2024 Retail Fit Out Cost Guide

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UNITED STATES RETAIL

FITOUT COST GUIDE 2024

INTRODUCTION

Cushman & Wakefield’s Project & Development Services (PDS) team developed this Retail Fit Out Cost Guide to provide guidance on current construction costs across major U.S. regions and markets. This retail cost guide features a modern-day retail space fit out, which includes a customer area, back-of-house area and two ADA restrooms. We assumed an 1,800 square foot (sf), in-line project space located within a single-story, multi-tenant strip center, and in a market’s Central Business District (CBD). Additional assumptions include: > The existing floor infrastructure is currently set up to have the electricity separately metered. > The building is a steel-framed, metal composite deck structure with a glass curtain wall system, with 12-foot finish floor deck heights. > All demising walls are installed for this project with the appropriate fire rating. Please note that no furniture, fixtures and equipment (FF&E) are applicable to this cost exercise. Technology costs are also excluded.

Fit out costs for this guide were gathered through a non-competitive bid process of 14 general contractors (GCs) in the fall of 2023. Some GCs submitted bids for several markets within their region of coverage, and others submitted bids for individual markets. We have designated the regions and markets as accurately as possible below. Regions covered in the guide include: > Appalachia (Tenn., Ky., W. Va.) > Chicago MSA > Mid-Atlantic (Washington, D.C., Va., N.C., S.C., Del., Eastern Pa., N.J., Md.) > Midwest (Wis., Mich., Ind., Ohio, Western Pa., Western N.Y.) > Mountain (Idaho, Wyo., Colo., Mont., Utah) > New England 1 (Boston, Connecticut, Mass., Vt., N.H., Maine, R.I.) > New York City MSA > Northern California (San Francisco MSA, Silicon Valley) > Pacific Northwest (Portland, Seattle) > Southeast (West Fla., Ark., La., Miss., Ala., Ga.) > Southern California (Los Angeles, Santa Barbara, Orange County, San Diego) > Southwest (Ariz., Nev., N.M., Okla.) > Texas (Dallas, Houston) > Upper Midwest (N.D., S.D., Minn., Iowa, Ill., Mo., Neb., Kan.)

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1 New England includes one GC estimate for Boston and a GC estimate for the greater New England region.

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UNITED STATES RETAIL RETAIL FIT OUT COST GUIDE 2024

EXECUTIVE SUMMARY

Cushman & Wakefield’s Retail Fit Out Cost Guide provides cost estimates for an in-line store fit out for 14 different major markets in the U.S. We also examine current construction trends that impact costs and retail market fundamentals.

> Construction costs continue to level out, but uncertainty remains . High interest rates have placed additional pressure on costs; however, expectations that the Fed is finished raising rates may bring some clarity. In the near-term, expect rates to remain high and continue to impact construction project plans. > Pandemic-fueled commodity price increases have abated, but strong demand continues to apply pricing pressure on select commodities. > Labor constraints apply upward pressure on costs, as companies continue to increase wages and benefit packages to attract construction talent. > Project timelines continue to be impacted by extended equipment lead times and labor constraints.

> Robust retail growth—driven in part by strong consumer spending—has resulted in positive absorption since 2021 and decreasing vacancy rates in most U.S. markets. > Inventory is increasingly constrained, as the construction pipeline remains subdued . > Retail developers have been hindered by rising costs, making it difficult to meet the increasing demand for retail space . Some of this demand will be offset by freed-up space following several recent bankruptcies of large retailers. > In-line store fit out costs average $147 per square foot (psf) nationally. Fit outs are costliest in Northern California, averaging $216 psf, and most cost-effective in the Midwest, averaging $106 psf.

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RETAIL FIT OUT COST GUIDE 2024

STATE OF THE CONSTRUCTION MARKET

SUPPLY CHAIN STRESS INDEX (2019-2023)

The construction sector faced several headwinds in 2023, including a high-interest, inflationary environment, labor shortages, and persistently extended equipment lead times. Supply chain constraints, which were prevalent early in the pandemic, have eased globally. While supply chain stress levels in the U.S. have fallen significantly from pandemic highs (-23%), they are still 22% higher than pre-pandemic levels. Current stress levels are driven in large part by labor constraints along the supply chain. Despite these challenges, construction cost increases have decelerated from pandemic highs and are currently more in line with their 10-year averages. Based on the Engineering News Record (ENR) index, construction costs, which include a common labor component, increased 2.7% year-over-year (YOY) as of December 2023 2 . This increase is significantly lower than the peak increase of 8.9% on April 2022 and below the 10-year average annual increase of 3.4%. Building cost increases, which include skilled labor, were up 3.8% YOY, less than both the 16% peak increase in April 2022 and its 4.4% 10-year annual average. The labor components of the ENR index reflect some easing in cost increases. Common labor costs are up 1.8% YOY, slightly lower than the 10-year annual average increase of 2.1%. Attracting and retaining skilled labor is more difficult, and this is reflected in the 3.3% YOY increase, which is well above the 10-year annual average of 2.3%.

United States China Latin America Global (RHS)

-1 0 1 2 3 4 5

80 90 100 110 120 130 140 150 160

Global Supply Chain Stress Index

-3 -2

Supply Chain Stress Index

2019 2020 2021

2022 2023

Source: Federal Reserve Bank of New York

BUILDING COST MONTHLY YOY CHANGES

Construction Building Common Labor Skilled Labor

10% 12% 14% 16% 18%

0% 2% 4% 6% 8%

Jul-21

Jul-22

Jul-23

Jan-21

Jul-20

Oct-21

Apr-21

Jan-22

Jan-23

Oct-22

Oct-23

Apr-22

Jan-20

Apr-23

Oct-20

Apr-20

Source: Engineering News Record (ENR) (McGraw-Hill)

2 https://www.enr.com/economics/quarterly_cost_reports

Cushman & Wakefield’s fall 2023 Construction Contractor Sentiment Survey of 14 GCs reflects some stabilization in costs. More than 50% of GCs felt that both their costs and supplier costs remained the same in the last six months. Half of GCs also felt that supplier costs increased slightly (46%) to significantly (4%), while 7% felt that their costs had decreased slightly in the last six months. Looking forward six months, 85% of GCs expect supplier costs to increase slightly (81%) to significantly (4%), but they do not expect to pass on those costs to customers. A third of GCs expect their costs to decrease slightly over the next six months.

