In the last edition of the Newsec Property            survive the pandemic. I dare to state the
Outlook we concluded that the pandemic had            opposite – the concept of the office will not
accelerated several developments and trends           be rendered obsolete.
already taking place in society pre-covid-19.
The concept of the office in the wake of the          In the history of humanity, the office is a
pandemic has been under a lot of scrutiny and         relatively new phenomenon driven by our urge
we will now take a closer look at this theme. In      to enable communication, increase efficiency
this edition of the Newsec Property Outlook,          and fulfill the organization’s goals. The office
we explore what the future holds for the office       also works like a glue in sticking the individual
market in the Nordics and Baltics.                    pieces together, by offering a physical place
                                                      where the members of an organization socially
Over time, we have seen a gradual shift in terms      interact with one another to build the company
of office space. The trend has been fewer square      culture and enforce its core values.
meters per person, as we have gone from
working in individual rooms to open landscapes        I strongly believe that the office will hold even
and activity-based offices. Not to mention co-        more importance in terms of a company’s
working that has experienced a great hype in the      competitiveness going forward. Having the
last few years.                                       right kind of office in the right location will be
                                                      key to attracting and retaining the most sought
Then the pandemic struck, really putting              after employees. And after all, the employees
digitalization and flexibility to the test as         are one of, if not the most, important asset of
governments urged offices to close and every-         an organization. We will surely see continued
one that possibly could to work from home.            developments and new usages as our behavior
It is impressive to see the giant leap that we have   changes, but I am certain that the office will
taken in these last months, but I also think that     continue to evolve and meet our needs. As Mark
this has made one point very very clear, at least     Twain put it: “the reports of my death are greatly
for me personally… Fine, it works. But nothing        exaggerated”.
more than that.
                                                      With that, I wish you an interesting read!
Rather, it has reenforced my belief in the
importance of the office. Nothing can compete
with meeting in person. What happens in the
human interaction when we meet face to face
is irreplaceable, whether it is about creativity,
creating a sense of community or building a
company culture. Some voices have been                Max Barclay,
certain that the office as a concept will not         Head of Newsec Advisory


Property in uncertain times............................................................................................. 7

The death of the office has been greatly exaggerated ........................... 12

The Swedish Property Market .................................................................................... 18

The Norwegian Property Market ............................................................................. 20

The Danish Property Market ....................................................................................... 22

The Finnish Property Market ...................................................................................... 24

The Estonian Property Market .................................................................................. 26

The Lithuanian Property Market ............................................................................. 28

The Latvian Property Market ..................................................................................... 30

European Property Markets ........................................................................................ 32

Macroeconomic data.......................................................................................................... 34

Property data ........................................................................................................................... 37

Definitions .................................................................................................................................... 41

The Newsec Property Outlook Team ................................................................... 42

The Full Service Property House ............................................................................ 44

Newsec’s market reports ............................................................................................... 45

Contact and addresses .................................................................................................... 46

Copyright Newsec © 2021
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 responsibility for any
damage or loss suffered by reason of the inaccuracy of this report.

Newsec, Box 7795, SE-103 96 Stockholm, Sweden. Phone + 46 8 454 40 00,

You may use the information in the Newsec Property Outlook but acknowledge-
ment must be made for all quotations and use of data/graphics.

Cover photo: iStock

THE NORTH        Newsec, the Full Service
              Property House in Northern
                Europe, is the solid choice
             of partner within Advisory and
             Property Asset Management.
             With sharp analyses, hard facts
                and just the right skill set,
                 we’ve got you covered.
NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                   PROPERTY IN UNCERTAIN TIMES ●

                                                                                                                               Photo: Maskot
Klas Eklund, Senior Economist, Mannheimer Swartling

We live in strange and turbulent times. In 2020, the economies of all Nordic countries contracted. Still, their property
markets showed strong resilience – both prices and transaction volumes. The main reason was strongly expansionary
policies in all countries. Asset markets – both stocks and real estate – are supported by monetary policy, in particular
negative real interest rates. Thus, an analysis of future developments must factor in actions from central banks to a
larger extent than usual. The basic forecast is continued strength of the property markets in 2021 and 2022 – but with
downside risks in the longer run.

Wild swings                               Differences between sectors and          nominal key rates were negative in
The economic development in Europe        countries have been large. Manufac-      both Finland and Denmark, and zero in
showed strong gyrations in 2020, as       turing has fared better than services.   Norway and Sweden. Thus, real rates
the pandemic spread and lockdowns         A number of countries like the UK,       were negative in all countries. Central
followed. There was a sharp contrac-      Spain and Italy on the one hand con-     banks also pursued QE, quantitative
tion in Q2, a bounce-back in Q3, and      tracted by some 10 per cent in 2020.     easing, meaning they bought large
then a second slowdown in Q4, leading     On the other hand, the Nordics did       amounts of bonds to press down
to a new, but milder contraction in       better, with GDP shrinking by 2–4 per    market yields. 10-year real govern-
Q1 of 2021. The pattern, consequent-      cent. Bad numbers, but not as abysmal    ment bond yields are negative in all
ly, has been similar to a W, with the     as was feared in the spring of 2020.     countries. In all four Nordic nations,
second downturn less severe than the      Strong support from fiscal and mon-      fiscal policy also turned expansionary
first.                                    etary policy gave relief. By year-end,   last year, with budget deficits rising.         →


»There is a good chance that growth
numbers, in particular for private
consumption will be strong in 2022«

