ChainLinks Retail Advisors U.S. National Retail Report 2013 Forecast

Brought to you by: Garrick H. Brown Matt Kircher ChainLinks Research Director ChainLinks President 916.329.1558 650.931.2220 [email protected] [email protected] Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Retail Macro Trends 2013 Assuming fiscal cliff scenario dealt with, continued slow growth mode with weaker first half of 2013, but economy accelerating heading into 2014.

Following the resolution of the fiscal cliff, the big economic story of 2013 will be the return of the U.S. housing market.

The 2012 holiday shopping season will turn in strong numbers and be generally deemed a success; despite this, retailer growth plans will not significantly increase heading into 2013. Meanwhile, the trend of sharp holiday discounts will mean slimmer profit margins for retailers.

The impact of e-commerce on bricks-and-mortar retailers will continue to expand. This long-term trend will gradually redefine shopping center tenant mixes (look for more dining and entertainment uses) and retail development. Expanding retail categories in 2013; grocery (new smaller Retailer expansion in 2013 still about “the sure thing;” urban concepts and niche players ranging from discount to luxury over suburban, Class A and B over Class C and locations with and ethnic to organic), restaurants (fast food and fast casual greater population densities and higher income demographics leading the way, but growth across spectrum), fitness/health/ still winning out most of the time. spa concepts, drug stores, dollar stores, thrift stores, automotive service, discounters, off-price apparel, pet supplies, sporting goods, hobby stores/arts & crafts, wireless stores (limited growth “The market is dealing with two challenges currently; driven mostly by a few new concepts)and some banking/check the continued soft economy and the increasing impact cashing/financial services growth. of e-commerce. The return of the housing market will Restaurants will account for about 40% of all the new tenancy in alleviate the first, with visible results by 2014. The latter, the marketplace in 2013 (unit counts, not square footage). however, will only escalate.” Contracting retail categories in 2013; grocery (traditional larger format concepts—especially unionized smaller or regional Retailer expansion continued to be driven by two trends; chains), video stores, video game stores, bookstores, do-it- bifurcation driven by weakness of middle class consumer (luxury yourself home stores (though these will rally by 2014), stationary/ retail and discounters still on a roll, but mid-price point concepts gift shops, office supplies (shifting more to e-commerce), largely missing in action across the retail spectrum) and the long- shipping/postal stores, some casual dining concepts (the old and term impact of e-commerce (food related from grocery to dining stale lose out to new and fresh). still hot, as are national credit service retailers—automotive, Housing related retailers ranging from home goods to furniture to health clubs, etc.), but hard goods retailer growth still limited to do-it-yourself home improvement stores will rally by 2014 thanks just the extremes of the price point spectrum. to the return of the housing market.

Retail development in 2013 will still dominated by urban redevelopment projects, outlet malls and the occasional long- planned regional mall going forward. There will only be limited suburban development throughout 2013, though this will be slowly changing as now home starts rise over the course of the year.

Malls will continue to see slow inline user growth in 2013, but this will likely be offset by major anchor closures from just a few of the weaker department store operators is a threat. Look for current vacancy of 5.8% to increase to around 6.0% by end of year.

Current specialty center (includes lifestyle centers) vacancy of 8.2% should fall to the high 7% range. 2 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Existing power center vacancy of 6.2% should decrease for third year in row, but pace of gains will slow. Lack of new construction will bode well for existing landlords; look for vacancy to hit the 6.0% mark or possibly less by the end of 2013.

General shopping center vacancy (this statistic includes neighborhood, community and strip centers) will see the greatest improvement with existing vacancy of 10.8% falling into the low 10% range by the end of the year thanks to strong growth by food and service related retailers, though strip centers will remain the Achilles heel.

“Home values have already stabilized and are beginning to show appreciation in most U.S. markets. The return of “the wealth effect” is the single most important trend to watch for retail—though it likely will not begin to impact consumer behavior until late 2014.”

Class C centers remain problematic everywhere; in the strongest Shopping center health to remain bifurcated; in the strongest and performing U.S. markets they are still producing a mix of trends— in mid-performing U.S. markets Class A properties will continue ranging from stabilizing to increasing vacancy rates. Rents here to dominate; posting the lowest vacancy levels and experiencing have yet to stabilize. Class C centers in the nation’s average the greatest tenant interest. Look for rents in most markets to producing and weakest markets are in worst shape. These climb between 5% and 10% and for fevered investor demand to properties will continue to weigh down overall averages and here keep cap rates in the 6% range or less. Class A properties in is where most of the distressed investment sales will occur with the nation’s weakest performing markets will still see rental rate cap rates of 8% or more. growth of up to 5% and strong investor demand keeping cap By 2014, resurgent housing market boosts GDP accelerates rates in the 7% range or less. recovery and speeds job growth.

Return of housing construction over final half of 2013 means more rooftops for retailers to follow and the return of limited suburban shopping center development, to be largely focused on neighborhood and community centers. Urban redevelopment projects still strong in 2014, but balance will slowly shift heading towards 2015.

“Mom-and-pops, who have largely been missing in action since 2008, will increasingly return to the retail marketplace with new small business concepts.”

Class B centers in the strongest U.S. markets will continue to post The return of housing appreciation is the most important long- declining vacancy rates and positive net absorption; with average term trend developing currently. Though we do not anticipate rental rate growth in the 5% range. Investor demand is increasing it to begin to result in visible increases in consumer spending for less than perfect retail properties and this will mean that these prior to 2014, this is the trend that holds the greatest promise centers will likely be trading with cap rates in the 7% range. Class of snapping consumers out of “the new frugality” that has been B product in the nation’s mid-performing markets will experience in place since the downturn began over four years ago. While declining or stabilizing vacancy trends in 2013 with flat or slightly the marketplace will remain extremely value-conscious thanks to increasing rents. Properties that fit this description, with no other both the habits learned during the recession and the increasing glaring occupancy issues, will generally trade with cap rates of encroachment of e-commerce, this is the best news that we can 8% or less. Class B properties in the weakest performing markets report to mid-price point retailers who have been squeezed by will mostly still be in stabilization mode this year. the downsizing of the middle class consumer.

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2013: Robust Recovery by Year End, or Derailed Assuming that nothing is done about the fiscal cliff, some Economy in January? economists are predicting negative GDP by the second quarter while others see things playing out quickly enough to land us in On the surface, it appears negative territory within the first three months of 2013. Of course, that the economy here is where the good news is. The fiscal cliff is avoidable. heading into 2013 is A compromise to reinstate some or all of the Bush tax cuts alone dealing with the same would likely be enough to keep the economy from veering issues that it was facing off the rails. as 2012 approached. Unemployment remains elevated and job growth has been weak for most “While we anticipate that Republicans and Democrats of the past year. Global will eventually come to some sort of compromise on economic growth continues to be challenged, with much of the issue of the fiscal cliff, the longer that this process Europe in recession and Asia also experiencing a slowdown. is delayed the more this political brinksmanship will Meanwhile, the United States continues to grapple with cost the economy… in real terms.” inflated sovereign debt and continued policy uncertainty. This uncertainty began in earnest with 2011’s debt ceiling debate, extended through November’s presidential elections and now Of course, the bad news is that the entire fiscal cliff scenario exists in the form of the looming fiscal cliff issue. Of course, the was created because Democrats and Republicans have been debt ceiling debate is what led to the current fiscal cliff issue. unable/unwilling to work together to find solutions in a Congress Lawmakers unable to reach a compromise in the summer of that has been starkly partisan and unable to compromise for a 2011 essentially agreed to kick the can down the road in a way couple of years now. And, as this report went to press in early that would ultimately force them to act. December, it appeared that neither side is willing to budge. So far, Republicans have held steadfast that the reinstatement of the Bush tax cuts must include all income brackets while the “Though it has been endlessly politicized, make Democrats have increasingly stated that any type of entitlement no mistake; the combined impact of major federal reform is off the table. But while both parties appeared to be spending cuts and significant tax increases will be a digging in their heels in late November and early December, significant enough shock to the system to guarantee a it remains to be seen if this is merely posturing for cutting a late December or early January deal or if these are merely relatively sharp recession in the coming year; the only the first signs of a political battle that will make the debt thing that reputable economists are debating is how ceiling debate look like a walk in the park. We anticipate the quickly this will play out.” former. But we would not be surprised at all if a deal was not struck until January.

Of course, the fiscal cliff is not actually a cliff, but more like a That is not to say that the successful resolution of the fiscal very steep slope. On January 1, 2013, the Bush tax cuts will cliff issue won’t hurt the economy in the meantime. We believe expire, effectively raising taxes on everyone and removing it already is, though it is too soon to show any meaningful about $280 billion from the economy. At the same time, the metrics. Anecdotally speaking, most of us in commercial real Obama Payroll Deduction will go away taking an additional $125 estate have observed that more real estate decision makers billion out of the pockets of American workers. The expiration have been postponing making moves or signing deals. Lack of emergency unemployment benefits will remove about $40 of taxation policy clarity has been impacting deal flow since the billion and the Alternative Minimum Tax AMT patch (which had third quarter. Many of the same decision makers who advised boosted the amount of taxpayer income exempt from the AMT) their brokers to “talk to me after the election,” are now saying will go away, meaning additional tax hikes to an estimated “call me after this fiscal cliff thing.” Meanwhile, Black Friday 26 million additional taxpayers. In addition to these expiring sales numbers for many retailers were not quite as robust as tax provisions, $1.2 trillion in automatic federal spending cuts what had been expected. But it is probably a reach to say (sequestration) over the next ten years will start to kick in on that fiscal cliff concerns played much of an impact here. The January 1st. All told, we anticipate that the combination of tax impact of Super Storm Sandy certainly impacted retail sales in increases and austerity measures will combine to effectively the Northeastern U.S., but probably a larger factor influencing remove about $600 billion from the U.S. economy in 2013. The those numbers was the fact that Black Friday weekend has combined impact of this will send the economy into recession increasingly become Extreme Discount Weekend. In general, –the only thing that most economists disagree on is how discounters and retailers offering strong sale pricing did better immediate the impact will be. than those that didn’t.

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marginal gain, what is more important has been the pattern as TOP RETAIL SALES PSF of late. After a dismal spring 2012 (April through June 2012) Concept Sales PSF in which employment gains fell below the six figure mark, job Apple $6,050 creation has averaged roughly 148,000 to 192,000 jobs per month since July. Unfortunately, the impact of the fiscal cliff Tiffany $3,017 debate could derail November and December numbers, but lululemon athletica $1,936 the trend had been positive at moderately strong levels. Job Coach $1,871 creation above the 125,000 mark is typically where we need it Michael Kors $1,431 to keep up with population growth (some economists put this Select Comfort $1,314 number as low as 100,000 and others as high as 150,000 per True Religion $1,227 month). So, is the employment situation the same as one year Vera Bradley $1,186 ago? No. It’s still not great, but it is slightly better. But this has Birks & Mayors $1,082 been the case with a slew of other indicators. Not great, but slightly better. Fairway Market $1,081 Source: RetailSails 2012 Chain Store Productivity Guide One exception to this would be the issue of consumer confidence. The Conference Board’s Consumer Confidence Ultimately, however, the longer that policymakers wait to Index (CCI) reached 73.7 in November. While this remains well make a deal the more the fallout to the economy will be. If below the historical average of 95.0, it is the highest level of you remember, the debt ceiling debate of August 2011 was consumer confidence recorded since February 2008 when it contentious enough to result in the lowering of the U.S. measured 76.4. This was on the front end of the recession, sovereign credit rating and the resulting Wall Street uncertainty before the near financial collapse of September 2008 but after caused billions in short-term losses for stock investors. it was abundantly clear that there were major problems with the U.S. housing market. Of course, the relationship between Assuming that we are correct in our assessment that a deal consumer confidence and consumer spending is a loose one. will be done—but probably not until January—the chances Over the course of the downturn we had plenty of months are considerable that we will enter 2013 with weak growth where trends in the two were divergent. However, eventually numbers. We also can’t rule out that a bitter debate throughout consumer spending almost always ends up mirroring those the month of December could have some residual fallout on reflected by the CCI. consumer confidence and the 2012 Holiday Shopping Season. But slightly improving consumer confidence and modest This could have a substantial impact on growth plans for some improvements in job growth are certainly not enough to chains, particularly those that are heavily reliant on Christmas support an optimistic economic outlook for 2013. Especially shopping patterns or those that are already on the edge and when weighed against the potential disaster of the fiscal cliff. banking on a strong showing this holiday season to just stay Yet, we are. There are two reasons why. alive. Ultimately, however, we don’t see the ongoing fiscal cliff debate as having the potential to derail this year’s holiday First, the greatest challenges facing the economy right now are shopping season, but it certainly could act as a drag. not about weakened underlying fundamentals. The greatest challenges to the economy are questions of policy that can be Hopefully we are right in our forecast of a deal being cut but shaped, determined and controlled. wrong (in terms of being too conservative) about the timing. It The second reason why we are optimistic about the economy also remains quite feasible that by the time that this report is in 2013 is about underlying economic fundamentals. It’s about released in mid-December that the issue has already been put the sector of the economy that led us into the recession initially to bed and is old news. and that will likely finally lead us out; housing. A Few Reasons for Optimism… Of course, we began our report with the premise that “on the surface,” it appears that the economy is dealing with the same issues heading into 2013 as it was dealing with last year. But this is not entirely true. Yes, unemployment remains elevated and a huge problem. But job growth is actually picking up. Over the course of 2011, the U.S. economy created approximately 1.84 million jobs, or an average of 153,000 jobs per month. Through October 2012, the U.S. economy had created 1.569 million jobs, or roughly of 157,000 positions per month. While this reflects only a

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2013: The Return of Housing investment market is where we continue to see high demand and top projects moving at cap rates in the 5% range or lower— Housing is finally starting to rebound. The depth of this investors are betting on pent-up demand to continue to support downturn was due to the deleveraging nature of this recession. strong rental rate growth and declining vacancy levels in both No other sector of the economy had more deleveraging to do the near to mid-term. than housing. And this is one of the factors behind the length of this downturn. Housing typically leads our economy out of But while pent-up housing demand has been improving recessions but has simply been absent for the past few years. multifamily fundamentals in most major U.S. markets over the past 18 to 24 months, it has only just begun to register in the Consider this; during the single-family housing market. JP Morgan analysts estimate that past three recessions current levels of pent-up demand equate to demand for about (1980, 1991 and 2001), 600,000 single-family (SFR) housing units. Meanwhile, with residential investment apartment rents growing at a rapid clip in most markets, and led the way to recovery, SFR pricing still averaging 30% below peak pricing nationally, it growing more than 30% is now cheaper to buy in most U.S. markets than it is to rent. A on average during the recent JP Morgan survey found this to be the case in roughly 50% first years of recovery. In of all U.S. marketplaces, while a Trulia study found that based past cycles, this meant on a 20% down payment, a 3.5% interest rate and assuming strong rebounds, thanks to that a buyer fell into the 25% tax bracket and wished to stay millions of jobs and billions of dollars in additional economic in their purchased home for at least seven years, that buying output. According the National Association of Home Builders is now cheaper than renting in all of the top 100 markets that (NAHB), were home construction near its historic norm, it would they track. This ranged from typically more expensive markets create an additional three million jobs. A 2008 study from like New York (31% cheaper), San Francisco (28% cheaper) and the NAHB found that each new home built creates three new Honolulu (24% cheaper) to typically more affordable markets fulltime jobs (from construction to financial services to retail) and like Detroit (70% cheaper), Oklahoma City (63% cheaper) and creates $90,000 in tax revenue. Even at half those numbers, the Cleveland (60% cheaper). So what does this mean? impact of housing is huge, especially when considering the fact that housing starts have set new records for lows throughout this downturn. Most economists agree that the housing sector HIGHEST AVG SALES PSF traditionally has accounted for between 15% and 20% of the Concept Average Sales Per Store ($1,000s) total U.S. economy. Costco $137,170 Sam's Club $78,551 “Assuming the issue of the fiscal cliff is dealt with, 2013 Neiman Marcus $72,959 will be a year in which gradually improving housing Walmart $68,665 fundamentals rapidly accelerate and begin to drive Fairway Market $68,070 economic growth.” PriceSmart $67,086 Nordstrom $65,720 BJ's Wholesale $56,330 Here are some statistics to consider; over the last 30 years the Apple $51,148 United States has averaged 1.3 million new households per Village Super Market $50,122 year. Household formation is a simple reflection of population Source: RetailSails 2012 Chain Store Productivity Guide growth and, despite the economic downturn the U.S. birth rate has not declined substantially throughout the recession. But The SFR market has struggled with low levels of user sales for household formation dropped to an average of just 600,000 the past four years. In some markets, it is estimated that up to per year from 2008 until the first half of this year. This means 40% of the SFR deal activity of the past four years has been that there is pent-up demand for housing—our estimate is to driven by investors. Many who would have otherwise bought the tune of 3.5 million housing units. Most of this demand homes throughout the recession have held off until the market will land in multifamily product first, and this trend has already “hits bottom.” Against this backdrop, the case exists for a sharp well underway. Depending on the sources cited, most current “pop” in demand once public perception shifts to accept that estimates for overall U.S. apartment vacancy fall between the the market has, indeed, has turned. And it has. 5% and 6% range. Most also reflect rental rate growth nationally in the 5% range, though some markets have seen rental rates Here are some metrics to consider; new home starts are now at explode. The San Francisco marketplace, for example, has their highest level since before the financial meltdown of 2008. seen multifamily rents increase by roughly 30% over the past Permits remain high, meaning that this trend will continue, at two years. The strength of multifamily fundamentals has least for now. Meanwhile, new home sales are now at their been the reason why this sector of the commercial real estate 6 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 highest level in over two and a half years (going back to the tail a year in which gradually improving housing fundamentals end of the new home buyer tax credit period in which stimulus rapidly accelerate and begin to drive economic growth. New propped activity up—not organic growth like today). home construction should continue to increase and accelerate heading into 2014 and beyond. Keep in mind that we lost over According to the National Association of Realtors, single-family two million construction jobs during the recession and that most home prices have improved in 100 out of 134 metros since of those have not come back yet. We see the potential for as the beginning of 2012 (Case-Shiller data mirrors this trend). many as one million new construction jobs through the end of According to RedFin, per square foot housing has turned the 2014. Likewise, the return of housing and homebuilding will corner in most U.S. markets, including some of the worst hit boost GDP. Our anticipation is that a return to 3.0% range GDP by the housing crisis. While stronger markets that were less by 2014 is likely. impacted by the housing meltdown have been posting pricing gains for a few months now (for example, Los Angeles +6.8% Most important to the retail landscape will be improvement and Washington, DC +6.6%), this trend has started to play in household wealth. For every $1 increase in home values, out in the ground zero markets of the housing meltdown. The consumer spending typically increases by $0.05. For years Las Vegas market has seen pricing jump by 10.5%, the Inland we have been dealing with the question of “the new frugality” Empire booked an annual increase of 9.6%, Sacramento pricing and how long would it last. Retail fundamentals have become improved by 8.8% while RedFin reports a whopping increase sharply bifurcated on all levels, partially due to this issue as of 30.0% in the per square foot pricing for the beleaguered pinched middle class consumers downsized, trading in Banana Phoenix marketplace. Republic for Old Navy. While retailers and restaurants on the lower end of the pricing spectrum have thrived throughout the The inventory of available homes has dropped sharply. recession, luxury brands and higher end dining only returned According to JP Morgan and substantiated by a number of to growth mode about two years ago. But this still has not other recent surveys, the shadow inventory of REOs, foreclosed happened for the mid-priced retailer, whether we are talking and delinquent homes is now back to 2008 levels. Meanwhile, about apparel, groceries, restaurants or any other retail sector. the inventory of homes for sale has dropped substantially. While we anticipate that consumers will not immediately revert According to RedFin, the available inventory has dropped in to old shopping habits, and that the increasing encroachment of Boston by 37.2%, while the hard-hit Inland Empire has seen SFR e-commerce will keep price competition high for many of these availability fall by 58.4% and Sacramento has recorded a drop retailers, the fact is that the return of the wealth effect can only of 66.4%. translate into increased consumer sales totals. This will only further strengthen retail fundamentals and drive greater demand All of these statistics point to the fact that housing is back. for investment in retail real estate. Assuming the issue of the fiscal cliff is dealt with, 2013 will be

