“CORE”, the Largest Conference of Real Estate Leaders: About what Matters Most

“Core”, the largest annual conference of real estate market leaders held by the Lithuanian Real Estate Development Association (LNTPA), which ended a week ago, provided the setting for presentation of the latest analytical data of the commercial and residential real estate market, discussion of this year’s challenges and risks, changes in the legal framework and related business expectations.

We share the information generated by “BNS Plus”, the partner of LNTPA and the sponsor of “Core”, from the insights and comments given by the speakers and the participants in the discussions at the Conference.

Simonas Gentvilas, the Minister of Environment, about the changes and novelties on the real estate and construction market and the regulatory procedure

“The year will be full of challenges, but our promises and commitments, the main messages are the restructuring of the National Land Service, the Building Code, a wider discussion with developers, a review of the tax framework and a little more extensive and more good faith consumer protection wherever it is, because we really feel the need for this based on the attention shown by state authorities, politicians, the Seimas, and the media”.


Jokūbas Markevičius, the Director of the Financial Stability Department of the Bank of Lithuania, on the situation on the real estate market

“It is probably obvious that the boom on the real estate market is over, that the boom was primarily caused by very strong demand. We see a pause, but after that pause the market should finally return to a healthy path, of course, provided that there are no new challenges related to the external environment.”

Raimondas Reginis, the Market Research Manager for the Baltic States at “Ober-Haus”, on real estate market prospects this year

“As we can see, that (housing – “BNS Plus”) supply is like a train set loaded with goods, which cannot be stopped so easily. If your construction is already in progress, stopping it would result in really major losses. It (supply – “BNS Plus”) is so inert and you still need to implement it. Meanwhile the demand may stop very abruptly, just like we saw when the war started. (…) Therefore, speaking about this year, it will definitely not be pleasant for the developers, it will be full of tension and, probably, we will see which developers were the least prepared and which were the weakest ones”.

Thoughts of the participants in the discussion “Why wouldn’t the real estate market collapse in 2023?”

Gediminas Šimkus, the Chairman of the Board of the Bank of Lithuania:

“I think that the market would not collapse. The real estate market is not a self-existent thing in space, a separate planet spinning, it is a part of the economy. (…) I suggest taking a soberer look, scare yourself less, yes, there will be fluctuations and maybe you need to take some medicine, but this is definitely not an intensive care unit.”

– Nerijus Mačiulis, the Chief Economist at “Swedbank”:

“Pulling back a little bit, several percent decrease in prices, a drop in the number of transactions is not what you would call a collapse. I would rather refer to it as a sustainable correction, which would enable to increase both the number of transactions and the sale of those new two thousand unsold apartments in Vilnius. What we are seeing now, taking off from the macroeconomic trends, is a very healthy market cooling down, not some kind of collapse.”

Saulius Putrimas, the CEO of “Merko statyba”:

“The secondary market dropped by 15-20 percent, the primary market dropped by 70 percent and I think that these are very clear signs that we are and would be moving towards sustainable housing, cost-effective and energy efficient housing at a very slow pace. Today we should probably talk about the main challenge: affordability. (…) Looking ahead, inflation plus new requirements in the primary housing will increase the cost significantly. Because of that I see no reason why the price of new housing, sustainable housing, energy-efficient housing should get lower.”

Mindaugas Kulbokas, the Head of the Research and Analysis Group in the Baltic States at “Newsec”:

“In principle, we have a dilemma: today the transactions are at a standstill, but they were at a standstill in 2020 as well. What happened in the following year? Rebounded spring. Demand is not going anywhere, the real estate market is driven by people and business. Can we say that people refuse to live better, that natural processes do not take place in families when they grow, diverge, when people leave this life and leave inheritances. The real estate market cannot collapse in theory. (…) It is important not to cling to the point where we are, but to see a perspective further ahead”.

M. Statulevičius, the Head of LNTPA, presenting the real estate expectations index in 2023:

“War fundamentally changes all possible scenarios and plans. Talking about expectations (real estate indeed is expectations) is not that easy until this geopolitical problem is resolved, until the war ends with Ukraine’s victory.”

Sandra Jovaišaitė, the Head of Commercial Property Brokerage Department at “Colliers”, on the perspectives of commercial real estate in the Baltic States.

“Quality improvement is now the primary motivator for tenants for most relocation or change projects now. The office may be smaller, but in a better location and of a higher quality. A non-operational store can be closed, but an operating one can be expanded or opened in a better location. There is also development in the industrial segment and the need for modern premises remains.”


The thoughts of the participants in the discussion about industrial and logistics real estate “Challenges and surprises on the commercial real estate market: in which direction will we move this year?”

