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CoStar Office Report - WestMar Commercial Real Estate

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Inland Empire Retail Market B The CoStar Retail Report ©2015 CoStar Group, Inc. Inland Empire – Third Quarter 2015 Inland Empire Retail Market

The CoStar
Retail Report

Third Quarter 2015

Inland Empire Retail Market

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Table of Contents

Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B

Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C

Market Highlights & Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

CoStar Markets & Submarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Inventory & Development Analysis
Select Top Deliveries
Select Top Under Construction Properties

Figures at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figures at a Glance by Building Type & Market
Figures at a Glance by Building Type & Submarket
Historical Figures at a Glance

Leasing Activity Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Select Top Lease Transactions

Sales Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Sales Activity Analysis
Select Top Sales Transactions

Analysis of Individual CoStar Submarket Clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Inland Empire East Market
Inland Empire West Market

©2015 CoStar Group, Inc. The CoStar Retail Report A

Inland Empire – Third Quarter 2015

Inland Empire Retail Market

Methodology

The CoStar Retail Report calculates Retail statistics using CoStar Group's base of existing, under
construction and under renovation Retail buildings in each given metropolitan area. All Retail
building types are included, including Community Center, Freestanding Retail, Neighborhood Center,
Power Center, Regional Mall, Specialty Center and Unanchored Strip Center, in both single-tenant
and multi-tenant buildings, including owner-occupied buildings. CoStar Group's national database
includes approximately 80.7 billion square feet of coverage in 3.5 million properties. All rental rates
reported in the CoStar Retail Report are calculated using Triple Net (NNN) rental rates.

For information on subscribing to CoStar’s other products and services, please
contact us at 1-877-7COSTAR, or visit our web site at www.costar.com

© Copyright 2015 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the
information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or
completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or
warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

CoStar Group, Inc.
1331 L ST NW • Washington, DC 20005• (800) 204-5960 • www.costar.com • NASDAQ: CSGP

B The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Terms & Definitions

Anchor Tenant: Alarge national or regional retailer that serves as represents the interests of the owner/landlord is referred to as the
a primarydrawfor a shopping center;a store strategicallylocated in a Landlord Rep.
retail property in order to enhance,bring attention to,or increase traf-
fic at the property. Sometimes called a “destination” tenant, usually Leased Space: All the space that has a financial lease obligation.
these tenants lease at least25,000 SF. It includes all leased space,regardless ofwhether the space is currently
occupied by a tenant.Leased space also includes space being offered
Availability Rate: The ratio of available space to total rentable for sublease.
space,calculated by dividing the total available square feet by the total
rentable square feet. Leasing Activity: The volume of square footage that is commit-
ted to and signed under a lease obligation for a specific building or
Available Space: The total amount of space that is currently market in a given period of time.It includes direct leases,subleases and
being marketed as available for lease in a given time period.It includes renewals of existing leases. It also includes any pre-leasing activity in
any space that is available,regardless of whether the space is vacant, planned,under construction,or under renovation buildings.
occupied,available for sublease,or available at a future date.
Lifestyle Center: An upscale,specialtyretail,main street concept
Buyer: The individual,group,company,or entity that has purchased shopping center. An open center, usually without anchors, about
a commercial real estate asset. 300,000 SF GLA or larger, located near affluent neighborhoods,
includes upscale retail, trendy restaurants and entertainment retail.
Cap Rate: Shortforcapitalizationrate.TheCapRateisacalculation Nicelylandscapedwith convenient parking located close to the stores.
that reflects the relationship between one year’s net operating income
and the current market value of a particular property.The Cap Rate Mall: The combined retail center types of Lifestyle Center, Regional
is calculated by dividing the annual net operating income by the sales Mall and Super Regional Mall.
price (or asking sales price).
Market: Geographic boundaries that serve to delineate core areas
Community Center: A shopping center development that has that are competitive with each other and constitute a generally
a total square footage between 100,000 – 350,000 SF. Generally will accepted primary competitive set of areas.Markets are building-type
have 2-3 large anchored tenants,but not department store anchors. specific,and are non-overlapping contiguous geographic designations
CommunityCenter typicallyoffers awider range ofapparel and other having a cumulative sum that matches the boundaries of the entire
soft goods than the Neighborhood Center. Among the more com- Region (See also: Region). Markets can be further subdivided into
mon anchors are supermarkets and super drugstores. Community Submarkets.(See also:Submarkets)
Center tenants sometime contain retailers selling such items as
apparel, home improvement/furnishings, toys, electronics or sporting Multi-Tenant: Buildings that house more than one tenant at a
goods. The center is usually configured as a strip, in a straight line, or given time. Usually, multi-tenant buildings were designed and built to
an “L” or “U” shape. accommodate many different floor plans and designs for different
tenant needs.(See also:Tenancy).
Construction Starts: Buildings that began construction during
a specific period of time.(See also:Deliveries) Neighborhood Center: Provides for the sales of convenience
goods (food,drugs,etc.) and personal services (laundry,dry cleaning,
Deliveries: Buildings that complete construction during a specified etc.) for day-to-dayliving needs of the immediate neighborhoodwith
period of time. In order for space to be considered delivered, a certifi- a supermarket being the principal tenant.In theory,the typical GLA is
cate of occupancymust have been issued for the property. 50,000 square feet. In practice, the GLA may range from 30,000 to
100,000 square feet.
Delivery Date: The date a building completes construction and
receives a certificate of occupancy. Net Absorption: The net change in occupied space over a given
period of time. Unless otherwise noted NetAbsorption includes direct
Developer: The company, entity or individual that transforms raw and sublease space.
land to improved property by use of labor,capital and entrepreneurial
efforts. New Space: Sometimes called first generation space, refers to
space that has never been occupied and/or leased bya tenant.
Direct Space: Spacethatisbeingofferedforleasedirectlyfromthe
landlord or owner of a building, as opposed to space being offered in Occupied Space: Space that is physically occupied by a tenant.
a building by another tenant (or broker of a tenant) trying to sublet a It does not include leased space that is not currently occupied by a
space that has alreadybeen leased. tenant.

