Commercial Property Market Report 2017

Commercial Property Market Report 2017

2017. year 09. October

Office space market review

In 2016, the office market underwent more changes than in the year before. The interest in new office spaces on the part of tenants grew. The year 2015 marked a trend, where large and successful companies acquired office buildings for their own use, whereas a significant event in 2016 was the completion of a new office building for letting in Riga. For some years now, tenants, lease brokers, and institutions willing to attract new companies to Latvia have acknowledged the lack of high quality office spaces in Riga meeting the requirements of tenants, the pace of the construction of these buildings is still somewhat slow and fails to meet the promised completion deadlines.

Despite a shortage of new office buildings, tenant turnover does happen. In cases where businesses expand or shrink, they move to office spaces that are of similar quality, in the same building or elsewhere. The reasons for opting for a new office include the opening of branches in different parts of Riga, due to changes in the company’s specialisation (e.g., they need to be closer to the airport), or due to unsatisfactory existing conditions (the company’s management may require a higher office quality standard, or in cases when there are grounded complaints from the tenants regarding the microclimate in the premises), etc.


In 2016, the interest in new office spaces on the part of customers was equally high throughout the year, without marking any particular seasonality. Tenants have become much more knowledgeable and confident as regards the type of the premises they are willing to lease. They are also more informed about the trends in other countries, inquire after the added value the lessor can offer and how comfortable, prestigious and pleasant the specific location will be. Apart from the office itself, the neighbours, the overall style of the building, the availability of showers and bike parking racks, catering facilities as well as other factors are also considered.

For quite a few companies, the availability of parking lots and the surrounding infrastructure plays an important role, whereas for other companies, the environment and design, which can be created in the office premises so that the premises meet the needs and character of the company, may be more important. It should be noted, however, that the current supply falls behind the current demand, which is why tenants sometimes need to make compromises in their choices. Often, having familiarised themselves with the market circumstances, businesses choose to invest in improving and bettering the existing spaces, rendering them more comfortable.

There is a stable demand for high and very high quality, respectable, effective-layout spaces with access to public transport and the possibility of parking a large number of cars. The trend that started a few years ago has been continuing as the interest in spaces with high ceilings and the possibility of creating a modern, open and comfortable design has been increasing. Companies are seeking the ways of how to furnish their premises and use them more effectively and efficiently, ensuring comfort for their employees as they carry out various tasks. The concept of activity-based working, which enables employees to work privately in silence or side by side with co-employees, or in a comfortable, open-space area, is replacing the trend of choosing open-space layout offices.

The tenants in Riga can be distinctly split into those, which have been loyal to keeping leasing premises at the right bank of the river Daugava and those – on the left bank. Even if there are suitable premises on the other side of the Daugava, employees have adjusted their everyday logistics to suit the current location, and the company’s management is not willing to change it to avoid causing inconveniences to their employees.

In 2016, the demand on the part IT and finance companies was not as high as previously. The clientele of Kivi Real Estate included the representatives of a wide spectrum of industries. Furthermore, it has to be acknowledged that the customers complained most not about the level of rent rates but rather about the lack of suitable spaces.

Successful, stable, and growing companies still prefer top-quality office spaces, thus demonstrating that they are willing to improve the work conditions for their existing employees, as well as to be capable of competing with similar companies in attracting talented employees in great demand. This can be observed especially in the field of customer service, which confirms to the saying: a company should take care of its employees, so that they would take good care of the company’s customers.

For the companies of specific industries (such as law, advertising and media agencies), it is still important to be located in the city centre, where interest in the premises in new or reconstructed projects remains high.

There has been a constant demand for high quality offices from companies that require an office space of 200-300 sq m.

The year 2016 also saw a continued demand for the office spaces of 1000-3000 sq m from already existing companies as well as from those willing to start their operations in Latvia.

The demand on the part of customers is characterised by high requirements and an adequate price. Ineffective layouts, premises with low ceilings, and untidy staircases are looked down upon by customers, and they are not willing to pay for such spaces. Tenants have acknowledged that the supply of attractive, non-conventional, and high quality spaces is low.


