MR 2018

82

Copenhagen Property Market Report 2018

Aarhus top ranking in terms of net migration 2016

The strong population growth is one of the reasons why the City of Aarhus has invested in a light rail. With the first stage connecting Odder south of Aarhus and Djursland north of the city, the light rail provides the suburbs of Aarhus with top-tier public transport to the Aarhus city centre and the central station, allowing for an easy commute, just like the S-trains in Greater Copenhagen. In many respects, Aarhus resembles Copenhagen, just on a smaller scale, as both cities benefit from strong population growth, relatively young residents and a rich business community. Housing market imbalances The population boom has exacerbated the Aarhus housing market supply and demand imbalance, driving up residential market rent levels, especially in inner city districts and near educational institutions, as the majority of newcomers are students. However, we believe that residential market rents have now reached a structural level and that the upward pressure on market rents will ease on account of the volume of residential completions in Aarhus in the years ahead. Because of the strong demographics, the Aarhus market, in particular for residential rental property, has seen an increase in the demand from domestic and international institutional investors. More than DKK 2bn investments by international investors Transaction volumes clearly reflect the stronger investment demand from abroad; in 2017, Sadolin & Albæk mediated the sale of Aarhus residential assets worth some DKK 2bn to international investors alone. For instance, Swedish Heimstaden entered the Aarhus market by acquiring a property portfolio formerly held by US capital fund Ares. Similarly, German investors were represented on the buy-side in the acquisition of 164 residential units in Åbyen at Åbyhøj (Catella Wohnen), and most recently the acquisition of 340 residential units at Bryggervej, Risskov, as well as almost 200 residential units at Trianglen (pension fund BVK via CapMan). Strong focus on turnkey assets The above-mentioned Åbyen and Bryggervej transactions illustrate the strong foreign investor appetite for turnkey assets. Situated in close proximity of educational facilities and the city centre, both are former commercial estates purchased for residential conversion and turnkey sale. We believe that this type of asset will continue to play a key role in the Aarhus property market for some years and that foreign investor demand will remain unabated too, no doubt driven by the city’s strong fundamentals and, by extension, exceptionally low residential vacancy risk. The growing demand has caused yield compression in this segment, with Aarhus yields largely matching Copenhagen yields.

Aarhus Copenhagen 1

Net migration

859

-704

Birth-rate surplus

2,426

7,029

Net immigration Population growth

1,752

5,416

5,037

11,741

Net migration 2016, Aarhus 859

Net migration 2016, Copenhagen 1 -704

Source: Statistics Denmark 1 Including Frederiksberg

That being said, the Aarhus property market is fairly inhomogeneous, requiring some knowledge of the local marketplace.