Houston s retail market remains healthy through year-end

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1 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market remains healthy through year-end Lisa Bridges Director of Market Research Houston Houston s retail market has shown resiliency amid an energy downturn, retailer bankruptcies and store closings, as well as a category 4 Hurricane which flooded Houston in August. Despite these events, Houston s average retail vacancy has remained under 6% over the past few years and the average retail vacancy rate remained steady between quarters, holding at 5.6%. Absorption slowed during the fourth quarter, but this was mostly due to decreased construction deliveries. Recent announcements of store closings by Sam s, Macy s and Charming Charlie adds to a growing list that includes; Sears, Gander Mountain, Toys R Us, Sports Authority and Walgreens to name a few. As landlords look to backfill big box vacancies with indoor entertainment users, the larger retailers that are still in business are looking for creative ways to keep consumers happy and increase market share. Kohl s for example, would like to partner with a food or convenience concept to help fill some of their unused space after downsizing and reconfiguring some of its stores. Amazon is looking to expand into brick and mortar with a possible acquisition of a retailer such as Target. E-commerce was the big story in 2017 with millions of consumers shopping online. H-E-B, Kroger, Walmart and Whole Foods have all jumped on the online shopping bandwagon with home delivery and curb side pickup. We expect the trend to continue and grow in 2018, as consumers look for ways to add a few extra hours back to their week. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.4% 5.6% 5.6% Net Absorption (SF) (million square feet) New Construction (SF) (million square feet) Under Construction (SF) (million square feet) Annual Quarterly Quarterly Forecast* 1.2M 0.5M 0.1M 0.9M 0.6M 0.4M 0.9M 2.8M 2.9M Asking Rents Per Square Foot Per Year Average NNN $14.86 $14.88 $15.17 Neighborhood Centers $14.09 $14.51 $15.12 Strip Centers $17.67 $18.58 $18.27 The above asking rents are an average of all property types and classes that are currently listed with an asking rate. This average does not include properties that are fully leased or that do not list an asking rate. Please see page 2 of this report for an expanded discussion of retail rental rates.

2 Vacancy & Availability Houston s average retail vacancy rate remained steady at 5.6% between quarters and increased 20 basis points from 5.4% in Q At the end of the fourth quarter, Houston had 15.8M SF of vacant retail space on the market. Among the major property types, single-tenant retail had the lowest vacancy rate of 1.7%, followed by theme/entertainment at 3.3%, lifestyle centers at 3.8%, power centers at 4.1% and malls at 4.5%. The highest vacancy rate is among outlet centers at 11.3% and the largest amount of vacant space by square feet is among neighborhood centers. There is currently 2.9M SF of retail space under construction of which 64% is pre-leased. The majority of the projects under construction are located in the outlying suburban submarkets adjacent to rapidly growing residential developments. Some of those projects include The Kirby Collection in the Inner Loop River Oaks submarket, The Village at Riverstone in the Far New Territory submarket, Augusta Woods Village in the Far North submarket and The Shoppes of Kemah in the NASA/Clear Lake submarket. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 11/16 11/17 HOUSTON 5.2% 4.3% TEXAS 4.5% 3.7% U.S. 4.4% 3.9% JOB GROWTH Annual # of Jobs Added HOUSTON 1.6% 48.5K TEXAS 2.7% 331.6K U.S. 1.5% 2.1M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg Quoted Rent Avg Vacancy 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Source: Real Capital Analytics Q NO. OF PROPERTIES: 40 TOTAL SF: 1.7M AVERAGE $/SF: $291 *Vacancy percentage includes direct and sublease space. AVERAGE CAP : 6.8% Absorption & Demand MARKET AT TOWN CENTER Houston s retail market posted 88,083 square feet of positive net absorption in the fourth quarter, an 83% decrease from the previous quarter. Some of the larger tenants that moved during the fourth quarter are listed in the table below. TENANT SF OCCUPIED SUBMARKET Conn s 50,000 Stafford GlowZone 37,500 Far Katy South Pinstripes 33,830 Inner Loo River Oaks Planet Fitness 30,208 Near Southeast AMC 26,671 Montgomery County Rental Rates According to CoStar, our data provider, Houston s citywide average quoted retail rental rate for all property types increased between quarters from $14.88 per SF NNN in Q to $15.17 per SF NNN. These average rental rates are typically much lower than actual deal rates since they include all retail property types and classes, the majority of those properties are not well leased and are listed with discounted asking rates. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $30.00 to $85.00 per SF, depending on location and property type. PSP Investments JV North American props purchased the Market at Town Center in November 2017 from Weingarten Realty for $125.7 million or $323 per SF. The 388,819 square foot, 9-building power center was 99% leased at the time of sale. Some of the tenants in the center include Marshalls, DSW, Home Goods, Ross and Old Navy BUSINESS CENTER DR PRC Investments Ltd purchased a 21,978 SF strip center located at 3609 Business Center Dr in Pearland, TX from Parkside Capital in December The one-year old strip center sold for $9.0 million or $410 per SF, based on a 6.9% cap rate. 2 Houston Research & Forecast Report Q Retail Colliers International

3 Leasing Activity Houston s retail leasing activity, which includes renewals, increased quarterly from 1.5M square feet in Q to 1.7M square feet in Q Some of the tenants that signed leases during the fourth quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Grand Parkway Marketplace II Far North 34,000 LA Fitness Oct-17 Steeplechase Plaza Jersey Village 16,028 The Loken Group Nov-17 Heights Center Inner Loop Heights 12,265 Restaurant Depot Oct-17 Highway Bayside NASA Clear Lake 9,026 Dollar General Oct-17 Harwin Wholesale Center Southwest 9,000 Sakta Int Nov Mesa Dr Near Northeast 8,320 Family Dollar Dec Repsdorph Rd NASA Clear Lake 7,800 AutoZone Nov-17 Center at Baybrook NASA Clear Lake 7, Tactical Nov-17 Villagio Town Center Far Katy South 6,843 Grazia Italian Kitchen Dec-17 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 4Q17 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 35,680,700 3,072, % 30, % 3,103, % 140,594 $27.00-$45.00 Neighborhood Centers (one anchor) 71,941,811 6,876, % 53, % 6,930, % (121,597) $28.00-$46.00 Community Centers (two anchors) 47,376,481 2,106, % 43, % 2,150, % 234,844 $28.00-$45.00 Power Centers (three or > anchors) 28,015,153 1,151, % 3, % 1,154, % 121,665 $28.00-$45.00 Lifestyle Centers 5,479, , % 2, % 209, % 141,330 $40.00-$85.00 Outlet Centers 1,330, , % - 0.0% 150, % 0 $20.00-$40.00 Theme/Entertainment 499,468 16, % - 0.0% 16, % (5,000) $25.00-$35.00 Single-Tenant 72,269,796 1,181, % 72, % 1,253, % (270,065) N/A Malls 23,881,447 1,075, % - 0.0% 1,075, % (153,688) N/A GREATER HOUSTON 286,474,803 15,839, % 72, % 16,044, % 88,083 According to FMI s U.S. Grocery Shopper Trends 2017 report, online-only food stores saw an 11% increase in Houston Research & Forecast Report Q Retail Colliers International

4 Q Houston Retail Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

5 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market sees a slight uptick in vacancy in the third quarter Lisa Bridges Director of Market Research Houston Houston s retail market activity slowed during the third quarter but still remains healthy despite a decrease in absorption and a slight uptick in vacancy. In August 2017, Houston faced one of the worst natural disasters in history. Hurricane Harvey, a Category 4 hurricane, slammed the Texas coast and dumped over 50 inches of rain in parts of Houston. The event caused widespread flooding, destroying homes, businesses and infrastructure. The retail sector saw supply chain interruptions which halted distribution logistics for a week or more. Ships carrying consumer goods were delayed due to ports shutting down and local distribution facilities could not get products delivered to consumers. A report by First Data shows that retail spending increased the week before the hurricane, but plummeted 58.7% week-over-week and 43.7% year-over-year in Houston and its surrounding areas at the peak of the hurricane. According to the Department of Commerce, September saw a slight uptick in consumer spending, mostly from purchases of replacement items damaged by Harvey. According to the U.S. Bureau of Labor Statistics, the Houston MSA created 53,500 jobs (not seasonally adjusted) between August 2016 and August 2017, an annual growth rate of 1.8%. Industry sectors that added jobs include: Mining and Logging, Manufacturing, Professional and Business Services, Health Care and Social Assistance, and Educational Services. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.2% 5.4% 5.6% Net Absorption (SF) (million square feet) New Construction (SF) (million square feet) Annual Quarterly Quarterly Forecast* 1.8M 1.3M 0.4M 1.3M 0.8M 0.6M Under Construction (SF) (million square feet) 4.3M 1.5M 2.8M Asking Rents Per Square Foot Per Year Average NNN $15.23 $15.17 $14.88 Neighborhood Centers $14.54 $14.74 $14.51 Strip Centers $17.80 $18.15 $18.58 The above asking rents are an average of all property types and classes that are currently listed with an asking rate. This average does not include properties that are fully leased or that do not list an asking rate. Please see page 2 of this report for an expanded discussion of retail rental rates.

6 Vacancy & Availability Houston s average retail vacancy rate increased 20 basis points from 5.4% to 5.6% over the quarter and by 40 basis points from 5.2% in Q At the end of the third quarter, Houston had 15.7M SF of vacant retail space on the market. Among the major property types, single-tenant retail had the lowest vacancy rate of 1.6%, followed by theme/entertainment at 2.3%, lifestyle centers at 3.2%, malls at 3.9% and power centers at 4.4%. The highest vacancy rate is among outlet centers at 11.8%, and the largest amount of vacant space by square feet is among neighborhood centers. There is currently 2.8M SF of retail space under construction of which 55.7% is pre-leased. The majority of the projects under construction are located in the outlying suburban submarkets adjacent to rapidly growing residential developments. Some of those projects include Waller Town Center in the Far Northwest submarket, The Village at Riverstone in the Far New Territory submarket, Buffalo Springs Marketplace in the Montgomery County submarket and University Commons in the Far Southwest submarket. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 8/16 8/17 HOUSTON 5.7% 5.2% TEXAS 4.9% 4.5% U.S. 5.1% 4.5% JOB GROWTH Annual # of Jobs Added HOUSTON 1.8% 53.5K TEXAS 2.4% 286.3K U.S. 1.5% 2.1M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg Quoted Rent Avg Vacancy 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 37 TOTAL SF: 2.0M AVERAGE $/SF: $323 *Vacancy percentage includes direct and sublease space. AVERAGE CAP : 6.6% Absorption & Demand LACENTERRA AT CINCO RANCH Houston s retail market posted 438,000 square feet of positive net absorption in the third quarter, a 66% decrease from the previous quarter. Some of the larger tenants that moved during the third quarter are listed in the table below. TENANT SF OCCUPIED SUBMARKET Kroger 100,000 Far North Academy Sports & Outdoors 62,943 Far North Hobby Lobby 55,000 Far North Jumping Jaks 40,357 Far North Altitude Trampoline Park 40,000 Far Southwest Rental Rates According to CoStar, our data provider, Houston s citywide average quoted retail rental rate for all property types decreased between quarters from $15.17 per SF NNN in Q to $14.88 per SF NNN. These average rental rates are typically much lower than actual deal rates since they include all retail property types and classes, the majority of those properties are not well leased and are listed with discounted asking rates. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $30.00 to $85.00 per SF, depending on location and property type. PGIM Real Estate purchased LaCenterra at Cinco Ranch in September 2017 from Vista Houston for $143.4 million or $347 per SF, based on a 5.5% cap rate. The 143,000 square foot, two story shopping center was 97% leased at the time of sale. Some of the tenants in the center include Gymboree, Eddie Bauer, Jeans Couture and Cold Stone Creamery. A 45,000 square foot expansion is set to be completed early next year. CENTER AT PARK LAKES 5th Stream Realty purchased Center at Park Lakes located at 9025 N Sam Houston Pky E from Satya, Inc. in August The 13,976 square foot strip center sold for $2.75 million or $197 per SF. The property was listed for $2.85 million based on a 7.28% cap rate. 2 Houston Research & Forecast Report Q Retail Colliers International

7 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased quarterly from 1.4M square feet in Q to 1.2M square feet in Q Some of the tenants that signed leases during the third quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Katy Pin Oak Shops & Pads Far Katy South 10,170 The Learning Experience Academy of Early Education Sept-17 Grand Parkway Marketplace II Far North 10,000 Blue Lion Salon Studios Sept-17 The Gardens Retail Center FM 1960/I-45 8,648 Dollar Tree Sept-17 Lakes on Eldridge Centre Northwest 6,300 Love & Art Day Care Sept-17 Meyerland Plaza Shopping Center Southwest 5,422 Navy Federal Credit Union Sept-17 Copperwood Village Far Katy North 5,000 Carters Sept-17 Market at Town Center Southwest 4,846 City Gear Sept-17 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 3Q17 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 35,773,891 3,232, % 24, % 3,256, % 10,443 $27.00-$45.00 Neighborhood Centers (one anchor) 71,572,850 6,595, % 69, % 6,664, % 76,406 $28.00-$46.00 Community Centers (two anchors) 47,169,154 2,251, % 54, % 2,306, % 179,082 $28.00-$45.00 Power Centers (three or > anchors) 27,622,955 1,215, % 4, % 1,220, % 99,760 $28.00-$45.00 Lifestyle Centers 5,316, , % 2, % 168, % 17,770 $40.00-$85.00 Outlet Centers 1,330, , % - 0.0% 150, % (9,300) $20.00-$40.00 Theme/Entertainment 499,468 11, % - 0.0% 11, % 1,121 $25.00-$35.00 Single-Tenant 72,268,637 1,108, % 57, % 1,165, % 91,891 N/A Malls 23,908, , % - 0.0% 922, % (29,255) N/A GREATER HOUSTON 285,463,416 15,653, % 57, % 15,866, % 437,918 U.S. seaports saw an increase in waterborne shipments, rising 4.9% in September over last year as retailers stock up inventories ahead of the upcoming holiday shopping season. The Wall Street Journal 3 Houston Research & Forecast Report Q Retail Colliers International

