EUR 1.19 bln spent in the Baltics

After the record-breaking year of 2015, the high investment activity in the Baltic real estate market continued throughout 2016, resulting in a total investment volume of EUR 1.19 bln including commercial properties with a sales price of over EUR 0.4 mln, but excluding development and land acquisitions.

Lithuania was the leader with an investment volume of EUR 430 mln, followed by Estonia with EUR 420 mln and Latvia with EUR 341 mln. Even though total investment volume was around one fifth less than in 2015, the number of closed transactions did not significantly differ from those concluded in the previous year (down by 5 pct).

Investment activity in 2016 was driven by several large deals and portfolio sales, including the sale of the Geneba portfolio, the DSV logistics centre portfolio, the acquisition of the Riga Plaza and Domina shopping centres in Riga, the sale of four shopping centres in Tallinn, the purchase of the Kesko Senukai logistics centre in Kaunas and the sale of Hilton hotel in Tallinn.

The retail sector continued to dominate the investment accounting for 53 pct of the investment volume in Latvia (down from 77 pct in 2015). Although in 2016 there was demand for all types of asset classes in Estonia, the office sector attracted the biggest share of the investment - 38 pct, up from 29 pct in 2015. Over 2016, the investment focus in Lithuania shifted to the industrial segment, which accounted for 39 pct of the total volume in Lithuania, compared to 18 pct last year.

The average transaction size across the market as a whole was EUR 4.0 mln in 2016 (compared with EUR 4.7 mln in 2015). Around 61 pct of total volume in 2016 was made up of deals above the EUR 10 mln threshold. At the same time, app. 77 pct of the total number of transactions in 2016 in the Baltic States were deals of less than EUR 3 mln.

Most of the investment came from established market players in Estonia and Latvia in 2016. Nordic capital accounted for almost one third of all the acquisitions in Estonia, while foreign capital in total was behind more than 65 pct of investment volumes. The share of the top three investors – East Capital, Eften Capital, and Northern Horizon – came to almost half of the total volume in Estonia in 2016.

The Latvian market continues to be dominated by local investors (including investors from other Baltic states); Baltic and domestic spending in Latvia accounted for more than half of acquisitions (53 pct) in 2016. Among existing market players, Eften Capital, New Hanza Capital and New Horizon Capital were the most active with 24 pct of the total annual investment volume generated by their acquisitions.

The confidence of local investors and international investment funds in the Lithuanian market continued to grow. Although Baltic and Nordic investors maintained a dominant hold of the market, one of the biggest investment transactions was made by the American fund CPA:17 Global managed by W.P. Carey.

Colliers forecasts a similar investment volume of in the Baltic States for 2017. Moreover, new professional investors from other regions will continue to appear on the Baltic commercial real estate market.