Denver Market Report – Retail Q3 2020

RETAIL MARKET REPORT Q3 2020 Denver, CO PREPARED BY: OUR NETWORK IS YOUR EDGE. All informaꢀon is from sources deemed reliable and is subject to errors,omissions, change of price, rental, prior sale, and withdrawal without noꢀce. Prospect should carefully verify each item of informaꢀon contained herein. Brandon Langiewicz Partner <ul style="display: flex;"><li style="flex:1">Hoff & Leigh | 2700 S Broadway #307 | Denver, CO 80113 | 720.572.5187 office </li><li style="flex:1"><a href="/goto?url=http://www.hoffleigh.com/denver" target="_blank">www.hoffleigh.com/denver </a></li></ul>Denver Retail Denver Retail RETAIL MARKET REPORT 24Market Key Statistics Leasing 9Rent 11 13 15 17 19 22 25 29 33 Construction Under Construction Properties Sales Sales Past 12 Months Economy Market Submarkets Supply & Demand Trends Rent & Vacancy Sale Trends 10/12/2020 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 OVERVIEW Overview Denver Retail Denver Retail <ul style="display: flex;"><li style="flex:1">12 Mo Deliveries in SF </li><li style="flex:1">12 Mo Net Absorption in SF </li><li style="flex:1">Vacancy Rate </li><li style="flex:1">12 Mo Rent Growth </li></ul>1.1 M (939 K) 5.3% 0.6% Denver has reclaimed about half of the jobs lost during April shutdowns, according to June data from the Bureau of Labor Statistics. The nonfarm unemployment rate compressed below 10%, outperforming the national average. At the start of 2020, Denver's unemployment rate was below 3%, making it one of the tightest job markets in the country. even with the growing market share of e-commerce and evolving consumer patterns. Store closures largely contributed to absorption turning negative last year, including another Safeway shuttering, but well-located assets continued to perform well. Trade area demographics were buttressing strong consumer demand as the metro has experienced robust growth in population, employment, and buying power this cycle. These factors, coupled with limited new supply, resulted in Denver outperforming nearly all major metros in the change of buying power per SF since 2010. Leisure and hospitality still weighed on the labor market as employment in the sector was down 20% from the same point last year. Other services, which includes many jobs tied to retail, were down about 14%. Workfrom-home industries continue to weather the storm relatively well. Information jobs were up 1% annually, and professional and business services was only down about 1.5%. Although leading retail indicators have been encouraging this cycle, development activity has been rather minimal. Denver's retail stock has only grown by about 5.5% cumulatively since 2010—near the national average despite far superior demographic trends. But developers appear to have made the right call to step on the brakes in recent quarters as the national economy, as well as Denver, encounter the growing likelihood of a recession. The economic impact of the pandemic and shelter-inplace orders in April dwarfed that of the Great Financial Crisis, which spanned several years. From 2008-09, Denver lost about 67,000 jobs, or about 100,000 fewer than reported last month. Until 2019, retail rents in Denver were growing by about 5% annually on average since 2016. Following the national trend, rent growth has noticeably cooled from growth rates observed earlier in the cycle. With nonessential retail virtually shut down throughout the state, rents will likely face tremendous downward pressure in the near term. The last time oil prices fell this low in 2016, the local economy felt the impact. An oil price war between Saudi Arabia and Russia caused prices to plummet to $20 a barrel in March. The fallout of the demand shock caused by the coronavirus led to oil prices hitting all-time lows in April, even after the U.S. and Mexico agreed to cut oil production along with OPEC+. Oil markets