8 Q Houston Retail Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

9 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market continues to expand Lisa Bridges Director of Market Research Houston Houston s retail market has remained healthy through mid-year 2017, with low vacancy, steady leasing activity and positive absorption. Despite 1.5M SF of new construction deliveries in Q2 2017, the average vacancy rate remained unchanged from last quarter, at 5.6%. Almost half of the 2.3M SF of retail space under construction is preleased and 83% of new construction delivered in 2017 is occupied. Houston s retail leasing activity, which includes renewals, increased over the quarter from 1.2M SF in Q to 1.4M SF in Q Much of the high-end class A space located within the major innercity retail hubs is % leased. It is hard to find good quality well located available space. Most of the space that is available is in older centers or projects under construction located in the suburbs near new master-planned residential development. Many large retailers such as Macy s and Sears, have announced store closings, but there are still new retailers entering the Houston market such as Dirt Cheap, a deep-discount chain, which recently leased space in 3 locations. According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created 45,300 jobs (not seasonally adjusted) between May 2016 and May Most of the recent quarterly job growth occurred in employment services, public education, food services and drinking places, health care, and fabricated metal products. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.8% 5.6% 5.6% Net Absorption (SF) (million square feet) New Construction (SF) (million square feet) Annual Quarterly Quarterly Forecast* 1.8M 0.6M 1.4M 1.1M 1.3M 1.5M Under Construction (SF) (million square feet) 4.4M 1.9M 2.3M Asking Rents Per Square Foot Per Year Average NNN $14.98 $15.00 $14.88 Neighborhood Centers $14.41 $14.58 $14.74 Strip Centers $17.44 $17.75 $17.93 The above asking rents are an average of all property types and classes that are currently listed with an asking rate. This average does not include properties that are fully leased or that do not list an asking rate. Please see page 2 of this report for an expanded discussion of retail rental rates.

10 Vacancy & Availability Houston s average retail vacancy rate remained unchanged over the quarter at 5.6% and decreased 20 basis points from 5.8% in Q At the end of the second quarter, Houston had 15.7M SF of vacant retail space on the market. Among the major property types, single-tenant retail has the lowest vacancy rate of 1.7%, followed by theme/entertainment at 2.6%, lifestyle centers at 3.0%, power centers at 4.2% and malls at 4.8%. The highest vacancy rate is among outlet centers at 10.6%, and the largest amount of vacant space by square feet is among neighborhood centers. There is currently 2.3M SF of retail space under construction of which 45% is pre-leased. The largest project under construction is the 438,000-SF Market Center at Aliana, anchored by H-E-B (completed and open) and Target s new concept store which is opening in October. The entire project is scheduled for completion in October The shopping center development was driven by the 2,000- acre Aliana master-planned residential community. The Richmond, TX Aliana is one of the top-selling master-planned communities nationwide, according to RCLCO Real Estate Advisor s most recent list. Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg Quoted Rent Avg Vacancy 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 5/16 5/17 HOUSTON 4.9% 5.1% TEXAS 4.3% 4.4% U.S. 4.5% 4.1% JOB GROWTH Sales Activity Sources: Real Capital Analytics Annual # of Jobs Added HOUSTON 1.5% 45.3K TEXAS 2.2% 268.1K U.S. 1.6% 2.26M Q NO. OF PROPERTIES: 57 TOTAL SF: 2.7M AVERAGE $/SF: $256 AVERAGE CAP : 7.3% *Vacancy percentage includes direct and sublease space. THE CENTER AT PEARLAND PARKWAY Absorption & Demand Houston s retail market posted 1.4M square feet of positive net absorption in the second quarter. A large majority of the absorption was caused by big box single tenants such as Kroger, H-E-B, and Walmart. Other large tenants that moved during the second quarter include Fitness Connection, Total Wine TJ Maxx, Michaels, PetSmart, and DSW. Rental Rates According to CoStar, our data provider, Houston s citywide average quoted retail rental rate for all property types decreased between quarters from $15.00 per SF NNN the in Q to $14.88 per SF NNN. These average rental rates are typically much lower than actual deal rates since they include all retail property types and classes, the majority of those properties are not well leased and are listed with discounted asking rates. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. Dunhill Partners, Inc. purchased The Center at Pearland Parkway for $41.8 million or $268 per SF, based on a 6% cap rate in June The 156,062-SF, 3-building shopping center was 100% leased at the time of sale. Some of the tenants in the center include TJ Maxx, Ross Dress For Less, Petco, Five Below, Inc., Chipotle Mexican Grill, Inc., MOD Pizza, and Mattress Firm. LAKES OF RIATA Finial Group recently purchased the Lakes of Riata shopping center located at Barker Cypress Rd. The 31,113-SF neighborhood shopping center sold for $5.5 million or $177 per SF, based on a 7% cap rate in April The property was 80% occupied at the time of sale. 2 Houston Research & Forecast Report Q Retail Colliers International

11 Leasing Activity Houston s retail leasing activity, which includes renewals, increased quarterly from 1.2M square feet in Q to 1.4M square feet in Q Some of the tenants that signed leases during the second quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Fountains on the Lake Sugar Land 36,600 Conn s May-17 Meadow Park Shopping Center Southeast Outlier 30,000 Dirt Cheap Apr-17 Towne Square Shopping Center Bridgelands 20,600 Planet Fitness May-17 Township Plaza Lake Houston 11,200 Exclusive Furniture May-17 Shoppes at Baytown Channelview 10,000 Elite MMA Baytown May-17 Crossroads Shopping Center Spring Creek 8,640 The Dance Studio 1 May Heights Boulevard Inner Loop River Oaks 6,000 Truth BBQ Jun-17 1 Renewal and/or Expansion Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 2Q17 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 35,230,929 2,956, % 23, % 2,980, % (78,572) $27.00-$45.00 Neighborhood Centers (one anchor) 71,754,809 6,638, % 69, % 6,707, % (78,308) $28.00-$46.00 Community Centers (two anchors) 47,142,907 2,326, % 57, % 2,384, % 486,853 $28.00-$45.00 Power Centers (three or > anchors) 27,527,466 1,145, % 1, % 1,146, % 128,806 $28.00-$45.00 Lifestyle Centers 4,848, , % 2, % 147, % 2,511 $40.00-$85.00 Outlet Centers 1,330, , % - 0.0% 141, % 8,606 $20.00-$40.00 Theme/Entertainment 499,468 12, % - 0.0% 12, % (6,621) $25.00-$35.00 Single-Tenant 72,657,879 1,166, % 38, % 1,205, % 484,243 N/A Malls 24,212,752 1,171, % - 0.0% 1,171, % 432,859 N/A GREATER HOUSTON 285,205,836 15,702, % 38, % 15,896, % 1,380,377 The Tax Foundation just released a new study which argues sales-tax holidays cost states revenue but provides few consumer benefits. Do you shop retail back-toschool tax-free weekends? Picture Source: James Beard Foundation 3 Houston Research & Forecast Report Q Retail Colliers International

12 Q Houston Retail Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

13 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market remains healthy moving into 2017 Lisa Bridges Director of Market Research Houston Houston s retail market moves into 2017 with a healthy outlook. Not much changed between quarters with vacancy rates ticking up only 20 basis points. Although Houston lost about 80,000 high income jobs between 2014 and 2016, retail market indicators show no signs of a struggling economy. Approximately 68% of the retail space under construction at the close of Q is pre-leased. Despite the 1.5M SF of new inventory delivered in the first quarter, Houston s average retail vacancy rate remains low at 5.6%. Houston s retail leasing activity, which includes renewals, decreased over the quarter from 1.6M SF in Q to 1.1M SF in Q Most of the high-end class A space located inside the city limits is % leased. It is hard to find good quality well located available space. Most of the space that is available is in projects under construction located in the suburbs near new master-planned residential development, and will most likely be leased and occupied by discount retailers, service businesses, restaurants, and entertainment concepts. As large department stores continue to close down, these spaces are being considered for other uses such as entertainment venues that still add value to the shopping center. Another trend on the increase are mixed-use developments planned where retail and entertainment brands are built in a live, work, shop, and play environment. River Oaks District and City Centre are success place making projects that have broad appeal and seem to be insulated from online shopping. Developers are clamoring for urban sites to develop retail in walkable areas such as the Heights and Washington Ave where several new projects are under construction or in the planning stage. To offset declining in-store sales due to online shopping, HEB recently announced plans to add curb side delivery at most of their Houston stores. According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created 19,300 jobs (not seasonally adjusted) between February 2016 and February Most of the job growth occurred in arts, entertainment & recreation, government, retail trade, and education. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.9% 5.4% 5.6% Net Absorption (SF) 0.1M 1.4M 0.9M New Construction (SF) 1.2M 1.8M 1.5M Under Construction (SF) 3.7M 2.4M 2.6M Asking Rents Per Square Foot Per Year Annual Quarterly Quarterly Forecast* Average $14.89 $14.86 $14.97 Neighborhood Centers $14.42 $14.09 $14.57 Strip Centers $17.33 $17.67 $17.79 The above asking rents are an average of all property types and classes that are currently listited with an asking rate. This average does not include properties that are fully leased or that do not list an asking rate. Please see page 2 of this report for an expanded discussion of retail rental rates.

14 Vacancy & Availability Houston s average retail vacancy rate increased 20 basis points from 5.4% in Q to 5.6% in Q At the end of the first quarter, Houston had 15.8M SF of vacant retail space on the market. Among the major property types, theme/entertainment retail has the lowest vacancy rate of 1.2%, followed by single-tenant at 1.7%, lifestyle centers at 3.1%, power centers at 4.1% and community centers at 5.3%. The highest vacancy rate is among outlet centers at 11.8%, and the largest amount of vacant space by square feet is among neighborhood centers. There is currently 2.6M SF of retail space under construction of which 62% is pre-leased. The largest project under construction is the 300,000-SF Paragon Outlets located on Hwy 59 South in Rosenberg. This project is scheduled for completion in October Future tenants include Nike Factory Store, Old Navy, Gap Outlet, Carter s, Banana Republic Factory Store, Skechers, Brook s Brothers Factory Store and Converse. Also under construction is the 168,000-SF Market at Springwoods Village neighborhood shopping center located in the Far North submarket. The Kroger-anchored center sits on the south side of the Grand Parkway at Holzwarth Rd, adjacent to Springwoods Village. The center is expected to deliver third quarter Other future tenants include MOD Super Fast Pizza, Supercuts, Chick-fil-a, Torchy s Tacos, and The Big Salad Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 2/16 2/17 HOUSTON 4.7% 5.9% TEXAS 4.4% 5.1% U.S. 5.2% 4.9% JOB GROWTH Sales Activity Sources: Real Capital Analytics Annual # of Jobs Added HOUSTON 0.6% 19.3K TEXAS 1.8% 218.8K U.S. 1.7% 2.4M Q NO. OF PROPERTIES: 39 TOTAL SF: 1.6M Retail Rental Rate and Vacancy Percentage Houston, TX Avg. Rent Avg. Vacancy $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $ % 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% AVERAGE $/SF: $242 AVERAGE CAP : 7.3% VILLAGE CENTER PLAZA AT CINCO RANCH *Vacancy percentage includes direct and sublease space. Absorption & Demand Houston s retail market posted 0.9M square feet of positive net absorption in the first quarter. A large majority of the absorption was caused by big box single tenants such as Target, Lowes, and Sam s Club. Other large tenants that moved during the first quarter include Floor and Decor, Urban Air, Home Goods/Marshalls, Rustic Furniture, PetCo and Party City. A privatge investor purchased Village Center Plaza in March The The SF shopping center was 100% leased at the time of sale. Some of the tenants in the center include Pinot s Pallet, Wild Birds Unlimited, and Sola Salon Studios. The sales price was undisclosed HILLCROFT ST Rental Rates According to CoStar, our data provider, Houston s citywide average quoted retail rental rate for all property types increased slightly over the quarter from $14.86 per SF NNN the in fourth quarter to $14.97 per SF NNN. These average rental rates are typically much lower than actual deal rates since they include all retail property types and classes. And, much of those properties are not well leased and are listed with discounted asking rates. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. A private investor recently purchased a long-term net leased Jack in the Box fast food restaurant located in Southwest Houston. The 2,868 SF restaurant was purchased for $2.55 million, based on a 5.05% cap rate in March Houston Research & Forecast Report Q Retail Colliers International

15 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased quarterly from 1.6M square feet in Q to 1.1M square feet in Q Some of the tenants that signed leases during the first quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Spring Cypress Center Far North 40,000 Altitude Trampoline Park Feb-17 Northland Shopping Center Spring Creek 20,000 Cool Kats Party Supplies Feb-17 Commons at Willowbrook Cypresswood 15,500 The Tile Shop Jan-17 Montgomery Plaza Montgomery County 13,700 Gallery Bridal Jan-17 Copperfield Marketplace Far Katy North 12,000 Tuesday Morning Feb-17 Montgomery Crossing Montgomery County 10,000 Dollar Tree Jan FM 2978, Suite A Montgomery County 8,450 Anthology Lighting Mar-17 Westlake Marketplace Near Northeast 7,800 Famous Footwear Feb-17 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 1Q17 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,991,545 2,779, % 19, % 2,799, % 131,761 $27.00-$45.00 Neighborhood Centers (one anchor) 71,436,604 6,494, % 58, % 6,553, % (198,815) $28.00-$46.00 Community Centers (two anchors) 46,684,375 2,405, % 64, % 2,469, % (7,310) $28.00-$45.00 Power Centers (three or > anchors) 27,280,668 1,121, % - 0.0% 1,121, % 185,274 $28.00-$45.00 Lifestyle Centers 4,848, , % - 0.0% 149, % 75,867 $40.00-$85.00 Outlet Centers 1,330, , % - 0.0% 157, % 6,729 $20.00-$40.00 Theme/Entertainment 499,468 6, % - 0.0% 6, % - $25.00-$35.00 Single-Tenant 72,292,659 1,157, % 38, % 1,196, % 413,158 N/A Malls 24,131,557 1,334, % - 0.0% 1,334, % 284,234 N/A GREATER HOUSTON 283,496,462 15,605, % 38, % 15,787, % 890,898 Congratulations to Houston s own Chef Hugo Ortega, owner of several Houston restaurants, for winning the 2017 James Beard Award in the Best Chef: Southwest category. Picture Source: James Beard Foundation 3 Houston Research & Forecast Report Q Retail Colliers International

