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According to them, the hotel, retail and catering segments most affected by the pandemic will have to consider other asset strategies, and the expansion of electronic commerce will accelerate the development of the logistics and manufacturing segments. The Lithuanian region will remain attractive to investors, although developers will turn to non-standard real estate projects.
The office availability rate will increase, but demand will be generated by companies moving from Belarus
According to Ignas Goštautas, a senior analyst at real estate services company CBRE, due to the pandemic, with many employees working from home, the trend to give up office space should intensify in 2021.
“Many companies realize that in the future they will need less office space due to the increase in working hours from home, but it is not always clear how much less. (…) Some companies are already actively giving up their land back to the owners of the buildings or trying to lease them. (…) This trend will only intensify next year, which will increase the vacancy rate, ”I. Goštautas told BNS.
According to him, this trend and competition between building owners will make it easier for tenants to negotiate for office leases.
However, according to S. Jovaišaitė, head of the Mediation Department of the real estate services company Colliers international advisors, the demand activity for offices in the capital in 2021 will be generated by companies moving from Belarus to Vilnius.
“The relocation of Belarusian companies in Vilnius, which started in 2020, should gain the greatest momentum in the first and second quarters of 2021. These companies will be one of the main drivers of demand in the office and housing rental segments in 2021” said S. Jovaišaitė to BNS.
The real estate services company Newsec advisers LT estimates that another 124,000 will be offered to the market in 2021. kv. m of office space, and in 2021 the office vacancy rate should reach an equilibrium of 8 to 10 percent. level.
Mindaugas Kulbokas, head of the research and analysis group at Newsec Advisers LT, predicts that there will be changes to the office design.
“The installation of open workspaces and fixed workplaces, the growing need for areas adapted to different tasks and activities, these changes await all employers. The search for new values that are important to both employees and organizations will lead to internal transformations in the office, as it will be necessary to reform teams, strengthen social ties, foster employee creativity and clearly rethink opportunities to increase efficiency and cooperation, ”Kulbokas said.
According to Raimondas Reginis, Head of Market Research for the Baltic States at the real estate services company Ober-Haus, due to the epidemiological situation in 2021, the biggest challenges await flexible job employers.
“If companies that have offices on long-term lease can afford to keep rented facilities empty during this period, the income of operators of flexible workplaces, such as cooperation spaces, depends directly on the physical flow of tenants in those facilities. The flexible, short-term working rental conditions have been of great benefit to their tenants during this period of change, “Reginis told BNS.
The hotel and commercial segments may need to change the concept
The accommodation, commerce and catering segments most affected by the coronavirus crisis will face even greater challenges. According to Tomas Sovijus Kvainickas, head of investment and analysis at real estate services company Inreal, some hotels are likely to close and be equipped with small apartments.
“Long-term and cheaper room rental is not always profitable enough, which is why it is currently used more as a means of survival than as an innovative idea to increase the profitability of typical long-term activities,” said TS Kvainickas to BNS.
According to I. Goštautas, the owners of commercial premises and hotels will establish other strategies for this property, either modifying it or abandoning the class of this property.
“We will see a clear modification and regeneration of supermarkets or simply price adjustments by the owners and an exit from this asset class. Meanwhile, some hotel owners are renovating their properties and waiting for the market to recover after a pandemic, ”said I. Goštautas.
According to Viktoras Račkovskis, director of the real estate services company 1partner LT, some of the retail projects may not be carried out.
“Developers will closely follow the market due to the development of retail facilities and a number of projects will not be implemented anyway,” V. Račkovskis told BNS.
R. Reginis predicts that individual business premises owners may have to search for new tenants due to the epidemiological situation.
“Individual retail store owners typically have one tenant, who substantially loses income when their activities are suspended or restricted. Therefore, if the owner of said premises reduces or deferrals the rent to the tenant, they lose significant income from the leased premises. It is in this real estate segment that we have already seen negative changes in rental prices this year, ”said R. Reginis.
However, according to TS Kvainickas, the traditional trade and the need for commercial and restaurant premises will continue.
“Lower prices and faster purchases are likely to be liked by many, so changes in physical stores are inevitable, but this does not mean that everything goes only to the online space. (…) Although it is possible to buy food online, the need to choose the freshest fruit and the most beautiful vegetables has not disappeared anywhere, and food delivery does not work throughout the country, “he said. TS Kvainickas.
E-commerce will further accelerate the development of the logistics segment
During the pandemic, rapidly expanding e-commerce may become the engine of logistics segment development next year, says Regimantas Kacevičius, director of the Industry and Logistics Services Group at Colliers International Advisors.
“The pandemic appears to have caused changes in consumer behavior in a few months, which were planned 3-5 years later. As a result, we expect more reports in the coming years about at least some transportation companies investing in the development of new terminals, which are growing slightly with e. the participation of commercially related companies in new leasing transactions of speculative areas ”, R. Kacevičius told BNS.
According to him, in 2021 there will be a further expansion of multifunctional offices, the so-called “stock offices”, which combine premises suitable for trade, office, storage and production, and a “build-to-suit” model, where the client can rent specially designed, built, built. and custom rooms, segments.
According to TS Kvainickas, due to increased e-commerce flows, the locations of new warehouses may change.
“In the production and logistics segment, small changes are possible related to the sizes of territories, automation of activities, location of objects. With the increase of e. trade flows, locations where new warehouses will open are likely to be adjusted and smaller space rental deals can possibly be expected by moving products from a physical store to a cheaper warehouse, ”he said.
According to M. Kulbokas, the biggest challenge in the logistics segment next year will be cost optimization between the manufacturer, the seller and the consumer.
“The logistics segment is entering 2021 with strong muscle growth and further development of logistics chains as components of e. development of commercial parts. Consumers will continue to buy actively through electronic channels and the biggest challenge will be optimizing logistics costs between manufacturer, seller and consumer, ”said M. Kulbokas.
Investors will look for alternatives
According to Kulbok, due to increasing competition and changes in end-user habits, investors will turn to alternative real estate projects.
“In 2021, we will see a number of non-standard development projects that have been in the portfolios of developers and investment funds in the old part of Europe for a long time.” The development of coexistence, care and maintenance of old people respectable, residential-only housing projects – this should definitely appear in the developers’ plans for 2021, “said M. Kulbokas.
According to M. Kulbokas, investor confidence in the Lithuanian market will increase next year.
“Investors will also see the Lithuanian investment market in 2021 as part of Northern Europe. Certainly, the trust mandate received by investors in the objects that generate cash flow for the Baltic countries will only increase ”, said M. Kulbokas.
According to I. Goštautas, the Baltic region will continue to be attractive to investors due to the higher return on assets.
“In the Nordic countries, the performance of high-end CBD (Central Business District – BNS) office buildings ranges from 2.25 per cent. Up to 4% and up to about 6% in smaller cities. Therefore, in the Baltic countries between 5 and 6 percent. The best assets are sold in terms of income, the growth potential of our region is greater “, said I. Goštautas.
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