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Market and customers

Adapteo’s addressable market consists of rental and sales of adaptable buildings in Sweden, Finland, Denmark, Norway and Germany. Adaptable buildings are prefabricated modular buildings which have the functionality and quality matching on-site buildings. They can be used to serve both short-term and long-term needs and are offered to several segments including school, daycare centres, offices and other premises in the private and public sector.

Public sector is the main customers segment and include municipalities, regions, government authorities, public institutions and other public sector entities. The high share of public sector customers drives the market’s resilience over time. A large share of both the rental and sales market consists of social infrastructure related customer segments, which are predominated by the public sector. In most cases, public customers have the legal obligation to deliver space to varying needs, such as daycare centres, school and elderly care facilities. Therefore, the market is to a large extent impacted by underlying demand drivers, most importantly regional population development and renovation needs, as opposed to the general economic situation

Market growth trends and drivers

The market for rental and sales of adaptable buildings has shown strong historic growth. Mid-term, growth of both the rental and sales markets are expected to be supported by structural demand drivers and trends, including: Population growth and urbanisation, Demographic trends as increased number of children in school and daycare centres as well as a growing elderly population, ageing building stock and renovation needs and a higher penetration of adaptable buildings.

Population growth and urbanisation

Population growth and urbanisation drive regional needs for space in growth centres and net loss areas alike, creating opportunities for adaptable buildings. In growth centres, there is often an urgent need for space. The effects of urbanisation especially concern the providers of daycare centres and school properties, as those moving to cities are often young people or families. In large cities where space can be difficult to acquire, adaptable buildings can be used to handle sudden increases in demand. Alternatively, adaptable buildings can be used to “buy time” in complex decision-making processes for permanent long-term solutions.

On the other hand, flexible solutions are favoured in net loss areas. As it can be difficult for municipalities to predict future building needs and commit to on-site built solutions with long-term obligations, municipalities choose temporary rental solutions, as they provide flexibility and limit financial liabilities. Investing in a permanent prefabricated turn-key solution can also be considered a viable option compared to on-site built buildings due to the re-use and re-purpose opportunities for adaptable buildings.

Demographic trends creating need for adaptable buildings

Children and elderly people are highly represented in the markets that Adapteo operates in. Growing number of children and the rapidly ageing population create significant opportunities for modular space solutions.

The demographic changes in the Nordics have led to a rapid increase of elderly people, at the fastest rate in Europe. An ageing population is resulting in a lasting and somewhat predictable increase in demand for space, providing opportunities for the elderly care market segment.

Generally, the number of children in the Nordics is expected to grow slightly in the future, mainly in Sweden and Denmark. Municipalities and other public entities have a legal obligation to deliver space for daycare centres and school facilities. Thus, especially in large cities, rapid inflow of children creates urgent need for extra capacity, which favours adaptable building solutions with fast and predictable delivery.

Ageing building stock with need for renovations

The building stock is ageing in the Nordics and Germany, which increases the need for both renovation and new building construction, driving the need for temporary and permanent space. The ageing building stock is expected to affect the daycare, healthcare and school property markets in particular.

Approximately half of the Nordic educational building stock was built between the 1960s and 1980s. Thus, in the forthcoming years that part of the building stock will approach the age of 50 years, which is typically the age when the need for renovation services increases. The ageing building stock is also a driver for new built volumes. New built volumes drive the demand for high-end semi-permanent adaptable building solutions which can be offered as a more flexible and efficient solution to on-site built buildings.

Private sector growth and industrial activity

In addition to the aforementioned market drivers and trends, private sector growth and industrial activity support the development of the market and increase the need for adaptable building solutions, particularly in the office customer segment. Growing order intake increases the need for resources and capacity driving the demand among industrial companies for both temporary and permanent space. Increasing acceptance of the modular building techniques and the appreciation of flexibility and fast delivery among the private sector also supports the expansion of the adaptable building market.

Competitive landscape

The rental market in the Nordics is characterised by a handful of large adaptable building providers. In the Nordic rental market, Adapteo is the largest player, holding just above one fourth of the market. In the German rental market, Adapteo holds a few percent market share, being one of the ten largest players in the market. The competitive landscape varies somewhat by geographical area, but a general feature is that the market is consolidated.

In recent years, several real estate companies have targeted the market for social infrastructure properties. This further highlights the need for solution development within in the social infrastructure industry, and the segment of real estate, in particular. The real estate companies should be viewed as valuable partners to Adapteo, further driving the need and demand for renovations in the building stock.

Favouring large scale and local presence

The competitive environment favours large scale and local presence. Customers generally have diverging needs, and a large portfolio enables having a broad range of different solutions readily available for delivery to customers without jeopardising a high utilisation rate. Smaller companies are less likely to have solutions readily available to match with a customer’s unique needs and the returning of modules from customers due to the expiration of the rental contract will have a larger impact on utilisation in comparison to large players. Having a sizable portfolio also enables participation in larger projects, which are often not feasible for smaller companies to execute. Adapteo’s rental portfolio is among the largest in the Nordics, which brings a competitive advantage as it enables fast delivery and matching of demand and supply.

Stricter regulatory requirements

Regulatory requirements are stricter and demand higher quality from adaptable buildings in the Nordics compared to Central Europe. This favour local established companies, as the quality of the buildings of Central European companies may not fulfil the stricter Nordic requirements. In addition, as the regulatory requirements are becoming increasingly rigid, having a modern high-quality fleet which is well-positioned for future regulatory environment and the capacity and capabilities to react to regulatory changes is important and not easily obtained. Adaptable building portfolios that easily can be upgraded to meet changing regulatory requirements to a lower cost enjoy a competitive advantage. Adapteo makes the majority of its investments in its advanced portfolio series that are future proof and can easily be upgraded to a lower cost, while also making the necessary investments to ensure that the entire portfolio meets the regulatory requirements.

Adapteo´s key strenghts

Adapteo as an investment

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