In 2016, the most significant addition to Class A office supply in Riga was the newly built office building Place Eleven in the widely discussed Skanste business territory. The largest part of the buildings’ floor space of 15,000 sq m has already been let. A number of lease agreements had been signed already during the construction process, and it is clear that the anchor tenants – the Norwegian IT company Visma (an office of approx. 4,500 sq m), the insurance company BTA (an office of 3,000 sq m) and MARS Latvija from the food producer group MARS (an office of 660 sq m) will be joined by other well-known companies from different industries.

Due to the tenants relocating to Place Eleven, many 200-1,000 sq m and larger Class B and Class C office spaces will be vacated in different parts of Riga. The demand for these types of premises is still high even after the relocation of the State Revenue Service, Latvijas Valsts Meži, Exigen Services, and Airbaltic to new premises in the past two to three years.

This summer, after Eurolive Technologies relocates to the building acquired by it in Triangula Bastions, the online gaming company’s office of 3,000 sq m in Ganību dambis will become available.

Overall, the demand for office spaces has slightly decreased. In 2016, all of the M4a building, which offered office spaces of approx. 1,700 sq m at the beginning of the year, was let.

In 2016, premises of approx. 13,000 sq m were added to Riga’s Class A and Class B office market, bringing the total supply to approx. 615,000 sq m at the beginning of 2017.

Around 65% or 399,750 sq m of the total supply are intended to be leased out, i.e., 35% or 215,250 sq m are envisaged for the private use of the companies.

At the beginning of 2017, the available supply of Class A and Class B office spaces in Riga was about 27,000 sq m or 4.4%

Office spaces with an ineffective layout, such offices which draw quality-related complaints on the part of the tenants thereof, high total costs per square meter (approx. 18-25 EUR/sq m), and the spaces located in buildings currently considered morally and physically obsolete stay unleased for long periods of time.

In Riga, there is still a shortage of new office buildings, which not only is keeping existing companies from relocating to better quality premises, but is also holding back foreign companies, which need large office floor areas conforming to high standard requirements.


  • With the approaching of the completion of the construction of Place Eleven, the signing of the preliminary lease agreements for premises in the unfinished building was popular. Taking into account the slow development of new office buildings, this trend is also expected to continue in respect of other new office buildings.
  • In 2016, tenants were keenly interested in new projects. Eventually, concluding that Riga has an insufficient stock of modern offices, some customers still chose to remain in the waiting mode until finding an office suiting their needs.
  • There has been an increase in the supply of co-working office spaces, favoured by small companies, start-ups or the companies engaged in carrying on a seasonal business. While in certain Western European countries this concept is gaining an increasing popularity also among large companies, in Latvia it has yet to become popular.
  • Some companies chose to locate their branches (call centres, etc.) in regional cities. Bite has opened theirs in Jelgava and Saldus, Transcom opened theirs in Jēkabpils, and Taxikurir operates a branch in Liepāja alongside their Riga office.
  • The demand is still high from IT, programming and finance technology (fintech) companies. Moreover, in 2016, for the first time, the exports of Latvian information and communications technology sectors outperformed the railway services exports.
  • The human factor plays an increasingly important role, i.e., tenants are willing to work in the premises managed efficiently by an understanding lessor, which treats them well.


The office building projects contemplated to be carried out in the near future as well as those already under construction are a current topic in almost every conversation with office tenants. Unfortunately, one can draw a conclusion that there is still little to choose from and the timing when the options may improve, remains unknown.

The year 2016 marked the beginning of the construction of Hanner multifunctional Class A office building Teodors at G. Zemgals gatve as part of the Jaunā Teika complex, which is currently under construction. The first stage of the project provides for the construction of an office floor area of 17,000 sq m, which tenants might start occupying in the middle of 2018.

In the 4th quarter of 2017, the offices of an industrial and modern design will be available at the Loft office building at Akmeņu Street 14 near the National Library of Latvia – overlooking the Daugava River. The total area will be approx. 4,000 sq m on six floors.

Class A office spaces will be available in the Z-Towers office building, to be put into operation in the second half of 2018 after carrying out construction works for more than ten years. The leasable area of this multifunctional complex is ​​more than 20,000 sq m, and offices and commercial spaces will be located on 27 floors of the South Tower with an area of ​​880 sq m.

In the summer of 2016, the construction works were launched on the New Hanza City project. In 2017, upon completing infrastructure construction works, the launching of the construction of ABLV Bank’s main building (21,700 sq m) is contemplated, followed by the construction of a multi-functional BREEAM-certified Class A class office building  with an area of 19,400 sq m.

