Cushman & Wakefield MarketBeat reports analyse quarterly Sweden commercial property activity across office, retail and logistics sectors including supply, demand and pricing trends at the market and submarket levels.
Office
About 31,000 sqm of new office space has been completed across Greater Stockholm, Greater Gothenburg, and Greater Malmö in the second half of 2023, marking a decrease of 47% compared to the same period last year. Greater Stockholm constitutes a vast majority of the delivered space (28,000 sqm), whilst Greater Malmö has had no completions. Full year completions for 2023 amounts to nearly 190,000 sqm, a reduction with 15% compared to 2022. A continued high development activity is expected, with a current under construction pipeline of nearly 390,000 sqm across the three largest urban areas in Sweden. Of these, about 150,000 sqm is expected to reach the market this year, while the remaining projects are expected to be completed in 2025 and beyond. The overall vacancy rate continues to increase in the three major cities, reaching 13% in Greater Stockholm, 10% in Greater Gothenburg and 9.5% in Greater Malmö. Although, the vacancy rates have declined in Malmö CBD New, marking a new low at 5%. Both Stockholm CBD and Gothenburg CBD encountered a slight increase in vacancy rates, extending to 6% and 11%, respectively. Prime rents continued to increase in Stockholm CBD, reaching SEK 9,400 per sqm. Prime rents in Gothenburg CBD and Malmö CBD New remained at SEK 3,800 per sqm and SEK 3,400 per sqm, showing signs of stabilisation. Meanwhile, the prime yields have continued to decompress, reaching 4.00% in the Stockholm CBD, 4.65% in Gothenburg CBD, and 4.90% in Malmö CBD New.
Logistics
2023 saw nearly half a million sqm of speculative space reach the Swedish logistics market, tripling the record-breaking completions of the previous years. At the same time, the regional cities saw more speculative projects completed throughout the year, than in the previous ten years combined. Altogether, nearly 1.2 million sqm of modern logistics space saw completion in 2023, marking a slight decrease from the record-breaking volume of 2022. Looking forward to 2024, the development pipeline remains robust with some 1.5 million sqm of projects scheduled to complete this year, with nearly 40% being developed on a speculative basis. Logistics demand remained stable in Q4 2023. However, the robust development pipeline continues to impact the vacancy rate. Overall, the vacancy rate in Sweden continued to increase, reaching 5%. Regional cities experienced the most significant increase compared to the previous quarter, with a vacancy rate reaching 6%. Both Stockholm and the Gothenburg region also saw a slight uptick in its vacancy rates, concluding at 6% and 2.5%, respectively. In contrast, the Öresund region vacancy rate decreased to 4.5%. Despite an all-time high in speculative completions, the vacancy rate increase has been less pronounced than anticipated, as lettings in older properties increased in the later half of 2023. Prime yields have continued their upwards shift in the fourth quarter 2023, after a brief period of stability induced by a quiet transaction market, to reach 5.00% in Stockholm and Gothenburg regions, 5.25% in the Öresund region and 5.5% across the most attractive regional cities. Meanwhile, prime rents marked a modest increase across Sweden, reaching SEK 1,000 in the Stockholm region, SEK 900 in the Gothenburg region, SEK 800 in the Öresund region and SEK 625 in the strongest regional cities. Consequently, the decrease of the implied capital values resulting from yield decompression was dampened by a strong rental growth experienced in 2023.
Residential
The number of new apartments in the recently started residential projects all over Sweden dropped to about 5,900 units in Q2 2023, marking a decrease exceeding 45 percent YoY. Developers are still facing significant challenges due to the maintained high construction costs and increasingly expensive debt. As a result, multiple projects are still left on hold despite a severe apartment shortage in 180 out of 290 Swedish municipalities. Regulated rents have risen by 14 to 21 percent YoY across the major cities in Sweden. Simultaneously, the yields have continued their upward trajectory in Gothenburg and Malmö reaching 4.6 and 4.7 percent, respectively. Yields in Stockholm remained flat at 4.1 percent. Meanwhile, the residential investment volume amounted to SEK 2.6 billion, reflecting a decrease of 64 percent quarter-to-quarter and 26 percent YoY. Total investment volume for 2023 came in at SEK 21.3 billion, corresponding to a drop of about 54 percent compared to 2022.