Nonresidential building starts are down from 2022 but significantly higher than the historical average, according to the Dodge Construction Network Index. On a month-over-month (MOM) basis, nonresidential building starts were down 15% in November 2023. On a year-to-date (YTD) basis, nonresidential starts were down 5.6%, reflecting a significant slowdown in office construction. Examining starts on a rolling 12-month basis, current activity is 38% above the 20-year trend. Going forward, construction starts will likely be impacted by the current restrained lending environment.

KEY TAKEAWAY Construction costs are not rising as aggressively as they have over the past two years, but uncertainty remains. Labor, especially skilled labor, remains a challenge, but increases in commodity and materials costs have eased. High interest rates have placed additional pressure on costs, but expectations that the Fed has finished raising rates may bring some clarity and allow more companies to plan fit out projects.

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RETAIL FIT OUT COST GUIDE 2024

CUSHMAN & WAKEFIELD CONSTRUCTION CONTRACTOR SENTIMENT SURVEY, FALL 2023 CONTRACTORS DON’T ANTICIPATE ANY PRICE CUTS FROM SUPPLIERS

Decreased Significantly Decreased Slightly No Change Increased Slightly Increased Significantly

100%

33%

80%

37%

46%

60%

81%

28%

40%

58%

51%

20%

33%

16%

General Contractors GC's Suppliers

PAST 6 MONTHS

NEXT 6 MONTHS

Source: Cushman & Wakefield Research

COMMODITY COSTS ARE LEVELING OUT

Commodities are one of the major components of construction costs. Peak pandemic cost increases were primarily driven by sharp increases in commodity prices. At year-end 2023, commodity price growth decelerated and is well below pandemic highs. Lumber has experienced the most significant change in price, falling 4% YOY. The near-term forecast calls for lumber prices to increase 4% by year-end 2024 from current levels, in line with its 10-year average of 3.9%. Copper and aluminum experienced the largest pandemic increases, but both have fallen from those highs. Copper prices were down 3.5% YOY, below its 10-year average of 2.4%. Prices for aluminum rose 4.0%, slightly below its 10-year average of 4.3%. The forecast calls for copper to increase 6.2% and aluminum 6.1% by year-end 2024.

Glass prices increased slightly at 2.4% YOY and are expected to rise at 2.1% by year-end 2024, which is nearly half the 10-year annual average. Prices for concrete grew 8.2% YOY, but that growth is expected to slow to 4.3% by year-end 2024, slightly lower than its 10-year average of 5.1%.

KEY TAKEAWAY

Pandemic-fueled increases have abated, but strong demand continues to apply upward pricing pressure on many commodities. Copper and aluminum prices are both expected to grow in 2024.

YOY INCREASES ARE MORE IN LINE WITH THEIR 10-YEAR AVERAGES INCREASES HAVE SLOWED FOR MOST COMMODITIES

YOY Pre-Pandemic (Jan 2020) 10-yr Average 2024 Forecast

80%

64%

60%

45%

37%

40%

24%

22%

20%

Percent Change

-3%

-4%

-20%

Lumber

Copper

Aluminum

Glass

Concrete

Source: U.S. Bureau of Labor Statistics (BLS); Moody’s Analytics Forecasted

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RETAIL FIT OUT COST GUIDE 2024

LABOR CONSTRAINTS PERSIST

Employment growth in the construction sector has been tempered due to the sector’s inability to fill open positions with qualified candidates. In 2023, 41,800 nonresidential building construction jobs were added, a number that would have been higher if there were more candidates with the required qualifications available. This still represents a 4.9% YOY increase, which is nearly double the 2.5% increase for overall construction employment and significantly above total employment growth (1.7%). As of November 2023, construction sector quits grew 28% YOY, straining a significantly constrained construction labor market. On an annualized basis, hires for November 2023 lag open positions by 97,000 jobs. This gap is nearly nine times larger than it was a year ago. Overall, openings continue to trend higher than the pre-pandemic period. Current openings are nearly double the two-year pre-pandemic average in 2018 and 2019.

To attract labor to the market, construction firms have increased compensation incentives, increasing hourly wages to an average of $34.92 per hour as of December 2023.

LABOR CONSTRAINTS CONTINUE TO IMPACT THE U.S. CONSTRUCTION SECTOR

U.S. CONSTRUCTION JOB OPENINGS OUTPACE HIRING

Openings Hires Quits

0 100 200 300 400 500 600 700 800

Job Openings and Labor Turnover: Construction, (Ths. #, SA)

Source: Bureau of Labor Statistics, Federal Reserve Bank of Atlanta

To attract labor to the market, construction firms have increased compensation incentives, increasing hourly wages to an average of $34.92 per hour as of December 2023. This reflects a 5.1% increase over December 2022 and is 19% higher than average total private employment wages. Wages and fringe benefits have increased for both open shop and union jobs based on the Q3 2023 ENR report 3 . Across union crafts, electricians experienced the largest increase (+7.2% YOY) in wage and fringe benefits, followed by plumbers (+7.0% YOY) and painters (+6.2% YOY). Wages are expected to increase further in 2024.

