Retail Viewpoint

SUMMER 2009

B O S T O N

www.colliersmg.comwww.colliersmg.com

For further information, please contact:

Jonathan Z. Martin, Assistant Vice President - Retail Services Phone: 617.330.8023 E-mail: jon.martin@colliersmg.comMary Sullivan Kelly, Chief Research Officer Phone: 617.330.8059 E-mail: mary.kelly@colliersmg.com

To be placed on our mailing list, please visit www.cmgretail.com

TENANT ADVISORY SERVICES LANDLORD REPRESENTATION RETAIL SERVICES

INVESTMENT SALES CAPITAL MARK ETS COUNSELING & VALUATION

DEVELOPMENT & ADVISORY SERVICES PROPERTY & ASSET MANAGEMENT SERVICES

294 OFFICES IN 61 COUNTRIES ON 6 CONTINENTS

USA 94

Canada 22

Latin America 17

Asia Pacifi c 64

EMEA 97

1.6 Billion in Global Revenue

1.1 Billion SF Under Management

12,749 Employees

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RETAIL REAL ESTATE FACES HUGE CHALLENGES

Retailers and landlords alike are facing the most challenging retail landscape of the past fi fty years. The apparent stabilization of the stock market and recent earnings from a number of key banks give hope that the worst of “The Great Recession” may be behind us. However, even if the most optimistic forecasts for economic growth by the end of the year come true, the fact remains that there is still more pain to come for the retail sector.

The Conference Board’s Consumer Confi dence Index surged in May to 54.8, up from 40.8 in April, and then retreated in June to 49.3%. This indicates a lingering sense of anxiety about recovery prospects, and that economic conditions are still fragile. Compared to the February reading of 25.3 -- the lowest since the Index was created in 1967 -- conditions are generally “less negative” as opposed to signaling growth.

BIG BOX SPACE AVAILABLE

With the recent demise of some of the country’s most prominent retailers, large blocks of retail space have hit the market. According to CoStar, Circuit City’s bankruptcy fi ling accounted for approximately 80% of the negative absorption recorded nationwide during the fi rst quarter 2009. Backfi lling the space will be especially diffi cult now with retailers faced with declining sales, layoffs and corporate cut-backs. Even where there is demand for space, retailers are looking to be more effi cient within the square footage leased. In two of greater Boston’s largest suburban retail markets, over 200,000 square feet of retail space has come available so far this year.

MARKET INDICATORS

Q2 2009 Q4 2009*

Vacancy

Net Absorption

Construction

Rental Rate

*Projected

SAME STORE SALES (1ST QUARTER 2009)

Wal-Mart 5.9%

BJ’s Wholesale Club 4.0%

Walgreens 1.0%

Auto Zone 7.4%

Staples, Inc. -8.0%

Lowes -6.6%

Sears -11.7%

Home Depot -8.0%

Pottery Barn -17.6%

Best Buy -6.2%

Macy’s -9.1%

SPACE AVAILABLE 2009

Framingham / Natick

Circuit City 33,000

Linens N Things 40,000

Offi ce Depot 25,000

Pier 1 Imports 17,000

Lazy Boy 22,000

Tweeter 7,000

Peabody / Danvers

Syms 43,000

Circuit City 33,000

Linens N Things 36,000

Comp USA 25,000

Tweeter 7,000

RETAIL SALES

LARGE CENTER OPENINGS (2000 - 2009)

33

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SUM

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ACQUISITIONS & DISPOSITIONS

After months of anticipation, the US Bankruptcy Court approved the sale of Filenes Basement for $62.4 million in mid-June. The ownership entity is a joint venture between Syms Corp. and Vornado Realty Ventures and includes 22 of 26 existing locations – eight in the Boston area: Braintree, Newton, Watertown, Saugus, Peabody, Framingham, Back Bay, Downtown Crossing – a distribution facility in Auburn and offi ce headquarters in Burlington, along with the Basement’s trademarked brand. No decision has been made on the fate of the fl agship Downtown Crossing location, although initial reports suggest all efforts will be made to bring the store back to the area. It does seem, however, that the Hyannis location will close.

