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REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA


Table of contentsents

This current real estate market overview is compiled by ARCO REAL ESTATE experts and is aimed only at providing information about the real estate market. We believe the information gathered from third parties and public databases is reliable, but we cannot guarantee their accuracy. ARCO REAL ESTATE does not take any responsibility for potential direct or indirect damage caused by this current material.

1. GENERAL INFORMATION

3

2. RESIDENTIAL PREMISES

9

3. OFFICE PREMISES

15

4. RETAIL PREMISES

17

5. INDUSTRIAL AND WAREHOUSE PREMISES

19

6. LAND MARKET

22


1. General information

ESTONIA GENERAL INFORMATION

TALLINN Tallinn is the capital and largest city of Estonia. Tallinn occupies an area of 159.2 km² and has a population of 430 594 (the registered population, December 2013). It is situated on the northern coast of the country, on the shore of the Gulf of Finland, 80 km south of Helsinki, east of Stockholm and west of Saint Petersburg. Tallinn’s Old Town is listed as a UNESCO World Heritage Sites. It is ranked as a global city and has been listed among the top 10 digital cities in the world (”Tech capitals of the world”. The Age. 15 May 2012.). The city was a European Capital of Culture for 2011, along with Turku in Finland. Tallinn is the financial and business capital of Estonia. The city benefits from the high level of economic freedom, liberal economic policy and has a highly diversified economy with particular strengths in information technology, tourism and logistics.

2013 Population (M)

1.3

Area (thousand km²)

45

Capital city

Tallinn

Population in Tallinn (thousand)

406.1

Population in Tallinn (%)

30.8

GDP (bn EUR)

17.5*

GDP growth (%)

0.7%*

Inflation rate (cpi %)

2.8

Unemployment rate (%)

8.6

Gross salaries (EUR per month)

930

Personal income tax (%)

21

Corporate income tax (%)

21

Tallinn and Harju County has three important and constituent harbours: Old City harbour, Paljassaare harbour and Muuga harbour.

VAT (general rate %)

20

TARTU

Land tax (%)

Nearly 49% of Estonia’s GDP is produced in Tallinn, even 60% when including the surrounding Harju County in 2012. There were 45 800 companies registered in the register of economic activities as Tallinn-based companies. They account for 42% of all the companies registered in Estonia. 93% of the companies based in Tallinn are micro-companies with fewer than ten employees. There were 34 029 cadastral units with a total area of 12 6115 ha registered in Tallinn (01.01.2013). 36% thereof being private land, 30% municipal land, 14% state land and 20% remains unregistered.

Tartu, with its population of 97 117 (Estonian Statistical Office from 201) in an area of 38.8 km², is the second largest city of Estonia. Tartu, lying 185 kilometres south of Tallinn, is also the centre of Southern Estonia. The Emajõgi River, which connects the two largest lakes of Estonia, flows for the length of 10 kilometres within the city limits. Tartu is often considered the intellectual centre of the country, especially since it is home to the nation’s oldest and most renowned university, the University of Tartu. The city also houses the Supreme Court of Estonia and the Ministry of Education and Research. Mostly known as a university town, Tartu is also a site of heavy industry. In the beginning of the 21st century, many ICT enterprises and other high-tech companies have taken a foothold in Tartu. Notable examples include Playtech Estonia, Webmedia, ZeroTurnaround, Tarkon, Regio and Raintree Estonia. Skype has an office in Tartu. The city is served by Tartu Airport. The university is one of the largest employers, which explains the large proportion of highly skilled professionals – researchers, professors, doctors.

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0.1 – 2.5

Property tax or building tax (%)

0

Currency, exchange rate

EUR

*Provisional data Sources: Estonian Statistics, Bank of Estonia, laws


PÄRNU Pärnu is an economic centre located in South-West Estonia on the shores of the Gulf of Pärnu with an area of 32 km² and a population number of about 43 600. From Tallinn to Pärnu 128 km. From Riga to Pärnu 180 km. Pärnu has become known as a summer and resort city. Since 1996, Pärnu holds the title of Estonia’s Summer Capital and in 2006 the new beach promenade was opened to grandly celebrate the 10th anniversary of the Summer Capital. At the end of 2004, UNICEF awarded Pärnu the title of Child- and Youth-Friendly City. The title means that Pärnu values working with children and the youth and that they are a target group who must be granted the best self-realization opportunities and a safe living environment. Small companies (with up to 10 employees) make up to 80% of the overall total in the county. However, big foreign investments have been made here too, several larger companies including Henkel Makroflex, AQ Lasertool, Scanfil, Efore and Note belong to parent companies situated abroad or are units of international groups.

NARVA Narva is the third largest city in Estonia. Narva is situated in the eastern extreme point of Estonia, 200 km to the east from the Estonian capital Tallinn and 130 km southwest from Saint Petersburg, by the Russian border, on the Narva River which drains Lake Peipus. The territory of Narva is 84.54 km². On 1 January 2011 Narva had 64 667 inhabitants. The population, which was 83 000 in 1992, has been declining since then. 93.85% of the current population of Narva are Russian-speakers (82% are ethnic Russians), mostly either Sovietera immigrants from parts of the former Soviet Union (mainly Russia) or their descendants. The town’s economy is currently based on textile industry and power engineering. The largest employers are the two local power stations and Kreenholm Holding. Traditional fields of activity also include clothing manufacture, metal-working and wood-working, as well as the production of furniture, building materials, controlling and measuring apparatuses, and industrial equipment.

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LATVIA GENERAL INFORMATION

RIGA Riga is the capital of Latvia and the main industrial, business, culture, sports and financial centre of the Baltics as well as an important port city. With 699 203 inhabitants (2012) it is the largest city in the Baltic States and the third largest city (after St. Petersburg and Stockholm) in the whole Baltic Sea region (by number of population within city limits). Riga City covers an area of 307.17 km². Number of population living within the limits of the City of Riga is about one-third of a million, but number of population in the agglomeration of Riga (Riga and its adjoining areas, including the nearest towns) is 0.94 million, which is nearly a half of all the population of the Republic of Latvia. Riga is situated in the central part of Latvia, on the south coast of the Gulf of Riga, on both banks of the Daugava River, about 10 km from the place where the river flows into the Gulf of Riga. Convenient and well-developed transport infrastructure, such as roads, railways, sea and air traffic, connects Riga with European and Eastern countries. The International Airport “Riga” is the largest international aviation company in the Baltic States, providing regular passenger, cargo and mail transport by civil aircraft to cities in Europe and other countries of the world. From the International Airport „Riga” you can go to 70 destinations. During the year, the airport services almost 5 million passengers. Train lines is connecting Riga with the largest Latvian cities, as well as with neighbouring countries – Estonia and Russia. Riga International Bus Station provides bus connections to all major Latvian cities, and the most important places, as well as to a number of European cities. Riga Passenger Seaport provides regular ferry connections to Sweden and Germany. Riga is a popular cruise ship stop, and about 100 cruise ships visit Riga each year. The Riga Freeport occupies a 15 km long territory on the both banks of the Daugava River. Maximum cargo handling capacity of the Freeport terminals is 45 million tons per year, and in 2013, the Riga Freeport was the largest port in the Baltic Countries as to cargo turnover – 35 million tons or 25.4% of the total volume of the Baltic ports.

2013 Population (M) Area (thousand km²)

Riga

Population in Riga in 2013 (thousand)

695

Population in capital cities in 2013 (%)

34

GDP (bn EUR)

22*

GDP growth (%)

4*

Inflation rate (cpi %)

-0.4

Unemployment rate (%)

9.5

Gross salaries (EUR per month)

722

Personal income tax (%)

24

Corporate income tax (%)

15

VAT (general rate) (%)

21

Land tax (%)

1 – 1.5

Property tax or building tax (%)

0.2 – 1.5

Currency, exchange rate

EUR

Sources: CSB, Bank of Latvia

5

65

Capital city

*Provisional data

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JELGAVA (CITY OF STUDENTS) Jelgava is the fourth largest city in the Latvia and is located in the middle part of Latvia, on the both banks of the Lielupe River, in the Zemgale lowland. Jelgava’s geographical location is very beneficial. The city is the point of the railway intersection, where the east – west and north – south direction tracks

are crossing. Jelgava is connected with Riga with a high-speed highway and electric rail line; distance to Riga is 42 km. Jelgava is the regional centre of Zemgale, which is characterized by the most fertile farmlands in Latvia and an intensive agricultural production.

