Vilnius Office outlook, 2020 Q3

VILNIUS OFFICE OUTLOOK 2020 Q3 SEB Bank Headquarters Building Developed by Lords LB Special Fund II

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q3 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. Uptown Park, Vinted 2Credit: Vinted

VILNIUS OFFICE OUTLOOK, 2020 Q3 VILNIUS OFFICE MARKET VILNIUS OFFICE MARKET WELCOME BACK… TO THE OFFICE! INSIGHTS MACRO FORECASTS 2020 market decelerated by about 15% versus • The Bank of Lithuania took a last year. In Q3 2020 the leasing market broadly optimistic step in September -2% experienced a decline by 53% compared by publishing improved forecasts for to the previous quarter, with take-up of the Lithuanian economy. After Q2 GDP 13,300 sqm. A new trend can be seen of statistics showed that the country’s smaller tenants finding opportunities to GDP contracted only 4%, with Ireland +1% lease premises in older office buildings at alone outperforming Lithuania in the smaller rental rates; several such small- European context, a GDP drop of just HICP scale transactions were made. Space 2% is expected for 2020. The country’s offered for lease in buildings still under unemployment rate is seen growing more 8.8% construction shrank to 6,000 sqm as slowly and reaching 8.8% (in 2020), the overall preleasing level reached 30% while the average wage is on a positive Unemployment (61% at projects planned this year and course and set to grow 6.8%. Inflation will 26% at those planned in 2021). slow to an average annual rate of 1% in +6.8% • The overall vacancy rate increased in December 2020. Q3 2020 from 3.3% to 4.9%. In class A • In Q3 2020, supply in Vilnius’s Wages the vacancy rose from 2.1% to 3.2% while modern office market grew by 50,100 increasing from 4.3% to 6.3% in B class sqm or 6.7%. That is the most space OFFICE MARKET 2020 Q3 office buildings. Space available for lease added in one quarter since the Quadrum in the modern office segment grew more and City projects came to market 4 797,500 sqm rapidly due to significant new supply years ago. Over the last quarter 4 office growth alongside dropping volumes of projects were officially completed and Total supply total leasing transactions. welcomed tenants, with several of the • In the near future the market will see market’s biggest occupiers moving in: 4.9% the reconstruction of the office buildings Danske Bank @ S7, SEB Bankas, Vinted, that has gone through one occupancy and Bentley Systems @ Uptown Park, Vacancy cycle (lasting about 10 years). With Swedbank @ WAVE, and others. tenants’ needs and attitudes towards • Construction work on office projects 236,800 sqm quality parameters rapidly changing, that in Vilnius did not stop, though there were will have to be one of many solutions at no official announcements of the start of Under construction that level in the office segment. construction for new projects. At the end • There was no correction of rental of Q3, some 236,800 sqm of office space OFFICE MARKET FORECASTS 2020 rates in Q3 2020. In class A the average was under construction in Vilnius. rent was 15.60 EUR/sqm/month and in • Take-up since the start of the year 843,200 sqm class B it was 12.20 EUR/sqm/month. exceeded 77 300 sqm as the leasing Furthermore, during the first three Total supply 7% Vacancy 191,100 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 2020F 2021F 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F GDP HICP F – Bank of Lithuania forecast Unemployment Gross Wage F – Bank of Lithuania forecast 3

