Colliers Copenhagen Property Market Report 2019

Office – Market Report 2019

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Slight decline in Greater Copenhagen office transaction volumes DKK 13.4bn in 2017 DKK 11.9bn in 2018

The current S-train line servicing this station, the F-line, arches its way around the city centre, running between Hellerup and Ny Ellebjerg, today making it necessary to change lines to reach central Copenhagen. The new metro station is expected to give this loca- tion a major boost in terms of improved accessibility. Office areas are still being converted for other uses The high costs associated with the refitting of outdated office premises to match today’s demands are also part of the reason why we see an increasing proportion of office prem- ises, both old and relatively new ones, being converted for other purposes, including hotel and residential uses. Even if situated in a central location, where office space is expected to be in strong demand, the premises require such high capital expenditure in upgrades to meet the requirements of a new office tenant that an alternative use scenario often proves more lucrative in terms of income return. This was the case with the building dubbed ‘Ørkenfortet’ (Desert Fort), the main building of the former Nordea head-office complex at Christianshavn, acquired by domestic pension fund ATP Ejendomme and currently undergoing redevelopment into a Hilton hotel. Another example is Kalvebod Brygge 20, which the Arp-Hansen Hotel Group acquired for hotel conversion (Wakeup hotel brand). Formerly a multi-tenant office building, with tenants including Falck A/S and Nykredit, the property did not attract suffi- cient investor interest based on continued office use as this would imply substantial refurbishment costs. At Holmens Kanal, the current head office of Dansk Bank will presumably be converted for residential and retail uses when the bank relocates to brand-new premises on the former post office site, ‘Posthusgrunden’. This trend is important to bear in mind when considering the current pipeline of office premises as a great many of the businesses that currently account for pre-lets will in fact vacate premises that will not become available again in the office market but be converted. Momentum in the market for prime office investment properties is as strong as ever, driven mainly by today’s strong office occupational market and massive placement requirements in the investor community. Properties situated in Copenhagen, including the CBD and adjoining districts, have attracted particularly strong investor demand. However, this sustained strong appetite is not fully reflected in the transaction volume recorded in the office market in 2018: Down from from DKK 13.4bn in 2017 to DKK 11.9bn, the recorded Greater Copenhagen office transaction volume is not believed to give a fair representation of underlying demand. An increasing number of existing investors active in the Greater Copenhagen market have announced plans to increase office property market exposure. So far, this has not manifested itself in a corresponding increase in transaction volume as mainly the shortfall in supply has dampened investment activity. Transaction volume does not give a fair representation of investor demand