ICSC Texas Retail Forecast - January 2016 Dallas, Texas

1. ICSC Texas Retail Forecast – January 25, 2016
Top Trends in Texas Retail

2. Top Trends in Texas Retail
Texas is a state of mind. Texas is an obsession.
Above all else, Texas is a nation in every sense
of the word.
- John Steinbeck
“

3. Top Trends in Texas Retail
The economy of Texas is roughly the
same as all of Scandinavia, including
Sweden, Norway and Denmark combined.
If it were a nation, it would have
the 11th largest GDP.
Source: 2014 GDP Estimates,
U.S. Bureau of Economic Analysis
and International Monetary Fund

4. Agenda: Top Trends in Texas Retail
 Wealth Disparity Drives Retail Growth
 Generations Spend Differently
 Rise of the Foodie Nation
 Trends Impacting Texas Retail
 Texas is Number One for Retail Development
 Around the State: Dallas, Houston, Austin and San Antonio
 Top Reasons to Invest in Texas

5. $650,074
$605,228
$729,980
$600,089
$344,162
$323,402
$98,057
$98,084
$161,050
$136,445
$95,657
$95,879
$9,465
$10,688
$18,264
$19,397
$14,024
$11,544
2013
2010
2007
2001
1992
1983
Lower Middle Upper
Wealth Gains
Wealth Disparity Drives Retail Growth
Only upper-income families have had wealth gains in recent decades
Median Net Worth of Families by Income Tier (Dollars)

6. 3.4
4.2 3.6 3.6 4.1 4.4 5.0 4.5
6.2 6.6
0.
1.8
3.5
5.3
7.
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Wealth Gaps
Wealth Disparity Drives Retail Growth
The 62 richest people in the world have as much wealth as the
poorest half of the world’s population*
Wealth gap between middle- and upper-income families is widest
on record: 6.6 times greater
Source: OxFam America

7. BOOMERS MILLENNIALS
Average Online Spend
$650 $429
Buying Priority
Necessities
e.g., Insurance
Travel and Apparel
Product Research
Newspapers,
Magazines, PC’s
Smartphones, PC’s
Influencers
Advertising, Sales
Representatives
Word-of-Mouth,
3rd Party Reviews
Baby Boomers
75 million born from 1946 to 1964;
50% of workforce today
Baby Boomers and Millennials
Generations Spend Differently
Millennials
80 million born 1980’s to 2000’s;
50% of workforce by 2020

8. Source: Forrester Research
Shoppers under 25 have been spending
less on consumer goods since the 1970’s,
but spending 7 times more on education.
33% of online
consumers over 65
state “Technology is
important to me.”
Boom in the tech savvy
senior market.
Households over 65
have experienced
a 30% gain in
purchasing power
since 1973.
Generations Spend Differently
Boomers are Big Spenders

9. Amazon Dominates Online Sales
Source: Macquarie Research
Online
Retailers
 Amazon made 26% of all U.S. web sales in 2015, up from 16% four years ago
 Amazon accounts for 24% of all new retail sales growth in 2015 and 51% of all
online sales growth

10. Growth in Restaurant Concepts
Rise of the Foodie Nation
Projected restaurant
sales for Texas in 2015
totaled $44.5 billion.
As of 2013, there were
41,678 restaurants
in Texas.
Restaurants like Five Guys
Burgers and Fries and
Chipotle are expanding
aggressively in Texas.
Top Retail Categories
with Expansion Plans
that Include Texas
(U.S. Openings – 12 Months)
5,859
Fast Food
4,100
Food or Beverage Specialty
2,205
Restaurant (Family)
1,841
Variety Store
1,619
Restaurant (with Liquor)

11. New Residents Flocking to Texas
Retail Follows Rooftops
MARKET 2015 NET MIGRATION
San Antonio 24,600
Austin 41,500
Dallas 57,600
Houston 72,600
Sources: Moody’s; PPR
Honolulu
San Francisco
Los Angeles
San Diego
Las Vegas
Phoenix
Dallas
Houston
Tampa
Miami
Fort Lauderdale
Palm Beach
Orlando
Atlanta
Charlotte
Chicago
DC
New York
Boston
Seattle
Austin
Raleigh
San Antonio
0% - 1%
1.1% - 2%
Over 2%
Color –
Job growth key
Size –
Population growth key
0.8%
2.7%
Philadelphia

