2017 Year-End | Retail Research & Forecast Report EASTERN SOUTHERN

MARKET INDICATORS PA/NJ/DE PA/NJ/DE Regional Retail Market | Overview Relative to prior period Q2 2017 Q2 2018*

>> The regional vacancy rate decreased during the last two quarters VACANCY from 8.2 to 7.6 percent. CONSTRUCTION >> While the majority of new, ground-up construction has been in RENTAL RATES mixed-use developments, redevelopment of existing centers and on infill locations has increased sharply. *Projected Arrows compare current period to the previous period and forecast the next period. >> Asking rents remained stable with stagnation in rent for older centers. >> Investment activity increased for fully-leased centers and ASKING RENTAL RATES BY CENTER TYPE redevelopment opportunities. Owners continue to rethink their AVERAGE ASKING center mix and spin off non-core assets. RENTS Asking rents for Community, Neighborhood The regional retail market has been adjusting to the pressure from COMMUNITY $14.00-$32.00 and Lifestyle Centers are e-commerce and big box retailer instability. In spite of a “terminal” for the typical quoted rent diagnosis, deals are still being done. Although still up from the end of NEIGHBORHOOD $12.00-$30.00 per-square-foot, triple net; 2016, vacancy decreased during the third and fourth quarters. and for in-line spaces. For Power Centers, asking POWER $13.00-$22.00 E-commerce-resistant tenants such as off-price retailers, medical rents are for anchor or junior anchor positions, users, entertainment, and fitness operators continue to be more $25.00-$45.00 LIFESTYLE 10,000 SF to 40,000 SF. active, backfilling the larger vacancies left by large format retailers such as Macy’s, Sears and Kmart. Many large owners are now targeting for one-third of center tenancy to be entertainment use. RETAIL VACANCY BY CENTER TYPE There is an element of caution for both tenants and landlords. Deals 15%15% are taking longer as tenants scrutinize locations. Landlords are 4Q 16 comprehending the need to adjust the tenant mix in centers and are offering shorter term leases with limited renewal options to have 2Q 17 more flexibility. 4Q 17 10%10% The next two quarters are likely to bring additional waves of store closings. The 2017 holiday season will be pivotal for some struggling retailers, and department stores such as Macy’s, JCPenney, Sears and Bon-Ton will be closing stores in 2018. However, the regional market has been resilient so far. 5%5%

0%0% Community Neighborhood Lifestyle Power Community Neighborhood Lifestyle Power Regional Overview (continued)

The larger lease deals reflect the current trend away from traditional Investors have been snapping up well-leased and well-located centers. retailers and the 100,000-square-foot anchor store. Fast casual and There has been an increase in smaller, strip retail centers on the market healthy casual concepts continue to flourish in outparcel and inline as owners seek to capitalize on high demand and typically limited locations. Chains like Whole Foods and Aldi continue to expand, and offerings for this segment. In general, more owners have been open to Sav-A-Lot is planning a new, freestanding store concept to compete selling rather than a long-term hold strategy. with Lidl and Aldi.

Recent Transactions in Q3 and Q4 2017

LEASE ACTIVITY

PROPERTY ADDRESS LOCATION TENANT SIZE SF Westmont Plaza Camden County Target 48,142 Columbus Crossing County TJ Maxx/HomeGoods 42,000 5600 Carlisle Pike Cumberland County Hobby Lobby 40,000 Greenleaf at Delran Burlington County Edge Fitness 40,000 Deptford Plaza Gloucester County Edge Fitness 36,520 Cross Keys Place Gloucester County Edge Fitness 36,000 Trainers Corner Shopping Center Bucks County Gabe's 35,000 Fairfield Shopping Center New Castle County Food Lion 34,000 The Shipyard New Castle County Altitude Trampoline Park 34,553 Christiana Power Center New Castle County Raymour & Flanigan outlet 32,000 Carlisle Commerce Center York County Altitude Trampoline Park 31,756 Cape Horn Crossing York County Tractor Supply 24,000 2201 Farrand Drive New Castle County Planet Fitness 23,000 Pottstown Center Montgomery County Aldi 23,315 Fairfield Place Shopping Center Chester County HomeSense 22,710 Village Mall Montgomery County ReStore 22,400 East Towne Centre Lancaster County A.C. Moore 22,000 Merchant's Square New Castle County dd’s Discounts 22,000 Fairfield Place Shopping Center Chester County Sierra Trading Post 17,850 Pennsboro Commons Cumberland County Geisinger Holy Spirit 14,918 Marlton Crossing Shopping Center Burlington County Chickie & Pete's 10,000

