NEWSEC PROPERTY OUTLOOK AUTUMN 2018 1

NEWSEC PROPERTY OUTLOOK AUTUMN 2018

HIGH DEMAND ANALYSIS OF SUMMER IS FAR ON THE REAL THE FINNISH FROM OVER FOR ESTATE MARKET HOUSING MARKET THE ECONOMY

THE FULL SERVICE PROPERTY HOUSE NEWSEC PROPERTY OUTLOOK AUTUMN 2018 3

CONTENTS

4–5 EXECUTIVE SUMMARY

6–9 SUMMER IS FAR FROM OVER FOR THE ECONOMY

10–41 REAL ESTATE MARKET 10–11 THE EUROPEAN REAL ESTATE MARKET 12–41 REAL ESTATE MARKETS IN FINLAND 14-17 METROPOLITAN AREA 18-21 HELSINKI CITY CENTER 22-25 26-29 30-33 34-39 OTHER REGIONS 40-41 ONGOING CONSTRUCTION PROJECTS

42-45 HOUSING MARKET

46–47 INFORMATION ABOUT NEWSEC

48 NEWSEC IN FINLAND

Copyright Newsec © 2018 This report is intended for general information and is based upon material in our possession or supplied to us that we believe to be reliable. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any warranty that factual errors may not have occurred. Newsec takes no responsibil- ity for any damage or loss suffered by reason of the inaccuracy of this report. You may use the information in the Newsec Property Update but acknowledgement must be made for all quotations and use of data/graphics. www.newsec.fi EXECUTIVE SUMMARY NEWSEC PROPERTY OUTLOOK AUTUMN 2018 5

HIGH DEMAND ON THE PROPERTY MARKET HAS ALSO BOOSTED SUPPLY PROPERTY MARKET LIQUIDITY REMAINS GOOD; HIGH PRICES HAVE ALSO INTRODUCED MORE SUPPLY.

Although last year’s record numbers Market liquidity has also increased in Certain people believe that the logistics are unlikely, the property market vol- other growth centres, which are begin- market is seen globally as “the new re- YIELDS OF CORE AND CORE PLUS ume is set to remain relatively high. ning to show up more on some of the tail property market”. Consumers’ and PROPERTIES HAVE REDUCED FURTHER – INCLUD- Demand on Finland’s property market international investors’ radars. service providers’ expectations are ING IN GROWTH CENTRES OUTSIDE THE also remains high, which has led to an clearly directed towards the efficient increase in supply. The economic up- An increase in core property prices in distribution of products. METROPOLITAN AREA. swing is seen as a good setting in Helsinki city centre has meant that which to sell, as the retrieved price is rents have increased too. Gross rents Vast amounts of money are still flowing likely to be good. At the same time for prime office properties now exceed into global property markets. Conse- there is a lot of uncertainty surround- EUR 40/m2/month, and rents in new quently, investment capital continues to OFFICE PROPERTY RENTS IN HELSINKI ing interests – no one really knows prime property leases have also gone flow into fringe market areas Fin- CITY CENTRE HAVE INCREASED WHILE THE when the European Central Bank will up in the last few months. The de- land. Urbanisation is now considered a VACANCY RATE HAS DECREASED. make significant changes to its reviv- creased vacancy rate has had an effect permanent trend too. The market situa- ing monetary policy. The uncertainty on rising rents. The vacancy rate in the tion in Finland will remain very favour- on the market is translating to cau- metropolitan area’s office properties able for the following year. The volume tiousness with regard to investment in continues to vary significantly between depicting property market liquidity in new properties to be completed in a submarkets and even individual proper- relation to the size of the market has couple of years’ time. ties. An old property may have a very settled permanently to the expected high vacancy rate in one area, for ex- 8–10 per cent as new international in- During the first half of 2018 the trans- ample, while a modern property next vestors arrive on the market. This sug- TRANSACTION VOLUME BASED ON RISK PROFILE action volume amounted to approx. door could be fully occupied. Therefore, gests that the Finnish property market 2018 H1 EUR 3.9 billion. Nearly two-thirds of the a property’s age and condition should has reached the same level as Europe-

19% volume was made from core properties. be considered in addition to location an markets with larger economies. Altogether more than 30% of the total when assessing the market. volume were made from the core plus 1% and value added properties. This is ex- On the property market, space plained by a few major portfolios in the supply will increase significantly this spring. Investors have also turned their year and next as several shopping cen- 16% attention more and more to higher-risk tres are completed. The centres, which investments over the past few years. have good accessibility from a consum- 64% er point of view, will thrive, whereas old Yields in Helsinki city centre’s core properties with limited services and properties have decreased further. In weak location may lose their market fact, the yields of Helsinki’s prime of- standing, especially considering the ex- Olli-Pekka Mustonen core core plus opportunistic value added fices are now on the same level as pected increase in online trade. The Head of Research those of Stockholm’s prime offices. Si- strong growth in online trade is also Newsec multaneously yields for higher risk core reflected in the logistics market, where +358 44 522 2693 plus properties have also decreased. there is demand for new properties. [email protected] SUMMER IS FAR FROM OVER FOR THE ECONOMY NEWSEC PROPERTY OUTLOOK AUTUMN 2018 7

The early summer business cycle is be- hind us and we are now living in a mid- summer mood. Some yellow foliage can already be spotted but summer is far SUMMER IS from being over. Best not think about the odd thunder storm that might soak you through.

INTERESTS ON A SLOW RISE FAR FROM OVER Towards the end of last year, all global economic indicators pointed to an im- provement. In the first half of the current year, development was a bit scattered, and some economic surveys revealed a downward trend. Despite this, all signs FOR THE ECONOMY point to positive developments. The world economy is expected to grow further next year, albeit more slowly than this year.

The eurozone economy lagged slightly behind expectations early this year, but decent two-per-cent economic growth is still on the horizon, which will be enough to boost inflation steadily towards the Eu- ropean Central Bank’s goal of just under two per cent. ECB is phasing down its ex- ceptional recovery measures. It will keep its interest rates unchanged for another year, however, if the economic growth meets its expectations.

Signs of a heating economy related to a boom will not be seen until 2020 at the earliest.

GROWTH INCREASING STEADILY The Finnish economy was achieving three-per-cent growth earlier this year, which is about double the estimated rate possible in the long run. The domestic market and exports are doing well on a SUMMER IS FAR FROM OVER FOR THE ECONOMY NEWSEC PROPERTY OUTLOOK AUTUMN 2018 9

variety of fronts, and the outlook for housing loans. The rise in household next year is positive. The rate will most indebtedness follows the long-term likely be lower than this year but is still trend, however, and is significantly set to exceed long-term expectations lower than in other Nordic countries. with a clear margin. Economic develop- ment will be more uneven than before, SOME UNPREDICTABILITY EMPLOYMENT- AND UNEMPLOYMENT RATE with some sectors at their full capacity. WITH RISKS % % Housing construction, for example, may Finland’s economic outlook is positive already begin to decrease, but the ac- in many ways. The economy is slowed 9,50 72,0 tivity will remain high. down in the short term mostly by its 9,25 71,5 potential lack of capacity or bottle-

9,00 71,0 / trend rate Employment The positive trend has also had a strong necks in the labour market. Signs of a impact on employment. Unemployment heating economy related to a boom will 8,75 70,5 has decreased, and employment has not be seen until 2020 at the earliest. 8,50 70,0 improved better than expected. It is no 8,25 69,5 wonder that households’ confidence in The most essential risks are related to 8,00 69,0 their own finances was stronger this international development. The threat summer than at any time since the fi- of a trade war looms, its significance 7,75 68,5

nancial crisis. With the improving eco- for prospects changing on a nearly dai- Unemployment rate / trend 7,50 68,0 nomic situation for households, con- ly basis. So far the effect of actual 7,25 67,5 sumer demand will pick up, whereas in- measures remains minor but the threat vestments and exports may experience should not be taken lightly. 7,00 67,0 weaker growth than before. 10 11 12 13 14 15 16 17 18 19 Naturally the world economy is starting

BALANCED DEVELOPMENT to reach its peak and it is likely to start Unemployment rate Employment rate Sources: OP and Macrobond Economic growth in Finland has been slowing down at the beginning of the fairly balanced and will continue on that coming decade. That is still in the fu- course next year. There are no signs of ture, though, and the prospect for the wide-range overheating for the econo- next 12 months or so is very likely to be my. Improved price competitiveness, extremely favourable. extended capacity and strong demand have boosted exports resulting in a bal- CHANGE IN FINNISH GDP anced economy.

Cost pressures have also remained 6 moderate. Inflation will remain below 5 the ECB’s target level of slightly under two per cent. Wage developments have 4 also been relatively moderate so far. 3

Government finance has improved too. 2 Debt ratio went down below the 60-per- 1 cent benchmark early this year and Annual change, % structural deficit will now be below the 0 target limit of 0.5 per cent. Private debt -1 to gross national product has also de- -2 creased, meaning that the development of private indebtedness has remained -3 moderate, and surprisingly slow, in fact, 10 11 12 13 14 15 16 17 18 19 in relation to the business cycle.