Also in June, Golden Gate Capital, a San Francisco-based private equity investment fi rm acquired the J. Jill brand from Talbots for approximately $75 million. Talbots had acquired J. Jill in 2006 for $517 million. Under the agreement, 75 J. Jill stores are slated to close within two months, with the remaining 204 leased stores remaining open. The company will keep its headquarters in Quincy. In conjunction with the sale, Talbots also announced a 20% job cut – which will result in an annual savings of $21 million in savings.

Abercrombie & Fitch Co. announced that it will shutter its 29 Ruehl locations, including nearby stores in Natick and Burlington. The company reported a 33% drop in same store sales in May. The stores opened in 2007 to much hype, but sales plummeted during the economic downturn last fall. Abercrombie, as a whole, is also reviewing other aspects of the company’s performance amid dismal store sales and a 63% drop in its stock price.

HOSPITALITY

BOSTON

Boston Properties recently welcomed a new restaurant and apparel retailer to The Prudential Center’s impressive retail lineup. Wagamama, an Asian-fusion noodle concept, opened its third Boston-area location in February. With restaurants open in Faneuil Hall and Harvard Square, Wagamama took over the former Talbots Collections space next to Saks Fifth Avenue. Next door, Vineyard Vines took over the former Talbots Mens location.

Add another retailer to the list of Newbury Street closures in 2009. Pottery Barn decided not to renew their lease at 126 Newbury Street upon lease expiration in January 2010. New York-based landlord, Rudin Management, has already begun the process of fi nding a replacement tenant for the 13,000-square-foot, two-level space – one of the largest on Newbury Street. Other recent closings include Rockport, Waterworks, Kidder Smith, Tess & Carlos and Sugar Heaven.

In many ways, much of the turnover on the street can be attributed to a “perfect storm” for retailers. By mid-2008 consumers, who over the past decade had been increasingly relying on home equity loans to fund their lifestyles, signifi cantly cut back on expenditures. Landlords who expected ever-increasing consumer spending levels and aggressive rental rate growth are now fi nding neither sustainable. A pricing dichotomy also exists on Newbury St. between institutional owners who acquired their properties during the 2006 to early-2008 timeframe and individuals who have owned their properties (often unlevered) for decades. This is refl ected in the fl exibility landlords are providing to existing tenants looking for rent abatements as well as for new retailers to the street. Further contributing to the slowdown in leasing activity is the fact that the smaller boutique shops are unable to pay more than 15% of their total operating costs in base rent and remain profi table.

One bright spot along Newbury Street is the re-development and revitalization of the last block, between Hereford and Mass Ave. The transformation picked up steam in 2006 with the addition of Best Buy taking over the former Tower Records location and has quickly spawned into a shopping destination for the younger, trendier demographic. New retailers include American Apparel, Ed Hardy, Madewell and Bebe. Other apparel retailers such as Ben Sherman and Ted Baker are also opening up on Newbury Street this year. These additions could just be a sign of the times or a true revitalization of the street that could expand to the adjacent blocks as the economy improves.

There are still major questions about what kind of retail the city wants and needs in Downtown Crossing. Once “the place where Boston shopped,” the rise of big box retailers, the emergence of upscale shopping options at Copley Place and in the suburbs, and the reshuffl ing of some of Downtown Crossing’s key tenants all helped contribute to the area’s downturn. Yet in 2007, asking rents at One Franklin were approaching “Back Bay” levels of $200 per square foot – a level considered by some to be aggressive for an area in need of major transformation.

Source: http://www.starwoodhotels.com/whotels/property/overview

Source: http://www.marriott.com/hotels/travel

The 235-room W Hotel Boston is expected to open in September. This Theatre District location will be W’s fi rst New England location. The developer recently received federal stimulus money to complete the project’s retail portion, a lounge tentatively called Living Room.

The 113-room Ames Hotel is currently under renovation in Boston’s Financial District near City Hall. Developed by The Morgans Hotel Group, this historic Boston structure is celebrating its 120th year in existence and should open later this year.

The Renaissance Boston Hotel & Spa at Patriot Place opened in May, prior to the NCAA Division 1 Men’s Lacrosse Championships at Gillette Stadium. The 150-room upscale hotel will also help anchor the new Brigham and Women’s/ Mass General Health Care Center.

