TBILISI REAL ESTATE MARKET OVERVIEW I 2015

Transcription

1 TBILISI REAL ESTATE MARKET OVERVIEW I 2015

2 Contents Georgia - Country Profile 3 Tbilisi City Profile 5 Tbilisi Retail Market Overview 6 Tbilisi Office Market Overview 12 Tbilisi Hotel Market Overview 19 Tbilisi Residential Market Overview 24 Tbilisi Warehouse Market Overview 34 Tbilisi Entertainment Market Overview 39 Conclusions and Outlook 48 Appendix 1 - Real Estate Registration, Construction Permit And Incentives 49 Appendix 2 - Primary Information Sources And Data Used For The Study 52 Disclaimer 55 Project Team 56 Colliers Global Stats at a Glance 57 Team Georgia at a Glance 58 2

3 Georgia Country Profile Introduction Located at the crossroads of Europe and Asia, the country of Georgia borders Turkey, Armenia, Azerbaijan and Russia. Georgia occupies an area of 69,700 square kilometres and is home to a population of 3.7 million people. The country s land borders run a length of 1,839 kilometres, while Black Sea coastline is 315 kilometres. There are two autonomous republics and 71 municipalities (including 12 self-governing cities) in Georgia. Since emerging from the Soviet Union as an independent country in 1991, Georgia has implemented large-scale reforms, leading to the country s political and economic transformation. These changes have made clear the country s choice to strengthen democracy and further their relationship with the EU. Georgia has made business development within the country a top priority, through encouraging entrepreneurship and devising methods to attract private investments to shifting tax incentives and making the country more attractive to the international business world. With its unique cultural heritage, highly diverse nature, and exuberant hospitality, Georgia s tourism industry continues to grow and thrive, further bolstering economic growth. Government The Georgian government shifted from a presidential to a parliamentary republic after the October 2012 parliamentary elections. The president, Giorgi Margvelashvili, is the head of state and supreme commander-inchief. Georgia s parliament is located in Kutaisi City and acts as the representative body of the country, exercising legislative power, and determining the principal directions of domestic and foreign policy. As an executive council of government ministers, the Cabinet of Georgia is headed by Giorgi Kvirikashvili who comes from the ruling Georgian Dream Coalition. Based on accountability, citizen participation, technology, and innovation as its guiding values, today s multi-party government continues to make European and Euro-Atlantic integration a primary strategic objective. Legal System The Constitution, adopted in 1995, sets out the structure of the national government as well as its powers and functions. The powers of government are divided into three branches the legislative, executive, and judicial. Georgia s court system has three branches: Courts of First Instance (District or City Courts), Appellate Courts (Tbilisi Appellate Court available for appeals from eastern Georgia, and the Kutaisi Appellate Court, available for appeals from western Georgia) and the Supreme Court. Тhe Courts of the First Instance have jurisdiction over all civil, criminal, and administrative cases. Decisions from the Courts of the First Instance may be appealed to the Appellate Courts and, from there, to the Supreme Court. As an alternative to litigation, Georgian laws allow arbitration both in local as well as in international arbitration institutions. The Constitutional Court of Georgia is the sole entity with constitutional jurisdiction in Georgia. Population Georgia s population was 3.72 million at the end of 2015, with a density of 53.4 people per square kilometre and a regional average (in the Caucasus region) 95. Urban dwellers make up 57.2% of the total population though the rate of urbanization is rising. Tbilisi, Georgia s capital and the country s largest city, is home to 30% of the total population, followed by Batumi and Kutaisi with 4.2% and 4%, respectively. Ethnic Georgians form 87% of Georgia s population. Other large ethnic groups in Georgia include the Azeri (6%), Armenians (5%), and Russians (1%). Labor Market Overview Georgia s labor force comprises approximately 2,021,500 people. The country s economic activity rate has risen in recent years, reaching 67.8% in The current unemployment rate is 12%, which is lower than the Gudauri 14.8% average seen last decade. It is worth noting that a large percentage of employed population are self-employed. Currently, 15.4% of the working population are employed by Public sector, while 84.6% work in the non-public sector. In 2015, the three industrial sectors that employed the largest share of people were wholesale and retail trade, industry, and construction. Economy Focused on improving efficiency and overcoming expected difficulties, Georgia s economy is structured to improve efficiency and overcome difficulties, thus allowing the private sector to maintain inclusive growth. The process of economic liberalization, backed by evident pro-western leanings, has greatly improved the country s competiveness for both export and investment opportunities. Georgia s main trade partners include Turkey, Russia, Azerbaijan, and China. Following institutional reforms designed to encourage and support entrepreneurship initiatives, Georgia s economy has taken a giant leap forward in attracting new business. Over the past decade, the per capita GDP increased by 2.45 times from $1,530 in 2005 to $3,743 in 2015 (at current prices). The estimated real GDP average growth equaled 2.3% for Q and is forecasted to reach 3% by the end of the year. The Ongoing Country Partnership Strategy for Georgia, developed through a collaborative effort by the World Bank Group, has further evolved to ensure the effective use of public resources and increase income opportunities. Tax system Since the wave of institutional reforms, Georgia has embraced a low-tax model, slashing the number of taxes and tax rates. Georgia now ranks globally among the top ten countries with the lowest taxes and continues to bring its fiscal policies into further alignment with those of the EU. Currently Georgia has concluded the Argument on the Avoidance of Double Taxation with 52 countries. According to the latest tax code changes, imported goods used in VAT-taxable operations will be exempt from VAT. Moreover, additional changes are planned by 2017, including the removal of the profit tax for the reinvestment of funds. Georgia s liberal tax code includes only six forms of taxes: Profit Tax 15% Personal Income Tax 20% Value Added Tax 18% Import Tax 0%, 5% or 12% Excise Tax on a few selected goods Property Tax up to 1% Tax rate on dividends is defined as a 5% in Georgia. Foreign Trade Overview In 2015 Georgia exports (FOB) and imports (CIF) amounted to $2,204 mln and $7,729 mln, respectively. The top export destinations for Georgia are its neighboring countries as well as Bulgaria and China, totaling about 50% of Georgian exports. Major export commodities include mineral water, metals, and motor cars (mainly re-exported). Throughout the world Georgia is among the largest exporters of hazelnuts, famous for their unique flavor, while the country s wide range of natural wine products continue to grow in popularity in the Chinese, EU, and USA markets. Georgia s main import partners are Turkey, Russia, and China, accounting for 33% of the country s total imports. The primary imported goods include oil, pharmaceutical products, motor cars, electrical equipment, wheat, and sugar. 3

4 Gudauri Business and Investment Environment According to the Heritage Foundation Index of Economic Freedom 2016, Georgia s economy is categorized as Mostly Free, ranking 23 rd out of the 178 countries measured. The significant improvements made to Georgia s legislative framework allowed entrepreneurship initiatives to reach new heights, encouraging domestic businesses and opening the door to foreign investors. Today, the country is exemplary in European and Central Asia due to the ease with which business can be conducted. It ranks 6 th in the world for Ease of Starting a Business, 3 rd for Ease of Registering Property, and 24 th (14 th in Europe and 1 st in the region) for Ease of Running a Business. With no minimum capital requirements, it takes on two days to set up a new business following a quick and simple process. Foreign and local investors are treated equally in Georgia. Today there are four Free Industrial Zones (FIZ) in Georgia in the cities Tbilisi, Poti and Kutaisi and several more is also planned to open including Kulevi FIZ. Two unique Free Tourism Zones in Anaklia and Kobuleti offers various advantages to investors such as free land and ready infrastructure. Aimed at the development of different sectors, the Georgian government has implemented several large-scale projects. Launched in 2014, Produce in Georgia is a successful state program that encourages entrepreneurship as it relates to the exportation of Georgian goods. Another interesting program which began this year is Film in Georgia which hopes to attract international film producers by cash rebate up to 25% on filming expenses. With the project Host in Georgia the local Government provides financial and technical assistance including co-financing to entrepreneurs in hotel industry. The Check in Georgia program brings together musical events with international stars, and promotes events dedicated to local products, all in an effort to increase tourism. In order to promote the development of innovative ideas, The Development Center of High Technology and Innovation (Tech Park Georgia) opened this year. According to the last Trade Policy Review produced in 2016 by the World Trade Organization (WTO), as evidenced by the progressive liberalization of its trade regime, Georgia has undertaken an impressive range of successful reform initiatives. The country has been a member of the WTO since Currently, Georgia is considering joining the expanded Information Technology Agreement, which would help the country attract further investment. FDI of USD 1.75 billion in Georgia in 2014 was the highest indicator seen since 2008, however, this number decreased by 11% in In H FDI of USD 376 billion is 29% higher compared to the same period of time of previous year (highest amount of to the same period of time since 2008). Georgia has signed FTAs with CIS countries. Georgia benefits from the General Scheme of Preferences regulation, which lowers tariffs on goods exported from Georgia to the US, Canada, and Japan. As a result of negotiations with the European Free Trade Association in 2016, Georgia was given duty free access to markets in Iceland, Liechtenstein, Norway, and Switzerland. FTA between the Republic of Turkey and Georgia entered into force in Currently, an FTA between Georgia and China is also in negotiations and will be finalized by the end of The EU represents Georgia s main trade partner. The Association Agreement (AA) between the EU and Georgia, signed in 2014, was ratified by all EU countries in December The Deep and Comprehensive Free Trade Area (DCFTA) was set up as a part of the AA and aims to gradually enhance Georgia s trade and economic growth on its path toward integrating with the European economy. The DFCTA has provided better opportunities for local businesses to trade with the EU and made foreign investment in Georgia much easier. For the period of Georgia also benefits from the unilateral Generalized Scheme of Preferences (GSP). Under the current regulations, due to sustainable development and good governance Georgia qualifies for a special incentive (GSP+) that provides advantageous access to the EU markets. Georgia in International Rankings According to the Doing Business report, Georgia has been among The Top Improvers since 2005 in the EE&CA and globally. Characterized as an efficientlydriven economy, Georgia ranked 66 th in with the relative average score of 4.2 on the Global Competitiveness Index, improving its position by 28 levels when compared to their ranking. The Transformation Index BTI shows that Georgia is up from 95th to 39th position in Management Index Ranking and up from 79th to 45 th position for Status Index Ranking during the period from 2003 to Democracy Status of the country has also risen in recent years and ranks at 40th position for the period of The country is ranked 48 th among 168 counties and territories on the Corruption Perception Index, greatly outperforming its bordering countries. Fitch s credit rating for Georgia was last reported at BB- with a stable outlook, and referred to 2016 as a challenging year for growth in Georgia. The report also revealed expectations that the country s economy will grow 2.5% in 2016 and 4.2% in Infrastructure & Transport Due to its access to important terrestrial and maritime transport routes, Georgia has always been a key player in the transportation of cargo as well as natural gas and oil. Today, the three main pipelines are the Baku-Tbilisi-Ceyhan pipeline, the Baku- Supsa oil pipeline, and the South Caucasus gas pipeline. With a capacity to export one million barrels of oil a day, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline runs 443 km through Azerbaijan, 249 km through Georgia and 1,076 km through Turkey. The Baku-Supsa oil pipeline (the Western Route Export Pipeline, WREP) runs from Azerbaijan to Georgia. The pipeline is 833 km long, with 375 km running through Georgia. Reconstruction of portions of the pipeline is scheduled in the near future. The South Caucasus gas pipeline (SCP) has been operational since 2006, following the route of the BTC crude oil pipeline project. The pipeline runs 691 km, with 443 km in Azerbaijan and 248 km in Georgia. Expansion of the SCP is now underway, and will eventually triple the gas volume exported through the pipeline. With the annual capacity of 7 mln tons Supsa oil terminal is a storage for crude oil transported via the WREP. With higher annual capacity of 10 mln tons Kulevi oil terminal has started functioning in Launched in December 2015, the Iron Silk Road is listed among the 100 Best Projects of Global Significance. Cargo trains will pass via Georgian transit, making the country the key link between the cheapest and shortest roads connecting Europe and Asia. Trade relations between Georgia and China have deepened in recent years, and the Georgian railway received its first cargo train from China in late The two main ports of Georgia are located in Poti and Batumi, though in order to develop the transit potential currently underutilized, the new $2.5 bln Anaklia Deep Sea port will be constructed till the year of Efforts will be made to increase its capacity to 40 mln tons in twelve years as the port is expected to become a trade connection between Europe and Asia, and between China and Europe through the New Silk Road. With increasing passenger traffic and an expanding network, the Tbilisi International Airport is the most efficient and secure cargo centre in the Caucasus Region. Reconstruction of the main runway is currently underway and will be completed in Two other international and one local airport are located in Kutaisi, Batumi, and Mestia. The Central and Eastern Europe's biggest low-cost airline Wizz Air will place an airplane at Kutaisi International Airport on permanent basis in Wizz Air will conduct flights to 11 destinations in 8 European countries, including Berlin, Munich, Sofia and Milan. Ukraine International Airlines and Pegasus Airlines also operate in Kutaisi Airport. Expanding its services, the airport will offer new, affordable flights to several other European destinations. Several local airports including Mestia Airport and Natakhtari Airport are also presented in Georgia. Georgia has also modernized its road infrastructure with some large projects, including the current construction of a primary autobahn that will connect Tbilisi and Georgia s eastern regions to the seaports. The total length of Georgian Railroad is 2,084 km with an operational length of 1,146 km. Estimated to finish in 2017, the Baku-Tbilisi-Kars (BTK) railway will further enhance Georgia s reputation and capacity as a transit country. Energy The country is rich in terms of renewable energy resources and substantial coal reserves, however, only about 25% of country s total energy potential has been exploited thus far. There are approximately 26,000 rivers in Georgia out of which more than 300 can contribute energy sector. Georgia intends to become a regional leader in the sustainable/efficient energy market by The Government is actively investing in the sector in order to achieve energy security and to establish a fully competitive energy market. Water is Georgia s most important natural resource. The country s sizable hydroelectric capacity per capita (40 TWh) ranks as one of the best in the world. This extra capacity holds the promise of export growth and energy self-sufficiency for the country. Currently, Georgia is focused on the development of small and medium-sized hydroelectric power plants to make efficient use of the country s remarkably rich water resources and to maximize domestic potential. Large-scale projects that have been implemented recently include: Khudoni HPP with an installed capacity of 750 MW and an average projected annual generation 1,66 TWh; Cascade of Oni HPPs with an installed capacity of 272 MW and an average projected annual generation 1530 TWh; Cascade of Namakhvai HPPs with an installed capacity of 450 MW and an average projected annual generation 1,6 TWh. 4

