Retail Property Market

1Q 2012 RETAIL SINGAPORE THE KNOWLEDGE REPORT Retail Property Market Underpinned by the largely positive consumer sentiment, leasing activities in the retail market resumed in 1Q 2012 following the momentary lull in the previous quarter when mall owners and retailers were caught in the height of welcoming shoppers during the year-end shopping season. MARKET INDICATORS RETAIL Prime Rents Prime Capital Values Food and beverage (F&B) operators across all segments - from bubble tea operators to mid-range restaurants to fine-dining establishments - were particularly active in sourcing for space across the island. Meanwhile, new-to-market brands, including international fashion brands continued to actively source for space to expand in Singapore during the quarter. Above all, while upscale and luxury brands continued to favour the main shopping belt, others including fast fashion chains in the likes of H&M and Cotton On were seeking an increased representation in well-positioned suburban malls. This has resulted in continued brisk take-up of retail space in suburban malls, including the newly- as well as yet-to-be-completed projects. Underpinned by the largely positive consumer sentiment, leasing activities in the retail market resumed in 1Q 2012 following the momentary lull in the previous quarter... F&B operators across all segments were particularly active in sourcing for space across the island. Meanwhile, new-to-market brands, including international fashion brands continued to actively source for space to expand in Singapore during the quarter. while upscale and luxury brands continued to favour the main shopping belt, others including fast fashion chains were seeking an increased representation in well-positioned suburban malls. For instance, Jcube, a redevelopment project of the former Jurong Entertainment Centre undertaken by CapitaMall Trust in Jurong East, was more than 90% taken up when it opened for business in April 2012. Notable tenants include Franc Franc - renowned for their modern furniture and household goods which opened its 9,300-sq ft flagship store; Laneige which set up its first standalone concept store; and Payless Shoesource, an American budget shoe retailer which opened its fifth outlet in Singapore. Other tenants in Jcube include Misulo Children Arts, ManNa, Pique Nique, Ginza Bairin, Chili s, Itacho, Kungfu Paradise, Canton Paradise, Nando s and Yamazaki Boulangerie. The 204,000-sq ft mall also boasts an Olympic size ice skating rink as well as a multi-screen and IMAX cinema. A short distance away from Jcube and opposite the Jurong East mass rapid transit (MRT) station is another suburban mall, Jem. Due to be ready by 2Q 2013, the 575,000-sq ft mall was already 80% let as of 1Q 2012. Its high profile tenants will count Swedish high-street giant H&M, Japanese casual wear brand Uniqlo and home-grown retailer Robinsons. Jem will also house Singapore s first 24-hour cinema operated by Cathay Organisation. In addition to these anchor tenants, OCBC Bank, OSIM, Capitol Optical and McDonald s have also committed to space at the mall ahead of its completion. Over in one-north, in what would be the first major mall in the Buona Vista area in over three decades, Star Vista, which is being jointly developed by CapitaMalls Asia and Rock Productions, has reportedly found tenants for more than half of its 163,000 sq ft space. An interesting feature of Star Vista is that more than 50% of the space available will be dedicated to F&B outlets. Given that few malls in Singapore carry such high F&B content, this positioning will provide Star Vista with a competitive advantage to capitalise on the fast growing F&B sector which saw sales in January 2012 hitting a high of 14.8% year-on-year (YoY) growth, not seen since May 2005, following a 4.2% YoY expansion in 2011. To date, notable F&B outlets which have www.colliers.com

Heightened competition among shopping malls for tenants and among businesses for the retail dollar is putting pressure on existing mall owners and retailers in these malls and driving them to renew and reinvent themselves. To this end, several malls have taken the refurbishment/repositioning path. committed to space in Star Vista include Jamaica Blue, Owl Café, Boston Seafood Diner, Porn s Restaurant, Senor Taco and Shiraz. The mall will also have a 7,000-sq ft supermarket by Cold Storage on the basement level and be equipped with a 5,000-seat theatre called The Star Performing Arts Centre that will be an additional venue for a myriad of performances from around the region. Continued interest from retail and F&B operators in suburban malls which enjoy the advantage of an immediate captive catchment population, provided support for rents to increase in 1Q 2012. As of the end of March, the average monthly gross rent of prime space in Regional Centres inched up by 0.6% QoQ to reach $33.80 per sq ft per month, after remaining unchanged for three consecutive quarters. Over at the Orchard Road shopping belt, the prevailing high rental levels of retail space had put a check on rental movements despite the limited availability of space suitable for international brands. Monthly prime ground floor rents in the locale held stable at $38.30 per sq ft as of 1Q 2012, after the 0.5% QoQ slip in 4Q 2011. Going forward for the rest of the year, approximately 655,000 sq ft of new lettable retail space is expected to be completed in the city-state, following the addition of 6.1 million sq ft since 2009. Notable projects expected to receive Temporary Occupation Permits in 2012 include Star Vista (163,000 sq ft), Gardens by the Bay (101,000 sq ft) and the asset enhancement works at Atrium@Orchard (111,000 sq ft). Heightened competition among shopping malls for tenants and among businesses for the retail dollar is putting pressure on existing mall owners and retailers in these malls and driving them to renew and reinvent themselves. To this end, several malls have taken the refurbishment/ repositioning path. For instance, Suntec Real Estate Investment Trust will invest $230 million to carry out an asset enhancement initiative (AEI) for Suntec City Mall. Forming part of the total $410 million AEI for the entire Suntec City, a multi-purpose development in Marina Centre, the Suntec City Mall spruce up will include a reprogramming of the tenant mix to feature a larger F&B component of 35%. Another 35% of the space in the mall will be dedicated to anchor/mini anchors (anchor stores, hypermarket, 15-screen cineplex, fitness centre) while the remaining 30% will be designated as specialty retail space housing specialty boutiques, fast fashion and accessories and new-to-market concept stores. Other proposed enhancements include the provision of new retail mall entrances, duplex and anchor stores, a new sky garden featuring alfresco restaurants and watering holes and direct connectivity from the convention centre into the mall. Tangs is also reportedly planning to transform its flagship store on Orchard Road into a retail offering akin to New York s Bloomingdale s or London s iconic Harrods. It will invest $45 million to renovate the various floors in the store in four phases between April 2012 and 2014. The first phase, which will cover level one, will AVERAGE MONTHLY GROSS RENTS OF PRIME RETAIL SPACE (BY MICRO-MARKET) $ per sq ft per month $45 $40 $35 $30 $25 As of the end of March, the average monthly gross rent of prime space in Regional Centres inched up by 0.6% QoQ to reach $33.80 per sq ft per month, after remaining unchanged for three consecutive quarters. $20 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 Orchard Road Regional Centres Source: Colliers International Singapore Research P. 2 COLLIERS INTERNATIONAL

