ROTTERDAM CENTRAL BUSINESS DISTRICT

ROTTERDAM CENTRAL BUSINESS DISTRICT an insider s view JUNE 2012

Disclaimer 2012 CBRE 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 CBRE clients, and cannot be reproduced without prior written permission of CBRE.

Quick stats (2012 Q1) TOTAL OFFICE STOCK 766,000 sq m NUMBER OF OFFICE BUILDINGS 38 AVERAGE ANNUAL TAKE UP 36,000 sq m Dear reader, Rotterdam is internationally known for the Port of Rotterdam, Europe s largest commercial seaport. The vast port and industrial complex naturally attracts many transportation, industrial and petrochemical companies, who among many others seek office space nearby, in the city of Rotterdam, one of the main urban centres in the Netherlands. The characteristics of the centre of Rotterdam are unique. The city s main public transport hub, its high street shopping heart, high grade residential buildings and the most important office district are entwined in the same area: the city centre. The number and height of the buildings here are unmatched anywhere else in the country and form the Netherlands most impressive skyline. The Municipality, entrepreneurs and the inhabitants of Rotterdam have joined hands to work on a continuous upgrading of the area. VACANCY RATE 14.1% In times of general consolidation in the office market and when general vacancy in the Netherlands is high, it is important to emphasise the strong qualitative differences that exist in the market and to highlight the success stories. Reason for CBRE to present an in-depth analysis of the prime office district in Rotterdam s city centre: the Rotterdam Central Business District (RCBD). This insider s view offers an invaluable tool for investors, financers and corporate tenants to support a strategic vision on their presence in this unique office district. Please feel free to contact us with any specific questions. Robert-Jan van Dijk CBRE Research & Consultancy

Rotterdam Central Business District an insider s view 1 Groothandelsgebouw 2 Weenapoint 3 Millenium Tower 4 Central Plaza 5 Delftse Poort 6 Central Post 7 Unilever HQ 8 200 Weena 9 Gebouw Weena 10 Weenatoren 11 Weena 70 12 Hofplein 19 13 Hofpoort 14 Hofplein 33 15 Coolsingel 6 16 Cool63 17 Stadhuis 18 Hermes 19 Holbeinhouse 20 De Utrecht 21 Coolsingel 93 22 Aert van Nesstraat 5 23 De Splinter 24 Rotterdam Building

25 Beurs WTC 26 Coolsingel 119 27 HBU 28 Coolse Poort 29 Robecohouse 30 Blaak 555 31 Blaak 333 32 Blaak 40 33 Blaak 34 34 Blaak 28 35 Blaak 20-24 36 Blaak 31 37 Blaak 16 38 Blaak 8 a Conradstraat e Spinoza b First Rotterdam f Forum Rotterdam c Delftsestraat g Markthal Blaak d Weena Boulevard h Blaakhaven

/ sq m / year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Rotterdam Central Business District an insider s view x 1,000 sq m 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 INTRODUCTION Office stock The Rotterdam Central Business District (RCBD) lies in the heart of the city of Rotterdam. The area stretches from Weena, through Hofplein, Coolsingel and Blaak until the Blaak railway station. The RCBD offers excellent accessibility by public transport. It is one of the few European locations where the international business district, high speed public transport and the city centre are in one and the same place. The Z-shaped district is draped over the shopping heart of Rotterdam and most of its office buildings are neighboured by numerous residential complexes. Within the RCBD, a distinction can be made between 2 subareas: The Weena area which consists of office buildings at Delftseplein, Hofplein and Weena. These buildings are shown on the map on the previous pages under number 1 till 14. 800 780 760 740 720 700 680 660 640 620 600 The Coolsingel/Blaak area which consists of office buildings at Beursplein, Blaak, Coolsingel and Aert van Nesstraat. These buildings are shown on the map on the previous pages under number 15 till 38. Rental level 250 Average Prime In April 2009, property developers, investors, real estate professionals, office users, retailers and the Municipality of Rotterdam decided to work together on the marketing, promotion and positioning of the so called Rotterdam Central District. This district is roughly the same area as the Weena area described above. There are various reasons for us to define the RCBD as a larger district for this insider s view: the importance of the office property and its users situated at Coolsingel and Blaak, the presence of the World Trade Center, the new developments surrounding Blaak railway station and the renovation and refurbishment of numerous buildings within this district. 200 150 100 50 0 The majority of the office property was constructed after the devastations of WWII, Groothandelsgebouw being among the first and (still) the largest. The RCBD currently offers a mixture between low profile post-war buildings with large footprints and modern high-rise buildings from (mainly) the eighties and nineties.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Combined with the excellent multimodal accessibility, the RCBD fulfills nearly all of nowadays tenants wishes. The long-term average annual demand for office space is, therefore, high: at 36,000 sq m per year it results in an annual turnover of more than 4.7% of the office stock, a rate which is only very rarely matched by other office districts in the country. Vacancy 18% 16% 14% 12% 10% With a current rate of about 14%, the RCBD has a vacancy slightly lower than the national average of approximately 15%. The immediate cause of the 2010 surge in availability was the demise of Fortis Bank and the relocation of law firm Simmons & Simmons, who left nearly 25,000 sq m vacant. The deeper lying cause, however, is the ageing of many of the office buildings that date from the reconstruction period after the war. At first, this impelled tenants to look for modern possibilities outside the RCBD, until their demands were met by new (re)developments at Blaak and Weena. 8% 6% 4% 2% 0% The renovation, transition and, in some cases, demolition of the oldest office buildings is a still continuing process. Coupled with the consistently strong tenant demand and the further strengthening of the inner city s multifunctional character, accessibility and appeal, this will doubtlessly lead to a tighter office market in the near future.

