Bright Northern Lights: The appeal of Nordic cities

In investment terms, however, many believe that secret Nordic city ingredient is 'liveability'. Indeed, Nordic cities are generally very good at the ...

July 29, 2015

Discreet design? Nordic noir? Scandi style? The secret ingredient in the global interest in Scandinavian countries is subjective.

In investment terms, however, many believe that secret Nordic city ingredient is ‘liveability’. Indeed, Nordic cities are generally very good at the factors that make for a good quality of life such as low crime rates, good infrastructure, an efficient health system, high standards of education, clean air and a wide variety of cultural facilities and leisure activities.

But for all their obvious attractions, the Nordics – comprising Sweden, Norway, Finland, Iceland and Denmark – is still a largely untapped market for international investment.

At present the area is the fourth largest region by investment within Europe amid fierce competition from domestic investors. When other economies faltered after the recession in 2008, the Nordics bounced back with a 132 percent increase in real estate investment between 2009 and 2011. Only Germany outperformed the region in investment terms

Although international investors have stepped up their activity in the Nordic capital cities year-on-year, they’ve been busy accessing the market in other ways, through joint ventures or M&A. This is, in part, why the GDP of the combined Nordic capital cities has been forecast to grow by an average of 23 percent between 2014 and 2022.

Nordic charms

“Investors research cities to invest in, not countries anymore,” says Jeremy Kelly, Global Research Director, JLL. “Real estate investors typically seek out save haven cities, where they can allocate capital long-term. Popular property investment cities also tend to be mid size, tech-rich, financially stable and environmentally aware.”

As such, Oslo, Stockholm and Copenhagen have always scored highly in JLL’s quarterly Investment Intensity Index. Now more investors are increasingly looking to buy into their unique appeal that ranks them so highly on the liveability scale.

“Copenhagen is my personal favourite in terms of liveability. It has fantastic food, is incredibly bicycle-friendly and is easy going,” says Kelly. “Would I invest there myself? Of course.”

Liveable cities play to their strengths. Buzzy Stockholm, for instance, is building on Sweden’s reputation as a style-conscious country, attracting international fashion houses such as Boggi Milano, a leading Italian men’s clothing company. Now the country is in high demand among international retailers.

Martin Lindgren, Head of Retail Agency at JLL Sweden, says: “2015 has been a record year for new brands in Sweden and there is currently high pressure to find store locations for the large number of international brands wishing to enter the market. We rank Stockholm as the Nordics’ most attractive retail destination thanks to its thriving market and affluent fashion oriented consumer base.”

An acquired taste

Other Nordic cities, though highly investible, may not be quite as liveable as Copenhagen, for every demographic.

For instance, even though Oslo ranks highly among global cities for attracting investment relative to its size, its high cost of living means it isn’t liveable for people within certain age groups or income brackets.

“Liveability results are often driven by expats so they can be skewed,” cautions Kelly. “And people have different liveability criteria at different times in their lives. People in their twenties may be attracted to grimy, edgier cities such as London and New York over cities such as Oslo or Geneva.”

What’s vital for globally competitive cities is the ability to attract and retain the best talent from around the world, maintains Kelly.

Where there’s population growth, there’s real estate investment opportunity. The good news is that the population of the combined Nordic capital cities is increasing at a rate faster than that of all other Western European capitals except London. And their reputation is attracting interest on a global scale.

Indeed, globally successful cities are good at promoting themselves in more than one arena. Barcelona is excellent at pitching itself as a business destination as well as a tourist destination, which very few cities do well, according to Kelly. Domestic-focused Oslo could look to imitate Barcelona’s successful international approach – and bring its own brand of liveability to a wider audience.

“Liveability is the magic dust which every successful city needs to be sprinkled with. It’s the secret ingredient that investors should always consider in any investment strategy,” adds Kelly.