Colliers Denmark Market Report 2024

2024 Colliers Market Report

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

D E NM A R K

Colliers Awards 2023

• Euromoney ‘Best advisor’ and ‘Best agency for research’, Nordics

• Forbes ‘ World’s Best Employer’ and ‘Top Company for Women’

• Estate Media 2 colleagues named best yount talents in the Danish property industry, ‘Ung i Ejendom’

• WELL Health-Safety Rating of our Danish branch offices

Contents Executive summary & welcome

1

Letter from the CEO A good start to 2024

2

Danish investment market The 2022 slowdown took effect in 2023

4

Nordic overview Dramatic slowdown in activity across the Nordics

12

Office Brisk letting activity and low vacancy Residential The largest cities are still growing

16

32

Retail Retail recovery – but will consumer spending weaken? Industrial and logistics Strong occupational market and high investor interest

46

60

Hotel Robust hotel market going into 2024

78

Danish economy Stable economy – a safe haven for investment

88

Market practices

94

Definitions

95

About Colliers

96

Transaction data included in Colliers Market Report 2024 are based on a coordinated data compilation in collaboration with a number of marketleading commercial property agents in Denmark.

DENMARK Executive summary Sustained high demand from both users and investors for industrial and logistics properties

16 % Office 41 % Residential 13 % Retail 25 % Industrial/logistics

In the residential segment, the rental market is strong after recent years’ sharp increase in homeowners’ cost burden Record-high employment and short commute times are fuelling office demand in Denmark Increased vacancy in the retail seg ment strengthening tenants’ leverage The hotel industry enters 2024 with optimism and record bednights in 2023

DKK 45bn

3 % Hotel 2 % Other

GREATER COPENHAGEN

27 % Office 38 % Residential 5 % Retail 23 % Industrial/logistics

DKK 23bn

4 % Hotel 3 % Other

Note: Total transaction volume 2023, Denmark, by segmen. Please note that the figure quoted for retail in the top figure has been rounded from 12.5%, with the “Other” category therefore quoted as being 2% . Source: Colliers

Sharp drop in transaction volume in 2023

120

100

80

60

40

20

0

14

15

16

17

18

19

20

21

22

23

Greater Copenhagen

Denmark, excluding Greater Copenhagen

Note: Transaction volume (DKK billion), investment property, Denmark, 2023. Source: Colliers

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COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

International investors less active in 2023 relative to previous years, but their appetite for the Danish investment property market remains intact

DENMARK

GREATER COPENHAGEN

36 % 2022: 57%

33 % 2022: 54%

64 % 2022: 43%

67 % 2022: 46%

INTERNATIONAL

INTERNATIONAL

DOMESTIC

DOMESTIC

Risk profiles, top-4 Danish property segments. Core assets heading the field in a year marked by economic uncertainty

OFFICE

RESIDENTIAL

88 % Core

66 % Core

1 % Opportunistic 11 % Value-add

3 % Opportunistic 22 % Value-add 9 % User

RETAIL

INDUSTRIAL & LOGISTICS

1 % Opportunistic 2 % User 38 % Value-add 59 % Core

37 % Core

7 % Opportunistic 29 % Value-add 27 % User

Note: Top two figures show transaction volume by investor origins. Bottom four figures show transaction volume by risk profile for specific segments of the Danish property market. Transaction volume, Denmark, 2023. Source: Colliers

Accelerating success.

2

COLLIERS MARKET REPORT 2024

Carsten Gørtz Petersen Partner and CEO (MRICS)

3

COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

A good start to 2024

2023 was a strange year. It began with the highest inflation in 40 years, even before the town hall bells rang in the year. Central banks carried out rate hikes in both Europe and the US, and investors, who had shattered all records and cham pagne corks just 12 months earlier, watched stock markets plummet while hibernating in fear of catching a falling knife. At the same time, Denmark celebrated record-high employ ment and rock-solid public finance results. The crisis did not come, and the underlying operations that guarantee the income return on investment properties enjoyed good con ditions throughout the year. Denmark had landed in a calm environment, in the eye of the hurricane, so to speak, while our closest European neighbours saw major fluctuations in their economies of all kinds. Rising interest rates and tighter bank lending policies had an impact on buyers’ return expectations. The market’s return expectations have been slow to adjust in Denmark compared to other European markets, but prices in the property invest ment market have now fallen for two years in a row. And there are signs that we are looking at an improvement in the fixed income markets, where long-term interest rates are sta bilising or edging down slightly, and where we may see a sig nificant drop in short-term interest rates as 2024 wears on. Have we reached the bottom of the real estate market? Probably we have. In any case, the biggest concern for 2024 is no longer rising yield requirements due to rising interest rates but rather whether strong employment is a lasting phe nomenon and investors will become more active. The world has become more complex The world as we know it, especially from the 2010s, with lin ear development and stable framework conditions, has been