16 Q Houston Retail Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston CONTRIBUTOR Vaughan Ford Senior Vice President Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

17 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market remains strong and moves into 2017 with a healthy outlook Lisa Bridges Director of Market Research Houston Houston s retail market ends 2016 on a positive note and moves into 2017 as the healthiest commercial real estate sector in the metro. The average vacancy rate remained unchanged at 5.8% on an annual basis and only increased 10 basis point on a quarterly basis from 5.7% in Q Although Houston lost about 80,000 high income jobs between 2014 and 2016, retail market indicators show no signs of a struggling economy. According to our data provider, CoStar Property, Houston ranks fourth nationally in construction activity. Approximately 74.6% of the retail space under construction at the close of Q is pre-leased. Despite the 1.3M SF of new inventory delivered in Q4 2016, Houston s average retail vacancy rate remains low at 5.8%, only 10 basis points higher than the 5.7% recorded in the previous quarter. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Annual Quarterly Quarterly Forecast* Houston s retail leasing activity, which includes renewals, decreased over the quarter from 1.4M SF in Q to 1.1M SF year-end leasing activity was actually more than the previous year, with 6.2M SF compared to 5.7M SF in According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created 13,400 jobs (not seasonally adjusted) between October 2015 and October Most of the job growth occurred in government, retail trade, education and healthcare, trade, transportation and utilities, and professional services. Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.8% 5.7% 5.8% Net Absorption (SF) 1.2M 1.5M 1.0M New Construction (SF) 1.1M 1.3M 1.3M Under Construction (SF) 2.8M 4.1M 2.4M Asking Rents Per Square Foot Per Year Average $15.20 $14.81 $14.87 Neighborhood Centers $14.72 $14.25 $14.48 Strip Centers $17.30 $17.57 $17.60

18 Vacancy & Availability Houston s average retail vacancy rate increased 10 basis points from 5.7% in Q to 5.8%. At the end of the fourth quarter, Houston had 16.9M SF of vacant retail space. Among the major property types, theme/entertainment retail has the lowest vacancy rate of 1.2%, followed by single-tenant at 2.5%, lifestyle centers at 3.2%, power centers at 4.2% and community centers at 5.4%. The highest vacancy rate is among outlet centers at 11.9%, and the largest amount of vacant space by square feet is among neighborhood centers. Houston s retail construction pipeline has 2.4M SF of projects underway of which 74.6% are pre-leased. The largest project under construction is the 374,000-SF Fairfield Town Center located on Hwy 290 and Cypresswood in the Cypress master-planned community development of Fairfield. The center is 100% pre-leased and is scheduled for completion in March Another large project under construction is the Paragon Outlets located on Hwy 59 South in Rosenberg. This project is scheduled for completion mid-2017 and some of the tenants that pre-leased. Future tenants include Nike Factory Store, Old Navy, Gap Outlet, Carter s, Banana Republic Factory Store, Skechers, Brook s Brothers Factory Store and Converse. Retail Rental Rate and Vacancy Class Percentage A Houston, TX $ $ $15.60 $ $15.20 $ $ $14.60 $ $14.20 $ *Vacancy percentage includes direct and sublease space. Occupancy Avg. Rent % Avg. Avg. Occupancy Vacancy % 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 10/15 10/16 HOUSTON 4.8% 4.9% TEXAS 4.4% 4.2% U.S. 4.8% 4.4% JOB GROWTH Sales Activity Sources: Real Capital Analytics CHAMPIONS VILLAGE Annual # of Jobs Added HOUSTON 0.4% 13.4K TEXAS 1.8% 212.6K U.S. 1.6% 2.3M Q NO. OF PROPERTIES: 31 TOTAL SF: 1.0M AVERAGE $/SF: $260 AVERAGE CAP : 6.9% Absorption & Demand Houston s retail market posted 1.0M square feet of positive net absorption in the fourth quarter, bringing the total 2016 annual absorption to 4.3M square feet. About one-third of the Q absorption occurred in Baybrook Mall s new Power Center development. Tenants that moved into Baybrook include: The Container Store, REI Co-Op, Total Wine, and Dick s 105,000-SF sporting goods store, Field & Stream and Golf Galaxy. Rental Rates According to CoStar, Houston s citywide average quoted retail rental rate for all property types decreased marginally over the quarter from $14.89 per SF NNN the in third quarter to $14.87 per SF NNN. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. Hines Retail REIT Holdings sold Champions Village, a 403,523-SF Randalls-anchored shopping center to Preferred Apartment Communities, Inc. in October According to CoStar Comps, the center sold for $50 million or $124 per SF. Some of the tenants in the center include Randall s, Stein Mart, Barnes & Noble and World Market. GOLDEN CORRAL 1 A private investor recently purchased a 15-year net leased Golden Corral located at Gulf Freeway. The restaurant is located in the Near Southeast submarket. The 12,500 SF restaurant was completely rebuilt in 2016 as one of Golden Corral s new prototypes. 1 Colliers International transaction 2 Houston Research & Forecast Report Q Retail Colliers International

19 Leasing Activity Houston s retail leasing activity, which includes renewals, increased annually from 5.7M square feet in 2015 to 6.2M square feet in Some of the tenants that signed leases during the fourth quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Shops at Bella Terra Far Southwest 34,950 Total Wine Dec-16 Katy Ranch Crossing Far Katy South 20,625 Rustic Furniture Dec-16 Willowchase Shopping Center Fairfield 18,000 Northern Tool Nov-16 Shoppes at Kingsgate Kingwood 17,150 Aldi Oct-16 Kroger Junction Near Southeast 16,725 Fallas Oct-16 West Road Plaza Near North 13,398 Petco Oct-16 Shoppes at Kingsgate Kingwood 7,350 Dollar Tree Oct-16 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 4Q16 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,644,172 2,778, % 34, % 2,812, % 62,546 $27.00-$45.00 Neighborhood Centers (one anchor) 70,908,258 6,196, % 47, % 6,244, % 96,453 $28.00-$46.00 Community Centers (two anchors) 46,651,463 2,455, % 66, % 2,522, % 253,232 $28.00-$45.00 Power Centers (three or > anchors) 26,646,817 1,087, % 26, % 1,113, % 140,343 $28.00-$45.00 Lifestyle Centers 4,775, , % - 0.0% 152, % -5,257 $40.00-$85.00 Outlet Centers 1,223, , % - 0.0% 145, % -12,650 $20.00-$40.00 Theme/Entertainment 499,468 6, % - 0.0% 6, % 0 $25.00-$35.00 Single-Tenant 72,072,629 1,785, % 38, % 1,823, % 241,424 N/A Malls 24,187,672 1,459, % 17, % 1,476, % 266,540 N/A GREATER HOUSTON 281,610,093 16,066, % 56, % 16,298, % 1,042,631 A study done by Rockport Analytics for the Houston Super Bowl Host Committee estimates that $450 million in new spending will occur during late January and early February as a result of Super Bowl Source: Houston Super Bowl Host Committee 3 Houston Research & Forecast Report Q Retail Colliers International

20 Q Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

21 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market continues to grow with 1.3M SF delivered in Q3 and 4.1M SF in the pipeline Lisa Bridges Director of Market Research Houston Houston s retail market continues its remarkable expansion by adding approximately 1.3M SF of newly delivered space and 4.1M SF under construction. According to our data provider, CoStar Property, Houston ranks second nationaly, slightly outpaced by Dallas/Ft. Worth in construction activity. Approximately 83.4% of the retail space under construction at the close of Q is pre-leased. Despite the 1.3M SF of new inventory delivered in Q3 2016, Houston s average retail vacancy rate remains historically low at 5.7%, 0.1% lower than the 5.8% recorded in the previous quarter. Houston continues to attract new tenants to the market. Pinstripes, a restaurant and entertainment bowling venue, signed a lease at The Kirby Collection, which is under construction and expected to deliver December Shake Shack opened its first Houston location in the newly renovated section of the Galleria I. Maryland-based Total Wine & More recently opened its first Houston location in Northwest Houston in The commons at Willowbrook, and a drive-thru grocery concept Farm Stores, has announced plans to open its first Houston -area location in According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created 14,200 jobs (not seasonally adjusted) between August 2015 and August Most of the job growth occurred in education and healthcare, trade, transportation and utilities, and professional services. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Annual Quarterly Quarterly Forecast* Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.8% 5.8% 5.7% Net Absorption (SF) 1.1M 2.0M 1.5M New Construction (SF) 1.0M 1.8M 1.3M Under Construction (SF) 2.6M 4.7M 4.1M Asking Rents Per Square Foot Per Year Average $15.16 $14.69 $14.81 Neighborhood Centers $15.00 $14.44 $14.25 Strip Centers $17.03 $17.22 $17.57

22 Vacancy & Availability Houston s average retail vacancy rate decreased 10 basis points from 5.8% in Q to 5.7%. At the end of the third quarter, Houston had 15.9M SF of vacant retail space. Among the major property types, theme/entertainment retail has the lowest vacancy rate of 1.2%, followed by single-tenant at 2.3%, lifestyle centers at 2.5%, power centers at 4.2% and community centers at 5.5%. The highest vacancy rate is among outlet centers at 10.9%, and the largest amount of vacant space by square feet is among neighborhood centers. Houston s retail construction pipeline has 4.1M SF of projects underway and 83.4% is pre-leased. The largest project under construction is the 374,000-SF Fairfield Town Center located on Hwy 290 and Cypresswood in the Cypress master-planned community development of Fairfield. The center is 100% pre-leased, and some of the tenants include Kirklands, HomeGoods/Marshalls, Party City, Ulta and Old Navy. Out parcels that have already been purchased and developed in the center include Rooms To Go, Chick-fil-A, Taco Bell, Whataburger, McDonald s and Bank of America. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 08/15 08/16 HOUSTON 4.9% 5.8% TEXAS 4.6% 5.0% U.S. 5.0% 5.2% JOB GROWTH Annual # of Jobs Added HOUSTON 0.5% 14.2K TEXAS 1.6% 186.9K U.S. 1.7% 2.4M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 47 TOTAL SF: 1.8M AVERAGE $/SF: $337 AVERAGE CAP : 6.5% *Vacancy percentage includes direct and sublease space. GLENBROOK SQUARE Absorption & Demand Houston s retail market posted 1.5M square feet of positive net absorption in the third quarter. According to Colliers in-house retail advisors, good quality, well-located retail space is in high demand and developers are responding, especially in the suburban markets. Some of the larger retailers that opened new locations during the third quarter include Sam s Club in the Northwest submarket, Dick s Sporting Goods in the Northeast submarket, Field Stream in the Katy North submarket, Bed Bath & Beyond in the Katy North submarket and Ross and TJ Maxx in the NASA/Clear Lake submarket. Weingarten Realty sold Glenbrook Square, a 77,890-SF neighborhood shopping center to a private buyer in August According to Real Capital Analytics the center sold for $8.4 million or $108 per SF. Some of the tenants in the center include Kroger, City Gear, and EZ Pawn. THE PLAZA ON BROADWAY 1 Rental Rates According to CoStar, Houston s citywide average quoted retail rental rate for all property types increased slightly from $14.69 per SF NNN in the second quarter to $14.81 per SF NNN in the third quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. Texas Medical Pearland Properties I & II LLC sold the 39,855-SF Plaza on Broadway neighborhood shopping center to Pearbroad Investors, LLC et. Al. in July The center was 100% leased at the time of sale and sold at an undisclosed price based on a 7% cap rate. 1 Colliers International transaction 2 Houston Research & Forecast Report Q Retail Colliers International

23 Leasing Activity Houston s retail leasing activity, which includes renewals, increased annually by 3.5%, recording 1,232,800 square feet in Q Some of the tenants that signed leases during the third quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Portofino Shopping Center Montgomery County 45,500 PGA Tour Superstore Jul-16 Fairfield Town Center Northwest 41,810 Home Goods / Marshalls Sep-16 The Kirby Collection Inner Loop 33,830 Pinstripes 2 Jul-16 Nottingham Plaza Far Katy South 30,000 Conn's Home Plus 1 Sep-16 Fairfield Town Center Northwest 25,000 Ross Dress for Less Sep-16 West Road Plaza II North 21,530 Marshalls Sep-16 Fountains on the Lake Sugar Land 11,425 Pump It Up Aug-16 1 Renewal 2 Pre-lease in building under construction Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 3Q16 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,499,395 2,723, % 27, % 2,751, % 241,596 $27.00-$45.00 Neighborhood Centers (one anchor) 70,306,511 6,179, % 55, % 6,234, % (22,729) $28.00-$46.00 Community Centers (two anchors) 46,216,509 2,490, % 56, % 2,546, % 514,842 $28.00-$45.00 Power Centers (three or > anchors) 26,300,604 1,113, % 3, % 1,117, % 323,095 $28.00-$45.00 Lifestyle Centers 5,108, , % - 0.0% 130, % 29,176 $40.00-$85.00 Outlet Centers 1,223, , % - 0.0% 133, % 15,986 $20.00-$40.00 Theme/Entertainment 499,468 6, % - 0.0% 6, % 12,370 $25.00-$35.00 Single-Tenant 71,547,838 1,624, % 26, % 1,650, % 415,870 N/A Malls 23,917,672 1,455, % 4, % 1,460, % 1,589 N/A GREATER HOUSTON 279,620,333 15,856, % 174, % 16,031, % 1,531,795 A $30 million renovation of the Galleria s Saks Fifth Avenue wing is scheduled for completion in 2017! Some of the tenants planning to move into the new space include Massimo Dutti, Loro Piana, Ted Baker and Tadashi Shoji. Source: Simon 3 Houston Research & Forecast Report Q Retail Colliers International

