Colliers Market Report Denmark 2023

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Office - Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

Investors and tenants alike are advised to closely monitor trends in sustainability and ESG, e.g. to which extent busi nesses (customers and tenants) increase their demands, and how legislation and regulations tighten. For instance, the sustainable building criteria in the EU Taxonomy (or set of rules) are stricter than current DGNB certification criteria, potentially translating into more exacting tenant demands of offices. Internationally, the CBD denotes the business centre of a given city, often enjoying good accessibility along with strong demand fromhigh-profile tenants. In Copenhagen, the CBD has historically encompassed the city centre as well as Frederiksstaden and Christianshavn directly north east and east of central Copenhagen. As urban develop ment has progressed, recent years have seen the expan sion of the CBD, now including also Kalvebod Brygge and Islands Brygge, both waterfront districts south of the city centre, but located on opposite quays. International investors often view a CBD location as a quality mark that safeguards tenant demand. For some investors, a CBD location is even a prerequisite for office property investment, often at the expense of all non-CBD locations. In consequence, a substantial portion of inves tors have downright discarded Greater Copenhagen dis tricts without a Copenhagen postal code as office invest ment is here considered too risky. Nevertheless, multiple office locations are transform ing in the Capital, and although they do not offer a cen tral location in the traditional sense, some have become highly central thanks to infrastructure improvements – all the while they still enjoy relatively short physical prox imity to the city centre. This applies to e.g. Sydhavn and Valby Syd. In the Copenhagen district of Sydhavn, the metro extension is scheduled for commissioning in 2024; the same applies to southern Valby, which is already ser viced by S-trains. Both districts witness brisk newbuilding, and foreign investors have started to display a stronger appetite for these parts of the Capital. Although the primary focus of mainly international investors will remain on the CBD, and to some extent Nordhavn and Ørestad, short supply and strong demand Foreign investors targeting also non-CBD locations

Mærsk Tårnet, University of Copenhagen, Copenhagen N

in the CBD gradually make investors develop an appe tite for some districts traditionally deemed secondary. In many of these locations, however, focus is on the devel opment of precisely up-to-date and sustainable build ings, and in combination with excellent accessibility this has made Valby one of the districts where foreign inves tors are ready to strike. Core properties coming under pressure Core properties are defined as properties that in all respects are associated with low investment risk, typi cally properties that are exceptionally well-located and in full operation, let on market-conforming terms and with moderate risk in terms of property income streams. The latest trend towards flexible lease agreements void of tenant non-terminability clauses are jeopardising future cash flows of core properties as well as challenging the so far relatively passive investment strategy required when owning this property type. If the trend towards shorter or no contractual lease com mitment terms prevails, it becomes even more crucial for core investors to understand various property-related risk factors. Whereas an investor was able to “disguise” the vacancy risk among the tenants behind a shroud of long non-terminability periods, it now becomes nec essary to move closer to each tenant, that is, becoming more sympathetic to the tenant’s business model, finan cial strength and geographical affiliation, and know ing just how satisfied the tenant is and what the tenant wishes for in the tenancy, including flexibility. Mind you, this applies to current owners and investors as well as prospective investors that are evaluating a new property