RETAIL REPORT MUNICH JUNE 2013

RETAIL REPORT MUNICH JUNE 2013 C

CBRE Special Report Retail Report Munich www.cbre.de June 2013 Contents Munich in brief key facts about Munich as a business and retail location... 1 The Munich Retail Market... 2 Marienplatz the hub and pivot of the Bavarian Capital...2 Kaufingerstrasse Top mass-market pitch in the heart of the city...5 Neuhauser Strasse - Joseph-Pschorr-Haus brings new dynamism...7 Between Stachus and the central station B level and the railway station district...9 Sendlinger Strasse boosted by the Hofstatt...9 Between Viktualienmarkt and Isartorplatz - Rindermarkt, Rosental and Tal... 12 Tal no longer a hot tip... 12 Between the Neue and Alte Rathaus Palais an der Oper has changed the situation... 13 Weinstrasse and Theatinerstrasse - sought-after upmarket locations... 16 Maximilianstrasse and Perusastrasse - Germany s best luxury locations... 18 2012/2013 Letting year Dynamic letting market Developments and large-scale lettings dominate the letting scene... 21 Proportion of chain stores Multiples gain additional market share... 24 Fashion and luxury retailers control the letting situation... 25

Retail Report Munich von Sören Hoffmann, Head of Retail Agency South, Munich Sven Buchsteiner, Retail Consulting & Research, Frankfurt CBRE Special Report Retail Report Munich June 2013 INTRODUCTION It is not only FC Bayern München, the football Star of the South, that plays in a different league: in Germany the Munich retail market also appears to be in a class of its own. In terms of demand from retailers and rental values, Munich, the Bavarian capital, can clearly be included among other major European shopping cities, such as London, Paris and Milan. The appealing urban structure and clear distribution of retail areas in Germany s biggest village, as Munich is fondly called by its local population, means that Munich is charismatic not only for international tourists but also for national and international retailers. In Theatinerstrasse, Perusastrasse and above all in Maximilianstrasse, upmarket and luxury retailers in particular benefit from a location that can compete with the luxury shopping areas in London, Milan and Paris. Munich in brief key facts about Munich as a business and retail location Tab. 1: Key Facts Munich in brief Key Facts Munich Berlin Hamburg Cologne Dusseldorf Frankfurt Population in tsd., 2012 1.388 3.375 1.734 1.024 594 688 Population forecast %, 2012-2030 10 7,9 9,7-0,3 3,2 4,8 GDP 2012 in Million 79.210 97.485 93.961 46.613 40.214 55.357 Unemployment rate % 2012 5,6 14,5 8,6 10,5 9,8 8,3 No. of arrivals 2012 6.113.000 10.849.000 5.604.000 2.914.000 2.417.000 4.285.000 No. of overnight stays 2012 12.366.000 24.896.000 10.634.000 5.083.000 4.056.000 7.071.000 INSM City Ranking, level(rank) 2012 445 (46) 551 (9) 544 (10) 479 (34) 485 (29) 504 (20) INSM City Ranking, dynamics (RanK) 2012 672 (1) 417 (47) 565 (8) 517 (20) 580 (6) 584 (5) Retail related purchasing power per capit in 2013 7.783 6.155 6.877 6.784 7.225 6.967 Retail related purchasting power index 2013 123,00 97,30 108,70 107,20 114,20 110,10 Centrality Index 2013 119,20 107,90 115,70 109,40 121,10 113,60 Share of the total German retail turnover in 2012 25,13 43,61 27,03 14,89 10,21 10,61 *Germany=100, ** Germany = 20.554, *** Germany = 6.086 Source: Bertelsmann Stiftung, BulwienGesa AG, Bundesagentur für Arbeit, MB Research, CBRE 2013 page 1

Fig. 1: Overview of the Cologne retail market Map Basis: OpenStreetMap Contributors, CBRE 2013 The Munich Retail Market Despite having the highest rental values of any German city, there is unfailingly high demand for space in Munich city centre. With no need for long marketing periods, the newly-developed space in the Hofstatt, the Joseph-Pschorr-Haus and the Palais an der Oper was let, in many cases two to three years before completion, to tenants including Louis Vuitton, Adidas, Abercrombie & Fitch and even SportScheck. Munich has therefore returned to the situation before the development phase that took place between 2010 and 2012: it has a sought-after and expensive retail market that, with its clear distribution of locations, is appealing. However, it has its own market rules that every eager-to-expand retailer should understand before even approaching the Star of the South. Marienplatz the hub and pivot of the Bavarian Capital The central square in the city of Munich is Marienplatz. Its tourist attractions, including the Neue Rathaus (new town hall), make it the popular starting point for many shopping tours in Munich. The page 2

