DENMARK Q MARKET REPORT COMMERCIAL REAL ESTATE MARKET. Full steam ahead for the real estate market Market rents and yields

Transcription

1 DENMARK MARKET REPORT MARKET UPDATE: Full steam ahead for the real estate market Market rents and yields COMMERCIAL REAL ESTATE MARKET Q1 2018

2 COMMERCIAL REAL ESTATE MARKET Q1 / 2018 PAGE 2 MARKET UPDATE Q FULL STEAM AHEAD FOR THE REAL ESTATE MARKET 2017 was a record year for the Danish commercial real estate market. The total transaction volume is an estimated DKK 95 billion (EUR 12.7 billion), 49% above the 2016 transaction volume of DKK 63.6 billion (EUR 8.5 billion). The graph on page 3 portrays the significant growth, that the market has undergone in recent years. PETER LASSEN COO, partner Cell phone peter.lassen@colliers.com 2018 has also started strong, led by an increasing number of international investors looking for large portfolio and single property deals. The big question everyone is asking themselves is, how long can this red-hot market last? The answer is that it can easily continue for several years, although stabilization periods and market adjustments will appear, which will affect various segments differently. We expect the following developments in the commercial real estate market for 2018 and the coming years: The office market will remain strong. Flexible office space will grow exponentially and the actors in this area will become more professional. The warehouse and logistics market will become more consolidated among investors with specialized knowledge and skills in this segment. Residential properties continue to be the sector with the highest investor interest. However, an area of concern is that the number of condominium project sales has fallen recently due to several factors: Buyers are concerned about buying at the top of the market and increased financial requirements for buyers were implemented as of 1 January 2018 for households with a mortgage of over 60% and a mortgage level four times above their income. Alternative property investments in other segments and geography are more attractive due to investors search for a higher yield. This includes segments such as senior and assisted living housing, dorms and youth housing, hotels and serviced apartments, parking facilities, etc. Increasingly, portfolios transactions will occur as the original investors seek to realize their profits. Hotel supply will grow exponentially in the coming years, which will be followed by a standstill, due to the cyclical nature of that segment. Re-printing only allowed with indication of source. Contact: Lisbeth Kempel, marketing director / Cell phone / lisbeth.kempel@colliers.com

3 COMMERCIAL REAL ESTATE MARKET Q1 / 2018 PAGE 3 Transaction volume / Q Billion DKK % 15% 60 5% Bolig Kontor % 22% Detail Industri og logistik Andet 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Estimated transaction volume Source: Colliers International Transaction volume by segment / Q % 15% 100 5% Residence Office % 22% Retail Industry and logistics Other 40 Source: Colliers International 20 0 Real estate vacancy levels / Q Lager og produk Detailhandel Kontor '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 OFFICE RETAIL INDUSTRY AND LOGISTICS Source: Ejendomstorvet

4 COMMERCIAL REAL ESTATE MARKET Q1 / 2018 PAGE 4 Increasing growth and employment 2,300, ,250, ,200, ,150, ,100, Full time employees Quarterly GDP PERSISTANT ECONOMIC GROWTH After a weak third quarter of 2017, where GDP fell by 0.9% Q/Q, a strong fourth quarter contributed to a 2.2% growth for This is the strongest annual growth Denmark has experienced since The primary difference between the Q3 and Q4 growth is due to private consumption, which was heavily influenced by consumers postponement of car purchases, as they awaited a political decision to change the vehicle duties, which was decided on September 21, The number of employees has increased by over 187,200 since April 2013 to a record 2,728,800 people, which is the highest number ever. The previous record set in April 2008 has thus finally been surpassed and occurred as we expected in Q By the end of 2019, we expect that there will be approximately 75,000 more employees compared to today. Currently, almost all economic indicators are positive, so expectations for the Danish economy are good: Annual GDP growth is expected to be 1.9% until Among other things, this is due to an increase in private consumption which in turn is driven by low unemployment and rising wage levels. At the same time, industrial production is at a record level. The low unemployment rate means that Denmark is approaching a labour constraint. The labour constraint is expected to increase the industry s incentive to invest, which should increase Danish competitiveness with the rest of the world. PRICES Nationally, the commercial real estate market is in excellent shape with falling vacancy within all segments, stable to slightly rising rent levels, and low financing costs due to the low interest rate level. The combination of these factors means that real estate continues to be traded at even lower yields than previously, although stabilization has occurred for prime assets. Certain segments and locations, however, still have potential for considerable increases in pricing. Manufacturing and logistics properties still have room for a reduced yield level relative to other segments. Less centrally located properties outside of Copenhagen and Aarhus have also come into the investors spotlight, which underpins the return on these properties as demand rises. Industrial and logistics properties are still trading at higher returns than other segments, while properties outside Copenhagen and Aarhus have also come in the spotlight of investors, which should add pressure on the yields for these properties as demand rises.

