Offices, concrete and vacancy rates – How Sweden’s real estate sector is navigating a new era

“It’s not English English, it’s international English,” a British architect living in Sweden told me when describing the Hagastaden area of Stockholm. He wasn’t just referring to the language, but to the international atmosphere – a place where people from around the world come together and where you hear a lot of international English being spoken.

This sentiment was the starting point for our portfolio managers, who recently visited some of Sweden’s most dynamic cities to take the pulse of the real estate market and gain a deeper understanding of how companies across the country are being impacted by today’s shifting landscape.

Hagastaden, Stockholm: Modern, international and optimised

Hagastaden, a modern district under development in the northern part of central Stockholm, is expected to be completed by 2030. The area will include 6,000 residential units and 50,000 workplaces. According to the architect, the developers are planning for around 10 square metres of space per employee - regardless of whether the layout is fixed or activity-based. While activity-based workplaces are typically more compact, they often require more complementary space in order to function well.

The real estate company Atrium Ljungberg describes the rental market as “challenging but stable.” Around 44,000 office jobs have disappeared during the current economic downturn - on par with the early 2000s IT crisis - yet vacancy rates in Hagastaden remain slightly below the national average, at around nine per cent. There is still a sense of optimism. Much of the current vacancy is believed to stem from macroeconomic uncertainty, leading companies to hold off on
non-essential investments.

Malmö: Architectural freedom and concrete over timber

While Hagastaden showcases a more modern approach through material choices and architectural precision, Malmö offers a different take on urban development - one that is more daring in certain aspects. One reason could be that property values in Malmö are lower than in Gothenburg or Stockholm, which means there’s less pressure to optimise every square metre. The city’s proximity to continental Europe may also contribute to its uniquely dynamic urban atmosphere - unlike anywhere else in Sweden.

New construction is currently limited in Sweden’s third-largest city, a fact evident in the lack of construction cranes doting the horizon. However, renovations are proceeding as usual.

One striking feature is the high concentration of ground-level shops and restaurants in Malmö’s central business district (CBD), a requirement imposed by the municipality to promote vibrant street life. Another standout characteristic is the choice of materials. Real estate owners such as Wihlborgs favour concrete over timber. Malmö’s high year-round humidity influences these decisions - concrete offers durability and stability. At the same time, the company is working to
reduce environmental impact by using climate-improved concrete and other low-carbon materials.

For logistics property companies, sustainability efforts are primarily driven by customer demand. Speculative developments tend to have lower environmental performance compared to those built for specific tenants.

Gothenburg: Active construction and focus on financial viability

Travelling from Malmö via Helsingborg to Gothenburg provides yet another perspective on Sweden’s property market. Gothenburg currently has a high level of construction activity, with numerous cranes dotting the skyline. One of Sweden’s largest real estate companies, headquartered in the city, reports that increased vacancy rates in Stockholm are mostly limited to areas like Kista and the city centre, rather than reflecting a broader economic downturn. According to the same company, new residential construction is difficult to make financially viable.

Even if the land comes at no cost and the project is expected to break even, the return on a newly built property would still be lower than the average yield of existing properties, based on a presumptive rent of SEK 2,700 m²/year. For comparison, the current average rent across the existing rental stock is around SEK 2,100 m²/year. The financial case for renovations, however, is a very different story. In Västra Frölunda, rents increased by 55 per cent after refurbishment—from SEK 1,286 to SEK 1,905 m²/year - while newly built flats in the same area
command rents around SEK 2,200 m²/year.

In the commercial sector, a new trend is emerging: late rental payments. Although the volume is still small, it is noteworthy - something the industry has not previously experienced. It may signal that certain businesses are beginning to feel financial strain.

Optimism amid caution

Despite uncertainties, vacancy rates and challenging financial calculations, a sense of optimism permeates the industry - especially in newly developed and well-planned districts like Hagastaden and in Malmö, where an international atmosphere and bold architectural solutions continue to drive progress.

Sweden’s property sector currently operates in a landscape where financial calculations, climate concerns, and creativity must coexist. Our meetings in Stockholm, Malmö, and Gothenburg show that it’s possible - but also that each city has its own nuances and is thereof charting its own course.

Special thanks to ABG Sundal Collier for organising the trip.