Economic growth in H1 2022 in Finland was on a healthy level, mostly due to pent up demand and the recovery of the service sector from the pandemic, which both continue to support the growth in 2022. However, the risks that Finland falls into recession over the next 12 months are rising.
The overall demand for office premises decreased compared to Q2 2022 as the underlying drivers have somewhat changed. While demand continues to be stable for prime offices with strong amenities that bring additional value to employees, demand for secondary assets has slowed down. On the other hand, we have witnessed an increased number of inquiries as the occupiers are tendering their current leases due to the pressure to create cost savings. According to the Helsinki Research Forum, the vacancy in the thirteen key office areas in the HMA was 12.3% in Q3 2022. The vacancy increased by 0.9 percentage points compared to the previous quarter.
Retail occupier demand has remained active for the retail park and big box type occupiers and F&B sector. Also, after sluggish Q2 the demand towards high street increased in August. However, in September a slow down in the overall demand was witnessed. Occupancy in high street and key shopping centres have improved after the pandemic. However, vacancy remained over the long-term levels in the Helsinki CBD, which took the most severe hit during the pandemic. Demand for F&B is expected to remain sold, but for brand/ fashion stores demand is expected to be sluggish placing downward pressure on high street rents.
Occupier demand for industrial premises gained momentum, leading to increase in prime rents in H2 2021. The demand towards light industrial, warehouse, and logistics premises has further increased during 2022.
In 2022 so far, some 43,000 sq.m of new logistics premises has been completed in the Helsinki Metropolitan Area. In addition, there are currently some 19,000 sq.m of logistics premises under construction in Vantaa. Most development activity consists f build-to-suit buildings. Occupier demand is expected to further improve in selected logistics segments and areas going forward as the e-commerce trend continues going forward.