February 26, 2014. Vilnius. The review of Lithuanian real estate (RE) market trends, drawn up by Inreal Group with its partner, the Law Firm Raidla Lejins & Norcous, states that currently the investment profitability differs in Lithuanian cities and RE segments. The lowest return on investment in rental property is in Vilnius (4-8 percent), and the highest – in Siauliai and Panevezys (5-11 percent). 

“It is possible to earn more from rental activity in smaller cities of Lithuania than in Vilnius, however it is related to higher risks and may require additional efforts and professional knowledge when choosing RE investment as well as searching for tenants”, - stated Arnoldas Antanavicius, the Head of Consultation and Analysis Department of Inreal. According to him, although the rate of return in Vilnius is lower, investing is safer here.

According to Inreal analysts, as a result of liveliness of the real estate (RE) market in Lithuania, an increasing number of people and companies are looking around for investments into RE. However, the analysis of return on rental of various RE showed that the average return on rental differs in the major cities of Lithuania and different sectors (apartments, houses, offices, commercial premises and warehouses). This period is not very  favourable for long-term investors in Vilnius, because the return on investment in rental property is the lowest here – depending on a segment it fluctuates from 4 to 8 percent in a year. Meanwhile, the highest return on investment in rental property may be expected currently in Siauliai and Panevezys – it fluctuates from 5 to 11 percent in a year. Nevertheless, Vilnius remains the most attractive among the investors due to safety of investing and currently attracts an increasing number of short-term investors, who expect to gain profit from price increment.

The analysts highlight the fact, that investors have to take into consideration not only the rate of return, but also the safety of investment, liquidity of acquired RE and the prospects in the entire market. RE rental market in other cities may be characterized as risky, because it is not as much liquid and active as in the capital city. “Kaunas, Klaipeda, Siauliai and Panevezys markets may be named as more risky, because there are weak tenants more, and in most cases the rental term in the housing segment does not exceed one year, and in commercial segment – 1-3 years. It means, that more active change of tenants and higher vacancy of premises, when looking for new tenants, are possible”, – stated A. Antanavicius. In order to achieve a higher return on investment in rental in the abovementioned markets, more knowledge and professional skills may be required, when choosing the investment RE as well as looking for new tenants.

“Whereas in the cases of investments in rental the return is generated not by the RE object itself, but income generated by it, it is particularly important to an investor to ensure the possibility to forecast an exact cash flow and control the risks, arising from relationship as regards rental. When investing in commercial RE, a clear and attractive concept of RE object, its proper location, tenants’ structure, pricing, which corresponds the market situation and trends, and long-term rental contracts, duly structured on legal and commercial approach, are particularly important”, – stated Simona Oliskeviciute-Ciceniene, the lawyer and the Manager of Real Estate and Infrastructure Practice Group of Raidla Lejins & Norcous. It would be worth investing in an impeccable process of transacting and high-quality contracts, which would ensure proper distribution of risk and consolidate an equivalent safety for contracting parties.

 ABOUT COMPANIES

Inreal group provides probably the widest spectrum of services in Lithuania, related to real estate services. The group consists of JSC "Inreal Valdymas" (Inreal Management),JSC "Inreal" and JSC "Inreal GEO". Inreal group companies belong to SC "Invalda privatus kapitalas". 90 employees are currently working in Inreal group; mediations  in   lease or sale of 550 thousand sq. m. of commercial premises; the value of asset, evaluated per year, is above 2 milliard Litas. Company offices or representations are operating in Vilnius, Kaunas, Klaipeda, Siauliai, Mazeikiai, Alytus, Plunge and Utena. Currently JSC "Inreal Valdymas" develops two real estate projects: houses in Nida "Kopu vetrunges" ("Dunes weathervanes") and apartments and comercial premises in Klaipeda oldtown "Danes uzutekis" ("Danes Bay").

 

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Ruta Mercaitiene
Head of Marketing and Communication
Mob. +3706 11 29779
E-mail ruta.mercaitiene@inreal.lt