Barings has completed the c.€72m off-market acquisition of Skvalberget 33, a 6,185m² office building in the CBD of Stockholm, Sweden from BLDG Holding AB. The transaction underlines Barings’ conviction in the continued importance of the office as the central focus of businesses’ working practices. Comprising eight-storeys Skvalberget 33 is fully let to four tenants on leases, with an average of 2.6 years to break, and is currently significantly under-rented. Current occupiers include Academic Work, Meltwater and Stratsys. The final tenant, Beckmans Design School, which occupies three floors, has indicated that it intends to exercise its lease break in 2.5 years, presenting an opportunity to upgrade this space, as part of a wider asset management plan, and capture reversion.
Barings intends to upgrade the entrance hall and communal facilities, including changing rooms and bicycle storage. The company has also identified the potential to increase the asset’s total lettable area, subject to planning, by developing additional office space of c. 3,500m² on the courtyard, as well as converting the attic space into a further c. 400m² of office space whilst also creating an outside roof terrace. Skvalberget 33 is situated in an excellent location in the Eastern part of CBD Stockholm, Sweden’s economic and political centre, close to local amenities including several of Stockholm’s most popular and well-known restaurants and bars, and within two minutes’ walking distance of Ostermalmstorg subway station, connecting to Stockholm Central Station.
Gunther Deutsch, Managing Director, Head of Real Estate Transactions – Europe at Barings, commented: “While a large proportion of the world’s office staff has been working from home successfully over the last few months as a result of government-enforced lockdowns, we firmly believe that, for many reasons, offices will continue to play a vital role for all businesses, particularly in relation to fostering culture, improving collaboration and creativity, as well as nurturing and attracting talent. We believe that in a post-COVID-19 world demand will more than ever be focused on brand new or newly refurbished offices in CBD locations that offer the flexibility of workspace, as well as strong technical and sustainability credentials. Furthermore, at a time when many deals are being cancelled or delayed due to COVID-19 travel restrictions, this transaction, as well as our recently announced acquisition of a Swedish sale & leaseback logistics portfolio, clearly demonstrate how Barings’ local office network affords us a real competitive advantage at this current time. With feet on the ground in our target eight countries across Europe and €1bn of transactions currently in the pipeline we can thoroughly assess investment opportunities firsthand, allowing us to provide the speed and certainty of execution that is so important to vendors.”
Thorsten Slyta, Managing Director, Head of Scandinavia at Barings, added: “Given the fierce competition within the value add a segment, we are extremely proud to be able to source an off-market acquisition like this. Each year only a handful of assets are traded in the Eastern part of the CBD, the most attractive part of the city. Stockholm remains one of the world’s top cities for business, innovation and quality of life. Our off-market acquisition of Skvalberget 33 reflects both our belief in the continued robustness of demand for office space in the city, coupled with its low supply, as well as the property’s ongoing attractiveness given its strong CBD location, low current rental levels and our own future conservative rental income assumptions. The fact that none of the building’s occupiers have asked for rent reductions following the outbreak of COVID-19 further strengthens that belief. We see a clear sign that modern companies today need to have an excellent location for their offices with great commuter possibilities to be able to attract and keep the most talented employees. This ongoing trend has shown to be even more important during the COVID-19 pandemic.”
