Large investments predicted in office buildings despite remote work

Investment experts predict growth in office building investments, despite current conditions of remote work.

Experts say last year in real estate investments passed without dramatic changes. Although a drop in property prices and the number of transactions was initially forecast, the amount of investments in the Baltic has exceeded the one billion euro mark, which is considered to be standard. In which areas can we expect investment in real estate this year?

Although almost everyone is working remotely during Covid-19, the head of the real estate financing board of SEB Bank Jānis Ozoliņš forecasts that offices will be one of the areas that will experience development in Latvia.

"If we look at the capitals of the Baltic States, those who have travelled through Vilnius and Tallinn feel that our market for offices is less developed than in those cities, and I think it is time for us to come to this level. Now, as part of the Covid-19 pandemic, companies are starting to assess what their office is like. It will have to be where people, employees find it enjoyable to stay. The office will certainly be needed, only, I think, will change the way we work in it," the expert said.

Ozoliņš said many projects are already close to obtaining construction permits. Meanwhile, the head of the Latvian Real Estate Association and the Chairman of Arco Real Estate Board Aigars Šmits did not forecast growth in the office segment.

“I wouldn't want to agree with the fact that we're going to start building offices in Latvia. Because the current situation shows that there are enough free areas on the market. Indeed, I have no explanation for how investors are calculating investment returns because if we put all the figures in the table, then against the construction costs of the moment, against rentals, all projects come to us negatively. Then I suppose it's very, very cheap, or this is a choice for the money to be invested in anything at all, not held in an account. That's the only explanation for me when it comes to offices,” Šmits said.

On the other hand, new residential areas will continue to appear on the market, according to Šmits, as apartments are in demand, banks in Riga also give loans, and prices are currently low.
But with the new rental law balancing the rights of landlords against tenants, investors' interest in the construction of rental houses could grow.

While there are currently more questions than answers in some property segments, foreign investors are very interested in the market, according to Luminor real estate financing expert Uģis Počs, saying that investments in the Baltic States are higher than in the rest of Central Europe and Scandinavia.

"If we saw previously that the investment was in the buying-selling business, where new investors bought already existing, functioning facilities, we see that there are currently separate large projects in the office market, where, for example, new buildings are being built, which gives an additional boost to both the urban environment and the economy.

"The development of the housing fund in Latvia has certainly lagged behind Estonia and Lithuania in the last ten years, but what we see – 2020 looks like the year it takes off. This sector is starting to grow again," Počs said.

Source: eng.lsm.lv