Baltics Part of the CBRE affiliate Network Baltics Retail, 2018 Shopping centres are eagerly renewing in order to keep up with the latest retail trends

Ç {/ { b  {/    t   2,390 million sq m 55,000 sq m 394 sq m 6.0%-6.75%

*Arrows indicate change from the corresponding period in the previous year Figure 1: Photo of T1 Mall of

Credit: T1 Mall of Tallinn

• KEY POINTS Competition among grocery stores as well as home improvement retailers is intensifying. New and existing • In 2018 GDP increased more than 3.0% y/y for the players are intensively opening new sites. second consecutive year in the Baltic states. • Largest apparel retailers are restructuring portfolios to • The labour market continues to heat up as the increase efficiency in the brick and mortar distribution unemployment rate has decreased and salaries have channel. been hiked across the Baltics. • In 2018, a single shopping centre was commissioned • In 2018 observed 4.7% y/y higher private in the Baltics. T1 Mall of Tallinn, which is located just consumption expenditure, followed with 4.5%, next to the Ulemiste shopping centre in Tallinn, adding and with 3.9%. 55,000 sq m of new retail stock. • Inflation in the region is expected to moderate at the • In April 2019, Akropole Riga was launched. The ca. 2% level in 2019 and 2020. shopping centre adds 62,000 sq m to the total retail stock. • In 2018 retail turnover increased by 6.8% y/y in Lithuania, 5.1% in Latvia, and 4.8% in Estonia. Sales of • Prime high street retail rents averaged at ca. EUR 30- electronic household appliances, pharmaceuticals, 60 sq m per month. At the same time, space in prime communication, and recreation goods were the most shopping centres averaged at ca. EUR 35-40 sq m per notable. month. • Results of the leading shopping centres were mixed . It • In 2018, investment volume in retail properties was mainly due to ongoing multiple refurbishments, increased by 3%. A few large transactions sustained the renovations, and expansions. investment pace in the retail sector.

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Baltics SPACE SUPPLY PIPELINE Part of the CBRE affiliate Network

Ç       .    !  w   $  ! 56 L   #   Ç  !            [   " !  D$    "#   #            [$  #   Ç #  "    L    !  $   ##   # $           # $$   $  " 9Üw   $    #    7   Ç    '5    $  !      #$"         %       !     8  ! $  " !        "   # 56 D ! !4$  w     $    #  "    "  Y {$  5Lò   "       % # %       [$   [   Ç $        Ç  #     56-     $      " %$ %      9Üw (-     5Lò        #   "   # %  ! #      .  $     '(   Figure 2: Shopping centre space and expected supply in 2017-2020 [    Ç         "  1,200   #  !   L b " Ç a   %  Ü   800      $  --   #     !  9   Sq m, '000 400    t Y  D$      9Üw 2     ! I    4 "  0             Lithuania Latvia Estonia    L               2017 2018 2019F 2020F    "  #  #       #$  Source: CBRE Baltics, Q1 2019

Figure 3: SC stock currently under construction with a planned GLA above 10,000 sq m Project Country City Type of development Year Added space, sq m Total space, sq m

Alfa Latvia Riga Expansion 2019 18,300 65,600 Origo One Latvia Riga Expansion 2019 16,500 35,550 Akropole Riga Latvia Riga New 2019 62,000 62,000 Ulemiste Estonia Tallinn Expansion 2019 13,200 72,400 Galerija Azur Latvia Riga Redevelopment 2019 29,500 29,500 Roboti - Rimi Latvia Riga New 2019 11,000 11,000 Via Jurmala Designer Outlet (I stage) Latvia Riga New 2019 15,000 15,000 Lasnamae Centrum Estonia Tallinn Expansion 2019-2020 5,000 25,000 Porto Franco Estonia Tallinn New 2020 32,000 40,000 VPH Home and Lifestyle Centre Latvia Riga New 2020 52,000 52,000 VPH Shopping Centre Lithuania Klaipeda New 2020 19,000 19,000 Vilnius Outlet Lithuania Vilnius New 2020 65,000 62,000 Total:Total:Total:338,500

Source: CBRE Baltics, Q1 2019

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Baltics MARKET RENTS Figure 4: Prime Shopping centre yields Part of the CBRE affiliate Network L 57           % France          "        t      Austria     9Üw (8'     !    Belgium          9Üw Finland Spain (-8;     !   #  Ç a Ireland # Ç   !  w    Portugal  #   $    $ Netherlands         Ç   Italy w  $    " "  $ 56 Slovakia Estonia INVESTMENTS Lithuania Latvia Greece w    #         L 57    $    0 3 6 9    " (<        Source: CBRE Research, CBRE Baltics, Q1 2019   52 ! #      [$  $            Ç Figure 5: Investment into the Retail Sector in the Baltics   "                   $  # h4   1,200 100   ë $ " b9tL w   # 9Üw 5; '   Ç            900 75 /  9  9$  $  h4    #  #      .  ! 600 50

