Oklahoma City

[Pages:20]Oklahoma City

2011 Mid?Year

Retail Market Summary

TABLE OF CONTENTS Retail Market Summary Planned Development Sales Summary North Submarket Northwest Submarket South Submarket Edmond Submarket West-Central Submarket Moore / Norman Submarket Eastern OK County Submarket Special Report: Downtown OKC Retail

1-2 2 3

4-5 6-7 8-9 10-11 12-13 14-15 16-17 Back Cover

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Oklahoma City

2011 Mid?Year Retail Market Summary

The Retail Market

Optimism returns, will the market follow? Retail in general and our market in particular reflect a number of factors that lead us to be optimistic about retail performance over the next year to 18 months. These factors include:

? As of the publication of this survey, the nation has had 10 months of rising retail sales (excluding car sales).

? Per the ICSC, overall retail sales rose 4.6 percent in 2010; the highest increase since 2006.

? The national retail vacancy rate is trending downward ending the first quarter at 7.1 percent.

? Nearly 65 million square feet of retail space was absorbed in 2010.

? Private sector hiring is up (state and local government layoffs are keeping national unemployment up). Oklahoma has the lowest unemployment in the nation.

? National incomes are beginning to grow again.

All of these bode well for retail, but concerns are still out there. Unemployment remains too high; the housing market in other parts of the country is still shaky; national debt and spending are a problem. But, don't get lost in the day-to-day or month-to-month figures. The trends over time are what matter and most are positive to retail. The one area that concerns us more than any other is consumer confidence; it's not where it needs to be for retail to take off. As a result, expect the next year to be characterized by uneven performance ? periods of growth and positive news followed by slippage and negative news. But, when you look back over time, there will have been significant improvement in the market.

The outlook for local retail is even better: ? Overall market vacancy is down about .5

percent over the first half of the year. ? Newer well-located centers are almost

all well-occupied. There is little space available for tenant expansions or new tenants coming to town. ? National tenants are becoming more active

in both expanding within a market and to new markets. ? Oklahoma City is home to one of the largest retail developments under construction in the country, the Horizon/CBL outlet mall. ? Last year, a significant number of big boxes were available; now, virtually all the newer boxes either have been leased or have deals pending. Even two of the four recently closed Borders & Ultimate Electronics have deals on the table. ? A number of national retailers new to Oklahoma City have recently signed leases; Whole Foods, Sunflower Market, Marco's Pizza, 5 Guys Burgers, Anthropologie, Genghis Grill? to name a few. And others continue looking for space, including Dick's Sporting Goods, California Pizza Kitchen, LA Fitness, Edwin Watts Golf, Performance Bikes, Sprouts, Sam Moon, Von Maur department store, and there are others. Not all will ultimately come, but many will.

Two categories of tenants are making aggressive pushes into our market: fitness facilities and grocery stores. Gold's Gym is opening three large facilities and a number of smaller satellite locations. LA Fitness is actively seeking locations as is Planet Fitness. After having a stagnant grocery market for the last 10 years or so, we are seeing a growing number of grocers look to our market for either expansion or new stores. Many are the new wave of specialty grocers. Everyone knows about the Whole Foods under construction at Classen Curve. Sunflower has signed a lease at 63rd and May and is seeking other locations. Sprouts continues to search for locations. Aldi plans to add several stores. Buy for Less is doing a fresh market concept in Edmond. Crest is planning more of its market stores after the success of the south May location. This activity will invigorate the grocery market and give shoppers greatly enhanced choices.

Our optimism is somewhat tempered by the sluggish performance of some local tenants, particularly in older more established shopping centers. While our survey shows

OKC TOTAL RETAIL MARKET INVENTORY

50 GLA SF Freestanding SF

40

(millions of square feet)

30

20

10

0 2007

2008

2009

2010

2011

OKC TOTAL RETAIL MARKET VACANCY

15%

12%

9%

6%

3%

0% 2007

2008

2009

2010

2011

(millions of square feet)

OKC TOTAL RETAIL MARKET ABSORPTION

0.2 0.1 0.0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 2007

2008

2009

2010

2011

significant strength in newer product, the last three years have been hard on the more local operators located in middle of the market locations. Consequently, market occupancy, which we expect to continue to increase, has not improved as fast as you might expect given the good things happening at the top of the market. The submarkets with the most of this type of product and tenants--Northwest, South, and Eastern OK County--are the areas most affected; their recovery will lag the overall market recovery.

