Focus report Aarhus - Colliers Denmark 2024

2024

HOTEL INDUSTRIAL/LOGISTICS RETAIL RESIDENTIAL OFFICE

Focus Report Aarhus

Contents Intro

2

Office

4

Residential

12

Retail

20

Industrial and logistics

24

Hotel

30

Transactions

34

About Colliers

37

Meet our experts in Aarhus

38

We have compiled various fur ther information on Denmark’s foremost growth centres to sup plement Colliers Market Report Denmark 2024, which offers a detailed review of key investment and occupational market trends in the Danish property industry.

This Focus Report describes the commercial property market in Aarhus .

If you would like to learn more about the markets for office, retail, in dustrial and logistics as well as residential property in Copenhagen, Odense, Aalborg or the Triangle Region, please visit Colliers’ website to view all local market reports: colliers.com/en-dk/research All reports provide you with local market insights, including histori cal rent developments along with key transaction data. In addition, we give a brief introduction to key development areas in the residen tial segment.

Colliers Denmark | colliers.com | +45 70 23 00 20

Colliers Market Report 2024 as well as all local market reports, Focus Reports, are based on market data that Colliers believes to be reliable. Whilst every effort has been made to ensure that the information provided in the reports is both accurate and complete, Colliers accepts no liability for factual errors. Published by Colliers. Reproduction or ci tation of Colliers Market Report 2024 as well as Focus Report Aarhus 2024 only with full acknowledgement of source. Please note that photos may be copyrighted.

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COLLIERS FOCUS REPORT AARHUS 2024

Contact

Any questions about data and contents?

Jeppe Egholt Senior Associate jeppe.egholt@colliers.com +45 30 91 41 54

Rasmus Graverholt Director & Head of Valuation & Advisory, Aarhus rasmus.graverholt@colliers.com +45 29 72 39 62

Do you require local market assistance (investment/leasing)?

Mehrdad Mangaard Sarraf Senior Director mehrdad.mangaardsarraf@colliers.com +45 30 60 89 19

Colliers Aarhus Søren Frichs Vej 38A

DK-8230 Åbyhøj +45 70 23 00 20

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COLLIERS FOCUS REPORT AARHUS 2024

INTRO

Continued progress in Jutland’s growth centre

Aarhus is Denmark’s second-largest city and is centrally located in Jutland. Within just an hour’s drive, you will find Aalborg to the north, Herning to the west and the Triangle Region to the south. Counting 367,000 inhabitants, the city is characterised by having the highest percentage of students in the population nationwide, around 25%. Aarhus is lo cated in the heart of the Central Denmark Region with more than 1.4 million inhabitants.

Over the past decade, Aarhus has seen strong popula tion growth of 13% compared to around 6% nationwide. One of the reasons for this impressive growth is a signifi cant increase in the number of 20-29 year-olds, which has risen 24% in the same period, bringing the population to 93,800. The city’s high proportion of young people may largely be explained by the city’s wide range of educa tion programmes, with Aarhus University being just one of the popular educational institutions in the city.

In summer 2023, the university reported an impressive increase in the number of applicants, with more appli cants having Aarhus University as their first priority in their choice of education programme. In addition, the young part of the labour force, i.e. the 30-39 year-olds, has also grown. This population group has grown 20% in the same period and now totals 51,000 inhabitants. By 2033, the number of people living in Aarhus will have continued to increase, reflected in a projected population growth of 8% compared to 3% nationwide. Future popu lation growth is expected to be largely driven by families with children, as the number of 0-9 year-olds is expected to increase by 21%, while the number of 30-39-year-olds is expected to increase by 18%. However, as in the rest of Denmark, the oldest popula tion groups are expected to continue to experience high percentage growth. Demographic changes will therefore play an extremely important role in the future housing needs of Aarhus residents if the population forecasts are correct. It is not a given that 30-39 year-olds will choose to remain in the City of Aarhus, despite an attractive job offering, as the housing supply and prices here and in neighbouring municipalities have a significant impact on the municipality’s ability to retain this age group. Put another way, there are several factors that can affect the future demographics of the municipality, and these can change from year to year.

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COLLIERS FOCUS REPORT AARHUS 2024

Demographics, 2021-2023

Migration patterns 1

Inflow

Outflow

40% 367,095 14% 45% Inhabitants, 2024

Birth-rate surplus

51%

-31%

17%

-25%

20-24 year-olds

25-29 year-olds

Net migration (domestic)

Net immigration (from abroad)

25-29 year-olds

20-24 year-olds

Population growth, 2014-2024 1

What age groups have driven population growth?

What age groups mainly account for negative growth?

25-29 year-olds

30-34 year-olds

45-49 year-olds

40-44 year-olds

32% | 13,838

16% | 6,791

-3% | -1,172

-1% | -618

Population forecast, 2024-2034 1

What age groups will drive future population growth?

What age groups will mainly account for negative growth?