Existing Inventory: The square footage of buildings that have Outlet Center: Usually located in a rural or occasionally in a
received a certificate of occupancy and are able to be occupied by tourist location, an Outlet Center consists of manufacturer’s outlet
tenants.It does not include space in buildings that are either planned, stores selling their own brands at a discount.50,000–500,000 SF. An
under construction or under renovation. Outlet Center does not have to be anchored. A strip configuration is
most common,although some are enclosed malls and others can be
Freestanding Retail: Single tenant building with a retail tenant. arranged in avillage cluster.
Examples includevideo stores,fast food restaurant,etc.
Owner: The company,entity,or individual that holds title on a given
Full Service Rental Rate: Rentalratesthatincludealloperating building or property.
expenses such as utilities,electricity,janitorial services,taxes and insur-
ance. Planned/Proposed: The status of a building that has been
announced for future development but notyet started construction.
General Retail: Typically are single tenant freestanding general-
purpose commercial buildings with parking. Many single retail build- Power Center: The center typically consists of several freestand-
ings fall into this use code,especiallywhen they don’t meet any of the ing (unconnected) anchors and only a minimum amount of small
more detailed use code descriptions. specialtytenants.250,000–600,000 SF. APower Center is dominated
by several large anchors, including discount department stores, off-
Growth in Inventory: The change in size of the existing square price stores, warehouse clubs, or "category killers," i.e., stores that
footage in a given area over a given period of time,generally due to the offer tremendous selection in a particular merchandise category at
construction of newbuildings. low prices.

Landlord Rep: (Landlord Representative) In a typical lease Preleased Space: The amount of space in a building that has
transaction between an owner/landlord and tenant, the broker that been leased prior to its construction completion date, or certificate

©2015 CoStar Group, Inc. The CoStar Retail Report C

Inland Empire – Third Quarter 2015

Inland Empire Retail Market

of occupancydate. and constitute a generally accepted primary competitive set, or peer
group. Submarkets are building type specific (office, industrial, retail,
Price/SF: Calculated by dividing the price of a building (either sales etc.),with distinct boundaries dependent on different factors relevant
price or asking sales price) bythe Rentable BuildingArea (RBA). to each building type. Submarkets are non-overlapping, contiguous
geographic designations having a cumulative sum that matches the
Quoted Rental Rate: The asking rate per square foot for a par- boundaries of the Market theyare locatedwithin (See also:Market).
ticular building or unit of space by a broker or property owner.Quoted
rental rates may differ from the actual rates paid by tenants following Super Regional Mall: Similar to a regional mall, but because
the negotiation of all terms and conditions in a specific lease. of its larger size, a super regional mall has more anchors, a deeper
selection of merchandise, and draws from a larger population base.
RBA: Abbreviation for Rentable Building Area. (See also: Rentable Aswith regional malls,the typical configuration is as an enclosed mall,
Building Area) frequentlywith multiple levels (See also:Regional Mall).

Region: Core areas containing a large population nucleus, that Tenancy: Aterm used to indicatewhether or not a building is occu-
togetherwith adjacent communities have a high degree ofeconomic pied by multiple tenants (See also: Multi-tenant) or a single tenant.
and social integration. Regions are further divided into market areas, (See also:Single-tenant)
called Markets.(See also:Markets)
Tenant Rep: Tenant Rep stands for Tenant Representative. In a
Regional Mall: Provides shopping goods, general merchandise, typical lease transaction between an owner/landlord and tenant,
apparel, and furniture, and home furnishings in full depth and variety. the broker that represents the interests of the tenant is referred to as
It is built around the full-line department store with a minimum GLA aTenant Rep.
of100,000 square feet,as the major drawing power.For even greater
comparative shopping, two, three, or more department stores may Theme/Festival Center: Thesecenterstypicallyemployaunify-
be included.In theory a regional center has a GLA of 400,000 square ing theme that is carried out by the individual shops in their architec-
feet, and may range from 300,000 to more than 1,000,000 square tural design and, to an extent, in their merchandise. Sometimes the
feet.Regional centers in excess of 750,000 square feet GLAwith three biggest appeal of these centers is to tourists; they can be anchored
or more department stores are considered Super Regional. (See also: by restaurants and entertainment facilities. These centers, generally
Super Regional Mall). located in urban areas, tend to be adapted from older, sometimes
historic, buildings, and can be part of mixed-use projects. 80,000
Relet Space: Sometimes called second generation or direct space, –250,000 SF.
refers to existing space that has previously been occupied by another
tenant. Under Construction: Buildings in a state of construction, up
until they receive their certificate of occupancy. In order for CoStar to
Rentable Building Area: (RBA) The total square footage of consider a building under construction,the site must have a concrete
a building that can be occupied by, or assigned to a tenant for the foundation in place.Abbreviated UC.
purpose of determining a tenant’s rental obligation. Generally RBA
includes a percentage of common areas including all hallways, main Vacancy Rate: A measurement expressed as a percentage of
lobbies,bathrooms,and telephone closets. the total amount of physically vacant space divided by the total
amount of existing inventory. Under construction space generally is
Rental Rates: The annual costs of occupancy for a particular not included invacancycalculations.
space quoted on a per square foot basis.
Vacant Space: Space that is not currently occupied by a tenant,
Sales Price: The total dollar amount paid for a particular property regardless of any lease obligation that may be on the space.Vacant
at a particular point in time. space could be space that is either available or not available. For
example, sublease space that is currently being paid for by a tenant
Sales Volume: Thesumofsalespricesforagivengroupofbuildings but not occupied by that tenant,would be considered vacant space.
in a given time period. Likewise,space that has been leased but notyet occupied because of
finishwork being done,would also be consideredvacant space.
Seller: Theindividual,group,company,or entitythat sells a particular
commercial real estate asset. Weighted Average Rental Rate: Rental rates that are cal-
culated by factoring in, or weighting, the square footage associated
SF: Abbreviation for Square Feet. with each particular rental rate. This has the effect of causing rental
rates on larger spaces to affect the average more than that of smaller
Shopping Center: The combined retail center types of spaces. The weighted average rental rate is calculated by taking the
CommunityCenter,Neighborhood Center and Strip Center. ratio of the square footage associated with the rental rate on each
individual available space to the square footage associated with rental
Single-Tenant: Buildings that are occupied, or intended to be rates on all available spaces, multiplying the rental rate by that ratio,
occupied bya single tenant.(See also:Build-to-suit andTenancy) andthenaddingtogetheralltheresultingnumbers. Unlessspecifically
specifiedotherwise,rentalrateaveragesincludebothDirectandSublet
Specialty Center: The combined retail center types of Airport available spaces.
Retail,Outlet Center andTheme/Festival Center.
Year Built: The year in which a building completed construction
Sports & Entertainment: A facility suited for recreational andwas issued a certificate of occupancy.
activities, including: Amusement Facility, Aquatic Facility/Swimming
Pool, Bowling Alley, Casino/Gaming Facility, Equestrian Center/Stable, YTD: Abbreviation for Year-to-Date. Describes statistics that are
Fitness,Court and Spa Facility,Golf Related,Racetrack,Skating Rink,Ski cumulative from the beginning of a calendar year through whatever
Resort,SportsArena/Stadium,andTheatre/PerformingArt Facility. time period is being studied.

