The corona effect on the Nordic real estate markets and the status of the tech investments in real estate were the topics when the Nordic proptech initiators shared their experiences online with close to 250 listeners from around the globe.

On Monday 6 April, Nordic Proptech Initiative by Magnus Svantegård from Stronghold Invest (owner of Newsec, NIAM etc.), previously named one of the world’s most influential persons within proptech, invited to Proptech Zoom Summit to discuss common challenges and possibilities in the Nordic region. Joining him in the panel were Roger Tofft from Proptech Sweden, Tasha Tolmacheva and Mikael Långström from Proptech Finland and the real estate organisation Rakli, Nadim Stub from Proptech Denmark and Henrik Taubøll from Proptech Norway and the law firm Wiersholm.

The proptech profiles shared a number of Nordic experiences with how the markets have handled the crisis.  Roger Tofft could inform that Sweden has taken another approach than the other Nordic countries.

Governmental measures in the real estate industry as a consequence of the corona pandemic

– What everyone is now discussing in the real estate industry here, is whether Sweden will enter into a lockdown like the other Nordic countries. This could have a significant impact on the retail and restaurant industry.

As one of the specific measures, Tofft explained that the authorities have proposed to cover 25 percent of the rent as direct financial support, but that the landlords must then commit correspondingly by giving a 25 percent discount, so that the total discount for the tenants amounts to 50 percent.

– This proposal has not yet been adopted, and the ongoing dialogue creates unease for the landlords and tenants. I believe that the players in the industry must stop discussing details and rather sign these decisions in order for us to move on, Tofft said.

He referred to the fact that a major survey was conducted in Stockholm, in which seven out of ten landlords stated that at least one of their tenants will have problems with the cash flow. However, the good news is that 75 percent of the landlords in Sweden have taken one or several measures to aid their tenants.

– In Denmark, the authorities are supportive, Nadim Stub from Proptech Denmark said. The authorities have stated that they will help with relatively large contributions.

Stub said that it is still unclear what is “settled and signed”, but that the model with high rent coverage, as mentioned in the media, will be the model serving as basis.

– Furthermore, we see that landowners are asked to enter into dialogue with the tenants to see how they can assist and support. This has led to both positive and negative results.

– The support will be paid directly to the tenants. One problem is that the support is only provided to companies that have actively been shut down. If you own a take-away restaurant, but minimise the use of your premises, you are not eligible for support. You have to have shut down completely.

In Denmark, there is also the additional aspect of complex rent acts, both for businesses and housing. Stub pointed to the fact that it is important to compare the authorities’ measures with the regulations on layoffs.

– The authorities cover up to DKK 23,000 per employee, conditional upon the employee not being laid off, and the tenant must therefore guarantee that the employees will not be laid off during a given period. It is now discussed whether to increase this amount to approx. DKK 40,000. This is important to think about when assessing the support packages for rent etc., as the costs for employees are key, Stub said.

In Finland, they are following the Swedish example with a 25/25 scheme with governmental rent support and discount from the landowner. The Finns are very interested in seeing how the housing prices will be affected in Helsinki, as the purchasing power has increased, while 300,000 people are now at risk of losing their jobs.

– The common mantra in Finland is to help one another and to be stronger together, although the Finnish media has published some negative articles about the landlords, including some “leaked” e-mails from landlords to tenants about negotiations on the discounts, Michael Långström from Proptech Finland explained.

– However, start-up companies are used to working online. For instance, Epicenter started a number of online events, which WeWork is also doing in Sweden, so the tenant side is adapting well, colleague Tasha Tolmacheva said.

Stub also added that it is important to stress that the authorities in Denmark are accelerating all construction projects and that this is a way of ensuring liquidity in the market.

In the short term, everyone agrees that valuations and willingness to invest will be adversely affected.

– In Norway, things have been chaotic, and this has created some uncertainties. I have been fortunate enough to be a mentor for the Antler program, where smaller companies with very talented people are looking to find seed funding, and it is obvious that the newly established companies coming out of the programme will have trouble finding this in the current market, Wiersholm lawyer and manager of Protech Norway, Henrik Taubøll, said. At the same time, we see companies like Norske SmartPlants, operating with smart buildings, for which there should be great demand now. They are actually looking for four new employees in a job ad that was posted this week.

– I think it is important to wait until the dust settles and see what the situation will be in a couple of weeks, Taubøll added.

In Finland, a number of start-ups are struggling to collect money.

– The authorities took measures early and efficiently, Långström said. They immediately offered support of EUR 10,000 to start-ups, which was an aggressive and good measure for the smallest of the companies. They were also quick to publish easily available information regarding different support schemes etc. online.

Tolmacheva also pointed out a positive effect.

– We believe it may become easier to talk to a conservative industry about technology, when they see that it can easily be implemented, Tasha says. We hope that this can result in new investments.

State of emergency results in increased digitalisation

Tofft from Sweden pointed out that it is also positive that the products actually offered by the proptech companies are new and good solutions for the real estate industry. This is precisely something in which it is sensible to invest now. He also stated that “hack the crisis” in Stockholm, a joint effort to find good solutions during these times, attracted as many as 10,000 participants.

Fundraising for proptech companies has also become problematic in Denmark during recent weeks.

