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Global real estate advisor, CBRE, has launched its first ever EMEA Investment Guide, providing an overview of the commercial real estate market in 36 countries.
“For the first time CBRE has compiled a comprehensive and meaningful information document for investors, who are interested in the EMEA, CEE and Baltic regions, providing insight into the economic situation and outlining the legal environment in each country. Investors who are interested in the Baltic region and are attracted by the stable economic situation and attractive yields can gain a basic understanding for each country in respect of the economic and property fundamentals that underpin real estate investment. The Guide offers an overview of the land system, foreign investment policies and the property taxes associated with buying, selling and owning commercial property. We believe this information will help international and local investors in the decision making process and will focus attention on the Baltic region as a stable environment for investment,” Vineta Vigupe, Director of Baltic Region Research and Consultancy at CBRE comments.

In the period between Q3 2015 to Q2 2016, a total of US$122 billion was invested into EMEA markets. This is a testament to the continued popularity of these markets for investors looking to deploy capital into real estate. Whilst investment levels are lower than in 2015, prime assets in core markets across the region remain key targets for capital, and cities such as London, Berlin, Paris, Amsterdam and Brussels have continued to attract foreign investment, particularly from the Middle East and Asia. However, both the UK and Germany, Europe’s top two sources of capital, have increased their investment into other European markets. This is particularly true of UK investors, whose cross border investment has increased by 66 per cent since H1 2015.

There was also a significant uplift in interest in Central and Eastern Europe (CEE). When taken as a group, CEE markets saw their proportion of preference rise from 6% in 2015 to 56% this year with total investment in this region (excluding Russia) totalling €4.897 billion during H1 2016. This uplift can be explained by the continued “search for yield” approach adopted by investors. Prime yields in continental Western Europe have fallen very sharply and this has resulted in the yield gap between CEE and Western Europe increasing markedly, raising CEE’s attractiveness to real estate investors. Yields in the Baltic region are still more attractive than those offered in Central Europe or Scandinavia. Therefore we see investors increasing their interest in the market.
Vineta Vigupe, Director of Baltic Region Research and Consultancy at CBRE comments: “CBRE preliminary figures show CRE investment of nearly €655 million in the Baltic region countries for the first ten months of 2016. The most attractive asset type in 2016 proves to be the retail sector – with a multitude of prime or close to prime deals closed, mostly in capital cities. The leading position in 2016 is likely to be held by Latvia with 45% of the overall investment figure during Q1-Q3 2016, whilst 35% was generated in Estonia, leaving Lithuania in third position with 20%.

Considered against total investment last year, investors’ interest in the Baltic region has been stable during 2016 reflecting the attractive yields offered and the positive economic background. We have witnessed the appearance of new investors – a trend that began in 2015 with the market penetration of new large players from Western Europe and the Americas, which has continued this year as well. According to the CBRE Guide, offices are the most popular investment choice amongst investors in 21 of the 36 states. In the Baltic States offices and shopping centres in the capital cities are the most popular targets.”

EVERSHEDS Bitāns Law Office Partner Ģirts Rūda comments: “It is good to see the Baltic States among the markets that continue to be the most popular in the EMEA region. The Baltic States are highly valued for transparency and legal protection issues, but as smaller markets we are lacking investment liquidity. In Latvia there is still a room for improvement on investment protection issues, like creditor protection during bankruptcy proceedings, and co-operation between the state and real estate market players could be improved.”
Eversheds Saladžius Law Office partner Rimtis Puišys mentions: “Lithuania is highly rated for its quality talent pool, ease of starting a business as well as the attractive ratio between wages and productivity, among other things. There is some room for improvement as well, including facilitation of business funding opportunities, accelerating the assimilation of EU structural funds, reducing the administrative burden and including the introduction and use of innovative e-solutions.”

