KAUNAS OFFICE OUTLOOK2018 H1

Business centre BLC2, K. Donelaicio str., Kaunas.

KAUNAS OFFICE OUTLOOK, 2018 H1MODERN OFFICE PREMISES

2

MODERN OFFICEPREMISES SUPPLYBy the end of the first half of 2018, the stock of modern office premises in Kaunas stood at 178,500 sqm, or 0.62 sqm per capita. However, the current pace of supply growth indicates that Kaunas is becoming the most attractive new market in Lithuania for all investments and in the long-term may even catch up with Vilnius as there are not so many features where Vilnius can outrun Kaunas taking into account the infrastructure, supply of qualified employees, costs and conditions for development projects or for starting a business.

Until 2018, the entire office stock in Kaunas was B class, but the growth of local companies together with the entrance of large international companies has led to the need for better-quality offices. This has naturally triggered growth in the development of A class offices. Although, unlike in Vilnius, a significant proportion of recent office development projects are still B class, this situation is likely to change over the long term.

Seven new office projects were completed by the end of the first half of 2018: ARKA (A class) opened with an occupancy of 100%, NEMUNO3 (A class; occupancy 100%), RIVER HALL (B class; occupancy 50%), KONVERSUS (B class; occupancy 85%), CUBE (B class; occupancy 75%), KALANTOS 49 (B class; occupancy 95%), and A43 (B class; occupancy 33%). Combined, this brought nearly 35,000 sqm of

new leasable area, which is already the equivalent of almost 80% of new supply for the whole of 2017. In total, it is expected that in 2018-2019 the Kaunas office market will increase by approx. 100,000 sqm of modern office space.

VACANCYBy the end of the first half of 2018, the average vacancy rate in Kaunas was 10.7 %, which is slightly less than the fixed 11.0% at the end of 2017. This is a very positive indicator, because despite the increasing supply of the office space, vacancy remains stable with slight hints of a downside. This shows strongly that new office buildings look very attractive for tenants and the reasonably high vacancy rate in today’s market is only a factor of the transition period, speedily increasing office stock and freed-up office space due to relocations from older office buildings. Compared to Vilnius, the rate may seem very high, but looking at other emerging European cities it is completely normal.

DEMANDThe take-up for lease agreements continues to show significant growth and strong demand for modern office space. During the first half of 2018 alone, the take-up of office space amounted to nearly 30,000 sqm, with more than 50% of these advised by Newsec. This looks quite positive even considering last year’s record of a total of 35,000 sqm. This indicator gives strong hope that at the end of 2018 the market will experience another record-breaking

year. Meanwhile, the Vilnius take-up for the first half exceeded 35,000 sqm, and given the size of the cities and office supply, demand is growing at faster pace in Kaunas right now.

Most of the transactions performed were either expansions or relocations of companies already present in Kaunas to modern office buildings, which indicates a change in lessees’ needs in terms of quality and location of premises. The largest ever transaction in the Kaunas office market was performed by US-based medical company Intermedix, signing for 7,300 sqm at the new office building BLC2, which is expected to be delivered in 2019. Some other big transactions also deserve to be mentioned: Confidential Engineering Company signed for 1,690 sqm at the recently built Konversus, and the bank Luminor signed for 1,160 sqm at Magnum, which is expected to be completed by the end of 2019. And as all of the A class buildings opened already fully leased, most of the other transactions completed during this half were relocations to newly built B class offices.

New companies also started operations in Kaunas in 2018. Centric signed up for 840 sqm at Kauno Dokas. OAG signed for 370 sqm at Kauno Dokas, NKT signed for 850 sqm at Kauno Dokas, and SMK is launching a branch in Kaunas with 570 sqm of modern office space at the Ausra Business Park. Several more companies are still in the negotiation and

City Total Stock Population Stock per CapitaBratislava 1,596,000 583,600 2.73Prague 3,217,000 1,294,500 2.48Budapest 3,353,000 1,752,700 1.91Bucharest 3,140,000 1,883,400 1.67Tallinn 750,000 450,000 1.66Katowice 460,600 297,200 1.55Krakow 1,099,600 766,700 1.43Sofia 1,728,200 1,263,000 1.37Vilnius 604,400 546,300 1.10Riga 650,000 641,000 1.01Kaunas 178,000 288,400 0.62

