Colliers Aarhus Delrapport 2023 UK

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Colliers Market Report

Local market report 2023

Aarhus Local market report for Colliers Market Report 2023

Accelerating success. Aarhus

Local market report Aarhus

Contents Intro Office Residential Retail Industrial and logistics Transactions

We have compiled various further information on Danish key property markets to supplement Colliers Market Report Denmark 2023, which offers a detailed review of key trends in the Danish property market.

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This local market report describes the commercial property market in Aarhus.

14 22 26 30

If you would like to learn more about the markets for office, retail, industrial and logistics as well as residential property in Copenhagen, Odense, Aalborg or the Triangle Region, please visit Colliers’ homepage to view the local market reports:

colliers.com/en-dk/mr23

All reports provide you with local market insight, including historical rent developments along with key transaction data. In addition, we give a brief introduction to key development areas in the residential segment.

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

Colliers Market Report 2023 as well as all local market reports are based on market data that Colliers believes to be reliable. Whilst every effort has been made to ensure that the information provided in the reports is both accurate and complete, Colliers accepts no liability for factual errors. Published by Colliers. Reproduction or citation of Colliers Market Report 2023 as well as the subject local market report only with full acknowledgement of source. Please note that photos may be copyrighted.

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Aarhus

Contacts

Contact

Any questions about data and contents?

Jacob Baum Associate jacob.baum@colliers.com +45 23 95 69 90

Rasmus Graverholt Manager & Head of Valuation & Advisory, Aarhus rasmus.graverholt@colliers.com +45 29 72 39 62

Or do you require local market assistance, investment or leasing?

Contacts

Residential Mehrdad Mangaard Sarraf Senior Director mehrdad.mangaardsarraf@colliers.com 30 60 89 19 Office Michael O. Andreasen Senior Commercial Real Estate Advisor michael.andreasen@colliers.com +45 20 45 30 24

Aarhus Local market report for Colliers Market Report 2023

Retail Trine Freno Muurholm

Certified Commercial Real Estate Advisor trine.frenomuurholm@colliers.com +45 40 60 95 15

Industrial and logistics Lennert Falkenberg Senior Commercial Real Estate Advisor lennert.falkenberg@colliers.com +45 20 45 32 96

Colliers Aarhus Søren Frichs Vej 38A DK-8230 Åbyhøj

Intro

Aarhus, the second largest city in Denmark, enjoys a central location vis-á-vis the urban centres of Jutland, only about one hour’s drive from Aalborg in the north, Herning in the west and the Triangle Region in the south. Jutland’s metropolis is thriving

The City of Aarhus (i.e. the municipality) has 362,000 in habitants, of which 15% are students, the highest student/ population ratio in Denmark. Furthermore, the city is lo cated in the heart of the Central Denmark Region (Region Midtjylland) with more than 1.3 million inhabitants. In the past decade, Aarhus has seen a population boom of 13% compared to the national average of approximately 5.85%. One of the drivers of this remarkable growth rate is a 31% increase in the ranks of students migrating to the city (20-29 year-olds), and a 13% increase in inhabitants aged 30 34, that is, young professionals. Mainly in the summer sea son, Aarhus sees a stronger influx of students, which is re flected in net migration patterns. Up until 2032, the number of inhabitants in Aarhus con tinues to grow, reflected in a growth forecast of 8% rela

tive to 3.5% on a national level. Unlike the historical growth rates, young families are expected to drive future popula tion growth, with a predicted 20% increase in the ranks of 0-4 year-olds and a 16% increase in 30-39 year-olds. Like the rest of Denmark, however, senior age groups continue to account for high percentage growth. Demographic changes will therefore be a key determinant of future Aarhus hous ing demand, provided forecasts prove correct. Despite the attractive offering of jobs in the City of Aarhus, it is not a given that 30-39 year-olds choose to remain residents here as residential supply and prices here and in neighbouring municipalities greatly dictate the extent to which the City of Aarhus can retain this age group. In other words, there are several factors that potentially affect future demographics in the municipality, and they may change from year to year.

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Demographics, 2020-2022

Migration patterns 1

Inflow of inhabitants Outflow of inhabitants

361,544 55% 9% 34% Birth-rate surplus Inhabitants, 2022

50%

-29%

17%

-23%

20-24 age-olds

25-29 age-olds

Net migration (domestic)

Net immigration (from abroad)

25-29 age-olds

20-24 age-olds

Population growth, 2012-2022 1 What age groups have driven population growth?

What age groups have mainly accounted for negative growth?

40-44 year-olds

45-49 year-olds

20-24 year-olds

25-29 year-olds

Aarhus Local market report for Colliers Market Report 2023

31%

13,271

16%

6,781

-3%

-1,166

-2%

-728

Population forecast, 2022-2032 1

What age groups will drive future population growth?

What age groups will mainly account for negative growth?

45-49 year-olds

50-54 year-olds

35-39 year-olds

0-4 year-olds

20%

5,575

17%

4,928

-5%

-1,338

-4%

-1,245

216,921

3.20% 23% 262,497

Number of employed

Unemployment rate

hold a bacherlor’s degree as a minimum

Average disposable annual income

Note : Data for City of Aarhus. 1 Based on aggregate population growth in the period. Source : Statistics Denmark, Colliers.

