Connecticut’s Retail Real Estate Scene

1. Connecticut’s Retail Real EstateScene R. Michael Goman Acting Co-Director Center for Real Estate University of Connecticut November 2010

2. Scope of Retail in CT RR November 2010

3. Connecticut’s Retail Real Estate Scene • Retail: • Consumer confidence: remains low • Sales: remain mixed • Women’s apparel at ‘04/’05 levels • Shoppers returning: +3.7% to June • Back to school – mixed • Holidays ’10 – cautious optimism November 2010

4. Connecticut’s Retail Real Estate Scene • Retail: • Hourglass effect: Luxury & Discount categories • Reduced inventories: markdowns dropping • Less focus on cutting expenses • Anticipating top-line growth, again • Newer store concepts being expanded November 2010

5. Connecticut’s Retail Real Estate Scene • Retail: • Overall vacancy – September – 7.4% • Slight improvement – Malls/Neighborhood centers • Quoted asking rates continue to be down – 4.28% since Q3-09: • $16.14 Q3-09 • $15.57 Q1-10 • $15.38 Q2-10 • $15.18 Q3-10 • Expanding retailers: PC Richards, Ulta3, rue 21, Sonic, Checkers, HHGregg, Tractor Supply, Lumber Liq., SYMS, dollar formats • Market opportunities: • gain better positioning – EMS, Costco, Target; • smaller/local retailers November 2010

6. Connecticut’s Retail Real Estate Scene • Retail: • Investment/sales activity: lots of buyers, few sellers • A properties getting good cap rates • C properties being sold at deep discounts • B properties not moving: Bid/ask mismatch • Further fallout expected: • Operating defaults • Maturity defaults • Construction loans November 2010

7. Connecticut’s Retail Real Estate Scene • Retail - Factors to Watch: • Absorption: < new development, > adaptive re-use • Development - <1% LY • Fundamental changes in consumer behavior • Aging Boomers: • time focus: travel, learning • Spending focus: comfort, health/fitness, hobbies, investments, retirement • Priority of time = convenience • CT’s shifting demographics November 2010

8. Connecticut’s Retail Real Estate Scene • Retail - Factors to Watch • Less “indulgence” spending • Internet retail • Convergence of retail & bricks & mortar channels • Consumer confidence & spending: • Unemployment, housing prices, lost wealth, low wage increases • Government policies/political turmoil November 2010

9. Connecticut’s Retail Real Estate Scene • Industry Issues: • New government regulations/policies • Cap & Trade • IASB/FASB changes re: real estate leases • V.A.T. • Green: GBC Retail • Streamlined Sales Tax • CRE Act November 2010

10. Connecticut’s Retail Real Estate Scene • Summary - Challenges: • CT’s demographics: a flat market • Continuing vacancies • Low demand • Tenant concessions, shorter terms • Projection: long, slow recovery November 2010

11. Connecticut’s Retail Real Estate Scene • Summary – Opportunity: • Not much new development • High barriers to entry • Fundamentals: Leasing, management, marketing • Demographics: CT’s solid, stable markets • Sales productivity • Redevelopment opportunities November 2010

12. Connecticut’s Retail Real EstateScene R. Michael Goman Acting Co-Director Center for Real Estate University of Connecticut November 2010