The Finnish Property Market 2009 - KTI

The Finnish Property
Market 2009
1
The Finnish Property Market 2009

The Finnish Property Market 2009

Contents
Preface 7
1. Basic facts about Finland 8
2. The Finnish economy 8
2.1 Finland is facing challenges together with the global economy 8
2.2 The Finnish Government is taking actions in order to support economic recovery 9
2.3 Export industries are suffering from the global economic downturn 10
2.4 Labour market’s challenges: increased unemployment in the short term; limited supply in longer term 11
2.5 Finland’s international competitiveness is still strong 12
3. Institutional aspects of the Finnish property market 14
3.1 Two forms of property ownership 14
3.2 Market practices of property investment and renting 15
3.3 Planning 17
3.4 Taxation in Finland 18
4. Structure and players in the Finnish property market 21
4.1 Ownership structure has changed markedly 21
4.2 Real estate service sector 28
4.3 Property investment market in 2009: increased uncertainty 30
5. Property sectors – market structure and practices 32
5.1 The office market: increasing supply, softening demand 32
5.2 The retail market: strong performance stabilising 36
5.3 Residential sector – positive outlook in the rental market 39
5.4 Logistics market – a developing property sector 42
6. Property Markets in different regions – Outlook for 2009 43
6.1 Helsinki metropolitan area: the dominant property market area in Finland 43
6.2 Other growth centres: Tampere, Turku, Oulu, Kuopio, Lahti and Jyväskylä 48
The Sponsors of this publication 51
Key Terminology 54
5
Useful links 55
The Finnish Property Market 2009

Preface
The Finnish Property Market 2009 aims to satisfy the information
needs of international investors and other players interested
in the Finnish property market. The report has been
published annually since 2001.
The publication aims to cover the basic facts of the market
structure and practices in the Finnish property market. More
detailed information and analysis on the individual submarkets
for specific needs can also be provided by KTI
Finland on request.
This publication is sponsored by 11 companies
representing the Finnish property investment, development,
management and finance markets. The sponsoring
companies include Aberdeen Property Investors, Citycon,
Eurohypo, IVG Polar, NCC, Newsec, Ovenia, Real Estate
Training and Education Institute, Sato Corporation, SEB
Merchant Banking and Skanska. Also RAKLI – the Finnish
Association for Property Owners and Construction Clients,
Greater Helsinki Promotion as well as Invest in Finland have
provided financial support for this report. KTI wishes to
thank the sponsors for their support.
KTI Finland also publishes a monthly electronic
newsletter, Finnish Property Bulletin, which covers the latest
news from the Finnish property market. To order to receive
this newsletter by e-mail, please subscribe at kti@kti.fi
The report will continue to be updated and published
annually. It is also available in PDF format at www.kti.fi. We
hope you find the information interesting.
Hanna Kaleva
KTI Finland
7
KTI Finland is an independent research organisation and service company providing information and research services for the
Finnish real estate industry. KTI maintains extensive databases on returns, rents, transactions, operating costs and customer
satisfaction measures in the Finnish property market. Based on these databases, various kinds of benchmarking and analysis
services can be provided. For more information, please call +358 20 7430 130 or visit www.kti.fi
The Finnish Property Market 2009

1. Basic facts about Finland
2. The Finnish economy
8
The Finnish Property Market 2009
Geography
Total area
Distances
Climate
People
Population
Languages
338,000 square kilometres
1,160 km north to south
540 km east to west
Cold winters, warm summers
Mean temperatures:
July: +17°C
February: -5.7°C
5.33 million
Density: 17 inhabitants per square
kilometre
Uusimaa region (southern Finland):
216 per km2
Lappi region (northern Finland):
2 per km2
Two official languages:
Finnish, spoken by 91.5%
Swedish, spoken by 5.5%
Foreign nationals: 2.5%
of population
Religions Lutheran 83.1%
Orthodox 1.1%
Capital city Helsinki, 574,000 inhabitants
Helsinki region, 1.3 million
inhabitants
comprising Helsinki
and 11 neighbouring
municipalities – Espoo and
Vantaa being the biggest
Other
important cities
Espoo, 241,000
Tampere, 210,000
Vantaa, 195,000
Turku, 176,000
Oulu, 134,000
Jyväskylä, 127,000
Lahti, 100,000
Kuopio, 92,000
Economy
GDP per capita € 35,041 (2008)
Most important
exporting
industries
Metal and engineering products
Electronics and electrotechnical
goods
Forest industry products
Currency Euro (since 2002)
History and Independent democracy since 1917
governance
Head of State
Parliament
Member of the European Union
since 1995
President of Republic, Tarja Halonen
(since 2000)
One chamber, 200 members, elected
for 4 years. Current parliament
elected in 2007
2.1 Finland is facing challenges together
with the global economy
During the past few decades, Finland has successfully
combined high economic growth with Nordic welfare
policies while simultaneously undergoing profound change
in the structural base of its economy..Measured by gross
domestic product per capita, Finland ranked fourteenth in
the world in 2007.
Finland is an open economy with strong emphasis on
external relations and foreign trade. Factors associated with
the openness of the economy include a commitment to
free markets combined with stable and functional political
institutions.
The egalitarian nature of the society, together with
homogeneous economic and cultural structures has
contributed to the success of the economy. Finland’s small size
and scarcity of natural resources has pushed Finnish society
to look for competitiveness from other sources. The ability of
Finns to utilise advanced technology has proven to be one of
the most important factors in the country’s competitiveness.
“The Finnish economy
is dependent on foreign
trade”
Finland has been one of the best performing economies in
the European Union throughout the past decade. Growth
has been supported by both solid advancement in private
consumption and brisk development of exporting industries.
During 2008, the global financial crisis and economic
downturn has increased uncertainty and turned the prospects
also for the Finnish economy negative. However, Finland fell
victim to the global crisis relatively late, and from a strong
underlying growth momentum of the previous years. The
crisis hit the Finnish economy mainly from abroad through
the decline in exports, whereas the foundations for domestic
businesses remained healthy.
The Finnish GDP grew by 0.9 % in 2008. The figure is
significantly lower than in previous years – 4.2% in 2007 and
4.9% in 2006. The economy continued to grow during the
first half of 2008, but towards the end of the year, the growth
turned negative because of a sharp decline in exports.
“The Finnish GDP
growth slowed down in
2008”

GDP growth in Finland and in the
Euro area
Retail sales* and households’
disposable income
%
7
annual growth %
9
■ Households’ disposable income –– Retail sales
6
5
4
3
2
1
0
-1
-2
Finland
Euro area
97 98 99 00 01 02 03 04 05 06* 07* 08** 09** 10**
*estimate
**forecasts
Sources: Statistics Finland, Nordea Bank, OECD
8
7
6
5
4
3
2
1
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
*excl. car sales
Source: ETLA, Federation of Finnish Commerce
As exists for the entire global economy, the forecasts for
Finland in 2009 are characterised by uncertainty. Prospects
for GDP growth have deteriorated steadily, and the latest
forecasts vary from -1,0% to -3.7% for 2009. Opinions as to
when the worst will be over vary, with the most positive views
forecasting the turning point to be reached already in mid-
2009. Despite the negative outlook, the Finnish economy
should still be among the strongest in the euro area.
“Negative outlook
for 2009 – turning
point to be seen in the
summer?”
According to the Confederation of Finnish Industries (EK),
the current downturn negatively impacts the entire Finnish
economy. Confidence indicators have declined rapidly for all
main business sectors – from manufacturing to services, and
especially in construction. All sectors forecast declining sales,
production and employment. Especially in construction, the
outlook is not expected to turn more positive in the near
future.
“The fundamentals of
the Finnish economy
are sound”
Of the main contributors to economic growth, the outlook
is most positive for private consumption – although there are
some contradictory facts related to this. On one hand, lowering
income taxes, decreasing inflation and positive development
of real income due to wage increases should support private
demand. On the other hand, increasing unemployment
and continued uncertainty decreases consumer confidence
quickly, which might result in increased savings.
“Outlook for private
consumption is
characterised by
uncertainty”
2.2. The Finnish Government is taking
actions in order to support economic
recovery
Increasing challenges facing the Finnish economy are being
confronted by the Finnish government, which has taken rapid
actions in order to support the economy and employment,
in particular. These actions, amounting to some €1.2 billion
and thus exceeding the EU recommendation of 1.5% of
GDP, include increased public investment in infrastructure
and construction, as well as support for renovation of
residential buildings. Other actions targeting at recovery of
the economy include continuous tax cuts, increases in social
benefits as well as decreases in employers’ social security
costs.
The government has also offered Finnish banks public
support in order to encourage the financing of Finnish
corporations and thus supporting companies’ ability to
employ people. However, the banks face the current
turbulence in a relatively healthy condition, and no bank has
so far announced taking these opportunities of government
9
The Finnish Property Market 2009

subordinated loans or state guarantees for their refunding.
The Finnish banking sector went through severe downsizing
in terms of numbers of employees and branches during the
recession of the early 1990s, and the need for cuts are now
not so urgent for them as in many other countries.
Well-balanced public finances create a solid base for
the government’s actions. General government budgetary
position has remained at a healthy surplus so far, at ca. 4.5 %
of GDP for 2008. However, sharply declining tax revenues
together with an expansionary budget and rapidly increasing
expenditure because of unemployment, among other things,
will erode the public finances in 2009. State debt, currently
standing at some 29% of GDP (total public debt at ca. 33%),
is expected to increase by some €30 billion because of
the economic downturn. Because of the crisis, the central
government’s budgetary position is expected to slip into
deficit in 2009 – for the first time in the present decade. For
2010, a small surplus of 0.5% of GDP is forecasted.
Public finance balance in Finland and
in the Euro area, % of GDP
%
8
6
4
2
0
-2
Finland
Euro area
-4
97 98 99 00 01 02 03 04 05 06* 07* 08** 09** 10**
*estimate **forecasts
Sources: European Central Bank, Statistics Finland, Nordea Bank
2.3 Export industries are suffering from
the global economic downturn
10
The Finnish Property Market 2009
“Decreasing tax income
and increasing expenses
create pressures for
public fincances”
The Finnish public sector provides comprehensive social
security and extensive welfare services to all residents,
including extensive healthcare, children’s daycare and senior
citizens’ care systems. Social security costs account for ca.
26% of GDP, which is slightly below the average for all EU
member states. In addition to extensive social services, the
Finnish government also provides a comprehensive system
of public educational services. There are no tuition fees for
education, not even in higher level.
Extensive public services are financed by tax revenues,
resulting in a high level of taxation. In 2006, total taxes
related to GDP accounted for some 43%, thus exceeding
clearly the EU average (39.7%).
High level of public services – a big proportion of which
are provided by municipalities – create increasing pressures
for municipal finances. Because of the economic recession,
the need for social services will increase, and simultaneously,
the tax revenues are decreasing. In the longer term, the
ageing of people is also increasing the demand for public
services. Therefore, the municipalities are facing the need to
increase the productivity of services. They are also looking
for structural and functional innovations, by e.g. increasing
co-operation both between municipalities and with the
private sector.
The Finnish economy is increasingly dependent on foreign
trade, the importance of which has increased since the
early 1990s, in particular. Exports currently account for
some 45% of the Finnish GDP. Structural changes, strong
growth of electrotechnical industries and their exports, in
particular, played an important role in Finland’s recovery
from the serious recession experienced in the early 1990s.
This development has improved the balance of the economy
by broadening the overall structure of exporting industries
previously dominated by forestry and metal industries.
“Exports account for
45% of the Finnish
GDP”
The Finnish exports have increased steadily in the past few
years. However, the current crisis seems to affect all exporting
industries as well as all target countries, thus emphasising the
challenges for the Finnish economy. Finnish export demand
started to decline rapidly starting from autumn 2008. In the
last two months of 2008, the volume of exports declined
almost by one-fifth compared with the previous year.
“The recession hits
the Finnish exporting
industries”

Industrial confidence indicator
25
20
15
Finland
10
5
0
-5
-10
Euro area
-15
-20
-25
-30
-35
-40
01-2000
07-2000
01-2001
07-2001
01-2002
07-2002
01-2003
07-2003
01-2004
07-2004
01-2005
07-2005
01-2006
07-2006
01-2007
07-2007
01-2008
07-2008
01-2009
Source: European Commission
Finland’s exports by countries,
% of total exports
Germany
Sweden
Russia
USA
United
Kingdom
Netherlands
France
China
Norway
Italy
■ 2007
■ 2006
■ 2005
0 2 4 6 8 10 12
%
Source: National Board of Customs
The recession hit first the most cyclical export industries,
i.e. metal, construction and forestry. Towards the end of
the year, exports for electrotechnical industries also turned
towards a sharp decline. Thanks to the brisk beginning of
the year, the total volume of exports in 2008 almost reached
the level of the previous year. However, the surplus of the
Finnish trade balance decreased to €3.7 billion, thus to its
lowest level since the early 1990s.
Positive factors in Finnish exports include that it is more
balanced not only in terms of number of industries but also
in terms of target countries, with developing economies
increasing their importance. Russia remains the biggest
target country for Finnish exports with some 12% proportion
of total exports. Other EU countries account for more than
a half of Finnish exports, with Germany and Sweden keeping
the second and third places.
Due to the global recession, Finnish exports are expected
to decrease by some 3 to 4% in 2009. The volume of exports
is expected to grow again in 2010, with most recent forecasts
varying from 0.5 to 3.5%. This is, however, dependent on
the timing of the revival of the global economy.
2.4 Labour market’s challenges:
increased unemployment in the short
term; limited supply in longer term
Employment has improved rapidly in Finland during the past
few years, supported by the strong growth of the economy.
After years of solid growth, unemployment currently stands
at ca. 6.1%. However, because of the recession, significant job
cuts have been announced at an accelerating pace in the end
of 2008 and in early 2009. In December 2008, the number
of unemployed increased by some 15,000 compared with the
previous year. The increase has been biggest in construction
and industrial work. According to the forecasts published in
early 2009, unemployment is expected to increase by ca. one
per cent in 2009.
In the short term, the decreasing supply of labour softens
the impact of decreasing demand. The Finnish population
is ageing rapidly, and baby boomers born in the 1940s are
retiring at an accelerating pace.
In the longer term, the Finnish labour market will face
problems caused by the ageing population. It is estimated that
Employed and unemployed
11
Employed 1000 persons
2600
2500
2400
2300
2200
2100
2000
Employed Unemployed
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
450
400
350
300
250
200
150
100
50
0
Unemployed, 1000 persons
The Finnish Property Market 2009
Source: Statistics Finland

Key Figures – Finnish Economy
2001 2002 2003 2004 2005 2006 2007 2008 2009** 2010**
GDP (change in vol) 2,6 1,6 1,8 3,7 2,8 4,9* 4,2* 0,9* -1,3 1,5
Inflation 2,6 1,6 0,9 0,2 0,9 1,6 2,5 4,1 0,8 1,3
Unemployment rate 9,1 9,1 9,0 8,8 8,4 7,7 6,9 6,4 7,2 8,0
Interest rates
3 months 4,3 3,3 2,3 2,1 2,2 3,1 4,3 4,6 2,8 3,2
10 years 5,0 5,0 4,1 4,1 3,4 3,8 4,3 4,3 4,3 4,6
* estimate
** forecasts
Source: Bank of Finland, Statistics Finland, Nordea Bank
12
there will be a shortage of skilled labour in certain labourintensive
service industries, in particular, including welfare
services, as well as construction and property services.
Economic upswing together with high demand for
skilled labour resulted in relatively vigorous wage increases
during the past few years. In economic upswings, it is typical
for Finnish labour markets to agree on salaries at the union
level, which happened in late 2007, as well. On average,
wages increased and will increase by some 4–5% in 2008
and 2009, with some industry-specific exceptions. These
increases will support private consumption, on the one hand,
but have a negative impact on employers’ competitiveness,
on the other.
2.5 Finland’s international
competitiveness is still strong
Finland has held one of the top positions in international
competitiveness rankings during the past few years, even
though they have deteriorated slightly in 2007 and 2008.
In the World Economic Forum’s Global Competitiveness
Index rankings for 2008–2009, Finland maintained its
sixth position after having fallen to that place from the top
position in 2006.
Finland’s strong position is based on high scores for both
primary and higher education and high-quality institutional
environment. Nonexistence of corruption and low business
costs of crime and violence are regarded as major strengths
of the business environment, together with transparency
and functionality of the legal framework. Finland also scores
high, in second place, in innovation. On the other hand,
inflexibility and restrictiveness of labour market regulations
are seen as the major disadvantages from the country’s
competitiveness point of view. Limited market size is also
one constraint of the Finnish economy.
Another international comparison where Finland has
performed well is OECD’s Program for International Student
Assessment (PISA), which assesses students near the end of
compulsory education. Finnish 15-year-old students have
scored the highest in all PISA surveys so far, which assesses
skills in science, mathematics and reading. The Finnish
education system’s strength in these studies has proven to
be the exceptionally small differences between schools
and regions, which are ensured by the egalitarian and free
schooling system and competent teachers.
The Finnish higher education system is currently being
developed by an extensive University reform, which will
extend universities’ autonomy. Starting from the beginning of
2010, the universities will be independent legal personalities,
either public corporations or foundations under private law.
At the same time, their management and decision-making
system will be reformed. As a part of this reform, the new
Aalto University will be created through a merger between
The most competitive national economies of 2009 (ranking in 2008)
The Finnish Property Market 2009
GCI 2009 score
United States (1.)
5,74
Switzerland (2.)
5,61
Denmark (3.)
5,58
Sweden (4.)
5,53
Singapore (7.)
5,53
Finland (6.)
5,50
Germany (5.)
5,46
Netherlands (10.)
5,41
Japan (8.)
5,38
Canada (13.)
5,37
5,0 5,2 5,4 5,6 5,8
Source: World Economic Forum

the Helsinki School of Economics, the University of Art and
Design Helsinki and the Helsinki University of Technology.
Dubbed the “innovation university”, Aalto University is
aiming at bridging technology, design and business in a
novel way.
ULI & PWC: European property
market prospects – top ten markets
Munich
Hamburg
■ Development ■ Investment
Istanbul
““The Finnish university
system is under reform”
Zürich
London
Moscow
Helsinki
Paris
Finland’s competitiveness and favourable business
environment have also played an important role in the
development of the real estate market, which has undergone
a period of rapid internationalisation in the past five years.
In Price WaterhouseCooper’s and ULI’s report “Emerging
trends in Real Estate 2009” Helsinki’s investment prospects
were ranked in the seventh place and development prospects
in the fifth place among European cities. Relatively moderate
yield compression during the past years, as well as limited
volatility, was regarded as the strengths of the Finnish
market in this study. The Finnish market has also scored well
in the Jones Lang LaSalle’s Real Estate Transparency Index,
receiving a thirteenth place ranking in 2008.
Berlin
Frankfurt
1 2 3 4 5 6 7 8 9
Abysmal Fair Excellent
Source: Urband Land Institute (ULI) and PricewaterhouseCoopers (PwC)
13
The Finnish Property Market 2009