– In addition to this effect, it will also become increasingly important for the companies to handle cash-burn. We read in Techcrunch that there was a global increase in VC investments. In the long run, maybe something more positive can come out of this, Stud said.

All players were more positive in terms of the long-term impact on technology and real estate.

– Increased digitalisation is accelerating these days, Stub said.

– For instance, in Denmark, the construction industry has great potential for improvement of efficiency. A construction site has many people on site, and the crisis may accelerate the technological development for digital interaction here. And we also see an increase in virtual viewings of houses, which I think will really gain popularity now.

Stub pointed out that he was recently informed that one of the governmental support packages will be offered to companies that innovate the use of energy.

– In Denmark today, energy measurements are made by someone going to each building and checking the meter, with the risk of being infected, despite the fact that we have the technology to do this digitally, like in Norway. Such digitalisation processes may work faster now.

Magnus Svantegård also explained that digital tools for communication with tenants are increasingly popular these days. Proptech Finland experiences the same:

– We see that tools for digital communication with tenants have a significant upswing. In fact, I read in the newspaper today that 40 percent of the Finnish companies are considering whether to maintain some or several measures after the corona crisis is over, so this will continue also “on the other side”. Furthermore, we see that VR companies are blossoming, and the same applies to tools for knowledge sharing on construction sites where you don’t have to meet physically.

Taubøll pointed out that the meta-effect of this will be that the trade and industry in general will become more digitalised, and this will also affect the real estate industry. This seminar should have taken place in Copenhagen, but was carried out online. This would not have been relevant only a few months ago.

– During the last crisis, Instagram, WhatsApp and other large companies entered the market, Tofft said from Sweden. New solutions will come out of this too, he continued. Within proptech, it has a very good effect that the ecosystem is working closer together to find new solutions during this crisis.

The need for office solutions may change

The future of co-working is also a hot topic.

– It is a very interesting development, Stud said. Retail has struggled for many years, and the corona virus has pushed the inevitable trend further, not to the “end of retail”, but to the “end of retail as we know it”. The real estate industry’s lack of focus on the success of the tenants has also contributed to this.

Stub also believed to see similar changes in the office market.

-I read an article by a CEO in a large Danish Bank, who said that “we have actually realised that working from home is far more effective than the way we used to work”. The bank had reduced its number of meetings and coffee breaks.

-In Denmark, many are now considering whether it makes sense to have gigantic buildings with many thousands of square meters, or whether we should have a more flexible approach to the workplace. For the real estate industry, this could have some very interesting effects.

Stub also asked what the landlords can do with all the extra square meters if the tenants are downscaling and the need for square meters goes down.

– In Denmark, we ask ourselves how to re-design buildings of 20-30,000 square meters to facilitate for a more flexible everyday life. For instance, do we need more tenants?

– Flexibility will become a very strong «value proposition» going forward.

Taubøll agreed with Stub.

– This can push landlords to become more aware of how buildings are utilised and to eliminate “dead” square meters.

– 10 years ago, large companies leased large buildings, and that was it. Now, many have a more flexible approach to the use of offices with fewer square meters per person, and when this is reinforced by the fact that many will continue to work from home after the corona crisis, I think it will be acknowledged that the need for square meters per employee will decrease. This could lead to changes, for instance in the “head office strategy”, where large head offices are established outside the city centre.

He also points to the fact that co-working can lose some short-term leases in the short run, but also that larger companies will use more flexible solutions when possible.

– PWC conducted a survey that showed that 63 percent of global top executives did now know how many employees they will have three years from now. Nevertheless, most of them are leasing large offices for the next ten years, and take the chance that they will have approximately the same number of employees. This train of thought may change in line with the fact that flexible office solutions can also be facilitated for large companies.

In Finland, many are also concerned with how the players within co-working are preparing for the next pandemic, which is likely to come. Svantegård also emphasised that players that make it through this crisis will be incredibly strong when the crisis is over.

– Working from home will probably not be the solution in the future, especially in large cities where people often live in smaller apartments, and you need an extra room to get your work done, Svantegård said. However, you might not want to commute to the head office every day, so maybe a middle ground will be the future. Different co-working locations may be of interest then.

Tofft added that players may struggle if freelancers globally are doing poorly. Large companies may be able to help the players in the capitals, but outside of these, they are depending on smaller players, who are struggling today.

Good news within proptech

An interactive survey during the session showed that the audience, which consisted of large landowners, advisers, VC players and proptech companies, believe that the possibilities for funding have now decreased and that the valuations of the companies are also decreasing. However, on the positive note, most believed that the need for proptech companies’ products has increased during the corona crisis.

Finally, the panellists presented some “good news” from the first quarter of the year. Taubøll mentioned that Spacemaker landed a large agreement with Bougues Immobilier, Unloc received a large funding and that the public is launching a series of new projects such as 3D scan of Stavanger Hospital, which was won by Imerso, and the National Archives of Norway’s new BIM project, which Jotne EPM is working on. In Denmark, LifeX received EUR 7 million in funding. Large deals have also been concluded in Finland, led by Unrealer and Gbuilder. Also in Sweden, large deals have been concluded with UK customers.

The recording of the session is published here.

This article has also been published in Estate News (8 April 2020).

  • Published: