Market Report 2022

Colliers Market Report Denmark 2022

Accelerating success.

Residential assets remain the most coveted

Denmark

Greater Copenhagen

56 % Residential 18 % Office 13 % Industrial/ logistics

55 % Residential 22 % Office 10 % Industrial/ logistics

105.4 DKKbn

58.4 DKKbn

8 % Retail 2 % Hotel 4 % Other

6 % Retail 3 % Hotel 3 % Other

Note: Transaction volume by asset type, 2021. Source: Colliers

Record-high transaction volume in the Danish property market

120

100

80

60

40

20

0

12

13

14

15

16

17

18

19

20

21

Greater Copenhagen

Denmark, excluding Greater Copenhagen

Note: Transaction volume (DKK billion), by geographical location, 2021. Source: Colliers

Executive summary

Historically strong office market due to economic upturn and ketchup effect from the coronacrisis Residential investment market an undisputed winner throughout the coronacrisis Some sub-segments of the retail market have proved non-cyclical – investors showing renewed interest Yields, rents and vacancy rates set new records in the industrial and logistics market in 2021 In step with the reopening of society, hotel KPIs are improving, with mainly provincial hotels performing well

Danish economy remains very strong with prospects of solid GDP growth in 2022

Conten t s Executive summary Letter from the CEO Record year for investors

1

3

Danish investment market Record-high transaction volume in 2021

4

Office Office market at historical high

16

Residential Population growth in a red-hot residential market Retail Emerging from the shadows of the pandemic

40

60

Industrial and logistics Buoyant occupational market with few vacancies and high rental prices

78

Hotel Golden years ending abruptly

98

Danish economy Speedy recovery due to strong Danish economy

108

114

Market practices

115

Definitions

116

About Colliers

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

International investor predominance in Copenhagen, but high proportion of domestic investors in non-Copenhagen locations drives down the national level in relative terms

Greater Copenhagen

Denmark

64 %

54 %

36 % Domestic

46 % Domestic

International

International

Core assets heading the field in a year characterised by economic prosperity but also marked by the uncertainty associated with COVID-19

Office

Residential

79% Core

68% Core

Vaue add

core 18% Value-add

21% Value-add

Risk profile

Risk profile

2% Opportunistic

7% Opportunistic

4% User

Industrial & logistics

Retail

69% Core

57% Core

25% Value-add

39% Value-add

Risk profile

Risk profile

4% Opportunistic

3% Opportunistic

3% User

2% User

Note: Top two figures show transaction volume by investor origins. Bottom four figures show transaction volume by risk profile for specific segments of the Danish property market. Transaction volume, Denmark, 2021. Source: Colliers

Colliers Market Report 2022

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Carsten Gørtz Petersen Partner and CEO (MRICS)

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Record year for investors

2021 was the busiest year ever in the Danish property market: One by one, records were broken, inve stor competition intensified, and in several locations the markets turned so red-hot that yield require ments dropped below the 3.00% mark. So, what happened? Firstly, in 2020 travel restrictions stunted the activity of foreign investment funds in particular. As a result, placement requirements built up, with many players witnessing a ketchup effect on transacti ons with the reopening of society in 2021, all the while that vaccination programmes were rolled out across Europe, and restrictions eased. The pandemic closed the book on 2021 with a new coronavi rus variant, but economic activity did not lose momentum. Businesses made good money and wages were rising. This fuelled the demand for more and larger dwellings and for more office, storage and production facilities, driving vacancy rates down and rental prices up to all-time highs. Secondly, substantial placement requirements among private and, not least, professional investors – mainly from abroad – intensified the competition for property investments. Supported by rising infla tion and sustained low interest rates, the cost of financing remained exceptionally low, whetting inve stor appetite for inflation-hedged property agreements, with no funds tied up in cash deposits or bond investments. On the threshold of 2022, all framework conditions for property investments remain favourable. Nevertheless, it is difficult to imagine that the years ahead will outperform 2021. All major Danish towns and cities are seeing brisk newbuilding of both residential, office and logistics space, with the supply of lease premises set to increase as from 2023 in particular, dampening any prospects of rent hikes. At the same time, net initial yield requirements are at an unprecedented low, and it almost seems to defy natural laws should they continue to drop. The question is whether the yield compres sion registered over the past 36 months is a temporary manifestation, reflecting the need for capital placement, or whether we have reached a point where Denmark resembles the European property market, with dwellings in Aarhus to be compared to dwellings in e.g. Munich in future. In 2022, it is therefore fair to expect a new, incredibly exciting and competitive market, albeit with a certain stabilisation in most segments, without a real turnaround in developments. Interest rates are only edging up slowly, macroeconomic key indicators are favourable and placement requirements remain massive. 2022 will therefore be yet another year when market players are required to have done their homework, ready to make prompt decisions in the property market. We hope this market report may be of some assistance.

February 2022

Carsten Gørtz Petersen Partner and CEO (MRICS)

carsten.goertzpetersen@colliers.com

Accelerating success.

