european retail commentaries q2 2009

Q2 2009

European Retail Commentaries

For internal use only

2 On Point • European Retail Commentaries • Q2 2009 For internal use only

Belgium

Consumer and Retail Trade Confidence

-35-30-25-20-15-10

-505

1015

Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Consumer Confidence

Long Term Consumer Confidence Average

Retail Trade Confidence

Long Term Retail Trade Confidence Average

Source: The European Commission

Key Economic & Consumer trends Consumer confidence in March 2009 remains at a record low level although a slight upturn in sentiment is expected. Nevertheless retail sales in Belgium have remained fairly stable with a strong start in 2009, which shows that consumers have not stopped spending.

Retailer Demand Shopping Centre RW Parks Unit Shops

Primary

Secondary Low High

Occupier trends Retailer demand remains high due to the lack of product. However most retailers are being more cautious with their expansion plans and are focussing strictly on prime locations. Rents in prime locations have remained stable although the key money retailers are willing to pay is decreasing.

Consumers are spending less on large purchases such as cars and homes, but food retailers seem to performing well. Also some major retailers perform better than earlier comparable periods such as Inditex, C&A, Aldi, and Lidl. Others have had to sacrifice their margin to keep their turnover growing.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Warande in Beveren, Shopping Centre on a high street, by ING

RE, 12.000 sq m About 2 million sq m of retail projects are planned for the coming years. More than half is still in its design phase and might never be developed. Delays on some projects are likely due to the difficulty in obtaining the necessary permits and the current economic climate.

Shopping centres are the biggest part of the pipeline, including two major shopping centres which are scheduled to open in 2009: K in Kortrijk (34,000 sq m) and Media Cité (41,000 sq m) in Liège. Other projects include the Anspach Center, a gallery of 7,000 sq m by Fortis RE in the centre of Brussels, and the 21,000 sq m retail park Frunpark in Izegem.

Investment trends Q1 2009 Retail Investment Volume* €19mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Retail capital values have decreased but have proven to be more defensive than other market segments such as offices and logistics. Even so prime yields have moved out by approximately 50BP. Private investors are still interested in small high street units but less in big retail schemes with no proven track record.

Contact: Wim Ottevaere +32 25 502 519

On Point • European Retail Commentaries • Q2 2009 For internal use only 3

Czech Republic


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Apr-06

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Consumer ConfidenceLong Term Consumer Confidence AverageRetail Trade ConfidenceLong Term Retail Trade Confidence Average


Key Economic & Consumer trends Following strong Christmas sales, the first quarter showed a slowdown in retail sales because of increasing unemployment, and consumers rather save their money than spend it. Government refused to undertake measures similar to neighbouring countries in order to support consumer spending on new cars, which was criticized by the opposition. The current governmental crisis, the parliament forced the government to resign, does affect the overall mood of consumers and therefore the consumer spending.


Primary

Secondary

Low High

Occupier trends The demand remains limited, with the only exception being the prime locations, where demand remains strong.

Other trends and openings - Korres Athens and Henry Cottons opened their first shops - Few coffee shop operators, such as McCafé, are looking for

their new space following the entry of Starbucks - Some international retailers are looking for new space, but with

the current market situation the date of their market entry is unsure.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Forum Liberec, Liberec, shopping centre, 18,200 sq m - Liberec Plaza, Liberec, shopping centre, 17,000 sq m While the first shopping centre opened in Liberec late February, the second one followed a month later. Forum Liberec, the first shopping centre, so far seems to be performing well, given current market conditions. As forecasted by Jones Lang LaSalle Liberec is too small for two centres and therefore Liberec Plaza opened with only approx 2/5 of its units let.

For 2009 we expect the number of completions and especially number of new started projects to drop, as finance is difficult and retailers are more cautious, making leasing of new centres more difficult.

Investment trends Q1 2009 Retail Investment Volume* €0 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. There were no retail investments in the first quarter of 2009

Contact: Ondrej Vlk +420 224 234 809


Finland Consumer and Retail Trade Confidence

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-505

1015202530

Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Consumer Confidence





Key Economic & Consumer trends 2008 was the 15th year of consecutive growth in retail sales in spite of growth slowing down at the end of year due to macro economic difficulties. The slowing trend continued in Q1 2009; especially car and electronic sales suffered. The research institute of the Finnish economy forecasts that private consumption will decline with 4% in 2009 because of decreasing wages and salaries. The income tax relief, decrease of VAT on food, low inflation and record low interest rates will increase purchasing power of consumers but they might be too cautious to spent money on retail goods.

According to a research paper of the Finnish Post Finnish people spent €1.4bn on internet sales in 2008, up approx. 8% from previous year. During the last ten years the growth in internet sales has tripled.


