Market Reports_Q4 2023 Retail

Q4 RETAIL market report 2023 | GALLELLI REAL ESTATE

Gallelli Real Estate 3005 Douglas Blvd #200 Roseville, CA 95661 P 916 784 2700 GallelliRE.com

market overview

Q4 23

7.9%

±92,000 SF

$2.05 PSF

Direct Vacancy Rate

Net Absorption

Average Asking Rate (NNN)

±282,000 SF

4.5%

4.9%

3.7%

Under Construction

Sacramento Unemployment

California Unemployment

United States Unemployment

(November)

(November)

(December)

*To provide the most accurate snapshot of market conditions, we revise our historical data in cases where new information is uncovered after the fact.

RETAIL MARKET OVERVIEW As of the close of Q4 2023, overall shopping center vacancy in the Sacramento region stood at 7.9%. While this reflects a modest decline from the 8.0% vacancy rate of three months ago (Q3), this metric climbed over the course of 2023. One year ago, local vacancy stood at 7.5%. Yet, the trend has played out unevenly. Just five of the region’s 14 submarkets ended 2023 with increased vacancy levels.

Among those that saw increased levels of vacancy in 2023 were the Arden/Howe/Watt, Auburn/Lincoln/Loomis, Carmichael/ Citrus Heights/Orangevale, Davis/Woodland, and Elk Grove submarkets. Only two of these trade areas saw significant negative net absorption in 2023—in both cases these were related to challenged Class C mall space. As of the end of Q4 2023, the Sacramento region retail submarkets that reported the highest levels of vacancy were the Arden/Howe/Watt (14.8%), Carmichael/Citrus Heights/Orangevale (12.7%), Davis Woodland (11.9%), and Highway 50 submarkets (11.3%). All of these, except for Highway 50, saw vacancy levels inch upward in 2023.

But most local trade areas recorded modest occupancy growth and incrementally declining levels of vacancy rates throughout the past year. The Downtown/Midtown/East Sacramento, El Dorado Hills, Folsom, Highway 50, Natomas, Rio Linda/North Highlands, Roseville/Rocklin, South Sacramento, and West Sacramento submarkets all closed 2023 with lower levels of overall vacancy than they had at the beginning of the year. The region’s tightest vacancy rates as of the end of Q4 2023, were in the El Dorado Hills (1.4%), Elk Grove (2.6%), Natomas (3.1%), Folsom (4.0%), Roseville/Rocklin (4.6%), Auburn/Lincoln/Loomis (4.9%), and West Sacramento (5.0%) submarkets. All of these, except for Auburn/Lincoln/Loomis and Elk Grove, experienced declines in vacancy over the past year—with new construction playing a considerable role in Elk Grove’s uptick of space availability.

In terms of total deal activity (gross absorption), we tracked 462,000 SF of transactional volume in Q4 2023, bringing annual totals to just over 2.1 MSF. This reflects a slight cooling from 2022, when the Sacramento shopping center market recorded 2.2 MSF of deal activity and is consistent with national trends.

While tenants remain in expansion mode across the United States within the automotive retail, beauty/cosmetics, cannabis, dental, discounter, dollar store, entertainment/experiential, grocery, gym/health club, luxury apparel, medical, off-price apparel, restaurant, spa, and warehouse store categories, deal activity has slowed slightly in 2023. While much of this has been due to the difficulty of finding available Class A space, it is also a reflection of deals taking longer and national credit tenants approaching the marketplace with a greater sense of caution due to bigger picture economic uncertainty. Yet, we continue to see very few players back off their stated growth plans for 2024.

The most significant is Dollar General, which is now looking to open 850 stores in 2024—down from a goal of 900 they had previously stated in September 2023.

