RETAIL MARKET. Houston Retail Continues to Thrive Job Growth Reaches 9,100 Year-Over-Year. 9,100 jobs Retail jobs gained year-over-year

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1 Q 08 HOUSTON RETAIL MARKET Houston Retail Continues to Thrive Job Growth Reaches 9,0 Year-Over-Year OVERVIEW Market Fundamentals Remain Strong The Houston retail sector continues its positive push as vacancy rates for all property types remain suppressed below % for the seventeenth straight quarter. Population and household growth are continuing on a positive trajectory throughout the market, spurring new developments, particularly within Mixed-Use/Lifestyle and Grocery-Anchored properties. Additionally, retail s ability to experientially and financially impact a commercial real estate development, makes it a central focal point in the revitalization of second generation office properties. While vacancy rates for core retail holdings remain tight, non-core holdings such as big box are suffering headwinds due to the continued emergence of e-commerce. Toys R Us officially closed its doors in the second quarter, a move impacting 8 Houston locations as the longtime retailer was forced to liquidate after previously filing for bankruptcy. Also of note, Sam s Club closed dozens of locations nationally, a move impacting locations in the Houston metro, as the retailer reevaluated their holdings. The potential for additional pain in big box retailers and regional malls remains elevated as the market continues to evolve. Conversely, demand for Mixed-Use/Lifestyle centers and Grocery-Anchored centers will remain elevated as consumers look to new and trendy retailing options and retailers look to follow the rooftop growth to the suburbs. RETAIL JOB GROWTH Strong Job Growth in Retail Sector Retail job growth remains strong with 9,0 jobs created over the months ending in June and,000 jobs created in the second quarter alone. As retailers extend into the suburbs to accommodate recent household growth, job opportunities will continue to increase throughout the market. In another sign of strength for the sector, Houston retail sales for 07 closed the year up.% from 0, totaling $. billion. Annual sales were boosted by recovery efforts from Hurricane Harvey as residents replaced items lost to the floods. With energy trading in the mid-upper $0 s per barrel, retail sales should continue their upward trajectory through the balance of 08. TRENDLINES -YEAR TREND JOB GROWTH ABSORPTION DIRECT VACANCY UNDER CONSTRUCTION RENTAL RATE CURRENT QUARTER 9,0 jobs Retail jobs gained year-over-year. msf Year-to-date absorption.% Up 0.% over the quarter.msf Construction activity remains strong $.7psf.8% increase over the end of 07

2 Q 08 HOUSTON RETAIL MARKET VACANCY Vacancy Rates Remain Extremely Low Overall retail vacancy ended the second quarter at.%, up slightly from.% in the first quarter. Core retail holdings such as Mixed-Use, Grocery-Anchored and Power Centers, all outperformed the broad market as pain in the sector is generally felt in non-core holdings. Grocery-Anchored space had the lowest vacancy of any of the property types recording.% this quarter, down from.% in the first quarter. Mixeduse/Lifestyle saw a slight uptick over the quarter recording.% for direct vacancy and.8% for total availability. As Sam s Club closed several locations throughout the Houston metro, Power Center direct vacancy experienced an increase of.% over the quarter, ending mid-year at.9%, compared to.7% at the close of the first quarter. RENTAL RATES Rental Rates Trending Upwards Rental rates at mid-year increased coming in at $.7 per SF NNN, up.% over the quarter and up.0% over the year. Mixed-Use/Lifestyle centers finished the quarter at $.99 per SF NNN, up 0.% from the first quarter, and 7.% year-over-year. Power Centers are currently averaging $.77 per SF NNN, while Grocery-Anchored centers are averaging $. per SF NNN. Rental rates should remain stable or increase slightly over the period ahead as high-quality space continues to deliver to the market. INVESTMENT SALES Investor Market Remains Active Retail investment sales activity totaled $0. million at the end of the second quarter, a 7.9% increase over the period. Pricing for the sales averaged $0 per SF this quarter, as compared to $9 per SF at the close of the first quarter. Investment activity was highlighted by the sale of the Tanglewood Court, a,000 SF Grocery-Anchored center in the Galleria/ Uptown submarket. American Realty Advisors acquired the property from Fidelis Realty Partners and BayNorth Capital joint venture. This property was a premier investment opportunity as HEB typically owns their stores and the location is in a prime urban location. Investors continue to seek out properties like Tanglewood Court for investment opportunities and overall investment activity amongst retail properties remains strong. Gross Retail Sales v Gas Prices Houston Metro Area Retail Vacancy Rate Trends Houston Metro Area Vacancy Rate $ $ $ $0 $90 $80 $70 Average Retail Rental Rate Houston Metro Area Asking Rents ($/SF NNN) 8% 7% % % % % $0 $ $0 $ $0 $ Retail Sales - Total Gross Retail Sales (Billions of $) 0 Mixed-Use/Lifestyle Q Q 0 08 Q 0 Mixed-Use/Lifestyle 09 Power Center Q 0 Grocery Anchored Q 07 Power Center SOURCE Costar, Transwestern *Through 07 Q 07 Gas Prices - Annual Avg Unleaded Gas ($/Gallon) Q 07 Overall Q 07 SOURCE Costar, Transwestern *Through Q 08 Grocery Anchored 7 Non-Core Q 08 $.0 $. $.0 $. $.0 $. $.0 Q 08 Overall $ Q 0 Q 0 Q 0 Q 0 Q 07 Q 07 Q 07 Q 07 Q 08 Q 08 SOURCE Costar, Transwestern *Through Q 08 Q 08 HOUSTON RETAIL MARKET

3 Q 08 HOUSTON RETAIL MARKET OUTLOOK Retail Outlook Remains Positive The outlook for the retail sector remains bright and is anticipated to continue its push forward as demand for new and trendy retail concepts remains high, population growth continues and the local economy rebounds from the fallout of the energy sector. E-commerce will remain a prominent influencer on the market as traditional brick-and-mortar concepts evolve to appeal to their customers. Amongst grocery stores, delivery services are the new trend as most major grocers look to create their own delivery service concept. The impacts of this will continue to be revealed as it picks up steam. HEB is continuing their expansion throughout the Houston metro with new locations opening in Bellaire, Meyerland and the Heights in 08. Additionally, several other restaurants have announced expansion plans such as Grub Burger Bar, Pokeworks, Slowpokes, Checkers & Rally s and First Watch. Retailers will continue to expand within the Houston market as demand remains strong. Comparative Retail Investment Sales Volume Select Metro Area Sales Volume in Billions $.0 $. $.0 $. $.0 $. $.0 $0. $ Atlanta Dallas Houston Denver 8* SOURCE Real Capital Analytics, Transwestern *Through Q 08 Notable Projects Planned/Under Construction Houston Metro Q 08 7 PROJECT SF Valley Ranch Town Center,00,000 Marketplace 700,000 The Junction at Deer Park 8,000 Waterview Town Center 8,000 Shops at Boulder Creek 0,000 CityPlace at Springwoods Village 00,000 Mont Belvieu Marketplace 0,000 University Commons,000 Stableside at Falcon's Landing,000 The Village at Riverstone,000 Studemont Junction 0,000 CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Hornbeak Research Analyst 7.7. rachel.hornbeak@transwestern.com Jenni Woodruff Research Analyst jennifer.woodruff@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service the Transwestern Experience. Specializing in Agency Leasing, Tenant Advisory, Capital Markets, Asset Services and Research, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Based in Houston, Transwestern has U.S. offices and assists clients through more than offices in countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com Copyright 08 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

4 Q 08 HOUSTON RETAIL MARKET Market Statistics - Houston Metro INDICATORS Population,90,,07,,80,87,,7,88,0,7,,77,70 % Change.%.%.0%.%.%.%.9% Total Employment,,0,,00,77,700,80,00,90,800,99,900,000,00 Unemployment Rate 8.% 7.8%.%.0%.9%.%.% Gross Retail Sales (billions) $90.B $0.7B $8.B $.B $.B $7.7B $.B CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Hornbeak Research Analyst 7.7. rachel.hornbeak@transwestern.com Jenni Woodruff Research Analyst jennifer.woodruff@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service the Transwestern Experience. Specializing in Agency Leasing, Tenant Advisory, Capital Markets, Asset Services and Research, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Based in Houston, Transwestern has U.S. offices and assists clients through more than offices in countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com Copyright 08 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

5 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET FIRST QUARTER 08 Core Retail Continues to Perform Well Despite Retailer Troubles Retail Continues its Ongoing Transformation Core Retail Continues to Perform The retail sector in Houston continues to perform, benefited by demand for new and innovative concepts to support the robust household growth throughout the metro. Core retail metrics remain strong as vacancy rates are below % and rental rates continue to increase. While there is pain for big box retailers and regional malls, new and trendy concepts continue to see robust demand. Mixed-use/lifestyle centers remain the most popular product type despite seeing a slight increase in vacancy over the quarter, up from.9% to.%, still the lowest of all core retail property types. Mixed-use centers have proven to be successful in both the urban core and suburban markets as consumers look for dynamic livework-play environments. Construction levels should remain elevated as developers look to replicate the success of new concepts citywide. Retail job growth totaled,00 in the months ending in March, a.% increase year-over-year. As more projects deliver to the market, the need for employees will remain high, thus further job growth increases are expected through the balance of the year. Gross retail sales through the first three quarters of 07 annualized, total $.8 billion, down marginally from $. billion in retail sales recorded in 0. However, once fourth quarter figures are added including a robust holiday shopping season, total sales for 07 should be on par with figures from 0. As gas prices trend to their highest levels in the last seven months, reduced consumer disposable income could begin to impact overall retail sales. RETAIL JOB GROWTH HOUSTON METRO AREA 8 Employees in Thousands OV E R V I E W * *-month job growth through February 08 SOURCE U.S. Bureau of Labor Statistics, Transwestern GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.0 $ $. $ $.0 $0 $. $90 $.0 $80 $. $ *Retail Sales through Q 07 annualized; Gas prices through 07 7* $.0 SOURCE Texas Comptroller s Office, Transwestern

