Newsec Property Outlook, Autumn 2021

NEWSEC PROPERTY OUTLOOK AUTUMN 2021



NEWSEC PROPERTY OUTLOOK



LOGISTICS, LOGISTICS, LOGISTICS I often get asked why I enjoy working in real To further enhance our real estate advisory estate so much and my answer is that it affects offering to large international investors and everyone in some way. Everything in the physi- global tenants, we decided to appoint a New cal environment that surrounds us - from where Head of Logistics & Industrial at Newsec during we live, work, and socialize to schools and where the past year. We are very pleased to have Anita we shop, is real estate. At first glance, logistics Simaza onboard the Newsec team. may seem more distant and industrialized from an end-consumer perspective, but it is very Logistics is the most borderless asset class much intertwined with retail and e-commerce. and as the Nordics is the third largest market in Europe, after the UK and Germany, this brings As our consumer behaviours are changing, so great opportunities for investors active in the are the needs for even more efficient and crea- region. For instance, one insight presented tive logistics solutions to match the increasing in this report is that compared to the rest of demands for flexibility and speed. And as such, Europe, significantly less logistics buildings there are a lot of exciting developments taking have been developed per capita in the Nordics. place within the sector, both with regard to last mile deliveries and larger hubs, not to mention With that, I wish you an interesting read! dark stores and ghost kitchens, robots and drones… I am convinced that we have seen Max Barclay, nothing yet! Head of Newsec Advisory In this edition of the Newsec Property Outlook, we take a closer look at the increasingly popular asset class logistics, and see what the future holds for the Nordic and Baltic real estate mar- ket. Over the last few years logistics has seen a massive increase in popularity – from being considered relatively niche, to now being the third largest asset class on the Nordic and Baltic property market. It’s fair to say that logistics has really been in demand the past year. 3



CONTENTS A difficult return to (some kind of) normalcy?................................................... 7 Storage is the new black: A dive into the logistics market .................... 12 The Swedish Property Market ..................................................................................... 18 The Norwegian Property Market ............................................................................. 20 The Danish Property Market ........................................................................................ 22 The Finnish Property Market ....................................................................................... 24 The Estonian Property Market ................................................................................... 26 The Lithuanian Property Market .............................................................................. 28 The Latvian Property Market ...................................................................................... 30 European Property Markets ........................................................................................ 32 Macroeconomic data........................................................................................................... 34 Property data ........................................................................................................................... 37 Definitions ..................................................................................................................................... 41 The Newsec Property Outlook Team .................................................................... 42 The Full Service Property House .............................................................................. 44 Newsec’s market reports ............................................................................................... 45 Contact and addresses ..................................................................................................... 46 Copyright Newsec © 2021 This report is intended for general information and is based upon material in our possession or supplied to us that we believe to be reliable. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any warranty that factual errors may not have occurred. Newsec takes no responsibility for any damage or loss suffered by reason of the inaccuracy of this report. Newsec, Box 7795, SE-103 96 Stockholm, Sweden. Phone + 46 8 454 40 00, www.newsec.se. You may use the information in the Newsec Property Outlook but acknowledge- ment must be made for all quotations and use of data/graphics. Cover photo: Getty Images 5

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NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY?  ● Photo: iStock A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY? Klas Eklund, Senior Economist, Mannheimer Swartling After a year of wild gyrations in the wake of the pan­ from the pandemic and ultra-loose policies wane. → demic, the global economy will gradually return to more The main risk – both in the Nordics and other developed normal growth. The “new normal” will, however, be economies – is that inflation stays high and inflationary different from the pre-pandemic normal. New virus expectations rise, which would force central banks to mutations may come and go, and we will need continu­ abandon their loose policies and cause strains in asset ous new vaccine jabs. Supply disruptions will be with us markets. for some time, as will bottlenecks in the labour market. Inflation will be higher than before the pandemic. All this holds also for the Nordics, who in general will Central banks will struggle with exit strategies. perform better than Europe as a whole. Inflation will fall Property markets will still be supported by low bond back after peaking this year and low rates will remain. yields – but headwinds will increase as the demand pull Here, Norway is the odd one out, with a steeper return to normal interest rates. 7

●  A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY?   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 »The consensus view is that GDP in the Euro zone, after falling a whooping 7 per cent in 2020, will grow by some 5 per cent in 2021 and 4 per cent in 2022« A strong rebound… 2.5 per cent. Most of this is, however, sector. A macro risk would be if banks caused by transitory factors, and are hit by contagion, but the main After the sharp contraction in 2020, inflation will fall back in 2022. Wage forecast is that the government will the OECD economies have rebounded inflation is not expected in Europe. protect them. during 2021. The upturn has been stronger than anticipated, courtesy of …will gradually cool Globally, it is likely that mobility and the roll-out of the vaccine. This helped travel will suffer for some time yet. unwind many of the regulations and Looking ahead, these wild swings – Supply chain disruptions are hurting lock-downs that created economic first down, then up – will gradually turn trade and cause local and sector bouts havoc during the early phases of the into a more normal pattern. As the of price increases. Thus, there will be pandemic. However, vaccination has strong cyclical and political stimulus a whiff of stagflation in the air as the been much slower in most emerging will fade, growth will gradually cool. aftermath of the pandemic causes dis- markets, meaning their economic This process has already begun, but ruption to production as well as some recovery is hurting. the exit strategies will be rather slow inflation. Digitalization will continue as central banks are afraid to tighten to change the way we communicate, Another reason behind the strong prematurely, and as the political cli- meet, shop and work. The labour mar- recovery has been record-breaking ex- mate seems to favour fiscal expansion ket will see lingering negative effects pansionary policy, both monetary and for some time yet. on groups with poor education and fiscal. During the past year, both real lacking core competences. key rates and bond yields have been Thus, the consensus view is that GDP negative in most countries, liquidity in the Euro zone, after falling a whoop- A difficult exit from injections have reached new highs, ing 7 per cent in 2020, will grow by loose policy… and fiscal deficits have grown. In the some 5 per cent in 2021 and 4 per cent US, where the fiscal stimulus was the in 2022. Inflation will hover just below For the inflationary shocks to give biggest, personal disposable income 2 per cent. The trend is similar in the permanent effects, they would have rose sharply, despite slumping GDP and UK, but inflation is higher and the to cause higher wage increases and rising unemployment. As a result, cyclical swings are even stronger. higher inflationary expectations. Such several Western countries seem poised risks do exist in the US, but hardly in to reach pre-pandemic GDP levels All this, of course, presupposes that the Euro-zone or in the Nordic region. already by year-end or in early 2022, new dangerous variants of the virus As inflation in most countries will fall although the UK and some countries in will be contained. This is not assured. back again, central banks will only Southern Europe are still lagging. It is likely that, after Delta, there will gradually take their foot of the throt- new mutations. New vaccine jabs will tle. Among the big economies inflation Predictably, inflation has risen as a probably be needed, and regional re- risks are highest in the US, where result of base effects (falling prices strictions will probably be necessary labour shortages occur in all sectors in 2020 autumn are not repeated in here and there. Furthermore, lack of and fiscal stimulus has increased real the 12-month statistical series), rising containers, semiconductors and other disposable income for households. commodity prices, supply bottlenecks inputs will put a brake on manufac- Thus, the Fed will move first, reducing and high demand. These effects turing and trade. This realization has liquidity injections already this year, are stronger in the US than on the dented consumer confidence and but being careful not to cause any European continent, and American helped hold down real yields. But the “taper tantrum”. inflation has reached 5 per cent. Here, forecasts lean heavily on the assump- inflation expectations have risen and tion that no lasting, general lockdowns The ECB has missed its inflation target labour markets may start to tighten will take place. on the downside for a full decade and enough for wages to have inflationary will keep its key rate below zero at effects. Although levels are lower in In China, the situation is aggravat- least another year. The huge pile of Europe, even in Germany inflation now ed by convulsions in the real estate debt amassed during the pandemic has reached 3 per cent, and in Sweden 8

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY? ● Photo: iStock could cause a financial crisis if rates spend more to fight it. Vast programs yields will still be historically low, are hiked rapidly. Both the Fed and the for education, social insurance, infra- but the trend will nonetheless point ECB have also adopted new strategies, structure and against climate change upwards. Also, after many strong according to which an overshoot of will keep expenditure high in most years, stock valuations are historically the old inflation targets can be accept- countries all of 2022. high. It is not unreasonable to believe ed after many years of undershooting. that we will see some profit-taking and The Fed and the US Treasury explicitly Jittery financial markets cooler equity markets. The market will state they are aiming at more than full understandably be nervous and we employment; a red-hot labour market The ultra-loose monetary policy has are bound to see some volatility. to radically increase labour participa- supported financial markets through- tion and reduce poverty. out the pandemic. Real bond yields Property markets have set records → have been extremely low – and fell in many countries, both with regard With rates that low, budget deficits further during summer as worries to prices and transaction volumes. will not be regarded as dangerous. regarding the Delta variant hit the The pandemic has triggered increas- Also, political priorities are changing market. Equity markets have boomed, ing demand for larger apartments in the wake of the pandemic. Inequal- as well as property markets. Looking and renovation of houses, in order ity is seen as more of a problem than ahead, monetary support will still be to accommodate work from home. before, and most governments will there, but it will slowly weaken. Bond Also here, it is reasonable to see a 9