5 Gudauri Tbilisi City Profile Tbilisi s flag Tbilisi s logo Population 1,113,000 Population Density City Area Number of International Brand Hotels Number of hotel rooms 5,967 Number of hotel beds 13,045 1,545.8 person/sq.km 720 sq. km 8 (Radisson, Tbilisi Marriott, Hotels and Preference, Holiday Inn, Courtyard Marriott, Citadines apart hotel, Best Western Tbilisi, Mercure) Main tourist destinations Infrastructural facilities Old Tbilisi, Sulfur Baths, Narikala Fortress, Tbilisi Botanical Garden, Freedom Square, Opera and Ballet Theater, Sameba Church, Tbilisi Concert Hall, Mtatsminda, Georgian National Museum, Giorgi Chitaia Ethnographical Museum - The Open Air Museum. Tbilisi International Airport (total capacity 2,000 passengers per hour), Tbilisi Railway Station, Underground Tbilisi is one of the largest cities in the Caucasus as well as one of the largest in Eastern Europe, with a population of 1.1 million. Tbilisi accounts for about 30% of the national population. It is the industrial, cultural and social centre of Georgia. The city is spread over a 720 square kilometre area. Despite an overwhelmingly orthodox Christian resident population, Tbilisi generously accommodates diverse cultures, religions and ethnicities. As of the end of 2014 the city generates 42% of the country s economic output, and accounts for most of the formal employment. Tbilisi is distinguished by the highest income per capita among Georgian regions. Real estate sector in Tbilisi is also much more developed than in other cities in the country. Existing international hotel brands in Tbilisi are Radisson, Marriot, Hotels and Preference, Courtyard Marriot,Holiday Inn, Citadines apart' hotel, Best Western and Mercure. Other major projects are under construction (Intercontinental, Hilton Garden Inn, Biltmore, Park Inn, Hyatt, Ramada, Sheraton etc.). The city is actively developing its tourism sector. Thanks to low taxes and a favourable climate for investors, Tbilisi is ranked among the top five European cities by the EBA (European Business Association) Attractiveness of Investment index. 5

6 Tbilisi Retail Market Overview

7 Thousands Supply The total volume of retail floorspace in Tbilisi amounts to 952,983 m 2. Bazaars and open markets occupy the largest share (40%) of this stock. The overall market continues to grow due to the opening of new and modern shopping centres and, consequently, the share of space occupied by bazaars is declining year-over-year. Tbilisi s modern shopping centres occupy 24% of the city s floorspace. With the addition of Gldani Plaza (6,385 m 2 ), Gldani Mall (11,700 m 2 ) and East Point (71,780 m 2 ), Tbilisi s shopping centre supply increased by GLA 89,865 m 2 in The first DIY supermarket, Domino, opened in East Point, occupying roughly 11,000 m 2. This shopping concept has the potential to replace open markets in a variety of different locations throughout Tbilisi. During the next two years, the new Hualing Mall, Gldani Central and Galleria Tbilisi shopping centres will be opened, further increasing the city s retail GLA by 68%, to a total of 387,885 m 2. It is worth noting that several other malls have been announced, but their opening dates have not been specified. They are expected to reach completion within the next three to four years. Retail space supply in Tbilisi (GLA m 2 ) Note: The chart excludes owner occupied retail space. Shopping centres are classified according to the standard of International Council of Shopping Centres (ICSC). Modern shopping centre supply pipeline in Tbilisi (GLA thousand m 2 ) Secondary streets, 148,547, 16% High streets, 55,136, 6% Traditional shopping centres, 134,367, 14% 231 Modern shopping centres, 230,933, 24% Bazaars, 384,000, 40% F 2017 F Upcoming Projects Name Developer Address GLA m 2 Completion Date Construction Status Project Type Hualing Mall JSC Hualing international Varketili 3, near special economic zone Tbilisi Sea 110,000 H Under Construction Greenfield Gldani Central IG Development Georgia LLC 1 Khizabauri Street 22,452 H Under Construction Greenfield Galleria Tbilisi Co-Investment Fund (Tbilisi Plaza LLC) 2/4 Rustaveli Avenue 24,500 H Under Construction Brownfield Didube Mega Trade Didube Mega Trade LLC 2 T. Eristavi Street 10,146 N/A Construction Temporarily Suspended Greenfield Gldani Shopping Construction Temporarily JSC Cross Near Mukhiani Bazaar 6,938 N/A Center Suspended Greenfield Niba Delisi Delisi LLC Along Delisi station 16,000 N/A Construction Temporarily Suspended Greenfield Sum 190,036 7

8 Existing and upcoming shopping centres Tbilisi Mall 69,566 11,700 Gldani Mall 6,400 Gldani Plaza Goodwill 8,000 Sarajishvili Akhmeteli Theatre 22,452 6,938 Gldani Shopping Centre Guramishvili Gldani Central H Grmagele Didube 10,146 Didube Mega Trade Gotsiridze Niba Delisi 16,000 Vazha-Pshavela Delisi 20,000 Tbilisi Central IG Mall 9,500 6,900 Technical University Station Square 8,600 Karvasla 110,000 Hualing Mall H Home Mart Marjanishvili Merani Rustaveli 7,600 Liberty Square Galleria Tbilisi H ,500 GTC 10,000 Avlabari 300 Aragveli Isani Samgori Varketili 71,780 Tbilisi East Point Airport Central Railway Station GLA m 2 Existing modern GLA m 2 shopping centre Upcoming Project Completion Date Source: Developers, Operators/Property Managers, Colliers International 8

9 Occupier Demand Fashion and Footwear holds the largest share of occupier demand in shopping centres and it is the second category in street retail. Tbilisi s largest fashion retailers include Retail Group Georgia and International Corporation ICR. They represent almost 60 different brands, including Zara, Massimo Dutti, Top Shop, Pull & Bear, Gap, Banana Republic, Aldo, Ecco, Geox, Tamaris and Obaïbi-Okaidi. The Fashion and Footwear category absorbed 15,125 m 2 in 2015, of which 90% was leased in shopping centres and 10% in street retail spaces. The vast majority of take-up was by existing brands who were extending their operations. Spanish brand Mango s franchisee partner shift may be considered a new entry to the market. Attracting new retailers and fashion brands remains one of the most significant challenges for shopping centre developers and management companies. 25% and 11% of occupier demand in shopping centres and high streets is represented by the Hyper/Supermarket category. Among the core representatives of the category are international and regional brands (Carrefour, Spar and Furshet), as well as local supermarket chains (Goodwill, Smart, and Fresco). Smaller Georgian grocery chains, such as Ori Nabiji and Nikora (together with Nugeshi), have been growing aggressively during the last two years. The major expansion in this category in 2015 was recorded by Carrefour (10,105 m 2 in East Point) and Furshet (2,288 m 2 in Gldani Mall and 1,630 m 2 in Gldani Plaza). The third largest share of occupier floorspace (12%) in modern shopping centres is held by the Consumer Electronics product category. In contrast, this category occupies an extremely low share in street retail (3%). The sector is dominated by local companies, such as Elit Electronics, AltaOkay, Metro Mart, Smiley, Galaxy, etc. These companies represent major world brands such as Samsung, Sony, LG, Philips, Bosch, Siemens, Hyundai and Gorenje. In 2015, the category absorbed 15,125 m 2. The majority of the take-up was in shopping centres, in particular at East Point, by Elit Electronics and Metromart. The Catering and Entertainment category occupies 11% of the floorspace in shopping centres and 20% in street retail. The category is dominated by international fast food chains such as McDonald s, Wendy s, Dunkin Donuts, KFC, Subway and Domino s Pizza. After the opening of a new cinema in Tbilisi Mall (5 screens and 750 seats), Cavea added another one in East Point (10 screens and 1,580 seats, equipped with IMAX technology). The opening of Lebowski Bowling Club (1,500 m 2, 12 professional lines) and the new kids centres Focus Mocus (East Point) and Maxxi Land (Gldani Plaza) - are also notable additions to this category. Modern shopping centres' floorspace by category in Tbilisi Category Consumer Electronics 12% Take up in 2015 (including renewals m2) Total Fashion and Footwear 35% Shopping Centres Street Retail Major Occupiers Household & Furniture 18,410 16,446 1,964 Domino, Super, Belhouse Catering & Enteratainment 17,809 14,014 3,795 Cavea, Focus Mocus, Lebowsky, Maxxi Land Hyper/Supermarket 15,527 14,255 1,272 Carrefour, Furshet Fashion & Foorwear 15,156 13,700 1,456 Zara, LC Waikiki, Mango, Koton, Defacto, Consumer Electronics 11,210 10, Elite Electronics, Metromart General & Service 7,092 2,547 4,545 Bank of Georgia Health & Beauty 2,028 1, Lutecia, GPC, Aversi, PSP Lifestyle Puma, Timberland, Adidas, Nike Undefined 2,414-2,414 Total 90,307 73,407 16,900 Hyper/Supermarket 25% General and Service 3% Catering and Enteratainment 11% Household and Furniture 11% Street retail floorspace by category in Tbilisi General & Service 25% Hyper/Supermarket 11% Consumer Electronics 3% Fashion & Footwear 22% Health and Beauty 1% Lifestyle 2% Catering & Enteratainment 20% Household & Furniture 5% Health & Beauty 12% Lifestyle 2% The General and Service category occupies the largest share (25%) of occupier floorspace in street retail and 3% in shopping centres. The sector is mainly represented by Georgian Banks Bank of Georgia, Liberty Bank, TBC Bank etc. The major expansion in this category was recorded by Bank of Georgia, which rented more than 2,200 m 2 during 2015, the bulk of which was in street retail locations. In addition to the above mentioned sectors, drug stores should not be excluded from the core occupier group of Tbilisi s retail market. Aversi, PSP and GPC are the largest drug store chains in the city, with a combined total of more than 160 branches. In 2015, the category rented 2,028 m 2, of which roughly 50% was in street retail locations. Major network expansion was recorded by perfume shop Lutecia and the above mentioned drug stores. 9

10 Performance Indicators The weighted average rent in high streets equals USD 36 /m 2, exceeding the same figure in modern shopping centres and secondary streets 2.25 and 1.7 times respectively. In 2015, the weighted average rent decreased by 6.2% in secondary streets when compared to 2014 and did not change significantly in high streets and modern shopping centres. The highest weighted average rent was observed on Pekini Street (USD 43 /m 2 ), and Rustaveli Avenue (USD 37 /m 2 ). The average vacancy rate is higher in modern shopping centres (17%) when compared to street retail locations (7%-8%). When compared to 2014 figures, we see an improving picture, with vacancy rates decreasing in shopping centres and high streets by 5% and 4% respectively. The only shopping centre with a higherthan-average vacancy rate is Tbilisi Mall. It is worth noting that recently opened shopping centres are experiencing low vacancy rates due to active leasing campaigns that start one to one and a half years before the opening date. The lowest vacancy rate among shopping streets is observed along the street fronting Varketili Metro Station (2%) and the highest are found on Tsereteli/Tamar Mepe/Tsabadze Streets (12%). Weighted average retail rent in Tbilisi (USD /m 2 net of VAT and service charge) Vacancy rate in Tbilisi $40 25% $35 $30 $25 $20 $15 $10 $5 $- $16 $16 Modern shopping centres $36 $36 High streets $22 $21 Secondary streets 20% 15% 10% 5% 0% 22% 17% Modern shopping centres 11% 7% High streets % 8% Secondary streets Source: National Agency of Public Registry, Colliers International Note: Data excludes East Point figures The rent indicated in the 2014 report was calculated based on available listings. 10

