Colliers: 2011 Best Year For Estonian Commercial Real Estate

27.04.2011 Andrew Whyte

Compared with the first quarter of 2010, the number of commerical real estate deals in Estonia has fallen by 18 per cent. However, their size and value has actually increased.

The monthly average transaction value has risen by 48 per cent, from 39 300 Euros to 58 100 Euros, according to a survey carried out by global real estate services corporation Colliers in March, as reported on Estonian business news site E24 Majandus. The company furthermore predicts that commercial real estate investments this year will make it the all-time most successful year in the history of the sector.

Company analysts confirm that the availability of modern office space continues to fall, and that offers of spacious office space to rent in the marketplace may dry up.

“Our own cooperation partners have demonstrated that plans for new office space construction are day by day becoming more realistic. A good example is the planned new G4S business development which Arco Vara Real Estate acquired at the end of 2010″, comments Colliers’ investment and evaluation manager Margus Tinno.

“Various developers are expressing a clear interest in properties with strategic locations in the central business district”, he adds.

The Colliers survey has shown that demand for rented office space is continuing to be carried by the IT and Telecoms sectors, which uses on the whole the greatest area of rental space.

Foreign investor confidence has recovered in Estonian real estate, as is demonstrated by Colliers’ estimates of the volume of planned and completed transactions in relation to shopping centres. This increased activity is exemplified by an agreement of 105 million Euros (still to be settled) for the Kristiine Shopping centre.

“Finnish captial-based Prisma Family Market has already been renovating and extending a number of its Tallinn hypermarkets for some time and commencement of the construction of a second hypermarket in Tartu has already been announced. At the same time a new Lithuanian-owned Maxima hypermarket is being planned in Pärnu. In a rejuvenating economy, conditions in the market clearly tighten up between the competing retail chains” Says Tinno.

Growing demand for warehouse and industrial space will be quickly offset by a rapid rise in construction prices. Estimates by Colliers analysts imply that new developments are breaking even at 4-4.5 Euros per square metre – this exceeds the level for 2009 by as much as 50 per cent and is still too expensive for many potential tenants today, despite the recovery of many businesses. Evidently those businesses which are enjoying a rapid expansion are expected to start to approach developers’ price expectations.

“The statistics for the first quarter of 2011 are very revealing – together with the transaction concerning the Kristiine Centre , the volume of real estate transactions has already exceeded figures for 2010 by 150 per cent. It is thought that some major commercial real estate portfolio talks are in progress, for example the East Capital and Capfeld deals, which can at the least mean that the commercial property  forecast for Estonia is for the most successful year in this sector”,  Tinno further states.

The original article (in Estonian) can be viewed here.

Andrew Whyte
Tallinn Property by Goodson & Red

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