“The major Nordic cities offer very stable conditions”

artikkelikuva: “The major Nordic cities offer very stable conditions”

Helsinki, Urban Environment House

Union Investment has already built a strong portfolio in the Nordic countries. Over the coming years, the company intends to more than double its exposure to Finland, Sweden and Denmark across all asset classes.

“The Nordics are a key driver of our growth strategy,” says Martin Schellein, head of Investment Management Europe at Union Investment. The Hamburg-based real estate investment manager is aiming to more than double its exposure to Finland, Sweden and Denmark across all asset classes over the coming years. The company is no stranger to the region – from development projects to existing properties, Union Investment has built a strong portfolio in the Nordic countries in recent years. That portfolio currently comprises 16 properties in the region plus one development project.

Martin Schellein

In 2018, for example, the real estate investment manager acquired the Urban Environment House, an office building which was then still at the project stage. Completed in September 2020, the property offers some 27,500 sq m of rental space and is located in the east of Helsinki in the Kalasatama sub-market, an inner city development area. The property’s tenant is the City of Helsinki, which has signed a 20-year fixed lease for the entire building to house its Urban Environment Division with around 1,500 employees.

It represents Union Investment’s largest single property investment in Finland to date. “The major Nordic cities such as Helsinki and Stockholm generally offer very stable conditions for long-term investment in office property,” notes Martin Schellein. “In this context, we are also looking beyond the established business districts to modern urban development areas that have the potential to become important inner-city sub-markets in the near future.” Development of the Kalasatama sub-market is expected to be completed by 2030. The Urban Environment House is one of the first office new builds to be constructed there. It’s also currently the most sustainable building in Union Investment’s portfolio, a fact which is partly due to its high energy efficiency. The Urban Environment House is what the EU Buildings Directive defines as a nearly zero energy building, i.e. it has extremely low energy consumption and the energy required comes mostly from renewable sources. It thus contributes to the goal of achieving climate neutrality by 2050 as set out in the 2015 Paris Agreement.

Solna, Stockholm

Likewise, in 2018, Union Investment acquired the U6 office property with approximately 18,000 sq m of rental space in Solna near Stockholm. The majority of the office space in the building, which was completed in mid-2017, is let to Siemens. It is one of three properties held by the real estate manager in Solna’s Arenastaden office district. The portfolio also includes the Vattenfall headquarters building there, which provides some 44,000 sq m of rental space, and the adjacent U7 building, comprising around 18,000 sq m. “The Arenastaden development area is one of the most sought-after office locations in Greater Stockholm, as demonstrated by the large number of high-profile companies located there,” says Martin Schellein, explaining the choice of location. In 2019, Union Investment acquired a fully let office property in central Stockholm comprising around 11,500 sq m of rental space. The main tenant in the multi-tenant building is cooperative housing association HSB, which has around 600,000 members in Sweden and occupies some 85 per cent of the space. Located at Fleminggatan 39–43/Celsiusgatan 10, the property was completed in 1939 by well-known Swedish architect Sven Wallander and extensively upgraded in 2013. “The HSB headquarters building in the Kungsholmen district is an excellent addition to our portfolio. This sub-market serves as an extension of Stockholm’s traditional business district due to its central position and very good transport links. We therefore expect to see further rent growth in this location,” says Martin Schellein.

Aleksanterinkatu 19, Helsinki

But it’s not just the office segment in the Nordic countries that appeals to Union Investment. The portfolio also contains retail and mixed-use real estate. In 2019, for example, Union Investment acquired a retail and office property at Aleksanterinkatu 19 in Helsinki’s city centre. Built in 1898 in the Neo-Renaissance style, the building is located in an area which registers some 5.6 million passers-by a year – the highest footfall in the Finnish capital. The anchor tenant of the approximately 8,300 sq m property is Zara. Some 60 per cent of the rental income is derived from retail, and around 40 per cent from office tenants. Back in 2008, meanwhile, the purchase of the Sisjö Entre retail park in Gothenburg marked the company’s entry into the Swedish retail segment. Boasting some 13,600 sq m of rental space, the property is located 20 km south of the city centre in the Askim district.

The first investment in Denmark was made in 2018 with the acquisition of a mixed-use property at Frederiksborggade 5 in Copenhagen. The property comprises around 2,800 sq m of rental space and is situated close to Købmagergade, the city’s main shopping street. It is only around 50 metres from the important Nørreport Station transport hub, making it one of the most prized business locations in the Danish capital. The building features a mix of hospitality, retail, office and residential use.

Helsinki, Hyperion
Photo: B&M Architects

“We want to make residential investments a strong pillar in our fund portfolios alongside offices, logistics, hotels and retail. The economically stable Nordic countries, where we have been investing in commercial property for many years, offer attractive conditions for residential investment, and especially for development projects,” adds Martin Schellein. Union Investment entered the Nordic residential market earlier this year by acquiring the Hyperion development in Helsinki. The planned residential tower will comprise 216 residential units across 24 upper storeys and offer total rental space of 10,537 sq m. Hyperion is slated for completion in the second quarter of 2023. The project is located in Vuosaari, an established housing sub-market in the Finnish capital with excellent transport links. As a residential location, Vuosaari also benefits from its proximity to the sea and to countryside and recreational green space. Most of the residential units will have a view of the Baltic Sea and the harbour. “The Hyperion project with its high sustainability standards and central location in an established Helsinki sub-market can serve as a template for our future residential investments,” says Schellein. The aim is to obtain a Finnish sustainability certificate for the Hyperion building with an energy efficiency rating of “A”. Solar panels on the roof and façade will help to meet the building’s energy needs. There are also plans to install a system for recovering heat from wastewater to supply the residential units.

Since 2008, Union Investment has invested EUR 1.36 billion in the Nordic countries, with the last five years accounting for EUR 531 million of that total. In future, the Hamburg-based real estate management company is aiming to grow significantly faster here and is actively seeking attractive investment opportunities in the core, core plus and value-add segments.

Office acquisition criteria in the Nordics

  • Core, core plus and value-add investments
  • Investment volume of EUR 10 million upwards per property
  • Acquisition structure: asset deals and share deals
  • Financing: 100 per cent self-funded
  • Only properties suitable for third-party use
  • Acquisition of development projects by way of forward funding, possibly also projects with a low pre-letting level
Retail acquisition criteria in the Nordics

  • Urban retail properties in prime locations and pedestrian zones in areas with a population of 100,000 plus, from EUR 15 million upwards
  • Retail parks: very well positioned properties with a minimum size of 5,000 sq m and from EUR 10 million upwards
  • Shopping centres: with creditworthy tenants and predominantly retail use, from 25,000 sq m, in catchment areas of at least 250,000 inhabitants, from EUR 30 million upwards
  • Development projects and existing buildings
  • Can include taking on letting risk
  • No properties with limited suitability for third-party use
Residential acquisition criteria in the Nordics

  • Development projects, forward funding and forward purchase deals
  • Existing properties with recent construction dates
  • Individual properties from EUR 50 million upwards and portfolios
  • Sustainability criteria and future viability are a high priority

For more information:

Martin Schellein,
Head of Investment Management Europe at Union Investment Real Estate
Email: Martin.Schellein@union-investment.de

>> Union Investment in the Nordics

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