I have the pleasure of providing to you our newest Property Report for the capital cities of the Baltic States: Tallinn , Riga and Vilnius , available here in its full 48 pages in pdf format.
Estonia, Latvia , and Lithuania are all emerging from the worst recession since the restoration of independence nearly 20 years ago. The bank liquidity fuelled real estate boom that started in 2004 quickly turned to bust in mid-2007. All three countries suffered GDP drops in 2009 from -14% (Estonia) to -18% (Latvia), but analysts’ consensus for 2010 is for mild growth of 1% or better in Estonia and Lithuania, while Latvia’s GDP decline slows to -3%.
All three countries saw a drastic drop in new commercial and residential developments. Tallinn delivered just 30,000 sqm of new office space to market in 2009, far less than the 100,000 delivered in 2008. No new office projects are slated for 2010. Even so, vacancy rates jumped over 20% and A class rents slumped 35% to as low as €8.30 per sqm by the start of 2010, whereas at the start of 2009 the cheapest to be found was €12.70. Today A class space rents for €8.30 to €16.00 per sqm, with most leases in the €9.00 to €12.00 per sqm range.
In Riga , A class office rents similarly plummeted 45% in 2009, to just €7.00 to €12.00 per sqm by the start of 2010. And A class office rents in Vilnius dove 38% in 2009, to €9.30 to €12.20 per sqm, a range significantly less than the 2007 high of €20.00 per sqm.
For those companies looking to secure long term leases on office space at low rents, now is the time. Please contact any of our offices in all major cities of Estonia , Latvia , Lithuania , or Poland , at the contact numbers at the bottom of this mailing.
Retail trade was down 28% in Latvia in 2009, but slightly less in Estonia and Lithuania . Existing tenants got no annual rent increase or even rent discounts. By the beginning of 2010 typical shopping centres in Tallinn charged €15 to €19 per sqm per month for medium sized units, and as low as €7 to €20 in Riga shopping malls, and even €8 to €25 in Riga city centre street retail, where – outside of the core prime shopping streets – retail vacancy topped 25%. Those retailers looking for new locations at low rents should contact Ober-Haus commercial brokers now.
The end of the mortgage boom meant banks had negative net lending in 2009, pulling liquidity out of the residential market. The average residential price in Tallinn fell 34% in 2009, to €727 per sqm, and is now down 53% from the April 2007 peak. Average prices had touched a low of €663 per sqm in July 2009, so Q3 and Q4 saw some recovery in both prices and transaction volumes. While it is too early to talk of a rebound, it is clear that the bottom has passed.
Riga saw a similar drop and recovery. The price of secondary market flats in Soviet-era buildings fell 48%, to €494 per sqm on average by the start of 2010, which was still something of a recovery after touching lows of just €459 per sqm in Q3 of 2009. In Riga too volumes are growing, and it appears that the lowest prices were passed already in 2009.
In Vilnius average residential prices sank 31% in 2009, and are now down 39% from their December 2007 peak. The trend looked to be reversing by the end of 2009, when the price drop in Vilnius in Q4 was lower than other quarters and amounted to 3.9% (after falling 13.2% in Q1, 10.5% in Q2, and 6.6% in Q3). In Vilnius city centre and Old Town , secondary market apartment prices fell 23% to €1,000 - €1,900 per sqm for unrenovated and to €1,450 - €3,400 per sqm for renovated apartments. Prices of new apartments dove 29% and are now offered for €1,450 - €2,900 per sqm without final fit-out.
New supply fell off the cliff, and we expect as few as 700 new units will be completed in total in all three Baltic capitals, far fewer than the 16,640 new flats delivered in 2007. When demand picks up – as it always does – the lack of new supply may drive prices up sharply in the years ahead.
Ober-Haus Real Estate Advisors leads the way in property consultancy across the region, with over 350 real estate professionals in 30 offices across Poland , Estonia , Latvia and Lithuania .
As European integration continues apace, Ober-Haus is there to help your business in the emerging markets of Central and Eastern Europe . We offer our clients a full range of services, including commercial and residential real estate sales and leasing, executive relocations, asset valuations, investment advisory and property management.
Ober-Haus has been active in the Central and Eastern European region since 1994. Call any of our offices and let us offer you our knowledge and detailed understanding of the local markets, and help you achieve your business goals.
Peter Gage Morris
Tallinn +372 66 59 700
Riga +371 6 728 4544
Vilnius +370 5210 9700
Warsaw +48 22 528 5454