Even before the Covid-19 pandemic, investment into Swedish logistics, multifamily and ‘public sector’ assets, including care homes and schools, was on the rise, but since the outbreak the amount of investment and the mix of investors has increased significantly.
In fact, at this point in 2020, multifamily and public sector assets have both recorded higher transaction volumes than the office sector. At the same time, the combined investment into Swedish real estate in H1 2020 increased by 1 per cent year on year to SEK102 billion (€9.7 billion).
There are a number of reasons for this:
Sweden’s lack of lockdown
Sweden's decision not to implement a nationwide lockdown to delay the spread of the coronavirus was seen as highly controversial when initially announced towards the start of the pandemic. While death rates from Covid-19 are higher in Sweden compared with other Nordic countries, they are lower than in some other European countries that implemented strict lockdowns.
It’s thought the lack of a lockdown in Sweden helped protect its economy, compared with other countries that took more extreme measures. One crucial advantage from a real estate perspective was that viewings could still take place – a key requirement for most investors which wasn’t possible in other European countries.
Familiarity with the market
Having previously made successful investments into the Stockholm multifamily market, Aberdeen Standard, Barings Real Estate and other non-Nordic funds now have the confidence to invest further in the local market and are seen as serious investors by sellers, with their attention spreading to the regional cities such as Gothenburg and Malmo.
Similarly, established international players such as Blackstone are investing in Swedish logistics, having acquired 12 logistics assets in Sweden, Denmark, and Finland for €289 million in September, instilling confidence in other international players to make similar investments.
Competitive yields
Despite prime yields for logistics and multifamily assets dropping to the high 3 per cents or low 4 per cents in Sweden, this is still significantly higher than, for example, prime office yields for German investors in their home market (yields were 2.8 per cent for prime offices in Frankfurt, and 2.7 per cent in Munich and Berlin as of Q2 2020).
This is one of the main reasons we continue to see so much investment from European investors into Sweden, with recent deals including Aberdeen Standard buying two multifamily assets in Gothenburg, Barings Real Estate purchasing a CBD office asset in Stockholm, having first invested €128 million in six residential buildings in the Swedish capital last year and Allianz Real Estate and CBRE Global Investment Partners jointly buying a portfolio of eight logistics properties in Sweden and Denmark.
Due to the uncertain economic outlook, we see a growing interest in low-risk sectors, such as multifamily, public sector, logistics and office properties with long leases and the state or a municipality as tenants.
Given the attractive yields on offer in Sweden compared with other European markets, we expect to see more competition from international investors to come over the next few months.
Further information
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