OFFICE

Still strong but changeable letting market

Early 2022 saw favourable conditions in the Aarhus office market as Danish economy regained momentum and employment levels rose. Conditions deteriorated dramatically as the year wore on: Inflation hit new highs and interest rates saw a sharp increase. However, the Aarhus office market proved resilient in terms of sustained strong occu- pational demand throughout 2022 irrespective of the change in market conditions.

Nevertheless, the coronavirus pandemic has prompted a dramatic change in the preferences of Aarhus office users. More than anything, business tenants clearly appear to push for flexible lease terms with shorter commitment periods as well as flexible office layouts making it possible for the ten ants to adapt to a changeable market. This trend has only amplified due to the war in Ukraine along with the rise in inflation and interest rates. Similarly, Aarhus office users are increasingly demanding “full-service” and high-quality lease premises, translating into stricter requirements for office newbuilds. In addition, businesses have been required to adjust to a more versatile working environment, as workers increasing- ly opt for homeworking or tend to share workstations. Par adoxically, this trend has not served to reduce corporate area requirements in general. Instead, the freed-up space has been used to enhance office arrangements, in part to encourage office attendance. Broadly speaking, focus is on creating attractive office premises that inspire existing as well as future workers. Despite a paradigm shift in demand, overall office occu pational demand remains strong in Aarhus, albeit with a sharper focus on office tenant requirements. For instance, office vacancy rates remain at a 10-year low, defying un- certain market conditions. There are virtually no vacancies among the best located office leases that meet new tenant requirements and are owned by landlords prepared to ac-

commodate the tenants by offering shorter lease commit ment periods and possibly partly fund tenants’ fitting-up costs. Due to the current high inflation, index-linked rent adjust ment may drive up the market rent of both prime and sec ondary office space in Aarhus. For the time being, mainly the owners of the best located and most coveted office premises, whose tenants generally tend to be less price sensitive, expect to carry out full rent indexation without the risk of tenants moving out and vacancy rates rising. The same applies to office leases that are today severely under-rented. However, we have anecdotal evidence sug gesting a general trend of maximum rent adjustments in prime and secondary properties alike and across all locations. Even though newbuilding activity is brisk in Aarhus, the new office supply is expected to be absorbed by demand. This is to be held up against the fact that only more or less new or modernised office facilities meet today’s generally higher office standards. The older and more secondary building stock, which is functionally obsolete, is expected to bear the brunt of this trend, with vacancy rates likely rising as new offices are completed. However, the scenario hinges on multiple factors, including the future gap be- tween prime and secondary rent levels as it is to be expect- ed that more price-sensitive tenants will be increasingly prone to shift to secondary offices.

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Strong demand continues to drive low vacancy rates

12%

10%

8%

6%

4%

2%

0%

12

13

14

15

16

17

18

19

20

21

22

Note : Vacancy rate, office, Aarhus. Source : Colliers, Ejendomstorvet.dk.

Aarhus Local market report for Colliers Market Report 2023

“Blixens”, office building, Brabrand

Lisbjerg

Egå

Skejby

Tilst

Risskov

Aarhus V

Aarhus Ø

Åbyhøj

Aarhus C

Brabrand

Viby J

Hasselager

Højbjerg

Holme

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New office buildings will reshape the cityscape

The Aarhus office market is highly area specific as each sublocation has unique strengths and weaknesses. In other words, the office market is very heterogenous, and several urban areas are undergoing major development schemes Aarhus C (central Aarhus) Aarhus C, central Aarhus, continues to be a prime office lo cation and, together with Aarhus Ø, the office leases in this area generally have the highest rent levels in Aarhus. The area typically attracts the liberal professions, financial busi nesses, and knowledge-intensive professions that value city centre proximity and prefer a prominent and visible loca- tion in the cityscape. Opposite DOKK1, the almost 9,000 sq m office building of Europa Plads (taking its name from the square on which it sits), remains under construction. Upon completion in 2023, Europa Plads will be yet another iconic office building in the heart of Aarhus with anchor tenants such as Nykredit and Poul Schmith/Kammeradvokaten. At the square of Europa Plads, another mixed-use residential/commercial high-rise building is on the drawing board at Remien Ejendomme. Provided the City of Aarhus approves the construction of this 20-storey building, it will provide a link between the DOKK1 area and Sydhavnen (the south harbour). After nearly 10 years, new life has been breathed into the development plans for e.g. the old bus terminal site and adjoining areas owned by Danish railway operator DSB, viz. DSB Ejendomme. Dubbed Perlekæden (the pearl necklace) and designed by Cobe, Rambøll and others, the scheme offers shops, offices, spaces for public-oriented uses and housing. The masterplan is pending city council approval.

