REAL ESTATE REVIEW Poland

REAL ESTATE REVIEW Poland 2011

Economic Overview I Office I Industrial I Retail I Hotels I Land I Investment

colliers INTERNATIONAL Research & Consultancy Research & Consultancy department at Colliers International undertakes research and advisory services for Clients in the area of Polish real estate market in particular; office, retail, industrial and hotel. Our knowledge is supported by years of experience and devised analytical methods, which support our Clients in the decision-making processes, identifying opportunities and threats and possible scenarios resulting from the changing market conditions. Services provided by the Department include economic analysis and market studies of the real estate market with respect to future market trends, feasibility study, competition analysis, investment strategies, analysis of the location, etc. Our database includes the most current information on the real estate market in Poland, and our close cooperation with Colliers agency departments allows for a better understanding of individual needs of our Customers. Dział Badań Rynku i Doradztwa Colliers International zajmuje się badaniami i szeroko pojętym doradztwem dla Klientów w zakresie rynku nieruchomości komercyjnych w Polsce, w szczególności: biurowych, handlowych, przemysłowych i hotelowych. Nasza wiedza poparta jest wieloletnim doświadczeniem i wypracowanymi metodami analitycznymi, którymi wspieramy naszych Klientów w procesach decyzyjnych, określając szanse i zagrożenia oraz możliwe scenariusze wynikające ze zmieniających się warunków rynkowych. Usługi działu obejmują analizy ekonomiczne i badania rynku nieruchomości komercyjnych z uwzględnieniem przyszłych trendów rynkowych; analizy opłacalności; analizy konkurencji; strategie inwestycyjne; analizy lokalizacji, itp. Nasza baza danych obejmuje najbardziej aktualne informacje na temat rynku nieruchomości komercyjnych w Polsce, a ścisła współpraca z działami agencyjnymi firmy pozwala na lepsze zrozumienie indywidualnych potrzeb naszych Klientów.

Table of Contents REAL ESTATE REVIEW I Poland 2011 Economic Overview 9 Office 10 Industrial 13 Retail 16 Hotels 18 Land 20 Investment 22 TAX SUMMARY 23 LEGAL OVERVIEW 26 Gospodarka 33 Powierzchnie biurowe 34 Powierzchnie magazynowe 37 Powierzchnie handlowe 40 Rynek hotelowy 42 Grunty inwestycyjne 44 Rynek inwestycyjny 46 PRZEPISY PODATKOWE 47 PRZEGLĄD PRZEPISÓW PRAWNYCH 51

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Poland real estate review > FOREWORD Lehman Brothers investors returned to regional cities with several prominent transactions, particularly in the office and retail sectors. Although new supply of office space in Warsaw was relatively limited, regional cities continued to grow steadily. More importantly, the office market recorded a noticeable increase in tenants activity. A similar situation was observed in the industrial market, where few industrial schemes were completed. Demand side, however, turned out to be very high. Dear Clients and Friends, It is my great pleasure to present to you, for the first time in my new role as Deputy Managing Partner, our latest publication summarising the main trends observed in the Polish commercial market during 2010 and an indication of what we can expect in 2011. 2010 was a good year for commercial real estate in Poland and in comparison with 2009 gave hope for a further improvement. The Polish capital market experienced a significant growth. Total real estate investment volume in 2010 more than doubled in comparison to 2009 levels, with a number of high profile transactions. It is worth noting that for the first time post- The retail market also experienced a slowdown in terms of new projects. As far as tenants are concerned, their interest in new space has visibly increased. However, market share is no longer their sole strategy and much more emphasis is now put on profitability and the quality of the location. 2010 turned to be a successful year for our company. Colliers was consistently instructed to advise in many prominent investment transactions which took place in the market, such as the sale of Grunwaldzki Center in Wrocław by Skanska, the sale of Jantar Shopping Centre in Słupsk by Mayland, the sale of Panattoni Park Garwolin by Standard Life Investments, as well as the purchase of Trinity Park III by SEB Asset Management.

Poland real estate review > FOREWORD 2010 was a turning point for our Land department, which acted as a real estate advisor in the first major transactions that took place in the Polish market after the crisis. More business opportunities are expected to come in 2011. Despite the unfavourable market conditions our Office, Industrial and Retail agencies secured space for many Clients and won their appreciation. The Property Management division within Colliers continued to expand its portfolio by adding over 140,000 sqm of office space and over 130,000 sqm of industrial space. Since people are our main asset we decided to hire several talented specialists who strengthened our market position both on a national and international scale. A new service line called Retail Solutions was also introduced, which will add a new value to existing services provided by Colliers International Poland. We were delighted that our efforts were acknowledged by the industry when we were voted the Best Real Estate Agency of the Year at the CiJ Awards and the Best Industrial Team of 2010 in Poland at the Eurobuild Gala Awards. We are entering 2011 filled with plenty of positive energy and hope for an exciting time of market revival. We wish all our Clients and Friends many new business opportunities and a prosperous year. Yours sincerely, Monika Rajska-Wolińska Deputy Managing Partner Also we accelerate our growth through continuous commitment to Service Excellence. As an enterprising organisation we endeavour to deliver the best client experience. We look forward to further engagement with our Clients and maintaining the customer-centric culture in our company. An additional change was our rebranding which gave us a new and more dynamic look and feel.