0-4 year-olds

35-39 year-olds

20-24 year-olds

50-54 year-olds

24% | 6,293

20% | 5,242

-8% | -2,018

-6% | -1,512

225,052

3.80% 24% 261,816

Number of employed

Unemployment rate

hold a bachelor’s degree as a minimum

Average disposable annual income (DKK)

Note: Data for the City of Aarhus. 1 Based on aggregate population growth in the period. Source: Statistics Denmark, Colliers

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

4

Mosevej 3, Risskov

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

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HOTEL INDUSTRIAL/LOGISTICS RETAIL RESIDENTIAL OFFICE

Record-high employment and green initiatives in high demand

Like the rest of the country, the Aarhus office market is favoured by national trends, inclu ding record-high employment in the Central Denmark Region. Tenants are increasingly demanding sustainability certifications and flexible lease terms.

Demand continues to be concentrated on new, prime office properties that offer functional, flexible, modern and cost-effective office leases. In particular, the demand for multi-user properties is seen to have grown. Multi user properties offer tenants the opportunity to move to a lease that is tailored to specific area requirements, while it is typically possible for tenants to minimise oper ating costs in terms of sharing common service facilities such as reception, canteen operations, etc., which has proven attractive to many tenants. In addition, sustainability is also on the agenda of ten ants, who increasingly want sustainability-certified prop erties in line with the increased corporate focus on ESG. The COVID-19 pandemic is also believed to have sharp ened companies’ focus on flexible contractual conditions – be it the possibility of upscaling or downscaling prem ises or legal conditions such as the possibility of surren dering leases rather than subletting. Furthermore, the period of elevated inflation has sharp ened tenants’ focus on rent capping, as rents are typically adjusted according to increases in the net price index (NPI). Finally, there are also companies that have shown interest in ’all-inclusive’ concepts, where companies rent

premises where all services are included in the rent, such as furniture, canteen operation, internet, maintenance of green areas, etc. An example of this is PFA’s concept The Union, which can be found in Risskov and with several planned locations in the Aarhus area. The vacancy rate generally indicates a healthy office mar ket, with supply matching demand. In 2023, there was a slight increase in vacancy in the key growth centres of Copenhagen and Aarhus. However, the vacancy rate remains at a low level relative to office vacancies in other major European cities. While the ability to work from home is often important to office workers, studies show that the majority of office workers prefer to be physically present in the office as it facilitates socialising with colleagues, face-to-face collab oration and a clearer demarcation of work and leisure, as well as practicalities such as better workstations as well as peace and quiet. This trend is helping to maintain office demand and impact vacancy rates in an office market where supply is increasing due to high construction activity.

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Aarhus office rent levels have been stable in recent years. However, Aarhus is undergoing rapid development, with several large, prominent office projects either recently completed or expected to be completed in the near future. The new office projects are expected to drive up office rent levels for prime space, in the process widening the rent gap between prime and secondary office space. Due to brisk development activity and occupational demand for new and modern office space, the new office stock in Aarhus is expected to absorb a significant portion of the demand. This will especially affect the older and more secondary office stock, which does not meet user requirements. As a result, the vacancy rate in the older building stock is expected to increase as new office pro jects are completed.

Mariane Thomsens Gade 1C, Aarhus Ø

Strong demand reflected in continued low vacancy rate

14%

12%

10%

8%

6%

4%

2%

13

14

15

16

17

18

19

20

21

22

23

Note: Vacancy rate, office, Aarhus. Source: Ejendomstorvet.dk, Colliers

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

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Europaplads 6-8, Aarhus C

Landmark office projects shaping Aarhus

Aarhus has a diversified office market, with each area having unique strengths and weak nesses. Several major office projects are under development, which is why several major players will be relocating in the coming years.

Aarhus C Central Aarhus, Aarhus C, remains a prime office loca tion, and office leases in the district, along with Aarhus Ø, generally command the highest rent levels in Aarhus. The district typically attracts liberal professions, finan cial companies and knowledge-intensive businesses that value the central location and want a prominent and visible location in the cityscape. A large proportion of the Aarhus C office space has historically been out dated and inefficiently designed, but recent years’ many

new office projects have changed that. Especially in the area around Frederiks Plads and the Sydhavnskvarteret neighbourhood, which marks the transition between the Frederiksbjerg district and the harbour areas. The area around Sydhavnen (the south harbour), the Sydhavnskvarteret neighbourhood, is being devel oped by A. Enggaard, PFA Pension and Kilden & Hindby into a new business area with offices and two hotels. In addition, the area is to become a vibrant neighbour hood with a focus on the arts and be packed with activi -

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

8

Lisbjerg

Risskov

Skejby

Aarhus Ø

Aarhus C

Brabrand

Viby J

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

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ties for citizens, including the music venue Train and the Jutland Art Academy. The development plan for the area also includes an Aarhus high line that will connect the Sydhavnskvarteret neighbourhood and Frederiks Plads. The prominent office tower block AKSON, which has 26 floors and more than 37,000 sq m, is virtually fully let. Several companies, including Kromann Reumert, AART Architects, Danske Commodities, Clearwater International and NIRAS, have already been announced as tenants in the project, which is being built by A. Enggaard. The tower block is scheduled for completion in H2 2025 and is expected to become DGNB Gold-certified. The TRÆ (“wood”) project, with 20 floors becoming Denmark’s tallest timber construction, is being built in wood, concrete and glass, with a focus on recycling mate rials such as discarded wind turbine blades. The office block of more than 14,000 sq m is scheduled for comple tion in H2 2024. Raundahl & Moesby will also be respon sible for the development of the final stage of Frederiks Plads. Here, a 27,000 sq m high-rise building will fill the last building plot with mixed residential and commercial uses, scheduled for completion in early 2027.

