REAL ESTATE MARKET OVERVIEW RIGA AND GREATER RIGA AREA March

REAL ESTATE MARKET OVERVIEW – RIGA AND GREATER RIGA AREA March 2006 In March the average price of a standard type apartment has climbed by 3%, reaching 1,058 EUR/m2. For a number of months in a row in the Old Town and the near centre one and the same properties are offered in the market. A new trend is emerging in the property market – prices of apartments in the new homes in Riga residential districts and those of budget detached houses in the Greater Riga area have become competitive. Choice of purchasers is not price-determined any more. More and more new homes are built outside Riga – in Ogre, Salaspils, Sigulda, Adazhi, Jelgava, Babite etc. Availability of credit resources facilitates purchasing demand not only for dwellings, but also for retail and office space, land for construction of industrial objects. In the beginning of March lease agreement of the last vacant office premises in “Valdemara centrs” was signed. Thus at the moment there is no Class A office space available in Riga any more. In March supermarket “Sky” was opened in the premises of the former supermarket “Mego Mix” in Krasta street. In Jelagva multipurpose retail centre “Pilsētas pasāža” was launched. On March 8, 2006 Constitutional Court of the Republic of Latvia reached a decision that beginning with January 1st, 2007 the regulated rent payment or the so called rental ceiling in the buildings that are either denationalized or returned to their lawful owners will be released. In the long run this decision will have a positive impact upon the real estate market. Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 1 of 9 HOUSING MARKET On March 8, 2006 Constitutional Court of the Republic of Latvia made a decision that beginning with January 1st, 2007 there will be released the regulated rent payment or the so called rental ceiling in the buildings that are either denationalized or returned to their lawful owners. In this respect the City Municipality has to make a decision on the means of supporting the needy residents of denationalized buildings – either by more active construction of new residential buildings or by offering financial support in rental payments. We do not expect one development scenario of the property market, a number of solutions is more likely, consequently leading to: • More rapid rental market development; • Capital renovation of the so far un-furbished residential buildings in the city centre; • Expansion of borders of the nice and prestigious Riga centre. The majority of the suppliers are willing to improve their living conditions, i.e., they are selling their old apartments in order to purchase and move to better quality dwellings. The biggest demand drivers in the housing market are family people from Riga in the age group of 30 to 45. The biggest demand so far is witnessed for apartments in standard type residential buildings. A new trend is emerging in the market – prices of budget detached houses and apartments in the new projects have leveled out, lately these two market segments have become competitive. Thus choice of purchasers either to buy an apartment in the new home in one of the Riga residential districts or a detached house is a matter of taste and not a financial issue any more. Cre dits grante d to private individuals by comme rcial banks , ave rage price s of total s pace 2 600 2 400 2 200 Credit portfolio, increase of credit portfolio x 10 mil. LVL 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 2000.Dec 2001.Dec 2002.Dec 2003.Dec 2004.Dec 2005.Dec 1300 1200 1100 1000 Average price, EUR/sqm 900 800 700 600 500 400 300 200 100 0 credit portfolio of commercial bank s credit portfolio changes (approximate amount of the credits granted) (x10) average price of s quare meter in a s tandart type block hous e, EUR S ource: LATIO, the Finance and Capital Mark et Commis s ion Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 2 of 9 STANDARD TYPE APARTMENTS The monthly average apartment price increase is the lowest this year, the price has climbed by 3%, i.e., by 34 EUR. Thus in March the average price of a standard type apartment in residential districts has reached 1,058 EUR/m2. Having analysed data of the Land Book register and the State Land Service, we have to state that the number of apartment purchases has decreased during the past few months. However, decrease in the number of transactions is a typical trend characteristic to the beginning of the year, the main reason still being the ever increasing asking prices. Number of the apartment sales transactions in Riga number per month 1 800 1 600 1 400 1 200 1 000 800 600 400 200 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 0 Source: Landbook register & State Land Service Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 3 of 9 Prices of standard type apartments in Riga residential districts in March, EUR Rajons/ sērija 1room Series 119 2rooms 3rooms 4rooms 1room Series 602 2rooms 3rooms 4rooms 1room 2rooms 3rooms 1room 2rooms 3rooms 1room 2rooms 3rooms 1room 2rooms 3rooms Purvciems 46000 58000 61000 73000 72000 88000 81000 103000 39000 46000 56000 67000 64000 76000 76000 91000 44000 54000 57000 68000 67000 82000 49000 60000 62000 72000 73000 101000 38000 