Colliers København Delrapport 2023 UK

RETAIL

From one storm to another

down, making landlords generally more flexible and accom modating. Because of the deteriorating market conditions, already established retailers in secondary locations have been given the opportunity to relocate to the Copenhagen high street, Strøget. Foreign market players remain active in the Copenhagen retail market, with e.g. Iris Galerie and Nike opening flagship stores. Despite the less favourable market conditions, Copenhagen retail rents in general remained stable in 2022. However, due to a more uncertain market outlook, including a drop in consumer spending, mainly secondary retail locations have been challenged, also in terms of rent levels coming under downward pressure. Prime locations, on the other hand, have been relatively unaffected, with rent levels here expected to remain stable in the short/medium term. Dark clouds still looming The change in market conditions is yet to manifest itself in vacancy rates, which remain low for Copenhagen retail lease units. However, most recently, demand has slowed, gradually driving up the number of retail vacancies as a result. Moreover, judging by ever-weakening Danish house hold budgets and the record-low Danish consumer confi dence indicator, multiple retail chains will be forced to scale back shop numbers just as several minor retailers are fac ing bankruptcy. This will translate into a higher number of retail vacancies, mainly in more secondary locations, with a heightened risk of vacancy and prolonged re-letting periods. In consequence, occupational demand is expected to be concentrated around the Copenhagen high street, Strøget. Activity in the Copenhagen retail investment property market was sluggish in 2022, in particular in the year’s final quarter. Investors have generally become extremely cau tious and selective. Nevertheless, demand is still fair for well-located retail properties with virtually no vacancy risk. The sale of Galleri K in central Copenhagen is one of the transactions serving as an example, although the sale took

Consequently, conditions have turned grim for Copenhagen retailers. Having already been called upon to be more flexible and accommodating due to the pandemic, some property owners may well be required to continue along those lines for some time to come. Although commercial leases subject to NPI-linked rent index ation may offer some hedge against inflation, the situation is different in the retail market as far as small tenants are con cerned. In this tenant segment, the fewest tenants are in to day’s market able and prepared to accept full rent indexation. However, this does not apply to tenants at prime shopping streets and high streets, as they are typically backed by finan- cially strong chains, etc. This is not to say that these tenants freely accept maximum rent adjustment or are prepared to sign a lease agreement without a cap on rent increases. Exact- ly this has come to the fore in the course of 2022, with multi ple Copenhagen retail tenants pushing for a cap on rent ad justments along with more lenient lease terms. Nevertheless, activity remains intact in the Copenhagen retail market, driven by newcomers that have made a suc cessful market entry, including Shaping New Tomorrow, Maanesten and Barons. Similarly, activity has been brisk among retailers that have been anticipating a market slow Copenhagen retail market on the threshold of 2022. However, it did not take long before a cocktail of dramatic hikes in inflation, energy prices and interest rates along with high geopolitical uncertainty triggered a sharp drop in consumer confidence, followed by a drop in real wages. Having pulled through the coronavirus pandemic, sentiment was bright in the