16 July 2019, Vilnius. The real estate (RE) market of Lithuania was very active during the first half of 2019, when sales in the primary market grew by 60-70 percent in Lithuanian cities. The real estate that is offered for sale here today can be sold within 11-18 months, which is 30 percent quicker (on average) than was predicted at the beginning of the year. A favourable economic environment, combined with the growing income of companies in the service sector and the active development of international and local companies has maintained a peak activity level and the liquidity of business centres, as well as a high demand for modern offices. The need for storage premises has also remained high because, irrespective of the newly-opened buildings, the vacancy levels in logistics centres are still low and the rent prices have remained stable throughout the country.
Despite the slowing of the economic development in the countries of the European Union that was seen during the first half of 2019, the economy of Lithuania maintained a rapid and simultaneously balanced growth. Retail trade and industrial production grew rapidly in Lithuania during the first months of this year, with more construction volume. Furthermore, the reduced unemployment, rapidly increasing salaries and stable inflation provided favourable conditions for an increased purchasing power, leading to the growth of consumers’ trust, domestic consumption and activity in the real estate market. The growth of the economy of Lithuania is expected to slow down due to slower export sales as a result of the sluggish development of the main export markets during the second half of the year; however, the financial status of Lithuanian residents and the domestic market should remain strong.
The housing market of Vilnius has remained very active. In particular, primary housing sales in the capital accelerated: 2,855 new apartments were sold there during the first half of 2019, i.e. 70 percent more sales than during the same period of last year. Furthermore, approximately 23 percent of these sales took place in the prestigious class segment. The high level of activity among buyers resulted in more building projects as well. Approximately 2,490 new apartments were offered to buyers during the first half of 2019, or 63 percent more than last year. “Currently, the primary housing market of the capital is demonstrating particularly good liquidity. If the conditions do not change, the entire existing supply of new housing could be sold within less than a year – and this motivates the developers to keep up the speed of the development,” stated Kotryna Griško, RE Analyst at Inreal Group. A moderate 2-6 percent increase in the price of new apartments in Vilnius was also recorded in all segments in the first half of the year.
The primary housing market of Kaunas remained comparable with that of the capital in terms of the speed of its growth. Approximately 400 newly constructed apartments were sold and the developers offered 473 apartments for sale during the first half of 2019, i.e. 62 and 67 percent more, respectively, than during the same period last year. “Notwithstanding the increased “warehouse” of unsold apartments, the liquidity index of the primary market in Kaunas improved from 1.6 at the beginning of the year to 1.3. This means that all new apartments could be sold within approximately 15 months, if the existing supply and demand do not change,” said K. Griško. A spike in such activity could be determined by the positive expectations of residents, as well as their increasing income, the development of new business centres and industrial companies, and the appearance of new jobs. The prices of new housing did not change significantly in Kaunas from the beginning of 2019.
Additionally, the housing market in Klaipėda recovered during the first half of 2019. Buyers were much more active in the primary housing market when compared to the respective period last year and purchased approximately 210 (63 percent more) new apartments. On the other hand, the developers were slightly more passive and offered just 187 new apartments (19.4 percent less) to the market. “The disproportion resulting from a relatively lower supply of new housing and an increasing demand led to the fact that the “warehouse” consisting of unsold new housing decreased to 628 apartments in the port city, and the liquidity indicator improved from 2.0 at the beginning of the year to 1.5. It is highly likely that builders will offer new housing projects to the market as a reaction to the growing demand,” stated K. Griško. The prices in different segments of the primary housing market increased insignificantly or remained the same in the port city.
On the other hand, the primary housing market of Palanga did not replicate the growth spike that took place in the other cities during the first half of this year. 126 apartments were sold in Palanga during the analysed period, representing approximately 8 percent more than during the same period last year. However, the builders were more passive and offered 31 percent less housing than last year. The average prices of newly build apartments increased in the resort city: in the economic and prestigious sectors by 3 percent; and in the medium-class sector by nearly 10 percent. Meanwhile, both the buyers and the builders of new apartments were much more active in the primary housing market of Neringa during the first half of this year.
