Investment market Finland

The real estate investment market came to an expected slowdown during the second half of 2022, after a very active start to the year. Total transaction volume in 2022 amounted to € 6.3 billion, reaching similar levels as in 2021. Residential remained the most traded segment for the second year in a row, with 26 percent of total transaction volumes. Healthcare and retail accounted for the second and third largest shares, with 20 percent and 17 percent of total volumes, respectively.

The ongoing economic climate of rising interest rates and inflation was the main cause of the change in investor sentiment during the second half of 2022. Many transaction processes were abandoned or put on hold, due to the high uncertainty in the market. Rising interest rates have translated directly into higher financing costs and more difficulty for investors to obtain financing. This is causing upwards pressure on yields, especially in the previously tightest priced sectors such as residential and office. In the last quarter of 2022, prime residential and office yields both stood at 4.00 percent, compared to 3.05 percent and 3.20 percent respectively in the first quarter of 2022. Transactions with higher yield products appear to be easier to carry out in the current market environment.

The outlook for 2023 remains cautiously optimistic, as investors are expected to continue to better adapt to the new market conditions. Investment activity is already showing some signs of recovery after the slowdown in the second half of 2022; however, further improvement in 2023 is heavily dependent on how inflation and interest rates develop going forward.

4.00%

Prime office yield rose from 3.25% in Q2 2022 to 4.00% in Q4 2022.

1.7€bn

“The outlook for 2023 remains cautiously optimistic, as investors are expected to continue to better adapt to the new market conditions.

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