GCs seem to be more optimistic about labor costs in the next six months. Based on Cushman & Wakefield’s sentiment survey, a third expect labor costs to decrease slightly in the next six months. This is in marked contrast to our January 2023 survey, in which 67% expected costs to increase slightly (63%) or significantly (4%) and only 1% expected slight decreases. Improved sentiment may be tied to expectations of slack in the labor sector; however, several construction projects were put on hold in the fall due to the lack of available labor. Until this eases, upward pressure on wages will continue.

KEY TAKEAWAY The lack of skilled labor to staff projects continues to be a significant concern. Besides increasing wages and benefit packages to attract talent, the sector is investing in upskilling and programs to attract workers from non-traditional sectors.

Source: Cushman & Wakefield Research

3 https://www.enr.com/economics/quarterly_cost_reports

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RETAIL FIT OUT COST GUIDE 2024

PROJECT TIMELINES REMAIN EXTENDED

Equipment lead times have eased for some systems but remain extended for most. Electrification efforts tied to net-zero initiatives have significantly increased demand for electrical components. Electric switchboards continue to have some of the longest lead times of more than 60 weeks, and it is very likely that longer lead times are here to stay. Generators also continue to have extended lead times of more than 66 weeks. There has been some easing for air handling units (AHU), although they still have lead times of 44–72 weeks. Permitting has contributed to the extension of timelines. GCs were asked to estimate the average time from requesting to receiving a permit. Pre-pandemic, the permitting process generally took one to two weeks. Among GCs surveyed, nearly half (42%) estimate that permitting takes four to eight weeks, 26% estimate eight to 12 weeks, and 16% experience permitting processes that take more than 12 weeks. Regionally, permitting is faster in Appalachia, Mountain, and Upper Midwest regions. On the other end of the spectrum, the Chicago MSA, N.Y. MSA, Florida, and Northern California have expectations that the permitting process will take much longer, beyond 16 weeks in some cases.

WHAT IS THE AVERAGE TIME FROM REQUESTING TO RECEIVING A PERMIT? CUSHMAN & WAKEFIELD CONSTRUCTION CONTRACTOR SENTIMENT SURVEY, FALL 2023

100%

17%

20%

25%

33%

80%

50% 50%

20%

25%

75%

25%

60%

50%

100%

33%

50%

100% 100% 100%

40%

80%

40%

50%

17%

50% 50%

50%

20%

33% 33%

25%

20%

17%

2-4 Weeks 4-8 Weeks 8-12 Weeks 12-16 Weeks Greater Than 16 Weeks

Source: Cushman & Wakefield Research

GCs continued to see some material lead time delays, based on Cushman & Wakefield’s sentiment survey. A third experienced slight (25%) to significant (9%) delays in the last six months. One in 10 saw some loosening in these material lead times, and that optimism extends to the next six months. The majority (75%) of GCs expect material lead times to remain the same in the next six months, while 12% expect them to decrease slightly. However, since lead times are already extended, an expectation of status quo means that they are overwhelmingly expected to remain longer than pre-2020.

KEY TAKEAWAY

Lead times for some systems remain extended,

which may be a “new normal” for projects.

However, the worst may be behind us, as lead times for components and materials are unlikely to grow longer than they were at the height of the pandemic.

Project execution times, which are already extended, are expected to remain unchanged (89%) in the next six months.

PROJECT EXECUTION TIME IS NOT EXPECTED TO SHORTEN CUSHMAN & WAKEFIELD CONSTRUCTION CONTRACTOR SENTIMENT SURVEY, FALL 2023

Decreased Significantly Decreased Slightly No Change Increased Slightly Increased Significantly

100%

9% 4%

11%

12%

80%

25%

60%

75%

89%

84%

40%

58%

20%

12%

Material Lead Times Project Execution Time

PAST 6 MONTHS

NEXT 6 MONTHS

Source: Cushman & Wakefield Research

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

E-COMMERCE SHARE OF RETAIL REVERTS TO TREND ONLINE AND IN-STORE ARE COMPLEMENTS, NOT SUBSTITUTES

25%

300

250

20%

200

15%

150

Billions

10%

100

2010 2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2022 2023

E-commerce retail sales, $

Share of core retail sales, %

Pre-Pandemic Trend

Source: U.S. Census Bureau, Cushman & Wakefield Research

RETAIL FUNDAMENTALS

In 2020, with traditional retail stores inaccessible, consumers embraced online shopping to an unprecedented extent and e-commerce sales exploded. Online sales had been steadily gaining ground in retail, but the pandemic markedly accelerated this trend. Three years later, the share of retail sales has returned to its long term growth trajectory. Digital native brands are exploring a presence in physical stores, as price hikes have made profitability increasingly difficult. FedEx and UPS increased shipping rates nearly 6% in 2022, the largest rate increase in almost a decade. Digital advertising costs have risen as well after Apple began allowing users to opt out of data tracking in 2021. Storefront demand has also been fueled by an influx of new discount retail locations from companies like Dollar General, Family Dollar and Dollar Tree. In 2023, estimated net openings for discount stores sat at 1,656. These three discount brands alone will add over 21 million square feet (msf) of retail space in 2023.

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Retailers in the apparel, footwear, beauty and accessories segments are also expanding for the first time in years. In response to the increasing importance consumers are placing on convenience, many retailers have begun targeting locations in close proximity to residential areas, often in the suburbs. Brands that were traditionally found in department stores or in-line mall space increasingly focus on open-air, suburban shopping centers. Department and Big Box Stores including Macys, Nordstrom and Target are pivoting toward smaller format stores most often found in suburban neighborhood shopping centers. Despite a robust tenant pipeline, there are some macroeconomic concerns facing the sector. Inflation has cooled off since 2022, with the December Consumer Price Index slowing down to 3.4%, which is 3.6% lower than the previous year. However, recent inflation figures are still above the Federal Reserve’s target rate of 2%, as consumers continue to battle heightened prices at the store. Unemployment numbers remain low, and consumers still maintain a favorable view of the labor market. However, consumer sentiment in the labor market has begun to slide over the last few months, with November bringing a 31-month low. In December 2023, overall consumer confidence ticked up 1.6% from a year ago, but is still below pre-pandemic levels after hitting a 15-month low in October 2023.

