Baltic property investments are at a relatively low level
The European Central Bank cut interest rates for the first time in June. However, the revision was insignificant and did not have a significant impact on the processes. As in other sectors, Baltic property is not yet showing an increase in activity.
What Baltic property attract investors
Compared to 2022, 2023 was a more stable period for the region. Colliers analysts noted a slight revival among investors, particularly in the commercial property sector. In the first quarter of 2024:
1. Investment in such properties in Estonia totalled around €250 million.
2. In Latvia, investments in the commercial sector amounted to EUR 40 million. Experts explain the low number of large transactions by the gap between buyers’ and sellers’ expectations.
3. Activity in the Lithuanian market remains low. Investors prefer to look for other sources of income. At the same time, the number of office leases in the country has increased.
The level of property yields in the Latvian market remains stable. In Lithuania, the difference in rental costs between existing office space and space under construction is becoming more pronounced.
European market dynamic
If we look at the property market in Europe, there has been a significant drop in investment. The Super.news resource provides the following data on the development of the sector in the EU:
– in the first quarter of 2024, the volume of investments totalled 34.5 billion euros;
– the figure is the lowest since 2011;
– compared to the same period of 2023, investments decreased by 26%.
Analysts point to the difficult situation in the office property sector. Here, sales fell by 45%. Among European cities, Paris has suffered the most. In the first months of 2024, there were only 8 transactions for a total of around €500 million. This is the worst result for offices in the French capital. In the country as a whole, the volume of property investment fell by 69%.
The German market is also experiencing difficult times. Activity has fallen in both the residential and commercial sectors. The number of transactions has also fallen in the industrial property sector, which had long enjoyed good growth rates. In the first quarter of the year, contracts worth EUR 6.3 billion were concluded on the German market. Experts describe this result as the lowest in 13 years.
The office sector is in decline. Buyers are not interested in this type of property. This is due to high interest rates and low tenant demand. As a result, the volume of investment in this sector in Germany fell by 32%.
Previously, analysts had predicted an increase in investment activity at the beginning of 2024. This has not happened. The European market continues to slow. The situation is also exacerbated by relatively low rental yields.