Historically, a large portion of office premises in Aarhus C have been neither contemporary nor space efficient. How- ever, recent years’ new office projects have remedied this. This is especially the case in the area around Frederiks Plads, which has been transformed by Bricks and Domis. Frederiks Plads is located between the neighbourhood of Frederiksbjerg, the city centre and Sydhavnskvarteret and has been under development since 2017. Except for one remaining building plot, the area is fully completed. Upon full completion it will comprise approximately 48,500 sq m floorspace in total, including 35,000 sq m commercial space and 13,500 sq m residential space. The commercial area will be laid out mainly for office use but also for retail, café and restaurant uses. Prismet, built by domestic pension fund PFA, is an iconic and controversial high-rise office building located next to the open-air museum of Den Gamle By (the old city). At Prismet’s 20th anniversary, PFA in collaboration with Kilden & Hindby announced renovation plans to the tune of billions of Danish kroner. The entire facade is to have a lighter red facing, and six storeys are to be built on top of the existing building. PFA will construct a total of 25,000 sq m commer cial and an additional 20,000 sq m residential space, adjoin ing Prismet. If the current time schedule holds true, the project will be completed in 2026. The area around Sydhavnen, Sydhavnskvarteret, is being developed by A. Enggaard into a new commercial area with office spaces and two hotels. In addition, the area is to become a vibrant neighbourhood focusing on art and cram- med with activities for Aarhus citizens. The development plan also includes a high line that is to connect Sydhavns- kvarteret and Frederiks Plads. At Sydhavnskvarteret, one will find Danske Bank’s headquarters in Aarhus. Nearby, Olav de Linde is currently building Denmark’s tallest office tower, called Mindet 6. With its 39 storeys, the tower will have a building height of 144 metres. In addition, the con-

Aarhus Local market report for Colliers Market Report 2023

struction of a new unique office building, TRÆ (wood) is in its early stages. Developed by PFA in a joint venture with Kilden & Hindby, TRÆ will be a predominantly wooden structure. Scheduled for completion in late 2024, the building will feature a building height of 78 metres, corresponding to 20 storeys. Aarhus Ø The vision for Aarhus Ø, a former industrial port, is to create a vibrant centre for urban living all year round. When fully developed, the district is expected to accommodate 12,000 inhabitants and 10,000 workplaces. As the district commands spectacular views and features an exclusive and prestigious building design, it generally attracts substantial demand. Rent levels at Aarhus Ø therefore exceed average rent levels across Aarhus. In recent years, Aarhus Ø has seen brisk newbuilding activity. The area between the marina and Bassin 7 has seen the com pletion of e.g. Nicolinehus, an iconic mixed-use residential and commercial building complex. Generally speaking, Aarhus Ø has a prominent skyline, but where Aarhus Ø meets Aarhus city centre, a different building design is called for, designed to hinge the two districts. To ac complish this, AAA United, part of the Bestseller Group, has started the development of a scheme aptly named Hængslet (the hinge). Scheduled for completion in 2026, the building is envisaged to be a 5-storeyed, 12,000 sq m commercial building with open-space offices and a food court. Although the plan is for Bestseller-associated businesses to move into Hængslet, third-party tenants will be able to take a lease here as well. Skejby (northern Aarhus) Skejby, and the surrounding area in northern Aarhus, is a highly successful office area. By opting for premises north of the city centre, tenants also achieve a lower rent level as well as ample parking facilities compared to those offered in more central locations. Vestas is one of the main businesses in the area, occupying a significant amount of space. Other large office users in the area include Falck, G4S, ATEA, IBM, Bankdata, NRGi, Tryg and Rambøll. Apart from offices, the area also houses the 25,000 sq m north campus of VIA University College and the university hospital, Aarhus Universitetshospital, which, being designated a superhospital, has undergone comprehensive expansion to

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Aarhus Local market report for Colliers Market Report 2023

Aarhus Ø.

accommodate more than 10,000 staff. The adjoining 22,800 sq m patient hotel in 14 storeys, named Forum, was com- pleted in 2022. In northern Aarhus lies Agro Food Park, Denmark’s largest industry-specific commercial hub for agricultural and food businesses, today housing more than 85 businesses and 1,300 employees. The most recent addition to the existing 58,000 sq m floorspace is Agro Food Park 26, an 8,300 sq m space-efficient and up-to-date multiuser building offering lease units from 45 sq m up. At Lisbjerg business park, fashion retailer Rains has an nounced planned construction start on its new headquarters in early 2023. Envisaged to comprise 12,000 sq m, including 6,500 sq m administrative space and 5,500 sqm storage, the building is scheduled for completion in summer 2024. Aarhus West (Aarhus V) Offices in the urban areas of Åbyhøj, Brabrand and Aarhus V, which can be categorised as Aarhus West, are typically concentrated around the ring road and along the approach roads. The quality of the building stock is generally more varied than in Aarhus C and Aarhus N, which is reflected in a relatively large spread in rent levels. A popular office dis trict has evolved along Viborgvej, attracting several large businesses and new office developments.

Byporten is a keenly awaited development comprising 32,000 sq m offices, a hotel and conference centre as well as commercial space distributed over nine towers. Byporten Syd (south), three adjoining office towers south of Viborgvej, was taken over by domestic pension fund Industriens Pen- sion in turnkey condition in Q4 2022. The construction of Byporten Nord (north) will take place in stages. On comple tion, it will comprise the remaining six towers, the tallest of which will feature 23 storeys (75 metres). In Aarhus V, the City of Aarhus continues the transformation of the Gellerup neighbourhood to upgrade it to the stand ards seen in other Aarhus districts. For instance, A. Enggaard is redeveloping the Helheden area of Gellerup into a mixed use city district comprising some 55,000 sq m residential and commercial space. The developer is PKA, and as part of the initial phase, they have constructed a new office building with a grocery store at its base. Aarhus South (Aarhus Syd) The office market in Aarhus South, which includes the urban areas of Viby J, Tranbjerg and Højbjerg, is generally charac terised by being established earlier than other areas around Aarhus, which is reflected in the age and quality of the build ing stock. As a result, this area typically attracts companies that have a relatively strong cost focus in their search for new premises. In this area, prime office space is typically facing either the ring road or one of the other arterial roads.

