Tallinn Office Outlook, 2024 H2 -
In H2 2024, the Tallinn office market showed early signs of stabilisation as the economy began to recover, although vacancy remained elevated. Tenant demand stayed cautious and selective, while declining average rents and fewer new completions reinforced a tenant-favourable environment focused on quality and flexibility.
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Tallinn Office Outlook, 2024 H2
In the second half of 2024, the Tallinn office market operated in a challenging but gradually improving economic environment. After a prolonged downturn, Estonia’s economy began to show signs of recovery, with GDP growth expected to return in 2025. However, high inflation and cautious hiring continued to weigh on office demand.
Vacancy remained elevated throughout H2, averaging 8.1%, reflecting a combination of weak recruitment, hybrid work practices, and significant new supply delivered in recent years. A-class vacancy stood at 7.7%, while B-class reached 8.3%, highlighting increasing pressure on older and less competitive office stock. Vacancy is expected to remain high into 2025, as labour market improvements are forecast to be gradual.
New supply totalled approximately 60,000 sqm in 2024, adding to already high availability. Development activity is now slowing, with new deliveries expected to fall to around 33,000 sqm in 2025, which should help limit further vacancy growth and support a gradual market rebalancing.
Rental levels declined during H2 as competition intensified. Average A-class rents fell from €19.5/sqm/month at the end of 2023 to approximately €18.1/sqm/month, while B-class averages decreased from €14.0 to €12.9/sqm/month. Some landlords significantly reduced asking rents and offered incentives to attract tenants, particularly in older buildings.
Overall, H2 2024 in Tallinn was characterised by high vacancy, declining average rents, and cautious tenant behaviour, but also by early signals of economic recovery and a slowing supply pipeline. These factors suggest that while short-term pressure will persist, the foundations for gradual improvement are beginning to form heading into 2025.