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Market Research - Lithuania

Lithuania : Vilnius office market - March 2019

Record stock growth is expected in 2019, but vacancy should stay low

Pre-lease agreements are becoming common

By the end of 2018 the stock of modern office premises in Vilnius totalled 635,150 sq m. Stock is still lower than in most of Central and Eastern European urban areas as is Vilnius’ average vacancy rate. Given that demand in all of these cities is mostly driven by shared service centres, Vilnius still offers growth possibilities in terms of office development. Net absorption remains positive indicating that the market remains attractive both to newcomers as well as existing market players. Newcomers to Vilnius in 2018 included Shopify/Oberlo who signed for 2,850 sq m renting the whole Green Hall III building, while Yara signed for 4,400 sq m in Park Town East Hill. Both of the buildings are set to open in 2019 so these deals are pre-leases. SEB, an existing market player, signed a pre-lease agreement for 10,000 sq m in the CBD to relocate their HQ and for 12,500 sq m in Technopolis campus to relocate the global services division. These deals highlight that pre-lease agreements are becoming common in the market as demand for premises remains high. Reduced vacancy is likely to support rental increase over 2019.

Highest volume of investment ever seen in Vilnius

 

In 2018, the total investment volume in Lithuania was €400m, which is the highest ever recorded amount. Investors are diversifying their portfolios with investment into other cities besides the capital city Vilnius, such as Kaunas, Klaipeda and Panevezys. The office segment accounted for 35% of the total volume. The market’s growth has been driven both by domestic and international investors, the former being responsible for the largest office market transactions. One of the largest deals was by Lewben fund who purchased the Business Triangle in Vilnius for more than €60m. 2019 will probably be an even more active year for the investment market. In February 2019, Eastnine purchased S7 office campus in Vilnius for a record €128m. That was one of the largest deals ever seen, and at one third of 2018 volume, which suggests prime office yields will remain under pressure.

 

Vilnius EOM - March 2019
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