The Nordic region the third-largest market in Europe, after UK and Germany 

The most recent edition of the JLL Nordic Outlook indicates, among other things, that:

·       Residential, logistics and community service properties remain the strongest segments.

·       Investor interest in them is driven by domestic as well as rapidly-growing foreign capital, which leads to the possibility that we will see even lower return requirements.

·       Rent for offices in prime locations in Stockholm and Oslo has stabilised and there has been something of an increase during 2021.

·       Sustainable investments, preferably made together with tenants, are deemed to reduce risk and support total return for properties in the future.

Record-strong first half of the year and a record year in sight

The economy has rebounded well despite the continued COVID-19 restrictions. Activity has also increased in the office market, supporting a stabilisation of rent levels Transaction volumes are record high and a significant portion consist of structural transactions. Listed real estate companies are being traded at record-high premium valuations, which can be considered a strong positive indicator of sentiment for the direct market. Ongoing structural transactions and current discussions with investors indicate that 2021 will be another record year for real estate transactions. Significant interest from investors, in combination with low interest rates and good access to capital, is creating conditions for even lower return requirements, especially for the most attractive segments.

“Transaction volumes in the Nordic region are expected to exceed EUR 50 billion this year. This will make the Nordic region the third-largest market in Europe, after the UK and Germany, which in 2019 had volumes of EUR 59 billion and EUR 67 billion, respectively, before the downturn in 2020. This makes the Nordic region even more attractive for international investors,” says Thomas Persson, Head of Capital Markets Nordic.

Sustainability investments reduce risk and can increase total return

The JLL Nordic Outlook includes a separate chapter on ESG, with an emphasis on reduced carbon dioxide emissions. JLL’s study shows that tenants generally prioritise sustainability higher than property owners do, which creates clear incentives for investments and partnerships. Access to green financing at attractive prices improves the conditions for returns, and the costs of non-green investments are forecast to increase over time. This should be considered a risk factor for properties that are weak from a green perspective and speed up green investments in existing properties, a prerequisite for reaching reduced emissions goals and slowing global warming.

“The real estate market is moving quickly, both in the direct market and on the stock market, driven by the economic recovery and the attractive level of interest rates. Sustainability is high up on the agenda for both property owners and tenants, which creates conditions for green investments and joint measures to both reduce risks and maximise returns on properties,” says Niclas Höglund, Head of Research at JLL .