Nordic investment volumes will hold up at €35 bn in 2020, just shy of the levels of the last few years.
The prediction by pan-Nordic firm Newsec, would make the region one of the most resilient in Europe in the face of the Covid-19 pandemic.
Max Barclay, head of Newsec Advisory, told PropertyEU that transaction volume in H1 2020 in the Nordics amounted to €15.9 bn. The activity was driven by the Swedish property market which accounted for close to 50% of deals by value in Q1 and 60% in Q2.
In Q2, when many European countries were locked down, Sweden had far fewer restrictions. ‘The consequences on the tenant side or the practical side of being unable to travel and do real estate transactions have hardly been seen in Sweden at all, unlike other places. In that sense I would say the Nordics and specifically Sweden was interesting for real estate investors before the pandemic but probably even more interesting since we have been in the middle of it,’ Barclay commented.
Like Germany's property market which has also seen high levels of activity, the Nordics can rely on strong domestic investors for real estate which supports the market. In addition there is good foreign interest. This is at a level this year that ‘has not been greater in the Nordics and specifically in Sweden where it was 35% in H1 2020,' he said. 'We see that increasing.’
One more factor is that the Nordic region has had slightly better economic performance than most of Europe. In Finland GDP declined by -5% in H1 2020 compared with the eurozone average of -15.3%. Both Sweden and Norway witnessed falls of -8.3% while Denmark’s GDP went down -9.3%.
The property sectors driving Nordic volumes are residential, public properties and logistics ‘where the cash flow is currently not as affected, and is close to normal’, Barclay said.
The rise of public property as a desirable investable sector is a particularly Nordic phenomenon but one which Newsec sees spreading further and faster in other countries.
In 2000, public properties accounted for 1% of total transaction volume in Sweden but by 2019 the share had swelled to 14%. This year Newsec expects the share to reach 20%.
Public property’s elevation to a top three segment is one of five trends which the firm analyses in its Autumn Property Outlook report, due for release on 16 September. The others are: flexible office occupation going global; a revitalisation of regional cities sometimes at the expense of capitals; logistics and retail parks merging into one segment; and real estate cementing its position as one of the few asset classes available which continue to offer investors’ returns.
Newsec’s investor contacts lead it to conclude that Swedish pension fund allocations to the asset class will increase further to 20% by 2030.
‘Not only has the Corona pandemic in many ways accelerated already ongoing societal trends but it is also leaving a significant mark on the world of property. It is clear that we have fast forwarded several years into the future regarding these trends and that is very important for property investors and owners to take into account to stay relevant,’ Barclay concluded.
