The commercial real estate sector in Iceland, following the pandemic, slowed down substantially.
Increased uncertainty following various restrictions to slow down the spread of the Covid-19 disease resulted in fewer transactions and lower turnover value.
The lowering of key interest rate (Central Bank policy rate) significantly increased demand for residential housing. Since interest rates reached historically low levels. The interest rate decrease had much less of an impact on the commercial sector. Turnover for commercial real estate in 2020 was 280 million EUR versus 510 million EUR in 2021, a substantial increase Y-o-Y.
Purchase price for office and retail properties decreased during the pandemic while prices for industrial properties increased. Resulting in downward pressure on rental yield for industrial real estate while putting upward pressure on rental yield for office and retail properties.
