Riga office outlook 2020 H2

RIGA OFFICE OUTLOOK 2020 H2 Project: Preses Nama Kvartals Developer: Lords LB Asset Management

RIGA OFFICE MARKET RIGA OFFICE OUTLOOK, 2020 H2 YOUR Project: Origo One PARTNER IN Developer: Linstow Baltic THE BALTICS Newsec, the Full Service Property House in Northern Europe, is the solid choice of partner within Advisory and Property Asset Management. With sharp analyses, hard facts and just the right skill set, we’ve got you covered. 2

RIGA OFFICE OUTLOOK, 2020 H2 RIGA OFFICE MARKET RIGA OFFICE MARKET MOVES FORWARD INSIGHTS MACRO INDICATORS 2020 • EfTEN Capital, besides acquiring large • Despite the initially very slow spread industrial spaces in 2020, also acquired of COVID-19 in the spring of 2020, by -3.6% Air Baltic’s 6,500-sqm headquarters in year-end Latvia was among the countries March. with the highest rates of infection. But GDP • At Preses Nams, demolition works the Latvian economy’s decline amid began in September 2020. In March the pandemic was not as pronounced +0.1% 2021, an agreement was signed with UPB as many feared. The country’s 3.6% on construction of phase 1 of the new GDP drop in 2020 was smaller than the HICP Preses Nama Kvartāls, maintaining plans EU average and well below the Bank of to deliver the phase in 2022. Latvia’s forecasts in March and June for 8.1% • Construction work on the Verde a fully-year decline of 6.5% and 7.5%, Business Centre started in November respectively. Unemployment 2020. • COVID-19 affected various market • Office vacancy, after a steep increase segments differently. Most heavily +6.2% in 2020, declined at year-end in class A impacted were hotels, catering, luxury and rose slightly in class B. Some office and premium offerings, which always Wages space commissioned in 2019 and 2020 tend to suffer in times of economic was filled during the year. downturn. The office segment was least OFFICE MARKET 2020 • No new office supply is planned in 2021 affected. while 2022 will bring significant office • Overall, 2020 saw many more 750,500 sqm stock to the market – though less than investment transactions (in all segments) initially planned, as quite a few projects than 2019, and even slightly more than Total supply have been pushed back to 2023. More 2018. office developers may also similarly shift • Prime office market yields stood at 15.8% their timelines. 6.1%. • There were two meaningful bank Vacancy NEW OFFICE PROJECTS AND NEW headquarters deals. In one, Citadele TENANTS sold its head office to Lords LB seeking 40,000 sqm The Origo One expansion of the Origo to generate cash flow and focus on its shopping centre meant new supply of main activity. The other transaction was Under construction 11,000 sqm of high-class office space in mainly a change of investors as SEB the very heart of Riga, in the busiest and Bank’s headquarters was purchased by 275,000 sqm most crowded area. Grinvest. SEB continues to rent. Planned stock Macro Indicators of Latvia Source: Statistics of Latvia Social Indicators of Latvia Source: Statistics of Latvia 10% 25% 5% 2.8% 20% 0.1% 1.1% 15% 0% 8.5% 10% 8.1% -5% -3.6% 5% 6.2% 5.3% -10% 0% -15% -5% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F GDP HICP F - forecast Central Bank of Latvia Unemployment Gross Wage F - forecast Central Bank of Latvia 3

RIGA OFFICE MARKET RIGA OFFICE OUTLOOK, 2020 H2 Project: Origo One Developer: Linstow Baltic Z-Towers, the Riga’s tallest office project, of highly qualified talent. In 2020 two Telegraph building in the Old Town before went live in 2020, offering 25,000 important foreign companies announced moving to permanent offices in Z-Towers. sqm of class A office space. Z-Towers they were opening offices in Riga. The By the end of 2021, Swisscom plans to combines office and residential premises. airline Norwegian said in November it grow to a staff of 40. The company says Unfortunately, due to high pricing, take- was opening an international service Riga offers an ideal location, since Latvia up of the office space has been slow, centre in Riga at the Jauna Teika office is widely acknowledged as a centre for though as the price drops, some tenants complex, and would expand from an IT, software and digitalization excellence are showing interest. initial 300 sqm to 3,000 sqm by the end and is raising a new generation of of 2021. Similarly, Swisscom opened its qualified IT experts. Many foreign companies continue to see second European DevOps centre in Riga, Riga as attractive due to the diverse pool starting at temporary premises in the Office Stock Source: Newsec Vacancy Rate Source: Newsec Thousand, sqm Percentage 900 11% 25 800 6% 0% 20 11% 700 5% 15 600 10 500 400 5 300 0 200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 100 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F Existing Stock Additional Stock A Class B Class 4

