SERBIAN REAL ESTATE MARKET REPORT H1 2010 Danos Group

SERBIAN REAL ESTATE MARKET REPORT H1 2010 Danos Group:

SERBIA: CYPRUS: LIMASSOL BELGRADE NICOSIA 69, Gladstonos Str., 3040 6, Vladimira Popovica Str. 35, I. Hatziosif Av. 2027 Acropolis Centre (Shop 10) Tel.: +381 - (0)11 260 06 03 Tel.: +357 - 22 31 70 31 Tel.: +357 - 25 343934 Fax: +381 - (0)11 260 15 71 Fax: +357 - 22 31 70 11 Fax: +357 - 25 343933 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Web: www.danos.rs Web: www.danos.com.cy Web: www.danos.com.cy

GREECE: ATHENS THESSALONIKI CRETE 1, Eratosthenous Str. & 3 Iroon Polytechniou Street, Vas. Konstantinou, 116 35 3, Ionos Dragoumi Str., 546 25 731 33, Chania Tel.: +30 - 210 7 567 567 Tel.: +30 - 2310 244962-3 Phone: +30 - 2821 0 57040 Fax: +30 - 210 7 567 267 Fax: +30 - 2310 224 781 Fax: +30 - 2821 0 57040 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Web: www.danos.gr Web: www.danos.gr Web: www.danos.gr

ALBANIA: BULGARIA: TIRANA SOFIA Blvd. Deshmozet e kombit 28, Blvd. Hristo Botev Str. Tel.: +355 - 4 22 80 488 Tel.: +359 - 2 953 23 14 Fax: +355 - 4 22 80 192 Fax: +359 - 2 953 23 99 E-mail: [email protected] E-mail: [email protected] Web: www.danos.al Web: www.danos.bg SERBIA - KEY FACTS

In Serbia 1H of 2010 was characterized by several important facts that contributed with modest improvement of Serbian macroeconomic per- spective.

Latest IMF report predicts that Serbi- an GDP will increase for 5% in 2012 and 5.5% in 2013 due to successfully completed third revision of IMF stand-by credit arrangement - during first half of 2010.

Serbia's rating at the Organization for Economic Cooperation and Develop- ment (OECD), entity that is relevant Picture: Europe map for business risk insurance evaluation, risk (DB4d) referring to overall gener- ing political elite insists on EU integ- increased and passed from category al positive economic and political ration targeting future membership sixth to fifth, positioning Serbia as trends. candidate status, improving interna- the only country whose rating im- tional community and investor's per- proved during this period. In 1H EU Council decided to unblock ception towards Serbia and process of the Stabilization of Associ- attracting additional portion of FDI. Also, international agency Dun & ation Agreement (SAA) with Serbia. BradStreet increased Serbia's rating Although this process could be long, After one year of constant decline from DB5a (high–risk) to a moderate- it remains important that Serbian rul- for the most important indicators of economic activity, GDP finally recor- General demographic indicators ded increase of 1%. This growth must be observed carefully due to a low comparison base.

During 1H 2010 volume of industrial production was higher for 2.8% comparing to the same period in 2009. Largest impact on improvement of industrial production was for the following industries: manufacturing of basic metals, production of motor vehicles, extraction of crude oil and Source: Statistical office of Republic of Serbia gas derivates.

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 2 | Deficit of payment balance increased to 9.8% of GDP, as a primary con- sequence of lower level of net current transfers during fiscal period H1 2010.

With 15.6% of GDP, deficit of balance for goods and services was the same as for 2009 level, where official trade export recorded growth (14.9 %), while import continues with decrease (- 5%).

External debt reached 23,278 M EUR which is 70.5% of estimated GDP, while share of public debt in GDP was 23%, reaching amount of M EUR 7.582.

FDI recorded inflow of M EUR 283, presenting significantly lower level than initially expected for first half of 2010.

Modest acceleration of inflation oc- curs during 1H 2010, initiated due to a growth of the electric energy GDP Growth, in % prices, tobacco products, petrol and gas derivatives increase of the value. Nominal exchange rate between EUR and RSD depreciated for 4% and real exchange rate for about 1% in 1H 2010.

