Market Report 2022

Office - Colliers Market Report 2022

36

eign investors at a price level that by no means indicated any significant price reduction on account of re-letting risk.

So far, most foreign investors have in their investment strate gies been confined by strict geographical location criteria, with the Copenhagen CBD or well-defined office districts in proxim ity of central Copenhagen, e.g. Ørestad or Nordhavn, being the only approved areas to invest in. Until recently, the vast major ity of foreign investors considered e.g. Valby to be a periph eral location vis-à-vis Copenhagen – a perception that is slowly changing these years, however, as the area evolves. Office properties in non-Copenhagen locations are often sus ceptible to a more uncertain letting market, just as you here require great local market insight to understand your tenants and their needs. In addition, critical mass is hard to achieve in single-property transactions, just as it is rare to see portfolios offered for sale that appeal to foreign investors in terms of vol ume and quality. However, the spread between net initial yields on Copenhagen properties versus provincial properties has now become so pronounced that mainly Aarhus is likely to come on the map of foreign investors, provided the right products in terms of volume, quality and location are put on the market. This yield spread is driven not only by developments in underlying fac tors, including low vacancy and strong tenant demand, but also

Foreign investors predominate in Copenhagen – still no presence in provincial locations Unlike the markets for residential and logistics properties, the office market outside Greater Copenhagen has seen virtually no foreign investor activity in 2021. Here, Swedish property company SBB, specialist in properties with public-sector ten ants, accounted for the highest share of transaction volume involving foreign investors. The picture is altogether different in Copenhagen and its neigh bouring suburbs, where six of the year’s seven largest trans actions either involved foreign investors or joint ventures with one partner hailing from abroad. The fact that foreign investors predominate the Copenhagen office investment property mar ket is not a new phenomenon. High transparency, low vacancy risk, an acknowledgement of Copenhagen as Denmark’s premier growth engine along with yields that exceed those of comparable European metropolises have combined to make the market attractive to investors that assess cross-border investments.

Yield spread between Copenhagen and Aarhus has widened since 2019

2019

2020

2021

2022

Aarhus

4.25

4.25

4.25

4.00

Copenhagen

3.75

3.50

3.25

3.00

Note : Development in prime office net initial yields (%) in 2019-2022, Copenhagen vs. Aarhus. Source : Colliers