Market Insight Q2 2023 UK

A wave of sustainability: Capital allocation and financing drive momentum for sustainability and ESG in the real estate industry

High demand for green buildings

Large European logistics real estate developer acquires 17.5 acres in Vejle South

EDC Project Poul Erik Bech and STAD Project join forces: Creating Denmark’s strongest project team

Sustainability is a major theme in the real estate industry

Buys fully leased property in the tens of millions: Next step is ESG and sustainability

Sustainability is playing an increasingly important role for several property actors

Multi-user office buildings are gaining popularity: Energy renovation of a commercial property of 6,000 sqm in Roskilde

Essential milestone: First platinum pre-certification for residential renovation project underway at Hellebæk Klædefabrik

Erantishaven in Rødovre soon to be ready with 83 DGNB Gold-certified rental homes

For sale/sold

Residential rental projects

Market Update Q2, 2023

real estate industry

Dear reader,

A new edition of Market Insight is out – in both Danish and English. In the center of the magazine, you will find the latest edition of Market Update, where you can be updated on the commercial property market with current market figures and detailed market data.

One of the big themes in the property industry is ESG and sustainability. It has long been known that the construction and property industry has been among the largest emitters, as construction and buildings are estimated to account for approx. 40% of Denmark’s total CO2 emissions.

In Market Insight, we focus sharply on ESG and sustainability in the real estate industry. We have spoken to experts in the property industry, including the Sustainability Manager at NREP and partners at the architectural firm AART and Mangor & Nagel, who, among other things, advises on how sustainability can be brought into existing buildings and future construction. You can also read about a Danish property investor who has a particular focus on making the properties in their portfolio sustainable.

At the start of 2023, we have significantly expanded our project department. STAD Project has become part of the team in EDC Project Poul Erik Bech, so we have now created Denmark’s strongest project team. As before, our project department works only for our customers, and we are not involved in construction ourselves. In this edition, you can also read about several of the many exciting projects in which we are involved and where, among other things, sustainability is a pervasive theme.

Enjoy the reading!

Best regards, Poul

Erik Bech

The EDC Poul Erik Bech Foundation is the primary owner of EDC Poul Erik Bech and receives a share of the business profits every year. The funds are distributed mainly to associations that make a difference for vulnerable children. Since the foundation was set up in 2015, it has received a total of DKK 50 million for distribution. Read more at www.poulerikbechfonden.dk

Sustainability and ESG have become a permanent part of the

A wave of sustainability: Capital allocation and financing drive momentum for sustainability and ESG in the real estate industry

Increased demands from authorities and market forces have brought sustainability, ESG, and carbon footprint to the forefront of the real estate sector. Investors who do not focus on optimizing their sustainability performance in properties, risk potentially receiving less attractive loans, lower rental income, and thus possible asset devaluation in the future. In an interview with Market Insight, this was evaluated by one of Denmark’s leading experts in sustainability in real estate.

”Sustainability has become a top strategic priority for all actors in the real estate industry in recent years, as the sector accounts for 40% of energy consumption in the EU, and 36% of CO2 emissions. Therefore, there has been regulatory and political pressure and increased requirements for transparent ESG reporting for real estate. With these conditions in order, companies and investors in the industry have started efforts to reduce their climate impact upstream and downstream in the value chain. I believe this trend is important in creating the conditions for capital allocation and financing to become central scaling drivers of the sustainable wave that will drive the green transition in the urban ecosystem.”

These views come from Rasmus Grosen Olsen, Sustainability Manager at Nordic Real Estate Partners (NREP), a North European urban development investor. In 2012, Rasmus was employed at the Council for Sustainable Building (then Green Building Council Denmark). The council works, among other things, to promote DGNB, the most widespread ”green stamp” for buildings in Denmark, and his award-winning master’s thesis from 2017 at CBS focused on the pension fund’s real estate investment strategy with DGNB as an essential element.

DGNB in explosive growth

”There has been much progress in the ten years I have worked with sustainability in the real estate sector. When I started at the Green Building Council, only a few buildings were DGNB-certified, and it was driven by pension funds like ATP and PensionDanmark. Many did not know what it was, and many were completely indifferent.”

”Today, DGNB is in explosive growth and is a common standard for banks, mortgage institutions, real estate investors, and the rest of the industry in terms of working transparently and systematically in the green transition of real estate. The development is exemplified, for example, by all major consultants - such as engineers and architectshaving sustainability experts. ESG has become an important part of the strategy and everyday life of more and more investors, and financial actors use DGNB as an ESG metric in their Green Bond Frameworks,” notes Rasmus Grosen Olsen.

Urgent problems

This is also the case at NREP, established in 2005, which today has approximately 700 employees and property investments in the Nordic region, Poland, and Germany. They focus on urban development and sustainability and manage properties totaling 7 million square meters worth up to DKK 150 billion. Their portfolio includes mainly residential-, office-, and logistics properties, as well as shopping centers in Denmark. NREP is owned by senior partners and Novo Holdings.

“NREP is founded on the idea that the best businesses solve problems. In the urban environment, climate change and sustainable transformation are some of our society’s most pressing challenges. We want to be part of solving these issues at NREP. Therefore, we actively work with our portfolio regarding sustainability initiatives and ESG. For example, we systematically and purposefully work to minimize energy consumption and thus the climate footprint of our existing buildings and reduce the embedded CO2 footprint in materials in new construction,” says Rasmus Grosen Olsen.

Regarding new construction, life cycle assessments (LCAs) are one of many tools NREP uses in collaboration with advisors and contractors. This includes a focus on the total CO2 footprint of building materials, including their production, transportation, construction, and maintenance during the expected lifetime of the building.

“It doesn’t necessarily have to be more expensive to build sustainably. However, it is crucial to get involved early in the design phase and have a dialogue with the contractor about choosing robust materials with the lowest possible CO2 intensity and incorporating renewable energy supply into the building design,” emphasizes Rasmus Grosen Olsen.

At NREP, the intensive work on sustainability and carbon footprint is part of the overall effort for corporate social responsibility or ESG (Environmental, Social, and Governance). For example, when NREP invests in residential construction in Tingbjerg in Denmark, it is done both to earn money and with a social perspective to revitalize the Copenhagen neighborhood, create a diverse, flourishing urban area with a community that will attract citizens who want to be an active and engaged part of the neighborhood.

Sustainable Wave

Sustainability is a central development area in NREP’s strategy and is related to Rasmus Grosen Olsen’s previously mentioned “wave”. It stems from the regular climate reports and international conferences organized by the United Nations - including global agreements to limit CO2 emissions to curb global warming.

The climate agreements have triggered a complete green transition in both the EU and Denmark - with a steady stream of new rules, such as lower energy consumption, insulation of properties, requirements for smaller carbon footprints, and using life cycle analyses in new construction. Last year, the transition or wave gained extra momentum when the conflict in Ukraine led to sharp energy price increases and highlighted the EU’s energy dependence on an authoritarian regime.

Green Loans

Among the newest pan-European initiatives is the so-called taxonomy - with the EU’s preference for complex expressions. Here, banks and investors are required to account for the climate aspects of their loans and investments.

“The major financial companies have established or are establishing sustainability teams with expertise in real estate, and within the next few years, I am convinced that progressive financial products will come to the market, with clear commercial incentives for property investors to invest in sustainability initiatives in each property, as well as to meet the banks’ ESG reporting requirements regarding the EU Taxonomy,” predicts Rasmus Grosen Olsen.

