An increasing number of cross-border Investors are coming into the booming Nordic real estate markets but they need to recognise the cultural differences between the four countries in order to find the best opportunities, PropertyEU´s Outlook 2016 briefing on the region heard on Tuesday.
An increasing number of cross-border Investors are coming into the booming Nordic real estate markets but they need to recognise the cultural differences between the four countries in order to find the best opportunities, PropertyEU´s Outlook 2016 briefing on the region heard on Tuesday.
'You have to get to know the cultural differences in each of the Nordic markets and then you will find the most interesting investment opportunities,' Rikke Lykke, managing director of Patrizia Nordics, told the briefing.
Starwood and Blackstone have both pulled off billion-euro investments in the Nordic region this year and more cross-border players and equity will materialise in the final days of 2015 and into 2016, Andrew Smith, senior partner at Catella predicted.
Each of the four Nordic countries - Sweden, Norway, Denmark and Finland - are benefitting from the surge in transactions. Finland has seen €5 bn of investment this year, 50% of which is from foreign equity sources. A €300 mln residential property deal is expected to close in Denmark this week, the largest volume transaction in that market this year.
However, Sweden remains the largest and most liquid real estate investment market in the region. Average annual investment volumes in Sweden were relatively stable at SEK 110 bn (€12 bn) from 2010-2014. Late in 2014 this started to rise dramatically and is heading for SEK 140-150 bn for this year, said Arvid Lindqvist of Catella Research Sweden said. The rolling 12-month volume to end-November already stands at SEK 134 bn.
Cultural differences
Although investment volumes are rising across the region, new investors need to be aware that the Nordics consists of four countries. Although they act like brothers they each exhibit cultural differences that can affect real estate stock picks, Lykke said.
For instance, large apartments are a must in some markets but not necessary in Finland. But all apartments in Finland have to have a sauna, while bicycle parking is essential for residential buildings in the Danish market - something that developers and investors might not even think about in other European markets.
It is important therefore, she said, to have an office or good local partner who understands the conditions on the ground.
Investment picks
Asked how to deploy a notional €500 mln, the briefing panellists indicated a preference for Stockholm and Sweden.
Philip La Pierre, head of investment management at Union Investment Real Estate, said he would split the equity, with €300 mln going to residential property in Germany and €200 mln to invest in offices in the CBD or surrounding areas in Stockholm. If compelled to spend all the allocation in the Nordics, La Pierre said he would aim it all at the Swedish capital.
Thomas Volker of German financier Helaba - which is opening an office in Stockholm after lending in the Nordics for a decade - said he would split the allocation in accordance with the liquidity of each market. Sweden would therefore get the largest share. Volkers said he liked retail, particularly dominant retail schemes, either big-box formats or local centres.