1. The Nordic Retail Market Anna K Johansson 14 April 2011

2. 2 Introduction l Life before and after 2008 l Key Economic Indicators l Consumer Attitudes l Retail Sales l Retail Rental Performance l High Streets l Shopping Centres l Trends – the fight for the Consumer l Polarisation l Retailers l Locations l Opportunities l Rents & Deals l Voids l Attracting New Retailers l Challenges for the Future

3. 3 Life before and after 2008 l Not a uniform picture across the Nordics l Norway was not hit as hard as other Nordic countries by the recession l The domestic consumption and the production of goods and services were fairly stable l The increase of the unemployment rate was the smallest of all Nordic countries l Denmark fairly stable performance during the recession but l GDP decreased with some 5% in 2009 l Housing market more hit than in other Nordic countries l Sweden and Finland l Rapid fall in GDP and fall in production of goods l Unemployment increase l All Nordic countries have performed well in comparison with many other countries in Europe

4. 4 Key Economic Indicators: GDP Growth l As a result of a strong policy response by the Danish government, GDP was expected to grow at about 1.9% in 2010 and increase to 2.1% in 2011. GDP set for relatively slow but steady growth l Recovery set to continue in Finland, although at a steady pace l Norwegian (mainland) growth recovery is accelerating. Some of the best growth prospects in Europe for 2011 l Slowing but still strong growth in Sweden

5. 5 Key Economic Indicators: Unemployment (%) l Unemployment rate in the Nordics below the EU average except in 2009 to varying degrees l Compared to EU unemployment lowest in Denmark and Norway. Generally decreasing mostly. Increasing slightly in Denmark l Unemployment could still rise further. In Denmark many companies avoid hiring due to moderate economic expansion and uncertainty from the Eurozone debt crisis l Unemployment is likely to stabilise in Finland l Strong labour market recovery being seen in Norway l Unemployment now starting to fall in Sweden

6. 6 Key Economic Indicators: Inflation (%) l Inflation more recently above the EU average l Recent rises in Denmark primarily driven by increase in prices of tobacco, petrol and other consumer products. Inflation expected to stabilise in 2011 l Modest increases in Finland over the next few years l Likely to remain stable in Norway l Small increases possible in Sweden but will be kept in check by the Swedish central bank

7. 7 Key Economic Indicators: Consumer Spending l Consumer spending in Denmark increased by 2% in November; however, confidence has drastically declined among Danish consumers as they appraise the current economic climate l Consumer spending in Finland continues to grow l Norwegian GDP growth is expected to be helped by rising household spending and increased investments in oil l A large driver behind the growth in Swedish GDP is high domestic demand, this trend has been reflected in retail sales volume growth

8. 8 Changing Consumer Attitudes Pre-Recession Consumer I deserve it I must have it I will buy it Post-Recession Consumer I really shouldn’t Do I really need this? I will think about it Source: Verdict Research

9. 9 Retail Trade Turnover - % Change on Previous Quarter Source: European Commission

10. 10 High Street Shops – Rental Growth by Country Source: Cushman & Wakefield European Research Group

11. 11 Shopping Centres – Rental Growth by Country Source: Cushman & Wakefield European Research Group

12. 12 Trends – The Fight for the Customer l Greater polarisation between retailers l Winners l Retailers still expanding, although cautiously and selectively l Greater polarisation between locations and types of locations

13. 13 Retailer Status l Retailers: l Many retailers saturated in their home market l No significant “no wave” of multiple site retailers l Not all dead – many willing to expand although cautiously l Active Retailers: l Value l Mainstream l Fashionable l New entrants l New format

14. 14 Polarisation of Locations l Location – the dominant are getting stronger l Downtown shopping streets e.g. Copenhagen city centre l Affluent suburbs and towns l Regional cities with dominant shopping centres l Smaller towns and first generation shopping centres l Suffering l Limited demand l Lack of attention and investment l Opportunities nevertheless

15. 15 Opportunities l Supply vs demand – little pipeline l Satisfying demands of retailers’ expansion plans l More concentration on proactive asset management of existing space l Refresh tired schemes to keep them fresh and of interest to tenants and consumers l Differentiation between prime and secondary l Prime cities driven by demand l Town centres and shopping centres: l Realisation of drop in values - its happening! l Rejuvenation - landlords/investors are the catalyst l Lack of true asset management expertise

16. 16 Shopping Centre Supply Finland Norway Sweden

17. 17 Rents and Deals l Number of deals decreased…. l Still growth l Predictions: l 2011 – rents are likely to remain stable with a slight upward pressure across the Nordics l Locations likely to recover quickest l Prime location streets l Up to date shopping centres l Deal structure changing l Turnover based rents increasing, sometimes including minimum rent l Lease incentives from the landlords

18. 18 Voids – What can be done? l Assist retailers: l Landlords need to re-connect with building retail entrepreneurs and new entrants l Supporting independents and small chains l Positive asset management l Lease incentives by the landlords l Think laterally about new initiatives to lease the vacant space using examples from elsewhere in Europe

19. 19 Attracting New Retailers to the Nordics l New retailers can also be home-grown l Number of retailers considering entrance to the Nordics. l Many attractions to international retailers: l High income and spending power l Brand conscious and oriented consumers l Market focused in a small number of cities l BUT they are also relatively small markets individually l Even taken together the total market size is only 25 million and the10 th largest in Europe l though in terms of area the Nordic market covers 1.155sq.km (making it the 2nd largest area (sq.km) in Europe excluding Greenland) ahead of Turkey

20. 20 Nordics - An Opinion on the Year Ahead l A healthier outlook for the global economy will boost the prospects for Nordic exports in the coming months, although the unemployment situation in the region is not expected to improve until 2011 l The Nordic countries are relatively better placed in terms of public finances, whereby governments can undertake fiscal stimulus without significant new debt, allowing a more gradual fiscal tightening once the economic recovery kicks in. Finland aside, the weaker level of local currencies will be beneficial to the recovery l Low interest rates are supporting business and consumer confidence/activity l The region’s banks are also heavily exposed to the Baltics, which heightens risk perception l The retail sector is being supported by tight supply, largely as a result of restrictive planning l The Nordic region is small but is also wealthy and stable l Once the current financial/economic crisis is over, investors’ perception of risk will have changed and the region stands to benefit from the fact that these countries are some of the cleanest in environmental terms, least corrupt and socially stable in the world

21. 21 Challenges for the Future l Likely trends in the future? l Consumer uncertainty l Increased polarisation - retailers l Stealing market share l Slower volumes l Good value l Continued flight to quality and dominance l Increasing tenant demand l Support for new retail companies? l Lack of new pipeline for 3-5 years