Colliers Denmark Market Report 2024

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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