2010 Retail Forecast

Jim Makens

The Makens Company

2009

A year of opportunity

2009 Predictions
 Landlords will have to pay higher finish-out dollars to secure

leases
 Shopping Centers that are poorly leased will go back to

lenders
 Overall retail vacancy will increase, Convenience Centers

and Power Centers being the most impacted, Lifestyle and Neighborhood centers will fare the best
 Grocery Stores will start to expand again 2009 will be a

buying opportunity for underperforming Shopping Centers
 TODs (Transportation Oriented Districts) begin to emerge  Many high end retailers will close locations

Changing Consumer
 Expect deep discounts

 Trading down
 Less credit, more cash
 Consumers are saving more  Low consumer confidence and tight credit translates

to less, more frugal spending
 Many consumers out of work

Changing Consumer Changing Retailer
 In 2009 consumer spending accounted for

70% of total U.S. GDP  Expect deep discounts  Trading down  Less credit, more cash

 Consumers are saving more  Low consumer confidence and tight credit translates to less, more frugal spending  Many consumers out of work

Changing Consumer
 In 2009 consumer spending accounted for

70% of total U.S. GDP  Expect deep discounts  Trading down  Less credit, more cash  Consumers are saving more  Low consumer confidence and tight credit translates to less, more frugal spending  Many consumers out of work

Changing Retailer Changing Retailer
Deep discounting
2009 retail sales down

Reducing employees
Increased online shopping

Changing Retailer
 Cater to younger (16-28) age

group
 Use of direct mail coupons

 Value retailers move up
 Reduced expansion, unprofitable

store closings, footprint shrinkage, rent re-negotiating

Fort Worth area Grocery Market Shares*
2006% 2007% 2008% 2009%
%Loss/Gain 2008 to 2009

Wal-Mart** Kroger

34.92 16.47

37.77 15.30

38.42 15.61

39.50 15.74

+1.08 +0.13

Albertson’s
Tom Thumb Others

12.34
11.42 24.85

10.69
10.78 25.46

8.64
10.75 26.58

8.54
10.36 25.86

-0.10
- 0.39 - 0.72

*Source – Shelby Report ** Includes SuperCenter and Neighborhood Grocery

Wal-Mart
x Since 2004 Wal-Mart has been the No. 1 

seller of groceries in Dallas Fort Worth  2009 global net sales were $403B, up from $371B in 2008 ($87 million dollars a day increase)  DFW still has the largest concentration of stores of any major metropolitan area in the U.S.  Wal-Mart’s grocery market share is 39.5% up 1.02% from 2008

Grocery Expansion
 Aldi Anticipated 40+ DFW stores
 Tom Thumb completes remodels  Kroger goes bigger  HEB comes through the back door

Categories of Retail Centers
Power Centers
Lifestyle Centers

Neighborhood Centers
Convenience Centers

Power Centers
 150,000 – 600,000 sf

 1 – 3 Major anchors of 125,000-

150,000 sf
 Several Junior anchors of 20,000 sf  Small shop space (about 15% of

anchor space)
 Several pad sites

Power Center - Net Absorption
800,000

600,000

400,000

200,000

0 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q QTD

(200,000)

(400,000) TARRANT CO net absorp DALLAS/COLLIN/DENTON CO

Power Center - Vacancies
16.0% 14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 2005 2005 1Q 2Q 2005 3Q 2005 2006 4Q 1Q 2006 2Q 2006 2006 3Q 4Q 2007 1Q 2007 2007 2Q 3Q 2007 4Q 2008 2008 1Q 2Q 2008 3Q 2008 2009 4Q 1Q 2009 2Q 2009 3Q QTD

TARRANT Co

DALLAS/COLLIN/DENTON CO

NATIONAL

Lifestyle Centers
● 150,000 to 600,000+ sq. ft.

● Retail center as the focal point
● Often includes a municipal building ● High density residential and/or office ● Entertainment may be a component ● Pedestrian friendly

Southlake Town Square

FM 1709 (Southlake Blvd.) @ Carroll St., Southlake
● 1.2 Million sq. ft GLA ● Theatre, City Hall, townhomes

● 97% Occupancy Level ● Model Development

● Built 1928 ● 470,000 sq. ft. Retail ● 93% leased

● Redeveloped to Lifestyle ● 240 Residential Units ● Spurred 7th Street revival

Museum Place

Museum Place

● 11 Acres ● 1,050,000 s.f. ● 170,000 s.f. Retail

● 130,000 s.f. Office ● 500 Residential Units ● Hotel

West 7th

● 1.1 Million s.f. ● Residential ● 350,000 s.f. Retail ● Office ● Restaurants

The Shops at SOSEVEN

South of Montgomery Place & north of Lancaster Blvd. Phase III
● 60,000 Retail ● 20,000 Office ● 45 Townhomes ● 62 Condos/Lofts ● Apartments ● Hotel

Alliance Town Center

SEQ I-35 @ Heritage Trace, north Fort Worth ● 200 Acre development ● Phase II 250,000 s.f. Retail ● Pioneering Lifestyle ● 70,000 s.f. Office

Lifestyle Center - Net Absorption
1,200,000 1,000,000

800,000

600,000

400,000

200,000

0 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q (200,000) QTD

(400,000)

(600,000)

(800,000) TARRANT CO DALLAS/COLLIN/DENTON CO

Lifestyle Center - Vacancies
40.0% 35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q QTD

TARRANT CO

DALLAS/COLLIN/DENTON CO

NATIONAL

Neighborhood Centers

30,000 to 150,000 sf including the anchor

 Three to fifteen acres of land  Supermarket anchor with gas station  2-3 additional pad sites

 Retail shop space of 25,000 to 40,000 sf

Neighborhood Center - Net Absorption
400,000 300,000

200,000

100,000

0 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q (100,000) QTD

(200,000)

(300,000) Tarrant Co Dallas/Collin/Denton Co

Neighborhood Center - Vacancies
Tarrant Start 11.1%, peak 15%, end 12.5% DCD Start 10.9%, peak 14.3%, end 13.1%
Nat’l 10.4%
16.0% 14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q QTD

Tarrant Co

Dallas/Collin/Denton Co

National

Convenience Centers
 Not anchored  Locate near larger anchored centers

 Follow residential growth
 Many mom & pop tenants & medical

professionals

Convenience Center - Net Absorption
500,000 400,000

300,000

200,000

100,000

0 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q (100,000) QTD

(200,000)

(300,000) TARRANT CO DALLAS/COLLIN/DENTON CO

Convenience Center - Vacancies

National

2009 All Retail Vacancy Changing Consumer
12.0% 10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 2008 4Q 2009 1Q Tarrant Co 2009 2Q Dal/Col/Den Co 2009 3Q Nat'l QTD

2010 Predictions
 CRE sale prices fall – CAP rates rise  Rents continue to fall  Occupancy falls  Finish-out costs to Landlord continue to remain high  NO new construction – except grocery anchored

centers
 Assets that sell early in 2010 will bring higher prices

than later in 2010.

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