43000 49000 59000 61000 73000 37000 45000 50000 60000 63000 71000 Ziepniekkalns 46000 55000 58000 70000 69000 85000 79000 96000 38000 46000 53000 63000 61000 75000 77000 93000 - Agenskalns - Imanta - Zolitude 44000 55000 59000 73000 69000 86000 80000 100000 - Plavnieki 43000 53000 58000 69000 67000 85000 75000 96000 39000 45000 55000 68000 62000 72000 74000 90000 41000 51000 56000 64000 64000 75000 46000 56000 57000 70000 67000 84000 - Mezhciems - Jugla - Kengarags - Vecmilgravis - Bolderaja - - - - - - - - - - - - - - - - 40000 47000 54000 64000 62000 73000 75000 99000 - 35000 43000 47000 55000 57000 71000 73000 82000 - - - 35000 44000 48000 60000 53000 67000 73000 78000 35000 45000 47000 60000 55000 62000 - - - - - - - - - - - - - - - 40000 50000 57000 64000 65000 75000 - - - - 37000 43000 49000 57000 58000 67000 - - - - Series 103 - - - - - - 47000 55000 61000 66000 71000 81000 38000 42000 51000 57000 60000 66000 37000 42000 47000 56000 58000 65000 47000 53000 60000 69000 71000 89000 39000 45000 52000 59000 60000 67000 - 46000 53000 57000 68000 67000 87000 - 41000 51000 49000 60000 59000 73000 35000 38000 48000 51000 54000 59000 - - - - - Series 104 - - - - - 35000 42000 52000 55000 60000 64000 36000 41000 48000 57000 56000 62000 - 36000 45000 42000 51000 49000 60000 28000 43000 40000 56000 52000 64000 32000 41000 42000 57000 53000 64000 34000 40000 45000 53000 52000 57000 33000 40000 44000 52000 55000 63000 - „Lithuanian” proj. - - - - - - 33000 39000 49000 53000 57000 63000 „Hruschov” type houses - - - - - - - - - - - - source: LATIO Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 4 of 9 NEW PROJECTS This March in Riga there were commissioned two new homes projects – residential buildings in Madonas street and Dignajas street, but construction works were completed in three new homes – projects "Vaivaru muiža" in Jurmala at the Ventspils highway, "Sauriešu nams 2" in Sauriesi and building in 386 Brivibas street. The last apartment was sold in the project „Albatross” in Katrinas dambis. More and more new homes are built outside Riga – in Ogre, Salaspils, Sigulda, Adazi, Jelgava, Babite and other places. The average apartment price in Riga residential districts with partial finish is about 960 LVL/m2 (1,365 EUR/m2), but in Purvciems the average price is higher – 1,054 LVL/m2 (1,500 EUR/m2), while in the centre of Riga it is 1,760 LVL/m2 (2504 EUR/m2). The average apartment price in Riga residential districts with white finish is about 1,150 LVL/m2 (1,636 EUR/m2), for apartments with partial finish in the Old Town 3,100 LVL/m2 (4,410 EUR/m2). The highest price is still witnessed for apartments with partial finish in the Old Town, 5 Palasta street - 3,514 LVL/m2 (5,000 EUR/m2). In Saulkrasti, project „Liepas” envisaged to be commissioned in the beginning of 2008, price of apartments with white finish is 1,265 LVL/m2 (1,800 EUR/m2). In Salaspils the average apartment price in the new homes is about 586 LVL/m2 (835 EUR/m2). APARTMENTS IN THE CENTRE OF THE CITY In March no changes were witnessed in the Old Town and near centre property market. Moreover, for several months one and the same properties are offered in the market. As property sellers are used to the stable price increase, the asking price is calculated by adding 20% to the current market price. However, there are not many transactions for the said prices. DETACHED HOUSING AND RESIDENTIAL DEVELOPMENT LAND Like every spring interest of the purchasers to buy detached houses is increasing. Rental market of the detached houses has become more active, too. The biggest demand is witnessed for detached houses located in Mezaparks for about 3,000 EUR per month, but cheaper houses in Adazi and other places are rented out as well. The main lessees of detached houses are representatives of the diplomatic corps and foreign companies. A newly built detached house with white finish and all the communications and land plot of about 800 – 1,200 m2 costs starting with 200,000 EUR. Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 5 of 9 RESIDENTIAL DEVELOPMENT LAND PRICES, EUR/m2 0 Dune zone Lielupe-Majori Jurmala Lielupe-Majori Dune zone Dubulti-Vaivari Bulduri on Lielupe side Dzintari on Lielupe side Saulkrasti near the sea Marupe (Marupe par.) Dreilini (Riga) Melluzhi on Lielupe side Jelgava Valteri (Jurmala) Ikshkile (Ogre par.) Olaine (Olaine par.) Kemeri (Jurmala) Salaspils (Stopini par.) Zvejniekciems (Sejas par.) Tiraine (Marupe par.) Tinuzhi (Ogre par.) Saulkrasti behind the railway Ozolnieki parish Source: LATIO 100 200 300 400 500 Je l gava Val te ri (Ju rm al a) Ik sh k i l e (O gre par.) O l ai n e (O l ai n e par.) Ke m e ri (Ju rm al a) S al aspi l s (S topi n i par.) Zve jn i e k ci e m s (S e jas par.) Ti rai n e (Maru pe par.) Ti n u z h i (O gre par.) S au l k rasti be h i n d th e rai l way O z ol n i e k i pari sh 0 10 20 30 40 50 minimum the most typical maximum Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 6 of 9 COMMERCIAL SPACE MARKET All the commercial space rents in this and the future LATIO market overviews are quoted net, i.e., not including utilities, management, CAM, marketing or any other payments. OFFICE SPACE In the beginning of March there was signed lease agreement on the last vacant office space in “Valdemara