RED – Danish Investment Atlas 2022 – English edition by Cushman & Wakefield RED

ANNUAL REVIEW

RED – DANISH INVESTMENT ATLAS

PUBLISHED BY

IN COLLABORATION WITH

HOTEL

RETAIL

LOGISTICS

OFFICE

RESIDENTIAL

ENGLISH EDITION

120

32%

BN DKK

100%

GREATER COPENHAGEN

21.7

Danish 49%

BN DKK

Foreign 51%

18%

VOLUME10.5 & INVESTORS 2021 AARHUS GREATER COPENHAGEN Danish 83% Danish 49% Foreign 17% Foreign 51%

21.7

BN DKK BN DKK

18%

OTHER ZEALAND

13.4

Danish 74% Foreign 26%

Foreign 61%

BN DKK

OTHER JUTLAND FUNEN Danish 52% Danish 65% BN DKK Foreign 48% BN DKK Foreign 35% COPENHAGEN 23% 6% GREATER COPENHAGEN Danish 39% Danish 49% BN DKK AARHUS Foreign 61% BN DKK Foreign 32% 51% Danish 18% 83%

27.8 7.3

Udenlandske 46% Danske 54% Udenlandske 46%

6% 52% Danish

BN DKK

Foreign 26%

Foreign 35% 11%

ZEALAND

13.4 BN DKK

Foreign 48%

23%

OTHER JUTLAND

27.8 23%

21.7

FUNEN

BN DKK

Danish 52%

BN DKK

10.5 BN DKK

Foreign 61%

Foreign 48% AARHUS

7.3

FUNEN

Danish 83%

Danish 65%

BN DKK Foreign 17% 6%

Foreign 35%

18%

11%

OTHER ZEALAND Danish 74%

38.1

7.3

FUNEN Danish 65%

BN DKK

1.6 BN DKK

AALBORG

10.5

AARHUS

Danish 88%

Danish 83%

BN DKK12% Foreign 9%

Foreign 17%

11%

Foreign 35% 6% OTHER ZEALAND

21.7 BN DKK

10.5 BN DKK

7.3

10.5

AARHUS

Danish 8 GREATER COPENHAGEN Danish 74% BN DKK Foreign 1 Foreign 26% Danish 9%49%

18%

B | RED – Danish Investment Atlas 2022

Foreign 2

Foreign 26% COPENHAGEN FUNEN 11% GREATER COPENHAGEN Danish 6 COPENHAGEN Danish 49% BN DKK Foreign 3 Foreign 51% Danish 6%39% BN DKK Foreign 61% 32%

7.3 13.4

Danish 7

VOLUMEN I ALT

Danish 74%

Danish 65%

Danske 54%

13.4

32%

OTHER ZEA

120

7.3

OTHER ZEALAND

13.4

MIA. KR.

Foreign 12% FUNEN

Foreign 51%

GREATER COPENHAGEN Danish 39% BN DKK

BN DKK

Danish 88%

OTHER JUTLAND BN DKK

18% COPENHAGEN

100%

38.1

AALBORG

BN DKK

Danish 49%

BN DKK

AARHUS

VOLUMEN I ALT

Foreign 18% 26%

GREATER COPENHAGEN

21.7

Foreign 51%

120

1.6

Foreign 5

100%

JUTLAND

Danish 49%

BN DKK

Foreign 12%

Danish 4

GREATER COPENHAGEN

Danish 74%

11% 88% Danish

BN DKK

21.7

GREATER C

18%

21.7

13.4

Foreign 61%

100%

BN DKK

Foreign 17% OTHER ZEALAND

AALBORG BN DKK

BN DKK

MIA. KR.

32%

Foreign

Danish 39%

Danish 83%

BN DKK

27.8

BN DKK

Danish 5

COPENHAGEN

AARHUS

10.5

38.1

Foreign 17%

1.6

120 Danske 54%

BN DKK

Foreign 6

32%

VOLUME IN TOTAL

Udenlandske 46%

10.5

Danish 3

BN DKK

38.1

21.7

COPENHAG

38.1

100%

AALBORG

UMEN LT

Foreign 46%

. KR.

Danish 32% 65% Foreign 35%

Danish 54%

Danish 39%

BN DKK

VOLUMEN I ALT

38.1

BN DKK

120

COPENHAGEN

FUNEN

7.3

VOLUME IN TOTAL

Danske 54%

11%

Udenlandske 46%

BN DKK BN DKK

120

1.6 13.4 1%

100%

AALBORG OTHER ZEALAND Danish 88% Danish 74% Foreign 12% Foreign 26%

MIA. KR.

11%

BN DKK

9% FUNEN

Foreign 51% Source: ReData AARHUS

Danish 83% Foreign 17%

1.6

OTHER ZEALAND Danish 65% BN DKK

AALBORG

Danish 8

| 3

21,7

32% STORKØBENHAVN

120 MIA. KR.

100%

Danske 49%

HOTEL

MIA. KR.

Udenlandske 51%

18%

VOLUMEN & INVESTORER 2021 10,5 21,7 MIA. KR. MIA. KR.

18%

AARHUS STORKØBENHAVN Danske 83% Danske 49% Udenlandske 17% Udenlandske 51%

ØVRIGE SJÆLLAND

13,4

Danske 74%

MIA. KR.

Udenlandske 26%

11%

RETAIL

1,6 13,4 MIA. KR. MIA. KR.

11%

AALBORG ØVRIGE SJÆLLAND Danske 88% Danske 74% Udenlandske 12% Udenlandske 26%

38,1

VOLUMEN I ALT

KØBENHAVN

MIA. KR.

Danske 32% 65% Udenlandske 35%

MIA. KR.

120

Danske 39%

FYN

7,3

Foreign 46%

Udenlandske 61%

MIA. KR.

AALBORG

27,8 7,3 LOGISTICS

Udenlandske 51% 32%

Danske 54%

Udenlandske 46%

KØBENHAVN

38,1

Danske 39%

MIA. KR.

VOLUMEN I ALT

Udenlandske 61%

32%

120

Danske 39%

Danske 49% MIA. KR.

MIA. KR.

Danske 18% 83%

MIA. KR.

100%

ØVRIGE JYLLAND FYN Danske 52% Danske 65% Udenlandske 48% Udenlandske 35% KØBENHAVN STORKØBENHAVN

MIA. KR. MIA. KR.

23%

38,1

21,7

AARHUS

10,5

38,1

Udenlandske 61%

MIA. KR.

Udenlandske 17%

32%

Danske 54%

KØBENHAVN

Udenlandske 46

Danske 39%

MIA. KR. Udenlandske 61%

100%

STORKØBENHAVN Danske 49% Udenlandske 51%

18%

21,7

OFFICE

7,3

STORKØBENHAVN

21,7

Udenlandske 51%

Danske 49%

VOL Udenlandske 51% ØVRIGE SJÆLLANI

MIA. KR.

AARHUS

13,4

ØVRIGE JYLLAND MIA. KR. 6% Danske 52%

Udenlandske 26%

Udenlandske 35% 11%

Danske 74%

Danske 65% MIA. KR.

FYN

SJÆLLAND

13,4

MIA. KR.

Udenlandske 26%

the individual transactions in the Danish real estate market. ØVRIGE JYLLAND

27,8

Danske 52%

MIA. KR.

Udenlandske AARHUS 48%

7,3

10,5

MIA. KR.

18%

Udenlandske 35%

MIA. KR. Udenlandske 17% 6%

MIA. KR.

Danske 65%

Danske 83%

KØBENHAVN Danske 49% MIA. KR.

38,1

UdenlandskeDanske 51% 6% 39%

MIA. KR.

ANNUAL REVIEW

MIA. KR.

11%

AARHUS

Udenlandske 35%

Danske 65%

MIA. KR. Udenlandske 35% AARHUS 6% ØVRIGE SJÆLLAND Danske 83%

10,5

STORKØBENHAVN Danske 74% MIA. KR.

21,7

Udenlandske 17%

UdenlandskeDanske 26% 9% 49%

MIA. KR.

18%

Danske 83%

Danske 88%

FYN

7,3

13,4 AALBORG

Udenlandske 61%

32%

10,5

1,6

Udenlandske 17%

MIA. KR. Udenlandske 12% 9%

Danske 74%

which uses many resources on collecting and verifying the data on

Danish real estate market.

ØVRIGE SJÆLLAND

MIA. KR. Udenlandske 26% KØBENHAVN FYN 11% STORKØBENHAVN Danske 65%

7,3

Data for this year’s report is made in collaboration with ReData,

of capital, which led to a record high investment activity on the

RESIDENTIAL

Udenlandske 48%

21,7

FYN

ised by a strong macroeconomy, low interest rates and an overflow

where you can either get a quick overview of a single segment or The report is structured as an easily accessible reference work, MIA. KR.

Danske 74%

STORKØBENHAVN

Danske 39%

Udenlandske 61%11%

32%

ØVRIGE SJÆLLAND

Cushman & Wakefield | RED

23%

18% KØBENHAVN

38,1

AALBORG

MIA. KR.

Danske 88%

MIA. KR.

13,4

Nicholas Thurø, Managing Partner

27,8

MIA. KR.

Danske 83%

MIA. KR.

Udenlandske 17% STORKØBENHAVN ØVRIGE SJÆLLAND Danske 49% Danske 74% MIA. KR.

Udenlandske 26% 18%

11% 88% Danske

Udenlandske 12%

JYLLAND

1,6

Udenlandske 12% FYN

RED’s forecast on how we expect the market to develop in the Danish 54% coming year. Foreign 46%

Enjoy the report,

MIA. KR.

21,7

AARHUS

10,5 9%

13,4

AALBORG MIA. KR.

1,6 MIA. KR.

Danish 54%

100% BN DKK

120 VOLUME IN TOTAL

Foreign 46% Danish 54%

100%

BN DKK

Foreign 46% Danish 54%

100%

BN DKK

VOLUME On the following pages, you can get a detailed insight into the IN TOTAL Danish commercial real estate market in the past year, as well as

immerse yourself in all the details segment by segment.

lenges and changes, but it was also a year that was character-

23%

88%

17%

83%

35%

65%

100%

BN DKK

120

26%

74%

VOLUME ALAND IN TOTAL

51%

49%

120

COPENHAGEN

n 46%

54%

VOLUME IN TOTAL

120

61%

39%

GEN

The past year was once again a year characterised by several chalWelcome to ”RED – Danish Investment Atlas 2022”. Dear reader,

Udenlandske 51%

WELCOME Kilde: ReData AARHUS

10,5

Danske 83%

MIA. KR.

Udenlandske 17%

9% FYN

7,3

1,6

AALBORG Danske 88%

ØVRIGE SJÆLLAND Danske 65% MIA. KR.

EXECUTIVE SUMMARY HIGHEST VOLUME EVER

AN INSATIABLE DEMAND FOR LOGISTICS

the total volume in 2021, which is the lowest

Although covid-19 continued to lead to

PROPERTIES

share ever.

uncertainties, the transaction volume in 2021

However, with a growth of 74% in trans

reached DKK 120.4bn (

figure 1). This is the

action volume, the logistics segment again

TWO TRANSACTIONS SAVED THE

all-time highest volume in the Danish market

caught up with the office segment in 2021.

HOTEL SEGMENT

and provides evidence of both Danish and

Despite the record-high investment a ctivity

With their purchase of hotel Skt. Petri and

foreign investors having had a very large

in the logistics segment, the market was

Comfort Hotel Vesterbro, at a total price of

capital placement need as well as a great

characterised by the fact that there only

DKK 1.7bn, Starwood Capital, showed that

confidence in the Danish commercial real

was a limited supply of m odern well-

when the right assets are offered on the

estate market.

located logistics properties. This resulted in

market, there still is investor demand for

an unsaturated investor demand that led to

hotel properties. The completion of these

decreasing yield requirements.

two transactions was the primary reason

However, the market in 2021 once again showed that when there are uncertainties in

why the transaction volume in the hotel seg-

the market, investors are primarily demand-

THE RETAIL SEGMENT FELL BEHIND

ing the safest assets on the safest locations.

In 2021, investors in the retail market contin-

ment reached DKK 2.5bn in 2021.

Therefore, we witnessed a market with sig-

ued to be reluctant to invest in high street

2022 WILL BE MORE CALM

nificant differences in investment activity

properties. Therefore, the investment activ-

Although investors still have a large invest-

across the segments.

ity in the retail segment was primarily driven

ment need, we expect the investment activ-

by the Danish investors completing a large

ity in 2022 to be slowed by the fact that it

EVERYONE WANTS TO INVEST IN

number of transactions with smaller retail

will be difficult for the investors to find qual-

RESIDENTIAL PROPERTIES

properties and by the foreign investors

ity products to cover their high demand

In 2021, the residential market was charac-

investing in a number of assets with long

for assets in both the residential, office and

terised by an insatiable demand for more

and safe cash flows (grocery stores, big-box

logistics segments. Therefore, we expect a

or less all types of residential assets, an

properties and shopping centres). However,

more subdued development in the investors’

increasing rent level and decreasing yield

with a transaction volume of DKK 7.4bn,

yield requirements and a lower but still high

requirements. This resulted in a high invest-

the retail segment only accounted for 6% of

investment activity.

ment activity throughout Denmark and a transaction volume of DKK 65.8bn. With a share of 55% of the total volume, the residential segment was once again the largest property segment. DANISH CAPITAL DOMINATED Figure 1: Transaction volume 2021

THE OFFICE MARKET In the office market, the foreign investors’ activity, in particular, was slowed down by the fact that there was a limited supply of prime office properties located in Copenhagen.

VOLUME IN TOTAL

120

However, the completion of the all-time largest office transaction in Denmark, which was completed when an investor consortium bought Ørsted’s domicile for almost DKK 2.5 bn contributed to a s ignificant

BN DKK

growth in the Danish investors’ activity. Therefore, the transaction volume in the office segment reached DKK 18.4bn and a share of 15% of the total volume, which was sufficient for the office segment to maintain its position as the second-largest property segment.

4 | RED – Danish Investment Atlas 2022

Source: ReData

Danish 54% Foreign 46%

ANNUAL REVIEW

RESIDENTIAL 80%

Greater Copenhagen 23.4

Danish 29% 13% 8.6

Aarhus

6.6

47%

Rest of Denmark

27.1

57%

Total

65.8

55%

BN DKK

36%

Foreign 71%

RESIDENTIAL VOLUME IN TOTAL

65.8

4 6%

COPENHAGEN

is h

23.4

Largest deal AP Pension’s Danish 46% acquisition of BoStad Foreign 54%

BN DKK

Largest investor Heimstaden

GREATER COPENHAGEN

8.6

Outlook 2022

Copenhagen

Investment highlights 2021

Change 54

Volume

Fo re i g n

BN DKK

3.3

Prime rent Prime yield

BN DKK

6.2

Transaction volume

Danish 40%

BN DKK

RESIDENTIAL

Area

Foreign 60%

13%

OFFICE

Greater Copenhagen 6.9

Danish 42% 322% 4.8

Aarhus

2.2

BN DKK

38%

18.4

607%

Foreign 46%

18.4

Largest deal An investor consorDanish 70% tium’s acquisition of Foreign 30% Ørsted’s domicile

BN DKK

4.4Danish 54% 73%

BN DKK

Largest investor KanAm Grund Group

52%

GREATER COPENHAGEN

4.8

BN DKK

2.5

Prime rent Prime yield

BN DKK

1.6

Transaction volume

Danish 90%

BN DKK

Foreign 10%

26%

OFFICE

Total

OFFICE VOLUME IN TOTAL

Foreign 58%

FUNEN

Rest of Denmark3.9

-14%

Outlook 2022

70 %

COPENHAGEN

is h

6.9

Foreign 17%

Copenhagen

Investment highlights 2021

OTHER ZEALAND

Volume Change Danish 83%

BN DKK

Fo re

5.8

Area

AARHUS

6.6

Danish 76%

LOGISTICS BN DKK

Foreign 24%

2% Foreign 0%

8.7

0.4

BN DKK

12%

27% Foreign 48%

0.4

FUNEN

347%

Rest of Denmark0.7

3.6Danish 60% -18%

Total

7.4

BN DKK

Foreign 40%

BN DKK

20%

Transaction volume

Foreign 47%

OTHER ZEALAND

0.0Danish 71%

Foreign 29%

0.2

FUNEN

0% N/A

Rest of Denmark0.4

0.3Danish 100%132%

Total

2.5 1,560% COPENHAGEN &

Foreign 0%

GREATER COPENHAGEN

HOTEL VOLUME IN TOTAL

2.5

N/A

TRIANGLE REGION

Investment highlights 2021

Outlook 2022

s 26

Greater Copenhagen 2.7

Foreign 49%

1.9

21%

1.1

Danish 53%

Volume Change Danish 51%

BN DKK

Prime yield

BN DKK

Largest deal Starwood Capital’s Danish 26% acquistion of Foreign 74% Hotel Skt. Petri

BN DKK

Largest investor Starwood Capital

BN DKK

1.1

Prime rent Prime yield

BN DKK

1.7

Transaction volume

HOTEL

3.3

0.4

Largest investor M&G Real Estate

-7%

1.1

Prime rent

OTHER JUTLAND

HOTEL

43%

BN DKK

Foreign 69%

23%

BN DKK

Outlook 2022

Danish 31%

BN DKK

7.0

7.4

Largest deal M&G Real Estate’s Danish 62% acquisition of Foreign 38% BIG Shopping Center

GREATER COPENHAGEN

1.7

Fo re i g n

73%200% Danish 52% 1.7

RETAIL VOLUME IN TOTAL

62 %

14% 22%

-43%

OTHER JUTLAND COPENHAGEN

is h

BN DKK

Investment highlights 2021 D

Foreign 55%

1.6

Greater Copenhagen 2.5 1.6

17%

Foreign 1%

Volume Change Danish 45%

15%

BN DKK

Transaction volume

Danish 99%

OTHER ZEALAND

BN DKK

Aarhus

1.5

RETAIL

2.2

Copenhagen

Prime yield

BN DKK

AARHUS

RETAIL

1.6

1.5

Prime rent

Foreign 54% 76%

26% 31%

Area

BN DKK

Danish 46% 24%

BN DKK

Aarhus

Largest investor Oxford Properties

OTHER JUTLAND GREATER COPENHAGEN

17.0 5.0

Copenhagen

Largest deal Oxford Properties’ Danish 45% acquisition of Foreign 55% M7’s logistics portfolio

BN DKK

Foreign 0%

2.4

16.1

16.1Danish 100% 74%

BN DKK

Area

109%

FUNEN

Fo re i g n

BN DKK

LOGISTICS VOLUME IN TOTAL

45%

98% -57% Danish 100% 0.5

1% Rest of Denmark 12%

Total

71%

is h

0.5 2.0

7.0

AALBORG COPENHAGEN

Outlook 2022

Foreign 18%

Greater Copenhagen Aarhus

Investment highlights 2021

Volume Change Danish 82%

BN DKK

74 %

1.5

Fo re i g n

Area

OTHER ZEALAND

LOGISTICS

10%

Danish 45% Foreign 55% AARHUS Danish 100% Foreign 0%

| 5

THE YEAR IN REVIEW 2021 was a year where the real estate market developed significantly in several ways. Therefore, it is relevant to sum up some of the most important topics, which were defining for the real estate market in 2021. Much has been said and written about these topics, and we will, therefore, only present a brief summary here.

RECORD HIGH VOLUME

Figure 2: Nordic countries – Transaction volume

The most significant trend in the real estate

10.2 BN €

market in 2021 was that we saw an extremely high investment activity throughout all months of the year. This activity was driven

7.0

BN €

15.4 BN €

by the fact that investors had accumulated

10.1

large sums of capital for real estate invest-

BN €

Prev. record

ments after a year of uncertainty.

2021

FINLAND The activity was not only high in Denmark but throughout the Nordic region. Therefore, the transaction volume was record high in both Denmark, Sweden and Norway (

Prev. record

fig-

38.1

2021

BN €

NORWAY

ure 2). However, there are still significant differences in the investment activity across the Nordic countries. Where volume both in recent years and in 2021 has been lowest in Finland, investors have had the largest appe-

22.8 BN €

tite for Swedish properties, and in 2021 the transaction volume in Sweden was almost as

16.2

high as in the other three Nordic countries combined.

