Vilnius Office Outlook, 2020 Q4

VILNIUS OFFICE OUTLOOK 2020 Q4 FLOW Business Centre Development planned by EIKA

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q4 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: S7 Business Centre Archit2ects: ARCHINOVA, Interior project: A2SM Photo: Leonas Garbačauskas

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET VILNIUS OFFICE MARKET OFFICE MARKET PROVES TO BE MORE RESILIENT THAN EXPECTED INSIGHTS MACRO INDICATORS 2020 volume. 2020 saw high-value deals • RESILIENCE OF LITHUANIAN signed off by Western Union, Ignitis, Telia ECONOMY. In 2020, the Lithuanian -0.9% Global Services Lithuania, Devbridge, economy contracted by no more than Metso and others. 0.9%, and most economic sectors fared GDP • PUBLIC SECTOR SUPPORTS OFFICE better than expected. Even though DEMAND. State-controlled companies unemployment increased to 8.5% and +1.1% sign new deals with the aim of improving the country went under lockdown office quality. The public sector may twice, wages increased by 9.2%. The HICP utilise the present period of supply prospects for 2021 are slightly dimmer growth to relocate and optimise. due to the uncertain timeline of normal 8.5% • NEWCOMERS FROM BELARUS economic activity resuming. Hopes for ALREADY HERE. IT companies from the future mostly hinge on the successful Unemployment Belarus announce confirmed relocation vaccination of the population. Since plans. Epam Systems, Wargaming and Lithuania’s economy saw, arguably, +9.3% others create take-up pipelines for 2021. the lowest degree of contraction in the • FINTECH STARTUPS EVOLVE. The ever European Union, GDP growth in 2021 Wages expanding Lithuanian fintech segment is estimated to be around 1.8-3%. More becomes a matured office occupier. It rapid economic upturn is expected in the OFFICE MARKET 2020 normally takes less than two years for a second half. new fintech to move from a co-working • DEVELOPERS ARE NOT PRESSING ON 843,700 sqm space to a solid CBD based office. THE BREAKS. All office projects planned • INCREASED VACANCY. As expected, for 2020 were delivered and market Total supply total vacancy has reached 6.7%. This supply was increased by 16%. A similar increase in available space has turned rate of development is planned for the 6.7% the marked into a “tenants’ market”. next two years. New supply is expected to further exceed • NEW PROJECTS. In addition to the Vacancy demand. construction of ongoing projects, the • NO PRESSURE ON RENTS. Landlords development of new schemes for FLOW, 236,800 sqm have adopted longer leasing plans with HERO, Cyber City, UNUM were confirmed less pressure on achievable rent rates. for 2021. Under construction However, flexibility in terms of leased • TAKE UP OF 2020 REMAINS ABOVE area, fit-out and other incentives are THE 5-YEAR AVERAGE - HITTING 100K OFFICE MARKET FORECASTS 2021 more common. IN Q4. Large companies with office plans • MARKET EXPECTED TO SPRING BACK in the pipeline guarantee that take-up 969,300 sqm INTO LIFE IN Q3/Q4. Optimism for the levels remains way above expected Vilnius office market is not expected Total supply 8-10% Vacancy 129,100 sqm Under construction Macro Indicators of Lithuania Source: Statistics Lithuania Social Indicators of Lithuania Source: Statistics Lithuania Percentage Percentage 10 20 5 15 0 10 5 -5 0 -10 -5 -15 -10 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 Ministry of Finance Unemployment Gross Wage F - forecast Ministry of Finance 3

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q4 to fade. Postponed decisions for office total office space of the campus had An additional 9 business centres with a occupancy and expansion plans are recently exceeded 100,000 sqm, with total leasable area exceeding 125,000 expected to return to the table in the tenants conducting their activities in sqm are scheduled to open their doors second half of 2021. eight individual buildings. With the NOVA in 2021. A further 4 projects are under project’s completion, the office space construction, with a leasable area DEVELOPERS ARE NOT PRESSING ON manager Technopolis became the largest exceeding 86,000 sqm are slated for THE BREAKS player on the Vilnius office space market, 2022. The Vilnius office segment – the most accounting for roughly 12% of the overall rapidly growing office segment in leasable office area. Despite the pandemic, most of the the Baltics – maintained its pace in project implementation plans for 2020 2020. Total market supply increased The fourth quarter of 2020 saw the remained unchanged. The majority of by 115,900 sq. m. or 16%, reaching completion of the second stage of the new business centres (primarily Class 843,700 sqm. In total, last year 9 Business Stadium quarter. The Business B) will be constructed outside the city business centres opened in Vilnius, and Stadium North project supplemented centre. Following the completion of 3 new buildings were completed in the the Vilnius office space market the new LVOVO business centre at the fourth quarter, which accounts for 40% of with approximately 16,200 sqm of heart of Vilnius, subsequent projects the annual increase in total office space. leasable area. Early 2020 also saw the will have to wait another two or more The 26,700 sqm Technopolis NOVA commencement of the third business years. At the end of 2020, several official project, built within the Technopolis centre’s construction – Business Stadium announcements were made regarding Ozas office campus, is the largest recent North East (approx. 16,000 sqm) – the on-going design of new business building introduced to the market. The slated for completion by 2022. centres and the upcoming construction Office Stock Source: Newsec Take-up Source: Newsec Thousand, sqm 15% Thousand, sqm 1,000 120 800 16% 100 14% 600 13% 7% 80 60 400 40 200 20 0 0 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2010 2011 2012 2013 2014 2015 2016 2017 2018 Existing Stock Additional Stock Q1 Q2 Q3 Q4 4