Typical rent levels

Office

Change

2020 1,450 1,050 1,250

2021 1,450 1,150 1,250

2022 1,500 1,150 1,250

2023 1,500 1,150 1,250

2022-23

Aarhus C

Prime

0% 0% 0% 0% 0% 0% 0% 0%

Secondary

Aarhus N

Prime

Secondary

825

825

900

900

Aarhus V

Prime

1,150

1,150

1,150

1,150

Secondary

800

800

800

800

Aarhus S

Prime

1,050

1,050

1,050

1,050

Secondary

700

700

700

700

Note : Rent levels quoted in DKK per sq m p.a., exclusive of operating costs and taxes, office, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.

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Aarhus Local market report for Colliers Market Report 2023

Typical yield requirements

3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%

18 Aarhus city centre - prime

19

20

21

22

23

Aarhus city centre - secondary

Aarhus, outside inner ringroad - prime

Aarhus, outside inner ringroad - secondary

Note : Net initial yields, office, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.

RESIDENTIAL

Letting market equilibrium?

4,146 residential units

This has manifested itself in an increase in vacancies in relatively uniform residential properties in more secondary locations. Similarly, residential newbuilding schemes have recently seen completion or are nearing completion, includ ing Basecamp Aarhus, Colosseum, Blækhuset and La Tour Towers, which are specifically tailored to meet the students’ demand for small-sized units with access to a range of com munal facilities and convenience offerings. The concept is also called micro living. However, despite a long period when even the most standard-quality residential properties were leased up, the Aarhus residential letting market remains buoyant, except that landlords are now increasingly required to meet ten ant requirements if they are to attract tenants. In autumn 2022, several landlords of such relatively uniform property schemes in more secondary locations tried to “lure” ten ants by not charging any deposits and offering a couple of rent-free months or a gift voucher for interior design. Con versely, differentiated residential newbuilds in more prime locations attract sustained strong tenant demand. “Differen tiated” in this context denotes bespoke concepts that appeal to a specific target group or offer a unique building design. However, differentiated concepts alone do not cut it, as an attractive location is a key determinant of both success and demand. In other words, location remains an important parameter for demand and for the readiness to pay (rent), even for differentiated residential concepts. For several years, Aarhus had a shortage of rental housing, with mainly the influx of young students driving demand. However, a prolonged period of brisk newbuilding activity has reduced this shortage, seeming- ly restoring the supply and demand balance in the letting market.

completed in 2022 (Q1-Q4)

312,265 sq m residential completions in 2022 (Q1-Q4)

74 sq m Average residential unit size

89.73% Tenant share

6.11% Average residential vacancy rate

Note : The three bottom figures denote average data on multi- storey apartment blocks in the City of Aarhus.

Source : Colliers, Statistics Denmark.

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Location and differentiation in focus A broader range of options has given Aarhus tenants and newcomers much more freedom of choice when it comes to finding their future home. In consequence, the oldest hous ing stock in less attractive locations – cost-regulated proper- ties excepted as they compete on different terms – have seen an increase in vacancies. However, a large portion of the relatively outdated stock enjoys central locations that have made it possible for these properties to retain tenants despite the added supply, because location remains a key parameter for tenant demand. Even with the sharp increase in supply, the past decade’s va cancy trend shows that the Aarhus residential market con tinues to be driven by strong demand, which can absorb the added supply. Similarly, the current pipeline of residential newbuilding suggests that despite times of uncertainty, historically high construction costs and historically ample supply, supply will remain strong in the years ahead, albeit not as strong as in recent years. Mainly new urban districts and redevelopment of centrally located business areas will drive future supply. Due to the improved supply and demand balance, and in some locations even oversupply, rent levels in Aarhus multi- storey apartment buildings have levelled off. However, it is important to emphasise that the trend is both area- and product-specific, with individual locations and schemes

therefore still commanding rising rent levels. As proved by e.g. the conversion of the Godsbane area and other resi- dential newbuilds in central Aarhus, which better meet the housing demand of students and graduates, it is possible to achieve rental prices that exceed average market rent levels. By the same token, new urban districts where the city meets nature, e.g. Bindesbøll Byen, have proved highly sought- after, seeing high rent levels and exceptionally low vacancy rates. The outlook for the coming years will shape the future Aar- hus residential market, with developers expected to increas ingly focus on developing the right product, e.g. residential units targeting senior age groups, the continued large stu dent ranks as well as new graduates.

Aarhus Local market report for Colliers Market Report 2023

Typical rent levels

Residential

Change

2020 1,650 1,475 1,500 1,225 1,275 1,000

2021 1,650 1,475 1,500 1,225 1,275 1,000

2022 1,650 1,475 1,500 1,225 1,275 1,000

2023 1,650 1,475 1,500 1,225 1,275 1,000

2022-23

Aarhus*

Prime

0% 0% 0% 0% 0% 0%

Secondary

Aarhus**

Prime

Secondary

Aarhus environs

Prime

Secondary

* Includes Aarhus Ø, Trøjborg, Åbyhøj, Aarhus N, Risskov and Viby ** Includes Tilst, Brabrand, Gellerup, Højbjerg and Vejlby

Note : Rent levels quoted in DKK per sq m p.a. for new residential units of 75-80 sq m, ground-floor and penthouse units excepted, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.

