The Finnish Property Market 2012 - KTI

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The Finnish Property Market 2012
business consultancy firms, such as KPMG, Ernst & Young
and PricewaterhouseCoopers, also offer real estate specific
services in Finland.
Financing services
The major part of real estate financing is provided by the
major local banks, including Nordea Bank, OP-Pohjola
Group and Sampo Bank. During the market peak, the market
also attracted some foreign specialised real estate lenders.
However, since the start of the financial crisis in 2008,
some of these newcomers have had to downsize markedly.
Eurohypo and HSH Nordbank, among others, have closed
their local offices.
International players currently active in the Finnish the
real estate market include SEB Merchant Banking, Helaba
(Landesbank Hessen-Thüringen) and Aareal Bank.
As in most European markets, the use of debt financing
in real estate investments increased markedly between 2005
and 2008. Due to the recent changes in market circumstances,
refinancing of this debt has become a widely discussed topic
also in the Finnish market. In the early years of increasing debt,
local banks, in particular, applied rather long loan periods.
Therefore, the terminations of the debt are, compared to
many other markets, more evenly distributed across years.
However, the total amount of terminating real estate debt
approaching terminations is significant, and estimated to be
around €6–7 billion in the next few years.
“Some €6–7
billion of real estate
debt approaching
termination”
In the current market conditions, lenders tend to concentrate
in core assets with stable cash-flow and solvent investors.
For these assets, it is also easier to find equity investors,
and refinancing of core assets is not, therefore, expected to
face any problems, even though the loan-to-value ratios are
significantly lower than in the past. However, refinancing
of non-core assets and portfolios is expected to face more
challenges. The values of these assets are expected to require
adaptation to the changed market conditions.
Property development
The Finnish commercial property development market is
dominated by construction companies who typically have
a separate arm that specialises in commercial property
development. They are active players in new development,
whereas the development of existing buildings is mostly
handled by their owners.
Major construction companies involved in commercial
property development include NCC, Skanska, YIT, Hartela,
Lemminkäinen, SRV and Peab. These companies have all
been active in this field in recent years and have co-operated
with both domestic and international investors. Skanska has
organised its development operations in the Nordics through
Skanska Commercial Property Development Nordic, which
can, under certain circumstances, also remain as investor in the
buildings it develops. NCC Property Development is known
especially as an active developer of its business park concepts
in the Helsinki metropolitan area and other major cities.
“Construction
companies dominate
property development
markets”
Some owner-occupiers – large retailers SOK and Kesko,
in particular – are significant and professional 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 traditionally have quite
conservative strategies concerning commercial property
development. They typically only enter the project when
the majority of the premises are pre-let. Their development
strategies emphasise the redevelopment of the existing assets
in their portfolios, where they can, for instance, look for
new uses for vacant properties. Institutions typically pursue
slightly more active strategies in residential development,
which is considered less risky.
Finnish property investment companies are also active
developers that focus on increasing assets to their own
portfolios. Sponda, Citycon and Technopolis are active
players in property development in their own core areas
both in Finland and in other countries included in their
strategies. There are also some smaller non-listed property
companies and funds active in property development in their
niche markets. One example is Renor, which concentrates
on redevelopment of old industrial premises. Additionally,
some property funds include property development in their
strategy.