MR 2018

57

Copenhagen Property Market Report 2018

to some 20%. IKEA has announced plans to open a new home furnishings outlet next to Fisketorvet Copenhagen Mall in 2020, similarly adding a new component to the local area and providing a more varied retail offering. In addition to traditional F&B and leisure activities, regional shopping centres in general see an increase in lettings to professionals or other tenants offering services and activities catering to the local community, including clinics, dentists, chemists, florists, etc., which generate regular footfall. Digitalisation is a buzzword in the global retail sector and is predicted to become an important diversifying factor in the coming years. According to polls, technological advances improve customer satisfaction, and social media platforms facilitate smoother communications, engaging customers through compelling content online, which combine with loyalty programmes to create a bond. Shopping centres are therefore forced to embrace digitalisation and their new role as customer-oriented providers of a holistic shopping experience. Interest from international investors Broadly speaking, the Danish market for prime (regional) shopping centres has traditionally been dominated by domestic institutionals pursuing long-term investment strategies. As a result, such assets have been offered only rarely in the market. However, the stronger international investor demand for Danish retail assets has spilled over to the shopping centre market,

with some 20% of Danish shopping centres today being owned by international investors. Attracted by the favourable risk- adjusted returns offered in Denmark, international investors are expected to retain an appetite for the Danish market. Investments in the largest shopping centres in particular typically require financially strong investors that are prepared to invest in upgrade schemes. International investors with specialist know-how fit this profile. Net initial yield requirements in the prime shopping centre segment are estimated at some 4.25%. Secondary and local shopping centres are attracting less demand, becoming increasingly illiquid assets. Investor activity in this segment is typically driven by value-add investors, reflected in net initial yields as high as 6.00-7.00%. The largest property transaction in 2017 took place in November: At a total price of DKK 6.9bn, ATP acquired a 50% share of 16 shopping centres, entering into co-ownership with Danica. The transaction underpins the demand for well-run shopping centres as well as the need for continuous upgrade schemes in this sector, which was one of the reasons for co-ownership cited by Danica. International investment manager BlackRock invested in Næstved Storcenter, Denmark’s 9th largest shopping centre, in November 2017. The investment was considered a value-add investment, and BlackRock used the opportunity to announce its plans to expand operations in the Nordics.

Continued interest in regional shopping centres retains the prime yield at 4.25%

Widening yield spread between prime and secondary local shopping centres

10.0%

10.0%

9.0%

9.0%

8.0%

8.0%

7.0%

7.0%

6.0%

6.0%

5.0%

5.0%

4.0%

4.0%

3.0%

3.0%

08 09 10 11

12 13 14 15 16 17 18

08 09 10 11

12 13 14 15 16 17 18

Prime

Secondary

Prime

Secondary

Note: Local shopping centres typically cater to the local community and have grocery anchors. Net initial yields, local shopping centres, Copenhagen.

Note: Regional shopping centres typically offer a wide range of retail brands and attract customers from a wider catchment area. Net initial yields, regional shopping centres, Copenhagen.

Source: Sadolin & Albæk

Source: Sadolin & Albæk