The Danish Property Federation´s market statistics – vacancy (September 2018)

The Danish Property Federation Market Statistics – Vacancy

July 2018

• Lowest vacancy since 2010 at national level • Annual decrease in vacancy for office means 0.6 billion DKK less loss in rental income compared to 2017 • Retail has the lowest vacancy level within the business segment • Increasing trend for residential vacancy

WEB REPORT VACANCY

Stable and positive economic development Danish economy is experiencing a boom, and a continuous annual growth of 2.0 percent towards 2025 is expected, giving a positive scope for the economic development. A moderate pressure on the labor market and inflation rates below 2.0 percent (source: DØRS, June 2018) are signs of a healthy economy. There is no direct risk of untenable salary or residential price increases which could enhance overheating and sudden for Danish economy.

A total annual return above 5.0 percent is expected in the investment property market in 2018 and the years to come. The Danish Property Federation’s latest consensus forecast from June also showed positive expectations for development in market rent and capital value for all sectors in 2019. Especially for office and industry, while expectations for residential are more subdued. A relatively low vacancy and fine residential rental conditions have given new

Figure 1. Economic vacancy, July 2018

New publication on geographical classification

10.3

10.0

8.1

In July 2018 the Danish Association of Chartered Estate Agents and the Danish Property Federation published a new publication on geographical classification in Copenhagen and surrounding areas.

7.6

6.1 4.2

Office

Retail

Industry

Residential

Other commercial

Total

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

0.1

-1.2

0.0

-0.5

-0.2

-0.5

0.1

0.8

-0.2

0.3

0.0

-0.7

Source: The Danish Property Federation Market Statistics.

Note.: The vacancy rates for all rectors also include actual annual rent and space for other commercial and secondary spaces.

Published by

Healthy Danish economy still gives positive expectations in years to come.

To follow these recommendations, Copenhagen CBD and Other Copenhagen are no longer included in this web report. New areas are: Copenhagen Centre, Other Copenhagen Municipal, and Other Capital.

Download the new publication www.ejendomsforeningen.dk/område

1

The Danish Property Federation Market Statistics – Vacancy, July 2018

Office vacancy is still relatively high, but the 2018-level is more than one percentage points lower than in 2017.

development projects and a higher construction activity over the last five years (source: The Danish Construction Association State of the Market Analysis, 2018). The Danish Construction Association expects that the already launched residential constructions will increase from 27.500 housings in 2017 to approx. 29.000 and 30.000 in 2018 and 2019.

A stabilized lower vacancy level Over the last six months the vacancy level has been 7.6 percent, the lowest since 2010. Looking at an annual perspective this is 0.7 percentage points below July last year. Overall, the long-term vacancy level is 6.9 percent, but if the decrease continues at the same speed, the vacancy will hit the average in a year - corresponding to approx. DKK 700 mill. higher rental income in July 2019.

Having a vacancy level of 10.0 percent, office almost maintain the level from March and it still looks as if the vacancy decrease is sluggish for office. However, the annual change has been negative seven quarters in a row. The annual decrease in July 2018 is 1.2 percentage points. The vacancy decrease since July 2017 corresponds to the fact that owners of office rentals have approx. 0.6 bill. higher rental income in July 2018. With regards to all quarters in 2018, the annual change for office has decreased with more than one percentage points.

New residentials increase vacancy slightly Residential continues a weak increasing trend since 2015 and has increased by 1.5 percentage points at national level the last two years. However, the level is still low compared to the other sectors. One of the reasons why there is an increased loss in rental value is the ongoing development of residentials and that new residentials are often vacant compared to older residentials. A higher vacancy in new residentials might be influenced by the fact that a lot of units enter the market at the same time.

Figure 2. Development in economic vacancy Percent 25,00

20,00

PROCENT

15,00

10,00

5,00

Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul.

