baltic states and belarus real estate market review - Colliers

Real Estate Market Review 2011 | Estonia Retail Market
Demand
2010 was expected to be more difficult for
retail owners than landlords in other sectors,
as considerable instability in tenant, rental
and vacancy rates became apparent towards
the end of 2009. Sales figures still remained
lower YOY at the beginning of the year, but
improved. It is still surprisingly, that in 2010
the market saw substantial development and
the demand for modern retail space in bigger
shopping centres still exceeded supply and
free space was absent. Therefore, in Tallinn’s
existing large shopping centres the vacancy
rate has remained almost zero. New retail
space delivered in 2010 was almost fully
leased out before completion.
In 2010 shops with more expensive clothing
and footwear have started to reduce their
retail space and move to smaller premises
(for example Emporio Armani has closed its
store on Rävala Str. and opened a smaller
store in the Old Town in April 2010). In
contrast to high-end brands, budget retail
chains have started to expand. Colliers has
received indications that one of Germany’s
most well known retail chains wishes to
expand its retail space in Estonia. This is one
example. Estonian local retailers have also
started to create new low-price brands (e.g.
new footwear brand SHU, which is a part of
Tallinn Kaubamaja Group).
Rental rates and vacancy
Rents remained stable in main shopping
centres until summer 2009, as demand
continually exceeded supply (the vacancy
rate in bigger shopping centres in Tallinn
varied from 0.5 to 2 per cent). At the same
time, due to an overall slowdown in private
consumption, tenants with goods and
services in less demand (for example,
sportswear) stared to relocate from the
larger shopping centres to retail spaces with
lower rent, or to close down some of their
stores.
The upper margin of rental rates increased
during boom time in accordance with
consumption growth while lower margin did
not substantially change. By the beginning of
2010, the average rent rates per square
meter in retail premises in Tallinn had
decreased by 5 - 8 per cent y-o-y.
Consumption in Estonia is positively
correlated with consumer confidence.
Continuing growth in consumer confidence
would signify not only growth in retail sales
figures but quite likely a rental growth.
Indications in recent months suggest that
rental declines have slowed and rental values
for the shopping centre sector might begin to
improve by the end of 2011.
Rent rates for anchor tenants are expected to
remain stable, with the main changes
expected in rent level for small size retail
units. Rent rates will also depend on retailers’
performance as well as supply of new
premises (completion of several big retail
projects / retail parks).
Rental and Vacancy Rates and trends in Tallinn
* asking rental rates (EUR/sqm/month) excluding VAT and operating expenses
- stable
Unit Size Rates* in 2010 Trends for 2011
Large retail unit (anchor tenants) 6.4 - 9.6
Medium retail unit (150 - 350 sqm) 9.6 - 28.8
Small retail unit (up to 100 sqm) 12.5 - 42.2
Vacancy (major shopping centres) 1%
Street Retail Rental Rates in Tallinn
* asking rental rates (EUR/sqm/month) excluding VAT and operating expenses
- stable
Unit Size Rates* in 2010 Trends for 2011
Street retail 9.0-28.0
CONTACT: AVO RÕÕMUSSAAR - a.roomussaar@colliers.ee
Colliers International | p. 61