International Poul Erik Bech MARKETUpdate Q Residential rental Office Retail Industrial Market rent GDP growt Employment Rates Consumer confidence Availability Yield 2024 1
Executive summary – Q1
The Danish economy has performed better than expected with significant growth in the fourth quarter of 2023. There is one explanation for this, namely Novo Nordisk’s great success. Inflation has fallen sharply in Denmark, and core inflation is at its lowest level since 2022. Employment is historically high with over 3 million employees and still rising. Consumer confidence is still negative, as it has been since the end of 2021, although it is improving. It is expected that economic growth will gradually return during 2024 and 2025, partly aided by interest rate cuts and increasing private consumption.
All these factors contribute to supporting activity among businesses, and the activity in the market for renting shops, offices, and industrial and logistics properties is declining, albeit from a high level of activity. This has resulted in a slight increase in vacancy rates for all three types of properties. However, for all property types, the vacancy rates are historically low. Due to the relatively low expectations for the economy in the first half of 2024, it is expected that vacancy rates will continue to increase slightly in the coming quarters.
The market for investment properties is significantly lower than last year, mainly due to the high interest rates we have experienced. The total transaction volume for January and February 2024 is estimated at 1.7 billion DKK and 3.9 billion DKK, respectively, representing a total increase in the period of 4% compared to 2023. However, there are signs that an interest rate stabilization is underway, as central banks have announced that the peak has been reached. Yield requirements are mostly evolving sideways now, and in many places, the forecasts for the levels a year from now indicate that yield requirements will be roughly unchanged from today’s levels.
Erhvervsmæglernes Branchedata
EDC Poul Erik Bech has teamed up with 6 other leading commercial real estate agents for a new collaboration aimed at coordinating and standardizing transaction data for commercial and investment properties in Denmark. The purpose of the collaboration is to create transparency in the commercial real estate industry. The collaboration was launched and came into effect on January 18, 2024, so only the figures from 2024 are covered by the collaboration.
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The Danish economy
After two years of strong growth in GDP of 4.9% and 3.8% in 2021 and 2022, respectively, there are prospects for a growth slowdown in 2023. The preliminary calculation of GDP growth for 2023 is 1.8%. 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 1.3% in both 2024 and 2025. The forecast for GDP this year is 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 0.1 percentage points higher than the last forecast.
Source: Statistics Denmark & Nationalbanken
In 2023 and in the beginning of 2024, the development in interest rates has been more stagnant compared to 2022, where interest rates increased significantly. This is due to a more moderate and falling development in inflation, which has been particularly driven by a decrease in energy costs. The short-term mortgage rate, which is closely correlated the monetary policy actions of the Federal Reserve (FED) and the European Central Bank (ECB), has undergone a more subdued development and was at 3.3% in January 2024. The long-term mortgage rates have been more volatile and have fallen since October 2023. In January 2024, the average long-term mortgage rate was at 4.6%.
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. The consumer confidence indicator in February 2024 is at minus 7.4 and has thus risen slightly since January, where it was at minus 8.4. All five indicators that together make up consumer confidence indicator have risen since last month. Despite consumer confidence remaining negative, it is the highest consumer confidence indicator seen since February 2022, where it was minus 3.2. The average for 2022 was minus 22.2 and for 2023 was minus 15.6, making the current level of consumer confidence a significant improvement.
Source: Statistics Denmark
The latest figures from Statistics Denmark from December 2023 show an increase of 1,300 employees to a total of 3,005,900 persons. Since December 2022, employment has increased in 11 out of 12 months, and in December 2023 there were 31,100 more wage earners compared to 12 months earlier. This corresponds to 1.0% growth in employees. In the knowledge services industry, which includes legal assistance, auditing, architectural and engineering, and advertising, the number of employees has increased by 5,300 since December 2022, corresponding to an increase of 3.0%.
