Q2 2013 | retail

research & forecast Report

BALTIMORE REGION

Retail Market Looks Ahead With Tempered Optimism

market overview The Baltimore Metro Retail market is comprised of Baltimore City, Baltimore County, Harford County, Cecil County, Howard County, Anne Arundel County and Frederick County. According to Costar, of properties over 25,000 sf there are 1,019 existing properties within this area with more than 89,450,000 of existing RBA (rentable building area). In the 2nd quarter of 2013 approximately 4,900,000 sf of that space was vacant. Current Conditions Retail construction over the past few quarters has been strong, due to projects in Canton, Owings Mills and Waugh Chapel to name a few. High end grocers continue to do well in the metro area such as Wegmans which opened a location at Waugh Chapel Towne Center in November of last year. Towne Center at Turf Valley opened last quarter anchored by Harris Teeter in Ellicott City. There is also a proposed Harris Teeter at the current location of Towsons Fire Station at the corner of York Road and Bosley Avenue. Construction has begun on the Whole Foods in the former Rouse Company building at Columbia Town Center. After several months of speculation, the Giant at the Rotunda will be replaced by a MOMs Organic Market. Construction on the ShopRite at Howard Park in Liberty Heights will finally begin after lengthy legal negotiations. Towson has seen revitalization with the City Center construction completion. In addition, the new development known as Towson Square is well under way. Once completed, it will house a 3,200 seat Cinemark Theater which is expected to open in the fall of 2014, and seven or eight restaurants. Also recently announced is the mixed use retail/office/residential project being developed by Caves Valley partnership on the corner of York Road and Towsontown Boulevard. H&S Bakerys announcement that they would be vacating their 51,000 sf distribution center in Fells Point opening the door to several high-end retailers interested in moving to this area. Whole Foods has announced plans to move and expand into a newly constructed building on this site from their currently location in Harbor East. Restaurants of all variations are showing a lot of activity in the market. Chick-Fil-A recently announced they would be opening their first city location at Canton Crossing on Boston Street. La Madeleine has also expressed interest in expanding to the Baltimore market. The BBQ Joint, an Easton based restaurant, has opened a second location in Pasadena in Anne Arundel County adding to the BBQ trend popping up throughout the region including Dickeys BBQ which announced another location in Frederick. Joes Crab Shack expanded opening locations in Abingdon and Hunt Valley. Nandos Peri-Peri, La Tagliatella and On the Border Mexican Grill & Cantina have signed leases to open at the new Towson Square project. Investment sales in the Baltimore region are very active so far in 2013. Notable transactions included Highlandtown Village shopping sold for $8.75 million. Peacock Shopping center in Mount Airy sold at auction for $4.5 million. Ballenger Creek Plaza in Frederick sold for $4.125 million, and Elkridge Corners sold for $11.2 million. The top buyers in the market are currently CPP Investment, Blackstone and Kimco which just acquired two shopping centers at Putty Hill Plaza and Columbia Crossing II.

market indicators
Q1 2013 VACANCY NET ABSORPTION construction rental rate Q2 2013

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research & forecast report | Q2 2013 | retail | baltimore region

The closing of two Best Buy locations in Hunt Valley and Downtown Baltimore left large vacancies to be filled with Marshalls recently announcing they would take the Hunt Valley space. As the banking industry continues to consolidate, a lot of pad sites are being put on the market as a result. Non-traditional retailers such as funeral stores and churches are back filling some retail spaces, while medical clinics and thrift stores are starting to move into large spaces left behind by grocery stores. forecast As the housing market improves, unemployment rates continue to fall and consumer confidence rises, the Baltimore Metro Retail market is in a position to see much improvement and growth. This could be particularly evident in Baltimore City which saw its first population increase in 60 years as young professionals seek to live and work in a more urban environment. That being said, there is still an overall feeling that the market is soft as retailers are cautious about expanding and are looking for bargains even as large blocks of space are getting increasingly difficult to find.

Vacancy Rates
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Overall Shopping Centers

Asking Rental Rates

$19.00 $18.50 $18.00 $17.50 $17.00 $16.50 $16.00 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Overall Shopping Centers

select SALES ACTIVITY

Address Sales Date Sale Price Size Price/UOM Buyer Seller

Highlandtown Village 300 E Lombard Street, Baltimore, MD Pheasant Run 9830 Mallard Drive, Laurel, MD Elkridge Corners 7280 Montgomery Road, Elkridge, MD Columbia Crossing II Putty Hill Plaza Hickory Ridge 6400 Freetown Road, Columbia, MD Dorseys Search Village Center 4725 Dorsey Road, Ellicott City, MD select LEASE ACTIVITY
Address