These efforts supported asset               good chance that growth numbers, in          inflation. American bond yields have
markets. After the initial fall of stock    particular for private consumption will      started to move up – albeit from low
markets as the pandemic broke, mon-         be strong in 2022.                           levels. A return of inflation obviously
etary support made equities bounce                                                       would have massive repercussions on
back and stocks reached all-time highs      However, the expected upturn starts          bond yields – and real estate.
by year-end. Real estate markets            from a low level of capacity utilization,
were resilient in all four countries        with high unemployment. In this              In the spring of 2021, consumer
throughout 2020, and segments of            respect, annual numbers for the whole        prices (CPI) are rising sharply in most
the markets reached all-time highs.         of 2021 may not look particularly            advanced economies. But this is a
Transaction volumes were also strong,       strong, even if growth rates per se will     temporary phenomenon, caused by
in several cases also surpassing            be high during H2. Sticky unemploy-          “base effects”. Firstly, the pandemic
previous peaks.                             ment means that economic policy will         is changing the weights of different
                                            remain expansionary throughout all of        consumption items in the CPI basket.
Looking ahead                               2021. Key rates will stay low.               Secondly, a year ago, oil prices col-
The outlook is uncertain. A gradual                                                      lapsed. Now both oil and other com-
recovery is the baseline scenario, but      This will continue to support asset          modities are rising again, and as last
there are upside as well as downside        markets. The question that will arise        year’s negative values fall out of the
risks which are impossible to quantify.     is whether the boom has gone too             12-month statistics and are replaced
On the one hand, vaccines are being         far. Equity valuations are indeed very       by positive numbers, reported prices
rolled out and pent-up demand may be        high: for the US S&P 500 the p/e ratio       on an annual basis automatically rise.
unleashed as a return to some kind of       is now the highest since 1929 (after         In several countries, CPI will reach 2
normalcy ensues. On the other hand,         which came the stock market crash)           per cent or above.
there is a risk of a third wave of infec-   and 1999 (after which followed the IT
tions and lockdowns, as new forms of        crash). No wonder some investors are         But this is a one-off effect, which will
the virus emerge and vaccination is         starting to fret, searching for alter-       ease as soon as more new numbers
delayed.                                    native investments, creating froth in        are incorporated into the 12-month
                                            subsegments of risky assets.                 series. The consensus view is there-
While this creates uncertainty in                                                        fore that inflation will fall back, due to
the short to medium term, we also           However, if we study historical yields,      low capacity utilization. So in H2, infla-
encounter uncertainty concerning            we find that this peak is different. Real    tion numbers should be back down to
structural changes as a result of the       bond yields are negative – at the same       low levels again. But looking further
downturn and technical change. Dig-         time as inflation is extremely low.          ahead – into 2022 and 2023 – raises
italization has taken a leap forward,       Thus, it would seem that the key to          several uncertainties.
affecting shopping, working, living         high equity valuations is the low level
and commuting. This will have conse-        of interest rates. With rates as low as      Wages have historically been a pri-
quences for real estate.                    today, it is not difficult to justify high   mary driver of costs and inflationary
                                            equity valuations.                           pressure. Given that unemployment
A reasonable starting point is that                                                      is high and capacity utilization low,
the first quarter of 2021 will prove to     Inflation?                                   it is difficult to see any rapid, cost-
be weak, and that the cycle bottoms         Will rates remain low? This raises the       inflating rise in wages in the near
out in the second quarter. This would       issue of inflation. For years, inflation     future. A more difficult issue is that
imply an upturn during the second           has stayed low; in most countries            of the massive liquidity stimuli from
half of the year. This could be brisk as    (including the Eurozone) clearly below       central banks. Traditional monetary
households spend more of the savings        inflation targets. Now, however, the         theory claims this should be inflation-
that have been amassed during               combination of a possible strong             ary. But so far, we have not seen any
the lockdowns, and as corporates            cyclical rebound and massive increase        inflationary impulses.
increase investments again. There is a      in liquidity has raised the specter of

NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                          PROPERTY IN UNCERTAIN TIMES ●

                                                                                                                                     Photo: iStock
How will central banks react?                Thus, from 2022 on, I presume infla-        home. Travelling patterns – both
That may change as capacity utili-           tion in the US will rise somewhat, but      long-range and commuting – changed.
zation picks up. The combination of          nominal interest rates will stay low,       Sure, many office workers will come
rising capacity, liquidity and perhaps       rising only slowly. Bond yields will        back after the pandemic, but working
rising inflationary expectations could       move higher than short-term rates;          from home has nonetheless proved to
very well end the period of ultra-low        yield curves will steepen. Europe will      be an efficient complement. We can
inflation. As we move into 2022,             lag, but here, too, the same forces         therefore expect demand for extra
inflationary pressures gradually may         will gradually materialize. As a result,    space at home to increase. Demand
start to increase. For whatever it is        real yields will stay negative in most      for co-working space in residential
worth, I believe that inflation will see a   countries – preserving favourable           areas may also increase. As a result,
short-term spike in H1, fall back in H2      conditions for asset markets.               there will be – ceteris paribus – a
2021, but then gradually climb from                                                      movement out from city centers and
2022. This process will be stronger in       But there are inherent risks in this        smaller apartments, to bigger houses
the US, because of more rapid growth         Goldilocks-situation. Inflation may         in suburbs and smaller towns.
and more expansionary policy.                suddenly pick up – and markets rate as
                                             well, threatening confidence in central     On top of this, we have seen another,
Central banks will not react to the          banks’ abilities to handle the situation.   unexpected and possibly temporary
spike in H1 by tighter policy. They will,                                                effect of the pandemic. As more peo-
rightly so, see the uptick as tempo-         So: my base case with regard to             ple work from home and have been
rary. And my guess is that they also         monetary policy is one of beneficial        hampered by lockdowns while ser-
will be reluctant to hike key rates even     conditions for real estate for yet an-      vices like restaurants and travelling
if inflation starts to move up in 2022.      other year or two, but with increasing      have been restrained, some house-
The reason is the huge pile of debt          risks of a set-back.                        holds have started to spend more on
which might unleash a financial crisis,                                                  housing consumption; rejuvenating,
should rates be hiked too rapidly. Also,     Structural changes                          decorating and refurbishing.
the Fed and some other central banks         This general picture should be
clearly have stated that they will accept    complemented with a realization that        The Nordics
somewhat higher inflation, partly as         real estate also will be influenced         These trends apply also to the Nordic
a compensation for many years of             by technological and demographic            region. In 2020, the four Nordic coun-
under­shooting inflation targets. In-        trends which intensified during the         tries – Denmark, Sweden, Norway and
stead, they will attempt to hold down        pandemic.                                   Finland – all suffered recessions, but
market rates via “yield curve control”,                                                  less severe than continental Europe.
which in essence means further inter-        Digitalisation took a quantum leap,         Initially, Norway was hardest hit, given
ventions on the bond markets.                with e-commerce and working from            its dependency on oil and gas – the             →