Laurynas Kuzavas, the Head of “SIRIN Development”:

“If we talk about the warehouse business, it has not changed. It has grown like it has been growing before, there are certain distributions, liquidity is as limited as it was last year or five years ago. (…) I am happy that the competition is growing, more professional players are emerging, we will see if the leaders would maintain their leading position later on, I would say and suggest to the client to choose a partner who has already done that”.

Sigitas Jautakis, the Head of the Lithuanian Brach of “Baltic Sea Properties”:

“A few years ago, logistics was like that bad stepdaughter. (…) The pandemic period was a boom for logistics, everyone loaded up warehouses, there were no more vacancies, the impact of the war in Ukraine was not on logistics itself, but probably on developers due to the supply of construction raw materials, so developers faced quite big challenges last year. Unlike in other segments, 2023 will be a year of strong and intense home harmony on our market: management of plots, detailed plans, architectural decisions, but the general trend will remain similar.”

Giedrius Muliuolis, the Head of “Urban HUB”:

“We do not believe that something would suddenly change in the next six months and we would return to 2020. This is surely not happening, therefore, we are not only developing (projects in progress – “BNS Plus”), but also actively looking for land plots available for purchasing in Vilnius, land plots where at least 10,000 square meters could be developed.”

– Darius Kvedaras, the CEO of “Baltic Engineers” operating under the brand name “Be-Live”:

“We work a lot with the industry, and really the industry is only stimulated in the regions. It is very nice seeing recovery of both the free economic zones and industrial parks, such as the Alytus option and the like. The action is underway.”


Simonas Skukauskas, Attorney-at-Law, Partner at “Sorainen”, about amendments to the Law on Construction.

“The law will surely have to change, as unfinished housing will become illiquid. (…) Another important moment, in fact, it is necessary to introduce a universal practice and a rule that challenging a building permit in court in defence of the public interest should be possible only in exceptional cases. Only in protected areas, only in special cases.”

Aušra Mudėnaitė, Attorney-at-Law, Partner at “Sorainen”, about business expectations regarding the National Land Service reform and the Law on Land.

“The developer community has very high expectations for this reform, the full impact of which will be felt from next year. Basically, the news about this reform is good and very long-awaited because the cities would become the owners of the state land located in them, and the Ministry of Environment takes political leadership of this area, which is much closer to urban planning and urban development than the Ministry of Agriculture, which has been in charge of this area until now.”

Thoughts of the participants in the discussion “State land and urban development: what is needed for qualitative changes?”

– Daiva Veličkaitė – Matusevičė, Deputy Minister of Environment:

“It seems to me and I do believe that the sense of partnership between business and the public sector is really possible, it unlocks those solutions. We actually have a lot of those discussions now, regarding the approach to the management of state land, its efficiency and the benefits it brings, that the goal is not to keep it in the hands of the state for as long as possible. We are talking about the greatest possible benefit to the society, and that greatest benefit is not necessarily financial, it could be opportunities for the creation and development of a quality environment.”

A. Mudėnaitė, Attorney-at-Law, Partner at “Sorainen”

“I think that we are at the beginning of a good story and the attitude that we should forget the old National Land Service and create a new format of relations is what we have now. We also have a clear indication from the Ministry of Environment: put all proposals on the table, it goes without saying that we will go to the Seimas, where not only your voice is heard as they are also open to all kinds of other thoughts, but we have a promise to consider and listen to everything. We are at the beginning of this journey.”

Mantas Galdikas, the Head of “Citus”:

“In our opinion, the main obstacles to the reform, are a possible lack of resources or insufficient training of resources. If we have a date from which everything must change, the resources must emerge at least three months before that date, they must be trained and prepared. There should be clear legislation and so on, but today we hear about new packages of legislation which do not contribute any clarity.”

– Remigijus Šimašius, Mayor of Vilnius:

“I have no doubt that mistakes would be made and missteps would need to be corrected in the process of carrying out a reform of this magnitude. I think the bigger risk is not that there would be mistakes, but the bigger risk would be saying in the middle of a stage or before the end something to the effect of “listen, since we haven’t put everything together yet, let’s hold off a little bit”. I see a greater risk in that.”

The thoughts of the participants in the discussion “Investments in real estate with a gusto: how much do their bold decisions cost developers?”
– Dalius Kaveckas, the Board Member, the Financial Director of “Baltic Asset Management”:

“We look at each building as a talent yet to be revealed. We are looking for ways to do that, how to reveal the potential of that building, to create exclusive spaces for a person who can and wants to be happy. That attitude of ours forces us to look at the potential of each building.”

– Darius Žakaitis, the Founder of “TechZity”:

“We are very interested in exploiting that history, adding something modern, a new function to the old elements, to the historical context already created over decades, and then that mix and context appear in a completely different colour. It is extremely interesting for our community members to come together and add some new layer to that history and context.”