One of the largest universities in Latvia – Latvia University of Agriculture  – is situated in Jelgava. Jelgava is doing well with the attraction of investments, and new businesses are being established, primarily related to mechanical engineering and food processing industries.

The city’s beaches are its largest draw. The Blue Flag beaches are especially popular among vacationers. At the beach you can hire paddleboats and jet skis, play football and beach volleyball, or learn to windsurf and kitesurf. Romantic streets and wooden cottages surrounded by pine trees also nowadays create the vision of the olden days. The wooden buildings of Jūrmala are significant and unique cultural heritage. Jūrmala buildings are made unique by the fact that historicism-style wooden houses are quite rare. Wooden houses with their finely divided windows, verandas and rooftops are a Jūrmala feature. Luxurious wooden buildings have extensive gardens, swimming pools, fountains and garden sculptures designed by noted architects.

During the last ten years, an intensive construction of multi-apartment residential houses and luxury villas has taken place in Jūrmala, and since the date of coming into effect of the law “On Obtaining Residential Permits” the number of new multiapartment residential houses exceeds the number of new projects existing in the city of Riga. Both the prices of exclusive individual residential houses and apartments, and the prices of land plots intended for building have been the highest both in Latvia and the Baltic countries already in a number of years.

which, unlike other Latvian ports, is characterized by a balanced Latvian import and export and transit cargo flow ratio, and in the result of this the port functions not only as a transportation hub of international significance, but also as an important regional development centre. A cargo-passenger ferry line provides regular traffic between Liepāja and Travemünde (Germany); in 2013 there was opened a ferry line Sassnitz (Germany) – Baltiysk (Russia) – Liepāja ( Latvia) – Ust-Luga (Russia).

and Tosmāre lakes. The lakes are connected with the sea by channels, where both the City Port and the Naval Port are situated. The location at the sea is the reason of specific climatic conditions – a relatively warm winter, but windy and variable weather conditions.

JŪRMALA (RESORT CITY) Geographically, the city is located west side from Riga, distance from Riga centre 25 km and distance from Riga International Airport – 15 km. Jūrmala is connected with Riga with a highspeed highway and electric rail line, but during the summer season – by a river boat line. Jūrmala is located between the Gulf of Riga and the Lielupe river, stretching along 26 km of coastline with white sand beach with modern relaxation and resort facilities. It has become the largest resort area in the Baltics as well as a popular location for international conferences and meetings.

LIEPĀJA (PORT CITY) The City of Liepāja is located in the south-western part of Latvia, on the coast of the Baltic Sea. Liepāja Region on the south is bounded by the Republic of Lithuania. The motorway A9 connects Liepāja with Riga; the distance is 218 km. Liepāja is connected with Riga also by a railway line; the distance to Riga by rail is 223 km. Liepāja is the third largest Latvian city and industrial centre, as well as the tenth-largest in the Baltic countries. Liepāja International Airport is located 7 km east of Liepāja. Liepāja has a modern multi-purpose port,

Geographically, the city is located between the Baltic Sea and the Liepāja

DAUGAVPILS (INDUSTRIAL CITY) Daugavpils is the second largest city in Latvia; it is the largest city of Latgale region. Daugavpils is located at the eastern border of Latvia, not far from Belarus (35 km), Lithuania (25 km) and the Russian border, and it is an important social and economic development centre in the Baltics. A highway and a railway line is connecting Daugavpils with Riga; the distance to Riga is 232 km. The city is situated on the both banks of the Daugava River.

Daugavpils is a city with a balanced multipurpose economy, where the base of welfare and employment is small and medium business which is based on new technologies and is producing competitive products. The city is an important cultural, educational, sports and recreation centre. You will find the Daugavpils University, several branches of Riga universities and the Daugavpils Theatre in this city.

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The white sandy beach provides the city so far little-used recreational sector. Liepāja is an important cultural, educational and sports centre. You will find the University of Liepāja, several branches of Riga universities, Liepāja Theatre and Symphony Orchestra in Liepāja.


BULGARIA GENERAL INFORMATION

SOFIA Sofia is the capital and largest city of Bulgaria. Sofia is located at the foot of Mount Vitosha in the western part of the country. It occupies a strategic position at the centre of the Balkan Peninsula. Sofia’s history spans 2 400 years. Its ancient name Serdica derives from the local Celtic tribe of the serdi who established the town in the 5th century BC. It remained a relatively small settlement until 1879, when it was declared the capital of Bulgaria. Sofia is the 15th largest city in the European Union with a population of around 1.3 million people, or 1 241 396 in the city proper. Politically, administratively and economically, Bulgaria is a highly centralized state, making Sofia a national administrative unit of its own right. It should not to be confused with Sofia Province, which surrounds but does not include the city itself. Besides the city proper, the 24 districts of Sofia encompass three other towns and 34 villages. Each of them has its own district mayor who is elected in a popular election. The head of the Sofia Municipality is its mayor. The assembly members are chosen every four years.

VÀRNA Vàrna is the largest city and seaside resort on the Bulgarian Black Sea Coast and the third largest city in Bulgaria. The city occupies 238 km² on verdant terraces (Vàrna monocline of the Moesian platform) descending from the calcareous Franga Plateau (height 356 m) on the north and Avren Plateau on the south, along the horseshoe-shaped Vàrna Bay of the Black Sea, the elongated Lake Vàrna, and two artificial waterways connecting the bay and the lake and bridged by the Asparuhov most. It is the centre of a growing conurbation stretching along the seaboard 20 km north and 10 km south (mostly residential and recreational sprawl) and along the lake 25 km west (mostly transportation and industrial facilities). Since antiquity, the city has been surrounded by vineyards, orchards and forests. Commercial shipping facilities are being relocated inland into the lakes and canals, while the bay remains a recreation area; almost all the waterfront is parkland. The economy is service-based, with 61% of net revenue generated in trade and tourism, 16% in manufacturing, 14% in transportation and communications, and 6% in construction. Financial services, particularly banking, insurance, investment management, and real-estate finance are booming. The city is the easternmost destination of Pan-European transport corridor 8 and is connected to corridors 7 and 9 via Rousse. Major industries traditionally include transportation (Navibulgar, Port of Vàrna, Vàrna International Airport), distribution (Logistics Park Vàrna), shipbuilding (see also Oceanic-Creations), ship repair, and other marine industries.

