IVG Research Market Tracker 2/2014: Nordic office markets

by Thomas Beyerle, Managing Director IVG Immobilien AG
Head of Corporate Sustainability & Research
The highly positive perception of Scandinavia and Finland held by international investors, which is not a new thing, probably doesn’t have much to do with the region’s charming coastlines and mountain ranges, children’s books or furniture. The fact that Stockholm and Oslo in particular have been classified as a “safe haven” for international capital is due to the independent and stable currencies of Sweden and Norway and the robust fundamental economic data of these countries. However, Finland (as a member of the euro zone) and Denmark (whose currency is pegged to the euro) are also distinguished by low public debt, high levels of innovation and top scores in the usual rankings for corruption, education and environmental protection.
In light of this, the February edition of our IVG Research Market Tracker will illuminate the current situation on the Nordic office markets. Here, too, a general assessment at a national level is little help. The markets and investment locations may have a lot in common, but they also have just as many features that set them apart.
•              There are structural divergences in terms of, for example, the centrality of markets. While the office market segments of Norway and Finland are almost entirely limited to their respective capitals, Denmark and Sweden have other major office markets.
•              Unlike when relocating at many investment centres in the rest of Europe, a number of national and international groups are currently tending to move away from the CBD and the consolidation of adjacent space in Nordic nations in favour of newly built property on city outskirts.
•              The office markets of Sweden and Norway have developed positively in particular. Since 2010/2011 there has been a noted drop in vacancies here, while in Denmark and Finland vacancy rates have recently been mired or on the rise.
•              In the past year, Sweden had the largest share of total investment turnover in the Nordics at around 47%, followed by Norway (21%), Denmark (18%) and Finland (14%). We expect to see this structure repeated overall for 2014.
•              The trends of 2013 will largely continue in the current year. Demand for prime properties is expected to remain high given the robust development in rents and the consistently good financing situation in this segment. Stockholm and Oslo in particular will continue to benefit from their status as a “safe haven”, even though this effect could lessen as a result of the weaker trend in private consumer spending and falling house prices.
•              Even if the breakup of the euro zone is an increasingly less likely scenario, investor focus will remain on the Scandinavian and Finnish office markets for some time to come. Above all Stockholm and Oslo, the two strongest centres in terms of macroeconomics and property markets, will continue to profit from the unresolved problems and generally slow growth in the euro zone.