– Mantas Skipitis, the CEO of “Orion Asset Management”:

“The return can be really measured in certain numbers, it is no secret that we see them as higher risk projects and we want to earn more from them than from some streamline or banal object. However, at the same time, it can be a completely different group of investors, who are ideological, who calculate returns in a mathematical sense in a completely different way. They may not even calculate the return, (…) because bringing the building to a new life is also a certain return.”

– Alfredas Eitutis, the Deputy Director at “T Parkas”, Investor in Real Estate:

“Five years ago, if investors were offered a land plot or a project outside Naugardukas Street, everyone said that there were factories there or something like that. Now it is nice seeing that the projects have already reached Naujininkai and no one has any doubts that the whole of Vilnius is attractive.”

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About “Core” and the real estate market

Raimondas Reginis, the Head of Market Research for the Baltic States at Real Estate Service Company “Ober-Haus”:

“Perhaps the key moment of the “Core” Conference is the essential consensus of market participants that considerable challenges await the real estate market in 2023. Market participants assess the current market situation quite realistically and do not expect exceptional performance in both the commercial and residential real estate market this year. Therefore, it is sensed that investors are much more cautious about somewhat riskier investments and currently tend to wait for a more stable period. Perhaps one of the best indicators is the latest results of the Real Estate Market Expectations Index presented during the conference, which clearly shows the mood we are facing in 2023.

The second extremely unpleasant moment for market participants is the constant changes in the construction and territorial planning procedures, which do not contribute to the sustainability of market development. When working under such conditions, it becomes difficult for investors or real estate developers to plan their investments and they have to devote a lot of time for dealing with bureaucratic issues. This is especially painful when the market is not going through the best of times and every procedural delay can be very expensive. For example, the desire to protect home buyers and to allow notarized purchase – sale transactions to be concluded only when the completion of the project is at 100 percent from the beginning of 2024 seems like a welcome decision at a first glance. However, when you see lawyers explaining the consequences of such a decision in practice, then you understand how many contradictions there are at the legal level and how many more problems such a change in the law can cause for all market participants, both sellers and buyers. It is obvious that the legislations would have to be adjusted in the course of this year, because currently an extremely large number of housing is being built in the major cities of the country, when the sale of a large part of which has already been agreed with the buyers. If certain specific issues are not resolved, we will see many unpleasant stories in the primary housing market in the coming years.

Examples of cooperation between various businesses can be positively evaluated when it results in the creation of a product that is both new and interesting as well as in demand on the market. It is clear that if the partners’ vision and approach coincide, it is possible to implement much larger, more ambitious projects generating additional benefits for all parties.”

Mantas Galdikas, the Head of Real Estate Development Company “Citus”:

“Overall, the “Core” Conference escalated very important and relevant topics and involved people who can influence the decision-making. LNTPA, which, I believe, is one of the most active and effective associations in evaluating all economic sectors in Lithuania, played the biggest role here. Now the most important thing is to go and work to make sure that the situation changes for the better and does not remain just a set of declarations or polemics. That is why I would like to emphasize not the positive, but the questionable things or topics that I missed.

The Bank of Lithuania emphasized that the overvaluation of real estate is currently at approximately 4 percent. This is good news, because the value of this indicator is not only decreasing, which we do hear from the representatives of the Bank of Lithuania, thus this means that the market is sustainable and there is no price bubble here. On the other hand, it is an opportunity to turn a blind eye to the issue of affordability. The problem does arise because the situation in the whole of Lithuania is being assessed, and the data is lumped into a single “mixture”. It is important to evaluate selectively: first of all, in two or three major cities, where the market is alive and constantly changing. Secondly, it is important to understand that the prices are different and changed differently depending on housing segments, location and so on. We will see a distorted picture as long as we do not analyse the data for each indicator separately.

We also heard that the prices of construction materials are decreasing. At the same time, wages are growing and it is predicted that they will continue to grow quite strongly. It means that the net cost will decrease and affordability will improve. I believe that such an approach is very incomplete and even amateur: about a half of the total construction net cost of a real estate project consists of wages. The share of wages is much higher in the lines of “internal costs”, administrative costs. Therefore, the net cost will also increase along with the growth of wages and, I emphasize, this increase will be much higher than the current decrease in the prices of some materials. A false public opinion is being formed that the drop in the prices of one element, which accounts for up to 5-10 percent of construction costs and an even 2-3 times less significant part in the whole project business plan, would result in visible and significant decrease of the total price. This creates false expectations for the market and the society. The Construction Cost Element Price Indices calculated and published by the Department of Statistics cover all cost lines, so we should take a look at them first.

