Multifamily investment swells Swedish volumes: Savills

SBB is to develop a new district in a former industrial area of  Nyköping. The company acquired Hemfosa earlier this year accounting for part of the public sector volume.

Large-scale investment in multifamily housing helped push Swedish real estate transactions to SEK 133bn (€12.7bn), 26% above the rolling ten-year average in the first three quarters of 2020 according to Savills research.

Savills said foreign investors were net buyers for the fourth year in a row despite prime yields for logistics and multifamily assets having fallen to the high 3%-low 4% range in Sweden, which the firm points out is nevertheless still higher than the yields for similar assets in Germany or Paris.

Multifamily property, including both new and existing stock, accounted for SEK 35.5bn (€3.4bn) of the investment volume, a 27% market share.

Half multifamily total is forward funding deals

Forward funding deals accounted for almost half of the multifamily investment volume, SEK 17bn (€1.6bn) of this, and were substantially above the five-year average of SEK 11.3bn (€1.1bn). 

Public sector properties were Sweden’s second most popular investment class, attracting SEK 31.5bn (€3bn) although Savills points out that SBB’s SEK 28bn (€2.7bn) acquisition of listed company Hemfosa accounted for a large part of this figure.

Office properties were third in line, with a total investment volume of SEK 27bn (€2.6bn), a market share of 21%. Stockholm accounted for 41% of the total, notably Barings acaquisition of the Skvalberget 33 CBD office building in September and AFIAA’s acquisition of Cerberus 2 ‘Forex-huset’.

Positive outlook for the remainder of 2020

Covid-19 has accelerated Swedish online retail sales increasing demand for logistics space and the sector was fourth largest with an investment volume of SEK 15bn (€1.4bn), an 11% market share.

“The outlook for the remainder of 2020 is positive compared to the initial phase of the pandemic. Long-term borrowing costs remain low, or negative across Europe, with the Swedish 10-year bond yield at -0.13%, which will maintain an attractive yield spread for most real estate sectors going forward,” Savills Sweden’s head of research Peter Wiman said.

“However, a low economic growth environment presents challenges and the effects of the lower bond yields could be offset by a rising risk premium and/or falling rental growth expectations,” Wiman added.