April 2022
The Danish Property Federation’s Market Statistics - Consensus Forecast • The expectations for total return on properties are increasing • The total return is expected to be 6.8 percent in 2022 • Significantly better expectations to retail • Highest expectations to the development in office properties
Increasing expectations – but large uncertainty The total return is expected to increase to 6.8 percent in 2022. That is an increase of 1.7 percentage points compared to last quarter and an increase of 1.6 percentage points compared to the same time last year. An expectation of 6.8 percent in a single year has not been higher in the 12-year period in which expectations to the total return has been measured. The expectations to the whole period 2022-2026 is 5.6 percent, which is the best expectation for a future 5-year period in almost 5 years. But there is large uncertainty among the participant. Half of the participants expect a total return between 5.1 and 8.0 percent in 2022, while the other half expect total returns that are either higher than 8.0 percent or lower than 5.1 percent.
/ Expectations for the total return are increasing. /
/ But the uncertainty of the total returns is also increasing. /
The uncertainty can also be seen from the invasion of Ukraine on 24 February, where the data for this collection took place during the course of February. We will have to wait for the next surveys to see how the invasion affects the total return in 2022. Highest expectations to office As it can be seen in figure 1, office now has the highest expectations. The best expectations to office are measured in 2018. The last two years, the expectations to office have increased. The largest increase in expectations are, however, in retail. There were overall
Figure 1. The expectations to retail are the best since 2018 40 30
Office
20
Retail
10
Industry
0 -10
111
311 112 312 113 313 114 314 115 315 116 316 117 317 118 318 119 319 120 320 121 321 122
Residential
-20 -30 -40 -50 Source: The Danish Property Federation’s Market Statistics. The answers are given a value in order to achieve an indicator between -100 and 100 for the four different property sectors regarding capital value, occupied space and market rent. An indicator of 100 means that everybody has answered “much higher”, and -100 means that everybody has answered “much lower”.
1
The Danish Property Federation’s Market Statistics - Consensus Forecast, April 2022
negative expectations to retail before the corona crisis, but now they are just positive again. It is encouraging that the participants again dare believe in a positive development for this sector. / Expectations to market rent for industry set a record./
The expectations to market rent for industry have not been measured higher before. From 2011 to 2015, there was an expectation of a negative market rent development for industry, but in this survey, it sets a positive record. For residential, there is still a positive expectation to the occupied space. This is despite a decreasing vacancy for residential in recent years. Increasing occupied space also show that there is still a huge need for private rental residences. Progress for Odense, Aarhus and Copenhagen There was an increase in the regional expectations to capital value for Odense, Aarhus and Copenhagen, whereas there was a decrease in the expectations for Aalborg, the Triangle Area and the rest of the country. After a longer period with an increase for the rest of the country, the rest of Denmark declined when the participants were to evaluate where the growth in capital value develops the most. Right now, there is the following order in the evaluation of capital value: Copenhagen, Aarhus, the Triangle Area, Odense, Aalborg and the rest of the country.
There is an expectation of 5.6 percent in total return for 2022-2026
Table 1
Historic 2021
2022
2023
2024
2022-2026
6.8
5.6
5.4
5.6
Quarterly change
1.7
0.6
New
New
Annual change
1.6
1.0
New
New
Total return
6*)
Source: The Danish Property Federation’s Market Statistics. *) Preliminary number
Significant improvements in expectations for retail (indicator values between -100 og 100) Capital value
Occupied space
Market rent
Table 2
April 2022
Quarterly change
Annual change
April 2022
Quarterly change
Annual change
April 2022
Quarterly change
Annual change
Office
25,0
3,9
9,0
15,5
3,6
30,4
28,6
6,2
21,1
Retail
3,6
14,1
42,9
1,2
9,1
34,2
3,6
16,7
44,0
Industry
23,8
-6,5
-3,9
11,9
1,4
-0,9
28,6
2,3
2,0
Residential
19,0
4,6
-4,4
6,0
7,3
2,8
10,7
1,5
4,3
Source: The Danish Property Federation’s Market Statistics. The participants have answered: ”Much lower”, ”lower”, ”unchanged”, ”higher” and ”much higher” on the question: ”What are your expectations to the development of [sector] buildings with prime location in a year compared to today?” The answers are given a value in order to achieve an indicator between -100 and 100. An indicator of 100 means that everybody has answered “much higher”, and -100 means that everybody has answered “much lower”. Indicator zero states expectations to unchanged conditions. An indicator of 28.6 may for example be obtained by 28.6 percent of the participants corresponding ”much higher” and the remaining corresponding ”unchanged”.