In April, Simon Property Group offi cially welcomed Nordstrom to the Northshore Mall in Peabody. In addition to the 138,000-square-foot two-level Nordstrom, retailers such as Zara, Sephora, White House Black Market and H&M occupy an additional 165,000 square feet, increasing the size of the complex to 1.7 million SF. Popular restaurants such as PF Changs, Cheesecake Factory and Chipotle have also recently opened at the mall. The pent-up demand for high-quality retail on the North shore is evident - being that Nordstrom Rack, Off Broadway, Fidelity, BMW, Acura, Audi and a slew of other retailers have expanded into the market over the past few years.

On the south side of Boston, Simon is ramping up construction of the state’s fourth Nordstrom store, at the South Shore Plaza in Braintree. Construction began last month for a scheduled opening in March 2010. Simon is also in discussions with Target to permit and construct a 150,000 -square-foot store at South Shore Plaza.

W/S Development has almost completed construction at the junction of Route 128 and Route 1 in Dedham. Legacy Place, when complete, will be a 675,000-square-foot life-style center – anchored by Whole Foods, L.L. Bean, Cinema de Luxe, Legal Sea Foods and Ruth’s Chris. The center is currently 95% leased and other tenants include: National Jean, City Sports, lululemon, Anthropologie, Qdoba, Ann Taylor Loft and Starbucks. The project was fi nanced by Sovereign Bank to the tune of $200 million – and is scheduled to open in the fall of this year.

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NEW DEVELOPMENTS THE RESTAURANT SCENE

Source: http://www.legacyplacededham.com

Source: http://www.boston.com/ae/restaurants/gallery

Source: http://www.camerogrilled.com

Despite rampant economic uncertainty, Boston’s entrepreneurial spirit seems to be heating up. Five Guys Burgers has opened its fourth Massachusetts location in Swampscott and has also signed a lease in Randolph. The franchise-driven burger joint has been well-received in Dedham, Foxborough and Marlborough and is still actively looking to open more locations in suburban Boston.

Pollo Campero, the world’s largest Latin-American chicken restaurant chain, opened its fi rst area location in Chelsea. The chain is actively pursuing additional locations in East Boston, Lynn and Providence. The Chelsea opening bought with it huge fanfare, long lines, and police tents to accommodate patrons.

Two local restaurant pioneers are opening new concepts in Boston this summer. Frank DePasquale, owner of several North End Italian eateries, recently re-opened Umbria Prime in the Financial District. DePasquale’s Homemade Pasta Shop and Gigi Gelateria will be opening at the former Martignetti liquor store at the corner of Cross and Hanover Streets along the Rose Kennedy Greenway. He also plans to open Splash later this summer, which will take over the former News restaurant on Kneeland Street in the Leather District.

Patrick Lyons of the Lyons Group recently opened the Lansdowne Pub at the former Jake Ivory’s Lounge in Boston’s Fenway district. Lyons also recently signed a lease at the Hynes Convention Center in partnership with Summer Shack’s Jasper White. The duo plan to open a two-level, 14,000-square-foot high-end seafood restaurant overlooking the Prudential Center Plaza tentatively named George’s Bank.

IN OTHER RESTAURANT NEWS:

• Rowe’s Wharf Sea Grille opened on the Waterfront, replacing Intrigue. The face-lift is one of many in Boston’s luxury hotel scene, and was probably necessary for one of the area’s highest end hotels to maintain its fi ve-star rating.

• In March, Stephanie Sokolove’s second area restaurant, Stephi’s on Tremont, took over the former Garden of Eden space at 571 Tremont Street in the South End. It is a much smaller version of its sister restaurant, Stephanie’s on Newbury, with 66 seats compared to Newbury’s 245 seats.

• After six years at the Hotel Commonwealth in Kenmore Square, Great Bay closed on May 30th. The high-end seafood eatery was local chef Michael Schlows’ fi rst area restaurant and had received several awards over the years.

• Aujourd’hui, another high-end hotel restaurant located in the Four Seasons Hotel, will also close this summer. More reasonably-priced dining options and increased competition from the Mandarin’s restaurants contributed to its lackluster performance as of late.

• The Federal, a “make-your-own sandwich and pizza shop” took over the former Venice Cafe on Cambridge Street across from Massachusetts General Hospital.

• Pazzo, the newest venture of Chef Bill Bradley, took over the former Croma Restaurant on Newbury Street.

