Market Report 2022

Colliers Market Report 2022

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

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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