pleted. Anchor tenants Nykredit and Poul Schmith/ Kammeradvokaten and consulting engineering firm Søren Jensen now share the address. A new tower block with a mix of residential and commercial space is also on the drawing board at Remien Ejendomme. If the plans for this 20-storey high-rise are approved by the City of Aarhus, the property will become a link between the DOKK1 area and Sydhavnen. Property company Olav de Linde A/S is also building a large-scale project at the address Mindet 6. The building will reuse several elements of the old landmark. It will therefore be built on top of the existing buildings. The building will consist of 41 floors and will be Denmark’s tallest office building with approx. 39,500 sq m of new construction in combination with 5,600 sq m of con verted original buildings. The office building is scheduled for completion in 2027. After almost 10 years, the sketch projects for the bus and coach station site and the neighbouring DSB Ejendomme areas have now been revived and brushed up. The sketch project, dubbed Perlekæden (the Pearl Chain) and designed by Cobe, Rambøll and others, includes shops, offices, public-oriented businesses and housing. The masterplan is awaiting city council approval.

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Opposite DOKK1, the office building Europaplads, which shares its name with the square, has now been com

Typical rent levels

OFFICE

2021

2022

2023

2024

CHANGE 2023-24

Aarhus C

1,450

1,500

1,500

1,600

7%

Prime

1,150

1,150

1,150

1,250

9%

Secondary

Aarhus N

1,250

1,250

1,250

1,300

4%

Prime

825

900

900

1,000

11%

Secondary

Aarhus V

1,150

1,150

1,150

1,150

0%

Prime

800

800

800

800

0%

Secondary

Aarhus S

1,050

1,050

1,050

1,100

5%

Prime

700

700

700

700

0%

Secondary

Note: Rent levels quoted in DKK per sq m p.a., exclusive of operating costs and taxes, office, Aarhus. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

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.

oration with Kilden & Hindby. The entire facade will have a light red cladding and the building will have 6 floors added. PFA will build a total of 25,000 sq m of commer cial space and an additional 20,000 sq m of residential space in connection with Prismet. A new local plan that enables the realisation of the future city gateway to Aarhus Ø, Hængslet (the Hinge), has now been approved and construction has started. Hængslet is being built by AAA United, part of the Bestseller Group, and is still at an early stage, but is expected to be com pleted in 2026. According to current plans, Hængslet will be a 5-storey building with 12,000 sq m of commercial space, including office landscapes and a food market. Bestseller-related companies will move into Hængslet themselves, but there are several leases available for other companies. Aarhus N Skejby and the surrounding areas north of Aarhus are very popular office locations. By choosing office space north of the city centre, tenants also benefit from lower rents and better parking conditions compared to more central locations. Vestas is one of the largest compa nies in the area and occupies a significant amount of space. Other office users in the area include Falck, G4S, ATEA, IBM, Bankdata, NRGi, Tryg and Rambøll. In addi tion to offices, the area also houses the 25,000 sq m VIA University College Campus Nord and Aarhus University Hospital, which is designated as a super hospital and therefore has undergone an extensive expansion to accommodate more than 10,000 employees. The associ ated patient hotel Forum has now been completed and offers 22,800 sq m on 14 floors. Located in northern Aarhus, Agro Food Park is Denmark’s largest industry-specialised business environment for agriculture and food companies, currently home to more than 100 companies and 1,500 employees. The latest addition to the existing 58,000 sq m of floor space is Agro Food Park 26, an 8,300 sq m space-efficient and modern multi-user building with lease sizes from 45 sq m and up. In Lisbjerg, the company Rains is establishing its new headquarters. Rains will benefit from the area’s green surroundings and good infrastructure, including motor way proximity. The new 12,000 sq m headquarters will accommodate 300 employees as part of the compa ny’s growth plans. Scheduled for completion by year end 2024, the building is part of an ambitious develop

Skt. Clemens Torv 6A, Aarhus C

Other Aarhus C PensionDanmark is in full swing with the development of the 70,000 sq m site where Silvan and Stark used to be located. The Trælasten project is only the second of its kind in Aarhus to achieve DGNB Platinum certifica tion, the highest and best DGNB level. The certification is partly due to the reuse of building materials from the demolition of the old buildings. In early 2024, anchor tenant BDO Statsautoriserede Revisorer, Nordstern and Taurus Ejendomsforvaltning moved into the new premises in Bjælkehuset, which faces Vestre Ringgade. Bjælkehuset focuses on sustain ability and has an attractive location. In addition to office facilities, Bjælkehuset also houses a shared canteen and meeting centre as well as roof terraces. Brokvarteret (the Bridge Quarter) also continues to expand. In the past year, LIDL has inaugurated its new head office, which covers more than 20,000 sq m and also includes a LIDL concept store on the ground floor and a car park. The head office brings together more than 300 employees under one roof. Nearby, there is still a vacant building plot where the Frames project will be constructed, comprising approx. 2,600 sq m floorspace over six floors. Prismet is an iconic and controversial office tower block located by Den Gamle By (the Old Town) and owned by PFA. In connection with the building’s 20th anniversary, PFA announced billion-kroner renovation plans in collab

