CENTRAL OHIO RETAIL REAL ESTATE OUTLOOK 2011 Prepared By: Chris Boring Boulevard Strategies Columbus, Ohio blvd@iwaynet

1. CENTRAL OHIO RETAIL REAL ESTATE OUTLOOK 2011 Prepared By: Chris Boring Boulevard Strategies Columbus, Ohio blvd@iwaynet.net (614)294-2072 May 17, 2011

2. Holiday 2010 Momentum (5% Increase Over 2009) Carries Into 2011 Still Not Back to 2007 Levels After Adjustments for Inflation Retail Employment Growth Flat (+0.5%) in Central Ohio (Columbus Chamber) Automation and Technology Are Top Job Killers As Transactions Consummated Via Self-Serve Kiosks Are Growing By 11% A Year Recession Was Broad-Based But Recovery Is Top Heavy Consumer Confidence Is Up To 65 in April 2011 (vs. 58 in April 2009), According to the Conference Board Bin Laden Bump Offset by $4/Gallon Gas Prices Fantastic Plastic: Debit Cards Surpass “Debt” Cards in Terms of Usage, 38 Billion to 25 Billion Transactions in 2009 Big Battle In Congress Brewing Between Banks and Retailers Over Debit Card Charge Fees (Now 44 Cents Per Transaction vs. Proposed 12 Cents) 10. THE BIG THAW:Life After The Great Recession

3. 4 Quarters of Positive Absorption As of 1Q 2011, According to Colliers, International Regional Retail Vacancy Rate Improves Slightly From 12% to 11.5% (USA = 10%) Overall Market Activity Remains Quiet – 0.8% of All Retail Space in Transition During 1st Quarter of 2011 High Five! – Spotlight Shines on Central City in 2011 German Village/Brewery District: Shadowbox Live, Via Vecchia Winery, Outland Goth Club Downtown: Columbus Commons, Scioto Mile, Columbus Brewing Company, Jury Room, Kacey Brankamp, Cup O Joe, East End/Students Arena District: New Convention Center Hotel, New Columbia Gas HQ, Grandview Yard Short North Arts District: More Home and Fashion Goods, New Restaurant at Goody Boy Site University District: New Kroger, Coated Plastics/Weinland Park/Long’s Bookstore Redevelopments Local Foods Purveyors Expand, Including Graffiti Burger, Jeni’s Ice Cream, Matt the Miller Tavern, Burgers, Dog & Fries, Las Margaritas, Various Ethnic Grocers 9. GAINING STEAM:Local Retail Real Estate Sector Shows Glimmers of Light

4. Facebook Ads Are Highly-Targeted, Affordable, Effective Media for Retailers of All Sizes Facebook Ads Have Higher Recall, Brand Awareness, and Purchase Intent Than Banner Ads According to Nielsen Research 72% of Retailers Surveyed by Forrester Research Plan to Increase Social Media Buy in 2011 600 Million Facebook Users on Facebook 5.5 Hours Per Month (vs. 150 Million/2 Hours Per Month in 2009) M-Commerce Stumbles Forward as Retailers Are Slow to Recognize Consumers Are All Thumbs Are Their Smartphones Recent Innovations Include Voice Search, One-Touch Checkout, QR Codes, Bar Code Screening, and Popularity of Tablet Devices (21% of All M-Commerce Transactions) Some Retailers Experiment With Dynamic Pricing Algorithms to Protect Margins While Others Roll Out Mobile Coupons M-Commerce Represents Only 3% of All Online Sales Columbus Clippers: Coupon Craze Sweeps The Region (Annual Growth Rate = 6%) Nationally, 350 Billion Coupons Will Be Issued This Year (1,136 For Every American) 22.5 Billion Will Be Redeemed for $35 Billion ($1.55 Per Coupon) 8. THE FUTURE OF RETAIL MARKETING:Facebook Passes Google As No. 1 Website

5. Backyard Living: A Growing $5 Billion/Year Home Décor Segment Patio/Porch/Deck and Backyard Now Viewed As “Rooms” as Indoor/Outdoor Distinction Blurs Broad Category Includes Everything From Manly Grills, Propane Accessories to Funky Birdfeeders and Cornhole Sets, All Driven by Fashion, Durability, and Price 71% of U.S. Households Own a Grill, 60% Grill Out Year-Round, 37% Even When Temperatures Are Below Freezing 8% of U.S. Households (50,000 In Columbus MSA) Will Buy New Lawn/Porch Furniture This Year; 3% Will Add a Deck/Porch/Patio Cashing In on Catastrophe: Survival/Emergency Gear Flies Off the Shelves This Spring Just In Case: 24/7 News About Terrorists, Tsunamis, Tornadoes, Mass Murderers, Earthquakes, Oil Spills, Fish Kills, Nuclear Meltdowns, Hurricanes, Flesh-Eating Aliens Instill Panic Shopping Craze Retailers Experience Runs on Items Such as Flashlights, Freeze-Dried Foods, First Aid Kits, Batteries, Utility Knives, and Even Gas Masks, Chemical Suits, and Machetes 7. I LOVE THE 10’S:Lifestyle Trends Create Retail Opportunities