                                                                                                                               Photo: Shutterstock
prices of which tumbled. With regard       the pandemic hit. That hurt both GDP     As vaccination spreads and if the virus
to political reactions, Sweden was the     and the housing market. However,         is contained, pent-up demand should
odd man out, initially implementing        both bounced back in the autumn of       mean a strong rebound. As the krone
weaker restrictions and more lenient       2020, and the long period of rising      is tied to the euro, but in the stronger
lockdowns. The number of infected          real estate prices took a new optimis-   part of the trading band, the National
and dead turned out higher than in         tic turn.                                bank has room for a small rate cut.
the neighbouring countries, while it is
difficult to see any beneficial effects    The Danish economy managed better        As a result, the real estate market is
on Swedish economic performance.           than most in 2020. The reasons           expected to stay strong. Bubble risks
                                           were swift measures to prevent the       are contained by a slew of macro­
With regard to monetary policy,            virus from spreading, a diversified      prudential regulations, e.g tougher
Finland is a member of the Eurozone,       export sector (including both foods      credit standards and higher required
while Denmark has a fixed exchange         and pharma), and financial resilience    down payments.
rate to the euro. Both Sweden and          courtesy of a strong savings buffer.
Norway have floating national curren-      Government support schemes worked        Finland
cies. All four countries have strong       well. Consumption was stimulated by      The Finnish experience is similar
fiscal positions. As a result, they have   one-off disbursements. At the end of     to the Danish. A quick and decisive
all been able to undertake strong          the year, though, Denmark suffered       lockdown in spring of 2020 contained
supporting policy measures.                a new virus scare as a mutation came     the contagion and made a gradual
                                           from minks. New lockdowns were im-       opening up possible during summer.
Denmark                                    posed in Q4 of 2020, which is hurting    As a result, the GDP contraction was
Denmark quickly chose a hard line in       the economy going into 2021.             less than half that of fellow euro mem-
closing down part of its economy as                                                 ber states. Within manufacturing,

NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                          PROPERTY IN UNCERTAIN TIMES ●

»In general, the Nordic countries
have fared better than countries
on the continent«

structural ailments in the forestry and      enforced at the same time as com-           The Swedish economy is expected to
pulp industry hurt.                          modities prices collapsed. Norway was       rebound in H2 2021. The Riksbank is
                                             hit by a double whammy. Construction        still expected to keep rates low for the
Restrictions in services have held back      was scaled back.                            remainder of 2021 and 2022. The bank
household consumption, but as they                                                       has signaled it will pursue a similar
are lifted, pent-up demand is expected       Still the housing market turned out         strategy to that of the Fed and the
to cause a strong upturn. Construc-          to be strong in 2020. One reason was        ECB, i.e to allow inflation to gradu-
tion has turned up. Key interest rates       swift action by the central bank, which     ally crawl up, without hiking rates in
remain negative and the Financial            cut its key rate to zero – the same level   advance. This is a positive signal to
Supervisory Authority has raised the         as in Sweden. This gave a new boost to      the real estate market. However, the
cap on home loans.                           real estate and weakened the krone.         Financial Supervisory Authority has
                                                                                         said it wants to re-tighten amortiza-
Finland is a member of the Eurozone,         Looking ahead, Norway will probably         tion rules which were relaxed during
meaning that monetary policy is set in       be the first country to hike key rates,     the pandemic. The net effect is none-
Frankfurt and is based on the perfor-        maybe even before the end of 2021.          theless a continued strong real estate
mance of the entire Eurozone, not just       The central bank is afraid of over-heat-    market.
Finland. More specifically, this means       ing and high debt levels. Possibly,
that the refi rate will stay low for long,   this will mean a slower growth of real      All in all
even if inflation were to gradually rise.    estate and house prices. An outright        The major European trends also
                                             fall is less likely, as underlying demand   characterize the Nordic region. But
This will contribute to another strong       growth still will be strong.                in general, the Nordic countries have
year on the housing market. But                                                          fared better than countries on the
urbanization and migration to the            Sweden                                      continent. The health care systems
Southwest is causing house prices to         Sweden is the largest economy in the        are universal and well-funded. Public
diverge, with asset prices and wealth        Nordic region. Although authorities         finances are sound. Low interest rates
rising primarily in the greater Helsinki     employed a lighter hand in applying         have supported asset markets in the
area.                                        corona restrictions than its neigh-         midst of the pandemic.
                                             bours, the economic outcome was
Norway                                       roughly the same in 2020, i.e a sharp       Looking ahead, these trends will con-
For years, Norway’s housing market           drop in Q2 followed by an autumn            tinue. Falling savings ratios may cause
boomed, driven by strong demand,             bounce-back. When the second wave           strong growth in 2022, too. The two
not least from rising incomes in the oil     of the virus came, at year-end, the         major risks are that 1) a third wave of
and gas sector. Disposable household         Swedish strategy was no longer an           the pandemic will cause new lock-
incomes have doubled since the start         outlier, as the government started to       downs and a new recession, 2) that a
of the millennium and borrowing costs        apply the same kind of restrictions as      bout of inflation and rising inflation-
have fallen. Norway is now by far            in the other Nordics. All in all, growth    ary expectations would force central
the wealthiest country in the Nordic         in 2020 came in at minus 3 per cent,        banks to abandon their low interest
region.                                      which is the average for the region.        rate strategies. That seems less likely
                                                                                         today. But the Norwegian central bank
Since Norway is not an EU member,            Fiscal policy turned expansionary.          will nonetheless cautiously prepare to
Norges Bank is independent, and the          The Riksbank kept the repo rate             start raising rates from the zero lower
krone is floating. Due to inflationary       at zero throughout the year and             bound.
pressures from the commodities sec-          intensified quantitative easing. This
tor, key rates historically have been        supported real estate, which despite
higher than in neighbouring countries.       the pandemic showed a stellar per-
However, when the corona pandemic            formance, with strong price increases
struck, a strict lockdown was rapidly        and record-setting transactions.


Just shy of one year ago, soon after the pandemic begun to escalate, Twitter was one of the first companies to
announce that they would move to a permanent work-from-home model, which would extend beyond the end of the
pandemic. Many other companies, including a number in the Nordics & Baltics, were quick to follow suit, and virtu-
ally every company in the region has adopted some form of remote working in 2020 and 2021. This has led some to
believe that the suit & tie era of commuting to a physical office is under pressure, and that the future of the office
market is bleak. In this edition of the Newsec Property Outlook, Newsec looks at some of the changes that the
future holds for office space, and highlights a few lesser known trends that will come to impact the office market
– in markedly different ways than those that are currently the talk of the town.