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2013 Population (M)

7.28

Area (thousand km²)

110

Capital city Population in Sofia Population in Sofia (%) GDP (bn EUR)

Sofia 1.24 million 17% 40.33

GDP growth (%)

1.7*

Inflation rate (cpi %)

-1.6

Unemployment rate (%)

13.1

Gross salaries (EUR per month)

407

Personal income tax (%)

10

Corporate income tax (%)

10

VAT (general rate %)

20

Land tax (%)

not available

Property tax or building tax (%)

0.01 – 0.45%

Currency, exchange rate

BGN (1 EUR = 1.95583 levs)

*Provisional data Sources: National statistical institute; Bulgarian National Bank


PLOVDIV Plovdiv is the second-largest city in Bulgaria after the capital Sofia with a population of 339 077 inhabitants as of December 2012. It is the administrative centre of Plovdiv Province and the municipalities of the City of Plovdiv, Maritsa municipality and Rodopi municipality, whose municipal body had a population of 403 153 inhabitants as of February 2011. It is an important economic, transport, cultural and educational centre, as well as the second-largest city in the historical international region of Thrace after Istanbul. Plovdiv is on the banks of the Maritsa river, approximately 152 km southeast of the Bulgarian capital Sofia. The city is in the southern part of the Plain of Plovdiv, an alluvial plain forming the western portion of the Upper Thracian Plain. The heights of Sredna Gora rise to the northwest, to the east are the Chirpan Heights and the Rhodope mountains surround the plain from the south. The city had originally developed to the south of Maritsa, and expanded across the river only within the last 100 years. Modern Plovdiv covers an area of 101 km², which is less than 0.1% of Bulgaria’s total area. This makes the city the most densely populated in the country with 3 769 inhabitants per km². Inside the city proper are six syenite hills, called tepeta. In the beginning of the 20th century there used to be seven of them, but one (Markovo tepe) was destroyed. Traditionally the citizens have called them Dzhendem tepe, Bunardzhik, Sahat tepe, Nebet tepe, Dzhambaz tepe and Taksim tepe. The last three form the area of the Three Hills, a lively section of the city centre. Plovdiv has one of the country’s fastest-growing economies with average GDP growth of 12% – 13%. The profits for the same period rose 4.5 times. Unemployment is 6.5% which is lower than the national average. One recent problem is the municipality’s administrative borders, which almost completely coincide with the city limits. Due to the constant increase of investments which are 465 000 000 USD for 2005 some of the businesses have to be redirected to the Maritsa or Rodopi municipalities such as the industrial zone of Radinovo village. Industry has been expanding again since the late 1990s, with manufacturing plants built in the city or in its outskirts, mainly the municipality of Maritsa. In this period, some 500 000 000  EUR has been invested in construction of new factories. Some of the new plants include the Liebherr refrigerator plant with 1 850 employees and a capacity of 450 000 items per year, the Socotab tobacco processing plant (2 000 employees), a bicycle plant (500 workers, capacity 500 000 units), а Schneider electronics factory, a biodiesel plant, the Bulsaphil textile plant (790 workers), and several electronics and high-tech plants producing CD players and other electronic equipment. The largest electronics plant in the Balkans was inaugurated in the nearby village of Voivodinovo. Due to the demand for business office space Business Park Plovdiv was going to be constructed in the district of Trakiya, but the advance of the global financial crisis has put a halt on the project. The investment has been planned for 68 000 000 EUR and the park should occupy an area of 110 000 m². A commercial and industrial park is to be built in the village of Radinovo at several km to the north-west of the city with a built-up area of 50 000 m².

BURGÀS Burgàs is the second-largest city on the Bulgarian Black Sea Coast and the fourthlargest in Bulgaria after Sofia, Plovdiv and Vàrna, with a population of 200 271 inhabitants, according to the 2011 census. It is the capital of Burgàs Province and an important industrial, transport, cultural and tourist centre. The city is surrounded by the Burgas Lakes and located at the westernmost point of the Black Sea, at the large Burgas Bay. The LUKOIL Neftochim Burgas is the largest oil refinery in south-eastern Europe and the largest industrial enterprise. The Port of Burgas is the largest port in Bulgaria, and Burgas Airport is the second-most important in the country. Burgas is the centre of the Bulgarian fishing and fish processing industry.

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2. Residential premises APARTMENT PRICES, EUR/m² RIGA Old town

TALLINN

EUR/m² 3 000 – 4 100

City centre:

Old town

SOFIA

EUR/m² 3 000

City centre:

EUR/m²

Old town City centre:

secondary

1 200 – 4 000

secondary

1 700

secondary

1 150 – 1 250

new projects

2 000 – 4 000

new projects

2 300

new projects

1 200 – 1 300

Suburban area: •

secondary

new projects JELGAVA

Old town

Suburban area: 510 – 950

secondary

1 000

secondary

850 – 2 000

new projects

1 800

new projects

secondary

new projects

TARTU

EUR/m² –

City centre: •

Suburban area:

Old town

600 – 3 100

City centre:

Old town

secondary

new projects

600 – 3 100

secondary

540 – 600

1 150 – 3 100

new projects

600 – 620

Suburban area:

Suburban area:

secondary

260 – 380

secondary

550 – 2 500

secondary

new projects

410 – 450

new projects

700 – 2 100

new projects

Old town

City centre: •

secondary

new projects

secondary

new projects

Old town

600 – 1 200

VÀRNA

EUR/m²

Old town

Old town

secondary

1 850 – 5 500

new projects

600 – 1 200

secondary

680 – 700

1 200 – 2 500

new projects

700 – 750

Suburban area: 380 – 750

secondary

1 300 – 1 900

new projects

City centre: •

secondary

new projects

Suburban area: 400 – 700

secondary

1 000 – 1 300

new projects

secondary

new projects

DAUGAVPILS

EUR/m²

Old town

City centre: 80 – 1 050

secondary

new projects

Suburban area:

City centre:

850 – 1 400

EUR/m²

550 – 570 590 – 620

near the seaside (Briz neighbourhood) LIEPĀJA

500

near the old historical part of Plovdiv (Marasha neighbourhood) EUR/m²

City centre:

Suburban area: •

PÄRNU

EUR/m²

EUR/m² –

JŪRMALA

750 – 850

City centre:

280 – 510

Suburban area:

PLOVDIV

EUR/m²

650

240 – 430 –

Suburban area: 95 – 450

secondary

445 – 1 100

new projects

175 – 310

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550 600 – 630 686 – 740


ESTONIA APARTMENTS The average unit area price of apartments in Tallinn has been growing since 2009. During the period 2012 – 2013, construction of nearly 25 new apartment buildings began in Tallinn. In the second half of 2013, the price of new apartments had, in places, risen to boom period levels. Apartment market activity is supported by low interest rates on loans. If the average increase in prices of Tallinn’s apartments over the last few years was 10% per year, then in 2013 the increase reached nearly 20%.

Market size

MARKET SIZE

In 2013, 17 901 purchase-sale transactions took place involving apartment ownerships, in the total amount of 847.4 million EUR. Of these, 7 780 took place in Tallinn, 1 659 in Tartu, and 697 in Pärnu. The total value of transactions was 548.2 million EUR, 88.3 million EUR and 27.7 million EUR, respectively.

ALL OF ESTONIA

In comparison, a total of 15 532 apartment transactions, in the amount of 666.1 million EUR, took place in 2012. In Tallinn, there were 7 519 transactions in the total amount of 437.5 million EUR, 1 387 transactions in Tartu, in the total amount of 65.9 million EUR, and 641 transactions in Pärnu, in the total amount of 25.6 million EUR.

Rent Over the last few years, the number of rental possibilities as a whole has decreased and will most likely decrease further. In centres of attraction, the offering of cheaper rental apartments remains significantly below demand. An especially large shortage of rental apartments occurs in the second half of the summer, when students at vocational institutions and institutions of higher learning begin searching for places to live.

