baltic states and belarus real estate market review - Colliers

Real Estate Market Review 2011 | Latvia Industrial Market
Industrial Market
Sqm (000s)
Dynamics of A and B Class
Warehouse Space in Riga
f - forecast
500
450
400
350
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
Distribution of A and B
Class Warehouse Space in
Riga and Riga’s district
2011f
Total Stock (speculative, built-to-siut,
without new construction)
Expected Construction New Construction
OVERVIEW
The industrial market in Latvia has been the
slowest market sector to recover; during
2010 it was the least active of all the
commercial real estate segments. The
vacancy rate remained effectively unchanged;
and additions to the total industrial stock
were only added by built-to-suit project.
Companies continued to renegotiate leasing
terms and used the opportunity of a weak
market to relocate to better quality premises.
Downward pressure on rental rates has
continued throughout 2010.
Another tendency observed in 2010 is that
the companies have started to reject the idea
of having their own warehouse facilities and
started using the services of “outsourcing”
companies, such as DSV and Schenker that
provide services in logistics, warehousing
and distribution.
SUPPLY
The total stock of modern warehouse space
in Riga and its suburbs amounted to 477,000
sqm by the end of 2010. The stock increased
over the year by 15,000 sqm of build-to-suit
GLA, which was leased to Kuehne + Nagel in
Maykel Business Park. No speculative
warehouse projects were put into commission
during 2010.
All other projects (such as the NCC, VGP in
Kekava and Vecinku Logistics Park
warehouses) have been postponed
indefinitely: the time of completion is hard to
predict.
There will be little addition to the industrial
stock in 2011: a speculative industrial project
at Plienciema Street 16, comprising 3,000
sqm will be commissioned during the year.
DEMAND
Despite the fact that throughout 2010 the
overall demand for industrial space was
slow, a number of large deals in this segment
took place. For instance, a distribution and
logistics company Sanitex JSC has leased
almost 13,000 sqm in Roņu ieleja 2 centre
with help of Colliers International. Atlas SIA,
has signed a lease agreement for almost
10,000 sqm in the premises at Lubanas 76.
As companies are becoming more keen to
use the services of third-party logistics (3PL)
companies there is increased demand for
warehouse space from companies that
provide a one-stop shop service to its
customers of outsourced (or “third party”)
logistics services for part, or all of their
supply chain management functions.
The market saw that companies have started
thinking about expansions, but the result of
signed lease transactions will not be evident
for another 12 - 18 months.
RENTAL RATES
Rental rates in the Latvian warehouse market
have seen further divergence between
classes. A Class warehouse space has seen
slight rental rate growth in its lower margin,
while lower class warehouses have continued
to diminish, reaching historically low levels.
Looking into 2011, we expect a slight upward
correction in rental rates in A class
warehouses but we do not anticipate notable
increases in rents over the year, with
occupiers likely to wait and see how the
economic recovery pans-out before
committing to immediate expansion. We do,
however, expect corporate occupiers to
commit to future space via pre-lets -
8
8
14
59%
20%
List of Completed Projects in Riga and Riga Region for 2010
City Project Name Type GLA, sqm Developer
Sauriesi Maykel Business Park Speculative 15,000 Carn Holdings
Total 15,000
21%
Number of Units
% GLA of Units
4,000 - 10,000 sqm 10,000 - 20,000 sqm
20,000 and more sqm
List of New Projects in Riga Region for 2011
City Project Name Type GLA, sqm Status Developer
Marupe Plienciema 16 Speculative 3,000 Planning Plienciema 16
Total 3,000
CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv
Colliers International | p. 15