BN €

12.2 BN €

The high level of activity in Sweden testifies that there is also potential for a high level of investment activity in Denmark in the coming years, as the Nordic markets are highly comparable in terms of infrastructure, political stability and a strong economy.

Prev. record

2021

DENMARK

6 | RED – Danish Investment Atlas 2022

Prev. record

2021

SWEDEN

While the yield level continued to decrease

the risk premium for taking location risk and

for prime locations and for the most attrac-

for investing in different types of retail prop-

tive segments, the yield level remained sta-

erties has increased.

ANNUAL REVIEW RESIDENTIAL

INCREASING YIELD SPREAD ble at the more secondary locations and for the less attractive segments. Therefore,

In the market for secondary office proper-

we saw price increases for both residential

ties, hotels and retail properties, there are

properties, logistics properties and well-lo-

thus good opportunities for first-movers to

cated office properties in 2021. The opposite

generate relatively high risk-adjusted returns

was true for secondary office properties,

by entering the cycle early before the yield

hotels and almost all types of retail proper-

spread narrows again.

As always, the interest rate development was a

After almost two years challenged by the pandemic, the stores

significant topic during 2021. While long-term

and restaurants are starting to look towards brighter times again.

interest rates both increased and decreased dur-

The two years with lockdowns, uncertainty and declining turno-

ing the year, short-term interest rates remained

ver have shown that the retail market neither was nor is dying. The

at a record low level throughout the year. How-

e-commerce market got optimal conditions with employees work-

ever, the talk of a lasting increase in long-term

ing from home and closed physical stores, and e-commerce also

interest rates have become more entrenched and

got a boost. However, the physical stores are coming back strongly,

seems to be an expectation among most inves-

and we have experienced a limited number of bankruptcies and

tors. Although an increasing interest rate envi-

consumers that are on their way back to the stores – because for-

ronment seems like a realistic scenario, due to

tunately, we miss getting outside our homes and meeting other

expectations of increasing inflation, the yield

people.

requirements for real estate decreased.

RETAIL

INTEREST RATE INCREASES

THE DOMINANCE OF E-COMMERCE HAS BEEN CANCELLED

LOGISTICS

OFFICE

ties, where the stagnation continued. Thus,

Therefore, the total dominance of e-commerce has been cancelled and replaced by the right balance between physical experiences

large amounts of capital allocated for return-

and online stores. Currently, several “pure” online stores choose to

giving assets and the limited supply of properties

open physical stores and thus show that there are synergies to be

in the Nordic countries, where a large part of the

gained between a strong online platform and presence on the right

capital is directed at.

locations in the cities.

HOTEL

In our opinion, this is an expression of both the

| 7

RED assisted C.W.OBEL with the letting of 429 m² on Ny Østergade 25 to Tine K Home.

8 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

CONTENT 11

ANNUAL REVIEW The Investment Market �� 12 Transactions & Investors �� 14

RESIDENTIAL

Interview: ReData – Transparency in the Investment Market �� 16 Interview: The Real Estate Market of the Future Is Sustainable �� 18 Highlight: An Overview of the Nordic Markets �� 22 Expectations for 2022 �� 24

RESIDENTIAL Volume & Investors �� 30 Geographical Distribution �� 32 Top 5 Transactions 2021 �� 34 Highlight: The Innovator, the Imitator and the Idiot �� 36 Expectations for 2022 �� 38

OFFICE

Transactions & Key Figures �� 40

OFFICE Volume & Investors �� 44 Geographical Distribution �� 46 Top 5 Transactions 2021 �� 48 Highlight: The Office Market in a Nordic Context �� 50 Expectations for 2022 �� 52 Transactions & Key Figures �� 54

LOGISTICS

Volume & Investors �� 58 Geographical Distribution �� 60 Top 5 transactions 2021 �� 62 Interview: Does the Yield Level on Logistics Properties Reflect the Risk? � 64 Expectations for 2022 �� 68 Transactions & Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

RETAIL Volume & Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

RETAIL

Geographical Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Top 5 Transactions 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Footfall: Are We at the End of the Crisis?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Expectations for 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Transactions & Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

HOTEL The Hotel Segment in 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Interview: The Hotels Have to Fight for Their Success. . . . . . . . . . . . . . . . . . . 90 Top 5 Transactions 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Pipeline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

HOTEL

| 9

RED assisted Kongeegen A/S with the sale of Ny Allerødgård.

10 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Interview: ReData – Transparency in the Investment Market

Interview: The Real Estate Market of the Future is Sustainable

Highlight: An Overview of the Nordic Markets

Expectations for 2022

OFFICE

Transactions & Investors

LOGISTICS

RETAIL

The Investment Market

HOTEL

RESIDENTIAL

ANNUAL REVIEW

Annual Review | 11

ANNUAL REVIEW – THE INVESTMENT MARKET

Highest transaction volume ever The momentum we saw at the end of 2020 continued into 2021, and even in the summer months, when there has historically been a clear slowdown in activity, the high investment activity continued, which meant that we witnessed a high activity level in all four quarters of the year. As a result, the total transaction volume reached DKK 120.4bn, which is the highest transaction volume ever measured on the Danish market for commercial real estate (

figure 3).

The increase in the volume was driven by

supply of prime Copenhagen properties in

properties in Copenhagen, a lack of inves-

significant growth in both Danish and for-

the office segment, there was a limited sup-

tor interest in high street properties and an

eign investors’ investments. However, the

ply of modern well-located properties in the

increasing demand for logistics properties

growth was highest among the Danish inves-

logistics segment, and finally, there was a

located outside Copenhagen.

tors, and with a share of 54% of the trans-

limited supply of grocery stores with tenants

action volume in 2021, the Danish investors

on long leases in the retail segment.

were back as the most active investors.

Looking at the distribution between Danish and foreign capital, it is still clear that for-

Despite the limited supply, the investment

eign investors are dominant in Copenhagen,

ALL RESIDENTIAL PROPERTIES

activity increased significantly in both the

whereas Danish investors are dominant out-

CAN BE SOLD

office and logistics segment, and with a

side the capital. This distribution is largely

In 2021, the market once again showed that

share of 15% of the total volume, the office

caused by the fact that the assets located

investors are looking towards the safest

segment maintained its position as the sec-

outside Copenhagen are often significantly

assets on the safest locations when there

ond-largest property segment. However,

smaller than the assets located in Copen-

are uncertainties in the market. Therefore,

a growth of 74% in investments in logistics

hagen, which is why the foreign investors’

we witnessed a high demand for virtually

properties meant that the logistics segment

interest is primarily focused on the assets

all types of residential assets (newly built

almost caught up on the office segment. At

located in Copenhagen.

homes, forward sales, rent-controlled hous-

the same time, the retail segment’s share

ing, student apartments and senior hous-

fell to 6%, and there is thus no longer any

ing). At the same time, the investors’ yield

doubt that the logistics segment has taken

requirements reached a record low level. As

over the place as the third-largest property

a result, investments in residential properties

segment.

reached DKK 65.8bn, which corresponds to a share of 55% of the total volume.

HIGHER ACTIVITY IN ALL GEOGRAPHICAL AREAS

THE INVESTORS DEMAND THE

Investors continue to perceive the Copenha-

SAME PROPERTIES

gen real estate market as the safest. There-

In both the office, logistics and retail seg-

fore, investments in Copenhagen reached

ments, the demand was significantly more

DKK 38.1bn and a share of 32% of the total

narrow and targeted at the safest proper-

volume in 2021 (

ties. The level of activity in these segments

also saw a significant growth in investments

was therefore slowed down by the fact that

outside of Copenhagen, which was driven

there only was a limited supply of the most

by the broad demand for residential prop-

attractive assets. While there was a limited

erties, a limited supply of attractive office

12 | RED – Danish Investment Atlas 2022

figure 4). However, we

ANNUAL REVIEW

Figure 3: Transaction volume 2012-2021 60%

120 9% 6%

40%

9% 60

11% 11% 16% 9%

21%

26% 11% 24%

23%

51%

32%

30%

2012

2013

2014

8% 6% 7% 7%

20%

24%

28%

30%

12% 16%

30%

55%

20%

27% 55%

41%

33%

42%

38%

10%

45% 43%

OFFICE

10%

11% 9%

15%

18%

FOREIGN INVESTORS' SHARE

TRANSACTION VOLUME (BN DKK)

13%

RESIDENTIAL

50%

100

0% Residential

Office

2015

2016

Logistics

Retail

2017

2018

Hotels

2019

Other

2020

2021

Foreign investors’ share

LOGISTICS

Figure 4: Geographic breakdown of transaction volume 2019-2021 50

40 61% 39%

36% 20

50%

RETAIL

42% 49% 36%

61% 10

81%

64% 48% 73%

64%

51% 75%

27%

0 2019

2020

2021

COPENHAGEN Source: ReData

2019

71%

83% 19%

29% 2020

2021

2019

GREATER COPENHAGEN Danish

2020 AARHUS

39% 50%

2021

2019

2020

2021

REST OF DENMARK

Foreign

HOTEL

BN DKK

Annual Review | 13

ANNUAL REVIEW – TRANSACTIONS & INVESTORS RESIDENTIAL INVESTORS DOMINATE

40%. However, that the share in 2020 was

HIGH DEMAND IN ALL PRICE RANGES

The residential segments’ dominance in the

so high was mainly caused by Heimstadens

In 2021, more than 3,000 transactions with

real estate market is also reflected in the

purchase of HD Ejendomme at a price of

commercial properties were completed in

ranking of the investors who invested the

DKK 12.1bn., which was the all-time largest

Denmark, which is a growth of 40% com-

most capital in Danish commercial prop-

transaction on the Danish real estate market.

pared to 2020 (

erties in 2021 (

figure 6). The only one of

figure 5). This growth is

significantly lower than the growth in the

the top ten investors of the year who did

ROTATION AMONG THE LARGEST

transaction volume, which implies that the

not primarily invest in residential proper-

INVESTORS

average price per transaction increased

ties was the tenth most active investor, Star-

Although there has been a high level of

from DKK 35m in 2020 to DKK 40m in 2021.

wood Capital, which invested DKK 1.7bn in

investment activity and many new players

the purchase of hotel Skt. Petri and Comfort

have entered the Danish market in recent

Looking more closely at the development in

Hotel Vesterbro. However, it should be noted

years, there have been no changes in the

the number of transactions within the vari-

that several of the largest investors (e.g.,

ranking of which investors have historically

ous price intervals, it is noteworthy that the

Catella and AXA Investment Managers) also

invested the most capital in Danish com-

number of transactions in the DKK 500m to

invested in other real estate segments than

mercial properties (

DKK 1bn price interval is more than doubled

the residential segment.

activity in 2021 led to a reshuffle between

from 2020 to 2021. However, the market

several investors. While both Heimstaden

was not only characterised by an increase in

In 2021, the ten largest investors invested

and Niam retained their position as the most

the very large transactions (+ DKK 400m),

a total of DKK 36.2bn in properties, which

and second most active investor, Koncen-

but also by an increase in both the number

corresponds to 30% of the total transaction

ton and NREP both jumped three places

of transactions and the transaction volume

volume. This is a significantly smaller share

from last year, thus taking the position as

within all price intervals for both the smaller

than in 2020, where the ten largest inves-

the third and fourth most active investor

(DKK 0-50m), the medium-sized (DKK

tors’ share of the total volume was above

historically.

50-200m) and the large (DKK 200-400m)

figure 7). However,

transactions. THE LARGE TRANSACTIONS WERE DOMINATED BY FOREIGN CAPITAL In 2021, the distribution between Danish and

Figure 5: Breakdown in price ranges 2020 & 2021 Price range (M DKK)

foreign investors was more or less equal when looking at the transaction volume.

No. of transactions

Volume (M DKK)

However, the distribution was significantly more skewed when looking at the number of

2020

2021

2020

2021

transactions, and in 2021, Danish investors

1,323

1,579

2,225

3,002

accounted for almost 90% of the 3,031 com-

5 - 10

262

409

1,818

2,815

market was once again characterised by the

10 - 20

183

389

2,549

5,442

20 - 50

173

331

5,542

10,341

50 - 100

141

6,128

10,256

100 - 200

8,676

11,329

200 - 300

6,501

10,427

of capital allocated to the purchase of Dan-

300 - 400

3,773

8,986

ish investment properties and that there is

400 - 500

5,894

4,357

500 - 1,000

9,475

25,505

> 1,000

24,070

27,924

2,168

3,031

76,652

120,382

0-5

Total Source: ReData

14 | RED – Danish Investment Atlas 2022

pleted transactions. Thus, the investment Danish investors being behind the majority of the smaller transactions. In contrast, the foreign investors were behind the majority of the larger transactions. This shows that there are still large amounts

a strong investor demand for properties in all price ranges. However, in order to attract foreign capital, the transaction must still involve projects (or portfolios) with a certain volume.

ANNUAL REVIEW Origin

Volume (M DKK)

No. of transactions

Heimstaden

6,298

Koncenton

5,096

NREP

4,676

Catella

4,323

AP Pension

3,442

Niam

3,259

Orange Capital Partners

2,985

AXA Investment Managers

2,451

Axer Eiendom

1,920

Starwood Capital

1,706

OFFICE

Investor

RESIDENTIAL

Figure 6: Top 10 investors 2021

Source: ReData

Origin

Volume (M DKK)

No. of transactions

Heimstaden

43,854

Niam

23,348

Koncenton

17,039

NREP

16,065

Patrizia

13,889

PFA Ejendomme

13,571

ATP

12,616

PensionDanmark

11,385

Blackstone

10,990

Core Bolig

9,405

RETAIL

Investor

LOGISTICS

Figure 7: Top 10 investors 2012-2021

HOTEL

Source: ReData

Annual Review | 15

REDATA:

TRANSPARENCY IN THE INVESTMENT MARKET For many years, the Danish market for

ReData aims to obtain the real estate infor-

investors can see the purpose of disclosing

investment properties has been character-

mation that is usually confidential or inac-

their own yields and gain access to others

ised by a very low degree of transparency.

cessible and make it available to market

yields in return.

Therefore, the players have been left to

participants. Thus, professional market par-

themselves and their own sources to obtain

ticipants can make decisions on an informed

Did you learn anything during the process

information about the Danish transaction

and equal basis.

of developing ReData?

market. Some partners from RED, therefore, saw a

Where does your data come from, and

ReData originates from RED, which has his-

how do you validate it?

torically have had a strong transaction data-

significant gap in the market, which is why

base. This database has always been a pow-

they and Mathias Fast from RED’s valua-

Our data comes from a wide range of

erful tool to support RED’s primary business.

tion department chose to start the com-

sources. We both track changes in the pub-

Therefore, we felt confident that the jour-

pany ReData, which aims to close this gap

lic land registry and changes in CVR [The

ney from A to B was relatively straightfor-

in the market. After just over a year of work,

Central Business Register]. In addition, we

ward. However, it has proven to be more

ReData launched its platform in the autumn

devote many resources to talking to inves-

complex, more expensive, and take longer

of 2021. In the following interview, Mathias

tors and stakeholders when a transaction is

than expected, so the destination is closer

Fast, partner at ReData, gives an insight into

completed.

to Z than B.

the journey with the development of ReData. In return, we now have a complex and adapWhat is your mission with ReData?

tive database that can handle both simple rental properties as well as larger and com-

ReData’s mission is to increase transparency

plex projects and portfolios.

on the commercial real estate market. In the

ReData aims to obtain the real

Danish real estate market, it is neither trans-

estate information that is usually

Do you think commercial real estate

parent who the largest players are, which

confidential or inaccessible

brokers will become redundant in the

assets are traded, nor at what prices and

and make it available to market

future with all the data your users can

yields the properties are traded.

participants.”

access via ReData’s platform?

Properties are not alone the world’s largest

Mathias Fast, partner at ReData

It is neither ReData’s intention nor expecta-

asset class measured by volume. The market

tion that commercial real estate brokers will

for commercial properties is also a market

become redundant in the future. Proper-

that has experienced an increasing degree

ties are way more complex than stocks and

of professionalisation in Denmark, as for-

bonds, and, therefore, they cannot be com-

eign investors have taken over the market.

Historically, it has been customary for inves-

pared one to one in the same way, which is

Therefore, it is paradoxical that investment

tors neither to disclose the price (even if the

why there will still be a need for qualified

properties in Denmark have historically been

information is publicly available through the

advice and help to complete the buying and

traded on such a low knowledge base com-

land registry) nor the yield. However, we

selling process.

pared to stock and bond trading, where data

are currently experiencing a breach of this

is both digitalised and market-covering.

confidentiality, which is probably because

16 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

MATHIAS FAST Mathias Fast is partner and director of ReData. Mathias has a master’s degree in International Marketing and Management from Copenhagen Business School and has previously been employed in RED’s

RESIDENTIAL

valuation & research department. ReData currently has five employees who collect and verify the data on the individual transactions on the Danish real estate market. For further information: Mail: mfl@redata.dk Tel.: 23 28 98 83

HOTEL

RETAIL

LOGISTICS

OFFICE

www.redata.dk

Annual Review | 17

THE REAL ESTATE MARKET OF THE FUTURE IS SUSTAINABLE In recent years, we have seen an increasing

The increasing focus on sustainability in the

William Kanta, CEO of the real estate com-

focus on sustainability across different asset

real estate market is driven by demands

pany BoStad, and Bjarne Jørgensen,

classes, including real estate, and our inves-

from stakeholders throughout the value

E xecutive Vice President for Large Real

tor survey shows that almost all of the inves-

chain. Tenants are increasingly demanding

Estate at Realkredit Danmark, each present

tors surveyed consider sustainability when

that their leases are sustainable. Further-

their views on which sustainability factors

investing in real estate (

figure 8). Further-

more, it is expected that there will be better

affect the market today, and thus their busi-

more, an increasing share of the investors is

financing conditions for sustainable proper-

nesses, and how the changed requirements

willing to pay a premium for a high sustaina-

ties in the future. This has a derivative effect

for sustainability will shape the future of the

bility classification (

on investor demand, as certified proper-

real estate market.

figure 9).

ties are in higher demand than non-certified properties. This ultimately leads to new requirements for the developers.

12%

30%

54%

Q1 2022

ut not of importance

Figure 8: Investor Confidence Index

Figure 9: Investor Confidence Index

– Sustainability classification

– Premium for sustainability classification

Do you consider sustainability classification

Are you willing to pay a premium for a high

when investing in real estate?

sustainability classification?

4% 4%

38%

50%

Q1 2021

12%

52%

30%

The Cushman & Wakefield | RED 41% Investor Confidence Index

52%

The index monitors 74 of the most active investors’ expectations for the Danish commercial real estate market during the coming six months. The broad coverage ensures that the findings are representative reflections of the investors’ confidence in the Danish market. By 59% conducting the survey on a biannual basis, we are also able to track changes in the confidence.

59%

54%

Q1 2022

41%

48%

Q1 2021 No

Q1 2022 Yes

Q1 2021 No

Q1 2022 Yes

Yes, but not of importance

Yes, but we do ut we do not have a formal approach to itnot have a formal approach to it

Yes, it is prerequisite part of our formalized investor prerequisite is part of our formalized investor

18 | RED – Danish Investment Atlas 2022

Kilde: Cushman & Wakefield | RED Kilde: Cushman & Wakefield | RED

ANNUAL REVIEW RESIDENTIAL

WILLIAM KANTA William Kanta has been CEO of BoStad since 2019 and has a degree in law from the University of Copenhagen. William Kanta has previously been Managing Director of Catella and CEO of NRE and started his career with almost ten years as a lawyer at Kromann Reumert. BoStad is one of Denmark’s leading resihomes distributed in and around 12 regional growth cities on Zealand, Funen and in Jutland.

