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13 February 2024, Finland | Corporate Finance, Investment Management | News

Catella Market Indicator, Spring 2024, has been published: Is the worst over in the real estate investment market?

The intense inflation that started in 2022, coupled with fast rise of interest rates, ultimately caused real estate transaction volume to collapse. We entered year 2023 with a very quiet market after the rapid increase in yields, and despite high hopes, the market did not show signs of recovery at any point. Last year’s transaction volume resulted in ca. EUR 2.5 billion, closely resembling the levels seen in the record weak years after the financial crisis.

Inflation and the rapid rise in interest rates significantly affected the real estate investment market during 2023. Yields continued their speedy rise, with the prime office yield of Helsinki now standing at 4.9%. The rise from the Q4 2021 baseline of 3.2% has been exceptionally steep and rapid. The number of active investors markedly decreased during the year, further diminishing market liquidity. Domestic open-end funds, which have been active investors in previous years, notably shifted to becoming net sellers. Similarly, previously active German investors and listed Swedish real estate investment companies were absent from the pool of active buyers, with a few exceptions. The inactivity of domestic open-end funds weakened the market liquidity, especially outside the centre of Helsinki.

In 2023, the most active investor group in terms of transaction volume was foreign funds, many of which still possess significant capital and finally have the opportunity to engage in transactions at attractive price levels. Notably, Nordic funds such as Nrep, Niam, and Northern Horizon made substantial acquisitions during the year. However, the largest deals of the year were orchestrated by American investors KKR and Goldman Sachs. KKR made its first real estate investment in Finland by acquiring a large residential portfolio from Kruunuasunnot in the summer. Meanwhile, Goldman Sachs secured a significant logistics portfolio just before the year-end.

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Petteri Kokko
Managing Director
tel. +358 40 8222 580