Poland real estate review > Economic overview Economic Overview GENERAL OVERVIEW Last year Poland was a leader in Europe in terms of economic growth. In the third quarter GDP growth reached as much as 4.2%, ahead of analysts expectations. Economic growth in the last quarter is estimated to be at a similar level. According to preliminary results from the Main Statistical Office (GUS), growth for the whole of 2010 was 3.8%. The Ministry of Finance forecast growth of 4% in 2011. The main driver of growth has been domestic consumer demand, reflected in retail sales growth. This is despite the fact that unemployment remained high throughout the year and in December stood at 12.3%. Economists estimate that unemployment will begin to drop during the first half of 2011, with IBnGR forecasting a decrease in unemployment rate to 10.8% by the end of the year. This is likely to create pressure for higher salaries amidst a general increase in inflation. In December inflation accelerated to 3.1% y-o-y, from a level of 2.7% in November. The increase was caused mainly by the growth of fuel prices. MARKET INDICATORS (y/y) METRIC 2009 2010 GDP Growth 1.8% 3.8% Industrial Production 7.2% 11.5% Unemployment 11.9% 12.3% Inflation 3.5% 3.1% Retail Sales 7.2% 12% Source: GUS GDP, INFLATION & UNEMPLOYMENT 25% 20% 15% From an investment perspective, the NBP (National Polish Bank) expects the inflow of Foreign Direct Investments (FDI) into Poland to have reached 9.8 billion in 2010. A further significant increase in FDI is expected in 2011, up to 12.7 billion, bringing with it a higher number of technological investments. FOREIGN DIRECT INVESTMENTS ( bln) 20,0 18,0 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0 Source: NBP PROGNOSIS FOREIGN DIRECT INVESTMENTS ( bln) 2004 2005 2006 2007 2008 2009 2010 2011f The consensus view of GDP growth in Poland in 2011 is around 4%, supported by growth in industrial production of 8-10%. With this will come an increase of investments into fixed assets, a decrease in the unemployment rate and rising salaries in tune with rising inflation. The most important challenge for the Polish Government will be to reduce the deficit and public debt. Although public debt levels did not exceed 55% of GDP in 2010, this may be difficult to maintain in 2011. The public deficit was around 8% of GDP. It is important for the longer-term sustainability of the national economy that both the public deficit and debt levels are reduced. Most economists indicate that a reform of the pension and social allowances system, savings in budget expenditures, a reduction of the Government s fixed-cost base and an acceleration of privatization are necessary to balance state finances. Last year Poland was a leader in Europe in terms of economic growth. 10% 5% 0% GDP Inflation Unemployment Source: GUS, IBnGR (forecast), Ministry of Finance (GDP forecast) Colliers International 9

Poland real estate review > Office Office The total volume of leasing transactions in Warsaw in 2010 was double that of 2009. WARSAW GENERAL OVERVIEW 2010 saw a significant improvement in activity in the office leasing market. The total volume of leasing transactions in 2010 was double that of 2009 facilitating renewed action in the development community. Improved access to bank finance has also helped to drive developers activity, although some restrictions on the availability of development finance remain, creating immediate current scenario of very low levels of new construction. As a relatively small amount of space is under construction, we expect a shortfall in the availability of good quality modern space as early as mid 2011. This will have an impact on vacancy rates, which by the end of the year had fallen slightly to ca. 7%, and will continue to fall into 2011. largest new projects completed last year were: Poleczki Business Park (Lower South zone; 45,000 sq m), New City Mokotów (Upper South; 35,000 sq m), Crown Square (West; 17,000 sq m) and Zebra Tower (City Centre Fringe; 17,000 sq m). We expect an even lower amount of new space to enter the market in 2011 with only ca. 132,650 sq m of space actively under construction. One third of this space will be delivered in the city centre. DEMAND Demand levels returned to those recorded in times of prosperity as a total of 549,210 sq m was leased over the year. This represents an increase of over 90% relative to take-up in 2009. This activity does, however, account for a sizeable amount of renegotiations and renewals (36%). TAKE-UP STRUCTURE TAKE-UP STRUCTURE KEY OFFICE FIGURES METRIC MEASURE Total Stock 3,435,830 sq m Take-Up 549,210 sq m Vacancy Rate 7.2% SUPPLY 36% 1% 5% 58% An estimated 188,400 sq m of new office space was delivered to the Warsaw office market last year, representing 27% y-o-y reduction in new supply. EXPANSION NEW OW-OCC RENEGOTIATION / RENEWAL NEW SUPPLY (sq m) 300,000 250,000 200,000 150,000 100,000 50,000 0 NEW SUPPLY (sq m) Over 60% of new space was delivered in two zones: in the Upper South zone (64,640 sq m) and the Lower South zone (54,000 sq m). The A clear positive trend was an increase in the volume of pre-let agreements (12%) and expansions (5%) as a proportion of overall activity. Although the share of expansions in total activity is still small, the overall significant increase in transactions is evidence of a strong recovery. Another noticeable trend is the increase in the number of large transactions in comparison with 2009. As many as 16 deals for space over 5,000 sq m were signed. For comparison in 2009 only 4 such transactions took place. Many of the largest transactions were renewals/ renegotiations. Among these were: Bank Pekao 10 Colliers International

