INVESTMENT BRIEFING: Nordic experts single out high-yielding segments

Logistics was billed as one of the sectors investors should look at in Sweden by panellists at PropertyEU's Nordics Investment Briefing hosted by CBRE in London this week.

Asked how he would spend a notional €500 mln to invest in the Nordics, Daniel Andersson, senior director Sweden Capital Markets at CBRE, said he would spend some of the money on core logistics in core areas. 'I would go for short leases, where I think we would see a great return performance. In general occupiers are third-party logistics (3PL) providers who are willing to pay high rents for short leases.'

Allan Lavén, first vice president Nordics for Prologis, noted there wasn't a sufficient supply of such properties in the Nordics to invest the full €500 mln.

But he said he would focus on short leases of around four years rather than 10-year agreements which used to be the norm. 'The trend now is shorter leases and for formats of 3,500-5,000 m2 rather than big boxes. So I would restructure existing logistics assets for smaller tenants. 'I have 1,800 m2 let out in Gothenburg on a short-term lease to a small 3PL who pays at least 30% higher rent than the big guys next door on a 10-year lease,' Lavén said.

Lavén' ended his case for logistics by saying the sector is set to see rental growth.

RESIDENTIAL
CBRE's Andersson said he would also invest in offices in Gothenburg and outside the core areas of Stockholm where there is a discrepancy in yields.

Residential development in the two largest Danish cities, Copenhagen and Aarhus was suggested by Rikke Lykke of Patrizia Immobilien. Lykke established and leads the Nordic business for the German listed property company.

She said she might spend some of the €500 mln on a 'little bit' of residential property development in Denmark's third city, Odense.

VALUE-ADD
Another investment opportunity, Lykke said, was high-street retail in Copenhagen. 'Then I would go and do value-add high-street retail in Oslo. The rental levels can be increased considerably if you refurbish high-street units.'

'The purchasing power of the Norwegians is amazing but they don't really have many high-street retail brands up there yet so there could be very interesting opportunities to fill that gap.'

Lykke said refurbishing rundown shopping centres in the top 5 to 15 cities in Sweden and investing in the Finnish residential sector would also be options to deploy capital productively.

Thomas Persson, managing director of Catella Corporate Finance Sweden, said he would deploy a value-add strategy in A-minus and B locations in Stockholm. 'I would also look at the Copenhagen market. It has suffered more than any other Nordic city in recent years but it is bouncing back.'