Real Estate

The international real estate broker Tranio.com advises investing in Latvian real estate in Riga and Jurmala as they are promising high returns in both residential and commercial property sectors.

Residential real estate

50% of Latvians live in or near Riga (in municipalities that were the Riga District before the administrative territorial reform of 2009), which is the focal point for investment options. The other regions in Latvia tend to be locations for buying houses to live in, and not so attractive for those looking solely for investment property.

Knight Frank reports that house prices in Latvia showed a year-on-year increase of 3.9% in 4Q 2014, cooling down the buoyant pricing of the previous quarter. An apartment in a standardized apartment block in Riga cost 637 EUR/sq.m in January 2015, which is still 24–45% less than in 2007, and is a slower recovery than in Jurmala where house prices are 15–25% lower than the 2007 figures. In both Riga and Jurmala, the pre-crisis property was overpriced, yet now the prices are closer to the fair market values (500–800 EUR/sq.m). Mid- to high-range accommodations have not been subject to material price adjustments, costing 2–5 thousand  EUR/sq.m, which is 10-20% less than before the '08-'09 crisis. As yet, the prices are still to reach the peaks of 2006-2007, which is a positive sign for potential market growth.

An average apartment in Latvia returns approximately 5%. The cost of renting an apartment is from 8–10 EUR/sq.m per month. To illustrate, a 40-square-meter apartment in downtown Riga that costs EUR 113 thousand is leased for EUR 500 per month returning 5.3% per annum. A 75-square-meter property in downtown Riga that costs EUR 160,800 is leased for EUR 737 per month, returning 5.5% per annum.

Office spaces

The safest investment opportunities on the office market are usually found in Riga. Office spaces of up to 150-200 sq.m are most popular, and lessors are drawn to the city centre, the business neighbourhoods of Skanstes Street and Duntes Street or the Pardaugava area.

Demand is high yet supply is low for quality spaces. To illustrate, there are only 3–5% vacant premium office spaces in Riga. In comparison, the vacancy rates for A- and C-class offices are 4% and 20–30% respectively.

A-class offices are leased for 12–20 EUR/sq.m returning 7.25–8%.

Retail properties

Riga's top shopping streets are in the Central District and the Old Town (such as Kalku, Valnu and Audeju streets). The shopping areas around hotels and tourist routes are popular as most of these target foreigners. Shopping premises of 55–100 sq.m are the most sought-after.

The cost per square meter is 300 EUR/sq.m outside Riga and up to 1,700 EUR/sq.m in the Central District. Shopping premises are leased for 15–60 EUR/sq.m and the return is approximately 7%.

Industrial and warehouse properties

It is crucial that this property type has good transportation access, a convenient driveway, available parking lots and a proper technical condition. The cost of lease is 3.5–5 EUR/sq.m per month. Non-heated facilities are cheaper with rentals starting from 1.5 EUR/sq.m. Lessors mostly favour warehouses of 800 – 1,500 sq.m outside Riga, located near the main highways.

The cost per square meter is 120–250 EUR/sq.m returning 9-10 %.

Hotels

The most desirable locations are the Old Town and the Central District. 3- and 4-star hotels dominate the market that focuses on tourists from Russia and CIS. Russians made up 18% of the total clientèle in 2014 and are the main clients of the hospitality industry. Also, there are many Russians among the owners of hotels. Supply and demand concentrates chiefly on Riga and Jurmala.

Hotel rates in Riga are among the lowest in Europe, ranked third after Dubrovnik (Croatia) and Budapest (Hungary). According to Colliers, 3-star hotel rates range from EUR 26 to 400, rooms in 4-star hotels cost from EUR 49 to 450 and 5-star accommodations are from EUR 199 to 1,800.

Property prices and returns in Latvia