Retail Market

Transcription

Retail Market

Report
States
Report
States
Executive Summary ........................................................................................ 3
Country Information ....................................................................................... 5
Baltic Economic Overview ............................................................................. 8
Main Commercial Market Indicators ........................................................... 17
LITHUANIA
Office Market ................................................................................................... 20
Retail Market ................................................................................................... 28
Warehouse/Industrial Market .......................................................................... 40
Hotel Market .................................................................................................... 45
Investment Market .......................................................................................... 49
Legal Environment .......................................................................................... 52
Taxation .......................................................................................................... 60
LATVIA
Office Market ................................................................................................... 73
Retail Market ................................................................................................... 77
Warehouse/Industrial Market .......................................................................... 83
Hotel Market .................................................................................................... 86
Investment Market .......................................................................................... 89
Legal Environment ........................................................................................ 90
Taxation .......................................................................................................... 97
ESTONIA
Office Market ................................................................................................. 104
Retail Market ................................................................................................. 106
Warehouse/Industrial Market ........................................................................ 109
Hotel Market .................................................................................................. 111
Investment Market ........................................................................................ 113
Legal Environment ........................................................................................ 115
Taxation ........................................................................................................ 123
SWOT ANALYSIS ......................................................................................... 126
Company Profiles ....................................................................................... 127
Executive Summary
Until the middle of 2007, impressive economic growth in the Baltic States
seemed inviolable and everlasting, and all warnings about overheated economy
given by market analysts sounded not more than amateurish rumblings.
However, accelerating inflation and slowing down economic growth together
indicate that the Baltic region steps into another economic cycle, which is
supplemented by international issues – global turmoil in the financial markets,
the US property crisis, growing cost of financing. In fact, the Baltic commercial
property market has already tasted the effect of these changes and is entering
the slowing down phase.
Report
States
The office market in all three countries was active during the past few years.
The growing economy and, consequently, companies’ expansion resulted
in the strong demand for modern office space in the Baltic capital cities.
Unsatisfied demand and relatively small existing supply were the key drivers
behind the rising rentals by nearly 10-20% and thus stimulated development
of new office projects. Today the development pipeline is rather impressive
and we therefore expect the market to level out by the end of 2009 with
certain pressure on vacancy levels and rents. However, the banks already
are applying stricter financing conditions, growing financing costs threat
to reduce developers’ profit and the construction sector still faces the lack
of qualified labour force. Given this background we anticipate that a lot of
initiated projects will be delayed, postponed or even suspended. Therefore
the more likely scenario is a balance between supply and demand rather than
the oversupply in the office market, at least during 2008-2009.
The low unemployment level and impressive growth of wages, reaching as
much as 20-30% annually, boosted retail trade turnovers in the Baltic region.
Retail sales of clothing, footwear, furniture and household goods were the
most important contributors to the overall retail trade turnover increase. In
the meantime, strong demand for quality retail space was clearly reflected by
very low vacancy levels, equal to zero in the most attractive shopping areas.
Until now the Vilnius retail market is one step behind the other Baltic capitals
in terms of shopping centres number. However, in 2008-2009 the modern
shopping centres stock is about to double and outrun that of the neighboring
capitals. There is a number of pipeline projects in Riga, while Tallinn looks
forward to several extension schemes.
The warehouse/industrial market sustains its specifics therefore it remains less
active if compared to other segments. Pre-leased and built-to-suit facilities
traditionally dominate the market as a consequence of higher letting risk,
relatively expensive land and increasing construction costs. However, the
strong economic growth will definitely lead to higher demand for warehouse/
industrial premises, and geographically attractive areas will welcome more
new projects.
The hotel segment is growing along with the increasing number of both local
and international visitors. All three countries enjoy growing business and
private tourists’ flows thus leading to a number of new hotel developments.
More conference, leisure, spa and other facilities, increasing quality and
stable room rates are expected in the hotel market.
Executive Summary
During the past few years, we observed a gradual yields compression that was
mainly supported by significant economic growth, extensive market potential,
the EU membership, etc. In the end of 2007, the yield curve bottomed out
and the upward yield corrections are expected in the commercial property
investment market. In general, certain slowdown in economic growth,
expensive financing and more conservative banks’ position will require a larger
proportion of equity from investors. In that sense, the foreign investors become
more active in acquisition of development projects, where some value can
be added. Nevertheless, the developed prime properties keep high interest
from the buyers’ side as attractive cash-flow deals. On the whole, the Baltic
commercial property market is gaining more transparency and maturity.
Report
States
NB!
Numerous changes in important areas for commercial real estate investment such as
tax frameworks, accounting or real estate law have to some extent already been made.
Now is the time to plan investment structures and models in light of the new regulations,
and to determine strategies for the future. However, your real estate consultant, attorney
and tax advisor should always be consulted on the risks and effects of whatever steps
you decide on.
Report
Country Information
States
Lithuania
Geography
Lithuania is the largest country of the Baltic States. With an area of 65,300
sq. km, Lithuania is larger than Belgium, Denmark, the Netherlands and
Switzerland. It borders Latvia in the north, Belarus in the southeast, Poland
and Russia (Kaliningrad) in the southwest.
Arable land accounts for 70% of the country’s lowlands, plains and hilly
uplands. About 28% of the area is forested. Lithuania’s 722 rivers, more than
2,800 lakes and 99 km of Baltic Sea coastline are mostly devoted to recreation
and the nature conservation.
Climate type falls between maritime and continental.
Population
The population of Lithuania is 3.37 million (the first quarter of 2008). About
67% of the country’s people live in urban areas. A quarter of the population
lives in the Vilnius county. Population density is 52 people/sq. km, the highest
densities being in Vilnius (87 people/sq. km), Kaunas (84 people/ sq. km), and
Klaipëda (73 people/ sq. km) counties.
The majority of the population (83.5%) is Lithuanian, with 6.7% Polish, 6.3%
Russian and 3.5% others (predominantly Belarusian, Ukrainian, and Latvian).
Some 79% of the population are Roman Catholics.
The official state language is Lithuanian which has its roots in Sanskrit and
belongs to the Baltic family of Indo-European languages. Most of the population
also speaks Russian, although English is becoming widespread.
Population Distribution in Lithuania, beginning of 2007
Vilnius 16%
Kaunas 11%
Klaipėda 5%
Šiauliai 4%
Other 61%
Panevėžys 3%
Vilnius
Kaunas
Klaipėda
Šiauliai
Panevėžys
Other
Source: Lithuanian Statistics Department
National Currency
Lithuania’s national currency is the Lithuanian Litas (LTL), which is pegged to the
Euro at the rate of EUR 1= LTL 3.4528. It was planned that from 1 January 2007
Lithuanian currency would be replaced by the Euro, unfortunately, because of
the slightly higher than permitted annual inflation rate, the Euro-adoption date
was postponed. The new projected date for the Euro adoption is 2010.
Report
Country Information
States
Latvia
Geography
Latvia is located on the crossroads of Northern and Eastern Europe, on the
eastern coast of the Baltic Sea. The Republic of Latvia is bordering with
Estonia in the north, Russia and Belarus in the east and Lithuania in the south;
it has also a maritime border with Sweden in the west. The strategic location
of Latvia has been the major factor influencing the country’s diverse history
and culture.
The total area of Latvia is 64,589 sq. km. Latvia has a maritime climate.
Population
In the beginning of 2008, the population of Latvia was 2,27 million. The major
ethnic groups are Latvian (approx. 59%) and Russian (approx. 29%).
The official state language is Latvian. It is an Indo-European language and
is similar only to Lithuanian. Russian, English and German are also widely
spoken.
Population Distribution in Latvia, beginning of 2007
Riga 32%
Riga
Daugavpils
Daugavpils 5%
Other 54%
Liepaja 4%
Jelgava 3%
Jurmala 2%
Liepaja
Jelgava
Jurmala
Other
Source: Central Statistical Bureau of Latvia
National Currency
On 1 January 2005 Latvia pegged its currency, the Lat (LVL), to the Euro at
the rate of EUR 1 to 0.702804 LVL. The Bank of Latvia intends to keep a plusminus 1% fluctuation band before and after joining the ERM2 mechanism.
Report
Country Information
States
Estonia
Geography
Estonia is situated in the northern part of Europe, along the north-eastern
shore of the Baltic Sea. Estonia is the smallest Baltic State and only slightly
bigger than Switzerland or Denmark. It borders Russia in the east and Latvia
in the south.
The country’s total area is 45,227 sq. km. Estonia is mainly flat, though there
are upland areas in the south-east. Forests cover around 40% of Estonia;
which also possesses the largest lakes in the Baltic region. Estonia’s climate
is temperate, characterised by warm summers and moderately cool winters.
Population
The population of Estonia is 1.34 million (1January 2008) and almost one third
of the population lives in Tallinn, the capital city. Some 67% of the population
are Estonians and 29% ethnic Russians.
The official state language is Estonian, very similar to the Finnish language.
Most of the population also speaks Russian, although English is becoming
widespread, especially among young people.
Population Distribution in Estonia, beginning of 2007
Tallinn 30%
Tallinn
Tartu
Pärnu
Other 54%
Tartu 8%
Pärnu 3%
Narva
Other
Narva 5%
Source: Statistics Estonia
National Currency
The national currency is the Estonian Kroon (EEK), which is pegged to the
Euro at the rate of 1 EUR = EEK 15.6466.
Report
Baltic Economic Overview
States
The Baltic economies have experienced stunning GDP growth after joining the
EU in 2004. The unemployment declined to the lowest-ever levels resulting in
the shortage of qualified labour force and forcing the employers to increase
wages. However, at the same time, consumer prices started increasing
steeply, which temporally closed the doors to the Euro adoption in Lithuania
and Estonia since 2007.
Currently the global credit turmoil together with the local uncertain
macroeconomic environment and slowing down growth of domestic demand
in the Baltics are contributing factors in the real estate market slowdown, too.
Economic Growth
Strong GDP growth in the Baltic States together with increasing current
account deficit and accelerating inflation in 2007 highlighted a threat of a socalled “hard landing” of the economies. The slowdown of economic growth
is expected in all three Baltic countries, affected by more modest growth of
domestic demand and household consumption, a result of tightening credit
conditions.
Based on the data provided by the Lithuanian Statistics Department, GDP
totaled EUR 20.2 billion (at current prices) during the first three quarters of
2007. The growth in the third quarter reached 10.8%. Significant growth was
recorded in construction (16.7%), retail, hotels and restaurants, transport and
communications (9.6%), financial services and real estate (9.4%). The input
of various regions into national performance varies significantly. Expectedly,
Vilnius county produces the biggest share of Lithuania’s GDP (37.2% in 2006),
followed by Kaunas (19.5%) and Klaipëda (11.7%) counties.
According to the preliminary estimation, Lithuania’s GDP growth reached
8.7% in 2007. The Ministry of Finance of Lithuania yet makes less optimistic
prognosis for the coming years - 5.3% and 4.5% GDP growth in 2008 and
2009, respectively, which is a clear sign of a slowdown.
Annual GDP Growth and Inflation in Lithuania
12
10.3
10
8
%
6
4
6.6
7.3
6.9
7.9
7.7
8.7
5.3
4.5
4.1
5.2
2
0
2000
2001
2002
2003
2004
2005
2006
2007 2008 F 2009 F 2010 F
-2
GDP Growth
Inflation
Source: Lithuanian Statistics Department, Ministry of Finance of Lithuania
Report
The central Statistical Bureau of Latvia informed that Latvia’s GDP amounted to
EUR 14.3 billion (at current prices) in nine months of 2007. The third quarter’s
GDP was still stably increasing and has ascended by 10.9%, which was mainly
determined by substantial increase in trade (by 14.5%) and construction (by
13.2%). However, the main risks for the economic growth remain unchanged,
i.e. high inflation and large current account deficit. Latvia’s Ministry of Finance
projects that the economic growth will maintain rather high level – 10.5%, 7.5%
and 7.0% in 2007, 2008 and 2009, respectively.
States
Annual GDP Growth and Inflation in Latvia
14
12
10.6
10
%
8
6.9
8
6.5
7.2
11.9
10.5
8.7
7.5
7
6.8
6
4
2
0
2000
2001
2002
2003
2004 2005
2006
GDP Growth
2007
2008 F 2009 F 2010 F
Inflation
Source: Central Statistical Bureau of Latvia, Ministry of Finance of Latvia
Statistics Estonia announced that Estonia’s GDP totaled EUR 11.3 billion (at
current prices) during three quarters of 2007. The third quarter’s increase
was the lowest among the Baltic States and decelerated to 6.4% level, after
impressive growth of over 10% in 2005-2006. Deceleration of the GDP growth
was substantially influenced by a weaker growth in the domestic demand and
the value added of economic activities, as well as by a decrease in exports
and imports of goods. The Ministry of Finance of Estonia forecasts 8.1% GDP
growth in 2007, followed by more modest 7.3% and 6.8% in 2008 and 2009.
Annual GDP Growth and Inflation in Estonia
12
10.8
10.2
10
8
7.7
8.0
2001
2002
7.2
11.2
8.3
8.1
7.3
6.8
7.2
% 6
4
2
0
2000
2003 2004
2005 2006
GDP Growth
2007 2008 F 2009 F 2010 F
Inflation
Source: Statistics Estonia, Ministry of Finance of Estonia
Report
Stabilizing GDP growth attests to the more sustainable growth of the Baltic
economies, which secures stable investment environment. Although in the
shot-run the uncertainties regarding further economic development might
frighten away some investors, the underlying economic fundamentals suggest
that the long-term perspectives are still very favourable in terms of investment
in the Baltic property market.
Annual GDP Growth
12
10
8
% 6
4
Lithuania
Latvia
2007 Q3
2007 Q2
2007 Q1
2006
2005
2004
2003
2002
2001
0
2000
2
States
Stabilizing GDP growth
attests to the more sustainable growth of the Baltic
economies, which secures stable investment environment. Although in the
shot-run the uncertainties
regarding further economic
development might frighten away some investors,
the underlying economic
fundamentals suggest that
the long-term perspectives
are still very favourable in
terms of investment in the
Baltic property market.
Estonia
Source: National Statistical Offices
Inflation
Inflation became a major challenge in the Baltic economies while climbing
over the expected rates in 2007 and together with expansive economic growth
and relatively high current account deficit signalized about unsustainable
economic growth in the region. In 2007, inflation has accelerated in all three
countries and is supposed to peak in 2008.
In 2007, the average annual inflation was the lowest in Lithuania (5.8%),
followed by Estonia (6.6%) and Latvia (10.1%). The inflation level in the
Baltic States has mainly been driven by strong internal demand, as well as
external factors, as prices for food, utilities and fuel increased significantly.
Nonetheless, ascending food and energy prices is a global issue, including
the EU member states.
The future expectations in
terms of inflation are quite
positive in the Baltic economies, as the governmental bodies forecast the slowing down pace of prices
growth already in 2008.
The increasing inflation is negatively affecting both consumer and investor
confidence, and along with global credit crunch raises the risk in the region.
However, the future expectations in terms of inflation are quite positive in the
Baltic economies, as the governmental bodies forecast the slowing down
pace of prices growth already in 2008.
10
Report
States
Inflation (y/y)
16
14
12
10
%
8
6
4
2
0
-2
-4
2002
2003
2004
Lithuania
2005
Latvia
2006
2007
Estonia
Unemployment
The rapid growth of construction and services sectors along with high
emigration levels, encouraged by the accession into the EU, were main
contributing factors in significantly shrinking unemployment in all three Baltic
countries. Since 2000-2001, the overall trend in the unemployment rate has
been downward and only minor fluctuations are expected in the next few
years, given that the economic growth is to slow down.
The unemployment level in Lithuania was the lowest among the Baltic states
and reached 3.9% in the third quarter of 2007, while in Latvia and Estonia
unemployment level stood at 5.9% and 4.2%, respectively.
Decreasing unemployment
has boosted consumer
spending power which, in
turn, has created potential demand for more retail
and leisure space thereby
maintaining perfect conditions for commercial property market development.
In some business sectors the shortage of both skilled and non-qualified
employees has already reached a critical level. Many vacancies have been
registered in the construction, manufacturing, transport and especially
services sector.
The limited labour force supply is one of the key drivers of increasing wages in
all three analyzed countries. Thus, the decreasing unemployment has boosted
consumer spending power, which, in turn, has created potential demand for
more retail and leisure space, maintaining perfect conditions for commercial
property market development. On the other hand, the tightening borrowing
conditions together with rising interest rates, have a negative effect on the real
property demand in the short run.
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Report
States
Unemployment Level
14
12
10
%
8
6
4
2
0
I
II
III
IV
I
2004
II
III
IV
I
2005
Lithuania
II
III
IV
I
2006
Latvia
II
III
IV
The rapid growth of wages
stimulates the consumer
spending power growth
and the desire to spend
more money is about to
create additional demand
for retail and entertainment
space in particular.
2007
Estonia
Salaries and Wages
With the continuously falling unemployment levels, fast economic upswing and
increasing inflation, the average wages keep growing at the impressive speed
in the Baltics. In the third quarter of 2007, the increase of salaries and wages
reached almost 33% in Latvia, over 20% in Estonia, and 18% in Lithuania, if
compared to the third quarter of 2006.
The continuous increases of minimal monthly salary was among other factors
of such impressive wages rise in Lithuania. Lithuania’s Ministry of Finance
forecasts a 20.4% increase of wages in 2007. According to the prognosis, the
wages growth will remain strong in 2008 (18.7%), however the growth will go
slow to the level of 7.6% in 2009. The strong average wages growth in 2008
will be maintained by the reduction of the proportional personal income tax
from 27% to 24% since 1 January 2008. The last reduction of the tax since 1
July 2006 has actually risen the disposable income of employees. Similarly,
the Estonia’s income tax rate was reduced by one percentage point to 22%
in 2007.
In terms of wage increases, the outlook in Latvia and Estonia is also positive.
In Latvia growth of wages will be strong and reach 17.5% in 2007, however
in 2008 and 2009 the expected growth will be relatively modest and decline
to the level of 4.9% and 6.1%, respectively, as Latvia’s Ministry of Finance
anticipates. According to the forecasts of the Estonia’s Ministry of Finance, the
real growth of the average monthly wage in the country should be 13.5% in
2007, and then decrease to 7.3% and 7.5% in 2008 and 2009, respectively.
The rapid growth of wages stimulates the consumer spending power growth
and the desire to spend more money is about to create additional demand
for retail and entertainment space in particular. However, the continuously
increasing inflation in the region has a negative effect on the real wages and,
at the same time, private consumption. Besides, the growth of wages is only
sustainable if it is in compliance with the growth of productivity.
12
Report
States
Growth of Average Monthly Wages (y/y)
35
30
25
%
20
15
10
5
0
2001
2002
2003
2004
Lithuania
2005
2006
Latvia
2007
Estonia
Average Monthly Wages in 2007 by Quarters
800
700
600
500
400
300
200
100
0
Q1
Lithuania
Q2
Latvia
Q3
Estonia
Foreign Direct Investment
Foreign direct investment (FDI) is one of the main factors influencing the
economic growth in the Baltic countries. Over the past few years the FDI
was constantly increasing in all three economies, however, some structural
differences occurred.
In Lithuania, the largest proportion of FDI has been invested in manufacturing
(38.2%), financial services (17.0%), transport, storage and communications
(12.8%), wholesale and retail trade (10.5%), and utilities (9.2%). The real
estate sector attracted 8.1%, or EUR 805 million of the accumulated FDI.
Over the past few years the
FDI was constantly increasing in all three economies,
however, some structural
differences occurred.
13
Report
Lithuania’s Cumulative FDI by Country as of 1 October 2007 (% of total)
States
Poland
Other countries 18%
Poland 20%
Latvia 4%
Denmark
Sweden
Russia
Netherlands
4%
Finland 5%
Denmark
13%
Germany
Estonia
Finland
Estonia 6%
Sweden 11%
Germany 9%
Netherlands
Latvia
Russia 10%
Other countries
The major proportion of FDI in Latvia is invested in financial intermediation
(26.8%), real estate sector (18.4%, or EUR 1.3 billion), wholesale and retail
trade (12.4%), manufacturing (9.2%), utilities (7.6%), and transport, storage
and communications sector (7.5%).
Latvia’s Cumulative FDI by Country as of 1 October 2007 (% of total)
Estonia 14%
Other countries
27%
Estonia
Sweden
Germany
Sweden
13%
Cyprus 5%
Germany
10%
USA 5%
Netherlands 5%
Russia 6%
Denmark 9%
Finland 6%
Denmark
Finland
Russia
Netherlands
USA
Cyprus
Other countries
Source: Bank of Latvia
Estonia’s picture is quite similar, as financial intermediation attracted the
majority of FDI (30.7%), leaving the real estate sector in the second place with
28.4% of the “pie”, or nearly EUR 3.1 billion. Manufacturing received 15.8% of
FDI, while wholesale and retail trade accounted for 12.7%.
Estonia’s Cumulative FDI by Country as of 1 October 2007 (% of total)
Sweden
Other countries
16%
Finland
Denmark
Luxembourg 2%
Cyprus 2%
Greet Britain 2%
Russia 3%
Sweden 40%
Norway
Germany
Russia
Germany 3%
Great Britain
Norway 3%
Denmark 4%
Cyprus
Finland 25%
Source: Bank of Estonia
Luxembourg
Other countries
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Report
Accumulated FDI growth was the most rapid in Latvia and reached 24.6%
during nine months of 2007. Respectively, Lithuania’s and Estonia’s FDI growth
was 18.4% and 12.2% during the same period. Unsurprisingly, the most active
foreign investors to the Baltic economies come from Scandinavian and other
neighboring countries. It is necessary to note that Estonia’s FDI from Sweden
and Finland accounted for more than 65% of all FDI in the end of the third
quarter of 2007, whereas in Latvia and Lithuania the investments are more
differentiated by countries.
States
FDI Stock by Kind of Activity, end of Q3 2007
4,000
3,000
2,000
1,000
0
Manufacturing
Utilities
Wholesale
and retail
trade
Lithuania
Financial
intermediation
Latvia
Real estate
Estonia
Source: Lithuanian Statistics Department, Bank of Latvia, Bank of Estonia
Foreign Direct Investment Stock (end of quarter)
12,000
4,000
10,000
3,000
8,000
2,000
6,000
1,000
4,000
2,000
0
0
Manufacturing
I
II
Utilities
III
IV
I
2005 Lithuania
Lithuania
Wholesale
and retail
trade
II
III
2006
Latvia
Latvia
Financial
intermediation
IV
I
II
Real estate
III
IV
Estonia2007
Estonia
Source: Lithuanian Statistics Department, Central Statistical Bureau of Latvia, Bank
of Estonia
Retail Trade
The retail trade growth has been impressive during the last few years in the
Baltics and showed far stronger growth than the EU average in 2007. This
can be explained by continuous increase in private consumption. However,
the pace of growth pursued the downward direction since spring 2007. Since
retail trade growth largely depends on expectations, it can be concluded that
consumers became more cautious about the future, especially in the light of
tightening borrowing conditions and increasing inflation.
The retail trade growth has
been impressive during the
last few years in the Baltics and showed far stronger
growth than the EU average
in 2007. This can be explained by continuous increase
in private consumption.
15
Report
As the Lithuanian Statistics Department states, retail trade turnover, excluding
those enterprises trading in motor vehicles and motorcycles, in Lithuania
increased by 12.2% in 2007 and surpassed the growth recorded in 2006, that
was 7.1%. The most significant increase in turnover was that of enterprises
trading in textiles, clothing and footwear (by 35.4%), food, beverages and
tobacco in specialised stores (by 22.6%), and furniture, lighting equipment,
household goods (by 19.8%).
States
The retail sales were also strong in Latvia and demonstrated 18.8% growth
during 2007 compared to 2006. The major increases were recorded in retail
trade in textiles, clothing, and footwear (39.5%), as well as in retail trade in
furniture, lighting equipment, household goods (37.9%).
In comparison, Statistics Estonia observed 14% increase in retail turnover in
2007.
The growth in domestic trade in the Baltic region reflects the increased
consumers’ ability to spend more money; however developers thinking of new
retail schemes will have to be more cautious as the retail market will be following
somewhat slower growth patterns than it used to be during latter years.
Retail Trade Turnover Indexes by Month, y/y
130
125
120
% 115
110
105
100
I
II
III IV V VI VII VIII IX X XI XII
I
II
III IV V VI VII VIII IX X XI XII I
2005
II
III IV V VI VII VIII IX X XI XII
2006
Lithuania
Latvia
2007
Estonia
Main Country Indicators
Period
Lithuania
Latvia
Estonia
Population, mln
Indicator
Jan 2007
3,384.9
2,281.3
1,342.0
GDP growth, %
Q3 2007
10.8
10.9
6.4
2006
6,989
7,003
9,851
GDP per capita, EUR
Inflation, %
2007
5.8
10.1
6.6
Unemployment rate, %
Average monthly gross
wage, EUR
Average monthly gross
wage growth, %
Retail turnover growth, %
Q3 2007
3.9
5.9
4.2
Q3 2007
565
575
697
Q3 2007
17.9
32.9
20.2
2007
12.2
18.8
14.0
Exports growth, %
Nov 2007
11.8
24.8
11.6
Imports growth, %
Nov 2008
11.8
4.8
1.8
FDI per capita, EUR
FDI flow during the
quarter, % of GDP
Q3 2007
2,943
3,125
8,038
Q3 2007
5.5
6.4
7.5
16
Main Commercial Market Indicators
Report
States
Modern Offices Stock and Planned Deliveries
700
thous. sq. m
600
500
400
300
200
100
0
Vilnius
Riga
Tallinn
Modern offices stock, January 2008
Planned deliveries in 2008
Source: KOBA
Average Rents in A- and B-class Offices
25
25
20
month
m//month
EUR / sq.
sq. m
EUR
20
15
15
10
10
55
0
0 A Class B Class A Class B Class A Class B Class
A Class B Class
A Class B Class
Vilnius
Riga
Vilnius
Source: KOBA
Riga
A Class B Class
Tallinn
Tallinn
Shopping Centre Space Development
(stock at the end of year)
600
thous. sq. m
500
400
300
200
100
0
Vilnius
Source: KOBA
Riga
Tallinn
17
Main Commercial Market Indicators
Report
States
Average Rents in Shopping Centres
EUR / sq. m / month
70
60
50
40
30
20
10
0
Anchor
Tenants
>100
sq. m
<100
sq. m
Anchor
Tenants
Vilnius
>100
sq. m
<100
sq. m
Anchor
Tenants
Riga
>100
sq. m
<100
sq. m
Tallinn
Source: KOBA
Average Rents in Warehouses
8
EUR / sq. m / month
6
4
2
0
New
Old
Vilnius
New
Old
New
Riga
Old
Tallinn
Source: KOBA
Prime Yield Development in the Baltics, 2004-2008
13
12
11
10
% 9
8
7
6
5
2004
2005
Retail
Source: KOBA
2006
Offices
2007
2008 F
Industrial
18
Report
States
Report
The office market development has been rather active in 2007, especially in
the country’s capital, where a lot of new projects were initiated and the total
stock of modern office space is expected to almost double by the end of 2009.
Now, that the residential market has been slowing down, a lot of developers
have focused on the office market, triggered by the undersupply of the
modern offices, thus the number of office projects in the pipeline increased
significantly.
Vilnius
Being the most developed throughout Lithuania, Vilnius office market is
encountering new challenges. After a short slow-down in new office projects
development in 2005-2006, the growth of modern office stock is expected to
be hitting new records in 2008-2009. The demand for modern office premises
is most apparent in Vilnius; hence most office-market activity is taking place
there.
States
In response to increased
shortage of modern offices
provisions, over the next
two years the developers
are building and planning
over 340,000 sq. m offices
in Vilnius, which, if delivered, would almost double
the current stock.
Supply and Demand
Total modern office space in Vilnius has reached approx. 365,000 sq. m when
more than 50,000 sq. m were added in 2007. We estimate that in 2008 an
additional 140,000 sq. m of modern offices space will be delivered to the
market. In response to increased shortage of modern offices provisions, over
the next two years the developers are building and planning over 340,000
sq. m offices in Vilnius, which, if delivered, would almost double the current
stock.
However, assuming that the market players will be forced to consider the
coming supply and taking the market’s recent track record of delays, a more
realistic scenario implies that much smaller amount of space will be delivered
within two years. In addition, a lot of projects might be suspended because of
tightening position of banks.
Development of Office Space in Vilnius
800,000
700,000
sq. m
600,000
500,000
400,000
300,000
200,000
100,000
0
Stock, beginning of year
New deliveries
Constructions started
Pipeline
Source: KOBA
Anyway, if such pace of development will be kept further, we expect the market
to encounter the oversupply of offices. The success of any project will strongly
20
LITHUANIA
Office Market
Report
depend on the developer’s experience and professional approach, location and
accessibility of the object, car parking facilities, offered services and quality,
and, most of all, early delivery to the market. Those potential tenants, planning
to move into new premises within further 6-12 months, will have a considerably
wider selection of projects; therefore the quality becomes an obligatory factor.
Generally, tenants are becoming more demanding in terms of the quality of
premises and the services provided. Although rental costs, location and size of
the premises remain the main factors in choosing a site, other important aspects,
such as plentiful parking for both clients and employees, image of the business
centre, convenient layout and planning of work places, high quality installations
and fit-out materials, expansion opportunities and skilled property management
also have a great influence. Today companies not only care about their image,
but also about convenient and secure working conditions for their employees.
States
The recent expansive economic growth together with
fast and successful growth
of various businesses, to
some extent affected by
Lithuania’s accession into
the EU, are the main drivers
for expansion of companies
and increasing demand for
quality offices.
The recent expansive economic growth together with fast and successful growth
of various businesses, to some extent affected by Lithuania’s accession into the
EU, are the main drivers for expansion of companies and increasing demand for
quality offices. Besides, the office buildings vacancy rates are as low as 0-2%
since the middle of 2006, and those over 50,000 sq. m provided to the market in
2007 were not enough to cover the existing demand; most of the new openings
were fully pre-let.
Vilnius has several clearly demarcated business districts displaying active
and determined development, though still in process. There is a clear trend for
companies to prefer moving to the northern part of the city, where two thirds of
the entire city population lives. People trying to avoid heavy traffic during rush
hours prefer locations with more convenient access, generally closer to their
residential area or along main transport arteries. In line with the current demand,
the majority of new developments is initiated and planned in this part of the city,
i.e. in the New City Centre (Konstitucijos Ave. and close areas), along Ukmergës
Street, in North Town and surrounding territories.
Development of Vilnius Office Districts
140,000
120,000
sq. m
100,000
80,000
60,000
40,000
20,000
Business
Triangle
Old Town
Naujamiestis
Pilaitės Ave.
Ozo Str.
North Town &
Žirmūnų Str.
New City
Center
Ukmergės Str.
0
Planned deliveries in 2008-2009
Existing A-Class Stock
Existing B-Class Stock
Source: KOBA
21
LITHUANIA
Office Market
Report
Office Market
During 2007 the rentals in
Vilnius have climbed up by
5-12%, which is not surprising as the demand was
over supply.
Main Business Districts in Vilnius
Jeruzalė
s Str.
u Str.
Str.
PAŠILAIČIAI
s Str.
O. Milašiau
nu
ve
sA
inė
Žirmūnų Str.
Str.
ūnų
tr.
io S
Anta
r.
St
Za
ra
sų
sS
Str.
Goš
Str
.
Ge
pr.
norių
.
r.
Str
St
io
aln
pk
Vilk
pė
Str.
dės
NAUJAMIESTIS
Lie
v
Sa
Sava
.
sų
pr
.
.
Oslo Str
rių
o
an
Old Town
Ra
inio
Vil
ko
Naujamiestis
lež
.
irko
tauto
La
pr
Str
.
Str.
ės
uto
s Str
LAZDYNAI
šta
gailo
Švitri
isv
s Str
Str.
. Šeimyniškių
Kud
isv
ės
pr.
ergė
Go
ndų
Business Triangle
Žirm
Ukm
Ola
ÞVËRYNAS
KAROLINIŠKĖS
La
Vilko
ŠNIPIŠKĖS
Narbuto Str.
tr.
r.
Narbuto St
ANTAKALNIS
New City Center
tr
Str.
North Town
Str.
kaln
Str.
sS
rgė
Pilaitës Avenue
Gele
me
kių
Ozo
žinio
Ozo
Str.
Uk
r.
St
Ozo
VIRÐULIÐKËS
tiniš
r.
St
Ne
Str.
kių
diš
ivy
ÐEÐKINËStr.
Jus
ių
eiv
r
Ka
nč
ės
Ozo Street
me
erg
Ukm
ÞIRMÛNAI
Bu
Rygos Str.
JUSTINIŠKĖS
e
FABIJONIŠKĖS
Kalvarij
io Vilko
Geležin
Ukmergës Street
VERKIAI
.
Ribiškių Str
Didž
ioji S
tr.
NAUJININKAI
Source: KOBA
Rents and Vacancy
During 2007 the rentals in Vilnius have climbed up by 5-12%, which is not
surprising as the demand was over supply. Currently, the monthly rental price
in new-construction office buildings, regardless their location, starts from 1113 EUR/ sq. m/ month. The price for A-class offices reaches 18-21 EUR/ sq.
m/ month.
22
LITHUANIA
States
Report
Rentals mainly vary with location in the city, as the general technical and fitout features of newly built A- and B-class premises are relatively comparable.
Price differences are also influenced by the image of business centres, their
neighbourhood, ease of access and parking facilities.
The vacancy was almost non-existent in A-class buildings due to high level of
take-up and comparably low number of finalized new office projects in 2007.
B-class buildings also enjoyed low vacancy rates, reaching no more than 13%.
States
In terms of quality, there is
active development of both
A- and B-class premises,
which is in line with current
demand.
EUR / sq. m / month
Average Monthly Rents in A-and B-Class Offices
22
20
18
16
14
12
10
8
6
4
2
0
A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class
Vilnius
Kaunas
Klaipėda
Šiauliai
Panevėžys
Source: KOBA
Pipeline Projects
As a result of strong demand, many market players commenced the active
development of modern office projects at the end of 2006. During 2008
the Vilnius office market will continue to show strong development and the
completion of 140,000 sq. m new supply is expected to come to the market,
which might put pressure to both vacancy level and rentals.
In terms of quality, there is active development of both A- and B-class premises,
which is in line with current demand. Developers are tending toward the
construction of multifunctional centres to secure risk diversification, synergic
effects for their marketing activities, optimal use of limited parking facilities, a
developed business infrastructure, and a business-to-business environment.
23
LITHUANIA
Office Market
Report
Office Market
States
Project Name
Location
Office Building
Lvovo /
Giedraièiø Str.
Ukmergës Str.
Orange Office
Vilniaus Verslo Uostas
Scheduled
Opening
Date
Planned
Total Area,
sq. m
2008 – Q2
27,700
2008 – Q4
18,000
Ukmergës Str.
2008 – Q4
14,000
Jin&Jan
Pilaitës Ave.
2008 – Q4
9,500
Kamanë
Ukmergës Str.
2008 – Q4
9,500
Ozo Str.
2008 – Q4
8,900
Ukmergës Str.
Konstitucijos
Ave.
Ukmergës Str.
2008 – Q4
6,700
2009
43,100
2009
40,000
Alfa Business Centre
Office Building
Hansabankas
Headquarters
Vilnius Office Park
TEO LT Headquarters
Business Centre
Þuvëdra Business
Centre
North Star
Beta Business Centre
Gama Business Centre
Akropolis Business
Centre
Business Centre
Fortûna Business
Centre
Commercial and
Business Centre
World Trade Center
Total
Lvovo Str.
2009
16,000
Ukmergës Str.
2009
10,500
Laisvës Ave.
2009
7,500
2009 – Q1
10,500
2009 – Q2
20,000
Ozo Str.
Geleþinio Vilko
Str.
Þalgirio Str.
2009 – Q4
11,700
2010
60,000
2010
17,500
Ukmergës Str.
2010
16,000
Jasinskio Str.
N/D
10,000
Naugarduko Str.
N/D
Ulonø / Apkasø
Str.
Ozo Str.
LITHUANIA
Major Pipeline Office Building Projects (over 5,000 sq. m) in Vilnius
N/D
>357,100
Source: KOBA
Kaunas
Supply and Demand
The office market structure in Kaunas is somewhat different from that in
Vilnius, primarily, owing to the different business structure and prevailing
type of companies in the city. Small and medium businesses predominate,
as do relatively small branches of large companies whose head offices are
in Lithuania’s capital city. Consequently, the most sought-after premises in
Kaunas are small, often not exceeding 50 sq. m. Besides, a lot of companies
prefer acquiring their own premises rather than renting them. However, there
are signs in the market that the demand for high class offices is reviving.
The office market structure
in Kaunas is somewhat different from that in Vilnius,
primarily, owing to the different business structure
and prevailing type of companies in the city.
24
Report
Currently, the supply of modern office space in Kaunas stands at around 38,200
sq. m. In 2007, the office market was not active and only a few rather small
schemes were introduced.
A lot of offices are located in Kaunas centre – Laisvës Ave. and nearby streets:
Kæstuèio, K. Donelaièio, A. Mickevièiaus. However, only a few office buildings
have undergone reconstruction and been adapted to contemporary office
premise requirements. In addition, car parking problems are yet to be solved.
Further from the city centre, in Savanoriø Ave., a new business district is
beginning to evolve. The location is active in terms of traffic and also advancing
commercially with its modern office buildings attracting blue-chip tenants,
including banks and insurance companies.
States
In 2007, the average monthly rent for A-class office
premises in Kaunas increased to 13-17 EUR /sq. m,
which is 30-40% higher
than in 2006.
Rents and Vacancy
In 2007, the average monthly rent for A-class office premises in Kaunas increased
to 13-17 EUR /sq. m, which is 30-40% higher than in 2006. The growth of the
B-class premises rentals was less extensive – around 25%, and reached 7-12
EUR / sq. m. Such significant growth of rentals was mainly determined by a
few new projects entering the market, as they set new pricing standards and
encouraged the raise of the rentals in older projects, too. The vacancy is almost
non-existent in high class office buildings. However, KOBA does not expect
the further rise in rentals as in some cases they are already overvalued and
surpassing those of Vilnius.
Pipeline Projects
More than 50,000 sq. m are expected to be delivered to the market by the
end of 2009, which, compared to the current stock is quite impressive, but is
relatively small when compared to the pipeline in Vilnius. Only a few new office
buildings are being developed in Kaunas. One of them is a modern 9-storey
business centre (5,200 sq. m.) in Pramonës Ave.
Pipeline Office Building Projects in Kaunas
Project Name
Mega Business
Centre
1000 LT
Nordic Business
Centre
Technopolis
Total
Location
Scheduled
Opening Date
Planned Total
Area, sq. m
Islandijos
Road
2008
31,000
Taikos Ave.
2008
5,200
N/D
13,000
N/D
1,600
Savanoriø
Ave.
Veiveriø Road
50,800
Source: KOBA
25
LITHUANIA
Office Market
Report
Office Market
States
Klaipëda
Supply and Demand
LITHUANIA
Currently, the largest proportion of the Klaipëda office market is made up
of older construction premises renovated and converted into modern office
space. Those several modern office buildings built during the last 5-6 years
were mainly small office centres not exceeding 5,000 sq. m, which perfectly
resembles the business structure in the city. Predominantly, the small and
medium enterprises operate in Klaipëda, along with small branches of large
companies, such as banks, insurance companies, etc., whose head offices
are in Vilnius. Large local companies, which mainly are involved in maritime
business, tend to own premises rather than rent them. In terms of demand, Bclass premises are currently more sought-after mainly due to the lower rents
and as a result of business structure in general.
The most significant office project completed lately in Klaipëda is a 16-storey
tower Neapolis (10,500 sq. m). One section of the building was occupied by
the regional headquarters of Hansabankas. The object is located in Taikos
Ave., which is becoming the main location for retail, office and various
multifunctional projects. Naujojo Uosto Str. and Taikos Ave. have the most
appeal for office developers and several new projects are currently being
developed in different parts of these streets.
Rents and Vacancy
The average monthly rent for A-class office premises in Klaipëda is 11.5-14.5
EUR /sq. m and 7-11.5 EUR /sq. m for B-class premises, which resembles a
5-10% increase during 2007. The rentals are expected to remain stable due to
steady balance between demand and supply. Besides, vacancy levels being
2-4% and comparably low activity foreseen in 2008 suggest that there will be
no dramatic changes in the nearest future.
Pipeline Projects
At present, there are several projects at different development stages, which
will add a total of over 38,000 sq. m of new modern office space to the market in
2008-2009. In addition to the pipeline projects listed in the table below, there are
also some projects being developed further from the Klaipëda city centre, most
of which will be combined with warehouses and logistics facilities.
Pipeline Office Building Projects in Klaipëda
Project Name
Vitës Business
Centre
Klaipëdos burë
Memelio miestas
Business Centre
Grandus Business
Centre
Total
Source: KOBA
Location
Naujoji Uosto/
Ðerniaus Str.
Taikos Ave.
Naujoji Uosto/
Danës Str.
Jûrininkø Str.
Taikos Ave.
Scheduled
Opening Date
Planned Total
Area, sq. m
2008
6,500
2008
2,700
2009
10,000
2009
9,000
N/D
10,000
38,200
26
Office Market
Ðiauliai
Report
States
LITHUANIA
No A-class office buildings exist yet in Ðiauliai. The needs of the few existing
tenants are satisfied with converted B-class premises on the first and second
levels of existing buildings. The most sought-after premises are in the size
range of 40-60 sq. m. Local companies, owning their premises, dominate in
the market.
The first modern office and hotel building is being developed by Ogmios
Centras as a part of multifunctional Bruklinas project. It will offer approximately
5,000 sq. m of modern office space. In addition to that, another multifunctional
building, offering 12,000 sq. m of office premises, is planned to be constructed
in Varpo Str. Currently, monthly rental prices vary from 3 to 7 EUR/sq. m in
residential and industrial districts, while premises in the central part of the city
can be leased for 6-10 EUR/sq. m.
Panevëþys
The current situation in Panevëþys is similar to that in Ðiauliai. There are no
A-class office premises available, and most of the B-class office space is in
older buildings which have been reconstructed and modernised, very often
upon the special requests of future tenants, e.g. bank affiliates and branches
of insurance companies. Most companies prefer acquiring their own office
premises rather than renting them. The only announced development in
the pipeline is a part of multifunctional Babilonas project, which currently
encompass over 45,000 sq. m shopping centre developed in two phases by
Ogmios Centras. The office building will be combined with residential and
hotel developments. The rentals in Panevëþys vary from 4 to 9 EUR/sq. m/
month.
Office Market Expectations