300,000

250,000

200,000

150,000

100,000

50,000

-

Source: NewsecKAUNAS OFFICE STOCK BY CLASS, sqm

%

B Class A Class

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

E

2019

E

OFFICE STOCK PER CAPITA IN CENTRAL AND EASTERN EUROPEAN CITIES 2018 H1

KAUNAS OFFICE OUTLOOK, 2018 H1 MODERN OFFICE PREMISES

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Developer/Owner Location / Name GLA, sqm Class Status Exp. finishingVerslo vystymo centras Konversus 4,600 B class Completed 2018Imlitex Holdings Arka 8,300 A class Completed 2018VG Valda Kalantos 49 5,500 B class Completed 2018Sirin Development River Hall 8,500 B class Completed 2018Saulius Vaičaitis Nemuno 3 2,000 A class Completed 2018Mikrovisata Cube 4,800 B class Completed 2018BetaPlius A43 700 B class Completed 2018Kauno Saulėtekis V. Krėvės 57B 1,500 B class Construction 2018Stanislovas Dumbliauskas K26A 1,200 B class Construction 2018Giedrolos investicijos Partizanų 15B 2,000 B class Construction 2018KPC Nekilnojamas Turtas Karaliaus Mindaugo verslo centras 5,000 B class Construction 2018Polonezas Aušra verslo parkas C 2,500 B class Construction 2019Urban Inventors BLC2 14,000 A class Construction 2019Kauno Saulėtekis Magnum 20,000 A class Construction 2019Urban Inventors Kauno Dokas II 5,000 B class Planned 2019TC Investicija Nemunas Factory HUB 2,300 B class Planned 2019YIT Kausta Piliamiesčio verslo centras 6,500 B class Planned 2019GS Investicija Kudirkos 21 2,800 B class Planned 2019Prime biurai Prime biurai 5,000 B class Planned 2019TOTAL 102,100

OFFICE DEVELOPMENT IN KAUNAS 2018-2019

«During the first half of 2018 alone, the take-up of office space amounted to nearly 30,000 sqm, with more than 50% of these advised by Newsec»

0

2

4

6

8

10

12

14

Source: Newsec

KatowiceKaunas

SofiaKrakow

Bucharest

BudapestRiga

BratislavaPrague

TallinnVilnius

AVERAGE VACANCY RATE IN CEE, 2018 H1

2.6

5.85.96.06.27.3

9.29.39.8

10.711.3

%

0

2

4

6

8

10

12

14

16

18

Source: Newsec

Kaunas

B class A class

AVERAGE OFFICE RENT RATE, EUR/sqm/month

Vilnius Kaunas Vilnius

8-119-13

12-14

14-16

leasing phase. Clearly, accessibility to a young talent pool, academic city status, excellent infrastructure and cheaper operating and living conditions are attracting more and more attention from strong international companies, and this interest is expected to grow even more in the near future.

RENTAL RATESBy the end of the first half of 2018, the average market rent for B class modern

office space in Kaunas was in the range of 8-11 EUR/sqm/month. Meanwhile, the asking rental price for already completed and upcoming A class premises currently amounts to 12-14 EUR/sqm/month.

Considering the fast-growing demand and the fact that there are no vacant A class offices, it is safe to assume that the rental price set for the first A class buildings was more than acceptable for the lessees and that upcoming

projects could certainly push the price higher and still attract enough demand. Meanwhile, rental rates in older office buildings dropped slightly because of the intense competition with new-build projects. This trend is expected to continue as landlords remain susceptible to negotiations, while some of the older premises are considering renovation or price adjustments in order to stay competitive.