In Riga’s modern centre – Skanste – the construction of Class A office building complex Skanstes Business Centre developed by ELL Real Estate and located between Arena Riga and the LNK Centre building is being contemplated. During the first development stage of this complex, more than 24,000 sq m BREEAM-certified office areas would be constructed. The total area of ​​the complex is expected to reach 55,000 sq m.

In the near future, the launching of the construction of a Class B office building with a total area of ​​5,327 sq m is being contemplated at Ganību Dambis 24a, envisaged to be completed in the 4th quarter of 2018.

According to the latest information available on the planned expansion of t/c Origo with Class A office space of 9,000 sq m, spaces would be offered to tenants in the beginning of 2019.

In 2017, the reconstruction of individual office buildings will continue. In the beginning of summer, the reconstruction of offices with an area of 3,500 sq m would be completed at Brīvības Street 21. LNK has plans to reconstruct buildings at Valdemara Street 118 and at Kauguri Street in Kalnciems offices. The reconstruction of the SWH office centre is expected to cover 10,500 sq m.

Partially reconstructed and partially newly built Class B office spaces with a total lease space of 1,800 sq m are available at the building at Mukusalas 29b. (Currently, the building has been almost fully leased out).

The development of new, top-grade, modern design office buildings is occurring at a somewhat slow pace, and of late, Riga has been increasingly being compared to Vilnius, pointing out that in Vilnius, there are new buildings as well as good international tenants. The plans and intentions of our developers seem to be remaining only on paper and in the form of promises for a long time, whereas, the matters of interest to tenants are not fully answered.


In 2016, rent rates remained at the previous level, with a slight upward trend in the best Class B offices (due to insufficient supply, but sufficiently high demand for such kind of premises). Still, rent rates for certain leases may differ from those originally set, depending on the office space area and the terms of the lease agreement.

At the end of 2016, rent rates for Class A office buildings reached 13 – 16 EUR / sq m, whereas rent rates for Class B office buildings were in the range 8 – 13 EUR / sq m.

In the centre of Riga, rent rates for good quality offices in renovated buildings vary from 8-14 EUR / sq m, depending on the area and the quality of the interior of the building. Rent rates in other locations for Class B and C offices vary from 5.5 - 9 EUR / sq m.

Customers are increasingly assessing office buildings in terms of total office costs, rather than the price of rent per sq m. They are prepared to pay more for quality accommodation and good location.


  • After the relocation of tenants to Place Eleven, office spaces in Class B and Class C buildings will become vacant.
  • The launching of the construction of certain planned new office buildings is being suspended or delayed, however, it is expected that more of the existing office buildings will be reconstructed and improved, rendering them more competitive relative to the new projects.
  • Companies that require large areas may be required to use office spaces on different floors or in different buildings. We expect that the trend of opening of some call centres, as well as branch offices outside Riga will continue.
  • The shortages of quality office spaces are expected to persist, driving a low supply of vacant office spaces with an area of over 500 sq m. Major changes are expected starting from 2018.
  • In 2017, rent rates will remain at current levels, changes are expected only after new buildings appear on the market.
  • Rent rates for the premises that have been vacant for a long time will not increase, as customers are not prepared to pay inadequate rent rates. Customers admit they would like to wait until they find the best solution. Occasionally, temporary inconveniences are being dealt with by making it possible for employees to work remotely from the office.
  • Entering into lease agreements for office spaces not yet built is becoming increasingly popular. However, this is typical for tenants who are already present in Latvia. Companies willing to enter Latvia are increasingly opting to visit the building first rather than familiarise themselves with the project on paper.
  • A strong demand from financial technology, IT, banks, and other service companies is expected for large (at least 1,000 sq m) offices with the possibility to expand within the building.
  • Riga will continue to lose prospective income from rents from foreign companies to other eastern European cities, including Vilnius and Kaunas, in the race for attracting large international outsourcing centres as long as there is a lack of appropriate office spaces in the office market.
  • In 2017, selling of office buildings will continue, and it is very likely that successful, high-growth companies will choose to buy a building for its own use over renting an office, considering that no great new office space offers are expected. Such an example has already materialised – in the spring of 2017, Printful Properties (a company related to Draugiem Group) bought an office with an area of nearly 3,000 sq m at O. Vācieša Street 6b, previously occupied by RBS Skals. As a result, all of the companies of Draugiem Group in Latvia would now have a single location.
  • Tenants increasingly pay attention to the sustainability and ecological characteristics of the relevant offices, as well as to low maintenance costs, and environmental concerns, thus demonstrating corporate social responsibility.
  • International companies include quality and sustainability certificates such as BREEAM and LEED as desirable or even mandatory requirements for their offices across the world.