centrally-situated S-Bahn (rapid transit) station generates additional footfall for Marienplatz. The retail offer is dominated by the Ludwig Beck concept and Galeria Kaufhof department stores. Because of its outstanding footfall and prominence, not least for the many international tourists, the highest retail rents are paid in this area of Munich city centre. The prime rent on Marienplatz is currently 340 EUR per sq m per month. The limiting factor for a dynamic letting market is the small number of retail buildings on Marienplatz. These are mainly on the south side of the square, between Galeria Kaufhof and the Alte Rathaus. One of the rare new lettings has recently taken place in the retail building Marienplatz 25, where British telecoms operator Vodafone took around 400 sq m of sales space. The north side of the square is taken up by the dominant Neue Rathaus, so that it lacks a northern street frontage. However, this does not mean that there are no shops there. Although the ground floor accommodation of the Neue Rathaus is in fact occupied by retailers and cafés/restaurants, they are all run by small or medium-sized firms. This is a peculiarity of the Munich retail market. In accordance with a city byelaw, the accommodation may only be let to small and medium-sized firms, in order to promote variety in the Munich retail market. These firms therefore have the opportunity for representation in locations that otherwise, under non-regulated market conditions, would be virtually entirely occupied by multiples. page 3

Fig. 2: Location plan Marienplatz Map Basis: OpenStreetMap Contributors, CBRE 2013 page 4

Kaufingerstrasse Top mass-market pitch in the heart of the city Kaufingerstrasse is the leading mass-market location in the centre of Munich. It has the highest footfall and also the highest retail rents. The mixture of historic and modern retail buildings provides an appealing overall streetscape. Because of the large scale of the buildings, this is mainly a location for the flagship stores operated by national and international retailers, who include Zara, H&M, s.oliver and Esprit. However, local retailers are also represented: Munich men s outfitter Hirmer has its company headquarters there. According to the company, this is the largest men s clothing store in the world. The large scale of the buildings also meant that, in the 2012/2013 letting year, no new leases were concluded on Kaufingerstrasse. It can be assumed that future letting activity on this street will also be limited, as large-scale lettings in Munich generally take place in new developments (Joseph-Pschorr- Haus). At the moment, however, there are no plans to redevelop the existing retail buildings, particularly because long-term leases limit the opportunities for development. For these reasons there is clearly excess demand for Kaufingerstrasse, so that the prime rents in the street are currently 340 EUR per sq m per month. page 5

Fig. 3: Location plan Kaufingerstrasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 6

Neuhauser Strasse - Joseph-Pschorr-Haus brings new dynamism Neuhauser Strasse extends between Färbergraben and Karlsplatz. Unlike Kaufingerstrasse, it has a more diversified range of retail accommodation, with small and medium-sized units interspersed with larger stores. One of the main anchor stores in the street is Oberpollinger, a luxury department store belonging to the Karstadt group. The development of the former Karstadt am Dom (Neuhauser Strasse 19-21) to become the Joseph- Pschorr-Haus has given considerably more dynamism to the letting market in Neuhauser Strasse. Particularly as a result of the Joseph-Pschorr-Haus, there have been some spectacular new lettings in the large-scale segment. For instance, the US young fashion label Forever 21 has taken a lease on its first store in Germany, which has around 6,500 sq m of sales space. This large-scale letting was, however, topped by the sports retailer SportScheck, part of the Otto group, whose new lease on 10,000 sq m was the largest new letting for years in the Munich retail letting market. SportScheck was previously represented in Sendlinger Strasse in Munich. The Spanish fashion label Mango has also taken a unit in the Joseph-Pschorr-Haus, where it will operate its largest flagship store in the world in around 3,000 sq m. This is actually Mango s second store in Munich: it had already taken a lease on an around 700 sq m store in Theatinerstrasse, on the corner of Weinstrasse. The building, which has a total gross floor area (BGF) of approx. 44,000 sq m, was developed by Bayerische Hausbau. For them this was not enough: The fashion label Zara, which also belongs to the Spanish Inditex group, has taken a lease on the around 2,000 sq m former Fashion Club (Colloseum group) unit, where it is operating a flagship store. In the future, demand in Neuhauser Strasse will once again be concentrated in the small and medium-sized segment, as no new large-scale units will be coming onto the market for the foreseeable future. The large number of buildings in this size segment means that there are interesting expansion efforts. Nevertheless, even in Neuhauser Strasse excess demand for retail accommodation can be discerned. The development of the Joseph-Pschorr-Haus only satisfied this in the short term. Prime rents in Neuhauser Strasse are currently 310 EUR per sq m per month. Alte Akademie good things come to those who wait? Neuhauser Strasse could be more dynamic if part of its northern street frontage was not missing. Most of this is occupied by the historic Alte Akademie building, the ground floor of which is not used for retail purposes. The complex of historic buildings is owned by the federal state of Bavaria. Despite a number of conceptual ideas, so far there have been no development proposals worthy of mention. Meanwhile, however, this seems to have changed. For example, a lettable area of around 15,000 sq m has been put out to tender for development. However, the demands of the property require creative approaches to development: it is not just the street frontage on Neuhauser Strasse that is to be developed but also the historic arcades at the rear and the inner courtyards, which should be made accessible to a wider public. The listed building and conservation area regulations are similarly high, although a development of the Alte Akademie would be welcome from a retail and also page 7

urban planning point of view: it would provide an additional attraction for the public on Neuhauser Strasse. The state of Bavaria however still sees itself as the operator of the property, but would dispose of it during the development phase. Fig. 2: Lageplan Neuhauser Straße Map Basis: OpenStreetMap Contributors, CBRE 2013 page 8

