ABOUT Construction Business In Georgia


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.

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.


Tbilisi contributes the majority of both leasable and owneroccupied 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.


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.

Analysis of Real Estate Boom In Georgia

An analysis of the real estate market in Tbilisi shows that prices have risen faster than rents in recent years. As a result, property owners earn less rent per U.S. dollar/Lari of investment today as compared to several years ago. This trend may be due to improved political and economic conditions, strong economic growth and rising incomes. Another factor may be that speculative property buyers are driving up prices based on very optimistic expectations about future price increases. This paper presents a framework for analysing Tbilisi’s real estate market that is based on standard real estate economics taught at Western business schools. Future analysis is needed to quantify the factors that drive the recent boom. .

What Does It Mean?

  1. Real estate prices in Tbilisi have risen faster than rents and building costs. After strong increases in recent years, real estate values significantly exceed marginal building costs, which are the long-term drivers of real estate prices according to standard economic theory. Developers are taking advantage of rich prices by building large volumes of new real estate.
  2. The stars were aligned for Tbilisi’s real estate boom. Pent-up demand, strong economic growth, relative political stability, the legalization of economic activity and lack of investment alternatives were powerful drivers of the recent boom.
  3. But supply could overshoot. There is a risk that developers may overbuild, because they may have over-optimistic expectations of future demand.
  4. Market participants should be prepared. Real estate buyers and investors should not expect prices to rise forever. Real estate developers need to realize that ultimately, prices are likely to move closer to building costs, reducing profit opportunities. Banks need to evaluate the credit risk of commercial real estate lending and residential mortgages. If price increases slow down or even reverse, credit losses are likely to increase. Governmental authorities need to be watchful, as every boom creates opportunities for questionable behavior.
  5. Information collected from National Bank Of Georgia Report, CLICK HERE to see more information.