PATRIZIA INVESTMENT COMPASS FINLAND 09|2017 FINLAND FROM A REGIONAL PERSPECTIVE: WHAT INVESTORS NEED TO KNOW For today’s real estate investors, the well- Looking at Finland, urbanisation began a few big centres for which growth was known megatrends of ageing, urbanisation, relatively late in comparison with other based on the export and high-technology technology and big data are the long-term European countries. This process, which industries. From an investment point of determinants when developing their invest- only began in the 1960s in conjunction view, this was the time the Finnish mar - ment strategies. Interestingly, two of these with increased motorisation and accessi - ket opened up for international investors, megatrends — ageing and urbanisation — are bility, has taken place all the more rapidly, but they only focused on Helsinki. Only subcategories of the overall demographic changing the country fundamentally over in the mid 2000s, as growth spread to a development within a country or region the last 50 years. During this develop - few other large towns, international insti - and are consequently heavily interlinked ment the population has concentrated tutional investors started to look beyond with each other. Demographics is therefore largely to the southern part of Finland Helsinki for investments. the most important driver for all long-term and there are nowadays only a few growth property investment decisions, making a centres within the country. During this thorough understanding a prerequisite for urbanisation process the number of cities success for a long-term investor such as and towns in Finland increased by nearly a pension fund or an insurance company. 60 % between 1950 and 2010 and, today, Having said this, urbanisation can be seen about 81 % of the population lives in urban as the crucial component of demographics, areas and the immediate surroundings. as it is about the spatial distribution of the During this process, the 1990s in parti - population and real estate is an immobile cular was a time of great economic unrest asset making a regional adjustment of and structural change. During these any investment nearly impossible, if the years, migration was largely directed demand base disappears. from rural and smaller urban areas toward URBANISATION WILL LARGELY TAKE PLACE IN THE SOUTHERN PART OF FINLAND. Rovaniemi WHERE DO 50 % OF FINNS LIVE? Oulu Vaasa Kuopio Joensuu Jyväskylä Pori Tampere Lappeenranta Lahti 2036 Turku Vantaa 2016 Espoo Kotka 1976 Helsinki 1950 Source: PATRIZIA, ArcGIS, Statistics Finland A notable feature of the whole urbanisation The Greater Helsinki area constitutes 25 % As this urbanisation process was accom- process in Finland is the small size of most of the country’s population, including three panied by structural economic change, of the cities and towns in terms of popula- cities with more than 200,000 inhabit- from an economy driven by the primary tion numbers. More than 80 % of them have ants: Helsinki (population of 630,000), and partly secondary sector to an econ- a population of less than 50,000 inhabit- Espoo (270,000) and Vantaa (215,000). omy driven by the tertiary sector, it is ants and only eight of them are exceeding Other major cities are Tampere (225,000), no surprise that, in relative terms, eco- 100,000 inhabitants. Consequently, this Turku (186,000), Oulu (199,000), Jyväskylä nomic activity and employees are even urbanisation process has resulted only in a (137,000), Lahti (119,000) and Kuopio more concentrated in the cities in com- very limited number of sizeable, liquid invest- (117,000) of which all except Oulu are parison with the overall population. This is ment markets for institutional investors. located in the southern part of Finland. related to the fact that in the capital region The Greater Helsinki area offers sizeable real estate investment products. in particular there is a great deal of com - only sizeable economically active invest- more concentrated compared with the muting from the suburbs to the city cen - ment market located in the region from an overall population will make this develop - tre. The capital region, other main growth institutional investor’s point of view. ment felt within the next two decades. centres and county centres are the true Consequently this generates a special drivers of the economy. A significant per- As the population will continue to con - focus on knowledge hubs such as univer - centage of economic activity is concen - centrate in Finland, with 90 % and more of sities when deciding about investments trated in the Helsinki metropolitan area, the whole population living in urban areas as these institutions and the affiliated as well as in regional centres in the south- in the coming 30 years, investors have research institutes will be the growth ern part of the country with a university to be careful in the selection of possible drivers and job generators of the future. or other public or private research institu- investment locations. Although we are For investors this results in an invest - tions. As the northern parts of Finland are talking about a long-term development, ment focus on the Greater Helsinki area extremely sparsely populated, Oulu is the the fact that economic activity is even (Helsinki, Espoo and Vantaa), especially TRANSACTIONS VOLUME IN THE FINNISH PROPERTY MARKET (BILLION EURO) 8 Domestic buyer International buyer 7 6 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: KTI STRUCTURAL CHANGE IN FINLAND FROM A REGIONAL POINT OF VIEW Rovaniemi Rovaniemi in %-points Oulu in %-points Oulu < 0 < 0 0 – 0 , 5 1 – 2 Kuopio Kuopio 0,5 – 1 , 0 Vaasa Joensuu 2 – 3 Vaasa Joensuu Jyväskylä Jyväskylä 1,0 - 3 , 5 3 – 4 Pori Tampere Pori Tampere > 3,5 Lahti Lappeenranta > 4 Lahti Lappeenranta Turku Vantaa Kotka Turku Vantaa Kotka Espoo Espoo Helsinki Helsinki Change of share of GDP of agriculture and mining 2000 – 2015 Change of share of GDP of service sector 2000 – 2015 Rovaniemi Rovaniemi in %-points Oulu in %-points Oulu < -2,5 < 0,5 -2,5 – 2 ,0 0,5 – 1 , 0 Kuopio Kuopio -2,0 – 1 , 5 Vaasa Joensuu 1,0 – 3 , 5 Vaasa Joensuu Jyväskylä Jyväskylä -1,5 – 0 , 5 3,5 – 5, 5 Pori Tampere Pori Tampere > -0,5 Lahti Lappeenranta > 5,5 Lahti Lappeenranta Turku Vantaa Kotka Turku Vantaa Kotka Espoo Espoo Helsinki Helsinki Change of share of jobs in agriculture and mining 2016 – 2030 Change of share of jobs in service sector 2016 – 2030 Source: PATRIZIA, ArcGIS, Oxford Economics if focusing on office investments, but local in nature with smaller lot sizes due investors, should be careful and very also Turku, Tampere, and Oulu should be to their absolute size and their inter - selective if they consider investing in any seen as attractive in the long-term and national accessibility. Looking at Lahti, of these cities as the structural changes consequently liquid investment markets, and especially at Jyväskylä and Kuopio, underway in the Finnish population and although the investment markets of the the situation is more ambiguous and economy will challenge these cities more latter three cities will always be more long-term investors, particularly foreign in comparison with the others. Disclaimer: This publication is purely for general information and not a prospectus. The information contained in this report is based on publicly available sources that we believe to be reliable. We cannot guaran- tee the correctness or completeness of information. All statements of opinion reflect the current estimations of the author and do not necessarily reflect the opinion of PATRIZIA Immobilien AG or its associated companies. The opinions expressed in this publication may change without prior notice. 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