SPRING 2019

KANSAS CITYRETAIL REPORT

EXECUTIVE SUMMARYNewmark 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.

SELECT MARKETTRANSACTIONS

WARD PARKWAY CENTER558,930 SF GLA – SOLD FOR $74,500,000 ($133/SF)South Kansas City | 8600-8800 Ward Parkway

INDEPENDENCE COMMONS402,900 SF GLA – SOLD FOR $57,000,000 ($142/SF)East Jackson County | 18813 E 39th Street

TRUMAN’S MARKETPLACE (10 PROPERTIES)328,750 SF GLA – SOLD FOR $30,650,000 ($93/SF)South Kansas City | I-49 & Blue Ridge Boulevard

BLAZE PIZZA, PHONE MEDIC | LIBERTY COMMONS19,900 SF GLA – SOLD FOR $7,800,000 ($392/SF)Clay County | 107-127 S Stewart Road

SPROUTS | LEE’S SUMMIT26,810 SF GLA – SOLD FOR $6,910,000 ($258/SF)Southeast Jackson County | 800 NE 291 Highway

© Newmark Grubb Zimmer 2019 KANSAS CITY RETAIL MARKET REPORT 1Q19

RETAIL KANSAS CITY MARKET OVERVIEW

** In the next two years ***In the next three years

2019 Announced Store Openings

0 200 400 600 800 1000

Burlington

TJ Maxx/Marshalls

Aerie

Hobby Lobby

HomeGoods

Ulta Beauty

Ross Stores

Peloton

Levi Strauss & Co.

Aldi

Five Below

Dollar Tree

Dollar General 975

350

150

130

100

100

100

80

65

65

60 to 75

60

50

2019 Announced Store Closings

0 500 1000 1500 2000 2500

Victoria's Secret

Soma

White House Black Market

Chico's

Performance Bicycle

Fred's

Gap

Shopko

Family Dollar

Charlotte Russe

Gymboree

Payless ShoeSource

53

60***

90***

100***

102

159

230**

251

390

400

749

2,341

The overall Kansas City retail market loosened year-over-year in the first quarter of 2019, realizing a 10-basis-point increase in vacancy. Net absorption totaled 371,814 square feet for the past four quarters and 1.7 million square feet for the past two years. The average quoted rental rate measured $13.25/SF, down $0.17/SF from one year ago.

In the local retail market:

• JPMorgan Chase will occupy the former Dean & DeLuca space at the Town Center development in Leawood, Kansas. JPMorgan Chase will operate a full-service bank service and occupy 9,000 square feet.

• Menards will open its fifth location in the metro near the Legends Outlets in Kansas City, Kansas. The firm has purchased a 17-acre site north of Schlitterbahn and expects to open in 2020.

• Sears’ new concept store, “Sears Home & Life” will open Memorial Day weekend in the Fountains Shopping Center, across from the Sprint Campus. Sears Home & Life stores will typically range from 10,000 to 15,000 square feet.

The “retail apocalypse” continues to make headlines, as well-known brand-name retailers announce closures in 2019. Although not supporting exponential success in the retail market, an evaluation of the overall landscape reiterates a slowing and adapting retail environment. With more than 30 million square feet of retail closings in the U.S. announced by the end of the first quarter this year, CoStar’s retail real estate data shows a reduction in total square footage being vacated compared with 2018. This is partly because fewer big box retailers are exiting space.

The real estate market will always continue to evolve, and although major brands such as J.C. Penney and Macy’s may be closing multiple locations in 2019, Dollar General, Aldi, Ross Stores and Hobby Lobby have a significant number of store openings planned for the year. As the department store sector continues to struggle, discounters with random closeout and surplus inventory, including dollar stores, clothing, home goods and grocers, are expanding.

Today’s consumer is motivated by saving money and having an experiential shopping experience. Discounters such as Ross Dress for Less and TJ Maxx can provide both by offering a type of in-store treasure hunt, as inventory changes continuously, and shoppers leave satisfied with savings from a combination of flash sales and already low prices.

Below are some of the current brick-and-mortar store opening and closure announcements in the U.S. for 2019:

© Newmark Grubb Zimmer 2019 KANSAS CITY RETAIL MARKET REPORT 1Q19

SUBMARKET MAPSDOWNTOWN & SUBURBS

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

KANSAS CITY

Lee’s Summit

Independence

Olathe

Weston

Tonganoxie

Edgerton

Lenexa

De Soto

BonnerSprings

Shawnee

Leawood

Raytown

Greenwood

Holden

Harrisonville

Drexel

Wellsville

Paola

Louisburg

Spring Hill

Belton

Peculiar

Oak Grove

Gladstone Liberty

KearneySmithville

Leavenworth

Lansing

PlattsburgAtchison

PLATTECOUNTY

EAST JACKSONCOUNTY

NORTH JOHNSONCOUNTY

CLAYCOUNTY

SOUTHKC

SOUTHEAST JACKSONCOUNTY

CASSCOUNTY

URBANCORE

SOUTH JOHNSONCOUNTY

WYANDOTTECOUNTY

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

© Newmark Grubb Zimmer 2019 KANSAS CITY RETAIL MARKET REPORT 1Q19

1Q19 KANSAS CITYRETAIL MARKET STATISTICS TABLE

Type# of

Buildings

TotalInventory

(SF)

TotalVacancy

Rate

QtrAbsorption

(SF)YTD Absorption

(SF)

Total Asking Rent

(NNN)

All 514 5,662,897 4.30% 26,160 26,160 $10.38CASS COUNTY Small Shop 372 1,296,452 3.80% -9,821 -9,821 $11.81

