BI-MONTHLY RESEARCH REPORT

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1 THE BELFAST MARKET Conditions in the Northern Ireland property market remain difficult, particularly now that economic prospects for the region are being revised downwards. Nonetheless, activity levels in the occupier sectors of the market remain encouraging. We continue to see new FDI announcements and a number of existing occupiers are continuing to take advantage of the competitive deals on offer in the current climate, which is stimulating activity. There is considerable lease regearing activity underway, particularly in the office sector of the market. Office lettings signed recently include the letting of 1,400m 2 to Alliance at The Gasworks; the letting of 1,000m 2 to First Source at Oyster Royston House and the letting of 650m 2 to Willis at Centre Point. Prime office rents appear to be now stabilising although rents on older and secondary buildings remain under downward pressure. In the investment market, there is evidence that yields are softening in all sectors, with insitutional demand primarily focussed on a limited pool of prime assets. Retailing remains under significant pressure and there have been further casualties in this sector in recent months including Peacocks, La Senza, Bon Marche, Past Times, Pumpkin Patch and Hawkins Bazaar. Conversely, some new retailers have entered the Belfast market in recent months, with Cath Kidston being the most recent new entrant, having recently opened a store on Arthur Street. In recent weeks, NAMA have sold a 0.27 acre site on Great Victoria Street, which is believed will be developed as a filling station. The Sanmina site in Lisburn has also recently been sold to an industrial occupier. We expect to see more development sites being offered for sale over the course of the coming months, with many of the more remote sites trading at agricultural land prices. The hotels and leisure sector is continuing to perform reasonably well, particularly in Belfast. Planning permission was recently granted for the Bushmills Dunes Golf Resort and Spa close to the Giant s Causeway in Antrim. This facility will include a five star hotel and spa, a golf course, a golf academy and 75 guest suites and lodges. The recent announcement that Royal Portrush will host this Summers Irish Open is a significant boost for the hospitality sector, in a year which is already gearing up for a notable improvement in tourist related activity as a result of the Titanic Centenary celebrations. Investment properties currently being marketed for sale include Lissue Industrial Estate West in Lisburn, which is guiding 2.5 million, reflecting a yield of more than 8%; the Northern Court office building at Gloucester Street in Belfast, which is guiding 1.6 million, reflecting a yield of more than 10% and Brownstown Business Centre in Portadown, which is guiding 850,000. For further information contact: Brian Lavery in our Belfast Office at brian.lavery@cbre.com THE OFFICE MARKET Having achieved an impressive level of take-up of 162,500m 2 in 2011, there has been no sign of a let-up in demand or activity in the Dublin office market in the first two months of The office sector is continuing to perform well with an encouraging level of new and unfulfilled requirements for accommodation in the capital. Occupiers including the Central Bank, BNY Mellon, Capita, Goodbody Stockbrokers, Davy, Jazz Pharmaceuticals, AA, Facebook, Wells Fargo and Yelp are currently looking for office accommodation. Outside of Dublin, Paypal have confirmed their decision to lease accommodation in Dundalk while Hewlett Packard has a requirement for 9,290m 2 in Galway. Recent lettings include the letting of 2,962m 2 to Google in Block P at East Point in Dublin 3 and the letting of an additional 3,767m² in Blocks J and K in the same business park to Arvato. In the north suburbs, Mylan have leased 1,996m² in Newenham Court at Northern Cross. In the city centre, Blackrock Asset Management have agreed to sublet 641m² in Grand Mill Quay on Barrow Street in Dublin 4 while BSKYB are in negotiations to lease 3,500m² in Burlington Plaza on Burlington Road. There is now 13,000m 2 of accommodation remaining in this prime office building with suites from 1,200m 2 available. In the south suburbs, the Sentinel Tower in Sandyford has reportedly been CBRE Bi-Monthly Irish Commercial Property Research Report Page 1 of 6

