Luxembourg Office MarketView

Luxembourg Office MarketView Q4 2012 CBRE Research & Consulting 2012 GDP 0,5% TAKE-UP 169.000 m² PRIME RENT 40 EUR/m²/mth PIPELINE 64.000 m² VACANCY RATE 6,08% PRIME YIELD 5,5% 2012 CATCHES UP DURING THE LAST QUARTER OF THE YEAR Quick Stats Q4 2012 QoQ YoY Take-up Prime rent Pipeline Vacancy rate Prime yield Chart 1: Economic growth & inflation in Luxembourg 8% 6% 4% 2% 0% -2% Quick Links -4% -6% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Despite a certain decline compared to 2011 the take up displays results above average. The supply of new office spaces becomes the limiting factor in the real estate market. The vacancy rate keeps on decreasing. The investment market is reawakening gradually. GDP Growth Overview In terms of results, the first two quarters of 2012 were quite similar to the previous year. However, the market has deteriorated in the third quarter. The end result of about 169.000 m² occupied space was performed thanks to important transactions achieved during the last three months of the year. The supply of new office spaces is still decreasing. This will continue at least until the end of 2013, because few projects will be finalized in the coming months. In consequence, the vacancy rate will continue to fall. Prime rents are stable and there is even some upward pressure in the districts with low availabilities. The investment market is revitalizing gradually. Inflation Source: Statec Luxembourg The economic environment remains tensed According to the latest publications of the Statec, economic forecasts are not the most optimistic. In early 2012, the growth rate of GDP was still planned to reach 1,4%, but it shows only 0,5% at the end of the year. The slowdown in GDP growth gradually spreads to the labor market, which results into an unemployment rate of 6,2% in late 2012 and a 6,5% rate is expected at the end of 2013. The growth of domestic employment having a positive rate of 2,8% in 2011 also decreased and amounts to only 2,2% at the end of the year 2012. In 2013, this rate should continue to weaken to 1,3%. It is likely that consumer prices will decline further in 2013. At the end of 2013 the inflation rate is expected to be equal to 2%.

DEMAND THE TAKE UP STAYS ABOVE THE RESULTS OF THE CRISIS YEARS 2009 AND 2010 Chart 2: Take up 300.000 250.000 200.000 Take-up (in m²) 150.000 100.000 50.000 0 2007 2008 2009 2010 2011 2012 2013 Expected Q4 Q3 Q2 Q1 Chart 3: Type of occupants (2012) 3% 2% 2% 2% 1%1% Bank Finance Insurance 5% Services 36% Government IT 6% EU Lawyers Real Estate Industry 8% Retail Not Specified Building Association Transports 16% 18% THE TAKE UP OF THE YEAR 2012 IS CLOSE TO 169.000 M² The take up of the year 2012, amounting to approximately 169.000 m², has deteriorated by about 10% compared to the result reached in 2011. It is however not a bad performance, as the take up is much higher than the results of the crisis years 2009 and 2010. The BFI sector remains the catalyst of the occupation market The major players in the occupation market have been as in 2011 the banks, finance and insurances sector (35,8%), the services sector (17,7%) and the Luxembourgish Government (16,1 %). The most significant transactions have been the preletting of about 9.100 m² in the Central Plaza Office project located in the station area by Société Générale Bank & Trust, the letting of about 8.600 m² in the Weicker building in the Kirchberg district by Université du Luxembourg and the letting of Chart 4: Split by size of transaction 100% 90% 80% 70% 60% 50% 40% 30% >=5000 m² 3000-4999 m² 1000-2999 m² 500-999 m² 300-499 m² 2 20% 10% 0% m² - 2005 m² - 2006 m² - 2007 m² - 2008 m² - 2009 m² - 2010 m² - 2011 m²-2012 150-299 m² 0-149 m²