Select Sacramento Region Retail Leases Past Six Months (Q3/Q4 2023) Address

Project Name

Submarket

SF Footage

Tenant

7505 – 7717 Laguna Boulevard

Laguna Crossroads

Elk Grove

31,000

Macy’s

6177 Sunrise Boulevard

Marketplace at Birdcage

Carmichael/Citrus Heights/Orangevale

26,000

HomeGoods

4415 Granite Drive

Rocklin Emporium

Roseville/Rocklin

15,000

Action Camera

9200 Fairway Drive

Fairway Creek Shopping Center

Roseville/Rocklin

15,000

The Cave

1508 Howe Avenue

1508 Howe Avenue

Arden/Howe/Watt

14,491

Geremia Pools

1331 Broadway

1331 Broadway

Downtown/Midtown/East Sacramento

12,161

Little Whales Swim School

1690 Arden Way

Tower Plaza

Arden/Howe/Watt

10,484

Dollar Tree

3440 – 3510 Palmer Drive

Goldorado Shopping Center

El Dorado Hills

10,200

Petco

5645 Watt Avenue

5645 Watt Avenue

Rio Linda/North Highlands

6,480

MAACO

Bidwell Street & Alder Creek

Folsom Ranch

Folsom

6,000

Dino’s

5207 Madison Avenue

5207 Madison Avenue

Rio Linda/North Highlands

6,000

Afghan Grocery

185 Placerville Road

185 Placerville Road

Folsom

4,400

Cantina Pedregal

8525 Madison Avenue

8525 Madison Avenue

Carmichael/Citrus Heights/Orangevale

3,779

Better Homes & Gardens Real Estate

7084 Auburn Boulevard

7084 Auburn Boulevard

Carmichael/Citrus Heights/Orangevale

3,092

Oyster

1563 Eureka Road

1563 Eureka Road

Roseville/Rocklin

3,000

Casa Ramos

705 E. Bidwell Street

Commonwealth Square

Folsom

2,820

Folsom Foot Spa

711 E. Bidwell Street

Commonwealth Square

Folsom

2,700

Alpha Autoworks

4001 Sunrise Boulevard

Sunridge Plaza

Highway 50

2,331

Chipotle

8601 – 8727 Auburn Folsom Road

Granite Bay Village Shopping Center

Roseville/Rocklin

2,101

Sylvan Learning Center

5198 Commons Drive

Shops 8

Roseville/Rocklin

2,000

The Great Greek

NET ABSORPTION TRENDS All told, the market recorded 92,000 square feet (SF) of positive net absorption in Q4, but this was not enough to lift annual totals back into growth mode. All told, Sacramento’s shopping center marketplace recorded -48,000 SF of negative net absorption over the past 12 months. Most of this occupancy decline came from just a few handfuls of high-profile retailer failures that resulted in the liquidations of Tuesday Morning, Bed Bath & Beyond, and buybuy Baby stores over the first half of 2023.

Yet, entering 2024, all the Bed Bath & Beyond and buybuy Baby stores that went dark have either already been backfilled with new tenants or have deals in place that will see these spaces occupied within the next few months. Meanwhile, the ongoing bankruptcy of Rite Aid also resulted in some additional junior box vacancies hitting the market in Q4 2023 and may result in further closures as the drug store chain continues to navigate the Chapter 11 process.

The biggest winner of Q4 2023 was the Rio Linda/North Highlands submarket which recorded 65,000 SF of positive net

absorption over the final three months of the year. Occupancy gains in Q4, brought annual net absorption tallies back into the black for this trade area with the Rio Linda/North Highlands trade area recording total growth of 28,000 SF over 2023—all driven by activity from unanchored strip and community/neighborhood centers. Meanwhile, the Roseville/Rocklin trade area recorded 47,000 SF of positive net absorption in Q4, bringing annual 2023 numbers to more than 83,000 SF of occupancy growth.

But most of Sacramento’s retail submarkets experienced a quiet Q4 in which movement (in either direction) was modest. Only three trade areas recorded more than 20,000 SF of positive net absorption: Highway 50 (+20,000 SF), Roseville/Rocklin (+47,000 SF), and Rio Linda/North Highlands (+65,000 SF).

Meanwhile, only two of the region’s submarkets recorded 20,000 SF or more of negative net absorption in Q4 2023: Carmichael/ Citrus Heights/Orangevale (-52,000 SF) and Davis/Woodland (-51,000 SF). In both of those cases, occupancy declines were overwhelmingly driven by the mall sector.