Primary

Secondary

Low High

Occupier trends - Terra - Finnish hardware store chain - is expanding to

emerging cities - Selected -fashion store is renovating premises for its new

brand store along the main shopping street in Helsinki - Demand for retail space in Helsinki CBD is still strong - Discount stores are strengthening their market position

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - New Prisma Hypermarket next to Itäkeskus shopping centre - Two new hardware stores (Kodin Terra) opened in Pori (14,700

sq m) and Jyväskylä (16,000 sq m) - Leading department store Stockmann is opening its first phase

of a new restaurant on the top floor in Helsinki. Significant retail development projects are under construction and will open this year such as the second phase of Shopping Centre Ristikko and the re-development of Prisma hypermarket in Kannelmäki which will be the first phase of a forthcoming shopping centre.

No new major shopping centre developments have been launched in the last quarter but some major projects are still in their planning process (Ideapark in Kiiminki). Most other projects are still on hold or postponed.

Investment trends Q1 2009 Retail Investment Volume* €64 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Activity in the retail investment market was weak in Q1 and only one significant transaction was closed. A Finnish insurance company Varma bought a retail development project from a Finnish constructor Skanska in Jyväskylä. A major retailer Kesko re-arranged its holdings by selling four properties to Kesko pension fund for €50 million.

Most investors are still waiting for opportunities and the recovery of the dept market. In the current market it is likely that only Finnish institutional investors will invest and only in emerging cities. Secondary assets are still suffering from a lack of investment demand.

Contact: Tero Lehtonen +358 40 565 53 89 and Kaisu Pienimäki +358 40 703 27 83


France Consumer and Retail Trade Confidence

-40-35-30-25-20-15-10

-505

1015

Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09



Key Economic & Consumer trends In spite of the economic downturn, retail sales in January were good because of high levels of discounts and increased 3.1%. In February, the CNCC shopping centre attendance index decreased 6.7% compared to the same month in 2008.

In March, the CNCC shopping centre attendance index decreased by 4.9% compared with the same month in 2008 due to the rise in unemployment (+ 90,000 unemployed people in January and + 80,000 in February) and the decrease in consumers purchasing.

Retailer Demand Shopping Centres RW Parks Unit Shops

Primary

Secondary

Low High

Occupier trends Slowdown in household spending leads to caution amongst retailers. Therefore retailers are focusing on the best locations while the gap between prime and secondary locations increases. New foreign brands continue to expand in France: - The American brand Fossil continues its deployment. After

having opened its first store in Passage du Havre in Paris, four new opening are planned for 2009 (in shopping centres only)

- H&M opened their first COS store in Rue des Rosiers in Paris.

In the same street, the brand SLVR from Adidas has opened its first French store. It is a new ecological and value brand.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable opening in Q1 2009: - Châteaufarine, Besançon, renovation, 13,000 sq m GLA,

opened in March. Due to a slow down in expansion of retailers, the development activity has slowed down. Several schemes have been postponed or cancelled. Therefore the focus is more on improving existing shopping centres.

Investment trends Q1 2009 Retail Investment Volume* €0 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. The French investment market is currently characterised by strong demand and a relatively limited supply of appropriate product resulting in an absence of significant transactions on which to base pricing. In Q1 2009, the retail sector accounted for only €52mio in France, which included only small retail unit shops bought by domestic investors. However, investors are actively seeking opportunities in the French market, especially German investors, because of the significant rise in yields, relative sustainability of performance and rents, and renewed activity is expected in the coming months.

Contact: Sophie Benainous +33 1 40 55 85 15


Germany


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1015

Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Consumer Confidence





Key Economic & Consumer trends - Inflation is at very low level. Consumer Price Index rose by

0.5% from March 2008 to March 2009. This is the lowest rate since July 1999.

- Consumption sentiment is stable for now but will be subjected to changes to unemployment levels in 2009.

- The car-scrap bonus (a government programme) of €2,500 for a new car and demolishing an old car has been extended. The bonus will be paid till the end of the year with the government budget capped at €5bn.


Primary

Secondary

Low High

Occupier trends National and international retailers, which are already in the German market, are continuing their expansion but only in the top prime locations, particularly retailers in young fashion, consumer electronics, book stores and shoes. Due to the current economic situation the demand for unit shops in secondary locations has become noticeably weaker. Only the demand for unit shops in prime locations remains strong.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Only in prime locations rents remain stable. In secondary locations rent decrease is likely.

Development trends and notable openings New shopping centre openings Q1 2009: - MyZeil, NLA 42,000 sq m, Frankfurt/M., February 2009 Notable unit shops openings Q1 2009: - Tally Weijl, 700 sq m, Düsseldorf, Flinger Straße - Rolex 250 sq m, Berlin, Kurfürstendamm - Roland Schuhe 1,200 sq m, Köln, Schildergasse Investment trends Q1 2009 Retail Investment Volume* € 278.60mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. - Equity driven investors are dominating the market - Prime product with a lot size of €20-70mio is preferred - The market shows signs of improvement after Q4 2008. - Investors are analysing investment opportunities more

intensively than previously. - International investors expect further shift in pricing because of

pricing in other European countries, but there continues to be demand for prime product.

