Oklahoma City Year-End 2007 Retail Market Summary TABLE OF CONTENTS Retail Market Summary 1-2 Retail Submarket Map 3 North Submarket 4-5 Northwest Submarket 6-7 South Submarket 8-9 Edmond Submarket 10-11 West-Central Submarket 12-13 Moore / Norman Submarket 14-15 Eastern OK County Submarket 16-17 Year-End 2007 Sales Summary Back Cover 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 Year-End 2007 Retail Market Summary elcome to the Year-End 2007 Retail Market Summary prepared by This survey evaluates the OKC Total Retail Market Vacancy Price Edwards & Company. occupancy of 215 retail centers W 15% Year-End 2007 (in excess of 25,000 s.f.) containing approximately 12% 26 million square feet. In 9% addition, we will be looking at the overall market including 6% freestanding properties which 3% are not part of a shopping 0% center. We have surveyed '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 231 free standing buildings containing in excess of 12 million square feet. With these two types of properties combined, we have about 3.3 million square feet of space available for retail use (excluding strip centers with less than 25,000 s.f.). During the past six months since our last retail market survey, our overall shopping center occupancy has declined slightly. Our vacancy rate is 11.16% which is slightly more than the last survey (10.95%). We have reduced our survey totals by a net 440,000 square feet. The cause of this reduction in square footage are a couple of centers that are being renovated and have been taken off our list of operating centers until the renovations have been completed, plus a center that has been taken out There are some clouds on the horizon that could affect our hot retail sector. of retail use. These reductions have been offset by three centers that have been completed and added to the survey. Vacant space in shopping centers Reports of numerous cutbacks in new stores by national and regional totals 2.9 million s.f. which is approximately 88,000 s.f. higher than it was retailers are being heard from every direction. Even though Oklahoma City’s at the time of the last survey. In addition, there is another 379,000 s.f. of economy is quite strong, we believe that there could be some fallout from free standing space that is available for occupancy. We continue to express retailer problems in other parts of the country. caution about the large number of strip centers (under 25,000 s.f. in size) which have small spaces vacant. We would estimate that there are easily At the same time, financing issues related to “subprime” home loans in 2.5 million square feet of these properties in the market which are not being other parts of the country could affect the loans that buyers and developers surveyed. Many of these have some vacancy, and they must be considered are able to arrange. This situation may dampen our sales closings and new when evaluating our retail market. We do still consider our overall retail project development. market to be healthy. In addition, we are concerned about the consumer debt situation. Many OKC Total Retail Market Absorption New construction continues. questions have been raised about whether the consumer will be able to 1.5 Year-End 2007 We have identified 14 sizable continue to buy as he has for (over 25,000 s.f.) centers with the past few years. While 1.0 over 3 million feet under OKC Total Retail Market Inventory 50 Year-End 2007 we don’t know how our 0.5 construction. In addition, market will be affected by there are several other large GLA SF Freestanding SF 40 the tightening of consumer 0.0 developments on the drawing credit, our local tenants’ sales board. It remains to be seen if 30 feet) (millions of square -0.5 could drop. these planned centers come 20 -1.0 '99 '00 '01 '02 '03 '04 '05 '06 '07 to fruition. While most of the (millions of square feet) (millions of square While all of these issues could larger centers are significantly 10 affect our retail real estate preleased, they all have some 0 market, we are fortunate shop space, and we cannot help but wonder if there is an adequate number '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 that we do not have a large of small tenants that can pay the higher occupancy costs demanded by number of speculative centers newly constructed centers to fill these spaces. under construction. Also, our economy is quite healthy, and we believe that our retailers are doing reasonably well. There is, however, a need to be The new construction has stemmed in part from a number of new tenants and cautious until the national economy stabilizes. prototypes entering the market. Not only are several mall anchors moving 1 to open-air stores, we are also attracting some tenants that heretofore have not been part of our market. The sizable new centers have a power center component, and most will have a lifestyle component as well. In addition, these new developments generally have significant excess land for future phases which offer the opportunity for the successful centers to become major shopping locations in the future. It is our feeling that some of the centers planned to be developed could be deferred or scrapped altogether as anchor tenants’ plans change due to the national economic picture. We continue to see multiple tiers of lease rates. In the new centers that are dominated by national credit tenants, rental rates between $18 and $35 per s.f. are the norm. In the centers that are primarily considered neighborhood and older community centers, where most of the local tenants are located, rental rates are significantly lower—generally between and $7 and $15 per s.f. Likewise, the national tenants are receiving higher tenant finish allowances than the local tenants with some of the new centers providing $25 to $50 per s.f. allowances compared to the local tenants’ allowances of $5 to $10 per s.f. above white box finish levels. However, in some of the Downtown continues to be a major focus of our city’s leaders. The goal is to older centers, many tenant prospects desire different space configurations develop more housing and hotels in order to create demand for significant than have been utilized in the past, and as a result, large retrofit costs are retail development to go with the entertainment venues that are in place at becoming more and more prevalent. this time. Seven hotels with over 1,200 new rooms have been completed or will be completed within the next year. Several significant housing projects During 2007, demand for retail properties by local and national acquisition are underway. They include rental units and condominiums for purchase groups remained quite high. We have monitored 13 centers ranging from with price ranges between $150,000 and $750,000. More than 1,000 approximately 35,000 s.f. to over 260,000 s.f. being sold. The 2007 sales residential units should be completed within the next couple of years. At total over $230 million and averaged $98.17 per s.f. the present time, we are showing one free-standing retail building, Bass Pro, and one multi-use center in our survey. The multi-use center includes The North Oklahoma City market, the West Central Oklahoma City market, the Harkins Theater, two strip centers in front of it, and a mixed use building the Moore/Norman market all have occupancy rates in excess of 90% along the canal just west and north of these facilities. There are numerous and continue to be doing quite well overall. The East Oklahoma County restaurants and clubs located throughout Bricktown, but all are located in submarket and the South submarket each have a vacancy in excess of 15%. buildings that cannot be classified as retail facilities. The City has publicly advertised the need for a downtown grocer of some type and significant efforts are being made to attract a specialty grocery store. There is also planning underway for a potential retail development area in the Core to Shore plans which addresses a potential expansion of downtown to the south as I-40 is moved towards the Oklahoma River. These developments lie five to ten years in the future, and as a result, there is no effect on the present retail market. The survey has been divided into seven submarkets and five classes within each submarket. Even though these submarkets are generally healthy, there are pockets of vacancy caused by loss of an anchor than can skew the actual results in a small area of a submarket. Detailed study of all the markets is suggested before a firm decision about investing in a specific submarket is made. Price Edwards & Company is pleased to provide you with this survey. Hopefully, it will help you better understand the Oklahoma City and the metropolitan area’s retail markets. Please do not hesitate to contact us if we can be of service. There are five classes of shopping centers being evaluated. “A” centers are super regional centers containing in excess of 900,000 square feet.