1. The rise of the regional city                         naturally been influenced by covid-19,
Over the past few years, Newsec has                      but in the long-term is being driven by        Definitions
highlighted the positive net internal                    a changing family cycle, a perceived           Capital cities
migration that regional cities have                      rise in crime and lack of safety in major      Stockholm, Oslo, Copenhagen,
been experiencing in the Nordics. Since                  cities, and generally changing prefer-         Helsinki, Vilnius, Tallinn, Riga
2016, net internal migration to the                      ences.                                         Major cities
capital cities in the Nordics has been                                                                  Gothenburg, Malmö, Bergen,
negative, and since 2019, even the                       Office developers have not been                Trondheim, Stavanger, Turku,
Greater Metropolitan capital regions                     particularly influenced by this trend.         Tampere, Aarhus, Odense,
have seen negative net internal migra-                   Diagram (1) shows the office space             Kaunas
tion. Meanwhile, net internal migration                  currently under development, that is           Regional cities
to the regional cities has remained                      set to be completed in 2021 and 2022.          All other cities with a population
positive. In 2020 and early 2021, this                   The graph clearly shows that both in           above 50,000 in the Nordics &
trend has strengthened further, with a                   absolute terms, and on the per capita          Baltics
fall in international migration meaning                  level, capital cities are expected to see
that many of the Nordic capitals have                    around twice as much development as
seen their population decline for the                    regional cities, with major cities also
first time in decades. This trend has                    being well ahead of regional cities.        This is despite many internal migrants,
                                                                                                     who tend to be more qualified and
                                                                                                     prone to office work than international
                                                                                                     migrants, flocking to the regional
1. Office space under development
                                                                                                     cities. While some of these workers
                                                                                                     will work from home, and others might
2,000,000                                                                                      40    commute to the head office in a larger
                                                                                                     city a few times a week, Newsec can
1,500,000                                                                                      30    still clearly identify a continued need
                                                                                                     for modern, attractive office space
                                                                                                     in regional cities that is not currently
1,000,000                                                                                      20
                                                                                                     being met.

 500,000                                                                                       10    Of the regional cities that do have
                                                                                                     expected office space under de-
            0                                                                                  0     velopment, cities like Lund, Vaasa,
                      Capital cities                 Major cities          Regional cities           Kristiansand and Tartu come out
     Expected office space (sqm, left axis)                                                          on top, while others like Eskilstuna,
     Expected office space per capita (right axis)                                                   Jyväskylä, Fredrikstad/Sarpsborg and


»Newsec can clearly identify a need for modern,
attractive office space in regional cities that is not
currently being met«

                                                                                                                                      Photo: i Stock

Aalborg have relatively little planned      despite rental potential in absolute         office space in regional cities, as it is
new production of office space. This        terms being more limited. This in turn       easy to rent out new space in these
is despite the latter cities generally      means that the gap in quality between        areas to tenants at strong rental levels.
experiencing strong inflows of internal     the existing office stock and new
migration, and having relatively young      production is wider. In addition, there is   Should more actors look to build in
populations.                                also more prestige attached to sitting       regional cities, the transaction market
                                            in the few newly produced office build-      will be impacted, too. Currently, the
Further, in most regional cities, market    ings that are produced, and vacancy          transaction market in many ways
rents are between 10-15% higher for         rates tend to be low. This results in        mirrors the office development market
newly produced office space than ex-        newly produced properties often being        – with the capital and larger cities being
isting grade A office space, and in some    fully let before completion, as was the      red hot, while demographically strong
regional cities can skew even higher.       case in e.g. the office and retail project   cities like Östersund and Oulu see little
This is partly because much of the          in Kuopio, Finland, which Lapti sold to      activity. As a result, there is clearly
existing office stock is generally not as   Aberdeen Standard Investments in             a lot of untapped potential in Nordic
modern as in the major cities, because      early 2021, where Newsec advised the         regional cities – for both developers
renovations are not substantially           seller. Hence, there is a strong case for    and investors alike.
cheaper than in the major cities,           new production of                                                                              →


»Investors and tenants increasingly require office
properties to be environmentally certified in order
to even consider a purchase or tenancy«
                                                                                                                                                          3. Capital cities

                                                                                                                                                                10 %

2. Sustainability – a mainstay                   2. Environmentally certified office space under construction                                       22 %                64 %
    on the office market                          Sqm                                                                                                Per cent

While regional office markets have                2,000,000                                                                                               100
strong potential to thrive, other trends
are also increasingly impacting the                                                                          3. Capital cities
                                                  1,500,000                                                                                           75
market. One such trend is environmen-                                                                                                           ■ BREEAM
tal sustainability, with different types                                                                        10 %                            ■ LEED
of environmental certifications rising            1,000,000                                               4%                                    ■ WELL50
substantially in popularity over the                                                                                                            ■ Other
past few years, and quickly developing              500,000                                                                                               25
                                                                                                        22 %                64 %
into mainstays on the commercial
                                                                                                                                                           4. Major cities
property market. This is shown in                            0                                                                                            0
diagram (2). Today, virtually all office                              Capital cities                  Major cities                 Regional cities
space being produced in capital and                 Total (sqm, left axis)             Certified of total (per cent, right axis)                                11 %
major cities is environmentally certi-                                                                                                                9%
fied, and a lower amount (though still                                                             ■ BREEAM
the majority of space) in regional cities                                                          ■ LEED                                                                57 %
is certified. This further increases the          favourable financing possibilities. As of        ments. As a result, in a number of the
                                                                                              ■ WELL                                   23 %
attractiveness of the relatively few              year-end 2020, 59 per cent of all listed■ OtherNordic & Baltic countries, Newsec has
modern, environmentally certified                 Nordic property companies have is-               noted evidence of a green premium
office buildings produced in regional      bonds.
                                                           Capital cities 62 per cent of listed    being  paidcities
                                                                                                     4. Major  among large international
cities.                                           companies have set up a framework for            corporations for environmentally
                                                                                                                                   ■ BREEAM
                                                  green financing, the majority having             sustainable space. As green financing
                                                           10 %                                                                    ■ LEED
Investors and tenants increasing-                 occurred
                                                              in 2019 or 2020. These green         and11sustainability
                                                                                                         %             agendas continue    to
                                                                                                                                   ■ WELL
ly require office properties to be                loans can either be linked to specific           grow in prevalence, it seems inevitable
                                                                                                  9%                               ■ Other
environmentally certified in order to             green goals or projects as set out in a          that environmentally certified office
even consider a purchase or tenancy.              green
                                                   22 % framework    64(e.g.
                                                                         % many Nordic &           space will continue
                                                                                                                 57 % be sold at a premi-
Indeed, Newsec has identified a clear             Baltic companies adhere to the Green             um,
                                                                                                  23 % and attract higher rents, than any5. Regional cities
rise in retrograde certification of exist-        Bond Principles), or linked to the com-          non-certified grade A office space in
ing properties, as well as a rise in green        pany’s own goals in terms of sustaina-           the entire Nordics & Baltics.
tenancy agreements and green financ-              bility, ESG or a specific project. This has
ing. The importance of green financing            indirectly led to increased prevalence           Which types of environmental certifi-              29 %
                                             ■   BREEAM                                       ■ BREEAM
in particular has risen substantially,            of certification among newly produced            cations are developers going for in43the%
                                             ■   LEED                                         ■ LEED
as sustainability-linked and other                office buildings, often required to fulfill      Nordics & Baltics? Of the total existing
                                             ■   WELL                                         ■ WELL
forms of green loans allow for more               ambitious
                                                               green   financing  require-         certified office stock, just over 60%
                                             ■                                                     ■ Other
                                                                                                                                                                         21 %

