Retail Research. Market Report Second Quarter 2017 Ohio Metro Areas. High Yields in Ohio Metros Spark Interest from Outside of State

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1 Retail Research Market Report Second Quarter 2017 Ohio Areas High Yields in Ohio s Spark Interest from Outside of State Ohio retail markets benefit from stout job growth and increased rental construction. Across the state, increases in the number of education, healthcare and retail trade positions will support overall job growth. In Columbus, expansions by logistics fi rms, Ohio State University and area hospitals will encourage signifi cant household formation. Consistent job growth will occur in Cincinnati thanks to additions at Children s Hospital Medical Centers, the University of Cincinnati, DHL and Amazon. Steady hiring will increase local incomes by nearly 5 percent year over year. Similar income growth will occur in Cleveland, where employment will grow a respectable 1.4 percent this year. All three metros are also substantially expanding multifamily stock, fortifying or creating new retail trade areas. Positive rent growth persists statewide; retail development a mixed bag. A cycle-high volume of space will come online in Cincinnati this year, while annual completions in Columbus and Cleveland each dip below 500,000 square feet. In each metro, retailers expansions will sustain robust absorption, further reducing vacancies to low levels. Rent growth at properties near new residential developments and growing employment hubs will drive overall effective rate increases, with Cincinnati positioned to record the largest gain. Retail 2017 Outlook Cincinnati $ % Cleveland $ Columbus $ % Investment Trends Cincinnati Vacancy Basis Point Asking Rent Retail properties built after 2000 in Cincinnati and Northern Kentucky remain popular among investors, with high-4 to mid- 5 percent yields achievable. An increase in supply could provide institutional investors additional opportunities at the top of the market, namely in the core. Average Rate 1 9% Local Retail Yield Trends Retail Cap Rate 10-Year Treasury Rate Cleveland Consistent sales prices and stable yields heighten the metro s appeal to California and New York-based buyers. Assets in the city of Cleveland and Cuyahoga County suburbs, including Parma and North Olmsted, drive overall deal flow. Investors target newer properties in Lake and Stark counties at mid-5 percent to mid-6 percent initial returns. Columbus Investors remain attracted to the metro s available yields, which are higher than other primary Ohio and Midwestern markets. The city of Columbus and suburban cities near the northwest and southwest sections of Interstate 270 are often targeted by buyers, with a host of sub-$5 million properties changing hands. * Trailing 12 months through 1Q17 Sources: CoStar Group, Inc.; Real Capital Analytics

2 Cincinnati 1Q17-12-MONTH TREND Employment Trends EMPLOYMENT: Year-over-Year 1% 2. increase in total employment In the 12 months ending in the fi rst quarter, employers created 24,000 positions and the unemployment rate declined to a cycle low of 4.1 percent. The higher-paying professional and business services, and fi nancial sectors contributed a combined 8,300 positions, with 7,500 workers added in retail. Completions and Absorption CONSTRUCTION: Square Feet Completed (millions) Completions Absorption 240,000 square feet completed Deliveries slowed during the last 12 months following the completion of more than 1.2 million square feet in the prior period. Recent deliveries were concentrated in Butler County and East Cincinnati. Approximately 578,000 square feet is under construction and will come online in A 6,000-squarefoot Kroger Marketplace is the largest property. Vacancy Rate Trends VACANCY: Vacancy Rate 1 8% 70 basis point decrease in vacancy Net absorption of 1 million square feet lowered the vacancy rate to 6.1 percent in March, maintaining historically low vacancy for a third straight year. A lack of deliveries in the city supported a decline in vacancy of 70 basis points to 3.1 percent. In Butler County and East Cincinnati, areas of new development, vacancy dipped by 0 and 50 basis points, respectively. Asking Rent Trends RENTS: Year-over-Year 8% - -8% 3.7% increase in the average asking rent Positive asking rent growth increased the metro s average rate to a seven-year high. At $11.44 per square foot, the marketed rate trails the previous cycle s peak rent by more than $3 per square foot. A 60 percent boost in multi-tenant rent elevated the average rate in Western Cincinnati to $9.46 per square foot. Tight vacancy supported 7.3 percent growth in the core. * Forecast