The market reinforces the sustainable wave

He points out that market forces are strengthening the sustainable wave in several ways. “We can see that large companies are adopting ESG reporting standards such as the Science-Based Targets Initiative (SBTi) or have already incorporated SBTi into their ESG strategy. Some even demand DGNB-certified leases, which reduces the vacancy risk and increases the possibility of higher rental income on the properties. Similarly, pension funds and other investors prefer to invest in properties with a transparent ESG profile in the form of, for example, a DGNB certification, as the properties entail less risk – and potentially contain better opportunities to sell at higher prices from the current owner’s point of view,” states Rasmus Grosen Olsen from NREP.

Warning investors

At the same time, he warns investors and others in the real estate sector about the possible consequences of not becoming part of the sustainability wave.

“Just as investors focusing on sustainability optimization of properties potentially may have prospects of less vacancy, higher rental income, and increased property values, investors without focus on sustainability risk ending up with non-transparent “stranded assets,” where the property cannot document its ESG profile or does not comply with the EU taxonomy. The properties may risk hitting a vicious circle, where they may become harder to rent out and meet the demand for rent reductions, thereby getting slightly worse loan terms, resulting in a slightly lower sales price.

Factors triggering more sustainability-optimized properties

• EU requirements for, e.g., energy consumption in existing buildings and CO2 footprint in new construction

• Sharpened requirements from the Danish Parliament regarding CO2 footprint in the construction

• Sharpened EU requirements for sustainability for loans/investments (taxonomy)

• Adjustment to green energy in the EU and Denmark

• More investors demand, for example, DGNB certifications if they are to buy properties

• More companies demand sustainable premises if they are to be tenants

• Properties with a large CO2 footprint can lose value (“stranded assets”)

• Sustainable investments can obtain favorable financing

Learn more about the developments in your city

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High demand for green buildings

Sustainability or green construction in general is gaining ground in the real estate industry, in the construction sector and among advisors, investors and lenders. This is according to Nanna Flintholm, a qualified architect and partner at AART, one of Scandinavia’s largest architectural firms following its acquisition last year of Mangor & Nagel.

“Sustainability is becoming more and more important in our own project portfolio. We can also see, for example, that the number of sustainability specialists is steadily increasing. Today, the vast majority of bigger project developers and large companies in the construction industry employ sustainability experts or sustainability managers. This was not the case just a few years ago,” Nanna Flintholm emphasizes.

A further sign of the above-mentioned development is a sharp increase, especially in 2021 and 2022, in the number of projects that have achieved DGNB-certification, the most widespread ‘green stamp’ in Denmark for sustainable properties.

Climate demands from legislators

According to Nanna Flintholm, there is a paradigm shift in the real estate sector. This is particularly due to the fact that both the Danish Parliament and the EU are currently adopting a large number of laws, rules and regulations on, for example, lower energy consumption in buildings, better insulation, lower CO2 emissions in the construction phase and requirements for life cycle assessments (LCA) for products. The goal is a climate-neutral Denmark and EU.

Among the many rules that have either been adopted or in the adopting process, she mentions the EU Buildings Directive. “It is being renegotiated in 2023, and the EU is proposing that buildings with energy labels F and G must be renovated to achieve energy label E - otherwise they will become illegal. At the same time, the requirements for obtaining energy label E will be tightened. So, if the directive is adopted, a large part of the Danish building stock from before 1980 will have to be energy renovated,” Nanna Flintholm points out.

A wide range of new rules from the EU and the Danish Parliament have accelerated the trend towards green or more sustainable construction across the real estate and construction sectors. This is according to partners at one of the Nordic region’s largest advisors in an interview with Market Insight.

The green wave, triggered by a steady stream of decisions in The Danish Parliament as well as in Brussels and Strasbourg, is further accelerated by the market economy - in the form of stronger green demands from investors, lenders and especially the largest companies.

“Larger companies across industries have started to include targets on e.g., energy consumption and climate impact in their business strategy. At the same time, listed companies and companies with more than 500 employees must already this year (2023) report on the EU Taxonomy - just as there is an annual requirement for financial accounts. In the year 2025, all companies with more than 250 employees must report CSRD. Among other thing the tenants demand that the property and their own premises must be more sustainable. Building owners are therefore currently looking at what they can do with, for example, additional insulation, ventilation, and lighting as they run the risk of not being able to rent premises that do not have a sustainable profile,” says Nanna Flintholm.

Focus on sharing

For office premises, the increased focus on sustainability has reinforced the trend with an increasing number of multi-use buildings, where companies share, for example, reception, canteen, meeting rooms, parking spaces, bathing and changing facilities, and more office hotels, where entrepreneurs and smaller companies can access common facilities.

“Multi-use houses are clearly gaining ground these years, and this is completely in line with the sustainability agenda. Studies show that companies can advantageously share up to 29% of their area with others,” Søren Stoustrup, architect and partner in Mangor & Nagel, who became part of AART last year, points out.

According to Ejendomstorvet.dk, the total office space in Denmark is 27 million sqm, and thus it is a huge amount of space that companies can save by sharing between a quarter and a third of the space with others. At the same time, it provides financial savings as well as CO2 emissions, e.g., for heating, lighting and from reduced production of building materials due to lower use of space.

All types of properties

However, the interest in green premises among companies/tenants and investors includes far from just offices, but also, for example, properties for storage, logistics and production, premises for retail trade and properties with rental housing.

“We feel the interest across categories of properties. It is to a greater extent the type of customer or company that makes the difference, more than the type of property itself. The interest in sustainable premises especially comes from the largest concerns, from listed companies as well as from foundations, pension companies and banks, all of whom have a special social responsibility,” says Nanna Flintholm.

She adds that studies have documented that, compared to conventional premises, sustainable properties bring in a higher rent, have lower vacancy rates and retain value to a greater extent. AART concludes that the tendency will be reinforced with the EU’s taxonomy or rules that listed and larger companies must report on sustainability. This means that they obtain information from sub-suppliers and other factors in the value chain, and thus the requirements to document sustainability create a ripple effect.

“We find that tenants and investors increasingly demand sustainability certifications and thus more climate-friendly premises and properties. In this way, climate-friendly properties are a much more future-secured investment, e.g. with better opportunities for later sale. In addition, climate-friendly leases contribute to improving the companies’ sustainable profile and are also more attractive in that way,” says Nanna Flintholm.

She adds that developments in green construction and more sustainable properties are moving very quickly. “Bigger players typically have a competitive advantage because it requires specialists and ongoing investment in upgrading skills. In general, things are going very fast at the moment, and sustainability is a ‘moving target’; it’s moving fast, and it’s not hard to imagine it will be going even faster with developments in just two or five years.”

Best to preserve Søren Stoustrup emphasizes that it often benefits the climate the most not to build new.

“Realdania has made a case study: Restoration of old buildings is good for the CO2 account, which shows that new construction emits 75% more than preserving and restoring an existing building. The reason is that it requires a lot of energy – and thus a climate footprint – to produce concrete, bricks, steel, and other building materials. In addition, energy is needed to transport the materials and for the installation and construction phase itself.”

Renovations or transformations of existing buildings are precisely one of the specialties of AART and Mangor & Nagel.