replaced by exponential, technological development and extremes. In the span of just a few years, we have had to deal with a global health crisis, climate crisis, energy crisis, interest rate crisis, wars and inflation, while new property valuations and stricter requirements from finance providers have made it more complex to figure out the right investment. Meanwhile, artificial intelligence is knocking on the door, threatening to turn our work habits upside down. ESG is becoming crucial, unless you ask a former president who may be on his way back to the US. I’ve said it before, but it seems to get truer every year: to suc cessfully navigate the Danish investment property market, you need to be aware of both the global currents and local trends that affect the demand for real estate, whether you’re an investor in Kolding or Copenhagen. It’s complex, but in that complexity lies a head start for those who understand its components. In 2024, the interest rate market will be less important than investors’ ability to iden tify the properties that are most in demand in terms of loca tion and quality. Not just by investors and capital, but most of all by the users and tenants who will pay the rent. And it will be crucial that investors are able to operate and develop the properties so that they will continue to meet the users’ needs for a more sustainable future. That’s why we don’t just call ourselves commercial property agents, we call ourselves experts. Because a sound invest ment requires expertise, insight, and overview. It requires collaboration and relationships.

The Colliers Market Report is our best effort. I hope it gives you a good start on the investment property market in 2024.

February 2024

Carsten Gørtz Petersen Partner and CEO (MRICS) carsten.goertzpetersen@colliers.com

Accelerating success.

4

COLLIERS MARKET REPORT 2024

DANISH INVESTMENT MARKET

General slowdown replaced by relatively brisk investment activity in Q4 2023 Decline in market interest rates due to prospect of more accommodative monetary policy provides much-needed tailwind in still challenged market International investors still interested in the Danish market, but were less active and took to the sidelines in 2023 Higher construction costs, yield require ments and interest rates have slowed newbuilding , strenghtening standing assets Higher capital requirements for banks expected to have limited effect on pricing

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Accelerating success.

6

COLLIERS MARKET REPORT 2024

The 2022 slowdown took effect in 2023

Record-high interest rates and recessionary concerns dampened transaction activity in 2023. However, the final quarter of 2023 saw a marked increase in activity in the real estate investment market with a number of large deals. Towards the end of 2023, the prospect of looser monetary policy led to a significant drop in market inter est rates, providing grounds for optimism about activity in 2024.

The transaction volume in 2023 ended at DKK 45 billion, marking a sharp decline compared to the previous year and indicating a turbulent investment market.

Market activity has been affected by the wait-and-see attitude of both buyers and sellers. Sellers have presumably hoped that inflation would be dealt with quickly, leading to a drop in interest rates, which would bring down yield requirements and justify higher selling prices. On the other hand, there have been buyers who have been unable to reconcile their business plan with sellers’ price expectations and high interest rates. Both parties’ wait-and-see strategy has led to a lower transaction volume and reduced market transparency.

Sharp drop in transaction volume in 2023

120

100

80

60

40

20

0

14

15

16

17

18

19

20

21

22

23

Greater Copenhagen

Denmark, excluding Greater Copenhagen

Note: Transaction volume (DKK billion), investment property, Denmark, 2023. Source: Colliers

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COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

Although we have to go back to 2014/2015 to find a similar transaction volume, activity in the last months of 2023 was particularly high with a number of major deals in several segments, including office, residen tial, industrial and logistics as well as hotel, with indi vidual transactions with a volume of up to approx. DKK 2.5 billion. These transactions included the sale of the office properties Codanhus and Kalvebod Brygge 32 in Copenhagen, a newly constructed residential prop erty, Køhlers Have, in Copenhagen’s Sydhavn dis trict, a portfolio of 10 light industrial properties in Greater Copenhagen and Comfort Hotel Vesterbro in Copenhagen. The increased transaction volume in Q4 2023 reflects a market that is regaining its equilibrium after a period where buyer and seller have been far apart. Compared to previous years, the industrial and logistics segment has been particularly popular in 2023.

Selected locations and uses within the segment have supply/demand dynamics that suggest potential rent increases, which investors are responding to. Many of the major deals that fell into place at the end of 2023 were priced before market interest rates started to move down in December. Whether investors have over reacted to the signals from central banks to cut inter est rates is debatable, but general consensus at the moment is that the policy rate will be cut several times in 2024, provided inflation, and especially core inflation, which internationally has not quite reached its long term targets, does not get out of control. For the prop erty market, the drop in market interest rates is favour able for pricing and transaction activity, as the drop signals that interest rates have peaked, which can give investors comfort in respect of future investments.

Decreasing market interest rates

As a result of the drop in interest rates in December 2023, buyers have been able to achieve a higher loan-to-value ratio. The high interest rates have particularly affected assets trading at the lowest yield requirements, where the ’critical rent’ rules have resulted in significantly lower loan-to-value ratios. Recent declines in market interest rates do not radically change this, but together with che

aper financing, allow for more attractive financing over all. In the current interest rate environment, the ’critical rent’ requirement affects and limits some investors who wish to acquire the safest and best properties (at the low est yields) as the achievable loan-to-value ratio for these assets will be lower. However, lower market interest rates have helped to reduce LTV restrictions.

