The volume of property transactions remains high in Finland. Strong investment demand has pressed down yields, which have reached record low levels. The improving economic conditions support office rental markets, where a clear turn to the better has taken place during the winter. The volume of new rental agreements, as well as rental levels in the best areas have increased during the past six months. The expectations for the development of retail rents are now clearly less positive than in the office markets.

Residential construction volumes increased significantly in 2016, supported by strong investment demand. Due to active new development, together with the positive development of market values, residential became the largest sector in the Finnish property investment market in 2016. An increase in supply is now seen in the residential rental markets, where the increase in rents seems to have almost stopped in all major cities. Strong rental demand supports, however, positive expectations with regard to both stable rental growth and high occupancy rates.

Read more at the new KTI Market Review.

The Finnish property market continues to attract both foreign and domestic investors. In 2016, residential properties continued strengthening their position in the property investment market, supported by continuous rental growth and strong investment demand. In the commercial property markets, investment demand expanded also beyond the prime assets and locations.

Transaction volume increased to €7.4 billion in 2016
The transaction volume reached a new record in 2016, boosted by several major portfolio transactions. Domestic funds and investment companies actively increased their portfolios in 2016. The share of foreign investors amounted to some 26% of all transactions. The transactions market was characterised by some major residential property portfolio transactions, and the share of residential properties amounted to 38%. Several foreign investors entered the Finnish residential investment market in 2016. Thanks to active new development as well as continuous capital growth, residential became the biggest sector in the invested property market with a share of some 30%.

The total size of the property investment market increased by 7% in 2016
The total size of the invested property market increased to €58.2 billion at the end of 2016. The growth is mainly a result of newly developed properties in the investors’ portfolios. Domestic institutions remain the biggest player group in the market, although their share has decreased markedly in recent years and currently stands at some 27%. In 2016, institutions continued restructuring their portfolios, and were involved in several major transactions. As a result, the absolute amount of their investments remained unchanged. Domestic funds and both listed and non-listed investment companies increased their portfolios rapidly in 2016. Foreign investors account for some 21% of the total market.

Residential continues to perform strongly, Helsinki CBD offices outperform all other submarkets
Of the main property sectors, residential has shown the strongest performance in the KTI Index for nine consecutive years. In 2016, total return on residential amounted to 8.0%. Smaller investments sectors, hotel and healthcare properties, outperformed residential with total returns of 12.4 and 9.8%, respectively. Yield compression continued to support capital growth of Helsinki CBD offices, where total return ended at 8.2%. In the whole country on average, total return of offices decreased to 4.8%. Returns on offices were pressured by high vacancy rates, which currently stand at some 14% in the Helsinki metropolitan area.

Retail property market in the Helsinki metropolitan area is characterised by active new development with some 165,000 sqm of new retail space under construction, and an additional 200,000 sqm to be started in the near future. Need for new retail space is based on the continuous population growth in the area. New development is mostly concentrated around the station areas of the new rail connections – Ring Rail Line and the western metro line.

• For more information, please contact:
  Hanna Kaleva, KTI Finland, +358 40 5555 269, hanna.kaleva@kti.fi

Read more about the structure, players, market practices and conditions in the Finnish property investment market on The Finnish Property Market 2017 -report, published today.

The Finnish property market continues to attract both foreign and domestic investors. In 2016, residential properties continued strengthening their position in the property investment market, supported by continuous rental growth and strong investment demand. In the commercial property markets, investment demand expanded also beyond the prime assets and locations.

Transaction volume increased to €7.4 billion in 2016
The transaction volume reached a new record in 2016, boosted by several major portfolio transactions. Domestic funds and investment companies actively increased their portfolios in 2016. The share of foreign investors amounted to some 26% of all transactions. The transactions market was characterised by some major residential property portfolio transactions, and the share of residential properties amounted to 38%. Several foreign investors entered the Finnish residential investment market in 2016. Thanks to active new development as well as continuous capital growth, residential became the biggest sector in the invested property market with a share of some 30%.