Despite these concerns, overall consumer spending remains healthy so far, although there may be some challenges on the road ahead if labor markets become unstable.

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2023 YTD RETAIL STORE OPENINGS AND CLOSURES

-2,500 -2,000 -1,500 -1,000 -500 0 500 1,000 1,500 2,000 2,500

Number of Stores

Convenience, Discount & Grocery

Apparel, Footwear, Acc. & Beauty

Luxury, Department Store & Other

Electronics, Home & Office

2022 Net Store Openings 2023 Net Store Openings

Source: Coresight Research (U.S. Store Tracker), Cushman & Wakefield Research

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RETAIL FIT OUT COST GUIDE 2024

KEY TAKEAWAY Strong consumer spending has contributed to robust retail growth. Rising costs facing online business and store expansion from established retail companies, influenced in part by changes in their commercial real estate strategy, contribute to increased retail growth.

Source: Cushman & Wakefield Research

KEY TAKEAWAY

Inventory is becoming increasingly constrained, and rents keep ticking up.

Source: Cushman & Wakefield Research

RENT AND VACANCY

Shopping center vacancy rates fell again in the fourth quarter, coming in at 5.3%, marking the eleventh consecutive quarter of declining rates. New store openings continue to drive demand, with over 2,300 net retail locations opened in the past two years. A strategic shift by retailers, focusing on more stores with a smaller footprint located near suburban consumer areas, are further contributing to net store openings and historically low vacancy rates. Limited available inventory has continued to push rent prices up across all shopping center segments, including power, neighborhood and strip centers. Neighborhood centers have seen the steepest decline in vacancy over the last eight quarters, down from 7.7% to 5.7%, while rent at power centers has increased the most, up from $23.10 to $26.18, over the same time. Power centers maintain the lowest vacancy rate and highest rent across the three shopping center categories.

MARKETBEAT U.S. NATIONAL

Shopping Center Q4 2023

at 38.8 msf in 2022, absorption slipped to 19.7 msf in 2023. Looking at demand regionally, the West region experienced the largest retrenchment from 2022 to 2023, decelerating by 68% due to negative net absorption in markets including San Jose, Portland, Seattle, Salt Lake City, Colorado Springs and Boulder. The South accounted for more than half of the national absorption in 2023, but even there, demand was down 45% from 2022. Given the favorable outlook for retail tenant demand, this pullback in absorption is likely more about the lack of shopping center space available to lease. With vacancy rates in many markets already well below historical norms, tenants are increasingly left with fewer suitable options in which to locate. New retail construction has been minimal since the pandemic and has retrenched further in light of higher interest rates and risk aversion by banks and other sources of financing. For the first time in years, the retail market is at a point of being supply constrained—at least for space in quality shopping centers. Last year set a new low for retail construction as only 8.1 msf (0.2% of existing inventory) came online, down from an average of 0.6% per year from 2015-2019. Although there is some semblance of a market response in Austin and Miami, where completions totaled over 1% of inventory in 2023, the paltry construction pipeline of 13.9 msf nationally suggests this imbalance will persist. The national shopping center vacancy rate fell 30 bps year-over-year (YOY) to 5.3% in the fourth quarter, marking the lowest rate since the beginning of our data in 2007. Half of the 81 markets we track sported a vacancy rate of 5.0% or lower, with Nashville, Raleigh/Durham, Miami and Charlotte having the tightest market conditions. Asking rents continue to increase in response to a tight market. Average asking rents in the fourth quarter were $23.73 per square foot, up 4.1% from a year earlier. Asking rents have risen 16.9% cumulatively from 2019 levels and 41.1% over the past decade. Outlook The retail fundamentals are expected to moderate in 2024. Leasing demand will be increasingly constrained by limited availability, so it’s difficult to envision vacancy rates going much lower, even in a robust economy. Layer in our baseline expectation for slowing household income growth, tighter consumer credit, and weaker corporate earnings, and the real estate demand outlook seems poised to throttle back in 2024. Consumers will turn more cautious, and retailers will follow suit. The rising costs of retail space—not just rent, but also fit out construction, operations, security, insurance, etc.—will contribute to more restraint in store expansion plans. Several additional retailer bankruptcies could also materialize. This will bring more balance to the market. With essentially zero supply risk, ebbing leasing demand will allow vacancy to drift higher over the course of 2024, rising from the current rate 5.3% to 5.7% in 2024 and 6.1% in 2025. For context, our forecast would be consistent with vacancy rates last seen in 2018 2019. Easing market conditions will be welcome news for those retailers who continue to do well and wish to optimize or expand their footprints. Occupiers should have more available space to choose from and somewhat stronger negotiating leverage than at present. Asking rents will continue to rise, but at a more modest pace compared to the past couple years. While the data in this report focuses on open-air shopping centers, the broader retail sector continues to evolve with a high degree of nuance. Top-tier malls will look to build on recent successes with re tenanting and capital improvements, while older regional malls will face more pointed questions about redevelopment as distressed loans accumulate. Urban retail, especially in gateway office-using districts, is also likely to remain a laggard in the near term, but retail and consumer engagement will be crucial foundations for urban planners to revitalize struggling downtowns. Despite these challenges, the overarching takeaway from 2023 was that retail CRE is back for good. MARKETBEAT U.S. NATIONAL Overall U.S. Shopping Center Markets Akron, OH 4.5% 4.2% 4.2% 4.3% Albany, NY 5.5% 5.2% 5.0% 5.0% Albuquerque, NM 4.8% 4.3% 4.4% 5.1% Atlanta, GA 4.4% 4.4% 4.3% 4.2% Austin, TX 4.0% 4.0% 3.8% 4.3% Bakersfield, CA 5.1% 5.0% 5.3% 4.7% Baltimore, MD 6.3% 6.2% 6.1% 5.9% Birmingham, AL 5.9% 6.1% 6.1% 5.4% U.S. Shopping Center Markets Q4 2022 United States 5.6% Northeast 6.0% Midwest 6.5% South 5.1% West 5.5% U.S. Retail CRE Caps Off a Resilient 2023 The U.S. retail real estate market closed out 2023 in the same manner it started—with resilient demand outpacing subdued new supply and the vacancy rate touching a new low. In the fourth quarter, the national shopping center vacancy rate edged down 10 basis points (bps) to 5.3%, which is the lowest rate on record dating back to 2007. Demand accelerated toward year-end with net absorption totaling 6.1 million square feet (msf) in the fourth quarter, up 71% from the third quarter. Lack of new retail construction has kept a ceiling on the vacancy rate since the start of the pandemic, and, in 2023, retail completions slumped to a nadir of just over 8 msf delivered, with 20% of that delivering in the fourth quarter. Healthy demand for retail space can be traced to surprisingly strong economic growth in 2023, particularly from the household sector. Through November 2023, real consumer spending (which adjusts for inflation) rose 2.7% from a year earlier and real retail spending was up an even stronger 3.2% over that period. Despite numerous headwinds— inflation, rising interest rates, reduced savings, etc.—spending has been largely unimpeded from a macro perspective. However, this headline masks changing dynamics within the retail sector; many shoppers are spending more of their budget on essentials like groceries, personal care and rent, leaving less income for discretionary items like furniture, sporting goods and apparel. These trends are clearly reflected in consumer foot traffic, retail sales, and company financial performance. This resilient macro environment encouraged retailers to expand their store counts. In 2023, there were 769 net retail store openings, and while that was down 50% from the 2022 surge, this marked the first two-year stretch of net store openings since 2013-2014. While the openings were largely driven by discount and grocery, other segments such as apparel, footwear, luxury and beauty saw a resurgence in net store counts as well. This wave of openings has

