SKYON, Maakri 30, Tallinn, Estonia Developer: Capital Mill MODERN OFFICE PREMISES TALLINN OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES

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SKYON, Maakri 30, Tallinn, Estonia Developer: Capital Mill MODERN OFFICE PREMISES TALLINN OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES TALLINN OFFICE OUTLOOK 2019 Project: SKYON, Maakri 30, Tallinn, Estonia Developer: Capital Mill MODERN OFFICE PREMISES TALLINN OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES SUPPLY area, Veerenni and the Mustamäe stock is already pre-leased. By the end of 2018, the stock of modern Road-Paldiski Road area. Ülemiste With the growing number of modern office premises in Tallinn totalled City projects’ building rights granted developments, outdated B class buildings 770,000 sqm, which is the equivalent of by zoning or detail plans is close to will increasingly become vacant and will 1.7 sqm per capita. This excludes entirely 700,000 sqm, while the Port of Tallinn be forced to renovate. built-to-suit and partially sold projects. development in the harbour area is Office buildings with a total leasable planned from 2023-2024 at over RENTAL RATES area of 65,000 sqm were delivered in 500,000 sqm, mostly in the mixed use In 2018, the average rent for B class 2018. The largest developments were segment – retail on the lower floors with premises increased slightly because of the Maakri Quarter towers, Öpik Building offices, hotels and residential spaces on some shortage in the office stock. This 2 and Lõõtsa 12 in Ülemiste City, Telia the higher floors. trend could continue, likely until the HQ in the WoHo Quarter, and the Zenith completion of several large-scale projects Business Centre in the central area. The VACANCY in the Ülemiste City area, Fahle Park, the year marked an expansion of the CBD The average vacancy rate in the Tallinn Avala quarter and in the harbour area in and Ülemiste City, showing demand for office market is around 5.5%. In 2018, 2019-2020. prime quality premises both in the CBD the vacancy rate for A class premises Other than that, the average office rental and in the outskirts of the city. increased slightly to 5% as the Maakri rates are expected to remain stable with Prime class premises located in the CBD Quarter was completed. The B class the gap between A and B class offices and harbour area as well as in Ülemiste vacancy rate stays at around 6% with the increasing slightly. In 2017-2018, the City will continue to dominate the possibility to decline as demand for such average market rent for prime office pipeline in 2019. In total, it is forecast premises remains high. space in Tallinn CBD amounted to 15.0- that in 2019-2020 the Tallinn office Significant changes in the vacancy 19.0 EUR/sqm/month, reaching over market will increase by over 110,000 rates are not expected in the near term. 20 EUR/sqm/month in special cases. In sqm of modern office space. The Demand in 2019 is expected to come other central areas, rents were in the growing modern office stock and fierce mainly from the IT, financial and start-up range of 13.0-15.0 EUR/sqm/month, competition between landlords enables sectors as companies such as Taxify and whereas those for B class offices located tenants to move or renegotiate existing Pipedrive continue expanding in the city. further from the city centre averaged contracts, for instance by shortening In 2020, when several large-scale office 9.0-13.0 EUR/sqm/month. Rental rates the lease term to 3 years instead of 5. buildings are completed, vacancy rates are gradually rising as new projects offer It is forecast that this tenant market will could possibly go up, but not by a large higher quality standards. persist, as in coming years the stock is margin. It should be noted that pre-lease The highest B class rents were captured set to increase by at least 10-15%. agreements with anchor tenants are in the modern business campuses and In the longer perspective, the main usually signed before construction work other professionally managed buildings development areas in Tallinn will be commences. For this reason, a significant located in the outskirts of Tallinn. the Ülemiste City area, the harbour proportion of the new modern office Office Stock Development Source: Newsec Office Stock By Class Source: Newsec Thousand, sqm 900 11% 800 10% 4% 3% 19% 700 8% 600 500 400 81% 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F Existing stock Additional stock A Class B Class 2 TALLINN OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES «Time for smart office development in Tallinn – the digital capital of Europe» INVESTMENT the Scandinavian countries have been current prime Tallinn office yield is The Tallinn office market remains active as well. 6.25%. It is forecast that the yield most attractive to equity holders as In 2018, Luminor HQ was purchased should remain at this level as banks investment in it makes more than by Rondam, and the