WINTER 2017 KANSAS CITY RETAIL REPORT

WINTER 2017 KANSAS CITY RETAIL REPORT

EXECUTIVE SUMMARY Newmark Grubb Zimmer (NGZ) is constantly monitoring market indicators, tracking and analyzing supply and demand drivers, cyclical patterns and industry trends. The following quarterly research report examines the multifaceted Kansas City retail market. NGZ research and analytics has established a system of data flow unique in our industry. Rather than rely on third party data sources, our data acquisition efforts involve inputs from advisors in the field, analysts and brokers executing transactions. NGZ research converts market data and analysis into knowledge that creates value for our clients. Our clients include market-leading landlords and distinguished institutions in and around the Kansas City area and the Midwest. Our market knowledge continues to expand as the market progresses and evolves. SELECT MARKET TRANSACTIONS PARKWAY SHOPPING CENTER 88,480 SF GLA SOLD FOR $9,025,000 ($102/SF) North Johnson County 11215-11225 Shawnee Mission Parkway 1501 VILLAGE WEST 9,000 SF GLA SOLD FOR $3,000,000 ($333/SF) Wyandotte County 1501 Village West Parkway CHAPEL RIDGE RETAIL CENTER 35,110 SF GLA SOLD FOR $3,000,000 ($85/SF) East Jackson County 3680 NE Akin Drive TEXAS ROADHOUSE 7,420 SF GLA SOLD FOR $2,330,000 ($314/SF) Platte County 8051 Roanridge Road PERKINS RESTAURANT & BAKERY 5,920 SF GLA SOLD FOR $1,950,000 ($329/SF) South Johnson County 2000 E Santa Fe Street

RETAIL KANSAS CITY MARKET OVERVIEW The overall Kansas City market tightened over the past year, realizing a 20-basis-point decrease in vacancy demonstrating a sound local retail market, 1.2 million square feet of net absorption occurred during the past four quarters, with over 3.3 million square feet absorbed over the past two years. The average quoted rental rate measured $13.16/SF, up $0.43/SF from the prior year. The local market is showing positive indicators, including decreasing vacancy rates, substantial net absorption and increasing rental rates coming out of the important holiday shopping season. Local brick-and-mortar announcements and a shift in the national retail landscape dominated the news in the fourth quarter of 2017. In the local retail market, a $305 million mixed-use project will come to Olathe and Planet Fitness expanded by leasing two locations. The Great Mall of the Great Plains site will be redeveloped as a $305 million mixed-use project. Plans include a 4,000-seat arena, 250,000 square feet of retail and entertainment uses, 150,000 square feet of office space, 250 to 300 apartments and two hotels. Planet Fitness leased two metro locations during the quarter. The first location is an 18,050-square-foot space at 9301 Quivira Road in Overland Park, Kansas. Planet Fitness will share the building with Best Buy. The second location is a 23,500-square-foot space at 300 SW Blue Parkway in Lee s Summit, Missouri. The 2017 holiday season was one that retailers won t soon forget. Sales jumped 5.5% from the previous year, the largest increase since the Great Recession. Total sales in November and December of $692 billion surpassed expectations with previously orecasted totals projected to range between $678 and $682 billion. The strongest sectors included building materials and supply stores at 8.1%, furniture at 7.5% and electronics at 6.7% growth. The past year demonstrated a significant shift in the retail landscape. Headlines throughout the year focused on major retailers that went bankrupt or reduced their portfolios, but was 2017 really that bad for brick-and-mortar retailers? The simple answer is no. The retail closings were somewhat confined to a few chains with the top 16 retail chains with closures accounting for nearly 50.0% of closings. The department store and specialty apparel sectors were negatively impacted the most during the year; however, there was abundant growth in the mass merchandiser sector, which includes discount stores like Dollar Tree and Dollar General, and in the convenience store and fast food sectors. In fact, the year ended with a net surplus of store openings compared with closings. In 2017, a total of 14,250 new physical retail and restaurant locations were added to the market, while 10,175 locations closed. 1,290 TOP STORE CLOSINGS & OPENINGS IN 2017 TOP STORE CLOSINGS & OPENINGS IN 2017 Dollar General 650 Dollar Tree 412 7-Eleven 318 Couche-Tard (Circle K) 200 195 155 120 111 110 Aldi O'Reilly Auto Autozone GNC TJX Tractor Supply GameStop Sears hhgregg Family Christian The Limited Gymboree -190-202 -220-240 -250-350 Ascena rue21-400 -400 Payless Shoesource -700 Radio Shack -1,000 The retail marketplace is changing faster than ever before. Consumer spending is still driving the economy, but fundamental changes in the way money is spent are dictating which retail chains stay in business and which ones fail. Those retailers and restaurants that can adapt to ever-shifting tastes and offer unique customer experiences will stay in the marketplace in 2018. Newmark Grubb Zimmer 2018 KANSAS CITY RETAIL MARKET REPORT 4Q17

