Newsec Property Outlook, Spring 2022

NEWSEC PROPERTY OUTLOOK SPRING 2022



NEWSEC PROPERTY OUTLOOK



INNOVATE TO STAY RELEVANT As a property owner it’s important to keep At the core of a dynamic retail experience is a up with developments and the ongoing mega great collaboration between the property owner trends in society as they will impact the usage and the retailers to generate new innovative and need of your property over time. The retail solutions that embrace our behavioral and industry is at the intersection of many societal societal changes, rather than being stuck in trends and changes. Digitalization, sustaina- old ways of thinking and doing. bility and the sharing economy, just to name a few examples, are reshaping what it takes to And take it from me when I say that Newsec succeed as a retail business, and consequently knows retail – we are very proud to have 6.2 retail properties will need to transform to stay million retail square meters under management relevant and remain an attractive alternative. across the Nordics and Baltics. That is more than a hundred different shopping centers, Last time we covered retail in this report was many of them award-winning. about two and a half years ago and then I ex- pressed my concerns about many burying their In this edition of Newsec Property Outlook, we heads in the sand rather than taking the appro- take a closer look at retail with a particular focus priate actions to ensure their retail properties on the challenges and opportunities facing would stay relevant. I’m pleased to see that re- physical retail. We highlight the current trends, tail is becoming more innovative in the Nordics what the shopping centre of the future will look and Baltics, although there is still some way to like and what elements physical retail needs to go in terms of providing exciting experiences. perform well. From an investment perspective, retail may With that I wish you an interesting read! provide interesting opportunities now as yields have come up compared to most other real Max Barclay, estate asset-classes on the Nordic and Baltic Head of Newsec Advisory property markets. Bear in mind that creating value in physical retail requires extensive knowledge, an innovative approach and active management. 3



CONTENTS From pandemic storm to inflationary headwinds ........................................... 7 The Wolf of Mall Street – An analysis of the physical retail 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 information ............................................................................................................ 46 Copyright Newsec © 2022 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 acknowledgement must be made for all quotations and use of data/graphics. Cover photo: Shutterstock 5

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NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS  ● Photo: Getty Images FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS Klas Eklund, Senior Economist, Mannheimer Swartling After two years of wild swings, in 2022 the global economy was supposed to return to normalcy. However, we now face a new uncertainty: the return of inflation. Will price increases fall back or will they prove to be more persistent? The answer decides central bank actions and how much interest rates will climb. A gradual move in step with some- what higher inflation is not problematic; it can be seen as a much-needed normalization, still from an historically low level. But a more abrupt move would cause turbulence in financial markets – and in the property sector. My view is that rates will indeed climb from the pandemic with rather small China led the way with 8 per cent GDP and create headwinds. Still, real rates economic injuries and with strong growth, US growth was not far behind will continue to stay low, since long property sectors. The stage is set for with 6 per cent. Even the stodgy Euro- term factors like global savings and a year of good growth as economies zone grew by 5 per cent. The main demography will stay in place . From open up. Also the Baltics are now re- reasons were rebounds after the a fundamental perspective, property covering quickly. But also in the Nor- horrible year 2020, and the roll-out still looks like a good long-term invest- dic/Baltic region inflation and interest of vaccine. ment, although not as spectacular rates will constitute headwinds before as during recent years. But market a new equilibrium is reached. Trade met disturbances as supply uncertainty and turbulence are likely chains were hurt by lockdowns and on the path to a new equilibrium. A strong recovery lack of shipping containers. In certain sectors, e.g semiconductors, shortag- In the Nordic region, economies are Despite Delta and Omicron the eco- es caused ripple effects along several strong. All Nordic countries emerged nomic recovery was strong in 2021. →industries. Nonetheless, world trade 7

●  FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 »In all regions, inflation has returned with a vengeance« did rebound strongly, and the global I now must admit that what I saw as temporary and will fade as energy economy showed resilience. the main risk scenario has become the prices first stabilise and then fall, main scenario. Inflation has spiked, while supply disruptions after the The main problems have instead come central banks are being forced to pandemic gradually heal. from energy supply and energy prices. react and the future has become more A perfect storm emerged with simul- uncertain again. But the situation has become more taneously rising prices for oil, gas and troublesome. In the UK, labour market electricity. This pushed up consumer Inflation is back! disturbances have been exacerbated prices in all countries and real income by Brexit. In the US a strong demand took an unexpected hit. In all regions, inflation has returned impulse was injected by the generous with a vengeance. In the US, it is over fiscal stimulus last year, contributing In the autumn edition of Newsec 7 per cent, in the Eurozone around 6, to a shrinking of labour supply as Property Outlook I wrote that most in the Nordic countries 4–6 per cent many workers left the labour force. At of the uptick in prices was caused by and in the Baltics even higher. These the same time the Fed sent out signals transitory factors and that inflation are the highest inflation numbers for that the central bank would welcome would fall back in 2022. However, I decades. inflation above target and a “red-hot” also added that the major risk to this labour market. benign picture was the risk that infla- Supply disturbances have been a driv- tion would stay elevated for a longer ing force. We have also seen strong As labour supply fell and inflation rap- time, and that central banks would increases of energy prices across the idly rose, they got what they asked for react by hiking key rates more rapidly, board. Energy price increases have and then some. Cost pressures now with the ensuing risk that markets – been particularly strong in the Euro are pushing up wage compensation including property – would be rocked. zone. Most central banks initially claims, and inflation expectations are claimed that the inflation uptick is Photo: iStock 8

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS  ● »Commercial property generally is in a more benign situation, as real yields are more important than nominal ones – and real yields will stay historically low as both nominal yields and inflation rise« rising. As a result the Fed by year-end fundamental point of view, this should stock markets. Margin calls and deriv- scrapped all talk about inflation being not really be much of a problem. For atives do not play the same destabi- “transitory” and in a swift U-turn re- too many a year our countries have lizing roles as for stocks. For housing, turned to traditional inflation-bashing lived in fear of deflation, with histori- rising mortgage yields probably will rhetoric. cally low interest rates, both real and hurt some households who cannot nominal – causing asset markets to compensate increasing nominal Both the Fed and the Bank of England rise to unprecedented heights. As costs with increasing income. But this (BoE) have now set out on paths both inflation and interest rates rise, change is starting from a very low with quantitative tightening (selling this may be regarded as a start of trough and most households will not securities) and rate hikes. The ECB has normalisation back to an economy on feel the pinch that strongly. Longer sent out signals that it, also, is about a more sounder footing. term, the neutral real rate is more to embark on a more rapid pace of important than short-term nominal tightening, tapering its asset portfolio But markets rarely adjust gradually. fluctuations. and then hiking the refi rate, maybe More often, they react in spats and already this year. jerks, driven by fear and greed. So Commercial property generally is in a market rates jump – often too much more benign situation, as real yields Market nervousness – and force monetary tightening to are more important than nominal move ahead faster than was priced in ones – and real yields will stay histor- This has troubled financial markets at the beginning of this year. This is ically low as both nominal yields and during the start of of 2022. Bond happening now in several countries. inflation rise. Liquidity will continue to yields have risen and stock markets Consequently, there will be continued be strong and the volume of transac- wobbled as investors try to adapt to a volatility and financial headwinds tions are likely to stay elevated, but new reality, with higher inflation and before markets settle down in a new perhaps not breaking new all-time higher rates. Valuations have to be equilibrium. highs. re-calibrated. Longer term, the main forecast is still Different segments of the property This process will take some time, that inflation gradually falls back – markets will face very different simply because it will take time before albeit from a higher level and more conditions. Retail is squeezed, and the we know the trajectory of inflation slowly than would be optimal. The pandemic has speeded up the transi- and central bank reactions. What is new equilibrium will be characterized tion to e-commerce. Logistics, on the clear is that the inflation peaks of by low real rates. The global forces other hand, is gaining from the same this winter automatically will pull up which have pushed neutral real rates transition. The office market is subject inflation numbers also for the whole to historical lows are still in force, not to divergent forces, where some year of 2022 because of base effects. least ageing populations and high employers will want to downsize, while Furthermore: the longer inflation savings rates. others need to upscale their premises. stays elevated, the higher the risk of Rental will stay more stable as the contagion to other sectors, such as What we see today is therefore proba- revenue flows change only gradually. food and wage costs. High inflation bly not the start of a new 1970:s period means real wages suffer and conse- of stagflation with high inflation and The Nordics → quently compensation wage claims high rates. But even so, we may be in may rise, not only in the US but also in for a period of adjustment, which may The Nordic region’s economic per- continental Europe and the Nordics. become painful to some investors. formance during the pandemic was outstanding. After the initial dip in Central banks are Property markets 2020, all the Nordic countries have turning hawkish outperformed the Eurozone and the In this situation, also property mar- UK – an interesting and unexpected Consequently, more central banks kets will meet headwinds in the short common result, since health strate- will switch to tightening mode. From a term. But they will be weaker than for gies and stringency measures varied 9

