INVESTMENT BRIEFING: Foreign money drives Swedish property pricing

Cross-border investors are having an influence on pricing levels in Swedish real estate, PropertyEU's latest Nordic Investment Briefing heard.

Over 80% of commercial real estate investment in the Nordics involve domestic investors or investors from one of the other Nordic markets. However, the logistics and retail segments are 'definitely' driven by international investors despite the fact that transaction volumes are smaller than for offices, said Daniel Andersson, senior director capital markets at CBRE Sweden.

'You have to look at what's going on in the different sectors. 2012 was dominated by a lot of large deals in Stockholm CBD offices and that was pretty much the only sector where international investors are not driving prices. If you look at it, paying a 4% to 4.5% yield in Stockholm doesn't make sense compared to fairly much all other markets in Europe.'

Rikki Lykke of Patrizia Nordics pointed to the dominance of cross-border European players in the shopping centre sectors in both Sweden and across the Nordic region. A few months ago Canada's massive pension fund investor CPPIB partnered with Citycon of Finland to acquire Kista mall in the Stockholm region for €500 mln while Franco-Dutch retail giant Unibail-Rodamco is developing the 101,000 m2 Mall of Scandinavia in the Swedish capital.

Similarly, German retail specialist ECE recently entered Denmark with the €400 mln acquisition of the Rosengårdcentret in Odense on behalf of a fund.

Foreign investors have also had a visible effect on pricing in the logistics sector in Sweden. Allan Lavén, first vice president Nordics, Prologis said two transactions in 2012 involved international buyers. 'They have driven the prices up quite amazingly. We would not touch some deals on that sort of cap rate.'

Overall, however, domestic pension funds played a leading role in Sweden which chalked up an impressive transaction volume of around €8 bn last year.

'2012 was very much dominated by the core markets and core investors,' Thomas Persson, managing director of Catella Corporate Finance Sweden said. The main driver of volumes, he said, was a number of large office transactions by domestic pension funds trading office assets in Stockholm's central business district. 'Two pension funds, in particular had to sell for various reason,' he noted.

Click on the link below for a full round-up (videos and presentations) of the event.