SUBMARKET MAPS DOWNTOWN & SUBURBS WEST BOTTOMS CBD PLATTE CLAY URBAN CORE SHAWNEE COLEMAN HEIGHTS HIGHLANDS MIDTOWN WESTSIDE CROWN CENTER FREIGHT HOUSE DISTRICT 70 Atchison Plattsburg WESTPORT 56 PLAZA 71 UENA VISTA HEIGHTS SUNSET HILL BLUE HILLS WYANDOTTE Weston Smithville 35 Kearney AIRIE LAGE WORNALL HOMESTEAD BROOKSIDE ARMOUR FIELDS Leavenworth Lansing Gladstone 291 Liberty 29 NORTH JOHNSON SOUTH JOHNSON Tonganoxie Wellsville De Soto Edgerton Bonner Springs Lenexa Leawood OLATHE 35 70 Spring Hill 635 Shawnee KANSAS CITY 69 69 50 71 Belton 435 Raytown 470 Peculiar INDEPENDENCE LEE S SUMMIT Greenwood CASS Oak Grove Holden EAST JACKSON Louisburg CLAY 7 Harrisonville Paola 69 SOUTH KC Drexel EAST JACKSON 71 CASS SOUTHEAST JACKSON This map was produced using reliable private and government sources. This information is provided without representation or warranty. N Newmark Grubb Zimmer 2018 KANSAS CITY RETAIL MARKET REPORT 4Q17

