The start of the year was relatively quiet, despite expectations for marked increase in property investments. In Q2 activity improved tremendously. Along with the recovery and limited supply for prime product in the capital region, investor appetite for properties outside the prime area is growing.

Some major portfolio transactions have taken place, the most prominent being the portfolio of 40 retail properties including three shopping centres sold by Kesko for approximately €605m. Aided by major portfolio transactions, investments reached a record level of €1.73bn in Q2 vs. €550m in Q2 2014. Domestic institutions continued to restructure their property portfolios. Majority of property sales had domestic vendors in Q2 2015.

In H1 2015, the total transaction volume amounts to the level of €2bn, +97% on the same period in 2014. Current prime yields stand at 4.75 - 5.00% for retail, 4.50% - 5.00% for offices and 6.75% for logistic properties. By location, the share of the total investment volume outside the Helsinki Metropolitan Area was 53% in H1 2015. Investments by property type were dominated by retail and office with shares of 50% and 41%.

The average size of the property transactions has grown gradually since 2011, largely due to increase in major portfolio investments. In H1 2015 the average size was €25.4m while in 2014 it was €22.9m and in 2013 €15.6m. The most significant single transaction in Finland in H1 2015 was the sale of the EY Headquarter in Helsinki CBD to Union Investment for €93.3m in Q1 2015.

^{Source: Realia, Savills European Research}

The sentiment and investors’ interest is expected to remain active in H2 2015. There is potential for increasing investment volumes in the context of fairly-low interest rates, availability of finance, and slightly improving economy. Negotiations on a few major transactions are under way. Essential to market development is the matching trend of demand and supply, to ensure that supply will meet the requirements of investment demand, not simply increase aggregate supply and demand. Investment demand will be focused on a wider selection of properties also outside the prime areas, still provided stable cash-flow.

^{Source: Realia}

Cross border investments are expected to increase towards the end of the year. Institutional investors continue to restructure their local property allocations and look for property investments abroad. Prime yields in the Helsinki Metropolitan Area are expected to stabilise towards the end of the year while prime yields in the growth centres are predicted to edge downwards in H2 2015.