Poland real estate review > Office SA in Lipowy Office Park (38,450 sq m), Orange in Renaissance Tower (17,400 sq m), Deutsche Bank in Focus (10,000 sq m) and Hewlett Packard (10,300 sq m) in University Business Center. The largest new deals were signed by Aviva Group in the fourth phase of Platinium Business Park (pre-lease; 13,050 sq m) and PZU in Empark Sirius (12,500 sq m). SELECTED LEASE TRANSACTIONS TENANT AGREEMENT PROPERTY Pekao SA Aviva Group Among tenants companies from the finance/ banking and IT sector dominated the market. A number of significant transactions were signed by public institutions including the Ministry of Foreign Affairs and ZTM (Public Transport Authority of Warsaw). VACANCY The vacancy rate remained during most of the year at 8% before dropping slightly at the end of the year to 7.2%. This included the city centre, where availability of space decreased despite the fact some tenants have moved out to other districts. As there is limited amount of new space under construction we can expect the vacancy rate to decrease further over the year across the city. RENTS Renegotiation 38,450 sq m Pre-lease 13,050 sq m GTECH Renegotiation 4,700 sq m Pfizer Polska New Lease 4,350 sq m Oracle Polska New Lease 4,000 sq m Tchibo New Lease 1,800 sq m Lipowy Office Park Platinium Business Park IV Brama Zachodnia Adgar Plaza B Crown Square Riverside Park Since the end of the first quarter rents have remained stable. Asking rents in the Central Business District are between 18 and 25 per sq m. Although in some properties space is available at rates below 18. Most non-central locations (Upper South and South-West) offer modern office space for 12-16 per sq m. Slightly higher rates were recorded in buildings located in the vicinity of the city centre. The market situation advantageous for tenants found its reflection in the incentives offered by landlords (rent-free period, fit-out allowance). PROGNOSIS In the coming months the situation in the Warsaw office market should remain stable. We can expect that many tenants will take advantage of the favourable conditions and renegotiate their lease agreements or decide to move to cheaper locations. High levels of demand combined with a limited number of projects entering the construction phase and overall diminishing space availability will change the market situation in favour of landlords in the second half of the year. REGIONAL CITIES GENERAL OVERVIEW In 2010 a revival was also recorded in regional office markets, where demand increased significantly. In the eight largest regional markets as much as 216,200 sq m of new space was completed. However, a smaller number of new projects entered the construction phase in 2010, so we anticipate lower levels of new supply in 2011. SUPPLY The amount of new space delivered in 2010 was comparable to the supply in 2008 and 2009. The majority of new supply was completed in Kraków (54,140 sq m) and Katowice (47,610 sq m). Due to this significant new supply Kraków remains the largest regional office market. The largest new projects completed last year were: Francuska Office Center (21,470 sq m) and Katowice Business Point (17,500 sq m) in Katowice, University Business Park B in Łódź (18,760 sq m), Vinci Office Center (18,720 sq m) in Kraków and Wojdyła Business Park in Wrocław (17,000 sq m). Currently approximately 242,000 sq m of office space is under construction, of which ca. 150,000 sq m is planned to be completed in 2011. The largest amount of new space in 2011 will be delivered in Kraków and Tricity. New supply will include, among others, the second phase of Quattro Business Park (Kraków) and Olivia Gate (Gdańsk). In 2010 a revival was recorded in regional office markets, where demand increased significantly. Colliers International 11

Poland real estate review > Office Similarly to the Warsaw market, we expect the situation in the regional markets to be stable over the first months of the year. KEY OFFICE FIGURES City Total stock Vacancy (sq m) rate (%) Kraków 388,030 12.3 Wrocław 305,430 4.3 Poznań 191,480 13.9 Tricity 217,060 16.8 Katowice 180,730 22.0 Łódź 177,750 25.6 Lublin 48,480 6.1 Szczecin 43,060 6.2 DEMAND Last year was characterized by high activity from tenants. The most popular was Kraków, where lease transactions volume reached over 80,000 sq m surpassing the activity level recorded in other cities. The largest transactions signed in the regional markets in 2010 were: IBM in Wojdyła Business Park (17,000 sq m) in Wrocław, Capgemini in Quattro Business Park (10,000 sq m) and Motorola in Green Office in Kraków (11,840 sq m), renegotiation by Thomson Reuters in Baltic Business Center in Gdynia (9,045 sq m) and renegotiation of Nokia Siemens Network deal in the Wroclaw Business Park (7,380 sq m). 2010 also saw further development of SSC/BPO sector in Poland. Such companies as IBM, Sony Pictures, McKinsey, Nordea Bank and Nycomed opened their centres. VACANCY In comparison with 2009 the most significant increase in vacancy level was recorded in Katowice (from 10.3% to 22%) and in Tricity (from 10.5% to 16.6%). This was caused by the delivery of new space which then failed to lease. In Kraków the vacancy rate did not change significantly despite delivery of high volumes of new supply. A decrease in vacant space was recorded in Łódź (from 30% to 25%) and Wrocław (from 9% to 4%). Wrocław, Szczecin and Lublin currently have the lowest vacancy rates. Although in both Łódź and Katowice a high level of demand was recorded, these markets are still characterized by the highest vacancy levels among regional cities at 25% and 22% respectively. RENTS Rental rates remained at similar levels throughout the year, although some landlords of buildings with high vacancy levels decided to lower their demands. Most asking rents are between 12 and 15 per sq m. The lowest rates are in Łódź and Katowice and are between 11 and 13 per sq m. PROGNOSIS Similarly to the Warsaw market, we expect the situation in the regional markets to be stable over the first months of the year. If demand continues to grow at a similar rate, the amount of available space will drop bringing more balance to markets such as Łódź and Katowice. As Wrocław has an insufficient amount of space available for lease we expect an increase in rental rates in this city in 2011. SELECTED LEASE TRANSACTIONS TENANT Agreement PROPERTY / CITY IBM Pre-let + Expansion 17,000 sq m Wojdyła Business Park / Wrocław Motorola Pre-let + Expansion 11,840 sq m Green Office / Kraków Capgemini Pre-let 10,000 sq m Quattro Business Park / Kraków Thomson Reuters Renewal 9,045 sq m Baltic Business Center / Tricity PKP Cargo New Lease 5,850 sq m Reinhold Center / Katowice Tieto Poland New Lease 4,600 sq m Oxygen / Szczecin Capgemini New Lease 3,000 sq m Millennium Tower / Wrocław IKEA New Lease 2,850 sq m Malta Office Park / Poznań 12 Colliers International

