Finland MarketBeat

Ville Suominen • 5/17/2021

Finnish GDP growth beat expectations in the last quarter of 2020 and the economy is set for a recovery in 2021. However, new COVID-19 restrictions and a slow vaccine rollout continue to weigh down growth at the first half of the year. Wider vaccination rollout and accelerating GDP will boost the recovery in the second half of 2021. GDP decreased -3.2% in 2020 and is set to grow 2.6% in 2021 and 2.3% in 2022. The growth is mainly driven by upturn in global economy and increased exports. Secondarily the growth is boosted by bottled-up private consumption and replenished service sector. Finland has navigated well through the pandemic. Low infection rates have allowed Finland to remain mostly open without major lockdowns or harsh restrictions. 


Office Space in Helsinki

Occupier demand for office space in Helsinki has polarized as the COVID-19 restrictions have progressed. Current clients on the occupier market can be categorized in three:  

1. Well established companies who are looking to execute post-pandemic occupancy strategy with potential hybrid-solution rolled out (remote working and office needs combined).  

2. companies looking to achieve economic savings due to tightened situation  

3. companies who are reacting to current situation by reducing space due to increased remote working etc.  

Furthermore, there are companies looking to pay a premium for a shorter agreement to hedge future uncertainty and companies who are looking to secure long agreements trying to benefit from the current slight ‘occupier's market’. The overall vacancy in the Helsinki Metropolitan Area (HMA) remained stable in Q4 and is currently at 12%. In Q1 2021 there were no new office completions in the HMA. There is currently some 114,000 sq.m under construction in the HMA due to be completed in 2021-2023.  

The billion-dollar question remains the same: how will the "new normal" look after the summer period with workforce returning to work without restrictions / remote working recommendations. It is fairly certain that remote working will remain at a higher level compared to pre-COVID time, but on the other hand companies will most likely make changes to their office concepts, making them healthier and capable to adopt in a potential new respiratory tract infection situation. Therefore, it remains uncertain, what will the total effect on office demand be in the "new normal". 

Retail Property in Finland 

The prolonged COVID-19 pandemic and the restriction measures have put increased pressure on Finish retail tenants in both specialty retail and F&B sector. Only daily-necessity based operators have been able to navigate trough the difficult period untouched. In the F&B sector, players able to adapt their concept into take-away and delivery concepts have been able to cope, although with smaller margins. On the contrary, many beverage and dinner concepts have been forced to close their doors permanently. In retail, concepts with well-functioning omni-channel sales are still operating in SCs and the best high street locations, whereas stores dependent on physical store sales are giving notices for reducing number of units in secondary locations. 

Despite everything, retail chains are preparing for the everyday life after the pandemic. This can be seen as new operators rolling out in the Finnish market. New entrants include KFC, Olivia, Lager 123, and Bestseller with their Normal-concept. This is mainly driven by the increasing Finnish consumption power and current ‘retailer's market’ in retail premise rents. 

There were no new retail completions in Q1 2021 in the Helsinki Metropolitan Area (HMA). However, there are currently 88,000 sq.m of retail premises under construction in the HMA expected to be completed in 2020-2022, with the new Lippulaiva shopping centre in Espoo being the most notable development (44,000sq.m). 

Well progressing vaccination rollout, strong expected domestic tourism and bottled-up private consumption is expected to be seen as strong results for retailers once the restriction measures are lifted for the summer period. The summer will be make-or-break time for many retailers, defining the next steps according to profitability. 

Industrial Property in Finland 

The occupier market in the industrial and the logistics sectors remained mainly stable and unchanged during 2020. As the Finnish economy overall, the industrial operators in general survived the pandemic relatively unscathed. There was no evidence of rent level movement during 2020 and Q1 2021. 

In 2020, some 40,000 sq.m of new industrial and logistics premises were completed in the Helsinki Metropolitan Area. The completed developments are mostly located in Vantaa. In addition, there are currently some 50,000 sq.m of industrial and logistics premises under construction in Vantaa. Majority of these developments are estimated to be completed during 2021. The developments consist mostly of build-to-suit buildings, although some parts of the premises in development are built speculatively. 

Export driven businesses, but also industries solely based on domestic markets, might still face severe challenges due to the pandemic and the overall slowing economy with trading partners during H1 and H2 2021. The outlook for the industrial properties remains therefore misty as the individual operators, often occupying the properties alone, might experience the remaining COVID-19 related challenges rather differently. The occupier demand is expected to improve in selected logistics segments and areas going forward as the consumers have been forced to get accustomed to e-commerce even for grocery shopping. 

Commercial Real Estate Investment Market Finland  

In Q1 2021 total real estate investments were only €830mn mainly due to lockdown restrictions caused by the third wave of the COVID-19 pandemic. Due to the restrictions, selected investment segments were relatively inactive. Office divestments were mainly on hold related to uncertainty related to future office occupier demand, and difficulty to arrange travel and property inspections for international investors. On the other hand, industrial / logistics assets and residential investments have been actively marketed and very sought after, resulting in record low yields in recently completed transactions. 

Existing residential, logistics, and public use properties are very actively sought after, and demand is exceeding supply pushing yields to record levels.  

The most traded sectors in Q1 2021 was the residential (41%), office (23%), and public use (17%) sectors. The share of international real estate investors was some 50% in the first quarter of 2021. 

According to discussions with active investors, capital allocation targets for the Nordics & the Finnish property market are very ambitious for the rest of 2021. This combined with well progressing vaccination rollout raises the expectation on the Finnish real estate investment activity to a high level for 2021. 

Current MarketBeat

Europa office building, Brussels
Finland Office data

After the summer period occupier activity rekindled but started to fade towards the end of the year. This pattern resulted in approximately 70% demand compared to previous years. 


Nice, France
Finland Retail data

The occupier demand was relatively strong during the fall period. As the second wave of COVID-19 hit Finland, the uncertainty rose, and the retail occupier demand decreased. 


loading bay, Vienna, Austria
Finland Industrial data

Occupier market in the industrial and the logistics sectors remained mainly stable and unchanged during the 2020.


Finland Investment data

Towards the year end 2020 the investment activity increased and in Q4 the volume reached €1.5bn (KTI). Projects discontinued during the spring / summer were restarted with good number of resources available to conclude transactions by the end of the year. 


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