Oklahoma City 2011 Year–End Retail Market Summary TABLE OF CONTENTS Retail Market Summary 1-2 Sales Summary 3 North Submarket 4-5 Northwest Submarket 6-7 South Submarket 8-9 Edmond Submarket 10-11 West-Central Submarket 12-13 Moore / Norman Submarket 14-15 Eastern OK County Submarket 16-17 National Retail Review and Outlook Back Cover The information contained herein has been obtained from reasonably reliable sources. Price Edwards & Company makes no guarantee, either express or implied, as to the accuracy of such information. All data contained herein is subject to errors, omissions and changes. Reproduction in whole or in part, without prior written consent is prohibited. Oklahoma City 2011 Year–End Retail Market Summary THE Retail MARKet The Oklahoma City retail market has seen a Questions/Issues of Interest OKC TOTAL RETAIL MARKET INVENTORY continuation of a marked improvement this past year. This is borne out both in our firm’s As part of our year-end study, we wanted to 50 GLA SF Freestanding SF transactional activity and the year-end 2011 address a number of questions or issues about 40 survey results. Price Edwards manages and which we are frequently asked: leases nearly 7 million square feet of retail space 30 across Oklahoma; we generated a 20 percent Is all the news good news? In a word, no. increase in lease transactions this past year. There are a number of positives, as you would 20 The market vacancy at year–end dropped below expect during a general economic recovery. (millions of square feet) (millions of square 10 10 percent for the first time in years, ending the However, national retailers are still being year at 9.8 percent. This is an improvement from cautious, capital markets are tight, shoppers 0 2007 2008 2009 2010 2011 10.5 percent at mid-year and 11 percent at the are still spending less, and more uncertainty end of 2010. Looking inside the numbers, the remains than you’d like. Local mom and pop OKC TOTAL RETAIL MARKET VACANCY improvement can be attributed to the following: tenants have probably been hurt the most and will be the last group to recover. The market is 15% • A number of vacant big boxes being filled; moving in the right direction, but the ongoing 12% • National tenants becoming more active recovery is somewhat uneven. after a 2-year hiatus; 9% • Limited new construction combined with Outlet Shoppes of Oklahoma – why has it the success of new projects, principally been so successful and what will be its long– 6% the Outlet Shoppes coming on line 100 term impact? The initial sales of the Outlet 3% percent occupied and a handful of existing Shoppes have been huge and probably property additions that were quickly surprised everyone a bit. We attribute them 0% 2007 2008 2009 2010 2011 occupied; to a combination of factors: some new stores • Nationally, retail sales are now 20 percent not previously in our market; discounters have OKC TOTAL RETAIL MARKET ABSORPTION above the 2009 trough and 5.5 percent typically done well in our market and an outlet 0.7 above the pre-recession peak (not mall plays to that demand; it’s a new concept 0.6 adjusted for inflation). having an in–town outlet mall; and, as noted, our 0.5 0.4 market is doing better than we sometimes think. 0.3 0.2 Three of the submarkets – Edmond, Moore- As to its longer-term impact, it’s too early to 0.1 0.0 Norman, and North – are showing significant tell. Historically, retailers haven’t wanted outlet -0.1 growth and vitality. The West Central submarket malls nearby because they tend to cannibalize -0.2 -0.3 is close behind, particularly given the success their regional mall business and compete with feet) (millions of square -0.4 -0.5 to the Outlet Shoppes. The South and their full price stores. Penn Square is such a -0.6 -0.7 Northwest submarkets are stable, but given juggernaut that we don’t see this being much -0.8 2007 2008 2009 2010 2011 their established neighborhoods and less retail- of an issue, though the Outlet Shoppes could friendly demographics, are seeing less activity pull some sales away from Yukon and northwest with vacancies in the mid-teens. New product Oklahoma City. Time will tell, although, we in the Eastern Oklahoma County submarket is believe the Outlet Shoppes will continue to the grocery front, everyone knows about Whole generally full, while older centers have some be successful and is a good addition to our Foods opening; Sunflower has two locations vacancy. market’s retail offerings. and is looking for others; Aldi and Save-A-Lot have expansion plans; Sprouts continues to Nationally, improvement was seen as well What new retailers are coming to town