Vilnius and Kaunas have the most active real estate market in Lithuania, while the third largest city of Lithuania – Klaipėda – up until now has been hiding in the shadows and has been forgotten by participants of the real estate market. Experts of international real estate advisory company Newsec say that the capital of Lithuanian seaside, if supported by decisive action of local authorities, may have the potential for rebirth, and a ‘blue wave’ effect may be created. This is best illustrated by the example of Kaunas that has been rapidly growing in recent years, the recovery of which has been driven by a clear and far-sighted vision of the city authorities and by the support of this vision's business initiatives, a press release from Newsec states.
Klaipėda
© DELFI / Rita Gečiūnaitė

According to Newsec's experts, the strategic plan of Klaipėda city until 2030 aims to create 25 thousand new jobs, attract 2,000 new companies and EUR 1.5 billion in new investments. The Klaipėda 2030 strategy developed by private business and the city authorities notes that such ambitious growth is possible only with the orientation toward international markets – by establishing closer links with industrial companies from Scandinavia and old Europe, and exploiting the attractive geographical location of the port city.

"The Klaipėda revitalisation plan focuses mainly on promoting growth of the city as a seaport. It is a welcome ambition, but, besides the 'industrial' vision, attention should also be put into how to make the city more attractive to its inhabitants and tourists all year round. As soon as the summer ends, life in Klaipėda comes to a halt due to the decreased flow of tourists – streets and cafés empty out, and small business "goes into winter sleep". Furthermore, over a year Klaipėda, as a city, loses about 2,000 inhabitants, and the inhabitants themselves chose Klaipėda District for residence and travel to the city only as to a place of work, most of them returning to suburbs in the evening. Therefore, attention must be paid not only to the port and industry but also to other aspects that are no less important for the city and would help bring the city out of stagnation", says Mindaugas Kulbokas, Head of Research and Analysis at Newsec.

High seasonality promotes stagnation

Although Klaipėda is a Lithuanian city attracting high numbers of tourists – 230 thousand guests and holidaymakers visit it annually, most of them come here only in the summer. Since the city experiences the problem of seasonality – the city life slows down during the cold season – this leads to stagnation in the entertainment and services sector.

"A developed leisure and entertainment sector is particularly relevant in order for Klaipėda, as the most important city of the country's economic growth, to maintain a situation where the city is visited on a continuous basis. High seasonality does not stimulate small business in the city – vendors, cafés and other catering establishments and shops enjoying advantages of the street have nothing to live off in the winter as there are no tourists, and the people working in the city return to suburbs in the evening, so life in the centre comes to a halt until the next holiday season", notes M. Kulbokas.

Shopping streets offer individual spaces in shopping centres on H. Manto Street, but the trade is livelier only on approaches to the Old Town, and the decisions made so far by the city's self-government regarding strategic plans on revitalisation of the Old Town do not produce tangible results.

Klaipėda currently has 23 hotels that can simultaneously accommodate several thousand visitors. Their occupancy rate in the summer exceeds 75 per cent, while in other seasons it amounts to 40 per cent. Such high seasonality of hotel accommodation does not encourage investment in the development of hotels in Klaipėda – the transactions made and the changes in hoteliers so far have shown low confidence of international hotel operators in the Klaipėda market", Newsec's experts state.

"Klaipėda has every opportunity to attract tourists all year round. What needs to be done is to take advantage of its attractive geographical location, which equates to resorts. One of the measures could be orientation toward offering of health tourism services. Various sectors – from medical and wellness institutions and travel agencies to hotels, restaurants, leisure and shopping centres – benefit from health tourists arriving in Lithuania. Also, Klaipėda has been made even more attractive for tourism by a multifunctional wellness centre that was opened in the city this year and has a 50-metre swimming pool – the most modern in the Baltic States and meeting the international Olympic standards. The implementation of such projects demonstrates that Klaipėda seeks to make its city attractive not only to tourists but also to inhabitants of the city", notes M. Kulbokas.

Recommends companies of various profiles

"The increasing volume of real estate transactions and supply of the services and leisure market in Lithuania's major cities – Vilnius and Kaunas – are driven by the growing population. Inhabitants are actively moving to the major cities due to more attractive employment possibilities. This year Kaunas has proven that the offer of modern business office space encourages international companies to come to the city, which leads to the appearance of new jobs", M. Kulbokas explains.

According to him, the office market of Klaipėda is not gaining momentum and has been in stagnation for many years. Up to 15 separate business centres are currently present in the modern office market of Klaipėda. The market is annually offered only 1-2 administrative buildings of very small area. Even new companies attracted to the port are forecasted to stimulate only the small-office market.

The Klaipėda market has three largest business centres – Neapolis, Laracija, and Vitė. Together, they make up about 23,000 sq. m of leased floor area. No modern business centre has appeared in the leasing market of Klaipėda for over a year since 2009, only small centres are being developed, and most of the administrative buildings are Class C or individual spaces in commercial, industrial buildings.

Vilnius continues to be the most active office market, but this year changes in the office market are also noticeable in Kaunas. Characterised previously by small new or reconstructed one-several thousand sq. m projects, in 2016 the market got 4 large modern business centres. Twelve more new business centres were completed in 2017, adding almost 45,000 sq. m of leased area to the market. Only Class B offices were offered in Kaunas up until 2018, but the growing needs of tenants, as well as the arrival of foreign companies in Kaunas have led to the appearance of first Class A business centres.

Small M19 project of about 2,000 sq. m was completed in the middle of 2016 in Klaipėda, Minijos Street. A similar small project in the port city can be expected in 2019 as well.

"Considering the level of development of the office market of the largest cities, the office market of Klaipėda has the potential to grow by up to 3-4 times, but this requires city- and country-wide package solutions – to be oriented not only toward the growth of activities of Klaipėda Seaport but also toward the attraction of companies of various profiles. The city should also use other means to increase the attractiveness of the city to its inhabitants and tourists all year round. It is obvious that the greatest expectation of employers must also be justified by universities operating in Klaipėda, which should already carefully review student training programmes and respond with the maximum flexibility to the expectations of potential employers. A common approach should unite and encourage to converge both public sector's actions and private actions of investors in the real estate sector. Only the work of these initiatives with a common vector will give the result expected by both sides", summarises M. Kulbokas.

About "Newsec":

"Newsec" is an international real estate counseling company operating in seven Nordic and Baltic countries and offering a wide variety of services. The company mediates real estate investment deals, provides real estate management services, mediates the rent and sale processes of the commercial property and helps the clients in developing new or existing projects by representing their interests. The company also performs the market research and analysis, provides licensed property and business evaluation services. Newsec's experts operate on the basis of the Royal Institute of Chartered Surveyors (RICS) standards and adhere to established working principles such as transparency, accountability, continuity and stability. The company is also a member of the Paribas Real Estate alliance. The company currently has 41 offices in Northern Europe, employing more than 1,700 employees.

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