Market Report 2022

Colliers Market Report 2022

57

Hotel Industri & logistik Detail Bolig Kontor I u trial/logistics R Residential Of f ice

for Danish property market entry Professional investors’ traditional roadmap

Regional growth cities climbing on international investor agendas Copenhagen, followed by Greater Copenhagen and Aarhus, has traditionally been the first choice of many investors. Here, they have been able to achieve stable returns in rental mar kets characterised by low vacancy rates and strong popula tion growth. However, this one-sided focus has also triggered stronger competition, yield compression and price hikes in Denmark’s two largest cities, in turn driving up the demand for major regional growth cities. Several financially strong, foreign investors with little or no Danish market experience are ready and keen to enter the Danish residential investment market, and they do not neces sarily have Copenhagen or Aarhus at the top of their list. Although Goldman Sachs entered the Danish market with an acquisition in Rødovre in 2019, this investor did not build an actual Copenhagen platform, but headed straight for provin cial locations, in 2020 acquiring seven residential properties in Jutland growth cities with a price tag of DKK 1.5 billion in total. In 2021, they continued this strategy by making two acquisitions: first, three residential turnkey properties in Horsens, Kolding and Randers at a total price of approx DKK 600 million, followed by three residential turnkey properties in Ringsted at a price of approx DKK 430 million. Goldman Sachs therefore serve as an example of foreign investors who no longer necessarily start in Copenhagen before heading for provincial locations. Not only foreign investors have a healthy appetite for regional growth cities and provincial locations, however. Several domes tic pension funds have increased their exposure to exactly these locations, too. Drawing on already attained local mar ket knowledge, domestic pension funds are also seen to enter investments at an earlier stage, thereby fetching a higher return by means of a develop-to-core strategy, taking part in the development process, or by means of forward funding, meaning that they not only take over the turnkey property but also fund the actual construction. Yield requirements in growth cities have not been unmoved by the strong demand either, seeing a sharp decline in recent years to a level where investors to a larger extent than before should evaluate risk factors and micro location characteristics, e.g., the population forecasts of specific towns and cities as well as the pipeline of competing new supply.

Copenhagen Step 1

Investor

Gt. Copenhagen and Aarhus Step 2

Regional growth cities Step 3

New trend

– foreign investors quicker to head for provincial locations

Copenhagen

Gt. Copenhagen andAarhus

Regional growth cities

Source: Colliers

Investor