Press Release - Baltic Real Estate Investment Forum
Press Release - Baltic Real Estate Investment Forum
Retail property investment yields not likely to go much lower, according to real estate experts
September 20, 2005 - Vilnius, Lithuania
On the second day of the Baltic Real Estate Investment Forum in Vilnius, leading developers, investors, and bankers generally agreed that commercial property yields probably would not go down much further, and may trade in this range for a long time. (Yields are rent return divided by price. Yields are the inverse of price - when yields go lower, prices go higher).
Algirdas Vaitiekunas, the Chief Financial Officer of Baltic Property Trust (one of the largest property investors in the Baltic States) believed that the Baltic States were now likely in a mature stage of development, when investment yields enter a range within which they tend to go up and down in cycles, just like anywhere else in the world.
“Yields anywhere are like a bouncing ball - eventually either the economic cycle, or interest rate changes in Europe, will push Baltic yields back up again,” said Mr. Vaitiekunas.
But in the short term, yields could still see some more move down (and prices move up), due to the enormous amount of money chasing only a few good commercial properties.
“Institutions like Deutsche Bank have billions to spend,” said Chris Eddis, Joint Managing Director of Mornington Capital. “This large weight of money could still push yields down in the short-term.”
Richard Weberberger, Senior Associate at ImmoEast from Vienna, agreed. “There is a herd mentality among investors,” Mr. Weberberger said. “One investor mentions the Baltics and all the others want to show that they are there. But they could all leave just as fast.”
Michael Kröger, Key Account Manager at EuroHypo, said the introduction of the euro in 2007 would have a positive impact on yields and investment. “Look at Finland,” Mr. Kröger said. “It’s the one Scandinavian country with the euro, and it receives the most foreign investment into real estate and has seen the most yield compression.” In his opinion, it was obvious that since most investors had euro denominated funds, they would pay a small premium for not having to hedge currency risk.
Citycon, the large Finish retail property owner which recently bought four shopping centres in Sweden and one in Estonia, said they were looking to buy shopping centres in Latvia and Lithuania as well, if the prices match their expectations, according to Petri Olkinuora, Managing Director of Citycon Oyj.
The Baltic Real Estate Investment Forum was sponsored by Hansabank, Ober-Haus Real Estate, Baltic Property Trust, Mei Baltija, Sorainen Law, Euro Hypo, Trigon Capital, and Citycon.
For more information about the forum, visit www.baltic-forum.com, or contact:
Ruta Ciboniene (GSM: + 370 699 48 600 Email: ruta@bendravimoformos.lt)
Vytas Zabilius (GSM +370 699 24 584 Email: vytas.zabilius@ober-haus.com)
Peter Gage Morris (GSM +48 502 246 446 email: peter.morris@ober-haus.com)