BOSTAD Q&A What is your ESG strategy, and how do

What factors are driving your choice of

How do you expect the market for

you think this strategy differentiates you

ESG strategy?

sustainable investments to develop in the

from your competitors?

future? BoStad has started its ESG journey in recog-

BoStad’s DNA stands on two ambitions: To

nition of the fact that buildings have a huge

The market for investments in sustainable

offer quality housing to people with ordinary

impact on our climate and environment.

real estate will only grow. The only question

Buildings account for up to 40% of Den-

plenty of attention, incentives and demand

ket towns. These two things differentiate us

mark’s total energy consumption – and more

in the market, including from investors and

from other real estate companies. We, there-

than a third of our waste. As a responsi-

sources of financing. The EU’s forthcoming

fore, also build our ESG strategy on one of

ble real estate company, we, therefore, want

taxonomy will fuel the development – as a

the two elements.

to contribute with our part and thus to the

new golden standard for when a real estate

green transformation in the sector.

investment is sustainable or not.

ening the supply of quality housing for the

But we also see that investors increasingly

A survey of 93 European institutional inves-

many people with ordinary incomes outside

want to invest sustainably. They can see

tors from 2021 confirms the trend but also

the big cities, but, e.g., also to help those

that sustainable properties both contribute

shows that there are challenges that are

who do not have a home. As the second

to the green transition and financially make

slowing the development. One of them is

main focus of our ESG strategy, we want to

good sense with a relatively solid and secure

that there currently is a lack of common

ensure that the new builds we acquire live

return. Sustainable buildings are easier to

standards in a number of areas, e.g. for data

up to the highest standard, namely DGNB

sell and therefore more future-proof – and

management. In general, data pose is a

Gold. I.e., that the new builds we acquire

this trend will only increase.

major and complex challenge, i.e., to provide

The focus will continue to be on strength-

are gold-certified – and that the latest

valid, high-quality data. We recognize that

new builds that we have acquired must be

challenge, but we have also embarked on it.

gold-certified in the operations. Continued on next page Annual Review | 19

RETAIL

is how much and how fast. There is already

ally balanced Denmark with strong mar-

HOTEL

incomes – and to help develop a region-

LOGISTICS

OFFICE

dential companies with approx. 1,750 rental

Continued from previous page

REALKREDIT DANMARK Q&A How do you see the growing focus on

What factors drive the changes in the

ESG affecting the market for financing

market?

commercial real estate today? It is difficult to identify a specific driver Within the last few years, we have expe-

because the focus on ESG is a megatrend

rienced a significantly increased focus on

that will affect all companies and all of us.

ESG from the largest Danish and interna-

And in that light, it’s just common sense for

tional investors. They very often require

both the investors and the lenders to relate

the properties to be certified when making

to ESG and integrate it into its business. We

new investments. A similar development is

at Danske Bank and Realkredit Danmark are

underway at banks and mortgage banks.

also in the process of integrating this change – both in terms of our business but also as a

In the autumn of 2021, a new EU taxon-

sparring partner for our customers.

omy was introduced for a number of different activities and assets, including real

It is new land for both our customers and us,

estate. The taxonomy defines what is green

but I am absolutely certain that the winners

and sustainable and thus also what can be

of the future will be among the companies

financed with a green loan. Going forward,

that succeed in integrating ESG – and this

there will also be requirements for banks

will probably also apply to both real estate

and mortgage banks to be able to determine

investors and banks/mortgage banks.

whether the assets they have financed are green or not under the taxonomy. Furthermore, ESG is also required to be part of the credit assessment when deciding on new credit requests. Will there be significant differences in the terms you offer investors seeking financing for green vs conventional properties in the future?

BJARNE JØRGENSEN Bjarne Jørgensen is Executive

With the beforementioned measures, there

Vice President and Head of Large

is no doubt that the EU countries will reg-

Real Estate Denmark at Realkredit

ulate the lending in banks and mortgage

Danmark/Danske Bank. Bjarne

banks so that it will be easier to finance

J ørgensen has been employed in one

a green property. How fast that develop-

of the forerunners of Danske Bank

ment is going is, of course, difficult to pre-

since 1979 and has worked specifically

dict. However, it is my belief that we can see

with real estate since 2007.

differences in the possibilities of financing green vs conventional properties already in

Realkredit Danmark, which is owned

a few years. And the differences will consist

by Danske Bank, is one of Denmark’s

of both the price of the loan, the repayment

largest mortgage banks, which offers

profile and the loan-to-value ratio.

mortgage loans to finance properties for both private and corporate

In the long run, I expect it may be more challenging to finance conventional properties outside the taxonomy.

20 | RED – Danish Investment Atlas 2022

customers.

ANNUAL REVIEW RESIDENTIAL OFFICE LOGISTICS It is new land for both our customers and us, but I am absolutely certain that the winners of the future will be among the companies that succeed in integrating ESG – and this will probably also apply to both real estate

Bjarne Jørgensen, Executive Vice President at

RETAIL

investors and banks/mortgage banks.”

HOTEL

Realkredit Danmark/Danske Bank

Annual Review | 21

AN OVERVIEW OF THE NORDIC MARKETS The Nordic countries are highly compara-

the risk in the segment. While there are sta-

ble, but there are still significant differences

ble expectations for the rent level in Norway

in the prime rent and yield levels across the

and Sweden, there are expectations of rent

countries and segments.

increases and yield decrease in Denmark, where prices are currently lowest.

THE RESIDENTIAL YIELD MOVES BELOW 3.00%

THE LOGISTICS MARKETS ARE

The Norwegian residential market is both

STABILISED, BUT NOT IN DENMARK

the market where the rent level is highest

The current rent and yield levels, as well as

and the yield level is lowest, which is why

the expectations indicate that the develop-

Norwegian residential properties are the

ment of the Danish logistics market is still

most expensive in the Nordic region. How-

lagging behind the other Nordic countries.

ever, where there are stable expectations

While expectations are stable in Finland,

for both rent and yields in Norway, there are

Norway and Sweden, rents are expected to

expectations of a downward pressure on

increase in Denmark.

yields in both Denmark, Finland, and Sweden. This indicates that the markets will

NO CHANGES IN THE RETAIL MARKET

approach each other in the future.

Although the Nordic retail markets are characterised by very different rent and

STABLE OFFICE YIELDS THROUGHOUT

yield levels, there are stable expectations

THE NORDIC REGION

for the market in all four Nordic countries

Recent years have been characterised by

(except for the rent level in Denmark). This

decreasing yield requirements for office

means that while Danish retail properties

properties across the Nordic region. How-

are expected to continue to be the most

ever, the expectations of stable yields indi-

expensive in the Nordic region, Finnish

cate that the yield requirements have

properties are expected to continue to be

reached the appropriate levels considering

the cheapest.

RESIDENTIAL PRIME RENT Current (1 per m: per year)

Outlook

PRIME YIELD Current (2)

DENMARK

201

3.00 %

FINLAND

328*

3.00 %

NORWAY

360

2.50 %

SWEDEN

242

2.55 %

22 | RED – Danish Investment Atlas 2022

Outlook

ANNUAL REVIEW RESIDENTIAL

OFFICE Outlook

Current (.)

DENMARK

201

3.25 %

FINLAND

465*

3.00 %

NORWAY

480

3.25 %

SWEDEN

784

3.15 %

Outlook

LOGISTICS PRIME RENT Current (: per m² per year)

Outlook

PRIME YIELD Current (.)

4.00 %

FINLAND

114*

3.80 %

NORWAY

134

4.00 %

SWEDEN

3.40 %

RETAIL

DENMARK

Outlook

OFFICE

Current (: per m² per year)

PRIME YIELD

LOGISTICS

PRIME RENT

RETAIL Current (: per m² per year)

Outlook

PRIME YIELD Current (.)

DENMARK

20117

3.25 %

FINLAND

1.452*

4.40 %

NORWAY

2.100

4.00 %

SWEDEN

1.912

3.40 %

Outlook

* Rents for Finland are gross rents (i.e., including service charges) Source: Cushman & Wakefield | RED

Annual Review | 23

HOTEL

PRIME RENT

EXPECTATIONS FOR 2022 DENMARK IS STRONG IN AN

mortgage credit system and the fact that

still approx. two-thirds of the investors

INTERNATIONAL CONTEXT

both Danish and foreign investors still have

who expect the value of their portfolios

An expansive fiscal policy, a good start-

large sums of accumulated capital allocated

to increase. The majority of the investors

ing point with an economy in balance, com-

for investment in real estate, we expect to

expect this increase in value to be driven

prehensive aid packages and compensation

continue to see high demand for commercial

by decreasing yields (66%), rent increases

schemes, as well as a flexible labour market

real estate in Denmark in 2022. This expec-

(43%) and decreasing vacancy (39%).

meant that Denmark was able to handle the

tation is supported by our investor survey,

challenges of the corona crisis well. There-

which shows that approx. three out of four

When asked which segment investors expect

fore, Denmark is still one of the most sta-

investors still expect to increase their port-

to perform best during the coming six

ble and solid economies in Europe, with low

folio during the coming six months (

months, almost half of the investors respond

government debt and a surplus on the bal-

ure 11).

ance of payments (

fig-

residential properties (

figure 10). Further-

figure 13). The

remaining investors are more or less evenly

more, Denmark’s political stability and low

However, we do not expect the activity to

divided between believing most in logis-

corruption ensure that the investors’ risk of

be so high that the transaction volume will

tics, office and retail properties. This distri-

investing in Denmark is low.

break the record from 2021 already in 2022.

bution testifies that the residential segment

HIGH ACTIVITY IN 2022,

CONTINUED INCREASES IN VALUES

erty segment, but it also testifies that 2022

BUT NO NEW RECORD

The investors’ optimism about their real

may be the year in which retail properties are

Based on the continued strong Danish econ-

estate portfolios is more or less unchanged

traded again.

omy, political stability, Denmark’s effective

from 2021 (

will, again in 2022, be by far the largest prop-

figure 12). Thus, there are Continued on next page

Figure 10: Government debt vs government surplus (avg. Q3 2018 - Q2 2021)

200%

Greece

GOVERNMENT DEBT (% OF GDP)

175% 150%

Italy Portugal

125% France

100%

Spain

Belgium Austria Hungary Slovenia

75%

Croatia Finland Poland

50%

Romania

Germany Ireland Netherlands Sweden

25%

DENMARK Luxembourg

0% -8%

-6%

Source: Eurostat

24 | RED – Danish Investment Atlas 2022

-4%

-2%

GOVERNMENT SURPLUS/DEFICIT (% OF GDP)

ANNUAL REVIEW Figure 12: Investor Confidence Index – Portfolio value

What is your objective with regard to the size of your portfolio

How do you see the value of your portfolio developing during

in terms of acquisition/disposal during the coming six months?

the coming six months? Increase

Increase: more acquisition the disposal

Unchanged

Stable: as much disposal as acquisition

76%

15%

13%

Q1 2021

Q1 2022

Decrease

Decrease: more disposal than acquisition

67%

68%

29%

33%

OFFICE

80%

RESIDENTIAL

Figure 11: Investor Confidence Index – Portfolio size

3% Q1 2021

Q1 2022

Source: Cushman & Wakefield | RED

Figure 13: Investor Confidence Index – Segment with best potential

LOGISTICS

Which segment do you consider to have the best potential to perform well during the coming six months?

49%

50%

46%

40% 36%

RETAIL

30%

20% 13%

12%

14%

10% 4%

0% Residential

Industrial

Source: Cushman & Wakefield | RED

Logistics

Office Q1 2021

Retail

Hotels

Q1 2022

HOTEL

Annual Review | 25

Continued from previous page

THE WILLINGNESS TO LEND CAN

ALL ELSE BEING EQUAL,

bank of Denmark again chooses to increase

SLOW DOWN ACTIVITY

A HIGH INFLATION IS GOOD

the interest rates, it will make it more expen-

In 2022, we are approaching the time when

In 2022, high energy prices, supply prob-

sive for investors to finance their real

the new rules on mark-to-market taxa-

lems, rent increases and wage increases in

estate investments, which will slow down

tion of properties and the new property tax

the labour market are expected to lead to an

the investment activity. When the inves-

system are anticipated to enter into force,

inflation of around 2.4%, which is the high-

tors are asked about their expectations to

which is expected to have an impact on the

est inflation in many years. Everything else

their future financing conditions, they are

real estate market. Furthermore, changes in

being equal, a high inflation is positive for

less optimistic than previously. While in our

the financial institutions’ willingness to lend,

property owners. Unlike equities and bonds,

investor survey from Q1 2021, only 4% of

inflation and interest rates may be decisive

commercial real estate is considered infla-

investors expected worsening financing con-

for the investment activity going forward.

tion-hedged assets, as rental income is usu-

ditions, there are now 31% who expect wors-

ally indexed with inflation. Therefore, assum-

ening financing conditions (

figure 14).

In recent years, the financial institutions’

ing that the yield requirement remains

willingness to lend to the safest proper-

unchanged, commercial real estate will

Thus, the development of the interest rate is

ties has contributed to a downward pres-

increase in value in line with inflation.

crucial for the investment activity in 2022. In

sure on the yield levels. However, at the end

the following interview, Danske Bank’s chief

of 2021, several financial institutions began

INTEREST RATES ARE EXPECTED

economist, Las Olsen, presents his expec-

to tighten up. A tighter lending policy in

TO REMAIN LOW

tations on how the interest rate will develop

the form of lower lending willingness, divi-

However, there is a strong caveat to the con-

and how it will affect the real estate market.

dend restrictions and similar measures will

clusion that high inflation is good for the

reduce the investors’ access to debt capital

real estate market. We have previously seen

and thus affect their return on equity, which

that the central bank of Denmark has raised

is a significant factor for foreign investors in

interest rates to keep inflation under con-

particular.

trol in periods of high inflation. If the central

Figure 14: Investor Confidence Index – Financing conditions What is the future outlook for your financing compared with your current financing? (In terms of the financing of new acquisitions or the refinancing of your existing properties)

Improved Improved conditionsconditions Improved conditions 25%

25%

21%

Unchanged Unchanged conditions Unchanged conditions conditions The Cushman & Wakefield | RED Investor Confidence Index

WorsenedWorsened conditionsWorsened conditions conditions

71%

Q1 2021 Q1 2021

48%

31%

71%

The index monitors 74 of the most active investors’ expectations for the Danish commercial real estate market during the coming six months. The broad coverage ensures that the findings are representative reflections of the investors’ confidence in the Danish market. By conducting the survey on a biannual basis, we are also able to track changes in the confidence.

4% Q1 2021

Q1 2022 Q1 2022

26 | RED – Danish Investment Atlas 2022

Q1 2022

Source: Cushman Source:&Cushman Wakefield Source: & |Wakefield Cushman RED &| RED Wakefield | RED

ANNUAL REVIEW RESIDENTIAL OFFICE How do you expect the interest rate to

What is your view on how developments

LAS OLSEN

develop in 2022?

in inflation and interest rates will affect

Las Olsen is chief economist at Danske

the real estate market?

Bank. Las Olsen has been with Danske Bank since 2007 and has a master’s

actual interest rate hike in 2022. The ECB has

Higher long-term interest rates are in them-

degree in Economics from the Univer-

clearly signalled that it is not on the agenda,

selves negative for the real estate mar-

sity of Copenhagen.

even though inflation is currently significantly

ket, but we are still looking at it quite posi-

higher than the target. But on the one hand,

tively. The Danish economy is running at full

Danske Bank is a Nordic bank head-

inflation is primarily driven by price increases

capacity, and although growth will be much

quartered in Denmark. The bank, which

for energy that do not continue, and on the

lower, the level of activity in the economy is

is the largest in Denmark, has custom-

other hand, the ECB has been well below the

very high. If inflation becomes more sticky

ers in 10 countries and advises both

target for inflation over the last ten years, so

in Europe and sends interest rates more

private and business customers as well

now they would rather shoot a little too high

upwards than expected, it will be negative

as institutional customers.

than a little too low. However, we can see

through the direct effect of interest rates,

the long-term interest rates rise by around

but higher inflation, which is not just due to

half a percentage point so that two-percent

energy prices, will also mean higher poten-

loans become relevant again. The ECB will

tial earnings from real estate.

RETAIL

We do not believe that there will be an

LOGISTICS

DANSKE BANK Q&A

reduce their bond purchases over the course of the year, and expectations of rate hikes will increase later, depending on whether we

HOTEL

begin to see broader-based wage and price inflation in Europe.

Annual Review | 27

RED facilitated the sale of a residential property located on Nørre Søgade 7 by The Lakes in Copenhagen on behalf of Kongeegen A/S.

28 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Top 5 Transactions 2021

Highlight: The Innovator, the Imitator and the Idiot

Expectations for 2022

Transactions & Key Figures

OFFICE

Geographical Distribution

LOGISTICS

RETAIL

Volume & Investors

HOTEL

RESIDENTIAL

Residential | 29

RESIDENTIAL – VOLUME & INVESTORS THE VOLUME INCREASED

Conversely, we have seen that the Dan-

HEIMSTADEN AND KONCENTON

BY MORE THAN 50% IN 2021

ish institutional investors have focused on

DOMINATES

Uncertainties in the real estate market led

entering the value chain earlier in order to

Heimstaden and Koncenton have both main-

to high expectations for activity in the resi-

develop residential properties themselves

tained their positions as the largest and sec-

dential segment in 2021. With an increase in

or offer financing models to developers in

ond-largest investor in 2021 and thus also in

activity of more than 50% to a record high

exchange for the purchase of parts of the

the entire period of 2012-2021 (

volume of DKK 65.8bn and a share of 55% of

building stock.

and

the total Danish transaction volume, the high

figure 17

figure 18). However, Heimstaden com-

pleted significantly fewer transactions than

expectations for the segment were met (

THE PROPERTY FUNDS ARE BACK

Koncenton. Therefore, it was primarily Heim-

figure 16). The high level of investment activ-

With a share of 42% of the total volume, real

staden’s acquisition of Akelius’ and Selm-

ity in 2021 testifies to a market where the

estate funds regained their dominance in the

er’s portfolios totalling approx. DKK 5.3bn

investors’ capital was primarily invested in

residential segment and, it was thus only for

that led them to retain the position as the

the most preferred real estate segment.

a brief remark that investments in 2020 were

most active investor in 2021. With the acqui-

evenly distributed between property funds

sition of the BoStad portfolio (the largest

and real estate companies (

transaction of the year), AP Pension took

FOREIGN INVESTORS WERE AGAIN

figure 15).

THE MOST ACTIVE

the position as the fourth largest investor

In 2021, foreign capital was behind 54% of

In 2021, the institutional investors and the

in 2021, although they only made this one

the investments in the segment. Thus, con-

real estate companies accounted for roughly

investment.

trary to the picture on the overall Danish

the same share of the transaction volume

investment market, foreign investors were

in the residential segment, but while the

In total, the year’s five largest investors

dominant in the residential segment for the

real estate companies’ investments were

invested DKK 21.8bn in residential proper-

second year in a row. The foreign investors’

divided between 259 transactions, the insti-

ties, which corresponds to approx. one-third

dominance can be attributed to the fact that

tutional investors’ investments were only

of the total transaction volume. Even though

the foreign investors primarily want to invest

divided between 41 transactions. This shows

more investors on this year’s top five list

in the safest asset classes. Therefore, they

that institutional investors primarily demand

were also on the list last year, this is a signif-

have been willing to accept a lower return

larger real estate portfolios, whereas the real

icantly lower share than in 2020, where the

than the Danish investors for existing prop-

estate companies’ investment strategy is

five largest investors accounted for more

erties and projects under construction.

more focused on individual assets.

than half of the total transaction volume.