Strip Center: A strip center is an attached row of stores or service
outlets managed as a coherent retail entity,with on-site parking usu-
ally located in front of the stores. Open canopies may connect the
storefronts,but a strip center does not have enclosedwalkways linking
the stores.A strip center may be configured in a straight line, or have
an "L" or "U" shape.

Sublease Space: Space that has been leased by a tenant and is
being offered for lease back to the market by the tenant with the lease
obligation.Sublease space is sometimes referred to as sublet space.

Submarkets: Specific geographic boundaries that serve to delin-
eate a core group of buildings that are competitive with each other

D The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Overview

Inland Empire’s Vacancy Stays at 8.3%
Net Absorption Positive 304,203 SF in the Quarter

T he Inland Empire retail market did not experience much Vacancy
change in market conditions in the third quarter 2015. Inland Empire’s retail vacancy experienced no change
The vacancy rate went from 8.3% in the previous quarter
to 8.3% in the current quarter. Net absorption was positive in the third quarter 2015, ending the quarter at 8.3%. Over
304,203 square feet, and vacant sublease space decreased the past four quarters, the market has seen no change in the
by (32,957) square feet. Quoted rental rates increased from vacancy rate, with the rate going from 8.3% in the fourth
second quarter 2015 levels, ending at $16.17 per square foot quarter 2014, to 8.3% at the end of the first quarter 2015,
per year. A total of 9 retail buildings with 289,157 square feet 8.3% at the end of the second quarter 2015, to 8.3% in the
of retail space were delivered to the market in the quarter, with current quarter.
423,605 square feet still under construction at the end of the
quarter. The amount of vacant sublease space in the Inland Empire
market has trended down over the past four quarters. At the
Net Absorption end of the fourth quarter 2014, there were 587,493 square feet
Retail net absorption was moderate in Inland Empire third of vacant sublease space. Currently, there are 578,431 square
feet vacant in the market.
quarter 2015, with positive 304,203 square feet absorbed in the
quarter. In second quarter 2015, net absorption was positive Largest Lease Signings
366,704 square feet, while in first quarter 2015, absorption The largest lease signings occurring in 2015 included:
came in at negative (31,255) square feet. In fourth quarter
2014, positive 375,521 square feet was absorbed in the mar- the 59,095-square-foot-lease signed by Big Country at The
ket. Club Center - Bldg B; the 50,000-square-foot-deal signed by
Haggen at 4200 Chino Hills Pky; and the 45,000-square-foot-
Tenants moving out of large blocks of space in 2015 lease signed by LA Fitness at 10988 Magnolia Ave.
include: Albertson’s moving out of 64,603 square feet at 8850
Foothill Blvd; Albertson’s moving out of 50,544 square feet at Rental Rates
Colonies Crossroads; and Vons moving out of 43,615 square Average quoted asking rental rates in the Inland Empire
feet at Palms to Pines West.
retail market are up over previous quarter levels, and up from
Tenants moving into large blocks of space in 2015 include: their levels four quarters ago. Quoted rents ended the third
Hobby Lobby moving into 50,009 square feet at 27651 San quarter 2015 at $16.17 per square foot per year. That com-
Bernardino Ave; Haggen moving into 50,000 square feet at pares to $16.08 per square foot in the second quarter 2015, and
4200 Chino Hills Pky; and LA Fitness moving into 45,000 square $15.97 per square foot at the end of the fourth quarter 2014.
feet at 10988 Magnolia Ave. This represents a 0.6% increase in rental rates in the current
quarter, and a 1.24% increase from four quarters ago.

Vacancy Rates by Building Type 2006-2015

Power Center Specialty Center General Retail Shopping Center Mall Total Market

31%

26%

21%

16%

11%

6%

1% 2007 1q 2008 1q 2009 1q 2010 1q 2011 1q 2012 1q 2013 1q 2014 1q 2015 1q
2006 1q

Source: CoStar Property®

Absorption©2015 CoStar Group, Inc. & Deliveries Vacancy & RentThe CoStar Retail Report 1

Past 9 Quarters Past 9 Quarters

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Overview

Retail Inventory & Construction the end of the second quarter 2015, and finally to 10.6% at the
1q During the third quarter 2015, nine buildings totaling end of the current quarter.

289,157 square feet were completed in the Inland Empire retail Rental rates ended the third quarter 2015 at $16.55 per
market. Over the past four quarters, a total of 1,018,572 square square foot, up from the $16.39 they were at the end of second
feet of retail space has been built in Inland Empire. In addi- quarter 2015. Rental rates have trended up over the past year,
tion to the current quarter, 10 buildings with 347,788 square going from $16.06 per square foot a year ago to their current
feet were completed in second quarter 2015, seven buildings levels.
totaling 78,107 square feet completed in first quarter 2015, and
303,520 square feet in 22 buildings completed in fourth quarter Net absorption in the Shopping Center sector has totaled
2014. 523,042 square feet over the past four quarters. In addition to
the positive 138,384 square feet absorbed this quarter, positive
There were 423,605 square feet of retail space under con- 90,805 square feet was absorbed in the second quarter 2015,
struction at the end of the third quarter 2015. positive 128,729 square feet was absorbed in the first quarter
2015, and positive 165,124 square feet was absorbed in the
Some of the notable 2015 deliveries include: Super Wal- fourth quarter 2014.
Mart Center in Perris, a 185,000-square-foot facility that
delivered in third quarter 2015 and is now 100% occupied, and Power Centers
27651 San Bernardino Ave, a 177,056-square-foot building that The Power Center average vacancy rate was 7.7% in
delivered in second quarter 2015 and is now 100% occupied.
2006T-o2t0a1l5retail inventory in the Inland Empire market area the third quarter 2015. With positive 114,951 square feet of
amShoopupinntgeCdentteor 186,2M2a7ll,076 sTqotuaal Mrearkfeetet in 15,648 buildings and net absorption and 45,481 square feet in new deliveries, the
1868 centers as of the end of the third quarter 2015. vacancy rate went from 8.1% at the end of last quarter to 7.7%
at the end of the third quarter.
Shopping Center
The Shopping Center market in Inland Empire currently In the second quarter 2015, Power Centers absorbed posi-
tive 351,566 square feet, delivered 294,208 square feet, and the
consists of 1792 projects with 89,122,595 square feet of retail vacancy rate went from 8.6% to 8.1% over the course of the
space in 5,323 buildings. In this report the Shopping Center quarter. Rental started the quarter at $16.87 per square foot
market is comprised of all Community Center, Neighborhood and ended the quarter at $17.05 per square foot.
Center, and Strip Centers.
A year ago, in third quarter 2014, the vacancy rate
After absorbing 138,384 square feet and delivering 208,521 was 7.7%. Over the past four quarters, Power Centers have
square feet in the current quarter, the Shopping Center sector absorbed a cumulative 436,154 square feet of space and deliv-
saw the vacancy rate go from 10.6% at the end of the second ered cumulative 472,103 square feet of space. Vacant sublease
quarter 2015 to 10.6% this quarter. space has gone from 81,854 square feet to 36,200 square feet
over that time period, and rental rates have gone from $17.92
Over the past four quarters, the Shopping Center vacancy to $17.20.
rate has gone from 10.8% at the end of the fourth quarter
202101114q, to 10.270%12 1aqt the e2n0d13o1fq the fir2s0t1q4 u1qarter 22001155,1tqo 10.6% at At the end of the third quarter 2015, there were 49,960
square feet under construction in the Inland Empire market.
Vacancy & Rent Vacancy Rate The total stock of Power Center space in Inland Empire cur-
rently sits at 18,658,853 square feet in 40 centers comprised of
Past 9 Quarters 517 buildings.

