Major projects add diversity to markets

  • 2003-05-01

In recent weeks a number of high-profile real estate ventures have been successfully launched and, together with upcoming projects, will maintain consumer interest in the Baltic states' dynamic property market.

Only two units remain unsold in the luxury Swiss Residence in downtown Tallinn.

Developed by the Swiss insurance company Swiss Re, the residence represents some of the highest standard apartment space in the Baltics.

With apartment prices ranging from 1,200 euros to 1,500 euros per square meter, 75 percent of the 47 luxury units were sold before the building was completed.

Part of this success, according to insiders, was due to favorable interest rates now available. Today clients can obtain a 30-year mortgage loan with an interest rate starting from 4.6 percent per year.

Rather than becoming overheated, the property market, according to experts, still has plenty of development potential. According to Ober-Haus, the Tallinn market can absorb at least 2,000 new apartments per year over the next few years.

Last year, for instance, only 800 apartments came to the market, leaving plenty of room for new residential developments.

Likewise, the land market is also undergoing a boom in Tallinn. Strong economic growth and low interest rates have ignited the commercial land market, with many firms opting to own rather than rent.

Interestingly, most of the firms buying land are foreign-owned and have even better opportunities to borrow at low costs.

In most cases land is bought by companies currently in the process of building their headquarters or other office space, though other uses include warehouse and showroom space.

The preferred plots are in the Tallinn suburbs adjacent to major roads, for instance next to highways east to St. Petersburg or south to Latvia.

And as purchases increase, the number of good plots is dropping, pushing prices up. Demand for plots situated away from major highways is still mediocre and the price rise for these kinds of plots will remain modest.

The price range for commercial land in downtown Tallinn is 100 euros to 640 euros per square meter, while suburban plots near major highways costs 26 euros to 64 euros per square meter.

In Latvia, the real estate developer Voldemars has appointed Ober-Haus to lease its new 12,000- square-meter office building in Riga, due to open in August 2003.

Capitalizing on the trend for businesses to move outside the crowded city center, the Voldemars building, which will have 1,000 parking spaces, will still be rather close - a 10-minute drive - to downtown.

Two anchors in the project are VP Market, which has 3,300 square meters, and the German electronics giant Siemens, which has contracted 1,140 square meters.

The building, which is pricing rents at 10 euros to 14 euros per square meter, is now 70 percent leased.

On the land market, the government last month passed a law banning the sale of agricultural land to foreigners for seven years to allow farmers a chance to buy land immediately after Latvia joins the European Union.

So far, foreign individuals and companies have been able to buy land freely in Latvia. The only requirement has been the permission of the local municipality, which has been only a formality and has rarely been denied.

While the government may decide to allow foreigners to conclude long-term leases on agricultural land, denying ownership to foreign developers will hinder the free development of the Latvian real estate market.

Finally, in Lithuania, a number of grandiose projects have been announced which promise to transform the landscape of the capital city, Vilnius.

One project, a 20-floor residential building, will be built in the prestigious residential suburb of Antakalnis. The development will boast total space of 9,000 square meters and two levels of underground parking.

The building, according to project organizers at Ranga IV, will be ready at the end of 2003.

A second residential building will stand within the new Europa City Center complex overlooking the Neiris River and the Old Town. The 27-story building will be directly next door to the new Vilnius municipality office complex and the new Europa retail center and office tower.

According to the most recent plan, the building will offer 10,000 square meters of residential apartment space and will be completed by March 2004.

Also, Ranga IV recently announced its plans to build a 60,000-square-meter complex of retail and office premises on Gyneju Street near the Lithuanian Parliament building.

The complex will boast the most office space in Vilnius and is to be completed by early 2005, according to Ranga IV officials.

Lithuanian developer Hanner and the local retailer Ogmios Centras have started construction of a retail and office complex in the Zermunai district of northern Vilnius.

The new complex, which will target the midrange market, will consist of 10,000 square meters of retail and 5,000 square meters of office space.

"The office premises will be offered to tenants who do not need the highest quality," said Vytas Zabilius, managing director for Ober-Haus Lithuania.

Ober-Haus is offering the premises for lease starting at 11.50 euros per square meter.

From material provided
by the Baltic offices of Ober-Haus
Real Estate Company