2007 REAL ESTATE

REPORT
Branson, MO. Market Area
Prepared BY; Commercial One Brokers LLC , 500 West Main Suite 302-A, Branson Financial Center, Branson, MO. 65616 www.commercialonebrokers.com 417-334-3149

THE INAUGUARAL REPORT

INSIDE THIS ISSUE 1 1 2 3 4 5 6
The Inaugural Report Branson Market Enters Expansion Stage The Residential Market Slows Hospitality Makes Strong Move Over 85,000 sq ft. of Inventory Added To Office Market Retail Occupancy Exceeds 95% New Developments

Commercial One Brokers is happy to present the inaugural addition of the 2007 Real Estate Report for the Branson market area. We also want to say thank you to Chris Cooper of Cooper Real Estate Consulting and Valuations for his work on the residential report as well as his counsel and comments on the other market sectors of this report. It is our intention to be the repository of real estate data and begin a process of analyzing and reporting that data for the benefit of our clients and friends of Commercial One Brokers. As Branson becomes better known nationally, more sophisticated investors and developers from outside are now considering this area for possible real estate investments. These developers and investors must have a complete view of the Branson real estate market in order to limit their risk and to not overbuild the market. Bob Huels, CCIM and Steve Critchfield formed their new company in June 2006 after serving as a broker/officer of another Branson commercial brokerage firm. Commercial One Broker LLC. serve exclusively the real estate needs of commercial and investment clients in the Branson/Hollister area. Bob and Steve have over twenty-seven years of combined commercial experience in the
Please see The Inaugural Report continued on page 2

7 Available Land Prices

Vary Widely

Branson Market Enters Expansion Stage

If the four stages of the real estate cycle are Recession, Recovery, Expansion and Oversupplythen there can be no doubt that Branson has entered the expansion stage of the market cycle. In the expansion phase, space becomes difficult to find, rents rise rapidly toward new construction levels, and prices continue to increase. Construction activity increases dramatically, but vacancy rates remain at the normal level or lower. This phase may last for a few months or for years, depending on a series of local and national factors. Branson set a record for total construction in 2006 with over $215 million dollars. This breaks the all-time construction record of just over $176 million dollars in 2005. In addition to setting construction records, the city collected a record amount of sales and tourism tax this year. Sales tax revenue totaled $13.1 million, breaking the $12.3 million mark set in 2003 and 2005. The tourism tax collection equaled $11 million in 2006, topping the 2005 total of $10.4 million. The Branson Lakes Area Chamber of Commerce reported that 2006 saw a record 7.8 million visitors to the area.
Please see Expansion Stage continued on page 3

Branson sets record for both total construction values and sales tax collections in 2006.

Commercial One Brokers LLC

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2007 REAL ESTATE REPORT

Residential Slows From Last Years Highs

Research Provided by: Chris Cooper of Cooper Real Estate Consulting and Valuations
Year End Home Sales
2500

After four years of increased sales, the areas residential market recorded a 3.5% decline over the record year of 2005. Sales softened during the last half of 2006 on the heels of the national sales slow down. The National Association of REALTORS reports that on average, the nationwide market was down 9% for single family and condominium sales with some markets down as much as 30%. It is clear that those wanting to retire or buy a second home in the Tri-Lakes area had to deal with a softening market in their home communities. The areas upper income buyer appears to be the segment of the market that has been most negatively affected by the national housing slowdown. If this buyer is unable to sell their home in their home town and or find market values have declined or marketing times have lengthened, they may delay or even cancel for now their decision to relocate to the Tri-Lakes. Many of these buyers however still find the Tri-lakes area a good value when compared to their local markets and will continue to pursue a new home in the area as their market improves we believe. Homes priced under $225,000 remained strong sellers with the $175,000 and under easily leading the market in sales and percent of listings sold at just over 75%. The strength in these market segments may be a reflection of the recent large increases in local employment. Based on the total number of listings, it appears that some overbuilding has occurred in the over $350,000 price range. This market is overbuilt and homes offered in this price range must be built in areas that provide a high level of amenities along with aggressive marketing in order to be competitive. The challenge remains for builder/developers who wish to build in the under $200,000 market is to find affordable land with affordable infrastructure. In order to find developed lots under $40,000, the builder must look at land outside the Branson city limits and probably outside the Branson school district.
See Residential Market continued on page 3

