Baltic Real Estate in 2025: Adapting to Change, Seeking Stability

Colliers Baltics has launched commercial real estate overview outlining main trends in the region.

For the second year in a row, the Baltic investment market has struggled to regain momentum, with total investment volume falling to EUR 830 million in 2024 —the lowest level in a decade. Yet, in the midst of uncertainty, retail has emerged as the dominant force, claiming 50% of all investments and 68% of the Top 10 deals. Meanwhile, office and hotel transactions have shrunk significantly, signaling a shift in investor priorities.

In Estonia, large-scale deals secured 60% of the market share, while in Latvia and Lithuania, activity remained below expectations. Investors are increasingly focusing on high-value transactions, with the Top 10 deals alone accounting for 55% of the total volume. Looking ahead, the return of international capital remains uncertain, leaving local investors to drive the market in 2025.

In the office sector, companies are actively downsizing or relocating to cost-efficient, ESG-compliant spaces. In Tallinn, vacancy rates are rising due to excess supply, while in Riga, new supply is slowing, with the next wave of developments expected only in 2027–2028. In Vilnius, demand is shifting toward fitted-out spaces and flexible leases, with the public sector becoming a key tenant.

The retail sector continues to evolve, as grocery chains expand and shopping centers refine their tenant mix to stay competitive. Interest in regional markets is growing, particularly in Panevėžys, Šiauliai, and secondary cities in Latvia and Estonia. However, retailers are optimizing space and consolidating locations, while new international entrants remain scarce, with the next expansion wave likely in 2026–2027.

Industrial real estate remains resilient, with Built-to-Suit projects driving demand in Estonia and Lithuania, while Latvia sees a shift towards Dreiliņi as Riga’s new logistics hub. However, rising operational costs and limited prime land availability continue to shape the market.

Finally, stock office developments saw significant expansion in Lithuania, nearly doubling supply, while in Latvia, vacancy rates rose to 18% as high rents slowed absorption. Estonia’s stock office market remains active, but the tenant pool is shrinking due to high competition and development activity.

Despite these challenges, 2025 is expected to bring renewed activity, supported by improving financing conditions. With more properties entering the market, investment volumes are projected to return to EUR 1 billion, bringing a sense of cautious optimism to the Baltic real estate landscape.

Baltic Commercial real estate market overview is available here: https://www.colliers.com/en-lv/research/annual-report-2025 

 

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