Expert: Tenants Are Dictating Terms in the Rental Market, Landlords Must Make Concessions on Price Too

Over the past two years, Tallinn's rental market has undergone a complete turnaround, and thanks to a sufficiently large supply, owners increasingly have to make concessions both in price and other conditions, comments Helen Šank, a broker at 1Partner Real Estate. 

According to 1Partner's broker, the last price increase occurred after the outbreak of the war in Ukraine, when demand for rental apartments increased sharply, but today's wide selection gives tenants the opportunity to negotiate conditions more boldly than before. "Many owners are still accustomed to the idea that rent can be raised every year, but that's not how it works in today's market conditions. There is plenty of choice and tenants are more inclined to negotiate prices, especially in cases where the apartment's utility costs are high or its condition does not meet modern expectations," says Šank, according to whom the wide supply is precisely the reason why apartment purchases for the purpose of renting have also clearly decreased. 

 According to Šank, tenant expectations for living space quality have risen noticeably. "Tenants very clearly prefer apartments in new buildings and a modern living environment. Apartments with Soviet-era section cabinets no longer attract anyone, and for old houses with outdated-looking apartments, the shortfall must be compensated with a lower price," explains Šank and adds that another important reason for price negotiations is utility costs. "Whereas previously it often sufficed for a potential tenant to merely mention the price range, now absolutely everyone asks to see concrete bills before making a decision. As a result of the high energy costs of recent years, for example, electric heating is a reason why an apartment is not chosen after all," says Šank and adds that if utility costs are too high, owners often have to lower the rental price as well.  

According to Šank's assessment, the most sought-after apartments on today's market are larger family apartments and quality two-room apartments in new buildings. "Four-room apartments find tenants most quickly, as there are very few of them on the market. Two-room apartments in good locations in new buildings are also popular, with rent usually ranging from 700–800 euros per month, but despite the relatively high price, these find tenants very quickly," explains Šank, according to whom demand for previously popular one-room apartments has decreased at the same time. 

In terms of neighborhoods, the most sought-after remain Old Town (Kesklinn), Kadriorg, and North Tallinn (Põhja-Tallinn), where rental prices are on average about one-fifth higher than in Mustamäe or Lasnamäe. However, many young families still prefer Mustamäe, where it is possible to get a larger apartment for the same money and schools and kindergartens are nearby. "If a two-room apartment in a new building in Mustamäe costs typically 600–650 euros per month, then for a similar apartment in the city center you should expect 750–850 euros. The most expensive neighborhoods currently stand out as Noblessner and Kalaranna, where rent for three-room apartments can reach 1500–1800 euros per month," adds Šank. 

1Partner is the Baltic leading real estate group with more than 20 years of experience, with offices in Tallinn, Tartu, Riga, and Vilnius. 1Partner group provides real estate brokerage, valuation, construction, development, management, and investment management services. 1Partner real estate group is the official partner of JLL (Jones Lang LaSalle), the world's largest commercial real estate advisory firm, in the Baltics.