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

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

WEB REPORT

The expected progress levels off

5.5 percent total return in both 2015 and for the period 2015-2019

Total return in 2015 is expected to be at 5.5 percent, which is an increase of 0.2 percentage points compared to last year, but unchanged compared to last quarter.

5.5 percent is also, what the participants expect in average for the period 2015-2019. This means that the participants do not expect the total return to increase in the coming 5 years period. In 2016 and 2017, total return will increase slightly to 5.6 percent.

2015

2016

2017

2015-2019

Total return

5.5

5.6

5.6

5.5

Quarterly change

0.0

-0.1

New

New

Annual change

0.2

0.0

New

New

Source: The Danish Property Federation.

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If you compare the participants expectations for total return in 2015 with the expected return in the period 2015-2019, a majority of 52 percent of the participants count on a total return in 2015 to be larger or at least just as big as in the period 2015-2019. In previous forecasts, the participants have counted on an increase in total return during the next 5 years period. This is connected with the fact that belief in total return this year has increased. In this forecast, it seems that the participants believe that total return has found its level for the next period.

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

Quarterly and annual changes are in percentage points.

50 percent of the participants expect a total return in 2017 of between 5.0 and 6.0 percent 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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

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Good times in 2015 When the participants are asked about their expectations to the coming year, they are more optimistic than ever before. With an expected total turnover of 5.5 percent in 2015, it will mean an increase in capital value for many properties. Actually, the participants expect that capital value for all four sectors: office, retail, industry and residential, will increase. This is the first time since 1st quarter 2011, where we published the first forecast that we see expectations of increasing capital value for industry. Indicator values in this forecast have the highest value measured when it comes to expectations for capital value including all sectors.

Total return for investment properties. 2000 to 2014 shows the total return of IPD Denmark Annual Property Index. 2015 to 2017 shows the average of the replies from the consensus forecast. 50 percent of the replies lie within the blue lines.

All indicator values have increased compared to last (indicator values between -100 og 100) Capital value Quarterly April 2015 change Office

28.7

Retail Industry Residential

Annual change

Occupied space Quarterly Annual April 2015 change change

10.5

21.4

17.0

25.5

6.2

14.1

7.4

16.5

15.8

43.6

10.7

13.4

Market rent April 2015

Quarterly

Annual change

3.4

8.7

10.6

6.1

10.6

6.4

0.7

-0.9

17.0

10.2

7.6

3.2

12.3

5.3

-5.3

4.9

3.0

13.8

3.6

-0.8

27.7

9.5

0.6

Source: The Danish Property Federation.

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The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’. The answers give 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 43.6 is feasible by 43.6 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 APRIL 2015

We also see expectations for an increase in occupied space for all sectors in the coming year.

The value of 13.8 covering residential is still positive, but has decreased compared to the same period last year, and this will probably mean that the residential occupied space percentage has increased so much that it cannot increase any further in certain geographical areas.

Even the expectations for market rent in retail have not ever been higher. As much as 47 percent of the participants expect increasing market rent in this sector, while 40 percent expect unchanged market rent. 30 percent of the consulted expect increasing market rent in office, while a majority of 55 percent expect increasing market rent in residential.

Progress abroad Numbers from IPD shows that in 2014, English investment properties gave a total return of 17.8 percent. The income return was 5.2 percent while the capital growth was 12.0 percent.

In 5 years, the English properties have given 10.9 percent total return in average, while the average over 10 years is 6.2 percent. In 2014, the Swedish and Norwegian properties gave a total return of 8.1 and 8.2 percent, which is very close to their 10 years average of 8.2 and 8.4 percent. An impressive total return is listed in Ireland, where properties gave a total return of 40.1 percent, while the 10 years average was a modest 3.1 percent. During the last 10 years, Danish properties have experienced 7.2 percent in total return.

Still highest expectations for capital growth in the major growth centres

Source: The Danish Property Federation.

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Progress in Copenhagen, Aarhus, the Triangle Region, and Odense Compared to last quarter and 2014, we see progress in Copenhagen, Aarhus, the Triangle Region, and Odense. This means that the expected increase in capital values primarily will come from the major growth centres. The highest expectations for development in capital value are seen in Copenhagen, Aarhus, and the Triangle Region, in that order, while Aalborg is valued slightly better than Odense. There is also consensus that capital value increases relatively least in the rest of the country.

WEB REPORT

The map shows which regions in Denmark that have the highest capital 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.

47 market players participated in this forecast. 40 percent of the participants are property owners. Furthermore, 23 percent are commercial brokers, 11 percent are banks/mortgage providers, and 26 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, PensionDanmark, PFA Ejendomme, PKA, PwC, Reinholdt A/S, RICS Nordic, Sadolin & Albæk, Sampension, Saxo Properties, Sinding Gruppen, Situs, Taurus Ejendomsadministration, Thylander Gruppen, TLK og Wiborg & Partnere.

About the Consensus Forecast These results from April 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