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We very much hope that our clients, partners and anyone else interested in the real estate market did not experience extremely negative outcomes in 2020, although all of us were affected to a greater or lesser extent by the current circumstances. Global economies and individual economic sectors have suffered a major blow from the coronavirus pandemic, which also had an impact on the performance of the real estate market that was growing so rapidly before the pandemic. Although the Baltic countries experienced an economic downturn in 2020, the recession in Lithuania, Latvia and Estonia was among the lowest compared to other EU countries. Lithuania’s GDP fell very slightly, the least among the Baltic countries, and probably among the countries of the EU.

LITHUANIA

OFFICE MARKET IN VILNIUS

RECORD NEW SUPPLY AND MORE TO COME

Vilnius saw a record new office supply in 2020, which was driven by strong demand in the modern office sector in the previous years. In total, 11 new projects were completed in 2020 bringing 102,600 sqm of office space to the market. The previous record of new offices was in 2008. After completion of these projects, the total area of usable modern office space (A and B class) grew by 13% to 887,000 sqm at the end of 2020 (see all projects on OHMAP). Currently, Vilnius has 1.56 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

RETAIL PROPERTY SECTOR HAS BEEN HIT HARD BY THE CORONAVIRUS PANDEMIC

The global pandemic and its control measures led to a number of changes in the Lithuanian retail premises sector in 2020. However, the situation in individual segments of this real estate sector varied: from fully or partially closed large shopping centres or stand-alone premises to further successfully operating supermarkets. Therefore, in 2020, investors focused on the development of specialized facilities (DIY, supermarkets), and the managers of existing shopping centres were most preoccupied with existing tenants. The current pandemic has become a considerable challenge for the owners and managers of major shopping centres, as it was necessary to adapt quickly to the changed situation and to discuss with each tenant the conditions for further cooperation (e.g. temporary or long-term rent discounts), replacement of tenants or ensuring the overall functioning of the shopping centre (work organization, safety, etc.). It should also be noted that no new major traditional shopping centres were built in Lithuania in 2020.

INDUSTRIAL MARKET IN VILNIUS

STOCK-OFFICE PROJECTS ON ITS WAY

After moderate expansion of the warehousing sector in Vilnius region in 2019, development in the sector was more active in 2020. Six new projects with a total warehousing area of 52,800 sqm were completed in Vilnius and its surroundings in 2020 and this is 42% more than was completed in 2019. These new projects increased the total leasable area of modern warehousing premises by over 8% to 675,800 sqm.

RESIDENTIAL MARKET IN VILNIUS

HOUSING MARKET LOOKS VERY STRONG

After the end of the first lockdown in mid-2020 and a period of uncertainty, real estate market players felt more relaxed. In the second half of 2020, the Lithuanian housing market did not hesitate and started to move upwards. This largely compensated the market activity losses and pushed frozen prices further up.

LAND MARKET IN VILNIUS

THE NEW INFRASTRUCTURE DEVELOPMENT LAW ENTERS INTO FORCE IN VILNIUS IN 2021

The Law of the Republic of Lithuania on Infrastructure Development that came into effect at the beginning of 2021 defines four infrastructure tax rates for newly planned buildings in Vilnius: €50 per sqm for buildings built in non-priority zones, €30 per sqm for buildings built in priority zones, €18 per sqm for conversion projects, and €15 per sqm for single-family homes. The municipality will use the funds only for the development of infrastructure. This law is particularly relevant for developers who plan to build new buildings in non-priority zones where infrastructure is not fully developed. In such zones, the tax burden on developers may represent a significant part of the development costs (e.g. warehousing buildings in the suburbs, etc.).

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LATVIA

OFFICE MARKET IN RIGA

NEW SUPPLY HAS PUSHED VACANCIES UP

Completion of four new office projects in 2020 added 49,500 sqm of office space to the market in Riga. Total modern office area at the end of 2020 stood at 640,900 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).