• In May, Upper Crust Pizzeria opened its 14th Boston-area location at 1330 Boylston Street, near Fenway Park.

SIGNIFICANT TRANSACTIONS - 2009

Lease Activity

Tenant Type Address Size (SF)

Market Basket Supermarket Chelsea 135,000

Market Basket Supermarket Gloucester 55,000

Nordstrom Rack Apparel Natick 40,000

ALDI Supermarket Raynham 18,000

STIMULUS

The Patrick administration announced that it will allocate hundreds of millions of the federal stimulus money to help get some of the area’s stalled development projects off the ground. The state received almost $800 million as part of the stimulus package. The money will not go to the developers but to the public works projects that will make the fi nancing of these projects much easier.

Westwood Station is planning signifi cant improvements to the access ramps and roadways around its $1.5 billion project. The improvements are critical for two of the projects would-be anchor tenants, Wegman’s and Target. With all the planned residential, offi ce and Amtrak development on the site, it is extremely important for these retailers, who will create signifi cant tax revenues for the town of Westwood, to have effi cient traffi c fl ow through the project.

One of the country’s largest and most successful REITs, Federal Realty Investment Trust, is planning a 3 million square foot, $1.4 billion mixed-use development at Assembly Square in Somerville. The project will be anchored by the Boston area’s second IKEA furniture store, 2,100 apartments and a new upscale movie theater, along with many other amenities. While the project is not scheduled to come online until 2012, road, infrastructure and public transportation improvements are critical steps that need to be taken now in order to reach that goal. The MBTA’s planned Assembly Square T stop has been the focus of much controversy over the past few years but hopefully the federal stimulus dollars will help get the much-needed transportation node back on track. The project is slated to receive a total of $65 million in funds with $50 million coming from the state’s I-Cubed program, (Infrastructure Investment Initiative), where developers receive funds to pay for road and infrastructure improvements to the site and repay the debt through the tax revenues generated once the project is operational. The balance will come from the federal stimulus program, or American Recovery and Reinvestment Act.

In April, Simon Property Group offi cially welcomed Nordstrom to the Northshore Mall in Peabody. In addition to the 138,000-square-foot two-level Nordstrom, retailers such as Zara, Sephora, White House Black Market and H&M occupy an additional 165,000 square feet, increasing the size of the complex to 1.7 million SF. Popular restaurants such as PF Changs, Cheesecake Factory and Chipotle have also recently opened at the mall. The pent-up demand for high-quality retail on the North shore is evident - being that Nordstrom Rack, Off Broadway, Fidelity, BMW, Acura, Audi and a slew of other retailers have expanded into the market over the past few years.

On the south side of Boston, Simon is ramping up construction of the state’s fourth Nordstrom store, at the South Shore Plaza in Braintree. Construction began last month for a scheduled opening in March 2010. Simon is also in discussions with Target to permit and construct a 150,000 -square-foot store at South Shore Plaza.

W/S Development has almost completed construction at the junction of Route 128 and Route 1 in Dedham. Legacy Place, when complete, will be a 675,000-square-foot life-style center – anchored by Whole Foods, L.L. Bean, Cinema de Luxe, Legal Sea Foods and Ruth’s Chris. The center is currently 95% leased and other tenants include: National Jean, City Sports, lululemon, Anthropologie, Qdoba, Ann Taylor Loft and Starbucks. The project was fi nanced by Sovereign Bank to the tune of $200 million – and is scheduled to open in the fall of this year.

44

Retail Viewpoint

SUM

MER

200

9

3 4

NEW DEVELOPMENTS THE RESTAURANT SCENE

Source: http://www.legacyplacededham.com

Source: http://www.boston.com/ae/restaurants/gallery

Source: http://www.camerogrilled.com

Despite rampant economic uncertainty, Boston’s entrepreneurial spirit seems to be heating up. Five Guys Burgers has opened its fourth Massachusetts location in Swampscott and has also signed a lease in Randolph. The franchise-driven burger joint has been well-received in Dedham, Foxborough and Marlborough and is still actively looking to open more locations in suburban Boston.

