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Office demand spreading out of Vilnius

  • 2003-10-30
  • By Steven Paulikas
VILNIUS - To say that parts of Vilnius have in the past two years been entirely dedicated to the city's ravenous desire for office space would hardly be an exaggeration.

A skyline accustomed to an unsteady but quaint mixture of baroque edifices and Soviet-era monstrosities is being drastically altered by the addition of sleek markers of modern capitalist prosperity – glass and steel skyscrapers.
According to information compiled by the municipality of Vilnius, in October 2003 the capital had approximately 77,500 square meters of office space. Upon the completion of construction projects on the right bank of the Neris River in early 2005, this number will almost double to 151,800 square meters.
With one massive wave of commercial real estate development already having washed over the capital, market observers are speculating as to whether demand is robust enough to spur further growth of office space in both Vilnius and around the country.
While analysts are shying away from making predictions, the safe money is on moderate, gradual growth accompanied by the forecast increase in national GDP – and only after the current dollop of property is digested by the market.
"Growth is going to continue," says Kjetil Hanssen, director of Moller Real Estate in Vilnius.
Hanssen says that after a one to two year respite, the thirst for office space will resurface. "There is a point in the market when immediate need is met, and we're close to that point," he says.
In contrast to the rash of major construction projects initiated only a short time ago, including the 33-story Europa Tower that will become the largest building in the Baltic states, development authorities believe that new office space will be phased in slowly.
"There will have to be a time when the market readjusts and when more foreign companies enter the market, and then growth will begin again. But the pace of this growth all depends on how fast the economy grows," said Sergei Ovchenikov of Hanner, the development company responsible for Europa.
Officials in city government echo Ovchenikov's sentiment on growth.
"I think the issue is connected to our entrance into the European Union. The stability of EU membership will encourage many companies from abroad to start offices here, and these offices will need space," says Linas Naujokaitis of the Vilnius city department for development.
With experts unanimous on the prospect of eventual expansion of commercial real estate, the largest question facing the industry is twofold, focusing on where the new offices will be built and what they will look like.
Like most other aspects of development in Lithuania, expansion of office space has been disproportionately concentrated in the capital. However, it appears that the country's other larger cities—and especially Kaunas—are about to witness modest growth-spurts as well.
"I see these projects develop about two years before the general public does, and there are some major things coming to Kaunas," says Aage Myhre, a Vilnius-based property developer and architect.
According to Myhre, low-rise projects along the Vilnius-Kaunas highway are afoot and set to be implemented in the short to medium term.
"This has only just started. A few years ago everyone was saying that Klaipeda had become the No.2 city, but this is not going to be true anymore," he said.
Myhre's colleagues agreed. "Without a doubt there will be growth in other cities. It won't be as large as in Vilnius, but as capital flows through the country these cities will have high demand for offices," said Ovchenikov.
Whether in Kaunas, Klaipeda or Vilnius, the design of new buildings will change as quickly as clients' demands. Moreover, the impact these structures have on the aesthetic qualities of the cities in which they are built is becoming a point of contention for many city dwellers.
"These skyscrapers in Vilnius are like putting an aluminum frame around a Rembrandt painting," says Myhre, referring to the stark contrast of the high-rise buildings against the quaintness of Old Town.