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MARKET REPORT - RED PROPERTY ADVISERS ISSUE III 2015 - COPENHAGEN

Copenhagen continues to grow more transparent and liquid and is currently one of the most attractive investment markets in Europe.


EXECUTIVE SUMMARY

HIGH VOLUME AND LARGE TRANSACTIONS

The investment volume of 2015 will in our opinion by far surpass the volume in 2014. The significant increase in the purchase of land plots further underlines that the investors have confidence in the Danish market – not just for the moment, but years ahead. Furthermore, the Danish pension funds have increased investments, especially in the office segment, which also indicates reliance in the stability of the market.

ISSUE III 2015 2 / 27

There has been several major and noteworthy transactions in the past months. Illum was sold in Q2 to the tenant and operator, Central Group, at an estimated price of DKK 2.5 bn and Galleri K has just been bought by Patrizia. Other notable transactions are the Scandic Hotel project in Skelbækgade which was sold to KLP Ejendomme with Scandic on a 20 year lease and NIAM’s acquisition of the former SKAT headquarters on Østbanegade, Tietgens Have. We expect more large transactions in the second half of 2015 and a still positive occupier market.

INVESTMENT MARKET OFFICE

2015 Q1

2015 Q2

CHANGE

Prime yield (Copenhagen City) 5.00% 4.75% 0 bp Secondary yield (Copenhagen area) 7.00% 7.00% 0 bp Investment volume in mill. (estimated) 696 € 384 € - 312 € Vacancy (Copenhagen City) 7.20% 7.20% 0 bp RETAIL 2015 Q1 2015 Q2 CHANGE Prime yield (Copenhagen City) Secondary yield (Copenhagen area) Investment volume in mill. (estimated)

3.75% 6.25% 189 €

3.75% 6.25% 514 €

0 bp 0 bp + 325 €

TRANSACTION VOLUME LAST 12 MONTHS - DKK 41.18 BN 15 12

Enjoy the report! Nicholas Thurø Managing Partner RED Property Advisers

9 BN DKK

Both occupier- and investment markets are across all segments in high activity driven by a still stronger economy and attractive financing market. Denmark is an investment hot spot in Europe with especially retail and residential properties being sought after by global investors. We consider the office segment to be the next big investment segment as the international investors have become comfortable with the Danish market.

6 3 0 Retail

Residential

Land

Other


CONTENT ISSUE III FOCUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 MACROECONOMICS

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

INVESTMENT MARKET OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 RESIDENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

RETAIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 OCCUPIER MARKET OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 RETAIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 RETAIL - FOOTFALL ANALYSIS

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

APPENDIX - DANISH TRANSLATION DANSK VERSION AF FOKUS ARTIKEL

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ISSUE III 2015 3 / 27


The iconic retail landmark Gallery K was aquired by Patrizia. RED Property Advisers were sales advisers on the transaction.

ISSUE III 2015 4 / 27

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX


ISSUE III FOCUS

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 5 / 27


DANSK VERSION PÅ SIDE 25

ISSUE III FOCUS YIELD LEVELS – IS THE INTEREST RATE A CONCERN? The interest rates continue to be at a historical low level despite a minor increase the past few months. As commercial real estate assets in the traditional sense are regarded as investment objects such as for example bonds, the historically low return on bonds in today’s market must imply an increase in demand and price on commercial real estate properties. Another consequence of the low interest rates is a cheaper access to financing. But how much of the development in yields can be explained by shifts in interest rate levels, and what will a decrease/ increase in interest rate levels mean in reality? Our studies identify a certain degree of correlation between the historical development in interest levels and yield levels in office properties as well as retail properties during the last 15-20 years. In the last few years, where the interest rates have dropped to the floor, it seems that only retail properties and residential properties are experiencing a continuous pressure on the real yield, whereas office properties look to have found a stable NIY level around 4.75 – 5 %. The price development on new residential income properties has primarily been driven by the increasing prices of condominiums, but also residential rent controlled income properties have increased in price. DEFINITION: The yield level is defined as a net initial yield and consists of the risk-free interest rate and the risk premium demanded by the investors.

Our assessment is that the development in interest rates is a significant indicator for the yield development, but it is far from a

ISSUE III 2015 6 / 27

FOCUS

FIGURE 1: NET INITIAL YIELD FOR “PRIME” OFFICE- AND RETAIL PROPERTIES IN COPENHAGEN Return 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

10y gov. bonds 10y gov. bonds

30y mortgage 30y Mortgage Bondsbonds

prime office Of ce NIY Prime Return

Prime retail RetailNIY Prime Return

Source: Statistics Denmark, Realkreditrådet & RED Property Advisers

stand-alone explanatory variable. DEVELOPMENT OF THE YIELD LEVELS Generally, interest rate levels’ effect on yield levels can be approached from 2 perspectives. Partly as the higher/lower return from bonds as an alternative investment, and partly as the financing costs associated with the property investment. Figure 1 shows the 10-year government bond as well as the long term mortgage rate (30 year) as relevant measures for the alternative investment interest rate and the financing interest rate respectively, held in comparison to the development in yield levels for both office- and retail properties. The figure shows a certain positive correlation for both segments, although office yield levels do not quite follow the interest rate drop during the past 4 years. Since the beginning of 2015 the interest rates have had minor increases, which have led to concern among the investors,

MACROECONOMICS

INVESTMENT MARKET

who fear a corresponding increase in yield levels. Is the fear justified? We believe there is no reason to worry in the short term. RELATED INFO: Residential rent controlled income properties in Copenhagen have been traded at prices equivalent to yields in the level of 1 – 2 %.

