Colliers Copenhagen Property Market Report 2019

73

Copenhagen Property Market Report 2019

LOCATIONS AARHUS Read more

Strong demand for up-to-date office space

Activity has picked up in the Aarhus office investment property market in recent years, driven by the increased presence of international and institutional investors. In addition, some developers have, with great success, opted for speculative office construction. The mounting investor appetite for the Aarhus office market is driven by several factors but most of all a strong occupational market where prime office property offers excep- tionally low vacancy risk. Strong market fundamentals support increase in demand Recent years’ favourable economic trends have served to put expansion plans on corpo- rate agendas, translating into an increase in the demand for office space. As Denmark’s premier growth engine, Greater Copenhagen is typically the first place to register the effect of stronger activity, just ahead of Aarhus, and before the rest of the country. According to Statistics Denmark, employment levels are up by more than 9% in the Central Denmark Region since 2013, driven mainly by growth in Aarhus as the largest city in the region – and the second largest city in Denmark. The FTE unemployment rate in Aarhus is slightly below the Copenhagen equivalent but still exceeds the national average by some 0.5 percentage point. We believe that unemployment in the ranks of new grad- uates to some extent drives up overall unemployment rates in university cities such as Copenhagen and Aarhus. Favourable developments in Aarhus are largely supported by a strong offering of educational institutions, fronted by Aarhus University, for years attracting a great many new students and, by extension, providing the Aarhus business community with a strong recruitment base. Office letting has been brisk in the Aarhus market in recent years, with tenants demon- strating a distinct preference for cost-effective premises in terms of high-quality shared office space, e.g. in so-called office hotels, offering flexibility in terms of potential up- or downscaling of lease premises. In addition, tenants are generally in pursuit of relatively new office space, citing indoor climate as a relatively important localisation parameter. Substantial shortage of high-quality office leases Although letting activity has gained momentum, we continue to see sustained strong demand for Aarhus office premises. This is supported by our knowledge of some 20 businesses being in the market for approximately 75,000 sqm office space in total. To this should be added the latent demand of businesses not actually in the market but who have asked to be kept informed of new office vacancies as they would consider relo- cating, provided the right premises become available in the right location. According

Overall, the Aarhus office market comprises two prime and two secondary office districts

Distinct shortage of contemporary office premises in prime locations

High minimum rent adjustments more widespread in secondary office locations

Occupational demand is not centred on prime office locations exclusively