- German investors are dominant in the market. - Increasing demand from private individuals for smaller lot sizes

(€5-30mio with high street preferred) - Financing still limited but banks are coming slowly back to the

market - First deals over €100mio on the horizon. Contact: Helge Zahrnt +49 40 350011269 and Bettina Borchmann +49 211 51877146


Hungary Consumer and Retail Trade Confidence

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0 Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

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Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

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Aug-08

Oct-08

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Feb-09

Apr-09

Consumer Confidence





Key Economic & Consumer trends Consumer demand has decreased over the last 9 months in Hungary due to the worldwide financial crisis. Customers have dramatically cut their spending, and sales declined in Q1 2009. The “season” sale in January-February this year was successful, although retailers found it necessary to cut prices with 50 and sometimes 70 to achieve the planned sales revenue. Retailer Demand

Shopping Centre RW Parks Unit Shops

Primary

Secondary

Low High

Occupier trends - Retailers are very selective regarding new projects and careful

with expansion. Many retail chains are re-negotiating rents and other terms both in new projects and in existing centres.

- Trading results continue to slow down: -20-25% for fashion and -50% for recreation and entertainment

- The discount stores are still operating well, but the turnovers in the mid-level and luxury segment may decrease further.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Corso Kaposvár – 15,000 sq m (Tenants: Brendon, C&A,

Charles Vögele, Deichmann, New Yorker, Orsay, Takko) All the planned developments in the beginning of 2009 are going ahead at this stage in Budapest; however some of them will face financial difficulties and delays. The 47,000 sq m ALLEE is due to open in November 2009. The 56,000 sq m KÖKI Terminal in Köbánya-Kispest and the 34,000 sq m Corvin Átrium in the 8th District are in the process of letting their shops. Loans are more difficult to access because 35% pre-let is required to receive the first transfer. In the next two-three years 3-4 new shopping centres, multifunctional developments, are expected to complete, however more retailers are putting their expansion plans on hold, therefore more delays are expected. Investment trends Q1 2009 Retail Investment Volume* €0 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. In the first quarter of 2009, there were no institutional investment transactions in the Hungarian real estate market. The global crisis and the specific macro-economic problems of Hungary had an impact on the willingness and capacity of traditional core investors to close transactions. This is in line with the trend already witnessed in the second half of 2008. Contact: Andrea Marian +36 1 489 02 02


Ireland

Consumer Sentiment Index

0

20

40

60

80

100

120

Q4 01

Q2 02

Q4 02

Q2 03

Q4 03

Q1 04

Q2 04

Q3 04

Q4 04

Q1 05

Q2 05

Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

% Growth of GDP

Source: IIB Bank/ESRI, September 2008

Key Economic & Consumer trends Consumer spending has continued to decline significantly in the first quarter of 2009. The latest figures from the CSO show that the volume and value of retail sales decreased by -20.9% and -23.4% respectively in the year to February 2009. The largest fall in the volume of sales in the year to February (excluding motor trades) was in the furniture and lighting market which fell by -22.1% - a continuation of the trend for significant declines in this sector as a consequence of the ailing housing market. Falling demand has pushed Ireland into a deflationary situation with the Consumer Price Index declining -2.6% in the year to March 2009.

Consumer sentiment weakened further during the quarter to March with the KBC Bank Ireland/ESRI Consumer Sentiment index decreasing to 44.1 (from 50.2 in December 2008). Sentiment has declined severely in the year, falling by over 30%. Ongoing rises in unemployment figures will also continue to have an impact on the level of disposable income which retail customers have available to spend during the coming months.


Primary

Secondary

Low High

Occupier trends As a result of the prevailing economic conditions and resulting fall off of demand retailers are experiencing very challenging trading

conditions. As predicted, a number of retailers have gone into administration or have left the Irish market in the months following the Christmas period.

Value retailers such as Penneys, New Look, TK Maxx, H&M, Lidl and Aldi are continuing to benefit from the difficult economic environment and may be in a position to pursue expansion plans on their terms.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Carton Park, Kildare - 27,375 sq m (Shopping Centre). - Market Green Retail Park, Cork – 4,552 sq m. The supply of shopping centre space in Ireland will continue to rise during 2009. In Q1 2009 27,375 m2 of shopping centre space completed at Carton Park in Maynooth. There are a further four shopping centres currently under construction and due to open by the end of the year. These are the Opera Centre in Cork, Ferrybank Shopping Centre in Waterford, Naas Town Centre and Showgrounds Shopping Centre in Clonmel, totalling 90,168 sq m of retail space scheduled for completion during the remaining three quarters of 2009.