Poland real estate review > Industrial Industrial general overview 2010 was characterized by exceptionally low activity of developers who almost completely withdrew from speculative projects and focused instead on BTS schemes. Nevertheless, several projects built on a speculative basis did enter the construction phase. Although the supply side turned out to be limited, the demand for industrial space was much higher than in 2009. Even so, the vacancy rates remain high in the Greater Warsaw area. In contrast, regional markets have recorded a gradual absorption of space by tenants. After a continued period with significant decreases in rents, the first signs of minor increases were recorded towards the end of 2010 in some of the regional Polish markets. KEY INDUSTRIAL FIGURES METRIC MEASURE Total Stock 6.4 mln* sq m Take-Up 1,440,000 sq m Vacancy Rate 15.6% *increased by projects located outside main markets Supply The Polish industrial market grew by almost 252,000 sq m in 2010, delivered within 14 projects. Over half of this new space was located in BTS warehouses. The remaining projects were speculative, requiring to be pre-let in order for construction works to start. The majority of space entered the market in the last quarter (ca. 140,000 sq m) and most of this space was added to the Upper Silesian market. STOCK BY REGION (sq m) STOCK BY REGION (sq m) 2,750,000 2,500,000 2,250,000 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 It is worth noting that Panattoni is currently one of the most active developers in the Polish market, having started numerous projects despite the unfavourable market conditions. In 2010 they completed almost 220,000 sq m of industrial space in different areas of Poland. At the end of the year ca. 196,000 sq m of industrial space remained under construction, with a delivery date expected in 2011. Warsaw Warsaw saw only 3 new deliveries which were the next phase of Ideal Idea in Zone I and 2 buildings within Panattoni Park Ożarów. It was thanks to these schemes that the total stock of the Greater Warsaw area grew by 42,830 sq m, exceeding 2.45 mln sq m as of end 2010. Almost 60,000 sq m of industrial space is under construction in the Greater Warsaw area. These are: the second phase of Good Point Puławska, 2 warehouses within Żerań Park II, Pannatoni s BTS project in Święcice and a warehouse within Annopol Logistic Park IV by ECI SA. Regional markets Almost 210,000 sq m of modern industrial space entered the regional markets. Significant deliveries included 3 BTS schemes built by Panattoni for Tesco in Gliwice (56,700 sq m), for H&M (30,000 sq m) in Gądki, Poznań and for Cereal Partners (30,000 sq m) in Toruń. With over 86,000 sq m of industrial space delivered to the market, Upper Silesia was first in terms of new supply. Poznań came second among regional markets with almost 38,000 sq m and Toruń third with 30,000 sq m. New deliveries were also recorded in Central Poland (26,000 sq m), Tricity (18,685 sq m) and Wrocław (9,700 sq m). Across the regional markets, the majority of space is currently under construction in Poznań (45,100 sq m within 3 schemes Panattoni s BTS project for Neuca SA and 2 speculative projects) and in Rzeszów, where 32,500 sq m will be delivered within a BTS project for Zelmer by Panattoni. Kraków is third in terms of the amount of space under construction (almost 25,850 sq m within Goodman and MARR s projects). In Wrocław, Upper Silesia and Toruń projects totalling ca. 10,000 sq m are under way, whereas in Central 2010 was characterized by exceptionally low activity of developers who almost completely withdrew from speculative projects and focused instead on BTS schemes. Colliers International 13

Poland real estate review > Industrial Total activity recorded in 2010 reached 1,440,000 sq m, which represents a substantial growth in comparison with 2009. Poland one project of ca. 3,300 sq m hit off the ground. DEMAND Total activity recorded in 2010 reached 1,440,000 sq m, which represents a substantial growth in comparison with 2009, when the total volume of signed agreements amounted to 940,000 sq m. New agreements and expansions were concluded for as much as 990,000 sq m, renewals and renegotiations constituted the remaining 450,000 sq m. TAKE-UP BY REGION TAKE-UP BY REGION Warsaw 12.9% 2% 1.3% 7.5% 0.3% 13.1% 0.7% WARSAW UPPER SILESIA CENTRAL POLAND WROCŁAW POZNAŃ 30.5% 30.7% 1% GDAŃSK TORUŃ SZCZECIN KRAKÓW OTHER The highest level of tenants activity was recorded in Warsaw amounting to ca. 440,000 sq m. New agreements and expansions encompassed over 315,000 sq m, whereas renewals constituted almost 125,000 sq m. Regional markets Tenants activity in Upper Silesia was at a level comparable to Warsaw s. The share of renewals was, however, higher than in the capital as they encompassed almost 190,000 sq m. New agreements and expansions reached almost 250,000 sq m. Upper Silesia saw the largest transaction in 2010, which was concluded between Tesco and Panattoni resulting in the development of a new BTS scheme totalling 56,700 sq m in Gliwice. Central Poland and Poznań came next in terms of the leasing activity, with 188,500 sq m and ca. 185,400 sq m, respectively. Activity surpassing 100,000 sq m was also reached in Wrocław (exactly 107,000 sq m). The amount of space leased in Kraków and Gdańsk was lower ca. 18,000 sq m and 15,000 sq m, respectively. However, we must consider that these are smaller markets. 2010 saw leasing activity also in Rzeszów (32,500 sq m BTS scheme for Zelmer), Toruń (10,250 sq m BTS for Nissin) and Szczecin (3,650 sq m). VACANCY Throughout 2010 the average vacancy rate for the Greater Warsaw area remained stable at ca. 20%. When compared with vacancy rates recorded in the regional markets, there was a noticeable difference in that vacancy rates in almost all locations namely in Central Poland, Upper Silesia, Wrocław, Poznań and Szczecin where they dropped over the year. The only exceptions were Kraków where, similarly to Warsaw, vacancy rates remained at practically the same level, and in Gdańsk where the availability of space increased slightly. SELECTED LEASE TRANSACTIONS TENANT SPACE (sq m) PROPERTY TYPE OF AGREEMENT Tesco 56,700 Panattoni Park Gliwice BTS Fiege 36,520 ProLogis Park Dąbrowa Renewal & Expansion Viva Group 33,080 ProLogis Park Teresin Renewal & Expansion Zelmer 32,500 Panattoni Park Rzeszów BTS Kaufland 24,500 Tulipan Park Gliwice New Lease PF Concept 23,000 Point Park Poznań New Lease Moto-Profil 20,000 ProLogis Park Chorzów New Lease 14 Colliers International