5 COMMERCIAL REAL ESTATE MARKET Q1 / 2018 PAGE 5 Residential properties continue to be the sector with the highest investor interest. However, an area of concern is that the number of condominium project sales has fallen recently due to several factors: Buyers are concerned about buying at the top of the market and increased financial requirements for buyers were implemented as of 1 January 2018 for households with a mortgage of over 60% and a mortgage level four times above their income.

6 PAGE 6 COLLIERS PULS Q JOSEPH ALBERTI Research Analyst MSc. Econ. Cell phone joseph.alberti@colliers.com Overview of market rent and yield The information in this document is regarded as coming from reputable sources. Even though everything has been done to ensure its accuracy, this cannot be guaranteed. We are not liable for any inaccuracies. The reader is encouraged to consult with professionals before acting on the basis of the material in this report. You may quote the market report Colliers PULS by providing a full source of reference. MARKET RENT The market rent is defined as the rent that a qualified tenant and a qualified landlord would agree at the evaluation date for the respective property, taking into account, among other things, the location, size, use, flexibility, quality, equipment and state of maintenance. The specified market rent is indicated in DKK per m² per year and is exclusive of operating costs. Operating costs consist of elements such as property tax, street and road contributions, insurance, shared electricity, stair washing, etc. that would normally be paid by the tenant. The landlord normally pays expenses for external maintenance and administration. The market rent is determined based on the normal operating expenses, consistent with the market, in the respective area. The yield is defined as the initial net operating income, which is the gross rental income and other income less any ground rent and after deduction of expenses and operating costs, at the date of valuation expressed as a percentage of the purchase price or gross capital value. The gross capital value is the total that a purchaser would have to pay, including property transfer taxes and other costs such as legal fees and agents. The property is assumed to be rented on market consistent terms with no vacancy. CONDITION AND LOCATION The individual property types and geographic areas are divided into the categories Best, Standard and Below average. The division refers both to the location and to the condition of the property, however for new constructions it is mainly location. Note that the division is associated with the individual property category, so that a good location for one property may be poor for another. CATEGORY DEFINITIONS: = The number is expected to increase in a year = The number is expected to be unchanged in a year = The number is expected to be lower in a year BEST // Prime location and quality. Either a new, modern building, or refurbished so that it is up-to-date and configured to meet future requirements. Low vacancy risk relative to market conditions. STANDARD // Good location and condition. The vacancy risk is moderate and reflects current market conditions. // The location or condition is below average. High vacancy risk relative to market conditions.

7 PAGE 7 OFFICE PROPERTIES Concerning the required rate of return, it is assumed that office properties are leased at terms consistent with the market. MARKET RENT DKK per m 2 per year excluding operation (%) BEST STANDARD PROGNOSIS BEST STANDARD PROGNOSIS ZEALAND Copenhagen City 2,000 1,300 1, Brokvarterer and Frederiksberg 1,350 1, Waterfront 1,800 1,350 1, Ørestaden 1,350 1,200 1, Other Copenhagen* 1, Suburbs north 1, Suburbs south/west Roskilde 1, Slagelse Ringsted Næstved Holbæk CENTRAL JUTLAND Aarhus City 1,350 1, Greater Aarhus 1, Horsens 1, Randers NORTHERN JUTLAND Aalborg City 1, Other Aalborg Nørresundby Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle 1, Kolding 1, Fredericia 1, Esbjerg 1, FUNEN Odense City 1, Other Odense Svendborg Middelfart Nyborg *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

8 PAGE 8 INDUSTRY AND LOGISTICS PROPERTIES Properties are located in an industrial zone with several properties of the same type. There is assumed to be a suitable administrative function on the property, in relation to its use. Concerning the required rate of return, it is assumed that the properties are rented to good lessees with leases that conform to the market. MARKET RENT DKK per m 2 per year excluding operation (%) BEST STANDARD PROGNOSIS BEST STANDARD PROGNOSIS ZEALAND Other Copenhagen* Suburbs north Suburbs south/west Roskilde Slagelse Ringsted Næstved Holbæk Køge** Greve/Tåstrup** CENTRAL JUTLAND Greater Aarhus Horsens Randers Herning area NORTHERN JUTLAND Other Aalborg Nørresundby Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle Kolding Fredericia Esbjerg FUNEN Other Odense Svendborg Middelfart Nyborg *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc. **Modern logistics.

9 PAGE 9 RETAIL PROPERTIES Properties in, for example, pedestrian streets with rental premises that are targeted towards shopping goods stores. The rental premises are regular and with a suitable façade width, and their size is between m². MARKET RENT DKK per m 2 per year excluding operation (%) BEST STANDARD PROGNOSIS BEST STANDARD PROGNOSIS ZEALAND Copenhagen City 22,000 12,000 2, Brokvarterer and Frederiksberg 3,700 2,500 1, Other Copenhagen* 2,500 1,800 1, Suburbs north 3,500 2,500 1, Suburbs south/west 3,000 1, CENTRAL JUTLAND Aarhus City 7,000 2,600 1, Horsens 3,000 2,350 1, Randers 1,800 1, NORTHERN JUTLAND Aalborg City 4,600 2,500 1, Other Aalborg 1,400 1, Nørresundby 1, Hjørring 1,600 1, Frederikshavn 1,500 1, TRIANGLE REGION AND SOUTHERN JUTLAND Vejle 3,300 2, Kolding 2,500 1, Fredericia 1,800 1, Esbjerg 3,200 2,500 1, FUNEN Odense City 5,300 3,200 1, Other Odense 1, Svendborg 2,450 1, Middelfart 1, Nyborg 1, *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

