Commercial Property Markets Overview

Commercial Property Markets Overview Poland I Spring 2008

Economic Overview Macroeconomic Indicators in Poland, percent 25 20 15 10 5 2002 2003 2004 GDP growth Inflation *Forecast 2005 2006 2007 Unemployment Source: Central Statistical Office (GUS), Consensus Forecast 2008* 2009* Preliminary GUS data estimates confi rm that the Polish economy was growing in 2007 at a very high rate of 6.5%. Primarily it was a result of very strong domestic demand. GDP is expected to grow between 5 5.5% over the course of 2008. The slowdown will be attributable mainly to a gradual decline in investment growth and to deteriorating external environment. The unemployment rate fell to 11.4% at the end of December 2007. It is forecast to decline further to 9.6% by the end of 2008. Unemployment in the major agglomerations such as Warsaw, Poznań, Kraków, Wrocław, Gdańsk and Katowice have dropped to the range between 2.9 to 4.7%. Economic growth will be accompanied by a gradual build-up of imbalances in some key areas of the economy. The largest threat comes from the growing tensions in the labour market and the resulting increase in wage pressures. Rapid depletion of labour resources puts at risk the prospects of economic growth while the very high wage growth increases the infl a- tionary pressure, which may reach 4%. The increasingly negative balance of foreign trade will also lead to deterioration of the overall current account balance. Nevertheless, these factors do not pose any direct threat to the stability of the Polish economy but certainly must be monitored carefully. Crown Square Office Building, Warsaw 2

Offi ce Market Capital City 2007 was another record-breaking year on the Warsaw offi ce market. 211,500 sq m of offi ce space was completed in 2007, bringing the total modern stock to 2.7 million sq m. Most of the new deliveries are located in the Upper South and South West subzones 30.6% and 20.8% respectively. Throughout the whole 2007, take-up (excl. renegotiations) reached 435,000 sq m, which is the best result ever recorded. The take-up with renegotiations accounted for 491,500 sq m, which represents a 19% growth in comparison to 2006. Most of the offi ce leasing transactions were signed outside the City Centre, especially in Mokotów (Upper South) district (169,500 sq m). Due to strong demand and scarcity of offi ce space on the market, pre-lets have remained a very popular practice. Transactions signed before the building completion accounted for 44% of the total take-up level. The vacancy rate dropped to 3.1%, which is the lowest value ever recorded on the Warsaw offi ce market. The availability in Central locations fell to 3.4% (compared with 5.3% at the end of 2006), while Non Central zones recorded 2.9% vacancy rate (5.4%). Key Office Indicators for Warsaw, 2005 2009* 2005 2006 2007 2008* 2009* Total supply (sq m) 2,374,000 2,557,100 2,707,800 3,011,800 3,481,800 Annual supply (sq m) 120,200 186,600 211,500 304,000 470,000 Annual take-up (sq m) 284,600 352,550 437,800 450,000 420,000 Vacancy rate (%) 8.2 5.4 3.1 3.6 4.0 Prime rents ( /sq m/month) 21 23 30 33 35 *Forecast Office Projects Completed, 2007 Project Location Office area* Vacancy** (%) Developer Nationality Trinity Park II US 24,000 4.0% Ghelamco BEL Lumen Core 23,500 69.0% ING Real Estate NED IO-1 US 23,500 88.0% Universale International AUT Skylight Core 19,525 100.0% ING Real Estate NED IBC II City Centre 19,400 3.8% Quinlan Private Golub IRL / USA *in sq m **At completion date US Upper South Office Stock by Subzone in Warsaw, percent 10.3% 2% Subzones Core 22.8% 27.5% City Centre East Lower South North South East 5.7% 4.2% 18.2% 3.9% 5.4% South West Upper South West Office Take-up by Subzone in Warsaw, 2007, percent 2.6% 17.9% 38.7% 16.5% 4% 8% 14% 12% 12.3% 2.5% 4.4% 1.7% 3.4% Office Take-up by Sector In Warsaw, 2007, percent 14% 20% 28% Subzones Core City Centre East Lower South North South East South West Upper South West Subzones FIRE Unknown / Other BS Manufacturing ICT Media Public Major Pipeline Office Projects scheduled for 2008 2009 Project Location Office area* Developer Nationality Delivery Marynarska Business Park US 43,000 Ghelamco BEL Q2 2008 Lipowy Offi ce Park SW 38,500 Hochtief Project Development GER Q4 2008 New City Mokotów US 38,000 ECI FRA Q3 2009 Horizon Plaza US 35,000 Curtis Development / IVG Immobilien POL / GER Q4 2008 Park Postępu US 34,000 Echo Investment POL Q3 2009 Trinity Park III US 33,000 Ghelamco BEL Q3 2009 North Gate N 27,000 Premiumred AUT Q3 2008 *in sq m US Upper South, SW South West, N North Largest Office Transactions, 2007 Tenant Office area leased* Occupier sector** Building Location Type of transaction Millennium Bank 22,400 FIRE Harmony Offi ce Centre US pre-lease Deloitte 14,500 BS Atrium City Core pre-lease Netia 13,300 ICT Marynarska Business Park US pre-lease Raiffeisen Bank 8,200 FIRE Blue Offi ce SW new Canal+ 7,600 Media Pory 6 SE pre-lease P4 7,500 ICT Marynarska Business Park US pre-lease DNB Nord 7,050 FIRE Marynarska Point US pre-lease *in sq m **FIRE Financial, Insurance, Real Estate, BS Business Services, ICT Information, Communication, Real Estate 3