0,00 2000

2001

2002

2003

2004

2005

2006 Kontor OfďŹ ce

2007 Butik Retail

2008

2009 Industri Industry

2010 Bolig

2011

2012

I alt Residential

2013

2014

2015

2016

2017

2018

Total

Source: The Danish Property Federation Market Statistics and own calculations based on data from IPD Danish Property Index and Ejendomstorvet Markedsstatistik.

Note: Data from January and onwards is from The Danish Property Federation. From 2001 to 2013 is data from IPD Danish Property index based on difference in level in 2014. In year 2000, office data from The Danish Property Federation incorporated. Calculations method differs, hence there is data breaches between October 2013 and January 2014. From January 2014 the publication is divided quarterly, while it is yearly before 2014. Therefore, from 2014 there is a bigger data base.

2

The Danish Property Federation Market Statistics – Vacancy, July 2018

Office – Almost unchanged quarterly level The economic vacancy for office has increased slightly increased by 0.1 percentage points compared to last quarter and ends at 10.0 percent, while compared to the same period last year it has decreased by 1.2 percentage points. This is the largest annual change among the sectors. The spatial vacancy increases by 0.2 percentage points to 11.4 percent but decreases at the annual level by 1.6 percentage points.

Highest annual vacancy changes within the office sector.

Still good potential Overall, office vacancy is still above the long-term average and with the present boom and high employment, there should be potential for further decrease in vacancy.

Copenhagen Centre has the lowest vacancy In the Northern Jutland Region has the highest decrease in vacancy of 0.9 percentage points, while the Zealand Region has an increase of 0.8 percentage points. The Zealand Region is also the only region where there is an increase compared to same period last year. The Mid Jutland Region has the lowest regional vacancy of 6.4 percent despite a slight increase. In Copenhagen Centre, the economic vacancy has decreased by 1.0 percentage points to 5.9 percent, still being the area of the lowest economic vacancy on national level. In Aarhus, the vacancy is also decreasing og here the level since 2016 has decreased with more than six percentage points to 6.3 percent.

Office vacancy in Aarhus has decreased by six percentage points in 18 months.

Economic vacancy rate July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

10.1

0.1

-1.2

Copenhagen Centre

5.9

-1.0

-0.5

Other Copenhagen Municipal

9.3

1.3

-0.8

Northern Zealand

12.2

-1.3

-6.4

Other Capital Region

13.8

-0.2

-0.9

12.7

0.8

5.1

16.1

0.0

10.7

9.8

1.1

0.1

Table 1. Office Capital Region

Zealand Region Eastern Zealand Western and Southern Zealand Southern Denmark Region

11.2

0.1

-3.4

Odense

15.9

-1.1

2.1

Triangle Area

11.4

-0.2

-3.5

Mid Jutland Region Aarhus Other Northern Jutland Region Aalborg Total

6.4

0.1

-1.9

6.3

-0.2

-2.2

6.6

0.9

-0.7

11.0

-0.9

-1.0

11.0

-0.9

-0.9

10.0

0.1

-1.2

Source: The Danish Property Federation Market Statistics.

3

The Danish Property Federation Market Statistics – Vacancy, July 2018

Retail – Still the lowest vacancy within the business segment The economic vacancy for retail has decreased by 0.5 percentage points since last year. Retail vacancy also decreases in July 2018 and maintain last years’ trend although the decrease is modest. In July 2018, the economic vacancy is 6.1 percent and retail maintain the position as the business sector with the lowest vacancy level. The vacancy level is the lowest since January 2009.

Conversions from retail causes a quarterly decrease of 0.3 percentage points.

Retail vacancy increases the most in the Northern Jutland and Zealand Region.

Conversions and more rentals cause lower vacancy level This quarter, conversions of empty retail rentals to other sectors have caused a vacancy decrease of 0.3 percentage points. In July 2018 more rentals have gone from being empty to being rented out than the other way around which also contributes to a vacancy decrease.

Rented retails contribute with 0.6 percentage points to the vacancy decrease while empty retails contribute with 0.5 percentage points to the increase.

