Q1 2018 RETAIL © 2018 CBRE|Hubbell Commercial | 1

MARKETVIEW

HIGHLIGHTS• The corridor in and about Jordan Creek Town

Center continues to be the #1 preferred destination for many retailers. Store openings in the big box or junior box categories have or soon will include The Container Store, Hobby Lobby, and Slumberland.

• The 300,000 square foot Outlets of Des Moines opened in 2017 in Prairie Crossing development in Altoona near the Bass Pro Shops. Almost 40 stores opened with others to come, including Lucky Brand Jeans in May 2018.

• Retail growth in Ankeny continues at rapid pace and is centered at Prairie Trail and the Delaware Avenue Corridor.

Des Moines Metro Retail, Q1 2018

Absorption slowed in 2017, but Des Moines shows continued strength as regional trade center

New Inventory 193,177 SF

Vacancy Rate (Neighborhood Center)15.4%

Vacancy Rate (Big Box)1.9%

Net Absorption (Neighborhood Center) 85,961 SF

Net Absorption (Big Box)293,075 SF

Various national headlines in 2017 declared “Retail is Dead”. It certainly is not and we submit the Des Moines marketplace as the first piece of evidence. What is accurate is that markets are changing. E-commerce sales are growing but still represented only 9.1% of total retail sales in the 4th quarter 2017. Demands from customers continued to evolve and retailers are responding to those demands. Brick and mortar stores are getting smaller.

Despite these changes, over 380,000 square feet of retail space was absorbed in the Des Moines market in 2017, including 293,075 square feet of big box space and 85,961 square feet in neighborhood and community centers. Another indication of strength in the market is that vacancy rates dropped across both categories. Vacancy slipped to just 1.9% for big box space and fell an additional 30 basis-points in neighborhood centers to 15.4%.

Vacancy Rates

4.6% 3.6% 1.4%

17.4%15.7% 15.4%

5.3%4.0%

2.0%0.0%

5.0%

10.0%

15.0%

20.0%

2016 2017 2018

Big Box Neighborhood & Community Center Regional Malls

Q1 2018 RETAIL © 2018 CBRE|Hubbell Commercial | 2

MARKETVIEW GREATER DES MOINES RETAIL

CHANGING RETAIL TRENDS IN THE MARKETPLACE

There is a dichotomy in the retail market and it is becoming more and more apparent. It exists between Class A retail locations and many second generation centers. The Class A centers are often newer construction and characterized by high visibility, superior co-tenancy, limited supply, and higher rental rates. On the other hand, there is a supply of inferior retail space that is often unanchored, located in mature retail corridors with limited growth, flat rental rates, and excess supply. Many landlords of these inferior locations continue to make necessary adjustments which include re-tenanting vacant spaces to non-retail uses, often service or medical tenants, or doing significant renovations to re-brand a particular center. The contrasts in our market continue to get wider as construction costs rise. Rental rates in the Western Suburbs have risen to the mid $30’s per square foot or higher for Class A centers whereas retail space can be leased just a few miles away in the $10-$14 psf range at inferior centers.

New construction has and will continue to occur but speculative retail construction will be limited. A major trend will be the placement of medical uses in retail settings. Medical tenants benefit from the easy access and visibility for patients. The proliferation of medical uses and other service providing tenants has been a positive factor for landlords in their efforts to re-tenant second generation neighborhood and community shopping centers.

We expect vacancy rates for big box stores to increase in the next twelve months as Babies R Us and Kmart have announced store closings in the western suburbs.

Market by Market UpdateANKENY

The City of Ankeny has been consistently been named one of the fastest growing cities in the U.S. and that growth included $337 million of new construction in 2017. It is no surprise that this growth results in a dynamic retail market.

New construction continued with five new buildings added to this year’s survey, totaling over 68,000 square feet. Occupancy within the neighborhood and community center declined slightly (1.2%) but that decrease is a result of new product being in the initial stages of lease-up. Overall, absorption in this market was positive with over 50,000 sf absorbed.

Occupancy within the big box category increased due to the backfilling of the former Dahl’s on N Ankeny Boulevard.

Growth continues in DRA’s Prairie Trail development and two new buildings have been constructed in The District section of the development. The mixed-use District has quickly become a favorite for office tenants, restaurants, and retailers. The biggest news at Prairie Trail is that B&B Theatres began construction on a 12 screen movie theatre and 12 lane bowling alley. The theater and bowling center will serve as an anchor in the town square area of The District.