Most of office market activities are taking place in Vilnius, where the
supply of modern office buildings is about to double in 2-3 years.
The tighter banks’ position along with general situation in the market
might become the temporary restraining factors for further market
development.
Vilnius CBD will grow further, however trend to develop modern
business districts in more remote areas has already emerged and
will be pursued in the future.
The other cities are still far behind and will remain of secondary
importance, however they have a certain potential for development.
The pressure on both vacancy rates and rentals is expected already
in 2009 due to possible oversupply of offices in Vilnius.
27
Report
Retail Market
General Overview
The Lithuanian retail market is experiencing very active development, which is
not limited to the capital, but has spread to other cities, in some of which new
projects have influenced the retail market by dramatically increased gross
area of retail space. The new shopping centres are primarily being developed
in the larger Lithuanian cities, having more than 100,000 inhabitants.
Low or zero vacancy levels in the existing retail units on the high-streets
and in successfully operating shopping centres reflect huge interest on the
part of retailers and have encouraged developers to consider new projects.
Additionally, a significant interest from investors, resulted from the EU
membership and the country’s declining risk status, also increases pressure
on developers to react in line with existing demand.
Low or zero vacancy levels
in the existing retail units
on the high-streets and
in successfully operating
shopping centres reflect
huge interest on the part of
retailers and have encouraged developers to consider
new projects.
The significant expansion of shopping centres (see the table below) might
raise doubts whether the market is ready to absorb the coming supply,
however, we believe that increasing consumer purchasing power combined
with changing shopping habits will maintain the steady retail market growth as
well as the demand for retail space and, consequently, the stable rental levels
in shopping centres.
thous. sq. m
Shopping Centre Space Development (beginning of the year)
500
450
400
350
300
250
200
150
100
50
0
2003
2004
Vilnius
2005
Kaunas
2006
2007
Klaipėda
2008
2009 F
Šiauliai
2010 F
Panevėžys
Source: KOBA
Main Developers
The main developers working on shopping centre projects are Ogmios Centras
(Domus Galerija, North Town project in Vilnius, Bruklinas multifunctional project
in Ðiauliai, Babilonas multifunctional project in Panevëþys), E.L.L. Nekilnojamas
Turtas (Panorama SC in Vilnius, Saulës miestas SC in Ðiauliai), Hanner (Europa
SC in Vilnius, Arena SC in Klaipëda, Savas SC in Kaunas), Senukai Group
(Banginis in Vilnius, Mega SC in Kaunas and a numerous DIY stores throughout
Lithuania), Akropolis (Akropolis SC in Vilnius, Kaunas, Klaipëda, and Ðiauliai),
Baltijos Investicijø Grupë (BIG SC in Vilnius and Klaipëda), and the Rubicon
Group (Ozas SC in Vilnius). One peculiarity of Vilnius and the Lithuanian retail
28
LITHUANIA
States
Report
Retail Market
market in general is that the major developers are often associated with the
anchor tenants of the shopping centres, for example Maxima, Senukai, Norfa,
RIMI, IKI.
States
LITHUANIA
Main Retailers
Main anchor tenants are: Maxima LT (Maxima, the largest grocery chain), Rimi
Baltic (Rimi grocery chain), Rivona (Norfa grocery chain), Palink (IKI grocery
chain), Senukai (DIY), Apranga (fashion retailer), Lëvuo (fashion retailer),
Armitana and Danbalt (footwear and fashion retailers), Elektromarkt and Topo
centras (home appliance retailers), Jysk (household goods retailer), Èilija,
Delano, Fortas (restaurants).
Main Grocery Chains in Lithuania (end of 2007)
250
200
150
100
50
0
Maxima
IKI
Norfa
RIMI
Number of shops in 5 major cities
Number of shops in other locations
Source: KOBA
The interest of international retailers in the Lithuanian market is increasing.
In 2007, several new brands were introduced, mainly with the opening of
Gedimino9 SC in Vilnius and Akropolis in Kaunas: Marks&Spencer, Lindex,
Moda More, Polarn O.Pyret, La Senza, Pepe Jeans, Almi Décor, KFC, Pizza
Hut, Hesburger, etc.
To date, most international retailers have licensed franchisees rather than
entered the market themselves, for example ZARA, Bata, Marc’O’Polo, Tommy
Hilfiger, Mexx, Hugo Boss, Esprit and Mango.
Vilnius
High Street Retail
There are four main retail and leisure streets in the capital of Lithuania: Gedimino
Avenue, Pilies, Vokieèiø and Didþioji streets. Each of these streets has unique
features in terms of location, attractiveness to consumers and retailers, and
potential for expansion of retail premises.
Gedimino Avenue is the most prestigious high street in Lithuania, especially
after its reconstruction. Although retail space on Gedimino Avenue is
29
Report
particularly limited, entertainment, leisure, and shopping areas are available
there. The new building construction opportunities on Gedimino Avenue
are rather limited, but there are still many institutional buildings, currently
accommodating government bodies, which might be perceived as an
eventually potential space for development in the future.
There are two shopping centres in Gedimino Avenue, Flagman (7,000 sq. m)
and newly opened Gedimino9 (16,600 sq. m), both of them located in the most
active part of the street – from the beginning of it up to ZARA department store.
Further along, pedestrian flows decrease, and more gaps appear between
shops because of institutional buildings and city squares. This is clearly
reflected in rental levels (see the map below).
States
Gedimino Avenue is the
most prestigious high street in Lithuania, especially
after its reconstruction.
štauto
Žy
gim
an
o-V
Geležinio Vilko Str.
Str.
g.
alo
n
Arse
Str.
CENTER
dir
r.
V.
Ku
Šventaragio St
OLD TOWN
iaus
avič
an
Bas
Str.
Maironio Str..
ko
sS
tr.
V.
Tu
m
tų
ių
eč
ki
Vo
r.
Str.
St
ilos
riga
Švit
J.
A. Go
aiž
ga
nto
Str
.
Segmentation of Gedimino Avenue and Other Major Retail Streets
40-65 EUR / sq. m / month
Source: KOBA
Having been, historically, one of the city’s main shopping streets, Pilies Street
is now a mainly tourist- (amber, jewellery and souvenirs shops) and leisureoriented (cafes, restaurants, hotels) area.
Vokieèiø Street was formerly quite attractive to both retailers and consumers,
but the insufficient pedestrian flow, difficult parking conditions, the rapid
development of out-of-city shopping centres and consumer preferences to
shop there have combined to turn it into a leisure space, which today features
cafes, restaurants, casinos, but very few retail units.
In contrast, Didþioji Street has evolved into one of the most well-appointed
shopping areas in Vilnius, where all major high-end brands have their
boutiques or shops (including Armani, Hugo Boss, Roberto Cavalli, Escada,
30
LITHUANIA
Retail Market
Report
Retail Market
Ermemenegildo Zegna). In 2007, the appeal of Didþioji Street was increased
after the reconstruction of the Town Hall Square, which added value to Didþioji
Street as retail, leisure and tourism area.
States
LITHUANIA
Shopping Centres
The Vilnius shopping centre market has been underdeveloped in comparison
with those of Riga and Tallinn due to a combination of factors: late introduction
of shopping centre concept in the market (with the opening of Akropolis SC
only in 2002 in Vilnius, while the first shopping centres in other Baltic states
appeared already in 1998), active shopping centre developments in other
Lithuania’s cities (when in Latvia and Estonia the majority of developments
were ongoing in capital cities, representing two-thirds of the populations in
these countries). Moreover, the most active shopping centre developers in
Lithuania are local companies, in contrast, a lot of foreign developers operate
in Latvia and Estonia. However, lately a number of international developers
who either started or plan to undertake new shopping centre projects in
Lithuania has increased.
In 2007, only one shopping centre was delivered in Vilnius. In April, Gedimino9
SC (16,600 sq. m) was opened in Gedimino Avenue by Duke House
Asset Managers and introduced a number of new brands to the market –
Marks&Spencer, Lindex, Moda More, Pepe Jeans, Almi Décor, etc. In addition
to that, some other modern retail schemes were offered to the market, as the
following multifunctional projects were completed: Helios City in Konarskio Str.
(approx. 7,000 sq. m shopping gallery) and Vilniaus Vartai in Gynëjø Str. (over
7,000 sq. m boutique shopping gallery). One of the notable lease transactions
is represented by Apranga Group which opened City department store (3,000
sq. m) after the reconstruction of formerly Grand Duke Palace SC.
Main Shopping Centres in Vilnius
Shopping Centre
Opening Year
Total Area, sq. m
2002-2004
100,500
Europa
2004
22,600
VCUP
2003
19,800
BIG
2006
18,800
Mada
2003
18,600
Gedimino9
2007
16,600
Domus Galerija
2003
14,000
Mandarinas
2005
9,000
Flagman
2004
7,000
Akropolis
Total
226,900
Source: KOBA
The number and scope of projects in the pipeline show that retailers and
property developers are seriously interested in the growth of the capital’s retail
segment. After a relatively quiet period from 2005 to 2007, the Vilnius retail
market awaits completion of several large shopping schemes. The Vilnius
shopping centre market is expected more than double in stock over the next
two years, when as much as over 310,000 sq. m shopping centres space is
expected to be added.
31
Report
Retail Market
States
Scheduled Opening Date
Planned Total Area, sq. m
Panorama
Project Name
2008
65,000
Pupa
2008
6,300
Ozas
2009
93,000
Akropolis-Velga
2009
110,000
Shopping centre
2009
37,000
Total
LITHUANIA
Pipeline Shopping Centre Projects in Vilnius
311,300
Source: KOBA
Development of Shopping Centres in Vilnius
600
thous. sq. m
500
400
300
200
100
0
2002
2003
2004
2005
2006
2007
2008 F
2009 F
New deliveries
Source: KOBA
Main Existing and Pipeline Shopping Centres in Vilnius
7
Str.
Goštauto
ŽVĖRYNAS
KAROLINIÐKËS
Str.
Go
šta
uto
Str
.
5
Šeimyniškių Str.
9
nalo
Arse
SENAMIESTIS
La
isv
ės
pr.
Source: KOBA
13
r.
ų
ivi
re
Ka
r.
St
me
NAUJAMIESTIS
ANTAKALNIS
Žirmū
pr.
nų Str
.
ų
ėn
6
rgė
sS
tr
2 .
Uk
ul
vės
10
Narbuto Str.
sk
to Str.
Narbu
Tu
r.
St
Lais
14
Žalgirio Str.
ės
r.
rg
St
me
kių
Gele
Uk
VIRÐULIÐKËS
4
.
žinio
r.
niš
St
sti
Ozo Str.
Ozo
Vilko
kių
3
Ju
tr.
oS
1
Oz
ŠEŠKINĖ
Str
Žirmūnų Str.
s pr.
r.
St
Str.
Laisvė
ijų
ar
io Vilko
diš
ivy
Bu
JUSTINIÐKËS
ivių
re
Ka
12Str.
Rygos Str.
St
ŽIRMŪNAI
lv
Ka
tr.
sS
Geležin
rgė
me
11
.
rijų Str
Uk
PAŠILAIČIAI
lko Str.
FABIJONIŠKĖS
Kalva
io Vi
Geležin
8
Existing:
1 – Akropolis
2 – VCUP
3 – Mada
4 – Domus Galerija
5 – Flagman
6 – Europa
7 – Mandarinas
8 – BIG
9 – Gedimino9
Pipeline:
10 – Panorama
11 – Pupa
12 – Ozas
13 – Akropolis
14 – Shopping Center
32
Report
Retail Market
Rents and Vacancy
Low or zero vacancy levels in the Vilnius shopping centres show that the
market still lacks high quality products. However, retailers are becoming
more experienced and selective when choosing projects to be in and are
not undertaking any proposed project without analyzing its competitive
advantages, attractiveness, catchment area, and potential to generate
sufficient customer flows.
Rental levels are quite comparable in the Vilnius shopping centres, however,
they differ somewhat from city to city, as showed in the graph below. The
rentals also depend on shopping centres’ location, concept, interior planning,
mix of tenants, and general success.
The Vilnius shopping centre rents paid by anchor tenants range between 7.2
and 14.5 EUR / sq. m / month, for premises that are about 100-400 sq. m
in size, tenants pay 14.5-35.0 EUR / sq. m / month, while the rent of small
premises up to 100 sq. m would cost 26-50 EUR / sq. m / month.
Average Rents in Shopping Centres
Low or zero vacancy levels
in the Vilnius shopping
centres show that the market still lacks high quality
products. However, retailers are becoming more
experienced and selective
when choosing projects to
be in and are not undertaking any proposed project
without analyzing its competitive advantages, attractiveness, catchment area,
entertainments and potential to generate sufficient
customer flows.
EUR / sq. m / month
60
50
40
30
20
10
Vilnius
Kaunas
Klaipėda
Šiauliai
<100 sq. m
>100 sq. m
Anchor Tenants
<100 sq. m
>100 sq. m
Anchor Tenants
<100 sq. m
>100 sq. m
Anchor Tenants
<100 sq. m
>100 sq. m
Anchor Tenants
<100 sq. m
>100 sq. m
Anchor Tenants
0
Panevėžys
Source: KOBA
Kaunas
High Street Retail
For a long time the most attractive retail place in Kaunas has been the
pedestrian Laisvës Avenue, where shops and restaurants prevail. However,
after Akropolis SC was opened in the spring of 2007, the attractiveness of
Laisvës Avenue has diminished, a lot of retailers have moved their shops to
Akropolis, entailing compression of rentals and increasing vacancy rates. We
believe that the pedestrian retail street could regain its position if the planned
reconstruction was implemented, however the project, which would add value
to the area, is being postponed for several years already.
33
LITHUANIA
States
Report
Retail Market
States
Shopping Centres
LITHUANIA
In April 2007, Akropolis (80,400 sq. m) was opened in Kaunas central location
– Karaliaus Mindaugo Avenue – in the vicinity of pedestrian Laisvës Avenue,
thus decreasing its attractiveness for a number of retailers. The main factors
of Akropolis appeal in Kaunas are the popularity and success of its sister
projects in Vilnius and Klaipëda, its good location (close to the city centre and
the island of the river Nemunas where a sports and leisure arena is to be built),
a strong anchor tenant (Hyper Maxima, approx. 6,800 sq. m), a large number
of tenants (around 200 shops), good parking (some 2,800 spaces) and its
leisure attractions (ice arena, bowling, etc.).
Main Shopping Centres in Kaunas
Shopping Centre
Opening Year
Total Area, sq. m
Akropolis
2007
80,400
Mega
2005
72,000
Molas
2003
22,600
Savas
2004
13,500
Total
188,500
Source: KOBA
Pipeline Shopping Centre Projects in Kaunas
Total Area, sq. m
Mega expansion
Project Name
2009
13,000
Arena
N/D
10,000
Total
23,000
Source: KOBA
Main Existing and Pipeline Shopping Centres in Kaunas
2 6
Islandijos Avenue
e
nu
5
4
Existing:
1 – Akropolis
2 – Mega
3 – Molas
4 – Savas
5 – Arena
6 – Mega expansion
e
iø
r
no
va
Sa
3
1
Source: KOBA
Av
KAUNAS
34
Report
Retail Market
Rents and Vacancy
The vacancy levels in the Kaunas successfully working shopping centres are
low and almost non-existent as demand for the premises in such centres is high.
However, the vacancy level in the high street reaches 15-20%.
The shopping centre rents in Kaunas vary from 7.2 to 11.5 EUR / sq. m / month
for anchor tenants, from 11.5 to 26.0 EUR / sq. m / month for premises that
are about 100-400 sq. m in size, from 17 to 40.5 EUR / sq. m / month for small
premises up to 100 sq. m. Retail premises in Laisvës Avenue can be rented for
20-35 EUR / sq. m / month, which is 8-10% lower than a year ago.
The vacancy levels in the
Kaunas successfully working shopping centres are
low and almost non-existent as demand for the premises in such centres is
high.
Klaipëda
High Street Retail
The main retail street in Klaipëda is H. Manto Street, which is a continuation of
Taikos Avenue – one of the main streets in Klaipëda, connecting southern and
northern parts of the city, having big flows of transport and pedestrians, and
concentrating public institutions, offices, hotels, restaurants as well as retail
units. There are few shopping centres on H. Manto high-street: Mega Plaza
(5,000 sq. m), Kapitolijus (4,500 sq. m); besides, Manto Namai (3,000 sq. m)
will be completed in 2008 and the project of Ðiauliø titanas (9,200 sq. m) is
also under construction.
The Old Town can be described as another retail area, mainly dominated
by Tiltø Street, which accommodates a lot of shops, bank affiliates, hotels,
public institutions, residential buildings. After the reconstruction Tiltø Street is
believed to gain more popularity and attract more pedestrian flows.
Shopping Centres
2006-2007 was a quiet period in terms of new shopping centre projects
after 2005, the Year of Big Openings in Klaipëda, when Saturnas, Arena and
Grandus shopping centres were opened, and Hyper Maxima conversion into
Akropolis was completed.
The market in 2007 received only a few interior and home design schemes - a
new specialised interior design and home decoration shopping centre Namo
Inþinerijos ir Interjero Centras (NIC, 4,500 sq. m), construction materials and
home decoration centre Ermitaþas (12,000 sq. m).
Main Shopping Centres in Klaipëda
Opening Year
Total Area, sq. m
Akropolis
Shopping Centre
2005
77,000
BIG
2004
20,000
Arena
2005
17,400
Grandus
2005
13,500
Studlendas
2006
8,000
Saturnas
2005
5,700
Mega Plaza
2003
Total
Source: KOBA
5,000
146,600
35
LITHUANIA
States
Report
There are several retail projects scheduled to be delivered in 2008-2009,
namely, an extension to BIG Shopping Centre (adding some 20,000 sq. m
to the existing 21,000 sq. m), Manto Namai, which will open its doors at the
junction of H. Manto Street and pedestrian M. Maþvydo Street and will welcome
several fashion retailers, and Power Centre, which will have Senukai DYI store
and Maxima as anchor tenants.
States
LITHUANIA
Retail Market
Pipeline Shopping Centre Projects in Klaipëda
Project Name
Total Area, sq. m
2008
30,000
Power Centre
Manto Namai
BIG expansion
2008
3,000
2008-2009
20,000
Shopping Centre
2009
12,000
Gandraliðkës
2010
15,000
Auksinis trikampis
N/D
38,000
Domus Galerija
N/D
22,000
Ðiauliø titanas
N/D
9,200
Total
111,200
Source: KOBA
Main Existing and Pipeline Shopping Centres in Klaipëda
6
KLAIPĖDA
Sausio
t
e
tre
sS
ie
Pil
11
7
8
5
13-os
ios Av
enue
15
Tai
kos
nue
eet
Str
Ave
ijos
Min
1213 1 Avenue
s
ltijo
Ba
10
3
4
Existing:
1 – Akropolis
2 – BIG
3 – Arena
4 – Grandus
5 – Saturnas
6 – Studlendas
7 – Mega Plaza
Pipeline:
8 – Manto namai
9 – BIG expansion
10 – Power Center
11 – Ðiauliø Titanas project
12 – Domus Galerija
13 – Gandraliðkës
14 – Shopping Center
15 – Auksinis trikampis
2 9 14
Source: KOBA
In addition to the pipeline shopping centre projects, there are plans to develop
some multifunctional projects, which will be also significant in terms of modern
retail space offered, i.e. Jûros Vartai and Memelio Miestas. Both projects
aim to change the former shipyard industrial area completely and open up
access from the city to the sea. The projects will encompass the development
of shopping galleries, restaurants, leisure centres, office buildings as well as
hotels and are to be completed in 2012-2015.
36
Report
Retail Market
States
Rents and Vacancy
LITHUANIA
The vacancies in strong shopping centre projects are almost non-existent,
however, the premises in retail streets have lower demand and thus vacancy
rates are somewhat higher.
The shopping centre rents in Klaipëda range between 5.8 and 11.5 EUR / sq.
m / month for anchor tenants, the premises that are about 100-400 sq. m in
size can be rented for 10 to 23 EUR / sq. m / month, while small premises up to
100 sq. m cost from 14.5 to 38 EUR / sq. m per month. The rents of retail units
in H. Manto Str. are currently 16-29 EUR / sq. m per month.
Ðiauliai
High Street Retail
The appearance of new shopping centres in Ðiauliai has remarkably reduced
the appeal of the pedestrians-only Vilniaus Street, which until 2007 used to be
the most popular shopping and leisure area. A lot of retailers have moved their
shops to newly opened shopping centres, thus negatively influencing rentals
as well as increasing vacancy and a number of premises for sale in Vilniaus
Street. Nevertheless, the people flows have not decreased significantly,
restaurants and bars are still in demand, suggesting that this area will remain
attractive.
The appearance of new
shopping centres in Ðiauliai
has remarkably reduced
the appeal of the pedestrians-only Vilniaus Street,
which until 2007 used to be
the most popular shopping
and leisure area.
Shopping Centres
As a result of the continuing Lithuanian economy’s growth and increasing
consumers’ purchasing power, the Ðiauliai commercial property market
witnessed an outstanding year. Four new shopping centres were delivered to
the market in 2007, making a huge influx of nearly 100,000 sq. m of modern
retail. These new completions represent almost half of all shopping centre
openings in Lithuania in 2007. Until 2007 Ðiauliai possessed no modern
shopping centres.
A new shopping centre Saulës Miestas with anchor tenant Hyper Rimi (4,500
sq. m), integrated with the city’s bus station, was completed by international
developer E.L.L. Nekilnojamas Turtas. After reconstruction and expansion of
Norfa XXL the Bruklinas Shopping Centre was opened.
Besides the above projects, shopping and entertainment centre Tilþë was
finalized at the end of 2007 in Tilþës Street, the city’s major transport artery.
Also, Arena shopping centre with anchor tenants Jysk and Rimi has started
its operations.
As a result of the continuing Lithuanian economy’s
growth and increasing consumers’ purchasing power,
the Ðiauliai commercial property market witnessed an
outstanding year.
Main Shopping Centres in Ðiauliai
Opening Date
Total Area, sq. m
Tilþë
Project Name
2007
31,100
Bruklinas
2007
28,000
Saulës Miestas
2007
25,000
Arena
2007
12,500
Total
Source: KOBA
96,600
37
Report
Retail Market
In addition to the projects delivered in 2007, already rising some doubts about
market’s capacity to absorb all of them offered in one year, the market awaits
one more strong competitor to enter in 2008, as constructions of Akropolis
SC (49,900 sq. m) were started at the end of 2007. Besides, Ogmios Centras
plans to complete Bruklinas project with DIY (13,000 sq. m) as well as an
interior and furniture centre (10,000 sq. m), both scheduled to be finalized in
2008.
Rents and Vacancy
All the existing shopping centres are almost fully let, however, the arrival of
another strong player, Akropolis, might make minor corrections in this relatively
young market in terms of both rentals and vacancies.
All the existing shopping
centres in Ðiauliai are almost fully let, however, the
arrival of another strong
player, Akropolis, might
make minor corrections in
this relatively young market in terms of both rentals
and vacancies.
Rents paid by anchor tenants in the Ðiauliai shopping centres range between
5.5 and 8.5 EUR / sq. m / month, while premises that are about 100-400 sq. m
in size cost 13-19 EUR / sq. m / month, and the rent of small premises up to
100 sq. m reaches 19-29 EUR / sq. m / month.
The retail units in Vilniaus Str. and close areas currently can be rented for
13-23 EUR / sq. m per month. Resulting from the immense new supply it is
15-20% less than just a year ago.
Panevëþys
High Street Retail
Similarly to other Lithuanian cities, the Panevëþys main retail area is located
in the city centre and the Old Town, mainly occupying the ground floors of
existing buildings. The main retail area is J.Basanavièiaus, Vasario 16osios, Vilniaus and Respublikos streets as well as Laisvës Square. However,
although the modern shopping centres have been present in the market only
for a few years, together with super/hypermarkets they have easily conquered
smaller shops in the city centre, as buyers got used to shopping in large retail
schemes closer to their living areas.
Shopping Centres
The major shopping centre project in Panevëþys is Babilonas, which has
been developed in a few phases by Ogmios Centras and now serves as a
regional shopping centre. Babilonas multifunctional centre is located in the
southern part of the city. The first phase of the development (a 28,000 sq. m
shopping centre) was completed in 2005 and supplemented by 19,000 sq.
m in 2007. There are no other modern shopping centres in the city, and the
market demand is supported by a few super/hypermarkets accompanied with
fashion, footwear, etc. retailers having their units under the same roof.
Main Shopping Centres in Panevëþys
Project Name
Opening Date
Total Area, sq. m
Babilonas-1
2005
28,000
Babilonas-2
2007
19,000
Total
Source: KOBA
47,000
38
LITHUANIA
States
Within further development of the multifunctional Babilonas project, the market
is about to receive a food and consumer goods shopping centre (28,000 sq.
m), DIY centre (15,000 sq.m), Cash&Carry centre (15,000 sq. m), Car retail
square (6,000 sq. m) in 2008. The project will also encompass office buildings
and residential developments.
Report
States
LITHUANIA
Retail Market
Rents and Vacancy
The Babilonas project enjoys non-existent vacancies, so do the most attractive
super/hypermarkets.
The shopping centre rents in Panevëþys vary from 5.5 to 8.5 EUR / sq. m /
month for anchor tenants, from 8.5 to 16.0 EUR / sq. m / month for premises
that are about 100-400 sq. m in size, and from 13 to 29 EUR / sq. m / month
for small premises up to 100 sq. m. The units in the main retail streets can be
acquired for 13-16 EUR / sq. m / month.
Retail Market Expectations