In the running for Office Building of the Year 2023: From worn-out warehouse to modern offices

On Rovsinggade in Copenhagen, Mangor & Nagel, which is part of AART, has helped transform an abandoned and dilapidated warehouse from 1963 into inviting and modern offices. The roughly 7,000 sqm is used by the company Veo Technologies, which develops advanced sports cameras. The transformed Nørrebro property was in the final for Office Construction of the Year 2023.

“We emphasized that the property’s history as an old warehouse and industrial building should stand out. It happens i.e., with exposed concrete and brickwork, and we have even preserved some of the old graffiti,” says partner and architect Søren Stoustrup.

The completely renovated property in three floors is furnished with large, open office spaces and with café and lounge areas on the 1st and 2nd floor. There is a natural light both from the building’s large window sections and from an atrium equipped with skylights.

Veo develops sports cameras. In order to contribute to creating a corporate culture and interior design that supports their DNA, Mangor & Nagel – part of AART, for example, has established a multi ball field on the ground floor. In addition, the ground floor contains a canteen and production facilities.

Nanna Flintholm and Søren Stoustrup from AART and Mangor & Nagel stand in Rovsinggade in Copenhagen, where the architectural firm has helped transform an abandoned and run-down warehouse into inviting and modern offices.

Large European logistics real estate developer acquires 17.5 acres in Vejle South

An agreement for the large commercial area in Trekantområdet, Vejle South in Denmark, has been signed. The large European family-owned logistics real estate developer VGP has taken the first step towards their first Danish project. The agreement was brokered by EDC Poul Erik Bech and the next step is to find tenants for the large industrial area. VGP has a strong focus on the green transition and ESG initiatives, where energy-friendly solutions are considered from the start, for the benefit of the tenants.

An agreement on the large area of Vejle South in Trekantområdet along the E45 highway has been secured. Johnny Røn from the construction company Erling Jensen, says: “We are very pleased with the agreement on Vejle South. Seven years ago, I was involved in developing the area together with others, and just under two years ago I was given the opportunity to buy the project with three other investors with the purpose of reselling it. The uncertain times of war in Europe, rising interest rates and less activity in the market presented some challenges. Therefore, the agreement with VGP is a relief. They want to take the next step in the developing Vejle South. The process has been nice and the cooperation with EDC has been good, despite challenging times. After the agreement, there is still about 50,000 sqm of vacant land for office/liberal business left.”

The agreement has been signed with the large European family-owned logistics real estate developer VGP from Belgium, which develops logistics and semi-industrial real estate. They are represented in 17 European countries with more than 100 logistics parks, with Germany as their largest market. They are now also focusing on Denmark with Vejle South.

Highly attractive commercial area

Arne Kristensen, partner at EDC Poul Erik Bech Vejle, who brokered the deal together with the international department of EDC Poul Erik Bech, says: “Two gas stations and a Burger King have already been established in the area, and McDonald’s will soon open as well. The new business park is already quietly gathering momentum. We are pleased to have landed the deal with an exciting investor and look forward to even more activity in the area. The next step is that we will help VGP find tenants for the area, but there is generally a great shortage of warehouse and logistics

properties, so it is expected that there will be a reasonable demand for renting. VGP has a strong focus on the green transition and ESG, where energy-friendly solutions are considered from the start for the benefit of the tenants.”

He continues: “It is almost the optimal area for a business park. There are large areas with good parking facilities, easy access and, most importantly, frontage towards the E45, where 75,000 motorists drive by daily. Thus, there is good exposure for the future commercial tenants. Vejle Municipality is a good business municipality, and they continue to increase their focus on business, which makes it even more attractive for businesses in Vejle South.”

International expertise for local benefit

The agreement for the large logistics and office space has come about through a collaboration between EDC Poul Erik Bech’s International and Vejle branches. Helle Nielsen Ziersen, Head of EDC Poul Erik Bech International, says: “It has been a really interesting, but also challenging process, where there has been continuous interest from various investors, even though the market has been challenged. The agreement shows that in 2023 it is still possible to complete major deals and projects despite rising interest rates and inflation. However, we have always had great faith in the project, and if you believe in the project, it is possible to secure a deal.”

“I am also pleased that we are once again confirmed that there is a need for national, international and local expertise in interaction and that it is beneficial for all parties in the real estate industry. It shows that our international unit in EDC Poul Erik Bech and our large network of foreign investors can be a great help – also in the local markets in Denmark,” concludes Helle Nielsen Ziersen.

EDC Project Poul Erik Bech and STAD Project join forces: Creating Denmark’s strongest project team

Two of the country’s most prominent project departments have joined forces, as EDC Project Poul Erik Bech and STAD Project combined their efforts on April 1, 2023. They are two nearly equal-sized project departments that will stand strong in the market, with more than 25 dedicated project employees to manage the sale and rental of project homes.

The founder and owner of STAD Project, Torben Hald, is the son of Niels Hald, who started the brokerage business in the early 1970s. Torben Hald, the owner of STAD Project, says, “It is no secret that it can be challenging to run your independent brokerage firm and continue to develop and implement a lot of new ideas. It requires many resources, time, and capital. Simultaneously, the real estate market has been experiencing a lot of pressure, which is why I started looking for a partner. I am pleased that we landed a deal with EDC Poul Erik Bech, a solid and competent partner for our employees and customers.”

“I have chosen to sell and have had some good talks with Poul Erik Bech and Jane Bech, and both companies are based on the same family values and DNA, and like us, they are independent of banks and mortgage institutions, so it is a fantastic solution for both our employees and our customers, who can get even better solutions with one huge and competent project department,” says Torben Hald, who will not be joining the new setup himself. In the same deal, EDC Poul Erik Bech has also taken over four Copenhagen housing stores from Paulun Bolig, where Amager has been significantly strengthened.

Two strong project departments

Poul Erik Bech has built Denmark’s largest and only nationwide brokerage firm over 44 years. He says, “We are very pleased that Torben Hald approached us. Two of the best and strongest project departments are now coming together, and we are creating something unique in the brokerage industry. We complement each other well, and only a few customers appear on both of our client lists.”

Uniting what we are good at Alice Lotinga, CEO of STAD Project, says: “We have been looking forward to the new setup, which clearly strengthens us in regard to our customers. In both project departments, we have an enormously strong customer base with long lists of the biggest sales and rental cases and a substructure of small and medium-sized projects. It’s super exciting to be a part of. It’s a setup that combines everything we at STAD Project are good at, with expertise in consulting, interior design, and a focus on proximity and accessibility.

At the same time, we gain new strength and more opportunities with EDC Project’s obvious qualities.”

Katrine Enø, Project Manager at STAD Project, adds: “We will, of course, continue with the same skilled employees and personal service that we are known for. At the same time, we gain analytical competencies and a high knowledge that provides us with additional opportunities to become an even stronger match for our customers. Especially in terms of local sales and rental power, we can offer our customers the best possible marketing opportunities through a nationwide network of more than 80 EDC Poul Erik Bech residential stores and 19 commercial centers. We now also have our own customer center, staffed with our employees every day from 8 a.m. to 10 p.m., giving our customers an extra level of service.

STAD Project is completing the rental of 534 rental properties at Rødovre Port, and they have rented out 374 homes at Engvej 155 in Amager, where they are now responsible for re-rentals. At TV Byen in Gladsaxe, they are working on Project Radio, which includes 272 rental apartments.