Delaware Avenue continues to be a major player for traditional retailers and the strength of this market was witnessed when MC Sports shuttered their Delaware store and it was quickly backfilled with Planet Fitness.

Prairie Trail

B & B Theatres plans a 12 screen theatre and 12 lane bowling alley. Above is a photo of the company’s Wentzville, Missouri theatre.

Container Store located in the Mills Crossing development in West Des Moines.

Mills Crossing

Q1 2018 RETAIL © 2018 CBRE|Hubbell Commercial | 3

MARKETVIEW GREATER DES MOINES RETAIL

WESTERN SUBURBS

When you think retail and Des Moines, you start in the Western Suburbs. The strength of this submarket is palatable as over 50% of the absorption in the neighborhood and community center and big box categories occurred in this market. New construction continues as four new buildings were added. Occupancy increased to 84% within the neighborhood and community center category and 97.5% in the big box market. Retail rental rates are highest in this submarket as rates for newly constructed small shop space range from the mid $20’s to mid $30’s per square foot.

Several noticeable projects included Stuff, Etc. consignment store backfilling the former Dahl’s at 86th Street & Hickman, Clive (45,245 sf), opening of Slumberland at Jordan Crossing (36,160 sf) and continued construction of the new Hobby Lobby (52,223 sf) at the Plaza at Jordan Creek. A major impact on this marketplace was Signature’s redevelopment of Parkwood Plaza to the new Urban Town Center. The transformation from a tired, mostly vacant Class C center to a bustling, stabilized center has been transformative for the City of Urbandale.

Additional retail projects are on the horizon as the Hickman Road corridor is gaining strength, especially near the Hy-Vee at Alice’s Road where Panchero’s, AutoZone, and Starbucks are in the process of opening new stores. Retail development will make a jump across Jordan Creek Parkway as Fareway will construct a new grocery store and development of The Parkways project adjacent to the new IMT headquarters will commence.

SOUTH

Changes are occurring in this submarket as well. NDC completed construction of a new retail center at 2619 SW 9th Street (5,734 sf) but the major event to occur is the redevelopment of the Wakonda on Fleur Shopping Center. Approximately 35,000 sf of Class C retail space was razed and replaced with a new 30,282 sf Fareway grocery store. The center is being re-branded Fareway on Fleur and also includes a remodeled McDonald’s, re-build of Financial Plus Credit Union, and addition of Pet Supplies Plus, Cheng’s Garden, Dollar Tree, and a fitness center to the tenant roster.

Occupancy within this submarket increased nicely three full percentage points to 86.7%. This positive development is a reflection of the growth of retail

on Fleur Drive and recent additions of retailers and restaurants on Fleur Drive, as well as increased occupancy at Stefon Plaza. Despite all of the momentum on Fleur Drive, absorption did decrease 10,942 sf in 2017 for neighborhood and community centers while big box occupancy remained almost unchanged.

NORTHEAST/ALTOONA

The October 2017 opening of the Outlets of Des Moines at Prairie Crossing was clearly the major event in this submarket. The 300,000 sf center is the first outlet style center to open in the immediate Des Moines area and solidifies Altoona as a major entertainment center in Iowa. Within the neighborhood and community center category, occupancy dipped slightly to 86.9% and there was a minimal positive absorption (1,985 sf). Alternatively, there was a major shift in the big box market as the former Dahl’s store at Eastwood Village was backfilled with Affordable Family Storage (47,019 sf), as was the former Homemaker’s East outlet store on Hubbell Avenue. New construction of neighborhood and community centers was limited.

An exciting entry to this submarket is the opening of the Des Moines area’s first Pet Supplies Plus store (8,998 sf) in Altoona. A new retail center is getting set to open at the corner of 8th Street SE & Prairie Meadows Drive that will include Dunkin Donuts, Radiant Complexions, and Supercuts (11,900 sf). Also, development at Prairie Crossing will continue to gain momentum as Hyatt Place, Burger Shed, and Hy-Vee Fast and Fresh are all expected to develop in the next 24 months.

Outlets of Des Moines

The 300,000 SF outlet center opened in Altoona in October 2017.