2 sold for approximately 900,000 while 538m² has been let to the RGA Insurance company in Central Park. Prime office rents are now stabilising at approximately 296 per square metre. Most lettings being signed in Dublin at present comprise 10 year lettings with breaks at year 5 although in cases where tenants are willing to forego a break option they are in a position to negotiate a more favourable rental deal. We expect to see continued activity in the office sector over the coming months, fuelled to a large extent by new FDI announcements and opportunistic lease regearing. It remains to be seen what additional accommodation will come on stream as a result of further rationalisation in the banking and insurance sectors. However, it is clear that the overall rate of vacancy in the capital is unlikely to decline to any significant degree despite the underlying level of letting activity being achieved. For further information contact: Willie Dowling Offices Department at willie.dowling@cbre.com; or Paddy Conlon in our GCS /Tenant Rep Department at paddy.conlon@cbre.com THE RETAIL MARKET Although most retailers reported good Christmas trading performance, with retail sales up 2.1% in December 2011 compared to the previous month and up 3% on an annual basis, both the value and volume of retail sales decreased in January 2012 by 3.7%. There is significant variance at a sectoral level, with some sectors of retail suffering to a greater degree than others. In recent weeks, Lingerie chain La Senza went into administration and the retailer BTW, that trades as Tubs and Tiles, Heat Merchants and Brooks in the Irish market went into examinership. On the other hand, fashion retailer Awear was bought by a group of international investors, securing 460 jobs in its 32 Irish stores. In the property sector, there is considerable activity, driven to a large degree by the more attractive rents and concessions on offer in the current climate. Food retailers and discount brands are particularly active. EuroGiant are to open new stores at Clarehall on the Malahide Road in Dublin, in Midleton, Co. Cork and in Westport, Co. Mayo and have a requirement for more stores. Iceland has recently opened a new store at Ashbourne in Co. Meath where Crazy Prices and Emobile have also recently opened. Iceland has also opened a new store in the Showgrounds scheme in Clonmel, Co. Tipperary and in Coolock in Dublin. Discount retailer Poundland has recently opened new Dealz stores in the Golden Island shopping centre in Athlone and on Grand Parade in Cork, having opened outlets in Letterkenny and Killarney recently, bringing their total number of stores in Ireland to eight. Meanwhile, Centra have announced plans to open 20 new stores in Ireland while Tesco Express is looking for new stores around the country. UCI are to open their Odeon branded multiplex cinema at the Point later this month which will drive the restaurant lettings in this location. Boots are to open a new 1,850m 2 store in Blanchardstown Town Centre and there are a number of new retailers interested in taking their existing store in the centre which is encouraging. In the pharmacy sector, Care Pharmacy, who have a number of stores in Northern Ireland, are looking to open between 6 and 10 stores in the Republic while the Unicare chain are looking to roll out their Doc Morris brand in more stores. Tesco has recently submitted a planning application to develop a new two storey retail unit at Liffey Valley Shopping Centre in West Dublin while planning has also recently been sought to add 7,000m 2 in 34 new stores at the Kildare Outlet Village. Although conditions remain very difficult for retailers and are unlikely to improve to any significant degree in the short term, it is encouraging that a number of new brands are actively looking for stores, with Banana Republic being the most recent new entrant to announce plans to open on Dublin s Grafton Street. In addition, Abercrombie and Fitch have now confirmed plans to start fitting out their store in Dublin city centre. There is no doubt that further rationalisation can be expected in the Irish retail market, particularly for retailers who are tied into legacy leases. However, at this juncture, UK retailers, who are now beginning to experience problems in their home market, are probably a higher risk than indigenous retailers who have significantly cut their cost bases following almost four years of austerity. For further information contact: Michael Harrington or Florence Stanley in our Retail Department at michael.harrington@cbre.com or florence.stanley@cbre.com CBRE Bi-Monthly Irish Commercial Property Research Report Page 2 of 6

3 THE INDUSTRIAL MARKET As in the office sector, there is considerable lease restructuring going on in the industrial sector of the market at present with landlords seeking to extend lease terms and tenants on the other hand making efforts to reduce their rental commitments. For the most part, the lettings being signed in the industrial sector of the Irish property market at present comprise relatively short term lettings. However, tenants are often willing to commit to longer leases if significant rental savings can be negotiated. In some cases, industrial tenants are willing to forego break options in exchange for a more attractive base rent. In Dublin, the most significant transaction to complete in this sector recently was the acquisition of a 10 acre site at Profile Park in Dublin to US data centre operator Digital Realty Trust. CBRE are the exclusive agents on this data centre campus development. Outside of Dublin, the most significant industrial letting to sign in recent months is the letting of 10,220m 2 to the National Pen Company at Xerox Technology Park in Dundalk, Co. Louth. Other transactions negotiated recently include the agreement to lease 5,443m 2 