At the end of 2016, the share of vacant spaces on the prime commercial streets in the city centre accounted for 7%, totalling approximately 3,300 sq m.

In the centre of Riga, there are premises, which have remained vacant for a very long time or which have had a large tenant turnover, and which are characterized by high rent rates, an inefficient layout, bad technical condition, difficult to be accessed with private transport, or lack visible windows.

As the demand for shop premises in the city centre is declining, so does the number of the so-called bustling and prime commercial streets or the sections thereof.


In 2016, a steady demand for commercial premises in the city centre could be observed. The demand has a tendency to decline on the part of the sellers of clothing, shoes, accessories, and cosmetics, who prefer to be located in shopping centres. Whereas the demand on the part of catering companies is higher than that of the retailers of various types of goods. These companies are interested in expanding the existing successful concepts as well as in opening new ones. However, the lack of appropriate technically appropriate spaces as well as disproportionately high rent rates renders it difficult.  Undoubtedly, changes in the demand are affected by consumer habits and their fashion trends.

Twenty years ago, people used to have meals at home and went shopping for food at shops, whereas at present, eating out is becoming increasingly popular in Latvia as well as elsewhere in Europe, whereas shopping is now being done online, using the computer.

There is still a high demand for the premises that can be used for various types of boutiques (designer goods and clothing; a shop, a showroom and a café).

The largest demand prevails for spaces with the floor space of up to 100 sq m in the busiest places of the city centre and Old Riga with busy pedestrian traffic, such as in certain sections of Tērbatas, Elizabetes, Ģertrūdes, Barona, Kaļķu and Vaļņu Streets. The demand on the part of tenants also focuses on prime premises, as determined by key factors, such as the flow of solvent customers, a top-quality building and the premises of the shop, large windows and convenient access.

Retailers see the value and an opportunity to use non-standard shopping facilities and locations. In 2016, the furniture salon Kate moved from Purvciems to the premises with a floor area of 1,200 sq m to Čiekurkalns, where the salon had been created by reconstructing an old fire-fighting station. Whereas, the now popular restaurant Ferma opened in the wooden auxiliary building, where a bike shop used to be located.

The demand has increased for premises in top-quality, renovated wooden buildings with an averagely large floor space. Retailers are willing to differentiate; they lease premises, which have a particular charm, which would attract additional attention on the part of customers.

The demand from second-hand clothing and shoe shops has declined. On the one hand, competition has increased among the said retailers, on the other the purchasing power of the population has risen. In 2016, several such shops closed in the city centre.

Over the past year, an interesting trend was observed relative to the demand between two segments, which are somewhat conflicting. In the centre of Riga as well as outside it, alcohol selling shops (especially in the outlet format) as well as the points of sale of electronic cigarettes kept expanding. At the same time, due to the growing demand, new eco and bio product/food stores and sports clubs kept appearing.

In addition to the various catering concepts, customers are keenly interested in healthy catering points that charge affordable prices and are located in well-designed premises. New entrants in this niche are the cafés Balts and Cafeterius at Ģertrūdes Street and Mr. Fox at Dzirnavu iela.


