Andrew H. Kessenich, Andrew H. Kessenich, CRECRE

MADISON RETAIL MARKET MADISON RETAIL MARKET REPORT 2010REPORT 2010

RetailRetail Market OverviewMarket Overview

Generally Soft Market ConditionsGenerally Soft Market Conditions Vacancies UpVacancies Up Rents Mostly Stagnant or DecreasingRents Mostly Stagnant or Decreasing Financing DifficultFinancing Difficult Fewer Sale TransactionsFewer Sale Transactions Alternative Uses of Retail SitesAlternative Uses of Retail Sites

Market Conditions Have Market Conditions Have Changed Changed 2008 – Transition Year2008 – Transition Year

Market Conditions – Market Conditions – LeasingLeasing

Average Vacancy Rates UpAverage Vacancy Rates Up

Class B & C SpaceClass B & C Space Old Rates:Old Rates: 6% - 10%6% - 10% New Rates:New Rates: 10% - 15%10% - 15%

Class A SpaceClass A Space Unchanged at 5% - 10%Unchanged at 5% - 10%

Average Rental RatesAverage Rental Rates

Class AClass A Steady at Steady at $15 - $25/SF 3N$15 - $25/SF 3N

Class B Class B Old RatesOld Rates $14 – 16/SF 3N$14 – 16/SF 3N New RatesNew Rates $12 - $14/SF 3N$12 - $14/SF 3N

Class CClass C Old RatesOld Rates $10 - $12/SF 3N$10 - $12/SF 3N New RatesNew Rates $ 8 - $10/SF 3N$ 8 - $10/SF 3N

FinancingFinancing

New Construction RequirementsNew Construction Requirements 70% minimum pre-leased70% minimum pre-leased

Loan to Value RatiosLoan to Value Ratios OldOld 75% - 80% LTV75% - 80% LTV NewNew 60% - 70% LTV60% - 70% LTV

Tenant Credit ReviewsTenant Credit Reviews

Market Conditions - Market Conditions - SalesSales

Cap RatesCap Rates Pre – 2009 ConditionsPre – 2009 Conditions Post – 2009 ConditionsPost – 2009 Conditions

Average Rate Increases 50 – 100 BPsAverage Rate Increases 50 – 100 BPs Class A Properties Class A Properties

Low 7%’s to Low 8%’sLow 7%’s to Low 8%’s Class B PropertiesClass B Properties

Low 8%’s to Low 9%’sLow 8%’s to Low 9%’s Class C PropertiesClass C Properties

Low 9%’s to High 9%’sLow 9%’s to High 9%’s

Sales ActivitySales Activity 20072007 54 Sales54 Sales 20082008 36 Sales36 Sales 20092009 30 Sales30 Sales 20102010 22 Sales22 Sales

Average & Median Sale PricesAverage & Median Sale Prices DecreasingDecreasing

East, West & Suburban East, West & Suburban MarketsMarkets

Historical designs losing favorHistorical designs losing favor Mixed-use & New UrbanismMixed-use & New Urbanism Spike in condo constructionSpike in condo construction

Alternative Uses of Retail Alternative Uses of Retail SitesSites

Mixed UseMixed Use

MedicalMedical

DentalDental

New Projects – Retail New Projects – Retail Target at HilldaleTarget at Hilldale

The DepotThe DepotMixed Use ProjectMixed Use Project