Mindaugas Liaudanskas, CEO of Capitalica Asset Management
Investors in the Baltic region are increasingly interested in commercial real estate (RE) as the market stabilizes and grows. The region is witnessing a rising demand for offices, logistics centers, and retail spaces, creating favorable conditions for investment. However, there are more reasons why commercial real estate is becoming an increasingly attractive asset class.
While many small and medium-sized businesses are still facing economic challenges, a significant portion of entrepreneurs have already started investing in alternative products and reinvesting previously profitable capital.
The IT sector remains the fastest-growing industry in the Baltics, and it is no surprise that tech executives are among the most active investors. With high incomes, they seek attractive asset classes to put their capital to work. Commercial real estate particularly appeals to them due to its stable and reliable returns. Many of these investors have families and children, so their primary goal is long-term, stable income to ensure financial security for the future.
Banks Are Showing Confidence
One of the strongest positive trends affecting investment flows into commercial real estate—and highly valued by both current and potential investors—is the growing number of bank loans issued for RE development and construction.
In May 2023, Swedbank announced that over the past two years, investments in real estate, energy, and manufacturing have increased by 60%. The rising number of loans for RE developers demonstrates banks’ confidence in construction projects, which in turn influences investor decisions.
Several major loans issued this year have significantly contributed to commercial RE development in the region. For example: Swedbank provided €58 million to Teltonika for the construction of a printed circuit board (PCB) manufacturing plant, which will be the largest A++ energy-class factory in the Baltic region. SEB Bank granted €40 million to Verslo Investicijos, which manages the Flow office complex in Vilnius. SEB also issued a €60 million loan to Capitalica Asset Management, a SBA Group investment company, to support the expansion of the Verde office complex in Riga.
Fading Fears
Investors’ growing interest in commercial real estate is also driven by diminishing concerns over geopolitical and economic uncertainties. While these risks remain relevant, businesses have learned to adapt by integrating new challenges into their daily operations.
Entrepreneurs who have successfully optimized supply chains and managed costs are building more resilient business models that can function efficiently even in uncertain environments.
Despite this, investment strategies have become more conservative—a larger share of capital is being allocated not only to expansion but also to financial reserves. This cautious approach ensures a financial cushion for unforeseen circumstances or liquidity needs, allowing businesses to react more flexibly to future changes.
EURIBOR’s Influence on Real Estate
Another critical factor shaping investor decisions is the declining European interbank lending rate (EURIBOR). This trend is particularly significant for the commercial RE market, where most transactions rely on bank financing.
A lower EURIBOR rate signals more favorable financing conditions since cheaper loans make it easier for investors to acquire real estate assets.
Additionally, the September 12 European Central Bank (ECB) meeting, which resulted in a 25 basis point rate cut, is expected to have an even greater impact on the market. This move will further reduce borrowing costs, enabling investors to purchase assets at higher prices while maintaining stable returns.
These trends send a positive signal to the commercial real estate sector, encouraging stronger investment flows into the market.