●  A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY?   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 »The Nordics – Finland, Denmark, Norway and Sweden – have fared better than the Euro Zone« somewhat slower development ahead all three countries are back to their Here, monetary policy will move in dif- as yields have dropped substantially pre-pandemic GDP levels already. In ferent ways since the Nordic countries already and the pandemic’s effects all countries, the recovery has been have different monetary regimes: Fin- gradually wane. broad-based, as well as helped by a land has adopted the euro, Denmark massive inflow of EU funds. has a fixed exchange rate to the euro, Nonetheless, there will still be a lot of Sweden has a floating exchange rate money chasing rewards and looking Inflation will be slightly higher than despite having no formal opt-out from for investments. Investors will look for in the Euro zone average, in particu- the euro, and Norway is not an EU alternatives to stock markets. With lar in Lithuania, because of labour member at all. only a slow rise of bond yields ahead, shortages and bottlenecks. But since it is difficult to see any market-in- all three countries have adopted the Sweden duced property crisis ahead. However, euro, key rates are set by the ECB, Sweden is set for the fastest growth should inflation for some reason stay which means that real rates will be among the Nordics during 2021, and elevated longer than anticipated, clearly negative. will still grow stronger than usual in there is a risk that central banks will 2022. Growth has been broad-based, rethink and that rates move up more In all the three Baltic states, property with manufacturing leading the way rapidly. This would rock all financial markets are been strong, courtesy of but services are now catching up. A markets, including property. the factors mentioned above. Trans- high household savings ratio enables action volumes have been high and increasing consumption. The Nordics and Baltics prices have risen. Unemployment is falling, but from The Baltic countries – Estonia, Latvia The Nordics – Finland, Denmark, a high level, and wage increases and Lithuania – have all recovered Norway and Sweden – have also fared remain subdued. Inflation follows the swiftly. The recession last year was better than the Euro zone. All the common pattern with a sharp rebound milder than in the Euro zone as a Nordic countries will have surpassed this year – but probably falling back whole, in particular in Lithuania. pre-pandemic GDP levels by year-end. next year. The Riksbank will gradually The rebound this year has been Growth has been broad-based, and slow the pace of liquidity injections, exceptionally strong in Estonia, but labour markets are improving. but its repo rate will be held at zero all through 2022. Fiscal policy will remain Photo: Shutterstock expansionary, courtesy of low public debt and 2022 being an election year. The property market has been strong, but both the Financial Supervisory Authority and the Riksbank have expressed concern that household debt is getting dangerously high. The FSA has consequently announced that compulsory amortization of mortgage loans (temporarily abandoned during the pandemic) will be re-introduced this autumn. Denmark Denmark re-opened in the spring and has seen good growth since then. Already in the second quarter, GDP 10

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 A DIFFICULT RETURN TO (SOME KIND OF) NORMALCY? ● »After the gyrations of recent years, the Nordic and Baltic economies are set to return to some kind of normalcy« surpassed its pre-crisis level. As in Unemployment has stayed stubbornly was boosted by new capital, also from Sweden, both manufacturing and high. Inflation will stay below the ECB foreign investors, and transaction vol- services have rebounded, and looking target, and since Finland is part of umes will set a new record this year. ahead consumption will be bolstered the Euro zone, the ECB’s negative key The housing market is expected to by pent-up demand. rate will persist also in Finland. Public cool somewhat, but the central bank is debt is clearly higher than in the other still determined to hike. The labour market has recovered Nordic countries, and will continue to faster than anticipated and is ap- rise. Yield spreads will remain narrow, Parliamentary elections have ushered proaching pre-pandemic levels. though. in a change of government. A left Labour shortages are clearly visible, turn can be expected, but the new and wage pressure is returning to The housing market has been strong, labour-led coalition is not expected to some sectors, such as construction. and the number of housing starts has undertake any policy changes which Still, the consensus view is that infla- been historically high this year. Liquid- will impact the property market in tion will remain low. Since the Danish ity has returned and the transaction any significant way. An important, yet krone is fixed to the euro, the central volume rose sharply during summer. undecided, issue is how the sovereign bank will continue to shadow the ECB. Foreign investors have shown increas- wealth fund should be used and if it Recently the krona has been strong, ing interest in the Finnish property will be politically affected. which may open up for the central market. bank to actually make a small, symbol- Summing up ic cut of the policy rate. Norway The commodity-dependent Norwe- After the gyrations of recent years, The property market was booming gian economy was hit by a double the Nordic and Baltic economies are during spring, with transactions whammy last year – the pandemic set to return to some kind of normalcy. growing and foreign capital flowing in. and crashing oil process. Both these The hectic pace of the rebound will The residential market is strong, but negative factors reversed this year as slacken, but growth will still be decent. it is reasonable to expect housing to the economy is opening up and fossil Unemployment is coming down, but cool somewhat next year. Supply of fuels have made a recovery. GDP has inflation risks seem small. In all coun- homes for sale has been limited, but surpassed the pre-pandemic level. tries – bar Norway – key rates will stay residential construction is picking up where they are. speed. A tightening of amortization The recovery is broad-based, with requirements has been discussed, but both manufacturing and services The underlying financial forces sup- no changes have been announced. contributing. Unemployment is falling. porting property markets will there- Inflation remains low. But while the fore mainly remain in place. Trans- Finland other Nordic and Baltic central banks actions have reached or surpassed The recovery in Finland has been will stay put and/or follow the ECB, record levels all over the region, and uneven this year, but picked up during Norway’s is ready to hike. Norway has prices have risen sharply. However, it’s summer. The positive cyclical forces no obligation to shadow the ECB, since not likely that property markets will have been strong, with household it is outside the EU with an independ- stay quite as hot in 2022. Bond yields consumption from pent-up demand ent central bank, its own currency and will rise, albeit slowly. The exceptional the driving force. Investments are a flexible exchange rate. stimulus caused by pandemic relief also picking up speed. However, will gradually shrink. Further, regula- Finland has some structural ailments, One reason for tightening is the hot tors are worried about debt levels. with weak productivity growth and housing market. Norway has a history a shrinking working-age population. of over-heating property markets, Property markets, too, will see a These underlying structural problems and the central bank wants to act in a return to some kind of normalcy after will remain, which means that growth precautionary manner. During spring the hysterical pandemic episode. will slow down again in 2023. and summer the real estate market 11

●  STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET The rise of industrial, and in particular its sub-segment logistics, as a property segment has escaped very few. In just a few years, the segment has gone from being relatively niche, to being the third largest property segment in the Nordics & Baltics, not far behind residential and office. Even pre-covid, the segment was pushing new highs, which has been further escalated by the impacts of the virus. Now, the segment is seen by investors as one of the safest segments to invest into on the property market, with the enormous growth of e-commerce further increasing interest. In this edition of the Newsec Property Outlook, Newsec explores the growth of logistics, the state of the market in the Nordics & Baltics contra the rest of Europe, and the opportunities and risks that the segment faces. 1. The new core segment 1. Investment into industrial is driving foreign investment in the Nordics & Baltics The growth in investment into the Per cent industrial segment over the past few 70 years has been sizeable. In 2015, the segment accounted for 9% of the 60 total transaction volume, while in 2021 YTD, the segment has instead ac- 50 counted for 17% of the volume in the Nordics & Baltics. This means that the 40 segment is on course for the strongest transacted volume ever – the current 30 record is EUR 5.9 billion (set in 2020), while transactions over EUR 5 billion 20 have already been recorded in 2021. Though the growth has been progres- 10 2016 2017 2018 2019 2020 2021 YTD sive, the biggest jump has been noted 0 since the pandemic, with the industrial segment taking clear market share 2015 from offices in particular. Industrial transaction volume accounted for by foreign investors Indeed, foreign interest for industrial Total transaction volume accounted for by foreign investors & logistics in particular has skyrock- eted, with many foreign investors 2. Logistics has established itself as the largest sub-segment viewing logistics as their new core segment, taking the place of offices. Per cent As shown in graph (1), in 2021 YTD, 70 foreign investors have accounted for over 60% of industrial purchas- 60 es in the Nordics & Baltics – while in 2020, the share was also over 50%. 50 In 2018, meanwhile, the share taken of the industrial segment by foreign 40 investors was only 19%. This is despite foreign investment as a whole being a 30 little weaker into the Nordics & Baltics during the pandemic, at around 30% 20 - with this having hovered closer to 10 2016 2017 2018 2019 2020 2021 YTD 0 2015 Industrial Logistics Warehouse 12

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET   ● »The industrial & logistics segment is on course for its strongest transacted volume ever – the current record is EUR 5.9 billion (set in 2020), while transactions over EUR 5 billion have already been recorded in 2021. Photo: Shutterstock 40% in previous years, including to over 300 in 2020. 2021 has already It is primarily the logistics sub-seg- 2018. At the same time, the number of seen over 250 transactions, meaning ment that has been driving demand. transactions within the segment has this year, too, looks set for over 300 Graph (2) shows that logistics has in recent years also increased by over transactions in the industrial segment clearly established itself as the domi- 50% – from just under 200 in 2015, in the Nordics & Baltics. nant sub-segment, with around 60% of the volume. Second to logistics, the Definitions industrial sub-segment tends to hover around 30% of the volume – though Industrial is often used as a catch-all phrase encompassing logistics, this has fallen in recent years – while industrial and warehousing. However, the sub-segments are generally warehouses hover between 10 and defined as follows. 20% of the total segment volume. High quality, newly produced logistics Logistics Warehouse Industrial properties are responsible for driving Refers to properties Refers to properties (light & heavy) much of the demand for the segment. that are used primarily that are used for Includes both light However, the rise of logistics has for short-term storage long-term storage industrial and heavy also increased demand for the entire purposes, where goods purposes, where there industrial. Refers to all industrial asset class. Companies are then distributed is limited production other types of industrial want to be closer to the consumer, onto last mile locations or distribution of properties, primarily and therefore any urban industrial or (“last stop” logistics), goods. used for production of logistics properties – whether they distribution centres or some form. be cross-dock, cold storage, or light end users. industrial – are experiencing yield compression. → 13

