Colliers Denmark Market Report 2025

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RESIDENTIAL - COLLIERS MARKET REPORT 2025

HOTEL INDUSTRIAL AND LOGISTICS RETAIL RESIDENTIAL OFFICE

Challenging market conditions have shortened the pipeline

Annual completions (av.), 2020-2024 1

Annual pipeline (av.), 2025-2027 2

Copenhagen

316,500

145,500

Greater Copenhagen 3

365,000

160,000

Aarhus

318,000

128,000

Triangle Region

364,500

57,500

Odense

137,000

53,000

Aalborg

170,500

47,000

Note: 1 Annual average of completed residential floor space, sq m. 2 Annual average of projected residential floor space based on data from Byggefakta, sq m. 3 Greater Copenhagen in this context excludes Copenhagen and Frederiksberg. Source: Byggefakta, Statistics Denmark, Colliers

typical way to obtain financing is to pre-sell your project to an end-investor - a so-called ‘forward purchase’ deal - and use the forward purchase agreement to access con struction financing from a financial institution or use a ‘forward funding’ structure, where the investor, in addi tion to committing to buy the completed property, pro vides the ongoing financing of the construction. In these constellations, an investor who commits to tak ing over the fully developed project 18-24 months into the future will often demand a discount (typically in the form of a yield premium) to take on the market risk dur ing the construction period. The price agreed 18-24 months before the residential property is completed will therefore be lower than if the property was already com pleted today. Considering the reduction in price in a for ward purchase deal, the total cost including the devel oper’s risk premium under current market conditions exceeds the achievable price, which is why construction often does not start. This dynamic is the main reason construction has largely stalled. Projects being launched in today’s market are therefore dominated by financially well-capitalised devel opers (or developers with strong equity partners) who are less reliant on debt financing. The modest pipeline of new supply in the short term gives owners of existing

housing stock better prospects for rent increases, as they face less competition from newbuilds.

Changes in the market give prospects for increased construction activity As 2024 wore on, investment activity and changes in mon etary policy collectively contributed to a more optimis tic future for developers. Several deals in 2024 restored pricing consensus, while recent rate cuts by central banks improved financing conditions. As a result, the future looks brighter for developers – and investors. At the same time, upward pressure on rent levels in selected locations has reinforced developers’ and inves tors’ assumptions about the rental growth factored in when assessing property values at completion. A cocktail of rising rent levels and expectations of yield compression creates the basis for higher development activity in the coming 12 months. We expect this activ ity to be concentrated in areas with favourable popula tion growth prospects and rising market rents, especially Greater Copenhagen. However, despite the drop in interest rates, we predict that financing and regulatory conditions will remain a challenge, which may limit the number of new development schemes.