The role of housing coop loans is up for Sources: OP and Macrobond debate. The overall picture remains a bit hazy, however, because there is no Reijo Heiskanen clear understanding of the connection Chief Economist and correlation between growing hous- ing coop loans and household’s private THE EUROPEAN REAL ESTATE MARKET NEWSEC PROPERTY OUTLOOK AUTUMN 2018 11

OFFICE DELIVERABLES IN 2018 STRONG PERFORMANCE sqm – selected European cities 900,000

800,000

700,000 SEEN IN THE EUROPEAN 600,000 500,000

400,000 REAL ESTATE MARKET 300,000 200,000

100,000

0 The European real estate market is being explored to respond to this issue. European real estate has delivered Lyon Rome Berlin Lisbon Madrid

performing well. Improving economic Prague

In the case of Helsinki for example, ten- positive total returns as expected. Münich London Warsaw Helsinki Brussels Budapest Paris CBD Paris

growth and the relative attractiveness ants are being attracted by rent-free However, countries are in different Stockholm Amsterdam of the asset class will drive increased periods, flexible agreements or with the phases of their cycle with momentum - Copenhagen demand for commercial real estate. offer of new kinds of space and service increasing in some and decelerating in concepts being developed. Although others. Following an extended period

The current real estate cycle is seeing redevelopment opportunities are ac- of above-average performance, total limited development activity. As a result, tively being explored these however returns are almost certain to moderate this is leading to vacancy rates across take time, therefore adding to the delay this year. The drivers will shift from OFFICE VACANCY RATES most markets falling and rental growth in the development pipeline. yield compression to income growth, – selected European cities increasing. Vacancy rates have reached while capital values will be driven pri- % all-time lows across many markets and As a result, we will still experience marily by a steady increase in rents. 16 rising rents make development a more muted development across Europe, Three underlying assumptions drive financially attractive proposition. We are which will make 2018 another good the outlook for real estate in Europe: 14 beginning to witness signs of higher con- year for rental growth particularly for the economic recovery; accommoda- struction activity emerge. The develop- prime assets. tive monetary policy; and the need for 12 ment activity focus is now clearly sustainable income. 10 switching to the office sector, which is “We forecast increases in starting to experience increased activity. 8 A notable example is Copenhagen. Co- prime rents in most penhagen offers several new large ur- markets in 2018, with 6 ban development areas, many of them Berlin (9.0%), Frankfurt near the city centre, where industrial 4 areas are being transformed into resi- (7.3%), Helsinki (5.6%) dential and modern offices. and Munich (5.4%) among 2 the strongest.” THIS YEAR WILL BE A GOOD 0 YEAR FOR RENTAL GROWTH Rome Berlin Lisbon

This year, we anticipate vacancy rates Central London will be the exception. Madrid Prague London Warsaw Helsinki Brussels Budapest Paris CBD Paris to edge lower or remain stable in most Prime headline rents have fallen along Stockhom Amsterdam major cities, with the exception of some with a rise in use of incentives. For this Copenhagen late-cycle markets. year we anticipate a further fall in rents Sukhdeep Dhillon 2017 2018 across London as typically incentives Senior Economist The high vacancy rates are a challenge approximately at 24 months rent free for office investors with several options are as far out as they go. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 13

REAL ESTATE MARKETS IN FINLAND

ROVANIEMI

Newsec wants to offer information about the MARKET PARAMETERS: largest markets for various operators. The fol- lowing city-specific chapters contain tables de- GROSS RENT EUR/M2/MONTH tailing gross rent, vacancy and yield levels for Gross rent is the total rent paid by the tenant for OULU office, retail and logistic properties in the most the use of the property, including compensation for important market areas in these cities. the capital (capital cost and taxes and insurance costs) invested in the property as well as mainte- These tables present Newsec’s view of market pa- nance costs. Gross rent may also include usage and rameters. Doing so enables us to better depict the user service costs. heterogeneous nature of the market, as differenc- es in quality between areas can be considerable. It VACANCY (%) is worth noting that there are also findings both Statistic that reveals the share of vacant premises VAASA below and above the dispersion. out of the entire stock. The vacancy rate is calcu- SEINÄJOKI lated by dividing the sum of vacant properties’ areas The market parameters of our outlook are based by the size of the stock. JYVÄSKYLÄ on findings in our database as well as our strong market expertise which, in turn, is based on several YIELD (%) projects with our clients. We are more than happy General term used for yield to describe the ratio to discuss the Finnish real estate market and our between annual net rent profit based on market rents PORI TAMPERE views on market parameters. in the period in question and property prices. LAPPEENRANTA HÄMEENLINNA LAHTI

HELSINKI SATELLITE MUNICIPALITIES Kauri Melakari HELSINKI METROPOLITAN AREA Head of Data Science TURKU Newsec +358 40 359 3217 [email protected] REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 15

construction projects are tending to lo- Concept changes and modernisations cate close to rail connections such as have been popular measures in an ef- those in Jätkäsaari, Kalasatama, Niitty- fort to boost visitor numbers and occu- kumpu and Kivistö. pancy rates in shopping centres in the metropolitan area. Shopping centres Office tenants prefer locations that are will no longer be merely for shopping: accessible by rail as well as modern fa- they will be developed into centres for cilities. The vacancy rate of older stock new experiences and entertainment as THE HELSINKI is therefore high compared to other Nor- their range of services becomes more dic cities. Demand in the vicinity of met- versatile and the supply of restaurants ro stations in in particular has in- and cafés increases. creased since the Länsimetro rail line was completed. New construction is The competition between shopping cen- tending to be near the rail lines, and tres will intensify even further when properties are usually fully leased even in Kalasatama opens in autumn HELSINKI before construction begins. New office 2018 and Tripla in Pasila is completed in METROPOLITAN AREA METROPOLITAN AREA space will be completed in Tripla, Pasila autumn 2019. Furthermore, in Low interest rates are helping with in 2019–2020, in ’s K-kampus in , Lippulaiva in Espoonlahti and property investments, which has kept Kalasatama in spring 2019 and in the ur- in are still under investment property yield in steady ban environment house in Kalasatama in construction. Investment demand di- decline. Foreign operators’ interest in The heated pricing of core investment early 2020. In Espoo, Ramboll’s head of- rected at retail properties comes mainly property investments has remained properties has led to a broader scope in fice in Leppävaara will be completed in from abroad, examples of which include particularly strong, bringing new investment criteria and led to growing 2019, while in the Aviapolis area in Van- the of shopping centre Kluuvi from players to the market. The majority of competition for properties in need of taa, several ongoing projects are set to CBRE Global Investors to French compa- Finland’s property transactions’ total development. However, investment de- be completed in the next 12 months. ny AXA and the transaction which saw value is still focused on the metropol- cisions are still primarily made after a itan area. As initial yields are now thorough process preventing reckless coming close to European cities’ lev- rises in prices. So far, traditional core els, particularly in core properties, investors have focused on strong micro foreign investors are now the most locations, but properties in challenging active buyers. Uncertainty in interest micro locations have also been sold in The competition between development has put the brakes on the value-added segment. speculative project launches, but at shopping centres will intensify the same time the supply of complet- In the metropolitan area, the interest ed properties has increased and kept generated by value-added portfolios is the market busy. evident in the transaction which saw even further when REDi in Swedish company Areim buy eight office properties from a fund managed by Kalasatama opens in autumn Tristan Capital Partners, Varma and Avant Capital, and another which saw 2018 and Tripla in Pasila is American company Goldman Sachs and Australian Cromwell Property buy a total completed in autumn 2019. of 24 office properties from IVG Polar.

Apartment investments have offered comparatively stable and higher profits than office properties in recent years. In The latest foreign investors to land in Swedish NIAM buy the shopping centres residential property transactions, Finn- Finland include Swedish listed company in Suurpelto and Laajasalo from NCC. ish operators are still the most active Castellum, which bought its first prop- Also, Norwegian company Fortus is buyers but in portfolio transactions in erty in Finland from another Swedish building the Helsinki Outlet village op- particular foreign operators’ interest has investor Skandia. The fully leased office posite Ikea in . grown. Increasing production property is located at Salmisaarenaukio is bringing relief to the great demand 1. German Corpus Sireo acquired Swiss Investment demand for logistics and and is curbing rent rises. Accessibility by Life Asset Managers’ fund’s first prop- warehouse properties has remained public transport is now considered more erty in Finland by buying the office and strong, focusing on modern facilities on important than personal car access in retail property at Kaisaniemenkatu 13 the Kehä III ring road. Compared to else- rental , so larger residential from Clarlyle. where in Europe, profits and rents in lo- REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 17

A favourable financing AVIAPOLIS market, slightly higher profits compared to elsewhere in Europe RING III PORTTIPUISTO and vibrant leasing JUMBO AND kept property invest- TAMMISTO ment activity high in the metropolitan area. Core property pricing is set to intensify even PITÄJÄNMÄKI further, which will lead LEPPÄVAARA VUOSAARI to Finnish players PASILA dropping out of NORTHERN DOWNTOWN contention. TAPIOLA KEILANIEMI EASTERN DOWNTOWN

WESTERN HIGHWAY

GROSS RENT EUR/M2/MONTH VACANCY (%) YIELD (%)

