Colliers Nordic Real Estate H1 2014

www.colliers.com

Nordic real estate reviewH1 2014

Nordic overview

%

Denmark Sweden Norway Finland EU (28 countries)

-10

-8

-6

-4

-2

0

2

4

6

8

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

80

100

120

140

160

180

200

220

Index (Index EU =100)

Denmark Sweden Norway Finland

Economic growtH

gDP PEr caPita

UnEmPloymEnt

Source: Eurostat 2013 and 2014 figures are estimates.

Source: Eurostat

Source: Eurostat

0

2

4

6

8

10

12

%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Denmark Sweden Norway Finland EU (28 countries)

P. 2 | colliErS intErnational

Nordic real estate review | H1 2014

Economydenmark, Finland, Norway and sweden are generally perceived as safe economies, and all four countries have been top-rated among the leading major credit rating agencies such as standard & Poor’s and Fitch and Moody’s.

the GdP growth rates in denmark, Norway and sweden are expected to be modest, but positive for 2013, whereas in Finland the growth rate for 2013 is estimated to be just below zero. the modest growth is expected to continue in 2014 and 2015, a bit higher for sweden and Norway than for denmark and Finland. especially for denmark and Finland, the GdP is very dependent on exports and consequently on the economic activity in especially the eU, but also in other parts of the world.

all four countries are wealthy with GdP per capita well above the eU average. Norway is outstanding with a GdP per capita of approx. index 190, while the other Nordic countries are between 115-125, with Finland somewhat lower than sweden and denmark.

the four countries have welfare systems with large public sectors, including public nurseries, kindergartens, educational institutions and health care systems. the financing of these systems requires quite high tax levels compared to most other eU countries. also public spending to social transfers is high.

except for Norway, unemployment has increased substantially in all countries since the global financial crisis in 2008, but in denmark, which has experienced the steepest increase, the level is decreasing again. still, all four countries have unemployment levels well below the eU level.

while the danish krone is pegged to the euro, both the swedish krona and the Norwegian krone are floating. the swedish krona and the Norwegian krone have gained in strength, both compared to the Us dollar and the euro since 2008, but during 2013 the Norwegian krone has weakened considerably. it is, however, forecasted that the Norwegian krone will strengthen again in 2014. Finland has used the euro since 2002.

the interest rates – exemplified by 10-year government bonds – have decreased substantially since 2008 in all four countries. also before that, the interest rates fell, but there was a minor increase in 2005-2007. However, in the last year the interest rate for 10-year government bonds has increased, while the short-term interest rates are still low.

tHE ProPErty marKEtthe Nordic countries are popular among international investors, because the economies and property markets are stable.

in all four countries investors are facing challenges when it comes to financing. the access to financing seems to be most limited in denmark, where a lot of the small and medium-sized banks are stopped by a rule of maximum 25 % exposure to the property sector. on the other hand, denmark has a special mortgage system which gives access to quite cheap financing, implying a historically high yield gap, as long as the buyer has access to financing. access to mortgage funding requires an investor with a very sound financial position.

the total amount of transactions have decreased slightly in sweden, Norway and denmark in 2013, while it has increased in Finland, which had a very active second half of 2013. the institutional investors dominate in all countries, and they focus on prime properties. it is, however, expected

Source: Eurostat

ExcHangE ratES againSt EUro for DaniSH KronE, SwEDiSH Krona anD norwEgian KronE

6

7

8

9

10

11

12

Danish kr. Swedish kr. Norwegian kr.