Marienthal start limiting financing for commercial 70% of the total country transaction commercial centre and Kadrioru real estate projects. volume. The country has a pool of business centre were purchased by With the supply of modern office stock local investors that actively participate Eften Capital funds. These three continuously growing, the market is in the market, the main ones being transactions made up 75% of the total going to remain attractive both for Eften Capital, Colonna Capital, Capital 2018 office transaction volume, which local investment funds as well as for Mill and others. Moreover, in recent amounted to EUR 100 million. international players looking for new years investors from Switzerland and After years of compression, the opportunities. OFFICE DEVELOPMENT IN TALLINN IN 2019-2020 Project Address Class GLA, sqm Location Developer Exp. Finishing Eesti Meedia HQ Tartu Road 80 B 8,000 Fahle Park, central Fausto Capital 2019 Pipedrive HQ Mustamäe Road 3a B 12,700 Mustamäe Ekerepol, EKE Invest 2019 Ovaal House Veerenni 38 B 6,100 Veerenni area, central Fund Assets 2019 Porto Franco Kuunari 1 A 25,500 Harbour area, central Porto Franco 2020 Lurich Office Valukoja 10 B 8,000 Ülemiste City Mainor Ülemiste 2020 Sepapaja 1 Sepapaja 1 B 10,800 Ülemiste City Technopolis 2020 Ellips House Veerenni 40a B 4,800 Veerenni area, central Fund Assets 2020 Pharma Plaza Töökoja 1 B 10,000 Veerenni area, central Pharma Plaza 2020 Skyon Maakri 30 A 8,200 CBD Capital Mill 2020 Elektrilevi HQ Filtri 8 B 10,000 Avala Quarter, central Kaamos 2020 Sadama 9 Sadama 9 A 5,600 Harbour area, central Infortar 2020 Total 109,700 Average Rental Rates Source: Newsec CEE Office Market Situation Source: Newsec Area, sqm Per cent 3.5 14 3.0 12 2.5 10 15.0-19.0 10.0-14.0 2.0 8 EUR/sqm/month EUR/sqm/month 1.5 6 1.0 4 0.5 2 0.0 0 BratislavaPragueBudapestSofiaKatowiceKrakowTallinn Riga VilniusKaunas A Class B Class Stock Per Capita (left axis) Vacancy Rate (right axis) 3 MODERN OFFICE PREMISES TALLINN OFFICE OUTLOOK, 2019 THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE Newsec — The Full Service Property 2016. The Norwegian asset and property some 1,800 co-workers, spread across House in Northern Europe — is by far the management companies First Newsec the seven Nordic and Baltic countries. largest specialised commercial property Asset Management and TM Partner Newsec has approx. EUR 45 billion under firm in Northern Europe. were acquired in 2012. In 2013, Newsec management and annually signs lease Newsec manages more properties and acquired Jones Lang LaSalle’s Swedish agreements of approx. 1 million square carries out more transactions, more property management operation. In meters, management transactions of lettings and more valuations than any 2017, Newsec grew with the acquisitions some EUR 3.3 billion and does real other firm in Northern Europe. Through of Norwegian Basale and Danish Datea, estate valuations with an underlying this great volume, and the knowledge further strengthening the position within property value worth almost EUR 165 and depth of our various operations, we Property Asset Management. In 2018, billion. Thanks to large volumes and acquire extensive and detailed knowledge Newsec opened a London office to assist local presence combined with in-depth of the real estate market. In turn, we can international investors interested in the understanding of a range of businesses, quickly identify business opportunities Nordic and Baltic region. Newsec has a unique expertise of the real that create added value. estate market in Northern Europe. Our prime market is Northern Europe, Newsec was founded in 1994 and is but through our alliance membership today a partner-owned company with with BNP Paribas Real Estate, we offer our services on the global market. This makes Newsec Northern Europe’s only full service property house, and provides us with a unique ability to forecast the future. A history of growth Newsec is the result of a unique history of growth, characterised by constant originality of thinking. The first issue OULU of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. TRONDHEIM The Group expanded internationally into Finland in 2001, Norway in 2005, the TAMPERE Baltic countries in 2009 and Denmark in BERGEN OSLO HELSINKI STOCKHOLM TALLINN GOTHENBURG RIGA AARHUS KLAIPEDA COPENHAGEN MALMÖ VILNIUS KAUNAS 4 TALLINN OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES CONTACT AND ADDRESSES More analytical information at Newsec: Transaction advisory at Newsec: ESTONIA Roseni str. 7 Head of Research and Analysis Head of Real Estate Advisory EE-10111 Tallinn Mindaugas Kulbokas Newsec Estonia Phone +372 664 5090 Cell +370 652 10556 Indrek Mihhels E-mail [email protected] E-mail [email protected] Cell +372 50 16181 www.newsecbaltics.com E-mail [email protected] Team Lead of Research and Analysis LATVIA Gintaras Tolocka Office solutions at Newsec: Vilandes str.
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