STATISTICAL ANALYSIS OF RENT PRICES FOR BUSINESS PREMISES IN VILNIUS Conference Lithuanian real esta

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STATISTICAL ANALYSIS OF RENT PRICES FOR BUSINESS
PREMISES IN VILNIUSConference Lithuanian real
estate 2002Author Martynas ulniusManager
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Statistical Survey on Commercial Premises Lease
in Vilnius Drop of lease prices in the Old Town
(drop 25, increase 22)

•       The Old Town of Vilnius is the biggest
  one in the Baltic States. It covers a 359 ha
  area. From commercial aspect exceptional are the
  following streets Didioji, Pilies, Vokieciu,
  Vilniaus, Traku. Those streets are the most
  popular on two aspects they are the most
  frequently visited and passed through. Commercial
  and service sector in the Old Town is usually
  established on ground floors of buildings.
  Basically such commercial premises are rented by
  clothes boutiques, designer clothing show rooms,
  lingerie shops, footwear, as well as jewellery,
  photo, dish and cutlery, and souvenir shops. In
  service area the most popular are restaurants,
  clubs, cafes, tourism agencies and translation
  bureaus. Recently, people began to show great
  interest in those premises that are located in
  the streets of the Old Town and are given the
  status of dwelling premises. However, only 10
  15 per cent of ground floor premises of such
  status are left.

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Drop of lease prices in Gedimino Ave., ground
floors (drop 27, increase 18)

• The central street of Vilnius City is Gedimino
  Avenue, which stretches from the Cathedral to
  Lukikiu square. Old 3-4 storey buildings
  dominate in this Avenue. Gedimino Avenue is
  considered a prestigious street hence rich
  organisations consider it their honour to own
  premises in Gedimino Avenue. This is one of a
  very few streets where ground floor premises have
  big windows. In Gedimino Avenue there are lots of
  various shops, bureaus and public enterprises and
  lots of people visit those places. Lease prices
  should keep increasing, as demand for the
  premises, located in Central part of the city
  remains big, when the offer for them is not big.
  Big flow of people and popular location determine
  the demand for commercial premises.

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Drop of prices in the Central part of town, not
ground floors (drop 45)

• Premises that are located in the centre of the
  town but not on the ground floor are still mostly
  designated for offices. The majority of them used
  to be apartments that have been reconstructed and
  their status was changed into non-dwelling
  premises status. Lease price of such premises
  significantly differs from that of the ground
  floor premise. An unsolved car parking issue has
  significant influence on office lease prices. In
  the future office lease prices in the Central
  part of the town should keep dropping as there
  are more and more new modern administration
  buildings that correspond to the most recent
  requirements are constructed in Vilnius. Par of
  former office premises will be returned back to
  the dwelling premise market sector and adjusted
  for rental to foreigners.

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Lease price change in Naujamiestis(drop 33,
increase 18)

• Naujamiestis block is located to the Southwest
  from the Central part of the town. The
  construction of Naujamiestis began after the
  World War II. A lot of dwelling buildings were
  constructed closer to the centre of town and in
  the western part of the block there is a number
  of local industrial plants, such as Elfa, Sparta,
  and Lelija. Investors think not only about
  construction of the new buildings they consider
  the prospective of old building renovation,
  re-construction of former soviet industrial
  complexes and adjustment of those to the
  premises, suitable for commercial
  administrative activities. Ground floors of the
  majority of former and current plants have been
  reconstructed and shops were established in them.
  It is especially noticeable in Vytenio,
  evcenkos, vitrigailos, Kauno, Naugarduko
  streets. Because of its convenient layout,
  Naujamiestis has more prospects to become a
  commercial centre of the town.

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Lease price change in verynas (drop 50)

• verynas is located next to the Central part of
  the town, in a picturesque part of Vilnius. The
  block is located in Neris loop, and Vingis and
  Karolinikiu parks are not far from it. The main
  are two parallel streets Kestucio and Vytauto.
  There are very few multi-storey dwelling
  buildings in this area it is a quiet and
  prestigious block. As there are a number of
  wooden monuments of architecture, offices and
  shops had to adjust and were established in those
  wooden one- or two-storey dwelling buildings that
  are not very convenient for commercial
  activities. Furniture manufacturers and dealers
  especially like this part of the town, therefore
  they established their representative offices in
  Vytauto St. Because of high land plot prices and
  small number of potential customers, investors
  are not very quick at commercial building
  construction.