Office Retail Logistics Office Retail Logistics Office Retail Logistics

NORTHERN DOWNTOWN 16 - 23 7.0 - 15.0 6.5 - 8.5

EASTERN DOWNTOWN 14 - 27 7.0 - 15.0 5.0 - 7.5

PITÄJÄNMÄKI 12 - 23 8.0 - 20.0 6.5 - 9.5 KEILANIEMI 18 - 26 5.0 - 13.0 4.5 - 6.5

TAPIOLA 14 – 22 15 – 50 7.0 - 15.0 4.0 - 8.0 6.5 - 8.5 5.5 - 8.0

14 – 22 5.0 - 15.0 6.0 - 9.0 gistics properties are high, which at- tan area this year. Veritas Pension In- PASILA tracts international investors, such as surance bought the Töölö Hospital com- 14 - 20 12 – 40 8.0 - 25.0 4.0 - 6.0 6.0 - 9.0 5.0 - 7.0 the fund managed by Deutsche Bank plex from the Hospital District of Helsin- WESTERN HIGHWAY that bought a logistics property by the ki and Uusimaa (HUS), who currently 16 – 25 15 – 50 5.0 - 15.0 5.0 - 9.0 6.0 - 7.5 5.0 - 7.5 airport leased to DHL from ELO Mutual occupies the complex. Plans are in place LEPPÄVAARA Pension Fund and LähiTapiola Group. to develop the block into apartments 16 – 25 8 – 11 7.0 – 15.0 2.0 - 5.0 6.5 - 8.5 5.8 - 8.5 There are no vacant new logistics prop- and retail space as HUS moves to the AVIAPOLIS erties as they are made to order for a new Siltasairaala hospital in 2023. VUOSAARI 8 - 12 5.0 - 10.0 5.9 - 9.0 specific tenant, like in the forward pur- Swedish Hemsö increased its public use chase type deal in which Savills IM property portfolio in Finland by buying RING III 7 - 11 5.0 - 10.0 6.5 - 8.5 bought a property to be leased to DSV a portfolio comprising three properties Amos Larinkoski for a club consisting of Korean investors. leased to University of the Arts Helsinki Partner, Capital Markets JUMBO AND TAMMISTO 14 - 120 4.0 - 8.0 5.0 - 6.5 from Helsingin Yliopistokiinteistöt. Newsec There have been few individual care +358 41 519 6462 PORTTIPUISTO 9 - 14 2.0 - 10.0 6.5 - 8.0 property transactions in the metropoli- [email protected] Explanation for the market parameters are presented on page 12. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 19

Another high-profile transaction in- volved the retail and office property Kir- jatalo on Pohjoisesplanadi. The main tenants at the property are Akateemin- en Kirjakauppa and HOK-Elanto’s Stock- mann Herkku. This property also houses a significant amount of office space. The buyer was AEW Europe City Retail Fund, which purchased the property for EUR 108.6 million (approx. EUR 12,200/m2) from .

Other significant core property transac- tions included the sale of Kluuvi shop- ping centre to AXA Investment Manag- ers and the sale of the property mainly HELSINKI leased to Nordic Investment Bank at Kai- saniemenkatu 13 to Corpus Sireo.

Helsinki city centre properties remain There is also continued activity on the extremely attractive investments. In development property market. The the past year, foreign investors have most significant transaction here was purchased several office and retail the sale of the property at Kansakou- HELSINKICITY CENTRE properties in central Helsinki for record lunkatu 3, owned by the City of Helsinki, prices. Yields from top properties have to CapMan fund for EUR 19.5 million. dropped to about 3.5 per cent, bringing City of Helsinki will stay at the property prices closer to those of major Euro- on a short lease before moving to a new pean cities. Yields from top properties property in Kalasatama, after which in Helsinki city centre are now compa- point the property will be renovated. In rable to those of Stockholm. our view, development properties re- main attractive, as yields from core The most significant transaction was the properties have dropped to record low sale of the office property at Töölönlah- levels. The small number of transac- denkatu 3, next to Helsinki Central rail- tions is mainly due to a lack of suitable way station. The transaction price here properties.

In our view, development properties remain attractive, as yields from core properties have dropped to record low levels.

was approximately EUR 190 million, or The most significant construction and EUR 12,000/m2. The seller was Ilmarinen renovation projects currently ongoing Mutual Pension Insurance Company and include Helsinki Central Library in the new owner is Deka Immobilien from Töölönlahti bay, the conversion of the Germany. The main tenant at the prop- former Kesko head office for hospitality erty is KPMG. Considering the price, this and residential use at Katajanokka, turn- was Finland’s largest office property ing the former Teboil office property transaction of all time. into a hotel on Bulevardi, and the REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 21

The vacancy rate is expected to decrease due to companies’ will- ingness to move and increased space needs, TÖÖLÖNLAHTI in light of the fact that there is not much space to construct in central KAIVOKATU Helsinki. MANNERHEI

KAMPPI SANTERINKATU ALEK

M INT IE CBD POHJOISESPLANADI TU SPLANADI construction of the Amos Anderson art INKA ETELÄE OT

LÖNNR I museum in Lasipalatsi. The most signifi- RD VA cant completed renovations include the BULE renovation of the Parliament House and CENTER Hotel St. George on Yrjönkatu.

Office market rents have increased in RUOHOLAHTI Helsinki city centre in recent years, and they will keep rising, albeit at a slower rate. The Finnish economy experienced strong growth in 2017, a development which is improving tenant demand and increasing companies’ interest in mov- ing. The office vacancy rate is at a his- CBD toric high in the city centre, however, KAIVOKATU which is curbing rent increase potential. The vacancy rate is expected to de- crease due to companies’ willingness to MANNERHEI move and increased space needs, in ALEKSANTERINKATU

M light of the fact that there is not much INT space to construct in central Helsinki. IE Retail space vacancy rates have also in- POHJOISESPLANADI creased slightly for certain properties TU INKA ETELÄESPLANADI but, on the whole, the retail space va- OT LÖNNR cancy rate is very low. I RD VA BULE

GROSS RENT EUR/M2/MONTH VACANCY (%) YIELD (%)

Office Retail Logistics Office Retail Logistics Office Retail Logistics CBD 29 - 38 50 - 180 10.0 - 14.0 2.0 - 4.0 3.5 - 5.5 4.0 - 5.5 CENTER 22 - 29 25 - 100 5.0 - 10.0 5.0 - 10.0 4.0 - 7.0 5.5 - 7.0

22 - 30 30 - 100 5.0 - 8.0 2.0 - 6.0 4.0 - 6.5 4.5 - 6.0 Pekko Horttana Analyst 32 - 36 2.0 - 4.0 3.5 - 4.5 Newsec TÖÖLÖNLAHTI +358 50 531 1426 20 - 26 15 - 30 7.0 - 12.0 5.0 - 10.0 4.5 - 7.0 5.5 - 7.5 [email protected] RUOHOLAHTI Explanation for the market parameters are presented on page 12. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 23

ownership in March, when Kekäle Oy building in their new Asemakeskus Cam- sold the property to a private investor. pus. This will increase the amount of The property has 3,750 m2 of office and modern office space in the city centre by retail space. 13,200 m2. The property will be complet- ed at the end of 2019. Furthermore, Additionally, OP-Palvelukiinteistöt spe- Sponda will build a 20,000-square-me- cial investment fund (OP Public Servic- tre office building next to shop- es Real Estate Fund) purchased a care ping centre. YIT also has plans for the home property from YIT. It will be com- Ratinan Virta and Ratinan Voltti office pleted in Niemenranta at the end of buildings in the Ratina area. 2019 and the transaction price was EUR 15 million. The property will have a Demand for office space in the group home and sheltered housing as area has increased. New construction well as apartments for the elderly. activity is mainly due to the develop- ment of Hospital. TAMPERE A significant development project The Hospital District is con- changed ownership when Varma Mutual structing two properties; the D building Pension Insurance Company sold the (37,000 m2) will be completed early former Pyynikin Trikoo industrial prop- 2020 and the L building (19,000 m2) in 2017 was busier than ever on the erty to an investment company man- the autumn of 2019. Tampere Heart TAMPERE Tampere property market, with the aged by Aberdeen Standard Invest- Hospital (14,000 m2) was completed in transaction volume exceeding EUR ment. The new owner will continue de- the spring, along with the first part of 800 million for the first time. The veloping the area and the whole the car with spaces for 400 vehi- sale of Sponda’s portfolio had a sig- property will be renovated piece by cles. Cost estimate for the D and L nificant impact on Tampere’s trans- piece. During the first phase, the middle buildings is EUR 170 million, whereas action volume, which doubled from 2016. Despite the buoyancy of the market, it is unlikely that the current year’s transaction volume will reach Strong economic growth has boosted the last year’s level. The biggest reason for this is the low number of proper- rental market, especially in , where ties available, particularly those the space needs for startup companies have worth more than EUR 10 million. De- mand from both domestic and foreign increased during the last 12 months. investors on the Tampere property market vastly exceeds supply.

