Real estate market picture brightens in Lithuania

  • 2001-02-01
  • Darius James Ross
VILNIUS - In the two years since the deepest part of the severe Russian recession that caused economic mayhem in Lithuania, the country's real estate market is beginning to see signs of hope.

Office space on rise

"1999 was a very tough year," said Nerijus Juodelis, head of commercial sales at the Vilnius office of the Ober Haus real estate company. "I'm starting to feel more optimistic and am seeing signs of improvement now."

He said the biggest sector to see improvement is the leasing of office space in the city, roughly 30 percent of which go to foreign companies investing in Lithuania. "Even Lithuanian companies are changing their attitude and are now more interested in leasing. Before companies tended buy space."

The most popular streets in Vilnius for offices are Gedemino, Pilies and Didzioji and renting in the downtown core costs between 48 litas ($12) and 80 litas per square meter per month. "Newly built business centers are hugely popular and offices there get snapped up very quickly. People want the prestige that comes with a new modern development. They also want locations with decent parking facilities as well," said Juodelis.

He said the market for offices in Klaipeda is also seeing signs of strength while Kaunas is stagnant. "The one bright spot for Kaunas is the retail sector which is experiencing renewed growth."

A few short months ago the main retail street in Kaunas, Laisves Aleja, was looking quite moribund but has picked up again with many new retailers opening their doors.

Overshadowed Kaunas

"The problem with Kaunas is that it's overshadowed by Vilnius and Klaipeda," said Greg Casting, manager of Baltic Shopping Centers, the company that is building the largest shopping facility in Lithuania on the outskirts of Kaunas. "Vilnius is the capital city with all the administrative offices in the country and Klaipeda is a port city, Lithuania's one small window to the world," he said. "We're still investing in Kaunas though."

On paper, Kaunas has the right combination of qualities to make it a great center for investment: a highly trained workforce, several universities, a central location and good infrastructure. It is also a transportation hub. The former mayor, Vytautas Sustauskas, did a fair bit of damage to the city's reputation prior to being elected to the Lithuanian Parliament.

Sustauskas' numerous inflammatory anti-Semitic comments reverberated around the world and were even quoted in The New York Times; not very good public relations for a city with a high unemployment rate (officially in the 12 percent range, though estimated to be higher). Kaunas' business community is relieved that he has moved to the nation's Parliament. One person remarked that it is a better venue for his histrionics and that he will take on a similar buffoon-type role, as does Vladimir Zhirinovsky in Russia.

Casting also said that Sustauskas had a detrimental effect on the city's image but maintained that municipal and regional officials are highly professional and welcome investment. Italian textile firm Mazarotto and Sweden' furniture company Ikea have made high profile investments in the city lately.

Saulius Merkenas, a Kaunas auto products dealer, owns a four-room apartment in Kaunas that he estimates is worth 60,000 litas . Two years ago he could have sold it for 100,000 litas. "People here don't have much money and heating costs and other utilities are very expensive." He said that the market for small apartments is still good as many people in the city are looking to downgrade to smaller ones because of the high utility costs.

Industrial real estate is in a similar position. "Three or four years ago I saw advertisements for large factories in the 3,000,000 litas range. Today those properties are going for 1,000,000 litas," said Merkenas. He himself decided to buy 120 square meters of warehouse space instead of continuing to pay rent on the 250 square meters he had before. "I can easily manage with less space just by being more efficient."

Although Klaipeda continues to attract much foreign investment and has a low unemployment rate, real estate development does not seem to be keeping pace. The general opinion is that the municipality is so focused on attracting industrial investment that they have forgotten about office buildings. "We have not one single new office building and have only three new apartment buildings in the whole city," said Donatas Bulvydas of Ober Haus Klaipeda.

Vilnius is still the place to be

"Prices for apartments in Lithuania have dropped between 20 percent and 25 percent in the last year," said Liutauras Sukys, a residential real estate expert. "I don't expect this to change much in 2001." It is possible to buy an apartment in Vilnius Old Town for between 3,600 litas and 5,200 litas per square meter. Monthly rent for an apartment is between 800 litas and 2,400 litas depending on the condition and size of the apartment.

Foreigners and local business people who can afford them, rent most apartments in the Old Town. "The average Lithuanian rents or buys in the suburbs around the city," said Sukys. He also said that newly built housing developments are quite popular and that most of these are being built outside the city center.

Diana, a translator from Vilnius, recently moved into a newly built, spacious two-bedroom apartment in the Santariskes neighborhood for which she and her husband paid 200,000 litas. "I feel so good to no longer live in an old Soviet-style apartment. It was like living in a birdhouse. Also, we were broken into and lost all of our expensive belongings as security in those buildings is so poor," she said. She was referring to the dreary Soviet-era apartment blocks that ring the city. "I feel I have a real home now."

Robertas Teodoriunas is in charge of selling 30 new apartments being built on Maironio Street in Vilnius for the Zverynas real estate company. The starting price is 3,000 litas a square meter and 10 have been sold already though they won't be ready until this summer. "Prices for apartments in the city's center are stable and new ones or the ones that are being renovated are now rising," he said. "Eighty percent of the apartments there are either bought or rented by foreigners or Lithuanians working for foreign companies."