Lowest vacancy is pushing for new developments

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1 e 217F 218F 219F Sq m Riga Office, Q4 215 Lowest vacancy is pushing for new developments 588, sq m 4.4% 13,45 sq m 18, sq m 7.25% *Arrows indicate change from the corresponding quarter in the previous year Figure 1: Modern Office Stock Completions from 2-216e and Forecast for 217F-219F % 6% 5% 4% 3% 1% % Growth, y-oy, % -1% Completions (Speculative) Completions (B-T-S) Forecast Completions Total Stock Growth, % KEY POINTS GDP increased by 3% in Q4 215 when compared to Q4 214 The estimated annual GDP growth is set to 2.7% for 215 and to 2. for 216 Prime rent and prime yield stable at 15.5 EUR/sq m/month and 7.25% respectively Additional 3,12 sq m of an office space was delivered at the Jauna Teika business area by Hanner Group CBRE has counted total investment volume for cash flow generating office buildings about 7m in total Lack of high quality office space to meet large international tenant requirements A reconstruction and refurbishment era will likely to continue during 216 in CBD The overall rate of vacancy decreased to 4.4%, the sharpest decrease is observed in Class B segment The current stock of 588, sq m could increase by approx. 75, sq m by the end of 217 If all proposed schemes are delivered on time, at the end of 219 the office stock will reach 775, sq m Q4 215 CBRE Research 216 CBRE Real Estate Consultancy 1

2 * Table 1: Office Completions in Q4 215 RBS Skals HQ Meistaru 33 NBP Central Offices Office premises at Jauna Teika Photos Office GLA, sq m 2,98 5, ,12 Location O.Vaciesa str. 6B Valdlauci CBD Teika Developer RBS Skals Fraternitas Nordic and Baltic Property Group Hanner Group Type B-T-S/Speculative B-T-S B-T-S/Speculative Speculative Anchor tenants RBS Skals C.T. o Premium Medical BIG Bank, Ingenico Source: CBRE Research, Q4 215 SUP P LY Figure 2: Riga Modern Office Stock Development Total Modern Stock, sq m Completions, sq m *Including Stock Withdrawals COM P LETI ONS Pictures: Largest Office Schemes Planned for 216-Q2 217 Teraudlietuves Biroji, GLA 4, sq m Carl Zeiss, GLA 4, sq m DEM A ND Place Eleven, GLA 15, sq m Z-Towers offices, GLA 8,6 sq m Source: Office Landlords, January 216 Q4 215 CBRE Research 216 CBRE Real Estate Consultancy 2

3 EUR/sq m/month sq m Figure 3: Distribution of take-up by amount of transactions in 215, 11% 9% 5% -15 sq m 21% 15-3 sq m 3-5 sq m 16% 5-1, sq m 1,-1,5 sq m 1 1,5-3, sq m 3,-1, sq m V A CA NCY Figure 4: Riga Office Market Take-Up Q 215 2Q 215 3Q 215 4Q Source: CBRE Research, Q4 215 Table 3: Vacancy Rate Vacancy Rate Q4 214 Q4 215 Overall 7.6% 4.4% Class A 1.6% 3. Class B1 7.% 6.% Class B2 9.6% 3.4% Source: CBRE Research, Q4 215 M A R K ET R ENTS Figure 5: Yields and Rents ,5% 1,% 7,5% 5,% 2,5%,% Prime yield Prime rent, EUR/sq m/month Average rent EUR/sq m/month Prime net yield, % Q4 215 CBRE Research 216 CBRE Real Estate Consultancy 3

4 Sq m Figure 6: Riga office market indicators (1 ) Q4 213 Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Q4 215 Vacant stock, sq m Net market absorption, q-o-q, sq m Overall vacancy rate, % 9% 7% 6% 5% 4% 3% 1% % Vacancy Source: CBRE Research, Q4 215 I NV ESTM ENT IN OFFI CE SEGM ENT Figure 7: Investment * Volume by Segments in Latvia 4 3 I NV ESTM ENT A ND A CQUI SI TI ONS IN Office Retail Industrial Mixed-Use Hotel Other *Cash flow generating commercial propeties, with transaction volume above 1 meur Figure 8: Investment by Segments in Latvia in % Office Retail 79% NEW COM ER S/ SSC/BP O Figure 9: SSC/BPO Companies by Origin Country in 215 3% 3% 3% 3% 5% 15% 2 1 Latvia Norway Sweden Finland USA Germany Belgium Bermudas Island Denmark Estonia Italy Marshal Islands Switzerland Source: Investment and Development Agency of Latvia, January 216 Q4 215 CBRE Research 216 CBRE Real Estate Consultancy 4

5 ABOUT CBR E IN BALTI CS Headquartered in Riga, Latvia from 27 Headcount 28 people Providing services in: valuation, consulting & research, property sales, property & asset management, tenant representation, agency services retail, offices, industrial & logistics. RESEARCH DEFINITIONS CONTACTS Prime Rent Represents the top open-market tier of rent that could be expected for a unit of standard size (commensurate with demand in each location), of the highest quality and specification and the best location in a market at the survey date. The Prime Rent should reflect the level of which relevant transactions are being completed in the market at the time. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on an expert opinion of market conditions. Average Rent represents the Average Rent for all units that were taken-up during the survey period. This rate indicates an average of what it would have costs to lease space in the market. Take-Up Represents the total floor space, including renewals, known to have been pre-let, sold or pre-sold to tenants or owner-occupiers during the survey period. Absorption represents the change in occupied stock within a market during the survey period. Total Modern Stock represents the total completed class A and B space (occupied or vacant) in the private and public sector at the survey date. Includes owner occupied (OO) space. Vacancy Rate - represents the percentage ratio of total Vacant Space to Modern Total Stock Prime Yield represents the net yield that an investor would receive when acquiring a class A building in a prime location (for office in the CBD). The net yield does not include any transaction costs. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.