BREAKTHROUGH: Arco Vara to develop the long-awaited Luther Quarter

Real estate developer Arco Vara has signed an agreement to acquire the Luther Quarter and will begin developing the long-anticipated project in Tallinn’s city centre. The former industrial site will be transformed into a modern and pedestrian-friendly urban space that combines residential homes, office buildings, and leisure areas. The total investment will exceed 200 million euros.




“Arco Vara has been actively seeking opportunities to expand its development portfolio. Very few sites meet our criteria — location, scale, development potential, and the value we can bring to our customers are all critical. With the Luther Quarter, we now have a rare opportunity to revitalise a key area in central Tallinn that has been awaiting a solution for years,” said Kristina Mustonen, CEO of Arco Vara. “Our team has the skills and experience to develop integrated city districts — proven by earlier projects such as the Kodulahe residential area near Stroomi beach and Merimetsa,” she added.

Bound by Pärnu road, Tatari, Vana-Lõuna, and Vineeri streets, the Luther Quarter consists of 15 plots. The new development will include homes, office and retail space, and a dedicated food street. The plan also features a public park. In total, the project will offer 454 apartments, nearly 18,500 square metres of commercial space, and an underground car park with 615 spaces. Historical industrial buildings will be preserved and restored, then integrated into the newly built modern urban environment.

According to Mustonen, the new development presents an extraordinary opportunity — both for the company and the city — to shape one of Tallinn’s most promising central areas into a contemporary, sustainable, and desirable district. “Our ambition is to create positive experiences and lasting value for future residents, workers, and citizens. In designing and delivering this project, we aim to push the boundaries of what’s possible, with a strong focus on community building. We want everything to function as a coherent whole — from door handles and control panels to the public park and property maintenance,” she emphasised.

“The main shareholder’s goal is to grow Arco Vara while also enabling talent within the company to thrive and lead. All shareholders, as critical contributors to the project, must benefit from the value creation,” said Tarmo Sild, Chairman of the Supervisory Board of Arco Vara and partner at Alarmo Kapital. “The transaction does not significantly alter Arco Vara’s capital structure — equity will still represent over 46% of total assets — but the total assets will nearly double. Arco Vara’s development potential, however, will more than triple, as the transaction will bring the total permitted gross floor area to over 70,000 square metres. We believe Tallinn is a city on the rise, and the Arco Vara team is an ambitious and capable group,” he added.

The total investment in the Luther Quarter is estimated at 200 million euros. The architectural plan for the project is based on a previously held architectural competition, with the winning plan design created by renowned architecture firms Apex and Hayashi-Grossschmidt. Construction is set to begin in 2026 and will proceed in stages, starting with four new buildings in the first phase. The project will be constructed by Arco Vara’s subsidiary, Arco Tarc.