6 HOUSTON RETAIL MARKET FIRST QUARTER 08 VACANCY Vacancy Remains Compressed Overall retail vacancy finished the first quarter at.%, down marginally from.% at the end of the year. Mixed-use/ Lifestyle centers recorded the lowest vacancy at.%, up slightly from.9% at the end of the year, but still extremely tight overall. Grocery-anchored retail ended the first quarter at.% vacancy, which is unchanged over the quarter. Power centers recorded.7% vacancy, down from.9% over the same period. Non-core retail has the highest vacancy rates of all the sectors recording.% at the close of Q 08. Core retails sectors continue to experience extremely low vacancy rates, while non-core holdings are seeing softness due to the evolving retail sector and pain in big box retail and malls. Overall, retail vacancy is anticipated to remain low in the period ahead. RENTAL RATES Rental Rates on the Rise Rental rates for the first quarter increased to $.9 per SF NNN, up.7% over the quarter and up.% over the year. Mixed-use/Lifestyle properties have the highest rates closing the quarter at $.78 per SF NNN, up 7.% from the end of 07. Power Centers are currently averaging $.99 per SF NNN, while Grocery Anchored centers are averaging $.7 per SF NNN. As the year progresses, look for rental rates to trend upwards as new construction delivers to the market and overall vacancy rates remain low. INVESTMENT MARKET Investors Interested in Long-Term Play The retail sales market saw a decline in activity over first quarter with sales totaling $9. million, down % from the fourth quarter. However, Houston remains a popular market for investors wanting to expand their portfolios. In the first quarter, 8 properties traded hands with an average sales price of $9 per SF, as compared to $ per SF at the close of the fourth quarter. Investment activity was highlighted by the sale of S Rive Ave, a former Walmart Supercenter. The 77, SF freestanding retail center is in the Southwest submarket. Essex Realty Investments acquired the property from Midway for an estimated $. million. Investment activity should trend up through the balance of 08 as investors look for infill locations to develop into new concepts for consumers. Vacancy Rate RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA % AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA Asking Rents ($/SF NNN) 8% % % % $0 $ $0 $ $0 $ $ Mixed-Use/Lifestyle Q 0 Q 0 Q 0 Q 0 Power Center Q 0 Q 0 Q 0 Q 0 Grocery Anchored Q 07 Q 07 Q 07 Overall Retail Q 07 SOURCE Costar, Transwestern COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Mixed-Use/Lifestyle $.0 $. $.0 $. $.0 $. $.0 $0. $0.0 Q 0 Q 0 07 Atlanta Q 0 08 Power Center Q 0 09 Q 0 Dallas Grocery Anchored Q 0 Q 0 Q 0 Houston Overall Retail Q 07 Q 07 Non-Core Q Q Q SOURCE Costar, Transwestern Denver Q * * Through Q 08 SOURCE Real Capital Analytics, Transwestern REAL ESTATE OUTLOOK HOUSTON METRO Q 08

7 OUTLOOK Retail Looks to Remain Active The Houston retail sector is anticipated to continue its strong performance throughout 08 as retail's ongoing transformation, a recovering energy sector and continued population growth fuel demand market wide. The impacts of e-commerce will continue to avail themselves as retailers are having to adapt to keep up with their competitors and appeal to consumers. The fast-casual dining sector looks to remain red-hot with concepts such as Uberrito, Checkers & Rally s, Salata and B. Good expanding or moving into the Houston market. However, this trend will continue to have negative impacts on traditional dine-in restaurants. Core retail holdings look to remain strong in 08 while noncore holdings such as big box retailers and malls will suffer impacts as e-commerce evolves. Mixed-use and grocery anchored projects will continue to drive the development pipeline over the next few periods in both the urban core and suburban markets. HEB has announced that it is planning on opening six new locations by the end of the year in order to meet consumer demand. As the housing market remains strong and consumers continue to move to the Houston market, the overall retail sector looks to have a bright year ahead. Notable Projects Planned/Under Construction Houston Metro Q 08 PROJECT Valley Ranch Town Center,00,000 Marketplace 700,000 The Junction at Deer Park 8,000 Waterview Town Center 8,000 Shops at Boulder Creek 0,000 CityPlace at Springwoods Village 00,000 Mont Belvieu Marketplace 0,000 University Commons,000 Stableside at Falcon's Landing,000 The Village at Riverstone,000 Studemont Junction 0,000 SF CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Hornbeak Research Analyst 7.7. rachel.hornbeak@transwestern.com Jennifer Woodruff Research Analyst jennifer.woodruff@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 08 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

8 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET YEAR-END 07 Retail Market Still Moving Forward E-commerce Continues to Change Sector Retail Market Metrics Remain Strong The Houston retail market continues to shine as vacancy rates amongst core retail holdings remain extremely low and demand for new and innovative retail concepts continues to expand. Retail job growth totaled,800 in the months ending in December, a 0.9% increase over the year. The retail sector added 0,900 in the fourth quarter alone in order to account for seasonal hiring. Job growth year-over-year is lower than the -year average, which is,00 jobs created per year. Gross retail sales for 07 total $. billion, annualized, down marginally from $. billion in retail sales recorded in 0. This is for which data could be obtained. Although sales remain lower year-over-year, as data is updated post Harvey and through the holiday season, gross retail sales will likely increase, posting larger sales than in 0. The market metrics for the overall retail sector remain strong, although there is pain in non-core retail holdings such as big box retailers and regional malls. Also, there have been many announcements of restaurants closing following Harvey, but new concepts continue to take their place. Grocery-anchored centers saw vacancy increase slightly over the quarter, but grocers are still expanding throughout the metro at a rapid pace to keep up with the population growth. Rental rates continue to rise, although they are still suppressed as withheld rates in quality space influences the data. The construction pipeline remains active, but it has dropped off from peak levels in mid-0. Mixed-use/ Lifestyle concepts continue to be the focal point of activity in both urban and suburban submarkets. RETAIL JOB GROWTH HOUSTON METRO AREA 8 Employees in Thousands OV E R V I E W SOURCE U.S. Bureau of Labor Statistics, Transwestern GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.0 $ $. $ $.0 $0 $. $90 $.0 $80 $. $ *Retail Sales through Q 07 annualized; Gas prices through 07 7 $.0 SOURCE Texas Comptroller s Office, Transwestern

9 HOUSTON RETAIL MARKET YEAR-END 07 VACANCY Vacancy Rates Remain Low Overall retail vacancy ended the year at.% down marginally from.7% at the close of the third quarter. All core retail holdings, except for Grocery-Anchored space saw a decrease in vacancy quarter-over-quarter. Mixed-use/Lifestyle centers recorded the lowest vacancy at.%, down from.% at the end of the third quarter. Grocery -anchored retail ended the fourth quarter at.% vacancy, a 0.% increase over the same period. Power centers recorded.9% vacancy, down from.% over the quarter. Non-core retail has the highest vacancy rates of all the sectors recording.9% at the close of 07. Vacancy remains at historic lows for the core retail sectors, while non-core properties will experience further softness going into 08. RENTAL RATES Rental Rates Tick Upwards in Q Rental rates for the fourth quarter increased to $.9 per SF NNN, up.9% over the quarter and up.8% over the year. Mixed-use/Lifestyle properties had the highest rate and closed the quarter at $0.8 per SF NNN, up.% from mid-year, and 9.8% year-over-year. Power Centers are currently averaging $.7 per SF NNN, while Grocery Anchored centers are averaging $. per SF NNN. Rental rates continue to be artificially suppressed as quality, welllocated retail centers have withheld asking rates. Moving into 08, rental rates will likely continue to rise as new Mixed-use/Lifestyle and Grocery-Anchored centers deliver to the market and as available space remains limited. INVESTMENT MARKET Investors Keep Eyes on Houston Retail sales activity remains robust as investors continue to be impressed by the growth of the Houston retail sector. Investment sales activity totaled $. million at the end of the fourth quarter bringing the annual sales totals to $.7 billion, consisting of 7 transactions. Pricing for the sales averaged $0 per SF this quarter, as compared to $ per SF at the close of the third quarter. Investment activity was highlighted by the sale of Market at Town Center, a four-building, 7,7 SF Power Center property in the Sugar Land. North American Development Group acquired the property from Weingarten Realty Investors for a confirmed $.8 million. Investors will continue to look for development sites within the urban core in order to create new, unique concepts for consumers. Vacancy Rate RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA Mixed-Use/Lifestyle % AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA Asking Rents ($/SF NNN) $0 $0 $0 $0 $ Mixed-Use/Lifestyle Power Center Grocery Anchored Overall Retail SOURCE Costar, Transwestern COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions 8% % % % Q 0 $.0 $. $.0 $. $.0 $. $.0 $0. $0.0 0 Q Q Q Atlanta Q Q Power Center 08 Q 0 0 Q 09 Q 0 0 Q Dallas Grocery Anchored Q 0 0 Q Q 0 0 Q Q 0 0 Q Houston 07 Q Overall Retail Q 07 Q 07 SOURCE Costar, Transwestern 07 Q Q Q Denver Non-Core Q Q 7 SOURCE Real Capital Analytics, Transwestern REAL ESTATE OUTLOOK HOUSTON METRO Q 07