14
The Finnish Property Market 2009
3. Institutional aspects of the
Finnish property market
3.1 Two forms of property ownership
In juridical terms, owning property in Finland means owning
the land and the buildings on it. This is the basic form of
direct property ownership. It is also possible to own only
the building and have a long-term lease agreement with the
landowner, typically the municipality. Direct ownership and
land lease agreements are registered with the Land Register
maintained by local courts.
Transactions with real property are official legal acts that
have to be carried out according to a specified procedure.
These transactions are public in nature and are registered
and published by the National Land Survey of Finland. In
some cases, defined in legislation municipalities have a preemptive
right to real property transactions, but they seldom
apply this right.
In practice, it is very common for property ownership
to be organised through a limited company (a real estate/
housing company) founded for the sole purpose of owning
the property. In these cases, the legal owner of the real
estate is the limited company, which may have one or several
shareholders. The shares may be connected to a specific
apartment/amount of space in the property, entitling the
shareholder to physical control and occupancy of these
premises. These types of company are called mutual real
estate companies (keskinäinen kiinteistöyhtiö). This form
of ownership is commonly used in both residential and
commercial properties.
The Housing Companies Act and Decree regulate
mutual real estate companies that operate in the housing
sector (asunto-osakeyhtiö). These regulations are always
applied when more than 50% of the area of the building is
designated for residential use. When establishing a mutual
real estate company for commercial property, shareholders
can choose to either apply the Housing Companies Act or
the normal legislation for limited companies (Osakeyhtiölaki)
as the regulatory framework for the company.
The Housing Companies Act and Decree is currently
being revised. The main changes in the legislation have to do
with long-term planning of repairs and the communication
of those plans to the shareholders. There will also be some
changes in decision-making procedures and responsibilities
of shareholders in certain specific situations, such as in major
refurbishment investments. These changes will thus affect
mostly residential buildings, where management is usually
less professional and decision-making more complicated
than in commercial properties.
In mutual real estate companies, rental agreements are
made between the shareholder and tenant, and the rental
cash flow goes directly to the shareholder.
The mutual real estate or housing company is responsible
for the management and upkeep of joint facilities, for which
it collects a maintenance fee from the shareholders, the basis
of which is defined in the company articles of association
– the basis being typically floor area designated for each
shareholder. The division of these responsibilities between
the company and its shareholders may be specified in the
company’s articles.
The company can also take out a loan, for example, for
renovation and modernisation, and use the building and real
estate as collateral. Shareholders can use their shares in the
company as collateral for their own loans.
The other type of real estate company is a standard
limited company (kiinteistöosakeyhtiö), founded for the
purpose of owning a certain property or properties. In these
companies, the shares are not connected to any specific
premises. The company collects rents from the occupiers,
and with this income is responsible for covering maintenance
and operating costs. The real estate company can pay out
dividends to its shareholders.
Impact on market practices
Owning property through a mutual real estate company is a
more flexible form of ownership, for example, in cases where
the ownership of a building is divided among several owners.
The transfer tax rate is also lower: 1.6% on the shares of the
limited company versus 4% on direct property. Transactions
are also less complicated compared to direct ownership of
real estate.
The decision-making and management procedures of
a mutual real estate company are defined in the company’s
articles, which have to fulfil certain requirements set by law.
An individual owner’s degree of control depends on their
share of ownership, unless otherwise agreed in the company
by-laws.
A mutual real estate company is a flexible and therefore
common way to organise the ownership and management of
property. In practice, the majority of commercial property
transactions in the Finnish market are made by transacting
© 2008, Anders Portman

the shares of real estate companies. These transactions are
not public in nature, and it is, therefore, not easy to define
the real market volumes.
Legislation concerning renting and
transactions
Generally speaking, the Finnish legal system is simple and
liberal. In principle, there are no restrictions on buying or
selling real estate, but as real estate transactions are subject
to certain provisions, it is advisable to use real estate brokers
or lawyers when entering into property transactions.
Transactions with housing or real estate company shares
are very simple. As soon as transfer taxes have been settled,
the purchaser can be registered as the owner of the shares in
the real estate/housing company’s registers.
Finnish legislation regulating rental agreements is
among the most liberal in the world and is based on the idea
of full freedom of agreement between two parties. There
are no minimum or maximum lease terms, indexation is not
regulated, there are no automatic rights for renewal and
break clauses are possible, if agreed. Only in the residential
market do some restrictions exist to protect the tenant, but
even there the legislation has few restrictions.
3.2 Market practices of property
investment and renting
Property investment
Recent developments in the Finnish property markets
– including the emergence of new players, increased
internationalisation and professionalism and more
sophisticated analysis – have resulted in new practices in
property investment processes. These have also increased the
use of specialist services in property transactions. Thorough
due diligence processes have become standard approaches,
especially in transactions with large assets or portfolios and
where international players are involved.
The role of the advisor or property agent in the
investment process varies depending on the situation and
type of company. In large portfolio transactions, the parties
typically use extensive advisory, corporate finance and
investment banking expertise. In single asset transactions,
advisors’ role is typically more limited. However, in the
current market downturn, more expertise and wider networks
are typically required, which increases the need for specialist
services in all transactions.
“Market downturn
has affected market
practices”
Due diligence and analysis services have rapidly increased
in importance as foreign investors use more formal and
stringent due diligence procedures. This has brought about
new approaches to these processes, with typically several
types of experts – legal, technical, financial and tax –
working together. This has also affected domestic investors’
analysis processes. Currently, a wide variety of these kinds of
services are offered in the market.
The development of investment processes is also
dependent on market cycles. During the most active years of
2005–2007, the use of auction processes in large transactions
became common. In current market conditions, no auction
processes are carried out, as the number of participants has
decreased sharply. Other phenomenon brought about by
the slowdown is the lengthening of the processes, which
is sometimes due to the withdrawal of some of the original
bidders. The average size of transactions has also decreased
markedly.
Rental practices
Rental practices in the Finnish commercial property market
are varied, and the liberal legislation regulating them gives
the parties lots of freedom in agreeing on the terms.
A common term in Finnish lease agreements is “until further
notice”: an indefinite contract is valid until either the tenant
or landlord wishes to terminate it after an agreed notice
period, which might be three, six or 12 months, typically.
These indefinite lease terms are especially popular in smaller
office units, but are widely used in other property types, as
well.
15
The Finnish Property Market 2009

The indefinite leases often last long as both parties
typically tolerate temporary fluctuations in the market. This
means that at the peak of the market tenants might pay less
than the current rental value, whereas in the downturn they
pay more. Both parties normally accept this, and do not
exercise the break clause easily. For its part, the landlord
wants to avoid periodic vacancy and the cost of searching
for a new tenant. In turn, tenants are not willing to pay the
cost of searching for new premises and the costs of moving.
Both parties’ interest in this kind of flexibility is based on
the assumption that in the longer term, the contract rent is
adjusted to correspond to the long term rental value.
“Indefinite leases are
typical in multi-tenant
buildings”
Where fixed terms are used, the contract periods are
typically quite short compared with international practices.
In multi-tenant office buildings, a typical fixed term is from
three to five years. In the commercial property market, it
is also common to agree on a fixed-term lease, which then
continues automatically for an indefinite period until one of
the parties wishes to terminate it.
For larger units, longer fixed-term agreements are
commonly applied. For a purpose-built, single-tenant office
building, a net lease of ten years or more is common.
The need for corporations to outsource operational
property assets has brought innovations in traditional saleand-leaseback
agreements, which are mostly financial deals
in nature. Agreements in large single-tenant buildings often
have lease terms of up to 20 years. The terms of this kind of
agreements are also driven by accounting issues.
16
The Finnish Property Market 2009
Typical leasing practices in Finland
Sector Shopping High street Super- Offices, Offices, Industrial /
Center shops markets multi-tenant single-tenant logistics
Lease term 5-15 3-10 / until 10-15 3-5 / until 10-20 5-15
further notice
further notice
Basis for rent Space area / Space area Space area Space area Space area Space area
turnover
Rental payments Monthly Monthly Monthly Monthly Monthly Monthly
Indexation CPI CPI CPI CPI CPI CPI
Rent review Annually Annually Annually Annually Annually Annually
Internal repairs Tenant / Tenant Tenant Tenant / Tenant Tenant
landlord
landlord
External repairs Landlord Landlord Tenant Landlord Tenant Tenant
Building insurance Landlord Landlord Tenant Landlord Tenant Tenant
Property taxes Landlord Landlord Tenant Landlord Tenant Tenant

Tenants’ rights are quite limited in the commercial
property market – for example, a tenant has no statutory
right to a lease renewal. There are, however, a variety of
different options that are exercised on this issue.
Traditionally, rental agreements are for “gross rent”,
which includes net rent plus a service charge covering
typical operating costs and minor repairs 1 . Gross rents are
very common in multi-tenant buildings in all property types.
In some specific property types, such as business parks,
the lease agreements typically include a varying amount of
business services offered to tenants. In these cases, the total
rent includes the base (net) rent as well as a separate service
charge. In single-tenant buildings, it is more common to
apply net rents.
In some cases, the rental agreement is for net rent, but the
landlord takes care of the management and maintenance of
the building, the costs of which are then charged separately
from the tenant. This kind of agreement is sometimes called
a “shared rent”.
Rents can be indexed freely in all indefinite leases and in
fixed period leases where the term exceeds three years. The
Consumer Price Index is the most commonly used index.
Turnover-based rents are becoming more common in
shopping centres, and they usually consist of a minimum
base rent supplemented by an agreed share of turnover.
However, the turnover-based part of the rent is typically
quite low, as the landlord wants to secure a stable base for
their cash-flow.
3.3 Planning
Land use in Finland is regulated by the Land Use and Building
Act, which came into force at the beginning of 2000. The
system has three levels of land-use plans including a regional
land-use plan, local master plan and detailed local plans.
The national level principles of land use are reflected in
the regional plans, which embrace structural, functional and
environmental considerations. Regional plans are confirmed
by the Ministry of the Environment. The local master plan
is an instrument for guiding and co-ordinating land use at
a general level. It is produced by local authorities, but the
Regional Environmental Centre must be consulted in order
to ensure that national targets are taken into account in local
plans. Detailed local plans are used to regulate the building
and formation of the physical townscape. In addition, every
local authority has its own building ordinance, the content of
which is defined according to local needs.
In the current act, local authorities have extensive powers
to make independent decisions in land-use planning matters.
It is also possible to agree on joint master plans between
municipalities forming a homogenous urban area. These
joint master plans require the approval of the Ministry of
the Environment. Together with the increased co-operation
and integration of the municipalities, these kinds of plans are
becoming more common.
The Land Use and Building Act obliges municipalities
to adopt an open and interactive approach to planning. The
local planning process is aimed at facilitating the involvement
of all those concerned in planning: landowners, residents and
businesses in the area. In practice, this new interactive process
has been proven to lengthen the planning processes.
Building permits are approved by municipalities. A
building permit may be granted if the plan allows the type
and size of building that is being applied for. Special permits
to exceed or change the use of the planned space can also be
granted, although these are becoming increasingly difficult
to obtain.
17
“Sustainability and
urban structure issues
are discussed actively
with regards to
planning”
1 Gross rents are where the land rent, insurance, property taxes and most service expenses are paid by the owner. This means that management and
maintenance costs for both indoor and outdoor areas of the building are the owner’s responsibility. This is also the case with heating, water and waste
disposal. When it comes to cleaning and electricity, the owner is responsible only for the public areas of the building. Normally, tenants have their own
energy and cleaning agreements regarding the space they use. The owner is also responsible for repair and replacement costs if caused by normal wear
and tear.
The Finnish Property Market 2009

18
The Finnish Property Market 2009
Planning and building permit practices have recently
been discussed actively, and they have been criticised for
their lack of holistic approach to sustainability and urban
structure issues, among other things. The municipalities
compete with each other and use planning and land-use issues
for attracting taxpayers – both companies and residents –
and employers, which can sometimes impact their planning
decisions.
“Major retail projects in
the pipeline”
A recent study made by the Ministry of the Environment on
planned retail projects in Finland came up with a figure of
almost 200 planned projects of varying sizes with a combined
floor area of more than 5,200,000 sqm. This would mean an
increase of almost one-third compared with the current retail
floor space. Ten biggest projects account for one-third of the
total space. The big number and volume of these projects
is mainly an outcome of the economic upturn of the recent
years – and many of these plans are now being postponed or
cancelled. However, the result has raised an active discussion
on the structure and preferred locations of retail units and
the competition between municipalities. Another stury made
by the Ministry discussed the planning policies’ impact on
competition in the retail sector, and different players’ roles
in this.
3.4 Taxation in Finland
Taxes in Finland are levied by the central government,
municipalities and the church.
Individual taxpayers’ income can be divided into two
categories: earned income and capital gains. Income tax is
paid to the state at a progressive rate and to the municipalities
at a flat tax rate. Capital gains tax is fixed, and it currently
stands at 28%.
In Finland, resident individuals are taxed on their
worldwide income. Residents are taxed according to
progressive tax rates for national tax purposes and flat rates
for municipal ones 2 . The highest state tax rate is 31.5% of
earned income. Municipal tax rates vary between 16% and
21%, with 18 and 19% being the most common rates applied.
The maximum marginal income tax rate for individuals
depends on the municipality, and can rise to some 56%. In
addition to the actual taxes, there are some obligatory social
security contributions that are paid by taxpayers.
The past government took serious actions to ease
taxation on earned income, which are now continued by
the current government. However, the extensive supply
of services provided by the public sector together with
the ageing population increases the challenges on public
finances. In the current financial environment, decreasing
taxes from corporations and unemployed create pressures
on public finances and thus reduce possibilities for further
tax cuts.
In the Finnish tax system, the taxes most relevant for
property investment are property taxes, capital gains taxes
and transfer taxes.
2 For tax purposes, persons present in Finland for a period of less than six months are considered non-residents. They pay tax in Finland only on income
received from Finland. Finnish employers collect a 35% tax at source on wages, unless they have received a tax-at-source card instructing otherwise.
The earned income of persons staying in Finland for more than six months is taxed according to the same rates as that of permanent residents of Finland.
However, foreign “key employees” may qualify for a special tax at the flat rate of 35% during a 24-month period if they receive any Finnish-source
income for duties requiring special expertise. For these “key employees”, specific rules concerning work and salary levels do apply. See www.vero.fi

Tax on real property
Real property situated in Finland is subject to a real property
tax, which is based on the taxable value of the property.
The taxable value is defined by local tax authorities and is
generally about 70% of the market value of the property. The
revenue goes to the municipality where the real property is
situated. Land used in forestry or agriculture is exempt from
real property tax. Tax rates in different municipalities vary
between 0.5% and 1.0% of the taxable value per annum.
Tax rates for permanent residences are lower and vary
typically between 0.2% and 0.4%.
The Ministry of the Environment has just recently set
up a committee to study the possibilities to scale the real
property tax according to the energy efficiency of the
building. The aim is to encourage the owners of the existing
building stock to decrease the use of energy.
Capital gains taxes
Any investment income (dividends, net rental income and
capital gains) is taxed at a flat rate of 28%. Financial costs,
such as interest expenses that are directly related to the
investment income, are deductible.
Non-residents have a limited tax liability on capital gains
in Finland. If they receive dividends, interests or royalties
from Finland, the payer withholds a final source tax. For
dividends, a 28% tax rate is applied on the disbursement to
non-EU and non-tax-treaty countries. Finland has special tax
treaties with several countries, which normally set a lower
percentage for this tax. If the shares fall into the category of
direct investment, and the beneficiary company fulfils the
requirements of the Parent-Subsidiary Directive, no tax at
source will be levied.
Dividend income is partially double-taxed in Finland.
The tax consequences depend on the type of company
that pays the dividend – whether it is publicly listed or not
and also, for non-listed companies, on the net assets of the
company.
Transfer taxes
Tax on the transfer of real property is 4% of the transfer
price. When the transaction is made by buying shares in a
housing or real estate company, the transfer tax is 1.6% of
the transfer price 3 .
The transfer of securities is tax exempt if the transaction
takes place through the stock exchange or if both the buyer
and seller are non-residents. Shares in a real estate or housing
company are, nevertheless, always subject to transfer tax.
Transfer tax is usually imposed on the purchaser.
Corporate taxation
The corporate tax rate in Finland is 26% of corporate
profits.
Companies resident in Finland are liable to pay tax
on their worldwide income. Non-resident companies are
taxed on their income derived from Finland and all income
attributable to a permanent establishment in Finland. In
principle, a company from a non-tax-treaty country is liable
to tax, regardless of any permanent establishment.
The concept of income considered in corporate taxation
is rather broad because it covers several income types, such
as proceeds from selling merchandise, rental income, fees
and compensation for work or services and the profits from
investing financial assets. The expenses incurred in acquiring
or maintaining a business are deductible. According to
Finnish accounting rules, income and costs are registered in
the year of delivery (not payment) of goods or services.
Costs for acquiring fixed assets are deducted by
depreciation in taxation. The declining balance method
19
3 No tax is imposed if a person aged between 18 and 39 acquires his or her first owner-occupied permanent home. There is no transfer-tax liability if the
transfer is due to an inheritance, a donation or a division of property subject to matrimonial rights.
The Finnish Property Market 2009

