DECEMBER TRADE How did 2017 compare to 2016? RETAIL SNAPSHOT Q4:2017. Visit broll.com or for more information.

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1 DECEMBER TRADE How did 2017 compare to 2016? RETAIL SNAPSHOT Q4:2017 Visit broll.com or for more information.

2 How did 2017 compare to 2016? With the interest rate at 10.25%, inflation at 4.7%, high living costs and household debt to disposable income standing at around 72.5%, the South African consumer remains under financial pressure. Furthermore, the consumer confidence index was recorded as being -8 as at Q4:2017 and even though this is an improvement from -9 in the second quarter, this is indicative of consumers remaining negative in terms of the country s economic position, personal finances and spending power. November 2017 saw South Africa s Retail Trade Sales rise to 7.9% year-on-year (y-o-y), up from 3.5% in October. This increase can be partly attributed to Black Friday, Small Business Saturday and Cyber Monday which took place at the end of November. In December, which is usually one of the busiest times in the South African retail market due to festive season trade, Retail Trade Sales recorded a growth of 5.3% y-o-y. The latter part of 2017 recorded some of the highest retail sales growth seen in recent years, however, as there is no differentiation between credit and cash sales, increased sales do not necessarily reflect less financial pressure on consumers. According to the Reserve Bank as at December 2017 the value of credit extended to South African households amounted to R1,548.9 billion, reflecting a y-o-y growth of 3.8% and a month-on-month increase of 0.3% which emphasises the financial pressure which consumers are under. In this snapshot the various retail categories, as broken down by Stats SA, within the different Broll centre types will be looked at in order to ascertain the y-o-y retail trade performance of different categories in December Market Retail Trade Sales 1 According to Stats SA, in December 2017 retail sales were up 5.3% y-o-y and amounted to R106,192 billion. General Dealers contributed the most to retail sales, accounting for 40.7%, followed by retailers in Textile and Clothing (23.0%) and Other retailers (10.2%). Contribution of Each Type of Retailer to Total Sales Food and Drink 8.7% Household Goods 5.3% Hardware 6.3% General Dealers 40.7% Pharmaceutical 5.9% R Billion Other 10.2% Textile and Clothing 23.0% Source: Stats SA 1 All sales data refers to constant prices.

3 The biggest contributors to the 5.3% y-o-y sales increase were Other retailers, General Dealers and retailers in Textile and Clothing, with each of these retailers contributing 1.4%. The highest y-o-y growth was recorded for Other retailers (14.7%), followed by Household Goods (1) while the lowest growth was evident for Food and Drink (0.6%). Y-O-Y% Change in Retail Trade Sales per Category Other 14.7% Household Goods 1 Textile and Clothing 5.9% Pharmaceutical 5.6% Hardware 5.6% General Dealers 3.3% Food and Drink 0.6% Source: Stats SA Consumer Price Inflation (CPI) Annual CPI was recorded as being 4.7% as at December 2017, which is an increase from 4.6% in November. Food prices increased by 4.3% y-o-y, with Meat recording the largest increase of 14.2% while Bread and Cereals recorded the largest decline of -6.1%. Which Items Increase your Monthly Grocery Bill? December 2017 vs. December 2016 Meat 14.2% Milk, Eggs and Cheese 4.8% Sugar, Sweets and Desserts 4.2% Fish 3.7% Vegetables 1.2% Entire Food Basket 4.3% Oils and Fats -3.0% Fruit -4.3% Bread and Cereals -6.1% Source: Stats SA

4 Overall Centre Performance To ascertain retail trade performance within the Broll portfolio in terms of different centre types, the size breakdown according to centre GLA, as per the IPD definitions, has been adopted i.e.: s 1,000m² - 4,999m² s 5,000m² - 11,999m² s 12,000m² - 24,999m² s 25,000m² - 49,999m² s 50,000m² - 99,999m² Category Performance within the Different Centre Types 2 When looking at the different centre types, all centres, with the exception of s, experienced positive as well as negative y-o-y growth with regards to average trading densities (TD) for the aforementioned retail categories. Small s recorded only positive growth for all categories, although marginal in some instances. Overall, Community Centres recorded the highest average growth across all categories averaging 2.8%, closely followed by Neighbourhood Centres at 2.7% which may be an indication that convenience has become increasingly more important to consumers. Overall Y-O-Y Sales per Centre Type 3.0% 2.0% 1.0% 2 The graphs which follow all refer to real y-o-y TD growth as at December 2017, taking inflation into account.