continued demand from various retail and F&B trades on the back of confidence fuelled by positive indicators on consumer spending and foreign visitor arrivals for 2012 will provide some support to rents. RETAIL SALES PERFORMANCE (EXCLUDING MOTOR VEHICLES) Retail Sales Index (2010=100, at Constant Prices) 150 125 100 75 50 25 0 25% 20% 15% 10% 5% 0% -5% -10% YoY % Change Singapore s retail sales index (excluding motor vehicles) posted a better-than-expected 0.6% year-on-year (YoY) growth in January 2012. Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Index YoY Change Source: Singapore Department of Statistics/Colliers International Singapore Research start in April and be completed in November this year, in time for the year-end shopping season. All 29,000 sq ft of the first floor will be devoted to beauty brands and services, with brands creating their own flagship boutiques. New brands will include Tom Ford Beauty, Maison Martin Margiela, Viktor & Rolf and Korean skincare line Sulwhasoo - which makes its first foray into South-east Asia at Tangs. Other plans include devoting the entire seventh level with some 7,000 sq ft of space to health and wellness featuring four anchor spa operators and four mini-operators. When the entire revamp is completed, the store will have F&B outlets on every floor, a mix of international fashion brands and up-and-coming homegrown and regional labels, and an expanded home wares department with an additional 7,000 sq ft of space and its own kitchen studio. Besides supply pressures, the retail property market will also come under the continued stress of a challenging business operating environment brought on by a tight labour market that is compounded by the stringent control over foreign worker dependency and increasing operating costs, among other factors. These will weigh on businesses, and in turn, retail space rents. However, continued demand from various retail and F&B trades on the back of confidence fuelled by positive indicators on consumer spending and foreign visitor arrivals for 2012 will provide some support to rents. Singapore s retail sales index (excluding motor vehicles) posted a better-than-expected 0.6% year-on-year (YoY) growth in January 2012. Sales were widely forecast to record a dip in the first month of 2012 compared to a year ago given that consumers would have taken a breather from spending as they celebrated the 15-day Lunar New Year taking place during the month. This rise on the back of an already high expansion of 14.3% YoY recorded for last January raises optimism about consumer resilience and gives hope for a positive year for retail sales in 2012 despite the prevailing global economic uncertainties and slowing domestic economy. PERFORMANCE OF TOURISM INDUSTRY 1,400,000 1,200,000 50% 40% January s retail sales were buoyed by the considerable 13.4% YoY surge in visitor arrivals to some 1.2 million. Number of Visitors 1,000,000 800,000 600,000 400,000 30% 20% 10% 0% YoY % Change 200,000-10% 0 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Visitor Arrivals YoY Change -20% Source: Singapore Tourism Board/Colliers International Singapore Research COLLIERS INTERNATIONAL P. 3

market confidence remains and barring any deterioration in macro-economic conditions, retail space rents are forecast to stay fairly resilient, with any downward corrections keeping within 3%. To a large extent, January s retail sales were buoyed by the considerable 13.4% YoY surge in visitor arrivals to some 1.2 million. With the Singapore Tourism Board (STB) projecting that the tourism industry will continue to strengthen from 2011 s blistering pace to achieve 13.5 to 14.5 million visitor arrivals and $23-$24 billion in tourism receipts in 2012, reflecting a 2% to 10% rise in visitor arrivals and 3.5% to 8% increase in tourism receipts compared to 2011, retail spending in the city-state looks set to stay healthy. Hence, market confidence remains and barring any deterioration in macro-economic conditions, retail space rents are forecast to stay fairly resilient, with any downward corrections keeping within 3%. Comparatively, rents for prime space in Regional Centres are projected to sustain better than those on Orchard Road given the immediate shopper catchment and the continued trend of retailers seeking a presence in well-positioned suburban malls. P. 4 COLLIERS INTERNATIONAL

Notes: 522 offices in 62 countries on 6 continents United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118 $1.8 billion in annual revenue 1,250 million square feet of property under management Over 12,300 professionals SINGAPORE: Colliers International 1 Raffles Place #45-00 One Raffles Place Singapore, 048616 TEL +65 6223 2323 FAX +65 6222 4901 RCB NO. 198105965E RESEARCHER: Chia Siew Chuin Director EMAIL singapore.research@colliers.com This report and other research materials may be found on our website at www.colliers.com. Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by Colliers International for general information only. Colliers International makes no guarantees, representations or warranties of any kind, express 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). 2012. All rights reserved. Accelerating success. www.colliers.com