Figure 15: Residential – Investor type breakdown 2021

RESIDENTIAL VOLUME IN TOTAL

65.8 BN DKK

Source: ReData

30 | RED – Danish Investment Atlas 2022

Property funds 42% Institutional investors 23% Real estate companies 21% Private investors 10% Others 4%

ANNUAL REVIEW

Figure 16: Residential – Transaction volume 2012-2021

65.8

RESIDENTIAL

46%

37.7 28.8

30 21.0

84% 0 2012

10.6

10.5

63%

55%

37%

45%

2013

2014

48%

62%

41% 26.8

54%

65% 59%

59% 52% 41%

38% 2015

2016 Danish

Source: ReData

35% 2017

2018

2019

2020

OFFICE

11.3

41%

59%

35.1

2021

Foreign

Figure 17: Residential – Top 5 investors 2021 Investor

Origin

Volume (M DKK)

No. of transactions

Heimstaden

6,174

Koncenton

5,096

Catella

3,958

AP Pension

3,300

Niam

3,250

LOGISTICS

BN DKK

42.5 40

RETAIL

Source: ReData

Figure 18: Residential – Top 5 investors 2012-2021 Investor

Origin

Volume (M DKK)

No. of transactions

Heimstaden

42,879

Koncenton

16,876

Niam

13,140

Patrizia

10,418

Core Bolig

8,902

HOTEL

Source: ReData

Residential | 31

65.8

36%

BN DKK

8.6

100%

GREATER COPENHAGEN Danish 40%

BN DKK

Foreign 60%

13%

RESIDENTIAL – GEOGRAPHICAL DISTRIBUTION 6.6 AARHUS GREATER COPENHAGEN Danish 76% Danish 40% Foreign 24% Foreign 60%

8.6 BN DKK BN DKK

10% 13%

5.8

OTHER ZEALAND Danish 83%

BN DKK

Foreign 17%

AALBORG OTHER ZEALAND Danish 98% Danish 83% Foreign 2% Foreign 17%

0.5 5.8 BN DKK BN DKK

1% 9%

3.9

23.4 BN DKK

OTHER JUTLAND FUNEN Danish 46% Danish 54% BN DKK Foreign 54% Foreign 46% 36%

23.4

17.0 3.9 BN DKK BN DKK

26% 6%

6.6

8.6 BN DKK

BN DKK

10%

13%

Danish 98%

5.8

Foreign 2%

AALBORG

Danish 40% Foreign 60%

23.4

AARHUS

BN DKK

36%

BN DKK

Danish 46% 6% Foreign 54%

26%

6.6 BN DKK

10%

BN DKK

GREATER COPENHAGEN GREATER COPENHAGEN GREATER COPENHAGEN Danish 40% Danish 40% Danish 40% BN DKK Foreign 60% Foreign 60% BN DKK Foreign 60% 13% 13%

8.6 8.6

COPENHAGEN

Danish 46% Foreign 54%

BN DKK

FUNEN

Danish 76% Foreign 24%

ZEALAND

Danish 54% Foreign 46%

AARHUS

10%

1%2022 32 | RED – Danish Investment Atlas

BN DK

Foreign 17%

13%

3.9

Danish 83%

Foreign 46%

BN DKK

Foreign 71% BN DKK 36% 36%

RESIDEN VOLUME IN

100

8.6

6.6 0.5

23.4 23.4

Danish 29%

COPENHAGEN COPENHAGEN Danish 29% Danish 29% Foreign 71% Foreign 71%

GREATER COPENHAGEN

Danish 54%

OTHER JUTLAND

BN DKK

COPENHAGEN

OTHER ZEALAND

FUNEN

OTHER JUTLAND

17.0

100%

Foreign 17%

Danish 98% 9% Foreign 2%

3.9

Foreign

GREATER COPENHAGEN

BN DKK

Danish 83%

26%

Foreign 24%

BN DKK

JUTLAND

65.8

Danish 4

BN DKK

OTHER ZEALAND

BN DKK

8.6

5.8

0.5 17.0

Danish 76%

AALBORG

BN DKK

Foreign 71%

Foreign 54% RESIDENTIAL VOLUME IN TOTAL

Foreign 60%

AARHUS

6.6

100%

Danish 29%

Danish 46%

Danish 40%

Danish 76% 13% Foreign 24%

10%

BN DKK

AALBORG COPENHAGEN

GREATER COPENHAGEN

AARHUS

BN DKK

0.5

Foreign 71%

Danish 54% 36% Foreign 46%

65.8

Danish 29%

FUNEN

BN DKK

RESIDENTIAL VOLUME IN TOTAL

COPENHAGEN

FUNEN

5.8 BN DKK

OTHER ZEALAND

5.8 5.8

Danish 83% BN DKK

Foreign 17% BN DKK 9% 9%

OTHER ZEALAND OTHER ZEALAND Danish 83% Danish 83% Foreign 17% Foreign 17%

AARHUS Danish 76% Foreign 24%

Danish 98%

3.9

Foreign 2%

AALBORG

BN DKK

AALBORG

FUNEN

3.9 3.9

Danish 54% BN DKK

Foreign 46% BN DKK 6% 6%

FUNEN FUNEN Danish 54% Source: ReData Danish 54% Foreign 46% Foreign 46%

also reflected in the geographical distribution, as there has been an

Figure 19: Geographic breakdown (BN DKK)

increase in the investment activity in all of the geographical areas in

AREA

the last three years (

Copenhagen

figure 20).

2020

2021

13.0

23.4

Greater Copenhagen

7.7

8.6

Other Zealand

5.8

Funen

1.8

3.9

Aarhus

4.5

6.6

Aalborg

0.6

0.5

a low illiquidity risk. Conversely, Danish investors, such as Koncenton

Other Jutland

9.1

17.0

and AP Pension, have a greater knowledge of the Danish market and

Total

42.5

65.8

Despite the increasing investor demand for properties in the country’s regional growth cities, almost half of the transactions in the residential segment continue to be properties in Copenhagen and Greater Copenhagen. The foreign investors are dominant in Copenhagen, which is due to the fact that they primarily demand projects with a large volume and

CHANGE

ANNUAL REVIEW

The increasing demand for residential properties in recent years is

RESIDENTIAL

FOREIGN INVESTORS ARE LOOKING TOWARDS COPENHAGEN

not the same requirements for the size of transactions, which is why they are more willing to invest outside the capital due to the great competition for the Copenhagen properties. This is not to say that foreign investors are only willing to invest in Copenhagen. Last year, we also saw that larger portfolios with properties in Jutland and on Funen attracted foreign capital. For example,

OFFICE

both Heimstaden, Catella, Niam and Axer Eiendom invested billions in portfolios with residential properties located across the country.

LOGISTICS

Figure 20: Residential – Geographic breakdown of the transaction volume 2019-2021

29%

56%

RETAIL

36% 39%

71% 36% 33%

5 64%

61% 82%

67%

40%

60%

0 2019

2020

2021

COPENHAGEN Source: ReData

2019

2020

2021

86% 76% 65%

79%

35%

21%

24%

14%

2020

2021

2019

GREATER COPENHAGEN Danish

AARHUS

44% 64%

2020

2021

REST OF DENMARK

Foreign

HOTEL

BN DKK

Residential | 33

RESIDENTIAL – TOP 5 TRANSACTIONS 2021 Photo: BoStad

1. BOSTAD PORTFOLIO

Est. price (DKK)

Investor

3,300,000,000

AP Pension & BankInvest

real estate group BoStad with their real estate portfolio of over 70

Gross area (m²)

Vendor

properties from Castlelake. BoStad’s employees will continue at Thy-

163,000

Castlelake

The year’s largest transaction within the residential segment was completed in December when AP Pension and BankInvest bought the

lander, who will manage the properties in the future.

Photo: Heimstaden

2. AKELIUS PORTFOLIO In 2021, Heimstaden completed the largest real estate transaction ever in the Nordic region, as they bought a portfolio with 599 properties located in the largest cities in Denmark, Sweden and Germany for approx. DKK 68bn. The portfolio included 18 Danish residential properties located in Copenhagen and Frederiksberg. The 18 properties have a total area of 100,302 m² and consist of 1,093 homes, approx. 6,000 m² of commercial space and 205 parking spaces.

34 | RED – Danish Investment Atlas 2022

Est. price (DKK)

Investor

2,829,000,000

Heimstaden

Gross area (m²)

Vendor

100,302

Akelius

ANNUAL REVIEW a total area of 128,427 m² from an investor consortium represented by Selmer. While 18 of the properties are existing properties (680 homes in total), the remaining 16 properties (793 homes in total) are under construction and are expected to be delivered within the next two years. The properties are primarily townhouses located in growth cities in Jutland and on Funen.

Price (DKK)

Investor

2,500,000,000

Heimstaden

Gross area (m²)

Vendor

128,427

Selmer

Photo: Google Maps

4. FORMUEPLEJE PORTFOLIO In 2021, German Catella Residential Investment Management acquired a portfolio of 11 residential properties with a total of 636 homes and seven commercial leases from the Danish asset manager Formuepleje. Four of the properties are located on Zealand (three in Copen-

RESIDENTIAL

In August 2021, Heimstaden bought a portfolio of 34 properties with

OFFICE

Photo: Selmer Gruppen

3. SELMER PORTFOLIO

hagen and one in Greve), and seven of the properties are located in Jutland (four in Aarhus, one in Tilst, one in Højbjerg and one in

Investor

1,939,000,000

Catella Residential Investment Management

Gross area (m²)

Vendor

42,000

Formuepleje

Photo: Axer Eiendom

5. GØDSTRUP PROJECT With the acquisition of a turnkey project with 1,500 homes, the Norwegian real estate company Axer Eiendom entered the Danish real estate market in the autumn of 2021. The homes will be located in Gødstrup near Herning, next to the new super hospital, and are expected to be completed in the autumn of 2024. The properties will

RETAIL

Price (DKK)

LOGISTICS

Skødstrup).

at minimum receive a DGNB Gold certification, but the developer

Price (DKK)

Investor

1,920,000,000

Axer Eiendom

Gross area (m²)

Vendor

N/A

Lopa Holding

HOTEL

aims for a DGNB Platinum certification.

Residential | 35

THE INNOVATOR, THE IMITATOR AND THE IDIOT HOW ALL GOOD IDEAS GO WRONG

done. Finally, come the idiots who jump on

risk-adjusted returns when investing in

In an interview in 2008, Warren Buffett, who

the bandwagon way too late in an attempt

residential properties compared with invest-

is considered one of the most successful

to make money on what everyone else is

ments in other segments (

investors in the world, gave his take on why

doing.

the following few years, there still was lim-

we ended up in the financial crisis. In the

figure 22). In

ited investor demand, which is why both the

interview, Warren Buffett was asked if all the

THE INNOVATORS IN THE RESIDENTIAL

square meter prices, the yield level and the

wise people should not have known better

SEGMENT STARTED IN 2012

transaction volume in the residential market

than to continue investing in subprime loans.

Given the development in transaction vol-

were fairly stable.

Warren Buffett replied that they should, but

ume and the investors’ yield requirement on

the problem was that there is a natural pro-

newly built residential properties, investors

THE IMITATORS MADE IT IN TIME

gression in how good ideas go wrong in all

in the residential segment need to consider

In 2015 and 2016, even more investors began

business cycles.

where in the residential segment’s cycle we

to open their eyes to the returns that inno-

have reached (

vators (competitors) could generate on

figure 21).

He called this natural progression “the

their investments in new residential prop-

three I’s”. First come the innovators who

Looking at the housing market in 2012, the

erties. Therefore, investors who had not yet

see opportunities that others do not and

yield level was around 4.50%, and the first

invested in residential real estate or who

who create real value. Then come the imi-

investors, i.e., the innovators, therefore saw

only had a limited exposure in the residen-

tators, who copy what the innovators have

an opportunity to generate relatively high

tial segment began to become dissatisfied

Figure 21: The cycle of the real estate market

TRANSACTION VOLUME

6 Imitators are buying

2 Increased liquidity in the market and a higher transaction volume

Innovators are buying

1 Low transaction volume low liquidity and few investors

3 The demand increases The prices increases and the return decreases 4 Imitators follow to willing sellers

increasing prices lead

5 Prices in the market peaks risk-adjusted returns are lowe compared with alternatives

6 Mismatch between buyer and seller expectations market slows down and the volume decreases TIME

36 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW YIELD

3.00%*

60 YIELD

BN DKK

3.50–3.25%*

YIELD

RESIDENTIAL

Figure 22: Residential – Transaction volume & yield level 2012-2021

4.00–3.75%*

OFFICE

YIELD

4.50–4.25%*

Source: ReData

2015

2016

2017

2018

Transaction volume

2019

2020

2021

* Prime yield for residential properties (market rent)

with the returns they could generate on their

properties, investor demand has there-

returns, and imitators in subsequent years

investments in the other segments.

fore continued to increase. At the same

followed in the pursuit of the same returns,

time, investors have moved further and fur-

the downward pressure on the yield level

At the same time, the “simple expectation

ther out of the risk curve to find residen-

seen in recent years have – if not com-

theory” implies that investors always expect

tial assets. Therefore, the yield level on res-

pletely, so to some extent – utilised these

that what happened yesterday will also hap-

idential properties is currently as low as

possibilities.

pen tomorrow. Thus, once the residential seg-

3.00% for the best locations – and we have

ment had generated high returns, new inves-

even seen some transactions with a yield

WHERE ARE WE IN THE CYCLE?

tors also expected that they could generate

level below 3.00%. This means that the

Therefore, the question now is whether

the same high returns if they also started

square meter prices in today’s market are

prices have increased so much that we are

investing in residential properties. In the pur-

approx. 80% higher than they were in 2012

at the top of the cycle for new residential

suit of generating returns, this meant that

when the innovators entered the market.

properties or whether there is still room for

a number of imitators entered the residen-

For example, PKA / TopDanmark’s acquisi-

further price increases before the cycle in

tial market. As a result of the increased inves-

tion of Magretheholmen, Patrizia’s acquisi-

the residential market is over?

tor demand, we saw a downward pressure on

tion of Dr. Tværgade and Balder’s purchases

investors’ yield requirements, and in 2016 the

on Østerfælled were all made in the range of

It is not certain that we are at the end of the

return was therefore reduced to 3.75%.

DKK 24,000-25,000 per m² in 2012, and the

cycle yet, but it is certain that in 2022 we

same properties are traded at DKK 44,000-

will look into a marked, where it begins to be

45,000 per m² today.

interesting to look at the risk-adjusted return

THE TIME OF HIGH RETURNS IS OVER In recent years, uncertainties in the mar-

LOGISTICS

2014

RETAIL

2013

that can be generated by investing in the

ket have led to an investor preference for

So while innovators back in 2012 entered the

other property segments, such as the retail

investments in the safest assets, and despite

market because they could see the potential

segment, where the yield level have been

the relatively low return on residential

in generating relatively high risk-adjusted

more stable in recent years.

Residential | 37

HOTEL

2012

RESIDENTIAL – EXPECTATIONS FOR 2022 In recent years, market uncertainties have led to a massive demand for residential properties, which has resulted in a record low prime yield. This development has been supported by significant price increases in the owner-occupied housing market. In 2022, we expect to continue to see an active residential market, but overall, we expect a more steady development. THE OCCUPIER MARKET

which is particularly expected to apply in

requirements. This is because it requires

the less central residential areas, where

high leverage if investors are to keep their

THE HIGH DEMAND CONTINUES

there is a large supply of newly built homes.

IRR at low yields.

Although we have seen a high level of con-

This expectation is supported by our inves-

struction activity in recent years, a large

tor survey, which shows that more than 60%

THE SAFEST ASSETS WILL BECOME

accumulated undersupply of rental housing

of the investors expect stable rent levels in

EVEN MORE EXPENSIVE

and forecasts of a large influx of new resi-

both the country’s largest cities and in the

If both the financial institutions’ willingness

dents are expected to lead to a continued

provinces (

to lend, the inflation and the interest rates

high demand for rental housing in Copen

figure 24 and

figure 25).

remain unchanged, we expect that the prime

hagen in 2022.

THE INVESTMENT MARKET

We also expect that the continued high rent

THE BANKS’ WILLINGNESS TO LEND

2022. This expectation is, i.e., based on the

levels for rental housing in Copenhagen will

WILL BE CRUCIAL

fact that investors have large sums of capital

have a spillover effect on the surrounding

A decisive factor for the development in

accumulated for investment in real estate,

municipalities in the form of an increasing

the investors’ yield requirements in 2022 is

where residential properties in Copenha-

demand for rental housing.

the financial institutions’ willingness to lend.

gen continue to be considered attractive, as

In recent years, investors in the residential

the continued high demand for rental hous-

MORE STEADY RENT LEVELS

segment have benefited from the fact that

ing in Copenhagen entails a low reletting risk

The search for rental housing rather than

financial institutions have had a particularly

for investors.

owner-occupied housing is still intensified

large willingness to lend to investors in the

by the combination of the restrictive lend-

residential segment. This has meant that less

The expectation is further based on the fact

ing rules introduced by the Danish Financial

equity has had to be tied up compared with

that where investors previously demanded

Supervisory Authority in 2016 and the mas-

e.g, the retail segment, where the willingness

a discount of 10-15% to the prices in the

sive price increases in the owner-occupied

to lend has been lower.

owner-occupied housing market, we cur-

yield for residential properties in Copen hagen will be under a downward pressure in

housing market in recent years. However, in

rently see that in the competition of buying

2022, we expect to see more limited price

It is difficult to predict how the willing-

the most attractive residential properties,

increases in the owner-occupied housing

ness to lend will develop in 2022. However,

more and more investors are willing to pay

market compared to previously, especially

if the financial institutions tighten up within

the same and sometimes even more than

in Copenhagen. This is expected to result in

the housing segment, we expect to see a

the prices in the owner-occupied housing

more limited increases in the rental levels,

flatter development in the investors’ yield

market.

If both the financial institutions’ willingness to lend, the inflation and the interest rates remain unchanged, we expect that the prime yield for residential properties in Copenhagen will be under a downward pressure in 2022.” Kjeld Pedersen Partner at RED

38 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW properties in the regional growth cities, as

pression and expectations of more limited

these properties are more tangible for many

In recent years, investors have been able

rent increases, investors remain optimis-

investors. This is partly due to the fact that

to take advantage of the fact that rent lev-

tic about the residential segment, and 96%

more tenants can afford to live in the proper-

els have increased year after year. This has

expect to continue to see decreasing or sta-

ties as the rent level is lower, which reduces

meant that their cash flow has increased,

ble yield levels (

the investors’ reletting risk. Furthermore, the

which has contributed to the downward

feel confident that we will once again see

yield level is still higher than in the largest

pressure on the yield requirement. However,

a high investment activity in the residential

and most sought-after cities in the country.

in the coming year, we expect investors to

segment in 2022.

However, the deals must still be of a certain

figure 23). Therefore, we

see more limited rent increases, which is

volume for foreign investors, in particular,

expected to reduce the downward pressure

THE REGIONAL GROWTH CITIES ARE

to be willing to invest in these properties.

on the yield requirement.

MORE TANGIBLE

This naturally means that we expect that it

In 2022, we also expect to continue to

will primarily be the new, larger projects and

see high investor demand for residential

portfolios that will be in demand in 2022.

The Cushman & Wakefield | RED Investor Confidence Index The index monitors 74 of the most active investors’ expectations for the Danish commercial real estate market during the coming six months. The broad coverage ensures that the findings are representative reflections of the investors’ confidence in the Danish market. By conducting the survey on a biannual basis, we are also able to track changes in the confidence.

