Contents. Copenhagen property market report. Contents. Introduction 3. Location Copenhagen 5. Macroeconomic overview 8

Transcription

1 Copenhagen Property market report 2016

2 Contents Contents Introduction 3 Location Copenhagen 5 Macroeconomic overview 8 The commercial investment market The Sadolin & Albæk property price index 11 Investment property market trends 14 Office property investments 16 Retail property investments 18 Industrial/logistics property investments 20 Key investment transactions 22 The residential market Residential property market 24 Residential investment property market 33 Key investment transactions 35 The occupational market Office occupational property market 36 Retail occupational property market 53 Industrial occupational property market 62 Market practices 68 About Sadolin & Albæk 69 Sadolin & Albæk contacts 70 Definitions 71 2

3 Introduction Introduction Danish economy continues on its bumpy road towards recovery. Consumer spending is picking up, fuelled by lower unemployment rates, hikes in residential prices and mounting consumer confidence. Danish exports are doing fairly well, in particular on the back of the US dollar appreciation against the euro and the Danish krone. However, growth remains slow, with annual GDP growth rates below the 2% mark, indicating that Danish economic recovery is still very much a work in progress. Geopolitical unrest, the European refugee situation, and highly volatile commodity and stock markets are also making business decisions on new ventures and investments more risky. Due to exceptionally strong demographics, Greater Copenhagen is the premier growth centre in Denmark. The combination of strong demographics and a sustained low level of interest rates is the main driver of the strong Copenhagen property market. With negative short-term interest rates and 10-year government yields below 1.0% p.a., the income return on prime investment property is very attractive indeed, and both domestic and international institutional investors, property funds and companies as well as UHNWIs are active buyers. In 2015, the aggregate transaction volume in the Danish property investment market was some DKK 48bn, a hefty 50% increase on In Greater Copenhagen, the transaction volume almost reached the previous peak level recorded in Bearing in mind that investors have generally become less leveraged, the amount of equity allocated to the Greater Copenhagen investment property market is higher than ever before. Sadolin & Albæk partners (left to right) Lau Melchiorsen, Carsten Gørtz Petersen, Peter Winther, CEO, Jan Kristensen, COO, and Christian Fladeland Pedersen. Nevertheless, we do not believe that the property market is close to, or even heading for, a bubble: Current property investment values continue to be supported by underlying fundamental drivers, with Danish property assets offering an attractive return relative to other asset classes and international property markets. This 2016 market report by Sadolin & Albæk offers an overview of key economic trends and of the Copenhagen commercial property market, including both occupational and investment market information as well as details on transactions across sectors and submarkets. The market report has been compiled to guide you in planning and making decisions involving investment property in Greater Copenhagen. It is based on market data that we believe are reliable. Whilst every effort has been made to ensure that the information provided in this market report is both accurate and complete, Sadolin & Albæk accepts no liability for factual errors. Since its inception in 1967, Sadolin & Albæk has been a leading independent and professional adviser to major players in the Danish property market. Every year since 2006, Sadolin & Albæk has been awarded top rankings in international polls. A strong market driven by high liquidity and bullish investors carries an inherent risk of misinvestments, and investors should always base their decisions on in-depth analysis and expert advice. At Sadolin & Albæk, we strive to enhance our capabilities and our understanding of key market drivers, sharpening our analytical skills with the aim of adding value to the business and success of our clients. Copenhagen, February 2016 Sadolin & Albæk 3

4 Robert Jacobsens Vej 81-91, Copenhagen S 4

5 Location Copenhagen Location Copenhagen Strong population growth drives boom in new construction, urban renewal and redevelopment as well as infrastructure upgrade schemes Supported by an overrepresentation of university graduates, Copenhagen boasts an unparalleled, knowledge-based business environment The Copenhagen investment property market is seeing strong capital inflows and brisk transaction activity Copenhagen is the capital of Denmark, located on the island of Zealand and at the very heart of the Øresund region, which includes also the southernmost part of Sweden. One of the most densely populated, affluent and dynamic parts of northern Europe, the Øresund region benefits from swift cross-border access via the fixed link, Øresundsbron, connecting Copenhagen with Malmoe, and the sea link between Helsingør (Elsinore) and Helsingborg. In addition, Copenhagen is the gateway to Europe. Air and sea ports facilitate long distance or international commutes, and an extensive rail network and motorway grid, including the European motorway E20, ensure swift transport to all parts of Denmark and abroad. In Copenhagen, the Metro connects most city districts and links to Copenhagen Airport. An expansion of the underground Metro line, the City Ring, is scheduled for commissioning in Greater Copenhagen has a population of some 1.2 million. Combined, the Øresund region has close to 3.8 million inhabitants. Including 29 municipalities and stretching from the island of Bornholm to the east to Hundested to the west, the Capital Region of Denmark is projected to see population growth in the order of 15% over the next 25 years. This makes it the fastest growing region of Denmark; in fact, a Statistics Denmark forecast predicts more than 310,000 new residents by Strong population growth is a key driver of growth in the housing and labour markets. As a result, new construction, urban renewal and redevelopment as well as infrastructure upgrade schemes are booming in Copenhagen, with brisk activity in the harbour areas north and south of the city centre and in a number of new development areas. Development schemes involve commercial and residential newbuilding as well as conversions/upgrades of disused industrial or office facilities. The strong influx of new residents has created an undersupply of residential space, which not even the great many ongoing construction schemes are able to cover in the short term. In addition, the office market is picking up, and the supply of prime office space is increasingly outstripped by demand. According to Eurostat, Danish GDP per capita exceeds the EU average by roughly 25%. In Copenhagen, GDP per capita exceeds the national average by 25%. In terms of education, the share of Copenhagen residents graduating with a university or similar tertiary degree is a staggering 74% above the average recorded in EU capitals in general. In addition, the number of university or college students in Copenhagen is growing. Similarly, the percentage of Copenhagen residents that have completed long-cycle higher education is 70% above the national average and Copenhagen is considered the main locomotive of Danish economy and a European hotspot. In fact, in terms of technological know-how, political stability, business-friendly environment as well as a transparent and liquid property market, Copenhagen is outranked only Population forecast (index 100 = 2015) GDP per capita (DKK 000) Capital Region Denmark Copenhagen Denmark Source: Statistics Denmark Source: Statistics Denmark 5

6 Location Copenhagen Prime office rents (EUR per sqm per annum) Copenhagen Aarhus Amsterdam Berlin Brussels Frankfurt Hamburg Helsinki London Munich Oslo Paris Stockholm Sources: Sadolin & Albæk and JLL Prime investment yields, office Copenhagen Aarhus Amsterdam Berlin Brussels Frankfurt Hamburg Helsinki London Munich Oslo Paris Stockholm 0% 2% 4% 6% 8% Sources: Sadolin & Albæk and JLL High-street retail rents (EUR per sqm per annum) Copenhagen Aarhus Amsterdam Berlin Brussels Frankfurt Hamburg Helsinki London Munich Oslo Paris Stockholm Sources: Sadolin & Albæk and JLL Prime investment yields, retail Copenhagen Aarhus Amsterdam Berlin Brussels Frankfurt Hamburg Helsinki London Munich Oslo Paris Stockholm 0% 2% 4% 6% 8% Sources: Sadolin & Albæk and JLL Education, Capital Region Education, Denmark 15% 24% Basic School (9-10 grade) Upper Secondary School 17% 9% 28% Basic School (9-10 grade) Upper Secondary School 19% Voca onal educa on Voca onal educa on 4% 13% Short-cycle higher educa on Bachelor/medium-cycle higher educa on 4% 10% Short-cycle higher educa on Bachelor/medium-cycle higher educa on 26% Long-cycle higher educa on 32% Long-cycle higher educa on Source: Statistics Denmark Source: Statistics Denmark 6

7 Location Copenhagen by London, Dublin and Munich in a JLL survey of the world s most dynamic cities, the City Momentum Index. Another recent JLL survey ranks Copenhagen as the top city among New World Cities that lead the provision of energy-efficient and smart buildings, increasingly taking into consideration also issues such as liveability, sustainability and technological prowess. In addition, for the fifth year running, Copenhagen tops the European Ease of Doing Business Index published by the World Bank, just as Denmark tops Forbes Magazines Best Countries for Business list. In an international context, investors perceive the Danish investment property market as a safe haven thanks to its strong framework conditions. Apart from low-volatility market rent levels and attractive net initial yields relative to other European capitals, a shift in investment patterns is the key determinant of the Copenhagen property market. Financial market volatility and unattractive returns on low-risk liquid assets, i.e. bonds, have made investors zoom in on alternative investment opportunities in the property market. In 2015, transaction activity picked up in several major cities in Denmark, with property investments in the capital region accounting for more than two thirds of the total transaction volume. Like all Eurozone economies in general, Denmark still struggles to meet target-rate economic growth; however, in Copenhagen the precursors are in place for continued growth, also in the property market. Købmagergade 33-37, Copenhagen K 7

8 Macroeconomic overview Macroeconomic overview Consumer spending again a key determinant of economic growth Outlook for Danish economy and employment levels remains bright Low inflation rates predicted to prevail in the next 12 months GDP and consumer spending Having climbed in eight quarters in a row, Danish GDP declined by 0.1% from Q2 to Q Apart from this little bump, Danish economic trends continued to be improving in However, with meagre year-on-year GDP growth of 1.3% forecast for 2015, the growth momentum remains moderate, mainly due to a slump in exports in the second half of According to a Dansk Bank forecast, GDP growth will increase to 1.5% in It is worth emphasising that Danish GDP growth obscures substantial disparities in regional growth rates: with growth rates double or triple the national average, Greater Copenhagen is the undisputed locomotive. Supported by a strong influx of new residents, employment growth, uptrending housing prices and a healthy business environment, Greater Copenhagen seems all set to retain its position as Denmark s premier growth centre. Consumer spending has finally picked up from the past seven years low, bouncing back as a key determinant of economic growth. Driven mainly by employment growth and low inflation, the renewed boom in spending does not appear largely determined by credit-driven stimulus as was the case during the latest economic upturn in Continued low inflation rates and exceptionally low oil prices, however, are predicted to sustain growth in consumer spending over the next 12 months. Similarly, recent years wealth effect of climbing equity and housing prices may stimulate increased spending. Unemployment In 2015, the Danish labour market continued to witness favourable trends in terms of steady employment growth and a decline in unemployment to a level of 4.7%. The recovery is driven by private-sector businesses exclusively as public-sector employment figures have remained relatively constant for the past couple of years. Due to an improved market outlook, further employment growth is anticipated in the years ahead, taking into account also the projected increase in structural employment resulting from the national reform programme introduced by the Danish government in The Danish unemployment rate is predicted to edge down to approximately 4.4% in Recent years employment growth correlates with brighter prospects across the board in the private sector. However, it is also associated with a higher risk of bottleneck issues. According to Danmarks Nationalbank, the output gap is estimated at almost 40,000, indicating that employment levels may increase by almost 40,000 employees before triggering inflationary pressures. Although Denmark in general has yet to see full capacity utilisation, there are early signs of labour shortage in certain sectors of the labour market, which may translate into renewed upward wage pressure. GDP (growth % y/y) Consumer spending (growth % y/y) 6% Denmark Eurozone Denmark 6% Eurozone 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% E16 E17 Sources: Eurostat and Danske Bank -6% E16 E17 Sources: Eurostat and Danske Bank 8

9 Macroeconomic overview Inflation Having dwindled for three years, inflation finally hit rock bottom at 0.5% in 2015, the lowest level recorded since 1953, driven down mainly by continued slumps in oil prices. Discounting energy prices, however, the rate of inflation is still low, which ties in with the fact that economic growth and wage increases have been moderate in recent years. As the labour market gradually moves towards full employment, wages are believed to come under upward pressure, which will ultimately feed through to prices. However, this is hardly likely to translate into normal inflation rate levels around the 2% mark until 2017 at the earliest. Accordingly, the rate of inflation is forecast at just below 1% in When inflation increases at a slower pace than wages, real income levels increase. As a result, most Danish households will have more money to spend in 2016 too, which may help to spur household spending. In January 2016, Statistics Denmark compiles data on most prices directly from the IT systems of Danish retailers. According to Danske Bank, the last four years results when applying the new method do not indicate that this will have any impact on year-on-year inflation, although it will presumably be possible to give a slightly more accurate presentation of seasonally-determined shifts in inflation. Interest rates In 2015, interest rate levels dropped to unprecedented lows in response to substantial upward pressure on the Danish krone, in particular in the early months of the year. In January, the ECB announced a massive asset purchase programme intended to kick-start growth and dodge deflation. In addition, the Swiss central bank decided to abandon its CHF ceiling vis-à-vis the euro, which caused a speculative rush for Danish kroner as investors relied on Danmarks Nationalbank to follow suit and abandon its fluctuation band to the euro, causing sharp appreciation. However, Danmarks Nationalbank successfully defended the krone, cutting key lending rates repeatedly. In February 2015, the yield on Danish 10-year government bonds thus reached an all-time low of 0.1%. At the same time, the 3M interest rate dipped into negative territory. Following an adjustment in 2015, the yield on Danish 10-year government bonds stands at approximately 0.75% 1.00% as at start In December, the Fed hiked its short-term interest rate for the first time since During that period, US unemployment rates had been halved from 10% to 5%. There are no signs of the ECB following suit, and since 2014 the spread in eurozone Short-term interest rates (3M) and 10-year government bonds* 6% 5% 4% 3% 2% 1% 0% Denmark (3M) Denmark (10-year gov. bond) Eurozone (3M) Eurozone (10-year gov. bond) -1% *) National annual average Sources: ECB, Danmarks Nationalbank and NASDAQ OMX Unemployment rates Inflation 14% Denmark Eurozone 5% Denmark Eurozone 12% 4% 10% 3% 8% 2% 6% 1% 4% 0% 2% -1% 0% E16 E17 Source: Eurostat and Danske Bank -2% E16 E17 Sources: Eurostat and Danske Bank 9

10 Macroeconomic overview yields versus US yields has only widened, prompting renewed appreciation of the US dollar via-à-vis the euro. This could stimulate further growth in European economies. As a result, the generally very low interest rate level is expected to support continued consumer spending and, to some extent, also investments, which have yet to gain serious momentum despite the generally brighter economic prospects. Conclusive remarks and outlook Overall, the Danish economy appears to benefit from a broadbased economic recovery. The greatest threat against the current recovery is the possibility of a further slow-down in world trade as an export-driven economy such as the Danish economy is highly dependent on foreign demand for domestic goods and articles. According to the OECD, the root cause of the downturn in international trade in 2015 was a slow-down in growth economies such as Brazil, Russia and China. Nevertheless, cross-border trade between developed economies is picking up, and we therefore believe that the slow-down will have no material effect on the Danish economy in the short term. This is also because activity in developed economies is driven by domestic demand, sustained mainly by exceptionally low oil prices and low interest rates. However, the turmoil prevailing in particular in the Chinese equity markets at start-2016 may well turn out to be a Black Swan reverberating in the equity markets of Western economies. In a historical context, such turmoil has been known to involve a strong element of systemic risk, leaving a severe and enduring mark on real economies. Macroeconomic outlook Year GDP* Unemployment** Consumer spending* Exports* Inflation* Public debt*** 10-year swap yield Denmark Eurozone *) Growth (% y/y) **) % of workforce ***) % of GDP Sources: Eurostat and Danske Bank 10

11 Commercial investment Property price index The Sadolin & Albæk property price index Continued upward trend in Greater Copenhagen commercial property prices driven by large capital inflows, also from international investors Total average return on commercial property at 12.8% in 2015 Brighter economic outlook has spurred property prices, but so far still mainly in prime property segments In 2015, Greater Copenhagen commercial property prices continued to climb for the third year running. With economic recovery finally showing, the Danish property market, in particular the Copenhagen market, attracted stronger capital inflows from domestic and international investors alike. Several years of sustained price hikes on financial assets such as stocks and bonds, made investors flock to the property market in pursuit of attractive risk-adjusted returns. According to the Sadolin & Albæk property price index, Greater Copenhagen commercial properties yielded a total average return of 12.8% in 2015, resulting from a compression of income return in the order of 5.1% and significant capital growth of 7.7%. Risk tolerance is slowly growing, but because of moderate economic growth rates, property investors still focus on the most liquid and transparent segments. Indeed, 2015 saw a continued surge in demand for Copenhagen prime investment properties, which accounted for the largest prices hikes. In particular high-street properties attracted strong demand almost on the scale seen in 2014, driving down yields substantially in this segment. The yield compression combined with strong occupational demand in this segment to cause a hike in high-street retail property prices in The office occupational market is still in the relatively early stages of recovery, but even CBD office properties with vacancies attract mounting demand. As a result, the risk premium in this segment has diminished over the last 12 months. As at end-2015, investors had lowered their yield requirements to approximately 3.75%, in some instances even lower, in the Copenhagen high-street market, while yields for top-quality office properties compressed to 4.25%. Driven down by historically low interest rates, yields dropped to unprecedented lows in several segments of the Copenhagen property market. Yield compression remains the main driver of capital growth in most segments as the occupational markets in general, except for the Copenhagen high street, saw only moderate rental growth, if any, in Although commercial property prices have climbed for three years running, in nominal terms they have only just rebounded to the previous peak level recorded in 2007, and in terms of deflated values they remain significantly below that level. When factoring in inflation, Copenhagen commercial property prices still stand some 10% below 2007 prices. However, a significant disparity in cross-sector price levels has become evident: Whereas today s prices of high-street retail and longlease office properties exceed 2007 values, also in terms of deflated values, the prices of secondary office and industrial/ logistics properties are still significantly below pre-crisis levels. Since 1985, net initial yields have ranged between 4.7% and 8.8%, whereas capital growth has fluctuated between -11.8% and 31.3%. From 1985 to 2015, the total return was negative only from 1991 to 1993 and again in 2009, whereas the average total return since 2000 has been 9.7%. Historical return index (index 100 = 2000) Average return and risk on stocks, bonds and commercial property Commercial property, Greater Copenhagen Nordea benchmark 7-year bond MSCI Denmark Gross Total Return Index Return Return Risk MSCI Denmark, Gross Total Return 38.9% 14.6% 25.3% Nordea benchmark, 7-year bond 0.1% 8.1% 9.0% Sources: MSCI, Nordea and Sadolin & Albæk Commercial property, Greater Copenhagen 12.8% 8.8% 7.8% Sources: MSCI, Nordea and Sadolin & Albæk 11

