Nordic Real Estate Investors Look to the Future More Cautiously

A survey conducted among participants of the Nordic Real Estate Forum held in Tallinn on March 23rd revealed that 42% of real estate investors would invest in developing their existing portfolio over the course of a year. Meanwhile, 36% of respondents preferred a more aggressive approach in the local real estate market and would increase their investment volumes even further.

According to Gert Jostov, chairman of the board of the Estonian Real Estate Association, two main future-oriented directions emerged from the responses of 380 real estate and business sector specialists who participated in the forum. "Nearly half of the respondents said that over the next year they would direct investments to their already existing portfolio, for example through increasing energy efficiency or other improvements. On the other hand, 36% believed that it would be preferable to make new investments on the local market instead," said Jostov.

In Jostov's assessment, rather turbulent times await Estonia's real estate market. Due to the war in Ukraine, the volume of direct investments in Estonia has decreased, which on the other hand provides additional opportunities for Estonia's real estate sector. At the same time, high inflation and rising euribor rates have dampened people's interest and ability to obtain loans for real estate purchases.

ESG, or responsible and sustainable investment, has emerged as an important term in the real estate sector over the past year alongside the green transition, for institutional investors, banks, and tenants alike. The survey conducted at NREF revealed, among other things, that within the ESG framework, investors are most affected by more difficult access to financing (39%), but on the other hand, it was confirmed that such real estate is significantly more attractive in terms of sales or rental.

According to the survey, companies' investment decisions are clearly most influenced by the European Central Bank's interest rate, which was mentioned by 64% of respondents. The forum was attended by nearly 400 people from Finland, Sweden, Denmark, Norway, Estonia, Latvia, Lithuania, England, Germany, Austria, and Poland.