Colliers Market Report Denmark 2023

201

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics Residential Office

Colliers Market Report Denmark 2023

Accelerating success.

202

Colliers Market Report 2023

Accelerating success.

203

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor el I ndustrial & l i ics e Residential Office

Contents

Executive summary & Welcome Letter from the CEO Facing a new reality

5

Danish investment market Brisk activity despite slowdown in mid-2022

6

Nordic overview

16

Office Strong letting market defies uncertain times

20

Residential Sustained population growth in major cities

42

Retail Corona behind us - but new obstacles looming ahead

62

Industrial & logistics Strong occupational market despite first-ever drop in online sales

78

Hotel The hotel market has rebounded

98

Danish economy Robust economy bolstering Denmark for low-growth period

110

Market practices

116

Definitions

117

About Colliers

118

204

New Nordic opportunities

With the Colliers-Pangea Property Partners combination, we added the leading property advi sor in the Swedish and Norwegian markets to our portfolio, in the process making new exper tise available to our clients. Pangea has facilitated some of the largest transactions in the Nordics with an average transac tion volume of SEK 800 million. The largest single transaction exceeded the SEK 90 billion mark. In addition, Pangea was named Best Real Estate Advisor and Consultant in the Nordics in the Euromoney poll in 2021.

Following the combination, the Pangea name and brand was phased out and became a part of Colliers, while the strong specialist skills and expertise will be retained and enhanced. In the corporate finance field, for instance, the combination has enabled Colliers to ramp up its corporate strategic advisory in terms of portfolio composi tion, market research and other fields.

Colliers Capital Markets is market leader in the Nordics In addition, the combination with Pangea will add considerable resources within debt ad visory, business formations and corporate restructuring. In the field of project finance, the combination will broaden Colliers’ service offering, including buyside advisory, negotia tion, business management and investment in alternative investment funds.

27 %

Nordics

New

30%

Finland

Norway

22%

Sweden

558

43%

Experts

Denmark

Source: Real Capital Analytics, Colliers

1

Colliers Market Report 2023

Welcome to Colliers Market Report Colliers Market Report provides you with key insights and an overview of the Danish mar ket for commercial and investment property. This year’s report is no exception, although we have added a Nordic touch: In September 2022, Colliers EMEA was happy to announce the combination with Pangea Property Partners, a leading transaction advisory provider in Sweden and Norway. We were already the market leader in Denmark with a market share of more than 40% measured in terms of transaction volume in the commercial property market but can now ramp up our services to those of our clients who invest and operate in the Nordics as all international clients in future will be able to tap into the expertise of 80 capital markets specialists and more than 550 professionals across the entire Nordic region.

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics t Residential Office

Based on an overall market share of 27% in the Nordics, our clients gain access to a broad range of attractive services whether they are looking to invest in Denmark, Norway, Sweden or Finland.

Left photo: Left to right: Carsten Gørtz Petersen, CEO, Denmark, Erik Høvik, Head of Capital Markets, Norway and André Lundberg, Head of Capital Markets, Sweden. Right photo: Left to right: Carsten Gørtz Petersen, CEO, Denmark and Bård Bjølgerud, CEO Nordics (Sweden, Norway & Finland).

Accelerating success.

2

Colliers Market Report 2023

Executive summary

Strong office market defies war and financial unrest Population growth supports sustained strong residential market New retail landscape : landlords and tenants required to work together Substantial shortage of up-to-date storage and logistics facilities Danish hotels mustering renewed solid KPIs Solid employment levels to buoy up Danish economy

Residential assets remain the most coveted

Denmark

15 % Office 39 % Residential 20 % Retail 18 % Industrial & logistics

86 DKKbn

2 % Hotel 7 % Other

Greater Copenhagen

18 % Office 45 % Residential 18 % Retail 12 % Industrial & logistics

49 DKKbn

2 % Hotel 5 % Other

Note: Transaction volumes by asset type, 2022 Source: Colliers

Transaction volume climbed to one of the highest levels ever in 2022 despite sluggish H2

120

100

80

60

40

20

0

13

14

15

16

17

18

19

20

21

22

Greater Copenhagen

Denmark, excluding Greater Copenhagen

Note: Transaction volume (DKK billion), by geographical location, 2022. Source: Colliers

3

Colliers Market Report 2023

International investor predominance in Copenhagen, but high proportion of domestic inves tors in non-Copenhagen locations drives down the national level in relative terms

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics R Residential Office

Denmark

Greater Copenhagen

57 %

54 %

43 % Domestic

46 % Domestic

International

International

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

Office

Residential

Core 45 % Value-add 51 % Opportunistic 2 % User 3 %

Core 83 % Value-add 16 % Opportunistic 1 %

Retail

Industrial & logistics

User 44 % Core 42 % Value-add 13 % Opportunistic 1 %

Core 64 % Value-add 32 % Opportunistic 2 % User 3 %

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, 2022 . Source : Colliers

4

Colliers Market Report 2023

Carsten Gørtz Petersen Partner and CEO (MRICS)

5

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics R Residential Office

Facing a new reality

If we were to caption the past 12 months, we could be tempted to resort to the popular saying, “The faster you rise, the harder you fall.”