Lower market interest rates allow for higher LTVs

80

70

60

50

40

30

3.75% 4.0% 4.25% 4.50% 4.75% 5.0% 5.25%

5.50%

5.75% 6.0%

Nov 2023, interest rate 5.275% Dec 2023, eff. interest rate 4.310%

Note: Loan-to-value (LTV). “Critical rent” is a set of rules set out by the Danish Financial Supervisory Authority. It takes into account how much a property’s rental income minus the property’s expenses can pay in interest, repayments and contributions to, for example, a 30-year fixed-rate loan. The figure is based on a 30-year fixed-rate housing loan. Source: Nykredit, Colliers

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Colliers Markedsrapport 2023 COLLIERS MARKET REPORT 2024

RESIDENTIAL REMAINS THE LARGEST SEGMENT

16 % Office 41 % Residential 13 % Retail 25 % Industrial & logistics

Despite low activity, international investor interest remains intact In recent years, international investors have accounted for slightly more than half of transaction volumes. In 2023, it is therefore notable that international investors only account for 33% of total transaction volume. This decrease is due to general caution in the market, which has been more pronounced in terms of the large deals that have been dominated by foreign investors in pre vious years. In addition, there have not been many dis tressed sellers in Denmark, which has led foreign inves tors to take advantage of opportunities in other markets where there have been larger price corrections. For example, both the Swedish and German markets have experienced greater price fluctuations than Denmark. However, the limited activity of foreign investors in the Danish market does not mean that interest has disap peared. Foreign investors are therefore expected to return in 2024 as prices stabilise. By 2023, the mismatch between buyers’ and sellers’ price expectations has been reduced and investors can see signs that the interest rate peak has been reached. With the increased transparency in the market due to renewed activity and the improved framework conditions of lower interest rates and higher loan-to-value ratios, Denmark is expected to remain an attractive market for international investors.

3 % Hotel 2 % Other

DOMESTIC INVESTORS PREDOMINATE THE MARKET

33 % INTERNATIONAL

67 % DOMESTIC

CORE ASSETS CONTINUE TO DRIVE THE MARKET

66 % Core 21 % Value-add 4 % Opportunistic 9 % User

Note: Total transaction volume 2023, Denmark, by segment, investor origins and risk profile. Please note that the figure quoted for retail in the top figure has been rounded from 12.5%, with the “Other” category therefore quoted as being 2%. Source: Colliers

TOP 5 transactions | All segments

PROPERTY

LOCATION

SELLER

BUYER (COUNTRY)

TYPE

SQ M PRICE 1

ENERGY LABEL

Codanhus & Kalvebod Brygge 32

Frederiksberg & Copenhagen V

Corem Property

AP Ejendomme (DK)

Office

61,000

~2,500 2

A2010 & A2015

Hedelandsvej 28B-C

A2015

Hedehusene

Allianz Real Estate Ikea (SE)

I&L

133,000

~1,800 2

Rema 1000 portfolio 3

AKA, Reitan Ejendom & AS Straen (NO)

Retail

na 4

All Denmark

Rema 1000

~1,800 5

Multiple

Køhlers Have

Copenhagen SV NREP

CapMan (FI)

Residential

28,500

1,240

A2015

For-profit assisted living portfolio 3

Zealand & Funen NREP

Northern Horizon (FI)

Residential

40,800

~1,225 2

Multiple

Note: 1 Prices quoted in DKK million (rounded figures). 2 Indicative due to confidentiality. 3 Portfolio sale. 4 64 assets, sale-leaseback. 5 Estimated. Source: Colliers

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COLLIERS MARKET REPORT 2024

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Negative total return for 2023 Commercial property pricing has been under pressure, which is reflected in the total return. For the whole of 2023 compared to the whole of 2022, the total return has been negative, specifically -0.55%, a historically low level. We have to go all the way back to the financial crisis in 2009 to find a similarly low level. Since major price corrections only occurred towards the end of 2023, it becomes rele vant to analyse the development of the total return in Q4 2022 compared to Q4 2023, which results in a decrease of 3.80%. A closer analysis of the total return through a decomposition shows to what extent different elements have contributed to the development. Despite the nega tive total return, it is highlighted that Denmark has a solid rental market anchored in record-high employment, which has contributed to a low vacancy rate and a direct return of 4.58%, which contributes positively to the total return. On the other hand, there has been a negative cap ital growth of -8.38% driven by general yield decompres sion. Overall, the total return is negative as the effect of the negative capital growth, driven mainly by higher yield requirements, exceeds the direct return.

More bankruptcies in the construction industry but few distressed sellers The construction sector, which is particularly cyclical, has recently seen an increase in bankruptcies due to ris ing construction costs, higher required returns and high interest rates - the ‘perfect storm’ for developers. This has meant that new construction projects are either put on hold or abandoned, in some cases resulting in bank ruptcies. The upcoming supply is primarily made up of develop ment projects that have already been in the pipeline for some time. This development has led to demand being directed more towards properties in operation, as the opportunity for investment in new construction is limited. Owners of standing properties have not been under as much pressure to make ends meet in the new interest rate environment. However, there have been a few transactions that have been provoked by the inter est rate increases. An example of this is the sale of two Copenhagen office properties by a Swedish investor, Corem Property Group.

