Colliers: commercial properties to be in focus
04.02.2010, 10:59In its monthly market review for January, Colliers International made the following forecasts about the Estonian real estate market in 2010:
Prices and transactions
As the real estate prices have fallen up to 70-80% from the top and have become more attractive for investors, 2010 promises to come more active year in the matter of transaction numbers in every sector.
Office market
In year 2010 the office rental prices and vacancy rates will stay more or less stable. Dynamics of existing vacancy depends also on the landlords continuing willingness to rent premises out with very attractive starting price, especially in A class premises. However, due to significant oversupply no quick positive changes can be expected and no larger office projects will be started in the next few years. So called hidden or secondary vacancy might become more visible in 2010 when companies that have managed to coupe with surplus area will start to offer it for sublease.
Retail market
By the recent months’ news and retail sales numbers it can be predicted that 2010 will be more difficult for shopping centre owners than 2009 as more considerable changes in tenant list, rental and vacancy rates are yet to come. Since the tenants who are struggling in difficulties can not postpone their decisions much longer and the threat that some retailer companies or chains are becoming out of reserves and solutions for their dept service is every month more and more likely, the main changes will probably occur in the first half of the year. From the second half of the year the rental and vacancy rates will probably start to stabilize similarly to office market.
Commercial space price and rent dynamics
In 2010 the average selling price will continue its downward trend as most of the asking prices still have “air” in them. The average rental price will probably still somewhat decrease at the expense of older vacant premises and newer problematic premises, but will most likely more or less stabilize by the end of the year.
Warehouse and industrial market
The situation of warehouse and industrial market in 2010 depends greatly on the export, transit and consumption growth. Many changes have already been made in 2009, so hopefully the current year will be more stable in the context of rental and vacancy rates. However, significant threat still lies in possible bankruptcies of occupying companies which will result sudden and high increase in vacancy. Similarly to office premises, the hidden or secondary vacancy might become more visible in 2010 when companies that have managed to coupe with surplus area will start to offer it for sublease.
Investment market
In the end of 2009 a number of negotiations on commercial objects were in the process, from which can be presumed that some more transactions will take place soon. Investors are continuously looking for good investment opportunities and as the yields have increased from the peak times and prices have fallen considerably, in case of smaller objects for some investors’ having loan capital is not even necessary. However, banks have also announced that the loan conditions are starting to improve. All prior and a quite high probability that Estonia will join the Eurozone in 2011, indicate that the investment market will be more active in 2010. Most desirable objects among investors are commercial and industrial properties in good location, with sustainable cash flow and strong tenants.