Colliers Copenhagen Property Market Report 2019

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Copenhagen Property Market Report 2019

Yields expected to hold stable or even edge up slightly in the next 12 months

Another important factor is the letting situation in the retail market. Although we main- tain that the high-street retail letting market is relatively healthy, abating rental growth and prolonged reletting periods mean that investors can no longer expect to add value by improving the income profile of their property assets on the same scale as in the past. As a result, risk premiums on retail property have started to climb, which will affect transaction activity in this segment due to a mismatch in price expectations. Investors continue to allocate capital to investments in the high-street market, and 2018 saw the market entry of a few new players, including Union Investment and Generali Real Estate. However, we believe that the market has reached saturation point. Yields are therefore expected to remain stable or even edge up slightly in the next 12 months. Broadly speaking, the retail property investment market outside Copenhagen is consider- ably less liquid and characterised by sluggish transaction activity and high yield require- ments, reflecting a higher NOI risk. In 2018, we witnessed a stronger flight-to-quality trend, making it much more difficult to sell more secondary retail properties. This ties in with the fact that finance providers have become more risk-averse to finance secondary retail properties, while risk premiums have climbed. We therefore see a continued segmentation process in the market between prime and secondary properties, and we expect the spread to widen in the next 12 months or so. Stronger prime versus secondary market segmentation coming to the fore

Flight-to-quality trend impinges on saleability of secondary retail properties