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MERKO signed new contracts for EUR 23 million in the 1st quarter of this year

In the 1st quarter of this year, UAB Merko statyba signed three new construction contracts with a total value of EUR 23 million.

In Kaunas Free Economic Zone, the company is building an industrial facility for UAB Continental Automotive Lithuania; in Vilnius, Savanorių Avenue, works have already started on the construction site of a new car service center of UAB Tokvila, and in Anykščiai Municipality, the foundations of a wind farm are being laid.

“After the imposition of quarantine in 2020, the majority of market participants suspended their investments; new tenders for construction works were renewed only in 2021,” said Mr Saulius Putrimas, head of MERKO in Lithuania.

The suspended investments affected the results of the 1st quarter of this year: the turnover from general contracts generated EUR 8.8 million and was by 10 per cent lower than in the same period last year (EUR 9.9 million).

The costs of construction works are increasing

Investors ready to resume investments after quarantine have faced another challenge this year: soaring prices of construction materials.

“Increased global demand has led to a severe shortage of all construction materials in the market since the beginning of the year and this results in rising prices. The prices of metal, glass products, plastic and insulation materials are rising particularly fast. Official figures from the Department of Statistics show only a slight – a few percent – increase in prices, but in reality, we see double-digit numbers: the prices of some positions have risen by more than 40 percent in a few months. We have building sites where costs increased by more than 15 per cent compared to last year,” added Mr Putrimas.

Mr Putrimas thinks that a significant proportion of clients who postponed their projects last year most likely will have to review their budgets this year, while contractors may face financial management challenges.

“In such a situation, customers should choose construction partners and assess their reliability very carefully, because otherwise they may be forced to freeze their buildings under construction for a long time. As a part of Merko Ehitus group, we aim to remain a reliable partner for all participants in the construction process, therefore we responsibly evaluate and plan financial resources, and our company’s solvency and liquidity ratios are among the highest in the market,” says Mr Putrimas.

Construction of the 2nd stage of Vilnelės skverai housing starts

In the 1st quarter of 2021, MERKO signed 66 preliminary apartment sale and purchase agreements, which is by 33 percent less compared to the 1st quarter of 2020, when 98 apartments were sold.

“Sales declined because of shrinking supply: at the beginning of 2020 we were selling apartments in four projects: Rinktinės URBAN, Vilnelės slėnis, Bastėja Life and Fizikų namai, and this year we can offer only one – Vilnelės skverai,” said Mr Putrimas about the present situation.

This was due to the situation that was rather unclear after the imposition of quarantine early last year, so investments in new projects had been suspended for some time. Taking into account the increased demand, there are plans to start the construction and sales of the 2nd stage of Vilnelės skverai housing in the nearest future, and also – later this year – to introduce two more new residential projects in Vilnius.

The increased demand for residential housing was fueled by several reasons: half-year slowdown in construction last year, the lack of supply, and also understanding that real estate is a safe investment and a way to protect money from inflation. However, those looking for residential housing should remain critical and responsibly evaluate the offered product, i. e. read the contracts, find out the state of completion of certain housing, etc. With the rapid growth of demand for apartments, inexperienced real estate developers start appearing on the market and developing their projects, where the sale of apartments begins even before construction permits are obtained, and lack of experience together with rapidly growing construction prices may hamper quality completion or even ruin it.