RESEARCH & FORECAST REPORT 2017 Overview

Summary

Recent Trends Prognosis

In the past decade Montenegro has shown considerable With the country directing its inflow of investments into growth, and many consider the country one of the fastest tourism, it is very likely that new structures will continue to be rising tourism markets in the world. With its stable economic built to accommodate the demands of the market. The new growth over the past few years, it is sure to continue to attract road infrastructure and air connections should allow not only foreign investments in the foreseeable future. The only a better and faster connection between the southern and downside of such trends is that development has largely been northern region, which would again present a valuable concentrated on retail and hospitality sectors, whereas the opportunity for new projects in the northern parts of the industrial market has been largely left in the backdrop. country, but this will largely depend on external factors.

Economic Overview

Summary & Prognosis Unemployment (% of active population)

> Introduction: Montenegro is an upper middle income country, with a small open economy. The country is in 19.5% 18.0% 17.6% 17.1% transition towards a market based economy and integration 16.1% 15.3% into the EU. Steady progress has been made on key reforms geared towards EU integration. However, further structural and institutional changes are required. The economy continues to be over reliant on the state and unprofitable state owned companies are kept afloat by public finance. Unemployment and regional differences in 2013 2014 2015 2016 2017 2018 development are also key political and economic issues. Source: Montenegro Statistical Office > Key Economic Indicators are summarized in the following > Economic Performance: The real growth rate of GDP in table: the second quarter of 2018 was 4.9%, following a growth rate Economic Figures of 4.5% in the previous quarter. The average growth rate for EU countries at the time was 2.2%, and Montenegro has 2015 2016 2017 2018F 2019F remained as one of the strongest performers in the region and Actual Europe as a whole. While both goods and services exports Nominal grew, import is still strong, reflecting machinery for the GDP € 3,625 3,954 4,299 4.492F 4,692F highway, and tourism and energy investments, which are millions driving the expansion of the current account deficit. GDP Real GDP 3.4 2.9 4.7 2.8F 3.0F % Change Annual Growth Rate in Montenegro averaged 2.31% from Inflation 2001 until 2016, reaching an all-time high of 10.7% in the CPI Year 1.4 0.9 2.4 1.9F 1.8F fourth quarter of 2007 and a record low of -5.7% in the fourth End quarter of 2009. % of GDP Current Average monthly gross earnings (€/month) Account (13.3) (19.0) (20.2) (21.2)F (18.8)F Balance Foreign 765 Direct 17.1 9.8 10.3 10.4F 11.3F Investment External 748 163.1 166.8 169.8 173.5F 164.2F Debt

Exports 3.9 (0.1) 1.8 1.7F 1.8F 727 726 725 723 Imports (6.6) (9.3) (4.1) (4.7)F (3.5)F

Source: IMF GDP (annual var in %) 2012 2013 2014 2015 2016 2017

Source: Montenegro Statistical Office -2.7% 1.8% 2.1% 3.0% > Economic Sectors: Tourism and the export of refined 3.4% 2.8% metals are major economic sectors. Significant natural resources include bauxite, hydroelectricity and, for tourism, the coast and climate. A large aluminum complex and much 3.5% of the financial sector have been privatized, and a large part of foreign direct investments focus on the hospitality industry. The following table indicates the composition of the economy by broad economic sector, based on employment by sector in September 2018.

Source: IMF

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Economic Overview

Employed percentage of workforce per sector > Taxation: The tax system that was reformed in 2001, made Montenegro’s tax regime one of the most competitive in the region and Europe as a whole. The rates of significant taxes are as follows: 8.7% Agriculture > Personal Income Tax 9%. 18.8% > Corporation Tax: 9%.

