Oklahoma City 2019 Mid-Year Retail Market Summary TABLE OF CONTENTS Retail Market Summary 1-3 Quick Hits 4-5 North Submarket 6-7 Northwest Submarket 8-9 South Submarket 10-11 Edmond Submarket 12-13 West-Central Submarket 14-15 Moore / Norman Submarket 16-17 Eastern OK County Submarket 18-19 Retail Investment Sales 20 Submarket Map 21 The information contained herein has been obtained from reasonably reliable sources. Price Edwards & Company makes no guarantee, either express or implied, as to the accuracy of such information. All data contained herein is subject to errors, omissions and changes. Reproduction in whole or in part, without prior written consent is prohibited. Oklahoma City 2019 Mid-Year Retail Market Summary THE RETAIL MARKET Oklahoma City real estate is known now start their shopping on the for its relative stability and slow internet which means retailers are but steady growth. We typically bolstering their digital capabilities don’t see the cyclical volatility and figuring out new ways to combine nor the overexuberance of other the internet with their stores. This markets. The numbers for the first trend will continue as retailers get half of the year reflect this even better data on how consumers as retail nationally and locally is use the internet for shopping and undergoing transformational change. determine the optimal mix of stores Occupancy edged up the first half of and digital. An exciting part of this the year to 90.6 percent from 90.2 process is internet retailers that are percent at year-end. We attribute now opening physical stores as its the improvement to a good but proven to increase their digital sales not great economy, the continued in areas that they do. growth of discount retailers, and the Experiential retail marijuana industry (see our take on continues to be a sexy, the success and expansion of this below). focus of retailers. Don’t get lost in discounters continues to be a trend. the term. This can be as simple as This includes the TJ Maxx’s and Ross’ The transformation of retail has training sales people to be friendlier of the world but also a new wave of or know their products better. It can been ongoing for several years deep discounters such as Ollie’s and now and will continue for several also mean computer kiosks in stores, Dirt Cheap. Shoppers have become more. Far from being an apocalypse, interactive displays or a themed store addicted to cheap, sometimes out of the changes are invigorating the layout. This is how Best Buy turned necessity. Private equity’s influence industry and creating a far more its performance around, better on retail has been significant over vibrant shopping experience; retail trained its people, improved its the past several years. To fund isn’t dying, it is changing to meet stores and changed its product mix. growth, many retailers have loaded customer preferences. Broad trends It shouldn’t be a surprise to anyone up on debt either through Wall Street include a more integrated shopping that consumers want to enjoy their or leveraged buyouts. This gives experience. A majority of consumers shopping experience. While not retailers less flexibility to weather OKC TOTAL RETAIL MARKET VACANCY OKC TOTAL RETAIL MARKET INVENTORY 12% 50 GLA SF Freestanding SF 10% 40 8% 30 6% 20 4% (millions of square feet) (millions of square 2% 10 0% 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 1 swings in the market and often the local economic influences and and then we’ll see a shakeout that incentivizes them to vary from the the short-term outlook is for more eliminates the weaker operators. operating model that made them of the same – stable but no spark Even with this anticipated fallout, successful in the first place, adding for growth. many owners are willing to roll the to the volatility of the industry. dice to both address vacancy but The Real Estate of Medical Marijuana also to get older or more functionally Oklahoma retail is experiencing obsolete properties improved at the all these industry-wide trends but Oklahoma’s legalization of medical tenants’ cost. Should marijuana be is facing headwind on a couple of marijuana has been a boon and legalized nationally, it will create local fronts. In particular, sluggish a headache for the real estate another wave of change as many population growth and a changing industry. The fact that marijuana of the large well-run Canadian energy industry. Oklahoma City’s is still illegal nationally creates issues companies that have been operating population growth has slowed in with lenders, some existing tenants in this space for years move to the the last couple of years to 1 percent have lease provisions that prohibit states. or less depending on the source; such uses, particularly larger national this is a significant decline from the tenants, and then there are the moral Development