Average Rental Rate A total of 49,960 square feet of space was under con-
struction at the end of the third quarter 2015.

Price in Dollars per Unit $16.20 8.9% Vacancy Rate Percentage General Retail Properties
$16.10 8.8% The General Retail sector of the market, which includes
$16.00 8.7%
$15.90 8.6% all freestanding retail buildings, except those contained
$15.80 8.5% within a center, reported a vacancy rate of 4.8% at the end
$15.70 8.4% of third quarter 2015. There was a total of 2,826,308 square
$15.60 8.3% feet vacant at that time. The General Retail sector in Inland
8.2% Empire currently has average rental rates of $13.47 per square
2013 3q 8.1% foot per year. There are 166,035 square feet of space under
8.0% construction in this sector, with 35,155 square feet having been
7.9% completed in the third quarter. In all, there are a total of 9,509
2015 3q
2014 1q 2014 3q 2015 1q

Source: CoStar Property®

2 The CoStar Retail Report ©2015 CoStar Group, Inc.

6%

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market1% 2007 1q 2008 1q 2009 1q 2010 1q
2006 1q

Overview Source: CoStar Property®

buildings with 58,372,919 square feet of General Retail space in Absorption & Deliveries
Inland Empire.
Past 9 Quarters
Specialty Centers
There are currently 13 Specialty Centers in the Inland Net Absorption Deliveries
0.5 0.47 0.46
Empire market, making up 2,134,335 square feet of retail
space. In this report the Specialty Center market is comprised 0.4 0.35 0.31 0.32 0.38 0.307.35
of Outlet Center, Airport Retail and Theme/Festival Centers. 0.30 0.300.29
0.3 0.28
Specialty Centers in the Inland Empire market have expe- 0.24 0.08
rienced positive 19,198 square feet of net absorption in 2015. Millions SF 0.18
The vacancy rate currently stands at 22.7%, and rental rates 0.2
average $21.65 per square foot. 0.13
0.1
0.09

Malls 0.0
Malls recorded net absorption of positive 27,503 square
(0.1) 2014 1q 2014 3q (0.03) 2015 3q
feet in the third quarter 2015. This net absorption number, 2013 3q 2015 1q
combined with no new space that was built in the quarter,
caused the vacancy rate to go from 6.7% a quarter ago to Source: CoStar Property®
6.6% at the end of the third quarter 2015. Rental rates went
from $16.63 per square foot to $16.95 per square foot during 38 retail sales transactions with a total volume of $302,524,100.
that time. In this report the Mall market is comprised of 23 The price per square foot averaged $174.96. In the same first
Lifestyle Center, Regional Mall and Super Regional Malls. six months of 2014, the market posted 48 transactions with a
total volume of $528,220,318. The price per square foot aver-
Sales Activity aged $163.32.
Tallying retail building sales of 15,000 square feet or larger,
Cap rates have been lower in 2015, averaging 6.51% com-
Inland Empire (California) retail sales figures fell during the pared to the same period in 2014 when they averaged 6.99%.
second quarter 2015 in terms of dollar volume compared to
the first quarter of 2015. One of the largest transactions that has occurred within
the last four quarters in the Inland Empire (California) market
In the second quarter, 17 retail transactions closed with a is the sale of Inland Center Mall in San Bernardino. This 294,365
total volume of $99,360,100. The 17 buildings totaled 605,665 square foot retail center sold for $51,300,000, or $174.27 per
square feet and the average price per square foot equated to square foot. The property sold on 2/17/2015.
$164.05 per square foot. That compares to 21 transactions
totaling $203,164,000 in the first quarter 2015. The total square Reports compiled by: Rory Hillenga, Research Manager; Susan Tysma
footage in the first quarter was 1,123,426 square feet for an and Lesley Casemero, Research Associates.
average price per square foot of $180.84.

Total retail center sales activity in 2015 was down com-
pared to 2014. In the first six months of 2015, the market saw

©2015 CoStar Group, Inc. The CoStar Retail Report 3

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Markets

CoStar Submarket Clusters & Submarkets

In analyzing metropolitan areas, CoStar has developed geographic designations to help group properties together, called
Markets, Submarket Clusters and Submarkets. Markets are the equivalent of metropolitan areas, or areas containing a large
population nucleus, that together with adjacent communities have a high degree of economic and social integration. Markets
are then divided into Submarket Clusters, which are core areas within a metropolitan area that are known to be competitive
with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called
Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally
accepted competitive set, or peer group.

Submarket Clusters Submarkets

Inland Empire East Coachella Valley
Inland EmpireWest Corona
East San Bernardino
Riverside
South Riverside

Airport Area
North San Bernardino
West San Bernardino

4 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Inventory & development

Historical Deliveries 1982 - 2015

Deliveries Average Delivered SF
8.0

Millions of SF 7.0 6.7
6.1 6.4
6.0 5.7 5.1 5.0
5.2 5.2 4.2

5.0 4.7
4.1

4.0 3.2 3.3 3.2 3.4
3.0 2.6
2.5 2.9 3.0 2.5
1.1 0.8 1.0 0.9
1.9 1.5 2.1 2.2
2.0 1.6 1.8 1.8 0.5 0.4

1.1

1.0

0.0 1986 1990 1994 1998 2002 2006 2010 2014
1982

Source: CoStar Property® * Future deliveries based on current under construction buildings.

