Sweden’s office transaction volume in 2024 reached approximately €3.5 billion, accounting for 28% of total real estate investment. Stockholm alone captured 73% of that volume, underscoring its dominance. In contrast, Finland recorded only €150 million in office transactions, representing just 7% of total investment volume. This sharp disparity in market activity reflects broader contrasts in sentiment, pricing, and capital dynamics between the two countries.
Sweden’s office market remains one of the most active in Europe, driven by institutional domestic capital and an extremely tight core market—particularly in Stockholm. Finland, by comparison, has entered a period of stagnation, defined by limited deal flow, cautious institutions, and increasing yields. While Helsinki’s yields have risen to reflect heightened risk and illiquidity, prime yields in Stockholm remain among the lowest in Europe. This article explores the similarities and key structural differences that underpin this divide.
Similarities Between the Swedish and Finnish Markets
Both countries are undergoing long-term structural changes in how office space is occupied and utilized. Remote work has fundamentally reshaped office demand across the Nordics. According to Eurostat, in 2023, 21.7% of employed people in Finland and 14.3% in Sweden aged 15–64 reported working regularly from home. The long-term impact is evident in tenant behavior, with companies increasingly reducing leased space or consolidating their footprints into central, high-quality locations that promote collaboration and employee well-being.
Despite the broad contraction in office demand, high-quality spaces in prime locations continue to perform well. In both markets, the “flight to quality” is well underway. Tenants and investors are prioritizing properties with strong ESG credentials, flexible layouts, and modern amenities. As occupier expectations evolve, landlords in both countries are investing more in fit-outs and services to retain tenants.
Rental dynamics have followed similar paths. In Stockholm’s CBD, rents nearly doubled over the past decade, though momentum stalled post-pandemic. Inflationary pressures pushed rents up by 18% between 2021 and 2023 due to full CPI indexation in leases. In Helsinki, rental growth has been more modest but remains stable. Both markets are witnessing growing divergence between prime and non-prime segments.
Vacancy rates have reached elevated levels. In Helsinki, the office vacancy rate rose to 16.2% by Q1 2025, up from 14.5% a year earlier. In Stockholm, JLL reported a vacancy rate of 14.4% at the end of 2024, with some sources, such as Cushman & Wakefield, estimating rates as high as 16.5%. These represent sharp increases from pre-pandemic levels. However, CBD vacancy in Stockholm remains healthier at around 8–8.5%, while Helsinki’s CBD has seen rates rise to 15.4%, primarily due to several major tenant exits in late 2024.
Weaker submarkets in both cities are dragging averages upward. Stockholm’s Kista district reported a vacancy rate of 35%, while Helsinki’s Pitäjänmäki reached 24.4%, highlighting deepening market polarization. It is worth noting that vacancy among prime office assets remains substantially lower than the overall market average in both cities, reflecting continued demand for high-quality, centrally located premises despite broader market softness.
Interest rate environments are broadly aligned. As of April 8 2025, the Swedish five-year swap rate stands at 2.45%, while the euro swap rate is 2.28%. The six-month Stibor and Euribor are also closely matched, at 2.43% and 2.28% respectively. While Swedish loan margins tend to be somewhat lower than those in Finland—partly due to stronger competition among banks—this alone does not explain the significant difference in transaction volumes or pricing between the two markets.
Differences Between the Swedish and Finnish Markets
The most fundamental difference lies in market activity. As noted, Sweden recorded €3.5 billion in office transactions in 2024—nearly 25 times the volume seen in Finland. Institutional dynamics play a key role. In Sweden, domestic investors accounted for 100% of office transactions by Q3 2024—well above the five-year average of 62%. Institutions and pension funds were active on both the buy and sell sides. These players benefit from deep market familiarity, internal synergies, and long-term perspectives, enabling them to price more aggressively than international capital.
At the same time, regulatory changes in Finland are permitting higher stock allocations and allowing institutions to apply leverage to their direct real estate investments—developments that could significantly reshape portfolio strategies. Some exceptions remain—Varma continues to develop office projects and increasing its office asset allocation. Also, Keva remains selectively active—but overall engagement to offices is limited.
Finland has historically attracted strong German investor participation, benefiting from euro-denominated capital with currency neutrality. German open-ended funds, in particular, were key buyers of core Helsinki offices. However, facing significant redemptions, these funds have ceased new acquisitions and become net sellers—undermining liquidity and confidence. The withdrawal of these core buyers has also impacted value-add investors. Without reliable exit opportunities, such strategies are difficult to execute. As a result, activity has stalled across the risk spectrum, constraining development and redevelopment pipelines.
Ownership structures also differ markedly. Sweden’s office market is dominated by institutional and listed players with low asset turnover and long-term strategies. Prime yields in Stockholm sit at or slightly below 4.0%—the lowest in Europe alongside London’s West End. Helsinki, by contrast, has a more fragmented ownership base that includes domestic institutions, German funds, Antilooppi, Sponda (Blackstone), and Swedish investors such as Castellum and Colony. However, prime yield benchmarks in Helsinki are harder to define due to the lack of recent transactions. While brokers indicate a CBD yield of 5.25%, actual yields may be higher. The yield gap between Helsinki and Stockholm has widened from 20 basis points in Q4 2021 to 125 basis points in Q4 2024, according to JLL. In reality, the yield differential may be even slightly above 125 basis points, reflecting investor caution in Helsinki amid weaker liquidity and pricing transparency.
Market transparency and capital depth are also markedly different. Sweden has 34 listed property investment companies with a combined market cap of €53 billion. Finland has only four—Citycon, Kojamo, Investors House, and Ovaro Kiinteistösijoitus—with a total market cap of just €2.8 billion. This lack of scale reduces liquidity, price discovery, and investor confidence.
Sweden also benefits from a deep network of family offices with long-standing real estate ties. These investors are active not just in Stockholm but in secondary cities as well, supporting broader market depth. In Finland, family office capital is smaller in scale and less consistently active, particularly outside the Helsinki region.
Macroeconomic conditions play a role as well. Over the past 15 years, Sweden’s GDP growth has outpaced Finland’s, driven by a broader industrial base, faster population growth, and higher productivity. This has translated into stronger occupier demand and better rental growth.
Furhter, many international firms base their Nordic headquarters in Stockholm or Copenhagen. When Nordic HQs are located outside Finland, Helsinki offices tend to be smaller and less strategic, reducing demand from global occupiers and weakening the investment case.
Conclusion – Overreaction
The Finnish office market remains subdued due to a combination of global and local factors. Global interest in office assets has declined. German open-ended funds have become net sellers. Finnish institutions are neither able nor willing to fill the gap. Foreing capital is increasingly concentrating on the most liquid locations, and Finland is currently not among them.
The key question is whether the yield gap between Helsinki and Stockholm is justified. Stockholm, although expensive, is supported by robust domestic capital and constrained supply. Helsinki, on the other hand, offers higher yields but struggles with illiquidity—even in prime assets.
Yet the yield gap may now be overstated. For future-proof, centrally located, ESG-aligned assets in Helsinki, the risk-reward profile could be skewed too far in favor of the buyer. Should new long-term capital—especially from Swedish pension funds—enter the Finnish market, it could reset pricing, restore liquidity, and compress yields. More transactions would attract more players, boosting competition and normalizing the yield environment.
As one seasoned investor put it, the best opportunities often emerge during times of maximum uncertainty. For those with long-term conviction and a focus on high-quality assets, this may be the time to act. The road to recovery may be long, but early movers could reap the greatest rewards as the cycle turns.