Residential and logistics properties in Finland attracting investors - Newsec Finnish Property Outlook Autumn 2019
Newsec estimates that the transaction volume in Finland will amount to approximately EUR 7.5 billion this year. There is no lack of investment demand, and foreign investors’ interest in Finland remains strong. The demand for prime properties continues to exceed supply.
In addition to the Helsinki Metropolitan Area, university cities such as Turku, Tampere and Oulu are attractive to foreign investors. In these cities, the location of properties is a crucial factor, and the transaction volume could be even higher if prime properties were put on the market.
International investors interested in residential and logistics properties in Finland
Investors are particularly interested in residential properties as well as logistics properties. This is due to several factors, including the more stable yield development.
“In addition to modern logistics centres in the Helsinki Metropolitan Area, there is also interest in warehouse and light industrial properties in growth centres”, says Mikko Tenhola, Head of Newsec Advisory in Finland.
This is part of a Europe-wide phenomenon, which revolves around the belief that goods distribution will continue to become more efficient as e-commerce grows. Logistics property leases have become shorter in the past year. This reflects users’ unwillingness to commit to a space for a longer period of time, due to either shorter delivery contracts, growth or the changing market environment.
International investors are increasingly interested in Finland’s residential property market and this trend is likely to continue. In addition to competitive yields, foreign investors are attracted by Finnish rental regulation, which is less strict than in other European countries.
“Residential property investments by international investors have increased over the past couple of years. Investors perceive Finland to be a stable economy with a functioning housing market,” says Olli-Pekka Mustonen, Head of Research at Newsec Advisory in Finland.
Residential property tenant demand has remained high in the Helsinki Metropolitan Area, but in many places, the high levels of construction have already stabilised rent growth.
Retail space investment demand declining
Retail space investment demand is uncertain and has decreased considerably, particularly in large retail units. There are considerable variations within the segment, however; shopping centres with grocery stores and the consumer goods trade as a whole are still an attractive investment, whereas investment demand is weaker in shopping centres without grocery stores or other services in towns outside the Helsinki Metropolitan Area.
The competition for tenants is fierce, making it the tenants’ market. The increasing number of retail spaces is impacting the Helsinki Metropolitan Area in particular, where there starts to be oversupply in shopping centres.
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