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


1
STATISTICAL ANALYSIS OF RENT PRICES FOR BUSINESS
PREMISES IN VILNIUSConference Lithuanian real
estate 2002Author Martynas ulniusManager
2
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.

3
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.

4
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.

5
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.

6
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.

7
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.

8
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.

9
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.

10
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.

11
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.

12
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.

13
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. 
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