OUTLOOK FOR OFFICE YIELDS The office prime yield in Copenhagen looks to have found a stable level around 5 %, where it has remained during the past 5 years. Thus, the drop in interest rates during the past few years has not affected the office prime yield. This is highly remarkable as our closest neighbor countries have experienced significant yield compressions during the last few years. Office prime yields in Oslo and Stockholm have dropped to 4.4 % and 4 % respectively – the lowest in 10 years in both countries. Thus, it is interesting that

OCCUPIER MARKET

APPENDIX


Danish yields are still relatively far from the lowest yield level in the same timespan – 4 % in 2006 - 2007. One of the explanations is that a large part of the demand for commercial real estate comes from foreign investors, to whom office properties simply has not been first priority. On the contrary the office market is dominated by domestic, institutional investors. The institutional investors in Denmark do not leverage their investments and are therefore not as sensitive to shifts in interest rate levels. Thus, a sudden interest rate increase is not expected to affect office yield levels significantly in the short term, as the terms for financing will still be favorable in a European context, and the investment activity will remain high. Nor will an interest rate decrease have a significant effect, and it is our forecast that we will experience the office prime yield in Copenhagen to remain steady in the levels of 4.75 – 5 % in the short term. Albeit, it is not unrealistic that we will see deals made at yields around 4.50 % if the right product is put in the market.

have followed in the wake of the interest rate development, have made way for a great arrival of foreign investors. In today’s market, the foreign investors are behind a considerable share of the investment activity in the retail segment equaling around 60 % of the total volume since 2014. A consequence of a potential increase in interest rate levels could lead to hesitance from foreign investors, which expectedly will lead to a higher average yield level. The foreign property funds often leverage their investments, and are willing to accept a low net initial yield because their focus is on the return on equity. All in all, the return on equity will be lower at a higher interest rate, which will affect their pricing of the asset. In one of the more recent due diligence processes, we experienced a sudden reticence from the investors as their original business case was worsened by an increase in interest rates and a satisfying return on equity became more difficult to distribute.

we will almost undoubtedly register retail property deals at lower yields as a result of unique units with a substantial development potential being put in the market. However, such deals will not reflect the stabilized prime retail yield, as there is still a significant risk premium attained on commercial real estate properties, which has been the case since the financial crisis. Thereby, it is our forecast that a temporary lower bound for the yield level has been found, which the spread between the risk-free interest rate and the yield levels on retail- as well as office properties supports.

Taking all into account, we do not see any signs of significant changes in the yield level as a consequence of sudden interest rate level shifts in the short term. Albeit,

IS RETAIL MORE SENSITIVE?

FIGURE 2: THE RISK PREMIUM IS STILL HIGH During the last couple of years we’ve seen a constant yield pressure on high-street retail properties, which has dropped to 3.5 - 3.75 % – on level with what we saw before the financial crisis. In contrast to the office market, the retail market is driven by foreign interest, where investors are willing to leverage their investments with up to 60 % mortgage financing, which altogether has created a downwards pressure on the yield as a consequence of the low interest rate levels. The favorable terms for financing, which

FOCUS

MACROECONOMICS

Risk premium 7% 6% 5% 4% 3% 2% 1% 0% 2010

2011

2012

2013 Risk premium Retail

2014

2015

Source: Statistics Denmark & RED Property Advisers Note: Nominal risk premium = Yield + Inflation – Risk-free interest rate, with inflation being a 5-year moving average.

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

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MACROECONOMICS

ISSUE III 2015 8 / 27

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX


MACROECONOMIC OVERVIEW THE DANISH ECONOMY DOING STILL BETTER For the first half of 2015, the real GDP growth rate has been positive. In real terms (i.e. adjusted for inflation), the GDP growth rate remains in positive territory because of the very low inflation levels of 2013 and 2014 (approx. 0.7 %). Since 1990 the inflation rate has varied around 2 %.

MACROECONOMIC VARIABLES KEY VARIABLE

CURRENT

GDP Growth Rate

1.9%

Inflation Rate

0.6%

Unemployment Rate

5.2%

Short Term Mortgage Rate*

-0.06%

Long Term Mortgage Rate*

2.75%

*Short Term is an average of 1 and 2 year inconvertible bonds, and Long Term is 30 year convertible bonds.

Expectations for the inflation rate for the next 2 years fluctuate around 1 %, and despite short-term upsets (e.g. the Greek fiscal crisis, or the Chinese stock-market trouble), the trend towards an economic upswing seems very present.

...resulting in a declining, but positive, real GDP growth rate...

Source: Statistics Denmark & Association of Danish Mortgage Banks

REAL GDP GROWTH 6

3

0

As we mentioned in our Market Report I 2015, the economy typically follows a business cycle as a consequence of government stabilization policy. If the economy grows too fast or unsustainably (say, in a housing bubble), governments may intervene and implement fiscal or monetary initiatives to dampen growth in order to reduce the risk of a similarly quick downturn. This is due to the fact, that in both psychologic and economic terms, a loss may be felt to weigh heavier than a gain of equal size and may have multiplier effects that intensifies the negative consequences of a downturn (e.g. forced sale/fire sale of assets in a bankruptcy). One of the policy tools used to stabilize the economy is the interest rate. Currently it seems that the 30 year mortgage rate has reached its lower limit. From having reached its most recent low of approx. 2 % in the early spring of 2015, it has since risen and now fluctuates around 3 %.

FOCUS

MACROECONOMICS

-3

-6 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2010

2011

2012

2013

2014

2015E

2016E

2017E

Source: Statistics Denmark & The Danish National Bank

INFLATION GROWTH 4

3

2

1

0 2005

2006

2007

2008

2009

Source: Statistics Denmark & The Danish National Bank

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

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INVESTMENT MARKET

ISSUE III 2015 10 / 27

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX


INVESTMENT MARKET - OFFICE INVESTORS ARE STILL CONFIDENT Following a very strong Q1, the transaction volume in the office segment continues to be strong with a volume of approx. DKK 2.9 bn in Q2 – slightly outperforming the corresponding Q2 volume in 2014. The institutional investors still dominate the market, with the main targets continuing to be well-located properties in Copenhagen City and The Harbour areas. As demand for prime assets remain the strongest, we see a tendency where more attention is given to secondary properties in the Greater Copenhagen area.

