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ePaper created 2012-04-27, 18:43:33 | version 1.23.1
OuTLOOK Private consumption is a major support for the German economy As German economic growth remained strong and exceeded the fore- casts in 2011, the outlook for 2012 and 2013 is also generally positive, provided the euro debt crisis can be prevented from spinning out of control. However, economists are predicting that economic growth will become more moderate. Following a weak start, 2012 is expected to bring a slight economic pickup, with real annual GDP grow of less than 1%, following on from 3% in 2011. Germany is expected to achieve growth of between 1% and 2% in 2013. The forecasters are banking on a continuing positive trend in the domestic economy, particularly with regard to private consumption, amid expectations of a perceptible boost to salaries in real terms across Germany. The robust labour market in Germany has also been a cause of some surprise. The rise in employment in recent months and the fall in unemployment to levels which have not been seen for decades are underpinning the positive outlook. Sound outlook for our shopping centers We expect this positive trend to be echoed in our shopping centers. The expansion and modernisation measures at the A10 Center, the Altmarkt-Galerie Dresden and the Main-Taunus-Zentrum were com- pleted in the year under review and retailers’ revenues have developed positively. Ten years after they first opened, lease renewals were suc- cessfully concluded in the City-Arkaden Wuppertal and the City-Gal- erie Wolfsburg Many rental agreements are due to expire in 2012 and 2013 in City-Point Kassel, the Altmarkt-Galerie Dresden (old port- folio) and the Rhein-Neckar-Zentrum, the majority of which have already been extended At the present time, the occupancy rate across all our shopping centers continues to exceed 99%. At the end of 2011, the level was 98.5%, slightly below the previous year’s level (99.3%). Retail space also witnessed a slight decline from 99.9% to 99.6%. The main effect of these declines was around 4,000 m2 of vacant office space in the Altmarkt-Gallerie Dresden, built as part of the extension, and of around 2,500 m2 in Árkád Pécs, which can be put down to the difficult economic environment in Hungary. However, outstanding rents and necessary valuation allowances remain stable at a low level. We see no sign of a significant change in this satisfactory situation. Transaction market remains strong Against a background of ongoing uncertainty on the financial markets and fears that inflation may rise sharply, the global demand for capital investments that retain value remains strong, particularly in financially well-positioned countries such as Germany. This is driving demand for properties for which there is insufficient supply. Retail property in par- ticular is a focus of interest among many institutional investors, leading to very high transaction prices and correspondingly low anticipated re- turns for core properties. We will therefore continue to monitor devel- opments on the real estate market intensively. As in the past, we will only make new investments if the return that is achievable over the long term bears a reasonable relation to the investment risks. Agreed transactions are the foundation for revenue and earnings planning The Deutsche EuroShop Group’s revenue and earnings planning for 2012 and 2013 does not include the purchase or sale of any proper- ties. The results of the annual valuation of our shopping centers and exchange rate factors are not included in our planning since they are not foreseeable. Forecasts about the future revenue and earnings situation of our Group are based on a) the development of revenue and earnings of the existing shopping centers, b) the assumption that there will be no substantial reduction in revenue in the retail sector that would cause a large number of retailers to no longer be able to meet their obligations under existing leases and c) the switching of proportionally consolidated companies to equity accounting from the 2013 financial year. 22 DES Annual Report 2011 GRoup MAnAGeMent RepoRt outlook