Construction Activity Markets Ranked by Under Construction Square Footage

Under Construction Inventory Average Bldg Size

Market # Bldgs Total GLA Preleased SF Preleased % All Existing U/C

Inland Empire East 30 302,989 173,443 57.2% 11,581 10,100

Inland Empire West 10 120,616 92,683 76.8% 12,654 12,062

Totals 40 423,605 266,126 62.8% 11,901 10,590

Source: CoStar Property®

Recent Deliveries Future Deliveries

Leased & Un-Leased SF in Deliveries Since 2011 Preleased & Un-Leased SF in Properties Scheduled to Deliver

Leased Un-Leased Preleased Un-Leased
1.2
180

160

1.0

140

0.8 120 T
Millions of SF
Thousands of SF 100

0.6

80

0.4 60

40

0.2

20

0.0 2013 2015 0 2016 2q
2011 2015 4q

Source: CoStar Property® Source: CoStar Property®

©2015 CoStar Group, Inc. The CoStar Retail Report 5

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Inventory & development

Historical Construction Starts & Deliveries Deliveries

Square Footage Per Quarter Starting and Completing Construction 0.66

Construction Starts
0.8 0.74

0.7

0.6

0.50

Millions of SF 0.5 0.45 0.39 0.35
0.4 0.36

0.28 0.31 0.30 0.29

0.3 0.24

0.20

0.2 0.16 0.14 0.14 0.13 0.13 0.15 0.13
0.07
0.11 0.09 0.08 0.06 0.09 0.08

0.1 0.03 0.07 0.08

0.0
2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4q 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q

Source: CoStar Property®

Recent Deliveries by Project Size of Year-to-Date Development

Building Size # Bldgs GLA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant

< 50,000 SF 23 276,940 242,843 87.7% $30.09 153,116 123,824

50,000 SF - 99,999 SF 1 76,056 56,281 74.0% $0.00 0 76,056

100,000 SF - 249,999 SF 2 362,056 362,056 100.0% $0.00 185,000 177,056

250,000 SF - 499,999 SF 0 0 0 0.0% $0.00 00

>= 500,000 SF 0 0 0 0.0% $0.00 00

Source: CoStar Property®

Recent Development by Tenancy Existing Inventory Comparison

Based on GLA Developed for Single & Multi Tenant Use Based on Total GLA

2015 Deliveries Currently Under Construction

Shopping Center

General Retail

47%

46% 54% Power Center

53%

Mall

Specialty Center

Multi Single Multi Single Millions of SF 0 20 40 60 80 100

Source: CoStar Property® Source: CoStar Property®

6 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Inventory & development

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©2015 CoStar Group, Inc.

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Inventory & development

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8

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Figures at a Glance

General Retail Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted
Total SF Absorption Deliveries Const SF Rates
Market # Blds Total GLA Direct SF Vac %
5.1% (100,283) 106,572
Inland Empire East 6,829 41,745,101 1,958,787 2,115,319 137,009 $14.21

Inland Empire West 2,680 16,627,818 706,344 710,989 4.3% 20,330 8,905 29,026 $11.78
9,509 58,372,919 2,665,131 2,826,308 4.8% (79,953) 115,477 166,035 $13.47
Totals

Source: CoStar Property®

Mall Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Leasing
Total SF Absorption Deliveries Const SF Activity
Market # Ctrs Total GLA Direct SF Vac %
8.7% 26,801 0
Inland Empire East 17 11,809,562 1,006,936 1,023,291 61,125 $15.95

Inland Empire West 6 6,128,812 154,150 154,150 2.5% (15,054) 0 0 $22.13
23 17,938,374 1,161,086 1,177,441 6.6% 11,747 0 61,125 $16.95
Totals

Source: CoStar Property®

Power Center Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Leasing
Total SF Absorption Deliveries
Market # Ctrs Total GLA Direct SF Vac % Const SF Activity
7.8% 388,636 294,208
Inland Empire East 24 10,113,010 748,689 784,889 49,960 $18.87
(57,894) 45,481
Inland Empire West 16 8,545,843 658,421 658,421 7.7% 330,742 339,689 0 $16.02
49,960 $17.20
Totals 40 18,658,853 1,407,110 1,443,310 7.7%

Source: CoStar Property®

Shopping Center Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Leasing
Total SF Absorption Deliveries Const SF Activity
Market # Ctrs Total GLA Direct SF Vac %
11.1% 289,354 233,751
Inland Empire East 1,218 62,264,247 6,705,612 6,925,523 54,895 $16.31

Inland Empire West 574 26,858,348 2,420,839 2,565,627 9.6% 68,564 26,135 91,590 $17.15
1,792 89,122,595 9,126,451 9,491,150 10.6% 357,918 259,886 146,485 $16.55
Totals

Source: CoStar Property®

Specialty Center Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Leasing
Absorption Deliveries Const SF Activity
Market # Ctrs Total GLA Direct SF Total SF Vac %
15.5% 13,073 0
Inland Empire East 8 1,299,996 201,047 201,047 0 $21.92
6,125 0
Inland Empire West 5 834,339 283,807 283,807 34.0% 0 $21.00

Totals

Source: CoStar Property®

Total Retail Market Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Leasing
Total SF Absorption Deliveries Const SF Activity
Market # Blds Total GLA Direct SF Vac %
8.7% 617,581 634,531
Inland Empire East 10,986 127,231,916 10,621,071 11,050,069 302,989 $16.14
22,071 80,521
Inland Empire West 4,662 58,995,160 4,223,561 4,372,994 7.4% 639,652 715,052 120,616 $16.23
15,648 186,227,076 14,844,632 15,423,063 8.3% 423,605 $16.17
Totals

Source: CoStar Property®

©2015 CoStar Group, Inc. The CoStar Retail Report 9

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Figures at a Glance

General Retail Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
38,447 8,905
Airport Area 1,089 7,380,619 277,516 277,516 3.8% 15,689 6,282 0 $12.34
Coachella Valley 1,230 8,045,703 513,185 513,185 6.4% (22,388) 0 0 $16.17
Corona 1,455,345 19,908 34,070 2.3% (70,793) 18,402 0 $12.40
East San Bernardino 232 13,260,054 811,789 954,159 7.2% (32,567) 0 0 $11.46
North San Bernardino 2,181 5,729,342 324,659 324,659 5.7% 23,967 55,410 9,026 $10.02
Riverside 1,073 10,902,130 366,033 366,033 3.4% (46,758) 26,478 99,956 $14.33
South Riverside 2,015 8,081,869 247,872 247,872 3.1% 14,450 0 37,053 $16.42
West San Bernardino 1,171 3,517,857 104,169 108,814 3.1% (79,953) 115,477 20,000 $15.61
Totals 4.8% 166,035 $13.47
518

