Vilnius office outlook 2022 H1

Vilnius Office Outlook 2022 H1 Project: FLOW Developer: EIKA

Vilnius Office Market VILNIUS 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. Project: Telia Global Services Lithuania Office Interior Design by Ieva Folk, Photos by Tadas Kazakevičius Office fitout services by Newsec 2

VILNIUS OFFICE OUTLOOK, 2022 H1 Vilnius Office Market STRONG DEMAND SHOULD STIMULATE DEVELOPMENT OF CLASS A PROJECTS INSIGHTS MACRO FORECASTS 2022 relocation in the CBD are highly limited • THE ECONOMY IS EXPECTED TO again. Smaller tenants are forced to SLOW. Despite weakening forecasts +1.6% make fast decisions to secure space in and expected economic growth of just prime locations. 1.6% in 2022, a 4.6% increase in GDP GDP • COMPETITION FOR THE BEST was reported for the first quarter of SPACE. Some tenants are taking risks as the year. It was supported by the lowest +15.8% last-minute decision-making is limiting unemployment level in two years (6.5%), their range of options, especially in the strong growth of the average wage and HICP CBD. rising employment. • NEW COMPANIES HAVE AMBITIOUS • AN INFLATIONARY SHOCK. 7.0% HIRING PLANS. Tenants’ expansion and Lithuania is experiencing one of relocation plans underpin much of the the highest inflation levels among Unemployment strong demand on the office market. EU countries. While a slowdown in • RENTS IN THE PRIME SEGMENT growth is expected in the second half +13.2% HAVE BEEN RAISED. Asking rents of the year, average annual inflation is were slightly increased in Q2 due to low forecast at 15.8%. Wages vacancies as well as indexation for on- • MARKET SUPPLY INCREASED. Four going leases. new projects, with approx. 35,000 sqm OFFICE MARKET 2022 H1 • ADDITIONAL COST BUDGETS ARE of office space were commissioned, UNDER RADAR. Increases in office increasing overall stock by 3.7% during 969,800 sqm maintenance costs are mainly being the first half of the year. Launch of driven by inflation and higher energy these new developments did face some Total stock costs. Older and less energy-efficient delays, though no major disruptions. buildings are losing their competitive • PRIME-SEGMENT SPACE IS IN HIGH 6.5% edge as new developments offer modern DEMAND. Tenants seeking to relocate or highly effective solutions for energy expand rather quickly absorbed “second Vacancy efficiency. generation” space that became available • EXPECTED SLOWDOWN IN SUPPLY in the CBD and its edges (UNIQ, 157,600 sqm GROWTH. Some projects are being Saltoniskiu 2, Baltic Hearts office delayed for an unspecified length projects) as some larger companies Under construction of time due to radical increases in consolidated to headquarters. Prime construction prices. This might put segment is seeing high demand from OFFICE MARKET FORECASTS further pressure on vacancies and rent tenants and therefore high occupancy 2022 prices as demand remains strong and levels. Options for the immediate new supply becomes limited. 1,059,700 sqm Total stock 7-8% Vacancy 123,600 sqm New supply Macro Indicators of Lithuania Source: Statistics Lithuania Social Indicators of Lithuania Source: Statistics Lithuania Percentage Percentage 19 15 15 12 11 9 7 6 3 3 -1 0 2018 2019 2020 2021 2022F 2023F 2015 2016 2017 2018 2019 2020 2021 2022F 2023F 2015 2016 2017 Gross Wage GDP HICP Unemployment 3

Vilnius Office Market VILNIUS OFFICE OUTLOOK, 2022 H1 “We are thrilled to Project: Telia Global Services Lithuania Office announce the opening Interior Design by Ieva Folk, of a new office in Vilnius. […] The new office occupies Photos by Tadas Kazakevičius 2,000 sqm on the top floor of a Office fitout services by Newsec building in an emerging business and banking district on the banks of the River Neris,” says Nuvei President Yuvalas Zivas Source: www.vz.lt Office Stock Source: Newsec Take-up Source: Newsec Thousand, sqm Thousand, sqm 1,200 150 1,000 125 800 600 100 400 200 75 0 50 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F 25 0 Existing Stock Additional Stock 2015 2016 2017 2018 2019 2020 2021 2022 Q1 Q2 Q3 Q4 4

VILNIUS OFFICE OUTLOOK, 2022 H1 Vilnius Office Market Project: Tech Zity Lilium OFFICE STOCK IS EXPECTED TO REACH include class A business centres such Workland co-working space, BTA 1 MILLION SQM THIS YEAR as Business Stadium North East, Office Draudimas insurance company, the A third of new supply for the year Boutique, and CORE stage II, and the Juodeliai Group, and a number of IT, was delivered during the year’s first class B+/B business centres Cyber City, fintech, consulting and other companies half. Four new office projects were BH Meraki and CLOUD Offices. Supply that have not yet made their lease commissioned in January-June: is set to grow at an annual rate of 13% agreements public. GIRTEKA PARK by Galio Group, CORE in 2022, with more than 123,600 sqm of stage I by Asis, Paupio Darboteka by new supply overall. Another 72,000 sqm About 55% of space leased in H1 was Darnu Group and AeroCity Tech Valley will be completed in 2023, implying a in the class A segment. Low vacancy in by Avia Solutions Group. These projects slowdown in the growth of supply. class A was the main reason that activity added approx. 35,000 sqm of new office in the segment was slightly lower in the space and increased total area by 3.7% to RECORD TAKE-UP IN H1 second quarter: the share of deals fell 969,800 sqm. Of the office supply slated The total leased area was higher than from 65% to 48%. for 2022, only 28% was commissioned in expected in H1 2022 at 78,000 sqm, the first half of the year. An additional including 45,700 sqm leased in Q2. The market is expected to be slower in 88,888 sqm of office space from 6 Second-quarter leased area include H2, though annual take-up of 100,000- projects is expected to be added by year- absorbed space in the second HQ of 110,000 sqm is within easy reach. end and put the total office stock on the Aerocity TechValley built for their Negotiations on space at projects to Vilnius market above 1 million sqm. own use. Large leases were signed be built in 2023 are intensifying and a New projects expected to be completed by Wargaming, a rapidly growing growing number of lease agreements later this summer or in the winter expanding video game company, the are being signed. One of the largest pre- Vacancy Rate Source: Newsec Average Rental Rates Source: Newsec Percentage EUR/sqm/month 12 10 8 6 16.0-18.5 12.0-14.5 9.0-12.0 4 2 0 2015 2015 2016 2016 201 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 Q2 Q4 Q2 Q4 Q27 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 A Class B Class A Class B+ Class B Class 5

