MarketView Retail Market Monthly

MONTHLY SUMMARY

CB RICHARD ELLIS

October 2010

Economic Indicators
hl d Monthly Indicators Retail Sales Y-on-Y (ONS) Retail Sales M-on-M (ONS) House Prices (Nationwide) Cons. Confid. (GFK NOP) Inflation RPI (ONS)

Economic Indicators UK retail sales (excluding fuel) remained flat over the previous month in September. Yearon-year sales volumes rose by 1.8%, the growth being driven by clothing and footwear stores. Whilst it is difficult to read too much into the monthly figures, the trend over the quarter suggests that consumers may be starting to rein in their expenditure. The UKs economy grew by 0.8% in the third quarter, a stronger recovery than had been anticipated. However, con nsumer confidence, hiring intentions and housing activity have all softened in recent months as uncertainty over future economic performance persists. s The deficit reduction plan set out by the Chancellor is estimated to cost in the order of half n a million public sector job by 2015. The government believes that this reduction will be ll bl b b bs h b l h h d ll b taken up by the private se ector. Irrespective of how the private sector performs in this task, there will be a significant geographical disparity in the take up of employment. Retailers operating within regions t that have a high proportion of public sector employment, and limited opportunities in th private sector, are likely to come under pressure going forward. he Retailer Performance The latest trading figures from a cross section of retailers illustrate the varying fortunes across retail sectors. Onli sales continue to grow at pace, highlighted by the strong ine performance of ASOS, who reported UK retail sales up 26% over the first half of the orward to Christmas, online sales are forecast to account for three financial year. Looking fo quarters of the extra spen nding growth of 1.9%, forecast on last year (Source: Verdict). In the fashion sector, two retailers from opposite ends of the price spectrum, Burberry and ve Matalan, reported positiv half yearly results, illustrating the importance of brand identity in the current market. In con ntrast, a number of other retailers including Argos, WH Smith and Carpetright have all poste more modest figures. These retailers have sought to reverse ed this trend through a varie of measures including diversification, streamlining of the ety portfolio and store refurb bishment. Property Performance Retail property witnessed a marginal dip in performance in September over the previous month, with t t l returns of 0 7% (CB Ri h d Elli M thl I d ) P f th ith total t f 0.7% Richard Ellis Monthly Index). Performance across th the matched. Shopping centres have been the best performing sector in sub sectors was evenly m the year to date with total returns of 14.0%. Rents & Yields n Rental values were flat in September (CB Richard Ellis Monthly Index). In the year to date, high-street shops have be the worst performing sector, with rents down 2.1%. Shopping een centre rental values have fallen 2 0% Retail warehouse rents have been the least affected e 2.0%. affected, falling just 0.7%. Investment yields on prim high-street shops moved in by 10 basis points in October, all me other classes remained st table on the preceding month (see table on following page). Investment After a slow start to Q3, commercial property investment transactions picked up markedly in September ending the quarter at 7 3bn of which 2 7bn was accounted for by Retail September, e 7.3bn, 2.7bn transactions (Source: Pro operty Data). Despite the strong end to the quarter, investor sentiment remains cautio given concerns over the strength of the economy in the short ous and medium term.
2010, CB Richard Ellis, Inc.

CBRE Three Monthly Outlook Retail Sales Cons. Confid. Interest Rates Inflation RPI

Property S P Stats
Rental Growth All Retail Shops Retail Warehouses Shopping Centres All Property M-on-M

Equivalent Yields Prime Shops Prime Shopping Centres Prime R/W (open user) Prime R/W (bulky user)

M-on-M

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MarketVie Retail Market Monthly ew t

RETAIL SALES *
Monthly Data
Retail Sales Value Retail Sales Vol me Volume Foods Stores (value) Food Stores (volume) Non-Food Stores (value) Non-Food Stores (volume)
Source: ONS * Excluding automotive fuel

KEY ECONOMIC INDICATORS

M-o-M %
0.6 0.0 00 0.8 0.1 0.5 0.1

Y-o-Y %
3.3 1.8 18 1.7 -2.3 4.0 3.8

Monthly Data
Consumer Confidence (GFK) Inflation (CPI) Inflation (RPI) ILO Unemployment Rate Base Rate (Bank of England) House Prices (Nationwide)
Source: ONS (unless stated)

M-o-M %
0.0 00 -0.1 0.5 -0.7

Y-o-Y %
3.1 31 4.6 7.8 0.5 1.4

CB RICHARD ELLIS MONTHLY INDEX SEPTEMBER 2010 INDEX, R

Sectors
All Retail Shops Retail W/H Shopping Centres All Property

Total Return
0.7 0.7 0.8 0.7 0.8

%, 1 Month Capital Rental Growth Growth

0.3 0.3 0.3 0.2 0.3 0.0 0.3 -0.1 -0.2 0.0

%, Year-to-date Total T Capital Rental Return Growth Growth

12.9 11.2 13.2 14.0 13.3 7.8 6.3 8.0 8.7 7.9 -1.6 -2.1 -0.7 -2.0 -1.0

%, 12 Months Total Capital Rental Return Growth Growth

26.6 21.2 32.7 25.6 24.9 18.6 13.7 24.4 17.5 16.7 -2.8 -3.8 -1.3 -3.4 --2.1

PROPERTY INVESTMENT YIELDS, OCTOBER 2010

Sectors
Prime Shops Good Secondary Shops Secondary Shops Prime Shopping Centres Best Secondary Shopping Centres

Equivalent Yields % October 2010

4.75 6.00 8.75 5.50 6.50

Sectors
Secondary Shopping Centres Retail W/H: Prime open user (inc fashion) Retail W/H Prime bulky user Retail W/H Secondary Prime Supermarkets

Equivalent Yields % October 2010

7.75 5.25 6.50 8.50 4.75

Note: Prime yields refer to an equivalent yield for a prime (well specified, well located and rack re ented) property let to a financially strong tenant on a lease with a minimum of 15 years unexpired.

AVERAGE NEW INDEPENDENT FORECASTS FOR U ECONOMY (% change on year earlier) UK

2010
GDP Private Consumption % Unemployment Q4, mns ( l i U l t Q4 (claimant) t) Employment growth % Inflation % CPI Q4 Official Bank Rate Q4 % 1.6 0.9 1.51 1 51 -0.5 2.7 0.5

2011
1.8 1.3 1.58 1 58 -0.1 2.5 1.3

2012*
2.2 n/s 1.56 1 56 n/a 1.8 1.9

Source: HM Treasury, Comparison of Independent Forecasts, September 2010. *2012 from M Medium term forecasts made in August 2010

For more information regarding the MarketView, please co ontact: Ciaran Bird Executive Director Head of UK Retail t: +44 20 7182 2414 e: ciaran.bird@cbre.com Bruce Nutman Executive Director Retail Investment t: +44 20 7182 2408 e: bruce.nutman@cbre.com Jonathan De Mello Senior Director Retail Consultancy t: +44 20 7182 2640 e: jonathan.demello@cbre.com Tom McDonough Associate Director Retail Consultancy t: +44 20 7182 3326 e: tom.mcdonough@cbre.com

Disclaimer 2010 CB Ri h d Elli Di l i Richard Ellis Information herein 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 independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis. Copyright 2010 CB Richard Ellis 2010, CB Richard Ellis, Inc.