Investment volumes into Europe’s ‘living sectors’, including purpose-built student accommodation (PBSA), co-living, multifamily, senior living and healthcare, have increased greatly in recent years. A trend of particular interest is the significant rise in outbound investment from the Nordic investors – those from Sweden, Finland, Denmark and Norway.
Typically, they first look to invest in their own country and neighbouring Nordic countries, given their familiarity with those markets, before looking further afield. For example, Swedish investment volumes into Denmark increased fivefold between 2020 and 2021, to €5 billion, with Heimstaden, CRIM and NIAM all making large residential acquisitions over the past year. This trend has continued into 2022, with Swedish student housing developer Studentbostäder i Norden (SBS) announcing in April that it had agreed to purchase a 173-unit student scheme in Copenhagen from SEBC II ApS and Bonum Development for DKK 344.5m (€47 million).
Yet in recent years, we have also seen increased outbound investment by Nordic investors, into the rest of continental Europe. One of the most high-profile examples is Norway’s sovereign wealth fund, Norges Bank, who have real estate investments in sixty-nine different markets outside Norway, including in excess of €13 billion across Europe.
One of the top destinations for Swedish investors allocating capital in 2021 was Germany, where they invested €7.9 billion. This was an astounding eight times more than in 2020 and represented 42 percent of their total investment volume that year, with the residential investment giant Heimstaden being particularly active. This year Heimstaden has already invested in Poland, forward-funding a 400-apartment residential project in Warsaw.
Meanwhile, in France we have seen La Française Real Estate Managers acquire a 105-unit senior living residence on behalf of Danish pension fund PFA, in a forward sale structure. Following on from its initial €100 million France-focused partnership announced in January 2020, in 2022 PFA has committed a further €300 million to the strategy, with €200 million of the new mandate allocated to senior housing across both France and Belgium.
There are a number of drivers behind this increase in outbound investment into wider Europe, including risk diversification, the possibility of achieving higher returns in other European countries, and their home markets alone not being large enough to allow full deployment of funds, given the size of many of the listed companies and private equity funds in the Nordics. As these drivers continue to play an important role in decision-making, we expect to see Nordic investors allocate increasingly large quantities of capital to the ‘living’ sectors across continental Europe, through a number of different investment structures.
Given the geopolitical events in Eastern Europe, which are materially affecting raw material costs and the construction pipeline, Nordic investors with capital to deploy will also increasingly focus on securing operational or almost-complete stock, as they prioritise income-producing assets.