● THE LITHUANIAN PROPERTY MARKET NEWSEC PROPERTY OUTLOOK • SPRING 2020
THE LITHUANIAN PROPERTY MARKET
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ALL EXPECTATIONS EXCEEDED AS RECORDS ARE SET ON THE PROPERTY MARKET
Economic growth in Lithuania in 2019 surpassed even the most optimistic forecasts. GDP last year grew 3.9 per cent, marking a third straight year of similar strength. The country is well placed to show further vigour. For the first time in almost three decades, Lithuania’s population increased, not only in the capital of Vilnius but also in the other big cities. The main factors behind the change are Lithuanian citizens returning from abroad, as well as immigrants from Ukraine and Belarus. Unemployment in Lithuania increased slightly in 2019, but the growing labour force offers a favourable environment for the foreign service providers and manufacturers that are rapidly setting up and expanding in the country. 2019 was a record-breaking year for Lithuania’s transaction market. The
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country’s investment volume reached an all-time high of over EUR 435 million, and accounted for nearly 60 per cent of the total Baltic market. In 2020, investors, aiming to direct investments to properties that generate cash flows, will quite aggressively seek to acquire properties that offer a good ratio of quality to value. Newsec no longer expects marked compression of yields, which will stay just below 6 per cent in the prime office segment. There remains a big chance, though, that the 5 per cent yield level will be tested in the central business district. Yield compression has reached 6.5 per cent in the retail segment and 7.5 per cent in the industrial segment. After record activity last year, when new lease agreements were signed for approximately 115,000 sqm, demand will remain strong in the Vilnius office
market in 2020 as well. Over the next two years tenants will be offered some 300,000 sqm of new office space. Pre-lease agreements will be the driver of projects now in development, with all office developers set to actively compete for several large tenants. Once those leasing transactions are completed in the market, the annual average will reach the level of the last 5 years, which was 70,000 – 80,000 sqm. Lack of space will be greatest in class A properties, especially in the central business district, with vacancies of less than 3 per cent. Contact: Kristina Živatkauskaitė k.zivatkauskaite@newsec.lt
