Nordic Office Markets Outlook, Spring 2025

The Nordic office market in 2024 demonstrated resilience amid challenges, with a clear trend towards quality and sustainability. Prime office spaces, particularly in central business districts, maintained stable or even increasing rent levels despite rising vacancies in most markets. This reflects a 'flight to quality' trend, with tenants willing to pay premium rates for modern, sustainable and well-located spaces. The focus on ESG and green-certified buildings has become a key driver in both leasing and investment decisions across the region.

The investment market showed signs of recovery, but with large discrepancies between the different Nordic markets. After a 27 percent increase in investments in the first half of the year, we witnessed even stronger growth in the second half of the year. The total Nordic office investment market reached almost EUR 7 billion in 2024, up 34 percent year-over-year, although still more than 40 percent below the 10-year average. Volumes increased significantly in Norway and Sweden, accounting for more than 80 percent of Nordic investment volumes in 2024, whereas they remained relatively flat in Denmark, and decreased dramatically in Finland, highlighting the uneven nature of the recovery. Office properties accounted for 27 percent of the total investment volume in the Nordics. Yields remained unchanged, with Copenhagen being the exception, seeing a 25-basis point increase. While improved financing conditions and increased risk appetite led to notable transactions in some markets, others continued to face challenges.

The tenant market remained challenging throughout 2024, characterised by rising vacancies and a focus on space optimisation. Vacancy rates increased across most Nordic cities. However, leasing activity showed signs of improvement towards the end of the year, particularly in Oslo and Helsinki. The adoption of hybrid work models and the emphasis on employee well-being continued to shape demand, with companies seeking flexible, collaborative spaces in prime locations. Looking ahead to 2025, while economic uncertainties persist, the Nordic office market is expected to see gradual improvement, supported by the region's strong economic fundamentals and focus on innovation and sustainability.

The Stockholm office property market continued to face challenges in 2024, with rising vacancies and subdued demand due to ongoing structural changes in work patterns and a focus on efficiency. However, prime office spaces, particularly in the CBD, showed resilience, with stable or even increasing rent levels. The latter part of the year saw improved conditions in the investment market, driven by more favourable financing terms and increased risk appetite among investors.

Investment market

The office investment market in Stockholm showed signs of recovery in the second half of 2024. The gap between buyers and sellers narrowed, facilitated by improved financing conditions and a more active bond market for property companies. This led to increased bidding activity and transaction volumes. It is worth noting that the office segment accounted for over 50 percent of the total transaction volume in Stockholm in 2024. Furthermore, all the top five transactions in the region were office transactions. These factors, combined with the gradual improvement in investment sentiment—particularly for high-quality assets in prime locations—suggest a potentially more active investment market for office assets going forward.

Tenant market

The tenant market in Stockholm remained challenging throughout 2024, characterised by increasing vacancies and a continued focus on space optimisation. The overall vacancy rate in Stockholm reached more than 14 percent by the end of 2024, an increase of almost 2 percentage points over the year. Notably, central submarkets experienced vacancy increases comparable to other areas, indicating a widespread impact across the market. The CBD, while still performing better than other submarkets, saw its vacancy rate rise to 8.5 percent. Despite the rising vacancies, prime rents showed resilience, particularly in the CBD where rates increased to SEK 9,500 per square metre per year. This reflects the ongoing 'flight to quality' trend, with tenants willing to pay premium rates for central, modern and sustainable spaces. However, landlords are increasingly offering discounts and investing in property upgrades to retain existing tenants and attract new ones.

Outlook

Looking ahead, the Stockholm office market faces both challenges and opportunities. Economic growth is expected to gradually improve in 2025, which could support a recovery in office demand. However, structural changes in work patterns and ongoing efficiency drives by companies are likely to continue impacting the market. The focus on high-quality, well-located office spaces is expected to persist, potentially widening the gap between prime and secondary assets. The investment market outlook appears more positive, with improved financing conditions and increased risk appetite likely to support transaction activity. As the market adapts to these changing dynamics, we may see further polarisation between high-quality assets in prime locations and secondary properties, potentially leading to repurposing or redevelopment opportunities in some areas.

Many companies are inclined to optimise their spaces in favour of higher quality, efficiency and better locations. The current market dynamics show a balance between companies seeking improved office solutions and the economic pressure and structural shifts. In the investment market, two large deals at the end of last year gave cause for optimism.

