RETAIL 2014 REAL ESTATE MARKET REVIEW

Author David Machupa Cushman & Wakefi eld | THALHIMER

Survey Collection Kyllie Bullion E.V. Williams Center for Real Estate and Economic Development Old Dominion University

Data Analysis/ David Chapman, Ph.D. Layout Old Dominion University

Financial The E. V. Williams Center for Real Estate and Economic Support Development (CREED) functions and reports are funded by donations from the CREED membership, organizations, and individuals.

Disclosure The data used for this report are deemed reliable; however, neither Old Dominion University, the E. V. Williams Center for Real Estate and Economic Development, nor sponsoring companies and/or individuals make any representation or warranty as to its accuracy. 2014 RETAIL

13 2014 RETAIL

General Overview

his report analyzes the 2013 retail real estate conditions within the Virginia Beach-Norfolk-New- port News, Virginia Metropolitan Statistical Area (MSA) which is commonly referred to as Hampton Roads. The report examines supply, vacancy, construction, absorption, and rent data to provide a comparison of data for the specifi c submarkets and product types located within the Southside and Peninsula regions of the Hampton Roads MSA. Southside properties surveyed for the purpose of this report included those located in the cities of Chesapeake, Norfolk, Portsmouth, Smithfi eld, Suffolk and Virginia Beach. Peninsula properties surveyed are located in the cities of Gloucester, Hampton, Newport News, Poquoson, Williamsburg, and York County.

This survey is recognized as the most comprehensive analysis of retail real estate trends in the Hampton Roads MSA. The report includes information on all retail property types including regional malls, freestanding buildings and strip centers of various classifi cations. The scope of the report also includes a summary of new retail construction activity, an analysis of absorption, and a review of selected retail investment sales that have occurred in the region in 2013.

METHODOLOGY This survey gathered information about strip shopping centers and regional malls located in the Hampton Roads MSA that were generally 30,000 square feet in size or larger. Additionally, information on retail-oriented freestanding buildings at least 23,000 square feet and freestanding buildings that contained furniture stores, discounters, grocery stores or category killer retailers that met the established size criteria were included in the survey.

Automotive uses and buildings containing “downtown storefronts” were not included. Although available retail space in many submarkets (e.g. Ghent) is best described as a collection of small specialty shops, storefronts or freestanding buildings, practical limitations dictated that the focus of the survey be on larger product types.

The survey data was collected between October 2013 and January 2014. Questionnaires were mailed to owners, leasing agents and property managers responsible for retail properties meeting the selection criteria. Direct contact was utilized as a follow-up to the mailing to encourage participation. Information on square footage for freestanding buildings was obtained from building owners, tax records, store managers and retail real estate representatives. Sales information was obtained from property owners, real estate agents, appraisers and real estate assessors.

14 2014 Hampton Roads Real Estate Market Review 2014 RETAIL 15 Submarket anchored by regional mall. by regional Submarket anchored Type of lease under which a tenant pays its pro-rata share of real estate taxes, insurance and of real share of lease under which a tenant pays its pro-rata Type Properties were classifi ed according to one of the following nine retail product types. The types. product retail to one of the following nine ed according classifi were Properties The market rate per square foot of a retail property (excluding freestanding buildings and malls), and malls), buildings (excluding freestanding property a retail foot of rate per square The market Hampton Roads is divided into 35 retail submarkets (25 Southside submarkets and 10 Peninsula Hampton Roads is divided into 35 retail In-line retail space usually less than 10,000 square feet located in a multi-tenanted shopping center. feet located in a multi-tenanted shopping space usually less than 10,000 square In-line retail Contiguous retail space that is at least 23,000 square feet and located in any one of the identifi ed in any one of the identifi feet and located is at least 23,000 square space that Contiguous retail supermarket or drug store anchored store anchored drug store or Neighborhood Center department Community Center supermarket feet; supermarket anchored 150,000 square 30,000 to discount Fashion/Specialty Center Power Center discount department store, feet; 350,000 square 100,000 to feet; fashion anchored to 250,000 square 80,000 and Theme Festival Center Outlet Center Freestanding entertainment anchored feet; restaurants, 80,000 to 250,000 square home improvement feet; category killer, 250,000 to 600,000 square Mall Other anchored outlet store feet; manufacturer’s 50,000 to 400,000 square a shopping center Individual building not considered designed for pedestrian use only Shopping center with area t into a typical category Any center that does not fi Common Area Maintenance. Common Area Triple Net Lease: Triple Small Shop: Submarkets: type. Geographical product ected general concentrations, pockets or corridors of retail submarkets) which refl physical or geographical product, by density of existing retail uenced infl submarkets were boundaries of the retail per- concentrations and retailers’ obstacles, existing transportation networks, municipal boundaries, population made by a subcommittee c boundaries of each submarket was ceptions of the MSA. Final determination of specifi c submarkets specifi actively involved in the MSA. Also highlighted were who are estate professionals real of retail is included in es the general location of each submarket malls. A map which identifi by regional anchored that are the centerfold of this report. maintenance. common area Regional Mall Node: DEFINITIONS OF TERMS DEFINITIONS CAM: Types: Product included additional categories were Three rst six categories. ned the fi International Centers defi Council of Shopping properties. to accurately categorize the remaining Big Boxes: to, the following: category killers, specialty not limited big boxes include, but are types. Retailers occupying product rinks and uses, roller theaters. Bowling alleys, automotive and stores grocery stores, discounters, furniture stores, not included. ice-skating rinks were exclusive of additional rents that may be paid under a triple net lease. Interpretation of average retail rates in rates retail of average Interpretation a triple net lease. be paid under that may of additional rents exclusive variability in rates for tremendous be viewed cautiously given the types and submarkets should product different and co-tenancy, such as visibility, within the same submarket. Factors located and for properties like products considered. in market rates which should be of variation some of the many sources are accessibility, Asking Rates: 2014 RETAIL

