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How would the development of Rail Baltica affect the real estate market?

Riga

Agija Verdina, Associate Director - Research & Consultancy

 

Construction of the Rail Baltica railway line has started in all three Baltic States, with the current goal of building it by 2026, and the Trans-European Transport Network TEN-T, of which Rail Baltica is a part, to be completed by 2030. We are already seeing how the Rail Baltica project is starting to change the look of our city—old objects are being demolished, new objects are being built.

The exact impact of Rail Baltica on the real estate market, its liquidity and price increases or decreases will be assessed a few years after the completion of the project. In general, the construction of any new railway line has a positive effect on the settlements near where the stations are located—there is a more pronounced development around the station and higher real estate prices. Accordingly, improvements in local transport infrastructure are generally considered to be positive for both the region's economic prosperity and property prices. However, easy access to a train station with a fast connection to the city is very different from building a new railway, road or airport on the edge of a particular property. When it comes to transport, you want to be close to it, but not too close.

As the construction of Rail Baltica also includes the construction of regional stations in and around Riga, examples from other countries suggest that this may have a positive effect on real estate prices. This effect is particularly pronounced in metropolises with a large population and in the metro rather than by train, but parallels can also be drawn by train line. A nationwide study shows that properties located 500 meters from a metro station are 10.5% more expensive than those located a kilometre away. The most extreme example is London, but the trend is also reflected in other major cities. Glasgow has the largest network of suburban railways outside London, and properties up to 500 meters from the station are 6% more expensive than those further afield. Various studies indicate different price increases in the range of 2-11%, but the effect of proximity to the station is always positive. And what is interesting, is that research shows that highway noise has a more negative effect on the value of the property than being close to railway tracks.

Good public transport connections to the suburbs allow these suburbs to develop faster and offer better access to housing, and residents can enjoy the benefits of an urban agglomeration without paying city centre rents. However, in order to see these effects, it is important to integrate the different modes of transport into one common and easy-to-use one, and when building new rail lines, it is important not to divide the city into two unrelated parts but to provide adequate infrastructure—especially for the convenience of pedestrians and cyclists.

There is already a great deal of interest from developers in the Rail Baltica project, planned stations and infrastructure changes. Among the most visible objects in Riga are the development around the central station, especially in the office segment—Origo One business centre has been built, Novira Plaza Riga business centre is under development, and Linstow has announced the construction of another business centre by concluding a lease agreement with SEB bank.

 

 


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Agija Verdina

Associate Director | Research & Advisory

Riga

Working in the industry since 2014. Previous experience working within bank sector with distressed real estate portfolios in Latvia and Lithuania as a real estate analyst. Joined Colliers in 2018 as senior real estate market analyst, a year later was promoted to Associate Director. Working with private clients providing research within all commercial real estate sectors with strong focus on retail & residential sectors as well as providing ongoing market research reporting and data.

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