RETAIL PROPERTY MARKET - FRANCE - Knight Frank

 
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
Q2 2018

 R E TA I L

     RETAIL PROPERTY
         MARKET

              FRANCE
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
OVERVIEW

             • Household consumption will remain sluggish in 2018 due to increases in purchase power being worn away by the increase in inflation.
               However, French spending should accelerate during the second half of the year and maintain a steady pace in 2019 and 2020 due to the
Economy

               continued improvement in the job market, wage gains and more favourable tax measures.
             • Following a record level in 2017, tourist numbers continue to increase in 2018 in the Greater Paris Region, with a 7% increase year-on-year
               in the number of hotel arrivals during the 1st quarter, related to the dynamism of the international clientele (+ 16.5 %, compared to + 0.2 % for
               the French).

             • This is a time for multi-faceted approaches, merging and commercial innovation. Shop-in-shops, pop-up stores, showrooms and single-brand
               stores, brand associations…. terms and formats are not lacking, revealing a deeply changed commercial landscape, notably as a result
Brands

               of the joint development of physical and virtual worlds.
             • This joint development, illustrated by the digitalisation of points of sale and the incursion of “pure-players” in the field of physical retail, also
               continues to manifest itself as an increase in alliances between traditional retailers and internet players (Monoprix/Sarenza,
               André/Spartoo, Carrefour/Google, etc.).

             • Brand difficulties and their profitability requirements continue to punctuate the retail property market through an increase in disposals,
               whatever the asset class. The lasting nature of the increase in vacancy rates is, however, a function of the intrinsic quality of each asset,
               retail zone or retail pitch.
Rental

             • Restaurants, food, sport, beauty and decoration account for a significant proportion of openings and thus partially offset the slow down in
               fashion. This diversity of players, and new concepts that they are the source of, notably contribute to the dynamism of the very heart of Paris,
               as well as the renewal of the retail offer in large regional cities.

             • 1.6 billion billion euros were invested in the retail market in France during the 1st half of 2018, an increase of 23% year-on-year. The
Investment

               increase, however, is misleading as it is due to the completion of one exceptional deal: the acquisition by Hines, for BVK, of the future Apple
               Store on the Champs-Élysées for almost 600 million euros, which greatly inflated investment volumes on high streets (65%).
             • Retail parks take second place, ahead of shopping centres. In this market sector, which only accounted for 14% of French retail investment
               volumes, yields saw new upward pressure, indicative of investors’ wait-and-see attitude

                                                                                                                                                                       2
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
Economic
 context
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
ECONOMIC CONTEXT

Temporary slowdown                                                                                                                    On the right track
French economic indicators                                                                                                     Change in unemployment rate
Annual growth as a %, unless otherwise indicated                                                                                               % of active population

                                                                                       12
  Indicator                                2016       2017   2018f   2019f

  GDP                                      1,1        2,3    1,8     1,7
                                                                                       10

  Inflation                                0,3        1,2    2,0     1,5                                                                                              8.9

                                                                                        8                                                                             8.0
  Household consumption                    2,0        1,1    1,1     1,6

  Household income¹                        1,8        1,4    1,2     2,0
                                                                                        6

                                                                                                                                                Metropolitan France
  Unemployment (whole of France)           10,1       9,4    9,1     8,8                                                                        Ile-de-France

                                                                                        4
                                                                                            12341234123412341234123412341234123412341
¹Household real gross disposable income.
                                                                                            2008   2009   2010   2011   2012   2013   2014   2015   2016   20172018

Source: Banque de France, Macroeconomic projections                                                                                                  Source: INSEE

• As with most other advanced economies, French GDP growth has clearly slowed down since the start of 2018, with growth limited to 0.3 % as at
  Q2 following growth of 0.2 % in Q1. However, activity should strengthen in coming months as a result of expected increases in company
  investment and household consumption.
• In spite of a lower level than in 2017, the upturn in employment remains on the right track. Following the creation of 333,000 private sector jobs
  last year, more than 160,000 will be created in 2018, contributing to the progressive fall in unemployment. The unemployment rate should soon drop
  below 9%, a level that in spite of everything remains clearly above that of the European average (7 % at the end of May 2018, within the EU28).                           4
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
ECONOMIC CONTEXT

Rebound expected…in 2019                                                                                              Decreasing morale
Household consumption                                                                                                         Household opinion
In France, % of annual change in volume                                                                             Summary indicator – CVS-CJO data

                                                                              130

                                                                              120
                                 2.00%

                                                                              110
                                                            1.60%

                                                                     1.60%
                        1.40%

                                                                              100
                                          1.10%

                                                   1.10%
               0.80%

                                                                              90
      0.60%

                                                                              80

                                                                                    mars-00

                                                                                    mars-07

                                                                                    mars-14
                                                                                      oct-00

                                                                                     juin-05

                                                                                      oct-07

                                                                                     juin-12

                                                                                      oct-14
                                                                                     mai-01

                                                                                      avr-04

                                                                                    janv-06

                                                                                     mai-08

                                                                                      avr-11

                                                                                    janv-13

                                                                                     mai-15

                                                                                      avr-18
                                                                                     déc-01

                                                                                     févr-03

                                                                                     nov-04

                                                                                     déc-08

                                                                                     févr-10

                                                                                     nov-11

                                                                                     déc-15

                                                                                     févr-17
                                                                                      juil-02

                                                                                    sept-03

                                                                                      juil-09

                                                                                    sept-10

                                                                                      juil-16

                                                                                    sept-17
                                                                                    août-06

                                                                                    août-13
     2013     2014     2015     2016     2017     2018f    2019f    2020f

Source: Banque de France, Macroeconomic projections                                                                                  Source: INSEE

• Having slowed down in 2017, household consumption will remain sluggish in 2018 due to the increases in purchase power being worn away by
  the increase in inflation (+ 2.0 % in 2018, following + 1.2 % in 2017).
• Nevertheless, French spending should increase during the second half of the year and will probably maintain a steady pace in 2019 and 2020 due
  to the continued improvement in the job market, wage gains and more favourable tax measures (suppression of council tax, decrease in employee
  contributions).                                                                                                                                      5
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
  ECONOMIC CONTEXT

     THE WINNERS…

                  Organic products
                           +17% in value in 2017
                         +250 new shops in 2017
                                                                                   Sports goods
                                                                                   +4% in value in 2017
                                                                                   +9 - 10% for the “women’s” category
         Garden centres
                +4% in value in 2017

                                                                        Beauty products
                                                                        +3% in value in 2017
                                  Bazaars                               Online perfume sales: +27% in 2017
                  +19.3% in value in 2017
                 335 shops (+115 in 2017)

                                                                                                      …AND LOSERS

                                                         Hypermarkets            Shoes
      Market share / all products: 29.3% in 2017 (32.6% in 2012)                 -4.4% in value in 2017
Market share / non-food products: 12.8% in 2017 (17.7% in 2012)                  -12% of shops > 400 m² between 2012 and 2017

