Our company KOM-INVEST specializes in residential real estate properties.
However, we also actively work with investment properties - we consult developers, manage several development projects, and monitor supply and demand in the market.
Our colleagues from STARLEX REAL ESTATE have prepared an interesting overview. Let's examine the most interesting observations.
- Demand for commercial properties in 2021 was stimulated by rising inflation (as is well known, real estate is one of the assets that preserves and increases in value), the impact of the pandemic (for example, demand for warehouses increased), and higher returns on Latvian real estate compared to other countries.
- Total transaction volume in 2021: over 650 million euros, which is a very high indicator. Of course, much of this is "thanks" to shopping centers - a shopping center "ALFA" was sold last year.
- This year, fewer transactions are expected, as many quality properties are currently owned by investment funds. Such funds have long-term strategies (for example, for 5 or 10 years), and during this time, properties will not be offered for sale.
- A normal return rate is 5-6.5% per year (not long ago, some investors expected to receive 7-8%).
- The geography of investors is quite extensive - these are our Baltic neighbors (Lithuania and Estonia), as well as professional investors from Germany and Austria.
- Sought-after properties for larger players are office buildings, warehouse complexes, and shopping centers.
- A new trend - requests to purchase land. Land is of interest to large companies (for example, to build a warehouse for their own needs), as well as investors (to build so-called "speculative" properties, where tenants are attracted as the property becomes ready). And of course, construction of small residential communities with private houses.
- Residential apartment buildings in Riga, where apartments are rented out, are in very high demand. The optimal area is 2000 - 5000 sq.m. Price for old buildings (without renovation), 600 - 1000 euros per sq.m., and 1500 - 2200 euros per sq.m. for buildings in good technical condition.
Rising construction costs create a very serious problem, so the decision to purchase a building in poor technical condition requires careful calculations.
- Rising construction costs will also affect the construction of apartment buildings. Riga still lags behind Vilnius and Tallinn in the amount of new housing. Approximately 2,000 apartments are commissioned annually, but considering the number of residents in Riga, 5-6,000 apartments are needed).
At the moment, construction prices are rising faster than prices for new housing. One solution for developers is to rent out completed apartments rather than sell them. Due to uncertainty, even fewer new buildings will be constructed, and prices for "apartments in new projects from secondary sales" will only increase.
In the current year, investors will face many challenges, the main ones being an unstable geopolitical situation, rising construction costs, and inflation.
Despite all of the above, life goes on! Based on our experience, we can offer the following recommendation to investors. It all depends on what position you are in.
If you have a good plot of land or property, have a clear development plan for it, and have the finances - you need to implement the project! Our company can provide legal and administrative support, as well as help with leasing and sales.
If you have a good project but lack the finances to develop it - you can sell it! Good properties are currently in short supply.
If you are just planning to "enter" the market, we advise you to choose an option that is not associated with construction. Returns will be lower, but risks will be much lower!
The main risks are the inability to predict the construction budget and the duration of the process (construction takes a year or two, and nobody knows what the market situation will be at that time). In the case of a ready-made property (whether residential or commercial), you simply direct cash flow to yourself, and from "day one" you receive a return on your investment.
Source: https://www.city24.lv/real-estate-news-story/17338/starlex-real-estate-investiciju-objektu-tirgus-un-prognozes-2022
If you wish to purchase any good real estate property, and individual attention is important to you, contact our company KOM-INVEST! We will be happy to select a suitable property for you, answer all your questions, draw attention to important details, complete the transaction, and manage your real estate.
Have questions? We look forward to your email or call!
Phone number: +371 29774775 (Viber, WhatsApp)
Email: info@kominvest.com