baltic states and belarus real estate market review - Colliers

Real Estate Market Review 2011 | Latvia Office Market
Office Market
OVERVIEW
After severe economic decline in 2009, 2010
was the year of stabilization. Many companies
have understood the new market realities
and have found new ways of doing business
in a challenging environment. Many
companies that were able to overcome the
difficult period of 2008 - 2009 are now able
to plan ahead, and build strategic plans for
next three-five years. They are thinking of
hiring new staff, expanding and growing.
This will eventually be reflected in increasing
demand for office space and will have
positive effect overall on the commercial real
estate market. We are on the way to further
recovery and growth.
In 2010 the Riga office vacancy rate dropped,
almost 30,000 sqm of vacant A and B class
office space was absorbed and rental rates
have stabilized as well. This all indicates a
positive trend which is expected to continue
in 2011.
Additions to office stock were negligable in
2010 and no new major office developments
are planned to be commissioned in 2011. This
allows for further decreases in vacant office
stock in the coming year, as the market
continues to absorb it.
SUPPLY
As at January 2011 total speculative A and B
class office stock in Riga has reached
355,000 sqm and the total A and B class
built-to-suit stock amounted to 163,000 sqm.
In total, the high class (A and B) office stock
in Riga equalled 518,000 sqm.
Most of the additions to the office stock in the
2010 were in the built-to-suit segment
(17,733 sqm): DnB Nord Bank headquarters
on Skanstes street, comprising 13,100 sqm of
leasable space, and the administrative
building of the Sanitary Transport Depot of
Riga (STDR), comprising 4,633 sqm of
leasable space were added to the stock. The
only project that was added to the speculative
office market in 2010 was Upenu Office
Centre with total GLA 7,003 sqm. It has been
overtaken by Ektornet Latvia, which is an
SPV Real Estate Fund of Swedbank, from a
financially distressed landlord.
Approximately 9,500 sqm of office stock GLA
has been “frozen” during construction until
there is clear demand from potential
occupants for the project. It is expected only
one new speculative office development to
be commissioned in 2011.
The American Embassy project is due for
completion in 2011 and this is the only project
that is expected in built-to-suit segment.
Dynamics of Office Space in Riga
f - forecast
400
350
300
250
200
150
100
50
0
2000
2001
2002
2003
Sqm (000s)
2004
2005
2006
2007
2008
2009
2010
2011f
Total Stock (Speculative, without new construction)
Total Stock (Built-to-suit, without new construction)
Expected Construction (Built-to-suit)
New Construction (Speculative)
New Construction (Built-to-suit)
Expected Construction (Speculative)
CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv
Colliers International | p. 7