In summarizing the year 2022, the predictions that the war in Ukraine would affect both the economic development of various countries and their real estate markets, have come true. It is obvious that the Baltic countries, being in the neighbourhood of Russia and Belarus, would be more directly affected by the consequences of aggression against Ukraine instigated by those countries. The Baltic countries have been members of NATO since 2004 and can feel safe, but due to the events of 2022, various sectors of the economy in Estonia, Latvia and Lithuania faced challenges large and small, including the significant amount of bilateral aid provided to Ukraine and the substantial flow of people fleeing the war directly into the Baltics.
OFFICE MARKET IN VILNIUS
OFFICE SECTOR REACHED ONE MILLION SQUARE METRES, REMAINING VERY STRONG IN 2022
As in previous years, there was a sufficient supply of new office space in Vilnius during 2022. And in the course of the year, the total usable area of modern office space in Vilnius exceeded one million square metres. The capital’s office market has accumulated significant space in the more than 20 years since 1998–2000, when new business centres were more actively built or older buildings were modernised and repurposed into present-day offices.
RETAIL MARKET IN VILNIUS
Owners of the Retail Schemes Focused on Working with Existing Tenants
In 2022, no new, large, traditional shopping centres were opened in Vilnius. At the end of 2022 there were 27 shopping centres in the city (those over 5,000 sqm GLA with over 10 tenants), with a total leasable retail area of 512,700 sqm. As the city’s population increased in 2022 by around 5%, the shopping area per capita decreased to 0.89 per sqm.
INDUSTRIAL MARKET IN VILNIUS
LESS SPECULATIVE PROJECTS, WITH GREATER FOCUS ON MULTIFUNCTIONAL SCHEMES
After moderate expansion of the warehousing property sector in the Vilnius region in 2021, development was more rapid in 2022. Seven new projects with a total warehousing area of 74,000 sqm were completed in Vilnius and its surroundings during 2022 – 76% more than in 2021. These new projects increased the total leasable area of modern warehousing premises by over 10% to 791,400 sqm.
RESIDENTIAL MARKET IN VILNIUS
MARKET ACTIVITY DROPPED SIGNIFICANTLY, WHILE PRICES CONTINUED TO INCREASE IN 2022
Despite the significant decline in housing market activity in Lithuania in 2022, the rapid growth in housing sales prices continued for almost the entire year. Only at the end of 2022, was a clear stabilisation of sales prices in evidence, something not unexpected. Rising mortgage rates, falling income in real terms due to inflation and the not overly optimistic expectations of the population, forced home buyers to postpone their purchase of residential properties at record high prices.
LAND MARKET IN VILNIUS
ECONOMIC UNCERTAINTY COOLED LAND MARKET ACTIVITY
In 2022, the mood in the land plot market was noticeably cooler than in the extremely hot preceding year. The significant slowdown in the activity of the housing market somewhat dampened the optimism of developers. Still, despite the decrease in activity in the land sector, the sales prices for land plots continued to increase further in the first half of 2022. In less desirable areas of the city, prices increased by up to 5%, while the most attractive plots of land located in the centre of the city or in adjacent areas, increased by 5-10%. Asking prices for plots in the central part of the city or other prestigious districts suitable for residential and commercial development (with detailed plans or a construction permit), are now at €550–€1,600 per sqm of land, or roughly €450–€1,200 per gross buildable square metre.
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OFFICE MARKET IN RIGA
TENANTS ARE LOOKING FOR ENERGY EFFICIENCY
Only one office project was completed in Riga in 2022. The first stage of the Verde business centre with 15,000 sqm was completed and this project increased total office space (A and B class) to 658,800 sqm. Following the difficult times of the pandemic, entrepreneurs have been choosing smaller, functional and energy efficient premises, with the hybrid working environment remaining relevant. Unfortunately, the world’s geopolitical situation has created new challenges for these businesses. Rapidly increasing inflation and an increase in costs across all sectors, has made the decision to expand or relocate much more difficult.
RETAIL MARKET IN RIGA
SIGNIFICANT FOCUS ON SUPERMARKETS CONTINUES
When 2022 began with the cancellation of various measures that had limited the spread of the Covid-19 virus, many thought that after this relaxation of restrictions, the already suffering commercial space sector would finally be able to recover and only positive development of the segment could be expected. However, the extended war in Ukraine, the subsequent unpredictable energy price increases and high inflation have brought new challenges not only to the retail segment but the entire real estate industry.
INDUSTRIAL MARKET IN RIGA
A FOCUS ON ENERGY EFFICIENT BUILDINGS
In 2022 the world was rocked by war in Ukraine. It introduced major changes in all areas, including the property market. Everything remained very expensive, affecting necessities and things like entertainment. People remained cautious. Employers started reviewing the need for certain room sizes as well as overall costs. There is also a possibility that some current development projects could be delayed because of increased costs and overall uncertainty .Although the construction process remains stable, developers have become more nervous and hesitant to initiate large developments. Industrial properties are also affected by energy costs. When building new industrial parks everyone is thinking more about heating solutions so that more savings can be made. Currently and importantly, existing industrial parks are trying to switch from natural gas to LPG to ensure lower heating costs in winter.
RESIDENTIAL MARKET IN RIGA
PRICES INCREASES IN ALL RESIDENTIAL SEGMENTS
As demand for apartments decreased in the second half of 2022, the sale prices had dropped a bit by the end of 2022. Despite this, overall apartment prices increased by 4.5% during 2022. Some vendors are rethinking, and waiting for a more active period providing they are not in a hurry to sell their home.
LAND MARKET IN RIGA
WAITING FOR THE LAND MARKET TO RISE
The land market in 2022 decreased, especially with for larger plots of land. One reason, is the significant price increases for building materials. Those clients who did choose to buy land, tried to find already started or unfinished projects, which significantly reduced construction costs. Most clients were also convinced that real estate prices would fall, which further influenced the reduced interest in land. The most requested plots of land were for the construction of a private house on a small land area, with all services established, and near to water.
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OFFICE MARKET IN TALLINN
DEMAND HAS COME TO A HALT
Five new larger office projects and a few spaces in mixed-use buildings were completed in 2022, bringing almost 50,000 sqm of office space to the market. This is twice as much as in 2021. After completion of these projects, the total area of modern office premises grew by 4.8% to 1,095,600 sqm by the end of 2022. Completion of several projects was delayed or suspended, due to high construction costs and labour shortages.
RETAIL MARKET IN TALLINN
AS COMPETITION INCREASES, CONSUMPTION DECREASES
In 2022, as in 2021, no large shopping centres were opened in Tallinn. At the end of 2022, there were 42 traditional shopping centres (including those with over 5,000 sqm of GLA and over), with a total leasable area of 678,300 sqm. Tallinn currently has 1.48 sqm of shopping centre per capita. An additional 40,000-60,000 refugees have arrived from Ukraine or other countries.
INDUSTRIAL MARKET IN TALLINN
RESIDENTIAL MARKET IN TALLINN
The average sqm price for an apartment in Tallinn increased 22.1% in 2022, reaching €2,970 per sqm by December 2022, which was a new record. It was a significant jump in prices when compared with the annual increase of 5% in 2020. The reasons behind these increases include overall growth in demand, lower interest rates, rising incomes, high inflation expectations/predictions and the purchase of apartments for investment purposes.