2000

1500

1000

500

0 1995 1997 1999 2001 2003 2005

Source: Chris Cooper of Cooper Real Estate Consulting and Valuations

The Inaugural Report continued from page 1

Branson real estate market and more than forty-five years of combined real estate experience. Both men have represented the whos who of local and national clients with the sale, leasing and or purchase of Branson commercial properties. Commercial One Brokers provide only commercial brokerage services to include landlord/tenant representation, site selection as well as consulting services and financial analysis. The commercial real estate business has become much more specialized and both local and national users are demanding more specialized services than residential real estate agents are able to offer. Cooper Consulting and Valuations serves the Branson area and Southern Missouri. The companys expertise is in the residential and commercial venues, with specific experience in: Feasibility Studies, Subdivision Analysis, Condemnation, Theaters, Motels, Convenience Stores, Retail Centers, Industrial Facilities and Multi-Family Projects.

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2007 REAL ESTATE REPORT

Residential Market continued from page 2

Page 3

It should be noted that over two hundred loft condominiums priced from the upper $200s to over $500,000 were sold on The Landing. These sales were not included in the total sales numbers and were not included in the multiple listing numbers. Further, it is our opinion that The Landing condominiums created their own unique market and those buyers would not have purchased other condominiums that were typically available in the market. This project and the pricing formula was a unique market aberration. In addition to the MLS reported sales, custom home builders are enjoying one of their best years. These upper priced homes are built for a particular customer and are not usually reported to the Multiple Listing Service unless a REALTOR member was involved in the transaction. Finally, there are a growing number of builder/developers who also do direct sales and are not members of the MLS and thus their sales are not reported in this report. A great deal of multi-family housing has been and is being built in the market. It appears that nearly two hundred duplex and or four-plex type units have been built and over three hundred units are now in some stage of construction with anticipated occupancy scheduled for the summer of 2007. These units are predominantly three bedrooms and are sold to investors who expect $900 to $1100 a month rental rates. Shortly, these investors will determine that these rental rates are not sustainable by the twenty to thirty thousand per year working families. The rates for these units will eventually be lowered to the $750 per month range in order to generate some income for the investor. This will create pressure on developers of more typical one and two bedroom garden-type apartment projects who need to generate at least $.80 to $.90 a ft rents in order to be feasible. It is our opinion however that one high quality 300 400 unit garden apartment development could still be built if it were on a special site and will include a variety of real amenities. The best multifamily opportunity however for 2007 are the tax credit projects that can offer very affordable rents in the $300 to $400 a month range. A large percentage of the Branson workforce is currently driving from surrounding counties where they live. If gas continues to remain high, these workers should become more interested in living in Branson if affordable housing continues to become available.
Expansion Stage continued from page 1

There is no question that The Branson Landing project along with increased marketing funds were the catalyst for the areas economic boost. The increase in new visitors who stayed longer helped to advance all economic market sectors. The controversial Tax Increment Financing program approved by the Branson city council made both The Branson Landing as well as the Branson Hills retail development possible. These two projects have greatly contributed to the double digit sales tax increases that Branson as well as other taxing entities in both Stone and Taney counties currently enjoy. The success of these projects as well as the other major developments that have been added to the Branson landscape in 2006 have created the jobs and visitors that have in turn increased the demand for housing, retail, office, hotel and land.

The Fountains at Branson Landing.

Hospitality Market Makes Strong Positive Move

The 2006 year saw an increase in Branson visitors traveling from outside of three hundred miles and therefore staying longer in market. This fact as well as an increase of more than a half million additional visitors greatly improved the hotel/motel market. According to Smith Travel Research, Room Demand was up 7.1%, Room Rates increased 7.3%, Room Occupancy improved 8.0%, Room Revenue increased 14.9%, and RevPar jumped 16.1% over 2005. The national hotel market has also improved, however Branson has out performed many of the other tourist destinations as well as other major markets in the Midwest. Those looking to purchase hotel properties in 2006 are now predominantly investors and operators from out of the area versus those local operators who in past years were the only prospects for properties and who would only buy at large discounts. Current Cap rates are still over ten percent but properties are now selling for at least three times income, up from two to two and one half in prior years. Demand for properties by both travelers as well as investors are moving toward those higher end, full service properties. In fact, new properties that we believe will be developed in the coming years will be more name brand, interior corridor properties.