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

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Year

Number of transactions

Total amount EUR million

2012

15 532

666.1

2013

17 901

847.4

Number of transactions

Total amount EUR million

TALLINN Year 2012

7 519

437.5

2013

7 780

548.2

Year

Number of transactions

Total amount EUR million

2012

1 387

65.9

2013

1 659

88.3

Number of transactions

Total amount EUR million

2012

641

25.6

2013

697

27.7

TARTU

PÄRNU Year


PRIVATE HOUSES RIGA bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

• old,

renovated private houses built in preceding years (private houses up to 120 m²)

400 – 900

private houses

• exclusive

private houses

bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

1 000

renovated private houses built in preceding years (private houses up to 120 m²)

1 500

1 100 – 2 400

• new

2 000

1 400 – 5 000

• exclusive

JELGAVA

private houses private houses

houses in the area close to Vitosha mountain (private houses with partial amenities in bad technical condition, up to 120 m²)

EUR/m²

• private

• old,

850 – 1 300

SOFIA

EUR/m²

• old,

• old,

• new

TALLINN

EUR/m²

• private

2 300

TARTU

houses built in the City Centre (private houses up to 120 m²)

990

• private

houses in Suburban area • exclusive

private

houses

1 500 – 1 700

600 – 700 2 100 – 2 500

PLOVDIV • private

• old,

bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²) renovated private houses built in preceding years (private houses up to 120 m²)

• old,

180 – 380

• old,

• new

private houses

• exclusive

bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

250 – 1 400

• old,

450 – 800

750 – 1 300

private houses

renovated private houses built in preceding years (private houses up to 120 m²)

not available

• new

230 – 2 100

private houses

• exclusive

private houses

houses in the area close to the Old historical part of the city (private houses with partial amenities in bad technical condition, up to 120 m²) houses built in the City Centre (private houses up to 120 m²)

578

• private

• private

houses in Suburban area

535

450 – 500

800 – 1 700

RESORT CITIES JŪRMALA bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

PÄRNU

• old,

renovated private houses built in preceding years (private houses up to 120 m²)

450 – 700

private houses

• exclusive

private houses

bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

1 100 – 3 000 2 500 – 10 000

renovated private houses built in preceding years (private houses up to 120 m²) • new

• exclusive

private houses

• exclusive

private houses

private houses

2 000 – 2 500 2 000 – 3 500

• old,

155 – 280

• old,

• new

private houses

bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

85 – 145

• old,

320 – 900 650 – 1 900

renovated private houses built in preceding years (private houses up to 120 m²)

150 – 280

• new

380 – 640

private houses

• exclusive

private houses

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

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houses in the area close to Black sea (private houses with partial amenities in bad technical condition, up to 120 m²) houses built in the City Centre (private houses up to 120 m²)

680

• private

700 – 1 000

DAUGAVPILS

• old,

renovated private houses built in preceding years (private houses up to 120 m²)

350 – 500

• old,

750 – 1 500

LIEPĀJA bad condition private houses built in preceding years (private houses with partial amenities in bad technical condition, up to 120 m²)

• private

• old,

• old,

• new

VÀRNA

• private

houses in Suburban area • exclusive

houses

700 – 750

500 – 550


MARKET SIZE

Private houses in Estonia Prices on the Tallinn and Harju County residential market have stabilised and increased in some areas. At the same time, the level of activity for objects located a distance of more than 25 km from Tallinn is relatively low. Buyers are not interested in average, poor quality and partially completed residential buildings, since the number of offers remains high

and there are a sufficient number of completed houses available. The sales period of residential buildings has dragged on for longer than usual, reaching an average of 6 – 12 months. The price expectations of sellers frequently do not correspond to the state of the market.

TRANSACTIONS WITH IMPROVED RESIDENTIAL LAND IMMOVABLE Year

Number of transactions

Total amount EUR million

2012

3 467

221.1

2013

4 076

271.6

VISION FOR THE FUTURE The development of the market for both residential as well as apartment buildings depends on the state of the economy, including changes in rates of employment, income and loan conditions. Arco Vara forecasts a slight slowing in the rate of price increases for Tallinn apartments, since the average wage has not grown at a comparable rate. The consolidation of the population into centres of attraction, along with the strong demand for basic rental apartments, will be accompanied by the continued increase in rental prices.

LATVIA The Latvian real estate market was influenced by the overall economic development of the country and its affecting factors, the overall welfare level, bank lending policies, investments by non-residents – the country's GDP showed a steady growth (4.0%), the unemployment level decreased, the average wages increased, the people's purchasing power improved, and on January 1, 2014, the country joined the euro zone – all this created a positive impact on the real estate market as a whole.

The most characteristic feature of 2013 in the real estate market was a significant increase in the number of transactions in almost all segments (except for residential land). But the price changes developed in different directions: increase in prices in Riga Centre, Riga region and Jūrmala apartments and new projects, farmland segment; •

price stability regarding apartments in housing estates of Riga and private homes; •

price decrease trend regarding land plots intended for building and standard type apartments in the rest of the territory of Latvia. •

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12

The Banks continued to actively get rid from the overtaken real estates, also by offering favourable conditions for obtaining loans. A large part of the market is still occupied by sales of forced nature at a lower price than in the market average, which explains price stability in several segments or even decrease of the prices, notwithstanding the high number of transactions. Together with the successful development of the national economy, the demand for production areas increased together with a corresponding increase in rents – especially in logistics centres. Occupancy of commercial and office buildings continued to grow, the retail space rent increased in the city centre and in certain office buildings. Residential space rent level continued to grow, fuelled by strong demand for rental space and low number of offers.


FORECASTS Also in 2014, in the result of improvement of the economic situation in the country, especially after the introduction of the euro, the people will be looking for ways to improve their living conditions, also by purchasing new properties. As in the past few years the construction of new projects was relatively inactive, then provided that the current volumes of sale of

new apartments would remain at the same level, a price growth in this segment can be expected. Along with improvement of the paying capacity of the population, the demand for individual residential buildings and in the future also for building plots will increase gradually. The price decrease trend will continue in the distant regions of Latvia, as the main reason for this is the reduction

of the number of population, but also in these regions there will be different trends in specific urban areas – a price decline in areas with poor infrastructure and a lack of working places, and, in contrary, a growth of prices in areas with good infrastructure and stable existing or newly constructed plants.

the best locations in the centre of Riga, during 2013, the apartment prices have grown by 4 – 10% on average. The price growth is characteristic mainly for high quality apartments in renovated and new buildings. In the Old Town, apartment prices in whole have not changed during 2013. The highest price growth was observed for apartments in renovated and new buildings, and apartments in the Quiet Centre and on the central Boulevard Ring.

houses was completed and the houses were put into operation over the past three years.

APARTMENTS In year 2013 in several segments of the apartment market in Riga, there was observed a price growth – the prices increased mainly in the central part of Riga and also in the largest housing estates. On average, the apartment prices in Riga in 2013 increased by 3 – 6%. Most of the apartment transactions are still registered as concluded according to the cadastral value of the apartments and even lower, which is preventing to objectively assess the real buying and selling price in all apartment housing segments. Also the shrinking of the rental market and the rise of apartment rents has stimulated the demand and the apartment price growth. People are tending to buy property, rather than to rent it. Prices have grown for apartments located in the central part of Riga. The prices in the central part of Riga have grown by 4 – 6% on average. In the central part of Riga in 2013, the prices have grown for good quality apartments – apartments with qualitative interior, good location in the centre of Riga, good location in the building, as well as with all the necessary public utilities. At

Standard type apartment prices have increased by 3%. Prices are at the same level as they were in late 2010, thereby it can be concluded that over the last three years there have been only price fluctuations. At the end of 2013, the average price of 1 m² of apartment in the housing estates of Riga was 613 EUR/m². In the first three quarters of 2013, there were built 1 394 apartments, or by 11% less than in 2012. Decrease of the number of newly built apartments can be explained by the continuing passivity in construction of new apartment buildings. Also the number of houses built and unfinished during the economical growth period has decreased – construction of such

Supply of apartments in new buildings in 2013 was the same as the previous two years, and it consists of apartments in building projects alienated by banks as well as of apartments offered by the major developer companies. However, unlike the previous years, there were observed changes in the structure of supply in 2013. If at the beginning of the year, apartments offered by bank subsidiaries at a very competitive price compared with the projects proposed by developers dominated in the market, then at the end of the year, the number of apartments offered by banks had rapidly decreased. The great sales activity in the sector of apartments alienated by banks has contributed to an increase of the average price of apartments in the new projects. For economy class projects, prices have increased by 10 – 15%. A competitive price for new flats in Riga in 2013 is ranging from 1 000 to 1 300 EUR/m2.