Figure 23: Investor Confidence Index – Residential yields residential properties will:

67% 3%

4% Q1 2021

Q1 2022

Figure 24: Investor Confidence Index

Figure 25: Investor Confidence Index

– Residential market rent (largest cities)

– Residential market rent (provinces)

During the coming six months, the market rent for residential

During the coming six months, the market rent for

units in the largest cities (Copenhagen & Aarhus) will:

residential units in the provinces will:

RETAIL

Increase

60%

Forblive uændret Stige

Increase

Increase Remain stable

Remain stable

Decrease

26%

Stige

e uændret

29%

67%

61%

Forblive uændret Falde 7% Q1 2022

10% Q1 2022 Residential | 39

HOTEL

Remain stable

30%

Falde

LOGISTICS

36%

During the coming six months, market yields for

Decrease

RESIDENTIAL

However, despite recent years’ yield com-

COMPRESSION

OFFICE

A SLOWDOWN IN THE YIELD

RESIDENTIAL – TRANSACTIONS & KEY FIGURES RESIDENTIAL – TOP 30 TRANSACTIONS 2021 PROPERTY

CITY

DATE

GROSS AREA

PRICE (DKK)

BoStad Portfolio

Across nation

Akelius Portfolio

INVESTOR

VENDOR

August

163,000 m2

3,300,000,000

AP Pension & BankInvest

Castlelake

Copenhagen

September

100,302 m2

2,829,000,000

Heimstaden

Akelius

Selmer Portfolio

Across nation

August

128,427 m2

2,500,000,000

Heimstaden

Selmer

Formuepleje Portfolio

Across nation

December

42,000 m2

1,939,000,000

Catella

Formuepleje

Gødstrup Project

Herning

October

N/A

1,920,000,000

Axer Eiendom

Lopa Holding

Birch Portfolio

Across nation

April

Engvej 155

Copenhagen S

April

TOGT Portfolio

Across nation

November

Coller Capital Portfolio

Copenhagen

June

26,262 m2

912,000,000

Triers & Gads Hus

Copenhagen S

June

18,540 m2

900,000,000* Patrizia

Nobelholmen

Copenhagen SW

December

18,042 m2

899,500,000

AXA Investment Managers

AP Pension

Nicolinehus, Nord

Aarhus

September

16,798 m2

825,000,000

Formuepleje

Bricks

Store Mølle Vej 5

Copenhagen S

November

19,869 m2

800,000,000* PFA

P+

The Residence CPH

Copenhagen SW

March

16,956 m2

775,000,000* NREP

NRE

Poppelstykket 6

Copenhagen SW

September

17,687 m2

752,000,000

Koncenton

Confidential

Ballerup

N/A

Encore+ Residhagen K/S Portfolio

Copenhagen

October

19,704 m2

686,000,000

Marmorbyen Øst

Copenhagen E

June

13,969 m2

675,000,000* CBRE Global Investors

Patrizia

Milton Huse Portfolio

Across nation

December

33,700 m2

667,000,000

Niam

Milton Huse

Gertrudehus

Copenhagen S

July

13,646 m2

640,075,410

Orange Capital Partners

Sampension & Akademikerpension

HI:LIFE

Aarhus

July

17,636 m2

630,000,000

Catella

Europa Capital

Teglbakken

Hedehusene

August

18,799 m2

601,568,000* Orange Capital Partners

FB Gruppen

Dalum Papirfabrik

Odense SV

July

27,578 m2

577,000,000

Niam

MT Højgaard

Emmahus

Copenhagen S

July

11,374 m2

552,924,589

Orange Capital Partners

Sampension & Akademikerpension

Confidential

Aarhus

N/A

Mariendalsvej 55A

Frederiksberg

November

Den Grønne Fatning

Herlev

69,000 m2

1,500,000,000* Niam

Birch Ejendomme

23,230 m2

1,250,000,000

Gefion Group

46,000 m2

1,065,000,000* NREP

Confidential

Studentbostäder

Harald Bidco (Fokus & KKR)

Orange Capital Partners

700,000,000* Koncenton LaSalle Investment Management

TOGT Coller Capital Sampension & Akademikerpension

Confidential P+

546,000,000* Koncenton

Confidential

14,000 m2

520,000,000* Hines

REI Investment

June

15,463 m2

508,000,000

AXA Investment Managers

Elf Development

Finsensvej 69

Frederiksberg

November

14,207 m2

505,000,000

PFA

P+

Ådalshuset

Åbyhøj

April

16,711 m2

477,040,000

Industriens Pension

KPC

Confidential

Odense

N/A

* Estimated price

40 | RED – Danish Investment Atlas 2022

Confidential

460,000,000* Koncenton

Confidential

of the shopping centre Kronen and 118

LOGISTICS

OFFICE

RESIDENTIAL

residential units located in Vanløse.

ANNUAL REVIEW

RED was sell-side advisor in the sale

SUBAREA

RENT LEVEL*

YIELD LEVEL**

Copenhagen City

2,000 - 2,200

3.00% - 3.25%

Copenhagen E, W & N

1,800 - 2,000

3.25% - 3.50%

Copenhagen NW

1,500 - 1,700

3.75% - 4.00%

Copenhagen S

1,700 - 1,900

3.25% - 3.50%

Frederiksberg

2,000 - 2,200

3.25% - 3.50%

North Harbour

1,900 - 2,100

3.00% - 3.25%

South Harbour

1,600 - 1,800

3.50% - 3.75%

Valby

1,700 - 1,900

3.25% - 3.50%

Vanløse

1,500 - 1,700

3.50% - 3.75%

RETAIL

RESIDENTIAL – PRIME RENT AND YIELD LEVELS Q1 2022

HOTEL

* DKK per m² per year ** In case of share deals, thís will impact yields due to deferred taxes Source: Cushman & Wakefield | RED

Residential | 41

RED assists ATP Ejendomme with the letting of the award-winning, characteristic office buildings at Christiansbro in Copenhagen.

42 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Top 5 Transactions 2021

Highlight: The Office Market in a Nordic Context

Expectations for 2022

Transactions & Key Figures

OFFICE

Geographical Distribution

LOGISTICS

RETAIL

Volume & Investors

HOTEL

RESIDENTIAL

OFFICE

Office | 43

OFFICE – VOLUME & INVESTORS THE VOLUME IS BACK TO NORMAL

of the investments in office properties in

behind the majority of the large trans

In 2020, we saw a significant decline in

2021, which is the highest share since 2015.

actions, whereas the other investor types

investments in office properties, but already

The overall growth in the office segment

were behind the majority of the smaller

in 2021, investments in the segment were

in 2021 was thus primarily driven by Dan-

transactions.

back at the level from 2016-2019 (

ish investors increasing their investments in

figure

27). However, although the transaction vol-

office properties significantly.

LARGE STAND-ALONE TRANSACTIONS

ume increased by more than 50% from 2020

DOMINATE

and thus reached DKK 18.4bn, the office

THE INSTITUTIONAL INVESTORS

With the exception of PensionDanmark,

segment only accounted for 15% of the total

CONTINUE TO TAKE MARKET SHARES

there was limited activity in 2021 among the

Danish transaction volume. This relatively

In the past year, institutional investors were

investors who have historically been among

low share is not due to the investors turn-

behind both the largest and second-larg-

the most active investors (

ing their interest towards other property

est transaction in the office market, contrib-

means that only PensionDanmark was both

segments but rather to an extremely lim-

uting to the institutional investors’ share of

among the most active investors in 2021 and

ited supply of the safest assets, prime office

the total transaction volume reaching 41%

overall for the period 2012-2021 (

properties located in central Copenhagen.

in 2021 (

28). The reason for this is that large stand-

figure 26). This meant that they

figure 29). This

figure

were behind almost twice as many of the

alone transactions dominated the office

THE DANISH INVESTORS ACCOUNTED

investments in office properties as the real

market in 2021. Consequently, four out of the

FOR THE HIGHEST SHARE IN SIX YEARS

estate companies. The trend from recent

five most active investors in 2021 (all except

As foreign investors primarily demand prime

years, where institutional investors have

PensionDanmark) were the investors behind

office properties, the limited supply meant

taken shares from the real estate companies,

the largest transactions in the segment.

that the growth in foreign investors’ activity

thus continued in 2021.

level in 2021 was limited, although demand continued to be high. Unlike foreign inves-

However, looking at the number of trans

tors, Danish investors are characterised by

actions, the picture is significantly differ-

having a broader demand, which is why they

ent, as the institutional investors only com-

were not affected by the limited supply of

pleted 17 out of the 382 transactions in the

prime properties to the same extent. As a

office market. The market was thus charac-

result, Danish investors accounted for 70%

terised by the institutional investors being

Figure 26: Office – Investor type breakdown 2021

OFFICE VOLUME IN TOTAL

18.4 BN DKK

Source: ReData

44 | RED – Danish Investment Atlas 2022

Institutional investors 41% Real estate companies 22% Others 17% Private investors 11% Property funds 9%

ANNUAL REVIEW

Figure 27: Office – Transaction volume 2012-2021

19.5 18.4

18.6

18.4

RESIDENTIAL

14.8

46%

BN DKK

59% 11.7

64%

12.1

67%

71%

60%

7.6 88%

5.3 93%

36%

29%

33%

40%

30%

2020

2021

OFFICE

54% 41%

92%

12%

0 2012

2013

2014

2015

2016 Danish

Source: ReData

2017

2018

2019

Foreign

Figure 28: Office – Top 5 investors 2021 Investor

Origin

Volume (M DKK)

No. of transactions

KanAm Grund Group

1,597

PensionDanmark

1,084

Aviva

918

Genesta

778

Danica

750

LOGISTICS

70%

RETAIL

Source: ReData

Figure 29: Office – Top 5 investors 2012-2021 Investor

Origin

Volume (M DKK)

No. of transactions

PensionDanmark

7,970

Niam

7,138

Jeudan

6,415

PFA Ejendomme

5,410

Klövern

4,386

HOTEL

Source: ReData

Office | 45

18.4 6.9 18.4 OFFICE – GEOGRAPHICAL DISTRIBUTION 38%

OFFICE BN DKK VOLUME IN TOTAL

100%

COPENHAGEN

BN DKK

38%

Danish 42%

Danish 70%

Foreign 58%

Foreign 30%

4.8

Foreign 10%

26%

GREATER COPENHAGEN Danish 90%

BN DKK

Foreign 10%

26%

OTHER ZEALAND

1.5

Danish 82%

BN DKK

Foreign 18%

1.5

6.9

4.8 BN DKK

12%

Foreign 1%

26%

1.5 BN DKK

100%

Danish 90% Foreign 10%

6.9

AARHUS

BN DKK

38%

Foreign 18%

Danish 99% 8% Foreign 1%

Danish 73%

1.5

Foreign 27%

OTHER JUTLAND

0.4

OTHER JUTLAND BN DKK

Danish 73% 2% Foreign 27%

BN DKK

Foreign 1%

BN DKK

12%

BN DKK

14%2022 46 | RED – Danish Investment Atlas

100

GREATER COPENHAGEN

4.8 BN DKK

26% FUNEN

GREATER COPENHAGEN GREATER COPENHAGEN GREATER COPENHAGEN Danish 90% Danish 90% Danish 90% BN DKK Foreign 10% Foreign 10% BN DKK Foreign 10% 26% 26%

4.8 4.8

ZEALAND

Danish 100% Foreign 0%

AARHUS Danish 99%

BN DK

COPENHAGEN

2.2 2.5

BN DKK

Foreign 58% BN DKK 38% 38%

OFFIC VOLUME IN

Foreign 18%

Foreign 0%

12%

6.9 6.9

Danish 42%

COPENHAGEN COPENHAGEN Danish 42% Danish 42% Foreign 58% Foreign 58%

Danish 82%

Danish 100%

BN DKK

COPENHAGEN

OTHER ZEALAND

FUNEN

0.4 2.2

Foreign

GREATER COPENHAGEN

BN DKK

Danish 82%

14%

18.4

Danish 7

BN DKK

OTHER ZEALAND

BN DKK

4.8

AARHUS

2.5 2.5

Danish 99%

AARHUS

JUTLAND

Foreign 30% OFFICE VOLUME IN TOTAL

Foreign 10%

Danish 100% 26% Foreign 0%

12%

BN DKK

38%

Danish 70%

Danish 90%

BN DKK

2.2

Foreign 58%

GREATER COPENHAGEN

FUNEN

2.2

100%

Danish 42%

Danish 100% BN DKK Foreign 0%

BN DKK

AALBORG COPENHAGEN

6.9

FUNEN

BN DKK

Foreign 58%

Danish 82% 38% Foreign 18%

0.4

18.4

Danish 42%

BN DKK

OFFICE VOLUME IN TOTAL

COPENHAGEN

OTHER ZEALAND

BN DKK

0.4

100%

Danish 90%

BN DKK

4.8

BN DKK

GREATER COPENHAGEN

FUNEN

1.5 BN DKK

OTHER ZEALAND

1.5 1.5

Danish 82% BN DKK

Foreign 18% BN DKK 8% 8%

OTHER ZEALAND OTHER ZEALAND Danish 82% Danish 82% Foreign 18% Foreign 18%

AARHUS Danish 99% Foreign 1%

Danish 73%

0.4

Foreign 27%

OTHER JUTLAND

BN DKK

OTHER JUTLAND

FUNEN

0.4 0.4

Danish 100% BN DKK

Foreign 0% BN DKK 2% 2%

FUNEN FUNEN Danish 100% Source: ReData Danish 100% Foreign 0% Foreign 0%

ties in Copenhagen has been characterised by declining investment

Figure 30: Geographic breakdown (BN DKK)

activity, and in 2021 the activity was almost halved compared to

AREA

the activity in 2019 (

2020

2021

Copenhagen

8.1

6.9

Greater Copenhagen

1.1

4.8

Other Zealand

1.0

1.5

Aarhus

0.3

2.2

by the sale of Ørsted’s domicile in Gentofte to almost DKK 2.5bn.

Other Jutland & Funen

1.6

2.9

Therefore, the increase in activity should not be seen as an indi-

Total

12.1

18.4

figure 31). This is not due to a lack of investor

demand but rather because there has only been a limited supply of the best-located office properties. Contrary to the development in Copenhagen, the investment a ctivity in Greater Copenhagen increased. However, this was p rimarily driven

cation of a demand that has generally been increasing in Greater

CHANGE

ANNUAL REVIEW

In the past three years, the investment market for office proper-

RESIDENTIAL

LACK OF PRIME OFFICE PROPERTIES

Copenhagen. The investors’ focus on prime properties is also reflected in the office market in Aarhus, where the sale of five modern office properties at a total volume of approx. DKK 1.9bn resulted in a sixfold of the investment activity from 2020 (

figure 30).

While foreign investors have been dominant in Copenhagen, their investment appetite for office assets outside Copenhagen has been

OFFICE

more or less non-existent. Therefore, the foreign investors were only behind 13 out of the 348 transactions with office properties, which were completed outside of Copenhagen in 2021.

LOGISTICS

Figure 31: Office – Geographic breakdown of the transaction volume 2019-2021

12 32%

54% 68%

RETAIL

42%

3 46%

90%

58%

78%

64% 0 2019

2020

2021

COPENHAGEN Source: ReData

36%

73%

10%

2019

2020

2021

2019

GREATER COPENHAGEN Danish

99%

75% 2020 AARHUS

2021

87%

90% 22%

2019

2020

2021

REST OF DENMARK

Foreign

HOTEL

BN DKK

Office | 47

OFFICE – TOP 5 TRANSACTIONS 2021 Photo: Kortforsyningen

1. ØRSTED’S DOMICILE The all-time largest office transaction on the Danish market was completed in December 2021, when ATP Ejendomme sold Ørsted’s domicile in Gentofte to a consortium of investors consisting of PenSam, AIP Asset Management & Artha Kapitalforvaltning. The property is let to Ørsted on a triple-net lease.

Price (DKK) 2,475,000,000 Gross area (m²) 84,437 (hereof basement 27,908)

Investor PenSam, AIP Asset Management & Artha Kapitalforvaltning

Vendor ATP Ejendomme

Photo: KanAm Grund Group

2. SVANEMØLLEHOLM In 2021, KanAm Grund Group entered a 50-50 a joint venture with AP Pension for an ownership interest in the company, which will own the future headquarter of Nykredit and AP Pension in Nordhavn. The deal includes the property, Svanemølleholm, which is expected to be DGNB gold-certified, as well as 287 parking spaces. The domicile is scheduled to be ready for occupancy in 2023.

48 | RED – Danish Investment Atlas 2022

Est. price (DKK)

Investor

1,596,800,000

KanAm Grund Group

Gross area (m²)

Vendor

75,000

AP Pension

ANNUAL REVIEW The British pension company Aviva acquired the newly built multi-user office building CPH Highline located on Havneholmen in Copenhagen’s South Harbor in 2021. The seller was the Swedish developer Skanska, who completed the construction in December 2020. The property is DGNB Gold certified and consists of four office leases and 270 parking spaces. The office tenants in the property are SAS Institute, Global Connect, Nordnet Bank and Skanska.

Price (DKK)

Investor

918,000,000

Aviva

21,852 (hereof basement 4,900)

Vendor Skanska

Photo: News Øresund

4. NEROPORT Castellum sold the office property Neroport, located in Ørestad in Copenhagen in April 2021. The property contains two buildings: Neroport, completed in 2010, and the Ferring tower, which was completed in 2002. The relatively low price is caused by the fact that the anchor tenant Ferring vacated the property in the autumn. Neroport is now

OFFICE

Gross area (m²)

RESIDENTIAL

Photo: Skanska

3. CPH HIGHLINE

facing a major redevelopment so that the property can become a

Price (DKK)

Investor

778,000,000

Genesta

39,332 (hereof basement 7,569)

Vendor Castellum

Photo: Danica Ejendomme

5. EUROPA PLADS In the summer of 2021, Danica Ejendomme bought a project with an office property on 17,884 m² and 100 associated parking spaces, which will be built on Europa Plads centrally in Aarhus. The property, which is expected to be completed in 2023, will have eight floors and is expected to be DGNB Gold certified. At the time of the sale, more than 60% of the property was already pre-let to, e.g., Nykredit and

RETAIL

Gross area (m²)

LOGISTICS

modern multi-user property.

Kammeradvokaten.

Price (DKK)

Investor

750,000,000

Danica

19,115 (hereof basement 2,569)

Vendor

HOTEL

Gross area (m²)

HKI Holding

Office | 49

THE OFFICE MARKET IN A NORDIC CONTEXT CENTRALLY LOCATED OFFICE

context, which contributes to a strong inter-

PROPERTIES IN HIGH DEMAND

est and optimism in the office segment from

In 2019 and 2020, Copenhagen assets

Danish as well as foreign investors.

accounted for approx. 70% of the total office volume. However, in 2021, only 38% of the

BUILDING OPPORTUNITIES HAVE KEPT

capital was invested in Copenhagen. A sig-

THE MARKET RENT DOWN

nificant need for placing accumulated cap-

While the office segment in Copenhagen

ital, a limited supply, and a large investor

has been characterised by a long period

appetite for exposure in the prime office

with flat rental development, Stockholm,

segment created high competition, resulting

Oslo, and Helsinki have experienced increas-

in historically high prices in 2021.

ing rent levels (

COPENHAGEN STAYS ATTRACTIVE

The difference in the market rent develop-

COMPARED TO OTHER NORDIC CAPITALS

ment in the Nordic countries is primarily

In line with the markets in Stockholm, Oslo,

caused by Copenhagen having benefitted

and Helsinki, the prime yield for office prop-

from a large supply of development oppor-

erties in Copenhagen has, thus, declined

tunities on central locations in contrast to

sharply in recent years (

the other Nordic capitals. However, most of

figure 32). The

figure 33).

yield level in Copenhagen is currently stabi-

the development opportunities in Copenha-

lized at approx. 3.25% (except for one prop-

gen CBD have now been utilized. Investors,

erty which was sold at a yield below 3.00%).

therefore, have to develop outside central

While the stabilized yield level is on par with

Copenhagen (North Harbour, Jernbanebyen,

the market yield in Oslo, the yield require-

South Harbour, Ørestaden, etc.) to add new

ments in Helsinki and Stockholm are 3.00%

construction to the office stock.

and 3.15%, respectively. The strong demand and the fewer developAnother essential difference in the Nor-

ment opportunities in central Copenhagen

dic markets is the market rent for prime

have been reflected in an increasing prime

office properties, as the office rent levels in

office rent in the past year.

our neighbouring markets are significantly above the level in Copenhagen.

INCREASING MARKET RENT WILL GENERATE ATTRACTIVE TOTAL YIELDS

The combination of the considerably lower

Although investors in today’s market are

rent level and the higher yield level in

acquiring prime office properties at low

Copenhagen is reflected in the fact that the

yields, the assets are anticipated to generate

price per square meter today is significantly

attractive total yields over the investment

lower in Copenhagen than in the other Nor-

period, given the expectation of increasing

dic countries. Therefore, Copenhagen

rental levels in Copenhagen CBD.

offices are still relatively ‘cheap’ in a Nordic

50 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Figure 32: Nordic capitals – Prime office yields 2010-2021

5.94%

5.75% 5.25%

4% 3.25%

3.25%

3.00%

3.15%

RESIDENTIAL

5.00%

OFFICE

0 COPENHAGEN

HELSINKI

OSLO 2010

STOCKHOLM

2021

LOGISTICS

Source: Cushman & Wakefield | RED

Figure 33: Nordic capitals – Prime office rent levels 2010-2021 (Index 100 = Copenhagen 2010)

400

350

300

RETAIL

250

200

150

100 2011

2012

2013

2014

Copenhagen

2015 Helsinki

2016

2017 Oslo

2018

2019

2020

2021

Stockholm

HOTEL

2010

Source: Cushman & Wakefield | RED

Office | 51

OFFICE – EXPECTATIONS FOR 2022 In 2021, we saw that covid-19 accelerated the development concerning remote work, which made many market participants question the future need for physical office space. However, at the same time, the sudden change tested the limits of how much remote work is suitable for the companies. THE OCCUPIER MARKET REMOTE WORK AND NEW

meetings, more meeting rooms of different

FLEXIBILITY AND OFFICE HOTELS

sizes, fewer concentration rooms and more

In the coming year, we also expect recent

informal work zones.

years’ increasing focus on flexibility to con-

REQUIREMENTS

tinue. For example, we increasingly see that

In the current market, office tenants have

LOCATION, LOCATION, LOCATION

both the smaller growth companies and the

realized that the hybrid is here to stay.