per sq m per year sq m Rotterdam Central Business District an insider s view OCCUPIERS An impressive total of approximately 600 companies have chosen the RCBD as their designated home of business. It should be noted that approximately over three quarters of all companies are located at either the WTC or the Groothandelsgebouw, the two largest multitenant buildings of the RCBD. When exiting the central station, many pedestrians can be caught looking upwards, trying to distinguish the top of Delftse Poort from the sky above it. Employees from all continents rush by, on their way to one of the many destinations within walking distance of the central railway station. The impressive height and size of some of the buildings in the RCBD are unparalleled in the Netherlands. Number of companies 23% 32% 45% The presence of the Port of Rotterdam, the largest port in Europe, greatly influences the demand for office space by industry- and transport-related companies in the RCBD. Almost one in five companies housing in this district is a company from this sector. The largest number of companies, however, are from the sector business services. Companies from the sector financial services represent 13% of the total, nearly the same share as IT and Media related companies. A striking amount of architects and construction related companies can be found in the RCBD, which is not a surprise considering the architectural status of the city and the continuous new real estate developments and refurbishments. The average office space used in the WTC per company is less than 300 sq m. In Groothandelsgebouw, alongside the central station, the average office size per company is almost 500 sq m. This is mainly due to some large users cranking up the average, such as LlyondellBasell (13,000 sq m). Looking at the average office space consumption of the occupants of all the other buildings in the RCBD, a clearly higher figure comes into play. This significantly higher figure is a result of the fact that an important part of the office users in the RCBD occupy large single tenant buildings. The top 10 largest users together occupy over 25% of all office stock in the district. Based upon the data of almost 400,000 sq m of let office space, we are able to make a statement about the cost of office space in the RCBD. The current average weighted rental level is 182 per sq m per year. This is some 20 lower than the asked top rent for existing properties in the district. The average rent level of 170 at the 100,000 sq m large Groothandelsgebouw* and lower rent levels in some of the older buildings are some of the reasons for the slightly lower figure. Because of the high rent levels in the WTC and some of the office buildings at Blaak (for example: Blaak 8 and Robecohuis), the weighted average rental level in the Coolsingel/Blaak area is surprisingly higher than in the Weena area. It should be noted that, mainly due to the location, the worth of prime office space in the Weena area is about 10 per sq m per year more than identical office space in the Coolsingel/Blaak area. WTC de Beurs Groothandelsgebouw Other office buildings Average office space in use per company 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 272 497 WTC de Beurs Weighted average rental level 200 195 190 185 180 175 170 165 160 155 150 177 Weena area *source: www.groothandelsgebouw.nl Groothandelsgebouw 193 Coolsingel and Blaak area 3,759 Other office buildings 182 Entire Rotterdam CBD