●  FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 »Fundamentals speak in favour of a gradual cooling of a hot property market« between countries (where a high from 10 per cent to just 2 per cent, The Swedish labour market is death toll stood out in Sweden). GDP and high oil prices assure a massive different from the other Nordics in surpassed the pre-pandemic level inflow of purchasing power. As result, the sense that it is clearly divided. A early in the year, government finances the scramble for labour is intense, and large portion of the labour force has have been robust and labour markets labour unions are pushing for wage difficulties being integrated into the are strong. increases. regular labour market, and almost half of the unemployed are structur- One reason may be that the Nordics These factors speak in favour of ally, long-term unemployed. On the are not as dependent on tourism as higher house prices, but tightening other hand, the regular labour market Southern Europe. Another can be that from the central bank aims to stifle is over-heating and vacancies are health care is universal and of high such increases. Despite strong macro reaching record numbers. Demands quality, and that vaccine was rolled fundamentals, the housing market will for higher wages in manufacturing out swiftly. Now that economies are therefore cool during 2022. are starting to emerge as a result of opening up again, recovery in the over-heating and as compensation for service sector will support a year of Denmark high inflation cutting into real wages. good growth, albeit not as spectacular Also the Danish labour market is tight, as in 2021. Growth rates will be above on the verge of over-heating. Unem- Inflation is high, but the Riksbank potential, but gradually taper off dur- ployment is only 3 per cent. Recruiting claims it is temporary, driven by ing the course of the year. people with the right skills is increas- energy prices which will fall back. The ingly difficult. As resource utilization bank has vowed to keep the repo rate The challenge of inflation and the is strained, strong real growth and at zero for two more years. Markets, risk of over-heating labour markets is bottle-necks in the labour market however, expect that the bank will common for all countries in the region. tend to push up both wages and the have to change course and tighten But it will be met differently, not least general price level. Construction has earlier. Soft monetary policy will because of different currency regimes been strong with a rapid increase of support the property sector a while and monetary policy strategies. housing starts. yet, but over the year as a whole head- winds from inflation and future rate in- Norway As the economy opens up after creases will make the property sector As usual, Norway leads the way restrictions, Denmark will show good somewhat cooler than last year. towards higher inflation and higher growth and inflation will stay above rates. This is what we would expect, the target. The Danish krone is, how- Finland since Norway traditionally shows ever, pegged to the euro, which means Also Finland is in the midst of an higher price pressures from her large that the central bank – contrary to upswing, driven by manufacturing off-shore sector and, consequently, the Norwegian – will not run away and construction. Parts of the service tighter monetary policy. Norges Bank on its own but will shadow the ECB. sector are lagging, but are expected to is both formally and practically inde- Only minor deviations of key rates catch up as the economy opens pendent from ECB and is now using are possible, to ensure currency up again. Here, the scope for growth that independence to push up its key stability. is high, as the room for pick-up in rate faster than her neighbours. services is large. A shift of governor by year-end is Sweden not expected to change monetary The Swedish export sector has per- The upturn of the economy has strategy. formed well during the pandemic. As brought the same side-effects as in the economy now opens up, services the other Nordic countries: inflation Hiking has already started and will bounce back and help propel both and labour shortages. The housing will continue throughout this year employment and income growth. market has been thriving, in particu- and next. One reason is the risk of Private consumption will be boosted lar larger houses and apartments over-heating, both of labour and as the high household savings ratio have gained from pandemic-induced property. Unemployment has fallen probably will fall somewhat. demand. 10

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 FROM PANDEMIC STORM TO INFLATIONARY HEADWINDS ● As Finland is a member of the Euro- Photo: iStock zone, monetary policy is set by the ECB. The ECB will start its tightening this stage, however, it is impossible to most rapidly in Norway. In the other process earlier than previously said, quantify the outfall since the geopolit- countries monetary policy will be set next year for sure, possibly even this ical and military outfalls are unknown. by the ECB, or in the case of Denmark year. The housing market will cool and Sweden by central banks who somewhat. Conclusion normally follow the ECB closely. The Swedish Riksbank will be the laggard. The Baltics The Nordic and Baltic countries have weathered the pandemic storm This means that tightening will be The Baltic region was hit by a severe better than feared. This holds also for gradual, not in itself causing havoc. wave of the Covid Delta virus. None- property markets, who have boomed. Fundamentals speak in favour of a theless, economic recovery has been Looking ahead, the challenges will gradual cooling of a hot property swift, in particular in Estonia. Inflation be to weather the inflationary storm. market. Commercial property is not has risen sharply, and by the beginning Inflation will fall back gradually, but as vulnerable as the housing market, of this year was close to the 10 per probably more slowly and from a since real rates will still be negative for cent mark in all three countries. The higher level than central banks have some time yet. In general, the Nordic reasons were the same as in their Nordic expected. property market also will be supported neighbours, i.e primarily rising energy by capital inflows from other countries costs. Wages have followed suit, driv- In all countries the central banks will and non-Nordic investors. en by compensation claims and bottle- gradually tighten monetary policy, necks in the labour markets. Monetary policy is set by the ECB, meaning a tightening could start this year. The Baltic countries should also be noted for the geopolitical risks. With Russia massing troops along the Ukraine border and hurling threats against NATO, the Baltic states – all three of which are NATO members – have been caught in the crossfire. The economic effects will be negative, due to more expensive gas imports and sanctions imposed by the US. At What if? different directions. Higher inflation calls for tighter policy, Just as this report is sent to the printer for hard copies, Russian but blows to production and income calls for support. The path troops are massed at the Ukrainian border and preparations are chosen will depend on the severity and length of the war. made for an invasion. The analysis in this chapter, however, does not include any serious effects of a hot war. Stock markets will fall, most dramatically in Russia and Ukraine. Property markets will be less affected since the invest- But military action will cause severe disruptions in Europe. For ment horizon is longer and they are more dependent on real rates. one, commodities prices will rise further. Oil, gas and grain prices Cyber attacks may wreak havoc in important sectors, sanctions will move up. The result will be higher prices on electricity and such as blocking Russian banks from the international payments food in most of Europe. At the same time, trade restrictions will system would hurt not only Russia but also her trading partners. cause a setback of production and income in several countries, At this stage, however, it is not possible to formulate any not least Finland and the Baltic states. This puts economic policy quantitative assessments of these shocks. in a difficult situation, where stagflationary forces pull policy in 11

●  THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE WOLF OF MALL STREET AN ANALYSIS OF THE PHYSICAL RETAIL MARKET All around the world, retail has been hit hard by the covid-19 crisis. Many shops have been closed, a wide range of restrictions have been enforced, and the physical shopping experience has in general looked very different to before the pandemic. However, even pre-pandemic, retail was struggling in many ways, with the growth of e-commerce posing a substantial challenge for physical retail. This growth has been accelerated by the pandemic, and led many to the conclusion that the end is approaching for physical retail. Newsec, however, does not believe that this is the case – at least not in the Nordics & Baltics. In this edition of the Newsec Property Outlook, Newsec analyzes the outlook for physical retail – and concludes that physical retail in the Nordics is in many ways thriving, vastly outperforming much of the rest of Europe and the world. Some retail has attracted thus far in 2022, over 50% has been Primary types of retail: investors – the rest has been within the big box and grocery store panned segments. Graph (1) shows that the big High Street: A shop located on box segment has been the one type of the main street of a town or city. There is no question that retail has retail in the Nordics that has experi- struggled on the investment market enced strong yield compression in the Shopping Centre: A group of in the past few years. In 2015, the seg- past few years, with yields now being shops built together, usually ment accounted for 24% of the total akin to or slightly below the yields under one roof. transaction volume in the Nordics & for prime shopping centres. In some Baltics, and thus was second to the prime Nordic markets, yields for big Big box: A retail store that office segment in terms of transaction box are now approaching 4.50%. occupies a large amount of phys- volume in the region. Post-pandemic, ical space, often in a retail park. the segment has instead accounted At the same time, yields for high street Usually located out of town. for just 10% of the total transaction retail and shopping centres have risen volume – and in some countries, like dramatically since 2019 – with yields Sub-segments: Sweden, the share taken has been for prime high street properties now even lower, at only 7%. Of the retail at around 4%, while yields for prime City mall: A shopping centre that has been purchased by investors shopping centres are in many cases located in the inner city. in the Nordics & Baltics in 2021 and above 5%. A number of retail sub- District centre: A medium-sized 1. Nordic Prime Retail Yields shopping centre usually located in a suburban area, but of such Per cent scale that it serves more than 6 just the local area. 5 Neighbourhood centre: A smaller shopping centre cater- 4 ing primarily to local residents. 3 Regional centre: A large shopping centre located in a 2 suburban area, providing experi- ence-based retail and attracting 1 large amounts of residents from all over the city. 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E Retail park: An external retail area, often comprising a large number of big box properties. Nordics High Street Nordics Shopping Centre Nordics Big Box 12

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET   ● »Most retail, beyond big box and grocery store properties, has been almost universally panned on the transaction market, with the few sales that have occurred having completed at generally high yield levels« segments could be added here, such as of retail. One of the few exceptions to investors often seeing potential for → district centres, city malls, or regional are so-called neighbourhood centres, creation of residential building rights centres, where yields have generally which have in many ways benefitted in connection to such properties. Most also risen sharply since 2019. In short, from an increased propensity to work other retail, however, has been almost investors have generally flocked to from home as a result of the pandemic universally panned, with the few sales big box and grocery store properties, – these, too, have attracted some that have occurred having completed and shied away from most other forms investor interest. This is partly owing at generally high yield levels. 13