Offi ce Market Capital City Over 2007 prime Class A headline rents in the Central locations has been constantly increasing and reached 30-33 per sq m per month. The average rent for a City Centre ranges from 21 to 25 per sq m per month. Rental levels in the best Non-Central offi ce developments grew to 16 18 with the average between 13 15 sq m per month. We forecast the Warsaw offi ce stock in 2008 is likely to increase by 310,000 sq m. Most of the new buildings due for completion in the next two years are located outside the City Centre, especially in Mokotów district. The annual offi ce supply is going to grow further at a substantial pace over 2009 2010. As a result of forecasted strong demand, the availability of modern offi ce space in 2008 is going to remain at a low level, in spite of large pipeline supply. Warsaw Major Existing Office Buildings 21 24 23 22 11 20 41 4 9 28 29 3 10 2 1 12 38 19 39 18 40 43 36 32 17 37 14 33 8 35 25 44 34 30 7 5 6 16 31 15 13 26 45 1. Złote Tarasy (Lumen, Skylight) 2. Rondo I 3. Warsaw Financial Center 4. City Gate 5. Focus 6. International Business Center I, II 7. Metropolitan 8. Millennium Plaza 9. Warsaw Trade Tower 10. Crown Point, Crown Tower 11. Renaissance Tower, Renaissance Plaza 12. Prosta 69 13. IO-1 14. Empark 15. Puławska FC 16. University Business Center I, II 17. Trinity Park 18. Wiśniowy Business Park 19. Brama Zachodnia 20. Business Center Bitwy Warszawskiej 21. Centrum Okęcie 22. Ochota Offi ce Park 23. Jerozolimskie Business Park 24. Kopernik Offi ce Buildings 25. Athina Park 26. Comfort Offi ces 27. Natpoll Pipeline Office Schemes 28. Art Park 29. Atrium City 30. Senator 31. Catalina Offi ce Centre 32. Horizon Plaza 33. Marynarska Business Park 34. Marynarska Point 35. New City Mokotów 36. Park Postępu 37. Trinity Park III 38. Immoeast Equator 39. Lipowy Offi ce Park 40. Platinium Business Park 41. Okęcie Business Park 42. Poleczki Business Park 43. Wiśniowe Ogrody 44. North Gate 45. Libretto Park 42 27 4

Offi ce Market Provincial Cities The offi ce market in Poland remains dominated by Warsaw, which has a 71.2% market share. The most mature regional markets include Kraków and Wrocław, where the volume of new deliveries over 2007 amounted to 49,000 sq m and 32,000 sq m respectively. nies, however developers continue to be very cautious regarding investing in these locations. The vacancy rates in regional cities have dropped further and stabilised at the very low level of at the maximum 1.5%. Prime headline rents have gone up to 15-18 per sq m per month. Moreover, landlords are reluctant to offer any incentives, which additionally results in an increase of effective rents Office Stock in Selected Cities Other cities like Katowice, Poznań, Tricity and Łódź are gaining on importance and start to attract more international compain thousand sq m, 2007 300 250 200 150 100 50 Kraków Supply Tricity Wrocław Katowice Poznań Łódź Vinci Office Building, Kraków 5

