1. No category

DTZ Research
INVESTMENT MARKET UPDATE
The annual transaction
volume increased by 70%
Finland Q4 2014
5 February 2015
Contents
Economic Overview
2
Investment Market
3
Major Transactions
5

The transaction volume of the published deals was approximately €4.0 billion in
2014.

Over 35% of the total transaction volume was made by foreign investors. We
expect that the share of foreign investors will remain at the same level, or even
increase during 2015.

Private property vehicles and companies have clearly been the most active
investor sectors in 2014, accounting for over 80% of the transaction volume.

In Q4 the retail sector was the most active sector measured by transaction volume.
Whereas in 2014, the industrial sector was the most active.

The prime office yield is currently at 4.75%, the prime retail yield is at 4.8% and the
prime logistics yield is at 6.75%. The prime yields are estimated to further
decrease during 2015.

The Quantitative Easing by the European Central bank is boosting European
property’s attractiveness, as it pushes down bond yields and forward interest rates.
Author
Ville Suominen
Analyst
+358 (0)10 836 8455
ville.suominen@dtz.com
Figure 1
Transaction Volume, €bn
Contacts
7
Magali Marton
Head of EMEA Research
+33 (0)1 49 64 49 54
magali.marton@dtz.com
6
4
60%
Hans Vrensen
Global Head of Research
+44 (0)20 3296 2159
hans.vrensen@dtz.com
3
40%
100%
80%
5
2
20%
1
0
0%
2005
2006
2007
2008
Domestic purchaser
2009
2010
2011
2012
International purchaser
2013
2014
% International
Source: DTZ Research
www.dtz.com
Investment Market Update
1
Finland Q4 2014
Economic Overview
Main Economic Indicators
The inflation rate estimated at 0.9% in 2015. The inflation
estimate for 2014 is 1.0%. The inflation rate was 2.8% in 2012
and 1.5% in 2013.
The third consecutive year with a stagnant economy has
naturally affected the employment situation. The
unemployment rate is estimated to increase to 8.6% in 2014
and to further increase to 8.8% in 2015.
The European central bank quantitative easing (QE) is
estimated to keep the interest rate at a low level during 2015.
The ECB QE program is however expected to increase
inflation. The Finnish 10-year government bond rate has
continued to decline, due to ECB buying of government bond.
E2016
E2015
E2014
2013
2012
2011
2010
2009
In 2015 private spending is estimated to continue to decrease
by 0.1%, due to modest salary increases, weak employment
situation, and slightly higher taxes.
2008
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
2007
The prolonged Ukraine crisis and the sanctions directed at
Russia, have caused uncertainty for the Finnish export sector
and weakened the export to Russia. The weakened exports
have kept down the GDP growth.
Figure 2
2006
The GDP is estimated to increase by 0.2% in 2015. The
Finnish export sector is estimated to improve during the latter
part of 2015 as a result of global economic growth and a
weaker Euro, compared to the dollar and other major
currencies. The GDP decreased by 0.2% in 2014 and by 1.2%
in 2013.
Unemployment
Inflation
GDP
Private spending
Source: Bank of Finland, Danske Bank, Nordea, and Handelsbanken
Figure 3
3 Month Euribor and 10 Year Government Bond
5%
4%
3%
2%
1%
0%
Q4
2006
Q4
2007
Q4
Q4
Q4
2008 2009 2010
Euribor 3 month
Q4
Q4
Q4
2011 2012 2013
10 Yr.Gov.Bond
Q4
2014
Investment Market Update
2
Source: Bank of Finland
www.dtz.com
Finland Q4 2014
Investment Market
Figure 4
Transaction Volume
Transaction Volume, €bn
The transaction volume of the published deals was some €4.0
billion in 2014. The transaction volume made 2014 the most
active year since 2008. Moreover, the transaction volume
increased almost 70% compared to 2013 (€2.4 billion).
7
4
60%
The activity of international investors is currently at the highest
level since 2008. In 2013 the share of international investors
exceed 35% and remained at the same level in 2014. During
2014 several new international players entered the Finnish
property market.
3
40%
Major Deals in Q4 2014
The largest deal in the fourth quarter was when a joint venture