YEAR IN REVIEW 2013

The Hampton Roads market appears to have stabilized. 2013 saw the re-emergence of grocery stores to the market as Walmart and Kroger continued to expand their presence. On a national level, the retail market remained stable and, as such, remained stable here in Hampton Roads. 2013 did not bring a mass exodus of retailers; however, a few large box brands did limp into 2014 and we expect a thinning of the herd as these retailers attempt to remain viable. The fi nancing market is stable with lenders actively seeking opportunities. A disconnect remains on product valuation between buyers, sellers and lenders of retail centers and, as such, we did not see a great deal of investment sales in Hampton Roads this past year.

2013 brought increased activity from grocery stores. Kroger, Walmart Neighborhood Market, and Harris Teeter were very active. Harris Teeter was purchased by Kroger and we will pause to see how this will curtail expansion by both retailers. Walmart opened on Jefferson Avenue and is under construction in the Pembroke area of Virginia Beach with a Super Center. Five of the smaller Neighborhood Market concepts are under construction in Hampton Roads. Harris Teeter will open in the Red Mill area of Virginia Beach and in the Wards Corner area of Norfolk. Kroger opened its 124,000 square foot Marketplace concept on Holland Road in Virginia Beach and is under construction with two more in Portsmouth and Northern Suffolk respectively. Additionally, Whole Foods has an- nounced they will anchor Tech Center at Oyster Point in Newport News and The Fresh Market will open in the Ghent section of Norfolk. Dave and Buster’s opened at and West Marine opened in Loehman’s Plaza in Virginia Beach. Starbucks opened a drive thru only location in Virginia Beach; this was the fi rst in Virginia and only the seventh in the country. CVS and 7-11 both continued aggressive expansion within the market. Simon Properties has Lake Wright under contract and is working to bring an outlet mall to the Norfolk site. We saw two small redevelopment projects along Lynnhaven Parkway near the mall with Noodles, Five Guys and Mattress Firm anchoring those developments. Lynnhaven Convenience, a mostly vacant property along Virginia Beach Boulevard anchored by Farm Fresh, is being redeveloped. Farm Fresh closed and has been replaced by Walmart Neighborhood Market, One Life Fitness, and Hobby Lobby. Bahama Breeze and Old Navy opened at the entrance of . Settler’s Market in Williamsburg came full circle. After starting off slowly, going through foreclosure, and sitting partially constructed, the new ownership was able to re-energize the project and Home Goods, Stein Mart, Michaels, Ulta, Shoe Carnival and 5 Below opened in March occupying roughly 200,000 sf of a 250,000 sf project.

There is concern for certain retailers as they continue to struggle on a national level. K-Mart and Sears are closing stores on both a local and national level. K-mart closed the and Tidewater Drive locations with many more being offered for lease with or without K-Mart. J.C. Penney’s announced the closing of the Military Highway location, while Ruby Tuesday shuttered thirty stores across the country and one here in Virginia Beach. Blockbuster fi nally threw in the towel and closed the last of its stores across the country, Radio Shack is closing 500 stores, Best Buy tried to go private, but could not obtain fi nancing and Barnes and Noble placed themselves for sale, but did not fi nd any suitors. The retail landscape is constantly changing and those tenants that do not change with it will be closing their doors.

Hampton Roads is stable, new tenants are looking for locations within the market, and we are seeing new development. We do expect the vacancy rate to increase because of the amount of big box space that will come to the market, but we also expect rental rates to increases as quality retail product is limited at this time.

16 2014 Hampton Roads Real Estate Market Review 2014 RETAIL 17 The Hampton Roads retail market contained retail The Hampton Roads feet of gross square 54,222,598 approximately with an properties (“GLA”) in 422 leasable area $15.97 with triple net rate of average asking rental Real Estate Maintenance, Area charges (Common per square and Insurance) running $2.87 Taxes indicates the population Bureau foot. The US Census 1.7 Million of Hampton Roads is approximately supply per feet of retail in a 31.90 square resulting (e.g., person. Certain methodological differences in buildings and malls the inclusion of freestanding per capita cult to compare this survey) make it diffi statistic. supply in the MSA to a national average

We move forward acknowledging 2014 is off to a strong start. We will see the size of the overall market increase will see the size of the overall market increase start. We to a strong acknowledging 2014 is off forward move We this under construction and will be opening currently expansion as multiple new centers are store due to grocery It should be noted some and redevelopment. generation space for re-use the older second will approach We year. These spaces will continue to negatively of the larger vacant space highest and best use may no longer be retail. redeveloped. impact the overall Hampton Roads numbers until such time as they are In 2013, the Hampton Roads market did see a slight increase in the vacancy rate as 2012’s overall 7.85% vacancy in the vacancy rate as 2012’s In 2013, the Hampton Roads market did see a slight increase While Big Box space coming onto the market. is largely due to more 8.37%. This increase rate gave way to 2013’s themselves repositioning are and retailers in the deal making process and tenants continue to get creative landlords not as new developments, as well as second generation opportunities, local tenants are within the market creating these second generation spaces with both traditional and approaching are abundant as in years past. Landlords product ll the space. Unlike years past, the market was not saturated with retail to back fi non-traditional retailers cally, space to enter in 2014. Specifi we expect a fair amount of big box retail closings; however, due to mass store large blocks that may enter the market. K-mart and Sears present The Peninsula also experienced some mixed change this past year. The 134 properties on the Peninsula that were were on the Peninsula that The 134 properties mixed change this past year. The Peninsula also experienced some shop space was The average asking price of small feet of product. square surveyed combined for 18,387,321 Peninsula was 11.55%; charges. The vacancy rate for the greater foot with $2.69 in triple net $14.61 per square rst quarter of 2014. The Williamsburg in the fi in the Peninsula market is strong activity and interest however, faltering projects. previously able to reposition as new ownerships were submarket rebounded Hampton Roads consist of two markets, the Southside and Peninsula. The Southside market has approximately the Southside and Peninsula. The Southside market has approximately Hampton Roads consist of two markets, The average askingin the market, in 288 properties. footage 66% of the total square feet, roughly 35,835,277 square rates can in rental to $16.56 triple net. The increase $.20 over 2012 numbers for small shop space increased rent feet low at 6.74% in 2013. While 89,200 square as vacancy rates remained be attributed to consistent demand cant amounts of new construction in the 2013, Hampton Roads has signifi of new construction came on line in pipeline for 2014. HAMPTON ROADS MARKET SURVEY SURVEY ROADS MARKET HAMPTON 2014 RETAIL

