Aalborg__Locations_Online_MR19

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Location descriptions | Aalborg – Market Report 2019

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 approximately DKK 575 per sqm p.a. in 2012 to approximately DKK 750 per sqm p.a. in 2018. 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 5.50%. 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 6.50%

OFFICE

Change Market

Expectations

Typical rent levels

2016 1,000

2017 1,000

2018 1,000

2019 1,000

2018-19 2019

0% 0%

Prime

Aalborg

700

750

750

750

Secondary

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