Market Report 2022

Colliers Market Report 2022

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Hotel Industrial/logistics Retail Residential Of f ice

Yields on student housing approaching yields on housing in general Historically, student housing has represented a highly attractive investment opportunity on account of high demand among students and low vacancy rates due to scarce supply. At the same time, investments in student housing have typically generated a yield premium as high as 50 bps, sometimes even higher, relative to residential yields in general, driven by the relatively narrow field of specialist investors that have been the only buyers – in the past, that is – of student housing properties. However, an increasing number of investors have entered the mar ket for student housing in recent years, with the increased depth and competition in the investment market reducing the yield gap vis-à-vis housing in general. The risk profile too is approaching the one seen in the general residential market, and with the abolition of study requirements some years ago, student housing in Copenhagen in particular shares many of the markings of the “micro living” concept gaining popularity in other coun tries around the world, a trend where minimum space and optimum utilisation of space and resources are key. Judging by realised student housing sales in 2021, student hous ing continues to trade at higher yields than housing in general, irrespective of virtually identical risk.

residential property having proved a safe investment dur ing the crisis. The Danish population’s generally healthy household budgets and virtually unchanged job situation on account of state-funded relief packages have translated into low vacancy rates and stable cash flows in residential investment property in nearly all parts of the country. The demand for residential properties is particularly strong among investors with a long-term focus, seeking stable returns at no significant risk. Both established and new market players were active as 2021 wore on, with Swedish Heimstaden being one investor to show a strong appetite for Danish residential properties. Dutch Orange Capital Partners (OCP) also checked in. Although having made its first investment in Denmark as late as in July 2021, OCP has already invested in more than 75,000 sq m residential space in transactions representing a combined value of just shy of DKK 3 billion. The strong demand has given rise to competition among an ever-increasing number of active investors, at year end 2021 driving down yields to an unprecedented low. In Copenhagen, the best prime residential investment prop erties are now trading at initial yields below the 3.00% mark, and in Aarhus at approx 3.25%. Given the resulting record-high rent levels, the price per square metre of res idential investment property in several locations exceeds the prices of ownership housing. In the past, the rule of thumb dictated that the price per square metre of residen tial rental property could not exceed the price of owner ship housing, but a strong and resilient rental market along with strong investment demand have made it impossible for investors to be competitive in the current market if they adhere to this doctrine.

An undisputed winner throughout the coronacrisis

Student housing is not the only segment to attract substan tial interest in the current market. When the uncertainty in the first months after the outbreak of COVID-19 had sub sided, the investment market had a near-insatiable appe tite for residential property. This was well-justified, with