10 OUTLOOK Overall Market Looks to Bright 08 The Houston retail sector looks to continue its push forward in 08, albeit at a slower pace than in quarters past. The e-commerce subsector continues to have impacts on the overall market as retailers are constantly having to adapt to meet consumer demands. As the retail juggernaut, Amazon continues to influence the e-commerce market, it is rumored that they may be in talks to acquire another large retailer in 08. It is said that both Target and Costco are possible acquisitions, which would put further pressure on retailers to adjust strategies and reclaim market share. Fast casual concepts will remain red-hot in the Houston market, although dine-in restaurants may see further softness as the market is currently saturated with trendy, new concepts. Looking to 08, vacancy for the core retail holdings are anticipated to remain tight and non-core holdings look to soften further as more big box retailer and malls struggle to compete withe e-commerce retailers. Grocery-anchored and mixed-use/lifestyle centers will continue to drive the construction pipeline in both the urban core and suburban submarkets. As job growth in Houston continues to rebound and oil prices return to normal levels, the overall retail sector will likely have a successful 08. Notable Projects Planned/Under Construction Houston Metro Q 07 PROJECT Valley Ranch Town Center,00,000 Marketplace 700,000 The Junction at Deer Park 8,000 Waterview Town Center 8,000 Shops at Boulder Creek 0,000 CityPlace at Springwoods Village 00,000 Mont Belvieu Marketplace 0,000 University Commons,000 Stableside at Falcon's Landing,000 The Village at Riverstone,000 Studemont Junction 0,000 SF Market Statistics - Houston Metro INDICATORS Population,90,,07,,80,87,,7,88,0,7,,77,70 % Change.%.%.0%.%.%.%.9% Total Employment,,0,,00,77,700,80,00,90,800,99,900,000,00 Unemployment Rate 8.% 7.8%.%.0%.9%.%.% Gross Retail Sales (billions) $90.B $0.7B $8.B $.B $.B $7.7B $.B CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Hornbeak Research Analyst 7.7. rachel.hornbeak@transwestern.com Jennifer Woodruff Research Analyst jennifer.woodruff@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 07 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

11 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET MID-YEAR 07 Retail Demand Continues Throughout Metro Job Growth Down Following Super Bowl The retail market continued its ongoing transformation through the second quarter of 07, with core brick and mortar and online retailers looking to further their market position by extending reach into different arenas. Both Walmart and Amazon had key strategic acquisitions this quarter as Walmart acquired Bonobos (an online retailer in men s clothing) and Amazon acquired Whole Foods. Both acquisitions were meant to help facilitate entry into growth markets for the mega retailers with the Amazon acquisition being particularly interesting as the online retailer makes its way into the brick and mortar world. Locally, Houston s retail activity continued through the quarter, albeit at a slower pace. Demand remains strong for well positioned urban infill locations and for suburban areas under-served by retail due to rapid population growth. Though there is pain in big box and mid-level dining, the infusion of fast casual restaurants, boutique style retailers and walkable urban/suburban retail centers continues to expand. On the heels on a holiday season extended by the Super Bowl, the Houston retail market saw jobs losses over a -month period for the first time since 0 (-,000 jobs). Still, retail absorption remained strong in the second quarter as large, pre-leased projects deliver to the market. Given the large suburban growth that continues throughout the metro area, demand for retailing is projected to remain strong through the balance of the year. VAC A N C Y Vacancy Increases, but Still Stable Retail vacancy has continued to rise on the heels of vacating big box retailers and speculative construction delivering to the market. RETAIL JOB GROWTH HOUSTON METRO AREA 8 Employees in Thousands The Changing Face of Retail * SOURCE U.S. Bureau of Labor Statistics, Transwestern *-month job growth through May 07 RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA 0% % Vacancy Rate OV E R V I E W % % * SOURCE Enriched Data, Transwestern *Through May 07

12 HOUSTON RETAIL MARKET MID-YEAR 07 Direct vacancy for the period registered.9%, up from.% at the end of the first quarter and from a market low of.% in the first quarter of 0. Despite the increases, vacancy rates remain favorable citywide and large portions of the suburban market remain under-served by various retail components. This will keep leading retailers expanding in the Houston market over the coming months. That said, vacancy is projected to continue rising as the sea change in retail move focus from big box to boutique. RENTAL RATES Rental Rates Slide At the close of the second quarter, retail rents were $7.7 per SF, down from $7.88 per SF in the first quarter. This is the third quarter in a row of falling rental rates, but is more indicative of the impacts of low cost available big box retail than it is of same store rent growth. In core urban and suburban areas, same store rents continue to increase as they re tethered to strong underlying demand. Looking ahead, rental rates are projected to continue softening as retailers look to smaller, more efficient footprints and leave large lower cost alternatives open to the market. INVESTMENT MARKET Investors Keeping Eye on Houston Retail investment sales activity totaled $.8 million at the end of the second quarter, a 0% increase over the first period. These are assets for which pricing could be obtained. Pricing averaged $7 per SF this quarter, as compared to $ per SF at the close of the first quarter. Investment activity was highlighted by the sale of the BLVD Place, a,9 SF property in the Galleria/Uptown submarket. Whitestone REIT purchased the property from Wulfe & Co. for approximately $8.0 million. Investors continue to seek out well-located, valuable investment opportunities in the Houston market, as they look to diversify portfolios and capture a piece of a competitive market. GROSS SALES Year-end Oil Prices Boost Annual Data The most recent data from the Texas Comptroller s Office shows that gross retail sales in the Houston metro closed 0 with $. billion in sales. This is a.0% increase from the $7.7 billion recorded for 0. Gasoline sales comprise a large component of retail sales, as oil prices increased towards the end of 0, it helped to boost overall retail sales in Houston. AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA $0 $9 Asking Rents ($/SF NNN) $8 $7 $ $ * SOURCE Enriched Data, Transwestern *Through Q 07 COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Atlanta Dallas Houston Denver $.0 $. $.0 $. $.0 $. $.0 $0. $ * SOURCE Real Capital Analytics, Transwestern *Through Q 07 GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.0 $ $. $ $.0 $0 $. $90 $.0 $80 $. $70 $ * *Retail Sales through 0; Gas prices through 0 SOURCE Texas Comptroller s Office, Transwestern REAL ESTATE OUTLOOK HOUSTON METRO Q 07

13 Although, there has been a recent decline in oil prices that could have impacts on future retail sales data. Gross sales for the majority of subsectors is anticipated to remain robust, but as more data for 07 begins to be released, retail sales will likely remain flat or decrease slightly because of recent oil price declines. OUTLOOK Retail to Continue Metamorphosis The days of traditional brick-and-mortar concepts is beginning to dwindle as companies are coming up with more innovative ways to reach consumers. Online retailers have a firm position in today s market and will continue to exert influence on how we go about retailing as highlighted by Amazon s acquisition of Whole Foods. Boutique shops, walkable retail concepts and fast casual dining are helping to drive the future of store front retail. Grocers are embracing online sales more and more as a future with limited storefront space and expanded warehousing allows them to more effectively and efficiently cater to the online crowd. Suburban growth will continue to provide under-served retail areas, allowing for more development in the coming months. As one of the hottest restaurant markets in the nation, Houston s restaurant scene has evolved rapidly and will continue to expand throughout the city. Notable Projects Planned/Under Construction Houston Metro Q 07 PROJECT Marketplace 700,000 The Junction at Deer Park 8,000 Shops at Boulder Creek 0,000 Mont Belvieu Marketplace 0,000 University Commons,000 Stableside at Falcon's Landing,000 The Village at Riverstone,000 Studemont Junction 0,000 SF CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Hornbeak Research Analyst 7.7. rachel.hornbeak@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 07 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

14 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET FIRST QUARTER 07 Retail Continues Growth in Houston Seasonal Hiring Over but Demand Remains Job growth slows following Super Bowl As is seasonally typical, hiring cooled in the early months of the new year as the retail sector shed approximately,000 jobs through February. While the losses appear staggering, they were anticipated as seasonal hiring and temporary support roles for the Super Bowl were no longer necessary. Retail demand has remained strong in Houston through the first quarter. Mixed-use centers remain a popular option for developers, as the urban sprawl across the Houston metro continues and consumers search for a live-work-play environment. Shopping centers with a grocery component are still dominating retail developments, making up approximately 7-80% of projects in the pipeline. Although vacancy rates are increasing slightly and rental rates are seeing a minor drop off, the retail market is still holding strong with new development delivering in both the urban core and suburban markets. VAC A N C Y RETAIL JOB GROWTH HOUSTON METRO AREA 8 Employees in Thousands OV E R V I E W * SOURCE U.S. Bureau of Labor Statistics, Transwestern *-month job growth through February 07 RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA 0% Vacancy sees an increase % Vacancy Rate After a long stretch of decreasing vacancy, retail experienced a fourth straight quarter of vacancy increases, recording.% at the close of the first quarter, up from.0% at yearend. Although retail vacancy has seen an increase, there is still opportunity for growth, especially in rapidly growing suburban markets. New and established retailers are still vying for space in a competitive market. Vacancy will remain extremely tight in the urban core and development pad-sites are becoming harder to find due to space confinements. In 07, suburban markets will become a viable option for new retailers as the urban core becomes saturated with new restaurants and retail concepts. % % * SOURCE Enriched Data, Transwestern *Through February 07

