Urban Concept for Klaipėda FEZ by DO ARCHITECTS

Project team DO architects Gilma Teodora Gylytė Algimantas Neniškis Mindaugas Kunevičius Karolina Čiplytė Domantas Baltrūnas

Project Leader Urban Designer Architect Architect Architect

Newsec Mindaugas Kulbokas Goda Pagojūtė Gintaras Toločka

Head of Reseach and Analysis, Baltics Analyst Analyst

Consultants Audrius Savickas Marius Ščerbinskas Mike Biddulph Dalia Sirutienė

Marketing,Strategy Labs Manufacturing Start Up advisor Self-Generative Design Methodology in Urban Design, advisor Landscape architect

Klaipėda FEZ Raimondas Bakas Eimantas Kiudulas Agnė Selemonaitė Vaidas Vėlykis

Pilies str.16, LT-01403, Vilnius, Lithuania 00 370 670 14119 gilma.gylyte@doarchitects.lt www.doarchitects.lt

Gediminas av.20, LT-01103, Vilnius, Lithuania 00 370 652 10556 m.kulbokas@newsec.lt www.newsec.lt

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Preface The Industrial Park of Tomorrow

We live in a time where we are presented with a constant load of information, often making it difficult to distinguish between what is valuable and what is not. Therefore, identifying the niche market in an honest and innovative way is the key element in success today. It is important to attract investors who share the same values that will contribute to building a strong reputation. Companies are created and run by people - from the CEO’s and management right down to the cleaners and workers - therefore the highest priority is to foster a people-focused culture and develop an inspiring and uplifting workplace. The point of difference at FEZ is to create an environment that shifts its focus from companies to their people - this is the path to shared success. This concept was developed in close dialogue with the FEZ team, with input from existing companies and considering the current needs of the city. Klaipėda City Municipality, Klaipėda Science and Technology Park, Philip Morris Lietuva and CEOs of international companies have all influenced the direction of the development plan for the territory. DO architects, together with Newsec, have created a lasting urban concept for the future development of FEZ, based on this direction. I strongly believe that this new course will allow FEZ to become a unique and notable place to be. Gilma Teodora Gylytė, architect

1.0 Introduction 1.1 1.2 1.3 1.4 1.5 1.6

Klaipėda..........................................................................................10 Market Preface...............................................................................12 Investing in Klaipėda.......................................................................13 Klaipėda FEZ Index.........................................................................14 Klaipėda FEZ Investors...................................................................16 Project Objectives...........................................................................18

2.0 Urban Concept

2.1 Values..........................................................................................................24 2.2 Design..........................................................................................................26

3.0 Territory Planning 3.1 3.2 3.3 3.4 6

Territory Zoning...............................................................................24 Transportation.................................................................................36 Facilities..........................................................................................38 Public Spaces.................................................................................40 Urban Concept For Klaipėda FEZ 2015

4.0 New Architectural and Spatial Quality

4.1 PramonÄ&#x2014;s street.............................................................................48 4.2 Central Spot...................................................................................50 4.3 Pop Up Hub....................................................................................52 4.4 Manufacturing Hub.........................................................................56 4.5 Landmark Building with Main Plaza..................................................60 4.6 Industrial Buildings and Warehouses...............................................62 4.7 KlaipÄ&#x2014;da Business Park (KVP)............................ ..........................63 4.8 Shopping Centre and Offices...........................................................64 4.9 Kindergarten...................................................................................65 4.10 Recreational Stops..........................................................................66 4.11 Bus Stops........................................................................................67 4.12 Lypkiai Geothermal Baths................................................................68 4.13 Signs..............................................................................................................70

5.0 Spreading the Message

5.1 Events.............................................................................................74 5.2 Temporary Land Use......................................................................76 5.3 FEZ Symbol....................................................................................78

6.0 Development Stages

6.1 Stages..........................,..................................................................82 6.2 Short Term.....................................................................................84 6.3 Medium Term.................................................................................86 6.4 Long Term......................................................................................88 6.5 New Development Buildings Data..................................................90

7.0 Market Review 7.1 7.2 7.3 7.4 7.5

Economic Outlook..........................................................................96 Investment Market .......................................................................100 Industrial Market...........................................................................104 Office Market................................................................................106 Retail Market................................................................................108 7

1.0 Introduction

Harbours in Baltic Sea

Connections

Latvia

Klaipėda

Belarus Container train from Klaipėda to: Russia 54 hours Ukraine 55 hours China 360 hours 10

Russia

Vilnius

Poland Urban Concept For Klaipėda FEZ 2015

1.1 Klaipėda Klaipeda is the third biggest city in Lithuania located on the coalescence of the Curonian Lagoon and The Baltic Sea, 311 km North West from the Capital Vilnius. Total area of the city – 98 sq. km. History of Klaipeda starts in 1252. Teutonic Knights built the castle of Memelburg at the mouth of the Dane River. Memelburg gave birth to Klaipeda City. Klaipeda became the centre of Kuršas diocese. It is an ice-free port with favourable geographical position (55o43’ North latitude, 21o07’ East longitude) on the coast of the Baltic Sea and Curonian Lagoon, within close distance to other Baltic sea ports: Kaliningrad (Russia) and Riga (Latvia). The Port of Klaipeda is the principal ice-free port on the eastern coast of the Baltic Sea. It is the most important Lithuanian transportation hub, connecting sea, land and railway routes from East to West. Klaipeda is a multipurpose, universal, deep-water port. Many big stevedoring companies, ship-repair and shipbuilding yards operate within the port and all marine business and cargo handling services are being rendered. Annual events include Klaipeda Music Spring, the Klaipeda Castle Jazz Festival, Museum Nights, the International Festival of Street Theatres, the International Short Film Festival, and the Klaipeda Sea Festival, among others.

1.0 Introduction

1.2 Market Preface

12 %

Klaipėda economy Klaipeda county’s GDP reached 4,18 billion EUR in 2013 and accounted to 12,1% of the country’s total GDP. GDP per capita in Klaipeda was 12,7 thousand EUR. Most of the employed population in Klaipeda county worked in service (105,3 thousand) and industry fields (27,6 thousand). The unemployment rate in Klaipeda County in 2013 stood at 7,4% and was by 1,7 percentage points lower than in 2012. The average monthly gross salary in Klaipeda in 2013 was 685 EUR and increased by 26 EUR over the year.

