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14 February 2019, Finland | Corporate Finance | News

Catella Market Indicator - Finland, Spring 2019

Catella Market Indicator has been published; Third strong year for property investments in a row

During 2018, the Finnish real estate market continued on a strong note. Transaction volume eventually climbed up to EUR 8.9 billion, which is the second highest volume of all times. Weakening economic growth and general  uncertainty regarding the future have not yet reflected on the property market, and activity is  expected to remain high also in 2019.

Year 2018 was again very busy in terms of transactions – perhaps the best transaction year of all times in Finland considering the number of transactions. Many significant deals were closed during the year, and several new international investors were again seen to enter the Finnish market. The largest individual arrangement was the acquisition of Technopolis Oyj by British Kildare Partners, after which yet another real estate investment company is going to exit the Helsinki Stock Exchange. However, after a long wait, a new major real estate company entered the Helsinki Stock Exchange when Kojamo Oyj was listed last year.

Demand by investors was again mainly international. Of the total volume, 65% of the transactions were foreign investors' acquisitions. In addition to Kildare, new investors entering the Finnish market last year were, among others, Blackrock, Morgan Stanley, Castellum and Round Hill Capital. Due to the high demand by investors, yield requirements have continued to fall, and Helsinki prime yield has fallen to an all- time low and is now clearly below 4%. In the Catella time series before year 2018, the 4% yield level was previously reached in 1990.

Not only foreign investors but domestic, too, were active in the market. Domestic special investment funds, in particular, have actively acquired new properties, and also new funds were founded last year. This has improved the property market's liquidity also outside the Helsinki Metropolitan Area.

Office vacancy rates remain high

Having continued strong for quite some time, economic growth has reflected positively on the rental market during 2018. It seems, however, that the downward trend in vacancy rates in the HMA has unexpectedly stopped, at least momentarily. According to Catella's calculations, office vacancy rates in the HMA have increased slightly from the level of our previous survey about six months ago. This is an unusual situation, as typically during periods of strong economic growth, office vacancy rates decrease.

The HMA vacancy rate persists on a very high level at 13%, while in the Stockholm area, for example, the vacancy rate for offices is currently only 6.5% and in the Copenhagen area 7.5%.

Although there is still plenty of vacant office space available in the HMA, good quality properties in the best office locations have a good position on the rental market, and during the autumn, we have seen a rise in prime rents despite the high vacancy rates on several submarkets.

Property investment market remains active

Although economic growth is slowing down in Finland, too, and uncertainty regarding worldwide economic development has significantly grown recently, the persistently low interest rates still support the property investment market, and there seems to be plenty of capital available for property investments. Good investment properties and very competitive returns can still be found in Finland, particularly if one is ready to look outside the centre of Helsinki.

Although the property transaction market has remained record active for a long while, we believe that there may again be a strong property transaction year ahead.

For more information, contact:

Antti Louko, Managing Director, Tel. +358 50 5277 392 , antti.louko@catella.fi

 

The Catella Market Indicator, Spring 2019 can be ordered by Catella's clients and co-operators from the following e-mail: info@catella.fi

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