Research & Forecast Report Singapore Retail 4th Quarter Accelerating success.

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1 Research & Forecast Report Singapore Retail 4th Quarter 2013 The steady increase in visitor arrivals throughout 2013 continued to boost the confidence of retailers and food and beverage (F&B) operators. According to the latest statistics from the Singapore Tourism Board (STB), from January to October 2013 about 12.9 million tourists visited Singapore, an improvement of 8.4% over the same 10-month period in With visitor arrivals expected to have swelled further during the year-end festivities in December, the overall total should comfortably meet the Government s projection of about 14.8 million to 15.5 million in 2013, having already chalked up 87.2% of the lower end of the year s target as of the end of October The steady increase in visitor arrivals throughout 2013 continued to boost the confidence of retailers and food and beverage (F&B) operators. 50% 40% 1,200,000 30% 1,000,000 20% 800,000 10% 600, ,000 0% 200,000-10% 0-20% Visitor Arrivals YoY % Change 1,600,000 1,400,000 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Supported by the growth in Singapore s tourism industry, as well as a continued spirit of enterprise among local start-ups and international chains, but held in check by tentative consumer sentiments, prime retail rents ended the year generally on stable footing. Performance of Tourism Industry Number of Visitors Supported by the growth in Singapore s tourism industry, as well as a continued spirit of enterprise among local startups and international chains, but held in check by tentative consumer sentiments, prime retail rents ended the year generally on stable footing. Accelerating success. YoY Change Source: Singapore Tourism Board/Colliers International Singapore Research from January to October 2013 about 12.9 million tourists visited Singapore, an improvement of 8.4% over the same 10-month period in With Singapore s continued popularity among tourists, the retail sector remained abuzz with new store and mall openings in the last three months of the year to catch the year-end festivities. the retail sector remained abuzz with new store and mall openings in the last three months of the year to catch the year-end festivities. In early December, two highly anticipated malls opened at opposite ends of the island. Bedok Mall opened at Bedok Central in the east, while Westgate started operations at Jurong East in the west.

2 At the fully leased 220,000-sq ft Bedok Mall, new-to-singapore retailers include Malaysian leather brand Sembonia, women s fashion store Roem, Faces of Spade - a collaboration between home-grown fashion label Spade and trendy bag label Faces Places, and Refresh Laser Clinic - an aesthetic clinic. New eateries include Wingstop, a popular buffalo-style chicken wings franchise from the United States (U.S.) and Guan Chee Hong Kong Roast, which will be opening its first stand-alone restaurant. Also setting up its first stand-alone restaurant at Bedok Mall is Ottoman Kebab & Grill. Other popular chains that have taken up space at Bedok Mall include fast fashion chains Uniqlo and Cotton On, supermarket FairPrice Finest, footwear chain Charles & Keith, and eateries such as Taiwanese chain Din Tai Fung, Hong Kong dim sum eatery Tim Ho Wan, Itacho Sushi and Canton Paradise. Bedok Mall enjoys a direct link to the Bedok Mass Rapid Transit (MRT) station from Basement 2, and will have the bus interchange integrated with the complex on Level 2, which will start operating next year. Westgate at Jurong East comprises seven storeys accommodating more than 250 brands over a net lettable area of 410,000 sq ft, with direct connections to the Jurong East MRT and bus interchanges. Global Work, a casual fashion brand from Japan, made its debut in Singapore at Westgate alongside other premium brands that include Kate Spade Saturday, AIX Armani Exchange, COS (Collection of Style), Giordano Ladies, Sacoor Brothers, GISELLAblu and Pandora. F&B outlets that will have branches outside the city at Westgate include Ippudo, Tonkatsu Ma Maison, Tsukada Nojo, Osaka Ohsho, Ryoshi Sushi Ikeikemaru, 4 Fingers, MK Steamboat and Royce. Together with Huang Ji Huang, a stew pot restaurant from China making its Singapore debut, these eateries take up about 25% of the net lettable retail areas at Westgate. Aside from the plethora of new openings as a result of these two major malls, other retailers and restaurateurs also continued to set up shop at existing malls. other retailers and restaurateurs also continued to set up shop at existing malls. A most notable opening in 4Q 2013 was department store Robinsons Orchard, which opened at The Heeren along Orchard Road in November. Spanning 186,000 sq ft on six storeys, over 380 new brands have been brought into Singapore s retail scene, of which 280 brands are exclusive to Robinsons Orchard. Robinsons will move out of The Centrepoint in 2014 when its lease is up. Openings in other locations include German luxury brand MCM, or Mode Creation Munich, which started its first flagship boutique in South-east Asia at Marina Bay Sands in October, while Repetto opened its first stand-alone footwear boutique in Singapore at Ion Orchard in November. Both Parisian accessories house, Roger Vivier and American footwear brand Ash opened their first stores in Singapore at Takashimaya Shopping Centre, while Hong Kong multi-label street wear boutique i.t opened its second store at Bugis Junction. The impetus to set up new stores, as well as to expand into new and existing malls when space becomes available, has been a feature of the retail sector during much of the year, even though consumer spending has been tentative, inconsistent and uncertain throughout The impetus to set up new stores, as well as to expand into new and existing malls when space becomes available, has been a feature of the retail sector even though consumer spending has been tentative throughout After shrugging off lacklustre year-on-year (YoY) increases of 0.3% and 0.6% in March and April, respectively, the retail sales index (excluding motor vehicles) grew at more encouraging levels of 2.8%, 2.4%, 2.1% and 1.7% YoY in the months of May, June, July and August, respectively. However, these initial signs of a positive turn in sentiment came grinding to a halt in September as the retail sales index only rose by a very slight 0.5% YoY and then fell by 0.1% YoY in October. Retail Sales Performance (Excluding Motor Vehicles) Retail Sales Index (2010=100, at Constant Prices) Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Index YoY Change Source: Singapore Department of Statistics/Colliers International Singapore Research 25% 20% 15% 10% -10% initial signs of a positive turn in sentiment came grinding to a halt in September as the retail sales index only rose by a very slight 0.5% YoY and then fell by 0.1% YoY in October. In spite of the upbeat leasing activity and the ever-growing diversity of concepts in the retail scene, uncertain consumer sentiment held retailers confidence in check and consequently prevented rents from increasing in any significant degree during the final three months of Monthly prime ground floor gross rents in Orchard Road, as of the end of December, rose by a marginal 0.2% from the previous quarter to $36.46 per sq ft. In 5% 0% -5% YoY % Change 2 Research & Forecast Report 4th Quarter 2013 Retail Colliers International

