RIGA OFFICE OUTLOOK 2019

Project: Akropole Business Centre, Maskavas iela 257B Developer: Akropolis group MODERN OFFICE PREMISES OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES

SUPPLY Development expands both south and owners will be forced to renovate. By the end of 2018, the stock of modern north of the historical city centre forming office premises in Riga totalled 650,000 modern office clusters in Pardaugava RENTAL RATES sqm, which is the equivalent of 1.0 sqm located south of river as well In recent year, the average rent in Riga per capita. This excludes entirely built-to- as Skanste, positioned north. Skanste slightly increased because of some suit and partially sold projects. area will see a significant increase in shortage in modern office stock. As new Office buildings with a total leasable office stock with projects such as Hanzas A and B class office premises open, the area of 24,000 sqm were delivered in 14B (Capitalica) and Elemental Skanste rent price is likely to stabilize. 2018. The largest development was (Kapitel) while Z-Towers opening in In 2018-2019, the average market Teodors with GLA of 16,300 sqm located 2019 will commence the development of rent for prime office space in Riga CBD in Teika neighbourhood. Main tenants Pardaugava area. amounted to 13.0-17.0 EUR/sqm/month, of the building were Accenture and In total, it is forecast that in 2019-2020 reaching over 20 in special cases. In DNB ASA. Other two projects delivered the Riga office market will increase by other central areas, rents were in the in 2018 each had GLA of 4,000 sqm, over 100,000 sqm of modern office range of 8.0-13.0 EUR/sqm/month, both of them being renovations of old space. whereas those for B class offices located premises located in central Riga. Such further from the city centre averaged trends prove that tenants demand quality VACANCY 7.0-10.0 EUR/sqm/month. Rental rates premises with modern office solutions. The average vacancy rate in the Riga are gradually rising as new projects offer Steep increase in the modern office stock office market is around 6.0%. The higher quality standards. is expected in the first half of 2019. vacancy rate of A class buildings is above The highest B class rents were captured To begin with, RED Line and Telegraph 5.5% while that of B class remains above in the modern business campuses and office buildings should open in the 6.5%. In 2018, the vacancy rate did not other professionally managed buildings second quarter of 2019. In total, two change significantly fluctuating around located in the outskirts of Riga. buildings will add 7,400 sqm of modern similar levels. Increase in the vacancy office. What is more, in the same period rate is expected in 2019 when a large INVESTMENT Akropole should open a 9,000 sqm office portion of currently developed buildings The Riga office market remains most building located next to the newly built is opened. Even though new premises are attractive to equity holders as investment shopping centre. Finally, the opening of popular among local and international in it makes up for more than 90% of Z-towers in Q2 2019 will add a significant companies, significant increase in the total country transaction volume. 24,000 sqm to the total Riga modern stock should have a negative effect on The city has a pool of Nordic and Baltic stock. the vacancy level. Gradual decrease is investors that actively participate in the Modern office development in the expected in two years’ time. market, the main ones being Eastnine, city shows not only in renovations With the growing number of modern Colonna Capital, SG Capital and others. and significant new stock growth but developments, outdated B class buildings Moreover, in recent years investors from also in formation of business clusters. will increasingly become vacant and Western Europe such as Corum started

Office Stock Development: Dynamics Source: Newsec Office Stock by Class, 2018 Source: Newsec Thousand, sqm

900 6% 800 14% 14% 700 4% 1% 3% 600 500 400 86% 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E

Existing Stock Additional Stock A Class B Class

2 RIGA OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES

«Modern office development continues with clusters forming North and South of the historical city centre»

investing in Riga. After years of compression, currently In addition to international investors In 2018, SWH Biroju Centrs was prime Riga office yield is 6.50%. It is purchasing existing office centres, purchased by SG Capital Partners, forecast that in 2019 the yield will international developers start investing in and the Alojas Business Centre was further decrease to 6.25% and then land plots with the purpose of developing purchased by Eastnine. These two remain at this level as banks start commercial real estate. Large-scale transactions made up almost 60% of the limiting financing of commercial real developers include Hanner, Lords LB and total 2018 office transaction volume, estate projects. With the supply of Capitalica Asset Management. Lithuanian which amounted to EUR 145 million. modern office stock starting to grow, developers among others are planning to Third biggest transaction was made by the market is going to remain attractive invest more than EUR 400 million in real Baltic Horizon Fund which acquired LNK both for local investment funds as well as estate in Riga. Centre office building for the purchase for international players looking for new price of EUR 17 million. opportunities.

