Newsletter_Q2_2018_UK

Newsletter Q2 2018

IS SPECULATIVE BUILDING RETURNING TO THE COPENHAGEN MARKET?

Investors’ pursuit of attractive risk-adjusted returns along with strong tenant demand and a limited supply of up-to-date office premises in Copenhagen are making many investors and developers consider speculative office construction, i.e. office starts without having secured any pre-lets.

By Emil Helmsøe-Zinck, Senior Consultant, Sadolin & Albæk, Research & Valuation

Crisis loosening its grip Irrespective of recent years’ massive momentum in the occupational and investment markets, we have seen only a very limited number of speculative office starts since the onset of the financial crisis in 2007-2008. Over the past ten years, relatively few speculative schemes have come to market, with an added office supply far below the level that market trends would arguably have been able to support.

The investor community’s reticence is a natural corollary of dearly bought experience from the years before, during and after the financial crisis. Back then, a cocktail of all-time low vacancy rates and climbing rent levels was one of the factors trigge- ring that up to 40% of new office starts were built on speculation. As a result, the ensuing years of lower employment figures and higher vacancy rates hit speculative building schemes exceptionally hard

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