11 International Benchmark Georgia s retail real estate investment market is still in the early stages of development. The acute shortage of modern shopping centre stock and the fact that most developers retain ownership means that there have been no large scale transactions. The prime high street rental rate in Tbilisi is around USD 56 /m 2 and the prime shopping centre rent is USD 33 /m 2. These figures are below the CEE average by 36% and 48% respectively. The estimated prime retail yield in Tbilisi is 13% for shopping centres and 12% for street retail, exceeding average CEE figures significantly. Tbilisi East Point Photo by Robbie RG Commercial The development pipeline suggests that Tbilisi s shopping centre supply will almost double during the next four years - which will increase shopping centre stock per 1,000 inhabitants and exceed the same level in Sofia. This new supply must be supported by economic growth and higher consumer spending to avoid declining rents and increasing vacancy rates. Prime rents H (USD /m 2 per month net of VAT and service charges) Prime yields 2H % 12% 10% 8% 6% 4% 2% 0% 13% 13% 13% 12% 12% 10% 9% 9% 9% 9% 8% 8% 7% 7% 7% 7% 8% 7% 7% 7% 7% 5% 6% 6% 4% Prime high street rent Prime shopping centre rent Prime high street yield Prime shopping centre yield Note: * - estimated yield, ** - H figure Existing and proposed modern shopping centre supply per 1,000 inhabitants and household final consumption expenditure per capita 9,000 8,000 7,938 1,140 7,000 6,750 6,894 1,182 6,627 6,000 6,177 6,214 5,756 5, , , , , , , Tbilisi Sofia Budapest Warsaw Zagreb Vilnius Riga Bratislava Tallinn 1,400 1,200 1, Modern SC (sqm per 1,000 inhabitants) RHS Modern SC (sqm per 1,000 inhabitants) proposed 2019 RHS Household final consumption expenditure per capita (constant 2005 USD) LHS Source: World Bank, Colliers International Note: Warsaw - Agglomeration 11

12 Tbilisi Office Market Overview

13 Thousands Thousands Supply With a cross-continental location in a now-turbulent region, Tbilisi is one of the most important cities of the Caucasus. Because of its central location and centuries-long commercial traditions, Tbilisi has been vital to the health and development of Georgia s social, political and economic life. Tbilisi s total office space is, essentially, equally distributed between leasable and owner occupied offices. Out of Tbilisi s 436,630 m 2 of leasable office space, 33% can be considered modern office stock (A, A-, B+ and B classes). As for the remaining 67%, which are classified as C and D categories, it comprises old and non-refurbished Soviet era office stock. In 2015, the leasable modern office stock increased by 6% and reached 144,380 m 2. The total leasable modern office space can be divided into four categories. Class A represents 22% (32,447 m 2 ) of the total supply, with Class A- representing 16% (22,724 m 2 ). Class B+ forms the majority of the stock, with 57% (82,189 m 2 ) with Class B comprising 5% (7,020 m 2 ) of the total supply. Tbilisi s modern office stock supply is expected to climb by 41% in three years time, increasing the total amount by 59,000 m 2. The King David Business Centre (GLA 8,780 m 2 ) and Axis Towers (GLA 15,000 m 2 ) are two large-scale projects, now underway, that will contribute to this growth. Followed by increased business activity and a rising number of active companies, the quantity of modern office stock of both types leasable and owner occupied - has grown since Most of the leasable modern office stock can be found in business centres (the supply of which has increased significantly). However, some large companies prefer to be located in private buildings. However, the practice of selling separate offices within a business centre to individual tenants complicates management and decreases the investment value and attractiveness of business centres as an asset. Total office stock supply in Tbilisi 2015 (m 2 ) B+ 82,189 57% modern Owner Occupied Leasable modern office stock in Tbilisi by classes 2015 B 7,020 5% Supply of leasable modern office stock in Tbilisi (m 2 ) Leasable A 32,447 22% 165 A- 22,724 16% Traditional F 2017 F 2018 F 13

14 Demand In 2015, 53 office lease deals were recorded, totaling GLA 18,000 m 2 of take-up (including lease renewals). 18% of Tbilisi's occupied business centre space is leased to trade organizations, followed by banking, insurance and investment organizations with 15% and professional services with 14%. High-class business centres are usually occupied by international organizations and local large companies, while small business offices tend to be located in low-class buildings. Using apartments, located on the lower floors of residential buildings, as offices for smaller companies is another common practice in Tbilisi. Another unique characteristic of Tbilisi s office market is that a significant number of financially strong companies prefer to own rather than lease their office space. Today, approximately 64% of owner occupied office stock is under ownership of state organizations. Several prominent financial institutions own and occupy 11% of the space, including leading banks such as TBC, the Bank of Georgia, ProCredit Bank and Liberty Bank. Demand distribution in business centres in Tbilisi 2015 Trade 3% 2% 3% Banking, Insurance & Investment 7% 8% 7% 4% 9% 10% 18% 14% 15% Professional Services Pharmacy, Beauty & Healtcare IT, Media & Communication Public Construction & Development Food & Beverage Other Transport & Logistics Manufacturing NGO Owner occupied office breakdown by costumers 2015 Performance Indicators The weighted average rent for A class office stock is USD 23.7/m 2, A- is USD 15.8/m 2, B+ is 14/m 2, and B is 6.9/m 2. There is no significant changes in rent prices in 2015 compared to the previous. At the end of 2015, vacancy rates for A class business centres was 8% and for A- class was 9%, followed by B+ and B classes with the vacancy rates of 18% and 16%, respectively. Compared to the year of 2014, the demand for A class office stock (typically occupied by strong international or local companies) has remained the same. The A- and B class occupancy rate has increased insignificantly against % 4% 9% 4% 7% 11% 64% State Organization Financial Organization State Owned Legal Energy Telecommunication State Owned Transport Other Vacancy rate by class in major Tbilisi business centres 20% 15% 10% 5% 0% 8.3% 8.32% 7.7% 8.89% 18.42% 16.5% 15.7% 15.67% A A- B+ B Weighted average rent prices in major leasable office stock (USD /m 2 per month excl. VAT and service charges) $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $- $24.7 $23.7 $16.4 $15.8 $14.1 $14.0 $6.0 A A- B+ B $6.9 Source: National Agency of Public Registry, Colliers International 14

15 Major Existing Business Centres Business Centre Location Class GLA Number of Parking Lots Parking Type Pixel 34 Vake A 11, Underground Grato Old Tbilisi A 4, Open Merani Old Tbilisi A 4, Open Aword Business Centre Old Tbilisi A 4,434 - Off street Green Building Old Tbilisi A 2, Underground Tabidze 1 Old Tbilisi A 2, Underground GMT Plaza Old Tbilisi A 3, Open/Underground Maidan Palace Old Tbilisi A- 4, Underground BCV Saburtalo A- 7, Underground Mantashevi Rows Old Tbilisi A- 2, Underground Besiki Business centre Old Tbilisi A- 3, Underground Metekhi Business Centre Old Tbilisi A- 1,500 7 Open/Off street BCL Old Tbilisi A- 1, Open/ Underground MGI Old Tbilisi A- 2, Open/Inside Subtotal A class 32,447 Subtotal A- class 22,724 Upcoming Supply Developer Project Name Location Class GLA (m2) Completion Date Construction Status Type Axis Axis Chavchavadze Street A 15, Under construction Greenfield Rezid Holding GMBH King David Business Centre Aleksidze Street A 8,780 H Under construction Greenfield Redix Redix 2 Leonidze Street A 6,000 H Under construction Greenfield Belinski Belinski 10a Chovelidze (Belinski) Street A- 4,063 H Under construction Greenfield MDM Group MDM Group 43 Beliashvili Street B+ 3,659 H Under construction Greenfield Lilo Rental Tiflis BC-2 Lilo Rental Tiflis BC Beliashvili Street 10 Kvernadze Street B+ 7,064 H Under construction Greenfield B+ 10,500 H Under construction Greenfield Ortachala Group Ortachala Group 1 Gulia Street B+ 4,300 H Under construction Greenfield Sum 59,366 15

16 Map of Major Existing Business Centres Didube Gotsiridze 7,000 BCV Station Square Technical University 4,800 Grato Pixel 34 11,235 4,434 Aword MGI 2,574 Merani 4,530 Rustaveli Marjanishvili 2,400 Green Building 3,000 Besiki BC Liberty Square GMT Plaza 3,000 2,048 Tabidze 1 Avlabari 1,500 Metekhi Business Group Varketili 1,650 BCL 2,500 Mantashevi 300 Aragveli Rows 4,500 Maidan Palace Isani Samgori GLA A class BC GLA A- class BC 16

17 Map of Upcoming Projects Lilo Rental 7,064 m 2 H Sarajishvili Akhmeteli Theatre Guramishvili H MDM Group 3,659 m 2 Grmagele Didube Gotsiridze Vazha-Pshavela Delisi 2018 Axis Towers 15,000 m 2 Belinski 4,063 m 2 H H Technical University Tiflis BC- 2 10,500 m 2 Liberty Square H Rustaveli Station Square King David Business Centre 8,780 m 2 Marjanishvili Avlabari Redix 6,000 m 2 H Aragveli Isani Varketili H Ortachala Group 4,300 m 2 Samgori Completion Date Developer GLA 17

18 Benchmarking Tbilisi s total modern office stock supply is significantly lower than that seen in other Eastern European cities and, although the supply will increase significantly in the next several years, the city s total stock will remain comparatively lower. Tbilisi's office market has some of the highest rental rates among comparable cities. The Prime CBD rent was 24.8 (USD/m 2 /month) at the end of 2015, while Tbilisi's Prime estimated CBD yield was 12% in 2015, one of the highest yields seen among EMEA cities. Existing modern office stock(m 2 )/city area(km 2 ),future supply(m 2 )/city area(km 2 ) and GDP per capita 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, , ,966 11, ,813 10,041 10,232 8, ,079 6,945 6,836 5, ,520 3,507 3,512 3,379 3,160 2,390 2,709 3,181 1,376 2,291 2,126 2,006 1, Bratislava Prague Sofia Warsaw Zagreb Bucharest Budapest Tallinn Riga Vilnius Krakow Belgrade Tbilisi Existing stock (LHS) Future supply (LHS) GDP per Capita (RHS) Source: The World Bank, Demographia World Urban Areas 12 th Annual Edition, Colliers International Note: Total future supply is a sum of existing office stock and projects currently under construction; GDP per capita data is defined for the countries, correspondingly. Prime CBD Rent and Yield in EMEA cities % % 6.0% % % 7.1% 7.0% 7.5% % 6.8% 7.0% 8.5% % % 10.0% 8.0% 6.0% 4.0% 5 2.0% 0 Warsaw Tbilisi Prague Budapest Vilnius Bucharest Belgrade Riga Tallinn Bratislava Zagreb Sofia 0.0% Prime CBD Rent (USD/m2/month) Prime CBD Yield 18

19 Tbilisi Hotel Market Overview

20 Tbilisi is one of the largest cities in the Caucasus as well as one of the largest in Eastern Europe, with a population of 1.1 million, spread over a 720 square kilometre area. Tbilisi accounts for about 30% of the national population. It is the industrial, cultural and social centre of Georgia. Demand The number of hotel guests in Tbilisi has been growing over the years. In 2015, the highest share was held by holiday, leisure and recreation, with 42%, after which stands business travellers (33%) and an other category with 25%. Supply In 2015, Tbilisi s hotel market supply comprised 243 hotels, 5,967 rooms and 13,045 beds. Internationally branded hotels provided 22% of the total room supply and, according to the forecasted pipeline of future projects, this share will increase to 46% by the end of When compared to the end of 2014, the number of hotel rooms and beds increased by 9% and 8% (486 and 1,007 units respectively). The opening of Hôtels & Préférence and Mercure significantly changed the supply during the first half of Over the course of the second half of 2015, seven hotels were added to the local budget/economy class market, totaling 137 rooms and 317 beds. International upscale brands Nowadays, only three international upscale brands are operating in Tbilisi, including the Tbilisi Marriott, Radisson Blu Iveria and the recently opened Hôtels & Préférence. Together, these hotels provide 12% of the total rooms and 8% of the beds. In addition to the Millennium, Intercontinental, Hyatt, Rixos and the refurbishment of the Sheraton Metekhi Palace, Pullman Hotels & Resorts announced plans to enter the market. International midscale brands International midscale brands in Tbilisi include the Courtyard Marriott, Holiday Inn, Rooms Hotel Tbilisi, Citadines Apart hotel, Best Western and Mercure, which together comprise 10% of the total hotel room supply. Six hotels will enter this segment during next three years, including the Park Inn hotel, the Golden Tulip, Hilton Garden Inn, Moxy and two Ramada Hotels, which will provide an additional 1,266 rooms. Local upscale and middle class Local upscale/middle class hotels provide 25% of Tbilisi s total hotel room supply. In the first half of 2016, three new hotels (Ambassadori 2, Colombi and Opera Tbilisi) will be added in this segment with a total of 324 rooms. Local budget/economy class The local budget/economy class provides the largest share (53%) of Tbilisi s hotel rooms. Seven hotels in this category opened in the second half of Supply in this segment is not expected to rise significantly in the near future. 20,000 15,000 10,000 Note: Rooms Hotel is a member of internationally-known brand Design Hotels Pipeline hotels with undefined operator (150 rooms) are considered in local upscale and middle class Breakdown of hotel guests by type % 80% 60% 40% 20% 0% Existing and upcoming supply in Tbilisi hotel market F 5,000-10,025 12,038 5,036 5,481 5,967 6, ,000 8,000 6,000 4,000 2,000-29% 24% 47% 13,045 13,898 17,544 8,025 19,577 8, F 2017 F 2018 F Number of accomodation units Number of rooms Number of beds Existing and future hotel room supply by type (rooms/%) F 3,134 (53%) 1,492 (25%) 718 (12%) 623 (10%) 3,134 (34%) 1,816 (20%) 1,984 (22%) 2,178 (24%) F 36% 27% 37% 27% 25% 25% 48% Source: National Statistics Office of Georgia, Colliers International 42% 33% Business Travellers Holiday, Leisure, Recreation Other International upscale brands International midscale brands Local upscale & middle class Local budget/economy class - 20