Between Stachus and the central station B level and the railway station district Karlsplatz, with its striking fountain, also called the Stachus in Munich vernacular, is one of the central S-Bahn (rapid transit) stations in Munich. The retail scene there is therefore also underground, on the so-called "B" level. This has one of the highest footfalls of all European transport facilities. The Landesbank Baden-Württemberg (LBBW) has revitalised the so-called Stachus Passagen there. The redesigned property, which has a total lettable area of 24,500 sq m, has been in operation for around two years following its reconfiguration. It enjoys great popularity, particularly among Munich commuters: on peak days up to 280,000 pedestrians stream through the arcade s three rotundas. The new tenants include Butlers, More & More, Bestseller, Dean & David and a dm drugstore. Schützenstrasse and Bayerstrasse, which run parallel to each other as pedestrian links to the Munich central station, lead from the Stachus. Schützenstrasse, which is flanked by the large Karstadt department store, is oriented to the mass market. Mainly laid out as a pedestrianised zone, it benefits from the high footfall coming from the station towards the prime (1A) locations. A further upgrade for Schützenstrasse cannot be ruled out, as the Karstadt property has interesting development potential. Bayerstrasse, where tenants include C&A and Kaufhof, is open to road traffic and is dominated by somewhat discount-oriented retailers. However, both roads still have considerable potential for upgrading towards a quality-oriented retail offer, as the footfall there is definitely attractive. Prime rents on Bayer- and Schützenstrasse are currently around 90 EUR per sq m per month. Reconfiguration of Munich central station and the whole station forecourt has long been planned. This also encompasses the extension and upgrading of the traditional retailing in the station. So far, the retail offer in Munich central station is well behind other comparable stations, such as the central stations in Berlin, Cologne and Leipzig. Sendlinger Strasse boosted by the Hofstatt As well as the development of the Joseph-Pschorr-Haus, the construction and opening of the Hofstatt was one of the most important projects, not just for Sendlinger Strasse but for the whole Munich retail market. Approx. 19,000 sq m of office space; 69 apartments with a total area of ca. 14,000 sq m; and ca. 12,000 sq m of space for retail and café/restaurants has been built on the site of the former Süddeutsche Zeitung headquarters, on Hackenstrasse/Sendlinger Strasse. The Hofstatt was officially opened on 24 April 2013, although Abercrombie & Fitch s pre-opening was as far back as 25 October 2012. page 9

As well as Abercrombie & Fitch, large-scale fashion stores that have taken leases on units in the Hofstatt include Adidas, Freeman T. Porter, Gant, HE by Mango, Hollister and Tom Tailor. Another pilot store, J. Lindbergh, has also opened on the German market. The luxury label is operating its first store in Germany there. However, the Hofstatt also provides local shopping facilities: in the basement are a dm drugstore and a denn s Biomarkt. Despite the lettings to well-known tenants and the large units by Munich standards in both the Hofstatt and the Joseph-Pschorr-Haus, demand for retail space has not declined. On the contrary and this is a particular phenomenon for the Munich retail market demand has actually increased even more. This relates not just to the popular Sendlinger Strasse but also to the entire city core. The current prime rents in Sendlinger Strasse are therefore 185 EUR per sq m per month. The remainder of Sendlinger Strasse, to the south of the Hofstatt, has also developed very well. The partial pedestrianisation of the upper part of Sendlinger Strasse, between Hackenstrasse and Frauentorstrasse, has been very well received by shoppers. An extension of the scheme, up to Assamkirche, is also proposed. This will further improve the atmosphere of the street. Complete pedestrianisation would be welcome from a retail point of view. There are aspirations for an even larger urban integration, up to the Viktualienmarkt. This would link Sendlinger Strasse with the Jewish Museum and the Viktualienmarkt, via a range of steps and footpaths. The city planners hope that this will provide even more targeted management of the major tourist flows in the centre of Munich. The buildings on Sendlinger Strasse have a very different style from those on Kaufingerstrasse and Neuhauser Strasse. The predominantly small scale of the buildings often results in more activity in the letting market. The retail concepts found in Sendlinger Strasse give the street a fashionable image. The most recent new lettings outside the Hofstatt include 400 sq m to Marc o Polo (Sendlinger Strasse 29-31) and 500 sq m of sales space to Planet Sports (Sendlinger Strasse 17). Lettings in Sendlinger Strasse outside the Hofstatt in 2012/2013 are summarised in the following table. Table 2: Retail Letting Deals Sendlinger Strasse (excl. Hofstatt) 2012/2013 Straße m² Konzept Branche Sendlinger Straße 65 m² Rigby & Peller Mode Sendlinger Straße 17 500 m² Planet Sports Sport Sendlinger Straße 25 k.a. Kennel & Schmenger Schuhe Sendlinger Straße 29-31 400 m² Marc O'Polo Mode Sendlinger Straße 31-33 155 m² Scotch&Soda Mode page 10