of Trevian Asset Management, Cording Real Estate Group,
and H.I.G. Capital, purchased a retail portfolio, from a fund
managed by AXA Real Estate Investment Management. The
portfolio comprised 123 retail assets. The purchase price was
€107 million.
The largest single property deal in the fourth quarter was, when
a fund managed by AXA Real Estate Investment Management
purchased MREC Espoon Keilalahden FG-talo, located in the
Keilalahti office area, from Exilion Real Estate I fund. The
property is a part of Microsoft Mobile’s complex consisting of
three properties. The total lettable area of the building is some
17,000 sq m. The purchase price was €64.8 million and the net
initial yield was approximately 5.8%.
Another significant single property deal was when AFIAA Swiss
Foundation purchased a landmark building, Brondankulma, in
the Helsinki CBD. The property was sold by CBRE Global
Investors. The purchase price was over €60 million. The
building covers a total of 8,230 sq m and the main tenant is
Hannes Snellman, a major law firm.
100%
6
80%
5
2
20%
1
0
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Domestic purchaser
International purchaser
% International
Source: DTZ Research
Figure 5
Quarterly Transaction Volume, €mn
2000
1500
1000
500
0
Q1
2013
Q2
2013
Q3
Q4
Q1
Q2
2013 2013 2014 2014
Domestic
International
Figure 6
The most active investors in 2014 have been private property
vehicles and private property companies, accounting for over
80% of the transaction volume. The share of quoted investors
(quoted property companies and vehicles) slightly increased in
last quarter of 2014. Out of the annual transaction volume the
share was some 11%.
Transactions by Investor Group
www.dtz.com
Q4
2014
Source: DTZ Research
Transactions by Investor Type
The share of the Finnish institutional investors increased in Q4
2014, however they represented only 4% of the transaction
volume in 2014. This is due to the strategy adopted by many,
to either move the investments from direct to indirect
investments, or to keep the property portfolio at existing levels.
Q3
2014
100 %
80 %
60 %
40 %
20 %
0%
Q1
Q2
Q3
Q4
2013 2013 2013 2013
Institution
Private Property Company
Other
Source: DTZ Research
Q1
Q2
Q3
Q4
2014 2014 2014 2014
Private Property Vehicle
Quoted Investor
Investment Market Update
3
Finland Q4 2014
Transactions by Property Sector
Figure 7
The office sector has typically been the largest sector
measured by the transaction volume. In Q4 2014, retail and
residential were the most active sectors, representing some
35% and 25% respectively. On annual level the industrial
sector was the most active in 2014 (30%). Office and retail
sectors represented some 20%, respectively.
Transactions by Property Sector
Transactions by Region
Usually, Southern Finland, especially the Helsinki Metropolitan
Area (HMA), has clearly been the most active region in the
Finnish property investment market. In Q4 2014, over 60% of
the transaction volume occurred in Southern Finland.
In 2014, over 50% of the transaction volume were multiregional portfolio deals. The share of the deals in Southern
Finland were some 43% in 2014.
Average Lot Size
Average lot size in Q4 2014 was just over €20 million.
However, the deals over €50 million represented over 70% of
the total transaction volume in Q4.
100 %
80 %
60 %
40 %
20 %
0%
Q1
2013
Office
Residential
Q4
2014
Other/Mixed Use
100 %
60 %
The prime office yield is currently at 4.75%, the prime retail
yield is at 4.8%, and the prime logistics yield is at 6.75%. The
spread between Finnish government bonds and the prime
office yield was around 3.8% in the fourth quarter.
40 %
European Central Bank’s decision made in January 2015 will
increase the supply of funding and will keep the interest rates
low. Hence, the real estate investment will remain attractive.
Healthcare
Q2
Q3
2014 2014
Industrial
Transactions by Region
Prime Yields
Foreign investors have during recent years mainly been
interested in core assets, however with the increased demand