21 The Biltmore Hotel Tbilisi # Developer Operator Stars Category Address 1 Ambasadori LLC Ambasadori* 4 2 Oasis 9 Art Boutique Hotel* 3 3 Vasil Bolashvili Colombi* 3 4 Dhabi Group Georgia Biltmore Hotel* 5 5 Adjara Group Hospitality, EBRD Intercontinental Hotel 5 6 Silk Road Group LLC Radisson Blu Telegraph 5 7 City M LLC Rixos Hotel 5 8 Redix Hilton Garden Inn 4 9 Block-Invest LLC Golden Tulip 4 10 RAKIA Sheraton Metekhi Palace (refurbishment) 11 Granat Holding Granat 5 12 Block-Invest LLC Park inn by Radisson 4 13 M2 Residence Ramada 3 14 M2 Residence Ramada 3 15 GMT Group Moxy 3 16 Axis Pullman Hotels & Resort 5 17 Rustaveli Property LLC Hyatt Regency 5 18 GCF N/A 5 19 GCF N/A Old City Development (Panorama Freedom Square) Old City Development (Panorama Sololaki) Autograph Collection by Marriott Autograph Collection by Marriott 5 Future pipeline in Tbilisi Local Upscale and Middle Class Local Upscale and Middle Class Local Upscale and Middle Class International Upscale Brands International Upscale Brands International Midscale Brands International Upscale Brands International Midscale Brands International Midscale Brands International Upscale Brands International Upscale Brands International Midscale Brands International Midscale Brands International Midscale Brands International Midscale Brands International Upscale Brands International Upscale Brands Local Upscale and Middle Class Local Upscale and Middle Class Number of rooms Completion date (Year) 13 Shavteli Street 79 H Tabukashvili Street 30 H Lvovi Street 65 H Rustaveli Avenue 216 H Construction status Finishing Construction Finishing Construction Finishing Construction Finishing Construction Type Investment Volume USD/mln Brownfield 3.2 Greenfield 1.5 Greenfield 3 Greenfield Kostava Street 205 H In Progress Brownfield Rustaveli Avenue 189 H In Progress Brownfield 60 3 Gudiashvili Street 170 H In Progress Greenfield Chavchavadze Avenue 170 H In Progress Greenfield 32 2a 300 Aragveli Street 80 H In Progress Greenfield 5 16 Telavi Street 255 H In Progress Brownfield Kostava Street 120 H Announced Brownfield Chanturia Street 200 H In Progress Greenfield Kazbegi Street 152 H In Progress Greenfield Melikishvili Street 127 H Announced Brownfield 11.7 Zaarbrukeni Square 130 H In Progress Greenfield Chavchavadze Avenue 230 H In Progress Greenfield Rustaveli Avenue 170 H In Progress Greenfield 60 Erekle II Square 50 H Announced Greenfield 10 Tabori Mount 100 H Announced Greenfield 20 5 Undefined operator 7 Freedom Square 220 H Announced Greenfield 44 5 Undefined operator Kojori Highway 187 H Announced Greenfield 37.4 Note: The table above describes hotel pipeline as of December 31, Marked hotels (*) has already been operating since the report publication. 21

22 Main existing and upcoming hotels in Tbilisi Main market players Akhmeteli Theatre Sarajishvili Upcoming projects Guramishvili Grmagele Didube Gotsiridze Vazha-Pshavela Delisi Ramada Holiday Inn Station Square Best Western Technical University Pullmann Hotels & Resort Grana Ramada t Radisson Blu Iveria Hilton Garden Inn Marjanishvili Rooms Hotel Tbilisi Radisson Blu Telegraph Millenniu Intercontinental Rustaveli m International midscale brands Hyatt Liberty Square Courtyard Marriott Moxy Marriot Tbilisi Park Inn by Radisson Tbilisi Rixos Hotel Avlabari Sheraton Metekhi Palace Panorama Freedom Square Citadines Apart 300 Aragveli 'Hotel Golden Tulip Isani Hotels & Preference Varketili Panorama Sololaki Samgori International upscale brands 22

23 Performance Indicators In 2015, the Average Daily Rate (ADR) for international upscale brands amounts to USD 177, while international midscale branded hotels recorded USD 118. Local upscale and middle class and local budget/economy hotels are averaging USD 90 and USD 51, respectively. In comparison with 2014, the ADR dropped significantly (25%) in local budget/economy class hotels. International upscale brands also saw a decrease by 4%, while international midscale and local upscale and middle class hotels ADR increased by 2% and 4%, respectively. At 68%, the highest hotel occupancy rate in Tbilisi occurs at international upscale branded hotels, followed by international midscale and local upscale and middle class with 65%; local budget/economy class stands at 49%. As compared to 2014, the occupancy rate increased only in local upscale and middle class hotels, by 6%, while international midscale and local budget/economy class has seen a decrease of 7% and 8%, respectively. International upscale brands remained unchanged. In 2015, RevPAR (Revenue Per Available Room) in international upscale brands amounts to USD 121, international midscale branded hotels and local upscale and middle class stands at USD 77 and USD 59, respectively. Local budget/economy class amounts to USD 25. In comparison with the previous year, international upscale brands have seen a 3% decrease, while in the local budget/economy class this figure dropped by 34%. RevPAR for international midscale branded hotels also decreased by 7%, while local upscale and middle class saw an increase of 16%. ADR in Tbilisi (USD excl. VAT) International upscale brands International midscale brands Source: STR Global, Colliers International Occupancy rate in Tbilisi % 50% 25% 0% Source: STR Global, Colliers International Local upscale and middle class 68% 68% 72% 65% 65% 59% 57% International upscale brands International upscale brands International midscale brands Source: STR Global, Colliers International RevPAR in Tbilisi (USD excl. VAT) International midscale brands Local upscale and middle class 59 Local upscale and middle class Local budget/economy class 38 49% Local budget/economy class 25 Local budget/economy class 23

24 Tbilisi Residential Market Overview

25 Thousands 532 PROJECTS UNDER DEVELOPMENT 29,427 FLATS UNDER DEVELOPMENT INCLUDING PRESALE AND AVAILABLE FOR SALE FLATS 3.0 MILLION SQUARE METRES RESIDENTIAL AREA UNDER DEVELOPMENT Existing and upcoming supply in Tbilisi Supply Today, there are approximately 360,000 housing units in Tbilisi, the bulk of which are so-called Soviet-type residential buildings. After the massive drop in residential development between , residential construction activity and completions have picked up significantly. In 2015, 3,908 residential flats were completed and added to the market, of which 70% are already sold in Tbilisi. Today, 532 projects (29,427 flats) are under development and are expected to reach completion between At 47% (1.41 mln m 2 of residential area), the biggest proportion of ongoing development is being conducted by small-sized developers. Mid-sized developers are running 38% (1.14 mln m 2 ) of the current projects, while large-sized and distressed developers are managing 11% and 4%, respectively. 16,332 of these residential flats (64%) will fall in to the low segment, while 28% will be considered medium and 8% as premium flats. At the time of this report, 37% of all units under construction were already sold. Development projects by categories 1 in Tbilisi ,407,983 47% 135,186 4% 325,633 11% 1,135,098 38% Large-sized developers Middle-sized developers Small-sized developers Distressed developers 25 Number of flats under development by years ,000 12,000 9,000 6,000 3, ,642 3,908 2,678 1,149 14,408 7,063 7,345 8,794 1,964 2,759 2,967 2, Suspended Sold 11,761 In Stock 2,433 Note: : In 2014, the vast majority of in stock apartments were in Dirsi (90%); The only sold portion of the Hualing Tbilisi Sea development were the flats purchased by the Ministry of Refugees and Accommodation of Georgia in Number of flats under development by segments ,000 15,000 10,000 5, Source: IPM, Colliers International 2,714 1,050 1,304 4,869 3,466 12,715 6,023 Premium Medium Low Sold 8,135 4 In Stock 21 16, Large-sized developers are companies with large-scale residential projects (over 50,000 m 2 ); Middle-sized developers are actively implementing mid-sized projects (from 10,000-50,000 m 2 ); Small-sized developers are represented by developers of condominiums and LLC-s, whose total residential area is under 10,000 m 2 ; Distressed developers are companies, who have encountered problems during development and have consequently suspended construction. 2 The segmentation was based on average listed price. Premium Segment - USD 1,200-3,000 p/m 2 ; Medium Segment between USD 800-1,200 p/m 2 ; Low Segment - USD p/m 2 ; 25

26 Map of major development projects in Tbilisi Akhmeteli Theatre Sarajishvili Guramishvili Grmagele Didube Gotsiridze 7 8 Delisi 1 6 Medical University Vazha-Pshavela Technical University 9 5 Station Square Marjanishvili Rustaveli Key Liberty Square Avlabari Varketili Airport Metro Station Main streets of the city 300 Aragveli Isani Samgori Major development projects # Developer Project/Location District Residential Area (m 2 ) Completion Date 1 M 2 6 Kartozia Street Saburtalo 62, Metra Metra Park Bagebi Vake 27, Meskhi LLC 82 Chavchavadze Avenue Vake 27, Domus 13 Tamarashvili Street Saburtalo 26, King David 12 Aleksidze Street Saburtalo 24, M 2 25 Kazbegi Avenue Saburtalo 23, GBC 20 Politkovskaya Street Saburtalo 21, BD Property 10 Asatiani Street Saburtalo 20, Archi Group Archi Towers Vake 19, Axis Axis Towers Vake 19, Source: Developers, Operators/Property Managers, Colliers International 26

27 Map of existing stock and density in Tbilisi DIDI DIGHOMI 3,406 11,016 GLDANI 4,257 55,080 SABURTALO 4,395 44,064 NADZALADEVI 4,293 48,600 DIDUBE 4,007 25,920 VAKE 2,226 25,200 MTATSMINDA 2,560 16,560 CHUGHURETI 4,229 20,520 ISANI 3,625 41,040 KRTSANISI 2,208 17,640 SAMGORI 2,446 54,360 Key District Density (inhabitant/km 2 ) Existing stock (unit) Source: National Agency of Public Registry, Colliers International Note: Administratively, Didi Dighomi is a part of Saburtalo District 27

28 Millions Millions Millions Demand In 2015, there were 18,286 residential real estate unit transactions, which reflects a 3% decrease when compared to It should be noted that the number of sales transactions of newly-built flats 1 and old flats changed contrary. The number of old flat transactions decreased by 9%, while newly-built flat transactions saw 9% increase. In 2015, total transaction volume dropped by 23% and stands at USD 558 million. With 32%, old flats has seen massive decrease, while the volume of newly-built flats declined only by 10% when compared to previous year. The vast majority of newly-built flat transactions occurred within the low segment (66%), reflecting a 3% increase over 2014 to USD 176 million. Medium segment transactions dropped 36% to USD 56 million, while premium segment transactions totaled USD 35 million. Older flat transactions amounted to USD 290 million. At USD 173 million, the largest share (60%) was represented by the low segment. At 34% and 6%, the medium and premium segments recorded USD 99 and USD 18 million in total transaction volume. The medium segment dropped by 36% compared to 2014, and the premium and low segments also declined by 25% and 30%. Residential transactions by type of unit ,000 18,910 18,286 6,149 15,000 3% 6,708 10,000 12,761 11,578 5, Old flats New flats Source: National Agency of Public Registry, Colliers International Transaction volume of residential flats by type (USD/mln) % Old flats New flats Source: National Agency of Public Registry, Colliers International Transaction volume of old flats by price segments (USD/mln) % USD USD 701-1,100 USD 1,101-1,500 Source: National Agency of Public Registry, Colliers International Transaction volume of new flats by price segments (USD/mln) % USD per m2 USD 801-1,200 USD 1,200-3,000 Source: National Agency of Public Registry, Colliers International 1 Transactions of new flats were determined based on cadastral database provided by Tbilisi City Hall. The mentioned database is recorded since

