Real estate boom will result from Georgia-EU free trade, expert believes

Architecture of Old Tbilisi; Photo by Nino Alavidze/, Apr 14, 2014, Tbilisi, Georgia

Georgia’s economic and political integration to the European Union needs to go hand-in-hand with European Foreign Direct Investment.

In’s interview with TBSC consulting’s Real Estate and Hospitality Associate, Martijn Kanters, he revealed his belief that 2014 would see the beginning of a boost in European foreign direct investments (FDI) in Georgia in the real estate sector and more.

"This year is very important for Georgia’s political and economic development as the country endeavors to sign the Association and Deep and Comprehensive Free Trade Area Agreements with the European Union. This will create incentives for European investors to come and invest in Georgia,” Kanters said.

"Georgia is now more and more, but slowly, attracting interest from European industries. Before today, most of the FDI in Georgia has been coming mainly from Middle East but not enough from Europe.”

Kanters has been based in Georgia since 2012 but has worked in the real estate industry in Central and Eastern Europe for almost 15 years. Pixel 34, A class mixed use building in Tbilisi. Photo by Nino Alavidze/

Today, Kanters believed the Georgian real estate market was in "an early phase of development”, a situation comparable to Central and Eastern European countries such as Poland, The Czech Republic, Slovakia, and Hungary in the mid 1990’s.

He used Slovakia as an example of possible development and said the country could be used as a "mirror” for Georgia.

"Slovakia was in a very bad shape in the mid 1990’s and it was expected at that time that Slovakia would join the EU much later than the Czech Republic, Poland and Hungary. However, economic development started to pick up in the late 1990’s and Slovakia joined the EU along with the others in 2004,”Kanters said.

"Development of the real economy leads the way in Georgia and soon after the demand for real estate will follow.”

The real estate expert believed Georgia was not on the "radar” of the European business community until now.

Radisson Blu Iveria Hotel attracts international travelers, including business, government and NGO clientele, all of whom appreciate its location near the Opera House on the prestigious Rustaveli Avenue. Photo by Nino Alavidze/

"I do believe this will start to change this year. European investors play a leading role in determining Georgia’s competitive advantage and will contribute to the development of an economy that will be able to thrive in a common market,” he said.

Kanters said in Central and Eastern Europe, European investors (British, French, German, and Dutch) dominated the real estate industry.

Building at a glance

The limited number of foreign investors active in Georgian real estate was one of the main factors hampering development of the sector, Kanters believed.

"Developers don’t have an ‘exit’ in the market now. Most commercial real estate developers need to have some level of certainty on selling their project. The absence of a liquid real estate investment market in Georgia is a crucial factor hampering further development and limiting interest by European investors,” he said.

Before the Georgia-Russia war and the global financial crisis in 2008, real estate was one of Georgia's fastest growing sectors. 

After slowing, latest FDI statistics now show an upward trend in the real estate sector, which was likely to have been affected by the volume of construction in 2014, Policy and Management Consulting Group’s (PMCG) economic outlook and indicators the construction sector reported.

In particular, the volume of FDI in construction increased by 29.1 percent (20.1 million GEL) in 2013 but unlike the construction boom from 2006-2007, it did not fizz out.

Many construction or engineering projects have remained unfinished in Tbilisi. Photo by Nino Alavidze/

FDI’s in the real estate sector composed only 2.95 per cent ($27 million USD) of total investments last year and was the fifth largest grossing sector after energy, financial, transport and communication and manufacturing.

The sector showed signs of weakness in the country's GDP: In 2013, construction was down at 6.7 percent of GDP from 7.8 percent in 2012. The volume decreased -10.5 per cent and -124.3 million GEL respectively.

As PMCG reported, the number of employees in the construction sector also decreased by -18.8 per cent, which was equivalent to 10,984 people.

When asked what his recommendation would be to foreign companies striving to invest in Georgia, Kanters responded by saying investing in a partnership with a local Georgian company would be advantageous.

"There are many good local investors willing and able to cooperate, and finding the right partner is just as important as finding the right project. As we see all the time in our line of work, the combination of local expertise and international experience can create magic,” he said.

Hotel market is "hot”

Georgia’s hospitality sector has been named by locals and foreign industry experts as the most rapidly growing sector and area which had the most investment potential.

Kanters agreed, noting that today thanks to the rapid growth of tourism in Georgia since 2009-2010, the hotel real estate market was now "hot”. In 2002, the building of the hotel listed among top 10 hotels all over the Soviet Union was again renewed and launched as Tbilisi Marriott Hotel, now the beauty and pride of Tbilisi. Photo by Nino Alavidze/

Meanwhile, after United Nation’s World Tourism Organization’s (UNWTO) Secretary-General Taleb Rifai visited Georgia this month, he appealed to global tourism sector insiders and said it was an ideal time to invest in Georgia’s tourism sector.

However the industry specialist believed there was a need to diversify a recent surge in projects in the hotel market, including location, segments and concepts: "The new projects are concentrated in the 4-star hotel segment and in capital city Tbilisi and Black sea city Batumi,” he said.

Nevertheless, Kanters believed there was still a big gap between demand and supply in the hotel sector. Looking back on the past couple of years and the demand of this service, Kanters noted the number of hotel guests had grown 30-40 percent for a year and now the supply was continually growing at a slow pace.

"The last big hotel to open in Tbilisi was the Holiday Inn in 2010. Since then no big hotel has been opened. I strongly believe in the potential of combined hospitality-retail-leisure developments in Georgia and investors should explore integrated concepts,” he said.

Over the next two years, the Ministry of Economy and Sustainable Development of Georgia noted six major hotels were scheduled to open in Tbilisi, Georgia’s capital. These were: Rixos; Intercontinental Tbilisi; Millennium Hotel; Park Inn; Hilton Garden Inn and Rooms Hotel Tbilisi totally with more than 1500 beds.