The Danish Property Federation´s market statistics - consensus forecast (January 2012)

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2012

Expectations for growth in the property sector remain gloomy

WEB REPORT

Decrease in expected total return compared to last quarter

Economic unease throughout the summer has been replaced by a general perception that regeneration will be slower than had been expected just six months ago. The continued debt crisis in Southern Europe, has not least contributed to these forecasts.

Total return

2011 5,2 (-0,3)

2012 5,3 (-0,5)

2013 2011-2015 5,9 (-0,3) 5,9 (-0,2)

Source: The Danish Property Federation.

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Despite these gloomy forecasts the Danish property market could profit from global economic turbulence, as investors might see Denmark and its stable economy as a safe haven in uncertain times.

The average total return based on the replies is presented in the table. The figures in parenthesis indicate change in percentage point compared to last quarter.

Continued increase in total return is still expected 20%

The result of this quarter’s consensus forecast reflects the negative outlook for the global economy. The expected total return for 2011 has decreased with 0.3 percentage points to 5.2 per cent. In the long run, a higher return is still expected; however, compared to former forecasts, we see a minor decrease. The participants’ expected total return in 2012 is 5.3 per cent. This is a decrease of 0.5 percentage points compared to last quarter. The return in 2013 is expected to be 5.9 per cent, which is 0.3 percentage points lower than three months ago.

Overall from 2011 to 2015 an average annual total return of 5.9 per cent is expected.

18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Increase in investment property value

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Source: IPD Denmark Annual Property Index and the Danish Property Federation.

Compared to last quarter expected capital value has developed in a positive direction for the four types of investment properties, office, retail, industrial, and residential.

For residential, capital value is still expected to be positive a year from now, while the forecast predicts flat capital value for the year in the office sector

Expected decrease in capital value, occupied space, and market rent (indicator values between -100 and 100)

Generally, we expect an increase in vacancies.

A new tendency is that expected vacancy for office is also negative.

Office Retail Industrial Residental

Occupied space Capital value (%) Market rent 0,0 (1,2) -5,8 (-14,1) -9,3 (-3,3) -7,0 (6,1) -7,0 (-1,0) -14,0 (3,9) -19,8 (4,0) -24,4 (-6,6) -27,9 (10,0) 11,6 (6,9)

11,6 (2,1)

14,0 (7,1)

Source: The Danish Property Federation.

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The expected market rent growth for retail and residential is better compared to last quarter, but it does not change the overall picture: Residential is the only property type where market rent is expected to be positive the coming year.

Total return for investment properties. From 2000 to 2010 the total return from IPD Denmark Annual Property Index is presented. 2011 to 2013 shows the average of the replies from the Consensus Forecast. 50 per cent of the answers lie within the blue lines.

The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers are given a value in order to obtain an indicator between -100 and 100. An indicator of 100 is identical to that everybody has answered ‘much higher’, and -100 is identical to that everybody has answered ‘very low’. An indicator of 0 indicates unchanged expectations. For example an indicator of 14.0 is feasible by 14.0 per cent of the participants answer ‘much higher’ and the remaining answers ‘unchanged’. The figures in parenthesis indicate change in indication point compared to last quarter.

Published by the Danish Property Federation.

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2012

Capital value growth is expected to be most significant in Copenhagen

WEB REPORT

Consensus that capital value growth is stronger in Copenhagen

As in former consensus forecasts, the results point to capital value growth being the highest in Copenhagen of all the regions. At the same time there is not much encouragement for property outside the three central areas. 95 per cent of the participants expect capital value growth to be smaller in the rest of the country compared to Copenhagen, Aarhus, and the triangle region in Jutland (Fredericia, Kolding, and Vejle).

The regional indicator value for Copenhagen, the triangle region in Jutland, and the rest of the country has marginally decreased compared to last quarter. Aarhus is the city where the growth in confidence has been the highest. However, there is still some way to go to reach the same level as for Copenhagen.

The economic advisers have also lowered their expectations

43 market players participated in this forecast. 49 per cent of the participants are property owners, 21 per cent commercial brokers, 16 per cent are banks/ mortgage providers, and 14 per cent are other players.

Please find below the names of some of the companies, which have contributed Aareal Bank, ATP Ejendomme, Bertélco Ejendomme A/S, BBN Consult, BRF Kredit, CB Richard Ellis, Cura Management, DADES, DNErhverv, DTZ, EDC Erhverv Poul Erik Bech, FIH Erhvervsbank, Finanssektorens Pensionskasse, Jeudan, Karberghus, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, PFA Ejendomme, PKA, RICS Nordic, Sampension, and Sadolin & Albæk.

Source: The Danish Property Federation.

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In November, the bi-annual economic adviser report from Danish Economic Council was published. In the spring report from May, an increase of 2.0 per cent in GNP was expected in both 2012 and 2013. In November it was downgraded with 0.9 and 0.7 percentage points. Over the last two quarters the consensus forecast results for 2012 and 2013 has decreased by 1.0 percentage points from 6.3 in 2012, and 0.8 percentage points from 6.7 per cent for 2013.

The expected total return and growth in GNP is moving in the same direction.

The map shows which regions in Denmark that have the highest capital value growth compared to other regions. We have asked about Copenhagen, Aarhus, the Triangle Region in Jutland (Frederica, Kolding, and Vejle), and all other regions as one region. From the replies, we have created an indicator.

If an area is light green, at least 70 per cent of the participants have agreed that this region is doing best compared to other regions.

About the Consensus Forecast These results from January 2012 are based on data collected and released by the Danish Property Federation. The objective is to create a more transparent property market.

The Consensus Forecast is published on a quarterly basis and is very dependant on the participating companies’ good will to report data every quarter. Without these companies the Consensus Forecasts would never have been possible.

Published by the Danish Property Federation.