4th quarter retail report09

CommerCe | FoUTH QUarTer - 20 09 | retail market review

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RETAIL MARKET INDICATORS

Change Since

Current 4Q09 4Q08

Vacancy 13.02%

Lease Rates $1.85 NNN

Net Absorption * (306,722)

Construction N/A

*The arrows are trend indicators over the specified time period, and do not represent a positive or negative value. (e.g., absorption could be negative but still represent a positive trend over a specified period.)

LAS VEGASRETAIL MARKET OVERVIEW

AT A GLANCE

Vacancy Rates Reached New HighsOverall vacancy rates reached another high during the quarter at 13.02%. This is a 2.8% jump from third quarter 2009 and a 5.62% raise from a year ago. Anchorless Strip product type is showing the highest vacancy rates at 18.66%. Vacancy increases during the year were impacted by several store closings due to the current economic conditions.

Rents Remained StableAs Landlords are faced with a “Tenant” market, they are seeing many retailers renegotiating for lower rents and asking for more concessions as their leases come up for renewal. Negotiations like these and more up-front incentives help stabilize and even lower the overall average lease rates. Currently, the Las Vegas market is showing annual averages lease rates at $1.85 per square feet (psf). This is a drop from last quarter at $1.92 psf and higher of a drop from a year ago when rates where at $2.18 psf.

Challenging Outlook for Las Vegas ContinuesLooking forward, the retail sector is expected to continue to face challenges posed by a troubled employment market, low consumer confidence levels and a still struggling housing market. Vacancy rates are expected to continue upward into the foreseeable future. The task of identifying tenants who have a need for space in some of the larger units and filling more than 6.9 million square feet of available product will be difficult

in the next year.

RETAIL MARKET OVERVIEW

By end of the year vacancies reached new highs with approximately 7.28 million square feet of vacant product coming online. This equates to a 13.02% vacancy factor. Above-average vacancies were noted in the North Las Vegas (17.43%), Central East (15.44%), East (15.37%) submarkets. By product type Strip Centers (18.66%) and Neighborhood Centers (18.05%) retail buildings posted the highest vacancies at the end of the quarter as discretionary spending pulled back, further impacting the viability of small business owners. The retailers that are pulling through the recession have enjoyed the current vacancy and the old time saying “location, location, location” really means something right now to the retailers that can make the move to a more premier locations as rental rates are lowered and become more affordable.

According to a report in Time magazine the new rage in retail leasing are what is called “pop-up shops” Pop-up stores, or temporary retail outlets, are one way for landlords to fill an ever growing amount of retail vacancy. According to Mike Kraus, “pop-ups are an opportunity for both entrepreneurs and big brands to make some money without having to worry about the overhead of a five-year lease.” Pop-ups are not just for mom

and pop operations. According to the report Toys “R” Us is looking to replace the former KB Toys, by opening 350 holiday express toy outlets during the holiday season. Other retails that have dabbled in the pop-up concept include American Eagle, Gap, JC Penny, Ann Taylor and Gucci. With long vacancy times Landlords are looking for some part time foot traffic and retailers gain opportunities to create buzz on special products and/ or short term sales during important shopping months.

Pricing (Average Asking Rents)

Weak consumer spending and troubled employment is forcing many businesses to close and the demand for retail space is shrinking. This activity has lowered the average asking rents around the valley. Average asking rents witness a decline to $1.85 per sf/mo NNN during 4th quarter 2009, which was slightly below the $1.92 per sf/mo NNN reported in the preceding quarter (Q3 2009) and further below the $2.18 per sf/mo NNN reported one year ago. The amount of product available at year-end represented an all-time high, which will likely contribute to continue softening in retail prices.


