Sees untapped opportunities in the public sector in the private office rental market

Renting offices of state and municipal institutions in the commercial market is an internationally common practice, which would be recommended to introduce in Latvia as well, encourages the consulting company “Colliers” and the Real Estate Developers’ Alliance (NĪAA).

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It is common for state-owned premises to be used for public administration purposes, which are often not suitable for office needs, and for brand new buildings to be built for institutions, which not only take a long time but also do not provide the flexibility needed today. Meanwhile, the supply of office space by private developers remains unexamined, distorting competition in the market and hindering the growth of real estate developers.

Long-term trends abroad, including in the immediate neighborhood of Lithuania and Estonia, show that more and more public authorities are choosing to rent office space on the commercial market. It provides both a wider choice and often offers employees better and more modern working conditions by choosing higher-class offices. At the same time, choosing to rent office space from private developers rather than build a new, institution-specific building provides incomparably more flexibility and the ability to adapt to changing circumstances, such as offering some workers remotely during a pandemic and more easily reducing or increasing office space.

“Currently, the transformation of office space is associated with changes in office functionality. Flexible work reduces work areas, as employees no longer work in the office five days a week, companies are introducing the principle of shared desks. Modern office space makes it easier and cheaper to adapt office space to current needs, and research shows that to conclude that slightly smaller areas are needed than are currently used, “emphasizes Erik Bergman, Colliers partner and head of the Agency.

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“The offices of countless state and local government institutions in Latvia are located in premises that are not even intended for this purpose or are very outdated and do not provide normal working conditions. Currently, 12,000 people have modern office space under construction in Riga – by renting part of them, state and local government institutions could provide their employees with a modern and high-quality work environment in a short time. European Commission sustainability goals and requirements for public buildings, “says Mārtiņš Vanags, Chairman of the Board of NĪAA.

Buildings are one of the largest sources of energy consumption in the EU, accounting for around 40% of the EU’s total energy consumption and 36% of its carbon dioxide emissions. To reduce overall EU emissions by 55% by 2030, the European Commission has adopted a comprehensive package for Fit for 55, which also sets new targets for buildings, their energy consumption and energy efficiency. Over the next decade, buildings must ensure that 49% of their energy is renewable, and at least 3% of public buildings in the country must be renovated each year (provided that their renovation helps to ensure that near-zero energy building standards are met). The buildings offered on the commercial market meet modern energy efficiency indicators, as evidenced by international certificates such as BREEAM and LEED, so the relocation of public office space to such buildings is a valuable step towards achieving the EU’s objectives.

The Real Estate Developers’ Alliance (NAAA) unites the most important players in the industry in order to achieve sustainable growth of the real estate industry, to represent it together at the state and municipal level, as well as to actualize the role of real estate developers and investors in the Latvian economy.

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