INVESTOR DISTRIBUTION – Q3 2014 - Q2 2015

Developers 4%

Users 4%

Others 5%

Institutional Investors 54%

Private Investors 7%

14.4

Real Estate Companies 15%

BN DKK

The institutional investors still dominate the market... Property Funds 11%

So far in 2015 the total office investment volume in Greater Copenhagen is approx. DKK 5.2 bn. The most notable transaction in Q2 was NIAM’s acquisition of the 42,000 sqm complex housing the Danish tax center located near the North Harbour area. The property was bought for approx. DKK 750 m. The prime yield in Copenhagen City is currently in the level of 4.75 - 5.00 %, and we expect it to remain stable in the short term, with a slight decrease over time.

FOCUS

MACROECONOMICS

Source: RED Property Advisers

YIELDS SUBAREA

Q3 2013

Q3 2014

Q3 2015

Copenhagen City (CBD)

5.25%

5.25%

4.75%

Copenhagen E & W

5.75%

5.75%

5.75%

Frederiksberg

6.00%

6.00%

6.00%

Harbour areas

5.00%

5.00%

4.75%

South Harbour

6.00%

6.00%

6.00%

Ørestad

6.00%

5.75%

5.75%

Copenhagen N & NW

6.50%

6.50%

6.50%

South and West of Copenhagen

7.25%

7.25%

7.25%

North of Copenhagen

5.25%

5.25%

5.25%

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 11 / 27


INVESTMENT MARKET - RESIDENTIAL HIGH DEMAND CREATES A PROMISING OUTLOOK Investment activity in residential properties has been slightly decreasing with a transaction volume of approximately DKK 8 bn in the past 12 months. Thus, it is now the third largest investment segment – however, the demand is still high. The main investor segments continue to be property funds and real estate companies accounting for 66 % of the volume combined. Within the Copenhagen area and parts of Greater Copenhagen the demand for housing continues to be at a very high level – at which the supply cannot keep up with demand. Thus, rent levels are high – and the sqm.-prices are at record level. The transaction volume in Q2 was approx. DKK 2.3 bn of which the largest transaction accounted for one fourth of the volume, as Havneholmen 46-84 – residential complexes in Copenhagen – were sold at a price in the level of DKK 500 m. The transaction volume is expected to be high the rest of the year. Although the number of registered transactions so far in Q3 is relatively low, the transaction volume is not – mainly due to a DKK 1,200 m sale of a residential project near Amager Strandpark. The project, named Øresundskysten, will be characterized by a tower of 42 meters – and the building cost of the project is expected to be in the level of DKK 600 m. Prime yields and rent levels were stable the past quarter, however slightly compressed due to the high demand in the residential segment – which we expect to continue throughout 2015.

ISSUE III 2015 12 / 27

FOCUS

INVESTOR DISTRIBUTION – Q3 2014 - Q2 2015 Institutional Investors 5%

Others 15%

Property Funds 38%

7.9 BN DKK

Real Estate Companies 28%

Private Investors 14%

Source: RED Property Advisers

YIELDS

PRIME MARKET RENT DKK/SQM SUBAREA

Q3 2015

SUBAREA

Q3 2015

Copenhagen City

2,000 - 2,200

Copenhagen Area - rent control

2.00 - 3.00%

Copenhagen E, W & N

1,600 - 1,800

Copenhagen Suburb - rent control

3.00 - 4.00%

Frederiksberg

2,000 - 2,200

Copenhagen Area - market rent

4.00%

North Harbour

2,000 - 2,200

Copenhagen Suburb - market rent

4.50%

South Harbour

1,400 - 1,600

Copenhagen S

1,400 - 1,600

North of Copenhagen

1,700 - 1,900

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX


DSB Ejendomme are selling the residential complex ”Den Gule By”. RED Property Advisers have been awarded the sales mandate.

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 13 / 27


INVESTMENT MARKET - RETAIL HIGH DEMAND AND INTERNATIONAL DOMINANCE The Danish retail market is still driven by the Copenhagen high streets, which are characterized by high demand. In the past 12 months the most active investor segment within the market was once again the property funds, who accounted for 36 % of the total retail transaction volume. The Q2 volume amounted to approximately DKK 3 bn, which was primarily carried by the sale of one of the most iconic retail buildings in Denmark, Illum. The building, located in the heart of Copenhagen, was acquired by the tenant and operator, Central Group, a major international player in the shopping centre industry. The property was sold by BlackRock at an estimated price of DKK 2.5 bn. The past few years we have seen an increasing amount of foreign investors in the Danish retail market and the tendency seems to continue. Since 2014 approximately 60 % of the total investments in the retail segment has been performed by foreign investors.

INVESTOR DISTRIBUTION – Q3 2014 - Q2 2015 Others 3%

Institutional Investors 12%

Real Estate Companies 17%

Users 32%

10.0 BN DKK

Property Funds 36%

Source: RED Property Advisers

The prime retail yield has been under pressure and has dropped to 3.75 % due to the high demand. Though activity in the retail market is mainly centered around the Copenhagen high streets, we have also witnessed investments made outside of Copenhagen in the beginning of Q3. The fierce competition around the high streets leads the investors to look towards more secondary retail cities in their hunt for yield. In Aarhus, one of the more prominent retail buildings of the city has been sold. The Regina property was acquired by Standard Life Investment for DKK 275 m.