SALES ACTIVITY

PROPERTY ADDRESS LOCATION BUYER SIZE SF PRICE / SF TYPE Centerton Square Burlington Cunty Prestige Properties & Development 426,415 $304 Power Center Colonial Park Mall (portion) Dauphin County Kohan Retail Investment Group 373,498 $40 Regional Mall Richard Marketplace (portion) Bucks County Katz Properties 266,565 $177 Power Center West Valley Marketplace Lehigh Valley Slate Retail REIT 259,163 $133 Community Center Whiteland Towne Center (portion) Chester County Gorman & Co.- Abrams Realty jv 220,398 $177 Community Center The Shoppes at English Village Montgomery County MetLife Real Estate 103,188 $552 Lifestyle Center MacArthur Towne Center Kmart Lehigh Valley At Home Group 104,854 $52 Community Center Forks Town Center Lehigh Valley Triple Crown Corporation - J.C. BAR 100,250 $237 Neighborhood Center Gilbertsville Shopping Center Montgomery County Westover Companies 90,845 $105 Neighborhood Center Town Square Shopping Center Burlington Cunty Westover Companies 88,265 $245 Neighborhood Center Meadow's Edge Marketplace Burlington Cunty Raymour & Flanigan 81,090 $148 Neighborhood Center Saucon Valley Center (portion) Lehigh Valley First National Realty Partners 80,695 $78 Community Center Quality Center Lancaster County Howard Strong 64,722 $159 Neighborhood Center Chesterbrook Shopping Center Chester County Crow Holdings 31,223 $367 Strip Retail

2 Research & Forecast Report | 2017 Year-End | Pennsylvania, New Jersey, Delaware | Colliers International Market Comparison Update

RETAIL MARKET SUBMARKET INVENTORY DIRECT VACANT SUBLET VACANT TOTAL VACANT VACANCY RATE Philadelphia County 17,245,992 1,198,386 0 1,198,386 6.9% Suburban PA Counties 74,958,727 5,165,684 42,189 5,207,873 6.9% Southern New Jersey 32,576,306 3,797,416 3,449 3,800,865 11.7% Lehigh Valley, PA 15,590,684 1,092,056 5,960 1,098,016 7.0% New Castle County, DE 17,831,211 1,061,936 2,481 1,064,417 6.0% Central Pennsylvania 46,077,838 3,219,707 21,504 3,241,211 7.0%

TOTAL PA-NJ-DE 204,280,758 15,535,185 75,583 15,610,768 7.6%

VACANCY COMPARISON BY MAJOR CENTER TYPE

SUBMARKET COMMUNITY CENTER NEIGHBORHOOD CENTER POWER CENTER LIFESTYLE CENTER Philadelphia County 6.5% 9.9% 4.0% 0.0% Suburban PA Counties 5.0% 9.0% 4.9% 7.0% Southern New Jersey 13.6% 145% 3.1% 0.0% Lehigh Valley, PA 7.7% 9.1% 3.3% 0.0% New Castle County, DE 7.1% 4.0% 8.4% 20.5% Central Pennsylvania 7.7% 9.8% 3.7% 18.1% TOTAL PA-NJ-DE 7.7% 9.9% 4.2% 9.0%

DEFINITIONS

Vacancy Rate: A percentage of the total amount of physically vacant space divided by the total amount of existing inventory.

Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation on the space.

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Under Construction: Counted when steel is up, not at the commencement of site work.

METHODOLOGY: The Colliers International PA, Southern NJ, and DE survey includes strip retail, neighborhood, community, power, lifestyle and malls over 25,000 square feet. The overall vacancy rates include strip retail centers and malls, but these are not broken out in the center vacancy comparisons.

