Colliers Copenhagen Property Market Report 2019

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Copenhagen Property Market Report 2019

IN FOCUS: Shopping centres

Shopping centres and Darwinism in the retail sector In 2018, several owners tested the market for a potential sale of their retail assets. However, this increased availability of retail investment opportunities coincided with investors substan- tially downscaling allocations to retail assets, fearing that tradi- tional shops may be at risk of extinction because of the boom in online sales. Mainly the Danish shopping centre market was characterised by a surge in assets offered for sale in 2018. Meanwhile, however, market liquidity as well as investor demand faltered in the retail segment in general. This served to put downward pressure on the prices of retail investment properties. Although this is worth bearing in mind, it is only fair to say that we have yet to see any significant change in the net initial yields for properties traded in the segment. Budding signs of an elimination race In particular, the general misconception that traditional retailing as such is at risk has changed dynamics in the entire retail prop- erty market. However, not all retailers are struggling. In the shop- ping centre segment, an elimination race is starting to take shape, with the best-performing shopping centres coming out on top, while poorly performing ones are reeling, resulting in diverging performance of individual shopping centres. In other words, this may be argued to be the beginning of a ‘survival of the fittest’ process, with top-performing shopping centres not only surviving but even increasing sales and gaining market share. Investors who monitor the market closely may be able to posi- tion themselves to snap up top retail properties at competitive prices. However, it is important to bear in mind that investments in the retail sector require an understanding of value drivers in this segment as well as the ability to develop and retain the concepts that will satisfy future shopping demands as well. More than anything, this calls for highly proactive asset management of

retail operations to safeguard sustained growth and future-proof customer appeal. The future retail winners are likely to have the right combination of structural layout, tenant mix, marketing efforts and a substantial offering of leisure activities to attract footfall and gain exposure. Additional determining factors are expected to include a long-term ‘hands on’ operational strategy and devotion to necessary CAPEX requirements to secure a modern and functional property.

Net initial yields for prime regional shopping centres hold stable, secondary yields edge upwards

2% 3% 4% 5% 6% 7% 8%

10 9

12 11

19 18 17 16 15 14 13

Prime

Secondary

Source: Colliers International