The development of the country's economy, the continuously increasing number of economic operators, and the particularly successful results of the service sector have caused an intensive increase in the demand for modern office space in the city of Vilnius, a low vacancy rate, and a rent price increase in business centres that are attractive to tenants. Today a landlords market exists. Nevertheless it is likely that the current situation will begin to gradually change in the course of the year.
The supply of modern office space in Vilnius at the end of the first half of 2007 consisted of 153,400 m², 36% or 55,000 m² of which consisted of class A office space. Significant growth is expected starting in 2007 (when over 59,000 m² of new offices will enter the market) and continue in 2008 and 2009 (70,000 m² and 150,000 m² respectively of new construction).
The general observation is that the demand in the Vilnius office market currently exceeds the supply. The demand predominant in the market (especially for large offices of 800 m² and up) will be soon met by the abundance of new projects, most of which are at the technical project coordination stage.
Rent and Vacancy Rates
The shortage of modern office space has been observable in the Vilnius office market for a while. Due to occupation reaching 100%, rent rates have increased 1015%. Future B1 class office centre expansion areas include the northwestern and northeastern districts of Vilnius, where residential suburbs are located. We can forecast that when the market reaches saturation stage in the next 23 years, vacancies will rise to 912% with a possible rent rate correction. In the first half of 2007, rent rates in reconstructed or old premises remained stable but in newly built objects, the asking rent rates reached 20.3 per m² per month.
Tendencies
- It is very likely that the situation in the office market will change noticeably even this year. It is obvious that significant growth in the supply of modern office space will negatively affect the occupation and rent rates of unprofessionally designed and developed office centres (including both existing and future projects).
- As far as the quality of office premises is concerned, the existing office centres meet the criteria of their tenants at the moment. After the expansion of the office market during the next 23 years, the situation will reverse and the tenants will be able to choose a more comfortable or higher class office.
- Class B2 and C offices will become less attractive and even reduced rent rates will not guarantee full occupancy.
- The tendency remains the same: the percentage of the class B office space in the market is continuing its stable growth since the technical and qualitative parameters of the buildings and the rent price for the office space correspond to the possibilities of most of the tenants and meet their expectations.
- The tendency is to establish banks, back-offices, and call-centres in administrative buildings outside the city centre. From this viewpoint, class B1 objects have a good perspective due to a good price quality ratio, a location close to the main transport arteries, and a developed service infrastructure.
- All the projects are expected to be implemented within 13 years and the ones being located in exclusive locations will receive a great deal of interest both among companies, which are competing for customers, and among companies, which are searching for a convenient location and visibility.
Source: Colliers
