Re Solution: Estonian quality properties becoming attractive to foreign investors
01.04.2009, 11:18 Saturated Baltic commercial property market
may already attract foreign investor interest, with some sectors like warehouse
properties in a rather healthy condition, according to the research by
Re Solution, the provider of integral real estate, financial, investment and
property management services in the Baltics, the company said.
Vitali Kõllomets Managing Director of Re Solution Estonia commented the
situation with commercial properties in Estonia:
"By retail property stock per capita, 364 sq m per 1,000 inhabitants, Estonia
is ranked fourth in Europe, after the Netherlands, Ireland and Sweden that is a
clear sign of market saturation. . But now, when many retailers face strict need
for restructuring due to changes in retail business environment, this fact will
lead to a more healthy market. Some international brands, like Prisma, Marks
Spencer, Peek Cloppenburg, have already announced expanding or
entering the business in the Baltics. It is a good opportunity for international
retailers to enter the market. Retail chains will be able to enter the market
more quickly, at rather low rental rates and in the most attractive
locations.
In office segment there was decline 15-20% in rents in 2008, and another
approximately 20% drop only in 1Q 2009. It gives an excellent opportunity for
companies to cut costs. By the beginning of 2010 there will be 550,000 sq m of
office space available in Tallinn. Market downturn coincided with massive
expiration of lease contracts in business centres. The tenants are not ready to
prolong lease contracts due to slowdown of turnover and cost optimisation.
Lease agreements in all segments are getting shorter, cheaper, and more
flexible – while this adds certain risks to the owners, at the same time this
helps companies to stay alive.
Warehouses remain the most healthy property market segment in the Baltics as
this market is not oversupplied yet. Only a low number of new developments are
expected in 2009, even built-to-suit properties are rather unlikely.
According to Kõllomets four of Top 5 real estate investments in Estonia in
2008 were made in Tallinn. The most active players in 2008 were local debutant
Eften Capital and traditional buyers with establishment in the Baltics, Danish
Baltic Property Trust and German Catella Real Estate.
By floor space the Marat office building, acquired by Baltic Property Trust,
was the largest transaction with 19,500 sq m. Catella Real Estate AG bought
Estonian Police headquarters (19,300 sq m) and Magnum logistics property (11,800
sq m) while local Eften Capital obtained
Premia warehouse (7,000 sq m) and also K-Rauta DIY in Võru (6,000 sq m).
Ricardas Cepas, Re Solution Group CEO, said about the Baltic market and
foreign interest:
“Baltic economies have clearly entered a period of
recession with bank lending expected to diminish considerably. While we see some
healthy features like a notable reduction of the current account deficit, the
overall sentiment pressures the real estate market. However in longer term the
Baltic countries would definitely belong to Europe's faster growing economies,
offering new good investment opportunities to foreign investors."
Max Barclay, Head of International Operations of Newsec said:
“Investment
market has remained relatively stagnant and many investors withdrew from the
market due to the high volatility of the market and the remarkably poorer
financing conditions. However, many investors have been still actively watching
the market with the purpose of entering it and are waiting for first positive
signals.”