●  THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 »Despite yields being higher and retail performance being stronger than in continental Europe, some international investors, marred by the more dire outlook for retail in their home countries, may fail to see opportunities in the Nordics & Baltics« Is retail actually struggling? 2. Post-pandemic turnover compared to pre-pandemic turnover – retail types* The fact that investors have shied away Per cent from many forms of retail almost en- 20 tirely could suggest that those forms of retail are struggling. However, Newsec 10 has found that this is not necessarily 0 the case. Using a large sample of turn- over data from a wide range of different -10 kinds of physical retail establishments, Newsec finds that retail turnover in the -20 Nordics & Baltics has, in many cases, recovered from the pandemic – and is -30 even growing when compared to 2019. -40 City mall District Neighbourhood- Retail park Graph (2) highlights this. The graph Regional centre centre shows, perhaps expectedly, that neigh- centre bourhood centres and retail parks have both displayed growth in 2020 and 2021 turnover compared to 2019 2021 turnover, when compared to 2019. However, interestingly, the graph also March–December 2020 turnover compared to March–December 2019 shows that regional centres struggled in 2020, but have fully recovered and *disregards periods in certain countries where retail was forcibly closed saw their turnover grow by a formida- ble 5% in 2021 when compared to 2019. 3. Post-pandemic footfall compared to pre-pandemic footfall* Furthermore, though district centres did not quite grow, their turnover in Per cent 2021 was more or less similar to 2019. 20 It is thus only city malls which continue to post turnover figures substantially 10 below those seen 2019 – likely owing 0 to less people working from the office now than pre-pandemic. Though there -10 have been some indications of growing investor interest for both regional and -20 district centres, with a few noteworthy transactions in 2021 and 2022 (e.g. -30 Alecta’s purchase of Solna Centrum in Sweden, or the Aurora portfolio in -40 Norway), Newsec expects more such transactions will occur. These centres -50 City mall District Neighbourhood- Retail park should trade at relatively low yield lev- Regional centre centre els, since these retail sub-segments are centre not struggling as much as perhaps was expected. Despite yields being higher 2021 turnover compared to 2019 and retail performance being strong- er than in continental Europe, some March–December 2020 turnover compared to March–December 2019 *disregards periods in certain countries where retail was forcibly closed international investors, marred by the Looking at footfall, the above trends more dire outlook for retail in their are essentially mirrored. Graph (3) home countries, may fail to see these shows that footfall for regional and opportunities in the Nordics & Baltics neighbourhood centres is up in 2021 for some time still – creating openings compared to 2019, and for district cen- for other players. tres it is only slightly down. City malls 14

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET   ● »Remarkarbly, almost all forms of retail tenants have seen turnover increase compared to 2019 in 2021« lag a little further behind, but still per- a shopping centre need to include, in fact that essentially all Nordic & Baltic form substantially better in 2021 than order to maximize performance and shopping centres contain grocery & 2020, indicating that recovery has be- withstand the growth of e-commerce? pharmaceutical elements, while many gun. Footfall on the high street in the in the UK & the rest of Europe do not, Nordics in 2021 is down an average of Part of the answer to this question is one of the key strengths of Nordic 29% - with the European average be- is likely to be in the data. Graph (4) & Baltic retail. This is thus also one ing closer to down 40%, and individ- shows which types of retail tenants of the primary reasons that physical ual countries such as the Netherlands have been performing best post-pan- retail is in many ways already “back to being down as much as 55%. Here, demic, in the strongest performing normal” in the region. too, we see the Nordics outperforming shopping centers. Remarkably, almost much of the rest of Europe, proving all forms of retail tenants have seen While groceries & pharmaceuticals that interest for physical retail in the turnover increase compared to 2019 region remains strong. in 2021, with only books and other ensure footfall through thick and thin, retail continuing to decline. Only two What elements does physical forms of retail perform worse in 2021 other forms of tenants also need to be retail need to perform well? than in 2020 – pharmaceuticals, and groceries (which both saw abnormally present in a shopping centre to ensure Though many forms of retail are strong growth in 2020). Nevertheless, high-performing, some still manage these still continue to experience its success. In 2021, the strongest to stand out from the crowd, and have strong growth, and their ability to improved their turnover and footfall withstand the impacts of a pandemic performing tenants have been restau- even more than others. This naturally make them a strong staple to build begs the question – what tenants does a shopping centre upon. Indeed, the rants & cafés, opticians, toys, jewelry, home furnishing & furniture, other service & alcohol. In essence, this encapsulates the spirit of a successful shopping centre – providing a wide range of shops & activities for differ- → ent demographics. 4. Post-pandemic turnover compared to pre-pandemic turnover – retail tenants* Per cent 30 20 10 0 -10 -20 -30 -40 Home furnishing & furniture Clothing Other retail Other service Pharmaceutical Groceries Restaurant & café Electronics Jewelry Optician Shoes Books Sports & outdoor Alcohol Toys Construction 2021 turnover compared to 2019 *disregards periods in certain countries where retail was forcibly closed March–December 2020 turnover compared to March–December 2019 15

●  THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 »The next “flight shame” could very well be “e-commerce shame”« What will the shopping centre Baltic shopping centres – is likely to expects that the conflict between two of the future look like? continue to be essential. Retail needs strong trends in the Nordics & Baltics to be fun and/or convenient to survive. – namely the expectation of next-day Still, the threat from the long-term delivery when online shopping, as well growth of e-commerce remains. Beyond this, one of the most im- as growing environmental aware- E-commerce today accounts for portant trends in the retail space ness – is likely to become highlighted roughly 13% of the total retail market is the increased focus on ESG and further in the societal discourse. in the Nordics & Baltics, but with sustainability, which in many ways is Next-day delivery is generally not the growth averaging 20% per year in the becoming ever more omnipresent in most sustainable, with issues posed by past few years, could even account modern society. An increased number both frequent customer returns and for as much as 30% by 2030. Though of retail tenants catering to this, in oversized packages, increasing cus- maturity for certain forms of e-com- the form of e.g. second-hand shops, tomer environmental footprints. As a merce remain low (with e.g. groceries charity shops, and “re-use” shops, is result, the next “flight shame” could having a market share of just a few an inevitability. However, Newsec also very well be “e-commerce shame,” percent), strong growth is being seen across all sub-segments, even those that are less mature. For physical retailers, the key to withstanding the long-term threat from e-commerce is creating an attractive, mixed-use place that provides more than just retail to its customers. Industry pro- fessionals have long spoken about the importance of place-making, as well as providing an experience. Though retail is becoming more innovative in the Nordics, Newsec continues to think that retailers in the Nordics & Baltics still have some ways to go in terms of providing exciting experienc- es to customers. Padel courts, cine- mas and restaurants may be one piece of the puzzle, but providing more unique experiences which people are happy to go out of their way for is also key. Strong additions could include ice-skating rinks, indoor downhill or cross-country skiing, swimming pools, darts, escape rooms, botanical gardens, axe throwing, experiences catering to children and much more. Retailers would be well-served to look abroad to other more mature retail markets in this regard. This, coupled with the provision of strong commu- nity service elements and building a community – elements which are already present in many Nordic & 16

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE WOLF OF MALL STREET – AN ANALYSIS OF THE PHYSICAL RETAIL MARKET  ● »It is important to capture every part of the customer's journey from idea to purchase of a product, and make it easy for them to shop in the ways they want« Photo: Dreamstime An increased focus on catering to and capitalizing on shoppers who “come which creates opportunities and chal- from it, and provide attractive expe- to try, not to buy,” is essential as part lenges for physical and e-commerce riences for physical shoppers where of this. It is important to capture every retailers. Though physical retailers they can e.g. both order products part of the customer’s journey from could be tempted to capitalize on the from a wide range of online retailers, idea to purchase of a product, and misfortune of e-commerce operators, and later collect these. make it easy for them to shop in the the best course of action is likely to be ways they want. This could entail the collaboration rather than conflict. For Other trends that are likely to con­ creation of more showrooms, smaller one, shopping centres could look to in- tinue to build include the importance scale retail shops, and more. Consum- crease provision of physical places of of evolving content in a shopping ers are increasingly valuing high-end, delivery, as well as expedited return, centre. More pop-up shops, as well exclusive shopping experiences, which of packages. In as an increased digital presence, is could also entail the provision of more general, physical retailers could also essential to both attract shoppers to targeted concept malls. On the other look to promote and complement physical retail and provide interesting end of the spectrum, discount stores e-commerce rather than shy away experiences for them while there. are also thriving. By listening to both prospective and current customers and finding the right fit for each indi- vidual retail location, Newsec thinks that most retail can succeed, and sees great development and potential for almost all retail sub-segments. For struggling retail owners seeing other retailers thriving, it remains important not to overreact. Adapting the contents or use classes of parts of a retail property, in order to play to its strengths, should not be a cause of major alarm. Rather, this should be seen as an opportunity to rise above the competition, while also creating value. If you need help maximizing potential out of your retail property, or are wondering where the opportu- nities in the market lie, do not hesitate to reach out to Newsec, the full service property house in the Nordics. Newsec has got all of your asset man- agement and advisory needs covered – for the retail market, and beyond. Adam Tyrcha, PhD [email protected] Ulrika Lindmark [email protected] 17

