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KTI Market Review, spring 2019: Property transaction volume remains high, property yields have continued to compress

Property transaction volume remains high in Finland. Investor interest is targeted at all sectors and regions. Foreign investor interest remains strong, but also domestic players are active in the transactions market. Strong investor demand and high development volumes contribute to the growth of the invested market. Total transaction volume amounted to €9.4 bn in 2018, and €1.3 bn in the first quarter of 2019.

After a short break late in 2018, property yields have continued to compress. During the first quartile of 2018, transactions of the very best properties in the Helsinki CBD have been carried out at record low yield levels. In the RAKLI-KTI Property Barometer, yield for a prime office in Helsinki CBD stood at 3.95%.  In addition to the Helsinki metropolitan area, yields have decreased also in Tampere and Turku regions.

In the commercial property rental markets, office rents in Helsinki CBD increased by 2.4% p.a., according to the KTI rental index. Outlook in the retail market remains more negative, and rents are expected to remain stable in the best areas in Helsinki, but to decrease in all other areas, according to the RAKLI-KTI Property barometer.

Supply in rental residential market is increasing due to active new development. Despite this, the increase in rents accelerated in all major cities after a couple of years of slower growth. In the Helsinki metropolitan area, residential rents for new agreements increased by 3.3% p.a., and in other main cities by 4.1% on average. Foreign investors strengthened their position in the Finnish residential property investment market in 2018, and their interest is expected to remain strong also in the future.

In addition to the main property sectors, also smaller sectors increase their attractiveness in the investment market. The supply of hotels is increasing in the largest cities, supported by property investor demand. In the public sector properties, investor interest is expanding from care properties to other property types, such as educational properties.

Read more: KTI Market Review spring 2019

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