On the threshold of 2022, most economic markets were soaring, and analysts and market players antic ipated another golden year for the Danish property market. COVID-19 was largely a problem of the past, growth was stable and interest rates historically low, and the budding signs of rising inflation were held to be a strictly short-term phenomenon. However, the Russian invasion of Ukraine prompted massive hikes in energy and food prices, and cen tral banks had no choice but to resort to substantial rate hikes to dampen economic activity and get inflation under control.

The Danish property market witnessed the effects in autumn: Several investors became wary, and transaction activity more than halved in Q3-Q4.

Are we anticipating a crisis that will never materialise? We are now facing a new reality where many ask themselves what kind of crisis we can anticipate. Compared to themost recent crisis in 2008, we see several similarities, but also differences: Employment levels remain high, private savings are substantial, and the banking sector better bolstered. Could it therefore be that we are anticipating a crisis that will never materialise? We are no doubt in the mid dle of a correction phase following recent years’ massive hikes in the property market, and we may well see an additional correction. However, unless we should plunge into deep recession with a sharp drop in economic activity, we at Colliers do not foresee a looming Danish property crisis with massive price declines, bankruptcies and forced sales. Our research indicates that we will have entered H2 2023 when transaction activity rebounds to nor mal. However, we also know from experience that it is impossible to time when exactly a market bot toms out. To await a crisis that may never materialise is a risky strategy, too. Opting for the right strat egy requires in-depth knowledge of the market, segments and locations that you as a property investor are interested in.

Colliers Market Report 2023 gives you a head start. We believe that transparency and collaboration pro vide the best basis for making the right decisions as well as sound investments.

Happy reading!

February 2023 Carsten Gørtz Petersen Partner and CEO (MRICS)

carsten.goertzpetersen@colliers.com

Accelerating success.

6

Colliers Market Report 2023

Danish investment market

Lowest total property return since 2009

Brisk transaction activity in H1 2022 followed by slowdown

Widespread market uncertainty about e.g. pricing , interest rates and macroeconomics at start-2023 Uncertain market conditions with few buyers providing attractive invest ment opportunities

Rejected mark-to-market taxation expected to benefit investments

7

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics Residential Office

Accelerating success.

8

Colliers Market Report 2023

Brisk activity despite slowdown in mid-2022

Rising interest rates and recession concerns dampened activity in the Danish market for commercial and investment property in H2 2022. Nevertheless, in terms of activity, the year was one of the best years ever. Sustained capital abundance suggests that activity will pick up in 2023 when macroeconomic key indicators and interest rates stabilise and pricing con sensus is restored. In terms of transaction volume, 2022 failed to match the record-breaking year 2021, although it was one of the better years overall in the Danish property market.

Transaction volume climbed to one of the highest levels ever in 2022 despite sluggish H2

120

100

80

60

40

20

0

13

14

15

16

17

18

19

20

21

22

Greater Copenhagen

Denmark, excluding Greater Copenhagen

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

9

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor o l I ndustrial l i ics Residential Office

The first six months of 2022 continued the favourable trends of 2021, with the volume of transactions exceed ing the H1 2021 equivalent, driven by substantial prop erty-specific placement requirements among large investors and property funds as well as newly estab lished international funds and funds of record-break ing size. This cushioned the immediate impact on the property market – unlike stocks – when Russia invaded Ukraine in late February. Before the summer holidays, widespread uncertainty was sparked by sharp increases first in inflation, then in inter est rates. The summer months saw a certain slowdown in price hikes and interest rate increases, allowing for

an optimistic property market outlook at start-H2 2022. However, cautious optimism was dashed by renewed, sharp and rapid interest rate increases in September and October against a backdrop of inflation that seemed to spiral out of control, exacerbated by supply chain con straints, COVID-19 lockdowns in China, and not least hikes in energy prices triggered by the war in Ukraine. The higher interest rates and, by extension, higher financing costs, put upward pressure on yield require ments, as a knock-on effect of the lower LTVs offered in the banking sector due to its focus on the positive “critical rent” that properties can produce when interest rates move higher.

Critical rent

”Critical rent” is a set of rules defined by the Danish FSA, stipulating how much rental income is required to cover interest, instalments and administration margins over a period of, say, 30 years for dwellings, given a fixed rate of interest, mind you. As interest rates move higher, repayment by means of current operating income becomes more difficult, and in the process, achievable LTVs become lower.

