Old City Harbour to be flooded with office buildings

Photo: promenaadimaja.ee

Developers set to morph wastelands on bank of Admiralty Basin into top notch city centre – in a few years.

Leading Estonian real estate developers are planning to invest a total of almost €200m into lots regarded as most valuable in Tallinn, to create 200,000 square metres of residential and office area.

OÜ Capital Mill has started selling apartments in the 25,000 square metre housing complex to be erected in the wastelands between Admiralty Basin and Tallinn Old Town. These will be houses up to six storeys high, with cafes, services and offices on 4,000 square metres of the lower floors and 120 flats higher up.

«Today, we are in negotiations to enter into building contract; in September-October we wish to send in the excavators,» said Capital Mill’s partner Tanel Samuel. «At one sweep, we will build the entire building complex by the fall of 2016.»

In the eyes of Mr Samuel, buyers of luxury flats in the housing complex costing close to €25m will be empty-nesters wishing to live the fun life in city centre. Even so, one of the houses will be built for families with children, featuring courtyards with playgrounds.

Capital Mill is a commercial real estate developer which recently opened the Navigator office building in Old City Harbour, in Laeva Street. For its developments, foreign capital is involved – also from Russia.

Meanwhile, an international architecture and engineering bureau is giving final touches to another project at Admiralty Basin. «We’d like to start building in 2015,» said sworn lawyer Raul Talts, chief of DeltaMax Group – owner of the near 31,000 square metres of plots. In reality, the lots are held by Hillar Teder, a commercial real estate businessman of international calibre.

«This entire year we have been dealing with the Admiralty project licences and, therefore, the dates are not fixed as yet. Before launching the construction, we want to have the underground parts and the exits-entrances [for vehicles – edit] settled, and that has been delayed doe to change of ownerships of the neighbouring lots,» said Mr Teder.

«As we assumed the project from Skanska, the approach changed. Skanska intended to build cheap and fast, and then to sell expensive. We aim to build and then to rent out.» The Mr Teder-led development will amount to over 150,000 square metres and the investment towers at €120–150m. For the most part, these will be A-class office spaces, but probably a bunch of luxury apartments will come with the package.

«When it comes to yields, the project is not a first priority for me as I can earn more elsewhere. Usually, the volume of my developments starts at 100,000 square metres – which coincides with the Admiralty project,» explained Mr Teder.

«We are currently working at the financing scheme; for that, we are establishing an investment company. Probably, we will be involving Estonian and Finnish investors starting at €5m investments. It may end up with a couple of core investors pouring in a total of 50 percent, with the rest covered by minor investors. We are ready to involve money through stock exchange.»

Urmas Sõõrumaa has also announced intentions to start development of Rotermann Quarter Centre stage two, in near future. «Around where the Rotermann Quarter chimney is standing, we will build 20,000 square metres of residential and commercial area,» stated Mr Sõõrumaa. «The overall concept is the same as with the first stage of Rotermann Quarter where we sell apartments but rent out the commercial spaces.»

Development of 2^nd stage of Rotermann Quarter may cost up to €30m.

While the Promenade housing project developed by Capital Mill rather resembles the Rotermann Quarter environment, according to Ott Kadarik – the architect behind the latter as hired by Mr Sõõrumaa – the commercial quarters under development by Mr Teder may turn out more closed by nature, as the businessman thinks this fits better into Estonian climate.

Comment

Viljar Arakas, head of Eften Capital

I think it remarkable that, 23 years after Estonia’s regained independence, we are at long last opening Tallinn to the sea at Admiralty Basin. Like in Helsinki or Oslo, the Tallinn Old City Marina also is among the most expensive real estate locations of the city.

Probably, the area will be filled up by stages as bringing the entire volume unto the market in one sweep would be very difficult. Even if, considering the logic of construction work, all the foundations of the buildings are built at one time, let’s say, then the houses will still be coming up during several years.

The Tallinn office space market is very thin and, at the moment, prices aren’t rising or falling too much over here. Together with the Admiralty area, Olav Miil’s 20,000 square metre tower of a house will also be completed. Filling up all these spaces will take a long time and the hopes for rentee should initially be set on companies which have outgrown B-class commercial space and are now seeking higher quality and a more prestigious location.