Full-year 2023 vs. full-year 2022 Year-end 2023 vs. year-end 2022 Yield decompression driving total property return regardless of method 6% 6%

4%

4%

2%

2%

0%

0%

-2%

-2%

-4%

-4%

-6%

-6%

-8%

-8%

-10%

-10%

-12%

-12%

-14%

-14%

Total return

Income return

Capital growth

Rental growth

Yield decompression

Increase in vacancy

Note: Decomposition of total return, commercial property, Greater Copenhagen. Source: Colliers

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COLLIERS MARKET REPORT 2024

According to Danmarks Nationalbank, around 9% of total mortgage lending to property companies is expected to be adjusted from an interest rate below 1% by 2025. However, it is important to point out that the risks associated with the interest rate adjustments may be hedged through the use of interest rate derivatives, which limits the impact. At the same time, it is highlighted that the majority of mort gage lending is already floating rate and so far has not generally resulted in distressed sellers across the sector. The Systemic Council’s recommendation to activate a new sector-specific systemic capital buffer for exposures to property companies at a rate of 7% will become a real ity on 30 June 2024. The new buffer will increase credit institutions’ financial buffers to better withstand impair ments and losses on their lending to property compa nies. Several stakeholders have attempted to estimate the impact of the legislation on the capital requirement, and while estimates vary widely, it suggests that the leg islation will result in an increased capital requirement of between DKK 10-20 billion. All other things being equal, an increased capital require ment will result in increased funding costs, assuming banks decide to pass the bill on to borrowers. While the measure will affect the entire sector, the impact will be greatest for borrowers financing higher risk pro jects/properties, as these loans are assigned a higher risk weight by banks. Assuming that the analysis of the impact of the capital requirement of DKK 10-20 billion proves to be accurate, Colliers estimates that the price effect of the legislation will be so modest that it is hardly measurable in the pricing of the commercial and invest ment property market. While 2023 has been a challenging year to raise capital, data from Preqin indicate that an increasing share of the capital raised has Denmark on the list of potential target countries. The Danish market is competing with prop erty markets in other countries to attract this capital, and before international investors return to the Danish mar ket on a large scale, they need to assess the pricing here as attractive compared to other markets. With a gradual improvement in framework conditions, including decreas ing interest rates, Colliers expects that this, together with increased transparency in pricing, will boost the Danish investment market. In particular, foreign investors, who have historically accounted for more than half of the trans action volume in the Danish market, are expected to return. Activation of new capital buffer will have a limited effect Better framework conditions and improved market transparency will shape 2024

ESG has become a more integral part of the decision-making process ESG has increasingly become an integral part of the invest ment decision-making process and there is widespread consensus among investors that ESG measures are now considered an essential investment parameter. An international survey conducted by Colliers in 2023 indi cates that most market players are moving from consider ing environmental initiatives to expecting to implement or have concrete action plans for the environmental aspects of their buying and selling activities by 2024. The analysis focuses on the international property market and inves tors’ views. In this context, it should be emphasised that the study does not specifically say anything about Danish inves tors. Nevertheless, the trend of increasing environmental awareness is also considered to apply here in Denmark, where, among other things, the number of DGNB-certified projects has been rising sharply.

Prevalence of environmental initiatives among property investors

Only a consideration

Currently being integrated

Completed full asset assessment

Capital programme, disposals & acquisitions strategy in place

0% 10% 20% 30% 40% 22 23 24

SPOTLIGHT

Note: International investor survey. Proportions of investors (%) responding to the question which action they are taking on environmental performance

of assets when buying and selling properties. Source: Colliers 2024 Investor Outlook Survey

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COLLIERS MARKET REPORT 2024

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Why a commercial property price index? Over the past two decades, an increasing amount of capital has been reallo cated to investment properties as real estate as an asset class is seen as an attractive alternative to stocks and bonds.

While commercial property in the Greater Copenhagen area has seen the lowest total return since the finan cial crisis in 2023, this asset class has historically deliv

ered the best risk-adjusted return compared to stocks and bonds. Commercial property therefore remains an attractive asset class despite the low total return in 2023.

Lowest total property return since the financial crisis

2023

2000-2023

Return

Mean return

Risk

Sharpe ratio

Commercial property, Greater Copenhagen 1

-0.55%

9.2%

6.2%

1.10

Nordea benchmark 7-year bonds

7.77%

4.1%

6.4%

0.25

MSCI Denmark Gross Total Return Index

32.1%

15.3%

25.0%

0.51

Note: Average return and risk on commercial property, bonds and stocks. 1 Please note that the Colliers property price index is based on observations record ed throughout the whole year and therefore the return computed is an average across the year compared to the average across the previous year. Source: MSCI, Nordea, Colliers

Model and approach

For both the Colliers property price index (capital growth) and the net initial yield calculations, we have used a hedonic multi ple regression analysis based on empirical data collected from more than 6,500 property sales and property valuations in the

Greater Copenhagen area since 1985, all involving Colliers (pre 2018, Sadolin & Albæk). The model covers all types of com mercial property, where individ ually fixed prices are applied for the various property character istics, mainly location, use, state

and condition/quality, suitabil ity/rationality and economies of scale, as a corrective measure to account for the differences between individual properties.

