MARKETBEAT COUNTRY SNAPSHOTS FINLAND Q 2012 ECONOMY OFFICE SECTOR RETAIL SECTOR INDUSTRIAL SECTOR CONTACTS. A Cushman & Wakefield Research Publication

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1 COUNTRY SNAPSHOTS Q 2012 PLEASE CLICK ON THE APPROPRIATE SECTOR TO VIEW ECONOMY OFFICE SECTOR RETAIL SECTOR INDUSTRIAL SECTOR CONTACTS

2 ECONOMIC SNAPSHOT SLOWDOWN CONTINUES After a strong start to the year, the Finnish economy slowed down in the remainder of 2012, with the second reading of GDP growth by Statistics Finland standing at a disappointing -0.1% q/q, after the optimistic flash reading of 0.3%. With positive growth in net exports and private and public consumption, the estimate is questioned by some economists. PRESSURE ON CONSUMERS Consumers, who have driven the recovery until recently, remain under pressure. The uncertainty stemming from the weaknesses in the global economy together with falling purchasing power are the main reasons for household s reluctance to part with their cash. Spending cuts introduced by the six-party coalition are responsible for lower disposable incomes, while indirect taxes have added to households woes by pushing up inflation this year. A VAT hike in force from January 2013 is expected to once again increase inflation, which has recently shown signs of easing, thanks also to lower oil prices. Inflation has been above the levels in the other Scandinavian countries, which may be attributed not only to indirect taxation, but also to capital flight from the euro to the currencies perceived as safer, such as the Swedish Krona. AUSTERITY Austerity has been implemented in order to improve the country s budget balance, which was positive until mid Although the deficit has fallen since the end of 2010, an additional 2bn worth of spending cuts and tax hikes, which represents over 4% of public spending for the current year, is planned for 2013 in order to take the balance into positive territory. This is despite the fact that fiscal accounts are already enviably healthy compared to many euro zone countries, as is Finland s financial market. Finland is expected to record modest growth next year thanks to its well capitalised banking sector and healthy fiscal accounts. Support may also come from exports, as the country maintains strong trade links with such fast growing countries as Russia and China, while currently depressed demand from the euro zone is likely to start recovering in mid Private consumption, the main driver of growth until recently, is anticipated to be muted next year as low business confidence is set to continue pushing unemployment up in the first half of the year, while inflation should remain high following the VAT hike in January this year. MARKET GDP: Slow but positive growth. Inflation: Interest rate: Employment: An increase in H1 due to the VAT hike, expected to ease thereafter. On hold. Unemployment to rise slightly. ECONOMIC SUMMARY ECONOMIC INDICATORS* E 2013 F 2014 F GDP growth Consumer spending Industrial production Investment Unemployment rate (%) Inflation US$/ (average) US$/ (end-period) Interest rates: 3-month (%) Interest rates 10-year (%) NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast Source: Oxford Economics Ltd. and Consensus Economics Inc ECONOMIC & POLITICAL BREAKDOWN Population 5.4 million (2011) GDP US$263.4 billion (2011) Public sector balance -0.6% of GDP (2011) Parliament Six-party governing coalition President Sauli Niinistö Prime Minister Jyrki Katainen Election dates April 2015 (Legislative) February 2018 (Presidential) ECONOMIC ACTIVITY E 2014 F GDP GROWTH (annual %) - left INFLATION (annual %) - right This report has been produced by or use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. The report also refers to these economic sources: Consensus Economics Inc.; The Economist; Reuters; Capital Economics; Oxford Economics Ltd; Centre for Business & Economic Research. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from or any related company, please unsubscribe@eur.cushwake.com with your details in the body of your as they appear on this communication and head it Unsubscribe All rights reserved.