                                     Clothing / Textile                          Books
                                                                                 -0.8% in value in 2017
                                        -13% in 10 years
                                                                                 E-books: +9% in 2017
  - 2.8% in 2018 at end of May, following +0.6% in 2017

                                                                                       Toys
                                                                                       -3.8% in value in 2017
     Sources: INSEE* / Union Sport & Cycle / IFM / NPD
     *Large specialist retailer figures/Annual change                                  Share of online sales: 24.9%
                                                                                                                            6
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
ECONOMIC CONTEXT

Towards new peaks                                                                                                 Foreigners driving growth
Change in number of hotel arrivals                                                                                  Change in number of hotel arrivals
In the Greater Paris Region, as at 1st quarter each year                                                                          In the Greater Paris Region

400000
               ▲ 14%
350000
                                                                                                                                    Foreign tourists
300000                          ▲ 15%
                                                                                                                                                +16.5%
250000                                                                                                                              Q1 2018 / Q1 2017

200000                                      ▲ 31%
                                                            ▲ 5%
150000
                                                                          ▲ 21%
100000
                                                                                        ▲ 17%
                                                                                                                                     French tourists
50000
                                                                                                                                                   +0.2%
     0                                                                                                                              Q1 2018 / Q1 2017
         United States      UK          Germany         China          Japan         Russia

                         2016    2017   2018

Source: Paris Tourist Office / Red box: annual growth between Q1 2017 and Q1 2018.                                                 Source: Paris Tourist Office

• Following a record level in 2017, tourist numbers continue to increase in 2018 in the Greater Paris Region, with a 7% increase year-on-year in
  the number of hotel stays during the 1st quarter, related to the dynamism of the international clientele (+16.5%, compared to +0.2% for the French).
• Almost all nationalities show an increase, to varying degrees depending on the continent. For once, Europe saw the greatest increase year-on-
  year (+19%), partly related to the rebound in arrivals of the Germans and Spaniards, and the return of the British. The increase in Asians is more
  modest (+10.8%) due to the slowdown in growth of Chinese arrivals.                                                                                              7
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
ECONOMIC CONTEXT

Strong growth in Paris…                                                                                                        …and the regions
Rate of Sunday openings in international tourist zones                                     Rate of Sunday openings in international tourist zones
In Paris, according to activity sector as a %                                                                                       In regions, by town as a %

         Food                              Luxury            Other                          City                       End of January       End of December
                                                                                                                           2017                   2017

                                                                                            Antibes                         12%                   15%

                                                                                            Cagnes-sur-Mer                  26%                   45%
                                                 11%                   27%
                                                       31%       16%
                                                                                            Cannes                          10%                   49%
                  43%
                                                                                            Deauville                       70%                   75%
                      63%
                                                                                            Dijon                          ˂10%                   51%

                                                                                            La Baule                        49%                   56%

                                                                                            Nice                            32%                   36%

                                                                                            Saint-Laurent-du-Var            37%                  ˃80%
    Before the measure         End of Septembre 2017

Source: French Ministry of Economy and Finance                                                                     Source: French Ministry of Economy and Finance

• Almost three years after the adoption of the Macron Law, a new assessment made by the Ministry of the Economy confirms the increase in Sunday
  openings of shops in Paris, going from an average of 17.4% before the measure to 30.4% in September 2017.
• The analysis is the same outside of Paris, where 44% of shops located in international tourist zones opened on a Sunday at the end of 2017,
  compared to 25% at the start of the year.
                                                                                                                                                                    8
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
Brand strategies &
  retail formats
RETAIL PROPERTY MARKET - FRANCE - Knight Frank
FRENCH RETAIL PROPERTY MARKET
BRAND STRATEGIES & RETAIL FORMATS

Increase of 14% expected in 2018                                                                                                          A general increase
E-commerce sales                                                                                                            E-commerce market shares per sector
In France                                                                                                                           In France, estimations in 2017 as a %

100                                                                                               50%

 90
                                                                                                        Cultural products     High-tech                      Clothing
              34%

 80                                                                                               40%
       33%

 70
                     28%

                            25%

                                   24%

 60                                                                                               30%
                                          22%

                                                 19%

                                                                                                                                                                    13%
 50                                                                                                                                  23%

                                                                             15%
                                                                      14%
                                                        14%

                                                                                    14%

                                                                                           14%
 40                                                                                               20%                 45%
                                                               12%

 30

 20                                                                                               10%
              15.6

                     20.0

                            25.0

                                   31.0

                                          37.7

                                                 45.0

                                                        51.1

                                                               57.5

                                                                      64.9

                                                                             72.0

                                                                                    81.7

                                                                                           93.2
 10
       11.6

  0                                                                                               0%
      2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f

                       Sales (€ billion)                       Annual growth (%)

Source: Fevad                                                                                                                             Sources: Fevad / GFK / IFM / Nielsen

• Internet sales increased by 14% in 2017 to reach almost 82 billion euros. Mobile devices accounted for 21% of this total (+50% year-on-year),
  compared to barely 2% five years ago.
• In 2018, online sales should reach more than 93 billion euros, putting France in second place in Europe, behind the United Kingdom (178 billion)
  and equal with Germany, but well ahead of other large European countries such as Italy and Spain (28 billion each).
                                                                                                                                                                            10
FRENCH RETAIL PROPERTY MARKET
BRAND STRATEGIES & RETAIL FORMATS

An ongoing revolution

Number of new concepts per year                              Highly sought-after formats                                           The joint development
All sectors, in France                                                                                                      of physical and virtual worlds

                                                                         POP-UP
                                                                         STORES
               292
      253

                                 248
                          236

                                                                         SHOP-IN-
                                                                          SHOPS

    2014     2015        2016   2017                                     SINGLE-
                                                                         BRAND
                                                                         STORES

Source: La Correspondance de l’Enseigne

• This is a time for multi-faceted approaches, merging and commercial innovation. Shop-in-shops, pop-up stores, showrooms and single-brand
  stores, brand associations…. terms and formats are not lacking, revealing a deeply changed commercial.
• The joint development of physical and virtual worlds, illustrated by the digitalisation of points of sale and the incursion of “pure-players” in the field
  of physical retail (AMPM, Birchbox, etc.), also continues to manifest itself as an increase in alliances between traditional retailers and internet
  players (Monoprix/Sarenza, André/Spartoo, Carrefour/Google, etc.).                                                                                           11
FRENCH RETAIL PROPERTY MARKET
BRAND STRATEGIES & RETAIL FORMATS

                                                                                                                      Type of location

Expansion projects that combine formats                                                                                  Out-of-town
Examples of developing brands                                                                                            Shopping centres
In France, by activity
                                                                                                                         High street