        $ # wòh EUR, mln

  # 9Üw ;2    t  4  ## 300 25 % total of investments   # [$   " 9  "     #$    9# /  h      0 0     %$    [$    Y  í!  "$ .LD   # 2006 2008 2010 2012 2014 2016 2018 9Üw 5; 6   . 9# /   í!  Other Retail %            Retail share in Baltics Retail share in Europe $      ! 4 "     Source: CBRE Research, CBRE Baltics, Q1 2019   $   w   9  /    $  D  w   #  $  Figure 6: Retail trade growth  8 L                "  t       " ' <  ' -<          6 " ' -<  ' 2-< I       #     $ $   4 %,y/y $" #     2 RETAIL TRADE

0 L        %$ # 2015 2016 2017 2018 $    #    $         $  L 57   $  Lithuania Latvia Estonia Euro zone @ A  % $     #$  Source: Eurostat, national statistics agencies, Q1 2019    "$  [$   ' 7<  [  

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Baltics #    - <  9  ; 7< {  Figure 7: Consumer spending per capita, 2018 Part of the CBRE affiliate Network     #       #   $        EUR, '000 $          Latvia "$   Slovakia I     $   # # Estonia       .    !   # Lithuania 57  58       # Slovenia %  [$    #     Malta           Ç Greece #  [$    # " "        %  # "$    Portugal    #$$ [      #     Spain     Ç $B     "  Cyprus "            Italy        ## # Ç Eurozone 9  %   9       France  "$        " Netherlands       #$$        Belgium "       Ireland SHOPPING CENTRES Germany Austria 5      $  #        .    % C  Finland 57  " $  #     Luxembourg    "        0 10 20 30     ë $ " (<    "    -<  Ç         7<  w Source: Eurostat, CBRE Baltics, Q1 2019 Ç     # % $  #  C Figure 8: Sales of 12 leading shopping centres in capital cities $ #         ## "   %   $  20 #  #       $"    #        $  #$"     % 4   15 5257 w       $   $" 8 $" #    10  $   "   "   " $ L      w     C 5 5  w t 4 #  #$  #  %,y/y #      52  57 !  0 h4   ë $        52 !  ë $   $   % -5                 $  56  $ #$" #      Ü   -10 Y  Ç   ## "  %  2012 2013 2014 2015 2016 2017 2018 $   #  # 57    Vilnius Riga Tallinn Total $   #  # # 56 !   # hB[    $ % ( Note: combined data and estimations of 12 leading shopping centres      "  "     Source: CBRE Baltics, Q1 2019  Y  57

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Baltics APPAREL MARKET Figure 9: Shopping centre space supply distribution in 2018-2020 Part of the CBRE affiliate Network

{  # %    #      Expansions and        $ L redevelopments 57  D $    " 2 6<   31% [$   5 5<  9     " 5 2<  [   Ç  .  #      "   $        " $  #       #  #        $ I       $ C  8    $" 8      $  "  #                New deliveries         {    69% %    #  $" #             $ # #  $$       $   Source: CBRE Baltics, Q1 2019   %  $ L   $  #         %$ ##  $   Figure 10: Arrivals of foreign tourist      # "  $  16   $ " $      

!  $ %     $"$  12 "  $# $ "       $  #       "$   8       L% b     %,y/y ##  57  .  $      4  #       # "  0     #       [tt $     !  $  #  -4 "$      $  $ $ 2013 2014 2015 2016 2017 2018 C [    [$        8      $ #  8#8 Lithuania Latvia Estonia        IFa $ Source: Eurostat, Q1 2019          $    "  #      # Figure 11: Revenues of the largest apparel retailers         #   300 30  $     % "$   

5    #   "  200 20     %   $                 100 10 %,y/y !  $     # h   EUR, mln ë $  w L I 56 {  $   0 0      "    " { 5 $ C Ü{/ !     -100 -10       ë  D # #  2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018      # D   Apranga Baltika H&M LPP   #   !  w  5      # C       8$   L ë $ Lithuania Latvia Estonia Growth (rh scale) Source: the companies, CBRE Baltics, Q1 2019

