CommercialREAL ESTATE FORECAST

2020E D I T I O N # 1 4

Table of CONTENTS6 2019 Summary

8 Office Market

10 Retail Market

14 Lodging Forecast

16 Industrial Properties Forecast

17 Vacant Land Forecast

18 J. Jeschke Appraisal, Residential Market Report

20 About Commercial One Brokers

2019 Summary

A rea market occupancy rates remain high in most segments

of the commercial market. Last year was the most recent

year that all segments of the commercial market reached

90% and above occupancy rates. Again, only the industrial/

warehouse market was unable to reach 90% levels. Overall,

it was a good year once again. We believe that the Branson

market remains solidly in the Expansion Phase of the cycle.

Even with strong occupancy levels, the area rents have

yet to increase any appreciable amount. Although commercial

construction levels have been strong, very little retail or office

space has been built. No speculative projects were started

during the year. Through the 3rd quarter, $87.7 million of

total commercial construction permits were issued for the year

to date. This dwarfed 2018 for the same period that was only

$38.7 million. We believe a well-located retail and a new mid

upper-scale lodging property could be supported in today’s

market. There is currently limited demand for additional office

construction as rents are not at levels sufficient to support the

increased construction costs. The two largest commercial

projects started in 2019 are the $55 million-plus Aquarium at the

Boardwalk and the $25 Million WonderWorks family attractions.

Silver Dollar City theme park is completing one of their largest

additions to the park with the $30 million-dollar Mystic River

Falls attraction that will also open in 2020.

In addition to these large family attractions, several small

attractions were also added to the market. Besides family

attractions, the 13,000 sq. ft. Paula Dean Kitchen opened with

great success at the end of year at the Branson Landing. Another

Food Network celebrity chef, Guy Fieri, just announced his new

restaurant will open this summer also at the Landing in the old

Buffalo Wild Wings location. Overall, contractors report a good

backlog of future construction projects for 2020.

Although the final visitation numbers for the year have not

been reported at this time, it appears that after a slow spring, the

market rebounded nicely in the summer and the fall/Christmas

periods. It is anticipated that visitation will hit the nine million

mark once again. With large investments that continue to

be made in the family attraction portion of the market, it is

anticipated that visitation will again be high in the summer and

Christmas 2020 seasons. In addition, the CVB has made a

major commitment to the development of the youth sports travel

markets as well. New owners and leadership at the Ball Parks of

America project is expected to help expand this important visitor

generator. We believe this market demographic will continue

to grow visitation numbers for the area. Typically, when Silver

Dollar City opens a new ride and or attraction, overall visitation

sees a bump as well.

Much of the commercial market is dependent on growth

of the residential market in addition to our visitors. The housing

market was a strong performer once again, with the under

$220,000 price range as the most active, although higher price

levels are also showing increased sales activity. A major focus

has been made by the Taney County Partnership, the chambers’

economic development arm, for the addition of workforce

housing. Several new below-market projects will break ground

in 2020. As with most areas of the country and certainly in

tourism markets, recruiting and maintain a quality workforce

has become the challenge.

Again, Commercial One Brokers completed our 13th year

in business with another record year. The company closed over

$24 Million in lease and sales production with 65 transaction

sides. Thanks again to all our clients, landlords and customers

for their continued trust in our company.

COMMERCIAL MARKET RENTS AND OCCUPANCY RATES REMAIN FLAT, BUT OVER 90%

Sincerely,

STEPHEN N. CRITCHFIELD, CCIM Broker/Partner

ROBERT HUELS, CCIM Broker/Partner

2019 SUMMARY | 2020 Commercial Real Estate Forecast 6

2020 Commercial Real Estate Forecast | 2019 SUMMARY 7

Office Market

After a strong 2018, the office market activity paused in 2019. Net absorption was slightly under break even for the year with a minimal drop in overall oc-cupancy. One 12,000 building was removed from in-ventory as it was sold to a single user. Class B office maintained good occupancy levels and strong rents as the typical common area maintenance charges and services are lower than those in Class A space, thus total monthly rent payments are lower for those tenants.