5 Household Goods Even though Household Goods contributed the least amount to overall Retail Trade Sales, i.e. 5.3%, this category was in the top 3 best performing categories for all centre types, recording the highest growth of 24.3% within s. This may be as a result of consumers thinking more carefully about their purchases, opting to purchase long-term items in comparison to Textile and Clothing items which have a shorter life span. Furthermore, many Household Goods retailers offer consumers the option to purchase on credit, thus a likely draw card for consumers which are under financial pressure. Household Goods Sales per Centre Type Food and Drink As defined by Stats SA, Food and Drink retailers are those providing fresh fruit and vegetables, meat and meat products, bakery products, beverages, tobacco and other food in specialised stores 3. Food and Drink is an important retail category in any retail development whilst serving the obvious function of providing consumers with food products, food services also comprise the entertainment aspect of a centre. Food and Drink Sales per Centre Type 2.0% 1.0% -1.0% -2.0% Average y-o-y TD increased in December 2017 in three out of the five centre types, with Food and Drink performing the best within s. However, growth levels were relatively low with the highest growth being 1.4%, an indication that consumers are thinking about what they spend their money on and eating out is not a priority. 3 Broll data for Food and Drink is inclusive of Food Services.

6 Hardware The Hardware category recorded the third lowest contribution to total Retail Trade Sales by type of retailer for December 2017 at 6.3%. However, Hardware showed positive growth in three of the centre types with the largest growth of 19.4% being recorded in s. This growth could be attributed to DIY and household maintenance as opposed to buying new homes with house prices increasing around 4.2% throughout Hardware Sales per Centre Type General Dealers General Dealers, as defined by Stats SA, comprise non-specialised stores with food, beverages and tobacco predominantly and include other non-specialised stores, contributed 40.7% to total Retail Trade Sales for December In terms of centre types, the highest growth was evident within s (12.6%), followed by s (1.0%), while all other centres indicated negative growth rates. This may be attributed to the convenience aspects of Neighbourhood Centres and the time strapped lifestyles that consumers live. Popping into a to do grocery shopping may be preferred as opposed to going to larger sized centres which are sometimes located a distance away or smaller centres which tend to have limited parking bays thus becoming problematic during peak periods. General Dealers Sales per Centre Type 15.0% 1 5.0% -5.0% -1

7 Pharmaceutical Pharmaceutical Retail Trade Sales recorded y-o-y growth of 5.6%. When looking at trading figures, this category performed the best within s (4.9%), closely followed by s (4.6%) and s (3.2%) which could be as a result of larger sized discounted health and beauty as well as pharmaceutical retailers trading within these centre types. Pharmaceutical Sales per Centre Type 6.0% 4.0% 2.0% -2.0% -4.0% Textile and Clothing Textile and Clothing, which comprises of men s, boys, ladies, girls and infants clothing, general outfitters and footwear, was the third best performing category relating to y-o-y growth at 5.9% and the second best performing in terms of contribution to total Retail Trade Sales by Type of Retailer at 23.0%. However, Local Convenience and s recorded negative trading growth while s displayed zero growth and Community as well as s recorded positive growths. s recorded the highest trading growth of 3.6%, attributable to the majority of fashion retailers being present within these larger centres, whereas s recorded a declined growth of -14.4%. This may be as a result of consumers preferring larger sized centres due to the number of different tenants making comparative shopping easy. Textile and Clothing Sales per Centre Type 5.0% -5.0% % -2

8 Other Other performed well within smaller sized centres with the highest growth in trading of 11.7% recorded in Local Convenience Centres whereas Small Regional and s recorded zero and -0.1% growth respectively. This category is representative of a wide range of categories varying from reading matter and stationary to jewellery, watches, sports goods and entertainment requisites, other specialised stores, second hand stores and informal stores. This broad definition makes it difficult to be able to identify why some centres did well while others performed poorly without delving down into each sub-category individually. However, smaller sized centres are viewed as being more convenient and generally more accessible making smaller centres the preferred choice for these types of purchases. Other Sales per Centre Type 15.0% 1 5.0% -5.0% Concluding Remarks Consumers appear to have become more conscious with regards to their purchases, placing more importance on items with longevity and more of a long term purpose, i.e. Household Goods. Convenience remains important to time strapped consumers although comparative shopping is important too from a financial pressure point of view. Furthermore, even though Retail Trade Sales increased in the latter part of 2017 this does not reflect less financial pressure on consumers with credit extended to households having increased by 3.8% y-o-y emphasising that consumers have become more credit reliant. For more information please Broll Research research@broll.com Disclaimer Broll Property Group has taken every care in the preparation of this report. The sources of information used are believed to be accurate and reliable, but no guarantee of accuracy or completeness can be given. Neither Broll Property Group, nor any CBRE company, nor any director, representative or employee of Broll Property Group, accepts liability for any direct or consequential loss arising from the use of this document or its content. The information and opinions contained in this report are subject to change without notice. No part or parts of this report may be stored in a retrieval system or reproduced or transmitted in any form or by any means, electronic, mechanical, reprographic, recording or otherwise, now known or to be devised, without prior consent from Broll Property Group.