In the case of the Carmichael/Citrus Heights/Orangevale market, even though strip, community/neighborhood, and power centers

all posted occupancy gains over the course of 2023, these were not enough to offset the amount of space that has gone dark (-285,000 SF) in connection with the ongoing redevelopment of Sunrise Mall in Citrus Heights. Meanwhile, new big box mall vacancies that emerged in 2023 within the Davis/Woodland trade area, returned -196,000 SF of space to market. While strip and power centers in the Davis/Woodland submarket recorded occupancy growth over the course of 2023, those gains were not enough to bring overall totals into positive territory for the year.

PERFORMANCE BY ASSET TYPE STILL FAVORS GROCERY ANCHORED All told, Sacramento’s shopping center market consists of over 66.0 million square feet (MSF) of retail space. Grocery or drug store-anchored community/neighborhood centers account for the greatest amount of local inventory, with just over 38.4 MSF of space. Community/neighborhood vacancy currently stands at 6.7%, down from a reading of 6.8% in Q3 and 7.1% a year ago.

This asset class recorded occupancy gains in 11 of the region’s 14 distinct submarkets over the course of 2023, recording 49,000 SF of positive net absorption over the final three months of the year. Sacramento’s community/neighborhood centers led all other product subtypes in terms of occupancy growth over the past year, recording total positive net absorption of 266,000 SF. Big box anchored power centers account for over 11.2 MSF of local shopping center inventory. Power center vacancy remained stable for the second consecutive quarter, measuring 6.2% as of the close of Q4 2023. With power centers experiencing the brunt of this past year’s Tuesday Morning, Bed Bath & Beyond and buybuy Baby liquidations, vacancy has crept upward from a reading of 5.8% one year ago. However, nearly all those spaces had been backfilled (though not necessarily occupied yet) as of the close of 2023. Only five of the Sacramento region’s 14 submarkets closed 2023 with higher levels of vacancy than a year ago. In terms of occupancy growth, power centers recorded a modest 2,000 SF of positive net absorption in Q4.

While this was the third consecutive quarter in which this asset type recorded occupancy growth, it wasn’t enough to offset all the occupancy declines from earlier in the year. Power centers closed 2023 with annual net absorption modestly in the red to the tune of 19,000 SF, or roughly the average size of a drug store.

Unanchored strip space accounts for just under 8.8 MSF of local shopping center inventory. Sacramento’s strip centers closed 2023 with a vacancy rate of 7.0%. One year ago, this metric stood at 8.0%, but has since declined for four consecutive quarters.

Only four of the region’s submarkets experienced increased vacancy over the course of the past year and only two recorded negative net absorption in 2023 (new construction is what drove vacancy upticks in the other two trade areas that experienced them). Strip centers recorded 60,000 SF of positive net absorption in Q4 2023. This asset class has recorded occupancy gains for the past three consecutive quarters and closed 2023 with total annual positive net absorption of 122,000 SF. Regional and super regional malls account for 4.6 MSF of local shopping center inventory. This asset type closed 2023 with a vacancy rate of 25.0%, up from a reading of 14.9% one year ago. The local mall market recorded -17,000 SF of negative net absorption in Q4 2023, reflecting the fourth consecutive quarter of occupancy declines. All told, Sacramento’s mall sector accounted for negative net absorption to the tune of -467,000 SF over the course of the past 12 months. The ongoing redevelopment of Sunrise Mall alone accounts for nearly 300,000 SF of this total.

This enclosed mall is in the early phases of being reimagined as a retail-focused mixed-use project. While it remains open for business, a substantial amount of space went dark in 2023, to accommodate redevelopment efforts. Meanwhile, new vacancies at Woodland Mall in the Davis/Woodland submarket drove most of the rest of this asset type’s negative occupancy trend in 2023.