The total size of the property investment market increased by 7% in 2016
The total size of the invested property market increased to €58.2 billion at the end of 2016. The growth is mainly a result of newly developed properties in the investors’ portfolios. Domestic institutions remain the biggest player group in the market, although their share has decreased markedly in recent years and currently stands at some 27%. In 2016, institutions continued restructuring their portfolios, and were involved in several major transactions. As a result, the absolute amount of their investments remained unchanged. Domestic funds and both listed and non-listed investment companies increased their portfolios rapidly in 2016. Foreign investors account for some 21% of the total market.

Residential continues to perform strongly, Helsinki CBD offices outperform all other submarkets
Of the main property sectors, residential has shown the strongest performance in the KTI Index for nine consecutive years. In 2016, total return on residential amounted to 8.0%. Smaller investments sectors, hotel and healthcare properties, outperformed residential with total returns of 12.4 and 9.8%, respectively. Yield compression continued to support capital growth of Helsinki CBD offices, where total return ended at 8.2%. In the whole country on average, total return of offices decreased to 4.8%. Returns on offices were pressured by high vacancy rates, which currently stand at some 14% in the Helsinki metropolitan area.

Retail property market in the Helsinki metropolitan area is characterised by active new development with some 165,000 sqm of new retail space under construction, and an additional 200,000 sqm to be started in the near future. Need for new retail space is based on the continuous population growth in the area. New development is mostly concentrated around the station areas of the new rail connections – Ring Rail Line and the western metro line.

• For more information, please contact:
  Hanna Kaleva, KTI Finland, +358 40 5555 269, hanna.kaleva@kti.fi

Read more about the structure, players, market practices and conditions in the Finnish property investment market on The Finnish Property Market 2017 -report, published today.

The Finnish Property Market 2017 -report has been published. The report provides a comprehensive overview of the Finnish property market structure, practices and players as well as recent development. The report is published annually in March.

Download The Finnish Property Market 2017

Total return on the Finnish directly owned property investments was 6.2% in 2016. Income return decreased from previous year and stood at 5.6%. Residential was the best performing main property sector for the ninth consecutive year.

Returns by sector in 2016

Residential continued strong performance
In 2016, residential investments delivered a total return of 8.0%. Income return stood at 5.0% and property values increased 2.8%. The average income return decreased clearly from previous year mostly due to the increasing amount of new residential properties in the Helsinki Metropolitan Area. Capital growth remained positive and was supported by growing rental values, decreasing valuation yields and strong investment demand.

For years residential properties have performed better than commercial properties. Demand for rental housing is strong compared to offices that are suffering from vacancy. In the retail sector the supply and uncertainty are increasing. The interest for residential investments is increasing and residential became the largest property sector in the Finnish property investment market in 2016. The proportion of residential properties increased to 35% of the KTI Index.

Income return for offices decreased in all regions
During 2016 vacancy for offices in the Helsinki metropolitan area increased further. Also operating costs increased and consequently income return decreased to 5.3%. Due to depreciating capital values the total return amounted to only 4.8% for office properties. The weight of the Helsinki metropolitan area has still increased in the professional property investors’ office property portfolios.

Capital values for retail properties decreased outside Helsinki metropolitan area
Retail and shopping center investment market is clearly split regionally. In the Helsinki metropolitan area rents continue increasing, occupation rate remains strong and valuation yields decrease. Total return in the Helsinki metropolitan area stood at 7.8% and was supported by stable income return and positive capital growth.

Outside Helsinki metropolitan area the returns suffer from increasing vacancy and decreasing rents. Capital values depreciated ca. five percent in larger cities and nearly nine percent in smaller cities.

Total return for all retail properties was 4.0% of which income return stood at 6.0% and capital growth at -2.0%.

Total return by property sector 2000–2016

For further information please contact:

• Pia Louekoski, tel. +358 400 95963
• Hanna Kaleva, tel. +358 40 555 5269

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KTI Finland is an independent research organisation and service company providing information and research services for the Finnish real estate industry. KTI Finland has been calculating the KTI Index since 1998. 26 property investors contribute to the KTI Index. The database currently comprises some €24.9 billion worth of properties, thus covering about 43% of the total property investment market in Finland.