Source: Statistics Denmark
3
GDP growth Interest rates
Annual
Consumer confidence indicator
-40 20 10 0 -10 -30 -20 2004 2006 2008 2010 2014 2012 2016 2018 2020 2002 2022 2005 2007 2009 2011 2015 2013 2017 2019 2021 2003 2023 2001 2000 2024 -1% 2% 6% 1% 4% 0% 2012 2014 2015 2016 2018 2017 2019 2020 2021 2022 3% 5% 2023 2013 2024 Short-term mortgage rateLong-term mortgage rate -4% 0% 8% 2013 2014 2015 2016 2017 2018 2020 2019 2021 2022 -2% 2024 2023 2025 6% 2% 4% Real growth in BNP compared to previous year (%) Expected real growth in BNP compared to previous year (%) 1.6% 0.9% 2.3% 3.2% 2.8% 2.0% 1.5% -2.4% 6.8% 2.7% 1.8% 1.3%1.3%
Employees
2.5 2.6 3.1 2.7 Mio 2.9 2.8 3.0 2023 2014 2015 2016 2018 2017 2019 2020 2021 2022 2012 2013
Residential rental
newer properties
Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months
4 Area* (see specifications page 14) Prime Secondary TertiaryTrend Capital of Denmark Central Copenhagen Yield in % 4.00%4.25%4.50% Annual market rent in DKK/sq m 2,550 DKK 2,200 DKK 2,000 DKK Østerbro, Frederiksberg and Gentofte Yield in % 4.00%4.25%4.50% Annual market rent in DKK/sq m 2,450 DKK 2,100 DKK 1,950 DKK Harbour areas Yield in % 4.00%4.25%4.50% Annual market rent in DKK/sq m 2,400 DKK 2,000 DKK 1,800 DKK Ørestad Yield in % 4.25%4.50%5.00% Annual market rent in DKK/sq m 1,900 DKK 1,800 DKK 1,700 DKK Remaining Copenhagen Yield in % 4.25%4.50%5.00% Annual market rent in DKK/sq m 2,300 DKK 2,000 DKK 1,800 DKK Remaining Zealand Western suburbs Yield in % 4.50%5.00%5.25% Annual market rent in DKK/sq m 1,750 DKK 1,600 DKK 1,500 DKK Northern suburbs Yield in % 4.50%5.00%5.50% Annual market rent in DKK/sq m 1,950 DKK 1,700 DKK 1,450 DKK North Zealand Yield in % 4.50%5.00%6.00% Annual market rent in DKK/sq m 1,950 DKK 1,700 DKK 1,450 DKK East Zealand Yield in % 4.75%5.00%6.50% Annual market rent in DKK/sq m 1,900 DKK 1,600 DKK 1.300 DKK West Zealand Yield in % 5.50%6.75%8.00% Annual market rent in DKK/sq m 1,500 DKK 1,300 DKK 1,000 DKK South Zealand Yield in % 5.25%6.25%7.50% Annual market rent in DKK/sq m 1,350 DKK 1,100 DKK 950 DKK Lolland, Falster and Møn Yield in % 5.75%6.75%8.00% Annual market rent in DKK/sq m 1,200 DKK950 DKK 800 DKK Southern Denmark Odense Yield in % 4.75%5.00%5.50% Annual market rent in DKK/sq m 1,450 DKK 1,275 DKK 1,100 DKK Other Funen Yield in % 5.25%5.75%6.50% Annual market rent in DKK/sq m 1,250 DKK1,100 DKK 950 DKK Vejle Yield in % 5.00%5.50%6.25% Annual market rent in DKK/sq m 1,400 DKK 1,200 DKK 1,000 DKK Kolding Yield in % 5.50%6.00%7.00% Annual market rent in DKK/sq m 1,350 DKK 1,150 DKK 950 DKK Fredericia Yield in % 5.50%6.00%7.00% Annual market rent in DKK/sq m 1,300 DKK 1,100 DKK875 DKK Esbjerg Yield in % 5.50%6.25%7.50% Annual market rent in DKK/sq m 1,250 DKK900 DKK 750 DKK Sønderborg Yield in % 6.00%7.00%8.00% Annual market rent in DKK/sq m 1,150 DKK900 DKK 750 DKK Other South Jutland Yield in % 6.00%7.00%8.00% Annual market rent in DKK/sq m 1,100 DKK 800 DKK 675 DKK Central Jutland Aarhus Yield in % 4.25%4.75%5.25% Annual market rent in DKK/sq m 1,850 DKK 1,600 DKK 1,350 DKK Silkeborg Yield in % 4.75%5.75%7.25% Annual market rent in DKK/sq m 1,400 DKK 1,050 DKK950 DKK Viborg Yield in % 5.25%6.25%7.25% Annual market rent in DKK/sq m 1,125 DKK 1,000 DKK 850 DKK Herning Yield in % 5.25%5.75%7.00% Annual market rent in DKK/sq m 1,200 DKK 1,050 DKK 900 DKK West Jutland Yield in % 5.50%6.50%8.00% Annual market rent in DKK/sq m 1,200 DKK850 DKK 750 DKK Northern Jutland Aalborg Yield in % 4.50%5.00%5.75% Annual market rent in DKK/sq m 1,400 DKK 1,150 DKK 950 DKK Hjørring Yield in % 5.25%6.50%7.25% Annual market rent in DKK/sq m 1,150 DKK950 DKK 775 DKK Frederikshavn Yield in % 6.00%7.00%7.50% Annual market rent in DKK/sq m 1,050 DKK 850 DKK 650 DKK Source: EDC International Poul Erik Bech, estimates as of Q1 2024
