Property Market Trends Spring 2015 Finland

Property Market Trends Spring 2015 Finland

Property Market Trends Spring 2015 Finland

Property Market Trends | Spring 2015 Finland

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 2 SWEDEN FINLAND ESTONIA LATVIA LITHUANIA GERMANY DENMARK FRANCE SPAIN UK NORWAY LUXEMBURG INTRODUCTION 2 About Catella 3 Editorial 4 Investment market 7 CREDI 8 European office market FINNISH PROPERTY MARKETS 9 The Helsinki Metropolitan Area 12 Tampere 14 The city centre of Tampere 18 Turku 20 Oulu 22 Lahti 24 Jyväskylä 26 Vaasa 28 Other growth centres 30 Market data by region OTHER 31 Catella employees 32 References Contents About Catella Catella is a finacial advisor and asset manager specialised in property, fixed income and equities. We have a leading position in the property sector and a strong local presence in Europe. Our property advisory services in Europe comprise three service areas: Sales and Aquisitions, Debt and Equity, and Research and Valuation.

Catella is a leading advisor in the Finnish real estate market. Our services in Finland include financial advisory services for property transactions, letting, capital markets, and valuations and consulting. The Finnish operations comprise some 37 employees in six offices. Transactions Single and portfolio transactions Sale-and-leaseback transactions Acquisition advisory Real estate development projects Letting Services Letting of commercial properties Letting advisory and space comparisons Project letting and campaigns Tenant representation Valuation Authorised single asset valuation  Authorised portfolio valuation and analysis Strategic and financial analysis Market rent analysis Market area analysis Capital Markets Public transactions Equity raising Debt advisory Restructuring Nordic Fixed Income -services Advisory Research Brokerage The services of the Valuation and Consulting unit now include valuation reports based on the valuation standards of RICS (Royal Institution of Chartered Surveyors). Catella’s Property Market Trends is a biannual publication summarising the real estate market situation and develop­ ments in Finland. Property Market Trends is available in English and Finnish in PDF format via our web site at www.catella.fi. Cover photo: The City of Tampere/Illustration NCC, Studio Daniel Libeskind, 2011. Catella’s advisory services were voted as best in Finland in Euro­ money’s annual survey.

FINLAND, 1ST PLACE

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 3 ERKKI HAKALA MANAGING DIRECTOR +358 (0)50 3625 768 erkki.hakala@catella.fi The amount of capital looking for European investment propeties has reached record figures Reflationary monetary policy supports the property market The reflationary monetary policy intro- duced by the European Central Bank – and low interest rates in particular – strongly support part of the property market. Last year, the Finnish transac- tion volume exceeded EUR 4 billion, compared to the more or less EUR 2 bil- lion in the previous five years. However, there is a reason behind the ECB’s reflationary monetary policy: weak economic growth in Europe.

Finland’s economy is facing the fourth year of recession in a row. The ECB’s reflationary actions are necessary, but cannot turn the real economy around on their own. Besides the low interest rate, also the collapse in oil prices stimulates the global economy. The massive weaken- ing of the euro also strengthens the real economy in export-led countries like Finland. Still, there is a similar message behind the weakening euro: the real economy is facing difficulties. Many factors also have a two-sided effect on Finland: for example the oil price reduction not only stimulates the economy, but has a nega- tive impact on export to Russia. Economy lowers rents, but lifts up prime properties It is interesting to see that the weak economy creates pressure to lower rents, but at the same time there is strong demand for high quality premises. Prime yields of the best office areas in the Helsinki Metropolitan Area have continued to decline. With an uncer- tain economy, investment features that are considered safe add to the appeal of properties. Safe features – or the lack of them – are overemphasised.

Common denominators for prop- erty transactions taking place last year include prime location, grocery stores, residential or nursing homes or long- term leases. There are logical reasons for valuing these features in an uncertain economic environment. Prime yields in the Helsinki CBD have continued to decline all throughout 2014 – while the amount of vacant office space in the Helsinki Metropolitan Area has risen to an all-time high, close to 1.1 million square metres. This is excep- tional, since the last times that prime yields in Helsinki were unusually low, were during the economic booms of 1989 and 2007.

Safe features are now key: premises that lack those, remain outside the demand boom. In a weak economy, a property’s alternative purpose of use after the current lease runs out, is what counts. Local investors that are familiar with the market as well as optional purposes of use, play a significant role in the acquisition of smaller properties. The amount of vacant retail space in the Helsinki Metropolitan Area grew by a third last year. The prime yield of retail space in the Helsinki CBD exceeds that of offices for the first time in years. Sales expectations of the retail sector continue to be considerably low this year. Year 2015: record amount of capital looking for return According to Catella’s study, the amount of capital looking for European invest- ment properties has doubled since 2007 and has reached record figures. Despite the economic risks, Europe appeals to Asian, Chinese, and American investors. Due to the strong increase in available money and the scarcity of prime proper- ties, the market has already turned to secondary objects. Consequently, the volume boom goes beyond safe proper- ties, which, unlike Finland, is already visible in Sweden. Last year, Sweden reached an all-time record transaction volume of EUR 17 billion.

We predict the Finnish transaction volume in 2015 to rise again above EUR 3 billion and prime yields to continue declining – at the same time the amount of vacant office, retail, industrial and warehouse space will grow. Ahead lies an interesting year with an exceptionally large amount of invest- ment capital looking for investment properties – and return! Editorial

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 4 Investment market TEXT: MARKUS JUVALA Transaction volume rose up to EUR 4.3 billion The transaction volume rose clearly last year and exceeded the level that pre- vailed before the peak years 2006–2007. In 2014, the transaction volume was EUR 4.3 billion compared to the more or less EUR 2 billion in the previous five years. The European transaction market already picked up in 2010, so Finland fol- lowed with a delay. Several transactions worth more than EUR 100 million took place in the last year. The most significant transaction included the foundation of a new logis- tics and industrial property investment company called Certeum by Sponda, Varma, the State Pension Fund and three funds managed by Sponda, which resulted in the acquisition of 124 prop- erties worth EUR 917 million in total. Swiss Partners Group acquired proper- ties owned by the Niam III fund for EUR 300 million and most of the properties are located in Finland. Large transac- tions worth more than EUR 100 million were made with various types of space, including shopping centres, offices, apartments, and healthcare properties. The increase in transaction volume is almost solely due to a substantial growth in transactions worth more than EUR 100 million. In 2014, such transactions were made in the amount of more than EUR 2 billion, compared to the average annual amount of EUR 300 million in the previous five years. Last year, there was also a substantially higher number of large transactions worth over EUR 100 million than in 2013. In addition, also the number of smaller transactions worth less than EUR 5 million increased compared to 2013.

The share of portfolio transactions in the transaction volume rose above 60 per cent compared to the slightly more than 30 per cent in previous years. Large portfolio transactions also increased the number of transactions taking place outside the Helsinki Metropolitan Area resulting in a 50 per cent share in the total volume. Capital flowing towards European properties According to a survey conducted by Catella in October, the amount of capital looking for European investment prop- erty has doubled since the strong real estate boom in 2007. In 2014, such global investment capital was estimated to lie at EUR 515 billion compared to EUR 250 billion in 2007. Only about half of this capital was actually used for investment properties. In addition to the tradition- ally strong investment markets of Paris and London, capital also flowed into other parts of Europe. As a consequence, also the number of transactions made by foreign investors in Finland showed a distinct increase and new international investors entered the market. The share of foreign investments in the transaction volume rose close to 40 per cent. This amounts to EUR 1.5 billion, which is more than twice the amount of 2013. The transaction market of residen- tial investments continues to be active. Properties were sold by construction companies, many older funds and other investors. A large part of new construc- tion is currently being sold to profes- Domestic Foreign 1 2 3 4 5 6 14*) 13 12 11 10 09 08 07 06 05 04 03 EUR bn. 2.4 3.2 2.7 5.5 6.0 3.7 1.6 1.8 1.7 2.0 2.3 4.3 46% 47% 37% 53% 65% 46% 16% 33% 28% 23% 30% 36% *) Certeum deal EUR 917 mil. Transaction volume in Finland 2003–2014 Global investment capital volume entering Europe in 2014 100 200 300 400 500 European transaction volume Available capital volume for real estate investments EUR Bn European transaction volume vs. Available capital 2007 2013 2014 EUR 226 Bn EUR 140 Bn EUR 219 Bn Source: Catella Research 2014, IMF, FED, BIZ, Bloomberg, Deutsche Bundesbank, Thomson Reuter, INREV, RCA. EUR 250 Bn EUR 320 Bn EUR 515 Bn

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 5 sional property investors. According to a survey conducted by Catella and IPD, residential investment also appeals on a European level, and the residential sec- tor has become the strongest performing property sector over the past decade. It is the only sector that recorded a posi- tive total return throughout the decade. Compared to other countries, Finland and Germany stand out with more stable markets. Yields of core premises have declined The grown investment capital, together with the strengthened rental market and rent growth expectations have added to the investors’ willingness to buy in many European countries. For example in London and Paris, speculative office con- struction has significantly increased, and projects are started with only a moderate or without any pre-leasing rate at all. In Finland, there are still challenges related to rent levels and vacancy rates. Additional capital allocated to prop- erty investments has further reduced the yields of core properties. Compared to the previous year, the yield of prime offices in the Helsinki CBD dropped 0.5 percentage points to 5.0 per cent. Long-term leases may reduce yields even further. This trend only affects the core office areas in the Helsinki Metropoli- tan Area. In other major cities, prime office yields have primarily remained unchanged.

Market will be strong this year The historically low interest rate sup- ports property investment. The Euro- pean investment market remains strong for the next 12 months, even if the FED and the Bank of England were to start raising interest rates this year. This would affect the property market with a delay, as the capital flow seems to con- tinue strongly and the ECB is not likely to increase interest rates in 2015. We pre- dict that the Finnish market will remain active this year, as increased demand has added to the property owners’ desire to sell. It remains to be seen how well the risk-return relationship of available properties meets the requirements of critical investors.

