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.