Colliers Market Report 2022

4

Danish investment market

Post-coronacrisis ketchup effect boosting activity to all-time high in 2021

Prospects of sustained brisk activity in 2022, driven by foreign investors

Residential and logistics properties expected to remain “top picks” in 2022

Higher inflation and rate hikes may stabilise yield requirements after years-long compression In several segments, investors are heading for Copenhagen suburbs and major provincial towns and cities

Limited supply of core properties is making investors more risk-tolerant

Total property return of 15.6% in 2021

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Accelerating success.

6

Colliers Market Report 2022

Record-high transaction volume in 2021

COVID-19 appears to have almost completely loosened its grip on the investment property market, with 2021 characterised by massive investment demand. The outlook is for sustained strong activity in 2022. In the wake of the short-lived slowdown in the investment market in 2020, we saw a kind of ketchup effect. Sustained massive placement requirements in the marketplace along with the fact that foreign investors are increasingly becoming aware of Denmark as a stable investment destination made 2021 a busy year. Although properties across several segments trade at record-low yield requirements, the supply of core properties remains limited, however, forcing several investors to zoom in on alternative options, including value-add property and development opportunities. Prospects of rising infla tion in addition to a rising yield curve may curb a future drop in yield requirements on the most attractive properties, with yields likely tracing a more stable trend.

Transaction volume hit an all-time high in Denmark in 2021

120

100

80

60

40

20

0

12

13

14

15

16

17

18

19

20

21

Greater Copenhagen

Denmark, excluding Greater Copenhagen

Note : Transaction volume (DKK billion), investment property, Denmark, 2012-2021. Source: Colliers

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Colliers Market Report 2022

Hotel Industrial/logistics Retail Residential Of f ice

sional and sought-after nationwide property market where a grasp of risks, yield profiles and opportunities in provincial loca tions has improved a great deal in recent years. Here, competi tion is often less intense, but transparency still quite considera ble and risk-adjusted returns attractive relative to Copenhagen, where strong demand has driven up prices shy-high, a phenom enon that has started to feed through to the behaviour of for eign investors, now increasingly heading for provincial locations, ready to compete with the domestic investors that have tradi tionally predominated in this market. The Danish investment market has witnessed mounting demand for several years now. In 2018-2019, however, investment activity slowed although prices were climbing in the same period. Either year was marked by a mismatch in buy-side versus sell-side price expectations. Irrespective of massive demand and capital allocations to real estate, many sellers therefore retained a wait-and-see attitude in antic ipation of sustained price hikes, with the limited supply of investment properties rendering it difficult to reinvest pos sible sales proceeds. However, any reluctancy in the seller community has evap orated. Continued uncertainty concerning the pandemic’s short-term economic impact, massive capital growth, strong demand along with an investment market largely dictated by sellers, have urged several of them to pocket the profits. Strong competition and price hikes bolstering supply

Although the year started – and ended – with restrictions and lockdowns due to COVID-19, activity in the investment mar ket reached an unprecedented high in 2021. Substantial place ment requirements, strong economic growth momentum, high employment, sustained low interest rates and a spill-over effect from 2020, a year marked by restraint, drove up transac tion volume in Denmark to an all-time high in 2021, exceeding the DKK 100 billion mark for the first time in history. Activity was driven largely by demand for properties in all parts of Denmark, whereas previous years had typically seen Greater Copenhagen accounting for far more than 50% of transaction volume. In the previous record year (2017), transaction volume in Greater Copenhagen exceeded the level recorded in 2021. Back then, however, non-Copenhagen locations accounted for just shy of DKK 30 billion or 35%. This is in stark contrast to 2021, when total transaction volume outside Greater Copenhagen amounted to DKK 47 billion, indicating a more mature, profes

Activity outside Greater Copenhagen continues to rise

2014-2017

2018-2021

27 %

Avg. annual share, Gt. Copenhagen Avg. annual share, non-Gt. Copenhagen

45 %

55 %

73 %

57 DKKbn

76 DKKbn

Average annual transaction volume

Note : Transaction volume (DKK billion), Denmark. Source : Colliers

Colliers Market Report 2022

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Typically, purchase offers have been so generous as to can cel out any concerns of how to reinvest proceeds. Overall, this has created a market characterised by much stronger supply than was previously the case. Nevertheless, supply is still unable to keep up with current investment demand, with mainly foreign investors still look ing to place a high proportion of capital allocations ear marked for investments in Scandinavia and Denmark. Predominance of foreign investors in the market One of the trends to stand out in recent years, namely ever-growing foreign investor demand, continued in 2021. In this respect, Denmark has benefitted from the increased inves tor focus on political stability, effective economic measures, our fixed exchange rate policy, and generally strong confidence in public institutions. All these factors taken together have con tributed to the consolidation of Denmark’s position as a safe haven in investment terms, perhaps even more so than in the past. This recognition along with yields that continue to exceed the level seen in a series of comparable countries and cities, has greatly whetted the appetites of foreign investors in pur suit of stable, attractive and risk-adjusted returns. Although the number of transactions involving foreign investors matches the figure recorded in 2020, there has been a sharp increase in the number of investors that are waiting to strike when the right opportunity arises. Several new international market play ers, mainly from Asia, Germany and the USA, have announced

