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Old Dominion University Old Dominion University Hampton Roads Real Estate Hampton Roads Real Estate Market Review and Forecast Market Review and Forecast

Presented by: The Center for Real Estate and Economic Development

Old Dominion Unive Old Dominion University sity Real Estate Center Real Estate Center 2004 Retail Market Overview 2004 Retail Market Overview

Presented By

• H. Blount Hunter

RETAIL SALES TREND

0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Southside Peninsula Virginia US

RETAIL MARKET OVERVIEW

• 46.4 million SF GLA (shopping centers)
• 30.3 million SF Southside (65 percent)
• 16.1 million SF Peninsula (35 percent)

Retail SF and population are generally “balanced”

2003 AVERAGE RENT

$13.46 $13.18 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 AVERAGE Southside Peninsula

LEASING DYNAMICS

749,000 SF new construction 831,000 SF estimated absorption Overall vacancy rate: 11.9 percent

↓ DOWN 0.5 percent from 2002 ↓ DOWN 1.6 percent from 2001

Average small shop asking rent: $13.32

↑ UP $0.49 PSF from 2002 ↑ UP $1.05 PSF from 2001

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RETAIL SUBMARKETS

• 24 retail submarkets Southside

– 6 regional malls 14.9 million SF – 419,500 SF new construction

• 10 retail submarkets Peninsula

– 2 regional malls 7.3 million SF – 330,000 SF new construction

RETAIL PRODUCT TYPE

2 4 6 8 10 12

Neighborhood Community Regional Power Freestanding Specialty Festival Outlet

MSA

VACANCY BY PRODUCT TYPE

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%

Neighborhood Community Regional Power Freestanding Specialty Festival Outlet

“BIG BOX” VACANCY

3.5 million SF “Big Box” vacancy

– 67 percent of total retail vacancy – Disproportionate problem on Peninsula

• 45 percent of “big box” vacancy is on Peninsula
• 77 percent of Peninsula’s vacancy is in “big boxes”

– Reflects modest decline compared to 2002 but still suffering from sharp increases in 2000 and 2001

“SWEET SPOTS”

“Sweet Spots” exist throughout the region:

– Williamsburg and Route 17 corridor – Northern Newport News – Coliseum Central – Northern Suffolk – Hilltop and Pembroke areas in Va. Beach – Victory Crossing in Portsmouth – Downtown Norfolk – Greenbrier and 664 corridor

NEW PLAYERS

Kohl’s A.C. Moore Bass Pro Shops Shoe Carnival Moe’s Southwest Grill

• P. F. Chang’s

The Sharper Image K & G Superstore Dick’s Sporting Goods Jared’s Jewelers California Pizza Kitchen Cold Stone Creamery

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EXPANDING RETAILERS

• Wal*Mart
• Farm Fresh
• Burlington Coat Factory
• Home Depot
• Lowe’s Home Improvement
• Pier 1
• Ross Dress for Less

NOTABLE SALES IN 2003

Lynnhaven Mall sold for $256 million ($197 PSF)

– TWICE the combined sales price of $112 million for Greenbrier Mall and Military Circle in 2002

Smaller centers sold for $9 - $100 PSF

“WORD ON THE STREET”

→There’s more interest in this market than ever before, and by a broader range of retailers and restaurants →Many “big box” vacancies reflect “wait and see” attitudes by landlords who are not investing capital to re-demise large spaces for smaller tenants

“WORD ON THE STREET”

→The grocery store war isn’t over…it’s entering a new phase with Wal*Mart just beginning to flex its muscles →Out parcel sites are scarce but eagerly sought by many types of users →Retailers aren’t bashful in making demands for tenant allowance or in putting pressure on rents

“WORD ON THE STREET”

→It remains difficult to convey local market nuances to out-of-town site selectors →This market’s orientation to “small investor property owners” continues to surprise and beguile regional and national retailers →Finding new sites for retail development is tough, especially in Chesapeake

“WORD ON THE STREET”

→All eyes are on Williamsburg for its population growth and quality of consumer base →Infill opportunities for existing retailers are not being promoted by retail tenant representatives →“Workhorse” retail areas such as Janaf and Coliseum are being overlooked despite strong sales and new investment

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Thank you

for your support of The Center for Real Estate and Economic Development.

Old Dominion University Old Dominion University Hampton Roads Real Estate Hampton Roads Real Estate Market Review and Forecast Market Review and Forecast

Presented by: The Center for Real Estate and Economic Development