Vilnius Office Market VILNIUS OFFICE OUTLOOK, 2022 H1 lease transactions was signed by Interge OFFICE DEVELOPMENT IN VILNIUS 2022-2023 AND PLANNED GLA, sqm Trans for the space in the second stage of the Premium Business Centre. Project 123,600 PRIME SEGMENT REMAINS ACTIVE 2022 35,000 Active demand should stimulate 30,000 speculative development of class A 1 CORE, stages A and B 15,500 office buildings. Though several office 2 Cyber City 14,000 projects are under construction in the 3 Business Stadium North East 10,400 central business district, including 4 Girteka Park 7,800 FLOW, Artery, and Business Stadium 5 AeroCity Tech Valley 5,000 North East, planning has begun for new 6 BH Meraki, stage I 4,300 office projects in the CBD and on its 7 Paupio Darboteka 1,600 edges as well. 8 CLOUD Offices 9 Office Boutique 72,100 LOW VACANCY While hybrid work is the new normal, Planned for 2023 21,800 tenants in Vilnius are not reducing their 15,000 footprint, thus vacancies are further 10 Artery 10,600 falling, including to below 2% in class 11 FLOW 10,000 A. The overall level of vacancy in the 12 Teltonika HQ 8,800 market fell in H1 from 7.8% to 6.5%, 13 LJB, stage II 3,400 while the vacancy rate in class A offices 14 Sky Office 2,500 fell even more – from 3.4% to 1.8%. 15 Sporto 18 Available space in the existing stock 16 Kintu 11 67,600 decreased by 13% during first half of the year to approx. 63,000 sqm. Total Planned for later 27,000 vacancy is forecast to increase slightly at 19,000 the end of the year and stabilize around 17 HERO 7,800 7-8%. New annual supply delivery is 18 UNUM 7,800 expected to slow to a level of 7% in 2023, 19 BH Meraki, stage II 6,000 which will put further pressure on 20 Agrejas market vacancy. 21 Naujasis Skansenas L 263,300 RESURGENCE OF THE UPTOWN TOTAL DISTRICT The most transactions by leased area in Source: Newsec recent years have been made by logistics and IT firms and a variety of software These main tenant segments are being (Tech Zity Lilium’s first stage, set to developers, health tech companies, targeted by the project developers, both open in 2024) will add space for tech public sector institutions and consulting as tenants and as project development companies. Development projects companies. The first half year of 2022 partners. Factors influencing decisions in Vilnius city’s uptown district are was dominated by IT companies, the to relocate and expand businesses leading to significant changes, with the financial sector and providers of fintech beyond the walls of traditional flourishing startup ecosystem expected services. E-commerce and investment modern office projects may include to grow further. According to the management companies are among neighbourhood, new concepts, and startup association Unicorns Lithuania, the largest occupants, but demand in community development. Brownfield Lithuania aims to almost triple the the market is led by IT companies and office projects under construction size of its startup ecosystem to 2,000 financial service providers. (e.g. Cyber City with planned opening companies by 2025. in 2022) or in the planning stage “Companies increasingly appreciate the importance of high- quality office facilities for employee well-being, productive work, the company’s competitiveness in the labour market and, at the same time, it operational results. Hence the ever-higher bar for the quality and sustainability of administrative buildings”, says Kęstutis Vanagas, Managing Director at YIT Lietuva. Source: www.yit.lt 6

VILNIUS OFFICE OUTLOOK, 2022 H1 Vilnius Office Market “After the pandemic, attitudes are changing: some companies can work using a hybrid method, but most are not able, or cannot work as efficiently. There is an increasing desire to go back to the offices”, says Arvydas Avulis, Chairman of the Board at HANNER. Full interview here: Press to watch Project: Business Stadium North East Developer: Hanner 7

Newsec Analysis Products VILNIUS OFFICE OUTLOOK, 2022 H1 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, Riga Office Outlook, Autumn 2021 2021 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, Spring 2022 Spring 2021 2020-2021 Access Newsec’s market report portal here: www.newsec.lt and www.newsec.lv 8

VILNIUS OFFICE OUTLOOK, 2022 H1 Vilnius 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 VILNIUS 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 Tenant Consulting Senior Analyst Head of Corporate Solutions LATVIA Kristina Zivatkauskaite Martynas Babilas Vesetas str. 7 Cell +370 610 38171 Cell +370 616 12216 LV -1013 Riga E-mail [email protected] E-mail [email protected] Phone +371 6750 84 00 E-mail [email protected] Office FIT-OUT Service www.newsec.lv Head of Project Management Tadas Grincevicius ESTONIA Cell +370 679 79779 Pärnu mnt 12 E-mail [email protected] EE-10146 Tallinn Phone +372 533 05313 Office Care and Property Management E-mail [email protected] Head of Office Management Group www.newsec.ee Justas Bandza Cell +370 6555 8989 E-mail [email protected] 10