OFFICE - COLLIERS FOCUS REPORT AARHUS 2024

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Aarhus V The offices in the suburbs of Åbyhøj, Brabrand and Aarhus V, collectively referred to as Aarhus V, are typically concentrated around the ring road and along the approach roads. The quality of the building stock is generally more variable than in Aarhus C and Aarhus N, which is reflected in a relatively large spread in rent levels. Along Viborgvej, a popular office area has emerged, attracting a number of large companies and new office buildings. Byporten Syd, which is the first stage of the Byporten pro ject and is located south of Viborgvej, has been acquired by Industriens Pension, who took over the property at the end of 2022. The second part of the project, Byporten Nord, is planned to be approx. 25,000 sq m over 20 floors. In Aarhus V, the transformation of the Gellerup neigh bourhood continues. Among other things, A. Enggaard is developing the Helheden area in Gellerup, which will be a mixed-use neighbourhood with approx. 55,000 sq m of residential and commercial space. The developer behind the project is PKA in collaboration with A. Enggaard. Building plot A, which consists of both offices and a Netto store, is now completed, while several projects on other building plots are ready and will turn the neighbourhood into a multifunctional area with mixed residential and commercial uses.

ment project, envisaged to transform the Lisbjerg area into a dense, urban and diverse city district where it will be attractive to both live and do business. In the longer term, Lisbjerg will also be home to one of the country’s major IT players, Bankdata, which would like to build a new, large office. However, the plans have been post poned due to rising costs, so Bankdata will remain in its current premises for the time being. Katrinebjerg is also being expanded with an 18-sto rey office tower for tech companies, called Incuba Next. Being developed by A. Enggaard, the office tower is expected to comprise 22,000 sq m and feature multiple rooftop terraces on staggered levels as well as meeting and conference facilities on the top two floors. The pro ject is expected to be completed in H2 2024. In Risskov, PFA and MT Højgaard have recently com pleted the second stage of the construction of Engsøhus. Engsøhus is part of PFA’s concept The Union, which offers serviced and flexible leases for companies that do not want to compromise on interior design and quality. As a tenant in the concept, you get access to an arrival area with digital reception, The Union Café, shared facilities such as a meeting centre, lounge, access to a patio and much more. The Union also offers an all-inclusive agree ment where everything from furniture, internet and cleaning is baked into the rent.

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Sustained upward pressure on prime office yield requirements

3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%

19 Aarhus city centre - prime

20

21

22

23

24

Aarhus city centre - secondary

Aarhus, outside inner ringroad - prime

Aarhus, outside inner ringroad - secondary

Note: Net initial yields, office, Aarhus. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

RESIDENTIAL - COLLIERS FOCUS REPORT AARHUS 2024

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RESIDENTIAL - COLLIERS FOCUS REPORT AARHUS 2024

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Surge in residential supply and housing market balance

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In 2010-2017, the Aarhus market for multi-storey housing was characterised by under supply, with a relatively moderate new supply of housing in the municipality. However, this changed dramatically as from 2017 and until to Q2 2023, when the newbuilding and supply of new multi-storey housing rose sharply due to e.g. favourable market conditions.

This transition from an undersupply to a slight over supply, which has also been seen in other growth cities outside Copenhagen, can be attributed to the fact that demand is immediate, whereas the entire process of newbuilding naturally means that the supply to match demand is often delayed, with completions often coin ciding. For Aarhus, the massive growth in residential supply has been driving up vacancy rates in recent years, with the market shifting towards a tenant’s market, where funda mental drivers such as location have once again become crucial. Indeed, low vacancy rates are still observed in central Aarhus. This is especially true for well-located new builds, where demand has been and continues to be high. Conversely, newer residential areas in a more secondary location generally have higher vacancy rates. A significant part of the new supply has been so-called micro living projects, constructed mainly on the outskirts of the city and at the same time. Here, timing plays a cru cial role. In other words: When many residential units come on the market at the same time, it can intensify competition for tenants and lead to longer absorption times, especially if the units fulfil the same basic needs, are in the same price range and have the same quality of location. This has been the case with the new micro living projects, as they have high vacancy rates and cur rently account for a significant portion of the municipali ty’s total vacancy rate.

3,926 residential units

completed in 2023 (Q1-Q4)

213,509 sq m resi completions in 2023 (Q1-Q4)

74 sq m Average residential unit size

89.8% Tenant share

6.9% Average residential vacancy rate

Note: The three bottom fi gures denote average data on multi-storey housing in the City of Aarhus.

