Foreign investors accounted for 94% of the retail property transactions during the first half of 2011 in Sweden, a market traditionally seen as dominated by the large domestic pension funds and insurers. This compares to 70% in 2010 and 30% in 2009, according to Jones Lang LaSalle’s latest Swedish Retail Market Survey.

In total, retail investment in Sweden reached SEK 8.5 bn (about EUR 930 mln) in the six months to end-June 2011, marking a 165% increase on the first half of 2010 when retail investment came to SEK 3.2 bn. Shopping centres accounted for 79% of transactions and retail warehouse for 15%.

Håkan Pehrsson, head of asset management and retail at JLL: 'Investor demand has been driven by Sweden's strong GDP and growth in consumption, the increased availability of debt finance and high-quality property stock. However, demand is weaker for secondary and tertiary retail property investments.'

Prime retail yields have contracted from 6.5% in mid-2009 to 5.5% in 2011 after a sharp rise in yields during 2008 and 2009, Pehrsson said.

'Our current forecast is that prime retail yields will remain relatively stable over the next few years, not only due to occasional economic volatility likely to restrict downward yield movement, but also pressure to increase interest rates when there is economic growth. In order to preserve or increase the value of investments the ability to increase rents will therefore be crucial, and this will only be achieved by active asset management, including refurbishment and well-designed extensions.'