Source: SRV’s January-September 2026 Interim Report, published on 22 October 2026
Finland’s macroeconomic environment
The outlook for Finland's economy has strengthened over the autumn. In September, the Bank of Finland raised its economic growth forecasts for 2026 and 2027 on the basis of exports, investments and a gradual recovery in private consumption. The labour market is still recovering slowly in spite of the strengthening economy, but a gradual decline in unemployment is expected during 2027. The rise in energy prices caused by the war in Iran will push inflation up to 2.4 per cent this year, but the impact is expected to be temporary. At its September meeting, the European Central Bank raised all three of its key interest rates by 25 basis points in response to mounting inflationary pressures.
Consumer confidence improved slightly during the third quarter. Statistics Finland's consumer confidence indicator rose to -4.9 from -5.3 in June. Households remain cautious about both spending and their own financial position.
We expect conditions in the construction market to improve in 2026–2027. Economic growth in Finland has been stronger than expected, which also supports the outlook for demand in the construction sector. However, there is still uncertainty surrounding the construction market environment, and market conditions vary significantly across the various segments of the construction industry. Both the disruptions to energy markets caused by the war in Iran and their impact on inflation are fuelling uncertainty around interest rates. General geopolitical uncertainty, adjustment measures in public finances, and continued caution in consumer confidence may slow market recovery more than expected.
However, a large number of data centre projects are boosting the demand outlook for the construction industry as a whole. As construction demand strengthens, particularly driven by data centre investments, key risks to be managed include ensuring the availability of skilled labour as well as the availability and cost of materials. The strong growth in data centre investments may also affect the timing of other projects, particularly in the public sector.
Non-residential construction
Contracting
We believe that public-sector investments in defence, security of supply and public services will continue to support the non-residential construction market. Demand has remained stable at a good level. We expect that public investments will continue to support the market over the coming years, and both renovation and demanding industrial projects will become increasingly important.
Data centre construction has emerged as the most significant growth segment in the Finnish construction market. The data centre market has considerable investment potential, and several projects are currently in various stages of development. The Confederation of Finnish Construction Industries predicts that the potential investment pipeline up to 2035 will be almost 30 times the actual figure for 2025. Demand for data centres is therefore expected to remain strong, which will provide SRV with significant growth opportunities. The pace at which data centre projects are initiated is also subject to risks related to, among other factors, the availability of grid connections and political decision-making.
Non-residential development projects
The launch of SRV’s development projects – that is, projects based on the company’s in-house project development and intended for sale to real estate investors – requires a functioning investor and tenant market coupled with a gradual stabilisation of economic and financial conditions. Although investor demand for non-residential development projects has been gradually recovering in tandem with improvements in Finland’s economic outlook and the stabilisation of the real estate market, there is still uncertainty surrounding the market situation. Investors' yield requirements remain relatively high, which is limiting the launch of new projects, and a rise in interest rates would further increase yield requirements. Although the most challenging times of recent years are now behind us, and we are now slightly better placed to launch new projects, the market remains partly thin and polarised. There is, however, demand for selected projects primarily in higher-yield segments.
Residential construction
Investor market (residential development projects)
Transaction activity in the real estate market is gradually picking up, and there have been signs of a recovery in investor demand. Yet volatile energy markets, coupled with the associated inflation and interest rate risks, are having a negative impact on investor demand.
The key factor in SRV’s residential development projects – that is, projects based on the company’s in-house project development and intended for sale to real estate investors – will be a gradual reduction in the existing oversupply of housing. Its pace will largely depend on trends in the number of households in cities. Although population growth in larger cities is supporting growth in demand, changes to housing allowances – and particularly to housing arrangements for young people – coupled with a relatively high level of state-subsidised residential development have hindered the reduction of this surplus. One key challenge facing the investor market is linked to an oversupply of rental housing, and small apartments in particular. Abundant supply and high vacancy rates have hindered rent growth, while construction and maintenance costs have remained high. This has reduced the potential return on investments, and made investors more cautious about launching new residential rental projects. However, vacancy rates are starting to decline, and demand for new housing is expected to strengthen gradually.
Consumer market (developer-contracted residential construction)
Recovery has been slower than expected in the owner-occupied housing market. According to the Central Federation of Finnish Real Estate Agencies (KVKL), the housing market has remained sluggish in 2026, and particularly in the new-home market, in which demand has remained well below long-term averages. Although activity in the market for existing homes has been brisker than in the market for new homes, the number of transactions remains quite modest.
According to Statistics Finland, prices for existing residential units experienced a 3.3 per cent year-on-year decline in August 2026. This has been most pronounced for small apartments, while prices for larger apartments have remained more stable. Rising market interest rates and the associated uncertainty have also slowed down the recovery of the housing market.
An upswing in the housing market is being hindered by a combination of factors – weak consumer confidence, falling apartment prices and rents, the volume of available housing on the market, rising market interest rates and uncertainty surrounding interest rates – all of which are undermining the conditions required for launching new projects. We believe that a recovery in the Finnish economy, the low number of startups and population growth in key urban areas will gradually help to reduce oversupply.
Subsidised housing
State-subsidised housing (ARA/Varke) has accounted for the vast majority of new residential construction projects. The volume of state-subsidised construction is expected to decline over the coming years, which could weaken demand for residential construction in the short term. However, over the longer term, this decline in subsidised residential construction is expected to help balance the market and facilitate private residential construction, as the supply of new subsidised rental housing decreases and demand shifts towards market-based projects.