3 Retail Research Market Report DEMOGRAPHIC HIGHLIGHTS 2017 JOB GROWTH 1.8% U.S. Average 1. FIVE-YEAR POPULATION GROWTH* 48,300 FIVE-YEAR HOUSEHOLD GROWTH* 34,000 1Q17 RETAIL SALES PER MONTH 1Q17 MEDIAN HOUSEHOLD INCOME $60,386 U.S. Median $58,218 $4,217 Per Household U.S. $3,785 $1,670 Per Person U.S. $1,454 RETAIL SALES FORECAST*.9% U.S. 21.1% * SUBMARKET TRENDS Lowest Vacancy Rates 1Q17 Submarket Vacancy Rate Basis Point Asking Rent % Cincinnati (city) 3.1% -70 $ Dearborn County 4.1% -500 $ % Northern Kentucky $ % Eastern Cincinnati $ Butler County $ % Northern Cincinnati $ Outlying Warren County 6.8% -60 $ Brown County 7.5% -60 $ % Western Cincinnati 9.9% 80 $ Overall 6.1% -70 $ % SALES TRENDS Buyer Interest Intensifi es; Newer Properties Targeted Multi-Tenant: Throughout the metro, investors pushed the average price up 11 percent to $181 per square foot over the year ending in the first quarter. Cap rates remain in the low- to mid- 7 percent area. Single-Tenant: In the past 12 months, fast-food restaurants garnered the most interest from investors. In sales of all single-tenant assets, the average price increased 6 percent to $287 per square foot, with the average cap rate hovering near 7 percent. Outlook: Buyers from California remain enticed by yields that are at least 0 basis points more than those that can be captured in their home markets. Average Price per Sqaure Foot $400 $300 $200 $100 $0 Pricing Trends Multi-Tenant Single-Tenant * ** Trailing 12 months through 1Q17 Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics

4 Cleveland 1Q17-12-MONTH TREND Employment Trends EMPLOYMENT: Year-over-Year 1% 0. increase in total employment In the 12 months ending in the fi rst quarter, employers created 4,100 positions and the unemployment rate increased to 6.3 percent after bottoming out in early 20. The infl ux of 7,350 education and healthcare jobs offset job cuts in the retail, leisure and hospitality, and professional and business services sectors. Completions and Absorption CONSTRUCTION: Square Feet Completed (millions) Completions Absorption 617,000 square feet completed The pace of deliveries moderated during the last four quarters following the completion of 735,000 square feet the year prior. The metro s East region added 0,000 square feet of space. A 94,000-square-foot expansion of Oakwood Commons in South Euclid and a buildout of Beachwood Place Mall represent the largest deliveries this year. Vacancy Rate Trends VACANCY: Vacancy Rate 1 8% 40 basis point decrease in vacancy On net absorption of 1.1 million square feet, vacancy dipped to 6.8 percent, matching the lowest level recorded during the current cycle. The Southwest, West and Northeast regions of the metro, along with Stark County, posted historically low vacancy rates. A lack of deliveries in Downtown Cleveland supported a large decline to 3.1 percent. Asking Rent Trends RENTS: Year-over-Year % decrease in the average asking rent Asking rent hovers between $10 and $11 per square foot for the eighth year, at $10.54 per square foot this quarter, dipping over the year as high-end space was absorbed. Recent deliveries in the metro s East region supported an 8.3 percent rise in asking rent to $.77 per square foot. The average rent on space marketed for lease dropped in fi ve submarkets as lower-quality layouts came to market. * Forecast