4Q17 KANSAS CITY RETAIL MARKET STATISTICS TABLE Type # of Buildings Total Inventory (SF) Total Vacancy Rate Qtr Absorption (SF) YTD Absorption (SF) Total Asking Rent (NNN) All 501 5,362,434 4.40% 238,741 137,317 $12.35 CASS Small Shop 365 1,269,041 3.50% 3,801-16,013 $16.70 Big Box 136 4,093,393 4.70% 234,940 153,330 $11.67 All 905 12,639,319 6.70% 116,689 167,077 $13.62 CLAY Small Shop 578 2,037,226 3.60% 17,388 8,719 $13.71 Big Box 327 10,602,093 7.30% 99,301 158,358 $13.62 EAST JACKSON All 2,226 23,474,292 5.70% -34,366-23,941 $11.06 Small Shop 1,639 5,297,961 3.50% 7,802 29,028 $14.33 Big Box 587 18,176,331 6.40% -42,168-52,969 $10.59 All 962 8,958,087 3.20% -2,710-34,387 $12.16 KC URBAN CORE Small Shop 660 2,282,400 1.90% 1,618 18,177 $17.58 Big Box 302 6,675,687 3.70% -4,328-52,564 $10.98 NORTH JOHNSON All 1,125 18,909,121 5.30% -59,383 317,586 $13.15 Small Shop 705 2,491,900 2.70% 2,838-402 $19.81 Big Box 420 16,417,221 5.70% -62,221 317,988 $12.43 All 345 6,020,469 4.30% 4,731 217,672 $14.80 PLATTE Small Shop 205 800,842 5.30% 2,812-8,137 $16.53 Big Box 140 5,219,627 4.20% 1,919 225,809 $14.42 SOUTH JOHNSON All 1,141 19,439,295 5.90% -36,587 271,842 $16.72 Small Shop 629 2,314,530 4.30% -13,399 23,429 $19.01 Big Box 512 17,124,765 6.00% -23,188 248,413 $16.44 All 553 6,057,099 10.70% -65,165 67,189 $11.74 SOUTH KC Small Shop 386 1,147,172 3.00% -200 6,167 $13.89 Big Box 167 4,909,927 12.50% -64,965 61,022 $11.70 SOUTHEAST JACKSON All 474 5,929,816 4.00% -26,348 88,729 $15.56 Small Shop 331 1,223,212 3.30% -264 1,006 $16.88 Big Box 143 4,706,604 4.10% -26,084 87,723 $15.36 WYANDOTTE All 964 9,329,279 3.00% -27,891 25,854 $9.62 Small Shop 751 2,357,852 2.70% -4,727-12,430 $19.45 Big Box 213 6,971,427 3.10% -23,164 38,284 $7.76 TOTALS All 9,196 116,119,211 5.40% 107,711 1,234,938 $13.16 Small Shop 6,249 21,222,136 3.30% 17,669 49,544 $16.74 Big Box 2,947 94,897,075 5.90% 90,042 1,185,394 $12.71 Newmark Grubb Zimmer 2018 KANSAS CITY RETAIL MARKET REPORT 4Q17

MARKET INDICATORS, ASKING RENT & NET ABSORPTION 5.40% 5.50% 5.50% 5.50% 5.60% 3.20% 3.20% 3.20% 2.60% 2.80% 4Q17 3Q17 2Q17 1Q17 4Q16 METRO MARKET The metro market vacancy rate has displayed a downward trend dropping 20 basis points over the past year. KC URBAN CORE The KC Urban Core vacancy rate increased 40 basis points from the prior year. At 3.2%, the KC Urban Core posts the second-lowest vacancy rate in the metro. Net Absorption SQUARE FEET, MILLIONS Asking Rent and Vacancy AVERAGE ASKING RENT (PRICE/SF) VACANCY (%) 1.6 $13.50 8.50% 1.2 $13.00 7.75% 0.8 $12.50 7.00% 0.4 $12.00 6.25% 0.0 $11.50 5.50% -0.4 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 $11.00 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4.75% Small Shop: Retail buildings in which GLA is 7,500 square feet or less. Big Box: Retail buildings in which GLA is 7,501 square feet or more. Examination and calculation of supply and demand determinants by building size uncovered statistically significant inflection points consistently at the 7,500-square-foot building size. For this reason, the division between small-shop and big-box occurs at 7,500 square feet. Newmark Grubb Zimmer 2018 KANSAS CITY RETAIL MARKET REPORT 4Q17

4Q17 KANSAS CITY SUBMARKET NORTH JOHNSON Improved by 150 basis points over the past year. 2017 Q4 5.30% 2016 Q4 6.80% Small shop space is hard to find in North Johnson County as vacancy for this niche sits at 2.7%. Big box space posts a 5.7% vacancy rate. Worsened by 60 basis points over the past year. PLATTE 2017 Q4 4.30% 2016 Q4 3.70% Platte County displays the third largest amount of year-todate net absorption in the metro. SOUTH JOHNSON Improved by 10 basis points over the past year. 2017 Q4 5.90% 2016 Q4 6.00% The South Johnson County submarket led the metro with the highest overall asking rents. SOUTHEAST JACKSON Improved by 50 basis points over the past year. 2017 Q4 4.00% 2016 Q4 4.50% The Southeast Jackson County submarket continues to flourish with the third-lowest vacancy rate in the metro. Newmark Grubb Zimmer 2018 KANSAS CITY RETAIL MARKET REPORT 4Q17