PRIVATE HOUSES In 2013 the activity in the private house market has grown. The number of transactions in Riga and vicinity of Riga has increased significantly, while price levels have increased only slightly. Unlike 2012, when the prices dropped slightly, in 2013 the average price of private houses increased both in Riga (+3%) and in the vicinity of Riga (+2%). The price growth has been caused by decrease of number of high-quality houses in the supply, as well as foreign citizen’s interest in high-quality and exclusive property purchase, mainly in order to ensure obtaining a residence permit. The market is running out

of high-quality private houses being offered for sale. The current supply contains a lot of private houses built during the economic prosperity period with disproportionately large space areas, poor quality and low energy efficiency. More and more people are choosing not to buy, but to build a private house according to their needs. Taking into consideration the fact that construction of new buildings in Riga is limited territorially and the construction volumes in 2013 were still small, the limited supply of new private houses allows the sellers to keep prices at a significantly high

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level. The highest prices of private houses in 2013 in Riga were in such areas as Mežaparks (1 500 000 EUR), Vecāķi, at the sea (550 000 EUR) and Teika (up to 450 000 EUR) . In 2013, the single-family private house prices in the vicinity of Riga in whole remained to be stable, and the prices have increased minimally. In Pierīga region, the private house prices during 2013 have increased by an average of 2%. In areas outside the municipality centres the stagnation of prices has continued. The most demanded are private houses in the municipality centres, in places with good infrastructure.


Prices for such properties are stable, because demand for such houses is stable and has not decreased. Buyers who need bank financing, are actively interested in private houses, which are now owned by bank subsidiaries, as such properties are being offered on more favourable

loan terms and conditions. These private houses are also willingly purchased in unfinished condition, because the total investment in the property will be lower than when starting construction of a private house from the very beginning.

BULGARIA In 2013 the residential market in Sofia was characterized by stabilizing prices and a moderate increase in demand towards the end of the year. Buyers were able to make a decision faster compared to previous years. Price and quality of the surrounding infrastructure remain the main factors in play. Average price for 1 bedroom apartments (comprising half of the transactions) was 675 EUR/m². To buy a 2 bedroom apartment, buyers had to pay 750 EUR/m², and for larger units average price was slightly lower at 735 EUR/m². The average apartment price for the period was 26 460 EUR for studios, 42 760 for 1 bedroom apartments, 67 240 EUR for 2 bedroom apartments and 102 030 EUR for the larger units. High-end apartment prices range widely between 850 – 1 600 EUR/m².

Increasing interest in 2 bedroom apartments was noted in 2013. Limited quality stock and lack of significant new developments determines their relatively higher sales prices. Arco Vara’s latest project in Sofia Manastirski LIVD apartments has been successfully filling this demand with more than 25% of the apartments already pre-sold – just 3 months after the start of construction. In 2014 we expect to see more active buyers on the market and at the same time more new projects.

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Rental levels for 1 bedroom and 2 bedroom apartments are around 4 – 4.5 EUR/m² in the city centre and 2.5 – 3 EUR/m² when moving away to the suburban areas. The subway network has been the main factor driving demand for rental apartments and the areas around new and upcoming stations have seen increasing interest. As the most economically active city in the country Sofia is attracting a large number of people and rents are expected to stay at their current levels.


3. OFFICE PREMISES ESTONIA In 2013, the offering of office spaces was stable along with demand. Lessees kept more of an eye on the accessory expenses accompanying specific commercial buildings. In the case of new office spaces, important key words – in addition to low accessory expenses – are good

location and good infrastructure surrounding the location, and the availability of parking. In 2014, more than 20 000 m² may be added to the office space market.

LATVIA Riga is basically dominated by Class B and A office market, and most rental transactions have been concluded just in this market part. While the total supply of office space was large in 2013, and it gradually increases, it is more and more difficult for tenants to find a space with desirable dimensions and characteristics. The proportion of vacant office in the last three years has gradually decreased, tenants absorbing an average of 28 000 m² of office space per year. Though the market has been supplemented only with small office buildings up to a total of 30 000 m² over the last three years, the future promises to be more active in the market. The new building of the State Revenue Service at Talejas Street 1 and an office building at

G. Astras 1C will be completed in 2014. These new buildings in total will offer tenants additional 53 500 m² of rental space. At such a small supply of high class office space it is expected that the share of the vacant Class A office space will continue to decline, but the share of the vacant Class B space could remain unchanged. The situation may change when the main building of “Latvijas Krājbanka” will be launched in the market, and depending on the area of available free space in the buildings which are currently occupied by the SRS but which will be vacated after moving to the new building. Existing trends indicate that the most demanded Class A space is a space with a small area of up to 150 m². The availability of such areas in 2013 was quite poor and the space was

in most cases available for a short period of time. The most important factors in choosing an office space was availability of parking facilities at the office building, effective and convenient layout, public utilities charges and management fee level and the building tenant's reputation. The most popular locations for office space were the central areas of the city, Duntes Street office buildings and office buildings in Mūkusalas Street. Since the most demanded are small size offices and since the proportion of tenants who may hire more than 2 000 m², is small, new construction of office buildings in the eyes of investors is relatively risky. In 2013 there were several investors who were actively looking for a larger anchor tenant to begin construction of a new office building.

RENT LEVELS Rents gradually increased during 2013 by 1 – 2 EUR/m². It has contributed to formation of new office centres and forced the tenants to re-consider rational use of the existing space. A characteristic trend, especially in the beginning of the heating season, was change of tenants caused by the increasing rents. Companies that are unable to

afford a rent increase, are willing to reduce the comfort level of the office space by moving to financially more appropriate locations, for example, with a limited number of car parking facilities or less convenient public transport connections. Also in the future an office space rent increase by 5 – 7% is expected, although this will depend on the country's

economic improvement rates. Offers from Vilnius or Tallinn, which are competitors of Riga office buildings, come more frequently in sight of international customers, although rents are similar to those in Riga.

OFFICE SPACE RENT LEVELS IN RIGA, 2012 – 2013 (EUR/m²) Class A

Class B

Riga city centre

Riga city periphery

1st half-year of 2012

11

2nd half-year of 2012

Class C

Riga city centre

Riga city periphery

Riga city centre

Riga city periphery

11

7

6

4.5

4

11.5

12

7

7

5

5

1st half-year of 2013

14

12

8

8

6

5

2nd half-year of 2013

15

12

8.5

8

6.5

5.5

Source: ARCO REAL ESTATE

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RIGA

TALLINN

Average rental prices

SOFIA

Average rental prices

Average rental prices

class A

8 – 14 EUR/m²

class A

10 – 15 EUR/m²

class A

10 – 13 EUR/m²

class B

5 – 9 EUR/m²

class B

6 – 8 EUR/m²

class B

5 – 7 EUR/m²

Average vacancy

5 – 11%

Average vacancy

3 – 4% (A), 10 – 20% (B)

Average vacancy

19.5%

Yield

7 – 8%

Yield

Yield

9.5%

8 – 9%

JELGAVA

TARTU

Average rental prices

PLOVDIV

Average rental prices

Average rental prices

class A

class A

8 – 12 EUR/m²

class A

6 – 7 EUR/m²

class B

3 – 7 EUR/m²

class B

3 – 6 EUR/m²

class B

3.5 – 5 EUR/m²

Average vacancy

Average vacancy

Yield

Yield

25% 6 – 8%

JŪRMALA

Average vacancy

10%

PÄRNU

Average rental prices

VÀRNA

Average rental prices

class A

Yield Average rental prices

class A

12 – 15 EUR/m²

class B

4 – 10 EUR/m²

class B

7 – 10 EUR/m²

Average vacancy

Average vacancy

15%

Yield

Yield

6 – 8%

class A

10 – 12 EUR/m²

class B

5.10 – 5.50 EUR/m²

Average vacancy

Yield

9.5%

LIEPĀJA

BULGARIA

Average rental prices •

class A

class B

3 – 7 EUR/m²

Average vacancy

Yield

– DAUGAVPILS

Average rental prices •

class A

class B

3 – 6 EUR/m²

Average vacancy

Yield

The office market was the strongest commercial real estate segment in 2013 with take-up rate increasing 12.2% compared to 2012. The office stock was increased by only 34 000 m², which represents the smallest increase since 2006. The total amount of rented offices in Sofia in 2013 was above 100 000 m² – level last experienced by the market in 2008. It is important to note that in 2013 we saw commencement of new developments for the first time since 2010.

