The Lithuanian Property Market

RESIDENTIAL PROPERTY PORTFOLIOS BEGIN A NEW TREND

Economic growth has returned to Lithuania. After experiencing a slight -0.9% decline caused by the pandemic in 2020, the Lithuanian economy began showing distinct signs of recovery, posting 4.7% of growth in GDP for the first half of 2021. Both businesses and the general population at large have adapted to the new reality. The accelerating vaccination process and declining operational constraints have laid the grounds for a gradual recovery, and the Lithuanian economy in 2021 could grow by 4.1-5.1% based on various forecasts. Meanwhile, in the coming years, the economic recovery is expected to continue, with growth projected to reach up to 4% in 2022. Wages are expected to grow above 10% this year, followed by a significant increase in retail turnover, decreasing unemployment and intensifying competition for talent. Unfortunately, improving customer confidence, increasing inflation and rising demand in various segments is giving rise to talk about possible economic overheating, as well as the need for more attentive control of the relief funds that have been provided.

A rally in the second half of 2020 allowed the Lithuanian real estate investment segment to end the year on a high note. In 2020, the total volume of investment deals made in Lithuania was 60% of the previous year’s, reaching EUR 265 million. Rapidly growing interest in the industrial and logistics segment, and stable demand for prime offices, were the main driving forces. The same trend remained in the first half of 2021, when close to EUR 200 million in transactions were closed mainly in the industrial, logistics and retail segments. Q3 2021 was dominated by transactions in the retail sector, illustrating that the demand for well performing projects in very good locations persists.

Contact: Kristina Živatkauskaite ˙ k.zivatkauskaite@newsec.lt

»Q3 2021 was dominated by transactions in the retail sector, illustrating that the demand for well performing projects in very good locations persists«

Interesting trends on the Lithuanian property market in 2021

INDUSTRIAL AND LOGISTICS CONSTRUCTION EXPECTED TO SURGE

The largest property developers in this segment have more confidence and have commenced construction of new projects, often at the full pre-lease stage. This is mostly related to the manufacturing segment, however. Many logistics and warehouse projects were constructed for the actual end user. Moreover, growth in traditional retail, e-commerce and production volumes reflect the increasing demand for speculative space as well.

EUR 265 MILLION

Total investment volume in 2020

EUR 300 MILLION

Total investment volume expected in 2021

ACTIVITY ON THE VILNIUS OFFICE MARKET REMAINS HIGH

The capital city office segment is expected to experience annual supply growth of around 15% or above 110 thousand sqm. Take-up had already reached the annual forecast‘s midpoint of around 90 thousand sqm in July, which was in line with the 5-year historical average for transactions. This year has witnessed activity from both large and small companies alike, and existing demand is seen from international and local tenants. Girteka, Dexcom, Wargaming, Alter Domus, Amber Grid and others were among the office tenants who made the biggest deals in the active Vilnius market.

PLANS FOR NEW HIGH-RISE OFFICE BUILDINGS IN VILNIUS CBD

Increased activity should soon be seen in the development of investment-grade office projects. A number of large scale multiple tenant type Class A properties have been scheduled or are already under construction in the Central Business District. A total of four – CORE, Artery, FLOW and HERO – will deliver more than 100,000 sqm of office space. Total market supply in 2022–2023 may increase by about 200,000 sqm or 21% and form a new investment-grade supply for investors.

4.5%

GDP growth expected in 2021

RESIDENTIAL PROPERTY PORTFOLIOS BEGIN A NEW TREND

The booming residential market is delivering new agreement opportunities for investors in the developing rental market, with portfolios of apartments for lease being developed. This reflects the long-term business plans of property developers and investors in all three Baltic states. The announcement at the beginning of September of a co-investment vehicle by YIT and the BTA Baltic Insurance company for investment in rental apartments is a clear barometer for where the market is heading.

THE GIANT OF BALTIC SHOPPING CENTRES BECOMES EVEN STRONGER

Akropolis Group, the leading shopping and entertainment centre development and management company in the Baltic States, finally announced the development deadline of their new project in Vilnius. H2 2024 is when the multifuntional cultural, leisure, business and shopping center Vilnius Akropolis Vingis will be delivered. The complex will consist of a 90,000 sqm shopping, services and cultural activities area and about 32,000 sqm of office complex. Following the closure of the SC ALFA acquisition, the group will, by the end of 2021, be managing a portfolio of 5 large scale shopping centres across the Baltics. The Akropolis Group will have 316,000 sqm of retail GLA in their hands alone and enjoy coverage in 4 major Baltic cities.