KANSAS CITY, MO 1220 Washington Street, Suite 300 Kansas City, MO 64105 816.474.2000 ST. LOUIS, MO 8235 Forsyth Boulevard, Suite 310 Clayton, MO 63105 314.254.4600 EASTERN JACKSON 1485 SW Market Street Lee s Summit, MO 64081 816.474.2000 SALINA, KS P.O. Box 3224 Salina, KS 67402 816.474.2000 Mark C. Long, SIOR, CCIM, LEED AP Executive Managing Director, Principal North America Canada United States Europe Austria Belgium Czech Republic France Germany Ireland Italy Netherlands Poland Portugal Romania Russia Spain Switzerland United Kingdom Justin A. Beal Director Retail Brokerage Latin America Argentina Brazil Chile Colombia Costa Rica Dominican Republic Mexico Peru Puerto Rico Asia-Pacific Australia Cambodia China Hong Kong India Indonesia Japan Malaysia New Zealand Singapore South Korea Taiwan Thailand Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Zambia Zimbabwe Uganda Zambia Zimbabwe Middle East Saudi Arabia United Arab Emirates Retail Terms and Definitions Victor Cascio Director Wendy Brand Director Kayla Gilchrist Associate Andrew J. Garten Director, Research Consulting Gross Leasable Area (GLA) Expressed in square feet. It is the total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines. It is the standard measure for determining the size of retail spaces, specifically shopping centers, where rent is calculated based on GLA occupied. There is no real difference between RBA (Rentable Building Area) and GLA except that GLA is used when referring to retail properties while RBA is used for other commercial properties. Vacancy Rate The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant. Net Absorption The net change in physically occupied space over a period of time. Average Asking Rent The dollar amount asked by landlords for available space expressed in dollars per square foot per year. Retail rents are expressed as triple net where all costs including, but not limited to, real estate taxes, insurance and common area maintenance are borne by the tenant on a prorata basis. The asking rent for each building in the market is weighed by the amount of available space in the building. Reproduction in whole or part is permitted only with the written consent of Newmark Grubb Zimmer. Some of the data in this report has been gathered from third-party sources and has not been independently verified by Newmark Grubb Zimmer. Newmark Grubb Zimmer makes no warranties or representations as to the completeness or accuracy thereof. Newmark Grubb Zimmer research reports are also available at www.ngzimmer.com By using any report or information provided by Newmark Grubb Zimmer ( Newmark ), the recipient hereby acknowledges and agrees that: (a) Newmark makes no express or implied representations or warranties with respect to the information and guarantees no particular outcome or result; (b) Newmark does not provide legal advice and does not represent or guarantee that any particular course of conduct, strategy, or action suggested by it conforms to any applicable law or regulation; (c) While Newmark has used its commercially diligent efforts to verify any underlying assumptions used in the report, some assumptions may not transpire and unforeseen events and circumstances may arise which may affect any such projections; (d) Although all information furnished in the report are from sources Newmark deems as reliable, such information has not been verified and no express representation is made nor is any to be implied as to the accuracy thereof and it is submitted subject to errors, omissions, change of price, rental or other conditions; (e) All proprietary information, which may include ideas, concepts, frameworks, know-how, methodologies, analytical approaches, databases, business insights, products, software, and descriptions thereof developed by Newmark shall be the property of Newmark; the ownership of the report does not include any rights of electronic data processing files, programs or models completed for research, unless specifically agreed to in writing by Newmark; (f) Such report shall be used for the sole purpose for which it is prepared and no other parties shall be deemed third party beneficiaries of such report; and (g) Any report may not be published, resold, distributed or communicated to the public without the prior written consent of Newmark Grubb Zimmer. Newmark Grubb Zimmer is a trademark of their respective owners ngzimmer.com