approximately 8.100 m² of office space in the building Espace Strassen in Strassen by DZ Bank. Different departments of the Luxembourgish Government have occupied about 8.000 m² of office space in their new building in Belval and the EIB has leased about 4.800 m² in the building BHK in the Kirchberg district. The National Lottery has settled down in its new development with a size of 4.500 m² located in Leudelange and Société de la Bourse de Luxembourg has preleased about 4.400 m² in the Aurora project in the city centre. New trends in the occupation market Compared to 2011, the average transaction size dropped. It amounts to approximately 640 m² at the end of 2012, compared to the average of 2011 which was around 760 m². The number of prelettings and prepurchases is lower than in 2011 but still represents 18% of all transactions. This is a positive sign for the real estate market in Luxembourg: the companies that made these real estate decisions in the medium term are confident about the future of their business and the Luxembourgish market. The central districts gather the majority of occupied m² The district having achieved the most important take up is the Kirchberg where approximately 20% of the leased areas are concentrated. The central business district and the station area follow with 13% and 11%. Once again the central districts remain the most wanted areas. By analyzing the number of transactions, the CBD is ranked first with about 19% of the realized transactions, followed by Capellen-Mamer and the station area having both a market share of 14%. Table 1: Key transactions in 2012 Date Address Submarket m² Occupant Q2-2012 Central Plaza Office, 28 place de la gare Station 9.216 m² SGBT - Sté Générale Bank & Trust Q2-2012 Weicker Building, 4 rue Alphonse Weicker Kirchberg 8.627 m² Université du Luxembourg Q4-2012 Espace Strassen, 5 rue des Primeurs Strassen 8.135 m² DZ Bank Q4-2012 Bâtiment Administratif, Terrasse des Hauts-Fourneaux Esch/Belval 8.000 m² Luxembourgish Government Q4-2012 BHK, 15 Avenue J.F. Kennedy Kirchberg 4.814 m² EIB- European Investment Bank Q4-2012 Immeuble Loterie, ZA Am Bann Leudelange 4.500 m² Loterie Nationale Q4-2012 Aurora, Bld Joseph II/ Av. Emile Reuter CBD 4.365 m² Sté de la Bourse de Luxembourg Q2-2012 Stena, 14-16 rue J-P Brasseur Lux-West 4.296 m² Banque Privée Edmond de Rothschild Europe Q2-2012 KUBIK, 6a circuit de la Foire Internationale Kirchberg 3.552 m² EFSF - European Financial Stability Facility Q2-2012 562/672, route de Neudorf Hamm 3.000 m² Deloitte Q4-2012 2, rue Jean Monnet Kirchberg 2.998 m² HSH Nordbank 3

DEVELOPMENT THE SUPPLY OF NEW OFFICE SPACE FOLLOWS A DOWNWARD TREND 4 Chart 4: Development pipeline 250.000 m² 200.000 m² 150.000 m² 100.000 m² 50.000 m² 0 m² 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 In 2012, the volume of deliveries has been very limited with only 64.000 m². The shortage of new office spaces will be felt during 2013 as only few projects will be finalized in the coming months. Only 17.000 m² of the areas delivered in 2012 are still available, the rest having already been the object of prelettings, prepurchases or developments for own occupation. Figures for 2013 are slightly higher, but still remain limited: about 74.000 m² of new space should arrive on the market, from which more than 50% have already been reserved by occupants. This is why the number of new available areas will be restricted until 2014 at least. However the majority of these delivered areas in 2014 will be used for own occupation and only 32% will still be available for occupation. What is changing for the occupants and owners? Occupants are aware of this reduction of available spaces through a more restricted choice as well as through less attractive leasing conditions than before. Available pipeline Commited pipeline Deliveries The landlords are the winners: even buildings that were vacant for several months or even years gradually fill. Major planned projects Among the projects that will be delivered in 2013 the project Central Plaza Office (14.000 m²) within the station district can be mentioned, the Aurora project (approximately 4.500 m²) in the city centre or the new headquarters of the bank Raiffeisen in Leudelange (approximately 11.000 m²). Developers face many constraints In recent years, developers have encountered great difficulties to start their projects. Indeed, starting a speculative project without a signed lease agreement or without a substantial amount of equity has become particularly compromised. With these more difficult market conditions some developers have turned their projects to alternative uses, when others were completely abandoned. Another observation is that the average size of buildings coming on the market is decreasing. Actually, large buildings such as the President building (30.000 m²) have become hard to fund. THE LANDLORDS ARE THE WINNERS

VACANCY THE VACANCY RATE IS DECREASING GRADUALLY SOME 215.000 M² OF OFFICE SPACES ARE AVAILABLE ON THE MARKET AT THE END OF Q4 2012 The vacancy rate is expected to fall below 5% at the end of 2013. Evolution between 2008 and 2013 After a sharp increase of the vacancy rate between the end of 2008 and 2010 a stabilization began in 2011. The vacancy rate has begun to weaken and represents more or less 6% of the total stock, which amounts to approximately 215.000 m². As the number of deliveries of available projects is limited during the year 2013, Chart 5: Vacancy rate the vacancy rate is expected to decrease further and to stabilize at around 4,5% at the end of the year. Return to a landlords market? The vacancy rate decline puts the owners in a more comfortable situation. Even if the demand does not beat records, supply is reducing. This should lead fairly quickly to a landlords market. Q4 2012 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 5