Poland real estate review > Industrial At the end of 2010, the locations with the largest volume of vacant space could be found in Warsaw Zone II and in the regional markets of Upper Silesia and Central Poland. VACANCY RATES 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% RENTS 20.1% 14.3% 10.8% 11.9% 10.6% 13.1% 4.1% VACANCY RATES 81.5% Since the beginning of 2009 rents had systematically fallen due to the high amount of unleased space which had entered the market alongside lower demand. Despite tenants higher activity in 2010 the downward tendency continued in the first six months of the year in all markets. Warsaw Zone II and Zone III, as well as Poznań and Szczecin experienced further downward corrections in rents at the end of 2010. In contrast markets with low availability of space (such as Gdańsk) or with increasing tenants activity e.g. Warsaw Zone I and Upper Silesia recorded the first increases in rents for over twelve months. Nevertheless, effective rents are still much lower than at the end of 2009. PROGNOSIS Due to tenants higher activity rents are expected to start growing, especially in markets with decreasing amounts of vacant space. These markets include: Poznań, Wrocław and Upper Silesia. Since there is still a relatively high volume of vacant space in Zone II in Warsaw, Upper Silesia and Central Poland it is unlikely that developers will begin new projects in these locations throughout the year, unless pre-lease agreements are signed. Only those markets with a low level of available space can expect some increase in supply. These include: Gdańsk (Segro and Goodman have already announced new investments in this location) as well as Kraków, where some investments are already under way (Goodman and MARR). Developers will continue to focus on BTS schemes, as they demonstrate a much lower degree of risk than speculative developments, as well as on projects with secured pre-lease agreements. Due to tenants higher activity rents are expected to start growing, especially in markets with decreasing amounts of vacant space. EFFECTIVE RENTAL RATES ( /sq m) EFFECTIVE RENTAL RATES ( /sq m) 6,0 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0 Colliers International 15

Poland real estate review > Retail Retail In 2011 retailers will continue to seize the opportunity to take units from their weaker competitors. MAJOR CHANGES IN SATURATION LEVEL (sq m/1,000 MAJOR INHABITANTS) CHANGES SATURATION LEVEL 1000 900 800 700 600 500 400 300 200 100 0 TARNÓW ŁÓDŹ PŁOCK PRZEMYŚL WAŁBRZYCH (sq m/1,000 INHABITANTS) STOCK STRUCTURE STOCK STRUCTURE 7% Q4 2009 Q4 2010 9% 1% 83% Shopping Centres Retail Parks Hypermarkets Outlets GENERAL OVERVIEW After a significant market decline in retailer activity in 2009, last year was characterized by stability. Although tenants continued to analyse their financial results carefully and many companies still looked to cut costs, growing optimism was visible amidst continued growth in retail sales across the country. Stronger retailers have taken the opportunity to expand their market share on advantageous conditions. In 2010 only 460,000 sq m of new retail space was delivered to the market, although developers activity actually increased as new construction of over 670,000 sq m began during the year in expectation of continued improvements in the years ahead. KEY RETAIL FIGURES METRIC Total Stock Stock under Construction Market Saturation in Poland Market Saturation in the eight Largest Agglomerations SUPPLY The total stock of modern retail space in Poland reached 8.04 mln sq m at the end of 2010 as ca. 460,000 sq m of new retail space was delivered to the market during the year. This was significantly less than in previous years (less than 60% of 2009 new supply) as a result of a significant drop in the number of schemes entering the construction phase during the crisis. NEW SUPPLY (sq m) 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 NEW SUPPLY (sq m) MEASURE 8.04 mln sq m 890,000 sq m 212 sq m/1,000 inhabitants 662 sq m/1,000 inhabitants 2004 2005 2006 2007 2008 2009 2010 2011f The total retail stock in the eight largest markets is 5.19 mln sq m. Approximately 153,000 sq m of new retail space was completed. The largest new project was Port Łódź (67,000 sq m). The majority of new space was completed in small and medium-size cities. At the end of 2010 the total stock in these markets reached 2.9 mln sq m. The largest projects delivered were Victoria Shopping centre in Wałbrzych (43,000 sq m) and Gemini Park in Tarnów (41,500 sq m). Among the largest cities the saturation level is still the highest in Poznań (984 sq m per 1,000 inhabitants) and Wrocław (863 sq m per 1,000 inhabitants). As regards medium sized cities (above 100,000 inhabitants) the most saturated are Opole (1,059), Bielsko Biała (905) and Płock (872). Market saturation in the latter increased significantly in 2010 due to delivery of 46,700 sq m of new retail space. PLANNED SUPPLY Up to 650,000 sq m of retail space is under construction and scheduled for delivery in 2011. This amount is similar to supply levels reached in 2008. The majority of this space will be completed in secondary cities. Taking into consideration the lengthy construction period for modern shopping centres we can expect only a few additional projects completed in 2011. Higher volumes of completions are expected in 2012 and 2013. The largest retail properties planned to be delivered in 2011 are Millenium Hall in Rzeszów (56,500 sq m), Galeria Kaskada in Szczecin (43,000 sq m) and Galeria Słoneczna in Radom (42,000 sq m). The majority of this new supply will be traditional shopping centres. Retail parks (in total 110,000 sq m) are expected to be completed in Opole, Kraków and Gdańsk. Also worth mentioning are outlets, which account for only 1% of the total retail space in Poland. Delivery of such properties are planned in Kraków (Factory Outlet; 21,320 sq m) and Szczecin (Outlet Park Szczecin; 23,000 sq m). DEMAND Although still very cautious when making decisions, tenants are more interested in new investments than they were during 2009. 16 Colliers International