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Lease price change in Antakalnis (drop 36)

• Antakalnis streches on the left bank of Neris.
  The only main street Antakalnis street where
  the majority of commercial premises are located,
  stretches from St Peter and Pauls Church and is
  parallel to Neris river. There is a number of
  dwelling building streets that from both sides
  are perpendicularly situated in respect to
  Antakalnis street. Antakalnis has good public
  communications network, beautiful nature and is
  considered one of the cleanest dwelling blocks in
  Vilnius. The majority of constructions in this
  area are either brick or concrete five-storey
  dwelling buildings. Commercial premises located
  around Antakalnis and ilas street crossing draw
  attention of various enrepreneurs here a new
  bridge through Neris was constructed few yeras
  ago and car and people flow increased, and this
  automatically increases the number of potential
  customers.

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Lease price change in nipikes and irmunai
(drop 25)

• The blocks are located to the North from the
  Central part of the town. From commercial aspect
  the main streets are as follows Kalvariju,
  irmunu, Kareiviu, algirio, Tuskulenu, and
  Lukio. The majority of buildings in these blocks
  are five-nine storey dwelling buildings that have
  been constructed thirty years ago. New trade
  centres and commercial facilities, located at the
  main streets, are being established here. In the
  middle of Kalvariju street there is a city market
  place that attracts a significant flow of people.
  iaures Miestelis, a big 64 ha former military
  building area is located between hose two blocks.
  Currently it is being rapidly filled with
  commercial and dwelling buildings. It requires
  big investment and in the future there will be
  various commercial buildings, because the area is
  located not far form the Centre, has good
  communications and big unprivatised area.

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Lease price change in Virulikes, Lazdynai and
Karolinikes (drop 15,
increase 9)

• The blocks are located in the Western part of the
  town and stretch along Laisves Avenue. such giant
  supermarkets as Maxima, Media, Iki, Rimi, etc.
  have been established here. five and nine storey
  concrete buildings dominate in this area. In
  these blocks there is a good public and private
  transport communications network as Laisves
  Avenue passes through the area and a big car flow
  daily passes through the Avenue. Commercial
  premises are located along the main streets and
  commercial centres, or in such administration
  buildings as Spaudos Rumai (Press Centre), etc.
  Fluctuation of commercial premises lease prices
  in this part of the town is insignificant this
  reflects low demand and offer in the area. The
  offer of commercial premises is not very big in
  the area, so is the demand.

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Lease price change in ekine, Justinikes,
Fabijonikes and Pailaiciai (drop 35, increase
38)

• The blocks are located in Norhwestern part of the
  town. Those are the newest pillow blocks in
  Vilnius with five, nine and twelve storey
  dwelling buildings dominating there. There are
  such trade centres as Eko, Norfa, Maxima, etc.
  here. The majority of commercial premises are
  established in trade centres and administration
  buildings. In the end of 2001 the investment
  group of Vilniaus Prekyba constructed the first
  in Lithuania trade and entertainment complex.
  Currently it is the biggest in the Baltic States
  entertainment complex that occupies 70000 sq.
  metres. Famous clothing, footwear, electric
  device, optics and cosmetics shops as well as
  cafes, pizza and other restaurants rent
  commercial areas in Akropolis. Appearance of
  Acropolis, the giant trade and entertainment
  centre, had significant influence on lease price
  changes in these blocks of Vilnius.

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SummaryI. Ground floors of the Central part of
the town, main streets of the Old TownII. Non
ground floors of the Central part of the own and
other parts of the Old townIII. Antakalnis,
Naujamiestis, verynasIV. irmunai, nipikes,
Virulikes, Karolinikes, Lazdynai, ekine,
Pailaiciai, Fabijonikes.