Sources: Knight Frank, press and brands

   FASHION / SPORTSWEAR                            RESTAURANT               FOOD     DISCOUNT / BAZAARS               OTHERS

  Calzedonia                              Au Bureau             Ange               Action                 Adopt’

  Chaussea                                Beef House            Bio C Bon          Centrakor              Amazing Jewelry

  Décathlon                               Bistro Régent         Biocoop            Easy Cash              Basic Fit

  Intersport                              Burger King           Day by Day         Gifi                   Cultura

  JD Sport                                Five Guys             Grand Frais        Hema                   Darty

  Kiabi                                   La Pizza de Nico      Kusmi Tea          La Foir’Fouille        Fnac

  Primark                                 O’Tacos               La Vie Claire      Maxi Bazar             La Redoute

  Superdry                                Pitaya                Marie Blachère     Noz                    Orchestra

  Takko                                   Steak n’ Shake        Naturalia          Stokomani              Parfois

  Uniqlo                                  Vapiano               NaturéO            Tiger                  Rituals

  Women’secret                            Yogurt Factory        Nespresso          Zeeman                 Sostrene Grene
                                                                                                                                            12
The rental market
   High streets
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Continued dynamism
Trends in the Parisian high streets retail market

• Hotel arrivals increased by 7.4% year-on-year in the Paris region. The          Rossignol has just taken over the Basler shop at 21 boulevard des
  increase is 16.5% for foreign visitors. This dynamism benefits the              Capucines.
  retail market, particularly within international tourist zones (ITZ).
                                                                                • The analysis of the different Parisian retail sectors does not really show
  Moreover, the ITZs concentrate most new flagship projects, as well as
                                                                                  any new trends. Rue Saint-Honoré remains one of the most lively
  most operations to create or renovate luxury hotels in the capital.
                                                                                  streets, with the advancing works to future large flagship stores
• The busiest streets are still the main targets of international brands          (Chanel, Graff, Saint Laurent, etc.), new openings (Akillis, Isabel Marant,
  looking to optimise their communications and offer their clients a              Moschino, Herno, Hervé Chapelier, Marni, Serge Lutens, etc.) and
  more qualitative and updated shopping experience, like H&M with                 recent deals (Balmain).
  their flagship store at 1-3 rue La Fayette over almost 5,000 m². Whilst
                                                                                • On the Champs-Élysées, certain or potential refurbishment projects
  retailer movements are less numerous than a few years ago, the mass
                                                                                  remain numerous and continue to drive the avenue, which is more and
  fashion giants continue to play an important role in this, especially given
                                                                                  more dedicated to flagship stores. These changes, in light of recent
  that the disposals they undertake to streamline their network help to
                                                                                  and ongoing transactions, will likely intensify the avenue's
  drive the market (Balmain instead of Zara at 374 rue Saint-Honoré).
                                                                                  upmarket move.
• Several other types of player are active: luxury brands and fashion
                                                                                • Dormant for some time, the Left Bank seems to be making a
  designers, the food and restaurant sectors, sport, cosmetics and
                                                                                  comeback. Brands (Tumi, Salomon), recent players (Five Guys) and
  decoration account for a significant share of openings. Such a range of
                                                                                  new concepts (From Future, Décathlon City) are all active there; the start
  players and concepts conveys the effervescence and upmarket move
                                                                                  of an increase in activity that has been seen in the mid and upmarket
  of the capital’s very heart.
                                                                                  sectors, but which has not yet been seen in the luxury sector, in spite of
• This effervescence is also indicative of tests undertaken by brands to          the reopening of Lutétia Hotel.
  adapt their models to new consumer expectations and to take advantage
                                                                                • The effervescence of the Parisian market is not expressing itself by a
  of changes in buying patterns (Leroy-Merlin at Madeleine and in the
                                                                                  generalised increase in prices. Rental values remain generally stable
  Batignolles area, the new AMPM flagship store on rue Étienne Marcel,
                                                                                  in the capital. Whilst these could still increase on a limited number of
  etc.).
                                                                                  streets, they are suffering from downward pressure on some good
• Furthermore, the trend for brands to undertake their own distribution           streets due to brand’s profitability requirements and high prices that
  is increasing in the cosmetics, luggage and sport sectors. After                have been reached in recent years.
  Fusalp in the Marais and Salomon on boulevard Saint-Germain,
                                                                                                                                                          14
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Examples of recent transactions in Paris
Source: Knight Frank

  Retailer                Address                        District   Total area      ZA rent
                                                                       (m²)          (€/m²)

  IKEA                    23 boulevard de la Madeleine   Paris 1     6,000       Confidential

  AMPM                    49 rue Etienne Marcel          Paris 1      564           1,700

  HEMA                    3 rue du Havre                 Paris 9      316           2,400
                                                                                                Future IKEA store, 23 bd de la Madeleine, Paris 1
  ROSSIGNOL               21 boulevard des Capucines     Paris 2      300           2,940

  TUMI                    17 rue du Vieux Colombier      Paris 6      240           2,670

  BAP                     16 boulevard des Capucines     Paris 9      220           3,250

  DYPTIQUE                56 rue de Passy                Paris 16     220           3,370

  SALOMON                 129 boulevard Saint-Germain    Paris 6      211           2,770

  HUGO BOSS               118 rue Vieille du Temple      Paris 3      168           2,350       Salomon, 129 bd Saint-Germain, Paris 6

  TUMI                    63 Avenue des Champs-Élysées   Paris 8      165          15,970

  FOOTPATROL (JD SPORT)   45 rue du Temple               Paris 4      110           1,160

  SERGE LUTENS            324 rue Saint-Honoré           Paris 1       87          10,000

  L’OCCITANE              144 rue de Rennes              Paris 6       86           3,060

  DUPONT ST               10 rue de la Paix              Paris 2       50           6,200       Foot Patrol, 45 rue du Temple, Paris 4

                                                                                                                                           15
Note: rounded values
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Record in sight                                                                                                              Alignment of the planets
Worldwide sale of luxury items                                                                                                     An array of favourable factors

300                                                                                        50%
                                                                                                                                                       Boom in
250
                                                                                           40%                                                          online
                                                                                                                                                        sales
                                                                                           30%      Rise in
200                                                                                                tourism
                                                                                                                  Increase in spending
                               13%

                                           10%

                                                             12%
                                                                                                                from Chinese consumers

                                                                               6 - 8%
                                     11%

                                                                                           20%
150
       7%

                                                                         4%
                                                 3%

                                                       3%

                                                                                           10%
                                                                   0%                                                                               Success of
             -2%

                   -2%

100                                                                                                                                                 beauty and
                         -8%

                                                                                           0%                                                       accessories
 50                                                                            276 - 281   -10%      Local
                                                                                                  consumption
       159

