Belgrade Retail Market - DANOS

Belgrade Retail MarketAs a capital city with almost two million inhabitants,Belgrade offers a great potential to retaildevelopments. Due to the recognition of the Belgrademarket potential among the local and foreignshopping center’s operators and retailers,the market competition is about to rise on themid-term period, positioning retail real estate marketas currently the most effective and prominentmarket segment in Serbian real estate industry. In2009, major activity in this segment was reflectedwith the opening of third modern shopping centerin Belgrade: Usce (40,000 GLA sq m) – locatedin New Belgrade.Supply of new generation of shopping centersin Belgrade started to develop more intensivelyin 2002 with the opening of two neighborhoodshopping concepts - Greek Veropoulos (supermarketwith adjoining retail units) and Slovenian Mercator(shopping center) at New Belgrade. Thesecenters have recorded a huge success, especiallythe Slovenian Mercator: total built-up area of52,400 square meters, located in New Belgrade, itencompasses a hypermarket with a shopping arcadelocated on two levels.The “first generation shopping centers” being developedwere the ImmoCenter, IDEA and Rodić,all of which located in the emerging area of NewBelgrade. During 2007 opening of “second generation”shopping centers, such as Delta City andZira in Belgrade, increased the shopping centersstock by almost 70,000 sq m of GLA.At the end of March 2009 Belgrade saw opening of thelargest shopping mall in Serbia, Usce shopping mallwith 120,000 sq m of GBA and 43,500 sq m of GLA onfour aboveground and two underground levels. Usceshopping mall presented to retail market additionalbrands such as: Stiefelkoeing, Koton, Brown Shoe,U.H.S. Taubner, Mandarina Duck and many more.Shopping Center stock in Belgrade, in sq m300,000250,000200,000150,000100,00050,00002004 2005 2006 2007 2008 2009eSource: Danos SerbiaTable: Projects in the PipelineProject Location Developer GLA (sqm) StatusImmo Center Cerek Cerek MPC, Serbia N/A Under construction (Deadline 2010)Plaza Center Downtown Plaza Centers 100,000 Approved (Deadline Unknown)Visnjicka Plaza Visnjica Plaza Centers 48,000 Approved (Deadline Unknown)Delta Planet Autokomanda Delta Invest, Serbia 80,000 Approved (Deadline Unknown)Source: Beobuild

Belgrade Street Retail MarketDowntown of Belgrade represents main shoppingand pedestrian zone, with great number ofdomestic and foreign brand tenants. Prime retailstreets are Knez Mihaila, Cika Ljubina, VaseCarapica, Zmaj Jovina, Kralja Petra, Kolarceva,Terazije, Kralja Milana, Makedonska, Svetogorskaand Nikole Pasica Square, while main secondarystreets are Bulevar Kralja Aleksandra, Pozeska,Balkanska, Blvd. Despota Stefana, Nusiceva, Decanskaand Slavija Square.Major shopping streetsKALEMEGDANKralja PetraKnez MihailaTrg RepublikeBlvd. Despota StefanaAn elite shopping street is Knez Mihaila with 113outlets, from which main tenants, such as TimeOut,Morgan de Toi, Zara, Escada, Miss Sixty,Terranova, Legend, Hugo Boss, Replay, Diesel,VIP Mobile, Telenor, Nike, Adidas, Bata, Bennetonetc., have leased areas from 500 – 1,000 sqm, whilesmaller areas are occupied by coffee shops, bakeries,IT shops, exchange offices, cosmetic salons,bank branches etc. Boulevard Kralja Aleksandrarepresents main secondary shopping street and isthe longest shopping area in Belgrade. It is oneof the most popular shopping areas, with manyinternational brands, such as Nike, Woman’s Secret,Puma, Bata etc., which occupies about 20%of total number of outlets.Vacancy rate in high streets increased due to thecrises to about 5%, with lease period of minimum10 years, while in secondary streets vacancy ratealso increased to approx. 15-20% with typical leaseperiod of 5 years.Most expensive rental levels are recorded in KnezMihaila Street, with average monthly rents fromEUR 100 – 150 per sq m/month. Also, this street recordedthe most significant investment sale deal;in 2007, an “Jugoexport” outlet, area of 361 sq m,was sold for EUR 15 million, or EUR 42,000 per sqm. Secondary street locations recorded rent levelsfrom EUR 25 – 80 per sq m/month, while lessattractive locations, mainly in suburban areas,recorded rent levels from EUR 10 -25 per sq m/month.High street retail categoriesRental levels, in EUR/sq m/month1501005007.6%7.6%14.4%14.4%Shopping CentersSource: Danos Serbia5.8% 1.8%4.3% 4.0%4.3%4.7%4.7%TerazijeSecondary Streesmin.(EUR/sq m) max.(EUR/sq m)26.2%3.5%6.8% 9.4%Fashion Casual fashion FashionShoesAccessoriesH & BBHome décor decorServicesLeisureCEEntertainment Lingerie OtherSource: Danos SerbiaMakedonskaNikole PasicaSquareKralja Milana4.0% 5.8% 1.8%BeogradskaSlavijaBlvd. Kralja Aleksandra26.2%Prime Street11.5%