Pollo Campero, the world’s largest Latin-American chicken restaurant chain, opened its fi rst area location in Chelsea. The chain is actively pursuing additional locations in East Boston, Lynn and Providence. The Chelsea opening bought with it huge fanfare, long lines, and police tents to accommodate patrons.

Two local restaurant pioneers are opening new concepts in Boston this summer. Frank DePasquale, owner of several North End Italian eateries, recently re-opened Umbria Prime in the Financial District. DePasquale’s Homemade Pasta Shop and Gigi Gelateria will be opening at the former Martignetti liquor store at the corner of Cross and Hanover Streets along the Rose Kennedy Greenway. He also plans to open Splash later this summer, which will take over the former News restaurant on Kneeland Street in the Leather District.

Patrick Lyons of the Lyons Group recently opened the Lansdowne Pub at the former Jake Ivory’s Lounge in Boston’s Fenway district. Lyons also recently signed a lease at the Hynes Convention Center in partnership with Summer Shack’s Jasper White. The duo plan to open a two-level, 14,000-square-foot high-end seafood restaurant overlooking the Prudential Center Plaza tentatively named George’s Bank.

IN OTHER RESTAURANT NEWS:

• Rowe’s Wharf Sea Grille opened on the Waterfront, replacing Intrigue. The face-lift is one of many in Boston’s luxury hotel scene, and was probably necessary for one of the area’s highest end hotels to maintain its fi ve-star rating.

• In March, Stephanie Sokolove’s second area restaurant, Stephi’s on Tremont, took over the former Garden of Eden space at 571 Tremont Street in the South End. It is a much smaller version of its sister restaurant, Stephanie’s on Newbury, with 66 seats compared to Newbury’s 245 seats.

• After six years at the Hotel Commonwealth in Kenmore Square, Great Bay closed on May 30th. The high-end seafood eatery was local chef Michael Schlows’ fi rst area restaurant and had received several awards over the years.

• Aujourd’hui, another high-end hotel restaurant located in the Four Seasons Hotel, will also close this summer. More reasonably-priced dining options and increased competition from the Mandarin’s restaurants contributed to its lackluster performance as of late.

• The Federal, a “make-your-own sandwich and pizza shop” took over the former Venice Cafe on Cambridge Street across from Massachusetts General Hospital.

• Pazzo, the newest venture of Chef Bill Bradley, took over the former Croma Restaurant on Newbury Street.

• In May, Upper Crust Pizzeria opened its 14th Boston-area location at 1330 Boylston Street, near Fenway Park.

SIGNIFICANT TRANSACTIONS - 2009

Lease Activity

Tenant Type Address Size (SF)

Market Basket Supermarket Chelsea 135,000

Market Basket Supermarket Gloucester 55,000

Nordstrom Rack Apparel Natick 40,000

ALDI Supermarket Raynham 18,000

STIMULUS

The Patrick administration announced that it will allocate hundreds of millions of the federal stimulus money to help get some of the area’s stalled development projects off the ground. The state received almost $800 million as part of the stimulus package. The money will not go to the developers but to the public works projects that will make the fi nancing of these projects much easier.

Westwood Station is planning signifi cant improvements to the access ramps and roadways around its $1.5 billion project. The improvements are critical for two of the projects would-be anchor tenants, Wegman’s and Target. With all the planned residential, offi ce and Amtrak development on the site, it is extremely important for these retailers, who will create signifi cant tax revenues for the town of Westwood, to have effi cient traffi c fl ow through the project.

One of the country’s largest and most successful REITs, Federal Realty Investment Trust, is planning a 3 million square foot, $1.4 billion mixed-use development at Assembly Square in Somerville. The project will be anchored by the Boston area’s second IKEA furniture store, 2,100 apartments and a new upscale movie theater, along with many other amenities. While the project is not scheduled to come online until 2012, road, infrastructure and public transportation improvements are critical steps that need to be taken now in order to reach that goal. The MBTA’s planned Assembly Square T stop has been the focus of much controversy over the past few years but hopefully the federal stimulus dollars will help get the much-needed transportation node back on track. The project is slated to receive a total of $65 million in funds with $50 million coming from the state’s I-Cubed program, (Infrastructure Investment Initiative), where developers receive funds to pay for road and infrastructure improvements to the site and repay the debt through the tax revenues generated once the project is operational. The balance will come from the federal stimulus program, or American Recovery and Reinvestment Act.

