LATVIA RIGA Riga is building a new CBD NET 25 OFFICE € RENT RATE % ABSORPTION 20 PRIME RENT 195 12 thousands 15 & VACANCY 190 10 +580 bp of sqm 10 RATE 185 8 5 180 6 THE LACK OF MODERN BUILDINGS planning stage with expected delivery 0 LIES BEHIND AMBITIOUS in 2-3 years. Riga has a lot of poten- 2016 2017 2018 2019 2016 2017 2018 2019 DEVELOPMENT PLANS tial to become the capital of the Baltic % BOND YIELD PRIME YIELD % The Riga office market is undergoing States and must take advantage of the 145 OFFICE 139 OFFICE changes that we have not seen for al- situation while delivering suitable qual- 116 1.2 7.10 INVESTMENT PRIME most a decade, with only a few new ity real estate projects. 0.9 6.80 € million YIELD -30bp office deliveriesand stagnating new 43 -20% 0.6 6.50 & BOND office supply. In 2019, grade B projects WESTERN EUROPEAN INVESTORS YIELD 0.3 6.20 in secondary locations dominated the ARE SHOWING INTEREST IN RIGA 2016 2017 2018 2019 0 availability in the market. The lack of The Riga office segment is particularly 2016 2017 2018 2019 interest in this product plus its expan- appealing to investors, accounting for sion meant the total market 50% of the €230m transaction vacancy rose to near 12% by volume in 2019. Western Eu- MAIN OFFICE TRANSACTIONS: LETTING & SALES the end of the year. The leas- ropean investor confidence in ing market may reignite with PRIME OFFICE the Latvian real estate market Occupier Space (m2) Building-address Submarket new grade A office space now returned over the year. At the ASSETS Maxima Latvia 3,500 Akropole non-CBD at planning stage. These end of 2019, VIG Fund, an in- projects will help address a WILL FUEL vestment company owned by Visma 1,500 Business Garden Riga non-CBD serious issue in Riga: the ab- THE MARKET Vienna Insurance Group AG, Cabot Latvia 1,500 Jauna Teika Henrihs non-CBD sence of a central business acquired three office buildings district. The planned proj- IN RIGA totalling 20,000 sqm from ects (especially those devel- Baltic RE Group. The entry MAIN OFFICE TRANSACTIONS: INVESTMENT oped by Lords LB, Galio Group) will form of VIG is one of the first major invest- Buyer Price (€ m) Building-address Submarket a viable centre. During the last 2 years, ments by a Western European company developers experienced in the Baltics in the Riga office sector, and one of the VIG Fund confidential 3 office building portfolio CC market have initiated four large office largest investments in the Latvian com- Colonna Capital confidential Luminor HQ CBD projects. More than 235,000 sqm of mercial property market during the last projects are in the planning stage in the few years. Eastnine 25 Valdemara Centrs CC 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 copied or reproduced without prior permission from BNP Paribas Real Estate. HELSINKI SAINT PETERSBURG 42,577 11.0 420 OSLO TALLINN EUROPEAN OFFICE DEMAND 133,792 30,549 5.5 210 STOCKHOLM M sqm TAKE-UP * EMPLOYMENT GROWTH ** % 5.7 165,900 14, 000 2.5 550 OFFICES IN EUROPE 5.5 12,000 2,0 676 10 ,000 1.5 Sustained office demand is creating historic lows RIGA 8 ,000 1.0 GLASGOW EDINBURGH MOSCOW 19,837 11.8 192 6 ,000 0.5 in Europe’s CBD vacancy rates 58,154 10.1 407 37,077 6.6 438 493,000 8.2 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 COPENHAGEN 557 -0.5 37,100 5.9 281 -1.0 DUBLIN VILNIUS THE OFFICE MARKET REMAINS (> 5,000 sqm) hampered the market in MANCHESTER 512,000 -1.5 309,847 5.1 670 87,879 3.4 192 DYNAMIC IN EUROPE DESPITE Central Paris, which was 6% below its 134,709 15.0 457 4.1 -2.0 A SLOWER ECONOMY 2018 result. However, the overall demand 372 * 30 cities - ** Eurozone The European office market was still level remained good in the French capital BIRMINGHAM 282,387 HAMBURG thriving in 2019, with take-up amounting as take-up was above its 10-year average. LEGEND 72,470 12.8 432 6.2 TAKE-UP sqm to 12.73m sqm, barely 3% down on a very 460 AMSTERDAM BERLIN 1,016,000 OFFICE TAKE-UP IN THE MAIN active 2018, and still well above the long- LOW VACANCY AND COMPETITION CENTRAL LONDON 1.5 WARSAW -2.7% EUROPEAN CITIES REACHED term average. Occupier momentum is FOR THE BEST SPACE IS PUSHING UP TAKE-UP (sqm) 1,147,084 5.7 1 407 480 583,000 7.8 288 still sufficiently great, even with econom- RENTAL VALUES NET ABSORPTION (sqm) 13,084,367 12,728,214 12.73m SQM, SLIGHTLY DOWN ic slowdown, for many city markets to The overall office vacancy in Europe VACANCY RATE (%) LILLE BRUSSELS 2018 2019 ON 2018. 