             170

                   167

                         153

                               173

                                     192

                                           212

                                                 218

                                                       224

                                                             251

                                                                   250

                                                                         260

  0                                                                                        -20%                      Millenials
      2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f

                     Sales (€ billion)                 Annual growth (%)

Source: Bain & Company                                                                                                            Sources: Bain & Company / Knight Frank

 • After a slowdown in 2016 and then an increase last year, luxury sales should once more gain strength in 2018. The increase for this year will
   thus be comprised between 6 and 8%, driven by the dynamism of sales in Asia (between 9 and 11%).
 • The luxury industry is benefitting from an array of structural and temporary favourable factors, ensuring durable growth in the long-term. Among
   these factors are the continued rise in international tourism (worldwide increase in arrivals of 3.3% per year between 2010 and 2030), as well as
   the growing adjustment of luxury brands to new consumption methods (digitalisation, expectations of millenials, etc).
                                                                                                                                                                           16
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Recovery still to be confirmed
Focus on the luxury Paris market

                                                                                 Breakdown of openings per street
Change in number of luxury shop openings
                                                                                 Share as a %, out of total openings in Paris
In Paris

                                                                                                             2018                     Rue Saint-Honoré
                                      52
                       50

                                                                                                                                      Avenue Montaigne
      39                                                                                       23%                        24%
                                                      37
                                                                                                    24%             22%               Vendôme / Paix
                                              28
                                                                                                                                      Faubourg Saint-Honoré
                                                                                               4%       2012-2017
                                                                                         8%                               12%
                                                                                               7%                                     Sèvres / Saint-Germain
                                                                                                                                13%
                                                                                                     10%            12%               George V / François 1er
                                                                                              11%            11%

                                                                                                        5%          11%               Champs-Elysées
Annual average         2015         2016      2017   2018*                                                   5%
  2012-2017
                                                                                                                                      Autres
¹Survey undertaken at the end of June 2018.
Source: Knight Frank                                                             Source: Knight Frank

  • More than thirty definite and potential openings are expected over 2018, equating to an increase of more than 30% already compared to
    openings that took place in 2017.
  • Three streets have confirmed their dynamism: rue Saint-Honoré, avenue Montaigne and the Place Vendôme / Rue de la Paix area concentrate
    nearly 50% of openings in 2018, a share equivalent to that of the last five years. Whilst the Champs-Élysées has seen their share increase,
    thereby confirming its upmarket move, others are less dynamic, for example rue du Faubourg Saint-Honoré and the Left Bank.                                  17
FRENCH RETAIL PROPERTY MARKET
 HIGH STREETS | PARIS

A larger supply of high-end accomodations
Luxury hotels in Paris: recent and future openings

Source: Knight Frank

                                                     18
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Few changes…
Prime rental values, in Paris, in €/sq m/year Zone A*

                                                                                                              Changes in prime rental values
  Street or retail area                   District                        Rent            Rent        Trend   Between 2006 and 2018, on some Parisian
                                                                      as at Q2 2017   as at Q2 2018           streets, in €/sq m/year Zone A*

                                                                                                              25,000
  Avenue des Champs-Élysées               Paris 8                       20,000          20,000        
                                                                                                              20,000
  Avenue Montaigne                        Paris 8                       15,000          15,000        
                                                                                                              15,000
  Rue du Faubourg Saint-Honoré            Paris 8                       15,000          15,000        
                                                                                                              10,000

  Rue Saint-Honoré                        Paris 1                       12,000          12,000                5,000

                                                                                                                  -
  Boulevard Haussmann                     Paris 8 / 9                    6,000           6,000        

                                                                                                                       Q2 2018
                                                                                                                          2006
                                                                                                                          2007
                                                                                                                          2008
                                                                                                                          2009
                                                                                                                          2010
                                                                                                                          2011
                                                                                                                          2012
                                                                                                                          2013
                                                                                                                          2014
                                                                                                                          2015
                                                                                                                          2016
                                                                                                                          2017
  Sèvres / Saint-Germain                  Paris 6 / 7                    6,000           6,000         
                                                                                                                            Champs-Elysees
  Marais                                  Paris 3 / 4                    5,000           5,000                             Avenue Montaigne
                                                                                                                            Rue Saint-Honoré
                                                                                                                            Rue des Francs-Bourgeois
  Capucines / Madeleine                   Paris 1 / 2 / 8 / 9            4,000           4,000        
                                                                                                                                    Source: Knight Frank
  Rue de Rivoli                           Paris 1 / 4                    3,500           4,000        

  Rue de Passy                            Paris 16                       2,500           3,000        

*Rental value: decapitalised rent + assignment (leasehold/business)                                                                                        19
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | PARIS

Change is in the air
Examples of recent and upcoming projects
In Paris, between 2017 and 2021

Source: Knight Frank

                                           20
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | REGIONS

Supply undergoing strong renewal
Trends in the high streets retail market in the regions

• A record number of new companies in Lyon, an unemployment rate at            thus continue to spread, following the inspiring examples of some large
  its lowest level since 2008 in Nantes, the number of overnight stays at      European cities, such as “Time Out Market” in Lisbon and “Foodhallen”
  its highest level for 15 years on the Côte d’Azur, a strong increase in      in Amsterdam.
  the number of foreign visitors in Bordeaux… For several months,
                                                                            • Large refurbishment projects remain numerous. They constitute
  macro-economic indicators have been green in the largest regional
                                                                              both new establishment solutions for brands, as well as an important
  cities, supporting the dynamism of their retail property markets.
                                                                              opportunity for large cities to regenerate and strengthen their retail offer.
• This vigour first and foremost benefits the best retail pitches, where      Following the Grand Hôtel Dieu, inaugurated at the end of April in Lyon,
  several flagship stores have recently opened or are expected, for           recent news was dominated by the progress of the mixed-use
  example Primark in Toulouse and Strasbourg, Uniqlo in Rennes,               “Iconic” project in Nice and the call for proposals undertaken within
  Toulouse and Nantes, and Zara in Vieux Lille. Certain large mass-           the scope of the transformation of the Palais du Commerce in
  market brands are also continuing to move their pawns into smaller          Rennes.
  towns, for example the recent opening of H&M in Vannes and the
                                                                            • Finally, certain projects related to the vacating of large areas seen in
  future opening of a Swedish brand by 2019 in Agen.
                                                                              recent years in town centres are being implemented, for example, the
• Like in Paris, mass-market fashion brands are also helping to animate       upcoming launch of the marketing of the former Galeries Lafayette
  the market through their transfers. JD Sports has thus just taken two       building in Marseille, and the CDAC authorisation that has been
  former H&M shops on rue de la République in Lyon and avenue Jean            obtained for the creation of 5,000 m² of retail in Bordeaux’s former
  Médecin in Nice. Other sectors, other than sport, are also                  Virgin Megastore.
  supporting activity in regional retail streets, such as beauty (L’Oréal
                                                                            • The stabilising of prime rental values seen in 2017 has been
  in Lyon, Rituals in Rouen, etc.), decoration (AMPM in Lille, Sarah
                                                                              confirmed since the start of 2018. Lyon and Bordeaux show the highest
  Lavoine in Bordeaux, etc.), and the urban format of brands who are
                                                                              rental values (€ 2,500 /sq m/year, sometimes more, for the best
  more typically found in out-of-town locations (Truffaut in Toulouse,
                                                                              locations). Nice completes the podium. Other regional capitals, such as
  Boulanger “Le Comptoir” in Rouen, H&H in Lyon, etc.).
                                                                              Strasbourg and Toulouse, follow with rental values of between €2,000
• The restaurant sector also remains very active, like the new                and 2,200 /sq m/year, levels that have been seen for several years
  openings of successful brands (Big Mamma in Lille, after Five Guys and      now.
  Big Fernand) and the growth in “food hall” projects (“Halle Bocca” in
  Bordeaux, the former “Halles Alstom” in Nantes, etc.). These formats
                                                                                                                                                              21
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | REGIONS

