Newsec Property Outlook: High activity on the real estate market continues
The real estate market in the Nordic countries faces a completely different financial market than in the past 20 years, with rising interest rates, high inflation, increased yield requirements and rampant energy costs. Despite this, there is still high activity in the commercial property market and 2022 is expected to be the second strongest transaction year to date in the Nordics. At the same time, sustainability has reached a point where it is decisive for the future of the real estate industry and the climate.
In the latest edition of the semi-annual property report - Newsec Property Outlook – the largest property consultant in the Nordics, Newsec, provides an overview and perspective on macroeconomic trends and the development of the property industry.
During the past year Europe has been affected by several negative external events, with the war in Ukraine being the most prominent. The macroeconomic situation has in turn worsened, and the central banks have gone from easing to austerity measures. Several analysts are warning that a recession may be looming.
The outlook for the real estate market has, according to Newsec, deteriorated somewhat in line with the outlook for the macro economy. The market has cooled down since the record year of 2021 and forecasts point to slightly falling transaction volumes and rising yields.
"We are definitely seeing a shift where the real estate market meets a completely changed financial market. Despite that, there is still high activity on the market, and we expect that there will be commercial real estate deals for almost SEK 600 billion in the Nordics and Baltics this year, making 2022 the second strongest transaction year to date." says Max Barclay, Nordic manager at Newsec's advisory operations.
According to Barclay, the explanation for the fact that there are many real estate deals despite increased yield requirements, is that after 20 years in a low-interest environment, deals are still being made at good levels for the sellers, while there is a lot of capital on the market looking for return.
In this autumn's Outlook, Newsec has also carefully looked at how the requirements for sustainability affect the development and management of real estate, as well as the impact of real estate on sustainability. Buildings currently account for close to 40 percent of global carbon emissions, yet energy consumption per capita for real estate remains at roughly the same levels year on year.
“This means that the greatest challenge of our lifetime represents a great opportunity for the real estate industry. With the current energy prices, reducing our energy consumption is necessary both for the economy and the climate. The current situation with an uncertain energy supply and high energy prices has emphasized how urgent it is," says Max Barclay.
It is therefore, in Newsec’s view, vital for the future for the industry and the climate that property owners become forerunners in ESG. This requires digitization, as more than 99 percent of emissions from the real estate sector come from existing buildings. Property owners need to continue to implement technology such as AI to effectively and accurately measure and gather relevant data to optimize indoor climate, occupancy, movement and usage patterns for different spaces.
Access the full report at newsec.com/npo
About the report
The Newsec Property Outlook has been published twice a year since 2001. The free report describes and forecasts the real estate market in Northern Europe, with a focus on the Nordic and Baltic countries. The report has come to be a handy tool for investors, property owners and tenants.