Exchange rate (against euro)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

PrimE yiElD for logiSticS

%

42009 2010 2011 2012 2013

5

6

7

8

9

Copenhagen Stockholm Oslo Helsinki

Source: colliers international

PrimE yiElD for officE

%

42009 2010 2011 2012 2013

5

6

7

8

9



PrimE yiElD for rEtail

%

42010 2011 2012 2013

5

6

7

8

9



Source: Eurostat and norges Bank

intErESt ratES 10-yEar govErnmEnt BonDS

0

1

2

3

4

5

6

%

2003 2004 2005 2006 2007 2008 2009 2010 20132011

Denmark Sweden Norway Finland


colliErS intErnational | P. 3

that secondary assets will be in more demand, as the supply of prime assets is limited and investors are becoming less risk averse.

the residential sector in the Nordic countries is very popular among investors, with the one exception that the Norwegian investors hold their breath, while the owner-occupied market has experienced decreasing prices for the first time since 2008. this gives rise to uncertainty in the minds of the investors who have been very keen on this sector since 2010. in denmark the housing prices decreased quite a lot as early as 2008, while in sweden and Finland only minor adjustments of the prices have taken place.

sweden continues to be the most transparent market, which is often first choice for cross-border investors, but the number of foreign investors in the other Nordic countries is increasing. Norway is still dominated by local investors, mainly due to the abundance of liquidity from oil, but increasing activity from foreign investors is expected, as the interest from foreign investors has increased.

the prime yields have hardly been changed during the latter six months. the only exception is oslo, where the prime yield for office and retail has decreased slightly.

in a longer time perspective, the prime yields for all sectors have decreased since 2009 in all the Nordic capitals. exceptions are copenhagen, where most yields have been stable, and oslo which has seen increases in the yield for prime retail, but as described above, this yield is now decreasing again.

deNMark

capital copenhagen

Population (2013) 5.60m

Number of employees (Q3 2013) 2.64m

DenmarkEconomyit is expected that the growth in 2013 will be only approx. 0.5 %. Most of the economic analyses suggest a growth of approx. 1.5 % a year in 2014 and 2015. the years since the financial crisis have been characterised by very moderate growth rather than high growth, which we have seen after some of the previous economic recessions.

a major reason for the growth being so relatively modest is that the growth in private consumption has been rather limited despite tax cuts, low inflation and higher consumer confidence.

inflation has been at a record low level in 2013, partly due to low wage pressures, tax cuts and a decline in prices of energy. at a level of 0.8 %, these price increases are the lowest since 1953. it is expected that inflation will rise again in 2014.

the housing market shows very modest growth, which is distributed very unevenly geographically with increases in the prices of owner-occupied apartments in the large cities and a decline or stagnation of the house prices in many parts of denmark. the labour market is improving with an increase in employment and a drop in the seasonally adjusted gross unemployment. exports are healthy, which has helped drive the economic growth that we, in spite of everything, have seen since 2008.

invEStmEntthere is strong investor demand for residential rental properties. the segment is popular, among others, due to low vacancy rates, expected low risk, ready financing, etc. demand is strongest in the large cities, where the population is growing faster than in denmark as a whole. it is also in these areas it is easiest to obtain financing.

the investor group demanding residential properties is very heterogeneous. the foreign investors and the danish institutional investors typically buy large properties, portfolios and projects mostly in the large cities. small property companies and private investors also buy residential properties, but it is often small properties in a wide variety of danish cities.

retail properties, for example in high streets, are very popular among investors. there have been a number of transactions in central copenhagen within the latter year. the investors are also demanding office properties and logistics properties on prime locations, but the supply is limited, which limits the number of transactions.

investment demand for convenience stores providing good and stable yields is still strong.

in general, all processes in the transaction market are still very long and can drag on and possibly fall apart late in the process, for example due to difficulties in obtaining financing.

officEthe office vacancy rate has increased to 10.2 % nationally, after having been between 9 and 10 % the last two years.

the small office premises are let out slightly faster than the large premises. the large companies still seem to wait for safer times, before they decide to find new premises. However, the number of large vacant premises has increased in copenhagen and the northern part of Zealand, which may reflect that some companies now start the relocation process and consequently offer their former premises for sale or to let.

it is still a tenant’s market in the sense that the landlords must be prepared to negotiate with the tenants on all terms, including fitting up, “trappeleje” (step change – during the term of a tenancy

Source: Eurostat

ExamPlES of rEcEnt tranSactionS

> Q4 2013: two danish pension funds, atP ejendomme and Pensions danmark, acquired the property of approx. 58,000 sqm, housing the well-renowned danish department store Magasin.