Market Overview Table

New Number of Construction in Occupied Absorption Properties GLA in SF Vacant SF % Vacant SF in SF in SF 2014 Southside 288 35,835,277 2,416,346 6.74% 89,200 33,418,931 701,392 Peninsula 134 18,387,321 2,123,718 11.55% 21,411 16,263,603 (280,018) Total 422 54,222,598 4,540,064 8.37% 110,611 49,682,534 421,374 2013 Southside 286 34,924,153 2,206,614 6.32% 57,442 32,717,539 1,896,773 Peninsula 138 18,532,649 1,989,028 10.73% 6,576 16,543,621 775,368 Total 424 53,456,802 4,195,642 7.85% 64,018 49,261,160 2,672,141 2012 Southside 279 34,150,108 2,534,765 7.42% 103,380 31,615,343 794,577 Peninsula 138 18,494,461 1,944,109 10.51% 999,389 16,550,352 782,099 Total 417 52,644,569 4,478,874 8.51% 1,102,769 48,165,695 1,576,676 2011 Southside 274 34,019,555 2,523,754 7.42% 18,880 31,495,801 675,035 Peninsula 138 18,548,407 2,175,793 11.73% - 16,372,614 604,361 Total 412 52,567,962 4,699,547 8.94% 18,880 47,868,415 1,279,396 2010 Southside 273 33,535,280 2,714,514 8.09% 302,352 30,820,766 (288,440) Peninsula 136 18,160,963 2,392,710 13.18% 981,463 15,768,253 362,777 Total 409 51,696,243 5,107,224 9.88% 1,283,815 46,589,019 74,337 2009 Southside 265 33,265,028 2,155,822 6.48% 275,252 31,109,206 238,525 Peninsula 133 17,112,012 1,706,536 9.97% - 15,405,476 (109,898) Total 398 50,377,040 3,862,358 7.67% 275,252 46,514,682 128,627 2008 Southside 263 33,086,160 2,215,479 6.70% 1,038,291 30,870,681 339,596 Peninsula 133 17,133,079 1,617,705 9.44% 1,009,000 15,515,374 100,485 Total 396 50,219,239 3,833,184 7.63% 2,047,291 46,386,055 440,081 2007 Southside 259 32,407,761 1,876,676 5.79% 1,552,392 30,531,085 1,741,962 Peninsula 131 16,895,155 1,480,266 8.76% 1,042,451 15,414,889 576,788 Total 390 49,302,916 3,356,942 6.81% 2,594,843 45,945,974 2,318,750 2006 Southside 246 30,852,210 2,063,087 6.69% 593,520 28,789,123 1,280,869 Peninsula 129 16,337,458 1,499,357 9.18% 618,179 14,838,101 687,097 Total 375 47,189,668 3,562,444 7.55% 1,211,699 43,627,224 1,967,966 2005 Southside 243 30,184,395 2,676,141 8.87% 271,610 27,508,254 341,736 Peninsula 125 15,799,778 1,648,774 10.44% 185,000 14,151,004 496,338 Total 368 45,984,173 4,324,915 9.41% 456,610 41,659,258 838,074 2004 Southside 243 30,336,266 3,169,748 10.45% 419,458 27,166,518 419,138 Peninsula 127 16,094,161 2,027,477 12.60% 330,000 14,066,684 412,018 Total 370 46,430,427 5,197,225 11.19% 749,458 41,233,202 831,156 2003 Southside 245 30,180,691 3,433,311 11.38% 574,400 26,747,380 535,167 Peninsula 126 15,546,085 1,891,419 12.17% 676,000 13,654,666 932,008 Total 371 45,726,776 5,324,730 11.64% 1,250,400 40,402,046 1,467,175 2002 Southside 239 29,760,443 3,548,230 11.92% 828,800 26,212,213 1,185,818 Peninsula 123 14,906,530 2,183,872 14.65% 202,750 12,722,658 242,563 Total 362 44,666,973 5,732,102 12.83% 1,031,550 38,934,871 1,428,381 2001 Southside 230 29,436,515 3,760,087 12.77% 918,100 25,676,428 (158,181) Peninsula 121 14,477,970 1,997,875 13.80% 212,229 12,480,095 147,115 Total 351 43,914,485 5,757,962 13.11% 1,130,329 38,156,523 (11,066) 2000 Southside 220 28,816,383 2,933,294 10.18% 2,064,727 25,883,089 1,344,209 Peninsula 118 15,249,617 2,012,637 13.20% 758,370 13,236,980 292,785 Total 338 44,066,000 4,945,931 11.22% 2,823,097 39,120,069 1,636,994 1999 Southside 208 27,089,939 2,551,059 9.42% 1,414,805 24,538,880 1,961,927 Peninsula 112 14,548,482 1,604,287 11.03% 1,253,342 12,944,195 1,592,805 Total 320 41,638,421 4,155,346 9.98% 2,668,147 37,483,075 3,554,732

