Retail driving RE investment market

The authors of Colliers’ ‘Latvia Real Estate Market Overview’ report compare the three countries in the region. “Development involving new commercial space including offices, retail and industrial is clearly not the same everywhere,” said Deniss Kairans, partner and managing director of Colliers International in Latvia. “Development in Riga is still lagging behind Vilnius and Tallinn. Most development projects in Riga still remain on paper while in the capitals of Latvia’s two neighbours, construction – especially in the office and retail segments – has led to discussion of possible oversupply of new space in the upcoming year or two,” added Deniss Kairans.

Last year closed in Latvia with a total annual investment volume of EUR 394.4 mln and, according to Colliers, this is the best result since 2007. In comparison, 2014 the figure was EUR 316.9 mln. Investment in the retail segment was the main driver of investment activity. This generated 77 pct of the total investment volume for the period.

Demand for potential investment targets was high, but the shortage of attractive cash flow investment targets served as a limiting factor. “It should be noted that 60 pct of the investment volume was accounted for by the acquisition of the Alfa, Mols and Dole shopping centres by Blackstone, as a part of the acquisition of ten Nordic real estate funds managed by Obligo Investment Management,” the report states. In 2015 the Latvian real estate investment market saw four new names – Blackstone, Hili Properties, Partners Group and Colonna Capital – which together were responsible for 64 pct of the total annual investment volume. In contrast, among players already present, Eften Capital was the most active with 8 pct of the total annual investment volume generated by its acquisitions.

The industrial segment continued to be less active compared to the office and retail sectors. This led to industrial segment investment volume in 2015 of just 4 pct of the total annual investment volume.

“We expect investment activity to continue, with trends initiated in 2015 carrying over into 2016. The transaction pipeline indicates that comparable volumes can be expected next year. In 2016, new names might appear on the local investment market. In addition, we expect an increase in activity by investment funds, which previously did not consider our region a target,” forecast the authors of the Colliers report. “Due to the lack of cash flow properties, the market will start to enter the commercial property development stage,” adds the report.

Top 10 Investment Deals in Latvia in 2015:

1. Retail Portfolio of Agasti Holding (SC Alfa, SC Mols, SC Dole) bought by Blackstone Real Estate Partners IV in Q3, 2015

2. State Revenue Service HQ of Biroju Centrs Ezerparks bought by Valsts Nekustamie Ipasumi in Q4, 2015

3. Olimpia Shopping Centre of Northers Horizon bought by Capital Partners Group in Q1, 2015

4. Retail Portfolio of RB Management bought by Retail Hili Properties in Q2, 2015

5. Duntes Biroji Biznesam office centre of Catella Real Estate bought by Eften Capital in Q3, 2015

6. Depo at Krasta 36 shopping centre of Retail Eirospektrs bought by NIP Service in Q2, 2015

7. Eirkel Business Centre of MC Estate bought by Reģionālā Investīciju Banka in Q1, 2015

8. North Gate Business Center of Talfin Amsterdam Holding bought by Evolution Gaming Group in Q4, 2015

9. Supernetto Portfolio of ICA Baltic bought by Colonna Capital in Q3, 2015

10. Lacplesa St. 20a office centre bought by Eften Capital from an insolvency administrator in Q1, 2015