           3. Capital cities                             4. Major cities                                    5. Regional cities
                                                                                                                                                ■ BREEAM
             10 %                                                                                                                               ■ LEED
                                                           11 %
     4%                                                                                                                                         ■ WELL
                                                                                                                            29 %                ■ Other (national
                                                                                                                                                  certifications etc.)
                                                                                                          43 %
    22 %               64 %                                          57 %
                                                   23 %
                                                                                                                            21 %


■ BREEAM                                     ■ BREEAM                                              ■ BREEAM
■ LEED                                       ■ LEED                                                ■ LEED
■ WELL                                       ■ WELL                                                ■ WELL
14 Other
■                                            ■ Other                                               ■ Other (national
                                                                                                     certifications etc.)

           4. Major cities                              5. Regional cities

»Newsec expects international certifications in
particular to rise further in popularity, in step
with globalization and international investor
interest for the Nordic & Baltic property market«

of office properties are certified with
national certifications. However, the
popularity of different certifications
for office properties currently under
construction is shown in diagrams
(3), (4) and (5). BREEAM is the most
popular certification for office proper-
ties under construction in capital and
major cities, while in regional cities,
where perhaps the brand appeal of
BREEAM and LEED is perceived to be
more limited, national certifications
tend to be more popular. International
certifications account for 90% of certi-
fications for coming projects in capital

                                                                                                                                        Photo: i Stock
cities, and 58% in regional cities. The
WELL health certification remains the
least popular of the three major inter-
national certifications, but is rising in
importance as more developers seek           3. The office market                         overall and in modern office space, is
to both health and environmentally               of the future                             set to decrease further in the long-run,
certify their projects. Newsec expects       Closely connected to the sustainability       as offices become even more efficient.
that certain forms of certifications will    of office space is the degree to which        Newsec notes a slightly higher amount
become more attractive than others to        this office space is being used in effi-      of office space per worker in the major
investors going forward.                     cient ways. Diagram (6) highlights the        cities, and the highest in the regional
                                             usage of office space per worker              cities, owing to inefficiency and a lot
What does the future hold in terms of        in different regions in the Nordics &         of potential to build or repurpose into
sustainability on the office market?         Baltics. The average worker in the Nor-       more modern and effective office
Environmental certification is a prod-       dics & Baltics has 18 sqm available to        space. The lowest amount of office
uct of the wider sustainability drive        them. This is despite the most modern         space per worker is found outside of
in society today, and this is likely to      office space being closer to 10 sqm per       the cities, where traditional office work
continue to intensify in the Nordics &       office worker or lower. The average           is performed from home, from a make-
Baltics. Newsec expects international        space available per worker, both              shift office, or other non purpose-built
certifications in particular to rise fur-
ther in popularity, in step with globali-
zation and international investor            6. Average sqm of office space per worker
interest for the Nordic & Baltic prop-
erty market. Among international
purchasers, these certifications in
particular are likely to carry an increas-
ing green premium in the long-run.
Properties with both environmental
and health certifications are likely to
thrive, while property owners of older
properties will continue to play catch-
up and invest increasingly in retro-
grade certification.                          0
                                                     Capital cities         Major cities     Regional cities     Rest of country                         →


»Newsec expects that most employees will work from the
office for 3–4 days a week post-pandemic, meaning that offices
will continue to play a prime role in the society of the future«

commercial space. Somewhat para-                       needs to be flexible and adapted to          In 2020 and so far in 2021, institutions
doxically, as a result of missing out on               match the rapidly changing needs of          have been the second largest purchas-
many of the different waves of office                  modern tenants. Further, shorter and         er, but have accounted for a very small
development (e.g. cellular offices),                   more flexible leases with more meeting       amount of sales. The impacts of these
office space in rural areas is in some                 spaces (and less fixed workspaces)           long-term trends are shown in diagram
ways the most efficient of all, in that it             are likely to be required, as well as a      (7). The diagram shows the % of the
does not exist in abundance.                           number of smaller meeting rooms,             office stock in the capital city CBD’s,
                                                       to enable e.g. video meetings to take        and in the major cities in general,
Beyond an increased drive for effi-                    place from the office. For employers,        that is effectively “stuck.” This office
ciency and sustainability, though,                     employer branding and culture is also        stock is controlled by pension funds,
what does the future of the office                     likely to become even more key. New          institutions and other very long-term
market hold, and how will an increased                 office clusters are under development        investors who have sold less than 10%
propensity to work remotely impact                     in all of the Nordic & Baltic countries,     of their office stock in the past 5 years,
it? Some parts of the office market                    and where this office space meets the        who are highly unlikely to divest. As
will suffer. Office space in some outer                above requirements and has access to         can be seen, in the capital cities in the
suburban areas, with poor access to                    public transport links, it is likely to be   Nordics & Baltics, over 50% of the
public transport and services or in                    successful. Newsec expects that most         office stock is controlled by such actors
socio-economically vulnerable areas,                   employees will work from the office for      (highest in Oslo at 67%, and lowest in
is likely to be increasingly consolidated              3-4 days a week post-pandemic, mean-         Stockholm at 47%), while in the major
or converted into other uses. Equally,                 ing that offices will continue to play a     cities in general (including outside the
Newsec believes that some office                       prime role in the society of the future.     CBD), over 20% of the office stock is
market subsegments remain underde-                                                                  effectively stuck in this way.
veloped, and that with the right market                While the office of the future will
knowledge, office investors will contin-               certainly be more efficient, the office      In the future, Newsec expects long-
ue to prosper. This is because the office              market as a whole is also likely to look     term investors to further increase their
as a concept will continue to fulfill a                different to today. The average office       presence on the transaction market.
number of key functions, particularly                  transaction is increasing in size, and       The allocation strategy among pension
in terms of allowing for the exchange of               existing property owners are growing         funds is likely to increase from today’s
ideas, scrum space, and certain types                  larger, while the absolute number of         ~12% to closer to 20% of capital being
of deskwork. However, office space                     office transactions continues to fall.       allocated towards properties. If allo-
                                                                                                    cation were to reach 20% and be pro-
                                                                                                    portionally spread across the segment
                                                                                                    around the Nordics & Baltics, 40-50%
7. Office space available to the investment market
                                                                                                    of the office stock will be owned by
100                                                                                                 long-term actors in the capital cities,
                                                                                                    as well as almost all of the office stock
                                                                                                    in the CBD’s. Since offices account for
                                                                                                    over a quarter of the annual transac-
                                                                                                    tion volume in the Nordics & Baltics, a
 50                                                                                                 change like this could lead to increased
                                                                                                    turnover of the remaining office stock.
                                                                                                    Less office properties being accessible
                                                                                                    to investors could also lead to a lower
                                                                                                    overall transaction volume, or higher
     0                                                                                              transaction volumes within other
                  CBD in the capital cities                       Capital cities in general
     Percentage of office space that is available to the market
     Percentage of office space that is effectively stuck