The Square, Rådshuspladsen Copenhagen CBD

plans to enter the Danish market due to attractive invest ment terms, all the while that many established players have increased their capital allocations to property investments in Denmark. For instance, Orange Capital Partners entered the Danish property market with investments worth close to DKK 3 billion when acquiring two Copenhagen apartment buildings, followed by the acquisition of student housing in Copenhagen SV, bordering on Valby, as well as two turnkey residential prop

TOP 5 transactions | All segments, Denmark

Property

Location

Seller

Buyer

Use

Sq m Price 1

Project Realm 2

All Denmark

Bostad

AP Pension/BankInvest

Residential

163,000 3,400

Part of Akelius resi portfolio 2

Copenhagen/ Frederiksberg

Akelius Residential Property

Heimstaden Bostad

Residential

na 3,000

Selmer portfolio 2 Jutland/Funen

Selmer

Heimstaden

Residential

125,000 2,500

Ørsted domicile

Greater Copenhagen ATP Ejendomme

Pensam/AIP/Artha

Office

84,000 2,475

Catella Residential Investment Management

Project Reditus 2

Residential

42,600 1,940

Copenhagen/Aarhus Formuepleje

Note : The listed transactions include disclosed sales only. Certain confidential or off-market transations are not included. 1 Prices quoted in DKK million (rounded figures). 2 Portfolio sale. Source : Colliers

Colliers Market Report 2022

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TOP 5 economies to have done best during the COVID-19 pandemic in 2021

Hotel Industrial/logistics Retail Residential Of f ice

1. Denmark 2. Slovenia 3. Sweden 4. Norway 5. Chile

Note : Excerpt from The Economist analysis of 23 wealthy countries, released on 1 Jan. 2022. Source : The Economist

erties in Nærheden, west of Copenhagen. Starwood entered the Copenhagen hotel market with the acquisitions of Hotel Sankt Petri and Comfort Hotel Vesterbro, and Swiss Life made their first property investments in Denmark when acquiring a DKK 520 million Copenhagen residential portfolio and a residential property in Risskov, Aarhus, at just shy of DKK 300 million. Residential property driving activity During the coronavirus pandemic, the residential market has proved highly resilient, boosting investor demand for residen tial property in 2021. This is reflected in the fact that residential property accounted for 56% of investment volume, just as four of the year’s top-5 transactions involved residential property. The substantial placement requirements of domestic and for eign institutional investors alike have driven down yield require ments to an all-time low, with the net initial yield on proper ties subject to open market rent for the first time ever falling below the 3.00% mark in 2021. One example was the acquisi tion by CBRE Global Investors of a 128-unit residential building at Marmorbyen in the Copenhagen district of Nordhavn. Because of fierce competition for investment opportunities in the largest cities, several domestic and established foreign investors are increasingly opting for investments in the munic ipalities surrounding Copenhagen, or in high-growth provincial

towns and cities on Funen and in Jutland. The largest transac tion in 2021, namely AP Pension’s acquisition of property com pany Bostad at approx DKK 3.4 billion, serves as an exam ple. Comprising more than 70 residential properties across 12 regional locations, this transaction attracted great investor interest in Denmark and from abroad. Another example was the acquisition by Goldman Sachs of a DKK 600 million portfo lio in three Jutland towns from Birch Ejendomme, just as Niam made multiple prominent acquisitions across the country. In addition, at year-end 2021, NREP acquired a portfolio of 23 res idential properties, located mainly in Odense, at a price just shy of DKK 1 billion. Apart from the residential market, the industrial/logistics mar ket was exceptionally coveted in 2021, with the transaction vol ume across Denmark more than doubling in this segment com pared to 2020. More than anything, investors have targeted up-to-date, high-volume logistics facilities in attractive loca tions. The 2021 increase in transaction activity is mainly attrib utable to a wider supply than previously. The main drivers of the increase in supply are stronger newbuilding activity fuelled by a buoyant letting market and the fact that several owner-oc cupiers have started to net the profits from sale & leaseback Market for I&L facilities has more than doubled compared to 2020

Colliers Market Report 2022

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Residential by far the largest segment

International investors predominate the market

Core assets continue to drive the market

2% Hotel 3% Other 8% Retail 13% I&L 18% Office 56% Residential

2% User 5% Opportunistic 21% Value-add 72% Core

46% Domestic 54% International

Note : Total transaction volume 2021, Denmark, by segment, investor origins and risk profile. Please also refer to Definitions, p. 115. Source : Colliers

transactions on account of record-high pricing. For instance, Savills IM has acquired two Jutland properties in Horsens in a sale & leaseback transaction with DKI Logistic as tenant at a total price of DKK 350 million. In brief, the market for indus trial and logistics property is robust as of year-start 2022, with investor demand right now at an unprecedented high. Retail potentially poised for comeback in 2022 The market for retail property continued to be marked by the wait-and-see approach that has prevailed in recent years. Uncertainty about the economic situation, repeated lockdowns and a market that continues to be straining under the impact of e-commerce growth have served to keep investors on the side lines. Because of the lack of investor demand, but also because

sellers were biding their time, being averse to selling with the current pricing and competitive situation, transaction activity was mainly driven by very few high-volume deals. In Herlev, big box/shopping centre hybrid BIG Shopping sold to M&G Real Estate at approx DKK 1.1 billion, while shopping centre Kronen Vanløse in a forced sale found a new owner in NREP. Because of the lack of activity and appetite that with some investors was becoming near-categorical in nature, the retail market has experienced less pronounced yield compression than the other segments of the property market in recent years. Once lockdowns and COVID-19 are things of the past, the current premium achievable when investing in retail prop erty will cause investors to flock back. Notwithstanding the

Part of Project Reditus portfolio

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Yield compression drives capital growth

competition from e-commerce growth, brick-and-mortar shops will always be in demand, with mainly core products expected to attract healthy demand in the market if they are offered for sale, provided the location and the tenancy situation are right.

