Founded in 1993, the Estonian-capital based real estate developer Favorte is launching a new real estate fund specialising in multifunctional stock-office type commercial property. The fund’s partners are Rainer Hinno, founder and owner of Favorte, and Riho Unt, former head of SEB Baltics.

According to the fund's founders, stock-office commercial properties that flexibly combine showroom, office and warehouse and/or manufacturing space are rapidly gaining popularity in Estonia and the Baltics. "The stock-office concept has been largely developed with the Estonian business environment in mind. It allows small and medium-sized growth companies to streamline their operations and limit costs by bringing all work processes and employees under one roof," explained Rainer Hinno, head of Favorte.

According to Hinno, Favorte, with almost 30 years of experience, has for the past seven years been increasingly active in the development of stock-office type commercial properties, as demand has been growing. "Today, we have a wide range of companies operating on our commercial premises, from a manufacturer of environmentally friendly detergents to a provider of renewable energy solutions," Hinno added.

According to Riho Unt, partner of the fund, stock-office commercial property's key advantage is sustainability. "All businesses want to be more efficient and economical in the way they do business, but this can sometimes be difficult for small and medium-sized players. A modern and multifunctional business space helps to reduce the environmental footprint, as well as limit the company's running costs. This type of space is also highly flexible and adaptable to the business needs of the specific company," said Unt.

According to Tarmo Kalviste, head of the commercial real estate unit at the Colliers commercial real estate advisory firm, the demand for stock-office type properties remains strong. "The vacancy rate in the sector is less than 4%, which clearly shows that there is more demand than supply, and 90% of the buildings under construction find lessees even before they are completed," Kalviste said. According to Colliers, more than 200,000 sqm of stock-office commercial properties have been built in Tallinn to date. The average building is 3,000 square metres, occupied by 7-8 tenants, and the lease ranges are between €6 and €13 per square metre, depending on the location. "We also see growing demand and development potential in this segment in Latvia and Lithuania," Kalviste confirmed.

The aim of the fund is to develop and subsequently sell 100,000 m² of stock-office commercial property, 50% of which will be located in Estonia and the other 50% in Latvia and Lithuania. The fund offers investors the opportunity to participate in the emerging commercial property sector, which is transforming the working environment of small and medium-sized enterprises. The fund's structure combines expertise in the field with good financial transparency. Following the launch of the first development fund, a follow-up fund of €100 million with existing and cash-flow generating stock-office assets will be launched, mainly for professional financial investors.