Retail Market Modern Retail Stock in Poland, in thousand 1500 1200 900 600 300 2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009* 2010* Annual supply Cumulative supply *Forecast 12000 10000 8000 6000 4000 2000 Prime Retail Rents in Major Cities /sq m/month 100 80 60 40 20 Upper Silesia Warsaw Shopping centre High street Kraków Tricity Łódź Wrocław Poznań Szczecin The total modern retail stock in Poland reached 7.6 million sq m at the end of 2007. Over 71% of the total supply is situated in shopping centres (defi ned as centrally managed modern retail developments with gallery of shops exceeding 10 units). Retail warehouse share amounts to 19.5%, while retail parks and factory outlets account for 7.5% and 1%, respectively. Cumulative supply located in eight major cities and agglomerations (Warsaw, Upper Silesia, Kraków, Tricity, Łódź, Wrocław, Poznań and Szczecin) is estimated at the level of 5.7 million sq m, which translates into 75% of total stock in Poland. In threeyear time their share will decrease to 69%, which proves strong market development in smaller Polish cities. In 2007 the retail market increased by 825,000 sq m of new supply, which is 44% more than in the previous year. 18% of new stock was delivered in Wrocław, 11% in Warsaw and 10% in Tricity. Some 341,000 sq m (41.4%) was completed in secondary and tertiary cities. 41 new schemes were developed in 2007 including 27 shopping centres, twelve retail warehouses, one retail park and one factory outlet. Extensions of existing schemes (Stary Browar in Poznań, Arena in Gliwice/ Upper Silesia, Fashion House in Warsaw, Tesco in Rzeszów and Auchan in Częstochowa) accounted for 6% of supply in 2007. 1.2 million sq m is currently under construction. Next wave of modern retail supply is expected to come in 2008-2009, when 1 and 1.4 million sq m should be completed. The legal regulations on large-scale retail schemes passed in the middle of 2007 may Modern Retail Stock in Major Cities, 2007 City Population Existing stock* Existing & Pipeline stock** Upper Silesia 2,463,400 351 414 Warsaw 1,840,600 834 895 Kraków 868,200 539 694 Tricity 799,700 684 878 Łódź 775,200 564 660 Wrocław 637,200 726 978 Poznań 572,300 833 1,277 Szczecin 413,100 568 862 Poland total 38,173,840 198 286 *per 1.000 inhabitants (sq m) ** per 1,000 inhabitants (sq m), as for 2010 Retail Projects Completed, 2007 Project Location GLA* Units** Developer Magnolia Park Wrocław 75,000 250 Redis Złote Tarasy Warsaw 64,000 220 ING RE Galeria Bałtycka Gdańsk (Tricity) 51,000 200 ECE Projektmanagement Forum Gliwice Gliwice (Upper Silesia) 46,000 150 Braaten & Pedersen Pasaż Grunwaldzki Wrocław 35,000 250 Echo Investment *in sq m ***number of shops Major Pipeline Retail Projects scheduled for 2008-2010 Project Location GLA* Units** Developer Delivery Bonarka Kraków 100,000 230 TriGranit 2009 Felicity Lublin 90,000 260 Gray International 2009 Port Łódź Łódź 70,000 250 Inter Ikea Centre 2009 Centrum Stocznia Gdańsk (Tricity) 60,000 200 TK Development 2010 Galeria Malta Poznań 55,000 200 Neinver 2008 Forum Koszalin Koszalin 54,000 100 Multi Development 2009 Focus Gliwice 49,000 220 Parkridge 2010 Millenium Hall Rzeszów 49,000 180 Conres 2009 *in sq m **number of shops 6

Retail Market hinder the strong dynamics of retail market growth, however the recently elected government plans to annul the unfavourable act, which will only postpone upcoming developments. Demand for retail space remains at stable high level. Vacancy rate in the most successful shopping centres are at the level of 0 2%. Opening of new downtown shopping centres brought new brands on Polish market such as Aldo Accessories, Body Shop, Claire s, Ecco Kids, Fabrikant, Flo, Guess, Hard Rock Café, Watch Corner and many others. Improvement in income indicators is encouraging luxury chains to open their stores in Warsaw and other major cities. New luxury boutiques were opened in Warsaw (Armani, Max & Co, Weston & Church s, Cacharel, Guess), Poznań (Burberry, Zegna, Redford& Grant), Wrocław (Premium Cigars) and Łódź (Premium Cigars). Chains operating on Polish market and wishing to increase their share have to adapt their concepts to even smaller markets. Tesco, Carrefour and Kingfi sher have already developed smaller-sized stores. Completion of high-quality, down-town, third generation shopping centres caused rental growth in those locations. Prime rents in Warsaw increased to the level of 90 per sq m per month, Wrocław witnessed over 35% increase (up to 52), rents in Poznań and Tricity increased by 25%. The most successful operating shopping centres want to take advantage of rental growth and try to relet their space where possible at the higher rent. Rental reduction may be anticipated by tenants in less successful retail developments to compensate for smaller footfall and less turnover. Major trends recorded on Polish retail market include: growing interest in secondary and tertiary cities (above 50,000 inhabitants), which refers to developers, retailers and investors; development of new concept such as convenience / neighbourhood shopping centres in large cities, local multifunctional centres in smaller towns, factory outlets, retail parks and strip malls; growing supply in down-town locations including development of new schemes, regeneration of existing post-industrial sites and/or high street manor houses. Nowe Centrum, Toruń 7

