OREANDA-NEWS. January 11, 2010. The average offering price in Tallinn has gone down by 13% from 1,240 euros per sqm to 1,084 euros per sqm and the average rent ca 4% from 5.8 EUR to 5.6 EUR in a month.

According to the data of the Land Board, the number of real estate purchase-sale transactions in Harjumaa (including Tallinn) in November was approx 30% higher than a year earlier, while the number of transactions in Estonia grew only 3% compared to the same time last year. The average value of purchase-sale transaction in November in Harju County was 920,000 kroons (59,000 euros), which is ca 40% lower than last year.

Compared to October the number of transactions with commercial properties in Harju County has grown from 22 transactions to 29, from which 17 transactions were made with industrial objects located outside of Tallinn. The number of transactions with vacant land has been quite unstable.

Compared to October in November can be observed ca 70% decrease. Still, as seen from the graph, the trend line is rather upward.

Office rental rates and vacancy has remained more or less stable compared to last two-three months. The landlords are offering several discounts for attracting new tenants as before. Still, as some of the landlords of contemporary office buildings have reached breakeven point, they will not make as generous discounts as earlier this year any more.

Department stores and supermarkets continue to experience a steady decline in sales. Some retail chains are facing really difficult times – for ex. Sportland, the largest retail chain of sports stores in the Baltic States, can go bankrupt in the next few months. Retailers are becoming additionally worried that 1% sales tax proposed by City of Tallinn from July 1st 2010 would raise retail prices.

At the same time the vacancy rate in mayor shopping centres is still close to zero and the number of visitors has not dramatically fallen.

Investment market has picked up speed similarly to Western Europe and Scandinavia. As in the beginning only local players were active, now also Scandinavian investors are looking more seriously for possibilities on Estonian market. The much talked about distressed real estate has not proved to be a serious investment alternative, although there are players on the market seeking for distressed objects. Investors are seeking mainly income producing properties with sustainable cash-flow, strong tenant and preferably some upside. The lessons from the past and still strict financing conditions set rather cautious and conservative conditions for decision making.

The known transactions from past 3-4 months are showing yield levels setting between 10 - 12% in case of sustainable cash-flow properties. There have been also transactions with secondary properties at higher yields. Single digit yields are still on the waiting list, looking for improving market conditions and for some core products with reasonable conditions to enter the market. There are high hopes tied to the Euro-zone joining on 2011, but the real effects could be seen not earlier than in the second half of 2010.

Nevertheless, upcoming 2010 promises to be much more interesting and vital investment year compared to 2009.