6. Pandora Pandemic: Bourgeois Version of Classic Charm Bracelets Provide Personalized Affordable Luxuries Worldwide Sales of Pandora Bracelets and Charms Topped $1 Billion in 2010 (vs. $250 Million in 2008); Went Public in October 2010 USA Accounts For 38% of Danish Firm’s Sales, Also Big in UK, Germany, Australia Vertically-Integrated Business Model With High Gross Margins (71% in 2010) Big Supporter of Komen Cure For Breast Cancer Charity; 7,271 Participants Ran Last Weekend Thru Columbus Pets Are People Too: $45 Billion Recession-Proof Industry Continues to Grow As Baby Boomers Become Empty-Nesters Humanization of Pets Impacts Pet Food, Supplies, Vet Care, Services, and, Of Course, Toys Pet or Paramour? 85% Pick Partner But 35% Say It Would Be a Close Call, Other 15% Would Choose Max or Bella (Top Names For Both Dogs and Cats) 7. I LOVE THE 10’S:Lifestyle Trends Create Retail Opportunities (Cont’d)

7. HotNot Fresh-Baked Pies $10 Pizzas - Experts Agree Pie is the - Chains Wage Price Wars While Costs of New Cupcake… Ingredients, Gasoline Go Up One Night Affairs Daily Deals - Wedding Gown Rentals, Already - Groupon Sales Down 13% So Far This Year Popular in California, Arrive in Central Ohio… as Wanna-Be’s Proliferate Red Wing Boots Blue Jacket Jerseys - Heritage Brands Made In USA Resonate - Third Jersey Featuring Phallic Cannon Flops With Blue Collar Consumers… As Team Loses On and Off The Ice Frugality Fatigue Paying More to Go Green - Luxury Goods/Jewelry Sales Up 8% So - Sales of Clorox’s Greenworks Product Line Plunges Far in 2011… from $100M in 2008 to Predicted $60M This Year Nail Salons That Serve Alcohol Bartenders Who Cut Hair - The Real Housewives of Columbus Know - There’s a 93% Chance That I Totally Made How to Chill Out… This Up 6. SECTOR SPOTLIGHT:What’s Hot and What’s Not

8. Best Buy’s Geek Squads, Home Depot’s Installation Business, CVS’s Expanded Corner Store Categories, Office Depot’s Ink Refills, Wal-Mart’s Money Center Check Cashing Operation Are All Examples of Chains Invading Mom-and-Pop Shop Territory Latest Effort Is Tide Dry Cleaners, Presented by $80 Billion Giant P&G (Dry Cleaning Is $9 Billion/Year Industry) Brandgasmic?: Prototype Is 3,000 Sq. Ft. Roomy Space with Tide Orange Walls, Tide Aroma Wafting Thru Huge Vents, Staffed by Employees in Tide Golf Shirts Drive-Thru Service, 24-Hour Pickup/Dropoffs, Green Cleaning Methods, Low Prices, Coupons Result in Successful KC Pilot Store ($1 Million in Sales vs. $250,000 Industry Average) Wal-Mart Decides Maybe “More Is More” After Strategy to Clean Up Stores/Edit SKUs by 9% Backfires Same Store U.S. Sales Were Down 2% for Wal-Mart in 2010, Compared to 2% Increase at Target, and 6% Increase at Family Dollar Plan For This Year Is To Re-Stock Thousands of Discontinued Food Items and Reduce Electronics Floor Space Target, Walgreens, CVS Plan Big Expansion Into Groceries with Fresh Produce, Frozen Meats, and Even Sushi Target’s $500 Million Investment to Renovate/Expand Stores For More Food Is Resulting in 6% Increase After Remodels Occur Coincidence?: There is 10% More Grocery Space Per Capita in U.S. vs. 1990; Average American Adult Now Weighs 188 vs. 171 in 1990 Don’t Tell the Flesh-Eating Aliens: Central Ohio Now Collectively Weights 80 Million Pounds More Than It Did in 1990 5. WHO’S THE NEW GORILLA ON THE BLOCK?:Mega Corporations Muscle Into Niche Categories

9. Fresh Every Day: Community Gardens and Farmers Markets Proliferate As Local Sourcing and Sustainability Remains Top Trends In Restaurant Industry Chefs Go Hyper-Local with Raising Own Gardens and Butchering Own Meat Canning Makes a Comeback Children’s Nutritional Needs Evolve Beyond Happy Meals, Cafeteria Mystery Meat Micro-Distilleries Emerge As First Two Open in Columbus Market (Middle West Spirits and Watershed Distillery) The Food Channel Released Its Top 10 Food Trends For 2011 in January – Here Are a Few Highlights: Men in Aprons: Recession Leaves More Men Unemployed Than Women Don’t Ask, Don’t Tell: Battle Over Nutritional Labeling Intensifies as Feds Declare War on Trans-Fats, Sodium, and Calories, in General Appetite for Apps: Food Is to Mobile Apps as Funny Cats Are to You Tube Videos; Locators, Reviews, and Coupons Are Killer Apps Discomfort Foods: Trying New Foods Other Restaurant Trends Include Premium Cocktails, Craft Beers, Gourmet Takes on Old Favorites, Artisan Sandwiches, Growth in Korean Cuisine, Eggs All Day, Extension of Delivery Services, and Fixed-Price Menus That Encourage Experimentation There Were 1% Fewer Restaurants Nationwide in 2010 vs. 2009 (2% Fewer Independents) According to NPD Group 4. MEET THE FORKERS:Chefs and Farmers Became Local Celebrities

