Monday, 25 August 2025
The Finnish real estate market kicked off 2025 with contrasting dynamics across its key sectors, according to the latest quarterly reports for the office, industrial & logistics, and residential markets from CBRE. The data reveals signs of stabilization in some segments, while others continue to face lingering challenges tied to financing costs, shifting demand, and macroeconomic uncertainties.
Office Market Remains Cautious but Stable
The office sector in Finland maintained a steady pace in Q1 2025, though challenges around occupancy and rent growth persist. Prime office yields remained stable, holding close to their levels from late 2024, while the spread between prime yields and the 10-year government bond rate showed no significant narrowing. This indicates that while investors remain active, risk premiums have not yet contracted, suggesting caution in underwriting assumptions.
Leasing activity remained subdued in secondary locations, whereas demand for prime assets in central Helsinki held up relatively well, driven by occupier demand for high-quality, ESG-compliant spaces. However, vacancy rates have edged slightly higher, particularly in non-core submarkets, reflecting ongoing pressure from hybrid work trends and space optimization by occupiers.
Industrial & Logistics: Resilient Demand with Supply Challenges
The industrial and logistics sector continued to be the outperformer of Finland’s property markets. Investor appetite remained robust in Q1 2025, particularly for modern logistics assets near key transport nodes. However, limited new supply in pipeline projects constrained transaction volumes, and upward pressure on construction costs delayed some planned developments.
Occupier demand remained healthy, bolstered by strong e-commerce and manufacturing activity. Vacancy rates in prime logistics locations remained low, pushing rents upward in certain hotspots. Yet, a widening gap between buyer and seller pricing expectations was observed, contributing to fewer large-scale transactions compared to peak years.
Residential Sector Faces Financing Hurdles Despite Stable Demand
In the residential market, demand for rental units remained stable in Q1 2025, supported by demographic drivers and continued urbanization. However, higher financing costs continued to weigh on both developers and investors. Transaction volumes remained below long-term averages as elevated interest rates dampened appetite for leveraged acquisitions.
Developers faced headwinds from persistent construction cost inflation and financing hurdles, leading to cautious launch schedules for new projects. Meanwhile, institutional interest in Finland’s residential market remained evident, although investors adopted a more selective approach, prioritizing projects with proven leasing performance and sustainable credentials.
Outlook: Gradual Recovery with Diverging Sector Performance
Market participants remain cautiously optimistic for the remainder of 2025, with the industrial and logistics sector expected to maintain its lead, while the office and residential segments continue gradual recoveries. “The Finnish market is showing signs of resilience, but transaction activity is still adjusting to new financing conditions and evolving occupier needs,” noted a market analyst familiar with the reports.
Stakeholders across all sectors are closely monitoring the potential for interest rate cuts later in the year, which could improve liquidity and narrow pricing gaps, offering a boost to investment volumes. Meanwhile, ESG compliance and asset quality remain central themes shaping investor and occupier decision-making across Finland’s real estate landscape.
Source: CBRE