20
The Finnish Property Market 2009
applies to the depreciation of buildings and other structures.
Depreciation for each building is calculated separately, with
a maximum rate varying from 4% up to 25% depending on
the type of building or structure.
Taxation of partnership structures
Taxation issues are of great importance in structuring real
estate fund structures. In real estate funds targeted for
domestic investors, partnership structures are most commonly
applied. In principle, partnership is a pass-through structure
from a taxation point of view, and income and capital gains are
taxed according to the investor’s own tax status.
The interpretation of a partnership’s tax status might
depend on the organisation and the type of activities of
the fund. Taxation of a partnership’s income generated by
property business can either be taxed according to income
taxation rules or as business income. Therefore, the tax
authorities should be consulted when the fund structure is
set up. However, Finnish partnership structures cannot be
beneficially applied for funds targeted at foreign investors.
Value added tax
Value added tax (VAT) is another tax that is relevant for
property investment. The standard VAT rate is 22%, which
is calculated on the total charge for goods and services.
There are some lower VAT rates for specific groups of goods
and services.
In Finland, it is optional for the property owner to apply
for VAT liability for collecting rents. The liability is granted
given that certain requirements are met concerning the
premises and tenants. The tenant must also be VAT liable. In
these cases, the VAT included in the rent is deductible from
the tenant’s final VAT. The property owner can deduct the
VAT included in the cost of services of the property.
Under Finnish VAT legislation, a taxable entity is
also entitled to deduct VAT included in the costs for the
construction of a new building as well as the restoration of
an existing building, provided that the relevant property
is intended for the use of a VAT taxable business activity.
This deduction will then be revised if the use of the property
entitling to a deduction decreases or if the ownership of the
property is transferred within a set revision period. In some
circumstances also an increase of taxable use could lead
to a revision. From the beginning of 2008, this revision is
proportionate to the lapse of time. This means that the full
amount of deducted VAT will not be subject to revision – as
was the case under the previous rules – but only a decreased
amount in accordance with and proportionate to the time
lapsed under the revision period. The revision period has
also been extended from a five year period to a ten year
period.
Corporate tax
rate
Capital gains tax
rate
Tax rate
26%
Note
28% Levied on profits from
selling real property,
buildings, securities such
as housing company
shares, shares in listed
companies, etc.
VAT 22% Special rates for food
(17%); medicine, books,
transportation, cultural
events, etc. (8%);
and newspapers and
periodicals (0%).
Tax on real
property
Transfer tax,
real property
Transfer tax,
securities
0.5–1.0% Depends on municipality
and type of property.
Taxable value defined
separately for the building
and the land.
4% The majority of
transactions are carried
out by selling the shares
of a (mutual) limited realestate
company, when the
transfer tax is 1.6%.
1.6% Transfer of securities is
tax-exempt if the transfer
takes place through
the stock exchange or
if both the seller and
the purchaser are nonresidents.
Shares in a
housing company are
always subject to transfer
tax.
Source: Finnish Tax Administration, www.vero.fi

4. Structure and players in
the Finnish property market
4.1 Ownership structure has changed
markedly
According to KTI estimates, the size of the Finnish
professional property investment market is ca. €36 billion.
The ownership structure of the market has changed markedly
during the past few years. Only a decade ago, the market was
dominated by domestic institutions such as pension funds, in
particular. They still remain major players in the market with
a share of some 38%, but their dominance has decreased
together with the emergence of foreign investors, domestic
funds and other players.
The structure of the Finnish property
investment market (36,5 mrd €)
Non-listed
property
companies 12 %
Listed property
companies 12 %
Charities and trusts 2 %
Others 1 %
Real estate
funds 8 %
International
investors 27 %
Institutional
investors 38 %
Source: KTI (Annual reports, query for investors, KTI estimates)
Institutional investors
Institutional investors have traditionally played a dominant
role in the Finnish property investment market. Pension
insurance companies and pension funds are the biggest
players in this group. At the end of 2008, the total property
investments of Finnish pension institutions amounted to €13.1
billion (€11.2 bn in 2007). This figure includes both direct
and indirect investments in Finland and internationally.
“Finnish pension funds
increase their property
portfolios”
The biggest property investors in Finland
(fair values of direct holdings at the end of 2008, EUR billions)
■ Institutional investors
■ Non-listed property companies/funds
■ Listed property companies
■ International investors
Varma Mutual Pension Insurance Company
Sponda
Ilmarinen Mutual Pension Insurance Company
VVO
Tapiola Group and Tapiola Funds’
Local Government Pension Institution
Citycon
Aberdeen’s funds' investments in Finland
Sato
CapMan Real Estate
RBS Nordisk Renting
Etera Mutual Pension Insurance Company
NIAM
Pension Fennia
Avara Suomi Ltd
Technopolis
Wereldhave Finland
OP Bank Group´s pension and life funds
Nordea Life Assurance Finland Ltd
Protego Real Estate Investors
Suomi Mutual
Genesta Property Nordic
Bronda Properties
Norgani Hotels
Veritas Pension Insurance
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5
Source: Annual Reports, Query for Investors, Press Releases
21
The Finnish Property Market 2009

Real estate investments’ proportion of the total investment
portfolios varies markedly between funds, and is currently ca.
12.5% on average for all Finnish pension institutions. During
the past year, their proportion has increased markedly – from
7.9% at the end of 2007 – mainly because of the rapid decrease
of the values of the equity portfolios, but also because of the
increase of property portfolios. Pension insurance companies,
which are the biggest players in the market, have an average
proportion of property investments of 9.2% of the total
portfolio (7.7% in the end of 2007).
Finnish pension institutions’ equities and bond portfolios
tend to be internationally well diversified, whereas
diversification of property investments has just started in the
past few years. Therefore, the weight of property is substantial
– up to one third - in their domestic investment portfolios.
Up until very recently, the property portfolios of pension
insurance companies consisted solely of domestic investments
in direct property. At the end of 2008, the value of their
foreign real estate investments was €1.7 billion, representing
some 2.5% of their foreign investment portfolios. Foreign
investments are made totally through indirect vehicles, mainly
to European non-listed property funds.
Varma and Ilmarinen are the two biggest pension insurance
companies in Finland, with total investment portfolios of ca.
€28 and €25 billion, respectively. As of the second quarter
of 2008, real estate investments account for 12% of Varma’s
total portfolio, whereas the proportion for Ilmarinen is 9.4%.
Ilmarinen, in particular, has emphasised indirect investment
both in domestic and foreign property portfolios during the
past few years. Varma has been active in increasing its portfolio
through new development.
During the past few years, many Finnish institutions
have increased their indirect property holdings both in their
domestic and foreign portfolios. Domestic pension institutions
are major investors in all major Finnish non-listed property
funds. Access to debt capital and third-party management
have been their major motivations for indirect holdings.
However, the tightening of the financial market might
increase the relative attractiveness of direct investments
again from the pension funds’ point of view.
“Pension funds are
major investors in
all Finnish non-listed
property funds”
In terms of the management of the institutions’ property
portfolios, there have been major changes in recent
years. In the early years of the decade, many institutions
outsourced their traditionally large in-house management
units to service providers. Since that, some of them have
taken back and/or tightened control on some of these
functions, especially those closest to their client interface,
such as in tenant relationships and property management.
Some of the asset and property management service deals
have also been re-negotiated with changes in service focus
and/or service providers. Portfolio management functions
have always been kept in-house, as Finnish legislation
requires the investment decisions to be made by institutions
themselves.
Some Finnish institutions, for instance, Pohjola and
Tapiola, have founded separate fund and asset management
companies to manage their property investment portfolios.
These companies are wholly-owned subsidiaries of these
institutions. They also offer management services to other
clients, and have launched unlisted funds.
22
Portfolio allocations of major pension
insurance companies, 30.6.2008
The Finnish Property Market 2009
%
100
80
60
40
20
0
■ Loans receivables ■ Bonds ■ Other money market instruments and deposits
■ Shares ■ Real estate investments ■ Other investments
5 908 7 757 25 183 28 575 1 848 22 879 5 676 M
Pension
Fennia
Pension
Tapiola
Ilmarinen Varma Pension
Veritas
Local
Government
Pension
Institution
Etera
Source: The Finnish Pension Alliance TELA

Listed sector
There are currently four recognised property companies
listed on the main list of the OMX Nordic Exchange in
Helsinki: Citycon, Julius Tallberg Kiinteistöt, Sponda and
Technopolis. At the end of 2008, their combined market
value stood at only €900 million, which represents a decrease
of some 54% compared with the end of 2007.
As everywhere else, the share performance of the Finnish
listed property companies in 2008 was very poor. The OMX
Property Investment Sector Index fell by some 60% during
2008, while the overall OMX Helsinki Index decreased
slightly less, by 53%. From its peak in early 2007, the OMX
Property Index has decreased by more than 70%. The shares
of listed companies are currently trading at a clear discount
compared to their net asset value.
Measured by the size of property portfolio, Sponda is
the biggest of the Finnish listed property companies with a
portfolio of €2.9 billion (€2.5 bn at the end of 2007) in office,
retail and logistics properties. During the past few years,
Sponda has expanded its business in the Russian market, and
its portfolio there currently comprises some €260 million
worth of properties in Moscow and St Petersburg regions. In
Finland, Sponda’s portfolio has recently increased through
completion of development of some major investments,
such as in the new Vuosaari harbour area, as well as by some
new acquisitions. Sponda’s current development activities
include a shopping centre and office property in the centre
of Helsinki. Sponda is also a co-investor and/or manager of
four unlisted property funds.
“Market capitalisation
of the listed property
companies decreased
dramatically in 2008”
OMX Helsinki CAP –index, OMX Helsinki
Real Estate -index (index, 6/2000=100)
Market capitalisations of the Finnish
listed property companies
23
500
400
OMX Helsinki Real Estate -index
300
200
100
OMX Helsinki CAP -index
0
01-2000
07-2000
01-2001
07-2001
01-2002
07-2002
01-2003
07-2003
01-2004
07-2004
01-2005
07-2005
01-2006
07-2006
01-2007
07-2007
01-2008
07-2008
01-2009
Source: OMX Helsinki
EUR million
1000
800
600
400
200
0
Sponda Citycon Technopolis Julius Interavanti
Tallberg
■ 2005 ■ 2006 ■ 2007 ■ 2008 Kiinteistöt
Source: OMX Exchanges
The Finnish Property Market 2009

24
The Finnish Property Market 2009
Citycon is a property company specialising in shopping
centres and retail properties. Its portfolio comprised some
€2 billion worth of properties at the end of 2008. This
represents a decrease of 8.7% during 2008, mainly because
of the increase in valuation yields. Of its 33 shopping
centres, 22 are located in Finland, eight in Sweden and three
in the Baltic countries. During 2008, Citycon completed
an expansion of shopping centre Trio
in Lahti. It is also carrying out major
expansion projects of the shopping
centres Liljeholmstorget in Stockholm
and Rocca al Mare in Tallinn.
Technopolis, a company that
concentrates on technology centres,
continued its expansion in 2008 both
by acquisitions and new development.
Of the major listed companies,
Technopolis has been hit the least by
the financial crisis in terms of share
price decline. By the end of 2008, the fair value of its
property portfolio increased to €594 million from €469 at
the end of 2007. Technopolis is currently one of the biggest
technology centre space and service
providers in Europe.
Julius Tallberg Kiinteistöt Oy is a
relatively small listed company whose
ownership is dominated by the founding
family and management. It has recently
sold some its property holdings. The
fair value of its portfolio currently
amounts to some €100 million. It
has, however, increased its indirect property holdings. The
company currently owns some 4% of the shares of Sponda.
The Finnish property sector’s efforts to create a REITtype
property investment vehicle have now been continuing
for more than a decade. During 2008, the Ministry of Finance
prepared a proposal for a listable property investment
company model; however, only granting tax-transparency
for funds investing in residential properties. This legislation
is currently being discussed by the parliament, with the
objective of new legislation coming into force in mid-2009.
The government’s aim is to boost the construction of rental
apartments in the Helsinki region, in particular. The need
for a boost in the construction sector has become even more
apparent because of the rapidly declining employment.
However, the property sector is continuing the
discussions with the Ministry and the parliament in order to
both correct some defects of the residential fund legislation
and also to continue the preparation of a wider, real “REITframework”
including also commercial properties – and,
hopefully also infrastructure investments.
“New legislation grants
tax transparency
for listed real estate
investment companies
investing in residential
properties”
“VVO, Sato and Avara
are major residential
property owners”
Non-listed property companies
The biggest non-listed Finnish property companies VVO,
Sato and Avara (previously YH) are all major players in the
rental residential markets. They all hold significant subsidised
residential portfolios, as well as major market portfolios.
All of these companies have also been major developers
in the housing market. The current
economic down-turn has, however,
decreased their business opportunities
in residential development.
VVO’s portfolio currently consists
of ca. 38,000 rental residential
apartments mainly located in larger
Finnish cities and municipalities. Its
largest owners comprise Finland’s two
largest pension insurance companies,
Varma and Ilmarinen.
Sato Corporation’s current
holdings comprise ca. 22,000 apartments. Sato’s main
owners include major institutions, such as pension insurance
companies Varma – with almost 40% ownership – together
with Ilmarinen and life fund Suomi.
Sato is also in its early phases of
expansion to the Russian markets.
The third major residential property
owner, Avara, together with its group
companies, owns and manages almost
20,000 rental and right-of-residence
apartments. The share ownership of
Avara was discussed widely during
2008, when four Finnish municipalities sold their shares
and several buyers attempted to take over the company.
The current owners and management finally succeeded in
balancing the ownership; currently, the biggest owner of the
company is Pension Fennia.
Non-listed property companies investing in commercial
property include some major foreign investors who have
established an office in Finland – or bought a Finnish
company with an existing organisation. These include IVG
Polar, Wereldhave, and Norgani hotels. IVG Polar is a Finnish
subsidiary of the German IVG Group, and the company’s
holdings comprise mainly office properties in the Helsinki
metropolitan area. The Dutch Wereldhave is the owner
of the Itäkeskus shopping centre, Stockmann department
store in Tapiola and some other smaller properties. Norgani
Hotels is a subsidiary of Norwegian Property, and it owns 15
hotel properties in Finland, which it bought from Kapiteeli
in 2006.
New property investment companies have also emerged
through newly established companies typically acting as
co-investors for foreign investors. These companies have
varying structures; some are majority owned by their foreign
partners, whereas some are held by Finnish entrepreneur-like
managers.