●  THE SWEDISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE SWEDISH PROPERTY MARKET 2021 SHATTERED ALL RECORDS – CAN 2022 KEEP UP THE MOMENTUM? Photo: Shutterstock 2021 proved to be yet another inter- – relatively low in a global context. at an enormous SEK 400 billion – esting year for the Swedish economy. The Swedish Riksbank is expected to almost double the previous transac- The year was mostly marked by recov- leave the key interest rate at 0 per tion volume record, which was SEK ery, though some resurgence of the cent for the foreseeable future. The 218 billion, set in 2019. This means that covid-19 virus, in both the delta and Riksbank has stated that the rate is Sweden was the third strongest omicron variants, resulted in periodic set to remain unchanged until 2024, transaction market in Europe in 2021 sharpening of restrictions, impacting though an increase in 2023 would – stronger than France, and not too recovery to some degree. Economic not be entirely surprising according far behind Germany and the United growth, however, remained strong to some industry forecasters. All in Kingdom. Though 2022 will have a throughout the year, and ended up at all, the Swedish economy continues tough time matching up to the record 4.7 per cent for the year as a whole to perform very well, and the country volumes seen in 2021, the year has – one of the strongest growth rates has navigated the covid-19 crisis well, come off to a strong start and is among the economies that performed economically speaking. expected to post a very strong trans- well in 2020. Unemployment fell to 7.5 action volume, too – likely among the per cent in 2021 – high in a European Few things are stronger than the strongest of all time. context, but low when factoring in Swedish economy, but one is the the very high employment rate that Swedish real estate market – which Contact: Sweden also boasts. Inflation picked has performed incredibly well in 2021 Adam Tyrcha, PhD up towards the end of the year, and and thus far in 2022. The full-year [email protected] ended up at slightly above 2% in 2021 transaction volume in 2021 ended up 18

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE SWEDISH PROPERTY MARKET  ● »The full-year transaction volume in 2021 ended up at an enormous SEK 400 billion – almost double the previous transaction volume record« Interesting trends on the Swedish property market in 2021 and 2022 RECORD-SHATTERING VOLUMES SEK 400 BILLION to as much as SEK 138 billion – dou- ON THE MARKET ble the previous record volume. The Total investment volume in 2021 second strongest segment was the Every quarter in 2021 saw the office segment, at 22% of the total strongest transaction volume of all SEK 350 BILLION transaction volume, achieving a re- time for that respective quarter – cord transaction volume of SEK 83 meaning that Q1 was the strongest Total investment volume billion. The office volume was driven Q1 of all time (SEK 52.1 billion), Q2 expected in 2022 by M&A transactions, as well as a was the strongest Q2 of all time (SEK few strong single property and port- 108.2 billion), Q3 was the strongest +3.75% folio deals. An astonishing 14 seg- Q3 of all time (SEK 85.7 billion), and ments and sub-segments achieved Q4 was the strongest Q4 of all time GDP growth expected in 2022 record-high volumes in 2021, and it (SEK 153.5 billion). The Q4 volume is much easier to list the segments alone was stronger than the full-year STOCKHOLM STRIKES BACK and sub-segments that did not do so transaction volume in 2018. The (these include hotels, retail, and the November transaction volume – SEK The Swedish capital city accounted shopping centre subsegment), than 76.3 billion – was the strongest trans- for 47% of total transaction volume those that did. action volume in any single month in 2021. This was the strongest share of all-time, and was not far off the taken by Stockholm since 2009 – the FOREIGN INVESTORS FALL BACK SOME- full-year transaction volume seen in city normally accounts for closer WHAT – BUT ARE LOVING LOGISTICS 2013. The strong volumes seen thus to 40% of the total transaction far in January and February 2022 volume. Strong activity in Stockholm Foreign investors accounted for just indicate that the record volume for a was primarily driven by some of 17% of the total transaction volume Q1 of SEK 49.1 billion may be eclipsed the above-mentioned M&A trans- in 2021 – the lowest share taken by in 2022. actions, as well as the sale of the foreign investors since 2013. In the Akelius portfolio to Heimstaden, and past few years, the average share M&A DEALS DROVE VOLUME – BUT A Heimstaden’s subsequent resale of taken by foreign investors has been RECORD NUMBER OF TRANSACTIONS, TOO the portfolio to a Heim­staden joint between 25 and 30%. Neverthe- venture with Allianz. less, in terms of the actual volume The record transaction volume was purchased by foreign investors, this driven by a large number of different ALL-TIME HIGH ACROSS MANY SEGMENTS amounted to SEK 65.0 billion – the types of transactions. M&A deals strongest such volume since 2007. ended up accounting for 39 per cent The residential segment accounted A lower share of the total transac- of the total transaction volume – the for 35% of the total transaction vol- tion volume being taken by foreign highest ever share taken by these. ume in 2021 – the highest share ever investors is largely a result of the 25 M&A deals occurred throughout taken by the segment. Volume with- lack of foreign involvement in most the year, with large deals including in the residential segment amounted major M&A deals throughout the Corem’s acquisition of Klövern, year. Foreign investors have shown a Castellum’s acquisition of Kungs­ particular interest in industrial prop- leden and Samhällsbyggnadsbola- erties – accounting for over 40% get’s acquisition of Amasten. The of the volume within the industrial year also saw a record number of segment, and close to 70% of the property transactions as a whole, volume within the logistics sub-seg- however, with 799 completed deals – ment. of which 63 were above SEK 1 billion. 19

●  THE NORWEGIAN PROPERTY MARKET    NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE NORWEGIAN PROPERTY MARKET THE RETURN OF INTERNATIONAL INVESTORS SPARKS RECORD HIGH VOLUMES The Norwegian economy has con- Economic activity is expected to ing to a total of 34 transactions tinued to grow and activity sharply continue to increase in 2022, primar- above one billion NOK. International increased while unemployment ily driven by industries which were investors have also returned to the continued to fall in the second half of severally hit by restrictions in 2020 Norwegian real estate market after the year. Society is on its way to fully and 2021. GDP is expected to grow by showing a limited presence in 2020. reopening and there is an optimism on 3.5% for the full year of 2022. Lack International investors amounted to the market. High energy prices have of qualified workers and supply chain 18% of the total transaction volume, however caused inflation to surge. issues might affect this growth. where Swedish buyers were the domi- Excluding energy prices and taxes nant international buyer contributing the inflation is roughly around the Norway is another Nordic country to half of that volume. With a strong inflation target of 2%. Salary increas- which noted a record year for the real financing market and a favorable mac- es and larger price growth in imported estate market. In total 420 transac- roeconomic climate, Newsec expects goods is likely to push underlying in- tions were noted amounting to NOK the real estate market to continue to flation higher. Due to the high inflation 167 billion – making this a year for the prosper in 2022 although the full year the Norwegian central bank raised history books. The last quarter alone volume is forecast to be lower than in rates at the end of 2021 from 0.25 to amounted to NOK 76 billion which can 2021 due to less M&A activity. 0.50%. The Norwegian central bank be put in relation to e.g. 2013 when the thus became the first central bank in total transaction volume for the entire Contact: the Nordics to raise interest rates. An year amounted to NOK 40 billion. Øyvind Johan Dahl additional three hikes are expected Apart from being characterized by re- [email protected] in 2022. As a result of the increase in cord high volumes, several M&A deals interest rates, 5 and 10 year SWAPs and large portfolio transactions could are now at pre-pandemic levels. be observed on the market – amount- Photo: Shutterstock 20

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE NORWEGIAN PROPERTY MARKET  ● »In total 420 transactions were noted amounting to NOK 167 billion – making this a year for the history books« Interesting trends on the Norwegian property market in 2021 and 2022 LOGISTICS PERFORMS WELL NOK 167 BILLION sale of Oslo Areal, the ABP port- – FAR FROM SURPRISING folio, Samhällsbyggnadsbolaget’s Total investment volume acquisition of Trygge Barnehager Logistics continue to be the second in 2021 and their acquisition of Solon Eien- largest segment on the Norwegian dom. Even the much-questioned transaction market. Never before NOK 150 BILLION retail segment was part of the has the share been as large as in action through the Aurora portfo- 2021 and the segment amounted Total investment volume lio. The year was truly the year of to 23% of the total transaction expected in 2022 M&A transactions on the real estate volume. The share is only expect- market and in the last quarter more ed to increase, and logistics is on +3.4% deals with a value above NOK one track to amount to a quarter of the billion were noted than in the full total transaction volume. As the GDP growth expected year of 2020. Less M&A activity is demand for logistics hubs spikes in 2022 expected in 2022. and the segment makes its mark on the transaction market, the price is crease or decrease space as RETAIL AND HOTELS ARE BACK bound to follow suit and since the required has become an important IN BUSINESS beginning of the pandemic the yield part when choosing premises. for prime assets have decreased by On the investment market, yield Both hotels and retail have done 75 basis points. Even more remark- compression within the Oslo CBD is a comeback throughout the year, able is that normal assets have seen flattening and has probably reached making 2021 perhaps the end of the a decrease of 100 basis points since bottom levels for now. Areas downfall which begun just a year the beginning of the pandemic. surrounding the CBD are instead prior. The two hotels Zander K in Logistics has thus noted a larger expected to increase in popularity Bergen and Quality River Station in yield compression than offices, on the market and the gap between Drammen which were pulled from with a 40% decrease compared to these areas and the CBD is expected the market at the beginning of the a 35% decrease for offices since to tighten. pandemic were put back on the 2014. market in 2021. The two hotels were THE YEAR OF M&A DEALS both sold during the year, at com- THE RETURN OF THE NEW OFFICE petitive market levels. For the retail As the global M&A market reaches segment the most notable transac- The rental market has bounced record levels, so does the M&A tions in 2021 were the Aurora port- back from the slow pace which had share of the real estate transaction folio and the Jærhagen Shopping been observed since the beginning volume in Norway. Several large center, both of which went for over of the pandemic. Although rent- deals have been noted such as the or around one billion NOK. Newsec al levels have remained roughly expects the comeback to continue unchanged, search processes have in 2022, with increased activity been substantially longer than prior within both segments, with large to the pandemic, but are now back portfolio premia being observed at pre-pandemic levels. An increase and sales at pre pandemic levels. in demand for modern premises of high standard near public transpor- tation hubs has been noted as well as flexibility in rental contracts. Especially the flexibility to in- 21