3 OFFICE SNAPSHOT OVERVIEW Finland s economy contracted in the H linked primarily to a decline in domestic demand, but also to ensuing issues in the euro zone. This has filtered down to a somewhat weaker performance of the Finnish office market in Q4 as occupational demand slowed for all but the best accommodation. While rents in this segment of the market may see positive growth as Grade A supply declines, in the non CBD areas of the capital and in second tier cities values remain static. OCCUPIER FOCUS Helsinki remains the key office market in Finland and accounts for the vast majority of the existing stock and development pipeline. However, a two-tier market is increasingly evident with older, more obsolete offices in the peripheral areas of the city suffering from higher vacancy in favour of new space that occupiers are able to negotiate for reasonable rents in what is still a tenant-led market. The CBD has the lowest vacancy rate which hovers around the 5% mark. Elsewhere the amount of available space is higher with an overall vacancy rate for the city around 9.9%. While demand is not expected to increase dramatically vacancy should begin to stabilise as less speculative space is delivered and in addition some older stock is removed from the market and either redeveloped with pre-lets in place or is converted to alternative uses, typically residential. Occupiers are seeking for more efficient and less expensive locations, although with Helsinki CBD still a popular choice, requirements will continue to be registered here. In other parts of the country, especially in small markets, the demand is limited and decreasing. INVESTMENT FOCUS Investment activity totalling close to 230 million were recorded in the last quarter of 2012, an increase of 7.0% on Q3 and takes the year s total to 950 in the office sector. Any improvement in market liquidity will be closely linked to the availability of debt which currently has stringent lending conditions attached. Prime yields held at 5.50% in Helsinki s CBD although elsewhere across the country yields are between basis points higher. With the Finnish economy expected to face continued challenges, short term there is likely to be a further slowdown in activity in the real estate market with decisions, both investment and occupier taking longer as both take on a more cautious approach. Focus is expected to remain on Helsinki s CBD, which should see further declines in quality space and potentially positive, albeit select rental growth. MARKET Prime Rents: Steady rents on the whole with some small pockets of rental growth for the best stock. Prime Yields: With competitive bidding on the very best space, yields may compress over Supply: Supply should begin to stabilize as older space is converted and development slows. Demand: Solid in Helsinki but quickly falling in Finland s smaller markets away from the capital. PRIME OFFICE RENTS DECEMBER 2012 MARKET (SUBMARKET) US$ GROWTH % SQ.M/MTH SQ.M/YR SQ.FT/YR 1YR 5YR CAGR Helsinki (City Centre) Helsinki (Out-of-Town) Turku Tampere PRIME OFFICE YIELDS DECEMBER 2012 MARKET (SUBMARKET) CURRENT LAST LAST 10 YEAR Helsinki (City Centre) Helsinki (Out-of-Town) Turku Tampere With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. RECENT PERFORMANCE 8.00% 7.00% 6.00% 5.00% 4.00% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 AVERAGE PRIME YIELDS (left) 10.0% 5.0% 0.0% -5.0% -10.0% RENTAL GROWTH (right) This report has been produced by for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman & Wakefield LLP or any related company, please unsubscribe@eur.cushwake.com with your details in the body of your as they appear on this communication and head it Unsubscribe All rights reserved.