The retail sector is the most progressive in terms of growth and
investment opportunities.
The total shopping centre stock in five major cities should increase
by over 210,000 sq. m by the end of 2008 with well above half of
these completions planned in Vilnius.
The shopping centre market in the secondary Lithuanian cities is
much better developed than those in other Baltic states and will be
undergoing further expansion.
As the market becomes more saturated and competition grows, the
developers will start introducing new types of retail schemes, e.g.
modern retail parks, which yet are a novelty in the country.
Apart from expanding geographically and conceptual variety of
projects, the market will also receive new players, both local and
international developers as well as new brands.
The negative effect on rentals and pressure on vacancy level are
possible in less popular facilities as the competition among the
existing and new shopping centres grows.
The sustainability of the new shopping centers will depend on the
continuing rapid growth of real wages and consumer purchasing
power.
39
Report
Warehouse/Industrial Market
General Overview
The Lithuanian market of modern warehouse premises is developing in terms
of both volume and quality, as the demand for logistic services grows and
consumers request the larger complex of them. This has resulted from the
rising retail turnovers, which consequently had impact on increasing traffic
flows inside and outside the EU especially after Lithuania’s joining to the
alliance and as a result of the recent impressive economic growth.
New constructions of warehouses/logistics centres
are being developed step
by step mostly in three
main cities: Vilnius, Kaunas
and Klaipëda.
In terms of new supply, the large-scale warehouse projects appeared in the
market only a few years ago. A lot of newly-built projects are planned and
constructed on a built-to-suit basis.
New constructions of warehouses/logistics centres are being developed step
by step mostly in three main cities: in Kaunas near Via Baltica road and in the
Kaunas FEZ, in the Klaipëda FEZ, as well as around Vilnius. In 2007, Vievis,
a small town situated just 40 km from Vilnius on the Vilnius-Kaunas highway,
has become a preferred location in terms of logistics. Besides, the popularity
of areas around Panevëþys is increasing as it is a rather central location for
regional distribution, even convenient for the ones serving the whole Baltic
market.
The most active industrial developments are being held near the main roads of
international European transport corridors that cross Lithuania:
 Highway Via Baltica (No. I) in the North-South direction and railway line
Rail Baltica, on the route Tallinn-Riga-Panevëþys-Kaunas-Warsaw;
 In the East-West direction: the road IXb (Kiev-Minsk-Vilnius-Klaipëda).
The demand for logistics and warehousing premises comes mostly from
the companies serving the local market, as the large multinationals rather
choose Poland, Czech Republic, Slovakia or Hungary to locate their regional
distribution centres in Central and Eastern Europe. Thus, the most sought-after
are small premises within city boundaries, which might take time to find as the
newly constructed modern warehouses tend to be built out of the city and are
oriented to large clients with tight lease agreements.
Most active developers on a local market are Ogmios Centras (Baltic
Logistics City, Vilija Park, DIG Logistika, Ormina Warehouses, etc.), MEI Baltija
(Dobrovolës and Kirtimai logistics centres), Vingës Logistikos Group (Vingës
Terminalas, Vingës Transsphere Logistika), BNTP (Klaipëda Business Park).
Warehouses Stock & Pipeline
thous.
sq.mm
thous.sq.
450
400
thous. sq. m
350
300
250
200
150
100
450
450
400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
0
Vilnius
Vilnius
50
0
Vilnius
Source: KOBA
Kaunas
Klaipėda
Vievis
Warehouses stock, January 2008
New deliveries by the end of 2008
The demand for logistics
and warehousing premises comes mostly from
the companies serving the
local market, as the large
multinationals rather choose Poland, Czech Republic,
Slovakia or Hungary to locate their regional distribution centres in Central and
Eastern Europe.
Kaunas
Kaunas
Klaipėda
Klaipėda
Vievis
Vievis
40
LITHUANIA
States
Report
Vilnius
Modern logistics supply in Vilnius currently stands at nearly 300,000 sq. m. At
the moment around 94,000 sq. m additional warehouse space is at different
development stages.
In general, not just in Vilnius, warehousing and industrial facilities are moving
out of the borders of the city mainly because of inner- city traffic problems and
rising land prices, which are too high to maintain industrial or warehousing
premises in the city. The early warehouse developments in Vilnius were
concluded in the Kirtimai, Paneriai and Vilkpëdë districts, where historically
industrial businesses have operated. However, now developers prefer
Minskas Road, Dobrovolë, Trakø Road, Vilnius-Kaunas highway directions,
which guarantee convenient access to the city.
Vilnius and nearby areas
are mostly chosen by the
smaller companies, whereas large distributors prefer
locations in more central
parts of Lithuania, e.g. Kaunas, Panevëþys, which are
more convenient in terms
of serving the whole country.
A perfect a example of how businesses are looking for more advanced
locations is Vievis town, situated within less than 40 km from the Vilnius city
centre. Vievis welcomed some noticeable completions in 2007 and is set for
further expansion in terms of logistics and industrial projects development.
Vilnius and nearby areas are mostly chosen by the smaller companies,
whereas large distributors prefer locations in more central parts of Lithuania,
e.g. Kaunas, Panevëþys, which are more convenient in terms of serving the
whole country.
Main Logistics/Warehousing Objects Delivered in Vilnius County in 2007
Project
Location
Total Area, sq. m
Vievis
18,400
Vingës Transsphere Logistika
Vilnius region
18,000
Dobrovolës Logistics Centre II
Vievis Logistics Centre
Dobrovolë
10,500
AP Warehouse
Vilnius
8,900
Autoverslas Warehouse
Vievis
Total
8,000
63,800
Source: KOBA
Mainly the same few developers are the most active in the Vilnius logistics
market; also it is quite popular to develop logistics projects for own-use, as do
some large logistics companies, grocery or DIY chains.
Ogmios Centras is developing two warehouse/industrial projects within the city
boundaries: DIG Logistika close to Vilnius airport and the projected southern
bypass and Vilija Business Park nearby the crossroad of Vilnius-Klaipëda
highway and road to Warsaw.
Vingës Logistikos Grupë (VLG), which has successfully completed Vingës
Transsphere Logistika project on the Vilnius-Klaipëda highway in 2007, has
announced plans of further expansion (approx. 40,000 sq. m) in Vilnius region.
The third development stage is also foreseen by MEI Baltija in Dobrovolë area
close to Vilnius.
41
LITHUANIA
States
Report
States
Project
Location
Vingës Terminal
Dobrovolës Logistics
Centre III
Vilija Business Park
Grigiðkës
Vilnius,
Dobrovolë
Vilnius
DIG Logistika
Pirkliø Business Park
Finëjas Transport and
Logistics Centre
Maxima Bazë expansion
Scheduled
Opening
Total Area,
sq. m
2009-2010
40,000
2008
32,000
2008-2009
23,000
Vilnius
2008
22,000
Vilnius
2008
10,000
Vievis
2008
7,200
Vilnius
N/D
Total
Most specialists agree that
Kaunas, being the geographical centre, will become
the country’s logistics and
warehouse centre.
N/D
>134,200
Source: KOBA
Kaunas
The modern warehouse stock in and around Kaunas reached 125,000 sq. m
at the end of 2007. New development activities remains strongly concentrated
along the Via Baltica highway close to Kaunas as well as in the Kaunas Free
Economic Zone (the Kaunas FEZ).
Most specialists agree that Kaunas, being the geographical centre, will
become the country’s logistics and warehouse centre. The year 2007 was the
most active in terms of new logistics projects development in both Kaunas city
and region, when nearly 70,000 sq. m of modern warehousing space were
delivered.
Main Logistics/Warehousing Objects Delivered in Kaunas County in 2007
Project
Kaunas Terminal I
Baltic Logistics City I
Celsis
Lavisa Logistics
Total
Location
Total Area, sq. m
Kaunas FEZ
30,000
Kaunas, Kaupiðkës
23,500
Kaunas
9,000
Kaunas FEZ
7,000
69,500
Source: KOBA
Developer YIT Kausta has finalized the construction of Kaunas Terminal
(30,000 sq. m) in the Kaunas Free Economic Zone (FEZ). The Kaunas FEZ
is located close to the country’s main transportation corridors as well as the
local Karmëlava airport, and offers a number of tax incentives to developers.
Successfully leased Kaunas Terminal is planned to be developed further.
A new logistics centre, Baltic Logistics City, is under development close
to the Via Baltica highway. Over three development stages, altogether the
market will receive a total of around 52,000 sq. m of modern warehousing and
administrative premises by the end of 2009. In the end of 2007, the first phase
of the project was completed.
The biggest in volume project is Kaunas Logistics Park close to VilniusKlaipëda and Via Baltica highways, which will host Senukai as the anchor
tenant.
42
LITHUANIA
Main Pipeline Logistics/Warehousing Projects in Vilnius County
Report
States
Project
Kaunas Logistics Park
Baltic Logistic City III
YIT Kausta
Baltic Logistic City II
Location
Scheduled
Opening
Total Area,
sq. m
Kaunas
Kaunas,
Kaupiðkës
Kaunas FEZ
Kaunas,
Kaupiðkës
2008
110,000
2009
20,000
N/D
20,000
2008
9,000
Total
LITHUANIA
Main Pipeline Logistics/Warehousing Projects in Kaunas
159,000
Source: KOBA
Klaipëda
Klaipëda, being Lithuania’s main port city is attractive for both industrial and
logistics businesses. The warehouses that have been newly constructed are
mainly directed towards the goods which pass through the seaport. Developers
are still focusing their projects in the Klaipëda Free Economic Zone (FEZ).
The Klaipëda FEZ was the first free economic zone in Lithuania, offering
favourable conditions and benefits to various businesses in a territory of 305
ha. The Klaipëda FEZ has more than 20,000 sq. m of modern warehouse
space available, which will almost double after completion of Vingës Terminal
in 2008.
Main Pipeline Logistics/Warehousing Projects in Klaipëda
Project
Laistø International
Trade Centre
Vingës Terminal
Location
Klaipëda,
Laistai
Klaipëda FEZ
Scheduled
Opening
Total Area,
sq. m
2008
27,400
2008
18,800
Klaipëda Business Park
Klaipëda
2008
11,500
Ad Rem
Klaipëda
2008
10,000
Total
67,700
Source: KOBA
Ðiauliai and Panevëþys
The industrial markets of Ðiauliai and Panevëþys are dominated by
reconstructed or older warehouse and industrial facilities. Although Ðiauliai
has many large industrial companies, the modern industrial and warehousing
market is underdeveloped. The Ðiauliai city council initiated the formation of
a 165 ha Industrial Park in the Zokniai district. Under this initiative, industrial
companies will be encouraged to move out of the central part of Ðiauliai into
more industrial zones. The Industrial Park is close to the Zokniai airport and a
logistics centre is included in the plans.
Panevëþys is expected to become more attractive in terms of logistics and
warehousing due to its favourable location, enabling to serve not only Lithuania,
but Latvia as well, which is pretty substantial for companies operating in both
countries. Palink (IKI grocery chain) has started the development of 47,000
Panevëþys is expected to
become more attractive in
terms of logistics and warehousing due to its favourable location, enabling to
serve not only Lithuania,
but Latvia as well, which is
pretty substantial for companies operating in both
countries.
43
sq. m built-to-suit logistics centre, which will be concluded in two phases. A
new E67 business park, offering around 20,000 sq. m logistics facilities, is also
planned by Kavaska.
Report
States
LITHUANIA
Rents and Vacancy
Prime warehouse rents range from 4.5 to 6.5 EUR/sq. m/month, and from 5.5
to 8.5 EUR/sq. m/month for office space in all major Lithuanian cities. Vacancy
levels are low in the modern premises as the market is very dependent on
pre-leasing.
Average Rents in New Construction Warehouses
7
EUR / sq. m / month
6
5
4
3
Vilnius
Kaunas
Klaipėda
Vievis
Source: KOBA
Warehouse/Industrial Market Expectations





The current intensive construction activity implies that new warehouse
supply will remain strong in 2008.
The demand of industrial premises is expected to remain stable,
while the market has a lot of growth potential, especially as a result
of the growth in retail sector and thus increased demand for retail
goods storage.
The increasing labour costs are making Lithuania less competitive
for international production relocation.
The warehouse rents are to remain stable with some signs of an
upward pressure, especially by the newly-entering projects.
The warehouse/industrial market will remain especially sensitive to
pre-leasing thus influencing low vacancy levels.
44
Report
The number of both incoming and local guests staying at Lithuania’s hotels,
and particularly those in Vilnius, constantly increases. The number of hotel
visitors has remarkably gone up after country’s accession to the EU.
Number of Guests in Hotels and Motels
1,200
thousand
1,000
800
States
Foreigners made up 61.6%
of overnight stays, among
them, Germans made the
majority (15.7%), followed
by Polish (13.0%) and Russian (8.0%) visitors.
600
400
200
0
2000
2001
Lithuania
2002
Vilnius
2003
2004
Kaunas
2005
2006
Klaipėda
Lithuania’s hotel market, as of September 2007, contained 297 hotels with
9,925 rooms, and the number of beds totaled 19,620. A quarter of all hotels
were located in the capital, however, Vilnius accounted for almost half of hotels
visitors.
Number of Hotels and Occupancy Rate in Lithuania
45
350
40
35
250
30
200
25
20
150
15
100
10
50
0
Occupancy, %
Number of hotels
300
5
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Total number of hotels
0
Hotel occupancy rate, %
The number of guests staying in hotels in Lithuania is rising continuously, and,
despite the increasing number of hotels, the occupancy rates keep the upward
direction too. In 2006, hotels accommodated 18.9% more guests than in 2005,
while the number of nights spent in hotels increased by 15.5%. Foreigners
made up 61.6% of overnight stays, among them, Germans made the majority
(15.7%), followed by Polish (13.0%) and Russian (8.0%) visitors. The Lithuanian
Statistics Department figures show that most foreigners, staying in hotels, visit
Lithuania for holidays (49.2%) and business (37.4%).
45
LITHUANIA
Hotel Market
Report
Hotel Market
In 2006, the occupancy rate for Vilnius hotel rooms was 52.3% (in 2005 –
51.0%). Hotel occupancy rates for the country overall are lower (42.3% and
40.8%, in 2006 and 2005 respectively), the busiest month in 2006 being
August (57.2%), the least busy – January (26.1%).
States
LITHUANIA
Hotel Rooms Occupancy Rate
60
50
40
% 30
20
10
0
5*
4*
3*
2005
2*
1*
Total
2006
56% of hotels in Lithuania are qualified for 3- and 4-stars, and the occupancy
rate is the highest in 4-stars hotels.
Number of Hotels by Qualification Categories in 2006
Non-classified
5*
4*
5*
2*
4*
3*
3*
2*
1*
Non-classified
3*
Average Rooms Prices in Hotels in 2006 (EUR / room / night)
Lithuania
Vilnius
County
Apartments
Lux
Single
Double
Triple and
other
153.8
96.7
54.4
69.2
47.8
189.1
139.6
82.0
89.8
45.8
46
Report
Hotel Market
States
LITHUANIA
Most of the hotels in Lithuania are small and privately owned. Among the larger
ones, management contracts (e. g. Radisson SAS, Scandic, Reval) are dominated
by private owners. The hotel market expansion is ongoing in two directions: hotels
are being built and reconstructed, firstly, in all major cities, secondly, in resort
areas, such as Druskininkai, Trakai, Palanga.
Main Hotels Delivered in 2007
Location
Category
Number of
Rooms
Druskininkai
4*
36
Hotel Name
Best Western Central
(reconstruction)
Trasalis
Trakai
3*
103
Klaipëda Hotel
Kaunas
3*
28
Daugirdas
Kaunas
4*
48
Panorama (reconstruction)
Vilnius
3*
224
Total
439
Source: KOBA
Main Pipeline Hotel Projects
Project
Artis Centrum
Hotels (expansion)
City Hotels
(Algirdo Str.)
City Hotels
(Bokðto Str.)
AAA Kempinski
Hotel Vilnius
World Trade
Centers Vilnius
Hotel in Vytauto
Ave.
Reval Hotel Neris
(reconstruction)
Europa Royal
Respublika
Babilonas
Panevëþys Hotel
(reconstruction)
Bruklinas
Total
Location
Scheduled
Opening
Expected
Category
Number
of Rooms
Vilnius
2008
4*
53
Vilnius
2008
3*
50
Vilnius
2008-2009
5*
120
Vilnius
2008
5*
110
Vilnius
N/D
N/D
300
Kaunas
2008
3*
160
Kaunas
2008
N/D
208
Kaunas
2008
4*
200
Kaunas
N/D
3-4*
250
Panevëþys
2009
N/D
N/D
Panevëþys
2008
N/D
50
Ðiauliai
N/D
3*
120
>1,621
Source: KOBA
47
Hotel Market
Report
States
Hotel Market Expectations




The number of both incoming and local travelers and hotel guests
is expected to increase further, thus influencing rising demand for
hotel services.
The positive impact on the number of foreign tourists is also likely due
to the expansion of Vilnius and Kaunas airports. The new passenger
terminal in the Vilnius Airport is already finalised, while that of Kaunas
Airport is expected to be ready in the first half of 2008.
Along with expansion of existing hotel chains, the new ones are
likely to enter the market.
Some real estate market players start to diversify their property
portfolios by stepping into the hotel market, e.g. Ogmios Centras
has undertaken several new hotel projects in Vilnius, Ðiauliai and
announced about planned developments in Panevëþys.
The hotel market remains one of the most complicated and specific
commercial real estate segments, as hotel business requires special
know-how and certain entrance barriers discourage developers to
enter this market.
LITHUANIA

48
Report
The number of investors interested in the Lithuanian property market and
looking for investments of different size has increased significantly as a
consequence of the country’s accession into the EU and impressive economy
growth leading to comparatively small risk. However, the economic outlook
has changed during 2007, influenced by both external circumstances (global
credit crunch, worsened Latvia’s and Estonia’s economic perspectives) and
internal factors (acceleration of inflation, increasing current account deficit,
etc.).
The market has already reacted to the changing situation driven by the
global credit turmoil. The investors whom are active come with a much larger
proportion of equity than before as the yields are rather low compared to
constantly increasing interest rates.
States
The investment market is
becoming more projectoriented. The shortage of
cash-flow deals has forced
the investors to look at development projects where
the yield is higher.
The investment market is becoming more project-oriented. The shortage of
cash-flow deals has forced the investors to look at development projects where
the yield is higher. On the other hand, now that the market is in the phase of
slowing down, a number of development projects for sale has increased. This
means attractive opportunities for those developers and investors who are
more experienced and dispose a larger proportion of equities.
The main objects of interest for institutional investors are located in the capital.
In 2007, Vilnius and Kaunas were the most active investment markets in terms
of transactions. However, during the last few years we observed a number of
transactions in secondary cities as well and believe that this trend will continue.
As a result of the strong competition among investors the secondary-city yields
are unexpectedly similar to those in the capital.
Main Investment Transactions in 2007
Project
Investor
Property
Type
SEB (SLB1, portfolio
of 26 properties)
Norfa (SLB1 portfolio
of 23 properties)
Homburg
Invest
Offices
Verdispar
Retail
BIG SC
Dainava SC
Auðra SC
Vingës Transsphere
Logistika
Metalco Baltic
(SLB1)
Invalda (portfolio of
5 properties)
Total
Deka
Immobilien
Investment
Parex Baltic
Real Estate
Fund II
Nude
Estates 2
City
Various
cities
Various
cities
Total Area,
sq. m
44,000
35,500
Retail
Vilnius
28,000
Retail
Kaunas
5,700
Retail
Utena
5,000
Verdispar
Logistics
VilniusKaunas
18,500
N/D
Logistics
Vilnius
3,400
Terra
Prospera
Logistics,
offices
Vilnius,
Kaunas
N/D
>140,100
sale and lease- back
Source: KOBA
1
After a significant decline over the last 4-5 years, the yield level has stabilized
in 2007. The yield compression to around the level of the Western European
49
LITHUANIA
Investment Market
countries indicates market becoming more mature and much less risky than
perceived just 4-5 years ago. However, we believe that the yields already
reached the turning point and are about to grow somewhat in 2008 due to the
changing market situation, as described above.
The investment market, previously dominated by capital inflows from
Scandinavian region, now receives interests from other countries too, namely,
the United Kingdom, the USA, Canada, Ireland, Germany, etc.
Office Market
The main objects of interest for institutional investors are located in the capital,
as the Vilnius office market remains the most active and the largest in volume.
The supply of fully developed objects for cash-flow deals is scarce. The main
transaction in the office segment in 2007 was the closing of SEB office portfolio
of 26 properties sale to Homburg Invest and leasing it back to the seller. With
stable labour market perspectives, promising high employment levels, the
demand for office space should continue to grow, making office properties
desirable investment objects.
Report
States
The yield compression
to around the level of the
Western European countries indicates market becoming more mature and
much less risky than perceived just 4-5 years ago.
However, we believe that
the yields already reached
the turning point and are
about to grow somewhat in
2008 due to the changing
market situation, as described above.
Retail Market
Investor interests cover the entire range of retail products – shopping centres,
super/hypermarkets, DIY stores. Some of the most notable transactions
in 2007 include BIG SC in Vilnius acquired by German Deka Immobilien
Investment and Norfa supermarket portfolio of 23 properties (sale and leaseback), purchased by Norwegian Verdispar, which currently is one of the most
aggressive and active market players of foreign origin. Generally, the demand
for attractive investment opportunities from domestic and international players
remains high.
Industrial/Warehouse Market
The industrial/warehouse market has been gathering pace in recent years and
was relatively active in 2007, also experiencing a few investment transactions.
In 2007, an acquisition of newly built Vingës Transsphere Logistika by Verdispar
was transacted. Several sale and lease-back transactions and smaller deals
were completed in 2007. We expect the number of transactions to increase,
chief factors behind being the volume of projects in the pipeline along with
favourable internal and external market conditions for further development of
industrial/warehouse market objects.
Generally, the demand for
attractive investment opportunities from domestic
and international players
remains high.
Hotel Market
Hotels in Lithuania are mainly operated by local companies, which usually
own no more than one or two establishments. International hotel chains lease
properties which are also mostly locally-owned. As a result of the constantly
increasing demand for hotels, the expansion of the existing hotel chains as
well as the arrival of new ones is an ongoing process which is expected to
continue for few years. Normally, international operators prefer to rent rather
than buy, and we therefore expect that developers will build more hotels for
leasing. This will naturally increase the number of investment opportunities.
50
LITHUANIA
Investment Market
Investment Market
Report
States
Investment Market Expectations



The underlying economic fundamentals suggest that the commercial
real estate market will continue to be a healthy market to the
investor.
A number of investment products for sale as well as the volume
of transactions are expected to increase due to relatively strong
commercial properties development pipeline and changing market
conditions.
A number of development projects acquisitions has already
increased and will keep the same direction.
The yields have already reached the turning point and will be
keeping the trend to increase slightly.
LITHUANIA