The most significant transactions in section of the property will see about the cost estimate for the completed 2018 so far have involved office proper- 70 apartments completed in 2020 in Heart Hospital and the parking hall was ties. In May, Finnpark Oy purchased the addition to expanding the services in over EUR 55 million. rest of the office property at Rautatien- the area. According to early estimates, katu 27 from VR Group for EUR 12 mil- the development costs for the property The hub of Tampere retail properties lion. The transaction involved an area of will exceed EUR 100 million. has moved further south after the com- 1,800 m2 price of approx. EUR 6,670/m2. pletion of Ratina shopping centre Finnpark Oy already owned the other of- Strong economic growth has boosted (53,000 m2) in April. Greatest demand is fice spaces and parking spaces at the the rental market, especially in Hervan- currently focused around Stockmann property. The property is part of the ta, where the space needs for startup and Ratina and Koskikeskus shopping travel and service centre development companies have increased during the centres. The retail spaces on Hämeenka- project. In April, Trevian Suomi Ki- last 12 months. This is helping to fill the tu have suffered due to the tramway inteistöt I fund, managed by Trevian As- spaces vacated by Microsoft. The popu- construction, which has complicated set Management, purchased the PMK-ta- larity of co-working spaces among ten- moving by car and by foot. These disrup- lo office and small industry property at ants has also grown, with quality de- tions will continue for several more Erkkilänkatu 11 from Renor Oy. The mands for spaces higher than before. years, as the first phase of construction transaction price for the 15,000 m2 was Office space needs to be open plan or will last until spring 2021. Decisions re- EUR 10.5 million or EUR 700/m2. Fur- multipurpose space in order to attract garding the second phase of construc- thermore, the Sandberg building at tenants. In early 2018, Technopolis be- tion and whether the tramway will be ex- Kauppakatu 2 in the city centre changed gan construction on their first office tended from Pyynikintori to Lentävän- REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 25

tion for tenants has increased during the ance Company will have 229 guest past year, increasing vacancy rates and rooms and a corridor connecting it to Demand for logistics prolonging vacancy periods between Tampere Hall. properties continues previous and new tenants. KAUPPI to be strong in the Demand for logistics properties contin- ues to be strong in the Linnakallio area Linnakallio area of of , with the construction of MYLLYPURO new logistics properties concentrated Pirkkala. there. The number of hotel rooms in CBD / CENTER Tampere will increase due to the 2 10,000 m hotel included in the Tam- Markku Turunen niemi will be made at the end of 2020. pere Arena project and Finland’s first Regional Director, Partner MESSUKYLÄ Spring this year saw the completion of Marriott hotel, which is being con- Newsec the extension at shopping cen- structed next to Tampere Hall. The +358 40 845 3482 tre in Lempäälä (15,000 m2). Competi- building owned by Keva Pension Insur- [email protected] SARANKULMA- PARTOLA

HERVANTA PIRKKALA

LEMPÄÄLÄ

GROSS RENT EUR/M2/MONTH VACANCY (%) YIELD (%)

Office Retail Logistics Office Retail Logistics Office Retail Logistics CBD 14 - 22 25 - 65 5.0 - 8.0 4.0 - 8.0 5.5 - 7.5 6.0 - 7.5

CENTER 12 - 20 15 – 40 6.0 - 10.0 2.0 - 6.0 6.5 - 8.0 7.0 - 8.5

NEKALA 4 – 7 3.0 - 6.0 7.5 - 10.0

SARANKULMA-PARTOLA 8 - 12 4 – 7 7.0 - 10.0 3.0 - 6.0 8.0 – 10.0 8.0 - 10.5

HERVANTA 12 - 18 12 - 30 8.0 - 15.0 4.0 - 10.0 7.0 - 9.0 6.5 - 9.0

MYLLYPURO 4 – 7 2.0 - 4.0 8.5 - 11.0

LIELAHTI 10 - 30 3.0 - 6.0 7.0 - 8.5

KAUPPI 12 - 19 6.0 - 10.0 8.0 - 9.5

MESSUKYLÄ 4 - 7 3.0 - 5.0 9.0 - 11.5

PIRKKALA 7 – 10 1.0 – 3.0 7.0 - 9.0

LEMPÄÄLÄ 8 - 14 5 – 8 2.0 – 4.0 2.0 – 4.0 6.5 - 7.5 8.0 - 9.5

Explanation for the market parameters are presented on page 12. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 27

TURKUto a busy start in all space types. crease of approximately one per cent in centre. In retail properties, the vacancy ing, with an aim to nearly double the versity of Applied Sciences and the Lease rates continue to increase, and both property types in the past year. rate is around 4 per cent, and in pro- number of guest rooms. The building’s conversion of the Helsinginkatu indus- the positive vibe has also brought Average yields have of course been duction, warehouse and logistics prop- restaurant operations will also undergo trial block for residential use. yields down in places. The possibility slightly higher than prime levels. Out- erties, even lower. The rental market is a facelift, with at least four new restau- to achieve higher returns compared side the city centre the rate is approxi- expected to remain buoyant throughout rants and a rooftop bar with views Turun Teknologiakiinteistöt has broken to the metropolitan area has further mately 2 percentage points higher, the year. Rents are on the rise in all across the city. ground on two office/campus buildings increased the interest of both domes- apart from the area, where of- property types, as is new construction. in the Kupittaa area. The buildings, tic and foreign investors in the Turku fice property yield is estimated to be The city centre is set to experience up- Skanska and Suomen Ylioppilaski- spanning a total of 30,000 m2 are ex- region. Property market outlook re- 6.5–7 per cent. For industrial and ware- heaval as the construction of the Tori- inteistöt Oy have signed a deal to build pected to be completed in 2020 and will mains positive for the entire year. house properties in good condition the parkki parking garage, financed by Taal- a new 23,000 m2 multi-user building re- bring all Turku Vocational Institute stu- yield is approximately 8–10 per cent, eri Oy, is set to go ahead. The archaeo- placing the Juslenia building in Yliopis- dents under the same roof. Plans for a The busy property market has mani- and over 10 per cent in places, depend- logical excavations are already under tonmäki. The Parkin kenttä football significant new residential area, Kirstin- fested itself in decreased yields and va- ing on tenants, length of lease and loca- way in the market square. The modern- pitch and the surrounding area are be- puisto, in Iso-Heikkilä, are going for- cancy rates. The yield for an office tion of the property. isation of the shopping centre ing developed as a sports venue as well ward. Another new area, Herttuankul- property in good condition and in a has progressed to Hansatori and will as business and office district. A signifi- ma, will be erected nearby, combining TURKU good location in Turku centre has gone Few office properties have been con- mean changes in passageways inside cant amount of housing construction is the areas around Tukholmankatu and down to below 7 per cent, even to 6.0– structed so the vacancy rate has de- the shopping centre. Turun Seudun also in the pipeline. Ongoing projects in the new residential areas near Turku 6.5 per cent in some places in the cen- clined to approximately 7.5 per cent. Osuuskauppa’s hotel in Hamburger the Aninkainen and Puutori areas in- Castle. Once Medisiina building D is Economic and employment prospects tre. Yields from city centre commercial There is actually a shortage of vacant Börs will close in 2019, but the coopera- clude the extension of Ukkokoti, con- completed, the new 50,000 m2 T3 hos- are strong in Turku, which is reflect- properties have also decreased to 6.0– office properties in the Kupittaa area tive has already launched an extension struction of Yliopistonkatu 5, develop- pital will be built next to it. Housing ed in the property market. 2018 is off 6.5 per cent. There has been a de- and of modern office premises in the to Hotel City Börs in the Wiklund build- ment of the Concert Hall and the Uni- construction in the area is also REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 29