Residential rental
fully developed properties
Yield in %, annual rent in DKK/sq m incl. operating expenses and trends for the next 12 months
5 Source: EDC International Poul Erik Bech, estimates as of Q1 2024 Area* (see specifications page 14) Prime Secondary TertiaryTrend Capital of Denmark Central Copenhagen Yield in % 4.00%4.25%4.50% Annual rent in DKK/sq m 1,800 DKK 1,650 DKK 1,500 DKK Østerbro, Frederiksberg and Gentofte Yield in % 4.00%4.50%4.75% Annual rent in DKK/sq m 1,750 DKK 1,650 DKK 1,550 DKK Remaining Copenhagen Yield in % 4.25%4.50%5.00% Annual rent in DKK/sq m 1,700 DKK 1,600 DKK 1,500 DKK Remaining Zealand Western suburbs Yield in % 4.75%5.25%6.00% Annual rent in DKK/sq m 1,600 DKK 1,525 DKK 1,225 DKK Northern suburbs Yield in % 4.50%5.00%5.75% Annual rent in DKK/sq m 1,500 DKK 1,350 DKK 1,225 DKK North Zealand Yield in % 4.50%4.75%5.75% Annual rent in DKK/sq m 1,550 DKK 1,400 DKK 1,300 DKK East Zealand Yield in % 4.50%5.25%7.00% Annual rent in DKK/sq m 1,600 DKK 1,300 DKK 1,000 DKK West Zealand Yield in % 5.25%6.50%7.50% Annual rent in DKK/sq m 1,150 DKK 900 DKK 750 DKK South Zealand Yield in % 5.25%6.25%7.75% Annual rent in DKK/sq m 1,200 DKK 900 DKK 700 DKK Lolland, Falster and Møn Yield in % 6.00%7.50%8.50% Annual rent in DKK/sq m 1,000 DKK 825 DKK 725 DKK Southern Denmark Odense Yield in % 5.00%5.25%5.75% Annual rent in DKK/sq m 900 DKK 875 DKK 800 DKK Other Funen Yield in % 5.75%6.25%7.50% Annual rent in DKK/sq m 825 DKK 725 DKK 600 DKK Vejle Yield in % 5.25%6.00%6.50% Annual rent in DKK/sq m 1,125 DKK 975 DKK 800 DKK Kolding Yield in % 5.75%6.25%7.00% Annual rent in DKK/sq m 1,175 DKK 1.000 DKK 850 DKK Fredericia Yield in % 5.75%6.25%7.25% Annual rent in DKK/sq m 1,175 DKK 975 DKK 800 DKK Esbjerg Yield in % 5.50%6.50%7.50% Annual rent in DKK/sq m 1,050 DKK 725 DKK 550 DKK Sønderborg Yield in % 5.75%6.75%7.75% Annual rent in DKK/sq m 1,000 DKK 950 DKK750 DKK Other South Jutland Yield in % 6.00%7.25%8.25% Annual rent in DKK/sq m 950 DKK 750 DKK 625 DKK Central Jutland Aarhus Yield in % 4.00%4.50%5.00% Annual rent in DKK/sq m 1,575 DKK 1,350 DKK 1,200 DKK Silkeborg Yield in % 4.75%5.75%7.25% Annual rent in DKK/sq m 1,350 DKK 900 DKK 650 DKK Viborg Yield in % 5.75%7.00%8.25% Annual rent in DKK/sq m 1,100 DKK 850 DKK 650 DKK Herning Yield in % 5.50%6.25%7.25% Annual rent in DKK/sq m 1,150 DKK 925 DKK 750 DKK West Jutland Yield in % 6.00%7.25%9.00% Annual rent in DKK/sq m 1,100 DKK 750 DKK 650 DKK Northern Jutland Aalborg Yield in % 4.50%5.25%6.25% Annual rent in DKK/sq m 1,200 DKK 1,050 DKK 850 DKK Hjørring Yield in % 5.75%6.50%7.75% Annual rent in DKK/sq m 900 DKK 800 DKK 700 DKK Frederikshavn Yield in % 6.50%7.25%8.00% Annual rent in DKK/sq m 850 DKK 750 DKK 625 DKK
Residential rental cost determined rental properties
Yield
in percent and trends for the next 12 months
6 Source: EDC International Poul Erik Bech, estimates as of Q1 2024 Area* (see specifications page 14) Prime Secondary TertiaryTrend Capital of Denmark Central Copenhagen Yield in % 1.50%2.25%3.00% Østerbro, Frederiksberg and Gentofte Yield in % 1.75%2.25%3.00% Remaining Copenhagen Yield in % 2.50%3.00%3.50% Remaining Zealand Western suburbs Yield in % 3.00%3.75%4.50% Northern suburbs Yield in % 3.00%3.50%4.25% North Zealand Yield in % 4.00%4.75%5.75% East Zealand Yield in % 4.00%5.00%6.50% West Zealand Yield in % 5.00%6.25%7.00% South Zealand Yield in % 5.00%6.00%7.25% Southern Denmark Odense Yield in % 3.50%4.50%5.25% Other Funen Yield in % 5.25%5.50%7.00% Vejle Yield in % 5.00%5.50%6.00% Kolding Yield in % 5.00%5.50%6.50% Fredericia Yield in % 5.50%6.00%6.50% Esbjerg Yield in % 5.00%5.50%6.50% Sønderborg Yield in % 5.50%6.00%6.50% Other South Jutland Yield in % 5.25%6.25%7.25% Central Jutland Aarhus Yield in % 2.50%3.75%5.25% Silkeborg Yield in % 4.50%5.25%7.00% Viborg Yield in % 5.25%6.00%7.75% Herning Yield in % 5.00%6.00%7.00% Northern Jutland Aalborg Yield in % 3.25%4.50%5.75% Hjørring Yield in % 5.00%6.00%7.00% Frederikshavn Yield in % 5.75%6.75%7.50%