●  STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 »The Nordics & Baltics lag behind continental Europe a little in terms of modern logistics stock« 2. The Nordics & Baltics the Nordics & Baltics – perhaps expect- 200,000 sqm in Finland – it will take – an undersupplied logistics edly, given the presence of significant some time for the older existing stock market? logistics hubs & trade routes in the to be replaced with property with countries. Interestingly, Czechia has higher specifications and sustainable Despite rising demand from inves- close to the same amount of logistics standards. At the same time, investor tors, there continues to be a huge space per capita as Sweden & Norway, appetite for logistics continues to undersupply of modern logistics that and more than in Denmark, Finland rise – and a relative lack of modern meets today’s demands in the Nordics & the Baltics. Czechia has a similar supply as well as competition between & Baltics. The lack of speculative population to Sweden and is located investors could serve to push down construction compared to the rest of in a strategically favourable location yields further. Europe, strict planning constraints, for logistics, but most importantly the and general requirement among many country has traditionally been strongly 3. Investor appetite grows players for a large portion of space linked to the manufacturing sectors to be pre-let prior to projects being of Germany, especially automotive. The last few years have generally seen commenced, has resulted in relative Nevertheless, the relatively high yield compression for most property supply being held down relative to the amount of logistics space in Czechia, segments, but few have seen as strong rest of Europe. At the same time, there as well as other continental European of an increase in investor appetite as is enormous potential and interest in markets, in comparison to the Nordics industrial & logistics. Indeed, graph (4) the segment. & Baltics highlights that the Nordics & shows the relative yield compression Baltics may lag behind a little in terms for the logistics segment compared Graph (3) shows the relative supply of modern logistics stock. In particu- to the office segment in the Nordics & of logistics space per capita, in the lar, geography and long distances Baltics in the past few years, as well as Nordics & Baltics compared to some between population centres suggests Newsec’s forecast for 2021 and 2022. key European markets. This shows the need for new space. Though a The diagram clearly shows that logis- that there continues to be relatively record amount of new development tics has moved closer to offices in the little logistics space in the Nordics & is expected in 2021 – 800,000 sqm in past few years. A gap that amounted Baltics. The major Western European Sweden (similar to the amount set to to as much as 200 basis points in the logistics markets of Germany, the UK, come to the UK in 2021), 350,000 sqm past has been narrowed to less than France & the Netherlands outperform in Norway, 300,000 sqm in Denmark, 3. Modern logistics stock (>10,000 sqm) in the Nordics & Europe 2,0 Thousand sqm 140,000 120,000 1,5 100,000 80,000 1,0 60,000 40,000 0,5 20,000 0 Germany United France Nether- Poland Czechia Slovakia Romania Sweden Norway Denmark Finland Lithuania Latvia Estonia 0,0 Kingdom lands Total stock (000 sqm, left axis) Total stock per capita (right axis) 14

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET   ● »Logistics has moved closer to offices in the past few years – narrowing a yield gap that amounted to as much as 200 basis points in the past to less than 100 basis points today« highlighting that there is still further room for compression in the Nordics & Baltics. While the logistics segment is attracting new tenants that need adaptable buildings, the number of genuinely new investors coming into the segment is fairly limited. Instead, we see experienced logistics investors going further afield – having perhaps invested into core European markets, and now instead looking for stronger returns in the Nordics & Baltics, driv- ing yield compression. Photo: Shutterstock The primary driver holding back the logistics segment is that the longevity 100 basis points today across many pression in the past few years, yields of buildings is not perceived to be as markets. In 2022, Newsec expects this in the Nordics & Baltics remain rela- strong as for office space. The latter gap to decrease further in size. tively high compared to many other segment is seen as more sticky in European cities. Key markets across that sense, while logistics is seen as In general, it is not surprising that Europe are seeing yield gaps narrow more easily replaceable, as absolute prime logistics yields are moving closer to 50 basis points or lower – with some location and quality of the exterior is to prime office yields. Both forms of in- even seeing the gap tending towards not as value-driving. Indeed, the in- vestments can provide similar income closing entirely. Prime logistics yields dustrial segment is the only property streams and growth opportunities. in Germany and the UK are below segment where the building itself is Further, despite impressive yield com- 3.5% and continue to compress – less important, while what goes inside the building is more important. The existence of a multitude of locations that can compete with any specific logistics location also worries some investors. 4. The yield gap between logistics & office tightens Nevertheless, in developed countries, Basis points zoning & permitting rules create land -50 constraints which make it difficult to exploit land in practice. While there is plenty of exploitable land – particular- -100 ly in the Nordics & Baltics – in practice, this land tends to be protected, and -150 subject to lengthy negotiations with local councils and planning & develop- -200 ment processes. This means that the downsides associated with logistics may not be as considerable as per- -250 2015 2016 2017 2018 2019 2020 2021E 2022E ceived – though clearly, these risks 2014 Norway Denmark Finland Estonia must still be understood and evaluated Sweden Lithuania Latvia fully by any prospective investors. → 15

●  STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 »Urban areas that used to cater to a mix of residential, retail, office and leisure could become a little more messy – with logistics join­ing the mix« Photo: Shutterstock 4. A segment of risks require more space. At the same time, office and leisure could become a & opportunities the desire to improve delivery times little more messy – with logistics join- and enable “just in time” delivery ing the mix. While there are risks associated with has popularized last mile logistics, the segment, industrial & logistics as putting pressure on land prices in A different dimension that is im- a whole also faces a number of major urban areas. It is likely that in future, portant to consider is the access to opportunities going forward, associat- we will have to be more creative with electricity & power. The Nordics & ed primarily with technological devel- storage & fulfillment solutions, as Baltics have already shown some opment and societal change. E-com- vacancy in urbanized industrial assets signs of a lacking infrastructure in merce being a driver has escaped no is already generally quite limited. terms of electricity supply, with e.g. one – with exceptional growth of 40% Solutions could include repurposing Pågen delaying their plans to expand across the Nordics & Baltics in 2020, retail or on-ground office space, in Malmö due to a lack of sufficient e-commerce looks set to continue meaning that urban areas that used power infrastructure, while Finland growing in the coming years, and will to cater to a mix of residential, retail, relies on importing electricity from 16

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 STORAGE IS THE NEW BLACK: A DIVE INTO THE LOGISTICS MARKET  ● »The importance of ESG considerations for the industrial sector, as well as green financing and certi­fication in general continues to rise« central Europe and Russia to meet 5. Industrial transaction volumes in the Nordics & Baltics Per cent its energy demands. The advent of 20 electric cars and need for charging MEUR points will naturally increase the need 8,000 for electricity further, but warehouses of the future, with a wide range of 6,000 15 automated systems, will also need a strong & reliable power supply. This 4,000 10 dimension could drive investment into markets where power supply can be 2,000 5 more reliably guaranteed, and is thus a risk factor for several Nordic & Baltic 0 2016 2017 2018 2019 2020 2021E 0 property submarkets that must be 2015 addressed. Transaction volume (millions of EUR, left axis) Renewable energy can serve to alle- Per cent of total transaction volume (right axis) viate some of the issues mentioned above (though whether enough Beyond this, more long-term structural for change on the logistics market as a energy can be created via renewable changes will also serve to transform result of this is enormous. sources is difficult to answer). Indeed, and create opportunities for logis- the importance of ESG considerations, tics. The usage of drones for delivery What does this all mean for the as well as green financing and certi- (already impacting pricing in some industrial & logistics market? Graph fication in general continues to rise, areas in Norway), as well as the advent (5) shows that volumes have been driven by investors and legislation. of self-driving vehicles could allow for relatively stable but strong over the However, impact for the industrial new regions or submarkets to emerge past few years, and 2021 has served segment has thus far been relatively as distribution hubs. Currently, there to accelerate demand for the market limited, with only around 20 buildings are human constraints regarding further. Going forward, it is likely that within the segment across the entirety e.g. maximum amounts of hours that demand for the segment will continue of Sweden being environmentally drivers can spend on the road, as to rise – as more and more money certified with BREEAM, LEED or local well as desired delivery times which seeks to be allocated towards real certifications. Indeed, the amount of necessitate logistics hubs in certain estate assets. Are you curious about office space that is certified is close locations. With self-driving, this limita- what the new hot submarkets will be to 40 times higher than certified tion goes out of the window, and at the on the logistics market in the Nordics industrial space in the Nordics & same time, congestion should ease as & Baltics, or are you looking for other Baltics. Nevertheless, sustainability is driving at less busy times of the day types of property advice related to the increasingly becoming part of invest- should become possible in due course. industrial market or property market ment committee requirements, and Clearly this will require structural as a whole? Newsec, the full service as the perception of a green portfolio long-term change, and is unlikely property house, always has your premium enhances, it is likely that the to change the market overnight (as every need covered. importance of ESG for the industrial drivers must generally still be inside segment will also increase further. & awake in many of the self-driving Adam Tyrcha, PhD The introduction of e.g. biodiversity cars currently being tested on the adam.tyrcha@newsec.se compensation schemes, to compen- market), but the long-term transform- sate for the large amount of land that ative potential is substantial. Should Ulrika Lindmark logistics occupies, could be one form technologies like those being trialed ulrika.lindmark@newsec.se of adaptation that investors will have by Einride – self-driving, remote con- to make in the future. trolled trucks – take off, the potential 17

●  THE SWEDISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE SWEDISH PROPERTY MARKET ASTOUNDING VOLUMES SO FAR THIS YEAR – 2021 WILL SHATTER ALL PREVIOUS RECORDS Photo: Shutterstock Though there have been some minor reach the Swedish Riksbank’s goal of 300 billion – an astonishingly strong setbacks, 2021 has generally consti- 2.0 per cent, but the Riksbank is ex- performance, which is set to make tuted a strong year of recovery for the pected to leave the key interest rate at Sweden the third largest real estate Swedish economy. Economic growth 0 per cent for the foreseeable future market in Europe, behind Germany throughout 2021 has been substantial, despite this. All in all, the Swedish and the United Kingdom but ahead and is projected to end up at approx- economy has fared well throughout of France. On the per capita level, the imately 4.5 per cent for the year as a the covid-19 crisis, and the country Swedish real estate market is by far the whole – one of the strongest growth has generally been substantially less strongest in Europe, and on a global rates among the economies that impacted than many major European level is only outperformed by city performed well in 2020. Unemploy- economies as a result. states like Singapore and Hong Kong. ment has fallen and is approaching 7 Record volumes have been noted per cent – high in a European context, While Swedish economic performance throughout every quarter thus far this but low when factoring in the very has been strong, the Swedish real year, driven both by large M&A trans- high employment rate that Sweden estate market has performed as- actions, as well as strong demand for also boasts. After an initially sluggish toundingly well throughout 2021. As virtually all property segments. vaccination process, vaccination rates of the end of September, the full-year picked up and Sweden now, together transaction volume record of SEK Contact: with the other Nordic countries, boasts 218 billion – set in 2019 – has already Adam Tyrcha, PhD one of the world's highest vaccination been broken. The transaction volume adam.tyrcha@newsec.se rates. Inflation continues to not quite in 2021 is expected to exceed SEK 18