under way, and apartments have been rage. Kansallis-yhtiöt intends to acquire Sähkö Oy. Retail properties that had selling well. In the first phase of the Ka- the rest of the block. stood empty in the Turku city centre kolanmäki prison area, Länsiselli, nearly now have new tenants, which suggests all apartments have been sold and in Pihlajalinna Liikuntakeskukset Oy that the centre can be a vibrant com- the next phase, Graniittilinna, the con- bought all shares in Leaf Areena Oy mercial area even outside the Hansa- version to apartments has begun. The from individual owners in an interesting kortteli block. attraction of this project, unique in all and exceptional transaction. Leaf Aree- AIRPORT of Finland, is enhanced by the construc- na, measuring more than 10,000 m2 This year is looking busy in the Turku tion of the funicular from Linnakatu to houses a gym, golf centre, several region property market and more sig- the top of the hill, a project that has fi- games arenas, children’s adventure are- nificant property transactions are likely nally been launched by the city. It has na as well as conference and sauna fa- to take place during the autumn. Turku continues to attract both domestic and - foreign investors, who are mostly inter- METSÄMÄKI ested in prime properties in the centre, but also in high-quality multi-user prop- LÄNSIKESKUS The housing construction is meeting the erties, including production, warehouse and logistics properties, outside the somewhat pent-up demand, and the centre. Clear-cut cashflow properties market is doing well. Apartment rents, with long leases are not the only ones attracting interest – investors are also PITKÄMÄKI for example, are still increasing. drawn to properties with potential for alterations in use or rise in occupancy: CBD / CENTER in other words, properties where addi- tional measures can bring added value. been a while since there were this many cilities. Hemsö bought two nursing cranes on the city skyline. The housing homes under construction in Turku and HARBOUR KUPITTAA construction is meeting the somewhat Kaarina from Hartela. The tenant will be pent-up demand, and the market is do- Esperi Care. FinCap sold the residential ing well. Apartment rents, for example, building on Kanslerintie to Nordea Life are still increasing. Assurance Finland Ltd. In addition, local private investors sold the former prison SKANSSI It was thought that the property trans- mental hospital, which is located in Ka- action volume of Turku and the sur- kolanmäki and now in residential use, rounding areas was improving in 2018 and a day care centre in Kaarina to OP compared to the volume of 2017, which Palvelukiinteistöt. GROSS RENT EUR/M2/MONTH VACANCY (%) YIELD (%) was approximately EUR 260 million. Al- Office Retail Logistics Office Retail Logistics Office Retail Logistics though several small transactions took The construction of production and lo- place early in the year, involving pur- gistics properties is well under way as CBD 14 - 20 25 - 65 4.0 - 7.0 3.0 - 5.0 5.5 - 7.0 6.0 - 7.0 chases by both users and investors, the predicted. DB Schenker is constructing total volume has not quite met the ex- a new 19,000 m2 logistics property by CENTER 12 - 16 14 - 35 5.0 - 10.0 5.0 - 8.0 6.5 - 8.5 6.5 - 8.0 pectations. It is worth mentioning, how- Ohikulkutie in Avanti, Lieto, which has ever, that transactions have taken place developed into a significant business AIRPORT 5 - 8 2.0 - 4.0 8.5 - 10.5 in many different property types. area of 170 businesses and 1,600 peo- 5 - 7 5.0 - 8.0 9.0 - 11.5 Rausanne Oy bought the Intelligate III ple. A new department store will ORIKETO-METSÄMÄKI project in the Kupittaa area from YIT, replace the old store in the Piispanristi KUPITTAA AND SKANSSI 15 - 22 12 - 25 2.0 - 5.0 3.0 - 6.0 6.5 - 8.0 6.5 - 8.0 and the new building will house a Sokos area in Kaarina, and Plantegen will have hotel operated by Turun Seudun a new store in the Krossi area. Verk- PANSIO 5 - 9 4.0 - 8.0 9.0 - 11.5 Osuuskauppa cooperative. A locally sig- kokauppa.com opened a large new nificant transaction took place in April, store in the Mylly area in , Ikea is HARBOUR 10 - 16 5 – 9 6.0 - 10.0 3.0 - 8.0 9.0 - 12.0 9.0 - 11.0 when Kansallis-yhtiöt bought a share of planning to expand its warehouse, and more than 90 per cent in the building HopLop indoor activity park will house MYLLY 13 - 30 2.0 - 6.0 6.5 - 8.5 known for the former restaurant Thri- the new building constructed across Vesa Eronen nax, on the corner of Yliopistonkatu from it. Furniture retailers Asko and Regional Manager PITKÄMÄKI 10 - 16 6 – 8 5.0 - 10.0 2.0 - 4.0 8.5 - 10.0 10.5 - 12.5 and Humalistonkatu. Completed in Sotka moved into the property vacated Newsec 1988, the building spans more than by Kodin1 in Raisio, and the former Ko- +358 40 552 9054 LÄNSIKESKUS 9 - 12 4.0 - 8.0 8.0 - 9.0 10,000 m2 and has its own parking ga- tikeskus property is now housed by [email protected] Explanation for the market parameters are presented on page 12. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 31

of the Technopolis campus in the cen- bring much needed life to the area of tre. The second phase of the Sepänkatu the centre by the sea. The construction campus has 8,400 m2 of leasable area. of the Torihotelli hotel and Talvitori The Technopolis investment is valued at market area will commence in the au- approximately EUR 25 million, and will tumn. The hotel that will be erected boost and support the development of next to the market hall will offer 130 the office market for the entire centre. guest rooms and be connected to the The city structure in the centre has Talvitori market area. Talvitori will be a grown denser in the past few years; a semi-heated space protected from the OULU trend that is likely to continue for sev- wind, which will allow the market to op- eral years. erate throughout the year.

Oulu University of Applied Sciences A large-scale development project, Ou- moving to Linnanmaa in autumn 2020 lun Ratapiha, is also in the pipeline in will increase the area’s significance to the centre. Development phase financ- the city’s office market. Traffic is being ing has been secured for this, but the OULU rerouted in the area to serve the large- final decision is pending. The project scale campus. The roads between the will develop a total area of 150,000 m2 centre and the Linnanmaa campus, for building apartments, exhibition facili- The Oulu property market has not example, will have bus lanes running in ties, a hotel, a restaurant and a bus ter- been able to keep up with similar- both directions. minal. A multi-purpose arena replacing sized cities such as Turku and Tam- the old Raksila arena is also pere. In our view, reasons for the low- Several projects to change the cityscape at the planning stages. er transaction volume include a low are ongoing and in the pipeline for the number of domestic investors outside grid plan area of the centre. A striking For several years, the centre had suf- Oulu, lack of foreign investors as well 16-storey round residential building will fered from a high vacancy rate in retail as centralised ownership of proper- be completed towards the end of the properties, but as the centre has been ties. In 2017, the city’s transaction year. Skanska’s Puistovahti building will developed, properties have been occu- volume was EUR 130 million, down house 94 apartments. The Asemantorni pied and vacancy rates have slowly de- from the previous year’s EUR 180 million.

This year’s transactions have mainly in- The most significant ongoing construction volved rental apartment properties. In the spring and summer, several apart- project in the city is the extension of the ment portfolios with properties in Oulu Technopolis campus in the centre. The second exchanged ownership. Buyers included 2 Kojamo, Avara, Kunta-asunnot and phase of the Sepänkatu campus has 8,400 m NREP, and sellers were special invest- of leasable area. ment fund OP-Rental Yield, other funds of the OP Financial Group, construction company Lehto and Avara. project’s first two 12-storey residential creased. The amount of retail space In January, RT-Rakennusteho, RIPA In- buildings are being constructed near the outside the centre will grow considera- vest Oy and LähiTapiola Tontit II Ky station. The first tower block will be bly in the next couple of years, as the bought an office and retail property lo- completed before the new year and the construction of the Oulunportti com- cated at Taka-Lyötynkatu 4 in Taka-Lyöt- third is set to be completed towards the mercial and employment area begins in ty, for the purpose of developing it into end of 2020. The buildings will have a to- 2020. More than 100,000 m2 of new apartments. The transaction price was tal of 337 apartments. A 12-storey retail space is being created by Valtatie 8, EUR 6.8 million, or EUR 581/m2. The ad- and residential building is being con- near the Kaakkuri shopping centre. In jacent plot, which is currently being used structed at Albertinkatu 9. Insurance addition, the preparations for the sec- as a car park, is undergoing a city plan company Pohjola’s Käpälänkulma build- ond phase of the retail and office prop- alteration to allow residential construc- ing, completed in the 1980s, has been erty at Alasintie 10, completed last year, tion for a total floor area of 20,650 m2. demolished to make space for it. has begun in the Limingantulli area. The second phase will develop an area The most significant ongoing construc- Oulu Allas Sea Pool sea spa is in the of 7,000 m2, the leasing for which be- tion project in the city is the extension pipeline in Kiikeli. The sea spa would gan this summer. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 33

Other ongoing construction projects in Oulu include the renovation of the Pohjankartanon lukio school building, set to be completed in 2019, and the first phase of the construction of Oulu University Hospital’s children’s and women’s hospital and the core hospital in the Kontinkangas hospital area. This LINNANMAA / Northern Ostrobothnia hospital district’s RITAHARJU project, across an area of 46,000 m2, is going to cost EUR 164 million in total, according to estimates. The buildings RUSKO are expected to be ready for use at the end of 2021.

Fish and seafood producer Hätälä Oy is 2 buying 20,000 m of park land from the CBD / CENTER city near its plant in Kaakkuri, with the intention of expanding the plant. This in- vestment programme will run until 2025 2 KONTINKANGAS and once completed will add 15,000 m HARBOUR / of space to the current plant. Building NUOTTASAARI rights for the plant area will be in- creased in scope to facilitate the exten- sion. Partnera Oy and Oulun Satama Oy made a preliminary agreement regard- ing the construction of a logistics centre 2 LIMINGANTULLI measuring 15,000 m in area in Oritkari AIRPORT in Oulu harbour. Construction has al- ready started and the building will be complete during 2019.

