According to a recent study conducted by the international real estate consultancy company Re&Solution, the Latvian, Lithuanian and Estonian real estate market is capable of attracting the interest of investors, while local market participants have to be ready for compromises and constructive cooperation.
Mr. Andzejs Neguliners, Head of Re&Solution Latvia, comments: "After a long and steady stimulating growth, the real estate market in Latvia has experienced a change of market trends and circumstances that have been unexpected, even sudden, for many market participants, and as a result the market even looks perplexed. But this is a time when it is possible to take decisions and initiate the implementation of new projects and conclude new transactions in a more pragmatic and weighed manner. The real estate market, like other markets, is developing cyclically, and this market depending on the location, is subject to certain laws which must be taken into account."
Retail market
- it is the best time for international retail chains to enter the market, more quickly and with a larger network at much lower rental prices than previously, selecting best locations and lowest rent rates, and thus occupying strategic places;
- retail space owners have become more flexible and ready to offer better tenancy terms and conditions and beneficial payment and contractual terms and conditions;
- in sight of the present economical situation, decrease of retail turnover will continue;
- success will be obtained by those owners of commercial premises, who will be able to adapt to existing requirements of retailers and changing habits and income of buyers, thus creaming off more successful commercial sites from the less successful.
Office market
- projects that are in final stage of development will be finished, other developments will be postponed for uncertain period of time;
- tenants are evaluating existing rented space with a purpose to optimize their costs and, therefore, are seeking for more attractive conditions prices, contractual terms and conditions, smaller areas;
- the upcoming trend from the office landlords is offering of rent free agreements in order to sign long-term agreements with the tenants;
- as construction costs have decreased significantly, currently it is most attractive time to develop new projects and to get better return on investments in the future (in comparison to the projects developed during last years).
Industrial / warehouse
- only build-to-suit developments can be expected to be developed.
Investments
- all trends depend on the economic situation and the government's ability to change the public and business state of mind;
- lack of financing;
- current investments yields have increasing trend;
- prices of commercial properties are still above the cost price;
- currently it is the most attractive time to invest in the properties with stable cash-flow ;
- many distressed properties are expected to appear in the market;
- foreign investors are scrupulously evaluating real estate supply in various markets, choosing the most attractive offers.
Mr. Ricardas Cepas, Head of Re&Solution Group, comments: "The current market situation in the Baltic countries demonstrates the opposite situation compared to what it was one or two years ago. Many market players have become more responsive and forthcoming, having drawn lessons from the ongoing market changes. Some developers are looking for and turning to partners to gain access to additional funding to complete existing projects, others, in turn, are offering objects for sale, in order to ensure future development. However, developers have to understand that securing of investments is subject of a competitive struggle."
Having analyzed the Latvian real estate market from the legal and tax viewpoint, Ms Ilga Gudrenika-Krebs, a partner of the international law firm Klavins & Slaidins LAWIN, comments: "Dynamic changes in the real estate market are reflected not only in market trends, but also in le