7.30% 5.00% 5.20% % 4 5 6 7 8 9 Q4 14 Q2 14 Q4 13 Q2 13 Q4 12 Q2 12 Q4 11 Q2 11 Q4 10 Q2 10 Q4 09 Q2 09 Q4 08 Q2 08 Q4 07 Q2 07 Q4 06 Q2 06 Office Helsinki Particulary long lease agreements decrease yields by 0.1–0.3% points. Retail Helsinki Indust./warehouse Prime yields in Helsinki Metropolitan Area Q4 2014 7.30% 6.25% 6.00% 6.75% 5.00% % 4 5 6 7 8 9 Q4 14 Q4 13 Q4 12 Q4 11 Q4 10 Q4 09 Q4 08 Q4 07 Q4 06 Q4 05 Q4 04 CBD Particulary long lease agreements decrease yields by 0.1–0.3% points. Leppävaara Ruoholahti Keilaniemi – Ring Road I Aviapolis Office yields in Helsinki Metropolitan Area Q4 2014 18% 2% (34%) (8%) 7% (8%) 15% (23%) 25% (20%) 33% (7%) Office Retail Industrial/Warehouse Healthcare Residential Other Distribution of Transaction Volume 2014 (2013)

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 6 6 Selection of the latest portfolio transactions in Finland 2014 Building / Object City / Location Seller (Local / Foreign) Purchaser (Local / Foreign) Date Size (m²) Price (EUR mil.) Property type 15 care assets Many Trevian Care I Hemsö Q1 n.a. 100.0 Care 5 grocery assets HMA, Tuusula HOK-Elanto Trophi Fastighets (Redito) Q1 n.a. n.a. Retail Sanomala printing facility, office property and production and office property Vantaa Sanoma Sagax Q1 45,000 65.0 Industrial / Office Industrial and logistics properties Many n.a. Suomi Toimitilakiinteistö Q2 n.a. 100.0 Industrial 68 grocery stores Many Sveafastigheter Fund III Trophi Fastighets (Redito) Q2 n.a. 124.0 Retail 8 grocery stores Many Glitnir Bank Luxembourg S.A. Balder Q2 65,000 66.0 Retail 12 industrial properties HMA Sponda and Varma Certeum Q3 917.0 Industrial/logistics 800 apartments Many Probus Holding (Avara) OP-Vuokratuotto Q3 n.a. n.a. Residential Retail and office properties Many Niam Partners Group Q3 n.a. n.a. Retail / Office 137 apartments Many YIT Ålandsbanken housing fund Q3 137 apt. ~ 30 Residential 123 retail properties Many AXA Real Estate Trevian Asset Management and H.I.G Capital Q4 n.a. ~ 107 Retail Retail properties HMA Etelä-Suomen Kauppakiinteistöt (Citycon) Quorum Kehitysrahasto I Q4 n.a. 6.7 Retail ~300 apartments HMA, Turku, Kirkkonummi Skanska Icecapital Housing Fund III Q4 300 apt. n.a. Residential 509 apartments HMA, Lahti Taaleritehtaan Asuntorahastot I and III LocalTapiola Group Q4 509 apt. n.a. Residential Three car sales and industrial premises Helsinki NV Property Fund I Sagax Q4 26,600 28.3 Retail / Industrial Selection of the latest transactions in Helsinki Metropolitan Area 2014 Building / Object City / Location Seller (Local / Foreign) Purchaser (Local / Foreign) Date Size (m²) Price (EUR mil.) Property type Sanomatalo Helsinki Sanoma Deka Immobilien Q1 n.a. 176.0 Office Alberga Business Park, C-building Espoo NCC Union Investment Real Estate Q1 5,500 n.a. Office Plaza Business Park, Tuike Vantaa NCC Fennica Properties I Q1 5,200 17.3 Office 88 apartments Vantaa Pohjola Rakennus LocalTapiola Groups housing fund Prime Q1 4,400 15.0 Residential Lönnrotinkatu 11 Helsinki Many YIT Q1 4,400 n.a. Office Porkkalankatu 5 Helsinki Aberdeen Real Estate Fund Finland AXA Real Estate Q2 12,000 41.0 Office Bisnespaja Avia Vantaa YIT OP Vuokratuotto Q2 5,000 n.a. Industrial / Office Hotel Scandic Marski Helsinki CapMan EM Group and Sewatek Q2 67 rooms n.a. Hotel Kadetintie 6 Helsinki Signe and Ane Gyllenberg Foundation VVO Q2 n.a. n.a. Residential Derby Business Park Helsinki SRV Niam Q3 n.a. n.a. Office Retail center Dixi Vantaa YIT NREP Nordic Strategies Fund Q3 9,100 n.a. Retail Office building Voimatalo Helsinki AXA Real Estate Niam Q3 9,300 n.a. Office Q-Park Kasarmitori parking facilities Helsinki Q-Park Pohjola Kiinteistösijoitus Q3 400 parking n.a. Other Retail properties Vantaa, Tampere n.a. OP Vuokratuotto Q3 n.a. 35.0 Retail Iso Omena shopping centre (40%) Espoo GIC Citycon Q4 n.a. n.a. Retail Keilalahdentie 2-4 Espoo Exilion Real Estate I AXA Real Estate Q4 17,076 64.8 Office Brondankulma Helsinki CBRE Nordic Property Fund AFIAA Q4 8,230 over 60 Office Selection of the transactions in other cities 2014 Building / Object City / Location Seller (Local / Foreign) Purchaser (Local / Foreign) Date Size (m²) Price (EUR mil.) Property type Entertainment Centre IsoCee Kuopio Carlson Keva Q2 n.a. n.a. Retail Huhtamäki logistics property Hämeenlinna Huhtamäki NREP Nordic Strategies Q2 52,000 n.a. Industrial Apartment building Kaasukello Turku n.a. OP Vuokratuotto Q2 61 apt. n.a. Residential Tulli Business Park Tampere UBS Real Estate Kapitalanlagegesellschaft Sponda Q3 20,000 63.7 Office Lemminkäisenkatu 32 Turku Carlyle Group Turku Technology Properties Group Q3 n.a. n.a. Office Logistics property Mäntsälä CapMan Real Estate II American Realty Capital Global Trust Inc. Q3 74,400 n.a. Logistics Hippostalo office property Tampere Senate Properties Tampere Student Housing Foundation Q4 19,000 12.1 Office

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 7 CREDI - Main Indices CREDI - Subindices Positive trend in property financing continues The positive trend in bank financing of property transactions continued also in the second half of 2014. In the December survey, the index reflecting changes in the availability and conditions of bank financing during the past six months was clearly positive despite the weak eco- nomic situation. According to the survey, credit avail- ability improved in the second half of 2014, but not as much as in the first half. Margins decreased clearly also in the second half of the year and also other key property financing terms continued to develop positively from the debtors’ point of view.

CREDI-survey TEXT: TUOMAS AHONEN Listed companies have refinanced their loans Listed property investment companies succeeded in refinancing their loans in late 2014. Sponda announced the refi- nancing of a major part of their loan due in November 2015 at a total of EUR 200 million. Citycon on the other hand announced the completion of the refi- nancing of their bank loans by signing a EUR 500 million syndicated line of credit facility in December. In connection with the refinancing the company also issued a 10 year eurobond in September for the amount of EUR 350 million at a fixed annual interest rate of 2.5 per cent. The positive trend prevailing in prop- erty financing last year supports the growth of liquidity in the property mar- ket. In 2014, the CREDI Main index was 20.7 on average, compared to the average 1.3 index in 2013.

Possible turn ahead next year? Respondents to the survey believe that the positive trend in financing will continue in the first half of this year, but based on the index progress will be slower than at the end of last year. In a corresponding survey conducted in Swe- den in October, the positive trend is pre- dicted to turn neutral by the end of the year. If Finland follows Sweden’s foot- steps, it is possible that the current trend in financing will already end next year. One third of the respondents believed that margins will decline within the next six months and two thirds believed them to remain unchanged. Availability and other conditions of bank financing were considered to improve slightly. CATELLA REAL ESTATE DEBT INDICATOR Impact on financing -50 -40 -30 -20 -10 0 50 40 30 20 10 Availability Past 6mth Next 6mth CREDI December 2014 CREDI June 2014 Leverage Past 6mth Next 6mth Margins Past 6mth Next 6mth Maturity Past 6mth Next 6mth Decrease Increase Increase Decrease Decrease Increase Decrease Increase Financing tightens -40 -30 - 2 - 1 -40 -30 - 2 - 1 Financing relaxes 40 30 2 1 40 30 2 1 Past 6mth Next 6mth No change No change CREDI December 2014 CREDI June 2014 This makes sure that the answers from investors and banks are treated equally. Subindices are calculated by weighting the answers according to the direction of the sen- timent, so that “no change” will have a weighted value of 0, a negative change will have a weighted value of -50, and a positive change will have a weighted value of 50. Based on this, an index of below 0 speaks of a tighter financial market, whereas an index of over 0 is a sign of a relaxing financial market. The CREDI Main Index (past six months and next six months) is an unweighted average of the subindices.

About the CREDI survey The Catella Real Estate Debt Indicator, CREDI, is a market sentiment indicator for the real estate debt financing market. In Finland, it is based on a survey conducted amongst active property investors and banks offering property funding. CREDI consists of four questions concerning changes in real estate financing and conditions during the past six months, and, respectively, four questions focusing on changes expected to take place in the next six months. CREDI Subindices report the impact of individual factors on financing and are calculated as unweighted averages of the subindices calculated separately for banks and investors.

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 8 SWEDEN FINLAND ESTONIA LATVIA LITHUANIA GERMANY DENMARK FRANCE SPAIN UK NORWAY STOCKHOLM MADRID LONDON CITY STUTTGART BERLIN FRANKFURT LUXEMBURG TALLINN RIGA LONDON WEST END AMSTERDAM MANCHESTER BIRMINGHAM ROTTERDAM COLOGNE DUSSELDORF BRUSSELS PARIS OULU VILNIUS MALMÖ OSLO TAMPERE JYVÄSKYLÄ GOTHENBURG MUNICH HAMBURG COPENHAGEN LYON BARCELONA HELSINKI MPA TURKU LAHTI 5.75 5,900,000 4.70 18,534,800 4.40 13,652,000 7.50 597,000 8.00 247,00 5.25 2,110,000 4.50 7,570,000 5.25 3,567,000 4.50 13,330,000 5.25 8,462,000 5.60 6,102,000 4.40 11,400,000 4,90 5,823,000 5.75 4,812,000 5.00 6,800,000 6.75 630,000 5.75 2,800,000 7.00 505,000 7.00 690,000 5.25 8,955,000 4.50 11,237,000 7.50 782,000 7.00 861,000 6.00 3,710,000 5.50 12,700,000 5.25 2,502,000 5.00 2,082,000 4.00 55,800,000 5.80 13,156,000 4.25 6,056,000 3.50 6,192,000 Prime Office Yield, % Office stock Forecast 6 months 8.25 363,000 5.00 8,673,000 European office market Spring 2015

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 9 Migration to the Helsinki area reported record figures Production growth remained weak in the whole country last year. The impact of the weak economic cycle on the Helsinki area is increased by the service-based structure of the area. The Helsinki Metropolitan Area is still strengthened by migration: last year, the population of the area grew by almost 19,000 people, of which 12,000 by migration. This is the strongest population growth in 50 years. More vacant office space than ever There is 1,083,000 sq.m. of vacant office space in the Helsinki Metropolitan Area, which is about 30,000 sq.m. more than six months ago and the highest level of all times. The vacancy rate is 12.5 per cent. An even higher impact could have been expected due to the economic situ- ation, but in the last two years job losses happened to a large extent in the retail and public sector, which has an imme- diate effect on retail premises and a delayed effect on office premises. The situation is also balanced by the scarcity of new office properties under construction. Last year, only 55,000 sq.m. of new office space was completed in the Helsinki Metropolitan Area, and the same amount is due this year. Companies have realised that offices contain plenty of unused workspaces, and the trend is to reduce the size as well as the number of workspaces. Accord- ing to a survey conducted by workspace developer Rapal, the utilisation rate of companies’ workspaces lies at 40 per cent in Finland, which supports continu- ous demand for easily convertible office space.

