This commercial real estate market overview focuses on the situation and trends in Estonia’s office, retail and service, as well as warehouse and production space segments in the first half of 2023.
For each segment, it presents the buildings completed or under construction this year, along with an overview of rental ranges and vacancy levels.

Office Space
The 2023 office market is characterized by a low volume of completed developments.
Due to rising interest rates increasing loan payments and fewer new office completions, rents for both high- and lower-grade office spaces have increased.
A-class office vacancy has risen as tenants have begun relocating to smaller and often newer office spaces, driven by remote work trends and cost-efficiency.
Fear of another surge in energy prices has increased demand for energy-efficient spaces.
Owners of older, less efficient offices are beginning to renovate in response to vacancy concerns, aiming for better energy performance.
Those who choose not to modernize their properties risk facing long-term vacancy unless they reduce rental prices.
In Tallinn, the office real estate market is concentrated in five key zones covering the bulk of A- and B-class spaces: the city center, Pärnu Road, the start of Mustamäe Road, Tehnopol in Mustamäe, and the Ülemiste business district.
Business real estate is increasingly expanding into North Tallinn, including the emerging areas of Noblessner, Kalamaja, and Volta, which are expected to grow significantly over the coming years.

The market is marked by strong competition between city center and suburban areas, as well as between under-construction and newly completed buildings.
As of mid-2023, Tallinn has over 1 million m² of modern office space.

A- and B-class office buildings in Tallinn
(Blue: A-class, Red: B-class; with a minimum commercial area of 2000 m²)

At the beginning of the COVID crisis, the pandemic had not yet significantly affected construction, and over 60,000 m² of new office space was added. However, due to uncertainty caused by the pandemic, only 30,000 m² was completed in 2021. In 2022, the volume of new office space increased to nearly 75,000 m². In 2023, the volume of office space development will be lower than usual, with major projects scheduled for completion in 2024. In the first half of the year, less than 20,000 m² of new office space was completed, and a total of over 40,000 m² is planned to be completed in 2023.

In 2022, due to construction delays on several buildings that were initially planned to be completed in 2021, more than 70,000 m² of office space was added to the market. By the first half of 2023, the major completed projects include the Sektor building and the Liivalaia 9 office building, totaling approximately 7,000 m² of office space. Outside the city center, in the Park Tondi development in Mustamäe, the office building at A.H. Tammsaare 56 was completed, offering 6,500 m² of office space. In its final construction stages is the Koge building on Lootsi Street, which is expected to deliver over 4,000 m² of office space in early H2 2023.

Office buildings to be completed in the second half of 2023 are also primarily located in the city center and adjacent areas. The largest developments planned for completion in 2023 include the Maakri HUB project—originally set to be completed in 2022—which is transforming the former Postimees headquarters (built in the late 1990s) into a modern 17-story office building. Other major completions in 2023 include the Roseni building (9,000 m² of office space) and the Vektor building (approximately 6,000 m²).

Office buildings to be built in 2023:

In Tallinn’s city center, the net rent for A-class office buildings during the first half of 2023 ranged mostly between €17 and €19 per square meter, with premium “Golden Mile” buildings exceeding €20/m². As of mid-year, the vacancy rate stood between 7% and 7.5%. In suburban A-class properties, vacancy rates were similar (7–8%), but rental rates averaged about €4/m² lower. Top buildings in Ülemiste City and new developments in Kalamaja reached nearly the same price levels as city-center A-class offices (around €16–18/m²). The most sought-after properties are those in established business districts or those offering better conditions than central locations—such as more parking, competitive pricing, or room for expansion.

Due to the large volume of developments completed in 2022, B-class buildings saw vacancy rise to 9% by mid-2023—one of the highest levels in recent years. Indexation and rising interest rates have driven up rents for these spaces. However, this may also lead to further increases in vacancy, posing new challenges for landlords. In some cases, B-class rents have reached levels comparable to newer buildings, meaning landlords may need to reduce rents to retain tenants. As of now, typical rents for B-class offices in the city center range from €10–16/m², while in suburban areas they are around €8–10/m², which is €2–4/m² lower than nearby A-class spaces.

Compared to the end of 2022, the vacancy rate in central Tallinn’s A-class office buildings increased by nearly 2%, and by up to 1% in suburban areas. This sharp rise is largely due to the growing popularity of remote work that began during the COVID crisis. Whereas pre-pandemic moves between office spaces were typically driven by company growth and demand for more modern premises, the remote work trend has left many leased spaces partially unused. In an effort to reduce costs, companies have started seeking smaller office spaces—often preferring even newer properties. This shift from larger to smaller premises has contributed to the overall rise in A-class office vacancies.