Deteriorating financing options as interest rates move higher

Loan-to-value

80%

70%

60%

50%

40%

30%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5% 7.0%

Yield

Jan 2022, rate 2.08% Jul 2022, rate 4.17% Oct 2022, rate 5.09% Nov 2022, rate 6.16%

Note : Rate denotes interest rate, quoted as the yield on a 30-year bond, residential property. Source : Colliers

10

Colliers Market Report 2023

Residential by far the largest segment

15 % Office 39 % Residential 20 % Retail 18 % Industrial & logistics

Positive total return in 2022 – but method is misleading

The fact that H2 2022 saw yield requirements and thereby prices coming under pressure is reflected in the year’s total return. Not since 2009 have property returns been this meagre, and similarly, this year’s capital growth is the first since 2012 to be in negative territory. It may seem surprising that the year’s total return turns out positive, but this outcome is largely determined by the applied methodology, involving a full-year compara tive analysis of 2022 and 2021. This has been the histori cal approach to ensure a sufficient basis of observations and data that can be considered valid. As a result, the estimated total return exceedingly mirrors 2021, a year of substantial yield compression, a year-start 2022 that largely continued where 2021 left off, followed by hikes in yield requirements in H2 2022. To gauge the effect from end-2021 to end-2022, we have in this market report included an additional total return analysis, albeit based on fewer observations and with a wider margin of uncertainty. In this period, total return is seen to turn negative, standing at -5.9%, clearly reflecting developments in the market for commercial and invest ment property since start-2022. The decline is driven mainly by yield decompression, which seen in isolation has reduced the total return by 11.6 ppts.

2 % Hotel 7 % Other

International investors predominate the Danish market

54 %

46 % Domestic

International

Core assets continue to drive the market

61 % Core 23 % Value-add 5 % Opportunistic 11 % User

Note: Total transaction volume 2022, Denmark, by segment, investor origins and risk profile. Please also refer to Definitions, p. 117. Source: Colliers

TOP 5 transactions | All segments

Property

Location Seller

Buyer

Type

Area Price 1

Copenhagen/ Aarhus

Project Nacre 2

NREP

OCP

Residential

110,000

~4,800 3

Four Magasin properties 2

ATP Ejendomme & PensionDanmark

Peek & Cloppenburg (Magasin)

Retail

135,000

~4,400 3

All Denmark

Copenhagen/Kgs. Lyngby/Aarhus

Student housing 2

Basecamp

Xior Student Housing

Residential

67,000

~3,400 3

Galleri K

Copenhagen K

Aviva Investors

Jeudan

Retail

25,000

~2,200 3

Supermarket portfolio 2

Cibus Nordic Real Estate

Retail

76,000

2,080

Greater Copenhagen SG Nordic Real Estate

Note : The listed transactions include disclosed sales only. Certain confidential or off-market transactions are not included. 1 Prices quoted in DKK million (rounded figures). 2 Portfolio sale. 3 Indicative due to confidentiality. Source : Colliers

11

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics R Residential Office

Uncertainty carrying over into 2023 As of year-start 2023, the job market has proved stronger and more resilient than anticipated, with several key mac roeconomic indicators suggesting that inflation has prob ably peaked. Nonetheless, the property market is still gripped by widespread uncertainty due to continued inter est rate concerns and recession fears, among other things. At the same time, the limited number of sales has been a contributing factor in clouding market transparency. The uncertainty will leave its mark on the first six months of 2023, all the while investors are trying to regain their footing. A narrow field of investors, all bringing to the table expectations that prices should be below the peak some 9-12 months ago, presents a challenge in a market where sellers did not start to align their expectations to the new normal until year-end 2022. Meanwhile, many investors are sitting on the sidelines, just like they did in the better part of H2 2022. They are awaiting more stable market and interest rate conditions and more stable property pricing before making new investments.

Potential tailwinds could rapidly improve market conditions Still, we believe that the market could be in for a quick turnaround, heralding numerous and high-volume investments. This is supported by the fact that an unprec edented capital abundance had accumulated at year-end 2021, e.g. in funds for property investments, just as sev eral pension funds and property companies announced plans to expand their property portfolios. However, most large-scale potential investments were hampered by uncertainty in 2022, with sizable amounts of money still ready and waiting to be invested in brick and mortar. As soon as key macroeconomic indicators start to stabi lise, restoring predictability and pricing consensus, it is likely that activity will pick up, just like the repeated reo pening of society after the coronavirus pandemic trig gered something along the lines of a ketchup effect. H2 2022 was also characterised by a wide gap between sellside and buyside price expectations. Mainly the sell side is increasingly coming to terms with the change in the market and the drop in prices. These are the first

Yield decompression severely reduces capital value regardless of method

Full-year 2022 vs. full-year 2021

End-2022 vs. end-2021

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 and investment property, Greater Copenhagen. Source : Colliers

12

Colliers Market Report 2023

Lowest total return since before the financial crisis

30%

10% 15% 20% 25%

0% 5%

-10% -5%

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

Total return

Income return

Capital growth

Note : Annual total return on commercial and investment property, Greater Copenhagen. Source : Colliers.

signs of market activity rebounding, but against a differ ent pricing backdrop than a year ago.

tion and demand that will invariably follow once the tide turns. When this will happen is of course hard to tell, and the path may be paved with numerous uncertainty fac tors and price declines, but not necessarily so. Rejected mark-to-market taxation good news for investments Traditionally, mainly foreign investors have considered the political system to be among Denmark’s strengths on account of substantial political stability and virtually no market interventions. In recent years, however, investors have revised their per ception, mainly due to the so-called Blackstone interven tion, aimed at “short-term property speculators”. In July 2020, an amendment of section 5(2) of the former Danish Housing Regulation Act made it harder to modernise apartments for the purpose of rent hikes. Then, plans of mark-to-market taxation were announced, imposing reg ular taxes on the value increment of major properties, and in 2022, a majority in the Danish Parliament voted to introduce a 2-year cap of 4% on annual residential rent adjustments.