12 Commercial investment Property price index Property vs. stocks and bonds When assessing the performance of Copenhagen commercial property, the return to risk reward offered by property compared to other asset classes is a factor worth considering. We have compared the performance of commercial property to that of stocks and bonds by analysing total return indices for each of the asset classes, i.e. including reinvested dividends for the respective asset classes. For a gross index of the Danish stock market, we use total return data compiled by MSCI, and for government bonds Nordea s 7-year benchmark return. For the total return on commercial property, we use the Sadolin & Albæk property index in which total return is comprised of average net initial yields and capital growth. Since 1990, the total return on stocks has on average outperformed commercial property and bonds by approximately 580 bps and 650 bps, respectively. Accordingly, in this period commercial property has produced a total return outperforming Nordea s 7-year benchmark by some 70 bps. For the fourth year running, the stock market prospered in 2015, translating into rallying prices. In the early stages of the recovery in Danish economy, stocks were coveted mainly because of low alternative rates of return in the bond markets, but in the last couple of years stock prices have been driven also by the global economic recovery and highly expansionary monetary policy measures. Inflation remains very low, and although evident, the recovery is considered somewhat fragile. In the second half of 2015, uncertainty and fears of a slow-down prevailed, causing a sharp increase in stock market volatility and effectively curbing prices in this market. The sentiment turned even more gloomy in early 2016, with the systemic repercussions of sustained low oil prices and a slowdown in Chinese economy looming ahead. Because of recent years historically low interest rates, bond yields are producing relatively poor income returns. In addition, a further decline in interest rates is deemed highly improbable, dampening the prospects of capital growth in the bond market. With total bond returns standing at a mere 0.14% in 2015, bonds were therefore greatly outperformed by Danish stocks and Copenhagen commercial property. The average return yielded on stocks exceeds the average returns on property and bonds, but at the expense of significantly higher return volatility. When calculating risk, measured as the standard deviation on each time series, the total return on stocks proves to carry more than three times the risk of commercial property in an analysis of times series dating back to Conversely, the total return on bonds carries about the same risk as commercial property investments in the same time period. Computing the Sharpe s ratio, a measure of risk-adjusted returns, for the three time series indicates that commercial property has significantly outperformed both stocks and bonds over the past 25 years. An analysis of recent data on the performance of the three asset classes in shows that commercial property outperformed stocks and bonds until However, hikes in stock prices in in fact made stocks the top-performing asset class overall in that time span. Overall, commercial property has produced fair returns during recessions, when stock markets typically plummet. Conversely, the commercial property market is lagging behind the stock market in terms of pace and scale of recovery. Supported by the last four year s strong stock market, stocks reclaimed their lead in terms of total return in , albeit at the expense of significant risk in terms of market volatility. Historical analyses of the three time series indicate that commercial property adds a significant risk diversification element to stock and Sadolin & Albæk property price index (index 100 = Q3 1984) Nominal values Deflated values Total return, income return and capital growth for commercial property in the Greater Copenhagen area Total return Income return Capital growth 30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

13 Commercial investment Property price index bond portfolios. From 2000 to 2015, stocks yielded an average total return of 14.4% and carried a corresponding risk of 24.9%, measured as the standard deviation of the yearly returns. In comparison, Nordea s 7-year benchmark bond yielded a return of 6.1% at a risk of 5.1%. Commercial property yielded an average return of 9.7% and carried a risk of only 6.5%. Model and approach For both the Sadolin & Albæk property price index (capital growth) and the net initial yield calculations, we have used a hedonic multiple regression analysis based on empirical analysis of data collected from close to 4,100 property sales and property valuations in the Greater Copenhagen area, all involving Sadolin & Albæk. The model covers all types of commercial property, but fixed implicit prices are applied for the various property characteristics, mainly location, use, state and condition/quality, suitability/rationality and economies of scale, as a corrective measure to account for the differences between individual properties. In this context, the return applied is the average return, which denotes the most likely return or the return that investors may expect in a random year on the basis of historical returns. The average return should not be mistaken for the expected compound interest on investments or the geometrical average used to measure the compound return on an investment. The risk is measured by the standard deviation of the yearly returns, that is, the average deviation from the most likely return. The risk measurement applied here thus provides information on the extent to which the return fluctuates around the expected average return. The property price index is based on observations recorded throughout the whole year and therefore the return computed is an average across the year. Nørgaardsvej 3, Lyngby 13

14 Commercial investment Market trends Investment property market trends Investor appetite for property assets remains exceptionally strong, fuelled by continued low interest rates and brighter occupational market outlook International investors front investment activity in terms of volume, but domestic institutionals are increasing their allocations to property investments too Prime yields remain downtrending Transaction volume in the Danish property investment market totalled DKK 48bn in 2015, marking a peak since the onset of the financial crisis in It is fair to say that saw the end of the property crisis that followed on the heels of the financial crisis. Only a small volume of non-performing property loans and distressed property portfolios remains, which is easily absorbed given the current investment climate. In addition, the financial sector has recovered, and the procurement of property financing is not nearly the challenge it was a mere couple of years ago. Heading the field, the (multifamily) residential property sector accounted for one third of total transaction volume in The office and retail sectors saw relatively brisk transaction activity too; in fact, had more prime investment opportunities in these segments been available, they would certainly have been snapped up. However, transaction activity in the market for secondary commercial property, including industrial property, remains sluggish. Obtaining financing for such assets remains difficult, and although risk tolerance is mounting and occupational demand picking up, they appeal to few investors. Today s property investment market is dominated by institutional investors, major property companies and international investors, coveting in particular large-volume Greater Copenhagen properties and portfolios, which currently account for almost 80% of total transaction volume in Denmark. Before the financial crisis, transactions involving Copenhagen properties accounted for some 60% on average. In addition, the leveraging of acquisitions in the investment property sector has dwindled since the financial crisis. In 2006, the average debt financing of investment property acquisitions was estimated at 60% a truly high rate, bearing in mind that domestic institutionals rarely (if ever) use leverage. According to our projections, the current rate of average debt financing stands below the 40% mark. In fact, the Greater Copenhagen investment property market is seeing an unprecedented surge in equity inflows. Needless to say, a sustained low interest rate level is a key driver in the property market. Throughout 2015, short-term interest rates remained in negative territory, a scenario that could well continue for the next 12 months. In most of 2015 and at start-2016, Danish 10-year government bonds traded at yields below the 1.00% mark. Although the spread towards non-investment grade bonds has widened significantly since mid-2015, pension funds and other institutionals are forced to reallocate funds to alternative investments in pursuit of higher yields, which is boosting the demand for property investments. As a result, prime yields across all sectors dropped by some 50 bps in 2015, and although a continued downtrend in prime yields in 2016 and 2017 is believed to hinge on stronger occupational market trends in terms of higher rental prices and lower vacancy rates, we see no reason to believe that yields have been driven lower than warranted by market fundamentals. In particular the high-street retail and residential markets have witnessed strong occupational demand and higher rent levels, whereas office and industrial rents remain relatively constant. As a result, the high-street retail and multifamily residential sectors outperform the office and industrial sectors in terms of value hikes. On the back of surging property values in the high-street retail and multifamily residential sectors, some have voiced concern that the market may be heading for a new bubble, bound to burst and inflict major losses on property investors and the financial sector. Obviously, full-scale expansionary monetary policy may create investment bubbles. Nevertheless, in our opinion there is little risk of such bubbles in the Greater Copenhagen investment property market, at least in the short term. Current property values across all sectors are fully supported by fundamentals, and no investments are (yet) based on the Greater Fool Theory. In times of economic recovery with rising employment levels, higher consumer spending and growing consumer confidence, property investors normally shift from core to value-add investments. 14

15 Commercial investment Market trends This has also been the case in the Greater Copenhagen property investment market. Domestic institutional investors have moved up the risk curve, displaying a healthy appetite for residential development projects in particular, but also for other types of value-add residential investments, including old-stock residential buildings subject to rent control. For instance, institutionals like ATP and PFA are adopting a more opportunistic approach, especially in the residential sector, due to the lack of core commercial investment products. Nevertheless, most institutionals are averse to higher risk in the commercial sectors, leaving room for value-add international investors in the office and retail property investment markets. Such investors include NIAM and Standard Life. Having entered the market for residential and high-street retail property, respectively, both investors are now zooming in on the office sector. Property senior financing is available in both the domestic banking and mortgage-banking sectors and from international providers. In an international context, terms are extremely attractive with margins down to some 50 bps and rarely above 100 bps. In addition, pension funds are now engaging in property financing, in particular in terms of residential development schemes. However, mezzanine financing is still rarely seen, being offered only by special international providers. Transaction volume, Denmark 2015 (DKK bn) Transaction volume by nationality Denmark Copenhagen area 40 Danish 30 52% 48% Foreign E15 Transaction volume by investment type Transaction volume by property type 10% 3% 10% 32% 29% 58% Core Value-add Opportunis c User 32% Office Retail Industrial Residen al Other 7% 19% Note: Other includes hotel and site areas 15

16 Commercial investment Office Office property investments Prime CBD office yields have edged down to 4.25%, in some instances even lower Domestic institutionals remain active buyers for core products but face increasing competition from property companies and international investors alike Non-CBD market for value-add assets dominated by international investors of Scandinavian origin in particular On the back of higher employment rates and a brighter economic outlook, investors have become more aggressive in the investment market for CBD office properties, in which segment vacancy rates have improved, rendering it increasingly difficult for users to find up-to-date office space. Although domestic institutionals seem reluctant to accept office yields below 4.50%, this has driven down prime CBD office yields to %, a level acceptable to both domestic property companies and a vast number of international investors. Central Copenhagen transactions that underpin this yield level include the acquisition by Hovedstadens Ejendomsselskab of a property at Silkegade 8, the acquisition by Jeudan of Fiolstræde 44 and the acquisition by a private investor of Sankt Annæ Plads 24, the former Lauritzen Shipping Company head office, sold in vacant possession for DKK 210m. Also worth mentioning is that in late 2015 property company Jeudan in rather fierce competition with several international investors acquired a new office development project in the harbour district of Nordhavnen, prelet to Maersk, at the price of DKK 585m, reflecting an estimated net initial yield just shy of 4.25%. As a result, domestic institutionals have been forced to either move up the risk curve, as exemplified by Danica investing in a joint venture with BlackRock in a large-scale redevelopment scheme involving the former post office site, Posthusgrunden, at Bernstorffsgade, or shift focus to non-cbd and provincial markets. As an example of the latter, in 2015 PensionDanmark invested in excess of DKK 1.5bn in suburban and provincial office property markets, where yields remain above the 5.00% mark. Quite remarkably, the market for non-cbd office buildings let on short-term leases or marked by vacancies is currently dominated by Scandinavian investors, including Norwegian pension fund KLP, Swedish NIAM, Wihlborgs and Briggen. In 2015 and early 2016, NIAM was one of the most active players in the Copenhagen property investment market, divesting more than DKK 2bn worth of residential properties and acquiring some DKK 1.5bn worth of non-cbd office properties. Other transactions in this segment include the acquisition by KLP of an only 50% let but prime-quality office building in the Nordhavnen district, and Swedish Wihlborg s acquisition of two large secondary suburban office buildings in a sale and leaseback transaction with Danske Bank. We predict yield requirements on prime CBD office property to remain stable around the % mark. On one hand, demand is strong for office space in the city centre; on the other hand, a vast amount of space may flood the market when Nordea Bank and potentially Danske Bank relocate from their current city centre head-office premises. However, it is worth bearing in mind that office conversions for residential and perhaps hotel uses will reduce CBD office supply as from 2016 and For non-cbd office premises, let on long leases, yields may well edge down, as the institutional demand for assets producing stable cash flows will grow stronger. However, the risk aversion of domestic institutionals and banks is still believed to curb activity in the secondary office market outside the CBD. Only cash-rich property companies and funds are ready to exploit the vast opportunities in the secondary non-cbd office investment market, where investors are able to generate a substantial premium by buying value-add assets and turning them into core products. We believe that in the years ahead, the prime office investment market traditionally dominated by domestic institutionals will witness a much stronger presence of international investors. Compared to other low-risk asset classes, Copenhagen prime CBD office properties continue to offer rather generous income returns, and an expected surge in occupational demand for CBD office space, fuelled by employment growth, will strengthen cash flows in this segment. Net initial yields, office, Copenhagen 10% 9% 8% 7% 6% 5% 4% 3% Prime CBD Copenhagen Secondary CBD Copenhagen Prime non-cbd Copenhagen Secondary non-cbd Copenhagen 16

17 Commercial investment Office Ofice transaction volume by nationality, 2015 Total office transaction volume by investment type, 2015) 7% 5% 35% 65% Danish Foreign 30% 58% Core Value-add Opportunis c User Net initial yields, office, Copenhagen CBD Net initial yields, office, Copenhagen non-cbd 10% Prime Secondary 10% Prime Secondary 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% %

18 Commercial investment Retail Retail property investments Continued downward trend in prime high-street yields High-street markets dominated by international investors in terms of core and value-add investments alike Investor activity in non-cbd retail markets remains sluggish although the segment offers attractive opportunities for selective investors The Copenhagen high-street investment property market remains by far the most active and liquid property market in Denmark. Both value-add and core international investors are actively pursuing opportunities in this segment, which in 2015 drove down prime yields from around 4.00% to close to 3.75%, in certain cases even lower. In 2015, the largest transaction by far involved Central Group of Thailand, acquiring the Illum department store building for a reported DKK 2.5bn. As a subsidiary of Central Group, Rinascente was already tenant in the building on a 30-year lease, the buyer should be considered an investor with a special interest. Another major transaction involved German property investors Patrizia, acquiring the Galleri K shopping arcade from Bank of Ireland at a price of approximately DKK 1.3bn plus some DKK 200m for the upper-floor office component, acquired in a separate deal from domestic pension fund MP Pension. The net initial yield was estimated at below the 4.00% mark. Other transactions included acquisitions by M&G Real Estate and Cubic Property Fund, both involving core high-street assets at prices reflecting yields slightly below the 4.00% mark. It is also worth mentioning that Catella Real Estate is active in this segment on behalf of German investors. Taking into account the healthy state of the occupational high-street retail market, we believe that this segment will continue to attract substantial international investor interest. Value-add investors in particular from the UK will pursue properties with a reversionary or even redevelopment potential, whereas institutional-backed investors from Germany will continue to dominate the core segment. However, we are also seeing mounting interest for the prime core segment on the part of domestic and international UHNWIs, and for the most prestigious landmark buildings, yield requirements are bound to drop even further. Unlike the high-street market, the non-cbd retail investment market remains slow with relatively weak transaction activity. Most prime shopping centres are owned by domestic institutionals as long-term holders, and although such assets would probably attract substantial international investor interest even at yields below 4.50%, the existing owners are not interested in pursuing a sale. Secondary and local shopping centres are in much lower demand, attracting interest exclusively from more value-add investors, including Nordic Real Estate Partners (NREP) and Sinai Group, who demand yields starting at 6.50% and upward. Retail transaction volume by nationality, 2015 Retail transaction volume by investment type, % 35% Danish Foreign Core Value-add 75% 86% 18

19 Commercial investment Retail The suburban retail market, including local shopping centres, is undergoing substantial structural changes, challenged by large-scale and high-quality shopping centres and by online sales. Overall, this segment is probably the value-add segment of the Greater Copenhagen property market to offer the most significant value-add investment opportunities but also the highest element of risk. Net initial yields, retail, Copenhagen 9% 8% 7% 6% In the stand-alone supermarket and big box segments, investment transactions are relatively rare. Net initial yields on such assets typically exceed the 6.00% mark, in certain cases by a substantial margin. Irrespective of today s exceptionally low financing costs, owners of such assets are reluctant to sell at the prices currently offered in the market. 5% 4% 3% High street Retail warehouse Regional shopping centre Local shopping centre Net initial yields, high-street retail, Copenhagen Net initial yields, local shopping centres, Copenhagen 10% Prime Secondary 10% Prime Secondary 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% % Net initial yields, regional shopping centres, Copenhagen Net initial yields, big box properties, Copenhagen 10% Prime Secondary 10% Prime Secondary 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% %

20 Commercial investment Industrial/logistics Industrial/logistics property investments Low transaction activity and few active specialised buyers Sustained low interest rates may whet appetite of institutional and international investors for prime industrial/ logistics properties Yields on prime industrial property let on long leases at 6.00+%; secondary yields substantially higher Traditionally, the Greater Copenhagen industrial market has been dominated by owner-occupiers, and the investment market for this asset class continues to be thin. Major players include domestic property fund NREP and UK based property fund M7 focused on prime logistics and secondary light industrial respectively. Nevertheless, as from 2016 we believe that in particular the prime segment will attract increasing interest from institutional and (in particular) international buyers. After all, prime logistics facilities currently trade at net initial yields of 6.00% 6.50% or higher, virtually outperforming all other asset classes in terms of secure and attractive cash flows. One single high-volume transaction stood out in 2015: In May, a consortium of four Danish pension funds acquired a pan-scandinavian portfolio of prime logistics properties at the price of DKK 4.8bn. Some 20% of the portfolio was located in Greater Copenhagen. The seller was a fund operated by NREP. NREP continues to manage the portfolio on behalf of the consortium. Industrial transaction volume by nationality, 2015 Industrial transaction volume by investment type, % 22% 3% Danish Foreign Core Value-add Opportunis c 11% 64% User 76% Net initial yields, industrial long lease, Copenhagen Net initial yields, industrial short lease, Copenhagen 10% Prime Secondary 10% Prime Secondary 9% 9% 8% 8% 7% 7% 6% 6% 5% %

21 Commercial investment Industrial/logistics Other notable transactions included the acquisition by CBRE GI of a new FedEx logistics facility at Copenhagen Airport, and the acquisition by AP Pension of a data centre facility, let on a 15-year lease to COLT and located in the Copenhagen district of Sydhavnen. Similarly, we predict transaction activity to pick up gradually in the market for secondary light industrial properties. Given the vast stock of such assets in the Copenhagen market in combination with weak investor appetite, this segment is definitely ripe for new and more specialised market players. M7 has paved the way, showing that an active hands-on investor with high-quality asset management capabilities and the required financial strength to invest in upgrading such assets may indeed improve the performance of secondary light industrial facilities, typically undermanaged by either minor individual owners or pension funds. Net initial yields, industrial/warehouse, Copenhagen 14% 13% 12% 11% 10% 9% 8% 7% 6% Prime Copenhagen long lease Prime Copenhagen short lease Secondary Copenhagen long lease Secondary Copenhagen short lease Kirstinehøj 23A, Kastrup 21

