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MIPIM, Cannes & Stockholm

Increased office occupier and investment activity in Nordic real estate markets forecast for 2010

Capital values still face downward pressure due to falling rents and increasing vacancies according to the Jones Lang LaSalle Nordic City Report Spring 2010


Stockholm & MIPIM, Cannes - 18th March 2010 - According to Jones Lang LaSalle’s Nordic City Report Spring 2010, Nordic capital cities are showing signs of stabilisation. All Nordic markets are showing the same pattern in demand for office space: occupiers are favouring new constructions and vacancy levels in the A segment are considerably lower than in the B and C segments.  Investors are favouring the prime properties, namely high-quality, core CBD products with demand for secondary offices still proving weak. This is largely due to the more prudent lending policies from banks, which are opting for low-risk assets.
 
Office vacancies in Stockholm, Oslo, Helsinki as well as Copenhagen have increased on an annual basis by between 2 to 3 percentage points. Vacancy rates have increased most significantly in Copenhagen (3.1 %), which is primarily due to a decrease in local demand. During 2009, occupancy levels fell between 5 and 10% in all Nordic markets with the exception of Oslo where levels declined by approximately 30 %. The large increase in occupancy rates that the city experienced before the recession started is the reason for the decline in occupancy levels in Oslo, and this is now stabilising.
 
The office rental market in the large metropolitan areas have stabilised more than expected. Vacancies, which at year-end 2009 had increased to 11.5 % in the Greater Stockholm area, 8.3% in the Greater Gothenburg area and 7.1% in Malmö/Lund, are expected to increase modestly in 2010; due to a negative employment rate combined with an increased supply.
 
In Stockholm and Malmö/Lund, a significant increase in leasing activity was recorded during the fourth quarter of 2009, while office take-up in Gothenburg was relatively stable over the same period.
 
Commenting on the research findings, Mikael Wallgren, head of Leasing, Jones Lang LaSalle Sweden, said: “Occupier demand for office space in the larger cities in Sweden has risen during the second half of 2009 and the fourth quarter saw positive activity in comparison to earlier quarters. The recession, however, is not yet over and a combination of many occupiers no longer using their space to maximum capacity together with negative employment growth will mean increased office vacancies during 2010.”

Jones Lang LaSalle estimates that by the end of 2010, office vacancy levels will be approximately 14% for Stockholm (about 8% for Sweden CBD), approximately 10% for Gothenburg and approximately 8% for Malmö/Lund. Rents in all locations are estimated to continue to decline by 0-5 % over the coming year.
 
Investment yields in Stockholm and Helsinki have risen on an annual basis by 0.25 percentage points, while Copenhagen has demonstrated a more stable market with unchanged yield demand. Oslo is the only Nordic market where yield sank, 0.50 percentage points on an annual basis. In contrast, yield levels for less attractive products will still move upwards over 2010.
 
Investment transaction volumes in Sweden have begun to increase, although they are from lower levels. During 2009 transaction volumes declined by around 60% compared to the previous year. Comparing the fourth quarter 2009 with the corresponding quarter in 2008, the decline was approximately 30%.
 
“Activity in the office investment market has begun to grow after a few noncommittal quarters. 2010 has also started stronger than 2009 and we can expect a market characterized by greater activity than the previous year. Furthermore, several international investors continue to be interested in the Swedish market and this should lead to even more transaction volumes,” added Daniel Gorosch, head of Capital Markets, Jones Lang LaSalle, Sweden
 
The yield in Stockholm CBD was 5.75 percent (5.50) by the end of 2009. In other submarkets and for B properties, yield increased by approximately 0.25 to 0.50 percentage points in the last year.

In 2010, yield levels are expected to stabilise as the markets reaches more normal volumes. Jones Lang LaSalle forecasts a yield for Stockholm CBD of around 5.75 % by the end of 2010.
 
-ends-
 

Notes to Editors:

  • For further information contact Daniel Gorosch, head of Capital Markets, Jones Lang LaSalle, Sweden (+46 8 453 51 03) or Mikael Wallgren, Mikael Wallgren, head Leasing in Jones Lang LaSalle’s Swedish office (+46 8 453 51 80)