rebounded in <ul style="display: flex;"><li style="flex:1">May, hovering around $30 per barrel. </li><li style="flex:1">Investment activity is expected to slow to a crawl in the </li></ul>coming quarters due to the financial uncertainty of the <ul style="display: flex;"><li style="flex:1">economy coming to a hard stop. </li><li style="flex:1">Denver's retail market was on solid footing entering </li></ul>2020, as vacancies were trending near historical lows 10/12/2020 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 Page 2 OVERVIEW Overview Denver Retail Denver Retail KEY INDICATORS Net Absorption SF Under Construction <ul style="display: flex;"><li style="flex:1">Current Quarter </li><li style="flex:1">RBA </li><li style="flex:1">Vacancy Rate </li><li style="flex:1">Market Rent </li><li style="flex:1">Availability Rate </li><li style="flex:1">Deliveries SF </li></ul><ul style="display: flex;"><li style="flex:1">Malls </li><li style="flex:1">16,763,810 </li></ul>15,723,041 50,381,001 7,969,695 3.8% 8.2% 7.5% 6.2% 3.2% 0.3% 5.3% $32.42 $24.45 $21.17 $20.51 $21.85 $21.46 $22.94 3.9% 9.3% 9.2% 7.9% 4.7% 0.2% 6.6% 79,161 (80,798) 2,906 (3,943) 10,362 0<ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">12,000 </li></ul><ul style="display: flex;"><li style="flex:1">7,500 </li><li style="flex:1">Power Center </li></ul>Neighborhood Center Strip Center General Retail Other 000 41,262 15,000 437,968 0 65,477,216 1,321,183 50,000 0<ul style="display: flex;"><li style="flex:1">Market </li><li style="flex:1">157,635,946 </li><li style="flex:1">7,688 </li><li style="flex:1">50,000 </li><li style="flex:1">513,730 </li></ul>Historical Average Forecast Average <ul style="display: flex;"><li style="flex:1">Annual Trends </li><li style="flex:1">12 Month </li><li style="flex:1">Peak </li><li style="flex:1">When </li><li style="flex:1">Trough </li><li style="flex:1">When </li></ul>Vacancy Change (YOY) Net Absorption SF Deliveries SF 1.1% (939 K) 1.1 M 6.2% 1,591,018 1,751,811 1.9% 6.3% 116,896 1,034,325 0.9% 8.7% 4,698,949 5,081,730 5.8% 2009 Q3 2007 Q2 2006 Q4 2014 Q4 2018 Q2 3.8% (957,520) 646,954 -2.9% 2018 Q4 2020 Q3 2010 Q4 2009 Q4 2010 Q3 <ul style="display: flex;"><li style="flex:1">Rent Growth </li><li style="flex:1">0.6% </li></ul><ul style="display: flex;"><li style="flex:1">Sales Volume </li><li style="flex:1">$946 M </li><li style="flex:1">$968.6M </li><li style="flex:1">N/A </li><li style="flex:1">$1.7B </li><li style="flex:1">$335.4M </li></ul>10/12/2020 Page 3 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 LEASING Leasing Denver Retail Denver Retail Retail has been one of the hardest-hit job sectors in Denver, and uncertainty looms for the market as retailers attempt to survive the pandemic. fitness centers: Vasa Fitness (56,000 SF), Chuze Fitness (50,000 SF & 40,000 SF), and Prestige Fitness (38,000 SF). Vacancies that peaked at 9% during the downturn were near historical lows entering 2020. However, the coronavirus shock to the retail market resulted in the shuttering of all non-essential stores for an extended period of time. Lost revenue in the coming months could force many tenants to permanently close their doors, unless both tenants, landlords, and lenders can get creative during this crisis. As malls attempt to generate more foot traffic, they have focused on experiential retail to draw consumers in. Urban Air, a trampoline park for children, is representative of this emerging trend. In early 2019, the company opened a 36,000 SF location at Towne Center at Brookhill in Westminster. By the summer of 2020, Urban Air will open a 50,000 SF location at the Cornerstar shopping center in Aurora. With retail inventory nearly at full capacity at the start of 2019, the vacancy rate expanded slightly during the year following a string of store closures. These closings were largely a result of unprofitable national retailers that failed to evolve