previous five years. This decline may issues. Add to this the sheer volume very well be related to changes in the of inquiries from people trying to get Costco opening its first Oklahoma energy industry and the reduction in into the business, many who are new City store at the southeast corner the number of energy and energy- to real estate, and the headaches of Memorial Road and Western was related jobs. As we have discussed become clear. The boon is pretty probably the biggest news of the first before, energy has always had an clear as well. A significant square half of the year. Crowds and sales outsized influence in the Oklahoma footage of space has been leased or continue to be strong. Costco is close economy, not only from the shear sold to dispensaries in all manner to identifying a second location in the economics but also for consumer of retail locations. In addition, south metro. Sooner Development optimism. The energy business has Oklahoma City has seen an influx of continues to expand Sooner Rose gotten much more efficient and can grow operations that rent but more in Midwest City with the soon to be do much more with fewer people. often buy industrial space which completed Warren Theater and the As a result, many of the high-paying has tightened the industrial market Andy’s Altitude indoor play center as energy jobs of the past may never even further. It will most likely take well as some restaurants. Burlington come back. another year to eighteen months to & Ulta are being added to Fritts ascertain what true demand will be Farm in Moore. Washington Prime Mix the national retail trends with for marijuana and related products is adding two small buildings, one OKC TOTAL RETAIL MARKET ABSORPTION 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 feet) (millions of square -0.10 -0.15 -0.20 2015 2016 2017 2018 2019 GLA SF Vacant SF Vacant % OKC Retail Market Totals 30,750,976 2,900,251 9.43% on the former Mamasita’s site and by Sooner Development is waiting the first new building (housing two to see if a soccer/multi-use stadium restaurants) on the triangle north will be included in MAPS 4 which of Whole Foods. Most of the other could anchor their retail and new development in the first half of entertainment project. None of the year was more small strip centers these projects have broken ground, throughout the market. all would take Oklahoma City retail to a new level. Oklahoma City has three large, transformative projects in the Survey Footnote: planning stages and all three made Our survey tracks 30.8 million square progress in the first half of the year. feet in 268 buildings of over 25,000 Chisholm Creek, the 192 acre mixed- square feet and 15.9 million square use development between Western feet of stand-alone buildings for a & Pennsylvania on the Memorial Road total market of 46.7 million square Corridor, released renderings of its feet. There continues to be a next phase, which include two larger significant number of smaller strip mixed use buildings with ground-floor centers in the market (under 25,000 retail, office above it and a pedestrian s.f. in size). We estimate there are friendly courtyard as well as a hotel close to 11 million square feet of and a dinner and a movie concept. these properties in the market. Penn Central, (recently renamed “Oak”) the ambitious high-end retail, office and residential project at Pennsylvania and Northwest Highway received Planning Commission approval for its site plan. And, the Cotton Mill project being marketed 87% of consumers begin their shopping journey with digital, a jump from 71% in 2017. - Salesforce When shopping for new products, 49% of U.S. consumers start by looking at Amazon. 36% start by searching on a search engine. Just 15% go directly to brands of retailers. - Survata The majority of consumers (80%) are more likely to purchase from a company that offers personalized experiences. - Edelman Consumers of all ages still say going to physical stores to make purchases is their first choice, including 62% of Baby boomers, 58% of Gen Zers. - Salesforce 4 Oklahoma City Quick Hits When customers have a great experience, they’re willing to pay up to a 16% price premium. - PwC 73% of consumers use multiple channels to shop. - Harvard Business Review Smart phones were used in more than one-third of U.S. retail sales in 2018. - Forrester Source: The Oklahoman | June 10, 2019 5 2019 Mid-Year Oklahoma City Retail Market Summary NORTH SUBMARKET Available North Built/Updated Leasing Agent Total Space Vacant Rate 1 Rate 2 Anchor Tenants Space 16524 N Pennsylvania Ave Gretchen Bybee Fenwick Liquor French Market Mall 1985 CBRE/OKLA 244,724 9,585 3.92% $8.00 $25.00 Bed Bath & Beyond 2836 NW 63rd St Mark Inman Staples, Petco Gold's Gym Center 1982/2008 CBRE/OKLA 66,662 2,746 4.12% $17.00 $22.00 ATT Flagship Store NORTH OKC SUBMARKET 2301 W.