Largest decrease in the Zealand Region In July 2018, the regional retail vacancy has decrease the most in the Zealand Region with a decrease of 0.5 percentage points since April. Especially West- and South Zealand contribute to the decrease with 2.7 percentage points. The regional vacancy in the Zealand Region is 8.4 percent. Likewise, there is a decrease in the Mid Jutland Region of 0.2 percentage points with the highest decrease in Aarhus followed by Other Mid Jutland. The Capital Region also has a decrease of 0.2 percentage point, where Other Copenhagen Municipal contributes to the decrease with 1.2 percentage points. Both in the Southern Denmark and Northern Jutland regions there are increases in July 2018, but the latter increases from a low level as the vacancy level in July 2018 is 3.2 percent.

Economic vacancy rate July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

6.2

-0.2

-0.5

Copenhagen Centre

4.9

-0.4

1.8

Other Copenhagen Municipal

4.9

-1.2

-1.9

Northern Zealand

6.4

0.2

-4.0

Other Capital Region

8.1

0.7

-0.6

7.8

-0.5

-2.3

Eastern Zealand

7.6

0.3

-1.2

Western and Southern Zealand

8.4

-2.7

-5.8

6.9

1.0

0.9

6.1

0.4

0.1

5.1

-0.2

0.1

Aarhus

3.7

-0.4

0.2

Other

7.9

-0.1

0.1

3.2

1.1

-0.1

2.6

0.2

-0.6

6,1

0,0

-0,5

Table 2. Retail Capital Region

Zealand Region

Southern Denmark Region Triangle Area Mid Jutland Region

Northern Jutland Region Aalborg Total

Source: The Danish Property Federation Market Statistics.

4

The Danish Property Federation Market Statistics – Vacancy, July 2018

Industry – The vacancy level follows the expected decreasing trend In July, the vacancy for industry has decrease by 0.2 percentage points ending at 10.3 percent. The economic vacancy for industry has decreased by 0.5 percentage points since last year and the spatial vacancy has decreased by 0.4 percentage points.

Annual decrease of 0.5 percentage points in compliance with development since 2013.

The vacancy within industry has had a decreasing trend since the top level in January 2013 and this is expected to continue at least a little while. According to the Danish Property Federation Consensus Forecast from July 2018, expectations for industry peaks for the first time compared to the other sectors. The participants have positive expectations to industry with increasing rental levels and continuous increases are expected for capital value.

Copenhagen Centre has the highest vacancy decrease The Capital Region experience a vacancy decrease of 0.6 percentage points. Copenhagen Centre represents a major part of the decrease and contributes with a decrease of 4.9 percentage point, whereas Other Copenhagen Municipal contributes with an increase of 1.0 percentage points. Other Capital has also decrease, whereas there are increases in North Zealand by 0.7 percentage points.

Copenhagen Centre experience a higher decrease while vacancy increase in Other Capital.

The Zealand Region still has a high vacancy level Vacancy in the Zealand Region has increased by 2.7 percentage points in July 2018 leading to the highest vacancy level of 22.8 percent. The Southern Denmark Region has also increased and ends at 14.2 percent with another 2.3 percentage points in July 2018. The Mid Jutland Region has increased by 0.4 percentage points in July 2018 but at annual basis decreased by 0.3 percentage points giving a vacancy level of only 4.6 percent.

Economic vacancy rate July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

10.5

-0.6

-1.1

Copenhagen Centre

12.1

-4.9

-7.6

Other Copenhagen Municipal

14.4

1.0

-1.3

Northern Zealand

12.4

0.7

-4.8

Table 3. Industry Capital Region

Other Capital Region

9.0

-0.4

-0.1

Zealand Region

22.8

3.7

5.6

Southern Denmark Region

14.2

2.3

3.3

4.6

0.4

-0.3

5.1

0.0

1.2

10.3

-0.2

-0.5

Mid Jutland Region Aarhus Total

Source: The Danish Property Federation Market Statistics.

