Total mall sales are up, but entertainment related sales are growing - - PowerPoint PPT Presentation

PwC

Total mall sales are up, but entertainment related sales are growing faster

80 90 100 110 120 130 140 201003 201005 201007 201009 201011 201101 201103 201105 201107 201109 201111 201201 201203 201205 201207 201209 201211 201301 201303 201305 201307 201309 201311 201401 201403

Entertainment Mall Sales

Index 3-Mo MA (2012 = 100)

Total Mall Sales

Source: ICSC

Mall Shopping Behavior

Number of trips has recovered…

2.6 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 2001 2004 2007 2010 2012

Monthly visits to the Mall But spending a little less time per trip

72 74 76 78 80 82 84 86 88 90 92 2001 2004 2007 2010 2012

Minutes Spent

Source: ICSC

PwC

Nearly 61.0 million square feet of obsolete mall space continues to deteriorate

60.9 60.9 60.9 60.9 61.0 61.0 61.0 61.0

Estimated Obsolete Inventory

MSF

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Availability Rate

Viable Obsolete

Source: CoStar, Obsolete = Space 4 or more years old with a vacancy rate of over 30%

PwC

Mall demand by class

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 2010 1Q 2010 2Q 2010 3Q 2010 4Q 2011 1Q 2011 2Q 2011 3Q 2011 4Q 2012 1Q 2012 2Q 2012 3Q 2012 4Q 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q

Class A Class B/C

The shortage of available “A” space is pushing tenants to “B/C” locations

MSF Source: CoStar

PwC

Retail market slower to recover…

Source: Reis, PwC Investor Survey

10 20 30 40 50 60 70 80 2014 2015 2016 2017 2018

1 2 3 4 5 6 7 8 9 10 11 12 Recession Recovery Expansion Contraction Cumulative #

• f Markets

PwC

…but appears to have turned the corner

86.0% 87.0% 88.0% 89.0% 90.0% 91.0% 92.0% 93.0% 94.0%

• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% Supply Demand Occupancy

Source: PwC, CBRE-EA

PwC

Retail market likely to be very selective about new development

Supply as % of Inventory Demand as % of Inventory San Jose 1.6% 1.9% Tacoma 1.5% 1.4% Knoxville 1.4% 1.4% Omaha 1.0% 1.0% Austin 1.0% 1.2% Opportunity? Orlando 0.5% 1.3% Syracuse 0.1% 0.8% Palm Beach 0.8% 1.4% Birmingham 0.2% 0.8% Phoenix 0.2% 0.8% Risk? Wichita 0.2%

• 0.1%

New Haven 0.2% 0.1% Tacoma 1.5% 1.4% Chattanooga 0.2% 0.2% Omaha 1.0% 1.0% Source: PwC, Reis, Inc.

PwC

Retail vacancy rates improve in the 25 largest markets

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% YE 2014 Forecast

Source: PwC, CBRE-EA

Cyclical Peak

PwC

Retail cap rates trend downward over the past five years, but flattened over the past four quarters

6.00% 6.50% 7.00% 7.50% 8.00% 8.50% 9.00% Regional Mall Power Center Strip Center

Historical Average Retail Cap Rate = 7.38%

Source: PwC Real Estate Investor Survey

PwC

Investors show renewed interest in retail

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 Number Dollar

Billions US$

Number

Source: PwC, Real Capital Analytics