The increase in vacant office space is thus not only a result of the economic situation, but reflects structural change. Old office premises are already being torn down in Lauttasaari, Pitäjänmäki, Tapiola and Kilo to give way to new resi- dential areas, but still not sufficiently to balance the situation. We predict this year’s office vacancy rate to rise to a new record level of more than 13 per cent. Strong growth in vacancy in many important office areas Last autumn, the amount of vacant office space decreased slightly in the Helsinki CBD and its surroundings. New premises in the Töölönlahti area Helsinki Metropolitan Area TEXT: ERKKI HAKALA ©Skanska Skanska has started the construction work of Aviabulevardi offices, which will comprise of 9,000 sqm of office space. The office building is located right next to the Aviapolis train station. Having a train station on the same plot ensures great connections: Aviabulevardi offices can be reached in half an hour from anywhere along the Ring Rail Line. The premises will be completed in the spring of 2016. A hotel and a generous amount of parking spaces will be built right next door. More information can be found from: www.skanska.fi/aviabulevardi

Property Market Trends Spring 2015 Finland

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 10 – and premises left vacant by users who moved there from Eteläesplanadi and Forum – have found new users. In other central office districts, the amount of vacant space increased. In the Aviapolis area, the vacancy rate rose 2 percentage points up to 19 per cent within six months, in Pitäjänmäki more than 3 percentage points again to over 16 per cent and in Leppävaara 3.5 percentage points to over 14 per cent. A substantial amount of space used, for example, by NSN has become vacant in Leppävaara and more is to follow in the course of the spring. If no new users are found for these vacant premises, Leppävaara’s vacancy rate will rise to over 20 per cent.

With the exception of the Helsinki CBD, prime office rents in key areas turned downwards again last autumn – the slight decline has now continued for more than two years. In more modest properties, the decline has been steeper than in prime properties. In the case of properties that are in urgent need of being filled, tenants have been offered quite low rents, but with leases that are valid until further notice. Challenges in retail result in growth of vacant retail space Retail trade confidence reached an all- time low last December. According to a survey conducted by the Confederation of Finnish Industries EK, sales contin- ued to decline and sales expectations for this spring are considerably weak. Many retail companies predict sales to decline in the coming months. In addition to the weak economic situation, there are structural reasons behind this, such as the transfer of certain specialist items to online stores.

There is currently 163,000 sq.m. of vacant retail space in the Helsinki Metropolitan Area, which is one third more than last year. The vacancy rate of 4.8 per cent is the highest rate since the mid-1990’s. The level is still tolerable, but since the rate used to be around 2 per cent for a long time, there has been a rapid increase. The highest vacancy rate in the area lies in Vantaa at 6.7 per cent. Among the largest vacant retail prem- ises is a considerable number of former car dealer premises. We predict a clear growth in the amount of vacant retail space due to the continuing weak sales development in the retail sector. New large chain stores in the Helsinki city centre The retail vacancy rate in the Helsinki CBD is still low. Yet there is vacant retail space in shopping streets close to the CBD. Top CBD premises have been let, but the turnover of tenants is higher than usual. The CBD is normally quite resilient to recession, but now even there 9.0% 12.5% 6.9% 4.8% % Retail Office Industrial and warehouse Total 2 4 6 8 10 12 14 Q4 14 Q4 12 Q4 10 Q4 08 Q4 06 Q4 04 Q4 02 Q4 00 Q4 98 Vacancy rate in Helsinki Metropolitan Area Q4 2014 micro location has become an increas- ingly important factor.

Many large-volume chain stores have come to the Helsinki CBD. Stores were opened by Gigantti in Forum, by interior design store Habitat in Citycenter and by sports and outdoor store XXL in Kluuvi. The arrival of stores requiring several thousands of square metres to the CBD also shows that property owners were not able to find specialised stores that pay the highest rents. From the owners’ perspective the solution does not really lie in rent levels, but in the fact that the leasable floor area increases, because for- mer passageways between smaller stores are turned into leasable space and stor- age space is turned into shopping space. The negotiation position of the most desired tenants has clearly improved and an increasing number of tenants wants to include turnover rents into their leases. Such agreements can be problem- atic for property owners, for example if a substantial part of a store’s sales revenues comes from their online store.

Rents of top industrial premises also declined The business decline of industrial com- panies evened out by the end of last year and the low order backlog did not weaken further. According to EK’s con- fidence indicator, industrial expecta- tions are still weak and the amount of 1000 m2 Ruoholahti, 14.8% Pitäjänmäki, 16.2% Herttoniemi, 21.9% Keilaniemi – Ring Road I, 18.1% Leppävaara, 14.2% Aviapolis Airport Area, 19.0% Vallila, Sörnäinen, Hermanni, Hakaniemi, 9.2% 25 50 75 100 125 150 Q4 14 Q4 13 Q4 12 Q4 11 Q4 10 Q4 09 Q4 08 Q4 07 Q4 06 Q4 05 Q4 04 Vacant office space in selected districts in the Helsinki Metropolitan Area and the vacancy rate Q4 2014

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 11 We expect the amount of vacant industrial and warehouse space to con- tinue growing, because there is currently unused capacity. vacant industrial and warehouse space remained at close to 7 per cent. There is now 533,000 sq.m. of vacant space in the Helsinki Metropolitan Area. A major part of the 30,000 sq.m. premises in Hakkila left vacant by Inex Partners a year ago has been let to a new user. On the other hand, space has become vacant in the Aviapolis area and, with Schenker leaving, in Oulunkylä. EUR/m2 /year Helsinki CBD prime Helsinki CBD Keilaniemi prime Ruoholahti prime Aviapolis prime Leppävaara prime 200 250 300 350 400 Q4 14 Q4 12 Q4 10 Q4 08 Q4 06 Q4 04 Q4 02 Q4 00 Q4 98 Rental levels of office premises Q4 1998–Q4 2014 Gross rent EUR/m2 /year (excl. VAT), New agreements t Turku Highway Western Highway Leppävaara Länsiväylä corridor Ruoholahti Jätkäsaari Ring l Ring lll Ring ll Centre CBD Lahti Highway Herttoniemi Eastern Highway Porvoo Highway Tuusula Highway Tampere Highway St. Petersburg 304 km Lahti 104 km Tampere 176 km Turku 165 km Vuosaari Harbour Marja-Vantaa Pitäjänmäki Ce Ce äki ki änm mä Ce Ce än C C CBD CB CB C C ä corridor ä c HELSINKI ESPOO VANTAA Keilaniemi Inner City Kalasatama Vallila Aviapolis 7 9 10 8 2 4 5 1 6 3 Rautatie- asema KAMPPI KLUUVI KAARTINKAUPUNKI PUNAVUORI Pohjoissata Pohjoisesplanadi Lönnrotinkatu M a n n e r h e i m i n t i e Arkadiankatu Bulevardi Kaivokatu Aleksanterinkatu F r e d r i k i n k a t u n ie m e n k a t u Kaisa Helsinki Metropolitan Area office market Major Office Projects in HMA Spring 2015 HELSINKI 1 Estradi office building, 1st phase 2 OP-Pohjola headquarters 3 Sweco office building 4 Office building, Osmontie 38, Käpylä 5 Ultimes Business Garden 6 National Institute for Health and Welfare, extension ESPOO 7 Alberga Business Park, 4th phase VANTAA 8 DB Schenker terminal 9 Technopolis Helsinki-Vantaa, extension 10 Aviabulevard, Skanska Helsinki Metropolitan Area Upper gross Prime yield Vacant Vacancy rate office market rental level Q4 14 Q4 14 space Q4 14 Q4 14 Q2 14–Q4 14 €/m2 /year % m2 change%-points Helsinki City Centre - Helsinki CBD 378 5.00–6.00 32,764 7,8 -0.7 - Helsinki Center (excl. CBD) 288 6.00–7.75 114,877 6,4 -0.5 Inner City 216 6.90–10.00 240,345 9,1 0.0 Ruoholahti 264 6.00–7.25 58,075 14,8 0.2 Keilaniemi - Ring Road 1 246 6.25–8.50 68,666 18,1 0.2 Espoo West, (modern space) 201 7.60–9.00 61,353 20,1 -2.0 Leppävaara Business Park area 216 6.75–8.40 30,707 14,2 3.5 Herttoniemi, (modern space) 204 8.35–9.35 19,624 21,9 10.2 Aviapolis Airport Area 222 7.30–8.50 45,896 19,0 2.3 Helsinki Metropolitan Area n/a n/a 1,083,162 12,5 0.4

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 12 Tampere’s real estate holds interest for investors Tampere has become the second most interesting area for investors due to the region’s strong growth and large invest- ments in the development of the city. However, the scarcity of properties that meet the investors’ strict purchase cri- teria limits the growth of the volume. Sponda acquired the 20,000 sq.m. Tulli Business Park completed in 2008–2009 from its Swiss owners at a price of EUR 63.7 million, which corresponds to an initial yield of 7 per cent. Senate Properties sold the Hippostalo property to the Tampere Student Hous- ing Foundation TOAS for EUR 12 mil- lion. The site, located in Kaleva, includes a 15,500 floor sq.m. office building and lots of unused building rights, which TOAS plans to utilise for residential con- struction. The City continued to reduce its real estate property by selling the Ratina Lämpötalo building to Pohjola Bank for EUR 7 million.

Large investments in university campus areas The office vacancy rate continued to rise up to over 10 per cent, because of the weak demand for older office space. The only larger office property that was com- pleted in 2014 was Insta’s new head office in Sarankulma. Now, with the start of the 11,900 sq.m. expansion of the Tech- nopolis Yliopistonrinne site, construc- tion of new space picks up. University properties of Finland is building a 15,500 sq.m. campus arena in Hervanta for the University of Technology that will incorporate university functions as well as office space for companies. In the Kauppi campus area, 25,000 sq.m. of space is under construction for the School of medicine of the University of Tampere. The Pirkanmaa Hospital District is also starting a significant project in the area, which incorporates three new buildings and an underground parking facility as well as extensive reno- vation of the current premises. Office sites are available in Ratina and an office tower is planned next to the bus station. Technopolis has made a pre- liminary agreement for a site on Ratapi- hankatu, which has a planned building right of 22,800 floor sq.m. waiting for approval due by the end of 2015. Significant retail projects under construction and planning Retail construction continued to be fairly active and significant projects are under way.

Lielahtikeskus, with a floor area of 13,000 sq.m. hosting public services and specialised stores, was completed in April 2014. The 4,000 sq.m. expansion of Stock- mann’s department store on Hämeen- katu was also finalised. The first phase of the Lahdesjärvi Ikano Retail Centre will incorporate the construction of 15,000 sq.m. of space for K-Rauta. Sports and outdoor store XXL opens two new stores in Tampere: one next to the Prisma cen- tre in Kaleva and the other in Lielahti upon completion of the renovation and Tampere TEXT: RAINO PESU © Vastavalo.fi

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 13 Sääksjärvi Pirkkala Pyynikki TAMPERE Hervanta Messukylä Myllypuro Elovainio Kankaantaka Haapaniemi Pispala Lielahti Hatanpää Sarankulma Kaleva Tohloppi Ruutana Ylöjärvi 3022 Näsijärvi Huovi Partola Lentola 1 5 8 6 7 2 12 3 4 3 3 9 9 12 12 E12 3 E12 E12 E63 E63 10 11 9 expansion project. The vacancy rate has increased and even the centrally located Hämeenkatu offers vacant retail space. The Tulli hotel tower offering 305 rooms opened its doors in October 2014. Hotel capacity has grown substantially in two years resulting in decreased utili- sation rates.