22 Commercial investment Key transactions Key investment transactions Office Property District Seller Buyer Sqm Price* Yield** Portfolio, 3 properties*** Ballerup etc. Kombit PensionDanmark % Girostrøget and Ejby Industrivej Taastrup etc. Danske Bank Wihlborgs % Gl. Kalkbrænderi Vej 51A Copenhagen Ø Newco 1 af 29. december 2011 NIAM na Amerika Plads 29 Copenhagen Ø A.P. Møller - Maersk Jeudan % Porcelænshaven Frederiksberg DSEB NIAM na Lersø Park Allé Copenhagen Ø Danske Bank PensionDanmark % Havneholmen 17 CBD Skanska PFA Ejendomme % Njalsgade Copenhagen S Tækker Europa/ ELF Development na Fontaine Partners Sundkrogsgade 7-9 CBD Lærernes Pension KLP Ejendom % Portfolio, 3 properties*** Greater Cph Aberdeen Briggen na Søndre Fasanvej 9 Frederiksberg Limited partnership Aberdeen na Holmens Kanal 9 (Hafnia building) CBD SEB Pension Bygningsstyrelsen na Sundkrogskaj 20 Copenhagen Ø Dansk Industri NIAM na Sankt Annæ Plads CBD Lauritzen Fonden Euro Economics % Fiolstræde 44 CBD DSEB Jeudan % Dampfærgevej Copenhagen Ø Danske Regioner Jeudan na Nyropsgade 38 CBD Dansk Metal Arp-Hansen Group na Sjællandsbroen 2-6 Copenhagen SV Sydporten Dansk Metal na Maskinvej 3 Gladsaxe Skanska PFA Ejendomme % Tagensvej Copenhagen N MP Pension AP Pension na Østergade 32/Antonigade 4 CBD Unipension Patrizia % Kajakvej 2 Kastrup Skanska Doric (German prop.co) na Silkegade 8 CBD DNP Ejendomme Hovedstadens Ejendomsselskab % 8Tallet Copenhagen S 8Tallet P/S M. Goldschmidt % Nørregade 49/Nørre Voldgade 56 CBD Ældre Sagen Jeudan % La Cours Vej 7 Frederiksberg Arbejdsløshedskassen Ase Jobfas Ejendomme na Finsensvej 86 Frederiksberg CPM Invest CapMan % Øster Allé Copenhagen Ø BRF Parken Sport & Entertainment na Kongevejen 495B Holte Prop.co. Norden NIAM % H.C. Andersens Boulevard 27 CBD Dansk Design Center ATP Ejendomme na Niels Brocks Gade 1 CBD DEVSEA Fastighets AB Balder na Martinsvej 9 Frederiksberg Kontiki Ejendomme Kirkbi Invest na Dag Hammerskjölds Allé 13 Copenhagen Ø Property company Industriens Pension % Upsalagade 20 Copenhagen Ø Serviceforbundet (user) K/S GG 9 (developer) na Lille Kirkestræde 3/Højbro Plads 13 CBD AP Pension Hovedstadens Ejendomsselskab % 22

23 Commercial investment Key transactions Retail Property District Seller Buyer Sqm Price* Yield** Østergade 52 & 60 (ILLUM) CBD BlackRock Central Group of Thailand na Galleri K CBD Bank of Ireland Patrizia na Nørgaardsvej 3 Lyngby Johannes Fog Pension Danmark % Vimmelskaftet CBD GEC Gads Fond M&G Real Estate % Amagertorv 2 CBD Cubic Properties Private investor % Vimmelskaftet et al. CBD PKA Standard Life na Østergade 40/Vimmelskaftet 36 CBD Limited partnership Cubic % Vermlandsgade 51 Copenhagen S Limited partnership Catella Real Estate % Ny Østergade 14-20, units nos. 1-4 CBD Private investors Catella Real Estate % Købmagergade CBD Limited partnership CapMan % Købmagergade 55 CBD Kirkbi Hovedstadens Ejendomsselskab % Gladsaxe Møllevej 14 Søborg Auto Property CPH Andersen Ejendomme na Farum Bytorv 2 Farum Coop Danmark DADES na Frederiksberggade 17 CBD Private investor Aberdeen % Industrial / logistics Property District Seller Buyer Sqm Price* Yield** Portfolio, 4 properties*** Greater Copenhagen NREP Lægernes Pensionskasse, % DIP, JØP & PFA Raffinaderivej 10 Copenhagen S IC Group Øens Invest na Sleipnersvej 2 Køge HD Ejendomme Ares Management % Kystvejen Kastrup MG Real Estate CBRE Global Investors % Borgmester Christiansens Gade 55 Copenhagen SV Limited partnership AP Pension % Greve Main 15 Greve Sanistål Lind og Risør Holding na Kirstinehøj 62 Kastrup Auto Property CPH Property company na Park Allé 381 Vallensbæk British American Tobacco NREP % Hammerholmen Hvidovre HBI Denmark Propco DaRE (M7 & Oaktree) % Meterbuen 6-12 Skovlunde HBI Denmark Propco DaRE (M7 & Oaktree) % Meterbuen 9-13 Skovlunde HBI Denmark Propco DaRE (M7 & Oaktree) % *) Prices quoted in DKK million (rounded figures) **) Yield in this context denotes estimated direct yield (approximate figure) ***) Portfolio sale 23

24 Residential Property market Residential property market Supply and demand imbalances are becoming more pronounced Stronger preference for flexible housing Residential newbuilding continues to struggle to keep up with demand Introduction On a national level, Danes have a traditional preference for owning their own home, with every other citizen occupying ownership housing. In Copenhagen, however, only one in five citizens own their own home today. This ratio would likely be higher was it not for the fact that the residential building stock in the City of Copenhagen and the City of Frederiksberg (collectively known as Copenhagen) is predominantly multifamily residentials not divided into commonhold units, with a large proportion not even qualifying for commonhold conversion. Even without the regulatory constraints on commonhold conversions, however, Copenhagen ownership ratios will tend to fall significantly below the national average as the capital attracts a number of students, first-time job hunters and senior citizens, all of whom typically prefer flexible housing. In addition, recent years urbanisation has caused a shift in migration patterns, seeing an increasing number of young families with children settling in central city districts as opposed to the suburbs where most of them grew up. Rental accommodation became especially attractive during the economic crisis when risk aversion prevailed, exacerbated by the stricter loan requirements of mortgage banks. This negative pattern was definitively broken in 2014, when low interest rates and growing confidence in an upcoming economic recovery made numerous households shift back to ownership housing, having been biding their time in rental housing during the credit crunch. This trend continued to prevail in 2015, when the market for ownership housing improved even further by all metrics. Although the market for ownership housing has become stronger, newcomers to Copenhagen are still largely targeting rental accommodation. As a result, rental prices have come under severe pressure. Residential building stock The Copenhagen residential market is characterised by a high concentration of multifamily houses and blocks of flats, accounting for as much as 90% of the residential building stock in Copenhagen, including Frederiksberg. This ties in with the fact that the vast majority of Copenhagen dwellings, equivalent to 87%, are rented. The vast majority of Copenhagen dwellings belong to the so-called old building stock, constructed before 1991 and governed by sections 5 to 14 of the Danish Residential Rent Regulation Act (boligreguleringsloven), which contains strict provisions on the fixing of rent levels. As illustrated in the figure below, all of 91% of Copenhagen residentials predate 1990, and 81% predate Properties built before 1 July 1966 are in principle disqualified from conversion into com- Ownership housing ratios Housing stock in Copenhagen and Frederiksberg, % 50% 51% 10% 40% 30% 20% 10% 19% Single-family and terraced houses Flats 0% All Denmark Source: Statistics Denmark Copenhagen and Frederiksberg 90% Source: Statistics Denmark 24

25 Residential Property market monhold units according to the Danish Act on Commonhold Units (ejerlejlighedsloven). However, this provision does not apply to residential properties that were in fact converted before The majority of Copenhagen dwellings, corresponding to some 71% of the Copenhagen residential stock (in terms of no. of units), are relatively small-sized units in the sqm range. Nevertheless, the current supply of units in this particular size bracket is greatly outstripped by demand. Market rents in this size bracket typically range between DKK 7,000 and DKK 15,000 per month, depending on location, unit size, quality, etc. Once rental prices exceed the DKK 15,000 per month mark, it seems to narrow the field of prospective tenants quite considerably, although this cap seems to have increased significantly in the last five years. In the past, the cap was DKK 10,000 11,000 per month. Although the market for larger units also enjoys full occupancy rates and continues to attract mounting demand, the supply and demand imbalances in this size bracket are less pronounced. In relative terms, in particular units of sqm attract strong demand, driven by an increasing number of affluent young professionals who tend to stay in Copenhagen even when they start a family. In new urban development districts, residential newbuilding schemes are increasingly catering to this stronger demand from young families with children, with units of larger average sizes and a lower sqm-to-room ratio that also large households can afford. Outlook for supply and demand Copenhagen s demographic composition will determine the city s future residential demand patterns. Accordingly, movements in specific age groups may determine future demand for housing in terms of type, size, location, affordability, etc. Overall, Copenhagen is set to experience a boom in the number of residents for years to come. According to Statistics Denmark, by 2040 this boom is predicted to correspond to an increase by 54,200 residents aged 0 to 17; 16,200 aged 18 to 29; 61,300 aged 30 to 49; 29,700 aged 50 to 65; and 45,300 aged 66+. With current population forecasts for Copenhagen implying an overall influx of 205,000 new residents by 2040, however, the increase in residential demand is predicted to pose a structural challenge, in particular in the next ten years when influx is peaking. In order to meet the surge in demand, the level and scale of residential newbuilding must increase considerably in the years ahead to accommodate all these new residents. Units in multi-dwelling houses by size < 50 sqm sqm Source: Statistics Denmark sqm sqm sqm sqm 175 < sqm Construction year, Copenhagen flats, 2015 Population forecast by age groups ( ) 10% 3% 6% Copenhagen and Frederiksberg All Denmark Before Source: Statistics Denmark 81% Source: Statistics Denmark 25

26 Residential Property market It is interesting to note that the forecast for the number of residents aged predicts a steep increase in the short term followed by a decline in As a result, medium and longer term demand for relatively small residential units will at best stabilise or potentially even taper off. The strong focus on the absolute rent level per month is therefore likely to abate over time as value-for-money becomes more important. Furthermore, it is interesting to note that the population growth forecast for the next ten years is driven largely by an increase in the ranks of people aged 30 65, who boast the by far strongest purchasing power. In 2015, newbuilding activity continued to pick up and many new development projects were initiated in the residential segment. Nevertheless, the added supply far from matches the rate of increase in demand, and construction activity is still somewhat below pre-crisis level. Although some 280,000 sqm space was completed in 2014, the highest level observed since , the volume still falls short of the some 365,000 sqm residential completions annually before the crisis. Copenhagen is predicted to welcome some 14,000 new residents in 2016 alone. Based on actual data for per capita area requirements in 2014, this population boost would require the new construction of more than 640,000 sqm residential space. Due to the current undersupply of new space, however, per capita area requirements have in fact diminished. This trend is expected to prevail in the coming years. According to our estimates, 250,000 sqm new residential space was completed in 2015, thus matching the 2014 volume and indicating today s high capacity utilisation in the construction sector. In addition, numerous large public-sector newbuilding schemes are in the pipeline. As a result, we doubt that it is feasible to expect residential completions of more than 300, ,000 sqm annually in the current market, unless a substantial number of construction workers are recruited from abroad. Accordingly, our projections for 2016 and 2017 are capped at this level although the required capital is available; indeed, we believe that only 50% 75% of capital earmarked for residential newbuilding will actually fund such schemes. The City of Copenhagen has taken a highly proactive approach to framework provisions for residential development in new urban areas in order to support supply and avoid price bubbles. The urban development company CPH City & Port Development (By & Havn) owns most development sites in Copenhagen. In , the company divested a great many residential building sites, and newbuilding schemes are now at advanced stages in all major development areas. Owned by the City of Copenhagen (95%) and the Danish State (5%), CPH City & Port Development is no ordinary commercial investor, but has public responsibilities in connection with the areas in question. These include efforts to safeguard sustainable long-term development to secure values in the short term and to align the master plan and the long-term vision adopted by the City of Copenhagen. Among other things, this has manifested itself in sticky asking prices, in turn translating into a very moderate number of building rights sales during weak investment cycles ( ), great emphasis on buyers ability to complete development projects and making sure that commercial building rights are not on a large scale converted for residential use for the purpose of short-term profit-taking. Demand prognosis, sqm ( 000) New construction, Copenhagen 2006 E2017 (sqm) Accumulated increase in demand (l. axis) Increase in demand (r. axis) Sources: Statistics Denmark and Sadolin & Albæk Comple ons Under construc on Sources: Statistics Denmark and Sadolin & Albæk Construc on starts E15 E16 E17 26

27 Residential Property market A continued sluggish office occupational market and a thriving residential market triggered several office-to-residential conversion schemes in This conversion trend is predicted to continue in 2016, although at a more moderate pace as the office market is gradually improving. Having been somewhat averse to a lenient approach in the past, fearing conversion schemes could jeopardise the framework conditions of businesses, the City of Copenhagen has in recent years realised that in terms of flexibility, space utilisation, energy efficiency, etc., the old CBD office stock is largely unfit to meet the requirements of future office users. In conclusion, it makes perfect sense to support conversion schemes in light of the accumulating undersupply of dwellings. Price and rental value developments Recent years hikes in ownership and rental housing prices continued in Although further increases are forecast for 2016, the pace is expected to slow. The last 12 months have seen an exacerbation in the supply and demand imbalances prevailing in recent years, and there are no imminent signs of improvement in This has driven up rental prices as home-hunters have become increasingly desperate. However, affordability constraints are becoming an issue, forcing many to seek alternative accommodation in the suburbs. Effectively, this curbs the projected net influx into Copenhagen. Rental price growth greatly exceeded expectations in 2015 While the rental market has prospered in recent years and vacancies are virtually non-existent, rental prices had already some 12 months ago reached a level rendering rental housing less affordable than ownership housing in terms of housing-cost burden as historically low interest rates favoured the ownership market. Supported by mounting confidence in the economic recovery, we predicted that an increasing number of residents would opt for ownership housing rather than rental accommodation in 2015, taking advantage of low mortgage rates. However, several factors caused uncertainty in 2015, dampening the appetite for investing in ownership housing even if the ownership market continued to be strong. As a result, the rental market in general thrived, with high single-digit rental growth across the board and some locations observing rental hikes of 10% 15%. In fact, supply and demand imbalances have been so severe that rental growth could be argued to be even stronger than recorded. However, we have based market rent projections on market-conforming annual churn rates of 20% 35%. Higher rents may well be temporarily achievable if tenants desperately require immediate accommodation, but they are typically associated with higher churn rates as tenants relocate once more affordable accommodation becomes available. Desperation and affordability concerns have manifested themselves in a narrower gap between prime and average rents, which is considered unsustainable longer term. Prime-to-average deviations stand at 20% for rental accommodation, while the prime-to-average deviation in the market for ownership housing is some 50%. We believe that the outlook for the residential rental market continues to be bright as the stronger preference for flexible housing seems to be here to stay. In addition, due to affordability constraints, rental growth is predicted to taper off in the next 12 months to a level reflecting 2% 3% real growth p.a., factoring in inflation. Prime residential rent levels, Copenhagen (DKK per sqm p.a.) Rent levels and net initial yields in Copenhagen districts Note: Prime residential locations in Copenhagen (e.g. Havneholmen and Langelinie). Flat sizes sqm. Ground floor and penthouse units discounted. District Rent level Reversionary yield DKK/sqm/annum Exp. % Exp. 1. Copenhagen K Copenhagen V Frederiksberg C Frederiksberg Copenhagen Ø Copenhagen N Copenhagen S Copenhagen NV Copenhagen SV Valby Vanløse Note: Flat sizes sqm. Ground floor and penthouse units discounted. 27

28 Residential Property market The market for ownership housing has entered a strong and stable phase With Copenhagen ownership housing prices driving the Danish residential market, it is evident after five consecutive years of price hikes that the recovery process is over; the ownership housing market has now entered a strong and stable phase. Resale periods are becoming shorter, sales have bounced back to pre-crisis levels and prices are climbing at a steady pace. Thanks to a massive influx of new residents and unprecedented interest rate lows in 2015, Copenhagen has all framework conditions in place for further price hikes, although some regulatory measures have been introduced to reduce the risk of a housing bubble. And indeed, after hitting a low in Q1 2009, prices in Copenhagen and Frederiksberg have surged, equivalent to increases of 57% and 70%, respectively. In Q3 2015, the square metre price averaged DKK 31,747 in the City of Copenhagen and DKK 37,196 in the City of Frederiksberg, surpassing the previous highs in From Q to Q4 2015, average square metre prices in the City of Copenhagen and the City of Frederiksberg increased by 13.5% and 13.9%, respectively. However, while housing demand has seen a sharp increase, housing supply has seen only moderate growth according to newbuilding statistics. As a result, resale periods improved even further in 2015, averaging some 65 days relative to about 80 days in 2014 and 170 days in 2008, when market liquidity bottomed out. At the same time, the number of traded commonhold units (owner-occupied flats) continues to increase, signifying substantial market depth. In 2014, a total of 5,979 flats sold in Copenhagen, up some 30% on 2013, when the corresponding figure was 4,589. According to data for Q1 Q3 2015, the number has increased by a further 24% on Q1 Q Although prompting an increase in the number of flats offered for sale, the price hikes are expected to have a moderate supply effect, considering the large number of flats offered for sale as off-plan or forward sales (projektsalg). In Q3 2015, the number was 2,546 relative to 2,285 in Q It is interesting to note that prices climbed mainly in the first half of 2015, while the second half of the year saw a slow-down in price growth. Because of fierce price hikes and historically low interest rate levels in the first six months of the year, media focus on the potential risk of an imminent housing bubble intensified. In response, the Danish FSA introduced stricter loan requirements, for instance demanding that homebuyers put up a down-payment of minimum 5% and document the availability of disposable funds to sustain interest rate hikes and service the mortgage to full amortisation. These measures are believed to have somewhat eased the upward pressure on ownership prices as they hit forward sales in particular, because these are associated with the highest risk in terms of fluctuating market conditions and interest rate levels. The prices quoted below are average realised selling prices based on the prices of all owner-occupied flats, i.e. a mix of new and old flats in a specific district. Refurbished flats as well as new flats tend to trade at higher prices, depending on location. It should be noted that new residential unit sales Movements in the prices of flats and resale periods (days on market) Number of sold flats vs. flats offered for sale, Copenhagen Copenhagen (l. axis) Frederiksberg (l. axis) Copenhagen (r. axis) Frederiksberg (r. axis) Source: Association of Danish Mortgage Banks Sold flats Q1-Q3 15 Source: Association of Danish Mortgage Banks Supply 28