Uncertain market offering opportunities The low activity level at year-start 2023 is widely believed to be a short-lived phenomenon, reflecting uncertainty in terms of pricing and where the market is headed as well as when it bottoms out. In addition, the limited activity gives rise to investment opportunities because the field of competing prospective buyers has narrowed. In our opinion, it is possible to make acquisitions on favourable terms, provided an investor has the stom ach to seize current opportunities and, appreciating the inherent risk, submits a bid more aligned with present sellside expectations. Such investments become feasible that would normally be rendered unfeasible in a more normal market where an investor would face intense competition from fellow prospective investors. In the current market, investments potentially impair short-term returns because financing poses a challenge and because pricing is subject to some uncertainty. Even though yield levels should not rebound in near future to the levels seen at year-start 2022, it will be possible for an investor to jump the queue in terms of the competi

Because of the 5(2) amendment, some foreign investors exited the market for old-stock residential properties

13

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor H t l I ndustrial l gi ics R Residential Office

(with modernisation potential). Similarly, the announced introduction of mark-to-market taxation gave rise to con cerns in foreign investor circles, not least among funds focused on operating income streams, because ear lier tax payment could jeopardise their business model. Some investors have started to question the traditional Danish stability of market conditions: Will conditions now change from year to year or from election to election? However, mark-to-market taxation was off the table when the new Danish left-right coalition government (the Social Democrats, Liberals and Moderates, mustering an independent majority vote) introduced its detailed polit ical programme in December 2022. This has served to rekindle international investor demand. The market has largely priced in the effects of the anticipated mark-to market taxation, and with the rejection of the taxes, this has a potentially favourable effect on property pricing. Sharp drop in residential transactions in 2022 … The postponement of development schemes in early 2022 was one of the factors driving the decline in transactions in the residential segment. In addition, the segment bore the brunt of the stricter financing requirements and the lower LTVs due to the rules of critical rent (see p. 9), which in combination with pricing based on low yields severely impinged on the achievable return on equity. In this

respect, commercial properties represent a more attrac tive alternative, often offering higher returns and easier financing opportunities. 2022 was also characterised by the retail sector making a great comeback, with several high-volume transactions driving up transaction volume to a level nearly twice the volume of 2021. … but poised for a comeback in 2023 Although the share of residential transactions dropped in 2022, the picture is set to change anew in 2023. The severe shock due to inflationary movements and, ulti mately, financing costs, will subside, with the sellside and buyside increasingly becoming aligned in terms of pric ing. More than anything, the dark clouds forming over the economy will fuel the demand for low-risk property assets offering stable returns – characteristics met by residential investment property. Demand for logistics facilities will remain strong, with 2022 only confirming the need for stockpiling in response to heightened supply-chain uncertainty and geopolitical unrest around the world.

Office properties in secondary locations have been in strong demand in recent years due to the intense com

Restored pricing consensus is required if activity is to pick up

H1 2022

H2 2022 - Q1 2023

Expectations for Q2 2023 onwards

No. of players

P1 P0

P1

P0

P0

P2

Buyside

Price expectations

Sellside

Activity

Note : A cocktail of rising interest rates, the risk of a sustained downtrend in prices, significant macroeconomic uncertainty along with dashed hopes of fire sales has made buyers lower their price expectations significantly compared to the sellers, many of whom have not been forced to sell. Once pricing consensus is restored, activity will pick up in 2023. Source : Colliers

14

Colliers Market Report 2023

Aerial photo: Amager and Amager Beachpark, Copenhagen S

petition and low yields in prime locations, mainly in Copenhagen. Although investor appetite will remain intact over the next 12 months, tenant covenants and vacancy rates will be key concerns, being prone to a risk typically exposed in downturns. Limited capital growth prospects in 2023 As of year-start, 2023 is characterised by the same trends that prevailed in 2022, in particular in the year’s final quarter. Sustained widespread uncertainty about the economic situation and interest rate movements therefore keep most investors safely on the sidelines. Despite bud ding signs of inflation coming under control, the fallout margin continues to be too wide for the taste of many investors, with bid levels in many instances still fall ing way short of sellside expectations. However, activ ity is expected to pick up as 2023 wears on. By and by,

previous widespread recession fear has been replaced by brighter expectations for the year. Recession is still expected to hit, but Danish economy is presumably in for a softer landing than previously indicated. Together with a decline in inflation rates, the downturn will only have a limited effect, not only on demand but also on yield requirements on Danish property assets. Yield requirements will remain under upward pressure in H1 2023 as the full effect of the autumn’s increase in interest rates is yet to materialise, just as the gap between buyside and sellside price expectations remains wide. Although the picture continues to be muddled by uncer tainty, the second half of the year may see renewed activ ity, because yield requirements are expected to stabilise. Conversely, the effect of rent indexations on account of high inflation rates in 2022 will buoy up capital growth. Overall, this spells prospects of low but positive capital growth in 2023.

