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.

The Finnish Property Market 2016 -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 2016

Despite the challenges in the Finnish economy, the Finnish property market continues to attract both foreign and domestic investors. Market volumes are boosted by both new investors coming into the market and portfolio restructurings of traditional investors. In the commercial property markets, strongest demand is targeted at prime assets and areas. Residential properties have rapidly strengthened their position in the investment market, supported by both continuous rental growth and inflow of new capital.

Transaction volume increased to €5.5 billion in 2015; brisk start for 2016
The total property transaction volume in 2015 increased to €5.5 billion, which is the second highest volume ever and 27% higher than in the previous year. The volume was boosted by several major portfolio transactions. Domestic funds and investment companies actively increased their portfolios in 2015, while foreign investors accounted for one third of all transactions. 2016 has started briskly in the transactions market, and already by the end of February, the volume has reached some €1.4 billion. This is the first time since 2008 when the first quartile’s volume will exceed the €1 billion threshold.

The total size of the property investment market increased by 9% in 2015
The total size of the invested property market increased by some €4.5 billion in 2015, ending up at €54.5 billion. The growth is a result of both newly developed properties in the investors’ portfolios as well as some major sale-and-leaseback transactions from corporations to investors. Domestic institutions remain the biggest player group in the market, although their share has decreased markedly in recent years and currently stands at some 29%. Domestic funds and non-listed investment companies have increased their shares rapidly, and they currently account for some 37% of the total market. Foreign investors owned some €12 billion worth of Finnish properties at the end of 2015, and accounted for some 22% of the total market.

Institutional investors restructure their property portfolios
Finnish pension institutions have contributed to the transactions market through active implementation of their renewed property investment strategies. In the past, direct domestic investments had a dominant position in their portfolios, but in recent years, many pension funds have targeted the majority of their new investments abroad with the aim of increased international diversification. This has also resulted in major restructurings in their domestic portfolios. In 2014 and 2015, several major transactions were released, where institutions transferred their formerly direct property holdings to joint venture structures with other, most often Swedish, institutions. In total, Finnish institutions sold some €1.2 billion worth of properties in 2015.

Helsinki CBD offices outperform all other submarkets
The strongest international interest is targeted at offices in the Helsinki metropolitan area. However, due to the oversupply of office space, investor interest is almost solely targeted at prime areas and assets, where the perceived risk in the cash-flow is the lowest. This has resulted in yield compression in the Helsinki CBD in particular, with prime yields currently standing at some 4.7%. This still represents a healthy gap compared to most other European capitals. In the KTI Index, the total return for Helsinki CBD offices increased to 11.6% in 2015, supported by strong capital growth. In most other submarkets in the Helsinki metropolitan area, the market values of offices continued to decrease. The main driver for falling values is the high vacancy rate, which, according to Catella, currently stands at 13.3% in the Helsinki metropolitan area.

Retail market characterised by active new development
At the end of 2015, there were almost 190,000 sqm of new retail space under construction in the Helsinki metropolitan area, and some major projects just about to be started. New development is mostly concentrated around the station areas of the new rail connections – Ring Rail Line and the western metro line. Need for new retail space is based on the continuous population growth in the area. Main shopping centres and retail property portfolios have recently attracted both domestic and foreign investors, and in 2015, retail accounted for some 32% of the total transaction volume.

Residential continues to perform strongly
Residential investments have increased in attractiveness in recent years supported by strong demand for rental apartments in main cities. Increasing rents have attracted new investments in the market and several new funds investing in the residential sector have been established. In 2015, the total value of residential property transactions increased to €1.2 billion, which is the record volume ever by a large margin. Thanks to the large amount of capital coming to the market, residential became, together with offices, the biggest sector in the property investment market, with a share of 29% of the total market. Residential has been the best performing sector in the KTI Index for eight consecutive years, supported by increasing market values. In 2015, residential properties delivered a total return of 8.9%.

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

Read more about the structure, players, market practices and conditions in the Finnish property investment market on The Finnish Property Market 2016 -report, published today.

Despite the challenges in the Finnish economy, the Finnish property market continues to attract both foreign and domestic investors. Market volumes are boosted by both new investors coming into the market and portfolio restructurings of traditional investors. In the commercial property markets, strongest demand is targeted at prime assets and areas. Residential properties have rapidly strengthened their position in the investment market, supported by both continuous rental growth and inflow of new capital.

Transaction volume increased to €5.5 billion in 2015; brisk start for 2016
The total property transaction volume in 2015 increased to €5.5 billion, which is the second highest volume ever and 27% higher than in the previous year. The volume was boosted by several major portfolio transactions. Domestic funds and investment companies actively increased their portfolios in 2015, while foreign investors accounted for one third of all transactions. 2016 has started briskly in the transactions market, and already by the end of February, the volume has reached some €1.4 billion. This is the first time since 2008 when the first quartile’s volume will exceed the €1 billion threshold.

The total size of the property investment market increased by 9% in 2015
The total size of the invested property market increased by some €4.5 billion in 2015, ending up at €54.5 billion. The growth is a result of both newly developed properties in the investors’ portfolios as well as some major sale-and-leaseback transactions from corporations to investors. Domestic institutions remain the biggest player group in the market, although their share has decreased markedly in recent years and currently stands at some 29%. Domestic funds and non-listed investment companies have increased their shares rapidly, and they currently account for some 37% of the total market. Foreign investors owned some €12 billion worth of Finnish properties at the end of 2015, and accounted for some 22% of the total market.