Retail and Service Spaces

• The release of pension savings from the second pillar and the increase in personal savings have continued to boost retail turnover despite high inflation.
• Current developments are focused on neighborhood stores, mainly around the Tallinn area.
• Existing shopping centers are being gradually renovated and expanded with new stores.
• The fastest growth is in the neighborhood store segment, with several retail chains building new outlets.
• Street-level retail performs best in multifunctional urban districts (Noblessner, Rotermann, Telliskivi).
• With Lidl entering the market, competitors lost market share, impacting the profitability of existing retail chains.
• Shopping center vacancy rates are around 4%.

The retail and service space market in Harju County is strongly centered around the capital and primarily concentrated along major roads leading out of the city, in larger shopping centers. Key roles are played by Ülemiste, Rocca al Mare, and Kristiine centers, as well as Tallinn Department Store and Viru Center. Additionally, a variety of local retail and service spaces are spread across the city. Street-level retail is active in areas like Rotermanni, Telliskivi, and Noblessner, where office, retail, service, and food establishments blend. Similar retail clusters are found along Peterburi Road in Lasnamäe and between the Osten Tor building and Järve Center on Pärnu Road. Likewise, regional clustering by product group is common in large shopping centers.

Tallinn’s largest shopping centers (with at least 5000 m² of leasable commercial space):

In recent years, due to increasing risks and market saturation, the development of large multifunctional shopping centers has been largely abandoned. A major exception is Porto Franco, whose development began back in 2015. However, due to its scale, legal disputes, and a corruption scandal, the project is still not expected to be fully completed by 2023. Kristiine Center’s plan to create a multifunctional business district with apartments and offices reflects a broader trend toward creating integrated urban environments, as already seen in Ülemiste City and emerging in Noblessner, Rotermanni, and Telliskivi districts. Major shopping center development projects within Tallinn are not expected to materialize before 2025. The creation of multifunctional city districts could help mitigate the risks that centers have faced due to declining profitability in entertainment and food services, along with a drop in physical retail demand, which has increased shopping center vacancy rates from near zero to around 5%.

Instead of large centers, the focus in recent years has shifted to developing local and neighborhood stores, with Tallinn’s suburbs—referred to as Greater Tallinn—taking an increasingly active role. The rapid population growth in areas surrounding Tallinn has created a natural need for regional retail services. In 2022, new Prisma stores were opened in Harkujärve village, Maardu, and Saue, and a new Selver store in Tabasalu, in addition to an IKEA store in the new retail hub in Kurna village.

In 2023, a new shopping center of about 20,000 m² is being developed next to IKEA in Kurna, with 6,000 m² already allocated to a Selver grocery store. A new Lidl store will also be completed in Mustamäe, along with the Kadaka Trade Center.

In recent years, the average rental rates in major shopping centers have remained within the range of €10–20/m², although there are significant price variations within individual centers. Due to the COVID-19 pandemic, prices have stabilized, and as of mid-2023, the average vacancy rate stood at around 4–5%.

Smaller retail spaces, such as pharmacies, flower shops, and pet stores, are rented in popular centers at rates ranging from €20–50/m². The highest rents—exceeding €50/m²—are paid by tenants located in high-traffic areas. In major centers, a turnover rent is typically added on top of the base rent, usually amounting to 5–10%.

Pharmacies and flower shops generally pay the highest rents, while anchor tenants typically pay €7–12/m². New spaces for anchor tenants are rented at €10–14/m², while smaller retail units command €20–50/m².

Rental rates for street-access retail spaces are:

In high-traffic areas: €20–40/m² (Golden Mile: €18–25/m²; city center: up to €60/m²)
In suburban areas: €7–15/m²
In less busy areas: stable at €7–15/m² in the city center and €5–10/m² in the suburbs.
Dominant rental price ranges in shopping centers:

Retail and service spaces with street access (business units of 50+ m²):

Warehouse and Production Spaces

• The majority of new developments are driven by demand from the logistics sector as well as retail and wholesale trade.
• Due to the rapid growth of e-commerce, the small share of speculative developments, and the increasing importance of local investment, the warehouse and production space sector has proven to be the most resilient during crises.
• The risk of oversupply is low thanks to short lead times and a high number of pre-lease agreements, although fulfilling large-scale lease demands within short construction timelines remains a challenge.
• The most active development is taking place in the vicinity of Tallinn, with the Kurna Park development expected to further boost the potential of plots along the Tallinn ring road in the near future.

