Analytics, Banks, Financial Services, Latvia, Markets and Companies
International Internet Magazine. Baltic States news & analytics
Thursday, 25.04.2024, 06:39
Trends of the Baltic investment market: real property, business success stories and capital market development
In general, both institutional investors and well-off
private individuals and family-owned private investment companies highly value
the Baltic region as a good place to invest in new bonds, stocks and
alternative investments. The demand and interest of investors is high, and the
time has come to look for new investment opportunities.
Real property as a classic investment value
Many investors are now returning to basic values that are
becoming relevant again. Of course, real property objects are a classic value
and asset in the investment market, but foreign investors often look for
large-scale investment projects in the field of real property that, for obvious
reasons (the size of the territory and population), the Baltic states cannot
always provide. The Baltic States are a very attractive market, but the size of
their territory sets certain limits on attracting investment in the field of
real property. There is a limited amount and need for large shopping centres or
huge office complexes. Of course, investors want to invest in transactions
amounting to EUR 100 mln, and the offer of real property projects of this scale
in the Baltic States is rather limited since the average real property
transaction ranges from 3 to 5 mln euro.
However, there are also transactions worth between 20 and 50
mln euro and in the current investment climate where the total return on
investment is low the Baltic real property market will continue to attract
foreign investors by offering investment grade products and higher returns than
those in Western Europe or Scandinavia. It is also expected that return on
investment in the field of real property will also remain stable.
At the moment, there are many attractive medium-sized
investment projects in the Baltic market, such as high-end office and office
building rentals, and over the last three to four years the total activity in
the Baltic market has exceeded one billion euro which is an extremely good
achievement for such a small market. The interest is great, and deals are made.
In Lithuania, activity is ensured by many new buildings in Vilnius, especially
in the office space segment which is currently on the rise, but the rest of the
Baltic states are not far behind. For instance, the apartment, private house
and commercial real property segments in Latvia show a growing and positive
trend. This fact continues to attract the attention of both local and foreign
investors.
The highest profitability is observed in the logistics and
industry sectors, but this segment is not risk free, especially in Vilnius and
Riga where large logistics buildings depend on the activity of major lessees
since after a lessee leaves the building it is often difficult to find another
similar major lessee. Of course, the return on investment here is attractive,
but higher risks should be taken into account; investors are different and a
certain proportion of them choose nothing but high-risk investments with higher
returns.
In general, the volume of investments in real property
deserves attention in terms of offering attractive and versatile real property
tools in the Baltic region market.
Local businesses, success stories and contributions to the Latvian economy
Foreign investors do not have their eye toward real property
only; they are also interested in local businesses – profitable companies with
good cash flow and, yes, with a great, attractive history. One of these
successful domestic examples, of course, is the natural cosmetics manufacturer
Madara Cosmetics whose owners created the company from scratch and currently
have a market value of about EUR 30 mln.
At the end of 2017, the Company decided to raise additional
funds and became a public company listed on the Nasdaq Riga stock exchange.
Investors like local success stories because Madara Cosmetics began with the
four founders of the Company, and over time the number of its shareholders grew
to 800 people. In addition, we should not underestimate small investors since
private funds in general are rapidly growing, and wealthy individuals are looking
for opportunities to invest them choosing the best offers. I believe that this
trend and the desire for alternative investment opportunities will continue to
grow in all markets of the Baltic region.
Development of Baltic capital markets and the value-added principle for investments
The development of the Baltic capital market is largely due
to the privatization of state-owned companies which increases the demand for
private financial instruments on the part of private investors. International
investors want to invest in the Baltic market when they see significant profit
potential as well as opportunities for cooperation with local investment banks.
It should be understood that the market of the Baltic region
is a new market where many investment traditions have not yet taken root as in
Western Europe. The capital market is developing rapidly, for instance, the
role of bonds in the Baltic economy is increasing. Baltic International Bank
also offers clients to buy and issue bonds. The Baltic bond market offers good
investment opportunities, and the number of transactions in the Baltic markets
shows healthy growth. Bond sales are growing in both the official NASDAQ list
and the second list. In addition, with the development of crowdfunding
platforms small investors are becoming more active.
Currently, the market in our region offers many attractive
investment opportunities since foreign investments are attracted by both the
banking industry and traditional industries – agriculture, the dairy sector,
forestry bearing in mind the sector of services that the Baltic States offer in
high quality. This is a time of opportunity in all categories of assets. At the
same time, high profitability can be achieved by contributing added value to
economic development, GDP growth, job creation and the development of society
as a whole.
Baltic International Bank evaluates investment proposals
carefully choosing investment projects in large and growing sectors with a
clearly defined initial strategy. Our goal is to find the most suitable
solutions for each customer conducting in-depth research rather than giving
preference to standard projects. We see particular potential in the renewable
energy sector and are focused on finding new investment opportunities in global
markets. Currently, the opportunity to invest in the Baltic wind energy sector
is very relevant since Latvia, as an EU member state, has set a goal to
increase the utilization rate of renewable energy sources from 36% to 45% by
2030. Technological developments have significantly reduced the cost of wind
energy generation. This makes it possible to generate wind energy which can be
sold at a market price without additional government subsidies turning into
profitable investments. The goal of increasing the share of renewable energy
and technological development offers great opportunities for investors and our
customers. In general, we invest in a prosperous, progressive business sector
with future potential, added value and contribution to the national economy.