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TWIN LAKES, Roseville, Minnesota Market Assessment & Demand Analvsis Retail-RestaurantMarket Assessment RETAIL MARKET UPDATE The following are key points regarding the Twin Cities retail market environment, based on our review of information on the surrounding market area according to the recent United Properties Market Outlook report for 2004 ��"d Hal� and a sample survey of community shopping centers in the Twin Lakes trade area. Summary tables and graphs are provided at the end of this section. • The Twin Cities Metro Area has a total of 56.7 million square feet of rentable office space. Of that total, 24.1 million square feet (42.5%) is located in community shopping centers. By definition, community shopping centers are greater than 100,000 square feet and have at least two anchor tenants. As conceptualized, the Twin Lakes redevelopment would be considered a large community center. • The Twin Cities overall vacancy rate jumped �� 3.6% at mid-year to 14.9% at year-end. Meanwhile, the region saw negative absorption of —618,888 square feet. The increase in vacancy created slight downward pressure on rents, with the average net rental rate declining from $30.00 at mid-year to $28.18 at year-end. • During the �" �� Half of 2004, retail vacancy surged and absorption declined for the first time in the Twin Cities market since 1996. However, this is due in large part to the closing of all nine Twin Cities Mervyn's stores. This accounts for 1,330,000 square feet of retail vacancy throughout the metro area, mostly in regional malls. � Community shopping centers have outperformed other center types during the past year. Community centers have a vacancy rate of just 43%. . Due primarily to a lack of land in inner-city and first-ring suburban locations, community centers are being built primarily in second and third-ring suburbs. 'VVaI- Mart and Target continue to penetrate the market, and are placing more stores closer to existing units than they have in the past. Meanwhile, Lowe's Home Improvement stores are another likely anchor to new community centers in the future. Several new big box and junior-anchor type retailers are also seeking entrance to the Twin Cities market. Examples include Hon�eGoods, Dicks Sporting Goods and Sears Grand. • Considering the lack of urban and close-in suburban development sites, more retailers are expected to participate in the redevelopment of former office, industrial and even distressed retail properties. Examples are Twin Lakes, as well as Silver Lake Village in St. Anthony, involving the redevelopment of the former Apache Plaza site. GVA Marquette Advisors Page 39