Industry > VAT: 21%, 7% (includes hotel accommodation) and 0%. > Withholding Tax: 9%. 72.5% > Social Security Charges: Employer 9.8% and Employee Services 24%. > Property tax is levied at proportional rates from between 0.1% and 1.0%. Source: Montenegro Statistical Office, Labor Force Survey 2rd Q2018 > Property transfer tax of 3% of the property’s value is > Foreign Trade: Major export partners in Montenegro in payable by the buyer. 2018 were (around 21.2% of total exports), Hungary (12.7%) and (7.6%). The major import partners were Serbia (19.6% of total imports), Prognosis (10.7%) and Germany (8.8%). Montenegro has significant growth potential. GDP grew by > Exchange Rate: Montenegro adopted the German mark 4.7% in 2017 (IMF forecasts were set at 2.5%) and is forecast in 1999, then the euro on its introduction in 2002 by the IMF to grow by 2.8% in 2018 and 3.0% in 2019. The rate of growth in the medium to long term will be influenced Year End 2013 2014 2015 2016 2017 2018 by progress towards membership of the EU and is dependent on addressing a number of challenges. EBRD and the US$ per € 1.37 1.23 1.15 1.11 1.07 1.14 government have identified the following challenges to be Russian 45.3 72.3 68.07 74.14 63.9 74.9 addressed: Rubles/ € > Diversifying and expanding the economic base through Source: European Central increased competitiveness, including targeted support to > Employment: 85.5% of the total economically active work SMEs in sectors with growth potential and further force (280,700) was in employment and 14.4% were strengthening of the financial system. unemployed as of September 2018. Employment of > Supporting sustainable tourism, property and associated expatriates is regulated by the Law on Employment of environmental and infrastructure needs. The tourism Foreign Citizens. For an expatriate employee a work permit, sector is a major potential driver of economic growth. This permanent or temporary residence permit and an involves addressing the lack of institutional and employment contract are obligatory. The Government has an infrastructure, and avoiding the environmental risks of annual maximum quota of foreigners to be employed. Foreign further tourism development. employees are entitled to equal treatment as local employees. > Introducing energy security and efficiency, and regional integration of energy markets.

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Tourism Overview

Tourist arrivals and overnight stays, total Summary 2013-2017 11,953 Tourism is a crucial economic sector in Montenegro. World 11,055 11,250 9,412 9,554 Travel and Tourism Council (WTTC) estimated that tourism accounts in excess of 10% of total GDP, although local estimates consider it to be higher. Tourism policies and

strategies, development, operations and marketing are the 1,492 1,517 1,713 1,814 2,000 Thousands responsibility of the Ministry of Sustainable Development and Tourism, with the National Tourism Organization responsible for planning and implementation tourism strategies, promotion and enhancing the tourism product. Local tourism organizations are active in 19 . The Tourism Arrivals Overnight stays

Development Strategy to 2020, which was formulated in 2008 with international expert assistance, guides all aspects of Tourist Arrivals and Nights: Foreign tourism (nights and tourism and its development. This followed a tourism master arrivals) has grown annually, with the exception of 2009 when plan that was adopted by government in 2001. tourist nights declined, due to the global economic crisis. Domestic tourism has fluctuated, but has declined in recent Montenegro’s tourism product is subdivided into six clusters, years. Nevertheless, the number of overnight stays in whose scenic and cultural traits differ from each other, in the Montenegro has grown steadily over the years, with a large Tourism Strategy. increase in 2016, a trend that continued in 2017 and 2018. > The rocky coastline from Lustica to , with many bays Accommodation is divided in two groups, collective and and beaches, is the major beach tourism destination and private accommodation. At this moment, no reliable includes . information is available for the total number of tourist arrivals and nights spent in 2018, but monthly reports from the > Ulcinj, which has an expansive sandy beach, with Ada Statistical Office indicate further growth for the summer Bojana and Valdanos. season (from May to September) by 10.9% in the number of > The Bay of , a cultural area surrounded by cliffs, arrivals, and 6.9% in the number of nights spent. together with Bay and the Lustica peninsula. The natural Collective 2014 2015 2016 2017 and cultural-historic features of the Kotor region are a Accommodation UNESCO World Heritage Site. Tourist Arrivals 000s > , of historic significance, and Skadar Lake, an area Foreign 595 636 708 843 of natural beauty. Domestic 81 98 101 112 > and Sinjajevina, mountainous regions with the Total 676 733 808 955 Tara canyon and the national park. Durmitor National Park is Tourist Arrivals % Growth a UNESCO World heritage Site. (Decline) Foreign 4.8 6.8 11.3 19.0 > Bjelasica, Komovi and Prokletije, mountainous areas with Domestic (4.4) 20.9 3.0 10.8 national parks, monasteries and mosques. Total (2.6) 8.5 10.2 18.1 Official statistics cover tourists staying in registered tourist Tourist Nights 000s accommodation. However, this understates tourism demand Foreign 2,720 2,843 3,114 3,459 because they exclude tourists in unregistered Domestic 364 403 408 431 accommodation (the “grey” market). Total 3,085 3,247 3,521 3,890 The coast between Budva and Bar is the main tourism zone. Tourist nights % Growth It accounts for approximately 55% of all tourist nights in (Decline) registered accommodation. There is also a significant Foreign 3.3 2.2 19.9 1.4 demand for unregistered accommodation. There was Domestic (1.0) (4.1) (22) (5.9) extensive real estate development, particularly apartment Total (1.2) 5.3 8.4 10.5 blocks, in the period from independence to the global Source: Montenegro Statistical Office, 2018 economic crisis. Now, many projects are incomplete or remain undeveloped. In peak season there is pressure on utilities and infrastructure, and beaches are crowded.

