Q4 2018 Bay Area Regional Shopping Center Quarterly Report

Q4: Power Center Occupancy Remains Stable John Cumbelich & Associates’ quarterly survey of the Bay Area’s flagship Power Center inventory reflects a About the slight decrease in occupancy in Q4. The period ended with an occupancy rate of 95.68%, only slightly less than Report Q3’s rate of 95.89%. The attached survey of flagship assets studies The North Bay submarket which experienced a slight decrease, from 96.60% to 96.37% has maintained the 25 dominant Power strongest occupancy levels in recent years. The Peninsula experienced a decrease, dropping from 96.52% to Centers located in each 95.68%. The South Bay, however, experienced a more noticeable decrease in occupancy, from 93.57% to of the 91.04%, while the East Bay submarket experienced an increase from 95.69% to 96.82%. Bay Area’s nine As 2018 began, Toys“R”Us announced the initial closing of eight Bay Area stores. Branded as Toys“R”Us or counties. The survey Babies“R”Us, these stores commonly occupy locations ranging from 35,000– 60,000 SF. The Bay Area’s flagship covers 13.1 million Power Centers were hit by the Toys”R”Us closures. Power Centers edged to higher occupancy in Q3 with square feet of best in increased occupancy rates. However, Q4 saw a small rise in vacancy with the final Toys”R”Us closures taking class inventory. place as well as the closure of Orchard Supply Hardware’s (OSH’s) entire fleet. (Cont’d on Next Page) * The information in this report is for information purposes only.

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Q4 2018 – Summary

GO CONSIDER STOP

EAST BAY BOUNCE East Bay occupany increased 1.13% from Q3 to Q4.

MORE EMPTY BOXES? , Orchard Supply Hardware (OSH), Toys”R”Us, The ...who’s next?

SOUTH BAY SAGS The drop to 91.05% occupancy is the lowest submarket rate in the Bay Area in 3+ years.

(Cont’d from Page 1)

Earlier in the year, Power Centers predominantly in the South Bay and East Bay were impacted by the vacancies caused by the closing of Toys“R”Us. Since then, the East Bay has rallied, with occupancy levels rising 3-4%, showing a quick recovery after being hit by big box closures, while the South Bay has stumbled.

Vacancies across the region in both large and small configurations are currently available, creating opportunities for new market entrants and enabling landlords to re-set rents.

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Completed Transactions

Burlington Smart & Final Stein Mart Advance Auto Parts BevMO! 42,216 SF 33,000 SF 30,000 SF 6,926 SF 4,662 SF Pleasant Hill, CA Stockton, CA Walnut Creek, CA Pueblo, CO Lafayette, CA

Sprouts Farmers Market Hobby Lobby Heritage Eats Philz Coffee Yoga Works 32,620 SF 57,000 SF 2,448 SF 2,162 SF 7,000 SF Newark, CA Concord, CA Walnut Creek, CA Lafayette, CA Walnut Creek

America’s Best The Shade Store Dick’s Sporting Goods Z Gallerie PotteryPottery BarnBarn Contacts & Eyeglasses 1,468 SF 35,000 SF 7,028 SF 16,76016 760 SF 3,151 SF Lafayette, CA Morgan Hill, CA Walnut Creek, CA Walnut Creek, CA Pleasant Hill, CA

LewisLewis Retail CentersCenters Burger Lounge Bluemercury Gott’s Roadside Walgreens 12.85 Acre Site 1,713 SF 2,965 SF 5,500 SF 15,000 SF Hercules, CA Walnut Creek, CA Lafayette, CA Walnut Creek, CA San Jose, CA

Walmart Tiffany & Co. Target Regency Centers LOJA 50,331 SF 6,785 SF 10.8 Acres 34 Acres 350,000 SF San Ramon, CA Walnut Creek, CA San Jose, CA Petaluma, CA Pleasant Hill, CA

Homewood Suites By Hilton El Pollo Loco Crunch Fitness AppleApple StoreStore Lowe’s 2.5 Acres Roseville, Folsom, 30,000 SF 9,425 SFS 28 Acres Pleasant Hill, CA Sacramento, Elk Grove, CA Walnut Creek, CA Walnut Creek, CA Concord, CA

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Santa Flagship assets included in the survey Rosaosa