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE SWEDISH PROPERTY MARKET  ● »The transaction volume in 2021 is expected to exceed SEK 300 billion – an astonishingly strong performance, which is set to make Sweden the third largest real estate market in Europe« Interesting trends on the Swedish property market in 2021 ASTONISHING VOLUMES ON THE MARKET SEK 188 BILLION INTERNATIONAL INVESTMENT IS WEAKER THAN USUAL Record transaction volumes have Total investment volume been noted in both Q1 and Q2 thus in 2020 Thus far this year, international far this year, and at the time of investment has accounted for 15% writing, Q3 looks set to also be a OVER SEK 300 BILLION of the total transaction volume – very strong quarter. Both Q1, at Total investment volume one of the weakest years for foreign SEK 46 billion, and Q2, at SEK 103 expected in 2021 investors in recent years. However, billion, constituted the strongest Q1 this is by and large a result of the and Q2’s of all time. It is noteworthy +4.5% very strong transaction volume as that even without some of the large a whole – in terms of volume, the M&A transactions, the performance GDP growth expected amount invested by foreigners is of the market would have been in 2021 actually higher than the historical record-breaking. average. 62% of international 2020. Residential continues to be investment into the Swedish market M&A DEALS REACH RECORD HIGHS the strongest segment, at 26% of thus far this year has been non- the total transaction volume, but Nordic, which is also a little higher Though performance has been the office segment is hot on its than the historical average, and is a strong without M&A transactions, heels, looking to retake its throne. testament to strong global interest the number and volumes traded in in the Nordic markets. M&A transactions have also been ALTERNATIVE SEGMENTS PROSPER astoundingly strong. Thus far GOTHENBURG ATTRACTS this year, M&A transactions have Segments that used to be termed STRONG INTEREST accounted for about 35% of the alternative, such as industrial total transaction volume – the (including logistics and ware- In recent years, Gothenburg has strongest percentage ever re- house) and public properties have fallen off a little, accounting for an corded. Large deals have included performed very well thus far in average of 7% of the total trans- Corem’s acquisition of Klövern, 2021. The industrial segment has action volume in any given year. Samhälls­byggnadsbolaget’s invest- accounted for 18% of the total However, thus far in 2021, Gothen- ments into Unobo (Riksbyggen) transaction volume, putting it in burg has accounted for 12% of the and Offentliga Hus – with more to a comfortable third place. Public total transaction volume – putting come in the autumn and winter. properties, meanwhile, sit at 15% of the city comfortably ahead of the total transaction volume, set- Malmö. The strong volume has been OFFICES RECOVER ting the segment up for its second particularly driven by a number strongest year of all time. of large office transactions, which The office segment has recovered have eluded the city in previous substantially from the trough it ex- years. This could signal an impend- perienced in 2020, accounting for ing shift in the coming years, where 24% of the total transaction volume Sweden’s second city in terms of thus far this year. A large portion population once again becomes its of this volume is made up of M&A second city in terms of the transac- transactions – however, the total tion market. volume traded in office transac- tions, even disregarding M&A deals, is substantially stronger than in 19

●  THE NORWEGIAN PROPERTY MARKET    NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE NORWEGIAN PROPERTY MARKET NOTHING CAN BRING DOWN COMMERCIAL PROPERTY Due to a higher infection rate and 2020 and is projected to level beneath transactions, such as the bidding stricter measures to contain the virus, 3% by the end of this year. The GDP war for Entra, as well as portfolio and the recovery in Norway was slightly growth in mainland Norway in 2021 single property transactions. The suppressed at the beginning of 2021. is expected to amount to 3.6% and market has also been boosted from However, as the year progressed the growth in the mainland economy is ex- several delayed projects which were Norwegian economy has shown great pected to be back at its pre-pandemic pushed from 2020 to 2021. With a promise and Covid-related restrictions level by the end of 2021. Low interest continued flow of capital onto the will cease sometime in the fall. Under- rates and a continued expansionary market, 2021 is set to reach record lying inflation passed the target of fiscal policy are the key drivers of high volumes of NOK 140 billion. 2% in 2020 but has edged off during growth. the year as the NOK strengthened. Contact: The CPI 12-month November figure is The real estate market in Norway has Øyvind Johan Dahl projected to come in as high as 4%. performed exceptionally well during ojd@newsec.no By the end of 2021 unemployment is the year and Q2 showed record high expected to have seen a sharp decline volumes at over 50 billion NOK. The from the high numbers observed in volume has been driven by both M&A Photo: Shutterstock 20

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE NORWEGIAN PROPERTY MARKET  ● »With a continued flow of capital onto the market, 2021 is set to reach record high volumes of NOK 140 billion« Interesting trends on the Norwegian property market in 2021 THE CREDIT MARKET IS WARMING NOK 115 BILLION PRIME LOGISTICS ARE RED HOT UP TO REAL ESTATE INVESTORS Total investment volume Logistics have continued to show After restricted borrowing for in 2020 high activity both in terms of vol- some time, the credit market is ume and number of transactions, warming up to lending towards the NOK 140 BILLION due to increased globalization real estate sector and the period and the sped-up growth in e-com- of limited access to bank funding Total investment volume merce during the pandemic. This is almost over. Banks are instead expected in 2021 has resulted in higher demand for eager to increase lending portfoli- distribution hubs. Both prime and os as the funding costs decrease. +3.6% average yield has compressed fur- The bond market is also improving, ther down to 4.25% and 5.00% for with margins back at levels seen GDP growth expected high standard (new builds), with pre-pandemic outbreak. Average in 2021 solid tenants and 10-year lease issuance spreads for real estate term. Location is most important widened from around 69 bps to 224 for yield levels, as tenants compete bps in March 2020 and have since primarily on lease lengths and not fallen to 75 bps per August 2021. price. Moving forward, stable lending rates should be expected. Swap A LONGER FALL THAN BAUMGARTNER rates will slowly increase, but BUT THE HOTEL INDUSTRY IS FINALLY margins and credit spreads are SHOWING SIGNS OF RECOVERY expected to fall further. The hotel industry has experienced FOREIGN INVESTORS ARE cross-border shopping and chang- its sharpest decline since the Finan- MAKING A COMEBACK ing customer behavior. The prime cial Crisis. Revenue per available yield is at 4.00%. room (RevPAR) in Oslo hit its trough Foreign investors who previously in March 2021 at NOK 151, totaling a were highly active especially within WITH RISING RENTAL LEVELS, fall of 80% since yearend 2019 — 6 logistics have during the pandemic OFFICES STAND STRONG times greater than the fall following been more absent in Norway. the financial crisis of 2008. Oslo However, the trend is breaking and The office segment performed well was already heading for a decline projections for the fall show an during the pandemic. Yields were in terms of RevPAR due to a large increase in the activity of foreign stable for prime assets in Oslo in incoming pipeline of new hotels investors, foremost in larger deals. 2021 and have compressed in the scheduled to open in 2020/21. The secondary cities. Spreads have hotel industry in Oslo has thus been SHOPPING CENTER LIQUIDITY IS widened as investors are keen on hit by both a pandemic and a large SLOWLY STARTING TO IMPROVE core products. The prime yield is at increase in room capacity. However, 3.25%. The vacancy rate is at 7.6% the fall seems to have leveled out The pandemic has left pricing in Oslo and is expected to peak at and stabilized at around NOK 153 as favorable for those who believe 7.8% towards the end of 2021. The of June this year. The prime yield is customers will return to old shop- rate in which offices are being let at 4.50%. ping habits post pandemic, or for increased sharply in Q2 together properties where there is potential with rental levels. in terms of adapting to e-commerce, 21

●  THE DANISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE DANISH PROPERTY MARKET THE DANISH ECONOMY AND PROPERTY MARKET IS BACK ON TRACK Photo: Shutterstock The Danish economy is back on track. continuation of the current sizable 54% compared to H1 2020. Foreign Activity picked up in Q2 2021 as employment growth and further de- investors have been very active on the restrictions were gradually eased, and cline in unemployment numbers. Infla- investment market acquiring property the economy has now regained what tion has been rising since March and for DKK 22 billion in H1. Foreign play- it lost since the onset of the COVID-19 is expected to reach 1.3% in 2021, up ers have increased their presence on crisis in Q1 2020. Employment rose from 0.4% in 2020. Interest rates are the Danish market with a market share significantly in Q2 and unemployment also rising, although from low levels. of 55% so far this year. Investors from dropped to 3.8% in June, approach- The yield on a 10-year Danish govern- the UK, USA and Sweden have been ing pre-crisis levels. An increasing ment bond has risen from -0.5% at especially active acquiring property number of businesses report that they the beginning of 2021 to -0.3% in July. in 2021. In light of the high investment cannot find the necessary manpower, Most forecasts predict that Danish activity during H1 and the positive sen- and shortage of labour is now the interest rates will only be moderately timent, Newsec has made an upward main impediment to growth in many higher by the end of 2021. adjustment of our expectations to the industries. The Danish Central Bank total transaction volume in 2021 from expects GDP to grow by 3.3% in Strong macroeconomic fundamentals, DKK 75 billion to DKK 80 billion. 2021. This is a significant upward low interest rates and ample capital adjustment compared to the previous chasing property provide beneficial Contact: forecast. Economic growth rates are conditions for the Danish real estate Robin Rich expected to remain high in the coming market. The transaction volume robin.rich @newsec.dk years and, most likely, we will see a reached DKK 40 billion in H1, up by 22