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Tourism Overview

Tourist Nights by Type of Accommodation: The majority Tourist Nights 000s (67% in 2017) of tourists stay in private accommodation Destination (private, rooms, houses and apartments). Hotels accounted Foreign Domestic Total for 23% of tourist nights. Budva 4,731 93.9 4,824

Tourist Arrivals by Destination Type: The vast majority 2,203 139.8 2,344 (approximately 94.9% in 2017) of tourist arrivals stay in seaside resorts. attracts demand in its role as the Other 4,536 249.3 4,785 capital city. Mountain resorts attract limited demand for Total 11,470 483 11,953 winter sports and summer nature tourism. % of Total Destination Destination Type % of Tourist Arrivals Foreign Domestic Total Seaside Resorts 94.9 Budva 41.2 19.4 40.4 Capital City (Podgorica) 2.2 Herceg Novi 19.2 28.9 19.6 Mountain Resorts 1.6 Other 1.3 Other 39.6 51.7 40

Total 100.0 Total 100.0 100.0 100.0 Source: Montenegro Statistical Office Source: Montenegro Statistical Office Country of Origin of Foreign Tourists: Russia and Serbia Seasonality: Tourist demand peaks significantly in the generate the majority of tourist demand (around 52.4% of summer months, reflecting the dominance of beach related foreign tourist nights in 2017), followed by Eastern European tourism. The months between June and September countries. Demand from Western Europe is limited, led by accounted for 81.8% of tourist nights in 2017. The two peak Germany and France (each 2.7% and 2.6% of foreign tourist months, July and August, accounted for over 59.9% of tourist nights respectively). nights.

Tourist overnights by country of origin, 2017 Tourism overnights distribution by months in Montenegro

Russia 4,000

26.7% 3,500 24.3% Serbia 3,000

BiH 2,500

Montenegro Thousands 2,000 3.8% 1,500 4% 25.7% Ukraine 1,000 9.4% Other 500 0 Source: Montenegro Statistical Office

Overnight Stays by Destination: Budva is Montenegro’s Foreign Domestic major tourist destination, accounting for 42.4% total arrivals and 40.4% of total nights spent in 2017, and research Source: Montenegro Statistical Office estimates that it will stay a hotspot for tourists in the following years. Herceg Novi accounts for 14.7% of arrivals and 19.6% of total tourist nights spent in 2017.