ISSUE III 2015 14 / 27

FOCUS

YIELDS CITY

STREET/SUBMARKET

Q3 2013

Q3 2014

Q3 2015

Copenhagen

Strøget (incl. Vimmelskaftet)

4.75%

4.10%

3.75%

Copenhagen

Strøget (secondary pedestrian area)

5.25%

5.25%

4.75%

Copenhagen

Østerbrogade

5.50%

5.50%

5.50%

Copenhagen

Nørrebrogade

6.25%

6.25%

6.00%

Copenhagen

Købmagergade

4.75%

4.10%

3.75%

Copenhagen

Lyngby

5.50%

5.50%

5.50%

Copenhagen

Suburban

6.75%

6.75%

6.75%

Aarhus

Søndergade

5.25%

5.25%

5.25%

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX


TRANSACTIONS

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 15 / 27


TRANSACTIONS OFFICE STREET NAME

LOCATION

DATE

SIZE (SQM)

PRICE VENDOR TYPE (M DKK)

Ny Kongensgade 9A

CPH City

2015Q3

Skagensgade 64-66

Taastrup

Galleri K, condominium 2 + 4

CPH City

Dag Hammarskjölds Allé 13 Enghavevej 36

VENDOR NAME

BUYER TYPE

BUYER NAME

2,312

36.4 Private investor

Private investor

Property fund

Thylander

2015Q3

6,000

2015Q3

8,480

33.0 User

DLH

Real estate company

Actus

Property fund

Patrizia

CPH E

2015Q2

3,217

65.6 Private investor

Viby J

2015Q2

3,793

55.6 Private investor

Private investor

Institutional investor

Industriens Pension

Private investor

Institutional investor

PKA

Gasværksvej 7

Aalborg

2015Q2

5,885

Hauser Plads 10

CPH City

2015Q2

2,075

N/A

N/A

N/A

Hjerteforeningen

Private investor

Kajakvej 2 (Nordhuset)

Ørestad

2015Q2

5,000

Metorion

Skanska

Property fund

Doric Group

Katrinebjergvej 107

Århus N

2015Q2

3,233

90.0 Private investor

Martinsvej 7-9

Frederiksberg

2015Q2

3,187

69.0 Real estate company Kontiki Ejendomme

Katrinebjergvej ApS

Private investor

Na Holding ApS

Real estate company

Kirkbi Invest

Raffinaderivej 10

CPH S

2015Q2

31,492

150.0 User

Sankt Annæ Plads 24-28

CPH City

2015Q2

6,500

208.5 User

IC Companys

Private investor

Private investor

Lauritzen Fonden

Private investor

Private investor

Silkegade 8

CPH City

2015Q2

4,277

Sommervej 31 (Zenit Company House)

Aarhus

2015Q2

6,270

120.0 Institutional investor Danica/Nordea pension

Private investor

Private investor

118.0 Developer

NCC

Institutional investor

Upsalagade 20

CPH E

2015Q2

3,336

PKA

Serviceforbundet

Developer

Gefion Group

Østbanegade 123 (Tietgens Have)

CPH E

2015Q2

42.000

Property fund

Niam

N/A Institutional investor Magistrenes Pension

124.0 N/A 33.8 User 122.0 Developer

61.5 User

est. 750.0 Institutional investor Confidential

LAND STREET NAME

PURPOSE

LOCATION

DATE

SIZE (SQM) EST. PRICE PR. SQM. OF BUILDING RIGHT

PRICE VENDOR NAME (M DKK)

BUYER NAME

Ceresbyen 3

Residential

Aarhus

2015Q3

35,625

5,650

Ceres Allé 1

N/A

Aarhus C

2015Q2

8,900

N/A

Ceres Allé 1

N/A

Aarhus C

2015Q2

9,300

N/A

Dybbølsbro land plot

Mixed

CPH W

2015Q2

37,000

7,800

est. 235.0 DSB Ejendomme

Ikea

Dyrehavegårds Jorder

Mixed

Lyngby

2015Q2

140,000

6,000

est. 500.0 Lyngby-Taarbæk Kommune

Novozymes

Ørestad Nord

Residential

CPH S

2015Q2

14,500

4,500

est. 65.3 By og Havn

Calum

Ørestad Nord

Residential

CPH S

2015Q2

16,700

4,500

est. 75.2 By og Havn

AP Pension

est. 200.0 Unibrew

A. Enggaard

50.3 N/A

N/A

40.3 N/A

N/A

HOTEL HOTEL NAME

LOCATION

DATE

PRICE PR. ROOM (DKK)

PRICE (M DKK)

VENDOR NAME

BUYER NAME

Skelbækgade (Scandic Hotel)

CPH W

2015Q3

1,650,000

610.0

Benjamin Capital

KLP Ejendomme

Tordenskjoldsgade 15 (Hotel Opera) Cabinn Vejle

CPH City

2015Q3

626,000

57.0

ARP-Hansen Hotel Group

Private investor

Vejle

2014Q4

294,118

30.0

Spar Nord

Cabinn

Hotel Marriott

CPH City

2014Q4

1,740,000

700.0

BlackRock

Solstra

Scandic Odense

Odense

2014Q3

240,000

24.0

TopDanmark

Private investor

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MACROECONOMICS

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OCCUPIER MARKET

APPENDIX


RETAIL STREET NAME

LOCATION

DATE

SIZE (SQM)

PRICE VENDOR TYPE (M DKK)

VENDOR NAME

BUYER TYPE

BUYER NAME

Købmagergade 25

CPH City

2015Q3

1,149

Confidential Private investor

Private investor

Property fund

CapMan

Galleri K Søndergade 53-55, Sønder Alle 9-11, Amaliegade 20

CPH City

2015Q3

16,000

Confidential Institutional investor

Bank of Ireland

Property fund

Patrizia

Århus

2015Q3

12,199

275.0 Real estate company

N/A

Property fund

Standard Life Investments

Gladsaxe Møllevej 14

Søborg

2015Q3

4,399

Corem

Real estate company Andersen Ejendomme ApS

Østergade 52 (Illum)

CPH City

2015Q2

44,586

Blackrock

User

Husby Allé 5

Taastrup

2015Q2

4,393

72.0 Real estate company

Corem

Real estate company Andersen Ejendomme ApS

Ny Østergade 14-20, ejl.nr. 1-4.