Investment trends Q1 2009 Retail Investment Volume* €30m *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Activity remains severely restricted in the Irish investment market, with the vendor/buyer mismatch on price still remaining, although narrowing.

Financing conditions are very poor and a lack of confidence and increasing distress in the occupier markets are now also having a negative impact.

Contact: Gemma Sturdy +353 1 6731600


Italy


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Feb-09

Apr-09



Key Economic & Consumer trends The unemployment rate continued to increase in the 1st quarter of 2009. This resulted in a worsening of the consumer market which already began to deteriorate in 2008. The impact on the retail sector has been significant, and the good turnovers of the Christmas sales and the end-of-season sales quickly disappeared. Retailers have consequently slowed down their expansion plans and renegotiating their already signed contracts.


Primary

Secondary

Low High

Occupier trends Retailers in furniture, home ware, DIY and food & beverage retailers continue to be active. In the furniture and home ware segment, both national (Mandi, Semeraro) and international (Jysk, Maison du Monde, Ikea, Casa) are expanding. However, deals take longer to close and with lower rents than previous quarters. The French Group Adeo (DIY) bought Castorama Italia and monopolized the market. In the food and beverage sector, all brands revised their format, focusing on supermarkets and smaller centres/convenience stores. The discount centres, both factory outlets and discount supermarkets, are showing a stable expansion pace, because of their low product prices.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Montedoro Free Time Park (Muggia, Trieste, mixed use,

42,000 sq m) - ETRA – Tiburtino (Guidonia, Roma, commercial gallery,

43,000 sq m) - Carrefour Porto Bolaro (Porto Bolaro, Reggio Calabria,

commercial gallery, 15,000 sq m) Investment trends Q1 2009 Retail Investment Volume* €306 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. - Further yield decompression throughout 2009 - The Italian market has not corrected as much as some other

European cities such as London, Paris and Madrid - Investors that are still active are Institutional investors,

Opportunity funds, International wealth entities, some German open and closed ended funds. Also equity investors are becoming more active (banks are highly selective in their lending criteria or even stagnant).

- There is still a demand for prime shopping centres located in northern regions with an ideal price between €35-75mio. There is a low demand for development projects in secondary areas and retail warehouses.

- Investment opportunities arise from developers in distress and funds which need to sell.

- Investors adopting a ‘Wait and see’ attitude and are waiting for more price corrections

- Active Asset Management becomes fundamental to keep income stable and increase the value of property portfolio

- Retailers are looking for merger and acquisition opportunities (retailers in distress, in need of restructuring their business strategy)

- Opportunities for non domestic retailers to enter the Italian market

Contact: Elisabetta Terzariol +39 02 36010 578


The Netherlands


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Apr-09

Consumer Confidence



Key Economic & Consumer trends - The Dutch economy is in recession and is expected to shrink

by 3.5% – 4.0% in 2009. - The unemployment rate is increasing, but is still at a low level. - Consumer spending is shifting from Non-food to Food. Non-

food turnover is declining, especially cars, furniture, luxury goods, DIY, fashion and electronics.

- After months of decline, consumer confidence showed a strong increase in April 2009.

- Despite the crisis, there is a strong increase in online sales which increases its market share.


Primary

Secondary

Low High

Occupier trends - There is an explosive growth in arrears of rent of retailers. After

a slow increase in 2008, it accelerated in Q1 2009. - Boundaries between food and non-food are blurring.

Supermarkets are introducing non-food products, while department stores start selling food products.

- Retailers in the three outlet centres profit from the current crisis, and see their turnovers increase.

Retailers which are currently expanding: FCUK (UK), Thomas Sabo (Germany), River Island (UK), Boots (UK), Jysk (Denmark), Tiffancy & Co. (US), Marc o’Polo (Germany), De Tuinen (UK), Hema, V&D, Media Markt / Saturn (Germany), BCC (UK), Topshelf, Coffee Company, G-Star, Hema, Van Lier, PostMasters, Jamin.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Take-over sums, which are common for unit shops and shopping centres in addition to the agreed annual rent, are declining. Vacancy on secondary locations is increasing slowly which results in a downward pressure on rental levels.

Development trends and notable openings Developers have difficulties in raising credit from banks. Several developments are postponed or cancelled.

Notable opening Q1 2009: - First stores in The Wall Q1 2009. The Wall is a unique high

quality retail park development of 65,000 sq m GFA. With a length of 800 meters, it serves as a sound barrier against the adjacent motorway and it is the longest building in The Netherlands.

