Retail specialists converge on the Nordics

A growing number of retail specialists are beefing up their presence in the Nordics.

In March, ECE acquired the second-largest shopping centre in Denmark. The Hamburg-based developer purchased Rosengårdcentret in Odense, Denmark’s third-largest city, through its European Prime Shopping Centre Fund from private investors for €400 mln.

The deal marks ECE’s debut in the Danish and Scandinavian market, but is also noteworthy for other reasons, Rikki Lykke, managing director at Patrizia Nordics told PropertyEU’s recent Nordics Investment Briefing in London. ‘I was pleasantly surprised that they didn’t go to Copenhagen but to Odense, the third largest city in the country. This deal proves the point that there is more to Denmark than Copenhagen.’

Sweden is also on the hit list of major European players. Earlier this year Franco-Dutch retail giant Unibail-Rodamco announced plans to develop the Mall of Scandinavia in Stockholm, the largest shopping centre in the region. The move follows the acquisition of Kista Galleria at a nearby location in the Swedish capital by Helsinki-based Citycon and Canadian pension fund CPPIB.

UK-based Henderson Global Investors is also strengthening its Nordic platform and recently recruited a new asset management specialist after setting up an office in Stockholm in 2012. Speaking at the Nordics Investment Briefing, Daniel Andersson of CBRE Sweden’s capital markets unit predicted that the Mall of Scandinavia will be a success. He added that nearby Kista could suffer from the additional competition but added that other centres will be hurt more.

‘If you go to Kista in the afternoon or on the weekend, there are always tonnes of people there. There aren’t many centres where you see that.’

Thomas Persson of Catella Corporate Finance Sweden agreed that older shopping centres in particular will suffer. ‘Sweden has a lot of shopping centres, we started building in the 1970s and some are old-fashioned today. There are much more interesting ones in Europe and demand for new ones is increasing.’

A growing number of international investors are also showing appetite for the Nordics, David Turner, director of property at Henderson Global Investors, said. ‘We’re seeing a mix of foreign investors from the US and Asia but also Germany. Local investors tend to focus on offices, but foreign investors have a strong emphasis on retail.’

In the run-up to the financial crisis, Sweden became something of a hot spot, but the market has cooled down significantly since then, he added. ‘At the peak in 2007, it was a different market, with really keen yields of 4% or even keener. That is not the situation now. Buyers are more sophisticated and not over-geared. Average LTVs are 50%. Not everything is being sold and some assets are overpriced, but we are very selective and only go for the best product. And there aren’t any signs that the market is overheated, the risk-return-adjusted profile is very good and is similar to Germany’s.’