OFFICE DEVELOPMENT IN RIGA, 2019-2020

Developer / Owner Name GLA, sqm Address District Exp. finishing 1 SPI Group Z-Towers 24,000 Ranka dambis 30 Kipsala district 2019 2 Akropolis Group Akropole Business Centre 9,000 Maskavas St. 257B Krasta district 2019 3 NBP Group Telegraph Offices 3,000 Audeju St. 15 City centre 2019 4 Dambis RedLine Offices 4,400 Bukultu St. 11 Ganibu dambis 2019 Business Garden Riga, 5 Vastint 14,500 Maldugunu St. 2, Marupe Ulmana district 2019 1st stage 6 Domuss Mezaparks Offices 3,300 Kelnes St. 1 Mezaparks 2019 7 Hanner Jauna Teika, Henrihs 19,100 Gustava Zemgala Ave. 74A Teika 2019 SWH Grupa (SG 8 SWH Office Centre 12,000 Skanstes St. 50/52 Skanste 2019 Capital Partners) Origo ONE Business 9 Linstow 11,500 Satekles St. 2B City centre 2020 Center ELEMENTAL Skanste, 10 Kapitel 20,500 Skanstes St. 25 Skanste 2020 1st stage 11 LNK Properties Valdemara Biroji 7,000 Krisjana Valdemara St. 118 Skanste 2020 12 Bauplan Nord Salas Biroji 4,700 Mukusalas St. 100 Mukusalas district 2020 Total 2019-2020 133,000

Source: Newsec

Average Rental Rates Source: Newsec CEE Office Market Situation Source: Newsec Area, sqm Per cent 3.5 14

3.0 12

2.5 10

13.0-17.0 8.0-13.0 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 RIGA OFFICE OUTLOOK, 2019 THE FULL SERVICE PROPERTY HOUSE

IN NORTHERN EUROPE

Newsec — The Full Service Property in 2001, Norway in 2005, the Baltic Newsec has approx. EUR 39 billion under House in Northern Europe — is by far the countries in 2009 and Denmark in 2016. management and annually signs lease largest specialised commercial property The Norwegian asset and property agreements of some 760 000 sqm, firm in Northern Europe. management companies First Newsec manages transactions of some Asset Management and TM Partner EUR 3 billion and does real estate Newsec manages more properties and were acquired in 2012. In 2013, Newsec valuations of underlying property worth carries out more transactions, more acquired Jones Lang LaSalle’s Swedish almost EUR 180 billion. Thanks to large lettings and more valuations than any property management operation. In volumes, local presence combined other firm in Northern Europe. Through 2017, Newsec grew with the acquisitions with in-depth understanding of a range this great volume, and the knowledge of Norwegian Basale and Danish Datea, of businesses, Newsec has a unique and depth of our various operations, we further strengthening the position within expertise of the real estate market in acquire extensive and detailed knowledge Property Asset Management. Northern Europe. of the real estate market. In turn, we can quickly identify business opportunities Newsec was founded in 1994 and is that create added value. today a partner-owned company with some 2000 co-workers spread across Our prime market is Northern Europe, the seven Nordic and Baltic markets. but through our alliance membership 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.

Newsec is the result of a unique history of growth, characterised by OULU constant originality of thinking. The first issue of the comprehensive market analysis, Newsec Property Outlook, TRONDHEIM was published in 2001. The Group expanded internationally into Finland TAMPERE

BERGEN OSLO HELSINKI STOCKHOLM TALLINN

GOTHENBURG RIGA AARHUS KLAIPEDA COPENHAGEN MALMÖ KAUNAS

VILNIUS

4 RIGA OFFICE OUTLOOK, 2019 MODERN OFFICE PREMISES CONTACT AND ADDRESSES

More analytical information at Newsec: Newsec in : LATVIA Head of Research and Analysis CEO, Latvia Vilandes str. 1 Mindaugas Kulbokas Girts Grinbergs LV -1010 Riga Cell +370 652 10556 Cell +371 2942 4847 Phone +371 6750 84 00 E-mail [email protected] E-mail [email protected] E-mail [email protected] www.newsecbaltics.com Team Lead of Research & Analysis Office Advisor Gintaras Tolocka Armands Bronics ESTONIA Cell +370 685 06940 Cell +371 2831 4240 Roseni str. 7 E-mail [email protected] E-mail [email protected] EE-10111 Tallinn Phone +372 664 5090 Office solutions at Newsec: E-mail [email protected] www.newsecbaltics.com Tenant Consulting Head of Corporate Solutions LITHUANIA Martynas Babilas Konstitucijos ave. 21C Cell +370 616 12216 LT-08130 Vilnius E-mail [email protected] Phone +370 5 252 6444 E-mail [email protected] Office FIT-OUT Service www.newsec.lt Head of Project Management Tadas Grincevicius Cell +370 679 79779 E-mail [email protected]

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