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REAL ESTATE MARKET OVERVIEWTHE FIVE YEAR FORECAST
June 2012
2
THE BALTIC ECONOMIES ARE GAININGPACE
SOUND GDP GROWTH
RECOVERING SOCIAL FACTORS
STRICT CONTROL OF PUBLIC FINANCES
THE FULL SERVICE PROPERTY HOUSE
THE BALTIC ECONOMIES CONTINUING PROGRESS UP THE ECONOMIC LADDER
3
The Baltic countries have shown a strong recovery from the deep recession of recent years. These problems have gradually been solved through internal devaluation and increased competitiveness
Exports have been the single most important engine but domestic demand is now starting to increase in importance
Estonia is showing the fastest recovery due to improving competitiveness, its ability to reform and good government finances. Confidence in the country’s economic recovery was also strengthened by the adoption of the euro in 2011
Latvia and Lithuania have experienced export-led recoveries partially driven by entries to new foreign markets and are expected to keep on growing in 2012-2014
RESULTS• Competitiveness is improving in the Baltic region
(but the recovery will be weakened by the global downturn and the region’s weak demographic development)
• As the internal imbalances are solved, the region is expected to continue its progress up the economic ladder.
-20,0
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0
2000 2002 2004 2006 2008 2010 2012E 2014E 2016E
%
GDP - Baltic region
Estonia
Latvia
Lithuania
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
2000 2002 2004 2006 2008 2010 2012E 2014E 2016E
%
Inflation - Baltic region
Estonia
Latvia
Lithuania
4
WAREHOUSE AND LOGISTICSMARKET
THE FULL SERVICE PROPERTY HOUSE
BUILT-TO-SUIT DEVELOPMENT
NO MAJOR LEASE TRANSACTIONS
5
WAREHOUSE AND LOGISTICS MARKET
Rental growth slowing
Rents falling
Rental growth
accelerating
Rents bottoming
out
Vilnius
RigaTallinn
Kaunas
Amsterdam
Frankfurt
LondonWarsaw
Paris, Madrid
LisbonBarcelona
Dublin
St. Petersburg
OsloPrague
Moscow
Stockholm
Source: NEWSEC, JLL
6
Nearly 810,000 sqm of modern warehouse
and logistics space is calculated in
Lithuania.
Overall vacancy level dropped down in
2011. Average vacancy level in Vilnius
region for modern properties is 5%, in
Kaunas and Klaipeda – 10%.
Rental rates increased in 2011 and in Q1
2012 remained similar to ones recorded in
the end of the last year.
4 projects total area 35,400 sqm were
completed in 2011. 3 projects were
completed in Vilnius region and 1 project –
in Klaipeda region.
2 projects total area ~17,900 sqm are
planned to be completed in 2012. Both of
the planned projects are in Vilnius region.
WLM MARKET - LITHUANIA
2006 2007 2008 2009 2010 2011 2012*0
1
2
3
4
5
6
Warehouse rent rates, A and B class, Vilnius region, EUR/sqm
58%20%
14%
8%
Distribution of warehouse stock by region
Vilnius region
Kaunas region
Klaipeda region
Other regions
7
Nearly 470,000 sqm of modern warehouse
and logistics space is in Vilnius region
(~60% of total space in Lithuania).
3 projects total area 29,000 sqm (6.6%
growth) completed in 2011:
o Entafarma – 8,000 sqm
o Transimeksa – 12,500 sqm
o Ektornet Management Lithuania –
8,500 sqm
2 projects total area ~17,900 sqm (are
planned to be completed in 2012:
Transekspedicija – 7,000 sqm
Airport Business Park stage III –
total area 10,900 sqm
SUPPLY GROWTH DYNAMICS IN VILNIUS
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f0
100,000
200,000
300,000
400,000
500,000
600,000
42,63461,834129,734
164,446
290,346
373,409398,141438,065438,065467,091
19,200
67,90034,712
125,900
83,06324,732
39,924 029,026
13,200
Warehouse supply in Vilnius region
Supply, sqm (beginning of year) New supply, sqm
8
FIGURES: VILNIUS
Overall vacancy level dropped down in 2011.
Rental rates increased in 2011 and in 2012 Q1 remain similar to ones
recorded in the end of the last year.
No major lease transactions were made in the first quarter of 2012.
RENT RATES, EUR/sqm/month
2011 H1 2011 H2 2012 Q1 ↑↓~
Vilnius regionA Class 3.4-3.9 3.8-4.1 3.8-4.1 ~
B-Class 2.0-2.7 2.3-2.9 2.3-2.9 ~
VACANCY, %
Vilnius region ~10% ~5% ~5% ~↓
9
WAREHOUSE AND LOGISTICS OUTLOOKTRENDS FOR 2012-2014
A class premises rent rates have increased by 5-10% during 2011. Further
growth of rent rates is not expected and should stabilize for the period of
2012-2013.
The demand for logistics and warehouse facilities will remain limited to
built-to-suit or early pre-lease projects.
Tenant migration should be seen due to expiring agreements, especially
in the small scale tenants group.
The demand in warehousing market follows the improvement in
consumption and increased export. Logistics companies, 3PL tend to
expand. There are a few large properties on sale.
THE BALTIC LOGISTICS MARKETSUFFICIENT SUPPLY AND STEADY GROWTH THROUGHOUT THE REGION
10
6,0
7,0
8,0
9,0
10,0
11,0
12,0
13,0
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
%
Source: Newsec
Logistics Yield
Tallinn Prime
Riga Prime
Vilnius Prime
30
35
40
45
50
55
60
65
2007
2008
2009
2010
2011
2012
E
2013
E
2014
E
2015
E
2016
E
2017
E
EUR/m²
Source: Newsec
Logistics Rent
Tallinn Prime
Riga Prime
Vilnius Prime
The demand for logistics and
warehouse facilities will remain
limited to built-to-suit or early pre-
lease projects. Tenant migration
should be seen due to expiring
agreements, especially in the
small scale tenants group.