In order to provide fiscal relief, NBS decided to continue with cutting 2W rep rate which currently amounts 8%.

Important note regarding central monetary institution is that current governor of National Bank of Serbia steps from his duty, with already Source: NBS known successor - Mr. Dejan Soskic

| 3 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia working as NBS vice-governor for Inflation rate, by years many years. It is likely to expect that general financial policy of Serbia will not be significantly changed before next regular parliament elections in 2012.

Indicators for labor market in 1H 2010 continued to deteriorate, with employment rate reaching 19.5 %, while net salaries and wages increased during 2009 in nominal terms for 5.7%, while in real terms increase was 1.1 %.

Source: NBS

Hotel Continental

Net FDI in Serbia, in EUR/bn

PC Usce Source: NBS

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 4 | Major Developments for Construction Industry

Construction industry in Serbia recor- due to major fiscal risks in Serbia. basis, from the average level that is ded a decrease of its activity for 15% Therefore investors still hesitate to projected to range between 9 % and in comparison to the same period last borrow funds from commercial bank, 10%. year. In accordance with data from using their own capital for new devel- Statistical office of Republic of Ser- opments, which caused lack of bigger In March 2010 regulation for con- bia, value of completed construction commercial and infrastructural pro- struction land at the price which is works was lower for 23% than last jects. under the market value or without year. any fees was put in effect. In accord- Key Real Estate Drivers for 1H 2010 ance with the new Construction and Although forecasts for construction Spatial Planning Law, the building industry still are not too optimistic, At the beginning of this year the Gov- land that local self – government State prepares several investment in- ernment of Serbia adopted regulation can sell or rent under these condi- centives in order to contribute to sec- for subvention for low-price apart- tions must be intended for construc- tor’s improvement. ments, with fluctuated price between tion of properties of social EUR 695 and EUR 1,595 for square importance, with precondition to in- Representative samples of named ini- meter, depending on location and increase number of employees for 1% tiative is acceleration of works on infrastructure. minimum. frastructure projects for Corridor X, Belgrade by-pass highway, Ostruznica First low-price apartments with state Ministry of Spatial planning adopted Bridge, reconstruction of Ibarska road subvention will be built in Nis, Novi regulations on governing the phase towards Central Serbia and Sad, Kragujevac and Belgrade. Addi- construction that enables more effi- Montenegro. tionally, Government of Serbia alloc- cient issuing of building permits for ates special funds for this purpose the residential projects whose sur- Bank’s loans needed to boost con- from the budget, subsidizing part of face exceeds 800 square meters. struction industry are still expensive, the interest rate of 7% on annual Pre-condition for this faster way of building permits issuance is that legal-ownership relations for the parcels No. of issued building permits in Serbia are resolved, without any legal or restitution claims.

Regulation for Conversion from right- of-use to the ownership title of building land is officially adopted, which after various issues that oc- curs, brings regulation back to be re- defined in order to provide adequate practical use.

Source: Statistical office of Republic of Serbia

| 5 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Belgrade Retail Market

First half of 2010 didn’t bring any in- Super/Mega/Hypermarket stock Serbia (in sq m) crease in total stock of modern shopping centers in Belgrade, stay- ing on the same level alike in 2H 2009. On the side of supply about 150,000 sq m of GLA stock is currently at the market, which is the same as 2009 level. Usce Shopping center was opened last March and has remained the largest shopping mall opened in Belgrade.

During last quarter of 2009, as well as in the first six months of 2010, we can confirm that previously Big box stock in Belgrade (in sq m) opened Delta City center (November 2007) and Usce maintains to har- monize their market share and keep strong operations. However, effects of the global economical turmoil was also reflected to major retail centers, mainly effecting rent reductions, following vacancy increase within both major malls and centers. Many of them also took initiative in regarding keeping tenants by reliefs in rent free periods, free parking spaces etc.

