Kaunas office outlook 2022 H1_vartyti

Kaunas Office Outlook 2022 H1 Project: PV CASE office, BC Magnum, Kaunas Interior project: Urbon Design Photo credit: Norbert Tukaj

Kaunas Office Market KAUNAS OFFICE OUTLOOK, 2022 H1 YOUR PARTNER IN 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. All Images: : PV CASE office, BC Magnum, Kaunas Interior project: Urbon Design Photo credit: Norbert Tukaj 2

KAUNAS OFFICE OUTLOOK, 2022 H1 Kaunas Office Market Kaunas is ready for a new wave of office supply INSIGHTS MACRO FORECASTS 2022 • IT firms, game developers and other • At the end of June 2022, Kaunas had technology companies bring substantial roughly 268,500 sqm of modern office +1.6% demand to the Kaunas office market. space, or 0.9 sqm per capita. The total Exporters of ICT services may add leaseable area increased by 8,000 sqm in GDP sizeable demand for office space as H1 as the TAIKOS project re-opened and well, though tenants will face a shortage returned to the lease market. +15.8% of options in the nearest future. The • The next 2 years will be dry in new Kaunas office market will see a need for supply and tenants will find little HICP some 50,000 sqm over the next 2-3 years, available space on offer. The two thus there is a chance of a new wave of projects currently under construction 7.0% supply and a push for longer leases on will only bring about 6,500 sqm of new new projects, similar to what occured in modern supply to the market over the Unemployment 2019-2020. next 2-3 years. • Vacancy in class A has fallen to 5.3%, +13.2% SUPPLY which is the lowest since the largest The Kaunas office market has not class A buildings were opened and Wages delivered significant office projects in substantial new supply was added to the about 2 years, with no substantial new market in 2018-2020. OFFICE MARKET IN 2022 H1 modern supply added recently. Total • The vacancy rate on the Kaunas office stock has remained steady with some market overall will fall to 5-6% in 2022 268,500 sqm minor additions to premises in the amid the lack of new projects. lease segment. The last and the only • Total available space in the class A Total Stock project of 2022 was the reconstruction segment shrank to just above 2,500 sqm, of the TAIKOS office centre’s 8,000 sqm with a big chance of that being leased 6.8% total GLA to accommodate new tenants out by the end of 2022. looking for effective class B space in a • Leasing activity was also slower Vacancy good location. in H1 2022. Take-up was roughly 5,400 sqm. Unity Technologies and OFFICE MARKET FORECASTS Class A offices account for about 18% Aardvark Technologies were among the FOR FULL-YEAR 2022 of the total stock, which is still low. largest tenants. The less active H1 and The supply of class A offices has more projections for H2 suggest Kaunas will 8,000 sqm potential, as quality premises have been end 2022 with few attractive options left in demand recently. The Kaunas office for relocation or business start. New Supply market is considered to be very cyclical 4-5% Vacancy Office Stock Source: Newsec Stock by Class Source: Newsec Percentage Thousand, sqm 60 Percentage 100 300 50 80 250 40 87% 200 30 60 82% 82% 82% 2020 150 48% 25% 20 40 18% 100 17% 2020 24% 10 20 B Class 1% 3% 13% 12% 0 0 50 8% 2021 2022F 2019 18% 18% 2021 2022F 0 2020 A Class 2015 2016 2017 2018 2019 Existing Stock New Stock 3