1

Survey Summary

A couple of notes: 1) Crossroads Mall has been removed from our survey. This reduces the size of the South submarket by 1.1 million s.f. Crossroad's vacancy distorted the survey numbers and there is question as to whether it will remain retail use in the long-run. The property is expected to be sold in the next few months; we will add it back to the survey in the future if warranted. 2) the listed square footages of Westgate Marketplace in the West-Central submarket and Shoppes at Moore in the Moore-Norman submarket were adjusted. Both square footages were reduced to actual square footages from the planned square footage of the initial developments.

These changes reduced the total market size to 26.8 million square feet in 230 buildings of over 25,000 s.f. and are the reason for the negative absorption for the period. In addition, we track 12.4 million square feet of standalone buildings for a total market of $39.2 square feet.

Vacancy at mid-year declined to 10.5 percent. The year-end 2010 figure was 13.8 percent; if you adjust the year-end figure to

make it comparable given the above noted changes, it was 11.0 percent, resulting in an improvement of .5 percent during the first half of 2011. Most of the improvement was due to the leasing of big box space; this increase in occupancy was partially offset by some additional vacancy in small shop space in older centers as noted above.

There continues to be a significant number of smaller strip centers in the market (under 25,000 s.f. in size). We would estimate there are easily 3 million square feet of these properties in the market.

Planned Development

Three significant construction projects started in the second half of 2010 are nearing completion: The Horizon/CBL Outlet Mall at I-40 and Council; the addition of Whole Foods to Classen Curve; and, the Target at Fritts Farm. All will open within the next few months.

A number of factors point toward the need for new development: limited availability in prime locations; national retailers becoming more active; new retailers looking at our market; and the overall health of our economy.

These positive developments are counterbalanced by still difficult financing terms for developers; market rents that (for the time being) still favor tenants; and the lingering uncertainty in the national economy.

Because it's easier to build on (and finance) success and because retailers want proven locations, development in 2011 will continue to be additions to existing projects. Expect to see expansions of the Shoppes at Moore, Midwest City Towne Center, and, possibly, the second phase of University North Park. A number of other ground-up projects are in the planning stages, both previously announced projects stalled by the downturn and new development. Even in good times development takes time, but, due to the reasons noted above, it takes even longer today and developers must have deeper pockets. Nonetheless, we would not be surprised by an announcement or two on new developments between now and the end of the year. The most likely locations: the Memorial Road corridor, east Edmond, and Midwest City.

OKC Retail Market Totals

2

Whole Foods

Submarket Map

GLA SF 26,827,428

Vacant SF 2,814,906

Vacant % 10.49%

Sales Summary

The last component of the retail market to pick up has been investment sales, for a number of reasons: financing of all but gold-plated projects has been difficult; investors have been seeking distressed deals and there haven't been many; the value expectation of sellers and buyers have been mismatched; and, there has been the question of where sellers can reinvest their money for similar returns.

Gradually, sales and investor interest are beginning to improve. In the first half of the year, there were five sales totaling 3.2 million square feet and nearly $55 million. This far surpasses the total of all of 2010, four sales of 410,386 square feet and $7.8 million.

Buyer South Shields #1 Ltd.

Inland Diversified Oklahoma AB AB Inc.

Seller Enterprise South Shields , LLC

Address 7301 S Shields

Sq Ft Land Size Sales Price Price/SF

200,624

712,497

$2,850,000

$14.21

Silver Springs Pointe Holding, LLC 9001 Northwest Passage 136,673

676,922 $16,012,500

$117.16

Heritage Park Mall LLC

6801 E Reno

213,280

826,768

$1,300,000

$6.10

Sale Date Comments 3/1/2011 Two parcels - Shields Plaza and a freestanding former Circuit City 4/1/2011 Site includes Kohl's, Office Depot and a Retail Strip Center

4/15/2011 In-Line Mall

Inland Diversified

UTC 1 LLC

1400 24th Ave. NW

178,898

845,499 $32,500,000

$181.67

5/1/2011 Sales included four different tax parcels

Dang, Ryan & Mary LLC Strickling , LLC

119 E State Highway 152 37,150

152,024

$2,290,000

$61.64

3/28/2011 Mustang Retail Center

Total Volume

766,625

3,213,710 $54,952,500

As is common when markets begin to recover, the sales are at the top of the market and the bottom of the market; institutional investors looking for stable, safe investments and entrepreneurial local investors seeking to reposition assets and generate higher returns. Inland, the purchaser of University North Park and Silver Springs, is one of the most active institutional investors in the country right now and paid a premium for these properties with a below 8 percent capitalization rate. Inland now owns five of the better retail properties in our market.