Real estate fund management companies
The market for non-listed property funds started to emerge
in Finland in 2005, when private equity firm CapMan
launched its first property fund. Currently, there are almost
ten significant managers offering non-listed funds for mainly
domestic institutional investors. New funds are being
planned also currently despite of the economic downturn.
Most of the Finnish non-listed property funds are
structured as partnerships. Taxation of partnerships is
favourable from a domestic investor’s point of view, as they
are pass-through entities, provided that certain conditions
are met. Through investments in these funds, institutions can
make use of debt capital, which is an important motivation
for these investments, together with the possibility for thirdparty
management, and still retain tax transparency.
CapMan, a listed private equity fund management
company, currently manages three property funds. CapMan
Real Estate I invests in commercial properties in the greater
Helsinki area, whereas CapMan RE II invests in development
properties, mainly outside the Helsinki metropolitan area.
In the beginning of 2008, CapMan published the biggest
transaction of the year by acquiring a hotel portfolio worth
€805 million from Northern European Properties and set up
CapMan Hotels RE fund. All CapMan funds have Finnish
institutions as equity investors.
Aberdeen Property Investors have increased their fund
management business during the last few years. They have
launched three Finnish funds: Aberdeen Property Fund
Finland I (APFF); Aberdeen Real Estate Fund Finland I
(AREFF); and Shopping Centre LP, (Kauppakeskuskiinteistöt
FEA Ky). AREFF has three pension funds as investors, two
of which are foreign, Danish ATP and Dutch ABP, together
with Ilmarinen. In APFF and FEA, the main investors are
domestic institutions. Aberdeen also manages its foreign
funds’ investments in Finland. Aberdeen’s own funds
currently comprise some €1.4 billion worth of assets.
Icecapital Real Estate Management manages one Finnish
fund, Icecapital Housing Fund I, investing in residential
properties in Finland. In late 2007, Icacapital launched another
fund called Icecapital Saint Petersburg Residential Fund I Ky,
which invested in some 300 apartments in St Petersburg.
Auratum Real Estate Oy (AKR) manages a couple of
relatively small property funds. It was also involved in a
recently launched fund “Quorum Asuntoturva”, which invested
in some 500 individual residential apartments, together with
Öhman Group and residential agency Vuokraturva. The
investors in AKR funds include domestic institutions and high
net-worth individuals.
Some of the traditional Finnish property investors have
also launched property funds during the past few years – with
varying strategies and client target groups. These investors
include Pohjola, Tapiola group and Sponda, as well as a joint
venture between Varma and Nordea Life.
“New funds emerge
despite of the
downturn”
“The non-listed fund
market has increased
rapidly”
25
The Finnish Property Market 2009

The Finnish fund managers concentrating in the Baltic,
Russian and other Eastern European property markets include
Evli Property Investment Oy and Vicus Capital Advisors Oy.
26
Pohjola Property Management ltd, part of the OP Bank
Group, is a company originally founded for the management
of property investments of insurance company Pohjola
and life fund Suomi. It currently also manages a non-listed
fund called Real Estate Fund Finland I, which has 15 smaller
domestic institutions as investors.
Tapiola Group recently transferred all its property asset
management functions into a separate management company,
Kiinteistö Tapiola Oy (Property Tapiola ltd). Besides managing
the Group’s properties, the company also offers management
services to other investors. The company has also launched
two property funds so far, with Tapiola Group’s companies as
investors in these funds.
Sponda has also launched two property funds, both
investing in logistics properties, and both with domestic
institutions as investors. Sponda is also a co-investor and
manager of a fund set up together with JER Europe Property
Fund II, and manages a portfolio it sold to Whitehall and
NIAM in early 2007.
Another fund manager in the Finnish market is NV
Kiinteistösijoitus Oy, which is a joint venture by pension
fund Varma, Nordea Life Insurance and Juhola Property
Management. The company manages a fund called NV
Kiinteistörahasto I (NV Property fund I).
The latest newcomer in the Finnish fund management
market place is Exilion Capital Oy. The management company
was set up by five Finnish institutions in 2007.
International investors
The internationalisation of the Finnish property market
started as late as in 2002, with 2006 and 2007 as the most
active years of foreign investment. There are currently some
70 foreign property investors in Finland. The number of
new market entries has decreased with the current economic
turbulence, with only a few new investors entering the
market during 2008.
In total, the foreign investors have acquired some €12
billion worth of Finnish properties. The foreign investors
currently form a diversified group of players with varying
strategies and management practices. Some of them have
established their own offices in Finland (e.g. IVG, NIAM,
Valad, Kenmore), whereas some have Finnish co-investors
as local representatives, with companies such as Genesta,
HGR or Sponda acting as their Finnish counterparts. Many
major investors and fund managers, however, rely on more
traditional asset management approach, and co-operate with
local managers.
“There are more than
70 foreign property
investors in Finland”
Starting from late 2007 and early 2008, the profile of foreign
investors started to change, and most highly leveraged
opportunistic investors were replaced by more conservative
investors, e.g. German funds. Towards the end of 2008,
the volume of transactions decreased rapidly. In 2008,
international investors accounted for some 45% of the total
transactions volume. The biggest acquisitions were made
during the first quarter of 2008 by Protego Real Estate
The Finnish Property Market 2009
TOP 10 foreign investors in Finland
RBS Nordisk Renting
NIAM
Wereldhave Finland
Protego Real Estate Investors
Genesta Property Nordic
I/S EjendomsInvest
Bronda Properties
Norgani Hotels
ING REIM
IVG Polar Ltd
0,0 0,2 0,4 0,6 0,8 1,0 1,2
EUR billion
Source: Annual Reports, Query for Investors, Press Releases

Purchases and sales of foreign investors
MEUR
3500
3000
2500
2000
1500
1000
500
■ Purchases ■ Sales
0
2002 2003 2004 2005 2006 2007 2008
(Kamppi shopping centre) and CIG Real Estate (40% of Iso
Omena shopping centre).
Foreign investors also increased their proportion in
the sellers’ side in 2008, and accounted for ca. 45% of all
sales, as well. The first significant exits were seen in 2007,
when, for example, Doughty Hanson realised its investments
in Finland. In 2008, the biggest sales by foreign investors
included the sales of the over €800 million hotel portfolio
by Northern European Properties, as well as the transaction
of the Kamppi shopping centre by UK-based Boultbee.
Public sector
Public sector entities remain a very important player
in the Finnish property market. The Finnish state has
concentrated most of its property holdings in a governmentowned
enterprise called Senate Properties, whose task is to
develop, manage and let the state’s property holdings. It also
sells or redevelops the properties no longer needed by state
authorities. Senate is by far the largest property owner in
Finland, with a diversified portfolio worth about €5.6 billion
consisting of mainly offices, university buildings, prisons and
cultural buildings, as well as properties used by the Finnish
Army. From the beginning of 2010, the university properties
will be transferred to three limited companies, in which
Senate will be a minority shareholder, and the universities
will own the majority. This change has to do with a wider
legislative reform increasing the autonomy of the Finnish
universities.
“Ownership of the
Finnish university
properties will be
reorganised”
Source: KTI
Finnish municipalities are typically highly significant
players in regional markets and own the majority of
properties required for public administration and service
provision, such as offices, schools, nurseries and healthcare
centres, as well as cultural buildings. It is estimated that
municipalities currently own ca. 90% of all premises needed
for their service provision. As an end result, this makes the
city of Helsinki one of the largest property owners in the
entire country. Through joint municipal organisations, public
sector entities also own and manage hundreds of hospital
properties managed by 20 special healthcare districts.
Real estate management has gone through considerable
development in most municipalities in recent years. All major
municipalities have centralised their real estate management
functions and tend to apply a market-oriented management
policy – for instance, by charging internal rents from the
occupiers.
In recent years, there have been active discussions
about applying new approaches to the strategic real estate
management of Finnish municipalities. New forms of
ownership, including public–private partnership models and
sale-and-leaseback type of solutions, have been discussed in
order to boost the efficiency of property finance, occupation
and service provision. The most significant new concepts so
far have been applied by the city of Espoo, which has applied
new approaches to some schools and health care properties, in
particular. Interest has also increased in other cities in recent
years, although not many significant deals have been made
so far. Increased pressures are, however, emerging together
with the ageing of the population, resulting in an increased
need for services. The ageing of municipal properties also
requires significant new investments. The current economic
downturn also affects the municipalities by decreasing their
tax income and thus increasing pressures for more efficient
and productive practices.
Corporations
Traditionally, property occupiers have played a
significant role in the Finnish property market through
their ownership of large property portfolios. The majority
of commercial property stock has traditionally been owneroccupied.
The proportion of owner-occupancy is currently
estimated to be somewhere below 60% and is thus close to
the average level found throughout Europe.
The broadening of the property investment and finance
market has opened up new possibilities for financing and
restructuring of corporate property ownership. Some
companies have actively reduced their property portfolios.
One of the most significant examples in this sense is Nordea
Bank, who in just a few years time span, has transformed
itself from being one of the biggest property owners in the
country to a retail bank operating only in rented facilities.
During 2006-2008, Finnish corporations sold worth some
27
The Finnish Property Market 2009

28
The Finnish Property Market 2009
€3.0 billion of properties. In most cases, the companies
remained as tenants in these buildings by relatively long
leases.
SOK and Kesko, the two major Finnish retail chains,
are active players in the property market. They emphasise
the role of property development in their business strategy.
They also want to maintain ownership and control over their
properties in strategic locations and properties. In 2008, the
S-Group even increased its holdings by using its repurchase
option and buying the shopping centre Mylly property from
RBS Nordisk Renting.
Industrial companies still typically own their production
properties. For office properties, more varied ownership and
finance strategies are applied.
Companies using dominantly office or light
production space, such as professional services, media and
telecommunications companies, are increasingly emphasising
sophisticated workplace strategies. International companies
are also increasingly pursuing these strategies globally. These
strategies emphasise the space usage and occupier view, and
sometimes even handle the real estate issues separately.
These strategies have an impact on their preferences for
ownership and finance issues as well, with many of them
pursuing increased flexibility in leasing solutions.
4.2 Real estate service sector
In parallel with the development of the investment and
occupier market, the Finnish real estate service sector has
undergone a phase of rapid development during recent
years. Currently, a wide variety of management, advisory,
transaction and brokerage services are available, facilitating
the entry of new investors and occupiers, as well as enabling
the adoption of different management strategies.
Asset and property management
services
Professional asset and property management services have
been widely available in the Finnish property market since
the early 2000s. Before that, all major investors had large
in-house real estate management teams and managed the
tenant relationships themselves. The main drivers behind the
development of the supply of management services include
large investors’ willingness to reorganise their management
activities as well as foreign investors’ market entry.
Currently, the major players in the Finnish asset and
property management service sector include both traditional
Finnish players (e.g. Ovenia, Realia) as well as major
international companies (e.g. Aberdeen, Newsec). Some
managers concentrate on only management services, whereas
some of them also offer other services, such as advisory and
tax consultancy. Some are also currently reorganising their
business activities.
Aberdeen Property Investors Finland Oy currently
emphasises the management of the group’s own funds, but it
also offers management services to other clients. It specialises
in shopping centre management, among other things.
Newsec is another major player in the asset and property
management sector. Newsec offers a wide spectrum of real
estate management, advisory and analysis services for both
property investors and corporations. Newsec reorganised its
business activities in late 2008 by dividing its management
services and advisory services into two separate companies,
Newsec Management and Newsec Advice Oy.
Another major manager in Finland is Ovenia Oy, which
concentrates on property management and advisory services.
Ovenia’s main owners include Sponda, Varma and Sampo, as
well as Ilmarinens’ Suomi Fund. Ovenia’s major clients include
its owners together with other major property investors
and occupiers. The volume of Ovenia’s business increased
markedly in the beginning of 2009, when the management of
Ilmarinen’s property portfolio was transferred to Ovenia.
Realia Management is a domestic major player in the real
estate management market. The company is part of the Realia
Group, which was formed in 2006 through the merger of
Huoneistokeskus and SKV, thus becoming a strong player in
also commercial agency and investment, valuation advisory
and property management. Realia Management is the
Finnish partner of CB Richard Ellis in commercial property
brokerage and valuation services.
YIT, the major Finnish construction company, sold its
management service business in 2008 to Corbel Oy, the
major owner of which is private equity firm Sentica Partners.
Corbel became one of the biggest Finnish management
companies, currently employing a staff of 80.
Realprojekti, a subsidiary of CapMan Real Estate,
manages the company’s own funds, but is also known
as a specialist shopping centre manager. It also offers

development consultancy services, especially for retail and
shopping centre projects.
Other domestic players offering asset and property
management services include KJ-Kiinteistöjohto, REIM
Group and Kiinteistömanagement J. Juhola Oy. All of these
companies have their own specific competitive strengths
based on their backgrounds and client relationships.
The market for facilities management services has
increased during the past few years. The growth has been
fuelled by a couple of major outsourcing decisions by large
occupiers. The provision of FM services has mainly emerged
from traditional property management, cleaning or catering
companies, which have extended their service provision
towards more occupier-oriented services. Some of the major
managers also offer facilities management services. Some
of the major service providers in the facilities management
service market are of Finnish origin (e.g. Lassila & Tikanoja,
SOL) while others are part of an international company (e.g.
ISS, Johnson Controls). The biggest player in the property
service market is ISS Services, which currently employs
some 14,000 people in Finland.
Advisory, valuation and transaction
services
The supply of different types of advisory services increased
rapidly in recent years because of the increased liquidity of
the market and the market entry of new players. Currently,
many of these companies are adjusting their activities to
the slowing market. The volume of transaction services,
in particular – both in terms of turnover and need for
personnel – is expected to decrease. However, despite the
significant increase during the past few years, the sector did
not grow as abundantly as in many other markets. The need
for downscaling is therefore marginal in most cases. On the
other hand, the need for some other professional services,
e.g. valuation, leasing and analysis services, is expected to
balance the need for adjustment in the sector.
Advisory services are offered by both management
companies and by specialist service providers. The rapid
development of the market has encouraged new companies
to enter the market. Nowadays a colourful mixture of small
domestic entrepreneurial firms and big global companies can
be found.
Of the major management companies, Newsec, Ovenia
and Realia Group, also offer valuation, advisory and
transaction services. Catella Property Group is a major
player in valuation, brokerage and market research services
in the Finnish commercial property market. Both Catella
and Newsec have recently divided their management and
advisory services into two separate companies.
DTZ has been present in the Finnish market since
2004, and mainly concentrates on valuation, agency and
workplace consultancy services. Cushman & Wakefield has
also established its position in Finland by setting up an office
– albeit, a relatively small one – after a couple of years of cooperation
agreements with Finnish partners. CB Richard Ellis
is represented in Finland through a co-operation agreement
with Realia Group.
Some of the major international firms have only been
present in the Finnish market for a short period of time. Jones
Lang LaSalle is currently one of the major players in the
transactions and leasing services market. The company was
set up by the acquisition of the operations of GVA Finland
in April 2007 after having explored the market for several
years. Colliers International also opened its office in Finland
in 2007 and merged with Finnish advisory and agency firm
Yritysresurssit. One example of the domestic transaction and
leasing service companies is Tuloskiinteistöt Oy.
In addition to the actual transaction services firms,
corporate finance type of services are being offered by some,
mainly domestic companies including Advium, Aventum and
Catella. Moreover, the global business consultancy firms,
such as KPMG and PricewaterhouseCoopers, also offer real
estate specific services in Finland.
How do you expect your turnover in the following services
to develop within the next year?
29
Valuation
Advice in transaction /
corporate finance
Property sales
Leasing / brokerage
Market and
portfolio analysis
Tenant representation
Other
0 20 40 60 80 100
%
■ Decreases clearly ■ Decreases slightly ■ Remains unchanged ■ Increases slightly ■ Increases clearly
The Finnish Property Market 2009
Source: Locus barometer survey / KTI

30
The Finnish Property Market 2009
Financing services
Property financing has traditionally been organised via
Finnish banks. Major Finnish banks include Nordea, OP
Bank Group (Osuuspankkiryhmä) and Sampo Bank, which is
currently a part of Danske Bank. In the past, all these banks
had an extensive interest in the property market via their
significant property holdings. Currently, only OP Bank
Group has significant property ownership.
During the past few years, several new players also entered
the property finance market, including some international
specialised real estate finance banks, e.g. Eurohypo, HSH
Nordbank and Aareal Bank. SEB Merchant Banking and the
Royal Bank of Scotland also have become significant players
in this market. Together with the increasing volumes and
market entry of new players, the range and variety of financial
products also increased rapidly. However, the current crisis
has dramatically slowed financing, the availability of which
is currently extremely tight. The first player who reacted to
the changing market circumstances was HSH Nordbank,
who closed its Finnish office in late 2008.
Property development
A typical feature of the Finnish property market is that
there are not many players specialising solely in property
development. Active players in the property development
field include construction companies, property companies
and owner-occupiers. Property development market
practices have also evolved thanks to the upswing and rapid
development of the market. However, the rapid slowdown of
the market and the tightened financing requirements have
narrowed business opportunities in property development
and increased the cautiousness of the players.
Major construction companies involved in property
development include NCC, Skanska and YIT, who have all
been very active in this field in the past few years, and have
co-operated with both domestic and international investors.
Other examples of domestic construction companies also
active in property development include SRV, Palmberg and
Hartela.
Some owner-occupiers – large retailers SOK and Kesko,
in particular – are significant property developers. They
typically have strong bargaining power with local authorities
in planning issues because they both increase employment
and bring tax revenues to municipalities.
Institutional investors have traditionally had quite
conservative strategies concerning property development
and have stipulated, for example, stringent requirements for
pre-letting. During the upturn of the market, some of them,
however, tightened their co-operation with developers and
committed themselves at earlier stages of the project in order
to get access to the best assets.
Finnish property investment companies have also
increased their development activities in recent years.
Sponda, Citycon and Technopolis are all very active players
in property development in their own core areas. In the
residential market, a significant proportion of Sato and VVO’s
turnover was acquired through property development, for
instance, by developing residential apartments for sale.
Development consultants have increased their role in
the market in recent years. In retail development, the role of
consultants is often significant in creating the concept and
co-operation among all parties. Realprojekti, a subsidiary of
CapMan, is one of the major players in this field, specialising
in retail properties
4.3 Property investment market in 2009:
increased uncertainty
The volume of major transactions amounted to some €4
billion in 2008. This represents a decline of about 32%
compared with the previous year’s record figure. The year
started briskly, with the first quarter’s volume exceeding €2.2
billion thanks to a few significant transactions. Towards the
end of the year, however, the transactions activity declined
drastically, as the outlook for the economy worsened and
financial markets tightened. In the three last quarters of the
year, the volume only amounted to €600, €700 and €500
million, respectively.
“Transactions volume
decreased by 32% in
2008”
Transaction yields increased in late 2007 already. By the
end of 2008, prime yields increased by some 0.5 percentage
points from their lowest level in late 2007. The increased
uncertainty has affected especially non-prime markets
and assets, where the increases in yields have been more
significant than in core assets. However, because of the
sluggish transactions market, there is not much market
evidence available on the real yield levels. In late 2008, the
real estate market professionals expected further increases of
some 0.5 percentage points in prime yields within the next
year. Since that, declining economic forecasts have increased
uncertainty further.
Foreign investors’ share of the total transactions volume
decreased to 45% in 2008. The biggest acquisitions of
foreign investors were made in the first quarter, with their
investment volume exceeding €1 billion. Foreign investors
were seen also in the seller’s side in transactions, with their
share amounting to 45% of the volume.
The transactions market is expected to remain relatively
quiet in 2009. Investors with equity, such as pension funds,
are in the strongest position in the market due to the
tight availability of debt finance. Pension funds’ targeted