The location of the lease has always been

larger companies consider office hotels to

Therefore, in 2022, we do not expect that

the most important factor and will continue

be attractive alternatives to the traditional

the tenants’ relocation decisions will be

to be so in 2022. In the pursuit of attracting

offices. This is due to the fact that the office

driven by a desire to optimize or minimize

the right employees, the company’s offices

hotels are more flexible, and at the same

the number of square meters but rather

must have an attractive location. It will thus

time, they offer the tenants a range of ser-

by the tenants wanting to have the right

continue to be important that the lease is

vices, which means that the tenants can

solution with the right interior and loca-

easily accessible by public transport, and if

focus more on their core business. There-

tion. Thus, there is no indication that recent

you look specifically at Copenhagen, prox-

fore, although several large office hotels will

months’ high level of activity will slow down

imity to a metro station is very important for

open in Copenhagen in 2022, we expect

yet. This is supported by our investor survey

the office tenants. Furthermore, it is essen-

to see a demand that exceeds the supply.

from 2022, which shows that almost twice

tial that the lease is located in an area with

Furthermore, we expect to see more crea-

as many investors expect improved occupier

an attractive local environment close to res-

tive and flexible solutions that benefit both

demand as in the 2021 survey (

taurants and shopping opportunities as well

the tenants and landlords. This could, for

as recreational areas.

example, be different non-termination peri-

figure 34).

However, office tenants have different and

ods for different parts of a lease.

more differentiated requirements to their

SUSTAINABILITY IS BECOMING

leases than before. Tenants are increasingly

MORE IMPORTANT

CONCLUSION: BE UNIQUE, SUSTAINABLE

demanding something unique that suits

We also expect that sustainability will be a

AND ATTRACTIVELY LOCATED

their identity and provides the desired sig-

factor that tenants will increasingly demand

The tenants’ increased focus on having the

nal value to their customers and employ-

in 2022. However, at the same time, we

right lease at the right location implies that

ees, thus enabling them to attract the right

expect tenants to continue to view sustain-

we expect to see an increasing spread in the

employees.

ability differently. While some tenants look

primary and secondary rent levels. For the

narrowly and require specific sustainability

most well-located unique and/or modern

Regarding the interior of the lease, covid-

certifications that can only be met in mod-

leases that live up to tenants’ demands for

19 has led to several changes in the tenants’

ern office buildings, others look at the big-

sustainability, we expect to see decreasing

requirements, which is why we expect to see

ger picture, where ‘recycling’ of existing

vacancy and upward pressure on rent levels

an increasing demand for space for online

older buildings is considered sustainable.

in 2022 due to a high demand and a limited

The tenants’ increased focus on having the right lease at the right location implies that we expect to see an increasing spread in the primary and secondary rent levels.” Anders Krogh Partner and Head of Office Letting at RED

52 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW SECONDARY AREAS ARE CHALLENGED

driven both by the tenants’ demand and by

rate and rent level for the less well-located

On the contrary, we expect to see an

the fact that the certified properties will be

older office properties to stay more or less

extremely limited demand for the older

easier to sell and will be able to be financed

unchanged in 2022.

office properties located in the municipali-

with cheaper sources of financing in future.

ties surrounding Copenhagen. This expectation is supported by the fact that already

MORE STABLE YIELD LEVELS

in 2021, we saw that several funds were try-

However, we generally expect the yield level

THE WINNER IS COPENHAGEN CBD

ing to raise capital to invest in office proper-

for office properties to be unchanged or

In 2022, we expect that the capital in the

ties in the surrounding municipalities. How-

only marginally lower in 2022, and the results

investment market will follow the occu-

ever, despite the already large price gap,

from our investor survey show that the inves-

pier market. We thus expect a continued

there were not enough investors willing to

tors more or less have the same expectations

high investor interest for the most attractive

invest, which is why the funds failed to raise

(

office properties located centrally in Copen-

the necessary capital.

yield level has been under downward pressure for several years, but in 2022 investors

erties we will see an increasing pressure on

LOWER YIELDS ON SUSTAINABLE

are looking into a market that must find its

the prices.

PROPERTIES

stand again. In addition, the market partici-

We expect to see a spread in the yield level

pants are looking into a future where, e.g., the

on the sustainability-certified and non-sus-

mark-to-market taxation on properties and

tainability certified properties. This will be

the new property tax system will play a role.

Figure 34: Investor Confidence Index – Office occupier demand

Figure 35: Investor Confidence Index – Office yields

During the coming six months, the demand on the office occupier

During the coming six months, market yields for office properties will:

OFFICE

hagen. Therefore, it is for these prime prop-

figure 35). This is due to the fact that the

LOGISTICS

THE INVESTMENT MARKET

RESIDENTIAL

supply. Conversely, we expect the vacancy

market will:

44%

32%

17%

RETAIL

11%

68% 80%

60%

53%

21%

Q1 2021

Increase

Q1 2022

Remain stable

3% Q1 2021

Decrease

Q1 2022

Remain stable

Increase

Office | 53

HOTEL

OFFICE – TRANSACTIONS & KEY FIGURES OFFICE – TOP 30 TRANSACTIONS 2021 PROPERTY

CITY

DATE

INVESTOR

VENDOR

Ørsted Domicile

Gentofte

December

84,437 m2

2,475,000,000

PenSam, AIP Asset Management & Artha Kapitalforvaltning

ATP Ejendomme

Svanemølleholm

North Harbour

August

37,500 m2

1,596,800,000

KanAm Grund Group

AP Pension

CPH Highline

Copenhagen SW March

21,852 m2

918,000,000

Aviva

Skanska

Neroport

Copenhagen S

April

39,332 m2

778,000,000

Genesta

Castellum

Europa Plads

Aarhus

June

19,115 m2

750,000,000

Danica

HKI Holding

The Square

Copenhagen W

January

16,766 m2

750,000,000

AM Alpha

Aberdeen Standard Investments

Frederiks Plads Company House II

Aarhus

January

13,800 m2

600,000,000

PensionDanmark

NCC

Sydmarken 1

Søborg

February

32,765 m2

377,000,000* AEW Europe

Thylander

Struenseegården

Copenhagen K

July

11,752 m2

280,000,000* P+

Privat investor

Nets' previous domicile

Ballerup

April

26,369 m2

278,500,000

Bygningsstyrelsen

City Property Holding

Haraldsgades Skolehus

Copenhagen E

January

10,785 m2

232,100,000

Sextus Next ApS

Dreyers fond

Byporten 1. stage

Aarhus

September

10,432 m2

220,000,000* Industriens Pension

Dansk Erhvervsprospekt

Lysholt Allé 14

Vejle

July

27,456 m2

200,000,000* Bagger-Sørensen Invest

Casa Group, Givesco og Insero Horsens

Lautrupbjerg 13

Ballerup

April

8,568 m2

196,041,132

GN Ejendomme

C.W. Obel Ejendomme

Omega Company House

Aarhus

September

9,025 m2

191,000,000

PensionDanmark

NCC

Nyhavn 43

Copenhagen K

January

3,232 m2

167,000,000

Vision Ejendomme

Metorion

Finsensvej 6D

Frederiksberg

December

3,229 m2

151,425,000

PenSam

Kongeengen

Toldbodgade 31

Copenhagen K

January

3,430 m2

143,000,000

Vision Ejendomme

Metorion

Pakkerivej 6

Valby

August

3,184 m2

135,579,717

Staten og Kommunernes Indkøbsservice

De Forenede Ejendomsselskaber

Bækkegårdsskolen

Ølstykke

October

8,517 m2

135,023,998

Egedal Kommune

Danske Bank

Tømmergravsgade 4 -6

Copenhagen SW July

3,303 m2

135,000,000

Jeudan

Kdl Holding

Jens Otto Krags Plads 3

Randers

September

7,452 m2

130,000,000

SBB

JOK af 2010

Danske Bank offices

Across nation

February

5,215 m2

263,000,000

DFE

M7 Real Estate

Chr M Østergaards Vej 4

Horsens

August

16,559 m2

125,000,000

MPP Holding

Professionshøjskolen VIA University College

Karen Blixens Boulevard 7, 2.

Brabrand

April

2,294 m2

119,800,000

Aarhus Kommune

KommuneKredit

Vestergade 29

Copenhagen K

March

2,712 m2

106,852,800* Ordnung Office Hotel

Amaliegade 13 & 13C

Copenhagen K

April

1,438 m2

102,860,000

Fynsvej 9

Middelfart

June

19,558 m2

Klosterstræde 23

Copenhagen K

January

1,920 m2

Skt. Clemens Torv 6A

Aarhus

* Estimated price

54 | RED – Danish Investment Atlas 2022

GROSS AREA

November

2,619 m2

PRICE (DKK)

UMA Workspace

Pasternak Jørgensen Management

Carl Ejler Rasmussen & Co.

98,000,000

AG Gruppen

Crescendo

95,000,000

Vision Ejendomme

Metorion

91,500,000

Emilienborg Development

A/S Kjøbenhavns Ejendomsselskab

ANNUAL REVIEW

RED assisted Ejendomsselskabet Rosenborggade 15-17 with the letting of a historic office lease on 1,213 m² on

OFFICE

RESIDENTIAL

Rosenborggade 15 in Copenhagen.

BASE RENT*

YIELD LEVEL**

CBD – City center and Christianshavn

2,000

3.00% - 3.25%

Kalvebod Brygge

1,900

3.25% - 3.75%

North Harbour and Amerika Plads

2,000

3.00% - 3.50%

Frederiksberg

1,500

3.50% - 4.00%

Copenhagen E

1,900

3.25% - 4.00%

Copenhagen W and Carlsberg Byen

1,900

3.25% - 3.75%

Copenhagen N

1,600

4.25% - 5.00%

Copenhagen NW

1,250

4.25% - 5.00%

Islands Brygge

1,550

3.25% - 3.75%

Ørestad

1,500

4.00% - 4.50%

South Harbour

1,300

4.00% - 4.75%

Valby

1,350

4.50% - 5.25%

Amager East and Copenhagen Airport

1,425

4.50% - 5.00%

Tuborg Harbour

1,700

4.00% - 4.50%

Kongens Lyngby

1,450

4.25% - 4.75%

Ring 3

1,100

5.25% - 6.00%

RETAIL

AREA

LOGISTICS

OFFICE – PRIME RENT AND YIELD LEVELS Q1 2022

HOTEL

* DKK per m² per year excl. service charges ** In case of share deals, this will impact yields, due to deferred taxes Source: Cushman & Wakefield | RED

Office | 55

56 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Top 5 Transactions 2021

Interview: Does the Yield Level on Logistics Properties Reflect the Risk?

Expectations for 2022

Transactions & Key Figures

OFFICE

Geographical Distribution

LOGISTICS

RETAIL

Volume & Investors

HOTEL

RESIDENTIAL

LOGISTICS

Logistics | 57

LOGISTICS – VOLUME & INVESTORS QUADRUPLED VOLUME IN THREE YEARS

A LARGER SHARE OF DANISH CAPITAL

The five largest investors of the year

In 2021, the investment market for logistics

The foreign investors’ share of the total

accounted for 28% of the total transaction

properties were characterised by a more

transaction volume in the logistics segment

volume in the segment, which is a signifi-

or less insatiable investment appetite and

reached 55% in 2021. Thus, the distribution

cantly lower share than in 2020, where the

a downward pressure on the yield require-

between foreign and Danish capital was sig-

five largest investors accounted for almost

ments. As a result, the transaction volume

nificantly more equal than in 2020, where

half of the total volume. Thus, the invest-

reached DKK 16.1bn, which is almost four

foreign investors accounted for almost

ments are spread between more investors,

times the volume in 2019 (

three-quarters of the total investments in

including new investors in the market, such

logistics properties.

as Oxford Properties Group, which com-

figure 37).

The high investor demand was primar-

pleted the largest transaction of the year.

ily driven by the combination of a contin-

The fact that the foreign investors were not

uing increase in the occupier demand for

behind a larger share of the investments in

THE DOMINANCE OF THE PROPERTY

logistics properties and the fact that inves-

2021 is not due to a lack of investor demand,

FUNDS CONTINUES

tors can still achieve relatively high returns

but rather that their investment appetite is

While there is primarily Danish capital

on Danish logistics properties compared

primarily aimed at the safest assets, modern

behind both the real estate companies, the

with similar properties in our neighbouring

well-located logistics properties, of which

private investors and the institutional inves-

countries.

there is an extremely limited supply in the

tors, the property funds are dominated by

Danish market.

foreign capital, and in 2021 four out of the

As a result of the significant growth in

five most active investors (all except AXA

activity in recent years, the logistics seg-

THE LARGEST INVESTORS ARE STILL

Investment Managers) were foreign prop-

ment accounted for 13% of the total Danish

FOREIGNERS

erty funds. This was one of the main reasons

transaction volume in 2021. Thus, the seg-

Regardless of the more equal distribution of

to why the property funds reached a share

ment was only a few percent from reaching

Danish vs foreign capital in 2021, all of the

of 41% of the total volume and thus main-

the office segment and the position as the

five largest investors in logistics properties

tained their dominance in the logistics mar-

second-largest property segment.

in 2021 were foreign (

ket (

figure 38).

figure 36).

Figure 36: Logistics – Investor type breakdown 2021

LOGISTIK VOLUME IN TOTAL

16.1 BN DKK

Source: ReData

58 | RED – Danish Investment Atlas 2022

Property funds 41% Real estate companies 17% Private investors 16% Institutional investors 16% Others 10%

ANNUAL REVIEW

Figure 37: Logistics – Transaction volume 2012-2021

16.1

RESIDENTIAL

9.3 8.4

51%

4.0 2.8 1.7 0.7

63%

2012

2013

1.3

82%

89% 2014

2015

2017

Danish

Source: ReData

71% 58% 49%

67%

55%

4.1

80%

33%

2016

29% 6.4

OFFICE

20%

42%

2018

2019

2020

2021

Foreign

Figure 38: Logistics – Top 5 investors 2021 Investor

Origin

Volume (M DKK)

No. of transactions

Oxford Properties Group

1,483

Blackstone

1,083

AXA Investment Managers

750

AEW Europe

650

Blackbrook Capital

601

LOGISTICS

BN DKK

45%

RETAIL

Source: ReData

Figure 39: Logistics – Top 5 investors 2012-2021 Investor

Origin

Volume (M DKK)

No. of transactions

NREP

3,780

Blackstone

3,668

Niam

1,898

Savills Investment Management

1,788

Pareto Securities

1,699

HOTEL

Source: ReData

Logistics | 59

2.0 BN DKK

12%

16.1 5.0 16.1

12% COPENHAGEN

VOLUME IN TOTAL BN DKK

100%

Danish 100%

BN DKK

31%

Foreign 0%

Danish 24% Danish 45% Foreign 76% Foreign 55%

BN DKK

LOGISTICS – GEOGRAPHICAL DISTRIBUTION 100%

GREATER COPENHAGEN

5.0

Danish 24%

BN DKK

5.0 BN DKK

31%

Foreign 76% 31% GREATER COPENHAGEN

2.4

Danish 24%

15%

OTHER ZEALAND Danish 45%

Foreign 55% 15% OTHER ZEALAND COPENHAGEN

2.0

Danish 45%

Danish 100%

BN DKK Foreign

Foreign 0%

12%

55%

BN DKK

4% FUNEN

20%

5.0

Danish 24%

BN DKK 40% Foreign 31%

Foreign 76%

2.4

Danish 53% BN DKK 47% Foreign 15%

5.0

Foreign 47%

31%

Foreign 0%

20%

Danish 71%

2.4

Foreign 29%

15%

0.7

Danish 71% BN DKK 29% Foreign 4%

43%

BN DKK

0.7 BN DKK

Danish 53% Foreign 47%

3.3 BN DKK

20%

17% 2022 60 | RED – Danish Investment Atlas

100%

TRIANGLE REGION

2.0

Danish 71% Foreign 29% BN DKK

12%

OTHER ZEALAND

COPENHAGEN Danish 100% Foreign 0%

GREATER COPENHAGEN

Danish 45% Foreign 55%

7.0 BN DKK

43%

COPENHAGEN & GREATER COPENHAGEN GREATER COPENHAGEN Danish 45% Danish 24% Foreign 55% BN DKK Foreign 76% 31%

5.0

COPENHAGEN

BN DKK Foreign

BN DKK

17%

Foreign 40%

Danish 45%

2.7

BN DKK

AARHUS

4% Foreign 55% COPENHAGEN & 43% OTHER JUTLAND GREATER COPENHAGEN 55%

2.7

Danish 60%

Danish 45%

20%

Foreign 47%

Foreign 76%

COPENHAGEN & GREATER COPENHAGEN

3.3

16.1

OTHER JUTLAND BN DKK Danish 53%

Danish 24%

BN DKK

Foreign 55% LOGISTICS VOLUME IN TOTAL

GREATER COPENHAGEN

Foreign 55%

17% TRIANGLE REGIONFUNEN

7.0 7.0

3.3 BN DKK

BN DKK

Danish 45%

100%

Danish 100%

TRIANGLE REGION

BN DKK

17%

Danish 53%

BN DKK

AALBORG COPENHAGEN

Danish 45%

Foreign 40%

20% OTHER JUTLAND OTHER ZEALAND

2.7 BN DKK

16.1 BN DKK

OTHER JUTLAND

JUTLAND

2.7

12%

0.7

GREATER COPENHAGEN

BN DKK

Foreign 40%

LOGISTICS FUNEN VOLUME IN TOTAL Danish 60%

BN DKK

Danish 60%

3.3 3.3

Danish 60%

2.0

FUNEN

0.7 0.7

Foreign 55%

15%

BN DKK

Danish 45%

BN DKK

Foreign 76%

2.4 2.4

OTHER ZEALAND

FUNEN Danish 60%

ZEALAND

Foreign 40%

FUNEN

2.4 BN DKK

15%

OTHER ZEALAND Danish 45% Foreign 55%

OTHER JUTLAND Danish 53% Foreign 47%

TRIANGLE REGION Danish 71%

0.7

Foreign 29%

BN DKK

TRIANGLE REGION

FUNEN Source: ReData Danish 60%

Foreign 40%

Danish 4

Foreign

Figure 40: Geographic breakdown (BN DKK)

In the last three years, the investment activity with logistics properties has increased year after year in all geographical areas in Den-

AREA

mark (

figure 41). In contrast to the other real estate segments,

where investors primarily demand assets located in the capital, both Danish and foreign capital in the logistics segment is invested significantly more equally across the country. While the Danish investors were dominant in Copenhagen, on Funen and in Jutland, the foreign investors were dominant in Greater Copenhagen, the rest of Zealand and in the Triangle Region. This geographical distribution reflects the fact that the increasing

2020

2021

Copenhagen & Greater Copenhagen

4.1

7.0

Other Zealand

1.2

2.4

Funen

0.2

0.7

Triangle Region

0.7

2.7

Other Jutland

3.0

3.3

Total

9.3

16.1

CHANGE

RESIDENTIAL

THROUGHOUT THE COUNTRY

ANNUAL REVIEW

THE CAPITAL IS INVESTED IN LOGISTICS PROPERTIES

demand in recent years has not only applied to a single geographical area but to warehousing and logistics properties in general. The broad interest from both Danish and foreign investors is largely caused by the fact that tenant demand is also broad geographically. For the tenants, it is not crucial that the property is centrally located but rather that it is a modern property located in an easily accessible logistics area with a short distance to the motorway network. Therefore, the most attractive logistics areas in Denmark are the Tri-

OFFICE

angle Region in Jutland and Greve Distribution Center, Scandinavian Transport Center in Køge and Avedøre Holme in Zealand.