Straße m² Konzept Branche Sendlinger Straße 45 485 m² Jeans Kaltenbach Mode Sendlinger Straße 54 200 m² More & More Mode Sendlinger Straße 58 200 m² Run² (Runners Shop) Accessoires und Lederwaren Source: CBRE 2013 Fig. 3: Location plan Sendlinger Strasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 11

Between Viktualienmarkt and Isartorplatz - Rindermarkt, Rosental and Tal There are two routes from Marienplatz to the historic Viktualienmarkt. One is through the Rindermarkt and Rosental, the other via the Tal. The route passing through the Rindermarkt and Rosental is interesting from a retail perspective, because both streets still appear to have considerable development potential. The anchor store in the Rindermarkt is certainly the old-established houseware retailer Kustermann, which carries wide and deep product ranges in its five floors. Apart from this, the street has a rather indistinct profile, mainly oriented towards goods for medium-term needs and tourist products. Tchibo, Douglas, Gerry Weber and also Peter Hahn could be regarded as the anchors there. So far, no other national and international retailers are represented in this area of the city centre. Tal no longer a hot tip Beyond the Alte Rathaus on Marienplatz, the shopping street Tal runs to Isartorplatz. This street, which is another link to the Viktualienmarkt, is also an up-and-coming retail location in the centre of Munich. Like Sendlinger Strasse, Tal benefits from the "rearward S-Bahn station on Isartorplatz. Tal is undoubtedly a mass-market location, with an indistinct sector mix ranging from café/restaurant concepts, such as Kentucky Fried Chicken and Burger King, through to upmarket furniture stores like Böhmler. Tal is very well accepted by the population of Munich and by regional and national retailers. Its importance as a complementary location for expansion could further improve. For example, the opening of the authorised Apple dealer Gravis is regarded as the trigger for a promising impetus in this central Munich submarket. The letting to Globetrotter in the Rieger City, a commercial complex on Isartorplatz, has attracted even more shoppers to the Tal. As in its store on Olivandenhof in Cologne, Globetrotter is operating a Try and buy outdoor world, where e.g. canoes can be tested in the shop s own trial pool. In order to cope with the increasing pedestrian flow, the Tal is to be extensively reconfigured. This will include narrowing the roadway and considerably widening the pavements. The Tal will gain lasting benefit from this urban development scheme. Prime rents in the Tal are currently 150 EUR per sq m per month. page 12

Fig. 6: Location plan Tal Map Basis: OpenStreetMap Contributors, CBRE 2013 Between the Neue and Alte Rathaus Palais an der Oper has changed the situation Two other prime locations that have now become established in the centre of Munich are Dienerstrasse and Residenzstrasse. In the past, neither of these streets had been at the top of the national and international retailers lists when searching for locations in the centre of Munich. On the contrary, both were more tourist locations, which relied on the attractiveness and drawing power of the original Dallmayr store. Both streets also benefited from their status as the connecting axis between Marienplatz and Odeonsplatz, running alongside the historic Feldherrenhalle, which is used as a museum. The dominance of Theatinerstrasse, at that time the dominant upmarket location, overshadowed both of these streets, although they are only 150 m from each other. Dienerstrasse and Residenzstrasse only came into the focus of the upmarket and luxury-oriented retailers when the pressure for expansion in Weinstrasse, and in particular Theatinerstrasse, became so great that a few retailers began to consider alternatives. The retro-department store Manufactum and the Swiss shoe retailer Navyboot began this positive trend in the last few years. page 13