Share of GDP, % (Source: Statistics Lithuania)

Gross earnings in cities, % (Source: Statistics Lithuania)

800 700 600 500 400 300 200 100 0

Urban Concept For Klaipėda FEZ 2015

Vilnius

Utena

Telšiai

Tauragė

Šiauliai

Panevėžys

Marijampolė

Klaipėda

Kaunas

Vilnius

Utena

Telšiai

Tauragė

Marijampolė

Klaipėda

Kaunas

Lithuania

Alytus

Šiauliai

Panevėžys

7,4%

Alytus

Lithuania

6 85 EUR

Unemployment rate in counties, % (Source: Statistics Lithuania)

1.3 Investing in Klaipėda Lithuania is one of the fastest growing economies in the EU with GDP growth rate varying form 2,9% to 5,9% in the period of 2011-2014. 3,4% GDP growth is expected in 2015. Lithuania joined euro zone on January 1st 2015. 11th place globally for 2015 for the ease of starting a business in the World Bank’s Doing Business Report. FDI in Klaipeda region: 962 million EUR in 2013, 9,1% growth 2008-2012. Major industry sectors: ship building & repair; chemicals & plastics; logistics & warehousing; wood processing; food, beverages & tobacco. In 2014, Invest Lithuania attracted a record number of foreign investors – 29 foreign companies decided to establish or develop businesses in Lithuania, and the combined number of new job places created was nearly 2.000. The largest proportion of investment projects (41%) were in the manufacturing sector. Nearly half of the companies attracted to Lithuania chose to set up outside Vilnius. FDI projects in Klaipeda county by sectors in 2013 (Source: Statistics Lithuania)

Top 5 educational programmes (Source: Invest Lithuania)

14%

17% 49%

10%

Manufacturing Transportation and storage Mining and quarrying Administrative and support service activities Construction Other

17%

27%

41%

13% 19%

FDI projects in Klaipeda county by countries in 2013 (Source: Statistics Lithuania)

15%

21%

Business & administration Social services & healthcare Engineering Social & behavioural Transportation services Other

15%

9% 9%

Cyprus Denmark Poland Switzerland Germany Other countries 13

1.0 Introduction

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

1.4 KlaipÄ&#x2014;da FEZ Index The KlaipÄ&#x2014;da FEZ is one of the first and most effectively managed free economic zones in the region according to the number of investments attracted and jobs created. Within its 412 ha area, companies are provided with specific preferential economic and legal conditions for their production and warehousing operations. An engineering infrastructure has been created and continuously developed in the area in which more than 21.5 million EUR has been invested up to date from the European Union, national and private funds. Area: 412 ha Officially opened: 2002 Area fully prepared for bussines activities: 260 ha FDI economic zone ranking: 5th place (2010) Current activities: Industrial real estate development, logistics and warehousing, production of plastic packaging and plastic pellets (PET), manufacturing of electronic devices, manufacturing of steel structures, metal processing, manufacturing of architectural glass, production of food packaging, processing of fish and its products, biodiesel production, electricity production from renewable sources, etc.

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1.0 Introduction

Baltijos mėsos grupės logistika

Urban Concept For Klaipėda FEZ 2015

1.5 Klaipėda FEZ Investors

Pramonės energija

1.0 Introduction

1.5 Project Objectives Clear FEZ Identity

FEZ has a huge potential to form the image of Klaipėda. The territory is situated on a major highway junction, so it’s the first thing you encounter when entering the city. FEZ has a big responsibility to develop a strong urban face and become a great landmark of Klaipėda. The area should adopt the eco-friendly values of a sustainable seaport city and inspire its citizens to do the same. 18

Urban Concept For Klaipėda FEZ 2015

Integration to the city

FEZ’s proximity to the centre of Klaipėda and the port facilitates its potential to become an active part of the city. A direct integration to the transport network, including public transport and bicycle routes, would ease accessibility for employees and visitors. A strong participation in city life and an active presence in social media would develop a good reputation and generate positive publicity and feedback. Cooperation and collaboration with universities, schools and colleges would strengthen the relationship between education and industry, a social investment in the future of business. This should be a place were both workers and visitors can visit by bike to engage with industry in a positive way.

Territory zoning

Such a big land plot inside the city should have its own classification and district system. In order to develop fluently all the territory should have clear vision and organization.

Pioneering niche and additional services

While FEZ must develop its own specific supporting and pioneering niche, attracting diverse activities is the key to successful territory planning. Introducing new functions, such as office or other commercial buildings, or leisure and entertainment facilities based on the needs of the city, would bring an added level of quality to the territory. Smaller scale supporting facilities and amenities should also emerge, such as a day care centre, cafes, conference halls and others, in order to activate the area and cultivate a healthy social sustainability.

Top working environment

Although multifunction is the key to successful territory planning, FEZ has to find its own supporting specific and pioneering niche. Beyond that, introducing new functions like offices or commercial buildings to the territory, perhaps leisure and entertainment according to the city needs would give to the territory another quality. Above all the smaller scale facilities and amenities should appear – day care center, café, conference hall and others, to revive the life of the area and to improve its own eco system. 19

2.0 Urban Concept

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

2.0 Urban Concept

2.1 Values Inspiring place to be

Given the large and scattered nature of the territory people working at FEZ are unlikely to venture further than the borders of their own companies. FEZ needs to build its own community that strengthens loyalty and promotes motivation. What gathers people? The answer is basic needs, such as food, shared interest and sports. Introducing a dense concentration of cafes, restaurants, meeting rooms, day care centres and sporting facilities will turn FEZ into an awesome environment in which to work. 24

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Seaport identity

The territory of FEZ is unique considering its location within the seaport city – only 5km from the harbour. Port cities have a particular maritime spirit and feature very specific objects – ships, containers, harbour cranes, docks, wind, piers and beaches. FEZ should embrace and accentuate this distinct character and become an exclusive industrial park with a unique maritime flavour.

Start-Up vibe

A start-up culture should be encouraged and supported to provide some acceleration and drive to a steady FEZ eco system. A start-up manufacturing community would create an inspiring atmosphere that could bring significant results and attract new companies and investments. Knowledge to equipment changing and similar projects could be fostered in FEZ tradition – an open platform to create something new and different.

FEZ forefront and landmark

It is crucial to form a face along the FEZ frontage to the main highway to Vilnius. This requires the removal of a segment of overhead power line that currently crosses the area. The new perimeter should portray a significant architectural quality that engages people as they pass, becoming a landmark and signature of Klaipėda. Functions like office complexes, highrise headquarters and shopping centres should appear here.

Bicycle connections

Good transport connections play an integral part in the success of a development. Bikes are a perfectly suited mode of transportation for FEZ. Grab a bike from a bus stop and ride directly to you workplace, perhaps stopping by a boulangerie for a coffee or breakfast.

Together with the city

All kinds of people – from students to researchers and scholars and ordinary citizens – should be welcome in FEZ. Events, such as festivals and open days, specific affairs and business cases should be held here to ensure FEZ is open minded, progressive and wanted. 25

2.0 Urban Concept

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

View towards new KlaipÄ&#x2014;da FEZ forefront from Vilnius highway

2.0 Urban Concept

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Looking to new manufacturing hub from PramonÄ&#x2014;s street

2.0 Urban Concept

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Perspective view of PramonÄ&#x2014;s street

3.0 Territory Planning

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

3.1 Territory Zoning

BACK YARD

BUILDING

REPRESENTATIVE ZONE

Zoning of the territory stipulates that smaller plots are located in the territory centres, while larger plots for more significant and heavy industry should be located further out. Certain defined principles should be followed to ensure unity and maintain order within the territory.

PARKING

Land plot organization

3.0 Territory Planning

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

3.2 Transportation The main entrance into the territory from the major national highway is via the main PramonÄ&#x2014;s Street. Private and public transport, bicycle and pedestrian coexist side by side in this arterial road. Two railway stations are designed on the western side of the territory.

3.0 Territory Planning

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

3.3 Facilities Additional functions and facilities are necessary to maintain a healthy FEZ community. Most of these functions concentrate along the main plaza and workshops at the front of the territory, while others emerge along Lypkiai Road.

