Key points of the snapshot include:
Global economic activity continued to drop sharply in the first quarter of 2009, and the Nordic economies have all been hit through the collapse of global trade and manufacturing activity. However, there are differences within the region, and we expect the contraction in GDP to range from 1.5 to 4.5 for the four Nordic countries this year.
The rise in prime yields slowed in the first quarter of 2009 compared to the preceding two quarters.
· Capital values in the Nordic commercial property market are estimated to have fallen by approximately 3% in the first quarter and are expected to continue falling throughout the year.
· While difficulties in the credit markets and higher required rates of return were the main drivers behind falling capital values in 2008, the deterioration of property values is now driven by a weaker outlook for the occupier markets.
· We expect UK property returns to outperform over the coming five years, followed by the Nordic region and the Euro zone.
· Market rents are forecast to decline for all sectors and markets in the region in 2009, and office markets are expected to be most vulnerable in the short term. The decline in prime office rents, from peak to trough, is projected to be greatest in Oslo, followed by Stockholm, Helsinki and Copenhagen.
· Good assets are expected to be available at attractive prices. However, Nordic property markets are not expected to be flooded by prime assets at distressed prices. Sellers are still not selling at any price.
· A five year average ‘All property’ total return of 5.6% is projected from the end of March 2009. Capital values are expected to stabilise during the first half of 2010, but real rental growth is not projected to resume until 2012.