or look in the market; the Fresh Market would although it was more uneven and accompanied are expanding? One of the signs of our market like to be here as would Tulsa’s Reasors; Buy by more uncertainty. Garrick Brown, analyst getting healthier is the number of retailers for Less & Crest are both expanding with their for Chainlinks Retail Advisors - our national expanding or looking to our market for the Market concepts; and, Walmart is planning affiliation with the leading retail firms in other first time. Gyms and grocery stores lead the additional grocery stores as well. Costco has states, takes a closer look at the national picture expansion efforts. Gyms expanding include said they would come if Oklahoma changed on the back cover article. Gold’s Gym, Planet Fitness, Fitness 19 and the their liquor laws to allow them to sell wine; YMCA. LA Fitness is seeking sites as well. On and, they might eventually come anyway. A 1 number of other retailers are either actively location and the reception the market gives have helped national/regional retailers improve looking in Oklahoma City or would like to be these different concepts. Downtown grocery is their performance. This will start to change in here, including Dick’s Sporting Goods, Home always a topic of interest. A smaller, local limited the upcoming year, as all retailers should begin Goods, Sam Moon, Von Maur, Performance product grocer or two may open downtown in to see the benefit of an improved market. This Bikes, Monarch Dental, Urban Outfitters, The the next couple of years, starting with Native doesn’t mean that there won’t be store closures Container Store, Nordstrom Rack and a number Roots at the Level Apartments; but, until there or weak performers. This is the nature of retail. of smaller tenants and restaurants. With limited are more people living downtown, no full-service In the aggregate, tenant sales are expected to vacancy in good locations, many of these will or national grocer is expected to be interested. increase at an increasing rate, market rents will either have to build stand-alone stores or wait A remodel of the Homeland at 17th and Western begin to rise, and landlords will be in the best until a new development breaks ground. is a possibility. position they’ve been in the past four years to negotiate deals. As with the past two years, When will we see new construction? What does the future hold for Crossroads improvement won’t always seem readily evident Construction the last couple of years has been Mall? The Mall was recently purchased from the as we are in the middle of it, but it will be real. limited to smaller additions to existing centers lender by a local group of investors. The Mall is with the notable exception of the 348,000 square being re-positioned as a mixed-use value-retail Survey Footnote: foot Outlet Shoppes. This past year, University center. A combination of physical improvements, North Park has added an 8,000 square foot marketing, and affordable rent will be used to Our survey tracks 27.4 million square feet in 231 strip and a couple of outparcel buildings; Fritts attract value-oriented retailers and other users buildings of over 25,000 square feet and 13.0 Farm is nearing completion of a 12,000 square to the Mall. The 1.2 million square foot mall million square feet of stand-alone buildings for foot small shop building; and, Shoppes at (this includes all the outparcels and various a total market of $40.4 million square feet. Moore finished their last couple of buildings. owners) contains nearly 900,000 square feet A few stand–alone buildings are new as well, of vacancy and is currently not included in our There continues to be a significant number of including a Walmart Neighborhood Market in survey numbers. smaller strip centers in the market (under 25,000 Midwest City, and Dave & Busters on Northwest square feet in size). We would estimate there are Highway, and the planned Walmart Supercenter Where do you see Internet sales going easily 3 million square feet of these properties at Choctaw’s Town Square. Newer centers are and what is the prospect for sales tax on in the market. uniformly well occupied. With the above tenants, Internet sales? Currently, Internet sales are and others, looking for space in our market, approximately 9 percent of total retail sales; and, we anticipate the announcement of two or Internet sales have been growing at a double– three new developments this upcoming year. digit rate. A lot has been written about this threat The most likely locations will be the Memorial to brick and mortar stores. Over the next several corridor and I-35 in Edmond.