In addition to the project department in Copenhagen, EDC Project Poul Erik Bech also has project departments in Aarhus and Roskilde. STAD Project has moved into EDC Poul Erik Bech at Bremerholm 29 in Copenhagen.

Projekt Poul Erik Bech /S TA D

Sustainability is a major theme in the real estate industry

One of the world’s largest real estate companies, Jones Lang LaSalle (JLL), together with EDC International Poul Erik Bech, has published a new report “JLL Nordic Outlook – Spring 2023”. Among other things, the report delves into one of the most popular topics in the real estate industry – sustainability.

JLL is one of the world’s largest real estate companies and has published the report “JLL Nordic Outlook – Spring 2023” with a special focus on financing, which is the biggest challenge in the real estate industry. EDC Poul Erik Bech has contributed with figures and trends in the Danish real estate market, where sustainability seems to be playing an increasingly prominent role.

Helle Nielsen Ziersen, Partner and Head of EDC International Poul Erik Bech, said: “It is no secret that 2022 was a challenging year on several parameters, and this has also left its mark on the real estate market in the Nordics. The more difficult financing conditions with rising costs and less availability are causing investors to hold back a little more. In addition, investors have stricter requirements than before, such as requirements for energy optimization or other sustainable initiatives.”

Energy prices increase importance of sustainability

EDC Poul Erik Bech has contributed to the JLL report with insights on, among other things, sustainability in the real estate industry in the Danish market.

SUSTAINABILITY IN THE REAL ESTATE SECTOR

Joseph Alberti, Head of Research EDC Poul Erik Bech, said: ”Sustainability is no longer just a trend, it has become a necessity. The rising cost of energy has meant that sustainability is taken much more seriously now than in the past. Investments in energy-efficient buildings are being made like never before, shortening the payback period.”

”In addition the vast majority of investors indicate that they are willing to pay more for sustainable buildings. This is motivated by being able to meet the future requirements of the taxonomy and adapt to tenants’ current expectations and future requirements.”

Adaptation to a more sustainable future

Sustainability has become almost a requirement for most investors as more companies work towards a greener future.

”For both companies and investors, it’s all about adapting to the times. Sustainability has become a major theme in the real estate industry, so for all parties, it’s about adapting to a future where sustainability is at the top of the agenda,” says Joseph Alberti, and continues:

1. Sustainability has become a necessity – also in the real estate sector

2. The focus on sustainability is increasing as energy costs continue to rise

3. More investors are willing to pay more for sustainable properties

”There is more and more focus on ESG policies around companies, and of course this also affects real estate. It is mainly in new construction that there is a focus on a greener future, but there is also value to be gained by energy optimizing older properties and making them more sustainable. Sustainability has become a key factor for both investors and owners, while tenants are increasingly demanding a focus on ESG.

The Nordic financing market

The latest JLL report also focuses on the Nordic financing market. Joseph Alberti, Head of Research at EDC Poul Erik Bech, says:

”If you look solely at reported transactions, the Nordic real estate market appears to be in a reasonable position, but

this is not entirely the case. The real estate market in Sweden is in a particularly difficult situation, as corporate bonds make up a significant share of the total financing for real estate investments. Corporate bond yields have skyrocketed over the past year and the market expects a significant increase in bankruptcies. This makes borrowing money expensive and difficult for companies that cannot raise capital from banks. This is not as widespread in Denmark, but not uncommon, as companies such as Gefion, Oskar Group and NPV raise money through bond issuance.”

The report shows that there has been 80% decrease in the issuance of real estate bonds in Q3 2022, compared to Q3 2021, across the Nordic countries.

Helle Nielsen Ziersen, Head of International and Partner • EDC International Poul Erik Bech +45 5858 8563 • hni@edc.dk

Joseph Alberti, Head of Research EDC Poul Erik Bech +45 5858 8564 • joal@edc.dk

Buys fully leased property in the tens of millions:

Next step is ESG and sustainability

Lindu Ejendomme, founded in 2021 by Pictet and Brunswick Real Estate, has purchased a fully leased warehouse and logistics property with a floor area of 4,330 sqm in the tens of millions. EDC Poul Erik Bech facilitated the sale of the property in the popular logistics area of Priorparken in Brøndby in Denmark, where tenants include Matas and the National Police. Together with EDC, the next step is to focus on ESG and sustainability, which often lacks in logistics, warehouse, and industrial properties.

The Danish real estate company Lindu Ejendomme has expanded its portfolio to 12 properties in Denmark and now has a total rental area of 75,000 sqm. The latest addition is Priorparken 359 in Brøndby, a fully leased warehouse and logistics property where tenants include Matas, the National Police, DK Flyt & Transport, and Hoffmann.

Anthony Romano, Investment Manager at Brunswick Real Estate, says: “The property fits perfectly into our existing property portfolio of logistics, warehouse, and industrial properties in Greater Copenhagen. Priorparken is almost the perfect industrial and logistics area in Denmark with a short distance to Copenhagen and close proximity to the highway.”

“This also comes to sight by the many logistics companies with their address there. The investment indicates that we continue to be active in the market, which we will continue to be. We continue our search for attractive rental properties, even though others are holding back. In fact, we have entered into a more formal agreement with EDC Poul Erik Bech to help us advise on optimizing our properties so

that we become even better at meeting the needs of our tenants.”

Focus on ESG and sustainability

Part of Lindu Properties’ strategy is optimizing their properties’ energy efficiency. Kasper Stagis, Portfolio Manager at Brunswick Real Estate and responsible for the Danish market, says:

“The real estate industry needs a sustainability boost, especially industrial and logistics properties are lagging behind, so we want to contribute to optimizing the focus on sustainability. We optimize the energy efficiency of our properties as much as possible and look at where we can make a difference. It can be small or large measures, but they must have an effect and benefit both tenants and the environment. It should make sense and be done in consultation with our tenants. We will go far for the right sustainable solution if it makes sense.”

“The property in Priorparken is fully leased and has suitable opportunities for implementing ESG initiatives. We have

an idea of what measures needs to be taken, but we also engage in dialogue with the tenants’ needs, and then we have to see how we improve the property.”

Future cooperation

Kenneth Jakobsen, EDC Poul Erik Bech Copenhagen, has facilitated the sale of the industrial property in Brøndby: “The sale was confidential, in the sense that the owner of the property contacted me about selling the property to one of the tenants. There was no interest from the tenants, so we made a list of potential buyers, including Lindu Properties. They have been great to work with. Therefore, we have decided to enter a more formal cooperation. We look forward to assisting them in renting out their properties in the future. First of all, congratulations on purchasing the property in the trendy industrial area of Priorparken, where we have facilitated a wide range of storage, logistics, and industrial property sales and leases.”

Regarding future cooperation, Kasper Stagis, Lindu Properties, says: “We are happy to have Kenneth Jakobsen and EDC as sparring partners. As owners, we need qualified sparring in terms of how we can optimize our properties to meet the tenants’ needs. Sometimes we need to be challenged, and we have certainly experienced that with EDC, so we would like to continue with that in the future.”

Anthony Romano adds: “Kenneth Jakobsen and his team are dedicated and thorough in their work, so we expect them to help us strengthen our position in Denmark and help facilitate rentals in the future.”

