TBC hosted a regional event in Batumi, where business sector and government representatives reviewed the role of Adjara in the country’s economy.

TBC Capital presented a study on tourism, residential and commercial real estate (RRE&CRE) and macroeconomic indicators in the region.
According to the macroeconomic review, Georgian economy is expected to grow more than 10% in 2022.

Adjara’s economy is progressing even faster as compared to the country’s economy, its expected growth rate being about 18.5%. While high dependence on tourism, most naturally, made the region more vulnerable the downturn in 2020, the speed of recovery is seen as remarkable. According to TBC Capital’s evaluation, Adjara’s share in national economy in 2022 has been almost 10%, and the trend equally applies to bank credits.

More than half of Adjara’s economy is related to the tourism industry, with HORECA, other tourism services and RE transactions accounting for 35%.

Employment and labour compensation indicators are in line with the economic activity in Adjara. The employment rate in the Adjara business sector rebounded 12.3% in Q1/2022, with the average salary increasing 20.8%, to the level of 1257 GEL.
Despite improved macroeconomic indicators in various sectors, inflation remains a challenge in Adjara, standing at 13.9% as of May 2022. According to TBC Capital’s market scenario, the GEL exchange rate is forecasted at 2.85 against USD and at 3.1 against EUR at the end of 2022.

Sectoral research has revealed that tourism is rebounding at a strong pace in Adjara, despite the challenges. The number of international arrivals equals 319 796 as of May 2022, while income from travel made 259 million USD, which indicates 96% recovery of the 2019 figures.

Tourism rebound in Batumi is more prominent than in other Georgian regions. The number of international and domestic visits to Batumi made 173 000 and 368 000 respectively in Q1/2022. As in previous years, the majority of tourists arriving at the Batumi Airport are Israeli citizens.

As of May 2022, hotel occupancy reached 70%, with the average daily hotel room price at 90 USD. 85% hotel occupancy and 320 000 guests are forecasted during the summer period.

Turkish citizens have the highest share in non-cash tourist spending. The spending of Saudi Arabian and Belarussian guests has increased 15 and 40 times respectively relative to 2019. The structure of tourism expenditure has changed in 2022, with cafes and restaurants accounting for the biggest share, 35%, in non-resident non-cash expenditure.

It should be noted that gambling spending has remarkably dropped in Adjara.

According to Adjara’s CRE market study, currently, there are 4 main trade centres in the region. During 2024 and 2025, their number is expected to increase to 7, with a tripled trade area. The average lease payment may increase due to higher lease prices in new malls.
The outdoor trading area lease payments have exceeded the pre-pandemic level. Outdoor trading area delivery is increasing stably along with RRE development. Lease prices have fully rebounded since the pandemic. The annual lease payments in contracts signed in Q2/2022 have increased 12-17%. The growing trend in outdoor trading area lease is expected to slow down against the increasing number of trade centers.

The office and business center industry is still on its initial stage of development, with only one active business center in the city. The demand on office spaces has increased in 2022, which has also affected lease prices. The higher demand is expected to result in an increased number of co-working spaces and business centers.

According to the Adjara RRE market Study, foreign demand for RRE remains high in Adjara. From 2016 to 2021, the number of migrants arriving in Georgia for residence reached 70.5 thousand, their majority being from Russia (30%), Iran (11%), Azerbaijan (10%), Turkey (9%) and Ukraine (6%). Apart from Russian, Belarusian and Ukrainian citizens, the interest in Georgia is growing among the citizens of Israel, Poland and Gulf countries as well.

Only a small part of Adjara’s RRE market is financed with mortgage loans, as compared to other Georgian regions. Furthermore, the share of non-resident mortgage loans is higher than in other regions. According to developers, non-residents prefer to buy homes in Adjara in cash. Price increase on building materials has partially affected the selling prices on RE in the region.

From 2020, residential building permits have fallen sharply, especially in Coastal Zone 1 and suburbs. 35 multi-story residential building permits were issued in 2021, none of them in Zone 1. TBC Capital expects housing projects to move towards the periphery and suburbs.
The number of registered RRE transactions grew by annual 42% in 5 months 2022. A further increase is expected, given the rapid rebound of tourism and migration. Likewise, lease prices are increasing significantly.

According to TBC Capital’s forecast, during 2022, the number of RRE transactions will grow by 29% and the selling price by 6%.
“In the last 2 years full of challenges, TBC has further prioritized regional development. We are proud that the number of TBC-supported businesses outside Tbilisi is increasing annually and more and more companies are showing trust in us. With the tourist season approaching, the Adjara region recaptures spotlights: it is very important now to share our expertise and experience with the business sector regarding tourism and real estate sector challenges and opportunities in Adjara, as these two areas are the main drivers of economic growth in the region. It is obvious that tourism, as well as the real estate sector, is on the rebound in Adjara, which is also confirmed by TBC Capital’s study. We are happy that the region is gradually recovering to its pre-pandemic level and coming back as a popular destination for domestic and international tourism as well as an investor- and business-friendly environment”. Vakhtang Butskhrikidze, TBC CEO.