The lack of modern buildings lies behind ambitious development plans
The Riga office market is undergoing changes that we have not seen for al-most a decade, with only a few new office deliveries and stagnating new office supply. In 2019, grade B projects in secondary locations dominated the availability in the market. The lack of interest in this product plus its expansion meant the total market vacancy rose to near 12% by the end of the year. The leasing market may reignite with new grade A office space now at planning stage. These projects will help address a serious issue in Riga: the absence of a central business district. The planned projects (especially those developed by Lords LB, Galio Group) will form a viable centre. During the last 2 years, developers experienced in the Baltics market have initiated four large office projects. More than 235,000 sqm of projects are in the planning stage in the planning stage with expected delivery in 2-3 years. Riga has a lot of potential to become the capital of the Baltic States and must take advantage of the situation while delivering suitable quality real estate projects.
Western European investors are showing interest in Riga
The Riga office segment is particularly appealing to investors, accounting for 50% of the €230m transaction volume in 2019. Western European investor confidence in the Latvian real estate market returned over the year. At the end of 2019, VIG Fund, an in-vestment company owned by Vienna Insurance Group AG, acquired three office buildings totalling 20,000 sqm from Baltic RE Group. The entry of VIG is one of the first major investments by a Western European company in the Riga office sector, and one of the largest investments in the Latvian commercial property market during the last few years.