Regarding new retail supply, during Shopping center stock in Belgrade (in sq m) May 2010 Israel investor Aviv Arlon opened first Retail park in Pancevo, with first construction phase consist- ing of large supermarket “DIS” as an- chor, compromising area of 4,500 sq m of NLA. In addition to the completed supermarket, future phases of retail park will offer fashion units, services, D-I-Y store along with res- taurants and children content. Also, Delta Maxi continued with development with their network, by opening new unit comprising 900 sq m of NLA in town of Cuprija. Source: Danos, Serbia

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 6 | High Street shopping areas are loc- of retailer chains alike Kika, Merkur, renegotiate current rental levels. ated in downtown of Belgrade, where- Mr. Bricolage and Interex. During 1H Hence, current market conditions im- as major shopping units are located 2010 major retail supply occurred prove the position of tenants in within Knez Mihailova and Terazije for new Mr. Brickolage store in Novi terms of leasing conditions, rental pedestrian zone, having numerous re- Sad, Tus in Kragujevac and Jagodina, levels and supply in general. Such tail offer of domestic and foreign and opening of new hypermarket in outcome relief presents opportunity brands. Belgrade – Hyper Cort (22,000 sq m, for major retailers to restructure next to the Belgrade – Zagreb high- their operations in Belgrade and For the second year in the row, de- way). In March 2010 Simpo opened cities throughout Serbia. mand for high Street retail units has one new small facility in the center of decreased significantly, reaching his- Belgrade area of 900 sq m and that Pipeline torically lowest level for the last ten presents beginning of development years. Vacancy level is vast for the of their retail network. Shopping centre stock in Belgrade major high-Streets along with second- expects new deliveries at the end of ary areas. All of these changes con- Vacancy rate in high Streets increased 2010. Leading domestic manufac- tributed to further rental reductions due to the crises, since many tenants turer and exporter of furniture, Vran- and more flexible lease terms for po- faced financial difficulties caused by je based Simpo, plans to open new tential tenants. decrease of purchasing power. retail facilities at about 20,000 sq m in total, within ten cities in Serbia Retail warehouse market was slightly It is noted that increased voids in the during 2010. less active than in 2009. Last quarter shopping centers caused landlords to of previous year recorded expansions become more flexible and ready to There are announcements from the

Some of Retail Warehouse

Announced new retail centers

| 7 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Government that the Swedish fur- Average rental levels by tenants niture company Ikea will enter the market, developing its first shopping center in Belgrade. Also we recorded planning announcements for French chain Carrefour and German “Do-It-Yourself” chain, planing to enter Serbian market during 2010.

Besides that, there are few announcements about further expansion across Serbia, from Delta Holding, Idea, Metro Cash-And-Carry and Veropoulos.

Rents for prime locations dropped significantly in comparison to the Source: Danos, Serbia previous year and amount in prime locations such as: Knez Mihajlova Street, Terazije Square and Kralja Milana Street between average EUR 30 and EUR 60/sq m/ month.

Rents in second zone which includes Blvd. Kralja Aleksandra, Balkanska Street, Nusiceva Street and Decanska Street varied between EUR 20 and EUR 30/ sq m/month.

Indicative yields for prime Street locations are at around 7% and for shopping mall from 8.5 - 9%.

Delta City

Usce

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 8 | Belgrade Office Market

Serbian modern office market started to develop after 2000, when Serbia opened its doors for international business, initially bringing significant inflow of foreign companies and or- ganizations, which were key indicator for developers in order to start with new, modern and quality office developments after almost 15 years of non-active construction in country .

Due to increased demand for modern class A office premises, investors started with strong development of new CBD (Central Business District) zone of Belgrade, where New Belgrade presented major advantages for this with many new deliveries, while the Last three months finally show some type of construction considering ad- economy crisis which reached Serbia element of rental levels stabilization equately large land portion and su- during late 2008 and beginning of under current market conditions. preme traffic and general 2009, caused further market contrac- infrastructure in comparison with tion on the demand side. Diversification of Belgrade office downtown. market includes Central Business Dis- All of these factors have affected trict (CBD), Broad Center area and The real expansion of office space rental levels which experienced sharp Suburban Area. stock started in 2004 and 2005, and decline during complete year of continued with same trend through 2009, proceeding with slightly moder- CBD area of Belgrade encompasses following years. First signs of market ate price decrease in 1st quarter of an area of Downtown (Dorcol, Knez saturation appeared during 2008 2010. Mihajlova Street, Terazije Street, Slavija Square and Kneza Milosa Total area of A and B class, in sq m Street) and New Belgrade (Blvd Zor- ana Djindjica, Blvd.Mihajla Pupina, III Blvd and Omladinskih brigada Street as the most prominent business areas in New Belgrade).