“Risskov Brynet”, Risskov

Increasingly cautious sentiment in the investment market

a slump in transaction activity, and driving up yield require ments on Aarhus residential investment property. In addi tion, the market changed to become largely a buyer’s market in 2022, whereas it was a seller’s market in 2021. Residential investment property remains investors’ top pick in Aarhus, and in anticipation of declining interest rates and, by exten sion, improved financing options, transaction activity is ex pected to pick up in the segment in 2023 relative to H2 2022.

Although 2022 started with exceptionally favourable market conditions on the back of historically strong transaction ac tivity, the situation changed as the year wore on and inves tors became increasingly guarded. Rising interest rates and a widening gap between buy-side and sell-side price expec tations severely impinged on market conditions, prompting

Typical yield requirements

Residential

Change

2020 3.75% 4.00% 4.25% 4.75% 4.50% 5.25%

2021 3.75% 4.00% 4.25% 4.75% 4.50% 5.00%

2022

2023 3.75% 4.00% 4.00% 4.50% 4.25% 4.75%

2022-23

Aarhus*

Prime

3.375%

50 bps 25 bps 50 bps 25 bps 25 bps 25 bps

Secondary

3.75% 3.50% 4.25% 4.00% 4.50%

Aarhus**

Prime

Secondary

Aarhus environs

Prime

Secondary

* Includes Aarhus Ø, Trøjborg, Åbyhøj, Aarhus N, Risskov and Viby ** Includes Tilst, Brabrand, Gellerup, Højbjerg and Vejlby

Note : Net initial yields, residential, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.

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0.17%

Realised sales prices (DKK)

44%

58%

Laydays

Units for sale

Note : Development between Q3 2021 and Q3 2022, owner- occupied apartments in City of Aarhus. Source : Colliers, Finans Danmark.

Change in framework conditions affects ownership housing market

Aarhus Local market report for Colliers Market Report 2023

After more than a decade of price hikes, a cocktail of record-high inflation, stricter financial requirements and higher costs has cooled the previously red-hot Aarhus ownership housing market. The slowdown follows on the heels of a period during the pandemic when square metre prices soared due to e.g. record-low supply and favourable financing possibilities. Historically high infla- tion has served to erode real wages, directly impairing Danes’ purchasing power. Meanwhile, buyers have faced rising interest rates and stricter financial requirements. Although H1 2022 saw much higher home loan interest rates, ownership housing prices did not drop. Not till H2 2022 did square metre prices drop and resale periods lengthen. Despite the slowdown in H2 2022, the Aarhus residential market is by no means expected to suffer the same se vere blow it was dealt during the financial crisis, as today’s homeowners enjoy more robust personal finances, redu- cing the risk of forced sales. The downtrend in prices is predicted to continue in the years ahead, albeit to some extent stabilising on account of a certain sustained short age of ownership housing, and in step with the procure ment of financing becoming easier, once interest rates start to come down as expected.

19

Aarhus continues to expand

Aarhus Ø In the district of Aarhus Ø, recent years have seen the completion of a string of prominent buildings, and this new urban district on the waterfront has become a popular city hotspot. Due to the attractive location, Aarhus Ø commands above-average residential rent levels and selling prices. To ensure a varied mix of residents, the City of Aarhus has spec ified that 25% of the residential construction must be non profit housing. In addition, all buildings are required to com ply with energy-efficiency standards according to the City of Aarhus’ objective of Aarhus being a carbon-neutral city by 2030. Lighthouse 2.0, including Fyrtårnet, has now been com pleted. Fyrtårnet is Denmark’s most recent (and tallest) resi dential tower block, standing 45 storeys tall and offering 391 owner-occupied apartments, with more than 90% of apart ments already sold. Nicolinehus (see Office paragraph) has been fully completed, too, offering 25,000 sq m residential space, distributed over 175 owner-occupied apartments. The construction of the large-scale residential project of Bassin 7, located in the cross field between cultural life, ur- ban living and island life, is nearing completion, including the building of Kampanilen, designed by BIG in a unique In recent years, Aarhus has been transform ing to accommodate the strong inflow of new residents. As a result, new residential districts have emerged, but with respect of older districts so as to blend city, nature and history to form a harmonious whole. The following provides an overview of urban development trends.