Poland real estate review > Retail Companies such as Tchibo, Starbucks, TK Maxx, New Look, Pandora, Peacocks, Marks&Spencer opted for further expansion in 2010. Among new brands entering the Polish market were Muji, New Look, as well as luxury brands Carolina Herrera and Salvatore Ferragamo. Generally, however, retailers are looking at consolidation focusing on their best performing stores and cities and reducing the size or closing unprofitable units, or increasing the size in the best locations to increase economies of scale and improve the range and value of the offer. Retailers are also considering potential locations more carefully market share is no longer the sole strategy. There is now much more emphasis on market dominance, profitability and the quality of the location. Demand for street locations is also at a stable level although limited bank branch expansions and the tendency to close unprofitable locations has had an unfavourable influence on the vacancy level, mainly outside large agglomerations. This poses an opportunity for mobile phone operators, cafes, bakeries, fast food bars, restaurants and shops with accessories, to take advantage of the current situation and secure units which were previously unavailable. In 2011 entry of such brands as Toys R Us, LC Waikiki, Chocolate Company and Jula is expected. Toys R Us will probably be the most significant market entry. RENTS Rents in the very best centres and high street locations were maintained over 2010, with some increases seen in regional cities where demand exceeded supply. However, some of the lower quality centres, have suffered from rental reductions as a result of falling retail turnover. PROGNOSIS We can expect an increasing number of projects to receive financing and enter the construction phase, driving new supply levels in the coming years. Most tenants have put their serious problems behind them and we therefore expect a more stable level of demand. Prime shopping centres will continue to enjoy the highest levels of interest. We expect to see rents remain stable in the coming months, although they are likely to increase slowly in prime shopping centres. In 2011 retailers will continue to seize the opportunity to take units from their weaker competitors and strong brands will continue to increase the size of their units and their offer to improve sales. We can also expect their higher levels of interest in high street locations. Despite growth amongst retailers, there will be continued pressure to improve the management and marketing of centres to increase turnover levels, improve efficiencies, reduce costs and diversify the overall offer relatively to competing shopping centres. We can expect an increasing number of projects to receive financing and enter the construction phase, driving new supply levels in the coming years. SELECTED PROJECTS PLANNED FOR 2011 CITY PROJECT DEVELOPER SIZE (sq m) Rzeszów Millenium Hall Develop Investment 56,600 Gdańsk Morski Park Handlowy Liebrecht&WooD 50,000 Szczecin Galeria Kaskada ECE Projektmanagement 43,000 Opole Turawa Helical 41,000 SELECTED PROJECTS PLANNED FOR 2012/2013 CITY PROJECT DEVELOPER SIZE (sq m) Gliwice Europa Centralna Helical 67,000 Elbląg Siódemka NEPH 64,000 Rzeszów City Center Star Europa Holding 42,000 Kielce Korona Kielce Church Land Development 36,000 Colliers International 17

Poland real estate review > Hotels Hotels 2010 was a year of worldwide hotel trading recovery, most regions participated in a pronounced improvement in occupancies and ADR growth. OCCUPANCY AND ADR IN MAJOR POLISH CITIES CITY Occupancy ADR Warsaw 67% 71 Kraków 64% 67 Gdańsk 58% 55 Wrocław 65% 57 Poznań 49% 61 Łódź 57% 64 GENERAL OVERVIEW 2010 was a year of worldwide hotel trading recovery, most regions participated in a pronounced improvement in occupancies and ADR growth. In Europe we noticed remarkable economic turnarounds, cities such as Munich, Frankfurt, London, Zurich, Berlin, Istanbul fared very well in the post recession year. Most of the aforementioned cities enjoyed a remarkable growth in RevPAR, from 19% in Munich, 17.5% in Istanbul, to 13% growth in Berlin. To be added to this positive outcome for 2010, Warsaw can also be mentioned, with the increase of RevPAR of 7.5% and occupancy growth of 8%. The ADRs are still under pressure, especially in the oversupplied 5-star branded hotel category in the capital of Poland. Some of the positive influencing factors in Poland were the GDP growth, the strong exports and manufacturing sectors, relatively well positioned Polish currency, and domestic demand level. Chopin 200 year anniversary and related festivals and activities also helped the Polish market with transient visits (4.5% y-o-y increase in the number of tourists). EU debt crisis, the currency wars, volcano ash business interruption, Smolensk tragedy and floods in the south of the country were negative business influencers. HOTEL SECTOR IN MAJOR CITIES IN POLAND Warsaw The hotel sector in the capital enjoyed a very good year. Strong demand for room nights in the business and small conference segments were noticed throughout the last three quarters of the year. The 5-star hotels performed with occupancy rate of 69.9% and ADRs of circa 98. The 4-star hotels also enjoyed a good trading year, occupancies were reported at the level of 68% and ADRs of 73. All the rest of the branded hotel products had circa 5% y-o-y growth in occupancies as well as ADRs. New hotel inventory was not added in Warsaw in 2010. In further years we can expect completion of the 4-star 347 room Doubletree by Hilton Conference Centre and Spa, the 5-star 250-room Renaissance by Marriott at the Chopin Airport, and the former Warszawa hotel building converted into a luxury class boutique hotel by the Likus family. In terms of the economy sector in Warsaw, Orbis/Accor has announced a combination Etap/ Ibis hotel, which together will bring 340 additional rooms to the market by the second quarter of 2012. Kraków This city also performed well in comparison with 2009. The branded hotel products fared well, the occupancy in that segment was circa 64% at an ADR of 67. 5-star hotels showed growth in occupancy to 72% with a final ADR of 97. The city enjoyed a favorable summer season, which is predominantly leisure based travel. The hotels did a pretty good job in staying busy and competitive against most cities in Poland. The BPO business is creating new corporate room nights, and a new Conference Centre is being built next to the Park Inn hotel, which will bring new MICE sector room nights to the city. A new hotel 157 room Hilton Garden Inn was delivered in January 2011, further diversifying the branded hotel offer in the city. Tricity Tricity did relatively well, when you consider that the Radisson Blu (2009; 134 rooms) and the Hilton (2010; 150 rooms) were added to Gdańsk s accommodation offer. There are no new branded hotel projects in the pipeline for 2011 in Tricity, however, a 3-star Globus hotel will be opened at the beginning of the year. Gdańsk faired 58% occupancy through all hotel categories, with an average daily rate of 55. The 5-star branded hotels finished the year at 64% occupancy and an ADR of 87. Sopot s hotels also enjoyed a better year than 2009, we estimate that the 5-star hotel segment is performing at the level of 57% in occupancy at an average achieved rate of 112. The lower segment non-branded hotels finished the year at 61% occupancy and an ADR at circa 64. Gdynia s occupancy rate was 49%, and an ADR of about 47. Poznań The city of Poznań has been trying to turn around its poor hotel trading performance. 2010 showed some improvement for a few hotels there. The 18 Colliers International