KAUNAS OFFICE OUTLOOK, 2018 H1MODERN OFFICE PREMISES

4

CENTRE

OLD TOWN

SANCIAI

PANEMUNE

PETRASIUNAI

VILNIUS

KAUNAS FEZ

KLAIPĖDA

DAINAVA

GRICIUPIS

EIGULIAI MURAVASILAINIAI

VILIJAMPOLE

ALEKSOTAS

FREDA

ZALIAKALNIS

Existing Office buildings

Under development Office buildings Central business district

New business district

Old business district

OFFICE BUILDINGS IN KAUNAS No Project Name Address, street Openings of 2017 1 Kauno Dokas Jonavos str. 72 Kauno Duona V. Kreves ave. 1293 Jonavos 30 Jonavos str. 304 B66 Barsausko str. 665 Renesansas 1 Juozapaviciaus str. 116 Birzelio 23 Birzelio 23-osios str. 47 Pramones BC Pramones ave. 4A8 Savanoriu 277 Savanoriu ave. 2779 Sitis Veiveriu str. 13910 Lapeno Namas Kestucio str. 3811 Ausra Business Park A&B Vytauto ave. 23, 27, 29 Openings of 201812 Arka Karaliaus Mindaugo ave. 3713 Kauno Dokas II Jonavos str. 714 River Hall Jonavos str. 6015 Konversus Chemijos str. 1516 K26A New V. Kreves str. 26A17 Kalantos 49 Kalantos str. 4918 Nemuno 3 Nemuno str. 319 Partizanu 15B Partizanu str. 15B20 Cube Savanoriu ave. 321C21 Ausra Business Park C Vytauto ave. 23, 27, 2922 A43 Ateities hwy. 4323 KMA Kaunakiemio str. 1 Openings of 2019 and later 24 Magnum Karaliaus Mindaugo ave. 3825 BLC2 K. Donelaicio str. 6026 Renesansas 2 Juozapaviciaus str. 1327 Piliamiescio BC Brastos str. 2428 Savanoriu 367 Savanoriu ave. 367 Existing Office buildings 29 Maironio 28 Maironio str. 2830 Plaza BC Taikos ave. 14131 Swedbank Maironio str. 26B32 BC 363 Savanoriu ave. 363A33 Savanoriu 363A Savanoriu ave. 36334 Savanoriu 349 Savanoriu ave. 34935 BLC Donelaicio str. 6236 Artis Savanoriu ave. 17837 Vytauto 32 Vytauto ave. 3238 Diurablis Partizanu str. 63M39 Savanoriu 221 Savanoriu ave. 22140 Technopolis Europos ave. 12141 BC 1000 Taikos ave. 88A42 Nordic BC Savanoriu ave. 19243 Kalantos 161 R. Kalantos str. 16144 Savanoriu 292B Savanoriu ave. 292B45 Capital Putvinskio str. 5046 Ausra Business Park Vytauto ave. 23, 27, 2947 K26A V. Kreves str. 26A48 Barkodas Pramones ave. 4D49 Senukai BC Islandijos hwy. 3250 NFQ (BTS) Brastos str. 1551 BC Mikrovisata Savanoriu ave. 10952 Ozeskienes 17 Ozeskienes str. 1753 Maironio 11 Maironio str. 1154 Pramones 23 Pramones ave. 2355 Kalantos 34 R. Kalantos str. 3456 Chemijos 9D Chemijos str. 19A57 Neries BC Neries krnt. 1858 Barkodas Pramones ave. 4E59 Daimonda Taikos ave. 131B60 Partizanu 15 Partizanu str. 15