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Baltics GROCERY MARKET Figure 12: Consumer basket in Eurozone and Baltics Part of the CBRE affiliate Network 100 /       # D  $    [       ;(   [$        #  #  75 50 44 [   "  $   #       [       8 9     55 % 50 10 6 6 w  L  #$     6 6 9     [$    "    %  25 9         #     28 $ #  / /$ # 19 0 [$    "   Euro zone Baltics (average)   w   $    [$       -   %   "  Food, beverages, & tobacco Recreation and culture  # 55( L $    -2    $ Furnishings & maintenance Clothing and footwear L     #$ 5  "   # Restaurants and hotels Other 55 Ç       5((   [$  Source: Eurostat, CBRE Baltics, Q1 2019 Ç       "  D    $ w        6( 2-<  57 Figure 13: Retail sales of home improvement goods h         # %  "           15 # %   %    $  %    $  #  10 HOME IMPROVEMENT RETAIL MARKET %,y/y L 57  #$  $  5     "        w          '8;<   !           0    %  C %    # LY9!   2014 2015 2016 2017 2018 [      !$ $ # w Ç (;-  Lithuania Latvia Estonia     9Üw '       [     Note: retail sales in audio and video equipment; hardware, paints and       5 5Lò   glass; electrical household appliances.   ë $ # -;7   "   Source: Eurostat, CSB Latvia, Q1 2019   Ç           Y $   56  55 L    Figure 14: GDP growth {$         #  6.0   ë $        2   !  {$      t#     6   4.0 #         $ #  9 4   a %  !   %,y/y 2.0 5Lò     %  L $ 9  5Lò   . $#   (  !  9 4           0.0 [$    ! 5Lò    [$   2015 2016 2017 2018 2019F 2020F    $"   %  $"   Lithuania Latvia   #  $   5- Estonia Eurozone

Source: Eurostat, Oxford Economics, Q1 2019

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Baltics ECONOMY Figure 15: Inflation rates and forecasts Part of the CBRE affiliate Network

L 57 D5t      ( <  #  4        .    Ç [    3 D5t        ; 7<   9 #    ( 6<  [$   ( -< 2 L 56    #   

         "   ( <    %,y/y 1      #       9$4 !   #    0 #   9$     "  -1 Ü        ## 2015 2016 2017 2018 2019F 2020F .%            $ "$   #   Lithuania Latvia Estonia Eurozone   9$   .  5$ 57  Source: Eurostat, Oxford Economics, Q1 2019          $  $# $      "  % Figure 16: Unemployment rate    $ I        #       #    12 $   

Ç        8

 #   L 57  % $          4    7    Ç 9  "$         $      - ;< [$  #    ' (<  [    0 2 ;< /  #     2015 2016 2017 2018 "     $  !    Lithuania Latvia Estonia      [$    " 6 '<  [   7 ;<   9 2 (<  $ 57 Source: Eurostat, Q1 2019

C $ "  "$      Figure 17: Salaries and wages   #$     $ L 57 9        #   12   $   ; 2<  $  $ %$ [   #  8  ; -<  [$   ( 6< /     %     #   $   9$4    (<  (   4

C        $ %$ $  $  /$  0 #    "   9$4   I  2015 2016 2017 2018   %        Lithuania Latvia Estonia  "    #  5<  56  55 t  $ $ $       Source: national statistics agencies, Q1 2019 $      $  %      #  "$8      {#      "  # #$    "    "     $ $  $    

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Prime Rent – for retail, Prime Rent is represented as the typical «achievable» open market headline rent which an international retail chain would be expected to pay for a ground floor retail unit of up to 200 sq m of the highest quality and specification and in the best location in a given market commensurate with demand in each location.

Average Prime Rent – represents the Average Prime Rent for all prime units that were taken-up during the survey period as specified in the definition for the Prime Rent variable. This rate indicates an average of what it would have cost to lease space in the market.

Average Rent – represents the Average Rent for all units that were taken-up during the survey period. This rate indicates an average of what it would have cost to lease space in that market.

Shopping Centre (SC) Stock – represents the total completed retail space (occupied and vacant) in the traditional shopping centres at the survey date, recorded as net rentable retail area. Included are traditional shopping centres with a gross lettable area above 10,000 sq m, excluding hypermarkets, DIY stores, retail parks and other specialised stores.

ABOUT CBRE BALTICS:

• Part of the CBRE Affiliate Network • Headquartered in Riga, Latvia from 2011 • Representative offices in Vilnius and Tallinn • Providing services in: • Research & Analysis, • Consulting, • Valuation, • Property Sales, • Property & Asset Management, • Tenant Representation, • Agency Services –––Retail, Offices, Industrial & Logistics, • Financial Services, Accountancy • Landlord/Investor Representation, • Transaction Management

CONTACTS

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OFFICES

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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its 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 CPB Real Estate Services.