2018 REAL ESTATE MARKET FORUM DAVID R. BLACK, CCIM, SIOR CEO

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1 2018 REAL ESTATE MARKET FORUM DAVID R. BLACK, CCIM, SIOR CEO

2 SOUTH SIDE 1.25 Million SF 43 Buildings Vacancy: Was 1.3% Now 7.5% Albertson s Hastings: 27,500 SF Average Rental Rate: $19.97 New Building Rates: $30.00 (Target) HIGHLIGHTS Ø New Washington Trust Bank branch at Manito Ø Former South Regal Lumber Yard Ø Harlan Douglass Maverick Ø John Stejer bought the SEC of 29 th & Regal 8 CAP Ø New addition on the 57 th & Regal property Ø Convenience store gas station on 57 th & Palouse Ø KXLY broke ground on infrastructure Ø Development is just plain hard. $20 x 5 = $100 land $150 building $ 50 soft costs $300

3 Ø 6 Million SF 181 Buildings NORTH SIDE Ø Vacancy (October) % % Ø Average Recent Rental Rates $17.35 NNN New Projects $30.00 Ø COSTCO purchased part of the Kaiser site. Will sell their building. Ø New Carl s Jr. and Wake Up Call in front of Planet Fitness and Goodwill. Ø New projects at Holland and Hwy 2 - $30 range Wells Fargo, Mod Pizza, Aspen Dental, BECU and a new Urgent Care Ø Maverick at Francis & Nevada Ø Stockton project (Matilda) on Hamilton Ø Dick s Sport s Authority space Northpointe Ø Mattress Firm closing 300 locations suing their leasing broker

4 N-S Corridor

5 *As submitted by Costco to the County N-S Corridor

6 VALLEY MARKET Ø 6 Million SF 166 Buildings (October 2017) Ø 5.38% Vacant 8.68% (October 2016) Ø Recent Rental Rates $13.85 NNN Lowest in any Sub-Market Ø Hastings vacated Backfilled with a Trampoline Park (Flying Squirrel) Ø Argonne & Mission sold New Altitude Trampoline Park Ø New Maverick at Montgomery & Argonne Ø Restaurant at Painted Hills Club House Craft & Gather Ø New building for Tuesday Morning Ø Skechers at Evergreen & Sprague next to Office Depot

7 WEST SIDE Ø 268,000 SF 10.7% Vacancy Ø Average Rental Rates $16.84 Ø Grocery Outlet Center sold 6 CAP Ø New Spokane Tribe Casino Ø Look for a new Maverick Ø Maybe a North 40

8 PERIPHERY OF CBD Ø 1,023,000 SF 63 Buildings Ø 9% Vacancy Ø Recent Rental Rates $16.35 Ø Most visible project: Division & 3 rd Ø Look for new Auto Parts and the continued proliferation of the Auto Dealerships Ø New Restaurants Ø Kendall Yards Ø My Fresh Basket

9 CENTRAL BUSINESS DISTRICT Ø Ground Floor 863,649 SF Vacancy 10.2% 11.66% (2016) Ø Skywalk 250,000 SF Vacancy 11.8% 15.06% (2016) Ø Average Rental Rate $14.69 PSF NNN Ø Nike Rent $25.00 PSF NNN Ø Carhartt $24.00 PSF NNN Ø Apple Rent $25.00 PSF NNN Ø Small Space: Mod Pizza $32.00 plus

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11 TRENDS IN LEASING National Tenants: Same lawyers 1. Commencement: The later of (1) 120 days after delivery or (2) when Tenant receives its permits or earlier upon opening. 2. Caps on CAMS: controllable vs. uncontrollable costs. 3. Exclusive Use: Anything on sub-lease: They may honor existing exclusives, but they need to honor future exclusive uses. 4. Prohibited Uses and Co-tenancy requirements 5. Damages if violation. Alternate rent.

12 IS THE INTERNET KILLING BRICKS AND MORTAR RETAIL? Yes and No. Ø Spokane retail sales are up almost 6%; Spokane Valley 10%. Ø Good real estate will continue to demand good retailers. Ø State-wide retail sales. Ø Auto sales up 7%. Ø Lawn, garden, and equipment up 17.3%. Ø Drug and health up almost 20%. Ø Taxable e-commerce up 10%. Ø Nationwide retail spending is up 4%. Ø Amazon has proven that brick and mortar is needed evidenced by the acquisition of Whole Foods. Ø Seattle prototype no check out stands.

13 Driving Traffic to Malls Ø Mall owners are leasing small spaces to showcase brands to online retailers seeking low cost entry to the brick and mortar retail world. Ø Mall owners are looking for tenants that drive traffic to their centers. Mike Kastner - West Coast Leasing Director General Growth Properties (NorthTown & Spokane Valley Mall) Ø Need for shoppers to be able to see and touch the products.

14 Driving Traffic to Malls

15 QUOTES Store space will get smaller, but it won t go away. Terry Tombari Spokane Retail Developer Shopping center owners must find a way to co-exist with digital retailers, embracing them as partners rather than viewing them as enemies bent on disruptive predatory price competition. 10,000 more store openings than closings 201 net new centers 96% of holiday shoppers went to stores Reinvention and innovation have always been a part of our industry. While many in the media have embraced the myth that retail is dying, the numbers support a different story. Tom McGee ICSC President

16 People are still looking to meet up with friends and have a social experience in addition to shopping, which is something you can t buy online. Bryn West General Manager River Park Square Most traditional brick and mortar retail stores have successfully adopted new strategies to cope with e-commerce. An example is they give the customer the option to shop online and pick up or claim their merchandise at the store. Stephen Pohl Retail Broker Nationals are not doing deals unless they have to it feels kind of flat. Carl Guenzel-Retail Broker Shopping is a sport; ordering online is tedious. Gina Hughes Professional Shopper If you are going to be thinking anyway, you might as well think BIG! Donald Trump