Largest Currently Proposed Shopping Centers Total GLA Project Name Type Location Developer 3,000,000 American Dream Entertainment East Rutherford, NJ Triple Five Meadowlands 3,000,000 Konterra Town Center East Lifestyle Laurel, MA Forest City 2,600,000 The Point at Sayreville Lifestyle Sayreville, NJ O'Neill 2,000,000 Copper Ridge at Northgate Lifestyle Colorado Springs, CO Northgate 1,500,000 Parkside Town Commons Lifestyle Raleigh-Cary, NC Kite 1,500,000 Waller Town Center Lifestyle Waller, TX Cullinan Properties 1,400,000 Ka Makana Ali'i Lifestyle Kapolei, HI DeBartolo 1,350,000 University Station Lifestyle Westwood, MA New England Development 1,300,000 The Bridges At Mint Hill Lifestyle Mint Hill, NC Howard Hughes 1,300,000 Seaport Square Lifestyle Boston, MA WS Development 1,300,000 Delta Shores Lifestyle Sacramento, CA Merlone Geier 1,300,000 Estrella Falls Mall Super Regional Goodyear, AZ Macerich 1,296,200 Oak Grove Village Lifestyle Oak Grove, KY Albers Iannaccone 1,282,571 Marana Spectrum Power Marana, AZ Kimco 1,100,000 Circle T Ranch Super Regional Westlake, TX Howard Hughes Source: Directory of Major Malls/ShoppingCenters.com 2012

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A True Crossroads or less and sluggish employment growth during the first quarter, but for those numbers to increase substantially heading deeper Usually when economists say that the economy is at a into the year. crossroads, what they are usually saying is that the indicators are too mixed to give anything but a hazy forecast. The national After a likely slow start, the housing market‘s recovery will pick economy now truly is at a crossroads, but that is because we up steam as the year progresses. Residential construction are in a place where it can only go one of two ways in 2013 and starts will continue to increase, with substantial jumps by 2014. its direction will be largely determined by choice. Meanwhile, the return of housing appreciation will not just reduce foreclosure activity, but will positively boost retail sales as Assuming that nothing at all is done about the fiscal cliff issue, consumers begin to have a greater sense of household wealth we anticipate a strong shock to the economy during the first again. By 2014, we anticipate a housing market that is in full quarter that will result in recessionary pressures within the recovery mode and that once again contributes to overall GDP. first three months of 2013 and possible negative GDP growth Overall economic recovery will finally accelerate beyond the by the close of the first quarter (negative GDP by the second turtle’s pace of the last few years, assuming our policymakers quarter is a given). Unfortunately, this holds the potential to set don’t drive us off the cliff first. off yet another downward spiral of contraction. Unemployment will climb to at least the 9.0% mark by summer 2013 and this will spur further bankruptcies, more business contraction and Holiday Sales Season Update possibly more layoffs. Government debt will only increase as Entering into this holiday sales season, the signs were there for revenues fall further and the demands for safety net services will a robust Christmas shopping season. Remember, the holiday only increase. The potential is strong for further bank failures shopping season for both 2010 and 2011 turned out to be and for the possibility of another credit crunch, which could set pleasant surprises for retailers in the United States. In both off another round of issues. Meanwhile, the blossoming housing cases, we were dealing with continued economic weakness and recovery will be derailed and delayed for at least a few more consumer confidence numbers that left much to be desired as years. A return to anything resembling a “normal” economy will late as October of both years. be delayed for at least another five years at the minimum.

Luckily, we see this Doomsday scenario as only being theoretical. In the unlikely event that a fiscal cliff deal is not brokered by January, the negative impact to the economy will begin to be visible within a couple of months. Political pressure will only build during this time, likely forcing some sort of compromise on the issue—but the longer the delay, the longer the damage to the economy.

The current lack of policy clarity on the issue is already likely to be reflected as depressed growth over the final months of 2012 and the first few months of 2013. The sooner a deal is reached, In 2010, luxury and upscale retailers had been dealing with nearly the less the negative impact. But assuming a January deal on 18 straight months of strongly negative same-store comps that the fiscal cliff is reached, we are likely looking at GDP of 1.5% did not turn positive until autumn. In some cases (Abercrombie & Fitch, for example), the declines had routinely been in the double digits. Meanwhile, consumer confidence (as measured 160 Conference Board U.S. Monthly Consumer Confidence Index by the Conference Board’s Monthly Consumer Confidence 140 Historical Avg = 95 Index) as of September 2010 stood at just 48.6 (95 has been the long-term average) and had fallen the month before. Yet, 120 Reading = 73.7 Highest Reading Since by November it had increased to 54.3 (it did actually slump 100 February 2008 back downward again in December to 53.3) and most analyst 80 predictions were for a relatively weak shopping season. The lion’s share of these predictions (typically made in September) 60 February November 2008 2012 generally assumed minimal sales growth in the 2% range, yet the 40 American consumer came unexpectedly delivering a Christmas gift of sales increased above the 4% rate (these numbers vary 20 according to the source and the metrics used, however, nearly 0 every analysts prediction turned out to be too conservative). Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12

CCI

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The 2010 numbers had a huge impact on retailer growth plans In 2011, we saw a repeat of the same trend, though to a lesser for 2011. They usually do have some impact, as so many degree. Consumer confidence reached a low of 40.9 in October retailers of hard goods are heavily dependent upon the holiday 2011, after having reached as high as 66 in April. A summer sales season. While the numbers don’t mean nearly so much consumed by rising fuel prices and the self-inflicted economic to most food or service related retailers who see the lion’s share malaise that followed the debt ceiling debate (and subsequent of their business spread out over the calendar year, for some downgrade of U.S. credit) had taken its toll. Heading into hard goods chains they can make or break an entire year. This autumn there was still plenty of talk of the potential of a double- can especially be the case for gift-oriented retailers (gadget dip recession and by September, most retail analysts were still store Brookstone, for example, can count on the holiday sales season for 40% of their annual volume or more), as well as ‘The last two years, surprisingly strong holiday sales department stores and apparel retailers. In 2010, the impact of the holiday sales season came as the first refreshing news have translated into substantial boosts in retailer growth (at least for most non-discount related chains—that mostly had plans. This is unlikely to happen following Christmas performed strongly in the face of the downturn) in about two 2012, despite the fact that all of the indicators prior to year. Many who had put growth plans on hold or that were Black Friday seemed to point towards an even more actually in contraction mode, reversed gears. We track retailer robust sales season.” growth plans and actually saw a 30% surge in new store plans between September 2010 and March 2011. But, keep in mind that this was not just a reflection of one solid holiday season, but cautious about how the holiday sales season would unfold. The that it also was the first signal to major chains that the worst of majority of industry forecasts were for growth in the 2.5% to 3.0% the recession was behind us. Expansion was not only allowed range. Yet, consumer confidence rebounded in November to again (provided it was smart, strategic growth), but with rents 55.2 and continued to increase to 64.8 by December. American in most markets off by 30% or more, it was the perfect time for shoppers came out again in force, with most analytics indicating opportunistic growth. a second year of annual sales increases in the 4% range.

Retailers also boosted their growth plans following Christmas 2011. Our data (which tracks planned growth from major national credit tenants over the next 12 and 24 month periods) indicates that planned unit counts increased about 15% between September 2011 and March 2012. These numbers fell for a couple of reasons, the first and foremost reason being that the previous year’s gains had come off of record low growth plans. Meanwhile, the strong absorption trends posted throughout 2011 meant that rents were recovering and premium space was no longer so readily available so those retailers who were motivated by opportunistic real estate plays had fewer options. Meanwhile, the trend was actually slowly returning back to the typical level of increases that we have seen in past years. Our data tracking retailer growth plans is limited historically to about 2005, however, between 2005 and 2007 (the peak of the last cycle), these fluctuations usually were between 5% and 10% at most.

But while 2010 and 2011 seemed to be identical in terms of overall trends, there was a big difference heading into this year’s holiday shopping forecasting season. Consumer confidence was on its strongest uptrend in over four years. After hitting a low of 61.3 in August, it jumped to 68.4 in September and has only been climbing since. By November it had reached a peak of 73.7—it’s highest rate since February of 2008 (when the trend was heading steadily downward thanks to a weakening housing market but had yet to plummet in the aftermath of September’s near collapse of the financial system).

And so it should come as no surprise that entering into the 2012 holiday sales season, most analysts were finally predicting a more robust gain in holiday sales. The National Retail Federation 9 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

predicted an increase of 4.1% while Deloitte forecast an increase by iPhones at 8.7% and Android phones at 5.5%. Of course, of 3.5% to 4.0% and both the International Council of Shopping this does not mean that shoppers are abandoning the malls. Center (ICSC) and ShopperTrak predicted a jump of 3.0%. Our Foot traffic actually increased 3.5% over Black Friday Weekend, forecast was slightly robust at 4.3%. Our rationale was simple. according to a recent report from ShopperTrak. But they also This holiday shopping season has an extra weekend of selling claim that retail sales fell by 1.8% during this period, reinforcing time and more retailers were moving up Black Friday openings some of the more negative anecdotes we have heard from to Thanksgiving dates to further boost selling time. Meanwhile, retailers. But these numbers do not get with those from the planned sale promotions and extreme markdowns which helped ICSC/Goldman-Sachs Weekly Chain Store Sales Index which to boost sales levels in both 2010 and 2011 were only expected indicate a 3.3% Y-o-Y increase in sales for the week immediately to increase (and they did). And, lastly, consumer confidence following Thanksgiving. Keep in mind that the methodologies of was finally on a strong upward curve heading into the season. the two are radically different; ICSC looks at the performance of All of these seemed to indicate that the strong performances of a select set of retailers while ShopperTrak is driven mostly by the past two years would be surpassed in 2012. charge card activity. We find both to be lacking at a certain level, but put more faith in the ICSC methodology behind their same- store sales approach. All this being said, the fact that there “Food and service related users are currently accounting is even a debate as to whether there were gains or losses on for the lion’s share of planned expansion and are generally Black Friday Weekend is potentially problematic for our earlier less dependent on the holiday sales season. Even aggressive seasonal forecast. exceptionally strong Christmas sales are unlikely drive current growth plans up by much more.” Meanwhile, regardless, we do not anticipate that this year’s holiday sales season will prove to be a bust. What we think is that 3.0% gains are almost guaranteed and the only issue Of course, our projections were before Super Storm Sandy— we are debating is whether the retail world will cross the 4.0% which will undoubtedly impact retail markets along the eastern threshold. Still, don’t look for this to translate into much as far seaboard. It was also before the fiscal cliff debate became first as additional planned retailer expansion in 2013. The surges of and foremost as the latest public policy stalemates to harm the past two year were not the norm to begin with. But equally economic confidence. as important is where retailer growth is currently coming from. Food and service related users are currently accounting for the Early Black Friday 2012 weekend sales returns are still being fully lion’s share of planned expansion. These concepts are much assessed, but appear to be extremely strong—despite the fact less dependent on the holiday sales season and so even if we that monthly November same-store sales figures were not quite saw an extremely robust increase of 5% or more this year, the as robust. But, we have heard some troubling anecdotal news chances are slim that we would see anything more than a 7% or that many retailer expectations were not met during the opening 8% boost in planned retail unit counts for the next year. weekend of the holiday sales season and success seemed to be inordinately distributed; with discounters and those retailers who pushed the envelope on Thanksgiving openings reporting the strongest weekend and mid-price retailers, particularly in the apparel and department store categories, posting smaller gains. Meanwhile, the Thomsen Reuters/University of Michigan Consumer Sentiment survey published in early December indicated that confidence levels may be faltering. It is too soon to say that Christmas 2012 is going sideways, and we don’t think that it is. However, we will need to see a strong closing to the season if our forecast of 4.3% is going to prove accurate.

This could be an indicator of a larger trend that will continue to impact retail and that is the biggest long-term threat that bricks-and-mortar stores faces; the continued growth and influence of e-commerce. An early December report from IBM reported that online sales grew this Thanksgiving by 17.4%, while Black Friday online sales grew by 20.7% this year. Cyber- Monday—like Black Friday—is increasingly a victim of the Christmas Creep as retailers from both the bricks and clicks sector continue to push their start dates forward. Meanwhile, iPads accounted for nearly 10% of all online shopping, followed

10 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Expansion Up Slightly; Dominated by Food & As stated earlier, as of October 2012, we were tracking just Service Users and Dollar Stores over 41,000 potential new storefronts to be opened in the U.S. over the next year. This compares to a metric of just under We track retailer growth plans for major chains throughout 40,000 potential new storefronts recorded one year ago. A the United States and regularly publish our detailed findings slow increase in retailer expansion plans is consistent with in our Annual ChainLinks Retailer and Restaurant Expansion the trends that we have seen in the leasing market, though Guide each Spring. That being said, we are currently tracking we are also seeing increase in a few key sectors. While hard plans from retailers of all stripes to potentially open as many goods retailers largely remain in conservative growth mode as 41,000 new retail storefronts over the next twelve months. (the exception would be dollar stores and discounters which To gather this data, we use a variety of sources ranging remain aggressive in expansion), the balance of tenants in the from the direct feedback of the 600+ brokers on the ground marketplace has increasingly shifted towards food related (from throughout the ChainLinks network, as well as our continuous grocery to restaurants) and service related retailers over the monitoring of media sources (our weekly Terranomics Retail past few years. Newsline publication tracks retail news, with an emphasis on growth plans, for over 60 major metropolitan markets and tracks • Restaurant concepts alone currently account for 42% of all hundreds of local newspapers and business journals as well the planned growth (in unit counts) that we are tracking in as regional and national trade publications dealing with both the marketplace today. Among the leaders in this category: the retail arena and commercial real estate). We also track plans detailed in quarterly stock reports for major publicly-held • Subway wants to open about 2,500 units next year (though chains and data that we purchase from numerous third-party this is a global franchise goal and it also does not take data providers that also attempt to track this information. That closures into account). Their historical averages have being said, we should caution that this metric does not include typically ranged between 1,500 and 1,800 units annually). planned closures (which some retailers are often notoriously tight-lipped about). Likewise, it is wholly dependent upon • Five Guys Burgers and Fries would like to open as many as the quality of the data shared by the retailers themselves. In 500 new stores in 2013 most cases this is fairly precise and accurate information. In • Other announced plans include; Long John Silver’s 300 others, particularly chains that are reliant upon franchisees for units; Penn Station Subs 265 units; Burger King 250 units; growth, this data can often be less precise—ranging from fairly Jimmy John’s 240 storefronts; Submarina, Dunkin Donuts, accurate projections of franchise-driven growth to sometimes Baskin-Robbins & Taco Bell all have goals of 200 restaurants “pie-in-the-sky” franchise goals for a driven year. As such, it is each; McDonald’s 175; Chipotle 165; Rita’s Water Ice, most useful as a general benchmark of activity, as opposed to a Saxby’s Coffee & Cold Stone Creamery are all at 150 precise representation of new store openings in any given year. planned new locations; Papa John’s 125 restaurants; Panda However, given those limitations, it is an extremely powerful Express 120; Panera will open 105 restaurants. Meanwhile, tool for forecasting and for understanding current and future Hardee’s, Papa Murphy’s, Menchie’s Frozen Yogurt, Mini growth trends (who is growing, where they are growing and Melts, Salad Creations, Smashburger, Wingstop, Vapiano’s why) throughout the marketplace. & Dickie’s BBQ Pit all plan on at least 100 units… and these are just the dining concepts at the top of the list. Planned Retailer Growth 2013 Dollar stores also continue to aggressively grow and are single- 41,015 Grocery handedly changing the net lease investment market which Planned Units has traditionally been dominated by drug store, fast food and automotive retail concepts. They have always proven to be popular with investors because of the minimal property management involved (triple net leases typically pass all expenses on to tenants) and the usually longer term leases favored by drug store and fast food users. With the dollar store 42% sector entering its third year of explosive growth and most Restaurants All Others chains considering everything from inline space at shopping centers, to more and more freestanding locations, investors who have struggled to find available drug store or fast food product are increasingly looking to standalone dollar stores for their net leased deals despite the fact that most of the active chains are still inking deals for ten years or less. We are tracking a potential Apparel of over 2,000 new dollar stores throughout the U.S. over the next

