880 $12.00 Powdersville 1 141,000 0.0% 0-0 - 0 - Simpsonville 10 697,345 2.7% 0-0 - 18,950 $14.10 South Side 4 159,418 6.6% 0-0 - 10,500 $7.00 West Anderson 17 728,508 18.9% 34,928 $8.00 40,801 $5.00 61,837 $8.28 West Spartanburg 16 1,521,963 11.2% 63,719 $5.57 45,284-61,957 $14.07 White Horse Road/Berea 10 777,987 10.2% 48,510 $4.75 0-31,057 $9.01 Woodruff Moore 3 145,400 0.0% 0-0 - 0 - Woodruff Road 32 2,112,629 2.9% 0-15,000 $30.00 45,688 $34.02 Market Total 223 16,160,987 11.7% 812,343 $6.41 266,727 $9.34 809,996 $12.61 Regional Demographics The Greenville/Spartanburg region, which makes up nearly 25% of South Carolina s population, offers favorable demographics for various types of retailers. HOUSEHOLD INCOME Average: 2020: $68,247 (ESRI forecast) 2015: $60,284 (ESRI estimate Median: 2020: $51,317 (ESRI forecast) 2015: $44,063 (ESRI estimate) AGE (2015 ESRI Estimate) 20-34: 233,606 (19.8%) 35-64: 463,374 (39.2%) 65+: 182,712 (15.5%) HOUSEHOLDS 2020: 480,434 (ESRI forecast) 2015: 460,525 (ESRI estimate) 2010: 442,333 (Census) POPULATION 2020: 1,233,227 (ESRI forecast) 2015: 1,182,589 (ESRI estimate) 2010: 1,137,380 (Census) Source: ESRI Demographics, Colliers International Research 4 South Carolina Research & Forecast Report Q1 2016 Greenville Retail Colliers International

Market Outlook The Greenville/Spartanburg retail market is poised for continued success through the remainder of 2016. A growing residential population and job creation will generate a greater need for retail services. Grocers, such as Harris Teeter and Lowes Foods, will continue to show interest in the market. The market will continue to be a gateway for retailers looking to establish a South Carolina presence. The vacancy rate will continue to decline and retailers will find themselves competing for the few remaining opportunities to locate in ideal locations. Additional construction is expected to accommodate the demand for space. Rental rates will escalate to new record high levels as a result of demand and rising construction costs. Around the State Retail development is on the rise throughout South Carolina with grocery stores and sporting goods retailers anchoring larger developments. As employment and population growth continue, the state will attract additional national tenants to the market. Mixeduse developments are gaining popularity in both the suburbs and downtown submarkets. Charleston, South Carolina Charleston s retail market continues to be influenced by a growing tourism and residential population. > > Activity remains strong along King Street in Charleston s downtown. Several new hotels are in the works to accommodate a strong tourism industry. A dual-branded Hyatt Place and Hyatt House hotel opened last year at Midtown on Upper King Street. > > Quality space is becoming difficult to find in Charleston, especially at prime intersections. An opportunity exists to redevelop older centers in order to attract new retailers to the region. Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE 2: EXPANSION PHASE 3: HYPERSUPPLY THE GREENVILLE/SPARTANBURG, SC RETAIL MARKET is moving along the expansion phase. Rental rates, occupancy and employment are all strong and increasing. New construction is at its highest level at years and momentum continues to grow as grocery stores and national retailers show significant interest in the market. Midtown Charleston Columbia, South Carolina Retail activity remains strong throughout Columbia s retail market. Almost every submarket is welcoming new retailers. > > Downtown welcomed City Bar and Fondue and Twisted Spur Brewing, both occupying redeveloped space. Quality space in the Congaree Vista was recently vacated by Wet Willie s and Jillian s, adding much desired space to the submarket s existing inventory. The spaces will likely backfill quickly as the downtown residential population grows and entertainment and dining options expand. The First Base Building at BullStreet recently completed and offers approximately 26,000 square feet of retail space. First Base Building Columbia > > The suburban submarkets are also seeing growth with retailers such as The Fresh Market, Walmart Neighborhood Market and Kroger Marketplace under construction. For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights 5 South Carolina Research & Forecast Report Q1 2016 Greenville Retail Colliers International

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 16,300 professionals and staff FOR MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina +1 803 401 4269 Liz.McCary@colliers.com Jessica D. Rahal, CPRC Director of Research South Carolina +1 803 401 4264 Jessica.Rahal@colliers.com GREENVILLE RETAIL PROFESSIONALS: Frank Hammond, CCIM, CPM Senior Principal +1 864 527 5451 Frank.Hammond@colliers.com Lyn Tyner Principal & Brokerage Associate +1 864 527 5431 Lyn.Tyner@colliers.com Nick Reinhardt Brokerage Associate +1 864 527 5432 Nick.Reinhardt@colliers.com Scott Burgess Brokerage Associate +1 864 527 5434 Scott.Burgess@colliers.com Colliers International Greenville 55 E. Camperdown Way, Suite 200 Greenville, South Carolina USA +1 864 297 4950 About Colliers International Colliers International is a global leader in commercial real estate services, with more than 16,300 professionals operating out of 502 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate occupiers, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. Colliers International has been recognized and ranked by the International Association of Outsourcing Professionals Global Outsourcing 100 for 10 consecutive years, more than any other real estate services firm. colliers.com Copyright 2015 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.