The Danish Property Federation's Market Statistics - consensus forecast (April 2019)

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The Danish Property Federation Market Statistics – Consensus Forecast

April 2019

• Total return 2018 at 7.1 % corresponding to approx. DKK 70 billion • Expected lower total return in 2019 of approx. DKK 20 billion • 2018 was a better year for investments than expected WEB REPORT CONSENSUS FORECAST

• Expectations for retail hits a low record

Total return expected to decrease in 2019 In 2019, total return is expected to be 5.3 percent corresponding to almost DKK 20 billion lower than 2018. In the years 2020 and 2021, total return is expected to drop to 5.1 percent. Compared to last quarter this is a small increase in expectations but compared to April 2018 it is a decrease. 2018 was better than expected 2018 is the fourth year in a row where expectations to total return were lower than realized. Last time the participants were asked about their expectations for 2018 was in January 2018. At that time, expectations for total return were 5.5. percent. This showed to be 1.6 percentage points too low. 2018 turned out to be a better year than expected for property investments.

Two participants got the expectations right during 2018. See who they are on page 5.

Prospect of decrease in total return Historic 2018 Totalt afkast


7,1 -0,1













Kvartalsændring Årsændring




Source: The Danish Property Federation Market Statistics. See remarks on page 4

The participants’ expectations For 2019

For the development in total return 2018-2020

9% expect a total return

4% more than 6 percent.

of 4 percent or below.

24 % expect a total return between 5 and 4 percent.

20 %

expect a total return of

63 % expect a total return between 6 and 5 percent.

expect an increase in

46 %

total return.

expect a decrease in total return.

35 % expect an unchanged total return.

The Danish Property Federation Market Statistics – Consensus Forecast, April 2019

The last year of positive expectations was 2014 where the expectations were at 5-6 percent in average, but the total return ended at 4.5 percent. Since 2000, the average total return has been 6.7 percent. Residential manages best in 2018 Total return consists of direct return and added value. A total return of 7.1 percent corresponds to DKK 70 billion in 2018. Residential has the lowest direct return of 2.7 percent in 2018, while added value of 7.9 percent means a total return of 10.6 percent. Increase in capital value for residential was expected by the participants, but it is worth noticing that the participants are now expecting decreasing capital value for residential in 2019. Seeing a decreasing capital value and a low direct return, residential meets a difficult 2019. Apart from decreasing capital value, participants expect that market rent for residential will decrease while vacancy will be stable.

Direct return in 2018 covering all properties was 3.6 percent and value added was 3.5 percent.

Seven years ago, industry had the same bad expectations as retail have now.

While the 2018 outcome for residential was good, professional properties (office, retail, and industry) had to settle for lower total return. Retail had 3.9 percent in total return which is composed by a direct return of 4.3 percent and a negative value added of 0.3 percent. Retail was the only sector with a negative value added while office had a value added of 1.8 percent and industry had a value added of 0.3 percent. Industry had the highest direct return of 5.5 percent which meant that both office and industry in total had the same total return of 5.8 percent. Record low expectations for retail Expectations for retail decreased significantly in this forecast and has never been as low. The economic vacancy is now at 5.2 percent while peaking in 2013 with 14.0 percent. The low level for retail in economic vacancy has contributed to an approved direct return of 4.2 percent in 2018 but participants now expect continuous capital value, increased vacancy, and decreased market rent. For the second quarter in a row we see negative expectations to residential. Still positive expectations for office and industry however decreasing over the last quarters. Copenhagen is still in the lead While capital values have increased by 3.5 percent in 2018, it is still expected that capital values in Copenhagen will develop the most in 2019. Copenhagen peaks expectation ahead of Aarhus, Odense, Aalborg, the Triangle Area and the rest of the country.

Occupied space for office and industry expected to increase (indicator values between -100 and 100) Table 2

Property value

Rental percentage

Market rental

April 2019

Quarterly change

Annual change

April 2019

Quarterly change

Annual change

April 2019

Quarterly change

Annual change









































Source: The Danish Property Federation Market Statistics. Rem.: The participants have answered: ‘very low’, ‘lower’, ‘unchanged’, ‘higher’, ‘much higher’ to the question: ’What are your expectations to the development within [sector]properties with prime location a year from today?’. The answers give a value 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 31.0 is feasible by 31.0 percent of the participants answering, ‘much higher’ and the remaining answers are ‘unchanged’.


