Along with the recovery of the external market, growth of manufacturing and absorption of EU funds, Latvia showed steep economic growth in 2017. Estimations of real GDP growth for the full-year 2017 has been increased to 4.5% as renewed investment and consumption reinforced the export growth during H2 2017.
The unemployment rate constituted 8.5% as of the end of Q3 2017. Compared to the previous year, the unemployment rate decreased by 1.0 percentage points.
At the beginning of 2018 the total Riga modern office stock amounts to 612,300 sq m showing an increase by ca. 26,000 sq m or 2.8% on an annual basis and ca. 3,950 sq m or 0.1% on a quarterly basis, respectively (taking into account withdrawals of 3,200 sq m from the stock in Q4 2017).
The overall vacancy rate showed a slight decrease by 0.4 pp on an annual basis comprising 3.6% of the total modern Riga office stock.
Prime net rent (including landlord contributions for a standard fit-out) remained unchanged and stood at the level of 16.5 EUR/sq m/month during Q4 2017. Net rents for modern B class offices also remained stable between 8.0-13.5 EUR/sq m/month during the year.
Office market activity is set to continue together with economic growth during 2018. Rent rates remained stable during 2017 and at the beginning of 2018 asking headline rents for large office areas (starting from 3,000 sq m) in new developments currently under construction are starting from € 12.0 up to € 14.0 /sq m/month (excluding service charges, utilities and VAT), depending on the office location.
Q4 2017 was the strongest quarter in 2017 providing the previously mentioned pre-leases in the market. The total take-up in Q4 2017 stood at the level of 17,435 sq m with the average transaction size of 608 sq m.
Demand for modern office space in Riga was largely driven by existing local and international occupiers, however, the interest from newcomers such as SSC’s and BPO’s remained stable in 2017. Several newcomers entered the market, the largest of them were WebHelp (France), Arvato Systems (Germany), and Genpact Latvia.