When it comes to improving the attractiveness, then main problem is the small size of the market (if the investor looks at each Baltic country separately). Positive change is rather driven by the market participants, who deal with the Baltics as one region regardless of the fact that there are 3 different jurisdictions. This change is supported among others by advisors and fund managers who have established pan-Baltic activities that allow unification of the Baltic market making the Baltics as a whole more interesting than Estonia, Latvia and Lithuania would be separately for investors from elsewhere, Randu Riiberg, Eversheds Ots & Co Law Office partner, underlined.

Global real estate advisor, CBRE, has launched its first ever EMEA Investment Guide, providing an overview of the commercial real estate market in 36 countries. The information regarding all Baltic capitals was prepared in conjunction with the global elite law firm EVERSHEDS.

CONTACT:
Vineta Vigupe
vineta.vigupe@cbre.lv
+371 29162408

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

About Eversheds
Eversheds Bitāns is the only elite law firm acting in the Baltics. Eversheds Bitāns is supporting its clients across the full range of businesses issues. Core activities are: banking, project finance, mergers and acquisitions, commercial, real estate, intellectual property and dispute resolution fields.
The company is part of Eversheds International, a global elite law firm with more than 50 offices across 30 countries, which employs over 2,000 lawyers. This empowers the company in delivering transparent cross-border legal solutions to its clients.
Eversheds Bitāns practice of more than 20 lawyers is led by experienced attorneys and legal advisers, which are highly recognised by independent international legal market research directories and clients.

Global real estate advisor, CBRE, has launched its first ever EMEA Investment Guide, providing an overview of the commercial real estate market in 36 countries. The information regarding all Baltic countries was prepared in conjunction with the global elite law firm EVERSHEDS.
Jonathan Hull, Head of EMEA Investment Properties at CBRE comments: “The EMEA Investment Guide 2016 is the definitive introduction to investing in commercial property in Europe, the Middle East and Africa. It explores the terms of buying, selling and leasing commercial property in 36 countries across the region.”

The report, which covers 36 markets in Europe, the Middle East and Africa, is a benchmark document which outlines both the economic and real estate fundamentals of different countries across the region. The report highlights key market strengths in each country as well as prominent investor groups, most desirable assets and a detailed overview of the land, taxation and legal obligations required in each country. The comprehensive guide is the first of its kind and will provide real estate investors with the critical information they need when considering property acquisitions across the region.
Vineta Vigupe, Director of Baltic Region Research and Consultancy at CBRE Baltics comments: “For the first time CBRE has compiled a comprehensive and meaningful information document for investors, who are interested in the EMEA, CEE and Baltic regions, providing insight into the economic situation and outlining the legal environment in each country. Investors who are interested in the Baltic region and are attracted by the stable economic situation and attractive yields can get a basic understanding for each country in respect of the economic and property fundamentals that underpin real estate investment. The Guide offers an overview of the land system, foreign investment policies and the property taxes associated with buying, selling and owning commercial property. We believe this information will help international and local investors in the decision making process and will focus attention on the Baltic region as a stable environment for investment.”
According to the CBRE Guide, offices are the most popular investment choice amongst the investors in 21 of the 36 states. In the Baltic States offices and shopping centres in the capital cities are the most popular targets.

EVERSHEDS Bitāns Law Office Partner Ģirts Rūda comments: “It is good to see the Baltic States among the markets that continue to be the most popular in the EMEA region. The Baltic States are highly valued for transparency and legal protection issues, but as smaller markets we are lacking investment liquidity. In Latvia there is still a room for improvement on investment protection issues, like creditor protection during bankruptcy proceedings, and co-operation between the state and real estate market players could be improved.”

For the sixth consecutive year “Verslo žinios” has been organizing the Baltic Real Estate Investment Forum, and the second time – „Baltic Real Estate Awards 2016“ (05.05.2016) for the Baltic region real estate projects, or phases of large projects completed for occupancy during the year 2015. It includes awards for the most value producing buildings of the year in the areas of office, retail, hotel and residential development.