15.6 %

3.9 %

3,9 %

0.1 %

Total return in Greater Copenhagen at 15-year high

11.7 %

4.8 %

2021 witnessed the highest total average return on commer cial property in Copenhagen in years, namely 15.6%, in the past 20 years only topped by 2005. The total property return was driven predominantly by high capital growth of 11.7%, with income return accounting for the remaining 3.9%. The fact that capital growth reached this level is mainly attributa ble to yield compression, with rental growth another signifi cant driver. This largely mirrors the developments seen in the property market in 2021, when the letting and investment mar kets alike prospered. Although H2 2022 was marked by rising inflation, this effect has by no means fed through to rent levels, as rent adjustments are typically based on the previous year’s inflation increase before possible adjustments. The fact that the rental growth component accounts for approx 4.8% therefore indicates a market where strong competition and scarce supply are putting rent levels under substantial pressure. Sustained strong activity, but risk is on the rise As of year-start 2022, Danish economy remains healthy: Record-high employment, low unemployment as well as pros pects of strong economic growth momentum are the underly

6.8 %

Total return Income return Decline in vacancy Capital growth Rental growth Yield compression

Note : Decomposition of total return, commercial and investment property, Greater Copenhagen. Source : Colliers

ing fundamentals of a resilient property market. Over the next 12 months, the demand for not only more dwellings but also office, storage and production facilities will further increase the pressure on vacancy rates and drive up rent levels. When also considering continued large capital placement requirements and low real interest rates, real estate will therefore continue to be high on investors’ wish list. Although 2022 is highly unlikely to be a rerun of 2021, framework conditions are favourable, indicating yet another busy year. However, a great many obvi

Highest total return since the financial crisis

-10% -5% 0% 5% 10% 15% 20% 25% 30%

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

Total return

Income return

Capital growth

Note : Annual total return on commercial and investment property, Greater Copenhagen. Source : Colliers

Colliers Market Report 2022

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In terms of risk-adjusted returns, commercial property is a more attractive asset than ever

1,000 1,200

0 200 400 600 800

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

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20

21

Commercial property, Greater Copenhagen

Nordea benchmark 7-year bond

MSCI Denmark Gross Total Return Index

Note : Total return on stocks, bonds and commercial property, index 100 = 2000. Source : MSCI, Nordea, Colliers

ous sellers are believed to have pocketed sales proceeds, and although demand potentially supports the same level of activ ity as seen in 2021, the supply is not expected to see a corre sponding increase. This spells stronger competition for assets on the market, and further pressure on pricing. Nonetheless, total average return is not expected to match the 2021 level. Along with strong competition, further downward pressure on vacancy rates and slightly uptrending rent levels are likely to ensure fair property returns.

Current yield requirements have however now hit such a low that it is difficult to imagine further compression. There is lit tle room for deviations in neither vacancy rates nor rent levels before the business plan of many investments starts to falter, based on today’s pricing mechanism and underlying assump tions, just as strong newbuilding activity across all sectors will increase supply in the years ahead. One-digit commercial property yields in 2022 In Greater Copenhagen, the overall yield on commercial prop erty is expected to be in the region of 7-9% in 2022, that is, far below the level seen in 2021. Rising inflationary pressure ren ders it difficult to predict the actual yield level, although it is fair to expect that it will stabilise as 2022 wears on, when global supply chain and production disruptions have been resolved. In addition to inflation and prospects of income returns on the low side of 4%, as seen in 2021, the contribution to returns is expected to derive mainly from declining vacancy rates and slightly climbing rent levels (in real prices) in 2022. Yield levels will remain largely unchanged although fierce com petition for mainly low-risk and well-located properties (should they be offered on the market) could well drive them down a little. All in all, the outlook for 2022 is for sustained strong momentum and intense competition but a more stable trend in most segments.

 EMIL HELMSØE-ZINCK , emil.helmsoee-zinck@colliers.com  ALEXANDER VISBY BERTHELSEN , alexander.berthelsen@colliers.com

Den Grønne Fatning, Herlev

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Why a commercial property price index?

The past two decades have seen an increasing amount of capital being funnelled into investment property as real estate is increasingly considered an attractive alternative asset class to stocks and bonds.

THE MOUNTING DEMAND has clearly manifested itself in Denmark too, with the volume of investment property trans actions peaking at an all-time high of DKK 105 billion in 2021. Whereas stocks and bonds are easy to price, investment prop

erties are much more diversified products that are only rarely traded. However, the Colliers commercial property price index represents a way to overcome this issue, by applying data from both property sales and valuations in lieu of actual trades.

