Focus report Copenhagen - Colliers Denmark 2024

RETAIL - COLLIERS FOCUS REPORT COPENHAGEN 2024

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low vacancy rates and good demand. However, the full effect of the interest rate increases has not yet materi alised, and a clearer impact on consumption patterns is forecast for 2024. Tenant's market Although the danger in the retail market is not yet over, the Copenhagen rental market is relatively solid. This is especially true on Strøget, which has become more of a tenant's market. In other words, it is the tenants who make the demands, and negotiations are typi cally centred around rent-free periods and fit-out cost subsidies. The further away from Copenhagen you move, the less competition there is from the major retail chains. This matters to the tenants that are located in the area, giving them a stronger negotiating position. However, one obvious threat to the Copenhagen retail rental market is online shopping. We are looking at a long-term trend where the share of retail transactions taking place online is increasing every year, which could reduce turnover in brick-and-mortar stores. Never theless, physical stores clearly still have a role to play. The challenge at this point is to combine online shopping with the physical store and to ensure that the physical store – in addition to supporting online sales – also provides the

customer with a shopping experience. The threat from increasing online shopping is estimated to be higher in more secondary locations, whereas prime retail loca tions, including the high street, Strøget, are more likely to be occupied by concepts and brands where customers want a physical shopping experience. In addition, Strøget's customers are much more likely to be tourists than is the case for other shopping streets in and around Copenhagen, which typically cater to consumers in a local catchment area. Few and cautious investors Investor activity in the retail property market in and around Copenhagen has been virtually non-existent in 2023. As online shopping gains ground, foreign investors fear that Denmark will follow international trends and face significant vacancy, even in the most attractive loca tions. Investors are extremely cautious and selective, with buy-side and sell-side expectations in terms of pricing and yields by no means being aligned. However, we believe that investment opportunities may arise in the future in the form of high-street properties purchased based on a develop-to-core strategy or properties purchased with a limited holding period. Here, potential buyers will have the advantage that competition is much less intense than in most other segments.

Typical rent levels

RETAIL

2021

2022

2023

2024

Area up to 100 sq m

13,000-21,000

12,000-22,000

12,000-22,000

11,000-23,000

Copenhagen high street (upper end)

Area 100-300 sq m

9,500-19,000

11,500-19,000

11,500-19,000

11,000-20,000

Area 300+ sq m

8,500-14,000

10,000-15,000

10,000-15,000

9,900-15,500

Area up to 100 sq m

5,000-10,000

6,000-10,500

6,000-10,500

5,700-10,500

Copenhagen high street (lower end)

Area 100-300 sq m

5,500-9,000

6,500-10,000

6,500-10,000

6,400-10,000

Area 300+ sq m

3,600-7,000

4,300-8,500

4,300-8,500

4,100-9,000

Area 100-300 sq m

3,300-9,000

3,800-9,500

3,700-9,400

3,500-9,200

Copenhagen Latin Quarter/ Grønnegade/Ny Østergade

Area 300+ sq m

2,600-6,500

3,000-7,500

3,000-7,500

2,800-7,000

Area 100-300 sq m

1,300-4,000

1,400-4,000

1,300-3,900

1,300-3,700

Other central retail districts

Area 300+ sq m

1,200-3,000

1,300-3,000

1,200-2,900

1,100-2,800

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