> Q4 2013: Finansiel stabilitet sold a portfolio of seven properties to swedish Niam for dkk 850m. Finansiel stabilitet was established in october 2008 as part of an agreement between the danish state and the danish banking sector on a scheme to secure financial stability.

> Q4 2013: NreP acquired retail properties for approx. dkk 800m, including the shopping centres Holte Midtpunkt and Frihedens Butikscenter in the outskirts of copenhagen from dades and the shopping centre veri centret in aarhus from a danish public housing body.

> Q4 2013; Jeudan sold three properties in central copenhagen for dkk 288m to standard life investment.

Please note that the yield in the transactions may differ from the yields stated in the market barometer, since the characteristics of the properties may differ from the standard.



marKEt BaromEtEr officE

city Market rent*

Yield vacancy rate

copenhagen 241 5.25 % 10.1 %

aarhus 174 5.50 % 13.0 %

odense 127 6.00 % 10.6 %

aalborg 134 5.75 % 6.3 %

vejle 141 6.25 % 10.9 %

esbjerg 147 6.25 % 6.2 %

* Euro per sqm a yearSource: colliers international and oline-ED Statistikken

increases by specific amounts may be agreed, becoming effective on specific dates), rent-free periods, etc. However, the basic rent is usually maintained at a fairly stable level – possibly because the landlords are increasingly aware of and realistic about what rent levels that are actually realistic.

rEtailthe retail vacancy rate was 6.4 % as at 1 January 2014, which corresponds to the average of the last one and a half years. Many factors are at play in the retail industry these years – the limited consumer spending, the booming e-commerce market, the momentum of the strong retail chains, etc.

consumer confidence has shown great promise in the autumn, but did, however, decline to 2.9 in december. the indicator is still positive, but not as high as in the months before. retail sales are relatively stable with small fluctuations.

the clear distinction between the primary and the secondary markets continues. in the primary markets, there is good demand from the big chains, almost no vacancies and in some areas rising market rents and more assignments. this applies, for example, to the best locations in copenhagen such as strøget (pedestrian shopping area). on the other hand, on the secondary locations the vacancy rate is high, and the market rent is under pressure. this provides excellent opportunities for entrepreneurs to set up businesses relatively cheaply.

inDUStrial anD logiSticSthe industrial and logistics vacancy rate was 4.0 % as at 1 January. the vacancy rate in this segment has been relatively stable since mid-2010.

Many of the vacant properties are outdated, including of a limited size and not in a good and substantial repair and condition. there is some demand for such properties, for example from skilled craftsmen or small manufacturing entities. if a company can use an old property located in a peripheral area, then it is possible to acquire such property quite cheaply. a number of investors also buy such properties – in particular the large properties – at relatively high yields.

commercial properties located in peri-urban areas – especially in large cities – can sometimes be converted into other uses such as housing or offices. this is not a new option, but it is very relevant due to the relatively high vacancy rates and the population growth in the large cities.

the difference between the market rent of newly built and existing properties is substantial. the new properties can be customised to the needs of the individual business, and the operating costs can be minimised.

in general, the market for industrial space remains the tenant’s market. the market rent is in some areas under pressure – and elsewhere, the tenants can negotiate a number of favourable terms.

marKEt BaromEtEr rEtail

city Market rent*

Yield vacancy rate

copenhagen 3,083 4.25 % 2.9 %

aarhus 737 4.50 % 6.1 %

odense 737 5.25 % 5.5 %

aalborg 603 5.50 % 9.7 %

vejle 442 5.50 % 6.0 %

esbjerg 415 5.50 % 5.8 %


marKEt BaromEtEr inDUStrial anD logiSticS

city Market rent*

Yield vacancy rate

copenhagen 54 7.50 % 6.0 %

aarhus 47 7.50 % 5.1 %

odense 37 8.50 % 4.4 %

aalborg 40 7.75 % 2.3 %

vejle 40 7.50 % 4.7 %

esbjerg 40 7.75 % 4.2 %


eUr/dkk 7.46

ExcHangE ratE, JanUary 2014



NorwaY

capital oslo

Population 5.05m


Source: Eurostat


> Q4 2013: ava eiendom acquired the 26,500 sqm office development «stasjonskvartalene» in asker for Nok 466m from aberdeen.