3 the Regional Centres, the average monthly gross rent of prime space remained unchanged at $33.46 per sq ft, after having increased by 0.1% in the previous quarter. For the whole of 2013, rents of prime retail space in the premier shopping belt of Orchard Road fell by a moderate 2.1%, a better-than-expected comparison to the 3.0% to 5.0% decline projected at the beginning of the year. The interest by local entrepreneurs and international brands to open new stores and F&B outlets or to expand, has kept rents fairly resilient in Orchard Road, despite the increasing prominence of suburban malls as well as the cautious consumer sentiment that has characterised much of At the same time, monthly rents for prime retail space in the Regional Centres held their own with a slight increase of 0.1% for the entire year. The rental trends in 2013 continue to indicate that retail activities are spreading out from Orchard Road to various other locations throughout the island. The rental premium that prime retail space in Orchard Road commands over similar space in the Regional Centres has narrowed from 31.0% in 2007 to 11.5% as of the end of 2012, and to 9.0% as of the end of 2013, representing the heightened competition between the two micro-market locations for tenants. Average Monthly Gross Rents of Prime Retail Space (by Micro-market) $ per sq ft per month $45 $40 $35 $30 $25 $20 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2013 Orchard Road Source: Colliers International Singapore Research Regional Centres Monthly prime ground floor gross rents in Orchard Road, as of the end of December, rose by a marginal 0.2% from the previous quarter to $36.46 per sq ft. In the Regional Centres, the average monthly gross rent of prime space remained unchanged at $33.46 per sq ft, after having increased by 0.1% in the previous quarter. While the leasing market has been consistent throughout most of the year, it was a tale of two halves in the strata-titled retail sales market. Robust sales momentum and price increases depicted the first half of the year. However, with the imposition of the Total Debt Servicing Ratio (TDSR), announced in late June 2013, the second half of 2013 witnessed a substantial drop in sales activity as well as investor interest in such products. While the leasing market has been consistent throughout most of the year, it was a tale of two halves in the strata-titled retail sales market. Though some of the caveats for December 2013 have yet to be lodged in the Urban Redevelopment Authority s Real Estate Information System (REALIS), preliminary indications present a total of 359 strata-titled shop transactions in the second half of 2013, representing a 42.4% fall in transaction volume when compared to the 623 caveats registered in the first half of the year. The subdued investor interest and demand volume evident in 3Q 2013 carried forward into 4Q Only 169 caveats were lodged from October to December 2013 for strata-titled retail premises, according to REALIS. When compared to the 190 caveats in 3Q 2013, the preliminary volume for 4Q 2013 was 11.1% lower. Primary transactions of purchases made directly from developers comprised 104 transactions, or about 61.5% of transactions in the last three months of The bulk of the new sales originated from the launch of 146 retail units at Junction Nine in Yishun. The 104 new sales in 4Q 2013 constituted an increase of 40.5% from the 74 primary market transactions recorded in 3Q The prevailing lacklustre investment interest in retail units as a result of the TDSR caused capital values to plateau in the quarter ending in December After remaining flat in 3Q 2013, the average imputed capital value for prime Orchard Road strata-titled retail space stayed at $6,942 per sq ft in the final quarter of The same was observed in the decentralised locations, as the average imputed capital value for prime Regional Centre retail space was also unchanged at $4,447 per sq ft. Therefore, the respective annual price increments of 5.1% and 9.2% for prime Orchard Road and prime Regional Centre stratatitled retail space were all recorded in the first six months of The retail sector has come through what was considered an uncertain year with typical resilience, upon which several positive attributes might lead to some measure of strengthening in the year ahead. The road to recovery for the global economy is now more certain, with several countries in the Euro-zone as well as the U.S. showing firm signs of improvement. Not only will this improve the export market for Singapore s economy, but international retail brands could also be encouraged to establish themselves in South-East Asia and Singapore, attracted by new market opportunities. Several international premium brands have been preparing for the right opportunities in which to enter the Singapore market, using the island nation as a starting point to establish an initial presence and create an impression among Asians, 3 Research & Forecast Report 4th Quarter 2013 Retail Colliers International

