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2014.04.07 11:42

Colliers: Lithuania’s real estate sector thrived in 2013

DELFI|The Lithuania Tribune2014.04.07 11:42

For Lithuania, 2013 was a year of sustainable economic recovery. Despite some dampening factors (a slowdown in export growth, increased tension with Russia, and further contraction of the eurozone economy), a strong increase in domestic demand followed by a recovery of the construction sector created favourable conditions business investment in Lithuania, particularly in the real estate sector, writes Colliers International in its Annual Real Estate Market Report.

 For Lithuania, 2013 was a year of sustainable economic recovery. Despite some dampening factors (a slowdown in export growth, increased tension with Russia, and further contraction of the eurozone economy), a strong increase in domestic demand followed by a recovery of the construction sector created favourable conditions business investment in Lithuania, particularly in the real estate sector, writes Colliers International in its Annual Real Estate Market Report.

The economy of the Baltic States continued to be one of the fastest growing in the EU, further projecting the region’s image as stable and promising market. As a result, the investment market, one of the major indicators of the health of the real estate market, reached pre-crisis levels (approx EUR 770 million) with a few large deals ahead (SMI Group Real Estate portfolio, EPI Baltic I portfolio, and Vilnius Business Campus). Baltic, Nordic and CIS investors focusing on real estate investment funds dominated the Baltic market.

In 2013, the Vilnius office market reported the most activity in the commercial real estate segment, with office space supply growing by 4.5 percent. A spike in business centre construction (currently a Gross Leasable Area [GLA] of 70,000 sqm under construction) coincided with higher demand for office space (spurred by the expansion of Shared Service Centres and relocation of public institutions) and a significant decrease in vacancies, which sunk to 9.3 percent, the lowest since 2009. This helped balance lease negotiations between landlords and tenants, though the former still enjoyed a slight advantage in the market in 2013.

In the retail segment, an overall retail growth of 4.5 percent two years in a row gave way to increased movement. In 2013, the retail market in Lithuania was the most active it’s been since the economic crisis, welcoming new market players, such as IKEA, H&M, and Fresh Market. Several new retail projects reached completion (IKEA SC in Vilnius, Viciunai SC in Kaunas, a total GLA of 31,800 sqm) with others under construction (DomusPro SC, Prisma SC, Norfa SC, Luize SC, total GLA 26,700 sqm).

The expansion of industrial companies and construction of built-to-suit warehouses sparked growth in the industrial segment in Lithuania, creating the strongest activity in warehouse market since the crisis with 130,000 sqm in new warehouse projects scheduled for 2014-2015. However, Colliers International Director in Lithuania Ramune Askiniene says that new tenants continue to face difficulties in finding suitable modern warehouse space as majority of new developments are built-to-suit projects. Growth in rental rates of four-six percent nationwide was still too low to attract investments for new, speculative developments.

The Lithuanian hotel market also grew in 2013, taking in 10.5 percent more tourists than the year before. Much of this additional business can be attributed to Lithuania’s EU Council presidency, a growing conference market (10-15 percent over 2012), and European tourism market trends, which show an increasing interest in new, emerging travel destinations. To accommodate this new growth, new international hotel brand Louvre Hotel Group entered the market as local hotel brands Europa Group and Amberton expanded their existing networks. Moreover, various international hotel brands (Hilton, Sheraton, Ramada, Accor) have been actively seeking to expand in Lithuania, with several planning to either open new hotels or rebrand old ones in the near future.

Overall, the Baltic States outlook for 2014 is optimistic amid a series of new transactions and ongoing construction activity. Vacancy rates in existing buildings in all segments are likely to stay low, rent rates continue to increase and Colliers does not exclude the possibility of new investment players entering the region in the near future. A more comprehensive review of the Baltic real estate market can be found in the full Colliers International Annual Market Report.

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