Estonia : Tallinn office market

March 2017
  • Economic growth is leading tenants to move to higher standard buildings
  • Strong demand enhanced by positive economic conditions
  • Prime office yield drops below 7%


LOM Q3 2014

Strong demand enhanced by positive economic conditions

Activity in Tallinn’s office market was high and occupier demand for office premises remained strong during 2016. At the same time several new office buildings were completed adding 59,000 m2 to the stock. Vacancy rates in the buildings completed in the second half of 2016 are still high indicating that supply outside of CBD is starting to exceed the demand. In 2017 delivery of new office buildings will be 22,300 m2 and over 40% of this pipeline has already been pre-let.
Occupier demand is expected to remain strong in 2017 in Tallinn reflecting the positive economic climate and continuing trend of tenants moving from older obsolete premises to modern office buildings. Vacancy rates and rents will remain stable during 2017; the prime rent is likely to stabilise at €210/m²/year.
The situation will change in 2018 when many big developments that are currently under construction will be completed. Unless some of those are delayed or put on hold, more than 100,000 m2 of new offices will be delivered during 2018. This will increase vacancy and will put pressure on rental levels, especially for buildings located outside of CBD.
The quality of new office buildings continues to improve, and for the first time in Tallinn an office building received LEED platinum certification in 2016.

Prime office yield drops below 7%

The volume of investment was lower in 2016 than during the record breaking year of 2015 but investor demand remained strong. Buyers are mostly domestic and international real estate funds already present in the Tallinn market. Yield compression continued and the prime office yield dropped below 7%, a trend expected to continue.

Votre contact

Robion Vincent

Vincent Robion
Head of Research for Alliances



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