North Bay Inventory: 2,740,135 SF Vacaville Available: 99,560 SF Occupancy Rate: 96.37% Napa

Petaluma

Vallejo Novato

PittsburgPittsbu

Pleasant Hill Brentwoodoooo East Bay Inventory: 5,145,397 SF EmeryvilleEmemeryvilleeerryville Available: 163,715 SF Occupancy Rate: 96.82% San Franciscoanncisco AlamedaAlamemmeded

Dublinbl DalyDaalyaaly CityC

Union City San Francisco/ Sanan MMateo FremontFrremo Peninsula Inventory: 3,651,244 SF Available: 157,605 SF South Bay Inventory: 1,660,758 SF Occupancy Rate: 95.68% PaloP llo AltoA o Available: 148,794 SF Occupancy Rate: 91.04%

SanS JoseJoose

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Q4 2018 Results – Flagship Power Centers

North Bay Overall Occupancy

Inventory: 2,740,135 SF 2016 2017 2018 Available: 99,560 SF 100%

75% Occupancy Rate: 96.37% 50% 97.09% 96.92% 95.73% 96.62% 97.04% 97.09% 97.55% 97.13% 97.16% 93.55% 95.89% 95.68%

25%

0% San Francisco/Peninsula Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Inventory: 3,651,244 SF Available: 157,605 SF Highest Occupancy

Occupancy Rate: 95.68% Power Center SF Vacancy % Ravenswood 101 1,517,692 0.00% Santa Rosa Market Place 541,693 0.00% East Washington Place 341,411 0.00% South Bay East Bay Bridge Center 453,500 0.00% San Bruno Towne Center 333,869 0.00% San Jose Market Center 356,000 0.00% Inventory: 1,660,758 SF South Napa Marketplace 349,530 0.00% Available: 148,794 SF

Occupancy Rate: 91.04% Highest Vacancy East Bay Power Center SF SF Avail. Vacancy % The Plant 650,532 125,338 19.27% Inventory: 5,145,397 SF Protrero Center 226,642 36791 16.23% Available: 163,715 SF Gateway Plaza 495,239 78,479 15.85%

Occupancy Rate: 96.82% Largest Vacant Spaces

Bay Area Totals Power Center SF Avail. The Plant 64,850 Inventory: 13,197,534 SF Century Plaza 46,000 Available: 569,674 SF Gateway Plaza 44,775 Occupancy Rate: 95.68%

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Recent Transactions

ABOUT THE FIRM

John Cumbelich & Associates is a firm that provides

YogaWorks America’s Best commercial real estate services to consummated a Contacts & Eyeglasses Fortune 500 retailers and select owners 7,000 SF, 10 year lease at consummated a and developers of retail commercial 3,151 SF, 10 year lease at Main Street Plaza properties. The firm’s expertise is in Walnut Creek, CA Downtown Pleasant Hill developing store networks for retailers The firm exclusively seeking to penetrate the Northern represented the lessor The firm exclusively in the transaction. represented the lessor marketplace, and the in the transaction. representation of premier power center and lifestyle developments.

John Cumbelich Chief Executive Officer [email protected] CA DRE ID 01006249 Tim Seiler Roam Artisan Burgers Smart & Final Extra Partner consummated a consummated a [email protected] 1,879 SF, 10 year lease at 33,000 SF, 15 year lease at CA DRE ID 01076263 City Center Bishop Ranch Stockton Plaza Joe Kuvetakis San Ramon, CA Sacramento, CA Associate Broker The firm exclusively The firm exclusively [email protected] represented the lessee represented the lessee CA DRE ID 01854159 in the transaction. in the transaction. Brandon Norton Associate Broker [email protected] Featured Listing Featured Retailer CA DRE ID 01985777

PARTNER

Former Toys”R”Us for Lease 6850 Amador Plaza Rd, Dublin, CA 1330 North Broadway Suite 200A Walnut Creek, CA 94596 47,455 SF endcap retail space Expanding in Telephone 925.935.5400 located in Target anchored center Fax 925.940.9583 Contact 5,000 SF John Cumbelich Contact FIRM BROCHURE | VISIT WEBSITE Download Brochure Joe Kuvetakis

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Better Real Estate Data – John Cumbelich

