Investment volume in the Nordics totalled €29bn during the first three quarters of the year. This is 4.1% up compared to the same period last year off the back of peak turnovers recorded during the past two years and still a better performance than at pan
European level (-5.6%). Based on further investment bustles witnessed since September, Savills anticipates the full-year volume to reach approximately €42bn, in line with the high volume achieved in 2018.
Excluding cross border investors from the Nordic region itself, interest from international investors is increasingly coming from Germany and the UK, whilst activity from US investors has been slowing down over the past two years. At the same time, the Nordic region has caught Asian investors’ attention, with notably South Korean investors mainly focusing on office properties.
Lydia Brissy, Savills European research director, says:
“Based on a high number of deals since September, we anticipate the full-year investment volumes in the Nordics to reach approximately €42bn, in line with the high volume achieved in 2018. In Q3 2019, the average prime Nordics CBD office yield moved in by 9bps annually and currently stands at 3.60%, compared to 3.22% on average in core countries. Denmark, Finland and Sweden also offer attractive office yield spreads with long term interest rates compared to other European countries.”
According to Savills, Sweden received almost half (46%) of the funds allocated to real estate between January and September, followed by Denmark (20%), Norway (18%) and Finland (16%). In terms of asset classes, some €10bn was invested in Nordic offices between Q1 and Q3 2019, reflecting a 14% rise on last year, fuelled by strong fundamentals; healthy labour markets, solid business expansion, low vacancy rates and positive rental growth. Logistics investment in the Nordics totalled €4bn, up 8% on last year, thanks to a record level of activity in Sweden. The sector accounts for 15% of the total Nordic investment volume, against 13% last year. The overall strong e-commerce penetration rate in the region (77% compared to 53% on average in Europe) is driving demand for logistics space.
Oli Fraser Looen, Joint Head of Savills Regional Investment Advisory EMEA, says:
“Given the healthy economic outlook for 2020 and 2021, we expect the Nordic property market to continue to attract significant levels of capital. As environmental, social and governance policies are slowly gaining ground on investors’ radar, the region which is already ahead of many of its European counterparts in this regard, is also likely to appeal to a growing number of investors looking to achieve good ESG performances.
“Overall, the office sector will continue to attract the lion’s share of investment, backed by above-average economic expectations, whilst multifamily will remain the second preferred asset type fuelled by positive demographics. Resulting from the strong growth of online retail sales, logistics assets will continue to capture a growing share of total investments, at the expense of retail investment.”