GROSS RENT EUR/M2/MONTH VACANCY (%) YIELD (%)

Office Retail Logistics Office Retail Logistics Office Retail Logistics CBD 12 - 17 25 - 60 4.0 - 8.0 6.0 - 12.0 7.5 - 9.5 6.5 - 8.0 CENTER 10 - 14 15 - 25 6.0 - 10.0 8.0 - 12.0 8.5 - 10.0 7.0 - 9.5

KONTINKANGAS 10 - 15 5.0 - 10.0 8.5 - 10.5

LINNANMAA/RITAHARJU 8 - 14 8 - 16 5.0 - 15.0 2.0 - 6.0 9.0 - 11.0 7.5 - 9.5

RUSKO 9 - 13 4 - 6 6.0 - 10.0 3.0 - 8.0 9.0 - 11.0 9.5 - 11.0

Minna Marjeta LIMINGANTULLI 9 - 13 8 - 15 4 - 6 6.0 - 10.0 3.0 - 6.0 3.0 - 8.0 9.5 - 11.0 8.0 - 10.0 9.5 - 11.0 Regional Manager HARBOUR/NUOTTASAARI 5 – 8 1.0 - 3.0 9.0 - 10.5 Newsec +358 40 545 5806 7 - 12 5 - 8 8.0 - 15.0 3.0 - 6.0 9.5 - 11.0 9.5 - 11.5 [email protected] AIRPORT

Explanation for the market parameters are presented on page 12. REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 35

mercial property for an operator requir- ing 18,000 m2 is in the pipeline in the Seppälänportti area. The Seppälä area retail construction projects pose a chal- lenge to retail properties in the city cen- tre, and competition for tenants is fierce. The transaction market has cooled down slightly from last year when the volume amounted to approximately EUR 350 million. Residential properties were sold as part of bigger portfolios for Kojamo and the international Morgan Stanley ROVANIEMI Real Estate Investing. Several office OTHER property transactions also took place this year. Osuuskauppa Keskimaa sold a retail property portfolio consisting of seven consumer goods stores to Swedish Redito AB earlier this year. Nordea Life Assurance Finland Ltd bought the 10,000 m2 retail property completed at the end of 2017 in the Seppälä area. In KUOPIO VAASA addition, Swedish AB Sagax bought SEINÄJOKI Vähälä Yhtiöt’s logistics centre in Ruoko- saari in July. The transaction price was JYVÄSKYLÄ REGIONS EUR 15.3 million, or EUR 951/m2.

PORI LAPPEENRANTA LAHTI HÄMEENLINNA LAHTI The residential construction projects on- going in Lahti are focused on the areas of HELSINKI SATELLITE Radanvarsi, Hennala, Niemi and Sopen- MUNICIPALITIES korpi. Plans are in place to convert the Starkki area on the south side of the rail- road into a residential area, the develop- ment of the Asko area is continuing, and the Hennala military area is being devel- JYVÄSKYLÄ comprise seven new buildings housing oped for residential use, services and New construction centres around four more than 250 apartments. shared use by companies. The location of main projects in Jyväskylä. The Kangas Renkomäki area as a commercial area will area is being developed into an urban The construction of the new central hos- improve when the southern ring road is residential area. The old paper mill area pital in the Sairaalanmäki or Kukkula competed. Several retail properties are in is set to have 250,000 m2 of residential area will continue to 2020 and the area the pipeline or have already been com- space and 85,000 m2 of office space. In development will be ongoing until 2030. pleted in the area. In addition, the second addition to completion of the first apart- In addition to the hospital, the plans in- phase of the central hospital renovation ment buildings, the 15-storey Koas Tow- clude 50,000 m2 of office construction started last autumn and is on schedule. er for the Central Finland Student Hous- and 60,000 m2 of housing construction. ing Foundation will be completed this Jyväskylä city council gave the Hip- Investment demand in Lahti remains autumn. In the grid plan area, the Val- pos2020 project the green light in May. moderate. Property transactions earlier tiontalo building is being renovated to be This project will develop 160,000 m2, this year mainly involved apartments. used as retail and office space. A 7-sto- and its total budget is EUR 220–250 mil- Several portfolios sold included residen- rey building, Reimari-talo, will also be lion. The construction is set to take until tial properties located in Lahti. The buy- constructed in the same block, housing the end of 2023. ers were Kojamo, Kunta-asunnot and the 6,300 m2 of retail and office space on international investor Morgan Stanley floors 4–7. The Lyseonkulma comple- Retail property construction is centred Real Estate Investing. mentary construction also continues. In around the Seppälä area. At the end of addition, Rakennusliike Lapti has broken 2017, the property spanning 10,000 m2 The most significant individual property ground on a block called Aallonportti ad- and occupied by Gigantti was completed transaction involved the BW Tower, the jacent to the university. The block will near the Seppä shopping centre. A com- 7,800 m2 office building located next to REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 37

the travel centre and completed in 2015. of approximately EUR 164 million. The most significant individual transac- time soon. The city of Lappeenranta the Wasa Station development contract located in Vaasa, seven in Sweden and The property was sold by Keskinäinen tion involved the 10,300 m2 retail prop- has dropped its plan to construct the on 15 May 2017, with the goal of com- one in Rovaniemi. All Vaasa properties Vakuutusyhtiö Fennia, Aktia Henkivaku- The construction of the new premises erty located in a visible place by the South Karelia arena on the Ikea plot. pleting the station in 2021. The block are located in the Kivihaka area, the utus Oy and Teollisuusliitto ry to French for Savonia University of Applied Sci- market square at Kauppakatu 41. The will include a shopping centre, a music largest being shopping centre GW Gal- Corum Asset Management. ences on Microkatu commenced earlier property was sold by Citycon Oyj to The volume of transactions in Lappeen- and conference centre, hotel with a res- leria. Other properties are occupied by this year: the 4,500 m2 property is set special investment fund Fennica Toimi- ranta remains low. A few property taurant, multi-purpose exercise facility Vepsäläinen and Byggmax, among oth- KUOPIO to be completed and in use at the be- tilat I managed by Fennia. The transac- transactions took place earlier this as well as offices and apartments, ers. The portfolio was bought by Swiss In Kuopio, construction is focused on ginning of next year. The Technopolis tion price was EUR 22 million, or EUR year, the largest of which involved the across a total gross floor space of company Partners Group, and the the Maljalahti and Puijonlaakso areas, project was scheduled to begin last 2,100/m2. The property’s tenants in- Galleria shopping centre, which was 85,000 m2. transaction price for the entire portfo- and the plans for residential construc- year but the launch has been post- clude Kesko, Tokmanni, Danske Bank bought by Agore Kiinteistöt Oy, a joint lio was approximately EUR 120 million. tion in the Savilahti area and the area poned, pending the properties’ leasing and Restel Ravintolat. venture of ELO Mutual Pension Insur- Office complex Powergate II, partially around Presidentinkatu are going for- status. The construction of Kuopion ance Company, Första AP-Fonden and under construction and partially com- Another significant property transac- ward. In the future, residential con- Portti, the area around the station that LAPPEENRANTA Trevian Asset Management. The seller, pleted, spanning 16,700 m2 near the air- tion in Vaasa involved the Plantagen struction will focus on the centre and has been in the pipeline for a long time, Construction in Lappeenranta city cen- Barings Real Estate Advisers, also sold port, was sold in June to Nordisk Rent- store in Kivihaka. The property the adjacent areas as well as on the finally started this summer. The area tre has been unusually busy during the the Revontuli shopping centre located ing Ab. The seller was Oy Vaasa changed ownership as a part of a port- Saaristokaupunki and Savilahti areas. will be constructed in three phases, past couple of years, with a significant in Rovaniemi. In addition, the portfolio Ab, who was also the contractor. The folio comprising three Plantagen with project completion due in 2023. number of new properties completed or comprising 1,600 apartments that was complex, consisting of three buildings, stores. The other two are located in One significant development project The area will feature more than 200 being constructed in the area. The bought by Morgan Stanley Real Estate is being leased to Wärtsilä Oyj, giving a Suomenoja, Espoo, and Kuninkaanport- will be Kuntolaakso in in 2018– apartments, retail, care and office IsoKristiina shopping centre expansion Investing from Kojamo included a resi- total of 900 company employees the ti, Porvoo. Both parties of the transac- 2020. The ice hockey arena known as premises as well as a separate parking was completed in 2015, and the devel- dential property in Lappeenranta. chance to work under the same roof tion were Norwegian investors: the Niiralan Monttu will be renovated and facility for approximately 470 cars. opment of the block known as Citykort- upon its completion. The A building of seller Oslo Pensjonsforsikring and the extended together with the indoor teli continues. In addition, the zoning VAASA Powergate II was completed in June, buyer Radge Eiendom AS. swimming pools and parking services. The transaction volume in Kuopio was plan change for the block known as The most significant projects planned the B building will be completed in Sep- The project involves a site measuring approximately EUR 120 million in 2017, Pormestarin kortteli is under way and and ongoing in Vaasa include Wasa Sta- tember or October and the C building in HÄMEENLINNA 30,000 m2 in area, and the total invest- and there were transactions for all would make complementary construc- tion, a 200-million-euro project led for- autumn 2019. The largest of the recently completed ment value is EUR 46.2 million. In addi- property types. This year the majority tion of the block possible. merly by Lemminkäinen but currently, projects in the city is the ser- tion, the inpatient ward and outpatient of transactions have involved rental following a merger, by YIT, to replace The transaction market has had a boost vice centre. The building, housing a li- clinic premises of the hospital’s apartment properties in larger portfo- The timeline for the Ikea department the old coach station, and the from several large-scale portfolio trans- brary, a maternity and child health clin- old main building will be renovated be- lios. The buyers were Kojamo, Kunta- store and an adjacent shopping centre Laajametsä employment area, the actions. Earlier this year Swedish Nor- ic, a school, a youth centre and an exer- tween 2018 and 2024. The project com- asunnot and the international investor has not yet been decided, however, so plans for which include the new giga- dika Fastigheter AB sold a retail portfo- cise facility, was completed in the prising 60,000 m2 has a cost estimate Morgan Stanley Real Estate Investing. construction will not be starting any factory. Vaasa city council approved lio of 11 properties, three of which are summer after two years of construc- REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 39