9,509 58,372,919 2,665,131 2,826,308

Source: CoStar Property®

Mall Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
488 0
Airport Area 3 3,617,347 39,369 39,369 1.1% 0 0 $16.49
Coachella Valley 4 2,139,342 232,969 247,969 11.6% 7,089 0 43,325 $12.10
Corona 1 492,404 7.0% (9,563) 0 $27.34
East San Bernardino 2 1,892,962 34,627 34,627 19.6% 0 0 $0.00
North San Bernardino 1 667,272 371,102 371,102 0.8% 0 0 0 $30.00
Riverside 8 5,557,141 5.5% 1,100 0 0 $19.82
South Riverside 2 1,727,713 5,034 5,034 3.8% 27,029 0 17,800 $27.00
West San Bernardino 2 1,844,193 302,371 303,726 6.0% 2,246 0 0 $28.75
Totals 65,867 6.6% (16,642) 0 $16.95
109,747 65,867 11,747 61,125
109,747

23 17,938,374 1,161,086 1,177,441

Source: CoStar Property®

Power Center Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
(17,213) 0
Airport Area 8 2,918,872 234,382 234,382 8.0% 42,606 0 0 $17.38
Coachella Valley 8 3,606,026 387,032 423,232 11.7% 0 0 0 $19.33
Corona 00 0.0% 0 $0.00
East San Bernardino 5 1,721,600 0 0 7.1% 304,468 294,208 49,960 $15.57
North San Bernardino 3 1,629,941 122,063 122,063 12.6% 30,049 45,481 0 $8.88
Riverside 6 2,901,469 204,875 204,875 6.3% 39,172 0 0 $22.68
South Riverside 5 1,883,915 182,837 182,837 3.0% 2,390 0 0 $16.11
West San Bernardino 5 3,997,030 56,757 56,757 5.5% (70,730) 0 0 $19.14
Totals 219,164 219,164 7.7% 330,742 339,689 49,960
$17.20
40 18,658,853 1,407,110 1,443,310

Source: CoStar Property®

Shopping Center Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
109,222 14,135
Airport Area 216 10,785,531 822,876 891,602 8.3% 79,350 0 0 $19.04
Coachella Valley 227 12,163,345 1,738,001 1,762,336 14.5% 13,079 0 0 $16.34
Corona 4,251,997 7.9% 11,254 3,200 17,700 $19.38
East San Bernardino 71 12,125,708 333,728 334,788 12.6% (32,760) 0 0 $13.93
North San Bernardino 303 8,812,064 1,522,234 1,526,898 10.5% 85,358 22,082 25,285 $13.55
Riverside 209 15,284,433 9.0% 100,313 10,700 $17.03
South Riverside 307 18,438,764 915,696 920,934 10.4% (7,898) 208,469 26,495 $17.74
West San Bernardino 310 7,260,753 1,255,436 1,379,796 10.4% 357,918 12,000 66,305 $18.93
Totals 149 1,856,213 1,921,705 10.6% 259,886 146,485
$16.55
682,267 753,091

1,792 89,122,595 9,126,451 9,491,150

Source: CoStar Property®

10 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Figures at a Glance

Specialty Center Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Ctrs Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
7,968 6,125 0
Airport Area 1 122,335 7,968 54,168 6.5% 0 0 $21.00
Coachella Valley 3 358,976 54,168 0 15.1% (31,529) 0 0 $23.13
Corona 00 0.0% 0 0 0 $0.00
East San Bernardino 1 240,000 0 33,806 14.1% 0 0 $21.76
North San Bernardino 2 512,866 33,806 275,839 53.8% (585) 0 0 $0.00
Riverside 2 95,000 275,839 0.0% 0 0 0 $0.00
South Riverside 2 606,020 0 18.7% 0 0 0 $0.00
West San Bernardino 2 199,138 0 113,073 0.0% 0 0 $0.00
Totals 113,073 22.7% 45,187
13 2,134,335 0 0 0 $21.65
0 484,854
484,854 19,198

Source: CoStar Property®

Total Retail Submarket Statistics Third Quarter 2015

Existing Inventory Vacancy YTD Net YTD Under Quoted

Market # Blds Total GLA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
137,069 23,040
Airport Area 1,901 24,824,704 1,382,111 1,450,837 5.8% 113,205 6,282 0 $17.61
Coachella Valley 2,037 26,313,392 2,925,355 3,000,890 11.4% (18,872) 0 43,325 $16.34
Corona 6,199,746 6.5% 244,344 315,810 17,700 $19.92
East San Bernardino 490 29,240,324 388,263 403,485 10.3% (34,178) 45,481 49,960 $13.59
North San Bernardino 2,962 17,351,485 2,860,994 3,008,028 10.0% 175,526 77,492 34,311 $12.24
Riverside 1,706 34,740,173 1,726,103 6.4% 103,378 234,947 128,456 $17.09
South Riverside 3,129 30,738,281 2,106,677 1,731,341 7.8% (80,820) 12,000 63,548 $17.60
West San Bernardino 2,368 16,818,971 2,339,782 2,232,392 7.1% 639,652 715,052 86,305 $18.98
Totals 1,055 2,405,274 8.3% 423,605
1,115,347 1,190,816 $16.17

15,648 186,227,076 14,844,632 15,423,063

Source: CoStar Property®

©2015 CoStar Group, Inc. The CoStar Retail Report 11

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Figures at a Glance

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12 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Figures at a Glance

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©2015 CoStar Group, Inc. The CoStar Retail Report 13

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Leasing Activity

Historical Rental Rates

Based on NNN Rental Rates

Power Center Specialty Center General Retail Shopping Center Mall Total Market

$29.00Dollars/SF/Year
$27.00
$25.00 2007 1q 2008 1q 2009 1q 2010 1q 2011 1q 2012 1q 2013 1q 2014 1q 2015 1q
$23.00
$21.00
$19.00
$17.00
$15.00
$13.00

2006 1q
Source: CoStar Property®

Vacancy by Available Space Type Vacancy by Building Type

Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type

4% Shopping Center

General Retail

Power Center

Mall

96% Specialty Center

Direct Sublet 0% 10% 20% 30% 40% 50% 60% 70%
Source: CoStar Property®
Source: CoStar Property®

GLA By Building Type Future Space Available

Ratio of Total GLA by Building Type Space Scheduled to be Available for Occupancy*

Shopping Center 0.6 0.56

0.5

General Retail

0.4

Power Center Millions 0.3

Mall 0.2
0.09
0.08
0.1
Specialty Center 0.00 0.02 0.00
0.0
Millions of SF 0 20 40 60 80 100 2015 4q 2016 4q