> Q4 2013: rema eiendom sold the 17,000 sqm elgseter gate 55-57 in trondheim to klP for Nok 452m.

> Q1 2014: Nordea sold the office development Hoffsveien 70 b-c at skøyen for approx. Nok 400m to a syndicate.

> Q1 2014: Bouwfonds acquired the parking facility at Bankplassen in a sale and leaseback deal with Q-Park for approx. Nok 210m.


NorwayEconomythe Norwegian economy is currently quite sluggish compared to recent years, and a broad consensus suggests year-on-year GdP growth of 2 % in 2014. For one, the residential market is currently showing weakness for the first time in 5 years. Forecasts on the further development in this segment vary substantially, and following the progress here will be interesting in 2014. on the other hand, oil production increased for the first time in 15 years in 2013, a trend that is expected to continue in 2014, as the Norwegian sovereign wealth Fund (Nok 5,060bn at present) continues to grow. as the economy is currently experiencing difficulties keeping up with the growth of recent years, it is likely that this will allow the Government to adapt a policy of fiscal easing in 2014 and to spend more money from the wealth Fund, which might contribute to increased economic growth and activity going forward. the Nok has weakened considerably compared to other key currencies in 2013 and appears to be undervalued. this has, however, caused an upturn in the Norwegian export sector, excluding petroleum. it is forecasted that the Nok will strengthen compared to other key currencies in 2014, even though the experts struggle to identify the reason for the faltering Nok as of late.

invEStmEntthe Norwegian transaction volume decreased somewhat in 2013 compared to 2012, as the transaction total went down from Nok 52bn to Nok 40bn. the number of transactions conducted in excess of Nok 50m was quite similar to the previous year, but we did not see the same level of especially large portfolio transactions in 2013. the largest transaction was once again found in the retail sector, as storebrand chose to sell 7 shopping centres, 3 to thon eiendom and 4 to sector Holding, respectively. the current outlook for the transaction year 2014 is quite similar to what we experienced in 2013. Financial institutions gradually became more approachable in 2013, and the general feeling is that banks are considerably more willing to provide finance going into 2014 compared to 2013. at present, our forecast is that the transaction volume this year will be Nok 43bn, a slight increase on 2013, largely based on a more investment friendly environment in the transaction market. Furthermore, it should be noted that the interest in Norway among foreign investors is increasing, and we are expecting increased activity from these investors in the Norwegian market.

officEthe office market is currently performing quite well with increasing rental prices in most sectors as well as decreasing vacancy rates in several areas and the Greater oslo area as a whole. the current vacancy rate from our most recent vacancy survey of october 2013 showed an office vacancy rate in the Greater oslo area of 6.70 %, which is a decrease of more than 0.2 % compared to the previous survey. the pipeline of new office development includes very few scheduled completions both in terms of actual completions and in terms of available square meters. the outlook for 2014 is that there will be roughly 70,000 sqm new development to hit the market, which is approx. a quarter of the level seen in 2012 and a third of what we had in 2013. this is a contributing factor to a continued rise in office rents and a decline in vacancy rates this year. employment is forecasted to remain at a high level, while the unemployment rate is still at a marginal level of 3.3 %, which is among the very lowest in europe. the prime yield estimate is currently 5.2 %.

rEtailthe retail market in Norway has performed quite well during the last couple of years with increasing rents and minimal vacancy in key areas such as the major shopping centres and high streets, including karl Johans gate. Prime premises in this street are currently let at prices up to Nok 20,000 per sqm and are also by far the most expensive in Norway. adjacent streets such as Øvre and Nedre slottsgate and akersgata may achieve rent prices of approx. Nok 11-13,000 per sqm. the prime yield estimate is currently 5.5 %.