5 Retail Research Market Report DEMOGRAPHIC HIGHLIGHTS 2017 JOB GROWTH 1. U.S. Average 1. FIVE-YEAR POPULATION GROWTH* (33,900) FIVE-YEAR HOUSEHOLD GROWTH* 3,000 1Q17 RETAIL SALES PER MONTH 1Q17 MEDIAN HOUSEHOLD INCOME $54,467 U.S. Median $58,218 $3,1 Per Household U.S. $3,785 $1,331 Per Person U.S. $1,454 RETAIL SALES FORECAST* 11.8% U.S. 21.1% * Lowest Vacancy Rates 1Q17 Ample Returns and Stable Prices Expanding Buyer Pool SUBMARKET TRENDS Submarket Vacancy Rate Basis Point Asking Rent % Downtown Cleveland 3.1% -210 $ Portage County $ % West $ Huron County 3.7% -200 $ % Medina County $ Stark County $ % Southwest $ Erie County $ Geauga County 6.7% -30 $ East 7.9% 40 $ Overall 6.8% -40 $ % SALES TRENDS Multi-Tenant: Investor demand for older neighborhood and strip centers throughout Cuyahoga County raised the metro s average price 4 percent to $8 per square foot over the year ending in March. Single-Tenant: Drugstores and fast-food establishments are sought after throughout the metro. Steady demand for standalone properties yielded an average price per square foot in the low-$240 area in the fi rst quarter. Outlook: The metro s lower price points and higher yields will attract more out-of-town investors, heightening competition for well-located properties. Average Price per Sqaure Foot $300 $225 $0 $75 $0 Pricing Trends Multi-Tenant Single-Tenant * ** Trailing 12 months through 1Q17 Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics

6 Columbus Employment Trends 1Q17-12-MONTH TREND EMPLOYMENT: 2. increase in total employment Year-over-Year 1% Employers expanded staffi ng in the year ending in March by 25,500 positions. The unemployment rate dipped to 4 percent, the lowest level since The government and education and health sectors combined to add 9,600 positions, with professional and business services creating 3,800 jobs. Completions and Absorption CONSTRUCTION: Square Feet Completed (millions) Completions Absorption 993,000 square feet completed Columbus East and Delaware County welcomed the most new space over the past year at slightly more than 270,000 square feet each. In the preceding 12 months, 492,000 square feet was completed in the metro. The 355,000-square-foot Ikea Polaris represents the largest upcoming delivery and the only completion this year that exceeds 50,000 square feet. Vacancy Rate Trends VACANCY: 1 30 basis point decrease in vacancy Vacancy Rate 8% In the 12 months ending in March, vacancy declined to a historically low 5.8 percent on net absorption of nearly 1 million square feet. In Delaware County, an area of recent deliveries, vacancy dipped 70 basis points to a metro low of 2.4 percent. The Columbus Central rate remained below 5 percent despite an increase in vacancy. Asking Rent Trends RENTS: Year-over-Year increase in the average asking rent A double-digit increase in the average single-tenant rent pushed the metro s overall asking rent to $12.24 per square foot, the highest average in the last six years. Columbus West and North, the metro s pricier submarkets, registered sizable rent increases of 27 percent and more than 10 percent, respectively. * Forecast