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MARKETVIEW GREATER DES MOINES RETAIL

VACANCY RATES

Overall market occupancy was 98.1% at year end 2017. Occupancy has risen 2.7% in the past 24 months. South Des Moines has the lowest occupancy rate at 96.6% and primarily results from Best Buy’s 2016 departure from Southdale Shopping Center. Big Box occupancy is 100% in both the Northeast and Northwest submarkets.

INVENTORY

Our survey included 148 properties, representing over 10.56 million square feet of retail space and an addition of 4 new properties over last year. Two of those new properties were in the western suburbs while one was in South Des Moines. Hy-Vee opened their new downtown grocery store in 2017, which is located at 4th Street and Court Avenue. The store is part of a 4-story mixed use project, with 81 upper floor apartments. An adjacent parking deck structure is included for additional parking. The addition is the first big box store added in the CBD. The grocery store contains 37,204 square feet.

Submarket

Market Rentable Area (SF)

Vacant(SF)

Vacancy Rate

Net Absorption

Western Suburbs 5,472,030 136,801 2.5% 150,777

CBD 37,204 - 0.0% 37,204

Northwest Des Moines 390,246 - 0.0% -

Northeast Des Moines 1,576,772 - 0.0% 85,146

South Des Moines 1,332,093 45,291 3.4% 30,282

Ankeny 1,791,343 21,496 1.2% 26,870

Greater Des Moines Total 10,562,484 203,588 1.9% 293,075

VACANCY RATES

Overall market occupancy was 85.6% at year end 2017. Occupancy has risen 2.0% percent since year end 2015. Excluding the central business district, all submarkets have occupancy rates between 84% and 90%. The strongest submarket in terms of occupancy is Ankeny where 90.3% of all neighborhood and community center space is occupied.

INVENTORY

This year’s survey included 383 properties, representing over 6.92 million square feet of retail space in strip retail centers. Eleven new properties were included in this year’s survey, including five in Ankeny, four in the Western Suburbs, and one each in Northeast and South Des Moines.

Submarket

Market Rentable Area (SF)

Vacant (SF)

Vacancy Rate

Net Absorption

Western Suburbs 3,784,558 605,529 16.0% 43,611

CBD 138,432 62,294 45.0% (3,461)

Northwest Des Moines 780,238 138,102 17.7% 2,341

Northeast Des Moines 823,723 107,908 13.1% 1,985

South Des Moines 549,445 73,076 13.3% (10,942)

Ankeny 845,860 82,048 9.7% 52,427

Greater Des Moines Total 6,922,256 1,068,957 15.4% 85,961

Big Box Retail

Neighborhood and Community Centers

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MARKETVIEW GREATER DES MOINES RETAIL

Regional Shopping Center

Overall 93.0% of the four major regional shopping centers are occupied. The lowest is approximately 75% at the Outlets of Des Moines due to its initial lease-up, and the strongest is Jordan Creek Town Center at 98%. A major event in this category is that Von Maur announced plans to build a new 140,000 sf store at Jordan Creek Town Center for a 2022 store opening.

Rentable Area (SF) Total Stores Occupancy

Merle Hay Mall 941,866 77 95.90%

Valley West Mall 910,000 118 91.00%

Outlets of Des Moines 300,000 40 75.00%

Jordan Creek Town Center 979,000 134 98.00%

Greater Des Moines Total 3,132,884 369 93.00%

Jordan Creek Town Center

Von Maur announced plans to open a new store in 2022 in West Des Moines.

Hobby Lobby plans to open a new store near Jordan Creek Town Center in March 2018.

Plaza at Jordan Creek

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MARKETVIEW GREATER DES MOINES RETAIL

Population635,000 (2017 MSA)

Unemployment00%

Unemployment Rate2.6%

Construction, 6%

Manufacturing, 5%

Trade Transportation/Utilities,

18%Leisure and Hosp Services, 10%

Other Services, 4%

Government, 12%

Information, 2%

Financial Activities, 15%

Professional and Business Services,

14%

Education and Health Services, 14%

LARGEST EMPLOYERS EMPLOYEES

Wells Fargo & Company 14,500UnityPoint Health - Des Moines 7,797Mercy Medical Center 7,055Hy-Vee, Inc. 6,400Principal 6,182Nationwide 4,442John Deere 3,089Vermeer Corporation 2,500DuPont Pioneer 2,495JBS USA 2,300Pella Corporation 2,224Kum & Go 2,043Wellmark Blue Cross Blue Shield of Iowa 1,800UPS 1,600Firestone Agricultural Tire Co. 1,600YMCA of Greater Des Moines 1,480Athene 1,320EMC Insurance Companies 1,300Casey's General Stores 1,200Tyson Fresh Meats, Inc. 1,200

