CBRE is expecting a rebound in Nordic real estate markets in the second half of 2021 and there are signs of strong pent-up demand in all four Nordic countries. CBRE's Managing Director in the Nordics, Colin Waddell, shares his insights on the Nordic real estate markets before the well-deserved summer holidays.
Before taking a few days off to enjoy the Nordic summer, I have taken the time to reflect on the past six months. First and most importantly, I hope that you all are well, our customers, partners, and all our employees.
Market activity expected to return through opening of the Nordic countries
CBRE estimates that the Nordic countries will get back on track during the fall of 2021 in regard to growth, through successful vaccinations and the opening of the economies during the summer. Denmark will see its economy grow by 2.1% while Finland, Norway and Sweden will see their GDP rebound by 2.5%, 3.6% and 3.7%, respectively. 1
Beginning of 2021, the Nordics and country by country
The first quarter of the year we saw that comparatively modest investment volumes, government guidelines and travel restrictions had an impact on market activity in the Nordics. First quarter investment volumes in the Nordics were 29% below the 5-year average quarterly figures at €7.7 billion.
- Denmark was the only country that showed record year-on-year growth (18%) at €2.5 billion of transactions.
- Investment volumes in Sweden were 43% below the 5-year average at €2.4 billion.
- Norway recorded investment volumes of €1.7 billion, 26% below the 5-year average.
- Finland saw a very modest €1.1 billion in transactions in the first quarter, 55% below the 5-year quarterly average. Nonetheless, Finland is expected to see a strong rebound as travel restrictions are lifted and cross-border investors are able to return to the most international market in the Nordic region.
Large amount of deployable capital looking for opportunities in the Nordic countries
If we look at the different sectors, we see that the residential and logistics sectors continue to see the strongest tailwinds as investor interest remains high. We also see that a large amount of both domestic and foreign investors are looking to deploy more capital in these sectors. Residential, and healthcare properties, have had stable occupier markets and thus been regarded as a recession-safe haven by investors, resulting in yield compression throughout the pandemic and into 2021.
My colleagues and I believe the strong interest will continue throughout the year, as Nordic prime yields continue to look very attractive in a European context. Nordic countries have seen the share of multifamily investment grow in recent years and the momentum has carried on during the pandemic. Residential was the largest sector in the first quarter of 2021 with 30% of total volumes followed by offices (21%) and industrial (19%).
The double-digit growth in e-commerce in all the Nordic countries has driven demand for new logistics’ space, and record-high volumes of new logistics premises are likely to come to market in 2021, most of it built-to-suit. Big box retail has also performed well during the pandemic, whilst indoor shopping centres with a high share of clothes and shoes have suffered. It remains to be seen if there will be the same kind of ‘revenge’ consumption in the Nordic countries post-Covid as has been seen in for instance Shanghai and London.
The investment market will likely see more M&A activity in the autumn, as M&A deals in other parts of the economy usually translates into strong M&A activity in the property market 2-3 quarters later. The office leasing market is also likely to gain more traction as visibility of occupiers’ post-Covid decisions will clear the fog on the extent of Work-from-home policies.
I can see that despite a quiet start to the year in the Nordics, the recent weeks have shown a number of large deals taking place in the Region and the remainder of 2021 is expected to be strong as vaccinations are well underway and our business lines are reporting high market activity across the board. We remain optimistic about the pace of recovery in the Nordics and believe in a rebound in the second half of the year.
Summing up the first half of 2021
The progress in vaccinations and the opening of the economies will bring Nordic countries back on the track of growth and market activity will return in full swing after the summer. CBRE is expecting a rebound in Nordic real estate markets in the second half of 2021 and there are signs of strong pent-up demand in all four Nordic countries.
When we look back at this year, it is with great pleasure to see that our everyday work gives amazing results. We help our customers grow and we grow at the same time. We are recruiting, taking market shares, and strengthening our Nordic business continuously.
Thanks to our clients
I would like to take the opportunity to thank our customers for interesting and challenging assignments that we have been entrusted to work with. It is you, our customers, who inspire us to find new ways, develop every day and advance our ways of working. The variety in our everyday working lives is also an important factor that inspires us to reach new heights. It motivates us and is an important pillar of our success. Thank you for giving us your trust to be part of your journey.
Thanks to our employees
I also would like to thank all our employees. I am proud of how you all have worked hard in these challenging times. You have been creative and adaptable in these extreme times.
Without your unique efforts, we would not have been this strong today. Together, we have navigated around the challenges that the pandemic has given us. Looking back at this year, it is thanks to our employees that we have managed to complete many great deals and grown in several business areas. It has been a successful first half of the year throughout the Nordic region and we aim to be even more successful throughout 2021.
Looking forward to the remaining of 2021
Our CBRE's Nordic teams are growing and our customers appreciate to meet with specialists in all areas, in all the Nordic countries. With strong and skilled teams in place and new ways of working, we look forward to continuing to help you realise n your business plans and create value together. We are available during the summer period, so do not hesitate to contact us if you have questions or want to meet, online or at a suitable meeting place.
Lastly, I encourage you to visit our Nordic Real Estate Blog, where we share our data, insights and experiences, and knowledge from all our advisors and experts. Make sure to sign up for a free subscription for all articles. New articles will be published in August.
I wish all our clients and employees a very pleasant summer holiday!
Stay well!
/Colin
1Oxford Economics