Source: Statistics Denmark, Colliers

RESIDENTIAL - COLLIERS FOCUS REPORT AARHUS 2024

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New build Vejlby: 6.75%

Former Gasa site: 16.50%

Bindesbøll Byen: 5.00%

2021-2023 2018-2020 2015-2017 Construction years

New build Christiansbjerg: 5.25%

New build Gellerup: 12.00%

Ceresbyen: 3.15%

Aarhus K: 3.50%

Åbyen: 10.85%

New build at Musikhuset: 2.50%

Note: Vacancy rates (%) in selected city districts in the City of Aarhus. Source: BBR, Colliers

Students make up the majority of tenants in the munic ipality, and here, optimally designed two-room apart ments located near educational institutions or in the city centre are especially sought after. For young people, the financial aspect plays a crucial role, as by sharing a well-appointed two-room apartment instead of renting a bedsit or one-bedroom apartment, they can reduce their rental costs, which, all other things being equal, increases their disposable income. The current increase in vacancy is expected to be a short lived phenomenon, as market conditions have drastically deteriorated over the past two years, so the pipeline of newbuilding is now more moderate. On the other hand, demand is still increasing, which was especially the case in 2023 when the municipality grew by almost 6,000 new inhabitants - the largest population increase in the munic ipality to date. In consequence, the balance between sup

ply and demand is expected to approach equilibrium in the coming years - and should newbuilding fail to pick up, even a potential undersupply in the longer term. The potential future undersupply is described in the Colliers article “Aarhus may be heading towards under supply of apartments”. Read the article at colliers.com/ en-dk/etageboliger-aarhus Location, location, location Given a wider range of options in the rental housing market, tenants enjoy significantly more freedom when deciding on their future home. This means that funda mental characteristics such as location become key to the success of residential projects. To be competitive in the rental property market and attract tenants, land lords must therefore continue to meet the needs of ten ants. However, the most standardised properties on the

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Increased caution in the investment market The past year was characterised by cautious investors biding their time. Significantly less favourable market conditions due to rising interest rates and an increased mismatch between buyers’ and sellers’ price expecta tions led to a sharp drop in transaction activity and higher required returns on residential investment properties in Aarhus. Similarly, the market in 2023 could be described more as a buyer’s market, whereas in recent years it has been a seller’s market. Residential investment property remains the most sought-after segment for investors in Aarhus, and with the expectation of falling interest rates and thus better financial conditions, transaction activity in the segment is expected to increase in 2024 compared to 2023.

outskirts of the city have been difficult to let. We still see tenant incentives, such as a few months’ free rent or a gift voucher for interior design or similar - espe cially in properties in more secondary locations. If you look at the vacancy rates in various sub-areas, you see great variation across the board. In more central loca tions, such as Ceresbyen, Brokvarteret and the area around Musikhuset, vacancy is at a low level, i.e. around 3%. However, in the newer housing projects built on the periphery of Aarhus, such as Gellerup, Tilst and Risskov Engby, vacancy is more pronounced. Developments in the coming years will help dictate the future Aarhus residential market, where developers are expected to increasingly focus on projects in central loca tions rather than building on the outskirts of the city and thus expanding the city.

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Typical rent levels

RESIDENTIAL

2021

2022

2023

2024

CHANGE 2023-24

Aarhus 1

Prime

1,650

1,650

1,650

1,650

0%

Secondary

1,475

1,475

1,475

1,475

0%

Aarhus 2

Prime

1,500

1,500

1,500

1,500

0%

Secondary

1,225

1,225

1,225

1,225

0%

Aarhus environs

Prime

1,275

1,275

1,275

1,275

0%

Secondary

1,000

1,000

1,000

1,000

0%

1 Includes Aarhus Ø, Trøjborg, Åbyhøj, Aarhus N, Risskov and Viby 2 Includes Tilst, Brabrand, Gellerup, Højbjerg and Vejlby Note: Rent levels quoted in DKK per sq m p.a. for new residential units of 75-80 sq m, ground-floor and penthouse units excepted. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

Typical net initial yields

RESIDENTIAL

2021

2022

2023

2024

CHANGE 2023-24

Aarhus 1

Prime

3.75%

3.38%

3.75%

4.13%

38 bps

Secondary

4.00%

3.75%

4.00%

4.50%

50 bps

Aarhus 2

Prime

4.25%

3.50%

4.00%

4.50%

50 bps

Secondary

4.75%

4.25%

4.50%

4.75%

25 bps

Aarhus environs

Prime

4.50%

4.00%

4.25%

4.50%

25 bps

Secondary

5.00%

4.50%

4.75%

5.00%

25 bps

1 Includes Aarhus Ø, Trøjborg, Åbyhøj, Aarhus N, Risskov and Viby 2 Includes Tilst, Brabrand, Gellerup, Højbjerg and Vejlby Note: Net initial yields, residential, Aarhus. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

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Rising property prices in changing times After more than a decade of rising prices, the tide turned in the ownership housing marked due to record-high inflation, stricter financial requirements and higher costs, with the prices of owner-occupied apartments dropping by up to 10% in H2 2022. However, the trend was short lived, as 2023 showed moderate increases in the average square metre prices of owner-occupied apartments. The increase is believed to be due to, among other things, ris ing real wages and a low proportion of owner-occupied apartments versus rental housing in the city. In addition, there were signs of increased activity due to the prospect of increased taxes on purchases after the turn of the year 2023/2024.