Home Related Dollar Store year. Though footprints can vary from as low as 3,000 to as high Drug Stores as 15,000 square feet, we anticipate that this sector alone will

11 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 account for a minimum of 15 million square feet of occupancy Of course, the growth plans we detailed did not even begin to growth (this number could easily cross the 20 million square cover growth that we are seeing from the grocery world itself. foot mark) across all retail building types in the coming year. And here is where we see a stark dichotomy between new Among the leaders; Dollar General will be opening as many as concepts and traditional grocery store chains. 625 stores in 2013, even while it beefs up its food and grocery offering in existing locations. Family Dollar is expected to open No surprise that the potential game changer is coming from the at least 500 new stores while Dollar Tree has plans for at least world’s largest retailer, Walmart. Walmart is launching two new 300 new units in 2013. smaller-format grocery-only concepts; the 15,000 square foot Walmart Xpress and the 30,000 to 40,000 square foot Walmart Neighborhood stores. It is unclear precisely how many of each Grocery Revolving Door to Spin Wildly in 2013 that they plan to open over the next twelve months and these We are also continuing plans could change rapidly depending upon the fate of Tesco’s to track strong growth Fresh & Easy concept in the Western United States. That being in the grocery sector, said, Walmart is on record as having stated their goal of opening but this will prove to be as many as 350 of these smaller format stores over the next a double-edged sword couple of years. This figure is in addition to continued plans to in 2013. Traditional open full service Walmart Superstores, which usually are at least grocers continue to 125,000 square feet in size and also feature full service grocery grapple with an influx sections. The move to smaller format stores can be a game of new players looking changer for a number of reasons. First, Walmart has struggled to seize a slice of the to gain a foothold in urban settings simply because of the grocery pie. Over the scarcity of affordable land in most markets and, even when they past few years, Target have found parcels upon which they could build, they have had has rapidly expanded to deal with the inevitable local politics. With their smaller format into the grocery arena, stores, Walmart is looking more to second-generation space, adding its P-Fresh giving them much more flexibility to rapidly expand into existing grocery concept storefronts while sidestepping all of the development issues that within nearly every have plagued them in urban marketplaces. Likewise, assuming existing U.S. store and that they can deliver at the same (or very similar) price points including sizable grocery sections within all of its new stores as their full service megastores (but with much easier ingress/ (Target continues to grow at a pace of about 15 to 20 new stores egress), the expansion of the Xpress and Neighborhood markets annually, including its new, smaller urban concept, CityTarget). holds the possibility of the Arkansas-based chain reinventing themselves for consumers who have, until now, shunned the Meanwhile, most dollar store chains are beefing up their Walmart experience. grocery components. With more than 2,000 new dollar stores planned for 2013 and chains like Dollar General and Family Dollar expanding their grocery selections, these players are also increasingly seizing a piece of the pie. Convenience store operators are also following this trend; 7 Eleven has been aggressively growing at a rate of about 300 new stores per year, while also expanding their fresh food offerings. Meanwhile, drug stores are upgrading their food selections—Walgreen’s recently opened stores in Hollywood and Chicago with full sushi bars, juice bars and baristas in place. Drug stores, particularly in urban locations, will increasingly be adding food selection beyond the typical canned goods and cooler beverage selections. Look for more premade sandwiches, salads and meals-to-go that will also compete with fast food and fast casual players. Lastly, warehouse stores with grocery components continue to expand (both Costco and Sam’s Club are looking at opening at least 15 new units next year while BJ’s Wholesale will open at least six). Other non-traditional discounters that dabble with groceries also remain in strong growth mode. For Of course, the arrival of yet another non-unionized grocery example, close-out specialist Big Lots is planning on opening player, much less the largest retailer in the world and one which at least 60 new stores in 2013—all with a healthy selection of has infinitely greater buying power than even the strongest discount groceries on hand. active grocery players, is the last thing that traditional grocers need. Grocery store consolidation has been underway for the 12 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 past two years; with smaller local and regional chains (particularly investor expectations and was the victim of a mix of factors. unionized players) struggling to maintain market share in a retail It launched at the wrong time, it launched in the wrong place landscape where consumers are still pinched and generally (nearly all of its initial markets were among those worst-hit by willing to sacrifice higher levels of service in exchange for the housing crisis and ensuing economic downturn). It’s format cheaper pricing. needed some tweaking upon opening and some within the commercial real estate world noted that its initial site selection Smaller format grocery expansion is the rule of the day; but may have had some issues. The store, which features a mix of nearly all of it is coming from niche players—whether on the fresh and premade foods (a la Whole Foods), combined with a discount side (Walmart, Aldi or new upstarts like Grocery limited grocery selection within a typical footprint of about 15,000 Outlet—formerly just a regional player, this chain just purchased square feet, was ideal for busy working couples or those looking a chain in Pennsylvania and is poised now for growth on both to grab a meal to heat and eat at home while picking up a few coasts), or the luxury end (Whole Foods is planning on doubling grocery staples. Yet, many of the original locations were not its store count over the next few years and could add as many as placed in higher density urban environments where they would 50 new stores over the next 18 months—usually with a footprint have thrived, but in suburban communities. The result was that in the 40,000 square foot range). The same holds true of organic the chain initially hemorrhaged cash and it took a couple of players (Fresh Market, Sprouts, etc.) as well as ethnic themed years for it to get back on the right track. Planned expansion grocery chains. into Northern California and Nevada were delayed, despite the fact that many deals were already signed and, in some cases, Against this backdrop, it is only logical that the pace of grocery the retailer was paying rent or more (in some cases, rent plus consolidation picks up and that most of the victims will be substantial penalties) for storefronts that were not yet opened. traditional grocers. Over the past couple of years we have Yet, by last year, it appeared that many of these problems were seen Arizona regional player Basha’s declare bankruptcy and being fixed. reorganize with a much reduced store count. A&P closed over 100 stores (mostly in the northeastern U.S.) with its reorganization about 18 months ago. Meanwhile, Supervalu and Delhaize “Smaller format grocery expansion is the rule of the (parent of Food Lion and a number of other regional concepts) day; with almost all of it coming from niche players; have combined to close well over 200 traditional grocery stores. discounters, luxury, ethnic and organic concepts are all Yet, surprisingly, the first fatality may be one of the players least actively expanding with footprints of 40,000 square feet expected. or less. But as more chains rush in, other chains will be forced out. The problem for landlords is that incoming is Fresh & Not So Easy all about junior boxes, while the outgoing will mostly be Following Walmart, Tesco is the world’s second largest retailer. about larger space users.” It IS the Walmart of Europe and not only has immensely deep pockets, but it was one of the first players to launch the small format grocery revolution. Tesco launched its American Fresh & Easy began opening its Northern California and Nevada concept, Fresh & Easy in 2006—focusing first on the Phoenix stores about 18 months ago, with many Bay Area stores in market and then rapidly expanding to Las Vegas and Southern particular, reporting strong sales. Meanwhile, sales volumes California. Then the recession hit. Fresh & Easy never met were increasing in Los Angeles, San Diego, Phoenix and Las Vegas. Even in California’s struggling Inland Empire and Central Valley markets (where unemployment remains well above the 10.0% mark in many cities), the chain was gaining traction. But after investments of over $2 billion, Tesco’s investors had had enough. Despite the fact that the chain was likely only another 12 to 24 months away from profitability in the U.S. and the efforts of its CEO not to abandon the experiment, a movement among Tesco shareholders to withdraw from the states continued to build momentum. The official stance of management had been to ask for more time until early December. But recession in Europe had taken a toll

13 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 on Tesco numbers and investors were losing patience. As a Meanwhile, market watchers will be struck by the irony of result, news broke just before this report went to market that the situation. Walmart had largely abandoned the idea of Tesco planned on withdrawing from the Unites States sometime smaller format grocery stores after experimenting years ago in 2016. with a 30,000 square foot concept called Marketside in the Phoenix area a few years back. They brought back the idea Details are not fully available, simply because Tesco is still as speculation grew regarding the launch of Fresh & Easy and working on an exit strategy. Fresh & Easy had the potential to many may make the argument that the chain only went this path be a national player—Midwest expansion had been the rumored to counter what had been perceived as a major challenge to next move before all of this transpired—and the chain could their stateside dominance by their biggest international rival. have easily funded the opening of up to 100 stores or more annually over the next few years. But while traditional grocers may be breathing a sigh of relief at the collapse of one of the “Though speculation that Walmart could purchase Fresh major threats hovering in the marketplace, their relief may be & Easy remains rife, this may simply be wishful thinking coming a bit too soon. on the part of the commercial real estate community. Rumors are circulating in the brokerage community that Tesco Regardless, there are plenty of other potential suitors out may sell the entire enterprise to archrival Walmart. We know of there ranging from discount grocer Aldi to some regional no official talks that are ongoing, however, the move would make upscale chains. Also don’t rule out the possibility of sense and we are aware of talks that have occurred on occasion major dollar store chains expressing interest.” in regards to some individual locations possibly changing hands. A sale to Walmart could give Tesco investors the quick exit that they seem to be demanding, while turning the Walmart This does beg the question; could Fresh & Easy’s withdrawal Xpress concept into a major player overnight in the Western translate into Walmart backing away from the small format United States. That is not to say that a deal would happen. grocery market? And the answer is almost certainly no. Walmart We happen to believe that Tesco may be able to get more has watched the Fresh & Easy experiment closely and even as it by chopping up the chain and would certainly find interested stumbled, they found enough merit in the plan to launch smaller takers in markets like San Diego, Los Angeles, San Jose or the format stores to not only boost opening plans but to actually San Francisco Bay area. Their locations are also generally now formulate two distinct concepts. And so the news is mixed for fairly strong elsewhere as well, though higher existing vacancy traditional grocers; another rival is gone, but it will likely hasten levels in Phoenix, Sacramento, the Inland Empire and Las Vegas the expansion of perhaps your most dangerous rival. all could negatively impact pricing in those markets. Ultimately, this will all depend on the timeframe that Tesco’s Even while this news continues to break, we see additional shareholders demand. signs of consolidation for traditional grocers ahead. Supervalu was reportedly in talks to sell to private equity firm Cerberus as this forecast went to press. Should Cerberus purchase the ailing chain, it is likely that they would probably close or sell off stores where it faces tough competition in a strategy similar to what it did with Albertson’s (a few years back it sold off about 132 stores to Save Mart in Northern California). Regardless, we anticipate a deal will be done sometime this year with either Cerberus or another private equity firm and that there will be dozens of underperforming stores shuttered when this is done.

All told, we anticipate at least 200 to 300 traditional grocery stores to close in the year ahead, even as a similar number (or even more) are opened. The difference is that the stores that are closing will mostly be larger in size (50,000 to 70,000 square feet in size), while nearly all of the growth will be coming from players using 40,000 square feet or less. Landlords will face the challenge of backfilling these larger, traditional units with a tenant pool sorely lacking above the 50,000 square foot mark. That being said, those able and willing to demise existing vacant space will have a significantly larger pool of expanding retailers of all stripes to target—the problem is that this could be extremely cost prohibitive, especially to landlords of Class B or C shopping centers where rents are only now starting to recover.

14 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

issue of whether they fit within traditional tenant mixes. There is only one segment of the market where we are seeing aggressive growth plans from inline users and that is the restaurant sector. Whether fast food, fast casual or upscale independent operators, demand for restaurant space has sky-rocketed over the past two years. Even demand from casual dining chains is up and this is just one of many retail sectors where operators with price points Welcome to the Food Court Economy in the middle have been hard hit. In terms of retailer demand, we have seen a slight increase in This is one of the challenges facing landlords; how to overall demand for space but the marketplace remains highly increasingly shift tenant mixes to accommodate more dining uneven in terms of growth by sector. The Royal Bank of Canada’s options. Though we anticipate that there may be an eventual Retail REIT analytics team tracks retail demand in terms of shakeout with many trends (it remains to be seen just how many planned unit counts and our sources there tell us that as of the fast casual burger chains Americans can support—though the end of 3Q 2012, they were tracking a total of 41,015 planned numbers may be surprisingly high), get used to this trend. As new store units throughout the United States (over the next 12 e-commerce increasingly competes with the bricks-and-mortar months). This compares to a reading of 38,349 planned units retail landscape, shopping centers will find themselves insulated one year earlier and 34,020 planned new stores as of Q3 2010. against those technology driven shifts by beefing up dining and We also track planned store growth, though our internal tracking entertaining options that do not compete with the internet. excludes some franchise operators (many of these operator’s planned growth amount to little more than optimistic franchising FASTEST GROWING RESTAURANT CHAINS goals) and our data is more anecdotal in nature. Still, what we are 2011 Average Total Change in seeing completely corresponds with RBC metrics. The problem Concept is that most of the increase in retail growth plans has come from Sales Per Unit Units 2010 - 2011 just a few slivers of the marketplace. Subway $469,000 872 Little Caesars $465,000 305 Who is growing nowadays? Restaurants easily lead the way, with Jimmy John's $821,800 199 fast food and fast casual concepts being the most active. Drug Five Guys $1,156,000 182 stores are continuing to expand, but usually require at least 14,000 Burgers & Fries square feet of space. Niche groceries of all types—discount, Chipotle $2,013,000 150 organic, upscale, ethnic and small format are also growing Papa John's $786,000 130 rapidly… but these are also larger space users. The same goes for most off-price apparel chains, sporting goods retailers and pet Dunkin Donuts $850,000 115 supply stores (all of which are growing aggressively but mainly Tim Hortons $1,069,000 112 taking down Class A or B junior box space). Automotive retailers Panda Express $1,157,000 97 are on the move, but also are typically looking for larger footprints Panera Bread $2,304,300 88 and/or freestanding or build-to-suit space. Health clubs are on Source: QSR Top 50 List 2012 the move, but most of these concepts are above the 15,000 square foot threshold. Dollar stores are on fire, but some of the fastest growing chains only look at space in the 5,000 to 10,000 TOP RESTAURANT FRANCHISES square foot range. Lastly, we are beginning to see the return of Worldwide Domestic Concept Total Units home furnishings chains, though next year’s planned growth will Sales ($M) Units likely initially be tepid—2014 is the year to watch for the return of McDonald's $85,491 33,510 14,098 furniture stores, furnishings and D-I-Y retailers. KFC $21,300 17,401 4,780 The fact is that landlords of malls with vacancies of 3,000 Subway $16,600 35,920 24,722 square feet or less are currently looking at a limited number of Burger King $14,975 12,512 7,500 possibilities. It is true that check cashing, shipping stores, hair Pizza Hut $12,828 13,747 7,600 salons, spa concepts and local mom-and-pop dry cleaning and Wendy's $9,200 6,594 5,876 beauty salon requirements are slowly ticking up. But there really Taco Bell $7,300 5,945 5,670 are not an enormous number of options out there for landlords Domino's $6,956 9,742 4,097 looking to backfill smaller shop spaces. Convenience stores are Pizza growing, but do not necessarily fit the profile of most shopping Tim Hortons $6,037 4,014 714 centers. Cellular/wireless store growth has slowed—outside of Best Buy Cellular—most every concept is nearing saturation point Dunkin $6,004 9,792 6,772 Donuts in most markets. Meanwhile, there are a few smaller format thrift and dollar stores in growth mode, but here again we deal with the Source: 2012 Franchise Times Top 200 Franchise Systems 15 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

