Newsletter_Q2_2018_UK

Market update Q2 2018

OFFICE MARKET IN TOP FORM

By Peter Winther, Partner and CEO, Sadolin & Albæk

Danish economic growth momentum is strong, with employment levels reaching new highs. All other things being equal, employment growth is correlated with an increase in office occupational demand, and as many businesses happen to have expansion plans, they typically demand more space today than their current requirements warrant.

Naturally, this market trend is triggering an increase in the construction of built-to-suit offices. But it also serves to increase investors’ risk tolerance, trans- lating into speculative office building starts, i.e. without pre-let agreements in place. It is worth bearing in mind that a great many newly completed or vacated office premises will come into play, but presumably not until end-2020 at the

Moreover, office sector newbuilding activity was rela- tively sluggish in the aftermath of the financial crisis.

Continued downtrend in Copenhagen o ce vacancy rate

As a result, businesses find it increasingly difficult to find suitable office premises; in particular the supply of up-to-date office premises at central and attrac- tive locations is greatly outstripped by demand. In addition, today’s absolute prime office rent in the Copenhagen CBD and central harbour districts has topped DKK 2,000 per sqm exclusive of taxes and other operating costs, marking an all-time high. In view of current demand, Copenhagen CBD rents may well increase by an additional 10% over the next 18 months.

12%

10%

8%

6%

4%

2%

0%

08 09 10 11

12 13 14 15 16 17 18

Note: O ce vacancy rate in Copenhagen proper Source: Ejendomstorvet.dk

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Published by Sadolin & Albæk. Reproduction or citation only with acknowledgement of source. ISSN 2246-6959 +45 70 11 66 55, sa@sadolin-albaek.dk