Emil Helmsøe-Zinck Senior Director & Head of Valuation & Advisory emil.helmsoee-zinck@colliers.com

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

15

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics Residential Office

Why a commercial property price index?

The past two decades have seen an increasing amount of capital being fun nelled into investment property as real estate is increasingly considered an attractive alternative asset class to stocks and bonds.

THE MOUNTING DEMAND has clearly manifested itself in Denmark too, with 2022, despite challenges in the second half of the year, turning out to be one of the best years ever in terms of transaction volume. Whereas stocks and bonds are easy to price, investment proper

ties are much more diversified products that are only rarely traded. However, the Colliers commercial prop erty price index represents a way to overcome this issue, by applying data from both property sales and valuations in lieu of actual trades.

Sky-high inflation and uncertainty made 2022 the least profitable post-financial crisis year

2022

2000-2022

Return

Mean return

Risk

Sharpe ratio

Commercial property, Greater Copenhagen 1

1.5%

9.6%

5.9%

1.22

Nordea benchmark 7-year bonds

-15.6%

3.9%

6.5%

0.23

MSCI Denmark Gross Total Return Index

-4.3%

14.6%

25.3%

0.48

Note : Average return and risk on commercial property, bonds and stocks. 1 Please note that the Colliers property price index is based on observations recorded 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 (cap ital growth) and the net ini tial yield calculations, we have used a hedonic multiple regres sion analysis based on empirical data collected from more than 6,500 property sales and prop

erty valuations in the Greater Copenhagen area since 1985, all involving Colliers (pre-2018, Sadolin & Albæk). The model cov ers all types of commercial prop erty, where individually fixed prices are applied for the various property characteristics, mainly

location, use, state and condi tion/quality, suitability/rationality and economies of scale, as a cor rective measure to account for the differences between individ ual properties.

16

Colliers Market Report 2023

Nordic overview

Denmark

Rock-solid public finances and market dominated by domestic investors Stable investment market with a volume exceeding NOK 100bn again Norway Solid transaction activity despite the nearby Russo-Ukrainian war International market with substantial net inflow of foreign capital Finland Sizeable listed property sector taking a large hit in 2022 Transaction volume down -42%, but still the largest market in the Nordics Sweden Second-highest transaction volume in the Nordics for the first time since 2009 International investors continue to predominate the market

17

Colliers Market Reoort 2023

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l gi ics Residential Office

Norway EUR 10.4bn 15 deals

Finland EUR 7.8bn 16 deals

Sweden EUR 19bn 38 deals

Denmark EUR 11.5bn 16 deals

Note: Number of deals denotes transactions with a transaction volume in excess of EUR 100 million. Source: Colliers

18

Colliers Market Report 2023

Nordic overview

TOP 5 transactions | All segments

Portfolio

Country Seller

Buyer

Type

Area Price 1

Minority stake in SBB portfolio, social infrastructure

Pan-Nordic 2

SBB

Brookfield

Education

na ~2,100

Heimstaden Bostad

56% of portfolio (JV)

Sweden

Allianz

Residential

na ~1,600

Remaining 50% of Svenska Myndighetsbyggnader 4

Sweden

SBB Nordics Kåpan Pensioner

Public tenants

~300,000 4

~800

Project Nacre

Denmark

NREP

OCP

Residential

110,000

~700

Multiple (Swedish)

Stenhus Fastigheter

Property company

Randviken Fastigheter AB 5 Sweden

~520,000 4

~700

Note: 1 Prices quoted in EUR million (rounded figures), all indicative due to confidentiality. 2 Nordic portfolio with GAV-split: Sweden (55%), Norway (38%), Finland (5%) and Denmark (2%). Value based on SEK 44.9bn (book value as of Q3 2022 and agreed transaction price including 50% of the earn-outs). 3 Prior to the transaction, Kåpan Fastigheter owned 50% of the portfolio, achieving full ownership in the transaction. 4 Estimated area (sq m). 5 Swedish listed company, reported property value and area in Q1 2022. Source : Colliers

Nordic monthly transaction activity in 2022

14

12

10

8

6

4

2

0

Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct -22 Nov -22 Dec-22

Sweden

Norway

Finland

Denmark

Note : Transaction volume quoted in EUR billion. Source : Colliers

19

Colliers Market Report 2023

Hotel Industri & logistik Retail Bolig Kontor H l I ndustrial l i tics Residential Office r B

