Georgian Real Estate Development Market Trends

The National Statistics Office of Georgia (GeoStat) published preliminary economic statistics last week for March 2019. Numbers for economic growth showed a marked slowdown in construction and real estate development. Starting in 2018, the development sector has been on a slow downward slope, reaching 3.1% negative growth.

GeoStat also released specific numbers on construction in the country.

Looking at the total numbers from 2018, 619 structures were constructed: 14.2% fewer than in 2017. These structures covered 624.4 thousand m2, 59.9% more compared to 2017. This trend of fewer and larger buildings continued into the first quarter of 2019.

Nationwide, in the first quarter of 2019, a total of 2,052 construction permits were issued for projects covering a total of 1,378,100 m2 of land nationwide: a 0.2% decrease in permit volume year-on-year, yet a 7.8% increase in total square meters year-on-year. One of the most interesting statistics in the report is that 50% of construction permits were issued in Tbilisi. Ajara registered 10.5% of all permits and the Kvemo Kartli region, 11.1%. The smallest number of permits were issued in Guria (1.6%) and the region of Racha-Lechkhumi and Kvemo Svaneti (0.3%). A “relatively large share of [construction] permits granted [were for] multifunctional residential complexes,” reports GeoStat.

More than half of construction completed between January and March 2019 was in three regions: Tbilisi (40.5%), Kakheti (12.6%) and Kvemo Kartli (7.9%).

There have been several major construction projects in the last few years in Tbilisi, many spearheaded by billionaire businessman and alleged shadow government leader Bidzina Ivanishvili, including Galleria Mall, Tbilisi Hills golf course and residential complex, and the Panorama Tbilisi project (which was recently suspended due to construction safety violations). Several new international brand hotels have also sprouted up: Wyndham Grand, and the Moxy Hotel among others, and the massively successful Georgian hotel Stamba.

In the next few years, several large construction efforts are planned. In the public sector, this includes a proposed theme park to be built near Tbilisi Sea, and Radio City: a planned sports, shopping and children’s activities complex to be built for an estimated $20 million on the site of a former Soviet radio factory in the Mukhiani neighborhood north of the city. The 2019 budget of Tbilisi City Hall is just over one billion GEL ($370 mln), of which nearly half (455 million GEL) was allocated for infrastructure. At the end of 2018, Tbilisi Mayor Kakha Kaladze began emphasizing the importance of developing some of the city’s most populous yet least trendy districts, Gldani, Mukhiani and Temka. Kaladze promised to bring cafes, restaurants and sports complexes to these underserved neighborhoods, pledging an investment of 50 million GEL ($18.5 mln) and the creation of 200 jobs.

In the private sector, the Tbilisi Hilton on Kostava Avenue, the three-tower, $75 million Alliance apartment complex and Wyndham Garden Hotel on Tamarishvili St. and City Mall near Vazha Pshavela metro, are some of the major ongoing construction projects expected to be completed in the next year or two.

GeoStat’s preliminary economic report for March showed overall economic growth in the sectors of trade, transportation, real estate transactions and services.

By Samantha Guthrie

Image source: Ministry of Economy and Sustainable Development of Georgia

06 May 2019 17:18