In last year’s annual review, we forecasted that the year 2019–2020 in the real estate market of the Baltic countries would be eventful and far from boring. Our prediction was indeed accurate and 2020 arrived with two pieces of news: after yet another remarkable year in the real estate market of the Baltic countries, the world is now engulfed in the coronavirus disease (COVID-19). Our company, like all market players, was taken completely by surprise by the pandemic. This detailed annual review of the real estate market of the Baltic countries in 2019 and forecasts for the year to come were prepared and finalized by Ober-Haus experts before the virus became widespread. So, we ask readers to take this fact into account when assessing the real estate market forecasts for 2020 or subsequent years provided in this review.
OFFICE MARKET IN VILNIUS
OFFICE TAKE-UP INCREASED BY 34% AND VACANCY RATE DROPPED TO 3%
Driven by strong demand, the modern office sector continues to grow. In total eight new projects were completed in 2019 bringing 66,100 sqm of office space to the market. After completion of these projects, the total area of usable modern office space (A and B class) grew by 9% to 784,400 sqm at the end of 2019 (see all projects on OHMAP). Currently, Vilnius has 1.40 sqm of usable office space per capita. By floor space, A class constitutes 43% of the total modern office premises in Vilnius, and B class – 57%.
RETAIL MARKET IN VILNIUS
INVESTMENTS IN UPGRADING EXISTING SCHEMES, LARGER PROJECTS TO COME
The development of traditional larger shopping centres both across the country and in Vilnius in recent years has been very slow. Greater developments in this segment are expected only in the country’s capital, where the population growth is the fastest. Hardly any major changes in this segment can be anticipated in the rest of the country due to the demographic situation.
INDUSTRIAL MARKET IN VILNIUS
STABLE RENTS AND INCREASING CONSTRUCTION COSTS DISCOURAGE DEVELOPERS
After intensive expansion of the warehousing sector in 2017-2018, development in the sector was relatively moderate in 2019. The year was not marked by an abundance of new projects, but at least it was characterized by the development of one of the largest warehousing buildings in the Vilnius region by one of the leading industrial property developers.
RESIDENTIAL MARKET IN VILNIUS
APARTMENT PRICES INCREASED AT A RECORD PACE
The year 2019 saw one of the most active periods in the Lithuanian housing market in the history of independent Lithuania. Within a year, apartment prices in five major cities of Lithuania (Vilnius, Kaunas, Klaipeda, Siauliai, and Panevezys) prices increased on average by 7.2%; this is the largest annual price increase since 2007. Depending on the city, apartment prices increased from 6% to 13% in 2019.
LAND MARKET IN VILNIUS
DEVELOPERS TARGET PLOTS OF LAND IN CENTRAL PART OF THE CITY
Interest in plots of land suitable for both residential and commercial development in the capital city has reached new heights. Particularly good residential and commercial real estate market indicators along with the growing purchasing power of the population and businesses have created all the conditions for developing higher-class projects. Therefore, it is no surprise that major developers have been particularly interested in the plots of land located in the centre of the city or the adjacent areas. In the meantime, plots of land located further away from the city centre were not of as much interest to developers. In these zones of the city, the rather tight range of sale prices and rents both in residential and commercial properties prevent faster sale or rent increase opportunities, so buyers are sufficiently conservative in assessing the prices of such plots of land.
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OFFICE MARKET IN RIGA
SIGNIFICANT GROWTH OF NEW OFFICE SPACE
Completion of eight new office projects in 2019 added 55,800 sqm of office space to the market in Riga. Total office area at the end of 2019 stood at 749,200 sqm. Newly built projects raise the bar of modern office quality in general, so some older construction projects, built 15-20 years ago can no longer be considered as modern ones (A or B class).
In the course of 2020–2021, six new projects are scheduled to come to market in Riga, with a total office space of more than 70,000 sqm.
In Europe and worldwide, the number of full-time employees is shrinking, and many are working from home using virtual offices or coworking space, and these are increasingly being marketed in Latvia as well.
RETAIL MARKET IN RIGA
THE OPENING OF AKROPOLE HAS SIGNIFICANTLY INCREASED THE RETAIL SPACE IN RIGA
2019 has been quite active for the development of the retail segment. According to Ober-Haus data, there were almost 81,000 sqm newly opened retail space in Riga. At the end of 2019, Riga had 730,000 sqm of total leasable space in shopping centres or 1.16 sqm of shopping area per capita (counting those over 5,000 sqm of GLA with over 10 tenants).