Investment market

Gothenburg stood for 9 percent of the total investment volume in Sweden for the full year of 2024. And the office transaction market finally showed some signs of life in the fourth quarter of 2024 with two significant deals. Both transactions involved exclusively Swedish actors, indicating continued domestic interest in the market. The largest deal was Alecta's acquisition from NCC in central Gothenburg, valued at SEK 2.2 billion for 27,000 square metres. Additionally, the newly formed Safjället acquired four properties from Wallenstam in Gårda and Högsbo for SEK 1.25 billion, totalling approximately 31,000 square metres.

Tenant market

Gothenburg's office rental market has shown relative stability recently, despite historically high vacancy rates. The prime rental levels have remained robust over the past six months, seemingly unaffected by current economic conditions. Market activity is primarily concentrated in central areas, although overall activity is lower compared to previous periods. The total vacancy rate for Gothenburg stood at plus 12 percent in the last quarter of the year, an increase of about 1 percentage point compared to the same period the previous year, according to data from Citymark. Currently, there are projects under production corresponding to about 100,000 square metres, equivalent to about 3 percent of the total stock, of which about 30 percent is leased.

Outlook

Lower take up volumes reflect lower demand, but the addition of new spaces in Gothenburg suggests the start of a much calmer phase, at least through 2026. There also seems to be a slow but gradual upwards pressure on rents, reflecting inflationary impact and a corporate focus on providing modern and efficient workplaces.

In line with other Swedish geographies, the office market in Malmö is characterised by companies optimising space in favour of location, quality and efficiency. This is evident in demand while, at the same time, economic and structural changes are pushing terminations higher. The net impact is continued rising vacancy rates while occasional contracts are signed at new highs.

Investment market

The depth of the transaction market for Malmö remains weak, with only a limited number of 'pure' office transactions taking place. However, a significant transaction occurred at the end of the year when Balder acquired Doxa's entire real estate business as well as apartments. The deal involved a total property value of approximately SEK 3.8 billion, with an estimated SEK 2.4 billion related to Malmö. The largest part of this transaction was Malmö Arena (office/arena/hotel), along with five other smaller properties. Currently, prime office yields stand at 5.0 percent in Malmö.

Tenant market

2024 was characterised as a relatively stable year in terms of new leasing volume in Malmö, with estimated total take-up down by about 15 percent compared to 2023. At the same time, many companies worked on remote work policies and reduced office spaces throughout the year. The vacancy rate for Malmö (excluding Lund) was above 14 percent in the last quarter, an increase of about 2 percentage points compared to the same period the previous year, marking the highest vacancy rate JLL has ever recorded for the market. Of the total volume under production, which amounts to some 2 percent of the total office stock in Malmö/Lund, with completion by 2026, JLL estimates that about 48 percent was leased. The market is still waiting for a turnaround as tenants remain cautious, generally taking longer to make relocation decisions.

Outlook

We are seeing occasional contracts being signed at new highs while, at the same time, there seems to be limited upwards pressure on new rents, which are struggling to catch up with inflation. A major slowdown in finalised new projects is also expected throughout 2025 and, with almost half of the volume coming to market in 2026 already pre-let, there is room for stabilisation of office vacancies in the region.

The office leasing market in the Helsinki Metropolitan Area has stayed fairly active, as vacancies and demand held steady in the fourth quarter of 2024. The activity has primarily been observed in premium office assets across the submarkets, which have managed to maintain consistent rental prices, as businesses prioritise high-quality spaces that can adapt to their changing requirements. The headwind in the office transaction market persisted strongly, and the market remained at a standstill throughout 2024.

Investment market

The transaction volume remained low with only €120 million in transactions recorded in 2024. Only one prime office transaction took place in Helsinki city centre, which provides much-needed pricing evidence to an otherwise opaque market, potentially paving the way for a gradual recovery in the office market. The polarisation of the office segment continues, with investors showing interest mostly for prime locations.

