SPRING 2016

KANSAS CITY RETAIL REPORT

Executive Summary Metro kansas city Trends Retail Market Overview

NGZ Recent TransactionsTHE VILLAGE AT BURLINGTON CREEK158,000 SF GLAPlatte County | Hwy 45 & 64th Street

SOUTHRIDGE SHOPPING CENTER56,000 SF GLAEast Jackson County | 1801 SW 7 Highway

NORTHEAST SHOPPING CENTER49,930 SF GLAEast Jackson County | 6001 Independence Avenue

Newmark Grubb Zimmer (NGZ) is constantly monitoring market indicators, tracking and analyzing supply and demand drivers, cyclical patterns and industry trends. The following quarterly research report examines the multifaceted Kansas City retail market.

NGZ research and analytics has established a system of data flow unique in our industry. Rather than rely on third party data sources, our data acquisition efforts involve inputs from advisors in the field, analysts and brokers executing transactions. NGZ research converts market data and analysis into knowledge that creates value for our clients.

Our clients include market-leading landlords and distinguished institutions in and around the Kansas City area and the Midwest. Our market knowledge continues to expand as the market progresses and evolves.

The metropolitan Kansas City retail vacancy rate increased 10 basis points to 7.4% during the first quarter of 2016. Following a strong holiday shopping season, the overall Kansas City market has tightened over the past year, realizing a 40-basis-point drop in vacancy. Demonstrating the growing strength of the local retail market, over 1.1 million square feet of net absorption occurred during the past four quarters, with nearly 2.8 million square feet absorbed over the past two years. Average quoted rental rates remained flat at $12.50/SF from the previous quarter, but increased $0.38/SF from the prior year. With decreasing vacancy rates, substantial net absorption and increasing rental rates, the metropolitan Kansas City retail market remains tight and is well-positioned coming out of the holiday shopping season.

Certain retail submarkets fared better than others during the first quarter. Clay County led the overall market with 23,203 square feet of positive net absorption between January and April, followed by Wyandotte County, with 21,978 square feet. Demand for space was weaker in both North Johnson County, where 77,657 square feet was returned to the market, and East Jackson County, where 72,763 square feet was returned.

The first quarter marked the eighth consecutive quarter of improving conditions for the big box sector. However, at 8.1%, the vacancy rate for big box stores remains 360 basis points above the 4.5% vacancy rate for shops smaller than 7,500 square feet. Despite continued demand for e-commerce retail solutions, brick-and-mortar sectors continue to perform well, especially in historically strong retail corridors and shopping centers.

A variety of sales dominated the list of significant first-quarter transactions. Highwoods Properties, Inc. selected a joint venture between two real estate investment trusts, Country Club Plaza KC Partners LLC, as the new owners of Kansas City’s iconic County Club Plaza. Taubman Centers, Inc. and the Macerich Co. closed the sale for $660.0 million. The portfolio consists of 18 properties with 805,000 square feet of retail space and 675,500 square feet of office space. Olathe Pointe Marketplace, located at 135th Street and Antioch Road in South Johnson County, sold for $8.5 million to Cincinnati-based Viking Partners III Fund. The retail shopping center was previously purchased in 2013 by DDR from Blackstone. Planet Fitness, a national franchise of fitness centers, opened its seventh metro location, a 28,500-square-foot space in the Millcreek Shopping Center located in Shawnee, Kansas. Planet Fitness agreed to a 10-year lease, with a 10-year option to renew. Walton Street Capital, LLC purchased the majority ownership from KKR & Co., LLP of Legends Outlets in Wyandotte County, Kansas. Posting 97.0% occupancy in over 100 stores, restaurants and entertainment attractions, Legends remains one of the best retail destination hubs for out-of-state consumers. Southridge Retail Center, located at 12090 Metcalf Avenue in Overland Park, Kansas, sold for $12.2 million to Highpoint Capital Group, LLC. Trading at $322/SF, the 38,000-square-foot center was constructed in 2004. The 13,900-square-foot Walgreens located at 9300 East Gregory Boulevard in Raytown, Missouri, sold for $6.0 million, or $432/SF.

The Kansas City metropolitan retail market is well-positioned, with sales activity increasing significantly coming out of the holiday shopping season. Limited available space in active retail corridors and shopping centers will continue to drive vacancy lower and boost retail rates. Mixed-use and infill projects within the Kansas City urban core will continue to grow and evolve. Development will continue on projects that offer consumers new shopping experiences not afforded by e-commerce limitations.

