MR 2018

55

Copenhagen Property Market Report 2018

Typical retail rent levels

Higher returns than in other European cities Yield compression in the Copenhagen high-street market has caused the majority of domestic investors to exit this segment and zoom in on other locations or segments. International investors, however, remain active as Copenhagen high-street assets still produce attractive returns relative to other European cities, including Berlin, Paris and London. Nevertheless, the yield gap has become much narrower in recent years, today standing at a mere 25-75 bps. The Copenhagen high-street property market remains highly liquid, which continues to attract new investors. In 2017, Richemont Group was one of these newcomers, acquiring a prominent building at Amagertorv 19 in the second half of the year. In addition, we still see Copenhagen high-street properties being redeveloped to be resold to core investors. Broadly speaking, prime high-street properties continue to attract more investor demand than secondary properties. However, in view of the sharp yield compression and the diminishing yield spread vis-à-vis other high-street markets, the high-street segment may arguably be nearing a saturation point. This is supported by the fact that the fast rate at which prime high-street rents at Strøget have increased in recent years is now gradually slowing. Nevertheless, in our opinion the high-street investment property market still has investment potential. Bearing in mind investors’ substantial placement requirements along with attractive financing options, high-street properties still represent solid investment opportunities. However, in the next couple of years we expect to see yields holding stable, ending the yield compression of 2012-2017. Broadly speaking, the retail property investment market outside Copenhagen is considerably less liquid and characterised by sluggish transaction activity and high yield requirements, reflecting a higher NOI risk. However, in 2017, activity was brisk in the shopping centre segment driven by this segment’s attractive risk-adjusted returns relative to other retail assets in and around Copenhagen. In addition, shopping centres generally offer great value increase potential provided their owners know how to secure the right line up of retail, leisure and F&B to suit changing shopping patterns. We believe that this segment will attract mounting investor demand in the years ahead.

Market expectations

2018

2018

Area up to 100 sqm

16,000 - 24,000

Copenhagen high street (upper end)

Area 100-300 sqm

14,000 - 24,000

Area 300+ sqm 11,500 - 18,000

Area up to 100 sqm

7,500 - 14,000

Copenhagen high street (lower end)

Area 100-300 sqm

6,800 - 13,000

Area 300+ sqm 5,000 - 10,000

Copenhagen Latin Quarter/ Ny Østergade/ Grønnegade Copenhagen other central city districts

Area up to 300 sqm

3,400 - 9,000

Area 300+ sqm 2,800 - 6,500

Area up to 300 sqm

1,300 - 4,200

Area 300+ sqm 1,200 - 3,200

Area up to 100 sqm

1,300 - 6,000

Greater Copenhagen high street

Area 100-300 sqm

1,200 - 5,500

Area 300+ sqm 950 - 3,300

Anchor food

950 - 1,800

Anchor non-food Area up to 100 sqm

900 - 2,100

Regional shopping centres

1,800 - 8,000

Area 100-300 sqm

1,400 - 5,600

Area 300+ sqm 1,000 - 4,600

Anchor food

900 - 1,800

Area up to 100 sqm

950 - 4,400

Local shopping centres

Area 100-300 sqm

950 - 3,500

Area 300+ sqm 700 - 2,900

Big box properties

Area 300+ sqm 750 - 1,800

Note: DKK per sqm p.a. excluding operating costs and taxes. Source: Sadolin & Albæk