3.0 Territory Planning

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

3.4 Public Spaces The main axis in FEZ is a green spine that connects all of the public spaces in the territory. A cycling track introduces new and unique types of spaces â&#x20AC;&#x201C; recreational bike stops, workshop platforms and viewing areas from which you can overlook the various manufacturing processes taking place around the area, as well as discover the range of sporting facilities that exist in FEZ.

3.0 Territory Planning

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

3.5 Landscape PramonÄ&#x2014;s street is redesigned to become a green boulevard, defined by the beach grasses, pines and Baltic birches that will line its length. Vegetation will form a vibrant and northern country atmosphere. Trees are also introduced on the plot boundaries to structure the overall landscape and urban arrangement.

3.0 Territory Planning

P P B11

B10

B12

PRAMONĖS ST.

B8 INDUSTRY / LOGISTICS

P INDUSTRY / LOGISTICS

INDUSTRY / LOGISTICS

B9 .

VE VERSLO ST.

INDUSTRY / LOGISTICS

METALO ST.

PRAMONĖS ST.

Urban Concept For Klaipėda FEZ 2015

METALO ST.

3.6 Territory Centre

Explication

INDUST RY / LOGIS TICS

INDUST R LOGISTI Y / CS

INDUSTRY / LOGISTICS

4.0 New Architectural & Spatial Quality

1. Main road 2. Beach grass land 3. Bicycle and pedestrian path 4. Grass land 5. Company signature 6. Entrance to companies territory

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

4.1 PramonÄ&#x2014;s street The central axis (01) of the territory is the major traffic route for trucks, cars and bikes (03), as well as a significant public open space in the territory. The thoroughfare is envisaged to become a vibrant and busy street that people positively associate with FEZ. The hard surfaces and movement of the road will be softened by the European Marram Beach grasses (04) and pine trees (02) planted on both sides. Wind from the passing traffic will rustle the grasses as if they were swaying in the dunes along the beach. Paths will be located behind the vegetation so that the cyclists and pedestrians can pass directly along the building facade or fence covered with greenery. All of the main facades with public functions are oriented towards the main street. Terraces, workshop platforms, a football pitch, tennis court and bus stops with integrated bike stands are spread along the length of the thoroughfare.

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4.0 New Architectural & Spatial Quality

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

4.2 Central Spot This is a central gathering place for meetings and appointments, lunches and simply hanging out. It is located at the entrance to the territory and visible from the highway so anyone passing by can always see and be tempted by whatâ&#x20AC;&#x2122;s going on. This is where the buzz begins, so people should be invited and feel comfortable here from the very start. The FEZ office is located here, surrounded by various other functions - meeting rooms, conference halls, offices for start-ups and bakery cafes all contribute to the vibrancy of the place. Bigger spaces are reserved for creative workshops and manufacturers that enhance the inventive spirit and atmosphere.

4.0 New Architectural & Spatial Quality

4.3 Pop Up Hub

Modular construction designed for offices, public functions (cafĂŠ, meetings) and workshops. Minimal module 5.9 x 2.35 x 2.4, 13,87 sq.m. for offices and public function. Maximal module 17.7 x 9.4 x 4.8, 166,38 sq.m. for workshps and manufacturing.

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

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Materials (01) Profiled metal wall cladding (02) Polycarbonate (03) Sliding metal doors (04) Wood terrace 01

4.0 New Architectural & Spatial Quality

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Pop Up Hub front view

4.0 New Architectural & Spatial Quality

4.4 Manufacturing Hub

A vintage industrial aura with a Scandinavian twist provides a comfortable workshop area on the ground floor and a mezzanine office.

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

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Materials (01) Brick facade (02) External concrete platform (03) Large grated windows 01

4.0 New Architectural & Spatial Quality

Manufacturing hub. Going high-tech The idea is to create a space where design can lead to manufacturing and the manufacturing can happen on-site. The lab will serve as an incubator space for designers, engineers, entrepreneurs and manufacturers to interact with the technology and with each other. Worldwide known manufacturing labs like FAB LAB or Brooklyn Navy Yard are great examples for successful manufacturing hub. Equipment & Machinery Access & Education

Computer & Software

3D Printer

Electronics LAB

Laser Cutter

Various Materials

CNC Router

Hand Tools

Vynyl Cutter

Sewing Machines

Manufacturing startuper in Klaipėda > The unique prototype of electric actuator, that will be implemented and used in the manufacture of electric buses is developed from the scratch in Klaipėda, Lithuania. JCS “Vėjo projektai” is the company funded by Lithuanian and German capital. The company manufactures innovative and renewable energy powered public transport systems for the international market. 58

Urban Concept For Klaipėda FEZ 2015

4.0 New Architectural & Spatial Quality

4.5 Landmark Building with Main Plaza

Extraordinary architectural quality office building incorporates terraced plinth for public uses. Central node connecting all representative and public functions.

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

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4.0 New Architectural & Spatial Quality

4.6 Industrial Buildings and Warehouses Buildings constructed by individual companies according to their brand guidelines should integrate FEZ architectural recommendations in order to ensure overall continuity and order in the territory.

Materials and References (01) Colors used in facades (02) Profiled metal wall cladding (03) FEZ design numbering (04) Hedge along facade 01 02 03 04

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

4.7 KlaipÄ&#x2014;da Business Park (KVP)

An upgrade of the facades, numbering and site plan brings a Scandinavian quality to the centre.

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Materials & References (01) Colors for repainting facades (03) FEZ design numbering (05) Backlit annex (06) Sport facilities (07) Wooden fence grid for outside storages 06 07

4.0 New Architectural & Spatial Quality

4.8 Shopping Centre and Offices

A shopping mall on the ground floor supports three office buildings above with ample parking in front.

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Urban Concept For KlaipÄ&#x2014;da FEZ 2015

4.9 Kindergarten

Designed as an annex to the existing SME business centre, the kindergarten should convey a fresh and colourful architectural expression.

Hereâ&#x20AC;&#x2122;s my kid!

Materials & references (01, 02) Polycarbonate internal partitions (03) Green courtyard 01

4.0 New Architectural & Spatial Quality

4.10 Recreational Stops Islands along FEZ waters for relaxation and lunch.

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References (01) Wild Flowers along the road (02,03) Elevated resting islands with lunch table 01

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

4.11 Bus Stop Designed with an integrated bicycle shelter, the bus stop provides seating for groups and bike stands.

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References (01) FEZ bicycle system (02) Baltic Birch square (03) Light Bus stop 01

4.0 New Architectural & Spatial Quality

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

B13

4.12 Lypkiai Geothermal Baths

Research studies undertaken by the KlaipÄ&#x2014;da Science and Technology Park show that FEZ territory is an ideal place for a geothermal pool complex. Lypkiai geothermal baths could emerge near the former Lypkiai Manor and become a major attraction point for its natural location among the trees and hills of the area.

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References (01) Industrial swimming pool architecture (02,03,04) surrounded in contrast by Lypkiai Garden greenery creates execptional experience to fully recreate your energy. 02 03 04

4.0 New Architectural & Spatial Quality

4.13 SIgns Big scaled FEZ logo in the front of the territory

Fez logo is placed straigth to the entrance on the main entrance to the territory. Logo must be bold and bright.

Big scaled territory map

Territory map is located in the central spot. All arivals should be able to find their destination here. Bold and bright design.