CASSCOUNTY

CLAYCOUNTY

EASTJACKSON

AtchisonPlattsburg

Lansing

Leavenworth

SmithvilleKearney

LibertyGladstone

Oak Grove

Peculiar

Belton

Spring Hill

Louisburg

Paola

Wellsville

Drexel

Harrisonville

Holden

Greenwood

Raytown

Leawood

Edgerton

Shawnee

BonnerSprings

De Soto

Lenexa

Tonganoxie

Weston

OVERLAND PARK

LEE’S SUMMIT

70

635

29

435

35

470

35

69

50

71

71

69

69

291

7

KANSAS CITY

OLATHE

INDEPENDENCE

market tightens

METRO MARKETVACANCY RATE

10%

9%

8%

7%

6%1Q 20164Q 20153Q 20152Q 20151Q 2015

7.4%7.3%7.3%7.8% 7.3%

The metro market vacancy rate has displayed a downward trend dropping 40 basis points

Market conditions continue to improve throughout Kansas City’s retail market. The market continues to tighten, as vacancy rates dropped over the past year and quoted rental rates increased in the majority of local submarkets. Demand remains strong leading out of the holiday season and into spring.

A

C

B SOUTHRIDGE SHOPPING CENTER56,000 SF GLANGZ was hired in 2015 to handle the leasing operations for Southridge Shopping Center. NGZ recently signed a 5-year agreement with Salvation Army reducing vacancy 27.0%.

THE VILLAGE AT BURLINGTON CREEK158,000 SF GLANGZ was hired by Inland Real Estate Income Trust to handle the leasing operations for The Village at Burlington Creek, a Class A retail center in Platte County. National tenants in the center include SPIN! Pizza, Caribou Coffee, Em Chamas, Sprouts and Bonefish Grill.

NORTHEAST SHOPPING CENTER49,930 SF GLANGZ represented the seller in a $2.6 million transaction which included two retail buildings. The Northeast Shopping Center traded at just under a 9.0% cap rate.

C

A

CASSCOUNTY

CLAYCOUNTY

EAST JACKSON

AtchisonPlattsburg

Lansing

Leavenworth

SmithvilleKearney

LibertyGladstone

Oak Grove

Peculiar

Belton

Spring Hill

Louisburg

Paola

Wellsville

Drexel

Harrisonville

Holden

Greenwood

Raytown

Leawood

Edgerton

Shawnee

BonnerSprings

De Soto

Lenexa

Tonganoxie

Weston

OVERLAND PARK

LEE’S SUMMIT

70

635

29

435

35

470

35

69

50

71

71

69

69

291

7

KANSAS CITY

OLATHE

INDEPENDENCE

KC URBAN COREVACANCY RATE

7%

6%

5%

4%

3%

5.3%5.2%4.9%4.9% 4.9%

1Q 20164Q 20153Q 20152Q 20151Q 2015

The KC Urban Core vacancy rate increased 40 basis points from the prior year. At 5.3%, the KC Urban Core posts the second lowest vacancy rate in the metro.

This map was produced using reliable private and government sources. This information is provided without representation or warranty.

N

South Johnson County remains one of the metro’s favored retail hubs by satisfying both consumers national brand and local boutique needs.

SOUTH JOHNSON COUNTYVACANCY RATE 1Q 2015

7.8%

Platte County ties KC Urban Core with the second-lowest vacancy rate in the metro.The Northland continues to attract key retailers as residential offerings grow.

Small shop space is hard to find in North Johnson County as vacancy for this niche sits at 3.4%. Big box space is readily available posting a 10.3% vacancy rate

PLATTE COUNTYVACANCY RATE

NORTH JOHNSON COUNTYVACANCY RATE

1Q 2016

5.3%

1Q 2015

9.4%

1Q 2015

5.6%

Worsened by 10 basis points over the past year.

Improved by 80 basis points over the past year.

1090

Improved by 30 basis points over the past year.

30130

80150

The Southeast Jackson County submarket led the metro with the largest drop in vacancy. Retail hubs in Lee’s Summit drove the recovery.

SOUTHEAST JACKSON COUNTYVACANCY RATE

Improved by 160 basis points over the past year.