Investment property continues to offer attractive risk-adjusted returns

2021

2000-2021

Return

Mean return

Risk

Sharpe ratio

Commercial property, Greater Copenhagen 1

15.6%

10.0%

5.8%

1.31

Nordea benchmark 7-year bond

-2.2%

4.8%

5.0%

0.46

MSCI Denmark Gross Total Return Index

28.5%

14.4%

24.0%

0.50

1 Please note that the Colliers property price index is based on observations recorded throughout the whole year and therefore the return computed is an average across the year compared to the average across the previous year. Note : Average return and risk on commercial property, bonds and stocks. Source : MSCI, Nordea, Colliers

Model and approach

FOR BOTH THE COLLIERS PROPERTY PRICE INDEX (capital growth) and the net initial yield calculations, we have used a hedonic multiple regression analysis based on empirical data col lected from more than 5,000 property sales and property valuations in the

Greater Copenhagen area since 1985, all involving Colliers (pre-2018, Sadolin & Albæk). The model covers all types of commercial property, where individu ally fixed prices are applied for the var ious property characteristics, mainly location, use, state and condition/qual

ity, suitability/rationality and econo mies of scale, as a corrective measure to account for the differences between individual properties.

Colliers Market Report 2022

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Our five detailed reports on: Read also ...

Copenhagen Local market report

Aarhus Local market report

Lautrupsgade 13-15, Copenhagen Ø

Odense Local market report

Godsbanen, Aarhus

Harbour front, Odense

Aalborg Local market report

Triangle Region Local market report

Musikkens Hus, Aalborg

Please note that the supplementary reports are available in Danish only until further notice.

Fjordenhus, Vejle

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Do you want to learn more?

We have compiled various further information on Copenhagen and other key property markets to supplement Colliers Market Report 2022. If you would like to learn more about the markets for office, retail, industrial & logistics as well as residential property in Copenhagen, Aarhus, Aalborg or the Triangle Region, please visit Colliers’ homepage to view the reports: All reports provide you with local market insight, including historical rent developments along with key transaction data. In addition, we give a brief introduction to key development areas in the residential segment. If you would like to learn even more, please contact one of Colliers’ local market experts. Contact details are included in the reports and available also on Colliers’ homepage. Please note that the reports are available in digital format only. colliers.com/da-dk/mr22

To access the digital reports directly, please scan this code:

Office - Colliers Market Report 2022

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Office

Historically strong office market due to economic upturn and ketchup effect from the coronacrisis

Virtually no vacant modern office premises in new building stock

Rent levels will increase in all parts of Denmark due to shortage of premises, strong business demand and higher construction costs Foreign investors predominate in the Copenhagen office market, with provincial locations yet of moderate interest

Green transition still pending in the existing office stock

Record-low yield requirements not expected to drop further but to stabilise

Svanemølleholm, Nordhavn Copenhagen

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Accelerating success.

18

Office - Colliers Market Report 2022

Office summary

Transaction volume DKKbn

In 2021, the strongest officemarket in Danish history set a record with a transaction volume of DKK 19.2 billion. The outlook is for a continued strong market in 2022 but with a slight slowdown in activity. In Denmark, the significant momentum in both the office occu pational and office investment markets was in 2021 driven by strong economic recovery, record-low vacancy rates, sky-high employment, a shortage of new and contemporary premises as well as a ketchup effect in investments due to the coronacrisis. Rental prices have climbed in most parts of Denmark. Activity is expected to remain brisk in 2022, but with yield requirements levelling off.

19

13

Denmark

Gt. Copenhagen

Share of total transaction volume

18% Denmark

22% Gt. Copenhagen

Yield compression in Copenhagen and Aarhus

Share of foreign investors

0% 1% 2% 3% 4% 5% 6% 7% 8%

45% Denmark

65% Gt. Copenhagen

13

14

15

16

17

18

19

20

21

22

Copenhagen CBD, prime

Copenhagen CBD, secondary

Aarhus, prime

Aarhus, secondary

Note: Based on transaction volume for office in 2021, Denmark. Source: Colliers

Note: Net initial yields, office. Source: Colliers

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

TOP 5 transactions

1

. 2

. 4

4

. 5

. 5

01 02 03 04 05 Ørsted domicile Svanemølleholm CPH Highline Ferring/Neroport Europaplads BUYER: BUYER: BUYER: BUYER: BUYER: Pensam/AIP/Artha KanAm Aviva Genesta Danica Ejendomme LOCATION: LOCATION: LOCATION: LOCATION LOCATION: Gentofte, Gt. Copenhagen Nordhavn, Copenhagen Sydhavn, Copenhagen SV Ørestad, Copenhagen S Aarhus C ADDRESS: ADDRESS: ADDRESS: ADDRESS: ADDRESS: Nesa Allé 1 Nordsøvej 15 Havneholmen Kay Fiskers Plads 9, etc. Europaplads 6 , etc. PRICE DKKM | AREA PRICE DKKM | AREA PRICE DKKM | AREA PRICE DKKM | AREA PRICE DKKM | AREA 2,475 | 84,000 sq m na | 57,500 sq m 917 | 17,000 sq m 824 | 39,300 sq m 768 | 17,900 sq m

20

Office - Colliers Market Report 2022

Office market at historical high

More small- and mid sized enterprises (SMEs) positive about their financial situation

The Danish office market broke through the histor ical ceiling in several locations, with movements in both rent levels and vacancy rates indicating a mar ket with continued momentum.