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE DANISH PROPERTY MARKET  ● »Foreign players have increased their presence on the Danish market with a market share of 55% so far this year« Interesting trends on the Danish property market in 2021 THE GENERAL SOCIETAL DEVELOPMENT DKK 72 BILLION transaction value in 2020. This was AFFECTS THE PROPERTY MARKET a relatively high share and so far the Total investment volume trend has continued in 2021, with The market for residential rental in 2020 this type of property constituting properties continues to benefit 12% of the total transaction volume. from stable demographic demand DKK 80 BILLION There has been a sustained decline and favourable household income in the availability of industrial and growth. The market for industrial Total investment volume logistics facilities. High demand for and logistics properties is charac- expected in 2021 modern, well-situated warehouse terised by high demand for, and and logistics properties, combined limited supply of, modern, well- with a limited supply of these situated facilities. Renewed employ- types of buildings, has led to rental ment growth boosts the need for growth and yield compression. office properties, and new offices in the major cities are particularly THE IMPACT OF HIGHER INTEREST RATES attractive to prospective tenants. – WHEN, HOW FAST AND HOW MUCH? The difficult situation in many ser- vice industries continues to affect That is the question. Rising interest the retail segment. rates, reflecting higher inflation and growth expectations, are a THE RESIDENTIAL MARKET +3.3% natural development in a phase of KEEPS BOOMING increasing economic activity. For GDP growth expected the property market, growth with The COVID-19 crisis did not curb in 2021 steady and moderately increasing the – already hot – Danish housing interest rates is desirable. As the market. Prices on owner-occupied particularly high in Q2 2021 where current level of interest rates is so homes grew by 15% from Q1 2020 to residential acquisitions accounted low, interest rate increases may Q1 2021 – almost three times faster for 68% of the total transaction have relatively large price effects than the EU average. Rapidly in- volume. An unquenchable demand on owner-occupied housing and creasing prices on owner-occupied from investors and a shortage of in- commercial properties. A scenario housing mean that rental housing is vestment products is driving yields of sharply increasing interest rates often seen as an attractive alter- down for both new properties with constitutes a potential risk for a native. Investors are attracted by unregulated rent as well as for older general price decline in the property the positive long-term outlook for properties with rent regulations. market. However, as described demand and rental growth in this above, there are no expectations segment. Residential properties INDUSTRIAL & LOGISTIC INVESTMENTS of such development in 2021. are – by far – the most popular asset ARE BECOMING INCREASINGLY POPULAR amongst investors. Residential property transactions amounted to Industrial and logistics properties DKK 19 billion in H1 2021. Investor accounted for 9% of the total interest in this segment was 23

●  THE FINNISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE FINNISH PROPERTY MARKET A RETURN TO FORM FOR THE FINNISH TRANSACTION MARKET Though Finland has been relatively pandemic, but has now recovered and Particularly the beginning of H2 has spared from the brunt of the impact is around 7%. Finland is, much like the been extremely active: large platform of the covid pandemic medicinally, rest of the Eurozone, likely to continue deals have been taking place on the with one of the lowest death rates to benefit from low interest rates set market. Consequently, we expect that in the world, the country’s economy by the European Central Bank, and in end of the year will still be very active was still substantially impacted by the general, the outlook for the Finnish – meaning that liquidity has returned pandemic. Recovery has now begun to economy remains strong. strongly to the market after the covid occur globally, and the Finnish econ- crisis. Expectations are that a trans- omy is no exception. Finland is set to Last year we saw a clear U-turn on action volume of EUR 7.5 billion will post a robust growth rate of 2.8% in the investment market in Finland: the be achieved in 2021, meaning that the 2021, which will repair much of the first quartile was the most active in year will be the strongest for the Finn- decline that the economy experienced many years, then the market slowed ish transaction market since 2018. in 2020. Inflation continues to be down during the summer, and the end relatively weak in Finland, and will not of the year was very active again. At Contact: meet the 2% target in 2021, though is the beginning of 2021, market activity Kauri Melakari likely to exceed 1.5%. Unemployment was slower than expected but the kauri.melakari@newsec.fi rose following the outbreak of the market picked up again in the spring. Photo: Shutterstock 24

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE FINNISH PROPERTY MARKET  ● »The end of the year on the Finnish transaction market will be very active – meaning that liquidity has returned strongly to the market after the covid crisis« Interesting trends on the Finnish property market in 2021 ACTIVE TRANSACTION MARKET EUR 6.0 BILLION new players onto the market this year. The Swedish property compa- The YTD transaction volume Total investment volume ny Nyfosa has bought three port- amounted to approx. EUR 4.0 in 2020 folios (total of twenty commercial billion at the end of August – that properties). The German based in- means that EUR 1.5 billion was EUR 7.5 BILLION vestor company Real I.S. acquired transacted in July and August. an office building in Helsinki in April The most traded property type has Total investment volume for its fund, making it its first ac- been residential portfolios: mul- expected in 2021 quisition in Finland. In addition, we tiple large either old stock or new have seen that some international stock portfolios have been sold. For investors have changed their pref- example, DWS in collaboration with erences: Union Investment made Newsec acquired three residential their first residential transaction in projects of 257 apartments to be Nordics in March when they bought built in Helsinki, Espoo and Kerava a residential tower (216 rental from the Finnish construction apartments), Hyperion, located company SRV for EUR 82 million. in Vuosaari district in Helsinki for approx. EUR 74 million. LOGISTICS IS BOOMING +2.8% LARGE OFFICE TRANSACTION AS Alongside residential properties, GDP growth expected CASTELLUM ACQUIRES KIELO the logistics property market is in 2021 booming in Finland as it is in the In July, one of the largest office Nordics in overall. We see logistics 60 % of the volume concerned gro- property transactions in the prime yields declining in Helsinki cery store properties. The largest Nordics was completed in Finland Metropolitan Area to slightly over retail property transaction was when Swedish investor company 4 %. In addition, in the Turku re- published in June when Swedish Castellum acquired the real estate gion, logistics prime yields have de- investor company Cibus Nordic company Kielo, part-owned and creased significantly over the past Real Estate AB bought 72 grocery managed by Brunswick Real Es- year. Moreover, we see increasing stores from another Swedish inves- tate, for approx. EUR 640 million. demand for light industrial prop- tor AB Sagax for EUR 71.6 million. The portfolio comprises approx. erties as e-commerce continues to It may be that the allocation to 237,000 sqm lettable area. Right grow. retail properties in investment after the mega deal, Castellum sold portfolios will again increase as the the properties located in the city RETAIL REMAINS TRICKY competition in many other sectors of Jyväskylä to Nyfosa for approx. continues to intensify. EUR 200 million. The properties Investor interest has been selective comprise approx. 67,000 sqm. in retail property segment – invest­ NEW PLAYERS ENTER THE MARKET Castellum has acquired multiple ment demand remains strong office properties in Finland during in grocery store properties and The Nordic and Baltic property the last year. At the end of last year, high-quality big-boxes, as well as markets have been very attractive they bought the Finnish real estate service focused shopping centres. among international investors over group Lindström Invest (EUR 150 The retail property segment trans- the past few years, but Finland has million / 36,000 sqm). action volume amounted to EUR still seen the entry of a number of 270 million after H1 where over 25

●  THE ESTONIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE ESTONIAN PROPERTY MARKET ESTONIA’S REAL ESTATE INVESTMENT MARKET CONTINUES TO POST STRONG RESULTS Estonia took the lead in the Baltics Estonia’s real estate investment mar- larger investment grade properties with a record 8.5% GDP growth in the ket continues to post strong results, are rare and local capital investors first half year and a 12.9% increase in with 2020 proving a successful year. compete for smaller scale opportuni- Q2 2021 alone. The biggest contrib- In fact, the country contributed one ties. In fact, there have been no large utors to economic growth were the third to the Baltic investment market. scale investment deals that exceeded rapidly recovering manufacturing, The first half of 2021 was more active EUR 25 million size per transaction transportation, and warehousing in terms of the number of deals and so far in 2021. With the construction sectors. The economy also received nearly 1/4th of the total transaction market experiencing an 18% increase a boost from the information and volume – more than 100 million EUR only in 2021, it will be the active tradi- communication segment. Increases in – was closed in the capital city and tional segments of office, industrial private consumption were reflected regions. The largest segment, ac- and logistics which will be responsible in retail turnover growth, especially counting for almost half of the volume for creating new investment grade from mid-spring onwards, and recov- of Estonian sales, was industrial/logis- properties to attract both local and ery in both the accommodation and tics. This remains the hottest sector international investors. catering sectors has also commenced. across the entire region. Smaller local According to the latest assessments, investors are mainly on the lookout for Contact: the Estonian economy is estimated to smaller scale retail, hotel properties Kristina Živatkauskaite˙ grow by 8.0% this year and maintain and office projects. The investment k.zivatkauskaite@newsec.lt this pace into 2022 as well. market in Estonia remains tight as 26

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE ESTONIAN PROPERTY MARKET  ● »According to the latest assessments, the Estonian economy is estimated to grow by 8.0% this year and maintain this pace into 2022 as well« Interesting trends on the Estonian property market in 2021 INDUSTRIAL AND LOGISTICS SEGMENT EUR 235 MILLION THE LOCAL TOURISM AND HOTEL IN DEMAND MARKET NEEDS AN INCREASED INFLUX Total investment volume OF ESTONIANS The Tallinn region is the most ad- in 2020 vanced Baltic capital area, offering Facing at least 1–2 additional years pre-developed modern infrastruc- EUR 165 MILLION of slow international tourism ture for manufacturing and logistics recovery, the hotel market is now companies. The largest RE invest- Total investment volume accommodating increased flows ment deals closed in 2021 H1 came expected in 2021 of Estonian citizens. The Estonian from this segment and involved market is expanding its supply with Estonian and Swedish investors +8% innovative and modern solutions – acquiring modern and sustainable such as attractive locations that are properties with secured long-term GDP growth expected close to nature, and resorts which tenants. in 2021 offer health and wellness tourism. The number of local tourists using LOCAL COMPANIES DIRECTED THEIR ESTONIA IS NO. 1 IN EUROPE BY NUMBER accommodation experienced a 26% FUNDS TO REAL ESTATE OF UNICORNS PER CAPITA year on year increase during H1 2012, while the number of foreign The stock of deposits held by resi- Estonia is currently leading the way guests remained low. The EU Digital dents in Estonia increased in 2020 when it comes to unicorn start-ups Green Certificate remains the by 15% and by 9% in H1 2021 . Busi- per capita in Europe, with 7 unicorns biggest hope for the revival of travel ness companies followed a tighter including Skype, Playtech, Wise, in Europe, and Tallinn’s hotels may regime in 2020 and saved more as Bolt, Pipedrive, Zego and ID.me welcome more business guests in the stock of deposits increased by being founded by Estonians. Esto- autumn and winter. 24%. However, at the end of July nia welcomed 162 new start-ups in 2021, savings were even lower. 2020, increasing its number by 16% ESTONIA PROCEEDS WITH NON- High activity on the RE investment up to 1,172. By the end of summer TRADITIONAL COMMERCIAL AND market may lead to more changes in 2021, the total number of com- RESIDENTIAL RE INVESTMENTS property ownership going forward. panies reached 1,217. The largest employers in the Estonian start-up In 2021, the Estonian EfTEN OFFICE DEVELOPMENT GROWTH sector are Wise (1,079 employees), Capital’s EfTEN United Property INCREASED Bolt (818), Veriff (265). Indeed, the Fund invested its first capital into growing start-up community may a residential development project. Tallinn is the largest office market in the future become one of the The active stock office market, among the Baltic capitals. After a largest office tenant groups. where commercial, storage, and short halt in growth, its 2021 supply productive functions are consol- will most likely see it maintain its idated within a single project, is top position. Annual growth of receiving more attention from local 10% will bring Tallinn’s supply to RE investors, as investment deals ca. 960,000 sqm. At least another are being closed and the properties 60,000 sqm is planned for the next are in demand. two years. There is a demand for new supply from office targeted investors, as the share of invest- ment into this segment has been in decline recently. 27