Ahmad Raad Senior Associate I Valuation & Advisory ahmad.raad@colliers.com

Victor Staun Jensen Associate I Valuation & Advisory victor.jensen@colliers.com

Kristian Axel Nielsen Senior Director I Capital Markets kristianaxel.nielsen@colliers.com

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COLLIERS MARKET REPORT 2024

DENMARK

International investors have maintained interest but are awaiting market developments The residential segment continues to account for largest share of transaction volume

NORWAY

Robust public finances and a market still dominated by Norwegian investors The only Nordic country where the average transaction size has not decreased

SWEDEN

Listed property companies have funding problems, also with corporate bond refinancing Transaction volume below SEK 100 billion for the first time since 2013

FINLAND

Continued high international investor interest with over 50% foreign buyers Biggest drop in transaction volume among the Nordic countries

Codanhus, Gammel Kongevej 60, Copenhagen, Denmark Office building | 31,500 sq m | Colliers, Denmark (photo made available by CBRE) Moss Næringspark, Norway Two logistics properties| ~106,000 sq m | Colliers, Norway Saltängsvägen 38, Västerås, Sweden Central warehouse | ~101,000 sq m | Colliers, Sweden Torikatu 29, Joensuu, Finland Shopping centre and office | na | Colliers, Finland

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COLLIERS MARKET REPORT 2024

Dramatic slowdown in activity across the Nordics

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Finland DKK 21.2bn -64%

Norway DKK 28.5bn -63%

Sweden DKK 57.0bn -60%

Nordics DKK 151.7bn -59%

Denmark DKK 45.0bn -48%

Note: Transaction volumes in 2023, followed by relative change on 2022. Source: Colliers

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COLLIERS MARKET REPORT 2024

Nordic overview

Top 5 transactions | All segments

PROPERTY/PORTFOLIO

COUNTRY SELLER BUYER

TYPE

SQ M PRICE, BN CURRENCY

Nursing homes

99,500

~5.0

SEK

Sweden Vectura NREP (Altura)

22 assets across Sweden

Denmark Corem AP Ejendomme

Office

61,000

~2.5

DKK

Two Copenhagen office properties

Sweden Fabege

NREP

Office

50,000

3.4

SEK

Two Stockholm office properties

Nursing homes

87,000

~2.8

SEK

Sweden Estea

Slättö

47 assets across Sweden

Hospital and development site, Ullensaker

Stiftelsen Diakonisse- huset Lovisenberg

Public sector

~30,000

2.8

NOK

Norway

SBB

Source: Colliers

Nordic transaction activity, 2014-2023

80

70

60

50

40

30

20

10

0

14

15

16

17

18

19

20

21

22

23

Denmark

Sweden Norway Finland

Note: Transaction volume quoted in EUR billion. The broken horizontal line denotes average transaction volume in the Nordics in 2014-2023. Source: Colliers

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COLLIERS MARKET REPORT 2024

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Nordic transaction activity by segments 2022 vs. 2023

22

17%

28%

10%

20%

26%

23

19%

24%

9%

33%

16%

22

24%

9%

16%

25%

25%

23

34%

20%

12%

13%

20%

23 Norway Sweden Finland Denmark Nordics 13% 15% 22 23 22 23 22

25%

13%

13%

35%

18%

19%

10%

19%

34%

39%

20%

18%

8%

16%

41%

13%

25%

5%

17%

26%

14%

19%

23%

22%

26%

10%

25%

18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Office

Resi

Retail

Industrial/logistics

Other

Note: The “Other” category includes e.g. hotels and properties let to public-sector tenants. Source: Colliers

John Petersson Deputy Head of Research Nordics I Stockholm john.petersson@colliers.com

Gregers Nytoft Rasmussen Director, Head of Research I Valuation & Advisory I Copenhagen gregers.nytoft@colliers.com

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OFFICE - COLLIERS MARKET REPORT 2024

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OFFICE - COLLIERS MARKET REPORT 2024

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Strong office market with low vacancy rates compared to other countries Office market benefits from record-high employment Short commute time benefits office demand – only limited desire to work from home

Tenants are increasingly focusing on ESG

Mainly foreign investors are holding back

Accelerating success.

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OFFICE - COLLIERS MARKET REPORT 2024

Office summary

TRANSACTION VOLUME DKK BILLION

The Danish office market is solid despite eco nomic uncertainty. Vacancy is limited and has been declining in the aftermath of the corona virus pandemic. The demand for office space is supported by record-high employment, and Danish employees are less likely to want to work from home – unlike in other countries. Tenants are increasingly demanding modern and preferably sustaina bility-certified properties with flexible layouts. Activity in the investment market has been moderate with fewer for eign acquisitions, while Danish pension funds have been more active.