Source: CoStar Property® * Includes Under Construction Spaces Source: CoStar Property®

14 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Leasing Activity

Select Top Retail Leases Based on Leased Square Footage For Deals Signed in 2015

Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company

1 The Club Center - Bldg B East San Bernardino 59,095 2nd Big Country N/A CBRE

2 4200 Chino Hills Pky West San Bernardino 50,000 2nd Haggen N/A N/A

3 10988 Magnolia Ave Riverside 45,000 1st LA Fitness N/A N/A

4 9059 San Bernardino Rd Airport Area 43,665 2nd Chuze Fitness N/A NAI Capital Commercial

5 Palms to Pines West Coachella Valley 43,615 1st Haggen N/A N/A

6 1250 E Washington St East San Bernardino 43,391 2nd Just Bargain Stores, Inc. Michael Development Corp Michael Development Corp

7 5391 Moreno St West San Bernardino 41,200 3rd Sports Authority N/A JLL

8 885 E Harriman St East San Bernardino 40,038 3rd 24 Hour Fitness N/A Colliers International

9 555 E Hospitality Ln East San Bernardino 39,123 3rd LA Fitness N/A Strategic Retail Advisors

10 2355 Compton Ave* Corona 32,500 2nd LA Fitness N/A N/A
11 1501 S Riverside Ave East San Bernardino 32,000 3rd N/A N/A Golden Hills Properties LLC

12 Corona Market Place Corona 25,047 2nd Sears N/A Newmark Grubb Knight Frank
13 Bear Valley Shopping Center Riverside 24,238 2nd Smart & Final N/A N/A

14 Tri-City Promotional Center East San Bernardino 23,586 1st ALDI, Inc. N/A Strategic Retail Advisors
15 3635 Riverside Plz Riverside 23,342 2nd N/A N/A Savills Studley; CBRE

16 16805 Valley Blvd Airport Area 22,000 3rd Fallas Perdes N/A Colliers International
17 The Springs - Building B Coachella Valley 21,260 1st ALDI, Inc. N/A Venture Capital Realty, Inc.

18 284 Dupont St Corona 21,076 1st Rio Ranch Market N/A Direct Deal
19 Ramona Plaza South Riverside 20,034 1st N/A N/A Lee & Associates

20 Rancherias Plaza North San Bernardino 20,020 2nd 99Cent Only Stores N/A LA Commercial Real Estate
21 14228 Schleisman Rd Riverside 20,000 2nd Bank of America N/A N/A

22 9041 Central Ave West San Bernardino 19,054 2nd Ying Qian Gu & Li Hong Jiau Direct Deal Progressive Real Estate Partners
23 4975 Mission Blvd West San Bernardino 18,923 3rd N/A N/A RE/MAX Commercial
24 4020 E Highland Ave East San Bernardino 17,506 1st ALDI, Inc. N/A Progressive Real Estate Partners
25 72453 Highway111 Coachella Valley 17,000 2nd ALDI, Inc. N/A Lee & Associates
26 12689 Foothill Blvd Airport Area 17,000 1st Crunch Fitness Paci�c Equity Corp NAI Capital Commercial
27 8160 Day Creek Blvd* Airport Area 16,830 3rd O�ce Depot Avison Young N/A
28 The Springs - Building B Coachella Valley 15,518 1st Party City N/A Charles Company
29 2275 S Euclid Ave Airport Area 15,200 2nd Grocery Outlet Bargain Market N/A N/A
30 2550 Canyon Springs Pky Riverside 14,950 3rd Guitar Center N/A Argent Retail Advisors
31 22612 Alessandro Blvd Riverside 14,500 1st New Christian Fellowship N/A Direct Deal
32 130 S Mountain Ave West San Bernardino 14,241 2nd Grocery Outlet Bragain Market JLL N/A
33 Plaza Calle Tampico Coachella Valley 13,969 2nd Jules Market N/A Wilson Johnson
34 333 S Waterman Ave East San Bernardino 13,925 1st Abbasi Auto, Inc. N/A Lee & Associates

35 West Gate Plaza - Bldgs A-D Riverside 13,500 1st 99Cent Only Stores N/A Argent Retail Advisors
36 10144 Central Ave West San Bernardino 13,040 1st 3 Way Thrift Store N/A NAI Capital Commercial

37 1890 W Highland Ave East San Bernardino 12,400 1st Dollar General N/A N/A
38 Central Court Shopping Center West San Bernardino 12,020 3rd We Mart Chino N/A NAI Capital Commercial

39 Sun City Plaza South Riverside 11,400 3rd True Value Hardware N/A CBC Sudweeks
40 Orchard Plaza - Bldg A West San Bernardino 10,422 3rd Dollar Tree N/A N/A

Source: CoStar Property®

* Renewal

©2015 CoStar Group, Inc. The CoStar Retail Report 15

Inland Empire � Third Quarter 2015

Inland Empire Retail Market

Sales Activity

The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates

Cap Rate Price/SF

8.0% $550
$500
7.0% $450
$400
Cap Rate Percentage 6.0% $350
$300
5.0% Dollars/SF$250
Price/SF
4.0%

3.0%

2.0%

1.0%

2012 3q 2013 3q 2014 3q

Source: CoStar COMPS®

Sales Volume & Price Sales Analysis by Building Size

Based on Retail Building Sales of 15,000 SF and Larger Based on Retail Building Sales From July 2014 - June 2015

Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate

$300 $200 < 25,000 SF 291 2,302,437 $605,619,007 $ 263.03 6.06%
$250 $180
Millions of Sales Volume Dollars $200 $160
$140
$120 25K-99K 34 1,525,223 $218,867,100 $ 143.50 6.65%
SF

$150 $100 100K-249K 9 1,074,312 $174,570,000 $ 162.49 6.06%
$80 SF
$100 $60
$40 >250K SF 1 294,365 $51,300,000 $ 174.27 -
$50 $20
2013 1q 2014 1q $0
$0 2015 1q
2012 1q

Source: CoStar COMPS® Source: CoStar COMPS®

U.S. Price/SF Comparison U.S. Cap Rate Comparison

Based on Retail Building Sales of 15,000 SF and Larger Based on Retail Building Sales of 15,000 SF and Larger

Inland Empire (California) US 10.0% Inland Empire (California) US

$220

$200 9.0%

$180 Cap Rate Percentage 8.0%

Dollars per SF 7.0%

$160

6.0%

$140 5.0%

$120 4.0%

$100 3.0%

$80 2013 1q 2014 1q 2015 1q 2.0%
2012 1q 2012 1q 2012 3q 2013 1q 2013 3q 2014 1q 2014 3q 2015 1q

Source: CoStar COMPS® Source: CoStar COMPS®

16 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Sales Activity

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�� The CoStar Retail Report 17
©2015 CoStar Group, Inc.