RENTAL VALUES PRIME RENTS MAINTAIN THEIR LEVEL Chart 6: Rental bands CBD Kirchberg Station Limpertsberg Luxembourg-West Gasperich Strassen Howald Airport Bertrange Leudelange Capellen-Mamer Munsbach Hamm Esch-sur-Alzette/Belval Contern 10 eur/m²/mth 15 eur/m²/mth 20 eur/m²/mth 25 eur/m²/mth 30 eur/m²/mth 35 eur/m²/mth 40 eur/m²/mth UPWARD PRESSURE ON RENTS INCREASES AS DELIVERY RATES ARE LOW Despite a more pronounced downward pressure in 2009 and 2010, headline rents maintained their level of 40 EUR/ m²/month (prime rents) in new high standard buildings in the city centre. The economic rents (especially for surfaces in the periphery) had decreased as landlords granted more easily rent free periods and incentives (for example fitting out allowances). Following the decrease of the vacancy rate, which is expected to intensify further due to low delivery rates, the upward pressure on rents gradually increases. A two-tier market In this context it is necessary to differentiate the central from the more peripheral areas. Currently this upward pressure is especially present in areas where vacancy rates are very low, as in the station area for example, where the vacancy rate stands at 2,5% or in the CBD with a rate of 3,3%. Areas located further away from the city center, as Bertrange with a vacancy rate of about 25%, are not yet concerned and the owners are still willing to make attractive offers to potential occupants. 6

INVESTMENT ACTIVITY THE INVESTMENT MARKET IS GRADUALLY RECOVERING Q4 2012 IN 2012 AN INVESTMENT VOLUME OF ABOUT 550 MILLION EUR HAS BEEN REALIZED Varied investment targets In 2012 an investment volume of about 550 million EUR has been realized. The prime yield stands at 5,5%. These transactions include investments, purchases for own occupation as well as land purchases. Purchases and prepurchases for own occupation represent roughly 11% of the investment volume. These transactions include office buildings, as well as commercial or industrial properties. Office buildings represent however the major part with a market share of almost 78%. Over 90% of these transactions regarding office spaces have been realized in the commune of Luxembourg City. More interest for Luxembourg, more assets for sale There is a growing interest from all types of investors (institutional funds, family offices, privates, etc..) for the Luxembourgish market. The shortage of products that had paralyzed the investment market in Luxembourg seems to come to an end. Some owners are starting to sell some of their premises. In addition, various institutional funds especially German Open Ended Funds may be forced to sell their assets in Luxembourg at short and medium term following regulatory changes in this field. This should revive the investment market. However, difficulties in obtaining credit from banks remain an unresolved matter. Chart 7: Investment volume Chart 8: Split by type of investment Millions 2800 2400 7,0% 6,5% 21% 1% 2000 1600 1200 800 6,0% 5,5% Office Retail Warehouse 400 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Volume of transactions Prime yield 5,0% 78% 7

Table 2: Statistics per submarket 84.381 SQM 73.747 SQM 135.845 SQM 719.796 SQM 81.596 SQM 170.214 SQM 324.286 SQM 810.543 SQM 64.382 SQM 190.766 SQM 24.062 SQM 43.921 SQM 271.928 SQM 83.547 SQM 72.990 SQM 86.240 SQM 8 Submarket Stock Take-up 2012 Vacancy Prime yield Prime rent Kirchberg 810.453 m² 33.491 m² 3,33% 6,5% 33 euro/m² Gasperich 271.928 m² 10.215 m² 15,04% 6,75% 28,5 euro/m² Station 324.286 m² 19.222 m² 2,47% 6,5% 32,5 euro/m² Strassen 135.845 m² 9.964 m² 1,72% 7% 28 euro/m² Airport 190.766 m² 3.974 m² 13,67% 6,75% 25 euro/m² Hamm 64.382 m² 3.150 m² 19,73% 7,5% 20,5 euro/m² CBD 719.796 m² 35,359 m² 3,26% 5,5% 40 euro/m² Munsbach 43.921 m² 450 m² 3,95% 8% 21,5 euro/m² Bertrange 81.596 m² 6.459 m² 25,13% 7,5% 23,5 euro/m² Contern 24.062 m² 345 m² 13,44% 8% 18,5 euro/m² Lux-West 170.214 m² 9.125 m² 4,21% 6,5% 28,5 euro/m² Howald 83.547 m² 4.871 m² 2,80% 7,5% 25,5 euro/m² Limpertsberg 73.747 m² 2.357 m² 6,55% 6% 31,5 euro/m² Capellen-Mamer 84.381 m² 15.375 m² 10,55% 8% 22 euro/m² Leudelange 72.990 m² 8.341 m² 18,91% 7,5% 23 euro/m² Belval 86.420 m² 9.935 m² 3,25% 7,5% 20 euro/m² TOTAL 3.240.000 m² 169.000 m² 6,08%

CONTACTS Q4 2012 For more information about this Local MarketView, please contact: LUXEMBOURG RESEARCH Véronique Koch Head of Research t: +352 26 26 12-23 e: veronique.koch@cbre.com +FOLLOW US GOOGLE+ FACEBOOK TWITTER CBRE RESEARCH This report was prepared by the CBRE Luxembourg Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. DISCLAIMER CBRE s.a. confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. 9