EUROPE - Increased uncertainty in the Finnish economy will result in a moratorium on new real estate take-up, but no immediate decline in demand, according to pension fund-owned property firm Sponda. 

Chief executive Kari Inkinen told investors the domestic impact of the global financial crisis in the second half of last year would result in potential occupiers putting on hold plans to expand their office space.

"This uncertainty has not been reflected in the office sector as increased vacancy rate, but on the other hand, companies do not have much need for additional premises either," he said.
The AUM€3.16bn Finnish property company, which last week posted revenues up 7% year on year to €248.2m, recorded an occupancy rate of 88.2% on its 200-odd properties, up slightly from 2010.

Sponda, which has insurers Varma (9.5%), Ilmarinen (9.5%) and Fennia among its shareholders, announced last August that it would narrow its domestic focus to Helsinki prime.

Describing office as "stable", Inkinen pointed out on Friday that the export slowdown had likewise been not been reflected in diminished demand for logistics to date - but he forecast no increase in demand this year.

Although the impact of the global economic crisis has been relatively less severe than in neighbouring markets, a scheduled surge in supply of new office in capital Helsinki by the end of the year is likely to put pressure on both occupancy and rental growth, which Inkinen said was likely to level off this year.

"We don't believe there will be major increases in rents except for raises due to inflation," he said.

Despite weak business sentiment - Sponda has stayed construction of its Ratina shopping centre because of the uncertain commitment of future tenants - Inkinen was relatively upbeat on GDP forecasts for 2.6% in 2011, despite a forecast drop to 0.4% in 2012.

"The fact the Finnish economy is stable by European standards and its credit rating is the highest possible promotes trust in Finland being a safe investment choice also in the future," he said. 

But he added that the market's "anticipatory atmosphere" would result in transaction volumes in the Finnish market below €2bn - a drop of 25% from the previous year.