51
Legal Environment
Harmonisation of the legislative acts with those of the European Union and
the reform of the administrative system in Lithuania has contributed to the
protection of ownership, legal occupancy and investments.
Report
States
LITHUANIA
The transposition of the EU Acquis Communautaire into the Lithuanian legal
system has started long before 1 May 2004, the formal day of membership.
In the autumn of 2004, Lithuania was the number one country in the entire EU
by the scope of transposition of the EU directives. Thus Lithuania’s investment
law conforms to the European Union standards, with a new Company Law and
the Civil Code that took effect in 2001.
The real estate market in Lithuania is regulated following the generally
accepted principles of ownership immunity and protection of rights of a just
acquirer (possessor). In addition, the principles of equal treatment and equal
protection are the main principles of the investment law, meaning that both
Lithuanian and foreign investors are subject to equal business conditions, and
their rights and lawful interests are equally protected by law.
General Information
Any resident of Lithuania or a foreigner, either an individual or an enterprise,
may acquire buildings, flats and other premises in Lithuania. However, there are
certain limitations for direct land ownership. On the other hand, any individual
or enterprise, either a Lithuanian national or a foreigner, may freely establish
an enterprise in Lithuania. Enterprises established in Lithuania notwithstanding
who has their effective control are entitled to acquire real estate without any
specific restrictions.
Establishing a Lithuanian Property Company
Kinds of Enterprises
A company of limited liability is a common legal form in Lithuania (over 98%
of all Lithuanian registered enterprises), particularly used for investment in
real estate. Private limited companies with a minimum capital of approx. EUR
2,900 and up to 250 stockholders as well as public limited companies with a
minimum capital amount of approx. EUR 43,443 are the two alternatives for
companies.
The Lithuanian law designated to satisfy private interests has established a
number of other legal forms for private ownership and the use of real estate: a
personal enterprise, a general partnership and a limited partnership. With the
exception of limited partners in a limited partnership, personal enterprises and
partnerships are regarded as enterprises with unlimited liability.
All registration differences of enterprises of so-called ‘local’ capital and
of ‘foreign’ capital have been eliminated. The Register of Legal Persons
accumulates, protects and provides information on all Lithuanian enterprises
and other legal persons. An enterprise is considered to be established
only when this enterprise is registered with the Register of Legal Persons.
Consequently, any changes of incorporation documents and data of the
enterprise are effective only after they are registered with the Register of Legal
Persons. The basic information accumulated in the Register of Legal Persons
is available on the Internet.
52
Legal Environment
Opening and Closing an Enterprise
Report
States
LITHUANIA
The World Bank Report ‘Doing Business in 2008’ ranks Lithuania the 26th
economy in the world on the ease of doing business. Lithuania maintains
uncomplicated market entry procedures for enterprises.
Establishing an enterprise is quick and inexpensive. In principle, when the
registration process goes smoothly, two weeks is the average time schedule for
enterprise registration. The registration time and cost are, naturally, higher for
foreign owners, which have to provide certified translations of the paperwork.
As far as company exit is concerned, the system is in place and operates fairly
well. Lithuanian laws allow for a fairly easy exit of companies from the market
through liquidation. An average bankruptcy case lasts for about 1.8 years,
which is among the shortest periods in the region.
Collective Investment Undertakings
According to the latest amendments in legislation regulating collective
investments, from 1 March 2008 a possibility to incorporate not only openended investment funds and investment companies with variable capital, but
also close-ended investment companies and investment funds is established.
The law entitles real estate collective investment undertakings (hereinafter
– RECIU) to invest into land, buildings (premises), securities of real estate
companies, shares of other collective investment undertakings as well as
certain other assets. To protect at the maximum the interests of participants
in RECIU certain restrictions with regard to investment activities apply. For
instance, the RECIU are not allowed to lend, grant for guarantee or security
their assets for the third parties’ obligations.
Public Private Partnerships
Public Private Partnerships (PPP) projects are still a new practice in Lithuania
though Lithuania has a favourable legal environment for PPP projects. The new
Civil Code, effective since 2001, introduced the required legal regulations for
PPP schemes. The new Concessions Law came into power on 1 October 2003
and improved significantly the possibilities to apply concessions for various
projects in the public sector involving private capital. According to the law,
the areas where concessions can be applied are broad enough, including
energy, healthcare, tourism, public services and other sectors.
The most popular areas where concession is applied in Lithuania are: energy
sector, public services, real estate development, transport and environment.
As the Lithuanian public sector is under constant need for investments, and is
moving towards the more efficient management of resources and achievement
of greater value for money over the longer period of time, there is major demand
for increase of the number and extent of PPP projects in Lithuania.
53
Legal Environment
Investment into Real Estate
Report
States
Acquisition of Land and Buildings
LITHUANIA
Principally, there are no severe limitations to the direct acquisition of buildings
and land for development by foreigners. Foreign investors have the right to buy
or lease buildings for their commercial activities as well as lease or purchase
land plots for the construction of buildings.
Rights of foreigners to acquire land in Lithuania are established in the
Constitution of Lithuania and regulated by the special Constitutional Law on
Implementation of Paragraph 3 of Article 47 of the Constitution. With certain
exceptions of the entrails of earth (underground) and nationally significant land
areas exclusively belonging to the State, other land, inland waters and forests
may be acquired into ownership by foreigners as explained below.
The main requirement for foreigners wishing to acquire land in Lithuania
is meeting the criteria of origin – citizenship, permanent residency or
establishment in a European Union Member State, or a member state of
the Organisation for Economic Co-operation and Development (OECD) or
of the North Atlantic Treaty Organisation (NATO), or a state which is a party
to the European Economic Area Agreement, or states parties to the Europe
(Association) Agreement concluded with the European Communities and
their member states. Certain limitations for acquisition of agricultural land
and woodland apply during the seven-year transitional period (until 1 May
2011). During the transitional period only foreign individuals who have been
permanently residing and engaged in agricultural activities for at least three
years as well as foreign legal persons and other organizations that have
established in Lithuania their representative offices or branches will be allowed
to acquire agricultural land and woodland.
Foreigners that do not comply with the established criteria may lease the land
plots or use them based on other kinds of contracts.
As for buildings, flats, other premises and structures, there are no substantial
restrictions imposed by Lithuanian law in relation to acquisition of these types
of real estate by Lithuanians or foreigners.
It is noteworthy that for the sake of the acquirer, the Lithuanian law establishes
the connection between the land and buildings. Pursuant to the Civil Code of
Lithuania, if a land plot is subject to acquisition, it is presumed that the buyer
also obtains the ownership right to the buildings, constructions and facilities on
this plot of land, unless the sale-purchase agreement specifies otherwise. On
the other hand, by an agreement on sale-purchase of a building or other real
estate, the seller has to transfer to the buyer the rights to the land, on which
the building is located. In case the seller of the building is also the owner of
the land plot, the seller has to transfer to the buyer either the ownership right to
that plot of land or the right of the land lease or development. If the seller does
not own the land, on which the sold building is located, the buyer acquires the
right to use a respective part of the plot of land under the same conditions as
the seller.
54
Legal Environment
Privatisation
Report
States
LITHUANIA
Real estate may also be acquired following the special procedures of
privatisation of state and municipal property. Usually, investors in state and
municipal property are asked to assume certain contractual obligations, which
are mainly contributing to preservation and development of such property.
Privatisation may take the form of any of the following: public sale of shares,
public auction, public tender, direct negotiations or transfer of control of state
or municipality-controlled enterprises. Investors may negotiate settlement for
privatised property by instalments and, depending on the form of privatisation
and the privatised property, payments may be allocated for the period of
maximum five years. Under certain conditions, for instance, in case of major
investment in the leased state or municipal buildings or premises, such
premises may be later privatised according to an agreement on lease with an
option to purchase allowing the investor to settle for the real estate during the
lease period up to ten years.
The latest information about privatisation objects may be found in the
Information Bulletin on Privatisation (Informacinis privatizavimo biuletenis).
Privatised property is sold by privatisation institutions such as the State
Property Fund (in case state property is privatised) or municipal administration
(in case municipal property is privatised).
Financing
Real estate financing is widely available. Foreign and domestic capital providers
offer a wide range of real estate financing products, including first and second
mortgages, debt financing, financial leasing, support from specialized funds
and other. As a result, long-term financing is generally available in litas, euros,
and US dollars.
The Lithuanian financial system has been adequate to support the recent
strong economic growth and the businesses have free access to finance.
European Structural Funds
European Structural Funds will be one of the main drivers of the Lithuanian
economy over the coming years. Over LTL 23 billion (approx. EUR 6,7 billion)
of EU structural assistance from the European Social Fund, European Regional
Development Funds and Cohesion Fund is intended for Lithuania for 20072013. The primary purpose of the support is to rapidly improve conditions to
invest, work and live in Lithuania. Operational programmes with regard to the
mentioned support are committed to the development of human resources,
economic growth, promotion of cohesion and technical assistance.
Mortgages
Real estate mortgages are common collateral on loans issued by Lithuanian
banks for acquisition and development of real estate.
55
Real estate owners are free to mortgage their property in order to secure the
existing or intended undertakings and obligations arising with respect to land
transactions, commercial loans and other. It is noteworthy that the mortgaged
property remains with the owner and does not eliminate the owner’s rights to
use and dispose of the mortgaged property taking into account the rights of
the creditor.
Report
States
LITHUANIA
Legal Environment
Like other real estate transactions, contractual mortgage has to be certified
by a notary and registered. Divisions of Mortgages at the local courts are in
charge of the registration of mortgages that come into effect upon registration
in the Register of Mortgages. It takes three days to register a real estate
mortgage.
Lithuania is currently undergoing mortgage reform. Consequently, mortgage
registration procedures will be simplified in the near future so that to implement
one-stop shop principle for mortgage registration. Due to this, all actions
required for the execution of a real estate transaction (including the mortgage,
transmission of information to respective registers, etc.) will be performed by
notaries. Application to various institutions will be no longer necessary.
Sale-Purchase Agreements
For protection of owner interests, all real estate sale-purchase agreements
have to be signed in the presence of a Lithuanian notary public who verifies the
agreement for its legality as well as notifies the Real Property Register on the
concluded sale-purchase agreement of a particular property. Nevertheless,
the buyer for his own sake is responsible for applying to the Real Property
Register for registration of the ownership right to the property after the transferacceptance of the property takes place. Even if the registration of the change of
the owner in the Real Property Register is not mandatory, no further real estate
transactions would be possible as long as the registration is not completed.
The notary fees are differentiated according to the parties (individuals or legal
persons) and count as a percentage of the price payable for the purchased
property. For example, if the sale of real estate involves a legal person, the
notary fee will be 0.5% of the purchase price. In any case the notary fee may
not exceed LTL 50,000 (approx. EUR 15,500) per transaction.
Following the general principles of law, Lithuanian law is always applied to
international transactions concerning real estate located in Lithuania. The
transfer of real estate has to be documented by a statement of transferacceptance that is signed by the buyer and the seller.
A notarised agreement on sale-purchase of real estate is binding on the seller
and the buyer. However, the sale and purchase of real estate may be invoked
against third parties only in the event of being properly registered with the Real
Property Register.
Real Property Register
In the World Bank’s ‘Doing Business in 2008’ report, Lithuania ranks in the 4th
place among the top 10 countries with the most efficient property registration
procedures.
The Real Property Register contains all actual information on buildings and
land plots, rights to real estate and encumbrances thereof. One can receive
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information from the Real Property Register on changes in real estate,
mortgages on buildings or land plots including pledges of land lease rights,
imposed attachments, civil cases brought to the court regarding real estate as
well as registered agreements or decisions made regarding the legal status of
real estate, such as concluded lease agreements and equivalent, regarding
any particular piece of property.
Report
States
LITHUANIA
Legal Environment
Real property registration fee depends on the kind of the real estate and its
value and varies in a range of up to EUR 1,450.
Planning and Development
For the purposes of the construction, a plot of land has to be formed according
to a detailed plan. A detailed plan should also be prepared in case of change
of the purpose of the land, division or combination of the land plots and in
other cases specified by the legislative acts.
The organizers of the detailed planning are the directors of the municipal
administrations. However, municipalities are allowed to transfer the rights and
obligations of the organizer of the detailed planning to the owners or users of
the land plot.
In a detailed plan, the following requirements for usage and arrangement of
the territory have to be established: the general and specific use of the land
plot, the maximum height of the buildings, the allowed density and intensity
of construction on the land, the territory for construction, the conditions of
arranging engineering and communication network and the servitudes, if
required.
The detailed plans of the territories that do not have engineering infrastructure
might be prepared only upon preparation of a special plan for development
of the engineering infrastructure. However, the legal acts provide that such
special plan might be prepared simultaneously with the detailed plan of the
land plot.
There are no particular restrictions imposed on the construction activities of
foreign enterprises. According to the Law on Construction, both Lithuanian
and foreign persons can benefit from construction rights to the extent limited
by law.
The principal legal requirements include possession of the land on which
construction activities are to be undertaken. Land developers thus have to
own the land or use the land plot on other legal basis. The second step is
to obtain a planning permission for the building. The developer should also
be in the possession of a building permit that is issued based on complete
architectural plans to comply with the general area development plans. The
procedure for issuance of building permits has been simplified and is based
on a one-stop-shop principle. A building permit can be obtained from the local
municipality if the developer submits certain documentation. A building permit
is normally granted for a period of ten years.
The owner is entitled to use the newly constructed or reconstructed building
after it has been commissioned. The next step is to register the building in the
Real Property Register.
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Legal Environment
According to the laws, the user of a building has to supervise its condition and
perform technical supervisions. The user of a building is obligated to timely
repair, reconstruct the building and maintain the surroundings. The municipality
is entitled to control how buildings are used.
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LITHUANIA
Letting of Real Estate
Both Lithuanian and foreign nationals and enterprises and may let or lease
land and buildings. Real estate and land in particular may also be leased from
the state or local municipalities.
Any agreement for the letting of real estate is to be concluded in a written
form and no further approval by a notary public is required. Such agreement
may also be invoked in respect to third parties only upon its registration with
the Real Property Register. Upon a change of the landowner, the new owner
takes over the rights and obligations of the lessor in accordance with the lease
agreement registered with the Real Property Register.
With the exception of certain lease conditions specified by law, provisions of
the lease of real estate are negotiable. One of the lease conditions regulated
by law is that terms of state-owned land leases may not exceed 99 years (25
years for agricultural land) and other real estate may not exceed 100 years.
Commercial real estate leases typically have terms of three - five or more years.
A lessee, who has duly performed under the terms of a lease agreement, shall
be entitled to a pre-emptive right to renew the lease agreement and is entitled
to restitution if the lessor has failed to comply. A land lease agreement may be
terminated with a two-month minimum notice if the land is not for agricultural
purpose, or a three-month notice if the agreement of the agricultural land lease
is terminated. An agreement of building lease may be terminated under certain
circumstances as established by law and the contract.
Rent fee is often denominated in the litas by establishing a firm rate with
euro (LTL 3,4528 to EUR 1) or in euros if a foreigner is a party to the lease
agreement. The quoted rent fee generally does not include utilities and service
charges and the value added tax (18%) that are added on the rent fee.
Investment Protection and Guarantees
The investor rights and lawful interests are secured by the Law on Investments
and other regulations. An investor has the right to possess, use and dispose
of the assets he invested in and, upon payment of the taxes prescribed by
the laws of Lithuania, to convert the profit into foreign currency and transfer it
abroad without any restrictions. Damage inflicted upon the investor by unlawful
actions of state or local authorities is compensated according to the procedure
established by law.
Property is protected from expropriation following the generally accepted
principles, i.e. property may only be expropriated in extraordinary
circumstances with prompt compensation at the market value.
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Legal Environment
Foreign investors can defend their rights and lawful interests against Lithuania
in the courts of Lithuania, international arbitration institutions or other institutions.
In case of investment disputes, foreign investors also have the right to directly
address the International Centre for Settlement of Investment Disputes.
Report
States
LITHUANIA
Bilateral agreements on investor protection are already in place with Argentina,
Armenia, Australia, Austria, Belarus, Bulgaria, Belgium-Luxembourg Economic
Union, China, the Czech Republic, Denmark, Estonia, Finland, France, Georgia,
Germany, Greece, Hashemite Kingdom of Jordan, Hungary, Iceland, Israel,
Italy, Kazakhstan, Korea, Kuwait, Latvia, Moldova, Mongolia, the Netherlands,
Norway, Poland, Portugal, Romania, the Russian Federation, Serbia and
Montenegro, Slovenia, Spain, Sweden, Switzerland, Turkey, the Ukraine, the
United Kingdom, the USA, Uzbekistan, Venezuela and Vietnam.
The Agreement on Use of Local Currency and the Agreement on Legal
Protection for Guaranteed Foreign Investments between the Multilateral
Investment Guarantee Agency (MIGA) and Lithuania are in force.
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Taxation
Lithuania’s tax regime is generally business-friendly. The statutory corporate
income tax rate is only 15% and is among the lowest in the EU, labour taxation
is in line with the similar countries, and the overall tax burden is one of the
smallest among the EU countries.
Report
States
LITHUANIA
The overview provided below focuses on the Lithuanian taxes and their aspects
relevant to the real estate owners, lessees and developers and is not aimed at
providing a thorough coverage of the Lithuanian taxation framework.
There are no taxes on investment in Lithuania.
General Information
In terms of taxation, there is no difference between investments in partnerships
and limited liability companies because Lithuanian partnerships are not
transparent for tax purposes and, like companies, are subject to corporate
income tax.
In addition, permanent establishments of foreign enterprises in Lithuania are
normally subject to the same tax requirements as other Lithuanian enterprises
with certain exceptions (allowed deduction of administrative expenses of the
head office, and etc.). A foreign enterprise has a permanent establishment in
Lithuania when such enterprise:
 Engages in business activity in Lithuania of a permanent nature either
itself or through a dependent agent, or
 Uses a construction site, an assembly or installation object in Lithuania, or
 Operates a natural resource exploration or extraction site.
As mentioned previously, the most common enterprise used to invest in
Lithuanian real estate is a private limited company, hereinafter referred to
as a Lithuanian Property Company. No capital duty is payable on initial or
subsequent capital contributions to the statutory capital of a limited liability
company.
Financing of a Lithuanian Property Company
Acquisition of real estate in Lithuania might be financed by a mix of a loan and
equity or by a loan from a bank, or equity only.
In the event bank loans are chosen for financing the real estate acquisition, the
interest incurred on the loan financing is generally treated as tax deductible
expense, unless subject to thin capitalisation and transfer pricing rules (see
below).
Withholding Tax on Interest Payments
Interest income derived by the foreign entities is subject to a Lithuanian
withholding tax of 10%. It should be noted that under the amended provisions
of the Interest & Royalties Directive (amended by the Council Directive 2004/76/
EC of 29 April 2004), Lithuania may not levy withholding taxes on payments of
interest as well as royalties to the associated EU entities higher than 10% till
2008 and 5% in 2009 – 2010. In case the international treaties provide for more
beneficial tax rates, the latter apply. Lithuania has concluded 44 bilateral treaty
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Taxation
on avoidance of double taxation. All the treaties are based on the OECD/UN
model agreement and are effective with the following countries:
Germany
Great Britain
Greece
Hungary
Iceland
Ireland
Israel
Italy
Kazakhstan
Latvia
Luxembourg
Malta
Moldova
Netherlands
Norway
Poland
Portugal
Romania
Russia
Singapore
Slovakia
Slovenia
Spain
Sweden
Switzerland
Turkey
Ukraine
USA
Uzbekistan
LITHUANIA
Armenia
Azerbaijan
Austria
Belarus
Belgium
Bulgaria
Canada
China
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Georgia
States
Source: Ernst & Young
Thin Capitalisation Rules
Starting from 1 January 2004, the principle of ‘thin capitalisation’ is applied
under Lithuanian tax legislation. Following the Lithuanian thin capitalization
rules, interest on shareholder and related party loans is deductible, however,
interest on controlled debt as well as currency exchange losses on controlled
debt are not deductible.
A controlled debt exists when there is debt to a controlling lender, and debt
to equity ratio exceeds 4:1 (only the exceeding part is treated as controlled
debt). The ratio is computed as of the end of the relevant tax year, but the
equity does not include the result for that year.
A controlling lender is one that controls, directly or indirectly, either more than
50% of the shares of the borrower alone, or more than 10% alone and more
than 50% together with related persons. Members of the group of a controlling
lender are also controlling lenders.
If the borrower can prove that the borrowing occurred under arm’s length
conditions, thin capitalisation rules will not be applied.
Transfer Pricing Rules
Lithuanian legislation provides for an arm’s length principle to be followed in
all transactions. The State Tax Authorities have the right to adjust transaction
value between associated parties and/or to describe income anew. The
following methods are approved by the Ministry of Finance, and could be used
for assessing the market price in transaction between associated parties:
 Comparable independent prices;
 Resale price;
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Taxation
 Cost plus;
 Profit sharing;
 Net margin of the transaction.
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LITHUANIA
Lithuanian entities, which (i) under the law submit annual financial accounts
and (ii) the sales proceeds of which exceed LTL 10,000,000 (approx. EUR
2,900,000) in the year prior to the year when the transaction with associated
parties took place, are obliged to keep documentary evidence regarding the
transaction value. The procedures for documentary evidence are similar to
OECD transfer pricing guidelines.
The acquisition of real estate in Lithuania is not subject to real estate transfer
tax or any stamp duties. Only ownership registration fees of a maximum of
approx. EUR 2,330 are incurred.
VAT
The transfer of real estate is generally exempt from VAT. In the event a property
purchase is executed by VAT-registered persons in Lithuania, the parties may
agree that the seller would charge VAT of 18%, i.e. a taxable person has a
right of option. Once taken, this option requires to be applied for 24 months to
all sales of real estate to purchasers registered for VAT purposes.
The law provides for several exceptions when the seller has to charge VAT of
18% in all cases, i.e. sale of buildings and structures before their commissioning
or within two years following their commissioning or material improvement (so
called ‘new’ buildings). No VAT is payable for the transfer of land unless the
land plot is designated for the construction of buildings or is purchased along
with ‘new’ buildings on it.
In case the Lithuanian Property Company is not a VAT payer at the moment
when it is transferred the right to dispose of the assets as owner but gets
registered later, the special procedure for VAT deductibility is available. The
procedure allows deducting a portion of input VAT, which reduces as the time
gap between acquisition and registration extends.
However, if the Lithuanian Property Company intends performing both taxable
and VAT exempt activities, only a certain percentage of the input VAT incurred
upon the acquisition is deductible based on the ratio of taxable sales to all
sales (VAT pro-rata computation).
The initial VAT deduction should be further adjusted for 10 consecutive years
in case of real estate (5-years period applies for movable property).
Therefore, a Lithuanian Property Company should consider registering for VAT
purposes in Lithuania before acquisition of real estate in order not to trigger
non-deductible VAT expenses. The procedures approved by the State Tax
Authorities provide for a 15 working days period after a registration request is
submitted to receive a VAT registration number.
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Taxation
Land Lease Tax
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States
LITHUANIA
Land lease tax is paid by individuals and enterprises leasing land from the state
and amounts to 1.5% – 4% of its value per year. The council of the municipality
on the territory where state plots of land are used determines the exact rate of
the tax. It may also reduce the tax, or provide a relief from tax payment.
Land Tax
Land tax is paid by landowners. The annual tax rate amounts to 1.5% of the
cadastral value of the land.
Real Estate Tax on Buildings
According to the Law on Real Estate Tax Lithuanian and foreign entities
owning real estate located in Lithuania also individuals using real estate for
business or individual activities with several exceptions or given for use by
legal persons for a period longer than 1 month or for an unlimited period are
obliged to pay real estate tax.
The rate of the real estate tax is 0.3% – 1% of the taxable value of the real
estate. The exact rate of the tax is determined by the council of the municipality
of the territory where the real estate is located.
Taxable value of real estate is an average market value, which, according to
the type of the property, is either estimated by mass valuation, i.e. a process
of valuation of similar real estate is executed and a common valuation report
is presented, or, in some cases, by a recoverable value method. However, in
certain cases a tax payer can apply for an individual valuation. If the value of
the individually valued real estate differs from the value defined in the course
of mass valuation by more than 10%, the tax payer is allowed to use the
individually determined value for the real estate tax base.
Both individuals and legal entities should provide an annual real estate tax
return to the State Tax Authorities not later than 1 February of the next year.
Only legal entities have to make advance payments equal to ¼ of annual tax
amount until 31 March, 30 June and 30 September.
Collective Investment – Basic Aspects
The latest amendments of the Law on Collective Investment Undertakings,
coming into force 1 March 2008, enables the establishment of new types of
corporate real estate investment vehicles eligible to favourable tax regime
under the Law on Corporate Income Tax.
Since the Law on Collective Investment Undertakings does not provide for the
new form of entity, Lithuanian investment company is incorporated as a joint
stock company under the Lithuanian company law. However, the company
is required to have a special collective investment company or closedended investment company status and license from the Lithuanian Securities
Commission.
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The investment company is allowed to invest into the following real estate
assets: land, buildings and (or) premises constituting separate real estate
objects, registered in the name of the investment company, and other tangible
asters that are necessary for the operation of the real estate. These assets
must consist from at least 4 separate real estate objects. Also the investment
company is allowed to invest into real estate objects in development, if their
development is to be finished during an acceptable timeframe.
States
LITHUANIA
Taxation
Tax Treatment at the Level of Real Estate Investment Trust
Current income
Capital gains
Withholding tax
- Investment income (e.g. rental
income, capital gains upon disposal of
property and shares) is tax-exempt
- Dividend income or any other income
from distributed profits and other
business income subject to 15% profit
tax
- Participation exemption might apply
Tax-exempt
In principle
creditable
Tax Treatment at the Domestic Shareholder’s Level
Corroprate shareholder
Individual shareholder
- In principle final
withholding tax of 15%
- Participation exemption
might apply
- Generally, capital gains
are subject to 15% income
tax
- Final withholding tax of
15%
- Generally, capital
gains are subject to 15%
income tax
Withholding tax
Creditable
Tax Treatment at the Foreign Shareholder’s Level
Corroprate
shareholder
Individual
shareholder
- Final withholding tax of
15% on dividends (may
be reduced to 0%)
- Capital gains are taxexempt
- Final withholding tax
of 15% on dividends
- Capital gains are
tax-exempt
Withholding tax
- Local participation
privilege available
- Treaty benefits
available
- Parent Subsidiary
Directive applicable
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Taxation
States
Tax Treatment of the Foreign Real Estate Investment Trust and its Domestic
Shareholder
Rental income shall
be subject to 10%
withholding tax
Corporate
shareholder
- Dividends are
subject to 15% profit
tax (may be reduced
to 0%)
gains are subject to
15% profit tax
Individual
shareholder
- Resident income
tax of 15% on
dividends
gains are subject to
15% income tax
LITHUANIA
Foreign real estate
investment trust
Letting of Real Estate
Corporate Income Tax – Basic Aspects
Lithuanian Property Companies and permanent establishments of foreign
companies are subject to Lithuanian corporate income tax at a rate of 15%.
The tax rate of 13% is enjoyed by entities if their average number of employees
does not exceed 10 and income during the financial year does not exceed LTL
500,000 (approximately EUR 145,000).
Under the Law on Corporate Income Tax, the taxable income is calculated
by subtracting non taxable income (e.g. after-tax dividends, revenues from
revaluation of fixed assets under certain circumstances, payments received
from Lithuanian insurance companies within the amount of incurred losses,
etc.) from the accounting profit, taking into account non deductible expenses
and deductible expenses of limited amounts.
Corporate income tax base calculation:
Profit before tax
- Non taxable income
+ Non deductible expenses
+ Deductible expenses of limited amounts exceeding the limit
+ Other corporate tax increasing items
- Other corporate tax reducing items
= Tax base
- 15 percent corporate income tax
= Profit after tax
Deductible expenses are allowed if they are incurred during the usual business
activity, provided that documentary evidence is presented. Deductible
expenses of limited amounts are allowed only if they do not exceed a certain
limit and consist of the following: depreciation and amortization, business trips,
representation expenses, and similar. Sponsorship expenses reduce taxable
profit twice, provided it does not exceed 40% of the taxable profit.
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Non deductible expenses include dividends, write-offs, revaluations, penalties,
deductible expenses of limited amounts in excess of the limit, costs incurred
outside of the usual business operations or inappropriately documented costs.
Losses incurred in transactions with related persons may not be deducted from
taxable income if the market price was not applied. Payments to tax havens
may be deducted only in case the taxpayer can prove that certain conditions
evidencing the economic basis of the transaction were met.
States
LITHUANIA
Taxation
Other taxes (e.g. real estate tax, etc.) are deducted from taxable income.
The object of depreciation (amortization) may be a certain unit of assets
or a group of identical units. These depreciation methods are applied for
corporate income tax purposes: straight-line, accelerated (applicable only to
certain types of assets) and production (introduced recently, rarely used, not
possible for real estate). The selected depreciation method is applied to all
the assets of the same type and may be changed in certain cases only. The
depreciation rates depend on the useful life of the asset. Below please find the
table summarizing the depreciation rates of certain groups of assets. Please
be aware that the law does not restrict choosing a longer depreciation period
for corporate income tax purposes.
Depreciation
Old (Used) buildings
Groups of
assets
Office
buildings
Retail
industry
buildings
Logistics and
hotels
Residential
buildings
New buildings (i.e.
completed or renovated
after 1 January 2002)
Rate
Straight line
or decliningbalance
Rate
Straight line or
declining-balance
15
years
Straight line
8 years
Straight line or
declining-balance
15
years
Straight line
8 years
Straight line or
declining-balance
Straight line
8 years
Straight line
20
years
Straight line or
declining-balance
15
years
20
years
Straight line
Land is not depreciated for tax purposes.
Losses may only be claimed as tax deductible for Lithuanian corporate income
tax. It is thus possible for Lithuanian companies and permanent establishments
of foreign investors to carry forward losses for five years. The main exception
to this rule is losses incurred as a result of disposal of securities or derivative
financial instruments that are calculated separately and may be carried
forward for three years by deducting them from the future gains from disposals
of securities and/or derivative financial instruments. It is not possible to carry
back losses in Lithuania.
Entities not resident and not constituting a permanent establishment in
Lithuania are subject to Lithuanian corporate income tax at a rate of 10% on
rent and lease payments.
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Taxation
Individual Income Tax
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LITHUANIA
Income from the lease of real estate located in Lithuania derived by either
Lithuanian residents or non-resident individuals is treated as income sourced
in Lithuania and taxed at a rate of 15%.
On the other hand, if a Lithuanian resident exercises individual activities of real
estate lease, income derived from lease is also taxed at a rate of 15%, or 24%
if deductible expenses are made.
VAT
Letting and leasing of real estate is generally VAT exempt. However, VAT
is payable with regard to the provision of accommodation in hotels, motels,
and camping sites or in sectors with a similar function and letting or leasing
of residential premises for two months or less. VAT also applies to letting of
permanently installed equipment as well as lots, garages or other sites for
parking or keeping of any kind of vehicles.
However, a VAT-registered person has a right of option for charging 18% VAT
on the letting or leasing of real estate, which is generally exempt from VAT,
but only in the case where the property is let or leased to other VAT-registered
persons. Once taken, this option applies for 24 months to all lettings or leases
granted by the same VAT payer to all tenants registered for VAT purposes. The
VAT payer should inform the State Tax Authorities on this option in accordance
with the procedure approved by the State Tax Authorities.
Charging VAT on lease of real estate is a normal practice in Lithuania, if leased
to a VAT-registered person, and secures input VAT deduction.
On the other hand, in the case where the real estate is let or leased to a
person, who is not registered for VAT purposes (e.g. individuals), the VAT
payer has no right to charge 18% of VAT.
Moreover, it should be noted that a Lithuanian Property Company registered
as a VAT payer should document a supply of goods and services, including
letting or leasing or real estate, with a VAT invoice.
A VAT invoice must be issued without delay upon the supply of goods or
services; however, in cases of long-term services, i.e. services, which are
supplied over a certain continuous period (letting, telecommunications, etc.)
as well as in cases of long-term supply of electricity, gas, heating and other
types of energy, a VAT invoice may be issued for the whole amount of services
rendered or goods supplied throughout the month. A VAT invoice should be
issued not later than by the 10th day of the month following the month, during
which the services or goods were supplied. The taxable event shall be the
moment when the invoice was issued.
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States
Tax Incentives
LITHUANIA
Tax incentives are a normal practice in the countries of the Central Europe
for attracting foreign investors. Different forms of tax incentives are usually
provided:
 Reduction of taxable income
 Reduction of tax rate
 Tax relief for a certain period
Tax Incentives
Country
General incentives
Free economic zones
No land, real estate taxes
Lithuania
Application of favourable
depreciation methods
Municipality has a right to
reduce / waive land and
real estate taxes
No corporate tax for the first 6
years
50% reduction of corporate tax
for the next 10 years
Extensive 0% VAT application
Latvia
Double rate of
depreciation of fixed
assets with regressive
method is allowed for tax
purposes.
Depreciation amount
increasing coefficients
with respect to new
production technology
equipment.
Tax losses can be carried
within the group
80% reduction of corporate tax
or property tax for companies
in free economic zones
In some cases wider 0% VAT
application possible
Estonia
No special incentives
applied. Resident
companies and
permanent establishments
of non-resident
companies do not have to
pay corporate income tax
upon profits retained.
Extensive 0% VAT application
in free zone and free
warehouse
In Lithuania, there are two free economic zones – in Klaipëda and Kaunas,
where tax incentives apply for local and foreign investors.
Klaipëda Free Economic Zone is an area occupying 205 hectares located in a
strategic position of the city of Klaipëda (3 km from the port of Klaipëda). The
first development stage covers 85 hectares and has all essential infrastructures
in place.
At present, Kaunas Free Economic Zone, covering 534 hectares, is developing
rapidly.
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Sale of Real Estate
Report
States
Capital Gains
LITHUANIA
A non-resident company selling real estate in Lithuania is liable for corporate
income tax at a rate of 10%. The tax is levied on income without taking expenses
into account. Afterwards a non-resident company may apply to the Lithuanian
State Tax Authorities for recalculation of tax on capital gains taking into account
the acquisition value of the real estate. This provision is applicable only in case
a non-resident company sold real estate to a permanent Lithuanian resident,
a Lithuanian enterprise or permanent establishment.
A Lithuanian Property Company and a permanent establishment of a foreign
company are subject to a standard corporate income tax of 15% or 13%
for capital gains on the sale of real estate. Capital gains and losses are
calculated by subtracting the acquisition costs and related expenses from
sales proceeds. Gain (loss) received from all sources other than transfer of
securities and derivative financial instruments are viewed as operating profit or
loss. Gain (loss) from transfer of securities and derivative financial instruments
constitutes a different tax base, although the tax rate is the same. Capital
gains on the sale of shares of the company registered in an EEA country or
another tax treaty country, however, may be exempt from tax if all the following
conditions have been met:
 Shares have been held for at least 2 years;
 At least 25% of the company’s shares have been held throughout that
period.
Individual Income Tax
In case a piece of real estate was held in ownership for three years after its
acquisition, capital gains from the real estate sale are not taxed at all, except
in cases when a person engages in individual activities. In other cases the
capital gains derived by an individual, either resident or non-resident in
Lithuania, from the disposal of the real estate are taxed at a rate of 15%.
In case a buyer of the real estate is a Lithuanian enterprise or a permanent
establishment of a foreign enterprise, the buyer has to withhold the individual
income tax from the total purchase price and transfer it to the state budget. In
such a case the seller has the right to apply to the State Tax Authorities for an
adjustment of income tax on the property sold, i.e. to have income tax adjusted
by deducting the expenses from the proceeds derived. Income tax is adjusted
where supporting documents are produced in respect of such expenses.
VAT
The transfer of real estate is generally exempt from VAT. However, the
Lithuanian Law on VAT provides that the sale of ‘new’ buildings and structures
or their sections is not exempt from VAT and is taxed at an 18% VAT rate. It is
considered that:
 A new building or structure is a building or structure prior to its
commissioning, also a commissioned building or structure for a period of 24
months following its commissioning or following its material improvement;
 A new section of a building or structure is a section of a new building or
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Taxation
structure, as well as a newly built section of an old building or structure – for a
period of 24 months following its commissioning.
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LITHUANIA
However, a VAT-registered person has a right of option for charging 18% VAT
on sale of real estate, which is generally exempt from VAT. This option can
be enjoyed in the case the property is sold to a VAT-registered person in
Lithuania. Once taken, this option requires to be applied for 24 months to all
sales of real estate to purchasers registered for VAT purposes.
The transfer of land is also generally VAT exempt, unless the land is considered
as a land under ‘new’ buildings or aimed for development. The land falling
under the above exception is subject to 18% VAT.
In case real estate is sold without VAT, the obligation of adjusting the initial
VAT deduction should be considered, i.e. VAT deduction must be adjusted in
the VAT return by increasing the amount of the VAT payable into the budget
accordingly or reducing the VAT amount refundable from the budget by the
deducted portion of the input VAT attributable to the period remaining until
the end of the time set for adjustment of VAT deduction (i.e. 10 years for real
estate).
Profit Repatriation
Taxation of Dividends
According to the Law on Companies, dividends can be distributed within one
month after the distribution of profit by the General Shareholders’ Meeting.
The General Shareholders’ Meeting should be convened within 4 months after
the end of a financial year. It is prohibited by the Law to pay dividends in
advance.
Although cash funds accumulated at the Lithuanian Property Company could
be sufficient to repatriate profit to the holding company, under the Law on
Companies, dividends can be distributed only if the profit for distribution (after
statutory reserves are formed) is positive.
Lithuania levies a 15% withholding tax on dividend distributions both to
Lithuanian and foreign shareholders. Following participation exemption
rules, withholding tax on dividend distributions does not apply if the foreign
shareholder holds an investment of more than 10% in the Lithuanian Property
Company for at least twelve consecutive months and the profit distributed is
taxed at a standard rate of corporate income tax.
Withholding tax at a rate of 15% also applies for the dividends received
by individuals, residents or non-residents of Lithuania. The tax should be
calculated, withheld and paid to the budget by the Lithuanian Property
Company.
70
Taxation
Liquidation and Return of Capital
Report
States
LITHUANIA
In the event the enterprise in liquidation transfers assets to its shareholders,
this type of distribution is treated as a sale of assets at their market value.
Therefore, the shareholder is taxed 15% on the capital gains, which are
calculated as the market value of assets less the acquisition value of shares.
On the other hand, cash transferred to the shareholders as a result of a
decrease in authorised share capital is treated as a distribution of profits, i.e.
dividend payment, to the extent when such payment exceeds monetary and
non-monetary contributions into a Lithuanian enterprise.
Sale of Shares in a Lithuanian Property Company
Any disposal of shares of a Lithuanian company by a non-resident individual
or a foreign company does not fall within the scope of income sourced in
Lithuania and consequently is exempt from taxation under Lithuanian tax
legislation.
Income tax on a capital gain, derived from the sale of shares by an individual
resident of Lithuania is taxed at a rate of 15%, with the exception of (i) shares
acquired before 1 January 1999, or (ii) shares held for more than 366 days,
if the individual was a minor shareholder (holding not more than 10 % of the
corporation’s shares) during three years prior to a tax year when the shares
are sold.
Since 1 January 2007 capital gains on the transfer of the shares of the
company subject to profit or similar tax and established in a state of the
European Economic Area or a state that concluded and applies a treaty on the
avoidance of double taxation with Lithuania are tax exempt provided that the
Lithuanian company transferring shares held more than 25% of shares for not
less than 2 years. This amendment to the Lithuanian tax legislation is aimed at
stimulating the establishment of holding companies in Lithuania.
71
Report
States
Office Market
After the independence, all three Baltic countries have experienced rapid
development in a number of economic areas. The office market development
began simultaneously in all three countries by transforming former apartments
in the downtown locations into the office space. As the combined area of the
Riga Old Town and the city centre is comparably larger than those in Vilnius
and Tallinn, the initial base of the market formation was different and had a
major impact on further developments. Until quite recently, most of the Riga
office market was represented by old type renovated offices located in the Old
Town and downtown areas of Riga, as well as old-type reconstructed industrial
buildings remodelled for office-use located outside the city centre.
Report
States
Supply and Demand
Currently only a few operating office buildings in Riga can be attributed to
the A-class office segment – Valdemara Business Centre, located in the
downtown, and some years ago built office building Saules Akmens, located
on the left side of the river Daugava in Kipsala. Due to location, outdated
interior installations, layout of premises, and parking facilities, the majority part
of the offices in Riga can be attributed to either B+ or B-class premises. As of
today the total stock of modern premium and high class offices in Riga is close
to 400,000 sq. m.
LATVIA
The major demand today is for a high quality product such as modern premises
with an advantageous location, preferably in the city centre, with good parking
possibilities as a mandatory requirement. In terms of the professional and
overall building management system, the situation lately has improved – most
of new office buildings are operated by professional real estate management
companies however large part of offices (mostly those previously built) still are
operated by the owners or developers themselves.
Large companies requiring more than 500 sq. m now tend to have premises
built-to-suit, as most of the office premises within the Riga office market have
outdated interiors, including a lot of corridor space and small offices. Because
of the strict regulations of the Cultural Heritage protection institutions, the
reconstruction and remodelling of buildings located in Riga’s downtown are
almost impossible. Another problem is parking space, which is very limited in
central Riga and causes a real problem for both the tenants and their clients.
Today, prices range from 50 to 150 EUR per month for a single parking place,
which is not necessarily located next to the entrance of the office building. The
above factors are major reasons for relocation of large companies outside the
city centre to the built-for-suit premises. Unibanka, Krajbanka and Hansabanka
office buildings could be good examples of the practice.
73
Report
Office Market
States
Main Office Buildings (over 10,000 sq. m) in Riga
Location
Total Area, sq. m
Saules Akmens
Office Name
Balasta Dambis 1
38,000
Barona kvartâls
Cçsu Str. 31
30,000
Mukusalas Str. 41, 41b
22,000
Mukusala Business Centre
RD Centrs
Maskavas Str. 240
18,000
Brîvîbas Str. 149/151
13,000
Valdo Office Centre
Bauskas Str. 58a
12,000
Valdemara Business Centre
Valdemâra Str. 21
12,000
Ropaþu Str. 6
10,800
Skanstes Str. 13
Unicentrs, Riga region, Kekava
district
10,000
Ziemeïu Vârti
LMT office building
Office building
Unibanka office building
The coming years 2008 2010 will be very active in
the office segment, as many
office projects are announced and shall be delivered
to the market during this
period.
10,000
Source: KOBA
Nearly 100,000 sq. m. of modern office space were delivered in 2007.
Unity Business Center, Duntes Bijori, Duntes Nami, Latvijas Krâjbanka
administrative buildings are among the major newly delivered office buildings
in 2007.
Pipeline Projects
LATVIA
The coming years 2008 - 2010 will be very active in the office segment, as
many office projects are announced and shall be delivered to the market
during this period. However, it has to be kept in mind that due to the tightened
credit policy of banks and current economic situation in Latvia promises of
developers might not be fulfilled as expected.
Main Office Pipeline Projects in Riga
Project Name
Location
Planned Delivery Date
Z-Towers
Daugavgrîvas Str. 9/11
2008
Upmalas Offices
Bauskas/ Mûkusalas
2008
Rietumu Capital Centre
Vesetas Str. 7
2008
Berzins Office Building
Mûkusalas Str. 41B
2008
Business Centre 224
Brîvîbas Str. 224
2008
SWH Business Centre
Skanstes Str. 13
2008
Office Centre
Katlakalna Str. 9
2008
Renovated Offices
Zemitânu Str. 6
2008
Forburga Office Centre
Ûnijas Str. 8
2008
Dzelzavas offices
Ulbrokas/ Dzelzavas Str.
2008
Office building
Gunâra Astras Str. 1c
2008
Magnat Business Centre
Renovated offices
Valdemâra pasâþa
Business centre Ganîbu
dambis
Helio - II
Daugavgrîvas Str. 83/89
2008
A.Briâna Str. 9
2008
Ganîbu dambis 31
2009
Territory of Riga Airport
2009
Alojas Business Centre
Valdemâra Str. 62
2009
Mûkusalas Office centre
Mûkusalas Str. 72a
N/D
Renovated offices VEF
Brîvîbas Str. 214, 214b
N/D
Office Centre TOMO
Raunas Str. 44b
N/D
Source: KOBA
74
Office Market
In general, the clustering in the Riga office market has not been observed
until now, but we can clearly identify areas with most of the developments
concentrated.
One of the fastest developing new office areas is Skanstes Str. and its
immediate surroundings. The street is very close to downtown, with good
access possibilities and a great potential for development. This area
resembles the recent developments on Krasta Str., which rapidly has changed
from green area into an active retail/ business district and continues to attract
new developments. Due to its excellent location (proximity to the city centre
and good accessibility) Krasta Str. is now experiencing a second wave of
development. Some years ago new shops were built here, and now new office
buildings are being developed as well. Ulmaña Str. should also be mentioned
as an area that primarily attracts modern built-to-suit or owner-occupied
premises.
Report
States
Despite a significant increase of modern office
premises over the last few
years as well as the future
projects mentioned above,
the supply of desired office
space is still not sufficient
enough.
LATVIA
Other promising areas are located on the opposite side of the river Daugava
in Kipsala and Kliversala. A development of seven new multi-storey buildings
within the next few years is planned near the Hansabanka office (Saules
Akmens) and the existing old building of Presses Nams. In approximately
two-to-three years Da Vinci complex consisting of 25-to-27-storey residential
buildings linked to the three (3-storey) office and retail buildings will be
opened. The so-called Z-Torñi, a project consisting of two separate towerbuildings with a total rentable area of around 100,000 sq. m, will be located
near Zunda Channel. The highest of the towers (120 m) will provide A-class
office premises, while the other will be given over to a high class hotel. Another
office building in this area is planned to be built on the corner of Balasta
Dambis and Ranka Dambis.
Smaller companies with no need to be centrally located tend to move out of
Riga downtown. Most popular directions are Purvciems, Pïavnieki (north-east
of Riga) for example Ulbrokas street, also Íekava, Mârupe, Ulbroka, Olaine
parish. It is common that such office premises are planned together with
industrial/ warehouse premises.
Rents and Vacancy
Despite a significant increase of modern office premises over the last few
years as well as the future projects mentioned above, the supply of desired
office space is still not sufficient enough. This is reflected on the rental levels,
which are among the highest in the Baltics. Currently, A-class premises are
rented from 20 up to 25 EUR/sq. m/month, B-class premises from 15 up to 18
EUR/sq. m/month.
As the supply of new modern premises in advantageous locations with good
parking facilities at the moment remains limited whilst the demand for such
premises is constantly growing, vacancy in the above-described offices is
almost non-existent. On the other hand, vacancy is a common thing in old
style offices where rents are comparably overestimated, and it can even reach
more than 10 % of the building’s area. Rent reduction almost always means
decreasing vacancies in all office buildings. However, owners sometimes tend
to keep vacant premises rather than reduce the rent.
75
Office Market
Report
States