Transaction volume by segments (2022 vs. 2021), %

2022

2 % 7 %

6 %

15 %

5 %

25 %

17 %

18 %

17 %

Denmark

Norway

17 %

10 %

25 %

39 %

20 %

17 %

Nordics

4 %

12 %

13 %

17 %

21 %

27 %

19 %

Sweden

Finland

24 %

23 %

28 %

20 %

14 %

13 %

14 %

10 %

2021

4 %

5 %

2 %

18 %

4 %

13 %

29 %

17 %

13 %

23 %

8 %

Norway

Denmark

20 %

13 %

56 %

17 %

Nordics

17 %

3 %

11 %

16 %

27 %

22 %

13 %

Sweden

Finland

18 %

9 %

13 %

33 %

29 %

33 %

8 %

7

%

Source : Colliers

Office

Residential

Retail

Industrial/logistics

Hotel

Other

Mikael Söderlundh Head of Research Nordics & Partner, Stockholm mikael.soderlundh@colliers.com

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

20

Office - Colliers Market Report 2023

Office

Strong office market defies war and financial unrest Record-high inflation poten tially triggering jump in rents

Tenants granted shorter con tractual commitment terms

Sustainable building topping tenant and investor agendas

Infrastructure whetting for eign investor appetite for new urban districts

Vester Søgade 10, Copenhagen V

21

Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

Accelerating success.

Office - Colliers Market Report 2023

22

22

Office summary

Transaction volume DKKbn

12 9

The Danish office market has remained strong, reporting brisk activity and low vacancy despite record-high inflation, rising interest rates, the war in Ukraine and economic uncertainty. Demand has been driven by exceptionally strong employment, but mainly the lessons learnt during the pandemic have made tenants call for increased flexibility, e.g. in terms of lease agree ments with shorter or no commitment as well as easily up- or down-scalable premises to fit requirements and workload. In addition, it remains to be seen if the 40-year inflationary high will take full effect, driving up rent levels substantially. Yield decompression in Copenhagen and Aarhus 0% 1% 2% 3% 4% 5% 6% 7% 8% 23 22 21 20 19 18 17 16 15 14 Copenhagen CBD, secondary Copenhagen CBD, prime Aarhus, secondary Aarhus, prime

Denmark

Gt. Copenhagen

Share of total transaction volume

15 % Denmark 18 % Gt. Copenhagen

Share of foreign investors

30 % Denmark

35 % Gt. Copenhagen

Note: Based on transaction volume for office in 2022, Denmark. Source : Colliers

Note: Net initial yields, office. Source: Colliers

Office - Colliers Market Report 2023

23

Hotel Industri & logistik Retail Bolig Kontor l I ndustrial l i ics Residential Office

TOP 5 transactions

1

. 2

. 3

4

Foto: Cadwalk

. 5

01 02 03 04 05 Amager Strandvej 390/ Hedegårdsvej 88 Fadet 2-4, etc. Carl Jacobsens Vej 30 Vester Søgade 10

Gamle Carlsberg Vej 3

BUYER:

BUYER:

BUYER:

BUYER:

BUYER:

Wihlborgs LOCATION:

ATP Ejendomme

Industriens Pension

Danica Ejendomme

THI Investments

LOCATION:

LOCATION:

LOCATION:

LOCATION:

Copenhagen S/Kastrup Copenhagen V

Valby

Copenhagen V

Copenhagen V

ADDRESS

ADDRESS:

ADDRESS:

ADDRESS:

ADDRESS

Amager Strandvej 390/ Hedegårdsvej 88

Diverse

Carl Jacobsens Vej 30

Vester Søgade 10

Gamle Carlsberg Vej 3

PRICE DKKM | AREA

PRICE DKKM | AREA

PRICE DKKM | AREA

PRICE DKKM | AREA

PRICE DKKM | AREA 440 I 9,900 sq m

1,075 I 51,800 sq m 965 I 21,500 sq m ~620 1 I 16,200 sq m 591 I 13,600 sq m

Note: 1 Indicative due to confidentiality

24

Office - Colliers Market Report 2023

Lautrupsgade 13-15, Copenhagen Ø

Strong letting market defies uncertain times Office occupational demand remained strong throughout 2022, a year of rising interest rates and high inflation, but also sky-high employment levels. New office market trends may trigger a call from tenants for shorter leases, flexible layouts and sustainable premises.

At year-start 2022, Danish economy boasted strong demand for goods and services as well as record-high employment. However, the war in Ukraine, a 40-year inflationary high and rising interest rates have given rise

to uncertainty. Nevertheless, the economy has largely retained momentum, and as 2022 wore on, office occu pational demand remained strong, not least in central districts of Copenhagen and Aarhus.

25

Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

A closer look at Copenhagen demand in terms of reloca tion patterns reveals that businesses increasingly move closer to the Capital, away from the environs, whereas few businesses relocate out of the city. To some busi nesses, mainly in growth-industries like the professi ons and knowledge-intensive sectors, a central loca tion potentially provides a competitive edge in the fight for young talent, often preferring a workplace in proxi mity of city life, cultural offerings and public transport.

Coupled with moderate Copenhagen CBD office supply and limited development opportunities, this has driven up office rent levels for contemporary office space in central locations. In the CBD, the strong demand is reflected in record low vacancy rates as of start-Q4 2022, and vacancies are largely reported in old, functionally obsolete properties that fail to meet today’s tenant requirements.