5

The Danish Property Federation Market Statistics – Vacancy, July 2018

Residential – 4.2 percent economic vacancy

Residential is still the sector having the lowest vacancy.

Apartments with few rooms have a lower vacancy.

The vacancy for residential shows an increasing trend. Since 2015 where the economic and spatial vacancy were at 2.5 percent, the vacancy has increased nice and easy. In July 2018, the economic vacancy is 4.2 percent which is an increase of 0.1 percentage points compared to last quarter and 0.8 percentage points compared to last year. Vacancy for residential lies above the average from year 2000 until today of 3.3 percent and residential is still the sector with the lowest vacancy. The economic vacancy peaked in 2009 with a little more than seven percent. From 2015, the economic vacancy has been higher than the spatial vacancy because of often vacant expensive square meters.

A little higher vacancy for new properties Even though there is still demand for housings, they take a little longer to be occupied.

One of the explanations of increasing vacancy is that new properties are often empty compared to older properties. At the moment, more properties are build. When the vacancy in new properties are higher, it is often because a lot of apartments/units enter the market at the same time and therefore it takes some time to have all apartments rented. Properties build after 2011 have an economic vacancy of 6.8 percent in average, while properties build before 2011 have an economic vacancy of 3.5 percent. At national level there is also higher economic vacancy for apartments with several rooms compared to apartments with few rooms. The economic vacancy for residential with three rooms or less has an economic vacancy of 3.9 percent, while the economic vacancy for residential with at least four rooms is at 4.9 percent.

Decrease in both the Zealand Region and the Southern Denmark Region In July 2018 there is a decrease in the economic vacancy in the Zealand and the Southern Denmark Region. Those two regions have the lowest regional economic vacancies of 2.4 and 2.5 percent. The economic vacancy in the Capital Region is unchanged at 3.7 percent, while the Mid Jutland Region has an economic vacancy of 5.6 percent which is an increase of 0.5 percentage points compared to last quarter. In Aarhus, the economic vacancy is 6.4 percent.

New as well as older housings give a higher vacancy level in the Northern Jutland Region.

6

Highest increase in the Northern Jutland Region In the Northern Jutland Region, the economic vacancy has increased to 8.5 percent. This is an increase of 1.7 percentage points compared to last quarter. New properties in the Northern Jutland Region has a slightly higher vacancy as in the rest of the country but it is both new and older properties in the Northern Jutland Region that have a higher regional vacancy compared to the rest of the regions.

The Danish Property Federation Market Statistics – Vacancy, July 2018

Economic vacancy rate July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

3.7

0.0

0.3

Copenhagen Centre

4.7

-1.4

-1.6

Other Copenhagen Municipal

4.6

0.2

0.2

Northern Zealand

2.4

0.5

0.6

Other Capital

2.4

-0.1

0.8

Zealand Region

2.5

-0.2

0.4

Eastern Zealand

1.3

0.4

0.8

Western and Southern Zealand

3.1

-0.6

0.0

2.4

-0.7

0.7

Odense

1.5

-1.8

-0.3

Triangle Area

5.2

1.6

3.1

Other Southern Jutland

2.3

-0.2

1.1

Table 4. Residential Capital Region

Southern Denmark Region

Mid Jutland Region

5.6

0.5

1.5

Aarhus

6.4

0.6

2.0

Other Mid Jutland

3.4

0.5

0.3

8.5

1.7

3.6

8.4

1.7

3.6

10.0

1.8

1.7

4.2

0.1

0.8

Northern Jutland Region Aalborg Other Northern Jutland Total

Source: The Danish Property Federation Market Statistics.

7

The Danish Property Federation Market Statistics – Vacancy, July 2018

Geographical overview Copenhagen Centre

Christiansborg Christianshavn

Tivoli

Source: The Danish Property Federation Market Statistics.

Note: Copenhagen Centre consists of Copenhagen inner city covering the zip codes: 900, 1000-1431, 1434-1438, 14481559, 1562-1609, 1611-1614 og 1631-1634.