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2007 REAL ESTATE REPORT

Over 86,000 sq ft of New Office Inventory Added

Two new, large office buildings have been recently added to the areas office market. The forty thousand foot Executive Center and the forty six thousand foot Branson Financial Center are currently in some stage of lease-up. These two new buildings have greatly expanded both the amount of office space as well as the quality of office inventory in the area. With the additions of these two new buildings, the office market finished 2006 at a 70% overall occupancy rate. Both buildings were offering two to five thousand sq ft. suites when the present market is for one thousand to fifteen hundred sq ft suites. The Financial Center is unique as it has been established as a condominium and thus can sell as well as lease office suites. The developer of The Financial Center has also divided some of his larger suites into twelve hundred to fifteen hundred foot suites that have recently increased that buildings occupancy. The owner of The Executive Center is now considering how they can also reduce the size of some of their suites as well. The Executive Center offers an additional opportunity to accommodate some retail space as well office suites. Professionals in the area have gotten accustom to either leasing an old house or locating in a retail center at $8 to $12 per sq ft. The rental rate increases required for these newer, nicer office buildings have caused some sticker shock with many office users. We believe that the high occupancy rates enjoyed by retail will increase rate pressures as some of these office leases will not renew. New office users coming to the market will increase and the current users are going to move up and pay two to four dollars more per foot for rent and in order to locate in a professional office environment. A property qualified for this office study if it were considered primarily office in nature, provided for multi-tenant users, was within the city limits of Branson, and consisted of at least 5,000 square feet of total leasable office space.

1 2 3

Total Office Space - City of Branson Totals By Total Square Sub-Market Footage Located on Hwy 76 39,200 sf. Located off Hwy 76 133,720 sf. Downtown 57,559 sf. 230,479 sf.

Occupancy Rate 92% 80% 56%

Average Age 23 14.3 29.2

Average Lease Rate w/o CAM charges 11.00 /sf 12.57 /sf 12.40 /sf

Totals :

Our collective data was analyzed on an overall market basis as well as on the sub-markets as outlined above. The sub-markets were identified by geographic and facility type in order to clearly determine the market potential for various options. The data collected on each property includes total leasable space, occupancy, published or recent net rental rates, CAM charges and the age of building as well as location, anchor tenants, tenant mix and classification of the facility. We have relied upon data from property managers, governmental agencies, city department publications, appraisers, real estate agents, developers and personal inspections. We strongly advise readers to use this information solely for overall market review in broad general terms. Due to the nature of the data specific queries will need inclusion and exclusion of data to clearly identify appropriate results and opportunities.

Average Office Space Age - City of Branson Total Square Number of Facilities by Age Footage Facilities 1 1 to 10 years 121,724 sf. 5 2 11 to 20 years 54,180 sf. 4 3 21 to 30 years 15,000 sf. 3 4 31 years and up 39,575 sf. 4 Totals : 230,479 sf. 16

% of Total 53% 24% 7% 17% 100%

Occupancy Rate 63% 93% 100% 83% 70%

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2007 REAL ESTATE REPORT

The criteria selected for analysis of the retail market was broad in scope yet was categorized in segments so that sub-markets could easily be studied and defined as well. The properties included in the study had to be for retail use only, multi-tenant buildings of five thousand square feet minimum and within the city limits of Branson. A total of just more than two million twenty-seven thousand feet was surveyed and included in this study. We categorized the total market into four segments that included the Off Highway 76 market, the Highway 76 market, the Outlet Mall market segment and finallyBranson Landing.
Distribution of Retail Space by Location
Located on Hw y 76

