Pangea: Nordics head for 2nd highest real estate deal volume

Transaction volumes across the four Nordic commercial real estate markets will exceed €42 bn in 2017. This is the second highest level ever recorded and Sweden is the only country showing lower volumes than last year, according to new figures from Pangea Property Partners.

'There will always be variations between the individual countries, but the Nordic region as a whole continues to be one of Europe’s most liquid property markets,' according to Pangea CEO Bård Bjølgerud.

The total transaction volume in the Nordic region will reach just above €42 bn in 2017, which is 3% lower than 2016. Looking at different countries, volumes have increased significantly in Norway (€8.5 bn, +11%), Finland (€9.6 bn, +30%) and Denmark (€8.6 bn, +31%) from last year, with the Finnish property market setting an all-time high in 2017.

Sweden remains the largest property market in the Nordic region as €15.4 bn of real estate changed hands in 2017, but the volume drops 28% from a very strong 2016.

'The decline in Sweden can be explained by increased uncertainty related to new tax regulations, a weaker housing market and few really sizeable deals. That said, the decline is not as dramatic as it first seems since we compare with the record volumes from 2016, and the number of transactions has only decreased marginally,' said Mikael Söderlundh, head of research at Pangea.

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Office sector
The largest property sector in 2017 is office accounting for 33% of the Nordic transaction volume, followed by residential and retail accounting for 22% and 17% respectively. Last year, residential was the largest property sector in the Nordic market.

'The office sector has been popular among investors in 2017 due to exceptionally strong rental growth in many Nordic key markets, while there has been some turmoil in the residential sector,' Söderlundh added.

The most active investors in 2017 are property funds and private property companies, both accounting for 31% of the buy-side volume. In comparison to last year, listed property companies are less active, decreasing their market share from 28% to 15%. The same goes for institutional investors going from 18% to 13%.

Foreign investors
The share of foreign buyers in the Nordic property market is 44% in 2017, a significant increase from 23% in 2016. In terms of volumes, foreign investors are significant net buyers acquiring property for about €18.5 bn and selling property for about €8.5 bn in 2017.

'We see a continued strong demand from offshore investors as well as significant pan-Nordic asset rotation. In particular, the share of foreign buyers in Finland and Denmark is exceptionally high this year, with the bulk of capital coming from the US, China and Sweden,' Bjølgerud said.

'We expect 2018 to be a very exciting year on the Nordic property market with somewhat more challenging market conditions. There will certainly be interesting opportunities for strong investors following the current price correction on the residential market, a more sober valuation of the listed sector and a likely consolidation in some segments,' Bjølgerud added.


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