  • The repair works on Barona iela have affected the activities of retailers, i.e., there has been a loss of comfort due to noise and dust, complaints by staff as well as customers, moreover, accessing the shops was rendered difficult. However, in the future, the visual changes and improvement in accessibility of this street might restore interest on the part of retailers as well as customers. In 2017, the new entrants at Kr. Barona Street included Costa Coffee, the shop Modernists owned by the architect and wine connoisseur Mārtiņš Pīlēns, as well as the new look of the book and stationery store Jānis Roze.
  • A new English fashion and interior object store Laura Ashley opened at Dzirnavu Street, at the premises of Centrus facade, whereas in the backyard, spacious premises near a well-cared for small park have been occupied by the hunting and fishing supply shop.  
  • As regards the shop premises of the town centre, there has been an increasing trend – various providers of services kept opening their branches. There is now a branch of MFD Medical Centre and a barbershop M Room Barber at Dzirnavu Street. Opening a laser clinic is being contemplated at Berga Bazārs.
  • Narvesen continued opening new points of sale in Riga, e.g. last year new points of sale opened at Merķeļa as well as Tērbatas Streets.
  • The restaurant Riviera has expanded at Dzirnavu Street 31. The well-known chef Raimonds Summers has opened his restaurant Entresol at Elizabetes Street. Conversely, Zivju lete closed at Dzirnavu iela, and the place has been occupied by a new caterer Riits. Whereas the well-known catering brand Lido has opened its eateries in the t/c Origo and t/c Apelsīns at Ādaži.
  • In certain parts of Tērbatas Street, there have been changes in the composition of tenants; some of the new tenants are the shops Ženēva and Tiger, the design studio My Print, and Lāči confectionary.
  • New sports medicine concepts and brands have entered Riga, i.e., Lemon Gym (at three spots in Riga) and People Fitness (two spots in Riga).
  • The pet shop network Dino Zoo opened its most ambitious animal services and trading centre in the Baltics, with a floor area of 3,000 sq m at Krasta iela 52. A new shop has also been opened by BN Kurši, the retailer of construction materials.
  • There have not been major changes in Old Riga; the small grocery stores of Rimi and Statoil seem to have found their niche. The future development thereof will be most likely depend on them being able to compete with Narvesen’s points of sale.


In 2016 and until now, there have been no dramatic changes in rent rates. They have remained at the previous level, which is still being affected by the decline in the demand for shop premises in the city centre.

Rent rates have been dropping for trading premises located at Čaka and Marijas Streets and along most of Brīvības Street. Although both the streets are busy in terms of people and vehicle traffic, however, retailers have not been benefitted from this.

Rent rates for trading spaces of up to 75 sq m, depending on the layout of the premises and location range from EUR 20 to EUR 40 per sq m in the city centre, and from EUR 35 to EUR 55 per sq m in Old Riga.

Rent rates for trading spaces with a floor are from 75 to 150 sq m range from EUR 16 to EUR 25 per sq m in the city centre, and from EUR 20 to EUR per 50 sq m in Old Riga.

Rent rates for trading spaces with a floor over 150 sq m range from EUR 12 to EUR 22 per sq m in the city centre, and from EUR 20 to EUR 50 per sq m in Old Riga.


In the shopping centre segment in Riga, the planning and implementation of reconstructions of the existing centres of various magnitude, complementing and improvement of the composition of tenants, changes in the shareholding structure as well as the construction of a new multi-functional shopping centre still play a significant role.

The shopping centres Alfa, Spice and Origo, for which expansion and improvement works are being planned, are expected to undergo changes. Expansion-related changes are expected to take place in the shopping centres Damme and Imanta Retail Park in 2017.

The reconstruction of the shopping centre Galleria Riga was carried out in 2016, within the scope of it,  more brands have complemented the list of its tenants, such as COS, H&M, as well as the sports club My Fitness.

The shopping centre Sky&More continues to expand and improve the range of fashion shops.

In 2016, there has been a change of the shareholders of the shopping centre Azur (Kesko Oyj), along with announcing plans of improving the quality of the premises and the composition of tenants. Following the sale of the shopping centre Domina to Eften Capital; currently, the works aimed at improving the centre are actively carried out. The second Sports Direct shop and another Jysk network shop have been opened in Latvia.

The food store Prisma closed all of its shops in Riga. There were plans to open the shop Rimi in the shopping centre Domina, however, the Competition Council banned this, and hence, the second largest grocery store operator in Latvia – Maxima will have its shop in the shopping centre (this shop operated in the shopping centre Domina before the shop Prisma did).

After opening the shop Podium near the Monument of Freedom – at Freedom Boulevard 21, at its previous location at Brīvības Street 201, which is a building with a floor space of 10,000 sq m and one of the prime shopping locations in Riga, the Lithuanian furniture shop Berry Baldai opened its shop. At the beginning of 2017, this transaction was carried out by Kivi Real Estate.

In the department store Stockmann the composition of tenants has been expanded to include new shops, such as Zvaigzne ABC, Laiks, Monokel, and Wood Religion Barber Shop.

Sports goods brand shop 4F has been opened in three locations in Riga.

