Nordic commercial property delivered capital growth of 2.8% in 2010, according to the IPD Nordic Annual Property Index, marking a return to positive growth after two years of capital depreciation.
Based on local currencies, the growth is below the figures seen before the downturn in 2007, but shows a marked improvement on the -5.7% and -2.8% seen in 2008 and 2009. The recovery is in line with other European indices, indicating a stable recovery in 2010.
Income return suffered a slight 20 basis point decline, to 5.5%, leading to a total return of 8.5% for 2010, a solid improvement on the 2.8% total return recorded in 2009.
The four country constituent index is composed and weighted as follows: Sweden, 47.9%; Finland, 18.4%; Norway, 18.3% and Denmark, 15.5%. All four individual countries recorded positive capital growth, but there was considerable variation amongst them. Sweden delivered the strongest growth, of 5.0%, followed by Norway with 2.1%. Finland and Denmark trailed, recording 0.7% and 0.3% respectively.
Sector returns
Retails and Offices recorded capital growth of 2.1% and 2.9% respectively in 2010, leading to total returns of 7.8% and 8.6%. However, this masked considerable variation amongst countries: with Sweden recording the largest capital appreciation in both Retails and Offices, of 4.4% and 5.0%.
Retails in Finland and Norway recorded a more muted capital growth of 0.9% and 1.7% respectively, leading to total returns of 7.6% and 7.3%, while Danish Retail values stagnated, with zero growth, leading to a total return of 4.4%, entirely driven by income return. Offices similarly saw Denmark and Norway trailing Sweden with growth of 0.7% and 2.0%, while Finland continued to see capital depreciation, of
-1.3%.
Residential delivered the strongest sector performance, an 8.9% total return, driven by capital growth of 4.7% and income return of 4.1%. Finland and Sweden delivered capital growth of 6.2% and 6.1% respectively, while Denmark, at 0.7%, lagged behind.
Industrial values continued to decline in 2010, at -0.4%, making it the only sector to record capital decline as a whole. Norway was the only country in the sector to record positive growth, of 3.2%. Total return was still 6.9% for the region, driven by a consistently strong income return of 7.3%.
Christina Gustafsson, Managing Director of IPD Norden, said: "2010 has seen a return to capital appreciation for commercial real estate across the region, a reflection of the overall strong recovery of the Nordic economies.
"Like the rest of Europe, we are, however, seeing a great variation across sectors and geographical locations. Sweden and Norway led the Nordic recovery in 2010, with rental value growth and downwards pressure on yields driving the recovering values. Denmark and Finland have so far experienced a more reserved property recovery. However, compared to the rest of Europe, returns were promising, showing the resilience of the Nordic property market."
Against other asset classes over a three year period, Nordic property, returning 3.5%, continues to outperform Equities, at 0.2%, as measured by the SHB NORDIX equities index, but underperforms property equities, at 8.1%, as measured by the SHB NORDIX real estate index.
Source: IPD
