Riga may have lagged behind in the new project development, but what has already been started and what is planned for the future is even more daring and sustainable than what's been done in Western Europe. This is one of the takeaways from the Nordic Baltic Business Forum, which took place in Riga yesterday, May 12, focusing on how Nordic investors are contributing to the sustainable development of the real estate and construction industries in Latvia.
Since the restoration of Latvia's independence, Nordic investors have provided a significant contribution to the development of Riga's cityscape and currently and are leading the way in introducing green and sustainable solutions in their development projects in Latvia raising the bar for all other players in the market. Nordic investors are also seen as strategic partners to the city of Riga in achieving its ambitious goals in becoming the first climate neutral city in the Baltic States and one of 100 cities in Europe that will aim to reach climate neutrality by 2030.
At the start of yesterday's forum, the Mayor of Riga Mārtiņš Staķis acknowledged that the largest proportion foreign direct investments in Riga have always come from the Nordic countries. „This strategic partnership will always be a priority for me and the city," said Mārtiņš Staķis in his opening remarks. The Mayor of Riga also pointed out that, lucky for him, residents of Riga have shown that they understand that „green and sustainable development is the only way forward". „Our doors in Riga are wide open to green investment," Staķis said. The Mayor of Riga acknowledged that having a good location is not enough to attract foreign investment and shared what the city of Riga is willing to „pay" to attract new FDI and achieve its ambitious climate neutrality goals.
Riga has already introduced „green corridors" to fast-track construction permits for large and sustainable investment projects; at a national level a new Rental Law has been passed to make investment in real estate properties more attractive; at a municipal level - real estate tax policies have been changed to allow for creation of infrastructure support fund making it cheaper to build new apartment, office and manufacturing buildings. The city is actively invested in improving its transport infrastructure, connectivity, and mobility.
When speaking of the geopolitical security in the Baltic region in the light of recent Russia's invasion of Ukraine, Adviser to the Council of Latvijas Banka Andris Strazds emphasized: "No, Baltic countries are NOT "the next "(see Article 5 of North Atlantic Treaty). In the face of threats from Russia, Latvia is as safe as other NATO member countries.
Even with a leadership change in Russia things will not change dramatically and the situation in Russia will largely remain the same (see extractive economic institutions in Acemoglu and Robinson "Why Nations Fail?", 2012).
Containment is an appropriate long-term strategy, when it comes to nuclear Russia (see George Kennan "The Sources of Soviet Conduct", 1947).
Geopolitical impact on economic development
Rebound from COVID was expected stronger, but now subdued by geopolitical developments;
Inflation pressures are broader than half a year ago - now a broad-based trend, growth still projected in the Eurozone area for this and next year.
We are in the last days of negative Euribor.
Sustainability & Innovation
Each next case presented yesterday by Nordic investors gave an insight into what already has been accomplished and what new additions will appear in Riga's cityscape in the years to come, which are built with sustainability in mind. As the moderator Viesturs Celmiņš, Managing Director of VEFRESH, commented on each subsequent presentation, it looks like Nordic investors have launched "sustainable construction Olympics" in Latvia, bringing forward innovative solutions that address the emerging long term and short term challenges. From already implemented projects such as Origo One by Linstow Baltic, which has already received recognition for its design, functionality, efficiency, sustainability, to upcoming all wooden high-rise projects in Riga's city center and new development projects at Riga's water front, there is a lot to learn.
When looking ahead, investors should be take into account:
The questions should be not, whether you can afford sustainable construction, but rather - can you afford not to?
The costs of sustainable construction are higher at the moment of implementation, but are less in the lifespan of the project.
Real estate developers and investors have to make a choice - whether to take costs now, or expect double or triple costs in the future;
"Soon there will not be sustainable construction, - only construction", as all construction will have to be sustainable.
The event is organized by four Nordic Chambers of Commerce in Latvia (Danish, Finnish, Norwegian, and Swedish) in close collaboration and support from the Nordic Council of Ministers' Office in Latvia and Norwegian, Finnish, and Swedish Embassies. The full agenda is available at: www.nbbf.lv. You may watch the recording of the event on the NBBF account!