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Crossroad signs with arrows

Wayfinding arrows are placed in the crossroads to lead the guest to his destination. Big scaled and bold design.

Company name sign near the entrance

PramonÄ&#x2014;s st. The form of the signature should be rectangular, bold and simple design. Frame could be made of anodized dark metal and interior of the signage could be made of milky organic glass. Numbering of the street should be drawn on the facade in bold numbers.

5.0 Spreading the Message

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

5.1 Events Public events are necessary for FEZ to generate publicity, build loyalty and attract positive reviews. All sorts of events are encourages in the territory of FEZ, some possibilities include: Street Events FEZ marathon (02) Racing (motorcycle, Porche car, robot, aeroplane, etc.); Fairs (craft fairs, parades, martial arts demonstrations, etc.); Open Air Events Cooperation with existing festivals (KlaipÄ&#x2014;da Jazz concerts, KlaipÄ&#x2014;da Sea Festival, etc.); Outdoor concerts (03) Outdoor cinema (01) Open Days Open factory day (04) Innovation and tech camps University + company workshops

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5.0 Spreading the Message

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

5.2 Temporary Land Use Unused plots of land should be utilised. Temporary farming improves the appearance of the area (04), especial with field flowers, without a major need for maintenance. By considering the phased development of the territory beginning along PramonÄ&#x2014;s Street, it could be sensible to lease plots away from this area for agricultural needs. Various crops could be cultivated â&#x20AC;&#x201C; rapeseed (02) (biofuel), flax, tulips (03), sunflowers (Biofuel), hemp, miscanthus (biomass), etc. In the grasslands and meadows flocks of sheep ( 01) could be brought.

11ha

22 ha

10 ha

50 ha 40 ha

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5.0 Spreading the Message

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

5.3 FEZ Symbol Everyone needs a hero to look up to, a significant character to relate to. A broccoli would literally appear on the highest peak in the territory, welcoming arrivals and engaging them with smiles and questions. FEZ needs to develop this friendly atmosphere of curiosity. The giant broccoli on the tallest chimney is a symbol of growth, freshness and courage, the values that align with FEZ.

6.0 Development Stages

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

6.1 Stages The project is planned in three stages - short term (2-5 years), medium term (5-10 years) and long term (10+ years). The first stage is an opportunity to build publicity and spread the concept and planned changes among the community. In this stage FEZ should establish itself as an active and visible player in KlaipÄ&#x2014;da by organising events, engaging in dialogue with start-ups and promoting the necessity for it to become a part of the city. The other priority in this stage is the improvement of working conditions for employees by adding basic supporting facilities such as a kindergarten and cafe and by introducing a bike share system and forming comfortable public spaces. Enhancing the working environment is critical in fostering loyalty and motivation in people. The second stage begins with the removal of the overhead power line, which is the first step in the realisation of the overall vision and development of FEZ. Removing the power line is a bold statement signifying the beginning of change, advancement and progress.

6.0 Development Stages

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Explication:

6.2 Short Term

Implemented in first stage (sorted not by order)

6.0 Development Stages

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Explication:

6.3 MediumTerm

Implemented in second stage (sorted not by order)

6.0 Development Stages

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Explication:

6.4 Long Term

Implemented in third stage (sorted not by order)

6.0 Development Stages

NEW DEVELOPMENT DATA: BUILDINGS 2015 02 16 Building no.

Stage*

Area /floor No. of Total area (m2) (m2) floors

Pop Up Hub

3000

1500 1000

2 -

Landmark Building with Main Plaza

12000-24000

600

20-40

4000

Kindergarten

800

1 0

FEZ incubator (warehouse)

7000

Manufacturing Hub

9000

7000 2000

1 1

Manufacturing Hub

9000

7000 2000

1 1

Shopping Centre & Offices

21000

6000 1500

1 10

Multistory Parking

9500

1900

Offices

2400

800

Offices

2400

800

B10

Multipurpose Building

6000-10000

2000

3-5

B11

Multipurpose Building

6000-10000

2000

3-5

B12

Multipurpose Building

6000-10000

2000

3-5

B13

Geothermal Baths

1000

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

6.5 New Development Building Data Functions

Remarks

Workshop hub Public space Small Offices

Temporary building (eg. Containers) Infopoint / project presentation space

FEZ office Offices Conference Centre Hotel Main Plaza

Landmark building, FEZ face, vertical dominant Underground parking High architectural-spatial quality

Kindergarten Courtyard

For children of FEZ employees

Christmas tree, main events, fairs, community meeting point.

FEZ incubator (warehouse) Already have project Manufacturing hub Offices

Multipurpose space: workshops, showrooms, docks

Manufacturing hub Offices

Multipurpose space: workshops, showrooms, docks

Shopping centre Offices / hotel (?) Roof terrace

3 separate volumes, 500 m2 per floor each

Car parking

Multistory

Offices

On the top of the existing building

Offices

On the top of the existing building

Multipurpose Multipurpose Multipurpose Geothermal baths

Geothermal water for SPA from â&#x20AC;&#x17E;Geotermaâ&#x20AC;&#x153; 91

6.0 Development Stages

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Cycling along KlaipÄ&#x2014;da FEZ waters

7.0 Market Review

7.1 Economic Outlook Lithuania became a full member of the European Economic and Monetary Union on the 1st of January 2015. Entering the Eurozone ensured deeper integration into the EU and granted more political security. The euro is more than just a currency to Lithuania. The membership of the euro area is a clear message to the EU, third countries and the world - a precondition for more intensive international trade, growth of investment flows, along with increased economic activity in the country and income growth opportunities. Euro stays as assumption to lower country credit risk resulting in lower interest rates to the state and to the private sector.

GPD growth remains highest in the Baltics

The Baltic States is a region with Lithuania being the largest of its economy. In spite of geopolitical uncertainty and difficulties in Eurozone, in 2014 the gross domestic product of Lithuania increased by 2.9%. Compared to the growth observed in the first three quarters of 2014, the GDP growth rate in the fourth quarter was slower, due to poorer performance results of wholesale and retail trade, transportation and storage, accommodation and food service companies. Construction and industry segments mainly caused the growth in GDP. This shows that the country’s economy remains fuelled by the increase in domestic demand. Expectations for further development remains positive and based on Newsec forecasts, GDP is expected to increase by 3.2% in 2015 and by 3.0% in 2016.

Exports have withstood the test of challenges

In 2014, exports of goods amounted to 24 billion EUR, imports – 27 billion EUR. Compared to 2013, exports decreased by 0.8%, while imports increased by 1%. The decrease in exports was influenced by a decrease in exports of petroleum products and ground vehicles. In 2014, Lithuania mainly exported to Russia, Latvia, Estonia, Poland and Germany. Goods of Lithuanian origin were mainly exported to the EU (Germany, Latvia, the Netherlands, and Poland) with almost 70% of total exports of goods of Lithuanian origin. Lithuania managed to redirect exports to new markets and avoid drastic decline in export volume, associated with the impact of the Russian embargo.

Decline in unemployment rate

In 2014, the unemployment rate stood at 10.6% and was by 1.2 p.p. lower than in 2013. The number of persons employed totaled to 1.32 million, the number of unemployed - to 160 thousand. Over 2014, the number of persons employed increased by 26,200 (2%). Newsec forecasts that the trend will continue and that in two years the level of average annual unemployment rate in the country will fall down to a single digit. During 2015 unemployment rate is expected to fall below 10% mark and reach 9.6% in 2016.