8

The Danish Property Federation Market Statistics – Vacancy, July 2018

About the Market Statistics

This report is based on data from

This web report is published 7 September 2018. Next scheduled publication is primo November 2018.

2 + 3 Ejendomme, Aberdeen Asset Management, Akelius, Alm. Brand, Andersen Partners Ejendomsadministration, AP Pension, Arkitekternes Pensionskasse, ATP, Bevica Fonden, Blue Vision, Carlsbergfondet, CBRE, CEJ Ejendomsadministration, Coller Capital, CS Pensionsfond, CW Obel Ejendomme, DADES, Domhusgaarden, Danica, Dansk Sygeplejeråd, Danske Bank, DATEA, DEAS, DEAS Invest 1, DIP, DNP Ejendomme, DSB Ejendomme, Ejendomsforeningen Danmark, Ejendomsselskaberne Grønløkkevej 10, Fast Ejendom Danmark, Fokus Asset Management, FrederiksbergFonden, Færchfonden, Grosserer Schiellerup og Hustrus Fonde, Gudbjørg og Ejnar Honorés Fond, HD Ejendomme, Højgaard Ejendomme, Industryens Pension, Jammerbugt Kommune, Jeudan, Jorcks Ejendomsselskab, JØP, Kalkværksgrundene, Kalvebod Ejendomme, Karberghus, KIRKBI, KLP Ejendomme, Kramers Legat, Laros, LB Forsikring, Lægernes Pensionskasse, Lærernes Pension, MP Pension, Niam, Nordea Ejendomme, Nordea Liv og Pension, North Property Asset Management, Patrizia Denmark, PBU, PenSam, PensionDanmark, Pensionskassen for Farmakonomer, PFA, Pitzner Ejendomme, PKA, Probus, ProDomus, Realdania, Sampension, SEB, SPG Omsorg DK1, Steen & Strøm, Taurus Ejendomsadministration, TDC Pensionskasse, Topdanmark, Tryg, Valad, Wagner Ejendomme og Aage Larsens Residentialudlejning.

The portfolios have approximately 83.900 rentals corresponding to an annual lease value of DKK 19,0 billion and 15,3 million square meters. In comparison the statistical base in April 2017 had an annual lease value of DKK 18,0 billion and 15,9 million square meters. 5.500 properties* are included in the market statistics.

The base of the economic vacancy is the actual annual rent. The economic vacancy is defined as: Sum of actual rent in all vacant rentals divided by the sum of actual annual rent in both occupied and vacant rentals.

The Market Statistics is based on quarterly processed property data for rentals and vacancies within the period in question. This web report has been closed 31 March 2018 and is called April 2018. Quarterly change is from April 2018 (closed 31 March 2018) compared to January 2018 (closed 31 December 2017). Annual change is from April 2018 (closed 31 March 2018) compared to April 2017 (closed 31 March 2017).

Published data are updated and valid on the date of publication. As the Market Statistics are updated ongoing historic data might also be updated.

We have chosen not to publish data, where the data is not sufficient to give valid and representative results or in combinations where only one or very few portfolios are represented

* The number of properties include properties and parent properties. A property can include one or more buildings and one or more residentials or office units. A parent property includes a property, in which there is apartments, which are registered as independent properties. For these units it is the parent properties that are counted and not each apartment.

Further information If you wish to know more about this publication please contact Director in the Danish Property Federation

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

9

The Danish Property Federation Market Statistics – Vacancy, July 2018

Appendix Figure 3. Spatial vacancy rate, July 2018 11.4 10.2 8.4

8.3

6.6

3.7

Office

Retail

Industry

Residential

Other commercial

Total

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Change in percentage points

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

Quart.

An.

0.2

-1.6

0.2

0.3

-0.1

-0.4

0.0

0.7

0.0

0.3

0.0

-0.7

Source: The Danish Property Federation Market Statistics.

Note: The vacancy rates for all sectors also include actual annual rent and space for other commercial and secondary spaces.