The Big Box Theory; Boxes Aren’t Dead, had shuttered dozens of stores and was teetering on the edge Just Shrinking of bankruptcy. As the U.S. housing market improves, look to see these retailers going back into expansion mode. But don’t expect There has been much speculation in the media and business Lowe’s and Home Depot to be in the market for much in the way trades over the past year that big box retail is dead, or dying. This of second generation space, unless it is exceptional. They are theory is based upon two factors; first, the marketplace for large much more likely to build in new locations from the ground up. box users remains extremely problematic in terms of demand. Secondly, the widespread trend of retailers downsizing their Those lamenting the death of the big box will frequently point footprints is spreading and is having a major impact upon the big out what is happening with the department store sector; the old box retail market. dinosaurs are dying off, etc. But this was happening long before the recession. The golden age of the department store was from about 1975 to roughly 1990. That’s when mall developers had “Big boxes are not dead. They are just shrinking. This dozens of names to turn to when they wanted to add another is actually good news for landlords of junior box space. 100,000 square foot plus anchor tenant. Some of the malls Not so much for the owners of vacant mega boxes.” built during that era still show the telltale signs; six or seven anchor tenant buildings, etc. that now are more likely to house Hobby Lobby of Forever 21 in spaces originally built for long- While both of these trends are absolutely correct, the problem extinct players like The Broadway or May Company. But again, with this theory is the conclusion that big box is dead. Here these have never been major players in the big box market, just is why; the marketplace for mega-box (80,000 square feet or big users in the mall market who on occasion will go into a big more) retail is where we see the greatest challenges for vacant box. The department store user who most utilizes box space is second generation space. Their core tenancy in the past Kohl’s, and this Wisconsin-based chain has actually upped their has come from department stores (usually in mall settings), expansion levels throughout the recession. Again, however, the category killing superstores like Target or Walmart, do-it-yourself problem for landlords of vacant second generation space is that home improvement outlets like Home Depot and Lowe’s and this tenant usually prefers new buildings built from the ground up. furniture stores. Lastly we have the category killers. Now it may be true that both Let’s start with the last two categories. Both home improvement Walmart and Target are experimenting with smaller formats, and furniture retailers are heavily impacted by the housing market but neither has gotten rid of their full-size superstore format. In and these retailers started to see their sales fall off a cliff back the case of Target, their smaller (70,000 to 90,000 square feet) in 2008 when the economy collapsed in a housing-driven heap. CityTarget concept is about fitting into tight urban spaces. They They’re not back yet. Both Home Depot and Lowe’s are currently still look to the 125,000 square feet or greater footprint when focusing their growth efforts in Canada and Mexico. But they will growing in the suburbs. The same holds true of Walmart, though be… and soon. The same thing goes for furniture retailers and they are currently experimenting with two smaller format grocery home related goods. Though not a user of mega-box space, only concepts. Walmart Xpress is about 15,000 square feet and Cost Plus recently announced a plan to nearly double in size to Walmart Neighborhood is about 30,000 to 40,000. They plan on roughly 270 units over the next few years. At the height of the opening as many as 350 of these stores over the next few years recession, this Northern-California-based home goods retailer and because they are option mostly to lease space in existing

Select MEGA Box Expansion 80,000 SF +

Concept Size Range Planned Units Next 12 Mos Planned Units Next 24 Mos Walmart Approx 15/40k SF smaller concepts 175 (mostly smaller 350 (mostly smaller Approx 125/175k SF superstores concepts) concepts) Burlington Coat Factory Approx 80k SF 50 100 Kohl's Approx 80k SF 30 60 Costco Approx 132k SF 20 40 Home Depot Approx 130k SF 15 30 Lifetime Fitness Approx 125k SF 15 30 Target Approx 130k SF 15 30 Menard's Approx 215k SF 11 22

Academy Sports Approx 80k SF 10 20 El Dorado Furniture Approx 100k SF 10 20 Ingles Approx 80k SF 10 20 Source: Retail Lease Trac 16 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 locations, this will be a boon to landlords of vacant second is actually up. We track active retailer growth plans throughout generation junior box space. But “the Beast from Bentonville” is the United States. The pool of retail space requirements we are also still planning on opening dozens of superstores over the next tracking in the 20,000 to 40,000 square foot range is currently 18 months using their traditional mega-box format. Once again, about fifteen times the size of what we are aware of for spaces of however, unless they find spectacular existing vacant space, 40,000 square feet or greater. Walmart overwhelmingly builds their own. For mid-boxes, 2013 will be a challenging year. For the past You may see a pattern here amongst the mega box users. Most couple of years, we have seen an increase in the numbers of of the national credit tenants that are actively growing in this size new players getting into the grocery business, most of them non- range tend to prefer to build their own space. This has always unionized. Target has added full grocery sections to nearly every been the case. And it has always been one of the biggest one of their locations in the United States. Walmart is launching challenge for mega box landlords when this type of space goes two small format concepts (the 15,000 square foot Express and dark. The issue of what to do with vacant big boxes was a 30,000 square foot Neighborhood markets) while their British pressing one long before the current downturn. Of course, mega nemesis, Tesco, had been expanding their Fresh and Easy box vacancy has only been exacerbated by the recession and (F&E) concept until recently. However, with their core European things, unfortunately, are likely to get a little worse before they get business off lately and Fresh and Easy still a couple of ways away better. The fate of Sears/K-mart remains in question and there is a from profitability in the brutally competitive U.S. grocery market, heavy possibility that they may go bankrupt sometime in the next there has been a movement among Tesco shareholders over the 15 to 18 months if things do not substantially improve for them. past few months to cut and run on “the American experiment.” Meanwhile, it will probably be about that long before we start to Tesco’s CEO Philip Clarke had been advocating against this see demand tick up from the furniture and home improvement plan until early December when the firm fired F&E’s CEO and sectors. In the meantime, there are a few players that look to announced the likelihood that their presence in America will soon vacant mega-box space for growth like Burlington Coat Factory be coming to an end. The smart money is that Tesco will sell the and Garden Ridge, but both are extremely opportunistic users. whole operation outright and Walmart is the most logical buyer since 15,000 square foot F&E stores would almost identically fit In the case of mega-boxes, as Developers Diversified Realty the profile for their Express concept. But they may not be the CEO Daniel Hurwitz proclaimed at a recent retail real estate only party to express interest in the enterprise. If willing to split up trade event, “We’re not overbuilt. We’re just under-demolished.” F&E, Tesco may find a lot more options in the marketplace and But not all box space is created the same. Yes, it is true that could potentially recoup more of their investment by dealing off space users are scaling back their footprints and we continue existing locations in portions. The real question is whether Tesco to see more closures than openings when it comes to mid-box shareholders have the patience for this. But obviously if they did, and mega-box space. However, demand for junior box space they also probably wouldn’t be forcing a pullout when the chain was finally on the road to profitability and starting to gain traction. Select MID Box Expansion 40,000 to 80,000 SF “Junior box fundamentals will actually improve in Planned Planned 2013. Decreasing vacancy and increased rental rate Concept Size Range Units Next Units Next 12 Mos 24 Mos growth will play out for most of the nation’s Class A TJ Maxx Approx 45k SF 75 150 and B space in the 20,000 to 40,000 square foot range. Gold's Gym Approx 42k SF 60 120 This particular form of big box isn’t dead or dying, LA Fitness Approx 48k SF 50 100 but thriving.” Dick's Sporting Approx 65k SF 40 80 Goods Bed, Bath & Approx 45k SF 40 80 Besides the aforementioned, a new slew of niche grocers have Beyond also been on the move, ranging from luxury (Whole Foods) to Sports Authority Approx 43k SF 40 80 discount (Grocery Outlet), ethnic (Northgate Gonzalez) to organic Staples Approx 43k SF 40 80 (Sprouts Farmers Market). Drug, dollar and convenience stores Hobby Lobby Approx 55k SF 30 60 are all upping their food offerings. This is the year that something will give and that something will largely be mid-priced unionized Marshall's Approx 45k SF 30 60 small-market or regional players. The space that will be returned Whole Foods Approx 58k SF 27 54 to the marketplace will largely be mid-box space in the 50,000 Alco Discount Approx 26k SF 25 50 to 70,000 square foot range. Meanwhile, mega-boxes will also Stores continue to see more space being put on the market than being Source: Retail Lease Trac taken down over the next year, though they will likely fare better than mid-boxes.

17 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

So what will this mean in terms of rents and investment pricing? But there is some very good news. Junior box fundamentals For mid-boxes, we had seen some nominal pricing gains for are strong and we see nothing changing this. Space users are both rents and sale prices for Class A product over the past shrinking their footprints, but this is mostly larger users moving year, providing it had long-term leases in place to solid credit downward a notch. Junior box fundamentals should actually tenants. But this had only been in some of the strongest primary improve over the course of 2013. Decreasing vacancy and marketplaces. Otherwise, rents and pricing had generally been increased rental rate growth (with perhaps the exception of Class flat for A product in most secondary and tertiary markets. Rents C properties) will help to drive both increased investor demand and Pricing for stabilized Class B product has also generally for net leased junior boxes, but sale pricing increases and cap been flat in most markets, while Class C product (even those with rate compression in the coming year. This particular form of big tenancy in place) has generally seen flat to negative movement in box is far from dead or dying. In fact it is thriving. both rents and pricing. With fundamentals for this property type likely to erode in the coming year and with more tenants shrinking Statistical Review their footprints, we anticipate downward pressure on pricing for most mid-box properties in the coming year. The strongest Class Retail vacancy data for the third quarter of 2012 (the most recent A properties with superior tenants locked in will likely escape with statistics available as this report went to press) indicate that flat growth. Meanwhile, the best option for many landlords of while overall retail fundamentals continue to improve throughout recently vacated properties may be to demise their mid-boxes to the United States, the pace of improvement has slowed over attract smaller, junior box users. the past year. Keep in mind that there have been fewer major retailer bankruptcies over the past twelve months than there were Rent and pricing trends in general for mega-boxes have been flat between 2010 and 2011. Through October, we tracked only 15 to negative over the past year. We have seen some minimal sale major retailer bankruptcies compared to 35 in 2011. Beyond this pricing gains for Class A product, but only for elite properties in the number however, the scale of retail failures this year has been best performing primary marketplaces providing they had sterling minimal compared to just the two largest defaults of last year, credit tenants locked into long-term leases. Rents on new space those of Borders and Blockbuster which combined to return that fits that profile are up, but are still mostly flat even for Class A nearly 30 million square feet to the marketplace over an 18 month space in the strongest performing markets. Otherwise, pricing for period. The largest retail failures that we have tracked this year Class A mega-boxes has been flat in most secondary and tertiary have been minor by comparison; the shuttering of locations by markets. Pricing has been flat to slightly negative for occupied chains like Baker’s Footwear, Tully’s Coffee, Backyard Burger and Class B properties with projects in primary markets faring best Ritz Camera (again) and others have returned only a few million and those in tertiary locations faring worst. Meanwhile, Class C square feet of space to the marketplace. Yet despite this, the mega-box product, even if tenants are in place, has typically seen page of vacancy declines has slowed for most retail building price erosion over the past year. Unfortunately for sellers, we types over the past year. Still, nearly all types have recorded don’t see a lot of relief coming soon. improvement over the past twelve months.

Select Junior Box Expansion Freestanding Update As of the close of 3Q 2012, the overall vacancy rate for freestanding Planned Planned Concept Size Range Units Next Units Next retail buildings (this sector includes the overwhelming majority of 12 Mos 24 Mos the nation’s freestanding net leased properties, including drug Big Lots Approx 25k SF 90 180 stores, fast food and automotive retail buildings) was 4.7%. Offi ce Depot Approx 22k SF 75 150 This vacancy rate reflects no change over the past six months and only a slight reduction from the 4.8% rate of one year ago. Beall's/Burke's, etc. Approx 23k SF 60 120 (all concepts) Nearly 17 million square feet of new product was delivered to the Gold's Gym Approx 25k SF 60 120 marketplace during this time, but this was nearly as much as the Delhaize grocery Approx 34k SF 55 105 17.3 million square feet of space that was absorbed during the concepts same period. In other words, demand only slightly surpassed Michael's Art Approx 21k SF 50 100 supply over the past year. In the twelve month period ending 3Q Supplies 2011, we had seen vacancy fall from 5.2% to 4.8% even as 19 Ross Dress for Less Approx 26k SF 50 100 million square feet of new product came online. But last year we HomeGoods Approx 25k SF 40 80 also saw over 29 million square feet of space absorbed. Clearly HHGregg Appliances Approx 28k SF 35 70 the pace of occupancy growth has slowed over the past year. Alco Discount Stores Approx 26k SF 25 50 Part of the reason for this slowdown is the fact that with vacancy Source: Retail Lease Trac levels already low, we are seeing fewer of the opportunistic plays that helped to backfill vacancies throughout the worst days of

18 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013 the downturn. The trend is still for growth and though the pace Power Centers Recovering Nicely has slowed, rents are escalating. The current average asking Power centers, the shopping center type hardest hit by the rate nationally is $15.14 per square foot (on an annual triple net big box vacancy surge in recent years, have shown some of basis), up from a low of $15.04 per square foot posted during the strongest gains over the past few years. Much of this has the fourth quarter of 2011. We should note that this average been driven by opportunistic plays by discount concepts (think includes freestanding retail product of all types and in all markets Ross, Marshall’s, etc.) and in some cases landlords have had and so is useful only as a benchmark. For example, national to struggle with demising larger box space or even radically drug store rents can average from as low as $24 per square foot re-inventing centers. However, power center vacancy has in rural or tertiary markets to the $36 per square foot range in continued to fall at an aggressive clip. The current vacancy rate secondary markets and well above that for premium urban space for this product type is 6.2%, down from 6.8% a year ago and where triple digit rents have been recorded. There is also a wide 7.1% two years ago. A huge part of this decline is the fact that disparity based on building size with vacant Class C mega big construction of new power centers has virtually dried up. We are boxes in rural markets frequently moving in the single digits while currently tracking less than 700,000 square feet of power center we know of some prime junior boxes in the nation’s strongest space currently under construction throughout the U.S. and submarkets have closed deals with rents approaching or above most of this is in the form of additional pad buildings at existing the triple digit mark as well. projects, as opposed to new shopping centers. At the peak of the last cycle (2005 to 2007), we were averaging anywhere Mall and Specialty Update from nine to twelve million square feet of product in the pipeline Mall vacancy in the U.S. now stands at 5.8%, down from a 5.9% at any given time. With big boxes shrinking, this is the product reading one year ago. Two years ago, this metric stood at 6.1%. type that will see the most fundamental changes in regards to Once again, the trend remains one of growth, but at a slightly future development. As housing development ramps back up slower pace than what we saw a year ago. The average asking in the coming years we anticipate far fewer power centers to be rental rate for mall space now stands at $19.21 per square foot, developed. Neighborhood and community centers will still follow up from a low of $18.98 per square foot recorded as of 4Q 2011. new rooftops, but 750,000 square foot-plus power centers will Again, as this rate includes everything from anchor to inline space become fewer and farther between. The ones that are developed in malls of every class and ago across every market in the U.S., will increasingly look like regional mall/lifestyle center hybrids, it is useful only as a benchmark. The average asking rate for with more entertainment and dining options while big box anchor inline space, even in the nation’s weakest shopping centers, sizes will continue to shrink. is generally much higher than this and asking rates for vacant Shopping Centers Vacancy Rate Vacancy Rate anchor space in Class C centers in tertiary markets are well (Includes all types, 3Q 2011 3Q 2012 below this rate. These numbers, both vacancy and rent, mask but NO freestanding retail) the highly bifurcated nature of the mall marketplace (more on 1. San Francisco, CA 3.9% 3.2% this later). While we anticipate a continued trend of slow growth 2. Hawaii 4.1% 3.6% driven by smaller space users in 2013 (much of it in the form of 3. New York Metro (NYC, 5.5% 5.2% dining and entertainment concepts), these gains could potentially Long Island, Southern CT) be wiped out depending upon what happens with Sears/Kmart. 4. Boston, MA 5.9% 5.4% We wouldn’t rule out a bankruptcy by this retailer in the next 5. Washington, DC 5.9% 5.8% year, though we think the chances of such a move may increase 6. San Diego, CA 6.6% 5.9% heading into 2014. In the meantime, however, we anticipate 7. San Jose., CA 6.2% 6.0% significant closures to be announced in the first quarter of 2013, 8. Pittsburgh, PA 6.7% 6.0% even if the chain benefits from a stellar holiday shopping season (and early numbers indicate that this is also unlikely). 9. Salt Lake City, UT 6.9% 6.2% 10. Los Angeles, CA 5.9% 6.2% Specialty center vacancy, a category that includes lifestyle centers, as well as other uniquely themed shopping centers) Shopping Centers Still Recovering actually increased slightly over the past year. The current vacancy rate of 8.2% is up from last year’s posting of 7.9%. Two years The one sector of the marketplace that has weathered this trend ago this number stood at 7.6%. New construction has been one best has been the nation’s shopping center market (this metric of the factors behind this, but the real culprit has been slowing includes community, neighborhood and strip centers). As of expansion from many of the mid-priced apparel retailers who had 3Q 2012, the national vacancy rate of 10.8% reflected a slight been most active with lifestyle centers. Again, these numbers are decrease from the 11.0% rate of a year ago. Two years ago, reflective of overall trends. We still see Class A lifestyle centers the vacancy rate for this product type stood at 11.1%. Though in first and second-tier marketplace doing exceptionally well. It is this product type still boasts the highest overall vacancy rate of the rest of the marketplace that has driven these numbers. all shopping center types, this is partially due to the continued weakness of unanchored strip product and also reflects the fact that this is the most localized of all shopping center types. 19 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Not only does this sector of the market account for the largest and while these shopping centers were only doing well in the top amount of shopping center inventory (over 3.4 billion square feet 1/3rd of U.S. metros two years ago (those with the healthiest local of competitive space, compared to just over one billion square economies like Washington DC, Boston, New York, Baltimore, feet of mall space), it also is the product type most dependent San Diego, San Jose, San Francisco, Seattle, etc.), they have upon local mom-and-pop retailers for vacancy. Though national since rebounded. Class B product is now generally back to credit drug and grocery store chains account for the lion’s share reasonable vacancy levels and rental rate growth in at least the of anchor tenancy, inline tenancy has always been about local top 70% of major U.S. markets. A quick note here, you may have businesses, whether in the form of restaurants or services (dry noticed that we didn’t name any Texas markets when reciting cleaners, beauty salons, etc.). Mom-and-pop retail is starting some of the healthiest local economies throughout the recession. to slowly return to the marketplace, but with roughly 75% of all The Texas economy actually was among the best performing in retail start-ups still dependent upon home equity loans for their the country, enough so that it was one of the few places where initial lines of funding, it will be years before we see mom-and- retail construction never ground to a halt. Because of this, pop retailers active at levels anything near the levels posted last many markets have dealt with elevated vacancy levels, despite cycle. The good news is that the resurgent housing market is strong economic fundamentals, over the past few years and so the key to jumpstarting this sector of the retail market and that Class B properties here did not always fit the overriding trend. those markets which suffered the lowest levels of housing They do now. Most are now performing well and posting some depreciation will see mom-and-pops returning first. The return of rental rate growth. the independents will help to further reduce these vacancy levels, but even in the strongest housing markets, this trend will likely not Shopping Centers Vacancy Rate Vacancy Rate (Includes all types, be more than just a blip prior to 2015. In the meantime, restaurant 3Q 2011 3Q 2012 but NO freestanding retail) and food users are what is driving this rate downward and this will not change anytime soon. With tenant mixes traditionally 21. Minneaplos 7.8% 7.6% focused on grocery/food use or retail services, this segment of 22. Charleston, SC 8.6% 8.0% the marketplace will emerge as the most e-commerce proof retail 23. Seattle, WA 8.3% 8.0% shopping center type in the coming years. 24. Hampton Roads, VA 8.3% 8.5% 25. New Orleans, LA 9.4% 8.6%

