Lexington: Columbia s Next Major Retail Corridor

Research & Forecast Report COLUMBIA, SC RETAIL Q1 017 Lexington: Columbia s Next Major Retail Corridor Bryana Mistretta Research Coordinator South Carolina Key Takeaways > > Lexington is gaining attention from national and regional retailers making it the next major retail corridor in the Columbia market. > > Successful retailers need to offer customers an experience and product unique to their brand to remain competitive with the growing e-commerce market. Lexington is Booming The Lexington County retail corridor is a -mile stretch along Sunset Boulevard from North Lake Drive to the Target-anchored Lexington Pavilion shopping center. The corridor is booming, driven by population growth and the establishment of the corridor as its own retail submarket. Based on projections from Esri, the county is expected to comprise 35.5% of the total Columbia, MSA population by 01. This growth is causing Lexington to gain interest from shopping center developers and regional and national retailers, building the retail market at a record pace. The population of the Columbia, MSA is estimated to be 819,700 people and projected to increase by 5.6% to nearly 866,000 people by 01. The current population of Lexington County is estimated to be 86,000 people and projected to be 307,000 people by 01, a 7.4% increase over five years. Supporting this growth are single family housing permits. According to the Federal Reserve of Economic Data, in 015 there were 1,677 new private housing structures authorized by building permits for Lexington County, a 4% increase from 01. Residential population plays a large role in location decisions as retailers look to expand to new markets. The residential areas of Lexington were once perceived to be served by the historically popular Harbison Boulevard retail corridor. Now, retailers are recognizing the significance of the Sunset Boulevard retail corridor in Lexington, many opening second locations along Sunset Boulevard to accommodate the growing demand. Since the first quarter of 016, the vacancy rate has Market Indicators Relative to prior period Q1 017 Q 017* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE** Note: Construction is the change in Under Construction. *Projected **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents. Summary Statistics Q1 017 Columbia Retail Market Market Downtown Suburban Vacancy Rate 9.% 3.7% 9.3% Change From Q1 016 (basis points) Absorption New Construction Under Construction Asking Rents Per Square Foot Per Year - -0-87.5 76.8 10.6 59.6-59.6 350.0-350.0 Shop Space $14.10 $4.15 $13.76 Change From Q4 016-0.6% 4.8% -1.1%

decreased from 4.1% to 1.3% in the Lexington retail corridor and average asking rental rates for shop space have increased from $16.30 per square foot per year (PSF/YR) to $1.36 PSF/YR. Three new grocery anchored shopping centers are set to deliver by the end of 017. Lowes Foods will anchor two of these shopping centers, Lexington Square at the corner of Hope Ferry Road and Sunset Boulevard and another at the corner of U.S. Highway 1 (Augusta Road) and Charter Oak Road across from Lexington High School. The Fresh Market will co-anchor Lexington Marketplace with Hobby Lobby at 5330 Sunset Boulevard. These shopping centers have attracted national and regional tenants such as the boutique fitness company, Orange Theory at Lexington Square and Ulta, Mod Pizza and Tijuana Flats at Lexington Marketplace. Retail Economizes Today s market is driven by convenience. Some retailers are struggling to compete with e-commerce platforms while others are economizing on the opportunity to provide consumers with an exclusive shopping experience. The future success of retailers will depend on offering consumers a product and experience unique to their brand. According to the U.S. Census Bureau, in the fourth quarter of 014, e-commerce retail sales accounted for 7.7% of all sales, totaling $94. billion. During the same quarter in 016, e-commerce retail sales comprised 9.5%, or $13.6 billion of total sales, a 14.3% increase in just two years. In fact, e-commerce accounts for a larger percentage of total sales, respective to the same quarter year-over-year, consecutively since the recession of 008. Success of online sales has encouraged retailers to be more creative at their brick-and-mortar locations to promote in-store sales. Brick-and-mortar stores allow customers to interact with products such as trying on clothing, tasting food products, or testing functionality of electronic devices, tools or gear. Additionally, these stores can create an experience for their customers with an engaging staff, offering additional services such as demonstrations, lectures, events or refreshments. Engaged customers stay longer and interact with the brand, personnel and products longer, which leads to a stronger customer relationship and future sales. Some retailers have specialized or personalized the products they sell to offer customers a unique product they can only find in their stores. These retailers create a specialized experience and product with larger, but fewer stores such as Ikea, The Container Store, REI, Bass Pro Shop, Duluth, Costco or Crate and Barrel. for smaller retail spaces in more locations, reaching a broader range of customers while reducing costs. Although a newer trend, it is believed to become more common place as e-commerce sales become more prevalent in the retail market. Recent Transactions Sales > > YFP Management Company purchased the 41,000-square-foot Walmart Neighborhood Market at 1019 Old Barnwell Road for $1,5,000 or $98.17 PSF. > > Realty Income Corporation purchased eight Walmart Neighborhood Markets, seven in South Carolina and one in Alabama, for $13. million in March. The sale included 3603 Broad River Road, a nearly 4,000-square-foot location, built in March of 016. Leases > > Salsaritas Fresh Cantina leased,430 square feet and Starbucks leased,000 square feet at the Killian s Crossing shopping center anchored by a 14,000-square-foot Kroger Marketplace. > > Smoothie King will be joining Title Boxing Club and Smashburger in a 3,400-square-foot space at an outparcel in Village at Sandhill. The outparcel is 7,00 square feet and delivered in April of 017. > > Burlington Coat Factory signed a lease for nearly 45,000 square feet at Sandhill Station, an outparcel in Village at Sandhill, in Northeast Columbia. The building is currently under construction and set to deliver later this year. Market Conditions The growing residential population in the Columbia retail market has created stronger demand amongst retailers to locate in the major retail corridors. The overall market vacancy slightly increased from the fourth quarter of 016, ending the first quarter at 9.% although several submarkets saw dramatic drops in vacancy such as Forest Acres, North Columbia and Cayce/West Columbia. The overall market average asking rental rate for shop space was $14.10 per square foot per year (PSF/YR) triple net, slightly lower than $14.18 PSF/YR last quarter. The decrease is due to a fewer number of available spaces in highly demanded retail corridors. Shifting to showrooms rather than storefronts is another strategy retailers are implementing to survive the growth of e-commerce. Similar to storefronts, showrooms offer customers a place to try on, touch and see products without the burden of inventory because customers purchase the products online. This marriage of online and brick-and-mortar retail allows personnel to spend more time with customers and less on restocking. Reduced inventory allows South Carolina Research & Forecast Report Q1 017 Columbia Retail Colliers International