7

6

DENMARK

GT. COPENHAGEN

Ofice transaction volume in Denmark, hereof Greater Copenhagen, DKKbn

SHARE OF TOTAL TRANSACTION VOLUME

16 % DENMARK 27 % GT. COPENHAGEN

Office’s share of total transaction volume, Denmark and Gt. Copenhagen, respectively, %.

Yield gap between prime and secondary properties is narrowing

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

SHARE OF FOREIGN INVESTORS

3 %

3 %

15

16

17

18

19

20

21

22

23

24

Copenhagen CBD, prime

Copenhagen CBD, secondary

Aarhus, prime

Aarhus, secondary

DENMARK

GT. COPENHAGEN

Note: Based on transaction volume for office in 2023, Denmark. Source: Colliers

Note: Net initial yields, office. Source: Colliers

5

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OFFICE - COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

TOP 5 TRANSACTIONS

. 1

. 3

. 2

. 4

. 5

01 02 03 04 05 CODANHUS & KB32 1 NJALSGADE 19-23 LAUTRUPBJERG 7 FORBUNDSHUSET 1 HAUSER PLADS 20 2 BUYER: BUYER: BUYER: BUYER: BUYER: AP Ejendomme Pensam Danske Leasing Four trade unions Private investors

LOCATION:

LOCATION:

LOCATION: Ballerup

LOCATION:

LOCATION:

Frederiksberg & Copenhagen V

Copenhagen S

Copenhagen SV

Copenhagen K

ADDRESS:

ADDRESS:

ADDRESS:

ADDRESS:

ADDRESS:

Gammel Kongevej 60 & Kalvebod Brygge 32

Njalsgade 19-23

Lautrupbjerg 7

Sluseholmen 1

Hauser Plads 20

PRICE DKKM | AREA

PRICE DKKM | AREA 750 3 | 25,800 sq m

PRICE DKKM | AREA 500 | 36,000 sq m

PRICE DKKM | AREA

PRICE DKKM | AREA

~2,500 3 | 61,000 sq m

~400 4 | 10,000 sq m 200 | 5,500 sq m

Note: 1 Photo made available by CBRE. 2 Photo made available by Holscher Nordberg Arkitekter. 3 Indicative due to confidentiality. 4 Estimated by Colliers.

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OFFICE - COLLIERS MARKET REPORT 2024

Brisk letting activity and low vacancy

Throughout 2023, the Danish office market was characterised by high demand and lower vacancy rates than many other countries. Activity in the investment market was limited, while ESG has moved up the agenda for both tenants and investors.

Denmark has fairly low office vacancy rates in a European context - throughout 2023 it was around 5% according to Ejendomstorvet.dk. Vacancy peaked in the wake of the financial crisis at around 10% in 2012-2015. An important explanation for the low vacancy rate is steadily increasing employment, which set several records in 2023 despite rising interest rates and uncertainty due to

the war in Ukraine. This has ensured a sustained demand for modern office space, especially in Copenhagen.

Another explanation for the low vacancy rate is that com panies in Copenhagen and Aarhus have only experienced limited pressure from employees to work more from home and therefore no resulting decline in office space requirements.

Job growth continues after coronapause

3,100

3,000

2,900

2,800

2,700

2,600

2,500

14

15

16

17

18

19

20

21

22

23

Note: Number of FTEs (’000 persons, seasonally adjusted) over time in Denmark, 2014-2023. Source: Statistics Denmark, Colliers

21

OFFICE - COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

AKSEN, Hedeager 44, Aarhus N

Short commute time benefits office market During the coronavirus pandemic, working from home really took off and employees in many countries realised the benefits of working from home. This is especially true in big cities where commute times from the surrounding areas are long - either due to long distances or long com mute times with traffic jams or both. As more and more employees in these cities have been less interested in resuming their commute, compa nies are rethinking their space, design and technology requirements. Several major cities – such as London, Los Angeles, New York and San Francisco – have seen sharp increases in office vacancy rates. In Denmark, the need to work from home is generally much lower than in several other countries. For example, a survey conducted by global research network CESifo in

2023, with responses from approx. 42,500 office workers in 34 countries across the globe, documented that Danes have relatively few planned days of working from home compared to other countries. The survey also showed that Danes’ desire for working from home is at a very low level. For example, on average, Danes surveyed only wanted to work from home 1.15 days a week, or less than half the number cited by Americans. The widespread desire to work from home in the US may explain the high vacancy rates in major US cities, and in general, the prevalence of scheduled work-from-home days may explain the decreasing demand for office space and thus increased vacancy rates. But beyond that, the large-scale survey can provide important signals as to whether vacancy rates may increase further. The greater the difference between the