April 2013 May 2013 May 2013 January 2013 January 2013 February 2013 February 2013

$8.8 million $3.2 million $11.2 million $21.8 million $15.9 million $23.9 million $46.4 million

58,815 SF 21,317 SF 73,529 SF 100,380 SF 90,380 SF 101,000 SF 106,324 SF

$149/SF $150.11/SF $152/SF $217.17/SF $176/SF $237/SF $436/SF

Broad Street Ventures New Life Christian center Elkridge Corners Owner, LLC Blackstone JV Kimco Kimco Blackstone JV Kimco Blackstone JV Kimco

S&N Hotel LP DKBK Enterprises Regency Centers UBS GE Capital UBS UPS

Lease Date

Lease SF

Tenant

Landlord

Type

Submarket

1401-1467 Vietnam Vets Memorial Highway

5/2013

6,592 SF

Costume Cabaret

JBG Rosenfeld Retail

Community Center Neighborhood Center Community Center Power Center

Outlying

2371 N. Rolling Road

4/2013

6,640 SF

Windsor Mill Surgery Center

Questar Properties, Inc

Woodlawn

1-15 Aberdeen Shopping Plaza

3/2013

6,000 SF

Overseas Ocean

Hemaco Management Co.

Aberdeen

Market Square at Frederick

6/2013

10,000 SF

Pier 1 Imports

JBG Rosenfeld Retail

Frederick

7930-7938 Eastern Avenue

6/2013

10,400 SF

Maryland Beauty School

JBG Rosenfeld Retail

Community Center

Baltimore County East

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research & forecast report | Q2 2013 | retail | baltimore region

MARKET COMPARISONS
submarket Anne Arundel Baltimore Baltimore City Cecil Frederick Harford Howard Carroll Existing Inventory 20,594,869 sf 30,545,962 sf 9,674,612 sf 1,658,442 sf 7,627,348 sf 6,721,391 sf 7,912,753 sf 4,732,426 sf Direct Vacancy 1, 156,476 sf 1,846,028 sf 720,727 sf 124,259 sf 330,178 sf 218,868 sf 148,761 sf 278,263 sf 5.6% 6% 7.4% 7.5% 4.3% 3.3% 1.9% 5.9% Sublease Vacancy 67,225 sf 156,801 sf 30,500 sf 0 0 0 0 9,100 sf 0.3% 0.5% 0.3% 0 0 0 0 0.2% Total Vacancy 1,223,704 sf 2,002,829 sf 751,227 sf 124,259 sf 330,178 sf 218,868 sf 148,761 sf 287,338 sf 5.9% 6.6% 7.8% 7.5% 4.3% 3.3% 1.9% 6.1% Net Absorption 56,019 sf 136,648 sf 72,258 sf 22,600 sf 43,448 sf -6,842 sf 46,386 sf 27,008 sf Under Construction 50,000 sf 250,000 sf 325,000 sf 0 300,000 sf 44,500 sf 0 0 Delivered 0 0 0 0 0 0 0 0 AvERAgE Asking Rent $21.52 / NNN $17.65 / NNN $17.82 / NNN $13.50 / NNN $18.04 / NNN $18.79 / NNN $19.22 / NNN $13.39 / NNN

Quarterly comparisons and totals

quarter Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Existing Inventory 89,467,803 sf 89,303,966 sf 89,303,966 sf 89,036,191 sf 88,823,283 sf 88,663,283 sf Direct Vacancy 4,823,538 sf 4,896,761 sf 5,185,529 sf 5,511,811 sf 5,877,698 sf 5,677,332 sf 5.4% 5.5% 5.8% 6.2% 6.6% 6.4% Sublease Vacancy 263,626 sf 285,262 sf 284,496 sf 212,046 sf 212,046 sf 217,796 sf 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% Total Vacancy 5,087,164 sf 5,182,023 sf 5,470,025 sf 5,723,857 sf 6,099,744 sf 5,895,128 sf 5.7% 5.8% 6.1% 6.4% 6.9% 6.6% Net Absorption 382,861 sf 288,002 sf 1,458,587 sf 936,980 sf 348,185 sf 392,801 sf Under Construction 669,500 sf 625,000 sf 625,000 sf 567,775 sf 780,683 sf 598,683 sf Delivered 0 0 267,775 sf 212,908 sf 160,000 sf 236,440 sf AvERAgE Asking Rent $18.68 / NNN $18.48 / NNN $18.21 / NNN $18.00 / NNN $17.50 / NNN $17.73 / NNN

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researcher: Nadia Kahler Vice President, Research & Transaction Management | Baltimore 100 North Charles Street Suite 1710 Baltimore, MD 21201
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