Record highs in the office market
Office market in Vilnius is growing rapidly compared to the record-breaking year of 2016 – last year saw another 14 per cent growth, and the number of leases of modern office spaces in 2017 was higher than the new supply. New constructions now open doors almost fully occupied – the vacancy rate at the office buildings Penta, Domus Pro and Saltoniškių 7, which opened in Q4 of last year, was less than 5 per cent. Market analysts say that virtually the only way to secure a desired office space that meet your business needs is to sign a lease as early as 12 to 18 months in advance.
There is still room for new offices
In 2017, leases in Vilnius were at record high-levels, with 80,000 square meters of modern office space available to tenants. Early in the year, the market was supplied with another 68,000 square meters of new office construction meaning that the new construction is yet to catch up with the demand.
Jurgita Šilaikytė, Head of the Brokerage Team at Newsec: “For a long time, real estate analysts calculated that, on average, around 35,000 square meters of office space are leased annually in Vilnius. This average, however, has been exceeded by almost twofold last year, and in 2017 growth continued hitting the 14 per cent mark. Newsec has contributed significantly to this growing number of lease transactions acting as a broker in as much as 70 per cent of these transactions. The new record-high number of office leases shows that there is still room for the market to expand.”
According to the Head of the Brokerage Team at Newsec, IT, financial and customer service centres of foreign businesses entering the market account for 15 per cent of all office leases and the remaining 85 per cent are shared by the growing domestic and international businesses operating in Lithuania and businesses looking for modern office spaces.
“Booking.com, which announced its move to Lithuania in November of 2017, has leased around 4,000 square meters in Penta – a part of the Technopolis Office Complex, Harbortouch, a US-based POS System provider, has leased around 1,000 square meters in the central business quarter Gostauto 40A. Nevertheless, the largest transactions were completed by Telia and Danske Bank operating in Lithuania. This year, the two companies leased 15,000 square meters each in the new office building in Saltoniškių street – these are the largest lease transactions in Lithuania to date,” she adds.
Start looking for an office space at least a year in advance
The ever growing demand has led to a drop in vacancies in all office buildings around Vilnius. In Q4 of last year, the vacancy rate remained one of the lowest in Europe. The vacancy rate in Class A office buildings stood at mere 1.9 per cent and at 4.2 per cent in Class B office buildings. This means that essentially there are no vacancies and if you want at least some choice of office space that meets your needs, you will have to start shopping for an office early.
“Lease transactions for office spaces are completed 6 to 18 months before relocating to new premises, and new office buildings are almost entirely pre-leased before they even open their doors – the highest vacancy rate in one of the Class A office buildings opened in September was a mere 5 per cent,” Ms Šilaikytė says.
Currently, there are 9 new office buildings under construction and 3 in the pipeline and already 46 per cent of the available space has been pre-leased. Spaces in Class A buildings account for 80 per cent of this number – this is no longer surprising to market players as energy efficient, conveniently located and well managed office buildings get filled quicker.
“It is expected that four new office buildings will become available in 2018. All of them will be located in the central business quarter, namely, in the Konstitucijos avenue and Saltoniškių street, and will meet the requirements for Class A office buildings. Their total area, however, will only reach 39,000 square meters, whereas the demand may be twice as high if the current growth trends continue. For this reason, the asking rent may increase slightly and finding the right office space may prove even more difficult in the future,” Ms Šilaikytė explains.