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET “Employee well-being will be increasingly important for the office selection process. <> The trend of employees gaining more and more power to steer executive decisions regarding offices remains strong. For this reason, office location might be more important to executives, while employees are most concerned with office type,” said Domas Dargis, CEO of Eika* of the following: Class A business centres OFFICE DEVELOPMENT IN VILNIUS 2020-2022 AND PLANNED in Vilnius CBD – FLOW by Eika and HERO by Realco, and Class B+ projects in Developer/Owner Project GLA, sqm developing districts – Cyber City by VK Investicija and UNUM by Capital Mill. 2020 Green Hall 3 115,900 Paupys TAKE-UP LEVELS REMAIN WAY 1 Urban Inventors U219 2 850 ABOVE EXPECTED VOLUME 2 Darnu Group SEB HQ 16 750 Take-up levels hovered around the 3 PST WAVE 15 000 5-year-average, exceeding 100,000 sqm 4 Lords LB Uptown Park 12 900 in 2020. At the end of the year, several 5 GALIO GROUP Zalgirio 94 9 700 office centres saw their vacancy levels 6 Vilbra Business Stadium North 12 500 go down, while new small- and medium- 7 Invalda PK Technopolis NOVA 3 300 scale advance lease agreements resulted 8 Hanner 16 200 in favourable annual take-up levels. 9 Technopolis 26 700 Following a minor slowdown in the third quarter, the last three months finally 2021 125,600 brought some good news. One of the largest international energy companies 10 Lords LB LVOVO 15 600 in the Baltics, Ingnitis Group signed a 11 Skraidenis Office 100 9 500 lease agreement with Vastint Lietuva for 12 Baltic Horizon BH Meraki 15 800 a 10,000 sqm office in the newly built 13 Vastint Business Garden Vilnius, stage I 40 000 project Business Garden Vilnius. During 14 Koriai NT CLOUD Offices 5 000 the first stage of the project, the tenant 15 GALIO GROUP Saltoniskiu 7, stage IV 13 000 will occupy roughly a quarter of the 16 Baltijos Gildija CORE, stage I 5 500 leasable area. 14 000 17 GALIO GROUP Freedom 36 7 200 Upon commencement of construction, 18 YIT Naujasis Skansenas/Zalgirio 112 half of the NOVA project’s total area 174,100 was leased out to SEB Global Services, Planned for 2022 and later with the remaining area being snatched 30 000 up by smaller enterprises (Enefit 19 Baltijos Gildija CORE, stage II 6 000 Lietuva, Vakarų Medienos Grupė, 20 YIT Naujasis Skansenas/Linkmenu 17A 8 600 Tiketa, Bazaarvoice, and others) during 21 YIT Sky Office 10 000 construction. 22 Lords LB K18B 9 500 23 Transmedos Projektai Jasinskio 14 19 000 24 Capital Mill Unum 30 000 25 VK Investicijos Cyber City 15 000 26 Eika FLOW 30 000 27 Realco HERO 16 000 28 Hanner Business Stadium North East 415,600 TOTAL Source: Newsec Vacancy Rate Source: Newsec Average Rental Rates Source: Newsec Percentage EUR/sqm/month 25 20 14.0-17.5 11.0-14.0 9.0-12.0 15 2009 Q410 2010 Q2 2010 Q45 2011 Q20 2011 Q4 2012 Q2A Class 2012 Q4 2013 Q2*Source: vz.lt 2013 Q4 2014 Q2 2014 Q4 2015 Q2 2015 Q4 2016 Q2 2016 Q4 2017 Q2 2017 Q4 2018 Q2 2018 Q4 2019 Q2 2019 Q4 2020 Q2 2020 Q4 B Class A Class B+ Class B Class 5