160180

1Q 2016

9.5%

B

C

COUNTY

ONCOUNTY

WYANDOTTE

CASSCOUNTY

SOUTH KC

NORTHJOHNSON COUNTY

CLAYCOUNTY

EAST JACKSONCOUNTY

KC URBANCORE

SOUTH JOHNSONCOUNTY

WYANDOTTECOUNTY

SOUTHEAST JACKSONCOUNTY

PLATTECOUNTY

1Q 2016

6.0%

1Q 2015

7.6%

1Q 2016

7.0%

CASSCOUNTY

CLAYCOUNTY

EAST JACKSON

AtchisonPlattsburg

Lansing

Leavenworth

SmithvilleKearney

LibertyGladstone

Oak Grove

Peculiar

Belton

Spring Hill

Louisburg

Paola

Wellsville

Drexel

Harrisonville

Holden

Greenwood

Raytown

Leawood

Shawnee

BonnerSprings

De Soto

Lenexa

Edgerton

Tonganoxie

Weston

TOTALS

OVERLAND PARK

70

635

29

435

35

470

35

69

50

71

71

69

69

291

7

KANSAS CITY

OLATHE

INDEPENDENCE

LEE’S SUMMIT

SUNSET HILLBUENA VISTAHEIGHTS

PRAIRIEVILLAGE

WESTPORT

COLEMAN HIGHLANDS

ARMOURFIELDS

WORNALL HOMESTEAD

WESTSIDE

SHAWNEEHEIGHTS

BLUE HILLS

BROOKSIDE

WARD PARKWAY

PLAZA

MIDTOWN

WEST BOTTOMS

CROWN CENTER

FREIGHT HOUSE DISTRICT

CBD

7156

69

70

70

Submarket MapsDowntown & Suburbs

1Q16 kansas cityRetail Market Statistics Table

NET ABSORPTIONSquare Feet, Millions

ASKING RENT AND VACANCYSquare Feet, Millions

1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Net AbsorptionSquare Feet, Millions

1.2

0.8

0.4

0.0

-0.4

-0.8

Asking Rent and Vacancy

$12.75

$12.50

$12.25

$12.00

$11.501Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Average Asking Rent (Price/SF) Vacancy (%)

$11.75

9.50%

8.75%

8.00%

7.25%

5.75%

6.50%

Type# of

BuildingsTotal

Inventory (SF)

TotalVacancy

Rate

KC URBAN COREQtr.Absorption

(SF)

YTDAbsorption

(SF)

TotalAsking

Rent (NNN)

All 480 5,034,771 6.40% -16,709 -16,709 $11.30

Small Shop 347 1,206,067 3.00% 5,446 5,446 $12.97 Big Box 133 3,828,704 7.50% -22,155 -22,155 $11.02

All 863 13,295,516 9.50% 23,203 23,203 $12.48

Small Shop 546 1,917,733 5.30% 19,048 19,048 $16.44 Big Box 317 11,377,783 10.20% 4,155 4,155 $11.88

All 2,164 22,956,395 6.60% -72,763 -72,763 $10.11

Small Shop 1,596 5,151,486 5.10% -8,340 -8,340 $13.93 Big Box 568 17,804,909 7.00% -64,423 -64,423 $9.64

All 952 8,783,718 5.30% -11,948 -11,948 $12.65

Small Shop 656 2,267,156 5.60% -7,751 -7,751 $13.62 Big Box 296 6,516,562 5.20% -4,197 -4,197 $11.72

All 1,119 19,332,470 9.50% -77,657 -77,657 $11.98

Small Shop 705 2,453,380 3.40% 3,672 3,672 $17.57 Big Box 414 16,879,090 10.30% -81,329 -81,329 $11.60

All 333 5,617,767 5.30% -6,828 -6,828 $12.56

Small Shop 194 740,397 4.10% 2,242 2,242 $17.52 Big Box 139 4,877,370 5.50% -9,070 -9,070 $11.80

All 1,076 19,574,063 7.00% -18,368 -18,368 $17.78

Small Shop 590 2,194,395 5.10% -852 -852 $21.43 Big Box 486 17,379,668 7.20% -17,516 -17,516 $17.42

All 544 6,028,570 13.10% -944 -944 $10.00

Small Shop 380 1,116,377 3.70% -3,809 -3,809 $13.18 Big Box 164 4,912,193 15.20% 2,865 2,865 $9.88

All 420 5,645,929 6.00% -7,051 -7,051 $13.77

Small Shop 287 1,075,643 5.20% 3,154 3,154 $14.34 Big Box 133 4,570,286 6.20% -10,205 -10,205 $13.65

All 946 9,335,847 4.30% 21,978 21,978 $11.31

Small Shop 733 2,313,639 3.00% 8,410 8,410 $9.05 Big Box 213 7,022,208 4.70% 13,568 13,568 $11.52

All 8,897 115,605,046 7.40% -167,087 -167,087 $12.50 Small Shop 6,034 20,436,273 4.50% 21,220 21,220 $15.49 Big Box 2,863 95,168,773 8.10% -188,307 -188,307 $12.14

CASSCOUNTY

CLAYCOUNTY

EAST JACKSONCOUNTY

KC URBANCORE

NORTHJOHNSON

COUNTY

PLATTECOUNTY

SOUTHJOHNSON

COUNTY

SOUTH KC

SOUTHEASTJACKSONCOUNTY

WYANDOTTECOUNTY

TOTALS

Small Shop: Retail buildings in which GLA is 7,500 square feet or less. Big Box: Retail buildings in which GLA is 7,501 square feet or more.