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Transport

% of % of Airline Routes Summary Passengers Passengers Airlines 19.8% London 14.0% Montenegro’s small size, geographic location, topography and its strong reliance on tourism and agriculture, increase EasyJet 10.9% Zagreb 8,1% the importance of developing an effective transport system Vueling Airlines 5.4% Paris 5.9% that is integrated with those of the nearby countries in the Norwegian Air 5.0% Barcelona 3.4% Thomson region. 4.6% Manchester 3.1% Airways > Air: Passengers handled at the two airports, summarized Jet2.com 4.6% Helsinki 2.7% in the following table, increased by 40% from 2008 to 2014. Lufthansa 4.1% Amsterdam 2.6% In addition, tourists access Montenegro’s coast via British Airways 3.8% Madrid 2.6% neighboring airports, particularly via Airport in Austrian 3.6% Stockholm 2.6% Croatia. Airlines > , is located 12 km south of Podgorica Travel Service 2.8% Dublin 2.6% city centre and 115 km from Herceg Novi. The airport has two Source: Dubrovnik Airport, 2016 runways. The new terminal (2006) has an annual capacity of > Future Developments: Proposed future airport 1 million passengers. The old terminal has been completely development in Montenegro is the subject of a master plan renovated and is used for VIPs and general aviation. covering the period to 2030. Plans include further upgrade Destinations served by scheduled flights are , and increase of capacity at Podgorica Airport and Tivat Frankfurt, Istanbul, London, Ljubljana, Paris, Rome, Moscow, Airport (with a new passenger terminal, increased taxiways , Zurich, Milano, and Stockholm. There are also and new apron areas). Long term proposals include a new additional seasonal and charter flights during the summer. operation at in the northeast part of the country. A tender for the privatisation of Podgorica and > is located by the coastal road 4 km from Tivat Tivat airports is to be released within the next two months. and 25 km southeast of Herceg Novi (via the car ferry linking The airport is undergoing an expansion that will increase its Kamenari and Lepetane). The refurbished and upgraded annual capacity to 3.5 million passengers. terminal has an annual capacity of one million passengers. However, the vast majority (over 80%) of passengers arrive > Road: Montenegro’s road network totals 7,000 km, of which in the summer period when there are seasonal and charter 884 km are main and primary roads, 964 km regional and flights from throughout Europe. This results in the passenger secondary roads, and 5,000 km roads. There is considerable terminal operating at capacity at peak times in the summer. disparity in road conditions between the coastal and mountainous areas. Significant investment is needed in much Podgorica Airport Tivat Airport of the road network, despite improvements in and around Podgorica and some of the most concentrated tourism areas Passengers Change Passengers Change such as Budva. 000s % 000s % 2011 612 -6% 647 19% > Rail: The rail network comprises 428 km of single line 2012 620 1% 726 12% track, of which 168 km are electrified. Key sections of the rail network have been rehabilitated and rolling stock upgrading 2013 681 10% 868 20% has taken place. 2014 701 3% 911 5% > Sea: Montenegro has three active sea ports: Bar (largest 2015 748 6% 895 -3% port in Montenegro that handles both cargo and passengers), 2016 873 16% 982 10% Kotor (the main cruise ship port) and Zelenika. There is also 2017 1,055 20% 1,129 14.9% a chain of marinas along the coast. The major marinas Source: Airports of Montenegro include those located at Ulcinj, Bar, Budva, Tivat, Kotor, > Dubrovnik Airport, located in Croatia 30 km northwest of Zelenika and Herceg Novi. Herceg Novi. The Airport handled 1.99 million passengers in > Transport Strategy: Montenegro’s strategy is to integrate 2016, 17% more compared to 2015. The result in 2016 is 7% its transport network into the regional transport network, to larger than number of passengers handled by Podgorica and improve communications with neighboring countries. Road Tivat airports combined. Major airlines and routes at network proposals include implementation of two major Dubrovnik Airport are summarized in the following table. highway corridors: the Bar - Boljare highway (pan European road networks) and the E65/E80 ( – Greece road connection). However, there is uncertainty over the financing of these major projects.

