Nordic Real Estate and the Real Economy

// Nordic Insight - Genesta’s editorial platform for independent perspectives on real estate.

KEY INSIGHTS:

• Strong institutional demand for Nordic real estate reflects confidence in the region’s stable, transparent and resilient economies.

• Investor interest is supported by stronger recovery prospects than core Europe, low geopolitical exposure and advanced sustainability integration.

• Commercial real estate is a major economic pillar, enabling productivity, competitiveness and activity across sectors and cities.

• Institutional investment provides critical infrastructure, supporting adaptation, employment and long-term value creation through economic cycles.

The stable and open economies of the Nordic region have attracted an up-weighting of institutional investment allocations relative to market size for over fifteen years. As well as reflecting risk and opportunity within the real estate markets, these smaller, dynamic and structurally robust economies are perceived as safe havens in times of both political and economic turbulence.

Using a five year average of INREV investor preferences, Denmark, Finland, Norway and Sweden are all represented in the top 10 preferred European markets[1]. Indeed, although there was a negative gap between target and current institutional real estate allocation at the beginning of 2025, investors indicated an increase in their preference across all Nordic markets, in contrast to their larger counterparts.

From Investor Preference to Economic Impact

The current up-weighting represents a significant confidence signal for the region. Investors are attracted by a number of factors. First, economic recovery and prospects in the region are outpacing Europe’s core economies, albeit growth rates remain relatively modest. At the same time, rising global geo-political risks have renewed the regions appeal as a safe haven, with these peripheral economies offering mature real estate markets that maybe less exposed to de-globalisation. If the value of Gold is setting new records, it would seem that in real estate terms at least, the Nordic markets appear to have a golden allure. Added to this, institutional investors are also attracted by the regions more advanced integration of sustainability into business, commerce and infrastructure which also reduces risks around energy security.

If institutional investors value the Nordic economies, what value does such investment afford to the real economy in the region? Comprising offices, shopping and leisure environments, factories, warehousing and distribution centres, and a wide range of housing solutions the sector influences all aspects of both the economy and society.

Institutional investment in this critical real estate infrastructure underpins the capacity of the built environment to adapt to the changing needs of those using it, ensuring urban environments function efficiently, are dynamic and liveable. This enables economic productivity and competitivity. To this end, investment is circular as well-functioning cities attract inward investment. The region’s capacity to attract counter-cyclical investment due to its safe haven status may be particularly beneficial if the industry is an important driver of the real economy.

Drawing on the methodology established by EPRA/ INREV to quantify the contribution of real estate investment to the real economy, this paper sets out the contribution of Nordic real estate to the real economy in the Nordic region [2].

The Scale of the Commercial Real Estate Sector

Excluding investments across the residential sector, the commercial real estate sector has a market value of approximately €951 billion and represents 10.7% of European stock[3]. This broadly correlates with the region’s economic contribution to GVA. Within the region, CRE is more highly concentrated in Sweden relative to its share of GVA, reflecting the market’s regional capital status (Figure 1). Equally, the structure of the natural and energy resource based Norwegian economy skews the comparative distribution of GVA.

The commercial sector accommodates economic activity across multiple sectors. CRE includes offices, managed retail environments and High Streets, light industrial, logistics and warehousing, as well as hotels, healthcare and other specialised segments. The sector provides the required commercial infrastructure that enables business, industry and society to function. At just under € 1 trillion, its value is considerably more than the total value of plant and machinery in the region (Figure 2)[i]. The sector is continually expanding as new forms of business and social enterprises emerge, increasingly blurring the boundary between real estate and infrastructure. For example, data centres are a rapidly expanding segment.

At € 2.2 trillion, the total value of residential property in the region exceeds the total combined value of all other sectors. This stock represents all forms of residential tenure including owner occupied, cooperative, privately rented, regulated affordable and social housing, as well as niche segments such as student housing, senior housing and co-living. Institutional investment in residential represents a relatively small portion of all residential real estate, but investment in the private rented sector (PRS) has been accelerating over the past decade.

The share and role of PRS in the housing market varies considerably across the Nordic markets. Genesta considered variation in the structure of housing markets in a previous article and highlights the housing challenge which -with the exception of Finland- is facing the region’s urban growth centres. Finland has a comparatively large PRS sector and institutional residential investment in the sector is long-standing.