10. Food Trucks and Carts Go to Where the People Are Instead Waiting For Patrons to Come to Them There Are Now About 400 Licensed Mobile Vending Units in Columbus, According to ECDI, Ranging From Delicate Japanese Crepes and Cupcakes to Falafels and Waffles This Year Established Restaurateurs Experiment with Food Trucks/Carts as Brand Extension, Not as a Stepping Stone Corporations Use Mobile Units to Expand Brand Awareness (Example: Heinz Ketchup Truck That Gives Away Fries with Newly Designed Ketchup Packets) Civil Disobedience on a Paper Plate: Underground, Unlicensed Midnight Pop-Up Food Raves Featuring Live Music and Great Cuisine Are All The Rage in NYC, SF, LA When Matters As Much As Where: Pop-Up Stores Provides a Flexible, Attention-Grabbing Way to Showcase a New Line of Goods, to Revitalize on Established Brand, to Test New Concepts and/or Locations, to Target Markets at Special Events Landlords Battered by Recession More Willing Than Ever to Consider Short-Term Leases Retailers and Manufacturers Opening Pop-Up Stores, Include P&G (All Free Samples), Toys R Us, Borders, Forever 21, The Limited (Forenza), and Disney About 25% of Pop-Ups Become Permanent Tenants Location-Based-Based Social Networks Such as Foursquare Predicted to Be Next Big Thing 3. MASTERS OF THEIR UNIVERSES?:Retailers Experiment with Dimensions of Time and Space

11. I’ve Been Called a Baby Boomer All My Life Since I Was Born in 1959 Most Articles/Presentation Concerning the Post WWII Baby Boom Generation (i.e., Those Born Between 1946 and 1964) Heavily References 1960’s Imagery (Hippies, Nam, Classic Rock, Etc.) I Was 9 Years Old in 1968, the Summer of Love, and I Survived It With My Virginity Intact The 60’s Must Have Been Life (and Reality) Altering for Those Old Enough to Participate But We Late Boomers Who Came of Age During Ford-Carter Years Felt a Little Cheated True Boomers Had:They Left Us With: John F. Kennedy - Johnny Rotten Impassioned Student Protests - Streakers at Tennis Matches Moon Landings - Moonies Outdoor Rock Festivals - Indoor Shopping Malls Beatlemania - Disco Fever Woody at the Rose Bowl - Woody at the Gator Bowl Peace Signs - Smiley Face Buttons 2. REVENGE OF THE LATE BOOMERS:No Longer Standing in the Shadows

12. We Will, We Will Rock You! (Queen, 1977) In 1965, There Were 8 Million More “True Boomers” (Born Between 1946 and 1955) Than “Late Boomers” (Born Between 1956 and 1964) In 2011, There Are 500,000 More Late Boomers Left Than True Boomers (25,000 More in Central Ohio) We Are In Our Peak Earning Years (Avg. Per Capita Income = $33,976 vs. $30,523 for True Boomers) Late Boomers Represent America’s Most Lucrative Retail Market ($540 Billion Nationwide, $3 Billion in Central Ohio) Late Boomers Are Different From True Boomers True BoomersLate Boomers Experimental - Entrepreneurial Free-Spirited - Pragmatic Idealistic About Causes - Cynical About Everything 2. REVENGE OF THE LATE BOOMERS:No Longer Standing in the Shadows (Cont’d)

13. Growth Prospects in the Retail Real Estate Industry Will Be Negatively Impacted by Several Trends Compounding Growth in E-Commerce and Other Alternative Channels Retailers Move Toward Fewer High-End Interactive/Showcase Display Locations with Well-Staffed Service/Repair/Return Centers Squeeze Play: Chains Edit SKUs to Downsize Prototypes After Decades of Building Bigger and Carrying More Population Growth Slows in Franklin/Delaware Counties (1.2%/Yr. in 2010’s vs. 1.4%/Yr. in 2000’s) The New Frugality Reshapes a New Generation of Consumers (Now Save 7% of HH Income vs. Less Than 1% 3 Years Ago) No Surrender Monkeys Allowed: Ways to Respond Positively Do Due Diligence to Develop Repositioning Strategies for Existing Portfolio Embrace Mixed-Use Plans as First Choice Not as Last Resort Integrate Eds and Meds Into Retail Centers (They Need What Shopping Centers Have – Traffic, Visibility, and Parking) Retail is Detail: Find Ways to Help Existing Retailers Get Better EVERYTHING IS OKAY NOW THAT THE RECESSION HAD ENDED (RIGHT?):Maybe Not

14. Thank You Questions or Comments? Contact Chris Boring at (614)294-2072 or blvd@iwaynet.net