This year the competition took place among 52 housing projects and 27 commercial buildings.
Best shopping center category rewarded the new, expanded or reconstructed shopping centres, retail parks or factory outlets which succeed in encouraging and retaining traffic, while offering a unique shopper experience through new technologies, services, customer loyalty programmes and architectural features that aim to increase footfall and customer satisfaction.
PONTOS Group project – reconctructed shopping center RYO in Panevėžys – has been awarded as „Best Shopping Center“ in the Baltic States. RYO competed in the shopping centres category with the projects in Vilnius and Tallinn. RYO has been reconstructed in year 2014, rebranded and re-opened in January, 2015. Investment of the project amounted to 7,4 million Euros. Since 2011 RYO is owned by the Finnish investment company PONTOS Group and managed by the commercial property and real estate services adviser CBRE.
“Verslo žinios” organized “Baltic Real Estate Investment Forum 2016“. Partner „Newsec Baltics“ and „Ober-Haus Real Estate Advisors“ has selected the finalists, which later was assessed by the international jury commission in accordance with the detailed criteria.
The awards are judged according to the following key criteria:
Innovation & Design showing new ideas, approaches or execution models that enhance the project’s tenant appeal, efficiency and value in relation to its environment, public and media recognition, sustainability;
Location & accessibility showing effective site selection credentials, catchment capacity, transport access, etc.;
Quality & punctuality of construction process.

Other Categories
Best office & business development.
This category rewards newly constructed office buildings and business parks that offer owners and users increased worker satisfaction and productivity, improved health, greater flexibility and enhanced energy and environmental performance of the workplace. Through an integrated design, the focus must be on the ability to accommodate the specific space and equipments needs of the tenant. WINNER: Investment company “Lords LB Asset Management“ developed office building “K29” in Vilnius.

Best residential development
This category celebrates new developments that provide the best housing opportunities, while adopting originality and aesthetics. An integrated urban design, as well as a smart-site planning, is important for the residential project to merge well with the wider community and surrounding neighbourhood. WINNER: „YIT Kausta“ project „Upės rezidencija“ in Vilnius.

Best hotel & tourism resort
This award honours the most innovative newly-constructed hotel in terms of architecture and interior design, while also considering client well-being, services provided to guests, leisure and recreational facilities and environmental aspects. WINNER: „SPA Estonia“ project „Estonia Resort Hotel & Spa“ in Parnu.

Real estate investors across the EMEA region intend to be very active in 2016. According to CBRE’s 2016 EMEA Investor Intentions Survey almost half (48%) of all surveyed expect their purchasing activity to be higher than last year, compared with just 15% who expect to be less active buyers. 43% also expect their selling activity to increase, indicating a buoyant and liquid real estate investment market for the region in 2016.
Despite this commitment to real estate investment, one notable change has been a decline in investors’ appetite for risk. After three years of diminishing popularity, prime or core assets are back on the agenda. The proportion of investors who see prime or core assets as the most attractive part of the market has jumped from 29% last year to 41% in 2016. This is partly explained by investors’ concerns over economic issues. When asked the question “What poses the greatest threat to property markets in 2016”, global economic weakness was seen as the greatest threat (31%), with domestic economic problems (14%) a distant second.

Diverging investor views were prevalent in the responses given for the most attractive country for real estate investment. Germany was the most frequent choice as investors’ preferred destination, with 17% of all responses. The UK was in close second place with 15.1%, followed by Spain (10.2%), Netherlands (9.9%), France (9.2%) and Poland (9.2%). More importantly however, is the fact that this was by far the closest result of any of CBRE’s seven surveys, with many more markets coming into the mix this year.

There was also a big uplift in interest in Central and Eastern Europe (CEE). When taken as a group, CEE markets saw their proportion of preference rise from 6% in 2015 to 23% this year. This can partly be explained by investors’ continued “search for yield”. In H2 2015 prime yields in continental Western Europe fell very sharply and this has resulted in the yield gap between CEE and Western Europe increase markedly, raising CEE’s attractiveness to real estate investors.