Findings by SME panel of Danish Board of Business Development, autumn 2021

In the last couple of years, Danish economy has fared well despite the shifting effects of the pandemic, with sustained strong demand for goods and services as of year-start 2022. The growth figures of Danish businesses are positive, just as the demand for labour has picked up. This has driven up employment levels to an unprecedented high. Nevertheless, businesses increasingly experience recruitment difficulties as the competition for manpower has intensified.

Most of SMEs, 63%, are positive about their financial situation. This reflects a 6%-point increase on spring 2021.

Mainly SMEs with 10-249 staff subscribe to a very positive view.

Record-high Danish employment in 2021

Just shy of 50% of SMEs in the survey expect growth within the next six months. More than 20% of SMEs expect to hire new staff within the next six months.

1,900,000

1,800,000

1,700,000

1,600,000

1,500,000

08

09

10

11

12

13

14

15

16

17

18

19

20

21

Note: Number of FTEs, Denmark. Source: Statistics Denmark

Source: Danish Board of Business Development

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Frederiks Plads Company House II, Aarhus C. Visualisation

The economic situation has reduced uncertainty in the business sector, restoring the sector’s confidence in the future. Several businesses have left the sidelines to focus on growth. This has fed through to the office market too, where a short-lived slow down at the start of the pandemic has now given way to a fiercer struggle for mainly the best and most up-to-date office premises. This applies mainly to Copenhagen and Aarhus. As Denmark’s key growth centres, the office markets of these cit

ies are also the first to witness the effects of economic up- and downturns. Whereas businesses can quickly shift the focus of business plans to expansion and hiring, the supply in the office market is not equally equipped for short-term adjust ments. This effect is evident especially in the current market, with both cities witnessing record-high demand for contem porary and well-located offices.

High employment driven by Denmark’s largest cities

Denmark

Copenhagen

Funen

South Jutland

East Jutland

West Jutland

North Jutland

0%

0.5%

1.0%

1.5%

Note : Average growth (y/y) in employment in various parts of Denmark, 2008Q3 to 2021Q3. Source : Statistics Denmark, Colliers

Office - Colliers Market Report 2022

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Decline in office vacancy rates in Denmark’s key markets

10% 12% 14%

0% 2% 4% 6% 8%

15 10 Copenhagen Greater Copenhagen Aarhus 14 13 12 11

16

17

18

19

20

21

Note: Vacancy rates, office, Denmark. Source: Ejendomstorvet.dk

Old obsolete premises the most vacancy prone The strong demand is feeding through also to vacancy rates, which are downtrending in all parts of Denmark. Having seen a slight increase at the start of the pandemic, vacancy rates are either lower or on a par with the level seen prior to the COVID 19 outbreak. Vacancy rates of 7-8% in Copenhagen and Aarhus indicate a market with fair supply and demand equilibrium. However, this does not tally with actual market observations of strong competition, ever shorter re-letting periods and climbing rent

levels, indicating a market where supply is outstripped by demand. A review of premises that are vacant or offered to let in Copenhagen, however, paints a more complex picture. A breakdown of the currently available Copenhagen offices therefore reveals that most vacancies are in properties pre-dat ing the millennium. As for the post-millennium office stock, mainly Copenhagen S, including Ørestad. accounts for vacancies, with only few large scale properties driving up the volume. This district harbours more than half (approx 58%) of the total number of office

Low supply of contemporary office supply in central Copenhagen

Copenhagen S Copenhagen V Copenhagen K

Northern Zealand Vestegnen (west of Cph.) Other Nordhavn/Copenhagen Ø

0

50,000

100,000

150,000

200,000

Built in or pre-2000

Built post-2000

Note: Office space offered to let (sq m) in Copenhagen and environs as of 28 December 2021 based on unique office lets. Breakdown of supply by location and construction year of premises. Source: Ejendomstorvet.dk

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Hotel Industrial/logistics Retail Residential Of f ice

DOKK1, Aarhus C

vacancies offered to let in Copenhagen properties constructed after 2000.

increase in supply are some of the factors explaining not only why Copenhagen CBD office rent levels have hiked by more than 10% since 2019 but also why they are expected to see a relatively sharper increase than other districts of Copenhagen and Denmark in general in the years ahead. Unlike the trend seen in Copenhagen, the increase in rent levels in other Danish locations is driven by strong economic growth momentum and general optimism. During economic upturns, tenants generally tend to be more willing to pay for the “right” office premises, with businesses likely to commit sooner rather than later to avoid that their physical setting hampers growth. Examples of this are seen in several major towns and cities, including Odense, Aalborg, Vejle and Esbjerg, where activ ity has been strong in the letting market, with multiple busi nesses taking leases on new premises, having outgrown their former ones.