CPH City

2015Q2

1,925

110.0 Real estate company

Confidential

Property fund

Confidential

Sydbanegade 2A-4 m.fl.

Kolding

2015Q2

13,212

67.7 Real estate company

Essex

Property fund

Thylander

Vimmelskaftet 46-48 m.fl.

CPH City

2015Q2

3,943

137.0 Institutional investor

PKA

Property fund

Standard Life Investments

72.0 Real estate company est. 2,500.0 Property fund

Central Group

RESIDENTIAL STREET NAME

LOCATION DATE

Øresundskysten

CPH S

SIZE (SQM)

PRICE VENDOR TYPE (M DKK)

VENDOR NAME

BUYER TYPE

BUYER NAME

2015Q3

57,000

1,200.0

Developer

Skanska

Real estate company

Balder

2015Q3

25,000

700.0

Real estate company

COPI & Artha

Property fund

Pears

Amalieparken - Punkthusene

Vallensbæk 2015Q2

8,080

177.0

Property fund

Confidential

Property fund

Confidential

Golfparken 1-9

Herning

2015Q2

6,741

81.0

Real estate company

Confidential

Real estate company

Confidential

Havneholmen 46-86

CPH W

2015Q2

23,669

504.0

Real estate company

Fredensborg Norge AS

Real estate company

Heimstaden

Islands Brygge, 70 cond.

CPH S

2015Q2

N/A

N/A

Institutional investor

TopDanmark

Real estate company

C.W. Obel

Rampelyset 1 (Musicon Kollegiet)

Roskilde

2015Q2

5,121

76.0

Property fund

NIAM

Private investors

Ejendomsselskabet Musicon

Skejbyparken 200

Århus N

2015Q2

3,840

77.5

Private investor

Private investor

Private investor

Private Investor

Strandvejen 141

Hellerup

2015Q2

1,536

61.0

Real estate company

Jeudan

Real estate company

Atlas Ejendomme ApS

Vesterbrogade 80-82 + 80B

CPH W

2015Q2

7,179

156.0

Private investor

Confidential

Property fund

CapMan

Portefølje, Store Kongensgade et al. CPH City

FOCUS

MACROECONOMICS

INVESTMENT MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 17 / 27


RED Property Advisers recently let out Dirch Passers Allé 27 to Steelseries ApS

ISSUE III 2015 18 / 27

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER MARKET

APPENDIX


OCCUPIER MARKET

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 19 / 27


OCCUPIER MARKET - OFFICE GREATER TRANSPARENCY IN THE OCCUPIER MARKET FOR OFFICES The occupier market for offices is highly influenced by the market situation which is shown in the figure. The vacancy rate for offices follows the trend of the unemployment rate. In the second quarter of 2015 the vacancy rate in Copenhagen City increased for the first time since the beginning of 2014 as well as the unemployment seems to level off. It indicates that the economy, and thereby the business segment in general, is in a positive trend but is slowly reaching a lower boundary. However, Oline, who publishes the vacancy rates, made it possible per 1st of January for market players other than brokers to list their vacant offices on their platform. This big change in how Oline gathers data should intuitively imply differences in the vacancy rates. Thus, roughly speaking, it is misleading to compare the vacancy rates before and after 2015. The increasing vacancy rate in Copenhagen City should therefore not necessarily be an indication of a declining growth, or even a setback in the office segment, but rather a more precise measurement of the Danish vacancy rates in the various segments.

SIGNIFICANT LEASES STREET NAME

LOCATION

DATE

SIZE (SQM) LANDLORD

TENANT

Strandgade 71-73

CPH City

2015/Q3

3,792 Wilders Plads Ejendomme

Tiger

Wildersgade 8

CPH City

2015/Q3

2,010 C.W. Obel

N/A

Langebrogade 6

CPH City

2015/Q3

1,293 Unipension Ejendomme

N/A

Sundkaj 9

CPH E

2015/Q3

1,810 Udviklingsselskabet By & Havn N/A

Vimmelskaftet 43

CPH City

2015/Q3

1,006 Vimmelskaftet A/S

N/A

Lyongade 21

CPH S

2015/Q3

4,756 Dreyers Fond

Copenhagen Municipality

Otto Mønsteds Gade 5

CPH W

2015/Q2

1,003 Bikuben Fonden

N/A

Emdrupvej 115

CPH NW

2015/Q2

2,014 Theodor Lund & Petersen Holding Verdens Børn

Vognmagergade 5

CPH City

2015/Q2

2,203 Ejendomsselskabet Vognmager- N/A gade 11

Strødamvej 46

CPH E

2015/Q2

7,598 Danske Bank

Badstuestræde 20

CPH City

2015/Q2

Tobaksvejen 4

CPH Area

2015/Q2

6,067 House of Prince

PostNorden

Adelgade 12

CPH City

2015/Q2

3,251 Tetrep Adelgade

N/A

Nørre Voldgade 90-92

CPH City

2015/Q2

1,200 Pensionkassen for Jordemødre

Nordjyske Medier A/S

Langebrogade 1

CPH City

2015/Q2

1,289 C.W. Obel

Copenhagen Economics

Havneholmen 25

CPH W

2015/Q2

6,500 Norrporten

L'Oréal

Havneholmen 25

CPH W

2015/Q2

1,200 Norrporten

Spillemyndigheden

Landemærket 29

CPH City

2015/Q2

Lersø Parkallé 2

CPH E

2015/Q2

Rued Langgards Vej 6-8

CPH S

2015/Q2

Egmont Publishing Magasiner

826 DLF

N/A

822 Hinton Invest

N/A

2,711 Københavns Erhvervsakademi 823 C.W. Obel

N/A NMP A/S

VACANCY RATES AND UNEMPLOYMENT Office vacancy rates compared to unemployment in Copenhagen