Representation of sectors Business services 4% 3% 4% Industry, transport, 5% utilities and trading Financial services 35% 7% IT and media Largest office users # Property name Sq m Occupier 1 Delftse Poort 65,500 2 Weena 455 22,000 Unilever 3 Coolse Poort 20,000 Allianz ING Insurance (Nationale Nederlanden) 12% 12% 18% Government Architects & construction Healthcare Education Other 4 Stadhuis 19,000 Municipality of Rotterdam 5 Robecohuis 17,000 Robeco 6 Blaak 31 14,400 Loyens & Loeff 7 Blaak 8 13,500 Stedin 8 Groothandelsgebouw 13,000 LyondellBasell Industries 9 Hofplein 19 12,600 ROC Zadkine 10 Weena 70 12,000 Shell Downstream

sq m number of completions Rotterdam Central Business District an insider s view BUILDINGS Although the RCBD is an office district in the inner city of Rotterdam, the office buildings are relatively young. During WWII, almost the entire city centre was destroyed. Out of the 38 office buildings of the current RCBD, only 4 were completed before the beginning of WWII. These buildings are all located at Coolsingel. The oldest building currently being used as an office dates from the 1920s and houses the Municipality of Rotterdam. The vast majority of the office buildings was built right after the end of WWII, when almost the entire centre had to be rebuilt as quickly as possible. This building boom ended in the late 50s, early 60s. The next major building spurt happened in the late 80s, when a few landmark office buildings were put up, for example the 151 metre high Delftse Poort, which was the highest building in the Netherlands up and till 2009, when the Maastoren at office district Kop van Zuid opened for business and claimed the title highest building of the Benelux. The density of office buildings in the city centre has increased in the course of decades and will continue to do so in the future, backed by the support of the Municipality. Size of buildings (number of total) 3 4 10 < 10,000 sq m 10,000-25,000 sq m 21 25,000-50,000 sq m > 50,000 sq m Size of buildings (% of total) 8% 30% The RCBD is dominated by large office buildings. A respectable 28 out of the 38 buildings are larger than 10,000 sq m, representing 92% of the total office stock. The Groothandelsgebouw, which was built right after WWII, is with its 100,000 sq m still the largest (office) building of Rotterdam. 17% 45% < 10,000 sq m 10,000-25,000 sq m Those office buildings which are outdated and perform suboptimally on the letting market are being renovated or converted to accommodate alternative types of users. Office buildings such as Central Plaza and Spinoza (currently known as Cool 69) are undergoing major rejuvenation in order to meet today s standards. Recently, the 38,000 sq m multi-tenant Central Post alongside the railroad was overhauled as well and is almost fully let to tenants requiring high grade office space. Both the Municipality as well as the investors, office users and retailers understand that continuous investment in real estate and the public area around it is necessary in order to create and strengthen a thriving district in which working, shopping, leisure & living are combined in a natural fashion. 25,000-50,000 sq m > 50,000 sq m Completions of (parts of) office buildings 250,000 12 200,000 11 10 8 150,000 6 100,000 6 6 5 4 4 4 50,000 3 2 0 0 pre-wwii 60s 80s post 2000

NEW DEVELOPMENTS The RCBD is a future minded district. New real estate developments in the RCBD are numerous. Besides the emerging Kop van Zuid office district which is mainly occupied by government-related bodies the RCBD is one of the few prime office districts where major investments are being made at the time. An important development is the renovation of the city s central railway station. From its completion in 2014, Rotterdam Central Station will seize its intended position as a public transport terminal at an international, national, and regional level. Connected by high-speed rail and light rail RandstadRail links, trains, underground railways, buses, trams, and taxis, it claims the title of European business centre. Paris, Brussels, Schiphol Airport and Amsterdam are easily accessible by high-speed rail. At the opposite side of the road from the Groothandelsgebouw, within walking distance of the central station, office complex First Rotterdam will arise from what is now called Weena Point. The now 33,000 sq m office complex will be transformed into a 120 metre high landmark building encompassing a total surface of 110,000 sq m of offices, theatres, restaurants, shops and apartments, a courtyard and parking facilities. Lease contracts have already been signed by legal firm Nauta Dutilh and financial services organization Robeco. Despite protests from Groothandelsgebouwen N.V., the construction is expected to take place in the very near future. Another large project that is aching to get on its way is Weena Boulevard. Weena Boulevard is planned to be built between the Central Post (#6) and Hofplein 19 (#12). Its goal is to be bustling with activity 24 hours a day. Working, shopping and culture during the daytime, and when work is over residences, restaurants, bars, casino, clubs and hotel will take over. Although very ambitious, the goals set out by the developer fit perfectly in the RCBD and will, upon completion, further emphasize the multifunctionality of the district. Top 10 available office space Building # New real estate developments # Project Property name Expected completion Available (sq m) 30 Blaak 555 18,350 4 Weena Plaza 15,525 13 Hofpoort 14,677 1 Groothandelsgebouw ~10,000 3 Millenium Tower 9,250 9 Gebouw Weena 7,970 24 Rotterdam Building 7,206 8 Weena 200 6,835 35 Blakeburg 5,410 23 De Splinter 4,004 Size office space (sq m) a Conradstraat Unknown 60,000 b First Rotterdam 2015 35,000 c Delftsestraat Unknown 45,000 d Weena Boulevard Unknown up to 100,000 e Spinoza 2014 5,600 f Forum Rotterdam 2016 15,000 g Markthal Blaak 2014 0 h Blaakhaven 2012 4,850 An eye-catching project is a wooden skybridge for pedestrians. This boardwalk will connect numerous office buildings of the RCBD, several metres from the ground. As a local initiative it was voted as best city initiative and only weeks after this election construction started. This is a good example of the strength of the RCBD: all involved parties are working together on continuous improvement of the public area and good initiatives can be implemented rapidly.

Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 % Rotterdam Central Business District an insider s view sq m vacancy OWNERS The RCBD offers typical investment-type office stock. Only three out of the 38 office buildings are owneroccupied; and this share is largely made up by the Municipality and ABN AMRO. All in all, the RCBD is a typical letting market. The bulk of the office space is owned by either funds or listed companies. A relatively large share of the office space is owned by developers. This underscores the continuous will to improve the RCBD. Sq m and vacancy per type of owner 300,000 34% 36% 250,000 200,000 150,000 18% 12% 14% 100,000 50,000 2% 40% 35% 30% 25% 20% 15% 10% 5% Although most investors are of domestic origin, a large share is comprised by German investors. These are mostly the well-known open- and closed-ended funds. The USA come third (CBRE Global Investors only), investors of other origin are hardly present in the district. 0 0% It should be noted that many buildings in the district, and most of the larger ones, are multi-tenant facilities. Although these are more complex to manage, they simultaneously offer a lower vacancy risk, a fact which is illustrated by the fact that none of the 38 buildings of the RCBD is completely vacant. Large single tenant buildings are present as well, and pose a greater threat in case of vacancy. The Robecohouse will be vacant when First Rotterdam will be completed and Robeco will move to their new office space. Letting the Robecohouse to a single tenant will likely prove to be more difficult than letting it to multiple tenants. Surprisingly, perhaps, investment transactions in the RCBD are not common. In fact, the last five years have not seen a lot of buildings in the district change ownership. Since the 2008 crisis five office transactions have been recorded. In the Weena-area, Weena 455 (Unilever) and Weenapoint purchased by Chalet Group as part of the Rhea portfolio were traded. The other investment deals took place at Blaak: the newly developed Blaak 31 was sold in the last quarter of 2008. Blaak 8 (Stedin) was purchased by Hannover Leasing in the first quarter of 2011. In May 2012, the fully let Blaak 28 and Blaak 34 exchanged ownership from one German fund to another for an estimated net initial yield of 6.4%. The initial office yields in the RCBD are generally among the lowest in the Netherlands. In the past five years, top prime net initial yields hovered between 4.8% and 6.2%, with a current level of approximately 5.65%. Nationality of owner in sq m 10% 49% 41% Netherlands Germany USA Prime yield 6.5 6 5.5 5 4.5

FINANCING When observing the financing structure in the RCBD its conservative profile is striking. In fact, 21 out of the 38 office buildings are not mortgaged at all. Only one property is part of a CMBS structure: the Blakeburg building at Blaak is part of the nationwide Tasman portfolio which was one of the few Dutch portfolios structured as a CMBS back in 2006. One property in the RCBD has a financial lease structure. The most obvious properties without mortgage loan are the owner-occupied buildings, such as the ABN AMRO buildings at Coolsingel and the city hall. But also the insurance company-owned properties are full equity assets. This also goes for the properties owned by the public funds, such as Unibail-Rodamco, and some of the German open-ended funds. Although the funds themselves are financed, the individual assets have been paid fully from the fund s capital. It should be noted that open ended funds in some cases have arranged a specific loan for the acquisition of a property, but with the total fund assets rather than the individual property as collateral. Nationality ownership and financer 3 Type of investor of property without mortage 3 1 1 5 1 6 6 German owned, German mortgage Dutch owned, Dutch mortgage USA owned, Dutch mortgage Dutch owned, German mortgage Dutch owned, Belgian mortgage The nationality of the lender is often related to the owner s nationality. Generally speaking, Dutch banks finance Dutch property and German banks finance German fund-owned office buildings. The three office buildings owned by the American based CBRE Global Investors are financed by ING Bank, who were logically linked to the legal predecessor of the owner of the buildings: ING REIM. The odd man out is developer Multi. The Belgian KBC Bank finances a project by Multi, a match probably made because of their joint experiences in the past. 3 4 Open/Closed/Special Fund Owner occupier Institutional Public company Private ING Bank is the most prominent Dutch lender in the RCBD and targets mainly Dutch institutional parties. German banks, e.g. the Berlin-Hannoversche Hypothekenbank and Bayerische Landesbank, are mostly linked to the German institutional funds, such as Real IS. The Dutch FGH Bank has particularly provided financing for (re)development schemes in the RCBD, such as Maarsen Groep (First Rotterdam) and LSI (Central Post).