It is critical to point out both these projects are considered Class B-/Class C assets in terms of their sales per square foot (PSF) levels. Meanwhile, the Class A Roseville Galleria, which consistently tops sales of $1,000 PSF, currently has an effective vacancy rate of 0.0%.

The national trend of extreme bifurcation in mall performance between Class A properties and everything else (the “have’s” and “havenots”) has only intensified during the post-pandemic era. Class A malls have rebounded hard since 2020, with foot traffic and sales metrics climbing substantially along with tenant demand. Meanwhile, most Class B- and C mall projects continue to face the same outsized challenges they were facing during the “retail apocalypse” era before the pandemic. Improvement for this sector of the market has been limited and mostly driven by the trend of inventory reductions due to older, struggling malls being redeveloped (in most cases as outdoor, retail-focused mixed-use projects) as is the case with the local Sunrise Mall project.

Lastly, we track just under 3.0 MSF of lifestyle and outlet center space across the Sacramento region. Though the region’s smallest asset class, it boasted its lowest vacancy rate as of the close of Q4 2023 at just 5.8%. This metric increased slightly in Q4, thanks to modestly negative net absorption of 3,000 SF over the final three months of 2023. But this asset class recorded occupancy growth for the year, with 50,000 SF of positive net absorption helping to drive vacancy down from a 7.1% reading of a year ago to its current level.

CONSTRUCTION OUTLOOK In 2023, just 218,000 SF of new shopping center space was delivered by local developers—mostly in the form of new outparcel buildings within existing shopping centers. This is in tune with what we saw in 2022 (225,000 SF of new inventory) and 2021 (230,000 SF). Since 2020, the Sacramento region has seen an average of 66,000 SF of new space come online in any given quarter, or roughly 264,000 SF of new product per year. This compares to an average of 120,000 SF per quarter, or 480,000 SF of new construction annually, being delivered to market from 2015 to 2020. Reduced development levels have played a major role in retail’s recovery nationally and locally and this trend does not appear to be ending. We are currently tracking 282,000 SF of new shopping center space under construction throughout the Sacramento region, with deliveries slated through early 2025. This should translate into a small decline in deliveries over the coming year as many developers taking a “wait-and-see” attitude towards moving forward on projects in the proposed stage until there is greater clarity regarding the path of the economy in 2024. While this certainly could change by the second half of the year—especially if scenarios were to play out where the Federal Reserve is lowering interest rates by the final six months of 2024—we aren’t expecting any significant upticks in development prior to 2025.

RENTAL RATES The current average asking rent for shopping center space across the region is $2.05 PSF on a monthly triple net basis, reflecting a 2.5% increase from the $2.00 PSF rate recorded one year ago. Because this average extends across all sizes and classes of available product, this number is best utilized as a benchmark only. It is not uncommon for secondhand large box space in Class B or C locations to have asking rents as low as $1.00 PSF or less, nor is it uncommon for newly constructed small shop space in premium locations or centers to have asking rates of $3.00 PSF or more. But the basic movement of this benchmark since 2021 has been towards growth, driven by rebounding tenant demand.

Despite growing economic headwinds over the final half of 2023, we have seen tenants remaining in growth mode and upward pressure on rents—particularly for Class A space—remaining in place. Whether or not the greater economy veers into downturn territory in 2024 could certainly impact this situation, but there are increasing signs that the US economy will probably avoid a recession in 2024. Meanwhile, even those economists that are still forecasting a downturn have been nearly universal in the belief that it would likely be a short and shallow recession.

Our discussions with national credit tenants in growth mode demonstrate to us that the difficulty in finding available quality space and concerns over rents have been a greater concern to site selection specialists than macroeconomics. We don’t think this is going to change in 2024 barring any sort of black swan economic event.

Gallelli Real Estate is proud to represent Costco. The club store giant opened a new 149,000 square foot store in Marysville, California on the site of the former Peach Tree Mall just before Thanksgiving. Though it is outside the Sacramento statistical area, planned Costco openings later this year in both Natomas (3881 E. Commerce Way) and Loomis (Sierra College & Brace Road) will impact our local statistics.

