Current State and Future Outlook of the Baltic Property Market

The preceding decade was one of tremendous growth for the Baltic property market in the states of Estonia, Latvia, and Lithuania. Financial analysts and economists have recognized an upward climb in the valuation of both commercial and residential properties. This speedy growth in the real estate market has caught the attention of several investors from across the world. To educate our readers on the current market trends, we have extracted some market insights from two reports: the Oberhaus Market Reports Baltic States 2019 and the Colliers International Market Report Estonia, Latvia, Lithuania 2019, and incorporated them in this market overview. First, we will look into the data retrospectively to have an idea about the past year’s ratios and trends. After that, we will analyze our key findings prospectively to forecast the upcoming years.

GENERAL OVERVIEW

All three Baltic states exhibited significant economic growth in the year 2018. Investments in commercial property exceeded €1 bn, which  accounts for €422 million in Lithuania and €513 million in Latvia, thanks to the on-going construction mega-projects in the region. The positive economic climate in Lithuania attracted 45 new FDI projects that contributed to rapid employment, creating 4600 new jobs. Lithuanian government’s decisions to expand into the Fintech sector, aid R&D, and diversify business services are the driving factors behind this rapid yet consistent economic growth. While Latvia attracted foreign direct investment of €513 million, indicating an increase of 3.5% from the preceding year. The country’s economy is progressing, and the future looks promising, as well, with increased wages, growing GDP, and more jobs. However, Estonia is not far behind Lithuania and Latvia in terms of economic performance and manifested a growth of 3.9% in GDP and 9% in foreign direct investments. Estonia’s workspace market attracted large investments from real estate fund managers, private equity funds, and commercial developers. Other positive factors include growing wages, progressing exports, higher employment rates, and rising retail sales. The Baltic’s economic boom is majorly attributed to investments in its estate market. The major lump of investments belongs to Baltic investors, who represent 65% of the total investment alone, and the remaining 35% is invested by International and Nordic investors. The 65% investment by Baltic investors represents a 37% share of the top 5 investors, including NEPI Rockcastle, EfTEN Capital, SG Capital, Lewben Investment Management, and East Capital. 

PERFORMANCE OF BALTIC REAL ESTATE MARKET - KEY FIGURES

Baltic’s real estate market saw a significant increase in the supply of commercial property. The expansion of office space in the capitals of all three states grew significantly in 2018. Lithuania’s capital Vilnius allocated 43,000 sqm of office space to 6 new projects completed in 2018. As demand for modern offices is still increasing steadily, commercial developers can take advantage and lease out the properties quickly -- 80% properties were leased out during the year 2018. Latvia’s capital Riga couldn’t attract investments such as Vilnius did, however, it saw the development of 3 new office projects that supplied 24,900 sqm of office space to the market in the year 2018. 11 new projects are planned for 2019-20 that will add another 140,000 sqm to the office market in Riga. Estonia’s capital city Tallinn remained a super-hot location for developers, thanks to the availability of high-class premises at prime locations of the city. 11 projects, that account for 80,000 sqm of office space, were completed during the year 2018. However, the year 2019-20 is projected to be full of business with 10 new projects set to be completed during this tenure. These projects will supply another 100,000 sqm of office space to the market in Tallinn. The real estate market fluctuated frequently with increasing demand for modern office facilities and a worrying concern for the old building owners. Other than demand and supply, rents and investments in each of the three states were also noticeable. That’s why we will dive into each state’s individual statistics to see its performance. 

This post was contributed by Lucas P. Ampleinvest a review and comparison site for European investors.