Cayce/West Columbia The vacancy rate in Cayce/West Columbia was.3% at the end of the first quarter of 017, down from 4.9% at the end of last quarter. The average asking rental rate for shop space was $10.99 PSF/YR NNN, a slight increase from last quarter s at $10.96 PSF/ YR NNN. Downtown The vacancy rate for shop space in grocery-anchored shopping centers in downtown Columbia was 3.7%, down from 4.% last quarter and the average asking rental rate was $4.15 PSF/YR NNN, a 4.7% increase since the fourth quarter of 016. Interest in downtown retail space is taking off as several regional and national tenants have begun to sign leases in renovated spaces along Main Street. Forest Acres The Forest Acres submarket, a half-mile stretch along Forest Drive from Trader Joe s to Trenholm Plaza, ended the first quarter with a vacancy rate of 1.0%, down from 9.0% last quarter. The drop in vacancy was due to the absorption of 6,450 square feet. Lowes Foods leased the 51,700-square-foot, former Bi-Lo anchor space in the Forest Park Shopping Center and T-Mobile leased,000 square feet at East Forest Plaza. Harbison/St.Andrews The Harbison/St. Andrews submarket is one of the largest in the Columbia retail market, with an inventory of 3.5 million square feet. The average asking rental rate for shop space was $1.44 PSF/ YR NNN. The vacancy rate at the end of the quarter was 9.8%. BJ s Restaurant and Brewhouse will be building a location on Harbison Boulevard at the former Macaroni Grill in the Columbiana Station Shopping Center. Columbia, SC Retail Submarkets 1 3 4 Lexington 8 Three grocers are set to open in Lexington this summer: The Fresh Market and two Lowes Foods. The vacancy rate was 1.3% at the end of the quarter, but will likely increase with the delivery of new shopping centers. The average asking rental rate for shop space increased to $1.36 PSF/YR NNN, a 4.6% increase from last quarter. Northeast Columbia 7 Northeast Columbia North Columbia Forest Acres Southeast Columbia 5 6 7 8 The Northeast Columbia submarket, a one-mile stretch from Clemson Road to Sparkleberry Lane, ended the first quarter with a vacancy rate of 10.8%. The average asking rental rate for shop space was $16. PSF/YR NNN. 6 5 3 Downtown Cayce/ West Columbia Lexington St. Andrews/ Harbison 1 4 Q1 017 Retail Market Summary Statistics Columbia, SC MARKET BUILDINGS INVENTORY VACANCY RATE (%) ANCHOR SPACE (GREATER THAN 5,000 SF) JR. ANCHOR SPACE (10,000-5,000 SF) SHOP SPACE (LESS THAN 10,000 SF) Cayce/West Columbia 15 1,1,954.3% 68,034 $6.00 81,940 $8.01 10,00 $10.99 Downtown 6 405,768 3.7% - - - - 15,085 $4.15 Forest Acres 3 777,96 1.0% - - - - 7,650 - Harbison/St. Andrews 34 3,599,931 9.8% 73,063-34,583-46,790 $1.44 Lexington 14 1,633,67 1.3% - - - - 1,968 $1.36 North Columbia 5 353,774 14.4% - - - - 51,00 $8.00 Northeast Columbia 33 3,919,366 10.8% 1,799 $3.57 69,70 $7.8 3,709 $16. Southeast Columbia 8 1,109,461 4.3% - - 33,000-15,100 $19.93 Market Total 118 13,011,817 9.% 63,896 $4.41 18,793 $7.94 710,34 $14.10 3 South Carolina Research & Forecast Report Q1 017 Columbia Retail Colliers International

