Sami Kiehelä, Head of Capital Markets, Nordics & Finland at CBRE shares his insight on the real estate investment market 2020 in the Nordics.
2020 - another strong year
While we are still finalizing our full-year investment data for 2020, our preliminary data indicates that the Nordic market experienced yet another strong year with total investment volume reaching c. €41 billion. This is down by 5% from 2019, but given we are still expecting some additional transactions to be recorded in our database, 2020 is virtually at par with 2019. We will continue to update the incoming data and the final figures for 2020 are released later in Q1 2021. Nevertheless, we will briefly discuss some of the trends revealed by the preliminary data below.
Sweden maintains its leading position in the region
Similar to 2019, Sweden remains the powerhouse of the Nordic market with c. 42% (€17bn) of the total market, followed by Norway and Denmark with 24% and 19%, respectively. Finland experienced a third consecutive year of declining volumes and accounted a mere 15% of the market with €5.9 billion of transactions. It is noteworthy that Norway has cemented its position as the second most important market in the region with an annual investment volume of c. €10 billion (the volume has been between €9.3 and €10.3 billion for the last four years).
Covid hit the Finnish market the hardest
As mentioned above, the Nordic investment volume decline from 2019 was modest, but there are slight variations between the countries. Denmark in fact recorded a 5% increase from 2019, whereas Sweden, Norway and Finland experienced declines between 5% and 13%. More interestingly, a simple comparison of investment volumes for Q2 - Q4 2020 over the same period in 2019 reveals significant differences between countries in terms of market activity since the outset of Covid-19 pandemic. Denmark weathered through the crisis virtually intact with a 3% increase in volume whereas Finland on the other end recorded a notable 45% decline in volume. Also, Sweden experienced a 25% Covid decline and Norway was down by 16%.
Finland and Denmark remain the most international markets
Both Finland and Denmark have attracted a steady c. 50% share of cross border investment over the last 5 years whereas Norway and Sweden are dominated by domestic players. 2020 made no exceptions: Denmark was somewhat above the 5-year average with more than 60% of purchasers from abroad followed by Finland with 53%. Norway and Sweden recorded 19% and 16% cross border investment, respectively.
However, it is worth noting that a large share of the cross border investment in the Nordic countries is in fact driven by cross-Nordic investors. In particular, many of the larger recent transactions have been cross-Nordic, including SBB’s takeover of Hemfosa in Q1[1] and most recently Heimstaden’s blockbuster residential deal in Denmark in Q4.
Residential overtook office as the largest sector
The rise of residential continued strong in 2020 and with the relative weakening of the office investment activity, residential grew to be the largest property sector in the Nordics for the first time ever. Residential investment amounted close to €13 billion, reflecting 31% of the total market (30% in 2019). Office investments were at c. €8 billion, which is 20% of the market (31% in 2019) and 38% down from 2019. The two substantially large sectors were followed by care and community service properties as well as industrial and logistics. Unsurprisingly, hotel investment experienced the steepest decline in volumes in 2020 ending at 57% down from 2019 (-72% since outset of Covid).
Concluding remarks
Our preliminary 2020 investment data indicates that the Nordic real estate investment market was impacted surprisingly little by the Covid pandemic as the overall investment remained above €40 billion. Sweden remains the largest market, whereas Denmark and Finland maintain the highest share of cross border investment. 2020 was also historic as residential is now the largest sector in the region.
Please don´t hesitate to contact Sami, should you wish to know more.
[1] We record SBB’s acquisition of Hemfosa in Q1 2020 investment figures as the acquisition was reported to become unconditional in January 2020.