4 RETAIL SNAPSHOT OVERVIEW Quarterly GDP fell by 0.1% in Q3, due primarily to a decline in domestic demand as a result of a fall in investment. However, household consumption remained resilient, rising by 1.8% in 2012, the second highest rate in the euro zone. Nevertheless, consumer confidence levels were low at year-end following the early-summer highs. OCCUPIER FOCUS There are several brands willing to occupy retail space, especially in the Helsinki High Street area, but the limited amount of suitable space is the main hindrance. The pipeline of new projects in Helsinki is low and not expected to rise significantly, though a few schemes have been initiated, such as a new shopping centre project near Kalasatama Metro station. M&S has returned to the market and is seeking a franchise partner. Shopping centre and street retail rents remained unchanged both quarterly and annually in all areas, with the exception of Helsinki Out-of-Town street retail where rents fell by 3.6% annually. INVESTMENT FOCUS In Q4 investment transactions in the retail sector are estimated to have totalled approximately 90 mn. Deals included the sale of the 15,000 sq.m Lielahtikeskus (under construction, due April 2014) in Tampere by NCC Property Development to Keva for 45 mn; the sale of Lohjanharjun Kauppapuisto 3A (2,065 sq.m of retail park) in Lohja by NCC Property Development to Varma Mutual Pension Insurance Company (price undisclosed); and the sale of Klinkkerinkaari 2 (6,200 sq.m of street retail) in Vantaa by Sponda to SaKa Hallikiinteistöt Oy (price undisclosed). Because of uncertain consumer confidence and negative GDP growth, even the biggest investors in Finnish retail (SOK, Kesko) have made limited new investments. Economic growth will remain restrained in 2013: GDP growth of 0.7% is currently forecast, rising to 1.7% in 2014 and higher in However, this may be revised downwards as the economy will be largely dependent on fragile external demand, particularly in the euro zone. Another significant source of external demand is Russia, from where the annually increasing number of visiting shoppers will be a major factor influencing the market. Finnish consumers, however, will be more cautious: consumer spending is forecast to slow to 0.6% due principally to a VAT increase in January, fears over a possible rise in unemployment as a result of low GDP growth, and lower income growth. New retail box developments outside Helsinki Metropolitan Area will be scarce. Consumer and retailer caution will prevail until MARKET Prime Rents: Likely to remain static throughout 2013 in most areas, though slight falls possible in secondary space in Helsinki. Prime Yields: Will remain stable in Supply: Demand: Some shopping centres in the pipeline for 2013, and renovation of older projects. Vacancy rates will remain low, implying stable demand for quality space. PRIME RETAIL RENTS DECEMBER 2012 HIGH STREET SHOPS US$ GROWTH % SQ.M/MTH SQ.M/YR SQ.FT/YR 1YR 5YR CAGR Helsinki 160 1, Turku Tampere PRIME RETAIL YIELDS DECEMBER 2012 HIGH STREET SHOPS CURRENT LAST LAST 10 YEAR Helsinki Turku Tampere SHOPPING CENTRES CURRENT LAST LAST 7 YEAR Finland With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. RECENT PERFORMANCE 8.00% 7.00% 6.00% 5.00% 4.00% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 AVERAGE PRIME YIELDS (left) 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% RENTAL GROWTH (right) This report has been produced by for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman & Wakefield LLP or any related company, please unsubscribe@eur.cushwake.com with your details in the body of your as they appear on this communication and head it Unsubscribe All rights reserved.

5 INDUSTRIAL SNAPSHOT OVERVIEW Finland s economy contracted in H linked primarily to a decline in domestic demand in Q3 which had previously held strong. Relatively weak demand from the euro zone was also an important factor. Factory closures mean that demand for industrial space will not increase: The closing of the Nokia factory in Salo will have a crucial impact on the local economy; and the important paper and steel sectors have also seen closures. OCCUPIER FOCUS Despite being a major exporter to stronger economies such as Sweden and Russia, the majority of Finland s exports go to the euro zone, from where demand remains stagnant: Germany alone accounts for 10% of exports. Demand for new industrial space is sporadic, making it difficult to speak of a market trend. However, occupiers in Finland prefer smaller premises in the locations around Helsinki, where higher vacancy, as a result of closures, has led to a fall in rents since 2011, although in Turku and Tampere they have risen. The market is currently tenant-led, allowing for competitive incentives to secure commitments. INVESTMENT FOCUS Investment in the industrial sector accounts for a tiny proportion of the total: 7% in the whole of The industrial sector has not