●  THE DANISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE DANISH PROPERTY MARKET THE PROPERTY MARKET RIDES THE WAVE OF A FLOURISHING ECONOMY The Danish economy continues to ex- Photo: iStock pand. In Q4 2021, GDP was 3% above the pre-pandemic level and it is esti- declining energy prices. This is due to type. Investment in industrial and mated to have grown by 3.9% in 2021. the increasing utilisation of capacity in logistic properties also contributed The economy is expected to grow the economy. significantly to investment growth, by 2.8% in 2022. So far, businesses almost doubled from DKK 6.6 billion in have, in general, made it through the Rising inflation is affecting interest 2020 to DKK 12.4 billion in 2021 – also pandemic relatively well and business rates. The 10-year Danish government a record high. Investment was to a confidence remains positive in most bond yield has risen from -0.5% at great extend driven by foreign inves- industries. Private consumption has the beginning of 2021 to -0.2% at the tors. Overall, they represented 60% increased substantially since the beginning of 2022. However, there of the transaction volume. Foreign reopening of society in the spring of were significant fluctuations with buyers were especially targeting in- 2021 and is expected to grow rapidly interest rates tending to fall with new dustrial & logistic assets (74% share) in 2022 as well. Danish households outbreaks of COVID-19 and surges in and residential properties (63% have resumed their consumption to infection rates. Nevertheless, interest share). the usual extent at the end of 2021. rates are still low and the Ministry of Incomes and wages are expected to Finance forecasts this to continue in The outlook for 2022 is continued continue to grow, and households 2022. Based on market expectations, strong investment activity. Momen- are likely to reduce the propensity to the average yield on a 10-year govern- tum from 2021 has continued into save in coming years. The composi- ment bond in 2022 is expected to stay 2022 with a number of large trans- tion of consumption is still distorted, negative at around -0.1%. Thus, real actions in January and a favorable with goods making up a larger share interest rates will remain very low. macroeconomic environment going than normal and services making up forward with high economic growth, a smaller share. In its latest forecast, The property transaction volume low (albeit moderately rising) interest the Ministry of Finance expects con- reached a record level of DKK 98 bil- rates, ample access to capital and pos- sumption to gradually approach its lion in 2021 - up by 37% compared to itive attention from foreign investors. “normal” composition from before the 2020. The growth was mainly driven COVID-19 crisis. by strong demand for residential Contact: properties. Investment in residential Robin Rich Employment skyrocketed through- assets reached DKK 53 billion making robin.rich @newsec.dk out 2021 to new record levels. From it, by far, the most transacted property January to November the number of employees increased by 154,000. This is significantly more than previously expected. Employment has risen in most industries. Unemployment has dropped to 2.5% and there is a widespread shortage of labor. The labour market is reflecting a booming economy with increasing pressure on the economy's available resources. Inflation accelerated to more than 3% in Q4 2021, mainly due to the sharply rising energy prices. Consumer prices rose by 1.9% on an annual basis in 2021. Inflation is expected to climb to 2.2% in 2022 despite forecast 22

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE DANISH PROPERTY MARKET  ● »The property transaction volume reached a record level of DKK 98 billion in 2021 – up by 37% compared to 2020« Interesting trends on the Danish property market in 2021 and 2022 WILL 2022 MARK THE RETURN OF RETAIL? DKK 98 BILLION leases, where the yield in the Copenhagen area fell by 75–125 Retail properties have been in low Total investment volume basis points. Prime logistics yields demand by investors in recent in 2021 fell below 5% in 2021 and is current- years, but the downward trend may ly at around 4.25%. Looking into be turning. Transaction volume DKK 85–90 BILLION 2022 yields may compress further soared by 38% from 2020 to 2021 as many foreign investors continue – mainly due to a number of large Total investment volume to show interest in this segment deals involving shopping centres expected in 2022 because yield levels in Denmark – such as BIG Shopping Center in are still relatively high compared Herlev and Kronen in Vanløse – and + 2.8% to neighboring countries. Foreign supermarket portfolios. The weak investors accounted for 70% of the market has seen yields soften since GDP growth expected transaction volume in this segment 2019, but there are signs that this in 2022 in 2021. trend is bottoming-out. Investors may find retail yields increasingly WILL FOREIGN INVESTORS DRIVE RESIDENTIAL PROPERTIES attractive compared to other asset LOGISTICS YIELD COMPRESSION IN REMAIN ON TOP types where yields have com- 2022? pressed steadily and are now rela- It will not come as a huge surprise if tively expensive compared to retail. Transactions in industrial and the residential segment does come logistics properties almost dou- in on top as the most sought-after DIVESTMENT BY FOREIGN OWNERS bled in 2021 compared to 2020. asset class in 2022. Strong demand MAY INCREASE OFFICE INVESTMENT The massive interest resulted in prompted by demography and ACTIVITY a sharp yield compression. The income growth combined with low development was most distinct for interest rates and rapid expansion Office properties accounted for an modern, well-located warehouse of new residential stock provides atypically low share of the transac- and logistics properties with long opportunities for long term inves- tion market in 2021. Lack of product tors. is restraining investment activity. In 2021, however, foreign property owners increased their divestment activity significantly representing 42% of the office transaction volume compared to 29% in 2020. Looking into 2022 office investment may experience a comeback driven by more potential sellers – Danish as well as foreign. 23

●  THE FINNISH PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE FINNISH PROPERTY MARKET 2021 – A YEAR OF UPS AND DOWNS BUT A PROMISING FORECAST GOING INTO 2022 The Finnish economy has, much like to 2020. After the U-curve of 2020 transaction volume was not a record the rest of the world, been affected by in the real estate investment market volume, but the strongest since 2018. covid-19 in 2021. Despite hitting the (Q2-Q3 2020), activity intensified Since the Finnish market often follows intended 80% vaccination rate in the towards the end of the year. In 2021 on the Nordic market with a slight delay, last quarter of the year, Finland has the other hand, the first quarter was liquidity is expected to remain strong had strict restrictions in both society quiet, followed by a booming spring in 2022. Many indicators show that as well as for foreigners entering the and summer. In the last quarter of the increased activity of the second country. The year of 2021 started 2021, trading volume was EUR 2.42 half of 2021 will continue, and with in- slow, but the economy made quite a billion. In the light of history, this is a creased cross-border flows and active comeback in the last quarter where high number, as the average quarter- international investors in residential, the unemployment rate dropped to ly trading volume in 2015-2021 has office, logistics and public property the lowest it has been since before been EUR 1.8 billion. Consequently, segments, it is possible that record the pandemic. Economic sentiment hit market liquidity remains strong, with Finnish transaction volumes could be all-time highs both in October and an active end of the year carrying forthcoming in 2022. November and the inflation rate was momentum into early 2022. Finland's at 3.7% in November, the highest transaction volume in total was ap- Contact: it has been for over 10 years. Thus, proximately EUR 7 billion in 2021. Valtteri Vuorio hopes are high that Finland will main- [email protected] tain and also increase its economic The Nordic real estate markets saw growth in 2022. exceptional activity in 2021, espe- cially those in Sweden, Norway and The Finnish real estate market had a Denmark, with new record-breaking very different year in 2021 compared transaction volumes. The 2021 Finnish Photo: Shutterstock 24

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE FINNISH PROPERTY MARKET  ● »Market liquidity remains strong, with an active end of the year carrying momentum into early 2022« Interesting trends on the Finnish property market in 2021 and 2022 FOREIGN INVESTORS CONTINUE EUR 7.0 BILLION A CONTINUED COOLER INTEREST IN TO DRIVE THE FINNISH REAL ESTATE THE RETAIL SEGMENT – GROCERIES MARKET Transaction volume SAVING THE DAY in 2021 Foreign investors accounted for 56 The transaction volume of retail % of the total transaction volume. EUR 8.0–8.5 BILLION properties continued to reduce to Swedish investors in particular Transaction volume approximately EUR 650 million in have continued to take an ac- expected in 2022 2021 and accounted for only about tive part in the Finnish property 9 % of the total volume. In 2015- market. 51% of the total transac- +2.8% 2018, the share of retail properties tion volume was transacted in the was on average 28% and in 2019- Helsinki Metropolitan Area. GDP growth expected 2020 it averaged about 15%. Thus, in 2022 the trend is clearly declining. Re- THE RESIDENTIAL SEGMENT TAKES cently, grocery-driven local service FIRST PLACE WITH SWEDISH INVESTOR NREP for EUR 90 million, as well as centers near populated areas and HEIMSTADEN BOSTAD AB ENTERING the Fredriksberg D office building in transport hubs, individual grocery THE MARKET Helsinki developed by NCC and sold stores and their portfolios, as well to Aberdeen Property Nordic Fund as high-quality big-boxes have The residential segment was the for EUR 75 million. The largest become popular. Grocery store largest segment with a transaction office trans­action of Q4 occurred properties accounted for a big part volume of EUR 2.6 billion and 55 in Oulu where LCN Capital Part- of the retail property segment, % of the transactions consisted of ners entered a “forward funding” where for example Cibus Nordic new residential stock. The inter- agreement with Nokia for the con- Real Estate and domestic funds est of international investors in struction and lease of new facilities were active. residential properties continued to Nokia. The year 2021 has seen to be strong. The Swedish investor an increasing office investment DECLINING YIELDS AFTER ALL TIME Heimstaden Bostad AB entered the demand outside the Helsinki Metro­ HIGH VOLUMES WITHIN THE LOGISTIC market as a new investor, acquiring politan area in prime assets, and SEGMENT apartments in Helsinki and Kuopio, it is notable that reasonably large among others. In addition, interest office transactions have been com- Logistics properties saw a turn- among international investors in pleted outside the Helsinki region. over of approximately EUR 900 residential projects under develop- million – as much as in the previous ment has been very strong. two years combined. This activity has also been reflected in a sharp INVESTORS BROADENING THEIR VIEW decline in prime yield for logistics – LARGE OFFICE TRANSACTIONS properties. In the Helsinki Metro- OUTSIDE HELSINKI politan area, the lowest yields have fallen below 4 %. In 2021, the total The office segment share remained transaction volume in logistics stable and was approximately 30 % properties rose to the third largest, of the total transaction volume, after residential and offices. Fur- which is perfectly in line with the ther increases within this segment five previous years. The most are expected and international significant office transactions of investors are expected to remain Q4 included the sale of the HQ of active. Metsä Group & Mela in Espoo to 25