●  THE LITHUANIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE LITHUANIAN PROPERTY MARKET RESIDENTIAL PROPERTY PORTFOLIOS BEGIN A NEW TREND Economic growth has returned to 10% this year, followed by a significant growing interest in the industrial and Lithuania. After experiencing a slight increase in retail turnover, decreas- logistics segment, and stable demand -0.9% decline caused by the pandem- ing unemployment and intensifying for prime offices, were the main driv- ic in 2020, the Lithuanian economy competition for talent. Unfortunately, ing forces. The same trend remained began showing distinct signs of recov- improving customer confidence, in the first half of 2021, when close ery, posting 4.7% of growth in GDP for increasing inflation and rising demand to EUR 200 million in transactions the first half of 2021. Both businesses in various segments is giving rise to were closed mainly in the industrial, and the general population at large talk about possible economic over- logistics and retail segments. Q3 2021 have adapted to the new reality. The heating, as well as the need for more was dominated by transactions in accelerating vaccination process and attentive control of the relief funds the retail sector, illustrating that the declining operational constraints have that have been provided. demand for well performing projects laid the grounds for a gradual recov- in very good locations persists. ery, and the Lithuanian economy in A rally in the second half of 2020 2021 could grow by 4.1-5.1% based on allowed the Lithuanian real estate in- Contact: various forecasts. Meanwhile, in the vestment segment to end the year on Kristina Živatkauskaite˙ coming years, the economic recovery a high note. In 2020, the total volume k.zivatkauskaite@newsec.lt is expected to continue, with growth of investment deals made in Lithua- projected to reach up to 4% in 2022. nia was 60% of the previous year’s, Wages are expected to grow above reaching EUR 265 million. Rapidly 28

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE LITHUANIAN PROPERTY MARKET  ● »Q3 2021 was dominated by transactions in the retail sector, illustrating that the demand for well performing projects in very good locations persists« Interesting trends on the Lithuanian property market in 2021 INDUSTRIAL AND LOGISTICS EUR 265 MILLION nities for investors in the develop- CONSTRUCTION EXPECTED TO SURGE ing rental market, with portfolios of Total investment volume apartments for lease being devel- The largest property developers in in 2020 oped. This reflects the long-term this segment have more confidence business plans of property devel- and have commenced construction EUR 300 MILLION opers and investors in all three of new projects, often at the full Baltic states. The announcement pre-lease stage. This is mostly relat- Total investment volume at the beginning of September of a ed to the manufacturing segment, expected in 2021 co-investment vehicle by YIT and however. Many logistics and ware- the BTA Baltic Insurance company house projects were constructed for investment in rental apartments for the actual end user. Moreover, is a clear barometer for where the growth in traditional retail, e-com- market is heading. merce and production volumes reflect the increasing demand for THE GIANT OF BALTIC SHOPPING speculative space as well. CENTRES BECOMES EVEN STRONGER ACTIVITY ON THE VILNIUS OFFICE 4.5% Akropolis Group, the leading MARKET REMAINS HIGH shopping and entertainment centre GDP growth expected development and management The capital city office segment is in 2021 company in the Baltic States, finally expected to experience annual announced the development dead- supply growth of around 15% or A number of large scale multiple line of their new project in Vilnius. above 110 thousand sqm. Take-up tenant type Class A properties H2 2024 is when the multifuntional had already reached the annual have been scheduled or are already cultural, leisure, business and shop- forecast‘s midpoint of around 90 under construction in the Central ping center Vilnius Akropolis Vingis thousand sqm in July, which was Business District. A total of four – will be delivered. The complex will in line with the 5-year historical CORE, Artery, FLOW and HERO – will consist of a 90,000 sqm shopping, average for transactions. This year deliver more than 100,000 sqm of services and cultural activities area has witnessed activity from both office space. Total market supply in and about 32,000 sqm of office large and small companies alike, 2022–2023 may increase by about complex. Following the closure of and existing demand is seen from 200,000 sqm or 21% and form a the SC ALFA acquisition, the group international and local tenants. new investment-grade supply for will, by the end of 2021, be manag- Girteka, Dexcom, Wargaming, Alter investors. ing a portfolio of 5 large scale shop- Domus, Amber Grid and others ping centres across the Baltics. The were among the office tenants who RESIDENTIAL PROPERTY PORTFOLIOS Akropolis Group will have 316,000 made the biggest deals in the active BEGIN A NEW TREND sqm of retail GLA in their hands Vilnius market. alone and enjoy coverage in 4 major The booming residential market is Baltic cities. PLANS FOR NEW HIGH-RISE OFFICE delivering new agreement opportu- BUILDINGS IN VILNIUS CBD Increased activity should soon be seen in the development of invest- ment-grade office projects. 29

●  THE LATVIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE LATVIAN PROPERTY MARKET LATVIAN INVESTMENT MARKET EXPERIENCING UNPARALLELED GROWTH The economy in the first quarter of the population’s optimism and confi- Despite the prevailing uncertainty and 2021 continued to follow the trends of dence for the future. risks in the health segment, the real 2020, remaining relatively slow and estate investment market is amassing still unpredictable. However, Q2 was The decision to change the current record market deals. By September more active, with GDP growth jumping cadastral values of real estate has 2021 there were 9 significant invest- by 11.1% compared to the same period been delayed. Beginning in 2020, the ment transactions in various sectors last year. Annual average inflation government has been working on a - hotel, office, retail, industrial and also climbed to 2.7%. The economy plan to set new and increased values logistics, and residential. The total reached pre-crisis levels and is ex- from 2022. Having cadastral values investment volume reached about pected to maintain this path towards that were close to actual market EUR 310 million and exceeded 2020 growth. Although the economy is value would significantly increase full-year volumes by 25%. This year expected to stabilize in 2021, and grow the amount of property tax paid by will definitely be the most successful in 2022, there are still several uncer- individuals and businesses. However, year for real estate in Latvian history. tain factors which may significantly in June 2021 current cadastral values alter the picture. First, Latvia has a were frozen until 2025. This decision Contact: relatively low vaccination rate and as brings relief for business as it gives Inita Nitiša a Covid-19 cases go up; restrictions them extra time and will not impose a i.nitisa@newsec.lv may come into force again. In addition, further tax burden on current prop- Kristina Živatkauskaite˙ there is the threat posed by the Delta erties, especially during the period of k.zivatkauskaite@newsec.lt Variant, which has already wreaked planning, construction, or when busi- havoc globally. Any restrictions and ness activities are low or even absent limitations that arise from this may and cash flow is limited. undermine the economy and erode 30

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE LATVIAN PROPERTY MARKET  ● »This year will definitely be the most successful year for real estate in Latvian history« Interesting trends on the Latvian property market in 2021 RECORD SIZE INVESTMENT DEALS EUR 250 MILLION OFFICE PLANS ARE NO LONGER FOR THE LATVIAN MARKET JUST ON PAPER Total investment volume One significant shopping centre in 2020 Construction works were com- transaction is of particular note. menced on a few large properties The Akropolis Group, which owns EUR 500 MILLION in 2021. Plans are in progress four large shopping and entertain- to deliver 240,000 sqm of new ment centres in Vilnius, Klaipeda, Total investment volume office space by the end of 2023, Siauliai and one in Riga, agreed to expected in 2021 most of which will be Class A. This buy the largest shopping centre in will account for 32% of current Latvia – Alfa. The purchase consist- +4.0% office space in the Riga market ed of a 9.7 ha land plot and a build- and provide tenants with a great ing with a total area of 154,000 GDP growth expected opportunity to choose from a vari- sqm including large parking space. in 2021 ety of high-class offices. With the The shopping centre underwent expectation of such a large area a major EUR 55 million expansion at 13.2%. Developers, meanwhile, being absorbed in the near future, and upgrading in 2019, while its are continuing with their future the market must be ready for an annual visitor numbers now reach plans, including the acquisition of intensive period of movement. 7 million. The EfTEN Real Estate new development properties and Active relocations from lower class Fund’s acquisition of Jauna¯Teika the commencement of construc- offices, expansions, new local and office campus in Riga from Hanner tion works. Linstow Baltic has foreign businesses will be neces- Group for EUR 131 million is also concluded a EUR 10.5 million deal sary so that market oversupply can significant. The campus consists of with NP Properties, acquiring the be avoided. four office buildings, one of which Sporta 2 quarter with the aim of was completed in 2009, with the developing a modern, high quality, NEW SEB OFFICE – A GOOD NEW START remaining three being finished in multifunctional urban environment AND A TRENDSETTER 2016. The gross leasable area of that focuses on office premises, the campus amounts to almost but also includes retail, service A relocation plan has already been 59,000 sqm with 1,100 parking and residential functions, as well made by SEB Group’s business spaces. as premises designed for public services centre in Riga. SEB has entertainment. signed an agreement with the real THE OFFICE SECTOR IS estate developer GALIO Group to ESPECIALLY ACTIVE move its office to the newly con- structed business centre GUSTAVS Although only three small offices at Gustava Zemgala gatve in the will be commissioned during this first half of 2023. SEB will occupy year, both tenants and developers approximately 11,000 sqm area, have been active in 2021. Several which will accommodate more than expansions and relocations to high- 1,000 employees. er class offices decreased vacancy by 2% and at the end of H1 it stood 31

