We are pleased to introduce our annual overview covering commercial real estate market trends and forecasts as well as the latest statistics and insights for the Baltic region.*
Despite the lasting influence of the pandemic, market participants have adapted to its impact on the business environment. This resulted in total investment volume in the Baltic States reaching a record high number - EUR 1.95 billion in 2021, exceeding the total record level achieved in 2015.
The industrial and office sectors continued to be less affected by the pandemic, with both sectors currently having high development volumes and good take-up figures. However, these are the sectors that have been first affected by increasing construction costs, which in turn have put upward pressure on new development rental rates. The retail sector continued to suffer from the pandemic-related restrictions and – the same as hotels – from lack of tourists. Grocery-led retail units remain strong, while traditional shopping centres are currently forced to constantly change and adapt as footfall and turnover figures continue to drop. The hotel sector is still severely affected by the pandemic, and it will take a while for that sector to recover. Both developers and investors have shown increased interest in developing and acquiring new asset classes for the Baltic market such as rental residential, student housing and senior housing. In 2021 we already saw notable transactions within these emerging asset classes.
* This report has been prepared and shows assumptions and expectations as of the time when the market was already recovering from the Covid-19 pandemic and most of the restrictions were being eased, that is, prior to February 24th 2022 when Russia launched a military intervention in Ukraine. The incursion received widespread international condemnation, including new sanctions imposed on Russia. The situation is expected to have a negative effect on the Baltic economies, though the exact scale of the impact is currently hard to estimate.