At the Barons centrs the first shop of the brand Realizācijas Centrs opened, which is currently expanding and planning to open another store in Pārdaugava as well.

Popular brands such as NEXT, Lush, and Marks&Spencer have left Latvia.

In the most popular shopping centres, the share of vacant spaces account for about 3%, and the rent rates thereof have remained at the previous level.

Major changes in the rent rates and occupancy rates can be expected after the planned shopping centre extension projects as well as the opening of the shopping centre Akropole in Kengarags, at Maskavas iela 257 are completed, the construction works of which have been started. It is expected that the shopping centre with a floor space of more than 60,000 sq m, with Maxima XXX shop and diverse entertainments options will be completed in 2019.

In spring 2017, the construction of Decco Centrs was started at Katlakalna iela 6d, which is going to be the largest interior and design object thematic quarters in the Baltics. The four-building complex with a floor space of 13,500 sq m, which will host salon shops, as well as office and warehouse premises, is expected to open at the end of this year. IKEA’s entering the Latvian market became a reality in 2016; the objective of opening a shop in the Stopiņi county in August 2018 has been announced. Despite lacking a unanimous opinion, this is bound to lead to changes in the furniture and home goods retailing segment. The shop will occupy an area of 10 hectares with a floor value of over 30,000 sq m and a spacious parking lot for 1,000 cars.

Depo is still going to build a shop in Imanta, at Kurzemes prospekts, as well as a shop at Jelgava, currently being an object of a heated debate.

At the end of 2016, restructuring of the home and garden goods shop K-rauta into K Senukai was launched. (Kesko Senukai operates the largest construction, repairs and household goods shop network in the Baltic States.) The first redesigned store has already opened at Lucavsala.

It can be expected that new brands will enter Latvian market not only in non-food goods but also in grocery shop categories, which will lead to new competition for the shops, which are widely represented, including the Rimi and Maxima networks, and well as smaller retailers.

In 2017, a further expansion of the catering sector, the creation of new concepts, as well as the entering of new foreign brands are expected.



At the beginning of 2017, the total supply of modern industrial spaces in Riga and the neighbouring areas amounted to approx. 920,000 sq m, whereof 75% were available for lease, whereas the remaining 25% were available for own use by businesses.  In 2016, the industrial space market was supplemented by new spaces of approx. 20,000 sq m. Thus, compared to the previous year, the number of new buildings put into operation has dropped by 80%. Owing to various reasons, only 36% of the planned spaces have been put into operation.

In 2016, the only major and worthy of mentioning addition to the industrial space supply side was the Balt Cargo Solutions complex at Dreiliņi (with a floor area of 18,000 sq m).

In 2016, given the relatively small floor area of the facilities put into operation, there were no such expansions or relocations on the part of tenants, which would significantly affect the situation in the industrial space market.


In subsequent years, compared to 2016, we expect a substantial growth in modern industrial spaces in Riga and the neighbouring areas. Currently, industrial spaces with a floor area of 62,000 sq m are being constructed. Almost all of these areas are built for lease with a profit gaining intention, without entering into preliminary lease agreements, which demonstrates the developers’ trust in the viability of the lease market and improvements in the availability of financing.

There are new industrial projects currently at the planning stage in Riga and the neighbouring areas, with a floor area above 200,000 sq m. The planned projects include the expansion of the existing industrial parks, quite a few industrial buildings with a floor area of up to 5,000 sq m for own use by businesses, as well as a number of ambitious projects, such as RIMI Baltic logistics centre at Augusta Deglava iela in Riga.

Still, only few developers are prepared to launch the construction of new spaces without entering into preliminary lease agreements, despite that the share of vacant spaces is relatively low and that all the premises built within the past years have been leased out. Businesses are increasingly more interested in buying land plots for the construction of the industrial buildings to meet their needs. Growing interest is related to a number of factors, such as a very limited supply existing in the lease market, improving crediting environment and economy, as well as the willingness of business owners to invest their free resources in real estate.


  • In 2016, the warehouse and production facility segment continued to grow slowly. The demand for modern warehouse and production facilities was mostly driven by the representative offices of foreign companies and successful local businesses, which provide services primarily in Riga and larger regions.
  • As the economic situation in key export markets is improving, an increase in demand for modern facilities can be anticipated on the part of exporting companies.
  • Latvia as a location for the deployment of production facilities and warehouses is being looked at by such foreign companies, which do not have a presence in Latvia yet; however, there no major new businesses entered the market during 2016.
  • The highest demand is for modern warehouse and production facilities with a floor area of 500 – 2,000 sqm.
  • To provide services to large international customers logistics companies need modern warehouse facilities with a floor area of at least 10,000 sq m, however, the market currently does not offer such spaces.