LOGISTICS

Figure 41: Logistics – Geographic breakdown of the transaction volume 2019-2021

8 7 6 45%

4 3 30% 2 1 0

79%

55% 47%

50%

2019

2020

2021

GREATER COPENHAGEN Source: ReData

2019

71% 47%

2020

48%

29%

70%

53%

50%

53%

2021

OTHER JUTLAND Danish

52% 76%

75%

74%

2019

2020

24% 2021

TRIANGLE REGION

2019

RETAIL

21%

52%

48% 2020

2021

REST OF DENMARK

Foreign

HOTEL

BN DKK

Logistics | 61

LOGISTICS – TOP 5 TRANSACTIONS 2021 Photo: Oxford Properties

1. M7 PORTFOLIO Canadian Oxford Properties entered the Danish market when they acquired a logistics portfolio with 27 properties from M7 Real Estate in 2021. The 27 properties have a total area of almost 224,000 m² and

Investor

1,483,000,000

Oxford Properties

Gross area (m²)

are located in Greater Copenhagen and the Triangle Region. M7 Real Estate will continue the asset management of the properties.

Price (DKK)

223,997 (hereof basement 6,589)

Vendor M7 Real Estate

Photo: Styrelsen for Dataforsyning og Effektivisering

2. NREP PORTFOLIO In the last month of the year, AXA acquired a logistics portfolio with a total of 20 properties (515,000 m²) located in the Nordic region, hereof four properties (96,451 m²) are located in Denmark (two in Jutland and two in Zealand). The seller of the portfolio was Logicenters, which is part of the Nordic property developer and investor, NREP.

Est. price (DKK)

Investor

750,000,000

AXA Investment Managers

Gross area (m²) 96,451 (hereof basement 748)

62 | RED – Danish Investment Atlas 2022

Vendor NREP

ANNUAL REVIEW In 2021, the international investment company AEW Europe acquired the logistics asset Copenhagen Cargo Centre, located next to Copenhagen Airport. The property is 27,903 m² and is almost fully let to occupiers, including Postnord, DHL and WFS (Worldwide Flight Services). In addition to the existing building, the deal also included a building right of 5,000 m² warehouse.

Est. price (DKK)

Investor

650,000,000

AEW Europe

(hereof basement 789)

Vendor Palm Capital

Photo: J. Nørgaard Petersen

4. LETLAND ALLE 3 Blackbrook Capital acquired a 42,389 m² logistics property located in Taastrup, west of Copenhagen, in April 2021. The property, which in recent years has undergone a number of improvements and extensions, is a cross-dock redistribution terminal with Danske Fragtmænd

Price (DKK)

Investor

601,000,000

Blackbrook Capital

Gross area (m²) 42,389 (hereof basement 1,517)

LOGISTICS

as tenants on a long lease contract.

Vendor K/S HØJE-TAASTRUP

Photo: Cushman & Wakefield I RED

5. H5 PROPERTIES PORTFOLIO In February 2021, the Swedish real estate company, Catena, expanded their Danish logistics portfolio from four to nine properties when they acquired a portfolio with a total of six logistics properties, out of which five properties were Danish, and one was Swedish. The five Danish properties, all of which are fully let, are located in Hvidovre, Risskov near Aarhus, Kolding and Vamdrup near Kolding and have a total area of 71,179 m².

Est. price (DKK)

Investor

575,000,000

Catena AB

71,179 (hereof basement 608)

Vendor

HOTEL

Gross area (m²)

OFFICE

27,903

RETAIL

Gross area (m²)

RESIDENTIAL

Photo: Europe Real Estate

3. COPENHAGEN CARGO CENTRE

H5 Properties

Logistics | 63

DOES THE YIELD LEVEL ON LOGISTICS PROPERTIES REFLECT THE RISK?

As with the yield on office and residen tial properties, the yield on logistics prop erties has declined over a longer period. The lockdown of physical stores across the globe has further fueled e-commerce – a trend that already existed but has been greatly intensified. The combination of a limited supply and an increased demand for distribution areas has naturally led to an increase in the price of logistics properties. But have investors become too eager when it comes to one of the trendiest segments in today’s market? In this section, Peter Michael Tetzlaff, Head of Investments at Verdion, and Lior Koren, Partner at Cushman & Wakefield | RED, will give their views on this matter.

64 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW it is today. The opposite will apply to virtu-

cantly shorter lifespan than all other prop-

ally all other property types located in prime

erty types, as they become obsolete rather

locations.

Do you think the premium on logistics

quickly. The requirements for the properties

properties compared to office properties

are developing rapidly, which makes a large

Would you, due to the risk of investing in

reflects the risk?

property stock outdated every decade. As

logistics properties, advise all investors to

the specifications of the properties are chal-

invest their capital in the other segments?

Before 2017, prime logistics properties in

lenging to change, and it remains relatively

Denmark were traded at a yield of approx.

cheap to build new logistics properties, the

No, the beforementioned factors do not

6%; around 200 basis points above office

outdated properties are typically re-let at

mean that all investments in logistics prop-

properties. However, in line with the price

a lower rent to tenants with less specific

erties are considered bad investments.

increases in all of the other asset classes,

requirements.

When investing in Danish logistics properties, there is still a premium to collect com-

tics properties have decreased. Currently,

Historically, the rent level for logistics prop-

pared to the same type of property in our

the benchmark is around 4.25% in “net initial

erties has remained relatively stable. Of

neighbouring countries; Sweden, Germany,

yield”, with a descending trend. At the same

course, this may change in line with increas-

and the Netherlands. Moreover, from a finan-

time, more investors are willing to accept

ing demand for well-located distribution

cial point of view, generating an adequate

yields just below 4.00% if the right property

premises. However, the relatively low con-

risk-adjusted return similar to corporate

with the right tenant can be acquired.

struction costs seem to set an upper limit

bonds can also make sense.

for what may be required in rent, as long as When comparing prime logistics properties

building plots are available at suitable logis-

However, it may be worth considering

to either an office property in the city centre

tics locations. The individual municipalities

whether logistics real estate is currently fac-

of Copenhagen, a residential rental property

typically determine the supply of the attrac-

ing a hype driven by the expectation of a

in Sydhavn or a high-street property on Fred-

tive logistics locations. Thus, the investors

global megatrend, namely rising e-com-

eriksberggade, the risk premium has gradu-

who rely on rent- and price increases must

merce. In addition, it should be consid-

ally narrowed to approx. 75 basis points.

trust the municipalities to limit the possibility

ered whether the demand for warehouses,

of building more logistics properties.

which logistics properties in principle are, is

I am therefore inclined to say that there are

strong enough for the assets to be assessed

just too many investment funds with logis-

Realistically, as a buyer of a logistics prop-

in the same risk class as the country’s best

tics properties on their shopping list com-

erty, you, therefore, have a re-letting risk

shopping centres, terraced houses around

pared with the supply.

that is significantly higher than in all other

Copenhagen, and well-run hotels in the big

segments, even if you secure yourself with a

cities.

longer lease agreement. If you buy a mod-

in logistics properties?

ern logistics property today with a good tenant on a 10-15 year lease, you will most

When looking at the characteristics of dif-

likely have a property that is worth less at

ferent property types, one must conclude

the end of the non-termination period than

In my opinion, common sense will say no. Continued on next page

RETAIL

What challenges do you see in investing

OFFICE

the investors’ yield requirement to logis-

RESIDENTIAL

that the logistics properties have a signifi-

LOGISTICS

RED Q&A

LIOR KOREN Lior Koren is partner at RED’s Capital Markets department. Lior has a master’s degree in Finance & Accounting from Copenhagen Business School and has been with RED since 2008. RED’s Capital Markets team is specialized in the sale of investment properties and advises both Danish and foreign investors within all real estate segments in both classic asset deals and share deals. For further information: Mail: lk@cw-red.dk

HOTEL

Tel.: +45 27 11 05 08

Logistics | 65

Continued from previous page

Even though the yield requirement for logistics properties has decreased, we are also looking into a property segment with an extremely strong tenant base, where more modern areas are in demand across the board. In addition, we have not seen the same rent increases within the logistics segment over the past 10 years as have been seen in other segments.” Peter Michael Tetzlaff Head of Investments, Nordics at Verdion

VERDION Q&A What makes you continue to see

who want great flexibility and on-time deliv-

What challenges do you see in investing

investments in logistics properties as

ery in all parts of the value chain.

in logistics properties?

an attractive investment case when you take the limited yield spread to, e.g.,

So even though the yield requirement for

As mentioned, the logistics real estate mar-

the residential and office segments into

logistics properties has decreased, we are

ket is under great development in these

account?

also looking into a property segment with

years. The modern building stock of logis-

an extremely strong tenant base, where

tics properties that are now being built

At Verdion, we are solely engaged in the

more modern areas are in demand across

in the Danish market will offer users sev-

logistics segment, where we are active as

the board. In addition, we have not seen the

eral options and general building quality

both developer, investor and asset man-

same rent increases within the logistics seg-

and flexibility that the older logistics prop-

ager, which is why our sole focus is also on

ment over the past 10 years as have been

erty stock cannot offer. Therefore, it will be

the logistics real estate segment. In addi-

seen in other segments. Thus, the realized

extra important to invest in the right and at

tion, we do not at all believe that the logistics

square meter prices have not seen the same

the same time well-located properties in the

segment shows signs of overheating, even

increase in the logistics segment as in other

older building stock in the coming years.

though the yield requirements have been

segments in the same period. If the demand

declining relatively more than in other seg-

continues to increase, it is very likely that we

In addition, the financing options in the

ments in recent years. The underlying driving

will see significant rent increases for the first

logistics segment have traditionally been

forces for the segment are very healthy and

time in a longer time period, which is further

more limited than in other property seg-

only seem to be further strengthened in the

supported by increases in the construction

ments. In general, it can be said that the

coming years, especially when it comes to

costs and a limited supply of land around

financing options in the industrial and logis-

modern properties with a focus on environ-

Copenhagen and Aarhus.

tics segment have previously been directed

mental certifications, building quality and the opportunity to re-let.

at user-owned properties to a greater Do you have an exit strategy for your

extent than investment properties. Although

logistics properties?

the financing options have become wide-

Users of modern logistics properties world-

spread and the financing sources have

wide need more and more space these

As a starting point, we are long-term players

come to know the logistics real estate

years. Not just because the property users’

in the market, and we both build and invest

investment market better in recent years, it

customers, and ultimately the consumers,

with long-term ownership and strategy in

is quite clear that location, building quality

demand more, e.g. through e-commerce, but

mind. The logistics real estate market is, to

and building specifications are essential for

just as much because the way these proper-

a greater extent than any other segment, a

obtaining financing of logistics properties

ties are operated is changing. We see a trend

strategic collaboration between tenant and

if the property is not let on 15- or 20-year

where more logistics space is required for

landlord, which is why we also see great syn-

leases, which is gradually becoming one of

the constantly more demanding customers

ergies in thinking long-term.

the rarities.

66 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW RESIDENTIAL OFFICE LOGISTICS PETER MICHAEL TETZLAFF Peter Michael Tetzlaff is Head of Investments, Nordics at Verdion. Peter Michael Tetzlaff has a master’s degree in Supply Chain Management from Copenhagen

Verdion is a real estate investor, developer and asset manager specializing in industrial and logistics properties that operate across Europe. In addition to

RETAIL

Business School and has previously worked at CBRE for six years.

the office in Copenhagen, which opened in March 2021, Verdion has offices in

HOTEL

London, Düsseldorf, Frankfurt and Gothenburg.

Logistics | 67

LOGISTICS – EXPECTATIONS FOR 2022 In recent years, several factors have led to a significant increase in tenant and investor demand for Danish logistics and warehouse properties. Although RED believes that some warning lights should start flashing among investors, nothing indicates that the high activity level will decrease just yet.

THE OCCUPIER MARKET

demand that the buildings they rent are sus-

markets in the Nordic countries and Ger-

tainability certified.

many, despite the massive downward pres-

THE UNDERSUPPLY CONTINUES

sure seen in recent years.

In 2022, several factors mean that we

INCREASING DIFFERENCE BETWEEN

expect to see a continued high tenant

PRIME AND SECONDARY PREMISES

LACK OF SPECULATIVE CONSTRUCTION

demand for modern and well-located logis-

Along with the rapid development in the

In recent years, we have seen a high con-

tics and warehouse properties. First, due

tenants’ requirements for logistics and ware-

struction activity within the logistics seg-

to growth in e-commerce and significant

house properties, we expect to see a con-

ment. However, the majority of these prop-

supply chain problems, we have seen that

tinuing increase in the difference in the rent

erties are so-called built-to-suit properties,

the tenants today have a higher capac-

level for the prime properties compared to

where the property has already been let

ity need than before, which we expect will

the secondary properties. While we expect

prior to the construction. Thus, we have

continue in 2022. Furthermore, the nation-

to see upward pressure on the rent level for

only seen limited speculative constructions,

wide vacancy rate is currently down to

the modern well-located logistics and ware-

which we expect will continue in the near

1.9%. Thus, there is still a significant under-

house properties, we expect an unchanged

future. Therefore, despite the high inves-

supply of modern logistics and warehous-

rent level for the less well-located and older

tor demand, we expect that the invest-

ing properties that live up to the tenants’

industrial properties.

ment activity in 2022 will be limited by the

requirements.

THE INVESTMENT MARKET

fact that there still is an undersupply of new modern logistics properties in the market.

The optimistic expectations for the logistics occupier market is supported by our

LOW RISK AND RELATIVELY HIGH

THE PROPERTIES ARE BECOMING

investor survey from the beginning of 2022,

RETURNS

OBSOLETE QUICKLY

which shows that almost two-thirds of the

In 2022, we expect to see a continued high

Due to the technological development and

investors expect to see an increased occu-

investor demand for modern logistics and

the increasing demand for sustainabili-

pier demand during the coming six months,

warehousing properties. This demand will,

ty-certified premises, logistics and ware-

and the remaining investors expect to see

i.e., be driven by the combination of the

house properties are becoming technically

a stable demand (

figure 42). Thus, none

continued limited supply and the high ten-

obsolete quickly, and in Denmark, there is

of the surveyed investors expects to see a

ant demand, which more or less eliminates

an almost unlimited supply of land available

decreasing occupier demand.

the investors’ reletting risk. The investor

within relatively short distances.

demand will also be driven by the fact that Similar to the trend in the other real estate

the yield on logistics properties remains

Looking at the costs of buying a land plot

segments, we also expect more tenants to

higher in Denmark than in comparable

and building new premises, it is therefore not

In 2022, we expect to see a continued high investor demand for modern logistics and warehousing properties. This demand will, i.e., be driven by the combination of the continued limited supply and the high tenant demand, which more or less eliminates the investors’ reletting risk.” Lior Koren Partner at RED

68 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW surprising that a number of the largest logis-

properties will be challenged with depreci-

expecting decreasing yield levels has fallen

tics players have it as part of their strategy

ating the properties for tax purposes before

from 50% in 2021 to 29% in 2022, the share

to build new properties and then sell them to

the properties are technically obsolete.

of investors expecting a stable yield level

THE YIELD LEVEL HAS REACHED AN

lease period but also a risk that investors will

APPROPRIATE LEVEL

INCREASED DEMAND FOR REGULAR

be left with empty and outdated properties

Despite the positive expectations for the

INDUSTRIAL PROPERTIES

in the event of termination.

occupier market and the high investor

We also expect a slight increase in demand

demand, our investor survey shows that an

for regular industrial properties, where

Likewise, the mark-to-market taxation

increasing share of investors believe that the

investors have the opportunity to achieve

of properties is expected to slow down

yield requirement has reached an appro-

high returns and buy properties at relatively

the investor demand for logistics prop-

priate level in relation to the risk associated

low square meter prices. This is a strategy

erties, as the rules are expected to imply

with investments in the logistics segment (

that several leading investors in the market started to initiate by the end of 2021.

THE CUSHMAN & WAKEFIELD | RED INVESTOR CONFIDENCE INDEX The index monitors 74 of the most active investors’ expectations for the Danish commercial real estate market during the coming six months. The broad coverage ensures that the findings are representative reflections of the investors’ confidence in the Danish market. By conducting the survey on a biannual basis, we are also able to track changes in the confidence.

Figure 42: Investor Confidence Index – Logistics occupier demand During the coming six months, the demand

63% 61%

on the logistics occupier market will:

Increase Remain stable

35%

37%

Decrease

Q1 2021

Q1 2022

Figure 43: Investor Confidence Index

29%

– Logistics yields During the coming six months, market yields for logistics properties will:

OFFICE

figure 43). While the share of investors

RETAIL

that the owners of logistics and warehouse

RESIDENTIAL

has increased from 46% to 65%.

This provides a secure cash flow during the

LOGISTICS

investors in sale-and-leaseback transactions.

50% 64%

Remain stable Increase

7% Q1 2021

Q1 2022

HOTEL

Decrease

46%

Logistics | 69

LOGISTICS – TRANSACTIONS & KEY FIGURES LOGISTICS – TOP 30 TRANSACTIONS 2021 PROPERTY

CITY

DATE

GROSS AREA

PRICE (DKK)

INVESTOR

VENDOR

M7 Portfolio

Across nation

October

223,997 m2

1,483,000,000

Oxford Properties

M7 Real Estate

NREP Portfolio

Across nation

November

96,451 m2

750,000,000

AXA Investment Managers

NREP

Copenhagen Cargo Centre

Kastrup

June

27,903 m2

650,000,000

AEW Europe

Palm Capital

Letland Alle 3

Taastrup

April

42,389 m2

601,000,000

Blackbrook Capital

K/S HØJE- TAASTRUP

H5 Properties Portfolio

Across nation

February

71,179 m2

575,000,000

Catena AB

H5 Properties

Kalundborg Refinery

Kalundborg

June

76,758 m2

375,000,000* Klesch Group

Equinor

Ventrupparken 3

Greve

May

60,652 m2

360,000,000* Hines

Toys Danmark

Kumlehusvej 1D

Roskilde

June

43,677 m2

330,000,000* Blackstone

Bach Gruppen

Greve Main 21

Greve

October

17,046 m

175,500,000

Verdion

AP Pension

Egeskovvej 12A

Horsens

August

21,353 m2

175,000,000

Savills Investment Management

Dki logistics

Egeskovvej 16

Horsens

August

21,046 m2

175,000,000

Savills Investment Management

Dki logistics

Østhavnsvej 37

Aarhus

August

24,168 m2

170,000,000* JT Ross

BoStad

Mileparken 10

Skovlunde

January

24,861 m2

165,000,000

Konbyg

Greve Main 3 & 10

Greve

November

15,180 m2

151,000,000* Highbrook Investors

Outfit International

Holkebjergvej 48

Odense

April

18,365 m2

138,000,000

Hanssen Hebo

Micro Matic

Jeudan Portfolio

Hvidovre

September

16,594 m2

131,250,000

AKF Holding

Jeudan

Venusvej 44

Kolding

July

12,902 m

122,284,000* Vika Project Finance

Daugaard Pedersen

Industriparken 21

Ballerup

March

8,404 m

120,000,000

Wihlborgs

C. Reinhardt

Bjerndrupvej 51

Tinglev

January

22,416 m

115,000,000

Pareto Securities

Real estate c ompany

Skovlytoften 33

Holte

January

10,557 m

102,000,000

Sampension

Niam

Pedersholmparken 10

Frederikssund

November

9,395 m2

100,000,000

Stendörren Fastigheter

Mountain Top Denmark

Sprogøvej 13

Hjørring

December

19,159 m2

97,500,000* Pareto Securities

Glaseksperten

Richard R. Nielsens Vej 3

Sønder Felding

July

25,433 m2

93,101,250

Emtelle Scandinavia

Erhvervspark Midt

Engvej 13

Langå

August

20,375 m2

75,000,000

KMC Properties

Limo Labels

Tobaksvejen 4

Søborg

November

Industrikrogen 28

Ishøj

July

10,391 m2

Langebjerg 29

Roskilde

June

6,991 m2

Langebjerg 3

Roskilde

November

10,554 m

Mineralvej 2A

Aalborg

December

17,130 m

Blushøjvej 9

Copenhagen SW

October

* Estimated price

70 | RED – Danish Investment Atlas 2022

7,820 m

5,505 m2

Blackstone

74,500,000* Highbrook Investors

Maycon

73,000,000

K/S Industrikrogen Ishøj

Blackstone

69,910,000* Blackstone

Real estate c ompany

69,500,000

Hamlet Property

Mille Food Roskilde

68,000,000

Jansen Ejendomme

Klitgaard Consulting

66,060,000* Pelican

DSV

carrying out the valuation of the logistics

LOGISTICS

OFFICE

RESIDENTIAL

hub named Greve Distribution Center.

