The Danish Property Federation´s market statistics - consensus forecast (January 2015)

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2015

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Fine progress

Higher expectations for 2014 compared to last quarter 2014

2015

2016

2014-2018

Total return

5.3

5.5

5.6

Quarterly change

0.2

0.1

0.0

0.1

Annual change

-0.1

-0.3

New

New

5.6

Source: The Danish Property Federation.

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When the investors settle total return in 2014, it is expected that investment properties have had a return of 5.3 percent. This is a progress of 0.2 percentage points compared to last quarter. This quarterly increase is the highest measured in 2014. At the same time, this is the highest return that has been expected for the past year.

In January 2011, the expectation for total return in 2010 was 4.6 percent, and in January 2014, the expectation for total return in 2013 was 5.0 percent. Even though total return historically have been decreasing since 2010, there is still an increasing expectation for the result of 2014.

We also see an increase in expectations for total return in coming years. A total return of 5.5 percent in 2015 and 5.6 percent in 2016. The expectations for total return in the years 2014-2018 are 5.6 percent. Expectations for the coming 5 years have not been higher since second quarter 2013. The increased expectations does not imply larger diversification in the results among the participants. Half of the participants expect a total return of between 5.0 percent and 5.7 percent in 2014.

For the period 2014-2018, half of the participants expect a total return of between 5.3 and 6.0 percent.

The average total return based on the replies is presented in the table.

Quarterly and annual changes are in percentage points.

Increasing total return for 2014, 2015, and 2016 expected 20% 18% 16% 14% 12% 10%

Increasing expectations for office

8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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

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Compared to last quarter, we see increasing expectations for office within capital value, occupied space, and market rent. Thus, office is moving in a more positive direction compared to retail. For both office and retail, capital value has the most positive expectations, which can imply that there will be a future demand for those sectors in the longer run. The development of market rent is expected to be constant with a minor positive tendency, while the participants expect the occupied space to increase more in office compared to retail. This can be connected with the fact that office has shown less occupied space compared to retail.

Total return for investment properties. 2000 to 2013 shows the total return of IPD Denmark Annual Property Index. 2014 to 2016 shows the average of the replies from the consensus forecast. 50 percent of the replies lie within the blue lines.

Expectation of increasing capital value for office, retail, and residential (indicator values between -100 and 100)

Jan. 2015

Capital value Quarterly change

Annual change

Occupied space Quarterly Annual Jan. 2015 change change

Market rent Jan. 2015

Quarterly

Annual change

Office

18.2

4.8

12.3

13.6

2.5

1.9

4.5

6.8

Retail

19.3

2.7

9.5

5.7

-1.0

-2.2

6.8

-2.1

4.9

-9.1

-3.5

1.7

-9.1

-19.1

-2.2

-10.2

-1.3

-0.4

33.0

-4.8

4.5

10.2

-4.2

-10.4

18.2

-9.6

-2.4

Industry Residential

5.5

Source: The Danish Property Federation.

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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 everyone having answered ‘much higher’, and -100 is identical to everyone having answered ‘very low’. An indicator of 0 indicates unchanged expectations. For example, an indicator of 33.0 is feasible by 33.0 percent of the participants answering ‘much higher’ and the remaining answers are ‘unchanged’.

Published by the Danish Property Federation

THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JANUARY 2015

Both residential and industry came out with a little weaker expectations than the previous quarter. However, this does not change that residential by far is the sector with most positive expectations. On the other hand, expectations for industry are not likely to move to the positive side. Still, the conclusion is that capital value for residential is expected to increase, while industry shows the opposite, a further decrease.

WEB REPORT

Still highest expectations for capital value in Copenhagen

Constant market rent for office

Compared to the other Nordic capitals, the development in market rent for office in Copenhagen will be constant over the coming years.

This is shown in a forecast from IPF (Investment Property Forum). It is expected that the market rent for office in Copenhagen will increase by 1.1 percent per year during the period from 2014 to 2016. In the same period, the economic advisers expect an inflation of 1.2 percent.

During the same period, market rent in office is expected to increase by 1.6 percent in Helsinki, while it is 2.7 percent in Stockholm, and 3.3 percent in Oslo. With a constant development in market rent for office, it will still be possible to get a turnover if the occupied space percentage continues to grow. This will mean improved cash flow to the property owners.

Odense is slowly gaining Compared to last quarter, Odense is the area that moves forward the most, when the participants evaluate where the capital value will develop most positively. However, only minor changes have occurred. Expectations are still most positive about Copenhagen followed by Aarhus, the Triangle Region in Jutland, Aalborg, and Odense. Finally, the participants still agree that the rest of the country has the lowest expectations in capital value. Over 90 percent of the participants rate capital value lowest for the rest of the country, while more than 90 percent rates Copenhagen highest.

Source: The Danish Property Federation.

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This quarter, expectations for office market rent have developed from slightly negative to slightly positive. During at least the last two years, the expectations for office has been around zero and with different operational signs. In this forecast, almost 70 percent reply that they expect the market rent to be the same in a year’s time.

A little more than 10 percent expect that the market rent for office will decline, while a little more than 20 percent expect an increasing market rent in a year’s time.

The map shows which regions in Denmark that have the highest value growth compared to other regions. We have asked about the Triangle Region in Jutland (Fredericia, Kolding, and Vejle), Copenhagen, Odense, Aalborg, Aarhus, and all other regions as the rest of the country. From the replies, we have created an indicator. If the area is the lightest colour, at least 70 percent of the participants have agreed that this region is doing best compared to other regions.

44 market players participated in this forecast. 32 percent of the participants are property owners. Furthermore, 27 percent are commercial brokers, 9 percent are banks/mortgage providers, and 32 percent are other players.

Please find below the names of some of the companies, which have contributed Aareal Bank, Aberdeen Asset Management, ATP Ejendomme, Bertélco Ejendomme A/S, BBN Consult, BRF Kredit, Carlsberg Byen, CBRE, Chr. Hjorth Erhvervsejendomme, Colliers International Danmark, Cura Management, DADES, Danbolig erhverv Johnny Hallas, DTZ, EDC Erhverv Poul Erik Bech, EY, Jeudan, Karberghus, Københavns Lufthavne, Lund & Lindhardt, NCC Construction Danmark A/S, Nordea, Nordea Ejendomme, Pension Danmark, PFA Ejendomme, PKA, PwC, Reinholdt A/S, RICS Nordic, Sadolin & Albæk, Sampension, Sinding Gruppen, Situs, Taurus Ejendomsadministration, TLK, Wiborg & Partnere.

About the Consensus Forecast These results from January 2015 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