●  EUROPEAN PROPERTY MARKETS   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 EUROPEAN PROPERTY MARKETS 2021 A YEAR OF CHALLENGES AND OPPORTUNITIES Since 2012, Newsec has been a BNP Paribas Real Estate Alliance Partner, which gives Newsec access to an international network of clients and relevant connections. The alliance allows for both Newsec and BNP Paribas to expand coverage, and help to advise you and drive your real estate strategy internationally. Real estate market momentum has Rome (5.3%) and Madrid (5%). do not look particularly attractive, certainly been picking up with most Shopping centres will continue to see we do believe there are now reasons European markets witnessing good the lowest returns across Europe. to be cautiously optimistic. Over the levels of investment activity in Q2 medium term, we expect strong total 2021. This is a sign of markets now To no one’s surprise logistics is the returns at the end of the forecast peri- adapting and working around COVID- only sector that will see double-digit od, with Spain (6.0%), Italy (5.6%) and 19 restrictions while other markets are returns. The top performing markets Sweden (4.5%) the top performers. further along in terms of life returning will be Poznan (11.2%), Copenhagen to normal. (10.9%) and Warsaw (10.4%). In the office sector, the return to office has resulted in occupational demand Total investment volume in Europe Growth and reliance of e-commerce picking up again. Although it is unclear in the first half of 2021 stood at €105 continues and will remain the main what impact flexible working practices billion which is 5% below the same driver for logistics. Combined with will have on future office demand, period in 2020, with a strong second the lack of space, the strongest rental quarter across most markets. We ex- growth will be generated by the logis- pect investment volumes to increase tics sector, with growth of 2.2% for this year, with volumes reaching 2021 and 2022 across Europe. As the €260bn, up 10% compared to 2020. development pipeline picks up, rental As was the case in 2020 we are likely growth is expected to ease. In 2021 to see investors targeting non-tra- the Nordics will exhibit strong rental ditional asset classes and logistics, growth of 4.0%. We also forecast which offer the better returns. prime yield compression in all mar- kets, due to the sheer weight of capital Over the past few years, we have targeting the sector. witnessed capital growth take a back- seat while income growth has largely The worst performing sector in terms contributed to total returns. Looking of rents will be the retail sector. Over ahead capital growth will now play a 2021, prime high street rents are greater role in returns. The strongest expected to fall by -5.0% and -1.5% in capital growth is likely to occur in the 2022. Shopping centres will perform logistics sector with growth of 3.2% slightly worse than prime high street across Europe, generating a total with rents falling by -6.8% over 2021 return of 7.4% over 2021 to 2025. with the UK (-11%) and Southern Europe (-10%) the worst performing. The retail sector will exhibit the We do anticipate shopping centres to lowest returns. Capital growth for begin recovering from 2023 onwards, prime high street is forecast at -0.4% with rental growth averaging 1.4% p.a. and shopping centres will generate thereafter. We will see the strongest -1.6% over the forecast period. Within bounce-back in the UK (3% in 2025) Europe there are disparities with best and Southern Europe (2.1% in 2025). performers to include Milan (5.7%), Although the retail sector’s metrics 32

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 EUROPEAN PROPERTY MARKETS ● »We expect investment volumes to increase this year, with volumes reaching €260bn, up 10% compared to 2020« Photo: Shutterstock we are likely to see a fall in average This will be reflected in the yields. We care, logistics and Life Sciences. Total floorplates required. For prime expect European prime office yield to returns will moderate into single digits offices across Europe, we expect harden by an average of 13bps over over the medium term and across rents to remain stable (0.2%) in 2021. the forecast period. In comparison, prime assets in Offices (+6.0%), Logis- The strongest rental growth will be yields on average assets will fall 3bps tics (+7.4%), High Street Retail (+3.7%) witnessed in France at 3.0%, with over same period. and Shopping Centres (+4.0%). the weakest seen in the CEE region (-2.6%). In contrast average market European real estate remains an Sukhdeep Dhillon, rents will fall in 2021, with rents declin- attractive asset class and is now Senior Economist & Associate Director, ing by -2.9% in Europe, and staying entering a renewed stage of the cycle. BNP Paribas Real Estate flat in 2022. Rental growth in the The difference in this cycle will be the office sector will be led by the prime growth of alternative and emerging segment, of which there is low supply. asset classes such as BTR, Health- 33

●  MACROECONOMIC DATA   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 MACROECONOMIC DATA Sweden Economic Indicators Source: Newsec Interest Rates Source: Swedbank, Swedish Central Bank Per cent Per cent 6 3 4 2 2 0 1 -2 0 -4 -6 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change Central Bank Interest Rate STIBOR 3M STFIX 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average Norway Economic Indicators Source: BNP Interest Rates Source: BNP Per cent Per cent 4 3 2 2 0 -2 1 -4 -6 0 -8 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E -10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change Central Bank Interest Rate NIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average Finland Economic Indicators Source: BNP Interest Rates Source: BNP Per cent Per cent 3 2 2 1 1 0 0 -1 -2 -3 -4 -5 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change Central Bank Interest Rate EURIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average 34

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 MACROECONOMIC DATA  ● BUY THE COMPLETE FORECAST adam.tyrcha@newsec.se Denmark Economic Indicators Source: BNP Interest Rates Source: BNP Per cent Per cent 4 2 3 2 1 1 0 0 -1 -2 -3 -4 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change Central Bank Interest Rate CIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average Estonia Source: BNP Interest Rates Source: BNP Economic Indicators Per cent 2 Per cent 6 4 2 1 0 0 -2 -4 -6 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change EURIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average Latvia Economic Indicators Source: BNP Interest Rates Source: BNP Per cent Per cent 6 2 4 2 1 0 0 -2 -4 -6 -8 -10 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change EURIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average 35

●  MACROECONOMIC DATA   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 MACROECONOMIC DATA Lithuania Source: BNP Interest Rates Source: BNP Economic Indicators Per cent 2 Per cent 6 4 2 1 0 0 -2 -4 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E GDP, Annual Percentage Change Employment, Annual Percentage Change EURIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average GDP Growth GDP Growth 2020–2021E Source: Newsec, BNP Per cent 6 4 2 0 -2 2020 -4 2021E -6 Sweden Norway Finland Denmark Estonia Latvia Lithuania 2020 2021E 36

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 PROPERTY DATA  ● PROPERTY DATA BUY THE COMPLETE FORECAST adam.tyrcha@newsec.se Office rents Source: Newsec Prime Office Rents (CBD) | Baltic Region Source: Newsec EUR/m2 Prime Office Rents (CBD) | Nordic Region 800 Per cent EUR/m2 2 300 Per cent 8 6 600 1 200 4 400 0 100 2 200 0 Oslo 0 -1 Tallinn Riga Vilnius 0 Stockholm Gothenburg Malmö Helsinki Copenhagen Average Annual Rental Growth 2016–2020 (left axis) Average Annual Rental Growth 2016–2020 (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Rent Level 2021E (right axis) Rent Level 2021E (right axis) Office yields Prime Office Yields | Nordic Region Source: Newsec Prime Office Yields | Baltic Region Source: Newsec Per cent Per cent 5,5 8 5,0 4,5 7 4,0 3,5 6 3,0 2,5 2015 2016 2017 2018 2019 2020 2021E 5 2015 2016 2017 2018 2019 2020 2021E 2013 2014 Gothenburg Malmö 2013 2014 Riga Vilnius Stockholm Helsinki Copenhagen Tallinn Oslo Retail rents Source: Newsec Prime Retail Rents | Baltic Region Source: Newsec EUR/m2 Prime Retail Rents | Nordic Region 4000 Per cent EUR/m2 2 500 Per cent 4 2 3000 1 400 0 300 0 2000 -1 200 -2 1000 -2 100 -4 Stockholm Gothenburg Malmö Oslo 0 -3 Tallinn Riga Vilnius 0 Helsinki Copenhagen Average Annual Rental Growth 2016–2020 (left axis) Average Annual Rental Growth 2016–2020 (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Rent Level 2021E (right axis) Rent Level 2021E (right axis) 37

●  PROPERTY DATA   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 PROPERTY DATA Retail yields Source: Newsec Prime Retail Yields | Baltic Region Source: Newsec Prime Retail Yields | Nordic Region Per cent 9 Per cent 6 5 8 4 7 3 2015 2016 2017 2018 2019 2020 2021E 6 2015 2016 2017 2018 2019 2020 2021E 2013 2014 2013 2014 Riga Vilnius Gothenburg Malmö Tallinn Stockholm Helsinki Copenhagen Oslo Logistics rents Prime Logistics Rents | Nordic Region Source: Newsec Prime Logistics Rents | Baltic Region Source: Newsec EUR/m2 EUR/m2 Per cent 150 Per cent 80 5 4 120 4 3 60 90 3 2 40 60 2 1 20 30 1 0 0 -1 Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen -30 0 Riga Vilnius 0 Tallinn Average Annual Rental Growth 2016–2020 (left axis) Average Annual Rental Growth 2016–2020 (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Forecast Average Annual Rental Growth 2021E–2023E (left axis) Rent Level 2021E (right axis) Rent Level 2021E (right axis) Logistics yields Source: Newsec Prime Logistics Yields | Baltic Region Source: Newsec Prime Logistics Yields | Nordic Region Per cent 10 Per cent 8 7 9 6 8 5 7 4 2015 2016 2017 2018 2019 2020 2021E 6 2015 2016 2017 2018 2019 2020 2021E 2013 2014 Gothenburg Malmö 2013 2014 Riga Vilnius Stockholm Helsinki Copenhagen Tallinn Oslo 38