Institutional investors restructure their property portfolios
Finnish pension institutions have contributed to the transactions market through active implementation of their renewed property investment strategies. In the past, direct domestic investments had a dominant position in their portfolios, but in recent years, many pension funds have targeted the majority of their new investments abroad with the aim of increased international diversification. This has also resulted in major restructurings in their domestic portfolios. In 2014 and 2015, several major transactions were released, where institutions transferred their formerly direct property holdings to joint venture structures with other, most often Swedish, institutions. In total, Finnish institutions sold some €1.2 billion worth of properties in 2015.

Helsinki CBD offices outperform all other submarkets
The strongest international interest is targeted at offices in the Helsinki metropolitan area. However, due to the oversupply of office space, investor interest is almost solely targeted at prime areas and assets, where the perceived risk in the cash-flow is the lowest. This has resulted in yield compression in the Helsinki CBD in particular, with prime yields currently standing at some 4.7%. This still represents a healthy gap compared to most other European capitals. In the KTI Index, the total return for Helsinki CBD offices increased to 11.6% in 2015, supported by strong capital growth. In most other submarkets in the Helsinki metropolitan area, the market values of offices continued to decrease. The main driver for falling values is the high vacancy rate, which, according to Catella, currently stands at 13.3% in the Helsinki metropolitan area.

Retail market characterised by active new development
At the end of 2015, there were almost 190,000 sqm of new retail space under construction in the Helsinki metropolitan area, and some major projects just about to be started. New development is mostly concentrated around the station areas of the new rail connections – Ring Rail Line and the western metro line. Need for new retail space is based on the continuous population growth in the area. Main shopping centres and retail property portfolios have recently attracted both domestic and foreign investors, and in 2015, retail accounted for some 32% of the total transaction volume.

Residential continues to perform strongly
Residential investments have increased in attractiveness in recent years supported by strong demand for rental apartments in main cities. Increasing rents have attracted new investments in the market and several new funds investing in the residential sector have been established. In 2015, the total value of residential property transactions increased to €1.2 billion, which is the record volume ever by a large margin. Thanks to the large amount of capital coming to the market, residential became, together with offices, the biggest sector in the property investment market, with a share of 29% of the total market. Residential has been the best performing sector in the KTI Index for eight consecutive years, supported by increasing market values. In 2015, residential properties delivered a total return of 8.9%.

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

Read more about the structure, players, market practices and conditions in the Finnish property investment market on The Finnish Property Market 2016 -report, published today.

The total return on the Finnish property investment market was 6.3% in 2015. Residential was the best performing property sector for the eighth consecutive year, due to appreciation in market values. Challenging economic conditions in Finland pressured commercial property values that continued to decrease with the exception of offices, where values remained stable due to the strong performance of the Helsinki CBD offices. The income return remained relatively stable, which makes property an attractive investment class in the zero interest rate investment universe.

Read more about the KTI Index results for year 2015

KTI Market Review, autumn 2015 has been published.

The globally high investment demand impacts also the Finnish property market. Transaction volume of the first three quarters of the year is already close to last year’s total volume, which was already significantly higher than in previous years.

The number of players in the market is increasing due to both new international investors entering the market and new domestic structures being established. Thanks to investors’ varying strategies, investment demand is targeted at numerous sectors and regions. Strong demand has pressured prime yields to record low levels. However, the tight economic situation has kept investors cautious, and yield premiums for secondary assets remain rather high. Higher yields have started to attract investors also to risker assets. Differently from the previous years, also some properties with high vacancies have been sold this year.

Tight economic conditions are clearly seen in the commercial rental markets. Office rents in Helsinki CBD, which have increased steadily during the past years, have now stabilized or even decreased slightly. Some significant moves of major companies have brightened the sentiment in the rental market slightly. However, companies demand efficient space and – almost without exception – move to smaller premises, due to which office vacancy rate keeps increasing.

Retail rental markets are challenged both by the economic conditions and the changing behavior of consumers. The ongoing structural change in the retailing business is also impacting space needs and usage. In the shopping centre markets, this is seen in increasing differentiation between centres, as well as changes in their tenant base. Traditionally large retail sectors – for example clothing – are decreasing their space usage, while the role of services is increasing in order to attract consumers to shopping centres.

The supply of rental residential apartments is increasing as new capital is being targeted at residential property investments. Residential rents continue increasing, especially in areas with lower rents, whereas in the most expensive areas, the affordability seems to become an issue. Good location and traffic connections are increasing in importance.

Read more: KTI Market Review, autumn 2015 (PDF)

The Finnish Property Market 2015 -raportti on julkaistu. Raportti tarjoaa kattavan kuvauksen Suomen kiinteistömarkkinoiden rakenteesta, toimintatavoista, toimijoista sekä viimeaikaisesta markkinakehityksestä. KTI julkaisee raportin vuosittain maaliskuussa.

Avaa The Finnish Property Market 2015 PDF-muodossa

Raportin painetun version voi tilata Riikka Takilta, riikka.takki(a)kti.fi.

Lisätietoja raportista: Hanna Kaleva, hanna.kaleva(a)kti.fi tai puh. 040 5555 269.