Colliers Copenhagen Property Market Report 2019

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Copenhagen Property Market Report 2019

Commercial property prices approaching pre-crisis peak

Sustained uptrend in Greater Copenhagen commercial property prices documented by six consecutive years of capital gains 8.9% Total average return on commercial property in 2018 15 bps Commercial property sector income return requirement compression in 2018

Greater Copenhagen commercial property prices continued to climb in 2018. According to the Colliers International property price index, Greater Copenhagen commercial prop- erties yielded a total average return of 8.9% in 2018, comprised of yield compression of income return to approximately 4.6% and capital growth of 4.3%. Having climbed for six years running, Greater Copenhagen commercial property prices have, in nominal terms, moved well beyond the peak level recorded in 2007. Factoring in inflation, however, Copenhagen commercial property prices have yet to catch up with 2007 prices, although the gap has narrowed to approximately 1.3%. Copenhagen property assets continue to offer attractive and competitive returns compared to other property markets and asset classes, but prices have soared across the board. As a result, some segments have seen a growing mismatch in buy-side and sell-side price expectations. In combination with a shortage of prime investment opportunities, this has served to curb transaction volume in the Danish property investment market: In 2018, total transaction volume landed at DKK 71bn, down from a record-breaking high of DKK 88bn in 2017. Overall, the 4.3% capital growth seen in 2018 was driven by yield compression and an inflationary uptrend. Income return requirements compressed by approximately 15 bps in 2018, corresponding to some 3.1% capital growth and exceeding our previous projections for the year by some 10 bps, driven mainly by developments in the office segment.

In real terms, Copenhagen commercial property prices remain below 2007-level

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Note: Colliers International property price index (index 100 = Q3 1984). Source: Colliers International

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