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q3 quarters of the year, class A rents rose remain the main reason for tenants to in some cases even building concepts, 1.3% and class B rents 3.4%. The overall experience increasing choice. and if possible, to reconsider new office price level began to rise slightly already • Project developers are continuing development plans outside the central in 2019, especially when new-generation office construction work and the part of the city. class B+ projects began filling-up the timelines for handing projects over are supply. Consequently, the year-end not changing notably. Those still just THE GROWING SUPPLY OF OFFICE vacancy level is likely to increase to planning new office developments must SPACE WILL BROADEN TENANTS’ 7-8%. Some companies will look for decide when to start the projects and CHOICE OF OPTIONS opportunities to reduce their leased how to change them and offer tenants The main reason for increasing vacancies space and developers will search longer even more flexibility. For new office remains the growth of the new supply. It for new tenants in order to occupy projects, this is a good time to reassess is forecast that total available space will available space. Growing supply will construction dates, quality parameters, grow to 60,000-70,000 sqm at the end of this year. Available modern premises OFFICE DEVELOPMENT IN VILNIUS IN 2020-2022 AND PLANNED at business centres will face even greater pressure from lease offers at individual Developer/Owner Project GLA, sqm administrative or alternative sites. Newsec notices an increase in the number of 2020 115,300 offers to rent space where there is no clearly formed concept, where the space 1 Urban Inventors Green Hall 3 2 800 offered is only minimally suited to the 2 Darnu Group Paupys 16 700 new tenant, and where the space is in 3 PST U219 15 000 non-administrative buildings which do not 12 900 meet the requirements set for class A and 4 Lords LB SEB HQ 9 700 B offices. Projects like that will require new 5 GALIO GROUP WAVE 12 500 conceptual solutions. 6 Vilbra Uptown Park 16 200 7 Hanner Business Stadium North 2 800 Nonetheless, increasing new supply in the 26 700 capital will remain the main reason for the 8 Invalda PK Zalgirio 94 growth of available space. In 2020 and the 9 Technopolis Technopolis NOVA 124,800 two following years, the average annual supply which is planned (138,000 sqm) 2021 15 600 is twice as large as the average for the last 9 500 five years (65,000 sqm). 10 Lords LB LVOVO 15 000 11 Skraidenis Office 100 40 000 WILL DEMAND IN THE OFFICE 12 Baltic Horizon BH Meraki 5 000 SEGMENT CHANGE? 13 Vastint Business Garden Vilnius, stage I 13 000 The question is being asked more and 14 Koriai NT CLOUD Offices 5 500 more: whether the office space will be 15 GALIO GROUP Saltoniskiu 7, stage IV 14 000 needed, and kept by the companies in 16 Baltijos Gildija CORE, stage I 7 200 the future? Amid the many views and opinions, there is no clear-cut answer. 17 GALIO GROUP Freedom 36 173,600 But the most likely vision of the future 18 YIT Naujasis Skansenas/Zalgirio 112 is that the main motive for needing to 29 500 maintain an office will become cultivating Planned for 2022 and later 6 000 a company’s culture and identity. 8 600 19 Baltijos Gildija CORE, stage II 10 000 The companies that make up the major 20 YIT Naujasis Skansenas/Linkmenu 17A 9 500 office tenant segment in Lithuania work in 21 YIT Sky Office 19 000 global services. It is they who are the main 22 Lords LB K18B 30 000 23 Transmedos Projektai Jasinskio 14 15 000 24 Capital Mill Unum 30 000 25 VK Investicijos Sparta Campus 16 000 26 Eika FLOW 27 Realco HERO 413,700 28 Hanner Business Stadium North East TOTAL Source: Newsec 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 2020F 2021F 2010 2011 2012 2013 2014 2015 2016 2017 2018 Existing Stock Additional Stock Q1 Q2 Q3 Q4 4

VILNIUS OFFICE OUTLOOK, 2020 Q3 VILNIUS OFFICE MARKET U219 Credit: PST reason for a leap in quality and dictate the market are unanimous – there will be a companies are standing firm. Companies trends. The growth pace of most of these need for an office, and if employees have that for one reason or another have companies has not slowed even with the to work together, develop new products delayed making essentially urgent introduction of complex models of working and seek solutions together, then an office decisions regarding office space, may be from home and office. In the first half will be essential. Managers today are no pushed into a corner. Decisions which are of the year the number of employees at longer asking ‘where will we work?’, since delayed or on hold can turn into rushed global service centres increased by about the answer is ‘in the office’; rather the actions unfavourable for tenants when 300 to a total of 19,600. This year will question they are formulating is ‘how will there is no real opportunity to choose but no doubt stand out for the plethora of we adapt the office and ensure business an office is needed here and now. individual solutions for office workers, and continuity?’. hybrid arrangements for organizing work In the major tenant segment, the trend of will leave deep traces in the history of many companies. “Direct physical interaction creates a setting for connecting, working together and building Open and activity-based workplace trust,” says Marius Ivanauskas, the CEO of design, multiple areas tailored to different Telia Global Services Lithuania.* tasks and activities, informal relaxation areas – in future such changes will Tenants that are making long-term office reducing the number of fixed workplaces need to help form teams and social ties lease decisions are not changing their has been popular for several years and promote creativity, efficiency, and expansion plans, so the major company now, but that does not translate into collaboration. These values are important segment is growing continually in this a reduction of space. On the contrary, both to employers and employees, so time of uncertainty. In addition, most demand among employees for alternative decision-makers now bear responsibility global business service, IT and technology workspaces is growing. for not making mistakes. How to adapt companies‘ formed and shared values to todays‘ changes? The heads of the major companies that operate inside the Vilnius Vacancy Rate Source: Newsec Average Rental Rates Source: Newsec Percentage EUR/sqm/month 25 14.0-17.0 11.0-14.0 9.0-12.0 20 15 10 5 0 A Class 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2019 Q1 2019 Q3 2020 Q1 2020 Q3 B Class A Class B+ Class B Class Souce: *verslozinios.lt, TELIA 5

