Detroit Retail Marketview Q3 2013 CBRE Global Research and Consulting

Detroit Retail MarketView Q3 2013 CBRE Global Research and Consulting

US Unemployment Rate Michigan Unemployment Rate Metro Detroit Unemployment Rate 7.6%  7.3% 8.4%  8.7% 9.0%  9.8% RETAIL MARKET TRENDING POSITIVE HEADING INTO Q4 Economy 101 market fundamentals improve. Quick Stats The Michigan economy faltered slightly to Developer’s have become increasingly Q3 2013 QoQ YoY begin the second half of the year reporting active with the construction of junior a thirty basis point (bps) increase in the centers as out lots and free standing Vacancy 10.4%10.1%   unemployment rate resulting in a 8.7 buildings in the 8-15,000 SF range. These percent figure. Since 2013, 70,000 risk-adverse centers are very profitable, Lease Rate $13.61$13.77   people have entered or reentered the and will allow new tenants in the market an opportunity to occupy quality space, Construction 580,000 SF   workforce causing unemployment to fluctuate. That being said, it has been while allowing existing tenants to relocate *The arrows are trend indicators over the to out position competitors and capitalize specified time period and do not represent a challenging for prospects without technical positive or negative value. (e.g., absorption skill sets to fill engineering positions in the on better rental rates. could be negative, but still represent a positive trend over a specified period.) reinvigorate auto industry in addition to a Grocery stores get tech savvy market that cannot support an influx of Hot Topics As technology continues to evolve, certain viable candidates for non-technical industries have been at the forefront of . The retail industry added 43,600 positions. innovation, while others like the grocery jobs in the month of August, The Michigan Retail Index reported that business have lagged immensely. Since which is 15,000 more than in the 47percent of retailers saw increased sales the inception of the barcode in the 1970s, month of May, according to the in the month of August on a Y-o-Y basis. there has been an absence of new National Retail Federation (NRF) Although this is slight decline from the technology to support continued growth month of July, retailer confidence should until now. Digital signage is a new . Arbor Hills, a newly constructed improve as we head into the holiday technology that can update prices and 90,000 SF retail center opened season despite decreases in the Index of promotions in real time in order to appeal in Ann Arbor, MI this past Consumer Expectations, which weighs how to customers based on the time of day. August; Retailers include The people view their own finances and the Overseas, grocery giant Tesco North Face, lululemon athletica general economy in the short and long- implemented a virtual marketplace in and V2V term. South Korea that allows customers to buy products by photographing QR codes . Construction of the new Detroit Vacancy down, rental rates up printed on images and paying through Red Wings facility and The Detroit Metropolitan retail market their phones. Groceries are then delivered surrounding projects are continued to improve in the third quarter fresh to the customer eliminating time expected to create over 4,000 of 2013, as shown by the 30 bps decrease spent at the store. With increasing jobs and *$600 million in capital in its vacancy rate reporting a 10.1percent competition from Target and Amazon investment for the City of Detroit figure. Furthermore, the average asking Fresh, the grocery industry must continue ease rate increased by $0.16 to $13.77 in to evolve in order to achieve sustainability . A *215,000 square foot Meijer third quarter. Landlord’s and owners and grow in an ever-changing supercenter recently opened at continue to give less concessions as marketplace. the Gateway Marketplace (350,000 SF Shopping Center) Chart 1: Direct Vacancy Rate vs. Net Asking Rate

creating *400 jobs and making it Net Asking Rates $13.77 12.00% $14.00 the first location in the City of Direct Vacancy Rate 10.1% Detroit $13.77 $13.80 1 10.00% $13.59 $13.61 $13.60 . Since 2012, 24 retailers have $13.39 8.00% $13.40 opened businesses in the City of $13.12 Detroit, and many other are set 6.00% 10.76% 10.33% 10.38% 10.06% $13.20 to follow suit in the near future 10.30% $13.00 4.00% $12.80 * Indicates an approximation 2.00% $12.60

Submarket Market Size Vacancy Rate % Net Asking Rate

Auburn Hills 2,785,858 1.3% $28.11

Birmingham 378,084 11.9% $25.15

Bloomfield-West Bloomfield 1,615,813 12.3% $19.17 Central Oakland 1,687,987 13.2% $13.09 MarketView