although we have experienced a lower growth rate in the Norwegian economy compared to the previous years, Norway is still experiencing a higher growth rate compared to most countries in europe, which makes it an attractive country to establish retail units. in the past year brands such as Marc by Marc Jacobs, Gucci, Hamley’s, starbucks and Bottega veneta have established themselves in Norway. However, we are currently noticing consolidation among retailers and a lower rate of establishment. we believe that several changes have already started in the market here in 2014 and that there will be an increase in vacant retail units from the second quarter of 2014.

inDUStrial anD logiSticSthe transaction market in the industrial sector has been sluggish at best for the last couple of years with a lack of willing finance providers and also a scarcity of solid projects most frequently discussed as the prime factors behind this development. However, with the easier terms of financial backers and some interesting developments in the pipeline, we believe that this will change in 2014.

we see that there are similarities between the transaction and letting markets in the industrial sector, as the latter market also has a fairly low activity, especially as for large lettings. we have seen some activity in Fugleåsen (Q4 2013) in the municipality of ski outside of oslo, among others, with tollpost Glove signing a 15-year lease agreement of 12,500 sqm. colliers is aware of specific interest from several players in this area as well as adjacent areas which might materialise rather quickly going forward.

Groruddalen in the eastern part of oslo is still achieving the highest rent in areas such as alnabru and Furuseth. Prime rent in the industrial sector is Nok 1,150 per sqm, and the prime yield for industrial property is currently 6.5 %.

city Market rent*

Yield vacancy rate

oslo 2,383 5.50 % 5.0 %


* Euro per sqm a yearSource: colliers international

city Market rent*

Yield vacancy rate

oslo 477 5.2 % 6.7 %



city Market rent*

Yield vacancy rate

oslo 143 6.50 % 10.0 %



eUr/Nok 8.39




SwedenEconomyaccording to most forecasts, sweden will have a GdP growth of 2.4 % in 2014 and 2.9 % in 2015. this can be compared to forecasts for the eurozone with a growth of 0.9 % in 2014 and 1.2 % in 2015. the unemployment rate will remain low in sweden (7.5 %) compared to the eurozone (12.1%) or the eU (10.9 %). the election in september 2014 may have an impact on decisions affecting the economy.

swedish companies will, according to stock market specialists, show good profits in their 2013 annual reports. this positive view spurred the stock market to reach an all-time high in mid-January 2014.

after a long period of hesitation, the swedish National Bank decided in december 2013 to cut the repo rate to 0.75 %. this implies that the 3-month stiBor rate quotes below 1 %. as lenders´ margins have continued to ease, major property companies can revise their budgets for short-term loans down to 2-3 % and expected loan-to-values up to 60-70%.

one of few uncertainties of foreign investors as to investments in sweden is the exchange rate. the sek/eUr has over the past 12 months oscillated between 8.34 and 8.95, which can be compared to an average of 9.4 in 2000-2010. However, as long as GdP growth in the eurozone continues to lag behind swedish figures, the sek will remain strong.

invEStmEntin 2013, the total transaction volume amounted to approx. sek 97bn compared to just over sek 105bn in 2012. despite a slight decrease in 2013, investor interest is high, and the access to financing is good. the decrease is mainly due to the lack of investment vehicles in the market.

like previous years, stockholm accounted for just over 40 % of the transaction volume in 2013, while Gothenburg, the second largest city, only accounted for approx. 11 %. University cities have become more attractive and accounted for almost 20 % of the total transaction volume compared to 14 % in 2012.

the investments have been more evenly distributed between the different segments in 2013 compared to the two previous years, when offices alone accounted for over 40 %. the residential segment was the most prominent segment in 2013 with nearly 30 %, followed by the office segment with 27 %. the industrial and logistics segment accounted for 15 % and the retail segment for 14 %. in university cities, the residential segment accounted for more than 50 % of the investments, making the university cities the dominant residential market, while the majority of the office transactions took place in stockholm.