Investment trends Q1 2009 Retail Investment Volume €114 *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. The only sellers are distressed sellers who are selling their products for low prices. Purchasers adopting a ‘Wait and see’ attitude due to increased cost of capital and expected decline of property prices. Both institutional and private investors are more cautious acquiring new real estate objects and portfolios.

Although prime yields did not move out in Q1 2009, stabilization is not expected before H2 2010. More retail transactions are expected in Q2 2009.

Contact: Tjard Martinus +31 205 405 405


Poland


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Key Economic & Consumer trends The Polish economy continues to slow. According to the Central Statistical Office, retail sales fell by 0.8% in March 2009 y-0-y continuing the negative trend. In Feb 2009 retail sales fell by 1.6% - the first drop since 2005; unemployment is rising, 11.2% in March 2009 and 10.5% in Jan 2009; the inflation rate in Q1 2009 was 3.3% y-o-y; Consumer confidence fell by 21.3% in Feb 2009 (y-o-y), which is the lowest level since 2004. Retailer Demand Shopping Centre RW Parks Unit Shops

Primary

Secondary

Low High

Occupier trends Retailers are selective towards new locations, and expanding only in prime schemes of reliable investors with financing possibilities in the major cities (above 200,000 inhabitants). We observe high requirements and strong pressure regarding tenants’ incentives – e.g. higher fit-out contribution or step rents.

Retailers that expanded in 2009 are Starbucks (in April), Zara Home, Brooksfield, Parfois, Woman Secret, Avanti. Some domestic retailers have serious financial problems such as Krosno and Galeria Centrum. Royal Collection is having serious financial problems and therefore has put their expansion plans on hold.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009 (95,300 sq m): - Malta shopping & leisure centre in Poznań (52,200 sq m) - Przymorze shopping centre in Gdańsk (23,600 sq m) - Solaris shopping & leisure centre in Opole (19,500 sq m) The shopping centre pipeline for the whole 2009 was recently revised downwards from 1,200,000 m2 to approx. 570,000 sq m. Further downward revisions are possible due to expected delays of construction works. Further openings till the end of 2009: 470,950 sq m in 23 schemes (including extensions), such as: Bonarka (91,000) and Jurajska (48,000)

Out of the remaining 2009 pipeline 73% is under construction and 28% is located in major agglomerations. We expect that most of the schemes that are already under construction will be delivered; however, some delays are possible. There are few big projects that have been stopped due to lack of financing (e.g. Felicity in Lublin, Wzgorze in Gdynia). Investment trends Q1 2009 Retail Investment Volume* €0 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. - The gap between sellers and buyers expectations will get

closer because of re-pricing - Investors are focusing on prime assets and smaller lot sizes ca.

€50-70mio - Opportunistic investors are targeting the market, but they want

to buy at 9%+ yields. However, for now none of the sellers are accepting such yields.

- Overall sentiment about the long term fundamentals in Poland is positive, especially towards occupier demand.

- Some investors are turning to cost cutting solutions, for example acquiring retail park schemes (e.g. Helical, Parkridge, Ires).

Contact: Patrycja Dzikowska +48 22 318 0003


Portugal


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0

Apr-06

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Aug-06

Oct-06

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Feb-07

Apr-07

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Apr-09

Consumer Confidence





Key Economic & Consumer trends Statistics from the European Commission show a significant decline for the Portuguese economic sentiment, reflecting a deterioration in confidence in most sectors including consumers. Consumers shop more times a week for food but spend less each time they visit and buy cheaper products.


Primary

Secondary

Low High

Occupier trends Due to the current economic context, retailers continue to be very cautious regarding their expansion plans. Some retailers have put their expansion plans on hold and are waiting for consumer confidence to increase. In some cases retailers even pulled out of negotiations when contracts were almost signed.

However, despite the economic crisis, some international brands entering the Portuguese market, like the Irish brand Primark and the Spanish brand Poly, which will open its first store in Portugal in the Dolce Vita Tejo.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Portimão Retail Center, in Portimão, Algarve, 11,616 sq m As seen in previous quarters, developers remain cautions and are holding back with starting new projects. To ensure that projects do not address the same catchment area and the same target audience not all projects will go ahead.

Investment trends Q1 2009 Retail Investment Volume* 0€M *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. The lack of liquidity, the difficulties in financing and the unrealistic pricing in relation with today’s market will continue to leave a mark on the Portuguese investment market in 2009.

Contact: Alexandra Gomes +351 21 358 32 22 and Cristina Cristovão +351 21 358 3239


Romania


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Consumer Confidence




Source: The European Commission Key Economic & Consumer trends The most important macroeconomic trends for the Romanian market are the depreciation of the RON and the acute lack of financing. The luxury retailers are worst hit by the economic trends, while the food and DYI sector seem the most resilient sectors.


