Market Report 2022

Colliers Market Report 2022

3

Hotel Industrial/logistics Retail Residential Of f ice

Record year for investors

2021 was the busiest year ever in the Danish property market: One by one, records were broken, inve stor competition intensified, and in several locations the markets turned so red-hot that yield require ments dropped below the 3.00% mark. So, what happened? Firstly, in 2020 travel restrictions stunted the activity of foreign investment funds in particular. As a result, placement requirements built up, with many players witnessing a ketchup effect on transacti ons with the reopening of society in 2021, all the while that vaccination programmes were rolled out across Europe, and restrictions eased. The pandemic closed the book on 2021 with a new coronavi rus variant, but economic activity did not lose momentum. Businesses made good money and wages were rising. This fuelled the demand for more and larger dwellings and for more office, storage and production facilities, driving vacancy rates down and rental prices up to all-time highs. Secondly, substantial placement requirements among private and, not least, professional investors – mainly from abroad – intensified the competition for property investments. Supported by rising infla tion and sustained low interest rates, the cost of financing remained exceptionally low, whetting inve stor appetite for inflation-hedged property agreements, with no funds tied up in cash deposits or bond investments. On the threshold of 2022, all framework conditions for property investments remain favourable. Nevertheless, it is difficult to imagine that the years ahead will outperform 2021. All major Danish towns and cities are seeing brisk newbuilding of both residential, office and logistics space, with the supply of lease premises set to increase as from 2023 in particular, dampening any prospects of rent hikes. At the same time, net initial yield requirements are at an unprecedented low, and it almost seems to defy natural laws should they continue to drop. The question is whether the yield compres sion registered over the past 36 months is a temporary manifestation, reflecting the need for capital placement, or whether we have reached a point where Denmark resembles the European property market, with dwellings in Aarhus to be compared to dwellings in e.g. Munich in future. In 2022, it is therefore fair to expect a new, incredibly exciting and competitive market, albeit with a certain stabilisation in most segments, without a real turnaround in developments. Interest rates are only edging up slowly, macroeconomic key indicators are favourable and placement requirements remain massive. 2022 will therefore be yet another year when market players are required to have done their homework, ready to make prompt decisions in the property market. We hope this market report may be of some assistance.

February 2022

Carsten Gørtz Petersen Partner and CEO (MRICS)

carsten.goertzpetersen@colliers.com

Accelerating success.