From left: Kasper Stagis, Portfolio Manager and Anthony Romano, Investment Manager both at Brunswick Real Estate

Kenneth Jakobsen, Commercial Broker, EDC Poul Erik Bech +45 5858 8378 • keja@edc.dk

Sustainability is playing an

role for several property actors

Sustainability has become a permanent part of the property industry for both investors and companies, and it will play an even more significant role in the future. This is illustrated in EDC Poul Erik Bech’s Expectation Survey 2023, conducted for the eighth year in a row. This year, more than 1,700 decision-makers have responded with their expectations for the commercial property market in 2023.

EDC Poul Erik Bech conducted an expectation survey for 2023 which, with responses from over 1,700 decision-makers, is the largest market survey on commercial real estate in Denmark. The participants represent all types and sizes of investors and companies. Responses from all parts of the country reflect EDC Poul Erik Bech’s position as a nationwide brokerage company with 19 business centers.

In recent years, the expectation survey has included more questions about sustainability, which has become part of the daily life of several investors and companies. With the increased focus on sustainability, green investments, and even national strategies for sustainable construction, it looks like a category that property actors should deal with both now and in the future. Frank Jensen, Director and Partner, EDC Poul Erik Bech Aalborg, says:

“Sustainability is essential for pension funds, and for them, it is a prerequisite that a new property is certified as sustainable. It is also becoming more essential for other larger investors but not so much for smaller investors. But it will. It spreads like ripples in water; for example, new EU rules signify that financial companies must account for their loans based on sustainability and carbon footprint criteria.”

Green progress

The Expectation Survey shows that there is a green transition to be found among investors and companies. Joseph Alberti, Head of Research, EDC Poul Erik Bech, says:

“More than half of the respondents have answered that sustainability plays a role in their current investment strategy. 28% answered that sustainability plays a role for both economic and ideological reasons, which was 21% the year before. 31% answered that sustainability plays a role either because it makes economic sense or for ideological reasons.”

He continues: “The trend is towards a greener mindset among investors and companies. 34% of the respondents have already optimized the energy of one or more of their properties, which is an increase of 6 percentage points compared to the previous year.”

Despite some uncertainty in the market, there is still a willingness to pay more for a property if it is sustainable. Joseph Alberti says: “Almost 6 out of 10 are willing to pay more for a sustainable property if the location, condition, and cash flow are the same. This is an increase of 12 percentage points from last year’s survey, where 46% were willing to pay more. However, almost one out of four individuals indicate they are still unwilling to pay more for sustainable property, as they do not believe sustainability should impact the price. This could indicate that more people think sustainability is a prerequisite and not something you should pay extra for.”

“There is also an expectation that tenants are willing to pay more for sustainable leases in the future. At least half of those surveyed believe that tenants are willing to pay more for sustainable leases in the future. In particular, it is expected that new leases will be more sustainable, and existing leases will become more sustainable over time.”

increasingly important

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It has become increasingly difficult to rent out large office buildings to just one company. With many small and medium-sized businesses in Denmark, the trend is that more and more large office spaces are converted into multi-user office buildings with shared facilities. They are easier to rent out. A 6,000 sqm office building in Roskilde, owned by the pension company PenSam, has been energy-renovated and designed ideally as a multi-user office building with up to 12 leases. EDC Poul Erik Bech is responsible for the rentals.

A multi-user office building at Ringstedvej 16-28 in Roskilde has been energy-renovated into a healthy office building with a better energy class, and soon also the sustainability designation ‘DGNB BIU-Gold’. The property contains up to 12 modern leases for rent on three floors. Jacob Østergaard Skyum, Senior Asset Manager at PenSam, says:

“It has previously been a headquarter property, but when the latest headquarter tenant, Orbicon, vacated, we explored different possibilities for sales, conversion to residential, or conversion to a multi-user office building. Ultimately, we chose to convert it into a multi-user office building because renting out smaller units than all 6,000 sqm to one company is easier. It is often obvious, but it was obvious here because it was a plug & play solution, due to the property’s three separate entrances. This implies that companies feel that their customers and partners visit their company exclusively, and the rentals have also been shown to have gone really well.”

“We have energy-renovated the property with new cooling/ventilation, energy controlling measures and removed a large part of the existing interior. When a new tenant arrives, we will closely discuss interior design wishes. This means that we have attracted many strong tenants, with several of them on 10-year lease agreements, and for us, it is important to have good, long-term collaborative relationships. We have invested significant resources in the roperty, but it has gone relatively quickly, so we have rented out almost everything in less than a year. This is satisfying, and even though it is a big investment, the property will give us a good return.”

The seven new tenants are: Kronjylland Savings Bank, plastic surgeons Horn & Gramkow, Children’s House Zealand, office hotel Væxthuset, a specialist dentist, an oral surgeon, and the consultancy firm QV Compliance. There are three remaining leases of 410, 621 and 621 sqm.

Strong sustainability profile

PenSam has a sustainability strategy involving the certification of a large part of their properties and with a declared goal that by the end of 2025, they should have reduced their total CO2 emissions by 50%. Jacob Østergaard Skyum from PenSam says:

“We certify all of our new builds for sustainability, but one thing is new buildings, and another is the existing building stock. A newly built property is built to contemporary and energy-efficient standards. Therefore, there are fewer improvement opportunities to work with, even though the building will have to stand for many years before the overall

Multi-user office buildings are gaining popularity: Energy renovation of a commercial property of 6,000 sqm in Roskilde

CO2 account is settled due to the embedded CO2 from the construction. On the other hand, there are many opportunities to create positive development on existing buildings, and if we are to reverse the trend and reduce the CO2 footprint truly, we must act. We have gone from energy class C to energy class B on the property, and we hope to reach energy class A with further initiatives.”

“We have a strong sustainability profile in PenSam. When we renovate our buildings, we must at least improve the energy class by one. The initiatives on the property have substantially reduced annual CO2 emissions of almost 7 tons here in Roskilde. We have optimized cooling/ventilation, which provides a healthy building with a good indoor climate and introduced energy management measures that reduce consumption. We have also implemented several measures so that the building can achieve the sustainability certification ‘DGNB BIU-Gold,’ which is the certification for existing buildings. We will also soon have charging stations for electric cars in our parking lot. We have gradually put all these things in place, and in fact, we have not even had time to promote the building’s sustainability before the leases were almost filled.”

Multi-user buildings are popular

John Borrisholt, Regional Director of Zealand and partner at EDC Poul Erik Bech Roskilde, has facilitated several of the leases and says: “In addition to energy optimization and sustainability, PenSam’s multi-user office is a good example of a trend we see throughout Denmark. It is more difficult to lease large office spaces to just one company, so we often advice clients to divide the property into several units, as it is easier to attract several small and medium-sized companies that can share office facilities.”

Alexander Wenzel, commercial advisor at EDC Poul Erik Bech Roskilde, adds: “The property is also a good example of the healthy rental market in Roskilde. In general, there is demand for both larger and smaller leases, and the vacancy rate is not very high for office spaces. Out of the total 6,000 sqm, there is now only about 1,600 sqm left, where we are in dialogue with several interested parties.”