benefited from the investor interest evident towards the retail and office sector. As such, yields for industrial investments have softened by 25 bp since 2011 across most locations. At the end of 2012, prime logistics yields in Helsinki were quoted at 7.50%. GDP growth of 0.7% is forecast for 2013, although if the euro zone does not recover, this estimate may prove to be too optimistic. Domestic demand will remain weak in comparison with early 2012, and Finnish exports (mainly manufactured goods) will remain stagnant until mid-2013 at the earliest. Once they have started to pick up, a recovery in industrial production and investment will begin, although investments are not likely to return to pre-crisis levels until Rents and yields will remain flat throughout 2013 and MARKET Prime Rents: There will be no upward pressure on rents in the current market. Prime Yields: Limited investment transactions will mean little movement in yields Supply: With industrial closures continuing, the amount of available space will rise. Demand: Demand will remain low with both domestic and euro zone demand staying weak. PRIME INDUSTRIAL RENTS DECEMBER 2012 LOGISTICS LOCATIONS US$ GROWTH % SQ.M/MTH SQ.M/YR SQ.FT/YR 1YR 5YR CAGR Helsinki Turku Tampere PRIME INDUSTRIAL YIELDS DECEMBER 2012 LOGISTICS LOCATIONS CURRENT LAST LAST 10 YEAR Helsinki Turku Tampere With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. RECENT PERFORMANCE 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 AVERAGE PRIME YIELDS (left) 10.0% 5.0% 0.0% -5.0% -10.0% RENTAL GROWTH (right) This report has been produced by for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman & Wakefield LLP or any related company, please unsubscribe@eur.cushwake.com with your details in the body of your as they appear on this communication and head it Unsubscribe All rights reserved.

6 Q 2012 COUNTRY SNAPSHOTS OUR RESEARCH SERVICES The Research Group provide strategic market analysis to support our clients in decision making and project execution. Consultancy is undertaken on a local and international basis, providing indepth advice and market appraisals incorporating real estate, business and wider macro influences. Typical projects include: reliable and comparable data and market intelligence site specific, location analysis, ranking and targeting for occupation or investment analysis of future development activity and existing supply/competition market research and demand analysis by retail/industry sector rental analysis, forecasts & investment and portfolio strategy VISIT OUR KNOWLEDGE CENTER TO ACCESS......Global Research Reports To learn more about the global trends in the industrial, office and retail sectors that are shaping economic development, business practices and real estate strategies....local Market Reports To find out about local real estate trends in the office, industrial and retail sectors in markets around the world....business Briefings For authoritative and insightful commentary and analysis on the business landscape for commercial property markets....economic Reports To keep you updated on global economic events and emerging trends that will influence finance, investment, business and real estate markets....the Cushman & Wakefield global real estate blog To hear our point of view on global market trends and how they are impacting on real estate decision making. With over 80,000 registered users, Cushman & Wakefield s Knowledge Center is one of the industry s most respected information resources on all aspects of commercial real estate. To read the reports please log in or sign up at:, or follow us on For further information about research or the report, please contact: Thomas Vane-Tempest Analyst Tuloskiinteistöt Oy Helsinki, FI thomas.vane-tempest@tuloskiinteistot.fi Istvan Toth Research Analyst European Research Group Budapest, HU istvan.toth@eur.cushwake.com Cushman & Wakefield (C&W) is known the world-over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, C&W also provides customized studies to meet specific information needs of owners, occupiers and investors. C&W is the world s largest privately-held commercial real estate services firm. Founded in 1917, it has 25 offices in 60 countries and more than 14,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within five primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, Consulting Services, including business and real estate consulting; and Valuation & Advisory, including appraisals, highest and best use analysis, dispute resolution and litigation support, along with specialized expertise in various industry sectors. This report was written and produced by Cushman & Wakefield with data and market intelligence contributed by Tuloskiinteistöt Oy, the Alliance Partner of Cushman & Wakefield in Finland. This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete. 201 Cushman & Wakefield, Inc. All rights reserved. Cushman & Wakefield, LLP