7 Retail Research Market Report DEMOGRAPHIC HIGHLIGHTS 2017 JOB GROWTH 2. U.S. Average 1. FIVE-YEAR POPULATION GROWTH* 106,500 FIVE-YEAR HOUSEHOLD GROWTH* 54,000 1Q17 RETAIL SALES PER MONTH 1Q17 MEDIAN HOUSEHOLD INCOME $61,922 U.S. Median $58,218 $4,091 Per Household U.S. $3,785 $1,617 Per Person U.S. $1,454 RETAIL SALES FORECAST*.1% U.S. 21.1% * Lowest Vacancy Rates 1Q17 Investors Expand Criteria, Target Newer Suburban Assets SUBMARKET TRENDS Submarket Vacancy Rate Basis Point Asking Rent % Morrow County 0.7% -60 $ Delaware County $. 3.5% Columbus South 4.1% -240 $ % Pickaway County $ Columbus Central $ Union County $ Madison County $ Fairfi eld County 4.8% 80 $ Columbus North 4.9% -20 $ Licking County $ Overall 5.8% -30 $ SALES TRENDS Multi-Tenant: The availability of 7 percent to 9 percent yields heightened investor interest in centers throughout Columbus. The average price recently rose 11 percent to $172 per square foot from one year ago. Single-Tenant: Buyers take advantage of pricing that still trails the previous cycle s peak by $40 per square foot. Single-tenant assets routinely trade on average in the mid-7 percent band. Outlook: As deliveries moderate, buyer demand for properties built this decade will rise. Out-of-town investors will focus on Dublin, Grove City and Hilliard. Average Price per Sqaure Foot $300 $225 $0 $75 $0 Pricing Trends Multi-Tenant Single-Tenant * ** Trailing 12 months through 1Q17 Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics

8 Retail Research Market Report Percent of Total Maturing Balance (billions) Retail Mortgage Originations by Lender 10 75% 5 25% * Forecast Sources: CoStar Group, Inc.; Real Capital Analytics National Retail Group National Bank International Bank Regional/Local Bank CMBS Insurance Financial Private/Other Estimated Commercial/Multifamily Debt Maturities by Lender Type CMBS Banks Life Insurance Cos. Other $400 $300 $200 $100 $ CAPITAL MARKETS By WILLIAM E. HUGHES, Senior Vice President, Marcus & Millichap Capital Corporation Monetary policy in transition. The yield on the 10-year U.S. Treasury bond remained in the low- to mid-2 percent range throughout the fi rst quarter of Despite the Fed raising its benchmark short-term rate twice in recent months and signaling another rise in June, long-term rates have remained stable. The Federal Reserve wants to normalize its monetary policy and, in addition to rate hikes, could start paring its balance sheet. While short- and long-term rates do not always move in tandem, both actions by the Fed have the potential to lift long-term rates. Sound economy a balancing act for Fed. Tight labor market conditions are fi nally producing upward pressure on wages and infl ation. Unemployment just hit the lowest level since 2007 and consumer confi dence sits close to its all-time high. Consumers have the means and the confi dence to expand consumption and retail properties stand to gain signifi cantly from increased spending. The Fed must now balance economic growth and job creation against wage growth and infl ationary pressures. Lenders exercise disciplined approach. Overall, leverage on acquisition loans has continued to refl ect disciplined underwriting, with LTVs typically ranging from 60 percent to 70 percent for most retail properties. The combination of higher rates and conservative lender underwriting encouraged some investor caution that slowed deal fl ow in late 20, a trend that will likely extend into A potential easing of regulations on fi nancial institutions, though, could liberate additional lending capacity and higher interest rates may also encourage additional lenders to participate. Visit Bill Rose First Vice President, National Director National Retail Group Tel: (858) bill.rose@marcusmillichap.com Prepared and edited by Catherine Zelkowski Research Associate Research Services For information on national retail trends, contact: John Chang First Vice President Research Services Tel: (602) john.chang@marcusmillichap.com Price: $750 Marcus & Millichap Ohio Offices: Michael Glass First Vice President Division Manager (2) michael.glass@marcusmillichap.com Cleveland 5005 Rockside Road, Suite 1100 Independence, Ohio 441 Columbus 230 West Street, Suite 100 Columbus, Ohio 432 Cincinnati Office: Colby Haugness Regional Manager Tel: (5) colby.haugness@marcusmillichap.com 600 Vine Street, 10th Floor Cincinnati, Ohio The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: -level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specifi c investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Experian; Moody s Analytics; Real Capital Analytics; TWR/Dodge Pipeline; U.S. Census Bureau.