Development in residential rental properties
Less development activity due to high interest rates
Demand for residential rental properties has decreased significantly during 2023. This is underscored by the fact that transaction volume has decreased by around 50% from 2022 to 2023.
The decrease in transaction volume is driven by recent years’ inflation and interest rate increases as well as general uncertainties. This has meant that the return requirements among buyers have increased significantly, while sellers are slow to adjust their return requirements to the new market situation. Overall, return requirements are also still lower in Denmark than in surrounding countries, partly because Danish property investors have a more robust financing structure to a large extent. This means they are not as sensitive to interest rate fluctuations as investors in the Swedish market, for example. Therefore, many investors have the option to hold onto their property rather than accepting a lower price in connection with a sale. The combi-
nation of high interest rates and rising taxes may mean that more private individuals choose or must rent a home, as it is currently relatively more attractive to rent than owning.
Despite significant construction activity in recent years, vacancy remains relatively limited at the national level. The vacancy rate is clearly lowest in Copenhagen, the Copenhagen area and North Zealand, while it is highest in Central and North Jutland. The housing vacancy has increased by 0.5% to 4.1% from Q4 2022 to Q4 2023.
The market rent is expected to between stable to slightly increasing in the coming year, while required returns are expected to be stable around the current reported levels. The return requirements are expected to be stable partly due to the anticipation of falling interest rates during 2024, which will quite naturally improve conditions for the transaction market.
Office
Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months
8 Area* (see specifications page 14) Prime Secondary TertiaryTrend Capital of Denmark Central Copenhagen Yield in % 4.00%4.75%5.50% Annual market rent in DKK/sq m 2,650 DKK 1,800 DKK 1,450 DKK Østerbro, Frederiksberg and Gentofte Yield in % 4.25%5.00%6.00% Annual market rent in DKK/sq m 2,350 DKK 1,600 DKK 1,350 DKK Harbour areas Yield in % 4.00%4.75%5.75% Annual market rent in DKK/sq m 2,700 DKK 1,850 DKK 1,600 DKK Ørestad Yield in % 4.75%5.25%6.25% Annual market rent in DKK/sq m 2,050 DKK 1,600 DKK 1,450 DKK Remaining Copenhagen Yield in % 4.75%5.75%6.50% Annual market rent in DKK/sq m 1,900 DKK 1,350 DKK 1,000 DKK Remaining Zealand Western suburbs Yield in % 5.25%7.25%9.75% Annual market rent in DKK/sq m 1,400 DKK 850 DKK 600 DKK Northern suburbs Yield in % 5.00%5.75%8.75% Annual market rent in DKK/sq m 1,625 DKK 1,350 DKK 750 DKK North Zealand Yield in % 5.50%6.25%9.25% Annual market rent in DKK/sq m 1,425 DKK 1,025 DKK 700 DKK East Zealand Yield in % 6,25%7.25%10.50% Annual market rent in DKK/sq m 1,400 DKK 900 DKK 450 DKK West Zealand Yield in % 6.50%8.50%10.50% Annual market rent in DKK/sq m 1,150 DKK700 DKK 350 