Significant increase in supply will be recorded in 2008-2010 in
Riga.
Office clustering in the certain areas of Riga will appear.
Rents of high-class premises in the nearest future will remain
stable.
Vacancy level in the modern premises will remain low.
Rental levels and occupancy in low quality premises will decrease.
LATVIA

76
Retail Market
Impressive economic growth of Latvia, increasing real income and growth of
private consumption strengthened domestic demand and provided a boost
to the retail market. Most active central streets with large pedestrian flows are
overly used by fashion retailers, while less active streets are providing space
for different service providers - travel agents, real estate companies, cafes
and restaurants, etc.
Report
States
Riga, being an industrial, political and cultural centre of Latvia, inhabits more
than 722,000 residents, or more than 1/3 of total countries’ population. This
makes the focus of retail to be in Riga, where unemployment level is the lowest,
and consumer spending power is relatively the highest in the country.
Latvian retail market can be classified into high streets, shopping centres and
super/hypermarkets, in addition to which a new for Latvian market concept
- retail park/shopping park - is coming with the new retail projects.
Retail Streets in Riga
LATVIA
Traditionally, Riga’s major retail streets are located in or near the Old Town
and the city centre. Most active retail areas in the downtown of Riga are
located on Terbatas and Barona streets between Elizabetes, Lacplesa and
Gertrudes streets. Because of insufficient supply of retail premises on the
most demanded retail streets, the active retail area continues to shift further
to Stabu and Matisa streets. Valnu, Kalku and Audeju streets are considered
to be the busiest and the most demanded retail area in the Old Town. The
Old Town retailing is featured by retail streets mostly exclusively traffic-free.
Entrance for cars to the Old Town is charged. Parking is also a severe problem
in the Old Town as well as in the city centre and is charged. Moreover, the Old
Town has its limitations, with only a few shops able to offer spacious premises
suitable for retail, although undergoing reconstruction of the old buildings for
commercial purposes can be observed. Due to these factors the demand for
retail premises in shopping centres remains high and vacancy rate in shopping
centres almost equals to zero percent.
Despite impressively increased rent levels during 2007, which hit rent level
of 90 EUR/sq. m/month (70 – 75 EUR/sq. m/month on average) for retail
premises on the busiest retail streets, international retailers still chose to open
their flagship stores in prime locations on high streets. This year NewYorker
opened their flagship store on Kalku Street in the Old Town and Hugo Boss
– on Terbatas Street. International brands like Mango, ZARA, Esprit, Max
Mara, Emporio Armani and Gerry Weber keep open their outlets on Barona,
Brivibas, Elizabetes and Terbatas streets, as well as look for retail space in
well chosen shopping centres proved to be successful in the Riga retail market
(ZARA opened in Spice and Alfa, Hugo Boss Orange – in Domina Shopping).
However a number of well known international brands still cannot enter Latvian
market due to insufficient supply of appropriate retail space.
77
Report
Retail Market
States
Rents
a
Hanzas iel
Ha
nz
Dz
as
ie
la
im
ie
ta
Lâ
èp
iz
et
es
ða
ie
ta
i
Br
la
ie
as
b
vi
ESPLANADE
pa
ka
bu
lv
rb
ar
is
Tç
s
Terbata
K.
as
bu
M
.
as
tm
a
âr
Ja
a
Satekles
as
LATVIA
a
iet
ij
ar
M
a
iet
nv
al
ta
ie
a
lv
u
Kr
a
rij
a
on
r
Ba
s
Au
ng
km
A
s
en
s
K
a
.B
zij
u
jò
pa
As
Va
Ku
ju
dç
na
ro
Vermanes
darzs
VECRIGA
t
til
ta
ie
s
a
at
ta
s ie
ete
s
zab abete
Eliz
iela
tilts
iç
Eli
orta
p
Eks
šu
Van
Va
K.
a Ka
l
ar
m
e
ld
ab
Br
KRONVALDA
îv
El
ta
tes ieta
ie
Elizabe
as
u
îb
av
G
og
oj
a
Streets
Barona,
Terbatas
(central
part of
Riga)
Brivibas,
Dzirnavu,
Gertrudes,
Stabu,
Lacplesa
Smilsu,
Grecinieku
(Old
Town)
Audeju,
Kalku,
Valnu,
Aspazijas
(Old Town)
Rent (EUR / sq. m
/ month
35-70
20-60
25-50
45-90
Source: KOBA
Shopping Centres in Riga
Currently the most successful shopping centres in Riga are considered to be
Alfa, Mols, Domina Shopping and Spice.
78
Report
Retail Market
States
Major Shopping Centres and Department Stores in Riga
Name
Alfa Retail Park
Domina Shopping
Spice
Origo
Mols
Galerija Centrs
SPICE Design &
Furniture Centre
Location
Owner
Total Area,
sq. m*
Brivibas Str. 372
Linstow
63,000
Ieriku Str. 3
KanAm
Grundinvest
Fonds (2007)
42,000*
Lielirbes Str. 29
Stacijas
Laukums 2
Krasta Str. 46
Merks
50,000
Linstow
35,000
Linstow
33,000
Audeju Str. 16
Linstow
32,000
Lielirbes Str. 29
Merks
27,000*
Galerija Azur
Rencenu Str. 1
SKY&MORE
Stockmann
(department store)
Duntes Str. 19a
Baltic Property
Trust
Austrian Mainl
European Fund
Skai Baltija
13 Janvara Str. 8
Stockmann
Olympia
Azenes Str. 5
Due to the undersupply of
retail space as well as rising competition, operating
shopping centres look for
further expansion possibilities.
25,000
25,000
16,000
14,000
LATVIA
*-total retail area
Source: KOBA
Despite modern shopping centres have been a recent addition into the Riga
market, some have already undergone extension schemes. In 2004, two major
extensions happened in Alfa and Domina Shopping centres. Other popular
shopping centres in Riga are Galerija Centrs (opened after reconstruction and
enlargement in August 2006), Origo and Mols. Spice shopping centre (located
close to Riga Airport) after its extensions proved itself successful in Riga retail
market as well.
Due to the undersupply of retail space as well as rising competition, operating
shopping centres look for further expansion possibilities. Alfa Retail Park is
undergoing another extension of 7,000 sq. m of retail space to be added to the
existing retail area. News has been recently announced about development
of a new commercial project with offices and retail space which might be
connected to Origo shopping centre as extension. The project is announced
to be developed instead of the former Post Office on Stacijas Laukums.
79
Report
Retail Market
States
Main Pipeline Projects in Riga
Project Name
Opening Date
Location
Total Area,
sq. m
2008
Brivibas Str. 372
7,000
Alfa Retail Park
(Extension)
Riga Plaza
2009
Mukusalas Str. 71
67,000
Alfa Home Centre
2009
Brivibas Str. 372
25,000
CUBE City
2009
Ieriku Str. 5
Akropole
2010
Daugavgrîvas
Blaumana / Dzirnavu
2010
Str.
Babite, Jurmala
2010 – 2014
Road
N/D
Stacijas Str. 1
Galleria Riga
Riga Retail Park
Origo (Extension)
25,500
40,000*
50,000
60,500*
N/D
* - retail and entertainment area
Source: KOBA
LATVIA
It is expected that the pipeline of new retail projects will bring new well-known
international brands into the Latvian market. One of the projects is Riga
Plaza (developed by Plaza Centers NV), which is planned to be opened in
2009. Besides, the Lithuanian VP Market Group is planning to build Akropole
shopping centre in Riga. Retail competition on the Riga high streets will be
highly increased by a new shopping centre Galleria Riga (developed by
Patollo SIA) being constructed between Dzirnavu and Blaumana streets in
the very centre of the Riga downtown. Akropole and Galleria Riga projects are
expected to be completed in 2010.
Linstow Centre Development (LCD) plans to build Riga Retail Park, with the
total area of 250,000 sq. m (including 60,500 sq. m retail area) in several
stages within 2010-2014. Due to its volumes, location and concept, it is
expected that the centre will attract strong local and well-known international
retail operators.
Development of Shopping Centres in Riga
700
thous. sq. m
600
500
400
300
200
100
0
1998
2000
2002
New deliveries
2004
2006
2008 F
2010 F
Source: KOBA
80
Report
Retail Market
States
Super/Hypermarkets and DIY in Riga
In general, shopping centres tend to be anchored by large super/hypermarkets,
several of them being owned by supermarket operators.
The food retail market in Riga and Latvia in general is fairly concentrated;
still there are only two major players in the market namely Rimi Baltic SIA and
MAXIMA Latvia SIA. Both of the above have equally strong positions in the
food retail market in Riga and other major cities of Latvia. In the beginning of
2008, Rimi Baltic SIA operated 215 shops in the Baltics, including 94 in Latvia.
At the same time VP Market was operating 384 shops (under the Maxima XXX,
Maxima XX, and Maxima X names) in the Baltics, 121 of them in Latvia. Both
retailers are planning further expansion of their shops in Riga and throughout
Latvia in 2008. Elvi, Beta, Mego, Nelda shall be mentioned as major Latvian
retail chains however their position in Riga is comparably weaker. Picture is
different in small cities and countryside – very often above-mentioned Latvian
retail chains are really successful there mostly because of no other choice
available.
LATVIA
The Finnish Prisma entered Latvian market in 2006, opening their first shop
in Domina Shopping Centre. In the nearest future more competition shall be
brought to the market as entrance of new player is expected – the grocery
store A-Selver to be developed by Selver Latvia SIA, the daughter company
of Estonian company Tallinna Kaubamaja, has announced their entry in the
Latvian food market. A-Selver plans to open at least fifteen super or hypermarket
format stores in Latvia by the end of 2009.
DIY retail market is also very actively expanding in Latvia. The major players
in this segment are the Finnish company Rautakesko, Depo DIY, and the local
Latvian concepts developed by Nelss, Tirdzniecîbas Nams Kurši and Profs
Latvija. Currently, the DIY segment is at the same level the food retailers were
a number of years ago, marked by recent expansion outside the capital into
other Latvian regions and cities.
Rents and Vacancy
While all shopping centres differ in their size, location, anchor tenants or
general concept, the average rent is quite comparable.
Average Rent in the Main Shopping Centres (EUR/sq. m/month)
Size,
sq. m
Rent
< 40
50-120
130250
260500
500
>
Hypermarket
60
35
30
25
18
10
Source: KOBA
Vacancy levels in the popular shopping centres and central retail streets are
close to zero, however, in the future, some not so successful retail units may
experience certain vacancy levels when new retail schemes will be delivered
to the market.
81
Retail Market
Report
States




In two-three years retail market will welcome significant number of
new projects; this will increase competition in the whole segment.
Stable rents may slightly increase in the most popular shopping
centres and retail streets until new projects are delivered.
More new brands, most on franchise basis, will appear in the
market.
Vacancy rates will grow in less popular shopping centres as well
as in retail streets with overestimated rents. In order to attract more
customers existing shopping centres will adopt new functions –
leisure activities and entertainment.
Secondary towns of Latvia like Liepaja, Daugavpils, Ventspils,
Jelgava and others will receive more interest from the developers.
LATVIA

82
Report
The development of industrial property market in Latvia has been rather slow
and supply of modern industrial/ warehouse premises has been insignificant
until 2006. After Latvia’s accession to the EU, demand for modern warehouse
facilities started to grow and deficit of modern industrial and warehouse
premises became obvious. As of today demand continues to increase
therefore segment of industrial and warehouse premises is considered to be
a prospective one.
States
Due to shortage of supply,
a number of companies
have developed built-tosuit industrial / warehouse
premises for their needs.
The current situation in Latvia’s industrial market is poor, since the largest
amount of existing industrial premises represents buildings that do not
correspond to international standards, nor meet minimal quality standards.
Most existing industrial premises are located in old industrial buildings and
factories from Soviet-times insolvent manufacturing territories or complexes.
Due to shortage of supply, a number of companies have developed built-tosuit industrial/ warehouse premises for their needs. Good examples are DHL,
Onninen, TNT, GNT that already opened their logistic/ office premises in the
rural municipality of Mârupe, not far from the Riga International Airport. Similar
situation is in almost all municipalities surrounding Riga city namely Babîte,
Olaine, Âdaþi, Salaspils, Stopini and Kekava.
Main Industrial Projects in Latvia
Area, ha
Dominante Industrial Park
65
Ritausmas Logistics Centre
50
Location
Kekava parish,
Riga county
Riga
Type
Eirkel Business Park
49
Jelgava
Liepaja Kara Osta Industrial Park
42
Liepaja
G/B
Rimi Logistics Centre
36
Dreilini, Riga
Greenfield
Daugavpils Business Park
30
Daugavpils
Brownfield
T & Industrial Park
25
Liepaja
G/B
NP Jelgava Business Park
23
Jelgava
Brownfield
Rîga Industrial Park
20
Greenfield
VP Market Logistics Centre
20
BIWC
17
Greenfield
Brownfield
Greenfield
Granîta str. Industrial Park
15.5
Rîga
Kekava parish,
Riga county
Olaine parish,
Riga county
Riga
Avers Logistics Centre
12.5
Riga
Greenfield
Nordic Industrial Park
14
Riga
Brownfield
NP Business Centre
8.5
Riga
Brownfield
Nordic Technology Park
7.5
Riga
Brownfield
Industrial Park
7.3
Brownfield
Wellman Logistics Centre
6.2
Tukums
Salaspils parish,
Riga county
5
Riga
Brownfield
3.1
Ogre
Brownfield
Riga Free-Port Industrial Park
Vega
Business Park SIVA
Baltic Industrial Park
Greenfield
Brownfield
G/B
Greenfield
3
Riga
Brownfield
Jekabpils Sawmill Business Park
2.1
Jekabpils
Brownfield
DHL Distribution Centre
0.9
Riga
Greenfield
Source: KOBA LATVIA
Project Name
83
In general, the tendency for warehousing or logistics companies is to move
further from the city due to persistent traffic problems, constantly rising land
prices and lack of suitable land plots. The most preferred locations for new
industrial developments are out of town locations up to 20 - 30 km away from
the Riga city centre with an easy access by roads of national and international
importance. Besides that demand is increasing for the warehouse, retail and
office premises combined in one building. As of today, most demanded are
800 – 1,500 sq. m warehouse premises with office facilities attached to them.
This demand has arisen due to limited supply of specific industrial premises,
development of which is not economically reasonable for the developers. At
the same time large international companies require logistics premises in the
size of 10,000 – 15,000 sq. m. The major requirements of potential tenants
are good location, access and infrastructure – roads and communications. In
addition, the requirements concerning quality of the premises and the range
and quality of services offered by developers and managers are increasing.
Report
States
Rents
LATVIA
Rent levels of modern high class warehouses in Riga and its suburb areas
currently vary from 5 to 6.5 EUR/sq. m/month and are not expected to increase
significantly. However, there are some exceptional new project developments
in Riga setting higher monthly rent payments: 7 – 9 EUR/sq. m, but we expect
them to stabilize in a long term perspective. Average rent levels for warehouse
facilities matching lower class requirements currently are in the range of 1.5 –
5 EUR/sq. m/month.
Pipeline Projects
There are currently several industrial park projects in Latvia being at different
stages of development. Several new projects are being actively planned near
Riga. It is expected that by the end of 2008, supply for prime industrial space
will increase by approximately 150,000 sq. m.
84
Report
Main Industrial Pipeline Projects
Project Name
Container Logistics
Centre
Bauska Industrial
and Logistics Park
Airport Business
Park
Dommo Business
Park
NP Industrial Village
NP Ventspils
Business Park
Mersraga Industrial
Park
Kekava Logistics
Park
NP Salaspils
Business park
Area,
ha
Location
Type
Year of
opening
160
Jekabpils
Brownfield
2008
60
Bauska
Greenfield
N/D
60
Riga
Greenfield
2008/2010
Greenfield
2007/2008
Greenfield
2007/2009
Greenfield
2010
G/B
N/D
2008
Greenfield
N/D
54
Olaine, Riga
county
Riga
36
Ventspils
54
30
13
12.5
Mçrsrags,
Talsu region
Kekava
parish, Riga
county
Salaspils
parish, Riga
county
Logistics Centre
Berìi
Spilves str. Industrial
Park
Saliena Service and
Light Industry park
12
Riga
Greenfield
2008
11.5
Riga
G/B
N/D
Greenfield
N/D
NP Rezekne
Business Park
7.3
Greenfield
2006/2009
Elipse - BLC
SRV Logistics
Centre
Business Park Eva
Logistics Centre
10
Pinki parish,
Riga county
Veremu
parish,
Rezekne
county
6
Riga
Greenfield
2008
5.5
Kekava
parish, Riga
county
Greenfield
2008
4
Riga
Greenfield
2007/2008
2.4
Marupe
parish, Riga
region
Greenfield
2008
LATVIA
States
Source: KOBA





