Quick Stats. Hot Topics OVERVIEW

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1 CB RICHARD ELLIS MarketView Romania Retail H2 20 OVERVIEW Quick Stats Hot Topics Change from H1 H2 09 Stock Prime Rents Volatility of pipeline development: only 17% of the schemes in plan are under construction. We expect the delivery of 2,000 sq m of new retail space in Provisional level of retail stock per 1,000 inhabitants is of 3 sq m. New retailers in the market in : 1% of the brands operate in the fashion business, % in the food segment, 19% in the food & bar segment and 13% have various domain s of activity. Lower levels of new supply At the moment the modern retail stock stands at 2.20 million sq m, with around 19,500 sq m of space delivered in 20 alone (a decrease by 3% compared to new supply from 2009). The total stock is a result of traditional shopping centers and specialized retail parks. Discrepancy of demand and shopping center performance We register a discrepancy between big cities, especially Bucharest and the likes of Constanta, Cluj Napoca, Timisoara, Brasov, opposed to smaller cities and rural areas, in favor of the first. A consequence of this higher level of demand experienced in bigger cities, retailers have also focused their expansion plans towards these areas. As this report will further highlight, almost 9% of new retailers in the market have chose Bucharest as first target. Emphasis on prime properties versus secondary Disparity in terms of demand leads to a highlight between prime and secondary areas with prime products attracting most of the clients (both retailers and investors), while in secondary assets financial concessions, higher vacancy rates and long-term negotiation process are more common. Prime rent stable in the past several quarters Prime rent, for both on-street retail spaces (EUR 70 / sq m / month) and for shopping centers (EUR 50 / sq m / month) has been stable in the past 2 quarters. It has to be underlined that there is a significant variation in terms of net effective rents within a shopping center, even in similar domains of activity. Pipeline focused on over 200,000 inhabitants cities Currently there are 2,000 sq m of retail space under construction in Romania to be delivered in 2011, with only 30% of this to open in Bucharest. Major Retail Indicators H2 20 Retail Indicator H2 20 Over 51% of the transaction volume for plots of lands subject to transaction in 20 were for future retail developments. Modern retail stock New retail supply in 20 Forecast Completions 2011 Prime Rent (On-Street Bucharest) End 20 2,203,000 sq m 19,500 sq m 2,000 sq m 70 / sq m/ month Prime Yield (On-Street Bucharest) End 20.50% Prime rent (Shopping Centers) End / sq m/ month Prime yield (Shopping Centers) End % Source: 2011,, Inc.

2 STOCK & PIPELINE As seen in the chart on the right, the total stock of modern retail space in Romania (including Bucharest) is almost equally divided between shopping centers and retail parks a total of 2.20 million sq m. The retail stock increased by % in 20, coming from schemes. It total the provisional level of retail stock per 1,000 inhabitants is of 3 sq m. Retail Stock & Pipeline Bucharest & Romania as of End 20 Planned (Construction stopped) Planned (Not under construction) Planned (Under Construction) Stock Closed Bucharest Romania The volatility of pipeline development is evident in Romania, considering the following: out of a total of more than 1.3 million sq m of retail space in various stages of planning, only 17% are under construction (meaning 290,000 sq m). Schemes planned for opening in 2011 are: Maritimo Constanta, Palas Iasi, Colosseum Bucharest, Baneasa Shopping City extension Bucharest, Electroputere Craiova, European Retail Park Botosani, Galleria Arad. If all these schemes will be delivered, than the level of new deliveries to the market in 2011 will be higher by 2% compared to the level in 20. In Bucharest we register the highest number of projects in planning, but not under construction (meaning 55,000 sq m), while in overall Romania there is a higher number of schemes with construction stopped (32,000 sq m). Based on the macro-economic situation and the financing options available, a number of current on-hold projects can re-activate in 2011, thus changing the level of forecast completions for the following years. Stock Retail Parks 13% 9% Stock Shopping Centers Split of modern retail space in Bucharest 20 11% 2% % % 30% 25% Shopping Centers <20,000 sq m Shopping Centers 20,001-0,000 sq m Shopping Centers >0,001 sq m Retail Parks <20,000 sq m Retail Parks 20,001-0,000 sq m Retail Parks >0,001 sq m Factory Outlet Planned Under Construction Well-known hypermarket operators have investigated the market opportunities and have started out development projects; as such Auchan will be the co-developer of the retail park in Craiova, Cora has plans for 3 large size shopping centers in prime locations in Constanta, Brasov and Bacau, while Carrefour Property (the investment division of Carrefour) is looking at a partnership with NEPI for the development of a shopping center within their current location in Ploiesti. Retailers, especially anchor retailers from food and DIY segment, have been active in searching and securing strong market opportunities in the lands sections. These retailers are looking at large plots of lands in Bucharest, either former factories or lands bought with the intention of residential development. Over 51% of the transaction volume for plots of lands subject to transaction in 20 were for future retail developments (e.g. : Cora two plots, former factories in Brasov and Bacau). Retail Schemes under development Romania (selection) Retail Scheme GLA Developer City Maritimo Shopping Center 50,000 Immofinnanz Constanta Galleria Arad 29,000 GTC Arad ERP Botosani Electroputere Craiova Aprox. 20,000 51,000 BelRom Auchan & BelRom Botosani Craiova Corall Mall,000 Cora Romania Constanta Baneasa Shopping City - Extension 15,000 Baneasa Investment Bucharest Colosseum 5,000 Nova Imobiliare Bucharest Page 2