24 Q Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 4 Colliers International Houston Market 000 Address, 1233 West Loop Suite South, # Suite Address, Houston, TexasSuite # colliers.com/<<market>> colliers.com/texas/houston North American Research & Forecast Report Q Office Market Outlook Colliers International

25 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market leads the nation in construction activty Lisa Bridges Director of Market Research Houston Houston s retail market continues to expands with 3.9M SF under construction. According to our data provider, CoStar Property, Houston ranks first in construction activity when compared to other U.S. markets. Northern New Jersey was second with 3.7M SF and Dallas/Ft. Worth third with 3.5 M SF. Approximately 82.6% of the 3.9M SF of retail space under construction at the close of Q is pre-leased. Despite the 1.8M SF of new inventory delivered in Q2 2016, Houston s average retail vacancy rate remained under 6.0%, decreasing to 5.8% over the quarter from 5.9% in Q Last quarter we listed several large tenants, including Sports Authority, with plans to close and exit the Houston market. Since that time, Dick s Sporting Goods was awarded the Sports Authority brand name and its existing leases in bankruptcy auction. No details about the Houston locations have been made public yet, but the company did state it plans to expand. The grocery store wars continue with Kroger edging out HEB and Walmart in Q2, opening three new stores over the quarter. According to the U.S Bureau of Labor Statistics, the Houston metropolitan area created 5,100 jobs (not seasonally adjusted) between May 2015 and May 2016, about an eighth of the historical average. Job growth occurred in the Arts, Entertainment & Recreation sector, followed by Accommodation & Food Services, and Healthcare. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Annual Quarterly Quarterly Forecast* Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 5.8% 5.9% 5.8% Net Absorption (SF) 1.3M -0.1M 2.0M New Construction (SF) 1.1M 0.8M 1.8M Under Construction (SF) 2.0M 3.7M 3.9M Asking Rents Per Square Foot Per Year Average $15.07 $14.64 $14.69 Neighborhood Centers $14.37 $14.46 $14.44 Strip Centers $16.72 $16.99 $17.22

26 Vacancy & Availability Houston s average retail vacancy rate decreased 10 basis points from 5.9% to 5.8% over the quarter. At the end of the second quarter, Houston had 16.4M SF of vacant retail space. Among the major property types, single-tenant retail has the lowest vacancy rate of 2.2%, followed by lifestyle centers at 3.1%, theme/entertainment at 3.7% and power centers at 4.7%. The highest vacancy rate is among outlet centers at 9.9%, and the largest amount of vacant space by square feet is among neighborhood centers with 6.2M SF of vacant space. Houston s retail construction pipeline has 3.9M SF of projects underway and 82.6% is pre-leased. The largest project under construction is the 374,000-SF Fairfield Town Center located on Hwy 290 and Cypresswood in the Cypress master-planned community development of Fairfield. The center is 84% pre-leased, and some of the tenants include Kirklands, HomeGoods/Marshalls, Party City, Ulta and Old Navy. Out parcels that have already been purchased and developed in the center include Rooms To Go, Chick-fil-A, Taco Bell, Whataburger, McDonald s and Bank of America. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 05/15 05/16 HOUSTON 4.4% 4.8% TEXAS 4.3% 4.2% U.S. 5.3% 4.5% JOB GROWTH Annual # of Jobs Added HOUSTON 0.2% 5.1K TEXAS 1.4% 169.4K U.S. 1.7% 2.4M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 23 TOTAL SF: 0.8M AVERAGE $/SF: $224 AVERAGE CAP : 7.3% LOUETTA CENTRAL *Vacancy percentage includes direct and sublease space. Absorption & Demand Houston s retail market posted 1,957,629 SF of positive net absorption in the second quarter. According to Colliers in-house retail advisors, good quality, welllocated retail space is in high demand and developers are responding, especially in the suburban markets. Some of the larger retailers that opened new locations during the second quarter include Walmart in the Montgomery County submarket, Kroger Marketplace in the Far South submarket, HEB in the NASA/Clear Lake submarket, Kroger in the Near Northeast submarket and in the Channelview submarket, and Showbiz Cinemas in the Lake Houston submarket. Rental Rates According to CoStar, Houston s citywide average quoted retail rental rate for all property types increased marginally from $14.64 per SF NNN in the first quarter to $14.69 per SF NNN in the second quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. RioCan Real Estate Investment Trust sold Louetta Central, a 148,924-SF community shopping center to The Blackstone Group LP in May The center sold along with 48 other properties in a portfolio valued at $1.9 billion. Louetta Central was valued at $205 per SF and the center was 100% occupied at the time of sale by tenants Famous Footware, Kohl s, Michaels, and Ross Dress for Less. MISSION BEND SHOPPING CENTER Whitestone REIT purchased the 131,575-SF Mission Bend shopping center from Investcorp for $15.1M or $115 per SF in May The property was 98% leased at the time of sale and some of the tenants include Dd S Discount, Dollar General, and Harbor Freight. 2 Houston Research & Forecast Report Q Retail Colliers International

27 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased by 9.0% on a quarterly basis, recording 1,386,500 square feet in Q Some of the tenants that signed new leases during the second quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Brazos Town Center Far New Territory 38, Hour Fitness Apr-16 The Shoppes At ParkWest Far Katy North 38,000 Bed Bath & Beyond Apr-16 Commons At Willowbrook Cypresswood 22,000 HomeGoods Jun-16 Southwest Plaza Southwest 16,000 Harbor Freight Tools Jun-16 Northtown Plaza Near North 16,000 dd s Discounts Jun-16 Federal East Plaza Pasadena/Galena Park 13,200 Boot Barn Jun-16 Spectrum Plaza Spring Creek 11,450 BodyUSA Jun N US 59 Hwy Kingwood 10,700 Mattress One Jun-16 Main Street Crossing Shopping Center Far Katy South 10,000 Ace Hardware May-16 Westchase Shopping Center Westchase 10,000 Kirkland s Jun-16 Tomball Market Place Far Tomball 9,600 Elite Billiards Jun-29 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 2Q16 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,199,107 2,766, % 31, % 2,798, % 376,508 $27.00-$45.00 Neighborhood Centers (one anchor) 71,077,659 6,183, % 48, % 6,232, % 335,721 $28.00-$46.00 Community Centers (two anchors) 45,976,616 2,601, % 37, % 2,639, % 392,973 $28.00-$45.00 Power Centers (three or > anchors) 26,197,900 1,224, % 3, % 1,228, % 312,303 $28.00-$45.00 Lifestyle Centers 5,180, , % 33, % 195, % 34,801 $40.00-$85.00 Outlet Centers 1,594, , % - 0.0% 149, % 8,407 $20.00-$40.00 Theme/Entertainment 499,468 18, % - 0.0% 18, % 862 $25.00-$35.00 Single-Tenant 76,593,486 1,673, % 40, % 1,714, % 484,023 N/A Malls 23,932,672 1,596, % 4, % 1,600, % 8,531 N/A GREATER HOUSTON 285,251,976 16,376, % 201, % 16,578, % 1,954,129 3 Houston Research & Forecast Report Q Retail Colliers International

28 Q Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

29 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market continues to expand adding another 1M SF to its construction pipeline Lisa Bridges Director of Market Research Houston Houston s retail market continues to expand even while the local economy is wavering due to lower oil prices. Approximately 3.7M SF of retail space is under construction and 81.5% of this space is preleased. Over 1M SF of new inventory delivered during the first quarter and most of the new product is pre-leased. A large majority of the new construction is located in suburban submarkets near new housing developments. Market Indicators Relative to prior period NET ABSORPTION Annual Quarterly Quarterly Forecast* Several large tenants have recently announced plans to close and exit the Houston market, such as Sports Authority, Aeropostale, and Fresh Market, which has resulted in negative net absorption during the first quarter. Although 0.2MSF of negative absorption isn t a significant amount, it is the first time the market has posted negative absorption since Retail leasing activity decreased 6.2% between quarters, recording 1.2M SF in Q and the citywide average quoted retail rental rate fell 3.6% between quarters from $15.19 to $14.65 per SF NNN and annually by 2.1% from $14.95 per SF NNN. Houston s average retail vacancy rate remained under 6.0%, increasing to 5.9% over the quarter from 5.7% in Q4 2015, but it is still 10 basis points lower than the 6.0% recorded one year ago. Over the last year and a half, thousands of energy jobs have been eliminated, but industries such as hospitality and healthcare added jobs helping to balance the job cuts which has resulted in little to no job growth for Houston. NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 6.0% 5.7% 5.9% Net Absorption (SF) 1.1M 1.2M -0.2M New Construction (SF) 0.9M 1.1M 0.8M Under Construction (SF) 2.7M 2.8M 3.7M Asking Rents Per Square Foot Per Year Average $14.95 $15.19 $14.65 Neighborhood Centers $14.42 $15.10 $14.44 Strip Centers $16.35 $16.83 $16.80

30 Vacancy & Availability Houston s average retail vacancy rate increased 20 basis points from 5.7% to 5.9% over the quarter. At the end of the first quarter, Houston had 16.6M SF of vacant retail space. Among the major property types, single tenant retail has the lowest vacancy rate at 2.1%, followed by theme/entertainment at 3.6% and power centers at 4.0%. The highest vacancy rate is among outlet centers at 9.9%, and the largest amount of vacant space by size is among neighborhood centers, which has 6.5M SF of vacant space. Houston s retail construction pipeline had 3.7M SF of projects underway at the end of the first quarter. The largest project under construction is the 450,000-SF The Shoppes at Parkwest located on I-10 and Katy Fort Bend Rd, in the Far Katy North submarket. The center is 100% pre-leased, and some of the tenants include Bed Bath & Beyond, buybuy Baby, DSW, Kirkland s, and DXL. Phase I of the center is scheduled to deliver in July Phase II, which is scheduled to deliver in September 2016, is 78% pre-leased to Dick s Sporting Goods, Golf Galaxy, Field & Stream, Mattress Firm and Chipotle. Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 02/15 02/16 HOUSTON 4.4% 4.7% TEXAS 4.4% 4.3% U.S. 5.8% 5.2% JOB GROWTH Annual # of Jobs Added HOUSTON 0.3% 9.0K TEXAS 1.5% 172.7K U.S. 2.0% 2.9M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 23 TOTAL SF: 0.8M AVERAGE $/SF: $224 AVERAGE CAP : 7.3% RICELAND PAVILION *Vacancy percentage includes direct and sublease space. Absorption & Demand Houston s retail market posted 216,000 SF of negative net absorption in the first quarter, mostly due to tenants relocating to newer centers and some national tenants leaving the market. According to Colliers in-house retail advisors, good quality, well-located retail space is still in high demand and developers are responding, especially in the suburban markets. As new segments of the Grand Parkway (SH 99) have opened, developers have announced plans to build shopping centers along Houston s outer loop. NewQuest Properties recently announced plans to develop a 600,000-SF large-scale shopping center in the Tomball suburban market at the southwest corner of Highway 249 and the Grand Parkway. Tomball is one of Houston s fastest growing northern communities which is now connected directly to West Houston and Northeast Houston with the expansion of the Grand Parkway. The Schireson Family purchased Riceland Pavilion in March 2016 from Wes Walters Realty. The sales price was undisclosed, however, the property was appraised for $31.6M or $213 per SF underwritten using a 7.0% cap rate according to REAL Capital Analytics. The 148,030-SF shopping center was 100% occupied at the time of sale. Major tenants include Office Depot, Old Navy, Petco, Spec s Liquor, and Hibbett Sporting Goods. LAKES ON ELDRIDGE CENTRE Rental Rates According to CoStar, our data service provider, Houston s citywide average quoted retail rental rate for all property types decreased 3.6% from $15.19 per SF NNN in the fourth quarter, to $14.95 per SF NNN in the first quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. The Richland Cos purchased the 30,049-SF Lakes on Eldridge shopping center for $7.5M or $250 per SF in January The property was 93% leased at the time of sale and some of the tenants include Bellar Pools, Tiny Treasures Childcare Center, and Edward Jones. 2 Houston Research & Forecast Report Q Retail Colliers International

31 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased slightly by 6.2% on a quarterly basis, recording 1,162,000 square feet in Q Some of the tenants that signed new leases during the quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Jones Plaza Northwest 44,200 Fitness Connection Jan-16 Mason Park Far Katy South 38, Ranch Market Feb Gessner Rd Northwest 34,380 Auto Zone Mar-16 Rosenberg Far Southwest 34,050 Jumping Jaks Mar-16 Westfield Shopping Center-Cypress Pointe Far North 23,000 Epic Stores Mar S Sam Houston Parkway Near South 15,000 Service King Feb-16 Stafford Park Plaza Stafford 14,300 Taking Kidz Places Mar-16 River Oaks District Inner Loop 14,000 Saint Bernard Sports Jan-16 Loop Center Inner Loop 12,000 Dollar Tree Jan-16 Lake Country Plaza Northeast 11,740 Lone Star Athletics Jan-16 Market at Town Center Southwest 9,000 Kirkland s Mar-16 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 1Q16 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,653,789 3,080, % 32, % 3,113, % (5,747) $27.00-$45.00 Neighborhood Centers (one anchor) 71,099,840 6,440, % 52, % 6,493, % 269,915 $28.00-$46.00 Community Centers (two anchors) 45,572,802 2,669, % 37, % 2,707, % (356,123) $28.00-$45.00 Power Centers (three or > anchors) 24,950, , % 2, % 988, % 58,797 $28.00-$45.00 Lifestyle Centers 5,266, , % 33, % 254, % 81,588 $40.00-$85.00 Outlet Centers 1,594, , % - 0.0% 157, % 5,975 $20.00-$40.00 Theme/Entertainment 533,474 19, % - 0.0% 19, % 80 $25.00-$35.00 Single-Tenant 75,642,000 1,554, % 25, % 1,580, % (100,251) N/A Malls 24,049,275 1,510, % 29, % 1,540, % (170,548) N/A GREATER HOUSTON 283,362,591 16,640, % 214, % 16,854, % (216,314) 3 Houston Research & Forecast Report Q Retail Colliers International

