MR 2018

21

Copenhagen Property Market Report 2018

Vacancy rates reveal market polarisation

LOCATIONS Office Read more

VIDEO Location Nordhavn

Demand and supply mismatch Today, the focus of Danish businesses is increasingly shifting from cost-effectiveness to growth. In Denmark in general, and in Greater Copenhagen in particular, economic growth has prompted a recovery in the office property market. With the favorable trend predicted to continue in the coming years, businesses are increasingly prepared to invest as they plan ahead for expansion, which, all other things being equal, requires more office space. Businesses typically tend to rent more office space than they immediately require in anticipation of sustained growth. We believe that a great many businesses are contemplating whether to relocate to larger premises to secure future expansion possibilities. In absolute figures, the number of full-time equivalents (FTEs) rose by approximately 12,500 between Q3 2016 and Q3 2017 in the Capital Region of Denmark. Like in 2016, job growth is driven mainly by office-intensive sectors, including ‘Information and communications’, ‘Trade and transport’ and ‘Other business services’ (categories used by Statistics Denmark). In 2017, this was a strong value driver in the office market, triggering a sharp downtrend in office vacancy rates. Declining vacancy rates Economic prosperity and brisker office market activity have a direct impact on vacancy statistics. In 2017, the Copenhagen proper office vacancy rate declined from 7.8% in Q1 to 5.7% at year-end, marking an eight-year low. Similarly, the vacancy rate in Greater Copenhagen, excluding the Copenhagen proper, is now at a six-year low, standing at 9.5% at start-Q1 2018, down from 10.8% in Q1 2017. This arguably indicates that the existing supply of office premises is sufficient to meet the demands of the businesses considering a relocation. However, we do not believe that this is accurate. In fact, we are aware of several medium-sized and large businesses that find it very difficult to find office premises that meet their requirements in terms of e.g. building design and layout, functionality, location, cost-effectiveness and sustainability/green tech, etc.

Need for more office space as employment rises

+1,617

Information and communication

+3,754

Trade and transport

+3,082

Other business services

+2,020

Construction

+1,979

Other*

Total

+12,452

Note: FTE growth, Capital Region of Denmark, Q3 2016 to Q3 2017. *) Other includes Finance and insurance, Real estate, Public administration, Manufacturing and Agriculture and other unspecified business activities.

Because office premises in the older building stock generally fail to meet the long- term demands of modern office tenants or are offered at non-competitive asking rents,

Source: Statistics Denmark