The participating investors are: Aberdeen Asset Management, Avara, Barings Real Estate Advisers, CBRE Global Investors, Citycon, Elo, eQ Asset Management, Etera, Exilion Management, Genesta, Hemsö, HYY Real Estate, Ilmarinen, Julius Tallberg-Kiinteistöt, Keva, LocalTapiola, Northern Horizon, OP, Renor, Sampo Group, SATO, Tarkala-Rettig Kiinteistökehitys, Turku Technology Properties, Varma, Veritas and VVO.

According to the statistics of KTI, transaction volume in the Finnish property market reached new annual record level of EUR 7.2 billion in 2016. The volume exceeded the former record level of EUR 6.3 billion, recorded in 2007, by 14%, and compared to 2015 figures, the volume increased by 30%. The quarterly volumes amounted to EUR 1.5 – 2.2 billion, and the largest transaction of the year was Sponda’s acquisition of the Forum block, comprising six properties in Helsinki CBD, for EUR 576 million.

Residential portfolios were the most traded property type in 2016, accounting for 38% of the total volume (over EUR 2.7 billion). Retail and office properties accounted for 23% and 22% of the total volume, respectively. In the retail and office sectors the volumes remained clearly below the record levels of 2007. Foreign investors accounted for 28% of the total volume (EUR 2.0 billion).

More detailed information and analysis on property transactions in Finland can be found in the KTI Transactions information service. For more information, please contact: Mikko Soutamo (mikko.soutamo(a)kti.fi, +358 50 548 0480) or Kauri Melakari (kauri.melakari(a)kti.fi, +358 50 338 5068). See the list of the largest recently published transactions in the Finnish property market: Major transactions listing.

According to the statistics of KTI, transaction volume in the Finnish property market has reached its new annual record level. YTD volume amounts now to approx. EUR 6.4 billion, which thus exceeds the former record of EUR 6.29 billion in 2007. In the final quarter of the year, the volume has so far amounted to slightly over EUR 1.0 billion, while in Q1-Q3, the quarterly volumes amounted to EUR 1.5–2.2 billion.

Residential portfolios have been the most traded property sector so far in 2016, accounting for 40% (EUR 2.5 billion) of the total volume. Foreign investors account for 28% of the total volume.

More detailed information and analysis on property transactions in Finland can be found in the KTI Transactions information service. For more information, please contact: Mikko Soutamo (mikko.soutamo(a)kti.fi, +358 50 548 0480) or Kauri Melakari (kauri.melakari(a)kti.fi, +358 50 338 5068). See the list of the largest recently published transactions in the Finnish property market: Major transactions listing.

Several records are broken in the Finnish property market this year. Property transaction volume is approaching its all-time-high level. Strong investment demand pressures yields, which are at their all-time-low levels. The strongest demand is targeted at rental residential properties, and their transaction volume is higher than ever. Residential rents continue increasing, even though at a slower pace than in previous years. Also in the commercial property rental markets, the activity has increased, even though the amount of vacant office space remains high.

Read more at the new KTI Market Review.

KTI’s third review on corporate social responsibility in the Finnish real estate sector focuses on the importance of collaboration between the various different players in the value chain in accomplishing corporate responsibility objectives. The review also includes the results of the KTI Responsibility barometer, which explores the largest property investors’ strategies and views on corporate social responsibility issues.

The review aims to increase information about the role and significance of real estate from the point of view of the economy, society and environment. It also discusses recent developments and trends in the management and reporting of corporate social responsibility issues in the Finnish real estate sector.

Read a brief summary of the review introducing some highlights of this year’s contents.

The Finnish property transactions volume increased to some €2.5 billion by the end of April, boosted by several large portfolio transactions. Strong investment demand continues to pressure prime yields, which, for instance, in Helsinki CBD stand at all-time low levels. Weak economic conditions are reflected in the commercial property rental markets, where office rents have decreased slightly. However, the amount of vacant office space seems to have stopped increasing, as demolitions and change of use projects equal the amount of new development. Retail property development is currently active in Helsinki metropolitan area, driven by population growth and new public transportation infrastructure. Residential investment has increased in attractiveness rapidly. Residential properties have produced the highest returns in recent years, supported by continuous rental growth in all major cities.

Read more at the new KTI Market Review.