They were followed by retailers including the Porsche Design luxury concept, Swiss men's outfitter Windsor and the haute couture label Akris, which is also Swiss. As a result, both streets have improved their long-term importance in the market. The increase in attractiveness has, not least, been boosted by the redevelopment of the Residenzpost, which is now the Palais and der Oper. In the former Post house, a modern commercial complex has been created, including offices, residential and retail uses in a lettable area of 23,000 sq m. The main tenant, French luxury retailer Louis Vuitton, opened its around 1,300 sq m flagship Luis Vuitton Maison store in April 2013. This branch is its only Maison concept outside Paris. The café/restaurant facilities will include a restaurant run by historic Munich restaurateur Kuffler, which is to operate the California Kitchen concept in a 1,500 sq m unit. The luxurious ambience is now to be complemented by a further new letting. The jeweller Bucherer, which also hales from Munich, has taken a 790 sq m flagship store in the Palais an der Oper. By a wide margin, this is the largest letting to a jewellery store in Munich for several decades. The drawing power of the Palais an der Oper will make itself felt in the northern part of Residenzstrasse, towards the Feldherrenhalle and Odeonsplatz. Despite its very good location close to Perusastrasse and Maximilianstrasse, in the past this part of Residenzstrasse has never developed a distinct quality. The situation of the square by the Oper, the lack of street frontage due to the Munich Residenz and the low footfall have so far prevented multiples from opening in the location. However, the revitalisation of the Theatinerpassage should provide new impetus. Prime rents in Diener Strasse and Residenzstrasse are currently 190 EUR per sq m per month. page 14

Fig. 7: Location plan Diener- and Residenzstrasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 15

Weinstrasse and Theatinerstrasse - sought-after upmarket locations Between Marienplatz and Briennerstrasse are the high-quality mass-market location in Weinstrasse and the upmarket Theatinerstrasse. Both have an attractive streetscape. Modern and historic commercial buildings are interspersed, which gives this part of the city centre a particular urban flair. With the Marienhof, a small inner-city park adjoining Weinstrasse, both streets invite visitors not only to stroll but also to linger. Weinstrasse has a comparatively short frontage: only a handful of commercial buildings compete for the favours of customers and tourists. Because of the Neue Rathaus and the Marienhof, Weinstrasse only has one street frontage. For this reason, in the past new lettings in Weinstrasse took place only rarely. In the 2012/2013 letting year, however, this changed. For example, H&M took a lease on the entire building Weinstrasse 8, where it will operate an additional flagship store. Theatinerstrasse, on the other hand, remains the undisputed upmarket location in the centre of Munich. It includes retailers such as Emporio Armani, Michael Kors, Nespresso, Etienne Aigner and Marc o Polo. As it includes the upmarket Fünf Höfe commercial property complex, which is firmly established in the Munich retail market, Theatinerstrasse could further improve its position as a high quality location. Some time ago Bogner took around 100 sq m in the Fünf Höfen for its Fire and Ice concept. A notable recent letting is to Spanish fashion label Mango. Mango has taken the property Theatinerstrasse 7, replacing historic Munich retailer Mändler, which had to give up the property after 76 years of trading there. The lettable area includes around 700 sq m of sales space. There were other letting activities in Theatinerstrasse in the 2012/2013 letting year. The US jeans label Guess was able to secure a shop unit in Theatinerstrasse 8-16. The future store will have around 330 sq m of sales space. Despite the lively letting activity in Theatinerstrasse, there continues to be no clear evidence of excess demand in either Theatinerstrasse or Weinstrasse. Prime rents in Weinstrasse and Theatinerstrasse are currently 270 EUR per sq m per month. Whether the excess demand can be satisfied by the development of the Theatinerpassage remains to be seen, although it can be assumed that the market repositioning of the property will give positive impetus to the entire location. The Theatinerpassage, a shopping arcade between Residenzstrasse and Theatinerstrasse, is no longer in line with modern retail requirements because of its format and layout. Taking account of the positive development of the Palais am Oper and the increased footfall, the property is now to be comprehensively revitalised, so that further letting activity can be expected there in the future. page 16

Fig. 8: Location plan Weinstrasse and Theatinerstrasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 17

Maximilianstrasse and Perusastrasse - Germany s best luxury locations No other city in Germany has such a clearly defined luxury location as Munich. Like a string of pearls, the international luxury labels shops and flagship line up along Perusastrasse and Maximilianstrasse. It is not just the concentration of international labels that makes the two streets so interesting: the considerable proportion of old-established luxury goods retailers also appeals to and attracts a well-to-do clientele. The luxury locations in Munich benefit from the geographical isolation of the city. The nearest comparable luxury shopping locations are on the other side of the Alps: in Milan, Zurich or Vienna. The catchment area therefore extends much wider than Munich and its prosperous surrounding districts. There is now a distinct trend for luxury shopping tourism for well-to-do clients from the Arab countries, China and even Russia. Of the two luxury locations, Maximilianstrasse is the stronger. This is primarily due to its length, with more commercial buildings and sales space. The magnet stores are without doubt Gucci, Hermès, Dior and Armani. The shops fit extremely well in both the modern and historic commercial buildings, giving the street that certain something. Other lettings in the recent past have been to the Italian designer Gianfranco Fèrre, Belstaff, Moncler and even Yves Saint Laurent. There were two new lettings in the 2012/2013 letting year. These in Maximilianstrasse 38, where the DOB label Tara Jarmon is to open a 65 sq m pilot store, while the avant-garde Optiker took a unit in the Maximilianhöfen. There are no direct development proposals in Maximilianstrasse at the moment. The only building with development potential is the René Lezard-Haus (Maximilianstrasse 4-6), which is currently vacant and could be used for retail purposes. However, rumour has it that so far there is no planning consent for a fundamental revitalisation of the commercial building. As in the other luxury locations in Germany, there is massive excess demand from the international luxury retailers in Maximilianstrasse. Key money - premiums paid to outgoing tenants is once again a common way to secure retail premises in the centre of Munich. Prime rents in Maximilianstrasse are currently 300 EUR per sq m per month. The pressure to occupy is so strong that the side streets off Maximilianstrasse have now developed to become serious areas for expansion. Neuturmstrasse, the pedestrian link between Maximilianstrasse and the tourist area around the Hofbräuhaus and am Platzl, stands out. The four new upmarket and luxury retailers that have just opened there include French sports label Lacoste, French designer Zadig&Voltaire and Swiss luxury retailer Rolex. The most recent letting is to Meindl Authentic Luxury Store, which has taken a 115 sq m retail unit. These locations are attractive insofar as they are in the immediate vicinity of the top luxury locations and, by Munich standards, are still available at moderate rents. However even these are already high- page 18