29 The distribution of transactions across districts remained the same as in The vast majority of demand occurred in the Saburtalo district, with 23% of the total transactions. The Samgori and Gldani districts were in second and third places with 13% and 11% share, respectively. Chughureti saw the highest increase (30%) in transactions during 2015 compared to In Didi Dighomi, Vake and Nadzaladevi, transactions increased by 13%, 8% and 1%, respectively. In the Mtatsminda district transactions dropped by 13%. In Samgori, Krtsanisi and Saburtalo, same figure decreased by 11%, 10% and 9%, respectively. The Gldani and Isani districts also experienced decreases by 7% and 3%, respectively, while Didube remained unchanged. Small-sized flats comprised the largest share of transactions. This trend was more significant in suburban parts of the city, such as Gldani, Nadzaladevi and Samgori, where small flats (up to 70 m 2 ) represented more than 50% of the overall transactions. The number of large-sized flat transactions remained low. Transaction units of residential flats in Tbilisi districts Saburtalo Samgori Gldani Didube Nadzaladevi Isani Didi Dighomi Vake Chughureti ,290 1,454 1,261 1,357 1,681 1,681 1,586 1,606 1,640 1,592 2,045 2,363 2,201 2,669 4,161 4,581 Mtatsminda Krtsanisi Source: National Agency of Public Registry, Colliers International Residential transaction distribution by districts and size of units in Tbilisi 2015 (unit/m 2 ) 4, ,200 1,800 2,400 3,000 3,600 4,200 4,800 4,000 3, ,000 2,500 2,000 1,500 1, , , ,082 1, Saburtalo Samgori Gldani Didube Nadzaladevi Isani Didi Dighomi Vake Chughureti Mtatsminda Krtsanisi Source: National Agency of Public Registry, Colliers International Note: Saburtalo District includes part of Vake Administrative District, such as Nutsubidze Plateau, Vazha-Pshavela Blocks, Kavtaradze Street and part of Kazbegi Avenue; Didi Dighomi is a part of Saburtalo District. 29

30 Map of residential demand in Tbilisi DIDI DIGHOMI 1,454 USD 25.9 mln 57 m 2 SABURTALO 4,161 USD mln 77 m 2 NADZALADEVI 1,606 USD 32.0 mln 57 m 2 DIDUBE 1,681 USD 49.8 mln 65 m 2 GLDANI 2,045 USD 45.5 mln 59 m 2 CHUGHURETI VAKE 1,357 USD 81.5 mln 93 m USD 15.9 mln 57 m 2 ISANI 1,592 USD 45.3 mln SAMGORI 2,363 USD 43.9 mln 56 m 2 MTATSMINDA 623 USD 31.2 mln 83 m 2 64 m 2 KRTSANISI 608 USD 18.0 mln 65 m 2 Key District Transaction unit Transaction volume Average size of unit Source: National Agency of Public Registry, Colliers International Note: Administratively, Didi Dighomi is a part of Saburtalo District 30

31 Selling price The selling price of newly built residential flats in Tbilisi varies from USD 400 to USD 3,000 p/m 2. In 2015, the average selling price of premium and medium units dropped by 1% compared to 2014 and amounted to USD 1,497 and USD 942 p/m 2, respectively. The low segment remained unchanged at USD 580 p/m 2. During 2015, the average selling price on the primary and secondary markets had downward trend. By the end of the year the average selling price on the primary market amounted to USD 596 p/m 2, while the secondary market selling price stood at USD 560 p/m 2. As compared to Q4 2014, the selling price of residential units dropped by 10% on the primary market and by 5% on the secondary. The variance in sales prices between primary and secondary market flats is due in large part to the condition units are sold in. Primary market developers are delivering flats in frame condition, while secondary market units are frequently sold in average or renovated condition. At USD 942 p/m 2, Mtatsminda led the districts for the average selling price of new flats. The Vake district stood at USD 773 p/m 2, while in Isani, the average selling price of new residential flats was USD 701 p/m 2. The lowest figures were recorded in Samgori (USD 490 p/m 2 ), Gldani (USD 486 p/m 2 ) and Didi Dighomi (USD 479 p/m 2 ). The most significant change occurred in the Vake district, where average selling prices decreased by 11%. Didi Dighomi faced an 8% drop, while the Saburtalo and Gldani districts declined by 6%. In the Isani, Samgori and Nadzaladevi districts, average selling prices of newly-built residential flats increased by 6%, 2% and 1%, respectively. Average selling price on primary market by segments (USD/m 2 ) ,600 1,400 1,200 1, ,515 1, Premium Medium Low Source: National Agency of Public Registry, Colliers International Average selling price of new flats in Tbilisi districts Mtatsminda Vake Saburtalo Isani Krtsanisi Chughureti Didube Nadzaladevi Samgori Gldani Didi Dighomi ,000 Source: National Agency of Public Registry, Colliers International Note: Saburtalo District includes part of Vake Administrative District, such as Nutsubidze Plateau, Vazha-Pshavela Blocks, Kavtaradze Street and part of Kazbegi Avenue; Didi Dighomi is a part of Saburtalo District. Average selling price of residential flats by type in Tbilisi (USD/m 2 ) Q Q Q Q Q Q Q Q Q Q Q Q Primary Market Secondary Market Source: National Agency of Public Registry, Colliers International Note: Primary Market is defined as sold apartments by development companies. Secondary Market is defined as sold apartments by individuals. 31

32 Rental rate In 2015, rental rates for one-room flats increased by 5% in the suburbs and by 3% in central districts, while middle-class districts recorded a 4% decrease when compared to Tworoom flats increased by 14% in middle-class districts, while suburban area flat rates grew by 7%. For three-roomed flats, the average rental rate decreased in central and middle-class districts by 6% and 1%, respectively, while suburb rates remained unchanged. At USD 500 p/month, Mtatsminda led Tbilisi s suburbs in average rental rates. Vake stands at USD 490 p/month, while Saburtalo amounted to USD 420 p/month. The lowest rental rates were observed in the Samgori, Nadzaladevi and Gldani districts, where prices varied between USD 325 USD 330 p/month. Average rental rate by type (USD/month) Central districts Middle-class districts Suburbs 1 room 2 rooms 3 rooms Source: Colliers International 360 Average rental rate by districts in Tbilisi (USD/month) Mtatsminda Vake Saburtalo Isani Didube Chughureti Krtsanisi Didi Dighomi Gldani Nadzaladevi Samgori Source: Colliers International 32

33 Development land market overview In 2015, land market sales in Tbilisi resulted a negative growth rate. The number of development land transactions decreased by 27% compared to Average and low-priced transactions also reduced by 35% and 26%, while the high-priced segment declined by 14%. In 2015, the average selling price of development land was USD 191 p/m 2. Compared to 2014, this reflects a 4% decrease, but a 22% increase over the same data for The highest development land sales prices were observed in Vake and Mtatsminda, amounting to USD 446 p/m 2 and USD 731 p/m 2, respectively. The highest number of sales transactions were reported in the Dighomi and Saburtalo districts. Number of development land transactions in Tbilisi Source: National Agency of Public Registry, Colliers International Note: Research included sales transactions of the vacant land parcels in Tbilisi with following characteristics: Plot size is greater than 1,000 m 2 Price is greater than USD 50 p/m 2 Average selling price of development land in Tbilisi (USD/m 2 ) Number of development land transactions by price range in Tbilisi Source: National Agency of Public Registry, Colliers International Less than USD 100 Between USD Greater than USD 300 Source: National Agency of Public Registry, Colliers International Average selling price and number of transactions of development land by districts in Tbilisi (USD/m 2 ) Mtatsminda Vake Saburtalo Krtsanisi Didube Nadzaladevi Chughureti* Gldani Dighomi Tskneti Didi Dighomi Isani Samgori Average selling price m2 (LHS) Number of transactions (RHS) Note: In Chughureti district the number of transactions was noticeably low, the average transaction value was determined based on listings 33

34 Tbilisi Warehouse Market Overview

35 Supply In November 2015, the Free Industrial Zone was established in Tbilisi, developed by the BitFury Group, who have retained ownership. The company has already launched a mega data centre (6,000 m 2 ) in the Tbilisi Free Zone (TFZ). As the TFZ becomes more established, it will facilitate further development of Tbilisi s warehouse and industrial market. Tbilisi s total warehouse space amounts to 1.3 million m 2, of which 910,000 m 2 (73%) is owner-occupied and 335,000 m 2 is leasable area. 88% of the total leasable stock is dry storage and 12% cold storage. The total capacity of cold warehouses in Tbilisi is around 130,000 tons. 63% of Tbilisi s leasable space is B class. Class A space is in short supply, with just 10,000 m 2 being operated by Austrian logistics specialist Gebrüder Weiss. Total warehouse space distribution in Tbilisi 2015 Leaseble supply 27% Owner occupied 73% Supply distribution by types in Tbilisi (m 2 ) 2015 Demand Food and Beverage is the most significant demand category, occupying 46% of the leasable supply in Tbilisi. Other categories with high space requirements include Auto Parts (occupying 17%) and Building Materials (occupying 13%). Pharmaceutical companies such as PSP, Aversi and GPC occupy 10% of the leasable supply. Dry Storage 294,350 88% Cold Storage 40,850 12% Warehouse occupied space by category in Tbilisi 2015 Supply distribution by classes in Tbilisi (m 2 ) 2015 Food & beverage 46% Building materials 13% Consumer goods and appliances 9% C class 115,488 34% A class 10,000 3% Other 5% Auto parts 17% Pharmaceuticals 10% B class 209,711 63% Main Market Players Developer Location District GLA (m 2 ) Class Type Main Occupiers Gebrüder Weiss LLC Kakheti Highway, Airport Adjacent Territory Lilo (Samgori) 10,000 A Dry Tegeta Motors, Bosch Transservice LLC 98 K.Tsamebuli Avenue Isani 10,000 B Dry Lilo 1 LLC 14 Iumashevi Street Lilo (Samgori) 60,000 B Dry G & A Logistics LLC 29 Demetre Tavdadebuli Street Didi Dighomi (Saburtalo) Isani Trade Center, Furchet Georgia Philip Morris Georgia, PSP Pharma, Aversi Pharma 3,300 B Cold Carrefour, Smart, Tolia Sakinvest LLC 32 Agladze Street Didube 20,000 B Dry LC Tbilisi LLC 4 Iumashevi Street Lilo (Samgori) 18,000 B Dry Magnum Electronics, Ziller Georgia Casa Calda (Tbili Sakhli), Lider Distribution Diplomat Georgia LLC Orkhevi Industrial Zone Samgori 6,000 A Dry Owner Occupied Source: Developers, Operators/Property Managers, Colliers International 35

36 Performance indicators The average rent in B class dry storage spaces stands at USD 4.1 /m 2 and in C class it equates to USD 2.0. Compared to 2014, average rent prices dropped in B class and C class dry storage warehouses by 13% and 15%, respectively. The rent price in cold storage has increased from USD 15.9 to USD 16.3 /ton for B class warehouses. The weighted average price in C class cold storage has remained the same, and stands at USD 14 /ton in C class. Class A cold storage is currently not available in Tbilisi. Average cold storage vacancy rates are significantly higher than for dry storage warehouses, due primarily to seasonal changes in need. Compared to 2014, vacancy rates in dry and cold storage warehouses slightly increased in 2015 and are around 27% and 51%, respectively. The average vacancy rate of A class warehouses in Tbilisi stands at 0%. The figure increased from 26% to 33% in B class, while in C class the vacancy rate decreased by 12% and amounted to 28%. Benchmarking Tbilisi s prime warehouse rental price is around USD 9 /m 2. The prime warehouse yield in Tbilisi is 13%. Compared to other European cities, Tbilisi stands between Kiev and Minsk. Average rent in dry storage warehouses in Tbilisi (USD/m 2 ) B class C class Average rent in cold storage warehouses in Tbilisi (USD/ton) B class C class Vacancy rate by type in Tbilisi Vacancy rate by class in Tbilisi 60% 50% 40% 30% 20% 10% 23.1% 26.8% 50.8% 51.4% 45% 40% 35% 30% 25% 20% 15% 10% 5% 25.8% 33.4% 40.1% 27.7% 0% Dry Storage Cold Storage 0% B class C class Benchmarking of prime rent USD 2015 Benchmarking of prime yield % 14% 12% 10% 8% 6% 4% 2% 0% 14.0% 13.0%12.0% 11.0% 10.5%10.0% 10.1% 9.0% 9.0% 8.8% 6.8% 7.0% 36

37 Map of existing and upcoming projects in Tbilisi G & A Logistics Demas Akhmeteli Theatre Sarajishvili Guramishvili Grmagele Didube Gotsiridze Sakinvest Delisi Medical University Nadzaladevi Tsereteli Vazha-Pshavela Technical University Station Square Rustaveli Liberty Square Avlabari Transservice Diplomat Georgia 300 Aragveli Universal Distribution Company Isani LC Tbilisi Samgori Varketili Lilo 1 Airport Central Railway Station Gebruder Weiss Gebruder Weiss Main streets of the city River Mtkvari Main market players Upcoming projects Upcoming Projects Developer Location District GLA (m 2 ) Class Category Construction Status Type Completion Date Gebrüder Weiss LLC Demas LLC Universal Distribution Company LLC Kakheti Highway, Airport Adjacent Territory Dighomi, in proximity to Agrarian University Lilo (Samgori) 37,000 A Leasable Announced Greenfield N/A Saburtalo 3,532 B 10 Moscow Avenue Samgori 3,871 B Owner occupied Owner occupied Announced Greenfield 2017 Ongoing Greenfield H Source: Developers, Operators/Property Managers, Colliers International 37