12. Some Retailers Will Take Their Vitamin C
Contraction, Consolidation, Closure
At least 10 struggling retailers have announced over 1,500 closings through 2017

13. Sources: JLL Research, Bloomberg.
Let’s do the time warp…to 2003’s oil prices
Declining Oil Prices

14. $0
$20
$40
$60
$80
$100
$120
$140
$160
Jan-70
Jan-72
Jan-74
Jan-76
Jan-78
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Jan-16
WTI Crude Price
Brent Crude Price
Crude Oil Price per Barrel
Sources: Bloomberg. Updated 5 January 2016
Declining Oil Prices
Oil price declines hit producers and financial markets but help consumers

15. Retail Property Clock
Major Texas markets in rising and
peaking quadrants at the end of 2015.
Texas Retail Still Rising
Peaking
Market
Falling
Market
Rising
Market
Bottoming
Market
United States, San Antonio
Dallas, Houston
Austin
Source: JLL Research, Q4 2015
JLL’s Property Clock indicates where each market sits within its real estate cycle.
Markets generally move clockwise around the clock. Geographies on the left side of the
clock are generally landlord-favorable, while markets on the right side of the clock
are typically tenant-favorable. Indicators include: Rental Rates, Occupancy, etc.

16. 4 Trends Impacting Texas Retail
1. Energy
2. Healthcare
3. Business-Friendly Environment
4. Education

17. Energy Prices Will Have Limited Impact on the State as a Whole
4 Trends Impacting Texas Retail
Source: Federal Reserve Bank of Dallas
 Texas added 11,100 jobs in November and 19,500 in October
 Texas unemployment rate at 4.6% is well below the U.S. average of 5%
 Houston lost professional and business services jobs in November, but added jobs
in education and health services
 Dallas-Fort Worth created jobs at a 3% annual rate in November

18. Texas is a Leader in Health Innovation
4 Trends Impacting Texas Retail
Source: Moody's Eoconomy.com, Dallas Regional Chamber
 Dallas healthcare employment grew by 5.1%
in the past year; Health Services makes up
10% of the DFW metro employment
 Rebuilt Parkland Memorial Hospital
completed in 2015
 UT Southwestern Medical Center’s William P.
Clements Jr. University Hospital built in 2014
 Medical tourists come to DFW for high-tech
procedures
 San Antonio and Houston will also continue
to see Healthcare industry growth

19. Business-Friendly Environment
4 Trends Impacting Texas Retail
 Texas ranks #2 on CNBC's “Top States for Business
2015”
 Ranked #1 for Infrastructure, #2 for Economy and #6 for
Access to Capital
 One of only 7 states with no personal income tax
RANK STATE
1 Minnesota
2 Texas
3 Utah
4 Colorado
5 Georgia

20. Education Attracts Spending and Grows Income
4 Trends Impacting Texas Retail
Sources: *UnivSearch.com. **Council of Public University Presidents and Chancellors, FY2013 Economic Impact Analysis.
 With 506 colleges and universities, Texas ranks
fourth in the nation*
 Texas colleges and universities create $143.9 billion
in added state income**
 Out-of-state students spend $1.3 billion annually on
goods, services and accommodations**
 Out-of-state visitors to college games and other
events spend $278.2 million annually**
STATE
COLLEGES AND
UNIVERSITIES
California 1,246
New York 633
Pennsylvania 544
Texas 506
Florida 439
Illinois 392
Ohio 386
Michigan 302
Massachusetts 261

21. Top Development Markets
Texas is Number One for Retail Development
Texas
7,949,419 SF
1
New York
6,302,608 SF
2
California
6,272,180 SF
3
Florida
5,927,502 SF
4
North Carolina
2,868,870 SF
6
New Jersey
3,389,018 SF
5
Illinois
2,799,376 SF
7
Virginia
2,662,838 SF
8
Ohio
2,070,378 SF
9
Maryland
2,070,378 SF
10
#1

22. Retail Construction by Asset Type
2015 Construction
by Retail Type (SF)
United States Texas New York California Florida New Jersey
General Retail 37,056,999 3,440,418 3,908,904 3,069,224 3,417,400 517,805
Community Center 5,497,475 781,772 163,785 563,507 199,509 371,213
Lifestyle Center 4,359,466 55,000 675,000 960,560 344,409 15,828
Neighborhood Center 7,336,667 919,506 175,000 903,293 337,774 314,632
Outlet Center 1,795,901 0 0 0 350,000 12,000
Power Center 4,125,874 1,504,361 0 253,143 53,908 10,500
Regional Mall 2,667,428 138,550 1,335,000 0 505,000 0
Strip Center 2,653,186 836,512 44,919 196,453 307,512 78,040
Super Regional Mall 3,131,831 273,300 0 326,000 103,990 2,069,000
Theme/Festival Center 393,000 0 0 0 308,000 0
Grand Total 69,017,827 7,949,419 6,302,608 6,272,180 5,927,502 3,389,018
Texas is Number One for Retail Development