Construction of new production and warehouse space attracts interest Demand for production and warehouse space continues to be weak, but compa- nies’ need for more modern space keeps site demand and new construction on a moderate level. Areas alongside the ring road are sought after because of their good traffic connections. IT wholsesale company Also Finland is building a large logistics centre in Pirkkala’s Linnakallio, and Posti acquired a site in the same area with the plan to set up logistics functions. Traffic network and railway station area under strong development The Rantaväylä tunnel is progressing well and due to be completed in 2017 freeing up sites along the Näsijärvi shore, which will mainly be used for residen- tial building. The traffic network is also developed by extending Ratapihankatu to Rantaväylä. About 30,000 sq.m. of offices and apartments are planned on Ratapihankatu near the railway station. An international design contest was organised for the development of the railway station and its surroundings and the tramline building decision is also due to be made in 2016. NCC announced its withdrawal from the Sori deck project and the city is looking for a new partner. The large Ratina shopping centre is still looking for a sufficient number of tenants to start construction works.

Rental levels €/m2 /month Retail Office Industrial/ warehouse Lielahti 9–25 Hatanpää 8–14 9–15 5,5–7 Sarankulma 8–12 5,5–8 Kaleva 8–18 8–12 Messukylä 5–7 Hervanta 10–25 9–16 5–7 Myllypuro 5–7 Elovainio 7–20 5–7 Kankaantaka 5–7 Huovi 5–8 Partola 8–20 City Centre €/m2 /month Retail 35–80 Office 12–16 Retail 15–35 Office 11–16 Retail 10–20 Office 10–14 Renovated/new office 16–22 Kyttälänkatu Hämeenkatu Hallituskatu Kauppakatu Puutarhakatu Satakunnankatu Hallituskatu Satamakatu Tiilliruukinkatu Tiilliruukinkatu Ratinan Rantatie S u v a n t o k a t u Tampereen Valtatie H a t a n p ä ä n V a l t a t i e Ra ut ati en ka tu Pe lla va te ht aa nk at u Al ek sa nt er ink at u Al ek sis Ki ve n ka tu Kir kk ok atu Ku nin ka an ka tu Nä sili nn an ka tu Hä me en pu ist o M us ta nla hd en ka tu H äm ee np uis to Tu om io kir ko nk at u H at an p ää n V al ta ti e R a t a p i h a n k a t u Sor ink atu Major building projects UNDER CONSTRUCTION 1 Yliopistonrinne 3rd and 4th phases, offices 2 Campus Arena, University’s space and offices 3 Ikano 1st phase: K-Rauta 4 School of Medicine, new building 5 Retail space, reconstruction and expansion XXL Sports & Outdoor IN PLANNING 6  Sori deck: Multipurpose arena, office and residential building 7  Shopping centre Ratina and two office buildings 8 Expansion of Ratapihankatu, office and residential buildings 9  Logistics space, Also Finland and Posti 10 Tesoma retail center 11 Kaukjärvi retail center 12 Oulu University Hospital, reconstruction and new buildings

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 14 The largest in the Nordic Countries, with the most vigorous development in Finland Tampere is the largest inland city in the Nordic Countries, as well as being the most vigorously developing inland city in Finland. In 2014, the city’s popu- lation increased by more than 2,500 inhabitants. Tampere’s location at the hub of Finland’s busiest railway tracks and highways creates a natural setting for growth and success. An urban zone is being formed between Helsinki and Tampere. It is the only urban zone in Finland and meets international stand- ards. It is connected to European trans- port channels. The city centre of Tam- pere is its northern gate.

At the end of 2014, the Tampere City Region had more than 370,000 inhabit- ants. By 2040, it will have 480,000 inhab- itants. The city centre of Tampere, the area of which is about 6 km2 , is currently home to 40,000 inhabitants, and in 25 years, it will have 60,000 inhabitants. Every quarter of the jobs in the Tam- pere City Region are located in the city centre of Tampere. The city centre has a one-third share of all retail activities in Tampere. The city centre of Tampere is the functional and financial focus of this developing city and city region. Five-star city centre Boosted by population growth, the City of Tampere has been proven to have a good strategic grasp and to be able to make bold decisions and act accordingly. The Five-star City Centre development programme was completed in 2011. Many of its projects have been imple- mented or are being implemented. The latest update of this programme will be published during spring 2015. It will pro- pose a large amount of new construction and infill development to the city centre. The city centre of Tampere forms a concentration of retail and residential activities, jobs, knowhow and services in this large economic region and com- muter area. Its regional structure will be strengthened in the future. Tampere is the capital and leader of the Tampere Region and the Tampere City Region. The city centre of Tampere forms the hub of the traffic system and operating envi- ronment. It is therefore the best possible place for the concentration of businesses, services and housing.

Competitive station area The city centre’s strategically most signifi- cant development area is the Travel and Service Centre, i.e. the new transport, ser- vice and housing concentration to be built in the current railway station area. Most of it will be built on top of the railway tracks, on the deck that connects the city districts to each other. It will comprise a travel centre, commercial premises, retail services, housing, a multifunctional arena and parks. The current central business district of Tampere will extend towards Bold building activities and sustainable competitiveness THE CITY OF TAMPERE’S WORKGROUP: TERO TENHUNEN, MIKKO NURMINEN, MINNA SEPPÄNEN (TEXT), TRANSLATIONS (FINNISH-ENGLISH): TRANSLATINKI OY 2015 The city centre of Tampere.

The construction of a multifunctional arena on top of the railway tracks in the city centre of Tampere may start in 2017–2018. The Arena will have almost one million visitors annually, which will stimulate the business and street life in the city centre. Picture: City of Tampere, local detailed plan 8366 / Aerial view by Lentokuva Vallas Oy and illustration by NCC, Studio Daniel Libeskind, 2011. Business and residential towers will be built in the area between the Arena and the Travel and Service Centre. The towers will be imple- mented on the deck that will be built on top of the railway area. Picture: City of Tampere, local detailed plan 8366 / Illustration by NCC, Studio Daniel Libeskind, 2011.

Tampere and the Tampere City Region have a bright future. The city centre of Tampere is the leader of developments. In the future, the city centre will be increasingly fascinating and competitive. It has everything that a successful business needs: a good location and accessibility, an operating environment that enables innovations, a beautiful urban setting, a developing population base and modern services. By 2030, there will be 15,000 new residents and 15,000 new jobs in the city centre.

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 15 • Part 3. The business area along Ratapihankatu Street. The construction of a business area in the northern part of the area is about to begin. Good traffic connections to the high-ways. Local detailed plan proposal 2014. Easily accessible traffic hub There is traffic through the city centre of Tampere: traffic to and from the high- ways, there are railways in three direc- tions, main regional routes, public trans- port, local streets, cycling routes and main pedestrian routes. The customer flows of the entire economic region and commuter area are directed towards the city centre of Tampere. It is therefore the best possible location for retail activities, services and real estate business activities. The strategic traffic projects improve the accessibility of the city centre and make the city more interesting and the enter- prises more competitive.

• The Rantaväylä tunnel. Traffic tunnel on Highway 12. Under construction, will be completed in 2017. Will enable housing construction and the development of the tourist areas on the shores of Lake Näsijärvi. Implemented through cooperation between the State and the City of Tampere. • Tampere tramway. Plans underway, construction is about to begin. Will start operating in 2018–2019 between the district of Hervanta and Pyynikintori Square. Infill and real estate development in the areas close to the tramline.

• Ratapihankatu Street. The new collec- tor street from Highway 3, via the railway station, onto Highway 12 and onto Ranta- väylä. Will be completed in 2017. Will par- ticularly serve the travel centre and the new working areas along the railway tracks. • Modern travel centre. A hub for all trips and modes of travel. Part of the Travel and Service Centre. Comprehensive public transport services (incl. connections to the airport). Implemented through cooperation between the State and the City of Tampere. Tampere Hall, the university, the Tulli area and the Tammela district. In the station area, there is a unique opportunity to combine working, hous- ing, services and leisure activities with the smooth utilisation of services and travelling. The development of the area continues on the basis of the international design contest that was organised in 2014. Amongst the current construction projects are Torni Hotel, which was com- pleted in autumn 2014, the hotel for Tam- pere Hall, Technopolis and many infill development projects in the Tammela district. The area will be built through cooperation between the City of Tampere and the State of Finland. The construction activities will take place in three parts. • Part 1. Deck and the Arena. The con- struction of the southern part may start in 2017–2018. The impressive multi-functional arena will serve as a venue for large public events. Almost one million visitors annually. Commercial premises and housing to the towers. Design by Architect Daniel Libeskind (USA). Local detailed plan 2011. • Part 2. Travel centre. A centralised travel centre, retail space, services, housing and parks will be implemented in the current railway station area and on top of the railway tracks. Design contest 2014, the winner ReConnecting Tampere, COBE Aps (Denmark). The master plan 2015–2016. The station area will be reshaped. A deck will be built on top of the railway tracks. The area will comprise a travel centre, commercial and office premises, housing, services and parks. Picture: City of Tampere / Design Contest for the Tampere Travel and Service Centre, the winning entry ReConnecting Tampere, COBE Aps and Lundén Architecture Oy, 2014. The P-Hämppi car park is the latest of the public underground parking facilities in the city centre. This parking facility, which is located beneath the railway station and Hämeenkatu Street, has been acknowledged for its archi- tecture and lighting. Photograph by Finnpark.

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 16 In the future, the city centre will extend towards Eteläpuisto and Lake Pyhäjärvi via the Nalkala Shore. There will chiefly be housing construction in the area, but service and commercial premises will also be built. The shores are public and urban. Picture: City of Tampere / International Design Contest for Eteläpuisto Park and Its Environs, competition proposal Seelake, worked-up plan, Tovatt Architects & Planners, 2014. • Underground parking. The P-Hämppi car park was completed in 2012. The other underground parking facilities are either at the planning or project development phase (the P-Kunkku car park, the Travel and Service Centre car park, as well as the Tammelantori and Pyynikintori car parks). Serve and promote the retail activities, services, commercial premises, housing, public events, park-and-ride activities and the accessibility of the city centre by car. • The pedestrian- and cycling-focussed city centre. The commercial epicentre will be turned into a pedestrian- and cycling- focussed area. The speed of ground-level motor traffic will be slowed down. Supports the retail and service activities in the city centre.

• Hämeenkatu and the pedestrian streets. Hämeenkatu will be developed as a public transport street, a pedestrian environ- ment and the main shopping street. Kunin- kaankatu and Tuomiokirkonkatu are pedes- trian and shopping streets that are to be developed. Attractive lakeside city Tampere is a famous city of sports and culture located on the lake shores and by the rapids. The production of events, the adventure services and tourism are determinedly developed. In the city centre, large numbers of tourists are particularly interested in the congresses and concerts held at Tampere Hall, the sports and music events at Ratina and also at the Arena in the future, the Särkänniemi amusement park, many theatres and museums.