32 Q Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

33 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market remains remarkably strong despite downturn in the energy industry Lisa Bridges Director of Market Research Houston Despite the decrease in oil prices over the past year and the negative effects felt in the office and industrial real estate sectors, Houston s retail market has remained resilient. Houston s average retail vacancy rate remained steady between quarters at 5.8%, and decreased 30 basis points from 6.1% over the year. During the fourth quarter, 1,153,907 SF of Houston s retail inventory was absorbed, pushing the year-end 2015 net absorption to 4.2M SF. Retail leasing activity increased 53.4% between quarters, recording 979,400 SF in Q The citywide average quoted retail rental rate increased marginally between quarters from $15.15 to $15.20 and annually by 2.1% from $14.88 per SF NNN. Approximately 2.8M SF of retail space is under construction and 52.5% is pre-leased. Over 1M SF of new inventory delivered during the fourth quarter and 83.0% of the new product is pre-leased. Several new stores opened in River Oaks District including ipic Theatres, Hermes, Cartier, and Harry Winston to name a few. According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created only 23,700 jobs between November 2014 and November This is an annual increase of just 0.8%, well below the 2014 annual growth rate of 3.4% (97,500 jobs). Local economists have predicted 2015 annual job growth will be around 20,000 jobs, however, we believe that number will be lower. Market Indicators Annual Quarterly Q Q Q % 5.8% 5.8% Net Absorption (SF) 656, ,375 1,153,907 New Construction (SF) 718, ,152 1,076,971 3,264,126 3,471,129 2,840,965 Average $14.88 $15.15 $15.20 Neighborhood Centers $14.44 $14.81 $15.00 Strip Centers $16.23 $16.31 $16.41 Relative to prior period Quarterly Forecast* NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected Summary Statistics Houston Retail Market Vacancy Rate Under Construction (SF) Asking Rents Per Square Foot Per Year

34 Vacancy & Availability Houston s average retail vacancy rate remained at 5.8% over the quarter. At the end of the fourth quarter, Houston had 16.4M SF of vacant retail space. Among the major property types, single tenant retail has the lowest vacancy rate at 1.9%, followed by theme/entertainment at 3.6% and then power centers at 3.8%. The highest vacancy rate is among outlet centers at 10.3%, and the largest amount of vacant space by size is among neighborhood centers, which has 6.2M SF of vacant space. Houston s retail construction pipeline had 2.8M SF of projects underway at the end of the fourth quarter. The largest project under construction is the 450,000- SF The Shoppes at Parkwest located on I-10 and Katy Fort Bend Rd, in the Far Katy North submarket. The center is 100% pre-leased, and some of the tenants include Bed Bath & Beyond, buybuy Baby, DSW, Kirkland s, and DXL. The center is scheduled to deliver in July Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 11/14 11/15 HOUSTON 4.3% 4.9% TEXAS 4.5% 4.5% U.S. 5.5% 4.8% JOB GROWTH Annual # of Jobs Added HOUSTON 0.8% 23.7K TEXAS 1.5% 180.4K U.S. 1.9% 2.7M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 43 TOTAL SF: 2.8M AVERAGE $/SF: $230 AVERAGE CAP : 6.5% *Vacancy percentage includes direct and sublease space. SHOPS AT ALDEN BRIDGE Absorption & Demand Houston s retail market posted 1,153,907 SF of positive net absorption in the fourth quarter, pushing the 2015 year-end total net absorption to 4,235,765 SF. There were several major tenant move-ins contributing to net absorption gains in the fourth quarter including Planet Fitness (21,320 SF) in the Far Katy North submarket, AP McGill Enterprises (20,900 SF) in the Stafford submarket, Party City (18,000 SF) and Tuesday Morning (12,000 SF) in the NASA/Clear Lake submarket, and ipic Theatres (10,000 SF), Hermes (10,000 SF) and Cartier (6,000 SF) in the Inner Loop River Oaks submarket Melrose, LLC purchased the Shops at Alden Bridge in December 2015 for $14.75M or $317 per SF. The sale included a 33,653-SF multi-tenant retail center and a 12,900-SF free standing building currently occupied by Walgreens. The cap rate was reported to be 7.15% and the property was94.6% leased at time of sale. Rental Rates WESTGATE MARKET According to CoStar, our data service provider, Houston s citywide average quoted retail rental rate for all property types increased marginally from $15.15 per SF NNN in the third quarter, to $15.20 per SF NNN in the fourth quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. An undisclosed Argentina-based private real estate holding company purchased the 4-building, 80,690-SF Westgate Market Shopping Center for $25.1M or $311 per SF in November The property was fully leased at the time of sale and was reportedly acquired at a 7.85% cap rate. The property is anchored by LA Fitness. 2 Houston Research & Forecast Report Q Retail Colliers International

35 Leasing Activity Houston s retail leasing activity, which includes renewals, increased by 53.4% on a quarterly basis, recording 937,700 square feet in Q Some of the tenants that signed new leases during the quarter are listed in the table below. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE West Oaks Shopping Center Far West 38,000 Sky Sports Oct-15 Township Plaza Lake Houston 30,675 Urban Air Dec-15 Katy Ranch Crossing Far Katy South 20,000 Planet Fitness Nov-15 Lion Square Westchase 12,752 Sam s Spa Nail Supply Oct-15 Fairmont Junction Near Southeast 10,998 Sterling Banquest Hall Oct-15 Bellfrey Plaza Sugar land 10,792 Parydym Gym Nov-15 Northland Shopping Center Spring Creek 10,000 HCTRA Novl-15 Katy Ranch Crossing Far Katy South 10,000 Blue Lion Salon Oct-15 Cypress Station FM 1960/I-45 9,271 Fresenius Dec-15 Shops at Alden Bridges Montgomery County 7,789 Lerotec Oct-15 Almeda Depot Shopping Center Near Southeast 6,180 Carquest Dec-15 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 4Q15 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,727,522 2,959, % 32, % 2,992, % 106,978 $27.00-$45.00 Neighborhood Centers (one anchor) 70,949,103 6,642, % 66, % 6,709, % 387,259 $28.00-$46.00 Community Centers (two anchors) 45,521,283 2,341, % 67, % 2,409, % 69,947 $28.00-$45.00 Power Centers (three or > anchors) 25,664, , % - 0.0% 979, % (36,106) $28.00-$45.00 Lifestyle Centers 5,239, , % 33, % 293, % 248,430 $40.00-$85.00 Outlet Centers 1,594, , % - 0.0% 163, % 3,363 $20.00-$40.00 Theme/Entertainment 533,474 19, % - 0.0% 19, % (1,920) $25.00-$35.00 Single-Tenant 75,376,376 1,412, % 25, % 1,437, % 234,763 N/A Malls 23,999,275 1,341, % 24, % 1,366, % 141,193 N/A GREATER HOUSTON 283,605,471 16,119, % 252, % 16,371, % 1,153,907 3 Houston Research & Forecast Report Q Retail Colliers International

36 Q Highlights 115.6M SF 15.3M SF FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 4 Colliers International Houston Market 000 Address, 1233 West Loop Suite South, # Suite Address, Houston, TexasSuite # colliers.com/<<market>> colliers.com/texas/houston North American Research & Forecast Report Q Office Market Outlook Colliers International

37 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market leasing activity decreases 41.9% in Q3 due to limited available space Lisa Bridges Director of Market Research Houston During the third quarter, 570,600 SF of Houston s retail inventory was absorbed, about half of the 1,171,800 SF absorbed in the previous quarter. Retail leasing activity decreased 41.9% between quarters, recording only 611,500 SF in Q When compared to the 1,490,500 SF recorded 12 months ago in Q3 2014, leasing activity decreased 59.0%. The decline in leasing activity is mostly due to a lack of available space as Houston s retail inventory is 94.0% occupied. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION Annual Quarterly Quarterly Forecast* Fortunately, there is currently 2.6M SF of retail space under construction, but only 25.0% is available as 75.0% is pre-leased. Close to 400,000 SF of new inventory delivered during the third quarter and 83.0% of the new product is pre-leased. UNDER CONSTRUCTION *Projected Houston s average retail vacancy rate decreased slightly from 5.8% to 5.7% between quarters, and decreased from 6.1% over the past year. The citywide average quoted retail rental rate decreased marginally between quarters from $15.18 to $15.15 and annually from $15.05 per SF NNN. The Houston metropolitan area created 38,400 jobs between August 2014 and August 2015, an annual increase of 1.3%. Sectors creating most of the jobs contributing to the annual increase include Legal Services and Accommodation & Food Services. Employment sectors that lost the most jobs over the year include Durable Goods & Manufacturing and Real Estate & Rental and Leasing Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 6.1% 5.8% 5.7% Net Absorption (SF) 1,039,851 1,171, ,607 New Construction (SF) 454, , ,865 Under Construction (SF) 1,789,965 1,974,864 2,581,927 Asking Rents Per Square Foot Per Year Average $15.05 $15.18 $15.15 Neighborhood Centers $14.83 $14.87 $14.81 Strip Centers $16.44 $16.29 $16.31

38 Vacancy & Availability Houston s average retail vacancy rate decreased 10 basis points from 5.8% to 5.7% over the quarter, and decreased 40 basis points from 6.1% in Q At the end of the third quarter, Houston had 15.5M SF of vacant retail space. Among the major property types, single tenant retail has the lowest vacancy rate at 1.9%, followed by theme/entertainment at 3.3% and then power centers at 3.6%. The highest vacancy rate is among outlet centers at 10.5%, and the largest amount of vacant space by size is among neighborhood centers, which has 6.6M SF of available vacant space. Houston s retail construction pipeline had 2.6M SF of projects underway at the end of the third quarter. The largest project under construction is the 450,000-SF The Shoppes at Parkwest located on I-10 and Katy Fort Bend Rd, in the Far Katy North submarket. The center is 100% pre-leased, and some of the tenants include Bed Bath & Beyond, buybuy Baby, DSW, Kirkland s, and DXL. The center is scheduled to deliver in July Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 08/14 08/15 HOUSTON 5.1% 4.6% TEXAS 5.3% 4.4% U.S. 6.3% 5.2% JOB GROWTH Annual # of Jobs Added HOUSTON 1.3% 38.4K TEXAS 1.8% 212.4K U.S. 2.1% 2.9M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 36 TOTAL SF: 2.7M AVERAGE $/SF: $138 AVERAGE CAP : 7.4% *Vacancy percentage includes direct and sublease space. Absorption & Demand Fairmont Parkway SC Houston s retail market posted 570,607 SF of positive net absorption in the third quarter, pushing the 2015 year-to-date total net absorption to 2,782,283 SF. There were several major tenant move-ins contributing to net absorption gains in the third quarter including TJ Maxx (24,000 SF) in the Near West submarket, Halloween City (21,164 SF) in the Pasadena/Galena Park submarket, Pump It Up/ Bounce Zone (13,065 SF) in the Montgomery County submarket, and Boot Barn (10,750 SF) in the Galleria submarket. Rental Rates According to CoStar, our data service provider, Houston s citywide average quoted retail rental rate for all property types decreased marginally from $15.18 per SF NNN in the second quarter, to $15.15 per SF NNN in the third quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type. WMC Fund LLC purchased the Fairmont Parkway Shopping Center from NewQuest Croswell in September 2015 for $23.5M or $136 per SF. The 172,002-SF center was built in 1992 and was approximately 98% leased at the time of sale. The cap rate was reportedly 7.75%. Bayway Village SC Rain Scott Investments, LLC purchased the 136, SF Bayway Village Shopping Center from David Mafrige Interests for $11.4M or $84 per SF in August The property was 90.3% leased at the time of sale and was reportedly acquired at a 9.64% cap rate. 2 Houston Research & Forecast Report Q Retail Colliers International

39 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased by 41.9% on a quarterly basis and by 59.0% on an annual basis, recording 611,500 square feet in Q The decline in leasing activity is mostly due to low vacancy and lack of new inventory. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Sugar Creek Village Shopping Center Stafford 27,930 Fishing Tackle Unlimited Jul-15 Greenridge Center Near West 22,000 Goodwill Sep-15 Barker Cypress Marketplace Far Katy North 21,320 Planet Fitness Sep-15 Lakeland Village Center Bridgelands 15,300 CVS Jul-15 Champion Forest Retail Cypresswood 14,000 Image Furniture Sept-15 Providence Plaza Far Southwest 9,724 Beauty Empire Sep-15 Cypress Station Square Far North 9,450 Dollar Tree Jul-15 The Galleria Galleria 8,500 Yauatcha Restaurant Sep-15 Shops at Cinco Ranch Far Katy South 5,994 Berkshire Hathaway Sep-15 Atascocita Commons Kingwood 5,928 Shogun Japanese Grill & Sushi Aug-15 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 3Q15 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,584,071 2,824, % 34, % 2,858, % 146,169 $27.00-$45.00 Neighborhood Centers (one anchor) 69,668,708 6,562, % 62, % 6,625, % 192,072 $28.00-$46.00 Community Centers (two anchors) 44,328,375 2,283, % 66, % 2,350, % 80,489 $28.00-$45.00 Power Centers (three or > anchors) 25,613, , % - 0.0% 919, % 39,378 $28.00-$45.00 Lifestyle Centers 4,330, , % 33, % 216, % (3,369) $40.00-$85.00 Outlet Centers 1,594, , % - 0.0% 166, % (2,650) $20.00-$40.00 Theme/Entertainment 533,474 17, % - 0.0% 17, % 240 $25.00-$35.00 Single-Tenant 74,537,665 1,361, % 25, % 1,387, % 127,630 N/A Malls 23,715,887 1,220, % 24, % 1,244, % (9,352) N/A GREATER HOUSTON 278,905,817 15,538, % 248, % 15,787, % 570,607 3 Houston Research & Forecast Report Q Retail Colliers International