15 HOUSTON RETAIL MARKET FIRST QUARTER 07 RENTAL RATES Rents soften slightly At the close of the first quarter, retail rents were $7.88 per SF, down from $7.9 per SF in the fourth quarter. This is the second straight quarter of rental decreases although rental rates vary widely depending on property type and location. Luxury retail space was in short supply coming into this upcycle, and deliveries of new projects have helped to push rents. As more projects deliver to the market in the coming quarters, rental rates will remain strong, but may see a slight drop off as the number of luxury projects comes to a close. INVESTMENT MARKET Houston remains popular option for investors Retail investment sales activity totaled $. million at the end of the first quarter. These are assets for which pricing could be obtained. Pricing averaged $ per SF this quarter, as compared to $0 per SF at the close of the fourth quarter. Investment activity was highlighted by the sale of the Northgate Shopping Center, a,8 SF property in the Far North submarket. Bargain Furniture Inc. purchased the property from Robin Parsley for an undisclosed price. Moving forward, investors will remain interested in well-located, quality spaces throughout the urban core in order to bring new and fresh concepts to the Houston market. GROSS SALES Low prices at the pump continue to drag sales The most recent data from the Texas Comptroller s Office shows that gross retail sales in the Houston metro have dropped to $. billion for all of 0, annualized. This is a.% decrease from the $7.7 billion recorded for 0. Gasoline sales comprise a large component of retail sales, and the oil downturn caused a significant decline in prices at the pump between 0 and 0. As more data becomes available for gross sales, we will likely see an uptick in overall sales as oil prices have started to rebound. Gross sales for most sectors is expected to remain strong, but with the oil market making a slow and tempered recovery, overall gross sales will likely record lower numbers through 0 with a rebound anticipated in 07. AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA $0 $9 Asking Rents ($/SF NNN) $8 $7 $ $ * SOURCE Enriched Data, Transwestern *Through Q 07 COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Atlanta Dallas Houston Denver $.0 $. $.0 $. $.0 $. $.0 $0. $ * SOURCE Real Capital Analytics, Transwestern *Through Q 07 GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.0 $ $. $ $.0 $0 $. $90 $.0 $80 $. $ * $.0 *Retail Sales through Q 0; Gas prices through 0 SOURCE Texas Comptroller s Office, Transwestern REAL ESTATE OUTLOOK HOUSTON METRO Q 07

16 OUTLOOK Retail outlook looks strong for 07 Following a red-hot 0, the retail sector is likely to continue growth into 07, although at a more moderate pace as the up-cycle flattens. The urban core and suburban mixed-use developments will continue seeing strong demand for fastcasual dining and chef-inspired dining experiences, adding to the growing food culture of the city. Given the underlying fundamentals of the metro area (growth rate, low cost of living, no state tax), retailers will look to expand their portfolios to include Houston. Several such companies have already made the jump and are beginning their Houston expansions, such as Austin-based Hopdoddy and New York-based Halal Guys. Large grocers, such as Kroger, HEB, and Walmart continue expansion efforts across the metro and still remain in high-demand where new rooftops are built. Unique, mixed-use concepts are faring well all over the market as residents look to live-work-play concepts. Shopping centers are evolving into congregating destinations, adding healthcare and unique restaurant tenants into the mix to draw people to brickand-mortar locations. Despite a few negative headlines in the paper, the retail market continues to press forward with new and creative concepts in order to capture a piece of the competitive Houston market. Notable Projects Planned/Under Construction Houston Metro Q 07 PROJECT Marketplace 700,000 The Junction at Deer Park 8,000 Shops at Boulder Creek 0,000 Grand Parkway Marketplace 0,000 Mont Belvieu Marketplace 0,000 University Commons,000 The Shoppes at Park West 0,000 Falcon's Landing,000 Main Street Kingwood,000 Market at Springwoods Village 70,000 The Village at Riverstone,000 Studemont Junction 0,000 SF CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Andrae Research Analyst 7.7. rachel.andrae@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 07 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

17 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET YEAR-END 0 Retail Sector Continues to Thrive Super Bowl helping lengthen seasonal job growth numbers OV E R V I E W Job growth largest since 007 The Houston retail sector is seeing the most job gains since 007 with,700 jobs added over the months ending in November, a.% increase. This is a record-breaking number of jobs added over a -month period. With the Super Bowl coming to town in February, job growth is unlikely to slow anytime soon. As the rest of the market continues to find ways to recover from the economic downturn, retail development remains red-hot. Mixed-use centers are still a hot ticket item for developers, as the urban sprawl across the Houston metro continues. Shopping centers with a grocery component are still dominating retail developments, making up approximately 7-80% of projects in the pipeline. Vacancy rates remain extremely tight and rental rates have dropped slightly but are holding strong with new, highend developments hitting the market. The retail market should fare well over the course of 07, but construction activity may begin to taper off as the year progresses. RETAIL JOB GROWTH HOUSTON METRO AREA Employees in Thousands * SOURCE U.S. Bureau of Labor Statistics, Transwestern *-month job growth through November 0 RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA Vacancy Rate VAC A N C Y 8% Vacancy up in Q % After a long stretch of decreasing vacancy, retail experienced a third straight quarter of vacancy increases, recording.0% at year-end, up from.7% at third quarter. Despite the recent increases, retail vacancy remains tight and is poised well for future growth. Retailers are continuing to lease up space quickly in order to grab market share in the competitive Houston market. Vacancy will remain stable available space in the urban core and development padsites are becoming harder to find. Moving into 07, retail space will remain popular as established retailers continue to expand and new retailers enter the Houston market. 0 % % % 8% % % * SOURCE Enriched Data, Transwestern *Through Q 0

18 HOUSTON RETAIL MARKET YEAR-END 0 R E N TA L R AT E S Rates drop slightly At the close of the fourth quarter, retail rents were $7.9 per SF, down from $8.00 per SF in the third quarter. Rental rates vary widely depending on property type and location. Luxury retail space was in short supply coming into this up-cycle, and deliveries of new projects have helped to keep rents strong. As rental rates remain high, retailers are working to reduce their footprints and utilize their space more efficiently. Looking ahead, rental rates should remain steady as new construction projects continue to deliver to the market. INVESTMENT MARKET YTD activity remains strong Retail investment sales activity totaled $99.9 million at yearend, for a year-to-date total of $. billion in sales. These are assets for which pricing could be obtained. Pricing averaged $0 per SF this quarter, as compared to $9 per SF at third quarter. Investment activity was highlighted by the sale of Little York Plaza, a 7, SF property in the Near North submarket. PF-LYP purchased the property from AEW Capital and Weingarten Realty for an undisclosed price. The retail investment market will continue to see an elevated level of investment activity as developers continue to seek out new, trendy retail concepts with irreplaceable locations. AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA Asking Rents ($/SF NNN) $0.00 $9.00 $8.00 $7.00 $.00 $ * SOURCE Enriched Data, Transwestern *Through Q 0 COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Atl Dal Hou Den $.0 $.0 $.0 GROSS SALES With oil prices down, gross sales follow The most recent data from the Texas Comptroller s Office shows that gross retail sales in the Houston metro have dropped to $. billion for all of 0, annualized. This is a.% decrease from the $7.7 billion recorded for 0. Gasoline sales comprise a large component of retail sales, and the oil downturn caused a significant decline in prices at the pump between 0 and 0. As more data becomes available for the year, sales are likely to experience a tangible increase as gasoline prices have begun to rebound slightly and consumption activity related to Super Bowl LI hits the ledger. Most retail subsectors are anticipated to post strong gross sales numbers, but as long as oil prices remain lower than average, overall gross sales will be down. $.0 $ * GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.00 $ $.0 $ $.00 $0 $.0 $90 $.00 $80 $.0 $ *Retail Sales through Q 0; Gas prices through Q 0 R E AL E STATE OUTLOO K HO UST ON MET RO Y E 0 SOURCE Real Capital Analytics, Transwestern *Through Q 0 * $.00 SOURCE Texas Comptroller s Office, Transwestern

19 OUTLOOK Retail forecast remains positive Throughout 0, the Houston retail sector displayed some of the strongest growth seen in recent history for the sector. Construction pipelines were booming, vacancy remains extremely tight, rents continued to remain strong and investors are still interested in developments. The retail market is likely to continue this push into 07, although it may be at a slower pace as the up-cycle flattens out slightly. Large grocers, such as Kroger, HEB, and Walmart continue expansion efforts across the metro and still remain in high-demand, especially in growing submarkets. Whole Foods is opening a new, lower-priced concept called, opening its first Houston location in the Heights. Also, a Germany-based grocer, Lidl, is looking to capture market share of clients that shop at stores such as Aldi or Trader Joe s. Notable Projects Under Construction Houston Metro Q 0 PROJECT SF Westlake Marketplace 00,000 The Junction at Deer Park 8,000 Shops at Boulder Creek 0,000 The Shoppes at Park West 0,000 Falcon's Landing,000 Main Street Kingwood,000 Unique, mixed-use concepts are faring well all over the Houston market as residents continue to seek a live-work-play environment. Shopping centers are evolving into congregating destinations, adding healthcare and unique restaurant tenants into the mix to draw people to brick-and-mortar locations. The retail development pipeline remains strong as new and established retailers alike continue to enter into the Houston market. Total Wine is opening its first Houston store, Dick s Sporting Goods is in the middle of opening six Houston locations. This is evidence that even through the oil downturn, retailers still have their eyes set on the Houston retail market. METHODOLOGY CONTACT Stuart Showers Director of Research stuart.showers@transwestern.com Rachel Andrae Research Analyst 7.7. rachel.andrae@transwestern.com The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