Rent level continues to climb – in all locations Low vacancy rates, strong economic growth momentum along with general optimism about the future are driving up office rent levels across Denmark. In central Copenhagen and Aarhus, businesses are finding it difficult to find the right premises, and although attractive alternative options are available in non-CBD locations, demand has become nothing but stronger in the city centres. Mainly businesses poised for further growth in the liberal pro fessions and knowledge-intensive industries, who strive to attract young and skilled workers, prefer a central location with city life, culture and public transport within easy reach. A shortage of available office leases in tandem with a moderate

Largest available office leases in individual properties, Copenhagen

Address

Location

Sq m Constructed in

Copenhagen S (Ørestad)

40,000

2021

Kay Fiskers Plads 10

Copenhagen K

24,000

1999

Strandgade 3

Copenhagen Ø

13,700

1993

Østbanegade 121

Kongens Lyngby, Greater Copenhagen

10,700

1978

Nymøllevej 85

Copenhagen S

9,000

2010

Njalsgade 72

Note: Individual properties accounting for the largest office vacancies (sq m) offered to let in Copenhagen and environs as of 28 December 2021. Source: Ejendomstorvet.dk, Colliers

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Danish office rent levels remain low by international standards

Helsinki A : 3.30% B : DKK 3,600 C : 4.56%

Oslo A : 3.25% B : DKK 4,400 C : 3.66%

A. Net initial yield B. Rent level C. Rental growth, CAGR, 2016-2021

Stockholm A : 3.00% B : DKK 6,100 C : 4.11%

Amsterdam A : 3.05% B : DKK 3,450 C : 4.12%

Paris A : 2.70% B : DKK 6,850 C : 3.35%

Berlin A : 2.30% B : DKK 4,000 C : 9.46%

Madrid A : 3.40% B : DKK 3,050 C : 3.23%

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Hotel Industrial/logistics Retail Residential Of f ice

Aalborg A : 5.25% B : DKK 1,100 C : 1.92%

Aarhus A : 4.00% B : DKK 1,500 C : 2.13%

Copenhagen A : 3.00% B : DKK 2,150 C : 3.05%

Triangle Region A : 5.50% B : DKK 1,200 C : 3.71%

Odense A : 5.00% B : DKK 1,300 C : 5.39%

Note: Prime net initial yields, office, and prime CBD office rent levels in selected cities in Denmark and the rest of Europe. Rent levels quoted in DKK per sq m p.a., excluding operating costs and taxes. Please note that area specifications vary from country to country, with rent levels therefore not strictly comparable. Source: Colliers

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Lautrupsgade 13-15, Copenhagen Ø. Visualisation

Nybrovej 116, Kongens Lyngby

Rising construction costs potentially driving up provincial rent levels Unlike districts in e.g. Copenhagen and Aarhus, where develop ment opportunities are scarce and office districts well-defined and in demand, many provincial locations are seeing rent lev els determined not only by demand but also by the potential for – and cost of – developing and building new office space. Once the rent has reached a level where the capitalised value exceeds total newbuilding costs, it is fair to expect newbuild ing to brisk up. However, the pipeline of new developments is subject to rising construction costs, resulting from exceptionally strong devel opment activity on a national level in the residential but also office and logistics sectors. Should this trend continue, sev eral planned newbuilding schemes could potentially prove so unprofitable to developers that they are delayed or shelved. We are already starting to see manifestations to this effect based on current construction costs, with rent levels in several locations not supporting newbuilding. Against the backdrop of

sustained strong economic activity and demand for the right office premises across Denmark, this trend is likely to not only support existing rent levels but potentially drive them up even further. Brisk newbuilding potentially exacerbates vacancy risk of secondary premises Because of strong occupational demand, recent years have seen strong office newbuilding. Although a large portion of new office space is absorbed because of an increase in demand, older, functionally obsolete properties in secondary locations will be prone to higher vacancy risk or downward pressure on rent levels due to general office stock upgrades in terms of newbuilding. This is mainly a natural corollary in times of brisk development activity and should be factored in when evaluat ing the risk of investments in secondary properties. The risk is believed to be negligible in Copenhagen as there is a natural cap on supply, but towns and cities with less well-de fined office districts and ample development opportunities are

Passer overskriften? Mangler vi ikke at vise, hvor meget vi så forventer, der bygges i 2022? Newbuilding activity brisk in Copenhagen

Copenhagen proper and environs

Triangle Region

Aarhus

Odense

Aalborg

300,000 sq m

115,000 sq m

70,000 sq m

45,000 sq m

4,500 sq m

Note: Office completions in 2019-2021. Source: Byggefakta, Colliers

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Hotel Industrial/logistics Retail Residential Of f ice

Ferring/Neroport, Ørestad, Copenhagen S.

likely to see increased vacancy risk and/or lower rent levels in the secondary market in the short to medium term. The time is therefore ripe for property investors to review their asset man agement strategies for properties that could be at risk, and to consider initiatives to reduce this risk. More than ever, the value of properties in this risk zone will hinge on the existing tenancy situation, making an extension of non-terminability periods and possible tenant incentives an obvious place to start. Lack of Copenhagen CBD opportunities causes geographical shift in demand The Copenhagen CBD letting scene is very different from any other Danish letting market as the demand for CBD office space outstrips demand. As a result, tenants are left with lim ited options at high prices. Several districts that used to see moderate development are now coming into play as alterna tive locations to the Copenhagen CBD. Valby is one of the districts expected to see a particularly strong increase in newcomers in the coming years as redevelopment progresses in the area. Here, factors like a relatively low rent, excellent connectivity by public and private transport along with ample newbuilding opportunities constitute a cocktail that appeals to many tenants and developers. All factors weighed in when domestic biotech company Genmab decided to relocate

from Kalvebod Brygge, Copenhagen CBD, to new, state-of-the art premises in Valby in 2023.

