The real estate market in Lithuania is in flux, facing significant challenges and, at the same time, providing numerous opportunities to explore, according to Fort Legal Partner Ruta Radzeviciute-Meizeraite.
"We are currently living in a very interesting decade, and the past few months have not been an exception," Radzeviciute-Meizeraite begins. "The situation in the world, especially the war in Ukraine, had a significant impact on Lithuania's real estate market."
"Unfortunately, with the developments in Ukraine, everything came to a halt for about two weeks," Radzeviciute-Meizeraite remembers. "Later, we were then hit with huge inflation, and the prices of construction materials skyrocketed. Consequently, all construction activities were either stopped, postponed, or renegotiated due to the high costs of construction and inflation." During the autumn, she continues, "inflation was still present, and the banks changed their financing policies significantly, leading to a rise in Euribor rates. As a result, transactions were once again impacted, and financing became more expensive." Looking to the future, she notes that Lithuania is keeping an eye on global economic news, as "there are concerns that the Baltic region might face a crisis in the summer."
Still, Radzeviciute-Meizeraite says there are acquisitions and developments taking place, but 2023 is not a blooming year like 2020 or 2021. "However, it's important to note that, in Lithuania, businesses are making the best of the current context," she adds. "Amidst the current slowdown in the real estate market, there are still opportunities to be found."
For instance, Radzeviciute-Meizeraite points out, "there are potential fire sales and there are interested buyers, and we're in a better position than we were during the 2008 financial crisis. Some well-established local players have been growing since then, and they have cash reserves that they're not afraid to use to acquire promising prospects or take advantage of potential fire sales. For context, cheap money has been available for a while, which has led to some opportunistic or less experienced players becoming over-leveraged, or about to be." Consequently, she notes, "for those with cash, this is an opportunity to take over these assets. While ongoing transactions may be limited, it's only a matter of time before more deals start happening. After being a seller's market for a long time, real estate is now becoming a buyer's market."
As for the most sought-after real estate segments, Radzeviciute-Meizeraite highlights there is an increased interest in "acquiring quality commercial assets such as business centers, shopping centers, and especially logistics centers." According to her, "local players have taken over investments from Western foreign investors that have halted or delayed their plans. They are particularly interested in single-tenant shopping centers that host major retailers, located in smaller cities, which are considered secure investments as food is a necessity regardless of economic conditions."
