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Home , Maxima Group, Vilnius

MARCH 2019

VILNIUS Record stock growth is expected in 2019, but vacancy should stay low

Pre-lease agreements are becoming common By the end of 2018 the stock of modern office premises in totalled 635,150 sq m. Stock is still lower than in most of Central and Eastern European urban areas as is Vilnius’ average vacancy rate. Given that demand in all of these cities is most- ly driven by shared service centres, Vilnius still offers growth possibilities in terms of office development. Net absorption remains positive indicating that the market remains attractive both to newcomers as well as existing market players. Newcomers to Vilnius in 2018 included Shopify/Oberlo who signed for 2,850 sq m renting the Net absorption Vacancy rate whole Green Hall III building, while Yara (thousand m2) (% ) signed for 4,400 sq m in Park Town East Hill. Both of the buildings are set to open 100 5 bp in 2019 so these deals are pre-leases. SEB, -6% +30 an existing market player, signed a pre- 75 4 lease agreement for 10,000 sq m in the CBD 50 3 to relocate their HQ and for 12,500 sq m in Technopolis campus to relocate the global 25 2 services division. These deals highlight that 0 1 pre-lease agreements are becoming com- 15 16 17 18 15 16 17 18 mon in the market as demand for premises remains high. Reduced vacancy is likely to Office investment support rental increase over 2019. (€ million) Prime office: rents & yields

Highest volume of investment (€/m²/ Prime rent Prime yield 200 year ) (%) ever seen in Vilnius +30% In 2018, the total investment volume in 150 190 9 was €400m, which is the highest 100 180 8 ever recorded amount. Investors are diver- 170 7 sifying their portfolios with investment into 50 other cities besides the Vilnius, 160 6 0 such as , Klaipeda and Panevezys. 12 13 14 15 16 17 18 15 16 17 18 The office segment accounted for 35% of the total volume. The market’s growth has Main office transactions - letting & sales been driven both by domestic and interna- tional investors, the former being res- Occupier Space (m2) Building-address Submarket ponsible for the largest office market tran- SEB GS 12,500 Technopolis Campus non-CBD sactions. One of the largest deals was by SEB HQ 10,000 G. Baravyko st. 4 CBD Lewben fund who purchased the Business Triangle in Vilnius for more than €60m. 6,400 Savanoriu av. 5 non-CBD 2019 will probably be an even more active year for the investment market. In Februa- Main office transactions - investment ry 2019, Eastnine purchased S7 office cam- Buyer Price (€ m) Building-address Submarket pus in Vilnius for a record €128m. That was (1) (2) one of the largest deals ever seen, and LIMF >60 Business Triangle non-CBD at one third of 2018 volume, which sug- DAO Family Office Investor Conf. Park Town West CBD gests prime office yields will remain under Lords LB Baltic Fund IV 20 Zveju 14 / Juozapaviciaus 13 non-CBD pressure. Real Estate : BNP Paribas Source (1) Lewben Investment Management Fund - (2) (Business Triangle)