20 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET THIRD QUARTER 0 Houston Retail Remains Red-Hot Job growth still rising rapidly OV E R V I E W Grocery anchored centers still driving growth The Houston retail sector is seeing the most job gains since 007 with 9,00 jobs added over the months ending in August, a.% increase. In the coming months, retail job growth should remain red-hot due to seasonal hiring ramping up through the end of 0 and for the upcoming Super Bowl in early 07. As such, demand for unique retail concepts continues to drive construction. Shopping centers with a grocery component are still dominating retail developments and make up approximately 7-80% of large projects in the pipeline; a trend that is unlikely to slow anytime soon. New, creative mixed-use concepts continue to flood the metro as retailers compete for market share and capitalize on the benefits of a walkable concept. On the other hand, high-end restaurants continue to be impacted by the down market as large companies cutting back discretionary spending budgets, which is causing a slowdown at these establishments. The retail market has continued to thrive in a soft economy and is unlikely to drop off in the near future. VAC A N C Y Vacancy sees slight uptick After a long stretch of decreasing vacancy, retail experienced a second straight quarter of vacancy increases, recording.7% in the third quarter up marginally from.% at second quarter. The increase in vacancy is due to the large amount of new space coming onto the market, although vacancy is still considered tight. Retailers are continuing to lease up space quickly in order to grab market share in a competitive Houston market. Vacancy will remain tight in the urban core as available space and development pad-sites are becoming harder to find. In the coming months, retail vacancy may edge up slightly, but will remain in a healthy level for future growth. RETAIL JOB GROWTH HOUSTON METRO AREA Employees in Thousands * SOURCE U.S. Bureau of Labor Statistics, Transwestern *-month job growth through August 0 RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA Vacancy Rate 8% % % % % 8% % % * SOURCE Enriched Data, Transwestern *Through Q 0

21 HOUSTON RETAIL MARKET THIRD QUARTER 0 R E N TA L R AT E S Asking rents rise At the close of the third quarter, retail rents were $8. per SF, up from $8.00 per SF in the second quarter. Rental rates vary widely depending on property type and location. Luxury retail space was in short supply coming into this up-cycle, and deliveries of new projects have helped boost rental rates. As rates continue to rise, retailers are working to reduce their footprints and more efficiently utilize space. In the period ahead, new construction coupled limited space in well-located areas will contribute to pushing rental rates further. INVESTMENT MARKET Retail investment activity still high Retail investment sales activity totaled $8.9 million in the third quarter, and sales for the second quarter totaled a revised $. million. These are assets for which pricing could be obtained. Pricing averaged $9 per SF this quarter, as compared to $ per SF at first quarter. Investment activity was highlighted by the sale of Cypress Town Center, a 07,8 SF property in the Cypress/Bridgelands submarket. Kimco purchased the property from GE Pension Trust for an undisclosed price. Investors continue to seek out irreplaceable sites in well-located areas to take advantage of the success of the robust retail sector. The retail market will continue to see an elevated level of investment activity as the market continues its up-cycle. AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA Asking Rents ($/SF NNN) $0.00 $9.00 $8.00 $7.00 $.00 $ * SOURCE Enriched Data, Transwestern *Through Q 0 COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Atl Dal Hou Den $.0 $.0 $.0 $.0 GROSS SALES Yearly sales down as a result of gas pump prices The most recent data from the Texas Comptroller s Office shows that gross retail sales in the Houston metro have dropped to $.8 billion for all of 0, annualized. This is a.% decrease from the $7.7 billion recorded for 0. Gasoline sales comprise a large component of retail sales, and the oil downturn caused a significant decline in prices at the pump between 0 and 0. As more data becomes available for the year, sales are likely to show further decline as gas prices have remained low through the first three quarters 0. Gross retail sales are anticipated to remain strong in most subsectors, but as long as oil prices are down, overall sales data will be impacted. $ * GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.00 $ $.0 $ $.00 $0 $.0 $90 $.00 $80 $.0 $ *Retail Sales through Q 0; Gas prices through Q 0 R E AL E STATE OUTLOO K HO UST ON MET RO Q 0 SOURCE Real Capital Analytics, Transwestern *Through Q 0 * $.00 SOURCE Texas Comptroller s Office, Transwestern

22 OUTLOOK Fast-casual concepts still flooding market The Houston retail market has displayed some of the strongest growth among commercial real estate sectors, outside of possibly healthcare. A wave of growth has hit from urban market where density retail is thriving to suburban submarkets where transportation corridors are driving new construction projects. After several years of strong population growth driving demand coupled with slow construction activity before this up-cycle, retail construction activity has hit its stride and is expanding at a rapid pace. Large grocers, such as Kroger, HEB, and Walmart continue expansion efforts across the metro and still remain in high-demand, especially in growing submarkets. Additionally, unique, mixed-use concepts are faring well all over the Houston market as residents seek a live-work-play environment. Notable Projects Under Construction Houston Metro Q 0 PROJECT SF Westlake Marketplace 00,000 The Junction at Deer Park 8,000 Shops at Boulder Creek 0,000 Baytown Mall (redevelopment) 70,000 The Shoppes at Park West 0,000 Falcon's Landing,000 Main Street Kingwood,000 Retailers have been taking advantage of the recent multifamily development cycle by capitalizing on ground level retail spaces available below apartment communities. This is particularly beneficial within the urban core where space is limited and rental rates remain high. Houston is becoming a popular destination for retailers looking to break into new markets outside of their home base cities. This can be seen in fast-casual dining and well as experiential retail concepts. Fast-casual dining concepts that have announced expansion in Houston are San Francisco-based The Melt, Austin-based Dolce Neve, and Michigan-based The Big Salad. The Bowl & Barrel, an upscale bowling alley with gourmet food, opened their first Houston location during the third quarter. The retail sector will continue to perform well through the end of 0 as it evolves with changing consumer dynamics. METHODOLOGY CONTACT Rachel Andrae Research Analyst 7.7. rachel.andrae@transwestern.com Kevin Roberts President, Southwest kevin.roberts@transwestern.com The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

23 REAL ESTATE OUTLOOK HOUSTON RETAIL MARKET FIRST QUARTER 0 Retail Sector Grasps New Opportunities in Houston Grocery-anchored centers drive construction activity OVERVIEW Retail boosting local economy Retail job growth continued its strong push into 0 with 8,0 jobs added over the months ending in February, a.8% increase. Job growth is expected to make further gains as the retail sector remains red-hot due to new and established retailers expanding their storefronts in a competitive Houston market. Shopping centers with a grocery component are still dominating retail development and make up approximately 7-80% of large projects in the pipeline across the metro. This is not expected to slow in the near future with rooftops pushing further out around the Grand Parkway. On the flip side, high-end restaurants have started seeing some softness with the oil price downturn. Energy companies are scaling back budgets and reducing discretionary spending, causing a general slowdown at these establishments. The overall Houston retail market remains robust and will continue to prosper in the period ahead, despite uncertainty in the economy. VACANCY Vacancy continues steady decrease Retail vacancy continues to drop, ending the first quarter at.%, down from.0% at fourth quarter. This is the sixth straight quarter that vacancy has declined, spurred by new restaurants and retailers attempting to grab market share in a competitive Houston market. Vacancy within the urban core remains tight as pad sites for new development projects are scarce. Looking forward, vacancy is expected to rise as a significant number of new projects deliver in 0 and 07. However, it will remain in a healthy range for continued growth. RETAIL JOB GROWTH HOUSTON METRO AREA Employees in Thousands * SOURCE U.S. Bureau of Labor Statistics, Transwestern *-month job growth through February 0 RETAIL VACANCY RATE TRENDS HOUSTON METRO AREA Vacancy Rate 8% % % % % 8% % % * SOURCE Enriched Data, Transwestern *Through Q 0

24 HOUSTON RETAIL MARKET FIRST QUARTER 0 RENTAL RATES Rents tick upwards At the end of the first quarter, retail rents were $8.00 per SF, unchanged from year-end. Rental rates vary widely depending on property type and location. Luxury retail space was in short supply coming into this up-cycle, and with several new high-end projects delivering, rental rates have maintained strong growth. As rates continue to rise, retailers are working to reduce their footprints and more efficiently utilize space. Asking rents will likely climb further as well-located, quality space is limited, and retailers are expanding to meet demand in both infill and suburban markets. INVESTMENT MARKET Sales activity lighter in Q Retail investment sales activity totaled $70. million in the first quarter, and sales for all of 0 totaled a revised $.0 billion. These are assets for which pricing could be obtained. Pricing averaged $ per SF this quarter, as compared to $ per SF at fourth quarter and $0 per SF for all of 0. Investment activity was highlighted by the sale of Cypress Town Center, a,090 SF property in the Fairfield submarket. Spigel Properties purchased the property from Inland Real Estate Corporation for an undisclosed price. Investors continue to seek out well-located, irreplaceable sites to capitalize on the success of the Houston retail market. Investment activity is expected to hold strong through 0 as expanding trade areas bring new sites into play. GROSS SALES Annualized projection down YOY The most recent data from the Texas Comptroller s Office shows that gross retail sales in the Houston metro are projected to reach $.8 billion, annualized, by the end of 0. This is a.8% decrease from the $. billion recorded for 0. Gasoline sales comprise a large component of retail sales, and the oil downturn caused a significant decline in prices at the pump between 0 and 0. Additionally, if the softness in high-end restaurants begins to spill into other retail sectors, gross retail sales could be further impacted. Overall consumer spending remains strong in Houston, but a few retail subsets are being impacted by the weakened Houston economy. AVERAGE RETAIL RENTAL RATE HOUSTON METRO AREA Asking Rents ($/SF NNN) $0.00 $9.00 $8.00 $7.00 $.00 $ * SOURCE Enriched Data, Transwestern *Through Q 0 COMPARATIVE RETAIL INVESTMENT SALES VOLUME SELECT METRO AREA Sales Volume in Billions Atl Dal Hou Den $.0 $.0 $.0 $.0 $ * SOURCE Real Capital Analytics, Transwestern *Through Q 0 GROSS RETAIL SALES HOUSTON METRO AREA Retail Sales - Total Gross Retail Sales (Billions of $) Gas Prices - Annual Avg Unleaded Gas ($/Gallon) $ $.00 $ $.0 $ $.00 $0 $.0 $90 $.00 $80 $.0 $ * $.00 *Retail Sales through Q 0, annualized; Gas prices through 0 SOURCE Texas Comptroller s Office, Transwestern REAL ESTATE OUTLOOK HOUSTON METRO Q 0