Gross Retail Sales & Employment Employment Trends Columbia, SC, MSA Non-farm employment is growing within the Columbia Metropolitan Statistical Area (MSA). Per the Bureau of Labor Statistics most recent data from March 017, the Columbia, MSA had 395,600 nonfarm employees. Since March 016, 3,800 new non-farm jobs were added to the market. Since March 014, the MSA has experienced a 6.% job growth rate. A strengthening job market correlates to the higher gross retail sales for this year compared to the last two years. Gross retail sales are driven by a strengthening economy, strong job growth and a growing residential population. Data from the South Carolina Department of Revenue says gross retail sales in the Columbia Metropolitan Statistical Area (MSA) reached $.1 billion in February of 017, a 13.8% increase from two years ago. The yearto-date (January 017 to February 017) total gross retail sales was 5.% higher than the year prior. Non-Farm Jobs Added Over 1 Months (thousands) 13,000 1,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000,000 1,000 - Mar-1 Jul-1 Nov-1 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Jobs Added Total Employment Source: South Carolina Bureau of Labor Statistics Mar-16 Jul-16 Nov-16 Mar-17 400 390 380 370 360 350 340 330 Total Non-Farm Employment (Thousands) Looking Ahead The retail market in Columbia is growing and attracting interest from national and regional retailers. Grocers are expected to announce and open new locations through the start of 017. Recently completed residential developments continue to draw more residents into the downtown area, with several more proposed to begin construction soon. Vacancy rates will begin to drop as demand for retail space in the Columbia retail market grows stronger, further increasing the average asking rental rates in all major retail corridors. Around South Carolina Growing populations across the state are leading to the expansion and strengthening of existing retail nodes in South Carolina s main retail markets. Grocers are continuing to expand in all markets, along with other regional and national tenants. Charleston, South Carolina > > Shopping centers nearing full occupancy in the Charleston market are being repositioned to attract new national and regional tenants. In response, the average asking rental rate is rapidly increasing, reaching record highs for the last six consecutive quarters. Greenville, South Carolina > > Greenville s West End is gaining momentum from its high residential density, proximity to major employers and existing historic, cultural and entertainment anchors. Development at the 37-acre University Ridge site will catalyze growth in the area. Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE 1: RECOVERY Ashley Oaks Charleston, SC Source: Overcash Demmit Architecture COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE : EXPANSION PHASE 3: HYPERSUPPLY For more statewide commercial real estate news, check out our market reports at: www.colliers.com/southcarolina/insights 4 South Carolina Research & Forecast Report Q1 017 Columbia Retail Colliers International

396 offices in 68 countries on 6 continents United States: 153 Canada: 9 Latin America: 4 Asia Pacific: 79 EMEA: 111 $.6 billion in annual revenue billion square feet under management 15,000 professionals and staff FOR MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina Liz.McCary@colliers.com Bryana Mistretta Research Coordinator South Carolina Bryana.Mistretta@colliers.com COLUMBIA RETAIL PROFESSIONALS: Rox Pollard Vice President & Director of Retail Services Team Rox.Pollard@colliers.com JP Scurry Vice President JP.Scurry@colliers.com Tripp Bradley Senior Brokerage Associate Tripp.Bradley@colliers.com Danny Bonds Brokerage Associate Danny.Bonds@colliers.com Scottie Smith Brokerage Associate Scottie.Smith@colliers.com Colliers International South Carolina 1301 Gervais Street, Suite 600 Columbia, South Carolina 901 +1 803 54 300 About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 15,000 professionals operating from 396 offices in 68 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 017 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.