MAPIC Keynote Wrap-Up 2012, by James Brown, JLL

Adapting for Change

and Positioning for Growth

James Brown

Head of EMEA Retail Research & Consultingjames.brown@eu.jll.com

2012Wrap up - Mapic

2

Looking BackWhat has happened since Mapic 2011?

Mapic 2011

4

European Economic Recovery ScenariosUncertainty and volatility remain...

Scenario 1: 10%Upside scenario: strong bounce back

Scenario 2: 60%Central scenario: ‘muddle’ through

Scenario 3: 30%Downside scenario: disorderly breakdown of Eurozone

4

Consumer and Retail Trade ConfidenceMild deterioration in consumer and trade confidence since last year…

5

Consumer Confidence Index Q3 2012Consumer confidence below LT trend across Europe (excl. Turkey & Russia)…

Long-Term Country Average = 100

Source: European Commission (November 2012)

Confidence above Long-Term Country Average

Confidence below Long-Term Country Average

Country confidence October 2011

8

Retail Sales Growth Forecast 2012 - 2014Multi speed forecast retail sales growth…

Source: Oxford Economics (October 2012); IHS Global Insight for Croatia and Ukraine (October 2012)

9

The Rise and Rise of OnlineThe move to multi-channel is accelerating…

Source: Euromonitor

Internet retail spend per capita 2010 (£)

10

The Impact of Multi-Channel RetailGlobal trends and initiatives are emerging, FAST…

Source: Google

Tesco shopping wall, Korea

11

The Retailer

12

Retail Requirements are ChangingInternational opportunities for growth; increased competition…

Source: Jones Lang LaSalle Global 660, ESRI

Jones Lang LaSalle - Global 660

13

Destination Europe: Leading CitiesLondon remains ‘springboard’ to Europe for non-European retailers…

Source: Jones Lang LaSalle, ‘Destination Europe 2013’

14

Destination Europe: Core and Growth CitiesGrowth, diversification; international borders no longer a barrier…

Source: Jones Lang LaSalle, ‘Destination Europe 2013’

15

Retailer Country of OriginItaly leads exporter league, the US is catching up fast and China emerges…

Source: Jones Lang LaSalle, ‘Destination Europe 2013’

• Continued growth anticipated

• Specific requirements

• Constrained supply of units

• Driving prime, luxury HS rents

• Favouring larger tourist markets

17

The Rise and Rise of LuxuryThriving through turbulence…

1

Portfolio Optimisation for Legacy RetailersLeases events area trigger for change...

Source: Jones Lang LaSalle (April 2012)

Note: Analysis based on a sample of circa 15,000 European Shopping Centre lease contracts.

Lease expiry profile varies by country and by retail sub-sector.

Number of lease expiries per year Cumulative number of lease expiries

Le

ase

exp

irie

s p

er

ye

ar

(%

)C

um

ula

tive

nu

mb

er o

f lea

se

exp

iries (%

)

18

The Owner & Developer

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Shopping Centre Pipeline H2 2012-2013

45% of new stock across

Europe to be opened in

Russia and Turkey

combined…

Note: Includes schemes >5,000m² GLA only; excludes Retail Warehousing and Factory Outlet Centre.

Pipeline figures should be treated with caution.

Source: Jones Lang LaSalle (October 2012)

Tired stock in WE ripe for redevelopment, Asset Management…

19

Differentiation to SucceedKey ingredients to succeed in a multi-channel World…

Culture

Community engagementEducation

Retail Catering

Cinema

Service Pop-up

Click & collect

Embrace digital

Listen & communicate

Environment

Security

Convenience

Accessibility

Know the customer

21

NEW Opportunities: Travel HubsEurope’s top 100 airports have a combined 1.34 bn ‘visitors’ annually….

22

The Investor

23

Source: Jones Lang LaSalle (October 2012)

Retail Transaction Volumes Q1-Q3 2012 in million €

4,000 or over

2,000 to 4,000

1000 to 2,000

500 to 1000

200 to 500

100 - 200

0 - 100

No Transactions

Note: This review considers all investment sales of shopping centres, retail warehouses, factory outlet centres and supermarkets in Europe. The analysis

excludes the high street and any investment deal less than $ 5 million in value.

€2,890

€436

€739

€178

€405

€121

€758

€74

€460

European Retail Investment Volumes Q1-Q3 2012€11.7bn invested in Q1-Q3 2012, down 50% y-o-y due to lack of large deals…

€52

€43

€32

€12

€844

€118

€580

€3,595

€6

€101

€29

€220

24

European Retail Investment Drivers Q1-Q3 2012Liquidity and fundamentals continue to attract majority of retail investment…

Source: Oxford Economics (October 2012), Jones Lang LaSalle (October 2012)

p.a.

Average EU (27 Countries)

Avera

ge E

uro

pe

€ 8,961 mn – 77%

€ 964 mn – 8%€ 130 mn - 1%

€ 1,584 mn – 14%

Note: Average Retail Sales per Capita based on countries shown on graph.% Share investment volumes based on countries shown on graph.

25

Global Retail InvestmentContinued globalisation and increased competition...

25

Global Retail InvestmentRedefining retail investment markets...

25

European Retail InvestmentRedefining retail investment…

• Absence of debt (for the majority) in the near term

• Global equity appetite for Retail investment to continue

• Partnering to continue – ‘Equity and Expertise’

• EMEA leads investment market but Asia is catching up

• Global flows to influence prime pricing for best retail schemes

• Spread between prime and secondary pricing likely to stay

26

Summary

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10 Takeaways2013 – Still adapting and positioning for growth…

• Uncertainty to remain; economic and retail sales growth subdued

• Pockets of strong growth exist across Europe

• Targeted retail expansion to continue

• Do NOT underestimate the impact of digital

• Retailer optimisation and consolidation to continue

• Re-development becomes the new development in WE

• New development continues in Turkey and Russia in particular

• Retail investment market to remain focused on ‘best’

• Lack of debt fuelling 2 tier market - prime vs. secondary

• Internationalisation of investment and partnering to continue

Adapting for Change

and Positioning for Growth

James Brown

Head of EMEA Retail Research & Consultingjames.brown@eu.jll.com

Thank you.