Cushman & Wakefield MarketBeat reports analyse quarterly Sweden commercial property activity across office, retail and logistics sectors including supply, demand and pricing trends at the market and submarket levels.
Office
About 31,000 sqm of new office space has been completed across Greater Stockholm, Greater Gothenburg, and Greater Malmö in the second half of 2023, marking a decrease of 47% compared to the same period last year. Greater Stockholm constitutes a vast majority of the delivered space (28,000 sqm), whilst Greater Malmö has had no completions. Full year completions for 2023 amounts to nearly 190,000 sqm, a reduction with 15% compared to 2022. A continued high development activity is expected, with a current under construction pipeline of nearly 390,000 sqm across the three largest urban areas in Sweden. Of these, about 150,000 sqm is expected to reach the market this year, while the remaining projects are expected to be completed in 2025 and beyond. The overall vacancy rate continues to increase in the three major cities, reaching 13% in Greater Stockholm, 10% in Greater Gothenburg and 9.5% in Greater Malmö. Although, the vacancy rates have declined in Malmö CBD New, marking a new low at 5%. Both Stockholm CBD and Gothenburg CBD encountered a slight increase in vacancy rates, extending to 6% and 11%, respectively. Prime rents continued to increase in Stockholm CBD, reaching SEK 9,400 per sqm. Prime rents in Gothenburg CBD and Malmö CBD New remained at SEK 3,800 per sqm and SEK 3,400 per sqm, showing signs of stabilisation. Meanwhile, the prime yields have continued to decompress, reaching 4.00% in the Stockholm CBD, 4.65% in Gothenburg CBD, and 4.90% in Malmö CBD New.
Logistics
The first quarter of 2024 had more than 100,000 sqm of new developed logistics space reaching the Swedish market, whereof a vast majority were BTS projects with tenants ready to move in at completion. Viewing the robust development pipeline of 2024, an additional 1.3 million sqm of new completions are estimated to be completed. More than half of the new developments take place in regional cities, with a combined volume of about 675,000 sqm. The fraction of speculative projects developed in Sweden during 2024 amount to about 43%, somewhat higher compared to 2023. However, the 2024e pipeline is now a bit slimmer than anticipated in Q4 2023 due to projects being delayed and pushed over into 2025e completions or ending up put on hold until further notice.
Demand for logistics space began to lose some momentum in Q1 2024 in certain submarkets, with a slight increase of 50 bps in the vacancy rate, resulting in 5.5% on a country level. Both the Stockholm market and the regional cities saw stabilising vacancy rates at 6.0%, respectively, whilst Öresund had a minor increase to 5.0%. The most significant change in vacancy rate Q/Q took place in Gothenburg, moving from 2.5% in Q4 2023 to 4.0% in Q1 2024, with properties in various standards having tenants not extending their leases. Adding to this is that there were no speculative completions in Gothenburg during Q1.
Prime yields have settled after last quarter’s upward movement, mainly due to a quiet transaction market in the logistics segment with only a few deals completed. Thus, prime yield in the Stockholm and Gothenburg regions remained at 5.00%, as well as the Öresund region and regional cities stabilising at 5.25% and 5.50%, respectively. Meanwhile, prime rents saw no major movements, coming from strong growth in 2023, and therefore maintaining the Q4 2023 levels of SEK 1,000 in the Stockholm region, SEK 900 in the Gothenburg region, SEK 800 in the Öresund region. However, prime rent in the regional cities increased slightly in Q1, amounting to SEK 650 in the most sought-after locations. Consequently, capital values were more or less flat in Q1, with a minor upside in regional cities.
Residential
The number of new apartments in the recently started residential projects all over Sweden dropped to about 5,900 units in Q2 2023, marking a decrease exceeding 45 percent YoY. Developers are still facing significant challenges due to the maintained high construction costs and increasingly expensive debt. As a result, multiple projects are still left on hold despite a severe apartment shortage in 180 out of 290 Swedish municipalities.
Regulated rents have risen by 14 to 21 percent YoY across the major cities in Sweden. Simultaneously, the yields have continued their upward trajectory in Gothenburg and Malmö reaching 4.6 and 4.7 percent, respectively. Yields in Stockholm remained flat at 4.1 percent. Meanwhile, the residential investment volume amounted to SEK 2.6 billion, reflecting a decrease of 64 percent quarter-to-quarter and 26 percent YoY. Total investment volume for 2023 came in at SEK 21.3 billion, corresponding to a drop of about 54 percent compared to 2022.