Significant arrivals
Examples of openings and recent projects in the regions

Source: Knight Frank                                                                             LILLE
                                                                                                 Zara / Zara Home
                                                              ROUEN                              AMPM
                                                               Rituals                           Boggi
                                                                 Tiger                           Big Mamma
                                                             Boulanger
                                             RENNES
                                                Uniqlo
                                             Nespresso                         AMIENS
                                                                             Mauboussin                                STRASBOURG
                                                                                 Courir                                Primark
                                                                                                                       Hugo Boss
                                     VANNES
                                                                                                                       Starbucks
                                         H&M
                                                                                                                       Samsonite

                                            NANTES                          LYON
                                               Uniqlo                    JD Sports
                                                 COS                        L’Oréal
                                            Superdry                        Ba&sh                               GRENOBLE
                                     Bensimon / Home                         Kujten                             Hema

                                                 BORDEAUX
                                       Former Virgin Megastore
                                                       Lalique                                                             NICE
                                                 Sarah Lavoine                                                             JD Sports
                                                      Balibaris                                                            Sœur

       Cities in the Top 10 French                                AGEN
       urban areas                                              H&M
                                                                                                                       CANNES
                                                   Sneakers Specialist
                                                                         TOULOUSE         AIX / MARSEILLE              Akris
       Other cities                                                            Primark            Five Guys            Dolce & Gabbana
                                                                                Uniqlo          Philipp Plein          Oysho
                                                                               Truffaut       Scotch & Soda            Seafolly
                                                                                                                                         22
FRENCH RETAIL PROPERTY MARKET
HIGH STREETS | REGIONS

Stabilising of rental values
In the regions, end Q2 2018, in €/sq m/year Zone A*

Source: Knight Frank

          Lyon                                                                                                                    2,200 / 2,500

     Bordeaux                                                                                                            2,200 / 2,400

           Nice                                                                                                          2,200 / 2,400

           Lille                                                                                        1,800 / 2,000

     Toulouse                                                                                           1,800 / 2,000

   Strasbourg                                                                                           1,800 / 2,000

     Marseille                                                                          1,500 / 1,700

        Nantes                                                                      1,400 / 1,600

                   €0                   € 500                   € 1,000   € 1,500              € 2,000                  € 2,500                   € 3,000

*Rental value: decapitalised rent + assignment (leasehold/business)
                                                                                                                                                            23
The rental market
  Retail complexes
FRENCH RETAIL PROPERTY MARKET
SHOPPING CENTRES

Opening up
Market trends in the French shopping centre market

• Several new centres opened during the 1st half of            diversity also enables the loss of impetus of          TOP 10 of the largest French
  2018 (“Le Prado” in Marseille, “B’Est” in Lorraine,          certain traditional players in the shopping centre     shopping centres
  “Grand Hôtel Dieu” in Lyon). However, the                    market to be compensated. As such, fashion             Area in thousands of m²
  dominant trend remains that of a slowdown of                 continues with arbitrations, assigning certain shops
  new creations to the benefit of improvements to              whilst at the same time opening large flagship
  existing centres, as recently demonstrated by the            stores.                                                      Vélizy 2                     106
  launch of some significant extension and/or
                                                             • This trend first and foremost benefits the most         Mondeville 2                      108
  renovation projects (“Les Trois Fontaines” in Cergy,
                                                               visited regional shopping centres, which remain the
  “Créteil Soleil”, “Italik” in Paris, etc.).
                                                               main target of international brands and the                 Rosny 2                        112
• Whilst the different types of centres (retail galleries,     most upmarket players. Among the most
  regional centres, city-centre shopping centres) are          significant movements, Galeries Lafayette has          Grand Littoral                       119
  not all impacted in the same way, all operators are          just made the opening of a new shop in
                                                                                                                             Parly 2                       123
  making an effort to renew the supply.                        Beaugrenelle official, following the recent opening
                                                               of shops in Prado in Marseille and in the Carré         Créteil Soleil
• Shopping centres have thus entered a new era,                                                                                                             125
                                                               Sénart extension.
  that of an opening up of centres that was
                                                                                                                      Carré Sénart                          130
  needed by a model weakened by the rise in e-               • The latest changes in the shopping centre market
  commerce, new consumer expectations and the                  also show the desire to open shopping centres           La Part-Dieu                             132
  requirements of brands looking to reduce their               up to their surroundings: through the
  costs and increase their arbitrations.                       development of hybrid concepts (“Open Sky”) but        Les 4 Temps                               139
                                                               also by developing activities without a direct
• This opening up is expressed through a wider                                                                          Belle Epine                             141
                                                               connection to the retail function (coworking areas,
  variety of supply, with the welcoming of new
                                                               medical centres, etc.).
  brands from the high street or out-of-town
  locations, the more frequent resorting to kiosks and       • Finally, emphasis is placed on the digital,
  temporary boutiques, and a growing share of sport,           notably with the aim of providing a seamless               Centres located in the Paris region
  leisure and restaurant brands. In reply to the               shopping experience.
  changes in buying behaviour, this wider range of                                                                    Source: LSA
                                                                                                                                                                      25
FRENCH RETAIL PROPERTY MARKET
SHOPPING CENTRES

A busy 1st half of 2018
Examples of significant shopping centre openings and projects

Source: Knight Frank

 2018
                                                                                                                           Share of shopping centre creations
 Centre                           Town                           Type                         Area (m²)
                                                                                                                                                        in France
 B’Est                            Farebersviller (57)            Creation                       55,000                     As a % of the total volume of openings

 Le Prado                         Marseille (13)                 Creation                       23,000                                  2018
 Leclerc Baleone                  Sarrola-Carcopino (2A)         Creation                       18,000