allocations would also typically enable further property
investments. However, many of them seem to be waiting for
further price corrections.
There have also been discussions about the increased
likelihood of distressed sales of the most leveraged portfolios
and assets to take place during 2009. However, no such
transactions have been carried out so far. Banks commonly
assure that they remain patient as long as the cash flow is
sufficient to cover the interests.
Transactions volume in the Finnish
property market
1000 MEUR
6
5
4
3
“Year 2009 has started
quietly”
Characteristics of the transactions and transacted assets
have also been affected by the downturn. Investors’ interest
is targeted towards high quality assets with secure cash
flows. The focus has shifted from large portfolios to single
asset deals, and the average size of transactions has thus
decreased. Transactions tend also take longer time, with
parties negotiating and researching the assets more carefully
than in the most liquid times. Due to the limited number of
potential bidders, transactions are currently typically done
as off-market deals.
Total return on the Finnish property market decreased
to 5.1% in 2008, comprising a decline of values of 1.2% and a
net income of 6.4%. The previous years’ strong performance
(11.3%) was disrupted by increase in valuation yields
especially. However, as the economic turbulence affected
all asset classes, the relative performance of property
investments remained strong.
2
1
0
2001 2002 2003 2004 2005 2006 2007 2008
Preliminary
■ Domestic buyer ■ International buyer
Prime property yields in Helsinki CBD
%
8
7
6
5
residential
office
retail
Source: KTI
05-1995
09-1995
05-1996
09-1996
05-1997
09-1997
05-1998
09-1998
05-1999
09-1999
05-2000
09-2000
05-2001
09-2001
05-2002
09-2002
05-2003
09-2003
05-2004
09-2004
05-2005
09-2005
05-2006
09-2006
05-2007
09-2007
05-2008
09-2008
(09-2009)
Source: KTI’s barometre survey
TOP 10 property transactions in 2008
Property Company / Portfolio /
Building
Type of
use
Hotel portfolio, 39 properties hotel Q1 /
2008
Kamppi Shopping Centre retail Q1 /
2008
Portfolio of 30 properties office Q1 /
2008
Portfolio of 21 properties
Iso Omena Shopping Centre,
40 %
Merikortteli, Pursimiehenkatu
29-31
retail,
office
Time Location Price
MEUR
Q4 /
2008
retail Q1 /
2008
office Q1 /
2008
Technology Center Teknia Ltd. office Q1 /
2008
Pasaati Shopping Centre, Keskuskatu
10
retail Q3 /
2008
Portfolio of 23 properties retail Q3 /
2008
Kluuvikatu 3 (K3)
office,
retail
Q3 /
2008
Purchaser
Seller
many 805 CapMan Hotels RE Ky Northern European
Properties Ltd (NEPR)
Helsinki 452,5 Nordic Retail Fund managed by Boultbee
Protego Real Estate Investors
many 216 The Carlyle Group Tapiola Group
many 200 n/a Lemminkäinen Group
Espoo 131,6 GIC Real Estate Citycon
Helsinki 70,5 ING Real Estate A joint venture between
Merrill Lynch, O´Connor
Capital Partners and
Genesta Property Nordic.
Kuopio 67,3 Technopolis Plc City of Kuopio, Municipality
of Siilinjärvi
Kotka 67 Kauppakeskuskiinteistöt FEA Ky Etera, Apteekkien
Eläkekassa and WH2005/
NIAM III East Holding Oy
many 55,6 Aberdeen Property Fund Finland
I Ky
Helsinki 50 Deka Immobilien Investment
GmbH
Kesko Group, Kesko
Pension Fund and Valluga-
Sijoitus Oy
Crownstone Luxembourg
S.A.R.L.
31
The Finnish Property Market 2009
Source: KTI

5. Property sectors – market
structure and practices
Total returns by property sector
1998-2008
All property sectors are suffering from the current economic
downturn. Total returns for all main property sectors in 2008
were clearly lower than in the previous year. Capital growth
turned negative for all commercial property types due to the
increase of valuation yields. Net income remained relatively
stable thanks to the healthy development of both occupation
rates and rental levels.
%
20
15
10
All property
Industrial
Office Retail
Residential
5.1 The office market: increasing supply,
softening demand
5
Stock
The total stock of office space in the main Finnish cities
amounts to some 10–11 million square metres. Of this,
almost eight million square metres is located in the Helsinki
metropolitan area, the dominance of which in the Finnish
commercial property market is greater than in many other
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: KTI
European centres of the same size. Other growth centres, the
Tampere and Turku regions, in particular, also accommodate
significant office stocks.
Commercial property stock in major Finnish cities,
31.12.2007
Helsinki Metropolitan area
Helsinki
Espoo
Vantaa
Tampere
Turku
Oulu
Kuopio
Jyväskylä
■ Retail ■ Office ■ Industrial and warehouse
32
Office Stock – European Centres,
Q4/2008
0 2000000 4000000 6000000 8000000 10000000
sqm
Source: Statistics Finland
The Finnish Property Market 2009
Paris
London
Berlin
Madrid
Brussels
Milan
Stockholm
Moscow
Oslo
Helsinki*
Amsterdam
Dublin
Warsaw
Budapest
0 10000 20000 30000 40000 50000
*Q4/2007
1000 sqm
Source: Jones Lang LaSalle, Statistics Finland (Helsinki)

Main office areas in the Helsinki metropolitan area
Players
Offices have typically played a dominant role in Finnish
institutional property portfolios. In the KTI Index, for
example, offices currently represent some 45% of the total
volume.
The largest proportion of investable office stock is multitenant
office buildings, typically located in city centres
and specific office areas. The second category is singletenant
buildings used typically for company headquarters.
The third office category is business park type properties
located by good traffic connections. This category has been
increasing quite rapidly in recent years. Large institutions
tend to invest in all these office property types. During the
past few years, foreign investors have invested in all these
office categories, as well.
The biggest investors in the office sector include
large Finnish institutions, e.g. Varma and Ilmarinen; listed
companies Sponda and Technopolis, as well as some
specialised non-listed domestic funds; e.g. CapMan’s and
Aberdeen’s funds. Foreign investors involved in recent office
transactions include some US funds, e.g. Carlyle Group
and Pembroke Real Estate, who both acquired significant
office portfolios in 2008 – as well as some German funds,
e.g. DEKA and SEB, who have been involved in single asset
transactions, in particular.
Rental practices
Rental practices in the office market are varied. The
terms of rental agreements differ significantly between
different office sub-categories.
In multi-tenant office buildings, rents are typically gross
and an indefinite lease term is commonly applied. Active
market players, such as property companies and some pension
funds, favour gross rents. In this kind of agreements, effective
property management is crucial, as the cost risk is carried
by the investor. Measured by the number of agreements,
gross rental agreements comprise almost 90% of the ca.
25,000 office contracts included in KTI’s rental database.
Measured by value of rental cash flow, their proportion is
about 75%. Typical operating costs for office properties
vary between €2.50 and €3.50 per square metre, depending
on the location and characteristics of the building. As such,
they might represent a significant proportion of the gross
cash flow. In an indefinite lease agreement, both parties
can terminate the contact within the agreed notice period,
which can be e.g. three, six or 12 months.
Fixed lease terms are commonly applied in larger office
units. In single-tenant buildings, the terms are usually quite
long, between ten and 20 years. In these agreements, net
rents are commonly applied.
Business parks compete with flexible agreements and
extensive service supply. Service options comprise typical
business services, such as reception, security, cleaning,
catering, postal services and meeting facilities. Business
park rents typically consist of the actual rent plus a separate
service charge. Rental agreements are normally fixed term
for three to five years.
Office rents are typically linked to the Consumer Price
Index.
33
The Finnish Property Market 2009

The office market in 2009
The demand for office space started to soften in late 2008
together with the increased economic uncertainty. The
uncertainty also affected the market position of offices in
different quality categories. The demand for prime offices,
which previously were relatively easy to rent, started also
to soften. Class B and C offices, which had faced vacancy
problems during the upturn, even strengthened their relative
position in some cases, thanks to tenants’ increasing interest
in cutting costs and better possibilities to negotiate the
rent.
The Helsinki central business district (CBD) retains its
position as the top office location in Finland. That is also
where rents and vacancies have showed the best performance
recently. The KTI rental index showed an increase of some
2.7% in 2008, with the increase slowing down towards the
end of the year.
Other attractive office areas with modern stock include
Ruoholahti in Helsinki, Keilaniemi and Leppävaara in Espoo
and the airport area in Vantaa. In cities outside of the Helsinki
region, offices are typically concentrated in city centres and
one or two office areas outside city centres.
“No new office
development projects
are being started in
the current market
situation”
Leasing office space has become significantly more
challenging during the past year. In the Helsinki region
especially, the decrease in demand coincides with a sharp
peak in supply. During 2008 and 2009, some xx0.000
sqm of new office space have been and will be completed.
This represents an increase of almost 5% in the total office
stock. The amount of new office space being planned is
an even bigger number. However, practically none of the
new projects are being started at the moment due to both
financing problems and lack of demand for premises. The
volume of new starts has decreased dramatically during the
past year.
In the current letting market situation, tenants have
a strong bargaining position, and can negotiate tenant
improvements and rental levels, among other things. Rental
levels are more flexible in older buildings, whereas other
issues are discussed in new premises. A common strategy is
to negotiate some free months in the beginning of the rental
period, or to discuss tailored modifications in the premises.
“Tenants have a strong
bargaining position in
the rental market”
Increasing stock and decreasing demand is likely to increase
the vacancy rate, which, according to Catella Property,
currently stands at ca. 9% in the Helsinki metropolitan
area. Rents, which have mainly shown stable development
so far, are expected to fall, and the strength of the decline
depends on the overall economic situation and employment,
in particular. The development of rents and vacancies will
also probably strongly vary between sub-markets, with the
prime office locations being probably hit less than B and C
locations.
Another phenomenon brought about by the recession is
sub-letting, as the tenants of the new buildings, in particular,
cannot take up all the space they’ve committed into in the
beginning of the project. The impact of this phenomenon on
rents and vacancies is not easily captured by statistics, which
increases the opaqueness of the market.
34
The Finnish Property Market 2009

Building projects under construction in
January 2009, rentable* area, sqm
m 2
400000
350000
300000
250000
200000
150000
100000
50000
■ Retail ■ Offices
■ Industrial / warehouse / logistics
■ Other property types
0
Espoo Helsinki Vantaa
* If information on rentable area hasn’t been available, rentable area has been
estimated based on gross area information.
Sources: KTI, Reed Business Information
Investment demand for offices decreased during 2008
both in absolute and relative terms. Office transaction
volume amounted to €1.1 billion, representing some 28% of
the total volume. In 2007, office transactions’ proportion of
total volume was almost 40%.
Total returns for offices decreased to 4.6% in 2008. This
shows a clear decrease compared to the previous year’s 9.8%.
Total return consisted of a capital growth of -1.6% and an
income return of 6.3%. Capital growth was pressured by the
increase in valuation yields, with an impact on values of -2%.
Rents and yields: Helsinki vs. other
European capitals
Office rents and yields in Helsinki seem to be significantly
less volatile than in most other European cities. Despite
the compression of yields between 2004 and 2007, they
remained attractive in European comparison, and never fell
much below 5%. Thanks to the moderate decrease in yields,
it is now expected that also the downturn’s impact on the
Total returns on office investments
1998-2008
14
12
10
Total return
Income return
Capital growth
Development of prime office yields
■ Q2 / 2007 ■ Q4 / 2007 ■ Q2 / 2008 ■ Q4 / 2008
%
8
7
6
8
6
4
2
0
-2
-4
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
5
4
3
2
1
0
London Stockholm Paris Helsinki Oslo
Source: KTI
Source: Jones Lang LaSalle, KTI (Helsinki)
35
Office market vacancy rates, Q4/2008
Dublin
Moscow
Budapest
Amsterdam
Stockholm
Brussels
Berlin
Helsinki
Milan
Paris
Madrid
London
Oslo
Warsaw
0 5 10 15 20
%
The Finnish Property Market 2009
Sources: Jones Lang LaSalle, Catella Property Group (Helsinki)

Prime office yields in Finnish cities
10
9
8
7
6
5
Helsinki
Espoo
Tampere
Turku
05-1995
09-1995
05-1996
09-1996
05-1997
09-1997
05-1998
09-1998
05-1999
09-1999
05-2000
09-2000
05-2001
09-2001
05-2002
09-2002
05-2003
09-2003
05-2004
09-2004
05-2005
09-2005
05-2006
09-2006
05-2007
09-2007
05-2008
09-2008
(09-2009)
Source: KTI´s barometre survey
5.2 The retail market: strong
performance stabilising
Stock
There is some 6.3 million square metres of retail space in the
major Finnish cities altogether. The Helsinki area accounts
for some 3.1 million square metres.
New development in retail space has been geographically
more diversified than in the office markets. While office
development has concentrated in the Helsinki metropolitan
area, new retail space has been built or is being planned in
all growth regions in Finland. At the same time, the stock
becomes more varied, with traditional city centre high street
locations competing with new suburban and out-of-town
shopping centres and retail areas.
“New retail space has
been developed in all
growth centres”
Helsinki market will be more moderate than in the cities with
greater volatility. Helsinki appears to be a significantly more
stable market even compared to its Nordic peers, Stockholm
and Oslo.
Rental levels also have remained relatively moderate and
stable in Finnish cities in comparison with other European
cities. The increase in rents in prime office locations, which
started in late 2005 in the Helsinki CBD, seems now have
ended. However, offices in the Helsinki centre are expected
to survive the crisis with the smallest damages thanks to
limited supply and CBD’s unquestionably dominant position
within Finnish office locations. In other locations, especially
those with increasing supply and varied stock, rents are
expected to fall more significantly.
Players
Finnish pension funds, property companies, international
investors, local investors and owner-occupiers comprise the
main investor groups in the Finnish retail sector.
The ownership of shopping centre properties is
concentrated in big investors’ portfolios. The Finnish
shopping centre market is dominated by Citycon plc,
which currently owns 22 shopping centres in Finland, eight
in Sweden and three in the Baltic countries. Some Finnish
pension institutions own whole, typically regional, shopping
centres, but also often enter into joint investments with
other investors in bigger centres. For example, the Sello
shopping centre in Espoo is owned jointly by three pension
36
Prime office rents, Q4/2008
The Finnish Property Market 2009
London
Moscow
Paris
Dublin
Milan
Madrid
Oslo
Stockholm
Warsaw
Amsterdam
Helsinki
Brussels
Budapest
Berlin
0 200 400 600 800 1000 1200 e/sqm/year
Source: Jones Lang LaSalle, KTI (Helsinki)

TOP 10 shopping centres in Finland
Center Retail GLA Main Owners Location
ITÄKESKUS 112 498 Wereldhave Finland Ltd HELSINKI
SELLO 97 000 KEVA, Etera, Pension Fennia ESPOO
IDEAPARK 91 712 Private investors LEMPÄÄLÄ
JUMBO 85 000 Rodamco Europe, Pension Fennia, HOK-Elanto, Kesko Plc VANTAA
ISO OMENA 48 800 Citycon Plc ESPOO
MYLLY 45 321 Kauppakeskus Mylly Ltd RAISIO
TRIO 37 100 Citycon Plc LAHTI
HANSA 36 688 Several owners: institutions, non-profit fund, property companies TURKU
KAMPPI 35 000 Protego Nordic Retail Fund HELSINKI
MYYRMANNI 33 000 Citycon Plc VANTAA
Source: Finnish Council of Shopping Centres
institutions. The Finnish shopping centre market has also
attracted foreign investors, such as Wereldhave, Rodamco-
Unibail, ING Reim, Protego Real Estate and GIC Real
Estate. Domestic property funds, such as those managed
by Aberdeen and CapMan, have also invested in shopping
centres, concentrating in smaller centres in the Helsinki area
and some larger ones in other cities.
New development of shopping centres has slowed due
to the economic downturn. Of the major projects being
planned around Finland, not many will be started before the
revival of the financing market and more positive signs from
consumer demand. During 2008 and 2009, however, new
regional shopping centres have been and will be completed
in Tornio, Espoo and Turku, for example. All these centres
are in the midsize category of 20,000–40,000 sqm.
High street shops are typically located in CBD office
buildings, and, therefore, major office investors, such as
Sponda and Ilmarinen, also are significant retail owners.
Hypermarket and supermarket investments have
traditionally been favoured by Finnish institutions. This
sector has also attracted foreign investors recently, including
AEW Europe and AXA, for example. Supermarket operators
normally take a 15–25% responsibility for the entire building.
In a hypermarket, the main tenant occupies more than 50%
of the floor space. Retail operators – SOK and Kesko, in
particular – still remain major owners of hypermarket and
supermarket buildings.
37
The Finnish Property Market 2009