Historically low office vacancy rates in Copenhagen and Aarhus

14%

12%

10%

8%

6%

4%

2%

0%

13

14

15

16

17

18

19

20

21

22

Copenhagen Greater Copenhagen Aarhus

Note: Vacancy rates, office . Source: Ejendomstorvet.dk, Colliers

26

Office - Colliers Market Report 2023

Despite high employment at year-end 2022, all forecasts have Denmark headed for an economic slowdown, pos sibly even recession. Against this backdrop, we believe that most districts across Denmark are likely to see a drop in office occupational demand and, by extension, a rise in vacancy rates. Whenever the market is belea guered, it often becomes clear which properties are aligned with tenant demands and which have instead benefited from low vacancy levels and few alternatives on the supply side. If you are a landlord, we therefore advise you to be aware of a possible vacancy risk already at this stage, and to enter into a close dialogue with ten ants and be accommodating to their requirements so as to be ready to act swiftly and be agile when needed.

Boom in Danish employment levels in recent years

2,500,000

2,400,000

2,300,000

2,200,000

2,100,000

2,000,000

13

14

15

16

17

18

19

20

21

22

Note: Number of FTEs, Denmark. Source : Statistics Denmark, Colliers

27

Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

Amager Strandvej 390, Kastrup

Old-stock buildings predominate supply in central Copenhagen

Copenhagen K

Copenhagen V

Copenhagen S

Nordhavn/Copenhagen Ø

Copenhagen, other

West of Copenhagen

Northern Zealand

0

50,000

100,000

150,000

200,000

Built in or pre-2000 Built post-2000

Note: Office space offered to let (sq m) in Copenhagen and environs as of 2 January 2022 based on unique office lets. Breakdown of supply by location and construction year of premises. Source: Ejendomstorvet.dk, Colliers

28

Office - Colliers Market Report 2023

Substantial hidden office demand in and around Copenhagen

-400,000 -200,000 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000

10

11

12

13

14

15

16

17

18

19

20

Actual change

Estimated change

Accumulated demand

Note: Office premises (sq m), Copenhagen proper and environs. Actual change based on change in tenanted office spaces, with the estimated change calculated based on employment trends. Due to a revised estimation practice by online portal Ejendomstorvet.dk, post-2020 data are not included. Source : Ejendomstorvet.dk, Statistics Denmark, Colliers

Moderate newbuilding and hidden demand may potentially cushion downturn All the while widespread recessionary fears will dampen demand, all other things being equal, new supply was stunted by a rise in financing and construction costs in 2022, with several development schemes being reconsid ered or put on hold. In the short term, this may curb a hike in vacancy rates and a drop in rent levels even dur ing an economic slowdown. Despite recent years’ multiple newbuilding schemes mainly in Copenhagen and Aarhus, we still see a sig nificant amount of hidden demand because finding the right space is difficult at a time when vacancies are scarce. In consequence, some businesses have in fact made do with less space than they were in the mar ket for and will therefore tend to be more wary about downscaling or vacating leases, with a staffing adjust ment not necessarily calling for an adjustment of the required amount of office space. In addition, the strong inflow of businesses into Copenhagen and exceptionally low vacancy rates indicate that a great many businesses are still interested in settling in or around Copenhagen but are potentially prevented from doing so due to the current lack of options.

Will inflation drive up market rent? All the while that office demand has yet to adjust to mac roeconomic trends, several new issues have come to the fore in the office market, including the question whether or not the currently high inflation will leave its more per manent mark on market rent. Many business tenants pay rents that are adjusted in step with consumer prices (the net price index, NPI), and unless the parties have agreed on a cap or limit on annual rent hikes, the rent is subject to full indexation. As of year-end 2022, inflation had hit a 40-year high, and busi nesses due for a rent adjustment subject to the October NPI were facing a hike in rent of approximately 10%. It is difficult to predict the impact on future market rent levels, especially because it remains to be seen if all land lords decide to fully factor in NPI increases in future rent levels, if possible, that is. The claim voiced by landlords in support of full indexation is that property operating expenses have risen, too. However, an increase in such expenses is typically paid by the tenant on top of the rent itself. Overall, this means that the tenant suffers both a sharp rent increase, triggered by indexation, and rising operating expenses, which are settled on a separate

29

Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

account, along with rising utility charges. In our opinion, this could potentially cause landlords to hold back for fear of an increase in vacancies even in the medium term. However, in a wider context, Copenhagen office rents are still relatively low. In other European metropolises, the office CBD rent exceeds the rent commanded by offices even in the very best Copenhagen locations. In the cap ital cities of two countries neighbouring Denmark, viz. Stockholm and Berlin, the prime office rent is as high as DKK 6,100 per sq m p.a. in Stockholm and DKK 4,100 per sq m p.a. in Berlin, topping even the highest office rent level of approximately DKK 2,200 per sq m p.a. in the Copenhagen CBD.

in e.g. Copenhagen, where demand outstrips supply and where tenants will accept higher rents. On the other hand, less sought-after locations will not necessarily see a corresponding increase in market rents or a “new nor mal” in the short term, at least not on the same scale. Such areas do not have the advantage of exceptionally low vacancy rates, but are subject to ordinary supply and demand mechanisms, where factors like competition and a range of options for the tenants to choose from help to curb possible rent hikes. Despite the uncertain rental outlook, it has become abun dantly clear, however, that tenants are taking more steps than previously to ward off substantial rent increases by demanding a contractual cap on rent adjustments, typi cally 4-5%, with this demand no longer a side note but a key element of future rent negotiations.