More modern premises will be developed 20-30 km away from Riga
city.
Stable rents of modern premises will remain.
Rents for low standard old type premises will decrease when new
projects will be delivered.
Low vacancy in modern premises will remain.
More “sale and lease-back” transactions will appear in this
segment.
85
Report
Thanks to its geographical location near the Baltic Sea as well as its importance
as a centre for trade, finance and culture, Riga has all the prerequisites for
tourism and business development.
The number of visitors to Latvia and Riga in particular is increasing annually.
Latvia, like other Baltic countries, is becoming a more popular place for both
tourism and business, notably after the EU accession.
In comparison with the third quarter of 2006, the number of visitors in hotels
and other collective accommodation establishments in the third quarter of
2007 increased by 9% and have reached 544.3 thousand people, according
to Central Statistical Bureau of Latvia. 39% of visitors were residents of Latvia
and 61% foreign tourists. The highest share of the Latvia residents stayed in
Riga – 25%, Ventspils – 11% and Riga district – 8%. 66% of foreign tourists
stayed in hotels and other accommodation establishments in Riga. 13% of all
foreign tourists stayed in collective accommodation establishments in Jurmala.
The highest rate of visitors were from Germany – 16.9%, Lithuania – 11.0%,
Finland – 8.6%, Estonia – 8.3%, Russia – 6.5%, Sweden – 6.2%, Great Britain
– 5.7% and Norway – 5.7%.
Due to the increasing number of tourists and business travellers, hotels
and short-term places are still demanded. Currently the hotel industry is
experiencing intensive growth. Most of the hotels are located in Riga and other
major Latvian cities.
States
Latvia, like other Baltic
countries, is becoming a
more popular place for
both tourism and business,
notably after the EU accession.
LATVIA
Hotel Market
Hotels and Other Tourist Accommodation Establishments in Latvia
(at the end of year)
Accommodation establishmentss)
2002
2003
2004
2005
2006
TOTAL
297
326
343
418
393
Hotels, spa hotels
and motels
134
151
161
181
175
109
120
129
149
147
..Of which hotels
Number of
beds
TOTAL
19093 18970 22171 24045 24469
Hotels, spa hotels
and motels
..Of which hotels
12164 13004 15851 16439 16772
9733
10182 12905 14085 14696
In terms of hotel classification, in the beginning of 2008, Riga’s hotels were
classified as follows:
Hotels Qualification in Riga
*****
*
**
***
***
**
*
*****
****
****
Source: Latvian Hotel and Restaurant Association
86
Report
Hotel Market
In Riga and its neighbourhoods there are five 5* hotels successfully operating
namely Hotel de Rome, Hotel Grand Palace, Reval Hotel Rîdzene, Radisson
SAS Daugava and Baltic Beach Hotel in Jurmala.
States
Europa Royale Hotel Riga and Hotel Valdemars, both located in the central
part of Riga, Hotel Europa City Riga, located outside the central area on
Brîvîbas street and Islande Hotel, located in Kipsala, were all opened in 2006.
In the first half of 2007, there were some significant openings in the Riga hotel
market as well – 4* Avalon hotel on Kaleju Street (111 rooms), Bura Hotel on
Blasta dambis, Hanza Hotel on Elijas Street (81 room), and Gallery Park Hotel
on Kr. Valdemara Street welcomed first guests.
Until today the Riga hotel market is missing worldwide hotel chains such as
Holiday Inn, Hilton, Marriot, Scandic, etc. Last year market received news of
two new worldwide famous hotel brands planning to enter Riga’s hotel market.
Hyatt Regency Riga – Tango Square hotel belonging to the prestigious
international 5* hotel chain Hyatt is being developed as a part of Tango project
and is centrally located on Dzirnavu Street in Riga. Other major news regards
the announcement of Z-Towers developer which has concluded agreement
with Starwood Hotel & Resorts Worldwide - as a manager of Sheraton Riga
Hotel (312 rooms) to be located in Íîpsala on Daugavgrîvas Str. 9.
Project Name/Address
Category
Number of
Rooms
Opening
Date
3*
160
2008
Kalnciema Str. 90
Reval Hotel Elizabete
4*
228
2008
N/D
111
2008
Nordic Hotel Bellevue Riga
3*
112
2009
Hyatt Regency Riga
5*
165
2009
Sheraton Riga Hotel
N/D
312
2010
Lido Hotel
N/D
N/D
2013
Dodo Hotels
LATVIA
Main Hotel Pipeline Projects in Riga
Source: KOBA
Room Prices and Occupancy
Average Hotel Room Price in Riga (EUR/room /night)
Category
Single
Double
5*
150
165
4*
90
120
3*
68
80
Source: KOBA
In Latvia, hotel room occupancy rate at the end of September 2007 reached
54% and bed occupancy rate – 42%, whereas in Riga hotel room occupancy
rate was 68% and bed occupancy rate 53% respectively.
87
Report
Hotel Market
States
Room Occupancy in Latvia, 2004-2007
80
70
60
50
%
40
30
20
10
0
I
II
III
IV
2004
V
VI
VII VIII
IX
X
XI
2006
2005
XII
2007
Room Occupancy in Latvia and Riga in 2007 (I-IX)
90
80
70
%
LATVIA
60
50
40
30
20
10
0
I
II
III
IV
V
Latvia
VI
VII
VIII
IX
Riga



Number of local and foreign tourists, staying in the hotels, will
continuously grow.
Together with growing number of hotels, competition will sharpen as
well; this will lead to higher level of services and prevent room rates
from increase.
More SPA services, conference facilities and other activities will be
offered by hotels’ operators to keep occupancy higher throughout
the whole year, especially in the hotels, located on the Baltic Sea
coast.
88
Investment Market
As in other Baltic States, during past few years Latvian investment market was
interesting to various types of investors. Part of the investments has been
related to development activity, interest in cash-flow transactions has recently
increased as well. However, the amount of accomplished transactions has
been rather small, mainly due to the lack of attractive investment opportunities
for sale, and the fact that owners-developers are generally more interested in
rent income than selling the property.
Report
States
The yields of finalized investment deals in 2007
were in the range of 5.5
– 7%.
In 2007, there were several investment transactions in the market. One of the
major ones was sale of Domina Shopping centre (total area 110,000 sq. m,
42,000 sq. m of retail area and about 4,000 sq. m of office space.) to KanAm
Grundinvest Fund. Galeria Riga (to be built in 2009) was sold (55% stake) to
Dawnay Day Carpathian PLC. The largest office transaction in Latvia (and in
the Baltics as well) was sale and lease back of SEB bank portfolio to Homburg
Invest Inc. for EUR 197 mln. Jerusalemes Nami (7,500 sq. m) office premises
were sold to AVEC Baltic Property Fund.
It is expected that a few more similar deals will be executed over the next few
years. However, it seems that most successful shopping centres and office
buildings will remain in the hands of existing owners, as no better possibilities
to reinvest money somewhere else exist in the current market.
LATVIA
The yields of finalized investment deals in 2007 were in the range of 5.5 –
7%. Forecasted yield level for such investments is expected to increase in
the nearest future, depending much on vulnerable economic developments
locally, in Europe, and globally.






Demand for prime cash flow generating properties will remain high.
More transactions of projects with development/extension potential
will be executed in the coming year.
Stronger investment funds (with more equity) will dominate, while
weaker ones will transfer to other businesses.
Supply of development projects will increase.
Yields level has reached the bottom in 2007 and shall go slightly up
in 2008 due to general situation in the global markets, slowdown of
economy growth, high inflation.
More sale and lease-back transactions are expected in the market.
89
Legal Environment
Establishing a Company in Latvia
Report
States
Types of Enterprises
There are a number of forms of business organization available to the real
estate investor in Latvia, the most common one being the limited liability
company, as it lends itself best to what is usually necessary for a special
purpose vehicle: low cost and relatively simple corporate governance and
management structure. The liability of shareholders in the limited liability
company is in most cases restricted to the amount of their investment in the
share capital of the company, with the minimum total share capital being 2,000
LVL (or about 2,857 Euro). While investments in kind are also possible, they
must be appraised by a duly authorized appraiser, and the process of ‘inkind’ valuation may be time consuming and cumbersome compared to cash
contributions. For this reason ‘in-kind’ contributions as a mode of capitalizing
a limited liability company are rarely used and generally not recommended,
especially for those real estate investors in a rush to register their company.
LATVIA
Less frequently used, but perhaps more appropriate for widely held ownership,
is the joint stock company form of business. Joint stock companies may be
public or private, and may issue publicly traded shares. They are therefore
subject to higher minimum capitalization requirements, generally starting at
25,000 LVL (with joint stock companies in particular industry sectors having
considerably higher minimum mandatory capitalization requirements). Joint
stock companies have a relatively complex management structure, including
a management board of at least three board members and a supervisory
board which is charged with the duty of appointing the management board.
In addition, individual merchant, partnership, and Societas Europaea are
available as forms of doing business in Latvia.
Public private partnership projects in the real estate sector are at an early
stage of development in Latvia. Existing projects include construction of
roads, social housing and kindergartens. From a legal perspective, all PPP
projects in the real estate sector are divided into two groups, depending upon
the income source of the private investor.
If a private investor receives payments from a state or municipality institution,
then the procurement must be made in accordance with the Public Procurement
Law and the respective agreements must be made in accordance with general
provisions of Latvian Civil Law and other applicable legal acts. If, however, a
private investor receives payment from third parties (for instance, the lessees
of premises), that constitutes a building concession, and the procurement and
the respective agreements must be made in accordance with the Concession
Law (currently under discussion in the Latvian Parliament).
While structural fund support exists for certain types of investments in Latvia,
real estate investment per se has been excluded from qualifying for such
support except in a very tangential way and limited way. We refer here to
limited structural fund support for the acquisition of road expansion property
on qualifying road infrastructure projects.
90
Legal Environment
Investment in Real Estate
Report
States
The Latvian real estate market is in general supported by a fully developed
legal and professional infrastructure for real estate ownership, occupancy and
investment.
Nevertheless, while the basic foundations for real estate law are already in
place, a certain amount of care must be exercised in the purchase and sale
process, particularly with respect to the mechanics of deposit agreements,
escrow agreements, title searching, conveyancing, and tax planning. It is
recommended that before entering into a real estate transaction, the support
of a professional legal and tax advisor is sought out.
In general, there are relatively few material limitations to the acquisition of land
or buildings for development by foreigners. Foreign investors have the right to
purchase or lease buildings or lease or purchase land. This is, however, not
an unqualified right.
LATVIA
EU citizens may acquire land in Latvia except a) agricultural land and forests,
unless specifically qualifying, and b) land in the area of national borders, land
adjacent to the sea, land in national parks and land by lakes and rivers. These
restrictions do not automatically apply to land in cities.
Latvian and other EU member state companies may acquire land in Latvia
provided 1) at least half of their share capital is owned by EU citizens or the
Latvian state or municipality either individually or jointly, or 2) at least half of
their share capital is owned by companies registered in countries with which
Latvia has entered into mutual trade and investment protection treaties with
ownership of the shares in the companies by citizens of such countries, 3)
their stock is publicly traded on the Latvian Stock Exchange.
It is advisable to review the legal description and physical location of the target
acquisition with a lawyer to ascertain if the planned purchaser can legally
acquire the target acquisition. In the event that the planned purchaser is not
eligible to take title to the object, it may be possible to do so indirectly through
the utilization of a Latvian registered special purpose vehicle to acquire the
property.
Prior to contemplating a purchase, it is advisable to review the legal description
and physical location of the target acquisition and where further development
is contemplated, the applicable planning and density restrictions.
Privatization
While the groundswell of privatizations of the 1990s is now largely a thing
of the past, it is still possible under certain conditions to participate in the
privatization of real estate in Latvia. A deadline of sorts has already passed,
as an application for initiation of privatization of a land plot owned by the state
or a local government was to be submitted not later than by 31 August 2006.
Nonetheless, the failure to apply before such deadline date for the privatization
of certain land does not automatically rule out privatization of such land as a
means of acquisition. In some cases, where another party has initiated the
91
Legal Environment
privatization prior to the deadline date, there may still be an opportunity to bid
on the privatization if either (a) the party who applied for the privatization has no
priority rights based on a currently valid lease agreement, or title to a building
atop the land plot to be privatized, or (b) the state or local government owner
of the land plot has decided to privatize the plot. Under such circumstances,
it is ordinarily necessary to participate in an auction and be the successful
bidder, in order to ultimately acquire the object to be privatized.
Report
States
Financing
LATVIA
Over the past year the mortgage market has tightened up, particularly with
respect to financing the acquisition of undeveloped land, and especially in
areas that do not show promise for short to mid-term return on investment.
Whereas banks typically financed up to 80 per cent of the purchase price
of undeveloped land in the past, financing thresholds have recently been
reduced to a maximum in most cases of between 50 and 60 per cent of the
acquisition price. Financing for short term speculative real estate ventures
now comes at a slightly higher risk premium over the base rate of financing
than what was the practice in the recent past. There is still a favorable climate
for financing of construction projects, provided the developer’s own level of
participation is considered adequate and the debt service indicators are in
order. Residential real estate financing is more difficult to acquire than in the
recent years past.
Mortgages
Latvia has a fully developed mortgage lending system, with mortgages easily
registrable in the Landbook. In a marked departure from the conditions of only
a few years ago, at present, there is considerable competition in the banking
sector for residential mortgage business. One of the side effects of this is that
often local real estate businesspeople, who typically are the best informed
about attractive ‘off-list’ investment opportunities, do not necessarily feel a
need for foreign investment partners in their projects, so long as their own debt
servicing abilities are sound.
The content of standard form mortgages of Latvian banks tends to require a
modest amount of revision, at least in the case of simple mortgage financing
transactions. For mortgagors, special care should be taken, however, in the
drafting of mortgage default provisions, to ensure that the mortgagor has a
reasonable opportunity to cure defaults before a power of sale. The structure
of potentially applicable power of sale procedures should also be considered
carefully before finalization of the mortgage content.
It is relatively rare to find vendor take-back mortgages.
Purchase and Sale Agreements
There is no such thing as ‘real time closing’ in Latvia, and there is always a
delay between the moment of submission of documents to the Landbook and
the moment of registration of property under the Landbook. For this reason,
aside from the relatively self explanatory requirement that purchase and
sale agreements include precise particulars of the buyers and sellers, legal
descriptions (cadastral number and municipal addresses) purchase price,
92
Legal Environment
and representations and warranties, it is imperative that purchase and sale
agreements stipulate an escrow closing and that the separately drafted escrow
agreements specifically bar the transfer of the purchase price to the seller
unless title is acquired free and clear of any undisclosed or unconsented to
encumbrances. This is particularly so because even if a last minute title search
is performed, certain conveyancing risks may still exist, as set out below.
Report
States
Under the currently prevailing views of the Landbook, judgment
creditors’claims and State Revenue Service claims take priority in sequence
over other registration applications. In certain circumstances, such claims
may despite being submitted after your application for registration, appear as
encumbrances together with your freshly registered title. The way of getting
around this risk is the utilization of an escrow closing mechanism setting out
pristine title as a condition precedent to transfer of the proceeds of sale to
the seller. By using this method, you are saying in effect that you don’t care
what the Landbook notaries register in what order, because you will not pay
the seller anything until the Landbook certifies good title free and clear of tax
arrear encumbrances or other encumbrances.
LATVIA
The escrow agreement is invariably between a local bank (not attorney) as
escrow agent, the buyer and seller. Investors are well advised to require a legal
professional to review the bank’s draft escrow agreement, as its content is the
best defence against random sequencing of registrations. Escrow agreements
frequently require amendment and in some cases, perhaps surprisingly to
purchasers, negotiation over the content of the escrow agreement may take
more time than negotiation over the purchase and sale agreement itself.
We encourage parties to factor into their timetable for closing a sufficient
amount of time for escrow agreement negotiation and content finalization.
While escrow agreement drafting may require more time and effort than one
might at first expect, whatever the complications with escrow agreements,
the use of an escrow agreement in the conveyancing process is infinitely
preferable to a closing without an escrow agreement.
Public auctions of property should be approached with great caution,
particularly where closing is not contemplated through an escrow arrangement
and where up-front deposits are required by auction participants.
Deposit agreements are often relied upon as a means of securing a property
from alternative purchasers prior to actual negotiation and conclusion of an
agreement of purchase and sale. It is common practice in Latvia to utilize a
penalty provision in a deposit agreement calling for return of the deposit on a
two fold basis by the vendor or the forfeiture of the deposit by the purchaser in
the case of a failure to close for reasons of ‘fault’ of the respective purchaser
or seller. If all goes well and the closing takes place, there may be no issue
with such agreement. If, however, there is a failure to close, there is a risk at
least of a protracted dispute as to the presence of ‘fault’ and allocation of such
fault. In practice, it is necessary to weigh the risks of such potential dispute
against the risk of not having any deposit agreement mechanism in place to tie
up the counterparty and lessen the risk of a changing of the mind on wanting
to close the transaction.
Section 78 of the law on Municipalities provides that a municipality is entitled
to a right of first refusal on a purchase of building on the same terms and
conditions as those proposed by the prospective parties to an agreement of
purchase and sale.
93
Legal Environment
In order to legally circumvent the municipal right of first refusal, it is common
practice to separate what is essentially one purchase transaction into two
parts as a form of conveyancing. There is no judicial consideration of such
practice and it is so widespread that there is little likelihood of the introduction
of measures to stop the practice, or impugn past title transfers utilizing the
practice.
Report
States
Current law requires that real estate purchase and sale agreements and official
requests to register title or leasehold estates under the Landbook registry
system be notarized by a notary.
Sometimes purchasers mistakenly believe that the mere act of notarization is
sufficient to ensure registration of good title. Notarization is not tantamount to
registration, and cannot be relied upon as sound evidence of good title, which
is generally only evidenced by Landbook registration. In other words, as self
explanatory as it may seem, once the documentary request for registration is
obtained and notarized at the notary office, the parties should take the next
step and proceed directly to the Landbook where they should submit the
documents for registration (even if sequencing of registration is sometimes
an issue). In the relatively rare cases of conveyancing disputes or failures to
close, there is more often than not a failure of a party to attend to the Landbook
with its notarized request to register in hand on a timely basis.
LATVIA
In summary, the most effective way to minimize risk of failure is by utilization
of properly drafted escrow agreements, such that the purchaser’s money is
held by a third party escrow agent (almost invariably a local bank), and only
transferred to the seller once good title in the manner expected is registered
in the name of the purchaser.
Zoning of territory is governed by the law on Territorial Planning and
Regulation Nr. 83 of the Cabinet of Ministers “on territory planning by
municipal government”. Planning takes place at four levels: national planning,
regional territorial planning, regional municipality territorial planning and local
government territory planning. It is important prior to acquisition of property
to determine whether it is planned for the use which the purchaser requires.
Density and minimum plot sizes may also be of concern. The City of Riga has
recently introduced its new municipal plan. This is a welcome development,
adding to the level of certainty for property developers and investors seeking
to develop municipal land in the Latvian capital.
Lease of Real Property
Leases of municipally owned lands are not permitted to have terms longer
than 12 years.
A lease does not require notarization in order to be a binding lease. It does,
however require registration in the Landbook in order for it to be binding upon
third parties without notice of the lease. In order to effectuate such registration,
it is necessary to attend to a notary’s office and sign and have notarized the
request to register the lease.
94
Legal Environment
As the law does not specifically mandate the registration of subleases,
Landbook notaries are sometimes reluctant to register subleases, even
where the parties so agree to their registration in writing. Additional legal
advice should be sought before contemplating a business structure utilizing
subleases as a registered instrument.
Report
States
Most aspects of commercial real estate leases are negotiable, and typically
commercial leases have a term of three years or more. Where a landlord or
tenant makes a significant capital investment in the leased space, lease terms
may typically range from five to ten years.
Rent controls do not apply to newly erected buildings. In cases where rent
control exists, various approaches are available for owners to try to terminate
rent controlled tenancies, more often then not requiring the acquisition
of alternate accommodation for tenants. Residential lessees in protected
tenancy situations are provided considerable protection under the law in
practice. Courts will, for example, typically find that even part payment of rent
demonstrating an intent to honor the lease relationship will shield a tenant from
eviction.
Investment Protection and Guarantees
LATVIA
On January 1st, 2005, the former law on Foreign Investment Protection in Latvia
expired, in effect being superseded by the Commercial Law already in place,
which sets out the rights to engage in commercial activity without segregation
of foreign and domestic investor activity.
The most tangible manifestation of investment protection is the bilateral
agreements which Latvia has entered into with a host of other jurisdictions on
mutual trade and investment protection. Currently such there are such bilateral
agreements with approximately 45 other jurisdictions.
95
Taxation
General Principles
Report
States
In Latvia there are following taxes:
 Corporate income tax, including withholding taxes;
 Gambling and lottery tax;
 Value added tax;
 Social security contributions;
 Personal income tax;
 Real estate tax;
 Natural resource tax;
 Excise tax;
 Customs duties;
 Motorcycle and car tax.
Additionally, there are different state and municipal duties. However, most of
the duties and some of the taxes are applicable only in specific situations;
therefore, this section provides a general overview of the most common taxes
and duties.
Personal Income Tax
LATVIA
Latvian residents are taxable on their worldwide income. Non-residents are
liable to tax their income attributable to Latvia. The personal income tax rate
in Latvia is 25%. The income tax rate applicable for income from individual’s
economic activities is at a rate of 15% starting from 1 January 2008.
According to the last amendments in Latvian Law on Personal Income Tax,
income received from the sale of the real estate is taxable in case the ownership
of the real estate has not lasted for more than 60 months and the real estate
has not been registered address of respective private individual for at least 12
months before the signing of the sales agreement.
Taxable income derived from the sale of real estate includes also income
received from the sale of share capital or shares of the company if in the year
of the sale or the year before the sale, 50% or more of the company’s assets
consisted of real estate located in Latvia; the company may be established in
Latvia or other country. Proportion of real estate in the assets is determined
based on the balance sheet data provided at the beginning of the respective
year, and taxable income is the difference between the sales and the
acquisition value of shares.
Social Security Contributions (Social Tax)
Social security contributions are made to the social insurance budget, entitling
the contributor to general sickness, pension, maternity, and other social
benefits.
Social security contributions are levied on resident employers, employees of
Latvian companies, resident employees employed by non-residents; resident
expatriates assigned to work in Latvia, and self-employed individuals.
Taxable income, which is subject to social security contributions, is any income
derived from employment relations and subject to personal income tax.
96
Taxation
An employer must withhold 9% social tax from the gross salary of the employee.
The employer must make social security contributions of 24.09% in addition to
the employee gross salary. Total social security contributions payable in 2008
are 33.09%.
Report
States
Person employed in Latvia by non-resident employers if the permanent place
of residence of such person is not Latvia but who remains in Latvia for more
than 183 days in any 12-month period is subject to social security payments
of 31.10%. The rate of 33.09% is applicable to persons employed by nonresidents of Latvia if the permanent place of residence of such persons is
Latvia.
The social security contribution rate for self-employed persons is 30.44%.
In the year 2008 income in excess of LVL 29,600 is not subject to social
security contributions.
Real Estate Tax
LATVIA
Taxable persons are individuals, legal entities, and non-residents that possess
or hold building and/or land located in Latvia. The real estate tax rate starting
from 1 January 2008 is 1%. Real estate tax is imposed on the cadastral value
of respective taxable property. The taxation period is a calendar year. The tax
assessment on buildings and land is made by the respective municipality in
the territory of which the respective real estate is located.
The municipality can grant support of up to 90% real estate tax reductions
for companies whose operations conform to their local/regional development
strategies and spatial zoning as well as for individuals.
In 2008, 2009 and 2010 increase of the real estate tax amount may not exceed
25% per year in comparison to the real estate tax amount paid in the previous
year. There are different types of real estate that are exempt from real estate
tax.
Corporate Income Tax
Taxable Income
Resident companies are subject to tax on their worldwide income. Nonresident companies having no permanent establishment in Latvia are subject
to tax on their Latvian-source income.
Non-resident companies operating through a permanent establishment in
Latvia are subject to tax on income derived by the permanent establishment
in Latvia, as well as income independently derived abroad by the permanent
establishment.
Tax Rates
Companies are subject to corporate income tax at the rate of 15%.
97
Taxation
Capital Gains
Report
States
Resident companies (with certain exemptions) and non-resident companies
operating through a permanent establishment in Latvia include capital gains
in their taxable income.
Withholding tax
Sale of real estate
For non-resident companies without a permanent establishment in Latvia, the
final withholding tax is imposed on proceeds received from sale of real estate
located in Latvia or from sale of shares of company if in the taxation period
of the sale or taxation period before the sale, 50% or more of the company’s
assets consists of real estate located in Latvia. The rate of withholding tax is
2% for income from the sale of real estate located in Latvia or from sale of the
respective company’s shares.
LATVIA
Interest
10% WHT applies to interest payments paid to the related company;
5% WHT applies to interest payments paid by commercial banks registered in
Latvia to companies or persons affiliated with them;
5% WHT applies to interest payments paid to the related EU member state
company from 1 July 2009 until 30 June 2013;
0% WHT applies to interest payments paid to the related EU member state
company (this applies also payments made by commercial banks registered
in Latvia) starting from 30 June 2013.
Royalties on literary or artistic works
15% WHT applies to payments to third country company;
10% WHT applies to payments to EU member state company until 1 July
2009;
5% WHT applies to payments to EU member state company from 1 July 2009
until 30 June 2013;
0% WHT applies to payments to EU member state company starting from 30
June 2013.
Other royalties
5% WHT applies to other types of intellectual property paid to non-EU member
state company or paid to EU member state company until 30 June 2013.
Starting from 30 June 2013 to such payments made to EU member state
company 0% WHT applies.
Movable property
5% WHT applies to payments for the use of movable property located in
Latvia.
Dividends
10% WHT applies to dividends paid to non-EU member state companies.
There is no withholding tax on dividend payments to EU or EEA countries if the
receiver is taxed with corporate tax in its residence country.
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States
Dividends
Dividends paid out of resident’s profits being taxed under the Law on
Corporate Income Tax are not included in taxable income of a resident
recipient company.
Taxable income of a Latvian company receiving dividends is not increased by
the amount of dividends received from non-residents if the Latvian company
owns at least 25% of the capital and voting rights in the company paying the
dividends; however, this provision is not applicable if the company paying
the dividends is located in such a state or territory, which, according to the
Cabinet Regulations, is considered to be a low-tax or no-tax state or territory.
If the payer is a company, which is registered in another EU Member State, the
Latvian recipient company should own at least 20% (15% in 2007 and 10% in
2009 and onwards) of the capital and voting rights of the payer.
Payments to Low-tax Countries
Payments to companies registered in low tax countries (there are special
Cabinet Regulations containing a list of low-tax countries) ordinary are subject
to 15% withholding tax.
LATVIA
Thin Capitalization Rules on Interest
No limits exist with respect to loans received by a company, however, the thin
capitalization rules are applicable. Namely, at the end of each taxation year,
the Latvian company is obligated to perform “deductible interest payment”
calculation (thin capitalisation) in order to evaluate the requirement for a
possible increase of taxable income for corporate income tax purposes.
According to these calculations, the tax deductible interest payments are the
smallest result of one of the following formulas:
Debt x 1.2 x average short-term interest rate determined by the Central
Statistical Bureau of Latvia at credit institutions as of the last month of the
taxation period
OR
Annual interest calculated