●  THE ESTONIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE ESTONIAN PROPERTY MARKET ESTONIA’S REAL ESTATE INVESTMENT MARKET CLOSE TO ALL-TIME RECORD VOLUME Photo: Magnus Heinmets In 2021, Estonia maintained the the fastest in Europe and the Baltics. has recovered and grown by more fastest economic growth in the Baltic Consumer prices are projected to con- than 30%, was sharply outperformed region, with GDP growing 8.1% from tinue rising in 2022, about 6% on av- in 2021 by the retail and the ware­ the prior year. Construction, IT, real erage, with the pace slowing down in housing- and industrial segments, estate and transport- and warehous- the second half of the year. According which garnered 42% and 28% of ing activities contributed the most to to the latest forecasts, the Estonian investments respectively. While there the economic growth. However, not economy will grow 3.5% in 2022. were more acquisitions of retail prop- all sectors performed at pre-pandem- erties late in the year, activity in the ic levels. Accommodation and food Real estate investments grew more industrial and logistics segments re- services, the hardest hit, remained than 90% in 2021, falling just 9% mained strong throughout the region. 15% down versus two years ago, and short of 2015’s record level. Invest- Newsec forecasts Estonia’s real estate manufacturing has not yet fully re- ments in cash-flow generating com- investment market to see some EUR covered either. The labour market has mercial property totalled nearly EUR 360 million worth of deals in 2022, heated up amid the economic growth. 450 million, with an all-time quarterly about 55% more than the average for Unemployment in Estonia declined record of EUR 285 million worth of the last 5 years. to 6.4% last year and is forecast to deals in Q4. The previous record was drop to 5.4% in 2022. Inflation, driven in Q3 2015, when investments totalled Contact: mainly by increases in energy prices, EUR 230 million. Investment trans- Kristina Živatkauskaite˙ rose rapidly, averaging 4.5% over the actions in Estonia in 2021 accounted [email protected] year and reaching 12.2% at year-end. for 30% of the total Baltic investment Price rises in Estonia were among market. The office segment, which 26

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE ESTONIAN PROPERTY MARKET  ● »Investments in commercial property totalled nearly EUR 450 million, with an all-time quarterly record of EUR 285 million worth of deals in Q4« Interesting trends on the Estonian property market in 2021 and 2022: THE MARKET FOR INVESTMENT EUR 450 MILLION and provide a new direction for TRANSACTION VOLUME DOUBLES development. It is hoped that addi- Total investment volume tional investments of EUR 10 million The size of Estonia’s investment in 2021 to upgrade the project will make it transaction market nearly doubled possible to restore the shopping in 2021 while the number of trans- EUR 360 MILLION centre to viability as early as 2022. actions more than quadrupled. The last quarter of the year alone saw 10 Total investment volume A RECORD YEAR FOR THE INDUSTRIAL- investment deals with a sale price expected in 2022 AND LOGISTICS SEGMENT of over EUR 5 million. A total of 25 deals were completed in Estonia +3.7% About 40% of all industrial real es- last year, almost catching up to tate investments in the Baltics were Lithuania, where 27 deals were GDP growth expected made Estonia. This segment has done in 2021. The Estonian market in 2022 seen a particularly strong demand mirrored the trends in the Baltics, over the last few years, with deals in where 2021 was characterised by for 3-4 years, the second half of 2021 worth a total of approximately investor activity and increasing last year can safely be considered EUR 125 million. That equals the market liquidity. Significant deals a break- through for the retail same amount invested into Estonia included properties sold by East segment. over the previous 5 years combined. Capital, Eften Capital and Baltic This well-developed property seg- Horizon investment funds, for TALLINN’S NEWEST SHOPPING ment is likely to remain in demand which the holding period had ended. CENTRE SOLD BY AUCTION this year. The future will bring growth in the supply of professionally managed After several failed attempts to sell THE DEMAND FROM LOCAL-CAPITAL properties acquired by investment the T1 Mall of Tallinn, the bankrupt- INVESTORS IS GROWING funds, with their value maintained cy administrator auctioned off the and continuously improved by 55,000 sqm multi-storey shopping The vast majority of the investors updating the assets’ concepts and centre. Lintgen Adjacent Invest- who acquired real estate in Estonia investing in their sustainability. ments, representing the mall's were domestic companies. The creditors, acquired the project for Estonian market also stood out RETAIL PROPERTY DEALS RETURN EUR 55 million. Following the acqui- for the increased share of invest- TO THE MARKET sition, there are plans to refurbish ments made by non-traditional the shopping centre and change its professionally managed investment In 2021, the value of retail prop- concept, invest in its management funds. Noteworthy among new erty transactions was the lowest investors on the Baltic market is the among the Baltic countries, though Finnish investment fund Titanium the number of transactions was Baltic Real Estate, which will seek similar. It should be recalled that to expand its portfolio of holdings investment into retail has been throughout the Baltic region. viewed with caution in recent years throughout the region and that transactions in this segment are less frequent. As there had been no notable acquisitions in Estonia 27

●  THE LITHUANIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE LITHUANIAN PROPERTY MARKET INVESTMENT MARKET ACTIVITY IN LITHUANIA RETURNS TO RECORD LEVEL The growth of Lithuania's economy the year, will continue rising and this demic levels. Growth was mainly in 2021 matched the latest forecasts, year could potentially reach around driven by deals within the retail and with GDP growing by 4.8%. The main 7.0%. A shrinking supply of labour industrial segments, but investments contributors were strong exports and will continue to put upward pressure were spread roughly equally across all industrial production growth of nearly on wages, and companies that are the traditional commercial property 20%. Rapidly falling unemployment expanding rapidly will continue segments. Of special note in 2021 was put pressure on the labour market, to face challenges in attracting talent. the emergence of a new segment in with job vacancies surging and average the market – demand for commercial wages increasing about 10% through- Activity on the Baltic property in- residential property for lease projects out the year. Meanwhile, positive vestment market increased notably was met through advance acquisition trends in consumer confidence and in 2021, with transactions reaching agreements. A similar level of invest- economic sentiment spurred house- a record level. Investment deals in ment activity is expected in 2022, hold consumption and boosted the Lithuania amounted to EUR 444 and Lithuania’s share of investments, retail sector. IT and logistics remained million, an increase of almost 70% which has declined over the last sever- among the fastest growing sectors, from 2020. Activity was high through- al years, is expected to increase in the while tourism and accommodation out the year, but an especially good Baltic context. services also showed early signs of re- last quarter took the total amount of covery. In 2022, the Lithuanian econ- investments for the year into record Contact: omy is currently forecast to grow by territory. In fact, as the total is very Kristina Živatkauskaite˙ about 3.2%. Inflation, which has risen similar to that in 2019, it is safe to say [email protected] rapidly and was at 4.6% by the end of Lithuania has returned to pre-pan- Photo: Rehau 28

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE LITHUANIAN PROPERTY MARKET  ● »Investment deals in Lithuania amounted to EUR 444 million, an increase of almost 70% from 2020« Interesting trends on the Lithuanian property market in 2021 and 2022: MORE COMMERCIAL RESIDENTIAL EUR 444 MILLION INVESTORS ARE PUTTING INVESTMENT DEALS SEEN IN THE FUTURE SUSTAINAB­ ILITY AT THE TOP Total investment volume OF THE AGENDA As investors’ demand and compe- in 2021 tition for projects grows, market All players in the market are getting players are making increasing EUR 450 MILLION seriously into the sustainability efforts and giving attention to game, which is becoming somewhat segments that are still small and Total investment volume of a routine. With banks now setting niche in the Baltics. Residential expected in 2022 rules for green financing, the rental projects are attracting more investment market is closing the and more interest among investors. +3.2% circle, from the ambitions of build- The investment funds are availa- ers and developers to the needs of ble and what is needed now, is to GDP growth expected tenants and the demands of inves- find the right product and project in 2022 tors and financiers. Modern project development partners. Residen- development without sustainability tial rental property has a broad outlying regions will also boost certification is becoming unlikely. promise in Lithuania and the other investor activity beyond the area of Baltic countries, with room for the the capital city. GEOGRAPHICAL DIVERSIFICATION number of investments per year to OF INVESTMENTS grow. Compared to other Northern SMALL DEALS DOMINATE DUE TO European countries where this LACK OF SUPPLY In Lithuania, it is easier to diversify segment accounts for about 30% of real estate investments geograph- all investments on the market, the Investment funds operating in the ically. The more developed regions development potential is big. Baltics have plans to invest in target are attracting investor interest in assets, but those plans exceed the both the commercial and industrial INDUSTRIAL SEGMENT HAS GROWTH supply of such properties. The larg- segments and diverting invest- POTENTIAL ON SALE-LEASEBACK BASIS est deal of 2021 in Lithuania, with ments is less risky. The purchasing a value of EUR 40 million, ranked power and labour force in outlying Growing investments to develop only 10th on the list of the largest regions are components of business new industrial projects in Lithuania deals in the Baltics. For larger deals, growth and also a factor that boosts have also attracted the attention a supply of new projects needs to investor confidence. In recent of real estate investors in recent increase. years, most new industrial projects years. Projects built for the specific have been realized in the regions needs of manufacturing companies of Kaunas, Klaipeda, Kedainiai, are both long-term investments and Naujoji Akmene and Alytus. Future attractive investment properties investments will also be seen in the with long-term occupants. Trans- capital of Vilnius and the regions actions for the sale of built-to-suit of Kaunas, Kedainiai, Klaipeda and projects that are still in the con- Panevezys. struction phase show the strong demand for industrial property. A surge in the development of industrial property in Lithuania’s 29

