Commercial real estate performance analysis services IPD said that its Swedish Annual Property Index saw a total return of 14.9% in 2007, representing a fall of 1.3% on the year before, but maintaining double-digit returns for the third consecutive year. Property far outperformed the equity and bonds markets, which returned -3.5% and 1.6% respectively.
Commercial real estate performance analysis services IPD said that its Swedish Annual Property Index saw a total return of 14.9% in 2007, representing a fall of 1.3% on the year before, but maintaining double-digit returns for the third consecutive year. Property far outperformed the equity and bonds markets, which returned -3.5% and 1.6% respectively.
This robust total return was predominantly driven by sturdy capital appreciation, IPD said. Capital values remained stationary in 2004, but have since increased at a steady pace with an average in the last three years of 9.1%.
Income return in 2007 was 4.8% year-on-year, the lowest recorded since 1997. This figure compares to the 2006 income return of 5.0% and brings the three-year annualised income return to 5.1% year-on-year.
According to IPD, the sector performance hierarchy changed somewhat between 2006 and 2007. Whilst Industrials were the top performing sector in 2006, it was the retail sector that outperformed last year with a return of 18.7%. Industrials returned 12.2% year-on-year and the residential sector had the weakest total returns at 11.8% year-on-year. 'Strong rental growth in the retail and office markets boosted the capital values in Sweden in 2007. Rental values increased by 8.7% in retails and by 5.3% in offices. The investors' appetite for these two sectors also forced yields down in 2007', said Christina Gustafsson, managing director at IPD Norden.
The Swedish Property Index is based on a sample of 1,113 properties from 15 portfolios covering SEK 232 bn at the end of 2007.