29 Residential Property market account for a larger share of today s transaction activity than previously seen, meaning that the average quality of the stock traded in 2009 differs significantly from the quality of the stock traded in As a result, the surge in prices not only reflects improving market fundamentals, but also a change in quality of stock over time. Development areas A number of large Copenhagen districts have been designated for redevelopment or urban renewal schemes in recent years, namely Ørestad, Sydhavnen, Valby, including the former site of the Carlsberg breweries, Nordhavnen, Amager Strandpark, Margretheholm, Islands Brygge Syd and Tuborg Syd. Ørestad Ørestad is a new Copenhagen mixed-use commercial and residential district situated on the island of Amager in the heart of the Øresund region, a mere 3 or 4 km from the Copenhagen city centre. The district has six Metro stations, among them Ørestad station, which also provides regional train links to a wide catchment area, including Malmoe in Sweden. Today, Ørestad has some 8,000 residents and in excess of 10,000 workplaces. Once fully developed, the district is projected to house 20,000 residents and more than 80,000 workplaces or student places. Ørestad is divided into four distinctive sub-districts, Ørestad Nord, Amager Fælled Kvarteret, Ørestad City and Ørestad Syd, which are developed at individual paces. For instance, the districts of Ørestad Nord and Ørestad City are all but fully developed, while construction activity in Ørestad Syd accelerated in Average realised prices, Copenhagen flats (DKK/sqm) District DKK/sqm Change Q Q % 1. Copenhagen K % 2. Copenhagen V % 3. Frederiksberg C % 4. Frederiksberg % 5. Copenhagen Ø % 6. Copenhagen N % 7. Copenhagen S % 8. Copenhagen NV % 9. Copenhagen SV % 10. Valby % 11. Vanløse % City of Copenhagen % City of Frederiksberg % Source: Association of Danish Mortgage Banks Activity in Ørestad is currently exceptionally brisk; in excess of 75,000 sqm building rights have been snapped up by investors over the past 12 months. As investors have now acquired more than half of the projected 3.1 million sqm building rights, the district is assumed to be fully developed within the next 15 years, with virtually all residential newbuilding schemes expected to be completed in the span of the next ten years. Sydhavnen Sydhavnen (the south harbour) is a harbour district about 2 km south of the Copenhagen city centre, bordering on new office buildings, hotels, etc. Furthermore, it is in close proximity of the Fisketorvet Copenhagen Mall shopping centre on the Kalvebod Brygge waterfront. Today, Sydhavnen has more than 5,000 residents, but is evolving into a highly sought-after place to live, popular among young families in particular, thanks also to a brand new stateof-the-art three-form elementary school. By 2025, the number of residents is predicted to exceed 15,000 at which point the area will also benefit from a Metro link to the city centre. Once fully developed, the area will accommodate some 22,500 workplaces. Because of multiple new residential development schemes, Sydhavnen has become an attractive and diverse housing district, with almost all building sites benefitting from a waterfront location. In addition to the new Metro station, a new combined road and footbridge will improve access to the district; the fixed link across Frederiksholmsløbet is scheduled to open in 2018, effectively connecting Sluseholmen to the south with Kalvebod Brygge to the north. Valby Valby is a central city district situated about 3 km west of the Copenhagen city centre. To the east, the district borders on the densely populated district of Vesterbro and to the north on the affluent district of Frederiksberg. Following large-scale urban renewal schemes for the past ten years or so, Valby has evolved into a popular city district commanding ownership and rental prices on a par with the levels recorded in some of the most attractive districts of Copenhagen. In the years ahead, in particular two large development sites shape the further redevelopment of Valby. One site is the former site of F.L. Smidth, where the redevelopment of the Valby Have allotment society continues, the first stages of conversion for residential use completed in Fully developed, the F.L. Smidth site will comprise some 1,000 dwellings and 35,000 sqm commercial space. Development activity is proceeding at a rapid pace, with more than 29

30 Residential Property market 200 dwellings being completed in the last couple of years and some 400 dwellings scheduled for completion in The second site is the 16-hectare former site of Grønttorvet, designated for some 2,500 new dwellings. With Grønttorvet relocating from the site to Høje-Taastrup in 2015, the first redevelopment activities are expected to start in 2016 and finish within the next ten years or so. In addition, old industrial facilities and sites in the southern part of Valby, Valby Syd, have been converted to accommodate trendy shops and businesses typically operating in the service sector, including several government agencies, or creative industries. The diversity of this part of Valby has been further enhanced by several residential development schemes. But most importantly, Ny Ellebjerg station is set to become one of the busiest stations in Denmark, serving as the future hub for the extension of the Ringstedbanen rail link and the new Metro line, City Ring. Furthermore, the district enjoys easy access to the regional road grid. As construction gains momentum in the large development areas of Valby, the district is expected to provide affordable housing to meet the growing demand from middle-income young families and couples. The Carlsberg site, Valby The redevelopment of the disused Carlsberg brewery site creates an entire new city district featuring a mix of housing, businesses, shops and a vibrant cultural life ranking on a par with Frederiksberg and Vesterbro. With planning provisions allowing for high-density building, the district is designed to offer an intimate setting of streets, squares and open spaces. The Carlsberg district is located in close proximity to green spaces and will benefit from easy access to public transport with two new Metro stations scheduled to open in neighbouring districts in 2019 and the relocation of Enghave station to a more ideal location in the south-eastern part of the district. Redevelopment activities started in August 2013 with the construction of a new university college for UCC. Several residential projects followed and units in three projects are currently offered for sale in the ownership market as off-plan sales. Scheduled for completion in 2016, the UCC property comprises some 80,000 sqm, making it the largest building in the new city district. Overall, the local plan adopted for this 25-hectare area allows for the construction of some 600,000 sqm floorspace in total, distributed on some 3,000 residential units, 22,000 sqm retail space and 270,000 sqm office space. The staged redevelopment schemes are expected to be completed in 15 to 20 years. Nordhavnen The Nordhavnen district comprises the Østre Gasværk site, Søndre Frihavn, Marmormolen and Nordhavnen (the north harbour) itself, which enjoys an attractive waterfront location just north of the Copenhagen city centre with easy access to Nordhavn station. Today, the former harbour areas of Søndre Frihavn have evolved into an attractive maritime city district offering residential and office space. Next follows the redevelopment of Nordhavnen and Marmormolen, where the UN has centralised its Danish head-office activities. The plan is for Nordhavnen to become a densely built and sustainable city district where construction on small islands off the waterfront will serve to maintain a maritime ambience. Furthermore, the road of Nordhavnsvej is to provide swift access to the regional road grid. The entire Nordhavnen district harbours building rights equivalent to some 4 million sqm, which on completion may accommodate about 45,000 residents and 50,000 workplaces. Most recent developments in the district have involved the area dubbed Århusgadekvarteret, which is to house some 3,000 residents and 7,000 workplaces. With all residential building sites sold to investors, the residential part will be fully developed within the next three or four years. The sale of residential building rights has now entered into the next development phase, involving Kronløbsøen and Sundmolen. Almost all active developers as well as institutional investors are taking part in the redevelopment of the area. Amager Strandpark In recent years, the eastern part of the island of Amager has undergone a remarkable transition from a predominantly industrial location to an attractive new residential district. As a result, this part of Amager today appeals even to those who in the past would never even consider becoming residents. The master plan for the area provides for a mix of terraced and multifamily houses in three to seven storeys as well as multiple high-rise buildings standing 12 to 21 storeys tall. Altogether, the vision is to construct some 135,000 sqm space in the first development phase, equivalent to an overall plot ratio of 125. With planning consent well underway to transform additional former industrial sites, new vibrant urban neighbourhoods will emerge in the eastern part of Amager. The first phase of the redevelopment scheme has progressed as planned, with more than half of the area completed or under construction. Active developers and investors in the area include Arkitektgruppen, Danica Pension, Lærernes Pensionskasse, KPC and ELF Development. 30

31 Residential Tuborg Syd Nordhavnen Carlsberg Margretheholm Valby Amager Strandpark Sydhavnen Islands Brygge Syd Ørestad 31

32 Residential Property market Margretheholm Margretheholm is a 125,000 sqm site situated between the northernmost tip of Amager, i.e. Refshaleøen, and the north-western part of Amager. The location has historically been considered somewhat isolated from the city centre due to its weak accessibility, but with the completion of the bridge connecting Christianshavn to the city centre, accessibility will improve significantly. Once fully developed, the area will comprise 77,400 sqm floorspace, 90% of space designated for residential use. The residual 10% space is earmarked for businesses operating in service-related industries. Islands Brygge Syd Well-positioned in continuation of the fully developed area of Islands Brygge, Islands Brygge Syd will comprise 190,000 sqm floorspace when fully developed, with 26,000 52,000 sqm designated for commercial use. The area is to include 1,600 1,800 residential units in multifamily and terraced houses. Targeting similar types of residents as Nordhavnen and Amager Strandpark, Islands Brygge Syd is considered a high-end residential area that appeals to young professionals as well as older couples that increasingly tend to move back to the city when the children leave home. Tuborg Syd In 2015, Danica Pension acquired the only remaining building site to be developed in the attractive neighbourhood of Tuborg Havn, located in Hellerup just north of Copenhagen. Comprising some 106,000 sqm, the site may be developed to hold 53,000 sqm residential space, distributed on units. Once developed, the area is expected to fetch some of the highest residential prices in Denmark, in fierce competition with Nordhavnen only 2 km from the site. Danica Pension plans to complete developments in the area by Kenny Drews Vej 1-27 etc., Copenhagen SV 32

33 Residential Investment Residential investment property market Major price hikes driven by increasing rents, lower investment yields and higher commonhold unit prices Both existing buildings and development projects and sites are in strong demand International investors dominate the market for new residentials let at market rent, whereas domestic institutionals focus mainly on development opportunities and old-stock residentials subject to rent control In the last couple of years, the Greater Copenhagen investment market for multifamily residential property seems to have required very little effort on the part of investors in pursuit of easy profits. The combination of strong demographics and low newbuilding activity has created a perfect setting in investment terms, with increasing rent levels and virtually no vacancies. In fact, with income returns on stabilised assets, let at market rent, around the 4.00% mark, for suburban locations even higher, and mortgage financing LTVs of up 75% 80% at very low interest rates, it was difficult to see that anything could go wrong. Hardly surprising, domestic and international investors in particular flocked to this segment as a result. In 2015 and early 2016, major transactions included acquisitions by Coller Capital (portfolio investment volume in excess of DKK 2bn, acquired from Norwegian DnB Bank), Heimstaden (portfolio of DKK 1.4bn, acquired from NIAM), Bouwfonds (multiple transactions, total investment volume DKK 1bn) and by domestic investor Core Property, for its property fund backed by domestic institutionals, funds and HNWIs buying multiple properties, including a DKK 750m portfolio from German property investors Patrizia. Furthermore, Swedish property company Balder and UK based Europa Capital Partners accounted for major residential turnkey property investments with individual investment volumes ranging between DKK 0.7bn and DKK 1.4bn or more. Most domestic institutionals with an appetite for newly built residentials prefer to either acquire turnkey projects off-plan or even enter in the development phase. Domestic pension fund Danica has acquired major development sites, including 100,000+ sqm of building rights at Sydhavnen (the Metro site) and at Tuborg Havn on the waterfront north of the city centre. It is also worth mentioning that two of the largest domestic pension funds, ATP and PFA, have expressed an interest in entering this segment although currently without any exposure to multifamily housing. Investors in residential buildings constructed after 1966 may adopt various investment strategies: They may convert a multifamily property into commonhold units (owner-occupier flats) for the purpose of operating it as a long-term residential rental property or alternatively sell off individual units in successive sales in the ownership market (privatisation). Most investors in this segment currently seem to adopt the long-term buy-and-hold (rental) strategy, taking advantage of stable income flows and locking in financing at a historically low level, thus generating a handsome return on equity. However, if commonhold unit prices continue to soar, some investors may well decide to pursue a different strategy. Needless to say, easy investment opportunities remain available only for a short while. It is worth bearing in mind that current rent levels and ownership prices are at an all-time high, and an increased supply may cause more moderate growth in rents and prices in the residential sector. In addition, it is important to note that a substantial number of new development projects now coming to the market are based on rental and selling price assumptions that may well be justified in light of recent comparables but nevertheless represent price levels that only a relatively small minority of Copenhagen households can actually afford. Recent moving patterns not surprisingly indicate that an increasing number of households are moving to the suburbs in pursuit of lower rental and ownership prices although they would in fact prefer to keep living in Copenhagen. Prime residential yields vs. government bond yields % 5% 4% 3% 2% 1% Residen al proper es 10-year Danish government bond yield +300 bps 0% Sources: Danmarks Nationalbank, NASDAQ OMX and Sadolin & Albæk 33

34 Residential Investment The old housing stock Investing in multifamily residential properties in the so-called old housing stock requires completely different skills. The properties belonging to the old housing stock do not qualify for conversion into commonhold units and they are subject to rent control. However, according to the Danish Residential Rent Regulation Act, vacant units that have been fully modernised command much higher rent levels, close to market rent (the so-called utility rent ). The pricing of old-stock multifamily residential properties is therefore based not only on current cash flows, but more so on the value-add potential associated with modernisations, as modernisation schemes at the cost of DKK 5,000 DKK 7,000 per sqm often lift the annual rental income by as much as DKK 800 DKK 1,000 per sqm. For obvious reasons, this segment attracts value-add investors with limited focus on short-term cash flows, ready to accept a relatively long holding period. Such investors may expect that virtually all cash flows in the initial years are reinvested in schemes to modernise units that become vacant, and that the anticipated holding period is subject to changes in churn rates. For some time, international value-add investors, including Resolution, Pears Global and CapMan, dominated this segment. Today, however, most transactions see domestic institutional investors on the buy-side, such institutionals typically operating with a long holding period and having lower cash flow requirements. In view of the relatively low-risk profile of such value-add investments, they should be of obvious interest to pension funds. Recent transactions in this segment include the acquisition by pension fund JØP of a 21,000 sqm old-stock residential building on the inner harbour front (the property was taken over by an association of tenants exercising their pre-emptive right to buy the property), and Danica acquired a vast prime retail and residential complex on the fringe of the CBD from UK based InfraRed at the price of DKK 630m. It is also worth mentioning that a consortium of domestic pension funds sold a portfolio of old-stock residential commonhold units to a UK based family office at a price of DKK 725m. The above-mentioned pre-emptive right granted to the tenants of old-stock multifamily properties is really putting a dampener on the investor appetite for such assets. The pre-emptive right of tenants applies to all major multifamily residential properties not divided into commonhold units, unless owned in a double holding structure. In fact, the vast majority of such properties are today taken over by tenants exercising their pre-emptive right, and an increasing number of investors are therefore becoming averse to allocating the necessary resources to the due diligence process preceding an acquisition if they fear that the property will ultimately be taken over by the tenants. 34

35 Residential Investment Key investment transactions Residential Property District Seller Buyer Sqm Price* Yield** Project Harald portfolio*** Greater Copenhagen DnB Bank Coller Capital % Project Rex portfolio*** Greater Copenhagen NIAM Heimstaden % Øresundsvej 143 et al. Copenhagen S Skanska Fastighets AB Balder na Portfolio, 4 properties*** Copenhagen Patrizia Core Property Management % Project Twins portfolio*** Greater Copenhagen Topdanmark, PensionDanmark Undisclosed na and Danica Pension Portfolio, 26 properties*** CBD Artha Kapitalforvaltning Undisclosed % Sortedam Dossering 3-9 et al. Copenhagen N InfraRed Danica Pension % Sluseholmen (Bøgholm) Copenhagen SV NIAM Bouwfonds % Havneholmen CBD Prop.co. Fredensborg Heimstaden na Teglholmen Copenhagen SV FB Gruppen PKA na Brombærparken A and B Valby West-Coast Real Estate Ares Management % Teglholmen (residential project) Copenhagen SV FB Gruppen/RHB Development Patrizia na Sluseholmen 3 (Metro site) Copenhagen METRO Properties Danica Ejendomme na Rosenfeldtvej & Vallensbæk Strand NIAM Core Property % Australiensvej 30 et al. Copenhagen Ø Private investor Thylander Gruppen % Amalieparken - Punkthusene Vallensbæk Strand NIAM Bouwfunds % Vesterbrogade & 80B CBD Private investor CapMan % Vallensbæk Stationstorv 52 Vallensbæk Strand Holberg Fenger Invest NREP na Sortedam Dossering 95A-B Copenhagen Ø Private investor Bjerke Eiendom na Spinderigade 5 et al. Valby Aberdeen DADES % Vester Voldgade 106 CBD SAS Piloternes Pensionskasse Dreyers Fond % Vesterbrogade 13 CBD Bach Gruppen TG Partners V (Thylander) % Valby Langgade 38 et al. Valby Developer Developer na Den Gule By Copenhagen SV DSB Ejendomme Private investor na Vodroffsvej 26 Frederiksberg C Dansk El-forbund Sampension na Mølle Allé et al. Valby Developer Developer na Rantzausgade 58A Copenhagen N Bach Gruppen TG Partners V (Thylander) % Bagsværd Hovedgade 151 Søborg Public sector Calum (developer) na 50 na *) Prices quoted in DKK million (rounded figures) **) Yield in this context denotes estimated direct yield (approximate figure) ***) Portfolio sale 35

36 Occupational Office Office occupational property market Office employment rising but not across all segments Occupational demand shifting to wider geographical area New tenant requirements pose a challenge to long life cycle of buildings Quality is key, not extravagance With employment in the capital region and in Denmark in general seen to rise in recent years, the financial crisis and ensuing economic downturn are definitely over. Having traced a largely upward trend for the past eight quarters, Greater Copenhagen employment has accelerated, rebounding to the level seen in late In the rest of Denmark, however, employment has been slower to pick up. In absolute figures, employment rose by some 11,000 between Q and Q However, the increase fails to reflect substantial disparities in the individual categories used by Statistics Denmark, with Construction, Arts, entertainment and recreation activities, Finance and insurance as well as Public administration, education and health seeing a decline by some 29,000 combined, and Trade and transport etc., Information and communications, Real estate activities and Business activities an increase by some 40,000 combined. In terms of office occupational demand, the rise in overall office employment is favourable. However, the decline in the number of people employed in the public administration and financial sectors is expected to feed through to the demand for office premises to some extent. According to a tendency survey, businesses operating within Communication and information as well as Consultancy, research and others are predicted to drive future demand because these sectors expect to hire new staff according to key indicators for the service industry. Conversely, businesses operating within Finance, insurance and real estate expect to effect further layoffs. In the latter group, the banking sector accounts for the majority of layoffs. In 2015, the Danish government announced its plans to set in motion a large-scale relocation of government workplaces from the capital region to provincial towns and cities. All other things being equal, these relocations will impact office occupational demand in Copenhagen, albeit in the short term presumably resulting in reduced capacity utilisation as opposed to added supply of office premises in real terms. The favourable trend in employment, in particular in traditional office-intensive service industries, has driven down office vacancy rates substantially in prime locations, and is gradually feeding through to secondary office locations. In structural terms, the rise in office employment correlates with a rise in the demand for small and medium-sized office units in the 200 2,000 sqm range as many of the expanding businesses are SMEs. Brisker activity in secondary office locations is indicative of a broader range of businesses in the market for office prem- Employment growth by sector (Q Q3 2015) Tendency survey, developments by assessment (%) Manufacturing Construc on Trade & transport Source: Statistics Denmark Informa on & comm. Financial & insurance Real estate Other business services Public administra on Arts & entertainment M M M03 Source: Statistics Denmark Communica on and informa on Finance, insurance and real estate Consultancy, research and others 2015M M M M M M M M11 36