33

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ER 2

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ACQUISITIONS & DISPOSITIONS

After months of anticipation, the US Bankruptcy Court approved the sale of Filenes Basement for $62.4 million in mid-June. The ownership entity is a joint venture between Syms Corp. and Vornado Realty Ventures and includes 22 of 26 existing locations – eight in the Boston area: Braintree, Newton, Watertown, Saugus, Peabody, Framingham, Back Bay, Downtown Crossing – a distribution facility in Auburn and offi ce headquarters in Burlington, along with the Basement’s trademarked brand. No decision has been made on the fate of the fl agship Downtown Crossing location, although initial reports suggest all efforts will be made to bring the store back to the area. It does seem, however, that the Hyannis location will close.

Also in June, Golden Gate Capital, a San Francisco-based private equity investment fi rm acquired the J. Jill brand from Talbots for approximately $75 million. Talbots had acquired J. Jill in 2006 for $517 million. Under the agreement, 75 J. Jill stores are slated to close within two months, with the remaining 204 leased stores remaining open. The company will keep its headquarters in Quincy. In conjunction with the sale, Talbots also announced a 20% job cut – which will result in an annual savings of $21 million in savings.

Abercrombie & Fitch Co. announced that it will shutter its 29 Ruehl locations, including nearby stores in Natick and Burlington. The company reported a 33% drop in same store sales in May. The stores opened in 2007 to much hype, but sales plummeted during the economic downturn last fall. Abercrombie, as a whole, is also reviewing other aspects of the company’s performance amid dismal store sales and a 63% drop in its stock price.

HOSPITALITY

BOSTON

Boston Properties recently welcomed a new restaurant and apparel retailer to The Prudential Center’s impressive retail lineup. Wagamama, an Asian-fusion noodle concept, opened its third Boston-area location in February. With restaurants open in Faneuil Hall and Harvard Square, Wagamama took over the former Talbots Collections space next to Saks Fifth Avenue. Next door, Vineyard Vines took over the former Talbots Mens location.

Add another retailer to the list of Newbury Street closures in 2009. Pottery Barn decided not to renew their lease at 126 Newbury Street upon lease expiration in January 2010. New York-based landlord, Rudin Management, has already begun the process of fi nding a replacement tenant for the 13,000-square-foot, two-level space – one of the largest on Newbury Street. Other recent closings include Rockport, Waterworks, Kidder Smith, Tess & Carlos and Sugar Heaven.

In many ways, much of the turnover on the street can be attributed to a “perfect storm” for retailers. By mid-2008 consumers, who over the past decade had been increasingly relying on home equity loans to fund their lifestyles, signifi cantly cut back on expenditures. Landlords who expected ever-increasing consumer spending levels and aggressive rental rate growth are now fi nding neither sustainable. A pricing dichotomy also exists on Newbury St. between institutional owners who acquired their properties during the 2006 to early-2008 timeframe and individuals who have owned their properties (often unlevered) for decades. This is refl ected in the fl exibility landlords are providing to existing tenants looking for rent abatements as well as for new retailers to the street. Further contributing to the slowdown in leasing activity is the fact that the smaller boutique shops are unable to pay more than 15% of their total operating costs in base rent and remain profi table.

One bright spot along Newbury Street is the re-development and revitalization of the last block, between Hereford and Mass Ave. The transformation picked up steam in 2006 with the addition of Best Buy taking over the former Tower Records location and has quickly spawned into a shopping destination for the younger, trendier demographic. New retailers include American Apparel, Ed Hardy, Madewell and Bebe. Other apparel retailers such as Ben Sherman and Ted Baker are also opening up on Newbury Street this year. These additions could just be a sign of the times or a true revitalization of the street that could expand to the adjacent blocks as the economy improves.

There are still major questions about what kind of retail the city wants and needs in Downtown Crossing. Once “the place where Boston shopped,” the rise of big box retailers, the emergence of upscale shopping options at Copley Place and in the suburbs, and the reshuffl ing of some of Downtown Crossing’s key tenants all helped contribute to the area’s downturn. Yet in 2007, asking rents at One Franklin were approaching “Back Bay” levels of $200 per square foot – a level considered by some to be aggressive for an area in need of major transformation.