Poland real estate review > Hotels Sheraton, the IBB Andersia, the IBIS and the Campanile are the city s best performers. The city in all categories managed to do 49% in occupancy and achieved an ADR of 61. One bright side to this city s attempt to improve its competitiveness was its commitment in promoting and advertizing the city for leisure travelers. The challenge for Poznań is continuing to be the MICE market. Szczecin 2010 was a better year for this city, and occupancies climbed to 58%, with an overall ADR of 49. The Radisson Blu, still the market leader, fared well in the city, with the introduction of renovated rooms and conference areas. Łódź The hotel segment had a slightly better year, only due to regional and local conferences held in the city. The leader in the market continues on being the Andel s Hotel in Manufaktura, which practically owns the small to medium size MICE segment in Łódź. The city did 57% in occupancy rate across all branded hotels, and an achieved rate of 64. 4-star Ambasador hotel was opened in 2010, however no new branded schemes entered the market. In the third quarter of 2011 Holiday Inn hotel (that has been under construction since 2007) located at the cross roads of Radwańska and Piotrkowska streets will be delivered into the market. A new 4-star, 191-room DoubleTree hotel is to open by Hilton in 2013. Wrocław The city finished the year with a very small improvement in RevPARs. The branded hotels leading in occupancy rates finished at 2009 levels 65%, and an ADR of 57 was achieved across all categories. The 5-star branded hotels managed to deliver circa 86 in ADR and a 69% occupancy rate. 5-star Platinum Palace boutique hotel was opened in 2010, and the pipeline has a Hilton 5-star project which has been delayed for some time now due to the lack of financing. The same issue is affecting the Hilton Garden Inn development in the centre of the city. A Park Inn and dual branded Campanile and Premiere Classe hotels are planned to be delivered into the market in 2012. Other Polish cities Bydgoszcz is progressing very nicely. A new 137-room Holiday Inn was opened in October, and a Campanile is also being planned in the city. Katowice is developing rapidly into a well diversified city, catering to the trade, investment and shared service center sectors. We saw two 4-star hotels opening in 2010 the Angelo (203 rooms), and the 168-room Best Western hotel. PROGNOSIS Positive factors for the Polish hospitality sector will be the GDP growth, one of the strongest in the EU, as well as ongoing preparations for the UEFA Euro 2012 championships. The EU Council Presidency will be taken over by Poland in July. We estimate over 100,000 room nights will be used in conjunction with this event. An extremely important promotion of the country during the last months of 2011 is expected to become reality. SELECTED HOTEL OPENINGS HOTEL NAME CITY NO OF ROOMS Hilton ***** Gdańsk 150 Holiday Inn **** Bydgoszcz 134 Best Western Premier **** Katowice 168 Ambasador **** Łódź 143 Arsenal **** Chorzów 115 HOTELS BY CATEGORY IN MAJOR POLISH CITIES TOURIST ARRIVALS (mln) TOURIST ARRIVALS (mln) 20 15 10 5 0 UDZIAŁ POSZCZEGÓLNYCH KATEGORII W RYNKU HOTELOWYM W NAJWIĘKSZYCH MIASTACH POLSKI 20% Source: Institute of Tourism 8% 8% 49% Hotel ***** Hotel **** Hotel *** Hotel ** Hotel * 15% on the base of Hotel Register in Poland FORMALLY RATED HOTELS AS OF END 2010 category Warsaw Kraków Poznań Wrocław Gdańsk Łódź Szczecin Hotel ***** 10 10 1 5 4 0 0 Hotel **** 7 21 5 8 5 2 4 Hotel *** 22 74 22 23 12 10 7 Hotel ** 13 22 15 3 4 9 3 Hotel * 9 5 2 4 0 2 6 Total: 61 132 45 43 25 23 20 on the base of Hotel Register in Poland Colliers International 19

Poland real estate review > Land Land The second half of 2010 (especially the fourth quarter) showed that the crisis in the land sector is over. GENERAL OVERVIEW The second half of 2010 especially the fourth quarter indicated that the crisis in the land sector was over as the number of investors and concluded deals grew. Therefore, it is highly probable that 2011 will also witness numerous new land and investment transactions. The beginning of 2010 was still strongly influenced by the global economic downturn which greatly affected the purchasing decisions of investment funds and developers. In this period no major transactions were recorded, however new plots were offered to the market. Also during this time a growing number of Polish and foreign companies began their quest for new investment plots. In the second quarter there was a slight increase in the number of transactions recorded. New agreements were mostly signed in cases where the transaction price was considerably lower than the asking price. The summer holiday period contrary to previous years showed eagerness from investors to begin considerable purchases. A higher number of preliminary contracts were signed. In addition, potential buyers started to invest in the process of examining the urban, infrastructural, and legal status of plots. In the last months of the year the number of companies with concrete investment plans, backed up with cash and preliminary promises of financing, increased. Also the number of closed transactions grew, including multi-phase investment projects. trends It is clear that in the coming years the market will be oriented towards buyers and not towards vendors, as it was before the crisis. More and more frequently the major factors that constrained new deals were lack of building permits, financing, and in case of commercial properties preliminary lease agreements. Many companies either changed or widened the range of their interests regarding the type of investments they focused on. The return of interest in residential plots is now noticeable. Commercial real estate, in particular retail, also become a priority for many investors who until now were developing only residential properties. Banks have started to search for buyers interested in purchasing plots with bad credit loans; and RANGE OF RESIDENTIAL LAND PRICES PER SQM OF NET SELLABLE AREA (PUM) City/region Min Max Mid-point Chnage in comparison with 2009 Warsaw - City Centre 300 900 600 37% Warsaw - Suburbs 140 350 245 24% Kraków 150 410 280 24% Łódź 100 220 160 0% Poznań 120 350 235 11% Silesia 70 200 135 0% Tricity 100 300 200 0% Wrocław 150 380 265 17% RANGE OF OFFICE LAND PRICES IN MAJOR POLISH CITIES PER SQM OF GLA City/region Min Max Mid-point Chnage in comparison with 2009 Warsaw 220 950 585 27% Kraków 180 350 265 23% Łódź 100 200 150 0% Poznań 180 300 240 0% Katowice 100 220 160 0% Tricity 130 350 240 0% Wrocław 160 450 305 19% 20 Colliers International