Warehouse Retail MarketIn the first half of 2009, retail warehousing continuedto develop at a much lower pace comparedto the last year’s level. Most of the new projectsare postponed or in the planning stage, with onlyone major delivery; in the end of 2009 a newMerkur center is about to open in the Karaburmasettlement, with total area of 28,000 sq m andthe investment value of EUR 25 mil. Most prominentbrands on Belgrade’s market are Super Vero,IDEA, Tempo and Metro Cash & Carry, Interex,Roda / Mercator and Tus, with the Croatian retailerPevec developed its first facility in Pancevo,which consists over 30,000 sqm of retail area andwas opened in 2008. Serbian Government is alsopushing an effort negotiating with the world famousretailer IKEA to open its first representativecenter in Serbia. Among the domestic retailers,Delta Holding is further expanding its retail network.All Delta retail brands of supermarkets andsmall shops; Maxi, C market and Pekabeta startedto operate under the uniform name – Maxi. Deltaalso owns the Tempo Cash and Carry chain, whichhas so far opened four facilities in Serbia.Warehouse retail stock in Belgrade, in sq m120,000100,00080,00060,00040,00020,0000Source: Danos Serbia2004 2005 2006 2007 2008 2009fWarehouse retail projects in BelgradeProject Location Developer GLA (sqm) OpenedSuperVero New Belgrade / Milutina Milankovića Veropulos,Greece 3,500 2002Metro Cash & Carry Belgrade / Krnjača Metro Group N /A 2005Tempo New Belgrade / Kvantaš Delta Holding, Serbia 18,000 2006Tempo Belgrade / Viline Vode Delta Holding, Serbia 10,500 2005Interex New Belgrade / Tošin bunar Interex, BIH 2,500 2007Roda New Belgrade Rodić, Serbia 8,500 2008Idea New Belgrade / Blok 65 Idea 12,500 2006SuperVero Belgrade / Vojislava Ilica Street Veropoulos n.a. 2006Tuš New Belgrade / Block 62 Tuš, Slovenia 3,000 2008Source: Beobuild

Rental LevelsRents of the retail majority in the internationalstyleshopping centre Mercator (except anchortenants) are approximately between EUR 25 and50 sq m per month, but vary depending on thesize, position and foot-traffic.Recorded rents for Immocenter vary betweenEUR 25 and 33, for units between 100 and 150 sqm. Rents in Delta city are approximately EUR 30-50, for units between 100 and 200 sq m and averageprice for units less than 100 sq m is EUR 50 persq m per month. Rents in other shopping centers -New Millennium Centar, City Passage, Futura andPiramida vary significantly more. For example inCity Passage and Piramida price range is EUR 15-30 per square meter per month. Shops in NewMillennium Centar achieve prices of EUR 30-60per square meter per month. Considering thatseveral projects of shopping malls are currentlyunderway based on our market knowledge, assumptionfor future rental level is within a rangefor hypermarket of EUR 7-11 per sqm.There are four main factors that influence the baserent for each store in the mall: size and shape ofthe store, linear frontage and visibility, position ofthe store inside of the mall, and intended use. Inaddition to the base rent, a CAM (Common AreaMaintenance/service charges) and marketing feeshould be charged. It is customary with pre-leasingof new shopping centers to charge a “percentagerent” (percentage of the turnover) on top ofthe base rent.Yields for prime street locations are at around 7%and for shopping mall from 8 - 9%.Selected asking prices for retail premises, in EUR/sq m/monthIn line In line tenants (less then 100 sqm)In In line line tenants (100-200 sqm)Mini anchors (200-600 sqm)Anchor Anchorte tenants (more then than600 sqm)ServicesCafesFood courtEntertainmentHypermarket3530201630302577555035225050401212Source: Danos Serbiaminmax

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