40 Q Highlights Million Square Feet LEASING ACTIVITY TOTAL RETAIL INVENTORY Q3 Q4 Q1 Q2 Q % Annual 41.9% Quarterly Million SF 2.6M SF 5.7% Current Vacancy 570.6K SF Current Net Absorption 115.6M SF 15.3M SF Over 94% Occupancy FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

41 Research & Forecast Report HOUSTON RETAIL Q Houston s retail market leasing activity declines in Q2 due to limited available space Lisa Bridges Director of Market Research Houston During the second quarter, 933,719 SF of Houston s retail inventory was absorbed, slightly more than the 837,255 SF from the previous quarter. Retail leasing activity decreased, reaching 1.0M SF, a decrease of 30.0% from the 1.3M SF leased in Q The decline in leasing activity is due to a lack of available space as Houston only has 5.8% vacancy factor. Over 1.1M SF of new inventory delivered during the second quarter and 87.1% of the new product is pre-leased. Houston s retail construction pipeline totals 1.9M SF and 78.0% is pre-leased. Market Indicators Relative to prior period NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION Annual Quarterly Quarterly Forecast* Houston s average retail vacancy rate decreased slightly from 6.0% to 5.8% between quarters, and decreased from 6.2% over the past year. The citywide average quoted retail rental rate increased 1.5% between quarters from $15.08 to $15.30 per SF NNN. The average rate has increased 2.3% on a year-over-year basis from $14.96 per SF NNN. *Projected The Houston metropolitan area created 62,300 jobs between May 2014 and May 2015, an annual increase of 2.1% over the prior year s job growth. Sectors creating most of the jobs contributing to the annual increase include Retail Trade, Transportation, Warehousing and Utilities (mostly due to truck and pipeline transportation), Accommodation & Food Services, Arts, Entertainment & Recreation, and Health Care & Social Assistance. Summary Statistics Houston Retail Market Q Q Q Vacancy Rate 6.2% 6.0% 5.8% Net Absorption (SF) 1,232, , ,719 New Construction (SF) 445, ,658 1,136,201 Under Construction (SF) 611,649 1,626,026 1, Asking Rents Per Square Foot Per Year Average $14.96 $15.08 $15.30 Neighborhood Centers $14.39 $14.72 $14.87 Strip Centers $16.43 $16.10 $16.29

42 Vacancy & Availability Houston s average retail vacancy rate decreased 20 basis points from 6.0% to 5.8% over the quarter, but decreased 40 basis points from 6.2% in Q At the end of the second quarter, Houston had 15.8M SF of vacant retail space. Among the major property types, single tenant retail has the lowest vacancy rate at 1.9%, followed by the theme/entertainment at 3.3% and then power centers at 3.7%. The highest vacancy rate is in outlet centers at 13.9%, but the largest amount of vacant space by square feet is located in neighborhood centers, which has 6.6M SF of available vacant space. Houston s retail construction pipeline had 2.0M SF of projects underway at the end of the second quarter. The largest project under construction is the 450,000- SF The Shoppes at Parkwest located on I-10 and Katy Fort Bend Rd, in the Far Katy North submarket. The center is 100% pre-leased, and some of the tenants include Bed Bath & Beyond, buybuy Baby, DSW, Kirkland s, and DXL. The center is scheduled to deliver in Q Job Growth & Unemployment (not seasonally adjusted) UNEMPLOYMENT 05/14 05/15 HOUSTON 4.9% 4.2% TEXAS 5.0% 4.1% U.S. 6.1% 5.3% JOB GROWTH Annual # of Jobs Added HOUSTON 2.1% 62.3K TEXAS 2.5% 287K U.S. 2.2% 3.1M Retail Rental Rate and Vacancy Percentage Houston, TX $16.00 $15.80 $15.60 $15.40 $15.20 $15.00 $14.80 $14.60 $14.40 $14.20 $14.00 Avg. Rent Avg. Vacancy 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Sales Activity Sources: Real Capital Analytics Q NO. OF PROPERTIES: 14 TOTAL SF: 5.9M AVERAGE $/SF: $174 AVERAGE CAP : 6.8% *Vacancy percentage includes direct and sublease space. Black Rock Commons Absorption & Demand Houston s retail market posted 933,719 SF of positive net absorption in the second quarter, pushing the mid-year absorption to 1,914,700 SF. There were several major tenant move-ins contributing to net absorption gains in the second quarter including Walmart Supercenter (177,514 SF), Kroger Marketplace (124,000 SF), HEB (100,000 SF), Fitness Connection (52,000 SF), Whole Foods (45,000 SF), Bel Furniture (35,000 SF), Aldi (33,000 SF), Nordstrom Rack (31,000 SF), TJ Maxx (24,000 SF), DD s Discount (21,000 SF), Pump It Up/Bounce Zone (13,065 SF), and Boot Barn (10,750 SF). Rental Rates According to CoStar, our data service provider, Houston s citywide average quoted retail rental rate for all property types increased 1.5% from $15.08 per SF NNN in the first quarter, to $15.30 per SF NNN in the second quarter. According to Colliers internal data, Class A in-line retail rental rates can vary widely from $25.00 to $85.00 per SF, depending on location and property type. Local Blackrock LLC purchased the 2-building, 27,132 SF Black Rock Commons from NewQuest Properties in May 2015 for $10.5M or $387 per SF. The 7-year old center was 100% occupied at the time of sale and reportedly sold based on a 6.75% cap rate. Willowbrook Plaza DDR Corp. purchased the 10-building, 382,144 SF Willowbrook Plaza Power Center from The Retail Connection for $74M or $193 per SF. The property was 89% leased at the time of sale and some of the large tenants include AMC Theatres, World Market, buybuy Baby, and Bed, Bath and Beyond. 2 Houston Research & Forecast Report Q Retail Colliers International

43 Leasing Activity Houston s retail leasing activity, which includes renewals, decreased by 30.0% on a quarterly basis and by 80.0% on an annual basis, recording 1.0M square feet in Q The decline in leasing activity is due to low vacancy and lack of new inventory. Q Top Retail Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Deerbrook Corner Kingwood Area 52,346 Ashley Furniture Home Store Jun FM 2100 Lake Houston 33,000 ALDI May-15 Echo Lane Shopping Center Near West 24,000 TJ Maxx Apr-15 Woodway Square Shopping Center Near West 20,000 Goody Goody Liquor Inc. May Almeda Genoa Rd Near Southeast 17,276 ALDI May-15 Pearland Plaza Southeast Outlier 15,000 Goodwill Apr-15 Spring Park Village Spring Creek 12,000 Boot Barn May-15 Texas City Bay Shopping Center NASA/Clear Lake 11,000 Lee s Oriental Buffet Jun-15 Katy Ranch Crossing - Ph. II Far Katy South 10,000 Bike World May-15 Spring Park Village Spring Creek 9,500 Town & Country Leather Jun-15 Market Summary Q Retail Market Statistical Summary PROPERTY TYPE RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET VACANT SF SUBLET TOTAL VACANT SF TOTAL 2Q15 NET ABSORPTION CLASS A RENTAL S (IN-LINE*) Strip Centers (unanchored) 34,398,258 2,862, % 40, % 2,902, % 126,004 $30.00-$50.00 Neighborhood Centers (one anchor) 69,348,861 6,549, % 43, % 6,592, % 251,261 $25.00-$45.00 Community Centers (two anchors) 44,503,623 2,442, % 63, % 2,506, % 75,125 $20.00-$40.00 Power Centers (three or > anchors) 25,736, , % % 958, % 36,766 $20.00-$40.00 Lifestyle Centers 4,419, , % 33, % 213, % 2,550 $40.00-$85.00 Outlet Centers 1,899, , % % 263, % 11,780 $20.00-$40.00 Theme/Entertainment 533,474 17, % % 17, % 6,316 $25.00-$35.00 Single-Tenant 72,817,078 1,367, % 25, % 1,393, % 423,781 N/A Malls 23,247,353 1,199, % 24, % 1,223, % 136 N/A GREATER HOUSTON 276,903,190 15,839, % 232, % 16,071, % 933,719 3 Houston Research & Forecast Report Q Retail Colliers International

44 Q Highlights Million Square Feet LEASING ACTIVITY 1.8 TOTAL RETAIL INVENTORY Q2 Q3 Q4 Q1 Q % Annual 30.0% Quarterly Million SF 2.0M SF 5.8% Current Vacancy 933.7K SF Current Net Absorption 115.6M SF 15.3M SF Over 94% Occupancy (Highest recorded occupancy in the last 10 years) FOR MORE INFORMATION Lisa Bridges Director of Market Research Houston Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International Market Houston Address, West Loop Suite South, # Suite Houston, Address, Texas Suite # colliers.com/<<market>> colliers.com/texas/houston 4 North American Research & Forecast Report Q Office Market Outlook Colliers International

45 Q RETAIL MARKET HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT Houston s retail market vacancy hits another record low, 6.0%, pushing rents higher Houston HOUSTON RETAIL MARKET INDICATORS Q Q CITYWIDE NET ABSORPTION (SF) 228K 708K CITYWIDE AVERAGE 6.1% 6.0% CITYWIDE AVERAGE RENTAL $14.87 $15.14 DELIVERIES (SF) 678K 600K UNDER CONSTRUCTION (SF) 2.2M 1.6M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) UNEMPLOYMENT 2/14 2/15 HOUSTON 5.4% 4.3% TEXAS 5.7% 4.3% U.S. 7.0% 5.8% ANNUAL # OF JOBS JOB GROWTH CHANGE ADDED HOUSTON 3.4% 96.7K TEXAS 3.2% 362.4K U.S. 2.4% 3.3M Houston s retail market posted 707,653 SF of positive net absorption in Q Some of the tenants that moved into space during the quarter include HEB, Whole Foods, Walmart, TJ Maxx, and Sprouts. The average citywide vacancy rate fell 10 basis points from 6.1% to 6.0% between quarters and fell by 50 basis points over the year from 6.5%. Currently, there is 1.6M SF in Houston s retail construction pipeline, which includes the 374,000-SF Fairfield Town Center, the 252,000-SF River Oaks District, a 177,514-SF Walmart Supercenter on S Rice Avenue, and a 124,000-SF Kroger Marketplace in Katy located on FM Due to the delivery of new product and dwindling supply, the average rental rate increased 1.8% from $14.87 per SF to $15.14 per SF between quarters and increased 2.2% from $14.82 in Q Class A average retail rental rates can vary widely from $25.00 to $85.00 per SF, depending on location and property type. According to Colliers internal data, recently quoted rental rates for River Oaks District are as high as $ per SF NNN, which to date is the highest quoted rental rate in Houston. River Oaks District has signed high-end luxury retailers such as Dolce & Gabbana, Roberto Cavalli, and most recently Warby Parker. The Houston metropolitan area created 96,700 jobs between February 2014 and February 2015, an annual increase of 3.4% over the prior year s job growth. Sectors creating most of the jobs contributing to the annual increase include mining and logging, arts, entertainment & recreation, and accommodation & food services. Houston s unemployment rate fell from 5.4% one year ago to 4.3%. 2, 000,000 1, 500,000 1, 000, , ,000 ABSORPTION, NEW SUPPLY & S Absorption New Supply Vacancy 12% 10% 8% 6% 4% 2% 0%

46 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RETAIL SALE TRANSACTIONS Green Tree Shopping Center S Fry Rd, Katy, TX Far Katy South Submarket RBA: 147,658 SF Built: 1996/2004 Buyer: Inland REIT Seller: Harris Family Trust Date: March 2015 Price: $26.2M or $178/SF Cap: 7.2% Comments: Major tenants include TJ Maxx, PetSmart, Office Depot, Target, and Ulta. Copperfield Village N Hwy 6, Houston, TX Bridgelands Submarket RBA: 165,293 SF Built: 1984 Buyer: Kimco Realty Corporation Seller: Greenstreet Real Estate Partners, LP Date: February 2015 Price: $39.5M or $239/SF Cap: 6.1% Comments: Major tenants include Sprouts, Ross Dress for Less, Goody Goody Liquor, Dollar Tree, and Five Below. SALES ACTIVITY Houston s first quarter retail investment sales activity included 82 sales transactions. The average price per SF was $165 and the average cap rate was 8.0%. Some of the more significant transactions that closed during the quarter are highlighted on the left. LEASING ACTIVITY Houston first quarter retail leasing activity, which includes renewals, reached 1.1M SF. Overall, transactions under 5,000 SF comprised the largest group of retail leases, with the market recording sixteen leases over 10,000 SF and only four over 20,000 SF in the first quarter. A partial list of the leases signed during the first quarter are listed in the table below. Q Retail Leases Building Name/Address Submarket SF Tenant Lease Date Ashford Village Center Far West 14,500 Salon Village Jan-15 Chelsea Square II Cypresswood 13,600 Fast Eddies 1 Feb S Fry Rd Far Katy South 13,450 Knowledge Beginnings 1 Mar-15 Stella Link Shopping Center Inner Loop University 13,243 CrossFit Central Houston Jan-15 Katy Ranch Crossing Far Katy South 12,500 Tuesday Morning Jan-15 Fairfield Plaza Fairfield 10,855 DaVita Dialysis Jan-15 The Plaza at Richmond Galleria 10,750 Boot Barn Mar-15 Royal Oaks Village II Westchase 10,487 Image Salon Jan-15 Deerbrook Plaza Spring Creek 10,250 Fresenius Medical Care Kingwood 2 Feb-15 Wood Ridge Plaza Montgomery County 10,080 Home Consignment Center 2 Jan-15 Westmont Shopping Center Inner Loop River Oaks 9,000 Physicians ER Jan-15 Rose-Rich Shopping Center Far Southwest 8,841 CVS Pharmacy Feb-15 Woodforest Shopping Center Pasadena/Galena Park 8,059 CM Clothes Max Feb-15 The Courtyard at Post Oak Uptown 7,606 Parvizian Rugs Jan-15 Atascocita Shopping Center Lake Houston 7, Cents Only Mar-15 Westmont Shopping Center Inner Loop River Oaks 5,800 Mattress Firm Jan-15 1 Renewal 2 Colliers International Transaction COLLIERS INTERNATIONAL P. 2