DKK South Zealand Yield in % 7.00%8.25%10.75% Annual market rent in DKK/sq m 1,000 DKK700 DKK 350 DKK Lolland, Falster and Møn Yield in % 7.25%9.00%11.00% Annual market rent in DKK/sq m 850 DKK650 DKK400 DKK Southern Denmark Odense Yield in % 5.75%6.50%8.50% Annual market rent in DKK/sq m 1,550 DKK 1,000 DKK 650 DKK Other Funen Yield in % 6.50%8.00%9.50% Annual market rent in DKK/sq m1,200 DKK 800 DKK 400 DKK Vejle Yield in % 6.25%7.50%9.50% Annual market rent in DKK/sq m 1,450 DKK950 DKK 550 DKK Kolding Yield in % 6.50%7.75%9.75% Annual market rent in DKK/sq m 1,400 DKK 800 DKK 450 DKK Fredericia Yield in % 6.50%8.25%10.00% Annual market rent in DKK/sq m 1,350 DKK 900 DKK 500 DKK Esbjerg Yield in % 7.00%8.50%10.00% Annual market rent in DKK/sq m 1,400 DKK 800 DKK 450 DKK Sønderborg Yield in % 7.50%9.00%10.50% Annual market rent in DKK/sq m 1,150 DKK700 DKK400 DKK Other South Jutland Yield in % 8.00%9.50%11.75% Annual market rent in DKK/sq m 900 DKK 700 DKK 400 DKK Central Jutland Aarhus Yield in % 5.00%6.00%8.00% Annual market rent in DKK/sq m 2,000 DKK 1,500 DKK 850 DKK Silkeborg Yield in % 6.25%7.25%9.25% Annual market rent in DKK/sq m 1,300 DKK 700 DKK 450 DKK Viborg Yield in % 6.75%7.50%9.25% Annual market rent in DKK/sq m 975 DKK 600 DKK 400 DKK Herning Yield in % 6.75%7.50%9.25% Annual market rent in DKK/sq m 1.150 DKK 700 DKK 425 DKK West Jutland Yield in % 7.00%8.25%10.25% Annual market rent in DKK/sq m 850 DKK 500 DKK 350 DKK Northern Jutland Aalborg Yield in % 5.75%6.50%7.50% Annual market rent in DKK/sq m 1,300 DKK 900 DKK 600 DKK Hjørring Yield in % 7.00%8.00%11.00% Annual market rent in DKK/sq m 1,000 DKK 650 DKK 400 DKK Frederikshavn Yield in % 7.50%8.50%11.00% Annual market rent in DKK/sq m 850 DKK 500 DKK 350 DKK Source: EDC International Poul Erik Bech, estimates as of Q1 2024
Development in office properties
Strong office market with low vacancy Demand for attractive office properties was relatively stable in 2022 with several major transactions traded at low yield requirements. Although 2023 has seen several major transactions traded at low yield requirements, activity has decreased significantly by around 50%. However, unlike many other European countries, the numbers are quite reasonable. In Europe, the activity has declined more significantly with increases in yield requirements even for the most attractive properties.
Demand in Denmark is supported by, among other factors, a robust labour market characterised by record-high employment, but also by remote work being significantly less prevalent than in larger European metropolises.
Many companies still demand flexible office solutions due to increased focus on remote work, better space utilization, and scalability options. This is primarily in Copenhagen,
where the supply of flexible concepts is large, while in cities like Aarhus, there is high demand but only limited supplyespecially in the city centre where demand for office space is highest. However, there are also trends pointing in the opposite direction, with several companies establishing policies regarding the number of remote workdays to limit the amount of remote work.
The nationwide vacancy rate for offices was 5.2% in the fourth quarter of 2023. Vacancy has increased by 0.2 percentage points since the same quarter the year before. Yield requirements are generally expected to remain stable over the coming year, which also applies to market rents. However, the development in interest rates will be the big unknown, with considerable risk that continued high interest rates will lead to further increases in yield requirements - especially for prime office properties.
