FINLAND – Pension fund-owned Finnish property firm Sponda says vacancies will increase in all but Helsinki prime this year as GDP struggles into positive territory.
Posting year-end results last week, chief executive Kari Inkinen told analysts the firm would focus on "quality of cash flow" via assets in Helsinki's central business district (CBD), where demand from international and local institutional investors – including its shareholders – has held up.
Eight of the listed firm's 10 largest are pension funds or insurers, including Finland's domestic first-pillar scheme and a subsidiary of the Norwegian sovereign wealth fund.
Sponda, which sold assets worth €62m in 2012, will this year offload sufficient non-core assets to cover its investments "at the very least".
Although Inkinen declined to give specific figures for likely divestments, he pointed to a range in recent years of between €50m and €100m.
"When the market is down, you don't want to push it by pushing assets onto it," said Inkinen.
"That seems to be the range the market is able to take in."
The firm expects occupation rates in the central business district to remain stable through 2013.
The strategic focus on prime "seems to be working quite well", said Inkinen.
Outside the CBD, office market vacancies have risen while rental growth has come under pressure from new assets that make up 1.5% of the market.
Overall, vacancies in 2013 are expected to hover just above 88% – the 2011 figure – though logistics occupation fell from 78.1% to 75.6%.
Inkinen attributed the segment-specific decline, as well as a 3.3% fall in logistics rents, to a slowdown in exports.
"Although the market seems to be getting slightly worse, and we could expect an increase in vacancies, we see good-quality prime properties outperforming the others," said Inkinen in response to questions over its relatively bullish forecast.
"We don't see positive changes, but it's reasonable to assume we will be able to hold on to our existing occupancy levels."
The firm is currently mulling an expansion of its development programme into northern Moscow, despite significant investment costs and modest yields.
"We don't want to be speculative, despite good demand, and developing in Moscow is complicated in any case, but it's a possibility," he said.
Land, including the Moscow site, comprises €91.2m of the firm's €135m development portfolio.
"We still believe in non-speculative development," said Inkinen. "We aim to go with new developments once existing ones are complete."