22

OFFICE - COLLIERS MARKET REPORT 2024

Top-3 answers from 34 countries: Why many people want to work from home

number of desired home working days and the actual or planned home working days, the more likely it is that vacancies will increase: If employees want to work more from home - e.g. to save commuting time - then it is likely that this will to some extent also trigger more working from home and thus less need for office space. However, in Denmark (and the Netherlands) there is lit tle difference between how much employees want to work from home and how much they actually work from home. Based on this, we believe that increased vacan cies triggered by a ‘homeworking effect’ are less likely to occur in Denmark than in most other countries in 2024. The underlying occupational market is stronger in Copenhagen than in many other major cities, and there fore office letting in the largest Danish cities is not prone to the same risks as in some foreign cities, where office vacancy rates continue to rise. At Colliers, we believe that there is unlikely to be a decline in corporate space requirements unless the Danish economy is hit by a major economic crisis with a drop in employment. Benefits of metro and light rail The CESifo study also found that saving on transport was rated as the biggest benefit of working from home by far, followed by reduced fuel and lunch costs. This high lights the benefits of companies being located close to public transport and/or major access roads. This speaks in favour of areas in Copenhagen with S-train or metro

60%

No transport

44%

Reduced fuel and lunch expenses

42%

Flexible work hours

Note: The three most frequent answers to the question: “What are the main benefits of working from home”. Respondents were able to select up to three answer options. Source: CESifo (Working from Home Around the Globe: 2023 Report), Colliers

proximity – either existing lines or the upcoming Sydhavn metro, scheduled for opening in 2024. Similarly, in Aarhus and Odense, we have seen increased interest in office space close to the light rail lines there – and we expect to see the same effect for the upcoming Greater Copenhagen Light Rrail in the suburbs northwest, west and southwest of Copenhagen (scheduled for commissioning in 2025).

Dusager 25, Aarhus N

23

OFFICE - COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

Only limited demand for more homeworking in Denmark

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Finland UK Actual/planned home working days Denmark USA

France

Norway Netherlands Germany

Spain

Sweden

Difference

Desired home working days

Note: Weekly home working days, selected countries. Source: CESifo (Working from Home Around the Globe: 2023 Report), Colliers

Danes commute less on average than other countries

23 24 25 26 27 28 29 30

Denmark

UK

USA

Finland

France

Norway Netherlands Germany

Spain

Sweden

Note: Average commute time, major cities, selected countries, minutes. The US figure is calculated as a simple average of commute times in minutes in the 10 largest cities. Source: Eurostat, TitleMax, Colliers

Copenhagen office vacancy rates are falling – quite unlike selected cities abroad

30%

25%

20%

15%

10%

5%

0%

21

22

23

Copenhagen

San Francisco

New York

Los Angeles

London 1

Note: Office vacancy rates in Copenhagen and selected cities abroad. 1 City of London. Source: Ejendomstorvet.dk, Colliers

24

OFFICE - COLLIERS MARKET REPORT 2024

Marmormolen Marmorvej 1, Copenhagen Ø

Discerning tenants demand energy-efficient properties

Vacancy rates in Copenhagen and Aarhus have been declining in the aftermath of the coronavirus pandemic and are now at 6.10% in Copenhagen and 7.24% in Aarhus (Q4 2023). The vacancies that still exist, however, mainly include outdated properties that do not meet the demands of more discerning tenants. We are increasingly seeing tenants actively opting out of leases without a sustainability certificate. This new demand has emerged as a result of an increased focus on ESG and corporate social responsibility. Many compa nies are investing in improving their sustainability pro file – both to help meet politically set climate goals and because it can be a competitive advantage vis-à-vis cus tomers and employees.

With a workforce that is increasingly dominated by smaller generations, we expect ESG policy to become a more important part of corporate branding and also a key factor in how companies can attract workers from the new, sought-after generation. As the demand for certified leases grows, we expect to see an increasing difference in the potential rent for certified and non-certified leases. At the same time, property owners with outdated properties risk experi encing longer vacancy periods unless the premises are energy retrofitted.

25

OFFICE - COLLIERS MARKET REPORT 2024

Low Copenhagen rent - methodology is part of the explanation

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

Tenants in Copenhagen have long benefited from low rents for prime office space compared to other European capitals. One of the reasons is that while other capitals – such as Stockholm and Oslo – are running out of building land, Copenhagen still has plenty of development sites. Even the Copenhagen CBD is growing as the Nordhavn (north harbour) development area has effectively become part of the central and most desirable office district.

In the other two Scandinavian cap itals, the demand for prime central locations is so high – and the availabil ity of land almost non-existent – that the two cities have significantly higher office rents than Copenhagen. While the best locations in Copenhagen cost DKK 2,250 per sq m p.a., the level in Oslo is around DKK 3,900 per sq m, and in Stockholm the price level is even higher at around DKK 5,450 per sq m. Two years ago, the price dif ference was even higher, but since then, both the Swedish krona and the Norwegian krone have depreciated significantly, so the rent gap in Danish kroner is currently smaller. However, another contributing fac tor of the large rent gap between Copenhagen and Stockholm is related to methodology, or rather dif ferences in the way the lettable area is calculated in the leases. There is no

international standard in this respect, and Denmark and Sweden in particu lar apply highly different methods. In Denmark, almost every conceiv able area is included in the calcula tion, such as external walls, columns, access areas, common parts and IT rooms. In Sweden, on the other hand, the area is calculated solely according to usable floor space for offices and lobby areas. As a result, there can be major dif ferences in the area statements, and two seemingly identical leases in Denmark and Sweden will often have different ”real office areas”. The difference in the area statement can be as much as 20-30%. In reality, this means that a lease will automatically be more expensive per square metre in Sweden, even though the rent may be the same for the two leases.

