Market Report 2022

Colliers Market Report 2022

11

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

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Total return

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