PRIME RENT DKK/SQM* Q2 2015

10,00%

Copenhagen City (CBD)

1,650

8,00%

Copenhagen E & W

1,250

Frederiksberg

1,200

Harbour areas

1,800

South Harbour

1,250

Ørestad

1,200

*Base rents

ISSUE III 2015 20 / 27

Vacancy rate Copenhagen City

Vacancy rate Copenhagen Area

Unemployment Copenhagen Area

Source: Statistics Denmark & Oline.dk

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER MARKET

APPENDIX

Q1 2015

Q3 2014

Q1 2014

Q3 2013

Q1 2013

Q3 2012

Q1 2012

Q3 2011

Q1 2011

Q3 2010

Q1 2010

Q3 2009

900 1,250

Q1 2009

North of Copenhagen

0,00% Q3 2008

South and west of Copenhagen

2,00%

Q1 2008

950

4,00%

Q3 2007

Copenhagen N & NW

6,00%

Q1 2007

SUBAREA

12,00%


OCCUPIER MARKET - RETAIL UPWARDS PRESSURE ON THE PRIME RENT LEVELS The Danish retail market continues to evolve. New players are entering the field and existing brands are expanding, which has put upwards pressure on the rent levels, as prime space is still limited in Copenhagen. In Q1 we saw Starbucks opening up at a new location, and this summer the major American restaurant chain, TGI Fridays, entered the Danish market with the opening at a prestigious location at Højbro Plads in the heart of Copenhagen. It is the 1st of already 5 planned openings in Denmark by the restaurant chain that employs 70,000 people on a global scale. Consumer confidence levels continued to

grow throughout Q2 and is now at the highest point since the financial crisis, thus encouraging investors and increasing demand by occupiers. Vacancy rates in Copenhagen City declined by 0.2 percentage points, while Copenhagen Area increased by the corresponding rate in Q2. The low vacancy rate along with the continued pressure on rent levels supports the fact, that we are experiencing a landlords’ market in the prime locations of Copenhagen. Thus, we expect occupiers to have increased focus towards the side streets and more “upcoming” areas looking forward.

STREET NAME

LOCATION

DATE

Højbro Plads 5-7

CPH City

2015Q3

N/A

TGI Fridays

Gammel Mønt 5

CPH City

2015Q3

158

JUNK de LUXE

Østergade 6

CPH City

2015Q3

143

66oNorth

Frederiksborggade 12

CPH City

2015Q2

411

Burger King

Fields

CPH S

2015Q2

1,000

Frederiksborggade 10

CPH City

2015Q2

180

Frederiksbergcenteret

Frederiksberg

2015Q1

10,000

Købmagergade 65

CPH City

2015Q1

150

The Body Shop

Kristen Bernikows Gade 5

CPH City

2015Q1

N/A

Aura

Kronprinsensgade 12

CPH City

2015Q1

113

Vagabond

Amagertorv/Illum

CPH City

2014Q4

N/A

Prada

SIZE (SQM)

NEW TENANT

Normal Daily 25 new shops including COS, HAY, H&M et al.

PRIME RENT DKK/SQM SUBAREA

Q2 2015

Q3 2015

CHANGE

Strøget - low end

10,000

10,000

0.00%

Strøget - average

17,500

17,500

0.00%

Strøget - high end

23,500

23,500

0.00%

Købmagergade - low end

7,500

7,500

0.00%

Købmagergade - average

14,000

14,000

0.00%

Købmagergade - high end

17,500

17,500

0.00%

Strøget Area (secondary pedestrian area)

6,250

6,250

0.00%

Østerbrogade

2,600

2,600

0.00%

Nørrebrogade

1,900

1,900

0,00%

VACANCY RATES AND CONSUMER CONFIDENCE Retail vacancy rates compared to consumer confidence in Copenhagen 15

5,00% 4,50%

10

4,00% 3,50%

5

3,00%

0

2,50% 2,00%

-5

1,50%

-10

1,00%

-15

0,50%

-20

Vacancy rate Copenhagen City

Q1 2015

Q3 2014

Q1 2014

Q3 2013

Q1 2013

Q3 2012

Q1 2012

Q3 2011

Q1 2011

Q3 2010

Q1 2010

Q3 2009

Q1 2009

Q3 2008

Q1 2008

Q1 2007

0,00% Q3 2007

...the major American restaurant chain, TGI Fridays, entered the Danish market...

SIGNIFICANT LEASES

Vacancy rate Copenhagen area

Source: Statistics Denmark & Oline.dk

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER MARKET

APPENDIX

ISSUE III 2015 21 / 27


FOOTFALL ANALYSIS PEDESTRIAN FLOW IN THE COPENHAGEN HIGH STREETS Overall we have seen a slight drop in the footfall counts at some of the busiest highstreet locations in Copenhagen compared to the same periods last year. The corner of Amagertorv and Østergade remains the top location in terms of number of pedestrians.

4.

4,900 Kultorvet

ager Købm e

gad

As shown in the figure, there is a clear correlation between footfall counts and the temperature. Both temperature and especially other weather conditions have not been among the best for enabling high pedestrian activity this spring/summer. But despite a lot of rainy periods, there is still a lot of activity in the high-streets.

5.

5,100

We are currently experiencing increased activity in the secondary streets around Strøget and Købmagergade, which is why we are expanding to more counting points. We are looking forward to present the results to the readers, when the data series are more comprehensive. Since counting points 5-7 only count few observations, these are not included in the average shown in the figure.