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q3 SUMMER 2020 WAS A TIME OF “The company’s new office is fully equipped GRAND OPENINGS for work in flexible teams and it echoes Danske Bank officially opened an office Danske Bank’s aims to be an innovative and building in the DC Valley in August. The highly adaptive organisation,” says Aistė 15,000-sqm service centre in phase Gataveckienė, Head of Danske Bank Global 3 of the Saltoniškių 7 Campus has Services Lithuania.* 1,000 workplaces suited to different working styles and individual needs. to change Danske Bank’s premises in need to work remotely for periods of The workspaces on the Danske campus other countries as per the example of its times. feature not just modern interiors and office campus in Vilnius, equipping more state-of-the-art technological solutions, team spaces and work hubs for physical SEB Bankas moved into its new head but also a productive, dynamic setting for meetings, idea generation, and fewer office in July. The 12,900-sqm building employees suited to their everyday work individual workplaces, given the growing offers roughly 1,100 employees of the and the prevailing culture. That such tenants are setting the course not just in Lithuania but also in other European countries is also affirmed by tenants themselves. There are plans SEB Bank Source: *danskebank.lt Credit: SEB 6

VILNIUS OFFICE OUTLOOK, 2020 Q3 VILNIUS OFFICE MARKET bank 840 standard and 440 alternative “Sometimes when it seems you’ve reached workplaces. Since it is open to the the upper limit, you suddenly realize you’re public, a fifth of the building’s area is going further and further – that is true for designed as alternative space for leisure, Danske Bank and also for Vilnius, for all the meetings, and work. investments that are coming to the city,” Vilnius Mayor Remigijus Šimašius says.* The SEB head office also features state- of-the-art technological solutions for developers. Lords LB, the developer choice of a new office was efficiency, reducing building maintenance costs. of the new SEB HQ project, seeks to both as regards the use of space and in The building’s sustainability, minimal obtain BREEAM “New Construction terms of employee collaboration and the impact on climate change, installed Outstanding” sustainability certification. company’s performance. solar power plant, biodynamically efficient lighting which adapts to human One of the key factors in SEB Bankas’s biological rhythms and the cycle of natural light, and exclusive ventilation system operating on the basis of the number of people in a space are technological solutions for meeting the long-term goals of the market Source: *BNS, ** SEB bank SEB Bank Credit: SEB “On moving to the single office complex, we’ll be able to work and interact more effectively, we’ll provide a much higher quality work environment for our employees and innovative customer service spaces,” says SEB Bankas’s Aivaras Čičelis.** 7

VILNIUS OFFICE MARKET VILNIUS OFFICE OUTLOOK, 2020 Q3 Uptown Park Vinted, Europe’s biggest online clothing Credit: Vilbra exchange and trading platform, moved its office to the rapidly renewing Naujamiestis area of Vilnius. Under a prelease agreement, 900 workplaces were equipped as per the company’s requirements in 9,000 sqm of space at the Uptown Park. The need for the new office arose amid rapid growth at the company. Besides traditional relaxation, leisure, children’s and other spaces, the office also has more than 120 different meeting and individual work rooms that can be easily adapted to the objective and nature of a meeting. Uptown Park Credit: Vilbra 8

VILNIUS OFFICE OUTLOOK, 2020 Q3 VILNIUS OFFICE MARKET The business centre, which boasts an “Vinted planned the move well in advance – A+ Energy Class rating, is efficient and the decision was related to the company’s cost-effective. Its sustainable technical growth. Both now and once we move to solutions, functional layout and building the new premises, Vinted’s employees can materials are environmentally friendly. choose whether to work remotely, but the Sustainability became a distinctive need for a high quality and sustainable office characteristic of the office, whose remains,” said Vinted’s Ieva Užkurnienė.* interiors feature second-hand refurbished furniture and long-lasting easily renewable materials. The organization successfully applied its mission ‘to make second-hand first choice’ in its office decisions as well. Source: *Vinted 9

NEWSEC ANALYSIS PRODUCTS VILNIUS OFFICE OUTLOOK, 2020 Q3 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 Q2 2020 H1 Riga Office Outlook, Tallinn Office Outlook, Baltic Office Outlook, 2020 H1 2019 2019 Baltic Property Outlook, Baltic Investment Outlook, Newsec Property Outlook, Spring 2019 2019 Autumn 2019 Access Newsec’s market report portal here: www.newsec.lt 10

VILNIUS OFFICE OUTLOOK, 2020 Q3 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 11

● CONTACT AND ADDRESSES VILNIUS OFFICE OUTLOOK, 2020 Q3 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 Roseni str. 7 Cell +370 698 83827 EE-10111 Tallinn E-mail [email protected] Phone +372 664 5090 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] 12