RAKOVICA RETAIL MARKET REPORT

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1 RAKOVICA RETAIL MARKET REPORT

2 Serbia Economy In recent years, Serbia has seen an increasingly swift foreign direct investment trend, including auto industry ( Fiat ), metal processing ( US Steel ), building materials (Lafarge ), food and beverages ( Carlsberg, Coca Cola and Nestle), textiles (Golden Lady, Pompea), leather (Progetti Company, Falc East), and ICT ) Microsoft and Siemens). By countries, most cash investments in the period came from Austria ($2.68 billion), Greece ($1.62 billion),norway ($1.55 billion),germany ($1.30 billion) and Italy ($0.95 billion), while major investor countries also include Slovenia, Netherlands, Russia and France. The actual amount of investments from countries such as the US and Israel is significantly higher than the official figure due to their companies investing primarily through European affiliates. The average growth of Serbia's GDP in the last ten years was 4.45% per year. GDP structure by sector in 2012 was: services 63.8%, industry 23.5%, agriculture 12.7%.GDP structure by components in 2011 was: private consumption 74.3%, public consumption 20.6%, investments 28.6%, exports 30,7%, imports 54,2%

3 Based on the already registered positive trends in the Serbian economy and assuming that, despite the recent slowdown in external demand and in Serbia s main trade partners, Germany and Italy, exports will continue to be a driver of economic growth in the forecast period it is expected that the economy of Serbia will grow by 2.0% in In the forecast period, exports will be more and more supported by investment and private consumption as growth drivers. The accession of Serbia to the European Union is the process of the Republic of Serbia being admitted into the framework of the European Union as a full-fledged member state. Serbia officially applied for European Union membership on 22 December 2009, and the European Commission recommended making it an official candidate on 12 October After the vote of the 27 EU foreign ministers on 28 February 2012, where with 26 votes for and 1 vote against, a candidate status recommendation was issued, and Serbia received full candidate status on 1 March. On 28 June 2013 the European Council endorsed the Council of Ministers conclusions and recommendations to open accession negotiations with Serbia. During to recent visit to Serbia in Febriary 2014, Austrian Foreign Minister Sebastian Kurz has stated that his country will support the reforms that Serbia needs to implement and that he expects Serbia to join European union in next 4-6 years.

4 Belgrade Belgrade is the financial center of Serbia and Southeast Europe with total m² office space, and is home to the country's central bank. Currently, over 600,000 people are employed in companies, 22,600 enterprises and 50,000 shops. With 6,924 companies in the sector (2013 data), Belgrade is one of information technology centers in this part of Europe, with strong growth. Microsoft Development Center located in Belgrade was at the time of its establishment fifth such center in the world. Many world IT companies choose Belgrade as regional or European center such as Asus, Intel, Dell, Huawei, NCR etc. New Belgrade is the main business district in the country. It offers a range of facilities such as hotels, congress halls (Sava Centar), class A and class B office buildings, sporting facilities (Belgrade Arena), shopping malls (Ušće and Delta City) and business parks (Airport City Belgrade). The Belgrade Stock Exchange is also located in New Belgrade. Currently, over 1.2 million square meters of land is under construction in New Belgrade and the estimated value of construction in the next two and half years is over 1.5 billion Euros. Serbia overcame the problems of inflation in the mid-1990s, and Belgrade has been growing strongly ever since. As of 2009, over 40% of Serbia's GDP is generated by the city, which also has 31.4% of Serbia's employed population. The city of Belgrade's 2012 nominal GDP is estimated at 1,341 billion RSD (about 16 billion USD), which amounts to 806,000 RSD ($9,500) per capita. In September 2013, the average monthly net salary in Belgrade was 53,564 RSD ($635), while gross salary was 73,970 RSD ($877). In the annual Economist Intelligence Unit survey in 2013, Belgrade ranked 86th most expensive among 131 world cities.

