2010 Global Market Report - NAI Commercial Real Estate

Vienna, AustriaThe Baltics (Latvia/Estonia/Lithuania)ContactNAI Otto Immobilien+43 1 512 77 77Country DataArea (KM 2 )GDP Growth (%)GDP 2009 (US$ B)GDP/Capita (US$)Inflation Rate (%)UnemploymentRate (%)Interest Rate(%)1334.3-3.82%$374.42$45,090.490.47%5.27%1.00%Population (Millions) 8.304Vienna is the capital of Austria and has a population of 1.7million. The city has historically been a focus for commercebetween East and the West. Growth in the Austrian economyis estimated at -3.4% for 2009 with inflation at 0.5%. Theunemployment rate was 4.4% in July 2009, compared to9% for the EU 27.The new supply of office space was approximately 240,000SM in 2008. For 2009 about 220,000 SM are estimated.Demand in the office space rental market has slackened.Nevertheless, with approximately 280,000 SM of activity,the leasing performance will level off at a respectable valuedue to numerous relocations and location consolidations.Annual leasing activity totaled approximately 340,000SM during the record years of 2005-2008.In recent months, increased space demand has come fromthe trade, financial and leisure sectors. Top rents as well asthe average rent are stable at €24.00, respectively€12.10/SM/month. The vacancy rate remains at 5.7%.Demand for industrial and warehousing facilities has weakenedsignificantly. Rents have softened to around€5.00/SM/month. Owner-occupation is still a dominantfeature of the market. Retail sales in Austria continued tobe strong during the first six months of 2009. Prime rentsfor unit shops achieve approximately €2,400/SM/year.Within the framework of Vienna’s main railway stations a lotof retail space is going to enter the market duringthe next few years. Investment market demand, as well asthe requirements concerning property quality and yields,have risen (as much as 1% beyond the top segment). Pricingcontinues to be difficult for both sides. The massivepurchase price reductions some expected have not materializeddue to market participants’ wait and see stance.In recent months, the commercial properties changingownership have been mostly special-use properties likegarages and supermarkets, rather than typical offices.Nowadays a trend to less risky real estate investments isclearly noticeable on the demand side.ContactNAI Baltics+371 6731 2396Country DataArea (KM 2 )GDP Growth (%)GDP 2009 (US$ B)GDP/Capita (US$)Inflation Rate (%)UnemploymentRate (%)Interest Rate(%)17501515.5%$83.70$11,9002.5%14.7%7.5%Population (Millions) 7.0Until recently, the Baltic States have been among the fastestgrowing economies in Europe. However, the unbalancedgrowth from 2005 through 2008, influenced by rapidlygrowing domestic demand and availability of advantageouscredit resources, is the primary cause for the current crisisin the three Baltic countries. The economic activitiesdecreased most significantly in trade, manufacturing andconstruction sectors. With the decline of domestic demand,the consumer price inflation has been gradually decreasing.The office market faces a severe slowdown due to lack offinancing and a decrease in demand. Vacancy ratescontinue to rise. Vacancy in Class A offices is about 10% onaverage and 10.5% to 27% in Class B offices. Landlordsare offering attractive incentives and discounted rentals.Compared to 2008, the average rental decrease was 25%for Class B and 15% for Class A offices.Over the last few years more than 15 shopping centersopened or were significantly expanded in the Baltic States.However, the large scale retail developments have beentemporarily postponed. The retail space market has changedfrom a landlords’ market to a tenants’ market, and manyinternational companies have chosen to enter the BalticStates retail market under the new preferential conditions.One major advantage of the three Baltic countries is strategiclocation at the crossroads between Eastern and WesternEurope, hence new entrant international companies areseeing the benefits of setting up manufacturing or logisticsactivities in the Baltic States. Due to current economicconditions, rental rates for industrial/warehouse facilitieshave shown instability and a major decrease.Investment volumes were diminished in 2009, mostly due tolimitations on real estate financing imposed by the Scandinavianbanks, which play a leading role in the Baltics, aswell as the influence of the sub-prime mortgage crisis on theEuropean markets.Experiencing a current downturn, the Baltic real estatemarket provides excellent possibilities to attain high returnsand future prospects of capital appreciation when themarket stabilizes. The Baltic States will remain an interestingarena for investors and professional developers due to itsexcellent strategic location between Eastern and WesternEurope.Vienna At A GlanceConversion: 0.70 € = 1 US$ RENT/M 2 /YR US$ RENT/SF/YRLow High Low High VacancyCITY CENTER OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIAL€€€€€€156.00156.00131.00140.00131.0090.00€€€€€€288.00288.00156.00156.00156.00140.00$ 20.70$ 20.70$ 17.39$ 18.58$ 17.39$ 11.94$ 38.22$ 38.22$ 20.70$ 20.70$ 20.70$ 18.585.7%5.7%5.7%5.7%5.7%5.7%Bulk WarehouseManufacturing€€30.0050.00€€60.0070.00$$3.986.64$$7.969.299.0%9.0%High Tech/R&DRETAIL€ 60.00 € 78.00 $ 7.96 $ 10.35 8.0%City Center€ 872.00 € 2,400.00 $115.73 $ 318.52 7.5%Neighborhood Service Centers € 260.00 € 430.00 $ 34.51 $ 57.07 7.5%Community Power Center (Big Box)Regional Malls€ 70.00N/A€ 87.00N/A$ 9.29N/A$ 11.55N/A7.5%N/ASolus Food Stores€ 62.00 € 70.00 $ 8.23 $ 9.29 9.0%DEVELOPMENT LAND Low/M 2 High/M 2 Low/SF High/SFOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential€ 4,360.00 € 13,081.00 $ 578.65 $ 1,736.08€ 2,100.00 € 3,200.00 $ 278.71 $ 424.70€ 2,000.00 € 3,052.00 $ 265.44 $ 405.05€ 2,180.00 € 3,488.00 $ 289.32 $ 462.92€ 2,000.00 € 3,052.00 $ 265.44 $ 405.05€ 2,620.00 € 8,000.00 $ 347.72 $ 1,061.74The Baltics At A GlanceConversion: 0.6664 Euro = 1 US$ RENT/M 2 /YR US$ RENT/SF/YRLow High Low High VacancyCITY CENTER OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILCity CenterRetail Units in ParksCommunity Power Center (Big Box)Regional Shopping Centers/MallsSolus Food Stores€€€€€€€€€108.00120.0084.0084.00N/A60.0042.00N/AN/A216.0096.0060.00N/AN/A€€€€€€€€€144.00180.00108.00120.00N/A84.0072.00N/AN/A540.00144.00240.00N/AN/A$$$$$$$$$15.0616.7311.7111.71N/A8.365.86N/AN/A30.1113.388.36N/AN/A$$$$$$$$$20.0725.0915.0616.73N/A11.7110.04N/AN/A75.2820.0733.46N/AN/A15.0%10.5%18.0%25.0%N/A27.0%20.0%N/AN/A3.0%8.0%1.0%N/AN/ADEVELOPMENT LAND Low/M 2 High/M 2 Low/SF High/SFOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential€ 250.00 € 1,000.00 $34.85 $139.41N/A N/A N/A N/A€ 20.00 € 50.00 $ 2.79 $ 6.97€ 10.00 € 50.00 $ 1.39 $ 6.97€ 20.00 € 200.00 $ 2.79 $ 27.88€ 10.00 € 170.00 $ 1.39 $ 23.702010 Global Market Report ■ www.naiglobal.com 43