Newsec Vilnius Office Outlook 2023 H1

Vilnius Office Outlook 2023 H1 Project: Žalgirio 114 business centre Developer: Capitalica Z114 Real Estate Fund

Your Partner in the Baltics Newsec 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. Building: EUROPA business centre Developer: Hanner

Vilnius Office Market  |  Vilnius Office Outlook, 2023 H1 3  Vilnius Office Market MACRO FORECASTS FOR 2023 Deadline approaches: tenants delay renting spaces in new business centres -1.0% Insights Rental rates have increased. GDP The economy is stalling. Economic growth has already started to slow. Due to contractually mandated indexation, property +8.9% Lithuanian GDP fell 2.5% during the first quarter of owners raised rents at the start of the year. But they 2023. Export growth is slowing. Rising interest rates had no basis for doing so again in Q2. HICP are supporting the deceleration of inflation. Wages continued to grow in Q1, increasing by 13.3%, a pace Debate on hybrid work intensifies. 7.3% that is naturally expected to slow. No one claims there is only one right way to do Unemployment Unemployment is edging up. your job. But in the context of a slowing economy, There were 15,000 more employed persons in Q1 there are more and more reasons to reconsider +10.4% 2023 than a year earlier, thus the labour market one’s approach. It has turned out to be much easier remains strong. But unemployment has started to to change the rules for work than to create an Wages increase slowly, reaching 7.7% in Q1. office concept that satisfies both businesses and employees. OFFICE MARKET IN 2023 H1 Less office rental activity. H1 was slower than expected, with take-up of only New office supply 1,069,400 sqm 33,700 sqm of office space, including 14,300 sqm in Q2. The supply of office space in Vilnius increased by Total stock nearly 41,000 sqm in H1 2023. The list of completed Vacancies are up and seen stabilizing. projects included the B+ class Kintu11, with 2,500 7.9% The overall level of vacancy in the market rose from sqm, the second phase of the B+ class Cyber City, 6.5% to 7.9% in H1. Class A vacancy was lower at the with 28,400 sqm, and the B+ class S28 business Vacancy end of June, at 5.9%, while class B vacancy increased centre with 10,000 sqm. The latter two added to 9.5%. modern office space in the uptown district. The 122,000 sqm overall market grew 10.7% during H1 to 1.07 million Jump in quick leasing deals. sqm. The remaining 2023 projects will be opened Under construction Increased activity can be seen in the recently at year-end or may be delayed a bit. Many recent enlarged area of subleases. The wait to move in is projects were late and this trend may well continue. OFFICE MARKET FORECASTS shorter here, while the spaces are very high quality Pre-leasing at the projects reached nearly 60%. FOR 2023 and already outfitted. Furniture and equipment can be rented, and there is less risk of fit-out work being Take-up slows down 1,130,600 sqm done next door. Take-up slower to only about 60% of the historical Total stock level in H1. The full-year projection thus must be reduced to 80,000 sqm. It will be difficult to reach 6-7% Vacancy 100,500 sqm New supply

4 Vilnius Office Outlook, 2023 H1  |  Vilnius Office Market   even that level, though, as tenants are assessing relocation plans more cautiously, extensively, and responsibly. Early in the year there was more activity in the B class segment, but in Q2 more lease transactions were concluded for A class properties. Few major deals took place in H1. The largest lease transactions were in the central business district. Medicinos Bankas, EPAM systems, Baltic Amadeus, Infes and others all made deals of 900 sqm or more. Some deals involved providers of financial, consulting, and transportation services. Others involved IT, technology, game industry, fintech, and logistics companies seeking better offices for their employees. Decisions on office leases are generally being put off until the economic environment stabilizes. Macro Indicators of Lithuania Source: Statistics Lithuania, F-forecast by Ministry of Finance Percentage 20 15 10 Building: EUROPA business centre Developer: Hanner 5 0 -5 2018 2019 2020 2021 2022 2023F 2024F 2017 HICP GDP

Vilnius Office Market  |  Vilnius Office Outlook, 2023 H1 5  “The most important goal for the new office Rise in vacancy likely short-term is to have colleagues who work in different fields all together in one place. We work in No new class A projects were completed in H1, so project teams, so having just one office space vacancies there decreased steadily as leases were will be convenient for employees while also made. In class B, projects with relatively lower pre- promoting our ‘EnjoyIT’ philosophy and rental came to market and increased the vacancy culture of collaboration”, said Baltic Amadeus level in that segment quite significantly. By the end HR head Akvilė Kazlienė. of the year, the market is expected to stabilize at an average vacancy level of 6-7%. Source: eika.lt Tenants’ headcounts do not seem to be decreasing In Lithuania, as elsewhere in the world, there has been much talk of a trend towards downsizing. That usually reflects hiring freezes and dealing with past overstaffing. The nominal figures that are announced may seem very high, but in most cases they are just 1-3% of the total number of employees. While there have been cases of major layoffs in Lithuania in the last six months, most companies have continued to grow their staff or have kept their headcount quite stable. The number of employees Social Indicators of Lithuania Source: Statistics Lithuania, Office Stock Source: Newsec, F-forecast F-forecast by Ministry of Finance Percentage Thousand, sqm 15 1250 12 1000 9 750 6 500 3 250 0 2018 2019 2020 2021 2022 2023F 2024F 0 2018 2019 2020 2021 2022 2023F 2017 Gross Wage 2017 Unemployment Existing Stock Additional Stock