25 OUTLOOK Houston retail will see strong year of growth In recent months, the retail sector has been a source of strength for the Houston economy, while other commercial real estate sectors have struggled to gain traction in a changing market. High land costs and limited site availability in urban areas has caused developers to explore stacked retail centers to reduce their traditionally large horizontal footprints. These retail centers typically contain an anchor tenant on the ground floor to drive foot traffic and smaller tenants on upper levels of space. Additionally, increasingly tech-savvy consumers are forcing retailers to adapt to new technological innovations. For example, Instacart, a grocery delivery service, allow consumers to purchase groceries on a phone application, and an Instacart employee will deliver the goods to the consumer. Grocers such as HEB, Central Market, Costco and Whole Foods have partnered with the service and more grocers are expected to be added in the future. Shopping centers are evolving into congregating destinations, adding healthcare and unique restaurant tenants into the mix to draw people to brick-and-mortar locations. There is less true retail in centers now as a diverse tenant-mix is sought after to attract an ever-changing consumer base. Fast-casual dining options continue to flourish, and new concepts include: Bojangles' Famous Chicken 'n Biscuits, Burgerim and Giordano's Pizzeria. The downstream boom along Houston's Gulf Coast has spurred tremendous population and income growth on the east side of the metro, opening the door for new retail opportunities. The Houston retail sector is expected to retain strong market fundamentals through 0. Notable Projects Under Construction Houston Metro Q 0 PROJECT Westlake Marketplace 00,000 The Junction at Deer Park 8,000 Shops at Boulder Creek 0,000 Baytown Mall (redevelopment) 70,000 The Shoppes at Park West 0,000 Falcon's Landing,000 Main Street Kingwood,000 Market at Crenshaw 0,000 Marketplace at Ninety-Six 8,000 Fairfield Marketplace,000 SF CONTACT Rachel Alexander Director of Market Research rachel.alexander@transwestern.com Kevin Roberts President, Southwest kevin.roberts@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office, industrial, retail, multifamily and healthcare properties located in the Houston metropolitan area. This report includes single-tenant, multi-tenant and owner-user properties and excludes properties owned and occupied by a government agency. Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

26 MARKET WATCH HOUSTON RETAIL FEBRUARY 0 RECENT RETAIL LEASES Fairfield :: Fitness Connection,89 SF new lease at Jones Plaza Spring Branch :: SOAP Hand Car Wash,000 SF new lease at Shoppes at Memorial Villages Atascocita :: Lone Star Athletics,70 SF new lease at Lake Country Plaza RETAIL LEASE STATISTICS.0%.0% 9.0% Overall Vacancy Rates Asking Rental Rates (NNN) $8. $8.00 $7.7 RECENT RETAIL SALES Fairfield :: Cypress Town Center,090 SF Buyer: Spigel Properties, Inc Seller: Inland Real Estate Corporation RETAIL IN THE NEWS High-end bowling alley moves forward on first Houston location Houston Business Journal, February, 0 Iconic Tex-Mex joint snaps up shuttered steakhouse for a move across the street CultureMap Houston, February, 0 New upscale H-E-B opens in growing Houston burb Houston Business Journal, February 7, 0 8.0% 7.0%.0%.0% Q Q Q Retail Sales Statistics QUARTER TO DATE Q Q Q HOUSTON MSA LAST QUARTER (Q 0) Q TRAILING MONTHS Source: CoStar - Houston retail buildings,000 SF and greater LAST QUARTER (Q 0) UNITED STATES TRAILING MONTHS Volume ($ Mil) $.7 $. $,88. $,79.7 $88,09. No. of Properties 9 8 8,8 7,9 Total SF 8,,9,7,8,87,80,709 7,,87 Average Price/SF N/A $ $8 $ $8 Average Cap Rate (Yield) N/A.%.9%.%.% Source: Real Capital Analytics Q Q Q Q Q Q $7.0 $7. $7.00 $.7 Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION 0 NET ABSORPTION East (Chambers County/Baytown, Channelview & Pasadena/Galena Park),,0 90,0 7.9% 7.9% 0, (8,87) Inner Loop (CBD, Galleria, Uptown, University, River Oaks, Heights & East End),,,07,.9%.9% 7,8 7,8 North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & Montgomery County) 7,8,77,07,9.8%.9% 90,9 8,0 Northeast (Near Northeast, Lake Houston, Kingwood & Liberty County),797,899,90 7.% 7.% 07,000 9,9 Northwest (Addicks, Bridgelands, Cypresswood, Fairfield, Far Katy North, Far Northwest, Far Tomball, Jersey Village, Near Northwest Oaks, Near NW Spring Valley, Willowbrook) 7,,79,78,7.9%.9%,098,7 8, South (Far South & Near South),7,8 79,9.%.%,70,7 Southeast (NASA/Clear Lake, Near Southeast, Southeast Outlier ),,0,0,0.8%.9% 7,7 7,00 Southwest (Near SW Central, Stafford, Sugar Land, Far New Territory, Far West, Far Southwest ),,7,0,000.%.%,7,80 West (Near West, Westchase, Far West, Far Katy South) 9,9,,9,0.9%.% 7,898,9,9 Total - Houston 8,89,8,,.0%.0%,99,8,,8 Source: Costar - Houston retail buildings,000 SF and greater

27 HOUSTON RETAIL MARKET WATCH FEBRUARY Inner Loop See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress NORTHEAST. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET FEBRUARY 0

28 HOUSTON RETAIL MARKET WATCH FEBRUARY 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 7 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 8 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Cindy Pham Senior Broker 7.. cindy.pham@transwestern.com Chace Henke chace.henke@transwestern.com Chris Reyes chris.reyes@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com Ryan Holliday 7.. ryan.holliday@transwestern.com CONTACT Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.com Kevin Roberts President, Southwest Kevin.Roberts@transwestern.com METHODOLOGY The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

29 Market Watch HOUSTON RETAIL December 0 Recent RETAIL Leases Katy/Cinco Ranch :: Planet Fitness 0,000 SF new lease at Katy Ranch Crossing Spring Creek :: HCTRA,000 SF new lease at Northland Shopping Center Inner Loop/River Oaks :: Roka Akor,9 SF new lease at 99 Weslayan RETAIL LEASE STATISTICS.0%.0%.0% Overall Vacancy Rates Asking Rental Rates (NNN) $8.00 $7.7 $7.0 Recent RETAIL sales Pearland/Manvel :: Brazos Mall 8,000 SF Buyer: Centennial Real Estate Co, Atlantic Creek RE Partners & The Northshore Property Group joint venture Seller: StreetMac Asset Managers, LLC & Five Mile Capital joint venture Retail IN THE NEWS Popular barbecue joint to open its largest location in Houston area Houston Business Journal, December 9, 0 Massive Sugar Land development signs Alamo Drafthouse as first tenant CultureMap Houston, December 8, 0 Post Oak bus lanes causing concern and panic in retail, jeweler says Houston Business Journal, December 7, 0 9.0% 8.0% 7.0%.0% Q Q Q Q Q Q Q Q Q Q Q Q Q $.0 Source: CoStar - Houston retail buildings,000 SF and greater Retail Sales Statistics Quarter to Date Houston MSA Last Quarter (Q 0) Trailing Months Last Quarter (Q 0) United States $7. $7.00 $.7 Trailing Months Volume ($ Mil) $9. $.7 $,98. $9,8. $90,7.7 No. of Properties 8 7,7 7,8 Total SF,9,7,0,,79,099,0,07 8,7, Average Price/SF $ $8 $8 $08 $ Average Cap Rate (Yield).% 7.% 7.0%.%.% Source: Real Capital Analytics Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION Q 0 NET ABSORPTION East (Pasadena/Galena Park, Channelview/Beaumont & Baytown/Chambers),0,770 9, % 7.9% 9,900,9 Inner Loop (CBD, Bellaire/West U, Galleria/Uptown, River Oaks, Heights & East End),900,078,,8.%.% 80, 9,778 North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & The Woodlands/Montgomery) 7,77,77,8,.0%.%,000 78, Northeast (Near Northeast, Atascosita, Kingwood & Liberty County),7,0,0 7.% 7.% 7,000 () Northwest (NW Oaks, Spring Branch, Willowbrook, Jersey Village, Copperfield, Fairfield, Cypress/Bridgelands, Far Katy North, Far NW & Tomball/Spring Cypress),90,,9,.%.% 978,0,0 South (Pearland/Manvel & Near South),79,9 7,999.%.% 7,00 (,8) Southeast (Gulf Frwy/Pasadena, Baybrook/Clear Lake & Old Pearland/Alvin) 0,89,708,999,0.9%.0% 9,097,8 Southwest (Sharpstown/Southwest Central, West Oaks, Sugar Land/Stafford & Richmond/ Rosenberg),7,8,978,9.7%.8% 9, (,08) West (Memorial, Westchase, Energy Corridor & Katy/Cinco Ranch) 8,,9,9,0.0%.%,8,8 Total - Houston 0,,,09,.%.%,0,7 88,8 Source: Costar - Houston retail buildings,000 SF and greater

