SWEDEN - Swedish retail has overtaken office as the market's best performing sector, according to the 2007 Swedish Annual Property Index.

Retail returned 18.7%, compared with the previous year's top performer industrials, which returned 12.2%. Residential was the worst performer, returning 11.8%.

Overall, Swedish property returned 14.9% last year, down from 16.2% the previous year. Despite the fall, the asset class outperformed both equities, which returned -3.5%, and bonds, which returned 1.6%.

One of Swedish retail's strongest champions, Cordea Savills head of research and strategy Andrew Allen, told IPE Real Estate: "We're big fans of Swedish retail but you need to be careful about interrogating indices [because they don't accurately reflect the market]. In general, retail will continue its strong performance and will beat office."

He said he had "not given any thought" to when the retail trend might turn down.

"GDP is good and indexation remains good. Inflation is quite high, which suggests natural rental growth. Some analysts look at Swedish shopping centres and see a danger of oversupply but they forget that in the Nordics it's cold for half of the year," he said. "Covered schemes make sense, and many shopping centres are not in as modern a format as you might expect. At the same time, more international retailers are going into the market."

One of the knock-on impacts of retail performance will be on warehousing in the Swedish market.  "What's built is good quality. Modern retail parks are opening up. Supply is relatively slow and rents are relatively low," said Allen.