18 2014 Hampton Roads Real Estate Market Review 2014 RETAIL 19 Rate PSF Small Shop % Vacant Vacant SF Vacant GLA in SF

Average Properties Number of

The range of vacancy rates in the Southside submarkets can be seen in the table below. rates in the Southside submarkets The range of vacancy There were 25 retail submarkets on the Southside in 2013. The average size of the submarkets was 1,433,411 in 2013. The average size of submarkets on the Southside 25 retail were There in 2012 to 2.76% this 3.27% from 2013 with vacancy decreasing had a strong feet. The Hilltop submarket square which is the highest foot, square $21.14 to $21.83 per from increasing small shop rents past year and average suburban submarkets. of all Southside asking rent SOUTHSIDE SUBMARKETS SOUTHSIDE BAY FRONT BAY BIRDNECK/OCEANFRONT CAMPOSTELLA CHESAPEAKE SQUARE CHURCHLAND-PORTSMOUTH/HARBORVIEW DAM NECK DOWNTOWN DOWNTOWN NORFOLK GHENT 16 BRIDGE GREAT 1,747,401 BOULEVARD GREENBRIER/BATTLEFIELD 6 NECK HILLTOP/GREAT 82,625 HOLLAND/GREEN RUN 225,350 4.73% including Chesapeake) INDIAN RIVER/COLLEGE PARK( 12 6 KEMPSVILLE 2,294,809 6 $17.13 VIEW CORNER/OCEAN LITTLE CREEK ROAD /WARDS 304,258 25 3 - 90,839 332,921 LITTLE NECK 25,654 4,134,369 8 Boulevard to Holland Road) ROAD (Virginia Beach LYNNHAVEN 0.00% 433,643 85,015 17 1 3.96% 225,041 1,822,511 MIDDLE PORTSMOUTH 8.43% 1,765,581 83,575 8 25.54% HIGHWAY/JANAF 205,452 MILITARY $15.30 5 50,000 5.44% $17.33 302,958 1,520,256 19.27% NEWTOWN 2,429,283 $18.20 11.27% $12.39 10,466 17.16% ODU 18 42,640 13 $19.82 49,675 $12.00 PEMBROKE 1,371,042 1,600,943 20.93% 10 $16.20 9 2.80% $16.23 PORTSMOUTH 118,592 2.04% 44,221 14 879,800 ANNE ROAD (from Kempsville Road to Holland Road) PRINCESS $28.00 396,454 1,731,761 $20.00 8.65% SMITHFIELD 46,468 $14.17 2.76% 25,722 SUFFOLK 72,252 12 $16.06 Total 5.28% $21.83 6.49% 1,246,748 4.17% 17 15 12 128,377 $13.93 3,356,493 1,770,272 $17.44 1,459,402 $17.23 10.30% 192,106 96,577 17,375 10.85% $15.59 2.88% 1.19% 11 $12.00 $13.24 607,596 $17.06 23 1 2,824,995 82,714 1 279,369 45,800 13.61% 49,875 5 9.89% 2,700 $12.90 14 279,756 1,153,958 $17.88 5.90% 288 12,656 - 35,835,277 93,277 2,416,346 0.00% 4.52% $12.00 8.08% 6.74% $21.00 $16.00 $17.00 $16.56 SOUTHSIDE BY SUBMARKET 2014 RETAIL

PENINSULA SUBMARKETS

There were 10 retail submarkets on the Peninsula with an average size of 1,671,574 square feet. The two largest Peninsula submarkets are now Patrick Henry and Williamsburg. The Patrick Henry submarket is anchored by a regional mall and has the lowest vacancy rate on the Peninsula.

The Patrick Henry submarket continues to be one of the most highly desired submarkets in Hampton Roads having 4,374,256 square feet and a vacancy rate of just 3.75%. The Williamsburg market continues to have good retail activity along the Monticello corridor.

PENINSULA BY SUBMARKET Average Number of Small Shop properties GLA in SF Vacant SF % Vacant Rate PSF

COLISEUM CENTRAL 16 4,051,110 496,819 12.26% $15.40 DENBIGH 15 1,785,033 451,642 25.30% $11.25 FOXHILL/BUCKROE/EAST MERCURY 7 708,425 91,796 12.96% $13.17 GLOUCESTER 8 894,676 68,664 7.67% $14.38 HAMPTON MISC 1 64,327 10,910 16.96% $10.00 NEWMARKET/MAIN (TO INCLUDE HAMPTON) 12 974,957 198,407 20.35% $9.48 NEWPORT NEWS 1 21,240 1,400 6.59% $14.00 PATRICK HENRY/OYSTER POINT/KILN CREEK 30 4,200,077 157,415 3.75% $16.31 POQUOSON 2 108,521 5,250 4.84% $13.50 WILLIAMSBURG 30 4,745,579 570,487 12.02% $18.64 YORK COUNTY 12 833,376 70,928 8.51% $14.41 Total 134 18,387,321 2,123,718 11.55% $14.61

RETAIL PRODUCT TYPE

The Neighborhood Center remains the predominant product type with 173 properties with over 12 million square feet of GLA. The Community Centers comprised almost 10 million square feet with both product types showing a decrease in vacancy rate and an increase in rental rate. We do anticipate new Neighborhood Centers in 2014 and expect they will contain less small shop space than traditionally developed.

