OREANDA-NEWS. April 26, 2011. Vacancy in well-located, modern office buildings is constantly decreasing and there are no larger rental premises currently available on the market. Construction of new built-to-suit buildings is becoming more and more realistic. One such example is the planned construction of a new office on Paldiski Road for the leading international security solutions group G4S, on the site which was acquired at the end of 2010 from Estonian real estate company Arco Vara Real Estate, reported the press-centre of Colliers International.  

Developers continue to express interest in acquiring strategic sites in the CBD area.
The main drivers of office sector demand are continually the IT and communication sectors, who lease the largest volume of non built-to-suit office space in Tallinn.

Retail market
Foreign investor confidence in the Estonian retail sector was again illustrated by the transaction in March 2011 of one of the largest shopping centres in Tallinn – Kristiine Shopping centre, agreed to be transferred for approximately EUR 105 million (contract under the law of obligations is concluded, the ‘real right’ contract will be likely concluded during the first half of 2011). The capital received from the transaction will be invested by Pro Kapital in the construction of a major shopping centre in the vicinity of Ulemiste Shopping Centre, who has also indicated plans to start expansions with a mid-term perspective. Finnish-based grocery chain Prisma Peremarket has been and is renovating and expanding several hypermarkets in Tallinn and is looking for a suitable location for its second hypermarket in Tartu. Also, Lithuanian supermarket chain Maxima is considering possibilities to open a new hypermarket in Parnu, clearly indicating a market share battle between grocery chains.

 Warehouse and Industrial market
An increase in export figures has improved companies’ future outlook and increased demand for industrial and warehouse space. According to information received from the market, companies looking for new premises are mostly with foreign-based and within the electronics, distribution or metal sectors.

Due to a sharp increase in construction cost, average asking rental prices have started to increase. For new built-to-suit projects the break-even rental price for developers starts from 4.0 – 4.5 EUR per sqm– up to 50% higher than 2009 levels and too high for the majority of potential tenants. Nevertheless, as many companies have special requirements for premises and there is a shortage of suitable industrial and warehouse space, companies with expansion plans will have to start accepting developers’ rental terms.

Investment market
Considering Estonia’s the largest single investment deal yet, Kristiine Shopping Centre the total investment volume of 2010 has already been exceeded by around 150%, by the 1st quarter of 2011. In addition, negotiations for the sale of several real estate portfolio are in progress (e.g. East Capital). 2011 is promising to be the best year yet in terms of real estate investment volumes.