How Lithuania’s second-largest city brings about first-class quality

The following article by Tadas Stankevičius, Director, Kaunas IN in the Outsourcing&More magazine. You can find the original here.

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Kaunas, the home of 400,000 inhabitants, has been getting more attention recently due to the fact that it’s the European Capital of Culture 2022. Known for its intact Modernist architecture and home to BC Žalgiris — a basketball club with a true cult following, Kaunas is also a dynamic business hub, with strong engineering and tech traditions. In this short article, I’d like to share the latest developments and point out the things that make Kaunas a city worthy to watch in the nearest future.

A city primed for excellence in IT

Universities very much shape the cities’ cultures and Kaunas is no exception. Home to Kaunas University of Technology — the largest tech and engineering school in the Baltics — Kaunas always has a steady supply of STEM talent. No less important to the city’s educational success is Vytautas Magnus University — an interdisciplinary liberal arts university that’s indispensable in preparing students with skills that match the demands of tomorrow. More than half of all the city’s students are in STEM or Life Sciences, and there are about 3,500 IT students in the pipeline at any given time.

When it comes to the ways Lithuanians use this IT talent, one should look no further than the scope and success of TeleSoftas and NFQ — two of the country’s largest homegrown Software Development companies. Both of them started out at Kaunas Science and Technology Park, the country’s largest innovation community, responsible for incubating more than 400 companies in its lifetime.

“Technological thinking combined with the right mindset has brought Kaunas to stand out as a hidden tech hub gem where several startups that are shaping the world are being developed. Not so many people know that a number of global brands run on digital technologies engineered here in Lithuania. And demand for our talents and know-how is rising fiercely,” says Paulius Insoda, CEO at NFQ Technologies.

The city’s potential has not been left unnoticed by foreign investors, as Kaunas has successfully attracted a number of IT companies. Interestingly enough, a significant number of them come from the US, including Devbridge, Virtustream, Bentley Systems, CUJO AI and Oracle, outsourcing veterans Centric, software developers Hyarchis and Macaw, among others.

The office game

Home to beautiful Modernist architecture, Kaunas was not exactly known for prime office space, but this is changing at a very rapid pace. According to the data collected by Newsec, the total office stock has more than doubled over the last 4 years, and stood at 256,800 sq m at the end of 2020. Premium quality and exquisite location choices are one of the main drivers for office space development in Kaunas, with expansion of class A supply constituting around a fifth of all office stock.

The supply of the highest quality office space is only bound to grow, with around 24,440 sq m to be added in the next couple of years. Out of all the new projects in Kaunas, MAGNUM business centre, located in the newly formed Kaunas CBD, is currently the biggest. It hosts 18,000 sq m of Class A office space equipped with the most innovative solutions on the market. The building, divided into smaller premises, can host up to 1,700 employees.

The vacancy level in Kaunas goes hand in hand with rapid construction of new offices, rising to an average of 14.03% in 2020 compared to 11.4% the year before. The growth in the supply of office space in Kaunas that has been happening for the past several years, is expected to keep rental rates competitive during 2021, truly making it a tenants’ market. Kaunas is also actively responding to the global demand of flexible office space solutions. The number of flexible workspaces in 2020 amounted to more than 3,400 sq m of workstations created.

Who’s already here?

In recent years, the Kaunas GBS sector has experienced significant expansion, with global names like Dematic, FESTO, and TransUnion choosing Kaunas as the most suitable destination for their operations. In addition to them, Kaunas hosts GBS and ICT centres of such demanding corporations as cloud solutions pioneers Oracle, Danish adtech giants Adform and French software company veterans Dassault Systemes.

„Kaunas-based universities provide us with the right talent that fits our parent company’s mold and can perform on a truly global level. It’s a pleasure to see such a high level of English proficiency and tech know-how in most of our candidates and hires. Talents are working from Kaunas, but the solutions they have developed and created reach businesses and customers all around the world,“ says Gitana Strazdauskė, Managing Director at Dassault Systemes in Kaunas. „Kaunas Technology University has never disappointed us – they are far-sighted, advanced and appreciating the long term relationship.“

Winning the award in the Attractive European City and Regions categories by fDi Magazine, Kaunas can easily give investors a run for their money. And if you thought Vilnius was an unsaturated location (which it is, with just 30.3 per 1000 residents working in GBS centres), Kaunas provides even more room for growth, with around 10 per 1000 residents employed by the GBS industry, and high-quality offices 15-20% cheaper than in the country’s capital.

Working with existing and potential investors, Kaunas IN, the city’s tourism, investment and international marketing development agency, is always ready to build new bridges. Who knows, maybe 2022 will be a year of not just cultural celebrations, but also ribbon-cutting ceremonies? I can’t wait to find out!