SHOPPING CENTER NET ABSORPTION

10 15

0 5

-15 -10 -5

MSF

2019

2020

2021

2022

2023

MARKETBEAT

LEASING ACTIVITY BY REGION & TYPE, % OF TOTAL Q4 2023

U.S. NATIONAL Shopping Center Q4 2023

23%

24%

50%

41%

39%

24%

12% 17%

12% 15% Strip

11% 16%

17%

YOY Chg

12-Mo. Forecast

Power & Regional

Neighborhood & Community

Shopping Center Total

5.3% Vacancy Rate 6.1M Net Absorption, SF $23.73 Asking Rent, PSF 13.9M Under Construction

Northeast

Midwest

South

West

Vacancy Rates Q4 2023

VACANCY RATE BY TYPE Q4 2023

Overall

Q1 2023

Q2 2023

Q3 2023

Q4 2023p

5.6% 5.9% 6.5% 5.0% 5.6%

5.4% 5.8% 6.2% 4.9% 5.5%

5.4% 5.8% 6.2% 4.9% 5.4%

5.3% 5.7% 6.0% 4.8% 5.3%

3% 6% 9% 12%

Overall

Q4 2022 Q1 2023 Q2 2023 Q3 2023

Q4 2023p

U.S. Shopping Center Markets

Q4 2022 Q1 2023 Q2 2023 Q3 2023

Q4 2023p

2014 Memphis, TN 2015 Louisville, KY

4.8%

4.6% 4.9% 3.0% 5.1% 4.8% 10.7% 2.7% 7.8% 3.5% 5.7% 7.8% 3.4% 7.7% 4.6% 5.0% 3.9% 6.5% 5.4% 4.9% 4.5% 5.8% 2.3% 5.6% 5.5% 9.1% 7.2% 3.6% 5.1% 5.1% 6.4% 5.3% 2.9% 3.9% 6.5% 6.4% 4.1% 6.5% 5.2% 4.8% 7.1%

5.0% 5.0% 2.8% 4.9% 4.8% 10.2% 2.5% 7.4% 3.1% 5.6% 7.0% 5.9% 7.8% 7.0% 4.6% 4.9% 4.1% 6.4% 5.2% 4.9% 4.6% 5.9% 2.5% 5.8% 4.7% 9.2% 6.9% 3.9% 5.1% 5.0% 6.1% 5.2% 3.0% 4.0% 6.4% 6.4% 4.2% 6.3% 5.1% 4.6%

4.8% 4.9% 3.2% 4.9% 5.0% 10.2% 2.3% 7.6% 3.5% 5.6% 7.3% 5.5% 7.7% 6.5% 4.6% 4.2% 4.1% 6.0% 5.1% 4.7% 4.7% 6.4% 2.5% 5.1% 4.9% 9.2% 6.6% 4.0% 5.1% 4.7% 6.3% 5.6% 3.1% 4.0% 6.1% 6.5% 4.2% 6.1% 5.3% 4.5%

5.1% 5.0% 3.1% 5.0% 4.2% 11.6% 2.1% 8.4% 3.6% 5.4% 6.9% 4.6% 7.7% 6.1% 4.3% 4.2% 4.2% 6.2% 5.1% 4.6% 4.4% 6.0% 2.2% 5.3% 4.2% 8.6% 6.5% 4.2% 5.3% 4.4% 6.4% 5.4% 3.3% 3.8% 5.6% 6.5% 4.0% 6.5% 5.2% 4.6%