37 Occupational Office ises. In addition, the supply of moderately priced premises in central city districts has been reduced on account of ongoing office-to-residential conversions, etc. In recent years, office occupational demand has surged in the north-western district of Copenhagen, Nordvest, and the Haraldsgade/Rådmandsgade quarter in the district of Nørrebro. This is because these areas continue to offer comparable quality leases at rent levels DKK below the rents commanded in the inner parts of the central city districts (Østerbro, Vesterbro, Nørrebro and Amagerbro) and substantially below the CBD. In recent years, the districts have attracted creative businesses such as architects and advertising agencies as well as minor consultancy firms and company startups. They are attracted not merely by the low rent level but also by the fact that many of the people working in these businesses live in the city and want their workplace to be within cycling distance from their home. In addition, businesses value the unpretentious nature of the areas. Copenhagen office vacancy rates remained high for a number of years, at start-2014 standing at 10.1% before starting on a downward trend in the four quarters that followed. The decline in vacancy rates tallied with our perception of an occupational market in recovery. Like other market players, we saw the favourable trend continue after Q However, the statistics of commercial property web portal Oline.dk painted an altogether different picture for Q2 and Q3 2015, namely that Copenhagen vacancy rates seemingly surged to 8.1% The discrepancy between the market s perception of vacancy trends and the Oline.dk statistics may be explained by the fact that Oline.dk opened up its commercial lease web portal to other players than property agents effective 1 January As a result, statistics have become more comprehensive, but at the same time it has implied a disruption of time series making it difficult to compare current and past vacancy rates. Accordingly, when reviewing the latest vacancy statistics, it is worth bearing in mind that they do not necessarily reflect actual occupational market trends. We therefore firmly maintain that the occupational market is indeed picking up, also in more secondary office locations. The increase in vacancy rates is attributable mainly to new office completions in the order of 35,000 sqm put on the market in 2015, including Copenhagen Towers in Ørestad and Pakhuset at Langelinie, in addition to a pipeline of some 65,000 sqm space under construction, for instance at Mitchellsgade and Havneholmen. In Copenhagen, only nine properties account for all of 100,000 sqm of about 370,000 sqm vacant space in total. These properties include outdated domicile buildings that are not up to today s office standards and requirements. In non-cbd locations, the increase in vacancy rates has been even more pronounced: at start-2014, vacancy rates soared to 14.1%, followed by a decline in the next three quarters. Like the CBD, these locations saw an increase in vacancy rates in Q2 and Q3 2015, peaking at 15.4% in the third quarter. Because of the large proportion of outdated properties that fail to meet today s requirements of up-to-date and flexible office premises, the business locations along Ring Road 3 took the brunt of the slow-down in office occupational demand. Poor ceiling heights, daylight inflow, break-up potential into multi-user buildings as well as highly inflexible cabling render the conversion of these properties a very costly affair. Employment index (index 100 = Q1 2008) Employment index, traditional office sectors (index 100 = Q1 2008) 106 Greater Copenhagen Copenhagen 114 Greater Copenhagen Copenhagen Public sector Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 Note: Copenhagen in this context includes the City of Copenhagen, the City of Frederiksberg, the Municipalities of Dragør and Tårnby Source: Statistics Denmark Note: Copenhagen, see definition to the left Source: Statistics Denmark 37

38 Occupational However, the Ring Road 3 corridor, including in particular Glostrup, Herlev and Gladsaxe, is set to come into play on completion of the future light rail along Ring Road 3, running through 11 municipalities on a stretch from Vallensbæk in the south to DTU (Technical University of Denmark) in Lyngby in the north and calling at 27 stations in total. We expect the light rail corridor to create four commercial development growth centres that will attract the main part of occupational demand and, by extension, investment demand. First off, these growth centres will be Glostrup Station, Ejby, Gladsaxe and Lyngby. These areas will in fact be strong enough to compete with Copenhagen, including new and more moderately priced locations at Ny Ellebjerg and Valby. We believe that the Ring Road 3 corridor is likely to appeal to both small and large businesses in pursuit of up-to-date and space-efficient premises, available at more affordable prices than premises in e.g. Ørestad and Sydhavnen. For businesses, the location near the ring road is ideal as their relatively broad-based staff commute from the entire capital region and Zealand. As a result, businesses require a location with motorway proximity and easy access to a swift public transport system. Both BOKA and NCC have succeeded in developing up-to-date office premises in Herlev, Gladsaxe and Vallensbæk. As part of their cost-optimisation measures implemented on the heels of the financial crisis, businesses zoomed in not only on costs relating to their business premises but also on the signal effects of their choice of location. In the post-crisis years, the financial sector has been most adept at relocating to less prestigious premises, signalling moderation. Before 2008, new head-office buildings would most certainly have been developed on the Copenhagen waterfront, at Nordhavnen or in Hellerup. Today, locations such as Ørestad top the list. In fact, we believe that Ørestad will remain the preferred head-office location of several major market players for several years to come. Like location, quality rather that extravagance is key in terms of building design. Sankt Annæ Plads 24-28, central Copenhagen 38

39 Occupational Office Copenhagen CBD office market The Copenhagen CBD office market may be divided into the following districts: (1) The Government District near the parliament buildings This district houses an imposing, historical building stock, exclusively used by public authorities and agencies, including a number of government departments. As a result, an actual letting market in the ordinary sense is virtually non-existent, and the risk of vacancy is limited due to the potential number of public sector tenants associated with the Danish government. The announced public-sector workplace relocations to provincial towns and cities may impact on the district s track record of stability. However, so far the effects seem limited. (2) The Pedestrian District In addition to the medieval city centre, this district also comprises the Copenhagen high-street area. Typically situated in old buildings, office premises in this district are generally smaller in size and have an inefficient space layout. Regardless of the very central location in the CBD, the premises in this district cannot be classified as prime office space. Easy access to public transport at Nørreport station somewhat compensates for the scarcity of parking facilities in this district. Activity in the district has predominantly centred on first-rate properties and locations, which has served to keep prime office rents constant at around DKK 1,350 per sqm p.a., whereas the rent commanded by more secondary properties and locations has been driven down to DKK 1,050 per sqm p.a. Recent office transactions include Momondo taking 4,800 sqm, Unity Technologies taking 4,400 sqm and Fredericia Furniture taking 1,200 sqm in the Copenhagen high street at Købmagergade Copenhagen CBD office vacancy rate 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 Source: Oline-ED Statistics 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 (3) The Banking District Located just north of the Government District at Holmens Kanal and in the Kongens Nytorv area, the Banking District has traditionally been a preferred location for many banks and other financial institutions. The district accommodates the Danish central bank as well as the head office of Danske Bank at Holmens Kanal. Given the proximity to the Metro station and multiple bus services at Kongens Nytorv, the district enjoys easy access to public transport, but parking facilities are relatively scarce. Thanks to its central location and easy accessibility, the district therefore continues to attract sound demand for small and medium-sized office units. Prime market rents still stand at DKK 1,500 per sqm p.a. in the district and secondary market rents also remained constant at DKK 1,050 per sqm in In 2015, The Danish Building & Property Agency acquired the former 10,000 sqm SEB head-office building for owner-occupation. Recent lease transactions include 2ndC taking 600 sqm at Kongens Nytorv 8 and Nordisk Copyright Bureau taking 500 sqm at Niels Juels Gade (4) Frederiksstaden Frederiksstaden around the Queen s residence, Amalienborg Palace, is considered a significant and most prestigious CBD office area. Traditionally, this district has been preferred by law firms, professional and business service consultancies, financial institutions as well as shipping companies, including the A.P. Moller Maersk Group, which is headquartered in Frederiksstaden. The office stock generally consists of period mansion buildings or palace style buildings, often renovated to high standards. Regional train, S-train and bus services at Østerport station, along with the coming Metro station at Marmorkirken, will further improve access to the district. The availability of parking facilities is fairly good and will improve substantially on completion of new underground parking facilities with 500 slots at Kvæsthusmolen. Completion is scheduled for early Strong demand has driven up prime rents in the district to DKK 1,600 per sqm p.a. and secondary rents to DKK 1,150 per sqm. The increase in demand and rent levels is attributable to the high-quality characteristics of the district in terms of location, building stock and public transport accessibility level. Recent transactions include Siteimprove taking a 6,375 sqm lease at Sankt Annæ Plads 24-28, Umwelt taking a 900 sqm lease at Store Kongensgade 66 and LMS (the Danish national association against eating disorders and self-injury) taking 800 sqm at Dronningens Tværgade At Trekronergården, 39

40 Occupational Office Turner Broadcasting System Denmark has taken 725 sqm and the Brazilian Embassy 700 sqm. (5) The Rosenborg District Located close to the pedestrian streets, this district enjoys easy access due to its proximity to both Nørreport station and the Kongens Nytorv Metro station. Another advantage of this district is the availability of larger lot sizes of relatively modern quality office space with underground parking facilities at Pilestræde and Vognmagergade. Companies seeking relatively large-scale lease premises in a central location prefer the district, including the media, government and quasi-government organisations and embassies. Supported by its large supply of relatively space-efficient office buildings, the district has continued to attract strong demand. As a result, the prime office rent in the district remained stable at DKK 1,450 per sqm p.a. in 2015, and the typical secondary office rent level climbed to DKK 1,100 per sqm. Recent transaction activity in the areas has been brisk, with The Danish Heart Foundation (Hjerteforeningen) taking a 2,200 sqm lease at Vognmagergade 5, Patrizia Nordics taking 760 sqm at Adelgade 15, AB Gruppen and Chanel Denmark each taking 600 sqm at Kristen Bernikows Gade 4-6 as well as OVG Proxy taking 425 sqm at Gothersgade 12. (6) The City Hall and Central Station District Located on the outskirts of the CBD, this district was developed in the 1960s and contains a considerable number of large-scale, relatively modern buildings with underground parking facilities. The district also offers easy access to public transport. Major occupiers are law firms, organisations, including trade unions, and financial institutions. Thanks to a sustained demand from governmental and municipal organisations, vacancy rates remain moderate in this district. The district clearly distinguishes itself by offering a good mix of space-efficient office premises, easy accessibility and moderate rent levels. On the former Scala site, construction of the new head-office premises of the Gorrissen Federspiel law firm, Axel Towers, is proceeding according to plan, and together with the development of the former post office site, Posthusgrunden at Bernstorffsgade, following the sale to Danica Pension and BlackRock, this will serve to enhance the district s position as a central Copenhagen office location. Due to the demand for space-efficient leases, prime office rents edged up to DKK 1,750 per sqm p.a. in 2015, with secondary rents following suit, increasing to DKK 1,050 per sqm. Recent transactions include Falcon Social taking 2,450 sqm at H.C. Andersens Boulevard 27, Core Property Management taking 650 sqm in Axel Towers (pre-let) and Copenhagen Language Center (Københavns Sprogcenter) taking 850 sqm at Tøndergade 14. (7) The Harbour Districts Characterised by highly prestigious first-class development schemes, the Copenhagen Harbour Districts offer large-scale and up-to-date office facilities with easy access to the motorway grid and Copenhagen Airport. In addition, the districts are fairly well serviced by public transport, including S-train services. As many buildings are of a relatively recent date, they typically offer parking facilities, e.g. underground parking garages. The most attractive office locations are the Langelinie area, the inner harbour area of Christiansbro as well as Kalvebod Brygge and Havneholmen to the south. Office premises in these areas command some of the highest office rents in the country and the rents remained stable in Looking ahead, rents are predicted to remain flat because of a certain abundance of office development sites in attractive locations at Havneholmen and Nordhavnen, which helps to balance supply and demand. Recent transactions include Maersk taking a 16,000 sqm lease at Amerika Plads 29, L Oréal Danmark A/S signing a 7,150 sqm lease at Havneholmen 25 and The Danish Gambling Authority (Spillemyndigheden) taking 1,200 sqm in the same property. At Midtermolen 1, Sopra Steria has taken a 900 sqm lease, with Omnicom Media Group taking 2,990 sqm in the neighbouring property, at Midtermolen 3. Also at Midtermolen 3, Shell has taken 750 sqm and Maersk Container Industry 500 sqm. Current development schemes include the office building known as HM2 on the corner of Mitchellsgade and Kalvebod Brygge as well as the ongoing construction of the Bryghus building by Realdania, with completion scheduled for Dubbed the BLOX project, the Realdania scheme includes the new head-office of the Danish Architecture Centre (Dansk Arkitektur Center, DAC), in addition to an innovative office concept, the Hub, aimed at bringing together businesses and research institutions under one roof. 40

41 Occupational Office Key lease transactions, Copenhagen CBD, office Property District* Landlord Tenant Sqm Amerika Plads 29 7 Jeudan Maersk Havneholmen 25 7 Norrporten L Oréal Danmark Sankt Annæ Plads Euro Economics Siteimprove Købmagergade etc. 2 PFA Ejendomme Momondo Købmagergade etc. 2 PFA Ejendomme Unity Technologies Strandgade Wilders Plads Ejendomme Zebra Midtermolen 3 7 Alm. Brand Omnicom Media Group H.C. Andersens Boulevard 27 6 ATP Falcon Social Vognmagergade 5 5 Egmont Publishing Magasiner The Danish Heart Foundation Landemærket 8 5 Egmont Publishing Magasiner Vivaki Købmagergade etc. 2 PFA Ejendomme Fredericia Furniture Langebrogade 1 7 MP Pension Copenhagen Economics Nørre Voldgade PKA Nordjyske Medier A/S Havneholmen 25 7 Norrporten Spillemyndigheden Dampfærgevej 28 7 PFA Ejendomme Eboks Store Kongensgade 66 4 Private investor Umwelt 900 Midtermolen 1 7 Alm. Brand Sopra Steria 900 Tøndergade 14 6 Private investor Københavns Sprogcenter 850 Dronningens Tværgade Patrizia Nordics LMS, Landsforeningen mod Spiseforstyrrelser 800 Langebrogade 1 7 MP Pension P.A. Pedersen 790 Langebrogade 1 7 MP Pension Ecomonics 780 Adelgade 15 5 MP Pension Patrizia Nordics 760 Midtermolen 3 7 Alm. Brand Shell 750 Trekronergården 4 M. Goldschmidt Ejendomme Turner Broadcasting System Denmark 725 Trekronergården 4 M. Goldschmidt Ejendomme Brazilian Embassy 700 Langebrogade 1 7 MP Pension Villa Viniere 660 Axel Towers 6 ATP Core Property Management (pre-let) 650 Wildersgade 10B 7 C.W. Obel Ejendomme Adform ApS 620 Kongens Nytorv 8 3 ATP 2ndC 600 Langebrogade 1 7 MP Pension Boxer 605 Kristen Bernikows Gade 6 2 PFA Ejendomme Chanel Denmark 600 Kristen Bernikows Gade 4 2 PFA Ejendomme AB Gruppen 600 Frederiksborggade 15 2 ATP AFA JcDeceaux 550 Vognmagergade 5 5 Egmont Publishing Magasiner Simon-Kucher 520 *) District number refers to table on p

42 Occupational Office Typical office rent levels, Copenhagen CBD (Exclusive of operating (DKK/sqm/annum) Change Market costs and taxes) expectations (1) Government District Prime na na na na na na na Secondary na na na na na na na (2) Pedestrian District % % (3) Banking District % % (4) Frederiksstaden % % (5) Rosenborg District % % (6) City Hall and % Central Station District % (7) Harbour Districts % % Note: Rent levels quoted at the beginning of year For location of district see map overleaf Strengths profiles of individual CBD areas, based on performance scores on four selected framework criteria Government District Pedestrian District Banking District Frederiksstaden Rosenborg District City Hall & Central Sta on Harbour Districts Efficiency Public infrastructure Parking Demand Note: One point denotes below-average performance, two points denote moderate performance, three above-average performance, four top performance 42

43 Occupational 43

44 Occupational Office Copenhagen non-cbd office market (1) Østerbro/Nordhavnen Located just north of the Copenhagen city centre, this district accommodates a diversified range of office premises. With development activity gaining momentum in the Nordhavnen (north harbour) area, a new sub-district has emerged, which differs considerably from the Østerbro district in general. Unlike the quite diverse quality of the building stock in the traditional Østerbro district, Nordhavnen is a new office location offering up-to-date and space-efficient office space. Østerbro In the Østerbro district, the prime office location stretches mainly along Dag Hammerskjölds Allé and Strandboulevarden, today housing a number of embassies and non-profit organisations. The area north of Jagtvej and around Lersø Parkallé contains several large-scale offices and is considered a less prestigious office location. Office leases typically fail to meet modern tenant requirements and access to public transport is relatively inadequate. However, as far as Jagtvej is concerned the latter may be remedied longer term by the future Metro ring commissioned for Recent transactions in this location include the Danish Building & Property Agency (Bygningsstyrelsen) taking 12,800 sqm at Haraldsgade 53, Egmont taking 7,600 sqm at Strødamvej 46, the Child and Youth Administration, City of Copenhagen (Børne- og Ungdomsforvaltningen), taking 2,400 sqm at Kristianiagade 9, Patchwork Group taking 880 sqm at Visbygade 16/Dag Hammerskjölds Allé 13 and Logpoint taking 660 sqm at Jagtvej 169. Nordhavnen Today, the Nordhavnen area is home to several financial businesses and law firms, which benefit from the up-to-date, space-efficient office premises and ample parking facilities offered in this location. In the next couple of decades, Nordhavnen is believed to serve as a strong extension of the existing Copenhagen CBD, with mainly Tuborg Nord and Kalvebod Brygge becoming competing locations. First and foremost, Nordhavnen has the advantage of S-train proximity, and with the Metro station commissioned for 2019, the area will enjoy easy access to the entire Greater Copenhagen area. Recent transactions in this location include Libratone taking 1,800 sqm at Sundkaj 9, and at Portland Towers, PA Consulting Group has taken 2,100 sqm and Brockstedt Kaalund 550 sqm. Top rents as well as secondary rents remained constant in both districts in (2) Nørrebro Located to the north-west of the CBD, Nørrebro is a predominantly mixed-use residential and retail rather than distinctive office district, with office premises of quite diverse quality scattered throughout the district. Parking facilities are inadequate, just as many office premises fail to meet today s tenant requirements in terms of flexibility, etc. Nevertheless, Nørrebro is considered a popular alternative office location, appealing to office users in the media and music industries, advertising agencies and similar businesses, which are drawn to the creative synergies of the area, as well as its lower rent levels and close proximity to the Copenhagen city centre. The prevailing trend of converting CBD office space for residential use is spurring demand for office space in Copenhagen NV once the most inexpensive lease premises have been absorbed. Bordering on Østerbro, the Copenhagen Science City is a brand new Copenhagen location with focus on the health and life sciences, cleantech as well as information and communications technologies (ICT). The Science City hopes to tap the synergies created by the presence of the University of Copenhagen, the Metropolitan University College and the Copenhagen University Hospital. Given the heavy investments by the Danish government as well as regional and local authorities, the location is predicted to undergo extensive redevelopment. Top rents as well as secondary rents remained constant during Recent transactions in the district include International Child Welfare Service, ICWS (Verdens Børn) taking a 2,130 sqm lease at Emdrupvej 115A, Wissenberg A/S Consulting Engineers taking 1,650 sqm at Hejrevej 26, the Danish Refugee Council (Dansk Flygtningehjælp) taking 530 sqm at Hejrevej 26, LEAD Agency taking 525 sqm at Ravnsborg Tværgade/Sortedam Dossering 5C and developer-advice counsellors BYR Gruppen taking 513 sqm at Lygten 11. (3) Frederiksberg Situated west of the CBD and in administrative terms in fact constituting a municipality of its own, Frederiksberg is a predominantly residential district, typically offering relatively small-sized office units in multi-tenanted buildings. Frederiksberg boasts several Metro stations and close proximity to the Copenhagen city centre. Compared to the other central districts, Frederiksberg offers relatively good parking facilities. 44

