In its Pangea Property Outlook 2019 published on Friday, the firm says higher interest rates and lower rental growth in some Nordic markets are some of the main factors clouding the outlook but that the fundamentals remain firm.

Transaction volumes across the Nordics amounted to €43 bn last year, the second highest volume ever, and compares with a 15% drop in European investment over 2018.  

For this year, Pangea is forecasting a transaction volume across the Nordics of about €40 bn, partly driven by portfolio and corporate deals and large inflows of foreign capital. The net capital inflow to the Nordics in 2018 was €5.7 bn, with foreign buyers representing 39% of the total. Blackstone and Brookfield are two of the biggest investors in the region.

‘Despite global headwinds in the form of declining global growth and rising interest rates, we expect another strong year for the Nordic property market, not least because the Nordic countries are experiencing solid growth, robust public finances and strong labour markets on the one hand and weak currencies on the other’, said Bård Bjølgerud, CEO and partner at Pangea Property Partners.

‘Depreciation of the Nordic currencies makes the markets attractive. Over the past years the currencies of Sweden and Norway have depreciated about 40% against the dollar and almost 20% against the euro,’ Bjølgerud added.

While the markets are performing well overall, there are significant variations between sectors, according to Pangea’s research. The office sector remains strong overall but prime rents in Stockholm are levelling off and residential developers in Sweden are struggling. Logistics is in strong demand while retail is languishing, reflecting the shift to e-commerce.