building style. Kampanilen comprises 75 owner-occupied apartments and one commercial unit, with virtually all owner-occupied apartments sold prior to completion. A redevelopment plan for the former berth of the Mols- linjen ferry link, Pier 3, has now been put into motion. In spring 2023, the City of Aarhus is expected to start the sales process for the area for the purpose of setting up of an area development company. The area is envisaged to offer residential units, green spaces, sports facilities, etc. Aarhus K The district named Aarhus K stretches all the way from Godsbanen to Trianglen – a new residential complex situ ated along Søren Frichs Vej. The district is expected to offer 2,800 residential units in total when fully developed. Aarhus K is home to a new architectural college, New AARCH, named newbuilding scheme of the year by domestic maga zine Byggeri, along with an ownership housing development called Æggepakkeriet. With the completion of Godsbane huset in 2022, the district saw the addition of 76 residential lease units, ranging from 1-room bedsits to 5-room units, all fully let a mere 2.5 months after completion. Development activity at Godsbanen has transformed the area into a diversified central Aarhus district with a great potential for multiple uses. In the area, the student hall of Godsbanekollegiet was completed in 2022, comprising two buildings, Karreen (the block) and Tårnet (the tower), offering a total of 331 bedsits and 29 2-room units. In addition, Lidl is in the process of constructing its new Danish head office in the area. Extending to 20,000 sq m and including a parking garage and concept store, the new Lidl head office is sched uled for occupancy in mid-2023. In proximity of Aarhus K, PensionDanmark has acquired the former 70,000 sq m Stark and Silvan site for the purpose of developing a new urban district dubbed Trælasten. The development is only the second of its kind to achieve DGNB

Aarhus Local market report for Colliers Market Report 2023

Platinum certification, among other things due to its use of recycled building materials from the demolished old build ings. Construction is ongoing, with the first stage, involving residential properties, scheduled for completion at year-end 2023. On completion, the district will offer a mix of commer- cial and residential spaces, including 700 dwellings, with ren- tal housing accounting for 59%, ownership housing for 21%, and commercial for the residual 20%, all of which will con tribute to making the city centre more compact. Christiansbjerg Katrinebjerg is a neighbourhood in the Christiansbjerg dis trict of northern Aarhus, a former industrial/commercial area. Due to its central location, the district has become a sought-after residential area, currently being transformed with the development of several large-scale newbuilds. Olav de Linde spearheaded development activity with the con struction of Nabolaget, offering 272 residential units. Simi larly, Olav de Linde is developing KatrineTorvet near Nabola get and Storcenter Nord. The development scheme involves 27,000 sq m high-quality residential space and 11,000 sq m commercial space with adjoining underground car park. In

addition, in 2022, Mogens de Line completed Mejerihøjen, offering 95 residential rental units. Finally, a joint venture of CapMan and Nordstern is heading the construction of 209 residential units at Katrinebjerg. Basecamp Aarhus, being developed by asset manager Base camp Student, is the name of a high-profile student housing development featuring all of 663 fully furnished units on the former Defco site at Katrinebjerg, along with shared facilities (kitchen, study rooms, fitness), a cinema and a resident café. Unit sizes are 6-20 sq m, the smallest without in-room kitch enettes. The development is scheduled for occupancy in August 2023. In mid-2022, Basecamp Aarhus was acquired by Belgian investor Xior Student Housing. In the area surrounding Århus Akademi (high school) at Ran- dersvej, the former Hotel La Tour has been demolished to make room for the development of Denmark’s sixth tallest building, La Tour Tower, a residential tower block with 652 relatively small units (20 sq m) and abundant shared facilities, scheduled for completion in 2023. Nearby, Nordbjerget was completed in 2022, offering 172 residential units.

“Bindesbøll Byen”, Risskov

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Risskov Engby The redevelopment of a disused industrial site at Arresøvej and Lystrupvej into a mixed-use urban district is now well under way, the site evolving into a brand-new, mixed-use 156,000 sq m urban district, holding e.g. residential, com mercial and institutional space. When fully redeveloped, the district is expected to house 1,600-1,700 residential units. In 2022, Heimstaden completed Enghaven and Lynghaven, both projects ready for occupancy in summer 2022 and featuring 473 residential units combined. Bindesbøll Byen Named after a famous former Danish architect, Gottlieb Bindesbøll, Bindesbøll Byen (Bindesbøll City) is located in Risskov in proximity of the bay and surrounded by park lands. In the past, the site held a psychiatric hospital and grounds. In 2018, the hospital relocated, becoming part of the superhospital. The area is now a brand-new urban dis- trict, with PFA, KPC and Lærernes Pensionskasse heading the transformation. Consisting of four different subdistricts with their own unique architectural expression and a mix of his torical and new buildings, the new neighbourhood offers

1,200 new residential units in total, with one in six units being non-profit housing. Only two of multiple schemes are earmarked for owner-occupation, and the district has gen erally proved highly popular, attracting strong demand. Con struction activity continues in the years ahead, and the dis trict is expected to appeal to both the young and the elderly. Marienlyst Located between Tilst and Skejby, approximately 7 kilo metres northwest of Aarhus, Marienlyst is a green expanse of some 1.2 million sq m, envisaged to become an urban area connecting nature and urban living. In a joint effort with the City of Aarhus, several major players are engaged in the early stages of the development, with plans including some 8,000 new residential units with a total floorspace of up to 738,000 sq m over the next decade. The intention is to build a new school, institutions and facilities for leisure- and cul ture-related uses. Lisbjerg Located approximately six kilometres north of Aarhus and connected to the city via light-rail services, Lisbjerg is the largest on-going urban development area in Aarhus, extend ing to all of one million sq m residential space. With a devel opment period of more than 60 years, annual residential completions are estimated at 16,000 sq m on average. The area will feature mainly apartment blocks built around a quadrangle, as a modern-day tribute to the courtyard farms known from the historical village in this location. In addition, the development includes 250,000 sq m com mercial space, including shopping goods stores, cafés and restaurants. The area is expected to have 25,000 inhabitants when fully developed, and it will feature a town centre and a school. Viby Store Ravnsbjerg is the name of the former Arla site in Viby where the first stage of the transformation has started to redevelop the site to house a total of 1,700 dwellings. Devel oped by a joint venture of 1927 Estate and Cebra, the new district is to include a car-free zone, a forest kindergarten, outdoor sports facilities and a communal building. In addi tion, the area enjoys proximity to an already established stop on the Aarhus light-rail line. The housing will consist of apart ment blocks and tower blocks containing apartments, sen ior housing, row houses and micro living units. Construction start is scheduled for 2024.

