This can be attributed to significant investments into multifamily (residential) assets and public sector properties, such as care homes and schools. Foreign investors were net buyers for the fourth year in a row despite prime yields for logistics and multifamily assets dropping to the high 3s/low 4s in Sweden, which is still higher than the yields for similar assets in Germany or Paris.

With a total investment volume of SEK 35.5bn (€3.4bn), reflecting a market share of 27%, multifamily properties were investors’ preferred asset class, whether new buildings or existing stock. By the end of the third quarter, forward funding deals amounted to SEK 17bn (€1.6bn), reflecting almost 50% of the multifamily sector’s total investment volume. This is a new record and well above the five-year average of SEK 11.3bn (€1.1bn). 

Public sector properties were the second biggest investment class, totalling SEK 31.5bn (€3bn), which is also a new record. This large investment volume is primarily driven by SBB’s SEK 28bn (€2.7bn) acquisition of listed company Hemfosa.

Savills notes that office properties were the third largest sector, with a total investment volume of SEK 27bn (€2.6bn), reflecting a market share of 21%. Stockholm accounted for 41% of the total. Notable deals include Barings buying the Skvalberget 33 CBD office building in September and AFIAA acquiring Cerberus 2 ‘Forex-huset’ in August in the Swedish capital.

The impact of Covid-19 has sped up Swedish online retail sales, creating new demand for logistics space. SEK 15bn (€1.4bn) was invested in this asset class, making it the fourth largest sector by volume with a market share of 11%.

Peter Wiman, Head of Research at Savills in Sweden, says: “The outlook for the remainder of 2020 is positive compared to the initial phase of the pandemic. Long-term borrowing costs remain low, or negative across Europe, with the Swedish 10-year bond yield at -0.13%, which will maintain an attractive yield spread for most real estate sectors going forward. However, a low economic growth environment presents challenges and the effects of the lower bond yields could be offset by a rising risk premium and/or falling rental growth expectations.”

Niklas Zuckerman, Head of Investment at Savills in Sweden, says: “From a historical perspective, investors tend to seek defensive options in uncertain times. The stable cash-flows and the very low vacancy risk in the Swedish multifamily sector offers an attractive risk-adjusted return for investors and we also expect to see further significant investments into logistics and office properties with the right tenants and long leases.”