Focus Report Copenhagen - Colliers Denmark 2025

OFFICE - COLLIERS FOCUS REPORT COPENHAGEN 2025

9

INDUSTRIAL AND LOGISTICS RETAIL RESIDENTIAL OFFICE

Bright outlook for the office market

In the transaction market, dark clouds have hung over the office segment in recent years. Although 2025 is unlikely to offer blue skies, there are signs of improvement. The occupa tional market remains healthy, with the combination of high demand and low construc tion activity expected to drive up rent levels.

Copenhagen’s position is strong as Denmark's economic centre and a magnet for businesses. Demand for modern and sustainable offices is growing, especially in attractive locations, and there seems to be a shift in the size of leases that are in demand. At the same time, rising construction costs and more expensive financing are slowing new construction, creating upward pressure on rent levels. Although investors are still cautious, there is renewed interest in the segment, with favourable pros pects of broader investor demand – including from inter national investors, who are expected to return in greater numbers. Slowdown in construction activity Despite underlying positive trends in the office rental market, construction activity has generally been weak over the past few years, and speculative office construction in particular is not as prevalent as before. Rising yield requirements for office properties, higher construction costs and more expensive financing terms for development schemes have prompted a significant slowdown in new office construction in Copenhagen. In fact, the decline has been so pronounced that the share of new office and administration building starts in Copenhagen plummeted by around 64% in 2023-2024 compared to the level in 2021-2022. With the challenges facing the underlying drivers of office construction, developers have an increased need for certainty around post-construction leasing. However, it has proven difficult to find tenants willing to enter into binding agreements that only come into effect 30 months or more into the future. The tenants want the developer to

get the project off the ground before they commit, which from the developers' perspective creates a challenge for office construction, as a pre-let agreement is typically one of the prerequisites for construction. However, the situ ation will probably find its natural solution once condi tions in the office segment improve in the form of lower yields and/or increasing rent levels, etc. Nevertheless, several office buildings were completed in 2024. At the same time, tenants are increasingly seeking contemporary, top-quality properties with easy access to efficient infrastructure, causing more office tenants to leave older buildings in favour of office new builds. Slowdown in Copenhagen office construction 20 21-22 20 23-24

130,000 sq m

363,000 sq m

Note: Building starts for office, retail, warehouse, public administration, etc., Copenhagen proper, Q1 2021 – Q4 2024, sq m space. Source: Statistics Denmark, Colliers