Accessing Real Estate Investment in the Nordics

Across Europe, approximately 35% of CRE is held as an investment and this is replicated in the Nordics (Figure 3). This provides businesses and organisations with an option to rent rather than own and manage the physical space required to operate their activities. Often leasing premises offers a number of advantages including greater capital efficiency and business agility. In short businesses are able to focus capital investments on their operations and ensure that real estate decisions facilitate their activities, rather than constrain them.

Investors primarily access CRE through direct holdings, non-listed third party managed funds and listed property companies/ REITs. The most appropriate mode of investment will vary with the scale of investor, market size, real estate sector and the existing structure of any given real estate market. Institutional investors’ strategies focus on identifying the strategic investment opportunity first and subsequently selecting the most appropriate means of accessing that opportunity.

In the Nordics, institutions have invested €243 billion in real estate through these investment modes, accounting for 26% of total stock[ii]. Private property companies, high net worth individuals (HNWIs) and other private investors are estimated to account for a further 9% of stock.

The non-listed sector accounts for the largest ownership of real estate at €122 billion, of which 78% is CRE and 22% is residential. The listed sector follows closely behind and accounts for a further €109 billion. Nordic institutions direct holdings are comparatively small at €12 billion, with Swedish institutions accounting for almost 60% of such investments. Institutions from outside the region will also have some direct holdings, although the smaller scale of the Nordic markets coupled with the need to have strong local market capabilities for real estate asset management suggests that they will have a preference for investing indirectly.

In part, the lower scale of direct investments results in the non-listed sector accounting for a higher share (50%) of institutionally invested and managed capital compared to the aggregate breakdown for Europe (45%). At a regional level the listed sector’s share is especially elevated. However, there is significant variation in its size across the markets.

In aggregate, Sweden accounts for 55% of the value of Nordic listed and non-listed real estate, bolstered by an 87% share of the Nordic listed real estate market (Figure 4). Although Sweden accounts for 36.7% of non-listed in the region, listed real estate represents 87% of indirect real estate investments. Sweden is distinguished by both the scale and profile of investment in the region. Indeed, Sweden has a 15% share of listed real estate companies by value in developed Europe[4]. However, it is worth noting that this represents the registered domicile of the company and a number of these listed entities invest across the region. In other Nordic markets the listed sector is comparatively insignificant by size in comparison to the non-listed sector.

The selection of investment mode appears to be largely agnostic to sector (Figure 5). The office sector remains the largest sector in the region, but together with the retail sector, its share of investors’ portfolios has been declining in favour of residential and logistics opportunities. However, analysis of the non-listed sector indicates that opportunities by sector vary significantly across countries, with logistics favoured in Sweden reflecting both its economic and geographic dominance. In Denmark, residential investment is strongly favoured due to a combination of real estate imbalances and housing market policies (Figure 6).

Across Europe, institutional investment in the residential sector has grown at a faster rate than CRE over the past decade, with the sector doubling its share of portfolio holdings to 23%. Investors have responded to the housing challenge, with a strong focus on providing professionally managed homes in the private rented sector to meet the needs of middle income households. Institutional investors are attracted by the long-term cashflows offered by a sector that is underpinned by accelerating structural trends, its dislocation from economic cycles and the opportunity to create a positive social impact through its activity. However, their fiduciary duty to underlying savers and pensioners remains paramount and housing policies can both facilitate and constrain this activity in any market. In addition to providing a reliable source of income for institutions to meet their obligations to pensioners and savers, the real estate sector is an important engine for the real economy.

As owners, institutional investors are attracted primarily to the secure and predictable income streams real estate offers. Additionally, real estate may also offer capital growth opportunities. This is often derived from the application of investment management expertise that aligns, adapts rand transforms real estate through its lifecycle to best meet the changing needs of occupiers, economy and society.

The Contribution of Real Estate to the Real Economy

The value of the CRE to the real economy is often underestimated due to the fact that it is cross cutting through multiple industry classifications and includes a share of construction, real estate services, professional and technical activities and investment fund and portfolio management. Together, CRE’s share of these industries contributed €57.9 billion to the Nordic economy in 2024, representing approximately 3.9 % of the total economy[iii]. The scale of this contribution is greater than the combined size of the automobile, telecommunications and manufacture of electrical equipment sectors (Figure 7). This data represents CRE excluding residential due to the difficulty in quantifying the industry’s share of the housing sector. Given the accelerating investment in institutional residential in Denmark and Finland and the higher development activity this requires, the value to the economy is even higher.

The CRE sector is responsible for the employment of approximately 2% of total employment in the Nordics, which is comparable to the combined employment of the manufacture of computers and electronic products, electrical equipment, and all plant and machinery[iv]. Again, if institutional investment’s share of activity in the residential sector is accounted for the investment industry’s share of total employment would increase yet further. If the entire residential sector is included, the share of employment rises to 8.1%.

