Vienna, Austria. 3-6 July 2013 European Real Estate Society 20th Annual Conference

The concept of the Latvian industrial property market development model in a context of the strategic planning Tatjana Staub, PhD candidate, Mg.oec., Ineta Geipele, Prof. Dr.oec. Institute of Civil Construction and Real Estate Economics, FEEM, RTU, Latvia Within the framework of the project:

RESEARCH SUBJECT AND OBJECT Subject of the research : modelling of the A class industrial property market development in a long-term perspective. Object of the research : the industrial property market. 3

Territory’s cooperation and impact radiuses of Latvia R1 (LV) R2 (LV) RUSSIA First radius (R1 (LV)) indicated for Latvia includes the border states: Lithuania, Estonia, Russia and Belarus. The second radius (R2 (LV)) accumulates the investments assets from the closest countries of the Baltic Sea region: Finland, Sweden, and Norway and next to the neighboring overland partners Ukraine and Poland.

Tasks and Purpose

THESIS STATEMENT:  in a process of spatial economic allocation in compliance with considerations of the climate change, a permanent development of the entrepreneurial activities of commercial real estate market in the Baltic Sea Region is facilitated thus preventing the short-term current imbalance in the local commercial real estate market. 6

PRACTICAL IMPORTANCE  the identified issues, assessment of the developed models’ creation and provided scientific solutions to determine the content of spatial economics in the context of development of the Baltic Sea Region, enhance the relevance of the concept of the use of spatial economic allocation in the Latvian commercial real estate market development. 7

SCIENTIFIC NOVELTIES, FORMAL SCIENTIFIC IMPLICATION AND MAIN CONCLUSIONS

THE LAYER MODEL OF THE ALLOCATION OF SPATIAL ECONOMIC OBJECTS IN A SYSTEM OF THE ENTREPRENEURIAL ACTIVITIES MNE   State Technologies Local economy, National economy Global economy   Climate change Globalization of manufacturing of goods and services Financial globalization 9 SCIENTIFIC NOVELTIES

THE ALGORITHM MODEL OF THE FORECASTING A SUPPLY OF THE SPATIAL ECONOMIC OBJECTS Manufacturing (and agriculture if compare the land-use) development dynamics assessment for the selected countries Conclusions on the sustainable development of the modern industrial real estate property’s for the target countries (complying existing demand, and possibly insufficient use of the territory’s potential and imbalance of the local market) Statistical data allowance for the stock of the focus countries’ modern industrial real estate property The climate change research data (comparison of the historical data and long-term forecasts) Determination of the focus countries Discuss ion: Factors impact The assessment of the average annual growth rate of manufacturing (and agriculture if compare the land- use) for the selected countries Manufacturing capacity measured for the focus countries in euro per modern industrial real estate property’s square meter Generation of three scenarios on gross value added on manufacturing (and agriculture if compare the land-use) for the target countries Generation of three scenarios on the forecast of the local market stock potential of the target countries Step 1 Step 2 Step 3 Step 4 Indications Conclusions A. Modeling of the climate change projections B. Making a forecast on the high-class (modern) industrial property stock and manufacturing capacity Manufacturing (and agriculture if compare the land-use) development dynamics assessment for the selected countries Conclusions on the sustainable development of the modern industrial real estate property’s for the target countries (complying existing demand, and possibly insufficient use of the territory’s potential and imbalance of the local market) Statistical data allowance for the stock of the focus countries’ modern industrial real estate property The climate change research data (comparison of the historical data and long-term forecasts) Determination of the focus countries Discuss ion: Factors impact The assessment of the average annual growth rate of manufacturing (and agriculture if compare the land- use) for the selected countries Manufacturing capacity measured for the focus countries in euro per modern industrial real estate property’s square meter Generation of three scenarios on gross value added on manufacturing (and agriculture if compare the land-use) for the target countries Generation of three scenarios on the forecast of the local market stock potential of the target countries Step 1 Step 2 Step 3 Step 4 Indications Conclusions 10 SCIENTIFIC NOVELTIES

ALGORITHM MODEL OF THE FORECASTING A SUPPLY OF THE SPATIAL ECONOMIC OBJECTS: practical solutions (I) Country selection/ season, rate Riga’s forecasted versus comparative climate intervals, °C summerwinter Latvia (Riga), in Belgium (Brussels) Czech Republic (Prague) Estonia (Tallinn) Lithuania (Vilnius) Poland (Warsaw) Sweden (Stockholm)-0.5 United Kingdom (London) increase of a number of dryness periods in summer; 2.high temperatures in winter; 11 SCIENTIFIC NOVELTIES