RETAIL MARKET IN RIGA

LANDLORDS AND TENANTS WILL HAVE TO ADAPT TOGETHER

2020 was a year of challenges and changes in the retail space segment. With the spread of the Covid-19 virus, national restrictions on trade and services have hit restaurants and cafes, hotels, sports clubs, beauty salons and virtually all non-food stores particularly hard.

INDUSTRIAL MARKET IN RIGA

RIGA HAS THE BIGGEST LOGISTICS CENTRE IN THE BALTICS

Three new projects with a total warehousing area of 131,500 sqm were completed in Riga and surrounding areas in 2020. These new projects were undertaken by LNK Properties, Lidl and Rimi. Recent projects increased the total leasable area of modern warehousing premises in Riga and surrounding areas by 22.5% to 910,400 sqm.

RESIDENTIAL MARKET IN RIGA

MINOR PRICE DROP JUST FOR OLD CONSTRUCTION APARTMENTS IN 2020

Apartment prices in Riga dropped by 0.9% in 2020, after an increase of 2.3% in 2019. In 2020, prices slightly decreased in old construction buildings in residential districts, while prices for new construction apartments, despite some fluctuations in middle of the year, stayed at the same level as in 2019.

LAND MARKET IN RIGA

THE LAND MARKET IN RIGA WAS STABLE WITH MODERATE PRICE GROWTH IN 2020

Prices for plots for residential development (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 central Riga areas. Commercial land, near highways, ranges from €15 to €20 per sqm, with commercial land in Riga neighbourhoods €20–€80 per sqm. In general, land prices in Riga and its vicinity remained stable in 2020, except for land for commercial use in Riga neighbourhoods, where prices increased by 5-10% on average.

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ESTONIA

OFFICE MARKET IN TALLINN

THE VOLUME OF DEVELOPMENTS IS INCREASING

7 new larger projects and a few spaces in mixed-use buildings were completed in 2020, bringing almost 34,000 sqm of office space to the market, which is 70% more than in 2019. After completion of these projects, the total area of modern office premises grew by 3.4% to 1,024,000 sqm at the end of 2020. However, the completion of several other projects had been delayed or suspended, due to high construction prices, labour shortages, and the recession.

RETAIL MARKET IN TALLINN

NEW BRANDS IN ESTONIA’S RETAIL MARKET 2020/2021

In 2020, as in 2019, no large shopping centres were opened in Tallinn. At the end of 2020, 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 1.55 sqm of shopping centre per capita.

INDUSTRIAL MARKET IN TALLINN

FURTHER RAPID DEVELOPMENT IN THE
STOCK-OFFICE SEGMENT

Three traditional warehouse projects, with a total warehousing area of 23,600 sqm, were completed in Tallinn and its surroundings in 2020. These projects were developed for their own use and increased the total leasable area of modern warehousing premises in Tallinn and Harju County to 1,358,600 sqm.

RESIDENTIAL MARKET IN TALLINN

AVERAGE PRICES AT AN ALL-TIME-HIGH

The average sqm price for an apartment in Tallinn increased 4.9% in 2020 reaching €2,124 per sqm by December 2020. Reasons behind the increased prices for apartments include higher proportion of deals with new apartments, (in total 32% in 2020 compared to 26% in 2019), lower interest rates, with rising incomes and the purchase of apartments for investment purposes. Altogether 45% of the deals took place without a bank loan and around 10% of the apartments were bought as investments.

LAND MARKET IN TALLINN

THE VOLUME OF TRANSACTIONS IS INCREASING

In 2020, the number of transactions involving residential land in Tallinn and Harju County increased 27%, but the average price per sqm decreased by 3.7%.

In the most popular residential areas in Tallinn the average price of land was €70-€110 per sqm, and near the city, €30-€50 per sqm.

The increase in prices was biggest in Rae, Saku, Kiili, Harku and Saue parishes, located in the immediate vicinity of the city of Tallinn and are increasingly popular.

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2021 REAL ESTATE MARKET REPORT

Baltic States Capitals
Vilnius, Riga, Tallinn

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