Figure 8 shows the breakdown of CRE employment. Construction activity accounts for the largest share, followed by real estate management and specialist services, and transactions. Investment and fund management represents a relatively small proportion of all employment, yet has a disproportionately high value add relative to the average per European worker[5]. In addition, employment in transactions, management and construction are directly dependent on the investment and fund management segment of the industry.

Together, this activity is essential for ensuring that new and existing real estate are developed, repurposed or refurbished to meet the changing needs of occupiers and ensuring that the real estate they operate from positively impacts upon productivity. Indeed, at €40 billion the annual investment in new and existing buildings represents 13.7% of fixed investment in the economy[v]. Retrofitting existing assets to reduce carbon emissions, improve energy efficiency, install renewable energy sources and promote biodiversity is a major focus of this capital investment.

Institutional investors – and their third party capital managers - are aligned with the United Nations Sustainable Development Goals. They also recognise that it aligns with their underlying fiduciary duty to savers and pensioners as this investment protects long-term value in a number of ways. First, it prolongs the lifecycle of the asset and second it safeguards income from the prospect of a future carbon tax or regulatory constraints on leasing. Thirdly, they recognise it is beneficial for occupier demand as in addition to the sustainable credentials of the asset, energy efficient buildings are more cost effective from a total occupation cost, which also benefits income. Ongoing investment in real estate assets also impacts upon the environmental quality of public spaces.

This highlights the sensitivity of the economy to CRE, and as already demonstrated, employment and value added growth. This data does not include the annual investment in housing, infrastructure and other non-domestic buildings which when included with represents 67% of annual capital investment in the Nordic economies in 2024 (Figure 9).

Sustaining the Economy Through Prolonging Safe Haven Status

The Nordic real estate markets position as a safe-haven in periods of geo-political and economic turbulence is of particular value to the region economies and lowering market volatility during periods of global uncertainty. The capacity to attract global investment assists in sustaining economic growth, employment and capital investment. This counter-cyclical investment also ensures business and commerce continue to be provided with up to date premises and facilities that are beneficial to productivity and may provide a competitive edge to other markets where such investment has receded. This capacity to attract CRE investment through an economic cycle contributes to an upward growth spiral is not well recognised, however policy makers in the region should consider the important contribution of the investment and fund management industry to the real economy

Sources

[1] INREV (2025) Investor intentions survey

[2] EPRA/INREV (2024) Real Estate and the Real Economy

[3] EPRA/INREV (2024) Real Estate and the Real Economy

[4] EPRA (2025) Total markets table, January

[5] EPRA/INREV (2022) Real Estate and the Real Economy

Methodology

The methodology used follows that detailed in the EPRA/ INREV Real Estate and the Economy publication, which is presented at a European level.

[i] The calculations use Eurostat, OECD and national statistical office national accounts balance sheet data relating to the value of the stock of “fixed assets” and “Land and Buildings”. For residential, the official data on dwellings is updated to 2024 where required using house price inflation. For commercial, the official data on “non-residential buildings” includes non-commercial buildings and is apportioned to commercial property using EPRA/ INREV methodology. The comparative Plant and Machinery estimate is derived on a similar basis from Eurostat.

[ii] Insurance company and pension fund assets derived from OECD balance-sheet data for financial institutions of real estate assets. Non-listed derived from the gross asset values in the INREV vehicle database and listed derived from Nordic listed company annual reports and EPRA total markets table.

[iii] Approach is to take Eurostat and national statistics offices estimates of GVA and employment for the Construction, Real Estate Activities (excluding imputed income from owner-occupiers) and other sectors from its National Accounts and Structural Business Statistics series and apportion shares to commercial property based on various criteria (for example, commercial real estate’s share of construction output, of the total amount of rented property, and its share of total property transactions etc); value added and employment in “investment, fund & portfolio management” is calculated directly (following principles consistent with national accounts methodology) using information from Nordic listed property company annual accounts.

[v] Estimates derived from Eurostat data on “gross fixed capital formation”, 2024. Commercial property share is derived from Eurostat’s estimate of “non-residential buildings & other structures”; additional information from EPRA/INREV study used to estimate share of GFCF buildings that is commercial (estimated at 33%). The remainder is in infrastructure and other non-residential buildings. The total GFCF figure used excludes “Cultivated biological resources” and “Intellectual property products”.