RIGA OFFICE OUTLOOK, 2020 H2 RIGA OFFICE MARKET “We closely analysed the impact of the COVID-19 outbreak and quarantine on the office market in Riga. Our analysis showed it will not have a significant impact on the office market in the long run – there will be strong demand for modern new-generation class A offices in the coming years,” comments Andrius Barštys, the CEO of Capitalica Asset Management, the developer of VERDE. THE FUTURE OF THE OFFICE OFFICE DEVELOPMENT IN RIGA IN 2020 AND PLANNED There are different and sometimes opposing opinions about the future of No Developer/Owner Project GLA, sqm offices. In general, COVID-19 increased readiness to work remotely on the 1. 2020 Z-Towers 44,000 part of both employees and especially 2. S.P.I. Group Origo One 25 000 employers. It has significantly boosted 3. Linstow Riverside Offices 11 000 the number of people who use 4. LVM Group Sāga Offices 6 000 e-signatures on a daily basis, made VPH Latvia 2 000 teleconferencing more standard, and 5. Preses Nama kvartals, 1st stage reduced printing, all of which can 6. 2022 Verde Riga, 1st stage 85,150 reduce the need for a shared office and 7. Lords LB ELEMENTAL Skanste, 1st stage 25 000 willingness to pay the same price as 8. Capitalica Salas Biroji 15 000 before. 9. Kapitel Office Building 20 500 Bauplan Nord 4 650 But offices will remain. For many, 10. Confidential Daugavgrivas 20 000 they are the “face” of a business, and 11. Business Garden Riga, 2nd stage companies often prefer to manage 12. 2023 Pine 128,400 employees face to face. There will 13. GALIO GROUP Verde Riga, 2nd stage 50 000 also always be some employees who 14. Vastint Balasta Dambis 27 500 are objectively unable to work from 15. Eastnine Valdemara Biroji 16 900 home (due to family circumstances, Capitalica 15 000 for example) or who are not able to 16. Direct Invest Group Business Garden Riga, 3rd stage 12 000 motivate themselves remotely (for 17. LNK Properties ELEMENTAL Skanste, 2nd stage 7 000 reasons of youth or psychological 18. Kimmel Quarter, 1st stage factors, for instance). Finally, the current 2024 61,100 period of isolation has left many people Vastint 28 200 eager to interact with their colleagues Kapitel 20 900 face-to-face, for socialization, ease of Eastnine 12 000 communication, and the sense of being part of a team. Source: Newsec Average Rental Rates Source: Newsec Office Stock by Class Source: Newsec Thousand, sqm 14.0-16.0 9.0-16.0 14.0-18.0 900 EUR/sqm/month EUR/sqm/month EUR/sqm/month 800 700 600 500 400 300 200 100 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F A Class B Class Prime A Class B Class 5

NEWSEC ANALYSIS PRODUCTS RIGA OFFICE OUTLOOK, 2020 H2 NEWSEC MARKET REPORTS REQUEST ANY REPORT [email protected] Thanks to Newsec comprehensive knowledge we are able to offer a number of analysis and segment market reports which give you a valuable summary of the property market. Newsec Property Outlook, Vilnius Office Outlook, Kaunas Office Outlook, Spring 2021 2020 Q4 2020 H2 Riga Office Outlook, Tallinn Office Outlook, Baltic Office Outlook, 2020 H1 2019 2019 Baltic Property Outlook, Baltic Investment Outlook, Newsec Property Outlook, 2020-2021 2019 Autumn 2020 Access Newsec’s market report portal here: www.newsec.lt and www.newsec.lv

RIGA OFFICE OUTLOOK, 2020 H2 RIGA OFFICE MARKET THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE Newsec — The Full Service Property the Baltic countries in 2009 and across the seven Nordic and Baltic House in Northern Europe — is by far Denmark in 2016. The Norwegian asset countries. Newsec has approx. EUR 65 the largest specialised commercial and property management companies billion under management and annually property firm in Northern Europe. First Newsec Asset Management and signs lease agreements of approx. TM Partner were acquired in 2012. In 1.6 million square meters, transactions Newsec manages more properties and 2013, Newsec acquired Jones Lang of some EUR 7.6 billion and does real carries out more transactions, more LaSalle’s Swedish property management estate valuations with an underlying lettings and more valuations than operation. In 2017, Newsec grew property value worth almost EUR 188 any other firm in Northern Europe. with the acquisitions of Norwegian billion. Thanks to large volumes and Through this great volume, and the Basale and Danish Datea, further local presence combined with in-depth knowledge and depth of our various strengthening the position within understanding of a range of operations, we acquire extensive and Property Asset Management. In 2018, businesses, Newsec has a unique detailed knowledge of the real estate Newsec opened a London office to assist expertise of the real estate market market. In turn, we can quickly identify international investors interested in northern Europe. business opportunities that create in the Nordic and Baltic region. added value. Newsec was founded in 1994 and is Our prime market is Northern Europe, today a partner-owned company with but through our alliance membership some 2,000 co-workers, spread with BNP Paribas Real Estate, we offer our services on the global market. This OULU makes Newsec Northern Europe’s only full service property house, and TRONDHEIM provides us with a unique ability to forecast the future. BERGEN TAMPERE A history of growth OSLO HELSINKI Newsec is the result of a unique history STOCKHOLM of growth, characterised by constant originality of thinking. The first TALLINN issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. The Group expanded internationally into Finland in 2001, Norway in 2005, GOTHENBURG MALMÖ RIGA KLAIPEDA AARHUS COPENHAGEN KAUNAS VILNIUS 7

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