The Danish Property Federation Market Statistics – Consensus Forecast, April 2019

Total return in 2018 was 7.1 percent 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2000






















Source: The Danish Property Federation Market Statistics. Rem.: Total return for investment properties. From 2011 to 2017 total return from the Danish Property Federation Market Statistic is shown, while 2000 to 2010 shows own calculations based on data from IPD Denmark Annual Property Index. 2018 to 2020 shows the average of the replies from the Consensus Forecast. 50 percent of the replies lie within the blue lines.

Highest expectations to capital value in the larger cities Regional indicator Low regional growth Anholt

Medium regional growth High regional growth


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.

Source: The Danish Property Federation Market Statistics.


The Danish Property Federation Market Statistics – Consensus Forecast, April 2019

About the forecast This web report was published in April 2019. The next sceduled publication is in July 2019. 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. 46 market players participated in this forecast. 54 percent of the participants are property owners. Furthermore, 13 percent are commercial brokers, 4 percent are banks/mortgage providers, and 28 percent are other players.

Please find below some of the companies which have contributed Aberdeen Asset Management, ATP Ejendomme, BBN Consult, Bertélco Ejendomme A/S, BRF Kredit, Carlsberg Byen, CBRE, Chr. Hjorth Erhvervsejendomme, Colliers international Danmark, Copenhagen Capital, Cura Management, DADES, Danbolig erhverv Johnny Hallas, Danica Ejendomme, DEAS, EDC Erhverv Poul Erik Bech, Ejendomsselskabet Norden, EK-Ejendomsadministration A/S, EY, Focus Asset Management, Heimdal Nordic, Hosta Ejendomme, Industriens Pension, Jeudan, Karberghus, KLP ejendomme, A/S, Lundsgaard Erhverv, Lægernes Pensionskasse, M7 Real Estate, M. Goldschmidt Ejendomme, Minova, NCC Construction Danmark A/S, Newsec Advisory, Newsec Property Asset Management Denmark, Nordicals, Nybolig, P+, Patrizia, Pensam, PensionDanmark, PFA Ejendomme, PKA, Probus Ejendom og Investering, Prodomus, PwC, Realdania, Realkredit Danmark, Sampension, Sinding Gruppen, Spar Nord Bank, Taurus Ejendomsadministration, Thylander Gruppen, TK Development. TLK, Topdanmark Ejendom, Valdal Advokatfirma, Wiborg & Partnere.

More information If you want to know more about this publication then contact Chief Economist

Morten Marott Larsen Phone +45 28 45 56 51

Remarks for table 1

The average total return based on the replies 2018-2020 is presented in the table. Total return is in percentage and shows return on investment property compared to the size of the investment in a given period. Total return consists of two types of returns: Direct return and return on value. Direct return is current net operating profit of the period divided by investments size at the beginning of the period. Return on value is the value added in the given period divided by the size of investment at beginning of period. Total return is before any financial costs and before inflation. The historic total return in 2017 might change in the future, when new data is included in the market statistic.


The Danish Property Federation Market Statistics – Consensus Forecast, April 2019

Interview med Jørgen Jørgensen, EDC Erhverv Poul Erik Bech How did you succeed with such precise expectations for 2018? ”It is obvious that when you are this involved in the market, it is easier to predict the development of supply and demand” You expect 5.5 percent in total return in 2019 - why? ”With regards to my expectations for 2019, I base them on the fact that interest rates are still rather low and liquidity continues to be high. Also, the opportunities of alternative investments – stocks and bonds – despite increased prices for stocks – still aren’t attractive enough. Nonetheless, I have my concerns about the years following 2019. I believe that there are still problems in the Euro Zone, unresolved negotiations between USA and China, and Brexit.”

Interview med partner Henrik Reedtz, EY How did you succeed with such precise expectations for 2018? ” In general, it has been a very good year. We have seen increases in value to continue (above inflation), and performance of properties has been strengthened due to the decrease in vacancy rates. I believe that most investors are satisfied. To be precise, you also need luck and a good intuition together with a good network within the investment community.” You expect a total return of 6.5 percent in 2019 – why? It was just a hunch based on quite a lot of factors.