I really miss the state level stance on housing affordability. Of course, if we consider that it is not an essential basic commodity, its affordability may not be considered a priority, but in this case it will deteriorate. “Can’t afford it? Go rent!”. In the long term, this means a consistent decrease in ownership in the housing segment, an increase in the probability of funds entering the housing market, and a situation similar to that in Germany: in Berlin or in Frankfurt. It is said that absence of policies is also a policy; if that is the desired result, then everything is clear. However, I believe it should be the other way around. This means that the entire state apparatus, all institutions should work and pass or change laws in this area, first of all, after answering the question: “how will this affect housing affordability?”. What is more, this is how work should be done on a day to day basis. Meanwhile, we have been living under shock conditions on the market for the past two years, because every law, in principle, worsens affordability, while external factors, uncertainty caused by geopolitical perturbations, changes in material prices or the growth of Euribor, are just circumstances, but not critical factors that can have an impact in the long term. It seems that we will live under these conditions for the next few years as well.”

Jokūbas Markevičius, the Director of the Financial Stability Department of the Bank of Lithuania:

“The post-pandemic shopping has come to an end in the housing market: there are fewer transactions, there is no more pressure to increase prices. Strong demand for housing is being replaced by more cautious buyer expectations driven by a changed economic environment: high inflation, rising interest rates, and general uncertainty due to the ongoing war. Sales volumes of non-new housing units prevailing in Lithuania are already a quarter lower than a year ago, and the stagnation of purchases from mechanical drawings in the primary market has been going on for almost a year since the beginning of the war. In 2021-2022, the prices of building materials on the world markets, which rose sharply, returned to their normal level, and permits to build housing in Vilnius recovered from the previous lows. All this improves the possibilities of new housing supply. With the slowdown in purchases and the increase in the available options, housing prices have essentially stopped growing since October 2022: this is something we have not seen since the beginning of the pandemic.

The respite in the housing market can be seen as a long-awaited positive phenomenon that will reduce price overvaluation, which recently reached about 4 percent in Lithuania. It is also important that the recent real estate boom was not caused by the growth of the debt bubble, so there were no imbalances that could lead to the collapse of the housing market. Growing income of the population and low unemployment make it possible for the population to return to normal, which in recent years has been thrown out of balance by the consequences of the pandemic and the war. In turn, if wages continue to rise faster than housing prices in recent months, as forecast, this should improve housing affordability.”

Mindaugas Kulbokas, the Head of the Research and Analysis Group in the Baltic States at Real Estate Service Company “Newsec”:

“When listening to the participants of the Conference, which I could divide into two groups, academic representatives (consultants, analysts, economists, etc.) and representatives of developers (developers, foundations, etc.), I got a dual impression about the direction of the real estate market. Developers in the primary housing market spoke about a lack of buyer activity and the increasing burden of liabilities, from infrastructure fees to hiding areas in new projects. Analysts and consultants, looking at the market as a whole, do not signal a dramatic decrease in market activity at this time, as transactions take place on the secondary market. Economists refer to the pause as a natural process, which is caused by the high net cost, increased financing costs, and the willingness of buyers to wait for discounts on the housing market. According to economists, expecting discounts has little basis, and developers talk about the prospect of price growth. An interesting year and an active monitoring period due to price changes (catching the moment) awaits the participants of the housing market. I see an emerging problem with new housing construction rates not being sufficient to ensure sufficient supply in a year or two.

The participants of the commercial real estate market have obviously named year 2023 as the year of “paper development” and are not going anywhere in a hurry besides the projects already in progress. There will be a lot of the so-called “build to suit” projects, when projects that meet the needs of a specific customer would be built. Developers will try to reduce the risks involved in financing projects and projects will be developed only under favourable circumstances (advance contracts, cheaper materials, lower interest rates, etc.). Investors will focus on projects with a very clear investment return (single-tenant stores, good office projects, good location for alternative asset use), which could be very liquid in the future. There should be a lot of demand for commercial housing rental in Vilnius and Kaunas: as prices increase, affordability decreases and cities grow, which is what Vilnius and Kaunas demonstrate, the need for housing rental will inevitably increase. This is where housing developers can find balance when there are not enough buyers on the primary market.”

Sandra Jovaišaitė, Partner at Real Estate Service company “Colliers” and the Head of the Mediation Department:

“It seems that the future will be really interesting and full of both opportunities and challenges. The design of new buildings will be under pressure both from the increase in state requirements, the increase in financing costs, and the quality bar being raised by tenants. It seems that all these aspects fall on the shoulders of the developer, which will certainly not facilitate their business plans and will likely result in a bit of a backlog when working with a new offer. However, it is also likely that these changes open up more opportunities for reconstruction projects, which will potentially stimulate the beautification of cities in the process of reconstruction and maintenance of the existing buildings and the existing urban spaces. Due to the changes limiting the development of new supply, one should not expect greater options, nor greater price corrections to the lower side in any sector of the real estate market.”

Moments from the “Core” Conference