Office vacancy rates hit record lows

In Q1 2018, the vacancy rates in the office market of Vilnius dropped by 3% to their historical lows. Although 4 new office complexes are to be opened in the city this year, it will not result in any significant increase in vacancy rates, claims Inside Office Market, a review on the office market of Vilnius for the first quarter of 2018 drawn up by the international real estate advisory company Newsec.

Lease contracts are signed a year and more ahead

“The drop in the vacancy rates was caused by a rapid economic growth that prompted the expansion of companies which, in turn, increasingly search for modern office premises. It is an important factor that advance lease contracts are signed as early as 6 to 18 months in advance, due to which a major part of new offices are almost occupied in full on their opening day. In the first quarter of the year, the market offered 9 thousand square meters of new space, although a demand for office space was considerably higher,” explains Jurgita Šilaikytė, the Head of the Intermediation Group of the international real estate advisory company Newsec.

LINK, a business complex that was opened in the first quarter of 2018, offered the market 8 500 square meters of Class A office space. True, its occupancy rate reached 100% already on the opening day, with Teltonika, Cognizant, BNS, Diginet, and becoming the tenants of LINK.

Vilnius has been ranked among the European cities with the smallest available office space for several consecutive years in a row. According to the latest data, the Lithuanian capital is one of the three cities with the lowest vacancy rates in Europe and is next only to two German cities. At the end of the last year, the lowest vacancy rate was recorded in Berlin (2%), Munich (3.3%), and Vilnius (3.4%).

“The increasing take-up and an insufficient number of new completed offices lead to a situation where the general vacancy rate has also decreased in the major cities of Europe. In 2017, it fell to 7.8% compared to 8.5% in 2016,” claims Ms Šilaikytė.

In 2017, the take-up of new offices in Vilnius reached their record highs at 80 thousand square meters. Meanwhile, the total European office take-up showed a year-on-year increase of 12% to around 13 million square meters in 2017 compared to 11.6 million square meters in 2016.

New offices already occupied on their opening day

The office centres which will open their door this year include Duetto II, Asgaard Keys, Business Stadium, and the third tower of the 3 Burės office complex.

“Three of these new office centres will be opened in the central business quarter of Vilnius and will be assigned the Class A energy performance. Their floor areas will range from 4 100 square meters to more than 15 thousand square meters. The only Class B business centre, Duetto II, will be opened in Viršuliškės Neighbourhood, next to the first office complex opened in 2017,” told Ms Šilaikytė.

In the first quarter of the year, the vacancy rate of Class A offices was 1.6%, while that of Class B offices was 3.9%. The new projects will increase the available office space in Vilnius by 39 thousand square meters. This, however, will not have any significant impact on the vacancy rate because a considerable part of the space has already been pre-leased.

“Class A offices remain most popular, showing the highest numbers of pre-lease contracts, while the third tower of the 3 Burės office complex has already been totally leased out. On an average, 55% of the area has already been leased out in the Class A office centres which will be opened this year. An active interest in modern offices comes from both foreign companies starting their business in Lithuania and local enterprises carrying out their developments. Thus, it appears that the new office centres will be opened with a low vacancy rate,” says Newsec’s Head of the Intermediation Services Group.

In 2018, the biggest lease transaction in Vilnius so far took place in February when SEB bankas leased the majority of the space of the business centre planned for construction by a fund managed by Lords LB Asset Management. Its space will reach 12 700 square meters, and SEB bankas has already leased around 10 thousand square meters of this space. The business centre is expected to be opened by the middle of 2020.

It is estimated that the office market of Vilnius will be supplemented by around 148 thousand square meters of new space in 2018–2019. Ten out of twelve planned projects are already under construction.

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