Rental practices
Rental practices in the retail market are becoming more
varied. Different types of investors have differing strategies
and preferences, and also the type of retail space in question
has an increasing effect on terms applied.
Rental agreements are normally longer in retail than in
the office market. Fixed terms are more commonly applied in
the retail market, as location is a key factor in the retail trade,
and tenants want to ensure this with agreements. The typical
minimum term for retail space is three years if the location
is competitive. In many cases, agreements are first made for
a fixed period and are then continued for an infinite time
period. These kinds of terms are typically applied in high
street shops especially.
In hypermarket and supermarket properties, investors are
increasingly cash flow driven, and agreements are typically
relatively long-term contracts with net rent.
In shopping centres, rental agreements are typically
developed towards the more co-operative type of deals
between the tenant and owner. Affordability varies between
different tenant categories, as does the bargaining position.
Anchor tenants often have leases of five to ten and even 15
years, with renewal options sometimes applied in shorter
leases. Other tenants have typically shorter leases. The use of
turnover leases is gradually increasing in shopping centres.
The retail market in 2009
The outlook for retail property market is, in many aspects,
more positive than in the office market. Retail sales continued
their growth in 2008, and increased by 5.4% compared
to the previous year, thus supporting the retail properties’
relatively strong performance. Consumers’ disposable
income will continue increasing in 2009 thanks to tax cuts
and wage increases. However, increasing unemployment and
economic uncertainty have impacted consumer confidence
significantly, which now is at its lowest level since the
recession of the early 1990s. This increases the uncertainty
related to retail sales. So far, however, consumers’ willingness
to consume seems to be at a relatively sound level.
The current economic situation’s impact on retail sales
varies between retail sectors, thus increasing the variation of
the performance of different types of retail properties. The
outlook is relatively positive for perishable goods, such as
for grocery stores. Increased cautiousness is likely to impact
most the sales of durable goods and luxury products.
The demand for retail space has remained strong, and
there is practically no vacant retail space in most Finnish
growth centres. New development will add to the stock
significantly in some regions, but most of the new space has
been rented out before the start of the project. Developers
are currently increasingly cautious with starts of new projects
in the retail sector as well, which has resulted in a decline in
construction volumes. The enormous number and amount of
planned retail projects around Finland will start construction
only if and when the economic situation looks more positive
again.
Retail properties maintained their strong position in
the transactions market by accounting for some 37% of the
total transactions volume. However, a few major transactions
accounted for a major proportion of the total volume. The
biggest retail transaction of 2008 was the acquisition of the
Kamppi shopping centre by Protego Real Estate in March.
“Retail properties’
total return decreased
significantly in 2008”
38
Prime retail rent in the Helsinki CBD
The Finnish Property Market 2009
eur/sqm/month
120
110
100
90
80
70
60
50
40
05-1995
09-1995
05-1996
09-1996
05-1997
09-1997
05-1998
09-1998
05-1999
09-1999
05-2000
09-2000
05-2001
09-2001
05-2002
09-2002
05-2003
09-2003
05-2004
09-2004
05-2005
09-2005
05-2006
09-2006
05-2007
09-2007
05-2008
09-2008
(09-2009)
Source: KTI´s barometre survey

Total returns on retail investments
1998-2008
%
16
14
12
10
8
6
4
2
0
-2
Total return
Income return
Capital growth
-4
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: KTI
The retail sector’s returns suffered the most from the
economic downturn in 2008, and total return on retail
decreased to 3.0%. This is a dramatic decline from the
previous year’s level of 15.8%. After having been the
best performing property sector for several years, retail
properties now produced the lowest total return among all
property types. Rental values continued their growth, while
increasing yields pressured capital growth to -3.3.%
5.3 Residential sector – positive outlook
in the rental market
There are some 2.5 million dwellings in Finland. Of these,
about 40% are single-family homes. More than 44% of the
dwellings are in apartment buildings. The average size of a
Finnish household has decreased constantly, and is currently
2.1 persons. Therefore, the demand for smaller dwellings has
been increasing steadily, especially in urban locations.
Two-thirds of Finland’s housing stock consists of owneroccupied
homes, and home ownership is widespread in all
forms of housing, including apartments as well as detached
and terraced houses.
There are slightly less than 800,000 rented dwellings in
Finland. Of these apartments, ca. 50% have been provided
with some kind of public subsidy – either state housing loans
or an interest subsidy.
In recent years, the dynamics of the housing market has
been affected by the availability and pricing of housing loans.
In early 2000s, easing availability of finance strengthened
the demand for owner-occupied housing, which caused
increases in house prices. At the same time, rental demand
was stable or even decreasing. Thus, rents remained relatively
stable, which made the net income available from residential
investments non-attractive. This resulted in a decline in
the supply of rental apartments in favourable locations,
in particular, as it was attractive to realise sales profits of
previously rented apartments – which was done by private
investors, especially.
In the latter part of the 2000s, however, high house prices
and relatively moderate rental levels have made rental housing
more attractive for tenants again. This has resulted in a strong
increase in rents for especially small apartments and centrally
located dwellings. Residential prices are currently decreasing,
but the decline is very moderate so far, which does not thus
support the attractiveness of owner-occupied housing.
Players
The players in the rental residential market vary according
to the sector in question. In the subsidised market,
municipalities are the major players, but there are also some
significant private, non-profit companies in the market (e.g.
Sato, VVO, Avara). There are various forms of public subsidy
for the supply side; some have specific strict rules for tenant
selection and the rents are regulated, whereas other forms
of subsidies allow a more market-oriented approach. On
the other hand, tenants are also subsidised through public
housing support system.
Of the rental apartments in the non-subsidised free
market, more than 50% is owned by small investors, mainly
individuals. The so-called professional residential investment
market currently consists of some 150,000–200,000
39
The Finnish Property Market 2009

40
The Finnish Property Market 2009
dwellings. The scattered ownership affects the rental
markets, as it results in great differences in market practices,
rental levels and professionalism of players.
Some pension funds and insurance companies have
traditionally had significant residential property investment
portfolios. However, starting from the early 2000s, some
players sold their residential properties because of their
typically low net cash flow as well as their management
intensiveness. Some of the institutions sold their residential
properties to big specialised companies, such as Sato and
VVO. As a result, pension funds Varma and Ilmarinen are
currently big owners of these companies, and can thus exploit
an indirect investment strategy. Some institutions pursued
more work-intensive sales strategies by selling parts of their
portfolios flat by flat in order to maximise sales prices.
Many institutions are still interested in residential
investment, and have even increased their portfolios recently,
mainly through new development.
There are currently two non-listed property funds specialised
in residential property investment. Icecapital Housing
Fund I invests in modern residential buildings in growth centres
and has domestic institutions as investors. The other,
Quorum Asuntoturva I, is invested in some 500 individual
rental apartments in the Helsinki metropolitan area. The investors
of this fund are mainly high net-worth individuals.
The first, and currently only, foreign investor in the
Finnish residential market is WH-Asunnot, a subsidiary of
a Danish property development company KE Project A/S,
who invested in some 2000 rental apartments in mid-2007.
Housing construction
The long-term need for new dwellings is estimated to be
around 30,000 dwellings per year. Of this, it is understood
that some 12,000–13,000 are needed in the Helsinki region.
To reach this objective, regional municipalities have entered
into an agreement with each other and the state to increase
supply. These objectives has proven challenging to reach,
especially in the current market conditions.
During the economic upturn, the limiting factors in new
construction comprised rapid increase in construction costs,
problems in finding skilled labour, as well as tight supply
of lots planned by the municipalities. At the moment, the
problems are somewhat different, with availability of finance
considered as the most limiting factor.
The outlook for residential construction looks pretty
negative at the moment, especially in owner-occupied
construction. New starts have been frozen because of the
decreasing demand from house buyers. According to RT, the
Confederation of Finnish Construction Industries, there are
currently some 5,700 unsold new dwellings on the balance
sheets of developers. In 2008, only some 26,000 dwellings
were started. For 2009, the forecasted figure remains
even lower, at 23,000 dwellings – and even this seems a
challenging objective at the moment. Of these, some 4,300
Residential construction activity in
Helsinki metropolitan area
sqm
1 000 000
800 000
600 000
400 000
permits
starts
completions
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
is expected to be produced with some sort of public subsidy,
which is a slightly higher number than in the previous years.
The estimated construction volume is at its lowest level since
the mid-1990s.
“The government
is trying to support
the economy by
boosting residential
construction”
Source: Statistics Finland
During the past few years, new production has
concentrated on free market and owner-occupied production
because subsidised construction has not been competitive in
the prevailing market conditions. However, the dramatic
change in financial market conditions has shifted the
production towards rental housing.
The government is also trying to boost housing
construction as a means to revitalise the economy and support
employment in the construction sector. The tools for this
boost include interest subsidy for new production, as well as
subsidies for renovations of older buildings. For subsidised
production, also direct financial support can be provided. So
far, however, the impact of these actions remains unknown.
Rental practices
Rents for free market rental dwellings were gradually
deregulated during the 1990s. Currently, there are no
restrictions for rental periods or rental levels. Rental
agreements are typically made for a certain period, such as
a year, and after that they are usually valid for an indefinite
period. After the fixed period, the tenant has the right
to terminate the contract after an agreed notice period,

Development of residential rents and prices in
Helsinki region
rent /sqm
14
13
12
11
10
9
8
7
6
5
4
rent /sqm
Residential price index 1983=100
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Price index
400
380
360
340
320
300
280
260
240
220
200
180
160
140
120
100
Source: Statistics Finland
typically one month. The landlord can only terminate the
contract under certain specific conditions.
The residential market in 2009
Residential prices turned towards a decline in the second
quarter of 2008 after a long period of constant growth. In
the Helsinki metropolitan area, the prices for old residential
dwellings decreased by 3.3% and elsewhere in Finland by
2.9% in the last quarter of 2008. The decrease accelerated
towards the end of the year. The decrease in volumes was
dramatically bigger, with a decrease of some 50% in the
Helsinki metropolitan area and 40% in other parts of the
country compared with the previous year.
Thanks to the increasing demand for rental housing,
rents have continued increasing. In the last quarter of 2008,
rents increased by 4.6% compared with the previous year. In
the Helsinki metropolitan area, the increase was 6.2%, with
small and centrally located apartments showing even stronger
growth. The increase is expected to continue; however, with
Rents for small apartments in
Helsinki Centre
the strongest demand targeted at smaller apartments, especially.
At the same time, the supply of larger apartments in the rental
market might be increasing, as it has become more difficult to
sell dwellings when families are moving. The rental development
might, therefore differ significantly between different types of
dwellings and sub-markets.
“Residential prices are
decreasing slightly”
Residential properties included in the KTI Index produced
a total return of 8.0% in 2008. Capital growth amounted
to 2.2%, and net income remained at 5.7%. Residential
investments were thus the best performing class among the
main property types.
Total returns on residential investments
1998-2008
41
/sqm
26
24
22
20
18
16
14
12
10
4/04–
09/04
10/04–
03/05
Average
4/05–
09/05
Median
10/05–
03/05
4/06–
09/06
10/06–
03/06
4/07–
09/07
10/07–
03/07
4/08–
09/08
% Total return Income return Capital growth
18
16
14
12
10
8
6
4
2
0
-2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
The Finnish Property Market 2009
Source: KTI
Source: KTI

5.4 Logistics market – a developing
property sector
Stock
The industrial and logistics property stock amounts to some
15 million square metres in major Finnish cities. Of this, the
Helsinki metropolitan area accounts for more than 50%.
The industrial property market can be divided into
various sub-categories with varying market structures and
practices, and a heterogeneous investor and customer basis.
Large industrial corporations’ manufacturing properties,
light manufacturing properties, and modern warehousing
and logistics properties are the main sub-categories in this
sector. Of these, the stock of logistics properties especially
is developing rapidly as a result of both increasing demand
and new traffic connections. This relatively late emergence
is partly caused by major retail companies’ sophisticated
centralised warehousing systems, which are self-maintained,
and which have dominated the market previously.
Total returns on industrial property
investments 1998-2008
%
14
12
10
8
6
4
2
0
Total return
Income return
Capital growth
-2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: KTI
The industrial/logistics market in 2009
42
The Finnish Property Market 2009
Players
Owner-occupation is very common in large manufacturing
properties especially. In the light manufacturing property
market, the ownership structure is more diverse, with
occupiers, property companies, pension and insurance
companies, individual investors, and municipalities as
examples of investors. Foreign investors have also shown
increased interest in these markets. Owner-occupation
has, up until very recently, been relatively common in the
logistics market as well, but this situation is now changing
rapidly. This emerging sector is attracting new investors
including domestic institutions, property funds as well as
foreign players.
Sponda is the most significant domestic developer and
investor currently active in the logistics market. It has an
extensive portfolio of logistics and warehousing properties in
the Helsinki area. Sponda also acts in this market through two
non-listed funds that have domestic institutions as investors.
Sponda also is a strong player in the new Vuosaari harbour
area, where its PortGate project comprises some 70,000 sqm
of logistics and warehouse space. However, a significant part
of this centre was not rented upon completion.
Market practices
Because of the heterogeneity of both the available stock and
user needs, rental practices are varied in the industrial and
logistics markets. Rents are typically net or triple-net rents.
Traditional Finnish gross leases are only used for smaller
premises in multi-tenant buildings. In fixed-term contracts,
the period is typically ten or 15 years, and rents are mainly
determined according to the rating of the tenant.
Vacancy rates for modern industrial and logistics properties
have been relatively low in recent years. Rents have remained
fairly stable or have increased slightly in recent years.
Modern logistics properties have become more popular
among major investors. Recent main transactions in the
industrial / logistics market include the sales of three logistics
properties worth some €16 million by Sponda to Sponda
Fund II. Other recently active investors in this market include
Aberdeen’s funds and some domestic institutions.
In Helsinki metropolitan area, major new logistics
projects are concentrated in the Vuosaari harbour and
Helsinki-Vantaa Airport areas. E.g. Tapiola Group and its
funds have invested in some new projects in Vantaa. Another
new major project in the logistics market is the new ca.
100,000 square metre logistics centre of the S-Group, to be
built in Sipoo, north-east of Helsinki. The centre is planned
to be completed by 2012.
In early 2009, surprising news was released in the heavy
industrial property market, when Google announced the
acquisition of an old paper mill from Stora Enso for a price
of €40 million. The paper production in the mill ended in
early 2008. Google has announced that it will redevelop the
building for server centre use. This is one of the few examples
of recent redevelopment plans for heavy manufacturing
properties.
Industrial properties produced a total return of 6.1% in
2008.

6. Property markets in
different regions – outlook
for 2009
The prime commercial property market areas in Finland are
located in the Helsinki metropolitan area, which consists of
the capital city of Helsinki and the immediate neighbouring
cities of Espoo, Kauniainen and Vantaa. Because of its volume
and liquidity, Helsinki metropolitan area is the most significant
investment region for domestic and international investors.
The second-tier markets – typically the regional growth
centres of Tampere, Turku, Oulu and Jyväskylä – are
traditionally popular among domestic institutions, but have
also attracted some international capital recently. In these
cities, there are some local players that operate only in these
market areas.
Property markets in smaller city regions have
traditionally been mainly dominated by local investors and
owner-occupiers.
6.1 Helsinki metropolitan area: the
dominant property market area in
Finland
The relative importance of the Helsinki commercial
property market is much greater than in many European
cities of comparable size. This can be explained by the
dominant position that Helsinki has in Finland, as there are
no other large city regions. Thus, nearly all major company
headquarters as well as most of government agencies are
located in the Helsinki metropolitan area. Strong internal
migration from other parts of the country has strengthened
the economic base of the Helsinki metropolitan area.
Population: Helsinki: 570,000
Espoo: 238,000
Vantaa: 193,000
Helsinki region in total: 1,300,000
Economic base: Professional services, high-tech
industries, public sector services
The entire Helsinki region, which consists of 14 municipalities,
represents 25% of the population, 29% of the jobs and 34%
of the GDP of the entire country. Jobs, administrational
activities, as well as the majority of the population of the
region are concentrated in the Helsinki metropolitan area.
The economic activity and growth of the Helsinki region
has constantly exceeded that of the entire country.
Compared to the rest of the country, the proportion of
jobs in the private service sector is significantly higher in
the Helsinki region, at 41% (31% across the entire country).
Specialist professional services, as well as high-tech
industries and research and development activities, have a
stronger role in Helsinki compared to the rest of the country.
Helsinki’s role as an administrative centre also affects its
economic structure. Therefore, the proportion of industrial
occupations is lower (18%) than in the entire country (26%).
The Helsinki region has a dominant position in the Finnish
office market. Within the Helsinki metropolitan area, the
Helsinki CBD has an undisputable position as a prime market
area. Since 2005, it has led the increase in rents, which only
spread thereafter to other locations. During the downturn, it
is also expected to survive with less damage than any other
sub-market in the country. Other prime office sub-markets in
Helsinki region include Ruoholahti in Helsinki, Keilaniemi in
Espoo and airport area in Vantaa.
Demand for offices in Helsinki increased up until late
2007. During 2008, the demand started to decline, and the
increased cautiousness started to affect rents and take up.
Prime rents, however, have continued increasing slightly,
although stabilised towards the end of 2008 and beginning
of 2009. According to Catella, vacancy rate for offices in
Helsinki stood at ca. 8.2% in the end of 2008.
The Helsinki metropolitan area also accommodates the
prime retail areas of Finland. The main retail areas include
the Helsinki CBD, regional centres of Tapiola in Espoo and
Tikkurila in Vantaa, as well as various major shopping centres
located adjacent to prime traffic connections.
43
The structure of the economy, Helsinki vs. the country as a whole
Services
41,1%
Agriculture and
forestry
0,4%
Percentage of jobs (%)
HELSINKI REGION 2007
Retail
15,6%
Public sector
24,9%
Manufacturing
17,7%
Services
31,2%
Agriculture and
forestry
3,9%
Percentage of jobs (%)
WHOLE COUNTRY 2007
Retail
12,5%
Public sector
26,8%
Manufacturing
25,5%
Source: Helsinki Chamber of Commerce
The Finnish Property Market 2009