WHAT DOES A SOFT-LANDING LOOK LIKE? For much of the past 18 months, the central economic debate in the United States has been whether the Federal Reserve would be successful in engineering a “soft landing” for the economy.

Unfortunately, the Fed only has one tool to deal with inflation: interest rate hikes. And those work more like a sledgehammer than a scalpel. Adding to the challenge is that while some sectors of the economy—like real estate—feel the impact of interest rate hikes nearly immediately, it can take up to 18 months for the full impacts to play out in other critical areas of the economy like consumer spending. All of which translates into an exceedingly difficult balancing act as the Central Bank attempts to raise interest rates just enough to cool the economy and tame inflation, but not so much that it freezes the economy and spurs a recession.

According to conventional economic wisdom, the Fed has only successfully managed to execute a soft landing once in eleven tries over the past 60 years. This Goldilocks moment took place in 1994 when the economy was in its third year of recovery following the 1990-1991 recession. Quickly falling unemployment and strong consumer spending had led to an uptick in inflation.

Fed Chairman Alan Greenspan would oversee seven rate hikes in 1994 as the FFR doubled from 3.00%/3.25% to 6.00%/6.25% by the end of the year. Then, when the economy showed signs of softening too much by early 1995, the Fed cut interest rates three times, which spurred significant economic activity. The result ended up being the late 1990s boom that was one of the strongest economic growth periods in the history of the United States and what Greenspan would describe in his memoirs as “one of the Fed’s proudest accomplishments during my tenure.”

The Federal Reserve’s most recent rate hike campaign began in March 2022 when the Federal Funds Rate (FFR) stood at just 0.25% to 0.50%. By the end of 2022, the central bank had increased rates seven consecutive times bringing the FFR to 4.25% to 4.50%. They would raise rates four more times in 2023, pausing the campaign after they increased the FFR to the current rate of 5.25% to 5.50% in July 2023.

With the lion’s share of their actions (both in the number and size of interest rate hikes) having taken place well over a year ago, it suggests that the economy has already experienced the impacts of most of those moves without veering into an actual overall economic recession. If the goal of the Federal Reserve has been to engineer a “soft landing,” the airplane that is the US economy is touching down right now in what could best be described as a hold your breath moment.

As for the chances of a recession in 2024, the consensus forecast of the National Association of Business Economists (NABE) continues to improve. In August 2022, 72% of the

members of the NABE anticipated a recession within the next six months. That never happened. By the time the NABE conducted their August 2023 survey, 69% of NABE economists said they saw a “soft landing” on the horizon. That view has only gotten stronger with time; their December 2023 survey found that 76% of their economist membership believed the chances of a recession in 2024 were 50% or less. Of the NABE economists that see a downturn ahead, 40% believe that it will begin in Q1 2024 while 34% believe it will happen starting in Q2. Meanwhile, Bank of America economists have also changed their tune—at midyear 2023 they were forecasting a strong likelihood of a recession by either Q4 2023 or Q1 2024. Their outlook now is for a soft landing.

What exactly would a soft landing in 2024 look like? The soft landing engineered by Alan Greenspan and the Fed in 1994 may give us some clues. Job growth was dismal that year. The economy lost jobs every month of 1994, averaging -321,000 jobs per month.

But strangely, retail sales were phenomenal—posting significant gains every month and averaging year-over-year growth of 8.2% overall. In other words, it was an incredibly mixed bag. We do not believe the trends would be so contradictory in the months ahead, but our soft-landing scenario sees the next six months as having near flat retail sales and job growth—with both metrics likely to remain in positive, but extremely tepid, territory. But we are not out of the woods.

One potentially troubling development has come from the latest inflation numbers for December 2023 which indicate a 3.4% increase in the Consumer Price Index (CPI). While these numbers have vastly improved since the peak inflation rate of 9.1% recorded in June 2022, December’s reading indicates an uptick from the 3.1% rate that had been posted in November 2023. Whether December’s numbers were just a holiday shopping season blip, or the resumption of an upward trajectory in inflation remains to be seen—but this development is one of critical importance.