10 PAGE 10 PROPERTIES WITH CONVENIENCE STORES Supermarkets/discount supermarkets. (%) SUPERMARKETS DISCOUNT SUPERMARKETS PROGNOSIS ZEALAND Copenhagen City Brokvarterer and Frederiksberg Other Copenhagen* Suburbs north Suburbs south/west CENTRAL JUTLAND Aarhus City Horsens Randers NORTHERN JUTLAND Aalborg City Other Aalborg Nørresundby Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle Kolding Fredericia Esbjerg FUNEN Odense City Other Odense Svendborg Middelfart Nyborg *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

11 PAGE 11 BIG BOX STORES WITH SHOPPING GOODS The property is located in external commercial areas, which targets businesses with shopping goods. Therefore, it does not include properties used for the sale of product categories that take up a lot of space, in accordance with the relevant provisions of the Danish Planning Act. Concerning the required rate of return, it is assumed that the shops are rented out with leases that conform to the market. MARKET RENT DKK per m 2 per year excluding operation (%) BEST STANDARD PROGNOSIS BEST STANDARD PROGNOSIS ZEALAND Other Copenhagen* 1, Suburbs north 1, Suburbs south/west 1, CENTRAL JUTLAND Greater Aarhus 1, Horsens 1, Randers NORTHERN JUTLAND Aalborg Nørresundby Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle 1, Kolding 1, Fredericia 1, Esbjerg 1, FUNEN Odense City 1, Svendborg *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

12 PAGE 12 NEW/NEWER RESIDENTIAL RENT PROPERTIES Properties occupied after December 31st 1991, and therefore subject to market rent according to s section 15a of the Housing Regulation Act, among others. MARKET RENT DKK per m 2 per year excluding operation (%) BEST STANDARD PROGNOSIS BEST STANDARD PROGNOSIS ZEALAND Copenhagen City 2,000 1,600 1, Brokvarterer and Frederiksberg 1,800 1,600 1, Waterfront 2,000 1,600 1, Ørestaden 1,600 1,400 1, Other Copenhagen* 1,600 1,400 1, Suburbs north 1,600 1,400 1, Suburbs south/west 1,500 1,400 1, CENTRAL JUTLAND Aarhus City 1,750 1,650 1, Greater Aarhus 1,600 1,400 1, Horsens 1, NORTHERN JUTLAND Aalborg City 1,350 1,150 1, Other Aalborg 1,250 1, Nørresundby 1,250 1, Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle 1,250 1, Kolding 1, Fredericia Esbjerg 1, FUNEN Odense City 1,500 1,250 1, Other Odense 1,150 1, Svendborg 1, Middelfart 1, Nyborg 1, *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

13 PAGE 13 OLDER RESIDENTIAL RENTAL PROPERTIES It is assumed that the properties are fully developed, such that there is no further potential for increasing rent through renovation, in accordance with section 5, subsection 2. Similarly, it is assumed that resources have been allocated for operation, pursuant to applicable rules. (%) BEST STANDARD PROGNOSIS ZEALAND Copenhagen City Brokvarterer and Frederiksberg Waterfront Other Copenhagen* Suburbs north Suburbs south/west CENTRAL JUTLAND Aarhus City Greater Aarhus Horsens NORTHERN JUTLAND Aalborg City Other Aalborg Nørresundby Hjørring Frederikshavn TRIANGLE REGION AND SOUTHERN JUTLAND Vejle Kolding Fredericia Esbjerg FUNEN Odense City Other Odense Svendborg Middelfart Nyborg *Other Copenhagen consists of Vanløse, Valby, Brønshøj, Nordvest, Amager, etc.

14 Colliers International (NASDAQ and TSX:CIGI) is a leading real estate and advisory company represented in 69 countries, with a total of about 15,400 employees. In Denmark, we are around 100 employees, in Copenhagen, Aarhus, Odense and Vejle. We offer sales of investment and user properties as well as leasing and valuation within all business segments. Furthermore, we offer strategic consultancy, analyses, corporate finance and corporate solutions. We have strong digital solutions for focused and efficient marketing of properties based on data. Furthermore, we have a comprehensive network and list of prospective buyers. colliers.dk Tel COPENHAGEN Gammel Kongevej 11, 1610 Copenhagen V AARHUS Søren Frichs Vej 38 A, 8230 Åbyhøj VEJLE Den Hvide Facet 1, 1 st floor, 7100 Vejle ODENSE Tagtækkervej 8, 5230 Odense M AALBORG Østre Havnegade 20, 9000 Aalborg