Primary

Secondary

Low High

Occupier trends Retailers are rethinking their expansion plans and optimising their current network. International retailers continue their expansion but are more cautious when selecting projects. There is a decrease in the demand from local retailers due to the difficult access of finance.

Retail sales decreased by almost 1% in January 2009 but the performance of the different retailers varies a lot. Some retailers see large declines in their turnovers while others experiencing 20% growth Y-o-Y.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Grand Arena, Bucharest, shopping center, 37,000 sq m - Galleria GTC, Suceava, shopping center, 20,000 sq m - ERA Park, Oradea, phase 1, retail park, 25,000 sq m - Plaza Romania, Bucharest, extension, 7,000 sq m There is still a solid pipeline for 2009-2010. Projects under construction will have higher chances to open on time but the planned schemes could face serious delays. Financing will get more difficult because a certain percentage of units need to be pre-let in order to receive the financing.

Investment trends Q1 2009 Retail Investment Volume* 0€M Change Y-o-Y 2007 – 21€M *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. The investment market in Q1 2009 was characterized by lack of liquidity and lack of activity. While several opportunistic funds are actively analyzing potential retail projects at significantly discounted pricing compared with the pricing levels in Q1 2008, no significant retail transaction has actually closed in 2009 and the gap between vendors’ and buyers’ expectations remains.

Only two company buy outs were publicly announced during Q1 2009. The first involved a corporate transaction between the Belgian Delhaize Group (Mega Image as the buyer) and the local supermarket chain Prodas (as the vendor) of 4 Bucharest supermarkets. The second involved the sale of a shopping center project in Ploiesti by the AIM-listed British fund Lewis Charles to the Irish property fund, Blackpearl Property.

Contact: Costin Blideanu +402 1 302 3414


Russia Key Economic & Consumer trends Real disposable incomes have been declining since September 2008, and were down by 7.2% YoY in January-February 2009. As a result retail turnover showed negative growth for the first time in the last eight years, declining by 2.4% YoY in February. The crisis continues to influence the consumption pattern and consumers are spending more on food and less on expensive products.

According to Comcon research agency, the number of people visiting cafes and restaurants has decreased by 20% in March compared to 10% last November. In addition, the average restaurant bill has declined by 40%. However, food court and cinema visits continue to be strong due to their low prices.


Primary n/a

Secondary n/a

Low High

Occupier trends Foreign retailers are still entering the Russian market, such as H&M (Sweden, fashion), River Island (UK, fashion), BEBE (USD, fashion), and IKKS (France, fashion) in Metropolis SC, Van Gaaf (Germany, luxury fashion) in Zolotoy Babilon Rosotkino in Moscow. Carrefour is highly likely to open in Filion SC (Moscow) in May 2009 and in Galaktika SC (Krasnodar) later this year. Other foreign retailers, like Auchan and Metro, continue their expansion in the Russian regions.

Several luxury retailers have left the market due to low profitability. Arts Group closed its franchise boutiques Stella McCartney and Alexander McQueen. Diesel kept only one of six stores. In order to attract new customers retailers try to diversify their offer. Two Russian retailers are targeting young consumers with new, inexpensive brands: Love Republic (clothes) and Centro (footwear).

Retail operators are forced to change their business plans, to survive in the current market conditions and adopt low margins. This gives an advantage to discounter type retailers like Auchan.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks n/a Development trends and notable openings Notable openings Q1 2009: - Metropolis SC (Moscow, 80,000 sq m GLA); - Megapolis SC (Moscow, 44,000 sq m GLA); - PA-NA-MA SC (Tumen, 20,000 sq m GLA). More regional projects have been delayed because of financing problems, such as Atrium European Real Estate delayed its three Park Houses, Vista LLC delayed its six Vega SEC, and Midland Group delayed its Million Melochey SC. The number of delayed projects in Millionniki cities accounts for 20% of the total pipeline for 2009-2010.

New types of shopping centres are expected to be developed in Moscow: Fashion House Development and GWA Sawyer planning to develop an outlet mall with a GLA of 40,000 sq m.

Investment trends Q1 2009

Retail Investment Volume* €107mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Investment volumes continued to slow down in Q1 2009. No schemes under development were traded during this period, and 44% of the investments were in the regional markets. In Q1 2009 domestic investors took over from foreign investors who where more active in previous years as investors are focusing on their own markets.

Investors are being restrained by the lack of financing and also hold back acquisitions due to market instability and on-going price adjustments. A number of distressed assets appeared on the market in Q1 2009. 2009 will be a year of M&A deals in all economic sectors, including commercial real estate.