3 Q Q Q Q 2007 Q1 200 Q2 200 Q3 200 Q 200 Q Q Q Q 2009 Q1 20 Q2 20 Q3 20 Q 20 RETAILER ACTIVITY Romanians made their first shopping in local stores of international retailers like: Emporio Armani, Gucci, Coccinelle, Gerard Darel, Moschino, Back Werk, Pure Fitness, M.A.C, Brioche Doree, Camaieu, SIX. For 2011 other important names are expected: H&M (already securing several locations in Bucharest and in the province), Leroy Merlin, Lidl (has bought the Plus Discount chain in Romania, but intends to open other units), Subway and Burberry. Selective local names made an impression in 20: Mic.Ro, Bet Cafe Arena, Dedeman. Retailers were attracted by the availability in prime locations and the long-term sustainable rents which could be achieved. In the CBRE study How Active are Retailers in EMEA, Romania was ranked 15 in terms of retailer s expansion plans (out of 3 countries analyzed), with around 3 retailers being interested in the Romanian market. The genuine interest for expansion in 2011 is based on following premise: the economy will be on a positive growth trend, and retailers want to secure peak prime locations, which allow for strong market shares. The reason for this effervescence is Bucharest, the most crowded city in the country (% of the total Romanian population), with one of the lowest unemployment rate in European Union (2.3% in October 20). The signs of recession were felt mostly in secondary cities which experienced a clear drop in purchasing power, translated into lower spending levels and struggling retail schemes. We have analyzed the new retailers market coming to Bucharest / Romania in the past 1 months in terms of domain of activity, entry model and sales format. We have included in the calculation over 30 brand names which opened their first stores in this period Top 20 Country Targets 2011 How Active are Retailers in EMEA Country Rank % of Retailers Targeting Germany 1 1% Poland 2 33% France 3 33% Spain 30% UK 5 29% Czech Republic 7 2% Austria 9 27% Netherlands 11 2% Hungary 13 22% Romania 15 17% Portugal 17 1% Slovakia 19 15% Evolution of Unemployment rate, Q Q3 20 Romania Bucharest Constanta Source: CBRE, based on INS Split of new retailers in Romania by domain of activity The conclusions of the survey are as follows: 1% of the new brands operate in the fashion business (clothes, accessories and footwear), % in the food segment, 19% in the food & bar segment and 13% have various domain s of activity (e.g.: fitness operator, DIY store). 19% % 3% Fashion Food Food&Bar In terms of entry model, retailers tend to use the franchisee operators (over 70% of the brands analyzed are operating like this), thus only 30% are direct entry. Still in the category of over 1,000 sq m sales surface all retailers entered directly, with franchisee model used for under 500 sq m stores. Out of the 1% of retailers operating in the fashion segment, 21% are direct, the rest being franchisees. % 2% Various DIY Page 3

4 Q Q Q Q 2007 Q1 200 Q2 200 Q3 200 Q 200 Q Q Q Q 2009 Q1 20 Q2 20 Q3 20 Q 20 dec.09 ian. feb. mar. apr. mai. iun. iul. aug. sep. oct. nov. dec. RETAILER ACTIVITY Out of the 1% of the retailers that operate in the fashion sector, only 21% preferred to own their businesses in Romania, the rest being developed by franchises. In the category food & bar all brands use franchisee operators. International food & bar operators (with notable exceptions, like McDonald s) use the franchisee model, as it offers exposure to the market, but also security for mother-companies. It seems that for large size stores, direct entry is the model of operation in Romania not only these new brands in the market, but names like Zara, Stradivarius, C&A, New Yorker, all food and DIY operators, plus the newcomer of 2011, H&M entered directly the market. Split of entry model of new retailers by domain of activity DIY Various Direct Food&Bar Franchisee Food Fashion 0% 20% 0% 0% 0% 0% In terms of online sales, the end of the year brought a number of clone sites dedicated to coupon sales, with currently over 15 sites offering products and services at discounted prices (especially in Bucharest, but also in large cities in Romania). International retailers do not have a strong presence on-line at the moment, but upmarket Romanian consumer is using on constant basis the international multi-brand online shopping sites. As some suggested, the Romanian on-line client has moved from using online as a comparative and informational tool to using it as a direct acquisition tool Retail Trade Turnover y-o-y Dec 2009 Dec 20 Retail Trade y-o-y Average Retail Trade 20 RETAIL TRADE Retail trade turnover, as calculated by Eurostat, registered a higher volume than in 2009, with an average index for entire year of 2.13%. Still, the modest growth can be explained by the restricted consumer credit, the austerity measures imposed by the Government and the relative lack of confidence in the economic performance. The spike in trade turnover in June 20 represents a short term effect of the VAT increase (from 19% to 2%) scheduled for the following month, July 20. Unfortunately, retail trade in December 20 did not match expectations of retailers, as retail trade turnover dropped by -1.7% compared to same month of 2009 (provisional data). (source: Eurostat) Source: CBRE, based on Eurostat Evolution of prime yield on-street retail major CEE capitals Sofia Prague Budapest Bucharest Belgrade Bratislava INVESTMENT All investment transactions for retail products of 20 were concluded during the first half of the year, reaching a level of 19,9 million (over 0% of the total investment volume for 20 in Romania). Lack of market evidence and lack of transparency in the sale transactions of onstreet retail spaces is a major obstacle in evaluating the prime yield for such premises. Currently we estimate the index at.50%, but there are strong chances for compression in coming months Page

5 H2 20 MarketView Romania Retail Bucharest Retail Map For more information regarding the MarketView, please contact: Laura Bencze Research Manager t: e: Luiza Moraru Head of Retail Department t: e: Radu Lucianu Managing Director Romania, t: e: Disclaimer 2011 Information herein has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of. Copyright 2011 Page 5