centrs”. Thus there are no Class A vacancies available in Riga any more. Office space vacancy rate vacant space/total space, % 25% 20% 15% 10% 5% 0% 2003.Jan 2003.Jul 2004.Jan 2004.Jul 2005.Jan 2005.Jul 2006.Jan 2006.Jul Source: LATIO Class A Class B Up to now there are two office buildings – JSC “Hansabanka” head office and “Valdemara centrs” - belonging to Riga Class A, i.e., the most advanced and best city office centres meeting the generally accepted Class A criteria. In order to belong to Class A an office building has to be of architectural value and technically well equipped, it should be located in the CBD, have sufficient parking lots for the needs of clients and employees as well as meet many other criteria. Location and insufficient parking are the main reasons why the so far built new office buildings in Riga do not meet Class A standards. In accordance with the Riga development plan the region of Hanzas and Skanstes streets will become one of the new city centres. The new office centres built in this area most likely will belong to Class A, provided the building quality meets Class A standards. Office rents are stable, the biggest market activity takes place in mixed type buildings. In this segment the most typical rent is about 10 EUR/m2. In compliance with the world practice only specialised office centres form the lease market, therefore data for the office premises in mixed type buildings are not reflected in the diagrams prepared by LATIO. Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 7 of 9 Average office space rent Price (USD) EUR/sqm per month 25 20 15 10 5 0 2003-Jan 2003-Jul 2004-Jan Class A (US D) Class A (EUR) 2004-Jul 2005-Jan 2005-Jul 2006-Jan 2006-Jul Class B (US D) Class B (EUR) Class C (US D) Class C (EUR) Source: LATIO Class C – Soviet time administrative buildings In March there were finally leased out office premises that had failed to be leased out for a long period of time, on some occasions even for several years. Generally the majority of office premises are leased out in a few weeks’ time. One of the most interesting transactions in March was lease of 800 m2 office space in the city centre to an IT company. It should be noted that IT as well as pharmaceutical companies, distributors of nutritional supplements including, are one of the most active demand drivers in other European countries as well. At the same time one of the banks has opened its branch in a mixed type building in Maskavas street for Class A rent – 20 EUR/m2 plus management costs 2 EUR/m2, plus VAT and utilities. RETAIL SPACE On 18th March supermarket “Sky” was opened in the premises of the former supermarket “Mego Mix” in Krasta street. In Jelagva multipurpose retail centre “Pilsētas pasāža” was launched. Premises in the retail centre “Pilsētas pasāža” were leased out long before launching the centre. It has to be noted that opening of new retail centres in Riga satellite cities is hindered by the habit of most of the citizens to make their main purchases in Riga. With spring setting in there is witnessed a growing interest from public catering companies to lease premises in the Old Town. Besides, in the active retail streets in the city centre and in the Old Town lately there is witnessed an increased supply of premises as not all the lessees are in the position to pay the high asking prices. At the same time there are lessees who are Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 8 of 9 ready to pay for advantageously located retail space having considerable concentration of pedestrian flow in various residential districts even 20 EUR/m2 and more, additionally paying management costs, VAT and utilities. One of the gambling operators for a price higher than the above said has leased premises in Salaspils. Typical retail space rents Price EUR/sqm per month 50 45 40 35 30 25 20 15 10 5 0 2004.Jan 2004.Jul 2005.Jan 2005.Jul 2006.Jan 2006.Jul S hopping centres and supermarkets (up to 150 sqm) Source: LATIO Prime retail unit shops (up to 100 sqm) Retail shops outside centre (up to 100 sqm) Availability of credit resources is facilitating demand to purchase retail space, especially great demand is witnessed for premises in the streets of active pedestrian flow. The main demand drivers in this market segment are clothing and footwear shops. INDUSTRIAL SPACE Industrial space market is not experiencing any changes, the price level is stable. The asking prices in the newly built warehouses is about 6 - 8 EUR/m2, deals take place for the price of 5 EUR/m2. At the moment there are a number of projects under construction, for example, in Pinki, Viskalu street. The majority of market players lease warehouses for a 2 - 3 year period planning to buy land and build warehouses meeting their requirements during this time period. The most popular locations for industrial object construction are in the direction of Olaine, Sauriesi, Jelgava. Like in the office market, industrial objects built for owner-occupation also have certain space envisaged for lease. One of the direct selling companies “Oriflame” is searching for warehouse premises of 2000 m2 in Riga or greater Riga. Data publishing without reference to the source is prohibited! Real estate market overview – Riga and Greater Riga Area, page 9 of 9