Broad Center Area includes wider locations in old Belgrade, while New Belgrade’s comparative business areas are Jurija Gagarina Street and Blvd Nikole Tesle.

Suburban area encompasses wider city area, along major Streets and en- Source: Danos, Serbia tering roads towards City (especially

| 9 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia route from and to Airport Nikola Rental levels, EUR/sq m/monthly Tesla).

Although during last few years office market was one of the most attractive segments for investors, global financial crisis contributed to the decrease of new investments and office projects. Current supply of office premises reached slightly below 800,000 sq m during 1H 2010.

More precisely, our market intelli- gence shows 1H 2010 total stock of office premises amounted about Source: Danos, Serbia 770,000 sq m of GBA which presents increase of supply by about Blue Center (32,000 sq m of AAA cial announcements till the end of 11% compared to last year. Class A of- opened plane office space, located in 2010. In the pipeline for 2010 is also fice premises recorded stock of Blvd. Mihajla Pupina), Vig Plaza one more building in New Belgrade around 500,000 sq m while class B (16,000 sq m of modern office space, (12,500 sq m of retail and primary of- stock records 260,000 sq m. located in Block 11a) and Red Stripe fice space, located in Block 60) (2,500 sq m, located in Blvd Milutina Supply of business premises and Milankovica). Downtown area offers new office some new projects which are under building of class A – Atlas House construction are still located mostly There is also 50,000 sq m in Block Business Center (4,933 sq m of busi- in New Belgrade. In 1H of 2010, four 23, New Belgrade, still under con- ness space, located on the corner of office buildings of category A have struction by Verano Invest which Takovska Street and Kosovska been delivered to the market: should be delivered according to offi- Street), while in direct vicinity new development of MPC Properties TLD (Tri Lista Duvana) expects to reach completion level till the end of this year according to official data.

Raiffeisen Bank in Serbia announced recently that it has started building its own administrative building in Bel- grade, in which total of about EUR 35m would be invested. The new administrative building (with total area of 21,000 sq m) of Raiffeisen Bank will be built in a very attractive location in the business zone of New Bel- grade and will be finished by 2012. 19 Avenue

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 10 | Belgrade were about EUR 11/sq m/month and the lowest was about EUR 10/sq m/month while in Down- town rents fluctuated between EUR 6 and EUR 8/sq m/month.

Yield and short-term outlook

Estimated yield for class A office in Belgrade is 9.5 %, while class B is on the level of 11%.

