Heißer Markt im kühlen Norden – The Nordic Real Estate Powerhouse

Der skandinavische Immobilienmarkt boomt. Das haben auch ausländische Investoren erkannt und zeigen großes Interesse am Norden. Doch wer seinen Platz an der Sonne im Norden sucht, sollte trotz der rasanten Entwicklung gut informiert sein.

Lars Ohnemus, CEO Baltic Property Trust, kennt sich bestens aus auf dem skandinavischen Markt. Er lässt Sie hinter die Kulissen des skandinavischen Aufschwungs schauen und gibt praxisorientierte Tipps für ein erfolgreiches Immobilien-Engagement rund um die Ostsee.

The Nordic region, consisting of Denmark, Finland, Norway and Sweden, is in a booming stage. The economies are characterised by strong to high GDP growth, decreasing unemployment along with increasing, but still low, interest rate levels.

The strong economic development has been reflected in the property markets: high take-up in the office segment due to low unemployment; increased purchasing power and strong consumer confidence impacting the retail segment; and an increasing number of in coming orders in the industrial/warehouse segment. Everything else equal, theses factors have pushed up prices for commercial real estate. Naturally, local market conditions are reflected through the current state of net take-up, new construction and demolitions.

Particular during the past year foreign investors have shown increasing interest. Cross-border transactions accounted for approximately 48% of all transactions in Finland and 55% in Sweden, whereas in Denmark and Norway it amounted to 25% and 8% respectively. (1)

The number of transactions has also increased, partly explained by greater transparency in the sector, which has a self-reinforcing effect on the amount of transactions. On the real estate transparency index, the Nordic region is the top with Denmark, Finland and Norway having “high” transparency and Sweden “highest” transparency. (2)

For the listed real estate companies the past year offered a very positive development in Finland, Norway and Sweden, where they outperformed direct property investments by 52%, 47% and 23% respectively on a total return basis. (3) The combination of general increased focus on real estate as a separate asset class in combination with investors noticing the favourable conditions in those markets has increased demand and thus prices for real estate equities. In Denmark the listed real estate companies underperformed direct property investments by 18% mainly due to significant share price corrections in the market, nonetheless, operating performance of the companies are still strong. Relative to equities in general Finish, Norwegian and Swedish real estate equities outperformed with 32.2%, 32.7% and 10.6% respectively. (4)

Overall the Nordic region is a very attractive region where property markets are peaking now and shows outperformance relative to other asset classes.

Despite the fact that the Nordic region is a powerhouse and the region is overall performing strongly, diversification should be undertaken in order to minimize three risks associated with: local economic developments within the Nordic region; the market risk which is reduced as the number of companies in which is invested increases; and sector risk which is depended on the reduced as the investments stretch across several segments (office, retail, industrial etc.).

Diversification is not the only consideration, but equally important is the choice of asset manager. Here investors must consider two main factors: Firstly, foreign investors suffer from information asymmetry and should therefore choose a local player with focus and a proven track record in the markets in question. Secondly, the investor should realise that real estate is a separate asset class therefore ensure that the asset manager has a core competence within real estate.

BPT Nordic is an UCIT mutual fund tracking the BPT Nordic Index which is under supervision of the Danish FSA. The index is comprised by 14 leading listed real estate companies in the Nordic region, selected on the basis of five criteria: (1) and (2) the companies must obtain minimum 60% of their revenues from development or operations of commercial real estate in the Nordic region; (3) liquidity; (4) free float and (5) corporate governance standards. The first two secure that the companies are focusing their operations in commercial real estate in the Nordic region whereas the other three attempt to increase the chance of the companies remaining attractive investment targets in the long term.

Since launch in January 2005 the BPT Nordic fund has outperformed direct real estate investment along with equity markets in the Nordic region. In 2006 the fund delivered a total return of 43.8%. Performance has persisted into 2007, during with the fund returned 6.1% during first quarter alone.

BPT Nordic is part of Baltic Property Trust Group. Since its establishment in 2001, the Group has emerged as one of the leading, real estate investors in the Baltic Sea region. Thanks to a strong team of skilled real estate, legal and financial specialists, Baltic Property Trust has built an impressive performance record.

For further information please refer to http://www.balticpropertytrust.com/funds/bpt+nordic.

(1) The full year 2006
(2) Jones Lang LaSalle, Nordic City Report, Spring 2007
(3) Investment Property Databank Ltd., 2007
(4) Ibid