23. Destination Texas
 Direct travel spending in Texas was $70.6 billion in 2014, an increase of 4.7% over the
previous year
 More than half of spending came from out-of-state travelers
 Top origin markets for Texas visitors include Mexico, Canada, the United Kingdom,
Germany, Brazil, Australia, Japan and China
MARKET
2014 TRAVEL SPENDING
($ MILLIONS)
Dallas 1,246
Houston 633
Austin 544
San Antonio 506
 Texas hotels collected $9.7 billion in revenues in 2014,
an increase of 9.7% over the previous year

24. Around the State – Dallas
 Home of Brinker International, AT&T, The Container Store, JC Penney, Michaels Stores,
Neiman Marcus and Pizza Hut
 Legacy West (240 acres, $2B cost) in Plano will house JP Morgan, Toyota, Liberty Mutual &
FedEx campuses; Plans include Legacy West Urban Village with 355,000 SF retail, plus offices
and apartments
 Richardson’s CityLine (186 acres, $1.5B) is home to State Farm campus, and a future
Raytheon; When complete it will house 6M SF of office, 300,000 SF of retail, plus apartments
and hotels
 Mixed-use Victory Park in Uptown already has
165,000 SF of retail, with 80,000 more
planned; 8-screen Cinépolis theater in lower
floors of residential tower to open 2017

25. Around the State – Houston
 Home of Pappa's Restaurants, Joe’s Crab Shack, Landry’s (Morton’s, Chart House…etc.),
Romano’s Macaroni Grill, Charming Charlie's, Francescas, Stage Stores (Palais Royal,
Bealls) and Academy Sports
 Simon’s Galleria Mall is fourth largest in the U.S.; With 26M visitors annually, about 60 cents
of each dollar spent comes from outside Houston
 River Oaks District, a 252,000 SF luxury lifestyle center was built in 2015; Tenants include
iPic Theater, Harry Winston, Tom Ford, Hermes of Paris and Dior
 Grocery war heating up: Kroger and HEB each to open one new store monthly in 2016; Aldi,
Trader Joes, Sprouts and Walmart are also in the fight
 Kirby Collection (Thor Equities) with 25-story luxury
residential, 13-story Class A boutique office and
65,000 SF of high-end fashion and restaurant retail
is slated to deliver end of 2017

26. Around the State – Austin
 Austin is a natural fit for hometown retailers like Whole Foods, Alamo Drafthouse Cinema
and Golfsmith
 The Domain rivals downtown for office and retail, among highest rents in the market;
Nordstrom opens this fall in Phase 3 of the mixed-use project
 Downtown Austin is a hotbed of development: 7 office, 5 hotel, 5 mixed-use and 3
residential projects are under construction
 The Seaholm Powerplant mixed-use redevelopment will include office space, a Trader
Joe’s, local retail and condos; 48,363 SF of retail in all

27. Around the State – San Antonio
Sources: *CVent, 2014; **SA Economic Impact 2013 Study
 Home of classic Texas chains HEB Grocery, Whataburger and Taco Cabana
 Ranked 4th in the nation among convention destinations for total number of meeting hotels;
2nd in Texas, after Houston;** Overall economic impact of visitors to the city is $13.4B/Year**
 Hemisfair Park area is slated for up to 750,000 SF of mixed-use redevelopment on the site
where the 1968 World’s Fair was once held
 Boutique Hotel Emma is the latest addition to the hip Pearl; The Pearl is a renovated 22-acre
industrial complex which once housed the Pearl Brewing Company.

28. Top Reasons to Invest in Texas
 Tort Reform,
 Right to Work State,
 No State Income Tax,
 No Barrier to Entry,
 Which Leads to Low Cost of Housing.
- Steven D. Alvis
“

29. Top Trends in Texas Retail
“
Patience and perseverance have a magical
effect before which difficulties disappear and
obstacles vanish.
- John Quincy Adams

30. Trust our retailntelligence.
© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. 01/21/2016
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