Kaunas office market is driven by growing local businesses

The expansion of Kaunas offices demonstrates consistent rapid growth. Up to now, the amount of modern office space has doubled, and this year the largest modern office space will be opened in Kaunas – over 52.3 thousand. square m. After such a wave of new business centers, Kaunas office market will be about 250 thousand. square m. Developers are actively pursuing real estate projects while exploiting Kaunas potential, and the growing vacant office space is creating extremely flexible options for tenants, according to a news release published by Newsec, an international real estate consultancy, “Kaunas Office Outlook” in the 1st Half of the Year
“Kaunas is currently actively demonstrating a breakthrough in office development, which means that companies operating in the city have a unique opportunity to settle in modern offices. Here, the supply of premises suited to the needs and capabilities of medium and small businesses is greater than in the capital, where business centers built so far have been primarily targeted at large tenants seeking 100 or more jobs, ”explains Mindecas Kulbokas, a Newsec analyst.
According to the data of the Department of Statistics of the Republic of Lithuania, the total number of companies operating in Kaunas city has exceeded 14 thousand, while the number of companies operating in Kaunas county has already exceeded 21 thousand and their numbers are growing every year. For example, from 2017, until 2018 the number of companies in Kaunas city increased by almost 300.
It is true that quite a few companies still work in spaces reminiscent of administrative offices. There are more than 1 million such premises in Kaunas. square m. Smart companies looking to set up an efficient and modern office will be able to do so in a 6-8 month perspective as the city has a much greater choice of modern office space.
The volume of lease transactions is stable
Lease transactions in Kaunas are being concluded actively – in the first half of this year almost 20 thousand square m leases were leased in the city. . This is becoming a common indicator for Kaunas. So far the largest leases in Kaunas were signed by Atea, YIT and Kelprojektas, which have have concluded advance leases for respectively 3,7 thousand, 2 thousand and 1.9 thousand. square m of newly developed office buildings.
Newsec predicts that in 2019 the market will absorb about 35-40 thousand. square m.. Kaunas is dominated by local companies expanding or moving into new premises, but international tenants are also interested in Kaunas – during the first half of the year, new international names such as Nordzucker, who rented 500 sq. M. m and collaborative spaces have grown to Hyarchi, with a contract for 250 sq ft. m of office space in Kaunas.
Highest need for Class A
The expert predicts that tenants are likely to be attracted to high-end Class A or modern B-class offices in the central part of the city. The vacancy rate in such business buildings is up to 5-6% and is almost twice as low as city average – 11 percent.
According to the analyst, high-end and higher-end offices in Kaunas are faring better than the market average: “Old construction offices are in a more difficult situation – they have more unoccupied space and are forced to revise their pricing. Meanwhile, new state-of-the-art high-end business centers are almost filled. This means that older construction offices will be increasingly challenged and will have to invest in refurbishments or focus on another segment of the office, such as smaller and less demanding tenants. ”
The area is being increased thoughtfully
Vacancy rates in the city are now at 11 percent due to rapid office expansion and are expected to reach 15 percent by the end of the year. The expert points out that while the vacant office space will grow this year, developers are realizing that they only increase supply by realizing the area previously offered. It is forecasted that supply in Kaunas office market should grow more moderately in the future and we are unlikely to see such record surges as this year, and Kaunas market will absorb a record office space in the coming years.
“The lease agreements will be concluded at the same pace as before – about 15-20 thousand square meter will be leased per half year, which will leave more vacant space in the second half than before. However, as office development slows down in the coming years, the vacancy rate will be as early as 2020. It will start to decline moderately and is forecast to reach around 12-13% by the end of the year, and by 2021. may return to the current 10-11 percent at the end of the year level. Such self-regulation demonstrates the rapid reaction of Kaunas developers to market changes and market maturity, ”observes M. Kulbokas.

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