According to Savills, the Swedish investment market has witnessed its strongest first quarter in history, with real estate transactions topping SEK 42bn (€4bn), an increase of 54% compared to Q1 2018. Offices, followed by storage/industrial and residential properties accounted for a combined 81% of the Q1 2019 transaction volume according to the international real estate advisor.
Peter Wiman, Head of Research, Savills in Sweden, says: “In what has been a record first quarter for Swedish real estate investment, offices were the preferred asset class, accounting for 29% of all investments, equalling SEK 12bn (€1.2bn). The property fundamentals for the sector are bright. Thanks to a strong labour market and solid business expansion, office vacancy rates have hit record lows in the three major Swedish cities of Stockholm, Gothenburg and Malmö, hence pushing rents up over the past years. Due to the tight supply situation in CBD markets, secondary locations are becoming increasingly popular as long as they are well-connected.”
The logistics and industrial sector produced by far its strongest quarter ever with a turnover of SEK 11.5bn (€1.1bn) according to Savills. As a result of growing online sales, investor interest in logistics and retail warehousing is increasing, thereby putting downward pressure on yields. Prime logistics and prime retail warehouse yields experienced the highest compression of all sectors over the past year. However, volumes have been restrained by lack of supply until now, when investors who entered the sector early and logistic developers seize last years’ yield compression.
Residential properties also had a strong first quarter with an investment volume of SEK 10bn (€960m) and a market share of 24%. Noteworthy, forward funding deals represented 64% of the residential investment volume. Since 2010, the number of forward funding deals has steadily increased. Investor interest is strong for all types of residential assets, both new builds and old stock, hence Savills expects volumes in the sector to remain high throughout 2019.
Niklas Zuckerman, Head of Investment at Savills in Sweden, says: “The outlook for the remainder of 2019 is positive, based on the current fundamentals and continued demand for real estate investments, especially from foreign investors with cross-border activity already accounting for 44% of all investments. It is likely that the logistics and industrial sector will experience a record year after an impressive start where strong investor appetite has been nourished by an increasing supply. A strong development pipeline indicates supply will continue throughout the year and we expect that the year-end volume will achieve record levels.”
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