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Office Market

Summary Demand

The core of business activity is located in Podgorica, Demand is driven by new companies, expansion of those therefore it presents a business hub of Montenegro. already present on the market, as well as companies Currently, Podgorica’s Central Business District (CBD) is currently occupying lower standard offices. located on and around the which is commonly The majority of demand will continue to come from referred to as Vektra Square after the construction of the first international and local companies that are actively looking to major development, Vektra business center. The secondary relocate from older and lower standard office buildings to business district of Podgorica is located east of the Roman newer and modern buildings. Square, towards the city center. This area has historically been called “Across the Morača“, originally a residential Modern Office Building Stock suburb with uniform high-rise apartment buildings. The city Business Project GLA center and its neighboring areas are also considered to be District the secondary business district. Even though a few new office Ex Hypo Alphe Adria Central 4,500 buildings are present, it is unsuitable for investors to develop Bank large office developments within this area due to smaller land Kroling Central 3,000 parcels. Building between T-HB Central 4,500 Business districts “Professor’s Building” Central 3,000 Cijevna Komerc Central 5,500 Normal Tower Central 6,515 Europoint Central 8,895 Capital Plaza Central 16,000 Universal Capital Bank Secondary 6,000 Hidromol Secondary 3,000 Palada Secondary 1,000 Šofranac Secondary 1,100 Čelebić Building Secondary 6,000

Source: Colliers International Montenegro Total 69,010 Class A Offices location Source: Colliers international Montenegro Rents

Rental levels for modern office space in Podgorica range between 14 – 22 EUR/m²/month. Class A office buildings on good locations can be rented at 17 EUR/m²/month. Lower quality office space price varies between 10 – 14 EUR/m²/month. The range of the rental prices for office space units in prime downtown streets and around the Roman Square which are located within residential projects is between 10 – 15 EUR/m²/month, depending on the age, size, condition and visibility of the unit. Office units that are a part of residential buildings, on unattractive position command

Source: Colliers International Montenegro lower rental prices of approximately 5 – 7 EUR/m²/month. Modern Class A office buildings include Europoint, Normal Tower, Capital Plaza, Cijevna Komerc/Societe General headquarter, Millennium Center and Celebic Business Center.

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Office Market

Yields

New Class A office stock supply in 2016 in Podgorica Lack of comparable evidence and a limited amount of deals amounted to approximately 8,000 m² of gross leasable area. has been experienced during the previous months. Hence, This new stock relates to the completion of the Čelebic City there is uncertainty regarding yield rates for the office Center. premises in the area. However according to experts opinion, prime yields are estimated at around 9 % - 10%. Čelebić City Center Pipeline and Prognosis

Project Business center by investor Čelebić brought to the market new 8,000 m2 of office space and 5,900 m2 of , with 140 parking places. Besides this, Normal Company started building a 5000 m2 A class office building in the area across river Morača in 2017, next to the hotel Podgorica. Due to the new supply and lower demand for the A class office space we are expecting further decrease of rents in the next year. The Capital Plaza is located close to the mall, one of the busiest areas of the capital. The complex started Source: www.skyscrapercity.com business in September 2015, and most capacities have been put to use. The office has approximately 4,000 m2 of office Asking Rental Price space remaining for sale in the gray phase (ground floor, Project Business District Rent EUR/m2 1st,2nd,3rd and 8th floor), with prices ranging from 1,900 to 3,300 EUR/m2, and the price depending largely on the floor Capital Plaza* Central 14-22 where the space is located, with prices on higher floors being Normal Tower* Central 13-17 more affordable.

Europoint* Central 13 In early 2018 construction company “ Gradnja” started building a new large scale project, located between the Čelebić Building Secondary 16 Capital Plaza and the Delta City mall. The complex will Cijevna Komerc Secondary 17 consist of eight buildings, and all available capacities will be Source: Colliers Montenegro *Additional service charges not included intended for sale. The complex is planned to concentrate on selling office and retail space, with a focus on office Demand for office space in Podgorica significantly increased capacities. Construction completion is planned by the end of in 2016 compared to the previous periods. The vacancy rate 2024, with a total capacity of 10,000 m2, but sales are planned in Podgorica is around 15%., with expectation of stabilization to start while it is in its gray phase, by the end of 2019, when below 10% vacancy by the end of 2018 when the new around 2,500m2 of space will be ready for sale. Prices are developments are properly absorbed. estimated to average at about 2000 EUR.

