● THE ESTONIAN PROPERTY MARKET NEWSEC PROPERTY OUTLOOK • SPRING 2021
THE ESTONIAN PROPERTY MARKET
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ESTONIAN INVESTORS BELIEVE THAT THE TIME FOR NEW TYPES OF INVESTMENTS IS NOW
Compared to the other Baltic States, Estonia implemented the fewest economic restrictions due to COVID-19. It is therefore likely that the Estonian economy will be among the first to recover in 2021. According to the latest assessments, the Estonian economy declined by 2.5% in 2020, and is estimated to grow by 2.9% this year. Like in other European countries, more rapid growth is expected in the second half of the year, following a successful vaccine distribution. The Bank of Estonia expects economic growth to return to the 2019 level by mid-2022. Unemployment is estimated to keep rising throughout 2021, potentially leading to 10% of the population being out of a job. 2020 saw a total transaction volume of EUR 235 million in Estonia, which was more than 2.5 times as much as in 2019, and roughly a third of the total
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Baltic transaction market. In the first half of 2020, Estonia attracted investors who concluded several largescale deals. In the second half, and in the fourth quarter in particular, the market saw a greater number of smaller transactions. Active investment managers – and Estonian managers in particular – are ready to take even more significant steps forward but a lack of suitable properties prevents a more substantial growth in real estate investment transaction volumes. The acquisition of a residential portfolio consisting of 1,200 apartments in Tallinn was responsible for 73% of the overall investment volume. Investment in the office segment was more modest and constituted only 24%. The recently dominant office segment will likely become attractive to investors again once 120,000 sqm of new office space is introduced within the next two years. Many experienced
developers are starting, or continuing, large-scale office projects in the country’s most extensively developed Tallinn market. Though it was a relatively weak year on the transaction market for retail, at 4% of total transaction volume, the country’s retail market grew the most among the Baltic States. The segment of shopping centres was highly impacted by the pandemic, with a large gap forming between successful shopping centres and those struggling to compete (e.g. those focused on large tourist foot traffic). In 2021, uncertainty continues to face the retail segment in Estonia, while other segments are thriving.
Contact: Kristina Živatkauskaitė k.zivatkauskaite@newsec.lt