The warehouse and production space market in Estonia is concentrated in Harju County. Within Harjumaa, the most attractive areas are located in and around Tallinn. Preferred inner-city areas include the zone between Mustamäe Road and Kadaka–Laki streets, as well as properties near Peterburi Road. In North Tallinn, warehouse and production spaces are concentrated around the port areas of Kopli and Paljassaare and their surroundings, as well as between the railway and airport in Sõjamäe and the Männiku and Kalmistu roads in Nõmme.

Out-of-town areas tend to have more modern buildings, especially in regions where historical development levels have been lower. Key locations include the surroundings of Tartu Road in Rae municipality up to Jüri borough, where many business parks are situated, as well as the Tänassilma Tech Park along Pärnu Road, and areas along eastbound roads out of Tallinn, such as Vana-Narva Road and Peterburi Road. Outside of these regions, the market is smaller and mainly focused in larger towns like Keila and Paldiski.

Main warehouse and production space clusters in Tallinn and its surroundings:
(1 – Laki-Kadaka area, 2 – Lasnamäe, 3 – Mõigu-Peetri-Jüri, 4 – Tänassilma, 5 – Loo-Maardu)

In recent years, construction activity has been strong, especially in the vicinity of Tallinn, where there is still sufficient undeveloped land and development potential. The most active areas lie along Tartu Road and in the direction of Peterburi Road. Within Tallinn, the most intensive development has taken place in the Laki Street business district on the border of Kristiine and Mustamäe districts, as well as in Lasnamäe (around Peterburi Road and Suur-Sõjamäe Street). The increase in activity is driven by business growth and expansion, along with a desire to move from older and less functional premises to more modern and efficient spaces.

Most of the newly built spaces have been developed for specific tenants or for owner-occupation, as speculative development is more complex due to diverse tenant requirements and is mainly typical for smaller units. As a result of this development activity, nearly 825,000 m² of warehouse and production space has been delivered over the past five years.

In the first half of 2023, approximately 30,000 m² of warehouse space was completed in major industrial zones. The largest completed buildings so far include the new building in Rukki Technology Park (10,000 m²) and the property at Taevavärava tee 6b (7,800 m²).

Major warehouse-production buildings to be completed in 2023:

Rental prices for modern warehouse spaces have mostly risen to around €6.5–7.2/m², though more affordable options at €5.5/m² still exist. Demand is stronger for newer and modern heated spaces located on the outskirts of Tallinn and nearby areas—especially those offering features such as crane access, loading docks, ramps, proper ventilation, and good maneuvering space. In attractive suburban zones, prices range between €6.5–7/m², while smaller warehouse units within Tallinn (under 200 m²) can reach up to €12/m². Older but decent-quality spaces are typically priced between €4.5–5.5/m². Row warehouses (ridalaod) command higher rents—starting at €6.5/m² outside Tallinn, €7.5–9.0/m² within the city, and even over €10/m² in the Kadaka-Laki area.

Vacancy rates for older premises have increased due to company relocations and because many of these older spaces are located in logistically less favorable areas (e.g., Põhja-Tallinn, Kristiine, Nõmme), making them less functional compared to newer industrial zones near the city. In contrast, vacancy for new buildings, including stock-office spaces, remains low—below 5%.

In the stock-office segment, smaller units—often up to 200 m²—are more popular, while larger units around 500 m² see less demand. Location in a high-traffic area is a key factor for both suburban and inner-city developments. The demand for row warehouses (ridalaod) has shifted toward the Tartu Road and Mõigu-Peetri corridor. While inner-city developments have so far reached nearly 100% occupancy upon completion, areas closer to the city outskirts show weaker demand, impacting both occupancy and the pace of new construction.

Vacancy rate and forecast for warehouse and production spaces:

Summary

The commercial real estate market is influenced by various factors, including economic and political conditions, technological advancements, and regulatory changes. In recent years, the market has experienced growth, particularly in the office and retail space sectors, with increasing demand for flexible and sustainable buildings. However, a decline in new development volumes suggests a potential drop in supply in the coming periods. As a result, vacancy rates are expected to decrease even among lower-class commercial properties, while demand for spaces with lower operating costs will grow.

Author: Kristofer Orupõld / Analyst / Uus Maa Headquarters