Entrepreneurs of Tallinn Old Town trying to get rid of ballast

Owners of the gift shop on Viru street in Tallinn old town. Photo: Sander Ilvest

A large share of rent and commercial space of the Tallinn Old Town is for sale since there are no tourists and the entrepreneurs are trying to get rid of excessive burden. It is estimated that there are five times less visitors in the Old Town than before the pandemic and locals do not go there.

One firm to close its doors as the crisis began is the legendary Balthasar garlic restaurant by Town Hall Square. The restaurant owner and chef Sergei Trunov said that they could not reach an agreement over the rent with the landlord and they did not want to keep making loss. They simply left the market to wait for better times.

“We did not go bankrupt, the firm still exists, the Balthasar name has been patented and is waiting for better times to return;” said Trunov, who is now working in the Keila-Joa palace. “Until the situation improves, we do not risk opening anything, especially in the Old Town.”

According to Pindi Kinnisvara real estate firm, some 100 units of commercial space were sold or to be rented in Tallinn Old Town as of early July; most of them used to be cosy cafés, restaurants, souvenir shops or other institutions catering to foreign tourists. Before the corona crisis struck, every much-visited spot had several applicants and entrepreneurs sometimes had to wait for years for a chance to open a business in the Old Town.

While businesses were kept going last autumn by the hope that tourism would return and the shops will reopen, it is now repeated with increasing conviction that there will be a third wave and that people would not hasten to travel. Owners of rental and commercial space are attempting to get rid of ballast, be it rent agreements or restaurants.

“Entrepreneurs cannot stand the pressure,” said Peep Sooman, head of Pindi Kinnisvara. “The locals only go to the Old Town to see the Christmas tree and the tourist-oriented beer gardens cannot make ends meet.”

Number of visitors plummeted

The mass of people which jammed the Old Town until 2019 has decreased greatly. The 700,000 cruise tourists, who spent some 20 euros per person in catering and shops, disappeared in a moment. The Tallinn Airport handled 3.26 million passengers in 2019 and only 835,000 in 2020. It received 136,000 passengers in the first four months of 2021, which is 85 percent less than in 2019.

Thousands of people from Finland and Sweden arrived every day. According to Tallink, they had 9.8 million passengers in 2019, only 3.7 million in 2020 and the 2021 June figure was still 22 percent lower than last year. In other words, June 2021 is worse than the already bad 2020.

Vello Leitham, who keeps a shop of Estonian food and handicrafts in 3 Viru Street knows it well. A counter at the door of his shop shows a sad trend: the number of visitors in 2020 and 2021 is respectively 22 and 11 percent of the number in 2019. The drop of 2021 is greater because January and February of 2020 were normal and June 2021 saw only 45 percent of June 2020.

“What is sad is that our shop, which was visited by some 400,000 people in 2019 and fed small craftsmen and food producers all over Estonia, cannot hold stocks and many of the suppliers have closed down,” Leitham said. “Many people do not understand to the background of this catastrophe that small farmers and craftsmen who supplied shops and restaurants have been brought to their knees.”

According to Leitham, the ones to survive are the establishments which own their commercial space or where the owners live in the building and have something special and touching to offer. “One could see the corona as a purgatory which wipes out parasite businesses and creates fruitful ground for new innovative and interesting entrepreneurs,” he said.

“This is how it goes in principle: all entrepreneurs depend on the landlords and the rent is nearly nonexistent combined with an agreement that the business pays for the utilities,” Leitham said. “The landlords do complain that they have bank loans to pay off or they have made expensive repair. So what? I know a landlord in Pikk Street who regrets that he terminated the lease, hoping to find a new tenant, but now has been paying for the utilities for a year and a half.”

Ever more offers

Broker Alexey Yavnashan of the real estate firm Uus Maa says that rent offers in the Old Town are increasing steadily but there are no takers. The establishments which closed down during the first corona wave last year are still closed and wait for new takers. There are interested parties but they fear a third wave of pandemic and dare not decide.

It is difficult to find new lessees for commercial spaces despite the fact that rent has halved compared with the pre-corona period. But business cannot be done without tourists; local people do not go to the Old Town, they prefer the Noblessner or Telliskivi quarters or walk by the sea.

“It all depends on the landlord, whether he agrees to lower the rent,” Yavnashan said. “Some did not and the tenants had no other option but to leave. The situation is so bad now that lowering the rent no longer helps; it is far too late.”

They are currently offering fixed lease until next spring, expecting to raise it if and when the tourists return.

Commercial space stands empty

Enterprises operating in the Old Town have joined the Old Town Entrepreneurs’ association (VEÜ), which is headed by Leitham and has recommended the city government allow Estonian creative industries enterprises use the empty municipal commercial space.

Leitham described the Old Town business as similar to the bear: it gathers fat throughout the summer, then hibernates through the winter and wakes up in the spring all skinny. “The ones which are skinny this autumn will not see next spring. The ones which are blossoming will keep going,” he said.

Competitors of the Old Town are the shopping centers and centers of attraction like Viru, Noblessner, Telliskivi, Patarei etc. The difference is that these centers choose their businesses. Every business must provide added value to the location. Shady parasite entrepreneurs are not admitted there, Leitham said.

“The end of Viru Street with its hamburger and kebab shops is hardly the attractive and inviting view the local residents, tourists and others would like to see,” he said. VEÜ has recommended establishing the same requirements to entrepreneurs operating in Old Town. Otherwise there will come a day when only the residents will remain in Old Town, the entrepreneurs have left and have been replaced by everything already spreading in other old towns of Europe.

“I remember how an international huge hamburger maker wanted to open their business in Dubrovnik Old Town. Dubrovnik said no. They argued that this was restriction of free enterprise and wanted to appeal to the European Court. Go and appeal but you will never come here, they were told. And they still have not got the permit. VEÜ believes that such principal approach is necessary in the interests of residents as well as entrepreneurs,” Leitham said.

What could save the Old Town?

VEÜ has also recommended that the Old Town should see more coordinated, dignified, witty and organized activities and fun. This cannot rely only on some individuals’ enthusiasm.

In Leitham’s opinion it is necessary to create a marketing unit advertising the Old Town as a cluster of interested enterprises and organizations which would combine the competence and resources necessary for promoting both business and community activities in the Old Town. “We believe that this is the right moment. We should take advantage of a good accident,” he said.

Peep Sooman thinks that the essence of business in the Old Town should change and the local people should be attracted there. He views the Old Town museums as the vanguard of breakthrough.

“How may young schoolchildren have visited the Town Hall Apothecary or the Old Town Festival?” he asked. “They used to be very popular and it is time that the Estonians rediscover the Old Town for themselves.”

“In order to bring locals to the Old Town the city should adjust its parking fees, for example, the first hour could be free,” offered Alexey Yavnashan. “It is otherwise very expensive and people do not want to go to the Old Town by car.”

According to Jüri Lump, deputy head of the Tallinn central district, the city has made deductions on rental space which are in force until the end of August. The city government will then decide whether or not to extend them. In addition, several public events are planned for August.

Despite the present difficulties, Vello Leitham is still optimistic and hopes that visitors and action will return to Old Town.

“We could see what the Old Town looked like last winter. There was sadness but also extraordinary glamour and activity,” he said. “We could play street hockey in Town Hall Square in winter. Now we do it nearly every Thursday evening at Kehrwieder. We provide the sticks, the goals and the ball!”