MR 2018

22

Copenhagen Property Market Report 2018

Plummeting vacancy rates

they are more vacancy prone. As a result, the Copenhagen office market is becoming particularly polarised in terms of vacancy rates and re-letting periods.

In the short term, the current pipeline of new office space is not expected to match the unregistered demand of businesses. This could potentially drive Copenhagen top rents over DKK 2,000 per sqm, excluding taxes and operating costs, in the course of 2018 or 2019. Longer term, however, the availability of extensive development opportunities, especially in some of the relatively new districts of Copenhagen, including Nordhavn, Ørestad, Ny Ellebjerg and Scanport, may serve to curb major rent hikes as office development activity gains momentum. Paradigm shift in occupational demand In recent years, we have seen a gradual shift towards more flexible workstyles, breaking away from the traditional “one employee, one desk” philosophy. This shift seems to be gaining momentum for various reasons. Firstly, businesses expect an increasing number of their future employees to be contractors or temporary workers, signifying a marked shift from previous, more static hiring regimes. Secondly, technological advances have accelerated, making it increasingly easy to work away from the office, for instance when on the go, from home or in small project-related office facilities. As a result, the required workplace area has become gradually smaller as workflows are becoming increasingly team-based and flexible. Recently, we have for example seen MSD relocate from Ballerup to move closer to Copenhagen, in the process reducing its area requirement by approximately 40% by introducing flexible workspaces. Similarly, Microsoft introduced more flexible space- utilisation when designing its new head-office premises in Lyngby, thereby reducing its overall area requirement by around 25%. Talent race and demanding employees Also, a more demanding workforce and fierce competition for talent have made businesses renew their ways of thinking and operating to accommodate the needs of their employees. As the line between work and play has become more blurred, businesses have started to adapt to a new reality. The new generation of graduates and workers is more entrepreneurial, more focused on career advancement, less loyal towards their employers and has a higher preference for working in an urban inner- city setting. Apart from valuing sociability and flexibility, this generation has a strong preference for easy access to public transport; parameters which businesses are now to a greater extent than before factoring in when they search for new premises. For instance, Danish consultancy firm Valcon recently relocated its head office from Hørsholm to Copenhagen, citing the long travel time associated with its former location as a substantial drawback to recruiting new talent and staff.

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

08 09 10 11 12 13 14 15 16 17 Copenhagen proper Greater Copenhagen, excl. Copenhagen proper

Source: Ejendomstorvet.dk

Modern, large lease units associated with very low vacancy risk

45% Units < 2,000 sqm 55% Units > 2,000 sqm 12% Units > 2,000 sqm Built after 2005

Indoor climate and flexibility As the office letting market has grown more dynamic, tenant parameters when choosing new lease premises have developed substantially too. In the past,

Note: Current supply of available lease units.

Sources: Ejendomstorvet.dk and Sadolin & Albæk