Why the Baltic property crash is good news

Apr 11, 2008
By Mike Collier

(Photo: Mike Collier)

TALLINN -- Falling prices in the Baltic real estate markets may be causing concerns for investors and developers, but they could actually present an opportunity to improve quality and the long-term outlook. That was the key message emerging at a seminar titled ‘Regeneration – Sustainable Urban Planning’ hosted by real estate giant Collier’s CRE in Tallinn on April 8.

Philip Harcourt, Head of Development Consulting at Collier’s emphasised that talk of regeneration and sustainability in real estate projects needed to be more than just window dressing.

“Regeneration is one of those misused words,” he said. “It’s like the term ‘property developer’. Property developers have developed a bad name. When you read about a businessman appearing in court, he’s usually described as a property developer. Today all the property developers are becoming ‘regenerators’. Regeneration is getting a bad name. The danger is the property developers build their building and go home – but that isn’t the end of it.

“Actually regeneration is about much more than just building things and walking away. Regeneration is about changing the cultural mix, how people react… not just the physical buildings.”

“Regeneration has become the ‘R’ word and I hope that sustainability does not become the ‘S’ word.”

As far as the Eastern European property crash is concerned, Harcourt had equally strong views, suggesting that narrower margins and less liquidity in the market would help focus minds on projects of genuine worth and long-term sustainability rather than grandiose projects designed to show off wealth in the most ostentatious way possible.

“Everyone has been saying the market is overheating, it’s going to crash and then when it happens we say ‘Oh my God, the market has crashed!’ It’s not necessarily a bad thing. We could house the entire third world in some of the schemes being proposed in Eastern Europe and the Middle East. Quality has gone to the wall.”

However, he was hopeful that the new economic realities would lead to “a smarter developer and a smarter tenant.”

In a Baltic context, the fact of the day came from Andrik Mand, Tallinn’s Chief Architect, who revealed that there is no Estonian word for a ‘brownfield’ site, a term used to describe an area that has previously been used for another purpose (usually industrial) and is ripe for redevelopment. That can sometimes make it difficult to communicate exactly what is being aimed for in a regeneration or redevelopment project, Mand said.

“That’s not necessarily a bad thing,” responded Philip Harcourt. “Even in the UK people tend to think of a brownfield site as being a field which is brown, just as they think a greenfield site is full of cows and daisies.”

There was plenty of evidence to show how the Baltics might build their way out of trouble by focussing on high quality and sustainability. Three different projects were held up as examples of the way forward: New Hansa City in Riga, Juros Vartai in Klaipeda and Ulemiste City in Tallinn.

There was also an outline of potential development for Tallinn’s former fishing port at Paljassare from Peeter Tiboo of KS Holding. Describing the ambitious project of over one million square metres as “a city within a city”, he said: “Tallinn is not using its potential as a city on the sea. Very few people in Tallinn live on the coastline and this gives us a chance to fix that mistake.”

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