Lithuania leads in terms of the volume of investments in commercial real estate with EUR 260 million, followed by Estonia with EUR 194 million and Latvia with EUR 57 million. Total investment turnover in the Baltic States slightly decreased by 2.4 per cent in 1HY 2017 in comparison to the EUR 523 million closed in 1HY 2016.
In 1HY 2017, the retail segment attracted the biggest share of investment (43 per cent), up from 34 per cent in 1HY 2016, being the main investment activity driver in all three Baltic States in the first half of the year.
Following the acquisition of Kesko Senukai LC in Kaunas in 2016, the American fund CPA:17 – Global, managed by W. P. Carey Inc., considerably expanded its portfolio with the acquisition of 11 Kesko Senukai stores and a logistics property in Lithuania. In addition, 7 DIY stores were acquired in Latvia and Estonia at a total transaction value of EUR 127 million, which was implemented through the acquisition of 70 per cent of shares of Baltic Retail Properties. Other notable deals in the retail segment included the acquisition of retail and administrative premises in Gedimino Ave. 20 in Vilnius by Sportland LT and the sale of Narva Prisma hypermarket in Estonia by EfTEN Capital to French asset management company Corum.
Investment in the office segment attracted the second biggest share of total transaction volume in the Baltic States in the first half of the year and accounted for 28 per cent of total volume. Notable deals in the office segment included the acquisition of the Vertas BC by Eastnine, the Duetto I BC by Baltic Horizon and new office building Penta BC under construction by Technopolis in Vilnius, the sale of the Hobujaama 4 office building to Colonna in Tallinn and the sale of the Ostas skati office building in Riga.
At EUR 111 million, investment in industrial/warehouse property accounted for the third largest share of transaction volume in 1HY 2017, driven by the sale of the VGP Park Nehatu in Tallinn and the acquisition of the Rimi logistics centre in Vievis (a sale-purchase transaction) by United Partners Property in Lithuania.
Average transaction size across the market as a whole was EUR 4.0 million in 1HY 2017 (compared with EUR 3.5 million in 1HY 2016). The increase in average transaction size can be attributed to the large number and volume of deals above the EUR 10 million threshold in 1HY 2017 (ca 64 per cent of total volume). At the same time, approx 78 per cent of the total number of transactions in 1HY 2017 in the Baltic states were deals of less than EUR 3 million.
In 1HY 2017, prime yields experienced downward pressure in all commercial property segments in the Baltic states, compressing by ca 20-25 bps, driven by cheap financial capital, shortage of investment grade products and strong investor appetite.
In 2HY 2017, the investment market is expected to remain active as most investors have capital available and are constantly looking for good quality cash flow properties. After a record-breaking 2015 and active 2016, Colliers foresees transaction volume in 2017 exceeding EUR 1.0 billion in total and thus, remaining at the previous year‘s level.