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Record year for the Nordics

The Nordic real estate investment (REI) market has rebounded since last year and there is a good chance that it will be another record year in 2021. At the end of third quarter, almost €36bln of activity has been recorded in the Nordics and there is a large number of investors looking to deploy more capital into Nordic real estate market. The REI market in the Nordic region is in robust health and set to continue in strong growth for the foreseeable future. 

The Nordic market has shown resilience, remaining a stable investment market during the pandemic year of 2020 – recording over €44bln of activity. Even the leading European economies such as Germany, UK and France saw their REI investment volumes recede in comparison to the Nordics. Overall, the Nordic market is now viewed as the third largest market in Europe, and it would appear that this hierarchical position will remain for the foreseeable future.

But why is this the case – that the Nordics is an REI powerhouse? Only 8 countries in the entire world have an AAA rating from all top credit rating agencies (Moody's, S&P and Fitch) and three of these countries are in the Nordics, while Finland has the next highest rating at AA+. All four are in the top 20 Forbes ‘Best Countries for Business’ meanwhile all Nordic countries have an above average share of the population with university education than the OECD average of 37% - for example Norway is 44%. Collectively, the Nordic region is the 12th largest economy in the world, comprises four exceptionally stable economies, highly skilled workforce and a higher propensity towards innovation. In addition, while the vaccine roll-out was initially slow in the Region, the uptake to full vaccination has been extraordinary and therefore the Governments of all four countries have abolished most Covid 19 restrictions by the end of October.

Real Estate Investment covers a lot of classes from healthcare, hotels through to industrial and logistic properties. In the Nordic region, Residential real estate has become the most popular investment sector with a 40% share of 2021 volumes followed by Offices at 20%, Industrial at 14%, Retail at 9%, Other (including Hotels) at 11% and Healthcare at 6%. CBRE believes that Office investment will recover lost-ground over the medium term as economies stabilize and office-based growth continues on its long-term trajectory. Whilst many office occupiers are debating to what extent their hybrid options will be, the fact remains that most offices will still require ‘peak-demand’ capability. Nonetheless Residential has roared on to the REI scene over the last decade and is here to stay. The very recent €9.1bln M&A by Heimstaden Bostad of the Akelius residential portfolio in the Nordics and Germany was a European record deal and is a testament of the keen investment interest in the residential sector.

Going forward, we are likely to see more M&A platform deals. They are attractive, particularly to new entrants. Generally, their large size allows the deployment of significant capital and usually means inheriting established development, asset, property management and C-level management teams to execute the strategy without interruption. It addition, it means the ever-increasing focus on ESG strategies are easier to implement with scale and creates the potential to capture efficient in-place capital structures. There have been a number of recent platform transactions involving Nordic capital.

In general, the REI market in the Nordic region is in robust health and set to continue in strong growth for the foreseeable future.

Colin Waddell, Patrik Kallenvret, Jussi Niemistö

Colin Waddell, Patrik Kallenvret, Jussi Niemistö

Colin Waddell, Managing Director of CBRE Nordics & Norway
Mobile Phone: +358 50 464 0458

Patrik Kallenvret, Head of Capital Markets, Nordics & Sweden and Managing Director of CBRE Sweden
Mobile phone: +46 767 633341

Jussi Niemistö, Head of Research, Finland
Mobile phone: +358 40 537 5760

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