Overall, in 2016, the activity in the market was low. No significant business expansions, reductions or relocations occurred, as a result, there were no significant changes to the share of vacant spaces. In January 2017, compared to January 2016, the vacancy rates had slightly decreased – to 4.2%.

As putting of new facilities in operation is expected in 2017, it is anticipated that vacancy rates will increase beyond 5%.

The facilities for which too high rent rates are charged and which are difficult to adapt to the specific needs of various lessees have long been vacant in the market. A longer lease term is required for leasing lower grade facilities with a floor area above 1,000 sq m. In this segment, there are great offerings of equivalent facilities, as a result, lessors are able to mutually compete only on price. The facilities, which have been upgraded and adapted to modern requirements, find their lessees faster.


In 2016, rent rates of grade A and B spaces remained almost unchanged compared to the previous year, whereas the level of rent rates of the facilities of poorer quality continued to drop. Higher rent rates have remained high for such modern facilities, which have been adapted to the needs of the lessee and located in places with well-developed infrastructure.

Compared to the previous year, more lease contracts have been concluded at the maximum rent rates mentioned in the report.

  • Rent rates for grade A spaces range from EUR 3.50 – 4.50/ sq m.
  • Rent rates for grade B spaces range from EUR 2.85 – 3.50/ sq m.


  • In new buildings, rent rates would remain unchanged, i.e., in the region of EUR 4 -4,50 / sqm.
  • In the coming years, a significant increase in the number of new projects with a floor area of up to 5,000 sq m is anticipated. The projects comprise those that are being built for own needs of specific businesses as well as those built for lease.
  • With competition in the labour market increasing, choosing of the location of industrial spaces and the availability of public transport for employees play an increasingly important role. The most competitive locations will be those with proximity to the Riga public transport system.
  • The share of vacant facilities in grade B and C warehouse segment will continue to grow, especially in regard to the facilities with a floor area of above 2,000 sq m, so declining rent rates can be expected in this segment.
  • Rent rates will continue to decline also for unreconstructed warehouse and production facilities built during the Soviet times, considering the large supply of such offerings.
  • Owing to the relatively low cost of construction of industrial objects and available financing, more and more companies appear to be interested in acquiring land for the construction of buildings of their own.
  • Major logistics companies, while refocusing their activities from CIS countries to other markets, have resumed expansion, thereby driving up the demand for modern logistics facilities.


The year 2015 was the best year in terms of investments in commercial properties in Latvia since 2007; market was still active in 2016, although lagging behind in terms of the number of transactions. Investments in Latvian real estate sector continue to demonstrate moderate growth, and in some investment segments, transaction amounts have reached a historic high. In 2016, total investments in Latvian commercial properties amounted to approx. EUR 350 million.

According to the Land Register data, the number of transactions in the segment above EUR 2.5 million has dropped by approximately 17%, whereas the total amount in the segment above EUR 0.4 million have increased by approximately 14 per cent. A high demand from local investors in the commercial property sector over EUR 2.5 million can be observed, with certain exceptions in the segment above EUR 10 million. In 2016, there was no major influx of new investors in the market; the transactions were carried out by the investment companies as well as private investors, which were already present in the market. Major investments have been made in the retail space segment, however, an increasing number of investors also check up on the industrial space segment.

In terms of the number of transactions closed in the Baltic countries in recent years, where the offer of properties generating the ROE desired by customers has dropped, investors are becoming increasingly more interested in the Riga market. In 2016, the most active investors in the Latvian market were the investment funds that had been already present in the Baltics. In Latvia, among the Baltic investors, Estonian investment management companies have been somewhat more active than Latvian investors.