Some of the same qualities are offered in the Copenhagen NV district, which is transforming these years. Despite the resi dential conversion of a large portion of the district’s distinctive dated production and office facilities, premises are increasingly rearranged to serve as up-to-date offices with a New York-style industrial décor that command relatively high rent levels. In addition, Copenhagen development areas such as Nordhavn (north harbour), Jernbanebyen and Sydhavn (south harbour)/ Havneholmen are expected to add substantial new supply in the coming years, likely offering a contemporary and attrac tive alternative to the most central Copenhagen locations, not least due to their access to the metro and/or S-train grid and the developer community’s sharp focus on space-efficient, modern and sustainable buildings. Except for Jernbanebyen, the areas have already been partly developed, attracting substantial interest and activity in 2021. At Havneholmen, the CPH Highline office building is virtually fully let one year post-completion, while the Spidsen (“the tip”) office property at Nordhavn is already fully let despite not being ready for occupancy until 2023.

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Development potential Copenhagen and environs

 Development potential The existing pipeline in a district is not always indicative of the area’s long-term development potential. On a scale from A to C, with A denoting major development potential, we have mapped the development potential of Copenhagen and environs.

1. LIGHT RAIL  A  122,200  1,300 2. LYNGBY/LUNDTOFTE

8. CARLSBERG CITY DISTRICT  C  46,300  1,700 9. VALBY  B  63,600  1,400 10. JERNBANEBYEN

 B  0  1,600 3. TUBORG HAVN  C  0  1,850 4. NORDHAVN  A  277,700  2,000 5. NORDVEST  B  19,800  1,300 6. CBD  C  137,000  2,100 7. REFSHALEØEN

 Pipeline The pipeline denotes office space (sq m) on the drawing board or in ad vanced development phases as from 2022 to 2024 inclusive.

 A  0  1,700 11. SYDHAVN  B  37,700  1,450 12. ØRESTAD  A  10,800  1,500 13. SCANPORT

 Market rent The quoted market rent corresponds to the annual prime office market rent (DKK per sq m), exclusive of op erating costs and taxes. For the cor ridor labelled 1, running along the future Greater Copenhagen light rail, the rent corresponds to the net rent required by a developer to initiate of fice development.

 B  0  1,500

 A  0 .  1,650

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Hotel Industrial/logistics Retail Residential Of f ice

A. Great potential B. Some potential C. Limited or no potential Development potential

2

2

3

4

5

7

1

6

8

10

9

11

13

12

Metro Light rail Road grid

Railway Airport

Source : Byggefakta, Colliers

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Case

Hotel Industrial/logistics Retail Residential Of f ice

However, demand for the area has weakened in recent years, with several develop ment sites standing idle for a prolonged period, unable to attract the amount of ten ant demand required to start development. This situation is underpinned by letting activity, with total office lets amounting to approx 19,700 sq m in 2021, although most vacancies are in top-modern and efficient buildings, including KLP’s newly completed approx 49,000 sq m HUBNORDIC scheme. Ørestad has long been the preferred location of many businesses, with existing office users in the district including mainly sales or administrative businesses and companies with a great many employees that reside south and west of Copenhagen. However, due to traffic issues along the motorway linking the island of Amager and Ørestad with Zealand and central Copenhagen as well as additional emerging districts offering the same qualities, the number of office vacancies in Ørestad is at an unprecedented high. Mainly the Valby district, having become part of the metro grid and seeing the expan sion of Ny Ellebjerg station, is expected to be a key rival location competing for the same tenants but at lower prices than offered in Ørestad. Furthermore, Valby benefits from a more well-established city environment and history, serving as an additional tenant magnet in the competition with Ørestad. Ørestad is by no means a district that has stopped evolving and attracting newcomers. Evident advantages and sought-after amenities such as excellent accessibility mainly in terms of public transport and airport proximity along with a modern, sustainable and space-efficient building stock will continue to have broad tenant appeal. However, competition will intensify as several new areas emerge as an alternative to Ørestad. Held together with the numerous development opportunities offered in Ørestad, we recommend maintaining a conservative approach to rent increase expectations in the area. In the short to medium term, the district may to some extent see prices come under slight downward pressure unless vacancy rates are brought down. Ørestad Ørestad, a long-established andwell-connected office district in proximity of central Copenha gen, continues to offer multiple possible build ing plots, just as several newly developed and up-to-date buildings have office space to let.