Colliers Copenhagen Property Market Report 2019

Office – Market Report 2019

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Distinct supply and demand imbalance may drive up rents by as much as 10% in some areas.

Broadly speaking, the financial crisis has served to make most market players less risk-tolerant, both developers and investors awaiting clear evidence of strong demand for new office space before starting new office development. Even though the market has seemed ready to absorb a certain volume of speculative newbuilding for several years now, such strong demand has in fact not registered until 12-24 months ago. As a result, we are now seeing increased appetite – albeit still not matching pre-crisis levels – for large-scale office development on a speculative basis, for instance KLP’s development scheme at Kay Fiskers Plads, Ørestad and the redevelopment of Oslo Plads in the district of Østerbro by Fokus Asset Management. Both schemes were started without any pre-let agreements in place. Ample potential for rent hikes Copenhagen office vacancy rates have now reached a level that is deemed unsus- tainable in the long term, taking into account the share of old and outdated buildings currently vacant. Strong confidence in the future has in many businesses fostered a focus on recruiting additional staff to meet demand both in the short and long term. This also poses new demands on the office premises of expanding businesses, typically not designed to accommodate growth on any large scale. As a result, several businesses are in the market for new premises, almost all of which have very specific demands in terms of flexibility, quality and location. Such requirements are often only met by new and up-to-date premises, designed specif- ically with these requirements in mind, whereas premises of an older date rarely even enter the running. However, in view of the virtually non-existent supply of new and up-to-date properties, we have recently started to see rent levels come under upward Given development periods that often drag on for years, the next couple of years will hardly see an increase in supply that is sufficient to match the existing strong demand.