‘Light industrial is a great sector to invest in’

Olle Håkanson Nobel, Partner, Transactions, Croisette Real Estate Partner

Light industrial in Sweden is a great sector to invest in and it is finally delivering rental growth, Olle Håkanson Nobel, Partner, Transactions, Croisette Real Estate Partner, told Real Estate Day.

‘Light industrial is all the rage now in the Swedish market and many new players are coming in but we have we’ve always found it to be a good sector to invest in,’ he said. ‘Going back just four or five years yields even in Stockholm were between 8% and 9% and to us it was obvious that there was a great investment opportunity’.

The problem was for thirty years there had been no rental growth at all in the segment, but that is now changing. 

‘We will see rental growth over the next few years, primarily because a lot of the industrial areas in the big cities are being converted especially the ones are close to the city,’ Olle Håkanson said. ‘They’re being converted into mixed cities with residential, office and retail space and very little of the area is put aside for industrial use’.

There are some industrial areas but they are quite a distance from Stockholm and the same thing is happening in other big cities. ‘Being distant from the city is not really suitable for a lot of the types of businesses that are generally located in these areas, so we saw that we’re going to lose a lot of the surface area over the next few years at the same time that the economy is doing quite well so the demand is actually increasing, so we figured that rents must start increasing and that’s exactly what they’ve done,’ he said.

In some some areas in the last few years there have been rental increases of around 40-50% and also a number of new funds and new players going into to this segment, he said: ‘Some of them are attracted by the rental growth so they’re willing to pay quite low yields because they know the reversionary yield over the next few years is going to be a lot higher for them’.

In contrast to logistics, in light industrial in Sweden the lease terms tend to be quite short  – usually 2 or 3 years – so investors are able to capitalize on rental growth quite quickly.

‘Even if we have seen unprecedented levels of yield compression, I think there are still a lot of good deals to be had in the light industrial sector,’ Olle Håkanson said.

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