The Helsinki Central Business District
The Helsinki CBD is the most important single property
sub-market in Finland. This geographically small area is
the most attractive office location, and also the undisputed
centre of retail trade in Finland. It also contains the most
important public sector administrative functions as well as
several cultural buildings.
Office users in the city centre are mostly companies
offering business-to-business services – business consultancies,
law firms, investment banks, etc – together with public sector
organisations – both municipal offices and ministries. The
majority of the office stock in the CBD was built in the early
1900s. Despite the lack of new supply, the stock is mostly well
maintained and refurbished. The supply of modern office
stock has been increasing rapidly in other areas in the Helsinki
area. Nonetheless, the Helsinki CBD has maintained its
attractiveness and remains the most preferred office location
in the region.
Rental activity has remained relatively high in the CBD in
terms of both number and volume of new rental agreements,
at least until the end of 2008.
Within the CBD, the Kamppi area has strengthened
its position in recent years thanks to new and refurbished
supply. Shopping Centres Kamppi and Forum, which are
very near to each other, are the largest shopping centres in
the CBD. New retail space will also be created in the CBD
by the Sponda’s CityCentre redevelopment project, as well
as by the 10,000 sqm extension of Stockmann’s department
store. These projects will be completed in 2010 and 2011.
“Helsinki CBD is
expected to continue
its relatively strong
performance”
“In 2008, office rents
increased by 2.7% in
the Helsinki CBD”
The KTI rental index showed an increase of 2.7% for office
rents in Helsinki CBD in 2008, with the increase slowing
towards the end of the year. The vacancy rate in the CBD
has remained moderate throughout the years, well below the
average of the entire city. The current economic downturn
is expected to put downward pressure on rents and raise
vacancy rates. However, the decrease is expected to remain
rather moderate for the CBD compared with other areas.
The rents for prime retail space in the city centre have
increased steadily, and the premises are almost fully occupied.
Prime retail rents are expected to continue increasing,
although at a slower pace than in recent years.
Even though the potential for new development in CBD
is limited due to limited supply of land, there are some major
projects and plans which will impact the CBD’s profile.
Around the Töölönlahti Bay area, a concentration of cultural
and administrative buildings will be extended with the
development of the new Music House to be completed in
2011. Also, other cultural buildings are being planned in the
area. The city of Helsinki is also planning a facelift around
the city hall quarters, where a dynamic shopping and leisure
area is being planned.
Office rent index and vacancy rate in Helsinki
44
Vacancy rate (Helsinki)
Vacancy rate %
12
Rental index (Helsinki, CBD), 1993=100
Rental index
180
The Finnish Property Market 2009
10
8
6
4
2
0
09-1991
09-1992
09-1993
09-1994
09-1995
09-1996
09-1997
09-1998
09-1999
09-2000
09-2001
09-2002
09-2003
09-2004
09-2005
09-2006
09-2007
09-2008
160
140
120
100
80
Source: KTI, Catella Property

Office construction activity in Helsinki
metropolitan area
sqm
500 000
400 000
300 000
200 000
100 000
0
permits
starts
completions
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ruoholahti and other areas outside the
city centre
Ruoholahti is a modern office area near the CBD at the
starting point of a major western radial route. Ruoholahti
has attracted a variety of office users, such as IT/high-tech
and business consultancy companies, as well as many other
industries. The area has consistently attracted tenants, rents
have increased steadily and vacancy levels have remained
low. Office rents per square meter are typically 2-5 euros
below the level of the CBD, but thanks to the homogeneous
supply, the variation of rents is relatively small.
There is still also new development potential in
Ruoholahti and especially in the adjacent Salmisaari area.
The ongoing or recently completed major office projects
in the area include those carried out by Varma, Ahlström
Capital and Technopolis, among others. Pension insurance
company Varma moved its head office to the area in summer
2008, and the other phase of the 60,000 sqm project will be
completed in early 2009, which will accommodate the head
office of Sampo Bank. There are also new projects being
planned by Technopolis and YIT, for example.
“Salmisaari is a new
office area near CBD”
Source: Statistics Finland
Other traditional office areas situated somewhat out of the
city centre include Pasila, Sörnäinen, Vallila and Lauttasaari.
These areas are characterised by a multifaceted office supply.
There are significant differences in rental levels between the
new and old property stock in these areas.
There is also some development potential in these areas.
In Pasila, together with the adjacent Ilmala area, major
new office projects are being built and planned. Insurance
company Fennia moved its headquarters to the first phase
of the Visio Business Center in late 2008. Other players in
the area include Sponda and the Pension fund of the Finnish
Broadcasting Company, who plan a joint Forum Virium
project. Retail and residential buildings are being planned
closer to the Pasila railway station. Due to the development
of new, high-quality premises as well as relativey moderate
rental levels, the areas like Pasila, Ilmala and Sörnäinen
have become more popular among occupiers. In a “Future
Workplace” survey carried out by KTI and Skanska in early
2009, the office areas in the northern down-town of Helsinki
were the most preferred office locations – after having been
in the third place in 2008.
Next to Pasila is the developing Ruskeasuo office area.
Recent development projects in the area include the business
parks developed by NCC, as well as the new headquarters
of the residential investment company VVO. Also, Skanska
is planning to move its offices to Ruskeasuo, with the
construction work planned to start in 2009.
Another developing area in the vicinity of the city centre
is Kalasatama, adjacent to Sörnäinen, where the land was
released when the harbour moved its operation to Vuosaari.
The area is planned to accommodate some 100,000 square
metres of new commercial space, with the first projects to
be completed in early 2009. Other starts are waiting for the
occupier demand to strengthen.
Other areas in Helsinki
Pitäjänmäki, situated seven kilometres north of the city
centre, is an old industrial area that was rapidly converted
into one of the IT centres of the Helsinki metropolitan
area in the late 1990s. In recent years, the office stock has
been increasing by some new business park type projects.
Pitäjänmäki is one of the areas in Helsinki that has suffered
from fluctuating demand, which has caused volatility in rents
and vacancies. Because of the heterogeneous space supply,
rental levels vary markedly within the area. Investors have
attracted tenants to older buildings by relatively low rents,
whereas in the modern stock, rents are relatively high.
Office stock has recently increased in Käpylä, a
traditionally residential area north-east of the city centre.
The headquarters for YIT and Sato, among other smaller
companies, are located next to the train station. In 2008,
additional office supply in the area increased through the
completion of the adjacent Business Park Duetto, as well as
by a new YIT office building.
Herttoniemi is an area five kilometres east of the CBD,
adjacent to both the eastern radial route and the metro line.
Herttoniemi is an old warehousing area, which is undergoing
a slow transition to a more diversified area with office and
45
The Finnish Property Market 2009

Preferred office locations in Helsinki Metropolitan Area %
Northern down-town of Helsinki
Helsinki CBD
Western Helsinki
Northern Helsinki
Tapiola area
Western radial route district
Airport area
Ruoholahti
Eastern Vantaa
Leppävaara area
Northern Espoo
Other
Eastern Helsinki
Ring road II area
Other parts of Helsinki Peninsula
Western Vantaa
0 2 4 6 8 10 12 14 16 18
%
Source: Future Workplace barometer survey; KTI and Skanska
46
The Finnish Property Market 2009
retail supply. New projects in the area include the Opus
Business Park, the third phase of which was completed in
2008. The office vacancy rate has increased recently in the
area, although the amount of vacant space measured by floor
area is not as significant because of the relatively small office
stock. New projects in the area are waiting for increasing
demand.
Further east is Itäkeskus (which is roughly translated as
the ‘eastern city centre’), located at the junction of Ring Road
I and the eastern radial route. The Itäkeskus shopping mall,
owned by Wereldhave, is one of the largest shopping centres
in northern Europe with a leasable area of 112,000 square
metres. In the immediate vicinity of the shopping centre, a
new 14,000 square metre hypermarket building for S-Group
is about to be completed in early 2009.
Espoo – a city with multifaceted areas
Espoo is a city with several regional property market
areas. Submarkets around the western radial route include
Keilaniemi, Otaniemi, Tapiola, Niittykumpu and Matinkylä,
which are expected to get a boost from a west-bound metro
line to be completed by 2013. Further along the Ring Road I is
a developing area called Leppävaara. West of Tapiola, a new
Suurpelto area is currently being developed, with a vision of
housing some 7,000 residents and numerous companies.
The areas of Keilaniemi, Tapiola, Otaniemi and southern
Leppävaara create an increasingly important converging
office market area in Espoo. The Keilaniemi area houses
several major headquarters – including Nokia, KONE,
Fortum and Neste. Several new business park projects have
been completed in recent years, including the High Tech
Center and Swing Life Center. In the best premises, the rents
are close to the levels of Ruoholahti. However, due to the
increased supply, there is also a lot of vacant space in the
Otaniemi-Keilaniemi area. The vacancy rate has increased
dramatically due to the completion of the new projects.
“Supply of office space
has increased rapidly in
Keilaniemi”
The Helsinki University of Technology is situated in Otaniemi,
located in the immediate neighbourhood of Keilaniemi. The
area will also host the new Aalto University, which will be
created in 2010 by combining the Helsinki University of
Technology, Helsinki School of Economics and the University
of Art and Design. The offices in Otaniemi mainly have
technology companies as tenants. New office space is being
developed through the construction of the Falcon Business
Park, where the second phase was completed in 2008.
In Leppävaara, office supply has increased through
the completions of the 20,000 square metre Panorama
Tower and the first phase of Polaris Business Park in 2008.
The amount of vacant space has also increased. The Sello
Shopping centre was extended in 2008 by the completion of
the cinema and new retail premises.
The traditional centre of Tapiola is undergoing a major
facelift. The development plans include significant amount
of new retail space and major underground parking facilities.
The Tapiola Group is also currently developing a major new
head office building with leasable area of 33,000 square
meters.
In addition to the centre of Tapiola, retail space in Espoo
is concentrated in the Iso Omena (Big Apple) shopping centre
close to the western radial route as well as in the Leppävaara
area, where the Sello shopping centre is located. Another
retail area is Espoo Centrum, where the Espoontori shopping
centre and train and bus terminal are being extended. A new
16,500 square metre shopping and service centre Entresse
was completed in late 2008.

The heterogeneity of the Espoo commercial property
stock can be seen in the development of rents and vacancies
in the various sub-markets. According to Catella, the vacancy
rate for offices in Espoo has exceeded 14%, representing the
highest figure among all Finnish growth centres. Vacant
office space can be found in Keilaniemi, Leppävaara and Kilo
areas especially. Retail space is fully occupied.
Vantaa: development continues in the
airport area
The Aviapolis area around the Helsinki-Vantaa Airport
has developed rapidly during the past few years. The main
players in the area include the City of Vantaa, Finavia,
main property developers as well as property companies
Sponda, Technopolis and Julius Tallberg Kiinteistöt. The
area currently hosts some 35,000 jobs. There are also
extensive property development plans with some 400,000
square metres of office space alone being planned. During
2008, some 26,000 square metres of new office space was
completed, and some new space will also come to the market
during 2009.
Traffic connections to the airport will be improved
through the development of the Ring Rail Road, scheduled
to be operational in 2014, thus linking the airport area with
the city centre. Also the Ring Road III is planned to be
upgraded in order to find solutions to the increased traffic to
and from the Vuosaari Harbour. At the airport itself, a new
international terminal will be in 2009.
The 85,000 square metre Jumbo shopping centre
is the major retail centre in the area. In the immediate
neighbourhood, the new Flamingo leisure centre comprising
hotel, office and leisure premises was completed in late 2008.
In the vicinity of Aviapolis, Pakkala and Tammisto areas are
also important retail areas, favoured by big-box retail units,
such as outlets for motor vehicles, furniture, gardening and
the like. There are also some new development projects that
also attract investors.
“The Flamingo leisure
centre was completed
in 2008”
Because of the modern supply, the rents in the Airport area
are relatively high, and have been increasing steadily. The
area has attracted tenants, and there is not much vacant
space supply.
With the exception of the airport area, Tikkurila is the
main office area in Vantaa and the location for most of the
city’s administration buildings. Because of Vantaa’s diversified
office stock, rental levels are dispersed. Highest office rents
can be found in the modern buildings at the airport area.
Total returns by region 1998-2008
%
16
14
12
10
8
6
Helsinki Metropolitan Area
All property
Rest of Finland
Other Major Cities*
4
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
*including cities of Turku, Tampere, Oulu, Lahti, Kuopio
and Jyväskylä
47
The Finnish Property Market 2009
Source: KTI

6.2 Other growth centres: Tampere,
Turku, Oulu, Kuopio, Lahti and Jyväskylä
Tampere
Location: 170 km north of Helsinki; the biggest inland city
in the Nordic countries
Population: Tampere: 210,000
Tampere region in total: 300,000
48
Tampere is the largest inland city in the Nordic countries. Its
population exceeded 200,000 in the early 2000s. Tampere
has a long history of metal and paper industries, but it has
recently been able to attract high technology businesses
as well as service companies. Technology expertise
areas in the Tampere region include telecommunication,
automation and healthcare technology. The city of Tampere
is currently developing co-operation with the surrounding
municipalities of Lempäälä, Pirkkala, Kangasala, Nokia,
Ylöjärvi and Vesilahti. Tampere’s favourable location and
diversified business activities create a strong basis for real
estate demand. Tampere has attracted both domestic and
international real estate investors.
In addition to the city centre, modern office space can
be found in the areas of Hatanpää, Tulli and Kauppi. Office
supply in the Tulli area has been extended by the construction
of Tulli Business Park, where the last phases will be completed
in mid-2009. Tampere is also known for its redeveloped
industrial properties, both for office and residential use, in
the city centre and the immediate vicinity.
Hervanta is a developing area in the neighbourhood of
the Technical University of Tampere located at some distance
from the city centre. Technopolis Hermia was extended in
2008 by a 5,000 square metre office building. The next,
7,000 square metre phase is planned for completion in late
2009. Technopolis is also currently developing new space in
the university area.
Office rents in Tampere have increased steadily for prime
premises, and vacancy rates have remained well below most
other Finnish growth centres. However, the amount of vacant
space has increased due to both increase in supply and some
major lease terminations. The vacancy rate currently stands
at ca. 6.0%, and is expected to increase further because of
softening demand.
The most expensive retail space is situated along the main
street, Hämeenkatu, and in the Koskikeskus shopping centre
next to the main street. New retail space is being built and
planned in the city centre, where the Stockmann department
store will be extended by some 4,000 square metres of new
space. In the Ratina area, Sponda plans to develop a new
ca. 45,000 square metre shopping centre, although no
final investment decision has been made. The city centre is
expected to maintain its attractiveness, and retail rents are
forecasted to increase slightly or remain stable.
The Finnish Property Market 2009
Office gross rents in major Finnish cities in 2008
/sqm/month
28
26
24
22
20
18
16
14
12
10
8
6
Helsinki
CBD
Helsinki Espoo Vantaa Tampere Turku
other
Jyväskylä
Oulu Lahti Kuopio
Q75
Q25
median
Source: KTI

New retail space is also being built outside the city
centre, in the Lielahti and Koilliskeskus areas, among other
places. In the neighbouring municipality of Ylöjärvi, the
Elovainio shopping centre is under construction. IKEA plans
to develop new retail space in Lahdesjärvi area. There are
also major plans for new retail space next to the Ideapark
shopping centre in Lempäälä, south of Tampere.
Turku
Location: 160 km west of Helsinki; in south-western corner
of Finland
Population: Turku: 176,000
Turku region in total: 290,000
Turku is the former capital of Finland, the economic
strengths of which are based on its three universities and the
competences provided by them. The major industrial sectors
comprise electronic industries and the traditional metal
industry. The proportion of private services in Turku region
is higher than in most other Finnish growth centres. The
Turku property investment market has interested various
types of players recently, with international, domestic and
local players having been active in the market.
The most active office market in the Turku area is in
Kupittaa, located near the university area and next to the
railway station. This area is mainly targeted at high-tech,
biotechnology and business-to-business service companies,
and consists of office and high quality manufacturing space.
Abundant development in the area has increased the supply
in recent years, and in some older buildings of the area there
is some vacant space. In modern office space, rents are higher
than those in the city centre.
According to Catella, the office vacancy rate in Turku
has decreased to 8.4%, thanks to slightly positive net take-up
and stable supply. Office rents have increased slightly thanks
to increasing demand and high quality supply. However,
the outlook is more negative; with an expected increase in
vacancy rates and decrease in rents due to the economic
slowdown and increase in unemployment.
The retail market in Turku is concentrated in the city
centre and some regional centres outside the city, such as
Länsikeskus and the Mylly shopping centre in Raisio. The
supply in the vicinity of Mylly, located in the Hauninen area,
was extended by the completion of the IKEA store in 2008.
The shopping centre itself will be extended by some 3,800
square metres of new space in late 2009, with a significantly
larger extension being planned.
In the Skanssi area, east of Turku, a 37,000 square metre
shopping centre Skanssi will be completed in spring 2009.
The other major retail plans in the vicinity of the Skanssi
centre, alongside the Helsinki motorway, are currently
expecting for the revival of demand.
Oulu
Location: 600 km north of Helsinki
Population: Oulu: 134,000
Oulu region in total: 200,000
The Oulu region has been one of the fastest growing areas
in Finland since the mid 1990s. Oulu is a university, science
and technology city, the influence of which covers all of
northern Finland – about one-half of the area of the entire
country. The Oulu region is regarded as one of the Finnish
centres of information and communication technologies, as well
as a centre of the medical science and healthcare industries.
Oulu’s real estate market is large enough to attract domestic
pension funds, whose position in the market has remained
quite strong. Listed property company Technopolis, originally
founded in Oulu, is an important player in the office market.
The most important real estate market outside the central
retail area is the Linnanmaa area, which accommodates
several high-tech companies and Oulu University.
49
The Finnish Property Market 2009