Kaunas Office Market KAUNAS OFFICE OUTLOOK, 2022 H1 and a new development phase is on the successful and very active second half of Large deals on the Kaunas market are way. 2021 was the main reason total take-up those involving more than 1,000-2,000 Class B has seen more balanced growth, decreased in H1 2022 to 5,300 sqm. At sqm. The options available for leasing with high-quality class B properties least 7,000-8,000 sqm of additional space spaces of that size are almost non- being added to the market gradually. is expected to be leased in H2. existent, as the newest developments Part of the new supply in the market are already rounding out their tenant may be delivered as build-to-suit The first half of this year brought portfolios. projects at locations more distant from several deals and tenant relocations the city centre. to new premises. The number of VACANCY companies opening new offices in The overall office vacancy rate at the New properties now being planned or Kaunas in H1 2022 was noteworthy. end of H1 2022 was 6.8%, slightly up under construction are not expected to Technology players including Zenitech, from 6.4% in H2 2021 and down from reach the market before the end of 2023 Oxylabs, Insoft and others celebrating 10.0% in H1 2021. At properties already or in 2024. new starts with new concept premises. built and operating, just over 18,300 They all seem to agree on Kaunas’s sqm of space was vacant and available DEMAND potential as a city with talented for lease. Vacant space increased by Nearly 28,000 sqm of office space was professionals and strong educational 10% during the first half of the year leased in 2021, which was 6% more than resources, citing that as a key reason to due to the recently re-opened TAIKOS in 2020 and 36% above expectations. A open or expand offices in the city. object. Demand remained balanced Supply and Demand Source: Newsec Average Rent Rates Source: Newsec Percentage EUR/sqm/month 25 22% 25 20 19% 20 17% 15% 16-18.5 15 13% 13% 12% 15 12-14.5 12-14.5 10 10% 11% 10% 10 7-12 5 5 5% 6% 7% 1% 3% 1% 0 0 Vilnius Kaunas Vilnius 2018 H1 2018H2 2019 H1 2019 H2 2020 H1 2020 H2 2021 H1 2021 H2 2022 H1 Kaunas A Class Supply Growth Vacancy B Class 4

KAUNAS OFFICE OUTLOOK, 2022 H1 Kaunas Office Market “Opening an office in Kaunas was just a matter of time. This city has strong educational institutions and a lot of talented professionals, quite a few of whom are already working in our company,” Oxylabs CEO Julius Černiauskas says. Source: Oxylabs 5

Kaunas Office Market KAUNAS OFFICE OUTLOOK, 2022 H1 “Aiming for a strong team that works together well and grows together, we decided to open a second physical office that is closer to home for our specialists,” says Mindaugas Mikulėnas, the CEO of Insoft. Source: Insoft 6

KAUNAS OFFICE OUTLOOK, 2022 H1 Kaunas Office Market accross market segments. Absorption OFFICE DEVELOPMENT PLANNED FOR 2022-2023 AND LATER of the space on offer in Kaunas slowed already in 2021, when take-up was No Project Location GLA, sqm approx. 28,000 sqm. Meanwhile, the first half of 2022 was one of the slowest 2022 Taikos ave. 8,000 ever. Demand was concentrated on class 1 TAIKOS (re-opening) 8,000 A and availability was very limited. Savanoriu ave. 38,900 A futher gradual decline in vacant Planned for 2023 and later Laisves alley 2,500 premises is forecast in H2, with the 2 Kalnieciai Raudondvario rd. 4,000 average market vacancy level dropping 3 Merkurijus Savanoriu ave. 5,000 to 4-5% or even lower by the end of 2022. 4 Sanitex HQ Brastos st. 5,600 5 Administrative building H. O. Minkovskiu st. 6,800 RENTAL PRICES 6 Piliamiestis 15,000 Rents were long unchanged in the 7 Nemunaiciai Kaunas office market amid higher-than- 46,900 average vacancies in both the class A TOTAL and class B segments. As vacancy levels declined and inflation increased, H1 Source: Newsec 2022 saw a slight upward correction of rental rates in class A, especially in the asking rent rates for the last available class A spaces. In class B, meanwhile, rents at older, non-renovated properties came under pressure. In the class A segment, the average monthly rent was 12-14.5 EUR/sqm, while class B spaces were renting for 7-11.5 EUR/sqm on average. 7