tion. Final decisions are pending in the goods retailer XXL opposite the Halpa- which will have an area of 66,000 m2 to data centre in the Jussla area in Tuu- of the properties are already under The transaction market in Rovaniemi Hämeenlinna hospital project. The halli store towards the end of the year. be completed by November 2019. The sula, with the extension spanning an ap- construction and will be completed in has been relatively busy this year, espe- Engelinranta residential area for 2,600 total value of the centre to be construct- proximate area of 8,000 m2 set to be 2019 and 2020. cially for retail properties. Several retail people is being constructed by Lake The transaction volume in Pori has re- ed in the Jouppi area is EUR 65 million. completed towards the end of this year. properties have been sold as part of Vanajavesi in the city centre. Construc- mained low since 2016. The most sig- Masku’s logistics centre, measuring ap- ROVANIEMI portfolios. The K-Rauta property in the tion has also started next to the railway nificant transaction in the first half of The most significant property transac- proximately 15,000 m2 in area, is in the The growth in tourism in Lapland has Suosila area was bought by Swiss inves- station and the Asemanranta area by the year took place in downtown Pori, tion in the first half of the year took pipeline for the Kapuli area in Mäntsälä. brought more tourists to Rovaniemi in tor Partners Group from Swedish Nor- Lake Vanajavesi. The first apartment where the Terveystalo property at It- place between PEAB and a private per- the past few years. This has had an im- dika Fastigheter AB in an 11-property buildings in the area will be completed senäisyydenkatu 33 was sold to the son and involved the historic Kalevan In Kerava, five new apartment buildings pact on construction, with several new portfolio. This transaction included this year. A total of 60,000 m2 of resi- special eQ Hoivakiinteistöt investment navetta building in the Itikanmäki area. will be completed in 2018–2022, and the projects now under way. Osuuskauppa three retail properties in Vaasa and dential construction is in the pipeline fund. The transaction price in this case The property spanning across 5,000 m2 new Karuselli shopping centre is set to Arina is expanding and renovating Pris- seven properties in Sweden. for the area. In addition, NREP has bro- was EUR 16 million, and Terveystalo will was built in the 1890s and is protected. open by the end of the year. In Järven- makeskus, which is set to be completed ken ground on the new Huhtamäki pro- stay on as a tenant with a 10-year fixed- The new pedestrian bridge brings the pää, construction of the city’s Perhelä by the end of the year. An extension The most significant property transac- duction facility in the Käikälä industrial term lease. property within walking distance from centre, comprising 10,000 m2 of retail measuring approximately 12,000 m2 in tion in the first half of the year involved park. The building is set to be complet- and office space and approximately 450 area is in the pipeline for the Eteläkeskus the Revontuli shopping centre in the ed in spring 2019, and Huhtamäki will apartments, is now under way. In addi- shopping centre. city centre, bought by Agore Kiinteistöt relocate its production in Hämeenlinna tion, YIT is planning a new 10,000 m2 Oy, a joint venture of ELO Mutual Pen- to the new facility. The transaction market has had a boost from retail centre in Nummela, Pori, by Porin- Residential construction has been buoy- sion Insurance Compely, Första AP- several large-scale portfolio transactions. tie and Citymarket department store. ant in the past few years, especially in Fonden and Trevian Asset Management. Residential properties located in Hä- the centre. YIT’s Kiela project is coming The seller, Barings Real Estate Advis- meenlinna were included in portfolio Earlier this year Swedish Nordika Fastigheter AB The transaction volume in the satellite to an end, with the construction of the ers, also sold the Galleria shopping cen- transactions earlier this year: properties sold a retail portfolio of 11 properties, three of municipalities has decreased slightly last buildings in the block set to begin in tre located in Lappeenranta. In addi- bought by Kojamo from OP Financial from last year. Earlier this year, a prop- the near future. In addition, a zoning tion, the portfolio comprising 1,600 Group’s funds and properties bought by which are located in Vaasa, seven in Sweden erty transaction significant to the satel- plan change is under way for the region- apartments that was bought by Morgan Morgan Stanley Real Estate Investing and one in Rovaniemi. lite municipalities took place when 123 al state administrative agencies block Stanley Real Estate Investing from Ko- from Kojamo. In addition, a residential consumer goods store properties ex- area and would allow apartments and a jamo for EUR 97 million included a resi- property still under construction in Hä- changed ownership in a portfolio. Four hotel to be built in the block. The prop- dential property in Rovaniemi. meenlinna was bought by Avara Asuin- of the properties were located in the erty owned by Senaatti is on sale at the kiinteistörahasto I Ky from construction Residential and retail properties sold in the centre, and the new owner will con- satellite municipalities. Sirius Fund I moment. company Lehto. The most significant of- portfolios were located in Pori. Residen- tinue its development. In addition, one Grocery and Sirius Fund II sold all of fice property transaction of the first half tial properties were included in a port- of twelve retail properties sold by Tre- their properties to the newly-founded of the year took place in May, involving folio sold by Kojamo to Morgan Stanley vian Asset Management Oy from the Cibus Nordic Real Estate AB, which was the 9,000 m2 logistics property built in Real Estate Investing and retail proper- Forte portfolio to Elite Kiinteistökehity- listed on Stockholm’s First North. The 2012 in the Moreeni area and leased by ties in Trevian Asset Management Oy’s srahasto I Ky was located in Seinäjoki. transaction had a value of EUR 767 mil- Posti Kiinteistöt Oy. The seller was the Forte portfolio, of which 12 properties lion, and the properties had an overall AKR Tuotto II fund managed by Auratum were sold to Elite Kiinteistökehitysra- SATELLITE MUNICIPALITIES area of approximately 440,000 m2. Kiinteistöt and the buyer a fund man- hasto I Ky. Helsinki satellite municipalities include aged by NREP. Hyvinkää, Järvenpää, Kerava, Kirkkon- In Järvenpää, Lujabetoni bought a ma- SEINÄJOKI ummi, Nurmijärvi, Sipoo, Tuusula, Vihti, chine shop property of 35,000 m2 on The opening of the Goodman shopping Construction remains buoyant in Seinä- Mäntsälä and Pornainen. Wärtsilänkatu, including the land from centre in 2014 shifted the city’s com- joki. The Toriparkki parking garage was Valmet Technologies, and is planning mercial centre towards the west, to the finally opened in March, and Lujatalo’s Residential construction has been on developing it into Finland’s largest Helsinki–Tampere motorway, decreas- and SSR Pohjanmaa’s residential prop- buoyant in the satellite municipalities concrete element factory. The property ing the occupancy rate of retail proper- erty projects in the centre were com- for several years and is set to remain comprises 30,000 m2 of high produc- ties in the city centre – a development pleted in the spring. Finn-Power is con- so. There are also several construction tion facilities, 5,000 m2 of office space which is still visible in the cityscape. structing a 20,000 m2 factory building projects either ongoing or in the pipe- and 25 hectares of land. The transac- in the Roves industrial area and is ex- line especially in logistics properties. tion price in this case was EUR 25 mil- PORI pected to be completed by the end of Frode Laursen is about to have a new lion. In addition, Cromwell Property Construction activity in Pori remains this year. 27,000 m2 logistics centre in the Kerca Group sold a logistics and small-scale moderate. The new urban seaside area area in Kerava. ’s new logistics cen- industry property of 8,000 m2 located in Karjaranta was developed for the Expansion and renovation of the Seinä- tre, with a floor space of approximately in Tuusula to private investors. 2018 Housing Fair, and the new trans- joki hospital are also continuing. YIT 60,000 m2 will be completed towards port hub constructed near the recently withdrew from the Lakeuden Ankkuri the end of the year near the Ainola sta- One of five residential properties sold completed Satakunta University of Ap- project, which is to be replaced by a re- tion. In Bastukärr, Sipoo, the construc- by construction company Lehto to Ava- plied Sciences. New stores were com- tail park: Toivo Sukari has signed a con- tion of Freeway Logistics City is set to ra Asuinkiinteistörahasto I was located pleted for household appliance and elec- tract with construction company Lehto continue at least until the end of this in Kirkkonummi. The total value of this tronics retailer Gigantti and sporting for the third Ideapark shopping centre, year. Hetzner Online is constructing a transaction was EUR 53 million. Some REAL ESTATE MARKETS IN FINLAND NEWSEC PROPERTY OUTLOOK AUTUMN 2018 41 ONGOING CONSTRUCTION PROJECTS OTHER CITIES

HELSINKI-VANTAA AIRPORT HELSINKI METROPOLITAN AREA 12 VANTAA 15 9 11

13

KAJAANI

7

3 6 5 22 8 7 2 KUOPIO 2 VAASA 16 3 SEINÄJOKI 10 8 20 ESPOO 1 16 JYVÄSKYLÄ 21 4 14 HELSINKI 17 13 6 15 TAMPERE 19 18 1 4 17 TURKU 5 11 14 18 12 10 9 KOTKA ESTIMATED ESTIMATED NAME PROPERTY TYPE RENTABLE AREA COMPLETION NAME PROPERTY TYPE RENTABLE AREA COMPLETION SHOPPING CENTRE LIPPULAIVA 1. (RECONSTRUCTION) retail 41,000 2020 / Q2 12. AVIABULEVARDI II office 8,000 2018 / Q4 ESTIMATED ESTIMATED 2. SHOPPING CENTRE REDI retail 60,000 2018 / Q3 13. TECHNOPOLIS III office 9,900* 2018 / Q3 NAME PROPERTY TYPE RENTABLE AREA COMPLETION NAME PROPERTY TYPE RENTABLE AREA COMPLETION