20 2014 Hampton Roads Real Estate Market Review 2014 RETAIL 21 Average Average Average Average Average CAM PSF CAM PSF CAM PSF Average Average Average Average Average Rate PSF Rate PSF Rate PSF Small Shop Small Shop Small Shop Small Shop % Vacant % Vacant % Vacant Vacant SF Vacant Vacant SF Vacant SF Vacant New New New in SF in SF in SF Construction Construction Construction Construction GLA in SF GLA in SF GLA in SF Properties Properties Properties Number of Number of Number of Number of Peninsula By Type Peninsula Southside By Type Total Retail Product By Type Product By Retail Total Neighborhood Center Community Center Center Fashion/Specialty Center Power 48 Center Theme Festival 3,297,977 2 20 Outlet Center Other 3,720,418 483,000 Freestanding - Mall 10 - Total 389,364 4,235,117 11.81% - - - 1 606,930 54,967 16.31% $13.54 33 349,927 11.38% $2.33 17 3,488,184 - $14.68 $26.00 515,375 - $2.54 743,702 12.17% $5.40 134 21,411 3 - 18,387,321 $19.95 323,093 2,068,996 - No data $3.00 9.26% No data 21,411 - - No data No data 2,123,718 114,318 $10.00 11.55% 15.37% No data $2.50 - No data 119,671 $14.61 $15.32 $2.69 5.78% $2.53 #DIV/0! $17.75 Neighborhood Center Community Center Center Fashion/Specialty 125 Center Power Center Theme Festival 9,150,514 8 36 Outlet Center 1,068,243 Other 5,721,904 36,000 Freestanding 1,084,314 1 Mall 11.85% 26,400 21 26,800 100,000 Total 6,616,525 491,022 80,026 $15.50 - 8.58% 7.49% $2.73 49 $16.17 $24.75 - 40 4,994,709 - $2.41 $4.03 - 271,371 1,433,737 4.10% 288 - 8 No data 35,835,277 6,749,645 $19.53 - - No data $3.58 - 35,225 No data 89,200 121,324 2,416,346 0.71% 8.46% - 6.74% No data - $17.12 333,064 $16.59 $16.56 No data $3.31 4.93% $2.95 $3.03 No data $20.50 $18.86 Neighborhood Center Neighborhood Center Community Center Center Fashion/Specialty 173 Center Power 12,448,491 Center Theme Festival 10 56 Outlet Center 1,551,243 Other 9,442,322 36,000 1,473,678 Freestanding 1 11.84% 26,400 Mall 31 26,800 100,000 Total 134,993 10,851,642 1,097,952 $14.95 11.63% 8.70% $2.71 1 $15.62 $24.89 82 349,927 $2.41 - - $4.03 57 8,482,893 786,746 2,177,439 7.25% 11 422 - 21,411 No data - 54,222,598 8,818,641 $19.67 358,318 No data No data $3.58 4.22% - 110,611 - 4,540,064 235,642 No data $14.87 10.82% 8.37% No data - $3.31 No data 452,735 $16.19 $15.97 5.13% $2.87 $3.02 $20.50 $17.75 2014 RETAIL

BIG BOX VACANCY

Big box vacancy increased in 2013 and is expected to climb again in 2014. The thought being several big box retailers limped into 2014. Additionally, a few small shop retailers are struggling as well. We will see tenants right size their units as they modify their footprints to stay current to what the market dictates. The boxes that we believe will bring the most product to market are K-Mart, Sears, and J.C. Penney. The 1,825,202 square feet of vacant space represents 40% of the total retail vacancy in the market. It is important to note some of the vacant boxes are now functionally or practically obsolete for today’s retailer. They will remain on the report as retail product until such time as they are demolished, converted to a non-retail use, or redeveloped.

Big Box Vacancy

4,000,000 Southside 3,500,000 Peninsula TOTAL 3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000 Vacant Square Feet Square Vacant 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Big Box Vacancy

Southside 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2,073,115 2,207,416 2,220,935 1,906,391 1,513,523 1,142,319 957,887 948,288 907,688 1,102,093 880,568 855,979 821,993 929,713

Peninsula 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1,328,841 1,435,489 1,407,021 1,556,029 1,141,207 982,263 819,163 827,360 880,805 989,305 837,025 794,484 767,637 895,489

TOTAL 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3,401,956 3,642,905 3,627,956 3,462,420 2,654,730 2,124,582 1,777,050 1,775,648 1,788,493 2,091,398 1,717,593 1,650,463 1,589,630 1,825,202

22 2014 Hampton Roads Real Estate Market Review 2014

Retail Submarkets RETAIL Southside Peninsula

1 Bayfront 11 Hilltop/Great Neck 21 ODU 26 Coliseum Central 2 Birdneck/Oceanfront 12 Holland/Green Run 22 Pembroke 27 Denbigh 3 Campostella 13 Indian River/College Park 23 Princess Anne 28 Foxhill/Buckroe 4 Chesapeake Square 14 Kempsville 24 Smithfi eld 29 Gloucester 5 Churchland/Harbourview 15 Little Creek Road/ 25 Suffolk 30 Hampton Miscellaneous 6 Dam Neck Wards Corner 31 Patrick Henry 7 Downtown Norfolk 16 Little Neck 32 Poquoson 8 Ghent 17 Lynnhaven 33 Newmarket/Main 9 Great Bridge 18 Middle Portsmouth 34 Williamsburg 10 Greenbrier/Battlefi eld 19 Military Highway/Janaf 35 York County Boulevard 20 Newtown

