Real Estate Expert: Finnish Industrial Companies No Longer Moving to Estonia, But Existing Ones Continue to Expand

The interest of Finnish industrial companies in establishing new production units in Estonia has noticeably decreased in recent years, but companies that have been operating here for a long time continue to invest in expanding their operations, comments Juha Ajakainen, partner at 1Partner Commercial Real Estate.

According to Juha Ajakainen, who has advised Finnish companies on the Estonian real estate market for years, our northern neighbors have not lost interest in Estonia, but investment plans have been affected in recent years by the coronavirus pandemic, the war in Ukraine, the general rise in interest rates, and of course Estonia's rapid inflation. "However, in recent years we have brokered new production space for several successful Finnish manufacturing companies that have been operating here for years, know the local market well, and are investing confidently in their future. Estonia's strength remains its good logistical location, a functioning business environment, and relatively good labor availability in the Tallinn region," explains Ajakainen.

The experienced expert cites Vado Filter Group, which has been operating in Estonia for nearly 15 years, as an example. The company recently leased 5,000 square meters of production and storage space at Peterburi tee 81, where the company is now consolidating three production units that previously operated at different locations. "A decade or so ago, Estonia was clearly a country with more favorable labor costs for Finnish industrial companies. Today, wage levels have converged significantly, and companies no longer come here solely for cheaper labor," says Ajakainen, who brokered the deal. According to him, the Vado Filter Group transaction well reflects a broader trend in which, instead of new Finnish manufacturing companies, those already established here for longer are expanding their operations in Estonia.

Ajakainen adds that Vado Filter Group considered, for example, both building a new production facility and new developments, but ultimately the existing building proved to be the most reasonable choice in terms of price and quality. "It is not easy to find such large production-suitable spaces in Tallinn, especially close to the city. The selected location in Lasnamäe means that labor is nearby and the port and airport are also conveniently accessible for logistics," he says, adding that while such large production space transactions are not extraordinary on the Tallinn market, they are certainly not a daily occurrence either.