Outlook for the Finnish property marketbecoming more positive

The improving outlook for the Finnish economy strengthens the expectations for increasing activity in the propertymarket.

However, despite increasing investment demand and decrease in prime yields, the transaction volumes have remained relatively low. Investor demand is mainly targeted at low-risk properties in prime locations. The current owners of this kind of properties – consisting mainly of domestic institutions – are not, however, eager to sell these core assets. For non-core assets, differences in yield perceptions between potential buyers and sellers still prevent significant increase in transactions volume from materializing.

In the rental markets, the Helsinki CBD is strengthening its unique position within the Finnish context. In prime retail rents, new peak levels are recorded. Office rents, which decreased slightly in 2009 and 2010 also in the city center, have now started to increase slightly again. In most other office areas in the Helsinki metropolitan area, serious oversupply restricts the possibilities for rental growth. Rents have therefore either continued decreasing slightly or remained stable. Despite the high vacancy rate, new offices are being constantly developed. New offices are mainly either extensions to existing business park concepts or tailored single tenant premises.

Residential market’s outlook remains positive both from rental and investment market point of view. Rental demand remains high and rents continue increasing in all major cities, and in the Helsinki metropolitan area in particular.Supported by strengthening market values, residential has been the best performing sector in the KTI Index in three consecutive years.

Source: KTI Market Review