Lowest inflation through the decade

Based on HICP, Lithuania’s average annual inflation in 2014 was 0.2%. It was by 1 p.p. lower than in 2013 and by 0.4 p.p. lower compared to the European Union rate. In 2014, prices regulated by State and municipal authorities dropped by 2.1%, while market prices increased by 0.1%. With the adoption of the euro, inflation is expected to rise to 1.5% in 2015, mainly because of the prices being rounded up and because of the anticipation of higher wages.

Urban Concept For Klaipėda FEZ 2015

Wages will grow futher

Domestic consumption is expected to maintain its positive trend; however, the increasing employment, salaries and growing expectations will affect it. In 2014, compared to 2013, average monthly gross wages in the whole economy, including individual enterprises, grew by 4.6%, and totaled to 676 EUR. Salaries in Lithuania are expected to grow due to continuous decrease in unemployment rate and improving business results of the companies. During the first nine months of 2014, Lithuaniaâ&#x20AC;&#x2122;s enterprises earned 2.7 billion EUR of pre-tax profit, which is 23% more than during the same period in 2013. The results show that the profits were growing twice as fast as personnel costs â&#x20AC;&#x201C; by 22 and 11% respectively, proving that there is more room for wages to grow. Increasing number of international companies establishing their branches in Lithuania set a higher level of wages - approximately 37% higher than country average.

FDI

In Q1-Q3 2014, the foreign direct investment (FDI) flow in Lithuania was positive and amounted to 450 million EUR. The largest increase was observed in FDI from Germany, the Netherlands, and Sweden, while the largest investments were made in wholesale and retail trade, financial and insurance activities. Based on the data of 30 September 2014, the largest investment in Lithuania was made by Swedish (25.6% of the total FDI), Dutch (10.4%), German (9.3%), Norwegian (6.6%), Estonian (5.9%) and Finnish (5.5%) investors.

Impact on real estate

After several volatile years Lithuaniaâ&#x20AC;&#x2122;s real estate market have finally stabilized. Growing demand has encouraged developers to start new significant commercial and residential projects. Improvement in retail turnovers stimulated the development of logistics and retail projects, furthermore, activity on previously frozen projects resumed. Healthy GDP growth levels, coupled with decreasing unemployment, are likely to lead to higher consumption and demand, lower vacancy rates and higher rents on the property.

7.0 Market Review

Percent 20

Economic Indicators I Lithuania (Source: Statistics Lithuania, Newsec)

Percent 10 20 100 -10 0 -20 -10

2007

2008

2009

2010

2011

2012

2013

GDP (% growth, fixed prices)

-20 2007

2008

2009

2010

2014E

2015E

2016E

Employment (yearly change %)

2011

2012

2013

GDP (% growth, fixed prices)

2014E

2015E

2016E

Employment (yearly change %)

Source: Statistics Lithuania, Newsec Source: Statistics Lithuania, Newsec Percent

Inflation and Private Consumption I Lithuania (Source: Statistics Lithuania, European Commmission, Newsec)

15 Percent 10 15 5 100 5 -5 0 -10 -5 -15 -10 -20 -15

2007

2008

2009

2010

2011

2012

2013

2014E

2015E

2016E

-20 Inflation (yearly 2010 average %) 2008 2009 2011

2007

consumption growth) 2016E 2012Private 2013 2014E (%2015E

Inflation (yearly average %) Private consumption (% growth) Source: Statistics Lithuania, European Commission, Newsec

Source: YearlyStatistics change, Lithuania, European Commission, Newsec

Retail Trade I Lithuania (Source: Statistics Lithuania, Newsec)

percent 40 30 20 10 0 -10 -20 -30 2007

2008

2009

Trade, excl. motor vehicles

2010

2011

2012

Food and beverages

2013

2014E

Clothing and footwear

Source: Statistics Lithuania, Newsec

mEUR 14.000 12.000

10.000 8.000 6.000 4.000 2.000 0 2007

2008

2009

2010

2011

FDI, million EUR

Source: Statistics Lithuania, Newsec

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

2012 Growth, %

2013

Percent 30 25 20 15 10 5 0 -5 -10 -15 2014E

Trade, excl. motor vehicles

Food and beverages

Clothing and footwear

Source: Statistics Lithuania, Newsec

Foreign Direct Investments I Lithuania (Source: Statistics Lithuania, Newsec)

mEUR 14.000 12.000

10.000 8.000 6.000 4.000 2.000 0 2007

2008

2009

2010

2011

FDI, million EUR

2012

2013

Percent 30 25 20 15 10 5 0 -5 -10 -15 2014E

Growth, %

Source: Statistics Lithuania, Newsec

Exports and Imports I Lithuania (Source: Statistics Lithuania, Newsec)

mEUR mEUR 30.000 30.000 25.000 25.000 20.000 20.000

15.000 15.000 10.000 10.000 5.000 5.000 0 0

2007 2008 2007Exports 2008 Exports

2009 2009 Imports Imports

Percent Percent 40 40 30 30 20 20 10 10 0 0 -10 -10 -20 -20 -30 -30 -40 -40 -50 -50 2010 2011 2012 2013 2014E 2010 2011% yoy 2012 Imports 2013 Exports growth, growth, %2014E yoy Exports growth, % yoy Imports growth, % yoy

Source: Statistics Lithuania, Newsec Source: Statistics Lithuania, Newsec

Wages and Salaries I Lithuania (Source: Statistics Lithuania, Newsec)

Gross avg Gross avg EUR/month EUR/month 800 800 600 600 400 400 200 200 0 0

2007 2007

Percent Percent 30 30 25 25 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 2014E 2014E

2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Public sector Private sector Public sector Private sector Public sector growth %, yoy Private sector growth %, yoy Public sector growth %, yoy Private sector growth %, yoy

Source: Statistics Lithuania, Newsec Source: Statistics Lithuania, Newsec

INVESTMENT MARKET INVESTMENT MARKET The Baltic region became a full member of Eurozone after the euro adoption in Estonia (2011), The Baltic region became a full member of Eurozone after the euro adoption in Estonia (2011), Latvia (2014) and Lithuania in 2015. It proved accomplishments of the Baltic States in securing Latvia (2014) and Lithuania in 2015. It proved accomplishments of the Baltic States in securing financial stability and stable economic growth. The Baltics will benefit from this, as the currency financial stability and stable economic growth. The Baltics will benefit from this, as the currency risk has been removed opening opportunities for new investors and proving the attractiveness of risk has been removed opening opportunities for new investors and proving the attractiveness of this region. this region. The Baltic countries showed their strength in growing economies, continuously improving The Baltic countries showed their strength in growing economies, continuously improving domestic consumption and increasing interest and investments from international companies. domestic consumption and increasing interest and investments from international companies.

7.0 Market Review

7.2 Investment Market The Baltic region became a full member of Eurozone after the euro adoption in Estonia (2011), Latvia (2014) and Lithuania in 2015. It proved accomplishments of the Baltic States in securing financial stability and stable economic growth. The Baltics will benefit from this, as the currency risk has been removed opening opportunities for new investors and proving the attractiveness of this region. The Baltic countries showed their strength in growing economies, continuously improving domestic consumption and increasing interest and investments from international companies.