30 HOUSTON RETAIL MARKET WATCH December Inner Loop 8 99 See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress northeast. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET December 0

31 HOUSTON RETAIL MARKET WATCH December 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 8 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 7 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Tony Armstrong Vice President tony.armstrong@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Cindy Nguyen Senior Broker 7.. cindy.nguyen@transwestern.com Chace Henke chace.henke@transwestern.com Chris Reyes chris.reyes@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com Ryan Holliday 7.. ryan.holliday@transwestern.com Contact Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.com Kevin Roberts President, Southwest Kevin.Roberts@transwestern.com Methodology The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

32 Market Watch HOUSTON RETAIL September 0 Recent RETAIL Leases Sugar Land/Stafford :: Fishing Tackle Unlimited 7,90 SF new lease at Sugar Creek Village Willowbrook :: Giant Dollar,000 SF new lease at Commons at Lincoln Green Far North :: Red Barn Special Events,00 SF new lease at 8 FM 88 Recent RETAIL sales Baybrook/Clear Lake :: Bayway Village II,9 SF Buyer: DuWest Realty Seller: David Z. Mafridge Interests RETAIL LEASE STATISTICS.0%.0%.0% 9.0% 8.0% Overall Vacancy Rates Asking Rental Rates (NNN) $8.00 $7.80 $7.0 $7.0 $7.0 Retail IN THE NEWS Midtown s newest restaurant features burgers and park views, but don t call it Shake Shack CultureMap Houston, September 8, 0 NewQuest to develop Kroger-anchored center in Katy area Houston Chronicle, September 7, 0 Krispy Kreme to open two Houston locations next months, plans for more growth in 0 Houston Business Journal, September 7, 0 7.0% Q Q Q Q Q Q Q Q Q Q Q Q Q $7.00 Retail Sales Statistics Quarter to Date Houston MSA Last Quarter (Q 0) Trailing Months Source: CoStar - Houston retail buildings,000 SF and greater Last Quarter (Q 0) United States Trailing Months Volume ($ Mil) $8. $87. $,97.0 $9,8. $90,. No. of Properties 9 8,77 7,7 Total SF,,,7,909 9,9,7 9,9, 9,,8 Average Price/SF N/A $7 $89 $ $ Average Cap Rate (Yield) N/A 7.% 7.%.%.% Source: Real Capital Analytics Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION Q 0 NET ABSORPTION East (Pasadena/Galena Park, Channelview/Beaumont & Baytown/Chambers),70,7 9,9 8.9% 8.9% 9,90,9 Inner Loop (CBD, Bellaire/West U, Galleria/Uptown, River Oaks, Heights & East End),89,7,9,9.%.% 8,8 (,09) North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & The Woodlands/Montgomery),,9,90, 7.% 7.% 9,0 99,77 Northeast (Near Northeast, Atascosita, Kingwood & Liberty County),0,8 8, 7.% 7.% -,8 Northwest (NW Oaks, Spring Branch, Willowbrook, Jersey Village, Copperfield, Fairfield, Cypress/Bridgelands, Far Katy North, Far NW & Tomball/Spring Cypress),0,,97,7.%.% 9, 98,78 South (Pearland/Manvel & Near South),7,7,77.9%.9%,0 8, Southeast (Gulf Frwy/Pasadena, Baybrook/Clear Lake & Old Pearland/Alvin) 0,0,89,9,7.9%.9% 0,7 8,70 Southwest (Sharpstown/Southwest Central, West Oaks, Sugar Land/Stafford & Richmond/ Rosenberg),9,00,7, 7.% 7.%,7,97 West (Memorial, Westchase, Energy Corridor & Katy/Cinco Ranch) 8,,9,09,98.%.7% 9,70 8,09 Total - Houston,,900,8, 7.% 7.%,0, 99,8 Source: Costar - Houston retail buildings,000 SF and greater

33 HOUSTON RETAIL MARKET WATCH September Inner Loop 8 99 See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress northeast. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET Septemeber 0

34 HOUSTON RETAIL MARKET WATCH September 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 8 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 7 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Tony Armstrong Vice President tony.armstrong@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Cindy Nguyen Senior Broker 7.. cindy.nguyen@transwestern.com Chace Henke chace.henke@transwestern.com Chris Reyes chris.reyes@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com Ryan Holliday 7.. ryan.holliday@transwestern.com Contact Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.com Kevin Roberts President, Southwest Kevin.Roberts@transwestern.com Methodology The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

35 MARKET WATCH HOUSTON RETAIL AUGUST 0 RECENT RETAIL LEASES Near North :: dd s DISCOUNTS,000 SF new lease at Eastex Shopping Center Bridgelands :: CVS,00 SF new lease at Lakeland Village Center Far North :: Dollar Tree 9,0 SF new lease at Cypress Station Square Center RECENT RETAIL SALES Channelview :: San Jacinto Mall. million SF Sale Price: undisclosed Buyer: Fidelis Realty Partners Seller: TriYar Companies RETAIL IN THE NEWS Retail centers are white hot investments as occupancy hits -year high Realty News Report, August 7, 0 Coffeehouse developers to launch new doughnut shop in the Heights Houston Business Journal, August, 0 Renovations underway at Willowbrook Mall Houston Chronicle, August, 0 RETAIL LEASE STATISTICS.0%.0%.0% 9.0% 8.0% 7.0% Retail Sales Statistics QUARTER TO DATE HOUSTON MSA LAST QUARTER (Q 0) TRAILING MONTHS Overall Vacancy Rates Asking Rental Rates (NNN) Source: CoStar - Houston retail buildings,000 SF and greater LAST QUARTER (Q 0) UNITED STATES $8.00 $7.80 $7.0 $7.0 $7.0 Q Q Q Q Q Q Q Q Q Q Q Q Q $7.00 TRAILING MONTHS Volume ($ Mil) $9.9 $7. $,8. $9,00.0 $90,.0 No. of Properties,9 7,77 Total SF,8,9,7,09 9,89,88 9,,,8,70 Average Price/SF N/A $87 $9 $0 $ Average Cap Rate (Yield) N/A 7.% 7.%.%.% Source: Real Capital Analytics Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION Q 0 NET ABSORPTION East (Pasadena/Galena Park, Channelview/Beaumont & Baytown/Chambers),70,7 9,9 8.9% 8.9% 9,90,9 Inner Loop (CBD, Bellaire/West U, Galleria/Uptown, River Oaks, Heights & East End),89,7,9,9.%.% 8,8 (,09) North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & The Woodlands/Montgomery),,9,90, 7.% 7.% 9,0 99,77 Northeast (Near Northeast, Atascosita, Kingwood & Liberty County),0,8 8, 7.% 7.% -,8 Northwest (NW Oaks, Spring Branch, Willowbrook, Jersey Village, Copperfield, Fairfield, Cypress/Bridgelands, Far Katy North, Far NW & Tomball/Spring Cypress),0,,97,7.%.% 9, 98,78 South (Pearland/Manvel & Near South),7,7,77.9%.9%,0 8, Southeast (Gulf Frwy/Pasadena, Baybrook/Clear Lake & Old Pearland/Alvin) 0,0,89,9,7.9%.9% 0,7 8,70 Southwest (Sharpstown/Southwest Central, West Oaks, Sugar Land/Stafford & Richmond/ Rosenberg),9,00,7, 7.% 7.%,7,97 West (Memorial, Westchase, Energy Corridor & Katy/Cinco Ranch) 8,,9,09,98.%.7% 9,70 8,09 Total - Houston,,900,8, 7.% 7.%,0, 99,8 Source: Costar - Houston retail buildings,000 SF and greater

36 HOUSTON RETAIL MARKET WATCH AUGUST Inner Loop 8 99 See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress NORTHEAST. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET AUGUST 0

37 HOUSTON RETAIL MARKET WATCH AUGUST 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 8 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 7 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Chace Henke chace.henke@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Ryan Holliday 7.. ryan.holliday@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Chris Reyes chris.reyes@transwestern.com Sage Klement 7.. sage.klement@transwestern.com Tony Armstrong Vice President tony.armstrong@transwestern.com Cindy Nguyen Senior Broker 7.. cindy.nguyen@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com CONTACT Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.com Kevin Roberts President, Southwest Kevin.Roberts@transwestern.com METHODOLOGY The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