2008 4.7% 4.2%

2009 Recession 2010

2011

2012

2013

2016

2017

2018

2019

2020

2021

2022

2023

Shopping Center Total Neighborhood & Community 4.9% 2.9%

Power & Regional 4.2%

Miami, FL

ECONOMIC INDICATORS Q4 2023

Strip 4.1% 4.1% 5.2% 5.9% 5.0% 4.4% 3.5% 6.5% 8.1% 4.1% 3.1% 7.0% 5.3% 6.7% 6.3% 4.4% 3.5% 6.3% 5.0% 5.2% 6.1% 7.9% 6.2% 3.3% 3.8% 4.2% 4.7% 4.9% 6.8% 7.3% 6.0% 4.7% 6.1% 5.8% 6.6% 4.2% 6.0% 5.6%

Milwaukee, WI Minneapolis, MN Montgomery, AL Nashville, TN New Haven, CT New Orleans, LA

5.2% 4.9%

10.4%

Source: CoStar, Cushman & Wakefield Research

YOY Chg

12-Mo. Forecast*

2.6% 6.9%

156.9M Total Nonfarm Employment

Boise, ID translated into positive net absorption for 11 consecutive quarters. Lack of Space Availability Puts Ceiling on Tenant Demand

cushmanwakefield.com | 2 4.3%

4.7% 4.0% 5.8% 8.6% 4.6% 4.5% 8.1% 6.0% 6.9% 5.0% 5.7% 3.8% 6.6% 6.3% 5.4% 6.2% 7.3% 6.9% 3.9% 3.9% 4.3% 4.6% 5.4% 6.4% 7.5% 6.4% 5.0% 6.4% 5.5% 6.6% 4.3% 6.1% 5.7%

5.3% 4.0% 5.6% 8.3% 5.2% 3.8% 8.0% 5.7% 7.0% 5.0% 5.4% 3.8% 6.7% 6.3% 5.1% 6.1% 7.6% 6.5% 3.4% 3.9% 4.2% 4.4% 5.2% 6.3% 7.6% 6.2% 5.2% 6.6% 5.8% 6.9% 3.7% 6.5% 5.8%

4.7% 3.8% 5.6% 8.2% 5.5% 3.3% 7.3% 5.3% 6.8% 6.0% 4.6% 3.6% 6.4% 5.9% 5.2% 6.1% 7.4% 6.3% 3.5% 3.7% 4.0% 4.1% 5.3% 6.3% 7.2% 6.1% 5.3% 6.3% 5.8% 6.6% 4.1% 6.3% 6.0%

4.7% 3.5% 5.5% 8.6% 5.4% 3.2% 7.3% 5.2% 6.5% 6.0% 4.3% 3.7% 6.3% 5.0% 5.1% 5.9% 7.7% 6.1% 3.6% 3.7% 4.2% 4.9% 5.5% 7.1% 7.2% 6.2% 5.4% 6.2% 5.7% 7.0% 4.3% 6.0% 5.9%

New York City Metro, NY

5.9% 7.9% 5.8% 8.1% 4.6% 5.1% 3.8% 6.6% 5.6% 4.8% 4.2% 6.2% 2.6% 5.5% 5.2% 9.0% 6.9% 3.5% 5.3% 4.5% 6.3% 5.2% 3.0% 3.6% 6.3% 5.9% 4.3% 6.8% 5.6% 4.8% 7.1%

Boston, MA Boulder, CO Buffalo, NY

Norfolk, VA

Northwest Arkansas Oklahoma City, OK

Charleston, SC Charlotte, NC The retail market absorbed 6.1 msf of space in the fourth quarter, which was a 33% increase versus the average over the first three quarters of 2023. While we should not put too much stock into a single quarter, it’s safe to say that occupier sentiment remains upbeat. That said, absorption levels are slowing over a longer time horizon. After peaking

15.5M

Omaha, NE

Orange County, CA

Chicago, IL

Retail Employment

Orlando, FL

Cincinnati, OH Cleveland, OH

Palm Beach, FL Philadelphia, PA Phoenix, AZ Pittsburgh, PA Portland, OR Providence, RI Richmond, VA Rochester, NY Sacramento, CA Salt Lake City, UT San Antonio, TX Raleigh/Durham, NC Reno, NV

SPACE DEMAND / DELIVERIES

Colorado Springs, CO OVERALL VACANCY & ASKING RENT

3.7% Unemployment Rate

Columbia, SC Columbus, OH

20 40

0% 2% 4% 6% 8%

$24

Dallas/Ft. Worth, TX

$22

Dayton, OH Denver, CO

-40 -20 0

4.1% Retail Sales Growth**

Des Moines, IA $20

MSF

Detroit, MI East Bay, CA El Paso, TX

$18

2019 2020 2021 2022 2023

2019

2020

2021

2022

2023

Fort Lauderdale, FL Fort Myers/Naples, FL

Source: U.S. Bureau of Labor Statistics, U.S. Department of Commerce, *Cushman & Wakefield baseline, **November 2023

Net Absorption, SF Construction Completions, SF

Asking Rent

Vacancy Rate

San Diego, CA

Greensboro, NC Greenville, SC

Source: CoStar, Cushman & Wakefield Research

San Francisco, CA

San Jose, CA Sarasota, FL Seattle, WA St. Louis, MO Syracuse, NY Tampa, FL Tucson, AZ Tulsa, OK

Hartford, CT

Hawaii

Houston, TX

Indianapolis, IN Inland Empire, CA Jacksonville, FL Kansas City, MO Knoxville, TN Las Vegas, NV Los Angeles, CA

