Executive Summarry
Retail Market
Tbilisi has the largest stock of modern shopping centre floorspace, with 231,000 m2 in 2015 among Georgian cities. This is expected to increase to 388,000 m2 by 2017 with three new shopping centres in the pipeline. Vacancy rates in high streets fell to just 7% in 2015. Shopping centre vacancy rates have also fallen but, on average, remain relatively high at 17%. Vacancy rates in new centres are much lower due to aggressive marketing campaigns. Despite the addition on modern shopping centres, 40% of Tbilisi’s retail stock remains in bazaars and open markets. The market is continuing to evolve and while the space given over to bazaars is reducing, it remains a challenge to convert traditional shopper habits to modern and, perhaps for many, less accessible facilities.
Office Market
Tbilisi contributes the majority of both leasable and owner-occupied office space supply in the country. The city has no specific business district and modern leasable office space (144,380 m2 in total) is distributed between the various business hubs located in each of Tbilisi’s primary districts. There is twice as much older, lower-class office stock in the city, which is spread throughout Tbilisi. The trend is for developers to add more high class office space to the market, although some of the city’s business centers are struggling to keep pace with international standards. There are no business centers outside of Tbilisi and the supply of modern stock is limited in regional cities.
Though Tbilisi’s leasable modern office stock supply increased by only 6% in 2015 compared to the previous year, the pipeline of projects (including the two largest projects, King David Business Center and Axis Towers) will increase the existing supply by 41% between now and the end of 2018.
Hotel Market
Tbilisi is the most profitable location for hotels and this has been recognized by a wide range of developer and operators. Over 20 new hotel developments are scheduled for completion between 2016 and 2018, many for international brands. If all schemes are developed, over 50 per cent of them are in the 5 Star category, bringing more than 2,000 quality rooms to the market. In reality, a number of these developments are likely to be delayed or dropped completely. There is, however, going to be more competition, which will inevitably place existing operators under pressure and potentially result in the unwanted combination of reduced room rates (ADR) and lower occupancy rates at the premium end of the market.
Residential Market
Tbilisi has a housing stock of 360,000 units. There is a considerable development pipeline for the period 2016 to 2018 that promises to deliver over 500 projects and just under 30,000 new units. Encouragingly, 37% of these units have already been sold.
Selling prices of new build flats vary between USD 400 p/m2 to USD 3,000 p/m2, but average prices in both the prime and secondary market have declined slightly between 2014 and 2015. With the amount of new stock in the development pipeline, significant growth in selling prices is not expected.
The development land market has shown some volatility, with land transactions down 27% y-on-y in 2015, resulting in average land prices falling by 4%. However, this reduced rate is still 22% higher than 2013 prices.
Warehouse Market
Of all sectors in the Georgian real estate market, the industrial market is the least developed. With the exception of Gebrüder Weiss’s facility in Tbilisi, modern A-class space is non-existent and developer-led projects have yet to begin. The market is further characterized by a very high share of (local) owner-occupied stock and a limited amount of international occupiers.
International and local brands occupy a majority of Tbilisi’s A and B class warehouse space. It should be noted that the relatively low level of exports is one of the contributing factors impacting the growth of the warehouse market.
Entertainment Market
Today, the rise of county’s leisure and recreation options is occurring primarily in Tbilisi. A variety of entertainment options, including extreme land-based activities, can be found in the Tbilisi, but the services supplied by the small number of operators now in business can hardly be compared to the wide range of options found in other famous European tourist spots.
Several sectors, such as gambling/gaming, the cultural art, and the sporting industry have benefited from governmental support in terms of investment, lenient taxes, and broad deregulation. Private investment in the casino sector recently increased as the number of higher-end gambling facilities grew and international gambling festivals have strengthened the country’s image as a gaming hub.
The sports, culture and cinema sectors made particularly large steps in 2015. Tbilisi is becoming famous as a host city for international sporting festivals and large-scale cultural events. As for the cinema industry, it has changed from a poorly developed market to one that shows great promise.
For more information please follow the link