7.

6,00

Methodology

Vimmelskaftet

RED carries out the counts on Fridays at 4 pm with the purpose of registrering a development and conclude a level of footfall at different location on Strøget and Købmagergade.

e

ad

Nyg

Gammeltorv

The map shows the counting points and the average footfall per hour the last 12 months. The footfall is counted manually from both directions. 3.

4,900 de

r

de

Fre

ISSUE III 2015 22 / 27

FOCUS

Rådhuspladsen MACROECONOMICS

ga

erg

b iks

INVESTMENT  MARKET

OCCUPIER MARKET

APPENDIX


AVERAGE PEDESTRIAN COUNTS IN Q2 2014 AND 2015 NO.

STREET NAME

Q2 2014

Q2 2015

CHANGE

1

Østergade

3,980

4,304

+ 324

2

Amagertorv/Østergade

7,164

6,389

- 775

3

Frederiksberggade

5,230

5,195

- 35

4

Frederiksborggade/Købmagergade

5,054

5,030

- 24

5

Rundetårn

-

2,234

-

6

Købmagergade/Silkegade

-

5,724

-

7

Amagertorv

-

6,107

-

Kgs. Nytorv 1.

de

rga

e Øst

3,850

6.

5,200 Købm e

gad

ager

gade

rv

Øster 2.

5,950

erto Amag

00

FOOTFALL COUNTS - LAST 12 MONTHS 30

8,000

25

7,000

20 6,000

15

5,000

10 5

4,000

0 3,000

-5

2,000

-10

Average count of location 1-4

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER MARKET

Temperature (right axis)

APPENDIX

ISSUE III 2015 23 / 27


RED Property Advisers assisted the sale of Upsalagade 20 in the beginning of the year. Gefion Group acquired the property from Serviceforbundet.

ISSUE III 2015 24 / 27

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER  MARKET

APPENDIX


APPENDIX - DANISH TRANSLATION

FOCUS

MACROECONOMICS

INVESTMENT  MARKET

OCCUPIER  MARKET

APPENDIX

ISSUE III 2015 25 / 27


ISSUE III FOKUS INVESTORERNES AFKASTKRAV GIVER RENTEÆNDRINGER GRUND TIL BEKYMRING? Renteniveauet er på trods af en mindre stigning de seneste par måneder fortsat historisk lavt. Da erhvervsejendomme i klassisk forstand betragtes som investeringsobjekter alternativt til f.eks. obligationer, bør det historisk lave afkast på obligationer i dagens marked betyde en øget efterspørgsel og pris på erhvervsejendomme. En anden effekt af det lave renteniveau er den billigere adgang til finansiering. Men i hvor høj grad kan renteændringer forklare udviklingen i afkastkrav i praksis, og hvad vil stigning/fald i renteniveauet betyde? Vores undersøgelser tegner et billede af, at der historisk set er jævn sammenhæng mellem udviklingen i renteniveauet og investorernes afkastkrav på såvel kontorejendomme som retailejendomme over de seneste 15-20 år. De seneste par år, hvor renteniveauet er dalet helt i bund, lader det dog til, at det kun er retailejendomme og boligejendomme, der oplever et fortsat pres på de reale afkastkrav, mens kontorejendomme ser ud til at have fundet et stabilt niveau omkring 4,75 - 5,0 %. Prisudviklingen på nye boligudlejningsejendomme er i høj grad drevet af stigningen i ejerlejlighedspriser, men også boligudlejningsejendomme med omkostningsbestemt leje har udvist prisstigninger. Det er vores vurdering, at renteudviklingen er DEFINITION: Afkastkravet er defineret som et 1. års afkastkrav og er i teorien en sammensætning af den risikofrie rente og den specifikke risikopræmie, som investor kræver, som eksempelvis illikviditet, beliggenhed samt det udlejnings- og lejeniveau, som følger med investering i erhvervsejendomme.

ISSUE III 2015 26 / 27

FOCUS

FIGUR 1: REALE AFKASTKRAV FOR “PRIME” KONTOR- OG RETAILEJENDOMME I KØBENHAVN Afkast 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 års statsobligation Lang rente Kontor Prime Afkast Retail Prime Afkast Kilde: Danmarks Statistik, Realkreditrådet og RED Property Advisers

en væsentlig indikator for udviklingen i afkastkrav, men langt fra kan forklare udviklingen alene.

en tilsvarende stigning i afkastkravet og dermed lavere priser. Er frygten begrundet? Vi mener ikke, at der er grund til bekymring på den korte bane.

AFKASTKRAVETS UDVIKLING Generelt kan renteniveauets påvirkning af afkastkravet anskues fra to vinkler. Dels det højere/lavere afkast fra obligationer som alternativ investering, og dels finansieringsomkostningerne ved ejendomsinvesteringen. I figur 1 er både den 10-årige statsobligation samt den lange realkreditrente (30 år) vist som relevante rentemål for henholdsvis alternativrenten og finansieringsrenten til sammenligning med udviklingen i afkastkrav for kontorejendomme og retailejendomme. Af figuren ses en jævn positiv korrelation for begge segmenter – dog følger afkastkravene for kontorer ikke de store rentefald de seneste 4 år. Siden starten af 2015 er renteniveauet steget svagt, og det har givet anledning til bekymring blandt investorerne, som frygter

MACROECONOMICS

INVESTMENT  MARKET

RELATERET INFO: Boligudlejningsejendomme med omkostningsbestemt leje i København er handlet til priser svarende til afkastkrav helt ned i niveauet 1,0 – 2,0 %.

