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Market Research - Finland

Finland : Helsinki office market

- Demand for cost efficiency pressurises rents
- Scarce supply in the city centre maintained yields at a low level

Demand for cost efficiency pressurises rents

In certain sub-markets outside the city centre, vacancy rates have improved but in the centre they have gone up. The pressure to lower office rents manifests itself in various incentives in lease agreements. Restructuring has also increased which, in turn, has resulted in lease modifications. The demand for new office space is based on space efficiency to reduce the overall rental costs compared to the tenants’ previous premises. In addition, rent-free months, as well as decreasing rents, are cutting tenants' expenses.

Scarce supply in the city centre maintained yields at a low level

The supply of office properties in the city centre is meagre, resulting in the spreading of investment further afield. Apartment investment allocations in particular have come up in the calculations of large and small investors as well as contractors. Office yields in the city centre have remained low and differences between sub-markets within the capital have grown even wider.

Significant portfolio transactions involved offices. One such example is the portfolio owned by Elo Mutual Pension Insurance in which six office properties were sold in early 2016 to Niam, a Nordic property fund. The properties are located in Pitäjänmäki, Tapiola, Vantaankoski, Mankkaa, Leppävaara and Aviapolis.

The first major portfolio transaction of 2017 was the Omega portfolio, containing 22 properties located in Finland. This was purchased by Goldman Sachs together with Valad Europe, part of the global property investment fund Cromwell Property Group. Around 80% of the portfolio's value is located in Helsinki, Espoo and Vantaa, the two most significant individual properties being the office building at Kaisaniemenkatu 13 and the Stella Terra office in Stella Business Park in Leppävaara, Espoo. The portfolio comprises nearly 109,000 m2 of office space in total.

EOM Helsinki
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