Favorte Real Estate Development Fund

Information about the fund

Favorte Real Estate Development Fund (Favorte Real Estate Development Usaldusfond) is the first real estate fund in the Baltics to focus on the development of modern stock-offices.

The innovative stock-office concept has been developed in Estonia and is therefore most suited to the needs of the Baltic market, fostering local entrepreneurship and a rapidly expanding community of growth companies.

Thousands of small and medium-sized enterprises are already in need of new and flexible commercial space to accommodate and support their growing business. Stock-office or warehouse/office/showroom-type rental premises are the best way to meet the space needs of these fast-growing companies.

The fund is led by Riho Unt, who has many years of experience as the head of SEB bank in Estonia and the Baltics, and Rainer Hinno, owner of Favorte, a successful real estate development company that has been active in the Estonian market for almost 30 years. The team also includes Marge Keerig, Chief Financial Officer, and Mart Saa, a recognised real estate expert. Favorte is already one of the largest developers of stock-office type commercial buildings in Estonia.

Favorte stock-office fund was established in June 2021. The fund is managed by Rari Capital Management OÜ, registered with the Estonian Financial Supervision and Resolution Authority. The fund is audited by Grant Thornton Baltic OÜ.

The stock-office concept

Stock-offices are characterised by the fact that they combine warehouse, production, office and showroom spaces.

This concept allows both medium-sized and fast-growing companies to keep their teams together, which increases the efficiency and flexibility of business processes. In today’s fast-changing business environment, the possibility to bring teams together under one roof to create agility and synergy can give a significant advantage over large companies with inflexible, cumbersome and often fragmented processes and logistics.

As mentioned above, in the case of stock-offices, warehousing and manufacturing units as well as office employees can all coexist at the same site. For business management, displaying goods and hosting customers and partners, the buildings also have modern office blocks. This kind of solution helps businesses to save on time, communication and other ancillary costs.

Furthermore, during the corona pandemic, many small and medium-sized enterprises have found that keeping buffer storage close by is crucial for the success of their business. Since it is often too risky to depend on the reliability of long supply chains that have been battered by multiple crises, the availability of goods locally and their rapid delivery is an important competitive advantage in today’s market.

In addition to smoother work processes and cost-efficiency, the modern stock-offices are energy-efficient and worker- and production-friendly. They are designed and built with the smallest possible environmental footprint in mind, both in terms of their integration into the surrounding natural environment, the choice of materials and technical systems to ensure low additional costs, and the development of waste recycling and resource recovery principles. All this supports small and medium-sized enterprises in their mission to change the world with their products and services.

Stock-offices in Harju County and the Baltics

In 2022, 37 new stock-office buildings with a total area of 158 000 m² were added to the Baltic commercial real estate segment. As of the end of 2022, there were already 110 stock-office commercial buildings in the Baltics with a total area of 413 000 m². The buildings are mainly located in Tallinn and its surroundings & according to Colliers, the volume of stock-offices in Estonia made up about 12% of the entire industrial real estate sector last year. However, the concept is also gaining popularity in other Baltic countries, and an additional 179 000 m² of modern stock-office commercial space will be added to the Baltic market in 2023 with the conclusion of new projects in all three countries.

The demand for stock-office real estate is driven by the rapid development of e-commerce. As e-shoppers in the Baltics value fast delivery, companies with proper middle warehouses located close to the consumer gain a considerable competitive advantage. In addition, in the case of a stock-office, the whole team works under one roof and thus the building must simultaneously have convenient accessibility for both the employees and the logistics service providers. As a result, stock-office buildings in Estonia have mostly been built either in the capital city or Rae Parish, but for future reference, other areas in the immediate vicinity of the capital city are also suitable.

Customers of the stock-office space solution

To date, stock-offices completed in Estonia are between 2000-6000 m² in size, the average size of a stock-office building is 3100 m²and it has 7-8 units. The distribution of tenants according to the size of the rental space shows that stock-office spaces are suitable for companies of different sizes, whether they are growth companies or traditional small and medium-sized companies. Their space requirement is mostly between 100-1000 m², and the company can choose the size of the surface according to its needs. Thanks to the functionality of the building, it is possible to increase the leased space over time and to reshape it according to the needs of the customer. This allows the company to expand comfortably its operations without changing its location, thus avoiding unnecessary additional costs and work stoppages.

About 60% of the tenants of stock-office business premises are engaged in retail or wholesale trade, but the premises are also popular among various light manufacturing and service companies. Therefore, it can be said that stock-office solution covers up to 70% of the space needs of the Baltic business sector. In addition, modern and energy-efficient stock-office buildings offer entrepreneurs the opportunity to contribute to a more sustainable world and at the same time save energy, natural resources and cut back on their ancillary costs.

Investment strategy

The whole world is striving for sustainability – in terms of natural, social and economic balance. This is also one of the pillars of the fund. The buildings developed by the Favorte stock-office fund will provide modern and flexible commercial space for companies with a very diverse profile, creating opportunities for smaller players to participate in environmentally-conscious business without high additional costs.

All innovative buildings developed by the Favorte stock-office fund: