Focus report Aarhus - Colliers Denmark 2024

RESIDENTIAL - COLLIERS FOCUS REPORT AARHUS 2024

13

Surge in residential supply and housing market balance

HOTEL IINDUSTRIAL/LOGISTICS RETAIL RESIDENTIAL OFFICE

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