At a city level, London retained its preferred status, with 15.1% of all investors favouring the city, but the gap between London and other cities is closing. Madrid came second with 12.2%, closely followed by Paris (11.6%), Berlin (10.8%), Amsterdam (7.3%), Warsaw (7.0%), Milan (4.7%), Budapest (2.9%), Prague (2.7%) and Munich (2.4%).

Across the more traditional sectors, offices remained the favourite asset type with 37% of the responses. However it was residential assets which saw the biggest increase in investor interest, growing from 5% of preferences in 2015 to 12% in 2016. Retail also fared well, and the recovery of consumer confidence and consumer spending has resulted in the proportion of respondents choosing retail increasing from 22% in 2015 to 27% in 2016.

The search for yield, as mentioned with regard to CEE, was also apparent in respondents’ answers to the “alternative” sector. 56% of all respondents were already invested in one or more alternative sectors, and 57% were actively looking in one or more of these sectors. Real estate debt is the segment that currently has the most market penetration with over 30% of investors already having some exposure and 22% actively looking for further investment. Student Housing was the segment which attracted the most new interest. 20% of respondents already have investments in this area with most of these seeking further exposure. However there are a further 13% of respondents who are looking to invest in student housing for the first time.

Jonathan Hull, managing director of Investment Properties, EMEA at CBRE, commented:

“There were a few stand-out themes in our survey this year, but the most interesting, to my mind, is investors’ purchasing activity. Almost 85% of respondents expect their purchasing activity in 2016 to remain higher or the same as last year. This result, taken alongside similar figures for investors’ selling intentions, indicates that we are set for another year of strong investment activity.

Overall however, there was much less agreement amongst respondents on what constitutes the most attractive market and preferred investment strategy. As differences in opinion are what make a market, this would suggest that 2016 will be an interesting time in real estate across the EMEA region.”
Vineta Vigupe, CBRE, Director of Research and consultations in the Baltic region, comments:

“For the seventh consecutive year CBRE has carried out such a comprehensive and important survey indicating and outlining investors’ activity and intentions. Getting acquainted with it, it can be concluded that investors’ interest in the Baltic region will not decline this year due to attractive yields and positive economic background. 2016 will be an interesting year and we will definitely see new investor names, respectively – a trend that began in 2015 with the market penetration of new large players from Western Europe and Americas, such as the Partners Group, Blackstone, Hili Properties, etc., will continue this year as well.

Demand will be high for prime retail and office properties with an attractive rate of return. Given the fact that recent year’s development of commercial properties in Latvia was limited, Lithuanian and Estonian investment market could be more active this year as evidenced already in the first months of accomplished transactions with a total investment volume of almost 100 million euros. However, currently there are large and attractive investment properties in the selling process in all three Baltic countries, which will likely change hands during this year. ”

To learn more about CBRE Research, or to access the additional research reports, please visit the Global Research Gateway at: www.cbre.com/researchgateway .

About CBRE’s 2016 EMEA Investor Intentions Survey
The survey was carried out between 8th January 2016 and 4th February 2016. The survey attracted 1,255 responses globally, but respondents were first asked the global region for which they were most responsible. This report covers the 423 who responded in EMEA.
These responses were spread across a range of types of real estate investors. The most numerous were fund/asset managers, who accounted for 42% of survey participants. A further 13% were pension funds, insurance companies or sovereign wealth funds. The other most numerous respondents were private equity/venture capital firms (11%), private property companies (10%) and listed property companies/REITs (10%).
The respondents were predominantly investors domiciled in Europe (87%). UK-domiciled investors were the most numerous, making up 26% of the total, followed by France (13%), Netherlands (12%) and Germany (12%). The respondents from outside Europe were mainly from North America (8%).

Media Contacts

Natasha Sunderland, CBRE
+44 20 7182 3688 / +44 7795 010209
natasha.sunderland@cbre.com

Vineta Vigupe, CBRE
+371 2916 2408
vineta.vigupe@cbre.com