38 Performance indicators by Tbilisi districts Didi Dighomi Dry Cold 3,484 3,300 $5.9 N/A 34% 20% Gldani and Nadzaladevi Dry Cold 36,970 2,000 $5.5 N/A 18% N/A Didube Dry Cold ,600 $2.9 N/A 10% 30% Isani Dry Cold 37,792 2,600 $3.2 $ % 30% Samgori Dry Cold 156,188 13,250 $4.1 $ % 55% Lilo Dry Cold 7,116 14,100 $2.0 $23.3 N/A 62% Key Warehouse type Gross leasable area m 2 Average rental rate USD/m 2 Vacancy rate Note: Didi Dighomi is a part of Saburtalo district. Lilo is a part of Samgori district. 38

39 Tbilisi Entertainment Market Overview

40 Entertainment Market Casinos Since the deregulation of the gaming segment, the casino sector has been growing rapidly in Georgia, attracting gamblers from Turkey, Russia, Azerbaijan, Armenia the Middle East. The gaming sector is one of the major contributors to the Georgian economy. Growing since 2009, the turnover of gaming venues reached GEL 2,246 mln (USD 989 mln) in 2015, an increase of 10% compared to the same period in 2014 and by 70% from Tbilisi is the city dominating casino supply. A variety of popular games, like Poker, Black Jack and Roulette, as well as modern slot-machines can be found in the casinos of the city. The leading players in the gambling sphere in the Capital include Casino Iveria, Shangri La Casino, Casino Adjara and others. The Millennium hotel will soon be opened in Tbilisi, offering another high-class Casino and up-do-date gaming facilities. The game of poker is becoming increasingly popular in the county. The first ever World Series of Poker (WSOP) Circuit event has taken place in Tbilisi, gathering poker players from various countries, with the region s largest prize pool offered. Turnover of Gaming Venues in Georgia mln GEL ( ) 2,500 2,000 1,500 1, Source: National Statistics Office of Georgia, Colliers International Existing Casinos in Georgia , , , Tbilisi Batumi Rest of Georgia Shangri La Casino Adjara Casino Iveria Iveria (Radisson Blu Batumi) Sheraton Batumi Casino Intourist Palace Casino Golden Palace Batumi Casino Leo Grand Casino Batumi Rooms Hotel Casino (Kazbegi) Ambassador Hotel (Kachreti) Casino Source: National Statistics Office of Georgia, Colliers International 40

41 Gaming regulations in Georgia 1. A casino operator has to obtain a permit from the State Authorities of Georgia. The permit is issued by the Revenue Service of Georgia; 2. The fees for obtaining the permit are for the whole territory of Georgia (excluding Batumi, Dusheti Municipality nearby the Lake Bazaleti, Gudauri recreation territory, Bakuriani, Kobuleti, Borjomi, Tskaltubo and Signaghi municipalities) no less than (five million) GEL per year (approximately USD 2,2 million) A casino operator in Tbilisi is entitled to a free permit for opening three gaming clubs in the territory of Tbilisi. The permit for operating the gaming club will be granted for no more than the permit granted for casino operation. 3. The validity of the permit is five years. 4. The fee for getting the permit in Batumi, Dusheti Municipality nearby Lake Bazaleti, Kobuleti and Borjomi Municipalities constitutes GEL per year; however, the permit is free in the event the Casino is opened in the recently built hotels in Batumi, Kobuleti and Khelvachauri Municipality (with regard the hotels having no less than 100 rooms), in the villages Anaklia and Ganmukhuri in recently built hotels having no less than 80 rooms. The permit is free within the 10 years upon it is awarded. For hotels to be considered for a casino they must be less than three years old - after the completion of construction works has been officially certified by the State Authorities. 5. In order to obtain a gaming permit, the person shall meet the special requirements defined by the law and special acts of the Government. The requirements are the following: a) Casino Regulations that shall include: the list of tables in the casino, indicating the manufacturers number, title, date of production, manufacturing country; the minimum and maximum bets; the manual for operation; Gaming Rules; Rules of Conduct; the place and the time for issuance of prizes; the time for consideration of the claim; b) Types of coins; c) The type of games that are not indicated in the Casino Regulations are prohibited from being offered. Permit Fee According to Geographic location in Georgia Geographic name Permit fee Tbilisi GEL 5,000,000 Batumi, Surrounding area of the Lake Bazaleti, Borjomi Municipality, Kobuleti Municipality GEL 250,000 Tskaltubo Municipality - Sighnaghi Municipality - Bakuriani - Gudauri - The rest of the country GEL 5,000,000 41

42 Cinemas The total turnover of the sector was GEL 20.7 mln (USD 9.1 mln) in 2015, up from GEL 17.9 mln (USD 7.8 mln) a year before. However, at present, Tbilisi remains the only city where the cinema industry is well-developed. Tbilisi s major cinemas include Cavea, Amirani and Rustaveli. Based in Tbilisi, Cavea Cinemas is the leading cinema chain in the county and the fastest growing operator in the south Caucasus. It operates the two largest ultra-modern cinemas, inside the biggest shopping and entertaining centers of Tbilisi Mall and East Point, located at two different ends of the city of Tbilisi. Five screens, with more than 750 seats are installed in Cavea Tbilisi Mall, while Cavea East Point offers the region s largest ten-screen multiplex, including an IMAX screen. Cavea Cinemas is the first provider to install an IMAX theater, greatly improving the entertainment experience for the local population. Rustaveli and Amirani cinemas are the other most popular cinema houses, located in the central districts of Tbilisi. There are five screens and a VIP hall with a total of 750 seats in Rustaveli cinema and three screens with 650 seats in Amirani cinema. World premieres, as well as local movies are shown in both cinemas, which have the latest technology and 3d projection facilities. Relatively small cinema houses like Cache and Cinema City are also popular with Georgian cinema-goers. Hosting from 6 to 20 people the cinema halls offer the possibility to reserve the halls and watch movies ordered individually. Amusement parks, Zoo and other destinations Situated on the highest place of the capital, Mtatsminda Park (Bombora) is the largest amusement park in Georgia. With an King David attractive Residence panoramic view of the whole of Tbilisi from the park, it occupies more than 100 hectares of land. The park is divided into several zones, including an extreme zone, a zone for families and a zone for children. Various restaurants, cafes and shops are located around the park. The park can be reached by car or public transport, but the most direct route to Mtatsminda from the central district of Tbilisi is via the historical funicular, which has been renewed in recent years. Tbilisi Zoo, heavily damaged after the flood in summer 2015, was soon brought back to life with the mutual effort of the society and the government. The infrastructure was renovated and new species and exhibits have been added to the zoo. Today, more than 200 species are represented in Tbilisi Zoo and it remains one of the favorite places for children to visit. Mziuri Theme Park, also known as the City of Children, in the central district of Tbilisi Vake was opened in The park also suffered from the harmful impact of the Tbilisi flood, but it was renovated quickly. The further improvements to Mziuri Park are expected in the nearest future. The works have already been started on the upper part of Mziuri Park, where the café (adopted for people with disabilities), amphitheater and other facilities will be rebuilt as it was decades ago. An educational center, sport complex and new pathways are also planned to open up and make more efficient use of the park territory. The National Botanical Garden of Georgia, based on former royal botanical garden, is considered to be one of the most beautiful places of the capital. The garden is located in the historical part of Tbilisi and occupies up to 100 hectares of land. Turnover of Cinemas in Georgia mlngel ( ) Name Cavea East Point Cavea Tbilisi Mall Rustaveli Cinema 25.7 Major Cinemas in Tbilisi 16.8 Location Tbilisi Tbilisi Number of screens 17.9 Capacity (number of seats) 10 1, Tbilisi Amirani Cinema Tbilisi Cinema House Tbilisi Source: Developers, Operators/Property Managers, Colliers International Source: National Statistics Office of Georgia, Colliers International Major Existing Parks in Georgia Name Location Visitors per year Mtatsminda Park Mtatsminda, Tbilisi 800,000 Tbilisi Zoo Saburtalo, Tbilisi 500,000 Mushtaidi Park Didube, Tbilisi 75,000 Rose Revolution Park Botanical Garden Gldani, Tbilisi 90,000 Krtsanisi, Tbilisi 120,000 Vake Park Vake, Tbilisi N/A Source: Operators/Property Managers, Colliers International 42

43 Leisure Market Gastronomy & Wine Served at local restaurants and cafés, Georgian food is in high demand, though foreign dishes, both eastern and western, are also quite popular. The turnover of cafes and restaurants has been growing rapidly since 2009, reaching GEL 571 mln (USD 331 mln) in Tbilisi dominates the supply of café-bars and fine dining restaurants. Traditional Georgian restaurants are the main players in Georgia s culinary market. Khinkali (dumplings with spiced meat and herbs) and Khachapuri (baked dough filled with cheese) are Georgia s famed specialties and many regions offer their own version of these and other famous Georgian dishes. A variety of meats, local cheeses, vegetables and generous fresh and dry herbs are the main components of most traditional Georgian dishes. King David Archaeological Residence discoveries prove that viticulture has been a thriving part of the Georgian culture for more than eighty centuries, making it one of the oldest wine producing regions in the world. A wide variety of wines are crafted from grapes indigenous to Georgia. These grapes, unique in aroma and taste, have helped to place Georgia on the world s wine making map. Both European and traditional Georgian wine making techniques are popular in Georgia. However, wine fermented the ancient Georgian way, called qvevri, is unique to Georgia. Using this age-old method, special underground clay jars are used to store grape juice, thus defining the main component of this winemaking tradition. Qvevri has been nominated by UNESCO as an element of Intangible Cultural Heritage of Humanity. Leaning on hospitality as a central pillar of Georgian culture, the country offers tourists an opportunity to familiarize themselves with a wide array of indigenous Georgian wine and cuisine in a warm and welcoming environment. Turnover of Café-bars, Restaurants and Canteens in Georgia mln GEL ( ) Number of Restaurants, Bars and Canteens and Meal Delivery in Tbilisi (2015) Operator MGroup GMT Group AMS Group Kala Group Main Market Players Source: National Statistics Office of Georgia, Colliers International Brands In the Shadow of Metekhi, Bread House, Maspindzelo!, and Otium Chela, Puri Guliani, Function Suite, Lounge Bar Funicular and Restaurant Funicular Shemoikhede Genatsvale and Dzveli Kalaki Café Kala, Acid Bar, Café Near Opera, 19 and KGB Restaurants Bars Canteens and Meal Delivery Source: National Statistics Office of Georgia, Colliers International 43

44 Wellness Georgian resorts are renowned for their ecologically clean, balneological facilities that draw visitors who come to take advantage of the restorative mineral waters, natural springs, sand and mud. The use of Tbilisi s natural hot springs for their restorative properties dates back to the 10 th century and bathing in the sulphur baths remains an integral part of the culture. The Abanotubani district, in the old part of Tbilisi, provides locals and tourists with hot sulphur facilities, while various public and private baths offer bathing, massage and other treatments for skin and relaxation. Europark and Gino Paradise Tbilisi are most famous destinations offering a wide range of entertainment and leisure possibilities like water sliding complexes and aqua bars. Europark was opened in 2007 in Tbilisi. There are four swimming pools and ten attractions for both adults and children. Pools. A pool with artificial waves, relaxating pool with hydromassage and olimpic pool can be found in Aqua park of Gino Paradice Tbilisi as well as varoius facilities for children. Active Leisure King David Residence The main cities of the country host various popular musical events including the most famous festivals including GEM Fest, Open Air and Jazz Festivals. Starting from 2009, the Caucasus region's biggest musical festival Tbilisi Open Air is organized each year. The festival held outdoor that gathers local and international stars like Deep Purple and Placebo is widely popular in the youth. In recent years, Georgian citizens have turned their time, energy and spending towards living a more healthy and active lifestyle. Sports and outdoor-focused activities are popular and often chosen by Georgians as weekend entertainment. A number of companies offer various hiking tours that are popular with both locals and tourists. Additionally, horseback riding, paraplaning, bungee jumping and paintball facilities can be found in or near the capital. As the country s bar and club scene develops, Georgian nightlife is growing in popularity. Most of the famous venues are located in the capital city. Local and international DJ s, can be found in Georgia s night clubs, the most famous of which include Café-Gallery, Khidi, Bassiani and others. Due to increasing market demand, the fitness club industry continues to expand as companies add new branches and modernize their facilities and equipment. Up to sixty different fitness gyms operate across Georgia, though the vast majority of them are located in Tbilisi. The country s major fitness clubs include Aspria Fitness (with four branches in Tbilisi and a Batumi branch in the pipeline), internationally-known Snap Fitness (with two branches in Tbilisi), Contours and local players including Arena, Club 71 and GYM 1. 44

45 Main Restaurant Locations in Tbilisi Akhmeteli Theatre Sarajishvili Guramishvili Grmagele Didube Gotsiridze Delisi Medical University Nadzaladevi Tsereteli Vazha-Pshavela Technical University Station Square 4 3 Marjanishvili Rustaveli Liberty Square 1 Avlabari Varketili 300 Aragveli Isani Samgori Main streets of the city River Mtkvari 1 2 Shardeni Street, Kote Apkhazi Street Aghmashenebeli Alley, Beliashvili Street Café-bars, foreign cuisine Georgian restaurants 3 Akhvlediani Street, Kiacheli Street 4 Abashidze Street, Paliashvili Street 45