in the digital age rather than a perceived weakness in Denver as a consumer market. Limited new retail developments, coupled with a growing and highly educated, high-income population with a large concentration of “big spenders” (the demographic aged 35–54 years), should continue to provide the retail sector with a much needed lift in the face of ecommerce driven headwinds. Sears was behind most of 2019's negative absorption. The 125-year-old retailer filed for bankruptcy at the end of 2019 and closed two stores in early 2019: a 150,000 SF location in Lakewood, and a 130,000 SF Sears at the Streets at SouthGlenn. Both spaces were still on the market at the start of 20Q1. Vacancies are concentrated in bad retail centers and have not spread into the average retail center. Moreover, a concerted movement of households, wealth, and employment to downtown submarkets have produced routinely above-average rent gains in the Downtown and Cherry Creek Submarkets, and vacancies in these areas have been razor thin for years. Centers and mixed-use developments with retail components in these rapidly growing neighborhoods are thriving. Safeway continued to plague the market after years of store closures throughout the state of Colorado. The grocery chain shuttered another big box location in <ul style="display: flex;"><li style="flex:1">2019—54,000 SF at Westminster Plaza in Westminster. </li><li style="flex:1">In other cases, retail in bad trade areas has often been </li></ul>removed from inventory or is undergoing renovations and in some cases, repurposing. With stronger demand drivers to weather the new age of retail, and supply that has only mirrored the national average despite superior demographic and economic trends, the Denver retail market has enjoyed an atypical amount of resilience to the effects of e-commerce. A Kmart and several Toys "R" Us locations have also closed in recent years. The top leases and move-ins of 2019 reflect the ongoing shift in consumer trends and where tenant demand is the strongest. Four of the top seven move-ins belonged to 10/12/2020 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 Page 4 LEASING Leasing Denver Retail Denver Retail NET ABSORPTION, NET DELIVERIES & VACANCY VACANCY RATE 10/12/2020 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 Page 5 LEASING Leasing Denver Retail Denver Retail AVAILABILITY RATE 10/12/2020 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 Page 6 LEASING Leasing Denver Retail Denver Retail 12 MONTH NET ABSORPTION SF IN SELECTED BUILDINGS Net Absorption SF <ul style="display: flex;"><li style="flex:1">Building Name/Address </li><li style="flex:1">Submarket </li><li style="flex:1">Bldg SF </li><li style="flex:1">Vacant SF </li></ul>1st Qtr 190,800 0<ul style="display: flex;"><li style="flex:1">2nd Qtr </li><li style="flex:1">3rd Qtr </li><li style="flex:1">4th Qtr </li><li style="flex:1">12 Month </li></ul>196,497 88,500 60,000 55,560 44,000 43,000 41,000 33,923 29,999 29,500 27,075 25,950 23,830 23,287 21,891 21,818 21,086 786,916 (1,725,770) (938,854) <ul style="display: flex;"><li style="flex:1">3235 Larimer St </li><li style="flex:1">Central Ret </li><li style="flex:1">200,000 </li></ul>88,500 <ul style="display: flex;"><li style="flex:1">3,503 </li><li style="flex:1">5,697 </li><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">Market Station </li><li style="flex:1">Downtown Ret </li></ul>Aurora Ret <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">88,500 </li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">Defy Denver </li><li style="flex:1">104,400 </li></ul>140,000 44,000 <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">60,000 </li></ul>43,560 44,000 0<ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li></ul>Candelas Marketplace AMC Northwest Ret Central Ret <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">12,000 </li><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li></ul>0 0 Promenade at Castle Rock Alpine Buick GMC South Lowry Marketplace 9th & Colorado Southeast Outlying Ret South Ret <ul style="display: flex;"><li style="flex:1">43,000 </li><li style="flex:1">0</li></ul>0<ul style="display: flex;"><li style="flex:1">43,000 </li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">41,000 </li><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">41,000 </li></ul>2,678 0 0<ul style="display: flex;"><li style="flex:1">Central Ret </li><li style="flex:1">95,763 </li><li style="flex:1">6,756 </li></ul>0 0(1,680) 0<ul style="display: flex;"><li style="flex:1">Central Ret </li><li style="flex:1">34,500 </li><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">13750 Grant St </li><li style="flex:1">Northeast Ret </li></ul>Southeast Ret Aurora Ret <ul style="display: flex;"><li style="flex:1">38,000 </li><li style="flex:1">8,500 </li></ul>0<ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">29,500 </li></ul><ul style="display: flex;"><li style="flex:1">Southlands </li><li style="flex:1">148,347 </li></ul>71,438 9,423 (8,115) 24,162 23,287 0<ul style="display: flex;"><li style="flex:1">7,559 </li><li style="flex:1">10,093 </li></ul>34,065 (2,521) 0 0 Center Tech Plaza Village On The Park The Gardens on Havana 5445 W Evans Ave Northglenn Marketplace Washington Plaza Subtotal Primary Competitors Remaining Denver Market Total Denver Market <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">Central Ret </li><li style="flex:1">45,800 </li><li style="flex:1">21,970 </li></ul>23,649 0<ul style="display: flex;"><li style="flex:1">2,189 </li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">Aurora Ret </li><li style="flex:1">61,737 </li><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">West Ret </li><li style="flex:1">21,891 </li><li style="flex:1">0</li><li style="flex:1">21,891 </li></ul><ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">Northwest Ret </li></ul>Northeast Ret <ul style="display: flex;"><li style="flex:1">25,091 </li><li style="flex:1">0</li><li style="flex:1">0</li><li style="flex:1">0</li></ul>0 0 128,257 1,331,724 156,305,462 157,637,186 4,500 68,878 25,000 412,117 <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">0</li></ul><ul style="display: flex;"><li style="flex:1">68,765 </li><li style="flex:1">195,706 </li><li style="flex:1">29,500 </li></ul>(21,812) 7,688 8,249,841 (372,206) (389,201) (788,542) 8,318,719 39,911 (320,436) (592,836) 10/12/2020 Page 7 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708 LEASING Leasing Denver Retail Denver Retail TOP RETAIL LEASES PAST 12 MONTHS Building Name/Address Arvada Marketplace * Northridge Shopping Center Westminster Plaza Submarket Northwest Northwest Northwest Northwest South <ul style="display: flex;"><li style="flex:1">Leased SF </li><li style="flex:1">Qtr Tenant Name </li><li style="flex:1">Tenant Rep Company Leasing Rep Company </li></ul>68,238 Q2 20 Floor and Decor Outlets 56,674 Q2 20 Spirit Halloween 56,127 Q1 20 VASA Fitness -- NewMark Merrill Comp… - David, Hicks & Lam… Crosbie Real Estate Gr… Westminster City Center Marketplace Centennial Promenade Westminster City Center Marketplace Aurora City Center * Seven Hills Shopping Center * Sunrise Village Shopping Center * Belmar 54,260 Q3 20 Overstock Furniture and… 44,300 Q3 20 Total Wine <ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">Brixmor Property Grou… </li></ul><ul style="display: flex;"><li style="flex:1">SITE Centers Corp. </li><li style="flex:1">-</li></ul>Northwest Aurora <ul style="display: flex;"><li style="flex:1">42,900 Q1 20 Golf Galaxy </li><li style="flex:1">-</li><li style="flex:1">Brixmor Property Grou… </li></ul>DePaul Real Estate Ad… - 39,421 Q4 19 24 Hour Fitness 35,974 Q4 19 Movie Tavern -<ul style="display: flex;"><li style="flex:1">Aurora </li><li style="flex:1">-</li></ul>Northeast West <ul style="display: