Expert: Strong Estonian Capital Prevents Worse in Commercial Real Estate

Over the past 6 months, the public has heard about several major transactions in which foreign owners are selling off their real estate in Estonia and local capital is taking over the properties. According to Kirill Vigul, head of 1Partner Commercial Real Estate, this is not a panicked exodus of foreign money, but rather a trend where Estonian capital is increasingly able to compete with foreign capital.

"Estonian investors know this market and therefore have a certain advantage over new foreign investors. Also, the time is past when foreign money flowed massively and indiscriminately into Estonian commercial real estate here, because the growth potential was many times greater compared to more Western Europe or Scandinavia. The Estonian commercial real estate market has matured and stability has been added," said Kirill Vigul, head of 1Partner Commercial Real Estate.

In addition to major transactions with extensive media coverage such as the Viru Centre or Ülemiste City moving into the hands of Estonian entrepreneurs, local money is also not sleeping when it comes to less conspicuous properties.

"For example, we recently advised on a purchase and sale transaction of a property in Tallinn on Suur-Sõjamäe Street. The land area was 12,000 square meters and the production space was just under 3,000 square meters. This is land purchased for investment purposes. We also advised on the sales process of a property of just over 33,000 square meters, which was purchased for development purposes," Kirill Vigul pointed out a couple of substantial transactions that had passed through his desk, adding that if 10-15 years ago such properties were typically purchased by, for example, a Finnish investor, then nowadays Estonian entrepreneurs can easily participate at this level too.

"Well-capitalized and often competing Estonian investors have saved commercial real estate from worse. If a foreign investor decides to leave and there is no one coming to replace them quickly, we would see much more serious decline figures, and this especially in the current economically difficult situation prevailing throughout the region," noted Kirill Vigul.