in Unit 400 Northwest Business Park in Dublin 15; an agreement to sub-let 4,845m 2 at the former Volkswagen facility at Ballymount, Dublin 24; the long term letting of 3,000m 2 at Unit 7, Westgate in Ballymount, Dublin 24 and the sale of Unit 39 in Fashion City in Ballymount for 650,000. A number of other notable industrial transactions are currently in legals. Despite the economic backdrop, there are an encouraging number of new requirements as well as some expansionary activity which is boosting take-up in this sector. There is a ready availability of industrial accommodation in all districts although there is an emerging scarcity of modern industrial accommodation along key corridors. Indeed, sourcing modern premises with eaves heights of greater than 12 metres in prime locations is proving a challenge for some occupiers. Prime rents are now at approximately 65 per square metre in this sector. We expect this rate will stabilise at between 60 and 65 per square metre over the course of However, the likelihood is that rents on older industrial premises will continue to come under downward pressure for some time yet. For further information contact: Garrett McClean in our Industrial Department at garrett.mcclean@cbre.com THE IRISH INVESTMENT MARKET Following a year in which transactional activity in the investment sector of the Irish market was stymied by proposals to reform rent review provisions in existing business leases, it is encouraging that some assets are now being traded. On Budget day last December the Government announced their decision not to proceed with rent review reform. They also announced a welcome reduction in the rate of stamp duty on commercial property from 6.0% to 2.0% and introduced a capital gains tax waiver on all properties purchased before the end of 2013 (if held for a period of 7 years). A combination of all three measures have restored some confidence in this sector and the stamp duty change had the effect of bringing the IPD index of commercial property values back into positive territory in Q following fifteen consecutive quarters in which Irish commercial property values declined. Two significant office investment assets are now under offer in the Dublin market. One Warrington Place, the headquarters of Bord Gáis is believed to be under offer to Prudential and Riverside II in Dublin Docklands is reportedly under offer to a German fund. Both properties attracted considerable investor interest and will be important benchmarks for pricing in a market that has been starved of meaningful transactional evidence for some time. A number of other interesting investment properties are being marketed at present including a retail unit on Henry Street in Dublin which is let to Skechers on a 15 year lease. This property is guided at 4.95 million, which would equate to a net intial yield of approximately 6.0%. A foodstore let to Aldi in Sandyford in the south suburbs of Dublin, which is let on a 25 year lease with rents linked to CPI, is being offered for sale at an initial yield of 7.25%. Other assets being marketed for sale at present include four office blocks at AIB Bankcentre which are guiding 85 million; two Bank of Ireland bank branches in St Stephen s Green and Arran Quay in Dublin, which are guiding 6.25 million and 1.3 million respectively; a portfolio which includes Bayside Shopping Centre in Coolock, Dublin 5, which is guiding 4.1 million and a scheme of 27 apartments and 3 retail units at Dominic Street in Dublin 1, which is being guided at 3.75 million, reflecting a yield of approximately 9.0%. It is also been reported that CBRE Bi-Monthly Irish Commercial Property Research Report Page 3 of 6

4 Texaco House (a showroom building let to Audi in Ballsbridge, Dublin 4) has been sold for about 4 million. A large number of overseas investors continue to seek out opportunities in the Irish market, particularly now that the Government have confirmed that they will not be proceeding with the implementation of retrospective legislation on upward only rent reviews. However, ironically, there is a lack of prime product to satisfy the volume of international demand and it remains to be seen what volume of assets come to the market over the coming months. We believe that a number of entities are considering bringing Irish loan portfolios to the market. As yet, there is no transactional evidence on pricing of residential investment portfolios although we understand that the Alliance building in Dublin 4 is now under offer. For further information contact: Sean O Brien or Colm Luddy in our Capital Markets Department at sean.obrien@cbre.com or colm.luddy@cbre.com THE UK INVESTMENT MARKET Investment in UK property hit 32.5 billion in 2011, equating to more than a third of the entire investment spend in the EMEA region in the 12 month period. However, the impact of a weaker domestic economy coupled with wider fears about prospects for the Eurozone is now having an impact on sentiment and performance prospects. Although total returns reached an impressive 8.0% in 2011, UK commercial property delivered a total return of only 0.4% in January its lowest