Newsec Analysis Products KAUNAS OFFICE OUTLOOK, 2022 H1 Newsec Market Reports REQUEST ANY 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. REPORT [email protected] Newsec Property Outlook, Vilnius Office Outlook, Riga Office Outlook, Spring 2022 2022 H1 2022 H1 Kaunas Office Outlook, Tallinn Office Outlook, Baltic Office Outlook, 2021 H1 2019 2019 Newsec Property Outlook, Newsec Property Outlook, Baltic Property Outlook, Autumn 2021 Spring 2021 2020-2021 Access Newsec’s market report portal here: www.newsec.lt and www.newsec.lv 8

KAUNAS OFFICE OUTLOOK, 2022 H1 Kaunas Office Market The Full Service Property House In Northern Europe Newsec — The Full Service Property The Group expanded internationally the seven Nordic and Baltic countries. House in Northern Europe — is by far into Finland in 2001, Norway in 2005, In 2018, Newsec opened a London the largest specialised commercial the Baltic countries in 2009 and office to assist international investors property firm in Northern Europe. Denmark in 2016. The Norwegian asset interested in the Nordic and Baltic and property management companies region. Newsec has approx. EUR 68 Newsec manages more properties and First Newsec Asset Management and billion under management and annually carries out more transactions, more TM Partner were acquired in 2012. In signs lease agreements of approx. lettings and more valuations than 2013, Newsec acquired Jones Lang 1.5 million square meters, manages any other firm in Northern Europe. LaSalle’s Swedish property management transactions of some EUR 3 billion and Through this great volume, and the operation. In 2017, Newsec grew does real estate valuations of underlying knowledge and depth of our various with the acquisitions of Norwegian property worth almost EUR 265 operations, we acquire extensive and Basale and Danish Datea, further billion. Thanks to large volumes, local detailed knowledge of the real estate strengthening the position within presence combined with in-depth market. In turn, we can quickly identify Property Asset Management. In 2018, understanding of a range of businesses, business opportunities that create Newsec opened a London office to assist Newsec has a unique expertise added value. international investors interested of the real estate market in northern in the Nordic and Baltic region. Europe. Our prime market is Northern Europe, but through our alliance membership Newsec was founded in 1994 and is with BNP Paribas Real Estate, we offer today a partner-owned company with our services on the global market. This some 2 400 co-workers spread across makes Newsec Northern Europe’s only full service property house, and provides us with a unique ability to forecast the future. A history of growth Newsec is the result of a unique history of growth, characterised by constant originality of thinking. The first issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. 9

Contact And Addresses KAUNAS OFFICE OUTLOOK, 2022 H1 Contact and Addresses MORE ANALYTICAL INFORMATION AT OFFICE SOLUTIONS AT NEWSEC: LITHUANIA NEWSEC: Head of Brokerage Konstitucijos ave. 21C Head of Research and Analysis Jurgita Ragaise LT-08130 Vilnius Mindaugas Kulbokas Cell +370 659 66808 Phone +370 5 252 6444 Cell +370 652 10556 E-mail [email protected] E-mail [email protected] E-mail [email protected] www.newsec.lt Commercial Real Estate Advisor Senior Analyst Aivaras Katinas LATVIA Kristina Zivatkauskaite Cell: +370 687 70117 Vesetas str. 7 Cell +370 610 38171 E-mail [email protected] LV -1013 Riga E-mail [email protected] Karaliaus Mindaugo ave. 38 Phone +371 6750 84 00 LT-44307, Kaunas, Lithuania E-mail [email protected] www.newsec.lv Tenant Consulting Head of Corporate Solutions ESTONIA Martynas Babilas Pärnu mnt 12 Cell +370 616 12216 EE-10146 Tallinn E-mail [email protected] Phone +372 533 05313 E-mail [email protected] Office FIT-OUT Service www.newsec.ee Head of Project Management Tadas Grincevicius Cell +370 679 79779 E-mail [email protected] Office Care and Property Management Head of Office Management Group Justas Bandza Cell +370 6555 8989 E-mail [email protected] 10