Market Report 2022

Office - Colliers Market Report 2022

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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