NEWSEC PROPERTY OUTLOOK AUTUMN 2018 1 NEWSEC PROPERTY OUTLOOK FINLAND 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 HELSINKI METROPOLITAN AREA 18-21 HELSINKI CITY CENTER 22-25 TAMPERE 26-29 TURKU 30-33 OULU 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 like 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 retail 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 Employment rate / trend 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.