The Danish Property Federation´s market statistics - consensus forecast (October 2014)

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

WEB REPORT

Favourable trend in snail’s pace

Half of the participants expect a total return of between 4.8 percent and 5.5 percent in 2014. Compared to last quarter, this is an increase of 0.3 and 0.2 in this group of participants. If you use the same method in 2016, it will give an expected total return of between 5.0 and 6.0 percent. It is quite normal that there is a considerable variation in the figures the further the timespan gets.

Anyway, it is only 10 percent of the participants who expect a total return of more than 7.0 percent in 2016 while another 10 percent expect a total return of less than 4.0 percent in 2016.

5,1 percent in total return in 2014 2014

2015

2016

2014-2018

Total return

5,1

5,3

5,6

5,5

Quarterly change

0,1

0,0

0,1

0,0

Annual change

-0,3

-0,4

New

New

Source: The Danish Property Federation.

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In this quarter, we experience progress, however in a very slow speed. The expectations for total return increased by 0.1 percentage points to 5.1 percent in this year’s last consensus forecast. It is the second quarter in a row without decrease in the expectations for total return in 2014, but compared to last year it is a decrease of 0.3 percentage points. If we go back two years, the expectations for 2014 are 1.0 percentage points lower than today. The expectations for 2015 are unchanged compared to last quarter on 5.3 percent, while expectations for total return in 2016 has increased with 0.1 percentage point to 5.6 percent. A total for the period of 5.5 percent is expected concerning total return.

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

Quarterly and annual changes are in percentage points.

Half of the participants expect a total return of between 4.8 and 5.5 percent in 2014 20% 18% 16% 14% 12% 10% 8%

New record for residential

6%

Also the indicator points are in progress this quarter. Residential keeps beating all records as an indicator value of 27.8 is the highest value ever measured for market rent, while capital value has an indicator value of 38.8, which is the highest indicator value measured since first quarter 2011 where this forecast started. The indicator value of 37.8 has been calculated based on 73 percent of the participants answering that they believed in increasing capital value for residential a year from now. Only 27 percent believe in unchanged capital values for residen-

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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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.

More positive than negative expectations (indicator values between -100 og 100) Capital value Quarterly Oct. 2014 change

Annual change

Occupied space Quarterly Annual Oct. 2014 change change

Market rent Oct. 2014

Quarterly

Annual change

Office

13,3

7,8

-1,9

11,1

0,0

1,3

-2,2

1,1

-7,7

Retail

16,7

10,0

4,7

6,7

-3,3

-4,2

8,9

2,2

-0,9

-5,6

3,3

9,7

10,0

15,6

15,4

-8,9

4,4

7,4

37,8

3,3

0,8

14,4

-5,6

-1,9

27,8

2,2

1,7

Industry Residential

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 37.8 is feasible by 37.8 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 OCTOBER

tial. Only minor drawback for residential was that the expectation for occupied space was decreasing compared to last quarter, however still positive.

WEB REPORT

Odense and the Triangle Area increase a little compared to last quarter

Industry also experienced progress, and there is even a slight positive expectation that occupied space will increase. Capital value for industry is still negative with an indicator value of -5.6, but -5.6 is the highest ever measured. Although the consensus forecast only deals with properties of prime locations, it is positive to see that industry is on its way up.

Capital value for office and retail also had a small upward revision. Retail’s indicator value of 16.7 for capital value has only been higher, if we go back to second quarter 2011. For both office and retail, a small progress on occupied space is expected while market rent is almost neutral.

Overall, the picture is the same regarding regional expectations for development in property prices on investment properties. The expectations are highest in Copenhagen and Aarhus, while the rest of the country has the lowest expectations. Compared to last quarter Odense and the Triangle Area gains a little to Aarhus and especially to Aalborg. This means that there is a little higher expectations to capital values in the Triangle Area than in Aalborg. Copenhagen and Aarhus still have the highest expectations.

Expectations of financial growth The economic growth in Denmark in second quarter was disappointing and this might influence the results for investment properties in the long run. So far, the government has maintained the expectations for economic growth at 1.4 percent for 2014, but this might be too high. It is crucial for the activity within properties that Danish economy is in progress. The economic growth must contribute to decrease in occupied space and stability in market rent in order to obtain a sound development in capital values.

In the most recent analysis of Danish Economy, the economic advisers downgrade the estimates of GNP-growth in 2014 significantly. However, they still have a positive view on the development in employment. The expectation of GNPgrowth in 2014 have been downgraded to 0.5 percent in the advisers’ fall report. In spring the estimate to growth was 1.5 percent.

Source: The Danish Property Federation.

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Relative increase in Odense and the Triangle Area

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.

45 market players participated in this forecast. 38 percent of the participants are property owners. Furthermore, 27 percent are commercial brokers, 13 percent are banks/mortgage providers, and 22 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, 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, TLK, Wiborg & Partnere.

About the Consensus Forecast These results from October 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