UDSIGTERNE FOR AFKASTKRAV PÅ KONTOREJENDOMME Afkastkravet for prime kontorer i København ser ud til at have fundet et stabilt niveau omkring 5,0 %, hvor det har holdt sig de seneste 5 år. Det store rentefald de seneste år har således ikke påvirket afkastkravet på kontorejendomme. Dette er bemærkelsesværdigt, idet vi i nogle af vores nabolande har erfaret kraftige fald i afkastkravene over de senere år. Afkastkravene for prime kontorejendomme i Oslo og Stockholm er dalet til henholdsvis 4,4 % og 4,0 % – de laveste i 10 år i

OCCUPIER  MARKET

APPENDIX


hvert af landene. Det er derfor interessant, at vi i Danmark stadig har så langt til det laveste afkastniveau i den tilsvarende periode – 4,0 % i 2006-2007. En af grundene er, at en stor del af efterspørgslen efter erhvervsejendomme i København de senere år stammer fra udenlandske investorer, hvor kontorejendomme ikke har været 1. prioritet. Det er derimod i høj grad nationale institutionelle investorer, der præger investeringerne i kontorsegmentet. De institutionelle investorer i Danmark gearer ikke deres investeringer i ligeså høj grad som de udenlandske, hvormed de ikke er ligeså rentefølsomme. En umiddelbar rentestigning forventes således ikke at have den store indflydelse på afkastkravene på kontorejendomme på kort sigt, idet finansieringsvilkårene stadig vil være favorable, og investeringsaktiviteten stadig vil være høj. Et yderligere rentefald vil heller ikke ventes at have en udtalt effekt, og det er vores vurdering, at vi vil se prime afkastkravet for kontorer i København forblive omkring 4,75 - 5,0 % i den nære fremtid. Det er dog ikke urealistisk, at der vil opleves handler til afkastkrav i niveauet 4,5 %, såfremt det rette produkt udbydes – dette vil dog ikke være udtryk for det stabiliserede prime afkastkrav.

kravet som følge af det lave renteniveau. De gunstige låneforhold, som er fulgt i kølvandet på renteudviklingen, har fået en række udenlandske investorer til at gøre stort indtog på markedet. De udenlandske investorer står i dag for en betydelig del af investeringsaktiviteten i retailsegmentet med omkring 60,0 % af den samlede volumen siden 2014. En konsekvens af en potentielt opadgående renteudvikling kan i den forbindelse komme til at betyde en afholdenhed fra de udenlandske investorer, hvilket forventeligt vil betyde gennemsnitligt højere afkastkrav. De udenlandske fonde gearer sig ofte i deres køb, hvormed de er villige til at acceptere en lav forrentning, idet fokus er på egenkapitalen. Alt andet lige vil IRR på egenkapitalen falde ved højere rente, hvilket vil påvirke deres prissætning. Ved den seneste rentestigning oplevede vi i konkrete due diligence processer, at der opstod en umiddelbar tilbageholdenhed fra investorerne, idet den oprindelige businesscase pludselig blev forringet, og et tilfredsstillende egenkapitalafkast blev vanskeligere at distribuere.

I det store hele ser vi dog intet tegn på væsentlige ændringer i afkastkravet som følge af umiddelbare renteændringer på den korte bane. Dog vil der næsten utvivlsomt komme til at ske handler med enkelte retailejendomme til lavere afkast som følge af unikke enheder med et betydeligt udviklingspotentiale. Sådanne handler kommer dog ikke til at afspejle det stabiliserede prime afkastkrav, idet tendensen er, at der stadig opnås en betydelig risikopræmie på erhvervsejendomme, som det har været tilfældet siden finanskrisen. Derved foreligger der efter vores vurdering en foreløbig nedre grænse for afkastkravet, hvilket spændet mellem den risikofrie rente og afkastkravene på retailejendomme såvel som kontorejendomme understøtter.

FIGUR 2: FORTSAT HØJ RISIKOPRÆMIE Risikopræmie 7%

RETAIL MERE FØLSOMT? På retailenheder har vi i løbet af det sidste års tid set et pres på afkastkravet, der er dalet til 3,50 - 3,75 % – på niveau med det vi så før krisen. I modsætning til kontormarkedet er retailmarkedet i høj grad drevet af stor udenlandsk interesse, hvor investorerne er villige til at foretage gearede investeringer med op til 60 % realkreditfinansiering, hvilket alt andet lige har skabt et nedadgående pres på afkast-

FOCUS

MACROECONOMICS

6% 5% 4% 3% 2% 1% 0% 2010

2011

2012 Risikopræmie Kontor

2013

2014

2015

Risikopræmie Retail

Kilde: Danmarks Statistik og RED Property Advisers

Note: Nominelle riskopræmie = Afkastkrav + Inflation – Risikofrie rente, med inflationen som et 5-årigt løbende gennemsnit.

INVESTMENT  MARKET

OCCUPIER  MARKET

APPENDIX

ISSUE III 2015 27 / 27


RED PROPERTY ADVISERS P/S THE PROFESSIONAL AND EXPERIENCED CONSULTANCY IN THE COMMERCIAL REAL ESTATE MARKET. Our clients are mainly major professional investors in the Danish market, public and institutional investors, and a number of leading Danish and international business enterprises. Our core competences are sale of and advisory on investment properties, office letting, retail, valuation, tenant representation, and market analysis. The keywords are trustworthiness, quality, integrity, know-how, and independence. RED is an alliance partner of CUSHMAN & WAKEFIELD – one of the world’s leading commercial real estate companies. In Denmark RED undertakes work for CUSHMAN & WAKEFIELD’s global clients and any assignment for Danish clients anywhere in the world can be resolved in a strong, professional environment, supported by the important element of local market knowledge.

RED Property Advisers P/S Amaliegade 3, 5. floor 1256 København K 33 13 13 99 red@red.dk red.dk

MDE, Chartered Surveyors MRICS

Market Report - Issue III 2015  
Market Report - Issue III 2015