er than the prime rents in many German cities. Prime rents in Neuturmstrasse are currently 100 EUR per sq m per month. In contrast to Maximilianstrasse, Perusastrasse undoubtedly benefits from a higher footfall, which compensates for its less illustrious address. The street is relatively short, so that planning requirements are a limiting factor for the supply and growth of sales space. This does not detract from the quality of the street: its retailers, which include Burberry, Prada and Aigner, are indisputably positioned in the luxury segment. Because of the shortness of the street, there were no new lettings in Perusastrasse in the 2012/2013 letting year. The only major change was the expansion of the luxury label Prada s flagship store. Prada took over local hat retailer Zehne and consolidated both the former shops to form a new store. The US fashion label Tory Burch is set to become an additional tenant in Perusastrasse. As in Maximilianstrasse, there is clearly excess demand in Perusastrasse, which has slightly increased as an effect of the positive development of the Residenzpost project. Prime rents in Perusastrasse are currently 300 EUR per sq m per month. Fig. 9: Location plan Maximilianstrasse and Perusastrasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 19

Fig. 10: Location plan Maximilianstrasse Map Basis: OpenStreetMap Contributors, CBRE 2013 page 20

2012/2013 Letting year Dynamic letting market Developments and large-scale lettings dominate the letting scene Munich city centre can look back at a very dynamic letting year (May 2012 to May 2013). A total of 41 lettings were concluded in the prime (1A) locations in the centre of Munich. Large-scale lettings and developments have given the Munich retail letting market more dynamism than has been seen for many years. Sendlinger Strasse, with the Hofstatt development, registered 24 lettings, thereby leading the ranking of the most active retail locations in the centre of Munich. This accounts for around 59% of the entire letting performance in the 2012/2013 letting year. It included a total of seven new lettings in Sendlinger Strasse, outside the Hofstatt development. As a comparison: These seven lettings alone equated to more than the entire letting take-up in Maximilianstrasse and Theatinerstrasse. Other active locations included Theatinerstrasse, with three lettings, and Weinstrasse, Brienner Strasse and Maximilianstrasse, with three each. The other new leases concluded were in the remaining streets. However, Kaufingerstrasse, the top mass-market location in the centre of Munich, was the only street in which no new lettings took place. Another notable feature is the high proportion of large-scale retail properties, i.e. with more than 600 sq m of sales space. In terms of numbers of lettings concluded, these accounted for 24% of the total. However, in terms of floor area, they accounted for as much as 69%. This accommodation came onto the market not just as a result of developments but also by direct lettings. Particularly outstanding in this respect were the lettings to Zara in Neuhauser Strasse 33 (3,500 sq m of sales space) and to H&M in Weinstrasse 8 (2,250 sq m). Table. 3: Retail Letting Deals Munich (May 2012 May 2013) Street Sq m Concept Sector Brienner Straße 11 204 m² Woolrich Fashion Brienner Straße 54 k.a. Baguette Company Gastronomy Fünf Höfe Theatinerstraße 100 m² Fire + Ice (Bogner) Luxury Neuturmstraße 155 m² Meindl Authentic Luxury Store Luxury Maffeistraße 5 200 m² Karl Lagerfeld Luxury Marienplatz 25 400 m² Vodafone Telecommunications Maximilianstraße 11-15 300 m² Optiker Leidmann Luxury Maximilianstraße 38 65 m² Tara Jarmon Fashion Neuhauser Straße 33 3.500 m² Zara Fashion Residenzstraße - Palais an der Oper 790 m² Juwelier Bucherer Jewellery & Accessories page 21