12 ALGORITHM MODEL OF THE FORECASTING A SUPPLY OF THE SPATIAL ECONOMIC OBJECTS: practical solutions (II) SCIENTIFIC NOVELTIES

Ratio/ Country’s Scenario 123 Agriculture gross value added Manufacturing gross value added Manufacturing Gross value added percent from GDP in Productivity per 1 inhabitant High class industrial property stock ALGORITHM MODEL OF THE FORECASTING A SUPPLY OF THE SPATIAL ECONOMIC OBJECTS: practical solutions (III) SCIENTIFIC NOVELTIES

Gini coefficient for regional specialization 14 SCIENTIFIC NOVELTIES THE REGIONAL SPECIALIZATION RATE OF THE MAIN ENTREPRENEURIAL ACTIVITIES IN LATVIA AND BALTICS (I)

According to NACE rev.2 structure coding: Separate: manufacturing (C), agriculture of crop and animal production, hunting and related service activities (A01) General: agriculture (A), industries (B - E codes), construction (F), trade and accommodation (G, I codes), services and transport (H, J-N codes) 15 SCIENTIFIC NOVELTIES THE REGIONAL SPECIALIZATION RATE OF THE MAIN ENTREPRENEURIAL ACTIVITIES IN LATVIA AND BALTICS (II) Specialization in manufacturing and agriculture Overall specialization, A-N coding in NACE rev.2

INTERACTIVE INTEGRATED PLANNING MODEL Level s of planning MICRO LEVEL MACRO LEVEL MESO LEVEL OfficesRetailPublic Strategic Industrial and warehouse ResidentialInfrastructureHotel 16 SCIENTIFIC NOVELTIES

MAIN CONCLUSIONS and PROPOSALS (I) 1.Very serious attention is paid to the climate change processes in the world. Climate change may be the result of natural processes as well as human activity. Changes in climatic conditions may change the country's economic development priorities. Objects of industrial significance are among theose commercial real estate market facilities, the operation of which even a short period of time can affect changes in the composition of the air, water and land. 2.The concept of the manufacturing development and the industrial property forecasts considering the Latvian economy potential for the development in a context of climate change. The industrial property market capacity might consider the existing schemes of the industrial development and the balanced land-use that would require the polycentric business activities. 3.Making calculations in comparable prices, According to the Czech scenario considered as impetuous development the current manufacturing capacities correspond to 53% of the current Latvian stock of the industrial real estate market properties demanded in Europe. 4.The Article states the problem of loosing the regional specialization might be analyzed through all the economy levels, considering controlled and targeted development without explosive growth and falls. Also a weakness of the local companies that is a lack of the strategic planning. In term of the taken the climate change topic it might be reconsidered to a continuous careful analysis from the foreign enterprises experience.

MAIN CONCLUSIONS and PROPOSALS (II) 5.The authors propose the academicians and professionals to use the following developed novelties to supplement the theoretical basis in the field of spatial economics. 6.Placement and location of the commercial real estate objects of the industrial purpose is closely related to the national priorities and economic development, therefore, according to the developed the algorithm model of the forecasting a supply of the spatial economic objects created according to the potential climate change and economic development, the author provides the recommendations to the Ministry of Economics and the Ministry of Environmental Protection and Regional Development to use the climate change instrument to make the forecasting for the economics and regional development. 7.The authors recommend using that time and holding back the supplementation of legislation focus efforts on matter of supporting the entrepreneurial activities in the middle term by tax policy, creation of the transport and utilities infrastructure. Educating the society, efficient resource relocation and use of the monetary sources might enhance the activity of the business activities in the territory of Latvia. 8.In addition, the authors would argue that educating the local inhabitants in a field of specialization, developing transport infrastructure, careful analysis on potential demand from the neighbouring countries, including dynamics in outward and inward FDI flows might be the driving forces in attracting foreign capital and stimulation of the increase of the industrial specialization in Latvia

Ich danke Ihnen ! Thank you! Questions? Tatjana Staub, Mg.oec. GSM: This work has been supported by the European Social Fund within the project «Support for the implementation of doctoral studies at Riga Technical University». 19