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q4 IT companies, such as the UK- enterprises expanding during the Lithuania and has already signed a lease headquartered and Minsk-based pandemic. The aforementioned company agreement with Capitalica for an office Godel Technologies, were among the decided to open a development office in in the 135 business centre. Continuing its development, the cyber-security “We have noticed that people generally company Tesonet leased additional office prefer a shared workplace. <> With this in space in the Green Hall and Asgaard Keys mind, the first change we’re going to make business centres. will likely be related to the changing reali- ties of office life,” said Virginija Mikutaitė, DEMAND FOR OFFICE SPACE LAGS HR Director at Lietuvos Draudimas* BEHIND GROWING SUPPLY The total leasable area has been steadily growing thanks to the rapidly expanding supply of office space. At the end of 2020, the vacancy rate in Vilnius reached 6.7%, as compared to 3.4% the year prior. Vacancy levels of Class A premises grew a *Source: vz.lt 6

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET bit slower – 3.1% to 5.8%, whereas in the “<> Our main priority will be employee B segment, the vacancy rate increased safety, increasing the space allocated from 3.6% to 7.4%. to each employee, as well as managing employee flows, regardless of According to estimates, in 2021, vacancy whether work is done in the office or rates will hover between 7-10%, providing remotely,” said Živilė Skibarkienė, Chief tenants with a wider array of options. For Organisational Development Officer at their part, real estate owners wishing to Ignitis Group* attract and retain tenants will be forced to offer more flexible conditions regarding lease duration and office area. Reacting to the changing needs of tenants will no doubt present the biggest challenge in 2021. New decisions will require not only additional investment but also the adjustment of agreement terms. *Source: ignitisgrupe.lt 7

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q4 BELARUSIAN COMPANIES AND shortly setting up in Vilnius. This segment THE WORK-FROM-HOME MODEL IS LITHUANIA-BASED FINTECH is expected to boost demand sustainably EXPECTED TO UNDERGO HYBRID BUSINESSES EXPECTED TO BOOST and result in large-scale lease agreements. TRANSFORMATION DEMAND The guidelines provided by the Service centres and IT companies, A growing number of Fintech companies Government regarding remote work, both which suffered the least damage during is setting up in Vilnius, which constitutes in the private and public sectors, have the pandemic, and in some cases even one of the most rapidly growing sectors resulted in very low physical occupancy underwent growth, remain the largest in Lithuania – in most cases, new Fintechs levels year-round. In 2021, the situation tenants on the market. In addition, several take about two years to move from a is likely to remain largely unchanged. Belarusian IT companies have confirmed co-working space to an individual office. The so-called hybrid work-from-home their relocation plans – the world’s largest Recent trends indicate that many Fintech model is typically recommended only enterprise software developer Epam companies have outgrown their co- upon reaching very low infection rates Systems, the international game developer working period and are now becoming per 100,000 people within 14 days. For Wargaming, and many others will be mature tenants of traditional offices. this model to become viable, infection 8

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET rates at the municipal level would have “During recent years, even smaller to be no higher than 25-50 cases per tenants have started looking for leasable 100,000 people. More rapid migration office space in <>. Besides, companies back to offices can be expected once a are increasingly looking for flexibility with faster rate of vaccination is established. regards to adjusting office area size in According to various sources, a significant case of growth or otherwise,” said Lina breakthrough is likely as soon as by the Maskoliūnė, Business Unit Director at end of summer. A bounce-back effect in Technopolis* lease transaction volumes and a return to higher market activity is expected already in the second half of 2021. *Source: technopolisglobal.com 9

