Real estate service company Colliers International Georgia has released an updated review of the real estate market for the year 2015. The study has been commissioned by the Ministry of Economy and Sustainable Development, as well as the Tbilisi City Hall.
Colliers International Georgia’s publication includes hotels, offices, warehouses, as well as commercial and residential real estate. The study, which covers Georgia’s principal cities of Tbilisi, Kutaisi, Batumi and Poti, as well as nearly every resort, has revealed numerous interesting trends within the real estate sector.
Positive trends are continuing within the hotel sector. Based on the future projects that have already been announced, a 53% growth in supply is forecast for the next three years, which will bring the number of hotel rooms in Tbilisi to 9112. In Batumi, the figure will be 5983, representing a 49% growth. The combined investment in the hotel sector in Tbilisi and Batumi exceeds USD 1 billion. It is also worth noting that the number of hotel brands is increasing significantly across the country, which positively affects Georgia’s international image and the growth of the country’s tourist potential.
Together with an increase in supply, there has been a growth in the flow of visitors and tourists to the country, reaching record levels in 2015 (5.9 million total visitors, and 2.2 million visitors who stayed for more than 24 hours). This positive trend has continued into 2016, with the total number of visitors during the first 6 months of the year growing by 13% compared to the same period in 2015, and the number of visitors who stayed for more than 24 hours growing by 18%.
Supply in the retail real estate sector grew by 11%, amounting to 1 230 000 m2 (total figure for Tbilisi, Batumi and Kutaisi). A total of 90 307 m2 of commercial space was rented out in 2015, due both to the expansion of brands already on the market, and the appearance of new international players. Parallel to the growth in supply, the vacancy coefficient decreased from 22% to 17% in Tbilisi, indicating that the vast majority of new properties in the capital were occupied within a short space of time. A reverse trend is seen in Kutaisi and Batumi, where a large part of the newly opened commercial centres remains unoccupied, reflecting a high vacancy coefficient.
In the office real estate sector, supply increased by only 1% in 2015. The study showed that the vacancy coefficient in Tbilisi’s high-end business centres is quite low, ranging between 1% and 8%. Due to this fact, we often come across a lack of relatively large offices (500-600 m2). Outside Tbilisi, supply of office-type real estate remains quite low.
The study of residential real estate includes Tbilisi, Kutaisi and Batumi. As of the end of 2015, a total of 623 development projects are ongoing in the aforementioned three cities. These projects include 47 217 flats which will be added to the market over the next 3 to 4 years. Of the ongoing construction projects, 60% are taking place in Tbilisi, 37% in Batumi, and only 3% in Kutaisi. The number of transactions on the residential real estate market in Tbilisi decreased by 3% and amounted to 18 286 units. In Batumi, the figure was 3 730 units, constituting a 6% increase, while in Kutaisi, the figure remained virtually the same, at 1 687 units. Average prices on residential real estate in Tbilisi in 2015 decreased by 5% in older buildings (to USD 560 per m2), and by 10% in newly constructed buildings (to USD 596 per m2), based on figures from the last quarter of the year.
The review of warehouse-type real estate revealed that no significant changes took place in terms of supply in this sector during 2015. Of the total existing supply in the cities of Tbilisi, Batumi, Kutaisi and Poti (1.8 million m2), 65% was occupied by owners, while the remaining properties were rented out. Tbilisi accounted for 53% of the total supply, followed by Batumi, Kutaisi and Poti, with 22%, 13% and 12%, respectively. Dry storage spaces accounted for 88% of total supply, and refrigerators for 12%. The food and drink industry accounted for the largest share of demand for warehouse space (41%).
The 2015 real estate market review also included the entertainment industry, which covered numerous sectors and sub-sectors, such as entertainment (cinemas, casinos and parks), leisure (gastronomy and wine, healthy living and leisure activities), culture (museums, theatres, stadiums, arenas and concert halls). It is worth noting that 64% of non-resident visitors to Georgia in 2015 visited the country for leisure and recreational purposes, which underlines the significance of the entertainment sector. Also highlighted were various state initiatives with regards to the development of the gambling industry, film industry, sports, resorts and internal tourism, thereby also helping the development of the entertainment industry.
The study prepared by the Colliers International team of experts involved a total of 21 towns and cities, more than 2000 interviews, as well as site visits to 800 locations across the country. Analyses of 1800 lease agreements and 24 000 transactions were prepared. Researchers also collected and studied up to 1500 pieces of data from 12 European cities for comparison.
This was the second time that Colliers International was commissioned by the Ministry of Economy and Sustainable Development and the Tbilisi City Hall to prepare a study of the Georgian real estate market. A team of Colliers International experts from Georgia and the United Kingdom had previously analysed the trends on the real estate market in 2014.
Detailed reports of market research from various sectors in 2015 can be viewed on Colliers International’s official website: http://www.colliers.com/en-ge/georgia/insights/market-reports