47 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RENTAL S According to our data source CoStar Property, the citywide overall average quoted rental rate for all property types increased from $14.87 to $15.14 per SF between quarters and increased from $14.82 in Q Houston class A retail rental rates vary widely from $20.00 to $85.00 per SF depending on location and center type. Recent quoted rates for neighborhood centers, typically anchored by a grocer, range from $ $55.00 per SF, power centers range from $ $45.00 per SF and theme/entertainment centers range from $ $40.00 per SF. Lifestyle centers in highly desirable locations such as CityCentre, Hughes Landing, and Vintage Park range from $ $85.00 per SF, with some centers that are not centrally located starting at $35.00 per SF. Strip centers range from $ $50.00 per SF, and outlet center rental rates range from $ $40.00 per SF. & AVAILABILITY The average citywide vacancy rate decreased from 6.1% to 6.0% and decreased by 50 basis points from 6.5% in Q By product type on an annual basis, theme/entertainment centers posted the largest decrease in vacancy, 950 basis points, from 14.0% in the Q to 4.5% in Q Strip centers followed decreasing 110 basis points from 9.8% to 8.7% over the same time period. Houston s retail construction pipeline contains 1.6M SF and first quarter deliveries totaled 600,000 SF. ABSORPTION & DEMAND Houston s retail market posted 707,653 SF of positive net absorption in the first quarter. Some of the tenants that moved into space during the quarter are listed in the following on the right. HOUSTON RETAIL MARKET STATISTICAL SUMMARY Q ABSORPTION Tenant/ Submarket SF Occupied HEB Near West 92,327 Academy Sports & Outdoors North/Spring Creek LA Fitness Inner Loop/River Oaks 42,500 Walmart Far Katy South 41,839 Whole Foods Montgomery County 40,000 TJ Maxx Southeast Outlier 30,000 Gold s Gym Montgomery County 29,710 Sprouts Inner Loop/River Oaks 27, Cents Only Inner Loop/East End 27,115 Dd s Discounts Jersey Village 25,220 Cost World Plus Market Inner Loop/River Oaks 18,000 Property Type Rentable Area Direct Vacant SF Direct Vacancy Rate Sublet Vacancy SF Sublet Vacancy Rate Total Vacancy SF Total Vacancy Rate Q Net Absorption Class A Rental Rates (in-line)* Strip Centers (unanchored) 34,188,039 2,926, % 35, % 2,961, % 69,077 $30.00-$50.00 Neighborhood Centers (one anchor) Community Centers (two anchors) Power Centers (three or > anchors) 69,116,397 6,745, % 50, % 6,795, % 179,316 $25.00-$ ,582,846 2,475, % 103, % 2,578, % 149,170 $20.00-$ ,472, , % 30, % 901, % (9,164) $20.00-$40.00 Lifestyle Centers 4,802, , % 33, % 308, % 10,192 $40.00-$85.00 Outlet Centers 1,899, , % - 0.0% 274, % 0 $20.00-$40.00 Theme/Entertainment 533,474 24, % - 0.0% 24, % (210) $25.00-$35.00 Single-Tenant 70,392,664 1,375, % 53, % 1,429, % 309,272 N/A Malls 23,002,250 1,199, % 24, % 1,223, % 0 N/A Greater Houston 273,990,050 16,168, % 330, % 16,499, % 707,653 COLLIERS INTERNATIONAL P. 3

48 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients success. This is evident throughout our platform from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the best places to work by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. *Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed. LISA R. BRIDGES Director of Market Research Houston Direct Fax lisa.bridges@colliers.com COLLIERS INTERNATIONAL 1233 W. Loop South Suite 900 Houston, Texas Main Accelerating success. COLLIERS INTERNATIONAL P. 4

49 Q RETAIL MARKET HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT Houston HOUSTON RETAIL MARKET INDICATORS YE 2013 YE 2014 CITYWIDE NET ABSORPTION (SF) 3.4M 3.2M CITYWIDE AVERAGE 6.6% 6.1% CITYWIDE AVERAGE RENTAL $14.73 $14.87 DELIVERIES (SF) 1.9M 1.9M Q4 UNDER CONSTRUCTION (SF) 1.0M 2.2M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) Houston s retail market vacancy hits a record low, 6.1% Houston s retail market posted 3.2M SF of positive net absorption in Many of the tenants that expanded in 2014 included grocers such as Kroger, HEB, Whole Foods, Sprouts, and Aldi, which in turn helped boost neighborhood center occupancy. The average citywide vacancy rate remained steady at 6.1% between quarters and fell by 50 basis points over the year from 6.6%. Currently, there is 2.2M SF in Houston s retail construction pipeline, which includes the 425,000-SF Center at Pearland Parkway, the 252,000-SF River Oaks District, a 177,514-SF Walmart Supercenter on S Rice Avenue, and a 90,945-SF HEB located at 5885 San Felipe Street. Due to the lack of available Class A space, the citywide average quoted rental rate for all property types decreased 1.2% from $15.05 to $14.87 per SF between quarters and increased 1.0% from $14.73 in Q Class A retail rental rates vary widely from $25.00 to $85.00 per SF, depending on location and property type.. Houston s retail investment sales market is benefiting from the foreign capital that is pouring into the U.S. According to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), Houston ranked #3 in the top five U.S. cities for foreign investors. The Houston metropolitan area created 120,600 jobs between October 2013 and October 2014, an annual increase of 4.3% over the prior year s job growth. Sectors creating most of the jobs contributing to the annual increase include mining and logging, construction, transportation, warehousing and utilities, and health care and social assistance. Houston s unemployment rate fell to 4.7% from 5.9% one year ago. UNEMPLOYMENT 10/13 10/14 HOUSTON 5.9% 4.7% TEXAS 6.1% 4.8% U.S. 7.0% 5.5% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 4.3% 120.6K TEXAS 3.9% 436.7K U.S. 2.0% 2.8M 2,000,000 1,500,000 1,000, ,000 0 ABSORPTION, NEW SUPPLY & S Absorption New Supply Vacancy 12% 10% 8% 6% 4% 2% -500,000 0%

50 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RETAIL SALE TRANSACTIONS Williams Trace Plaza 3420 Hwy 6, Sugar Land, TX Far New Territory Submarket RBA: 129,222 SF Built: 1983 Buyer: Whitestone REIT Seller: NDC Capital Partners, LLC and Henry S. Miller Brokerage, LLC Date: December 29, 2014 Price: $20.1M or $156/SF Cap: 7.6% Comments: Some of the tenants include 99 Ranch Market, Dollar Tree, and Big Lots. Market at Bees Creek 4225 Sienna Parkway, Missouri City, TX Far New Territory Submarket RBA: 22,307 SF Built: 2004 Buyer: Trung Tin Investments LLC Seller: K&G Ventures LLC Date: October 1, 2014 Price: $5.2M or $233/SF Cap: 8.1% Comments: Unanchored strip center. Tenants include Subway, RE/Max and Bees Creek Grill. Shops at Williams Trace 3346 Hwy 6, Sugar Land, TX Far New Territory Submarket RBA: 132,991 SF Built: 1983 Buyer: Whitestone REIT Seller: NDC Capital Partners, LLC and Henry S. Miller Brokerage, LLC Date: December 29, 2014 Price: $20.6M or $155/SF Cap: 7.6% Comments: Major tenants include Randall s, Walgreens, and Petco. Gray Falls Center I Westheimer Rd, Houston, TX Far West Submarket RBA: 20,155 SF Built: 1983 Buyer: Francis Lam and Naomi Lam Seller: Gray Falls Shopping Center LLC Date: October 27, 2014 Price: $3.0M or $149/SF Cap: N/A Comments: Unanchored strip center. Tenants include Bike Barn and Pizza Hut. SALES ACTIVITY Houston s fourth quarter retail investment sales activity included 58 sales transactions. The average price per SF was $182 and the average cap rate was 8.6%. Several of the more significant transactions that closed during the fourth quarter are highlighted on the left. LEASING ACTIVITY Houston fourth quarter retail leasing activity reached 680,500 SF. Overall, transactions under 5,000 SF comprised the largest group of retail leases, with the market recording eight leases over 10,000 SF and only two over 20,000 SF in the third quarter. A partial list of the leases signed during the fourth quarter are listed in the table below. Q Select Retail Leases Building Name/Address Submarket SF Tenant Lease date The Market at Pasadena Southeast/NASA/Clear Lake 55,000 Burlington Coat Factory Dec-14 Steeplechase Shopping Center Northwest/Jersey Village 25,220 DD's Discounts Oct-14 Four Corners Shopping Center South/Far South 24,396 Goodwill Oct Mills Branch Dr Northeast/Kingwood Area 16,000 Kingwood Montessori School Inc Oct-14 Willowbrook Shopping Center Northwest/Jersey Village 9,603 Bombshells Dec-14 Town & Country Center West/Near West 9,500 Boot Barn Dec-14 Rose-Rich Shopping Center Southwest/Far Southwest 8,841 Dollar Tree Nov-14 Pine Forest Village East/Pasadena/Galena Park 8,640 Furniture Nov-14 The Colonnade of Fall Creek Northeast/Near Northeast 7,913 The Karate School Oct-14 Hamilton Plaza North/FM 1960/1-45 6,540 Rim Tyme Oct-14 Tabs Retail Center West/Near West 6,500 Hookah Dec-14 Fuqua Professional Center Southeast/Near Southeast 6,100 Fuego Houston Nov-14 Crossroads Plaza Jersey Village 5,297 La Madeleine Nov-14 COLLIERS INTERNATIONAL P. 2

51 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RENTAL S According to our data source CoStar Property, the citywide overall average quoted rental rate for all property types decreased slightly by 1.2% from $15.05 to $14.87 per SF between quarters and increased 1.0% from $14.73 in Q Houston class A retail rental rates vary widely from $20.00 to $85.00 per SF depending on location and center type. Recent quoted rates for neighborhood centers, typically anchored by a grocer, range from $ $55.00 per SF, power centers range from $ $45.00 per SF and theme/entertainment centers range from $ $40.00 per SF. Lifestyle centers in highly desirable locations such as High Street, Uptown Park and The Vintage range from $ $85.00 per SF, with some centers that are not centrally located starting at $35.00 per SF. Strip centers range from $ $50.00 per SF, and outlet center rental rates range from $ $40.00 per SF. & AVAILABILITY The average citywide vacancy rate remained steady between quarters at 6.1% and decreased by 50 basis points from 6.6% in Q By product type on an annual basis, lifestyle centers posted the largest decrease in vacancy, 190 basis points, from 8.6% in the fourth quarter of 2013 to 6.7% in the fourth quarter of Strip centers and outlet centers followed both center types decreasing 120 basis points over the same time period. Houston s retail construction pipeline contains 2.2M SF and fourth quarter deliveries totaled 1.9M SF. ABSORPTION & DEMAND Houston s retail market posted 227,864 SF of positive net absorption in the fourth quarter, pushing year-end absorption to 3.2M SF. Some of the tenants that moved into space during the fourth quarter are listed in the following table. Q ABSORPTION Tenant/ Submarket SF Occupied Sam s Club Southwest 136,545 HEB Near West 90,945 Fiesta Mart Far Katy North 60,000 Whole Foods Galleria 52,000 Fitness Connection Southwest 46,133 Micro Center Southwest 32,000 Goodwill Fairfield 21,002 Planet Fitness Lake Houston 20,880 Petco Supplies Far Katy South 12,527 Isigntec Sugar Land 10,908 HOUSTON RETAIL MARKET STATISTICAL SUMMARY RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET SF SUBLET TOTAL SF TOTAL Q NET ABSORPTION Q NET ABSORPTION CLASS A RENTAL S (in-line)* Strip Centers (unanchored) 32,848,832 2,889, % 25, % 2,915, % 14, ,250 $30.00-$50.00 Neighborhood Centers (one anchor) 68,062,088 6,612, % 38, % 6,650, % 15,679 16,151 $30.00-$55.00 Community Centers (two anchors) 43,123,277 2,531, % 97, % 2,628, % 45, ,825 $30.00-$40.00 Power Centers (three or > anchors) 25,770, , % 30, % 911, % (40,253) 73,846 $25.00-$45.00 Lifestyle Centers 4,738, , % 33, % 319, % 26, ,702 $35.00-$85.00 Outlet Centers 1,899, , % - 0.0% 274, % (2,757) 2,650 $20.00-$40.00 Theme/Entertainment 513,474 5, % - 0.0% 5, % - 49,769 $25.00-$40.00 Single-Tenant 69,852,264 1,431, % 53, % 1,484, % 219, ,954 N/A Malls 23,080,646 1,249, % 24, % 1,273, % (50,570) 8,066 N/A Greater Houston 269,888,979 16,160, % 302, % 16,463, % 227,864 1,025,213 COLLIERS INTERNATIONAL P. 3