3. SHOPPING CENTRE TRIPLA retail 85,000 2020 14. K6 office 12,000 2019 / Q2 1. RETAIL AND OFFICE PROPERTY retail 2,600* 2018 / Q3 10. LOGISTICS CENTRE OF LIDL logistics 60,000* 2018 / Q4 retail, care, LOGISTICS CENTRE LOGISTICS PROPERTY (HQ OF DSV) 11,000* 2020 / Q1 logistics 2018 / Q4 4. LAAJASALO RETAIL CENTRE retail 8,200 2018 / Q4 15. logistics 64,000* 2018 / Q4 2. KUOPION PORTTI office 11. (PHASE II; LOGITRI OY) 15,580 EDUCATION- AND 5. LOCAL SERVICE CENTRE HERTSI retail, care 18,500 2021 16. education 26,000* 2018 / Q4 3. IDEAPARK retail 66,000* 2019 / Q4 12. UNIVERSITY OF APPLIED SCIENCE education 28,400* 2020 / Q1 OFFICE PREMISES

6. RETAIL PARK (LAAJALAHTI) retail 15,000 2018 / Q4 17. HOTEL (192 ROOMS) hotel 2020 / Q4 4. ZSAR OUTLET VILLAGE,PHASE I retail 12,000* 2018 / Q4 13. CENTRAL HOSPITAL OF KAJAANI public 46,300* 2021

CENTRAL HOSPITAL OF KYMENLAAKSO 63,000 HEADQUARTER OF office 20,750* 2019 / Q1 LAPLAND HOTELS BULEVARDI hotel 2018 / Q4 5. SHOPPING CENTRE LOHI retail 11,000 2019 / Q3 14. public 2019 / Q3 7. RAMBOLL FINLAND OY 18. (182 ROOMS) (REDEV. & EXT.) (ext.10,000) * ASEMAKESKUS CAMPUS OFFICE PROPERTY HOTEL HELLSTEN 6. office 13,200 2019 / Q3 TAYS EXTENSION (D-WING) public 27,100* 2020 / Q1 8. (KAUPUNKIYMPÄRISTOTALO) office 40,000* 2020 / Q2 19. (84 ROOMS) hotel 2018 / Q4 (PHASE 1) 15. HOTEL CENTRAL HOSPITAL 9. (PHASE I) office hotel 7. KOY TECHNOPOLIS MICROKATU 1 office 4,390* 2018 / Q4 16. public 99,800* 2020 TIKKURILAN SILKKI 5,000 2018 / Q4 20. (SÖRNÄINEN, 197 ROOMS) 2019 OF JYVÄSKYLÄ

10. K-KAMPUS office 26,000 2019 / Q1 21. HELSINKI CENTRAL LIBRARY public 12,100 2018 / Q4 8. POWERGATE II office 10,285 2019 / Q4 17. HYVINKÄÄ HOSPITAL EXTENSION public 22,800* 2018 / Q3 LOGISTICS CENTRE OF S-GROUP, 11. PRESSI (PHASE I) office 5,400 2019 / Q1 22. HUS HOSPITAL (SILTA HOSPITAL) public 35,000* 2022 / Q1 9. PHASES II-IV logistics 112,000* 2018 / Q4 18. T3 HOSPITAL public 54,000* 2021 / Q3

Source: KTI, Newsec *Gross Area Source: KTI, Newsec *Gross Area HOUSING MARKET NEWSEC PROPERTY OUTLOOK AUTUMN 2018 43

The Finnish housing market is polaris- ing fast. There are no common trends, but regional differences are signifi- cant. All aspects of the metropolitan area, Tampere and Turku are experi- encing strong growth, and ten or so other areas are growing but with cer- tain reservations. In some towns, rent- al apartment build-ings are being de- molished as demand has died, most HOUSING MARKET likely permanently, and municipalities are facing great challenges. In some smaller towns on the other hand, in- dustrial and even tourism investments are creating housing demand that the We have received requests asking us to include a more com- rental apartment market of a previ- prehensive overview of the housing market in our property ously declining area cannot even begin market outlook, which we are pleased to present to you here. to meet. In conclusion, the housing Newsec’s expertise in relation to the housing market is the market remains busy and local market most versatile in the field. We are involved in transactions expertise is needed. for apartments on an ongoing basis and manage client port- folios comprising 14,000 apartments. Thanks to our exten- In Helsinki, the number of rental house- sive housing business, we have our finger on the pulse of the holds has already surpassed the number rental market, making approximately 300 new apartment of owner-occupied households, and leases per month, with our clients’ portfolios growing thanks many other factors also support the con- to new completed properties waiting for pricing and market- tinuing growth of rental apartment de- ing. We have some 50 professionals working in housing in mand, which is being met by record-high eight different locations. construction activity. A solvent tenant can certainly pick and choose, meaning In addition to housing management and transactions, News- that the market is also very efficient ec offers its clients comprehensive valuation services. We from the enduser point of view. Con- define the apartment portfolio market values for our numer- struction companies are operating at the ous clients annually. The need and scope of valuation is de- limits of their capacity, and while rental termined separately for each client, and with our extensive apartment production seems to be fall- market data base and advanced valuation tools we can draft ing behind demand, it is worth remem- apartment valuations efficiently and accurately. Our valua- bering that many privately owned apart- tion team consists of approximately twenty real estate pro- ments end up on the rental market fessionals, with annual property valuations amounting to ap- through private investors and smaller proximately EUR 15 billion in value. The latest product we are housing funds. This stock can easily ad- offering our clients is an apartment valuation tool which can just to the market situation: if a tenant be used to make a fast valuation when, for example, making cannot be found, the apartment is easily a credit decision. sold. 2017 broke records both in terms of apartments completed and apartment construction started. The construction of more than 44,000 apartments start- ed, which exceeds the average of the 2010s by approximately 34 per cent. A great number, some 35,000, of new apartments were also competed. Even if 2018 has not reached those figures in new construction projects, a considera- ble number of new apartments will be completed, which will inevitably be re- flected on the rental apartment market.

In the production of new apartments, the average apartment size has been in HOUSING MARKET NEWSEC PROPERTY OUTLOOK AUTUMN 2018 45

DEVELOPMENT OF APARTMENT PRICES AND RENTS 2000-2017

THE SIGNIFICANCE OF INCOME RETURN INCREASES 250 FURTHER IN AREAS WHERE PRICE DEVELOPMENT OF APARTMENTS IS NOT ON PAR WITH THAT OF THE 200

METROPOLITAN AREA AND LARGER GROWTH CENTRES. 150 THESE AREAS ALSO ATTRACT INVESTORS: WHEN RISKS ARE CONTAINED, YIELDS CAN BE 100

EXTREMELY TEMPTING. 50

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Apartment prices, Rest of Finland Rents, Rest of Finland Apartment prices, HMA Rents, HMA Source: Statistics Finland

decline for a long time now, and the something the residents are willing to rise in apartment prices in growth cen- the same as the rents trend for non-sub- kind of competitive situation for domes- investor market is fairly liberal for for- trend is even stronger on the rental sacrifice. tres and in the metropolitan area in par- sidised rental apartments, whereas else- tic operators, but also an opportunity eign investors, and less regulated yet apartment market. Changes in living ticular. The significance of income re- where in Finland rents have contin-ued to benefit from the vibrant market, for sufficiently standardised compared to preferences and the declining average As investment instruments, apartments turn increases further in areas where to rise while price development has example by selling older apartment many other European countries. size of households have increased the differ from other property types due to price development of apartments is not stagnated. stock and focusing on increasing the demand for smaller apartments. While the strong element of change in value. on par with that of the metropolitan amount of new construction in their the average floor area of an average When making an investment decision, a area and larger growth centres. These Several foreign operators have arrived own portfolio. The Finnish apartment rental apartment completed in the traditional apartment investor consid- areas also attract investors: when risks on the Finnish apartment investment 1970s is typically higher than 55 m2, it ers both rent yield and the property’s are contained, yields can be extremely market in the past few years, and our can be as low or even lower than 45 m2 potential for value increase, which is tempting. Rents do not traditionally de- housing market is viewed as an attrac- in new rental apartment properties. not always as significant in other prop- crease like apartment prices, even in tive investment option. In the current Growing living expenses and the resi- erty types. Looking at total return, i.e. municipalities experiencing an econom- climate, it is very common for an apart- Antti Poteri Risto Mustaniemi dents’ desire to keep the total rental the sum of income return and capital ic downturn. The adjacent figure shows ment portfolio on sale to attract both Analyst Director, Residential Business cost at a moderate level have their role growth, apartments have long been the that the price development trend for domestic and foreign investors, as long Newsec Newsec in directing consumers to increasingly property type most profitable to inves- older apartment building apartments in as it is a substantial enough investment. +358 40 776 0787 +358 40 041 0119 small apartments, and apartment size is tors, which is largely due to a prolonged the metropolitan area has long been Naturally this creates an entirely new [email protected] [email protected] INFORMATION ABOUT NEWSEC NEWSEC PROPERTY OUTLOOK AUTUMN 2018 47

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