Nordicum - Real Estate Annual Finland 2013 | Page 63

Photo: Sini Pennanen

are even competing for these assets,” Larma says, adding that especially the foreign
investors are keen on prime properties – but
also the long-term lease contracts are highly attractive. This trend, however, is not that
much different from what the domestic players are doing:
“Also the majority of domestic investors is preferring properties in the capital
region or in the best spots of the biggest
growth centres.”

Also-rans in Trouble
According to Larma, it is considerably harder to get the investors excited about properties that are not top quality and of optimal location.
“Due to this development, I feel that
the yield gap between prime real estate and
other properties has become too wide. As a
result, we perceive that investors now have
a chance to make great deals by taking on a
bit more risk and investing outside the Helsinki Metropolitan Area,” Larma says.
In the present situation, Finland is better off than many – or even most – European economies. Finland is one of the last EU
countries in possession of AAA rating, and
has made a name for itself as the “Germany of the North”.
Larma perceives another strong asset
that the Finns have: the rents have stayed
stable and vacancy level has not become
a big problem even during the most acute
phase of the financial crisis. “In many other European capitals, the economic turmoil
hit much harder.”

Hold the Line

M

anaging Director Janne Larma from
Advium says that the prevailing sentiment on the property investment
market is pretty much the same as that of
other investment markets: investors shun
away from risk, whenever they can.
“The biggest challenges have to do
with low investor demand,” he says, while
making one exception to the rule: “Prime
real estate is still doing well and investors

Larma notes that especially the commercial
and residential property markets have been
going quite strong and rents have even increased during the crisis.
“This goes a long way to add stability
and decrease the risks of the investors. Also
the companies’ balance sheets are solid and
the development of profits is quite good.”
Still, the vacancy rate for offices in the
Helsinki metropolitan area is likely to increase since there are a lot of new properties coming to the market. An exodus from
less-than-prime real estate may well be in
the cards in the near future, which leaves the
property owners with a dilemma: is the problem cyclical or structural? In the first case,
the improving economy will fix the situation eventually, but if an aging property is
deemed obsolete the high vacancy rate may
become a permanent problem.
In this set-up, many owners of office
properties are forced to evaluate, if it is possible to redevelop the property into something else altogether – or, alternatively, if the
property should be demolished, even. KTI
Finland observes that during the last five
years, around ten office properties – with a

total area of 50,000 square metres, have been
redeveloped into hotels in Helsinki. Some
offices have also been transformed for residential purposes, and, in a couple of cases,
properties have been demolished.

Flooding the Market
According to KTI Finland, there were
230,000 square metres of office