OUTLOOK

As the winter months approach the temperatures are not the only thing dropping around the valley. Turbulent debt markets and a slowing economy have finally hit the commercial real estate market. According to a Federal Reserve official, “The strong headwinds that are facing financial institutions in the United States will likely continue for some time and struggles for the commercial real estate market are far from over.” Prices of existing commercial properties have declined sharply from their record highs and will likely continue to decline. Market conditions are expected to remain sluggish all throughout 2010 as the economy works it way out of the recession. Also affecting a faster recovery in the retail market comes from a combination of all-time low levels of consumer confidence and the highest unemployment numbers that we have seen in 26 years. The current 10% national unemployment rate equates to 15.7 million workers that remain jobless. According to the Labor Department “the largest job losses were in construction (down 62,000), manufacturing (down 61,000) and retail (down 40,000). Chief economist, Alan Levenson stated that “It’s not surprising to see continuing job losses in the retail sector because too many stores were built in response to overzealous consumer spending fueled by borrowing.” Although most economists report that the recession ended sometime in June, people are still afraid to spend money as unemployment keeps going up.

As the Holiday shopping season comes to a close, the negative sales that were forecasted during third quarter ended up being a positive shopping season. Last year at this time retail sales fell 3.4%, however even as shoppers continue to worry about credit card debt and sky high unemployment rates, retail sales actually rose 3.6% from November 1st through December 24th. According to an Associated Press article, “ A large increase was seen in internet shopping, which SpendingPulse said was up 15.5% over last year.”

Looking forward, incremental job growth is anticipated to be limited, with nearly every sector pointing toward continued contraction in 2010. Income and spending levels are also likely to remain depressed, as consumers pull pack in the face of uncertainty. These conditions will force retailers to shift their business models back to the pre-boom era, a change that can be difficult to achieve. That said, opportunities for those seeking expansion or entrance into the Las Vegas market over the next several years should be attractive from a pricing perspective.

LAS VEGASRETAIL MARKET OVERVIEW

Las Vegas, Nevada | Commerce Fourth Quarter 2009

Las Vegas Retail Overview 2005-2009 YTD

7.40%

3.90%4.31%3.71%

13.02%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2005 2006 2007 2008 2009 YTD

$1.75 $1.92 $2.04 $2.15 $1.85

44.50 48.73 50.06 50.40 55.88

Year

Ave Lease Rate

Base * Sf Millions

Squa

re F

eet

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

Vaca

ncy

Built Vacant Inventory Vacancy


No. of existing Under Const. Planned Net Gross NewBldgs. SF SF SF SF rate absorption Spaced Supply Low High avg.

Central eastCommunity Centers 21 3,470,953 - - 543,162 15.65% (84,048) 8,843 - $0.75 $3.50 $1.57Freestanding 8 257,490 - - 32,125 12.48% 13,891 13,891 - $1.00 $2.75 $1.46Neighborhood Centers 6 399,098 - - 126,622 31.73% (4,600) 1,100 - $0.90 $4.00 $2.44anchorless Strip 35 1,365,424 - - 146,378 10.72% 5,893 36,288 - $0.65 $3.00 $1.39total 70 5,492,965 - - 848,287 15.44% (68,864) 60,122 - $0.65 $4.00 $1.63

Central westCommunity Centers 34 5,827,422 - - 674,069 11.57% (78,656) 13,282 400,000 $0.50 $3.23 $1.42Freestanding 2 90,320 - - 4,950 5.48% - - - $0.75 $1.60 $1.19Neighborhood Centers 19 1,418,919 - - 179,188 12.63% (49,443) 6,929 - $0.90 $2.50 $1.48anchorless Strip 40 1,440,320 - - 197,797 13.73% (2,573) 30,623 - $0.31 $2.50 $1.29total 95 8,776,981 - - 1,056,004 12.03% (130,672) 50,834 400,000 $0.31 $3.23 $1.35

eastCommunity Centers 17 2,637,089 - - 352,400 13.36% (177,521) 100,447 - $0.80 $4.50 $1.60Freestanding 3 135,234 - - 50,000 36.97% 1,910 49,058 - $1.40 $1.75 $1.58Neighborhood Centers 3 243,177 - - 30,324 12.47% (90) - - $1.50 $4.50 $2.40anchorless Strip 12 402,940 - - 92,789 23.03% (13,883) 15,291 - $0.99 $2.25 $1.41total 35 3,418,440 - - 525,513 15.37% (189,584) 164,796 - $0.80 $4.50 $1.75