9 0% 4% 2% 8% 10% 14% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2020 12% 6% 2023 2022 2024 Capital Region of Denmark Region Zealand Region of Southern Denmark Central Denmark Region North Denmark Region Denmark, total
space as a percentage of building stock Source: Ejendomstorvet-ED
estimates as
2024
Available office
Statistikken,
of Q1
Retail
Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months
Area* (see specifications page 14) Prime Secondary TertiaryTrend Capital of Denmark Strøget Yield in % 4.00%4.50%5.00% Annual market rent in DKK/sq m 20,000 DKK 11,000 DKK 6,000 DKK Central Copenhagen Yield in % 5.00%5.75%6.25% Annual market rent in DKK/sq m 4,750 DKK 2,500 DKK 1,800 DKK Østerbro, Frederiksberg and Gentofte Yield in % 5.25%6.00%7.00% Annual market rent in DKK/sq m 4,000 DKK 2,250 DKK 1,350 DKK Harbour areas Yield in % 5.00%5.75%6.25% Annual market rent in DKK/sq m 2,750 DKK 1,800 DKK 1,500 DKK Ørestad Yield in % 5.50%6.25%7.00% Annual market rent in DKK/sq m 2,400 DKK 1,750 DKK 1,500 DKK Remaining Copenhagen Yield in % 5.50%6.25%7.50% Annual market rent in DKK/sq m 3,000 DKK 1,750 DKK 1,050 DKK Remaining Zealand Western suburbs Yield in % 5.75%7.25%9.25% Annual market rent in DKK/sq m 2,500 DKK 1,500 DKK 850 DKK Northern suburbs Yield in % 5.50%6.50%8.00% Annual market rent in DKK/sq m 4,400 DKK 1,900 DKK 1,000 DKK North Zealand Yield in % 5.75%7.00%8.75% Annual market rent in DKK/sq m 3,400 DKK 1,600 DKK 750 DKK East Zealand Yield in % 6.00%7.25%8.75% Annual market rent in DKK/sq m 2,800 DKK1,400 DKK 900 DKK West Zealand Yield in % 6.75%7.75%9.75% Annual market rent in DKK/sq m 1,700 DKK 950 DKK 500 DKK South Zealand Yield in % 6.75%7.75%9.75% Annual market rent in DKK/sq m 1.600 DKK 900 DKK 500 DKK Lolland, Falster and Møn Yield in % 8.00%9.50%11.00% Annual market rent in DKK/sq m 900 DKK700 DKK400 DKK Southern Denmark Odense Yield in % 6.00%7.00%8.25% Annual market rent in DKK/sq m 5,250 DKK 2,500 DKK 650 DKK Other Funen Yield in % 6.50%7.75%10.25% Annual market rent in DKK/sq m 2,100 DKK 1,250 DKK 500 DKK Vejle Yield in % 6.50%7.50%9.50% Annual market rent in DKK/sq m 2,900 DKK 1,500 DKK 750 DKK Kolding Yield in % 6.75%7.75%9.50% Annual market rent in DKK/sq m 2,000 DKK 1,200 DKK600 DKK Fredericia Yield in % 7.25%8.25%10.00% Annual market rent in DKK/sq m 1,650 DKK1.000 DKK 550 DKK Esbjerg Yield in % 7.25%8.75%10.25% Annual market rent in DKK/sq m 2,350 DKK 1,000 DKK 550 DKK Sønderborg Yield in % 7.50%9.00%10.25% Annual market rent in DKK/sq m 1,800 DKK 1,200 DKK 400 DKK Other South Jutland Yield in % 8.00%9.25%10.50% Annual market rent in DKK/sq m 1,500 DKK 1,000 DKK 400 DKK Central Jutland Aarhus Yield in % 4.75%5.75%7.50% Annual market rent in DKK/sq m 6,000 DKK 2,500 DKK 1.000 DKK Silkeborg Yield in % 6.75%7.75%9.00% Annual market rent in DKK/sq m 2,400 DKK 1,050 DKK 550 DKK Viborg Yield in % 7.00%8.00%10.25% Annual market rent in DKK/sq m 2,500 DKK 1,050 DKK 500 DKK Herning Yield in % 7.25%8.25%10.00% Annual market rent in DKK/sq m1,750 DKK 900 DKK500 DKK West Jutland Yield in % 7.50%8.75%11.00% Annual market rent in DKK/sq m2,300 DKK 750 DKK500 DKK Northern Jutland Aalborg Yield in % 5.75%7.00%8.75% Annual market rent in DKK/sq m 4,000 DKK 1,800 DKK 900 DKK Hjørring Yield in % 7.00%8.00%10.00% Annual market rent in DKK/sq m 1,400 DKK 750 DKK 400 DKK Frederikshavn Yield in % 7.50%8.50%10.00% Annual market rent in DKK/sq m 1,200 DKK 700 DKK 375 DKK
Source: EDC International Poul Erik Bech, estimates as of Q1 2024
Development in retail properties
Tenants have gained increased influence
The high uncertainty of recent years has materialised in a significant decrease in transaction volume, which has fallen by around 60% between 2022 and 2023. The decline in transaction volume is broadly based, leading to significantly rising yield requirements.