46 Thousands Culture Museums Sector Overview Today, visitors are able to view a vast collection of historical Georgian artifacts housed in more than 200 museums across the country. The Georgia National Museum (GNM) resides within a chain of buildings in Tbilisi as well as in other regions of Georgia and is the country s largest and most visited museum complex. Incorporated into the GNM complex, the Museum of Fine Arts is founded on the basis of The National Gallery and exhibits various historical-ethnographic collections. The Open Air Museum of Ethnography occupies 51 hectares of land and represents fourteen ethnographic zones while displaying more than 8,000 Georgian relics. The annual Art Gene festival, that draws large numbers of both locals and tourists, is held in the Ethnography Museum. A new, multi-functional fine art museum complex will be opened in Tbilisi in 2016, offering temporary exhibition space, conference halls on the first and second floors and a permanent 7,000 m2 exhibition space on the top three floors. Stadiums & Arenas The number of sport facilities being renovated or newlydeveloped in Georgia has risen in recent years due, in large part, to the number of international sport festivals that take place in the country. The Georgian government actively contributes to the development of popular sports and their required infrastructure. From July 2015 the tax on property in sport sector was declined by 1000 times to 0.001%. This rate will be maintained till the year of A majority of the country s main sport facilities are located in Tbilisi. Sector turnover of sport complexes and stadiums amounted to GEL King David Residence 39.6 mln (USD 17.4 mln) 2015, which is 1.5 times higher than the same figure in Georgia s two largest stadiums - the Boris Paichadze Dinamo Arena (55,000 seats) and the Mikheil Meskhi Stadium (27,000 seats) have recently undergone renovations to meet the demand for high-quality sporting venues. The Boris Paichadze Dinamo Arena hosted the UEFA Super Cup in Designed to be compliant with UEFA standards, a new 20,000-seat football stadium complex spanning eight hectares is also scheduled to open in Tbilisi in Tbilisi s recently renovated 10,000-seat Sports Palace is Georgia s main multi-functional facility. Its arena easily adjusts to accommodate both sporting tournaments and various kinds of cultural events, including exhibitions and concerts. The 3,300-seat New Sports Palace, in Tbilisi s Saburtalo district, was opened to host the European Youth Olympic Festival in It is equipped with all the infrastructure necessary to meet current standards and it remains under state ownership. While used by local athletes, the New Sports Palace also hosts international tournaments, such as the Judo Grand Prix that took place in A new tennis complex in Mziuri Park, Tbilisi was opened in The USD 2.9 complex offers players nine outdoor and two indoor courts and hosts both local and international events. Number of museum visitors in Georgia 1,600 1,400 1,200 1, Existing Stadiums in Georgia Name Location Capacity Sport Boris Paichadze Tbilisi Dinamo Arena Tbilisi 55,000 Mikheil Meskhi Stadium Tbilisi 27,000 Tbilisi Sports Palace Tbilisi 10,000 1,101 1,066 Football, Rugby Football, Rugby Basketball, Judo Shevardeni Tbilisi 3,000 Rugby Source: Developers, Operators/Property Managers, Colliers International 1, Source: National Statistics Office of Georgia, Colliers International Turnover of theatres and museums in Georgia mln GEL ( ) Source: National Statistics Office of Georgia, Colliers International Turnover of sport complex, stadiums and sport clubs in Georgia mln GEL ( ) Source: National Statistics Office of Georgia, Colliers International 46

47 Theatres & Concert Halls Georgia s performance art roots and traditions date back centuries. Today, forty-nine professional theatres (with a total capacity of 13,700 seats) perform almost 5,000 performances across Georgia every year. Of these theatres, 24 are located in Tbilisi. The Rustaveli and Kote Marjanishvili State Drama Theatres are Georgia s most prominent theatres, with 1,269 and 674 seats, respectively. Located in the capital city, the Tumanishvili Film Actors Theatre and Rezo Gabriadze Marionette Theatre, along with Batumi s Art & Music Centre and the Opera House in Kutaisi, are also among Georgia s most significant theatres. With 2,251 seats, the Tbilisi Concert Hall is the country s largest venue. It hosts a wide variety of cultural events and performances, from local festivals to mega concerts starring international performers. The grand opening of the renovated Tbilisi Opera and Ballet House took place in January This ambitious project took more than five years to complete at a cost of $40 million. Founded in 1917, the Ivane Saradjishvili Tbilisi State Conservatoire is a highly acclaimed institution for musical arts education and a major centre of scientific research in music. Renovated to modern standards, it also hosts important musical events within three halls capable of seating a total of 780 people. The Djansug Kakhidze Tbilisi Centre for Music & Culture is a leading concert organization for symphonic music, promoting classical music in the country and presenting it abroad. Major sporting events and international visitors in Georgia Event Number of visitors UEFA Super Cup 30,000 European Youth Olympic Festival 20,000 European Weightlifting Championship 5,000 IRB Tbilisi Cup 5,000 Basketball Tournament 5,000 Judo Gran Prix 4,000 Source: Ministry of Sport and Youth Affairs of Georgia, Colliers International Number of Theatre Visitors in Georgia (thousand person) King David Residence Source: National Statistics Office of Georgia, Colliers International Main existing and upcoming theatres and concert halls in Georgia Name Location Number of stages Capacity Rustaveli Theatre Tbilisi 3 1,230 Marjanishvili Theatre Tbilisi Concert Hall Opera and Ballet House Tbilisi Tbilisi 1 2,251 Tbilisi 1 1,056 Source: Developers, Operators/Property Managers, Colliers International 47

48 Conclusions & Outlook Retail Market Tbilisi has the largest stock of modern shopping centre floorspace, with 231,000 m2 in 2015 among Georgian cities. This is expected to increase to 388,000 m2 by 2017 with three new shopping centres in the pipeline. Vacancy rates in high streets fell to just 7% in Shopping centre vacancy rates have also fallen but, on average, remain relatively high at 17%. Vacancy rates in new centres are much lower due to aggressive marketing campaigns. Despite the addition on modern shopping centres, 40% of Tbilisi s retail stock remains in bazaars and open markets. The market is continuing to evolve and while the space given over to bazaars is reducing, it remains a challenge to convert traditional shopper habits to modern and, perhaps for many, less accessible facilities. Office Market Tbilisi contributes the majority of both leasable and owneroccupied office space supply in the country. The city has no specific business district and modern leasable office space (144,380 m2 in total) is distributed between the various business hubs located in each of Tbilisi s primary districts. There is twice as much older, lower-class office stock in the city, which is spread throughout Tbilisi. The trend is for developers to add more high class office space to the market, although some of the city s business centers are struggling to keep pace with international standards. There are no business centers outside of Tbilisi and the supply of modern stock is limited in regional cities. Though Tbilisi s leasable modern office stock supply increased by only 6% in 2015 compared to the previous year, the pipeline of projects (including the two largest projects, King David Business Center and Axis Towers) will increase the existing supply by 41% between now and the end of Hotel Market Tbilisi is the most profitable location for hotels and this has been recognized by a wide range of developer and operators. Over 20 new hotel developments are scheduled for completion between 2016 and 2018, many for international brands. If all schemes are developed, over 50 per cent of them are in the 5 Star category, bringing more than 2,000 quality rooms to the market. In reality, a number of these developments are likely to be delayed or dropped completely. There is, however, going to be more competition, which will inevitably place existing operators under pressure and potentially result in the unwanted combination of reduced room rates (ADR) and lower occupancy rates at the premium end of the market. Residential Market Tbilisi has a housing stock of 360,000 units. There is a considerable development pipeline for the period 2016 to 2018 that promises to deliver over 500 projects and just under 30,000 new units. Encouragingly, 37% of these units have already been sold. Selling prices of new build flats vary between USD 400 p/m2 to USD 3,000 p/m2, but average prices in both the prime and secondary market have declined slightly between 2014 and With the amount of new stock in the development pipeline, significant growth in selling prices is not expected. The development land market has shown some volatility, with land transactions down 27% y-on-y in 2015, resulting in average land prices falling by 4%. However, this reduced rate is still 22% higher than 2013 prices. Warehouse Market Of all sectors in the Georgian real estate market, the industrial market is the least developed. With the exception of Gebrüder Weiss s facility in Tbilisi, modern A-class space is non-existent and developer-led projects have yet to begin. The market is further characterized by a very high share of (local) owner-occupied stock and a limited amount of international occupiers. International and local brands occupy a majority of Tbilisi s A and B class warehouse space. It should be noted that the relatively low level of exports is one of the contributing factors impacting the growth of the warehouse market. Entertainment Market Today, the rise of county s leisure and recreation options is occurring primarily in Tbilisi. A variety of entertainment options, including extreme land-based activities, can be found in the Tbilisi, but the services supplied by the small number of operators now in business can hardly be compared to the wide range of options found in other famous European tourist spots. Several sectors, such as gambling/gaming, the cultural art, and the sporting industry have benefited from governmental support in terms of investment, lenient taxes, and broad deregulation. Private investment in the casino sector recently increased as the number of higher-end gambling facilities grew and international gambling festivals have strengthened the country s image as a gaming hub. The sports, culture and cinema sectors made particularly large steps in Tbilisi is becoming famous as a host city for international sporting festivals and large-scale cultural events. As for the cinema industry, it has changed from a poorly developed market to one that shows great promise. 48

49 APPENDIX REAL ESTATE REGISTRATION, CONSTRUCTION PERMIT AND INCENTIVES

50 Property Registration In Georgia, the National Agency of Public Registry is the state institution responsible for the registration of property, registering both transfers between private entities and state-owned properties. In case of private transfer, the purchaser has two options: Via a notary - contract drafting and legalization by the notary and subsequent registration. The notary assumes responsibility for the content of the draft and its legalization. The presence of a translator and his signature on the bilingual purchase document is required and the translator assumes responsibility for the authenticity of texts. Time for preparation of the bilingual document and its legalization varies depending on the notary Via the National Agency of Public Registry - direct submission of the purchase contract for legalization and registration. In this case, the bilingual purchase document is to be drafted directly by both parties or by their authorized representatives. The Agency s representative certifies the signatures and may provide recommendations if the document is not accurately drafted, but does not carry any responsibility for the validity or its content. The National Agency of Public Registry is represented in: a) Public Services Halls (Tbilisi, Gori, Kutaisi, Batumi, Ozurgeti, Mestia, Zugdidi, Rustavi, Marneuli, Gurjaani, Telavi, Kvareli and Akhaltsikhe) and b) regional departments of the National Agency of Public Registry (located in cities throughout the country). Construction Permits For the purposes of construction, buildings are divided into five types: 1 st class buildings - no construction permit is required; 2 nd class buildings - buildings with low risk factors; 3 rd class buildings - buildings with medium risk factors; 4 th class buildings - buildings with high risk factors; 5 th class buildings - buildings with very high risk factors. The permit issuance process is divided into three stages: Stage I - Statement of urban construction terms; Stage II - Approval of architectural-construction project; Stage III - Issuance of Construction Permit; State organs responsible for the issuance of permits: Local self-governmental (municipal) organs - for II, III class buildings within the municipal territory (at stages I and II) except from Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi. Local self-governmental (municipal) organs - for IV class buildings (at stages I and II) with the participation of corresponding state organs Local self-governmental (municipal) organs - for II, III and IV class buildings (at III stage) independently (including Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi) Tbilisi City Hall - for II, III and IV class buildings in Tbilisi Municipality (at all stages) independently Corresponding local organs of Adjara Autonomous Republic and Abkhazia Autonomous Republic - for II, III and IV class (at all stages) on the territory of the Autonomous Republics Local self-governmental (municipal) organs - II, III and IV class buildings (at stages I and II) for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi - with the participation of the Ministry of Economy and Sustainable Development. Ministry of Economy and Sustainable Development - for V class buildings Ordinary terms per each stage (working days): Stage I 12 days for II and III class buildings 15 days for all IV class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki- Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi (excluding V class buildings), also for all buildings that require ecological expertise 30 days for V class buildings In the case the property being purchased from the state/municipality (privatization, auction or other form of purchase) the documents should be submitted directly to the Agency. Times and fees for registration 4 working days upon the submitting of documents (ordinary time) - the day of submission of documents is not counted - GEL 50 (registration fee per one property) + GEL 5 for certifying the document (GEL 5 per each document subject to submission) 1 working day - GEL GEL 5 for certifying the document On the day of submitting the agreement in the Agency - GEL GEL 5 Times and fees for renewal of public registry information Online 1 working day - GEL 10 (USD 4.4) Same working day - GEL 40 (USD 17.6) Justice House 1 working day - GEL 15 (USD 6.6) Same working day - GEL 50 (USD 22) 18 days for II and III class buildings Stage II 20 days for all IV class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki- Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi (excluding V class buildings), also for all buildings that require ecological expertise and for V class buildings 5 days for II, III and IV class buildings 10 days for V class buildings Exceptions: Stage III The special terms for permission process: Construction permits concerning: III class buildings with an intensity coefficient up to 1,500 p/m 2 and for buildings with a height of up to the 14 meters that will be located on the territories where urbanization regulatory plans do not exist and are organized according to land use or which are organized according to the perspective development regulatory plans on the territory of Tbilisi - the permission process may involve II and III stages only The simplified permit procedure may involve just two stages and the permit is issued in the second stage. The terms for the simplified procedure are as follows: Stage I - 12 days for II and III class buildings 15 days for all IV and V class buildings, for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi, also for all buildings that require ecological expertise. Permission fees Stage II (issue of permit) - 20 days for all classes The municipal organs determine the permission fees though the maximum limits are envisaged by the Law: For all territory of Georgia - 1 (one) GEL (USD 0.4) p/m 2 of construction territory For construction of industrial buildings - 5 (five) GEL (USD 2.2) p/m 2 of construction territory Exceptions: Investors seeking the construction of hotels in free tourism zones and investing not less than 1,000,000 (one million) GEL (USD 440,494) per each hotel are exempted from paying the permission fee. 50

