2022 in real estate was full of unexpected changes. None of the fundamentals such as cost of capital, capital availability, vacancy levels, transaction activity, and rental rates were left unaffected. However, 2022 was a record-breaking year for stock-office type of premises, a sub-segment of the industrial & logistics.

To put the year into perspective:

● 18 new Stock-Offices (+28%) with a total GLA of 63,350 sqm (+32% YoY) were added to the market in Tallinn region while ca 44,200 sqm (9 projects) remain under construction.

● Stock-office volume accounts for 12% of total industrial & logistics spaces in Estonia and about 1/3 of industrial premises under construction in Jan’ 23 are new stock-office type buildings.

● The segment was the highest performing of all asset classes enjoying the lowest vacancy rate at 2.7% - a historical low.

● Investors considered the assets attractive as five deals with a total value of EUR 31.4m were closed last year with various stock-office premises. Industrial & logistics segment was a driver of investment volume in Estonia reaching 36% of the total volume (EUR 300 million). Deals with modern stock-offices made up slightly less than one third of total investments in industrial segment.

Rapid growth of e-commerce has been fuelling the development of stock-office premises. The industry has begun to respond to structural changes in the way we are shopping and living by delivering modern and more flexible and cost-efficient properties.

Compared to the old-fashioned production and warehouse premises that can mainly be used for storage purposes, stock-office type of facilities are perfect for efficiency oriented entrepreneurs, especially for light production, and e-commerce related companies. Therefore, it is not surprising that the market is thirsty for new flexible commercial premises.

It is expected that business environment in 2023 will be even more challenging, but e-commerce will continuously serve as a tailwind for the logistics and industrial warehouse and distribution properties. As e-commerce grows, so does the need for new innovative warehouses and industrial spaces.