Nordic institutional investors have become sellers in their domestic property markets, according to Oslo-based Pangea Property Partners in its latest outlook report.
Factors such as an increased desire for international real estate, development projects, new capital requirements and overly high real estate allocations have all contributed to the shift from being buyers, the Nordic advisory firm says.
‘It’s a new trend we are seeing right now,’ comments Mikael Söderlundh, head of research and partner at Pangea Property Partners. ‘Nordic institutions have been large buyers in the Nordic real estate market throughout the 2000s and they have contributed to low property yields. In 2017 and 2018, however, the Nordic institutions turned net sellers.’
Swedish institutions have the highest property allocation (11.3 percent), followed by Norwegian investors (11.1 percent) and Finnish investors (7.3 percent). The lowest allocation is found among Danish institutions (5.6 percent).
‘Swedish institutions have gradually increased their property allocation from 6.9 percent at end of 2010, while the Finnish institutions have gone in the opposite direction and reduced their property allocation significantly,’ observes Söderlundh.
Real estate is still ranked by Nordic institutions as one of the most attractive asset classes. Alternative investments such as hedge funds and infrastructure are also deemed to be attractive in the current market, according to the outlook.
Joakim Arvius, project manager and partner at Pangea, adds: ’Many Nordic institutions are starting to feel their domestic markets are expensive and therefore they start looking for investments abroad. In parallel to building up an international real estate exposure, they are also investing more in property development to enhance returns.’
It is primarily the largest institutions that are interested in international real estate. Asia and the US are considered the most attractive markets, while continental Europe has lost some attractiveness in recent years, according to the outlook.
The Pangea Institutional Outlook report surveys 160 of the largest Nordic institutions on their views of real estate as an asset class, including planned investment strategies for the next 12 months. These investors own €116 bn ($131 bn) of real estate in aggregate, corresponding to 9.2 percent of total assets.
