During the last year and the year before the last commercial real estate sector was dominated by the retail branch. This can be attributed to large transactions that took place last year, including the purchase of three large shopping malls in the capital city: Riga Plaza, Domina Shopping and Galerija Azur.
It seems everything that could be resold was resold and commercial real estate along with other business sectors of Latviа encountered a problem — the shortage of projects. Regardless of the fact that investors' interest in the country stays more or less on the same level, the number of available good quality projects decreases along with the earning capacity. As a result, investors approach new offers with greater caution.
Last year local (from the Baltic states) investors demonstrated better capitalization compared to 2015. The northern neighbours Estonians invest most actively in Latvia. Latvians do not yield much to them. However, Lithuanian investors have made only a few purchases during the last year. But their interest will increase this year, because competition in Lithuania is toughening and investors are looking for new investment opportunities. Let's hope they will find them in Latvia.
Private players from CIS countries are still present in Latvia, but to a lesser extent compared to the rich, but short period of resident permits programme in exchange for investments. Moreover, investors from the east most often look for earning assets in the centre of Riga, which are becoming increasingly sparse.
Upon taking a look at the numbers one could imagine that population of Latvia is settling into offices en masse. Last year almost 19 thousand m² of office premises were occupied. For comparison: in 2015, this indicator amounted only to 4000 m². This sudden rise is mainly the result of operational commissioning of three custom built office buildings in Riga.
The expectation is that this year the market of office premises will increase by 26 400 m² of floor space. Some projects, which are still in the planning stage, will pass into construction phase. In addition, owners of the existing office centres due to competition may pick up their reconstruction plans to improve the quality of the objects.
The optimistic forecast for the developers profiting from commercial real estate is based on the aforementioned circumstances as well.