Street Sq m Concept Sector Rosenstraße 600 m² Zara Home Furniture & Interiors Schäfflerhof 6 200 m² Rosenthal Furniture & Interiors Sendlinger Straße 65 m² Rigby & Peller Fashion Sendlinger Straße 12 Hofstatt 800 m² Adidas Sports & Outdoor Sendlinger Straße 12 Hofstatt 200 m² Bartu Shoes & Leather Goods Sendlinger Straße 12 - Hofstatt 1.300 m² Das Depot Furniture & Interiors Sendlinger Straße 12 - Hofstatt 800 m² Gant Fashion Sendlinger Straße 12 - Hofstatt 230 m² Brandy & Melville Fashion Sendlinger Straße 12 - Hofstatt 200 m² Liu Jo Shoes & Leather Goods Sendlinger Straße 12 - Hofstatt 200 m² Only Fashion Sendlinger Straße 12 - Hofstatt 900 m² denn's Grocery Sendlinger Straße 12 - Hofstatt 700 m² dm Drogeriemarkt Drugstore & Parfumery Sendlinger Straße 12 - Hofstatt 130 m² Baumgartner Gastronomy Sendlinger Straße 12 - Hofstatt 50 m² Li-LA-LO Jewellery & Accessories Sendlinger Straße 12 - Hofstatt 50 m² Codello Shoes & Leather Goods Sendlinger Straße 12 - Hofstatt 130 m² Freeman T. Porter Fashion Sendlinger Straße 12 - Hofstatt 1.200 m² Humanic Shoes & Leather Goods Sendlinger Straße 12 - Hofstatt 100 m² Calzedonia Fashion Sendlinger Straße 12 - Hofstatt 150 m² J. Lindeberg Luxury Sendlinger Straße 25 k.a. Kennel & Schmenger Shoes & Leather Goods Sendlinger Straße 29-31 400 m² Marc O'Polo Fashion Sendlinger Straße 31-33 155 m² Scotch&Soda Fashion Sendlinger Straße 45 485 m² Jeans Kaltenbach Fashion Sendlinger Straße 54 200 m² More & More Fashion Sendlinger Straße 58 200 m² Run² (Runners Shop) Shoes & Leather Goods Sendlinger Straße 17 500 m² Planet Sports Sport Tal 8 k.a. Tegernseer Gastronomy Theatinerstraße 35 100 m² Schiffhauer Munich Fashion page 22

Street Sq m Concept Sector Theatinerstraße 8-16 330 m² Guess Fashion Weinstraße 4 450 m² WMF Furniture & Interiors Weinstraße 8 2.250 m² H&M Fashion Source: CBRE 2013 In the future, demand will be reoriented to the small and medium-sized segment, as no large-scale projects are currently in the pipeline and most of the existing flagship stores are let on long leases. A commonly-observed feature of the Munich letting market are the premature extensions and renewals of leases agreed between landlords and the exiting tenants. This can be regarded as a clear sign of the outstanding levels of retail turnover achieved in the Munich market. However, these long-term landlord and tenant relationships will inevitably lead to less retail accommodation coming onto the market in the future. In the context of the existing excess demand and the strong pressure to expand by international retailers, it can be assumed that there will be further moderate growth in prime rents. Especially in the top locations, new peak rents will be paid for the retail accommodation that rarely comes onto the market, with the payment of key money and/or premiums priced into the acquisition strategy. This selection by rental value will mean that, in the future only particular tenants will be able to afford the prime rents in the top locations. On the Munich retail market this is what leads to the search for alternative locations, otherwise there is no way to explain e.g. the rise of Neuturmstrasse. This phenomenon has already been evident in the past, as the following graphic, showing the trend of prime rents, illustrates. Fig. 11: Trend of prime rents in Munich Source: CBRE 2013 page 23

For the future as well it can be assumed that, because of the factors mentioned, Munich will continue to be Germany s most expensive retail city and that at least net rents will continue to grow more strongly towards London levels. Munich also fares very well from the opening of pilot stores, i.e. the first branches to open in the German market. Munich is in second place, after Berlin, in the ranking of the most active retail centres. Fig. 12: Pilot stores in Germany by city 2012/2013 Source: CBRE 2013 Proportion of chain stores Multiples gain additional market share The constant rivalry for the best retail accommodation is also leading to a change in the proportion of multiples. However, because of the varied structure of Munich city centre and the large number of different accommodation formats, the proportion of multiples varies considerably between locations. While the peak 1A locations such as Kaufingerstrasse have a comparatively high proportion of multiples, up-and-coming 1A locations like Sendlinger Strasse and the Tal are more heavily dominated by owner-operated shops. Marienplatz is an anomaly: the intentional promotion and letting of the civic retail accommodation in the Munich Rathaus to small and medium-sized retailers has resulted not only in a varied retail landscape but also in a much lower proportion of multiples. page 24