  • Investors are mainly willing to acquire property that have been let to international anchor tenants and let under long-term lease contracts.
  • The demand for top-quality and profitable cash flow objects at an appropriate price is still greater than the supply.
  • Following the boom of term residence permits, the developers of residential object have had a focus on the demands of various kinds by local customers. There has been an increased interest in the development of residential objects in prime locations, such as the city centre, nearby it or for living in highly demanded suburban areas.
  • Market participants are increasingly looking at alternative types of investment in property, in order to achieve the desired return on capital.
  • There has been an increase in interest as well as the number of transactions to do with the acquisition of regional shopping centres, specific industrial objects, and unlet premises.
  • The industrial space segment is becoming more attractive to investors, which can be explained by the lack of appropriate retail or office objects and higher profitability.
  • The demand from end-users have remained the same as in the previous year, however, the total volume of investment transactions in this sector has been at least four times lower than in 2015, when mostly office buildings were acquired.
  • The demand exceeds the supply for such shopping centres located in Riga, which have top-quality tenants, a successful concept, and are managed professionally.


  • Unlike the situation in Riga, i.e., a wider supply can be observed in shopping centres in regions, as well as in properties with higher tenant turnover or other cumbersome factors, however, the profitability of these centres is rarely tied to the risks.
  • One of the growing investment object segments is exactly these regional shopping centres outside Riga where grocery and everyday service companies offering first necessity goods to the population are located. The annual return on such transactions depending on the location and the volume of transactions can reach up to 13 per cent.
  • There is still a high supply of obsolete industrial objects, unreconstructed property complexes of various segments, which require large financial investments in order to improve the quality thereof as well as a professional approach for development.
  • For the investors who are willing to get actively involved in the managing of the processes aimed at improving the property, a segment worth considering is that of vacant spaces. By engaging designers and professional managers, it is possible, subject to investing relatively small financial means and time to create attractive objects for lease. With a focused and sufficiently creative strategy, the new owners can significantly shorten the term of leases and raise the potential rents.
  • When investing in less demanded segments, investors need to be aware that attracting of bank financing will be more complicated as well as often additional investments aimed at improving the property will be required. However, such investing can result in a higher return on investment (9-13%), flexible terms and conditions of the transaction, as well as an opportunity to create a high value-added with thorough investment of finances and time.
  • Generally, one can observe the lack of the supply of economically justified and top-quality property.


In 2016, the sale transactions of shopping centres prevailed. Accordingly, following the transactions worth several millions, there has been a change of the shareholders of trading centres Riga Plaza, Domina Shopping and Azur. Domina Shopping has already seen improvements in terms of the composition of tenants with over 40 new stores, including Sports Direct and Jysk, as well as the planned change of the grocery store anchor tenant. The new shareholder of the trading centre Azur, i.e., KS Holding plans to invest EUR 16 million to improve it, and it has been announced that the prospective anchor tenant will be Kesko Senukai. Notably, the anchor tenant at Domina Shopping and Riga Plaza was Prisma. Perhaps the information on Prisma’s exiting from the Latvian market served as a catalyst of the transactions.

In 2016, the list of major investment funds that acquired real estate was supplemented by the international private capital company Lone Star Funds that became the new shareholder of t/c Riga Plaza.

In the office-building segment, the number of end-users in the segment over EUR 1.0 million has considerably dropped.

However, there have been various significant transactions in Class B office buildings with a floor area over 10,000 sq m, which reflects the great interest on the part of investors in this segment. Office buildings with long-term international tenants are still being considered the safest type of real estate investments.

In 2016, less than one-third of transactions accounted for the purchases of office buildings, whereas transactions in industrial spaces constituted only about 5-7% of the total volume of transactions.

There have been very few investment transactions in the prime commercial street segment in the centre of Riga. The demand for such spaces is low, because in Riga, the lease market for these premises has become increasingly uncertain, as only a relatively small part of concepts, brands and networks are capable of existing and expanding there, which allows us to expect that in the next few years, no increase in rents may be expected, whereas the stability thereof is not certain.


  • A moderate increase in the number and volume of transactions is expected, which will also depend on the economic growth of Latvia.
  • Housing prices are expected to rise because the interest in purchasing land plots and buildings requiring reconstruction can be expected to grow on the part of the developers.
  • An increase in the lending activity in regard of investment transactions on the part of commercial banks can be expected.
  • In the context of Baltic investors, it is expected that there will be a rise in the interest on the part of Lithuanian investors regarding Latvian commercial property market.
  • The interest about large-scale investments in commercial properties on the part of major international investor is expected to prevail.
  • It is expected that the return level for the best investment objects will remain at the 2016 level.