Nordicum - Real Estate Annual Finland 2010 | Page 62

REAL ESTATE SPECIAL REPORT

Real estate investments
expected to pick up
Photo: SARC Architects Ltd

As the stormy 2009 draws
to a close, there are some
signs of better weather
ahead – at least in the real
estate investment market
where cautious optimism is
slowly finding root.

J

anne Larma from Advium
sees that there are quite many
positive signals out there.
“First of all, yield-spread
is on a historically high level
and banks are interested in financing real estate transactions
again,” Larma says, adding that
the banks’ focus is still mostly
on prime real estate and longterm contracts.
“In addition, there is a lot
of money in funds that need to
be invested somewhere. Interest
rates are down and those players
using their own capital to make
investments – such as pension
funds – are looking for yields
60 Nordicum

that are stable but nevertheless
higher than bond yields.”
Larma also notes that
share prices have risen significantly during the last eight
months while the real estate
prices have not followed suit.
However, in the big European
countries, such as the UK and
France, the prices have already
started to climb in the real estate market.
“As a consequence, the
eyes of the European investors
will fix, more and more, on markets with higher yields and less
competition – such as the Nordic countries.”

Stability
Returning
Furthermore, the rise in yield
demands seems to have stabilised, especially in the prime areas and prime assets. According
to recent RAKLI-KTI barometer survey, the investor demand
is expected to increase in the
Finnish commercial real estate

market. The transaction volume
is predicted to go up in all property types during the next 12
months. The prime yields have
moved up during the last two
years, but now the respondents
expect that yields have reached
the peak and will be stable for
the next year or so – especially with regards to prime areas/
assets.
Janne Larma agrees with
this assessment: it is likely that
the elevation of yield demands
has peaked and in a year or two
the yields may be on a level that
is lower than presently is the
case. Yield levels are dropping
as the banks are giving out more
loans and the margins shrink.
“I believe that during 2010
the margins will come down to
the level of 1.25–1.50 %.”

Pressure Still On
According to RAKLI-KTI Barometer, the investors would
now be willing to commit to
a downtown Helsinki office

premise on a 6.2% net yield.
Nevertheless, the values of the
properties are still under pressure since cash flow from the
rents is not what it used to be
during the fat years.
In addition, there is still
not that much trade to speak of.
At the end of October, the real
estate transaction volume was
on the level of € 1.2 billion
for 2009 – only one third of the
comparative figure the year before. The transaction volume is
quite well spread across different types of properties, offices,
retail and residential. The main
reason for the small volume has
been that sellers and buyers have
been quite apart from each other
regarding the price tag.
Since Finland is still a
very stable economy, there will
be both international and domestic attention on the markets
here, Larma analyses.
“The volume will double
going from 2009 to 2010. The
rents will still go down in 2010,”
he predicts. b