baltic states and belarus real estate market review - Colliers

Real Estate Market Review 2011 | Estonia Industrial Market
Tendencies
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After 2009 saw diving rental rates and
increasing vacancy, 2010 began with
very little tenant demand and a high
vacancy rate. The sector remained
fragile with fears of bankruptcies or
jumps in vacancy with hopes pinned on
a growth in exports and transit and a
stabilising.
In 2010 the market remained in favour
of occupiers as landlords offered
competitive and more flexible lease
conditions to tenants. Companies that
were seeking and leasing warehouse
premises in 2010 represented mostly
retail sector companies (Prisma, Rahva
Raamat, Selver, R-Kiosk).
As 2010 has progressed, construction
prices have increased steeply
(approximately 20 per cent over the
year) and widened the gap between the
asking price of developers and tenant
expectations. Due to increased
construction prises and the high cost of
borrowing, occupiers tend to prefer
build-to-suit to self-financed and built
projects because companies could use
their capital for other purposes rather
than tying it up in real estate.
◊ Occupiers are still cautious and
generally show preference to leasing
over purchase. In the case of needs for
premises with specific parameters, due
to a shortage of such new buildings
often older industrial premises are
considered. Short-term rental contracts
have become more common. Investor
interest for industrial sector is improving
but remains relatively low.
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Even though the industrial market
vacancy rate was quite high throughout
2010, the sector has become more
active among Russian and Scandinavian
clients, and there was some degree of
demand shortfall in larger properties
(above 5,000 sqm). In addition to
international companies, some local
companies have also become active in
this segment.
Although the sector has shown some
positive signs of recovery, supported by
strengthening exports and economic
revival in neighbouring Nordic countries,
stable recovery in this market will be
slow-moderate over the medium-term.
Despite reduced demand, a drop-off in
supply should allow rents to remain
more stable in 2011.
The development of industrial properties
is concentrated on the area of Tallinn
and Harju County. The obvious reasons
for this are the location (for example,
proximity of main ports such as Muuga
and Paldiski), built-up infrastructure and
economic activity in the area.
Since the end of 2009 foreign investors
have turned their attention to the
industrial market and continue to seek
attractive investment possibilities.
Growing interest from foreign investors
attracted to the sector by low prices,
remains to be a promising sign.
CONTACT: AVO RÕÕMUSSAAR - a.roomussaar@colliers.ee
Colliers International | p. 66