Swedish real estate investors are aggressively exploiting opportunities in neighbouring Nordic countries as their home market slows down, experts agreed at the Outlook 2018: Europe & Nordics Investment Briefing, which was held in Stockholm last week.
'Swedish capital is playing a major role in the region,' said Arvid Lindquist, head of research, Catella (pictured). ‘Investors see attractive yield levels and markets that are earlier in the cycle than Sweden and are still bouncing back.'
Swedish names dominate Catella's list of top 20 investors in the Nordics over the last two years. Heimstaden is the biggest investor in Denmark, followed by NIAM and Castellum. AREIM is the biggest investor in Finland, ahead of giants like Blackstone and China’s CIC. Outside real estate, SPB is the biggest investor in Norway.
In Sweden, transaction volumes peaked in Q1 2017 and have been going down since, while in Finland ‘volumes are soaring, many deals have been done recently and liquidity in the market is really good, which is what investors like,’ said Lindquist.
In Norway, Finland and Denmark cross-border investors – including Swedes – represent half of the market, while in Sweden domestic capital dominates, leaving only 10/20% to foreign players.
As the cycle matures the market is becoming more complex for everyone, said Rikke Lykke, managing director, head of corporate integration, Patrizia Nordics: 'Now the upturn is finished investors are more demanding. They want value, they want more in depth analysis of the business plan and they want a business case they can believe in.'
See also, Nordic real estate reverts back to stable growth
At this stage of the cycle there is very little choice, said Martin Schellein, head investment management Europe, Union Investment Real Estate: ‘We have to move up the risk curve, but we look at fundamentals for each individual sub-market.’
The search for value opportunities is bringing come worrying developments, said Pontus Sundin, chief representative Nordics, Helaba: 'Opportunistic investors are re-introducing mezzanine and highly geared structures not seen since 2007 and that to me is a disturbing sign.'
In this context Helaba, like others, is being more cautious, he said: ‘A lot of investors will have an extremely hard time finding money in this late-cycle stage.’
Technological innovation and changing consumer habits are also putting a strain on operators. 'We at Patrizia have created a digitalisation strategy and an innovation lab, because there is so much changing that you have to embrace it. If you cannot beat them, join them,' said Lykke.
'The future is not what it used to be,' said Carl Struve, director Nordics, Grosvenor. 'We need to live with levels of uncertainty we never had before, so we need to adapt quickly and we need to be brave and bold.'
The interplay of retail, e-commerce and logistics is a case in point. Retail has been a star performer for the last few years, but now things are shifting. As traditional shops suffer, 23% of retail offering is now F&B, a sector which is booming as consumers’ habits change.
Consumers are also getting used to the convenience of home deliveries. Amazon doesn’t yet have a presence in Sweden, but other smaller players are making their mark.
‘It is a question of when, not if, Amazon enters the market, so retailers need to change their business model,’ said Lindquist. In any case, the e-commerce giant has a Swedish website and is already delivering to the country.
An evolving market brings new opportunities. In the Nordics 'there are a lot of huge logistics warehouses but the real opportunity is in last-mile logistics, small hubs in inner city locations,' said Lykke.