The cityscape has special features, such as the settings dealing with the city’s industrial history, the Tammer- koski Rapids, Lakes Näsijärvi and Pyhäjärvi, as well as the forests in the close-by Pyynikki and Kauppi areas. At a distance of two kilometres from A possible future vision for the city centre of Tampere in 2030, when many pending projects have been completed. New construction takes place on top of the railway tracks and in shore areas, but elsewhere, infill development is carried out. Picture: City of Tampere, the vision 2030 regarding the city model of Tampere / visualisation by MY Architects Ltd, 2015.

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 17 Keskustori Central Square, you will find more than ten kilometres of construc- tion free shorelines. They delight people and promote the city’s image, competi- tiveness and economy. Many of the new city-centre development areas are located close to the lake shores. • Ratinanranta and Ratina. The new residential area on the city’s southern shore has been completed. The building of commercial premises has begun. The construction of the shopping centre is about to begin. The stadium is being developed as an event venue.

• Ranta-Tampella. The construction of a new residential area will begin at the completion phase of the Rantaväylä tunnel in 2016. • Eteläpuisto and Nalkala Shore. Design contest 2014. The competition entry Seelake, Tovatt Architects & Planners (Sweden), was selected for further planning. Housing, services, commercial premises, recreational areas, parks and shore routes. • Särkänniemi, Mustalahti and Onkiniemi. The development of the amusement park, the tourist area and the construction of housing and services is ongoing. The area will be connected to the city centre.

• Viinikanlahti Bay. Some shore areas of Lake Pyhäjärvi will become vacant for construction after the wastewater treatment plant has been moved to another location in the 2020s. For further information: The City of Tampere www.tampere.fi/keskustahanke The next new district in the city centre will be Ranta-Tampella. Handsome lake views will open out from its dwellings and shores. The Rantaväylä tunnel enables the construction of Ranta-Tampella and the extension of the city centre to the shore of Lake Näsijärvi. Illustration: YIT Construction Ltd / Arkkitehti- toimisto Jukka Turtiainen Oy, 2014.

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 18 The weak economic situation and the lay-off news affect the region’s property market. The change of ownership of the shipyard together with new orders have brought optimism to the market, but the increasing retail vacancy rate in the city centre is a growing cause for concern. City of Turku implements substantial property transactions Last year, several larger property trans- actions took place in Turku. In August, Turku Technology Properties bought Trivium’s 8,700 sq.m. office building on Lemminkäisenkatu. In late 2014, the City of Turku sold nine properties, mainly in office use, to Turku Technology Properties, 48 per cent of which is owned by the city. These properties include Puolalankatu 5, Puutarhakatu 1, Puutarhakatu 14 and Linnankatu 23, which the city will con- tinue to let, as well as the restaurant Kupittaan paviljonki and the former work centre in Itäharju. In addition to this extensive transaction, the city is also selling other individual properties. Office market focuses more strongly on areas outside the centre Due to the lack of modern office space and parking lots in the city centre, a growing number of users choose office premises elsewhere. The largest office cluster is in Kupittaa, where also the tax authorities moved from the centre. Premises in ElectroCity near the Kupit- taa station are currently undergoing interior renovation to meet modern requirements. Other office concentra- tions outside the city centre are in the harbour, in Pitkämäki and alongside Helsinginkatu. But new offices are also built in the centre: The 3-storey creative centre Logomo Konttori will be opened in spring adding plenty of office space of various types and sizes to the total of 9,000 sq.m. in the Logomo centre. Amount of vacant retail space grown substantially in city centre The retail vacancy rate of the Turku city centre has grown steadily in recent years and reached a peak last autumn as Ant- tila and KappAhl left their premises in the pedestrian street. The Turku Coop- erative also decided to discard some of its restaurants at the market square, and Amarillo, Rosso and Coffee House closed their doors at the turn of the year. The centre’s retail vacancy rate currently lies at 5 per cent, whereas it was 1.7 per cent in 2008. Internal migration has taken place in Hansa Emporium shop- ping centre lately and also new players moved in, as Burger King opened its first fast food restaurant in Turku in street level premises of the Kultatalo building. The largest demand for centrally located retail space focuses on restaurants and coffee houses, which are particularly frequent in the Aurakatu and Vähätori area. Last November, the City Council approved the continuation of the plan- ning of the Toriparkki parking facility. The new city plan foresees a maximum of 800 parking lots in two storeys beneath the Kauppatori market square. If imple- mented, the parking facility could add momentum to other developments in the Turku TEXT: MARI ROUVALI © Turun kaupunki/Hannu Waher

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 19 t 5 4 8 7 3 9 6 2 1 10 11 12-13 E18 E18 E18 E18 E18 E18 E18 E18 E18 E8 E63 E63 E8 E18 1 1 8 8 9 9 1 10 10 Kakskerta Hirvensalo TURKU Kuusisto Kirjalansaari Ispoinen Kupittaa Ruissalo Kulloinen Pansio Lieto Halinen Hauninen Kaarina Raisio Piikkiö city centre, such as the Torinkulma pro- ject at the corner of Kauppiaskatu and Eerikinkatu. While Skanssi and Mylly shopping centres strengthen their positions, cen- trally located Hansa’s visitor numbers have slightly decreased in recent years. A 17,000 sq.m. expansion is under con- struction in Mylly, which will incorpo- rate several players that are new to the Turku region, such as sports and outdoor store XXL, which will also receive new premises next to Skanssi.

New shipyard ownership adds momentum to industrial space market The uncertainty around the future of the Turku shipyard came to an end, when the State of Finland and German ship- builder Meyer Werft bought the ship- yard together. At the same time, also the financing of new ships and the building of two TUI Cruises cruise ships were secured. Tallink and Meyer Turku also signed a letter of intent for the construc- tion of an environmentally friendly car- passenger ferry. The positive news has created optimistic expectations on the market, but has not yet caused concrete space demand. The industrial and ware- house vacancy rate has remained fairly steady in recent years. There is also hid- den vacancy on the market that is not captured by the statistics, where prem- ises are too large for their users and the use of space is thus ineffective. Invest- ments are still scarce and there is mainly a demand for letting smaller hall space. Rental levels €/m2 /month Retail Office Industrial/ warehouse Hauninen 15–30 4–7 Lentokenttä 5–7 Kupittaa/ Itäharju 13–20 4–6 Satama/ Iso-Heikkilä 10–20 4–7 Länsikeskus 12–20 City Centre €/m2 /month Retail 40–80 Office 13–20 Retail 15–30 Office 11–16 Retail 10–20 Office 10–13 Yliopistonkatu Yliopistonkatu Linnankatu Hämeenkatu Läntinen Pitkäkatu Ratapihankatu A u r a k a t u K a u p p ia s k a t u H u m a li s t o n k a t u U r s in in k a t u B r a h e n k a t u A n in k a is t e n k a t u Eerikinkatu Puutarhakatu Major building projects UNDER CONSTRUCTION 1 Logomo, creative centre 2 Expansion of Mylly shopping centre 3 City Theatre renovation and expansion 4 Extension of shopping centre Skanssi IN PLANNING 5 AMK Campus 6 Sports hall 7 Fortuna quarter 8 Intelligate III office building 9  HTC 4 office building 10 Brahe Center 11 Tori Corner 12 Toriparkki, underground parking facility 13 Terminal centre

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 20 New projects add to attractiveness of the CBD An exceptional number of large construc- tion projects are under way in the Oulu city centre and proceeding on schedule. Projects that will be completed in autumn 2015 and spring 2016 are Arina’s Valkea shopping centre in the Galleria block, Ilmarinen’s retail and office building in the Pallas block and the underground parking facility Kivisydän. Cube shop- ping centre owned by private investors is also due to be finalised in early 2016. Upon completion, the constructions will revive the centre and may also add momentum to other development pro- jects in the city centre. Ideapark shop- ping centre opened its doors in Ritaharju last October and the entire floor area of 24,000 sq.m. has been let. The implemen- tation schedule of Aurora shopping centre planned next to Ideapark and the travel centre planned next to the railway station is still open and also the size of the pro- jects has been scaled down.

New chain stores are coming to the CBD Changes will continue to take place in the CBD retail market. In the last six months a few long-time stores closed down, which slightly increased the retail vacancy rate in the CBD. The afore- mentioned three new constructions add 15,000 sq.m. to the supply of retail space, in addition to which part of the space in Valkea shopping centre will be used by Arina itself. As the new premises will primarily be occupied by players that are new to Oulu, the retail vacancy rate is not likely to grow significantly in the long term.

Transaction volume returning to normal level The transaction volume began to return to a normal level in late 2013 and the positive trend prevailed in 2014. No large transactions took place, but several deals worth EUR 0.5–3 million were made in the Oulu region. Buyers were without exception local investors and user buy- ers. Nationwide institutional investors and foreign investors seem cautious about investing in Oulu, which is prob- ably partly due to the lay-off news last summer. Large companies plan to set up offices Last year showed an increase in the office vacancy rate, which still seems to continue, as 30,000 sq.m. of office space will gradually become vacant by 2020 due to Microsoft and Broadcom clos- ing down their operations. In addition, many companies and the public sector have streamlined their use of space. The vacancy rate is high outside the city cen- tre, but remains low within the centre. The availability of high quality office premises and skilled workforce provides businesses with good opportunities, and many growth companies have already been founded. Many large companies also plan to set up new offices or transfer new functions to Oulu alongside existing © Oulun kaupunki Oulu TEXT: AIMO TYYBÄKINOJA

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 21 ones. This should fill part of the premises becoming vacant. Industrial space turned into retail and residential premises There has been an equilibrium between the supply and demand of industrial and warehouse space for quite some time. Even though the industrial volume has decreased all throughout the 21st cen- tury, the amount of vacant space has shown practically no increase. One rea- son for this is that industrial properties in good locations have been turned into retail space and old industrial areas, for example in Limingantulli and Toppila, have been turned into residential areas. Small hall space is constantly built for example in the Rusko area.

Several new retail premises under planning The three new constructions mentioned earlier are not the only development projects in the Oulu city centre. Despite the incorporation of retail and residen- tial building rights to the city plan of the Pallas block and the confirmation of the alteration to the city plan of the Ham- mar block received last year, no decision has been made yet on the implementa- tion schedule. A retail property is under planning in Välivainio and premises for specialised stores are planned on several sites in Limingantulli. Some deteriorated industrial and retail properties built between the 1960’s and 1980’s in Lim- ingantulli and Karjasilta will be turned into residential premises, and part of the objects are already under construction. Examples are the former Kaleva print- ing house in Karjasilta and the Liiketulli property in Limingantulli.

