*SALE & LEASE TRANSACTIONS, Q1 2018

MARKET INDICATORSVACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE* *Asking Rents

407

1,932,775

Q4 2017 Q1 2018

TOTAL RETAILTRANSACTIONS

SQUARE FOOTAGEIN DEALS

Research & Forecast Report

DETROIT & ANN ARBORRETAILQ1 2018

The Metro Detroit retail market posted an overall vacancy rate of 5.7%, down thirty-basis points since the fourth quarter 2017. Asking rental rates in the first quarter were $13.05 per square foot and net absorption is positive with 787,819 square feet absorbed in the first quarter. The market improved in 2018, compared to the fourth quarter 2017; vacancy was at 6.0% and asking rental rates were $12.97 per square foot.

The decisions on how and where we shop continues to affect the retail landscape as we’ve come to know it. Due to a lack of traffic and in a world where convenience rules, the big box footprint we became accustomed to is becoming extinct in today’s shopping world. As retailers rework their strategies to overcome these changes and move forward, some were unfortunately met with store closures. In 2017 alone, retailers occupying 105 million square feet closed locations throughout the United States. In Michigan, we witnessed dozens of household names such as Sears, Kmart, The Limited, Macy’s and other underperforming stores disappear from the landscape. Adding to the list of closures in 2018, department store chain Bon-Ton and the retail giants Toys R US and Babies R US recently announced plans to close 180 stores. It’s not all bad news though. In 2018, we expect to see less store closures as retailers move toward a healthier business model and footprint. Many of these old stores are being repurposed from traditionally hard to fill big box space, to accommodate today’s shopper, which means smaller footprints and mixed-use variety. Retailers such as Ulta, Target and Meijer are already working to adopt smaller footprints in urban areas such as the Meijer slated to open in Downtown Detroit. The super home goods store, At Home, is finding that stores formerly operated as Sears and Kmart are a comfortable fit for their footprint and has added a couple stores to their Michigan portfolio, including the recently opened location in Roseville. In the world of chain discount stores, Sierra Trading Post recently opened stores in Novi and Ann Arbor with plans for another store in West Michigan in 2018. Aldi plans to renovate 20 Detroit area stores by the end of 2019 and it’s still building in Michigan with a store in Ann Arbor and west Michigan coming soon.

RETAIL IMPROVES IN FIRST QUARTERAmber Goodwin Senior Research Analyst | Detroit & Ann Arbor

TOTAL GENERAL RETAIL SHOPPING CENTERS

2 Detroit & Ann Arbor Research & Forecast Report | Q1 2018 | Retail | Colliers International

PROPERTY CITYSUBMARKET

SIZE OF DEAL BUYER NAME PRICE

3541 Highland Road Waterford Lakes Area 114,227 Amerco Real Estate

Co. $35.02

2051-2133 N Wixom Road Wixom West Oakland 44,000 North Wixom Plaza,

LLC $31.48

905 South Main Street Royal Oak 18,789 9 Zero 5, LLC $159.66

SALES

PROPERTY CITY SUBMARKET SIZE OF DEAL TENANT NAME

495 Summit Drive Flint Outlying Market 110,000 Tommy's

29330 Schoolcraft Road Livonia West Wayne 22,500 ALDI

7007 - 7093 Dexter Ann Arbor Road

Dexter Outlying Area 10,581 Redline Athletics

LEASES

Without a doubt there is growing interest in the Motor City from local and national retailers which is fueling supply and demand in Detroit and other downtown markets. Planet Fitness plans four new gyms in Detroit in 2018 and H&M is looking to join Nike, Under Armour, John Varvatos and other national retailers downtown. We look forward to flavor filled landscapes and destinations offering a variety of entertainment, theater, hotels, restaurants and retail experiences with ambiance and amenities at the center of the consumer’s focus.

Notes on the MarketALL SECTORSRetail is off to a good start as a flurry of activity in the first quarter leads to improved market conditions. The total retail vacancy rate in the Metro Detroit market was 5.7% this quarter, down thirty-basis points from 6% in the fourth quarter 2017. Year-to-date absorption was positive at 787,819 square feet absorbed in the first quarter. Ann Arbor’s retail sector is feeling the squeeze, posting a 3.3% vacancy rate in the first quarter with an average asking rate of $16.04 per square foot. The city of Troy remains tight with a 98% occupancy rate and asking rents of $21.94 per square foot, the highest rents in the market. The North Oakland County submarket is experiencing the highest vacancy rate at 9.8% with an average quoted rental rate coming in at $13.99 per square foot.

GENERAL RETAILGeneral retail (which includes all freestanding retail buildings that are not contained within a shopping center) closed the fourth quarter with a 3% vacancy rate. Year-to-date absorption for general retail was 209,567 square feet. Quoted rental rates are $13.75 per square foot. Year to date, there was 112,137 square feet delivered in the general retail category with 813,226 square feet currently under construction in 2018. Construction activity in the general retail sector accounts for the most active of all retail sectors as we move into 2018.