Aarhus Local market report for Colliers Market Report 2023

Aarhus Ø

“Frederiks Plads”, Aarhus C

RETAIL

Enterprising retail market battles headwinds

With the coronavirus pandemic behind us, the sentiment in the Aarhus retail market was one of optimism: The market had proved its strength during the pandemic by virtue of an enterprising sprit, customer appreciation and successful tenant-landlord negotiations, among other things.

Traditional retail market challenged The renegotiations, relocations and flexible landlords wit nessed during the pandemic remain the key drivers of the Aarhus retail market’s resilience. Recent years have seen a much stronger call for landlord-tenant dialogue, with mainly landlords being forced to accommodate the wishes of be- leaguered tenants, for instance by offering a cap on rent adjustments and shorter lease commitment periods. Due to the change in market conditions and consumer pat terns, many Aarhus retail chains have sharpened their focus on setting up shops that offer a better interaction with their online platform, e.g. via customer loyalty programmes and click & collect services and by installing in-shop self-service terminals to make it possible for the customer to order goods for home delivery. In addition, a couple of home fur nishings stores and kitchen retailers have returned to the city centre, leaving behind big-box clusters. In the Aarhus grocery retail market, Wolt and Nemlig are gaining ground as they offer subscription services that precisely meet con sumers’ demand for convenience and minimal time ex- penditure. In the period ahead, we expect stable rent levels for retail units in the most attractive Aarhus locations, whereas the rent levels of retail units in more secondary locations may come under downward pressure.

Although 2022 turned out to be a year when the retail market experienced headwinds from deteriorating market conditions, the market has shown its continued resilience. Aarhus retail vacancy rates remain low but are likely to rise in 2023 as several tenants continue to struggle financially. Moreover, judging by the Danish consumer confidence in- dicator as well as ever-weakening Danish household bud- gets, multiple retail chains will be forced to scale back shop numbers. For instance, at year-end 2022, Sportmaster an- nounced eight shop closures. For minor retailers, the im- plications of the market outlook may be even more grim. The main Aarhus high street, Strøget, including the streets of Ryesgade and Søndergade along with the squares of Lille Torv and Store Torv, is the prime and most attractive Aarhus location for shopping goods stores. In the middle of Strøget lies the Salling department store, an important customer magnet that has boosted Strøget as a shopping destination. At Aarhus Central Station, located at the south ern end of Strøget, lies Bruuns Galleri, one of Denmark’s best-performing shopping centres in terms of footfall. Known for its charming architecture and pulsating city life, the Latin Quarter is located at the northern end of Strøget. The Latin Quarter is considered the most popular F&B loca tion. Due to the change in market conditions and reduced customer purchasing power, competition is expected to intensify for prime locations in future. Similarly, retail chains under financial pressure are expected to retain shops in prime locations and terminate retail leases in more second ary locations.

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Sct. Clements Torv

Salling (department store)

Søndergade

Aarhus Local market report for Colliers Market Report 2023

Tenanted shop units Vacant shop units

Note: Count of retail vacancies, Ryesgade/Søndergade, Aarhus, end-January 2023.

Source: Colliers.

Ryesgade

Aarhus Central Station

Moderate investor demand Investor demand remains relatively moderate for Aarhus retail properties, and buyers have generally become more cautious and selective. Nevertheless, demand is still fair for non-cyclical retail properties with financially strong tenants.

The same applies to properties in top locations, which are expected to see sustained strong occupational demand and customer flows. Over the next 12 months, investors with a retail focus are expected to remain active in the market, although they will be more discerning.

Typical rent levels

Retail

Change

2020 6,500 3,500 3,500 2,000 1,000

2021 6,000 3,250 3,250 2,000 1,000

2022 6,000 3,000 3,000 2,200 1,100

2023 6,000 3,000 3,000 2,000 1,000

2022-23

Aarhus high street (upper end)

Prime

0% 0% 0%

Secondary

Aarhus Latin Quarter

Prime

Secondary

-9% -9%

Local shopping centres

Prime

Secondary

900

900

900

900

0%

Note : Rent levels quoted in DKK per sq m p.a., exclusive of operating costs and taxes, retail, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.

Change in market conditions affects yield levels

3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%

18 High street - Prime

19

20

21

22

23

High street - Secondary

Local shopping centres - Prime

Local shopping centres - Secondary

Note: Net initial yields, retail, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source: Colliers.

