Scandinavian domestic economies continue to outperform the rest of Europe. Scandinavia’s strong macroeconomic environment and political stability provide safe investment opportunities for investors in the region. The uncertainty over Brexit is also one of the factors moving investors to these nations. There is an increase in the number of international investors putting capital into commercial real estate. Foreign net investments have risen mainly in Sweden while for Norway and Denmark it has decreased considerably in 2018.

Scandinavia has developed into an attractive market for German investors. A total of 1.37 billion US dollars flowed into the region during 2018. Sweden has seen the greatest growth among other countries in the European region. In Sweden investments into Logistics, the market is gaining momentum. For instance, Allianz Real Estate and CBRE Global Investment Partners jointly introduced a portfolio of eight logistics properties in Sweden and neighboring Denmark.

The outlook for Norway in the future remains positive with a strong rental market. Norway’s low-interest-rate coupled with a strong economy is favoring commercial real estate in the country.

Denmark is the country with the lowest borrowing costs because of the country’s unique mortgage system. Copenhagen offers several new large urban development areas, mainly near the city. The country offers a high yield in various retail properties located in the capital. Overall, the Scandinavian market offers many opportunities for real estate investments supported by its stable economy.

Key Market Trends

Increase in Transaction Volume in Scandinavian Countries Office Market

Swedish investment volumes for office spaces in 2018 reached EUR 15.1billion (for transactions over SEK 40m), while yields remain at the low level of 3.4%. The total transaction volume for the year is slightly higher than the previous year’s volume EUR 14.7 Billion cause of the substantial demand in the market.

Norway saw transaction volumes in 2018 reach EUR 9.03 billion. The transaction volume is slightly less than the previous year as office yields are still low. Office buildings dominated the total volume with roughly 41% share. For the first-time logistics surpassed the retail segment, with the former taking 21% of total volume and latter only 16%.

Office investment volume was approximately EUR 2 billion for Denmark in 2018. The investment in industrial and logistics properties almost doubled from 4.5% to 8% as buyers wish to acquire core properties with a shortage of products. Transaction costs on commercial real estate investment in Denmark are very competitive.

Rising Rents in Oslo And Stockholm for Office Market

The office market in Sweden has a lower supply indicating the rental growth in office rents to continue, but the growth pace is slowing down. Stockholm still has the highest growth pace in Europe. Office demand remains strong with falling vacancies although lack of vacant stock is slowing net absorption rate in 2019.

The demand for office space has improved in 2018 in Norway. However, Oslo occupational market is looking at space shortage situations. There is a lack of construction on new offices plus office space is getting converted to alternative uses like residential. The current situation is favoring rents positively which are increasing since 2016 and expected to increase in 2019.

Competitive Landscape

The commercial real estate market in Scandinavia is fragmented and competitive. There are growing partnerships between international and local players in real estate which provides opportunities to grow for investors. Strong interest from international investors that is lowering down the yields in the market. Major players in the market are Vasakronan AB, Jeudan, Citycon.

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