Rental levels €/m2 /month Retail Office Industrial/ warehouse Limingantulli 8–12 8–10 6–7 Tuira 8–12 8–10 Toppila 6–8 4–6 Linnanmaa 10–15 Rusko 8–11 6–7 City Centre €/m2 /month Retail 40–85 Office 11–13 Retail 13,5–22 Office 10–12 Retail 10–17 Office 10–12 Renovated/new office 17–21 t Oulunsalo OULU Kaakkuri Karjasilta Limingantulli Nuottasaari Toppila Taskila Teknologiakylä Linnanmaa Rusko Tuira Kontiokangas Rusko Toppi Toppi pil mingantul nt Tuir r Li Tek n 14 15 16 11 9 8 4 5 6 7 10 4 20 20 20 20 22 22 4 4 E75 E75 E75 E8 E8 E8 12 1-3 13 Hallituskatu R a n t a k a t u A le k s a n t e r in k a t u T o r ik a t u K ir k k o k a t u I s o k a t u U u s ik a t u M ä k e li n in k a t u R a u t a t ie n k a t u Kauppurienkatu Kauppurienkatu Saaristokatu Albertinkatu Asemakatu Hallituskatu Pakkahuoneenkatu Pakkahuoneenkatu Kajaaninkatu Major building projects UNDER CONSTRUCTION 1 Retail centre Valkea 2 Private clinic Mehiläinen 3 Shopping centre Cube 4 Office building in Peltola 5 Renovation of city hospital 6 Residential construction in Alppila-Toppila 7 Residential construction in Limingantulli 8 Residential construction in Kasarmintie 9 Residential district in Hiukkavaara IN PLANNING 10 CBD areas development 11 Retail property in Välivainio 12 Shopping centre in Ritariharju 13 Terminal centre 14 Children’s & Women’s Hospital 15  Office building in Hiironen 16 Retail properties in Limingantulli

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 22 Large infrastructure developments about to be completed Lahti’s recent infrastructural improve- ments have added momentum to other construction works in the city centre. One of many is the market square park- ing facility that will be finalised this spring. The City decided to turn Alek- santerinkatu into a more pedestrian- friendly one-way street, and planning continues in early 2015. Recent decisions give way to the creation of even more centrally located apartments in addi- tion to the development projects already underway. The alteration of plan for the city hospital located outside the CBD was approved and the expansion work awaits implementation. Another focus area is the travel centre next to the railway sta- tion and its surroundings. Partners have been found and the construction of an office building and a parking facility is due in October 2015.

New office space under construction close to the travel centre In the centre, plenty of office space has been turned into apartments: The Kul- mala building will be completed this spring and apartments have been for sale at Aleksi 11 since last year. With the approval of the city plan for Aleksi 5 in December, more changes are about to take place. The plan foresees the con- struction of an 8-storey building with a floor area of 15,700 sq.m., 1,200 floor sq.m. of which are reserved for parking and the rest for residential and retail use. Lahti receives much needed new office space, as YIT’s 8-storey BW Tower is finalised next to the travel centre. Plans to build seven new HTC office towers are reconsidered and the implementation of the five remaining buildings is re-evalu- ated: they might be used for other pur- poses than originally planned. The court- house will move away from the travel centre area to premises in Askonalue that will be renovated by the end of 2016. The Lahti University of Applied Sci- ences has decided to move to Isku’s former 18,000 sq.m. premises in Niemi. Using ren- ovated industrial space instead of building new space is reasonable, and the move will happen gradually, once the future purpose of the current space is resolved. Renovation of retail space and cautious movement Caution prevails in the Lahti retail prop- erty market. Renovated retail premises in the city centre have found new users, the most visible being the new Burger King in the Kulmala building. Lahti’s old music hall bought by two private property inves- tors will be renovated at a total of EUR 25 million this year. Mukkula manor, renovated by the City and operated by Vanajanlinna Group, opened in January after many years of inactivity. With the rejection of the complaints against the master plan by the Supreme Administra- 12 © Jani Mahkonen Lahti TEXT: MATTI ALI-LÖYTTY

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 23 tive Court, the plan for the Teivaa tourist area and hotel progresses after more than two years of waiting. Retail construction focused mainly on the renovation of small street-level premises in the city centre. The favourable development of Rautatien- katu also continued with plenty of small stores along the street. A Kesko Supermarket was built in Hollola along Tarmontie, whereas Hollo- la’s Prisma centre still awaits tenants; the final construction decision requires a pre-leasing rate of at least 60 per cent for the specialised store premises. Steady market situation for industrial and warehouse space The general economic development impedes the production and warehouse market situation of the old industrial town. Large industrial premises are vacant and part of the vacant space remains hidden. The Askonalue area developed by Renor is a positive excep- tion, where office space is almost filled up, but there is still space in need of renovation. Due to its central location, the area will continue to attract interest, also after the negotiations about setting up data server centres there. Hennala and Ranta-Kartano offer new opportunities The property transaction volume has picked up nationwide, which should also become visible in Lahti going forward. The consolidation of municipalities has been a vivid point of discussion and now seems to become reality for Lahti and Nastola and for Hollola and Hämeenkos- ki. Lahti is undergoing steady develop- ment and renewal. The site of the Hennala garrison that became vacant at the turn of the year and the Ranta-Kartano area pro- vide the city with excellent opportunities in the longer run. The world ski champi- onships taking place in Lahti in 2017 may further boost planned tourism projects. Rental levels €/m2 /month Retail Office Industrial/ warehouse Pohjoinen 6–9 6–8 4–6 Etelä 7–14 6–8 5–7 Itä 6–8 6–8 4–6 Länsi 6–8 5–7 4–6 City Centre €/m2 /month Retail 25–55 Office 12–15 Retail 7–12 Office 8–9 Retail 7–12 Retail 9–15 Linnaistensuo Renkomäki Laune Sopenkorpi Vipusenkatu Askonalue Jokimaa Salpakangas Pennala Karisto Kujala Lotila Petsamo Nastola Niemi Holma Hollola LAHTI 312 4 E75 4 4 12 12 24 24 12 4 E75 E75 E75 2 5 8 9 10 6-7 1 3 4 Aleksanterinkatu Vapaudenkatu Kirkkokatu Vapaudenkatu Päijänteenkatu J a l k a r a n n a n t i e K y ö s t i K a l l i o n K a t u S a im a a n k a tu Kulmakatu Sammonkatu Vuorikatu Harjukatu L a h d e n k a t u Hollolankatu Ra ut at ie nk at u Ve sij är ve nk at u Oikokatu Sa im aa nk at u Ka up pa ka tu Ra uh an ka tu Si be liu ks en ka tu Harjukatu Puistokatu Loviisankatu Aleksanterinkatu Hämeenkatu Hämeenkatu Mannerheiminkatu Major building projects UNDER CONSTRUCTION 1 Toriparkki, underground parking facility 2 Kulmala building renovation 3 Terminal centre 4 Office building/Parking facility IN PLANNING 5 Ranta-Kartano district 6  Development of Aleksi 5 7  Renovation of Aleksi 6 8 Luhta quarter 9 Retail centre project 10  Further use of Hennala

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 24 In December, Skanska acquired a site in the Seppälä area from VR-Yhtymä with the goal to build a 30,000 sq.m. shopping centre due to be completed by Christmas 2016. Regional private investors bought 3,000 sq.m. of office and retail space in the Torikulma property from OP Keski- Suomi. Local investors have been active in an otherwise fairly quiet investment market. Plenty of commercial properties are for sale, but with no pressing sched- ules the final transactions are waiting for the buyers’ expected returns and the sellers’ price requests to meet. New commercial players and internal movement within the city Last year’s most significant retail con- struction news was the decision to build a new Prisma in Seppälä. The project due in summer 2016 has a total leasable area of 22,000 sq.m. and will also include a larger number of other retail premises. Another 4,500 sq.m. retail building is in the pipeline in the Seppälä area and will be mainly let by Puuilo, a new player in Jyväskylä.

Apart from Prisma, there are no larger construction projects underway – gro- cery store investments primarily focus on smaller units. Grocery stores are also renovating their existing large premises with the intent to let part of them. Smaller retail premises nearby settled areas, including the city centre, are sought after, but the scarcity of such premises slows down progress in Jyväskylä. There has been some movement on the commercial letting market, as companies try to find more suitable premises. Even profitable companies try to take advan- tage of the situation and find premises with a better location and more favour- able rental terms. Many chain stores have cut back their operations lately, which has freed up space for others. Internal move- ment continues to take place in Jyväskylä this year and creates pressure on the mar- ket, which has already resulted in a slight decrease in retail rents.

The most substantial projects in the Jyväskylä CBD in 2015 are the renova- tion works of the properties at Kaup- pakulma and Kauppakatu 37, which are likely to attract new commercial players to the centre once completed. The City also starts a development project for the renewal of the city centre. Office construction is slow this year There will probably be no new office construction projects starting this year. The Ruusupuisto project that will be completed this year and used by the University of Jyväskylä will bring addi- tional space to the letting market. The continuous need for provisional prem- ises in the public sector will result in increased office letting demand. There is demand for reasonably priced, modern and smaller office space near the centre. Demand origins primarily from inside Jyväskylä, as companies operating else- where rarely move to the city. However, as Jyväskylä is investing more in the 18 23 © Vastavalo.fi Jyväskylä TEXT: JUKKA KOIVISTOINEN

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 25 development of the start-up phase of new businesses, space demand may change in the future. Office rent levels have gen- erally decreased slightly, but nowadays location and other individual qualities of the premises weigh in more than rents. Large demand for small production and warehouse space Letting demand for production and warehouse space focuses primarily on smaller premises nearby commercial areas. New space is mainly built for the owners’ own needs. With prices coming down and interest rates remaining low, owning properties is becoming increas- ingly attractive to companies. Larger new projects are underway, such as the construction of the Sakupe laundry and the Pohjolan Liikenne depot. The future brings more retail and other projects The single most significant construc- tion project in Jyväskylä will be the new central hospital with a total cost of up to EUR 420 million. Retail projects will also be launched, if building costs and interest rates remain moderate. Grocery store investments will even grow in the future because of new service concepts. New constructions and renovations will take place in the commercial area in Sep- pälä. The centre will also be renewed and its services improved. The development of the former paper mill area Kangas begins with the construction of resi- dential homes, but also teaching facili- ties will be set up in the area. All in all, construction volume will stay below the long-term average.