The largest multifunctional retail and office project Akropole was opened in Q2 2019. Located in Riga, Salaspils Street, 5 km from Old Town, it comprises 60,000 sqm of shopping area and around 9,000 sqm of office space.
INDUSTRIAL MARKET IN RIGA
LOW VACANCY RATE EXPANDS THE WAREHOUSING SECTOR
Three new projects with a total warehousing area of 70,100 sqm were completed in Riga and its surroundings in 2019. These new projects were undertaken by VGP, Piche and Sirin. Recent projects increased the total leasable area of modern warehousing premises in Riga and its surroundings by 10% to 778,900 sqm.
In 2020, implementation of at least four major projects in Riga and its vicinity (within 20 km) – including expansion stages – with total area of around 80,000 sqm, are scheduled. These projects are being developed by Lidl, Sirin Development, Piche and LNK Properties.
RESIDENTIAL MARKET IN RIGA
THE LARGEST SUPPLY OF UNSOLD NEW APARTMENTS
Apartment prices in Riga increased by 2.3% in 2019, after an increase of 2.5% in 2018. In 2019, prices slightly increased both in old construction buildings as well as in new construction apartments located in residential districts.
Prices for apartments in Soviet-era buildings increased by 3.3% and stood at an average of €808 per sqm at the end of 2019. Prices per sqm in old Soviet-era buildings are usually 40–50% cheaper than prices in new projects in the same locations.
LAND MARKET IN RIGA
STRONG DEVELOPERS SHOWING THE INTEREST IN BIGGER LAND PLOTS IN RIGA
Prices for plots for residential development (multi-apartment buildings) are generally in the range of €50–€300 per sqm in Riga neighbourhoods and for mixed commercial and residential development €300–€1,000 per sqm in Riga central areas. Commercial land, near highways, range from €15 to €20 per sqm, commercial land in Riga neighbourhoods €20–€80 per sqm. In general land prices in Riga and its vicinity remained stable in 2019, except for land for commercial use in Riga neighbourhoods, where prices increased by 5-10% on average.
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OFFICE MARKET IN TALLINN
MANY NEW PROJECTS IN THE PIPELINE
Only 2 new bigger projects and a few spaces in mixed-use buildings were completed in 2019 bringing almost 20,000 sqm of office space to the market. This is the smallest amount in recent years. The reason is high construction prices, labour shortages and the expectation of a recession.
After completion of these projects, the total area of modern office premises grew by 2% to 1,050,000 sqm at the end of 2019.
RETAIL MARKET IN TALLINN
In 2019, no large shopping centres were opened in Tallinn. At the end of 2019, there were 42 traditional shopping centres (including those with over 5,000 sqm of GLA and over 10 tenants) with a total leasable area of 678,300 sqm. Tallinn currently has 1.56 sqm of shopping centre per capita.
All the biggest retailers – Coop, Selver, Maxima, Rimi and Prisma have continued the development of their supermarket-type schemes in populated areas.
INDUSTRIAL MARKET IN TALLINN
CONSTRUCTION OF THE BIGGEST DATA-CENTRE IN THE BALTICS BEGINS
Only one bigger warehouse projects, with a total warehousing area of 14,900 sqm, was completed in Tallinn and its surroundings in 2019. However, around 100,000 sqm could be completed in the next 1-2 years.
Most of these projects were developed for own use. These projects increased the total leasable area of modern warehousing premises in Tallinn and Harju County to 1,335,000 sqm.
RESIDENTIAL MARKET IN TALLINN
AVERAGE PRICE IS AN ALL-TIME-HIGH
The average sqm price for an apartment in Tallinn increased by 9.7% in 2019 reaching €2,024 per sqm in December 2019. Reasons behind the increased prices for apartments include: low interest rates, rising income levels, and the purchase of apartments for investment purposes. Altogether 40% of the deals took place without a bank loan and overall 10-20% of the apartments were bought as investments.
The new trend is mini-apartments of 12-25 sqm, priced between €4,000 to €6,000 per sqm in the city centre, for short term rent.
LAND MARKET IN TALLINN
IKEA ACQUIRED LARGE SIZED LAND PLOT FOR ITS FIRST FULL-SIZE STORE
In 2019, the number of transactions involving residential land in Tallinn and Harju County decreased by 16%, but the average price per sqm increased by 3.2%.
In the most popular residential areas in Tallinn the average price of land was €70-€105 per sqm and, near the city, €25-€40 per sqm.
The increase in prices was biggest in Rae, Saku, Kiili, Harku and Saue parish, which are located in the immediate vicinity of the city of Tallinn and are increasingly popular.