Low inflation, 0% interest rate and moderate economic growth will set the stage for another good year for properties. Recently CBRE Sweden published the Market Outlook 2020. Amanda Welander, Head of Research, Sweden & Nordics, CBRE, shares the report and the insights.Growing Cities
The Swedish population will grow by 6.6% until 2030. As the population aged 65+ will grow 14%, the need for investment in public sector properties will increase dramatically. We believe interest for public sector properties will stay high in 2020, as the sector also remains an interesting alternative to government bonds. Higher yielding, and with similar countercyclical properties, will continue to hold attractions for investors.
Less people are in the “pension savings age” in Sweden than in a global perspective, which might mean a relatively smaller influx of capital to our institutions than global ones. GDP growth rate in 2020 is forecast to be a little higher than 2019. A slightly stronger SEK is also expected, on average. But as the currency remains weak in a historical perspective and Sweden remains one of the best five-year GDP growth potential countries in Europe, we believe this will appeal to international investors.
Investors will also likely be pushed further out on the risk spectrum, with converging yields and narrowing risk premiums as a consequence. We believe in strong M&A activity in 2020.
On the back of strong office employment growth and modest near-term supply, we believe rental growth in the office sector will continue in 2020, but at a slower pace. For retail and logistics, convenience will continue to be key, whether it concerns fast deliveries or opening stores in transport hubs. Experiential Instagram-friendly environments will help drive footfall.
For the residential sector, construction will continue to be sluggish in 2020. Investor interest in the sector will continue to be high in 2020 due to the stable risk-adjusted returns.
Many investors will continue to invest in line with ongoing mega trends, such as e-commerce, city growth and an ageing population. Please contact Amanda Welander if you have questions or would like to book a meeting with her.