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Residential/HTL Market

Summary Domestic investors that had the biggest impact on the Montenegrin market in 2017 were construction companies The economic and financial crisis caused a decline in Čelebić and Zetagradnja. The most attractive investment residential sales in the last few years, which led to a surplus destinations in Montenegro in 2017 and 2018 were: Budva of the number of apartment units that have been developed , , Petrovac, Dobre Vode, and are available throughout Montenegro. Moreover, the Utjeha, and Herceg Novi. disruption of relations between Russia and Ukraine has further negatively affected the Montenegrin real estate Porto Montenegro market resulting in very poor sales in recent years. Russians and Ukrainian citizens accounted for more that 70 percent of Porto Montenegro is one of the Mediterranean’s leading residential purchases on the coast in recent years. However, luxury yacht homeport, with residential and business 2016 marked the return of British tourists and a number of premises. It is nominated as the possible candidate for other investors from Ex Yu countries, western and northern prestigious award in the category “Best International Marina” Europe who chose Montenegro as a second home which will be granted for period 2015/2016 by the Marina destination. Slower recovery is expected as the market is still Industries Association (MIA) from Australia. Residential heavily reliant on Russian tourists as well as Eastern complex of Porto Montenegro Marina currently consists of 6 European travelers whose numbers are declining and a large properties. One of the important benefits which Porto number of Western European travelers cannot replace the Montenegro offers to its users is tax and duty-free fuel. reduced number of Russian buyers from previous years. The construction of next phase of complex, a luxury The most successful projects in Podgorica today are located hotel/residential development Regent Pool club has already in the once industrial zone, where the Radoje Dakic factory completed. It includes apartment units from 74 m2 to 344 m2, was located, and is now known as City Quart. Celebic and with secured underground parking places. The total Zetagradnja construction companies finished a new phase of investment of the new complex is 35 million EUR. The new twelve buildings and most of the apartments have been sold. phase of RPCR with total of 70 apartments has started and The City Quart is located in the vicinity of the Delta City mall, will be delivered to the market in 2019 year. which is one of the most attractive locations for locals. Average Sales Prices (EUR) Sales Prices (Q2 2017 - Q2 2018) 1,200 The average sales price of the residential units per m² in Montenegro in Q2 2018 was 1,081 EUR/m², which represents 1,150 a decrease by 1.9% when compared to Q2 2017, and 7.0% 1,100 less than prices recorded in Q1 2018. Average sale prices for 1,050 Q3 2018 have not yet been published, and reports done by the Statistical Office of Montenegro do not provide price data 1,000 based on individual towns anymore, but offer estimates 950 based on broader regions (coastal, central, northern and the Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 capital). Highest apartment prices were recorded in the Montenegro Podgorica coastal region, averaging at 1,433 EUR/m2 (vs. 1,355 EUR/m2) for Q1). The average price per m² in Podgorica in Q2 Source: Montenegro Statistical Office was around 1,021 EUR/m², while prices in the central and northern region averaged at about 730 EUR/m². Apartment sizes between 50 m² and 60 m² were the most attractive and frequently sold in 2017. The real estate market of Montenegro experienced low construction activity during the previous years except for the coastal region, which is recognized as the most attractive part of the country for new investments, due to its position, natural beauty and economic potential.

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Residential/HTL Market

Luštica Bay Portonovi

Luštica Bay is an investment worth 1.1 billion EUR, and was Porto Novi is an ongoing project, developed by the undertaken by the Swiss - Egyptian company “Orascom investors. Construction works on the first phase of the Development”. The first phase of 10 buildings with 70 units, apartments are almost done including marina. The part of the is completed and all units have been sold, and 80% of project will be One&Only hotel with 110 luxurious rooms and apartments planned in second phase including apartments in will have additional branded apartments and villas. The future hotel Chedi are reserved or sold. Prices of residential units project will be positioned in , near Herceg Novi, on range from 4,500 to 6,000 EUR/m2. They launched first phase the 60 hectar of land. The date of completion of One & Only of “Centrale” residencies which will offer much more is scheduled for 2019. The prices of the apartments ranges affordable prices of the apartments starting from 2,300 between 6,000 EUR/m2 up to 11,000 EUR/m2. EUR/m2. The residences vary from studios to three bedroom apartments, covering 45 to 110 square metres of space. Large, airy windows provide a full view of the scenery. Comfortable living areas are planned to make best use of space with a connected kitchen and dining zones. The rooms flow naturally into balconies, open terraces and courtyards making for seamless indoor-outdoor living that luxuriates in the year-round, Mediterranean sunshine. The structure of buyers is presented in the following chart: Luxury residence Luštica Bay, buyer structure