52 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients success. This is evident throughout our platform from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the best places to work by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. *Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed. LISA R. BRIDGES Director of Market Research Houston Direct Fax lisa.bridges@colliers.com COLLIERS INTERNATIONAL 1233 W. Loop South Suite 900 Houston, Texas Main Accelerating success. COLLIERS INTERNATIONAL P. 4

53 Q RETAIL MARKET HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT Houston Houston s 6.3% Retail Vacancy Rate at a Record Low Houston s retail market posted 1.2M SF of positive net absorption in the second quarter. Some of the tenants who opened new locations during the quarter include Whole Foods Market, Kroger Marketplace, Conn s Appliances, Horse & Rider, Vineyard Vines, Trina Turks, Brucettes Shoes, and Harbor Freight Tools. HOUSTON RETAIL MARKET INDICATORS Q Q CITYWIDE NET ABSORPTION (SF) 560K 1.2M CITYWIDE AVERAGE 6.8% 6.3% CITYWIDE AVERAGE RENTAL $14.75 $15.19 DELIVERIES (SF) 276K 612K UNDER CONSTRUCTION (SF) 632K 1.2M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) UNEMPLOYMENT 5/13 5/14 HOUSTON 6.1% 5.0% TEXAS 6.3% 5.1% U.S. 7.3% 6.1% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.3% 93.3K TEXAS 3.4% 375.3K U.S. 1.8% 2.4M The average citywide vacancy rate fell 30 basis points between quarters to 6.3% from 6.6%, and by 50 basis points over the year from 6.8%. Currently, there is 1.2M SF in Houston s retail construction pipeline, which includes a 136,000-SF Sam s Club located at the NEC of Bellaire and West Grand Parkway, and a 90,900-SF HEB located on the southeast corner of San Felipe and Fountainview. The citywide average quoted rental rate for all property types increased 3.1% from $14.73 to $15.19 per SF between quarters and 3.0% from $14.75 in Q Houston retail rental rates vary widely from $10.00 to $85.00 per SF, depending on location, property type, and building class. The Houston metropolitan area added 93,300 jobs between May 2013 and May 2014, an annual increase of 3.3% over the prior year s job growth. Local economists have forecast 2014 job growth to remain strong, expecting between 68,000 and 72,000 new jobs. Houston s unemployment rate fell to 5.0% from 6.1% one year ago. Houston area home sales were down by 7.3% between May 2013 and May 2014, the first decline in the past 34 months. The reduction was due almost primarily to a lack of inventory. 2,000,000 1,500,000 1,000, ,000 0 ABSORPTION, NEW SUPPLY & S 12% 10% 8% 6% 4% 2% -500,000 0% Absorption New Supply Vacancy

54 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RETAIL SALE TRANSACTIONS Southway Shopping Center S Gessner Dr, Houston, TX Southwest Submarket RBA: 178,768 SF Built: 1976/2003 Buyer: American Realty Capital Seller: RPD Catalyst LLC Date: June 6, 2014 Price: $27.5M or $161/SF Cap: N/A Marq*E Entertainment Center I-10 and Silber Near NW Spring Valley Submarket RBA: 351,811 SF Built: 1999 Buyer: Levcor, Inc. Seller: Canyon Capital Realty Advisors Date: June, 2014 Price: Undisclosed Cap: N/A Kirkwood Shopping Center Westheimer, Houston, TX Far West Submarket RBA: 81,607 SF Built: 1979/2008 Buyer: Private REIT Seller: Revesco Properties Date: May 23, 2014 Price: $17.1M or $210/SF Cap: N/A Cinco-Westheimer Shopping Center Westheimer Pky, TX Far Katy South Submarket RBA: 17,500 SF Built: 2006 Buyer: Hass Holdings, LLC Seller: Prime Property Center MGNT Date: June, 2014 Price: $3.8M or $214/SF Cap: 9.8% SALES ACTIVITY Houston s second quarter retail investment sales activity included 51 sales transactions. Total sales transaction value totaled $376M and the average price per SF was $163. The average cap rate was 7.2%. Several of the more significant transactions that closed during the second quarter are highlighted on the left. LEASING ACTIVITY Houston retail leasing activity in the second quarter reached 1.2M SF. Overall, transactions under 10,000 SF comprised the largest group of retail leases, with the market recording eleven leases over 10,000 SF and five over 20,000 SF in the second quarter. A partial list of the leases signed during the second quarter are listed in the table below. Q Retail Leases Building Name/Address Submarket SF Tenant Lease Date Tanglewood Court Near West 90,945 HEB Apr-14 Market at First Colony Stafford 64,169 Floor & Décor Outlets of America Apr-14 Fiesta Mart - FM 529 Far Katy North 60,000 Fiesta Mart May-14 Fairmont Junction Plaza Southeast Ret 42,130 Bravo Ranch Supermarket Mar-14 Fondren Road Plaza Southwest Ret 46,133 Fitness Connection May-14 River Oaks District Inner Loop River Oaks 10,117 Hermès May-14 COLLIERS INTERNATIONAL P. 2

55 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RENTAL S According to our data source CoStar Property, the citywide average quoted rental rate for all property types increased 3.1% from $14.73 to $15.19 per SF between quarters and 3.0% from $14.75 in Q Houston Class A retail rental rates vary widely from $10.00 to $85.00 per SF depending on location and center type. Recent quoted rates for community centers and power centers range from $ $40.00 per SF and theme/entertainment centers range from $ $35.00 per SF. Lifestyle centers in Class A locations such as High Street, Uptown Park and The Vintage range from $ $85.00 per SF. Strip centers range from $ $50.00 per SF and neighborhood centers range from $ $45.00 per SF. & AVAILABILITY The average citywide vacancy rate fell 30 basis points between quarters to 6.3% from 6.6%, and by 50 basis points over the year from 6.8%. This is the lowest Houston s vacancy rate has been in the last 10 years. By product type on a quarterly basis, theme/entertainment centers posted the largest decrease in vacancy, 2,060 basis points, from 30.5% in the first quarter to 9.9% in the second quarter Lifestyle centers recorded the largest increase in vacancy between quarters increasing 90 basis points from 4.9% to 5.8%. Houston s retail construction pipeline contains 1.2M SF and second quarter deliveries totaled 612,000 SF. ABSORPTION & DEMAND Houston s retail market posted 1.2M SF of positive net absorption in the second quarter. Some of the tenants that moved into space during the second quarter are listed in the table at right. Q ABSORPTION Tenant/ Submarket SF Occupied Kroger Marketplace Far North 31,622 Whole Foods Galleria 52,000 Anthem College Far North 31,622 Conn s Appliances Montgomery County 22,500 Harbor Freight Tools NASA/Clear Lake 15,040 Chulas Sports Cantina Pasadena/Galena Park 13,775 King Dollar Stafford 12,779 Dollar Tree NASA/Clear Lake 12,500 Brucettes Shoes Galleria 9,122 Horse & Rider Montgomery County 8,460 Prudential Gary Green Realtors NASA/Clear Lake 8,300 HOUSTON RETAIL MARKET STATISTICAL SUMMARY RENTABLE AREA DIRECT VACANT SF DIRECT SUBLET SF SUBLET TOTAL SF TOTAL Q NET ABSORPTION Q NET ABSORPTION CLASS A RENTAL S (in-line)* Strip Centers (unanchored) 32,630,810 2,976, % 6, % 2,982, % 236, ,434 $30.00-$50.00 Neighborhood Centers (one anchor) 68,350,477 6,529, % 24, % 6,553, % 521,534 94,018 $25.00-$45.00 Community Centers (two anchors) 43,407,750 2,875, % 79, % 2,954, % (16,076) (133,012) $20.00-$40.00 Power Centers (three or > anchors) 22,956, , % - 0.0% 789, % 84,491 40,414 $20.00-$40.00 Lifestyle Centers 3,782, , % 33, % 219, % (1,029) 33,490 $40.00-$85.00 Outlet Centers 1,899, , % - 0.0% 250, % (10,215) 34,231 $20.00-$40.00 Theme/Entertainment 553,786 54, % - 0.0% 54, % 1,028 15,200 $25.00-$35.00 Single-Tenant 68,370,776 1,498, % 64, % 1,562, % 257, ,749 N/A Malls 26,219,981 1,398, % 54, % 1,453, % 144,177 37,219 N/A Greater Houston 268,171,181 16,557, % 263, % 16,821, % 1,217, ,609 COLLIERS INTERNATIONAL P. 3

56 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients success. This is evident throughout our platform from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the best places to work by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. *Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed. LISA R. BRIDGES Director of Market Research Houston Direct Fax lisa.bridges@colliers.com COLLIERS INTERNATIONAL 1233 W. Loop South Suite 900 Houston, Texas Main Accelerating success. COLLIERS INTERNATIONAL P. 4

57 Q RETAIL MARKET HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT Houston HOUSTON RETAIL MARKET INDICATORS Q Q CITYWIDE NET ABSORPTION (SF) 400K 573K CITYWIDE AVERAGE 7.0% 6.6% CITYWIDE AVERAGE RENTAL $14.72 $14.73 DELIVERIES (SF) 154K 445K UNDER CONSTRUCTION (SF) 585K 1.3M Houston s Strong Economy Boosts Retail Construction Houston s retail market posted 573,000 SF of positive net absorption in the first quarter. Some of the tenants who opened new locations during the quarter include Whole Foods Market, Spec s, Rue21, Sears Outlet Center, Jack s Carpet, and Mattress One. The average citywide vacancy remained unchanged from the previous quarter at 6.6%. Currently, there is 1.3M SF in Houston s retail construction pipeline, which includes a 102,000-SF Kroger Marketplace located just south of The Woodlands on Kuykendahl Rd and W Rayford Rd, and an 80,000-SF HEB located on the north side of FM 518, just west of Pearland Parkway. The citywide average quoted rental rate for all property types increased 0.3% from $14.69 to $14.73 per SF between quarters and 0.1% from $14.71 in Q Houston retail rental rates vary widely from $10.00 to $70.00 per SF, depending on location, property type, and building class. The Houston metropolitan area added 91,300 jobs between January 2013 and January 2014, an annual increase of 3.4% over the prior year s job growth. Local economists have forecasted 2014 job growth to remain strong, adding between 68,000 and 72,000 jobs. Houston s unemployment fell to 5.6% from 6.9% one year ago. Houston area home sales increased 8.35% between February 2013 and February 2014 and the average price of a single-family home rose 12.5% over the year. JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) UNEMPLOYMENT 1/13 1/14 2,000,000 ABSORPTION, NEW SUPPLY & S 12% HOUSTON 6.9% 5.6% TEXAS 7.0% 5.8% U.S. 8.5% 7.0% ANNUAL # OF JOBS JOB GROWTH CHANGE ADDED HOUSTON 3.4% 91.3K TEXAS 3.0% 330.9K 1,500,000 1,000, , ,000 10% 8% 6% 4% 2% 0% U.S. 1.7% 2.3M Absorption New Supply Vacancy

58 RESEARCH & FORECAST REPORT Q HOUSTON RETAIL MARKET RETAIL SALE TRANSACTIONS Colony Plaza 4811 SH 6 S, Missouri City, TX Stafford Submarket RBA: 55,022 SF Built: 1996 Buyer: Texas Colony Plaza, LLC Seller: Everest Fund Ventures I, Ltd. Date: March 3, 2014 Price: $8.0M or $145/SF Cap: 9.5% Windrose Plaza Kuykendahl Rd, Spring, TX Far North Submarket RBA: 28,715 SF Built: 2005 Buyer: Summit Dental Seller: American Spectrum Realty, Inc. Date: January 6, 2014 Price: $5.75M or $200/SF Cap: 8.15% Waterside Commons S Mason Rd, Richmond, TX Far Southwest Submarket RBA: 39,779 SF Built: 2008 Buyer: Zenda Waterside Commons U.S. Seller: Mason Grand, Ltd. Date: March 18, 2014 Price: $8.85M or $222/SF Cap: N/A Tuscan Village Plaza 7214 FM 1488, Magnolia, TX Montgomery County Submarket RBA: 15,318 SF Built: 2007 Buyer: Private Investor Seller: 1488 Del Sul Investments LP Date: March, 2014 Price: $3.4M or $222/SF Cap: N/A SALES ACTIVITY Houston s first quarter retail investment sales activity included 76 sales transactions. Total sales transaction volume totaled $52M and the average price per SF was $162. The average cap rate was 7.6%. Several of the more significant transactions that closed during the first quarter are highlighted on the left. LEASING ACTIVITY Houston retail leasing activity in the first quarter reached 1.2M SF. Overall, transactions under 10,000 SF comprised the largest group of retail leases, with the market recording eleven leases over 10,000 SF and only two over 20,000 SF in the first quarter. A partial list of the leases signed during the first quarter are listed in the table below. Q RETAIL LEASES Building Name/Address Submarket SF Tenant Lease Date Fairmont Junction Plaza Near Southeast 42,130 Bravo Ranch Supermarket Mar-14 Cypress Station Square Far North 31,622 Anthem College Jan-14 Portofino Center Montgomery County 22,500 Conn's Appliances Feb-14 Woodforest Shopping Center Pasadena/Galena Park 13,775 Chulas Jan-14 Quail Corner Stafford 12,779 King Dollar Feb-14 Pecan Park Plaza NASA/Clear Lake 12,500 Dollar Tree Feb-14 Uptown Park Uptown 11,384 Champps Americana 1 Feb-14 Greenbriar Square Sugar Land 9,629 Pennywise Jan-14 E-1 - Sunrise Lake Village Far South 7,981 Title Boxing Club Feb-14 Tomball Marketplace Far Northwest 7,700 Five Below Jan-14 E-1 - Sunrise Lake Village Far South 6,736 Blue Lion Salon Studios Feb-14 1 Renewal COLLIERS INTERNATIONAL P. 2