23 The following is a list of the Planet Fitness Plaza A 52,966 Edinburgh East D 133,000 properties included in this year’s survey Poplar Hill Plaza B 102,326 Gainsborough Square A 88,862 listed by submarket with a code Sterling Creek A 75,660 I 899,665 representing the type of property Town Point Square A 58,989 Greenbrier Market Center D 487,580 The GLA of the property is also listed H 500,000 Greenbrier Shops A 37,500 Greenbrier South SC A 97,500 A Neighborhood Center F Outlet Center Home Depot H 130,060 B Community Center G Other DAM NECK C Fashion/Specialty Center H Freestanding 2236 General Booth Blvd. A 11,500 K-Mart/OfficeMax H 165,000 D Power Center I Mall Dam Neck Crossing B 138,571 Knell’s Ridge Square G 40,000 E Theme Festival Dam Neck Square A 67,917 Lowes H 114,000 General Booth Plaza A 71,639 Orchard Square A 88,728 southside Red Mill Commons D 750,000 Parkview @ Greenbrier A 83,711 Red Mill Walk D 240,000 Plantation Woods A 16,800 BAY FRONT Sandbridge SC A 66,800 Regal Cinemas H 60,763 Cape Henry Plaza A 58,424 Strawbridge Marketplace A 173,829 The Shoppes at Greenbrier G 40,000 Chic’s Beach Shopping Center A 79,397 Thn G 80,160 Kroger H 47,000 DOWNTOWN Towne Place at Greenbrier C 127,109 Kroger Shops A 13,540 Berkley Center A 47,945 Village Square G 15,000 Lake Shores Plaza Shopping Center A 58,230 Church Street Crossing A 51,000 Volvo Parkway SC G 41,874 Marina Shores G 47,667 MacArthur Center Mall I 2,200,000 Wal-Mart/Sam’s Club/Kohl’s D 433,821 Waterside Festival Marketplace I 130,338 BIRDNECK/OCEANFRONT HILLTOP/GREAT NECK Birdneck SC A 65,460 DOWNTOWN NORFOLK Great Neck Square A 94,587 Birdneck Shoppes B 24,000 Wells Fargo Retail G 50,000 Great Neck Village A 73,736 Farm Fresh H 29,296 Hilltop East C 144,100 Harris Teeter H 48,000 GHENT Hilltop North A 202,346 Linkhorn Shops A 48,899 201 Twenty One A 15,616 Hilltop Plaza B 152,025 Pacific Plaza H 9,695 21st Street Pavilion G 21,000 Hilltop Square B 270,093 Center Shops A 139,081 Hilltop West G 55,784 CAMPOSTELLA Colley Village A 44,585 La Promenade C 63,280 Atlantic Commons A 63,393 Ghent Place G 13,000 Marketplace at Hilltop C 113,000 Bainbridge Marketplace A 46,444 Harris Teeter H 27,000 Mill Dam Crossing A 25,776 Campostella Corner A 43,375 Palace Shops I, II C 78,669 Regency Hilltop B 236,549 George Washington Commons A 44,942 Palace Station G 37,503 Renaissance Place G 47,667 Holly Point SC A 65,338 The Corner Shops G 20,000 Target H 122,000 Southgate Plaza A 69,429 GREAT BRIDGE HOLLAND/GREEN RUN CHESAPEAKE SQUARE Cahoon Commons D 278,023 Auburn Place A 42,709 BJ’s H 115,660 Cedar Lakes Center A 35,659 Chimney Hill B 207,175 Castle Shops H 37,464 Centerville Crossing A 46,000 Green Run Square A 75,000 Chesapeake Center B 270,602 Country Club Shoppes H 17,700 Holland Plaza SC A 155,000 Chesapeake Square Mall I 800,000 Crossings at Deep Creek A 68,970 Holland Windsor Crossing B 74,200 Chesapeake Square Shops H 13,559 Dominion Marketplace A 73,103 Lowes H 125,323 Crossroads Center at Chesapeake Square D 332,464 Dominion Plaza SC A 63,733 Lynnhaven Green A 50,838 Food Lion @ Chesp. Sq. H 45,000 Glenwood Square A 73,859 Rosemont Center A 12,700 Home Depot H 130,060 Great Bridge SC A 156,937 Shipps Corner A 63,355 Lowes H 115,000 Hanbury Village A 100,560 Timberlake SC A 73,500 Shops at Chesapeake Square H 25,000 Harbor Watch Shoppes G 21,505 Taylor Road Plaza A 60,000 Las Gaviotas A 82,000 INDIAN RIVER/COLLEGE PARK( including Chesapeake) Wal-Mart Supercenter/Sam’s Club H 350,000 Millwood Plaza G 16,930 College Park I & II B 183,874 Mt. Pleasant Shopping Center A 100,000 Indian River Plaza B 126,017 CHURCHLAND-PORTSMOUTH/HARBORVIEW Mt. Pleasant Village A 34,180 Indian River SC A 123,752 Churchland Place Shoppes G 21,000 Wilson Village A 52,500 Churchland SC A 149,741 Woodford Shoppes B 9,760 Churchland Square A 72,189 Woodford Square B 139,623 College Pkwy Crossing at Harbour View A 86,130 Grand H 30,000 GREENBRIER/BATTLEFIELD BOULEVARD Harbor View Shoppes A 17,000 Battlefield Marketplace G 30,000 Harbour View East D 172,000 Chesapeake Crossing B 287,679 Harbour View Marketplace H 96,624 Country Club Square H 12,600 Harbourview Station East D 217,308 Crossways Cntr I Harbourview Station West D 83,007 & Eden Way Shops D 438,725 Marketplace Square A 12,461 Edinburgh Commons D 184,232

