Country s Second quarter 2017 Please click on the appropriate sector to view Offices Retail Industrial About & Contacts
Office Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Vacancy is still high - although declining - and rents are generally stable, but there is some potential uplift for quality stock in the key office locations. Prime yields are expected to further decrease in the short term. Supply: Supply is expected to be stable during 2017-2018. Demand: We see strengthening of demand in the short term. Prime Office rents June 2017 LOCATION US$ GROWTH % MTH SQ.FT 1 5 CAGR Helsinki (City Centre) 35.50 426 44.2 4.4 3.4 Helsinki (Out of Town) 21.75 261 27.1 1.2 2.7 Turku 17.00 204 21.1 3.0 2.5 Tampere 21.50 258 26.7 2.4 3.1 Oulu 15.00 180 18.7 0.0 n/a Prime Office yields June 2017 LOCATION (FIGURES ARE NET, %) Helsinki (City Centre) 4.10 4.25 4.40 6.00 4.10 Helsinki (Out of Town) 5.20 5.25 5.75 6.95 5.20 Turku 7.00 7.00 7.25 8.00 5.80 Tampere 6.50 6.50 6.75 7.75 5.80 Oulu* 7.50 7.50 7.50 7.50 7.00 Note: *4yr record. With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Yield - Prime Rental Growth - Prime Rental Growth - Country Average 8.00% 15.0% 7.00% 10.0% 6.00% 5.0% 5.00% 0.0% 4.00% -5.0% 3.00% -10.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview During Q2 2017 the GDP growth estimate for 2017 was revised up by 110 bps to 2.1% compared to the estimate made in Q1. The rather drastic change is mostly due to improving household consumption and accelerating export sector. The office sector continued to attract investors, which lead to compression of yields in key locations of Helsinki. Minor rental growth was also recorded in Helsinki in both prime and secondary locations. Occupier focus Occupier demand continued to grow during the second quarter of 2017, and the overall vacancy declined (-50bps from 14.2% in Q1 to 13.7% in Q2). The demand remains to be mostly towards smaller units (200-300 sq.m) in modern buildings with good locations. In Q2 2017 some 10,000 sq.m of new office premises were completed in Vantaa. Also, there is an estimated 48,000 sq.m due to be completed in the HMA during 2017 and further 54,000 sq.m in 2018. The current market conditions will support positive rental growth at the prime end of the market. For secondary properties, the rental levels are estimated to remain stable. Investment focus Total office investment volume equaled Q1 220 mn, totaling 440 mn for H1 2017. The investor base in Q2 consisted of private property vehicles and companies with roughly an equal share of 50%. International investors (mostly Swedish) accounted for around 67% of office deals in Q2. Investor demand is still clearly focused on prime product. However, the demand for secondary office properties has increased during 2016 and H1 2017, as the lack of quality product has forced investors to look broader for opportunities. Outlook Prime, well-let assets will remain a key focus for investors, although demand for non-core assets has improved and will attract more investors. The occupational market has shown good signs in the first half of 2017 and is expected to further improve since the economy is forecasted to continue building good momentum. cushmanwakefield.com
Office Market LOCATION BUILT STOCK AVAILABILITY VACANCY RATE NET ABSORPTION NET ABSORPTION UNDER CONSTRUCTION () () (%) () () () Helsinki (CBD) 420,000 25,200 6.0% 8,800 15,100 0 Helsinki (Ruoholahti) 406,000 35,500 8.8% 1,200-400 8,000 Helsinki (Pasila/Vallila) 580,000 45,000 7.8% 6,400 8,100 34,000 Helsinki (Pitäjänmäki) 475,000 107,700 22.8% -1,400-2,400 0 Espoo (Keilaniemi/Otaniemi) 325,000 57,700 17.8% 8,500-29,600 0 Espoo (Leppävaara) 231,000 42,600 18.5% -900 3,000 20,700 Vantaa (Aviapolis) 268,000 21,400 8.0% 500 2,700 13,000 Helsinki Metropolitan Area (Overall) 13,573,107 1,185,000 13.7% 102,000 Source: Cushman & Wakefield Key Occupier Transactions PROPERTY SUBMARKET TENANT