Average debt


1
 Shareholders equity − non - current assets revaluation reserve x 4 
(
1
)
Shareholders equity at the beginning of a taxation year.
These provisions are not applicable to loan and leasing interest payments to:
 credit institutions registered in the Republic of Latvia or another EU
Member State;
 State Treasury of the Republic of Latvia;
 Nordic Investment Bank;
 World Bank;
 Latvian residents.
Transfer Pricing Rules
The Latvian legislation provides for an arm’s length principle to be followed
in all related party transactions. The State Revenue Service may redefine
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Taxation
the transaction between related parties and recalculate the tax base if it has
grounds to suspect intentional tax evasion. The methods such as comparable
uncontrolled price, resale price, cost plus, profit split or transactional net
margin method could be used for assessing the market price in transactions
between related parties.
Report
States
The generally accepted transfer pricing practice is based on the OECD
Transfer Pricing Guidelines.
Value Added Tax
VAT rates
VAT rates applied in Latvia are 18% (standard rate), or 5% (reduced rate), or
0%.
Input and Output VAT
Neutrality of the VAT system provides for the tax burden to be borne by the
final consumer and is neutral to businesses. VAT taxpayers are entitled to
deduct the tax, which they pay on supplies and services received (input VAT)
from the tax, which they charge their customers (output tax), if input supplies
secure the taxable transactions of the taxpayer.
LATVIA
Registration Obligations
Persons registered in Latvia whose supplies during 12 months period do not
exceed LVL 10 000 (approx. EUR 14 229) are not liable to register as VAT
payers. The registration threshold of LVL 10 000 (approx. EUR 14 229) does
not concern foreign taxpayers, who are obliged to register for VAT purposes
irrespective of the value of their transactions subject to VAT in Latvia, except
distance sales where the threshold is LVL 24 000 (approx. EUR 34 149). Law
on Value Added Tax provides special registration requirements for persons
registered in other EU Member States in case such persons are performing
certain activities in Latvia.
VAT General Deduction and Refunds
Businesses are entitled to deduct input VAT on goods and services received
to ensure taxable transactions of the respective persons provided they are
registered as VAT taxable persons in Latvia. Retrospective registration is not
allowed in Latvia.
The overpaid VAT can be claimed back with respect to the three last years.
The State Revenue Service shall repay the overpaid VAT or inform the taxpayer
regarding the reasons why the overpaid VAT cannot be repaid within 30 days
after receiving the application form and supporting documents required.
VAT Refunds to Foreign Taxpayers
Generally, taxpayers from other countries making no taxable supplies in
Latvia may claim the refund of VAT paid in Latvia under the requirements
equivalent to the EU Eighth and Thirteenth Directives. However, in case of
businesses established outside the EU the refund is conditional upon the
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Taxation
reciprocity rule. The refund is not possible if deductibility of input VAT on
similar transactions is not allowed for Latvian taxpayers (e.g. goods for
private use), as well as on acquisitions of unused immovable property and
services received in relation to construction, reconstruction, renovation,
restoration, or repairs of immovable property. In addition, the tax shall not
be refunded to tourism (travel) firms and organizations.
Report
States
VAT on Supply of Real Estate
The supply of real estate (including supply of land) is generally exempt from
VAT. The mentioned rule is not applicable to the first supply of an unused real
estate or parts of it (e.g. following renovation). Such supplies are subject to the
standard tax rate of 18%.
LATVIA
An unused real estate is:
 newly built buildings or structures (also stationary equipment installed
therein), if such are not used, rented or leased after being approved for use,
 newly built buildings or structures, if such are sold within one year after
being approved for use, regardless of the form of their use until the time they
are sold,
 buildings or structures if such are sold within one year after renovation,
reconstruction or restoration work has been accepted, and
 objects the construction of which is not completed.
Moreover, if in case of supply of real estate the value of real estate that is
exempt from VAT is not indicated separately from the value of real estate that
is subject to 18% VAT rate, then the taxable value that will be subject to 18%
VAT shall be the whole value of the transaction.
Input VAT on the unused real estate acquired as well as on the building,
reconstruction, renovation or restoration of real estate is deductible in full
if the real estate is intended to be used only for the carrying out of taxable
transactions.
If the real estate is intended to be used for the carrying out of both taxable
transactions and non-taxable transactions, the amount of input VAT to be
deducted shall be determined on the basis of the intended real estate use
proportion. VAT deductions do not apply to VAT paid for construction of objects
used for VAT exempt business or social infrastructure, such as apartment
buildings, sports, medical and educational facilities if the social objects do not
relate directly to the commercial activities of the company.
Unused real estate acquired by the taxable person should be registered with
the Latvian State Revenue Service.
The VAT exempt sale of the real estate (or any part thereof) within 10 years
from acquisition or commissioning thereof, imposes the taxable person to
refund the amount of input tax, which is calculated by multiplying 1/10 of the
claimed input tax by number of years remaining until the said 10 years period.
The repaid tax amount is included in the value of the real estate, and the buyer
may not deduct the said amount as input tax.
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States
Excise Tax
Application of excise tax for goods in Latvia is prescribed by the Law on Excise
Tax adopted on 14 November 2003 and effective since 1 May 2004. The Law
on Excise Tax is integrated with the Council Directives 92/12/EEC, 92/79/EEC,
92/80/EEC, 92/83/EEC, 92/84/EEC, 95/59/EC, 95/60/EC, and 2003/96/EC.
According to the Law on Excise Tax the following products are subjects to
excise tax:
 alcoholic beverages;
 tobacco products;
 oil products;
 soft drinks;
 coffee.
Real Estate Transfer Stamp Duty
LATVIA
Every registration of title rights with the Land Register as a result of an
alienation of a real estate is subject to a stamp duty. The amount of the stamp
duty depends on the type of alienation of a real estate. For alienation of real
estate to:
 relatives (children, parents, brothers, sisters, spouses, grand children,
great grand children, grand parents) regardless the number of real estate
– 0.5% of the value of real estate (in lats), but not more than LVL 1 000 (approx.
EUR 1 423);
 other natural persons: for 1st or 2nd real estate – 2% of the value of real
estate (in lats), but not more than LVL 30 000 (approx. EUR 42 686); in other
cases – 4% of the value of real estate (in lats);
 other natural persons as a gift: for 1st or 2nd real estate – 3% of the value
of real estate (in lats), but not more than LVL 50 000 (approx. EUR 71 144); in
other cases – 6% of the value of real estate (in lats);
 legal persons: 2% of the value of real estate (in lats), but not more than
LVL 30 000 (approx. EUR 42 686); as a gift – 3% of the value of real estate (in
lats), but not more than LVL 50 000 (approx. EUR 71 144);
For corroboration of mortgage rights with the Land Registry:
 legal persons: for a loan to ensure business activity – 0.1% of the amount
of the loan agreement (in lats), but not more than LVL 1 000 (approx. EUR
1 423);
 natural persons: for the first two mortgages – 0.1% of the amount of the
loan agreement (in lats), but not more than LVL 1 000 (approx. EUR 1 423); for
the third and following mortgages – 3% of the amount of the loan agreement
(in lats).
The value of real estate for stamp duty payment purpose shall be the highest
of the following amounts:
 alienation amount of the real estate prescribed by the agreement;
 cadastre estimation of the real estate;
 evaluation determined as a result of mortgage of the real estate with the
credit institution.
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States
Office Market
While all capitals of the Baltic countries seem to be quite similar to each other
in terms of market size, the property markets and their segments differ quite
significantly in each of the country. The Tallinn office market development
began same as in Vilnius or Riga by remodelling apartments located in the Old
Town and the downtown into office space, however, the Tallinn office market is
a clear pioneer in terms of the segment development.
Supply and Demand
Report
States
Due to the limited space in
the CBD area new projects
are being initiated outside
the city centre.
Today the Tallinn office market represents nearly 350,000 sq. m of modern
space and is developing further. Major office buildings in Tallinn’s city centre
and its vicinity are WTC on Ahtri Street (35,000 sq. m of rentable area, total
commercial area is 60,000 sq. m), SEB Ühisbank building on Tornimae
Street. (16,000 sq. m), Hansabank office building on Liivalaia str.(15,000 sq.
m), Hobujaama office building on Hobujaama Str. (7,000 sq. m), City Plaza
(7,200 sq. m of rentable area), Pro Kapital office building (7,300 sq. m of
rentable area), Ravala Business Centre (9,200 sq. m), Admirali Maja office and
apartments building (8,300 sq. m of rentable office area), Veerenni Arikeskus
(4,600 sq. m), Tere Maja (6,000 sq. m), Ülemiste Arimaja (5,000 sq. m), City
Plaza office building (5,500 sq. m), Rävala Four office building (5,100 sq. m),
Pärnu Rd. 102c (rentable area 9,500 sq. m) and Valge Ärimaja (4,000 sq. m).
Majority of the modern office is concentrated in the CBD area, which is quite
limited in size and therefore there are lots of new developments outside the
city centre towards Pärnu and Mustamäe direction.
Due to the limited space in the CBD area new projects are being initiated outside
the city centre. The major demand is for high quality product, e.g. modern
premises with advantageous location and good parking possibilities. Strong
international and local companies, working in consulting, pharmaceutical,
IT business require certain flexibility in the size of premises keeping in mind
potential expansion in the future. Most often they need premises in the range
of 150 to 300 sq. m. However, another tendency is growing demand for bigger
space; companies are expanding in line with impressive economy growth and
start seeking for bigger offices from 1,000 to 3,000 sq. m and more.
Rents and Vacancy
ESTONIA
During 2007 the A - class office premises rent in Tallinn increased slightly
during the year and currently varies from 16 to 20 EUR/sq. m, B - class– 10-12
EUR/sq. m. The price difference is mainly due to location in the city, as general
technical characteristics of A and B - class newly built premises are relatively
comparable. The size of the office space and lease terms also have an impact
on the rental level.
While old construction buildings still keep certain level of vacant premises,
vacancy in the modern office buildings is almost non-existent.
Pipeline Projects
In 2007, nearly 50,000 sq. m of office space was planned to be added to the
office market of Tallinn and almost 40,000 sq. m were delivered. The year
2008 seems to be even more active as nearly 100,000 sq. m are planned to
be delivered to the market. Even if the plans are fulfilled by only 70-80%, the
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market will feel significant influx of new modern space and this will definitely
have a certain impact on vacancy levels and some premises (old style, lower
quality) rent’s level as well.
States
Main Pipeline Projects
Project Name
Peterburi office
building
Gildhall
Kadaka
Tammsaare Business
Centre
Delta Plaza
Ülemiste City
Pärnu Road 158 office
building
Estonian Railway Main
Building
Scala City
Tammsaare Business
Building
Meistri tee 22 office
building
Liivalaia office building
Rannamõisa Office
Centre
Address
Väike-Paala 1
Scheduled
Opening Date
Mustamäe Road 16
2008
2008
Kadaka Road 76D
2008
Tammsaare Road 49
2008
Pärnu Road 141
2008
Lõõtsa Street
2008
Pärnu Road 158
2008
Toompuiestee 36/Tehnika
16d
Tartu Road 43
Tammsaare Road 118d
Meistri Road 22/Ehitajate
Road 116a
Liivalaia 45/47
Rannamõisa Road 4a
2008
2008
2008
2008
2009
2009
Source: KOBA, BPE
ESTONIA
One of the biggest projects in the pipeline is Ülemiste City project in Tallinn.
A 15-minute stroll from the centre, close to the Ülemiste intersection, and just
0.5 km from both the Tallinn Airport and Ülemiste railway station, the project
is already started and currently some developments are in progress. Ülemiste
City is designed to include almost 160,000 sq. m of office space for sale and
rental. The project will be implemented within several years.



Supply of modern office space will grow mainly in suburban areas.
In the coming years rental levels shall remain stable for the prime
quality space, rents for less quality, old type and far from the city
centre located space may slightly decrease.
Vacancy rates in high class premises will remain low, lower quality
premises may encounter increased vacancy factor when new
projects will be delivered to the market.
105
Retail Market
Despite certain slowdown in the economy, the smallest of the Baltic States is
still experiencing impressive economic growth (8.1% GDP growth in 2007),
exports and private consumption. Unemployment is low, largely due to the
expansion of the service sector. In general, strong growth in wages and
attractive interest rates in the past few years were the major drivers of boosting
consumption, however, current slowdown in the economy will have certain
impact on consumption in the future.
Report
States
Small domestic retail groups and independents still dominate in non-grocery
segments, but new brands are also successfully entering the market. In
general, the role of Nordic retailers in the development of the Estonian retail
market has been very important: Rimi Baltic grocery chain is the leader in the
grocery market, K-Rautakesko chain dominates the DIY segment.
The Estonian retail market is concentrated in the capital city Tallinn, mainly
because of the population (almost 1/3 of the total Estonian population lives
in Tallinn), but also because of its proximity to Finland and the consequent
attraction of cheaper shopping to Finnish shoppers.
Retail Streets in Tallinn
Historically, high-street retailing was concentrated in Tallinn’s Old Town;
however, the swift development of modern shopping centres in recent years has
seen a significant reduction in the attractiveness of high-street retail locations.
The Old Town has evolved into an exclusively tourist-oriented (amber jewellery
and souvenir shops) and leisure (cafes, restaurants) district.
Centrally located Viru Street, connecting the CBD with the Old Town, was
formerly very attractive to both retailers and buyers. Today, difficult parking
conditions, the development of shopping centres in and outside the city
centre and consumers’ preference to shop in those centres have combined
to transform part of Viru Street (crossing the Old Town) into a tourist-oriented
area with lots of souvenir shops, and a leisure quarter, concentrating numerous
cafes and restaurants.
The other section of Viru Street (crossing Pärnu Road) features one of
Tallinn’s most popular shopping centres, Viru Keskus, which makes it and the
surrounding area a very attractive location for smaller retailers or cafeterias.
The first shopping centre in Tallinn - Rocca al Mare – was opened in 1998.
Today, it is one of the largest shopping centres in Estonia, with the total area
of 35,000 sq. m. It hosts more than 100 trade and service firms. Kristiine is
another successful shopping centre in Tallinn. Situated in between residential
area and the city centre, with big number of various tenants, it attracts many
visitors everyday. The other shopping centre - Viru Keskus - was opened in
2004 and became extremely popular among local and foreign visitors first of
all due to its prime location. It is situated in the very city centre, with the walking
distance from the historical Old Town, huge flows of people are passing the
centre everyday. Tallinn’s largest shopping centre – Ülemiste - opened its
doors in 2004. The centre, located near the lake Ülemiste, covers an area of
50,000 sq. m in total. The Estonia’s largest hypermarket in the shopping centre
ESTONIA
Shopping Centres in Tallinn
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Retail Market
and big number of various tenants attract a lot of buyers from all over the city.
All of the afore-said shopping centres are among the top ones in Tallinn.
States
Main Shopping Centres in Tallinn
Location
Anchor
Tenant
Total Area,
sq. m
Suur-Sojamae 4
Rimi
50,000
Shopping Centre
Ülemiste
Jarve Keskus
Pärnu 238
Selver
40,000
Rocca al Mare
Paldiski 102
Prisma
35,000
Endla 45
35,000
Kristiine
Viru Keskus
Viru Valjak 4
Sikupilli Keskus
Tartu Mnt 87
Prisma
Tallinna
Kaubamaja
Prisma
Mustika Keskus
Lasnamae
Keskus
Norde Centrum
Tammsaare 116
Prisma
26,500
Mustakavi 13
Rimi
24,000
Lootsi 7
Rimi
13,500
Sorpuse 201
Rimi
12,000
Magistrali
30,000
27,000
Source: KOBA
Development of Shopping Centres in Tallinn
400
thous. sq. m
350
300
250
200
150
100
50
0
1998
2000
2002
2004
New deliveries
2006
2008 F
2010 F
Source: KOBA
ESTONIA
Rents and Vacancy
While all the above mentioned shopping areas differ in their location, interior
planning and tenants mix, the rent level is comparable in any of them and is
provided below.
Rents (EUR /sq. m/month)
EUR/ sq. m/month
Anchor
Tenants
Medium Areas
(>100 sq. m)
Small Areas
(< 100 sq. m)
8-10
10-30
30-45
Source: KOBA, BPE
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Retail Market
Major anchors or catchy tenants are: Rimi Baltic (Rimi, Säästumarket), SOK
(Prisma), and Tallinna Kaubamaja (Selver).
In general, the interest from foreign retailers is to open their first shops in the
capital of Estonia, whereas local companies are focussed on maximising their
market share. Tallinn is the most attractive place because of its larger visitor
numbers and proximity to Finland and Sweden. This makes demand for retail
space quite strong with zero vacancy rates in the major shopping centres. The
most popular shopping centres (Viru Keskus, Kristiine, Jarve, Rocca al Mare
and Ülemiste) are currently most in demand from retailers and thus have no
vacancies.
Report
States
High demand for retail
space pressures shopping
centres’ owners to consider extension schemes of
existing shopping centres.
Pipeline Projects
High demand for retail space pressures shopping centres’ owners to consider
extension schemes of existing shopping centres. One of the major projects
today is extension of Rocca al Mare, which is planned to be enlarged by
additional 16,000 sq. m of retail space in 2008. Total area is planned to reach
70,000 sq. m in 2010, some entertainment zones to be developed as well.
Magistrali and Jarve shopping centres also are subject to certain extension.
In December 2007, it was announced that Trigon Property Development will
develop Estonia’s largest shopping centre (115,000 sq. m of floor space)
Tallinn Gate near Tallinn. It will be located next to the Pärnu highway some 15
km from the border of Tallinn and is planned to be completed in 2011-2012.
Super/Hypermarkets in Tallinn
The main anchor tenants in super and hypermarkets are the following grocery
chains: Rimi Baltic (Rimi, Säästumarket), SOK (Prisma), Tallinna Kaubamaja
(Selver) and Maxima Group (Maxima).
ESTONIA
The food retail market in Tallinn, and in Estonia in general, is quite concentrated,
with Rimi Baltic (Rimi) and SOK (Prisma) being both on leading position. The
position of a grocery chain Selver (belongs to the Kaubamaja Group) is also
mentionable.





Strong demand for retail space from retailers’ side will remain.
New international brands will enter the market.
Extension projects will add some demandable space to the market.
Vacancy level in the popular retail units will remain low.
Further expansion of retail chains in Tallinn and Estonian secondary
cities through new super and hypermarkets will remain active.
108
Estonia’s warehouse market mainly consists of old buildings with only a few
new builds. Block and brick warehouses and production buildings, built in
the period from 1962 to 1990, as well as large-area administrative buildings,
dominate in all major-city warehouse markets. New, most often purpose-built,
modern warehouse buildings or renovated old ones are the few exceptions. By
now, the majority of old warehouses and administrative buildings have been
equipped for goods-storage for both the wholesale and retail trades.
Report
States
A recent trend in the industrial property market is the
development of industrial
parks.
Supply and Demand
On the demand side, relatively small premises within the city boundaries are
the most sought after. It can take time, however, to find suitable premises for
both big and small clients because of the specific requirements for warehouse
premises. The overall increase in land prices and the huge growth in demand
for residential premises have made developers to be more active in the
residential segment and more conservative in the warehouse segment.
A recent trend in the industrial property market is the development of industrial
parks. There is less and less industry in the central city area of Tallinn,
manufacturing companies and factories are moving to more suitable locations
in the outskirts or even further out.
Tallinn and its immediate vicinity have three areas under development for
manufacturing facilities and warehouses: Peterburi road, Pärnu road in Laagri
and Tartu road between the city boundary and Jüri. The biggest industrial
parks in and around Tallinn are Jüri Industrial Park, Logistics Park Liiva Centre,
Tänassilma Technological Village, Dvigatel Industrial Park, Keila Industrial
Park and Lasnamäe Industrial Park. The total areas of the parks vary from 30
to 80 hectares.
Rents
Rental prices per square meter per month vary depending on location, lease
conditions and size of the rented premises. Industrial/warehouse properties
are rented from 4 to 7 EUR/sq. m/month for newly built high quality warehouse
premises not far from the city centre, and from 3 to 5 EUR/sq. m/month for
lower quality warehouse facilities.
ESTONIA
In general, rental prices are quite stable with some trends to slight increases
in the most sought-after locations. The biggest differences in rental prices are
because of location and the quality level of premises.
Pipeline Projects
Constant demand for modern warehouse and logistics premises and slowdown
in residential construction encourage developers to think about new projects
in warehouse and logistics premises. Majority of the projects are being started
with pre-lease agreements only.
Major new projects are Magnum Medical Logistics Centre, Via Baltica Logistics
Centre. Hawaii Express logistic centre is planned to be built in the Jõelähtme
Parish, the centre should be completed in spring 2008. In Maardu more than
30,000 sq. m size Maardu Logistic Centre will be built.
109


States
“Build–to–suit” projects remain dominating in the market.
New projects will have an impact on increasing vacancy in the old
premises.
Rents shall remain stable with slight tendencies to increase, mainly
due to increased construction and other costs.
More “sale and lease–back” transactions will appear in this
segment.
ESTONIA


Report
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Report
Hotel Market
According to Statistics Estonia, during the nine months of 2007, half of the foreign
tourists, who used the services of accommodation establishments of Estonia,
came from Finland. Finland is continually the main foreign partner of Estonian
accommodation establishments, although, compared to the nine months of
2006, the number of Finnish tourists decreased by 37,000 tourists. The number
of tourists from other larger partner states in tourism — Sweden, Germany,
United Kingdom and Russia — decreased as well. The number of tourists from
Norway, Latvia and Lithuania, staying in the accommodation establishments,
was much larger than in 2006. Compared to the nine months of 2006, the
total number of foreign tourists, who used the services of accommodation
establishments, decreased 4%. The decrease in the number of foreign tourists,
staying in accommodation establishments, was compensated for by an increase
in the number of domestic tourists — the number of domestic tourists staying in
accommodation establishments increased by 106,000.
States
During the nine months of 2007, 1.8 million tourists stayed in accommodation
establishments.
Hotel Establishments in Estonia and Tallinn
2005
2006
Number of Establishments in Estonia
784
951
Number of Establishments in Tallinn
113
120
Number of Rooms in Estonia
16,610
17,811
Number of Rooms in Tallinn
6,038
5,931
Number of Beds in Estonia
38,088
40,850
Number of Beds in Tallinn
12,396
12,058
Source: Statistics Estonia
Today the Tallinn hotel market represents big variety of different hotels in
terms of class, location or size. The larger ones include Radisson SAS, Reval
Hotel Olümpia, Tallink-Best Western Hotel, Sokos Hotel Viru, Reval Express
Hotel, Reval Hotel Central, Meriton Grand Hotel Tallinn and Metropol. In 2007,
new hotel Swissôtel Tallinn Estonia (238 rooms) and Nordic Hotel Forum (267
rooms) welcomed first guests. Hotel Telegraf (5*, 86 rooms), Hotel Europe (4*,
185 rooms), Tallink Spa & Conference Hotel (4*, 290 rooms), Hotel Bern (4*, 49
rooms) shall also be added to the list of recently opened hotels in Tallinn.
ESTONIA
The major chains operating in Tallinn are Domina Hotels and Resorts, Meriton
Hotels, Reval Hotel Group, Radisson SAS Hotels and Resorts, Scandic Hotels
and Best Western Hotels.
In terms of hotel classification, in the beginning of 2008, Tallinn hotels were
classified as follows:
Hotels Classification in Tallinn
*****
**
***
***
**
*****
****
****
Source: Estonian Hotels and Restaurants Association, BPE
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Report
Hotel Market
Despite recently decreased number of visitors from Finland, growing number
of local residents, staying in the accommodation establishments, keeps
demand for hotels and other types of accommodation still strong.
States
Room Prices
Hotel Room Price in Tallinn (EUR/room /night)
Category
Single
Double
5*
150-250
180-270
4*
95-120
95-155
3*
70-90
80-100
Source: KOBA, BPE
Occupancy
As it was stated by Estonian Hotels and Restaurants Association, in the third
quarter of 2007, average room occupancy rate in the Tallinn hotels was
72.44%, at the same time, average room occupancy rate in the Estonian hotels
was 68.78%.

Number of local tourists, staying in the hotels, will continuously
grow.

Together with growing number of hotels, competition will sharpen as
well; this will lead to higher level of services and prevent room rates
from increase.
More SPA services, conference facilities and other activities will be
offered by hotels’ operators to keep occupancy higher throughout
the whole year.

ESTONIA
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Investment Market
The investment interest in the Baltic States markets has increased remarkably
during the last years. Initially the biggest investments have been related to
development activity; later the number of transactions with business and
industrial properties generating cash flows has increased. Today we again
notice some interest in development projects, or the projects where some
value added can be created via reconstruction or extension of the projects.
In general, the yields were decreasing over the last 4-5 years which is the
time since we first experienced a local investment market selling cash flow
producing real estate – and not just real estate development. The yields have
gradually dropped and for prime properties the average rate was close to 66.5% in the beginning of 2007. However, the situation in the second half of the
year has changed mainly due to the general economic situation (high inflation,
risk of currency devaluation, overheating of economy) and currently, the prime
property yields are close to 7%.
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States
Today we again notice
some interest in development projects, or the projects where some value
added can be created via
reconstruction or extension of the projects.
Office Market
The largest office transaction in Estonia (and in the Baltics as well) was sale
and lease–back of SEB bank portfolio to Homburg Invest Inc. for EUR 197
mln (the yield was not disclosed). Baltic Property Trust has acquired Tolaram
Business Centre.Radisson Hotel and Business Centre was also sold in 2007
(British real estate company Boultbee became the sole holder of the shares
in July 2007).
Retail Market
The major transactions in 2007 include the sales of Sikupilli shopping centre
and Magistrali shopping centre. Sikupilli shopping centre was acquired by
the British real estate company Boultbee, while the Finnish real estate investor
Citycon OYJ acquired Magistrali. The real estate fund AVEC Baltic Property
Fund is also operating actively in the country, having bought three trade
centres in Ida-Viru County in Jõhvi. K- Rautakesko premises on Tammsaare
Street were sold to EVLI.
Industrial Market
ESTONIA
High quality warehouse and logistics investment offers are quite rare in
the market, mostly because of the product specifics itself. One of the few
transactions represents some “sales and lease-back”. The clothing producer
Baltika sold the right of superficies of their registered property located in
the Lasnamäe Industrial Park together with the logistics centre located on
its territory, leaving themselves as the lessee of the property for the next ten
years.
Hotel Market
In 2007, the Rezidor Hotel Group sold its minority share of 14.1% in the RDS
Hotelli AS, owner of the 280-room Radisson SAS Hotel in Tallinn, - in a deal
where the UK investor Boultbee acquired 100% of the real estate.
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Investment Market
Report
States
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