Big Box 142 4,366,445 4.50% 35,981 35,981 $10.17

All 940 12,817,907 5.40% -9,022 -9,022 $12.50CLAY COUNTY Small Shop 598 2,109,730 3.60% 174 174 $17.12

Big Box 342 10,708,177 5.70% -9,196 -9,196 $11.35

All 2,262 23,383,094 5.40% 8,379 8,379 $11.13EAST JACKSON

COUNTY Small Shop 1,662 5,342,718 3.10% -2,397 -2,397 $14.03

Big Box 600 18,040,376 6.10% 10,776 10,776 $10.67

All 975 8,964,126 3.30% -26,177 -26,177 $15.32KC URBAN CORE Small Shop 658 2,277,906 3.30% 11,534 11,534 $16.98

Big Box 317 6,686,220 3.80% -37,711 -37,711 $14.88

All 1,136 19,155,871 6.60% 104,960 104,960 $14.43NORTH JOHNSON

COUNTY Small Shop 710 2,495,760 3.60% 9,218 9,218 $22.86

Big Box 426 16,660,111 7.10% 95,742 95,742 $13.54

All 363 6,245,873 4.70% -57,668 -57,668 $16.80PLATTE COUNTY Small Shop 213 834,934 2.20% -3,500 -3,500 $16.31

Big Box 150 5,410,939 5.10% -54,168 -54,168 $16.85

All 1,169 20,130,920 4.70% 41,761 41,761 $16.23SOUTH JOHNSON

COUNTY Small Shop 640 2,373,784 3.60% 5,055 5,055 $21.87

Big Box 529 17,757,136 4.90% 36,706 36,706 $15.68

All 556 6,515,569 12.00% -85,029 -85,029 $11.15SOUTH KC Small Shop 385 1,133,949 3.30% 7,557 7,557 $12.53

Big Box 171 5,381,620 13.90% -92,586 -92,586 $11.05

All 475 5,989,725 4.40% 34,898 34,898 $15.74SOUTHEAST

JACKSON COUNTYSmall Shop 331 1,218,985 2.80% -267 -267 $18.48

Big Box 144 4,770,740 4.80% 35,165 35,165 $15.10

All 982 9,436,439 4.70% -22,940 -22,940 $9.37WYANDOTTE

COUNTYSmall Shop 764 2,406,050 2.40% -9,410 -9,410 $18.47

Big Box 218 7,030,389 3.20% -13,530 -13,530 $7.63

TOTALS All 9,372 118,302,421 5.30% 15,322 15,322 $13.25Small Shop 6,333 21,490,268 3.00% 8,143 8,143 $17.35

Big Box 3,039 96,812,153 5.80% 7,179 7,179 $12.66

© Newmark Grubb Zimmer 2019 KANSAS CITY RETAIL MARKET REPORT 1Q19

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.

MARKET INDICATORSVACANCY RATE, ASKING RENT & NET ABSORPTIONMARKET INDICATORSVACANCY RATE, ASKING RENT & NET ABSORPTION

METRO MARKETVACANCY RATE

The metro market vacancy rate has displayed an upward trend increasing 10 basis points over the past year.

URBAN COREVACANCY RATEThe KC Urban Core vacancy rate increased 10 basis points from the prior year. At 3.3%, the KC Urban Core posts the lowest vacancy rate in the metro.

1Q19 4Q18 3Q18 2Q18 1Q18

3.2%3.2%3.1%3.0%3.3%

5.2%5.5%

5.3%5.3%5.3%

0.3

-0.3

0.0

0.5

0.8

1.0

1Q191Q181Q171Q161Q151Q14

NET ABSORPTIONSQUARE FEET, MILLIONS

$14.00

$13.50

$13.00

$12.50

$12.00

$11.50 4.00%

4.75%

5.50%

6.25%

7.00%

7.75%

1Q191Q181Q171Q161Q151Q14

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

AVERAGE RENT AND VACANCY SQUARE FEET, MILLIONS

© Newmark Grubb Zimmer 2019 KANSAS CITY RETAIL MARKET REPORT 1Q19

1Q19 KANSAS CITYSUBMARKET VACANCY RATE

NORTH JOHNSON COUNTY VACANCY RATE

Worsened by 110 basis points over

the past year.

Small shop space is hard to find in North Johnson County as vacancy for this niche sits at 3.6%. Big box space posts a 7.1% vacancy rate.

PLATTE COUNTYVACANCY RATE

Worsened by 170 basis points over

the past year.

Platte County displays the fourth-lowest vacancy rate in the metro.

SOUTHEAST JACKSON COUNTYVACANCY RATE

Worsened by 70 basis points over

the past year.

Although vacancy rose in the past year, the submarket vacancy rate remains below the metro average of 5.3%.

SOUTH JOHNSON COUNTYVACANCY RATE

Improved by 120 basis points over

the past year.

The South Johnson County submarket remains one of the most stable submarkets in the metro with only three quarters of negative absorption in the past ten years.

SUBMARKET VACANCY RATE

6.6%

5.5%

1Q19

1Q18

4.7%

3.0%

1Q19

1Q18

4.7%

5.9%

1Q19

1Q18

4.4%

3.7%

1Q19

1Q18

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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, CRE, SIOR, CCIM, LEED APPresident and Chief Executive Officer

Justin A. BealDirector – Retail Brokerage

Victor CascioManaging Director

Wendy BrandDirector

Andrew GartenDirector, Research

KANSAS CITY, MO1220 Washington Street, Suite 300Kansas 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

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