Shopping Centers 26. Denver, CO 9.0% 8.6% Vacancy Rate Vacancy Rate (Includes all types, 3Q 2011 3Q 2012 27. Mobile, AL 9.2% 8.7% but NO freestanding retail) 28 Houston, TX 9.0% 8.9% 11. Oakland/East Bay, CA 6.2% 6.2% 29. Tulsa, OK 8.8% 8.9% 12. Orange County, CA 6.4% 6.6% 30. Houston, TX 9.0% 8.9% 13. Portland, OR 7.9% 6.6% 14. Little Rock, AR 7.6% 6.9% Meanwhile, urban retail continues to far outperform suburban 15. Miami, FL 7.9% 7.1% retail. This is partially due to the relationship between income 16. Raleigh, NC 7.5% 7.3% and density demographics. Most urban shopping centers are 17. Baltimore, MD 7.9% 7.3% situated in the higher income enclaves of major cities and/or 18. Austin, TX 8.1% 7.4% near major employment hubs. As a result, they boast density 19. Norhtern New Jersey 7.9% 7.4% demographics (both in terms of permanent residents or daytime 20. Santa Barbara, CA 7.9% 7.5% work population) that typically are superior to all but a few premium suburban centers. Lastly, with housing off the radar until recently, there have been very few new rooftops for retailers to Looking for the “Sure Thing” follow. The overwhelming majority of new retail construction over If you want an accurate picture of where retail growth is occurring, the past four years has been in the form of outlet centers, regional it is all about the “sure thing.” If your shopping center is a Class malls (most of which were set in motion prior to the downturn) A project, located on a premium corner in a densely populated and urban redevelopment projects. A rebounding housing urban location with high income demographics, you are where market will begin to boost retail development totals by late 2013, just about every retailer wants to be. With few exceptions, this is but don’t expect any huge surge in deliveries before 2014 at the profile for a shopping center with sub-5% vacancy or better the earliest. Even as new home construction picks up, much and strong rental rate growth in nearly every major U.S. market. of the initial focus will be about infill development and/or urban But, the fundamentals become weaker for each of those variables redevelopment. Likewise, once we start to see more suburban that you take away. homebuilding, grocery or drug store anchored neighborhood centers will be the hottest commodity. Unanchored strip product The market is still bifurcated on the basis of Class—though to a was vastly overbuilt during the last cycle and few developers, lesser degree than it was either 12 or 24 months ago—but while much lenders, are willing to make this mistake again. Meanwhile, Class A properties are now generally doing well in all U.S. markets, with most retailers downsizing their big boxes, the rate of power Class C properties are still struggling in virtually every national center development will fall significantly in the future. trade area. Class B properties are the big swing properties here 20 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

2013 National Forecast: More Slow Growth until Shopping Centers Vacancy Rate Vacancy Rate (Includes all types, 3Q 2011 3Q 2012 Housing Ramps Up but NO freestanding retail)

Looking forward, we anticipate that the current trend of slow 41. Inland Empire (Riverside/ 11.2% 11.2% growth will remain in place throughout 2013. Even if the 2012 San Bernardino, CA) holiday shopping season turns out to be a strong one, we do not 42. Kansas City, MO 11.4% 11.3% anticipate the same surge in growth plans from retailers that we 43. Albuquerque, NM 11.7% 11.3% saw in 2010 and to a lesser degree in 2011. This is because in 44. Dallas, TX 12.2% 11.4% 2010, the strength of the holiday shopping season was genuinely 45. Milwaukee/Madison, WI 10.0% 11.5% shocking considering the lows of 2009 (which was the year when 46. Jacksonville, FL 11.2% 11.6% the recession fully took its toll on retailer same-store sales). That 47. Oklahoma City, OK 11.6% 11.7% holiday shopping season singlehandedly sent the message to retailers that consumers were itching to get back to normal 48. Nashville, TN 11.5% 11.9% spending habits as soon as possible and it brought many back 49. Sacramento, CA 12,2% 11.9% to the marketplace who had been either in a holding pattern or in 50. Las Vegas, NV 13.2% 12.6% consolidation mode. The same thing happened to a much lesser degree following the 2011 holiday shopping season. its current rate of 8.2% to something closer to 7.7% in the coming year, we also expect mall vacancy to climb. The current mall Shopping Centers vacancy rate of 5.8% will increase due to likely Sears closures Vacancy Rate Vacancy Rate (Includes all types, 3Q 2011 3Q 2012 but NO freestanding retail) alone. The question is how many locations the struggling chain will shutter in 2013—a complete collapse (which we see unlikely, 31. 10.2% 9.5% Tampa, FL at least for now), could have a significant impact. Meanwhile, 32. Orlando, FL 9.7% 9.6% questions remain about the health of a number of other mall 33. Richmond, VA 8.8% 9.6% anchor tenants like Dillard’s and JCP as they struggle to reinvent 34. San Antonio, TX 9.6% 9.6% themselves. Despite this, we also continue to see a slew of 35. Indianapolis, IN 10.3% 9.8% new retailers being welcomed into malls with discounters like 36. Louisville, KY 9.8% 9.9% Nordstrom Rack or even grocery players like Whole Foods or 37. Chicago, IL 9.8% 10.1% category killers like Target and Walmart increasingly showing up 38. St. Louis,MO 10.3% 10.4% in territory once reserved for department stores only.

39. Tuscan, AZ 11.2% 10.8% Still, we anticipate that malls will close 2013 with a vacancy rate of 40. Charlotte, NC 11.0% 10.8% roughly 6.0%. We expect power center vacancy to also continue to decline, though we expect a slower occupancy growth rate We have informally polled a number of retailers who have shared in 2013. Look for power center vacancy to stand at about 6.0% with us a general opinion that while a weak holiday shopping by this time next year. The current shopping center vacancy season might result in some downgrading growth plans, few rate of 10.8% will also continue to fall, but because this is being anticipate any scenarios that would see them significantly driven by food related and service related users, the market for boosting expansion plans. The first half of the year, of course, neighborhood, community and strip centers will be the greatest is typically retailer closure time. This may be exacerbated by beneficiary of growth this year. Look for the vacancy rate for this the fiscal cliff issue. We already anticipate that overall growth product type to fall into the low 10% range by the end of 2013. numbers for December 2012 and January 2013 will be adversely impacted by the fact that a fiscal cliff deal hadn’t been reached as Shopping Centers Vacancy Rate Vacancy Rate (Includes all types, of mid-December. Should this situation extend into January, this 3Q 2011 3Q 2012 but NO freestanding retail) will only expand and deepen business uncertainty with palpable impact to the economy, even when a deal is eventually reached. 51. Cleveland, OH 12.5% 12.7% As a result, we see growth possibly even turning negative over 52. Omaha, NE 11.6% 12.7% the first half of 2013, though we do expect the trend of a gradually 53. Detroit, MI 13.0% 12.9% improving economy to re-establish itself once the fiscal cliff 54. Atlanta, GA 13.4% 13.0% issue is in the rearview mirror. By 2014, we anticipate that the 55. Cincinnati, OH 13.3% 13.0% acceleration of housing recovery will start to pay off in terms of 56. Birmingham, AL 13.9% 13.5% boosting GDP, job growth and retailer expansion. But for now, 57. Phoenix, AZ 14.8% 13.9% current trends will hold. 58. Memphis, TN 14.4% 14.2% Look for retail vacancy for freestanding retail to hold at, or near, 59. Reno, NV 13.5% 15.5% its current level of 4.7%. We anticipate another year in which deliveries match demand, but with overall rental rate growth continuing. While we expect specialty center vacancy to fall from 21 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Regional Outlooks the strongest retailer expansion markets in the Midwest along with Chicago) with a current vacancy rate of 7.6% (down from 7.8%). Shopping center vacancy for most U.S. markets moved only Unfortunately, no other Midwestern marketplace ranked as high slightly over the past year. Of the top ten performers, nearly all had on our survey. The Chicago market, which continues to churn a few basic trends in common. Most have unemployment rates out relatively strong occupancy growth numbers faces the same below the national average, most also have higher than average dilemma as most Texas markets; recent growth—though still income levels. And with the exception of Salt Lake City, all are strong—has not been enough to offset continued development coastal markets. Now, keep in mind, that these are the top U.S. and existing levels of vacancy. It places on our survey at 26th markets in terms of vacancy levels—not necessarily occupancy place with a current vacancy rate of 10.1% (up from 9.8%). growth, though nearly all of these have posted strong positive net absorption trends in the past year. The absence of any Texas The markets at the bottom of our survey are a mix of markets markets in the top ten is not a reflection on occupancy growth geographically; Midwestern, southern and a few of the western in the Lone Star State; the coasts and Texas still account for the markets hardest hit by the housing market collapse. The good lion’s share of retailer growth plans. The difference is that the news is that some of the marketplaces that had seen the greatest Texas economy fared among the best of all local state economies run-ups in vacancy rates over the past few years, like Las Vegas, during the recession and because of this, Texas was one of the Phoenix and Sacramento, have all seen considerable occupancy few places where retail development continued throughout the growth over the past couple of years. Las Vegas vacancy, for downturn. As a result, though occupancy growth levels remain example, now stands at 12.6% (ranking it 49th on our survey), high there, vacancy rates are also elevated. compared to 13.2% one year ago. If there is positive news it is that only three of the bottom ten markets on our survey continued Of the 60 national markets that we track, western markets to see vacancy increases over the past year. The overwhelming accounted for ten of the top 20 in terms of vacancy. San Francisco majority of U.S. markets are recording growth, including these led the way with a vacancy rate of 3.2% (down from Q3 2011’s trade areas. The difference for those at the bottom of our survey 3.9%). Also in the top ten were Hawaii at 3.6% (down from 4.1%), is that they have deeper holes to dig out of. San Diego 5.9% (down from 6.6%), San Jose 6.0% (down from 6.2%), Salt Lake City 6.2% (down from 6.9%). Only one western market in our top ten saw a vacancy increase—Los Angeles now has a 6.2% rate (up from 5.9%). Meanwhile, eastern markets accounted for all of the remaining top ten performers with the greater New York City market (this statistic includes Manhattan, suburban New York and Connecticut, but not Northern New Jersey markets) leading the way in the number three slot with a low rate of just 5.2% (down from 5.5%). Boston followed in fourth place with a vacancy rate of 5.4% (down from 5.9%). Washington DC came in at fifth place with a current rate of 5.8% (down from 5.9%), however, we think the nation’s capital is guaranteed to see slowing growth in the next few years. With over 40% of its local economy dependent upon federal expenditures, even a fiscal cliff deal to restore most (or even all) of the Bush era tax cuts will not be enough to offset the local economic losses that will be felt by sequestration (and that is assuming that a deal on the fiscal cliff also trims back some of the automatic austerity measures currently slated to take place in January). Lastly, Pittsburgh finished the year in eighth place with a vacancy rate of 6.0% (down from 6.7%).

The number 11 through 20 slots on our vacancy survey still featured a number of coastal markets ranging from Oakland/ New York East Bay (its 6.2% vacancy rate was unchanged from last year) to Northern New Jersey (its current 7.4% rate is actually up slightly from last year’s 7.3% rate). But it also saw some southern 5.2 markets; Little Rock came in at 14 with a 6.9% rate (down from 7.6%) and Miami ranked 15 with 7.1% (down from 7.9%). Austin also made the top 20—its current rate of 7.4% (down from 8.1%) places it at the number 18 rank nationally. Meanwhile, we don’t see Midwestern markets ranking on the survey until Minneapolis (which ranked 21st nationally and continues to benefit as one of 22 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

All Freestanding General Retail Net Under Average Date Total GLA Vacant SF Vac % Absorption Deliveries Construction Asking Rates 2012 3q 4,958,141,101 233,573,568 4.7% 484,390 3,562,506 18,297,225 $15.13 2012 2q 4,955,682,324 231,599,181 4.7% (1,424,197) 4,300,060 18,733,304 $15.12 2012 1q 4,952,436,804 226,929,464 4.6% 14,051,268 4,109,108 17,253,424 $15.07 2011 4q 4,949,315,811 237,859,739 4.8% 4,205,500 4,961,555 14,122,312 $15.04 2011 3q 4,946,552,811 239,302,239 4.8% 10,091,012 4,723,233 14,289,517 $15.13 2011 2q 4,943,997,964 246,838,404 5.0% 3,805,258 4,520,622 13,904,333 $15.20 2011 1q 4,940,761,902 247,407,600 5.0% 4,859,435 3,965,336 13,680,843 $15.22 2010 4q 4,938,391,122 249,896,255 5.1% 10,231,863 5,830,092 12,462,941 $15.28 2010 3q 4,933,772,933 255,509,929 5.2% 4,476,977 5,362,008 14,783,370 $15.47 2010 2q 4,929,764,402 255,978,375 5.2% 6,476,716 4,658,283 14,753,145 $15.69 2010 1q 4,926,685,872 259,376,561 5.3% 5,668,947 9,157,297 16,066,436 $15.78 2009 4q 4,918,393,768 256,753,404 5.2% 6,642,930 6,267,900 20,498,404 $16.04 2009 3q 4,914,348,839 258,315,491 5.3% 4,207,321 6,835,089 21,163,615 $16.41 2009 2q 4,907,799,419 255,973,392 5.2% (618,748) 8,931,888 20,302,528 $16.72 2009 1q 4,899,731,737 247,286,962 5.0% 3,138,479 15,493,958 22,727,269 $16.94 Specialty Centers Net Under Average Date Total GLA Vacant SF Vac % Absorption Deliveries Construction Asking Rates 2012 3q 73,887,551 6,038,839 8.2% (121,294) 420,000 2,304,411 $15.40 2012 2q 73,467,551 5,497,545 7.5% 424,613 423,775 2,064,411 $15.61 2012 1q 73,043,776 5,498,383 7.5% 100,826 55,000 1,716,400 $15.55 2011 4q 72,988,776 5,544,209 7.6% 472,492 269,245 1,551,400 $16.05 2011 3q 72,719,531 5,747,456 7.9% 381,654 348,000 1,820,645 $16.04 2011 2q 72,371,531 5,781,110 8.0% (77,753) 1,780 1,262,400 $16.42 2011 1q 72,369,751 5,701,577 7.9% (48,055) 0 844,180 $16.69 2010 4q 72,369,751 5,653,522 7.8% 285,135 461,055 771,775 $16.34 2010 3q 71,908,696 5,477,602 7.6% 49,395 5,500 1,218,055 $19.30 2010 2q 71,903,196 5,521,497 7.7% 119,890 0 466,555 $19.25 2010 1q 71,903,196 5,641,387 7.8% (157,402) 6,079 466,555 $18.89 2009 4q 71,897,117 5,477,906 7.6% (296,771) 9,285 6,079 $19.66 2009 3q 71,887,832 5,171,850 7.2% 66,064 0 15,364 $20.91 2009 2q 71,887,832 5,237,914 7.3% (257,560) 114,951 15,364 $20.46 2009 1q 71,772,881 4,865,403 6.8% (301,388) 189,298 121,030 $19.75 Shopping Centers (includes Community, Neighborhood & Strip) Net Under Average Date Total GLA Vacant SF Vac % Absorption Deliveries Construction Asking Rates 2012 3q 3,419,600,923 368,605,280 10.8% 4,828,179 1,586,277 5,521,086 $14.63 2012 2q 3,418,014,646 371,847,182 10.9% 2,502,226 2,089,192 6,087,242 $14.69 2012 1q 3,415,925,454 372,260,216 10.9% 1,423,286 2,216,203 7,201,326 $14.74 2011 4q 3,413,709,251 371,467,299 10.9% 5,574,432 2,809,390 6,329,495 $14.80 2011 3q 3,410,899,861 374,232,341 11.0% 5,567,235 2,625,438 7,537,784 $14.85 2011 2q 3,408,274,423 377,174,138 11.1% 1,459,726 2,387,198 8,350,510 $14.89 2011 1q 3,405,887,225 376,246,666 11.0% 1,832,237 4,240,276 7,249,040 $14.98 2010 4q 3,401,646,949 373,838,627 11.0% 6,565,538 3,593,752 9,216,721 $15.11 2010 3q 3,398,053,197 376,810,413 11.1% 3,166,964 2,041,633 11,516,333 $15.26 2010 2q 3,396,011,564 377,935,744 11.1% 4,273,399 2,845,834 10,817,772 $15.44 2010 1q 3,393,165,730 379,363,309 11.2% (797,443) 4,138,727 9,922,191 $15.61 2009 4q 3,389,027,003 374,427,139 11.0% 1,276,756 5,668,389 10,252,928 $15.91 2009 3q 3,383,639,818 370,040,206 10.9% (3,473,234) 7,084,966 13,696,487 $16.28 2009 2q 3,376,554,852 359,482,006 10.6% (7,633,174) 8,007,422 17,875,393 $16.43 2009 1q 3,368,547,430 343,841,410 10.2% (8,189,307) 13,023,001 21,186,957 $16.74 Chainlinks Retail Advisors U.S. National Retail Report Forecast 2013