Demand for prime cash flow generating properties will remain high.
More transactions of projects with development/extension potential
will be executed in the coming year.
Stronger investment funds (with more own equity) will dominate,
while weaker ones will transfer to other businesses.
Supply of development projects will increase.
Yields level has reached the bottum in 2007 and shall go slightly up
in 2008 due to general situation in the global markets, slowdown of
economy growth, high inflation.
More sale and lease-back transactions are expected in the market.
ESTONIA
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Legal Environment
Estonia started enforcing the Continental-Europe legal principles immediately
after gaining the re-independence in August 1991. While the economical
relations in a newly regenerated market-economy developed rapidly the
reforming of the civil law system was a priority from the perspective of state
policy.
Report
States
Land reform started in November 1991, with the objective to transform
relations based on state ownership of land into relations primarily based on
private ownership of land. The system of German style Land Register were
introduced and enforced with a great success. During the years 19931995 the main legislative acts regulating the real estate transactions were
evolved: Law of Property Act, General Principles of the Civil Code Act and
Commercial Code. Hardly had the national law been created, was Estonia
in situation where it was necessary to bring the regulations into line with EU
requirements. The transposition of the EU Aquis Communautaire started.
Estonian Government started also developing the information society, where
the priority was evolvement of digital state registers that could make different
administrative procedures easier and more timesaving for private entities and
public institutions. For transforming the economy more attractive for foreign
investments, clear and advantageous tax-system was also established.
All these reforms are the keys why Estonia’s economy grows at the moment
demonstrably and why Estonia was the first Soviet satellite to crack the top ten
in the Heritage Foundation/Wall Street Journal “Index of Economic Freedom”,
ranking at the moment at World rank 12 and Europe rank 5 ahead of many
Western democracies, including Finland and Germany.
General Information Investing into Real Estate
In Estonia the connection between the land and the building exists. Usually the
buildings are considered as the inseparable parts of the land. The movables
(buildings) maintain the separate status only if they are build on the basis of the
restricted real rights (building title or servitudes). The real estate transaction
can actually be divided into two contracts: first the transaction that requires
the transfer of the right or obligation and second a real right contract. Both
should be concluded in notarized form. That kind of segregation is necessary
for functioning of the Land Register based immovables system, but also it
provides more flexibly to regulate different legal relations.
ESTONIA
The real estate market has until recently showed extremely high growth. Bank
of Estonia recently announced that one fourth of the whole economic growth is
achieved because of the real estate sector. This remarkable accomplishment
is effect of the free economy, ownership immunity principle, simplicity of legal
regulations and equal treatment of both Estonian and foreign investors. Any
resident or non-resident of Estonia, either an individual or an enterprise may
acquire or rent buildings, flats and different real rights in Estonia. There are
only some restrictions for acquiring the agricultural land or forestland and land
situated in the region that has the importance for national defense. Named
restrictions are mainly directed towards the residents of third countries
(outside the EU and EEA). The establishment of enterprises in Estonia isn’t
restricted. But same principal restrictions that were mentioned before apply
to them also. Currently, the real estate market has stagnated and the market
growth rate shows signs of decline towards the year 2005 levels according to
Bank of Estonia.
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Establishing Estonian Property Company
Report
States
Kinds of Enterprises
Limited liability companies are most common in Estonia, constituting nearly 98%
of the registered companies (in October 2007 altogether 91 844 companies
were registered). The two possible forms for establishing the limited liability
company are: private limited company with the minimum capital approx. EUR
2,600 and public limited company with minimum capital approx EUR 26,600.
There is also possibility to establish the commercial association that has also
the character of limited liability, but which requires from its members active
joint economic activity. If the limited liability form isn’t needed the investor can
choose operating in a form of a general partnership, a limited partnership or
a sole proprietor.
The notary public controls the establishment of the enterprise. All the
companies should be registered in the Commercial Register. The legal
capacity of a legal person in private law arises as of entry of the legal person
in the Commercial Register. But for securing the interests of third persons
Commercial Code recognizes the transactions made by company in foundation
before the registration. In this case persons establishing the company shall be
solidarily liable for performance of the obligations arising from the transaction.
Subsequently all the changes regarding the company’s data should be
reflected in register. Only data that is reflected in register shall be held correct
with regard to a third person.
Opening and Closing an Enterprise
ESTONIA
Heritage Foundation/Wall Street Journal “2007 Index of Economic Freedom”
ranked Estonia 12th after annual survey that was compiled using 50 variables,
including trade policy, fiscal burden of government, government intervention
in the economy, property rights, wages and prices, and informal market. The
World Bank Report “Doing Business in 2008” ranks Estonia 17th economy
with its business-friendly regulation. The World Bank applauds to all the Baltic
States while only a bit more than a decade has passed since these countries
started with the reforms. Registration of the company goes in Estonia rather
quickly. All the applications for registering the company shall be submitted
through the notary public or as an alternative through electronic means.
That kind of control guarantees that the foundation process is lawful. After
the application is submitted the registration takes normally 5 working days,
provided all documentation is in order. In an accelerated procedure the
process of founding a private limited company may be completed within 2
working days. Foreign investors have to keep in mind that documents in a
foreign language shall be submitted to a registrar together with a notarized
translation into Estonian.
Closing the company is rather easy. If the closing is conclusive the liquidation
process is applicable. Alternative is transformation, if the objective is to
continue the existence in another form of company. The rights of the creditors
are protected in both procedures through the informing obligation and
creditors rights to claim for special guarantee if the transformation endangers
fulfillment of the creditor’s claim. Liquidation can evolve also into bankruptcy
proceeding if the assets of a private limited company being liquidated are
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insufficient for satisfaction of all claims of creditors. An average bankruptcy
case lasts approx 1.5 years.
Report
States
Despite of the fact that in Estonia there is no special legislation regulating
the PPP projects, actual practice with these transactions already exists. There
have been projects in environment and waste-management, real estate and
infrastructure development. In upcoming years this sector is expected to
increase more significantly because of the constant need for investments into
public sector for providing public services. City of Tallinn has already developed
different projects in cooperation of private and public sector, for example
Tallinn Technology Park, Lasnamäe Industrial Park and Saviliiva residential
area in Tallinn. While the public sector has understood the importance and
usefulness of that type of cooperation, the different governmental institutions
have been started drafting special and clearer legislation (at the moment the
legal situation regarding this matter is spread between different regulations).
The ownership of the land and buildings of residents and non-residents of
Estonia are equally protected. That is guaranteed with the art 32 of Constitution
of Estonia. Constitution stipulates that for the common interests the prohibition
can be stipulated that only the citizens of Estonia, special type of legal
entities, local authorities or state, can acquire some forms of property. Some
prohibitions regarding this matter are included to State Property Act. Law of
Property Act stipulates that seafloor belongs exclusively to state and delimits
also the amplitude of the ownership (until the height or depth were special
interest of the owner can be identified). There are also several environmentprotecting regulations that also restrict the acquiring of land in some areas.
But all of these regulations apply to residents of Estonia also.
For acquiring the commercial plots, buildings, flats and other premises there
are no restrictions imposed by Estonian law. Also all the real rights and
ESTONIA
The main significant prohibition for acquiring land in Estonia derives form
the objective to protect the local farmers and foresters and to develop clear
areas for agriculture and forestry. The foreigner-investors are divided into
two groups: residents of EEA and non-residents of EEA. The first group of
investors is required to tolerate the transitional period of seven-years that was
agreed with the EU. During the transitional period EEA residents are allowed
to acquire farming and forest land more than 10 hectares only if the have
been permanently resided and engaged in agricultural activities at least three
years (natural persons) or they are registered in Commercial Register and
have been permanently engaged in agricultural activities at least three years.
The companies are allowed to acquire such land on condition that they are
registered in Commercial Register (at least as a branch) and they are also
been engaging with agricultural activities at least three years. If the person
shall not correspond to the above mention requirements then it is allowed to
acquire land only with the permission of county governor. After transitional
period (until 2011) the criteria of origin shall be annulled for the EEA residents.
It shall remain valid only for investors outside the EEA.
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obligations and transaction costs (notary fees, state fees etc) are identical to
foreign and domestic investors.
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States
Privatization
In land reform unlawfully expropriated land is returned to its former owners or
their legal successors or they are compensated therefore, secondly land is
transferred for or without charge into the ownership of persons in private law and
legal persons in public law (privatization) or to local governments (municipal
ownership) and thirdly some land is retained also in state ownership (first
alternative for privatization). Once the property is retained to state ownership
it can be also subsequently transferred to private entities (regulated in State
Property Act) (second alternative for privatization).
If the privatization takes place as a part of the land reform, then there are
special reform regulations for that and special conditions who can acquire
property through that procedure. A foreign legal person may privatize the land
necessary for servicing a structure owned by the foreign legal person with the
permission of the county governor. In such case, the branch of the foreign
company must be entered in the Commercial Register. If the privatization
takes place after the land reform is ended then the foreign legal person can
acquire land on the same conditions as domestic investors, usually through
the auction if there aren’t other restrictions that were mentioned in clause 1.3.1.
Special agency dealing only with privatizing matters doesn’t function any more
(formerly there was Privatization Agency), cause mainly the land reform has
been completed. The latest information about objects for privatization can be
obtained from the local authorities.
Financing
ESTONIA
Different type of real estate financing is available. Most banks provide so-called
investment-loan to companies, the purpose of which is acquisition of fixed
assets or building office-, warehouse- or production facilities. For companies
the maximum period of loan contract is 10 years. Natural persons can finance
their acquisitions with mortgage-based home-loans that are available up to 40
years. Self-financing is usually in commercial field around 34% of the costs of
the loan project. Home-loans have a self-financing level of 10% of the cost of
the home. The borrowing in Estonia is rather inexpensive. The average interest
for companies for bank loans is 7%, and for natural persons around 6%.
There are several guarantee instruments also available: for companies – a
guarantee of Credit and Export Guarantee Foundation (KredEx) may be applied
for covering up to 75% of the loan amount, in rural areas also a guarantee of
Maaelu Edendamise Sihtasutuselt - MES, for covering up to 75% of the loan
amount. It should be noted that while these instruments are for promoting the
enterprises established in Estonia, then there are restrictions in providing these
guarantees directly to foreign companies. But while there are no restrictions
regarding the origin of the capital then these financial instruments are also
worth examining.
Loan and personal suretyship agreements with natural persons should be in
written form, otherwise considered null and void. All the contracts regarding
the pledges should be signed in notarized form (also if the mortgager is a
company).
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Report
States
There are numerous amount of different programmes co-financed by EU
structural funds. Some of them are for example: Research and Development
Institutions’ Infrastructure Development Programme, Marketing and Product
Development Programme for Travel Trade, Business Infrastructure Development
Programme etc. it must be kept in mind that the funding is dedicated solely to
the Estonian market. But while there are no restrictions regarding the origin of
the capital in concrete company, then through the investment schemes, foreign
investors can also take advantage of the funding possibilities. Of-course the
funded projects should be carried out in Estonia and should be dedicated
in favour of the Estonia’s economy. Enterprise Estonia is one of the largest
institutions within the national support system for entrepreneurship in Estonia,
providing financing products, advice, partnership opportunities and training
for entrepreneurs, research and development institutions and the public and
third sectors. Ministry of Economic Affairs founded Enterprise Estonia in 2000,
with the aim of promoting the competitiveness of the Estonian entrepreneurial
environment and Estonian businesses, thereby increasing prosperity.
Information regarding the funding possibilities are simply obtainable through
that institution.
Mortgages
ESTONIA
Real estate mortgages are the most common collaterals used by natural
persons and companies for securing their loans before financial institutions.
Mortgaging the real estate is one opportunity to dispose the real estate.
Mostly there are no restrictions for mortgaging the property. Restrictions that
might be in connection with some real estate are mainly cause of the earlier
agreements between the real estate owner and for example the restricted realright owner (for example person having the building title to the land). This kind
of restrictions should be written up to the Land Register, because otherwise
these aren’t valid regard to the third persons. Mortgaged property remains
to the ownership and possession of the owner and does not eliminate the
owner’s rights to use and dispose of the mortgaged property. Only the usage
and disposal shouldn’t hamper the rights of the mortgage holder nor decrease
the value of the mortgaged property.
Like other real estate transactions the contract for encumbering the real estate
with the mortgage should be concluded in the notarized form and mortgage
shall be considered effective after such remark is registered in Land Register.
It might take up to two months for making the registration into the register.
Sale-Purchase Agreements
Imperative form-requirement is applying for the sale and also for encumbrance
contracts of real estate. All the contracts relating with the ownership or disposal
of the real estate (mortgaging, encumbrance with usus fructus or building title
etc.) have to be notarized. Notary public verifies the identity of the parties,
their authorizations and the agreement for its legality and also sends the
contract to Land Register for registration. Further transactions with real estate,
relating the real rights can be concluded only if the acquirer is registered in
the Land Register as the owner. The Land Register represents extremely high
importance, cause only after the registration, the acquirer can be considered
as owner of the real estate. Without such registration only agreement on the
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basis of Law of Obligations can be concluded between the future owner and
the third party.
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Regarding with the private international law it should be mentioned that ius res
domicili is applicable. It means that the creation and extinguishment of a real
right shall be determined pursuant to the Estonian law if the thing was situated
in Estonia at the time of creation or extinguishment of the real right
The notary fee depends on the amount of transaction. The exact sum can be
checked from the list of notary fees. But approx it is around 0,3% of the amount
of transaction. The fees are regressive. The lower transaction amount equals
to a bit higher percentage of the fees. VAT (18%) shall be also added to the
notary fee.
Land Register
Land registry departments of county and city courts shall maintain Land
Registers. All immovables shall be entered in a Land Register unless otherwise
provided by law. An independent register part is opened for each immovable
entered in a Land Register and a separate number (registered immovable
number) is assigned thereto. In addition all real rights relating to an immovable
are entered also in a Land Register and also all changes of real rights, the
restrictions of disposal and civil cases brought to the court regarding real
estate. In conclusion, form the Land Register the interested person should
obtain adequate information in connection with all the immovables. All the data
in register shall be held correct with regard to a third person.
Real estate transactions are taxable with state fee (riigilõiv). The amounts
depend of the value of the immovable and the exact fees can be determined
on the basis of the state fee table stipulated in State Fee Act. The approx
amount is 0,2-0,4% of the value of the immovable.
ESTONIA
In connection with the real estate transactions the most important type of the
plans is detailed plan, which is prepared with the aim of establishing land use
provisions and building provisions for cities and towns and for other areas and
in other cases where detailed planning is mandatory. The higher levels of the
planning are: comprehensive plan, county plan and national spatial plan. The
preparation of detailed plans is mandatory for areas located in cities and towns
in the following cases: as the basis for new buildings, except for outbuildings
of detached houses, outbuildings of summer-houses, outbuildings of garden
houses and other small buildings with an area occupied by buildings of up to
20 m2; as the basis for the expansion of the cubature above ground of existing
buildings; in the event of land areas being divided into plots. Administration of
planning activities within the administrative territory of a rural municipality or
city is within the competence of the local government. The local government
is also allowed to conclude the contract with private entities for organizing the
planning.
The detailed plan shall regulate following: determine the building rights of a
plot; delimit the area that can be occupied by buildings; determine the areas
and traffic management of streets, the principles for planting vegetation, the
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location of utility networks and technical infrastructure; establish environmental
provisions for implementation of the plan; make proposals, where necessary,
for placing areas and objects under protection; establish the essential
architectural requirements for buildings; determine the scope of other
restrictions on immovable property ownership arising from different legislation
in planning areas etc.
Report
States
There are no special restrictions imposed on the foreign companies. Planning
regulation applies with all its conditions to all the landowners, despite of their
nationality or place of business. Anyone may make a proposal for initiation
of the preparation of a plan, but regarding with the detailed plan a local
government shall initiate and administer the procedure. If the initiator finds that
the local government had no grounds for dismissing the proposal for initiation,
it can apply for the administrative court.
The building (also reconstructing or expanding) is allowed only on the basis
of building permit. Building shall be performed pursuant to building design
documentation, except in the event of the building of small construction works.
A building permit does not grant the holder thereof the right to build without
the permission of the owner of the land unit or construction works specified
in the building permit. A building permit can be obtained from the local
municipality if the developer submits required documentation (list is stipulated
in the Building Act). A building permit is granted for an unspecified term, but it
becomes invalid if building is not commenced within two years as of the date
of issue of the building permit.
A completed construction works or a part thereof may be used only for
the purpose prescribed therefore. The building can be used only if a local
government has issued a permit for use of a construction works. A permit for
use shall be issued after the construction works has been reviewed and is
declared to conform to the requirements. The local government has the right to
involve persons and institutions, which are competent to review construction
works in the review thereof, and such persons and institutions shall present
their opinion in writing. Afterwards the municipality is entitled to control the
usage of the building. In case of misuse of the building or non-fulfilment of
public requirements (repairment obligation, maintaining of the surrounding etc)
the local municipality has a right of making the compulsory predescriptions.
ESTONIA
Leasing of Real Estate
Leasing the real estate and its conditions are subject of the lease agreement
between the owner and the lessee. There is no imperative form applying for
leasing contracts, but it should be mention that if the accommodation-leasing
contract for period more than one year is concluded in oral form, then it is
considered to be concluded without deadline. Legal acts don’t constitute any
remarkable restrictions regarding the leasing. But it should be noticed that
the accommodation-leasing clauses stipulated in the Law of Obligations are
usually considered imperative. The period of the lease is subject to agreement.
Upon the change of the landowner, the new owner takes over imperatively all
the rights and obligations of the landlord. But if there is no registration of the
leasing contract in Land Register, then the new owner can within three month
terminate the effective leasing contract. If the registration is made, then the
termination right shall not apply.
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More detailed regulation is stipulated in connection with the real estate, owned
by the state or local municipalities. In this case the leasing contracts are usually
concluded through the auction with the person submitting the higher fee for the
lease. The possible leasing periods are following: rooms maximum 10 years,
movables maximum 5 years, and other real estate maximum 50 years (leasing
on the basis of obligation law). It is possible to lease state or municipality owned
real estate also on the basis with real rights. In such cases the conclusion of
the contract happens also usually through the auction, but there are more
detailed regulations and requirements. The deadlines for encumbering the
real estate with usus fructus are following: 15 years for agricultural land, if the
person uses the land already on the basis of the Estonia SSR Farmers’ Act,
then for 99 years, other cases maximum for 50 years.
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States
Investment Protection
There is no special internal act regulating the protection of the investments into
the Estonia’s economy. The main principle applicable is the protection of the
property and capital despite of its origin. Also the EU free capital movement
principle is a guarantee for investors that all the companies from the EU
countries should be treated equally.
In connection with the dispute resolution it should be mention that usually
the action should be filed according to location of defendant. There is also
possibility determining the court jurisdiction with the agreement and then the
contractual agreement is premier. Estonia recognizes also the jurisdictions of
the different arbitrage courts. In Estonia for example, The Arbitration Court of
the Estonian Chamber of Commerce Industry is operating. This is a permanent
arbitration court, settling disputes arising from contractual and other civil
law relationships, including foreign trade and other international economic
relations. The court has the authority to make a decision if at least three of its
arbiters participate in its activity. The decisions of the arbitrage court become
effective at the moment of their adoption are final and cannot be appealed
(appellation is possible only in connection with the procedural breaches).
ESTONIA
Bilateral agreements concerning the promotion and reciprocal protection
of investments are concluded with following countries: the USA, Denmark,
Finland, Sweden, France, Norway, the Netherlands, Germany, Switzerland,
Poland, China, Israel, the United Kingdom, Austria, the Czech Republic,
Ukraine, Lithuania, Belgo-Luxemburg Economic Union, Latvia, Italy, Greece,
Turkey and Spain. In case of investment disputes foreign investors have the
right directly address the International Centre for Settlement of Investment
Disputes.
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Taxation
Estonia’s tax regime is generally business-friendly. Especially the Estonian
system of corporate earnings (income) taxation, with its flat rate of 21% (the
rate shall fall down to 20% in 2009), is considered as one of the most liberal
and innovative tax regimes in the world, as it shifts the moment of taxation from
the moment of earning the profits to the moment of their distribution. Thus the
undistributed profits are not subject to income taxation, regardless whether
invested or merely retained.
Report
States
The short overview provided here below focuses on the Estonian taxes and
aspects of these relevant to real estate owners, lessors and developers and is
not aimed at providing a thorough coverage of the Estonian taxation framework.
However, a local advocate or tax advisor should always be consulted on the
legal risks and effects when planning an investment into or a transaction with
the real estate in Estonia.
Income Tax
There is no classical corporate income tax system in Estonia. The Estonian
companies do not pay income tax on the profit derived from their enterprise,
for example from transactions (sale, lease etc) related to real estate. Instead of
taxation of the profit earned by resident companies, actual and deemed profit
distributions (usually done in the form of dividends) are taxed by the rate of
21% on the gross amount of the distribution. Thereby, the main difference of
the Estonian system from corporate income tax systems in other countries is
the timing of tax liability.
However, several other general elements of the traditional corporate income
tax in a way still exist. For example, expenses that are not deductible in a
traditional system are taxable in Estonia. These may be fringe benefits;
gifts, donations and representation expenses; and expenses and payments
not related to business. In addition to such profit allocations (“distribution”
is treated wider than direct dividend payments), transfer-pricing rules apply
against hidden distributions of profits.
ESTONIA
Under the traditional system, the starting point (the basis) for taxing profits of
a company is usually profit and loss account that is calculated according to
the accounting rules and then it will be adjusted according to the tax rules.
In Estonian system, dividends reflect the commercial profits and in addition
to that, non-deductible expenses are taxed. Estonian simple system lies on
cash-basis accounting and in view of taxation there is no need for amortization
and depreciation rules.
In terms of taxation, there is no difference between investments through
Estonian partnerships and limited liability companies because they are all
similarly treated tax-wise and considered non-transparent for tax purposes
and subject to corporate income tax. Furthermore, the profits of the permanent
establishments of non-residents are taxed in a similar manner as income of a
resident company i.e. only on distributions or deemed distributions. However,
as in the latter case there are no dividends, the direct distributions of the
permanent establishment are considered to be the assets taken out of it (for
tax base the input assets are subtracted).
There is also separate (additional) withholding tax of 21% on dividends
paid to non-resident legal entities if the recipient has less than 15% of the
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shareholding in the distributing local company. In case there is a double
taxation avoidance treaty executed between Estonia and the country where the
recipient is residing, the mentioned withholding tax rate is lowered usually to
15%. However, similarly to the residents no additional withholding income tax
is charged on dividend payment received by a non-resident natural person.
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States
In case the activities of the company for example to acquire real estate is
financed through loans, the income tax is not charged on interest received by
a non-resident, if the rate of the interest corresponds to the market conditions.
However from the part of the interest crossing the usual rate the income tax
of 21% is withheld unless there is a double taxation avoidance treaty, which
lowers the tax rate to 10%.
With regard to the gains or income derived by a non-resident (natural or legal
person) respectively from a transfer or lease of real estate (also transferred
real right or claim related to an immovable) located in Estonia the income tax
of 21% is charged.
As the gains derived by a non-resident from the transfer of securities are
considered to be outside of Estonian based source of income, such gains
are not taxed in Estonia. However there are exceptions. The payments of
liquidation proceeds and the ones made upon the reduction of the share
capital exceeding the acquisition cost of the holding, made to a non-resident
by a resident legal person, are taxed by 21%.
Furthermore, income tax is also charged on gains derived by a non-resident
from the transferred shareholding, if it is a holding in a company of whose
property, at the time of the transfer or during a period within two years before
transfer, more than 50% was directly or indirectly made up of real estate
located in Estonia and in which the non-resident had a holding of at least 10%
at the time of transfer.
Value Added Tax
ESTONIA
The transfer and letting of real estate is generally exempt from value added tax,
the general rate of which in Estonia is 18%. However in certain cases provided
by the law such supply (transfer or letting of real estate) is compulsorily taxable
or it is taxable because the seller or lessor has chosen to charge the value
added tax on such supply.
Tax exemption is not applied to construction works and parts thereof and
to the land under these transferred before the commencement of use of the
construction works and to the plots of land where there are no construction
works but the plot is intended for building purposes and located in an area
where the preparation of a detailed plan (establishing land use and building
provisions) is mandatory.
The principle here is that real estate shall be taxed if it is transferred by a
taxable person (usually not a natural person, but a person engaged in
business in Estonia and registered here as a taxable person) before the first
actual commencement of use of the new constructed building on the purpose
provided in the project and in order to avoid cumulating taxation the further
sales of it are exempted from tax.
124
Taxation
Repaired and reconstructed buildings are generally not taxed. But, if the
building on the real estate is substantially enhanced (the costs of which cross
the acquisition cost of the building by 10%) and the real estate is transferred
before the recommencement of use of the building following the enhancement,
the exemption does not apply.
Report
States
However, if the taxable person has used the aforementioned right of option
(the seller’s voluntary right to charge value added tax on supply of real estate)
then the right to deduct the input value added tax is preserved. However if the
tax exemption of the supply of real estate is applied such right to deduct the
input tax is lost.
It may be argued that it is useful to apply the tax exemption when the
purchaser or the lessee is a natural person or an entrepreneur whose supply
is tax-free (e.g. credit institutions) as the tax saved from the sales supply is
bigger than the lost input tax. However, it may be useful to charge the tax if the
purchaser or the lessee is another entrepreneur who is using the building for
its taxable supply and thereby has the possibility to deduct the whole tax on
the transaction as the input tax.
Considering the principles that the value added tax is an indirect tax and
the tax burden should not be on the entrepreneur but is finally laid on the
consumer then, as a general rule if the sales value added tax during a taxable
period (1 month) is less than the amount of input tax deductible by the taxable
person during the same period, the overpaid tax will be refunded to the latter
one upon application.
Furthermore, with respect to real estate the period of adjustment of input
value added tax is 10 calendar years. Thus, a taxable person who acquires,
constructs or repairs buildings for its business purposes has the right to
deduct input tax if the building is used for at least 10 years for its taxable
supply (e.g. rents it out or uses it as its production or office building). If the
building is transferred before the passing of the 10 years tax-free or it is used
for non-taxed supply (e.g. rents it out tax free) then for each year of the 10-year
period, when the building was not used for taxable supply, 1/10 of the input tax
initially deducted has to be adjusted and re-calculated.
ESTONIA
Finally, it should be mentioned here that the Estonian Value Added Tax Act
has implemented a number of EU directives covering value added taxation
including the so called 6th VAT-directive (Council Directive 2006/112 of
1.01.2007) on the harmonization of the laws of the member states relating to
turnover taxes.
Land Tax
The only property tax imposed in Estonia is land tax, which is based on the
assessed value of land (only the clean plot) determined by the law. Generally,
the land tax is imposed on all land however with several exceptions and it
is payable by the owner or by a certain user of the land. The land tax rate,
established by the municipalities, is between 0,1 – 2,5% of the assessed
taxable value of the land annually.
125
SWOT Analysis of the Current Baltic
Commercial Property Market
A SWOT analysis is the most common tool in analysing the expected
performance of equities. It describes the strong and weak sides of an
investment together with its opportunities and threats. It does not pretend to
give an exact answer to the dilemma of whether to invest or not to invest, but
illustrates the expected yields and risks.
Report
States
Strengths
 High quality real estate objects
 Demand for prime properties in attractive locations (mostly from
foreign investors)
 Fairly developed market
 Still high potential for separate segments (hyper/supermarkets,
warehouses) development
 Potential for development and extension projects (adding value by
redeveloping)
Weaknesses




Still high expectations about property values from the sellers’ side
Lack of parking space in the city centre and near office buildings
Shortage of land plots for prime properties’ development
Lack of professional large scale international real estate developers





The EU membership
Transparent investment environment
Well-educated labour force
Stable political climate with a democratic spirit
Development of western consumer habits
Opportunities
Threats
 Due to growing financing costs investments require a larger proportion
of equity and stronger position in the market
 Sharply growing inflation rate will slow down domestic consumption
 Longstanding slowdown of economic growth might cool the property
market (less demand for new space, less transactions, etc.)
 Relatively low yield rates might shift international investments into
other countries.
126
Company Profile
Report
States
Since 1989, KOBA has striven to be a serious, competent and professional
real estate consulting company, constantly adjusting to the conditions within
an ever-changing market.
Today, our organisation is composed of qualified and motivated employees
always focused on the needs of our clients. We are organised in various
business fields ensuring that each employee has a sound general knowledge
of the property market to complement a profound insight into his or her
specialist field. This enables us to provide added value to our clients, not only
as real estate consultants, but also as professional and trustworthy advisers
and partners at the strategic level.
KOBA UAB
Konstitucijos Av. 7
LT-09308 Vilnius
Lithuania
Tel. +370 5 2487222
Fax +370 5 2487223
[email protected]
www.koba.lt
KOBA was established in Copenhagen in 1989, and opened an office in Vilnius
(Lithuania) in June 2000. The organisation into business fields enables us to
operate in all parts of the Baltics and beyond.
Investment
Acquisition and sales of investment property. Preparation and implementation
of buying and selling strategies combined with consulting services.
Valuation
Maintenance of high professional competence in valuation services related
to change of ownership, property financing, accountancy, and expert
appraisals.
Corporate Services
Selling and leasing offices and industrial premises. Locating headquarters for
large and small businesses.
Retail
Real estate services to retail chains wishing to acquire or sell shops, including
strategic consulting services. Letting and sales of retail shops.
Hotels
Providing market analysis, consultancy and advisory services to local and
international hotel property operators, owners and investors.
Property Management
Various assignments related to property management, including collection of
rent, care-taking and maintenance.
Research
Preparation of newsletters addressing the market situation, preparation of
market reports, market analyses, and continued monitoring and evaluation of
market conditions.
Special Projects Group
Complex projects, highest and best use analysis, public companies’ and large
corporate’ projects.
127
Company Profile
Report
States
Profile
Jurevièius, Balèiûnas & Bartkus is a professional law partnership acting as a legal
counsel to domestic and foreign, private and public legal entities. The professional
law partnership was established under the leadership of four partners: Gintautas
Bartkus, a distinguished specialist in private law, former Minister of Justice in the
11th Government of the Republic of Lithuania; Gintaras Balèiûnas, a distinguished
litigation expert, former Minister of Justice in the 9th and 10th Governments of
the Republic of Lithuania; Raimundas Jurevièius, an experienced international
commercial lawyer, and Gytis Kaminskas, a prominent expert in the EU law.
In the last years, Jurevièius, Balèiûnas & Bartkus welcomed four new partners:
professor Valentinas Mikelënas, former judge of the Supreme Court of Lithuania,
one of the most prominent experts of civil law in Lithuania well established abroad,
the author of a number of scientific articles, handbooks and studies; Kæstutis
Jungevièius, a distinguished real estate law expert experienced both in the legal
and management spheres; Lina Mikalonienë, an experienced lawyer in corporate
law and in mergers & acquisitions; Iraida Þogaitë, a distinguished expert in
competition and distribution law as well as public private partnerships.
Jurevièius, Balèiûnas &
Bartkus
Professional Law Partnership
Subaèiaus 7
LT-01127 Vilnius
Lithuania
Tel.: +370 5 274 24 00
Fax: +370 5 274 24 44
E-mail: [email protected]
www.jbblegal.lt
Jurevièius, Balèiûnas & Bartkus is a member of Baltic Legal Solutions. Baltic Legal
Solutions currently includes Jurevièius, Balèiûnas & Bartkus in Lithuania, Kronbergs
& Èukste in Latvia, Teder, Glikman & Partnerid in Estonia and has around 80
practicing lawyers. Through this legal network and through relationships with other
outstanding law firms and attorneys, Baltic Legal Solutions is able to serve the
needs of every client, no matter in what country his needs may arise or how large
the transaction may be.
Jurevièus, Balèiûnas & Bartkus is also a member of one of the leading associations
of European law firms, the Pinsent Masons Luther Group (PMLG). In total, the
association brings together almost 1,400 lawyers in 35 offices across Europe.
Members firms have a strong track-record of collaborative working, with particular
synergies in real estate.
Services
General Practice, Mergers & Acquisitions Law, Corporate Law, Insolvency Law,
Distribution Law, Competition Law, Finance & Banking Law, EU Law, Transport
Law, Insurance Law, Environment Law, Energy Law, Real Estate Law, Employment
Law, Intellectual Property and Information Technology Law, Litigation & Arbitration,
Tax Disputes, Lobbying.
People
The team of Jurevièius, Balèiûnas & Bartkus brings together lawyers with
professional experience gained in law firms, audit and consulting firms, Lithuanian
Ministry of Justice, Vilnius University Law Faculty, the Supreme Court of Lithuania,
the Court of Appeals of Lithuania, other state and municipal institutions.
The majority of the lawyers have been trained in foreign law schools, including
J. W. Goethe University (Germany), Jean Moulin University, Lion (France), John
Marshall Law School (USA), University of the Pacific McGeorge School of Law
(USA), Utrecht University (the Netherlands), Lyon Catholic University (France),
Riga Graduate School of Law (Latvia), University of Lund (Sweden).
The lawyers of Jurevièius, Balèiûnas & Bartkus have broad international experience
with the European Commission bodies, European Bank for Reconstruction and
Development, Council of Europe.
128
Company Profile
Report
States
Local Dimension
Kronbergs & Èukste is a full service law firm, specializing in corporate
commercial law, energy & utilities, and real estate and construction, founded
by two former accounting firm legal practice partners, Valters Kronbergs &
Vineta Èukste. It consistently performs well in reputable legal market analysis
guides such as the LEGAL 500, Chambers, the International Financial Law
Review and the Practical Law Company.
Baltic Dimension
Kronbergs & Èukste is a founding member of Baltic Legal Solutions, a panBaltic integrated legal network of law firms which included Teder Glikman &
Partnerid in Estonia and Jurevicius, Balciunas & Bartkus in Lithuania. This high
quality legal network has the ability to provide a one-stop-shop approach to all
of the client’s needs in the Baltics.
Kronbergs & Èukste
Attorneys at Law
Kronvalda bulvaris 3-5
LV-1010 Riga
Latvia
New address after Sept 1, 2008:
Muitas iela 1
Tel.: +371 67043803
Fax: +371 67043804
email: [email protected]
www/kclegal.lv
Pan European Dimension
Kronbergs & Èukste, together with the aforementioned Estonian and Lithuanian
members of Baltic Legal Solutions, is a founding member of the Pinsent
Masons Luther Group, known as ‘PMLG’, established on 12 December,
2006. Other founding members include Luther (Germany); Granrut (France);
Karasek Wietrzyk (Austria); Gobert, Fest & Partners (Hungary); and Pinsent
Masons (United Kingdom). PMLG is more than a name. Our firms have been
working closely together, focusing on those areas where we are recognized in
the marketplace for our expertise: competition; corporate; employment; IP/IT;
PPP; real estate and construction. Our aim is to match the international reach
of our clients, freeing them from the time-consuming business of windowshopping for a local firm, and delivering a seamless, first-class service on time
and to budget. Our client-facing work is supported by a common infrastructure
including joint training events, a secondment program, the development of a
common quality and risk management procedures and shared technology.
129
Company Profile
Report
States
Glikman & Partnerid (formely known as Teder, Glikman & Partnerid) is one of the leading Estonian law firms, situated in Tallinn, the capital of the Republic of Estonia.
Glikman & Partnerid was established in 2004 as a result of merger between two law
firms - Teder & Partnerid and Glikman & Glikman. Founded respectively in 1992 and
1991 Teder & Partnerid and Glikman & Glikman were among the first independent law
offices in Estonia. Integration of the strong litigation practice of Glikman & Glikman
with a long-term experience of Teder & Partnerid in M&A and commercial law allowed
us to become a truly full-service law firm.
Glikman & Partnerid is able to provide local experience combined with full range of
legal services to both domestic and international corporate clients. We have an indepth understanding of business, cultural and political environment in the Estonia.
This combined with our international expertise ensures that we provide legal services
of the highest quality in both the private and public sectors.
Glikman & Partnerid has 17 lawyers. We place great emphasis on the training and
development of our partners and staff in both current legal and business issues as
well as internationally. Good communication is an essential part of effective business
relationships. We therefore ensure the most of our staff are bi-lingual in Estonian and
English and many are capable of working in Russian, German, French, Finnish and
Swedish.
GLIKMAN & PARTNERID
LAW FIRM
2 Tornimäe 18th floor
10145 Tallinn
Estonia
Phone: +3726657070
Fax:
+3726657071
www.tgplegal.ee
Contact partners:
Mrs. Mariana Hagström
[email protected]
Mr. Leon Glikman
[email protected]
Mrs. Daisy Tauk
[email protected]
We have substantial experience in commercial and corporate transactions and we are
renowned for our dispute resolution practice. The main areas of practice are:
 Infrastructure & Transportation
 EU & Competition
 Corporate & Commercial
 Real Estate & Construction
 M&A
 Energy & Utilities
 Tax
 Environment
 IT & Communications
 Medical & Pharmaceuticals
 Banking & Finance
& Healthcare
 Litigation & Arbitration & Dispute Resolution
Glikman & Partnerid consists of the litigation and business teams, which have been
developed to ensure that clients receive advice from lawyers who are always experts
and often leaders in their field. Our litigation team is headed by partner Leon Glikman,
LL.M. (Harvard) and business team by partners Mariana Hagström, LL.M. (Stockholm) and Daisy Tauk, LL.M. (Stockholm). Most of our lawyers possess professional
knowledge not only in law, but also in other areas, such as business management,
corporate finance and public relations.
Glikman & Partnerid is a member of Baltic Legal Solutions, which is a Pan-Baltic
alliance combining three well-established firms – besides Glikman & Partnerid in Estonia Jurevicius, Balciunas & Bartkus in Lithuania and Kronbergs & Cukste in Latvia and
has over 80 practicing lawyers. Through this legal network and through relationships
with other outstanding law firms and attorneys, Baltic Legal Solutions is able to serve
the needs of every client, no matter in what country his needs may arise or how large
the transaction may be.
Glikman & Partnerid is also a member of one of the leading associations of European
law firms, the Pinsent Masons Luther Group (PMLG). In total, the association comprises over 360 partners operating out of 36 offices across Europe. Members firms
have a strong track-record of collaborative working, with particular synergies in Real
Estate. The pan-European network will provide a formidable cross-border legal services resource for clients doing business in the region.
130
Company Profile
Report
States
Ernst & Young is a global leader in assurance, tax, transaction and advisory
services. Worldwide, our 130,000 people are united by our shared values and
an unwavering commitment to quality. We make a difference by helping our
people, our clients and our wider communities achieve potential.
Ernst & Young employs over 500 people in the Baltics.
For more information, please
contact us in:
Vilnius, Lithuania
Ernst & Young Baltic UAB
Subaèiaus 7
LT-01127 Vilnius
Lithuania
Tel. + 370 5 274 22 00
Fax + 370 5 274 23 33
[email protected]
www.ey.com/lt
www.ey.com
© 2008 Ernst & Young.
Riga, Latvia
Ernst & Young Baltic SIA
new address as of August
2008:
Kronvalda Boulevard 3-5
LV-1010 Riga
1 Muitas street
LV-1010 Riga
Latvia
Tel. + 371 67 043 801
Fax + 371 67 043 802
[email protected]
www.ey.com/lv
Tallinn, Estonia
Ernst & Young Baltic AS
Rävala pst 4
10143 Tallinn
Estonia
Tel. + 372 6 114 610
Fax + 372 6 114 611
[email protected]
www.ey.com/ee
COPYRIGHT © KOBA UAB. 2008. All rights reserved. No part of this publication
may be reproduced or transmitted in any form or by any means without prior
written consent of KOBA UAB. It is based on material that we believe to be
reliable. Whilst every effort has been made to ensure its accurancy, we cannot
offer any warranty that it contains no factual errors. All information provided by
the parties is prepared as of 1 March 2008.
131
Report
States
132

Retail Market

Transcription

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