12 Month Changein employment 2.6%

Sources: Greater Des Moines Partnership Bureau of Economic AnalysisUS Bureau of Labor Statistics - December 2017

GREATER DES MOINES ECONOMIC DATA

YEAR DES MOINES MSA PERCENTAGE CHANGE

2012 $8,270,064,777 5.07%2013 $8,411,526,797 1.71%2014 $8,787,650,388 4.47%2015 $9,346,317,273 6.36%2016 $9,769,581,274 4.53%2017 $10,071,879,055 3.09%

Source: Iowa Retail and Use Tax Report, Iowa Department of Revenue and Finance

Annual Retail Sales

MARKETVIEW GREATER DES MOINES RETAIL

2018 - Hubbell Commercial Brokers, L.C., d/b/a CBRE|Hubbell Commercial and Frandson & Associates . The information contained herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we make no guarantee, warranty or representation, either expressed or implied, as to its accuracy or completeness.

SUBMARKET BOUNDARIES

Central Business District (CBD) - Includes the Western CBD and the East Village, extending west to Martin Luther King Jr. Parkway and east to East 14th Street.

Western Suburbs - Encompasses West Des Moines, Clive, Urbandale, Windsor Heights, Johnston, Grimes, Waukee, and some unincorporated areas of Polk, Dallas, and Warren Counties.

Northwest - Includes Northwest Des Moines and Western Saylor Township.

Northeast - Consists of Northeast Des Moines (extended south to the Des Moines River), Pleasant Hill, Altoona, Eastern Saylor Township, and Delaware Township.

South - Comprises Southwest Des Moines, Southeast Des Moines (south of Des Moines River), and some unincorporated areas of Polk and Warren Counties.

Ankeny - Evaluated separately.

DES MOINES CENTRAL BUSINESS DISTRICT (CBD)

GraysLake

Des MoinesRiver

RacoonRiver

SaylorvilleLake

ANKENYREGIONALAIRPORT

DES MOINESINTERNATIONAL

AIRPORT

NW 10

0TH S

T

ANKE

NY B

LVD

E EUCLID AVE

STATE

ST

SE 14

TH ST

BROADWAY AVE

DELA

WARE

AVE

HUBB

ELL A

VE

NE 78TH AVE

DELA

WARE

AVE

SW 9T

H ST

2ND

AVE

E UNIVERSITY AVE

SW 63

RD ST

86TH

ST

NW 70TH AVE

GRAND AVE

ARMY POST RD

MERL

E HAY

RD

100T

H ST

EP TRUE PKWY

DOUGLAS AVE.