Following November’s inflation numbers, Fed policymakers said that that current interest rates were likely at their peak level and that if their current forecasts held up, the central bank would be in the position to cut interest rates at least twice in 2024 by later in the year. The Fed has not commented on whether December’s modest uptick in inflation has changed that plan. We think it is likely that policymakers will wait to see January’s inflation data before changing course. But further upticks in inflation would clearly mean the Fed would feel compelled to resume raising interest rates further, which would cast a further pall over the economy. All of this means that the next few months of inflation, employment and retail sales report will have outsized importance in determining what happens next.

As for the Sacramento region’s retail market, we anticipate that vacancy levels will stay at, or near, current levels. Continued occupancy growth will be challenged by potential bankruptcies as well as deliveries of new speculative space. But just as retail was among the most active of commercial real estate property types throughout 2023, we expect this to continue in 2024. This includes retail investment, though all property types continue to struggle in the aftermath of Federal reserve rate hikes with a significant gap between bid/ask and the unwillingness of sellers to offload premier properties considering improved leasing fundamentals and downward pressure on pricing that have come about because of significantly increased lending costs. Either way, look for improvement on the investment front by the second half of 2024— particularly if the Federal Reserve can begin cutting interest rates.

Even if this is not the case, so long as events do not necessitate the Fed raising rates again, there should be increased investment momentum as greater economic clarity emerges and erodes some of the bid/ask gulf that remains.

Q4 23

retail market report Criteria based on: Retail in a Shopping Center. Includes Existing, Under Construction, Proposed, Final Planning Net Absorption

Submarket

Inventory

Existing Vacant SF

Arden/Howe/Watt

7,109,398

1,049,008

Strip Centers

1,081,092 3,862,023 513,356 1,652,927

103,677 240,943 167,707 536,681

3,115,619 413,235 1,630,083 886,142 186,159 -

Vacancy Direct (%)

SF Delivered

SF Under Construction

Avg. Asking Rate PSF

Avg Asking Rent PSF One Year Ago

Average Asking Rent % Change Annually

Total Quarterly

Last Four Quarters

14.8%

(1,004)

(25,029)

-

31,056

$2.00

$1.95

2.6%

9.6% 6.2% 32.7% 32.5%

2,098 (261) (2,841)

(29,991) 24,186 (20,238) 1,014

-

31,056 -

$1.90 $2.10 $2.10 -

$1.85 $2.05 $2.08 -

2.7% 2.4% 1.0% -

153,535

4.9%

(9,663)

(10,385)

-

-

$1.90

$1.88

1.1%

27,378 112,136 14,021 -

6.6% 6.9% 1.6% -

(410) (5,076) (4,177) -

6,839 (18,543) 1,319 -

-

-

$1.75 $1.90 $2.30 -

$1.70 $1.85 $2.25 -

2.9% 2.7% 2.2% -

7,720,617

982,813

12.7%

(51,553)

(239,723)

-

5,000

$1.90

$1.85

2.7%

1,403,673 4,820,231 337,725 1,158,988

114,160 409,216 38,813 420,624

8.1% 8.5% 11.5% 36.3%

2,136 (56,868) 3,179 -

39,229 3,116 3,187 (285,255)

-

5,000 -

$1.75 $1.90 $2.05 -

$1.70 $1.85 $2.00 -

2.9% 2.7% 2.5% -

Davis/Woodland

3,354,060

398,444

11.9%

(50,584)

(210,824)

-

3,800

$2.25

$2.20

2.3%

Strip Centers

204,515 2,237,222 489,615 422,708

11,097 177,838 7,687 201,822

5.4% 7.9% 1.6% 47.7%

(996) (35,001) (487) (14,100)

19,998 (40,407) 5,953 (196,368)

