2016 was a record year in Vilnius office market: twice as many lease agreements were concluded
The last year was exceptional in Vilnius office market – the lease of office area reached a record and one of the biggest lease contracts in the history of Lithuanian office market was concluded.
“The year was exceptional – the supply increased extensively as it was predicted, however, the demand surprised pleasantly. Reviewing the historical extent of office premises transactions of the last 10 years, the average of office lease in Vilnius market reached about 35 000 sq. m. in a year, and the number of concluded transactions increased twice in 2016. Two thirds of concluded transactions, made with the help of mediators, in the last year happened with mediation of Newsec”, says Mindaugas Kulbokas, the head of international real estate consulting company Newsec research and analytics group in the Baltic region.
2016 was exceptional in office market, since practice of forward transactions and one of the biggest transactions in the history of Lithuanian office market was concluded last year – Danske Bank global services center rented an office building of 11 600 sq. m. The building is being constructed at Saltoniškių str. 7 by M.M.M. projektai company next to the headquarters of the bank.
The balance of supply and demand is observed
Five new business centers Quadrum, City, Highway, 135, Delta increased office supply up to 526 700 sq. m. in 2016. Their total area consists of 84 400 sq. m.
“The average occupation rate of business centers, opened last year, was very high and reached about 70 percent. While at the end of the year, the average level of modern office unleased area reached 4.8 percent. In comparison, a normal rate is considered to be 7-8 percent vacancy in the mature European markets. Therefore, the proportion between office market supply and demand in Lithuania is currently balanced. When analyzing the overall market image and already implemented development, we see that there appears free space to the extent necessary to ensure maneuver possibilities of lessees and, therefore, amounts of rent remain sufficiently stable”, notes M. Kulbokas.
The prices of modern offices in Vilnius centre remained 14–16 euros / sq. m/ within a month, in rare cases, the prices reached 17 euros. The prices of offices in city parts more distant from Vilnius centre range between 11–14 euros, and in the outskirts of the city and of older B class offices – 8–11 euros.
Development and stability anticipated in 2017
The office market will develop dynamically in 2017 – 2018. It is estimated that having implemented yet only planned projects, the area of modern offices will increase to 140 000 sq. m. in Vilnius. Currently, 12 out of 17 offices that are planned to be opened in 2017 – 2018 are under construction.
“The market and its prices will remain sufficiently stable, since, regarding the prospective plans from the side of lessors, stable supply for good offices will remain. It is expected that companies will continue to move from old ineffective office premises to new offices and in this way will increase the effectiveness and their attractiveness as an employer to potential employees. Those Vilnius office buildings who wish to attract new companies coming into the market will face a new challenge and will have to compete with Kaunas, where at least four significant office projects will be implemented in 2017 – 2018. Most likely, the profile of potential clients will increase if public institutions decide to move from ineffective buildings to modern offices”, states Newsec representative Mindaugas Kulbokas.
It is noticed that during the last year the biggest part of commercial real estate was rented by services and informational technologies (IT) centers, which currently conclude almost a quarter of office markets. It is predicted that this indicator will increase further. In 2016 a tendency emerged for lessees to think about new offices 12 – 24 months prior to moving in, and the office premises’ lease contracts are concluded 6 – 18 months prior to moving in.