The real estate investment remains one of the viable and profitable endeavours bringing very lucrative returns to its investors. Recent events like the Covid-19 pandemic have brought enormous drawbacks to the sector and its affiliated sectors like the construction industry and the construction supply chain. After the outbreak of Covid-19 pandemic all Baltic economies shrank. Nevertheless, numerous big transactions and even the arrival of new foreign companies occurred in the Baltic investment market. Despite the short-term uncertainties, there has been a steady increase in the long-term attraction of the real estate to investors bearing in mind the immediate and future challenges facing the sector. The nature of the sector and its interconnections with the construction and the construction supply chain sectors defines the nature of the challenges, making some of those challenges direct and others indirect. Main results of research reveal direct challenges of real estate industry in Baltic region: constrained liquidity; lack of alternative forms of financing that provides investors with appealing products; the impacts of e-commerce on the traditional retail space; insufficient investment capacities in environmentally friendly, energy efficient facilities; affordable housing; and the sectors’ ability to adapt to the technological level. Among the indirect challenges faced by the industry are rising cost of materials, skilled labour shortages, poor project performance, which affects delivery times, sustainability and efficiency of energy demands within the construction sector.