6 Vilnius Office Outlook, 2023 H1  |  Vilnius Office Market   “Given the hybrid work model that has prevailed since in global business services, one of the main tenant the pandemic, we want to make employees feel just segments in the Vilnius office market, grew 15% as comfortable at the office as they do at home. So in in Lithuania during 2022 and 19% in Vilnius itself. choosing new premises we gave importance to being able Further growth of about 13% is expected this year. to create a modern setting well-suited to today’s style of Startups reported 18.5% growth in 2022 and another work”, said Gwido Liepins, Samsung’s Head of Human 1.0% in Q1 2023. Resources in the Baltics. Developers believe in market opportunities Source: bns.lt H1 2023 stood out for increased activity both at construction sites and in project planning. Among the biggest projects of the future are the HERO and BS Central business centres, which are already in full swing. They will add new multifunctional or business-only spaces within the central business district or on its outskirts. Take-Up Source: Newsec, F-forecast Average Rental Rates Source: Newsec Thousand, sqm EUR/sqm/month 12.0-15.3 150 120 90 19.0-21.5 16.0-19.0 60 30 0 2018 2019 2020 2021 2022 2023F 2017 Q1 Q2 Q3 Q4 Forecast Prime A Class B Class

Vilnius Office Market  |  Vilnius Office Outlook, 2023 H1 7  “Although employees appreciate the benefits of the hybrid work model, they increasingly choose to work in the office together with their colleagues. This led us to search for a more spacious office that better meets the changed expectations of employees”, said Modus Mobility CEO Ainė Martinkėnaitė-Martyniuk. Source: citybee.lt Vacancy Rate Source: Newsec, F-forecast Percentage 15 12 9 6 Building: EUROPA business centre Developer: Hanner 3 0 2018 2019 2020 2021 2022 2023F 2017 A Class B Class Total

8 Vilnius Office Outlook, 2023 H1  |  Vilnius Office Market Project: Žalgirio 114 business centre Developer: Capitalica Z114 Real Estate Fund

About Newsec  |  Vilnius Office Outlook, 2023 H1 9  Transforming real estate, and beyond Newsec manages more properties and carries Newsec was founded in 1994 and is today a partner- Finland out more transactions, more lettings and more owned company with some 2 400 co-workers spread valuations than any other firm in Northern Europe. across the seven Nordic and Baltic countries. Newsec Estonia Through this great volume, and the knowledge has approx. EUR 68 billion under management Latvia and depth of our various operations, we acquire and annually signs lease agreements of approx. 1.5 extensive and detailed knowledge of the real estate million square meters, manages transactions of Lithuania market. In turn, we can quickly identify business some EUR 3 billion and does real estate valuations of opportunities that create added value. underlying property worth almost EUR 265 billion. Thanks to large volumes, one of the largest property Our prime market is Northern Europe, but through databases, a local presence combined with in-depth our alliance membership with BNP Paribas Real unders­ tanding of a range of businesses, Newsec Estate, we offer our services on the global market. has a unique expertise of the real estate market in This makes Newsec Northern Europe’s only full northern Europe. service property house, and provides us with a unique ability to forecast the future. Sweden A history of growth Norway Newsec is the result of a unique history of growth, characterised by constant originality of thinking. Denmark The first issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. The Group expanded internationally into Finland in 2001, Norway in 2005, the Baltic countries in 2009 and Denmark in 2016. The Norwegian asset and property management companies First Newsec Asset Management and TM Partner were acquired in 2012. In 2013, Newsec acquired Jones Lang LaSalle’s Swedish property management operation. In 2017, Newsec grew with the acquisitions of Norwegian Basale and Danish Datea, further strengthening the position within Property Asset Management.

10 Vilnius Office Outlook, 2023 H1 |  Newsec in the Baltics market reports   Newsec in the Baltics market reports Request any data to suit your needs Thanks to Newsec having one of the most comprehensive data bases for real estate related data in the Nordics and Baltics we are able to offer [email protected] tailormade data deliveries and analyses. We also offer analyses and segment market reports which provide you with a valuable summary of the property market. Newsec Baltic Property Outlook Newsec Property Outlook Newsec Baltic Property Outlook Spring 2023 Autumn 2022 Autumn 2022 Vilnius Office Outlook Kaunas Office Outlook Riga Office Outlook Tallinn Office Outlook 2023 H1 2023 H1 2023 H1 2023 H1 Access Newsec’s market report portal here: www.newsec.lt For more information about data deliveries and analyses customized to your needs contact: [email protected]

Contact and addresses  |  Vilnius Office Outlook, 2023 H1 11  Contact and addresses Lithuania More analytical Office solutions at information at Newsec: [email protected] Newsec: Head of Brokerage Vilnius Head of Strategic Analysis, Jurgita Ragaišė Konstitucijos ave. 21C Newsec Advisory in the Tel: +370 659 66808 Quadrum North, 8th floor Baltics [email protected] LT-08130 Vilnius Mindaugas Kulbokas Lithuania Tel: +370 652 10556 Tenant Consulting Tel: +370 5 252 6444 [email protected] Head of Corporate Solutions Martynas Babilas Latvia Head of Research and Tel: +370 616 12216 Analytics Group [email protected] [email protected] Ramunė Aškinienė Tel: +370 618 48709 Office FIT-OUT Service Riga [email protected] Head of Project Management Vesetas iela 7 Darius Balčiūnas LV-1013 Riga Senior Analyst Tel: +370 615 70206 Latvia Kristina Živatkauskaitė [email protected] Tel: +371 6750 84 00 Tel: +370 610 38171 [email protected] Office Care and Property Estonia Management Head of Operations for [email protected] Offices and Logistic Centres Modestas Povilaitis Tallinn Tel: +370 612 30630 Viru väljak 2 [email protected] Tallinn 10111 Estonia Tel. +372 533 05313