2008
At present, the rental payment for spaces on the main streets of Riga, where before there was the highest rent, is up to EUR 40/sq.m. maximum. “Part of the shops that started to lease premises in those locations in the last year for EUR 60-80/sq.m., have ended their activity and left the premises just because of the high rental payments”, says Kristaps Jankovskis, Manager of “Balsts” Commerce Department.
In general, the commercial premises market is at present on the verge of a critical phase because the winter heating season has started, which will make the owners of the empty premises reconsider very seriously the amount of rental payment and their capabilities to find new tenants for the premises.
In the offices sector, most of deals are taking place as a result of change of premises, when companies are trying to optimise costs by merging branches or moving to smaller premises. Most potential tenants are at present ready to pay a rental payment of EUR 8-10/m². The supply is very large, and lessors are ready to meet the various requirements of tenants. The fall in prices in the offices sector this year has reached 30-35%.
The largest interest is still in office premises of small area (40-100 m²), and also, as a result of insolvency of some companies, the premises not present in the market before are now vacated (in advantageous locations, for very attractive rental payments). The potential tenants, who still have free financial resources and are planning to change premises, will now be the ones who will dictate the situation in the market. This means that these companies will be able to afford moving to such premises which previously were not accessible to them (rental payment was too high or premises were leased out for a long term).
The most stable situation is still in the warehouse premises sector. Rental payments for warehouse premises have decreased by 10-15%, yet the demand is stable and there are companies that are still looking for new warehouse premises which are well equipped.
“At present, clients have adopted a waiting attitude and are waiting for a larger decrease in rental payment. Observations show that the following trend has emerged in the rental market: new premises are found for a tenant, and he/she has agreed to rent them, however, when it is notified to the current owner to whom the tenant is bound, the owner decreases the rental payment and the tenant stays in the current premises”, says Kristaps Jankovskis.
Price corrections in the rental sector will certainly continue. More activity both in the selling spaces rental sector and the office premises rental sector is expected in spring 2009. Tendencies show that most of the deals taking place in the next months in the rental sector will be related to change of premises for saving purposes.
“The tenants, who have concluded rental contracts in 2006 and 2007, are often now not able to cover their expenses, including rental payments, with their turnover. Owners that will be able to be flexible and will conditionally start to share responsibility with tenants will be able to keep tenants in the long term and gain regular income. Until now, all responsibility has always been taken by tenants”, asserts Kristaps Jankovskis.