City Centre €/m2 /month Retail 25–58 Office 12–19 Retail 11–16 Office 10–15 Retail 9–14 Office 9–13 Säynätsalo Keljonkangas Etelä-Keljo Myllyjärvi JYVÄSKYLÄ Haapaniemi Jyskä Kanavuori Muurame Seppälä Tourula Seppälänkangas Palokangas Ylistönmäki Korkeakoskenlahti Vaajakoski Tikkakoski Korpilahti Palokka Palokan Orsi Kirri t 4 4 9 9 9 18 18 9 9 13 13 13 13 23 23 23 23 4 E75 E63 E63 E63 E63 E75 E75 2 1 5 6 7 8 9 4 3 10 11 12 Y l i o p i s t o n k a t u Y l i o p i s t o n k a t u V a p a u d e n k a t u V a p a u d e n k a t u Keskussairaalantie H a n n i k a i s e n k a t u Rantaväylä K a u p p a k a t u Cygnaeuksenkatu Vaasankatu Gum m eruksenkatu Kilpisenkatu Satamakatu Asem akatu Väinönkatu Sepänkatu Kansakoulukatu Kalevankatu P it k ä k a t u H ar ju ka tu Seminaarinkatu Major building projects UNDER CONSTRUCTION 1 Prisma in Seppälä 30 000 m2 2 Vasarakatu 25, retail property 4 500 m2 3 Ruusupuisto office building 4 Lidl- grocery store 5 Sakupe dry cleaner’s 6 Pohjola liikenne, depot 7 Kauppakulma, retail property renovation IN PLANNING 8 Kauppakatu 37, retail property renovation 9  Central Hospital of Central Finland 10  Vapaudenkatu 48–50, retail- office- and residential construction 11 Lidl- grocery store 12 K-Supermarket- grocery store Rental levels €/m2 /month Retail Office Industrial/ warehouse Tourula 10–13 10–17 6–7 Ylistönmäki 12–16 6–7 Tikkakoski 6–10 5–8 5–7,5 Seppälä 9–13 8–11 5–8,5 Seppälänkangas/ Palokangas 8–10 8–10 6–8 6–8 5–8,5 5–9 Palokan Orsi 9–15 6–8 Palokka 6–8 7–10 5–7 Kirri 6–8 6–9 4–6 Keljo/Etelä-Keljo 9–15 7–9 6–9,5 Savela 9–11 8–12 6–8,5 Kanavuori/ Vaajakoski 6–9 7,5–11,5 5–8,5

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 26 Local investors willing to invest Many local investors have added to their property portfolio in recent years and are able to develop properties actively with the help of good market knowledge. Harry Schaumans Stiftelse acquired a retail and office property located at Kauppapuistikko 23 from Svenska lit- teratursällskapet i Finland. A large part of the 2,380 sq.m. building completed in 1981 is planned to be turned into apart- ments. Local Wasa Group Fund has already built three commercial premises – Svennan Kulma, Gneissihovi and one property outside the city – and will con- tinue to expand.

New property investment company Certeum also became a significant owner in Vaasa, as Varma and Sponda sold several production and logistics proper- ties to the new company. YIT, Capman and Restel are planning the construction of Vaasa’s highest building in Vaskiluoto. The at least 16-storey building planned next to the spa is designed to be used primarily as vacation homes, but there should also be room for permanent resi- dences. Plenty of new office space completed Plenty of new office space was completed at the end of 2014. The new 4,550 sq.m. Futura IV office building, with Wapice and Frankis Group as main users, was finalised in the Airport Park area, on Yrit- täjänkatu opposite from the three older Futura buildings. Vaasan Sähkö’s new 5,800 sq.m. office building, which is situ- ated by the sea near Palosaari bridge and which also hosts the headquarters of EVP Energia, was completed at the turn of the year. The 2,000 sq.m. office and retail building Svennan Kulma was finalised in Klemettilä and a 2,800 sq.m. office build- ing called Vaasan Takomo is under plan- ning at the intersection of Sepänkyläntie and Myllykatu. The first phase of the planned Palosaari Innotalo block project will include an EnergyLab laboratory for engine and fuel research.

Extensive retail projects in progress The large retail cluster planned alongside the motorway south of the city centre is one step closer to its implementation. In late 2014, Ikea, Ikano and the KPO Cooperative signed a letter of intent with the City of Vaasa for the planning of an Ikea store, a shopping centre and a Prisma store in the Risö area. The stage plan of the Liisanlehto area, where Kesko’s and Minimani’s sites are located, also foresees the construction of large- volume stores. Kivihaka continued to expand, as Tokmanni opened a 3,500 sq.m. store and premises for WasaGroup and Würth were completed in the 4,800 sq.m. Gneissihovi retail centre. Gneissi- hovi’s second phase is under planning and upon completion the entire area will hold a 9,500 sq.m. construction, renova- tion and interior design cluster. © Vaasan kaupunki/Ann-Britt Pada Vaasa TEXT: RAINO PESU

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 27 Plenty of production and logistics sites available The first object to be completed in the new logistics area of the Vaasa region is Auramaa’s Kaukokiito terminal. A flight logistics terminal is also under planning in the northern corner of the airport. There are plenty of sites available near the airport in the areas of the logistics centre and Laajametsä. In Mustasaari, the Lintuvuori industrial area will also be expanded by 70 company sites. The by-pass road in Sepänkylä facilitates further development The opening of the new by-pass road in Sepänkylä and the new junction improve traffic conditions in Kivihaka. With the by-pass road, it will be possi- ble to develop the commercial centre of Mustasaari, Sepänkylä, in an even more urban way. It will be easier to construct apartment buildings, when most of the traffic to Kokkola will be transferred from going through the centre to the new by-pass road.

The Vaasa CBD will be revitalised with the construction of 300 new apart- ments, underground parking space and street-level retail premises in the Teatterikortteli block. Lemminkäinen Talo Oy was selected by the City for the implementation of the development pro- ject of the former bus station area. The planned project will include a shopping centre, offices, apartments as well as a music and congress centre. Rental levels €/m2 /month Retail Office Industrial/ warehouse Kivihaka 8–13 Klemettilä/ Strömb. 6–12 6–13 4–6 Airport Park 6–14 4–8 Vaskiluoto 4–6 Palosaari 6–12 Sepänkylä 7–13 Lintuvuori 4–6 City Centre €/m2 /month Retail 20–55 Office 8–13 Retail 9–18 Office 8–12 Retail 8–12 Office 7–10 Vaskiluoto VAASA Hietalahti Vanha-Vaasa Vanhasatama Palosaari Isolahti Metsäkallio Kivihaka Sepänkylä Lintuvuori Airport Park Klemettilä Strömberg Park V haka S Lint L tu Kleme me me K Strö rö met me K K öm röm s Vask t Park Pa rt rt t 3 3 3 8 8 8 8 8 E12 E12 E12 E8 E8 E8 E8 E8 3 6 4 5 2 8 1 7 Vasanpuistikko Moottorikatu Hovioikeudenpuistikko Hietasaarenkatu R a n ta k a tu K o u lu k a tu K ir k k o p u is t ik k o R a a s t u v a n k a t u K ir k k o p u is t ik k o K a u p p a p u is ti k k o P it k ä k a tu A s e m a k a tu Ratakatu K la m e n ti n k a tu K o u lu k a tu R a n ta k a tu Rauhankatu Ajurinkatu Kasarminkatu Korsholmanpuistikko Tiilitehtaankatu Hietalahdenkatu Korsholmanpuistikko Kellosepänkatu Kirvemiehenkatu Kasarminkatu Vasanpuistikko S e p ä n k y l ä n t i e Major building projects UNDER CONSTRUCTION 1 Theatre district: retail and residential construction IN PLANNING 2 Innotalo 1st phase, EnergyLab 3  Hypermarket Prisma, Ikea and Ikano 4 Minimani and Kesko, large retail units 5 Development of the old bus station plot 6 Vaasa Takomo, office space 7 Gneissinhovi 2nd phase, retail space 8 Airport logistics terminal Cooperating partners: Oy Vaasa Parks Ab – Ulla Mäki-Lohiluoma Kiinteistövälitys & Rakennuspalvelu Erkki Väkelä Oy LKV

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 28 Hämeenlinna TEXT: MATTI ALI-LÖYTTY Up to 95 percent of the 26,000 sq.m. Goodman shopping centre, which opened last autumn, was let by the time of completion, and half the space is used by foreign chain stores. Among the users are stores that moved here from the city centre and stores that are new to the city, such as Clas Ohlson. Ruokakesko acquired a site in the Sampo area for a new 1,000 sq.m. store that is due in 2015, in addition to which Kesko is planning to move Käikälä K-market to a new site nearby, because current premises are not worth renovating.

The investment market has been fairly active: NREP bought a 52,000 sq.m. logistics property in Käikälä from Huhta- mäki, Fiskars opened its renewed factory in Iittala and Can-Pack is currently expanding the warehouse of its can fac- tory. Property development transactions were made in relation to the former police building on Kasarmikatu and the former VPU property alongside Aulan- gontie. Under planning are also the 17 hectare campus area in Visamäki and the former garrison area that is intended for building small apartment buildings. With a special permission, the planned hotel on Rauhankatu can be built higher as foreseen and is currently awaiting building permission. YIT plans an office building next to the railway sta- tion in Keinusaari, but site transactions with VR have not yet been finalised. H2O4U Finland Oy plans to set up a bot- tling plant in the Mäkelä industrial area. The unfinished plans to develop road 10 of the Uusimaa ELY Centre still prevent the further planning of hardware store cluster Centra.

Kouvola TEXT: MATTI ALI-LÖYTTY Lemminkäinen has postponed the planned Halkotori office tower project, because even an 80 per cent reservation rate has failed to attract investor buyers. The travel centre project is also still on hold due to insufficient space reserva- tions and may be implemented on a smaller scale than originally planned. The nearby Valtari shopping centre hopes to attract new tenants with the ongoing renovation of its 7,600 sq.m. of space. An alteration to the city centre plan was approved in December, which led to the planning of three apartment buildings along Hallituskatu and the expansion of the Cumulus Hotel. YIT is looking for tenants for their Motor- Center service centre, which will be situ- ated near Veturi shopping centre. Last year, new industrial space was completed in Voikkaa, and this spring a shared logistics hall of 6,000 sq.m. will be finalised for Kouvola Cargo Handling in Kullasvaara. Half of the companies in Kullasvaara and Tehola are in logistics and the areas are being developed into a business park. The City also plans to merge the areas of Tervaskangas, Kata- jaharju, Tommola and Korjala into an attractive commercial centre, which would double the amount of retail space to 500,000 sq.m. There have also been negotiations for expanding Jokela indus- trial area.

Kasvukeskukset Other growth centres PICTURE: ROVANIEMI, JÄTKÄNKYNTTILÄ BRIDGE © VASTAVALO.FI

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 29 Lappeenranta TEXT: MATTI ALI-LÖYTTY Lappeenranta focuses on the develop- ment of the city centre. The old Kesko building in the Rakuuna block will be torn down to give way to 9,100 sq.m. of residential and retail space built by Varte. The K-Supermarket in the same block will be replaced by a new one. The South-Karelian Cooperative builds a restaurant world with 1,200 seats in the Sokos property in the centre this spring. The IsoKristiina expansion progresses and will be completed in two phases in May and October 2015. The expansion of the city hall next door is due in August and will include 5,000 floor sq.m. of retail and office space and a parking hall. Lemminkäinen builds a head office for OP Etelä-Karjala on the site of the Tapa- nainen building in the City block. The project worth more than EUR 15 million is due in October 2016 and may give way to the planning of a new parking facility for 150 cars.

Ikea’s plans in Mustola remain open, but OP Etelä-Karjala and J. Kärkkäinen Oy are still interested in construct- ing retail premises next to the Ikea site. Kärkkäinen plans a 30,000 sq.m. depart- ment store and a 25,000 sq.m. retail centre that will include a grocery store among others. Construction is not likely to start soon, as planning and infrastruc- ture may take up another 3–5 years. Pori TEXT: MARI ROUVALI The construction of the campus of the University of Applied Sciences on the station square owned by Citycon started in December. Upon completion in spring 2017, the EUR 40 million investment will include a total of 23,000 sq.m. of new and renovated space. Premises of educational institutions are also being thoroughly reshuffled in relation to the campus project.