Foreign investors only invested sek 10bn in the swedish property market in 2013, mainly in the stockholm region, which is a 50 % decrease compared to 2012. this is not due to a lack of interest, but rather the strong swedish krona, which has made it difficult for foreign investors to compete with domestic investors, as well as a lack of core office products.

core properties in good locations will continue to attract investors in 2014. However, transactions with properties in secondary locations and properties with a high risk profile will also increase. this is mainly due to a reduced gap between the sellers’ and the buyers’ price expectations combined with improved financing. Furthermore, investors are more optimistic and are willing to take higher risks.

swedeN

capital stockholm

Population 9.56m


Source: Eurostat


> Q3 2013: kungsleden acquired Ge capital real estate’s portfolio of 84 properties for sek 5.5bn (net yield of 6.5-7.0 %).

> Q4 2013: starwood capital Group acquired seven retail centres from kF Fastigheter for sek 3.9bn (net yield of 5.75-6.25 %).

> Q1 2014: trygg-Hansa’s headquarters in stockholm was sold to areim for sek 2-2.3bn. colliers was the sale adviser.

> Q1 2014: carlyle and klövern signed a loi to acquire the carlyles Globen city portfolio for sek 3.5bn.




city Market rent*

Yield vacancy rate

stockholm 532 4.75 % 4.0 %

Gothenburg 328 5.25 % 3.0 %

Malmö 294 5.75 % 7.0 %



officEthe office market will remain stable in the metropolitan regions as far as rent levels are concerned. vacancy rates will remain low in central parts of the cities with high demand for modern office space. although large tenants in the central parts of stockholm, such as swedbank and Nordea, are about to relocate, the rent levels have and will most likely remain unaffected. Many property owners consider this to be an opportunity to modernise and refurbish their buildings, while some choose to convert their offices into other uses such as hotels.

outside the congestion tax zone in stockholm, there is a large supply of office space, both existing vacancies and newly constructed premises. communication continues to play a significant role for the property owner’s ability to fill up vacancies, and we expect that the extension of the new light rail will enhance the attractiveness of the affected areas, i.e. parts of Bromma and solna. Furthermore, development areas are becoming increasingly popular.

we estimate the prime rent at approx. sek 4,800 per sqm a year in stockholm cBd and approx. 2,900 sek per sqm a year in Gothenburg cBd. rents may differ within cBd depending on sub-locations, the property and the effectiveness of the premises.

rEtaila stable economic climate in combination with optimism defines the outlook for the swedish retail market in 2014. consumers’ confidence in the economy is optimistic, and the forecast for 2014 and 2015 is an increase in consumption and GdP growth, which will have an impact on the consumption in all segments and especially durable goods. the stock of retail space continues to increase, and international brands look upon sweden as an interesting market with investment and development opportunities.

the importance of location continues to grow, shifting the focus of demand to small premises on prime locations. the e-commerce continues to take market shares and expand into new segments. when adapting to the new climate, retailers are forced to see the e-commerce as a supplement to their existing business, slowly turning the shops into showrooms. Prime locations continue to have low vacancies and stable rental values, while the attractiveness of retail boxes in remote locations drop both from the consumers’ and retailers’ perspective.

inDUStrial anD logiSticSthe take-up for build-to-suit projects for 2012 and 2013 was the highest measured in sqm ever (741,450 sqm), divided on 34 logistics buildings. all of them exceed 10,000 sqm and fulfil the technical requirements requested by the end-user market. 35 % of this stock was built by the end users, and the other 65 % was leased on long leases, built by developers. However, the overall take-up is fairly stable over time. 63 logistics properties were erected in 2009-2013 compared to 57 properties in 2004-2008.

still, there is a lack of supply of modern logistics premises, mainly due to the fact that almost no projects are built on speculative basis. the domestic developer Bockasjö has erected a property of a total of 20,000 sqm in stockholm on a speculative basis, and in 2014 the international well-known Prologis will commence a project in Gothenburg, consisting of 15,000 sqm, which also will be built on speculative basis. the current mismatch between supply and demand for modern space makes the rents higher for existing buildings close to large cities. the reason is that tenants are willing to pay for short leases and quick access, which only can be obtained in existing, often old, buildings.

in 2013, the investors within the logistics market were quite active, which made turnover pass sek 7bn, with stockholm and Gothenburg as the largest sub-markets.