45 Occupational Office Flintholm has established itself as the prime office location in the Frederiksberg district in recent years, and recent transactions in this location include Steelseries ApS taking a 600 sqm lease at Dirch Passers Allé 27. Well-located office premises with easy Metro access continue to be in demand, and both prime and secondary office rents edged up slightly in the district in (4) Hellerup Situated north of the Copenhagen CBD, Hellerup remains an attractive office district with up-to-date and efficient office premises and ample parking facilities. Accessibility to the area is fairly good in terms of private means of transport, whereas the location of the S-train station is not ideal. Furthermore, the area lacks access to the Copenhagen Metro line. Some years ago, the Tuborg Nord waterfront area in Hellerup, five kilometres north of the Copenhagen city centre, became one of the most prestigious non-cbd office locations, commanding rents almost on a par with inner harbour CBD areas. Tuborg Nord attracted a number of high-profile occupiers among law firms and providers of consulting services. However, the area is becoming outrivalled by Nordhavnen as a prestigious non-cbd office location. Compared to Nordhavnen and taking into account the inferior public infrastructure of Tuborg Nord, the rental prices as well as high property taxes commanded in Tuborg Nord seem somewhat excessive. As a result, Tuborg Nord seems to be gradually ousted as one of the most sought-after office locations, now in fierce competition for tenants and prone to structural vacancy. The fiercer competition from Nordhavnen and other Copenhagen districts has driven up vacancy rates in Hellerup and Tuborg Nord, with office vacancies of some 35,000 sqm as at end This clearly demonstrates that infrastructure and non-competitive rent levels impair the lettability of domicile and large-scale office premises. Conversely, demand is Lautrupparken 40-42, Ballerup 45

46 Occupational Office healthy for smaller office units in the old building stock of Hellerup. In terms of rental developments, this is reflected in constant prime office rent levels and slightly uptrending secondary rents. Recent transactions in Hellerup include Implement Consulting Group taking 3,875 sqm at Strandvejen 54, EQT Partner taking 900 sqm at Strandvejen 58. (5) Lyngby/Gladsaxe Situated some ten kilometres north-west of the Copenhagen city centre, the Lyngby and Gladsaxe office locations benefit from excellent motorway access, especially from the affluent residential areas north of Copenhagen, as well as close proximity to Copenhagen. A light-rail link commissioned for the area along Ring Road 3 will substantially improve accessibility. Lyngby/Gladsaxe may be described as a predominantly mixed-use commercial area, but with an increasing share of up-to-date and space-efficient office premises. Parking facilities are adequate, mostly consisting of onground spaces. The area has traditionally been a preferred location with domestic and international companies demanding large-scale premises and easy access to a pool of highly skilled labour. Consequently, it has attracted large companies operating in the IT, insurance and biotech industries. Unlike 2014, the area saw only moderate activity in Recent lease transactions include Baxter taking 1,300 sqm at Tobaksvejen 4 (Gladsaxe Company House), construction company Milton Huse A/S taking 630 sqm at Generatorvej 6 and Cphbusiness (Copenhagen Business Academy) taking 450 sqm at Nørgaardsvej 26. The generally strong demand for well-located and efficient office premises has served to sustain constant prime and secondary office rents in the area in (6) The north corridor Along the motorway to Helsingør (Elsinore), the north corridor features a number of office areas in Vedbæk, Hørsholm and Kokkedal, mostly dating from the 1980s. The north corridor enjoys easy access by car, but access to the coast railway services, linking northern Zealand and Copenhagen, is not ideal in all locations. None of the locations benefit from the S-train system. The north corridor is characterised by relatively weak occupational demand, very limited new development and a somewhat outdated office stock. As a result, rents in the district have come under substantial downward pressure in recent years. The weak occupational demand calls for innovative measures in order to attract new tenants in particular to large-scale office premises. In this context, a conversion into e.g. office hotels may be an option for large, high-vacancy office buildings that may otherwise be very difficult to re-let. Recent transactions in the north corridor, at Scion DTU, include FMC/Cheminova taking a 8,700 sqm lease, Veloxis Pharmaceuticals taking 860 sqm, Marvell Technology Denmark taking 850 sqm and Jacobsen Pharma & MedTech Advice taking 510 sqm. (7) Birkerød/Allerød The Birkerød/Allerød district includes major office areas of varying quality, ranging from rather outdated office buildings to modern buildings, typically adjacent to warehouse and logistics facilities. The district used to be a preferred location for the IT sector, but due to the increased focus on space-efficiency, access to public transport and the prevailing flight to quality, the district has seen a rise in vacancies and a decline in rent levels. Irrespective of the availability of relatively up-to-date premises, the district has faced fiercer competition from alternative locations offering superior accessibility. This has put rents under pressure. It is therefore imperative that landlords/owners carry out the required upgrade of premises to match today s layout and flexibility standards, although their manoeuvrability may be limited considering the rents they may actually achieve in return. However, rent levels for both prime and secondary properties and locations were stable in Recent transactions include the Danish Building & Property Agency taking 5,950 sqm at Birkerød Kongevej 2-4, Furesø Municipality taking a 5,400 sqm lease at Hørmarken 2 in Farum, Niras taking 2,150 sqm at Sortemosevej 19 in Allerød and High Jump Software taking 2,400 sqm at Banevænget 13 in Birkerød. 46

47 Occupational Office (8) Herlev/Ballerup In the Herlev/Ballerup district, the most important office location is situated around Lautrupvang, which is predominated by several large-scale high-tech users, including Siemens, GN Store Nord, Bluegarden (formerly Multidata) and KMD. In 2015, the competition from new areas closer to Copenhagen drove down rents in the district, the prime rent edging down from DKK 1,100 per sqm p.a. to a level of DKK 1,050 per sqm. Other office locations in Herlev/Ballerup are characterised by an office stock built between 1970 and 1990 or ancillary office units in connection with industrial facilities. Generally speaking, office premises in these locations attract only weak demand and command low rent levels, with secondary rents in the lowest rent bracket for the Copenhagen area in general. Central commercial locations in Ballerup may longer term face competition from the business park Kong Svends Park, situated west of Måløv in the Municipality of Egedal. With its offering of almost 180,000 sqm commercial land and proximity to rail services, this business park has already attracted large companies such as Oticon and Novo Nordisk. Recent transactions include Leo Pharma taking 8,800 sqm at Industriparken 32 in Ballerup. (9) The west corridor With an office stock typically pre-dating the 1990s, the west corridor offers relatively outdated office premises, in particular in the form of ancillary office units in connection with industrial facilities. As a result, the west corridor is characterised by many office vacancies and a relatively high proportion of secondary office properties. Encompassing primarily the towns of Glostrup, Brøndby, Albertslund and Høje-Taastrup, the west corridor fetches some of the lowest secondary office rents in Copenhagen. The low office rents and the good accessibility, also by private transport, continue to make the west corridor a popular back-office location, in particular given the prevailing strong cost-awareness. After years of declining secondary rents, rents remained stable in the corridor in Recent transactions in the corridor include the Danish National Police (Rigspolitiet) taking 10,600 sqm at Ejby Industrivej 125 in Glostrup, Informationsteknik Scandinavia A/S taking 3,600 sqm at Ejby Industrivej 91-95, also Glostrup, Nilfisk taking 1,100 sqm at Kornmarksvej 1 in Brøndby, Verizon taking 850 sqm at Roholmsvej 19 in Albertslund, OBH taking 700 sqm in Vallensbæk Company House III and Rittal A/S taking 600 sqm at Delta Park 37 in Vallensbæk Company House I. (10) Valby In Valby, former predominantly industrial areas are still being converted for e.g. residential and office uses, as seen for instance in the area surrounding Gammel Køge Landevej. With the construction of Ny Ellebjerg S-train station, accessibility has improved in the district, helping to position Valby as a moderately priced back-office location. The area surrounding Carl Jacobsens Vej and along Gammel Køge Landvej is now considered one of the foremost urban development areas outside the city centre. Disused industrial facilities in this area are being converted into modern office premises, duly preserving original building parts wherever possible. Given its location on the very district borders of both Valby, Vesterbro and Frederiksberg, the site formerly used by the Carlsberg breweries represents an exciting new urban development district, with up-to-date and efficient office and educational premises scheduled to hit the market in a matter of some years. Easy access to public transport at the new Carlsberg station and the Metro station at Tove Ditlevsens Plads is expected to compensate for the lack of parking facilities, which may otherwise become a challenge for this location. Development activity is brisk in the district, which is evolving into a new and attractive residential, educational and office location in Copenhagen. Recent transactions include Azanta A/S taking 650 sqm at Gearhalsvej 1 and Big In Japan taking 460 sqm at Gammel Køge Landevej 59. On account of the ongoing activities in the district and the supply of up-to-date and well-located premises, the prime office rent climbed in 2015, whereas secondary rents remained flat. (11) Sydhavnen After having been considered one of the most important office locations in Copenhagen in the mid-2000s, Sydhavnen (the south harbour) suffered a severe blow during the economic downturn. The district had a predominance of large single-tenant properties formerly used by companies in the telecommunications sector. The district was popular for its reasonable land prices and easy access to the general Copenhagen road grid and the airport. However, following the relocation of some large companies from the district and the increasing emphasis on access to public transport, the district saw a steep increase in vacancy rates. With the sale of Syd- 47

48 Occupational Office porten and Aalborg University taking over the former Nokia premises at Frederikskaj, the vacancy rate improved. In addition, the rerouting of the Copenhagen Metroline via Sydhavnen to Ny Ellebjerg has changed the way investors and users perceive the district. With a new station at Sjællandsbroen, linking to Amager, the district will position itself as an attractive office location. The location of the new station is also expected to benefit the redevelopment of the Borgmester Christiansens Gade/Bådhavnsgade area of Sydhavnen. Recent transactions include Falck taking 8,300 sqm at Sydhavnsgade 18 and the Danish Property & Building Agency, on behalf of The State Administration (Statsforvaltningen) taking 2,700 sqm at Ellebjergvej In addition, the Danish Metalworkers Union (Dansk Metal) relocates to owner-occupied head-office facilities at Sydporten. The new head office extends to 13,100 sqm. (12) Amager, Havnestad and Ørestad The island of Amager benefits from an excellent infrastructure with motorway and railway links to the Copenhagen city centre, the fixed link to Sweden, the Metro line and Copenhagen Airport. Ørestad and Havnestad are predominated by up-to-date, space-efficient properties, whereas the area surrounding Prags Boulevard has a number of office and production facilities dating from the 1970s and 1980s. In particular Ørestad has benefitted greatly from the Metro line, and thanks to its massive offering of development opportunities it has now positioned itself as a key non-cbd office location. The strong demand for well-located office space that meets today s tenant requirements has been one of the key factors driving the development in Ørestad, where market rents started to climb in 2013 and continued to do so in In Ørestad, recent transactions include NMP taking 825 sqm at Rued Langgaards Vej 6-8, Knowledge Cube taking a corresponding 825 sqm in the same property, Komplett Service Denmark taking 675 sqm at Kay Fiskers Plads 9, Identitøren taking 550 sqm at Robert Jacobsens Vej 64 and MeeBox taking 500 sqm at Richard Mortensens Vej 61. In the former SAS property at Hedegaardsvej 88, Post Danmark has taken an 11,500 sqm lease, and Hidros Denmark 1,250 sqm. Dyrberg/Kern has relocated to a 1,400 sqm lease at Prags Boulevard 80. When Ferring Pharmaceuticals relocates to Scanport, this location will consolidate its position as a new development area and a strong alternative location to Ørestad. The strength of Scanport lies in its unique location close to the infrastructural hub of Copenhagen Airport, the fixed link to Sweden and the Metro link. However, no letting activity was recorded at Scanport in Strengths profiles of individual non-cbd areas, based on performance scores on four selected framework criteria Østerbro/ Nordhavnen Nørrebro Frederiksberg Hellerup Lyngby/ Gladsaxe The north corridor Efficiency Public infrastructure Parking Demand Birkerød/ Allerød Herlev/ Ballerup The west corridor Valby Sydhavnen Amager/Havnestad/ Ørestad Efficiency Public infrastructure Parking Demand Note: One point denotes below-average performance, two points denote moderate performance, three above-average performance, four top performance 48

49 Occupational Office Key lease transactions, Copenhagen non-cbd, office Property District* Landlord Tenant Sqm Haraldsgade 53 1 Nordea Ejendomme Bygningsstyrelsen Hedegaardsvej PFA Ejendomme Post Danmark / PostNord Ejby Industrivej PensionDanmark Rigspolitiet Industriparken 32 8 DADES Leo Pharma Scion DTU 6 Scion DTU FMC/Cheminova Sydhavnsgade Scandiagade ApS Falck Strødamvej 46 1 Danske Bank Egmont Publishing Magasiner Birkerød Kongevej MP Pension Bygningsstyrelsen Hørmarken 2 7 Petunia Furesø Municipality Strandvejen 54 4 Realdania Byg Implement Consulting Group Ejby Industrivej Private investor Informationsteknik Scandinavia Skøjtevej PFA Ejendomme Arriva Danmark Ellebjergvej Aberdeen Bygningsstyrelsen (Statsforvaltningen) Amager Strandvej PFA Ejendomme Jet-time Kristianiagade 9 1 C.W. Obel Ejendomme Børne- og Ungdomsforvaltningen Banevænget 13 7 PFA Ejendomme High Jump Software Sortemosevej 19 7 Topdanmark Ejendom Niras Emdrupvej 115A 2 Private investor Verdens Børn Göteborg Plads 1 (Portland Towers) 1 NCC PA Consulting Group Tonsbakken 3 8 Private investor Undisclosed Sundkaj 9 1 By & Havn Libratone Banemarksvej 2A 9 Private investor Vognmand Olsen (road haulage) Hejrevej 26, 4. og 5. 2 Nordicom Wissenberg Prags Boulevard TopDanmark Dyrberg/Kern Tobaksvejen 4 5 PensionDanmark Baxter Klampenborgvej 50 5 Private investor Sputnik Kajakvej 2 12 Skanska Advance Cleantech Hedegaardsvej PFA Ejendomme Hidros Denmark *) District number refers to map on page 51 49

50 Occupational Office Typical office rent levels, Copenhagen non-cbd (Exclusive of operating (DKK/sqm/annum) Change Market costs and taxes) expectations (1) Østerbro/Nordhavnen Prime % Secondary % (2) Nørrebro % % (3) Frederiksberg % % (4) Hellerup % % (5) Lyngby/Gladsaxe % % (6) The north corridor % % (7) Birkerød/Allerød % % (8) Herlev/Ballerup % % (9) The west corridor % % (10) Valby % % (11) Sydhavnen % % (12) Amager/Havnestad/Ørestad % % Note: Rent levels quoted at the beginning of year Number in brackets refers to map overleaf 50

51 Occupational 51

52 Occupational Amagertorv, central Copenhagen 52

53 Occupational Retail Retail occupational property market Outlook for the retail market is bright In the high street, Strøget, activity is exceptionally brisk, driven by a strong international presence New big box concept Broadly speaking, the Greater Copenhagen retail market is a relatively complex market featuring a wide assortment of retail shops and outlets as well as local shopping destinations, most of which have weathered the crisis successfully. Irrespective of weak employment growth, the capital region never suffered a blow on the scale seen in other parts of the country. This has helped to bolster the market. In addition, the Copenhagen city centre continues to benefit from scores of tourists, boosting retail sales in the high street and, in turn, serving as a catalyst for an ongoing internationalisation process in the upper end of this market. At end 2015, the consumer confidence indicator edged down but is today fairly strong relative to In terms of domestic households own perception of their financial situation over the next 12 months, consumers have remained confident too, and we see no signs of any imminent slow-down in household spending. Strong hikes in the housing market have restored equity values, by extension fuelling retail sales. For the past 12 months, DIY outlets and home furnishings stores have seen a 4 5% increase in sales. In comparison, overall retail sales increased by 2% in this period. The grocery sector has seen similar growth rates in sales, with low-budget stores posting 3.8% and specialty shops 5 10% growth. In the same period, traditional supermarkets and grocery stores experienced moderate growth of about 2%. It is important to bear in mind this polarisation trend as it could reflect a long-term phenomenon that will divide the retail market into two: a standard tier where competition focuses on prices and a top tier where competition focuses on quality and shopping experience. This trend is highly prevalent at Strøget, which has seen a surge of high-end newcomers in the past two or three years, and at Amagertorv and the upper end of Købmagergade, where the presence of such brands in Copenhagen was unthinkable a mere ten years ago. In the grocery/convenience store sector, Irma plans to open a number of Lille Irma convenience stores in Greater Copenhagen. At Strøget, activity is fronted by international brands that perceive Copenhagen as an important retail location, not least because of the vast number of cruise tourists that have the means and inclination to spend a substantial amount of money. With Copenhagen becoming an international hotspot, the composition of residents in Copenhagen and Frederiksberg has gradually shifted, with an increase of residents mainly of working age. Copenhagen and Frederiksberg have welcomed approximately 100,000 new residents in the span of ten years, with residents aged accounting for some 75% of this growth relative to the national equivalent of some 30%. On a national level, residents aged 65+ account for a growth contribution rate of almost 90%; in Copenhagen and Frederiksberg, Consumer confidence indicators Financial situa on of the household over the next 12 months (l. axis) Consumer confidence indicator (r. axis) M M M M M M M M M M M M M M M M M M M M M M10 Note: Financial situation in this context means Danish households own perception of their future financial situation Source: Statistics Denmark Breakdown of grocery sales (index 100 = 2010) by segment Tradi onal supermarkets Low-budget supermarkets 2006M M M M M M M M M M M M M M M M M M M M07 Note: The retail sales index is a seasonally adjusted value index. Source: Statistics Denmark 53