»The transaction volume in the Nordics & Baltics as a whole
was comparable to that noted in the UK in 2020 – despite the
population in the region being roughly half of the UK«

4. Offices stand strong                    8. Office transaction volume
Despite all the talk of transformation     MEUR                                                                                      Per cent
and change, the office market has gen-     15,000                                                                                         50
erally remained robust in the Nordics &
Baltics throughout 2020 and so far in      12,000                                                                                         40
2021. Diagram (8) shows the transac-
tion volume on the office market. The       9,000                                                                                         30
volume in 2020 saw a slight decline,
but still remained mostly in line with     6,000                                                                                          20
the historical average, both in absolute
terms, and in terms of the percentage      3,000                                                                                          10
of the total transaction volume that the
office segment accounted for in the               0                                                                                       0
                                                       2015            2016          2017              2018      2019         2020
Nordics & Baltics.
                                              Office transaction volume (millions of EUR, left axis)
                                              Per cent of total transaction volume (right axis)
A number of large office transactions
have served to drive up the transac-
tion volume in the Nordics & Baltics
in 2020, with 2021 set to bring many                                                              strong year ahead of it, with Newsec
                                            Country              2020 transaction
more major office acquisitions. A prime                          volume
                                                                                                  expecting record volumes of SEK 225
example of a recent major transaction                            (bn of euros)                    billion in Sweden, NOK 120 billion in
is Reinvest’s acquisition of the newly                                                            Norway, strong volumes in the other
produced SEB HQ in the Vilnius CBD          1 Germany            59.8                             countries, and a record EUR 50 billion
in Lithuania in December, in a record       2 UK                 48.7                             in the Nordics & Baltics as a whole.
transaction for the Baltic market,
                                            3 France             28.2
where Newsec acted as adviser for the                                                             The office looks set to remain an
seller Lords LB Asset Management.           4 Sweden             18.0                             attractive investment for a broad
The other Baltic markets, as well as        5 Norway             10.6                             range of different kinds of investors
the Norwegian market in particular                                                                going forward – as long as it is located
                                            6 Netherlands        10.4
have also been active in 2020 and                                                                 in the right place and managed in the
early 2021, with 50 bps drops in yields     7 Denmark            9.3                              right way. Are you unsure of how to
in Norway over the past year, as well       8 Italy              8.8                              meet the needs of the future in your
as a number of record-breaking office                                                             office portfolio, or are you struggling
transactions. Investor interest for the     9 Spain              7.7                              to identify which office submarkets are
office segment since covid-19 hit has       10 Finland           6.0                              likely to outperform others in the long-
also remained substantial in Denmark,                                                             run? Newsec, the full service property
Sweden and Finland, although single                                                               house, is always here to help you make
property transactions have been a          transaction volume in the Nordics &                    sense of the Nordic & Baltic commer-
little smaller in size.                    Baltics as a whole was comparable to                   cial property market.
                                           that noted in the UK in 2020 – despite
In general, interest in the commercial     the population in the region being
property market in the Nordics &           roughly half of the UK. The volume in                  Adam Tyrcha, PhD
Baltics was very strong in 2020. The       Sweden was not too far off the French        
total transaction volume ended up          transaction volume – even though                       Ulrika Lindmark
at EUR 44.6 billion, in line with the      France is six times larger than Sweden       
historical average - an exceptionally      in terms of population. Amid all of this,
strong result, given the turbulent year    early indications for 2021 are that the
that 2020 was. This means that the         Nordic & Baltic market has yet another



                                                                                                                                  Photo: Shutterstock
2020 was an unusual year for Sweden,         spite this. In 2021, the Swedish econ-     of SEK 74 billion set in Q4 2016. As
much like for the rest of the world. The     omy is expected to rebound and grow        such, it is clear that market sentiment
covid-19 virus had substantial impacts       by around 3.5 per cent. This will entail   in Sweden is currently very strong.
on the Swedish economy, which ended          a strong recovery, though pre-covid        A number of major transactions have
up contracting by 2.9 per cent – one         levels of GDP are not expected to be       already been completed in 2021,
of the best performances among the           reached until 2022. Naturally, the         and many more are currently being
major economies in Europe. Though            strength of the recovery will continue     initiated and likely to be completed in
this was a less severe contraction than      to indirectly depend on epidemiolog-       Q2 and later throughout the year. As a
initially expected, there were still clear   ical considerations in Sweden and          result, 2021 is set to be yet another
impacts on e.g. unemployment, which          abroad, as well as the success of the      very strong year for the Swedish
rose by around two percentage units          vaccination process and return to rela-    transaction market – with Newsec
throughout the year. The relatively          tive normality that follows.               expecting a new record transaction
light restrictions instituted in Sweden                                                 volume of SEK 225 billion.
contributed to the economy outper-           Despite a shaky economy, the Swedish
forming much of the rest of Europe,          real estate market performed incred-
though the other Nordic countries,           ibly well in 2020. The transaction         Contact:
which introduced more severe restric-        volume in 2020 ended up at SEK 189         Adam Tyrcha, PhD
tions, performed similarly to Sweden.        billion – the third strongest year on
Inflation remains below the goal of 2.0      record by some margin. Q4, with a vol-     Alexandra Lövgren
per cent, but the Swedish Riksbank is        ume of SEK 82 billion, ended up being
likely to leave the key interest rate at 0   the strongest quarter of all-time in
per cent for the foreseeable future de-      Sweden, breaking the previous record

NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                     THE SWEDISH PROPERTY MARKET ●

»2021 is set to be yet another very strong year for the Swed-
ish transaction market - with Newsec expecting a new record
transaction volume of SEK 225 billion«