Washington, DC

cushmanwakefield.com | 4

CLICK HERE TO ACCESS THE LATEST U.S. RETAIL MARKETBEAT

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

SEGMENTED RETAIL VACANCY AND RENT INVENTORY IS BECOMING INCREASINGLY TIGHT AS VACANCY RATES FALL AND RENTS RISE IN ACROSS CATEGORIES

Vacancy Rate (%)

Vacancy Rate (%) (Baseline)

NNN Asking Rates ($)

NNN Asking Rates ($) (Baseline)

12%

$27

10%

$25

Vacancy Rate (%)

Vacancy Rate (%) (Baseline)

NNN Asking Rates ($)

NNN Asking Rates ($) (Baseline)

POWER CENTER

12%

$27

$23

10%

$25

$21

$23

$19

$21

$17

$19

$15

2008 2009 2010 2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$17

$15

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

NEIGHBORHOOD CENTER

12%

$15 $17 $19 $21 $23 $25 $27 $29

10%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

STRIP CENTER

12%

$15 $17 $19 $21 $23 $25 $27 $29

10%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: CoStar, Cushman & Wakefield Research

CURRENT CONSTRUCTION PIPELINE

Average construction inventory in 2023 outpaced the previous year by roughly 1 msf but continued to lag the pre-pandemic era, down nearly 2 msf when compared to 2019. Limited retail inventory, historically low vacancy rates and increasing rents have tempted developers to increase retail construction. However, developers are being faced with a series of hurdles, including higher interest rates, and higher material and labor costs. The shift in retailers’ commercial real estate strategy is reflected in the composition of space under construction. Companies are largely transitioning from relatively limited locations with larger footprints, to a greater quantity of smaller stores that are located closer to consumers. Power and strip centers share of construction declined 2.8% and 2.7%, respectively, when compared to 2021. Meanwhile, neighborhood centers have increased their share 5.5% over the last eight quarters. Despite a limited construction pipeline, previously occupied retail space will become available, helping offset demand, after several high-profile bankruptcy announcements by retailers such as Bed Bath & Beyond, Tuesday Morning and Rite Aid.

SEGMENTED RETAIL SPACE UNDER CONSTRUCTION POWER CENTERS HAVE LOST NEARLY HALF THEIR SHARE OF DEVELOPMENT SINCE 2017

20 Millions SF

2011

2017

2012

2021

2015

2013

2018

2016

2019

2014

2010

2022

2023

2020

2008

2009

UC (msf) - Power Center UC (msf) - Strip Center

UC (msf) - Neighborhood Center

Historical Average (msf)

Source: CoStar, Cushman & Wakefield Research

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

KEY TAKEAWAY The retail construction pipeline has been subdued for over a decade, and current macroeconomic headwinds will keep deliveries at low levels for the next few years. Developers have been hindered by rising costs, making it difficult to meet rising demand for retail space. Some of that demand will be funneled to recently freed-up space following several large retailer bankruptcies, but national vacancy should remain tight.

Source: Cushman & Wakefield Research

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U.S. RETAIL FIT OUT COST COMPARISON

USING THE GUIDE Estimated costs provided herein are indicative of market averages based on certain assumptions. Exact costs for specific projects may differ to those presented here, and so we recommend that you engage a PDS professional to advise on precise costs based on your unique construction requirements. Inclusions: Costs are based on an 1,800 sf 4 in-line store fit out in an as-is condition to bring to a modified white box condition with a 12-week 5

completion schedule. This scope of work includes a new mechanical HVAC system, new HVAC duct work, a new drop ceiling and lighting fixtures, and minor demo. Also includes a three phase amp panel, two ADA restrooms, drywall ready for painting, and a small partition wall near the back of the space. EXCLUSIONS Furniture, Fixtures and Equipment (FF&E)

4 Some estimates were provided on a 2,500-sf floorplan which are comparable to an 1,800-sf bid. 5 While some GCs provided shortened alternate bids, we utilized a 12-week schedule for this guide.

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

MOST EXPENSIVE AND MOST COST-EFFECTIVE MARKETS In-line store fit out costs average $147 per square foot (psf) nationally. Fit outs are costliest in Northern California, averaging $216 psf, followed by the Pacific Northwest at $191 psf and the Southwest at $162 psf. The most cost-effective market is the Midwest, averaging $106 psf, followed by the Upper Midwest and the Southeast at $112 psf.

FIT OUT COST AVG COST BY MARKET, PER SQUARE FOOT

$250

$200

$150

$100

$50

Source: Cushman & Wakefield Project & Development Services

BREAKDOWN OF EXPENSES BY CATEGORY

FIT OUT COST SEGMENTATION AND COMPOSITION AVERAGE COST BY CATEGORY, PER SQUARE FOOT

Fit out costs are segmented into 11 categories:

7%, Ceiling, $9.66 4%, Specialties , $5.28 4%, Existing Conditions, $5.15 2%, General Requirements , $3.23 2%, Concrete , $2.57

7%, Ceiling, $9.66 4%, Specialties , $5.28 4%, Existing Conditions, $5.15 2%, General Requirements , $3.23 2%, Concrete , $2.57 2%, General Requirements*, $3.23

100%

> Carpentry, Doors & Windows > Ceiling > Concrete > Electrical > Existing Conditions > Finishes > General Conditions > General Requirements > Mechanical > Project Overhead and Profit > Specialties

90%

80%

70%

9%, Finishes , $12.63

60%

10%, Project Overhead and Profit , $14.44

10%, Project Overhead and Profit , $14.44 and Profit, $14.44

50%

12%, Electrical , $17.64

40%

16%, General Conditions , $23.16 16%, General Conditions, $23.16 16%, General Conditions , $23.16

30%

20%

17%, Carpentry, Doors, & Windows, $25.18

17%, Carpentry, Doors, & Windows, $25.18 17%, Carpentry, Doors, & Windows, $25.18

10%

19%, Mechanical , $27.99 19%, Mechanical, $27.99

19%, Mechanical , $27.99

Among these categories, 19% of the cost is allocated to Mechanical, followed by Carpentry, Doors, and Windows (17%) and General Conditions (16%). While cost allocation is highest for Mechanical across most markets, Carpentry, Doors and Windows are the costliest category in Northern California (18%) and Southern California (21%). Project overhead costs average 10% of total costs across most markets but trend higher in Texas, averaging 16% of total costs.