-

3,800 -

$2.10 $2.10 $2.50 -

$2.10 $2.10 $2.40 -

0.0% 0.0% 4.2% -

1,591,236

116,417

7.3%

11,944

20,558

-

-

$2.55

$2.50

2.0%

426,700 604,049 560,487 -

11,360 68,977 36,080 -

2.7% 11.4% 6.4% -

5,831 6,113 -

3,466 2,052 15,040 -

-

-

$2.65 $3.00 -

$2.60 $2.95 -

1.9% 1.7% -

El Dorado Hills

2,644,655

37,544

1.4%

(2,575)

9,577

-

44,500

$2.10

$2.05

2.4%

Strip Centers

366,669 1,564,058 551,115 -

38,072 81,986 7,760 -

10.4% 5.2% 1.4% -

28,108 14,540 (720) -

25,772 (20,118) 8,584 -

-

5,000 -

$2.00 $2.30 $2.85 -

$2.00 $2.25 $2.80 -

0.0% 2.2% 1.8% -

4,497,955

117,384

2.6%

785

(15,212)

-

144,500

$2.30

$2.23

3.1%

411,815 2,644,655 1,185,144 256,341 -

32,675 37,544 45,465 1,700 -

7.9% 1.4% 3.8% 0.7% -

600 (2,575) 4,460 (1,700) -

6,411 9,577 (40,700) 9,500 -

-

44,500 100,000 -

$2.00 $2.50 $2.55 -

$2.00 $2.45 $2.50 -

0.0% 2.0% 2.0% -

4,477,680

180,157

4.0%

1,215

47,542

-

-

$2.05

$2.00

2.5%

405,120 3,223,239 849,321 -

18,688 110,133 51,336 -

4.6% 3.4% 6.0% -

(1,306) 2,521 -

16,721 9,164 21,657 -

-

-

$2.00 $2.20 $3.30 -

$1.95 $2.10 $3.20 -

2.6% 4.8% 3.1% -

Highway 50

3,466,729

391,509

11.3%

20,498

106,767

12,100

-

$1.85

$1.79

3.4%

Strip Centers

645,689 2,821,040 -

68,693 322,816 -

10.6% 11.4% -

(3,258) 23,756 -

(1,017) 107,784 -

12,100 -

-

$1.70 $1.90 -

$1.65 $1.85 -

3.0% 2.7% -

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Auburn/Lincoln/Loomis Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Carmichael/Citrus Heights/ Orangevale Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Downtown/Midtown/East Sacramento Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Elk Grove Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Folsom Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Q4 23

retail market report Criteria based on: Retail in a Shopping Center. Includes Existing, Under Construction, Proposed, Final Planning Net Absorption

Submarket

Inventory

Existing Vacant SF

Natomas

3,074,776

96,502

Regional/Super Regional Malls

213,026 1,421,599 1,440,151 -

6,461 33,687 56,354 -

Rio Linda/North Highlands

2,865,597 730,822 2,134,775 -

Roseville/Rocklin Strip Centers

Vacancy Direct (%)

SF Delivered

SF Under Construction

Avg. Asking Rate PSF

Avg Asking Rent PSF One Year Ago

Average Asking Rent % Change Annually

Total Quarterly

Last Four Quarters

3.1%

(2,378)