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16

Outsourcing and IT companies are the main drivers of demand for office space accounting for more than 40% of the take-up. Although the pipeline in the market for 2014 comprises 60 000 m² of new office premises, we don’t expect high long-term vacancy rates. Towards – the end of 2013 rental levels range was between 10 – 12 EUR/m². Lower vacancies and stable rents in 2014 are also expected to attract investors who are ready to purchase large-scale projects at a reasonable yield.


4. RETAIL PREMISES AVERAGE RENTAL PRICE RIGA • city

centre (high streets)

• trade

8 – 28

centre (outside city centre)

6 – 15

• old

town

• prime

yield (%) JELGAVA

• city

centre (high streets)

• trade

centre (outside city centre) • prime

yield (%)

TALLINN

EUR/m² • city

centre (high streets)

• trade

25 – 30

8 – 45

• old

30 – 40

7 – 8%

• prime

town

3 – 12

JŪRMALA centre (high streets)

• trade

centre (outside city centre) • prime

yield (%)

2–6 –

5 – 20 –

• city

centre (high streets)

• trade

centre (outside city centre) • prime

yield (%)

DAUGAVPILS • city

centre (high streets)

• trade

centre (outside city centre) • prime

yield (%)

EUR/m² 4 – 15 3–8 – EUR/m² 3 – 18 5 – 20 –

10 – 15

centre (outside city centre)

15 – 18

• old

13 – 15

town yield (%)

6–8

PÄRNU • city

centre (high streets)

• trade

centre (outside city centre) • prime

centre (outside city centre)

10 20 – 25

town

7 – 12

yield (%)

yield (%) PLOVDIV

• city

centre (high streets)

• trade

centre (outside city centre) • prime

yield (%) VÀRNA

EUR/m²

centre (high streets)

• trade • old

• city

EUR/m²

• trade

EUR/m² 5 – 25

6–8

centre (high streets)

• prime

LIEPĀJA

yield (%) TARTU

• city

• prime

• city

20 – 25

centre (outside city centre)

EUR/m²

SOFIA

EUR/m²

• city

centre (high streets)

• trade

centre (outside city centre) • prime

yield (%)

EUR/m² 25 – 30 7 – 12

9 EUR/m² 18 – 24 6 – 10

10 EUR/m² 20 – 27 10 – 12 9

6–8

ESTONIA Retail space situated in a good location continues to be in high demand. There are no vacancies in shopping centres with high rates of traffic, with rental spaces covered 2 – 3 times over with interested parties. The planning of new retail and recreation centres may change the current situation.

LATVIA Along with improvement of indicators describing the economic situation, such as unemployment level and average wage of working population, the retail sales volumes have grown every year since 2010. Thus, commercial space occupancy is also increased reducing availability of premium quality and most demanded retail space to a minimum. Most stable tenants are located predominantly on leading shopping streets in the Riga city central part and in the Old Town, where retail sales are less subject to seasonal changes and pedestrian flow is guaranteed throughout the year. In areas with less successful positioning, stability of a lessee depends on competitiveness. A crucial factor for restaurants and cafes during the summer season is whether it is possible to place a summer terrace.

Characteristic feature of 2013, in comparison with previous years, was increase in demand for space with good sound insulation or space in non-residential buildings. Demand for space that is suitable for a variety of leisure clubs, bars and different types of eateries are great. In the best selling points both in the Old Town and the active city centre is difficult to find free space for a mediumsized rent. The situation is changing along with increasing foreign investors' investments in purchases of centrally located retail space. In many cases, the rent significantly increases after the change of owners. The rent increases occur in up to 30 – 50% of the cases. With the increase of rent amounts, the rental term increases from 3 months to 1 year, and there is a higher tenant

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17

rotation. The percentage of space with increased rents in the city centre and the Old Town currently does not exceed 7%, but in the future it could be bigger. Shopping centres now are feeling stable and have future plans to increase their retail space. Most of the shopping centres, such as “Alfa”, “Spice”, “Galerija Centrs”, select only the best of the potential tenants, in order to improve the shopping centre's reputation, and ensure long-term lease relationships.


THE BIGGEST SHOPPING CENTRES RIGA

TALLINN

area, m²

SOFIA

area, m²

area, m²

Alfa

92 600 m²

Rocca al Mare

57 000 m²

Paradise Center

208 000 m²

Spice

64 374 m²

Ülemiste centre

50 000 m²

The Mall

66 000 m²

Riga Plaza

66 921 m²

Kristiine shopping centre

43 700 m²

Serdica Centre

120 000 m²

Origo

5 784 m²

Bulgaria Mall

33 000 m²

Galeria Centrs

17 756 m²

Sofia Ring Mall (Opening in March, 2014)

172 000 m²

Galeria Rīga

36 000 m²

Mols

50 389 m²

BULGARIA Modern shopping mall leasable area increased by 18% in 2013 after the opening of lifestyle centre Paradise Center in Sofia and the open-air shopping mall Strand in Burgàs. Despite the increased supply, competition among retailers for modern premises is strong. Shopping mall occupancy levels remain high at above 85%, and projects opened prior to 2012 enjoy less than 5%

vacancy. With the opening of some large shopping mall schemes in 2014 the total stock of modern retail space is expected to reach 905 000 m². The main high street in the city centre – Vitosha blvd. is also very popular destination, especially after construction of the subway stations was completed. For the first time in years supermarkets and hypermarkets are not at the

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18

top with the most newly opened stores. In 2013 drugstores have been aggressively expanding and optimizing their market coverage. Rental levels have remained stable, except along Vitosha Blvd where in 2013 after completion of the construction works they rose with 23% to an average of 37 EUR/m².


5. INDUSTRIAL AND WAREHOUSE PREMISES

AVERAGE RENTAL PRICE RIGA • new

warehouse premises

• renovated

warehouse

premises • premises • old

in industrial parks

1.2 – 2 EUR/m²

warehouse premises warehouse

premises • premises

in industrial parks

JŪRMALA

EUR/m²

warehouse premises warehouse

premises • premises

in industrial parks

warehouse premises LIEPĀJA

• new

warehouse premises

• renovated

warehouse

premises • premises

in industrial parks

– 2–4 – 1.5 – 3

warehouse

• premises

in industrial parks

warehouse premises

• premises • old

in industrial parks

2.5 – 3

TARTU

EUR/m²

warehouse premises

• renovated

warehouse

premises • premises

in industrial parks

3.5 – 4 3 4

warehouse premises

1–2

PÄRNU

EUR/m²

• new

warehouse premises

• renovated

warehouse

premises • premises • old

4.5 – 5.5

warehouse premises

• new

• old

3.5 – 4

in industrial parks

warehouse premises

4–5 2–4

warehouse premises

• renovated

• premises • old

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

4–5 not available 1–2 EUR/m²

• new

warehouse premises

• renovated

warehouse

premises • premises • old

5–7

PLOVDIV

in industrial parks

3 – 4.5 1.5 – 2.5 not available

warehouse premises

1–2

VÀRNA

EUR/m²

• new

warehouse premises

• renovated

warehouse

premises

• old

0.6 – 1.1

in industrial parks

EUR/m²

warehouse premises

1.2 – 2

1.2 – 2.3

warehouse

premises

• premises

2–3

19

• new

4 – 5.5

– EUR/m²

premises

warehouse

premises

4.5 – 5.5

1.5 – 2.3

DAUGAVPILS • renovated

• renovated

SOFIA

EUR/m²

warehouse premises

EUR/m²

0.8 – 1.3

warehouse premises

• new

1.8 – 2.3

warehouse premises

• new

• old

1.3 – 2.5

0.8 – 1.3

• renovated

• old

1.8 – 3

warehouse premises

• new

• old

3–5

JELGAVA • renovated

• old

1.8 – 3.5

warehouse premises

• new

TALLINN

EUR/m² 2.5 – 3.8

in industrial parks

warehouse premises

4 – 5.5 2.5 – 3 not available 1–2


ESTONIA Strong demand remains for 100 – 400 m² compact warehouse and manufacturing spaces and multifunctional buildings. The appearance of vacancies can be expected within a period of 2 – 3 years, at the earliest, when the construction of big new warehouse complexes will be completed and a line of rental spaces currently in the use of large clients becomes available.

