By Keti Tabatadze
Colliers International Georgia views the development trends on the Georgian real estate market positively. The company’s managing director Irakli Kilauridze tells Property Georgia about the existing challenges on the local market, achievements and expectations.
Your company regularly conducts research of the local real estate market. What are the forecasts for 2016?
We have identified certain changes from 2015. Demand on the residential property market decreased by 10%, which was mainly due to the changes in the foreign currency exchange rates. The average sales price also decreased slightly. Compared to 2014, prime rent of A-class offices went up by 13% on the office real estate market. Two A-class business centers have been added to the list of current construction projects in the form of King David and Axis Towers, which are expected to be completed in 2016-2017.
As for the hotel market, 2015 saw the opening of the Hilton hotel in Batumi. Furthermore, 2016 will see the opening of the Tbilisi branch of the international hotel chain Millennium, as well as three high-quality local hotels in the capital, while six projects with a total of up to 900 hotel rooms will be completed in Batumi, most notably Holiday Inn Batumi, Kempinski and Gazelli.
How did the devaluation of the local currency affect the real estate business?
The trend of growing demand that existed on the Tbilisi real estate market up until 2014 has been negatively affected by internal and external economic factors. The changes in the foreign exchange rates, a decrease in money transfers, as well as other factors, have placed the real estate market players in an unfavourable position. However, it must be said that development companies reacted promptly in the form of various marketing promotions and new offers. Their pricing policies greatly limited the damage to the real estate market.
What were the most significant events on the real estate market in 2015?
From the largest transactions in 2015, we can highlight the top three market deals that were concluded in Tbilisi: the acquisition of the Ministry of the Economy building by the Hualing Group for $ 9.45 million; the sale of the warehouse industry on Eristavi Street for $ 8.75 million; and the acquisition of the former Ministry of Agriculture building on Kostava Street by the Granat Group from Austria for $ 7.09 million.
I can confidently say that the most significant development project has been the start of the Axis Towers construction project that includes commercial, office, hotel and residential real estate. I can also highlight the Panorama Tbilisi project that will add 400 rooms to the local hotel market. The construction of the Galerea Tbilisi shopping mall on Freedom Square is another project that is of interest to us.
Will the restoration of visa-free travel between Georgia and Iran have a positive effect on the real estate market? How big is the interest from Asian investors towards the Georgian market?
The abolishment of visa-free travel between Georgia and Iran had a considerable effect on the tourism flow between the two countries. The number of Iranian visitors to Georgia fell by 47% in 2015 compared to the previous year. Economy-class hotels were particularly affected, since that is the segment typically used by Iranian tourists. The restoration of visa-free travel will have a positive effect on the hotel market.
Today, Georgia is one of the most attractive countries for real estate investment. The largest Asian investor has been the Hualing Group from China, which, together with the banking sector, is involved in the residential, commercial and hotel sectors. Other investors that stand out include Ras Al Khaimah and the Dhabi Group from the United Arab Emirates and AS Georgia from Azerbaijan, and there are numerous others.
According to which criteria is real estate being assessed? What are the lowest and highest prices in Tbilisi and Batumi?
There are various criteria for assessing real estate. Foremost of all, the assessment is based upon the type of real estate. Different criteria apply to residential and commercial properties. The core criterion which determines the price segment of all property types is the location. In Tbilisi, as in any other city in the world, three categories are represented: the central (prestigious), the medium, and the suburbs. Other significant assessment criteria are the condition of the property, the quality of construction and fit-out, the number of floors, and the parking facilities. Additionally, the view represents another criterion for residential real estate, and the glazing for commercial real estate.
Based on the pricing policies, residential real estate market in Tbilisi can be subdivided into three types: the premium segment is represented by the Vake and Mtatsminda districts, where prices range between $ 1200 and $ 2500 per square meter (higher upper limits are possible for certain projects); prices in the middle segment start from $ 800 and go up to $ 1200, while the city suburbs fall under the lower segment, where prices range from $ 350 to $ 800. The real estate market in Batumi is characterized by similar price segments.
To what extent is the population now protected from the ‘real estate bubble’ that negatively affected many people several years ago?
These days, Tbilisi is undergoing an active development phase. The construction fever can be felt in all parts of the city. In contrast with the previous period, a certain percentage of development companies and individual developers are insuring the current projects with commercial banks or insurance companies. Thus, customers get a guarantee that construction of the property that they purchased will definitely be completed.
Construction works are mainly taking place in Tbilisi and Batumi. What can be done to draw more attention towards other big cities?
It is true that construction works most are most actively taking place in Tbilisi and Batumi. However, it should be pointed out that rehabilitation works conducted in Tskaltubo have greatly enhanced the town’s potential within the thermal spa resort niche; various types of hotels have been built; negotiations are ongoing with a French-based international brand; and the completion of the port in Anaklia will have a great impact on the market. Another significant event is the start of construction works on a high-quality hotel in Abastumani.Overall, it can therefore be said that various Georgian towns and resorts are steadily developing.
What are Colliers International Georgia’s plans for 2016?
We attach priority to large-scale projects. One such example is Galeria Tbilisi – a distinguished shopping mall on Rustaveli Avenue. Colliers International Georgia is conducting marketing and rental works for this project. Works of the same kind are being done for the Vake project, which involves the first A-class offices on the market.
Colliers International Georgia has been operating on the Georgian market for 10 years, although the company only opened a local agency two years ago due to the scale of the projects. This turned out to be a successful move, as the company’s revenues on the Georgian market have since been growing by 50% each year. The Caucasus region in general is of great interest to Colliers International.