There is still demand, especially for grocery portfolios with geographic diversification, as grocery stores are considered resilient to economic fluctuations. Additionally, grocery chains often lease on contracts with long non-terminable periods.
The economic unrest that arose during 2022 due to increases in interest rates and inflation led to a significant erosion of consumers’ real income and therefore purchasing power. Since the end of 2021, this has resulted in considerable declines in the quantity index. However, consumer confidence has been steadily increasing since the low point in October but is still negative, currently around -13.
Higher rent increases due to NPI regulations have pressured tenants. However, it is the impression that not all landlords have fully implemented NPI regulation. Among some landlords, consideration has been given to the tenants’ resilience or risk of termination, and consideration has also been given to the risk of a §13 regulation of rent due to the possibility of the regulated rent exceeding market rent. The risk of high NPI regulations has also increased attention among tenants to clauses regarding regulation in lease agreements. This means that there is an increasing expectation of demands for maximum regulation going forward.
Vacancy rates for retail have been slightly increasing over the past year, with vacancy increasing by 0.3 percentage points to 3.1% in the first quarter of 2024. Yield requirements are generally assessed to be stable to slightly increasing over the coming year, while there are certain risks of declining market rents in some areas.
Source: Ejendomstorvet-ED Statistikken, estimates as of Q1 2024
11
Available retail space as a percentage of building stock 0% 2% 1% 4% 5% 3% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2020 2023 2022 2024 Capital Region of Denmark Region Zealand Region of Southern Denmark Central Denmark Region North Denmark Region Denmark, total
Yield in %, annual market rent in DKK/sq m incl. operating expenses and trends for the next 12 months
12 Area* (see specifications page 14) Prime Secondary TertiaryTrend Remaining Copenhagen Yield in % 5.00%5.50%6.25% Annual market rent in DKK/sq m 1,000 DKK 800 DKK 600 DKK Remaining Zealand Western suburbs Yield in % 5.50%7.25%9.00% Annual market rent in DKK/sq m 750 DKK 600 DKK 450 DKK Northern suburbs Yield in % 5.75%6.75%8.00% Annual market rent in DKK/sq m 800 DKK 550 DKK 400 DKK North Zealand Yield in % 6.00%7.25%9.00% Annual market rent in DKK/sq m 800 DKK 550 DKK 375 DKK East Zealand Yield in % 5.00%6.25%9.00% Annual market rent in DKK/sq m 750 DKK 500 DKK 300 DKK West Zealand Yield in % 6.50%8.50%10.50% Annual market rent in DKK/sq m 550 DKK 350 DKK 200 DKK South Zealand Yield in % 7.00%8.75%10.75% Annual market rent in DKK/sq m 475 DKK 300 DKK 200 DKK Lolland, Falster and Møn Yield in % 8.00%9.50%12.00% Annual market rent in DKK/sq m 550 DKK 300 DKK 200 DKK Southern Denmark Odense Yield in % 5.50%7.00%8.50% Annual market rent in DKK/sq m 550 DKK 400 DKK 250 DKK Other Funen Yield in % 5.75%8.25%10.00% Annual market rent in DKK/sq m 500 DKK 350 DKK 200 DKK Vejle Yield in % 5.50%7.50%9.50% Annual market rent in DKK/sq m 600 DKK 375 DKK 250 DKK Kolding Yield in % 5.50%7.75%9.75% Annual market rent in DKK/sq m 575 DKK 375 DKK 250 DKK Fredericia Yield in % 5.25%7.25%8.50% Annual market rent in DKK/sq m 600 DKK 400 DKK 250 DKK Esbjerg Yield in % 6.50%8.50%10.00% Annual market rent in DKK/sq m 450 DKK 300 DKK 225 DKK Sønderborg Yield in % 6.75%9.25%11.25% Annual market rent in DKK/sq m 500 DKK275 DKK 200 DKK Other South Jutland Yield in % 6.75%9.25%11.25% Annual market rent in DKK/sq m 500 DKK 275 DKK 200 DKK Central Jutland Aarhus Yield in % 5.25%6.75%9.00% Annual market rent in DKK/sq m 575 DKK 450 DKK 300 DKK Silkeborg Yield in % 7.25%8.50%10.50% Annual market rent in DKK/sq m 450 DKK 350 DKK 200 DKK Viborg Yield in % 7.25%8.75%10.75% Annual market rent in DKK/sq m 400 DKK 300 DKK 200 DKK Herning Yield in % 7.25%8.75%10.50% Annual market rent in DKK/sq m 375 DKK 300 DKK 200 DKK West Jutland Yield in % 7.50%9.25%12.00% Annual market rent in DKK/sq m 375 DKK 225 DKK 150 DKK Northern Jutland Aalborg Yield in % 6.00%7.25%9.00% Annual market rent in DKK/sq m 525 DKK 375 DKK 250 DKK Hjørring Yield in % 7.25%9.25%11.00% Annual market rent in DKK/sq m 400 DKK 300 DKK 200 DKK Frederikshavn Yield in % 7.50%9.50%11.75% Annual market rent in DKK/sq m 400 DKK 275 DKK 150 DKK Source: EDC International Poul Erik Bech, estimates
Q1 2024
as of
Industrial
Development in industrial properties
High demand and continued low vacancy
The logistics segment has seen consistent reasonable demand in recent years, underscored by the fact that the segment in 2023 experienced the smallest decrease in transaction volume compared to the previous year – a decrease of approx. 17%. In comparison, the total transaction volume has fallen by more than 50% compared to 2022.