Power Centers Net Under Average Date Total GLA Vacant SF Vac % Absorption Deliveries Construction Asking Rates 2012 3q 613,037,545 38,166,656 6.2% 1,352,291 118,884 670,298 $16.96 2012 2q 612,918,661 39,400,063 6.4% 1,076,298 331,779 772,207 $16.98 2012 1q 612,586,882 40,144,582 6.6% 562,099 455,666 989,253 $17.16 2011 4q 612,131,216 40,251,015 6.6% 2,467,594 1,075,535 1,137,001 $17.11 2011 3q 611,055,681 41,643,074 6.8% 757,526 1,133,797 2,177,872 $17.29 2011 2q 609,921,884 41,266,803 6.8% 660,718 247,238 2,927,005 $17.51 2011 1q 609,674,646 41,680,283 6.8% 1,226,381 914,007 2,614,890 $18.27 2010 4q 608,760,639 41,992,657 6.9% 1,981,831 930,939 2,902,139 $17.81 2010 3q 607,829,700 43,043,549 7.1% 2,913,268 706,903 2,662,712 $17.84 2010 2q 607,122,797 45,249,914 7.5% 2,369,949 839,050 2,722,652 $17.82 2010 1q 606,283,747 46,780,813 7.7% 1,970,905 1,312,969 3,228,920 $18.95 2009 4q 604,970,778 47,438,749 7.8% 2,008,338 2,535,851 3,812,477 $19.11 2009 3q 602,434,927 46,911,236 7.8% 3,419,712 3,610,799 5,948,977 $19.56 2009 2q 598,824,128 46,720,149 7.8% (373,430) 2,338,732 8,093,954 $19.70 2009 1q 596,485,396 44,007,987 7.4% (2,110,035) 4,905,967 9,471,826 $19.76

Malls Net Under Average Date Total GLA Vacant SF Vac % Absorption Deliveries Construction Asking Rates 2012 3q 1,027,699,733 59,700,164 5.8% 104,259 281,987 2,890,545 $19.21 2012 2q 1,027,417,746 60,097,918 5.8% 2,012,060 805,201 2,909,876 $19.11 2012 1q 1,026,612,545 58,813,533 5.7% 2,118,161 1,556,829 2,600,247 $19.62 2011 4q 1,025,055,716 58,592,209 5.7% 1,415,932 533,119 3,449,814 $18.98 2011 3q 1,024,522,597 60,111,334 5.9% 1,729,482 2,253,862 3,810,061 $19.01 2011 2q 1,022,268,735 59,073,099 5.8% 1,341,995 1,014,193 5,184,401 $19.37 2011 1q 1,021,254,542 59,675,729 5.8% 2,835,553 924,330 5,676,166 $19.48 2010 4q 1,020,330,212 59,912,491 5.9% 1,127,597 404,785 6,154,564 $19.60 2010 3q 1,019,925,427 62,202,495 6.1% 16,069 622,896 5,744,241 $19.82 2010 2q 1,019,302,531 62,793,714 6.2% 1,342,490 1,381,230 5,900,676 $20.26 2010 1q 1,017,921,301 61,447,813 6.0% 2,616,266 1,902,280 6,574,681 $20.42 2009 4q 1,016,019,021 60,878,943 6.0% 2,085,992 3,530,128 8,278,129 $20.99 2009 3q 1,012,488,893 60,029,419 5.9% (713,372) 5,444,266 10,375,038 $21.01 2009 2q 1,007,044,627 56,583,139 5.6% (4,595,281) 1,381,135 15,099,357 $21.87 2009 1q 1,005,663,492 54,327,070 5.4% (4,951,773) 4,164,837 15,264,332 $23.43

24 Chainlinks Retail Advisors U.S. National Retail Report

Northeast U.S. - New England

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Boston MA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 73,527,875 4,473,554 6.1% 6.2% 6.7% 80,395 499,854 181,250 0 $15.04 Neighborhood Power/Regional Centers 25,142,949 919,317 3.7% 3.7% 3.9% 18,365 56,992 73,217 0 $12.65 Specialty Centers 3,837,226 185,574 4.8% 4.9% 6.0% 3,042 427,877 409,000 177,000 $15.00 Strip 13,905,067 1,169,627 8.4% 9.0% 8.7% 76,140 50,713 32,759 10,000 $14.94 Malls 17,686,301 484,702 2.7% 2.7% 2.7% 0 6,000 0 0 N/A All Shopping Centers 134,099,418 7,232,774 5.4% 5.5% 5.9% 177,942 1,041,436 696,226 187,000

Northeast U.S. - Middle Atlantic

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average New York City* YTD Under Net Net Quoted Deliveries Construction NY Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 86,165,620 4,746,141 5.5% 5.7% 5.8% 123,417 371,097 270,000 617,741 $20.36 Neighborhood Power/Regional Centers 21,652,577 1,066,453 4.9% 5.4% 6.6% 108,181 208,888 0 0 $16.10 Specialty Centers 3,431,882 500,870 14.6% 14.0% 14.2% (19,270) (46,729) 0 0 $22.37 Strip 17,990,406 1,411,436 7.8% 7.9% 7.0% 6,728 (80,257) 20,615 0 $21.79 Malls 26,114,872 375,363 1.4% 1.6% 1.7% 41,147 63,159 0 0 $32.09 All Shopping Centers 155,355,357 8,100,263 5.2% 5.4% 5.5% 260,203 516,158 290,615 617,741 * Includes New York City, Long Island and Southern CT

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Northern YTD Under Net Net Quoted Deliveries Construction New Jersey Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 81,469,427 8,051,621 9.9% 9.7% 9.5% (114,492) (21,565) 54,454 0 $19.27 Neighborhood Power/Regional Centers 31,203,722 1,566,659 5.0% 5.4% 5.7% 125,019 183,516 0 0 $24.63 Specialty Centers 3,641,949 130,061 3.6% 3.1% 3.8% (18,540) (32,765) 0 0 $33.24 Strip 15,294,271 1,608,029 10.5% 10.1% 10.0% (57,853) (79,629) 23,200 10,000 $19.48 Malls 30,421,839 676,643 2.2% 2.4% 2.2% 47,558 (2,126) 0 0 $32.29 All Shopping Centers 162,031,208 12,033,013 7.4% 7.4% 7.3% (18,308) 47,431 77,654 10,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Philadelphia YTD Under Net Net Quoted Deliveries Construction PA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 138,389,502 13,781,561 10.0% 9.8% 9.8% (141,356) 149,649 339,365 84,400 $14.18 Neighborhood Power/Regional Centers 58,345,510 2,781,346 4.8% 4.9% 5.4% 57,118 379,213 172,074 15,122 $13.47 Specialty Centers 6,683,959 312,537 4.7% 4.9% 4.4% 14,719 (13,626) 0 302,103 $22.37 Strip 20,237,187 2,027,858 10.0% 9.7% 9.7% (63,733) (55,694) 41,013 27,449 $14.39 Malls 30,128,806 937,249 3.1% 2.8% 2.9% (91,116) (73,916) 0 0 $34.46 All Shopping Centers 253,784,964 19,840,551 7.8% 7.7% 7.8% (224,368) 385,626 552,452 429,074

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Pittsburgh PA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 29,281,387 1,876,638 6.4% 6.6% 7.2% 45,990 249,156 145,000 0 $10.92 Neighborhood Power/Regional Centers 17,931,037 789,470 4.4% 5.0% 5.3% 110,121 89,830 0 0 $15.65 Specialty Centers 2,615,910 136,453 5.2% 5.2% 4.8% (531) (10,029) 0 0 N/A Strip 4,654,638 342,459 7.4% 8.3% 7.8% 43,690 57,710 23,539 0 $14.95 Malls 11,702,313 810,253 6.9% 7.0% 7.9% 7,019 3,709 0 225,000 $12.36 25 All Shopping Centers 66,185,285 3,955,273 6.0% 6.3% 6.7% 206,289 390,376 168,539 225,000 Chainlinks Retail Advisors U.S. National Retail Report

South U.S. - South Atlantic

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Atlanta GA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 112,638,870 16,694,989 14.8% 14.8% 15.1% 60,642 377,876 259,875 134,286 $12.27 Neighborhood Power/Regional Centers 36,345,656 3,324,476 9.1% 9.3% 10.3% 48,262 242,481 0 0 $12.15 Specialty Centers 6,921,569 796,112 11.5% 12.1% 13.7% 40,991 91,652 0 403,786 $11.71 Strip 34,657,235 5,270,378 15.2% 15.2% 15.6% 26,758 141,973 27,150 0 $13.51 Malls 23,584,287 1,663,411 7.1% 7.1% 6.4% 7,272 (243,370) 0 0 $24.67 All Shopping Centers 214,147,617 27,749,366 13.0% 13.0% 13.4% 183,925 610,612 287,025 538,072

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Baltimore MD Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 41,479,976 3,299,624 8.0% 8.7% 8.1% 475,577 370,588 277,881 110,638 $18.41 Neighborhood Power/Regional Centers 15,341,824 781,169 5.1% 5.3% 5.6% 31,194 26,184 0 0 $15.53 Specialty Centers 2,090,726 199,396 9.5% 10.4% 9.4% 85,282 192,204 207,568 190,535 $18.57 Strip 6,025,071 460,920 7.7% 7.7% 8.2% 4,549 11,661 0 26,500 $17.92 Malls 12,080,681 887,559 7.3% 7.4% 9.9% 9,308 209,060 0 0 N/A All Shopping Centers 77,018,278 5,628,668 7.3% 7.8% 7.9% 605,910 809,697 485,449 327,673

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Charleston SC Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 13,566,551 1,242,691 9.2% 9.8% 10.0% 88,668 68,076 0 9,855 $13.48 Neighborhood Power/Regional Centers 2,062,684 125,343 6.1% 7.9% 8.8% 37,101 81,157 0 0 $12.73 Specialty Centers 581,969 0 0.0% 0.0% 0.0% 0 0 0 0 $24.27 Strip 2,963,389 291,770 9.8% 9.6% 9.3% (7,808) (21,618) 3,500 0 $12.07 Malls 1,858,363 14,710 0.8% 0.2% 0.2% (11,770) (11,920) 0 0 $20.00 All Shopping Centers 21,032,956 1,674,514 8.0% 8.5% 8.6% 106,191 115,695 3,500 9,855

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Charlotte NC Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 46,441,885 5,716,025 12.3% 12.7% 12.5% 256,645 57,349 106,305 245,501 $12.29 Neighborhood Power/Regional Centers 16,911,005 1,105,042 6.5% 6.5% 5.9% (6,327) (160,300) 5,000 0 $23.05 Specialty Centers 3,072,308 338,164 11.0% 10.8% 10.7% (6,117) (17,067) 0 0 $25.70 Strip 8,744,572 1,128,751 12.9% 12.3% 12.3% (23,743) (1,477) 49,413 0 $14.44 Malls 8,076,213 729,957 9.0% 11.5% 11.7% 197,488 197,488 0 0 $15.17 All Shopping Centers 83,245,983 9,017,939 10.8% 11.2% 11.0% 417,946 75,993 160,718 245,501

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Hampton YTD Under Net Net Quoted Deliveries Construction Roads VA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 34,122,399 3,429,185 10.0% 10.0% 10.4% 3,091 (26,123) 38,300 180,626 $12.07 Neighborhood Power/Regional Centers 9,438,305 339,818 3.6% 3.5% 3.0% (7,063) 9,537 0 0 $21.83 Specialty Centers 1,899,921 132,726 7.0% 7.4% 8.9% 8,350 5,654 0 0 $22.64 Strip 6,825,498 679,699 10.0% 10.5% 9.5% 50,589 (13,740) 30,823 0 $13.87 Malls 6,151,471 356,724 5.8% 3.8% 3.6% (120,026) (135,041) 0 0 $18.22 All Shopping Centers 58,437,594 4,938,152 8.5% 8.3% 8.3% (65,059) (159,713) 69,123 180,626 26 Chainlinks Retail Advisors U.S. National Retail Report

South U.S. - South Atlantic cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Jacksonville YTD Under Net Net Quoted Deliveries Construction FL Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 31,266,370 3,957,475 12.7% 13.1% 11.8% 146,682 (215,732) 159,856 28,490 $12.58 Neighborhood Power/Regional Centers 4,030,997 609,966 15.1% 15.0% 15.0% (3,888) (6,933) 0 0 $12.32 Specialty Centers 1,014,841 75,228 7.4% 7.4% 10.9% 0 1,400 0 0 N/A Strip 7,572,794 905,581 12.0% 12.3% 12.8% 25,853 80,632 8,250 11,551 $14.36 Malls 5,681,894 206,307 3.6% 3.8% 3.4% 8,884 (10,721) 0 1,104 $20.76 All Shopping Centers 49,566,896 5,754,557 11.6% 12.0% 11.2% 177,531 (151,354) 168,106 41,145

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Miami FL Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 105,368,742 8,461,252 8.0% 8.3% 9.0% 265,857 849,942 169,417 508,029 $18.65 Neighborhood Power/Regional Centers 17,228,612 1,441,106 8.4% 8.8% 9.5% 70,864 137,048 0 520,000 $20.79 Specialty Centers 7,525,150 513,923 6.8% 7.1% 6.7% 17,046 21,580 0 0 $26.24 Strip 24,587,022 1,700,499 6.9% 7.0% 7.2% 29,813 24,082 35,288 0 $19.28 Malls 23,643,917 577,323 2.4% 2.4% 2.5% (20,541) (16,051) 0 35,000 $75.07 All Shopping Centers 178,353,443 12,694,103 7.1% 7.3% 7.9% 363,039 1,016,601 204,705 1,063,029

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Orlando FL Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 55,389,259 6,520,210 11.8% 12.2% 11.4% 271,027 (110,705) 142,243 190,000 $13.96 Neighborhood Power/Regional Centers 13,171,301 801,962 6.1% 6.0% 6.2% (5,685) 51,628 0 0 $17.96 Specialty Centers 5,900,100 426,026 7.2% 7.2% 8.1% (2,100) 21,523 0 8,116 $18.01 Strip 10,479,722 1,269,088 12.1% 11.9% 13.0% (20,504) 22,826 5,000 0 $14.80 Malls 12,955,344 393,397 3.0% 3.1% 3.7% 12,236 55,929 0 0 $33.73 All Shopping Centers 97,895,726 9,410,683 9.6% 9.9% 9.7% 254,974 41,201 147,243 198,116

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Raleigh NC Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 34,297,662 3,083,324 9.0% 8.9% 9.1% (27,966) 8,231 12,209 60,213 $14.75 Neighborhood Power/Regional Centers 10,616,856 560,731 5.3% 5.0% 5.7% (26,778) 18,038 11,700 391,500 $14.86 Specialty Centers 2,749,465 61,001 2.2% 2.2% 2.0% (1,400) (14,890) 0 0 $13.58 Strip 3,865,465 456,861 11.8% 11.0% 12.0% (30,164) 1,334 0 0 $15.48 Malls 7,173,007 122,311 1.7% 1.6% 2.3% (6,376) 6,014 0 0 $24.48 All Shopping Centers 58,702,455 4,284,228 7.3% 7.1% 7.5% (92,684) 18,727 23,909 451,713

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Richmond VA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 25,428,883 3,000,872 11.8% 11.8% 11.1% 56,096 (113,393) 97,042 63,800 $13.08 Neighborhood Power/Regional Centers 7,504,163 366,407 4.9% 5.2% 3.7% 21,407 12,209 0 0 $22.72 Specialty Centers 54,528 0 0.0% 0.0% 0.0% 0 0 0 0 N/A Strip 4,127,891 464,785 11.3% 11.1% 10.4% (8,111) (37,075) 0 14,400 $14.54 Malls 4,270,107 129,291 3.0% 3.1% 2.7% 3,200 (9,810) 0 0 $15.00 All Shopping Centers 41,385,572 3,961,355 9.6% 9.6% 8.8% 72,592 (148,069) 97,042 78,200 27 Chainlinks Retail Advisors U.S. National Retail Report

South U.S. - South Atlantic cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Tampa FL Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 74,259,332 8,027,998 10.8% 10.8% 11.7% 52,493 210,572 75,295 32,032 $13.01 Neighborhood Power/Regional Centers 14,033,889 780,935 5.6% 5.8% 7.5% 36,668 233,861 0 0 $18.44 Specialty Centers 1,863,814 230,061 12.3% 11.5% 16.7% (15,943) (17,098) 0 0 $23.03 Strip 17,794,572 2,033,214 11.4% 11.1% 10.8% (60,228) (112,377) 15,300 0 $14.22 Malls 11,601,788 332,149 2.9% 2.8% 2.2% (3,700) (78,600) 0 0 $26.87 All Shopping Centers 119,553,395 11,404,357 9.5% 9.5% 10.2% 9,290 236,358 90,595 32,032

