OREANDA-NEWS. February 28, 2012.
Office Market
The Tallinn office sector is currently very active. However, due low vacancy and limited availability it takes some time for tenants to find suitable premises. The demand is consistently the highest for A-class and well-located B1-class premises (City Centre), reported the press-centre of Colliers.  

As a result of increased rent rates the level of additional costs concerning the premises is becoming more and more important and has become quite a significant factor in the decision making process. Based on market information available to Colliers, additional costs of modern office buildings exceeding an annual average of ca 3 EUR/sqm/month start to cause tenants to consider alternative options. Fortunately, owners acknowledge the importance of the issue and are making efforts to improve building efficiency in order to keep Tenant’s additional expenses as low as possible.

Retail
In the retail sector the battle between the main grocery retail chains for secure their market share continues. For example in the beginning of February Rimi announced the construction of a new supermarket ion Paavli Street in the district of North-Tallinn.

Discussions concerning the long-awaited retail giants IKEA and H&M are becoming somewhat more realistic. Nevertheless, a key criteria for such companies is the size of their market and the volume of potential customers and although the economic climate in Estonia is better than the other Baltic countries, larger retailers tend to prefer to first establish stores in Lithuania or Latvia.

Warehouse and Industrial
The industrial and warehouse market is largely driven by foreign companies who are relocating their business activities for cost saving and/or logistical purposes to Estonia. For instance, Spanish manufacturer Atienza & Climent Group, that among others produces also Hello Kitty branded toys, has set up production in Tallinn. The main criteria for the company moving to Estonia were a ca 30% cheaper production price, the location between Scandinavian and Eastern Europe and the Euro as an official currency.

Upward pressure on rental rates continues to be strong.  Modern premises located in the area of Peterburi road and Tartu-Tallinn road area with a rental rate in the range of 4.0 – 4.5 EUR/sqm/month are in most demand.

Investment market
At the beginning of February VGP signed a binding agreement with East Capital to sell its newly built logistics property of 40,000 sqm located in Tallinn Tanassilma Industrial Park at a price of approx. EUR 24M, making it the largest investment to warehouse sector in Baltics States in the past 2-3 years. The transaction was intermediated exclusively by Colliers.

Colliers also played a mediator role in a transaction that was concluded at the end of January with a 3.3 ha development land plot located near St. Petersburg, previously owned by an Estonian company.

In general the interest of local as well as foreign investors is has continued to remain high. Growing interest can be expected from Russian investors. The main investment targets are retail and office properties with a strong and sustainable cash-flow in core locations. Properties with added value are also in demand.