In the Baltic States, the real estate (RE) market was record high in 2021 – the volume of commercial real estate investment transactions has doubled compared to 2020, reaching 1.5 billion euros.
The most valuable deals were concluded in Latvia, reports the international real estate consulting company Newsec.
Last year, transactions for 610 million lats were concluded in Latvia. euros, in Estonia by 447 mln. euros, but in Lithuania – 444 mln. euro.
The record high results were determined by the availability of capital, general trends in the world and the positive market sentiment. Investors are actively looking for objects, however, the lack of supply hindered the achievement of even better results in the real estate investment market.
According to Neringa Rastenīte-Jančūnienė, head of Newsec’s capital market services group in the Baltic States, the volume of transactions for the Baltic region is 1.5 billion euros. In order to maintain the interest of foreign investors, this card should not be lowered in 2022 either.
“In the past, investors were unsafe to enter the Baltic States due to the volume of small transactions, which in the last few years did not exceed 800 million. euro border. Beyond the 1 billion mark, certain psychological barriers were breached. We have never seen as many people want to invest in real estate as there were last year. In 2021, everyone invested – funds, individuals, property management companies, business representatives. In Estonia, for example, two thirds of transactions were with non-professional buyers. Compared to previous years, more transactions were concluded, however, they were smaller. For example, in 2020 the average transaction amount reached 50 million euros, but in 2021 it exceeded 23 million euros, ”says N. Rastenīte-Jančūniene.
International investors are more looking for objects in the logistics, office and housing rental segments. Meanwhile, private equity investors are more interested in small commercial buildings, such as neighborhood-type TC, retail parks.
The expert points out that although the office segment in the Baltic States is going through a golden age, there is a significant shortage of objects for sale.
“The office segment in the Baltic region demonstrates stability; last year, the volume of transactions remained at 300 million. euro. However, its potential is like a time bomb. The occupancy rate of business centers is currently very high (the vacancy rate for Class A offices in Vilnius reaches only 3.4%), the figures for leased space exceed records, for example, in 2021 more space was leased in the Vilnius office market compared to 2020. The market is hampered by the lack of new properties that are attractive to investors for sale. If there were more offers, we would see even larger volumes of transactions in this segment, ”says N. Rastenīte-Jančūniene.
According to the head of Newsec’s capital market services group in the Baltic States, the logistics segment in 2021 lived up to expectations – three times more was invested in it than a year earlier. However, the expert warns that the unstable international relations with China may quickly be reflected in the market of investment real estate in the industrial segment, especially in Lithuania.
“Although the industrial real estate segment flourished last year, Lithuania’s conflict with China is currently straining market players, and the logistics and manufacturing segments may be most affected – investors, looking at the geopolitical situation, may start to evaluate such objects more cautiously and postpone purchases for some time. At present, the prevailing tension in the transactions is not yet reflected – they take place by inertia – however, it is difficult to make clear predictions about what changes are expected in such an uncertain situation, ”emphasizes N. Rastenīte-Jančūniene.
An expert from Newsec points out that the view of the large shopping center (TC) segment has been skeptical recently, as there are very few such transactions in Europe. There have been no sellers or buyers in the market for some time, due to the temporary stagnation of the segment. It was moved by the acquisition of the Alfa shopping center in Latvia by Akropolis Group, which became the largest transaction in the Baltic States.
“After surviving the pandemic, retail properties have strengthened their liquidity – in 2021, the value of transactions in this segment was twice as much as in 2020. We observe that due to the decrease in tension caused by the uncertainties caused by COVID-19, this segment is recovering, but the most coveted product has become slightly smaller, neighborhood-type shopping centers, ”says N. Rastenīte-Jančūniene.
The housing rental segment in the Baltics still has room to grow. In 2021, investment in such real estate amounted to about EUR 110 million, which was about 8% of the region’s total business. Meanwhile, in other countries, such as Finland, such objects accounted for as much as 37% of all investment transactions in 2021.
In the “Baltic States”, this segment is still new. We think that this year the number of transactions for the purchase of housing for rent will grow, but this type of agreement will accelerate in 2023–2024. per year. Seeing the potential of the segment, we plan to pay more attention to it this year, ”says N. Rastenīte-Jančūniene.
According to the expert, in the first half of this year, the real estate investment market will be active due to the inertia acquired in 2021. On the other side of the year, the market may face challenges – investors may slow down their plans due to possible rising interest rates.
Newsec is an international real estate consulting company founded in 1994 in Sweden, operating in seven Nordic and Baltic countries. The range of services it provides covers all areas of commercial real estate services. Newsec acts as an intermediary in real estate investment transactions, as well as leasing and selling commercial real estate, providing real estate management services, representing the interests of clients, developing new or existing projects.
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