Nevertheless, we believe that indexation will drive up market rent levels in particularly sought-after locations

Post-2022 Future tenant focus is on contractual provisions for cap on rent increases

Pre-2022

Lease agreement Agreed rent Non-terminability

Lease agreement Agreed rent Non-terminability Rent discount

Lental dis Cap on rent increases

Cap on rent increases

30

Office - Colliers Market Report 2023

Sustained wide gap between Danish and international office rent levels

Helsinki A : 3.90% B : DKK 3,550 C : 2.1%

Oslo A : 3.90% B : DKK 4,250 C : 3.8%

A. Net initial yield (start-2023) B. Rent level (start-2023) C. Rental growth, CAGR, 2018-2023

Stockholm A : 3.75% B : DKK 5,700 C : 2.0%

Amsterdam A : 3.40% B : DKK 3,850 C : 4.4%

Paris A : 3.50% B : DKK 7,300 C : 4.1%

Berlin A : 3.70% B : DKK 4,100 C : 8.0%

Madrid A : 3.90% B : DKK 3,050 C : 1.9%

31

Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

Aalborg A : 5.50% B : DKK 1,100 C : 0.0%

Aarhus A : 4.38% B : DKK 1,500 C : 1.4%

Copenhagen A : 3.50% B : DKK 2,200 C : 2.4%

Triangle Region A : 5.63% B : DKK 1,250 C : 4.6%

Odense A : 5.50% B : DKK 1,300 C : 3.4%

Note: Prime net initial yields, office (as of start-2023), and prime CBD office rent levels (as of start-2023) in selected cities in Denmark and the rest of Europe. Rent levels quoted in DKK per sq m p.a., excluding operating costs and taxes. Please note that area specifications vary from country to country, with rent levels therefore not strictly comparable. Source : Colliers

32

Office - Colliers Market Report 2023

Lautrupsgade 13-15, Copenhagen Ø

Are long lease agreements up for retirement? Flexibility is another item ranking high on today’s tenant agendas in connection with lease negotiations. Firstly, the coronacrisis, secondly, the war in Ukraine, have proved that the economic conditions for running a business can change dramatically, and lightning fast. Although location remains the most important parameter when businesses are searching for new premises, flexible lease terms have become almost equally important. Historically, tenants have typically committed to a 5-10 year non-terminability period when entering into new lease agreements. However, businesses are increas ingly looking to adjust space consumption to changes in demand. In times of uncertainty in particular, swift adapt ability is key. We therefore see an increasing number of contracts completely void of tenant non-terminability, and this trend is expected to become more widespread. Landlords that understand how to adjust their business plans accordingly, accommodating tenants’ requirements, will enjoy a market advantage in the years ahead. As a result, landlords have started to make other contractual amendments to maintain the same risk profile even with out the tenant committing to a non-terminability period. Such amendments include the introduction of a mov ing-out penalty or a claim for repayment of the fitting-up costs paid by the landlord, should the tenant vacate the lease premises within a specific period. Another model, albeit so far only seen on few occasions, has the tenant pay a higher rent as a premium to the landlord in return for flexibility (no non-terminability period). The higher rent or premium is phased out over some years. The model ensures that the landlord profits in terms of higher rent

– and it incentivises the tenant to stay, all the while lease costs are gradually reduced, and the tenant retains the desired flexibility. Due to the call for increased flexibility, office hotels and multiuser offices are well-poised to gain market share as they cater to the needs of many businesses by offering a range of services as well as flexible lease agreements, with the added option of swift up- or down-scaling, should the tenant’s area requirements change. The office market has for some time witnessed mounting demand from busi nesses with flexibility requirements, and traditional office hotels like Ordnung and Regus have seen the emergence of multiple new competing concepts, including The Union by PFA andWoods by NREP, developed exactly with a focus on accommodating the new market trends. More market players are considering similar initiatives, and competition will intensify in the segment in the years ahead. For landlords with major portfolios, however, the absence of contractual commitment may seem less risky than for landlords that have fewer office lease units, and the demand for lease agreements with long commitment peri ods will continue to exist, mainly for large domicile prop erties fitted up according to the tenant’s requirements. However, the trend is that it is becoming increasingly rare for tenants to enter into lease agreements with long non-terminability periods. The standard letting strategy of the past, that is, waiting for the right domicile tenant to come along, has therefore been laid to rest by many land lords, who today increasingly consider it an added bonus if they manage to let an office property to a domicile tenant on a long-term lease agreement.