4 Average Capital Values of Prime Retail Space (by Micro-market) $ per sq ft $8,020 $7,020 $6,020 $5,020 $4,020 $3,020 $2,020 $1,020 $20 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2013 Orchard Road Source: Colliers International Singapore Research Regional Centres the average imputed capital value for prime Orchard Road strata-titled retail space stayed at $6,942 per sq ft in the final quarter of 2013 the average imputed capital value for prime Regional Centre retail space was also unchanged at $4,447 per sq ft. before subsequently venturing into other capital cities in the region. At the same time, international chains that have already established a foothold in the shopping culture of Singaporeans will be looking to expand, not only across borders, but also within Singapore. Fast fashion chains the likes of Uniqlo, Cotton On and H&M are likely to expand their base of existing stores as and when growth opportunities present themselves. In 2014, these brands are likely to move quickly into new shopping centres that are slated for completion or when older shopping centres have completed asset-enhancement works. In 2014, retail sales should perform better with improving external conditions contributing to a steadily growing domestic economy, a low-unemployment climate, continual increase in visitor arrivals and an increasing variety of new retail concepts in more locations. This will promote an environment where retailers and F&B operators can be confident in Singapore s retail sector, leading to further expansion as well as new set-ups. Nevertheless, productivity issues and manpower challenges remain, and the high operating cost environment is expected to place a lid on rent growth. In 2014, retail sales should perform better with improving external conditions a low-unemployment climate, continual increase in visitor arrivals and an increasing variety of new retail concepts in more locations. space projected to be completed in Orchard Road, notably that of Orchard Gateway and the refurbishment of Shaw House in early 2014, rents of prime ground floor retail space in the Orchard Road district are forecast to remain relatively stable within a range of -1% to 2% in rents of prime ground floor retail space in the Orchard Road district are forecast to remain relatively stable within a range of -1% to 2% in The remaining bulk of 2014 s new supply will be located in the fringe and suburban areas, distributed over a wider geographic sprawl. With the residential population catchment and regular pedestrian footfalls that Suburban Areas/Regional Centres enjoy, prime ground floor rents in the good-quality malls in the Regional Centres could benefit from slightly better rent growth of 1% to 3% in With the residential population catchment and regular pedestrian footfalls that Suburban Areas/ Regional Centres enjoy, prime ground floor rents could benefit from slightly better rent growth of 1% to 3% in Investor demand for shop and F&B space in the strata-titled retail space market (including mixed-use developments) is likely to remain soft as a continued result of the TDSR. After the average imputed capital value of prime strata-titled retail units in Orchard Road and Regional Centres had increased by 5.1% and 9.2% respectively, in 2013, the outlook for 2014 appears to be muted with both micro-markets expected to remain generally flat for the entire year. the average imputed capital value of prime strata-titled retail units in Orchard Road and Regional Centres for 2014 (are) expected to remain generally flat... Moreover, about 2.5 million sq ft of retail space is expected to be completed in With an estimated 420,000 sq ft of retail 4 Research & Forecast Report 4th Quarter 2013 Retail Colliers International

5 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 Contact: Chia Siew Chuin Director singapore.research@colliers.com Colliers International Singapore 1 Raffles Place #45-00 One Raffles Place Singapore TEL FAX RCB No E $2 billion in annual revenue 1.12 billion square feet under management 13,500 professionals and staff About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world. colliers.com Copyright 2014 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.