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

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

WEB REPORT

Declining expectations

Only 4 percent of the participants expect that the total return in 2014 will be lower than 3.5 percent and only 4 percent expect that the total turnover in 2014 will be above 6.0 percent. Therefore, there is a high degree of consensus concerning a continuous stable development in total return. Of course, changes can happen during 2014 when different current incidents will influence the expectations.

Expectations from 2014 and 2015 have decreased 2014

2015

2016

2014-2018

5.0

5.3

5.5

5.5

Quarterly change

-0.3

-0.4

New

New

Annual change

-0.6

-0.6

New

New

Total return

Source: The Danish Property Federation.

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In general, there are declining expectations to total return on investment property. In the consensus forecast the expectations for 2014 has decreased with 0.3 percentage points in a quarter which means a total return of 5.0 percent is expected for 2014. In 2015, the expectations have been downsized with 0.4 percentage points to a total return of 5.3 percent. A year ago, the expectations for 2014 and 2015 were 0.6 percentage points higher. 2014 and 2015 have the lowest levels measured so far. This is the first time that the participants have been asked about 2016, where they expect a total return of 5.5 percent. The expectations for the coming 5-years period is also 5.5 percent, which is the lowest expectations for a 5-years period. In the third quarter of 2011, the expectations for 2011-2015 were at 6.5 percent. Over the last 14 years, investment property has shown 8.1 percent in total turnover.

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

Decreasing total return from 2010 to 2013 20% 18% 16% 14% 12% 10% 8% 6%

Residential met the expectations

4%

Residential is the sector for which the most positive expectations for the coming year is seen. In the consensus forecast, we ask about properties with prime location in the year to come, and there are positive expectations to both capital value, occupied space, and market rent regarding residential. The indicator value of 27.1 for residential market value is the highest ever. The indicator value of 27.1 comes from 54 percent of the participants

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.

Industry increasing (indicator values between -100 og 100) Capital value Quarterly April 2014 change

Annual change

Office

7.3

1.4

Retail

11.5

1.7

-8.3

2.5

30.2

1.8

-1.2

Industry Residential

Occupied space Quarterly Annual April 2014 change change

April 2014

Market rent Quarterly change

0.0

1.0

Annual change

8.3

-3.4

1.0

7.3

-0.6

-2.0

9.4

7.4

-1.1

13.8

-2.1

4.8

10.7

-8.3

1.5

13.8

14.6

-6.0

-0.5

27.1

6.5

8.5

-2.0

2.5

-3.5

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 30.2 is feasible by 30.2 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 2014

expecting an increased market rent for residential, while the rest has a neutral expectation to market rent the coming year. In figures from IPD Danish Property Index, residential is also the only sector, which generally has a growth in value and a decrease in occupied space, while residential as a total also has a positive market rent growth. Industry is also continuing the positive development this quarter. In the figures from 2013, industry showed a general growth in value of -3.3 percent. A continuous fall in capital value is expected for 2014. Industry is also the sector that has the most positive annual change in the consensus forecast. Office and retail have small positive expectations on capital value and market rent, while the expectations for occupied space have decreased a bit since last quarter.

WEB REPORT

Still expectations on centralisation

Source: The Danish Property Federation.

The regional map covering the expectations for capital value is still characterized by an expectation of increased centralization in the future. If you look at the results from 2013 they showed a general value growth on investment property of -1.2 percent and on office -1.4 percent.

However, there are positive figures for office in Copenhagen, Aarhus and the Triangle Region.

The differences between the cities are not significant in 2013. Office in Copenhagen has a general growth in value of 1.0 percent, the Triangle Region a growth of 0.9 percent, and Aarhus a growth of 0.4 percent. The consensus forecast still expects the best development in Copenhagen, a head of Aarhus and the Triangle Region, followed by the rest of the country.

Expectations for 2013 were too high Recent figures from IPD Danish Property Index show that since 2010, the total return for investment property has declined and in 2013 it was 3.5 percent. In the latest consensus forecast the expectations for 2013 ended at 5.0 percent. The expectations were 1.5 percentage points higher than the final figures, which were 3.5 percent. It is the third time in a row that the consensus forecast shows higher figures compared to actual, while in 2010 the expectations were lower than actual. This shows that there is a belief in a better economy and total return in the future, but the years 2011-2013 ended up by being years with low growth and low total return on properties in general.

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Positive growth in value for Office in Copenhagen, Aarhus, and the Triangle Region

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, Aarhus and all other regions as one region. From the replies, we have created an indicator. If the area is light green, at least 70 percent of the participants have agreed that this region is doing best compared to other regions.

48 market players participated in this forecast. 42 percent of the participants are property owners. Furthermore, 27 percent are commercial brokers, 10 percent are banks/mortgage providers, and 21 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 April 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