Outlook for next 3-6 months is that besides additional portion of office Belville office stock, rental levels and its yields will remain stable. Demand for high quality office Average monthly rentals for Class A premises at Belgrade market shows office premises have a descending Also due to a tenant driven market, also some elements of recovery – trend since 2007. In 2009 the investors are more than ever ready total take-up in 1H 2010 recorded highest rental levels are recorded in for package reliefs, which can be de- about 10,000 sq m of GLA which CBD Area, where in 2H 2009 average scribed through significant rent-free presents increase of about 80% in rents varied between EUR 15 and 17 period, more attractive price ranges comparison to the previous year. per sq m/month, while rents in Wide for parking space and timeline of Center Area were fluctuating from lease agreement. During previous The highest demand (more than EUR 13 to 15 per sq m/month. In 1H period usual practice was 5+5 years, 50%) was for small offices – up to 2010 the highest rent in New Bel- while now majority of investors al- 300 sq m and less than 19% of de- grade was about EUR 15/sq m/month lows interested tenants binding mand was for larger space – more while in Downtown the highest rent agreement for 3 (three) years with than 600 sq m. was EUR 18/sq m/month. The lowest possibility of exit strategy, while in rent in New Belgrade was about EUR the cases of 5 (five) years lease con- In comparison to the end of last year 9/ sq m/month while in the center of tracts common practice is acceptance level of rent for A and B class re- the city rents varied between EUR 8 of rent review after first two years of mains similar with modest decrease. and EUR 10/ sq m/ month. contract. In CBD average rents for A class premises are in range – EUR 14-15/ sq Class B Rents Transaction market recently recor- m/month and average asking rents ded acquisition of office building in for B class premises fluctuated about Average monthly rentals for Class B New Belgrade – Hypo Plaza owned EUR 10-12 sq m/month. office premises have the same trend. by MPC Properties which sold In 2H 2009 the most expensive loca- named property for 9 M EUR to As opposed to the requested price, tion is CBD Area average rents varied largest Serbian Cable Network oper- achievable prices were at the lower between EUR 10.5 and 11.5 per sq ator – SBB. level – EUR 13.5/ sq m/ month for A m/month, while rents in Wide Center class business units and even below Area were fluctuating from EUR 7 to EUR 10/ sq m/month. 9 per sq m/month.

Class A Rents The highest rents for B class in New

| 11 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Residential Market in 1H 2010

In 1H of 2010 index of completed Number of constructed apartments in Belgrade apartments significantly decreased, finishing this period with 30% fall compared to the same period of 2009.

Residential projects which were delivered in 1H of 2010 were as fol- lows:

- Galerija apartments (investor: Ocean Atlantic, mixed-use complex of residential (80%) and business space (20%) on attractive location in the broad center of Belgrade with 18,500 sq m) Source: Danos, Serbia - Belville (Block 67, New Belgrade, 20, 000 sq m with 2,100 apartments)

In accordance with data from Statist- ical office of Republic of Serbia, the largest share of new apartments is for one-room residences, followed by two and three-room units.

Estimation is that buyers of newly Dedinje build apartments are mostly young Number of constructed apartments in Belgrade, in sq m married couples.

Demand

On the side of demand there were changes after Serbian Government adoption of supportive measures presenting favorable conditions of housing loans, in order to ease the position of the buyers.

Also, demand for apartments increased in 1H of 2010. In accordance with data from Association of Serbi- an Banks, number of housing loans increased by 12% compared to last year. Despite the high demand Source: Danos, Serbia

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 12 | trend, the supply is still low, which Belgrade is revitalized for the first and EUR 4,000 per sq m, while results that newly built apartments in time after the beginning of financial prices of mid-end projects which are prime locations still keep high level crisis. characterized by medium quality of of prices, which is also result of the finishing works, fluctuate between fact that in this moment Belgrade Price ranges depend on the attractive- EUR 2,000 and EUR 2,500. does not have adequate development ness of the location, quality and gen- land lot where bigger stock of resid- eral conditions of developments. Rental prices in previous period were ential development portion can be between 8-15/sq m whereas year of constructed. Selling prices for high-end apart- construction and estate location are ments range between EUR 3,000 most important price drivers. Most of the activity is concentrated within the prime city areas, with mid Average asking prices in Belgrade in 1Q 2010, in EUR/sq m or upper mid-range constructions, without clear signals when new locations within Belgrade will have defined infrastructural and detail urb- an regulations.

Such modifications will in future open possibility for significantly vaster developments in order to reach demand/supply equilibrium as close as possible. Most interesting locations in Belgrade residential market are still the same – Senjak, Dedin- je, Vracar and New Belgrade. Source: Danos, Serbia Residential projects are still mainly under construction or on hold like Ze- Structure of newly built apartments in Belgrade, in 1Q 2010 land complex where residential complex is in final phase of construction while commercial building is still pending, (Dedinje area; 20,000 sq m); Kalemegdan park Apartments are currently on hold (Center of Bel- grade, 12,000 sq m) and Metropol- iten apartments (broader center of Belgrade, 14,353 sq m) will be delivered in the 2H of 2010.