Central Wayne 1,348,206 1.0% $9.31

Dearborn 1,578,974 5.5% $16.55

Detroit 2,592,356 22.2% $7.00

Eastern Macomb 1,449,889 9.1% $14.64

Farmington Hills 1,203,222 15.2% $12.90

Genesee-Lapeer 3,779,652 8.9% $10.43

Livingston 1,642,611 7.8% $14.55

Livonia 1,716,823 17.6% $13.30

NE Wayne 1,391,939 15.3% $22.23

Northern Macomb 2,066,545 13.6% $13.74

Novi 1,326,599 12.4% $20.00

Out of Area 177,176 3.8% $12.00

Rochester Hills 2,312,047 7.8% $25.24

Saginaw-Bay 1,945,200 16.4% $8.14

SE Oakland 2,669,023 9.1% $14.53

SE Wayne 1,350,752 17.8% $16.72

Shelby Twp 1,253,860 3.5% $13.28

Southern Macomb 1,823,485 2.8% $14.08

Southfield 1,238,238 5.6% $14.96

Sterling Heights-Warren 2,896,066 13.7% $20.13

Taylor-Southgate 1,662,509 9.3% $10.80

Troy 2,058,315 9.2% $14.70

Washtenaw 2,835,581 7.9% $11.43 2 2 Western Oakland 1,134,027 3.7% $16.01

Western Wayne 1,722,120 7.0% $16.25 TOTAL 51,642,957 10.1% $13.77

Source: CBRE Research, Q3 2013 © 2013, CBRE, Inc. Detroit Retail | Retail Q3 2013 Detroit Chart 2: Unemployment Michigan’s unemployment rate increased by 30 basis points during the third quarter of 2013 to Detroit 9.8% Michigan 8.7% 8.7%, however, this figure is still 70 bps lower than United States 7.3% the year-over-year figure. Total non-farm employment for the month of August increased by 16% *60,000 jobs statewide and by *9,000 in 14% Metropolitan Detroit on a Y-o-Y basis. 12% 9% 7% The national unemployment rate decreased thirty bps to 7.3%. Additionally, non-farm payroll MarketView 5% employment increased by *169,000 in the month of 2% August. Increases in employment were reported in 0% retail trade and health care adding *44,000 and 2010 2011 2012 2013 YTD *33,000 jobs, respectively. Conversely, the largest decline occurred within the information sector, Source: bls.gov, August 2013 which lost *22,000 jobs in the month of August.

Chart 3: Average Asking Lease Rates The average asking lease rate for retail space in the Community/Neighborhood $12.20 Detroit Metropolitan area improved to begin the Strip/Inline $15.70 second half of the year posting a rate of $13.77 NNN, which is up from the $13.61 NNN figure set Free Standing $13.29 $15.00 in the second quarter of 2013. Looking ahead, lease rates should continue to ascend as more $12.00 national tenants seek out Detroit as destination for business. $9.00 The Auburn Hills and Rochester submarkets reported the highest lease rates in Metro Detroit, averaging $6.00 $28.11 NNN and $25.24 NNN, respectively. The Detroit retail submarket reported the lowest average $3.00 asking rate closing the quarter averaging $7.00 NNN, which is up $1.15 from the previous quarter. $0.00 The aforementioned figure is partly attributable to 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 the 24 retail business that have opened in the City Source: CBRE, Research Q3 2013 of Detroit since 2012.

Chart 4: Vacancy Rate The average asking lease rates for Free Standing Community/Neighborhood 12.3% buildings decreased to $13.29.Community/ Strip/Inline 25.7% Neighborhood asking lease rates decreased by Free Standing 11.4% $0.01, whereas lease rates for Strip/Inline centers 30% increased by $0.59. 25% The Metro Detroit Retail market posted an overall 20% vacancy rate of 10.1% in the third quarter of 2013, which is the same mark set previously in the second 15% quarter of 2012. The Central Wayne submarket reported the lowest vacancy rate at 1.0% whereas 10% the Detroit submarket posted the highest vacancy 3 reporting a rate of 22.2%. 3 5% The Western Wayne and West Oakland submarkets 0% saw vacancy rates decrease by over 3.5%, whereas 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 the Saginaw-Bay and Livingston retails markets Source: CBRE Research, Q3 2013 vacancy increased by 3.1%, respectively.

CONTACTS

For more information about this Local MarketView, please contact:

Detroit Research Brandon Carnegie Nick Ahern John A. Latessa, Jr. Research Analyst Research Analyst Senior Managing Director Detroit Research Detroit Research Central Division CBRE CBRE CBRE 2000 Town Center, Suite 500 2000 Town Center, Suite 500 2000 Town Center, Suite 500 Southfield, MI 48075 Southfield, MI 48075 Southfield, MI 48075 t: +1 248 351 2054 t: +1 248 936 6853 t: +1 248 353 5400 e: [email protected] e: [email protected] e: [email protected]

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Global Research and Consulting This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

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