The Nordic real estate markets have come close to a standstill since the arrival of the credit squeeze last summer. There has yet to be any significant falls in values, though, because the local economies still are strong and domestic players are re-emerging.
Lars Almquist, head of Protego Real Estate Investors in Sweden, believes that the region has held up better than elsewhere in Europe. “There is some slowing in GDP growth across the region, but it is still outperforming any of the other western European regions,” he says. “The economy looks good and the real estate market hasn’t really fallen out of balance.”
Last year, Sweden saw gross domestic product growth of 2.8%, a marked drop from its 4.4% growth rate in 2006. SEB Bank estimates that growth will be 2% this year, and will then fall to 1.3% in 2009. The country’s real estate market, the largest in the region, has been supported by large international investors buying large portfolios. The lack of debt has dampened demand for these large assets and more single assets are being traded as a result.
The €1.13bn sale of the City of Stockholm’s portfolio of ten Stockholm retail centres to Boultbee last summer was the Nordic countries’ biggest deal to date. Since then, the Swedish retail market has generated no transaction sized bigger than €150m, a clear sign that large deals are not taking place.
Three big Nordic deals are in the works. Norwegian Properties is selling Norgani hotels six months after buying it. Also in Norway, a private investor is selling property developer and property company
Steen & Strøm. In Sweden, the government is selling Vasakronan, a SKr45bn (€4.79bn) property company.
The sales process is taking a long time because financing is difficult to obtain and such large portfolios would give a new owner a big exposure to a single country or sector.
“As a result of the credit squeeze, things are sitting on the market for a few months,” says Peter Helfrich, country manager for Sweden, Finland and Denmark at ING Real Estate Investment Management.
Trond Sejersted Bødtker, an agent at Heilo Eiendom, Savills’ affiliate in Norway, said that sellers are reluctant to destroy their portfolios by marketing them to a broad audience. “They would sooner test out a few potential players,” he says. “We have had people approach us and say they want to sell assets, but we don’t want the market to know.”
With many investors taking to the sidelines, the property market has turned into a wait-and-see game. Some investors saw real estate as a financial instrument and that strategy no longer works. These investors have left. Real estate companies with enough equity behind them and the ability to manage the assets, are regaining control of the market.