24 KEMPSVILLE Alexander’s Corner Shopping Center A 50,826 Loehmann’s Plaza C 139,380 Arrowhead Plaza A 97,006 Elmhurst Square A 66,250 Northern Super Center G 36,588 Fairfi eld SC B 239,763 Gilmerton Square A 43,236 Pembroke East B 24,806 Kemps Corner Shoppes G 25,929 Manor Commerce Center G 67,060 Pembroke Mall I 570,000 Kemps River Center A 62,507 Manor Shops G 14,573 Pembroke Meadows SC A 81,592 Kemps River Crossing B 245,268 Old Towne Marketplace A 42,000 Pembroke Place B 165,000 Kempsville Crossing A 94,477 Rodman SC A 45,000 Pembroke Plaza G 34,900 Kempsville Plaza A 60,778 Super Wal-Mart H 200,000 Roomstore H 50,000 Parkway Marketplace A 26,602 Triangle SC A 84,437 The Town Center Providence Square SC A 144,904 Victory Crossing D 500,000 of Virginia Beach C 325,147 University Shoppes A 47,200 Victory West Shopping Center A 167,102 Town Center Station B 36,185 Witchduck Exchange A 50,000 Williams Court B 214,739 Woods Corner A 152,314 PORTSMOUTH MILITARY HIGHWAY/JANAF Academy Crossing A 45,800 LITTLE CREEK ROAD/ 3455 Azalea Garden Road A 1,024 WARDS CORNER/OCEAN VIEW Best Square B 140,030 PRINCESS ANNE ROAD Ames/Kroger B 140,568 Broad Creek Crossing Phase 1 and Phase 2 D 100,000 (from Kempsville Road to Holland Road) Dollar Tree Shopping Center A 51,415 Broad Creek SC D 205,417 Brenneman Farm SC A 254,197 East Beach Marketplace B 202,000 Bromley SC A 67,790 Courthouse Marketplace A 103,263 East Beach Shoppes A 63,000 CostCo H 110,000 Home Depot H 130,000 Farm Fresh - Little Creek H 66,120 Dump/Mega Offi ce G 115,854 Kempsville Marketplace A 71,460 Glenwood Shoppes A 53,255 Farm Fresh H 60,000 Landstown Commons D 505,766 Little Creek and Tidewater Shops B 119,820 Food Lion #170 H 41,000 Lynnhaven Square S C G 22,933 Little Creek Square A 82,300 Grand Outlet H 35,000 Parkway SC A 64,820 Meadowbrook S C G 27,260 Janaf D 882,262 Pleasant Valley Marketplace A 88,107 Mid-Town A 75,768 Lowes H 115,000 Princess Anne Marketplace B 209,500 Mid-Way SC G 31,000 Military Crossing D 192,000 Princess One SC A 84,725 Ocean View SC A 73,658 Military Triangle G 10,061 Salem Crossing D 92,316 Roosevelt Gardens SC A 109,175 Super K-Mart & Shoppes B 200,000 Salem Lakes Marketplace A 42,087 Southern Shopping Center B 245,868 Super Wal-Mart H 224,513 Salem Lakes SC A 37,087 Super Wal-Mart H 225,000 The Gallery @ Military Circle I 856,542 Woodtide SC A 25,500 Wards Corner Strip A 61,540 Wedgewood SC A 137,834 NEWTOWN SMITHFIELD Cypress Point A 117,958 Cypress Run SC G 25,000 LITTLE NECK Diamond Springs North (Shopping Center) A 23,880 Eagle Harbor A 77,049 Birchwood SC A 358,635 Diamond Springs Shoppes H 18,840 Shoppes at Eagle Harbor A 23,343 Colony Building A 23,625 Mattress Discounters Plaza A 59,892 Smithfi eld Plaza B 89,120 Home Depot H 130,060 Newpointe SC A 92,978 Smithfi eld Square A 65,244 Kroger H 45,000 Newtown Baker Crossing A 91,687 London Bridge Plaza B 114,584 Newtown Center H 19,800 SUFFOLK Lowes H 160,000 Newtown Convenience Center G 19,800 Bennetts Creek Crossing A 119,812 Lynnhaven 2600 H 13,300 Northampton Business Center G 85,000 Bennetts Creek Food Lion A 64,544 Lynnhaven Convenience G 36,900 Thomas Corner SC G 23,557 Centerbrooke Village A 12,600 Lynnhaven Shopping Center B 191,136 Wesleyan Commons Shopping Center A 54,204 Creekside Village A 18,835 Princess Anne Plaza West C 77,558 Holland Plaza A 69,345 Regatta Bay Shops G 60,000 ODU Kensington Square A 66,421 Sam’s Club Plaza D 248,604 First Floor Retail Shops at Lowes H 150,000 University Village Apartments G 49,875 Oak Ridge Plaza A 38,700 LYNNHAVEN ROAD Suffolk Plaza B 176,733 (Virginia Beach Boulevard to Holland Road) PEMBROKE Suffolk Plaza West A 60,000 Lynnhaven Crossing G 55,550 Aragona SC A 69,700 Suffolk Shopping Center B 155,733 Lynnhaven East B 97,303 Best Buy H 45,000 Suffolk Specialty Shops G 15,200 Lynnhaven Mall I 1,293,100 Collins Square A 123,870 Suffolk Village SC G 11,875 Lynnhaven North B 176,254 Columbus Village East A 63,000 Wal-Mart Super Center H 194,160 Lynnshores Shopping Center G 12,692 Columbus Village Entertainment Center E 100,000 Lynnway Place G 30,213 Dean Plaza (Former HQ) D 140,000 Parkway Plaza A 44,287 Former Bloom Brothers H 165,000 Wal-Mart H 113,112 Giant Square B 150,000 Goodwill H 34,000 MIDDLE PORTSMOUTH Haverty’s H 55,000 Afton SC A 106,500 Haygood SC B 165,000 Airline Marketplace A 69,000 Haynes H 228,000 Airline Plaza A 99,549 Hunter’s Mill Shoppes G 22,827