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Aarhus Local market report for Colliers Market Report 2023

Restaurant “Reel” Nørre Allé 16, Aarhus C

“Pustervig Torv” Aarhus C

Strøget/Sønder Allé, Aarhus C

“Skt. Clemens Bro”, Aarhus C

INDUSTRIAL AND LOGISTICS

Sustained strong tailwinds in the industrial/logistics market

The Aarhus market for industrial and logis tics facilities is characterised by a highly diverse building stock, in terms of both quality and location, as well as a shortage of commercial development sites. Broadly speaking, occupational demand centres on industrial/logistics facilities in locations with good infrastructure, i.e. proximity to the motorway grid or the most central arterial roads. Driven by its motorway proximity, Logistikparken Aarhus, in Brabrand west of Aarhus, has developed into a prime indus trial/logistics location. Extending to 177,000 sq m commer cial space in total, the area is home to Danske Fragtmænd, Salling Group, Nemlig, Søstrene Grene and Advansor, just to name a few. Other prime locations include Hørning, where logistics busi ness Frode Laursen, Antalis and Hørkram are located, and Hasselager, where COOP has its fresh produce terminal for all of western Denmark. Older industrial clusters are found at Lystrup, Brabrand, Viby J and Risskov. Commercial areas along the E45 motorway, defined as Skanderborg/Stilling southwest of the city and Hinnerup/ Søften to the northwest, are also popular with logistics and wholesale businesses due to their proximity to Aarhus, pro viding easy access to a strong recruitment base. Important companies located in this motorway corridor include DHL, Freja Transport & Logistik, Bridgestone and GLS. The Port of Aarhus is Denmark’s largest bulk and commer cial port with a market share of more than 65% in terms of

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total container traffic. The Port of Aarhus is home to more than 150 businesses across a 280-ha expanse, with approx- imately 97% of the area being rent-bearing or designated for infrastructure. With the Molslinjen ferry link having re located here, more than 1.3 million cars currently pass through the area each year. If current plans are carried out, the port is expanded by a 100-ha outer port, Yderhavn, to consolidate the Port’s position as Denmark’s preferred com mercial port. The expansion will help to create jobs in the area. West of Aarhus, along the Herning-bound motorway, lie Harlev and Framlev. In this area, the City of Aarhus has ear- marked new areas for industrial/logistics newbuilding, main- ly heavy industry, which has generally been difficult to place in consideration of off-city-centre residential districts and groundwater vulnerability. Still on the drawing board, the plans for the area have yet to be determined in local plan ning. Industrial/logistics newbuilding lagging behind The boom witnessed in the Danish industrial/logistics mar ket during the coronavirus pandemic carried over into 2022, in Aarhus too, translating into e.g. historically low vacancy levels and rising rent levels. Demand continues to greatly

outstrip supply, and recent years’ virtually non-existent sup ply is not set to grow in the short term as the industrial/ logistics pipeline counts very few Aarhus developments. In addition, supply is hampered by the fact that multiple old industrial districts have been or are being converted for residential use, in the process effectively reducing even the more secondary building stock. Broadly speaking, demand centres on up-to-date and con temporary facilities in prime locations with swift and easy access to the motorway grid or with city proximity, providing ideal conditions for last mile distribution. Nevertheless, de- mand is so strong that even the old building stock enjoys record-low vacancy rates, with an increasing number of ten- ants feeling forced to remain in existing, obsolete premises, just as new tenants feel forced to settle for premises that fail to fully meet their requirements. Moreover, the shortage of premises makes it more difficult for Aarhus industrial businesses to expand as they are stuck in their existing premises.

Aarhus Local market report for Colliers Market Report 2023

Industrial/logistics in demand, but in scarce supply

Irrespective of rising interest rates and widespread econo- mic uncertainty, the strong investor demand for industrial

Record-low number of industrial/logistics vacancies

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

12

13

14

15

16

17

18

19

20

21

22

Note : Vacancy rate, industrial and logistics, Aarhus. Source : Colliers, Ejendomstorvet.dk.

Typical rent levels

1 Aarhus N Prime

400 325

Secondary

2 Aarhus V Prime

500 375

Secondary

E45

3 Aarhus S Prime

400 325

Logistics location Urban area Road grid

Secondary

Market expectations

Note: Rent levels quoted in DKK per sq m p.a., exclusive of operating costs and taxes. Level in 2023 indicates Colliers’ estimation at year-start.

Source: Colliers.

1

2

3

E45

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and logistics properties has remained intact. Unlike other segments, this segment has there fore generally been subject to less price pres sure. In addition, due to favourable market con ditions, including a record-high production and turnover index, users in the segment are gen erally in a stronger financial position. Held up against a general undersupply, the precursors are in place for full rent indexation without any increased vacancy risk. In Aarhus, this trend has mainly affected secondary lease units as rents came under upward pressure in 2022. As for prime lease units, new lets were virtually non-existent in 2022, which however needs to be put into the context of exceptionally weak supply as well as remarkably low moving-out rates. Nevertheless, the rent level commanded by prime properties has continued to rise due to rent indexations. In 2023, we expect to see a continued uptrend in rent levels and stable yield requirements, although depending on market trends, including financing options.

Aarhus Local market report for Colliers Market Report 2023

Rise in yield requirements due to new market conditions

4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% 9.00% 9.50% 10.00%

18

19

20

21

22

23

Short lease

Long lease

Prime

Secondary

Prime

Secondary

Note : Net initial yields, industrial/logistics, Aarhus. Level in 2023 indicates Colliers’ estimation at year-start. Source : Colliers.