2
The Danish Property Federation’s Market Statistics - Consensus Forecast, April 2022
Figure 2. Half of the participants expect a total return of between 5.1 and 8.0 percent in 2022 20% 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 2021 2022 2023 2024
Source: The Danish Property Federation’s Market Statistics. Total return of investment properties. From 2011 to 2021, the total yield from the Danish Property Federation’s market statistics is shown, while 2000 to 2010 is own calculations based on data from the IPD Danish Property Index. 2022 to 2024 shows the average of the answers in the Danish Property Federation’s market statistics - expectations. 50 percent of the answers are within the blue lines.
Figure 3. Copenhagen and Aarhus have the highest expectations to capital value Regional indicator Regional indikator
Least regional growth Mindst regional vækst
Medium regional growth Middel regional vækst
Anholt
The map shows the areas in Denmark where the capital value of investment properties are expected to increase the most compared to the other areas. We have asked about the Triangle area, Copenhagen, Aarhus, Aalborg, Odense and the rest of Denmark. The answers have formed an indicator. If an area is light blue, at least 70% of the respondents have agreed that this area is doing better than the others.
Anholt
Largest regional growth Størst regional vækst
Rømø
Røm ø
Source: The Danish Property Federation’s Market Statistics.
3
The Danish Property Federation’s Market Statistics - Consensus Forecast, April 2022
About the survey This is the Concensus Forecast for April 2022 from the Danish Property Federation’s market statistics. The aim is to create information for a more transparent property market. The survey is published every quarter and is completely and utterly dependent on the participating companies being willing to report data every quarter. Without these companies, the survey would never become a reality.
42 market players have participated in this survey. 60 percent of the participants are property owners. In addition, 12 percent are property administrators, 12 percent are commercial brokers, 7 percent are banks/mortgage providers and 9 percent are other players.
The following companies have contributed Agat ejendomme, ATP Ejendomme, Bertélco Ejendomme A/S, CBRE, Chr. Hjorth Erhvervsejendomme, Colliers, Copenhagen Capital, Cura Management, Cushman & Wakefield | RED, DADES, Danbolig erhverv Johnny Hallas, Danica Ejendomme, DEAS, EDC Erhverv Poul Erik Bech, Ejendomsselskabet Norden, EK-Ejendomsadministration A/S, Elf Development, EY, Fokus Asset Management, Gefion Group, Heimdal Nordic, Heimstaden, Hosta Ejendomme, Industriens Pension, Jeudan , Jorcks Ejendomsselskab, Jyske Bank, Karberghus, Keystone, KFI Erhvervsdrivende Fond, KLP ejendomme, Lintrup & Norgart, Lokalebasen. dk A/S, Lundsgaard Erhverv, Lægernes Pensionskasse, M7 Real Estate, M. Goldschmidt Ejendomme, NCC Construction Danmark A/S, Newsec Advisory, Newsec Property Asset Management Denmark, Niam, Nordea, Nordicals, Nykredit, P+, Patrizia, PBU – Pædagogernes Pension, Pensam, PensionDanmark, PFA Ejendomme, PKA, Probus Ejendom og Investering, Prodomus, PwC, Qvortrup Administration, Realdania, Realkredit Danmark, Rosenkæret, Sampension, Sinding Gruppen, STAD Erhverv, Taurus Ejendomsadministration, Thor Stevnss Real Estate, Thylander Gruppen, TLK, Topdanmark Ejendom, Wihlborgs, Wiborg & Partnere, Øens Advokatfirma og Ejendomsadministration.
Further information If you wish to know more about this publication please contact Director in the Danish Property Federation
Morten Marott Larsen mml@ejd.dk Phone +45 28 45 56 51
Remarks for table 1 The table indicates the average total return based on the replies for the years 2022-2026. The total return is in percent and measures the return on investment on investment properties in relation to the size of the investment in a given period. The total return includes two types of yield: Direct return and return on value. The direct return is the period’s ongoing net operating results divided by the investment size in the beginning of the period. Return on value is the value increment in the given period divided by the size of the investment at the beginning of the period. The total return is before any financial costs and inflation. The historic total yield may change slightly in the future when new data is added to the market statistics.
4