level since June According to IPD, UK capital values declined by 0.2% in January, the third consecutive month in which values declined following more than two entire years of positive monthly returns. Prime yields in Central London remain stable and record prices continue to be achieved, particularly in the retail sector. Indeed, the record for the most expensive retail rent in the UK was recently set following a letting on Bond Street to Italian shoe retailer Salvatore Ferragamo, which equated to a Zone A of 1,000 per square foot. However, a number of sectors are now beginning to see yields weaken slightly in light of a more negative view on economic and rental growth prospects, with regional markets most susceptible. In the City, the Malaysian pension fund PNB has been very active. Having acquired Milton & Shire House, Linklaters HQ buildig for 344 million at a yield of 5.48%, they recently went under offer to buy the Woolgate Exchange Building in the City of London. They have reportedly agreed to pay 270 million for the asset which was formerly owned by Irish investor D2. This price reflects a yield of approximately 5.7%. They are also rumoured to be acquiring part of the 1 billion Kanam city portfolio although this has not been confirmed. Other recent UK disposals by Irish investors include the off-market sale of the Louis Vuitton store on Bond Street in London for a record price of approximately 350 million; the sale of an office building at Bartholomew Lane in London for approximately 90 million; the sale of Oxford Street in London for 53.5 million, reflecting a yield of 4.5%; the sale of a prime retail investment in Sheffield for approxiamtely 22 million, reflecting a yield of approximately 6.0% and the sale of 1-3 Royal Exchange in London City for 14.3 million, reflecting a yield of 5.0%. Battersea Power Station, which went into receivership recently, is expected to be offered for sale over the coming months and NAMA are reportedly in negotiations to sell an Irish borrowers loan portfolio of 38 UK properties. Following the sale by Bank of Ireland of a UK loan portfolio to Kennedy Wilson towards the end of last year, AIB are now reportedly considering selling a portfolio of 800 million of property loans in the UK. It appears that a period of weaker performance is now in prospect in the UK investment market. However, the prime end of the London market, which has accounted for more than 40% of capital flows from outside Europe since 2008, is expected to remain largely insulated, with a weight of international capital continuing to seek investment opportuntiies in the capital. For further information contact: Caroline McCarthy in our Capital Markets Department at caroline.mccarthy@cbre.com THE DEVELOPMENT LAND MARKET There has been a notable increase in the volume of development sites being offered for sale in recent months. To date, most of the sites that have been brought to the market in Dublin have been relatively small. Encouragingly, there is appetite from cash buyers for a lot of these properties (particularly for small infill development sites in key locations) and a number of sales have been achieved. Recent land sales have included the sale of the 1.14 acre former Sunday World site in Terenure, Dublin 6W, which had been quoting 5 million; the sale of a site on Eglington Road in Donnybrook in Dublin 4 for a price in the CBRE Bi-Monthly Irish Commercial Property Research Report Page 4 of 6

5 region of 1.75 million; the sale of the former Crawford s Motors site in Dun Laoghaire, for approximately 765,000; the sale of the 0.3 acre former Classic Cinema site in Harold s Cross in Dublin 6W for approximately 600,000 and the sale of a 3 acre site in Donabate Village for approximately 350,000. A number of other land sales are pending the exchange of unconditional contracts. Some of the most significant agricultural land sales concluded in recent months include the sale of a 275 acre dairy farm in Cork for in the region of 4.7 million; the sale of 270 acres at Nurney in Co. Kildare for 2.64 million; the sale on the instructions of a receiver of 125 acres in Cork for between 3 million and 4 million and the sale of 49 acres at Enfield, Co. Meath for 655,000 or 13,200 per acre. Sites that are currently being marketed include a 2.2 acre site in Greystones, Co. Wicklow, which is guiding 4 million; an 11.8 acre residential zoned site between Swords and Dublin Airport, which is guiding 3.5 million; the former Flanagan s Furniture Showroom on a site of 0.73 acres in Mount Merrion in Dublin, which is guiding 3 million; a 2 acre site at The Park retail park in Carrickmines, Dublin 18, which is guiding 1.5 million and a 0.67 acre site at Newtownpark Avenue in Blackrock, Dublin, which is guiding 700,000. The former Gateway Site in Sandyford, which comprises approximately 5 acres and is currently producing a rent roll of 175,000, has also been brought to the market, quoting a price of 3.5 million. We expect to see a notable increase in the volume of sites being offered for sale over the course of the coming months, buoyed to some extent by demand from cash purchasers who