Oklahoma City 2018 Year-End Retail Market Summary TABLE of CONTENTS

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Oklahoma City 2018 Year-End Retail Market Summary TABLE of CONTENTS Oklahoma City 2018 Year-End Retail Market Summary TABLE OF CONTENTS Retail Market Summary 1-2 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 Downtown Review 22 Submarket Map 24 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 2018 Year-End Retail Market Summary THE RETAIL MARKET The Retail Market the market is seeing a wave of new tenants, many of which were birthed Overall market occupancy equaled over the internet; and, this past 92 percent at year-end 2018, Holiday season saw a 5.1% increase unchanged from a year ago. This in sales, the most in six years. confirms that there has been little overall movement in the aggregate Concerns remain however. The most market but belies all the activity worrisome concern is the chance of behind the numbers. The underlying a national recession within the next fact is that retail continues to grow, few years. A downturn is inevitable both nationally and locally. We regardless of the time frame and added 650,000 square feet of space could stall the retail recovery and in centers over 25,000 square feet the ongoing transformation of the this past year, maintained occupancy, industry. Trade wars could also and, for the most part, rents. Much hurt retailers given how many use of the pain of the last few years is overseas suppliers. The retail industry as a recession or escalating trade war over – store closings have declined, has always been characterized by would end up putting significant downsizing is still taking place but at creative volatility and today is no stress on retailers. a reasonable rate, and retail layoffs different. These changes include have leveled off. Retailers have been a focus on smaller spaces, more OKC Retail focusing on the strategies that have flexible spaces, internet sales and always made retailers successful – marketing, alternative non-retail Locally, we see the effects of the the customer (both what they want uses, like entertainment, and health national retail trends play out and how they want it), getting their and fitness tenants as well as the here. We continue to see a few marketing and distribution right, continued growth of discounters. closures (Toys R Us for example) and figuring out the optimal mix of There is a certain natural pace to and downsizing (Office Depot among stores and digital. As a result, for these changes which the current others). We have also seen much of the first time in a while, retailers are market appears to be comfortable the square footage vacated over seeing growth in sales and profits; with; but, a national disruption such the past few years back-filled with 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 10 2% 0% 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 1 either discounters or non-traditional course, the health of the local retail Survey Footnote: tenants. These include Urban Air, market is somewhat dependent Lifetime Fitness and a future wave on who you talk to – discounters, Our survey tracks 30.7 million square of deep-discounters like Ollie’s and many restaurants, service and feet in 265 buildings of over 25,000 Dirt Cheap. These types of tenants entertainment tenants would say square feet and 15.7 million square are why the market has been able the market is good; boutiques, feet of stand-alone buildings for a total to maintain occupancy, but, in larger most fashion tenants and many local market of 46.4 million square feet. spaces, it puts pressure on rents as tenants would say it’s uneven at best. There continues to be a significant these tenants generally pay less than Expect more of the same in 2019. number of smaller strip centers in traditional big box users. In addition, the market (under 25,000 s.f. in size). the traditional big box users that New Construction are active typically want a turn-key build-out, putting stress on landlord The most significant retail projects in returns, particularly as construction 2018 were the continued expansion costs escalate. of Sooner Rose in Midwest City, the Lifetime Fitness at Quail Springs and The energy business has an outsized ShowBiz Cinemas in Edmond. The influence on the local market, market also saw the construction of a partially due to employment and number of stand-alone buildings and incomes but also given the number smaller strip centers. Oklahoma City’s of Oklahomans that get royalties. The first Costco at Western & Memorial industry has been undergoing its own and the Flix Brewhouse mixed-use transformation with an emphasis on project on the Broadway extension technology over people. We believe both broke ground in 2018. A number that transformation has negatively of other projects are in some phase impacted local retail, particularly of planning or pre-leasing, including mom and pop retailers, in a way that the Cotton Mill site south of is difficult to measure. These local Bricktown. But, the uneven nature retailers have had a harder time over of the market described above and the past few years than standard the present national uncertainties economic tools have indicated. will most likely hinder any significant This has been acerbated by a slow- new construction this year. down in population growth. Of OKC TOTAL RETAIL MARKET ABSORPTION 0.5 0.4 0.3 0.2 0.1 (millions of square feet) (millions of square 0.0 -0.1 -0.2 2014 2015 2016 2017 2018 GLA SF Vacant SF Vacant % OKC Retail Market Totals 30,680,392 2,992,668 9.75% 3 Oklahoma City Quick Hits This month, economists surveyed by The Wall Street Journal put a 22% chance of a recession occurring over the next 12 months, compared with 14% a year earlier. Farewell to 2018 Third-quarter revenue growth, year over year. Amazon (U.S.) 35% Costco 7.2% Target 5.6% Home Depot 4.9% Retail Retreat Department-store sales as a percentage of toal retail sales Walmart (U.S.) 4.0% 6% 5 Best Buy 3.7% 4 Source: FactSet, The Wall Street Journal 3 2 Amazon wants to patent mobile warehouses to Oklahoma City Sales Tax Growth 1 cut down on delivery times during the last mile of by Category for Fiscal Year 2018 A recent report by IHL Group 0 destination. filed with the U.S. Paten and Trademark Note: Excludes food, motor vehicles Office,the patent application is a continuation of an Retail Total 5.1% and parts and gas; 2018 is through Octo- Amazon patent file in 2014. The “transient warehouses” would indicates store openings are ber Source: U.S. Census Bureau be parked in and around cities or towns to supplement Ama- Hotels & Restaurants Total 9.2% Source: The Wall Street Journal Services Total 6.9% outnumbering clsures in 2018, zon’s growing network of brick-and-mortar warehouses across Wholesale Total 16.7% the world. According the the filing, “The transient warehouse can be established in a parking lot or on the side of the road, so Utilities Total 11.8% with an estimated positive net that other transport vehicles can access the transient warehouse Manufacturing Total 26.8% quickly and deliver items to item requesters more efficiently Other Miscellaneous Total (3.5%) gain of from a centralized location. The transport vehicles can also pick Sakes Tax Grand Total 8.3% 3,835 stores nationally. up items from item providers to replenish items for the transient warehouse.” Source: City of Oklahoma City Source: Marketbeat, U.S. Shopping Center | Q3 2018 Source: Retail News & Views | September 5, 2018 2018 Year-End Oklahoma City Retail Market Summary NORTH SUBMARKET The North Oklahoma City submarket has always led the Oklahoma City market and continues to do so in terms of square footage of retail and desirability for retailers. Of the 7.1 million square feet of space in the submarket, nearly half is along the Memorial Road corridor. This submarket also had some of the most activity in 2018, ie, closures and tenant movement. Occupancy ended the year at 92 percent, unchanged from mid- year and down from 93.9 percent a year ago. Big box closures included two Gordmans, a Toys R Us and the Babies R Us at Belle Isle. Hobby Lobby is now open in the Memorial Road Gordmans but left a vacancy in their former location. A portion of the Babies space is being filled by REI. Chisholm Creek continues its growth with the addition of five new-to-the market restaurants at the Pointe at Chisholm Creek, including Chuy’s and Firebirds. Lifetime Fitness opened after constructing a stand-alone building on the former Macy’s parcel at Quail Springs Mall. Quail Springs Mmall was acquired by Brookfield from GGP. Costco is under construction at the southeast corner of Memorial Road and Western. The area around Penn Square Mall, Oklahoma’s leading mall, is probably even more highly desired among retailers, but there is limited availability of land for development. The Container Store is now open. Washington Prime is expected to proceed with a scaled down mixed-use development on their land north of Whole Foods.
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