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Retail Occupancy Exceeds 96%

built prior to 1997 received the lower range of rents. It is noted that properties of 20,000 square feet or larger in size and were less than eight years old typically demanded the higher rental rates. The Outlet Mall properties were viewed as a submarket due to the tenant type and marketing approaches they follow. Outlet Malls generally lease only to manufacturers and factory direct off price retailers. These properties are usually not available to general retail tenants. In reviewing this sub-market the current occupancy is 92.9%. Actual rental rates are not readily available or widely published. In discussion with local and national management firms, the rates are typically negotiated and are based on the total number of stores and the total amount of space a tenant leases throughout the country from a particular Outlet mall landlord. In addition, many of these tenants are leasing 10,000 sq ft plus stores in the market and may lease several hundred thousand feet through-out the country from one landlord. Commercial One Brokers has categorized The Branson Landing as a sub-market due to the size and unique nature of the property. The Landing currently has a 96.5% occupancy rate. While this property certainly falls within the parameters of another sub-market, it also commanded rental rates much above any currently being paid in the area.

21%

13%

Located off Hw y 76 Outlet Malls Branson Landing

29%

37%

The Off Highway 76 sub-market is defined as any qualifying property not fronting on Highway 76. The majority of these properties are located on Gretna Road (expanded) which is defined as that corridor from Business 65 on the east thru Highway 248 and Gretna Road then south on Highway 165 to the city limits. This sub-market category introduced several newly constructed properties that are still in the initial leaseup marketing stage and thus reflect above average vacancy. The occupancy rate for this sub-market however was still a very strong 96.3%. In general, the rental rates were the highest for properties north of Highway 76. The range in net rental rates was $10.00 to $17.00 per square foot per annum, depending upon the age of the building. The Highway 76 sub-market was defined as any qualified retail property fronting on Highway 76 except specialized properties such as outlet malls and the Branson Landing retail mall. The occupancy rate of this sub-market is approximately 96.1%. Actual occupancy was skewed slightly down due to the inclusion of one much older property that was included in the total. If that older property were removed from the data, an occupancy rate of approximately 98.2% would then be reached for this submarket. Net rental rates range from a low of $13.00 per sq/ft/year to a reported high of $27.00 per so/year. The properties that were generally

Occupancy Ratios per Sub-market

800000 700000 600000 500000 Square Feet 400000 300000 200000 100000 0 On Hwy Off Hwy 76 76 Outlet Branson Landing
Leasable Space

Sub-Market

Occupied Space

Even with a strong retail market, anticipated new developments must be properly located and must be designed for a specific market in order to be successful. Design must include proper sizing of bays as well as providing parking ratios that are higher than city requirements just to name a few issues. Commercial One Brokers LLC

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2007 REAL ESTATE REPORT

New Developments
Several significant projects are scheduled to either open this year or begin construction. These projects, when complete will certainly continue the expansion of the Branson market and surrounding areas. Branson Convention Center and Hilton Hotel Of course the most significant project to open will be the 220,000 sq ft convention center and 293-room Hilton Convention Center hotel this summer. There can be no doubt that this project will have a large ripple effect on the Branson economy for years to come. Branson Hills Retail and Residential Golf Community The next phase of the Branson Hills Plaza is well under construction. Joining Target, Home Depot and TJ Maxx will be a Wal-Mart Supercenter and Kohls Department store both scheduled to open in 2008. This 141-acre commercial development adjoins the 900 acre- golf and residential portion of the Branson Hills project. The mixed use residential development includes single family, condominiums, villas, a commercial town center and the Payne Steward golf course. Construction has begun on the first phase of homes with over 260 lots already pre-sold. Branson Hills is the citys first master planned mixed-use development. Sight & Sound Theater A successful theater operation that is expanding to Branson from Lancaster, PA. where they entertain over 800,000 each year. The Sight & Sound Theater is a fifty million dollar facility that will bring to life books of the bible with highly produced shows that feature a cast of 40, live animals and soaring sets that are over forty feet high. The theater is under construction and scheduled to open in June of 2008. Branson Commerce Park The Branson Commerce Park will be the citys first and only business park. The two hundred acre project is being built to attract office/warehouse users, light manufacturing, office showroom and warehouse distribution uses. A CenturyTel Smart Park, the development will have state of the art high speed internet support available to all users. Infrastructure construction has begun with sales and building construction expected to begin in the fall of 2007. This project will create many new, higher paying, and year-round jobs for the community. Other Important Additions To The Market Branson Regional Airport In the planning stages for several years, it appears that this very important area amenity will begin construction this year. A 7000 ft runway, terminal building and regularly scheduled flights to major Midwest cities as well as each coast. The fares anticipated are to be more competitive than the Springfield Branson airport and will certainly help to support the attendance at the convention center as well as other Branson attractions. Presently, over 96% of all Branson visitors currently arrive by rubber tire transportation. A more affordable and easily accessible travel option will help visitation to the area. The Pinnacle Entertainment District A 300-acre, six hundred million dollar development that will feature the areas first aquarium, indoor water park, restaurants and other attractions are planned for this project. This developer is now working with area governments to obtain TIF financing for the project. If this project goes forward it is expected to be completed by 2009. Point Entertainment Complex A 25-story hotel, high-end retail, restaurant and collector car museum are but a part of a new project announced for the NW corner of Highway 65 and 248. This project recently received zoning approvals from the city and preliminary design and feasibility studies are now being conducted. It is expected that a decision to proceed with this project will be made before the end of this year. Commercial One Brokers LLC

