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Market Research - Estonia

Estonia : Tallinn office market - March 2020

Non-core areas are the focus of future development

Low grade a supply in the core is shifting tenant demand to secondary market areas 

The office segment in Tallinn remains the largest and most balanced among the Baltic capitals. Total office supply in-creased by 21,300 sqm or almost 3% up to 827,300 sqm in 2019. Supply of modern space is diminishing and although vacancy rates remain stable, both developers and tenants are looking to secondary market areas instead of the core.  Grade A office projects are under construction but local developers will pay more attention to buildings in the city outskirts.  The largest development in 2019 was the 8,000 sqm built-to-suit project delivered for Postimees Grupp HQ in Fahle Park. At least 100,000 sqm of new supply may arrive until the end of 2021.

Rents have remained stable even though the demand for modern office premises is high. Significant changes to rents and vacancy are unlikely in the short term. New high-quality supply in attractive areas welcomed strong tenants in 2019, such as law firm Sorainen who signed for 1,670 sqm and Baltics based co-working operator Workland signed for 2,500 sqm at Porto Franco. One of the largest co-working operators IWG leased 3,000 sqm to operate its Spaces co-working concept at Fahle Park. Prime class premises located in the CBD and harbour area, as well as city outskirts, will continue to attract the most demand in 2020. Demand is likely to come mainly from IT, financial and start-up sectors.


New products will attract foreign capital to Tallinn


In 2019, the Estonian investment market experienced a slowdown in investment to around €100m. The Tallinn office market saw an investment of nearly 45% of the country’s total transaction volume. The lack of product is the primary factor behind the slower pace of investment as both local and international investors remain interested in buying: they are simply waiting for new supply to appear in the market. Local buyers accounted for most purchases. The country has a pool of local investors that actively participate in the market, the main ones being Eften Capital, Colonna Capital, Capital Mill, LHV and others.  International ones from Western Europe and Scandinavian countries remain active and will chase for suitable assets when they appear.



Tallinn EOM - March 2020
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