THE DANISH PROPERTY FEDERATION CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK JULY 2014

WEB REPORT

Emerging progress

The participants expect that 2014 will be the turning point after 3 years of decrease in total return. The expectation of 5.0 percent for the coming year is not higher than formerly expected for third quarter the actual year. In 2013, the expectation was also 5.0 percent, in 2012 5.3 percent, and in 2011 5.5 percent. Only 9 percent of the participants expect a total return of less than 4.0 percent in 2014 while 50 percent of the participants expect a total return of between 4.5 and 5.3 percent.

5.5 percent in total return in 2014-2018 2014

2015

2016

2014-2018

5.0

5.3

5.5

5.5

Quarterly change

-0.0

-0.1

0.0

0.0

Annual change

-0.3

-0.3

New

New

Total return

Source: The Danish Property Federation.

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In 2014 a total return of 5.0 percent is expected for investment properties in Denmark. In 2015 the total return is expected to increase to 5.3 followed by 5.5 percent in 2016. Compared to last quarter, the decrease in expectations has stopped and the expectation for 2015 has even increased by 0.1 percentage points. Compared to same time last year, there is still a decrease in expectations, which have been downsized with 0.3 percentage points in 2014 and 2015. This has to be seen in connection with the fact that total return in 2013 was a modest 3.5 percent. When the expectations for total return did not decrease in this forecast, it can be related to the fact that the Danish economy is expected to increase in 2014.

The average total return based on the replies is presented in the table. Quarterly and annual changes are in percentage points.

In 2014 total return is in progress 20% 18% 16% 14% 12% 10% 8%

Residential strengthened Compared to last quarter, residential stands out. We see progress in capital value and occupied space, while there is a slight decline in market rent. Looking at capital value, occupied space, and market rent as one, residential has never been stronger since the beginning of the forecast in 2011.

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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The other sectors have a decline in capital value and market rent compared to last quarter, while occupied space shows minor improvements for office and retail.

6%

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.

Industry increasing (indicator values between -100 og 100)

July 2014

Capital value Quarterly change

Annual change

Occupied space Quarterly Annual July 2014 change change

5.6

-1.7

4.3

11.1

Retail

6.7

-4.8

-0.8

Industry

-8.9

-0.6

6.1

34.4

4.2

1.9

Office

Residential

July 2014 -3.3

2.8

2.4

10.0

2.7

0.0

-5.6

-3.5

3.2

20.0

5.4

3.8

25.6

Market rent Quarterly change

Annual change

-3.3

4.2

6.7

6.7

11.7

-13.3

-13.3

6.7

-1.5

1.8

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 34.4 is feasible by 34.4 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 JULY 2014

A little more than 30 percent of the participants count on an increase in the percentage of occupied space for office and retail, almost 60 percent expect unchanged percentage of occupied space, while approx. 10 percent expect decline in percentage of occupied space in office and retail.

WEB REPORT

Better development in capital values in the centres

Compared to same time last year, there is progress for industry; however, the last many quarters’ exclusively positive development for industry is set on hold in this quarter’s consensus forecast.

Odense and Aalborg are in

Expected growth in Denmark This headline is a direct quote from the Economic Advisor Report Spring 2014. The economic advisors emphasize that there is economic growth at the Danish export markets together with growth in consumer- and business confidence in Denmark. The economic advisors expect the economic growth to be 1.4 percent in 2014 and 2.0 percent in 2015. This is a depreciation of 0.2 percentage points for both 2014 and 2015 compared to their expectations in the fall of 2013. The economic advisors also write that the expected growth in Denmark is associated with uncertainty especially because positive indications for Danish economy have not yet meant a considerable growth in BNP or private consumption.

Source: The Danish Property Federation.

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The regional analysis of development in capital value has been extended with Odense and Aalborg in this web report. Both Odense and Aalborg follow the trend from the other regional centres by being above the expected development for the rest of the country. Thereby, the general expectation is still that the best development in capital value in 2014 will be in the centres. Among the centres, we find the most positive expectations for Copenhagen followed by Aarhus. On third place, we find Aalborg closely followed by the Triangle Region, and Odense as the fifth center. All in all 96 of the participant believe that the capital values in Odense develops better than the rest of the country.

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 50 percent of the participants have agreed that this region is doing best compared to other regions.

45 market players participated in this forecast. 42 percent of the participants are property owners. Furthermore, 29 percent are commercial brokers, 11 percent are banks/mortgage providers, and 18 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, FIH Erhvervsbank, 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, TLK, Wiborg & Partners.

About the Consensus Forecast These results from July 2014 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