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Available Land Prices Vary Widely

Land is the most difficult market segment to evaluate. Parcel prices vary greatly based upon the location, size, zoning, topography, utilities, and access. In general land sales reported in 2006 range from several thousand dollars per acre to $18 and $20 dollars per square foot for small commercial tracts located on Hwy. 76. Development land in sizes from 10 to 200 acres sold from the low of $4,500 per acre to $100,000 per acre. Of course land generally located near or in the Branson city limits that can accommodate a residential or mixed use development and located with acceptable visibility, access and utilities sold at the higher end of that range. The properties that were topographically challenged and had poor access and location sold in the lower end of the range. Today the land most in demand are those parcels that can accommodate residential development within the Branson School District and with utilities accessible. Residential lots in the Branson School District have sold from the mid $30,000 to over $100,000 price ranges. Land prices have firmed up with development land located along Hwy 76 East all the way to Kirbyville has likely shown the greatest appreciation. Land that was offered less than twenty-four months ago for $4000 to $5000 per acre is now selling for $12,000 to $15,000 per acre. Land with public utilities and located near the proposed East/West expressway has shown the strongest interest and appreciation. Commercial lots fronting on Highway 76 sold from a low of $14.50 per square foot to a reported high of $20.00 per square foot. It should be noted that very little vacant land is available on Highway 76 within the city limits. Several older improved properties were purchased with the intention of raising the existing structure and building a new project. We anticipate investors/developers buying smaller, older economically obsolete properties and continuing this process in coming years. Commercial lots not located on Hwy 76 have sold in the $3.00 to $13.00 price ranges with corners and very level sites demanding the higher end of the price range. These lots are well located on major highways and strong collector roads. By far, the most important contributing factor to value is the traffic count followed by the sites topography, utilities and access.

We Represent Buyers And Sellers

Seller Representation
In order to efficiently complete our tasks, we are physically unable to list and properly market for sale or lease every property. Therefore, our efforts are focused on properties and clients that we can positively affect. Our approach is meant to build long-term relationships and complete not just one transaction, but many. We feel our job is to sell your property not just to put a sign on it. Our philosophy of doing business is summarized in this one statement We might not tell you what you want to hear all the time, however, we will tell you what we believe you need to hear. If that is how you wish to be treated in your real estate dealings, Steve Critchfield and Bob Huels of Commercial One Brokers are ready to go to work on your behalf.

Buyer Representation

We do not list every property in town, and therefore we spend our time on market priced listings or we prefer to represent buyers instead. We are trained to help you buy a property that will fit your needs. We approach many of our assignments from the perspective of the Buyer/Developer. We understand or work to understand your business so that we can be more effective representing you. Call us with questions or an assignmentwe would love to talk.

FOR MORE INFORMATION OR FREE MARKET ANALYSIS CONTACT Bob Huels CCIM Or Steve Critchfield 417-334-3149
www.commercialonebrokers.com

Commercial One Brokers LLC