23,707

3,000

-

$2.00

$1.95

2.6%

3.0% 2.4% 3.9% -

729 1,689 (4,796) -

2,775 33,688 (12,756) -

3,000 -

-

$1.90 $2.05 -

$1.80 $2.00 -

5.6% 2.5% -

147,647

5.2%

65,186

28,345

-

-

$1.60

$1.55

3.2%

52,345 95,302 -

7.2% 4.5% -

5,525 59,661 -

4,396 23,949 -

-

-

$1.55 $1.60 -

$1.50 $1.55 -

3.3% 3.2% -

11,628,473

535,281

4.6%

46,699

83,242

-

13,300

$2.10

$2.05

2.4%

1,104,307 5,112,576 3,550,292 461,431 1,399,867

89,472 346,286 81,541 17,982 -

8.1% 6.8% 2.3% 3.9% -

6,226 40,730 (57) (200) -

1,152 32,267 24,769 11,200 13,854

-

6,800 6,500 -

$1.88 $2.10 $2.30 $2.75 -

$1.80 $2.05 $2.20 $2.70 -

4.4% 2.4% 4.5% 1.9% -

8,545,741

817,712

9.6%

7,397

116,560

12,000

79,473

$2.05

$2.05

-

1,256,366 5,453,082 1,714,292 122,001 -

35,585 453,246 271,319 57,562 -

2.8% 8.3% 15.8% 47.2% -

14,785 (11,715) 4,327 -

19,079 82,792 21,239 (15,739) -

12,000 -

59,224 20,249 -

$1.75 $2.05 $2.35 $2.50 -

$1.75 $2.00 $2.30 $2.50 -

2.5% 2.2% -

West Sacramento

2,072,114

104,111

5.0%

11,151

21,290

-

-

$1.75

$1.70

2.9%

Strip Centers

108,826 874,944 1,088,344 -

4,965 88,627 10,519 -

4.6% 10.1% 1.0% -

11,151 -

6,724 16,685 (2,119) -

-

-

$1.70 $1.95 $2.30 -

$1.65 $1.90 $2.25 -

3.0% 2.6% 2.2% -

66,001,837

5,218,338

7.9%

91,621

(48,113)

27,100

282,129

$2.05

$2.00

2.5%

Strip Centers

8,771,855

614,628

7.0%

60,068

121,554

15,000

10,600

$1.90

$1.85

2.7%

Community/ Neighborhood Centers

38,403,576

2,578,737

6.7%

48,665

266,192

12,100

151,280

$2.00

$1.95

2.6%

Power Centers

11,205,061

693,426

6.2%

2,449

(19,346)

-

20,249

$2.05

$2.00

2.5%

Lifestyle/Outlet Centers

2,986,855

172,420

5.8%

(2,620)

50,242

-

100,000

$2.90

$2.85

1.8%

Regional/Super Regional Malls

4,634,490

1,159,127

25.0%

(16,941)

(466,755)

-

-

-

-

-

Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers

Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

South Sacramento Strip Centers Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Community/Neighborhood Centers Power Centers Lifestyle/Outlet Centers Regional/Super Regional Malls

Totals

about gallelli real estate

Gallelli Real Estate is a private firm that specializes in commercial real estate services and property management. We believe that as a boutique firm whose understanding of the business runs as deep as our core values, our advantage is large. We take pride in our unique approach to offer more individual solutions that address the ever changing needs of our clients and the industry. After all, our success is measured by the success of our clients and the strength and longevity of our relationships.

For the latest news from Gallelli Real Estate, visit GallelliRE.com, or follow us on LinkedIn.

Gary Gallelli President 916 784 2700 gary@GallelliRE.com

Gallelli Real Estate 3005 Douglas Blvd #200 Roseville, CA 95661 P 916 784 2700

GALLELLI BROKER TEAMS INVESTMENT Gary Gallelli

Pat Ronan

Aman Bains

Adam Rainey

Kevin Soares

Bob Berndt

Jeff Hagan

Phillip Kyle

Matt Goldstein

Kurt Conley

Robb Osborne

Brandon Sessions

CEO - Partner gary@gallellire.com

Vice President pat@gallellire.com

Associate Vice President abains@gallellire.com

Associate Vice President arainey@gallellire.com

RETAIL Executive Vice President | Partner ksoares@gallellire.com

Vice President mgoldstein@gallellire.com

Executive Vice President | Partner bberndt@gallellire.com

Senior Vice President | Partner jhagan@gallellire.com

Senior Associate kconley@gallellire.com

OFFICE Executive Vice President rosborne@gallellire.com

Senior Vice President bsessions@gallellire.com

CAPITAL MARKETS RESEARCH Kristopher Krise Capital Markets Advisor kkrise@gallellire.com

Gallelli Real Estate 3005 Douglas Blvd #200 Roseville, CA 95661 P 916 784 2700 GallelliRE.com

Garrick Brown VP, Real Estate Intelligence & Business Development

gbrown@gallellire.com

Kannon Kuhn

Associate kkuhn@gallellire.com

Senior Vice President pkyle@gallellire.com