Regarding EDC Poul Erik Bech’s role, Jacob Østergaard Skyum, PenSam, says: “When we first decided on a multi-user building, we went all in on strategy and marketing, and it has worked impeccably. There has been an excellent dialogue with John and Alexander from EDC, where we, together with DEAS and our construction consultant, have held briefings every 14 days to give status updates. As an experienced man like John, we naturally expect him to deliver and help find tenants. Still, I would also like to highlight Alexander, who has been proactive, shown great engagement and initiative, and found several tenants, so it has been an outstanding job. I would definitely describe the case as a success story.”

More information

From left: Alexander Wenzel from EDC Poul Erik Bech Roskilde, Jacob Østergaard Skyum from PenSam and John Borrisholt EDC Poul Erik Bech Roskilde.

Essential milestone:

First platinum pre-certification for residential renovation project underway at Hellebæk Klædefabrik

Hellebæk Klædefabrik in Denmark has been pre-certified with DGNB platinum, making it the first existing property project to achieve platinum pre-certification from the Council for Sustainable Construction. Almost all the office leases at Hellebæk Klædefabrik are rented out, and the first dwellings have just been sold.

The renewal and development of the historical and conservated property, Hellebæk Klædefabrik, near Helsingør, is progressing. The construction of the 32 quality dwellings has now obtained the DGNB platinum pre-certification and is thus the first residential property to achieve this award. Sisse Normann Canguilhem, Acting Director of the Council for Sustainable Construction, says: “It is a pleasure for us to see investors with ambitions in the green sector and the willingness to put in the hard work to achieve them. We look forward to carrying out the final certification for Hellebæk Klædefabrik.”

Community comes first

Hellebæk Klædefabrik is all about putting the community first. The ambition is to create a vibrant community with optimal conditions for combining work and leisure. Solveig Rannje, Head of Real Estate Investments at Velliv, says:

“In addition to the platinum pre-certification, Hellebæk Klædefabrik has also been certified with DGNB Heart, which promotes health and well-being with humans at the center, which is a major focus of the construction. We have set high ambitions for the social dimension and want to contribute to an increased quality of life for residents, neighbors, unions in the area, and Velliv’s pension customers. It means a lot to us that it is being recognized in terms of a pre-certification.”

First sale completed

Partner in EDC Poul Erik Bech Helsingør, who is responsible for selling the 32 dwellings, Søren Blom Hesselhede, says: “The first dwellings have been sold, and the first open houses will be held within a short amount of time. The dwellings will be ready for occupancy in two stages. The sale of the 2nd stage has just opened, so the dwellings in the 1st stage will be ready for occupancy on July 1, 2023, and the 2nd stage will be ready on October 1, 2023. The sizes of the dwellings vary from 64-182 sqm with prices from DKK 3,500,000-6,995,000.”

Circularity is a common thread

The CO2 impact has been assessed in the pre-certification, and it will be significantly lower than the legal requirement (12.0 kg CO2/sqm/year) and is assessed as low. This is partly because the existing historical framework is converted into new attractive homes and commercial leases while the new construction is also built in wood.

“The pre-certification is an important milestone for the development of Hellebæk Klædefabrik, which indicates that we are fully on the right track and have chosen to focus on what truly matters. We are focusing, among other things, on contributing positively to the circular economy and resource utilization through the project. This is, for example, done by reusing bricks in the greenhouse and selecting coatings. We also have a comprehensive waste sorting system on the construction site,” says Marius Møller, CEO of PensionDanmark.

Hellebæk Klædefabrik’s heating supply has also been replaced from gas to geothermal spirals, reducing the opera-

• In 2020, the owners of Hellebæk Klædefabrik’s, PensionDanmark and Velliv, collaborated with DEAS Asset Management and were in dialog with users and neighbors, intending to develop a vision and masterplan to transform klædefabrikken into dwellings, open offices, and green meeting spaces.

• With a focus on community, a green profile, and preserving the existing framework, 32 dwellings are being built, and 60 commercial leases are being renovated.

• The transformation of Hellebæk Klædefabrik into dwellings, open offices, green outdoor spaces, and communities began in 2020 and is expected to be completed in 2023.

Read more at www.klaedefabrikken.dk

tion’s heat consumption and CO2 emissions. It has a positive impact on the building’s climate impact, overall economy, and energy consumption. The new heating system results in an annual reduction in CO2 emissions, equivalent to about 450 round-trip flights to Paris.

“Two words stand out when we talk about Hellebæk Klædefabrik: ‘community’ and ‘reduction of the carbon footprint’. Both areas of focus are rewarded in the pre-certification, and it has been successful in good cooperation with a wide range of skilled partners, each contributing with their expertise and ambitions,” says Kasper Ørsnes Larsen, Senior Development Manager, DEAS Asset Management.

More information

Kenneth Nielsen, Senior Advisor, Partner, Real Estate Agent, MDE • EDC Project Poul Erik Bech +45 5858 8378 • kni@edc.dk

Søren Blom Hesselhede, Partner, Real Estate Agent, MDE EDC Poul Erik Bech, Helsingør +45 5858 7430 • svi@edc.dk

About Hellebæk Klædefabrik

Erantishaven in Rødovre soon to be ready with 83 DGNB Gold-certified rental homes

The construction of the housing project Erantishaven in Rødovre in Denmark is well underway, which is a collaboration between CapMan and Nordstern, who have previously collaborated on several projects. Now the actual letting work is starting and therefore EDC Project Poul Erik Bech has been chosen to be responsible for the letting of the 83 quality apartments of between 2-6 rooms with occupancy from October 2023.

The construction of Erantishaven on Egegårdsvej in Rødovre is fully underway. The first test home is ready, and the open house events are open, and construction is expected to be completed in October 2023. Robert Feldt, Investment Director, CapMan Real Estate, says:

“Erantishaven consist of 83 DGNB Gold-certified homes in the urban and vibrant Rødovre Centrum, they will be centrally located close to the town hall and with only 100 meters to the large shopping center Rødovre Centrum and a few minutes’ walk to Damhusengen and Damhussøen. With this project, we have a vision of creating a greener city center with modern quality housing, urban life and recreational areas.”

“The area has previously been characterized by business, but now the beautiful location will be fully utilized with modern rental housing, which is intended for mixed age groups and family compositions. The building will be constructed as a staircase-shaped building that goes from the basement to the fifth floor. Common areas will be established on top of the underground parking garage. We look forward to welcoming the many new resident to Erantishaven.

CapMan and Nordstern is also developing and constructing a new residential area, Augusthave, in Aarhus with 209 rental homes, where EDC Project Poul Erik Bech Aarhus is responsible for the letting. They have also previously let 198 homes in Trianglen in Aarhus and are currently developing 463 rental homes at KobberEngen in Brøndby.

It was recently announced that STAD Project and EDC Project Poul Erik Bech are joining forces to create Denmark’s strongest project team. STAD Project already has a successful project in Rødovre, where they are completing the letting of 534 residential rentals in Rødovre Port. Read more page 12-13.

The environment is a recurring theme in Erantishaven, which is being certified DGNB Gold. To achieve the certification, the concrete from the old commercial building was crushed and used as a base layer on the construction site and under the future pavements. This corresponds to approximately 1,000 tons of concrete, which has been recycled on site. The existing pavements will also be reused.

Rødovre is developing fast Kenneth Nielsen, Project Director, EDC Project Poul Erik Bech, says: “These will be really nice quality apartments for families of all ages. The focus is on the environment and beautiful green surroundings with 2-6 room apartments of between 65-155 sqm, with rental prices starting from DKK 10,950 per month. This is a lot less than similar stateof-the-art apartments in Copenhagen. Rødovre is a city in rapid development, where the old commercial buildings are being transformed into thriving residential areas.”

