OREANDA-NEWS. October 09, 2012.
Office Market
The expiry of many 5-year lease agreements signed at the peak of the ‘boom’ market (2007 – 1HY 2008) as well as 3-year lease agreements made in the middle of the crisis (2009 - 2010) is currently starting to occur leading to temporary higher vacancy in several office buildings. At the same time, lowered vacancy and increased demand during last one and a half year have already assured certainty in landlords and made them gain from the situation by asking higher rents. Finding compromise between landlords’ desire to increase rental rates and tenants’ willingness and ability pay more may lead to situation, when some premises will remain vacant. As seen from the market, one very important factor that plays essential role in choosing a rental premise and which still unfortunately is overlooked by several landlords, is professional property management – it is one of the reasons why despite increased demand some office buildings are still vacant, reported the press-centre of Colliers.   

Additionally, the interest among foreign companies for back office outsourcing on cost reduction purposes remains constantly high. Nevertheless, the realisation of such lease deals may get entangled not due to the lack of suitable premises, but due to other factors such as lack of qualified workforce.
 
Retail
Low bank deposit interests and record low Euribor motivate people to give up saving and stimulate to spend more (although mortgage payments have decreased, there is no point of saving). However, while in 2010 – 2011 retail trade growth was mainly driven by durable goods (electronics etc.), by now most of the costly purchases have been made and outgoings include mainly grocery expenditures.

Due to higher real wages and employment growth, which has promoted consumer confidence and household consumption, rental values for the shopping centre sector have also begun to improve slightly by 3-5% on average mostly due to index increments and fewer rental discounts.
 
Warehouse and Industrial
At the end of August a Swedish company Hydroscand, bought a land plot in Lookivi Logistics Park near Tallinn. On the plot with the area of 22,000 sqm will be built a regional sales centre together with central warehouse for servicing clients in Eastern Europa. Total volume of the planned construction is 8,200 sqm.

Lower rent and land prices, as well as cheaper operating costs, continually attract Swedish and Finnish logistics and industrial companies’ to Estonia. For example, prime rent rate in Tallinn (4.8 €/m?/month) is almost half of the prime rent in Helsinki and Stockholm (10.0 and 8.6 €/m?/month correspondingly) and almost third of the prime rent in Oslo (12.3 €/m?/month). In addition to foreign companies, warehouse sector development activity is currently greatly supported by growing domestic consumption – for example, new premises under construction are for Estonian poultry company Tallegg and leading importer and distributer of alcoholic beverages Dunker.

Investment market
Investment sector is constantly very active. Number of investment deals over EUR 0.5M concluded so far exceeds already the level of 2011 and if not considering Kristiine Shopping Centre transaction of EUR 105M in 2011, total investment volume of 2012 already approaches the level of 2011.

Although the interest for buying among investors is very high, there is lack of good quality investment objects. Nevertheless, the circumstance has not had much influence on yields, as investors still wisely calculate the risks related to the cash flow and do not count on yield compression and growing prices.

Even though investment market is lively, activity on development land market is constantly minimal. Most on the transactions are concluded with industrial or mixed use land in logistic and industrial parks and bought for specific purpose, not on speculative intentions, which is usually the case for commercial and residential development land.