For sales to spread beyond the high and low end, we need to see a continued improvement in capital markets ? credit is becoming more available but lending is still very sluggish. In addition, a general improvement in the national economy and lessening of economic uncertainty will help. Again, there is progress but it is slow. Equity is in the market, we are seeing more offers on deals, and more inquiries. The investment sales market isn't back, but recovery is underway.

Sales Summary & Upcoming Developments

Silver Springs Pointe

There are five classes of shopping centers being evaluated. "A" centers are super regional centers containing in excess of 900,000 square feet. "B" centers are regional centers containing from 300,000 to 900,000 square feet. Class "C" centers are those community shopping centers with 100,000 to 300,000 square feet. Class "D" centers contain 30,000 to 100,000 square feet and are classified as neighborhood strip centers. "E" centers are strip centers with 25,000 square feet to 30,000 square feet. You will be able to see how each of the classes of centers in each sector are performing.

3

2011 Mid?Year Oklahoma City Retail Market Summary North Submarket

SUBMARKET Summary

The North submarket is Oklahoma City's largest concentration of retail and one of the areas that all national retailers want to be. This is supported by the survey numbers with the submarket's mid-year vacancy totaling 8.05 percent, a slight increase from year-end but still showing stability and a healthy market. The Memorial Corridor lies at the heart of this submarket, contains nearly 3 million square feet and is arguably Oklahoma City's most desirable retail location.

Both of Oklahoma City's regional malls are located in this submarket and appear to be performing very well. Quail Springs Mall and Penn Square Mall are each 100 percent occupied. Penn Square is the strongest performing mall in the state with estimated sales of over $600 per square foot and a waiting list of tenants. The Classen Curve continues its lease up with primarily local tenants; the Whole Foods building is under construction and is expected to open this fall. Many of the national retailers looking to Oklahoma City for the first time will open stores in this submarket.

This market saw a number of big box closures over the last three years, but leases have either been completed or are pending on most of them. Gold's Gym has leased the Sportman's Warehouse space. Sunflower, another new entry to our grocery market, has leased space at the NWC of 63rd and May. We expect the former Linens N Things space at Belle Isle and the former Circuit City at Memorial Square to be leased in the not too distant future. Even the recently vacated Borders and Ultimate Electronics buildings reportedly have deals pending.

Given this level of activity, interest is renewed in new development around Quail Springs and along west Memorial road.

NORTH OKC SUBMARKET VACANCY

10%

8%

6%

4%

2%

0% 2007

2008

2009

2010

2011

NORTH OKC SUBMARKET ABSORPTION

50

40

30

20

10

0

-10

-20

-30 2007

2008

2009

2010

2011

North (thousands of square feet)

4

Whole Foods

2011 Mid?Year Oklahoma City Retail Market Summary North Submarket

North

Center

Britton Plaza Shopping Center 2648 W Britton Rd Belle Isle Station NW Expressway & N Classen Blvd Midland Center NW Expressway Casady Square W Britton Rd & N Pennsylvania Ave Spring Creek North 12200 N May Ave Mayfair Place 2900 NW 63rd St Lakeside Shops Shopping Center 7500 N May Ave Shoppes at North Pointe W Memorial Rd & N May Ave Colonnade 9600 N May Ave Town & Country Village 12335 N May Ave Cross Rock Shops 3521-3561 W Memoral Rd Camelot Square NW 122nd St & N Pennsylvania Ave Charter At May 9494 N May Ave North Penn Plaza 5601 N Pennsylvania Ave Penn-Hefner Plaza 2121 W Hefner Rd Country Club Corner 6410 N May Ave Quail Springs Village 13801 N Pennsylvania Ave The Plaza at Quail Springs 2221 NW 138th St Highland Park Retail Center W 189th St & N Western Ave Wilshire Village W Wilshire Blvd & N Western Ave Colonial Plaza 9225 N May Ave 50 Penn Place NW 50th St & N Pennsylvania Ave Country Club Plaza 2800 W Country Club Dr Fenwick Plaza 16524 N Pennsylvania Ave Quail Springs Mall W Memorial Rd & N Pennsylvania Ave Penn Square Mall 1901 NW Expressway Shops at the Veranda 150th St & N Western Ave Village Plaza (Waverly Crossing) 1505 W Britton Rd Lakewood Shopping Center 6901 N May Ave Quail Plaza 10950 N May Ave Nichols Hills Plaza 6501 Avondale Dr Quail Springs MarketPlace W Memorial Rd & N Pennsylvania Ave Sportsmen's Warhouse Center 2301 W Memorial Rd Britton Square 9415 N May Ave Lakehurst Plaza 8025 N May Ave Memorial Square W Memorial Rd & N Pennsylvania Ave 6900 Place 6900 N May Ave Village Park 10405 N May Ave Centennial Plaza NW 58th St & N May Ave Northpark Mall 12100 N May Ave French Market Mall 2850 NW 63rd St Village at Quail Springs 2201 W Memorial Rd Quail Village 14101 N May Ave Classen Curve NW Grand Blvd & N Classen Blvd Wilshire Village W Wilshire Blvd & N Western Ave

