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New records expected on very strong Nordic real estate market in 2020

Press release   •   Feb 06, 2020 07:57 CET

Despite weaker economic growth, the Nordic property market is expected to continue its positive trend in 2020. In particular, the Swedish market is hotter than ever and foreign capital continues to flow into the region. Several previous records are about to be broken and there is a clear portfolio premium in the market, according to the new report Pangea Property Outlook 2020.

The transaction volume in the European property market declined by two per cent in 2019, but increased in the Nordic region to above EUR 45 billion, the highest level ever. Pangea Property Partners also forecasts a strong 2020 with a transaction volume in the same range and an overall positive price trend in the commercial real estate market.

“For the first time ever, the yields for central office properties in Stockholm is close to 3 per cent and well below 3.5 per cent in Helsinki. Square meter prices are also record high as a result of many years of rising rent levels,” says Mikael Söderlundh, Head of Research and Partner at Pangea Property Partners.

In other hot sectors, such as logistics, hotel and public sector properties, prices are also at record levels. This is the result of a gradual adjustment to the low interest rates, ample access to financing and an increasingly heated competition among buyers, according to the report.

“It is a sellers' market in most segments and by divesting larger portfolios instead of individual properties, one can expect even higher prices. Many buyers look for large investments and are willing to pay a substantial portfolio premium,” continues Mikael Söderlundh.

The most active buyers during the year are expected to be real estate funds, syndicates, listed real estate companies and various types of foreign investors. Nordic institutions, on the other hand, are close to fully invested and expected to focus more on developing their existing portfolios. Substantial net sellers during the year are expected to be construction companies, developers, smaller local players and, above all, the public sector, as many municipalities have large investment needs.

“International investors continue to be very active in the Nordic region and have net invested more than 20 billion euro over the last three years. We see large capital flows from, for example, the US, Germany and Asia”, says Bård Bjølgerud, CEO and Partner at Pangea Property Partners.

The positive trend for real estate is also evident in the stock market, where Nordic real estate shares have gained 55 percent on average over the past year, excluding dividends. Following the strong price run, listed real estate companies are now valued at a 25-30 percent premium (estimated EPRA NAV per share in Q4 2019 vs current pricing). There are, however, major differences between segments and companies.

“We see that companies showing strong growth and utilizing the availability of inexpensive financing are valued higher. More conservative companies, on the other hand, are punished. The same goes for companies with large exposure to shopping centers, where there is a fear of lower rents going forward, says Bård Bjølgerud, CEO and Partner at Pangea Property Partners.

Pangea Property Outlook 2020 is a report on the Nordic real estate market produced by Pangea Property Partners.

For more information, please contact:

Mikael Söderlundh, Head of Research and Partner
+46 73 770 77 90, ms@pangeapartners.se

Bård Bjølgerud, CEO and Partner
+47 484 08 080, bb@pangeapartners.no

Attachments:

  • Pangea Property Outlook 2020
  • Photos

Pangea Property Partners is an independent Nordic corporate finance and advisory firm focusing on the real estate sector. The company has offices in Stockholm, Oslo and London with more than 35 employees. Since 2009, Pangea Property Partners has advised on more than 400 transactions with an underlying property value above €33 billion. The mandates include property divestments and acquisitions as well as large corporate transactions, capital raisings and debt financing.

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