Another major development project in the city centre is Karhukortteli, where Satamaito Cooperative is selling its 5,500 sq.m. dairy premises to transfer its operations to Ulvila. Major owner of the block MVR-Yhtymä is going to buy the property and has started planning with the goal to get permission for the con- struction of one hundred apartments. The retail property market is chang- ing, as the largest shopping centre of the Satakunta region Puuvilla opened its doors in October 2014. The new shop- ping centre includes more than 60 stores on a floor area of 42,000 sq.m., which creates challenges for current retail areas in the city centre and Mikkola. A few stores moved from these areas to the new Puuvilla centre, but most of the users are stores that are new to Pori. Retail premises in the centre have also been developed: Sokos’ retail premises were renovated and expanded, and Citycon renewed Isokarhu shopping centre. New retail space is also under con- struction, such as the 2,700 sq.m. retail building due in autumn 2015 that tyre company Euromaster is building next to its current premises. Lemminkäinen is building the new Juhannuslehto business park including office, retail, production and logistics premises in Aittaluoto. As a result of the first phase of the business park, a new 3,500 sq.m. Gigantti store will be completed in 2015.

Skangass, a subsidiary of gas com- pany Gasum is investing EUR 85 million in the construction of an LNG import terminal with a capacity for 30,000 cubic meters of liquified natural gas due in autumn 2016. Rovaniemi TEXT: AIMO TYYBÄKINOJA In the last years, construction in Rovaniemi has focused on residential buildings and no significant retail or office projects were implemented. As a result, for example the amount of hard- ware store space has declined. No sub- stantial commercial space transactions have taken place in the last years, thus the market situation is fairly quiet. The tourism and service sector is an impor- tant industry and many tourism-related projects that have been in the pipeline for a while have been postponed because of the prolonged recession. The planned expansion of the Eteläkeskus retail prop- erty and the Prisma store has also been deferred. After Skanska’s and Arina’s withdrawal from the Valionranta devel- opment project, the City organised an idea competition for the area’s land use and construction. The winning proposal is based on efficiently built apartment building blocks and a 450 room hotel north of the Jätkänkynttilä bridge. Seinäjoki TEXT: RAINO PESU Shopping centres are primarily owned by two local investors and their company City Kauppapaikat Oy. Last autumn, the company acquired the 6,500 sq.m. Mega centre opposite from the railway station with main tenants Halonen and Pukumies. The company also owns Torikeskus, Citypiha, Lehtinen and a share of Epstori shopping centre. The City’s main goal is to develop the city centre to increase its population and commercial attraction with complemen- tary building. A parking facility under- neath the central market square is also planned.

The construction of the eastern bypass to remove heavy lorry traffic from the centre is due in autumn 2016 and will give way to interesting development projects alongside the new road. With the rejection of the complaints against the acquisition of the Roves area by the Supreme Administrative Court last autumn, the City is free to change the plan of the area for logistics, industrial and retail use. The letter of intent made with Ikea about the Kauppa-Jouppi area has lapsed, but the City plans to offer a new site at the intersection of Highways 18 and 19. YIT and Kesko continue to plan the large Lakeuden Ankkuri shopping centre in the Jouppi area that would host Citymar- ket, specialised stores, restaurants and various free-time activities. Apartment buildings are under construction in the old Itikanmäki factory area, where also office buildings are planned, such as the 9,000 sq.m. Ruokaprovinssi building that would gather players from the food industry under one roof.

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 30 Commercial property markets Q4/2014 Property type Vacant space, m2 2) Vacancy rate,% 1) Yield % Rent €/m2 /year HELSINKI METROPOLITAN AREA Retail 163,090 4.8 - - Office 1,083,162 12.5 see page 11 see page 11 Indust./Ware. 532,703 6.9 - - Total 1,778,955 9.0 TAMPERE Retail 41,020 4.1 6.75–8.0 540–1,020 Office 91,780 10.7 6.75–8.0 168–216 Indust./Ware. 79,380 3.8 8.0–10.0 66–84 Total 212,180 5.4 TURKU Retail 58,830 6.5 6.75–8.0 480–960 Office 76,230 9.7 7.25–8.25 156–192 Indust./Ware. 113,730 5.2 9.0–11.0 60–84 Total 248,790 6.4 OULU Retail 22,210 3.3 7.25–8.25 480–1,020 Office 76,390 12.8 7.50–8.50 144–180 Indust./Ware. 42,310 3.2 9.50–11.00 72–84 Total 140,910 5.5 JYVÄSKYLÄ Retail 35,470 3.7 8.25–9.0 276–696 Office 33,230 9.5 8.5–10.0 144–228 Indust./Ware. 40,630 2.6 11.25–13.25 60–84 Total 109,330 4.8 LAHTI Retail 33,030 4.8 7.5–8.5 300–660 Office 21,410 8.7 8.0–9.0 144–180 Indust./Ware. 70,580 4.5 10.0–11.0 54–66 Total 125,020 5.0 VAASA Retail 4,270 0.9 7.5–8.5 300–660 Office 20,390 7.8 8.0–9.0 120–156 Indust./Ware. 28,940 4.2 9.5–11.0 60–72 Total 53,600 3.8 1) Gross rents. Rental levels and yields are based on the following criteria: Retail premises: Street level retail premises in the CBD, well-known domestic or inter- national tenant, 5–7 year lease agreement and initial yield without renovations. Office premises: Modern or renovated premises in the CBD with good rentability, stable anchor tenants, 5–7 year lease agreement and initial yield without renovations. Industrial and warehouse premises: Ordinary premises located in a good industrial area, newer medium-sized building without major renovations needed, one stable ten- ant, 5–7 year lease agreement and initial yield without renovations. 2) The updated building stock is based on data produced by Statistics Finland, YTV, each city and Catella.

Growth centre prime properties can also be located outside the CBD area. Vacancy rate and vacant space in Helsinki Metropolitan Area Vacancy rate (%) Vacant space (m2 ) Q4 14 Q2 14 Q4 14 Q2 14 HELSINKI Retail 4.3 3.5 78,000 64,000 Centre 1.7 2.1 9,000 12,000 Office 9.6 9.5 595,000 585,000 Centre 6.4 6.9 115,000 124,000 Indust./Ware 6.0 6.1 209,000 215,000 ESPOO Retail 3.7 2.6 29,000 21,000 Office 20.9 20.1 334,000 323,000 Indust./Ware 6.8 6.4 89,000 83,000 VANTAA Retail 6.7 6.6 56,000 54,000 Office 17.1 16.0 154,000 143,000 Indust./Ware 8.2 8.4 235,000 232,000 HELSINKI METROPOLITAN AREA Retail 4.8 4.0 163,000 138,000 Office 12.5 12.1 1,083,000 1,051,000 Indust./Ware 6.9 6.9 533,000 530,000 Market data by region

PROPERTY MARKET TRENDS FINLAND | SPRING 2015 31 Contacts Transactions and Capital Markets ERKKI HAKALA CEO +358 (0)50 3625 768 JORMA JANHONEN SENIOR ADVISOR +358 (0)500 443 790 MARKUS JUVALA SENIOR ADVISOR +358 (0)50 3737 540 NIKO KVARNSTRÖM SENIOR ADVISOR +358 (0)50 3574 804 TUOMAS AHONEN ASSOCIATE +358 (0)50 3035 009 JANNE SIVONEN JUNIOR ANALYST +358 (0)40 825 6446 JOHAN ERICSSON +46 (0)70 544 00 00 johan.ericsson@catella.se Nordic Fixed Income ANNA RINGBY HEAD OF NORDIC FIXED INCOME +46 72 726 16 72 anna.ringby@nordicfixedincome.se FREDRIK EDNER SENIOR DIRECTOR, DCM ORIGINATION +46 72 700 13 93 fredrik.edner@nordicfixedincome.se Valuation HELSINKI ARJA LEHTONEN DIRECTOR +358 (0)500 763 427 PERTTI RAITIO SENIOR CONSULTANT +358 (0)500 546 105 RISTO VAINIONPÄÄ SENIOR CONSULTANT +358 (0)500 763 437 TEEMU HALL CONSULTANT +358 (0)50 5982 300 VILLE VAARALA CONSULTANT +358 (0)40 5690 699 ELLA SPERLING JUNIOR ANALYST +358 (0)50 343 7795 CAMILLA MAIKOLA JUNIOR ANALYST +358 (0)50 453 5181 SINI VEDENOJA JUNIOR ANALYST +358 (0)50 346 4466 TAMPERE RAINO PESU SENIOR CONSULTANT +358 (0)50 5979 412 SAMI SARASTE SENIOR CONSULTANT +358 (0)50 3014 455 JYVÄSKYLÄ/INFONIA KARI MUSTONEN CONSULTANT +358 (0)44 0646 602 TURKU SAMI MATARA SALES MANAGER/ SENIOR CONSULTANT +358 (0)500 408 667 MARI ROUVALI CONSULTANT +358 (0)50 9116 110 OULU AIMO TYYBÄKINOJA SENIOR CONSULTANT +358 (0)50 5126 451 LAHTI MATTI ALI-LÖYTTY SENIOR CONSULTANT +358 (0)50 5720 258 Sales and Letting TAMPERE KARI MYLLÄRI SALES MANAGER +358 (0)500 637 951 PERTTI MIETTINEN SALES MANAGER +358 (0)400 624 801 SAMI SARASTE SENIOR CONSULTANT +358 (0)50 3014 455 TURKU SAMI MATARA SALES MANAGER/ SENIOR CONSULTANT +358 (0)500 408 667 RIKU LEHTIMÄKI SALES MANAGER +358 (0)50 3706 530 OULU PEKKA LAURILA-HARJU SALES MANAGER +358 (0)50 5841 303 TERTTU VARPU SALES ASSISTANT +358 (0)50 5576 120 LAHTI MIKKO KANTOSAARI SALES MANAGER +358 (0)50 4434 055 SIIRI EEROLA SALES ASSISTANT +358 (0)500 492 011 JYVÄSKYLÄ / INFONIA ANTTI MALINEN SALES MANAGER +358 (0)50 561 7006 JUKKA KOIVISTOINEN SALES MANAGER +358 (0)40 7467 964 MIKKO HIRVI SALES MANAGER +358 (0)40 7579 731 ERKKI HAKALA CEO +358 (0)50 3625 768 erkki.hakala@catella.fi PETTERI HEIKKINEN DIRECTOR LETTING +358 (0)40 7301 669 petteri.heikkinen@catella.fi ARJA LEHTONEN DIRECTOR VALUATION +358 (0)500 763 427 arja.lehtonena@catella.fi JUHANI LEHTINEN DIRECTOR GROWTH CENTRES +358 (0)50 2073 juhani.lehtinen@catella.fi EMAIL: forename.surname@catella.fi Letting HELSINKI PETTERI HEIKKINEN DIRECTOR +358 (0)40 7301 669 MARIKA VÄLIAHO ADVISOR +358 (0)50 5471 290 KRISTINA KNAPE-RYTKÖNEN ADVISOR +358 (0)50 3058 324

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