   Interesting occurrences on the Swedish property market in 2020 and 2021

   LOGISTICS STEPS UP AND BECOMES                                                    INTER-NORDIC INVESTMENT
   THE SECOND LARGEST SEGMENT                                                        REBOUNDS
   After a number of major invest-                                                   After a relatively quiet 2019, so-
   ment deals were completed in Q4,                                                  called inter-Nordic investment
   logistics crept past offices and be-              SEK 189 BILLION                 was once again very strong in
   came the second largest segment                 Total investment volume           2020. Foreign investment in total
                                                            in 2020
   on the transaction market in 2020.                                                accounted for 27% of the Swedish
   The segment accounted for 18%                                                     transaction volume, and just shy
   of the total transaction market,                                                  of half of this comprised purchases
   which can be compared to 16% for                                                  made by Norwegian, Finnish, and
   offices, and 33% for residential.                                                 Danish investors. This means that
   International investors have shown                                                13% of the total transaction vol-
   particular interest in logistics and
                                                     SEK 225 BILLION                 ume in 2020 in Sweden was made
                                                   Total investment volume
   accounted for around half of the                   expected in 2021               up of Nordic investment. Newsec
   transacted volume in 2020. With                                                   expects inter-Nordic interest in the
   further growth in e-commerce all                                                  Swedish market to remain strong
   but guaranteed, the future looks                                                  in 2021.
   bright for logistics.
                                                                                     M&A DEALS ABOUND
   RETAIL HAS A STRONGER YEAR                             +3.5%                      For some time now, Newsec has
   THAN EXPECTED                                    GDP growth expected
                                                          in 2021                    forecast that M&A deals will
   Despite the doom and gloom that                                                   continue to rise in prominence.
   perpetuates the retail sector in the                                              Indeed, in 2020, M&A acquisitions
   media in particular, retail transac-                                              accounted for over SEK 20 billion
   tion volumes in 2020 and thus far         INVESTORS LOOK TO REGIONAL CITIES       of the total transaction volume in
   in 2021 have been stronger than           As new segments have gained in          Sweden. While there was no single
   many would expect. After account-         popularity, so too have new invest-     enormous acquisition in 2020,
   ing for just 6% of the total transac-     ment locations around the country.      the year still saw a number of
   tion volume in 2019, the segment          “Other major cities” and the “rest      major deals, such as e.g. Fredens-
   strengthened in 2020 and account-         of Sweden” together accounted           borg’s acquisition of the Veidekke
   ed for 9% of the total volume.            for just shy of 50% of the total        property development arm, SBB’s
   While this is a far cry from record       transaction volume in 2020, and         acquisitions of Offentliga Hus and
   years of the past, it still signifies a   have had a strong start to 2021         Sveafastigheter, and Balder’s
   strong recovery for the segment,          as well. This is largely a result of    acquisition of Masmästaren. Look-
   despite covid-19. The strength of         many public properties, residential     ing to the future, M&A activity on
   the segment has been particularly         properties and logistics properties     the Swedish and Nordic markets is
   driven by big box and retail park         being located in less traditionally     likely to intensify further.
   investments, which have continued         core areas. As these segments
   to attract strong interest from           continue to rise in popularity, it is
   consumers and investors alike.            likely that investment activity will
                                             persist outside of the three major
                                             Swedish cities.


Covid-19 had a strong impact on            experience an accelerating recovery.       the number of transactions in 2020
Norway in 2020, with the Norwegian         The interest rate is expected to be        was far higher than in the record year
economy contracting by 3.6% in             kept at the 0% level, but increases are    of 2015, ending with 323 completed
2020. The recovery continued until         possible in the coming years, although     transactions compared to 198 in
the end of the year and initial projec-    not expected in 2021. Inflation has        2015. This shows the high, increasing
tions were outperformed, however, as       been pushed down because of the            liquidity on the Norwegian real estate
the virus caught traction towards the      crisis but is again being driven up by     market. Access to capital and financ-
end of Q3 and more so during Q4, the       growth and a weaker currency. The          ing has continued to be easy, both be-
economy recovered at a slower pace         level of unemployment is projected to      cause investors are on the lookout for
than projected. In 2021, GDP growth        increase in Oslo and will flatten out at   alternative investments, and due to an
is expected to increase substantially      a level of 8%, rising from the current     active and functioning capital market,
by 2.6%, and a strong growth is also       7.3%.                                      as well as a continued willingness
expected in 2022. However, a full                                                     among banks and other market actors
recovery of the economy is not ex-         The commercial real estate market          to issue debt because of low interest
pected until the autumn of 2022. The       also saw a turbulent year with a record    rates. The transaction market ended
substantial fall in consumption that       start and a deep fall as the pandemic      2020 red hot and going forward the
took place in 2020 will thus be offset     spread across Europe. The end of the       projection for the transaction volume
by savings and an increased growth         year experienced a strong rebound          in 2021 is in line with the record year of
in the coming years. An increased ac-      and once the dust settled a transac-       2015 at NOK 120 billion.
tivity among Norway’s trade partners       tion volume amounting to NOK 113
will lead to an increase in export and     billion was recorded, which is slightly
economic activity. The infection rate      below the record year of 2015 when         Contact:
is expected to go down in the first half   the transaction volume amounted            Øyvind Johan Dahl
of 2021, and as vaccination is pro-        to NOK 120 billion. The intensity on
gressing, the economy will hopefully       the transaction market was high and

                                                                                                                                   Photo: Shutterstock

NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                   THE NORWEGIAN PROPERTY MARKET ●

»The intensity on the transaction market was
high and the number of transactions in 2020
was far higher than in the record year of 2015«

   Interesting occurrences on the Norwegian property market in 2020 and 2021

   YIELD COMPRESSIONS ON                                                               which has seen a yield compression
   THE OFFICE MARKET                                                                   and has also sent international
   Although the turbulent year left                                                    investors on a shopping spree.
   many offices empty, in Norway                                                       This led international investors to
   the segment did well and experi-                  NOK 113 BILLION                   become slight net buyers in 2020,
   enced yield compressions, which is              Total investment volume             compared to previous years when
                                                            in 2020
   quite an unusual occurrence when                                                    international investors have been
   compared to the rest of Europe. In                                                  clear net sellers.
   Oslo, the average office rent ended
   the year at the highest levels since                                                STRUGGLE FOR MALLS AND
   2008, at NOK 2,470 per square                                                       SUCCESS FOR GROCERIES
   meter.                                                                              As shopping goes digital, retail has