Poland real estate review > Land importantly, this process is carried out in collaboration with existing plot owners. Another noticeable trend is joint-ventures as a more and more attractive form of investing, sometimes the only possible one for certain investment targets. Among factors restricting market activity are long administration procedures and the issue of perpetual usufruct (granting of ground leases), the costs of which constrain some companies from investing in this type of plots. This is, in addition to high prices for the best locations, instances where the high amount of capital required deters many from investing. Prices & transactions The average price of office investment sites increased in comparison with the end of 2009 in Warsaw (27%), Kraków (23%) and Wrocław (19%). Prices in Łódź, Katowice, Poznań and Tricity remained at the same level. With respect to residential investment plots, the highest increase in average prices was recorded in Warsaw city centre (37%). An increase in prices was also recorded in other Warsaw districts (24%), as well as in Kraków (24%), Poznań (11%) and Wrocław (17%). The most significant transactions in the Polish land investment market included sale of a 4.85ha plot in the city centre of Kraków at a price of ca. 21 million. The site is designated for residential and office development. Another major deal was the sale of a residential/office investment site in south-eastern Warsaw. The price for the 4.4ha plot was PLN 70 million (ca. 17.9 million). Prognosis The second half of the year, especially the last quarter proved that the crisis is over and that the number of transactions and investors is increasing. Some banks now offer conditions that many investors are willing to accept. With regard to the residential market, the improvement in borrowing power is noticeable, which will cause an increase in purchasing activity. Everything indicates that 2011 will be a very active year in terms of new land and investment transactions, construction of new residential, office, retail and warehouse projects. Locations for potential hotel developments will also find buyers. New residential projects will begin in all major and medium-sized cities. Developers are already in possession of well-prepared plots, therefore in many places we can expect construction to begin soon. There are more and more investors interested in retail parks. Cities with above 30,000 inhabitants will continue to be besieged by searches for plots in attractive locations, offering a good price and limited competition in the area. In the coming years prices will remain at the current level with some minor changes. If a growth in prices is recorded, it will be sensible, especially taking into consideration dynamics in the pre-crisis years. Everything suggests that 2011 will be a very active year in terms of new land and investment transactions. MAJOR TRANSACTIONS in 2010 City Size (ha) Investment potential (sq m) Purpose Price ( mln) Kraków 4.85 70,000 Residential / Office 21.3 Warsaw 4.4 60,000 Residential / Office 17.9 Gdańsk 2.7 45,000 Residential 7.9 Warsaw 1.8 45,000 Office 6.2 Gdynia 1.44+2.25 30,000 Office / Industrial 4.4 Toruń 3 10,000 Industrial 2.6 Preliminary agreements signed in 2010 planned to be closed in 2011 City Investment potential (sq m) Purpose Warsaw 20,000 Retail Szczecin 14,000 Retail Warsaw 15,000 Residential (Letter of intent) Colliers International 21

Poland real estate review > Investment Investment For the first time post-lehman Brothers, investors turned to regional cities with several prominent transactions. TRANSACTION VOLUME ( mln) TRANSACTION VOLUME ( MLN) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 PRIME YIELDS 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% PRIME YIELDS INDUSTRIAL RETAIL OFFICE GENERAL OVERVIEW As a result of strong macroeconomic fundamentals and low vacancy rates, Poland s commercial property market navigated well through the recent credit crisis. Poland is widely perceived by the international investment community as the hot-spot in the CEE region and indeed a major European economy. The country has continued to emerge as a core market, with such features as liquidity for core assets (equity and debt), low risk premiums and an institutional quality inventory within a sound legal environment. KEY INVESTMENT FIGURES METRIC MEASURE Investment Turnover 1.8 bln Prime Office Yield 6.75% - 7.25% Prime Retail Yield 6.75% - 8% Prime Industrial Yield 8% - 8.5% The Polish commercial real estate market has remained attractive relative to other EU countries and property values have not been impaired to the degree observed in other CEE countries during the crisis. Moreover, upward pressure on pricing with regard to core assets was recorded in 2010. Total real estate investment volume in Poland in 2010 more than doubled in comparison to 2009 levels with a number of high profile transactions. Single transaction volume increased in comparison to 2009 and the market has witnessed several all equity transactions which demonstrated the confidence of the investors in the market. Office and retail asset classes dominated the market, whereas the logistics sector also recorded major transactions, including a core portfolio sale. For the first time post-lehman Brothers, investors turned to regional cities with several prominent transactions, particularly in office and retail sectors (Grunwaldzki Center in Wrocław, Avatar in Kraków, Jantar Shopping Center in Słupsk, Galeria Malta in Poznań). We note that the Polish investors are becoming increasingly interested in the commercial real estate market, which has been marked by acquisitions concluded by PZU, Poland s largest insurance company (which purchased the Athina Park office complex). PROGNOSIS Core German investors are expected to continue to dominate the investment landscape for the medium term, given the ability to transact by means of all equity or low leverage levels. As a result of the available pool of debt and equity being focused on standing core assets, a growing difference in yield or pricing has become more prevalent between core and non-core assets. Several assets in Poland are currently in due diligence and we expect investment activity to remain strong in 2011, although likely less volume than in 2010. We are of the opinion Poland will out-pace the rest of CEE for the near term, primarily due to the inherent, healthy macro-economic dynamics, a national economy, which continues to expand and also due to favourable leasing dynamics in Poland s major cities. Stabilization of core yields in the mid-term is becoming increasingly dependent on the macroeconomic fundamentals of the region in the wake of the sovereign debt issues. KEY INVESTMENT TRANSACTIONS DEAL VALUE ( mln) VENDOR PURCHASER Arkadia & Galeria Wileńska n/a Simon Ivanhoe Unibail-Rodamco Horizon Plaza 102 IVG Union Investment Trinity Park III 93 Ghelamco SEB AM Jantar 92 Mayland EPISO Logistics Portfolio 91 Panattoni EPISO Topaz & Nefryt 79 GTC RREEF Grunwaldzki Center 77 Skanska RREEF 22 Colliers International