Demand is primarily focused on newer and modern logistics properties located close to essential infrastructure such as highways. The increased focus on supply chains is a contributing factor to the healthy activity, as demand among users for warehouse and logistics properties is rising in the West.
High-ceiling warehouses with good access and ramps are highly sought after and meet the current needs. Likewise, there is growing emphasis on sustainable and energy-efficient properties – preferably certified.
Available industrial space as a percentage of building stock
However, the supply of the most sought-after properties has not kept pace, which can be attributed, among other factors, to the conversion of urban industrial and logistics areas into residential areas. At the same time, it is increasingly difficult to find suitable land for logistics properties in prime locations, as there is to some extent a lack of municipal willingness to designate suitable land for warehouse and logistics properties. The industrial segment has also experienced high demand in recent years, primarily driven by users and to a lesser extent investors, although there has been a larger portfolio of industrial properties traded in recent years.
Vacancy rates for industrial and logistics properties have been slightly increasing over the past year, with vacancy increasing by 0.6 percentage points to 2.2% in the first quarter of 2024. Yield requirements are expected to be stable in the coming year, which also applies to market rents.
Source: Ejendomstorvet-ED Statistikken, estimates as of Q1 2024
13 0% 4% 2% 8% 5% 9% 7% 6% 3% 1% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2020 2023 2022 2024 Capital Region of Denmark Region Zealand Region of Southern Denmark Central Denmark Region North Denmark Region Denmark, total
Definitions
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.
* Area specifications
Copenhagen City = Copenhagen K ex. harbour areas.
Østerbro, Frederiksberg og Gentofte = Østerbro, Frederiksberg and Gentofte municipalities.
Harbour area (Nordhavn, Kalvebod Brygge & Tuborg Havn) = Areas located along Copenhagen’s harbour.
Remaining Copenhagen = Vesterbro, Nørrebro, Nordvest, Valby, Sydhavn (ex. harbour areas), Brønshøj, Husum, Vanløse, København S (ex. Ørestad and harbour areas), Kastrup and Dragør municipalities.
Western suburbs = Hvidovre, Rødovre, Glostrup, Brøndby, Albertslund, Vallensbæk, Ishøj, Høje Taastrup, Ballerup and Herlev municipalities. Northern suburbs = Lyngby, Holte, Farum, Birkerød, Gladsaxe, Rudersdal and Furesø municipalities.
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.
North Zealand = Gribskov, Helsingør, Allerød, Hillerød, Egedal, Fredensborg, Halsnæs and Hørsholm municipalities.
East Zealand = Greve, Køge, Lejre, Roskilde and Solrød municipalities.
West Zealand = Holbæk, Kalundborg, Odsherred, Ringsted, Slagelse and Sorø municipalities.
South Zealand = Faxe, Næstved, Stevns and Vordingborg municipalities. Lolland, Falster and Møn = Guldborgsund and Lolland municipalities.
Other Funen = All municipalities at Funen ex. Odense.
Other South Jutland = Billund, Fanø, Haderslev, Tønder, Varde, Vejen and Aabenraa municipalities.
West Jutland = Skive, Struer, Holstebro, Thisted, Morsø and Ringkøbing-Skjern municipalities.
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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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2023 2023 DIN BY Find all previous editions of Market Update and other EDC publications here: edc.dk/erhverv/magasiner ›
Joseph Alberti Head of Research
Niclas Holm Senior Research Analyst
JLL Nordic Outlook Focus: Re-industrialisation February 2024 jllsweden.se
CONTACT
EDC Poul Erik Bech
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