An accessible and professional real estate community and a transparent and sustainable property market – these are two major reasons foreign investors choose the Nordic market. Economic recovery in the Baltic countries is making their property markets attractive for foreign investment as well.
Pembroke Real Estate, an American firm, surveyed Europe to find attractive markets. The company settled upon the Swedish capital, buying four adjacent commercial properties in Stockholm’s centre during 2008 and 2009.
“As long-term investors, we considered the demographics of the region, the structure of the central business district and the accessibility of the market to be important factors,” says Erik Gustafson, who as the director of Pembroke’s Stockholm office is responsible for the company’s investments in Northern Europe. “Stockholm’s property market is dominated by institutions, which makes it very transparent and professional.”
The easy access to public records makes it easy for foreign investors to understand the market, and standard agreements are used to let or lease property. This transparency is also the case in Finland and Norway. Macro-economics obviously play an important role as well; Norway, Sweden and Finland all show growing employment figures, increased GDP in stable economies with low interest rates and relatively low inflation.
"Norway was the first Northern European economy to round the corner,” says Johan Bergman, CEO at Stockholm-based NIAM. “We believe that Norway will develop very well with good sustainable economic growth and increased private consumption,” His company invested one billion euros in shopping centres and commercial property in Norway during 2009 and 2010.
With a similar stable economic outlook, the Finnish market’s biggest hindrance for investment seems to be the lack of objects. Antti Muilu, Portfolio Manager for real estate investments at Pension Fennia, a pension insurance company, says, “The Finnish market has the advantage of being part of the Eurozone. That, combined with low interest rates, makes real estate a good investment opportunity – but unfortunately there are very few well-located core assets, retail or office with long-term leases available.”
Even if the Baltic countries have less mature property markets and much bigger financial falls to recover from, there are signs of activity. The Homberg Group owns 54 office properties in the three countries, and the company’s director in the Baltics, James Torpey, agrees that the initial crash was worse here than in many other parts of Europe. “But,” he says, “the ability to recover was impressive. As harsh as the finance crisis was, it has also made the countries stabilise their economies.”
He points out that the Baltic countries no longer have markets for speculative opportunities. A long-term commitment is key, and if a company has the equity to buy a site and negotiate a long-term lease with a strong tenant, banks are willing to finance the construction. Torpey points to Homburg’s recently signed contract for the construction of a Maxima supermarket in Riga, funded by the Swedish bank Nordea.
“This made Homburg one of the first companies to receive third-party funding after the crisis,” he says. “We see clear signs of change and improvement on the market and are now also looking into public-private partnerships for hospitals, prisons and other infrastructure that needs to be built.”
Written by Susanna Lindgren