38 Market Watch HOUSTON RETAIL june 0 Recent RETAIL Leases Kingwood :: Ashley Furniture,0 SF renewal at Deerbrook Corner Spring Branch :: Harbor Freight Tools 8, SF lease at Northway Center Far Katy North :: Bike World,000 SF new lease at Katy Ranch Crossing II Recent RETAIL sales Pasadena/Galena Park :: Federal East Plaza,7 SF Sale Price: undisclosed Buyer: Embrey Development Seller: Metro National Corp. Retail IN THE NEWS More Sugar Land dining choices: Galleria-area Thai restaurant adds second location in the burbs CultureMap Houston, June, 0 Popular food truck nabs Greenway Plaza space Houston Business Journal, June, 0 Louboutin to open first Houston location amid strong luxury retail competition Houston Business Journal, June 9, 0 RETAIL LEASE STATISTICS.0%.0%.0% 9.0% 8.0% 7.0% Retail Sales Statistics Quarter to Date Houston MSA Last Quarter (Q) Trailing Months Overall Vacancy Rates Asking Rental Rates (NNN) Q Q Q Q Q Q Q Q Q Q Q Q Q Source: CoStar - Houston retail buildings,000 SF and greater Last Quarter (Q) United States $8.00 $7.80 $7.0 $7.0 $7.0 $7.00 Trailing Months Volume ($ Mil) $99. $7.7 $,99.9 $,977.8 $8,9.8 No. of Properties,79 7,0 Total SF,8,,077,0,008,8 8,9,90,9, Average Price/SF $8 $8 $88 $8 $08 Average Cap Rate (Yield) 7.%.% 7.%.%.7% Source: Real Capital Analytics Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION Q0 NET ABSORPTION East (Pasadena/Galena Park, Channelview/Beaumont & Baytown/Chambers),79,0 9, 9.% 9.% 9,90 (8,) Inner Loop (CBD, Bellaire/West U, Galleria/Uptown, River Oaks, Heights & East End),989,,08,7.8%.9% 98,0 0,90 North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & The Woodlands/Montgomery),,,89,990 7.% 7.%,00, Northeast (Near Northeast, Atascosita, Kingwood & Liberty County),,, 7.% 7.% -,0 Northwest (NW Oaks, Spring Branch, Willowbrook, Jersey Village, Copperfield, Fairfield, Cypress/Bridgelands, Far Katy North, Far NW & Tomball/Spring Cypress),9,9,987,.%.% 07,8, South (Pearland/Manvel & Near South),0,,7.9%.9%,90,9 Southeast (Gulf Frwy/Pasadena, Baybrook/Clear Lake & Old Pearland/Alvin) 9,7,,0,7.%.%,7 (,) Southwest (Sharpstown/Southwest Central, West Oaks, Sugar Land/Stafford & Richmond/ Rosenberg),77,7,,9 7.% 7.%,00,8 West (Memorial, Westchase, Energy Corridor & Katy/Cinco Ranch) 7,9,0,978,70.%.% 8,0,08 Total - Houston 0,9,8,9,00 7.% 7.%,9,09 780,8 Source: Costar - Houston retail buildings,000 SF and greater

39 HOUSTON RETAIL MARKET WATCH june Inner Loop 8 99 See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress northeast. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET june 0

40 HOUSTON RETAIL MARKET WATCH june 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 8 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 7 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Chace Henke chace.henke@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Ryan Holliday 7.. ryan.holliday@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Chris Reyes chris.reyes@transwestern.com Sage Klement 7.. sage.klement@transwestern.com Tony Armstrong Vice President tony.armstrong@transwestern.com Cindy Nguyen Senior Broker 7.. cindy.nguyen@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com Contact Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.net Methodology The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

41 Market Watch HOUSTON RETAIL March 0 Recent RETAIL Leases Sharpstown/Southwest Central :: Sellers Bros,000 SF renewal at 900 Renwick Dr. Near North :: Conn Appliances,000 SF renewal at Northline Commons Katy/Cinco Ranch :: Party City,000 SF at Green Tree Shopping Center Recent RETAIL sales Cypress/Bridgelands :: Copperfield Village,9 SF Sale Price: $9.8 approximate Buyer: Kimco Seller: Greenstreet Partners Retail IN THE NEWS All the right pieces put in place, but downtown retail not quite there yet Houston Business Journal, March 0, 0 New plan for Montrose retail center aims to fit in with the neighborhood Houston Business Journal, March 9, 0 Whole Foods takes grocery wars to The Woodlands with wine bar, concierge and taco station Culture Map, March 9, 0 RETAIL LEASE STATISTICS.0%.0%.0% 9.0% 8.0% 7.0% Overall Vacancy Rates Asking Rental Rates (NNN) Q Q Q Q Q Q Q Q Q Q Q Q Q Retail Sales Statistics Quarter to Date Houston MSA Last Quarter (Q) Trailing Months $8.00 $7.90 $7.80 $7.70 $7.0 $7.0 $7.0 $7.0 $7.0 $7. $7.00 $.90 Source: CoStar - Houston retail buildings,000 SF and greater Last Quarter (Q) United States Trailing Months Volume ($ Mil) $9.7 $7. $,9. $,. $8,98.8 No. of Properties 7 9,9 7,90 Total SF,,9,7,09 8,9,87,,8,, Average Price/SF Average Cap Rate (Yield) N/A $8 $8 $00 $0.0%.7% 7.%.7%.8% Source: Real Capital Analytics Retail Market Indicators SUBMARKET TOTAL RBA (SF) DIRECT VACANT (SF) DIRECT VACANCY RATE OVERALL VACANCY RATE SF UNDER CONSTRUCTION 0 NET ABSORPTION East (Pasadena/Galena Park, Channelview/Beaumont & Baytown/Chambers),8, 909,9 9.% 9.% 8,9 7, Inner Loop (CBD, Bellaire/West U, Galleria/Uptown, River Oaks, Heights & East End),,,7,0.7%.7%,89 0,78 North (Near North, FM 90/I-, Greenspoint/North Belt, Spring Creek, Far North & The Woodlands/Montgomery),,,988,0 7.% 7.% 9,09 87, Northeast (Near Northeast, Atascosita, Kingwood & Liberty County),, 78,9 8.0% 8.0% -, Northwest (NW Oaks, Spring Branch, Willowbrook, Jersey Village, Copperfield, Fairfield, Cypress/Bridgelands, Far Katy North, Far NW & Tomball/Spring Cypress),98,79,07,0.%.% 7,000 80,9 South (Pearland/Manvel & Near South),008,89 0,8 7.8% 7.8% 9,8,9 Southeast (Gulf Frwy/Pasadena, Baybrook/Clear Lake & Old Pearland/Alvin) 9,0,7,97,0 8.0% 8.%,97,77 Southwest (Sharpstown/Southwest Central, West Oaks, Sugar Land/Stafford & Richmond/ Rosenberg),0,0,7,989 7.% 7.% 8,07,9 West (Memorial, Westchase, Energy Corridor & Katy/Cinco Ranch) 8,09,9,088,.%.7%,99,97 Total - Houston 0,, 7,8,0 7.7% 7.7%,79,90,8,8 Source: Costar - Houston retail buildings,000 SF and greater

42 HOUSTON RETAIL MARKET WATCH March Inner Loop 8 99 See Inner Loop Map INNER LOOP. CBD. Bellaire/West University. Galleria/Uptown. Inner Loop/River Oaks. Heights. East End WEST. Memorial. Westchase. Energy Corridor. Katy/Cinco Ranch NORTH. Near North. FM 90 & I-. Greens Point/North Belt. Spring Creek. Far North. The Woodlands/Montgomery SOUTHWEST. Sharpstown/Southwest Central. West Oaks. Sugar Land/Stafford. Richmond/Rosenberg NORTHWEST. Northwest Oaks. Spring Branch. Willowbrook. Jersey Village. Copperfield. Fairfield 7. Cypress/Bridgelands 8. Far Katy North 9. Far Northwest. Tomball/Spring Cypress northeast. Near Northeast. Atascocita. Kingwood. Liberty County SOUTH. Pearland / Manvel. Near South EAST. Pasadena/Galena Park. Channelview/Beaumont. Baytown/Chambers SOUTHEAST. Gulf Freeway/Pasadena. Baybrook/Clear Lake. Old Pearland/Alvin MARKET WATCH HOUSTON RETAIL MARKET march 0

43 HOUSTON RETAIL MARKET WATCH March 0 ABOUT TRANSWESTERN Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has U.S. offices and assists clients through more than 80 offices in 8 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. Transwestern was founded in Houston, Texas in 978, and Houston remains the corporate headquarters today. As one of the preeminent commercial real estate firms in Houston, we offer a comprehensive menu of real estate services designed to provide owners, tenants and investors with the optimum solutions for their unique requirements. Transwestern has seasoned veterans in every area of expertise with the integrity, experience and creativity to be the best partner for its clients. Transwestern s Houston office currently employs over 00 team members and has been an innovator in the Houston market for 7 years. SEATTLE MINNEAPOLIS BOSTON SAN FRANCISCO SILICON VALLEY WALNUT CREEK SALT LAKE CITY DENVER MILWAUKEE CHICAGO ST. LOUIS DETROIT BETHESDA WASHINGTON DC GREENWICH NEW YORK NEW JERSEY BALTIMORE NORTHERN VIRGINIA LOS ANGELES ORANGE COUNTY SAN DIEGO PHOENIX OKLAHOMA CITY FORT WORTH DALLAS ATLANTA TRANSWESTERN LOCATIONS AUSTIN SAN ANTONIO HOUSTON NEW ORLEANS ORLANDO FORT LAUDERDALE MIAMI-DADE HOUSTON RETAIL TEAM Nick Hernandez Managing Director nick.hernandez@transwestern.com Micha van Marcke, CCIM Senior Vice President 7.7. micha.vanmarcke@transwestern.com Tony Armstrong Vice President tony.armstrong@transwestern.com Grant Walker Vice President grant.walker@transwestern.com Crystal Allen Vice President crystal.allen@transwestern.com Chace Henke chace.henke@transwestern.com Chris Reyes chris.reyes@transwestern.com Danielle Schidlowski 7..8 danielle.schidlowski@transwestern.com Alex Kelly 7..8 alex.kelly@transwestern.com Cindy Nguyen 7.. cindy.nguyen@transwestern.com Sage Klement 7.. sage.klement@transwestern.com Lauren Heimann 7.. lauren.heimann@transwestern.com Contact Rachel Alexander Director of Market Research Rachel.Alexander@transwestern.net Methodology The information in this report is the result of a compilation of publicly available data from a variety of commercial and government sources. 900 West Loop South, Suite 0 Houston, Texas 7707 T F Copyright 0 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.