SIZE () TRANSACTION TYPE Ässäkeskus (Fleminginkatu 34) Helsinki (Vallila) SOK 41,000 Resigned lease Iso Paja Helsinki (Pasila) VR Group (move in date in H1 2018) 20,000 Lease Lönnrotinkatu 18 Helsinki (Kamppi) Bonnier Books Finland n.a. Lease Keilalahdentie 2-4 (Microsoft Building) Espoo (Keilaniemi) Fortum n.a. Sublease Source: Cushman & Wakefield Key Investment Transactions PROPERTY SUBMARKET SELLER / BUYER YIELD PRICE MILLIONS Itämerenkatu 3 Helsinki (Ruoholahti) Yleisradion Eläkesäätiö / Antilooppi n.a. 27.7 Portfolio of four office assets Espoo, Helsinki, Oulu n.a. / Elite Kiinteistökehitysrahasto I n.a. 30 Portfolio of three office assets Espoo, Helsinki Tristan Capital Partners & Varma (JV) / Nordika n.a. n.a. Keilaranta 4-8 & Miestentie 1 Espoo (Keilaniemi) Fund managed by JP Morgan / Alma Property Partners n.a. n.a. Source: Cushman & Wakefield This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield LLP. All rights reserved. Keskuskatu 1 A, Helsinki, 00100, Finland Tel: +358 10 836 8455 cushmanwakefield.com / cushmanwakefield.fi
Retail Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Supply: Demand: Stable rents, although some marginal growth potential in the best prime high streets in Helsinki. Yield compression expected for prime high street retail and shopping centres, but stable across all other retail segments. Increased supply in 2017-2018, mainly through new shopping centre developments. Steady demand or slight improvement for prime assets in Helsinki and for the best retail stock in dominant regional cities. Prime Retail Rents - June 2017 HIGH STREET SHOPS US$ GROWTH % MTH SQ.FT 1 5 CAGR Helsinki 133.50 1,602 166 2.7 0.2 Turku 65.00 780 81 0.0-1.5 Tampere 70.00 840 87 0.0-2.6 Oulu 60.00 720 75-14.3 n/a Prime Retail Yields - June 2017 HIGH STREET SHOPS (FIGURES ARE GROSS, %) Helsinki 4.25 4.40 4.50 5.80 4.25 Turku 6.00 6.00 6.00 7.20 5.65 Tampere 5.75 5.75 5.75 6.95 5.40 Oulu* 6.50 6.50 6.50 7.00 6.50 SHOPPING CENTRES (FIGURES ARE NET, %) Country prime 4.40 4.50 4.80 5.80 4.40 Note: *4yr record. With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Yield - Prime Rental Growth - Prime Rental Growth - Country Average 7.00% 20.0% 6.00% 15.0% 10.0% 5.00% 5.0% 4.00% 0.0% -5.0% 3.00% -10.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview During Q2 2017 the GDP growth estimate for 2017 was revised up by 110 bps to 2.1% compared to the estimate made in Q1. The rather drastic change is mostly due to improving household consumption and accelerated export sector. According to Statistics Finland, consumer confidence continued to increase from 22.9 in March 2017 to 23.9 in June 2017. The highest recorded value was reached in May 2017 (24.1). Occupier focus Retail occupier demand in Q2 2017 showed strengthening compared to Q1. The improved demand is mostly towards prime locations. Due to improvement in the demand the retail rents increased in the Helsinki CBD. However, in the other sector the rents remained steady. Demand is expected to further improve in key retail locations and the prime rents in the Helsinki CBD are expected to further increase during 2017. In Q2 2017 some 32,000 sq.m of new retail premises were completed in the HMA. Development activity is expected to further improve in the coming years, with over 350,000 sq.m of new shopping centre space due to delivered in 2017-2019. More than 60% of new shopping centre space will be opened in the Helsinki area. Although strong supply in the retail market when comparing to annual growth in demand through population growth and improved purchasing power the pace of annual completions indicates even the HMA shopping center segment is fairly balanced or even short of supply. Investment focus There were no major changes in the investment focus for the retail sector compared to Q1. Investment volumes in the retail market were 410 mn in Q2, with a largest deals being the Skanssi shopping centre in Turku and 10 retail property portfolio sold by Elo. International investors accounted for around 43% of retail deals and the most active investor type was private property vehicles. Outlook The retail property market is expected to remain relatively stable with an increasingly positive outlook. Occupational and investor demand is estimated to improve and some yield compression is expected in the prime locations in 2017. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield LLP. All rights reserved. Keskuskatu 1 A, Helsinki, 00100, Finland Tel: +358 10 836 8455 cushmanwakefield.com / cushmanwakefield.fi
Industrial Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Supply: Demand: Low demand and limited new supply should maintain a relative stability in the market for rents. Prime yield compression is estimated for 2017 as the demand for prime products remains high. Vacancy should remain fairly stable and new supply will be driven by prior commitment. Demand, for both occupiers and investors, will concentrate on best in class assets. Prime Industrial Rents June 2017 LOGISTICS LOCATION US$ GROWTH % MTH SQ.FT 1 5 CAGR Helsinki 9.25 111 11.51-2.6-1.0 Turku 7.75 93 9.64 0.0 0.0 Tampere 7.75 93 9.64 0.0 0.0 Oulu 7.00 84 8.71 0.0 0.0 Prime Industrial Yields June 2017 LOGISTICS LOCATION (FIGURES ARE NET, %) Helsinki 6.10 6.25 6.40 8.00 6.10 Turku 6.85 7.00 7.40 9.40 6.85 Tampere 6.85 7.00 7.40 9.40 6.85 Oulu* 7.40 7.50 7.90 8.75 7.40 Note: *4yr record With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Rental Growth - Prime 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% Yield - Prime Rental Growth - Country Average 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview During Q2 2017 the GDP growth estimate for 2017 was revised up by 110 bps to 2.1% compared to the estimate made in Q1. The rather drastic change is mostly due to improving household consumption and accelerated export sector. The export sector is estimated to further increase in 2017, however mostly through cyclical and temporary factors. Investor demand exists, albeit exclusively for prime product, and despite the limited activity during H1, logistics yields hardened by 10bp-15bps across a number of markets. Occupier focus The activity pattern seen in 2016 and early 2017 remains largely unchanged in the second quarter of 2017. The absorption of space remains limited. The average vacancy in the HMA remains at 6.0%. In Q2 2017 some 35,000 sq.m of new logistics space was completed in the HMA. The new developments mostly consists of a new cargo terminal for Finnair. There are currently some 42,000 sq.m of new logistics premises under construction in the HMA to be completed in 2017-2018. Lower cost of land is focusing new logistics development to the outer parts of the HMA (e.q. Sipoo and Kerava). Investment focus Low investment activity in the industrial sector continued in Q2, with transaction volume totaling only 30 mn, mainly due to the lack of prime properties for sale. Demand remains strong, however, both from domestic and international investors but there is a clear focus on high quality income producing properties. Prime yields in Q2 were at 6.1% in Helsinki and are around 75-130 bps higher in the regional markets. Outlook As the export sector is estimated continue accelerating in 2017, there is likely to be some more activity on the industrial occupier market. The fundamentals underpinning the industrial real estate sector will remain stable, with further consolidation by occupiers dominating activity going forward. Indeed, volumes are unlikely to pick-up dramatically until the long-term performance of the economy improves. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield LLP. All rights reserved. Keskuskatu 1 A, Helsinki, 00100, Finland Tel: +358 10 836 8455 cushmanwakefield.com / cushmanwakefield.fi
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