The current rents do not justify the cost of new office construction as no new properties were added to the

market last year. Missing in the current market were properties at both ends of the size scale. Small 2 or 3 room offices in class B or C buildings were in short supply as were the 5-10,000-foot office spaces. We were able to convert a couple of retail locations to office use for this larger size tenant.

Coworking and/or small one-man offices are still in demand but finding the right property with services at a price and level the user and landlord will ac-cept has been a challenge. Pure coworking space is less acceptable to the market than small individual private offices.

2020 Office Outlook

Absorption, Rents and Occupancy Rates will remain within the current levels unless some unknown larger user needs to

expand in 2020.

OFFICE MARKET ACTIVITY PAUSES

8 OFFICE MARKET | 2020 Commercial Real Estate Forecast

87%

2018

93% 91%

YEARLY OFFICE OCCUPANCY RATES

Source: Commercial One Brokers, LLC

2017 2018 2019

LEASABLE SQ. FT.

107,202

119,174

111,655

338,031

Class A Space - 2

Class B Space - 5

Class C Space - 8

15

OCCUPIED SQ. FT.

98,287

111,274

98,099

307,660

PERCENTAGE %

92%

93%

88%

91%

AVG. RENTS PER SQ. FT.

$11

$11.06

$7.94

All rents are NNN with adjustments made for gross leases in the class B and C spaces.

2019 OCCUPANCY RATES

92020 Commercial Real Estate Forecast | OFFICE MARKET

Retail Market

The area’s retail market remains at nearly full occupancy. Net absorption was minimal with a small increase that bumped occupancy levels to 94% in 2019, up from 93% in 2018. The 47500 sq. ft. Branson Mall remains empty for another year and is currently for sale. We ignored this property in our calculations at this time as it would lower the overall market occupancy rate to 93% from the current 94%. It would also lower the occupancy rate for the Hwy 76 Entertainment corridor from 97% to 88%. Until the future of this property is known, we don’t think including it gives a true picture of the current leasing market condition.

The Landing has nearly completed its remixing of the center by the addition of more food and attractions to the property. The Landing dealt with several large national tenants who either left the market, went out of business or were downsizing their footprint. This national trend has recently affected The Shops

at Branson Meadows as we have been notified by several national tenants at the end of the year that they are either leaving the market and not renewing their leases or are downsizing their space in 2020. It is anticipated that nearly 12,000 store closings could occur nationwide in 2019. While the shift to online shopping is a factor weighing on bricks-and-mortar retail, it’s not solely responsible for the current carnage. Retail experts say some retailers are overstored, outdated and dealing with too much debt. However, it is still anticipated that more new stores will open in 2020 than close.

Although it was not a part of our database as a multi-tenant property, the vacant Kmart space may become a multi-tenant property in the future as it is under contract to a developer who will demise the 121000 sq. ft. space into 2 or 3 smaller box tenants. At least one new national tenant has committed to one of the new spaces.

RETAIL MARKET REMAINS NEAR FULL OCCUPANCY

RETAIL MARKET | 2020 Commercial Real Estate Forecast 10

RETAIL VACANCY IN THE UNITED STATES

Retail occupancy rates for the Springfield-Branson Metro area has received some national recognition as the Federal Reserve Bank of Atlanta graphic shows below that overall vacancy rates of from 2-4% for the region keeps the area at the top of the national retail market performance.

The Hollister/Southtown area occupancies remained flat but still solid at 93%. The available land and pad sites around Menards are well priced and we would expect some additional new activity in this area in 2020 should occur.