Industrial & Logistics Market Demand is strong and we enjoyed the record level of take up in 2007 accounting over 1.37 million sq m. That represents an increase of as much as 63%. Third Party logistics providers and retail logistics companies continues to be the most important occupier of modern logistics space. Upper Silesia with 23% share in total take up remains a leader among the other locations, followed by Warsaw Zone 3 and Central Poland, 21% and 17% respectively. Industrial Supply / Take up in Poland, in thousand sq m 1500 1200 900 600 300 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* Annual Supply *Forecast 7.5% Prologis Park, Wrocław split by hot spot 12.6% 16.7% 2.2% 0.3% 11.9% 16.1% 20.9% Annual Take-up Modern Warehouse Stock 11.9% Subzones Warsaw Zone 1 Warsaw Zone 2 Warsaw Zone 3 Central Poland Poznań Region Lower Silesia Upper Silesia Tricity Region Krakow Region To date, the logistics market accounts for some 3.7 million sq m, that represents an increase of as much as 63% compared to 2006. Additionally, approximately 700,000 sq m was under construction at the end of December. Greater Warsaw region share in total stock accounts for 49% while the Regional locations increased to 51%. We can observe the new locations gaining on importance, and modern schemes being developed outside the common hot-spots. Vacancy rates are fl uctuating and at the end of 2007 approximately 330,000 sq m remained vacant market wide representing 8.9% rate. That constitutes an increase of almost 2.0 p.p. That is due to many projects being delivered speculatively that requires some time to lease up. Headline rental rates are relatively stable over the last years with the average and effective rents increasing in some locations due to strong demand and landlords not being so willing to offer rents free periods. Overall, headline rents in Greater Warsaw are on the level between 3.50 5.75 per month per sq m and in the regional locations between 2.90 4.00 per month per sq m. The year 2008 is expected to be the next strong year on logistics property market. Largest Warehouse Transactions, 2007 Building Location Tenant Area* Panattoni Park Teresin Warsaw - Zone 3 DSV 36,500 Panattoni Park Poznań III Poznań Region Raben 26,410 Panattoni Park Poznań Poznań Region Piotr i Paweł 26,000 Panattoni Park Garwolin Warsaw - Zone 3 Avon 25,000 Goodman Park Toruń Toruń Region NYK Logistics 23,240 Panattoni Park Łódź Central Poland Flextronix 21,700 Tulipan Park Gliwice Upper Silesia Decathlon 20,600 Panattoni Park Mysłowice Upper Silesia ND Logistics 20,000 Panattoni Park Wroclaw Lower Silesia Orsey 18,500 ProLogis Park Błonie Warsaw Zone 3 Antalis 17,800 *sq m Annual supply reached its highest level of almost 1 million sq m delivered during 12 months. Stock in the Greater Warsaw region increased by 8% while regional locations increased by as much as 70%. Poznań region, Lower and Upper Silesia enjoyed the highest proportion of space delivered last year. 8 We estimate that supply should account 1 million sq m and demand should be at similar level as in 2007.

Industrial & Logistics Market Logistics hot spots in Poland Tri-City Tricity Region Olsztyn Szczecin Szczecin Region Bydgoszcz Poznań Toruń Toruń Region Warsaw Zielona Góra Poznań Region Greater Warsaw Region Łódź Central Poland Region Wroclaw Lower Silesia Region Lublin Opole Upper Silesia Region Kielce Katowice Kraków Region Kraków Rzeszów Primary Market Area Secondary Market Area Tertiary Market Area Motorways Motorways (under construction) Key Logistics Sector Indicators for Poland 2002 2003 2004 2005 2006 2007 2008* Total supply (sq m) 1,100,000 1,320,000 1,500,000 1,980,000 2,730,000 3,703,000 4,703,000 Annual supply (sq m) 170,000 220,000 180,000 480,000 750,000 973,000 1,000,000 Annual take-up (sq m) 200,000 200,000 255,000 440,000 830,000 1,370,000 800,000 Vacancy rate (%) 6.0 11.6 5.8 13.0 7.0 8.6 5.0 Prime rents ( /sq m/month) 6.8 5.0 5.5 5.5 5.5 5.5 5.5 *Forecast 9