54 Occupational Retail the corresponding figure is only 5%. In addition, population growth is driven largely by an increase in the ranks of students or young active workers aged Obviously, population growth is a key determinant of future demand for retail premises in general, but the shift in the composition of age groups determines which kind of retail units and locations are in demand. At Frederiksberg and in the large residential districts encircling the Copenhagen city centre, demand is strong for a broad range of shops and articles. This broad demand sustains the traditional local shopping streets in the non-cbd districts, e.g. Østerbrogade, Nordre Frihavnsgade, Gammel Kongevej and Vesterbrogade, all of which offer a good mix of specialty shops, bakery shops, cafés, etc. This also applies to the local shopping centres, e.g. Frederiksberg Centret and Amagercentret. In the central districts, the higher proportion of young residents, students and young workers, is one of the factors that are gradually transforming the city centre from a mixed-use residential and commercial district to an increasingly leisure-related area with a great many restaurants, cafés and bars. Central Copenhagen retail market (1) The Copenhagen high street retail area Traditionally, the pedestrian streets of Strøget and Købmagergade constitute the Copenhagen high street, with specific locations along the some 1.8 km stretch labelled either prime or secondary. Prime high-street retail locations are typically found at Østergade, Amagertorv and the upper end of Købmagergade, starting at the square of Amagertorv, whereas the remaining part of Strøget running towards Rådhuspladsen (the city hall square), as well as the remaining stretch of Købmagergade and Frederiksborggade, including the Nørreport station area, are secondary locations. In 2015, Strøget in general and the Amagertorv area in particular continued to prosper. With remodelling works nearing completion, the ground floor of the Illum department store now features large display windows, opening up the store to the strong pedestrian flow in this part of the high street. In addition, Illum offers a mix of mainly international brand retailers, which together with the Louis Vuitton shop on the corner of Amagertorv and Købmagergade have given the area a substantial lift. The corner of the Illum store facing Amagertorv has been upgraded too to serve as the new Prada flagship store. Købmagergade is set to see further redevelopment activity as the new co-owners, domestic pension fund PFA and Revco, are expected to initiate a conversion scheme of the former post office and distribution centre in So far, the owners have not disclosed the names of future retail tenants but when fully redeveloped the building is predicted to attract strong-covenant tenants thanks to its prominent location and building design. Another prominent department store in the high street area is Magasin du Nord at Kongens Nytorv, which benefits from direct Metro access in its basement. Similar to Illum, Magasin has been adept at retaining strong customer flow and increasing sales. In the upper end of the high street, letting activity remained brisk in 2015, with e.g. Natura Siberica, 66 O North, Victoria s Secret, Moss Copenhagen, Daily, Size, Message, G-Star Raw, Imerco, Desigual and Zara Home signing new leases or relocating to new premises. Nørreport station recently reopened after extensive upgrade and development works in connection with the new Metro City Ring, and accessibility to Købmagergade, Hauser Plads and Frederiksborggade returned to normal in A host of domestic and international brands in pursuit of locations offering strong footfall and high visibility, but not a prime location near Amagertorv, are zooming in on the area around Nørreport station. Recent lease transactions in the area include Søstrene Grene and Burger King. Secondary locations at Strøget, situated along the stretch terminating at Rådhuspladsen, have not seen the same positive developments as Købmagergade. Retailers in this lower end of the high street predominantly run mainstream and lowend shops, which are commonly found in shopping centres all across the country. In addition, there are some businesses, including a bank branch office and various restaurants and bars, which still to some extent have a negative effect on traditional shops as the retail mix fails to create the desired synergies. However, with several recent property acquisitions in the area, it is expected to see a considerable lift in terms of redevelopment activity. The area surrounding Rådhuspladsen is still affected by the ongoing Metro excavation works. However, the area stands to benefit immensely once the new Metro City Link opens in 2019 with improved accessibility. In the process, the lower end of Strøget may well experience a lift. Newcomers in this part of Strøget include Rezet Store, Unisport, Lyngby Shop and Hunkemøller. 54

55 Occupational Retail (2) The Copenhagen Latin Quarter and Grønnegade/ Ny Østergade area A web of side streets complements the high-street locations at Strøget and Købmagergade. Historically preferred by domestic designers in particular as well as specialty shops and cafés, the side streets should be acknowledged for their vital role in creating today s unique shopping environment in the city centre. The side streets in question run between Købmagergade and Gothersgade, and they include Pilestræde, Ny Østergade, Berlingske Karréen, Kristen Bernikows Gade and Christian IX s Gade in particular. Following comprehensive upgrade schemes, the area has a constant, albeit limited, supply of retail space, which serves to retain stable rent levels. While the side streets have always supplemented the main pedestrian streets, they are becoming increasingly popular in their own right, in particular Ny Østergade and Grønnegade, with strong brand retailers that have failed to secure a lease at Strøget or are attracted by the lower rents commanded off Strøget. As a result, the side streets have managed to increase footfall in recent years. By fanning out to the side streets, the retailers are also in a better position to influence the layout and size of a shop unit, as the availability of large shop leases is relatively limited in the traditional high street. In the past couple of years, the area has seen multiple newcomers, including strong brands such as Norse Project, Salotto42, Storm & Marie, Clarks Originals, Frankly, 66 O North, Junk De Lux, Føtex Food, Suka Copenhagen Haircare and Custommade. The so-called Copenhagen Latin Quarter, encircled by the streets of Købmagergade and Strøget towards Rådhuspladsen, including Skindergade, as well as other side streets running off Strøget contains a mix of local shops, cafés, night clubs, restaurants and bars. In the span of relatively few years, coffee shops, sandwich and juice bars, fine chocolate shops as well as bakery shops have mushroomed on an unprecedented scale, reflecting the current surge in demand and readiness to pay for delicatessen and exceptional dining experiences. As a result, several new restaurants have opened in Copenhagen in recent years. (3) Other central city districts, including Frederiksberg Traditionally dubbed brokvartererne, i.e. the bridge quarters, with a historical reference to their establishment when the medieval fortifications and original gateways were removed in 1857, these districts form a semi-circle around the Copenhagen high-street market. The districts are therefore aptly named Østerbro (the east bridge), Nørrebro (the north bridge), Vesterbro (the west bridge) and Amagerbro (the bridge to Amager). In addition, Frederiksberg, which is in fact a municipality in its own right, serves as a central city district in a retailing context. Generally speaking, these districts have their respective local retail areas, a main shopping street and a shopping centre. The offering of shops in these districts caters to local residents in particular, which is reflected in the tenant mix, with grocery stores, specialty shops and fashion shops located side by side. Like the high-street market, several of the listed city districts have seen an increase in the number of specialty shops, including coffee shops, juice bars, bakery shops and restaurants. Vacancy rates are relatively moderate, with shop vacancies seen mainly in more secondary locations, i.e. typically the locations that are situated the farthest from the Copenhagen city centre. Among the city districts outside the high-street market, Frederiksberg stands out as a superior shopping destination, boasting two successful shopping streets (Gammel Kongevej and Falkoner Allé) and a very well-functioning shopping centre, Frederiksberg Centret. In a retailing context, Østerbro is also an important non-cbd district, fronted by the streets of Østerbrogade and Nordre Frihavnsgade that have a varied and high-quality offering of shops, mainly domestic and local brands. The availability of shops is stable, and retail vacancy rates moderate. Unlike Frede riksberg, the district does not benefit from a shopping centre in a central location. The shopping streets in the districts of Nørrebro and Amagerbro are more disparate, accommodating attractive shop clusters in some places and less attractive ones in others. Compared to Østerbro and Vesterbro, the main shopping streets of these districts are markedly longer. Both districts boast well-functioning shopping centres. Amager Centret is a major shopping centre anchored by two supermarkets, Føtex and Irma, and other strong tenants, including H&M, overall providing a wide mix of shops. Although containing no grocery stores or supermarkets, Nørrebro Bycenter offers an attractive and strong mix of domestic and international brands, including H&M, Jack & Jones, Fona and Sportmaster. The future Metro station at Nørrebro station will greatly improve accessibility to the area. At Sortedam Dossering, the comprehensive redevelopment of the large building block known as SD-Karréen has finished, and along the stretch facing the lake of Sortedammen three restaurants and a bakery shop opened in late In the Vesterbro district, Vesterbrogade and Istedgade are the main shopping streets. In recent years, Vesterbrogade has evolved from a traditional shopping street and today features a large cluster of cafés and restaurants catering to local residents as well as the many tourists staying at hotels near Copenhagen Central Station. 55

56 Occupational Retail Typical retail rent levels, central Copenhagen (Exclusive of operating costs and taxes) (DKK/sqm/annum) Market expectations (1) Copenhagen Area up to 100 sqm high street Area sqm (upper end) Area 300+ sqm Copenhagen Area up to 100 sqm high street Area sqm (lower end) Area 300+ sqm (2) Copenhagen Area up to 300 sqm Latin Quarter/Ny Øster- Area 300+ sqm gade/grønnegade (3) Copenhagen other Area up to 300 sqm central city districts Area 300+ sqm Note: Rent levels quoted at the beginning of year Key lease transactions, central Copenhagen, retail Property Landlord Tenant Sqm Købmagergade 3 Standard Life Zara Home Danmark Høkerboderne 8 City of Copenhagen Mitco 700 Frederiksborggade 12 InfraRed Burger King 615 Kultorvet 2 Højgaard Ejendomme Søstrene Grene 385 Christian IX s Gade 5 Private investor Custommade 320 Købmagergade 9 Danmarks Lærerforening Imerco 250 Klosterstræde 19 Vecta Ejendomme Biomega 220 Amagertorv 3 J. Nørgaard Agora Trading (Victoria s Secret) 200 Gothersgade 43 Housing association Storm & Marie 190 Kronprinsensgade 12 Barfoed Group Vagabond (shoes)

57 Occupational 57

58 Occupational Retail Greater Copenhagen retail areas (1) Greater Copenhagen high-street markets In Greater Copenhagen there are five towns and cities that offer high-street markets, namely Helsingør (Elsinore), Hillerød, Lyngby, Roskilde and Køge. Each of these towns and cities has a fairly varied and wide offering of shops, a pedestrian grid and a central shopping centre, apart from Køge, which may however be remedied in 2016, when a new shopping centre is scheduled for completion in connection with the large-scale urban development project of Køge Kyst. The new shopping centre is situated next to Køge station, connecting the old town centre and the new development areas near the waterfront. Although generally quite adept at attracting customers from wider catchment areas, the retail markets of these towns and cities have been hit by recent years weak consumer spending too, with accelerating tenant turnover and climbing retail vacancy. Although the shopping centres have also been affected by the downturn, they have proved better at retaining tenants. The downtrend in retail spending has served to fuel the segmentation process in the retail market, with the distinction between prime and secondary locations becoming increasingly pronounced. Among the towns and cities mentioned above, only retail locations in Lyngby and to some extent Hillerød may be classified as prime. As a result, Lyngby has seen an increase in rent levels in recent years, whereas the remaining markets have mainly seen a decline. Overall, the spread in prime versus secondary rental prices has in fact widened to quite an exceptional degree. Irrespective of the brighter outlook for Danish economy, including a rebound in consumer spending, this segmentation process is predicted to prevail for some time to come. (2) Regional shopping centres The Greater Copenhagen market has seven shopping centres that may be characterised as regional on account of their ability to attract customers from a wider catchment area. These shopping centres offer a mix of mainstream brands and retail chains as well as numerous high-profile brands and specialty shops, depending on the size, footfall and turnover volume of the respective shopping centres. In Copenhagen, there are two regional shopping centres, Field s and Fisketorvet Copenhagen Mall. North of Copenhagen lies Lyngby Storcenter, to the west Rødovre Centrum, City 2 and Ro s Torv and to the south-west Waves. All regional shopping centres are situated in highly visible locations near major traffic hubs, most of them close to main train stations, and offer ample parking facilities. In addition to the range of shops listed above, the shopping centres have restaurants, cafés and various leisure activities. As recent years waning retail spending has made competition fiercer, it has become crucial for the regional shopping centres to invest in upgrades and offer the right retail mix to retain their tenants and customers. One of the first shopping centres in Denmark, Rødovre Centrum, has responded to the ever-increasing struggle to attract shoppers by investing heavily in recent years. Today, Rødovre Centrum has 134 shop units, a multiplex cinema and an indoor playground in addition to 2,700 parking slots right next to the shopping centre. Whereas there are plans to add further slots, bringing the total to some 4,000, there are no immediate plans to add additional shop units. Rødovre Centrum posted retail sales of DKK 2.2bn in City 2 at Høje-Taastrup has invested heavily in recent years too, for instance adding Copenhagen Designer Outlet to the existing shopping centre in the hope that the additional 80 individual shop units will increase the footfall of City 2 in general. So far, letting activity has been very slow and the outlet concept is still to attract top-tier international brands in order to prove its viability. Situated in Ørestad City, Field s comprises some 85,000 sqm space, with 140 shop units, a 9-screen multiplex cinema, a fitness centre and an entire floor dedicated to restaurants and cafés. In connection with the cinema, a 3,000 sqm media lab was established for the high-school students of Ørestad Gymnasium. Field s offers excellent parking facilities, with 3,000 slots in total. Owned by Steen & Strøm Danmark, Field s posted retail sales of DKK 2.5bn in One of the top-performing shopping centres in Greater Copenhagen, Lyngby Storcenter, comprises 31,000 sqm retail space, with 110 shop units and a parking garage holding 1,080 cars. Lyngby Storcenter expanded in connection with the Vidensby initiative to brand Lyngby as The City of Knowledge & Urban Development. Overall, the aim is to construct some 40,000 sqm space for mixed uses, i.e. residential, office and retail. Vidensby is part of a more comprehensive redevelopment masterplan for Kanalvej. In 2014, Lyngby Storcenter posted retail sales of DKK 1.7bn. Fisketorvet Copenhagen Mall enjoys the most central city location of all the regional shopping centres: it lies on the central Copenhagen waterfront, a mere 5-minute drive from Rådhuspladsen. Fisketorvet offers more than 110 shop units, some 2,000 parking slots and a 14-screen CinemaxX cinema with the first IMAX screen in Denmark. It is owned by Unibail-Rodamco. Fisketorvet posted retail sales of DKK 1.6bn in

59 Occupational Retail One of the largest shopping centre owners in Denmark, DADES, owns Ro s Torv in Roskilde. In terms of retail space, this shopping centre ranks fifth in Greater Copenhagen and seventh nationally. Ro s Torv posted retail sales of almost DKK 0.8bn in Waves, located in Hundige and also owned by DADES, comprises some 62,000 sqm space distributed on 110 shop units. Waves offers 3,200 free parking spaces and and is anchored by Bilka. Waves posted retail sales of DKK 1.6bn in Generally speaking, most regional shopping centres have emerged from the crisis relatively unscathed, thanks mainly to competent and strong owners, highly skilled in shopping centre operations and aware of the need for continued maintenance and upgrade investments in order to retain tenants and customers. (3) Local shopping centres The market for local shopping centres is slightly less homogeneous, in the sense that the quality of prime and secondary facilities varies quite considerably. The past almost seven years of crisis have further exacerbated the market segmentation: shopping centres enjoying good location and proactive management focused on upgrades and an attractive tenant mix are also the ones to prosper, whereas slightly run-down shopping centres with a somewhat less attractive offering of shops have been unable to retain tenants and footfall. Altogether, the latter shopping centres are thus susceptible to negative spiralling effects and are labelled secondary as a result. Typically anchored by supermarkets, local shopping centres offer a range of specialty shops, including pharmacies, hairdressers, etc., catering to the needs of the local catchment area. In Copenhagen alone, there are about 35 local shopping centres with a size of 5,000+ sqm and 35 units on average. Local shopping centres are predominantly located near a Metro, S-train or regional train station. Supported by strong supermarket anchor tenants even the less successful shopping centres suffering from higher vacancy rates are able to generate moderate retail sales, although the smaller local shops are gradually closing. Customers prefer to shop for groceries locally, whereas other items may easily be purchased as part of a weekend shopping trip to a major shopping centre or high-street area, with the local shopping centres having a much narrower assortment and losing out as a result. One of the best performing local shopping centres in Denmark, Frederiksberg Centret, benefits from a large and financially strong catchment area. Following an expansion scheme, the shopping centre has 80 top-quality units, positioning it in the same league as the Magasin and Illum department stores. In addition, its offering of cafés and parking facilities has greatly improved. Newcomers include Tiger, Hay, Bahne, & Other Stories, COS, Eventyrsport, Humac, Peak Performance, Sand and Tinderbox. Following several years delay, plans to construct the new Galleria shopping centre in Vanløse have been revived under a new and financially strong owner. On its scheduled completion in 2017, Galleria will comprise some 25,000 sqm retail space and 400 parking slots. Pre-letting activity is already brisk, and anchor tenants are expected to include a Føtex supermarket. Although the local authorities had given the go-ahead, the plan to develop the Hillerød Storcenter has been shelved. Apparently, the large-scale shopping centre development failed to pass muster in the local community as a residential newbuilding scheme with a minor retail component will replace it. (4) Big box segment In Greater Copenhagen, big box clusters are predominantly located in Lyngby/Gentofte, Høje-Taastrup and Ishøj, all anchored by IKEA or Ilva. Secondary locations are found at Gladsaxe, Rødovre, Glostrup, Albertslund, Ishøj, Valby and at Kirstinehøj on the island of Amager. Since 2008, the market for big boxes has been challenged by the slump in consumer spending, with several segments of this particular market taking the brunt. Broadly speaking, DIY outlets and kitchen-unit retailers have experienced particularly difficult years, but also home-electronics retailers have been hit in spite of the introduction of new products such as smartphones and tablets. Although increasing online sales have started to challenge these retailers, they have seemingly managed to combine large-sized strategically placed conventional shops with an e-commerce platform, offering pick-up services in shops. The collect at store concept of Elgigan ten and Power serves as a good example of this new business model. 59

60 Occupational Retail In October 2015, Big, opened in Herlev, offering a new retail concept with some of the strongest retailers in their respective segments under one roof, including Power, Harald Nyborg, Føtex, Jysk, Elgiganten, Netto, IDEmøbler, H&M, Silvan, Sportmaster and Babysam in addition to a cinema, fitness centre and a number of eating places offering fast food or restaurant dining. Judging by the strong customer flow following the opening of Big, the concept of mixing top-brands, eating places and a cinema with easy access and ample parking facilities is already proving a success. At Roskildevej in Glostrup, the big box area has expanded, with domestic developer Daugaard Pedersen A/S adding some 12,000 sqm retail space, anchored by e.g. Biltema and Harald Nyborg. Existing retailers in this area include Bauhaus and Elgiganten. Strengths profiles of individual retail areas, based on performance scores on seven selected framework criteria A rac veness Tenant mix Infrastructure - accessibility Layout (internal infrastructure) Up-to-date Interna onal brand presence Catchment area Copenhagen high street Regional shopping centres Local shopping centres Big box areas Note: One point denotes below-average performance, two points denote moderate performance, three above-average performance, four top performance Typical retail rent levels, Greater Copenhagen (Exclusive of operating (DKK/sqm/annum) Market costs and taxes) expectations (1) Greater Copenhagen Area up to 100 sqm high street Area sqm Area 300+ sqm (2) Regional Anchor food shopping centres Anchor non-food Area up to 100 sqm Area sqm Area 300+ sqm (3) Local shopping Anchor food centres Area up to 100 sqm Area sqm Area 300+ sqm (4) Big box properties Area 300+ sqm Note: Rent levels quoted at the beginning of year 60

