Major investors focus on the real estate market and are now expanding their operations
Institutional capital is piling into Nordic real estate as investors hunt for returns. The stronger investor demand in the Nordics last year- Sweden, Normay, Denmark and Finland- was the most ever recorded and current trend also seem just as strong and favourable.
Linus Ericsson, CEO of Jones Lang LaSalle’s Swedish outfit said that demand is from deep-pocketed investors and his firm has already hired three new senior advisors for the same in the region this month.
Though some worry that Europe’s real estate market could be approaching a bubble, it has not impacted the foreign investments. According to the statistics, foreign investors accounted for a third of transactions by value last year, about $49 billion.
Alongside Goldman Sachs and a Luxemborg-based entity backed by the Qatari royal family, New York-based Neuberger Berman is now also opening an outpost in the region.
Hybrid bonds, which are meant to convert to equity or absorb losses- are now gaining prominence in the region. The real estate firms are now opting for the bonds, largely because they’re cheaper than equity.
In comparison with 2018, where just one real estate company offered a hybrid bond, in 2019, three companies offered bonds of benchmark size. Nordic real estate companies issued $1.5 billion in hybrid debt last year.
Surge in foreign capital has caught the attention of domestic regulators in Nordic regions, especially Sweden and Denmark, where interest rates have been below zero. The diversification potential in the Nordic countries remains high due to the heterogeneous yield structure.