Market Report 2022

Colliers Market Report 2022

47

Hotel Industrial/logistics Retail Residential Of f ice og logostik Detail Bolig Kontor

Rising costs may slow residential newbuilding The brisk new construction activity is not without conse quences: The price of construction materials has started to climb due to the strong demand in the wake of the coro nacrisis. In addition, the supply of materials has been reduced because of global lockdowns, prompting a decline in production as well as logistical strains. Should these cost increases continue, they will put a damper on the mar ket for newbuilding. So far, we have only seen a moderate slowdown in activity as massive price hikes in the owner ship and investment markets alike have cancelled the neg ative effect of increased development costs. However, when constructing non-profit rental housing, these massive price hikes have severe repercussions. Due to the cap on non-profit newbuilding costs, price increases may result in development schemes being reassessed, postponed or even altogether shelved. We have already seen examples to this effect. In addition, developers have

found it necessary to revise original plans, for instance dis carding sustainable solutions to meet budgets. Further price hikes that are not balanced by a corresponding increase in the stipulated maximum amount may therefore serve to slow development in the segment, both in terms of a decline in newbuilding, but also in terms of compromises on quality and sustainability.

Residential construction costs rallied in 2021

100 101 102 103 104 105 106 107 108

98 99

18

19

20

21

Nominal growth Real growth

Note: Construction cost index, residential, index 100 = 2018. Source: Statistics Denmark

Nicolinehus, Aarhus C