Throughout the recent years, the vacancy rate of offices has
remained at a very low level but has, however, now increased
to ca. 4.5%, according to Catella – thanks to new supply. In
the retail market, there is practically no vacant space at the
moment. However, there are abundant plans for new retail
development both in the city centre and in the neighbouring
municipalities. These plans are likely to only come true when
the economic activity peaks up again. The rents of modern
premises have remained stable or increased in prime locations.
Jyväskylä
Location: 270 km north of Helsinki, in the centre of Finland
Population: Jyväskylä: 127,000
Jyväskylä region in total: 142,000
Prime office yields in major Finnish cities
Helsinki
Espoo
Tampere
Turku
%
10
9
8
7
6
5
50
The Finnish Property Market 2009
Jyväskylä is a dynamic university town that has a strong
emphasis on both traditional industries and new technology.
The Jyväskylä region’s most prominent business areas cover
paper manufacturing as well as information, energy, health
and environmental technology. The population of the City
of Jyväskylä increased markedly in the beginning of 2009,
when two neighbouring municipalities (Korpilahti and
Jyväskylän maalaiskunta) were merged with Jyväskylä.
The Jyväskylä area municipalities’ joint development
company Jykes-Kiinteistöt is one of the most active players
in the commercial property market. It also co-operates
with property investors in order to ensure the supply of
suitable company premises. Currently, Jykes-Kiinteistöt is
redeveloping the old Kivääritehdas (Rifle Mill) property into
office use. Other ongoing office development projects include
those carried out by Technopolis south of the city centre.
The retail property market in Jyväskylä is concentrated
in the city centre. The major players include local retailers
as well as some national investors. Also, new retail space
is currently being developed in the centre by S-Group
and Anttila department store, among others. North of the
city centre, the Seppälänportti shopping centre is due for
completion in late 2009.
Vacancy rates for both offices and retail space are at a
low level. The outlook for the market is also relatively good.
Office rents in the Tourula / Seppälä areas are close to the
ones in the city centre. Retail rents are the highest in the
pedestrian shopping district in the city centre.
Lahti
Location: 104 km north-east of Helsinki
Population: Lahti: 99,000
Lahti region in total: 157,000
Lahti is a traditional industrial city with a strong background in
furniture and the food industry. Recently, the emphasis on jobs
has transferred to professional services. Because of structural
changes in the economy, Lahti has suffered from relatively
high unemployment compared to the rest of the country.
4
05-1995
09-1995
05-1996
09-1996
05-1997
09-1997
05-1998
09-1998
05-1999
09-1999
05-2000
09-2000
05-2001
09-2001
05-2002
09-2002
05-2003
09-2003
05-2004
09-2004
05-2005
09-2005
05-2006
09-2006
05-2007
09-2007
05-2008
09-2008
(09-2009)
Retail space occupancy rates have improved rapidly
in Lahti. Also, office vacancy rate has decreased and is
now around 6%. Retail construction is active also in Lahti,
with new projects carried out outside the city centre. The
extension of Trio shopping centre in the city centre was
completed in 2008 by Citycon. Also, new office projects are
planned or are developed both in the city centre and in old
industrial buildings. Rents for both office and retail premises
have remained relatively stable.
Kuopio
Source: Kauppalehti-KTI barometre survey
Location: 400 km north-east of Helsinki
Population: Kuopio: 92,000
Kuopio region in total: 118,000
Kuopio, the capital of the province of Savo, is situated in
eastern Finland. Kuopio is a university city that places
emphasis on the research and development of information and
welfare technologies. Traditional industry areas are mostly
related to wood. As in most major cities at the moment, the
service sector is the biggest employer in the area.
The property investor base in the Kuopio property
market is dominated by domestic players, consisting of both
national and local investors. The retail market of Kuopio
is concentrated in the city centre around the main market
place. New development in the region is concentrated in
the retail space, new projects including a new shopping
centre in Haapaniemi, a Citymarket hypermarket property
in Päivärinta, and a retail park in Leväinen. Also, IKEA has
confirmed the opening of a new store in the region. New
supply has not affected vacancy rates so far.
In the office market, vacancy rate remains at a low level
of 3.3%, according to Catella. Due to limited supply, rents
have increased steadily, but moderately.

The sponsors of this
publication
Aberdeen Property Investors is the dedicated
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listed on the London Stock Exchange which manages over
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In Finland, Aberdeen manages some €2 billion of property
assets. Our clients are both domestic and international
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with total property asset value about 1.5 billion euros in Finland.
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Citycon is an active owner and longterm
developer of shopping centres,
laying the foundation for a successful retail business. Citycon’s
retail properties serve both consumers and retailers. The
company takes account of environmental aspects and wellbeing
in the areas surrounding its retail properties. Citycon is
the market leader in the Finnish shopping centre business and
holds a strong position in Sweden and a firm foothold in the
Baltic Countries.
Citycon combines property investment with shopping
centre business. This differentiates Citycon from many other
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buying, selling and owning properties.
At the end of 2008, Citycon owned a total of 33 shopping
centres and 50 other retail properties. The fair value of the
company’s property portfolio totalled approximately two billion
euros. Citycon’s shares are listed on Helsinki stock exchange.
www.citycon.com
Eurohypo is a global specialist bank for
commercial real estate and public finance in the
Commerzbank Group. In 2008, Eurohypo was
once again awarded the Best Global Commercial
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for solutions is for the future focused in the slogan: “What
moves you drives us”. In Finland Eurohypo financed among
others the Forum deal in Helsinki CBD.
www.eurohypo.com
Greater Helsinki Promotion Ltd (GHP)
is the international business promotion
agency for the Greater Helsinki area.
GHP receives its funding from public sources – from the
cities of Helsinki, Espoo, Vantaa and Kauniainen as well as
the Uusimaa Regional Council.
Helsinki is a dynamic hub for international business. At
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Invest in Finland assists foreign companies in finding
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IVG Polar Ltd., founded in 1952, is a real
estate investment company concentrating on
owning, leasing and developing office premises. IVG Polar
also manages properties owned by IVG Funds. The main
thrust of its operations is in the Helsinki metropolitan area.
The balance sheet value of IVG Polar’s real estate portfolio
totals €250 million, while its leasable facilities in investment
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NCC is one of the leading housing and
development companies in the Nordic
region. In 2008, annual sales totalled €6 billion. The Group
employs 20,000 persons. NCC develops residential and
commercial property projects and builds offices, industrial
51
The Finnish Property Market 2009

52
The Finnish Property Market 2009
facilities, housing, roads, civil engineering structures and
other types of infrastructure.
In Finland, NCC has three companies: NCC Construction,
NCC Property Development and NCC Roads. NCC’s annual
turnover in Finland stands at €955 million, and it employs
2,500 persons.
NCC Property Development acquires, develops, sells and
leases office, retail and logistic premises and provides services
for the entire life cycle of the properties. Recently, it has been
active in developing new business concepts for business parks,
company headquarters, shopping centres and other retail
projects. NCC Property Development has been elected as the
best property developer in the Nordic region during 2008 by
the international financial magazine Euromoney. As the first
European property developer, NCC Property Development
has been approved as a partner at corporate level in EU’s
GreenBuilding Programme.
www.ncc.fi
Newsec Oy is offering a wide range of
integrated professional and advisory services.
The business is carried out in two business companies:
Newsec Advice Oy offers investment transaction advisory
and leasing brokerage services, valuation and analysis, and
real estate consultancy.
Newsec Asset Management Oy provides asset and property
management as well as corporate services and corporate real
estate management.
Founded in 1989, the Newsec Finnish operations are
part of the Stronghold Group, which is headquartered in
Stockholm, Sweden.
Newsec has over 120 employees in Finland, with offices
in the Helsinki, Turku, Tampere and Oulu regions. Its clients
are among the leading Finnish and international real estate
investors and corporations. In a survey carried out by the
Great Place to Work Institute® Finland, Newsec Oy was
nominated amongst the top 15 best workplaces in Finland
2009 and is the best workplace within real estate industry.
Newsec is The Full Service Property House in Northern
Europe with 18 offices in 7 countries. Newsec offers services
to property investors as well as corporate clients who lease or
own premises for their own use. The company has over 600
professionals and has recently been advisors in transaction
deals with a value of over 9 billion euro. Annually we valuate
properties for more than 65 billion euro and we manage over
1000 properties with a total value of 10 billion euro. This
makes us the only Full Service Property House and gives us
a unique capability to deliver.
www.newsec.fi
Ovenia Oy, founded in 1980, provides
customer driven asset, property and
facility management services according to the needs of
our customers’ property portfolio. Ovenia concentrates
on operative portfolio management, including property
management, financial management, leasing services and
life cycle development services. We don’t invest ourselves in
properties and we buy all the needed services from the open
market. Ovenia’s business model is based on nationwide
network of our own offices and highly skilled management
professionals with cost-efficient, open and transparent
way of working. Our network includes all the best service
producers in Finland. Ovenia’s key success drivers are active
co-operation and highly committed teamwork with our
customers. We are committed to achieve the best possible
profits one can get out of the market whether it’s a question
of maximising the revenues or optimising the costs of the
property portfolios. Ovenia is a sought-after business partner
and employer. We hold around 40 customers covering various
domestic and foreign investors and corporate clients. Ovenia
has over 6 million square metres under its management in
Finland. In 2008, Ovenia’s turnover was over €10.0 million.
Ovenia has 120 employees and offices in Helsinki, Turku,
Tampere, Lahti, Jyväskylä, Oulu, Kuopio, Lappeenranta and
Vaasa.
www.ovenia.fi
RAKLI – The Finnish Association of Building
Owners and Construction Clients is an interest
group and trade association representing
the most prominent real estate, residential building and
infrastucture owners, investors and management service
providers in Finland. The members represent both the
private and public sectors, and member organisations
number around 400 in total. The association brings together
property and construction professionals. RAKLI’s activities
are divided into three branches and five committees. The
branches are residential properties, commercial and public
properties, and infrastructure. Committees coordinate
investment and finance, asset management, use and services,
procurement and urban planning.
www.rakli.fi
The Real Estate Education
and Training Institute is one of
Finland’s leading training companies offering a wide range
of higher professional education and training services for
Finnish real estate and construction industries.
We have 30 years of experience in providing the best
information to help our customers to do better in their
business. We listen carefully to our customers, screen the
things affecting their businesses and co-operate closely with
the entire industry and all the leading Finnish universities
and polytechnics. Our motto is that the better we understand
our customers and their businesses, the better we can answer
to their needs.

The Institute also co-operates with leading universities
in Europe and the United States, and creates platforms for
co-operation with real estate professionals from all over the
world. Our focus is on the northern European and Russian
real estate market. We gather both domestic and international
customers to educate them on, for example, new property
investment opportunities in Finland, Russia, Scandinavia and
the Baltic countries.
Real Estate unit. In the following year, a Commercial Real
Estate unit was established in Helsinki as part of SEB Merchant
Banking covering the Finnish and Russian real estate markets.
Merchant Banking works with large and medium-sized Finnish
corporations, financial institutions and foreign companies
with subsidiaries in Finland.
www.seb.fi
www.propertyinvest.fi
SATO Corporation (SATO Oyj) is one
of Finland’s leading corporate investors
in housing. SATO owns some 23,000 rented homes in
Finland’s largest centres of urban growth and St. Petersburg.
SATO’s investment assets have a fair value of roughly 1.4
billion euros.
SATO’s value proposition is ‘A Home the Way You Want
It’ and boosting customer satisfaction is one of SATO’s key
objectives. The housing portfolio is improved dynamically
to meet changing customer needs, through maintenance and
repairs as well as by investment and divestment. In the past
five years we have invested an average of almost 100 million
euros and divested about 34 million euros per year. In the
same period we have devoted an average of 26 million euros
per year in repairs and upgrading the quality of homes.
SATO commissions new housing construction for the
Group’s investments and for sale. During the year under
review, 567 homes were completed.
The Group’s turnover in 2008 was 232.4 million euros
and the profit before taxes was 27.4 million euros. The largest
shareholders are Finnish pension companies and insurers.
www.sato.fi
The SEB Group is a northern European
financial group providing serving some
400.000 corporate customers and institutions and five
million private individuals. SEB offers universal banking
services in Sweden, Germany and the Baltic countries –
Estonia, Latvia and Lithuania. It has also local presence in
the other Nordic countries, Poland, Ukraine and Russia and
a global presence through its international network in the
major financial centers. On December 31 2008, the Group’s
total assets amounted to SEK 2.511bnT(ËUR 230bn) while
its assets under management totalled SEK 1.201bn (EUR
110bn). The Group has about 22.000 employees.
In 1984, SEB opened a representative office in Finland
and, in 1994, ten years later, SEB opened a branch office.
SEB in Finland comprises Merchant Banking, card operations
(Diners Club, Eurocard and MarterCard) and wealth
management via SEB Gyllenberg. Close to 350 employees
serve more than 100.000 customers in total.
In 2004, the SEB Group decided to consolidate its groupwide
activities in the real estate business within the Commercial
Skanska is one of the world’s
leading project development
and construction groups with expertise in construction,
development of commercial and residential projects and
public-private partnerships. The Group currently has 58,000
employees in selected home markets in Europe, in the US
and Latin America. Headquartered in Stockholm, Sweden
and listed on the Stockholm Stock Exchange, Skanska’s sales
in 2008 totalled EUR 15 billion.
Skanska’s operations in Finland cover construction
services, residential and commercial project development
and public-private partnerships. Construction services
include building construction, building services, and civil
and environmental construction. In Estonia Skanska’s
activities comprise construction services and residential
development. The combined sales for Skanska’s Finnish and
Estonian operations in 2008 were EUR 1,0 billion and the
company employed about 2,900 people.
Skanska Commercial Development Finland Oy is part of
Skanska Commercial Development Nordic, which initiates,
develops and invests in property projects within offices,
logistic facilities and retail warehouses. Office operations
focus on the three large metropolitan regions in Sweden,
the Copenhagen region of Denmark and Helsinki, Finland.
The development of logistics facilities and volume retail
properties is conducted in strategic locations in Sweden,
Denmark and Finland.
www.skanska.fi
KTI Finland is an independent service company
and research organisation providing information,
analysis and research services for the Finnish real
estate industry. KTI maintains extensive databases on the
rents, costs and returns of the Finnish property market. On
the basis of this information, KTI provides benchmarking
services for property investors and publishes market
information. The KTI Index is an internationally comparable
measure of property investment returns covering some €
18.8 billion of property assets representing some 52 % of the
total investment market. KTI has established relationships
with all major property investors in Finland and with many
significant international research organisations and service
companies. KTI has a staff of 17 professionals.
www.kti.fi
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The Finnish Property Market 2009

Key terminology
Property
Kiinteistö
Rent
Vuokra
Rental agreement
Vuokrasopimus
Tenant
Vuokralainen
Landlord
Vuokranantaja
Tax
Vero
Investment
Sijoitus
Return
Tuotto
Yield
Tuotto / tuottovaatimus
Operating / maintenance cost Ylläpitokustannus
Transaction
Kauppa
Limited company
Osakeyhtiö
Housing company
Asunto-osakeyhtiö
Real estate company
Kiinteistöosakeyhtiö,
kiinteistöyhtiö
Mutual real estate company Keskinäinen kiinteistöyhtiö
Real estate investment company Kiinteistösijoitusyhtiö
Pension insurance company/ Eläkevakuutusyhtiö/
pension fund
eläkerahasto
Office (space)
Toimisto(tila)
Retail
Liiketila, myymälä(tila)
Shopping centre
Kauppakeskus
Industrial
Teollisuus
Manufacturing
Tuotanto
Warehouse
Varasto
Logistics
Logistiikka
Hotel
Hotelli
Residential
Asunto
Building
Rakennus
Site
Tontti
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The Finnish Property Market 2009

Useful links
The Finnish Economy
The Research Institute for the Finnish Economy
www.etla.fi
Statistics Finland
www.stat.fi
Bank of Finland
www.bof.fi
Confederation of the Finnish Industries EK
www.ek.fi
in co-operation with:
Property Market Information
Catella Property
www.catella.fi
KTI Finland
www.kti.fi
RAKLI – the Finnish Association for Building Owners and
Construction Clients
www.rakli.fi
RAPAL
www.rapal.fi
Real Estate Education and Training Institute
www.kiinko.fi
Real Estate Companies
Citycon plc
www.citycon.fi
IVG Polar Ltd
www.ivgpolar.fi
Sato Corporation
www.sato.fi
Sponda plc
www.sponda.fi
Technopolis plc
www.technopolis.fi
Real Estate Services
Aberdeen Property Investors Finland
www.aberdeen.fi
NCC
www.ncc.fi
Ovenia Oy
www.ovenia.fi
Skanska
www.skanska.fi
Newsec
www.newsec.fi
YIT
www.yit.fi
Financing Services
Eurohypo
www.eurohypo.com
SEB Merchant Banking
www.seb.fi
Other
Greater Helsinki Promotion
www.helsinkibusinesshub.fi
Invest in Finland
www.investinfinland.fi
Publisher
KTI Finland
Eerikinkatu 28, Helsinki
Tel: +358 20 7430 130
Fax: +358 20 7430 131
ISBN 952-9833-37-7
Photos: Sponsor companies’ archives
55
The Finnish Property Market 2009

56
The Finnish Property Market 2009
KTI Finland in co-operation with: Aberdeen Property Investors, Citycon, Eurohypo, Greater Helsinki
Promotion, Invest in Finland, IVG Polar, NCC, Newsec, Ovenia, RAKLI, Real Estate Education and
Training Institute, SATO, SEB Group and Skanska.