City, Retail MarketView Q2 2014 CBRE Global Research and Consulting

CONSUMER CONFIDENCE INDEX SALES JANUARY-APRIL 2014 AVERAGE EXCHANGE UP TO MAY 2014 ANNUAL VAR. APR 2014 5.71% ANTAD (SAME STORES) 0.5% $13.14 PESOS PER DOLLAR

UP TO Q2 2014 METRO AREA RECORDS ALMOST 750 K SQ.M OF SHOPPING CENTERS UNDER CONSTRUCTION At the start of the year, Mexico’s treasury growth rate of close to 2.7% by the end of Quick Stats secretary predicted the nation's economy the year. would grow at a rate of 3.9%. In May, Q2 2014 Q-o-Q Y-o-Y The development of commercial space in however, the figure for 2014 was adjusted Mexico’s City’s metropolitan zone has GDP Q1 2014 downwards to 2.7%. The treasury 1.8%   shown an important dynamism even (Y-o-Y) department also made it known that the though Mexico's economic landscape CPNI Apr. 2014 economy grew by 1.8% in the year's first 1.23%   hasn't been all positive. This year, plans (Accumulated) quarter, a percentage that is less than for important shopping malls have been what Banco de México had estimated. CCI May 2014 hatched and have been in the planning -4.7%   (Y-o-Y) External factors, such as the low rate of stages for the past six months. The growth in the U.S. economy and internal sector’s dynamism can best be seen in Unemployment 4.8%   factors such as the fiscal reforms in expansions, remodeling and in the Rate (April 2014) Mexico, were the determining elements in construction of new projects, which are Source: Mexico´s Institute of Geography and Statistics. CPNI (Consumer Prices National Index) the reduction of growth expectations. expected to be completed in the next three GDP (Gross Domestic Product) Although inflation and unemployment are months. This reflects investors’ confidence CCI (Consumer Confidence Index) low, exports to the U.S. have not in the economy’s recovery in the short Hot Topics recovered. term. According to a report sent to the The impact of fiscal reforms on the The Mexico City Metropolitan Zone now Mexican stock exchange, the REIT consumption sector has been very has an inventory of 5.2 million sq. m. of net Fibra Macquarie has completed its pronounced and can be seen in the rentable space distributed among 183 acquisition of City Shops del Valle. consumer confidence index. The nation’s shopping malls with net rentable space of The REIT managed eight commercial statistical research bureau, INEGI, in its more than 10,000 sq. m. properties with a total of 253,100 sq. May report, noted a 4.7% decrease in Space available at large-format malls such m. of gross rentable space in all of retail sales compared to the same month Mexico. as the Super Regional Mall, Regional Mall in the previous year. Sales dropped 1.6% and Fashion Mall is less than 10%, a level in March compared to the same period in similar to that of the previous year. Rental According to first quarter results 2013 and 7.6% compared to the month prices for these formats are in the range of published by the REIT Fibra Danhos, previous. USD$40.00 to USD$100.00/sq. m./month. it reached agreements in April and Economically speaking, Mexico has had a Prices at medium-sized and small-format March to acquire lots in the southeast difficult year, but it's important to malls such as Power Center, Centros de and eastern parts of the city to emphasize that business expectations in Vecindario, etc. have availability that develop shopping malls and offices. terms of production and exports remain fluctuates between 15 and 20%, with high for the year's second half, factors that prices in the range of MXN$200 to Thor Urban Capital acquired the have been crucial for expectations of a MXN$400/sq. m./month. Altavista 147 shopping mall in March of this year but hasn’t released the amount it invested. The mall is in the Consumer Confidence Index and Sales Index (2008-2014) south of Mexico City and is Consumer Confidence Index (May 2014) 90.7 distinguished by the luxury Sales Index (March 2013) 120.40 businesses located there. 105 155

100 Salomón Chertorivski, the city’s 145 Secretary of Economic Development, 95 135 has said that Mexico City has grown 90 at a higher rate than the national 125 average over the past year, and most 1 of all in the real estate, information 85 115 technology and financial sectors. 80 105

75 95 2008/01 2008/04 2008/07 2008/10 2009/01 2009/04 2009/07 2009/10 2010/01 2010/04 2010/07 2010/10 2011/01 2011/04 2011/07 2011/10 2012/01 2012/04 2012/07 2012/10 2013/01 2013/04 2013/07 2013/10 2014/01 2014/04 Source: Mexico´s Institute of Statistics and Geography. Shopping Centers with over 10k sq.m GLA: Inventory and Construction in MCMA Q2 2014

Shopping Center Total GLA Total GLA Under Corridor with over 10k sq. m. Shopping Center Under Construction (sq. m.) Construction (sq. m.) of GLA Parques Toreo, Mundo E (Expansión), Plaza Periférico Norte 1,352,611 51 242,055 Retail| Mexico City Tlalpan

Oriente 1,068,939 39 37,129 Patio Lomas Estrella y Plaza Tezontle (Expansión)