“The residents of Erantishaven will have access to either private roof terraces, patios or balconies, with the remaining square meters of the roof covered with sedum and solar cells. In addition, open spaces will be created on the ground floor, which will be surrounded by the building, creating private common areas for the residents. We expect many visitors and a great interest in living in Erantishaven, and the future residents will move into a super exciting quality project.”

Read more about Erantishaven, including rent levels, the layout of the 2-6 room rental homes and the first open house are open in the project’s test home, on the project’s website: www.erantishaven.dk

More information

Kenneth Nielsen, Senior Advisor, Partner, Real Estate Agent, MDE • EDC Project Poul Erik Bech +45 5858 8378 • kni@edc.dk

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FOR SALE

Well-maintained property with a vocational school and youth dwellings in Holbæk

The fully leased properties consist of two registers situated close to each other and centrally located within a short distance of the train station and city centre. A newly built vocational school, well-designed with bright and modern rooms spread over two floors and 60 and 78 youth dwellings of 23-39 sqm. The youth dwellings are all well-maintained, with their own kitchen and bathroom. The outdoor areas appear well-kept and inviting, with parking lots available at the school and a location close to public transportation.

Slotshaven 3A-G and Lundstræde 55, 4300 Holbæk

Case no.: www.edc.dk/40301718

Area commercial/residential: 3,188 sqm/4,228 sqm

FORSALE

Yield: 5.60% Price: DKK 198,500,000

Contact: John Borrisholt, Regional Director Zealand, Partner, EDC Poul Erik Bech, +45 5858 8395

Residential rental property with the possibility of project development centrally located in Hedehusene

The property ”Hedelykke” consists of several buildings, which have been carefully rebuilt with respect for the historical features. The property is centrally located in Hedehusene, with a short distance to the centre with grocery stores and several specialist shops, public transport and close to the Hedeland nature area. There are good parking conditions both in front and behind the property. There is a local plan proposal approved in principle for a project with 38 terraced houses and a total of approx. 3,000 sqm residential area.

Hovedgaden 449 etc., 2640 Hedehusene

Case no.: 18101430

Area: 4,414 sqm Yield: 4.51%

Price: DKK 114,000,000

Contact: Poul Randrup, Estate agent, MDE

EDC Poul Erik Bech, +45 5858 8378

Striking and well-located investment property in Aalborg City South

FORSALE

The property appears particularly well-maintained, light and inviting and has since 2015 been converted into an ILVA. The property’s location is attractive and one of the best in Aalborg City South, which is an area with growth. With a location only 100 meters from IKEA and other well-known stores, the property attracts many customers. The property is 6,732 sqm large, has 349 spm building rights and approx. 100 parking spaces in the immediate vicinity of the property.

FORSALE

Stenbukken 22D, 9200 Aalborg SV

Case no.: www.edc.dk/91201064

Area: 6,732 sqm Yield: 6.68%

Price: DKK 98,900,000

Contact: Frank Jensen, Director, Partner

EDC Poul Erik Bech, +45 5858 8449

Functional and solid investment property in Fredericia

The property consists of three buildings which are divided into 14,118 sqm warehouse/production, 984 sqm office and a basement area of 794 sqm. The property offers excellent property facilities, including 18 gates, 16 ramps/sluice gates, a ceiling height of 6-7 metres, pillar-free production halls and ideal outdoor areas with, among other things, tank plant, laundry hall and 4 garages. Postnord expects to vacate Snaremosevej 65 per 1/9 2023 and the property can thus also be used as user property. The plot at Blytækkervej 1 of 10,469 sqm can be acquired together with this property.

Snaremosevej 63-65, 7000 Fredericia

Case no.: www.edc.dk/60301990

Area: 16,089 sqm Yield: 7.74% Price: DKK 65,000,000

Contact: Preben Balle, Partner, Commercial Manager EDC Poul Erik Bech, +45 5858 8399

FORSALE

EDC sold this modern and well-located property in Frederiksberg at the beginning of the year.

The property was built in 2017 and contains 47 fully let micro homes. All apartments have access to both balcony and lift, large outdoor areas and parking for both bicycles and cars.

Since the location in Frederiksberg near the ZOO and CBS is very demanded, and the size of the apartments fit within the youth housing segment, there was great interest in the property from the investors’ side.

Contact: Lone Thuen, Head of Investments

EDC Poul Erik Bech, Copenhagen + 45 5858 8378

JLL and EDC as buyer advisors in the largest real estate transaction in the Nordics in 2022

JLL Capital Markets in Sweden and Finland, together with the partners in Akershus (Norway) and EDC International Poul Erik Bech (Denmark), have been commercial buyer advisors for Brookfield Super-Core Infrastructure Partners in the purchase of 49% of the shares in the newly founded real estate company EduCo at a transaction price of approx. SEK 43.7 billion. The seller of the shares is Samhällsbyggnadsbolaget in Norden AB (SBB). SBB focuses on education properties in the Nordics and the property portfolio includes 585 properties with a letting area of approx. 1,300,000 sqm.

Contact: Helle Nielsen Ziersen, Partner, Head of International, EDC Poul Erik Bech, Copenhagen, +45 5858 8563

47 residential rental apartments in Frederiksberg sold for a three-digit million sum

Sluseholmen is a modern canal town where you can enjoy the water’s edge and unfold yourself in the surrounding beautiful nature. Here you can rent your dream home designed for an active life. Sluseholmen is both close to the city and close to nature. It only takes 10 minutes to get to the inner city, while Amager Fælled is just on the other side of the Sluseløbet. The floor plans of the apartments are modern and well thought out with good light entering all rooms. Beautiful floors and elements in the kitchen and bath which have been carefully selected with an eye for quality. EDC Project Poul Erik Bech has the task of re-letting the 800 homes.

Read more at www.sluseholmen.dk • Contact: +45 3330 7800

The building in Trekløveren, which will be DGNB-Gold certified, offers well-furnished two and three-room apartments, all with access to a large balcony or terrace. Located in a quiet neighbourhood, where green wedges, parks and good common areas characterize the areas between the buildings. Close to the light rail and the super cycle path that provide easy access to central Odense, the railway station and the city’s other facilities. The homes will be ready for occupancy in late summer 2023 and will be let out in several stages.

Read more at www.trekloeveren.dk

Contact: +45 6612 6127

New modern homes are built with the sustainability certification DGNB Gold. Kvægtorvet’s homes will form the framework for the good life across generations. The location doesn’t get much better with newly created green oases, path systems and space for both young and old. The development forms a wide range of different forms of housing such as family homes, youth housing and senior housing. Here you get a short distance to countless educational institutions, a good framework for family life, a good local environment and a unique community.

Read more at www.kvaegtorvet-slagelse.dk

Contact: +45 5852 8200

Green housing close to the university, Aarhus city centre and Vennelystparken. With its seven squares, centred around the large courtyard, Augusthave forms a small, elegant district in the big city. Here you can get a modern, up-to-date home with good floor plans. The building consists of varying housing sizes from one to four rooms, so that both young and old, couples and families with children can find accommodation here. The courtyard spaces in the middle of the building support well-being in everyday life and contribute to valuable neighbourhoods.