63RD

ST

RAILROAD AVE

INGERSOLL AVE

NW 86

TH ST

RACCOON RIVER DR

ML KING JR PKWY

JORD

AN CR

EEK PK

WY

MILLS CIVIC PKWY

FLEUR

DR

NW 14

2ND S

T

GRAND AVE

N 1ST

ST

HICKMAN RD

UNIVERSITY AVE

NW BEAVER DR

NW 12

8TH S

T

SW 8TH ST

163

R22

28

5

415

5

141

65

65

65

5

28

69

6

28

5

6

44

65

69

6

6569

28

80 35

35

235

35

80

235

80

80

35

CARLISLE

NORWALKCUMMING

URBANDALE

DES MOINES

CLIVE

WESTDES MOINES

WARRENCOUNTY

MADISONCOUNTY

WAUKEE

JOHNSTONGRIMES

BONDURANT

ALTOONA

PLEASANTHILL

ANKENY

POLKCOUNTY

DALLASCOUNTY

WINDSORHEIGHTS

CBD

SOUTH

NENW

WESTSUBURBS

DES MOINES METROPOLITAN AREA

GRAND AVE

GRAND AVE

GRAND AVE

GRAND AVE

E GRAND AVE

9 TH ST

WALNUT ST

WALNUT ST

W

ALNUT ST

E WALNUT ST

3RD ST 3RD

ST 3RD ST SW

3RD ST SW

2ND

ST IND

IAN

OLA

AVE

2ND

AVE 2ND

AVE 2N

D AVE

6TH AV

E 6TH AV

E 6TH AVE

7TH ST 7TH

ST 7TH ST 7TH

ST SW 7TH

ST

SCOTT AVE

SCOTT AVE

E ST

H S

T

SE

6TH

ST

E 6T

H S

T

PEN

NSY

LVA

NIA

AVE

E

7TH

ST

SE 7TH

ST SE 7TH ST

E 14 TH ST

SE 14TH ST E 14TH

ST

KEOSAUQUA WAY 8TH ST 8TH

ST

W MARTIN LUTHER KING JR PKWY W MARTIN LUTHER KING JR PKWY

W MARTIN LUTHER KING JR PKWY

MA

RTIN LU

THER JR PKW

Y MA

RTIN LU

THER KIN

G JR PKW

Y FLEUR D

RIVE

LOCUST ST

LO

CUST ST

L

OCUST ST

LO

CUST ST

18TH

ST

COURT AVE

COURT AVE

E COURT AVE

5TH AV

E 5TH AVE 5TH

AVE SW 5TH

AVE

DES MOINES ST

DES MOINES ST

LYON ST

E 12TH ST E 12TH

ST

E 5TH ST

E ELM ST

E 2ND

ST

E VINE ST

E 5TH ST

PARK ST

9TH ST

CENTER ST

13TH AVE

M

ULBERRY ST

4TH ST

E 1ST ST

CHERRY ST

E LIVINGSTON AVE

SCHOOL ST OAKRIDGE DR CROCKER ST

17TH ST 17TH

ST 17TH ST

INGERSOLL AVE INGERSOLL AVE

HIGH ST

HIGH ST HIGH ST

CENTER ST

12TH ST

CENTER ST 10TH ST

12TH ST 12TH

ST

TUTTLE ST

4TH ST

WATSON POWELL JR WAY

COTTAGE GROVE AVE COTTAGE GROVE AVE CROCKER ST 15TH ST 15TH ST 15TH

ST SW 16TH

ST

20TH ST

WOODLAND AVE WOODLAND AVE

E 9TH ST E 9TH

ST

MA

PLE

ST

E 4TH ST E 4TH

ST E 4TH ST

ROBE

RT D

RAY

DR

SW W

ATER ST

SW W

ATER ST

19TH ST 19TH

ST

SE 14TH ST

TUTTLE ST

MURPHY ST

OAKRIDGE AVE

15TH ST

16TH ST

18TH ST

16 TH ST

LINDEN ST

11TH ST

SCHOOL ST 8TH ST

SE 10TH ST

SE 9TH ST

RACCOON ST

SE 8TH ST

E 3RD ST

E MARKET ST

VINE ST

MARKET ST

W R

IVER

DR

E 13TH

E 13TH

PLEASANT ST

SCHOOL ST

SCHOOL ST LYON ST

LYON ST

Racoon River

Des Moines River

Des Moines River

ELM ST

235

State Capitol

PrincipalPark

Iowa EventsCenter

BotanicalCenter

East Village

Western Gateway Park

801 Grand Civic

Center

State Historical

Museum

Court AvenueDistrict

While there are a variety of retail uses, this survey focuses on regional shopping malls, neighborhood and community centers, and big box retail. The neighborhood and community centers analysis focuses on multi-tenant with small to medium size occupiers. Big box includes grocery stores, home improvement stores, and larger retail and discount stores containing approximately 20,000 SF. Regional shopping centers are considered separately. The 2018 Marketview contains information collected during the first quarter of 2018.

METHODOLOGY

Commercial Real Estate Advisory and Transaction Services

6900 Westown Parkway • West Des Moines, Iowa 50266 • +1 515 224 4900 • Fax +1 515 221 6652

www.cbre.com/desmoines

Licensed in the state of Iowa.

FRANDSON & ASSOCIATES, L.CFrandson & Associates, L.C. is a full service commercial real estate appraisal and consulting firm based in

Des Moines, Iowa. The principals and associates of Frandson & Associates, L.C. have extensive experience in evaluating complex commercial, industrial, multi-family, development and special use properties.

Financial Center, Suite 1801 • 6th & Walnut • Des Moines, Iowa 50309• 515.247.0040 • Fax 515.247.0044

www.frandsonandassociates.com