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 PROPERTY DATA  ● BUY THE COMPLETE FORECAST adam.tyrcha@newsec.se Residential Source: Newsec Prime Residential Yields | Nordic Region Source: Newsec Prime Residential Rents | Nordic Region EUR/m2 Per cent 400 5 Per cent 4 3 300 4 3 2 200 2 1 100 1 0 Malmö Helsinki 0 0 2018 2019 2020 2021E Stockholm Gothenburg Copenhagen 2013 2014 2015 2016 2017 Malmö Average Annual Rental Growth 2016–2020 (left axis) Stockholm Gothenburg Copenhagen Forecast Average Annual Rental Growth 2021E–2023E (left axis) Oslo Helsinki Rent Level 2021E (right axis) Public Properties Source: Newsec Prime Public Properties Yields | Nordic Region Source: Newsec Prime Public Properties Rents | NordicRegion EUR/m2 Per cent 300 6 Per cent 6 4 200 5 2 100 4 0 Gothenburg Malmö 0 3 Stockholm 2013 2014 2015 2016 2017 2018 2019 2020 2021E Average Annual Rental Growth 2016–2020 (left axis) Stockholm Gothenburg Malmö Forecast Average Annual Rental Growth 2021E–2023E (left axis) Oslo Helsinki Copenhagen Rent Level 2021E (right axis) Annual transaction volumes Transaction Volumes — Annual | Nordic Region Source: Newsec Transaction Volumes — Annual | Baltic Region Source: Newsec BEUR MEUR 35 500 30 400 25 20 300 15 200 10 5 100 0 0 2015 2016 2017 2018 2019 2020 2021E 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2013 2014 Latvia Lithuania Estonia Sweden Norway Finland Denmark 39

●  PROPERTY DATA   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 PROPERTY DATA BUY THE COMPLETE FORECAST adam.tyrcha@newsec.se Transaction Volume Transaction Volumes — Quarterly | Nordic Region Transaction Volumes — Quarterly | Baltic Region BEUR Source: Newsec MEUR Source: Newsec 250 12 10 200 8 150 6 4 100 2 50 0 2014 2015 2016 2017 2018 2019 2020 2021E 0 2014 2015 2016 2017 2018 2019 2020 2021E 2013 Norway Finland Denmark 2013 Latvia Lithuania Sweden Estonia Office new construction Office stock Office New Construction (Capital Office Market) Source: Newsec Office Stock Q4 2021E (Capital Office Market) Source: Newsec Per cent of stock Thousand m2 Million m2 200 16 14 12 150 12 10 100 8 8 6 50 4 4 2 0 HMA Copenhagen Tallinn Riga 0 0 HMA Copenhagen Tallinn Riga Vilnius Stockholm Oslo Vilnius Stockholm Oslo 2020 (left axis) 2021E (left axis) 2021E (right axis) 40

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 DEFINITIONS ● DEFINITIONS General Logistics Public Properties • All rents, yields and vacancies are • The forecast is referring to ware- • A public property is defined as a end-of-year values. houses and logistics premises. property used predominantly for tax-financed operations and specifi- • All forecasts are referring to nominal • T he rents are referring to premises cally adapted for community service. values. of 5,000-10,000 sqm with a 10 year In this document, public properties lease agreement. are limited to schools (pre-schools • T he rental levels are the most and primary schools), hospitals, and probable prime rent when signing • The rent is excluding heating and elderly care homes. a new lease agreement. property tax. • T he market data refers to public • A ll yield levels are referring to net • The rent refers to modern, newly property premises of normal to initial yield. built premises with a solid lease con- modern standard with normal space tract and tenant A properties. efficiency. Offices • T he forecast is referring to new/re- Residential • T he market rent refers to the rent • T he forecast is referring to attractive excluding supplements. furbished modern and flexible office premises with normal area effective- locations with an area of around 80 Exchange rates ness. sqm. All rents and transaction volumes • T he rents are referring to premises • Definitions generally, as well as of are calculated using the average of at least 500 sqm. new and old housing depend on the exchange rates in 2021. country. • T he rent is excluding heating and excluding property tax. Retail • The rents are referring to modern retail premises of 70–250 sqm. • T he rent is excluding heating and excluding property tax. • T he rents refer to prime areas with definitions by each country. 41

●  THE NEWSEC PROPERTY OUTLOOK TEAM   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE NEWSEC PROPERTY OUTLOOK TEAM Max Barclay Head of Newsec Advisory Ulrika Lindmark Adam Tyrcha, PhD Head of Valuation & Head of Research Strategic Analysis adam.tyrcha@newsec.se ulrika.lindmark@newsec.se Øyvind Johan Dahl Karen Cecilie Thunes Christian Hagen Head of Research Senior Analyst Analyst ojd@newsec.no karen.cecilie.thunes@newsec.no christian.hagen@newsec.no 42

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE NEWSEC PROPERTY OUTLOOK TEAM   ● Morten Jensen Robin Rich Head of Newsec Advisory Head of Research Denmark robin.rich @newsec.dk morten.jensen@newsec.dk Kauri Melakari Head of Data Science kauri.melakari@newsec.fi Mindaugas Kulbokas Kristina Živatkauskaite˙ Inita Nitiša Head of Research & Analysis Senior Analyst Real Estate Economist m.kulbokas@newsec.lt k.zivatkauskaite@newsec.lt i.nitisa@newsec.lv 43

●  THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE Newsec — The Full Service Property The Group expanded internationally across the seven Nordic and Baltic House in Northern Europe — is by far into Finland in 2001, Norway in 2005, countries. Newsec has approx. EUR 65 the largest specialised commercial the Baltic countries in 2009 and billion under management and annu- property firm in Northern Europe. Denmark in 2016. The Norwegian asset ally signs lease agreements of approx. and property management companies 1.6 million square meters, transactions Newsec manages more properties and First Newsec Asset Management and of some EUR 7.6 billion and does real carries out more transactions, more TM Partner were acquired in 2012. In estate valuations with an underlying lettings and more valuations than 2013, Newsec acquired Jones Lang property value worth almost EUR 188 any other firm in Northern Europe. LaSalle’s Swedish property manage- billion. Thanks to large volumes and Through this great volume, and the ment operation. In 2017, Newsec grew local presence combined with in-depth knowledge and depth of our various with the acquisitions of Norwegian understanding of a range of operations, we acquire extensive and Basale and Danish Datea, further businesses, Newsec has a unique detailed knowledge of the real estate strengthening the position within expertise of the real estate market market. In turn, we can quickly identify Property Asset Management. In 2018, in northern Europe. business opportunities that create Newsec opened a London office to as- added value. sist international investors interested in the Nordic and Baltic region. Our prime market is Northern Europe, but through our alliance membership Newsec was founded in 1994 and is with BNP Paribas Real Estate, we offer today a partner-owned company with our services on the global market. This some 2,000 co-workers, spread makes Newsec Northern Europe’s only full service property house, and provides us with a unique ability to forecast the future. A history of growth Newsec is the result of a unique his- tory of growth, characterised by con- stant originality of thinking. The first issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001. 44

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 NEWSEC’S ANALYSIS PRODUCTS  ● NEWSEC’S MARKET REPORTS REQUEST ANY REPORT IN ENGLISH adam.tyrcha@newsec.se Thanks to Newsec’s comprehensive knowledge we are able to offer a number of analyses and segment market reports which provide you with a valuable summary of the property market. Market Report Market Report Market Report Market Report Residential Construction Rights Future Growth Markets Office Market Report Market Report Market Report Market Report Logistics Projects Retail Public Properties Sedis Report Newsec's Valueguard Market Report Transaction List Nordic Market Access Newsec’s market report portal here: https://www.marknadsrapporter.se/store 45

●  CONTACT AND ADDRESSES   NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 CONTACT AND ADDRESSES Sweden Norway Finland Lithuania info@newsec.se info@newsec.no info@newsec.fi info@newsec.lt Stockholm Oslo Helsinki Vilnius Stureplan 3 Filipstad Brygge 1 Mannerheiminaukio 1 A Konstitucijos ave. 21C, P.O. Box 7795 P.B. 1800 Vika P.O. Box 52 Quadrum North, 8th floor SE-103 96 Stockholm, NO-0123 Oslo, FI-00101 Helsinki, LT-08130 Vilnius, Sweden Norway Finland Lithuania Tel: +46 8 454 40 00 Tel: +47 23 00 31 00 Tel: +358 207 420 400 Tel: +370 5 252 6444 Stockholm Trondheim Tampere United Kingdom Humlegårdsgatan 14 Beddingen 10 Aleksanterinkatu 32 B P.O. Box 5365 NO-7042 Trondheim FI-331 00 Tampere, London SE-102 49 Stockholm, Norway Finland The Clubhouse 50 Sweden Tel: +358 207 420 400 Grosvenor Hill Tel: +46 8 55 80 50 00 Denmark W1K 3QT London Newsec Advisory Turku Gothenburg in Denmark Yliopistonkatu 16 C Sankt Eriksgatan 5 info@newsec.dk FI-20100 Turku P.O. Box 11405 Finland SE-404 29 Göteborg, Copenhagen Tel: +358 207 420 400 Sweden Silkegade 8 Tel: +46 31 721 30 00 1113 Copenhagen Estonia Tel: +45 33 14 50 70 Gothenburg info@newsec.ee Kungsportsavenyn 33, 5 tr Aarhus SE-411 36 Göteborg, Skanderborgvej 277, Tallinn Sweden 1. sal, blok 1 Pärnu mnt 12 Tel: +46 31 733 86 00 8260 Viby J EE-10146 Tallinn, Tel: +45 87 31 50 70 Estonia Öresund Office Tel: +372 533 05313 Davidshallsgatan 16 Newsec Property Asset SE-211 45 Malmö, Management in Denmark Latvia Sweden pam@newsec.dk Tel: +46 40 631 13 00 +45 26 01 02 info@newsec.lv Lyngby Riga Lyngby Hovedgade 4 Vesetas iela 7 2800 Kgs. Lyngby LV -1013 Riga Latvia Aarhus Tel: +371 6750 84 00 Viby Ringvej 2B, #. 8260 Viby J Næstved Ringstedgade 24, 1.tv 4700 Næstved 46

NEWSEC PROPERTY OUTLOOK  •  AUTUMN 2021 EXECUTIVE SUMMARY  ● THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE 47

THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE