Aalborg Locations MR2020

2 0 2 0

OFFICE HOTEL RETAIL INDUSTRIAL RESIDENTIAL REGIONS

Aalborg

LOCATION DESCRIPTIONS

Published by Colliers. Reproduction or citation only with acknowledgement of source. This is an online addition to The Copenhagen Market Report 2020, based on market data that we believe are reliable. Please note that the rental prices quoted may reflect data inconsistencies compared to the respective pre-merger (July 2018) databases of Colliers and/or Sadolin & Albæk. Whilst every effort has been made to ensure that the information provided in the report is both accurate and complete, Colliers accepts no liability for factual errors.

Colliers Denmark | colliers.dk | +45 70 23 00 20

2

Location descriptions | Aalborg – Market Report 2020

In brief Aalborg property market

Introduction Aalborg is the largest city and the main growth centre in northern Jutland. Despite its somewhat peripheral location, the city has the entire North Denmark Region (Region Nordjylland) as its catchment area. However, while it only takes about one hour by car to reach Aarhus to the south, the city is fairly hard to reach from all other important growth centres in Denmark by car or train. Both the Triangle Region, Odense, and Copenhagen are more than a two-hour drive away. This emphasises the importance of the regional airport (Aalborg Lufthavn) situated just outside Aalborg. As of 1 October 2019, the City of Aalborg (i.e. the municipality) had approx 217,100 inhab- itants, making it the third largest municipality in the country. According to the population forecast by Statistics Denmark, the City of Aalborg (i.e. the municipality) will see 4.4% population growth by Q1 2029. In the past, Aalborg was a traditional industrial city, among other things known for its distilleries, cement and tobacco industries as well as shipbuilding. Most of these indus- tries have relocated or have closed down altogether. This is a result of a long-term strategy transforming Aalborg from an industrial city to a modern knowledge-based university city. Aalborg University has three campuses and awards bachelor’s, master’s and Ph.D. degrees. The university has over 20,000 students, approx 80% of which are at the Aalborg campus. In particular, this transformation process is evident around the harbour with the new modern Østre Havn, where new apartments, office buildings as well as renovated ware- houses have replaced heavy industry. Likewise, development of Eternitten, which used to be the home of a major fibre-cement plant, is almost completed with its extensive urban renewal scheme including residential, office and retail space. The remaining heavy industry has moved to the east of the city with commercial shipping being handled at Østhavnen. Generally speaking, regional GDP per capita in northern Jutland falls below the national average. This is due to the region’s slightly below-average level of education, again attrib- utable to Aalborg’s traditional status as an industrial city. Nevertheless, the city’s trans- formation and focus on education and the more office-intensive industries may well boost the economic performance of the region, with regional GDP per capita possibly catching up with the national average as a result.

Location descriptions | Aalborg – Market Report 2020

3

Office Along with the general transformation of the city, Aalborg’s commercial property market has changed significantly. The harbour district Vestre Havnepromenade was the original place for prime office locations, and still boasts prominent tenants such as Ernst & Young, C.W. Obel and TK Development. This area is also expanding with the ongoing renewal of Spritten, the previous industrial distilleries complex of De Danske Spritfabrikker. East of the bridge across the sound of Limfjord, Limfjordsbroen, another harbour district, Østre Havn, has been undergoing an urban renewal scheme. Today, it is home to one of Aalborg’s most sought-after multi-user office buildings, E-huset, with tenants including Hjulmand Kaptain, Niras and Deloitte, to name but a few. Over the past couple of years, the new urban development area Eternitten has managed to attract some high-profile tenants like BDO, COWI and Topdanmark. In addition, the new Aalborg office for Nykredit is nearing completion. This influx of new prime office space especially in the aftermath of the financial crisis, could have spelled disaster for the office market in Aalborg, but general economic growth and especially increased urban area growth have ensured constant rent levels in the range of DKK 950–1,000 per sq m p.a. for prime office space.

4

Location descriptions | Aalborg – Market Report 2020

The market for secondary offices has been through the opposite development than that of prime offices. Even though the segment has a very wide definition, and is consequently found all around the outskirts of the city, there seems to have been a concentration of tenants (NEAS, PwC, Spar Nord Bank and more) in the area around Skelagervej. These tenants prioritise proximity to the motorway, as well as a reduced rent level compared to a prime location. Accordingly, an argument can be made that the market for secondary offices has concentrated around Skelagervej (reducing the remaining office buildings all around Aalborg to a tertiary segment). At the same time, demand for more modern office facilities, and the increased focus on conversion to residential areas, has seen the total area of secondary office space decrease over the recent years. This has been the primary reason for the steady increase in the rent level for secondary offices from approx DKK 575 per sq m p.a. in 2012 to approx DKK 750 per sq m p.a. in 2019. The low-interest rate setting prevailing over the last couple of years has driven up demand for prime real estate from out-of-town pension funds. This has challenged the normal order in Aalborg, where a few local developers used to be alone around the table, but now face competition from the pension funds owning some of the prime office building stock. The combination of increased demand and low interest rates has caused the yield on prime office buildings to drop to around 5.25%. The increased demand for leasing secondary office buildings has also driven up demand for ownership of these buildings, both on the part of professionals and semi-professionals, but also from companies that still prefer to own their own premises. As a result, yields on secondary office buildings have dropped to around 6.50%.

OFFICE

Change Market

Expectations

Typical rent levels

2017 1,000

2018 1,000

2019 1,000

2020 1,000

2019-20 2020

0% 0%

Prime

Aalborg

750

750

750

750

Secondary

Note: Rent levels quoted in DKK per sq m p.a. exclusive of operating costs and taxes. Market expectations indicate trend forecast for the next 12 months. Source: Colliers

Location descriptions | Aalborg – Market Report 2020

5

Residential development areas

Aalborg currently has five major residential development areas:

Østre Havn Østre Havn is an old harbour district currently undergoing a transition turning it into a mixed-use commercial and residential district situated to the right of the city centre. The district provides a smooth transition from the cultural centre with Nordkraft, Musikkens Hus and the long-established residential areas of the city centre towards the commercial area of Gasværksvej. Demolition and reconstruction started in 2012, and the area is approx 85% completed now. Once fully developed, expectedly around 2023, the district will house 165,000 sq m floor space, with commercial use accounting for 20%, residential 70% and cultural facili- ties, retail and grocery stores for the residual 10%. This new neighbourhood has a mix of residents: There are many owner-occupied flats commanding some of the highest prices per sq m in all of Aalborg, but also youth housing for some of the students at Aalborg University. Godsbanearealet Godsbanearealet (the old freight terminal area) is situated right next to the main train and bus station in Aalborg and the Kennedy Shopping Centre. Godsbanearealet started its urban renewal scheme back in 2010 and is almost fully developed, and construction is expected to be completed within a couple of years. The residential mix is dominated by young students living in rented flats. The area also has some owner-occupied flats, but the primary residential building stock reflects the presence of educational institutions in the area with a large dormitory for both domestic and international students. In terms of commercial use, the main residents are three different educational institutions (SOSU Nord, VUC & HF Nordjylland and Aalborg City Gymnasium). When fully devel- oped the area will have approx 138,000 sq m of floor space (115,000 sq m excluding car parks), with commercial development accounting for 30%, residential development accounting for 60% and retail, convenience stores and cultural facilities accounting for the remaining 10%. Sofiendal Enge Sofiendal Enge is a new development area situated southwest of Aalborg in extension of the exclusive Hasseris neighbourhood and close to the secondary centre City Syd. The area is located near existing schools and is designated for detached residential and terraced housing.

6

Location descriptions | Aalborg – Market Report 2020

The local plan for the area, which stretches over approx 500,000 sq m, was approved in September 2017, paving the way for the construction of approx 1,200 houses. The almost completed first phase of the development is a mix of owner-occupied and rental housing, whereas the second phase is predominantly rental housing. The area is expected to be fully developed in approx five years, and ongoing talks in the public administration are discussing the need for a third crossing of Limfjorden, which is expected to be located just west of this new district. If this third crossing is carried out, the surrounding areas are expected to be further developed. Eternitten Eternitten is situated at the eastern perimeter of Aalborg and is located between the city and Aalborg University. The location near both the city and the university makes the area ideal for both students and companies that prefer a location just outside the city bounda- ries with easy access to the motorway grid. Eternitten used to be the home of one of the biggest workplaces in Aalborg, Dansk Eternit, which produced fibre-cement products for construction. The site was heavily contaminated with asbestos from the production and underwent a thorough cleaning process before construction could begin. The urban renewal scheme started in 2009- 2010 with the approval of the first two zoning plans, and recently the demolition of the old warehouses started. The district is already a thriving new area in Aalborg, with several supermarkets, shops and homes. Apart from some warehouses in the south-west end of the district and the construction sites around them, the district is close to being fully developed and stands as a vibrant district with an appealing mix of new and old buildings. When fully developed in approx seven years, the area will have approx 210,000 sq m of floor space divided between approx 25% commercial use, 65% residential use and 10% retail, convenience and cultural facilities. Again, the City of Aalborg has followed through on its goal towards expanding its reputation as a centre for education with the construction of more than 300 subsidised youth homes. Stigsborg Brygge Stigsborg Brygge is located on the north side of Limfjorden in the eastern part of Nørresundby, stretching between the motorway tunnel Limfjordstunellen, connecting Northern Jutland to the rest of Jutland, and Limfjordsbroen, the fixed link connecting the city centres of Aalborg and Nørresundby. The area stretches over more than 540,000 sq m and is going to be developed over the next 25 to 30 years. This new district will be home to more than 7,500 inhabitants and will also include schools, retirement homes, day care institutions and other public institutions to support the inhabitants. The district will also feature supermarkets, retail shops and office build- ings. The whole area will consist of 400,000 sq m of floor space when fully developed. The City of Aalborg approved the development plan in March 2017, and the first proper- ties are almost finished.

Location descriptions | Aalborg – Market Report 2020

7

8

Location descriptions | Aalborg – Market Report 2020

Retail

The retail market in Aalborg is split in two sub-markets: the large retail district City Syd with Aalborg Storcenter just south of Aalborg on one side, and the city centre on the other. Even though the retail market is increasingly challenged by online shopping, both the city centre and City Syd have seen decent results. City Syd is the largest in terms of revenue, and according to a 2018 study by ICP (Institute for Center Planning), the district accounts for more than one third of the total retail revenue generated in the North Denmark Region. The district is home to Aalborg Storcenter, boasting the second largest BILKA hypermarket in Denmark, the smaller shopping centre Shoppen, IKEA, Bauhaus, Biltema, Plantorama and more. The location just south of Aalborg makes it accessible by car, and the entire district has approx 4,500 free parking spaces. In its study, ICP recom- mended allowing an expansion of City Syd by deregulating some of the local development plans. The City of Aalborg is currently working on following that recommendation. In Aalborg Storcenter, the rent level is between DKK 3,500 – 4,500 per sq m p.a., excluding operating costs and taxes, depending on location, and outside the rent level is DKK 750 – 1,200 per sq m p.a. for big box stores, also depending on location. The city centre has a thriving retail scene distributed on two primary pedestrian streets, where typical big international and Danish retail chains have their flagship stores. In 2018, the shopping centre Friis opened after an extensive makeover, welcoming back Magasin to Aalborg. This might mean a new beginning for the shopping centre after battling with a challenging rental situation for some years. However, fringe locations on the outskirts of the high-street area have suffered under the increasingly beleaguered retail market, and the secondary pedestrian streets are struggling. The opening of Magasin and Lagkagehuset in Nørregade and development of Budolfi Plads may revitalise both Nørregade and Gravensgade with reduced vacancy to follow. Prime retail rent is approx DKK 4,600 per sq m p.a., while secondary retail rent is approx DKK 2,000 per sq m p.a.

RETAIL

Change

Market Expectations

Typical rent levels

2017 4,600 2,000

2018 4,600 2,000

2019 4,600 2,000

2020 4,600 2,000

2019-20 2020

0% 0%

Prime

Aalborg

Secondary

Note: Rent levels quoted in DKK per sq m p.a. exclusive of operating costs and taxes. Market expectations indicate trend forecast for the next 12 months. Source: Colliers

Location descriptions | Aalborg – Market Report 2020

9

Industrial & logistics

As stated above, Aalborg used to be a traditional industrial city. The change the city has undergone, and still is undergoing, is particularly visible in the industrial and logistics property market. Aalborg used to have a considerable amount of heavy and light industry throughout the city. Now most of the heavy industry has moved outside the city bounda- ries or has closed down altogether. Other major Danish cities have seen a similar shift with heavy industry being replaced by firms with logistics operations. This is not the case in Aalborg, where logistics firms prefer a location outside Aarhus or in The Triangle Region, and only place minor hubs in the Aalborg area. Østhavnen, the commercial harbour where the Port of Aalborg operates from, still sees substantial container traffic, and several logistics companies have placed minor logistics facilities here. Despite the lack of a major logistics hub, and the steady decline of industrial firms, demand remains strong across the region for small, flexible industrial and logistics areas. The entire North Denmark Region has the lowest industrial and logistics vacancy rates among all regions in Denmark with just 1.3% vacancy in this category. Prime industrial and logistics properties in Aalborg are situated in a wide belt from the south of Aalborg towards the east by Østhavnen. Some companies prefer a location north of the sound of Limfjorden, in order to serve North Jutland without having to pass through the motorway bottleneck Limfjordstunnelen. Although this broad diversity in the property location counteracts a massive rise in rent levels, the prime industrial and logis- tics rent level has now risen to approx DKK 375-400 per sq m p.a.

INDUSTRIAL/LOGISTICS*

Change

Market Expectations

Typical rent levels

2017

2018

2019

2020

2019-20 2020

350 250

375 275

400 275

400 275

0% 0%

Prime

Aalborg

Secondary

1 Industrial includes production, storage and logistics facilities. Note: Rent levels quoted in DKK per sq m p.a. exclusive of operating costs and taxes. Market expectations indicate trend forecast for the next 12 months. Source: Colliers