city Market rent*

Yield vacancy rate

stockholm 1,755 5.00 % 2.0 %

Gothenburg 849 5.00 % 3.0 %

Malmö 679 5.75 % 5.0 %



city Market rent*

Yield vacancy rate

stockholm 63 6.50 % 1.0 %

Gothenburg 63 6.50 % 1.0 %

Malmö 61 6.50 % 1.0 %



eUr/sek 8.83




FinlandEconomyFinnish GdP declined in the first half of 2013 and returned to a moderate growth path in the latter half of the year. still, Finnish GdP declined by 1.0 % in 2013 (forecast). the modest growth will continue in 2014 and 2015, indicating annual GdP growth of 0.6 % and 1.7 %, respectively.

the Finnish exports will start to increase in 2014, as the global investments are forecasted to start growing. the increase is forecasted to accelerate in 2015. the same pattern applies to domestic industrial investments. However, private consumption will not start growing until 2015 due to consumer uncertainty and an unstable employment market.

the unemployment rate is currently approx. 8 % and is forecasted to remain unchanged in 2014. the potential growth of unemployment due to sluggish GdP growth will be offset by a decreasing labour force. the accelerating growth in the economy in 2015 is forecasted to decrease the unemployment figures by approx. 0.5 %.

Finland’s national debt will continue to rise, and no turnaround in debt-to-GdP ratio is expected before 2016. the national debt will rise to 64.2 % of GdP by 2015. inflation was approx. 2.2 % in 2013 and will decrease during the next two years, being approx. 1.5 % in 2014 and 2015.

invEStmEntthe second half of 2013 was very active within property transactions in Finland. the total transaction volume for 2013 was eUr 2.4bn, showing a fair growth on the 2012 figure of eUr 2.0bn. the transactions are focused on prime properties in the Helsinki metropolitan area (HMa), which has been the case since the 2008 credit crunch. the price gap between buyers and sellers still prevails as for secondary assets. a few transactions of distressed assets were recorded in 2013.

the transaction volume increased significantly in the residential and health care segments, where several residential apartment and health care/nursing home property portfolios were transacted. the office segment remained the most traded asset class, while the proportion of logistics property transactions continued to decrease.

the most active parties in the investment market are Finnish pension funds and foreign funds, especially German and swedish property funds. two new foreign investors, Hemsö and redito, entered the Finnish market in 2013. the foreign investors completed approx. 30 % of the transactions. the most active foreign investor was Union investment real estate.

officEthe amount of vacant office space in the HMa has continued to increase in 2013. the current vacancy rate is approx. 11.50 %. there are currently over 1 million sqm vacant space in the HMa. still, the office development has been active in the past years. in 2012, some 150,000 sqm new offices were completed. the pace, however, has slowed down, and in 2013 and 2014 less than 100,000 sqm new space will be completed annually.

the office market is highly diverged, as some prime office areas are attracting tenants with good rent levels, while some secondary areas are suffering from high vacancies. in some cases, especially in Helsinki inner city area, vacant office spaces are being converted into hotel and residential use.

the rent level in Helsinki cBd has been rising steadily in the last 3 years, currently being eUr 31 per sqm a month. However, notably higher rents are being paid for tailor-made premises in cBd and the new töölönlahti office area adjacent to the cBd. other prime office areas have been able to maintain their rent levels, but downward pressure exists in many sub-markets.

the yield level in Helsinki cBd has remained at 5.25 %, and no significant changes are expected.

FiNlaNd

capital Helsinki

Population (2012) 5.43m


Source: Eurostat


> Q4 2013: allianz real estate acquired 50 % of the 35,000 sqm kamppi shopping centre from cornerstone real estate advisers. the acquisition price was not disclosed.

> Q4 2013: technopolis Plc acquired Falcon Business Park in espoo from aberdeen Property Nordic Fund 1. the transaction price for the 26,000 sqm business park was eUr 77.5m, reflecting an initial yield of 7.4 %.

> Q4 2013: UPM kymmene and Union investment real estate completed a sale and leaseback transaction for UPM’s 12,400 sqm new headquarters in Helsinki. the transaction value was eUr 74m.

