A record of SEK 35 bn (€3.8 bn) of commercial real estate changed hands in Sweden in the first three months of 2016, data by property adviser Savills reveals.
The Q1 investment volume was 39% up on Q1 2015 and 11% higher than the previous Q1 record in 2007, an all time high for a first quarter period.
'The increased appetite for property lending among banks has led to a competitive climate, meaning more favourable terms for property owners,' comments Peter Wiman, head of research, Savills Sweden. 'Sweden is characterised by a strong expansionary monetary policy and the economy is expected to remain robust throughout 2016. This in turn has made our commercial property an increasingly desirable asset and fuelled demand from investors here and abroad.'
Offices remain the most sought after real estate commodity and the sector accounted for 24% of the total spend between January and end-March this year, Savills noted. Residential, closely followed by industrial, were the second and third largest sectors, representing 20% and 19% respectively of total transaction volumes.
The demand for industrial and warehouse assets has increased significantly in recent years as demand for logistics space to service online retail has grown.
Savills recorded completed 640 transactions last year, a record high and 11% up on 2014. The total investment volume for 2015 amounted to SEK 154 bn, which is slightly lower than 2014, but comparable with the strong years prior to the financial crisis in 2008.
Fewer but bigger deals
This year has seen a 20% dip in transaction numbers during the first quarter compared to Q1 2015. However, the average deal size in the first quarter of 2016 reached SEK 315 mln, 25% higher than the 10-year average deal size.
The portfolio transaction volume during the first quarter of 2016 amounted to SEK 22 bn, an increase of 107% compared to Q1 2015, and accounting for 64% of the total transaction volume. 'The amount of capital targeting property investments has led to premiums being paid for sizeable property portfolios,' Wiman said.
According to Savills, cross-border investment in Sweden has also notably increased continuously since 2009 and foreign investors accounted for 21% of the total transaction volume in 2015. The share of foreign investors has continued to increase in 2016 and already reached 24% in the first quarter.
The outlook for the rest of 2016 looks to be positive as recent repo rate cuts by the Bank of Sweden will favour the property sector, keeping the costs of financing at historically low levels.
'There is still a shortage of supply, and demand for assets across all sectors and geographical markets is likely to remain high,' comments Fredrik Östberg, head of investment, Savills Sweden. 'Yields across all property sectors are expected to remain stable, however we do anticipate that fierce competition for prime assets could result in investors turning to secondary assets, leading to a compression in the yield gap.'
