Nordic investors are increasingly targeting pan-European investment into real estate's living sectors, including purpose-built student accommodation (PBSA), co-living, multifamily, senior living and healthcare, according to new research from Savills.
The report finds that Nordic investors typically first look to invest in their own country and neighbouring states, given their familiarity with those markets, before looking further afield.
For example, Swedish investment volumes into Denmark increased fivefold between 2020 and 2021, to €5 bn, with Heimstaden, CRIM and NIAM all making large residential acquisitions over the past year. This trend has continued into 2022, with Swedish student housing developer Studentbostäder i Norden (SBS) announcing in April that it had agreed to purchase a 173-unit student scheme in Copenhagen from SEBC II ApS and Bonum Development for DKK 344.5m (€47 mln).
Yet in recent years, Nordic investors are also increasingly pursuing this strategy across continental Europe. One of the most high-profile examples is Norway’s sovereign wealth fund, Norges Bank, which has real estate investments in sixty-nine different markets outside Norway, including in excess of €13 bn across Europe.
One of the top destinations for Swedish investors allocating capital in 2021 was Germany, where the bank invested €7.9 bn. This was eight times more than in 2020 and represented 42% of the firm's total investment volume that year, with the residential investment giant Heimstaden being particularly active. This year Heimstaden has already invested in Poland, forward-funding a 400-apartment residential project in Warsaw.
Meanwhile, in France La Française Real Estate Managers acquired a 105-unit senior living residence on behalf of Danish pension fund PFA, in a forward sale structure. Following on from its initial €100 mln France-focused partnership announced in January 2020, so far in 2022 PFA has committed a further €300 mln to the strategy, with €200 mln of the new mandate allocated to senior housing across both France and Belgium.
Savills says that the drivers behind this increase in outbound investment into wider Europe include risk diversification, the possibility of achieving higher returns in other European countries, and their home markets alone not being large enough to allow full deployment of funds, given the size of many of the listed companies and private equity funds in the Nordics.
As these drivers continue to play an important role in decision-making, the firm expects to see Nordic investors allocate increasingly large quantities of capital to the ‘living’ sectors across continental Europe, through a number of different investment structures.
Given the geopolitical events in Eastern Europe, which are materially affecting raw material costs and the construction pipeline, Nordic investors with capital to deploy will also increasingly focus on securing operational or almost-complete stock, as they prioritise income-producing assets.