investors is likely to move to more opportunistic assets as well.
Q1
2014
Figure 8
80 %
DTZ Research estimates that the prime yields will further
decrease during 2015. There are clear signs that the share of
foreign investors in the Finnish market will remain at the same
level as in 2014, or even increase.
Q3
Q4
2013 2013
Retail
Source: DTZ Research
In 2014 the average lot size was some €30 million.
Outlook
Q2
2013
20 %
0%
Q1
Q2
Q3
2013 2013 2013
Southern Finland
Northern Finland
Multi-Regional
Source: DTZ Research
Q4
2013
Q1
2014
Q2
Q3
Q4
2014 2014 2014
Western Finland
Eastern Finland
HMA
Figure 9
Helsinki Metropolitan Area (HMA) Prime Yields
9%
8%
7%
6%
5%
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
F2015
4%
Office
Retail
Logistics
Source: DTZ Research
www.dtz.com
Investment Market Update
4
Finland Q4 2014
Major Transactions
Table 1
Major Office Transactions in Q4 2014
Building
City
Vendor
Purchaser
MREC Espoon
Keilalahden FG-talo
Espoo
Exilion Real Estate I Ky
Fund of AXA Real Estate
Brondankulma
Helsinki
CBRE Global Investors
AFIAA
Hippostalo
Tampere
Senaatti Properties
The Tampere Student
Housing Foundation
Plaza Business Park
Presto
Vantaa
Finnish Paper Workers’
Union
CapMan Nordic Real Estate
fund
Area (sq m)
Price €mn
Price € / sq m
17,076
64.8
3,800
8,230
> €60
> 7,300
19,000
12.1
640
5,760
n.a.
n.a.
Source: DTZ Research
Table 2
Major Retail Transactions in Q4 2014
Building
City
Vendor
Purchaser
Portfolio of grocery
store properties
Multi-City
Etelä-Suomen
Kauppakiinteistöt Oy
(Citycon)
Quorum Kehitysrahasto I Ky
Portfolio of 123 retail
assets
Multi-City
Fund of AXA Real Estate
Trevian AM, Cording RE
Group, H.I.G. Capital
40% share of the Iso
Omena Shopping
Centre
Espoo
GIC Real Estate
Citycon
Two retail properties
Vantaa
and
Tampere
Unknown
OP-Vuokratuotto special
investment fund
Area (sq m)
Price €mn
Price € / sq m
n.a.
6.7
n.a.
128,000
107
840
63,300
(whole
shopping
centre)
n.a.
n.a.
n.a.
35
n.a.
Source: DTZ Research
Table 3
Major Industrial Transactions in Q4 2014
Building
City
Vendor
Purchaser
Mäntsälä logistics
centre
Mäntsälä
Capman Real Estate II
American Realty Capital
Trust
Area (sq m)
74,400
Price €mn
Price € / sq m
n.a.
n.a.
Source: DTZ Research
www.dtz.com
Investment Market Update
5
Finland Q4 2014
Table 4
Other Major Transactions in Q4 2014
Building
City
Vendor
Purchaser
Area (sq m)
Price €mn
Price € / sq m
Three
carsale/workshop
properties
Multi-City
NV Property Fund I Ky
Sagax AB
26,600
28.3
1,060
Taaleritehdas
residential property
funds I and III (509
apartments)
Multi-City
Taaleritehtaan
Pääomarahastot Oy
LähiTapiola Group's
insurance companies
n.a.
n.a.
n.a.
Portfolio of five
office buildings, one
restaurant, and two
undeveloped sites
Turku
Municipality of Turku
Turun Teknologiakiinteistöt
Oy
n.a.
n.a.
n.a.
Source: DTZ Research
www.dtz.com
Investment Market Update
6
EMEA
Country Head Finland
John Forrester
CEO
+44 (0)20 3296 2002
john.forrester@dtz.com
Janne Eriksson
Managing Director, Partner
+358 (0)10 836 8406
janne.eriksson@dtz.com
Valuation
Valuation & Research
Capital Markets
Capital Markets
Juha Mäki-Lohiluoma
Director, Partner
+358 (0)10 836 8435
juha.maki-lohiluoma@dtz.com
Ville Suominen
Analyst
+358 (0)10 836 8455
ville.suominen@dtz.com
Arno Jaulas
Partner
+358 (0)10 836 8415
arno.jaulas@dtz.com
Ilkka Kujanpää
Partner
+358 (0)10 836 8420
ilkka.kujanpaa@dtz.com
Letting & Occupier
Services
Letting & Occupier
Services
Retail
Raul von Denffer
Partner
+358 (0)10 836 8401
raul.denffer@dtz.com
Hanna Lamadon
Partner
+358 (0)10 836 8425
hanna.lamadon@dtz.com
Jari Jäntti
Director, Partner
+358 (0)10 836 8418
jari.jantti@dtz.com
Disclaimer
This report should not be relied upon as a basis for entering into transactions without seeking specific,
qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no
responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this
report. Information contained herein should not, in whole or part, be published, reproduced or referred
to without prior approval. Any such reproduction should be credited to DTZ.
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