Read more at www.augustshave.dk • Contact: +45 5858 7730

in Slagelse 324 rental properties

EDC Poul Erik Bech welcomes you to the 2nd quarter of Market Update, which is your tool for following economic developments in the commercial real estate market. Market Update is published quarterly in both Danish and English and reviews the most important key figures from the Danish economy and the commercial property market.

You can find detailed market data on yield requirements, rental levels and vacancy rates within residential rental, office, retail and industrial properties. There are several relevant themes this quarter:

• The economy has performed better than expected. This indicates that Denmark will avoid a recession and have a soft landing instead. Inflation is still high but has been falling since the autumn of 2022. It is the same story with the consumer confidence, which is still negative, but has been increasing since the autumn of 2022. Finally, employment has been steadily increasing, which is in sharp contrast to expectations from just few months ago.

• All these conditions help to support the activity among businesses, and there is still strong activity in the occupier market for stores, offices, industrial and logistics properties. The vacancy rate for office properties has fallen slightly, while it has increased slightly for retail and industrial and logistics properties. For all property types, the vacancy is very low in a historical context, and due to the low expectations for the economy in 2023, we expect the vacancy to increase slightly in the coming quarters.

• Activity on the commercial real estate investment market is significantly lower than last year, which is mainly due to the sharp rise of interest rate levels we experienced during the last year to year and a half. However, there are signs that a stabilization of interest rates is underway, and at the same time the yield requirements for several property types and in several geographical areas have increased slightly since last quarter, which indicates progress.

Annual GDP growth

The Danish economy

After two years of strong growth in GDP of 4.9 percent and 3.8 percent in 2021 and 2022, respectively, there are now prospects for a growth slowdown. The preliminary calculation of GDP growth for 2023 is 0.9 percent. The lower GDP growth can be linked to a reduced private consumption due to rising interest rates and a reduced purchasing power from a historical high inflation. The latest forecast from Danmarks Nationalbank shows an expected growth of 1.2 percent in both 2024 and 2025. The forecast for GDP this year is slightly higher than the last forecast indicating that the risk of a mild recession has been averted. This can be linked to a high foreign demand, which is most likely associated with the noticeable production increase in the pharmaceutical industry. The forecast for GDP next year is unchanged.

Source: Statistics Denmark & Nationalbanken

Interest rates have risen significantly in 2022 and short mortgage rate is still rising moving into 2023. The upward pressure on interest rates can be linked to a combination of several factors, primarily that the central banks are trying to tame the historically high inflation. Furthermore, the war in Ukraine and the Corona pandemic also play a big part in the high inflation. The short mortgage rate has been rising over the past month and is currently at 3.41 percent in June 2023. The long mortgage rate has been more volatile in 2023 and is currently at 4.14 percent in June 2023.

Source: Finance Denmark & Statistics Denmark

Consumer confidence indicates the population’s view of its current and future economic situation and is thus a good indicator of how the general population is affected by Denmark’s economic situation. Consumer confidence in May is at minus 15.1 and has thus risen since April, when it was at minus 18.2. The average for 2023 is minus 21.5. Three out of five indicators that together make up consumer confidence have risen since last month. The judgement of the current situation has become less negative expectation of the future economic situation has risen, which play a big role in the improved consumer confidence.

Source: Statistics Denmark

The latest figures from Danmarks Statistik from March 2023 show an increase in the number of employees of 4,794 persons corresponding to an increase of 0.16 percent compared to April. The number of employees increased especially in the sectors Companies and organizations and Public administration and service. With 46,076 new employees since March 2022, employment remains at peak levels. However, the pressure on the labor market is expected to ease with the growth slowdown in the Danish economy.

Source: Statistics Denmark

Residential rental

newer properties

Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months

Residential rental

fully developed properties

Yield in %, annual rent in DKK/sq m incl. operating expenses and trends for the next 12 months

Source: EDC International Poul Erik Bech, estimates as of Q2 2023

Residential rental cost determined rental properties

Yield in percent and trends for the next 12 months

Source: EDC International Poul Erik Bech, estimates as of Q2 2023

Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months

Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months

Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months

Source: EDC International Poul Erik Bech, estimates as of Q2 2023

Location and condition

Yield and rent levels estimates are based on primary, secondary and tertiary categories, where primary is the best and tertiary is the worst. Various variables for each property type have been taken into consideration with regards to determine the facility classes, such as: size, floor plan structure, year of construction, lifts, climate control, cabling infrastructure, staff facilities, customer facilities, parking facilities, building energy rating, ceiling height, general accessibility, general condition of the property, etc.

Primary: A property with prime location and class A facilities has the best possible location in an area, the highest standard when it comes to facilities, is modern and ready to move into. This type of property will typically be sold at the lowest yield in the area, have the highest market rent and have a short reletting process.

Secondary: Average in terms of location and condition. Yield and rent levels also reflect the average levels for the area. The re-rental options are market compliant and reflect the general market conditions.

Tertiary: Poor location for the area, low standard, and outdated. This type of property is expected to be able to be sold at a relatively high yield level, and the rent level is low for the defined area. Similarly, vacancy rates can be expected to be higher than the market average.

Yield

All yields are initial net yields and are defined as the annualized rent generated by the property after the deduction of estimated annual irrecoverable property outgoings, expressed as a percentage of the property valuation (property valuation is adjusted for the value of rental deposits and prepaid rent). For comparison purposes, it is assumed that all properties are fully let at market-conform conditions.

Market Rent

All rents are headline rents, in other words, the contracted gross rent receivable, which becomes payable after any tenant incentives have expired. Market rent estimates are expressed in DKK/sq m/year. It is assumed that all properties are let at market-conform conditions.

Residential rental properties

1) Newer residential rental properties are properties that have been occupied after 31.12.1991 and thus covered by the rules on free/market rent according to the Danish Residential Rent Regulation Act section 54 (1, 1).

2) Cost determined rental properties are older residential rental properties that have been occupied before 31.12.1991 and are regulated in accordance with the provisions of the Danish Residential Rent Regulation Act on cost-determined rent.

3) Fully developed older residential rental properties are older home rental properties without further potential for rent increases through modernization pursuant to section 19 (2) of the Danish Residential Rent Regulation Act.

Data for available commercial premises

The source of available commercial premises is the latest available supply statistics from Ejendomstorvet. Further information about these statistics can be found at ejendomstorvet.dk/statistik/udbudsstatistik.

Trends

All trends reflect our expectations to the level in 12 months time.

 The figure is expected to increase

 The figure is expected to remain unchanged

 The figure is expected to decrease

Note on estimates

The valuation of a property depends on many specific factors, including conditions of the lease, the tenant, and the property condition. The estimates cannot be used uncritically in the valuation of one specific property but can serve as input related to the valuation. Reproduction or citation only with acknowledgment of source. While every effort has been made to ensure that the information provided is accurate, EDC International Poul Erik accepts no liability for errors.

Improve your decisions by using data-based analyses

As an investor, it is crucial to approach an investment objectively. With analyses from EDC Poul Erik Bech, we provide you with the opportunity to do just that by ensuring that your investment is based on a solid data foundation. EDC Poul Erik Bech Research offers area-specific analyses for the entire country that can be tailored to your specific needs. Additionally, we provide in-depth analyses of population trends, housing supply, transaction volume, and more, which can help you as an investor to make the right decisions based on a solid knowledge foundation.

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