DIRECT MARKET REPORT GERMAN RETAIL - Europe Real Estate

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Demand Occupational demand continued to improve over the second and third quarter of 2007. In prime locations, the demand is being driven almost exclusively by multiple clothing retailers. Especially retail parks, shopping centres (new and existing), higher-yielding small-sized retail parks and DIY stores, are very much looked for by tenants. Exhibit 17 Transaction volume per retail type in HY1 2007 6% 14% 15% 6% German retail update - 28/11/2007 20 4% DIY Shopping centre Supermarkets Retail warehouse Retail park High street Other Source: Jones Lang Lasalle Today investor demand is very much coming from asset managers, of which 1/3 rd from Great Britain. Especially Dawnay Day Treveria is growing in a tremendous pace by acquiring DIY-, shopping centres and king-size portfolios containing individual retail units. Garigal AM’s DIY portfolio is another example. The recent Hahn Group survey concluded that overall 53.3% of the investors are planning to invest more in 2007 than they did in 2006, whereas 26.7% intend to stick to their current investment volume. Despite the credit crunch, which has also touched ground in Germany, more than EUR 6.9bn has been collected by the open-ended Funds during the first 3 quarters of 2007. This is quite a surprise seen the expected overall downward revaluation of assets and image left after the recent capital outflow. Due to their relative conservative leverage (LTV 50%) they are able to act much stronger on the investment market now highly leveraged parties have been set off-site and assets are becoming available at more reasonable prices. This also applies to REIT-like firms which are financed in a conservative way. Another issue one should take into account for the open-ended funds is the earlier mentioned huge amount of liquid means still kept in money market products. For the decision makers of the real estate industry their focus for investments remains Southern Germany, as this region is regarded as strong, both economically as well as demographically. The views expressed by the decision makers from the large-scale retail sector differ hardly from those of the real estate industry. Here too, emphasis is on the economically strong regions of Baden-Württemberg (30%), Bavaria (27%) and Southern Germany as a whole 24% 31%
(30%) 4 . The preference for hypermarkets and superstores in the state of North Rhine-Westphalia (50 percent) is not surprising given the densely populated conurbations in that state. Both retailers and investors will in future place more weight on sites within the German inner cities and residential centres. This hardly comes as a surprise given the forecast of demographic change in Germany. The agglomeration formats are not only limited to shopping centres, but the expectation is also for retail parks and/or retail warehouse centres to grow. Supply 4 Hahn Group survey 2007/2008 As stated before, the amount of square meters (GLA) per 1,000 inhabitants has always been below the <strong>Europe</strong>an average, i.e. tends to be in short supply in Germany. Today Germany has 360 shopping centres for more than 11 million square meters, which means that shopping centre space has nearly doubled over the past 10 years. In 2006 another 20 centres got up and running and currently another 27 malls are in the pipeline (1,150,000m 2 ). But this still means only 145m² of shopping centre space for every 1,000 inhabitants, which is lower than the EU-24 average of 176m²/1,000 (EU-15 219m²/1,000). This is quite a contrast with Spain (200 m²), even Portugal, France and both number one and two, the Netherlands and Sweden (> 400m²) per 1,000 residents. Especially retail warehouse formats are less widespread than in other countries as municipalities are trying to protect their downtown locations. Tight planning in more mature markets such as the UK, France and Germany has shifted the focus back to in-town development. Only 4% of all shopping centres in Germany built since 2002 are on green fields. In Germany one can definitely speak about a so called “back to the city centre” trend; in the years 1995-1999 the share of inner-city shopping centres was only 30.5%, which rose to almost 50% in the last 5 years. Presently large scale schemes which are increasingly located on central and peripherical inner-city sites for its high frequency of visitors are regarded as attractive. Especially the ones that contain a full multifunctional range are unbeatable; shopping, office, residential, public services, culture, gastronomy and leisure facilities. Besides a less restrictive interpretation of building laws and permits in inner cities, a central factor for this trend could well be the more favourable risk assessment of real estate in city locations compared to other locations. On the other hand, the old high streets will always attract people in order to shop in the more old fashion way, especially in summer time. Therefore it’s crucial to rededicate or re-position obsolete properties in between the chique warehouses and shopping centres. German retail update - 28/11/2007 21
Page 1 and 2: www.petercam.com Real Estate Novemb
Page 3 and 4: Executive Summary “The secret of
Page 5 and 6: Introduction Following the record r
Page 7 and 8: The ZEW Indicator of Economic Senti
Page 9 and 10: 2 Destatis 3 Federal Statistical Of
Page 11 and 12: Consumer Price Index Consumer price
Page 13 and 14: Exhibit 11 Division median net inco
Page 15 and 16: Exhibit 14 Population, purchase pow
Page 17 and 18: Exhibit 16 Life cycles of the vario
Page 19: Corporate tax rate to 15.8% In the
Page 23 and 24: Exhibit 20 Indexed space developmen
Page 25 and 26: Exhibit 23 Shopping centre pipeline
Page 27 and 28: y approximately 25 basis points by
Page 29 and 30: spread of DIY over shopping centres
Page 31 and 32: Rental levels Not only prime assets
Page 33 and 34: Exhibit 30 Retail yields and rents
Page 35 and 36: acquisition of new shopping centres
Page 37 and 38: Dawnay Day Treveria • Bloomberg t
Page 39 and 40: Exhibit 34 Portfolio overview BBI I
Page 41: Petercam Institutional Research and

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