MARKET SIZE Transactions with improved commercial use registered immovables

Purchase-sale transactions for production land

Number of transactions

Total amount EUR million

2012

183

119.3

2013

236

89.3

Year

Purchase-sale transactions for commercial land

Number of transactions

Total amount EUR million

2012

533

66.6

2012

310

159.8

2013

622

83.1

2013

289

158.5

Year

Year

Number of transactions

Total amount EUR million

RURAL MARKET

MARKET SIZE

The market for unimproved land, in comparison with the apartment market, is moving in yearly shifts. The price floor was broken through in 2010. Tenderers and interested parties have both become a bit more active. Prices remain stable, although the market continues to be buyer-centric, since offers exceed demand. At the same time, an increase in the price of land can be observed in Tallinn.

Transactions with unimproved registered immovables Year

Number of transactions

Total amount EUR million

2012

10 582

274.3

2013

11 851

309.7

LATVIA In 2013 the industrial space market has shown a marked demand for highquality space. The most demanded premises are premises with heat insulation which are connected to the city utilities networks and having high-quality flooring.

The most demanded locations for industrial premises in the vicinity of Riga are: Mārupe, Jaunmārupe, Ķekava. But in Riga the most demanded locations are: Ganību Dambis, Rencēnu Street, the area of Granīta and Krustpils Street.

The most demanded are premises constructed during the last decade with a convenient location, area of 800 – 1 500 m2 and a plot area of 0.7 – 1.2 ha. Rent of such premises on average is from 2.7 EUR/m² to 5.1 EUR/m².

Characteristics of the spaces that are most important for warehouse tenants are ceiling height, floor load resistance, high transport gateways, as well as existence of transport driveway ramps.

A rent depends on space specifications. The less demanded premises are those situated in buildings erected during the Soviet-era with irrational number of ancillary rooms or being in technically poor condition. Currently, there are still a relatively large number of such premises in the rental market and the rent in such buildings is from 0.7 to 1.8 EUR/m².

Premises with the highest rents are specific premises, such as freezers, rooms with precisely controlled climate control and antiseptic finishing materials or materials suitable for use in food and medical industry.

The most demanded premises for manufacturing needs are premises provided with the necessary public utilities of sufficient capacity, asphalted roads, parking places for parking of personnel cars.

RENTAL FEE OF PRODUCTION AND LOGISTICS PREMISES IN RIGA, EUR/m² end of 2008

end of 2009

from

up to

from

up to

from

end of 2010 up to

from

end of 2011 up to

from

up to

from

up to

New buildings in Riga

5

8

2.5

4.2

2.5

4.2

2.8

4.5

2.8

4.8

3

5.1

New buildings around Riga

4.5

7

2

4

2

4

2.2

4.3

2.6

4.5

2.7

4.6

Renovated buildings

3.5

5

1.6

3

1.6

3

1.8

3.1

2.1

3.3

2.1

3.4

Depreciated, unheated, non-renovated and modern inadequate buildings

1.5

3

0.8

2

0.7

1.5

0.7

1.8

0.7

1.8

0.7

1.8

Source: ARCO REAL ESTATE

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20

end of 2012

end of 2013


The rent level in new warehouse buildings is 4.5 – 6 EUR/m² which is sufficient for developers to carry out construction of new industrial buildings or renovate industrial buildings erected during the Soviet-era. The optimum area for a developer in the construction of a new industrial building is from 10 000 to 15 000 m².

Taking into account the current industrial space rent levels existing in the market it should be concluded that it is not cost effective for tenants with the necessary industrial space area of up to 5 000 m² to build their own buildings, and that the best way for them is to rent.

400 – 450 EUR/m². The costs increase if it is planned to install glazed walls in that part of the building, which is commonly used as office space. Thus, the building construction costs may rise to 550 EUR/m².

In 2013, the average construction costs of a heated and insulated industrial building were

BULGARIA INDUSTRIAL AND LOGISTICS The main drivers of demand for modern industrial and logistics space are pharmaceutical companies, FMCG distributors, and the automotive sector. Hypermarket chains are also actively looking for premises in areas close to Sofia. Investment deals are primarily driven by defaulting owners who need to dispose of their properties. This segment has been relatively passive in the past years. Modern properties are owner-occupied and speculative stock is very limited.

Most space available for rent is old, lacks amenities and is generally substandard for contemporary logistics operations. Operating costs for such space are also high. Tenants’ options are scarce and thorough research is required to find a suitable solution for every company looking for industrial and logistics space. Pipeline in Sofia amounts to 58 000 m² with more than 90% of it for owner-occupied premises. Extra space is often rented out by the owners with shrinking businesses

LOGISTICS AND INDUSTRIAL PARKS ESTONIA

LATVIA

area

area

Muuga industrial park, Harju county

75 ha

Dominante

27.9 ha

Juri industrial park, Harju county

46 ha

NP Logistics

10.7 ha

Nehatu logistics park, Harju county

40 ha

Dommo

12.3 ha

Rae industrial park, Harju county

52 ha

Nordic Technology PARK

7.5 ha

Tanassilma industrial park, Harju county

30 ha

Nordic Industrial PARK

14 ha

NP Jelgavas Business PARK

23 ha

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

21

and it usually doesn’t stay too long on the market. Sofia’s location, market size, relatively well -developed infrastructure and available suppliers attract new companies. Monthly rent for high quality industrial and logistics space in Sofia is around 3.5 EUR/m². Although development activity in this sector is minimal, soon we expect to see more interest towards new projects in Sofia and throughout the country.


6. LAND MARKET ESTONIA RESIDENTIAL LAND The largest share of the turnover in the unimproved land for specific purposes market is comprised of transactions with residential plots. The rapid increase in construction prices that took place in the period 2011 – 2013 also serves to inhibit the ability of market participants to build residential buildings.

Development activity is once again profitable in a good location, especially the city centre of Tallinn and in the vicinity of the city centre. Plots suitable for development are purchased either for immediate construction or for starting construction within a period of 2 – 4 years.

MARKET SIZE Year

Number of transactions

Total amount EUR million

2012

1 272

40.2

2013

1 656

47.9

Source: Estonian Land Board

The biggest interest is in plots with good location, access and detailed plans. Raw land is invested in only rarely and carefully.

COMMERCIAL LAND There were few transactions involving commercial and production land. The price depends on the potential of a specific registered immovable, which is why the average indicators for the year do not characterise the actual price dynamics for unimproved land.

The market becoming more active is not foreseen. Many of the commercial and production lands available for sale have, for the purposes of cost savings, fallen behind in terms of public offerings. In other words, they are simply waiting for better times.

MARKET SIZE Transactions with unimproved commercial use lands Purchase-sale transactions for mixed-use land

Purchase-sale transactions for production land

Purchase-sale transactions for commercial land

Year

Number of transactions

Total amount EUR million

Year

Number of transactions

Total amount EUR million

Year

Number of transactions

Total amount EUR million

2012

210

27.9

2012

98

3.9

2012

80

16.5

2013

171

30.3

2013

151

6.8

2013

154

10.8

Source: Estonian Land Board

The demand for agricultural and forest lands significantly exceeds what is being offered. The situation led to a rapid increase in prices in the second half of 2013. Regardless of the notable increase in price, no increase in offers is expected.