Source: http://www.starwoodhotels.com/whotels/property/overview

Source: http://www.marriott.com/hotels/travel

The 235-room W Hotel Boston is expected to open in September. This Theatre District location will be W’s fi rst New England location. The developer recently received federal stimulus money to complete the project’s retail portion, a lounge tentatively called Living Room.

The 113-room Ames Hotel is currently under renovation in Boston’s Financial District near City Hall. Developed by The Morgans Hotel Group, this historic Boston structure is celebrating its 120th year in existence and should open later this year.

The Renaissance Boston Hotel & Spa at Patriot Place opened in May, prior to the NCAA Division 1 Men’s Lacrosse Championships at Gillette Stadium. The 150-room upscale hotel will also help anchor the new Brigham and Women’s/ Mass General Health Care Center.

22

Retail Viewpoint

SUM

MER

200

9

1 6

RETAIL REAL ESTATE FACES HUGE CHALLENGES

Retailers and landlords alike are facing the most challenging retail landscape of the past fi fty years. The apparent stabilization of the stock market and recent earnings from a number of key banks give hope that the worst of “The Great Recession” may be behind us. However, even if the most optimistic forecasts for economic growth by the end of the year come true, the fact remains that there is still more pain to come for the retail sector.

The Conference Board’s Consumer Confi dence Index surged in May to 54.8, up from 40.8 in April, and then retreated in June to 49.3%. This indicates a lingering sense of anxiety about recovery prospects, and that economic conditions are still fragile. Compared to the February reading of 25.3 -- the lowest since the Index was created in 1967 -- conditions are generally “less negative” as opposed to signaling growth.

BIG BOX SPACE AVAILABLE

With the recent demise of some of the country’s most prominent retailers, large blocks of retail space have hit the market. According to CoStar, Circuit City’s bankruptcy fi ling accounted for approximately 80% of the negative absorption recorded nationwide during the fi rst quarter 2009. Backfi lling the space will be especially diffi cult now with retailers faced with declining sales, layoffs and corporate cut-backs. Even where there is demand for space, retailers are looking to be more effi cient within the square footage leased. In two of greater Boston’s largest suburban retail markets, over 200,000 square feet of retail space has come available so far this year.

MARKET INDICATORS

Q2 2009 Q4 2009*

Vacancy

Net Absorption

Construction

Rental Rate

*Projected

SAME STORE SALES (1ST QUARTER 2009)

Wal-Mart 5.9%

BJ’s Wholesale Club 4.0%

Walgreens 1.0%

Auto Zone 7.4%

Staples, Inc. -8.0%

Lowes -6.6%

Sears -11.7%

Home Depot -8.0%

Pottery Barn -17.6%

Best Buy -6.2%

Macy’s -9.1%

SPACE AVAILABLE 2009

Framingham / Natick

Circuit City 33,000

Linens N Things 40,000

Offi ce Depot 25,000

Pier 1 Imports 17,000

Lazy Boy 22,000

Tweeter 7,000

Peabody / Danvers

Syms 43,000

Circuit City 33,000

Linens N Things 36,000

Comp USA 25,000

Tweeter 7,000

RETAIL SALES

LARGE CENTER OPENINGS (2000 - 2009)

Retail Viewpoint

SUMMER 2009

B O S T O N

www.colliersmg.comwww.colliersmg.com

For further information, please contact:

Jonathan Z. Martin, Assistant Vice President - Retail Services Phone: 617.330.8023 E-mail: jon.martin@colliersmg.comMary Sullivan Kelly, Chief Research Officer Phone: 617.330.8059 E-mail: mary.kelly@colliersmg.com

To be placed on our mailing list, please visit www.cmgretail.com

TENANT ADVISORY SERVICES LANDLORD REPRESENTATION RETAIL SERVICES

INVESTMENT SALES CAPITAL MARK ETS COUNSELING & VALUATION

DEVELOPMENT & ADVISORY SERVICES PROPERTY & ASSET MANAGEMENT SERVICES

294 OFFICES IN 61 COUNTRIES ON 6 CONTINENTS

USA 94

Canada 22

Latin America 17

Asia Pacifi c 64

EMEA 97

1.6 Billion in Global Revenue

1.1 Billion SF Under Management

12,749 Employees