Newsletter Q3 2017 UK

Newsletter Q3 2017

Downtrend in o ce vacancy rates

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

2007 2008 2009 2010 2011

2012 2013 2014 2015 2016 2017

CBD

Greater Copenhagen, incl. CBD

Source: Ejendomstorvet.dk

Does behavioural change affect vacancy rates?

indications of this being attributable to a change in the buying behaviour of commercial tenants, the relatively short decision-making process and increased digitalisation. Market developments are largely supported by a sustained strong labour market, driving the demand for additional office workplaces, all other things being equal. In addition, conversions of office space for both residential and hotel purposes affect vacancy statistics, although the scale of these conversion schemes is difficult to gauge. However, Sadolin & Albæk believes that, due to the increased digitalisation and use of networks, it is possible to find a quicker match between a prospective tenant and landlord for their mutual benefit. All other things being equal, this makes for a more active office letting market, where trends are favourable.

The most recent vacancy figures from Danish online portal Ejendomstorvet.dk show a 6.1% decline in the Copenhagen CBD (Central Business District) office vacancy rate, marking the lowest level since mid-2009. In the span of the last 12 months alone, vacancy has seen a 1.8 bps decline, corresponding to a decline in office vacancies of almost 100,000 sqm. This trend is also confirmed by the latest market statistics released by the Danish Property Federation, measuring financial vacancy in the market (with financial vacancy defined as the sum total of current annual rent of all vacant leases divided by the sum total of current annual rent in both tenanted and vacant lease units). In the CBD, financial vacancy has dropped by 0.8 percentage point in the last 12 months, standing at 5.6% as at start-Q3 2017. In Greater Copenhagen, the pattern is the same: the vacancy rate has come down to 7.6%, but financial vacancy is calculated at 13.1%.

Irrespective of the highly favourable trend in office vacancy rates, however, there are no clear

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