Green valleyCommunity Centers 35 7,275,457 - - 546,273 7.51% (68,345) 44,024 - $0.50 $3.50 $2.04Freestanding 4 189,929 - - 58,491 30.80% (3,045) - - $0.99 $1.85 $1.61Neighborhood Centers 21 2,128,629 - - 430,437 20.22% (26,230) 56,294 55,000 $0.21 $7.50 $2.23anchorless Strip 23 789,884 - - 206,459 26.14% (3,124) 27,630 - $0.40 $3.25 $1.61total 83 10,383,899 - - 1,241,660 11.96% (100,744) 127,948 55,000 $0.21 $7.50 $1.87

HendersonCommunity Centers 10 1,843,893 - - 289,315 15.69% 41,893 64,851 42,175 $0.75 $4.00 $1.98Freestanding 3 115,059 - - - 0.00% - - - Neighborhood Centers 3 295,539 - - 7,400 2.50% - - - $1.75 $2.25 $2.11anchorless Strip 4 232,564 - - 69,252 29.78% 4,601 4,601 - $1.70 $3.50 $2.57total 20 2,487,055 - - 365,967 14.71% 46,494 69,452 42,175 $0.75 $4.00 $2.22

NellisCommunity Centers 8 1,235,823 - - 74,602 6.04% (8,014) 8,668 - $0.85 $2.55 $1.41Freestanding 3 170,340 - - 6,003 3.52% 32,532 32,532 - $1.75 $1.75 $1.75Neighborhood Centers 11 908,002 - - 164,255 18.09% 49,075 64,075 - $0.75 $3.25 $1.81anchorless Strip 15 458,204 - - 38,671 8.44% 54,617 54,800 - $0.70 $3.50 $1.67total 37 2,772,369 - - 283,531 10.23% 128,210 160,075 - $0.70 $3.50 $1.66

North las vegasCommunity Centers 24 4,817,384 - - 708,695 14.71% 17,936 92,636 115,425 $0.99 $4.00 $2.32Freestanding 1 22,200 - - 22,200 100.00% - - - $0.25 $3.50 $1.88Neighborhood Centers 16 1,429,455 - - 306,467 21.44% (160,788) - - $0.90 $4.00 $1.91anchorless Strip 10 381,659 - - 121,610 31.86% 24,200 45,085 - $0.49 $3.50 $1.52total 51 6,650,698 - - 1,158,972 17.43% (118,652) 137,721 115,425 $0.25 $4.00 $1.91

NorthwestCommunity Centers 18 3,574,266 - - 282,380 7.90% 2,613 26,928 - $0.21 $3.17 $1.70Freestanding - - - - - #DIV/0! - - - Neighborhood Centers 11 721,010 - - 224,528 31.14% (34,389) 24,237 - $0.99 $4.00 $1.91anchorless Strip 6 162,765 - - 20,057 12.32% 16,404 17,244 - $1.00 $3.25 $2.18total 35 4,458,041 - - 526,965 11.82% (15,372) 68,409 - $0.21 $4.00 $1.93

SouthwestCommunity Centers 17 4,661,095 - - 541,241 11.61% 64,342 70,000 - $1.00 $4.00 $2.18Freestanding 1 26,218 - - 1,500 5.72% - - - $2.25 $2.25 $2.25Neighborhood Centers 10 962,756 - - 131,931 13.70% (38,609) 23,803 - $1.25 $3.00 $2.13anchorless Strip 41 1,509,686 - - 362,803 24.03% 124,819 169,974 - $0.75 $5.00 $1.84total 69 7,159,755 - - 1,037,475 14.49% 150,552 263,777 - $0.75 $5.00 $2.10