Tenant market

The tenant market has remained on par with the beginning of 2024 as office demand continues below pre-Covid levels. Modest take-up volumes reflect increased hybrid working and the uncertain economic environment. The polarised dynamic in the market persists, as tenants continue to struggle to get employees back to the office. The demand has been strong for prime location assets with well-developed services and ESG concepts in different submarkets. Technology companies and creative industries stand out in Helsinki's relocation statistics as, in certain industries, the office has become a more important part of the employer brand. Due to reduced space requirements, companies can move to areas with higher office rents than their previous locations without increasing their overall facility costs.

Outlook

A fairly active leasing market is expected to continue in the first half of 2025, as the Finnish GDP is forecast to grow, however moderately. Moreover, the changed requirements in the office set up, due to hybrid working, will continue to drive demand. Nevertheless, a slowdown in tenant decision-making, due to the geopolitical climate, can be anticipated. The largest tenants in the market with long lease maturities still need to reduce office space in the coming year, while mid-sized and smaller tenants may have reached the minimum space requirement as they have been able to react faster to changing needs, due to the shorter average lease maturity. Despite the challenging market conditions, there are a few new office development projects under construction. These new developments broaden the market offering to meet the demand for super-prime office space that ticks all boxes for tenant requirements of services, technical specifications, ESG criteria and location.

The office market showed signs of improvement in 2024, both in terms of transactions and the leasing market, despite a still cautious investment climate. With continued strong demand for office spaces and a limited supply of attractive properties, the market is stabilising ahead of an expected rise in activity.

Investment market

Market sentiment for office properties improved in 2024, totaling a transaction volume of NOK 31.3 billion. Offices account for 40 percent of the total investment volume, in line with the historical average which makes office properties the most traded segment of commercial real estate in the Norwegian market. The limited supply of attractive properties is driving increased competition, particularly as more investors are returning to the market in anticipation of an upturn. Due to the persistence of high interest rates and ongoing market volatility, we have chosen to keep our prime yield estimate unchanged at 4.75 percent.

Tenant market

Leasing activity in the office market was somewhat lower in 2024, with tenants being more cautious in their office decisions compared to previous years. This contributed to a slight increase in office vacancy rates throughout the year, with the vacancy rate standing at 6.7 percent at the start of 2025. However, activity in the leasing market picked up during the final quarter of 2024, reflecting a gradual improvement in sentiment. There has been a moderate increase in office rents in Oslo, in line with low supply and high demand for high-quality office spaces with prime micro-locations. As of early 2025, the market rent for high-standard office space in the Vika/Aker Brygge area is NOK 6,400 per square metre, reflecting a 1.6 percent increase from the beginning of 2024.

Outlook

Looking ahead, we expect a continued flat development in office vacancy rates before they start to decrease in mid-2025, with rental prices continuing to rise moderately toward the end of 2025. It is anticipated that construction cost growth will normalise moving forward, which will continue to pose challenges for developers looking to push office projects further into the future. As a result, we also expect low volumes of new office spaces in 2026 and 2027, meaning the supply of office properties will remain constrained for some time.

The office market in Copenhagen is among the most dynamic and sought-after in the Nordic region. As Denmark’s capital, the city serves as a hub for business, innovation and international commerce. Driven by a robust economy and a highly educated workforce, the market has seen steady demand for office spaces, particularly in prime locations and sustainable developments. The city’s global reputation for quality of life and green initiatives further enhances its appeal to companies and investors.

Investment market

Copenhagen continues to attract domestic and international investors seeking stability and growth. Prime office assets, particularly those with green certifications, remain in high demand. Key areas such as central Copenhagen, Nordhavn and Ørestad are hotspots for investment, offering state-of-the-art office developments in vibrant, mixed-use environments. Despite rising interest rates and construction costs, investor appetite remains strong, underpinned by long-term confidence in Copenhagen’s economic resilience and the enduring demand for high-quality office spaces.

Tenant market

The tenant market is evolving, influenced by hybrid work models and a growing focus on sustainability. While some companies have downsized their office footprints, demand remains strong for flexible, collaborative spaces that prioritise employee well-being. Green-certified buildings and locations with excellent transport connectivity are particularly attractive. Rent levels have risen in prime locations, due to limited supply and high demand for premium office spaces.

Outlook

Copenhagen’s office market is poised for continued growth in 2025, with sustainability and flexibility driving development trends. While economic uncertainties may impact short-term activity, the city’s strong fundamentals and focus on innovation ensure its long-term appeal for investors and tenants alike.