In the commercial real estate business, like all complex and sophisti- valuable, relevant and usable data. Otherwise, our data would be cated fields, every market participant relies on market data to window dressing at best, or misleading at worst. succeed. Good data allows principals such as landlords and tenants to frame lease terms, or buyers and sellers to establish a fair price. As we set out to build our database, the lessons I first observed thirty years before weighed heavily on my opinions about the meaning of Good data also enables service providers such as real estate and good real estate data. Rather than tracking everything and calling mortgage brokers, appraisers, lenders and contractors both to advise ourselves experts, we blew up the model and determined to only count their clients with superior market knowledge, and to price their the best in class assets. Better to be a little bit right I thought, than all services competitively. Data on lease and sale comparables, absorp- the way wrong. tion, occupancy & vacancy rates, inventories, development pipelines, development costs and asking prices are but a few of the tools that We developed a database that tracks what we call Northern Califor- market participants use on a daily basis to ply their craft and compete nia’s Flagship regional shopping centers. As a firm that has been effectively in the marketplace. deeply engaged in this market for decades and that has relationships with dozens of Fortune 500 users, Institutional owners and municipali- In short, it’s fair to say that real estate data is an indispensable tool ties throughout the region, we feel that we have a very strong and that the industry can’t function without. Thus, questions about the sober handle on what “best in class” means. By choosing the most where the data comes from, who produces it, and exactly what data is sought after retail assets in every one of the Bay Area’s nine counties, being recorded are existential questions for the present and future of we provide a geographically balanced snapshot that reports on the the industry and the individual principals and firms that make a living market’s ability to secure the most active, best in class brands. Since in the field. these brands are almost always looking in multiple markets, our tool provides a yardstick that scores this market against others. As a real estate services firm that records data, drafts and publishes quarterly reports and advises our clientele based on the result of our Today, when we report on the Bay Area marketplace and post that findings, we have had to ask ourselves fundamental questions about overall occupancy is, say, 98%, while our peers claim it is only 92%, I what data to track and report on. Essentially, we’ve had to ask take a sigh of relief and feel at ease because I know we are right, ourselves, “what data really matters?” because we paid close attention to what we were counting. We’ve elected to look at the market like the premier owners and users do. Thirty years ago I worked for the largest real estate services firm in the After spending some thirty years in the car driving virtually every world, and I started in the research department. Their philosophy was Northern California submarket with our clients, we know exactly what simple: separate all commercial real estate into categories (office they look for and what they can get approved for a new store opening. building, shopping centers, warehouses, etc.) and then build a Indeed, over the years, we have trained scores of real estate manag- database that included every property in a given city or submarket. ers along the way, paying forward the timeless lessons about competi- tive, best in class retail real estate, that the savviest of our mentors Visiting every property was tedious work that frequently left me and taught us a few decades before. my cohort of college aged researchers asking ourselves if anyone was really going to use this stuff. A real estate lesson that I learned as a When we say that the vacancy rate is 2%, while our peers claim that it green rookie was that when looking at a market in total, the majority of is 8%, what we are really saying is that the market that Federal Realty the inventory – in every asset type – was dated, underpriced, function- or Regency Centers or GAP or Trader Joe’s or Dick’s Sporting Goods ally obsolete, junk. The owners of yesteryear’s shopping centers and cares about is 2% vacant. The owners and users that drive the market, office buildings held assets that today’s expanding brands wouldn’t that are the catalysts for 100% of all new development, those who build think of using – whether due to deferred maintenance, lack of ameni- and occupy more space than everyone else, don’t care about the C ties, changing market dynamics, or fundamental shifts in the size and class real estate any more than they care about the F class real estate. shapes of users. These latent flaws were best affirmed through asking We’ve created a database that speaks to the availability and pricing of rents that were at times 50% or more below market, or the final insult, the kind of real estate that these premier users can reasonably hope to that no broker would agree to take as a listing. Why, I asked myself, get approved through their real estate committee process. would we track assets that none of the users we hoped to represent, would ever lease or purchase? Our methods clearly vary from those of the macro economist, but our goals do as well. We are providing powerful and timely data to the Years later when our firm began to grow, I knew two things for certain. owners, users, developers, investors and lenders that push the market First, we needed to tell our current and future clientele that our firm forward every day. We want to make sure that they have at least one had a big commitment to market data. We wanted to be able to under- place to find information that they can really use. pin our advice against real time market data that we had built ourselves. Second, we wanted to track and report on the most Click to view more articles.

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