SummerlinCommunity Centers 17 3,253,457 - - 106,760 3.28% 19,729 25,549 - $0.75 $5.00 $2.58Freestanding - - - - - 0.00% - - - Neighborhood Centers 9 604,612 - - 43,306 7.16% (2,799) 201 - $1.45 $3.25 $2.31anchorless Strip 13 429,521 - - 82,954 19.31% (25,020) - - $1.00 $3.75 $1.74total 39 4,287,590 - - 233,020 5.43% (8,090) 25,750 - $0.75 $5.00 $2.12

las vegas totalCommunity Centers 201 38,596,839 - - 4,118,897 10.67% (270,071) 455,228 557,600 $0.21 $5.00 $1.88Freestanding 25 1,006,790 - - 175,269 17.41% 45,288 95,481 - $0.25 $3.50 $1.67Neighborhood Centers 109 9,111,197 - - 1,644,458 18.05% (267,873) 176,639 55,000 $0.21 $7.50 $2.07anchorless Strip 199 7,172,967 - - 1,338,770 18.66% 185,934 401,536 - $0.31 $5.00 $1.72total 534 55,887,793 - - 7,277,394 13.02% (306,722) 1,128,884 612,600 $0.21 $7.50 $1.85

Commerce CrGLas Vegas retail market report Q4 2009

Vacancy asking rent (NNN)inventory vacancy Demand & Supply Pricing


LAs VEgAs | RETAIL GRAPHS


Retail: Quarterly Vacancy

0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q208 Q308 Q408 Q109 Q209 Q309 Q409

Retail: Quarterly Absorption (SF)

(4,000,000)

(3,000,000)

(2,000,000)

(1,000,000)

-

1,000,000

2,000,000

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q308 Q408 Q109 Q209 Q309 Q409




Retail: Inventory (SF) and Vacancy Rate (%)

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q308 Q408 Q109 Q209 Q309 Q409

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Retail: Vacancy (%) and Ave. Lease Rates

$2.12$2.10$1.93

$1.91$1.66

$1.87$1.75

$2.22

$1.35

$1.63

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%16.00%18.00%20.00%

Central

East

Central

West

East

Green V

alley

Henders

onNellis

North Las

Veg

as

Northwes

t

Southw

est

Summerl

in

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50




Retail Space Vacancy Rates

Central West, 12.03%

East, 15.37%

Henderson, 14.71%Nellis, 10.23%

North Las Vegas, 17.43%

Northwest, 11.82%

Southwest, 14.49%

Summerlin, 5.43%Central East,

15.44%

Green Valley, 11.96%

Retail Vacancy by Type

Anchorless Strip, 18.66%

Community Centers, 10.67%Neighborhood

Centers, 18.05%

Freestanding, 17.41%


LAs VEgAs | RETAIL SUBMARKET MAP


COMMERCE | fULL sERVICE COMMERCIAL REAL EsTATE sOLUTIOnsCommerce Real Estate Solutions has been among the top commercial real estate brokerage firms in the Intermountain West for 30 years. From our headquarters in Salt Lake City and offices in Provo/Orem, Park City, Clearfield and St. George, Utah and Las Vegas, Nevada we offer a full range of brokerage services, valuation and consulting, client representation and property/facility management. Our alliance with Cushman & Wakefield extends our reach worldwide.

CUshMAn & WAKEfIELd ALLIAnCEA number of Cushman & Wakefield offices, including Commerce Real Estate Solutions, are independently owned and connected with the company by way of an international alliance. Cushman & Wakefield concentrates on larger markets like Los Angeles and New York, and alliance members like Commerce Real Estate Solutions concentrate on developing secondary markets.

Together the geographic coverage is nearly universal. This enables Cushman & Wakefield to provide comprehensive services for clients with local requirements as well as for those with more expansive national or international portfolios. In either case, Cushman & Wakefield’s services are supported by the full integrated resources of the entire alliance.

Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. Founded in 1917, it has 230 offices in 58 countries and more than 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

230 Offices in 58 Countries

C&W Owned Offices

C&W Alliance/Associate Offices

AS OF MARCH 2009

Australia Adelaide* Melbourne* Sydney

China BeijingChengduGuangzhou Hong KongShanghaiShenzhen

Fiji*India Bangalore ChennaiGurgaonHyderabadKolkataMumbai – CityMumbai – Suburbs New DelhiPune