51 Government incentives Host in Georgia From 2016 the Government of Georgia provides financial and technical assistance to entrepreneurs involved in hotel industry in all regions of Georgia except Tbilisi and Batumi cities Hotel Development/Expansion 10% Interest Rate Co-financing for the first 2 years loans in GEL 8% Interest Rate Co-financing for the first 2 years loans in USD or EURO Minimum loan volume GEL 500,000 (or equivalent in USD/EURO) Maximum loan volume GEL 1,000,000 (or equivalent in USD/EURO) Partial collateral guarantee for the first 4 years, 50% of the total loan, with upper limit of GEL 500,000 (or equivalent in USD/EURO) Co-financing of consulting services Development of International Brand Hotels Co-financing of Franchising/Management agreements for the first 2 years (up to GEL 300,000 annually) 10% Interest Rate Co-financing for the first 2 years loans in GEL 8% Interest Rate Co-financing for the first 2 years loans in USD or EURO Minimum loan volume GEL 500,000 (or equivalent in USD/EURO) Maximum loan volume GEL 5,000,000 (or equivalent in USD/EURO) Partial collateral guarantee for the first 4 years, 50% of the total loan, with upper limit of GEL 2,500,000 (or equivalent in USD/EURO) Co-financing of consulting services Development of International Brand Hotels Co-financing of Franchising/Management agreements for the first 2 years (up to GEL 300,000 annually) Co-financing of consulting services Amendment in the Tax Code of Georgia Article Income taxation of individual, owner or partly owner of hotel assets by tourism venture Based on a relevant agreement, between tourism venture and individuals, remuneration is charged with 5%. According to the first part of this article, the income received by the individual, which is taxed at source, will not be included in the gross income of recipient, and will not be taxed. In 2015, the Government of Georgia adopted several amendments in the Law of Free Touristic Zones Development: Article 2. The scope of law The coordinates of Free Tourism Zones can be determined only in the area, where the touristic infrastructure in neighborhood area is not developed, but has the potential for tourism development. ( N4599) Article 5. Preferential conditions An investor shall be exempted from property and profit tax provided for by the Tax Code of Georgia with regard to the implementation of activities compatible with the activities of a hotel in a free tourism zone, from the date of putting the hotel into operation up to the period defined by the Tax Code of Georgia, provided that the conditions laid down by this Law are satisfied; Article 6. The arrangements to be implemented by the government The Government of Georgia, in accordance with the Georgian legislation, will provide: a) Development and regulation of existing infrastructure (gas, water, sewerage, electricity) and if necessary construction of new infrastructure; b) Construction / rehabilitation of the access roads to the hotel; c) Refurbishment and planting of the land plot on the hotel territory within reasonable limits; d) Considered under this law, assignment of a special status and a simplified procedure of issuing construction permits to the hotel regulated by the Georgian legislation. 51

52 APPENDIX PRIMARY INFORMATION SOURCES AND DATA USED FOR THE STUDY 52

53 Primary Information Sources In the process of preparing the research, we were guided by the information provided by property managers, owners, developers, governmental institutions (The National Agency of Public Registry, the National Statistics Office of Georgia, the National Bank of Georgia, the Ministry of Economy and Sustainable Development of Georgia, City Halls). Information from Colliers International EMEA office was used for benchmarking. The following web-portals is also used: Definition and Assumptions DCFTA: Deep and Comprehensive Free Trade Agreement EMEA: Europe, Middle East and Africa FDI: Foreign Direct Investment IMF: International Monetary Fund GDP: Gross Domestic Product GEL: Georgian Lari GLA: Gross leasable area m 2 : Square metre USD: The United States Dollar VAT: Value Added Tax y-o-y: year over year RHS: Right Hand Side LHS: Left Hand Side Retail Modern Shopping Centres: The term used in this report - Modern Shopping Centres coincides the term Traditional Shopping Centre, defined by the International Council of Shopping Centre. Gross Leasable Area of Bazaars: Gross Leasable Area of bazaars is calculated using GIS program by measuring floorspace on cadastral maps and deducting 10%. Gross Leasable Area of Street Retail: Gross Leasable Area of street retail is calculated using GIS program by measuring ground floor space on cadastral map and deducting 60%. Gross Leasable Area of Shopping Centres: Gross Leasable Area of shopping centres is calculated based on information provided by property managers, developers and owners, as well as by the National Agency of Public Registry. Shopping centre Karvasla comprises only 0 and 1 levels of the property. Retail floorspace by categories: Retail floorspace by categories was calculated based on the information obtained from the National Agency of Public Registry. In those cases, where the mentioned information was not available, we were guided by the information provided by GREMIC (Georgian Real Estate and Investments Management Company). The Weighted Average Rent: Are calculated based on registered lease transactions in the National Agency of Public Registry, unless otherwise indicated, and weighted by the space. All rents are calculated in USD /m 2 per month net of VAT and service charges. Turnover based rents are calculated according to the information provided by retailers and/or property managers. Vacancy rate: is calculated as ratio of total vacant stock to total stock within the specified area. Prime Rent: Prime Headline Rent represents the top open-market tier of rent that could be expected to be paid by an in-line tenant in a shopping centre for a unit of standard size commensurate with demand (typically 250 m²), of the highest quality and specification (Grade A) in the best shopping centre in the market at the survey date. Prime Headline Rent should reflect the level at which relevant transactions are being completed in the market at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions, but the same criteria on building size and specification will still apply. The rent should be quoted excluding service charges and taxes, and should not reflect tenant incentives. Prime Yield: The yield an investor is prepared to pay to buy a Grade A building, fully-let to high quality tenants at an open market rental value in a prime shopping centre. Lease terms should be commensurate with the market e.g. typically 5 years +. The size of the building should also be commensurate with the local market. Gross Yield is considered in calculations. Gross Yeld = First years' passing rent (i.e. net effective rent) / Property Price (irrespective of transaction costs). High Streets in Tbilisi: Pekini Avenue, Rustaveli Avenue, Chavchavadze Avenue and Aghmashenebeli Avenue with Marjanishvili Street are considered as high streets. Secondary Streets in Tbilisi: Paliashvili Street, Abashidze Street, Kostava Street, Vazha-Pshavela Avenue, Kazbegi Avenue, Tsereteli Avenue, Tamar Mephe Street, Tsabadze Street, Leselidze Street, Pushkini Street, surrounding of Akhmeteli Metro Station and surrounding of Varketili Metro Station are considered as secondary streets. Office Rent Prices: Are calculated based on registered lease transactions in the National Agency of Public Registry. all rents are calculated in USD /m 2 per month net of VAT and service charges. Vacancy rate: Vacancy rate is calculated as ratio of total vacant stock to total stock within the specified area. Vacant Stock is calculated as total currently vacant within the specified area. Prime Yield: When considering the yield to be quoted, the Prime CBD yield should reflect what an investor would be prepared to pay for a fully-let, prime rented asset within the CBD area of the city at the time of reporting. It should be quoted in relation to recent comparable transactions, where possible/available, but should not be skewed by one-off transactions. Nor should it simply be an average of recent prime CBD transactions. Gross Yield is considered in calculations. Gross Yield = First years' passing rent (i.e. net effective rent) / Property Price (irrespective of transaction costs). Prime Rent: The Prime Headline CBD Rent represents the rent that could be expected for a unit of standard size commensurate with demand (typically 500-1,000 m2 for offices), for space of the highest quality and specification (Grade A) in the CBD area at the survey date. This rent should reflect the level at which relevant transactions are being completed at the time, but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions, but the same criteria on building size and specification will still apply. 53

54 Hotel ADR (Average Daily Rate): Calculated by dividing revenues by the number of rooms sold. Rack Rate: The standard price of a hotel room before any discounting has taken place and is often a statement of position in the market. RevPAR (Revenue per Available Room (or Room Yield)): Calculated by dividing rooms revenue by rooms available for sale in the same period. Room Occupancy: Calculated by dividing the number of room nights sold during a period by the total number of rooms available in the same period. Negotiation adjustment rate: Rack hotel room rates are higher than average daily rates. This means that many rates are individually suggested to customers. The amount of discount differs according to the hotel type and management. It was determined that the adjusted rate for local hotels in Tbilisi was 15%, while the other cities and destinations was adjusted by 20%. Our determination of ADR takes into account the above mentioned discounts. Residential Large-sized developers: Large-sized developers includes companies that have large scale construction projects (over 50,000 m2) and also are involved renovation, refurbishment and fit-out. Middle-sized developers: Middle-sized developers are actively implementing middle scaled projects (from 10,000-50,000 m2). Small-sized developers: Small-sized developers are represented by developers of condominiums, limited liability companies and houses etc., whose total construction area is under 10,000 m2. Distressed developers: distressed developers are those companies, who have encountered problems during development and have consequently suspended construction. Premium segment: The segmentation was based on selling price, the average varies around USD 1,200 and higher. Medium segment: The segmentation was based on selling price, the average varies around USD 800 to USD 1,200. Low segment: The segmentation was based on selling price, the average varies around USD 400 to USD 800. Primary Market: Primary Market is defined as sold apartments by development companies. Secondary Market: Secondary Market is defined as sold apartments by individuals. Central Districts: In this category are represented Vake, Saburtalo, Mtatsminda, Vera and Sololaki. Middle Class Districts: Nutsubidze plateau, Avlabari, Ortachala, Krtsanisi, Chughureti, Didube, Dighomi Massive, Nadzaladevi and Didi Dighomi. Suburbs: Temka, Muxiani, Gldani, Avchala, Isani, Samgori, Varketili, Vazisubani and Ponichala. Future Projects: For the market study it was analyzed development projects above 1,000 m 2. Warehouse Rent Prices: Are calculated based on the data provided by warehouse developers and owners, property managers, tenants, National Agency of Public Registry etc. all rents are calculated in USD per month net of VAT and service charges. Rents for dry storages are calculated per m 2 except Poti, where it is calculated per ton. All rents for cold warehouses are calculated per ton. Prime Yield: The yield an investor is prepared to pay to buy a modern warehouse facility, fully-let to high quality tenants at an open market rental value in a prime location. Lease terms should be commensurate with the market e.g. typically 5yrs +. The size of the building should also be commensurate with the local market. Gross Yield is considered in calculations. Gross Yield = First years' passing rent (i.e. net effective rent) / Property Price (irrespective of transaction costs) Prime Rent: The Prime Logistics & Distribution Headline Rent represents the top open-market tier of rent that could be expected for a unit of standard size commensurate with demand for units over 3,000 m2 or greater, of the highest quality and specification (Grade A) in the best location in the market at the survey date. Warehouse Units would typically include up to 10% office space, the balance being general warehousing/logistics/distribution space with at least 6 to 12 metre ceiling heights. All loading is dock-height. Prime Headline Rent should reflect the level at which relevant transactions are being completed in the market at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions, but the same criteria on building size and specification will still apply. The figure should exclude service charges and taxes, and not reflect tenant incentives. 54

55 Disclaimer This document has been prepared by Colliers International for general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s) All rights reserved. 55

56 Project Team Mark Charlton Head of Research & Forecasting United Kingdom Zurab Kananashvili Head of Valuation & Advisory Georgia Nikoloz Kevkhishvili MRICS Manager Valuation & Advisory Georgia Ramaz Sharabidze Team Leader Research & Forecasting Georgia Mariam Benashvili Research Analyst Georgia Eliso Burkishvili Junior Research Analyst Georgia 56

57 COLLIERS GLOBAL STATS AT A GLANCE 554 OFFICES 66 COUNTRIES 6 CONTINENTS 16,000 EMPLOYEES $2.5 BN REVENUE $112 BN TOTAL TRANSACTION VALUE 185m SQUARE METERS MANAGED >80,000 LEASE/SALE TRANSACTIONS United States 153 Canada 31 Latin America 24 Asia-Pacific 231 EMEA 112

58 TEAM GEORGIA AT A GLANCE 22 PROFESSIONALS 53 PROJECTS COMPLETED $1.5 BILLION SALES GENERATED 9,500 VALUATIONS CONDUCTED 15 YEARS IN INDUSTRY 2.7 MILLION SQUARE METERS DEVELOPED $310 MILLION FUNDS RAISED 150 MARKET & ADVISORY REPORTS We cover 10 Regional Centers and 59 Municipalites in Georgia BLACK SEA TURKEY RUSSIA ARMENIA AZERBAIJAN CONTACT DETAILS DIR FAX /39 Kostava Street Grato Business Centre 0179 Tbilisi Georgia