Poniente 881,926 29 75,450 , The Point, Moliere Dos22 (Expansión)

Noreste 957,228 31 133,443 VIA Vallejo, Plaza Parque Jardín

Plaza Delta (Expansión) y Plaza Patriotismo Centro 432,952 15 64,560

(Expansión) MarketView Centro Comercial Oasis, Ciudad Medica Sur, Patio Sur 529,249 18 195,403 Barranca del Muerto, Patio Tlalpan y Antara Pedregal

TOTAL 5,222,905 183 748,040

Source: CBRE Research with data from MAC. */GLA (Gross Leasable Area) and MAMC (Mexico City Metropolitan Area) Retail and Shopping Centers Trends

The REITs market in Mexico is relatively new. There are eight on the Mexican stock exchange and they have performed positively in the last two years. REITs like Fibra Shop, Fibra Macquarie, Fibra Uno and Fibra Danhos have had a pronounced tendency to invest in shopping malls and thus have motivated the construction and acquisition of malls with the goal of managing and promoting this real estate sector in Mexico which before a few years ago appeared to be flat. If we analyze the malls that are now under construction, we can see a tendency to build mixed-use spaces in the Mexico City metropolitan area, and the trend appears to be here to stay. The trend appeared as a result of the need to meet all of the needs of the market in one location, including residential, commercial, corporate and lodging. Examples of mixed-use developments currently being built are: Parques Toreo, Antara Pedregal, Miyana, VIA Vallejo, and Ciudad Medica Sur, etc. Other trends that can be seen in the retail market today include the expansion of brands that have only recently reached wide-spread popularity for the first time in the metropolitan zone. Brands such as Aeropostale, Forever 21, Olive Garden, American Eagle Outfitters, and California Pizza Kitchen, etc. are in an expansion phase, opening new stores at different points around the city. All of this is a result of the brand acceptance shown by consumers. As a result, brands like Hyundai, Victoria´s Secret, Shakeaway, etc. have gained wide popularity for the first time in the city, awakening interest in many others as a result of the desire to enter the Mexican market. Mexico City is the most sought-after market for these brands to gain success.

High Street: Masaryk Avenue

Masaryk Avenue, the “Rodeo Drive” of Mexico City with its confluence Indicator of international and national luxury brands and its recreational urban chic appeal to shoppers and tourists, is currently undergoing Inventory (sq. m.) 67,990 reconstruction. The first phase of the upgrade to the street is expected to be finished in April of next year. Vacancy (sq. m.) 4,428 The avenue is undergoing significant changes both at the market level and regarding the brands that can be found there. The development Vacancy Rate (%) 6.50% of important Fashion Malls surrounding the avenue, such as Moliere Dos22, and , is providing direct Average Asking Prices competition with the avenue’s offerings. One example is Burberry's $106.90 (USD/sq. m./month) move from Masaryk to Moliere Dos22. Over time, the constant relocation of brands, including Salvatore Ferragamo now managed by Hugo Boss, reflects the brands’ desire to be strategically located in the zone with the most fashionable boutiques. The result is change all Prime Core Businesses in Masaryk Av. along the avenue.

Under Other A CBRE analysis observed that vacancy rates in the current quarter 10.0% Construction Restautants & fell in comparison with the same quarter in 2013, from 6,454 sq. m. to 4.7% Bar 4,428, sq. m. The dip is due to the absorption of space by Plaza 25.5% Vacancy Republica. Masaryk’s commercial real estate inventory grew by a little 6.5% more than 1,500 sq. m. as the result of the opening of several restaurants that were under construction for the past six months. Personal Care & Medical The drop in the vacancy rate and sustained demand on the avenue 2.0% has pressured prices to rise considerably to an average of Phones & USD$106.9/sq. m./month, an increase of USD$10 with respect to the 2 Electrics 2 3.6% third quarter of 2013. Furniture & Home Prices, availability and inventory all indicate that Avenida Masaryk 6.0% Clothing, remains a highly sought-after location by luxury brands that, even with Jewelry & Shoe, etc. the competition that close-by fashion malls have generated, continues Watches 16.6% to see positive development. Projections continue to be favorable Banking & 6.6% Cars & given the current investments in infrastructure. Motorcycles Insurance 8.7% 9.9%

Map of Services and Shopping Stores on Masaryk Avenue Q2 2014 Mexico City Retail| Mexico City

MarketView

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Updated: May 16, 2014. Q2 2014 Retail| Mexico City

MarketView

CONTACT

For more information about this local MarketView, please contact: Mexico Research Yadira Torres-Romero Pablo de J. López Gallardo Director Analyst Mexico Research Mexico Research CBRE CBRE Montes Urales 470, 2nd Floor Montes Urales 470, 2nd Floor Lomas de Mexico, D.F., 11000 Mexico, D.F., 11000 ph: + 52 (55) 5284 0000 Ext. 3014 ph: + 52 (55) 5284 0000 Ext. 2023 e: [email protected] e: [email protected]

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Global Research and Consulting This report was prepared by the CBRE Mexico 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.

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