Research & Forecast Report | 2017 Year-End | Pennsylvania, New Jersey, Delaware | Colliers International 3 Submarket Reviews Colliers Global Stats

Philadelphia County New Castle County, DE The vacancy rate in Philadelphia County decreased from The vacancy rate in New Castle County Revenue: $2.6 billion US* 7.7 to 6.9 percent in the last two quarters of 2017 as has been trending steadily downward Countries: 68 larger blocks have been leased. A new TJ Maxx/ since 2016, dropping from a full HomeGoods opened in a portion of the former percentage point to 6.0 percent at the Professionals: 15,000 SuperFresh at Columbus Crossing. However, the Kmart end of the fourth quarter. New Castle Square feet managed: 2 billion store on Aramingo Avenue and the Sears at Great County has been largely spared from the Lease and sale transactions: 72,000 Northeast Plaza will be closing in April of 2018. wave of anchor store closings. However, Total transaction value: >$105 billion* Cedar Shopping Centers plans to reposition a smaller this will be changing in 2018 due to the announcement by Sears that it will be *All statistics are for 2016, are in U.S. strip center across from its Quartermaster Plaza dollars and include affiliates.​ Complex, and there are plans to redevelop Port Richmond closing the 125,000-square-foot store at Village. The opening of the Fashion District Philadelphia Prices Corner Shopping Center. has been pushed back until late 2018. Lehigh Valley, PA Suburban Pennsylvania The Lehigh Valley vacancy rate increased Vacancy in the four suburban counties decreased to 6.9 from 5.7 to 7.0 percent. The main reason for UNITED STATES: percent after spiking in the first and second quarters of the increase was the closing of a Kmart store Colliers International | Philadelphia 2017 to the mid-seven-percent range. Steady activity in Allentown Towne Center and the Wells continues to backfill the numerous anchor vacancies. Fargo call center in the Lehigh Shopping Philadelphia, PA (headquarters) PREIT and Kin Properties are exploring options for the Center in Bethlehem. TEL +1 215 925 4600 vacant Macy’s stores at Plymouth Meeting and Despite these larger vacancies, there were Allentown, PA . TEL +1 610 770 3600 positive trends. Investor and developer interest Three new Whole Foods stores will be opening in Exton, in the market remains high. Home décor Conshohocken, PA Newtown Square, and Spring House in early 2018. The superstore At Home purchased the former TEL +1 610 684 1850 retail portion of the Promenade at Granite Run Kmart store at MacArthur Towne Center. redevelopment is scheduled to open in mid-2018. The Harrisburg, PA TEL +1 717 730 3752 new owners of Valley Square in Warrington are adding Central Pennsylvania The overall vacancy rate in Central Pennsylvania town square elements to the mixed-use complex. Wilmington, DE decreased from 7.6 to 7.0 with all eight counties TEL +1 302 425 4000 Southern New Jersey registering vacancy declines as larger vacancies Southern New Jersey’s vacancy rebounded after a sharp continued to backfill and new stores and Mount Laurel, NJ increase in the first half of 2017. The overall vacancy restaurants open. TEL +1 856 234 9300 dropped from 12.5 to 11.7 percent. Camden and Gloucester counties had full percentage point-plus drops. The first stores at the Shoppes at Belmont in In Burlington County, PREIT signed two yet-to-be-named Lancaster will be opening in early 2018. Tractor tenants for a portion of the recaptured Macy’s store at Supply will anchor the Cape Horne Crossing Retail . Raymour & Flanigan purchased a Center in York County. The Wegmans-anchored shopping center in Marlton, opening a outlet store, and retail component of the Crossings at Conestoga FOUNDING GLOBAL PARTNER leasing out the remaining vacancy. Sun Equities signed Creek will also open later in 2018. Edge Fitness to the Greenleaf at Delran redevelopment. Central PA will be impacted by Sears and Kmart Cherry Hill continues to be a hotbed of retail downsizing in 2018 as stores in Dauphin, Cumberland, WORLD GREEN BUILDING COUNCIL development. A new Costco was approved at the Garden and York counties close. d ce us u in d g o State Park Complex and multiple smaller developments r p

are underway along Route 70 and the Haddonfield Road r p e e co w po corridors. wind

Colliers International Ten Penn Center 1801 Market Street, Suite 550 Philadelphia, Pennsylvania, 19103 Copyright © 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. +1 215 925 4600 While every reasonable effort has been made to ensure its accuracy, we cannot colliers.com/philadelphia guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material 4containedNorth in this report.American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International