Inland Empire – Third Quarter 2015

Inland Empire Retail Market

Inland Empire East Market

Market Highlights – Class “A, B & C”

Deliveries, Absorption & Vacancy Historical Analysis, All Classes

Delivered SF Absorption SF Vacancy

      0.800 9.6%           
0.700 9.4%
0.600 9.2%
0.500 9.0%
0.400 8.8%
0.300 8.6%
0.200 8.4%
0.100 8.2%
0.000 2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4q 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q
(0.100)
(0.200)
(0.300)

Source: CoStar Property®

Vacant Space Quoted Rental Rates

Historical Analysis, All Classes Historical Analysis, All Classes

Direct SF Sublet SF $16.20

11.60

11.40 $16.10

11.20 Dollars/SF/Year $16.00

11.00

      $15.90

10.80

10.60 $15.80

10.40 $15.70

10.20

10.00 $15.60 2014 3q 2015 1q 2015 3q
2014 1q
2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q
Source: CoStar Property®
Source: CoStar Property®

Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA
2015 3q 205,454 $16.14
2015 2q 10,986 127,231,916 11,050,069 8.7% 362,034 6 231,541 30 302,989 $16.04
2015 1q 50,093 $15.90
2014 4q 10,980 127,000,375 11,023,982 8.7% 290,127 9 339,788 30 492,782 $15.95
2014 3q $15.97
2014 2q 10,971 126,660,587 11,046,228 8.7% 211,031 4 63,202 22 676,286 $15.99
2014 1q (195,802) $15.79
2013 4q 10,967 126,597,385 11,033,119 8.7% 335,748 14 261,682 17 644,144 $15.82
2013 3q 306,863 $15.84
2013 2q 10,954 126,344,037 11,069,898 8.8% 234,390 9 97,163 27 830,776 $15.81
2013 1q $15.92
2012 4q 10,946 126,540,080 11,476,972 9.1% (21,898) 7 97,786 32 869,237 $15.96
2012 3q 358,924 $16.29
2012 2q 10,939 126,442,294 11,183,384 8.8% 173,947 16 267,878 22 327,392 $16.27
2012 1q 352,054 $16.36
2011 4q 10,923 126,174,416 11,251,254 8.9% (61,640) 9 89,674 30 479,998 $16.85
692,063
10,915 126,090,477 11,474,178 9.1% (90,800) 15 199,709 33 455,304

10,900 125,890,768 11,508,859 9.1% 9 54,021 40 608,534

10,891 125,836,747 11,432,940 9.1% 15 200,331 36 515,954

10,878 125,646,226 11,601,343 9.2% 9 87,323 26 269,138

10,871 125,567,267 11,696,331 9.3% 10 334,619 29 316,342

10,861 125,232,648 11,713,766 9.4% 4 12,695 28 567,417

10,858 125,226,153 11,645,631 9.3% 12 104,603 26 476,166

10,848 125,127,220 12,238,761 9.8% 11 130,550 28 366,540

Source: CoStar Property®

18 The CoStar Retail Report ©2015 CoStar Group, Inc.

Third Quarter 2015 – Inland Empire

Inland Empire Retail Market

Inland Empire West Market

Market Highlights – Class “A, B & C”

Deliveries, Absorption & Vacancy Historical Analysis, All Classes

Delivered SF Absorption SF Vacancy

0.500 10.0%

0.400 9.0%           
0.300 8.0%
7.0%

      0.200 6.0%
0.100 5.0%
4.0%

0.000 3.0%
(0.100) 2.0%
1.0%

(0.200) 0.0%

2012 1q 2012 2q 2012 3q 2012 4q 2013 1q 2013 2q 2013 3q 2013 4q 2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q

Source: CoStar Property®

Vacant Space Quoted Rental Rates

Historical Analysis, All Classes Historical Analysis, All Classes

Direct SF Sublet SF $16.30

4.70

$16.20

4.60

4.50 Dollars/SF/Year $16.10

4.40 $16.00

      4.30 $15.90

4.20 $15.80

4.10

$15.70

4.00

3.90 $15.60 2014 3q 2015 1q 2015 3q
2014 1q
2014 1q 2014 2q 2014 3q 2014 4q 2015 1q 2015 2q 2015 3q

Source: CoStar Property® Source: CoStar Property®

Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $16.23
2015 3q 98,749 $16.18
2015 2q 4,662 58,995,160 4,372,994 7.4% 4,670 3 57,616 10 120,616 $16.08
2015 1q $16.02
2014 4q 4,660 58,945,368 4,421,951 7.5% (81,348) 1 8,000 7 91,927 $15.95
2014 3q 85,394 $15.82
2014 2q 4,659 58,937,368 4,418,621 7.5% 111,210 3 14,905 3 59,481
2014 1q 372,307 $16.14
2013 4q 4,656 58,922,463 4,322,368 7.3% 124,560 8 41,838 3 14,905 $16.06
2013 3q 161,143 $15.73
2013 2q 4,648 58,880,625 4,365,924 7.4% 117,015 4 29,815 11 56,743 $17.68
2013 1q 183,321 $17.61
2012 4q 4,644 58,850,810 4,447,319 7.6% 294,650 5 213,379 12 71,653 $17.28
2012 3q (78,966) $17.23
2012 2q 4,639 58,637,431 4,606,247 7.9% 330,207 2 10,820 11 260,593 $17.32
2012 1q (72,866) $17.26
2011 4q 4,637 58,626,611 4,719,987 8.1% 240,978 1 3,800 10 261,523 $17.77
72,902
4,636 58,622,811 4,877,330 8.3% 4 36,000 7 239,162

4,632 58,586,811 4,958,345 8.5% 5 25,670 9 264,342

4,628 58,567,141 5,121,996 8.7% 6 191,960 10 76,091

4,624 58,418,268 5,267,773 9.0% 3 54,408 10 215,640

4,621 58,363,860 5,134,399 8.8% 5 408,512 9 241,538

4,616 57,955,348 5,056,094 8.7% 3 19,558 12 641,380

4,613 57,935,790 4,963,670 8.6% 5 50,587 14 650,848

4,608 57,885,203 5,154,061 8.9% 3 10,436 12 470,102

Source: CoStar Property®

©2015 CoStar Group, Inc. The CoStar Retail Report 19

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