Why the Baltic property crash is good news

TALLINN -- Falling prices in the Baltic real estate markets may becausing concerns for investors and developers, but they could actually presentan opportunity to improve quality and the long-term outlook. That was the keymessage emerging at a seminar titled 'Regeneration 's Sustainable UrbanPlanning' hosted by real estate giant Collier's CRE in Tallinn on April 8.

Philip Harcourt, Head of Development Consulting at Collier'semphasised that talk of regeneration and sustainability in real estate projectsneeded to be more than just window dressing.

"Regeneration is one of those misused words," he said. "It'slike the term 'property developer'. Property developers have developed a badname. When you read about a businessman appearing in court, he's usuallydescribed as a property developer. Today all the property developers arebecoming 'regenerators'. Regeneration is getting a bad name. The danger is theproperty developers build their building and go home 's but that isn't the endof it.

"Actually regeneration is about much more than just buildingthings and walking away. Regeneration is about changing the cultural mix, howpeople react… not just the physical buildings."

"Regeneration has become the 'R' word and I hope thatsustainability 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 lessliquidity in the market would help focus minds on projects of genuine worth andlong-term sustainability rather than grandiose projects designed to show offwealth in the most ostentatious way possible.

"Everyone has been saying the market is overheating, it'sgoing to crash and then when it happens we say 'Oh my God, the market hascrashed!' It's not necessarily a bad thing. We could house the entire thirdworld in some of the schemes being proposed in Eastern Europe and the MiddleEast. Quality has gone to the wall."

However, he was hopeful that the new economic realitieswould lead to "a smarter developer and a smarter tenant."

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

"That's not necessarily a bad thing," responded PhilipHarcourt. "Even in the UK people tend to think of a brownfield site as being afield which is brown, just as they think a greenfield site is full of cows anddaisies."

There was plenty of evidence to show how the Baltics mightbuild 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 HansaCity in Riga, Juros Vartai in Klaipeda and Ulemiste City in Tallinn.

There was also an outline of potential development for Tallinn'sformer fishing port at Paljassare from Peeter Tiboo of KS Holding. Describingthe ambitious project of over one million square metres as "a city within acity", he said: "Tallinn is not using its potential as a city on the sea. Veryfew people in Tallinn live on the coastline and this gives us a chance to fixthat mistake."