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Ejendomsforeningen Danmarks markedsstatistik – forventninger

april 2018

The Danish Property Federation Market Statistics – Consensus Forecast

July 2018

• Reasonable but decreasing total return expected • For the first time, industry peaks expectations • Progress outside Aalborg, Aarhus and Copenhagen • Rent is expected to increase 2.2 percent a year over the next three years for offices in Copenhagen

WEB REPORT CONSENSUS FORECAST

Decreasing total return expected Total return in 2017 was 7.2 percent increasing four years in a row. In 2018, the property trade expects total return to be 5.6 percent. This has not changed since last quarter, but compared to last year, it is a decrease of 0.2 percentage point. In 2020, total return is expected to decline to 5.4 percent, which is a small increase of 0.1 percentage point compared to last quarter. This is enough to keep a positive but small value added.

Total return is expected to decline by 1.6 percentage points between 2017 and 2018.

Total return in 2017 was DKK 18 bill. If total return declines to 4.2 % in 2018, as expected by ten percent of the participants, total return will decrease by DKK 7 bill. to a total of DKK 11 bill. Another ten percent of the participants expect a total return of at least 6.6%, corresponding to a decrease in total return of DKK 2 bill. To a total of DKK 16 bill. in 2018. Most of the participants expect a lower total return in 2018 compared to 2017.

50 % of the participants expect that total return in 2018 is above the expectations for average total return in the period 2018-2022.15 % expect increasing total return from 2018 and forward.

During the period 2018-2022, participants expect a total return of 5.4 percent in average.

Total return in 2018 expected to drop to 5.6 percent Historic 2017

2018

2019

2020

7.2

5.6

5.4

5.4

Total return

2018-2022 5.4

Quarterly change

0.0

0.0

0.1

0.0

Annual change

-0.2

-0.3

New

New

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

The participants’ expectations For 2018

For the development in total return 2018-2020

10 % expect a total return of 6.6 percent or above.

80 %

10 %

expect a total return between

expect a total

4.2 to 6,6 percent.

15 %

50 %

expect a 2018 below level.

expect a 2018 above level.

35 %

return of 4.2 percent or below.

expect a 2018 at level.

afkast på 6.6 eller mere

Published by

4,2 eller mindre

4,2-6,6

under niveau

på niveau

over niveau

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The Danish Property Federation Market Statistics – Consensus Forecast, July 2018

In 2017, the value added for residential increased by 6.9 percent, while the rent for residential still increases.

Industry is the new black For the first time ever, industry is the sector with the highest expectations. In 2017, value added increased by 3.3 percent and continuous increase in capital value is expected. Rent has developed evenly, but the participants expect that rent within industry will rise during the coming year. Overall, we see significant changes within industry, as participants expected that capital value, occupied space, and market rent would decrease 3,5 years ago. Residential has peaked as the sector with the highest expectations for the coming year. But indicator values for residential are only just positive in this consensus forecast. Office and retail are still expected to experience increasing capital value, occupied space, and market rent.

Increasing capital value in Copenhagen, Aarhus, and Aalborg decreases compared to other areas.

Participants expect market rent to increase during the next year within all four sectors.

Progress in the Triangle Area and Odense Capital value is still expected to increase the most in Copenhagen, but Copenhagen has not experienced a worse expectation before. Aarhus and Aalborg also decrease a little. The Triangle Area is improving the most, and is now at the same level as Odense that experience the best expectations since 2014. The rest of the country is also progressing in this consensus forecast giving hints for the first time that capital value soon peaks in Copenhagen, Aarhus, and Aalborg. Increasing rent In April 2018, the actual rent increased for three out of four sectors. In April 2018, the annual increase in the actual rent was 3.9 percent for residential, 1.8 percent for retail, 1.1 percent for office, while the actual rent for industry decreased by 0.4 percent. With decreasing vacancy and the relatively low new constructions, we see indications of continuous increasing rent. IPD May 2018 shows that for offices in Copenhagen, market rent is expected to increase by 2.2 percent a year over the next three years. It is an increase of 0.5 percentage point compared to the forecast in November 2017. When rent is not increasing within office in Copenhagen, one of the explanations is that vacancy in the Copenhagen area is still above 10 %.

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

Office

Rental percentage

Market rental

July 2018

Quarterly change

Annual change

July 2018

Quarterly change

Annual change

July 2018

Quarterly change

Annual change

25.0

-2.4

-1.8

23.8

-7.2

-0.6

23.8

2.3

1.8

Retail

13.8

1.8

-0.9

10.0

5.2

-1.0

8.8

-0.8

-7.1

Industry

30.0

3.8

12.9

23.8

3.5

7.9

20.0

-2.6

12.7

Residential

7.5

-5.6

-15.7

1.3

-1.1

-3.6

6.3

-6.8

-12.0

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 [secrot]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’.

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The Danish Property Federation Market Statistics – Consensus Forecast, July 2018

In 2000-2002 and 2005-2007, total return was higher than in 2017 18 % 16 % 14 % 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

2018

2019

2020

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 Copenhagen

Regional indicator Low regional growth 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.

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The Danish Property Federation Market Statistics – Consensus Forecast, July 2018

About the forecast This web report was published in July 2018. The next sceduled publication is in October 2018. 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. 40 market players participated in this forecast. 40 percent of the participants are property owners. Furthermore, 25 percent are commercial brokers, 8 percent are banks/mortgage providers, and 25 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, Cura Management, DADES, Danbolig erhverv Johnny Hallas, DEAS, EDC Erhverv Poul Erik Bech, EK-Ejendomsadministration A/S, EY, Focus Asset Management, Heimdal Nordic, Jeudan, Karberghus, Lokalebasen.dk A/S, NCC Construction Danmark A/S, Newsec Datea, Newsec Egeskov & Lindquist, Nordea, Nordea Ejendomme, Nykredit, Patrizia, Pensam, PensionDanmark, PFA Ejendomme, PKA, Prodomus, Probus Ejendom og Investering, PwC, Realkredit Danmark, Sadolin & Albæk, Sampension, SEB Pension, Sinding Gruppen, Spar Nord Bank, Taurus Ejendomsadministration, Thylander Gruppen, TLK, Topdanmark Ejendom, Wiborg & Partnere.

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

Morten Marott Larsen mml@ejendomsforeningen.dk Phone +45 28 45 56 51

Remarks for table l 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.

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The Danish Property Federation's Market Statistics - consensus forecast (July 2018)  

Reasonable but decreasing total return expected For the first time, industry peaks expectations Progress outside Aalborg, Aarhus and Copen...

The Danish Property Federation's Market Statistics - consensus forecast (July 2018)  

Reasonable but decreasing total return expected For the first time, industry peaks expectations Progress outside Aalborg, Aarhus and Copen...

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