Contact: Olesya Cherdantseva +7 495 737 8405 and Roksolana Nechmyrya +7 495 737 8250


Spain Consumer and Retail Trade Confidence

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-10

0

Apr-06

Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

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Dec-07

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Apr-09



Key Economic & Consumer trends Although the economy continues to contract, the slow down seems to be less severe than previous quarters. Sales via internet continue to grow but on a slower pace. The growth in 2008 was 39% vs. 74% in 2005, but internet sales still account for €5.2bn. There is still a strong potential for internet sales because the number of online purchasers is still low compared to the number of internet users.


Primary

Secondary

Low High

Occupier trends Retail sales continue to decrease and even more than in Q4 2008. Therefore retailers are selective and expanding only with the right incentives and they are negotiating lower rents. However low value chains and discounters are still performing well.

The most active operators are H&M, Sport Zone, Mango Men, Orange and Primark. Other retailers are trying to enter the Spanish market such as Blanco Men, Marwa, Worten and G-Star. Most new retailers are specialised in fashion and beauty, such as Uterqüe (Inditex group), Mango Touch (specialised in accessories), and Avanti (C&A's second brand), as well as Fashionkids and the new concept Imaginarium 08, dedicated to the children's sector.

Short-term outlook on rental growth

Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Alhsur in La Zubia (Granata), 4 level shopping centre

18,000 sq m GLA. - Puerta de Ave, a small retail warehouse Park in Ciudad Real

with 8,000 sq of GLA. Developers continue to have problems because of low retailers’ demand and lack of finance. Rental expectations are not being met and due to yield shift many projects are not feasible.

Investment trends Q1 2009 Retail Investment Volume* €0 mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Investors are focusing on prime properties in the major cities because of concerns about decreasing retail sales and uncertainty of feasibility for new developments..

Declines in asset value are expected to continue due to the adjustment in rental levels and yields. Despite current price corrections there is still a gap between the price expectations of sellers and buyers.

Contact: Borja Reig +34 91 789 11 00


Sweden


-30

-20

-10

0

10

20

30

40

Apr-06

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Consumer Confidence





Key Economic & Consumer trends Private consumption growth will remain stable in 2009 and will increase 1.0% in 2010 according to the Swedish Retail Institute (HUI). In 2008 private consumption decreased with 0.2% in 2008.

Retail sales growth was 3.3% in 2008, but not all retailers performed well. Furniture and electronic retailers were hit harder than other segments. The Swedish Retail Institute (HUI) is forecasting retail sales to grow 1% in 2009, -1% for the non daily goods and 3% for the daily goods.


Primary

Secondary

Low High

Occupier trends The number of retailers have gone into administration has increased with 57% in the first three months of 2009 compared to the same period in 2008. Most retailers are small with one notable exception Bagur, the owner of the city gallery SOUK in Stockholm.

Other retailers are selling or closing their stores. The electronic chain PC City will close all their eight stores in Sweden. The owner Elkjøp Nordic will instead focus on their other electronic chain Elgiganten. The fashion group RNB (Retail and Brands) has sold their stores in the city galleries NK, in Stockholm and Gothenburg, to Åhléns for SEK 440 million. Åhléns has also announced that they

plan to develop pharmacy stores when the pharmaceutical monopoly ends, which is expected in July 2009.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Malmö Entre, Malmö, shopping centre, 25,000 sq m GLA - Sickla köpkvarter, Stockholm, shopping centre, extension of

12,000 sq m (New GLA 23,000 sq m) Retailers have become more cautious with their expansion plans and it has become increasingly more difficult to secure tenants for new projects. The large shopping centre development project Emporia outside Malmö was planned to open in 2011 but has been delayed by at least one year.

Investment trends Q4 2008 Retail Investment Volume* €35mio *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. Only three retail transactions were closed in the first quarter and only by domestic investors. The slow down in investments is due to the gap between vendors and purchasers expectations and not because of a lack of product. Both primary and secondary assets are available. In addition financing is still difficult therefore investors prefer small investments.

Contact: Karolina Nystrom +46 8-453 52 03


Turkey

Consumer and Retail Trade Confidence Source: Central Bank Turkey

Key Economic & Consumer trends The Turkish economy slowed down to 1.1% in 2008 from 4.6% in 2007. The latest IMF projections show a negative growth of 5.1% in 2009. Market expectations show a negative growth for the first quarter of 2009, but consumer confidence index has been improving. The index had hit its lowest level by the end of 2008 at 68%, but has been improving since the beginning of this year and reached 74.8 % as of March 2009.

The government’s measures such as the tax reduction in electronics, automotive sector, white goods and furniture have improved the demand for these products and consumer sentiment. These were reflected on the March turnover figures, which recorded 6.8% increase over February 2009. However, the first quarter turnover figures show a slight increase over the first quarter of 2008.