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Washington YTD Under Net Net Quoted Deliveries Construction DC Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 89,585,616 6,945,560 7.8% 7.7% 7.8% (9,151) 345,048 165,475 254,853 $19.85 Neighborhood Power/Regional Centers 38,159,771 1,321,561 3.5% 3.6% 4.1% 59,293 125,040 0 47,750 $24.56 Specialty Centers 6,897,210 202,260 2.9% 3.1% 3.4% 12,702 30,153 0 214,672 $25.67 Strip 13,254,291 1,174,135 8.9% 9.1% 8.7% 56,621 47,969 59,517 38,683 $19.95 Malls 29,183,142 647,202 2.2% 2.3% 2.1% 26,257 (33,075) 0 148,000 $18.25 All Shopping Centers 177,080,030 10,290,718 5.8% 5.9% 5.9% 145,722 515,135 224,992 703,958

South U.S. - East South Central

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Birmingham YTD Under Net Net Quoted Deliveries Construction AL Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 21,832,844 3,222,442 14.8% 14.4% 15.3% (84,421) 49,305 0 0 $8.15 Neighborhood Power/Regional Centers 10,233,818 1,277,144 12.5% 12.5% 12.4% 4,365 (19,540) 0 66,881 $20.71 Specialty Centers 1,178,000 121,200 10.3% 10.3% 9.9% 0 35,485 0 0 $23.50 Strip 5,009,095 460,670 9.2% 9.0% 10.0% (10,657) 40,792 14,641 0 $12.65 Malls 2,438,037 419,057 17.2% 17.2% 17.2% 0 0 0 0 N/A All Shopping Centers 40,691,794 5,500,513 13.5% 13.3% 13.9% (90,713) 106,042 14,641 66,881

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Louisville KY Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 24,772,270 2,484,202 10.0% 9.9% 10.8% (28,623) (38,374) 0 0 $10.19 Neighborhood Power/Regional Centers 4,590,073 191,006 4.2% 4.2% 3.8% 2,184 (27,002) 0 0 $18.04 Specialty Centers 341,496 124,894 36.6% 36.6% 58.5% 0 82,970 0 0 $13.51 Strip 3,839,780 530,646 13.8% 14.1% 13.0% 10,301 (6,303) 27,428 18,950 $13.47 Malls 3,949,115 374,413 9.5% 9.5% 3.5% 0 (235,311) 0 0 $8.64 All Shopping Centers 37,492,734 3,705,161 9.9% 9.8% 9.8% (16,138) (224,020) 27,428 18,950

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Memphis TN Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 23,937,656 3,712,873 15.5% 15.4% 14.7% (9,177) 154,537 133,099 14,080 $10.31 Neighborhood Power/Regional Centers 8,276,976 690,727 8.3% 8.7% 11.0% 70,463 229,658 101,461 0 $9.91 Specialty Centers 1,678,057 290,845 17.3% 17.6% 18.8% 4,571 17,064 0 0 $15.10 Strip 7,181,987 874,488 12.2% 12.2% 12.8% 24,414 28,085 32,967 0 $12.66 Malls 3,272,050 711,203 21.7% 21.7% 21.8% 0 1,000 0 0 $1.19 All Shopping Centers 44,346,726 6,280,136 14.2% 14.2% 14.4% 90,271 430,344 267,527 14,080 28 Chainlinks Retail Advisors U.S. National Retail Report

South U.S. - East South Central cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Mobile AL Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 8,913,157 852,317 9.6% 9.7% 10.2% 9,327 31,525 0 0 $10.55 Neighborhood Power/Regional Centers 1,864,780 118,446 6.4% 6.7% 5.1% 6,000 (23,892) 0 0 $19.62 Specialty Centers 1,845,157 214,121 11.6% 11.1% 11.2% (9,600) (13,970) 0 0 $21.57 Strip 2,443,216 249,229 10.2% 10.3% 11.4% 3,052 (8,798) 0 0 $10.91 Malls 2,470,766 98,704 4.0% 3.7% 4.9% (6,200) 16,220 0 0 N/A All Shopping Centers 17,537,076 1,532,817 8.7% 8.8% 9.2% 2,579 1,085 0 0

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Nashville TN Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 30,169,422 3,663,361 12.1% 12.3% 10.7% 86,236 (483,365) 71,900 20,053 $12.54 Neighborhood Power/Regional Centers 8,472,924 1,033,521 12.2% 12.3% 11.8% 11,921 (44,775) 0 71,250 $17.86 Specialty Centers 1,451,540 73,945 5.1% 5.0% 2.1% (1,344) (41,135) 0 0 $8.84 Strip 5,740,540 676,407 11.8% 11.3% 10.1% (25,510) (45,846) 49,200 0 $14.41 Malls 7,851,774 967,943 12.3% 11.8% 17.1% (40,105) 126,326 0 0 $23.69 All Shopping Centers 53,686,200 6,415,177 11.9% 11.9% 11.5% 31,198 (488,795) 121,100 91,303

South U.S. - West South Central

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Austin TX Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 25,303,072 2,589,771 10.2% 10.6% 11.5% 91,754 365,590 170,950 19,000 $17.35 Neighborhood Power/Regional Centers 16,844,433 764,572 4.5% 4.6% 4.7% 14,913 41,629 0 0 $18.57 Specialty Centers 3,097,396 66,998 2.2% 2.1% 2.3% (1,313) 7,472 0 0 $21.04 Strip 6,641,261 779,153 11.7% 12.0% 12.9% 19,740 44,806 3,480 40,771 $18.39 Malls 5,221,347 21,459 0.4% 0.5% 0.5% 3,500 3,500 0 0 N/A All Shopping Centers 57,107,509 4,221,953 7.4% 7.6% 8.1% 128,594 462,997 174,430 59,771

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Dallas TX Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 119,193,434 16,005,563 13.4% 13.9% 14.6% 592,873 1,167,538 186,956 146,780 $12.96 Neighborhood Power/Regional Centers 33,038,147 1,993,348 6.0% 6.3% 6.3% 100,477 497,433 301,915 20,269 $18.88 Specialty Centers 5,763,363 731,976 12.7% 6.5% 9.9% 37,242 72,977 420,000 0 $20.81 Strip 30,717,485 3,986,414 13.0% 13.4% 13.9% 144,903 349,561 126,821 50,674 $14.44 Malls 27,404,120 1,980,130 7.2% 7.4% 7.4% 49,315 29,198 0 0 $24.00 All Shopping Centers 216,116,549 24,697,431 11.4% 11.7% 12.2% 924,810 2,116,707 1,035,692 217,723

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Houston TX Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 117,223,380 11,504,225 9.8% 9.7% 9.8% (188,164) (212,502) 67,969 75,827 $13.27 Neighborhood Power/Regional Centers 27,799,292 1,614,483 5.8% 6.3% 6.7% 129,456 211,349 79,561 23,566 $22.02 Specialty Centers 6,731,582 648,568 9.6% 9.5% 10.0% (11,420) 27,008 0 0 $14.44 Strip 33,359,374 3,482,392 10.4% 10.0% 10.0% (109,448) (105,748) 92,255 45,800 $15.71 Malls 24,287,436 1,330,678 5.5% 5.6% 6.1% 37,118 112,007 0 0 $14.43 All Shopping Centers 209,401,064 18,580,346 8.9% 8.8% 9.0% (142,458) 32,114 239,785 145,193 29 Chainlinks Retail Advisors U.S. National Retail Report

South U.S. - West South Central cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Little Rock AR Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 11,486,533 941,363 8.2% 8.1% 8.8% (8,805) 30,675 0 0 $9.80 Neighborhood Power/Regional Centers 4,987,404 176,802 3.5% 3.5% 4.4% (1,719) (21,163) 0 0 $12.87 Specialty Centers 558,115 73,269 13.1% 17.7% 12.9% 25,595 24,509 0 0 $15.62 Strip 3,674,375 234,128 6.4% 6.7% 7.4% 11,067 30,203 0 0 $13.49 Malls 13,600 0 0.0%0.0% 0.0% 0 0 0 0 N/A All Shopping Centers 20,720,027 1,425,562 6.9% 7.0% 7.6% 26,138 64,224 0 0

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average New Orleans YTD Under Net Net Quoted Deliveries Construction LA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 16,735,632 1,768,596 10.6% 11.4% 11.3% 144,592 (6,872) 0 225,000 $11.93 Neighborhood Power/Regional Centers 2,956,133 137,247 4.6% 4.7% 5.1% 3,000 83,678 10,560 0 $32.47 Specialty Centers 1,567,208 52,951 3.4% 5.0% 6.3% 25,663 42,663 0 0 $14.15 Strip 3,133,263 383,841 12.3% 11.6% 13.2% (5,419) 28,150 16,637 0 $15.19 Malls 5,205,524 214,468 4.1% 4.1% 4.1% 0 0 0 0 $19.50 All Shopping Centers 29,597,760 2,557,103 8.6% 9.2% 9.4% 167,836 147,619 27,197 225,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Oklahoma City YTD Under Net Net Quoted Deliveries Construction OK Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 20,641,307 2,110,099 10.2% 10.2% 10.5% (3,444) 32,032 2,500 0 $9.60 Neighborhood Power/Regional Centers 7,179,830 762,664 10.6% 10.8% 9.1% 11,741 (171,516) 0 0 $14.92 Specialty Centers 677,724 117,473 17.3% 15.9% 17.2% (9,901) 638 0 28,000 $14.05 Strip 7,175,170 656,262 9.1% 9.1% 9.2% (4,715) 5,763 0 0 $10.60 Malls 3,520,528 942,488 26.8% 27.4% 27.0% 20,500 8,264 0 0 $6.00 All Shopping Centers 39,194,559 4,588,986 11.7% 11.7% 11.6% 14,181 (124,819) 2,500 28,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted San Antonio TX Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 33,778,350 3,819,861 11.3% 12.2% 11.6% 301,139 426,694 152,560 217,026 $13.42 Neighborhood Power/Regional Centers 10,893,354 909,988 8.4% 8.4% 8.6% 4,864 (28,352) 15,200 0 $19.73 Specialty Centers 1,360,600 255,956 18.8% 18.7% 18.6% (1,617) 12,954 3,481 0 $17.74 Strip 9,196,699 958,216 10.4% 10.0% 9.2% (25,283) 7,589 53,609 0 $14.04 Malls 9,379,377 240,923 2.6% 2.6% 2.8% 4,924 21,992 7,136 0 $21.19 All Shopping Centers 64,608,380 6,184,944 9.6% 10.0% 9.6% 284,027 440,877 231,986 217,026

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Tulsa OK Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 17,298,505 2,026,873 11.7% 12.3% 11.8% 109,300 36,021 0 105,516 $9.59 Neighborhood Power/Regional Centers 4,390,532 272,065 6.2% 6.6% 5.3% 16,105 (38,448) 0 0 $6.26 Specialty Centers 1,290,153 166,506 12.9% 13.2% 9.7% 3,730 (39,217) 0 0 $8.45 Strip 5,649,969 324,531 5.7% 5.7% 5.6% (4,476) (6,527) 0 12,000 $11.91 Malls 3,081,347 45,005 1.5% 1.5% 2.9% 1,400 1,595 0 0 $15.17 All Shopping Centers 31,710,506 2,834,980 8.9% 9.3% 8.8% 126,059 (46,576) 0 117,516 30 Midwest Chainlinks Retail Advisors U.S. National Retail Report

Midwest U.S. - East North Central

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Chicago IL Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 133,748,685 16,664,970 12.5% 12.4% 11.9% (138,207) (609,261) 9,830 357,000 $14.99 Neighborhood Power/Regional Centers 44,151,100 3,097,933 7.0% 7.0% 7.3% 13,343 65,649 0 0 $16.83 Specialty Centers 6,154,710 378,506 6.1% 6.6% 6.2% 30,070 211,190 190,445 0 $21.61 Strip 34,484,747 4,247,139 12.3% 12.4% 12.6% 18,051 196,897 29,378 29,587 $15.99 Malls 30,709,762 682,338 2.2% 2.2% 2.3% 906 93,309 0 0 $24.39 All Shopping Centers 249,249,004 25,070,886 10.1% 10.0% 9.8% (75,837) (42,216) 229,653 386,587

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Cincinnati OH Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 48,513,823 7,629,769 15.7% 15.9% 15.4% 83,640 55,077 2,400 0 $9.57 Neighborhood Power/Regional Centers 16,272,997 1,883,051 11.6% 12.2% 9.6% 129,107 (200,098) 29,364 0 $12.99 Specialty Centers 4,565,217 230,372 5.0% 5.4% 7.8% 15,400 58,598 0 0 $17.07 Strip 9,209,737 1,204,561 13.1% 13.7% 15.2% 53,615 173,441 20,300 0 $12.64 Malls 9,018,740 842,951 9.3% 9.8% 10.2% 45,069 72,108 0 0 $9.56 All Shopping Centers 87,580,514 11,790,704 13.5% 13.8% 13.3% 326,831 159,126 52,064 0

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Cleveland OH Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 57,444,434 7,905,106 13.8% 14.2% 13.7% 272,253 202,136 30,143 6,000 $10.21 Neighborhood Power/Regional Centers 24,176,485 2,181,884 9.0% 9.3% 9.4% 62,724 27,149 0 0 $12.30 Specialty Centers 3,416,373 284,036 8.3% 8.3% 7.4% 0 25,505 62,000 0 $12.79 Strip 10,422,069 1,200,812 11.5% 11.7% 10.9% 18,076 (5,817) 0 0 $11.82 Malls 15,835,347 2,544,299 16.1% 15.5% 15.2% (83,616) (152,833) 0 0 $12.03 All Shopping Centers 111,294,708 14,116,137 12.7% 12.9% 12.5% 269,437 96,140 92,143 6,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Detroit MI Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 70,744,810 11,114,217 15.7% 15.9% 16.1% 162,724 197,306 83,617 0 $11.76 Neighborhood Power/Regional Centers 26,039,596 2,294,267 8.8% 8.5% 8.7% (78,464) (11,448) 87,734 148,864 $14.04 Specialty Centers 3,249,397 311,663 9.6% 10.7% 6.3% 36,610 (103,819) 0 0 $17.94 Strip 19,414,240 3,060,368 15.8% 15.5% 15.9% (42,049) 86,630 17,836 8,200 $12.82 Malls 20,987,112 1,389,276 6.6% 6.5% 6.4% (14,825) (16,787) 0 0 $7.54 All Shopping Centers 140,435,155 18,169,791 12.9% 13.0% 13.0% 63,996 151,882 189,187 157,064

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Indianapolis IN Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 34,782,096 3,987,326 11.5% 11.7% 12.0% 79,169 (30,671) 7,000 0 $10.56 Neighborhood Power/Regional Centers 15,730,281 1,266,846 8.1% 8.1% 8.3% 14,107 (9,113) 0 0 $16.35 Specialty Centers 883,531 55,800 6.3% 6.3% 6.7% (300) 3,060 0 0 $13.57 Strip 6,921,262 770,556 11.1% 11.5% 13.1% 23,310 144,080 9,000 0 $14.11 Malls 9,000,809 486,309 5.4% 5.3% 5.0% (12,834) (33,212) 0 0 $11.31 All Shopping Centers 67,317,979 6,566,837 9.8% 9.9% 10.3% 103,452 74,144 16,000 0 31 Midwest Chainlinks Retail Advisors U.S. National Retail Report

Midwest U.S. - East North Central cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Milwaukee WI Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 35,799,670 4,377,496 12.2% 12.1% 12.1% 149,266 155,188 286,490 28,069 $10.97 Neighborhood Power/Regional Centers 8,642,093 717,273 8.3% 6.9% 6.9% (118,560) (110,116) 0 0 $15.17 Specialty Centers 2,088,126 60,894 2.9% 3.6% 3.9% 14,691 18,075 0 0 $21.08 Strip 7,829,095 946,727 12.1% 12.7% 13.7% 46,724 116,556 35,710 28,210 $13.56 Malls 7,715,017 1,035,744 13.4% 1.7% 2.1% (906,838) (899,435) 0 0 $8.24 All Shopping Centers 62,074,001 7,138,134 11.5% 9.9% 10.0% (814,717) (719,732) 322,200 56,279

Midwest U.S. - West North Central

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Des Moines IA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 8,604,451 638,825 7.4% 7.2% 7.2% (17,616) 13,215 12,000 12,000 $11.33 Neighborhood Power/Regional Centers 966,816 65,425 6.8% 6.8% 7.0% 0 0 0 0 $11.69 Specialty Centers 494,019 28,017 5.7% 4.7% 8.5% (4,662) 619 0 0 $19.84 Strip 2,481,672 360,621 14.5% 15.0% 15.2% 22,618 19,863 12,950 0 $10.92 Malls 4,705,442 228,922 4.9% 4.9% 4.0% 0 3,044 0 0 $15.91 All Shopping Centers 17,252,400 1,321,810 7.7% 7.6% 7.5% 340 36,741 24,950 12,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Kansas City YTD Under Net Net Quoted Deliveries Construction MO Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 43,181,718 5,349,667 12.4% 12.7% 13.3% 156,862 402,828 142,400 6,000 $10.94 Neighborhood Power/Regional Centers 15,540,682 1,601,358 10.3% 10.6% 9.2% 52,135 (134,792) 6,750 105,106 $16.28 Specialty Centers 3,147,579 392,977 12.5% 10.5% 11.1% (5,879) 4,032 64,916 112,663 $15.36 Strip 6,952,078 1,099,596 15.8% 15.5% 15.3% (21,867) 19,271 0 0 $12.16 Malls 8,381,522 244,353 2.9% 2.7% 2.9% (20,674) (4,958) 0 0 $23.32 All Shopping Centers 77,203,579 8,687,951 11.3% 11.4% 11.4% 160,577 286,381 214,066 223,769