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q4 TARANDE OFFICE BUILDINGS IN VILNIUS 80 No Project Name Openings of 2020 Address, street 1 Green Hall 3 Upes str. 21 2 Paupys Aukstaiciu str. 7 3 U219 Ukmerges str. 219 4 SEB HQ Konstitucijos ave. 24 5 WAVE Savanoriu ave. 5 6 Uptown Park Svitrigailos str. 13 7 Technopolis NOVA V. Gerulaicio str. 18 8 Business Stadium North Rinktines str. 5 9 Zalgirio 94 Zalgirio str. 94 Openings of 2021 and later 10 LVOVO Lvovo str. 37 11 Office 100 Paneriu str. 49 12 BH Meraki Ukmerges str. 310 13 Business Garden Vilnius, stage I Laisves ave. 10 14 Saltoniskiu 7, stage IV Saltoniskiu str. 7 15 CORE, stage I & II Ukmerges str. 126 16 Freedom 36 Laisves ave. 36 17 Naujasis Skansenas Zalgirio str. 112/Linkmenu str. 17A 18 CLOUD Offices Zalgirio str./Kalvariju str. 19 K18B Konstitucijos ave. 18B 20 Business Stadium North East Rinktines str. 3 21 Cyber City Svitrigailos str. 32 22 UNUM Pilaites ave. 24 23 FLOW Lvovo str. 21A 24 HERO Kalvariju str. 24A 25 Sky Office Spaudos str. 7 26 Jasinskio 14 J.Jasinskio str. 14 Office buildings of 2019 and earlier 27 Tower Konstitucijos ave. 15 JUSTI 28 Live Square Gedimino ave. 44A 29 Avia Solutions Group HQ Dariaus ir Gireno st. 21A 30 Quadrum Business City Konstitucijos ave. 21, 21B, 21C 31 Asgaard Keys Ukmerges str. 124 32 Link Saltoniskiu str. 9B 33 3 Bures III Giedraiciu str. 3 34 Business Stadium West Rinktines str. 5 35 Park Town West Hill & East Hill Lvovo str. 105; 101 36 Green Hall 2 Upes str. 21 37 Saltoniskiu 7, stage I, II & III Saltoniskiu str. 7 38 Technopolis PENTA Ozo str. 12A 39 Narbuto 5 Narbuto str. 5 40 Domus Pro Bieliunu str. 1 PILAITE 41 Duetto I & II Spaudos str. 8; 6 42 Eleven Kareiviu str. 11 43 B Nordic 26 J . Basanaviciaus str. 26 79 41 44 City Zalgirio str. 90 78 25 45 135 Zalgirio str. 135 46 Technopolis DELTA J. Balcikonio str. 9 22 47 Highway Savanoriu ave. 178A 77 76 48 Uniq A. Gostauto str. 12A 49 k29 Konstitucijos ave. 29 50 Premium Sporto str. 18 KAROLINISK 51 IBC (International Business Centre) Seimyniskiu str. 3A, 3, 1A / A. Juozapaviciaus str. 6/2 16 52 3 Bures Lvovo str. 25 53 Europa Konstitucijos ave. 7 54 Swedbank HQ Konstitucijos ave. 20A 55 GV18A Gelezinio Vilko str. 18A 56 Danske Bank Saltoniskiu str. 2 57 Saltoniskiu 10C Saltoniskiu str. 10C 58 Baltic Hearts Ukmerges str. 120 59 Green Hall Upes str. 21 60 Marenta Business Centre Kestucio str. 65 61 Vertas Gyneju str. 16 62 Merchants' Club Gedimino ave. 35 63 Plaza 31/1 Vilniaus str. 31 / Islandijos str. 1 64 Business Centre 2000 Jogailos str. 4 65 Basanaviciaus 15 J. Basanaviciaus str. 15 66 BC 12 J. Jasinskio str. 12 67 MG Baltic J. Jasinskio str. 16, 16A, 16B, 16C 68 Eika Business Centre A. Gostauto str. 40A, 40B 69 G40 A. Gostauto str. 40 LAZDYNAI 70 Business Centre Svitrigailos 11B Svitrigailos str. 11B, 11H, 11M LAZDYNELIAI 71 Vytenio 46 Vytenio str. 46 72 Skraidenis Naugarduko str. 100, 102 73 LJB Savanoriu ave. 28 74 Evita Savanoriu ave. 18 75 L3 Laisves ave. 3 76 JIN&JAN Menulio str. 7, 11 77 GRTArtIaeGpaeISciKjaES Pilaites ave. 16 78 J. Rutkausko str. 6 79 Grand Office Virsuliskiu ln. 34 80 Orange Office Senasis Ukmerges rd. 4 81 Trio Perkunkiemio str. 3, 5, 7 82 Business Park Four Perkunkiemio str. 2, 4, 6 83 One Ukmerges str. 322 GARIUNAI 84 Kamane Ukmerges str. 369A 85 Sostena Ukmerges str. 280 86 Evolution Ukmerges str. 223 87 Akropolio Business Centre Ozo str. 25 88 BH-92 Zalgirio str. 92 89 Zalgirio Business Centre Zalgirio str. 88 90 North Star Ulonu str. 2 91 Ulonu Business Centre Verkiu str. 25C / J. Galvydzio str. 1 92 Domus Centre P. Luksio str. 32 93 Ozo Business Centre Ozo str. 10A 94 Technopolis ALFA V. Gerulaicio str. 1 95 Technopolis BETA J. Balcikonio str. 3 96 Technopolis GAMA Kalvariju str. 204 Under development Office buildings 97 NCBC Kareiviu str. 6 Existing Office buildings 98 Eta Zirmunu str. 107 CBD 99 Zirmunu Business Centre Zirmunu str. 139 Secondary Business locations 100 Sunrise Valley Sauletekio al. 15 101 VITP Mokslininku str. 2A 10102 Vilnius TechPark Antakalnio str. 17 ZEMIEJI PANERIAI