2014 In Brief

The most active investment market last year was Lithuania (40%) and investment volumes in Latvia in Estonia were alike (~30% each). The most active investment segment in the Baltic countries was the office market, which covered half of all investment volume and was the highest ever-reaching nearly 210 million EUR. Warehousing and logistics segment was also active - 2014 marked the first time when investment in this segment exceeded investment in the retail segment. Transaction volume in the Baltics has reached pre-crisis level (approx. 425 million EUR in 2014) setting high expectations for 2015.

Investors Profile

All the existing Scandinavian funds continue enlarging their portfolios, at the same time successfully implementing exits of their first funds. Key players are Nordic, Baltic and Russian investors. Dominating investor types are international funds with established presence (East Capital, Northern Horizon Capital), local funds (EfTEN Capital, Lords LB) and private investors (Russian, Scandinavian capital, i.e. Capital Mill, Zenith). Broken down statistics of investors by country of origin show that ~50% are from Baltics, including ~25% of Russian capital raised funds, ~35% Scandinavian capital, and just above 2% from the western countries. International investors who were previously unwilling to enter the Baltic region because of relatively small markets, currency risk and lack of liquidity, continue investigating their possibilities to include the region in their investment maps.

2013-2014 Evolution

Firstly, local funds became solid attracting professional investors. Secondly, the number of private non-professional investors and family offices (Russia and Nordics) increased significantly. Thirdly, greater amount of homework being done by new cross border investors.

Yields

Baltic States are still at an attractive value gap compared to Western European and Nordic levels as average yields for prime retail and office assets remain around 7.00 to 8.00%. Average yields for prime retail and office assets in 2014 decreased slightly down from around 7.00% to 7.25% on average, with the most attractive properties lower by up to 50 basis points and secondary properties standing between 8.00% and 9.25%. Yields for prime logistic centers and warehouses vary between 8.50% and 8.75%. Capital cities are the main investment targets in Baltic countries with most expensive yet liquid assets, thus yields for properties in other cities than capitals are higher and reach 9.00%-12.00% on average. Transaction Volume by Investor Origin in 2013-2014 |n Baltic Countries (Source: Newsec) Scandinavia Western Europe Baltic Countries Other 100

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

mEUR 1.000 800

Transaction Volume | Baltic Countries (Source: Newsec)

mEUR

600 1.000 400 800 200 600

0 400

2004

2005

2006

2007

2008

Lithuania

200 0 Newsec Source: 2004

2005

2006

2007

Latvia

2008

Lithuania

Prime Office Yields I Baltic Capitals (Source: Newsec)

2009

Latvia

2010

2011

2012

2013

2014

Estonia

2010

2011

2012

2013

2014

Estonia

Percent

Source: Newsec 14 12 10

Percent

148 126 104 82 60

Percent 2007

Prime Retail Yields I Baltic Capitals (Source: Newsec)

2008 2009 2010 4 14 Vilnius Prime 2 12 Percent 0 Newsec Source: 10 2007 2008 2009 2010 14

8 12

Vilnius Prime

2011

2012

2013

Riga Prime

2011

2012

Riga Prime

2014

2015E 2016E

Tallinn Prime

2013

2014

2015E 2016E

Tallinn Prime

6 10

Source: Newsec 4 8 2 6 0 4

2007

2008

2009

2010

Vilnius Prime

2011

2012

2013

Riga Prime

2014

2015E 2016E

Tallinn Prime

0 2007

Source: Newsec

2008

2009

2010

Vilnius Prime

2011

2012

2013

Riga Prime

2014

2015E 2016E

Tallinn Prime

Source: Newsec Percent

Prime W&L Yields I Baltic Capitals (Source: Newsec)

14 12 Percent

10 14 8 12 6 10 4 8 2 6 0 4

2007

2008

2009

2010

Vilnius Prime

2011

2012

2013

Riga Prime

2014

2015E 2016E

Tallinn Prime

2007

Source: Newsec

2008

2009

2010

Vilnius Prime

Source: Newsec

2011

2012

Riga Prime

2013

2014

2015E 2016E

Tallinn Prime

101

7.0 Market Review

102

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

103

7.0 Market Review

7.3 Industrial Market In 2014, the industrial market saw an outburst in new warehouses. While constructing built-to-suit warehouses, many companies planned for larger space than they need, thus increasing market supply.

Supply

There are approx. 876,000 sq. m of modern warehousing space in Lithuania including Vilnius, Kaunas and Klaipeda regions; however, old, not renovated warehouses and industrial units cover a much greater part of warehousing space. Currently, a major part (approx. 505,000 sq. m) of modern warehouses is situated in Vilnius and Vilnius district. Whereas, there are approx. 190,000 sq. m of modern warehousing and logistics space in Kaunas and approx. 140,000 sq. m in Klaipeda.

New deliveries

Warehouse space in Lithuania increased by ~ 80,000 sq. m. and grew by almost 11% in 2014. There have been built around one third of the new space in each of Vilnius, Kaunas and Klaipeda regions. New developments of modern 3PL warehouses in the market comprised of 10 new build-to-suit projects; however, a significant part of premises was offered for speculative needs. During 2014 there were a few projects for both 3PL and built-to-suit purposes – Transekspedicija (stage II) in Vilnius, Vlantana (stage II) in Klaipeda, Limedika and Sanitex/BLS in Kaunas. There were also five entirely built-to-suit projects completed – Wurth, Hormann and Stengel in Vilnius, Osama in Kaunas and Klasco bulk fertilizer warehouse in Klaipeda. Three new warehousing and logistics projects were completed and three other projects are expected near the highway Vilnius-Panevėžys in 2014. This part of Vilnius region (near the highway Vilnius – Panevėžys) is becoming more and more popular destination for both logistics companies and companies exporting their products to Baltic and Scandinavian countries because of the good accessibility. Among new warehousing projects, the largest one currently under construction is the LIDL distribution center – it is announced that its area will be 41,000 sq. m and investment will reach 30 million EUR. For 2015-2016, 50,000 sq. m of new space is planned in the market. New development is mainly spurred by well-performing logistics, import-export and trade companies looking to develop properties according to their own requirements.

Growing demand

Market absorption ratio reached 75,000 sq. m in 2014 in the main Vilnius, Kaunas and Klaipeda regions. Tenants already existing in the market made major share of lease transactions and no fresh tenants were attracted. The end users of built-to-suit projects will mostly absorb new projects in the market. Due to expiring agreements, the further tenant migration is expected, especially in the small-scale tenants group. A new trend that emerged in the industrial premises market is that the premises tenants include the growing number of manufacturers. However, not all newly comers necessarily choose Vilnius region, or even Kaunas and Klaipeda, some are looking for smaller cities and regions as well. Tenants providing 3PL services transform and diversify activities. It is a tendency to separate services provided in warehouses from transporting or even storage services.

