Market Report 2022

Colliers Market Report 2022

13

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.