Colliers Copenhagen Property Market Report 2019

Office – Market Report 2019

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International investor appetite continues to increase for Copenhagen International investor demand remained strong in 2018, reflected in the breakdown of transaction volume by investor origin. In 2017, international investors accounted for 36% of total Greater Copenhagen office transaction volume, increasing to 54% in 2018. Broadly speaking, international investors have certain volume requirements when investing in Denmark, typically targeting big-ticket transactions as they do not have local resources to handle property management operations on a large scale. This is supported by a breakdown of transaction volume by transaction size as international investors were on the buy-side in four out of the five largest transactions in 2018. One of the international frontrunners on the buy-side of high-volume transactions in 2018 was Swedish Klövern, consolidating its position in the Copenhagen market. In March, Klövern was on the buy-side in one of the largest single-property sales in the Copenhagen office market, involving Codanhus, a prominent multi-user office tower in the Copenhagen district of Vesterbro, which sold at a price of DKK 1.44bn. In 2018, additional acquisitions by Klövern included four fully let office properties, previ- ously owned by Niam and situated in various locations in and around Copenhagen, at a total price of DKK 733m. Another transaction that deserves mention is the second- largest office transaction recorded in 2018: South Korean property investor AIP Asset Management entered the Danish market by acquiring a property north of Copenhagen (Søborg), let to Novo Nordisk, at a price of DKK 1.2bn. This transaction underpins the strong position of Copenhagen in an international investment context. Mounting risk tolerance among investors In 2018, about two thirds of office transactions in Copenhagen involved core assets, largely continuing the trend of the previous year. However, we see mounting risk toler- ance among investors in pursuit of attractive returns as prime yields on core assets have been driven down to an all-time low. In the past, investors demanded a substantial discount or illiquidity premium on the price of office properties not fully let. However, today, investor appetite has grown stronger for this type of property, in particular in good locations. The pursuit of attractive returns together with an exceptionally strong occupational market have made investors change perception of vacancy: Vacancies are no longer viewed only as a negative factor, but also as a value-add potential for optimising property operations to produce even higher returns than those achievable when investing in a fully let core asset.

Pursuit of attractive returns and favourable trends in the

occupational market serve to make investors more risk-tolerant, today more readily investing in partly vacant properties, in particular in good locations

 EMIL HELMSØE-ZINCK , emil.helmsoee-zinck@colliers.com