Primary NA

Secondary NA

Low High

Occupier trends Retailer demand has slowed down since the second half of 2008 due to the economic conditions. However, retailer demand remains strong for primary shopping centres and unit shops. Retailer demand is also strong for outlet centres because of the increasing popularity of outlets, because of their low prices for consumers and

low inventory costs for retailers. In general, retailer interest is high for projects with a good catchment and optimal tenant mix.

Electronics retail chains, such as Media Markt and Electro World, and food stores continue to show a strong demand. Luxury retail turnovers have been affected, but Prada and Miu Miu are planning to open stand alone stores in Istanbul.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks NA Development trends and notable openings Notable openings Q1 2009: - Mozaik Shopping Centre in Ufa, its first modern shopping

centre, 15,000 sq m GLA - Demirpark Shopping Centre in Zonguldak, Black Sea region,

also its first modern shopping centre, 18,000 sq m GLA. Shopping centre development slowed down in the first quarter of 2009 because of deteriorating economic conditions. Some planned schemes were put on hold and only 2 shopping centres opened in the 1st quarter.

Investment trends Q1 2009 Retail Investment Volume* Unknown *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. There was only one small retail transaction in the Turkish market, which involved Corio`s increase in their stake in Teras Park Shopping Centre in Denizli from 40% to 51%. The slow down in retail investments is due to the gap in yield expectations between local investors and international investors. Local investors are not as leveraged as the Western investors, which leaves them in a more comfortable position regarding liquidity. Unless they are satisfied with the yield offers they are not in rush to sell their assets, except for a few distressed assets. However, some of the international investment funds are showing interest in prime products, to benefit from the medium to long term retail strength of the Turkish market.

Contact: Idil Hamzadi +90 212 350 08 21

50

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70

80

90

100

110

Jan

07

April

07

July

07

Oct 0

7

Jan

08

April

08

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08

Oct 0

8

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09

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%


UK Consumer and Retail Trade Confidence

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0

10

20

30

Apr-06

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Consumer Confidence




Source: The European Commission Key Economic & Consumer trends The UK economy shrank by 1.9% in Q109 according to ONS, which was worse than expected and the largest quarterly decline since 1979. Increased levels of unemployment will likely impact on consumer spending and result in more vacancies on the high street, although some retailers have reported a positive shift in consumer confidence and spending trends, suggesting a softening or even bottoming out of the downward pressure on the retail market. The online-sales continue to thrive, with average weekly sales volume up from £167m in February to £172m in March.


Primary

Secondary

Low High

Occupier trends There continues to be a mixed picture on the high street. Retail Sales Volumes were 1.5% higher in March (YoY) according to ONS, with fashion and food retailers performing well, helped by the fine weather early in the month. Despite this, an average of 7 retailers per day fell into administration in Q109 (PWC) – a 60% rise on the same period last year.

Value retailers are performing well; with Original Factory Shop for instance recording a 12% YoY rise in customer numbers over the last quarter. Discounting, which was widespread and aggressive earlier in the year died down during February/March and will hopefully help restore some confidence in the sustained pricing of goods

Retailers that have posted strong results in this recessionary period will look to take advantage of weakness in the property market, with Superdry (Young Fashion) and JD Sports (Sportswear) amongst those planning to expand their portfolios.

Short-term outlook on rental growth Rental Growth Unit Shops Shopping Centres Retail Warehousing Parks Development trends and notable openings Notable openings Q1 2009: - Arc shopping centre, Bury St Edmunds (24,500 sq m) Sentiment in the development market remains relatively poor as investors and developers continue to display caution in committing to new or proposed schemes. Capital Shopping Centres’ Westgate scheme in Oxford has already been delayed and looks set to be shelved, whilst construction is still yet to begin on Centros’s 1 million sq ft Northern Quarter development in Portsmouth.

Notable retailer openings include the upmarket US brand Michael Kors which opened its first standalone store on New Bond Street in April, whilst Italian luxury retailer Boggi will open its first UK store in July on Jermyn Street, London.

Investment trends Q1 2009 Retail Investment Volume* €1.3bn *Includes shopping centres, retail warehouses, supermarkets and factory outlet centres, and deals over €5 million in value. The landmark deal of 2009 so far has been the acquisition of Meadowhall Shopping Centre in Sheffield by London and Stamford Property in a joint venture with Cavendish for £587.7m

This has however been an isolated case, with pessimism in the occupier market impacting upon investor sentiment causing the majority to continue their “wait and see approach” until the fall-out from 2008 is clearer. Existing demand is overwhelmingly for prime properties in key locations.

Contact: Stephen Daniels +44 203 147 1261

Neville Moss National Director EMEA Research London +44 (0)20 3147 1187 [email protected]

European Retail Commentaries – Q2 2009 OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveys and forecasts that uncover emerging trends.

www.joneslanglasalle.com

COPYRIGHT © JONES LANG LASALLE IP, INC. 2009. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

european retail commentaries q2 2009

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