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Minneapolis YTD Under Net Net Quoted Deliveries Construction MN Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 41,974,557 3,853,546 9.2% 9.6% 9.6% 172,793 154,119 26,076 7,200 $13.73 Neighborhood Power/Regional Centers 15,415,642 680,570 4.4% 4.4% 4.3% (831) (52,989) 0 0 $19.66 Specialty Centers 2,880,441 154,316 5.4% 5.9% 7.6% 14,436 32,952 0 0 $19.17 Strip 11,584,075 1,437,359 12.4% 12.7% 12.3% 33,953 23,318 54,640 9,000 $13.29 Malls 12,492,329 309,500 2.5% 2.3% 2.2% 4,862 (1,550) 29,510 0 $17.61 All Shopping Centers 84,347,044 6,435,291 7.6% 7.9% 7.8% 225,213 155,850 110,226 16,200

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Omaha NE Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 13,209,799 1,799,725 13.6% 13.7% 12.5% 8,250 (117,161) 18,781 0 $11.02 Neighborhood Power/Regional Centers 6,970,327 761,545 10.9% 11.5% 9.6% 54,543 (85,043) 15,718 4,569 $9.13 Specialty Centers 618,763 149,706 24.2% 24.2% 21.5% 0 (20,030) 0 0 $5.32 Strip 3,889,102 589,081 15.1% 14.6% 14.1% (12,177) (45,048) 9,000 0 $11.17 Malls 2,283,395 131,141 5.7% 6.1% 5.8% 8,550 8,550 0 0 $10.18 All Shopping Centers 26,971,386 3,431,198 12.7% 12.9% 11.6% 59,166 (258,732) 43,499 4,569 32 Midwest Chainlinks Retail Advisors U.S. National Retail Report

Midwest U.S. - West North Central cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted St. Louis MO Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 47,646,271 5,332,009 11.2% 11.1% 10.8% 54,904 (21,731) 97,095 25,000 $11.89 Neighborhood Power/Regional Centers 12,369,906 1,287,965 10.4% 10.5% 11.2% 9,262 116,613 0 0 $13.47 Specialty Centers 2,982,510 530,100 17.8% 18.3% 16.7% 14,814 29,003 17,024 310,000 $13.31 Strip 9,642,628 1,340,865 13.9% 14.1% 13.1% 19,405 11,744 17,322 23,000 $13.21 Malls 13,511,881 470,622 3.5% 3.7% 4.2% 34,350 59,773 0 0 $23.81 All Shopping Centers 86,153,196 8,961,561 10.4% 10.5% 10.3% 132,735 195,402 131,441 358,000 West

West U.S. - Mountain

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Albuquerque YTD Under Net Net Quoted Deliveries Construction NM Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 14,374,257 1,670,585 11.6% 12.0% 12.3% 55,722 6,138 0 0 $13.08 Neighborhood Power/Regional Centers 2,144,193 234,753 10.9% 12.7% 12.4% 36,822 39,253 0 0 $12.22 Specialty Centers 212,283 9,000 4.2% 4.2% 4.2% 0 0 0 0 N/A Strip 3,229,694 378,314 11.7% 12.1% 10.6% 13,786 (39,518) 0 6,600 $14.73 Malls 3,182,681 321,608 10.1% 9.9% 9.9% (7,907) (7,907) 0 0 $15.60 All Shopping Centers 23,143,108 2,614,260 11.3% 11.7% 11.7% 98,423 (2,034) 0 6,600

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Denver CO Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 62,707,574 6,038,070 9.6% 9.9% 10.0% 282,486 534,729 165,405 201,682 $13.73 Neighborhood Power/Regional Centers 24,203,275 1,963,613 8.1% 8.2% 8.7% 17,564 24,503 53,190 29,800 $19.29 Specialty Centers 1,771,642 79,334 4.5% 3.7% 3.4% (13,163) (19,200) 0 0 $22.58 Strip 9,737,350 968,549 9.9% 10.1% 10.0% 12,222 (21,505) 0 38,964 $14.73 Malls 14,003,380 634,169 4.5% 4.3% 4.8% (32,666) 24,169 0 0 $24.13 All Shopping Centers 112,423,221 9,683,735 8.6% 8.7% 9.0% 266,443 542,696 218,595 270,446

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Las Vegas NV Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 42,218,425 6,347,505 15.0% 14.8% 15.4% (98,558) 79,230 101,091 0 $16.18 Neighborhood Power/Regional Centers 16,263,342 1,302,212 8.0% 8.0% 8.9% 1,983 29,993 0 0 $18.66 Specialty Centers 2,803,575 244,975 8.7% 9.2% 8.1% 11,735 13,652 0 343,599 $18.95 Strip 9,271,326 1,495,609 16.1% 16.9% 18.3% 74,854 134,059 0 0 $14.49 Malls 6,523,128 305,004 4.7% 4.7% 5.1% 1,260 26,170 0 0 $22.73 All Shopping Centers 77,079,796 9,695,305 12.6% 12.6% 13.2% (8,726) 283,104 101,091 343,599

33 West Chainlinks Retail Advisors U.S. National Retail Report

West U.S. - Mountain cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Phoenix AZ Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 90,670,910 14,472,897 16.0% 15.9% 17.2% 15,423 929,646 116,155 90,000 $13.88 Neighborhood Power/Regional Centers 25,617,738 2,557,014 10.0% 10.8% 10.9% 217,579 32,738 14,107 0 $18.77 Specialty Centers 3,685,514 479,025 13.0% 13.1% 13.3% 4,005 (552) 0 328,000 $29.68 Strip 13,371,919 2,565,861 19.2% 18.9% 19.0% (12,043) (33,718) 40,900 31,738 $13.63 Malls 20,455,357 1,227,679 6.0% 5.9% 6.4% (28,974) 60,333 0 0 $23.79 All Shopping Centers 153,801,438 21,302,476 13.9% 13.9% 14.8% 195,990 988,447 171,162 449,738

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Reno NV Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 11,125,094 1,521,463 13.7% 13.3% 12.5% (38,102) (122,906) 0 0 $14.47 Neighborhood Power/Regional Centers 3,074,291 759,697 24.7% 24.5% 19.1% (5,778) (96,326) 0 0 $14.96 Specialty Centers 690,674 40,134 5.8% 3.0% 0.0% (19,199) (40,134) 0 0 N/A Strip 3,086,061 590,479 19.1% 19.4% 18.6% 9,104 (13,368) 0 0 $16.08 Malls 1,858,810 156,651 8.4% 8.4% 6.1% 0 53,889 103,000 0 $19.09 All Shopping Centers 19,834,930 3,068,424 15.5% 15.2% 13.5% (53,975) (218,845) 103,000 0

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Salt Lake City YTD Under Net Net Quoted Deliveries Construction UT Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 33,521,506 1,900,580 5.7% 5.7% 6.3% (1,231) 126,918 58,994 252,373 $13.57 Neighborhood Power/Regional Centers 10,122,103 716,364 7.1% 6.8% 7.9% (27,497) 1,038,809 1,040,333 0 $14.50 Specialty Centers 1,215,246 153,660 12.6% 12.6% 15.5% 0 1,664 0 242,000 $21.11 Strip 7,207,363 577,980 8.0% 8.2% 9.5% 11,751 108,546 12,700 0 $13.88 Malls 8,193,823 361,900 4.4% 4.7% 4.9% 22,265 35,976 0 0 $10.20 All Shopping Centers 60,260,041 3,710,484 6.2% 6.2% 6.9% 5,288 1,311,913 1,112,027 494,373

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Tucson AZ Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 18,167,560 2,147,044 11.8% 11.6% 11.8% (30,260) (20,995) 37,842 2,500 $14.97 Neighborhood Power/Regional Centers 4,122,921 301,097 7.3% 8.6% 10.2% 93,257 128,714 42,500 0 $19.64 Specialty Centers 919,906 133,219 14.5% 13.6% 13.8% (8,505) (7,498) 0 0 $23.83 Strip 4,025,207 541,289 13.4% 13.4% 12.9% (1,197) 9,306 4,400 0 $12.82 Malls 3,540,038 214,871 6.1% 6.4% 6.4% 10,800 10,800 0 0 $26.77 All Shopping Centers 30,775,632 3,337,520 10.8% 10.9% 11.2% 64,095 120,327 84,742 2,500

34 West Chainlinks Retail Advisors U.S. National Retail Report

West U.S. - Pacific

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Hawaii Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 14,944,534 587,309 3.9% 4.1% 4.2% 42,355 85,607 25,000 0 $33.99 Neighborhood Power/Regional Centers 6,846,270 231,417 3.4% 3.3% 4.1% (2,897) 37,639 0 2,000 $38.15 Specialty Centers 569,958 93,302 16.4% 17.9% 18.0% 8,736 9,085 0 0 $72.74 Strip 1,494,779 88,288 5.9% 6.5% 7.0% 8,335 7,294 0 45,000 $36.56 Malls 4,364,561 26,288 0.6% 0.6% 0.8% 0 8,264 0 0 $47.86 All Shopping Centers 28,220,102 1,026,604 3.6% 3.8% 4.1% 56,529 147,889 25,000 47,000

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Inland Empire* YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 74,368,359 8,447,225 11.4% 11.4% 11.5% 118,233 276,281 178,474 62,777 $17.46 Neighborhood Power/Regional Centers 74,368,359 8,447,225 11.4% 11.4% 11.5% 118,233 276,281 178,474 62,777 $17.46 Specialty Centers 5,756,711 803,216 14.0% 11.4% 8.8% (147,147) (274,630) 0 0 $18.28 Strip 13,475,779 1,647,661 12.2% 12.2% 13.2% (8,945) 126,775 8,900 29,999 $15.90 Malls 12,927,175 847,802 6.6% 6.6% 6.9% 4,919 1,157 0 0 $45.00 All Shopping Centers 180,896,383 20,193,129 11.2% 11.1% 11.2% 85,293 405,864 365,848 155,553 * Includes Riverside & San Bernardino Counties, CA

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Los Angeles YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 115,079,468 8,256,041 7.2% 7.1% 6.8% (45,941) (469,337) 66,009 80,000 $22.28 Neighborhood Power/Regional Centers 35,976,788 1,637,019 4.6% 5.0% 4.6% 149,890 (97,854) 0 0 $23.19 Specialty Centers 8,108,096 348,113 4.3% 4.3% 4.0% (101) (38,039) 0 0 $41.40 Strip 37,841,358 2,993,599 7.9% 7.5% 7.1% (138,131) (150,432) 50,538 59,531 $22.77 Malls 28,971,030 701,554 2.4% 2.4% 2.9% (12,252) 13,564 18,000 0 $25.01 All Shopping Centers 225,976,740 13,936,326 6.2% 6.1% 5.9% (46,535) (742,098) 134,547 139,531

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Oakland/East YTD Under Net Net Quoted Deliveries Construction Bay CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 35,435,823 2,045,904 5.8% 6.1% 6.5% 105,612 219,041 90,107 182,333 $20.99 Neighborhood Power/Regional Centers 10,416,221 751,967 7.2% 6.5% 7.2% (60,421) 91,409 103,500 0 $20.64 Specialty Centers 1,339,914 52,390 3.9% 3.9% 4.9% 0 6,291 0 450,000 $30.00 Strip 5,750,477 451,010 7.8% 8.6% 8.7% 64,792 76,492 25,000 10,088 $21.80 Malls 8,078,823 160,555 2.0% 1.9% 1.4% (4,340) 407,294 459,000 0 $25.39 All Shopping Centers 61,021,258 3,461,826 5.7% 5.8% 6.2% 105,643 800,527 677,607 642,421

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Orange County YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 54,143,590 3,760,147 6.9% 7.3% 6.6% 189,955 (75,378) 8,404 64,001 $23.55 Neighborhood Power/Regional Centers 11,875,225 739,601 6.2% 6.2% 7.0% (2,855) 163,833 154,113 0 $29.32 Specialty Centers 4,793,868 543,262 11.3% 12.6% 14.2% 58,720 158,189 55,000 0 $25.55 Strip 11,371,193 915,754 8.1% 7.6% 7.2% (44,613) (76,540) 7,266 3,600 $21.50 Malls 14,472,640 413,727 2.9% 2.4% 1.8% (63,640) (118,531) 0 0 $35.91 All Shopping Centers 96,656,516 6,372,491 6.6% 6.7% 6.4% 137,567 51,573 224,783 67,601 35 West Chainlinks Retail Advisors U.S. National Retail Report

West U.S. - Pacific cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Portland OR Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 42,445,888 3,755,978 8.8% 8.2% 7.8% (260,942) (498,598) 17,000 0 $15.46 Neighborhood Power/Regional Centers 14,498,689 939,170 6.5% 5.9% 6.3% (81,935) (51,387) 0 138,000 $16.45 Specialty Centers 1,751,482 69,774 4.0% 4.0% 4.4% 0 2,291 0 38,000 $32.76 Strip 8,691,905 1,124,056 12.9% 12.3% 13.2% (51,676) 8,892 8,000 11,430 $15.91 Malls 6,612,576 320,049 4.8% 5.0% 5.4% 7,793 6,090 0 0 $35.00 All Shopping Centers 74,000,540 6,209,027 8.4% 7.8% 7.9% (386,760) (532,712) 25,000 187,430

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Sacramento YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 44,145,039 5,524,563 12.5% 12.7% 13.4% 93,223 334,928 14,000 8,800 $16.64 Neighborhood Power/Regional Centers 14,522,435 1,496,410 10.3% 10.7% 10.4% 76,630 16,030 22,997 6,600 $21.20 Specialty Centers 2,805,942 406,813 14.5% 15.9% 11.3% 76,801 85,854 82,736 25,216 $22.28 Strip 10,548,765 1,681,181 15.9% 15.7% 15.0% (28,400) (56,205) 3,000 0 $15.50 Malls 4,944,378 33,000 0.7% 0.7% 0.6% 0 (1,498) 0 0 N/A All Shopping Centers 76,966,559 9,141,967 11.9% 12.1% 12.2% 218,254 379,109 122,733 40,616

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted San Diego CA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 43,893,205 3,287,842 7.5% 7.8% 7.9% 128,372 120,946 17,985 192,540 $20.88 Neighborhood Power/Regional Centers 12,259,700 405,132 3.3% 4.0% 5.5% 79,675 210,978 0 0 $26.64 Specialty Centers 2,392,308 136,208 5.7% 4.0% 3.4% (41,650) (45,236) 0 0 $20.90 Strip 10,998,581 891,542 8.1% 8.5% 8.8% 45,375 57,632 3,590 0 $18.94 Malls 12,053,426 114,798 1.0% 1.1% 1.7% 18,023 52,873 0 100,000 $21.67 All Shopping Centers 81,597,220 4,835,522 5.9% 6.2% 6.6% 229,795 397,193 21,575 292,540

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average San Francisco* YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 7,794,746 275,550 3.5% 3.9% 4.9% 29,236 11,057 0 0 $28.15 Neighborhood Power/Regional Centers 3,823,321 110,550 2.9% 1.7% 1.8% (43,735) (46,401) 0 0 $24.98 Specialty Centers 1,451,626 48,810 3.4% 3.0% 5.2% (5,298) 24,880 0 0 $60.00 Strip 2,015,447 104,556 5.2% 4.8% 5.0% (8,739) (7,923) 0 0 $25.81 Malls 3,871,160 72,661 1.9% 2.3% 3.0% 17,130 47,299 0 0 $30.00 All Shopping Centers 18,956,300 612,127 3.2% 3.2% 3.9% (11,406) 28,912 0 0 * Includes San Francisco and San Mateo Counties

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted San Jose CA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 24,798,403 1,720,611 6.9% 7.3% 7.3% 158,860 (63,655) 85,562 18,960 $27.35 Neighborhood Power/Regional Centers 6,482,994 479,441 7.4% 7.0% 6.7% (28,296) (31,881) 0 0 $28.63 Specialty Centers 715,372 1,600 0.2% 0.2% 0.2% (202) (202) 0 0 N/A Strip 5,510,154 391,235 7.1% 7.8% 7.3% 39,067 23,349 41,000 0 $26.65 Malls 7,711,330 135,201 1.8% 1.8% 1.7% 6,907 4,219 0 0 $33.00 All Shopping Centers 45,218,253 2,728,088 6.0% 6.2% 6.2% 176,336 (68,170) 126,562 18,960 36 West Chainlinks Retail Advisors U.S. National Retail Report

West U.S. - Pacific cont.

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average Santa Barbara YTD Under Net Net Quoted Deliveries Construction CA Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 6,012,287 619,159 10.3% 10.0% 9.2% (19,398) 4,794 0 0 $17.23 Neighborhood Power/Regional Centers 2,557,490 51,685 2.0% 3.1% 4.4% 28,551 47,881 0 0 $39.43 Specialty Centers N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Strip 941,836 40,648 4.3% 4.1% 1.8% (2,123) (26,504) 0 0 $19.10 Malls N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A All Shopping Centers 9,511,613 711,492 7.5% 7.6% 7.1% 7,030 26,171 0 0

Vacancy 3Q 2012 Historical Vacancy Quarterly YTD Average YTD Under Net Net Quoted Seattle WA Deliveries Construction Total GLA Total SF Vac % 2Q 2012 3Q 2011 Absorption Absorption Rate

Community/ 45,434,279 4,248,887 9.4% 9.5% 9.3% 90,205 549,687 278,294 310,009 $18.34 Neighborhood Power/Regional Centers 11,267,943 803,582 7.1% 8.1% 7.4% 112,245 74,502 0 0 $23.04 Specialty Centers 2,977,535 188,552 6.3% 7.1% 6.3% 24,000 10,069 0 0 $26.61 Strip 12,563,872 1,245,836 9.9% 10.7% 12.2% 103,309 221,157 2,940 28,878 $17.96 Malls 10,518,080 162,910 1.5% 1.6% 1.3% 9,112 (26,105) 0 0 $25.58 All Shopping Centers 82,761,709 6,649,767 8.0% 8.4% 8.3% 338,871 829,310 281,234 338,887

37