Source: Cushman & Wakefield Project & Development Services *Permits and Fees

Other significant variations include:

> Ceiling costs average 7% of total costs but have a higher allocation in Northern California at 11%. > Finishes average 9% but are nearly 14% of total costs in Northern California. > While Mechanical is the largest cost

allocation nationally, it trends much higher in the Midwest, averaging 30% of total costs.

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

SEGMENT COST BY MARKET AVG COSTS, PER SQUARE FOOT

$50

$100

$150

$200

$250

NorCal Pacific NW Southwest NYC MSA Chicago SoCal Mid Atlantic New England Mountain Texas Appalachia Upper MW Southeast Midwest

SEGMENT COST COMPOSITION BY MARKET

AVG COSTS, PER SQUARE FOOT

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% NorCal

Pacific NW Southwest NYC MSA Chicago SoCal Mid Atlantic New England Mountain Texas

Mechanical Appalachia Upper MW Southeast Midwest

Carpentry, Doors, & Windows General Conditions

Electrical

Mechanical

Carpentry, Doors, & Windows General Conditions

Electrical

Mechanical Project Overhead and Profit

Finishes

Ceiling

Electrical Specialties

Carpentry, Doors, & Windows General Conditions

Project Overhead and Profit

Finishes

Ceiling

Specialties

Project Overhead and Profit Existing Conditions

Finishes General Requirements

Ceiling Concrete

Specialties

Pacific NW

Existing Conditions

General Requirements

Concrete

Source: Cushman & Wakefield Project & Development Services

Pacific NW

Existing Conditions

General Requirements

Concrete

Pacific NW

LOCAL MARKET DATA

APPALACHIA

CHICAGO MSA

2024

$21.72

$35.84

Mechanical

$19.36

$26.08

Carpentry, Doors, & Windows

$18.77

$15.25

General Conditions

$12.12

$17.68

Electrical

$10.23

$14.52

Project Overhead and Profit

$10.70

$15.75

Finishes

$4.95

$11.61

Ceiling

$9.55

$2.88

Specialties

$2.46

$10.19

Existing Conditions

$2.70

$8.22

General Requirements

$1.73

Concrete

Total Cost

$112.56

Total Cost

$159.74

MID ATLANTIC

MIDWEST

2024

$32.69

$31.33

Mechanical

$27.97

$11.44

Carpentry, Doors, & Windows

$25.72

$4.28

General Conditions

$16.61

$17.26

Electrical

$14.63

$9.61

Project Overhead and Profit

$8.04

$11.34

Finishes

$5.78

$8.92

Ceiling

$3.17

$1.19

Specialties

$6.94

$4.11

Existing Conditions

$0.83

$4.82

General Requirements

$4.03

$1.44

Concrete

Total Cost

$146.42

Total Cost

$105.74

Cushman & Wakefield

RETAIL FIT OUT COST GUIDE 2024

LOCAL MARKET DATA

MOUNTAIN

NEW ENGLAND

2024

$27.18

$32.69

Mechanical

$26.11

$27.97

Carpentry, Doors, & Windows

$24.45

$25.72

General Conditions

$14.93

$16.61

Electrical

$12.75

$14.63

Project Overhead and Profit

$12.52

$8.04

Finishes

$7.74

$5.78

Ceiling

$3.41

$3.17

Specialties

$6.46

$6.94

Existing Conditions

$2.26

$0.83

General Requirements

$2.46

$4.03

Concrete

Total Cost

$140.27

Total Cost

$146.42

NORTHERN CALIFORNIA

NYC MSA

2024

$22.78

$35.96

Mechanical

$39.03

$30.77

Carpentry, Doors, & Windows

$37.36

$28.29

General Conditions

$29.44

$18.27

Electrical

$19.67

$16.09

Project Overhead and Profit

$30.56

$8.85

Finishes

$24.72

$6.36

Ceiling

$1.17

$3.48

Specialties

$7.64

Existing Conditions

$5.00

$0.92

General Requirements

$6.67

$4.43

Concrete

Total Cost

$216.39

Total Cost

$161.06

LOCAL MARKET DATA

PACIFIC NORTHWEST

SOUTHERN CALIFORNIA

2024

$24.96

$27.36

Mechanical

$29.37

$33.14

Carpentry, Doors, & Windows

$34.41

$28.89

General Conditions

$27.30

$19.22

Electrical

$20.01

$12.91

Project Overhead and Profit

$13.76

$14.88

Finishes

$17.69

$11.70

Ceiling

$14.84

$2.54

Specialties

$2.56

Existing Conditions

$3.40

$1.19

General Requirements

$5.10

$1.63

Concrete

Total Cost

$190.84

Total Cost

$156.02

SOUTHEAST

SOUTHWEST

2024

$20.79

$34.72

Mechanical

$18.09

$26.51

Carpentry, Doors, & Windows

$18.35

$29.36

General Conditions

$11.23

$18.47

Electrical

$10.24

$15.02

Project Overhead and Profit

$10.49

$13.14

Finishes

$6.78

$7.97

Ceiling

$8.44

$1.22

Specialties

$5.14

$6.81

Existing Conditions

$1.00

$5.00

General Requirements

$1.04

$3.36

Concrete

Total Cost

$111.60

Total Cost

$161.58

Cushman & Wakefield

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