Colliers Copenhagen Property Market Report 2019

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Copenhagen Property Market Report 2019

building has taken place in prime office locations, typically offering office space aligned with today’s tenant requirements in terms of quality, indoor climate, flexibility, etc.

Outlook for the Aarhus office market We foresee sustained strong growth momentum in the Aarhus office letting and invest- ment property markets. Prime locations, both Aarhus N and Aarhus C in particular, are expected to attract continued strong occupational demand. On completion of the ongoing redevelopment of the former harbour district, Sydhavnskvarteret (‘the south harbour district’) by the City of Aarhus, a new Central Business District will emerge in Aarhus, expected to attract substantial attention. Danske Bank was the first to relocate to the new district, and we expect an additional number of similar tenants to follow suit. On the opposite side of the road called Spanien, the area surrounding the square of Frederiks Plads has already proved to be a strong office location, attracting a great number of law firms and knowledge-intensive industries. We expect to see the completion of several large-scale multi-user office buildings able to meet the area requirements of large tenants. Irrespective of the shortage of high-quality office leases, the prime office rent is expected to hold stable. This ties in with the fact that major office tenants in Aarhus occupy regional rather than national head offices, making these tenants somewhat more cost-conscious. In other words, Aarhus tenants are typically not prepared to accept rent levels on a par with Copenhagen rents. In addi- tion, the large corporations that reside in Aarhus traditionally tend to favour owner-oc- cupancy, exemplified by e.g. Danske Bank, Salling and Bestseller, all of which own their head-office buildings. Prime office yields in Aarhus C are expected to remain around the 4.25% mark due to the low vacancy risk in this district and a strong market in general. Judging by today’s market conditions, we believe that this yield level represents a fair risk premium relative to the prime office yield required in the Copenhagen market. The combination of strong occupational demand and the prevailing shortage of new high-quality office leases makes for a healthy office property investment market. Well-located high-quality office leases continue to be associated with minimal vacancy risk, all the while employment growth is driving up demand for office space. We believe that the current surge in demand calls for new office construction on a large scale in the coming years.

Net initial yields, office, inner ring road locations

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

19 18 17 16 15 14 13 12 11 10 09

Prime

Secondary

Net initial yields, office, outer ring road locations

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

19 18 17 16 15 14 13 12 11 10 09

Prime

Secondary

 HENRIK BORCH, henrik.borch@colliers.com

Source: Colliers International