IndonesiaJakarta

JapanTokyo

MalaysiaKuala Lumpur*

New ZealandAuckland* Wellington*

PakistanKarachi*

PhilippinesManila*

Singapore South KoreaBusanSeoul

TaiwanTaipei*

ThailandBangkok*

VietnamHanoiHo Chi Minh City

Alberta Calgary Edmonton*

British ColumbiaVancouver

NewfoundlandSt. John's*

Nova ScotiaHalifax*

OntarioLondonNewmarketOttawa Toronto CentralToronto EastToronto West

Quebec Montreal CentralMontreal Suburban

ManitobaWinnipeg*

New BrunswickFredericton*Moncton*Saint John*

IsraelTel Aviv*

LebanonBeirut*

Middle East/AfricaSouth AfricaCape Town*Durban* Johannesburg*Pretoria*

United Arab EmiratesDubai

ArgentinaBuenos Aires

Brazil ManausRio de JaneiroSão Paulo

ChileSantiago*

Colombia Bogota*

Latin America

AustriaVienna*

BelgiumBrussels

BulgariaPleven*Plovdiv*Sofia*

Channel IslandsJersey*

Czech RepublicPrague

DenmarkCopenhagen*

England BirminghamLondon-City London-West EndManchesterThames Valley

FranceLyonParis

GermanyBerlinDusseldorfFrankfurtHamburgMunich

GreeceAthens

HungaryBudapest

Ireland Cork* Dublin*

Italy Bologna Milan Rome

LuxembourgLuxembourg*

MacedoniaSkopje*

The NetherlandsAmsterdam

Northern IrelandBelfast*

NorwayDrammen*Oslo*Stavanger*

PolandWarsaw

PortugalLisbon

RomaniaBucharestTimisoara

Russia Moscow

Scotland Edinburgh Glasgow

Serbia Belgrade*

Slovakia Bratislava

Spain Barcelona Madrid

Sweden Stockholm

SwitzerlandBasel* Geneva* Zurich*

TurkeyIstanbul

Canada

United States

Australia/Asia Pacific

Europe

EcuadorQuito

Mexico Ciudad JuarezGuadalajara*Mexico CityMonterrey

Peru Lima

VenezuelaCaracas

AlabamaBirmingham*MobileArizonaPhoenixTempeTucson*

CaliforniaCarlsbadInland EmpireL.A. L.A. South BayL.A. WestMarin/Sonoma CtyOaklandOrange CountySacramento San Diego - DowntownSan Diego - EastgateSan FranciscoSan JoseWalnut Creek

ColoradoColorado Springs*Denver

ConnecticutHartfordStamford

DelawareWilmington

District of ColumbiaWashington, D.C.

Florida Ft. LauderdaleFt. Myers*JacksonvilleMiami OrlandoPalm Beach Gardens Tampa

GeorgiaAtlanta

Hawaii Honolulu

Illinois Chicago Chicago Suburban

IndianaIndianapolis*

KentuckyLouisville*

MainePortland

MarylandBaltimoreBethesda

MassachusettsBoston

MichiganDetroit*Grand Rapids*Grosse PointKalamazoo*Lansing*Muskegon*

MinnesotaMinneapolisMinneapolis Suburban

MissouriKansas City*St. Louis*

NevadaLas Vegas*Reno

New HampshireManchester

New JerseyEast RutherfordEdisonMorristown

New York Albany*Binghamton*Buffalo*Corning/Elmira*IslandiaIthaca*Kingston*Melville, LIN.Y. Downtown N.Y. MidtownRochester*SyracuseSyracuse*Utica*Watertown*Westchester County

North CarolinaCharlotte*Greensboro/Winston-Salem*Raleigh/CaryRaleigh/Durham*Tarboro*

OhioCincinnati*Cleveland*Columbus*Toledo*

OregonPortland

PennsylvaniaPhiladelphiaPhiladelphia SuburbanPittsburgh*

Puerto RicoSan Juan*

South Carolina Charleston* Greenville/Spartanburg*

Tennessee Memphis*Nashville*

Texas Austin*Dallas HoustonSan Antonio*

Utah Clearfield/Ogden* Park City*Provo/Orem*Salt Lake City*St. George*

VirginiaFredicksburg*McLeanNewport News*Norfolk/Virginia Beach*Richmond*Roanoke*

WashingtonBellevue Seattle

WisconsinMilwaukee*

4th quarter retail report09

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retail market overviewat

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