are willing to engage if pricing is realistic. Interestingly, the National Transport Authority (NTA) are currently seeking tenders for consultants to prepare a report on planning and development of high-density schemes in the Greater Dublin Area, in light of the low levels of development at present and the current preference for lower density development. For further information contact: Wesley Rothwell in our Development Department at wesley.rothwell@cbre.com THE HOTELS & LICENSED MARKET The Dublin hotel market received a welcome boost in recent days with the announcement of the sale of the iconic Morrison Hotel for 22 million. The Morrison was sold to a private fund controlled by Ms Elena Baturina, a high-net-worth Russian investor who has a number of hotel interests in Europe including the Martinez Hotel Group which operates hotels in Kitzbuhel, Austria; Karlsbad in the Czech Republic and Peterof in Russia. Over 80 parties expressed strong interest in this well-known Dublin hotel and CBRE Hotels received a number of competitive cash bids from a range of international buyers, demonstrating the weight of demand for prime Dublin hotels. Following three years of limited transactional activity in the Irish hotel property sector, there is strong evidence now of keen demand from cash purchasers for prime 3, 4 and 5 star Dublin hotel properties that are competitively priced. Following the sale last year of the Four Seasons Dublin, a deal was completed just before Christmas on the 169 bed part-complete Grand Canal Hotel in Dublin 4. This property, which included 84 apartments and 5 retail units was also purchased by an overseas investor for a reported 30 million. We expect the Fota Island Resort near Cork city to be formally launched for sale over the coming weeks. This property should prove to be a good test of the market for hotels and resorts outside of the capital city. It is hoped that the strong interest being shown in Dublin hotel opportunities in recent times will encourage holders of hotel assets in the capital, to bring hotels to the market to satisfy the obvious demand. The international interest in Dublin is in response to a notable improvement in hotel performance in Dublin over the last 12 months with positive growth in both occupancy and RevPar measures year-on-year. Indeed, RevPar has improved for 17 consecutive months in Dublin, according to STR. Performance was undoubtedly boosted by the fact that overseas visitor numbers to Ireland were up by 7% in 2011 to 7.4 million - the first increase in visitor numbers to the country since The Burlington Hotel in Dublin 4, the former Ormond Hotel on Ormond Quay in Dublin along with Parknasilla in Kerry and Cork International Hotel all went into receivership in recent weeks bringing the total number of hotels in receivership around the country to more than 70. In other news in this sector, Jacobs Inn hostel in Dublin city centre has now re-opened under new management having gone into liquidation earlier in the year and Isaacs Hostel is due to re-open in the coming weeks. Through our recent experience with the Morrison, the Four Seasons and the Pearse Hotel Dublin (which is also attracting strong international interest) we are aware of a number of international buyers who have an appetite to purchase hotel portfolios. However, specialist knowledge of the hotel sector is CBRE Bi-Monthly Irish Commercial Property Research Report Page 5 of 6

6 necessary to ensure that portfolios are correctly assembled to meet the specific requirements of these specialist purchasers. A number of pub properties have also changed hands in Dublin recently, demonstrating that there are buyers for properties where the pricing is realistic. The Kestrel in Walkinstown sold towards the end of last year for in excess of 2 million. Doyle s pub in Phibsboro, Dublin 7 has been sold for a reported 800,000. Other pubs that have sold recently include Cassidy s on Westmoreland Street, Dublin 2 and The Coast Inn in Skerries in North County Dublin. A number of offers were received for The Pierhouse pub in Howth, which has now been sold. Meanwhile, the Stout Bar in Rathmines in Dublin 6 is now under offer. The former Blu Bar and Renaissance nightclub in Tuansgate, Tallaght in Dublin 24 is currently being marketed guiding offers in excess of 750,000. Other licensed properties that are being marketed at present include The Twelfth Lock Bar and Restaurant in Castleknock, Dublin 15; The Fountain Bar on Dublin s Meath Street, which is guiding offers in excess of 500,000 and The Ardmore Bar in Bray, Co. Wicklow, which is also guiding 500,000. The Odeon Bar on Harcourt Street in Dublin 2 has recently ceased trading. Meanwhile, the adjoining POD nightclub venue has been let to an investment consortium. Outside of Dublin, the 28 bed Railway Hostel in Killarney, Co. Kerry has been sold for approximately 760,000. For further information contact: Paul Collins, Dermot Curtin or John Hughes in our Hotels & Licensed Department at paul.collins@cbre.com or dermot.curtin@cbre.com or john.hughes@cbre.com CBRE Bi-Monthly Irish Commercial Property Research Report Page 6 of 6