Retail Market Snapshot Second Quarter | 2019

MARKET INDICATORS Overview Market Outlook Q1 2019 was yet another quarter of growth for the Finnish economy and the GDP grew by 0.6%. The GDP landed at Prime Rents: Increased competition lays pressure on prime rents. 1.7% for 2018 and the current growth expectations for years Prime Yields: Through uncertainties in the occupier side the yields 2019 and 2020 are slightly lower at 1.6% annually. The main are seen to increase. driver for the growth in the end of the last year and the Supply: Increased supply in 2019, mainly through new shopping beginning of 2019 was domestic demand. For the rest of centre development. 2019, domestic demand growth is supported by rising wages, Demand: Steady demand for prime high street, SC’s and best restaurant spaces in , while challenges in the low inflation, and loose monetary policy, which should ensure secondary sector remains. Finland’s economy to outperform the eurozone average. Prime Retail Rents – June 2019 According to Statistics Finland, consumer confidence HIGH STREET SHOPS € € US$ GROWTH % decreased in June 2019 to -4.6, while in June 2018 the SQ.M SQ.M SQ.FT 1YR 5YR MTH YR YR CAGR consumer confidence indicator was at 1.7. Helsinki 137.00 1,644 184 1.5 0.7 Turku 62.50 750 84 -3.8 -1.5 Occupier focus 67.50 810 91 -3.6 -2.1 In Q2 2019 retail occupier demand remained stable. The Oulu 55.00 660 74 -4.3 -6.0 focus of demand is strong towards prime locations and Prime Retail Yields – June 2019 especially the trend of converting specialty retail into services HIGH STREET SHOPS CURRENT LAST LAST 10 YEAR is expected to continue (e.g. F&B and beauty / well-being). (FIGURES ARE NET, %) Q Q Y HIGH LOW Helsinki 4.00 4.00 4.10 5.80 4.00 Approx. 14,000 sq.m of new retail space was completed in the Turku 5.80 5.80 5.80 6.95 5.80 Helsinki Metropolitan Area (HMA) during Q2. Moreover, some Tampere 5.60 5.60 5.60 6.70 5.60 140,000 sq. m of new retail is currently under construction in Oulu* 6.50 6.50 6.50 7.00 6.50 the HMA, incl. Tripla SC (85,000 sq.m, Q3 2019) and SHOPPING CENTRES CURRENT LAST LAST 10 YEAR SC (20,000 sq.m, 2020), among some smaller schemes. With (FIGURES ARE NET, %) Q Q Y HIGH LOW the strong influx of new supply, even prime rents can be under Country prime 4.45 4.40 4.40 5.80 4.40 pressure for the next upcoming years. With the current Note: *5yr record. population growth and purchasing power projection, we With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and expect HMA shopping centre segment to be fairly balanced or direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. even short of supply in the early 2020’s. Recent performance Yield - Country Average Yield - Prime Investment focus Rental Growth - Prime Rental Growth - Country Average Total retail investment volume in Q2 was some €375m, being

7.00% 6.0% ( growth Rental 4.0% the second most traded sector after offices. Strong demand 6.00% 2.0% for convenience retail was justified with three transactions in

5.00% 0.0% the HMA (Arabia, Myllypuro and DIXI) and one (Duo) in Yields -2.0% 4.00% Tampere. International investors accounted for some 33% of y

-4.0% / y

) retail deals in Q2 2019. 3.00% -6.0% Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Outlook Occupier demand is expected to remain stable in key retail locations. Other segments and areas will be under pressure during 2019. Investor demand is estimated to remain strong for selected niche segments (e.g. grocery & prime SC’s).

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