> Q4 2013: Hok-elanto and redito completed a sale and leaseback transaction for 4 retail properties in the Helsinki area, comprising approx. 40,000 sqm premises. the transaction price was not disclosed.




city Market rent*

Yield vacancy rate

Helsinki 372 5.25 % 11.5 %

tampere 192 6.75 % 7.5 %

turku 192 7.00 % 7.5 %

oulu 180 7.00 % 5.5 %



rEtaildespite the vague economic outlook, consumer confidence started to pick up in the latter half of 2013. However, the figures are still low compared to the long-term average, and due to increased unemployment and tax increases the real disposable income of households will not increase until 2015. some retailers performed slightly better in the fourth quarter of 2013 compared to the fourth quarter of 2012, but, in general, the retail sales have been decreasing a little compared to 2012.

in 2013, two major shopping centre development projects were completed in the HMa, as the 46,500 sqm “kaari” was opened and the refurbishment of “city-center” in the cBd was completed. However, the constant lack of prime high-street premises prevails, as the demand for such premises is strong. New international retail brands are entering the market and looking for such premises, including international brands such as starbucks and Burger king who established their first branches in Finland in 2013.

the development of rent levels diverges greatly geographically. in Helsinki, the rent levels have been fairly stable, decreasing marginally. in the other major cities the rent levels have declined to some extent, while the small cities have seen a significant decline.

Prime yield for retail premises is currently approx. 5.25 %.

inDUStrial anD logiSticSthe logistics property market in the HMa has been fairly stable in the past years. only some 10,000 sqm new logistics space was completed in 2013, and virtually none is under construction in the HMa. No speculative projects are started – all new properties are built directly to end users. the vacancy rate has remained at 5 %. changes in the market might be seen in the future, since there are major development plans in surrounding municipalities of the HMa. there is an ongoing 200,000 sqm development project in sipoo, of which 75,000 sqm are estimated to be completed in 2016. Moreover, another 200,000 sqm are planned to be developed in kerava, although the timetable of the construction remains open.

rent level has remained stable. the end-user demand focuses on good quality and modern premises with sufficient floor-to-ceiling height and loading docks. investment demand is focused on modern and modifiable properties within HMa, preferably along ring road 3 and in the airport area. there is also increasing emphasis on the lease maturity, as some investors are seeking up to 20-year lease commitments. the yield level for such properties has remained at 7.5 % in the Helsinki area.

city Market rent*

Yield vacancy rate

Helsinki 1,860 5.25 % 3.0 %

tampere 900 6.75 % 3.5 %

turku 900 6.50 % 3.5 %

oulu 960 7.00 % 2.0 %



city Market rent*

Yield vacancy rate

Helsinki 120 7.50 % 5.0 %

tampere 96 8.50 % 3.0 %

turku 108 8.75 % 5.0 %

oulu 96 9.00 % 2.0 %



the information contained herein has been obtained from sources deemed reliable. while every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. readers are encouraged to consult their professional advisers prior to acting on any of the material contained in this report.

DEnmarKcodanhus, Gl. kongevej 60dk-1850 Frederiksberg ctEl +45 70 23 00 20www.colliers.dk

Jeppe schønfeldceo · Partner tEl +45 40 26 34 27Email [email protected]

norwayHegdehaugsveien 31N-0352 oslotEl +47 22 06 62 80www.colliers.no

thor Bjørdalceo · PartnertEl +47 40 20 17 00Email [email protected]

SwEDEnringvägen 100s-118 60 stockholmtEl +46 8 - 402 36 70www.colliers.se

dan törnstenManaging director · Partner tEl +46 708 -55 75 50Email [email protected]

finlanDPorkkalankatu 20 aFi-00180 HelsinkitEl +358 9 8567 7600www.colliers.fi

Petri MellaManaging directortEl +358 50 539 9170Email [email protected]

rESEarcHEranne kaag andersenHead of research, PhdtEl + 45 58 58 38 54Email [email protected]



www.colliers.com

Presentations & Public Speaking

Colliers Nordic Real Estate H1 2014