Disclaimer: BNP Paribas Real Estate cannot be held responsible if the information contained in the present report turns out to be inaccurate or incomplete. The information is dedicated to the exclusive use of BNPPRE clients. This report and the information contained may not be 1 copied or reproduced without prior permission from BNP Paribas Real Estate. * 82,800 12 456 * * 119,593 5.9 506 60,000 5.5 210 * OFFICES 185,000 5.5 658 IN European Office * Demand 25,000 6 187 Take-up * Employment growth ** (M m2) (%) No letup in European office 12,000 2 11,000 1 market activity in 2018 65,447 7.5 413 10,000 0 86,146 9.5 394 VILNIUS * 9,000 -1 75,000 3.7 192 Take-up volume as high as in 2017 - 5.9 268 8,000 -2 The office market in Europe is flourishing, 12 13 14 15 16 17 18 with 2018 total volumes at the same level as those of 2017, by far the most active year in MANCHESTER the decade. At city level, Central be- 163,649 11.7 425 ---- 2017 ------2018 ---- 372,441 6.4 670 nefited from the return of activity from small 563,000 4.5 348 and medium businesses and from the high 12,908,832 13,016,528 +0.8% demand from the Media Tech sector, reaching BIRMINGHAM 648,000 8.6 270 2 70,155 12.4 400 Take-up (m ) 1.4m sq m (+19% over 1 year). The four main 831,000 1.7 432 German markets combined dropped 8% but 381,077 7.2 425 CENTRAL LONDON still represented 3.04m sq m, well above the Office take-up in the main European 1,400,461 5.0 1,365 long term average. Volumes in Central cities reached 13 million sq m, and diminished by 9%, notably due to the lack of remained stable compared to 2017. 2 very large deals (-30% in transactions over Take-up (m ) 361,423 7.9 310 280,216 - 240 FRANKFURT * 30 cities - ** Eurozone 20,000 sq m). Very high results were achie- Vacancy Rate (%) 678,000 7.4 528 318,210 5.1 264 ved in (+54%), , Prime Rents (€/m2/year) (+21%), Milan and Warsaw (+10%). LUXEMBOURG 247,882 3.7 600 Take-up in thousand m2 Vacancy contraction in Europe CENTRAL PARIS 1,000 2,159,027 5.5 857 VIENNA European office pushing up prime rental values 500 270,000 5.3 306 106,100 6 198 prime rent and vacancy The average vacancy rate shrunk again in Eu- 975,000 2.3 468 rope in 2018 and probably attained its floor 250 (40 cities) in several markets. The German markets still 100 385,787 7.3 288 (€/m²/ ZURICH Vacancy Rate Prime Rents displayed the lowest vacancy rates, especial- (%) year) - 3.9 688 ly Berlin (1.7%, representing only 327,000 sq 10 420 * Net absorption * 9 400 m) and Munich (2.3%). Luxembourg (3.7% of instead of take-up - 4.8 800 vacancy) was close to the level of German - 4 - 8 380 LYON markets. Vacancy dropped the most in Ams- 7 360 330,571 5.7 300 MILAN terdam (-310 bps) and Warsaw (-340 bps). 389,530 10.6 590 6 340 The share of empty premises fell in all the 12 13 14 15 16 17 18 other markets, such as Central Paris (-100 bps), Central London (-120 bps), Milan (-110 TOULOUSE 292,019 8.3 222 bps) and Dublin (-170 bps). Prime rental va- 177,888 4.9 220 ---- 2017 ------2018 ---- lues remained steady or increased in all the bp main European markets, except in Central 368,288 - 320 7.7 6.8 -100 London (-2% vs. the end of 2018) where prime rents reached £1,211/sq m/year. Ma- Vacancy Rate (%) drid (+13%, €432/sq m/year) saw the most 172,529 8.7 440 significant growth in rental values. 378,337 8.9 312 +5% Other big increases were in Hamburg, 403 423 Berlin (+9%), Milan and Frankfurt 538,465 9.6 420 Prime Rents (€/m²/year) (+7%). LISBON 201,985 8.8 252 70,000 8 240 The vacancy rate continued to diminish on average in the main European cities, supported by the combination of growing take-up and low level of completions.