SHOPPING CENTERSIn the Metro Detroit market, the average quoted rental rate for shopping centers (all classes: community centers, neighborhood centers, and strip centers) is $12.38 per square foot in the first quarter 2018. Vacancy is 9.9% in the first quarter, little changed from the fourth quarter 2017. Shopping centers in Bloomfield’s submarket command top dollar for rent at $17.93 per square foot. However, the market is still relatively tight reporting the lowest vacancy at 3.5%. The Shopping Center sector absorbed 53,860 square feet so far this year.

POWER CENTERSMetro Detroit’s power center market (which includes centers consisting of several free-standing unconnected anchors and only a minimum amount of small specialty tenants, 250,000 – 600,000 square feet) decreased to 4.3%, a ninety-basis point decrease from 5.2% vacancy in the fourth quarter 2017. Rents continue to improve with a $16.11 per square asking lease rate, compared to $15.69 per square foot in the fourth quarter 2017.

SALES / LEASESIn the first quarter, there were 168 transactions with an average sales price of $97 per square foot, and an average cap rate of 7.9%. Investors seem eager to buy small multi-tenant retail strips, however, availability of such product is scarce.In Dexter, Redline Athletics signed a lease in February for a 10,581-square-foot training center, which marks the addition of their second location to the region. Among the flurry of new restaurants popping up, Broasted Brothers Chicken signed a lease at Sheldon Place in Plymouth and plans to open in early summer.

TOTAL GENERAL RETAIL SHOPPING CENTERS

QUOTED RENTAL RATESOVERALL MARKET

NOTABLE RETAIL DEALS

OCCUPANCY RATEOVERALL MARKET

3 Detroit & Ann Arbor Research & Forecast Report | Q1 2018 | Retail | Colliers International

BY THE NUMBERS

SHOPPING CENTER MARKET STATISTICS BLOOMFIELD DETROIT / THE POINTES DOWNRIVER LIVINGSTON /

W OAKLAND MACOMB NORTH OAKLAND ROYAL OAK SOUTHFIELD TROY WASHTENAW WEST WAYNE TOTALS

EXISTING INVENTORY

NO. OF BUILDINGS 99 156 126 168 480 169 105 60 56 123 428 2,396TOTAL GLA 4,577,970 4,796,410 4,359,549 6,621,422 18,979,720 6,507,162 3,257,181 1,891,765 2,272,311 6,124,245 15,751,675 94,102,338

VACANCY

DIRECT SF 154,724 509,820 507,088 576,324 1,456,070 549,441 491,441 204,087 80,480 396,006 1,949,422 8,910,610TOTAL SF 158,644 524,300 571,911 631,858 1,614,790 612,756 497,311 206,087 80,480 400,506 2,015,506 9,349,856

VACANCY % 3.5% 10.9% 13.1% 9.5% 8.5% 9.4% 15.3% 10.9% 3.5% 6.5% 12.8% 9.9%YTD NET ABSORPTION (4,654) 45,792 53,592 28,784 (122,960) 131,232 (1,022) 373 2,681 (67,188) (165,356) 53,860

YTD DELIVERIES 0 0 0 10,782 0 0 0 0 0 0 0 10,782UNDER CONSTRUCTION SF 0 0 0 33,797 15,088 5,500 17,218 0 43,082 0 45,060 166,404

QUOTED RATES $17.93 $12.50 $11.99 $13.35 $12.07 $13.46 $11.93 $15.20 $17.68 $12.83 $12.07 $12.38

GENERAL RETAIL MARKET STATISTICS BLOOMFIELD DETROIT / THE POINTES DOWNRIVER LIVINGSTON /

W OAKLAND MACOMB NORTH OAKLAND ROYAL OAK SOUTHFIELD TROY WASHTENAW WEST WAYNE TOTALS

EXISTING INVENTORY

NO. OF BUILDINGS 674 4,937 1,536 1,408 3,388 1,583 1,646 308 259 1,640 3,918 25,963TOTAL GLA 5,002,377 25,923,430 9,088,127 10,251,084 23,286,766 10,759,942 8,306,624 3,328,375 2,173,709 10,834,051 23,503,445 164,720,134

VACANCY

DIRECT SF 178,061 1,058,960 311,023 221,762 450,907 265,917 187,756 79,435 39,956 184,887 817,013 4,885,296TOTAL SF 178,061 1,061,342 311,023 221,762 467,229 282,752 192,756 79,435 39,956 187,929 823,363 4,942,127