                                                     NOK 120 BILLION                   been struggling and has been the
                                                   Total investment volume             hardest hit real estate segment in
   WITH AN EXPECTED INCREASE                          expected in 2021                 the crisis of 2020 and thus far in
   IN TENANT MOVEMENT                                                                  2021. Parts of the segment such as
   Over the past year, many contracts                                                  malls and other retail are expect-
   have been re-negotiated, with prop-                                                 ed to continue to have problems
   erty owners giving discounts today                                                  throughout 2021, although areas
   but in return receiving higher rents                                                which typically lose customers to
   and longer contracts in the future.                    +2.6%                        cross-border shopping have expe-
   This has pushed property values                  GDP growth expected                rienced a slight increase in sales in
   upwards. Once again, Newsec has                        in 2021                      some cases. As the crisis and the
   observed that investors attach a                                                    consumer behaviour shift contin-
   premium to stable tenants and sta-                                                  ues, malls are expected to continue
   ble cashflows, and although returns      tions). The office market in Norway        their struggle to survive. On the
   have fallen, a lack of alternative       is all in all one of the most attractive   other side of the segment, grocery
   investments has led to yield com-        and stable markets in the Nordics,         stores are doing well and supermar-
   pressions. This is because a low risk    after the bizarre year of 2020.            kets are considered highly attrac-
   investment might not yield that low                                                 tive tenants, meaning an increase in
   of a return, meaning that relatively     LOGISTICS IN THE SPOTLIGHT                 transactions in that sub-segment is
   speaking properties as a segment         Among the segments that expe-              expected in 2021.
   are highly attractive (this applies      rienced a strong year, one of the
   especially to buildings in prime loca-   hottest is without a doubt logistics



The Danish economy contracted             Danish bond yields rose and share         return on real estate investments. The     Photo: Shutterstock

sharply in Q1 and Q2 and unemploy-        prices fell in March as uncertainty       challenging conditions impacted the
ment rose from 3.6% in February to        about the impact of covid-19 spread.      market in Q2 and Q3 where invest-
5.5% in May. Restrictions were briefly    However, these movements were soon        ment activity was low, but Q4 saw a
relaxed during the summer, which led      redressed and by the end of 2020          strong return of activity – most signif-
to a rapid economic recovery and a        share prices were higher and yields       icantly the transaction of a residential
drop in unemployment in Q3. How­          lower than at the beginning of the        portfolio for DKK 12.1 billion. The
ever, due to a second wave of covid-19,   year.                                     outlook for the property investment
infection lockdown was reimposed in                                                 market in 2021 is positive as market
Q4 and restrictions tightened further     Meanwhile, the transaction volume on      conditions will be more favourable
at the beginning of 2021. GDP is esti-    the Danish real estate market ended       than in 2020.
mated to have fallen by approx. 4%        up at DKK 70 billion, up by 25% com-
in 2020. The economy is expected          pared to 2019 and above the 5-year
to start growing again in 2021 with       historical average. Investment activity   Contact:
GDP increasing by approx. 2.9%.           was surprisingly high considering the     Robin Rich
The Danish government has financial       difficult macroeconomic situation.
leeway to address the situation with      In addition, new housing regulations      Daniel Nielsen
stimulus packages. It has adopted         for residential rental properties and
huge fiscal and financial schemes to      changes in taxation of commercial
support businesses and households.        estate caused uncertainty about the

NEWSEC PROPERTY OUTLOOK • SPRING 2021                                                     THE DANISH PROPERTY MARKET ●

»The outlook for the property investment
market in 2021 is positive as market conditions
will be more favourable than in 2020«

  Interesting occurrences on the Danish property market in 2020 and 2021

  RESIDENTIAL DOMINATES                                                             mercial properties with effect from
  Residential properties were the                                                   2023. Although the final legal text
  most traded property type in 2020                                                 has not been finished yet, an effect
  with transactions of approx. DKK 38                                               on the investment market is ex-
  billion. This was largely due to some              DKK 70 BILLION                 pected ahead of 2023. The change
                                                   Total investment volume
  very large portfolios and develop-                        in 2020
                                                                                    in property taxation from a tax on
  ment projects being transacted.                                                   actual capital gain to a tax on no-
  A large proportion of the buyers                                                  tional gain is expected to increase
  were foreign investors. Residential                                               the effective taxation, even though
  property is expected to be very pop-                                              the nominal tax rate is expected to
  ular amongst investors in 2021 too,                                               remain unchanged at 22 per cent.
  driven by strong fundamentals in                                                  The second theme is about the
  terms of demographic growth and                    DKK 75 BILLION                 government's plans for a new model
  household income.                                Total investment volume          for public appraisals of commercial
                                                      expected in 2021
                                                                                    real estate. The proposal presented
  MOVEMENTS ACROSS                                                                  is anticipated, in its present form, to
  MANY SEGMENTS                                                                     diminish transparency and market
  Offices were also attractive with                                                 conformity.
  deals in this segment at DKK 13
  billion. The buyers were primarily                                                LONGER TERM IMPACT OF
  Danish investors. The outlook for                       +2.9%                     COVID-19 WILL EMERGE
                                                    GDP growth expected
  office buildings is also strong in                      in 2021                   The economy is expected to recover
  2021. Many industrial properties                                                  rapidly in 2021 when covid-19 is
  were also traded in 2020, the major-                                              brought under control. However,
  ity of which were sales of smaller                                                businesses will enter 2021 suffer-
  properties for less than DKK 100           however, may create possibilities      ing from the reimposed lockdown
  million. The segment accounted             for these segments.                    caused by the second wave of cov-
  for DKK 7 billion of real estate                                                  id-19, and the economic recovery
  investments. There was a pre-              INVESTMENT MARKET WILL                 will be uneven between industries.
  dominance of foreign buyers for            LOOK FOR ANSWERS FROM                  The short-term outlook is weak for
  properties in this segment. Modern         POLICY MAKERS                          industries within e.g. tourism and
  industrial and logistics properties        In 2020, the investment market         travel, while many other industries
  are scarce and will be sought after        was affected by the uncertainty        may rebound quickly. The different
  by investors in 2021. Meanwhile,           concerning residential rental          fundamentals between industries
  trade in retail property was DKK 4         properties due to changes in the       will present different challenges
  billion, while hotels accounted for        legislation. In July 2020 the amend-   and opportunities for the various
  only 1 billion. Retail as well as hotels   ments to Section 5.2 of the Housing    segments of the property market.
  are suffering from covid-19 which          Regulations Act came into effect.
  hit traditional shopping, tourism          In 2021, two “political” themes will
  and business meetings hard. Market         be of relevance to the Danish real
  fundamentals for retail and hotels         estate investment market. One is
  will be difficult in 2021 too, which       the change of taxation of large com-

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