Why invest in Nordic Countries

Reports
	Nordic News August 2007
	Nordic Offices Spring 2007
Source: CBRE

These countries have the potential of providing superior investment returns for investors. This is based on the following factors:

• A generally positive economic backdrop.

• A commercial property market that has a number of positive structural aspects from an investment perspective.

• The existence of identifiable drivers of capital value growth in the form of rental growth and yield compression.

The Economic backdrop.

The Nordic region has a generally positive economic outlook with forecasts pointing to strong growth and consumer spending figures, decreasing unemployment and stable inflation.

The underlying economic performance is of crucial importance to a successful outcome in commercial property investment and these figures indicate that transactions in the Nordic Region would appear to have a foundation for success. In addition, the relatively stable nature of the political and financial systems in place in each of these countries provides a degree of comfort that internal factors should not lead to dramatic changes that would fundamentally alter the basis of these economic projections.

Positive Structural Aspects.

The structure of the commercial property market in the Nordic countries lends itself to doing business in the region. Key attractive features include:

Size

In European terms the Nordic institutional investment market ranks only behind the UK and Germany in terms of size, is similar to France and ahead of the Netherlands. In total, the investible market of the Nordic Region is estimated to be in excess of €130bn. (Source: IPD, Cordea Savills)

Liquidity

The volume of investment property transactions measured on an annual basis relative to the total property stock in each of the countries in the Nordic Region compares favourably with most investment property markets on a worldwide basis, indicating that assets are traded regularly. In 2006 the transaction volume for the region was estimated to be in excess of 23% of the total investible market. (Source: Jones Lang LaSalle, Cordea Savills)

Transaction Costs

Relative to other European countries the costs of a typical property transaction (transfer taxes, legal fees, agent fees etc) are at the lower end of the scale. Standard estimated transaction costs range from 3% to 6% (as compared to Ireland at 11.42%). (Source: DTZ, Cordea Savills)

Financing Options

As a by-product of the above mentioned factors, there are many financial institutions, both domestic and international, willing to make available bank finance to support the funding of acquisitions at competitive rates.

Drivers for Capital Value Growth.

Whilst a sound underlying economic performance in a market that facilitates transactions are important aspects of a decision to invest, the primary focus is on whether there is an ability to generate a return on the equity invested. Research (Source Cordea Savills) indicates that, in certain segments of the commercial investment property market in the Nordic Region, there are prospects for both rental growth and further yield compression – the main drivers for capital value growth. The retail sector generally shows positive signs in terms of:

• General Macroeconomics.

• Higher yields relative to much of Europe.

• Further anticipated yield compression.

• Annual full indexation of rents.

• Strong forecast rental growth.

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Patrick Matthews trading as Smart Finance is regulated by the Central Bank.