IKEA as a magnet and a driving force for urban development

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We all remember the saying "Riga will never be finished". This is true because, according to urban planning theories, the city will always be in constant process of development. Over the past decade, Riga's development has marked a new course – its most distant neighborhoods have evolved into new and powerful business and shopping centers. One of the most striking examples at the moment is Mežciems and Stopiņi district. After the appearance of IKEA, the area continues to develop rapidly with new projects, such as the construction of the lifestyle shopping center Saga. The district’s development potential is similar to Teika’s area with its real estate project New Teika.

 

From the sleeping district to the dynamically developing area of Riga

In general, the area uniting Dreilini, Mezciems and Plavnieki is characterized by increasingly growing population, more than 75,000 people according to the Central Statistical Bureau. Since 2003, 2,200 new apartments have been added to the housing stock and another 2,000 apartments are in the planning and construction phase. Major projects include AFI Europe project Trebu Home (108 completed apartments, 1500 total planned), Bonava project Dreilinga (116 completed apartments, total 700 planned), developed by NCC Bikernieku 160 (322 apartments), developed by Merks Gaiļezera Nami (190 apartments), as well as earlier developed Jaunbiķeri (380 apartments). Other projects in the area include Meža Ciems (470 apartments), Salnas 21 (518 apartments) and Rembates 8 (72 apartments).

 

Industrial and commercial objects including Rimi, LIDL logistics and office complexes are being developed now in the quarter between Bikernieku, Jugla, Ulbrokas and A. Deglava streets – with more than 130 million euro invested and more than 800 new jobs created. Riga Industrial Park and Coca-Cola Logistics Center have been previously built there; plots of land for several new real estate projects have been purchased in the area. Currently more than 100,000 square meters of industrial space are offered for lease and another 280,000 square meters of land are under construction or planning.

 

The above-mentioned logistics centers as well as the Riga Eastern Clinical University Hospital and the Children's Clinical University Hospital together providing more than 3,000 jobs, are the major employees in the area. IKEA, with 390 employees and the future Saga shopping center, are planning to add at least 300 more jobs. A number of other developing projects will create new jobs in the region. This means that the demand for new infrastructure and services – catering, shopping centers, entertainment venues, etc. – will continue to grow in this neighborhood of Riga.

 

Riga follows the world as urban environment follows IKEA

IKEA shopping center has already become important driving force in the area, which until now was considered a quiet suburb of Riga. World experience has proven that new urban projects are emerging around IKEA and Riga is following the path. The IKEA factor is a guarantee that the new residential projects and logistics and office centers will develop here soon.

 

A successful example of IKEA influence is the Swedish capital Stockholm and its Barkarby area, which was originally a meadow. The construction of the IKEA shopping center and related infrastructure has attracted new investment projects, which in a couple of years allowed the site to grow rapidly into a new commercial and residential area. Today, with 30,000 homes, it has become one of the fastest growing areas in Stockholm. Lithuania has a similar example. Investors' interest in developing new hotel, office and shopping center projects has emerged with the construction of IKEA in Vilnius.

 

Ambitious projects will change the district

Currently a similar scenario develops in Riga. Another large-scale Latvian real estate project, the lifestyle shopping center Saga is currently under construction near IKEA, with ambitious goals and a € 68 million investment. It is worth mentioning that, like IKEA, this project has a unique feature – It will offer a globally recognized concept that is new, however, for the Baltic market – combining home and garden shopping, recreation, sports and office center. Following the new trends in the catering industry, it will become the first shopping center in Latvia with a specially designed Food Hall concept combining restaurant and café area. It will also become the first center with a pre-school facility, which is a great benefit knowing how busy are the kindergartens in Riga and its suburbs. I take this example because the developers of such big-scale projects carefully choose the construction site – together with IKEA they mark a new phase of urban development on the map of Riga and contribute to the higher value of the properties that will be built there later.

 

Riga and its real estate market in the Mežciems - Stopiņi district are developing rapidly. It is expected that this quiet sleeping area will soon evolve into well-developed and dynamic environment with potential for new numerous investment projects. The life here will become more comfortable due to new infrastructure, shopping and leisure opportunities. Tendencies in the real estate market show that Riga is following the global trend of exiting the city center. More and more offices are opting for the new developing areas outside the Riga centre due to the available parking spaces and convenient accessibility. In turn, unoccupied areas attract the construction of new commercial properties. New investment projects are also the key to the potential growth of the area.

 

Public transportations remains a challenge

The decision of Riga City Council, Stopiņi Municipality Council and State Roads Department to extend Dzelzavas street connecting it to Juglas street could contribute significantly to the development of the surrounding area and improvement of its infrastructure. This is a good example of cooperation in improving the infrastructure. At the same time, the development of public transportation in the area is a major challenge for the Riga municipality, as the existing infrastructure is outdated and the situation could deteriorate in the future, while the demand for mobility in this area is only increasing due to its dynamic development.


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Eriks Bergmans

Partner | Director | Head of Agency

Riga

Eriks has more than 10 years experience in commercial real estate across the Baltic States region.  

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