25 PENINSULA Brentwood SC A 53,600 Olde Towne SC G 30,000 Dresden SC G 35,000 Prime Outlets F 349,927 COLISEUM CENTRAL Forest Park Square B 150,000 Quarterpath Crossing A 85,600 Coliseum Corner A 49,267 Fransisco Village A 55,865 Settlers Market at New Town D 232,808 Coliseum Crossing B 221,004 Hampton Plaza B 173,199 Staples H 37,400 Coliseum Marketplace A 105,998 Hilton SC A 74,000 The Marquis (Phase I) D 1,000,000 Coliseum Specialty Shops G 15,026 Midway Shopping Center G 58,780 The Shops at High Street B 114,449 Coliseum Square G 43,307 Plaza @ Newmarket B 117,377 Village Shops at Kingsmill G 82,200 Hampton Towne Centre D 376,100 Warwick Center A 103,886 Wal-Mart SuperCenter H 210,000 Hampton Woods A 89,092 Warwick Village A 75,400 Williamsburg Crossing A 150,000 Home Depot H 130,060 Williamsburg Farm Fresh A 79,188 Newmarket South D 368,085 NEWPORT NEWS Williamsburg Marketcenter B 120,920 Peninsula Towncenter I 1,174,389 Jefferson Shoppes A 21,240 I 180,000 Riverdale Plaza D 260,316 Williamsburg Pavillion Shops G 50,000 Sports Authority H 40,000 PATRICK HENRY/OYSTER POINT/KILN CREEK Williamsburg SC I & II B 251,000 Target H 122,000 Bayberry Village A 72,883 Williamsburg Towne and Cnty A 49,802 The Power Plant D 621,150 Best Buy Building H 135,000 WindsorMeade Marketplace D 189,605 Todd Center & Todd Lane Shops B 242,000 City Center C 230,000 Yankee Candle H 42,000 Wal-Mart Super Center H 193,316 Commonweatlh Center G 30,279 Fairway Plaza G 37,950 YORK COUNTY DENBIGH Glendale SC G 30,000 Grafton SC A 32,000 Beaconsdale SC A 28,000 Grand Furniture H 35,000 Heritage Square A 73,865 Denbigh Speciality Shops G 24,504 Harris Teeter H 52,334 Kiln Creek Center A 45,700 Denbigh Village Centre B 334,299 Haverty’s H 45,000 Lakeside 17 H 8,400 Denbigh Village Shopping Center H 327,322 Haynes H 85,000 Marketplace @ Yorktown A 73,050 Ferguson Center G 118,000 Hidenwood SC A 100,000 Patriots Square A 47,231 Former Hills Denbigh H 86,589 Jefferson Commons D 400,000 Pavilion at Kiln Creek A 26,820 Jefferson Crossing Jefferson Greene G 57,430 Shady Banks SC A 56,634 (formerly Denbigh Crossing) A 145,000 Kroger H 55,000 Wal-Mart SuperCenter H 220,000 Kmart H 115,854 Lowes H 120,000 Washington Square Lee Hall Plaza A 36,000 Market Place @ Oyster Point A 69,660 Shopping Center B 177,056 Newport Crossing B 200,000 Newport Marketplace D 450,000 York Square A 48,720 Richneck Shopping Center A 63,425 Newport Square B 184,126 Yorkshire Downs G 23,900 Stoneybrook Shopping Center A 74,340 Offi ce Depot H 30,122 Turnberry Crossing A 53,775 Oyster Point Plaza A 73,197 Village Square A 40,000 Oyster Point Square A 83,089 Warwick Denbigh SC B 137,925 I 714,607 Patrick Henry Place A 17,000 FOXHILL/BUCKROE/EAST MERCURY Sam’s Club H 133,880 Buckroe SC A 76,000 The Shoppes at Oyster Point G 30,000 Farm Fresh Phoebus H 60,411 Victory Center @ Kiln Creek A 78,000 Kmart H 94,500 Village Square @ Kiln Creek B 267,021 Langley Square A 120,646 Villages of Kiln Creek G 45,300 Marketplace @ Nickerson A 75,850 Wal-Mart Super Center H 201,146 Nickerson Plaza A 83,849 Yoder Plaza SC D 337,053 Willow Oaks Village Square S.C. B 197,169 POQUOSON GLOUCESTER Poquoson SC A 57,458 Food Lion H 40,000 Wythe Creek Plaza SC A 51,063 Hayes Plaza SC A 52,651 Hayes SC A 100,000 WILLIAMSBURG Home Depot H 100,000 Colony Square A 66,806 Lowe’s H 125,000 Governor’s Green SC A 100,000 Shoppes at Gloucester B 82,025 Home Depot H 130,000 Wal-Mart Super Center H 220,000 James York Plaza B 137,708 York River Crossing B 175,000 Kingsgate Green B 138,348 Lowes H 163,000 HAMPTON MISC Marketplace Shoppes G 32,026 Kecoughtan SC A 64,327 Marketplace Shopping Center A 36,000 Monticello Marketplace B 299,792 NEWMARKET/MAIN (TO INCLUDE HAMPTON) Monticello SC A 82,000 4113 W Mercury Blvd. H 49,770 New Town Shops on Main C 253,000 4205 W. Mercury Blvd. H 28,080 Norge Crossing H 52,000

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