Landlords are expected to take
their opportunity in changing risky
tenants.
– Similar to office and retail
markets, the rentals for
warehouses and logistic centres in
Baltics are expected to be
gradually shifting up and the are
expected to be slowly shifting down
and reach an average of 8% in
2016-2017
11
INVESTMENTMARKET
THE FULL SERVICE PROPERTY HOUSE
12
TRANSACTION MARKET IS SWIFTLY SHIFTING UP FROM THE SILENCE IN 2009/10…
Volume of investment transactions reached ~260 mEUR in 2011.
Over 300 mEUR is forecasted for 2012.
Transaction market is dominated by investors already present in the region.
Due to desirable risk and quality balance, Baltics is an attractive destination.
In 2011, yields fell due to clear signs of an economic recovery and significantly lower interest rates.
Credit availability is positive for good products
Private Norvegian capital is very active in doing homeworks.
Source: NEWSEC
Prime yield development in the Baltics
Transaction volume in the Baltics
13
WHAT'S ON SALE IN INVESTMENT MARKET?
Baltic Property Trust is exiting from one of the funds (BPT Secura) comprising of diversified portfolio with prime properties and development upside.
One of the leading retail chains is planning to enter into S&L transaction concerning its discounter portfolio.
Ogmios group sells Airport Business Park in Vilnius (3 stages) comprising 24,000 sqm.
Good supply of B+ grade office buildings with reputable tenants and leases concluded in the very bottom.
Svyturys sells warehouse in Klaipeda (9,650 sqm).
Bank companies have started disposing assets taken over from distressed owners.
14
In between huge markets
Transportation hub
Member of international
organizations
REASONS WHY LITHUANIA IS AN INVESTMENT DESTINATION (1)
Lithuania is located on the very crossroads of huge markets:
EU markets (Western Europe and Scandinavian countries)
Eastern markets (Russia and the Commonwealth of Independent
States (CIS))
Lithuania is a hub and interconnection of international transport
corridors (air, rail, sea and highway):
4 international airports (in Vilnius, Kaunas, Palanga and Siauliai)
Northernmost ice-free seaport on the eastern shore of the Baltic
Sea
Transcontinental railway network linking Lithuania with markets in
the Middle and Far East
A good network of roads and highways
Lithuania is a member of the United Nations (since 1991), European
Union ( since 2004), NATO (since 2004), Schengen Zone (since 2007)
and other international organizations
15
Qualified workforce
Business incentives
Ice free Port
REASONS WHY LITHUANIA IS AN INVESTMENT DESTINATION (2)
Qualified workforce can be found in Lithuania:
50% of the population speaks two foreign languages
In 2011, the share of the population aged 25–64 having
completed at least upper secondary education in Lithuania made
up 92%
Labor costs in Lithuania are more than twice lower than those in
other EU countries and the US
Lithuania welcomes foreign investors and businesses to take
advantage of the special ready-for-business locations:
2 free economic zones (FEZ)
21 industrial park (IP)
5 integrated science, studies and business centers (valleys)
Klaipeda State Seaport is the northernmost ice–free port on the
Eastern coast of the Baltic Sea. It is very important transport hub,
connecting sea, land and railway routes from East to West.
16
NEWSEC GROUP IN BRIEF
• Newsec Advice– A leading property advisor in Northern Europe with 70 professionals and access to
more information than any player– Valuation value over 50 MEUR last 12 months
• Newsec Asset Management– The leading asset manager in Northern Europe with about 400 professionals and
offices throughout the region – Manage over 1 000 properties representing over 7 million sq m
• Newsec Transactions– Transaction team of 30 professionals specializing in investment and corporate
finance – Offering tailor-made property-related financial and strategic advisory services– A leading advisor within wind power
• Lease volume of over 350 000 sq m last 12 months
17
CONTACTS
NEWSEC SWEDEN
Stureplan str. 3P.O Box 7795SE-103 96 SockholmTel. +46 8 454 40 00
Lilla Bommen str. 5P.O Box 11405SE-404 29 GöteborgTel. +46 31 721 30 00
Dockplatsen str. 12
SE-211 19 Malmö
Tel. +46 40 631 13 00
NEWSEC ASSET MANAGEMENT
Humlegårdsgatan str. 14
P.O Box 5365
SE-102 42 Stockholm
Tel. +46 8 55 80 50 00
www.newsec.se
NEWSEC BALTICS
LITHUANIA
Tel +370 5 252 6444
Saltoniskiu str. 2, LT-08126 Vilnius
E-mail [email protected]
www.newsecbaltics.com
LATVIA
Tel +371 6750 8400Zala street 1, Riga, LV – 1010
E-mail [email protected]
www.newsecbaltics.com
ESTONIA
Tel +372 6640 540
Roseni av. 7, Tallinn, 10111
E-mail [email protected]
www.newsecbaltics.com
NEWSEC FINLAND
Mannerheimsplatsen str. 1 A
PB 52
FI-00101 Helsingfors
Tel. +358 207 420 400
www.newsec.fi
NEWSEC NORWAY
Kronprinsens gate 3, 5. etasjePostboks 1800 Vika,NO-0123 Oslo Tel. +47 23 00 31 00
www.newsec.no
