OREANDA-NEWS. December 07, 2011.
Office market
Office sector conditions remain fragile with market players hesitant. Although developers are in position to construct new office buildings in the CBD area, the asking rental level of such projects (13-14 EUR/m2/month) is currently too high for potential tenants, reported the press-centre of Colliers International.

Currently, the main player on the office market is the public sector. In addition to one speculative office building that will be completed by the end of 2012, Technopolis Ulemiste will build a new office building for the Estonian Tax and Customs Board with the area of ca 11,600 sqm, planned for completion by the end of 2013. Approximately half of the office area in the new buildings of Tehnopol in the Mustamae district is also covered by the state lease contracts.

The main topic for the state is cost efficiency, requiring architects and developers to create more cost efficient solutions. Although the state’s recent decisions have strengthened the construction sector, there is uncertainty over the future of the buildings being vacated by the state.
 
Retail market
 
 Development activity continues to be driven by supermarket and hypermarket construction, which is also very active outside of Tallinn. In October Maxima opened a new ‘XX’ supermarket in Narva with GLA 1,850 sqm and in November a ‘X’ supermarket in Tartu with GLA 810 sqm, and laid plans for expansion to Haapsalu. In addition Eften Capital will build a new shopping centre in Viljandi with an area of ca 7,000 sqm. The building will host the largest grocery store in the town.
 
Warehouse and Industrial market
 
 Industrial companies continue to look for modern industrial premises or possibilities for expansion. The main restraint on expansions are sharply increasing construction prices, pushing asking rates far too high level for potential tenants. Most demanded are modern premises with a rental rate between 4-4.5 EUR/m?/month.

The industrial market is also experiencing several bankruptcy processes. The size of the industrial land area of the bankruptcy estate of a former leading metal company Levadia Metal is over 12 ha. Finnish electronics manufacturing company Elcoteq has also submitted an application for bankruptcy. The future of the Elcoteq’s Tallinn plant which is around 9,000 sqm is unknown. 
 
Hotel market
 
 Several recent expansions of Spa-hotels show the confidence in the Hotel sectors’ continued improvement. For example Viimsi Spa opened an extension at the end of 2010, Laulasmaa Spa (located ca 40 km from Tallinn by the sea) re-opened its doors under new a operators’ management in the middle of 2011. In September 2011 Rakvere Aqva Spa & Hotel started expansion works and Aura Centre in Tartu has also announced enlargement plans. The primary drivers of growing interest in spa-tourism are the lower price of Estonian holidays compared to neighbouring countries (Russia, Finland, Sweden etc) and recovering domestic tourism.
 
Investment market
 
The beginning of November saw a deal with a commercial building at the edge of the Tallinn Old Town in Parnu road. The investor was with Russian background, confirming eastern investors’ interest for Baltic market.

In general, investment willingness is relatively strong. The main problem for investors’ is a lack of good quality properties with reasonable prices on offer. Nevertheless, although the demand is quite high, the prime yields are expected to remain stable in the near future.