Stock-office segment has reached a historically low vacancy rate in Estonia

Currently, the most sought-after warehouse spaces are energy-efficient premises with low utility costs, that are due for completion this year. From the moment energy prices soared, the key issue has been rising utility bills and businesses in old buildings are looking to move out. Whoever has the resources will move. 

The second segment of tenants is rapidly growing companies, who are involved in e-commerce. As they expand, they are also taking into consideration green topics such as solar panels, a healthy work environment, the building's footprint and smart solutions that also help save energy. 

The trend of companies preferring stock-office type commercial premises continues. There are still companies whose different departments are scattered around the city and who don't take advantage of the benefits of the three-in-one solution of stock-offices, which help to minimise logistics, time, and other extra costs. The stock-office segment in Estonia has reached a historically low vacancy rate of 2.7%, indicating a very strong demand for this new generation commercial space concept. 

In terms of overall demand, the winter months, which were not as difficult as everyone feared, have now passed. The rise of Euribor does not directly affect the lease market either. With construction prices remaining high, the supply of high-quality and energy-efficient new commercial space is expected to fall, but demand for such low-cost rental spaces is more likely to pick up as spring arrives.

We at Favorte haven't paused any projects, and we're currently working hard on two objects that will add more than 20,000 m2 of new commercial space to the city. As our buildings are designed with the potential tenant in mind and keep the pace with both recent technological developments and changes in the economy, they are suitable for a wide range of businesses.

In the light of today's energy prices, the time to buy or keep completely depreciated warehouses for renovation is probably over. 

The energy crisis was not foreseen when the commercial buildings were built ten years ago, and although they may be heat-retaining, they have inefficient heating systems and poor ventilation. It makes sense to consider making them more energy efficient. 

Today, the best investment is in commercial buildings with B-energy label, that have been completed in the last five to six years, with heat recovery ventilation and other energy-efficient technical solutions. Doubled heating system and solar panels will make them even more attractive to both investors and future tenants. 

Developers should seriously consider building out duplicate heating systems to bring down the utility costs of warehouse space. With our customers in mind, we have begun to upgrade commercial buildings that are in the design phase and those that already exist: for example, we recently signed a contract to duplicate the heating solution for the commercial buildings of Tähetorni Tehnopark. As an alternative to using a gas boiler, we will install an air-to-water heating system, which will allow the use of whatever is cheaper in the future. 

It is increasingly necessary to consider the fact that customers are becoming more and more aware and are interested in both green topics and smart technological solutions. In times of high energy prices, companies are increasingly interested in optimising business processes, and this brings along tailor-made commercial spaces, where every square metre is optimized for smart use. 

Clients looking for new and modern business space should be aware that there is little commercial space left on the market. Although the real estate portals are full of offers, there aren't too many warehouses in construction, and it's more a case of testing the market. Waiting time for receiving warehouse space has increased. As the rise in construction prices has not been followed by a fall, we don’t expect a fall in rental prices either.