2 HELSINKI 2,423 61 3.4 OSLO TALLINN 2,184 50 3.75 149 60 6.25 STOCKHOLM INVESTMENT 4,580 46 3.4 Commercial real estate MARKET investment volume RIGA 188 45 6.5 in Europe Office investment investment (€/m²/ Other investment Another stunning year year ) EDINBURGH 250 GLASGOW for investment 1,026 33 4.75 897 55 5.25 200 VILNIUS COPENHAGEN 150 The total commercial real estate investment 286 49 6.25 1,100 58 4 100 volume in Europe reached €261bn in 2018**, 50 a similar level to 2017. Activity actually stren- 0 gthened in the sixteen largest city markets as DUBLIN MANCHESTER 12 13 14 15 16 17 18 with a 10% increase they broke the €100bn 1,694 19 4.75 3,125 45 4 HAMBURG bar; an absolute historic record. 5,895 52 3.05 Offices remained the most sought-after assets WARSAW ---- 2017 ------2018 ---- BIRMINGHAM 2,249 77 4.75 on the market, sustained by record levels of BERLIN 1,432 34 4.75 AMSTERDAM office take-up. They represented 45% of in- 7,429 57 2.7 261, 923** 261 ,056** 0% vested volumes in Europe and were charac- 3,634 62 3.5 Investment volume (€ million) CENTRAL LONDON terized by a large share of mega deals. Total investment (countries) 20,330 77 3.5 Thanks to an impressive growth of invested Office share of total investment volume (%) volumes (+26% y.o.y.), Paris was back to being Net Office Prime Yield (%) LILLE BRUSSELS 118 ,702 126 ,343 +6% the leading European city market. This perfor- 600 89 4.15 2,976 66 4 FRANKFURT PRAGUE mance was mainly driven by office mega deals Investment € bn Total investment (cities) and American investment. London (-10%) (by city) 10,229 82 2.95 1,187 86 4.75 LUXEMBOURG downgraded to second position but was host 10 1,973 94 4 Full year volumes remained stable to the top three largest single deals in Europe. 5 in 2018 with €261bn invested across German markets performed extraordinarily CENTRAL PARIS 2 BRATISLAVA * Europe. Central Paris is back to being well again as 2018 was an all-time high for 22,987 82 3 VIENNA 1 MUNICH 265 - 6.25 the leading European city market, the country, passing 2007 result. Frankfurt 2,731 39 3.5 6,667 64 2.8 followed by Central London. (+38%) was number one ahead of Berlin (-6%) Investment € bn BUDAPEST which was hampered by the lack of product (by country) 1,057 68 5.75 ZURICH to buy. 2018 was a good year for Dublin mar- n > €20 n €5 - €20 1,853 33 2.2 n €2 - €5 n < €2 ket (+81%) that concentrated almost 90% of GENEVA the Irish market. The Luxembourg market BELGRADE * Total investment - - 2.9 reached its highest level since 2007 with of- In (source RCA) - - 8.25 LYON fices representing 94% of the turnover. European Office prime 1,412 80 3.85 MILAN Office yields continued their downward trend 3,182 65 3.3 yield vs 10-year Bund throughout Europe, reaching historic lows at Office prime yield 10-year Bund the end of 2018. Prime yields stood at 4.40% BUCHAREST (%) in Q4 2018 on average among the 40 markets TOULOUSE 818 70 7.25 8 434 79 5 analyzed in this report, 26 bps down on Q4 6 MARSEILLE 2017. Among the largest markets, Berlin still 4 675 39 4.7 had the lowest prime office yield (2.70%) fol- 2 lowed by Munich (2.80%), Frankfurt (2.95%) 0 and Paris (3.00%) ROME 12 13 14 15 16 17 18 BARCELONA 2,169 55 4 1,212 51 3.5 MADRID ---- 2017 ------2018 ---- 4,196 36 3.25 bp LISBON ATHENS 4.66 4.40 -26 2,771 27 4.25 - - 7.5 Prime yield (%)

Office prime yields continued their fall during 2018 recording new lows.

** In the countries monitored in this report

3 BUSINESS LINES 6 in Europe A 360° vision Main locations* EUROPE MIDDLE EAST / ASIA LUXEMBOURG DUBAI Headquarters Axento Building Emaar Square 167, Quai de la Bataille Avenue J.F. Kennedy 44 Building n° 1, 7th Floor de Stalingrad 1855 Luxembourg P.O. Box 7233, Dubai 92867 Issy-les-Moulineaux Tel.: +352 34 94 84 Tel.: +971 44 248 277 Tel.: +33 1 55 65 20 04 Investment Management HONG KONG Tel.: +352 26 26 06 06 63rd /F, Two International Finance Avenue Louise 235 Centre, 1050 Brussels Antonio Vivaldistraat 54 8 Finance Street, Central, Tel.: +32 2 290 59 59 1083 HP Amsterdam Hong Kong Tel.: +31 20 305 97 20 Tel.: +852 2909 8888 Ovocný trh 8 SINGAPORE 110 00 Prague 1 Al. Jana Pawła II 25 Pte Ltd 20 Collyer Quay, #17-04 Tel.: +420 224 835 000 Atrium Singapore 049319 00-854 Warsaw Tel.: +65 8189 2762 Tel.: +48 22 653 44 00 Goetheplatz 4 60311 Frankfurt Alliances* Tel.: +49 69 2 98 99 0 Avenida da República, 90 Piso 1, Fracção 1 LITHUANIA 1600-206 Lisboa 117-119 Vaci ut. NORTHERN IRELAND Tel.: +351 939 911 125 A Building 1123 Budapest, PORTUGAL** Tel.: +36 1 487 5501 Banul Antonache Street n°40-44 SERBIA IRELAND Bucharest 011665 20 Merrion Road, Tel.: +40 21 312 7000 Ballsbridge, Dublin 4 HUNGARY ** SWITZERLAND Tel.: +353 1 66 11 233 JERSEY USA C/ Emilio Vargas, 4 28043 Madrid Piazza Lina Bo Bardi, 3 Tel.: +34 91 454 96 00 20124 Milano Tel.: +39 02 58 33 141 @ 5 Aldermanbury Square * March 2019 BNPPRE London EC2V 7BP ** Coverage In Transaction, Valuation Tel.: +44 20 7338 4000 & Consulting www.realestate.bnpparibas.com

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