Capital depreciation in Nordic commercial real estate markets led to annual capital growth of -5.4% in 2008, according to the IPD Nordic Annual Property Index.

Based on local currencies, the capital return over last year was the lowest annual figure in the index’s nine-year history. In 2007, capital growth totalled 8%. Annual income return last year climbed 20 basis points to 5.5%, resulting in a -0.1% total return in 2008. The four-country constituent index is composed and weighted as follows: Sweden, 45.1%; Finland, 21%; Denmark, 17.1% and Norway, 16.8%. All four individual countries contributed negative capital value movements to the Nordic Index.

However, the scale of the negative movements reveals that the index is composed of two countries so far mildly affected, and two countries more profoundly affected, by the impact of rising yields and the credit crunch. At one extreme, Norway was most significantly affected by sector-wide yield rises, producing a capital return of -9.9%, followed by Swedens -7.9%. By contrast, Finland produced the shallowest negative capital return, at -1.2%, while Denmarks annual capital growth was -2%.

At sector level, the steepest movements in capital values were in offices, at -6.4% according to the IPD Nordic Index, pulled by the relative underperformance of both Norway and Sweden, which returned -12.5% and -8.2%, respectively. Some way behind was industrial, which ended 2008 at -4.2%, followed by retail, at -3.8% ? both sectors pulled, principally, by the underperformance of the same two countries. By contrast, Denmark and Finland both recorded shallow negative returns in offices and industrial with the only divergence in this trend in the retail sector, where Denmark produced the only positive annual sector capital return, at 1.6%, while Finlands was -3.3%.