Investment Market After the record wave of property investments over the last years we have observed a slowdown in the second half of 2007, which was partly due to uncertainty on the fi nancial markets, both globally and on Warsaw stock market. However, 2006 should be seen as an exceptional year when a number of buildings were sold more than Volume of Investment Transactions in 2001 2007, in million 5000 4000 3000 2000 1000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Annual volume Prime Yields in 2000 2008*, percent 15 12 once, as investors used continuing yield compression to take real profi ts. Value of 3.1 billion has been transacted over 2007, which represents a decrease of 1.5 billion in the year-on-year comparison. Overall, cumulative volume of 14.5 billion has been invested in real estate acquisitions since 1998. In 2007 the retail sector retained the leading position in terms of market share with 1.7 billion in transactions. The offi ce sector came in the second place generating 1.1 billion while industrial sector recorded some 146 million. The remaining 200 million was spent on mixed use properties. A growing number of transactions were concluded in regional locations and we can also observe more opportunistic projects being acquired. Almost 50% of volume of transactions came from investors originated in Germany, France and United Kingdom. Portfolio transactions constituted 27% of total volume. 9 6 2000 2001 2002 2003 2004 2005 2006 Office Retail Warehouse *Forecast 2007 2008* Prime offi ce yields as for 2007 were at the levels of approximately 5.50-6 %. The retail sector has also been sustained by growing retail expenditure, at levels of 5.50%. Prime yields in the logistics property sector were in the region of 6.50 6.75%. We expect prime yields to remain relatively stable in 2008, however secondary and tertiary properties are likely to move out. Major Investment Transactions, 2007 Quarter Location Sector Property Purchaser Nationality Volume* 2 Poland Retail Cefi c portfolio Macquarie Global Property Advisors AUS 232 2 Warsaw Retail Wola Park IXIS AEW FRA 146 2 Poland Retail Part of GE portfolio Oppenheim GER 132 3 Gliwice Retail Forum Gliwice Deka Immobilien GER 128 2 Warsaw Offi ce Focus DEGI GER 122 1 Nadarzyn Retail Maximus Sybil Europe ISR 104 2 Rybnik Retail Rybnik Plaza Klepierre FRA 90 2 Warsaw Offi ce Prosta Offi ce Center ING Property Fund CEE NED 87 1 Poznań Retail Galeria Pestka PBW IXIS FRA 85 2 Warsaw Offi ce Lipowy Business Park Europolis AUT 82 1 Warsaw Offi ce Millenium Plaza Atlas Estates ISR 78 2 Warsaw Offi ce Trinity II ING Property Fund CEE NED 78 3 Warsaw Warehouse City Point Teesland iog UK 71.6 3 Poland Retail Galeria Gniezno, Galeria nad Jeziorem Pradera SPA 70 *in million 10

Investment Market City Point, Warsaw 11

Contact: DTZ Lumen Offi ce Building/Złote Tarasy Ul. Złota 59 00-120 Warsaw, Poland Tel.: +48 22 222 3000 Fax: +48 22 222 3001 info@dtz.pl /pl Alan Colquhoun Managing Director, Poland & CE Anna Staniszewska CEE Regional Director, Consulting & Research Cover: Marynarska Business Park, Warsaw DTZ Research, March 2008 DTZ is a leading global real estate adviser and consultancy fi rm with more than 11,000 staff worldwide with offi ces in 140 cities across 45 countries. The company provides services for leading multi-national companies, major fi nancial institutions, developers, investors and government institutions. DTZ Research is a global platform with over 85 analysts from a diversity of backgrounds including economics, property, planning, fi nance and business consultancy. We occupy a leading position in the marketplace through the provision of research products and services that add value to clients and help to create leading edge property investment and business solutions worldwide. A continuous R&D programme anticipates market trends as well as assess the impact of economic, social and political change on real estate markets. In addition, the research team is often involved in the highest and best use analysis, concept developments, feasibility studies and due diligence projects. More DTZ Research publications from around Central & Eastern Europe and the Global DTZ network can be found on www.dtz. com/research.