RETAIL VACANCY RATES*

< 2% (23)

2%-4% (165)

4%-6% (141)

6%-8% (33)

>8% (11)

*Percentages as of 2019 Q2; Source: Costar, Risk Analysis Unit/ Federal Reserve Bank of Atlanta

2020 Commercial Real Estate Forecast | RETAIL MARKET 11

The legalization of medical marijuana created active site selection activity in the last quarter for store locations before the state selected licensees are determined in January. Many companies, small and large, were trying to tie up locations for their applications. Typically, landlords required at least half rent while the possible tenant waited for the selections by the state but few if any sites will be approved, we believe. The city requirements kicked out several of the early prospects, and many sites in Branson do not qualify.

2020 Retail Outlook

We believe that the retail market will remain consistent with possible new construction occurring in the food sector and

possibly a new retail project. Rents for these new projects will certainly be at the high end of the current market rents in the

$20 PSF NNN plus range. Rents for these new projects will certainly be at the high end of the current market rents in the $20

PSF NNN plus range.

BRANSON RETAIL MARKET

LANDING DISTRICT

ON ‘76 OFF ‘76HISTORIC DOWNTOWN

HISTORIC DOWNTOWNLANDING DISTRICT OFF ‘76ON ‘76

97% OCCUPANCY

13 total properties

464,010 leasable sq. ft.

449,041 occupied sq. ft.

95% OCCUPANCY

2 total properties

493,600 leasable sq. ft.

467,848 occupied sq. ft.

97% OCCUPANCY

58 total properties

451,098 leasable sq. ft.

436,137 occupied sq. ft.

93% OCCUPANCY

15 total properties

1,194,206 leasable sq. ft.

1,112,511 occupied sq. ft.

12 RETAIL MARKET | 2020 Commercial Real Estate Forecast

8

132020 Commercial Real Estate Forecast | RETAIL MARKET

8

14 LODGING FORECAST | 2020 Commercial Real Estate Forecast

Lodging Forecast

LODGING PROPERTIES STILL ATTRACT STRONG INTEREST FROM INVESTORS

Interest remained strong in 2019 for lodging properties, as has been the case for the last three years. Since 2017, a large majority of the inventory has now changed ownership. Two local families remain as one of the few original property owners in the market. No new product has been added since the LaQuinta Inn and Suites in Hollister, built in 2015, and the Hampton and two Hiltons at the Landing in 2006 and 2007.

In summary, an aging inventory, along with steady improvement in both the overall market as well as the “Upper Midscale” class of the market, means new product should be considered. Typically, occupancy levels need to reach approximately 60% before much new product is considered. We believe that the “Upper Midscale” category is ready for an added property. If something is added to the market, the lower quality, older rooms that have not been

updated will surely suffer even more.

The nightly rental product and the larger multi-bedroom product being built for the VRBO/AirB&B vacation rentals have filled some of the demand for more modern, upper-scale lodging product. The nightly rental sector reported a 4.1% increase in tourism tax collections through 2019, while the traditional lodging category sank 1.8% for the year. As the visitor income demographic continues to increase, demand will increase for more modern lodging rooms. The 220,000 sq. ft. convention center has produced a steady increase in activity, and the property nears breakeven operations.

Investors appear to be paying anywhere from 2 times gross sales to as much as 3.5 times gross sales, depending upon the condition and past performance of the property.

2020 Forecast

We believe interest will remain strong by investors for area properties; however, those remaining for sale will be challenged

to receive their asking prices in many cases. It is likely that at least one new lodging property could be announced this year,

either in the Thousand Hills area or near the convention center.

152020 Commercial Real Estate Forecast | LODGING FORECAST

Industrial Properties Forecast

INDUSTRIAL PROPERTIES REMAIN STEADY

After several years of a soft industrial market, demand for industrial properties has improved but remained steady. The available inventory remains a major impediment to the market’s full growth as available properties typically don’t offer the features required by today’s office and warehouse users. Demand remains for higher ceiling clearances, more efficient lighting, dock high doors and truck court depths, and turning

radiuses large enough for today’s users. Gross rents remain from the mid $4.00 and $5.00 PSQF to the upper $5’s and low $6’s. In addition to smaller user demand, requests for 10,000 and 15,000 ft. spaces are now occurring. The market currently has little to no available inventory in those sizes. Estimated occupancy has improved from the low 80’s to upper 80’s percentages.

