Vilnius office market – still before storm
Although in the first half of 2018 a situation in Vilnius office market was quite calm, it is going to be different in the second half. It is planned to open four new office centres until the end of the year, thus, tenants will have better options. In the meanwhile, in 2020 even fifteen new office buildings will be built, and the modern office space index per one resident will increase by approximately 30 per cent, as reported by the international real estate consulting services company Newsec in its review Inside Vilnius Office Market, 2Q 2018.
At the end of the first half of 2018, the A class building vacancy rate in Vilnius reached 1 per cent, and B class – 3.9 per cent. The total vacancy rate in A and B class offices reached 2.6 per cent. The last time these rates were lower was only in 2015.
“During the first half of this year only about 9,000 sq. m. of new rented office space were offered to Vilnius market, when the demand of the market for modern office space is much higher. The first half of the year was more passive due to continuing construction works and many construction works performed at the end of 2017,” says Gintaras Toločka, the Newsec analyst.
Tenants will get a more favourable position
It is planned to open four business centres in the second half of 2018: A class Asgaard keys, Business Stadium, the third tower of the office complex 3 Burės and B class Duetto II, which will increase Vilnius office market space by 39,000 sq. m. At the moment 40 per cent of this space has not been rented yet.
According to G. Toločka, opening of these objects will increase the vacancy rate. “At the moment the position of office lessors is more favourable in the office market, so companies looking for premises most often have one option only, as simply there is no space in other modern buildings. New business centres will restore the balance – there will be more free space, and the vacancy rate will approach 5 per cent. However, the vacancy rate in Vilnius will keep to be the lowest in Europe,” says the Newsec analyst.
By 2020 fifteen new business centres will open their doors
By 2020 Vilnius office market will grow by 15 business centres, the total area of which will make 192,000 sq. m. of modern office space. However, 45 per cent of this space has already been rented under a forward lease contract, which means that in 2020 the vacancy rate will finally reach the healthy limit, which is very low now.
“Office space will be developed not only in the central Vilnius business district, but also in other districts: development of Technopolis is planned in Baltupiai district, which will bring more than 20,000 sq. m. of office space, moreover, in Lazdynai, Laisvės Av., the business centre Business Garden, developed by Vastint, will offer the market 40,000 sq. m. of office space,” says G. Toločka.
The speaker notes that after implementation of this and other projects the rate of modern office space per one resident will reach 1.5 sq. m. – in a city there will be around 850,000 sq. m. of modern office space per 550,000 residents. In the meanwhile, in economically strong cities of Central Europe this rate is close to 2 sq. m. per resident and even more somewhere.
“In 2018, the rate is 1.1 sq. m. of modern office space per resident in Vilnius. In the Baltic States, only Tallinn has more office space to offer, which makes 1.7 sq. m. per resident. The experience of the largest cities of Central Europe shows that after having achieved the 2 sq. m. office space rate per one resident, office development becomes more temperate in case the number of residents remains stable. Thus, Vilnius will still have untapped potential after 2020,” says the Newsec analyst.
The largest space part is rented by IT companies
During the first half of this year more than 35,000 sq. m. of office space have been rented, more than 10,000 sq. m. of which have been rented by IT companies.
“IT companies, such as Tesonet, NFQ, Trafi, Blockchain solutions and others, are growing demand for modern office space. During the first half of the year, this trend was in particular pronounced, as such companies made almost one third of all new rent transactions. The largest contract was signed by an international IT company that had rented all office spaces, i. e. 2.8 thousand sq. m., of the business centre Green Hall 3, which has been only started to develop,” says G. Toločka.
During the first half of this year, Newsec provided consultations to parties of 75 per cent of lease transactions concluded in Vilnius. It is forecasted that by the end of 2018 all rented office space can make up approximately 70,000 sq. m.