North Totals

Class Year Built E

B

2000

C

1961

C

1953/83/95

D

1981

D

1978

D

1950/99/07

D

D

1984

D

1982/92

E

2001

C

1984

D

1963/88/96

D

1970/71

D

1973/77

D

1959/96

E

1983

E

2005

D

2009

E

1986

C

C

1973/1985/00

D

1970/92/03

D

2009

A

1980/98/99

A

1960/88

B

2006

D

1964/73/89

D

C

1965/89/91

C

1963

B

E

2008

D

1983

D

C

D

1981/91/92

E

1972

B

1993

C

1971/81

C

1985

C

2004

D

2007

C

2008

E

1986

Leasing Agent

GLA

Vacant

Gerald Gamble Co.

27,340

5,050

Gerald Gamble

Price Edwards & Co.

433,333

42,979

Laci Jackson/ Karleen Krywucki/Susan Brinkley/Ev Ernst

Price Edwards & Co

54,272

3,503

Susan Brinkley, Ev Ernst, Laci Jackson

Price Edwards & Co.

159,396

24,612

Laci Jackson//Susan Brinkley/Ev Ernst

Price Edwards & Co.

89,006

3,390

Laci Jackson//Susan Brinkley/Ev Ernst

Price Edwards & Co.

95,000

3,747

Karleen Krywucki

Pippin Properties

67,000

11,450

Julie Shelton

Price Edwards & Co

37,684

0

Phillip Mazaheri

Brady's Properties

78,000

1,300

Ali Ghaniabadi

Brady's Properties

43,500

10,950

Ali Ghaniabadi

Dan Ward Companies

25,060

3,525

Chris Bruel

Blanton Property Co.

107,799

3,895

Jeff Bolding

The Boettcher Companies

99,757

1,400

Fred Boettcher

Steve Hetherington

32,000

0

Steve Hetherington

Haydel Associates

69,392

0

Aimee Dial Parrish

JAH Realty, LP

53,477

0

Jeff Norman/Ethan Slavin

JAH Realty, L.P.

26,500

0

Ethan Slavin

JAH Realty, L.P.

104,001

0

Ethan Slavin

Steve Walters

26,369

9,000

Steve Walters

Dr. Scott Samara,M.D.

27,000

0

Dana

Eric Roberts

122,000

0

Eric Roberts

CB Richard Ellis/OKLA

86,082

68,590

Kristin Blasiak

NAI Sullivan Group

38,436

1,200

Susan Davis Jordan

Lease Space OKC

35,304

12,155

Gretchen Bybee

General Growth Mgmt.,Inc.

1,124,482

0

Kelly Waswo

Simon Property

1,100,000

0

Simon Property

Grubb & Ellis Levy/Beffort

30,650

23,978

Vicki Knotts

Legacy Properties

49,133

2,000

Candace Sullivan

The Pilchner Group

55,247

7,500

Gaby Villarreal

Morris Enterprises

144,335

75,000

Kevyn Colburn

Chesapeake Energy

130,000

8,500

Steve Barwick

Bayer Properties

450,000

37,799

Mary Beyerzell

Hawkins Companies

66,662

0

Ryan Manteuffel

Grubb & Ellis Levy/Beffort

27,326

8,689

Jim Rose

CBRE/Oklahoma

32,637

2,400

Jason Little

CBRE/Oklahoma

225,000

28,000

Inman/Graham

CBRE/Oklahoma

49,502

7,500

Ryan Storer

CBRE/Oklahoma

32,574

9,995

Ryan Storer

CBRE/Oklahoma

233,794

1,500

Mark Inman

Morris Enterprises

200,000

43,509

Kevyn Colburn

CBRE/Oklahoma

244,724

5,368

Mark Inman

Inland Companies

100,404

0

Laurie Long

Grubb & Ellis Levy/Beffort

49,845

9,323

John Cohlmia

Blanton Properties

141,066

39,550

Tom Blanton

Dr. Scott Samara,M.D.