61 Occupational 61 Big boxes Local shopping centres Regional shopping centres

62 Occupational Industrial/logistics Industrial occupational property market Demand centres on up-to-date facilities Oversupply of traditional and outdated industrial properties Wide rental spread between existing old stock and new due to high construction costs Low interest rate level spurs renewed demand for owner occupancy Broadly speaking, occupational demand is healthy for up-todate and well-located logistics facilities, driven by accelerating activity in the business sector and a strong emphasis on the most efficient means of cargo handling, also taking into account issues such as quality of building and geographical strategies. The existing building stock in the market for industrial and storage/logistics properties is highly inhomogeneous in terms of construction year, location and efficiency, with the saleability, lettability and vacancy risk of individual properties differing accordingly. In Greater Copenhagen, the overall industrial vacancy rate of 5.2% as at start-2016 thus covers a substantial disparity in the demand for up-to-date facilities versus older, outdated facilities. This applies to production facilities in particular as they are typically tailored to accommodate the plant and machinery of previous occupants. It is worth noting that this market segment in general is characterised by a high level of owner-occupation, and available data may not reflect actual vacancy rates. As Denmark covers a relatively small geographical area, businesses with storage facilities on Zealand and in eastern Jutland, in the so-called Triangle Region, are able to reach customers all across the country in a matter of hours. Indeed, only two large-scale facilities are thus required, always provided of course that the location is right. In this context, the south corridor stretching from Køge to Høje-Taastrup benefits from easy motorway access (the E20), ensuring swift road passage to Copenhagen, northern Zealand, the remaining parts of Zealand as well as to Jutland, Sweden and Germany. In addition, this corridor is covered by contemporary local plan provisions that are in keeping with today s requirements, allowing for the construction of efficient facilities standing up to 30 metres tall in commercial districts sized for heavy-goods vehicles. Typically situated along the Ring Road 3 that runs west of Copenhagen, traditional industrial districts in Greater Copenhagen start at Brøndby to the south, stretching to Glostrup, Albertslund, Herlev and Gladsaxe. Additional industrial locations are found at Ring Road 4 at Ballerup to the north-west, at Høje-Taastrup to the south-west and finally between Birkerød and Allerød north of Copenhagen. These districts share some of the same characteristics and challenges in so far as their existing stock of built-to-suit facilities fails to meet today s tenant requirements. As a result, these districts are to a certain extent prone to structural vacancy. As the supply in Køge and Høje-Taastrup is relatively limited, prime rents have increased. Speculative newbuilding of logistics facilities is virtually non-existent due to the spread be- Capacity utilisation (%), Danish industry Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 Source: Statistics Denmark Production index, Danish industry (index 100 = 2010) Source: Statistics Denmark 62

63 Occupational Industrial/logistics tween capitalised values and construction costs. Although the gap has narrowed in recent years, new construction costs still exceed property market values based on market rent/yield calculation, and developers need to factor in repayment costs during the typical lease term of 5 10 years in this segment. South of Copenhagen lies Avedøre Holme, also a relatively old industrial district that faces the same challenges as the Ring Road 3 corridor in terms of outdated facilities. Nevertheless, Avedøre Holme enjoys an excellent location right next to the E20 east-west bound motorway. Also, the district is slightly segregated from the surrounding residential districts, making environmental concerns somewhat less of an issue. Should new construction become possible, Avedøre Holme is therefore believed to be able to attract strong demand due to its high-quality location. In the Copenhagen area, Copenhagen Airport is also believed to offer opportunities but still with the qualification that activities must be airport-related. Logistics properties Comprising terminal and warehouse facilities, the market for logistics properties has picked up over the last 12 months, with demand concentrating on up-to-date, efficient and well-located facilities. Demand is driven mainly by the need for increased efficiency rather than the need for the capacity to handle larger bulks of goods. In terms of volume and logged distance in kilometres, domestic freight transport did not increase to any significant extent in Although other modes of transport are used to move goods, road transport is still believed to predominate in the market for storage and logistics properties. The same trend prevails in transport sector employment figures, which are still substantially below pre-crisis level. Remaining constant in the 135,000 to 140,000 bracket, the number of people employed in this sector is not expected to increase on any significant scale. In 2015, the volume of online sales is estimated to total approximately DKK 90bn, triple the volume of This surge in activity is making handling and distribution efficiency a key parameter, fuelling demand mainly for efficient and well-located terminals in an effort to reduce the time from purchase to delivery to a minimum. However, online sales are fronted by some of the largest players in the market, including Elgiganten and Power, offering collect at store options. These major big box retailers benefit from considerable storage facilities in addition to central distribution facilities in other European locations, which are often able to deliver direct to Danish households without stopping at Danish terminals. At Køge, Skandinavisk Transport Center (STC), has managed to attract a great many financially strong tenants, including Dansk Supermarked, Lemvigh-Müller, Lidl, DBK Logistik Service, KP Logistics, Lastvognscenter 24-7 and DKI Logistics. In 2015, pharmaceutical company Nomeco announced the acquisition of a 100,000 sqm site for the construction of a new state-of-the-art storage facility. Construction is ongoing on the 67,000 sqm Copenhagen Markets (Grønttorvet) development in Høje-Taastrup. Completion Volume of goods vs. logged distance in kilometres, Danish road transport Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 Source: Statistics Denmark Volume of goods, tonnes (l. axis) Logged distance, million km (r. axis) Turnover e-commerce in Denmark Source: Danish E-commerce Association (FDIH) 63

64 Occupational Industrial/logistics is scheduled for February 2016 and most pre-let agreements are in place. Driven by exceptionally strong tenant demand, a 12,000 sqm expansion and the introduction of additional foodstuffs are in the pipeline. When fully developed, Copenhagen Markets may achieve the status of a wholesale shopping centre, in fact the largest of its kind in the entire Nordic region. PostNord was one of the players driving the occupational market in 2015, taking some 35,000 sqm in total in Taastrup, Vallensbæk and Søborg. At Copenhagen Airport, the fact that FedEx and Boeing have signed leases on 20,000 sqm space in total is expected to consolidate this location as a hub for Scandinavian air cargo handling. Industrial properties The industrial property market has been affected not only by the general economic slow-down, but also by challenges of a more structural nature, as many businesses have moved their production activities to facilities abroad. Furthermore, the last 10 to 15 years have in fact seen obsolescence rates accelerate in this segment, reflecting that industrial facilities are more quickly becoming functionally obsolete today than in the past, with the means of production required to adjust to increasing automation levels. As a result, this market segment is currently seeing some structural vacancy: it is economically less feasible to opt for conversion/demolition of existing facilities rather than to construct new facilities in one of the newly evolved commercial districts located close to the motorway grid, where development opportunities are in ample supply. In effect, the industrial market is fighting on three fronts, putting a severe damper on the demand for industrial properties. According to Statistics Denmark, industrial capacity utilisation has remained constant at some 80% in Denmark since 2010, although picking up slightly since In other words, the industrial sector still harbours some unutilised capacity, and an increase in total output levels will therefore not necessarily prompt an increase in the demand for industrial properties. In view of the relatively meagre economic growth rates, it may well take some years before market activity rebounds. Conversely, the production index has almost rebounded to pre-crisis level, indicating accelerating output levels. This increase has been facilitated by investments in the means of production. In an international context, businesses with cross-border activities tend to centralise logistics and administrative facilities in large regional units. As a result, many facilities belonging to the old industrial stock, situated in particular in the Ring Road 3/Ring Road 4 corridors and originally built to cater to the needs of businesses with national activities, have become functionally obsolete in terms of office/storage ratios. Broadly speaking, the traditional industrial property that has an administrative unit at the front and storage/production facilities at the back no longer meets the requirements of today s businesses, neither in terms of office and storage space, nor in terms of external and internal design and qualities. Many facilities are grey-coloured concrete or yellow-brick buildings with inflexible space layout and utilisation, a far cry from today s standards in terms of work environment, energy-efficiency, sustainability and cost-optimisation. We believe that the next couple of years could well see a number of the municipalities surrounding Copenhagen redefine their commercial districts, giving them a more distinctive profile in terms of office, distribution or similar uses. In connection with the new light rail, for instance, it would make good sense to designate areas with station proximity for increased office use but designating the more remote areas with motorway proximity for industrial and storage uses. Another challenge facing the market for industrial properties is that many industrial districts on the outskirts of major Danish towns and cities were developed in the 1960s and 1970s. Originally, these new developments were predominantly tai- Strengths profiles of individual industrial areas, based on performance scores on four selected framework criteria Birkerød/Allerød/ Hillerød Ballerup/Måløv Brøndby/Glostrup/ Herlev The south corridor Avedøre Amager/Kastrup Loca on Efficiency Infrastructure Demand Note: One point denotes below-average performance, two points denote moderate performance, three above-average performance, four top performance 64

65 Occupational Industrial/logistics lored properties, built to suit specific uses, rendering them difficult to remodel for alternative uses by new tenants. As industrial rent levels are already relatively low, most owners will consider it unprofitable to make large-scale investments in existing facilities. As a result, such facilities have little or no appeal to new tenants and are in risk of dilapidation, to the detriment of entire districts. Today s prospective tenants largely favour newly built production facilities, tailored to their specific uses and requirements. In this context, a very low interest rate level is one of the factors that helps to make newbuilding a sound investment for industrial users as they are able to procure LTV ratios as high as 60% at interest rates substantially below the returns demanded by industrial property investors. Other industrial users opt for a leasing structure, giving the users a right of first refusal at relatively low prices on expiry of the leasing agreement. Industrial rent levels remained stable in most districts in 2015, but the great emphasis on infrastructure and accessibility has put rents under substantial pressure in Birkerød/Allerød/Hillerød and Ballerup/Måløv. Key lease transactions, Copenhagen, industrial/logistics Property District* Landlord Tenant Sqm Bohus Boulevard 1 4 Carlsberg PostNord Park Allé British American Tobacco PostNord Rundageren 4 4 Private investor City of Copenhagen Tobaksvejen 4 3 British American Tobacco PostNord Priorparken Aberdeen University of Copenhagen Tobaksvejen 4 3 British American Tobacco Hans Bo Jacobsen Mileparken 2 2 Hobe Real Estate Gavefabrikken Farverland 7 3 Henriksen Grus Umove Meterbuen M7 NMS-Silo Holding Smedeland 24 3 M7 Four Theatres Kornmarksvej 25 3 M7 RTC Transport Hassellunden 3 2 Stila Smørum Autoland Præstefælledvej 16 6 Private investor Klassik Moderne Møbelkunst Hedegaardsvej 88 6 PFA Ejendomme Meyer Kantiner Roskildevej M7 Premium Aqua *) District number refers to map overleaf 65

66 Occupational Industrial/logistics Typical industrial rent levels, Copenhagen, industrial/logistics (Exclusive of operating (DKK/sqm/annum) Change Market costs and taxes) expectations (1) Birkerød/Allerød/Hillerød Prime % Secondary % (2) Ballerup/Måløv % % (3) Brøndby/Glostrup/Herlev % % (4) The south corridor % % (5) Avedøre % % (6) Amager/Kastrup* % % Note: Rent levels quoted at the beginning of year *) Prime rents quoted for premises situated in the eastern part of Copenhagen Airport 66

67 Occupational 67

68 Market practices Market practices Agents and legal fees are typically subject to negotiation in Denmark and highly case-dependent. As for acquisition costs, it should especially be noted that the Danish transfer tax is only 0.6%, in eastern Denmark (including Copenhagen) payable by buyer, in western Denmark split 50:50 between the parties. Information provided in the table below is intended as a guide only and reflects typical market practice as far as commercial and residential leases are concerned. Typical leasing practices, Denmark Commercial leases Rent quoted in 1 Floor areas Lease term 2 Breaks Rent payment Deposit 3 Basis of rent adjustment 4 Frequency of rent adjustm. Rent review 5 External repairs Internal repairs Common parts 6 Building insurance Property taxes Subleasing Right of assignment Restoration 7 Pre-emption DKK per gross sqm p.a. Gross external Negotiable None Monthly or quarterly in advance 3-6 months NPI Annual Every 4 years Landlord Tenant Tenant (via S/C) Tenant Tenant Negotiable Negotiable Yes Negotiable Residential leases Rent quoted in 8 DKK per gross sqm p.a. Floor areas 9 Gross external Lease term 10 For time and eternity Breaks None Rent payment Monthly Deposit and prepaid rent months Basis of rent adjustment NPI 11 Frequency of rent adjustm. Annual Rent review 12 Every 2 years External repairs Landlord Internal repairs Negotiable Common parts Landlord Building insurance Landlord Property taxes Landlord Subleasing 13 Yes, 2-year max. Right of assignment Yes, in a swap Restoration Negotiable Pre-emption 14 Danish Rent Act Notes 1. Exclusive of VAT, 25% 2. An initial non-termination period of 3-10 years is customary, upon expiry of which the lease may be terminated on 6-12 months notice. The landlord is only entitled to terminate the lease under special circumstances, cf. Sections 61 and 62 of the Danish Commercial Rent Act 3. Not in escrow 4. NPI = Net Price Index, minimum and maximum annual increase as per agreement 5. A review of the rent to market rent may be applied for by either party every four years but is not compulsory 6. S/C means Service Charge 7. The typical tenant restoration obligation is to put the space back to the original condition when leased 8. Not subject to VAT, 25% 9. For multi-let properties including a proportionate part of common parts, including stairs, lifts, etc. 10. Tenant typically entitled to terminate the lease on 3 months notice 11. Applicable to buildings occupied after 31 Dec subject to agreement. Rules of cost regulated rent control ( omkostningsbestemt husleje ) may apply to buildings occupied prior to this date 12. Utility value review may be applied for by either party every two years. This mechanism applies if the lease is not governed by the rules of cost regulated rent control, cf. (11) 13. Alternatively 50% of the rooms in the flat if not more than 2 persons live in each room. The total number of residents may not exceed the number of rooms 14. Existing tenants in residential properties governed by the Danish Rent Act may have a pre-emption right to acquire the property in case of a direct or indirect sale 68

69 About Sadolin & Albæk About Sadolin & Albæk Sadolin & Albæk is a market-leading commercial property adviser and agent. We constantly strive to be recognised for our unrivalled skills, integrity, qualified and dedicated staff as well as for providing professional and accommodating client services. In Denmark as well as abroad, we draw on in-depth and comprehensive market knowledge. Coupled with our long-standing industry experience and cutting-edge analytical tools this helps us to create value for our clients. We make every effort to maintain these high standards of quality and service throughout, when assisting our clients with commercial lettings, commercial property valuations, property investment strategies or transactions involving major commercial and investment properties. Sadolin & Albæk strives to be the foremost and largest supplier of value-based solutions in the market for commercial and investment properties. We create value for our clients: We are always highly focused on ways to growing our clients potential for achieving their goals, whether higher profitability or efficiency, increased or reduced exposure to real property, higher returns or reduced risk. We deliver efficient and innovative solutions: We identify the best possible and viable solutions for our clients, and we are not averse to new ways of thinking and new approaches. International alliance with strong partner: We work closely with JLL, our alliance partner with more than 200 offices in 75 countries worldwide. Thanks to this partnership, we are able to assist our Danish clients in international markets, too. Best in Class : Sadolin & Albæk has repeatedly been named Best Danish real estate advisor and consultant by financial magazine Euromoney. The internationally acclaimed awards are based on international polls among peers in the property industry, starting back in Sadolin & Albæk has recurrently won several categories. Sadolin & Albæk is a member of RICS, the Royal Institution of Chartered Surveyors, internationally acclaimed for its high valuation standards and practices. Sadolin & Albæk offers a broad range of services in the following core business areas: Capital markets Qualified strategic advice on major property transactions. Based on solid market expertise and an outstanding data base compiled over decades, the highly qualified team mak ing up Sadolin & Albæk Capital Markets offers clients advisory services relating to the acquisition and divestment of property companies, single properties and property portfolios. Corporate solutions Experience-based advice on optimising space utilisation. Many businesses stand to gain substantial overhead savings from optimising their space utilisation, while improving standards for the benefit of employees and clients in the process. We help our clients clarify their demands and area requirements. On that basis, we identify the ideal solution and act as strategic facilitators in order to achieve the most favourable terms and conditions for our clients. Analysis and research In-depth market research and property valuations. Based on extensive market knowledge, solid practical experience and a keen analytical mindset, our dedicated team of analysts prepares thorough market research and analyses. We provide our clients with a well-documented basis for decision-making whatever the assignment. Commercial leasing Professional and dedicated commercial leasing. Our experienced and proactive leasing team handles commercial leasing exclusively, with particular focus on office and retail premises. The team has accumulated an extensive and unrivalled insight into the industry and specialist knowledge of the commercial letting market, both of which we constantly strive to maintain and improve. 69

70 Sadolin & Albæk contacts Sadolin & Albæk contacts Capital markets Copenhagen office Peter Winther Partner, CEO, MRICS Jan Kristensen Partner, COO, MRICS Christian Fladeland Pedersen Partner, Director, MRICS Kenneth Efdal Tronier Director, MSc BACL Anne Sofie Raaschou Sigaard Manager, MSc EBA Capital markets and commercial leasing Aarhus office Carsten Gørtz Petersen Partner, Director, MRICS Anders Holm Director, MRICS Karsten Petersen Estate Agent, Valuer, MRICS Tonny Yderholm Estate Agent, Valuer Henrik Borch Consultant Analysis and research Copenhagen office Maria Drews Winther Manager, MSc BACL Christian Langvardt Berg Senior Consultant, MSc Econ Christopher Elgaard Jensen Senior Consultant, MSc AEF Jens Rosenlund-Knudsen Consultant, MSc Econ Emil Helmsøe-Zinck Consultant, MSc Econ Jakob Bruun Borring Consultant, MSc AEF Muhamed Jamil Eid Consultant, MSc Econ & Man Corporate Solutions Copenhagen office Lau Melchiorsen Partner, Director, MRICS Keld Abildgaard Director Ulrich Reckert Director, MRICS Peter Lybye Manager Commercial leasing Copenhagen office Communications/press Peter Back Director, Letting, MBA, MRICS Tina Vestergaard Letting Manager Jan Dahl Letting Manager, MRICS Cecilie Lykkegaard Head of Communications 70