Rent rates increased

Warehousing rents have returned to the pre-crisis levels, and after a long time this segment began to recover, with a number of new projects being delivered to the market. However, due to Russia’s sanctions on EU countries, logistics and warehouse sector can once again experience a painful shock. The average rental rates now are in average 3.8-4.8 EUR/sq. m/month for A class buildings in Vilnius prime locations and up to 3.5-4.5 EUR/sq. m/month in Kaunas and Klaipeda. The rent rates also differ according to the size of the tenant. 104

Urban Concept For Klaipėda FEZ 2015

Vacancy Low vacancy levels remained at ~5% in combined Vilnius, Kaunas and Klaipeda markets during 2014. Klaipeda has the highest W&L vacancy rate among the largest cities while there are almost no vacant warehousing space in Kaunas. However, it should be noted that the vacancy in the W&L segment could visibly increase in 2015-2016, if any of the large companies occupying large spaces in current warehouses build their own built-to-suit projects. This trend is already visible in Estonia, where Maxima is investing 30 million EUR into 45,000 sq. m built-tosuit logistics center.

Outlook

However, it should be noted that the vacancy in the W&L segment could visibly increase in The ones Lithuanian producers suffered from the Russian embargo were not the warehouse tenants, 2015-2016, if any of the large companies occupying large spaces in current warehouses build so the real risk to this segment wasvisible insignificant. Moreover, their own built-to-suit projects. This trend is already in Estonia, where Maxima the is annual results of goods importers grew, investing 30 million into 45,000indices sq. m built-to-suit logistics center.providing a favorable environment for the development of the retail andEUR wholesale have improved,

warehouse market. Based on the trends expected in 2015, the storage space market will avoid any negative consequences. Another important notefrom tendency is the fact were thatnot thetheretail chains may start developing their own logistics The ones Lithuanian producers to suffered the Russian embargo warehouse tenants, so the real risk to this segment insignificant. Moreover, the annual results of goods centers and optimize thewas logistics chain performance. A significant share of retail chain tenants decided to importers grew, retail and wholesale indices have improved, providing a favorable environment follow the trend could shake up the market and it could accelerate the growing rents. for the development of the warehouse market. Based on the trends expected in 2015, the OUTLOOK

storage space market will avoid any negative consequences. Another important to note tendency is the fact that the retail chains may start developing their own logistics centers and optimize the logistics chain performance. A significant share of retail chain tenants decided toI follow the trend could shake up the market and it could accelerate the W&LMarket Lithuania W&LMarket growing rents.

I Lithuania (Source: Newsec)

(Source: Newsec)

Ths. sq. m

800

13%

20 11%

200 100 100

0 2007

2008

2009

2010

Stock

0 2007

2008

2009

2011

2012

2013

2014 2015E

2011

2012

2013

2014

2015E

Source: -50 Newsec

7% 50

Absorption

New supply

5% 3%

0 2007

7% 5%

2008

2009

2010

2011

2012

2013

2014

2015E

1% -1%

-50 Absorption

New supply

Vacancy, %

1% -1%

Source: Newsec

Vacancy, %

Warehouse Rents I Vilnius Source: Newsec Newsec) (Source:

Stock growth, % yoy

2010

11%

100

10 9%

15%

150

Percent 40 15% 30 13%

400 150300

Percent

200

700 Ths. sq. m 600 200500

Ths. sq. m

Percent

900

Distribution of Warehouse Space by Regions I Lithuania Newsec) Distribution of Warehouse Space by Regions I 5(Source:

EUR/sq. m/month

Lithuania

EUR/sq. m/month

KlaipÄ&#x2014;da

1 2007

2008

2009

Kaunas

Rental rate Avg

2 1

2010

2011

Vilnius

Rental rate Min

2012

2013

Vilnius 2014 region 2015E Kaunas region

Rental rate Max

Klaipeda region

Source: Newsec 2007

2008

2009

Rental rate Avg

Source: Newsec

2010

2011

Rental rate Min

2012

2013

2014

2015E

Rental rate Max

Source: Newsec

105

7.0 Market Review

7.4 Office Market Economic growth and increasing interest from foreign investors influenced Lithuaniaâ&#x20AC;&#x2122;s office market demand. The year 2014 was especially active in the office segment. Record-high occupancy levels turned the market into the property owners market. High demand for office space attracted many developers to get back to planning and developing new business centers.

Burstling development

Vilnius ended 2014 with 404,500 sq. m of modern office stock or 0.76 sq. m per capita. A 5.2% increase, or almost 20,000 sq. m of new office space was delivered in the market by completing three office buildings: Grand Office (10,200 sq. m), 3rd phase of Baltic Hearts (3,300 sq. m) and Atea (6,400 sq. m). Newly offered office space was almost fully absorbed by the end of the year. Office developments planned for 2015 will exceed the total supply delivered in 2013-2014. It is expected that during 2015 and 2016 Vilnius will add approx. 136,400 sq. m of modern office space. Currently five out of eleven planned projects in Vilnius are under construction. After a few years of silence in Kaunas market, the year of 2015 will be marked with new supply. An increased interest to investments and favorable labor market has forced the creation of new office supply. Starting with a few smaller scale developments such as Mikrovisata office building (3,600 sq. m), Kaunas market will welcome some large-scale developments in a short time period.

Vacancy at the bottom

Since 2010, the market has seen decreasing vacancy rates; at the end of 2014, vacancy in Vilnius CBD was very low. Vacancy in prime offices has fallen below 2% in average in the beginning of 2014 while in Q4 2014 vacancy for A class properties did not even reach 0.5%, which means that there are almost no available A class offices in the market. The rising demand for business clusters has positively affected B class business centers, especially the ones close to CBD. High demand for quality premises in B class office segment has forced vacancy in this segment to move down at a very quick pace. In 2014 Q1, the average vacancy rate in B class offices stood at 8.5% and in Q4 2014, it decreased down to 3.3%. New projects now target the B class level.

Active Demand

The largest lease transactions and more than half of the space leased in 2014 were by companies working in finance, IT/telecommunications and retail. Shared service centers made the largest rent transactions in 2014 and IT companies use the more than 20% of all office stock in Vilnius. The trend of pre-lease is coming back to Vilnius office market with agreements often signed 6-9 months in advance.

Rent Rates

In the end of 2014 the average market rent for prime office premises in Vilnius CBD remained in the range of 14-15.8 EUR/sq. m/month, in other central areas the market rent rates were in the range of 10-13 EUR/sq. m/month, whereas B class offices further from city center were leased for 8.5-11 EUR/sq. m/month. Record-low vacancy rates turned Vilnius office market into the landlord market, where asking rent rates can be easily increased, however this trend cannot last for a long time as new buildings are coming to the market and the old ones (especially in the prime segment) will be forced to face the competition.

