1.2% 3.5% 13.2% Inflation May 2017 y-o-y. Retail Sales, May 2017 y-o-y

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1 City Report Q2 2017

2 1.2% 3.5% 13.2% GDP Growth Q y-o-y Inflation May 2017 y-o-y Unemployment rate Q1 2017, Belgrade % 6.2% Net Salary May 2017, Belgrade Retail Sales, May 2017 y-o-y Industrial production, May 2017 y-o-y Economy According to the Serbian Statistical Office, GDP noted growth of 1.2% in the first quarter of 2017 when compared to the same period of Furthermore, according to Oxford Economics, the strong 2016 export and investment upturn puts the economy on track for a 3% growth in the period from 2018 to 2020, as capital inflows finance the external deficit and the IMF and EU support allows expansionary budgets. Although risks are balanced, there could be delays to the recovery in growth if high unemployment, slow growth in real incomes and difficult public sector reforms drain the government s popularity. Despite this caution, growth is forecast to climb slightly to about 3% a year between 2018 and 2020, with the sustained recovery driven by firm political direction, external support and conditions, EU accession prospects and sustained trade recovery. April s presidential vote strengthens the ruling party, whose focus on reform to meet EU accession criteria will boost domestic investment and maintain the regional lead in FDI. The country remains well placed to accelerate its progress towards EU accession while retaining trade and investment links with Russia, other Balkan states and China. Medium term growth will be supported by the steady progress towards EU membership and the precautionary IMF standby funding that insulates the deficits against FDI downturn.

3 Prime Yields 8.00% 8.50% 9.75% Shopping Centre Office Industrial The real estate market potential remains stable throughout the country and investors continue to look for investment opportunities. The appeal of Serbia s relatively unexplored market has been increasing due to positive economic movements and a favourable business environment. Even though the demand for investment opportunities is high, activity remained low during the second quarter. One of the most notable and recent transactions includes the sale of the Big Fashion shopping centre, while under development. The recently completed shopping centre, initially developed by Plaza Centres, was acquired by Big CEE, an Israeli company. The overall price will be determined after 12 months of operation. Recent Investment Transaction Sector Type Property City Seller Buyer Retail Shopping centre Big Fashion Belgrade Plaza Centres BIG CEE

4 Office stock in Belgrade (sq m) 800, , , , , , , , Q Q Class A Stock Class B Stock Recent completions The second quarter witnessed no new completions on the market although there are several projects in the final stages of development Property Submarket Size (sq m) Sirius offices phase 1 New Belgrade 14,500 GTC Fortyone phase 3 New Belgrade 10,000 Navigator Business centre New Belgrade 14,600 The beginning of the third quarter was marked by the completion of the first phase of the Sirius Offices project, which added 14,500 sq m of office space to the market Construction activity remains high and more Class A office projects are expected to be completed by the end of the year Market activity was driven by net take-up, underpinned by new leases and relocations The most active sector was IT, followed by consumer goods

5 Vacancy rate based on office building class 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Q Q Q Q Q Q Q Q Q Total vacancy rate A Class vacancy rate B Class vacancy rate Future office projects Prime rental levels ( /sq m/month) Property Status Size (sq m) Sirius Offices 2nd phase Planned 10,000 N House Under construction 10, Usce Tower 2 Planned 22,000 Green Heart Planned 46,000 Airport City V Planned 75,000

6 Prime shopping centre stock in Belgrade (sq m) 180, , , , ,000 80,000 60,000 40,000 20, H Prime Shopping centre density in Belgrade 97 sq m Per 1,000 inhabitants Big Fashion shopping centre delivered in Q2 2017, totalling over 32,000 sq m of GLA There are several shopping centres in the capital which are planned or under construction, scheduled for completion over the next three years The construction works on Rajićeva shopping centre are progressing with completion due very shortly The first IKEA store opened The development of retail parks has continued throughout the country

7 Future retail schemes in Belgrade Property Format Size (sq m) Completion year Rajićeva Shopping centre 15, Ada Mall Shopping centre 34, Big Fashion Vidikovac Shopping centre 70, BW Galerija Shopping centre 93, Capitol Park Rakovica Retail park 21, Demand Rental levels ( /sq m/month) The opening of new shopping centres has prompted new brands to enter the market Existing retailers continue their market expansion plans Home Centre has changed its name to Home Plus and has launched a new retail concept - Mini Home Market entrants Location City Brand Big Fashion Belgrade Knez Mihajlova Belgrade WYCON Reserved, Tezenis, Funky Buddha Shopping centres High street

8 Recent completions Sheme Type Size (sq m) Location Univerexport Distribution centre 30,000 Novi Sad Phoenix Distribution centre 7,000 Šimanovci Ametek Light industrial 10,000 Subotica Lear Light industrial 29,000 Novi Sad Industrial stock (sq m) 531, ,000 During the second quarter of 2017, development activity relied on the construction of new distribution centres and the expansion of existing production facilities Univerexport has finished its distribution centre in Novi Sad, spread over 30,000 sq m Phoenix group opened a new logistic centre spread over 7,000 sq m in Šimanovci Ametek expanded its operations by opening a new production facility in Subotica, spread over 10,000 sq m Construction activity will remain high with various production facilities and distribution centres being announced Belgrade Greater Belgrade

9 Future projects Project Type Location Size (sq m) Yazaki Light industrial Šabac 30,000 Eyemaxx phase 2 Distribution warehouse Stara Pazova 30,000 Lidl Distribution warehouse/ administrative bldg Nova Pazova 78,500 Industrial Park Belgrade 3 Distribution warehouse Šimanovci 7,200 Quass Light industrial Inđija 5,000 During the second quarter of the year, the market activity was driven mainly by manufacturing and distribution companies Further development of the retail as well as the logistics sector are expected to remain the key drivers of market expansion, which will further support the development of speculative schemes Industrial production index 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0% 90.0% Source: Statistical Office of the Republic of Serbia, 2017 Prime rents ( /sq m/month) Q

10 Contacts Jana Golubović Senior Research Analyst - SEE jana.golubovic@eu.jll.com Andrew Peirson Managing Director - SEE andrew.peirson@eu.jll.com Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.