Rental apartment buildings, logistics and consumer goods store properties attracting international interest

13.2.2019

Urbanisation is intensifying rental apartment building investment demand in Finland and abroad. Domestic investors have been the most active in this sector, although last year, international investors made significant direct investments in rental apartment buildings in Finland – a trend that is likely to continue to grow this year. A good example of the activity of Finnish investors in the residential property market is the property portfolio comprising nearly a thousand apartments bought by Kojamo from OP Financial Group funds. The apartment investment strategies of international players are focusing heavily on either low-risk core property portfolios or higher-yield value-add portfolios. Finnish investors usually operate between these extremes and are often also used to constructing properties themselves, which is something international investors with their limited resources are unable to manage at the moment.

Another sector attracting investor attention is logistics which is heavily influenced by the strong growth in online trade. Location near the airport or logistics hubs adds to the appeal of these properties. A typical example of international demand in Finland's logistics market is the transaction in which the German company DWS, a client of Newsec Investment Management, bought a 42,000 m2 logistics property located in Aviapolis, Vantaa, from Finnish investors in August last year. Logistics property investment demand has secured its position as a globally institutionalised property sector in the past couple of years, and demand will remain strong in the future.

The investment demand of consumer goods store properties also remains strong and is not affected by the rise in online trade in the same way as other retail. In the future, local consumer goods stores will serve as a service network for online trade and postal services which will increase the appeal of these retail sites even further. The problem of consumer goods stores from the point of view of property investors has been their small size. One solution has been to create portfolios to achieve more significant unit sizes and, at the same time, spread the risk across different locations.

Shopping centre investment demand, in turn, is polarising further but the centres are likely to maintain their position in the competition. Although in the Helsinki metropolitan area in particular, the completion of new shopping centres within the past few years has already affected the profitability of some centres and increased investors' yield demands. Local shopping centres that meet consumers' every day needs remain vital as long as their concept can meet consumer demand and changes in it through active leasing.

Read more in Newsec's spring Property Outlook Finland. Sign up to receive a download link to your email at www.newsec.com/insights/reports/finnish-property-outlook-spring-2019/.