OREANDA-NEWS. April 09, 2013.
Office Sector
Several rental agreements concluded in 2009-2010 with a step-by-step indexation have led to a higher than market average rental level, thus it can be expected that for several 3-year lease agreements concluded in 2010, as well as for 5-year lease contracts concluded in 2008 some downward price adjustments will occur during this year. Earlier good landlord-tenant relations play important role in lease agreement prolongation.

Although companies prefer contemporary office buildings to older ones, total cost level (rent + additional costs) plays a significant role in decision making process. Therefore, due to continual cost-optimising purposes, a trend of moving to premises with lower rent level (somewhat less favourable location and/or older building) can be observed. While for contemporary office premises yearly average level of additional costs of 2-3 EUR/sqm/month is considered competitive then office buildings with costs below 2 EUR/sqm/month have definitely an advantage.

Retail Sector
Retail sales in grocery stores continued to grow in 2012. Compared with 2010 and 2011, the grocery market share profile in 2012 has remained broadly unchanged, although Rimi and Selver lost a slight portion of market share, while Maxima (market share increased from 15.7% in 2010 to 17.5% in 2012) and Prisma (from 7.2% in 2010 to 9.3% in 2012) were able to gain more market share due to expansion, campaign sales and opening of new stores (in 2012 Maxima and Prisma grocery chains were able to increase their sales by 15.4 and 21.1 per cent yoy respectively).

Grocery chains continue to open and build new stores in order to increase and reclaim their market share – Selver opened a new supermarket in Lasnamae city district in the beginning of March and announced about the start of the construction works of a 6,500 sqm hypermarket on Tallinn city boarder near Moigu. Rimi also declared to open four new stores across Estonia in 2013 including two stores in Tallinn.

There is a growing interest for street retail premises among new foreign brands, who wish to enter Tallinn retail market. One of the reasons for such interest is definitely Estonia’s good recent macroeconomic results and positive market sentiment as well as favourable retail sales numbers. In addition, premises in larger shopping centres continue to be in demand, which has led to noteworthy top rent increase – rent level for prime location small retail premises has sometimes reached 60-70 EUR/sqm/month level, with the average around 25-50 EUR/sqm/month.
 
Warehouse and Industrial Market
Positive sentiment in warehouse and industrial market continues. As over the past few years companies have managed to improve their financial capability, a trend of securing good location land positions can be observed. The tendency is more popular among logistics companies, whose improved turnover numbers are strongly related to increased consumption figures in Estonia.
 
Investment Market
While during the last three years investors’ main focus has been Estonia, currently the interest has moved more towards Latvia and Lithuania. Although Latvia is expected to adopt Euro in 2014, raising the country’s trustworthiness in the eyes of investors and therefore expectably also the country’s investment activity, past months have been quite active in Lithuania. In addition to transaction with Gedimino 9 property, a high-street shopping mall in the centre of Vilnius, which East Capital acquired from Ektornet at the end of 2012 and a few other transactions with office and industrial properties over the price level of EUR 5 million, Finnish listed real estate company Technopolis Plc has signed a deal to acquire a new office campus in Vilnius. The purchase price is EUR 61.0 million and the company expects to close the deal by May 1, 2013. The net market yield of the investment is 8.2%. The net initial cash flow-based yield is 7.6% and the stabilized yield is expected to reach at 9.3%.