While differences in floor area may partially explain the wide range in top rents when comparing Copenhagen to other capitals, rents in Copenhagen are much lower. This is best illustrated when comparing the Danish capital to Oslo, as Norway has the same guidelines for calculat ing area as Denmark. There is no doubt that rents in Copenhagen are lower than in many other major cities, but the described differences in the area calculation can muddy the picture of the real difference. Nevertheless, Copenhagen is still inexpensive compared to most other capitals, and we believe there is still room for substantial rent increases mainly on prime Copenhagen CBD prop erties, especially once the availa ble land in central Copenhagen has been developed.

CASE

Great difference in how lettable space is calculated

THE NETHER- LANDS

RICS NIA (UK)

DENMARK

FINLAND

FRANCE

GERMANY

NORWAY

SPAIN

SWEDEN

+

+ + + + + + + + + +

+

+ + +

+ +

+ + +

+ + + + + + + + + -

+ + +

+

Office area

- - - - - - - - -

- -

- - - - - - - -

Building common parts

- - - - - - -

Building main IT rooms

+

- - - - - -

- - -

- - -

Toilets

- - - - - -

Stairs

Lifts

+

+

+

+ + +

+

Floor lift lobby

- -

External walls

Columns

+

-

Ducts & risers

Note: Building parts included in lettable space. Source: Colliers

26

OFFICE - COLLIERS MARKET REPORT 2024

Sustained wide gap between Danish and international office rent levels A. Net initial yield (start-2024) B. Rent level (start-2024) C. Rental growth, CAGR, 2019-2024

Helsinki A: 5.00% B: DKK 3,600 C: 1,57%

Oslo A : 4.75% B : DKK 3,900 C : 2.42%

Stockholm A: 4.25% B: DKK 5,450 C: 2.24%

Amsterdam A: 5.50% B: DKK 4,300 C: 5.50%

Berlin A: 4.90% B: DKK 4,200 C: 6.01%

Paris A: 4.15% B: DKK 7,450 C: 3.55%

Madrid A: 4.70% B: DKK 3,200 C: 0.57%

27

OFFICE - COLLIERS MARKET REPORT 2024

HOTEL INDUSTRIAL & LOGISTICS RETAIL RESIDENTIAL OFFICE

Aalborg A : 5.50% B : DKK 1,200 C : 2.83%

Aarhus A : 5.00% B : DKK 1,600 C : 2.71%

Copenhagen A : 4.00% B : DKK 2,250 C : 2.90%

Triangle Region A : 6.25% B : DKK 1,325 C : 3.79%

Odense A : 6.25% B : DKK 1,300 C : 1.61%

Note: Prime net initial yields, office (as of start-2024) and prime CBD office rent levels (as of start-2024) in selected cities in Denmark and the rest of Europe. Rent levels quoted in DKK per sq m p.a., excluding operating costs. Please note that area specifications vary from country to country, with rent levels therefore not strictly comparable. CAGR calculated based on rent per sq m in local currency to allow for exchange rate fluctuations. Source: Colliers

28

OFFICE - COLLIERS MARKET REPORT 2024

No active foreign investors in 2023

With a 2023 characterised by uncertainty and a transac tion drought, it can be difficult to map where the office investment property market is at and where it is headed. In November 2023, in Copenhagen, AP Pension acquired Codanhus in the district of Frederiksberg and Kalvebod Brygge 32 in the district of Vesterbro for a total of approx. DKK 2.5 billion, but until then, the year had only seen a few major transactions with office properties - and no transactions with properties above DKK 200 million. This is evidence of a market where investors are very cautious and reluctant, and where sellers who do not have to sell prefer to wait for better times before selling high-volume properties. Foreign investors in particular have been inactive. This may be because some of the foreign capital is managed by asset managers based in the UK and the US, both of which have high office vacancy rates. This may make

investors from these countries cautious about invest ing in a segment that is struggling at home. In addition, Swedish property companies and German institutional investors and asset managers, who have bought a num ber of core-categorised office properties in Denmark in recent years, may also be challenged by the current mar ket situation. The office transactions we have seen with an invest ment volume of over DKK 100 million have all been with domestic buyers, which further emphasises how reluc tant foreign investors are. AP Pension’s acquisition of Codanhus and Kalvebod Brygge 32 is a clear indication that the market has shifted and that major transactions can easily take place when there is a realistic seller and a buyer who dares to act when the opportunity arises.

In the rest of the Nordic region, we see a similar situation. The number of deals with office properties above DKK

Property companies waiting on the sidelines in 2023

2021

2022

2023

16 %

19 %

23 %

26 %

40 %

40 %

55 %

53 %

20 %

Property fund

Institutional investor

Other

Property company

Note: Breakdown of office transactions with a volume in excess of DKK 500 million in Denmark, Sweden, Norway and Finland, by investor type. Source: RCA, Colliers