• During the period from the second half of 1998
  until the first half of 2001, lease prices in the
  central part of the town dropped by 25 per cent.
  During the period from the first half of 2001
  until the first half of 2002, lease prices in the
  central part of the town increased by 23 per
  cent. Fluctuations of commercial premise lease
  prices in pillow blocks were a bit unexpected
  in commercial premise market. Until the second
  half of 1998 lease prices were increasing and
  then they were gradually falling. This drop makes
  25 per cent. From the second half of 2001 until
  the first half of 2002 the prices were increasing
  again and increased up to 18 per cent. Having
  analysed overall change of commercial premise
  lease prices during the recent five years it
  could be noticed that lease prices were
  increasing until the second half of 1998 and then
  they were gradually falling until the first half
  of 2001. From the first par of 2001 they began to
  rapidly increase again and in the future they
  should reach the former level of 1998.
  Practically form the second half of 1998 until
  the first half of 2001 commercial premise lease
  prices in all districts of Vilnius dropped by 25
  per cent, and from the first half of 2001 until
  the first half of 2002 they increased by 21 per
  cent.

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Capitalisation rate change

• Profit is the main goal of each investor
  in certain real estate. On one hand investor must
  have his/her investment returned, and, on the
  other hand, he/her must get profit for the
  finances used. Hence, the return of the finances
  invested is related to the capital return and
  profit, gained from that capital. Therefore,
  investors follow various indicators that show
  profitability of future projects, turnover terms,
  and better alternative. Capitalisation rate is
  one of the key indicators. It converts annual net
  income received from certain real estate into the
  value of that property. The diagram shows that
  capitalisation rate in all analysed districts was
  changing during the period from 1998 until 2001.
  This was determined by falling lease prices, and
  sales prices during the same period were changing
  insignificantly. A tendency of significant
  increase is defined from 2001. It could be
  noticed that the volume of capitalisation rate
  depends on commercial premise location.
  Capitalisation rate in the Central half of the
  town as well as that of in the Old Town is less
  than that of the premises, located in different
  areas. It is so, because investment risk is less
  as the demand remains stable.

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Conclusions

• Having carried out the survey on commercial
  premise lease in Vilnius, it was noticed that
  during the period of the second half from 1998
  until the first half of 2001 lease prices were
  falling in all districts. Such situation was
  determined by the overall economical situation in
  Lithuania. During the recent five years
  commercial premise lease price in Vilnius has
  decreased by 25 per cent. From the first half of
  2001, when the overall economical situation in
  Lithuania revived, commercial premise lease
  prices began to increase gradually and by the
  first half of 2002 they increased by 21 per cent.
• The major changes next year are expected in
  office premises market. In 2003 it is planned to
  commission approximately 60000 sq. metres of
  modern offices. Such abundance of administration
  premises will make investors to compete between
  themselves in the aspect of premise quality and
  prices.
• In Lithuania office premise market categorisation
  break-down, based on the following A-B-C
  categories should automatically begin in 2003 -
  as soon as the offer will significantly increase.
  
• Part of former offices premises in the Centre and
  Old Town will be returned again to the dwelling
  premise market sector and will be adjusted to
  apartments suitable to let for foreigners.
• When banks significantly reduced interest rates,
  foreign investment in office premise market has
  also decreased, local Lithuanian construction
  activities increased and so did investment
  companies interest in commercial premises
  business.
• Increasing concentration of commercial buildings
  and land plot prices in the central part of the
  town will create the situation of destroying low
  buildings and constructing tall office buildings
• Having constructed more and more new commercial
  building in the Capital, restructuring of
  transport and commercial flows will be
  automatically carried out. This will influence
  distribution of modern office and commercial
  areas prices.
• Commercial centres all over the World proved on
  the fact that customer goes to those centres that
  offer better choice of goods. During the recent
  years commercial area sector has changed their
  strategies the main commercial networks are
  moved from the Centre to the giant modern trade
  centres in the pillow districts of the town.
  This is a good balance for the decreased
  commercial area offer in the Cenre and Old town
  of Vilnius.