flex;"><li style="flex:1">29,727 Q1 20 Arc Thrift Stores of Colorado </li><li style="flex:1">-</li><li style="flex:1">Emerald Real Estate G… </li></ul>SRS Real Estate Partn… SullivanHayes Brokerage SullivanHayes Brokerage TEL Management 27,611 Q3 20 27,216 Q3 20 24 Hour Fitness 25,467 Q1 20 25,000 Q4 19 Goodwill <ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">-</li></ul>CityCenter Englewood Towne Center at Brookhill Washington Plaza Southwest Denver Northwest Northeast Northeast Southwest Southeast Aurora -<ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">-</li></ul>-<ul style="display: flex;"><li style="flex:1">Larkridge </li><li style="flex:1">23,824 Q3 20 </li></ul>20,430 Q4 19 20,388 Q4 19 20,000 Q1 20 ----<ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">Jordon Perlmutter & Co. </li></ul>Newmark Knight Frank Newmark Knight Frank SullivanHayes Brokerage SRS Real Estate Partn… Legend Partners Jefferson Marketplace Parker Hilltop Town Square Abilene Market ---<ul style="display: flex;"><li style="flex:1">Aurora City Square </li><li style="flex:1">Aurora </li><li style="flex:1">18,884 Q1 20 Innovative Services </li></ul>18,500 Q3 20 Perfect Teeth For Kids 17,233 Q3 20 Golf Galaxy - Willow Creek Shopping Center Westminster City Center Marketplace Villager Square <ul style="display: flex;"><li style="flex:1">South </li><li style="flex:1">Rare Space Inc. </li></ul>Northwest Northwest Northwest Aurora <ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">Brixmor Property Grou… </li></ul>SRS Real Estate Partn… Retro Commercial 16,908 Q3 20 Restore Habitat for Huma… 16,302 Q3 20 Kids Empire - Westminster City Center Marketplace Mission Plaza Legend Partners <ul style="display: flex;"><li style="flex:1">15,636 Q1 20 Octapharma Plasma </li><li style="flex:1">-</li></ul>----------------- SullivanHayes Brokerage NAI Shames Makovsky SRS Real Estate Partn… David, Hicks & Lampert… John Propp Commercia… Newmark Knight Frank Crosbie Real Estate Gr… SRS Real Estate Partn… SullivanHayes Brokerage Retro Commercial <ul style="display: flex;"><li style="flex:1">Abilene Market </li><li style="flex:1">Aurora </li><li style="flex:1">15,232 Q3 20 </li></ul>14,946 Q3 20 14,000 Q4 19 ---<ul style="display: flex;"><li style="flex:1">Belmar </li><li style="flex:1">Southwest Denver </li></ul>Southeast Outlying Northwest Aurora Promenade at Castle Rock Noah's Event Center Iliff Exchange Shopping Center Candelas Marketplace Pioneer Hills 13,319 Q3 20 Noah's Event Venue 12,000 Q1 20 12,000 Q1 20 -<ul style="display: flex;"><li style="flex:1">-</li><li style="flex:1">Northwest </li></ul>Southeast Northwest West 11,714 Q2 20 Dollar Tree 11,152 Q3 20 Five Below 11,000 Q3 20 Fiesta Furniture 10,973 Q3 20 Appliance Factory Outlet 10,472 Q1 20 Gen-X Arvada Marketplace Alameda Crossing Festival Shopping Center Arlington Square * <ul style="display: flex;"><li style="flex:1">South </li><li style="flex:1">Miller Real Estate Inves… </li></ul>Peak Property Manage… Gibbons-White, Inc. Northwest Northwest Southeast Southeast Southeast Southwest Southeast <ul style="display: flex;"><li style="flex:1">Solaire Shoppes </li><li style="flex:1">10,268 Q2 20 </li><li style="flex:1">-</li></ul><ul style="display: flex;"><li style="flex:1">Southlands </li><li style="flex:1">10,093 Q2 20 ULTA </li><li style="flex:1">SRS Real Estate Partn… </li></ul>Brixmor Property Group Brixmor Property Grou… Brookfield Properties R… SullivanHayes Brokerage Arapahoe Crossings Arapahoe Crossings Southwest Plaza 10,055 Q3 20 Goldfish Swim School 10,055 Q2 20 Goldfish Swim School <ul style="display: flex;"><li style="flex:1">10,000 Q2 20 </li><li style="flex:1">-</li></ul>5060-5062 S Syracuse St *Renewal 10,000 Q4 19 Lions Den 10/12/2020 Page 8 Copyrighted report licensed to Hoff & Leigh, Inc. - 689708

Denver Market Report – Retail Q3 2020

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