baltic states and belarus real estate market review - Colliers

Real Estate Market Review 2011 | Latvia Office Market
Dynamics of Vacancy Rates
in Riga
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Jan 2006
Jan 2007
Jan 2008
Jan 2009
Class A Class B Total
Jan 2010
Jan 2011
Vacancy Rates and Trends in
Riga
- slight decrease
Class
Rates in Trends
2010 for 2011
Class A 5.8%
Class B1 31.0%
Class B2 34.0%
VACANCY RATEs
Due to virtually no growth in office stock in
2010, combined with an improving overall
economic environment in Latvia, which
normally drives demand for office stock, the
total vacancy rate in the market has declined.
The office vacancy rate was 26.6 per cent as
at January 2011 compared to 36.9 per cent
12 months earlier. Consequently, total vacant
office supply has decreased from 128,000
sqm in the beginning of 2010 to 99,000 sqm
at the year-end, which is a 23 per cent
decrease or reduction of almost 30,000 sqm
of office premises.
The take up was mostly driven by expanding
companies and moving to better quality
premises from C class offices and residential
properties. A number of new international
companies has also entered the market in
2010. One example is where Colliers
International represented the interests of the
tenant, a chemical and materials company,
namely Cytec that has leased premises in the
Europa Business Centre.
Tendencies AND FORECASTS
◊
The economic recession of Latvia that
has started in 2008 has increased the
competitive advantage of Riga for
relocation or establishment of back
offices, call centers, and shared service
functions of international companies.
With relatively low real estate costs,
together with lower salaries and an
educated workforce, Riga is emerging
as one of the most attractive cities in the
EU. Companies have explored this
opportunity and many have entered
◊
◊
◊
◊
◊
Latvian market in 2010. It is anticipated
that this tendency will continue in the
next couple of years.
Several large office deals took place in
2010 in the Riga office market. Large
companies have chosen to use a
favorable situation for tenants and were
able to sign long-term lease agreements
with landlords at favorable terms and
conditions. As vacant stock will be
gradually absorbed by the market, the
number of such favorable opportunities
will become limited.
The vacancy rate in the Riga office
market has dropped from 36.9 per cent
to 26.6 per cent during 2010. In the
case that the economy will continue to
recover at the same pace, then vacant
stock will continue to be absorbed
within two-three years and vacancy
rates will reach long-term sustainable
levels.
Regarding rental rates, as predicted,
they were stable during 2010 and are
expected to stay this way throughout
2011.
A significant increase in supply is not
forecasted in 2011. Several office
centers are “frozen” and may be
resumed in 2011. There is expected to
be limited development, but no
significant increase in office stock is
forecasted within next 2 years.
A balance in the office market supply
and demand can be sustained in next
two-three years when there will be a
right time for adding new office supply
to the stock.
CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv
Colliers International | p. 9