2020 Forecast

Demand for office warehouse and industrial properties will continue to increase; however, the available inventory does not fit

many of today’s users. Therefore, larger users will either buy or build their own building. They may also find a property that

fits their needs in Ozark or Springfield. A well-located office warehouse project with individual units sized between 2000 sq.

ft. and 5000 sq. ft. with dock access could be absorbed.

16 INDUSTRIAL PROPERTIES FORECAST | 2020 Commercial Real Estate Forecast

2020 Outlook

We project demand for commercial parcels will continue to slowly increase due to the lack of available existing buildings

sufficient for repurposing. It is expected that several parcels will sell in the Hollister Hwy 65 interchange area, as well as along

76 Country Blvd, once the cities CID is confirmed. We believe a few of the smaller residential parcels will also sell this year for

additional residential development.

Vacant Land Forecast

VACANT LAND SALES HAVE BEGUN TO SHOW INCREASED DEMAND

Although commercial land sales were not robust, it did continue to improve from last year. Some are still attempting to find older buildings to repurpose. It has slowly become apparent that new construction is becoming more financially practical as older buildings are cleared for new projects. Most of the interest continues to be along Hwy 76 and the Hwy 248 corridors with some early interest in the Hollister Menards area as well. New parcels were purchased along Hwy 248 with construction underway. Additional small parcels were placed

under contract for new residential development, which will be predominately for below market rents and subsidized workforce housing projects. A few 20-50 acre parcels have been put under contract but are still progressing through due diligence and have not closed. City governments of both Branson and Hollister purchased new locations for their police departments, and Hollister purchased a lot for the new city hall last year. Another lot was purchased next to Arrowhead for a new equipment leasing company behind the Lowe’s store in Hollister.

172020 Commercial Real Estate Forecast | VACANT LAND FORECAST

I mproved residential markets in the Tri-Lakes area continued

an upward trend from 2018, setting a record with sales

totaling 2,546 units. While the new totals surpass the 2018

numbers by 6.8%, the rate of increase is slightly reduced over

the 2017-2018 comparison period, where the reported increase

was 8.7%. The 2019 numbers are well above the 2005 to 2008

boom cycle that topped out with sales totaling 2,161 units.

Selling agents continue to report shortages of property for

sale, and exposure periods continue to decline. The average

days on the market for a single-family residential property was

130, down about 6% from 2018. The increased competition for

available supply is causing buyers to pay a higher percentage of

the asking price, which increased 2.5 percentage points to an

average of 96.8% of the final list price.

Total sales volume by dollar in Stone and Taney counties

reflected the increase. Total sales rose from $414 million in 2018

to $498 million in 2019, an increase of just over 20%. Residential

sales prices continued an upward trend in 2019 with median and

average sale prices increasing by 6.8% and 8.7%, respectively.

Average asking prices also increased slightly in 2019 from

$199,800 to $200,300. The list price to sell price ratio increased

by about 2 percentage points. All of these statistics support

increasing improved residential property values. There is no

indication that the market is slowing, but dips in the mortgage

interest rate in the 2nd and 3rd quarters could have caused the

increases in 2019.

Agents continue to report shortages of inventory to sell

despite an increase in new construction listings. There are few

developers in the market building speculative housing, and

most of the new construction listings are proposed construction.

Speculative builders continue to be conservative with reports

that new construction is typically under contract well before it is

complete.

Although residential sales have been brisk and supply

is tight, residential building lot sales declined slightly. The

oversupply of lots has continued to suppress lot values, but they

are rising. Typically, the sales volume of residential lots rises and

falls at a rate similar to the improved residential market. In 2019,

residential lot sales were only 18% of the improved residential

properties, which is about half that generated between 2004

and 2007—when residential lots sales were between 30% and

45% of improved residential property sales. Though anecdotal

evidence indicates there is an uptick in new construction, no

developers are building wholesale numbers of new houses

as occurred in the boom years of 2006 and 2007. There still

appears to be an adequate supply of developed lots on the

market sufficient to meet the demand.