Outlook

Real estate developers in Lithuania has rushed to catch the running train and tried to relocate resources from the development of the residential segment to the office supply direction. Those who are planning and developing now, are experienced and professional developers. Since a significant proportion of new office space will be offered in the A class segment in the market, it will create the need to revise the parameters and requirements of classification and to once again review the objects balancing on class A and B line. Property owners getting the signals from tenants have started already or are planning to invest in the business centers in order to maintain their current class. Naturally, this evaluation will have effect on rental rates in different segments, as at 5-10% higher rent rate tenants will be able to rent premises in higher quality projects. 106

Urban Concept For KlaipÄ&#x2014;da FEZ 2015

Office Stock I Vilnius (Source: Newsec)

Percent 50%

450 400

40%

350 Ths. sq. m 300 500 250

Percent 30% 50%

Thousands

Ths. sq. m 500

450 200 400 150

20% 40%

350 100 300 50

10% 30%

250 0 200 2004

2005

2006

2007

150

2008

2009

Stock

100

2010

2011

2012

2013

2014 2015E

Stock growth, % yoy

0% 20% 10%

50 0 Source: Newsec 2004

2005

2006

2007

2008

2009

Stock

2010

2011

2012

2013

2014 2015E

Stock growth, % yoy Percent

Ths. sq. m

Office Market Indicators I Vilnius (Source: Newsec)

100 Source: Newsec

25%

20% Percent 15% 25%

Ths. 60 sq. m 100 40 80

10% 20%

20 60

5% 15%

0 40

2004

2005

2006

Percent 20 25%

2007

2008

2009

Absorption

2010

2011

New supply

2012

2013

2014

2015E

0% 10%

Total vacancy, %

0 Newsec Source:

20% 2004

0% 2005

2006

Percent

Office Vacancy I Vilnius (Source: Newsec)

2007

2008

Absorption

15% 25%

2009

2010

2011

New supply

2012

2013

2014

2015E

Total vacancy, %

10% Newsec 20% Source: 15% 5% 10%

0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E

A class, %

B class, %

Total vacancy, %

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E

Source: Newsec A class, %

B class, %

Total vacancy, %

Source: Newsec

EUR/sq.m/month

Office Rents I Vilnius (Source: Newsec)

23 EUR/sq.m/month 21 2319 2117 1915 1713 1511 13 9 11 7 9 5 7 5

2007 2007

2008 2008

2009 2009

A class

2010 2010

2011

A class Max

2011

2012

2013

B class

2013 2014

2014

2015E

B class Max

Source: Newsec Source: Newsec

RETAIL MARKET

107

RETAIL MARKET

The improving economic situation, wage growth and declining unemployment rates create favorable conditions for the development of the retail space market. Although, despite the

The improving economic situation, wage growth and declining unemployment rates create

7.0 Market Review

7.5 Retail Market The improving economic situation, wage growth and declining unemployment rates create favorable conditions for the development of the retail space market. Although, despite the positive signals, most of the investments are still directed towards the improvement of shopping center internal problems, updates of the outdated projects, expansion and optimization of the leasable area. Significant amounts of investments in the renewal the leading shopping centers strengthens their position in the market and creates more favorite conditions, attracting new brands to the market. The growth number of new projects is also seen in the grocery retail segment, however at the end of the preparation process for Lidl market entrance; existing market players’ investment volume is significantly reduced.

Improving Constumtion

In 2014, the retail turnover increased by 5.6% compared to the same period in 2013. The biggest growth was recorded for sale of audio, video and hardware equipment, also for furniture and lighting in specialized stores; for communication equipment, watches, jewelry (12.6%) and for sale of textiles, clothing and footwear (10.5%). In 2014, the largest increase was observed in retail sale via mail order or via the Internet – by 27.6%. The significant retail growth is affected by weakening consumers’ expectations and a decline in the number of inhabitants outside the capital. Improving consumption indicators and an increase in wages led to growth in the shopping center turnover, however, the number of visitors has been stable. For now, the main goal of shopping center managers is to improve customer expenditure even further.

New Developments

The total leasable shopping center area in Lithuania amounts to 820,000 sq. m or 0.28 sq. m per capita. 40% of the total supply is concentrated in the most developed city, the capital of the country, Vilnius, with 16 modern shopping centers and a total leasable area of 330,000 sq. m or 0.6 sq. m per capita. The latest developed retail project in Vilnius was the 1st phase of DomusPro in 2014. Developer TK Development has sold DomusPro to the investment fund Baltic Opportunity in 2013 and started its construction works accordingly. The 2nd phase of ~3,600 sq. m is planned to be developed in 2015. Among largest redevelopments in Lithuanian retail market were re-openings of formerly named Gedimino9 (Vilnius) center under new name GO9 in March 2014, and redevelopment of Babilonas (Panevezys) shopping center in January 2015, that re-opened as RYO shopping center. After more than a year of successful operation in Vilnius, IKEA will welcome a new neighbor Nordika Shopping Valley with total area of 40,000 sq. m. Approx. 45 million EUR will be invested in the project and house a large Senukai DIY store along with grocery retailer Rimi Hypermarket, electronics store Elektromarkt and a number of other additional retailers. The project will be developed in two phases and will form a favorable shopping destination in the southern part of Vilnius city. Shopping centers developer Baltic Shopping Centers plans to expand shopping center Mega (72,000 sq. m) up to 102,000 sq. m and increasing number of tenants up to 190. Expansion project is planned to be finished in 2016, after approx. investments of 45 million EUR.

New Blood On the Market

International brands such as H&M, Subway entered and expanded the market. However, major part of the demand was generated from the local retailers seeking to secure the best locations in leading shopping centers and maintain their market positions. In the grocery retailers segment, all major retailers have renewed a lot of their stores along with opening new ones. Grocery retailer’s plans for 2015 are set as ambitious as in 2014. New entrant Lidl mainly caused such flurry in the market, being the first “unknown” brand in the market. It is expected that Lidl will open 25-30 stores in Lithuania and will start its operation after logistics center will be completed in Kaunas. The other “unknown” brand in the market is Fresh Market, as after rapid expansion of stores (26 stores in 11 cities) it throws all the forces to e-commerce development in Vilnius. The main outcome of such intense expansion of stores will be a shift in the market share and decrease of turnover per square meter. 108

Urban Concept For Klaipėda FEZ 2015

H&M stores became a very important competitor to companies currently holding the largest share of apparel stores in Lithuanian shopping centers. Operating retailers are improving their concepts, modernizing stores and focusing on business class and luxury segment. During 2014, the total area of ~8,200 sq. m H&M stores was opened in Panorama, Go9, Ozas and Akropolis Ĺ iauliai. H&M has already signed eight lease agreements across the country and will continue opening new stores in 2015 (RYO in Panevezys, expansion in Mega, Kaunas).

Low Vacancy and Increased Rents

Vacancy in prime shopping centers remained at the minimum levels as the new apparel retailer occupied large areas and intensified competition. Newcomers and successfully operating local brands took place in the weak market players share. Continuously improved turnover/rent ratios in successfully operating shopping centers in all major cities have caused significant rent increases. The tendency is likely to continue in 2015, for both the shopping centers and retail streets.

Outlook

The year 2015 will be challenging and stressful for retail market players in order to maintain the position in the market. However, growing demand and potential entrance of the new brands to the market will encourage local developers to start new shopping center developments. Favorable consumption market situation will strengthen the position of landlords in raising rents. Supply of Shopping Centres I Vilnius

Ths. sq. m(Source: Newsec) 400 350

Sq. m 700

Ths. sq. m

Sq. m

400

700 600

300

350

600 500

250

300

200

250

150

200

100

500 400

400 300

150

200

100

300

100

50 0

100 0

2004 2004 2005 2005 20062006 2007 2008 2011 2012 20122013 2013 2014 2015E 2007 20082009 2009 2010 2010 2011 2014 2015E Existing stock Existing stock

New supply supply New

Sq.Sq. m/1,000 inh. inh. m/1,000

Source: Newsec

SC Stock by Classification in 2014 I Vilnius (Source: Newsec)

Regional City centre

Regional Neighbourhood Specialized City centre

Neighbourhood Specialized

Source: Newsec

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