A POSITIVE ECONOMIC BACKGROUND UNDERPIN THE SUCCESS OF THE BALTIC INVESTMENT MARKET
Global real estate advisor, CBRE, has launched its first ever EMEA Investment Guide, providing an overview of the commercial real estate market in 36 countries.
“For the first time CBRE has compiled a comprehensive and meaningful information document for investors, who are interested in the EMEA, CEE and Baltic regions, providing insight into the economic situation and outlining the legal environment in each country. Investors who are interested in the Baltic region and are attracted by the stable economic situation and attractive yields can gain a basic understanding for each country in respect of the economic and property fundamentals that underpin real estate investment. The Guide offers an overview of the land system, foreign investment policies and the property taxes associated with buying, selling and owning commercial property. We believe this information will help international and local investors in the decision making process and will focus attention on the Baltic region as a stable environment for investment,” Vineta Vigupe, Director of Baltic Region Research and Consultancy at CBRE comments.
In the period between Q3 2015 to Q2 2016, a total of US$122 billion was invested into EMEA markets. This is a testament to the continued popularity of these markets for investors looking to deploy capital into real estate. Whilst investment levels are lower than in 2015, prime assets in core markets across the region remain key targets for capital, and cities such as London, Berlin, Paris, Amsterdam and Brussels have continued to attract foreign investment, particularly from the Middle East and Asia. However, both the UK and Germany, Europe’s top two sources of capital, have increased their investment into other European markets. This is particularly true of UK investors, whose cross border investment has increased by 66 per cent since H1 2015.
There was also a significant uplift in interest in Central and Eastern Europe (CEE). When taken as a group, CEE markets saw their proportion of preference rise from 6% in 2015 to 56% this year with total investment in this region (excluding Russia) totalling €4.897 billion during H1 2016. This uplift can be explained by the continued “search for yield” approach adopted by investors. Prime yields in continental Western Europe have fallen very sharply and this has resulted in the yield gap between CEE and Western Europe increasing markedly, raising CEE’s attractiveness to real estate investors. Yields in the Baltic region are still more attractive than those offered in Central Europe or Scandinavia. Therefore we see investors increasing their interest in the market.
Vineta Vigupe, Director of Baltic Region Research and Consultancy at CBRE comments: "CBRE preliminary figures show CRE investment of nearly €655 million in the Baltic region countries for the first ten months of 2016. The most attractive asset type in 2016 proves to be the retail sector – with a multitude of prime or close to prime deals closed, mostly in capital cities. The leading position in 2016 is likely to be held by Latvia with 45% of the overall investment figure during Q1-Q3 2016, whilst 35% was generated in Estonia, leaving Lithuania in third position with 20%.
Considered against total investment last year, investors' interest in the Baltic region has been stable during 2016 reflecting the attractive yields offered and the positive economic background. We have witnessed the appearance of new investors - a trend that began in 2015 with the market penetration of new large players from Western Europe and the Americas, which has continued this year as well. According to the CBRE Guide, offices are the most popular investment choice amongst investors in 21 of the 36 states. In the Baltic States offices and shopping centres in the capital cities are the most popular targets.”
EVERSHEDS Bitāns Law Office Partner Ģirts Rūda comments: “It is good to see the Baltic States among the markets that continue to be the most popular in the EMEA region. The Baltic States are highly valued for transparency and legal protection issues, but as smaller markets we are lacking investment liquidity. In Latvia there is still a room for improvement on investment protection issues, like creditor protection during bankruptcy proceedings, and co-operation between the state and real estate market players could be improved.”
Eversheds Saladžius Law Office partner Rimtis Puišys mentions: “Lithuania is highly rated for its quality talent pool, ease of starting a business as well as the attractive ratio between wages and productivity, among other things. There is some room for improvement as well, including facilitation of business funding opportunities, accelerating the assimilation of EU structural funds, reducing the administrative burden and including the introduction and use of innovative e-solutions.”
“When it comes to improving the attractiveness, then main problem is the small size of the market (if the investor looks at each Baltic country separately). Positive change is rather driven by the market participants, who deal with the Baltics as one region regardless of the fact that there are 3 different jurisdictions. This change is supported among others by advisors and fund managers who have established pan-Baltic activities that allow unification of the Baltic market making the Baltics as a whole more interesting than Estonia, Latvia and Lithuania would be separately for investors from elsewhere, Randu Riiberg, Eversheds Ots & Co Law Office partner, underlined.
Global real estate advisor, CBRE, has launched its first ever EMEA Investment Guide, providing an overview of the commercial real estate market in 36 countries. The information regarding all Baltic capitals was prepared in conjunction with the global elite law firm EVERSHEDS.
About CBRE Group, Inc. CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
About Eversheds Eversheds Bitāns is the only elite law firm acting in the Baltics. Eversheds Bitāns is supporting its clients across the full range of businesses issues. Core activities are: banking, project finance, mergers and acquisitions, commercial, real estate, intellectual property and dispute resolution fields. The company is part of Eversheds International, a global elite law firm with more than 50 offices across 30 countries, which employs over 2,000 lawyers. This empowers the company in delivering transparent cross-border legal solutions to its clients. Eversheds Bitāns practice of more than 20 lawyers is led by experienced attorneys and legal advisers, which are highly recognised by independent international legal market research directories and clients.