The Finnish Property Market 2012 - KTI

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The Finnish Property Market 2012
in early 2012, will create increasing challenges for Senate
properties in the coming few years.
The majority of the Finnish university properties
are currently owned by three limited companies, which
were founded in 2010 for the sole purpose of owning and
managing university buildings. Two of the companies own
and manage university buildings in the Helsinki metropolitan
area (Helsinki University Properties and Aalto University
Properties), and one elsewhere in Finland (University
Properties of Finland ltd). Universities own a two-third’s
majority of the shares of these companies, with the state
owning the remaining third.
“Public sector’s
property management
facing increasing
challenges”
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 they currently own some
90% of all premises they use. Some municipalities, such as the
City of Helsinki, in particular, also have significant amount
of space that it lets to private market players. 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. Municipalities’ property ownership
and management are facing considerable challenges due
to the tight financial situation. In the future, potential
significant changes in the municipal structure and/or service
provision strategies will also have an impact on the need and
management of properties.
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 owner-occupied. The
proportion of owner-occupancy is currently estimated to be
somewhere below 60% and is thus close to the average found
throughout Europe.
Major Finnish corporations have adopted different
strategies with regard to their real estate management. The
broadening and development of the property investment and
finance market has enabled the execution of these strategies.
During the past five years, Finnish corporations have,
in total, sold approximately €1.0 billion worth of properties.
In many cases, the companies remained as tenants in these
buildings through relatively long leases. During 2011, no
significant sale-and-leaseback transactions were carried out.
Together with the tightening market situation, also potential
future changes in accounting principles of rental agreements
might increase unsecurity in this kind of deals. On the other
hand, Pöyry Plc pursued a break option of the sale-andleaseback
deal of its head office, and purchased the property
from Nordisk Renting in early 2011.
SOK and Kesko, the two major Finnish retail chains, are
active players in the property market and emphasise the role
of property development in their business strategy. They
both hold significant property portfolios in their balance
sheets, but also rent premises from other investors. They are
also significant landlords in the retail market.
Industrial companies still typically own their production
properties. For office properties, more varied ownership
and finance strategies are applied. In new investments, head
offices are typically developed by investors. For instance, a
new head office of Tallink Silja was completed by Nordea
Life Insurance in 2011, and pension insurance company
Etera is currently developing a new headquarters for media
company Alma Media in the Töölönlahti area of downtown
Helsinki, and will start office projects for KPMG and Ernst
& Young in the same area in 2012.
Companies using dominantly office or light production
space, such as professional services, media and IT/
telecommunication companies, are pursuing increasingly
sophisticated workplace strategies. International companies
are also increasingly executing these strategies globally.
These strategies emphasise space efficiency and occupier
view, along with environmental issues, which has led to
abundant new development in the office market. This kind
of approach also impacts the preferences for ownership and
financial issues.
Photo: Skanska / Pauliina Munukka