1

3

2750

4

7

15

1755

43

54

47

3059

41

38

58

56

48

6

265

2

1314

8

19

20

28

60

34

49

33 32

44

10

253529

3153

52

45

51

57

36

4239

23

46

40

2137

241218

9

16

11

KAUNAS OFFICE OUTLOOK, 2018 H1 MODERN OFFICE PREMISES

5

CENTRE

OLD TOWN

SANCIAI

PANEMUNE

PETRASIUNAI

VILNIUS

KAUNAS FEZ

KLAIPĖDA

DAINAVA

GRICIUPIS

EIGULIAI MURAVASILAINIAI

VILIJAMPOLE

ALEKSOTAS

FREDA

ZALIAKALNIS

Existing Office buildings

Under development Office buildings Central business district

New business district

Old business district

OFFICE BUILDINGS IN KAUNAS No Project Name Address, street Openings of 2017 1 Kauno Dokas Jonavos str. 72 Kauno Duona V. Kreves ave. 1293 Jonavos 30 Jonavos str. 304 B66 Barsausko str. 665 Renesansas 1 Juozapaviciaus str. 116 Birzelio 23 Birzelio 23-osios str. 47 Pramones BC Pramones ave. 4A8 Savanoriu 277 Savanoriu ave. 2779 Sitis Veiveriu str. 13910 Lapeno Namas Kestucio str. 3811 Ausra Business Park A&B Vytauto ave. 23, 27, 29 Openings of 201812 Arka Karaliaus Mindaugo ave. 3713 Kauno Dokas II Jonavos str. 714 River Hall Jonavos str. 6015 Konversus Chemijos str. 1516 K26A New V. Kreves str. 26A17 Kalantos 49 Kalantos str. 4918 Nemuno 3 Nemuno str. 319 Partizanu 15B Partizanu str. 15B20 Cube Savanoriu ave. 321C21 Ausra Business Park C Vytauto ave. 23, 27, 2922 A43 Ateities hwy. 4323 KMA Kaunakiemio str. 1 Openings of 2019 and later 24 Magnum Karaliaus Mindaugo ave. 3825 BLC2 K. Donelaicio str. 6026 Renesansas 2 Juozapaviciaus str. 1327 Piliamiescio BC Brastos str. 2428 Savanoriu 367 Savanoriu ave. 367 Existing Office buildings 29 Maironio 28 Maironio str. 2830 Plaza BC Taikos ave. 14131 Swedbank Maironio str. 26B32 BC 363 Savanoriu ave. 363A33 Savanoriu 363A Savanoriu ave. 36334 Savanoriu 349 Savanoriu ave. 34935 BLC Donelaicio str. 6236 Artis Savanoriu ave. 17837 Vytauto 32 Vytauto ave. 3238 Diurablis Partizanu str. 63M39 Savanoriu 221 Savanoriu ave. 22140 Technopolis Europos ave. 12141 BC 1000 Taikos ave. 88A42 Nordic BC Savanoriu ave. 19243 Kalantos 161 R. Kalantos str. 16144 Savanoriu 292B Savanoriu ave. 292B45 Capital Putvinskio str. 5046 Ausra Business Park Vytauto ave. 23, 27, 2947 K26A V. Kreves str. 26A48 Barkodas Pramones ave. 4D49 Senukai BC Islandijos hwy. 3250 NFQ (BTS) Brastos str. 1551 BC Mikrovisata Savanoriu ave. 10952 Ozeskienes 17 Ozeskienes str. 1753 Maironio 11 Maironio str. 1154 Pramones 23 Pramones ave. 2355 Kalantos 34 R. Kalantos str. 3456 Chemijos 9D Chemijos str. 19A57 Neries BC Neries krnt. 1858 Barkodas Pramones ave. 4E59 Daimonda Taikos ave. 131B60 Partizanu 15 Partizanu str. 15

1

3

2750

4

7

15

1755

43

54

47

3059

41

38

58

56

48

6

265

2

1314

8

19

20

28

60

34

49

33 32

44

10

253529

3153

52

45

51

57

36

4239

23

46

40

2137

241218

9

16

11

KAUNAS OFFICE OUTLOOK, 2018 H1MODERN OFFICE PREMISES

6

OSLOBERGEN

TRONDHEIM

GOTHENBURG

MALMÖCOPENHAGEN

STOCKHOLMHELSINKI

TALLINN

RIGA

VILNIUS

KLAIPEDA

KAUNAS

OULU

TAMPERE

AARHUS

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KAUNAS OFFICE OUTLOOK, 2018 H1 MODERN OFFICE PREMISES

7

CONTACT AND ADDRESSES

More analytical information at Newsec:

Head of Research and AnalysisMindaugas KulbokasCell +370 652 10556E-mail m.kulbokas@newsec.lt

ConsultantGintaras TolockaCell +370 685 06940E-mail g.tolocka@newsec.lt

Office solutions at Newsec:

Head of BrokerageJurgita SilaikyteCell +370 659 66808E-mail j.silaikyte@newsec.lt

Tenant ConsultingHead of Corporate SolutionsMartynas BabilasCell +370 616 12216E-mail m.babilas@newsec.lt

Landlord ConsultingAdvisorMarius PrieskenisCell +370 687 701 17E-mail m.prieskenis@newsec.lt

Office FIT-OUT ServiceHead of Project ManagementTadas GrinceviciusCell +370 679 79779E-mail t.grincevicius@newsec.lt

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LITHUANIAKonstitucijos ave. 21CLT-08130 VilniusPhone +370 5 252 6444E-mail info@newsec.ltwww.newsec.lt

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ESTONIARoseni str. 7EE-10111 TallinnPhone +372 664 5090E-mail info@newsec.eewww.newsecbaltics.com

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