Commercial RE. The positive attitude of investors towards the market of the capital of Lithuania has undoubtedly contributed to the current plans to provide almost 100,000 sq. m. of new office premises that will be available to the market in 2019, and as much as 175,000 sq. m. every year in 2020 and 2021. “It seems that the record speed of development is not an obstacle to maintaining small vacancies in the modern business centres, which amount to 5 percent in the Class A business centres of Vilnius and are slightly greater than last year. The increase in the vacancies in Class A business centres has resulted from the new business centres that were opened in the second half of 2018, but I believe that the market will use up these new premises by the end of the year,” said Tomas Sovijus Kvainickas, RE Analyst at Inreal. The vacancies in the Class B1 and B2 business centres of the capital have remained at a similar level and currently amount to 4.5 and 4 percent, respectively. 8 business centres should open their doors in Kaunas this year, which will provide approximately 65,000 sq. m. of area to the leasing market, and almost 60,000 sq. m. more should be added to the market in 2020-2021. According to T. S. Kvainickas, the decrease in vacancies that occurred during one year in the temporary capital confirms the need for modern offices and the competitiveness of Kaunas in the fight for the development of companies in the service sector. The developers of business centres are slowly looking toward the Klaipėda region after over a decade of stagnation. As a result, a Class A business centre was opened in the port city in 2019, and it is planned that two more Class A business centres as well as two Class B2 business centres will open their doors before the end of 2020.
Other significant events took place in the retail premises’ segment during the first half of the year, including the opening of the Depo store in Kaunas and a new-format MaximaXXXX in the Akropolis of Vilnius. An even higher development of the retail industry is anticipated in 2020-2021. The total area of vacant premises in shopping centres decreased slightly during the last half of the year and currently amounts to approximately 2 percent in Vilnius and Klaipėda, and approximately 1 percent in Kaunas, which clearly provides evidence that shopping centres remain highly attractive, even in the age of online commerce.
3 new logistics objects, with a total area amounting to approximately 40,000 sq. m., were opened in Vilnius during the first half of 2019. It is expected that the construction work on one more logistics centre will be completed by the end of the year, and it will add 30,000 sq. m. more to the market. A logistics centre that is approximately 5,500 sq. m. in area was opened in Kaunas, and the area of its new premises should increase by 48,000 sq. m. more by the end of the year. The supply of logistics premises was supplemented by a nearly 7,500 sq. m. centre located in the free economic area (FEA) of Klaipėda, while there are additional plans to build an 8,500 sq. m. centre in this area and an over 20,000 sq. m. warehouse-refrigerator in the outskirts of the city this year.
“There have been no significant changes to the legal regulations for real estate for quite a long time, which undoubtedly has had a stabilising effect. As the rules have not changed for some time, it has led to the development of better order and clarity of their applications. Unfortunately, such a situation has not solved the old issues which occurred due to the opposite situation: the changes led to different perceptions of the way in which the old rules should be applied. Such a situation has not solved all the miscommunications between organisations, and even the antagonism that has been present in some cases. Nevertheless, it seems that the first half of this year brought about an innovation after all: the new Law on Special Conditions for Land Use was enacted and the drafting of land reorganisation projects was consolidated in the hands of the municipalities. Besides this, some people believe that proposals regarding a new regulation on the leasing of state land will be made this year. Thus, if the issues raised by the participants in the real estate market are taken into consideration, there is hope that at least one more significant reform will take place before the new election fever begins,” said Simas Paukštys, Associate Lawyer at the COBALT law firm.
About INREAL group
INREAL is a trademark of an idea, which gives spark to unique projects, basis for professional services, and added value to businesses, clients, and partners. INREAL positions creativity as a core value in the dynamic business world. INREAL Group, which consists of UAB "Inreal", UAB "Inreal GEO" , UAB "Inreal valdymas" and its managed companies, develops unique real estate (RE) projects and provides probably the widest range of real estate services in Lithuania. Currently they have over 90 employees working for them in 11 cities in Lithuania. The company has engaged in business operations for 25 years and implemented more than 50 real estate projects of various purposes, which received recognition and awards at contests not only in Lithuania but on an international scale as well. In 2015/16, 2016/17 and 2017/18 INREAL Group was named as the National Winner during the prestigious European Business Awards.
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Rūta Merčaitienė
Head of Marketing and Communication at INREAL group +370 611 29 779 ruta.mercaitiene@inreal.lt