514,680 7.1 315 perform extremely well and achieve new reached 5.8% at the end of 2019, 40 bps PRIME RENTS (€/m2/year) 264,106 4.7 240 highs in take-up. Records were broken down on 2018. With only 1.5% of empty BUCHAREST FRANKFURT last year in Milan (+25% vs. 2018), Rome offices, representing 304,000 sqm, Berlin PRAGUE 329,519 TAKE-UP thousands of sqm LUXEMBOURG 635,000 EUROPEAN OFFICE PRIME RENT AND VACANCY (42 CITIES) (+60%), Brussels (+42%, best performance displays the lowest vacancy on the con- 260,606 284,063 5.5 276 10.5 since 2007), Barcelona (+6%, best result tinent, followed by Munich (2.4%), Vilni- 1,000 6.8 CENTRAL PARIS 3.6 228 €/m²/year AVERAGE PRIME RENTS AVERAGE VACANCY RATE % since 2005) and Lyon (+33%). Another all- us (3.4%) and Luxembourg (3.6%). Other 750 540 2,064,363 4.9 880 600 400 12.0 time high was in Berlin, where transacted markets saw important drops in vacancy 500 BRATISLAVA 81,400 8.7 204 VIENNA volumes stood at 1.02m year-on-year, such as Barce- 250 MUNICH 350 10.0 220,000 sqm (+22%). Berlin’s re- lona (-210 bps) and Budapest 770,000 2.4 474 BUDAPEST 300 8.0 sult is the first time ever (-170 bps). It is unlikely that 4.7 GENEVA 361,980 5.6 300 that any German city re- TAKE-UP IN EUROPE Europe will see large increas- 306 250 6.0 ported take-up in excess es in vacancy over the next n/a 5.0 610 AMOUNTED TO 200 4.0 of 1m sqm. Berlin al- five years: the restrained LYON lowed the combined four construction pipeline and MILAN 441,838 4.7 325 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 main cities of the country 12.73msqm strength of demand mitigate 488,087 to reach 2.93m sqm, de- against that scenario occur- 9.8 BELGRADE spite a dip in Munich (-21%), Hamburg ring. The lack of supply pushed up prime VACANCY RATE % PRIME RENTS €/m²/year THE VACANCY RENT TOULOUSE 600 n/a 3.0 196 (-9%) and Frankfurt (-6%). Leasing activi- rental values over 2019, especially for the CONTINUED TO DIMINISH 127,895 4.2 230 ty in Central London slowed compared to prime assets located in the best-located MARSEILLE -40 bp +3% ON AVERAGE IN THE MAIN 2018 (-18%) and was below its long-term business districts in Europe. Big increases 138,586 6.5 295 ATHENS 6.2 5.8 406 418 EUROPEAN CITIES WHILE average, despite the good demand from in rents occurred in Lisbon (+19%), Berlin 80,000 media-tech companies and the finance (+11%) and Barcelona (+10%), all among 2018 2019 2018 2019 PRIME RENTAL VALUES 5.0 sector. The lack of deals for large units Europe’s liveliest office markets. BARCELONA INCREASED. LISBON MADRID 400,169 6.7 342 252 ROME 188,527 4.8 300 617,133 8.4 435 272,619 8.0 450 HELSINKI SAINT PETERSBURG 1,340 78 3.00 OSLO TALLINN COMMERCIAL REAL ESTATE INVESTMENT VOLUME IN EUROPE 3,048 80 49 6.00 STOCKHOLM 74 € million O ce investment Retail investment Other investment 6,034 3.75 300,000 FULL YEAR VOLUMES INVESTMENT MARKET 51 3.25 250,000 INCREASED SLIGHTLY IN 2019 WITH MORE Investment in offices is still booming RIGA 200,000 GLASGOW EDINBURGH MOSCOW THAN €281bn INVESTED 235 49 5.80 758 28 5.25 1,004 46 4.75 – 150,000 ACROSS EUROPE. – PARIS REMAINED 100,000 COPENHAGEN 9.50 THE FIRST CITY 2,699 55 3.50% 50,000 MARKET. DUBLIN VILNIUS MANCHESTER 4,403 LEGEND 4,322 70 4.00 406 78 5.80 0 MANY EUROPEAN CITIES POST booming occupational market and high- 1,048 20 4.75 66 2013 2014 2015 2016 2017 2018 2019 NEW HIGHS FOR OFFICE INVESTMENT er construction activity, which provides 2.80 The total commercial real estate in- more products for sale. Intense office BIRMINGHAM 3,582 HAMBURG TOTAL INVESTMENT COUNTRIES TOTAL INVESTMENT CITIES vestment volume in Europe reached investment activity was also recorded Investment volume (€ million) 1,287 38 4.75 66 € million € million €281bn in 2019, a 3% increase com- in Milan with €3.8bn (best year ever on 3.10 Office investment volume AMSTERDAM BERLIN 12,800 pared to 2018.