Focus Report Copenhagen - Colliers Denmark 2025

RESIDENTIAL - COLLIERS FOCUS REPORT COPENHAGEN 2025

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Residential rental market remains robust

INDUSTRIAL AND LOGISTICS RETAIL RESIDENTIAL OFFICE

The residential rental market in Copenhagen and environs has been characterised by rising rental prices in recent years. A favourable population trend, increased costs of owner- occupied housing and limited new construction in the short term contribute to expecta tions of continued rental growth.

Residential construction in headwinds Developers have faced a new reality since 2022, with yield decompression and a continued rise in construction costs to record highs. In addition, despite recent declines, interest rates today remain higher than the record low levels seen until 2022, rendering construction financing particularly expensive and challenging for those devel opers who finance themselves through corporate bond issuance or other external financing. Historically, however, a large proportion of new con- struction financing has been secured through forward funding and forward-purchase transactions, where in- vestors provide capital early in the process or commit to taking over the property upon completion – typically within 18-24 months – in exchange for taking over the property at a lower price than if the property was completed at the time of the agreement (forward premium). However, this structure has also been under pressure as the forward premium has been high in recent years, which has meant that developers' business plans are often non-profitable,

with several projects being shelved as a result. Despite the difficult market conditions, new housing projects are still underway in Copenhagen and Greater Copenhagen. However, the projected residential space is significantly below the residential space completed in 2020-2024 – despite the fact that this residential space was absorbed in the market. Competition for attractive residential properties in Greater Copenhagen has been increasing in 2024, and we expect this trend to continue in 2025. This will undoubtedly create more favourable conditions for developers and increase their appetite for new projects. However, it typically takes a while from local plan approval or groundbreaking to the commissioning of a residential property. As a result, there is a time lag before the renewed desire to build translates into new homes. For this reason, we see a limited increase in the supply of new homes in the short term, increasing demand for existing rental properties and supporting expectations of further rent increases in 2025 and beyond.

Challenging market conditions have shortened the pipeline

Annual completions (average) 2020-2024 1

Annual pipeline (average) 2025-2027 2

Copenhagen

316,500

145,500

Greater Copenhagen 3

365,000

160,000

Note: 1 Annual average of completed residential floor space, sq m. 2 Annual average of projected residential floor space based on data from Hubexo Den mark, sq m. 3 Greater Copenhagen in this context excludes Copenhagen and Frederiksberg. Source: Hubexo Denmark, Statistics Denmark, Colliers