Examination and calculation of supply and demand determinants by building size uncovered statistically significant inflection points consistently at the 7,500-square-foot building size.

For this reason, the division between small-shop and big-box occurs at 7,500 square feet.

By using any report or information provided by Newmark Grubb Zimmer (“Newmark”), the recipient hereby acknowledges and agrees that: (a) Newmark makes no express or implied representations or warranties with respect to the information and guarantees no particular outcome or result; (b) Newmark does not provide legal advice and does not represent or guarantee that any particular course of conduct, strategy, or action suggested by it conforms to any applicable law or regulation; (c) While Newmark has used its commercially diligent efforts to verify any underlying assumptions used in the report, some assumptions may not transpire and unforeseen events and circumstances may arise which may affect any such projections; (d) Although all information furnished in the report are from sources Newmark deems as reliable, such information has not been verified and no express representation is made nor is any to be implied as to the accuracy thereof and it is submitted subject to errors, omissions, change of price, rental or other conditions; (e) All proprietary information, which may include ideas, concepts, frameworks, know-how, methodologies, analytical approaches, databases, business insights, products, software, and descriptions thereof developed by Newmark shall be the property of Newmark; the ownership of the report does not include any rights of electronic data processing files, programs or models completed for research, unless specifically agreed to in writing by Newmark; (f) Such report shall be used for the sole purpose for which it is prepared and no other parties shall be deemed third party beneficiaries of such report; and (g) Any report may not be published, resold, distributed or communicated to the public without the prior written consent of Newmark Grubb Zimmer.™ Newmark Grubb Zimmer is a trademark of their respective owners

Newmark Grubb Zimmer research reports are also available at www.ngzimmer.com/?q=market-research

www.ngzimmer.com

Retail Terms and DefinitionsGross Leasable Area (GLA) – Expressed in square feet. It is the total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines. It is the standard measure for determining the size of retail spaces, specifically shopping centers, where rent is calculated based on GLA occupied. There is no real difference between RBA (Rentable Building Area) and GLA except that GLA is used when referring to retail properties while RBA is used for other commercial properties.Vacancy Rate – The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant.Net Absorption – The net change in physically occupied space over a period of time.Average Asking Rent – The dollar amount asked by landlords for available space expressed in dollars per square foot per year. Retail rents are expressed as triple net where all costs including, but not limited to, real estate taxes, insurance and common area maintenance are borne by the tenant on a prorata basis. The asking rent for each building in the market is weighed by the amount of available space in the building. Reproduction in whole or part is permitted only with the written consent of Newmark Grubb Zimmer. Some of the data in this report has been gathered from third-party sources and has not been independently verified by Newmark Grubb Zimmer. Newmark Grubb Zimmer makes no warranties or representations as to the completeness or accuracy thereof.

Mark C. Long, SIOR, CCIM, LEED APSenior Vice President - Principal

Victor CascioVice President

Justin A. BealAssociate Director

Andrew J. GartenDirector of Research Consulting

KANSAS CITY, MO1220 Washington Street, Suite 100Kansas City, MO 64105816.474.2000 ST. LOUIS, MO8235 Forsyth Boulevard, Suite 310Clayton, MO 63105314.254.4600

EASTERN JACKSON COUNTY1485 SW Market StreetLee’s Summit, MO 64081816.474.2000

SALINA, KSP.O. Box 3224Salina, KS 67402816.474.2000

North AmericaCanadaUnited States

EuropeAustriaBelgiumCzech RepublicFranceGermanyIrelandItalyNetherlandsPolandPortugalRomaniaRussiaSpainSwitzerlandUnited Kingdom

Latin AmericaArgentinaBrazilChileColombiaCosta RicaDominican RepublicMexicoPeruPuerto Rico

Asia-PacificAustraliaCambodiaChinaHong KongIndiaIndonesiaJapanMalaysiaNew ZealandSingapore

South KoreaTaiwanThailand

AfricaBotswanaKenyaMalawiNigeriaSouth AfricaTanzaniaUgandaZambiaZimbabweUgandaZambiaZimbabwe

Middle EastSaudi ArabiaUnited Arab Emirates