2004 2005 2006 2007 2008 2009 2010 2011 Rotterdam Central Business District an insider s view sq m 2004 2005 2006 2007 2008 2009 2010 2011 LEASES The conditions in the lease contracts signed by tenants in the RCBD are an interesting reflection of the quality of the district, its buildings and its tenants. In existing property, the most common lease length is 5 years. Lease contracts for newly developed offices are usually signed for a period of 10 or even 15 years. The realized top market rent is 205 per sq m per year. Top rental prices are expected to rise though, due to new developments and refurbishments which will be completed in the coming years. Take-up 70,000 60,000 50,000 40,000 30,000 20,000 As of 2004, 86 transactions are accounted for in the RCBD. These were new contracts (not renewals) of office space with a minimum size of 500 sq m. A total of over 234,000 sq m was occupied in these transactions. Only 3% of the volume concerned new office stock, the vast majority concerned the lease of existing buildings. This makes sense, taken into account the small amount of completions over the last decade. Leases that concern office space less than 500 sq m are numerous in the RCBD as well, especially in Groothandelsgebouw and WTC. Rental prices vary greatly within the RCBD. While a mere 100 per sq m per year was paid for the older offices, such as Rotterdam Building at Aert van Nesstraat, some of the better offices in the WTC are pricier with well over 200 per sq m per year. Tenants in the 100,000 sq m Groothandelsgebouw pay an average of 170 per sq m per year for their professional accommodation. A reasonably good measurement appears to be the age of the building; a younger office building is usually of higher quality for which you pay a higher rent. 10,000 0 Weighted realized average rental price per sq m 195 190 185 180 175 170 165 160 155 150 145 The weighted average rental price of the transactions made in the previous years show a general upward trend, which has more to do with the quality of the office space that has been let, than with an overall increase of the rental level. Incentives play an important part in the game between tenants and landlords. This typical Dutch phenomenon reduces the market s transparency because it makes it often hard to figure out what the net effective rent is. New lease contracts with a lease length of 10 years in the RCBD are currently rewarded with incentives varying from 15% up and till 25%.

CONCLUSIONS AND OUTLOOK The RCBD is the only true downtown Central Business District in the Netherlands. The devastations of WWII gave Rotterdam the need and opportunity to construct an entire new inner city. By doing so, a genuine multifunctional area has been created, providing a balanced mix of working, living, retail, and leisure. A true strength of the RCBD is that all involved parties are working together on continuous improvement of not only the offices or the retail strips, but also the entire public space of the RCBD, which will positively influence the way people work, live and recreate there. Examples of these efforts are numerous. Recently, the renovated Central Plaza opened its doors. The entrance of the shopping center in Central Plaza improves the public area of Weena, and thus positively affects the value of the real estate. The new central railway station will open up the western part of the Weena area. Together with a large capacity underground parking garage and improved accessibility by car due to the construction of a tunnel this will greatly improve the quality of the public area. The earlier mentioned sustainable wooden skybridge is also an example of the improvement of the public area and drive to connect the people to their environment. There are more examples of sustainability projects and activities in the RCBD. A project to create green roofs throughout the RCBD is currently in progress. Next to the central station, a company is situated where you can rent, lease and buy the latest models of electric vehicles. The RCBD is growing in its role of being a magnet for international companies. The RCBD matches all the spacial needs the new ways of working lay down. Rotterdam is a desirable place for particularly energy- and transport related companies. Recently, the RCBD has been successful in attracting tenants in the likes of Petrobas, Shell Downstream and Sea Trucks. As a result, the vacancy rate in the RCBD is gradually declining. Considering the appeal and quality of the area in the present and the endeavors which will shape this area in the future, the vacancy rate is expected to drop further. It is not unthinkable that the rent levels will rise. The RCBD is and will continue to be a very interesting district for investors. All in all, the RCBD is a desirable environment for nowadays office user and can be regarded as one of the true prime office areas in the Netherlands. For more information regarding this report, please contact: CBRE Research & Consultancy T: 020 626 26 91 www.cbre.nl Machiel Wolters Robert-Jan van Dijk Director Consultant E: machiel.wolters@cbre.com E: robert-jan.vandijk@cbre.comm