Source: Estonian Land Board

Source: Estonian Land Board

MARKET SIZE FOREST LAND

AGRICULTURAL LAND

Year

Number of transactions

Total amount EUR million

Year

Number of transactions

Total amount EUR million

2012

2 660

51.4

2012

1 195

20.3

2013

2 625

54.5

2013

1 539

27.5

Source: Estonian Land Board

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

22

Source: Estonian Land Board


LATVIA LAND FOR PRIVATE BUILDING Land plots with area from 1200 to 2 000 m², located close to Riga or near water, with existing connections to public utilities and good infrastructure were still interesting and demanded in 2013. Interest in land plots with larger areas or plots without connections to public utilities was not practically observed. Interest in plots without connections to public utilities and access roads is very low. Despite the low overall demand, negative price

fluctuations of private building land in year 2013 were not observed. Even a small growth of prices of qualitative land plots around Riga was observed. In a good location in neighbourhood of Riga buyers choose more expensive plots of land, but with a better location, public utilities level, and nearby infrastructure. This is due to the fact that in the most cases the land is purchased to build a house for their own needs.

There is still no demand in the market for plots to be parcelled. Market value of created parcels in the current market situation does not cover the total cost the development, which includes construction of access roads and connections to public utilities. Partially developed land plots still are available for purchase at well below the prime cost of development investments. Supply of land plots intended for private building around Riga far exceeds the demand.

LAND FOR COMMERCIAL DEVELOPMENT (OFFICE BUILDINGS, SHOPPING CENTRES, MULTI-APARTMENT HOUSES ETC.) Also in 2013 there was no significant increase in the activities in the commercial land segment. It is considered as one of the most stagnating market segments in 2013. The overall level of commercial building land prices in Riga has slightly increased on average, but this is mainly due to good plots of land, mostly in the central part of Riga. At the same time at the outskirts of Riga, in places with low demand in the current market situation, the price level of large-area land plots, plots with significant encumbrances and a lack of connection to public utilities, had a tendency to decrease. For example, at the end of 2013 at Šķirotava, land plots were offered also at the price of 5 EUR/m². In 2013, the demand for commercial land grew slowly. The main reason for this was lack of risk capital in the economy and uncertainty among borrowers. Seemingly, many investors are keeping a waiting position to see how quickly the economic changes will take place in the exporting countries, what will be the euro area recovery process, and how fast the economic situation in Russia will get worse in the near future. Crucial for the economic development and the construction of new commercial buildings will be the ratio between the work efficiency and the population wage in the long run. The main factors that have a positive impact on commercial building value of the land: the location and distance from the main streets; • the existence of utilities; • road transport parking facilities. •

Factors that negatively affect the value of the land plot: quality and structure of objects in the surroundings; • the existing buildings on the plot; • the existence of the red lines on the plot. •

Price range for commercial lands is very varied. The cheapest land is available at Rumbula, where land sales prices are from 10 EUR/m², while the most expensive is in the Old Town, where the land plots are being offered starting from 3 000 EUR/m². Most appropriate and the most popular commercial areas are Krasta, Maskavas, K. Ulmaņa Gatve, Skanstes, Mūkusalas, Krustpils and Granīta Streets. Apartment building developers have retained an interest for relatively small land plots with an area up to 5000 m² with a good location and available infrastructure.

Although the volume of construction production has been increasing already for three consecutive years – in the 3rd quarter of 2013 compared to the previous year, construction growth was 11.6 % (in the 3rd quarter of 2012 relative to the corresponding period of the previous year the increase was 8.3 %), this has minimally contributed to growth of activities in the land segment. In the first three quarters of 2013, the number of constructed residential buildings decreased by 9.7 % compared to the same period of 2012. This can be explained with completion and putting into service of partially built pre-crisis period houses in 2012, which resulted in a large amount of constructed buildings. In 2013 new projects were developed, but, obviously, a lesser number of unfinished buildings was put into operation.

PRICES OF LAND PLOTS SUITABLE FOR COMMERCIAL BUILDING IN RIGA ON JANUARY 1, 2004, EUR/m² Location

Minimal price

Typical price

Maximal price

Krustpils / Granīta Street

10

25

45

Maskavas Street

15

30

60

Vienības Ave

45

50

120

Čiekurkalns

25

40

85

Teika

70

90

130

K. Ulmaņa Ave

30

70

130

Āgenskalns

25

65

230

Ganību dambis

40

50

70

Dzelzavas Street

50

80

200

Riga Centre

100

450

1500

Source: ARCO REAL ESTATE

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

23


There still exists a number of offers for land plots with developed and approved projects of multiapartment buildings, and usually these offers include projects that have been developed earlier and that do not meet the current market situation and demands. In a number of cases there is a too

weak economic substantiation for development of the finished projects that are being offered. Price of land plots in housing districts suitable for construction of multiapartment buildings is from 40 to 70 EUR/m², but in the city centre this price is 450 – 850 EUR/m² on average. In turn, suitable plots for

construction of supermarkets are in very good locations, at intersections, with excellent transport logistics. Such plots in housing areas are offered at 60 – 85 EUR/m².

BULGARIA DEVELOPMENT LAND 2013 was marked by increased interest for land plots suitable for development. The most attractive locations are those close to the new and upcoming subway stations. Real estate developers are already exploiting these locations where new construction is in high demand. Local and international developers have announced plans for some large-scale.

Prices for development-ready land in Sofia vary between 170 – 200 EUR/m²; however, in the city centre prices reach 900 – 1 000 EUR/m², and landmark properties on major traffic arteries with high intensity construction parameters are offered for as much as 1 500 – 2 000 EUR/m².

PRICES OF DIFFERENT TYPE LAND RIGA

EUR/m²

• land

for commercial purposes

15 – 1 200

• land

for residential purposes

18 – 450

• agricultural

land

JELGAVA

EUR/m²

• land

for commercial purposes

2 – 35

• land

for residential purposes

3 – 10

• agricultural

land (Zemgale)

1 200 – 4  800 EUR/ha

TALLINN • land

for commercial purposes • land

for residential purposes • agricultural

land

TARTU • land

for commercial purposes • land

for residential purposes • agricultural

land

EUR/m² 100 – 300 70 – 180

SOFIA • land

for commercial purposes • land

for residential purposes

EUR/m² 170 150 – 200

1 500 – 2  500 EUR/ha EUR/m² 60 – 150 40 – 100

PLOVDIV • land

for commercial purposes • land

for residential purposes

EUR/m² 50 – 70 100 – 150

1 500 – 2  500 EUR/ha

RESORT CITIES JŪRMALA

EUR/m²

• land

for commercial purposes

180 – 700

• land

for residential purposes

25 – 550

• agricultural

land

LIEPĀJA

EUR/m²

• land

for commercial purposes

1.5 – 45

• land

for residential purposes

4 – 70

• agricultural

land (Kurzeme)

DAUGAVPILS

• land

for residential purposes • agricultural

land

EUR/m² 30 – 80 30 – 60 1 500 – 2  500 EUR/ha

EUR/m²

for commercial purposes

1.5 – 25

• land

for residential purposes

3–7

land (Latgale)

for commercial purposes

750 – 2  800 EUR/ha

• land

• agricultural

PÄRNU • land

650 – 1 400 EUR/ha

REAL ESTATE MARKET OVERVIEW 2013 ESTONIA | LATVIA | BULGARIA

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VÀRNA • land

for commercial purposes • land

for residential purposes

EUR/m² 48 – 50 110 – 190


Arco Vara in Estonia Jõe 2b, 10151 Tallinn, Estonia Phone: +372 614 4600 info@arcovara.ee www.arcovara.ee

Arco Real Estate in Latvia Brīvības 39, Riga, LV-1010, Latvia Phone: +371 6736 5555 riga@arcoreal.lv www.arcoreal.lv

Arco Real Estate in Bulgaria 38А Cherkovna Str., Sofia, Bulgaria Phone: +359 2 950 3888 info@arcoreal.bg www.arcoreal.bg

www.arcorealestate.com

ESTONIA

LATVIA

BULGARIA

ARE Annual Market Overview 2013  
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