The Finnish Property Market 2012 - KTI

increasing quite rapidly in recent years due to both strong
occupier demand and solid investment appetite. Domestic
institutions typically hold all three office types in their
portfolios, whereas property companies and funds tend to
have more focused strategies.
The biggest investors in the office sector include large
Finnish institutions such as Varma, Ilmarinen and Keva, listed
companies Sponda and Technopolis, as well as specialised
non-listed domestic funds (for example, CapMan’s, Exilion’s
and Aberdeen’s funds). Foreign investors involved in office
transactions in 2011 included Sveafastigheter, Catella
Real Estate, Hansainvest, IVG Institutional Funds, Union
Investment and SEB Asset Management.
“German funds invested
in Finnish offices in
2011”
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
rents. These are favoured by active market players, such as
property companies and some pension funds, in particular. In
these kinds of agreements, effective property management is
crucial, as the cost risk is carried by the investor. Operating
costs can also be charged separately to tenants, thus
increasing the transparency of rents and tenants’ motivation
for cost savings.
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.
Indefinite lease terms are commonly applied in multitenant
office buildings. In this kind of agreement, both
parties can terminate the contract within the agreed notice
period, which might be three, six or 12 months.
Fixed lease terms are commonly applied in larger office
units, which are often developed for the needs of a certain
occupier. In single-tenant buildings, the terms are usually
quite long, between ten and 20 years. In these agreements,
net rents are commonly applied. These kinds of agreements
are also typically applied in sale-and-leaseback deals, with
lease lengths varying between five and 15 years.
Business parks compete by offering 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 a fixed rent plus a
separate service charge, which can be based on the actual
usage. Rental agreements are normally a fixed term for three
to five years.
Office rents are typically linked to the Cost of Living
Index.
The office market in 2012
In the current market, different office submarkets perform
somewhat differently. Despite the softening demand due to
the economic uncertainty, the Helsinki CBD office market
has shown strong performance. In this limited market area,
rental demand is stable and relatively insensitive to market
fluctuations, as, for many businesses and companies, it is
important to locate in Helsinki CBD. In addition to the
CBD, other well-performing office areas include Ruoholahti
in Helsinki, the airport area in Vantaa and Leppävaara in
36
Commercial property stock, 31.12.2010
■ Retail ■ Office ■ Industrial and warehouse
The Finnish Property Market 2012
Helsinki Metropolitan Area
Helsinki
Espoo
Vantaa
Tampere
Turku
Oulu
Jyväskylä
Lahti
Kuopio
0 1 2 3 4 5 6 7 8 9 10
million sqm
Source: Statistics Finland