We also recorded increase of residential stock for the city of Kragujevac, Novi Sad, Indjija, Subotica and Jagod- ina, while Nis is on similar level as for 2009. Important note is that increase of residential construction outside Source: Danos, Serbia

| 13 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Projects under construction

Savograd

Belville

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 14 | Industrial & Logistic Market

Having favorable geo-strategic position offering the possibility to access EU market easily, but also providing transit to the East, Serbia provides strong opportunity for industrial and logistics developments in future. Stra- tegic transportation corridors 10 and 7 are connecting Western Europe and the Middle East through Serbia, rep- resenting favorable location for future regional logistics centers which may effectively cover Western Balkans Region.

Regarding future development and ex- Picture: Serbian road network pansion of this sector, the Serbian Na- tional Investment Plan identifies 49 Supply ic development range from 15,000 industrial development zones, out of sq m and above. which 17 are in Belgrade, 20 in It is estimated that total stock of Vojvodina while the other 12 are modern warehouse and industrial fa- According to the Belgrade Statistical located in central and southern parts cilities in 2010 in Serbia was around office, in the last few years average of Serbia. 600,000 sq m, with total of 2,000 construction dynamic of new logistic facilities. From 2005 construction developments was 30,000 sq m an- Apart from Industrial zones, city au- activity in this real estate segment re- nually. The majority of these devel- thorities across Serbia have also recorded increased construction trend opments range between 2,000 - cognized the concept of Free in the number of facilities from 14% 15,000 sq m, with few facilities en- Industrial Zone potentials, as an in- to 24% per year, while as con- compassing constructions from vestment initiative to attract foreign sequence of financial crisis new logist- 15,000 sq m and larger. industrial and logistic operators. Number of newly built industrial and warehouse facilities in Serbia

Most attractive industrial and logistic zones are located in Belgrade wide area, such as Simanovci, Stara and Nova Pazova, Indjija, Ruma, but also within Belgrade boundaries, such as Belgrade Free Industrial Zone in Palil- ula municipality, Dobanovci, Surcin, Krnjaca, Zemun, Grocka.

Other major cities are also becoming more and more interesting for investors, where Kragujevac, Sabac, Su- botica, Nis and Novi Sad already position themselves as major industrial areas in Serbia. Source: Danos, Serbia

| 15 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Due to economic crises, growth is (270 Ha) and Obrenovac (255 Ha). stopped during this year, with estim- Most interesting areas for investors ated total stock of logistic space in in this moment are Dobanovci with Belgrade at the 2009 level with 3,118 Ha of total land, Simanovci area amounted stock of approximately with 250 Ha, Stara and Nova Pazova 300,000 sq m. with Krnjesevci area of 800 Ha and Indjija with 382 Ha of land. Belgrade’s logistics stock is mostly concentrated in the popular areas of In H1 2010 demand for logistic and in- Zemun and Krnjaca, and also along dustrial space remains at the same the highway E-70 towards Zagreb, level as in 2H 2009. Demand mainly with most developed areas such as Si- comes from logistic operators, phar- manovci, Dobanovci, Surcin. Over the maceutical and retail companies. Aver- mid-term, Belgrade’s authorities will age size of warehouse inquiries Picture: Major industrial and logistic centers in Serbia

near the airport, with total area of 136,000 sq m which will be developed in phases. Developer is Aus- trian company Eyemaxx. Comm- encement of construction is still un- known.

Rental levels depend on many factors, such as number of tenants that are seeking for modern and flexible warehouse space with built up transportation infrastructure on at- establish four main industrial / logist- decreased, ranging between 1,000 tractive locations. Preferred ceiling ics zones within the city territory - and 3,000 sq m. heights are 9 - 12 meters, independ- Surcin, Grocka (100 Ha), Mladenovac ent power supply, temperature con- Pipeline trol, loading docks, ramps etc. These facilities could be classified as Class The logistic market experienced sub- A, and are mostly located in wider stantial change in 2009 due to lack Belgrade area. of demand which caused many developers to postpone their activities On the other hand, Class B industrial for an indefinite period. We did not re- and warehouse facilities are mostly cord any change and projects in this located in areas that surrounds segment of market during first half of Pancevo Bridge, along the Danube 2010. Many proposed logistic devel- River (Viline Vode and Belgrade’s opments are currently stopped and Port area), but also in wider Belgrade uncertain. area. Premises are characterized as older facilities with poor equipment, There is announcement that logistic ceilings between 6 - 7m of height, and cargo center will be built in Nis, without ramps etc.