 Grand Hôtel Dieu                 Lyon (69)                      Creation                       17,000

 La Lézarde                       Montivilliers (76)             Extension                      15,000
                                                                                                                                                     38% 40%
 Shop’In Houssen                  Colmar (68)                    Extension                       5,200
                                                                                                                                         2017
                                                                                 Note: pink box= projects already opened

  2019
  Centre                          Town                           Type                          Area (m²)

  Lillenium                       Lille (59)                     Creation                       56,000

  Open Sky                        Plaisir (78)                   Redevelopment                  37,000
                                                                                                                                         Creations
  Cap 3000                        Saint-Laurent-du-Var (06)      Extension                      32,500

  Vélizy 2                        Vélizy-Villacoublay (78)       Extension                      19,970

  Italik                          Paris (75013)                  Extension                       7,000                              Sources: Knight Frank, CNCC

  Les Berges de l’Ourcq           Les Pavillons-sous-Bois (93)   Creation                        6,800                                                              26
FRENCH RETAIL PROPERTY MARKET
RETAIL PARKS

Practicality, proximity, profitability…and quality
Trends in the French retail park market

• Following 480,000 m² in 2017, almost 200,000 m²          discount stores continue to expand and take                       Year-on-year change in T/O of
                                                                                                                                           specialist retail
  has already been opened since the start of 2018,         advantage of, notably, transfers undertaken by
                                                                                                                            Accumulation January-May 2018
  including some large, regional projects (“Les            other brands. Stokomani and Centrakor recently
  Océanides” near Bordeaux, “Cap Saran” near               took over several Fly shops. Furthermore, Gifi is
  Orléans, “Frunshopping” in south Nancy etc.).            about to take over Besson Chaussures, having
  Several complexes ˃ 10,000 m² will open in the 2nd       bought Tati a few months ago.                                      Town centre            Out-of-town
                                                                                                                    0
  half of the year, including “PAC de Chalezeule”
                                                         • That being said, out-of-town locations are not

                                                                                                                              -3.5

                                                                                                                                          -3.2

                                                                                                                                                     -2.2

                                                                                                                                                            -2.6

                                                                                                                                                                   -1.9
                                                                                                                                     -4
  close to Besançon and “L’Aren’Park” in Cergy.                                                                   -0.5
                                                           retail’s poor sibling. Fashion, for example, is more
                                                                                                                   -1
• In 2019, some large scale projects are expected,         present than previously, with a wider range of
  such as “Steel” in Saint-Étienne and the “Puisoz”        formats and levels. This is also the case with sport   -1.5
  site in Vénissieux, near Lyon.                           which, at the same time as the expansion of the         -2
                                                           usual suspects (Intersport) or tests undertaken by
• Contrasting with the slowdown in developments of                                                                -2.5
                                                           new brands (JD Sports), is seeing the number of
  new shopping centres, the pace of creation of retail                                                             -3
                                                           gym implantations multiplying (Basic Fit, Fitness
  parks remains sustained. Size and flexibility of the                                                            -3.5
                                                           Park, etc.); a success that is indicative of the
  premises, ease of access and parking, occupancy
                                                           growing position more generally given to                -4
  costs noticeably lower than those of other retail
                                                           leisure, whose new concepts continue to                -4.5
  formats: the model meets the practicality and
                                                           expand, for example, the “B’Fun” space that
  proximity requirements of the ever increasing
                                                           recently opened in Farébersviller to complete the             City centre including:
  number of suburban consumers, as well as the
                                                           offer in the “B’Est” shopping cetre.                          Shops in shopping centres
  profitability logic of brands.
                                                                                                                         High street shops
                                                         • Finally, food and restaurant brands are also more
• The good value for money of out-of-town formats,
                                                           present, driven by the boom in franchising and the            Out of town including :
  and their success with consumers, explains the
                                                           desire of brands to create dedicated hubs which               Shops in shopping centres
  broadening demand of a growing number of brands.
                                                           have a wider and more qualitative offer.                      Large & medium size units
  Low cost brands admittedly continue to make up the
  DNA of the retail park market. Bazaars and
                                                                                                                                                     Source: Procos

                                                                                                                                                                          27
FRENCH RETAIL PROPERTY MARKET
RETAIL PARKS

A sustained pace of development
Examples of significant retail park openings and projects

Source: Knight Frank

 2018
 Centre                            Town                         Type                         Area (m²)                    Share of retail park creations in France
                                                                                                                                  As a %, out of the total volume of
 Les Promenades de Brétigny        Brétigny-sur-Orge (91)       Creation                       49,000                                                       openings

 La Sucrerie                       Abbeville (80)               Creation                       30,000
                                                                                                                                           2018
 Cap Saran                         Saran (45)                   Creation                       29,200

 Frunshopping Nancy Sud            Saint-Nicolas-de-Port (54)   Creation                       23,000

 Les Océanides                     La Teste-de-Buch (33)        Creation                       22,000

 Aren’Park                         Cergy-Pontoise (95)          Creation                       20,000
                                                                                                                                           2017
                                                                                Note: pink box= projects already opened

  2019
                                                                                                                                                  81%
                                                                                                                                                        73%
 Centre                            Town                         Type                         Area (m²)

 Steel                             Saint-Étienne (42)           Creation                       70,000

 Puisoz                            Vénissieux (69)              Creation                       50,000
                                                                                                                                           Creations
 Wood Shop                         Cesson (77)                  Redevelopment                  42,000

 Eden 2                            Servon (77)                  Creation                       35,000

 Shopping Promenade                Arles (13)                   Creation                       19,000                                 Sources: Knight Frank, CNCC

 Frunshopping Fourmies             Fourmies (59)                Creation                       13,000                                                                  28
FRENCH RETAIL PROPERTY MARKET
DESIGNER OUTLETS