Rental property managers and owners continue to report

high occupancy with low frictional vacancy. Rents continued

to increase in 2019 and will likely maintain an upward trend as

demand remains strong. The supply of rental units continues to

change as motels move in and out of the long-term rental market.

In 2019, one motel property entered the rental housing market

with 484 rooms, but at least three others have abandoned the

rental housing market and one was closed by the City of Branson

due to health concerns. Overall, the supply of motels used as

long term rental housing is similar to that found in 2018.

RESIDENTIAL MARKET CONTINUES STRONG PERFORMANCE AND SETS RECORD

J. Jeschke Appraisal

J. Jeschke Appraisal is a real estate valuation and consulting firm that has been operating in the Tri-Lakes market since 1982.

18 J. JESCHKE APPRAISAL | 2020 Commercial Real Estate Forecast

500

20011998 2004 2006 2009 2012 2014 2017 2020

1000

1500

2000

2500

3000

YEAR

Home Sales

Land Sales

ANNUAL HOME & LAND SALES VOLUME IN STONE & TANEY COUNTIES

192020 Commercial Real Estate Forecast | HOME & LAND SALES

ABOUT COMMERCIAL ONE BROKERSCOMPREHENSIVE MARKET RESEARCH

Commercial One Brokers provides trends and forecasts of rent, vacancy, and inventory for office, retail, and industrial properties. We follow the lodging and land markets as well. Overall averages often don’t adequately reflect the market due to significant variations in location and classification of this market’s assets. We have collected and built real-time databases since our company’s inception over 13 years ago. Due to its smaller size, national reporting services, brokers, and other reports don’t accurately depict this market.

ACCURATE, UP-TO-DATE INFORMATION

We provide our clients, area lenders, and others with reliable historical trends and forecasts for the Branson market. Our metrics include market composition, asking rents, vacancy absorption, inventory levels, and new construction. Commercial One Brokers is the Branson area’s largest full-service commercial real estate firm. We are led by Robert Huels, CCIM, and Steve Critchfield, CCIM, along with our partner in our management company, Christine Maples, CCIM, who is based in Springfield. This veteran management team has more than 85 years of combined commercial real estate experience.

As a CCIM (Certified Commercial Investment Member), this management team is a recognized expert in the commercial and investment real estate industry. The CCIM lapel pin is earned after successfully completing a designation process that ensures CCIMs are proficient not only in theory but also in practice. This elite corps of CCIMs includes brokers, leasing professionals, investment counselors, asset managers, appraisers, corporate real estate executives, property managers, developers, institutional investors, commercial lenders, attorneys, bankers, and other allied professionals.

A CCIM is part of a global commercial real estate network with members across North America and more than 30 countries. This professional network has enabled CCIM members to close thousands of transactions annually, representing more than $200 billion in value. CCIMs complete a designated curriculum that covers essential CCIM skill sets including ethics, interest-based negotiation, financial analysis, market analysis, user decision analysis, and investment analysis for commercial investment real estate. CCIMs complete a portfolio demonstrating the depth of their commercial real estate experience. Finally, they demonstrate their proficiency in the CCIM skill sets by successfully completing a comprehensive examination. Only then is a designation candidate awarded the coveted CCIM pin, joining the ranks of highly skilled commercial and investment real estate experts. Over 13,000 commercial real estate professionals have earned the designation. Currently, over 5,500 professionals are pursuing their CCIM designation. The three principles of Commercial One Brokers and Maples Properties of Branson are the only such companies in Branson.

20 ABOUT US | 2020 Commercial Real Estate Forecast

THE BRANSON FINANCIAL CENTER

212020 Commercial Real Estate Forecast | ABOUT US

500 West Main Street, Suite 205-B

Branson, Missouri 65616

OFFICE 417.334.3149

FAX 417.335.5152