Market Report 2022

46

Residential - Colliers Market Report 2022

Brisk newbuilding reduces former shortage of housing

Sustained brisk newbuilding activity in all parts of Denmark Population growth has set the scene for residential newbuild ing, and recent years have seen a substantial increase in added supply in the residential market, both in the largest cities and in more provincial towns. Having slowed for many years in the aftermath of the financial crisis, newbuilding picked up in 2016 2017, and in 2020, residential completions in Denmark’s four largest cities amounted to three times the quantity of space completed in 2010. Newbuilding mainly takes place in the largest cities today, albeit a string of major provincial towns and cities are witness ing a spell of record-high activity. So far, there is no sign of a sig nificant slowdown in construction activity. The current pipeline in fact suggests that activity in the coming years will match or almost match the level seen in recent years. This has given rise to concerns that future supply will outstrip demand, thereby driving rent levels down and vacancy rates up in newbuilds in certain areas. We have yet to see data to support this, and reletting activity continues at a rapid pace in most new devel opments across Denmark. However, the number of new dwell ings that the market can absorb is determined by demand, and investors are advised to reign in their expectations of sustained rent hikes in many areas in the years ahead when evaluating new investment opportunities. The old residential building stock comprised by the Danish Housing Regulation Act, however, is more vacancy prone in provincial cities with brisk newbuilding activity as the new dwellings are better aligned with tenant requirements. In the

Completions 2016-2020 1

Pipeline 2022-2024²

Demand 2022-2024 2

Copenhagen

511,000

572,000

352,000

Aarhus

321,000

321,000

174,000

Triangle Region

304,000

244,000

174,000

Odense

138,000

156,000

63,000

Aalborg

195,000

79,000

87,000

Note:

1 Annual average, sq m, ²Estimated annual average, sq m.

Source:

Byggefakta, Statistics Denmark, Colliers

new residential districts of major provincial towns and cities, many newcomers have relocated from older buildings where the rent level rarely falls far below the level commanded by newbuilds. In terms of old-stock residential buildings, this may likely put downward pressure on rent levels and impose sub stantial refurbishment costs on properties with less than a prime location or prime layout, if these properties are to con tinue to attract and retain tenants.