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Estonia, along with the other Baltic States,
is one of the smallest investment markets in
Europe by size, and thus sees relatively low
levels of investment. But like other emerging
markets, we are seeing relatively strong levels
of growth, with the value of investment grade
stock doubling since 2005.
The focus of investment is centred on the capital,
Tallinn, particularly for core office and industrial
assets. The retail landscape is more diversified
across the country, covering a number of secondary
cities, which have proved resilient to the economic
downturn.
Investors are attracted to the strong cash flows and
relatively high yields on offer and expectation of
further compression. Asset transfer deals and share
transfer deals are both common practice. Activity
in the market is limited to private companies, funds
and institutions. 40% of the activity has driven by
domestic investors in 2014, with some growing
interest from Russia. Although there has been activity
from Nordic investors, but their share is falling.
Debt funding is relatively easy to obtain for assets
offering strong income. Interest rates are favourable,
but selectivity is key. Currency risk was eliminated
back in 2011, when Estonia joined the Eurozone.
Market sizing
Estonia
Europe
Invested stock
(Total stock)
EUR 6bn
(EUR 13bn)
EUR 3,335bn
(EUR 8,201bn)
Liquidity ratio
(10y average)
1.6%
n/a
5.6%
(4.6%)
2014 volumes
(10y average)
EUR 0.1bn
n/a
EUR 187bn
(EUR 142bn)
Market pricing – Tallinn (Q4 2014)
Office
Retail
Industrial
Current Yield
7.50%
7.25%
8.75%
Min/Max (10y)
6.00-9.50% 6.00-10.00% 7.00-13.00%
Yield definition
Net initial yield
Source: DTZ Research
Investment activity by source of capital, 2014
Investment activity by asset type, 2014
Source: DTZ Research
Source: DTZ Research
Domestic
Non-European
European
Office
Mixed Use
Retail
Industrial
Other
46%
4%
4%
33%
13%
59%
41%
Estonia
28 Investors Guide to Europe 2015