Spatial vacancy July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

11.6

0.4

-1.4

Copenhagen Centre

6.2

-0.5

-0.6

Other Copenhagen Municipal

9.5

1.8

-0.9

Northern Zealand

13.9

-1.0

-3.4

Other Capital

15.8

-0.1

-1.3

Zealand Region

13.9

-0.7

3.5

Eastern Zealand

16.7

-0.9

10.5

Western and Southern Zealand

17.8

5.0

4.0

Table 5. Office Capital Region

Southern Denmark Region

16.0

2.9

-2.2

Odense

12.0

-6.5

-4.5

Triangle Area

12.8

-1.3

-9.3

Mid Jutland Region

9.3

1.9

-0.1

Aarhus

7.4

0.6

-1.1

Other Mid Jutland

6.6

-2.6

-5.9

Northern Jutland Region Aalborg Total

9.6

-3.4

-4.3

12.4

-1.2

-1.8

11.4

0.2

-1.6

Source: The Danish Property Federation Market Statistics.

10

The Danish Property Federation Market Statistics – Vacancy, July 2018

Spatial vacancy July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

7.0

0.4

1.2

Copenhagen Centre

5.4

-0.6

2.4

Other Copenhagen Municipal

6.8

0.4

1.5

Northern Zealand

7.6

0.5

-2.0

Other Capital

8.2

1.0

1.3

Zealand Region

7.0

-0.8

-2.2

Eastern Zealand

6.0

-0.2

-0.5

Western and Southern Zealand

8.7

-1.8

-5.2

7.5

1.7

1.2

9.5

4.0

2.8

5.8

-0.6

-0.7

Table 6. Retail Capital Region

Southern Denmark Region Triangle Area Mid Jutland Region Aarhus

5.2

0.3

1.5

Other Mid Jutland

6.4

-1.9

-3.3

3.2

0.3

-1.5

3.5

0.0

-1.8

6.6

0.2

0.3

Northern Jutland Region Aalborg Total

Source: The Danish Property Federation Market Statistics.

Spatial vacancy

Table 7. Industry Capital Region

July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

11.2

-0.3

0.2

Copenhagen Centre

18.4

-1.3

-2.2

Other Copenhagen Municipal

15.3

0.9

-0.5

Northern Zealand

13.8

0.2

-1.4

9.4

-0.4

0.6

Zealand Region

15.8

0.8

3.6

Southern Denmark Region

13.9

0.9

-8.3

4.4

0.2

-1.1

4.0

0.0

0.7

10.2

-0.1

-0.4

Other Capital

Mid Jutland Region Aarhus Total

Source: The Danish Property Federation Market Statistics.

11

The Danish Property Federation Market Statistics – Vacancy, July 2018

Spatial vacancy

Table 8.

Residential

July 2018 (percent)

Quarterly change (percentage points)

Annual change (percentage points)

3,3

-0,1

0,3

Copenhagen Centre

3,8

-0,9

-0,7

Other Copenhagen Municipal

4,1

0,1

0,2

Northern Zealand

2,4

0,5

0,5

Other Capital

2,3

-0,3

0,6

Zealand Region

3,2

-0,2

0,3

Eastern Zealand

1,5

0,4

1,0

Western and Southern Zealand

3,8

-0,6

-0,2

Capital Region

Southern Denmark Region

2,0

-0,9

-0,3

Odense

1,5

-1,5

-0,5

Triangle Area

3,4

0,1

1,7

Other Southern Jutland

2,0

-0,4

0,6

4,4

0,0

1,0

Aarhus

5,0

-0,1

1,2

Other Mid Jutland

2,9

0,1

0,4

8,1

1,2

3,0

Mid Jutland Region

Northern Jutland Region Aalborg

8,0

1,3

3,2

Other Northern Jutland

9,0

-0,6

-1,1

3,7

0,0

0,2

Total

Source: The Danish Property Federation Market Statistics.

12