27,000

0

Dana

6,425,089

517,357

Vac. 18.47% 9.92% 6.45% 15.44% 3.81% 3.94% 17.09% 0% 1.67% 25.17% 14.07% 3.61% 1.40% 0% 0% 0% 0% 0% 34.13% 0% 0% 79.68% 3.12% 34.43% 0% 0% 78.23% 4.07% 13.58% 51.96% 6.54% 8.40% 0% 31.80% 7.35% 12.44% 15.15% 30.68% 0.64% 21.75% 2.19% 0% 18.70% 28.04% 0%

Rate 1 $8.00 $18.00 $0.00 $10.00 $11.00 $10.00 $9.00 $15.00 $9.00 $12.00 $18.00 $0.00 $11.00 $0.00 $10.00 $16.00 $16.00 $14.00 $17.00 $11.00 $0.00 $17.50 $12.00 $10.00 $0.00 $0.00 $17.00 $9.50 $9.00 $10.00 $12.00 $0.00 $12.00 $9.00 $12.00 $20.00 $8.00 $10.00 $10.00 $14.00 $8.00 $0.00 $18.50 $20.00 $11.00

Rate 2 $8.00 $23.00 $0.00 $14.00 $0.00 $0.00 $12.00 $0.00 $0.00 $0.00 $20.00 $0.00 $6.50 $0.00 $12.00 $0.00 $20.00 $0.00 $0.00 $12.00 $0.00 $0.00 $12.00 $13.00 $0.00 $0.00 $0.00 $0.00 $0.00 $15.00 $16.00 $0.00 $18.00 $0.00 $0.00 $18.00 $10.50 $0.00 $14.00 $0.00 $25.00 $0.00 $20.00 $24.00 $12.00

8.05%

Anchor Tenant(s)

Johnnies' Charcoal Broiler

Walmart SuperCenter Old Navy Conn's Panera Bread CVS Pharmacy Walmart Neighbor Mkt CVS Pharmacy Homeland Akin's Health Foods PetsMart, Big Lots Firestone Freddie Frozen Custard Chase Bank

Party Bazaar Boca Boca Cocina De Mino Subway ME/CU Credit Union

Cox Communications

Luby's Cafeteria Mill Creek Koslow's Commercial Federal Bank Buy For Less Beauty World Sunflower Farmers Market Half Price Books RadioShack Pier 1 Imports Fabrics Unlimited Dollar Tree Louie's Lapels Dry Cleaners Dodson Art Gallery Makeup Bar Homeland Cato Bank of Oklahoma

Fitness Together Edward Jones

Macy's JC Penney JC Penney Macy's Holder Brothers Beef

Westlake Hardware Dollar General Mazzio's Cokesbury Bookstore USA Baby Goodyear Tire Crescent Market Starbucks Old Navy, Ross Lowe's ATT Flagship Store

Beauty Alliance Gourmet Yarn Company Gulfport Sea Food Movement Inovations Dance Super Target PF Changs Ted's Cafe Subway Magnolia Hair Salon

Best Buy Home Depot Shogun Steak House B.C. Clark Bed Bath & Beyond Staples Gordmans Best Buy Tan &Tone Edwards Jones Whole Foods Balliet's Dodson Art Gallery Makeup Bar

5

2011 Mid?Year Oklahoma City Retail Market Summary NorthWEST Submarket

SUBMARKET Summary

The northwest submarket vacancy continues to be one of the highest in the market at 16.0 percent. This is an increase from 15 percent at year-end. Much like the south submarket, the northwest submarket is characterized by established neighborhoods. There has been limited population growth and relatively unchanged demographics. Most of the retail product is established neighborhood shopping centers with little new product. For many retailers, this market is their second or third choice; the I-40 corridor and the Memorial corridor are the more in demand markets at this time. Eight of the 30 centers in the submarket have over 30,000 s.f. vacant. Local tenants, who are feeling the effects of the downturn of the last three years, make up much of this submarket's tenant base.

The news is not all bad. A few of the bigger holes have been filled with Gold's leasing the old Circuit City space on Portland, and Vatterott College leasing the long-vacant Service Merchandise space on Northwest Highway. Silver Springs continues to have high occupancy and do well. Many of the restaurants along Northwest Highway report strong sales. And, there are a few new-to-the area tenants looking in the Northwest Highway and Rockwell area.

NORTHWEST OKC SUBMARKET VACANCY

20%

15%

10%

5%

0% 2007

2008

2009

2010

2011

NORTHWEST OKC SUBMARKET ABSORPTION

50

40

30

20

10

0

-10

-20

-30

-40

-50 2007

2008

2009

2010

2011

NorthWEST (thousands of square feet)

6

Mayfair Vilalge

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