●  THE LATVIAN PROPERTY MARKET   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE LATVIAN PROPERTY MARKET RIGA’S INVESTMENT MARKET IN 2021 WAS ACTIVE AS NEVER BEFORE Photo: ADM Holding At the start of 2021, the Latvian econ- catering), others like logistics, grocery territory. Deal value of about EUR omy continued its 2020 trend of rela- and healthcare improved, spurring 610 million in 2021 was the most ever tive sluggishness and unpredictability, economic growth and employment. in Latvia and exceeded the figure with above-average unemployment. Rising energy prices gave some sense for 2020 by 144%. There were 15 But Q2 was more active: a GDP jump of of uncertainty at the end of the year. significant investment transactions 10.3% from the year before contribut- Nevertheless, the latest forecasts for in various sectors in the year, led by ed to inflation of 2.7%, while unem- 2022 envisage GDP growth of 4.1% retail, with deals for one-fifth of the ployment decreased slightly to 7.9%. with a 6.6% inflation rate and 6.8% total value signed in the last quarter. In Q3, GDP grew by 5.1% and inflation unemployment. It will be difficult to maintain similar was 4.2 %, while unemployment fell levels of investment in the coming notably to 7.2%. For Q4, preliminary The office market remained active years, though the number of invest- figures put GDP growth at 3.4% and despite the popularity of working ment transactions may grow further unemployment at 7.6%. Average infla- from home, with decreasing vacancy and maintain development momen- tion for the year was 3.2%. Forecasts rates and new projects. Some of the tum. for 2022, as updated in December large office developments put on hold 2021, are slightly less optimistic than in 2020 began construction in 2021, Contact: before. Overall, however, 2021 was making the city of Riga more attrac- Inita Nitiša better than initially expected. While tive to international companies. [email protected] some segments remained weaker The real estate investment market than in pre-Covid times (hotels, in Latvia, meanwhile, was in record 30

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE LATVIAN PROPERTY MARKET  ● »Deal value of about EUR 610 million in 2021 was the most ever in Latvia and exceeded the figure for 2020 by 144%« Interesting trends on the Latvian property market in 2021 and 2022 MORE THAN HALF OF INVESTMENT EUR 610 MILLION NEW PRE-LEASE DEALS FOR SEB GOES TO RETAIL Total investment volume SEB Group’s business services Of 15 investment deals 7 were in in 2021 centre in Riga has signed an agree- the retail segment and accounted ment with the real estate developer for more than 50% of total deal EUR 380 MILLION GALIO Group to move its office to value. The largest retail transac- the newly constructed GUSTAVS tions were the acquisitions of the Total investment volume business centre on Gustava Zem- Alfa shopping centre by Lithuania’s expected in 2022 gala Street in the first half of 2023. Akropolis Group, acquisition of the SEB will occupy around 11,000 sqm, Stockmann shopping centres in +4.1% accommodating more than 1,000 Riga and Tallinn in one transaction employees. by Estonia’s Viru Keemia Grupp, GDP growth expected and acquisition of the Ozols shop- in 2022 In addition, SEB Bank in Latvia has ping centre by Titanium Baltic Real signed a pre-lease office headquar- Estate. Ozols (formerly Azur) was more than 240,000 sqm of new ter agreement with Linstow Baltic previously acquired by KS Holding office space by the end of 2023, in the planned office building at in 2016 and redeveloped over 3 mostly Class A. These projects are Ernesta Birznieka-Upisa 2, in the years. equal to 32% of current space in very centre of Riga. SEB will be- the Riga office market, which will come the anchor tenant of the new NEW FOREIGN INVESTOR ON provide tenants with a great oppor- office development. Preparation THE LATVIAN MARKET tunity to choose from a variety of works have started already, with a high-class offices. Still, the market planned opening for 2025. A new Finnish investment fund en- needs to be ready to absorb so tered Latvia by acquiring the Ozols much space over a short time peri- PAN-BALTIC INVESTORS DOMINATE shopping centre, as noted above. od. Intense movement from lower THE MARKET The fund is focused on the Baltic class offices, expansions, and the real estate market, diversifying its entrance of new local and foreign Overall, the real estate investment investments in housing, business, businesses will all be needed to market last year was driven by logistics and industrial properties, avoid oversupply on the market. pan-Baltic investors. Latvia had hotels and commercial and social the smallest share of capital from real estate. It invests mainly in new non-Baltic investors of all the Baltic and contemporary properties. countries, at about 15% of total transaction value. Close to 85% of OFFICE DEVELOPMENTS AND total investment was carried out NEW LEASING DEALS by professional investors, mainly in large deals. Average deal size of Construction commenced on EUR 40 million in 2021 was nearly several large office projects in double the previous year’s amount. 2021: Preses Nama Kvartals, Verde, Elemental Skanste and New Hanza. In total, there are plans to deliver 31

●  EUROPEAN PROPERTY MARKETS   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 EUROPEAN PROPERTY MARKETS EUROPEAN REAL ESTATE, BUSINESS AS USUALS A year in Review phase of the real estate cycle. In this Retail: the only way is up? Investment in European commer- cycle we can expect to see more of The retail sector has had a difficult cial real estate was back in line with what we have seen during the pan- time over the last few years, particu- pre-COVID levels in 2021, reaching demic, with strong investor interest larly badly hit during the pandemic. €272.7bn, a 15% increase compared towards non-traditional asset classes. Over 2021 retail investment in Europe to 2020 levels. Across the asset class- was €24.4bn, down 12% on 2020. All es, logistics was the overall winner ESG will play an increasingly impor- with investment into logistics up by tant part this year. This is partly a 51%, reaching an all-time high. Office result of the real estate sector alone investment increased by 10% and contributing to approximately 30% of hotels by 33%, while retail investment global annual greenhouse gas emis- did not fair too well over the course sions, with investors and occupiers of the year (-7%). Country wise, there now beginning to look into making were significant improvements in significant changes to address this. investments in the UK, Germany, Therefore, we will see more focus on Sweden and Spain. Investment vol- futureproofing of assets in the tradi- umes in France, the Netherlands and tional sectors as well as an increased Belgium remained below pre-COVID focus on acquiring modern assets, levels. particularly for offices. This is likely to lead to a widening of the gap between Over the course of the year, yields the market average and prime. were fairly stable for prime offices *and even for prime high street retail Logistics: No signs of cooling for most part. No surprise, prime The logistics sector will continue full logistic yields continued to compress. steam ahead, with no signs of cooling. Prime rents also surprised, with the It had its most successful year in 2021, prime market not taking much of a hit setting yet another new record for vol- and instead in some markets prime ume of letting transactions over just rents, particularly for offices, climbed nine months of the year, increasing by higher than before the onset of the 29% in the six most active markets. pandemic. The sector continues to benefit from growth in consumer demand, however Take-up began to recover from will soon have to tackle issues on the the second quarter of the year as horizon, one of which is limited supply. lockdowns and restrictions eased. Speculative development remains lim- Across Europe’s 17 main markets ited. As a result, we anticipate strong 8.52m sqm was transacted in 2021, rental growth across the sector. It will which although is below the pre-crisis continue to remain a strong sector of levels (-8%), has continued to improve interest. In 2021, €40 billion was in- across the rest of the year and we vested into European logistics, which expect it to continue on this trend. is an increase of 59% on the year before. As there is strong competition New phase of the real estate cycle for any produc,t we are likely to see The increased activity into real estate further yield compression on the back over the course of 2021 points to the of the compression we have already fact that we are now entering a new witnessed during the pandemic. 32

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 EUROPEAN PROPERTY MARKETS ● »The increased activity into real estate over the course of 2021 points to the fact that we are now entering a new phase of the real estate cycle« Photo: Dreamstime countries witnessed a decline in retail retail. Investors are now seeking levels across high streets. Last year investment apart from the UK (+64%) opportunities particularly in shopping we saw investors favour retail parks and Ireland (+ 260%). centres. This year will be a turning and supermarkets across Europe, point for the sector. We do anticipate something we are likely to witness During the course of 2021, investors retail to stabilise over 2022 as footfall further this year. began showing interest back into begins to resume to pre-pandemic 33