More and more sought after
Trends in the French designer outlet market

• With a stock totalling more than 500,000 m² that is     • In spite of the specific features of this distribution          Gross lettable area worldwide
  mainly located in the north of the country, designer      format, France still has a relatively significant                  For 1,000 inhabitants, in m²
  outlets only account for a limited share of the           development potential, in certain regions with
  retail market in France.                                  little current stock in particular, and owing to the
                                                            success of the format with consumers.
• In recent years, projects have continued to multiply.                                                              Germany     1
  As such, almost 150,000 m² have opened since            • Furthermore, a growing number of brands are
  the start of the 2010s, including approximately           expanding their presence within designer outlet           Poland         2.5
  35,000 m² in 2017 with the extension of Romans-           centres, such as department stores (Galeries
  sur-Isère and the opening of two new centres:             Lafayette), and several brands of accessible luxury
                                                                                                                      France          4.1
  “Honfleur Normandy Outlet” and “McArthurGlen              (The Kooples, the SMCP group, Zadig & Voltaire,
  Provence” in Miramas close to Marseille.                  etc.). Others are opening their first shop, for
                                                            example, Rituals in ”Villefontaine”.                       Spain          4.4
• The 1st half of 2018 saw the opening of “The
  Village” in Villefontaine, near Lyon. With an area      • Indeed, designer outlets have reinvented                     Italy             7.6
  of 25,000 m², this new designer outlet, developed         themselves and now better fit the needs of
  by Compagnie de Phalsbourg, has some 80                   consumers and brands. They thus offer a more
                                                                                                                     Portugal               7.8
  brands including Galeries Lafayette who have              thought out buying environment and architecture,
  almost 1,500 m².                                          as well as more diversified and more upmarket
                                                            concepts, very different to the first factory outlet          UK                      13.9
• The pace of development of new designer outlet
                                                            centres of the 1980s.
  centres shouldn’t weaken. As such, almost
                                                                                                                        USA                              20.8
  180,000 m² could potentially be completed by
  2021. Some will supplement stock in regions that
  already have some (the Greater Paris Region with
  “City Outlets Paris” in Romainville). Others will be                                                                                     Source: Neinver/ICSC
  the 1st opening, for example “Viaduc Village” in La
  Cavalerie, in Aveyron.
                                                                                                                                                                  29
FRENCH RETAIL PROPERTY MARKET
DESIGNER OUTLETS

Some projects…and a lot of uncertainty
Examples of significant designer outlet openings and projects

Source: Knight Frank

     Opening                    Centre            Town                          Type                             Area (m²)

      2011              Nailloux Outlet Village   Nailloux (31)                 Creation                           24,800
                                                                                                                                                  Change in openings in France
                                                                                                                                                     In m², total volume per year*
      2012                 The Style Outlets      Roppenheim (67)               Creation                           27,300

      2013                 One Nation Paris       Les-Clayes-sous-Bois (78)     Creation                           24,000
                                                                                                                                          70000
      2015               Marques Avenue A13       Aubergenville (78)            Redevelopment                      13,700
                                                                                                                                          60000
      2017             Honfleur Normandy Outlet   Honfleur                      Creation                           12,700
                                                                                                                                          50000
      2017              McArthurGlen Provence     Miramas                       Creation                           25,000

                                                                                                                                          40000

     Opening                    Centre            Town                          Type                             Area (m²)
                                                                                                                                          30000
      2018                   The Village          Villefontaine (38)            Creation                          25,000
                                                                                                                                          20000
      2019             Viaduc Village (Phase 1)   La Cavalerie (12)             Creation                           7,500

      2019                     L’Escale           Hautmont (59)                 Creation                          19,900                  10000

      2019                City Outlets Paris      Romainville (93)              Creation                          20,000                      0

                                                                                                                                                  2011
                                                                                                                                                  2012
                                                                                                                                                  2013
                                                                                                                                                  2014
                                                                                                                                                  2015
                                                                                                                                                  2016
                                                                                                                                                  2017
                                                                                                                                                  2018
                                                                                                                                                  2019
                                                                                                                                                  2020
                                                                                                                                                  2021
      2020                Village des Alpes       Châtillon-en-Michaille (01)   Creation                          16,000

      2021               Village de marques       Coutras (33)                  Creation                          13,000
                                                                                                                                                               Source: Knight Frank
      2021               Village de marques       Sorigny (37)                  Creation                          20,000                             *Definite and potential projects

                                                                                                Note: pink box= projects already opened                                                 30
The investment market
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

                                                                                         H1 2018        H1 2017       TREND

  Retail investment volume in France                                                    €1.6 billion   €1.3 billion    

  Share of retail*                                                                         14%            16%          

  Number of transactions > €100 million                                                      4              3          

  Share of Ile-de-France**                                                                 53%            52%          

  Share of foreign investors**                                                             55%            30%          

  Prime yield | High streets                                                              2.75%         2.75%           

  Prime yield | Shopping centres                                                          4.25%         3.75%           

  Prime yield | Retail parks                                                              5.00%         4.75%           

Source: Knight Frank

* On total investment in France,all asset types – excluding non divisible portfolios.
** On total retail investment in France.
                                                                                                                              32
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

A deceptive increase
Change in retail investment volumes
In France
Source: Knight Frank

 € 30,000                                                                                                            35%

                                                                                                                     30%
 € 25,000

                                                                                                                     25%
 € 20,000

                                                                                                                     20%
 € 15,000
                                                                                                                           +23%
                                                                                                           14%
                                                                                                                     15%

 € 10,000                                                                                                                  In one year
                                                                                                                     10%

  € 5,000
                                                                                                                     5%
                                                                                                         € 1,560

       €0                                                                                                            0%
              2007     2008    2009     2010   2011     2012     2013     2014     2015    2016   2017      1S
                                                                                                           2018
               Investment volume in France            Retail investment volume in France          Retail share (%)

  • Almost 1.6 billion euros were invested in the French retail market during the 1st half of 2018, equating to 14% of total corporate real estate
    volume, and an increase of 23% year-on-year. This increase is deceptive because it is due to one exceptional deal undertaken by Hines, for
    BVK, of the future Apple Store on the Champs-Elysées for almost 600 million euros.
  • Retail activity remains limited by the imbalance between available supply and investor demand, whose selective nature has increased and is
    now widespread across all asset classes.
                                                                                                                                              33
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

Paris accounts for almost half of volume
Geographic breakdown of retail investment volumes
In France
Source: Knight Frank                                                                                                              TOP 3 | Deals in H1 2018*

                                                                                                                                 Regions              Paris / IDF
                       H1 2018

                                                                                                                                                                                  114 Champs-El.
                                                                                                        Grand Vitrolles
                        3%

                       9%
                                 24%

                                                                                                                                                                                  277 Saint-Honoré
                                                  Paris

                                                                                                  Ste-Catherine
                                                                                                   Promenade
                                         47%      Ile-de-France (excl. Inner Paris)
      44%               2017
                                                  Regions
                                   13%
                                                  Non-divisible portfolios
                54%

                                                                                                         St-Priest Retail Park

                                                                                                                                                                                  Lutèce portfolio
                            6%

                                                                                                                                                   Source: Knight Frank
                                                                                                                                               *Excl. Non-divisible portfolios

  • The sale to Hines, for BVK, of the future Apple Store on the Champs-Élysées inflated the share of investment volume in the capital since the start
    of 2018. Furthermore, Paris concentrates almost a third of the total number of deals recorded in France.
  • Following an already slow start to the year, investment volumes in the regions were relatively low during the 2nd quarter and, with the
    exception of part of the Promenade Saint-Catherine, were mainly for the sale of retail parks and brand portfolios.
                                                                                                                                                                                 34
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

High streets increase their domination
Breakdown of retail investment volumes by asset type
In France
Source: Knight Frank

100%
                                                                                         15%
 90%

 80%                                                                             37%
                                                                                         20%
 70%