The lack of owner-occupied apartments has also received political attention, as the City of Aarhus wants to make it easier to own your own home rather than rent. The City of Aarhus has therefore asked the government for help, and the government has looked at various options, such as requiring owner-occupied apartments in new construction to increase the supply of owner-oc cupied housing and promoting the possibility of mixing owner-occupied apartments and rental apartments in the same building.

-4%

Realised selling prices

-5%

42%

Units for sale

Laydays

Note: Development between Q3 2022 and Q3 2023, owner-occupied apart ments in the City of Aarhus. Source: Finans Danmark, Colliers

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Mixed-use office/residential newbuilding, Aarhus Ø

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Harmonious urban development in and around Aarhus

In recent years, Aarhus has been transforming to accommodate the strong inflow of new residents. As a result, new residential districts have emerged, but with respect of older districts so as to blend city, nature and history to form a harmonious whole. The following provides an overview of urban development trends.

Aarhus Ø In the district of Aarhus Ø, recent years have seen the completion of a string of prominent buildings, and this new urban district on the waterfront has become a pop ular city hotspot. Due to the attractive location, Aarhus Ø commands above-average residential rent levels and selling prices. The process concerning Pier 3, formerly Molslinjen’s ferry berth, is progressing. At the beginning of 2024, the City of Aarhus put out a tender for a development and co-oper ation agreement to find a commercial partner. In the first stage, the partner is to assist in the drafting of a develop ment and realisation plan for Pier 3. Subsequently, the partner is expected to join the City of Aarhus in an area development company heading the development of Pier 3 in the years ahead, with a focus on the strategic themes that the municipality has defined for Pier 3. Overall, the strategic themes must ensure that Pier 3 becomes an urban neighbourhood connected to the water and mar itime life, and that Aarhus Ø becomes a green district. At the same time, the area should be a prime example of sustainable urban development in Aarhus and accom modate the different types of housing needed to create diversity in the resident mix. Finally, it must be a healthy urban neighbourhood with room for movement, and the neighbourhood must be developed in an open process through close collaboration between future stakehold ers. Pier 3 covers an area of approx. 100,000 sq m and it is expected that up to 180,000 sq m space can be built, of which a minimum of 100,000 sq m will be residential.. Aarhus K / Aarhus C The area, which has been dubbed Aarhus K, is a neigh bourhood bordering on the city centre and stretch ing from before Godsbanen to Trianglen along Søren

Frichs Vej. It is expected to accommodate a total of 2,800 homes when fully developed. The area includes the new school of architecture, New AARCH, Godsbanehuset, Æggepakkeriet and Godsbanekollegiet (student hall). The development at Godsbanen has now transformed the area into a diverse and opportunity-rich space in cen tral Aarhus, but development is still ongoing. The area will also be the centre of Det Poetiske Kvarter neighbour hood (the Poetic Quarter), an initiative supported by the Nordea Foundation. The initiative will bring together the area’s many new neighbours with literature as a common denominator. Residential newbuilding at Trælasten is in full swing. The first phase of the development, Teglgården, has been completed and is successful in both letting and selling off owner-occupied apartments. However, there are still sev eral apartments for rent under the Virke concept, which are apartments earmarked for more mature tenants (50+ years). When Trælasten is completed, the composition of the area will be 59% rental housing, 21% owner-occupied housing (a total of 700 homes) and 20% commercial. The project will help densify the city centre. Between Godsbanen and Scandinavian Centre, an inves tor consortium has started the construction of ZigZag Huset after winning the project in a municipal tender back in 2018. ZigZag Huset will offer 126 residential units, two small cafés and six offices. The building will comprise seven towers, which will be staggered to form a common courtyard. The pension company consortium that owns Scandinavian Center has decided to breathe new life into the centre by building an extension and renovating the existing build -

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ing. The plans include housing in the centre’s current car park and a theatre. The project will be realised by con tractor Nordstern and architectural firm Aart. Local developer 1927 Estate, in collaboration with archi tects from Cebra, has entered into an agreement with DSB to transform more than 300,000 sq m of disused rail way land in a joint venture. The project has been dubbed Banekvartererne and the areas will be released over the next 7 or 8 years as the existing train sets are replaced by IC5 trains. The development of the old county hospital, Amtssygehuset, is taking shape. Won by Raundahl & Moesby and Patrizia Denmark, the first tender now has an approved local plan. The project will be a reinterpre tation of the original architecture designed by Høgh Hansen, and it is scheduled for completion by year-end 2025. The new block will be located on the corner of Tage-Hansens Gade and Viborgvej and will include 200 residential units, one grocery store and one retail store. Furthermore, Aarhus City Council has approved another sale, namely of the large, central building with wards, which will be preserved and modernised, while two new U-shaped residential blocks will be built. The tender was won by pension company PenSam and turnkey contrac tor Raundahl & Moesby. Their project will house 434 homes when it is scheduled for completion in 2026. The development of Ceresbyen is now complete. Olav de Linde has completed the last building plot with the construction of 101 apartments in a block of apartments called Maltgården and 30 non-profit housing units for Alboa. The apartments were ready for occupancy in 2023 and are now all fully let. Aarhus N Katrinebjerg is a neighbourhood in the Christiansbjerg district in northern Aarhus, which has historically been an industrial and commercial area. However, its central location has made it an attractive residential area and it is undergoing a major transformation with several major construction projects. Olav de Linde pioneered the cur rent development with the Nabolaget development, which consists of 7 buildings and 390 residential units in total. Olav de Linde is also working on the development project KatrineTorvet, which is connected to Nabolaget and close to the Storcenter Nord shopping centre. The project offers 27,000 sq m residential space and 11,000 sq m commercial space with an underground car park.

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Åbyen, Åbyhøj

Mogens de Linde has also built Mejerihøjen, which offers 95 rental apartments. Basecamp Aarhus, built by asset manager Basecamp Student, is the name of a prominent student housing development in Katrinebjerg on the for mer Defco site with as many as 663 fully furnished stu dent apartments as well as communal kitchens, study areas, fitness, cinema and café for residents. The apart ments themselves are 16-20 sq m, with the smallest not having an in-room kitchenette. Basecamp Aarhus was acquired by Belgian Xior Student Housing in mid-2022. In the area around Aarhus Academy on Randersvej, Unity has now also been completed. Unity offers 652 fur nished small apartments with an average size of approx. 33 sq m and several shared facilities, targeting students, among others. Basecamp Aarhus and Unity have expe rienced challenges in terms of occupancy rates due to the large supply and the fact that the apartments were released with a short time lag, which immediately increased competition for tenants in a short period of time. Furthermore, part of the explanation may be that the projects are located in northern Aarhus, which is not necessarily the first priority with the students that the buildings are predominantly aimed at. Finally, landlords have found the initial rent levels to be on the high side, as they have subsequently reduced rents to attract more tenants. On the corner of Rødkløvervej and Katrinebjergvej, CapMan has built 209 student housing units with Nordstern as the turnkey contractor. The units make up the new urban neighbourhood called Augustshave. The first phase has been offered to let since autumn 2023, while the second phase will be offered to let in H1 2024.

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Visualisation: Europaplads 2, Aarhus C

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Shift in consumer behavior affecting the retail segment

On a national level, 2023 was better for retail and restau rants than many had predicted. Retail sales increased on the back of a strong second half of the year, making 2023 better than expected. This is despite rising interest rates and uncertainty, which have already had an impact on Danes’ spending patterns. These suggest that Danes are buying fewer goods but spending more mon ey on experiences, such as travelling and dining

Sct. Clemens Torv

out. Aarhus continues to struggle to attract new international brands but is experienc ing demand from national players.

Salling

Despite several positive trends, changing consumer behaviour has challenged several retail chains, which have been forced to reduce the number of stores. In general, it seems that many are experiencing pres sure on their bottom line because of an increased cost base without a corresponding increase in reve nue. This has proven to be the case in Aarhus, where there is an increased vacancy rate in the city centre. One of the locations where vacancies are visible is Strøget, which is made up of Ryesgade, Søndergade, Lille Torv and Store Torv, and is one of the prime and most attractive locations for shopping goods stores in Aarhus. Nevertheless, several stores have had to close here, and we are aware of several cancelled leases. In 2023, the design

Søndergade

Tenanted shop units Vacant shop units

Note: Count of retail vacancies and shops at Ryesgade and Søndergade, Aarhus, at year-start 2024. Source: Colliers

Ryesgade

and furniture house Paustian filed for bankruptcy, and the store subsequently held a going-out-of-business sale in their iconic setting at Lille Torv.

Aarhus Central Station

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New players and concepts Despite rising vacancy rates, demand for retail space remains strong. We see a tendency for more space-inten sive retailers to move from big box areas to more cen trally located leases. In 2023, Silvan moved to H&M’s for mer premises at Lille Torv as part of the DIY group’s push for compact city stores in the largest cities. Restaurant chain Pincho Nation also opened their new restaurant on Skt. Knuds Torv as part of their growth stra tegy, where they now have six restaurants and plans to go nationwide. PWT Group leased a total of three leases on Søndergade/Ryesgade, two of which have been merged into one store. Tøjeksperten, owned by PWT Group, now occupies one of the largest leases on Strøget. Sportswear company Planet Nusa, which previously only had a store in Copenhagen, has opened at Guldsmedgade. In April 2024, restaurant Bouillon opens, serving French bistro food at affordable prices. Bouillon moves into the restau rant space in Europahuset, which has been empty since Dalle Valle’s bankruptcy. In Lighthouse, a restaurateur couple has opened two restaurants - Restaurant BAVN, located on the 44th floor at a height of 142 metres, and Brasserie BAVN on the first floor of the property. Several grocery stores in central Aarhus have also received a boost. For example, Netto on the corner of Thorvaldsensgade and Vestergade has completed devel opment with a newly built store that has been upgraded