Danos Serbia SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 | 16 | Rents for Class A in area around and in the city of Belgrade, in EUR/sq m/month In 1H 2010 Class A premises recorded a slight decrease in the rental levels comparing 2009. Facilities at less attractive locations recorded average range from EUR 3 – 4 per sq m/month, while modern and equipped facilities range from EUR 4.5 - 5 per sq m/month.

Class B premises recorded average rental levels from EUR 2.5 – 3.5 per sq m/month for less attractive locations, while locations in close Bel- grade areas and within the city Source: Danos, Serbia boundaries recorded higher average rental levels from EUR 2.5 – 3.5 per sq m/month.

Main characteristic of the industrial / logistics investment market is lack of adequate facilities with limited construction. Most of the facilities are owner occupied; therefore few transactions have been recorded in the open market.

The estimated yield ranges from 11 - 13%.

Rents for Class B in area around and in the city of Belgrade, in EUR/sq m/month

Source: Danos, Serbia

| 17 | SERBIAN REAL ESTATE MARKET OVERVIEW H1 2010 Danos Serbia Danos Company operates for 42 Market Survey was prepared by Contact: years in Greece and Cyprus, while in Valuations and Investment Advisory 2009 offices in Belgrade, Tirana and team – Danos Serbia. BELGRADE, SERBIA Sofia were opened. 6, Vladimira Popovica Str. Tel.: +381 - (0)11 260 06 03 Since 2008 Danos is an alliance Tamara Gorsek Fax: +381 - (0)11 260 15 71 member of BNP Paribas. In particular Junior Consultant E-mail: [email protected] Danos is part of specialized property [email protected] Web: www.danos.rs division BNP Paribas Real Estate, which operates through 80 offices in Srdjan Runjevac DISCLAIMER Europe, Middle East and the United Senior Consultant This report is published for general information States, having over 3.300 employed [email protected] only. Although high standards have been used in professionals. the preparation of the information, analysis, view, and projections presented in this report, no legal Jovan Vujic responsibility can be accepted by DANOS or Head of Department BNP PARIBAS RE for any loss or damage [email protected] resultant from the contents of this document. As a general report this material does not necessarily represent the view of DANOS or Jovan Jovanovic BNP PARIBAS RE in relation to particular properties or projects. Reproduction of this Country Manager report in whole or in part is allowed with proper [email protected] reference to DANOS Research. ALBANIA* JAPAN* SLOVAKIA* Danos & Associates RISA Partners Modesta (Dr, Max Huber & Blvd, Deshmoret e Kombit 5F Akasaka intercity 1-11-44 Partner Group) MAIN LOCATIONS Twin Towers - Building 2 Akasaka, Minato-ku Heydukova 12-14 11th Floor 107-0052 Tokyo 811 08 Bratislava ABU DHABI FRANCE JERSEY Tirana Tel.: +81-3-5573 8011 Tel.: +421-2-3240 8888 Al Bateen Area 13 boulevard du Fort de Vaux 4th Flooi: Conway House Tel.: +355-4-2280488 Fax: +81-3-5573 8012 Fax: +421-2-3214 4777 Plot No. 144, W-11 75017 Paris Conway Street Fax: +355-4-2280192 New Al Bateen Municipality Tel.: +33-1-55 65 20 04 St Helier NETHERLANDS* SWITZERLAND* Street 32 Fax: +33-1-55 65 20 00 Iersey JE2 3NT AUSTRIA* Holland Realty Partners Naef RO. Box 2742 Tel.: +44-15 34-62 90 01 Dr Max Huber & Partner IJ. \/iottastraat 33 Avenue Eugene-Pittard 14-16 Abu Dhabi, UAE GERMANY Fax: +44-15 34-62 90 11 Dr Karl-Lueger-Platz 5 1071 IP Case Postale 30 Tel.: +971-505 573 055 Goetheplatz 4 1010 Vienna Amsterdam 1211 Geneva 17 Fax: +971-44 257 817 60311 Frankfurt LUXEMBOURG Tel.: +43-1-513 29 39 0 Tel.: +31-20-305 97 20 Tel.: +41-22 839 39 39 Tel.: +49-69-2 98 99 0 EBBC, Route de Treves 6 Fax: +43-1-513 29 39 14 Fax: +31-20-305 97 21 Fax: +41-22 839 38 38 BAHRAIN Fax: +49-69-2 92 91 4 BIOC D Bahrain Financial Harbour 2633 Senningerberg BULGARIA* NORTHERN IRELAND* UKRAINE* West Tower INDIA Tel.: +352-34 94 84 Danos & Associates Whelan Property Consultants Astera 16th Floor 403, The Estate Fax: +352-34 94 73 28, Hristo Botev Boulevard 44 Upper Arthur Street 2a Konstantinovskaya Street PO. Box 5253 121, Dickenson Road Sofia Belfast BT1 4GI 04071, Kiev Manama Bangalore - 560042 ROMANIA Tel.: +359-2-9532314 Tel.: +44-28-9044 1000 Tel.: +38-044-501 50 10 Tel.: +971-505 573 055 Tel.: +91-80-40 508 888 Union International Center Fax: +359-2-9532399 Fax: +44-28-9033 2266 Fax: +38-044-501 50 11 Fax: +971-44 257 817 Fax: +91-80-40 508 899 11 Ion Campineanu Street Sector 1 CANADA* POLAND* USA* BELGIUM IRELAND Bucharest 010031 Cresa Partners Brittain Hadley Europa Cresa Partners Blue Tower 40 Fitzwilliam Place Tel.: +40-21-312 7000 Tel.: +1-617-758 6000 Warsaw Financial Centre 200 State Street Avenue Louise 326 Dublin 2 Fax: +40-21-312 7001 Fax: +1-617-742 0643 13th floor 13th Floor B14 Louizalaan Tel.: +353-1-66 11 233 Emilii Plater 53 Boston Massachusett 02109 1050 Brussels Fax: +353-1-67 89 981 SPAIN CYPRUS* 00-113 Warsaw Tel.: +1-617-758 6000 Tel.: +32-2-646 49 49 Maria de Molina, 54 Danos & Associates Tel.: +48-22-586 31 00 Fax: +1-617-742 0643 Fax: +32-2-646 46 50 ITALY 28006 Madrid 35, I. Hatziosif Ave Fax: +48-22-586 31 16 Corso Italia, 15/A Tel.: +34-91-454 96 O0 2027, Nicosia Falcon Real Estate DUBAI 20122 Milan Fax: +34-91-454 97 85 Tel.: +357-22 31 70 31 RUSSIA* 570 Lexington Avenue Emaar Square Tel.: +39-02-58 33 141 Fax: +357-22 31 70 11 Astera 32nd Floor Building No. 1, 7th Floor Fax: +39-02-58 33 14 39 UNITED KINGDOM 10, b_2 Nikolskaya Str. New York, NY 10022 P0. Box 7233 90 Chancery Lane GREECE* Moscow, 109012 Tel.: +1-212 271-5445 Dubaï, UAE London WC2A 1EU Danos & Associates Tel./Fax: +7-495-925 OO 05 Fax: +1-212 271-5588 Tel.: +971-505 573 055 Tel.: +44-20-7338 4000 1, Eratosthenous Str. Fax: +971-44 257 817 Fax: +44-20-7430 2628 11635 Athens SERBIA* Tel.: +30-210 7 567 567 Danos & Associates *Alliance Fax: +30-210 7 567 267 6, Vladimira Popovica Street Office A102 11000 Belgrade Tel.: +381-11-2600 603 Fax: +381-11-2601 571