COMMERCIAL REAL ESTATE

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Commercial real estate is any nonresidential real property that is intended to generate profit from selling it or renting it out. While technically any real estate can be used in this way, commercial real estate is specifically built or re-designed with such a purpose in mind. It is important to distinguish the general and legal notions of the term. Some legislations, e.g. certain US states, consider residential property containing more than a certain number of units to also be commercial for legal and tax purposes. The two most widespread types of commercial property are offices and retail real estate.

Offices
An office is a type of commercial real estate that is intended to be leased out to other businesses. Typically, offices are designed to provide work space for companies, for which they pay rent to a landlord. Depending on the on the type of company renting an office, these premises may be of various size, number of units (different spaces or rooms) and include a number of appliances, equipment and machinery.

Another type of offices is the so-called ‘built-to-suit’ office. While in general office spaces are built to suit a wide range of potentially very different tenants, built-to-suit premises are designed and constructed to match the requirements of a specific company. The most straightforward example would be an enterprise expanding into a new market and building their own new premises, like the K-Senukai brand did in Riga, the capital of Latvia.

Retail real estate
Retail real estate is a type of commercial property that generates profit by hosting a retail business. While offices tend to be used for the administrative divisions of a company, retail estate mostly serves as an outlet, a point of sale, a studio where services are provided directly to a customer, etc.

Nowadays, especially in bigger retail complexes (such as shopping centres), retail space and office space are combined. This mostly done for the convenience of tenants, so that their administrative branches can be located near the place of conducting business, thus allowing them to administer the said business in a more direct fashion. Accordingly, such offices serve as auxiliary spaces and cannot be rented separately from the retail estate.

Commercial property in Latvia
As of 2017, the commercial property market in Latvia is in its stable phase, both in terms of prices and vacancy. Since the financial crisis of 2009, when vacancy rates were very high and rent rates experienced a sharp decline, the market is steadily returning to its pre-crisis state.

For both offices and retail estate, vacancy rates are 3% to 7%, depending on the location. Due to active construction projects, especially in the retail segment, it is possible that the average percentage will increase from 3.5% to 4% or 4.5% in 2018 and 2019.

As for the prices for Latvian offices and retail estate, they are considered to be one of the lowest in the EU. At the same time, the presence of major international businesses indicates that these prices do not mean the lack of quality.

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