THE DANISH PROPERTY FEDERATION MARKET STATISTICS – CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK January 2016
Positive figures for the investment property market will strengthen Danish economy The Danish economy is improving even if Denmark fails to reach its 2.0 percent in growth target, it is good to see some growth. The Danish Economic Councils estimate that the Danish economy grows by 1.6 percent in 2015, even though third quarter figures from Statistics Denmark showed negative growth of 0.4 percentage points. The government’s latest estimate of economic growth is 1.4 percent regarding 2015. The USA continues to be the main driver of global economic growth and in Denmark we must do what we can to hang on to what we have. At the moment we are happy to see that the investment property market is doing well in Denmark as this has a positive impact on the level of investment and employment and therefore is good news for the economy as a whole. When the investors expect higher return, higher capital values, increasing occupied space and increasing market rent it is a sign that at least some parts of the Danish economy is showing signs of improvement.
WEB REPORT
Total return is expected to be 5.6-5.7 percent in the coming year 2015
2016
2017
20152019
Total return
5.6
5.7
5.6
5.7
Quarterly change
0.1
0.1
-0.1
0.1
Annual change
0.2
0.0
New
New
Source: The Danish Property Federation Market Statistics. 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 between 5.3 and 6.0 percent in total return in 2017 20% 18% 16% 14%
The market players expect the total return to be 5.6 percent in 2015. This is an increase of 0.1 percentage point compared to last quarter and 0.2 percentage point compared to last year. In 2016 total return is expected to increase with 0.1 percentage point to 5.7 percent and the expectations for 2016 is now at its peak measured over the space of the eight quarters, where we have asked about 2016. For the period 2015-2019, it is expected that the total return will end at 5.7 percent, which is an increase of 0.1 percentage point compared to last quarter.
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 Market Statistics. Total return for investment properties. 2000 to 2011 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.
Half of the participants in our Consensus Forecast expect a total return of 5.1-6.0 percent in 2015, which means that the
Indicator value of 30.0 in capital value for both residential and office (indicator values between -100 and 100)
Capital Value January 2016
Quarterly change
Occupied space
Annual change
January 2016
Quarterly change
Market rent
Annual change
January 2015
Quarterly change
Annual change
Office
30.0
3.5
11.8
26.7
-3.7
13.0
15.6
-3.1
11.0
Retail
20.0
-8.4
0.7
13.3
-4.3
7.7
15.6
-8.0
8.7
7.8
-8.9
16.9
8.9
1.0
18.0
3.3
-3.5
13.6
30.0
-5.3
-3.0
13.3
0.6
3.1
26.7
-4.7
8.5
Industry Residential
Source: The Danish Property Federation Market Statistics. 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 30.0 is feasible by 30.0 percent of the participants answering ‘much higher’ and the remaining answers are ‘unchanged’.
Published by the Danish Property Federation
THE DANISH PROPERTY FEDERATION MARKET STATISTICS – CONSENSUS FORECAST COVERING THE PROFESSIONAL INVESTMENT PROPERTY MARKET IN DENMARK
major part of the participants expect normal direct return and slightly increasing value added at an overall level. It is noticeable that there can be large differences in sectors and geography. As a whole, the investment property market in Denmark is doing fine.
Progress for Office Since 2011, the residential sector has had the best outlook among the four sectors (office, retail, industry and residential). However, capital values and occupied space have increased so much that there are limits to the extent that the increase can continue. When capital value increases, all things being equal, it means that the direct return is decreasing. This situation can influence the professional investors’ expectations for higher capital value increases and improvement in occupied space as residential cannot continue at the same pace. Investors increasingly expect that there is more space for capital value appreciation and improved occupied space within office, as office has not experienced the same value added and improvement in occupied space, as is the case for residential.
January 2016
Still most unity on value added in larger cities Capital values in the larger cities are still expected to develop more positively than the rest of the country. A large majority expects the capital value to develop most positively in Copenhagen, followed by Aarhus. We also see positive expectations to development in capital value in Aalborg and the Triangle Area; the participants evaluate both cities almost equally. There is a lower confidence in Odense and the rest of the country. Both Odense and the rest of the country have increased a little compared to the other areas, but not yet enough to change the overall tendencies.
Capital value in Copenhagen and Aarhus is expected to develop the most Regional indicator
Both office and residential have an indicator value of 30.0 in capital value, just as 60 percent of the participants expect increasing capital value for residential and office.
Low regional growth Medium regional growth
Investors also expect that the occupied space percentages will rise more for office than for residential, but this are probably because the occupied space for residential is exceptional while the occupied space for office is still at 12 percent. When it comes to market rent, the participants expect residential to develop more positively than office. All indicator values for market rent are positive, which means an expectation of increasing market rent in all sectors. There is a little less positive expectations for retail and industry, which experience prevailing minor negative quarterly changes in indicator values while the annual changes are positive. It also applies for both retail and industry that indicator values are still positive, which means expectations of increasing capital value, increasing occupied space, and increasing market rent. Retail has better indicator values than industry.
About the forecast
WEB REPORT
High regional growth
Source: The Danish Property Federation Market Statistics. 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.
These are the expectations for January 2016 from the Danish Property Federation Consensus Forecast. The objective is to create a more transparent property market. The Consensus Forecast is published on a quarterly basis and is very dependent on the participating companies’ good will to report data every quarter. Without these companies, the Consensus Forecast would never have been possible. 45 market players participated in this forecast. 44 percent of the participants are property owners,24 percent are commercial brokers, 11 percent are banks/mortgage providers, 20 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, PostNord Real Estate, PwC, Reinholdt A/S, RICS Nordic, Sadolin & Albæk, Sampension, Saxo Properties, Sinding Gruppen, Situs, Taurus Ejendomsadministration, Thylander Gruppen, TLK, Topdanmark Ejendom, Wiborg & Partnere.
Published Udgivet byafthe Ejendomsforeningen Danish Property Federation Danmark