5 Rakovica district The municipality of Rakovica is located south of downtown Belgrade, 9-10 kilometers (~6 mi) from Terazije, downtown Belgrade. It is bordered by the municipalities of Savski Venac on the north, Voždovac on the west and Čukarica on the east and south. Its neighborhood of Resnik marks the southernmost point of the Belgrade City Proper Rakovica covers an area of 31.8 square kilometers (12.3 sq mi). It is located in a hilly area, with numerous hillocks out of which many got urbanized and developed into Belgrade neighborhoods: Miljakovac (193 m/633 ft), Petlovo Brdo (205 m/673 ft; the top of the hill is in the municipality of Čukarica), Kanarevo Brdo, Labudovo Brdo, Straževica, Košutnjak, Vidikovac, etc. According to the 2011 census population of municipality was 108,413. Previously one of the urban Belgrade's municipalities with highest population growth, since the 1990s the growth slowed down. However, Rakovica remains one of the most densely populated municipalities of Belgrade with 3,738 inhabitants per square kilometer (9,680 /sq mi). Rakovica is one of the most industrialized parts of Belgrade. Some of the factories in the area include: Industrija motora Rakovica IMR (engine factory), Rekord (tire factory), 21 Maj (tractors and other agricultural vehicles factory), Frigostroj (coolers and air conditioners factory), IMP (foundry), Tehnogas MESSER (oxygen and acetylene factory), etc. Most of these factories suffered badly in the transition process. Another industrialized area of the municipality is the neighborhood of Kijevo with the quarry which supplies the entire Belgrade's building industry with stone and slates. The remaining industry is also mostly into construction and building (building companies and cement plants Komgrap, Graditelj, etc.). Rakovica is located on important traffic routes. The valley of Rakovički potok is a route to the Kružni put, suburban road of Belgrade and the future part of the projected Belgrade beltway, and a Belgrade-Požarevac railway, while the valley of Topčiderka is a route to the Belgrade-Niš railway. The other important roads in the municipality are Patrijarha Dimitrija street which goes through the middle of the urbanized area and Ibarska magistrala on the western edge of the municipality. Rakovica has lower unemployment rate compared to Serbia and other cities except Belgrade.

6 Rakovica Municipality Location

7 Existing Retail Stock The retail market in Rakovica is in the early phases of development. Currently there are no retail park format schemes in the town. This fact represents a market gap that definitely should be considered in future development of Rakovica retail market. There is no pedestrian nor high street areas. The map demonstrates that penetration from international retailers is limited to the McDonalds and Jysk (in Robna kuća Beograd ). It is also clear that there is no integrated retail warehousing developments in the city at present, and that overall the retail market is undersupplied.

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9 Shopping Centers In Rakovica at the present there are 2 shopping centers in the city from which TC Vidikovac is the first generation SC and Robna kuća Beograd as second generation shopping center. Located on the main road entering Vidikovac from Belgrade is Bazar Vidikovac comprising of approximately 5,000 sq m occupied mostly by local retailers. Mayor tenants are Lilly, Costa coffee, Handy. All other retailers are local who occupy from sq meters like exchange office, jewelry, hair dresser, shoe man, bookies, pharmacy, cafe bar etc. Robna kuća Beograd is located in Rakovica center occupied by 1,000 sq m Roda Hypermarket at ground floor. Delfi book shop occupies 100 sq meters of ground floor. First floor is equally divided by Metro shoes and Urban jungle shoes, each tenant occupying 500 sq meters. Second floor is reserved for Jysk.

10 Robna kuća Beograd TC Vidikovac

11 Stand Alone Retail Maxi supermarket 1 is located on the main road which connects Rakovica and Vidikovac covering 1200 sq meters Maxi supermarket 2 with approximately 800 sq meters is located in centre of Kanarevo brdo on Borska/Vukasoviceva intersection. McDonalds is located on Pilota Mihaila Petrovića/Kneza Višeslava intersection next to the TC Vidikovac Tehnomanija is the only W&B retailer in the area. It is located in Kanarevo Brdo next to Maxi supermarket. Maxi supermarket 1 (Pilota Mihaila Petrovića) Maxi supermarket 2 (Kanarevo brdo)

12 McDonalds Tehnomanija

13 Retail Market Conclusion All relevant parameters indicates that Serbia is moving more quickly towards a consumer based dynamic which is creating a demandsqueeze on existing stock, requiring an increase in supply. Further economic growth will create increased demand in the long term. This rapid increase in consumer spending makes Serbia one of Europe s hot spots for retail growth and has been the driver of demand from retailers looking to access the market. The topography of Rakovica with a Valley gives excellent visibility and walk to and drive to a 10 minute catchment of 110,000 Despite schemes above, Rakovica has very low provisions of retail centre space per inhabitant compared to mayor cities in Serbia and Europe. The retail market in Rakovica is at the early stages of evolution and chronically undersupplied with lack of strong international tenants which, along with positive investment and economic climate in Serbia, represents opportunity for other international retailers to enter Serbian and Rakovica market. According to above mentioned biggest advantage is foreseen for international retailers that have already enter the country but have no units in the region of Rakovica such as New Yorker, Takko, Deichmann, DM, C&A, H&M, Sport Vision, CBT. New Reatil Park schemes will therefore have a strong competitive advantage over existing schemes as consumers have historically, across all markets, shown a preference for shopping in a single location which provides the broadest range of goods.