BALTIC STATES | INVESTMENT MARKET

Investment Market

Transaction Volume

The total volume of investment in commercial real estate in the Baltics amounted to EUR 611 million in 1HY 2018, thus surpassing the record level achieved in 1HY 2015. Total investment turnover in the Baltic States increased by 22 per cent in 1HY 2018 in comparison to EUR 502 million closed in 1HY 2017. Lithuania leads in terms of volume of investment in commercial real estate with  UR 321 million (which is over half of total Baltic investment volume), followed by Estonia with EUR 164 million and Latvia with EUR 126 million. Even though 2018 saw a soft start to the year, the second quarter was distinguished by several large investment transactions in all three Baltic States but most notably in Lithuania. It is also important to note that investment in development  chemes in Latvia, totalling an additional EUR 51 million in 1HY 2018. Average transaction size across the market as a whole was EUR 4.4 million in 1HY 2018 (compared with EUR 4.0 million in 1HY 2017).

Investment Properties

The retail segment attracted the biggest share of investment (40 per cent) in the Baltics, being the main investment activity driver in Latvia and Lithuania in the first half of the year. In Lithuania, investment in retail property accounted for over half (52 per cent) of total volume, driven by the acquisition of Ozas SC by NEPI Rockcastle for EUR 125 million and the sale of BIG SC in Klaipeda to Dutch capital company Westerwijk Klaipeda for EUR 25 million. In Latvia, investment in retail property accounted for 46 per cent of total volume due to the acquisition of SC Galleria Riga by East Capital. Other notable deals in the retail segment included the sale of the former Prisma store in Vilnius for EUR 6.3 million and the acquisition of Kärberi Centre in Tallinn and two Maxima stores in Narva and Tallinn by Lumi Capital.

Investment Yields

In 1HY 2018, prime yields remained largely stable, influenced mainly by tightening competition and harder financing conditions. In Vilnius, prime yields compressed in the industrial segment, reaching 7.75 per cent due to the increasing attractiveness of industrial assets, while prime office and retail yields remained stable at 6.5 per cent. In Riga, prime yields remained stable at 6.5 per cent in the office and retail segments and at 7.75 per cent in the industrial segment. In Estonia, prime yields remained at 6.25 per cent in the office sector, 6.4 per cent in the retail sector and 7.75 per cent in the industrial sector.

Tendencies and Forecasts

• Colliers foresees transaction volume in 2018 exceeding EUR 1.1 billion in total, thus surpassing the level achieved in 2017.
• 2018 has the potential to become a recording-breaking year in Lithuania in terms of investment volume, considering impressive transaction volume closed in the first half of the year.
• New global investors will continue to enter the Baltic market in search of higher returns than in Western Europe or Scandinavia.

Read full Research & Forecast Report here.

Source: Colliers International