Last year, 32 investment real estate transactions occurred in the Baltic States, with a total value of 663 million EUR. Almost a half of this amount consisted of investment transactions made in Lithuania – their value reached 315 million EUR. In Latvia, this amount was 160 million EUR, in Estonia – 188 million EUR. According to the review “Newsec Property Outlook, Spring 2018” by the real estate advisory company Newsec, the largest share of the transactions consisted of investment in office and commercial real estate.
44% of all transactions were made in Lithuania
Last year, 14 investment real estate transactions were made in Lithuania, i.e. 43.8% of all transactions in the Baltic States. The value of the investment transactions amounted to 315 million EUR and accounted for 47% of the entire market of the Baltic States. Compared to 2016, the value of the investment transactions in Lithuania increased by 15%. Mostly, about 80% of all transactions consisted of retail trade and office projects, as earlier.
“Over the past few years, the Lithuanian real estate market has been very active. Especially the year 2017 was important for such cities as Kaunas or Klaipėda – their market has been increasingly trusted by real estate developers and investors,” said Mr Gintaras Toločka, an analyst at the international real estate consulting services company Newsec.
One of the biggest and most interesting investment real estate transactions of the last year was the sale of the GO9 shopping centre in Vilnius, acquired by Lords LB Asset Management for an undisclosed amount.
“Local investors remain the most active in the Lithuanian market. However, last year major foreign institutional buyers performed a lot of preparatory work, and this year we can already expect large deals that will further boost the market. The capitalization rates in the country currently amount to 6.5-6.75 percent in the area of the most attractive offices and commercial objects and 7.75-8% in the area of industrial buildings,” said Mr Toločka.
Six free economic zones, operating in Lithuania, also played a role of great importance on the Lithuanian real estate market in 2017. They have attracted international investors such as Continental, Hella, Devold, IMG, Dovista, etc., which are planning to invest hundreds of millions in the near future in Lithuania and establish thousands of new jobs.
Latvia recorded a fall of 52%
In 2017, the value of investment real estate transactions amounted to 160 million EUR in Latvia. However, this indicator was more than double the year before and amounted to 330 million EUR.The correction of 52 percent of the investment transactions was determined by a lack of new projects – almost all development works in 2017 were related to the reconstruction of existing offices and commercial spaces or to the completion of long-term projects.The capitalization rates of modern offices in Latvia currently amount to 6.8% and are slightly higher than those in Lithuania.
Despite the general stagnation in the market, the last year developers of the shopping centre Akropolis secured the banking financing of 106.5 million EUR. The total amount of the investment in the project will amount to 177 million EUR and this is undoubtedly the largest investment in a new commercial real estate object in the Baltic States over the last few years. It is being planned that the shopping centre with the total area of 100 thousand square meters will open its door in 2019, and a space of 10 thousand square meters will be dedicated for modern offices.
Estonia remained stable
In 2017, the amount of investment real estate transactions in Estonia amounted to 188 million EUR. Almost a half of these deals (48%) consisted of transactions in the commercial real estate sector.
The persisting demand and the number of transactions also affected the capitalization rates – in the office sector, this indicator dropped to 6.50%, and to 6.75% in the commercial real estate sector. Thus, Estonia, along with other Baltic States, is still approaching the profitability indicators typical of Western European countries.
“Presently, two large supermarkets are being built in Tallinn – T1 and Porto Franco; it is scheduled to open them in 2018 and, respectively, in 2019. The development of new projects promotes activities in the investment market – the Postimaja shopping centre, located in the central business district of Tallinn, was sold for 34.4 million EUR last year,” said the Newsec analyst.
The hotel market in Tallinn is also active – the French hotel group AccorHotels is about to start the construction of a new hotel in the downtown of Tallinn, investing 12 million EUR in the project. Still, the fastest growing sector in Tallinn is the sector of residential housing since more than a hundred multi-apartment projects are being implemented currently. In 2017, more than 2,500 apartments were constructed, which is approximately 23% more than in 2016. It is planned that this year the construction of multi-apartment buildings in Tallinn will be even more intense since the number of issued building permits is 64 percent higher than before.