Fig. 13: Proportion of multiples in Munich city centre Street No. of Stores No. of Chain Stores Share of chain stores Marienplatz 55 17 30,9 in % Kaufingerstraße 33 30 90,9 Neuhauser Straße 49 40 81,6 Weinstraße 13 11 84,6 Theatinerstraße inkl. Fünf Höfe 107 87 81,0 Sendlinger Straße 90 63 70 Tal 58 35 60,3 Residenzstraße/Dienerstraße 36 21 58,3 Brienner Straße 29 8 27,6 Maximilianstraße/Perusastraße 67 53 79,1 Leopoldstraße 68 37 54,4 Hohenzollernstraße 108 48 44,4 Source: CBRE 2013 Fashion and luxury retailers control the letting situation Fashion and luxury retailers dominated the letting situation in the 2012/2013 letting year. There were 16 lettings in the fashion sector, making up 39% of the total. The second-largest segment was the luxury retailers, with five lettings. As, particularly in the luxury area, clothing is the predominant product group, these retailers could also be assigned to the clothing segment. If the fashion-wise shoe retailers, with four leases agreed, are also included, clothing accounts for around 61% of the lettings. page 25

Fig. 14: Leases concluded in Munich 2012/2013, by sector Source: CBRE 2013 In conclusion, the following table provides a concise summary of the prime (1A) locations in Munich city centre. The ranges of rental value and prime rents relate to a model 100 sq m shop unit, with 5 metre display frontage, in the peak location of the street concerned. Table 4: Retail locations in Munich Retail locations in Munich Street Rental value range EUR/sq m Quality of location Prime rent EUR/sq m Trend Development impetus Marienplatz 300-340 Peak 1A location 340 Very high footfall with a very high proportion of tourists, unceasingly high demand can be expected in the future. Kaufingerstrasse 300-340 Peak 1A location 340 Regularly one of Germany's highest-footfall pedestrianised zones, similar to Marienplatz, so that without new space being created future demand can hardly be satisfied. page 26

Retail locations in Munich Neuhauser Strasse 280-310 Peak 1A location 310 Marginally lower footfall than on Kaufingerstrasse, the Joseph-Pschorr-Haus has created very strong impetus, development potential in the Alte Akademie. Weinstrasse 250-270 Peak 1A location 270 Clear excess demand in Weinstrasse, lack of a street frontage (Marienhof and Neue Rathaus) means only moderate impetus. The opening of Mango and H&M: rejuvenation of the location to be expected in the future. Theatinerstrasse 220-270 Upmarket 1A location 270 Munich s upmarket location around the Fünf Höfe enjoys unceasingly high demand. Low tenant fluctuation confirms the satisfaction of the retailers, some of which have paid high premiums. Partial rejuvenation through the replacement of Mädler by Mango. Tal 120-150 Prime (1A) location 150 Tal is a location in the heart of Munich that is dominated by a strong and heterogeneous mix of national and international retailers. Continuing strong upward pressure on rents however makes it difficult to present the Tal as a lower-priced alternative in the future. Sendlinger Strasse 120-185 Fashionable location / prime (1A) location 185 Dynamic retail location in the 2012/2013 letting year, Hofstatt is an outstanding development, not just for this street. The development has also attracted a few new retailers to the area outside the Hofstatt. Traffic calming and pedestrianisation has been very well received by shoppers. Residenz- /Dienerstrasse 160-190 prime (1A) location 190 Numerous well-known and upmarket retailers and multiples have chosen to locate here. Both these streets, in particular Residenzstrasse, have been given considerable further impetus by the Palais an der Oper. Lower-priced alternative to Perusastrasse and Maximilianstrasse. Maximilianstrasse 250-300 Luxury location 300 Maximilianstrasse is indubitably one of the most famous luxury shopping locations in Europe and is foremost in Germany. For many international multiples in the luxury segment representation there is essential. Taking this into account, it can be assumed that there will be hardly any space available, even in the future. Perusastrasse 280-300 Luxury location 300 Perusastrasse, the link between Maximilianstrasse and Theatinerstrasse, is Munich s second luxury location after Maximilianstrasse. The very limited numbers of properties mean that this is a very inflexible market, which will experience little movement in the future and will therefore remain highly sought-after. Source: CBRE 2013 page 27

For furhter information: Sören Hoffmann Associate Director, Head of Retail Agency South CBRE Retail - Agency South Isartorplatz 1 80331 München t: +49 89 24 20 60 11 e: soeren.hoffmann@cbre.com Sven Buchsteiner Senior Consultant CBRE Retail Consulting & Research Bockenheimer Landstraße 24 60323 Frankfurt am Main t: +49 69 17 00 77 66 2 e: sven.buchsteiner@cbre.com DISCLAIMER 2013 CBRE Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have notverified 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 GmbH clients, and cannot be reproduced without prior written permission of CBRE GmbH. page 28