Colliers Market Report Denmark 2023

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Residential - Colliers Market Report 2023

Housing targeting specific user groups gaining ground In recent years, developers and investors have initiated an increasing number of development schemes involving differentiated housing con cepts that have attracted strong demand.

Historically, most newbuilding schemes have involved ordinary units in apartment buildings or terraced hous ing, that is, standard-quality housing, typically marketed as family housing. In recent years, developers and inves tors have, however, realised the potential of differentiated housing concepts, tailored to suit specific target groups. Student housing has long been on the agenda, mainly in Copenhagen and to some extent in other Danish student cities, with other concepts gradually following suit, includ ing senior living communities, for-profit assisted living facilities and micro living, i.e. small residential units. Housing types are carefully selected based on demo graphics, etc. Not infrequently, they fetch a rent premium compared to more ordinary rental housing, because the product better matches the requirements of specific ten ants, and because vacancy rates are generally very low. Properties offering differentiated housing have often traded at higher yields, but the yield premium has all but vanished as investors have become more familiar with these types of housing. However, we consider it feasible that residential concepts enjoying exceptionally strong tenant demand and low vacancy rates could even trade at yields below the yields of ordinary residential rental properties in future. Sustained shortage of housing for singles The young age groups’ preference for urban living – and the cultural offerings that go with it – have amplified the shortage of mainly small residential units in recent years. For some time now, the micro-living concept has been gaining ground in metropolises around the world, offer ing a concept that precisely meets this strong demand, involving self-contained units as small as 35-45 sq m (sometimes even smaller), with an efficient layout that includes both living space, sleeping space, a bathroom, and a kitchen(ette).

requirement of new units) hampered the development of micro-living units for years, unless investors were pre pared to exploit the loophole left by student housing for non-students. But the push for small units became stronger, and due to lobbying developers, investors, busi ness organisations and other stakeholders, the 95-sq m rule was eased (spring 2020). Most recently, however, micro living has come to the fore, exemplified by the upmarket Kaktus Towers scheme at Dybbølsbro station in the Copenhagen dis trict of Vesterbro, with 495 units completed in H2 2022. They were all but fully let on completion, at rent levels that exceeded the rent commanded by 80-100 sq m units of comparable quality and location by approximately 20%. Not only tenants have an appetite for micro living, investors do too. In September 2022, this was confirmed by NPV’s sale of a development scheme in the Sydhavn (south harbour) district of Copenhagen. Involving 333 micro-living units and 17 hotel apartments, property investor Deutsche Finance International (DFI) acquired the development in a forward funding transaction.

Single households increasing at a steeper rate than the increase in small dwellings

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

13 14 15 16 17 18 19 20 21 22

Increase, small dwellings Increase, single households

Fødselsoverskud Note : Data for Denmark’s four largest municipalities and Frederiksberg. Accumulated data since 2013. Small dwellings include student housing units and apartments with a unit size of less than 75 sq m. Source : Statistics Denmark, Colliers Nettotilflyttede (fra Danmark)

In Copenhagen, where rents are the highest in Denmark, the so-called 95-sq m rule (denoting the minimum area