At the centre of Strøget lies the Salling department store, a significant customer magnet and massive driver of Strøget’s popularity. At Aarhus Central Station at the southern end of Strøget, lies Bruuns Galleri, one of Denmark’s most visited shopping centres. Bruuns Galleri seems to have been spared from the rising vacancy rate experienced on Strøget. In early 2024, it was announced that global clothing chain Mango will open a store of more than 600 sq m on the first floor of the shopping centre. The Latin Quarter, known for its charming architecture and vibrant city life, is located at the northern end of Strøget and is the most sought-after location for cafés and restaurants. The rise in vacancy rates is not evident in the Latin Quarter, as it continues to see demand from small retailers and eateries. Continued tenant’s market As during the COVID-19 pandemic, renegotiations, relo cations and flexible landlords continue to characterise the Aarhus retail market. Landlords are not achieving the same rent levels as before and are generally willing to discuss shorter non-terminability periods on leases, fit out subsidies and stair-stepped rents when signing new leases. Leases that are not refurbished, etc. are vacant or rented out to temporary pop-up concepts. However, large-scale stores are still being established with a focus on sales areas.

Typical rent levels

RETAIL

2021

2022

2023

2024

CHANGE 2023-24

Aarhus high street (upper)

6,000

6,000

6,000

5,800

-3%

Prime

3,250

3,000

3,000

3,000

0%

Secondary

Aarhus Latin Quarter

3,250

3,000

3,000

3,250

8%

Prime

2,000

2,100

2,000

2,000

0%

Secondary

Local shopping centres

1,000

1,100

1,000

1,000

0%

Prime

900

900

900

900

0%

Secondary

Note: Rent levels quoted in DKK per sq m p.a., exclusive of operating costs and taxes, retail, Aarhus. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

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to their latest concept and has housing on upper floors above the store. COOP’s new concept, COOP 365, has also opened at Vestergade. The low-price concept encoura ges people to shop there every day of the year and to buy more organic food, fruit and vegetables in gene ral through incentive programmes. In the Brokvarteret district, as mentioned in the office section, LIDL has also opened their new headquarters, which includes a lar ge-scale LIDL supermarket store on the ground floor.

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Guldsmedgade 22A, Aarhus C

Continued yield decompression in the retail segment

4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50% 9.00%

19 High street - Prime

20

21

22

23

24

High street - Secondary

Local shopping centres - Prime Local shopping centres - Secondary

Note: Net initial yields, retail, Aarhus. Level in 2024 indicates Colliers’ estimation at year-start. Source: Colliers

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INDUSTRIAL AND LOGISTICS

Rosbjergvej 4-6, Brabrand

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Industrial/logistics segment defies transaction drought

The Aarhus market for industrial and logistics properties is highly diverse in terms of building quality and configuration. In addition, the area has a limited supply of commer cial land. However, occupational demand remains strong, especially for industrial and logistics properties in locations with good infrastructure, either close to the motorway grid or close to the most central arterial roads.

Despite elevated interest rates, hesitant investors and general market uncertainty, the industrial and logistics segment defied general market trends and accounted for 27% of the total transaction volume in 2023 in Denmark, which is a significant increase compared to previous years’ share of 18% in 2022 and 13% in 2021. Aarhus and environs contributed with several major deals in the past year. The positive trends are driven by a continued strong occupational market and opportunities involving sale-leaseback transactions, which has proven to be a liq uid segment. Sale-leaseback Sale-leaseback transactions, where a company sells its user property to an investor but enters into a long term lease to remain in the property, have proven popular in recent years. The benefits of a sale-leaseback transaction are that it provides the company with an immediate release of capital that can be invested, for example, in the core business. The model is typically favoured by compa nies that want to convert the value of the property into working capital while retaining operational control of the property. Investors also require longer non-ter minability periods and a high credit rating from the future tenant to secure their cash flow during the term of the agreement. In other words, from the company’s

perspective, this is an attractive opportunity to raise capital that can be seen as an alternative to traditional financing. In 2023, industrial company DAFA Group sold their head office in Brabrand, which consists of approx. 16,000 sq m of production, office and warehouse space. DAFA specialises in products and solutions for sealing, protection and soundproofing. The solu tions are sold in the wind and construction industries, among others. E-bike company Promovec sold their facilities in Lisbjerg in a sale-leaseback, while COOP sold their fresh produce centre in Hasselager to a pension fund as part of a portfolio transaction. Development despite higher construction costs Logistikparken Aarhus in Brabrand remains one of the prime locations for industry and logistics in Aarhus due to its strategic location by the motorway grid. The area is home to Danske Fragtmænd, Salling Group, Søstrene Grene and Advansor, among others. The company Nemlig.com has vacated their facilities, leaving a state-of the-art logistics and warehouse property of 38,565 sq m empty and available for rent. Nemlig.com is closing due to declining online sales of groceries, so the activities are moving back to the warehouse in Brøndby.