Reykjavik’s residential project Keldur offers significant opportunities for international investors

Speaking to REAL FDI at Mipim 2026, Thorsteinn R Hermannsson, director of development at Transport for the Capital Area, Iceland, and Joanna Attvall, architect and partner at FOJAB, set out plans for Keldur, a major new residential-led urban district in Reykjavik designed to attract international capital.

Hermannsson described the project as a uniquely large, single-owner development opportunity within the Icelandic market.

“The Keldur Development Area is a big piece of land within Reykjavik that was previously owned by the state as a farmland, but it is now enclosed within the urban development in Reykjavik,” he said. “As a public company, we have been given this land to develop and all the profits from the land will go into funding transport infrastructure in the capital area.”

The site is being brought forward under Reykjavik’s master plan following an international design competition in 2023, won by FOJAB. The scheme will deliver around 6,000 housing units alongside 150,000 square metres of commercial space.

“Having a big piece of land and that big development area in one project is quite unique,” Hermannsson said.

The scale and structure of the project underpin its appeal to global investors, with authorities actively testing international appetite.

“We want to present it and see if there is any untested interest from international investors and developers to see if they want to come to Iceland for the first time, to Reykjavik for the first time and develop a new urban quarter with us,” he said. “Maybe buy big pieces of land; instead of the Icelandic way of doing things [which] is sort of going smaller.”

The masterplan centres on transit-orientated development, anchored by three public transport stations along the Borgarlína corridor.

Attvall said sustainability and liveability sit at the core of the design approach.

“Environmental aspects are the most important part and the core of the project,” she said. “The way we have done it in the Keldur area is really like transit-orientated development, which means in this case that everything stands along the public transport.

“And then we have kept the green areas surrounding it. And it is really designed for easy everyday life.”

The project also responds to acute housing pressure in the Icelandic capital, with authorities positioning it as part of the solution to supply constraints.

“There is a huge demand for new housing in the Reykjavik area,” Hermannsson said. “We believe that we have an opportunity now to maybe involve international investors in helping us solve the housing crisis.”

Planning is advancing toward formal approval, with detailed design work expected to follow.

“By the end of this year, we will have a local master plan confirmed by the city of Reykjavik. We will also start doing the detailed plans. So hopefully in 2027 or late 2026, we can start having a discussion with developers and investors on how to proceed with the detailed plans and the development itself.”