 60%

 50%                                                                             27%

 40%
                                                                                         65%
 30%
                                                                                                                       65%
 20%                                                                             36%                         Share of high street retail in H1
                                                                                                              2018 investment volume in
 10%                                                                                                                     France
  0%
            2010       2011     2012      2013      2014      2015      2016     2017   1S 2018

                          High streets   Retail warehousing   Shopping centres

 • Inflated by the sale of 114 Champs-Elysées, high street investment volumes accounted for 65% of retail investment volumes. Other
   significant deals were mainly for Parisian assets. In the regions, the 1st half of 2018 saw the transfer of part of “Promenade Sainte-Catherine” in
   Bordeaux by Redevco within the scope of the start of the Urban Retail Ventures fund formed with PGGM. Other large sales are expected, such as
   that of “65 Croisette” in Cannes, for which a sale commitment has just been signed.
 • Retail parks take second place due to some sales of individual assets of more than 20 million euros, but also due to the sale of brand portfolios.
   The shopping centre market, on the other hand, remains subdued.                                                                                35
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

Examples of significant retail investment deals in H1 2018
Source: Knight Frank

  Address                                                 Type                      City                            Seller                       Purchaser           Price

  Apple Store | 114 Champs-Élysées                          HS                     Paris 8                            EPI                       Hines (BVK)
  Grand Vitrolles                                           SC                    Vitrolles                    Klépierre / CNP                     Carmila
  Promenade Sainte-Catherine*                               HS                   Bordeaux                          Redevco                         PGGM
  & Other Stories | 277 rue St-Honoré                       HS                     Paris 8                          Private                        Private
  Lutèce portfolio | 46 assets                              HS                      Paris                          Generali                    Groupe Madar                  Apple Store, Paris Champs-Élysées

  Retail Park                                              RW                   Saint-Priest                           -                      ImocomPartners
  Ermenegildo Zegna | 50 rue du Fbg St-Honoré               HS                     Paris 8                             -                          BMO Rep
  H&M, Desigual | 45-55 rue St-Jean                         HS                     Nancy                           Vastned                           UBS
  Hypermarché Géant                                         SC                    Pessac                       Groupe Casino              Tristan Capital Partners
  Jardiland portfolio                                      RW                      France                           Covivio                     Inter Gestion
  Les Grands Philambins                                    RW             Chasseneuil-du-Poitou                        -                      ImocomPartners
  Léon de Bruxelles portfolio                              RW                      France                        AEW Ciloger                        Sofidy                   Retail Park, Saint-Priest
  ZAC Benoît Hure                                           HS                    Bagnolet                        Vinci immo                      Heracles
  Portfolio | 8 assets                                      HS                     France                        Family Office            F&A Asset Management
  Les Portes de Gayant                                     RW              Flers-en-Escrebieux                Marne & Finance                  Midi 2i / Duval
  ZAC de la Haie Passart                                   RW               Brie-Comte-Robert                          -                            Perial
  Place des Fêtes                                           HS                    Paris 19                           Duval                         Private
  26 rue de Rivoli / 19 rue du Roi de Sicile                HS                     Paris 4                             -                           Fiducial
  JD Sports | 29 rue Saint Ferréol                          HS                    Marseille                        Vastned                          Voisin
                                                                                                                                                                             45-55 rue Saint-Jean, Nancy

*Transfer of part of “Promenade Sainte-Catherine” in Bordeaux by Redevco within the scope of the start of the Urban Retail Ventures fund formed with PGGM.

        < €20M                 €20-50M               €50-100M                  > €100M         Note: HS high street, RW retail warehousing, SC shopping centre
                                                                                                                                                                                                                 36
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

French investors declining                                                                       Insurers / Mutual funds in the lead
Retail investment volumes by nationality                                                              Retail investment volumes by investor type
In France, as at 1st half 2018                                                                                               In France, as at 1st half 2018
Source: Knight Frank                                                                                                                     Source: Knight Frank

                       4%                                                                            1%
              3%                                                                           12%
         4%                                                                                                                     Insurers / Mutual funds

                                           France
                                                                                                                                SCPI / OPCI
                                                                                    12%                                39%
                                           Eurozone
                                                                                                                                Property investment
                                    45%                                                                                         companies
                                           Europe (outside Eurozone)                                                            Funds

                                           North America                                                                        Private investors / Family
                                                                                    12%                                         Office
44%
                                           Others                                                                               Others

                                                                                                   24%

  • French investors only accounted for 45% of retail investment volume, a share that is clearly down compared to the 1st quarter (71 %) due to a
    limited number of deals and the acquisition of 114 avenue des Champs-Elysées on behalf of the German BVK fund.
  • This same deal explains the increase in volumes invested by insurers/mutual funds, which accounted for the largest share of activity (39%),
    ahead of SCPI / OPCIs (24%) and property companies (12%).
                                                                                                                                                      37
FRENCH RETAIL PROPERTY MARKET
INVESTMENT MARKET

New upward pressure
Prime retail yields
In France, as a %

Source: Knight Frank

10.00

  9.00

  8.00

  7.00

  6.00

  5.00                                                                                                                                            5.00
                                                                                                                                                  4.25   High street
  4.00
                                                                                                                                                         Regional shopping centres
  3.00                                                                                                                                                   Retail parks
                                                                                                                                                  2.75
  2.00
             2000

                    2001

                           2002

                                  2003

                                         2004

                                                2005

                                                       2006

                                                              2007

                                                                     2008

                                                                            2009

                                                                                   2010

                                                                                          2011

                                                                                                 2012

                                                                                                        2013

                                                                                                               2014

                                                                                                                      2015

                                                                                                                             2016

                                                                                                                                    2017

                                                                                                                                           2018
                                                                                                                                            Q2
  • With the exception of the best ground floor retail locations (2.75%), yields in the retail market saw new upward pressure, bearing witness to the
    increased prudence of investors with regard to off-prime and secondary locations, and even prime locations that do not offer all guarantees with
    regard to return.

                                                                                                                                                                                     38
Antoine Grignon
Partner | Head of Retail Capital Markets & Leasing

+33 (0)1 43 16 88 70
+33 (0)6 73 86 11 02
antoine.grignon@fr.knightfrank.com

Antoine Salmon
Partner | Head of Retail Leasing

+33 (0)1 43 16 88 64                                          Contacts
+33 (0)6 09 17 81 76
antoine.salmon@fr.knightfrank.com

Vianney d’Ersu                                       David Bourla
Partner | Retail Leasing                             Partner | Chief Economist & Head of Research

+33 (0)1 43 16 56 04                                 +33 (0)1 43 16 55 75
+33 (0)6 75 26 03 96                                 +33 (0)7 84 07 94 96
vianney.dersu@fr.knightfrank.com                     david.bourla@fr.knightfrank.com

                                                                                                    39
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