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Retail real estate is any real estate that is intended to generate profit by hosting a retail business. This category of real property includes shops and shopping centres, restaurants, cafes, studios etc.
Retail buildings usually have larger spaces designed to store a significant number of articles and/or service clients on a regular basis, sometimes many of them simultaneously. Nowadays a lot of retail estate is not concentrated on retail only, and includes office spaces to accommodate administrative workers. Depending on a specific business, retail property may include special sub-structures, such as kitchens for restaurants. Additionally, convenience property may be attached to the main complex/building. This includes parking lots, recreational areas for visitors, etc.
Retail property can be more or less universal in usage, bigger companies with specialized services choosing built-to-suit projects which would ensure all the needs of a particular business. Some real estate, however, can be used for retail purposes with minimal reconstruction works, e.g. photographic studios can operate in a typical office space that is big enough and allows for interior design changes.
Retail estate in Latvia
As of 2017 Latvian retail estate market is in its stable phase, and no significant influx of vacant or cheaper property is expected. Likewise, retail estate is not expected to rise in price in the nearest time. Most major developments are that of foreign retail chains entering the Latvian market or the existing ones expanding their business - e.g. SC Riga Akropolis and IKEA are currently expanding to Riga.
Among other developments, the existing shopping centres have adopted a trend of emphasizing original ideas and concepts, providing advantage to original and innovative brands. Foreign investors who wish to expand into Latvia and are seeking retail estate for their business are more likely to find premises in shopping centres, if they present an original conceptualized idea. In a similar vein, wooden buildings with a relatively large space are in high demand, due to a particular style they provide to businesses located in them.
In 2017 Large-scale roadworks conducted in the centre of Riga, especially along Brīvības street, the main street of the the capital, led to poor accessibility to premises located in this area. Because of this, prices for real estate there have dropped somewhat. Many Latvian analytics, however, predict that as soon as the roadworks are finished, the prices and popularity of the premises will rise up again, which is why it may be advantageous to invest now.
Rent and vacancy rates
Rent rates for Latvian retail estate have remained stable for the last three years, and no significant changes are expected in the near future. The average prices for retail property in Latvia are 38 EUR per m2 per month for property smaller than 75 m2, 27 EUR per m2 per month for estate from 75 m2 to 150 m2, and 26 EUR per m2 per month for property bigger than 150 m2. It should be noted that prices in the Old Riga (the historical city centre) are, on average, 30% - 50% higher than in other locations of the capital. It is also projected that rent rates in the centre will somewhat decrease during the next year.
As for vacancy, the situation is very similar - the vacancy rate stays at approximately 3% percent and it is projected to stay more or less the same in the nearest future. Some fluctuations have been observed in 2016 that may eventually increase the rate up to 4% or 5%. The vacancy rate in Old Riga is higher - 7%. On of the reasons for this is that some retail estate in the centre of the city is less efficient due to its disadvantageous location and high rent rates. This also includes poor accessibility and/or visibility to the potential clients. Such premises remain vacant for a long time or change many owners in a short span of time, and the situation is unlikely to change in the nearest future due to the inherent disadvantages of this estate. It is currently unclear whether an investment in the technological infrastructure in such estate would help.
Real estate market legal experts guide
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