MR 2018
55
Copenhagen Property Market Report 2018
Typical retail rent levels
Higher returns than in other European cities Yield compression in the Copenhagen high-street market has caused the majority of domestic investors to exit this segment and zoom in on other locations or segments. International investors, however, remain active as Copenhagen high-street assets still produce attractive returns relative to other European cities, including Berlin, Paris and London. Nevertheless, the yield gap has become much narrower in recent years, today standing at a mere 25-75 bps. The Copenhagen high-street property market remains highly liquid, which continues to attract new investors. In 2017, Richemont Group was one of these newcomers, acquiring a prominent building at Amagertorv 19 in the second half of the year. In addition, we still see Copenhagen high-street properties being redeveloped to be resold to core investors. Broadly speaking, prime high-street properties continue to attract more investor demand than secondary properties. However, in view of the sharp yield compression and the diminishing yield spread vis-à-vis other high-street markets, the high-street segment may arguably be nearing a saturation point. This is supported by the fact that the fast rate at which prime high-street rents at Strøget have increased in recent years is now gradually slowing. Nevertheless, in our opinion the high-street investment property market still has investment potential. Bearing in mind investors’ substantial placement requirements along with attractive financing options, high-street properties still represent solid investment opportunities. However, in the next couple of years we expect to see yields holding stable, ending the yield compression of 2012-2017. Broadly speaking, the retail property investment market outside Copenhagen is considerably less liquid and characterised by sluggish transaction activity and high yield requirements, reflecting a higher NOI risk. However, in 2017, activity was brisk in the shopping centre segment driven by this segment’s attractive risk-adjusted returns relative to other retail assets in and around Copenhagen. In addition, shopping centres generally offer great value increase potential provided their owners know how to secure the right line up of retail, leisure and F&B to suit changing shopping patterns. We believe that this segment will attract mounting investor demand in the years ahead.
Market expectations
2018
2018
Area up to 100 sqm
16,000 - 24,000
Copenhagen high street (upper end)
Area 100-300 sqm
14,000 - 24,000
Area 300+ sqm 11,500 - 18,000
Area up to 100 sqm
7,500 - 14,000
Copenhagen high street (lower end)
Area 100-300 sqm
6,800 - 13,000
Area 300+ sqm 5,000 - 10,000
Copenhagen Latin Quarter/ Ny Østergade/ Grønnegade Copenhagen other central city districts
Area up to 300 sqm
3,400 - 9,000
Area 300+ sqm 2,800 - 6,500
Area up to 300 sqm
1,300 - 4,200
Area 300+ sqm 1,200 - 3,200
Area up to 100 sqm
1,300 - 6,000
Greater Copenhagen high street
Area 100-300 sqm
1,200 - 5,500
Area 300+ sqm 950 - 3,300
Anchor food
950 - 1,800
Anchor non-food Area up to 100 sqm
900 - 2,100
Regional shopping centres
1,800 - 8,000
Area 100-300 sqm
1,400 - 5,600
Area 300+ sqm 1,000 - 4,600
Anchor food
900 - 1,800
Area up to 100 sqm
950 - 4,400
Local shopping centres
Area 100-300 sqm
950 - 3,500
Area 300+ sqm 700 - 2,900
Big box properties
Area 300+ sqm 750 - 1,800
Note: DKK per sqm p.a. excluding operating costs and taxes. Source: Sadolin & Albæk
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