The heyday of the real estate industry is over

The real estate market is likely to continue to decline over the next 12 months, driven by both high energy prices and the decline in the value of money. Andrjus Barštys, general director of Capitalica Asset Management, developer of office complex Verde, predicts this in an interview in Dienas Biznesa special issue Real Estate. In any market, we constantly see both ups and downs, but at the moment it is very difficult to predict when the market will stabilize again, A. Barštis thinks, adding that the times of easy money in the field of real estate are behind us. It must be admitted that at this time no segment is completely safe for investment, as the market situation is too unpredictable, notes the general director of Capitalica Asset Management. Despite this, he thinks that those market players who are professional and experienced will be able to profit during these times as well, while new entrants may have a harder time. Excerpt from the interview Currently, there seems to be no shortage of tension in the investment business – inflation, energy crisis, rising interest rates. How is it currently possible to plan, predict, develop anything? To be honest, it is very difficult to answer this question, because I think that such a rapid increase in the prices of goods and services was a surprise to everyone. It is no secret to anyone that in recent years we have experienced countless upheavals – starting with the Covid-19 pandemic, ending with the war in Ukraine and the drastic rise in energy prices. The value of money is also decreasing, as a result of which we can now buy significantly less for one euro than before. For these reasons, predicting future investments in business has become more and more difficult. I have observed that a large number of developers have become very cautious and analyze both already started projects and also carefully evaluate where to invest money in the future. We also look at new development projects very critically, because we understand that the costs have increased significantly. I think that we will be able to see changes in the market in the next few years, but right now it looks like the heyday of the real estate industry is over. Which segments of real estate do you think are safe and attractive for investment in these times? It must be said that currently no segment will be completely safe for investment, because the market situation is too unpredictable. At the same time, it should be emphasized that in historically difficult conditions, modern and efficient office buildings, located in an excellent location, feel the influence of external conditions less. Tenants who choose to rent offices in city centers are usually stable and strong, so they do well even in times of crisis, so developers do not suffer either. The investment climate in Latvia has often been criticized. How do you rate it based on your experience?

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Andrjus Barštys, general director of Capitalica Asset Management, developer of office complex Verde.
Photo: Ritvars Skuja, Dienas Bizness