VACANCY % 3.6% 4.1% 3.4% 2.2% 2.0% 2.6% 2.3% 2.4% 1.8% 1.7% 3.5% 3.0%YTD NET ABSORPTION 33,155 44,888 (23,413) (17,788) 108,582 9,167 31,069 (3,025) 11,428 (5,754) 2,753 209,567

YTD DELIVERIES 7,500 4,000 2,000 4,426 27,590 0 4,739 0 0 0 43,400 112,137UNDER CONSTRUCTION SF 0 216,700 329,141 25,378 104,811 4,270 7,770 6,700 7,840 28,660 30,795 813,226

QUOTED RATES $18.70 $13.36 $12.20 $13.31 $12.01 $16.61 $18.12 $22.09 $24.32 $22.83 $11.91 $13.75

OVERALL MARKET STATISTICS BLOOMFIELD DETROIT / THE POINTES DOWNRIVER LIVINGSTON /

W OAKLAND MACOMB NORTH OAKLAND ROYAL OAK SOUTHFIELD TROY WASHTENAW WEST WAYNE TOTALS

EXISTING INVENTORY

NO. OF BUILDINGS 850 5,162 1,749 1,846 4,230 1,908 1,808 405 365 1,917 4,746 30,416TOTAL GLA 10,609,131 32,348,734 15,454,299 23,734,202 50,544,992 23,915,905 12,045,994 8,068,311 8,212,719 18,833,801 48,050,287 308,331,788

VACANCY

DIRECT SF 357,029 1,781,996 818,111 1,139,782 2,238,893 2,266,538 701,164 291,062 162,949 606,030 3,316,531 17,185,822TOTAL SF 360,949 1,798,858 882,934 1,195,316 2,418,932 2,346,688 712,034 293,062 162,949 613,572 3,409,199 17,707,130

VACANCY % 3.4% 5.6% 5.7% 5.0% 4.8% 9.8% 5.9% 3.6% 2.0% 3.3% 7.1% 5.7%YTD NET ABSORPTION 26,082 121,480 161,940 41,478 (23,337) 151,676 30,047 535,512 14,109 (69,975) (203,192) 787,819

YTD DELIVERIES 7,500 4,000 7,000 19,308 27,590 0 4,739 0 0 0 43,400 132,019UNDER CONSTRUCTION SF 0 216,700 329,141 59,175 119,899 9,770 24,988 6,700 50,922 28,660 286,187 1,189,962

QUOTED RATES $18.80 $13.05 $12.05 $13.70 $12.56 $13.99 $14.92 $16.15 $21.94 $16.04 $12.01 $13.05

RETAIL MARKET > Q1 > 2018

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CONSTRUCTION & DEMOLITION ACTIVITYDuring the first quarter 2018, 132,019 square feet completed in Detroit’s retail market. There is currently 1,182,962 square feet under construction as we move into 2018. Top Golf broke ground over the winter in Auburn Hills and is expected to open in the winter of 2018. Construction activity is especially hot in downtown Detroit. New retail, restaurants, hotels, mixed-use and multi-family developments dot the area, including a European-style promenade which is planned for the block between Fox Theater and the new Little Caesars headquarters downtown. The 7.Liv project envisions a 20,000 + square foot commercial space with 10-residential apartments. In February it was announced that the overpass at Woodward and I-75 may be widened in anticipation of 9,000 square feet of new retail.

2018 REVIEW

» Overall retail improved in the first quarter 2018

» Retail users re-think their strategy and adjust footprint to eliminate dead space and reduce their real estate costs

» Food users drive per-square-foot prices

» Construction activity remains active

2018 OUTLOOK

» There is an abundance of opportunity for retail in Metro Detroit with a demand for almost every category of supportive services such as grocery, restaurants, coffee shops, bakeries, pet stores, furniture, and health & fitness

» Smaller more convenient footprints will dot landscape

» Downtown areas such as the Central Business District and suburbs like Birmingham, Royal Oak, Ferndale, and Ann Arbor remain highly sought after

» Re-population and demand in the City of Detroit drives a spur of new construction of residential units, retail, office and mixed-use space

» Opportunity spreads from Detroit’s Central Business District to communities outside downtown such as New Center, Midtown, Brightmoor and 7LIV

4 North American Research & Forecast Report | Q1 2014 | Office Market Outlook | Colliers International

Copyright © 2018 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International | Detroit2 Corporate Drive, Suite 300 Southfield, MI+1 248 540 1000colliers.com/detroit

Amber GoodwinSenior Research AnalystDetroit & Ann Arbor+1 248 540 1000 Ext. 1624amber.goodwin@colliers.com

FOR MORE INFORMATIONPaul Choukourian, CCIMExecutive Managing DirectorDetroit & Ann Arbor+1 248 540 1000 Ext. 1622paul.choukourian@colliers.com

All statistics are for 2018, are in U.S. dollars and include affiliates.