Dukley Gardens A luxury complex of residences Dukley Garden was completed 2015. It is located on peninsula of Zavala, in city Source: Colliers International Montenegro of Budva. Resident units in Dukley gardens have asking prices from 4,500 to 7,500 EUR/m2. The buyer structure is based on five groups: Western Balkan countriesrket hold the largest share, Russians are on the second Buyers of Dukley Garden residential complex are mainly from place with 25%, while the rest of the buyers come from Russia (70%). Other buyers are mostly from Ukraine, France Switzerland, Middle East and UK. It is planned that the project and UK. The structure of the origin of buyers is presented in will comprise seven hotels, two marinas, a spa and wellness the following chart: center, a sport center and other amenities. Luxury residence Dukley Gardens, buyer structure

Source: Colliers International Montenegro

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Retail Market

Supply and Demand Monthly rent/m2 per category (range)

Even though Podgorica is a small capital city compared to Food court neighboring capitals in the region, its retail segment is quite Inline tenants (small shops) expansive. If the relationship between population and the gross leasable area of existing shopping centers is observed Inline tenants (120-200m2)

Podgorica has more than adequate modern retail space. Mini Tenants According to the most recent available data, Podgorica has a population of about 220,000 inhabitants and an area of Anchor Tenants 60.000 m² GLA of shopping centers, which results in a Hypermarkets shopping center ratio of 272 m² per 1,000 inhabitants. €0 €10 €20 €30 €40 Key Retail Figures – Podgorica Source: Colliers International Montenegro Project GLA Opening Date

Delta City 24,000 2008 Pipeline and Prognosis

Mall of Montenegro 15,000 2010 Capital Plaza Business Center occupies 100,000 m² of GBA Bazar 8,000 2012 and is worth around 150 million EUR. Apart from office, retail and residential space which is converted into office space it Capital Plaza 9,200 2015 includes „Centreville hotel”. Office space is already taken by City Mall 5,900 2016 various international tenants such as DHL, the UAE Source: Colliers International Montenegro Embassy, Fly Montenegro, Atlas Bank, UNIQA, Microsoft, ADDIKO bank, Hard Rock Cafe, Elite restaurant and bar. Rents & Vacancy Rate Retail space was opened to the public on 18th of September, and 90% of available space is already leased. Open air retail space covers an area of approx. 9.200 m² GLA on two floors. The average rental price in the largest shopping center in Among the first tenants on the ground floor are XYZ, Antony Podgorica Delta City is approximately 22 EUR/m²/monthly. In Morato, Gant and Evita Peroni. New small shopping center the second largest shopping center it is Forum brought to the market additional 1,600 m2 GLA. In estimated at 17 EUR/m²/monthly, City Mall 10 comparison with the capital towns in the region Podgorica is EUR/m2/monthly, Capital Plaza 15 EUR/m2/monthly. In the still recording lower ratio of shopping centers/inhabitants “Bazar”, a relatively smaller shopping center in Blok V, the which is at the level of 272 m2 of shopping centers per 1,000 range of achieved rental prices is between 7 and 15 EUR/m². inhabitants, especially when comparing with regional centers Specific to this shopping center is that more than 50% of the in Croatia, and BIH where this ratio is between 600- retail space is sold to the local retailers. The table below 1000m2 per 1,000 inhabitants. We are expecting that the level indicates the net rental levels within the shopping centers, of the rents and occupancy rates will be on the similar level depending on size and position within the shopping center. in 2018 in comparison to 2017. As a result of market non-transparency, rental level breakdown by tenant category represent approximations.

Main shopping malls in Podgorica

8% Delta City 16% 39% Mall of Montenegro Bazar 13% Capital Plaza City Mall 24%

Source: Colliers International Montenegro

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Contact: Milovan Novakovic MRICS 554 offices in Managing Director [email protected]

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Copyright © 2017 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the w material contained in this report. 12 Research and forecast report | 2018 | Montenegro | Colliers International