●  MACROECONOMIC DATA   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 MACROECONOMIC DATA Sweden Economic Indicators Source: Newsec Interest Rates Source: Swedbank, Swedish Central Bank Per cent Per cent 6 3 4 2 2 1 0 0 -2 -4 -6 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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 -4 1 -6 -8 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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 Interest Rates Per cent Source: BNP Per cent Source: BNP 2 4 3 2 1 1 0 0 -1 -2 -3 -4 -5 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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  •  SPRING 2022 MACROECONOMIC DATA  ● BUY THE COMPLETE DATA SET [email protected] Denmark Economic Indicators Source: BNP Interest Rates Source: BNP Per cent Per cent 5 2 4 3 2 1 0 1 0 -1 -2 -3 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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 Economic Indicators Interest Rates Per cent Source: BNP Per cent Source: BNP 10 2 8 6 4 1 0 2 0 -2 -4 -6 -1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 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  •  SPRING 2022 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 2021 2022E 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E GDP, Annual Percentage Change Employment, Annual Percentage Change EURIBOR 3M SWAP 5Y Private Consumption, Annual Percentage Change Inflation, Yearly Average GDP Growth GDP Growth 2021–2022E Source: Newsec, BNP 2021 Latvia Lithuania 2022E Per cent 9 8 7 6 5 4 3 2 1 0 Sweden Norway Finland Denmark Estonia 2021 2022E 36

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 PROPERTY DATA  ● PROPERTY DATA BUY THE COMPLETE DATA SET [email protected] Office rents Source: Newsec Prime Office Rents (CBD) | Baltic Region Source: Newsec EUR/m2 EUR/m2 Prime Office Rents (CBD) | Nordic Region 800 Per cent 300 3 Per cent 600 200 8 2 400 100 6 1 200 0 4 0 0 2 0 -2 Oslo -200 -1 Tallinn Riga Vilnius -100 Stockholm Gothenburg Malmö Helsinki Copenhagen Average Annual Rental Growth 2017–2021 (left axis) Average Annual Rental Growth 2017–2021 (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Rent Level 2022E (right axis) Rent Level 2022E (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 2016 2017 2018 2019 2020 2021 2022E 5 2016 2017 2018 2019 2020 2021 2022E 2014 2015 Gothenburg Malmö 2014 2015 Riga Vilnius Stockholm Helsinki Copenhagen Tallinn Oslo Retail rents Prime Retail Rents | Nordic Region Source: Newsec Prime Retail Rents | Baltic Region Source: Newsec EUR/m2 Per cent 3000 Per cent EUR/m2 3 600 3 2000 2 1000 2 500 1 0 1 400 0 Helsinki Copenhagen -1 0 300 -2 -3 -1 200 -4 -2 100 -5 -6 Stockholm Gothenburg Malmö Oslo -3 Tallinn Riga Vilnius 0 Average Annual Rental Growth 2017–2021 (left axis) Average Annual Rental Growth 2017–2021 (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Rent Level 2022E (right axis) Rent Level 2022E (right axis) 37

●  PROPERTY DATA   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 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 2016 2017 2018 2019 2020 2021 2022E 6 2016 2017 2018 2019 2020 2021 2022E 2014 2015 2014 2015 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 140 Per cent 80 6 120 4 100 5 80 4 60 3 60 40 3 20 2 40 0 2 Helsinki Copenhagen 1 1 20 0 -1 Stockholm Gothenburg Malmö Oslo 0 Riga Vilnius 0 Tallinn Average Annual Rental Growth 2017–2021 (left axis) Average Annual Rental Growth 2017–2021 (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Forecast Average Annual Rental Growth 2022E–2024E (left axis) Rent Level 2022E (right axis) Rent Level 2022E (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 4 7 3 2016 2017 2018 2019 2020 2021 2022E 6 2016 2017 2018 2019 2020 2021 2022E 2014 2015 Gothenburg Malmö 2014 2015 Riga Vilnius Stockholm Helsinki Copenhagen Tallinn Oslo 38

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 PROPERTY DATA  ● BUY THE COMPLETE DATA SET [email protected] 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 2019 2020 2021 2022E Stockholm Gothenburg Copenhagen 2014 2015 2016 2017 2018 Malmö Average Annual Rental Growth 2017–2021 (left axis) Stockholm Gothenburg Copenhagen Forecast Average Annual Rental Growth 2022E–2024E (left axis) Oslo Helsinki Rent Level 2022E (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 4 2 100 3 0 Gothenburg Malmö 0 2 Stockholm 2014 2015 2016 2017 2018 2019 2020 2021 2022E Average Annual Rental Growth 2017–2021 (left axis) Stockholm Gothenburg Malmö Forecast Average Annual Rental Growth 2022E–2024E (left axis) Oslo Helsinki Copenhagen Rent Level 2022E (right axis) Annual transaction volumes Source: Newsec Transaction Volumes — Annual | Baltic Region Source: Newsec Transaction Volumes — Annual | Nordic Region MEUR 600 BEUR 40 500 30 400 20 300 200 10 100 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E Sweden Norway Finland Denmark Estonia Latvia Lithuania 39

●  PROPERTY DATA   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 PROPERTY DATA BUY THE COMPLETE DATA SET [email protected] Transaction Volume Transaction Volumes — Quarterly | Nordic Region Transaction Volumes — Quarterly | Baltic Region BEUR Source: Newsec MEUR Source: Newsec 350 16 14 300 12 250 10 200 8 150 6 4 100 2 50 0 2014 2015 2016 2017 2018 2019 2020 2021 2022E 0 2013 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E Sweden Norway Finland Denmark Estonia Latvia Lithuania Office new construction Office stock Office New Construction (Capital Office Market) Source: Newsec Office Stock Q4 2022E (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 2021 (left axis) 2022E (left axis) 2022E (right axis) 40

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 DEFINITIONS ● DEFINITIONS General Logistics Public Properties • A ll 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 • The 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 • The 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 • The 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. • The rent is excluding heating and excluding property tax. Retail • T he rents are referring to modern retail premises of 70–250 sqm. • T he rent is excluding heating and excluding property tax. • The rents refer to prime areas with definitions by each country. 41

●  THE NEWSEC PROPERTY OUTLOOK TEAM   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE NEWSEC PROPERTY OUTLOOK TEAM Max Barclay Head of Newsec Advisory Ulrika Lindmark Adam Tyrcha, PhD Ravi Barot Head of Valuation & Head of Research Associate Strategic Analysis [email protected] [email protected] [email protected] Øyvind Johan Dahl Karen Cecilie Thunes Christian Hagen Head of Research Senior Analyst Senior Analyst [email protected] [email protected] [email protected] 42

NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE NEWSEC PROPERTY OUTLOOK TEAM   ● Morten Jensen Robin Rich Head of Newsec Advisory Head of Research Denmark robin.rich @newsec.dk [email protected] Valtteri Vuorio Head of Research [email protected] Mindaugas Kulbokas Kristina Živatkauskaite˙ Inita Nitiša Head of Research & Analysis Senior Analyst Real Estate Economist [email protected] [email protected] [email protected] 43

●  THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE Newsec — The Full Service Property The Group expanded internationally the seven Nordic and Baltic countries. House in Northern Europe — is by far into Finland in 2001, Norway in 2005, In 2018, Newsec opened a London the largest specialised commercial the Baltic countries in 2009 and office to assist international investors property firm in Northern Europe. Denmark in 2016. The Norwegian asset interested in the Nordic and Baltic and property management companies region. Newsec has approx. EUR 68 Newsec manages more properties and First Newsec Asset Management and billion under management and annu- carries out more transactions, more TM Partner were acquired in 2012. In ally signs lease agreements of approx. lettings and more valuations than 2013, Newsec acquired Jones Lang 1.5 million square meters, manages any other firm in Northern Europe. LaSalle’s Swedish property manage- transactions of some EUR 3 billion and Through this great volume, and the ment operation. In 2017, Newsec grew does real estate valuations of under- knowledge and depth of our various with the acquisitions of Norwegian lying property worth almost EUR 265 operations, we acquire extensive and Basale and Danish Datea, further billion. Thanks to large volumes, local detailed knowledge of the real estate strengthening the position within presence combined with in-depth market. In turn, we can quickly identify Property Asset Management. In 2018, understanding of a range of business- business opportunities that create Newsec opened a London office to as- es, Newsec has a unique expertise added value. sist international investors interested of the real estate market in northern in the Nordic and Baltic region. Europe. 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 2 400 co-workers spread across 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  •  SPRING 2022 NEWSEC’S ANALYSIS PRODUCTS  ● REQUEST ANY NEWSEC'S DATA DELIVERIES DATATOSUIT YOUR NEEDS & MARKET REPORTS [email protected] Thanks to Newsec having one of the most comprehensive data bases for real estate related data in the Nordics we are able to offer tailormade data deliveries and analyses. We also offer 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  For more information about data deliveries and analyses customized to your needs contact: [email protected] 45

●  CONTACT AND ADDRESSES   NEWSEC PROPERTY OUTLOOK  •  SPRING 2022 CONTACT AND ADDRESSES Sweden Norway Finland Lithuania [email protected] [email protected] [email protected] [email protected] 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 [email protected] 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 [email protected] 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 [email protected] Tel: +46 40 631 13 00 +45 26 01 02 [email protected] 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  •  SPRING 2022 EXECUTIVE SUMMARY  ● THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE 47

THE FULL SERVICE PROPERTY HOUSE IN NORTHERN EUROPE