In its recently released 2025 European Real Estate Market Outlook Mid-Year Review, published in early August, CBRE revisits its initial projections for the year and offers an updated perspective on the prevailing market dynamics. This article includes specific observations concerning the Nordic real estate market.
Economy
The economic outlook for the Nordics is mixed, as four countries have divergent growth drivers.
Considering the substantial contribution of the pharmaceutical industry to Danish GDP, the imposition of a tariff on pharmaceuticals would likely exert a consequential impact on overall GDP growth projections for the year 2025. Inflationary pressures have moderated, stabilizing at approximately 2%. Simultaneously, robust real wage growth and elevated employment levels are expected to provide stimulus to private consumption. The extent to which this consumption expands, however, will be contingent upon prevailing consumer confidence and their sensitivity to the current economic uncertainties.
The Swedish economic expansion, although exhibiting signs of a recent slowdown, is anticipated to demonstrate renewed growth in the second half of the year. The Swedish Riksbank policy rate has been cut from 4.00% to 2.00% since May 2024, through a series of steps in response to a slowing economic recovery and declining inflation. Furthermore, Sweden demonstrates a significant degree of exposure to US trade within the EU. Specifically, direct exports to the US constitute 3% of GDP, with automotive products and associated components contributing approximately 1% of GDP.
The reduction in interest rates has demonstrably stimulated economic activity within the Finnish private sector, given the prevalence of variable-rate financing. Consequently, the outlook for heightened consumer demand has been positively revised. Although household consumption has been constrained by persistent unemployment and fiscal austerity measures implemented within the public sector, a consumption rebound is projected to materialize during the latter half of the year.
Norway's recent economic performance has been characterized by solid expansion, primarily driven by augmented public expenditure. Projections from financial institutions anticipate the Norges Bank implementing monetary easing measures, specifically reductions in the policy rate, in Q3 and Q4. While Norwegian merchandise exports to the US are currently subject to a 10% tariff, it is crucial to acknowledge that this tariff regime excludes petroleum products. Given that petroleum constitutes a considerable proportion (40%) of Norway's total export value, the direct impact of US tariffs on the Norwegian economy is, therefore, considered to be relatively limited.
Capital Markets
Capital markets activity in the Nordics has gained momentum, driven by a material improvement in financing conditions.
In the first half of 2025, the Nordic real estate investment market recorded a transaction volume of EUR 17.5 billion. This represents a significant expansion of 26% relative to the same period in 2024. The observed market resilience was largely attributable to augmented investment flows within the Living sector, which registered a doubling of transaction volume compared to the first half of 2024. Subsequent to the Living segment, the Industrial & Logistics (I&L) and Office sectors exhibited the most significant levels of liquidity across the Nordic region as a whole.
Market projections anticipate continued expansion in the latter half of the year, with heightened investor demand anticipated to be met by an increase in available assets, partially resulting from an anticipated increase in loan and equity maturities.
Focus on Living
Most European countries (Nordics included) have seen a decrease in permits since the beginning of the year due to:
- the implementation of more stringent regulatory frameworks,
- inefficiencies in the permitting process, characterized by protracted decision-making timelines and limited processing capacity, and
- profitability concerns stemming from the interplay between yield potential and escalating construction expenses.
Consequently, current building permit levels remain significantly below the peak observed in 2021. Specifically, in Finland, Sweden, Germany, and Austria, the number of housing units authorized for construction continues to lag substantially behind both governmental objectives and demonstrable market demand.
Residential permit level in 2024 (thousands) vs 2024 permit level relative to recent peak (%).
Source: Eurostat, Glenigan, CBRE Research
In the Swedish context, the observed contraction in building permits can be attributed to a confluence of economic factors. Specifically, pre-2022 elevated land prices, coupled with challenges in making some development projects economically feasible, have contributed to a slowdown in construction activity. Furthermore, the residential market is exhibiting novel characteristics, including difficulties in securing tenants for newly completed apartments, and an increased rate of turnover among tenants in new developments. This phenomenon is likely driven by a combination of factors:
- elevated presumption rental levels,
- the geographical location of units outside of prime urban centers, and
- a significant increase in the housing supply over the past five years.
Furthermore, across a number of European cities, a favorable environment exists for a privatization strategy. While absent in Sweden, this trend has been visible in Denmark and is anticipated to persist and broaden in scope, largely influenced by the divergence between vacant possession values and capital values. The precise extent of these impacts will be contingent upon several factors, including the characteristics of the specific properties, tenant turnover rates, the strength of existing tenant protections, and anticipated developments in vacant possession value.
Occupier
The interplay of sector-specific factors and occupier market dynamics is exhibiting noteworthy trends.
Specifically, office-based employment experienced continued expansion throughout the primary Nordic markets during the first half of the year, with projections indicating a growth rate of 1.4% to 2.2% in the capital cities in 2025. While this anticipated growth is slightly below the 2020-2024 average in Copenhagen and Oslo, it is nonetheless anticipated to stimulate demand. Furthermore, occupiers' preference for premium office spaces has exacerbated the divergence in performance between central business districts (CBDs) and less central submarkets, potentially leading to further rental appreciation in prime locations.
The logistics sector has demonstrated a degree of stabilization in terms of space absorption, with occupiers exhibiting continued prudence in their decision-making processes amidst prevailing uncertainties. Despite the upward trajectory in vacancy rates across numerous locations, these are anticipated to reach a peak later this year (in some Nordic locations first in H1 2026) as construction activity levels off. The recent trade agreement between the US and the EU is projected to mitigate uncertainty for European logistics occupiers, potentially contributing to the aforementioned market strengthening during the latter half of the year. However, results from our 2025 European Logistics Occupier Survey suggest that a considerable proportion of occupiers had already integrated such geopolitical risks into their strategic planning or did not perceive tariffs as an immediate impediment to their real estate requirements.
Sustainability
Nordic financial institutions and national banks are increasingly adopting the European Union Taxonomy (EUT) as a foundational framework for evaluating green loan eligibility and investment viability. Assessment of full and partial alignment with the current, and, when applicable, revised taxonomy, helps real estate assets and funds drive more sustainable investments in a low carbon economy, even on a voluntary basis.
Furthermore, the findings from the 2025 European Lender Intentions Survey indicate a pronounced shift towards sustainability as a critical determinant in financing decisions. Nearly half of the surveyed lenders stated that they are implementing minimum asset-level criteria related to sustainability as a prerequisite for new lending activities or require business plans for assets failing to meet these criteria.
Contacts:
Please contact Dragana Marina, Head of Research, Denmark or Maryrose David, Head of Research, Sweden, or your CBRE Advisor.
Read more:
2025 European Real Estate Market Outlook Mid-Year Review
CBRE Nordic in-country Market Outlook reports 2025
