Commercial real estate market largely unaffected by coronavirus pandemic

View of Tallinn skyline.
View of Tallinn skyline. Source: Siim Lõvi /ERR

The COVID-19 pandemic has not played a significant role in the situation with the commercial real estate market in Estonia, though contract conditions are now more flexible than ever, and the market is tougher to enter for newcomers, say experts.

Viljar Arakas, CEO of commercial real estate fund manager EfTEN Capital, said there is no great change to be spotted on commercial and office space markets at present. He said landlords have agreed to meet renters halfway, but all agreements made are temporary and will conclude with August or September.

According to Arakas, all parties on the market are carefully examining the situation.

He said: "I can say that a requirement to wear masks indoors was established in Lithuania on August 1 and after that, visitations to shopping centers dropped."

Office spaces are still being developed and Arakas said those who already have renters on their property have it easy. "We have not had anyone just terminating the contract," he said, adding that it is certainly tougher for developers of new spaces.

The EfTEN Capital CEO said that companies have been hit hard and are mulling their options much more cautiously than before.

The price range of office and commercial spaces is of a similar level in all of the Baltics. "Within the Baltics, I can bring a comparison - it's like Mustamäe, Lasnamäe and Õismäe," Arakas said, explaining that they reached an agreement to acquire an office building in Vilnius, Lithuania, but there is no real price difference and the purchase could have also been made in Õismäe.

Peep Sooman, former chairman of the board at the Estonian Association of Real Estate Companies (EKFL), agreed that there have not been noticable changes in the market. He added that the market has naturally quietened down and it is getting more competitive.

Sooman said one should not forget that companies have also tightened up and do not have as many employees as before the pandemic.

He said: "They are looking for smaller spaces and are critically assessing if they need to be in the Kesklinn district."

New commercial spaces will not remain empty but conditions are bound to change. Sooman said landlords are more receptive now when it comes to renters' ideas on reconstructions.

He added that combined contracts have been put into force with options to finish the contract prematurely.

Sooman concluded: "Price is just one component and. often times, not the most important one."


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Editor: Kristjan Kallaste

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