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET 101 SANTARISKES 83 81 82 12 JERUZALE 40 84 TURNISKES PASILAICIAI 85 FABIJONISKES 99 BALTUPIAI 100 3 46 96 98 95 INISKES 7 94 97 42 86 38 93 SESKINĖ 87 91 92 90 VIRSULISKES SNIPISKES ANTAKALNIS 45 ZIRMUNAI 6 153312515847375556 35 4 17 9 88448918 102 KES 60 39 49 834 50 6 30 524719150353232234 20 36 59 1 51 ZVERYNAS 48 61 62 28 67 2666 6968 64 63 43 65 UZUPIS SENAMIESTIS 2 5 NAUJAMIESTIS 75 74 70 13 73 6 21 MARKUCIAI 71 RASOS VILKPEDE 72 11 PAVILNYS NAUJININKAI 47 29 11

NEWSEC ANALYSIS PRODUCTS VILNIUS OFFICE OUTLOOK, 2020 Q4 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 2020 2020 Q3 2020 H1 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 12

VILNIUS OFFICE OUTLOOK, 2020 Q4 VILNIUS OFFICE MARKET THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE Newsec — The Full Service Property in 2001, Norway in 2005, the Baltic Newsec has approx. EUR 39 billion under House in Northern Europe — is by far the countries in 2009 and Denmark in 2016. management and annually signs lease largest specialised commercial property The Norwegian asset and property agreements of some 760 000 sqm, firm in Northern Europe. management companies First Newsec manages transactions of some Asset Management and TM Partner EUR 3 billion and does real estate Newsec manages more properties and were acquired in 2012. In 2013, Newsec valuations of underlying property worth carries out more transactions, more acquired Jones Lang LaSalle’s Swedish almost EUR 180 billion. Thanks to large lettings and more valuations than any property management operation. In volumes, local presence combined other firm in Northern Europe. Through 2017, Newsec grew with the acquisitions with in-depth understanding of a range this great volume, and the knowledge of Norwegian Basale and Danish Datea, of businesses, Newsec has a unique and depth of our various operations, we further strengthening the position within expertise of the real estate market in acquire extensive and detailed knowledge Property Asset Management. Northern Europe. of the real estate market. In turn, we can quickly identify business opportunities Newsec was founded in 1994 and is OULU that create added value. today a partner-owned company with some 2000 co-workers spread across Our prime market is Northern Europe, the seven Nordic and Baltic markets. but through our alliance membership with BNP Paribas Real Estate, we offer our services on the global market. This makes Newsec Northern Europe’s only full service property house, and provides us with a unique ability to forecast the future. Newsec is the result of a unique TRONDHEIM history of growth, characterised by constant originality of thinking. The first issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. The Group expanded internationally into Finland BERGEN TAMPERE OSLO HELSINKI STOCKHOLM TALLINN GOTHENBURG RIGA AARHUS KLAIPEDA COPENHAGEN MALMÖ KAUNAS VILNIUS 13

● CONTACT AND ADDRESSES VILNIUS OFFICE OUTLOOK, 2020 Q4 CONTACT AND ADDRESSES More analytical information at Newsec: Office solutions at Newsec: LITHUANIA Konstitucijos ave. 21C Head of Research and Analysis Head of Brokerage LT-08130 Vilnius Mindaugas Kulbokas Jurgita Ragaise Phone +370 5 252 6444 Cell +370 652 10556 Cell +370 659 66808 E-mail [email protected] E-mail [email protected] E-mail [email protected] www.newsec.lt Senior Analyst Tenant Consulting LATVIA Kristina Zivatkauskaite Head of Corporate Solutions Vesetas str. 7 Cell +370 610 38171 Martynas Babilas LV -1013 Riga E-mail [email protected] Cell +370 616 12216 Phone +371 6750 84 00 E-mail [email protected] E-mail [email protected] www.newsec.lv Landlord Consulting Head of Office Solutions ESTONIA Indre Narauskaite Pärnu mnt 12 Cell +370 698 83827 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] 14