Focus report Copenhagen - Colliers Denmark 2024

INDUSTRIAL AND LOGISTICS - COLLIERS FOCUS REPORT COPENHAGEN 2024

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Strong user market and high investor activity

INDUSTRIAL/LOGISTICS RETAIL RESIDENTIAL OFFICE

In 2023, the industrial and logistics market in and around Copenhagen was character ised by record-high rent levels and low vacancy rates due to high and sustained demand for space and few newbuilding opportunities. The strong occupational market provides prospects for real growth in rent levels in prime locations, especially last mile locations in Greater Copenhagen.

The sustained demand in the segment has been driven mainly by international supply chain disruptions due to the COVID-19 pandemic and the war in Ukraine. Most recently, geopolitical unrest in the Middle East has prevented shipping companies from sailing through the Red Sea, which has affected freight prices. Events like these have significantly sharpened companies' focus on ensuring stable supply chains. Similarly, a high level of economic activity in Denmark has accelerated the need to scale up production facilities and warehouse capacity, which has further increased the demand for new, larger and up-to-date leases. Broadly speaking, the areas around Copenhagen feature an old and outdated industrial and logistics building stock. ESG and sustainability certifications have charac terised the discourse in 2023 with regard to both the new and older building stock. Energy optimisation in older leases in the Copenhagen area has also been a driving force behind the rent increases seen in the area. For many tenants, a sustainability certificate is no longer just a side benefit, but rather a requirement. Therefore, landlords have also been able to justify higher rents as a result of such initiatives, as tenants can achieve savings from lower energy consumption, etc. However, indus trial and logistics properties with sustainability certifica tions that meet tenants' requirements are now predom inantly found in the south corridor due to the lack of development opportunities in the Greater Copen

hagen area. In consequence, some tenants may have to compromise on a specific property's certification, quality and up-to-date conditions in order to secure a location close to Copenhagen.

Developers and investors defy higher construction costs

High demand and low vacancy rates have fuelled activity among developers and investors in the logistics segment. More are choosing to defy higher construction costs, which has resulted in an increase in industrial and logistics newbuilding. In Greater Copenhagen, historically low supply has meant that start-ups or companies with expansion plans have had to look further afield to more peripheral areas to find commercial land with easy access to the motorway grid. Most of all, this phenomenon has strengthened the so-called south corridor southwest of Copenhagen, where supply has been higher and where several players have built speculatively with great success. Development activity in the south corridor in recent years has resulted in a number of modern and up-to-date premises. These are in high demand and characterised by minimal vacancy, underpinning the sustained demand in the area. In 2023, Køge Municipality adopted a local plan for a new business park which supports continued development in the area, while Solrød Municipality has a new transport and logistics centre in the pipeline.