MR 2018

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Copenhagen Property Market Report 2018

As good as it gets?

This 2018 market report by Sadolin & Albæk offers an overview of key economic trends and of the Copenhagen commercial property market, including occupational and investment market information as well as details on transactions across sectors and submarkets. The market report has been compiled to guide you in decisions involving commercial and investment property in Greater Copenhagen. This year, we have included a feature on Aarhus, where demand for housing in particular is at an all-time high. This opportunity is being tapped into by both domestic and international investors. For more than half a century, Sadolin & Albæk has been a leading commercial and investment property adviser in Denmark. Including our affiliated companies, property asset management company Keystone Investment Management as well as property and facility management company Taurus, we count some 100 professionals. We are dedicated to maintaining our position as a second-to-none commercial property adviser, with one goal: To add value to the business and success of our clients.

The Greater Copenhagen commercial and investment property market is thriving against the backdrop of sustained economic growth in Denmark. Growing exports combine with a surge in private investments and consumer spending to create new jobs; real estate vacancy rates are decreasing in all segments, and rents are uptrending. On top of this, interest rates remain exceptionally low, with short-term rates in negative territory and 10-year government bond yields of a mere 0.5%. Supported by its highly efficient mortgage financing system, Denmark offers inexpensive property financing. Irrespective of downtrending net initial yields, the positive gap between property yields and financing rates remains wide. In 2017, property transaction volumes broke all previous records, up by 30% relative to the previous peaks of 2006 and 2016, to more than DKK 88bn. International investors accounted for 54% of the transactions, marking another new record. Still, fairly- priced Copenhagen property assets offer strong and competitive returns relative to other property markets and asset classes. However, competition for prime and secondary assets alike has driven down yields, and as interest rates will not stay low for time and eternity, risks are rising.

Copenhagen, February 2018 Peter Winther, Partner and CEO