ANNUAL REVIEW

RED has an ongoing valuation mandate on

AREA

BASE RENT*

YIELD LEVEL**

Copenhagen (Avedøre Holme and Amager)

650

4.00% - 4.50%

Taastrup Area

650

4.00% - 4.50%

Køge and Greve

650

4.00% - 4.50%

The Triangle Region (Fredericia, Kolding and Vejle)

500

4.25% - 4.75%

Odense Area

400

5.50% - 6.00%

Aarhus Area

500

4.50% - 5.00%

RETAIL

LOGISTICS – PRIME RENT AND YIELD LEVELS Q1 2022

HOTEL

* DKK per m² per year excl. service charges ** In case of share deals, this will impact yields, due to deferred taxes Source: Cushman & Wakefield | RED

Logistics | 71

RED was sell-side advisor in the sale of the shopping centre Kronen and 118 residential units located in Vanløse.

72 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Top 5 Transactions 2021

Footfall: Are We at the End of the Crisis?

Expectations for 2022

Transactions & Key Figures

OFFICE

Geographical Distribution

LOGISTICS

RETAIL

Volume & Investors

HOTEL

RESIDENTIAL

RETAIL

Retail | 73

RETAIL – VOLUME & INVESTORS DECREASE IN THE ACTIVITY

made 15 investments in retail properties in

was sufficient make it on the list of the most

Recent years’ uncertainties in the retail

2021, and except for a single traditional store

active investors.

market continued to slow down inves-

(located in Copenhagen), all of these trans-

tors’ demand for retail properties in 2021.

actions included grocery stores or big-box

The five most active investors’ share of the

This resulted in a 7% drop in the transac-

properties.

total transaction volume amounted to 36%

tion volume to DKK 7.4 bn (

figure 45). The

in 2021, which is almost equivalent to half of

decrease in activity is in particular caused

Although the Danish capital has also increas-

their share in 2020. This share and the many

by the fact that we only saw a single trans

ingly sought the safest assets in recent

smaller transactions made by Danish inves-

action with a volume above one billion in

years, the Danish investors completed 326

tors testify to a large spread of the capital in

2021. In contrast, three transactions with a

transactions in 2021, which included several

the segment.

volume above one billion were completed in

different types of retail assets. Despite the

2020; these three transactions accounted

fact that the transactions, on average, were

THE PROPERTY FUNDS ARE BACK

for almost 60% of the total volume.

significantly smaller than the foreign inves-

Although property funds have been reluc-

tors’ transactions, this high number of trans-

tant with investments in the retail seg-

The combination of a reluctancy within the

actions meant that the Danish investors’

ment in recent years, the most active inves-

retail segment and a high level of activity

share of the total volume reached 62%, and

tor types in the retail segment in 2021 were

within the other property segments meant

thus, the retail market for the fifth year in a

property funds and real estate compa-

that retail properties only accounted for 6%

row was dominated by Danish capital.

nies, both of which accounted for 31% of

of the total Danish transaction volume in 2021, which is the lowest share ever.

the investments (

figure 44). The fact that

NEVERTHELESS, THE LARGEST

property funds are among the most active

INVESTORS ARE FOREIGNERS

types of investors is primarily due to M&G

ONLY 15 TRANSACTIONS WITH FOREIGN

However, the Danish investors were not

Real Estate’s acquisition of BIG Shopping

CAPITAL

dominant in the ranking of which individ-

Center in Herlev and NREP’s acquisition of

In both 2020 and 2021, we saw that for-

ual investors placed the most capital in the

Kronen in Vanløse, which in total made up

eign investors, in particular, focused their

retail segment in 2021 (

almost 80% of the property funds’ invest-

investments on either other property seg-

there was foreign capital behind three out

ments or the most secure retail proper-

of the year’s four largest transactions with

ties. Therefore, the foreign investors only

retail properties, which at the same time

figure 46). In 2021,

ments.

Figure 44: Retail – Investor type breakdown 2021

RETAIL VOLUME IN TOTAL

7.4 BN DKK

Source: ReData

74 | RED – Danish Investment Atlas 2022

Property funds 31% Real estate companies 31% Private investors 23% Others 14% Institutional investors 1%

ANNUAL REVIEW

Figure 45: Retail – Transaction volume 2012-2021

16.2

RESIDENTIAL

8.7

8.5 7.4

2.5 35% 0

61%

44%

52% 71%

58% 48%

7.4

51% 62%

4.1 40% 74%

56%

39%

65% 2012

7.9

18%

29%

42% 5

8.7 7.7

49%

38%

OFFICE

26% 2013

2014

2015 Danish

Source: ReData

2016

2017

Foreign

2018

2019

2020

2021

ATP/Danica deal

Figure 46: Retail – Top 5 investors 2021 Investor

Origin

Volume (M DKK)

No. of transactions

M&G Real Estate

1,100

NREP

680

W.P. Carey

324

NRP

315

Tækker Group

195

LOGISTICS

BN DKK

43%

RETAIL

Source: ReData

Figure 47: Retail – Top 5 investors 2012-2021 Investor

Origin

Volume (M DKK)

No. of transactions

ATP

7,941

Patrizia

2,900

ECE

2,900

Danske Shoppingcentre

2,788

Central Group

2,700

HOTEL

Source: ReData

Retail | 75

7.4

22%

BN DKK

1.7

100%

GREATER COPENHAGEN Danish 31%

BN DKK

Foreign 69%

23%

RETAIL – 0.4 GEOGRAPHICAL DISTRIBUTION AARHUS GREATER COPENHAGEN Danish 100% Danish 31% Foreign 0% Foreign 69%

1.7

BN DKK BN DKK

6% 23%

1.6

OTHER ZEALAND Danish 51%

BN DKK

Foreign 49%

21%

AALBORG OTHER ZEALAND Danish 85% Danish 51% Foreign 15% Foreign 49%

0.2 1.6 BN DKK BN DKK

3% 21%

0.4

1.6 BN DKK

OTHER JUTLAND FUNEN Danish 96% Danish 100% BN DKK Foreign 4% 22% Foreign 0%

1.6

1.5 0.4 BN DKK BN DKK

20% 5%

0.4

1.7 BN DKK

1.6

AALBORG Danish 85%

20%

1.6 BN DKK

Foreign 15% 21%

BN DKK

Danish 31% Foreign 69%

1.6

AARHUS

BN DKK

22%

0.4 BN DKK

1.6 1.6

Danish 52% BN DKK

Foreign 48% BN DKK 22% 22%

100

GREATER COPENHAGEN

1.7 BN DKK

23%

GREATER COPENHAGEN GREATER COPENHAGEN GREATER COPENHAGEN Danish 31% Danish 31% Danish 31% BN DKK Foreign 69% Foreign 69% BN DKK Foreign 69% 23% 23%

1.7 1.7

COPENHAGEN

Danish 96%

0.4

BN DKK

Foreign 4%

20%

0.4 BN DKK

BN DKK

Danish 100% Foreign 0%

0.4 BN DKK

0.2 BN DKK

3%2022 76 | RED – Danish Investment Atlas

FUNEN

ZEALAND

Danish 100% Foreign 0%

AARHUS

FUNEN

1.6 BN DKK

21%

OTHER ZEALAND

1.6 1.6

Danish 51% BN DKK

Foreign 49% BN DKK 21% 21%

OTHER ZEALAND OTHER ZEALAND Danish 51% Danish 51% Foreign 49% Foreign 49%

AARHUS Danish 100% Foreign 0%

Danish 85%

0.4

Foreign 15%

AALBORG

BN DKK

AALBORG

7.4

BN DK

Foreign 49%

Danish 100%

OTHER JUTLAND

RETA VOLUME IN

Danish 51%

Foreign 0%

Danish 96% 5% Foreign 4%

COPENHAGEN COPENHAGEN Danish 52% Danish 52% Foreign 48% Foreign 48%

COPENHAGEN

OTHER ZEALAND

FUNEN

OTHER JUTLAND

1.5

100%

Foreign 49%

Danish 85% 21% Foreign 15%

BN DKK

Foreign

GREATER COPENHAGEN

23%

Danish 51%

BN DKK

JUTLAND

Danish 6

BN DKK

OTHER ZEALAND

AALBORG

0.2 1.5

Foreign 48%

1.7

Foreign 0%

7.4

100%

Danish 52%

Danish 100% BN DKK

BN DKK

AALBORG COPENHAGEN

Foreign 69%

AARHUS

0.4

Foreign 38% RETAIL VOLUME IN TOTAL

Danish 31%

Danish 100% 23% Foreign 0%

Danish 62%

GREATER COPENHAGEN

AARHUS

BN DKK

0.2

Foreign 48%

Danish 100% 22% Foreign 0%

7.4

Danish 52%

FUNEN

BN DKK

RETAIL VOLUME IN TOTAL

COPENHAGEN

FUNEN

0.4 0.4

Danish 100% BN DKK

Foreign 0% BN DKK 5% 5%

FUNEN FUNEN Danish 100% Source: ReData Danish 100% Foreign 0% Foreign 0%

Figure 48: Geographic breakdown (BN DKK)

In contrast to the other property segments, the retail market in 2021 was characterised by capital being relatively evenly distributed

AREA

between the geographical areas in Denmark (

2020

2021

Copenhagen

3.0

1.6

Greater Copenhagen

0.5

1.7

Other Zealand

1.0

1.6

Aarhus

0.1

0.4

transaction volume in recent years is primarily due to uncertainties

Other Jutland & Funen

3.3

2.1

about the future of the physical store, which has led investors to be

Total

7.9

7.4

figure 48).

The retail market in Copenhagen only accounted for just over onefifth of the total volume in 2021 (

figure 49). This is a signifi-

cant change from 2012-2015, where the share of capital invested in Copenhagen was at 60-75%. The decline in Copenhagen’s share of

reluctant to invest in high street properties, which have previously

CHANGE

RESIDENTIAL

IN COPENHAGEN

ANNUAL REVIEW

TRANSACTIONS WITH HIGH STREET PROPERTIES ARE MISSING

driven the investment activity in Copenhagen. With the sale of BIG Shopping Center in Herlev, Greater Copenhagen became the area with the highest investment activity. However, this high activity was not driven by an increased investor demand but rather by the offering of an attractive fully let retail park, which has proved resilient during the corona crisis. As with Greater Copenhagen, the relatively high investment activ-

OFFICE

ity in the rest of Denmark was not driven by an increased investor demand, but rather by the fact that Danish investors, as in previous years, acquired a large number of smaller retail properties and at the same time the foreign investors invested in a number of safe assets (grocery stores and big-box properties).

80%

70%

60%

50%

40%

30%

20%

10%

LOGISTICS

90%

RETAIL

COPENHAGEN’S SHARE

0% 2012

Source: ReData

2013

2014

2015

2016

Transaction volume

2017

2018

2019

2020

2021

Copenhagen's share

HOTEL

BN DKK

Figure 49: Retail – Transaction volume & Copenhagen’s share of investments 2012-2021

Retail | 77

RETAIL – TOP 5 TRANSACTIONS 2021 Photo: Big Shopping

1. BIG SHOPPING CENTER The largest transaction in the retail segment in 2021 was completed close to year-end when M&G Real Estate bought BIG Shopping Center in Herlev from CBRE Global Investors and Portus Retail, which acquired the shopping centre back in 2016. The shopping centre is fully let to 24 tenants, hereof 17 retail units, a gym, a cinema and five restaurants.

Est. price (DKK)

Investor

1,100,000.000

M&G Real Estate

Gross area (m²) 39,138 (hereof basement 559)

Vendor CBRE GI & Portus Retail

Photo: Cushman & Wakefield I RED

2. KRONEN In April 2021, NREP bought the shopping centre Kronen located in Vanløse. Kronen was built in 2017 and includes a shopping centre with 49 retail units, 158 apartments (of which 118 were included in the deal) and a parking basement with almost 400 spaces. NREP plans to transform Kronen into a strong local town centre.

Price (DKK) 680,000,000 Gross area (m²) 49,819 (hereof basement 16,068)

78 | RED – Danish Investment Atlas 2022

Investor NREP Vendor Apollovej ApS under konkurs (bankruptcy estate)

ANNUAL REVIEW a portfolio with 11 grocery stores with a total area of 13,100 m² from Coop Danmark in December. The properties are distributed throughout Denmark and include 10 Coop365 stores and one Kvickly store. W. P. Carey, who are specialized in sale-and-leaseback transactions, sees the deal as the start of a long-term partnership.

Price (DKK)

Investor

324,000,000

W.P. Carey

Gross area (m²)

Vendor

13,100

Coop Danmark

Photo: PR W.P. Carey

4. NÆSTVED RETAIL PARK Norwegian, NRP, acquired Næstved Retail Park, which was under construction from Innovator & Daugaard Pedersen in June 2021. Næstved Retail Park, which is scheduled to be completed in the spring of 2022, will accommodate 15 retail leases (which were almost entirely pre-let at the time of the transaction) and will thus be one of

RESIDENTIAL

In a sale-and-leaseback transaction, American W. P. Carey bought

OFFICE

Photo: Retail Architects & Sweco Architects

3. COOP PORTFOLIO

Est. price (DKK)

Investor

315,000,000

NRP

19,488

Vendor Innovater & Daugaard Pedersen

Photo: Paustian

5. LILLE TORV 2 In January 2021, Tækker Group acquired a 3,827 m² retail property located on Lille Torv in Aarhus. The property is let by the Danish furniture design house Paustian, which uses the property for a state of the art design universe on five floors (basement to the fourth floor).

Price (DKK)

Investor

158,000,000

Tækker Group

3,827 (hereof basement 523)

Vendor

HOTEL

Gross area (m²)

RETAIL

Gross area (m²)

LOGISTICS

the largest big-box properties in Denmark.

Private Investor

Retail | 79

FOOTFALL:

ARE WE AT THE END OF THE CRISIS? LARGE FLUCTUATIONS IN THE FOOTFALL

where the footfall generally followed a uni-

the footfall in the third and fourth quarters

In 2021, the footfall on Copenhagen’s high

form development across all registration

of 2021 with the activity in the same period

streets was characterised by large fluctu-

points.

of 2020. While the average footfall on the

ations. As a result of the month-long lock-

high streets in the third quarter of the year

down at the beginning of the year, the num-

HIGHER FOOTFALL IN 2021 THAN IN 2020

increased by 12% from 2020 to 2021, activity

ber of visitors on the high streets decreased

Historically, the footfall on the high streets

in the fourth quarter increased by 15%. This

significantly in the first quarter of 2021

has been characterised by the same sea-

positive development can, i.e., be attrib-

(

sonal fluctuations, and in both 2020 and

uted to the fact that the number of foreign

spread in traffic in the second quarter of

2021, both the third and fourth quarters

tourists in the city has increased by approx.

the year. However, the large spread was

were without restrictions until the end of

one-third from 2020 to 2021.

evened out in the third and fourth quarters,

December. Therefore, it is ideal to compare

figure 50). This was followed by a large

Figure 50: High street footfall 2020-2021

FOOTFALL COUNT PER HOUR

6,000

5,000

4,000

3,000

2,000

1,000 Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Østergade/Ny Østergade

Frederiksberggade

Amagertorv/Købmagergade

Nygade/Vimmelskaftet

The Round Tower

Østergade/Pilestræde

Vimmelskaftet/Amagertorv

Købmagergade/Valkendorfsgade Source: Cushman & Wakefield | RED

80 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW the level observed before the start of the

footfall was more or less stabilised in the

forced to stay closed, the high streets’ con-

pandemic.

fourth quarter of the year, which testifies to

sumer appeal has generally proved resistant

RESIDENTIAL

Thus, as long as the stores have not been

the high streets’ fundamentally strong abilBoth under normal conditions and in 2021,

have otherwise proved challenging to handle

the share of foreign tourists in the fourth

ity to attract consumers.

for the retail and restaurant industries.

quarter of the year only accounted for a

We do not expect to see significant changes

small share of the total number of visitors

in the footfall on Copenhagen’s high streets

WE ARE NOT BACK YET,

on the high streets. Our registration from

before the reproduction rate of the coro-

BUT WE ARE CLOSE

the fourth quarter of 2021 shows that foot-

navirus decreases again, all restrictions are

Despite the overall positive patterns in con-

fall was only 10% below the registration

eased, and the foreign tourists again have

sumer movements, the total number of

from the corresponding quarter in 2019, i.e.,

free access to travel to Denmark.

visitors on the high streets is still not at

before the start of the pandemic. Thus, the

OFFICE

to repeated periods of restrictions, which

Figure 51: Average footfall counts per hour

Østergade/Ny Østergade

3,035

Østergade/Pilestræde

3,911

Amagertorv/Købmagergade

4,092

Amagertorv

4,040

Amagertorv/Vimmelskaftet

4,019

Nygade/Vimmelskaftet

4,006

Frederiksberggade

3,302

Købmagergade/ Kronprinsensgade

4,115

Rundetårn

Frederiksborggade/ 10 Købmagergade

LOGISTICS

10 Kultorvet

12 Kø

11 e rg

8 1

3,699

3,164

11 Pilestræde/Kronprinsensgade

2,007

12 Grønnegade/Ny Østergade

1,656

Øs

RETAIL

2021

3 5

Vimmel

skaf tet

Amagertorv

Source: Cushman & Wakefield | RED

Gammeltorv

METHODOLOGY RED carries out the footfall counts on Fridays at 4 pm with the

purpose of registering the development and estimating the level of footfall at different locations on Strøget and Købmagergade. The footfall is counted manually from both directions.

Retail | 81

HOTEL

Street

RETAIL – EXPECTATIONS FOR 2022 Covid-19 has caused a worldwide crisis in the high-street retail market. When the crisis started, few could predict how long the crisis would last and what the physical retail market would look like once the crisis ended. THE OCCUPIER MARKET

We expect the vacancy rate to remain at

LARGER SPREAD IN THE RENT LEVELS

this high, but at a stabilized level until mid-

The retail industry can be used as a com-

This uncertainty also affected the market in

2022. Afterwards, we expect the vacancy

mon term for all companies that sell goods

Copenhagen. However, in the second half of

rate to decrease moderately.

to private consumers. However, the industry

2021, we saw a shift in the tenants’ approach

has not been affected uniformly by covid-19.

to future planning, as tenants, after several

NEW BRANDS WILL DRIVE THE MARKET

For example, manufacturers of luxury goods

lockdowns, had realized that the physical store

In 2020 and 2021, we saw that covid-19

have generally experienced higher growth

was able to maintain its popularity with the

accelerated a development in which brands

rates than many of the competitors selling

consumers despite the short-term lockdowns.

are successful in the physical retail mar-

goods in the low-price segment. This diverse

Thus, the tenants’ activity level increased, and

ket. Therefore, we expect to see a shift in

development will also lead to a significant

we saw that decisions to a greater extent were

which brands will drive the development of

spread in the development of rent levels on

made with a long-term perspective.

the market in the future. The brands that

Copenhagen’s high streets in the short term.

become successful will be the ones that THE VACANCY HAS REACHED ITS PEAK

manage to develop themselves by creating

Thus, the rent level for Amagertorv, which

The vacancy rate for ground floor areas on

an experience that customers cannot get

is currently the most expensive location in

Copenhagen’s high streets is currently at a

online, and thus manage to use the physi-

Copenhagen, is expected to increase with

record high. This is partly due to the com-

cal store as a media channel to build their

higher growth rates than any of the other

bination of the fact that several stores were

brand and create a relationship with their

high streets in the near future. The rationale

forced to shut down due to covid-19 and

customers.

for this expectation is the tenant type. Ama-

that only very few brands made decisions

gertorv today houses several manufacturers

about opening new stores. However, the sig-

This means that we expect to see more

of luxury goods, and in the coming years, we

nificant increase in the vacancy rate is pri-

store closures among the established

expect that more will come. As Amagertorv

marily due to the fact that the completion of

brands, which fail to develop and only

cannot be expanded, the high demand will

Hines’ development project on Købmager-

see the physical store as a sales channel.

lead to an upward pressure on the rent level.

gade (The Trinity Quarter), which added

On the contrary, we expect to see more

a significant area to the total ground floor

store openings from the innovative online

For the rest of Copenhagen’s high streets,

area, and that this project was vacant when

brands, which have been successful dur-

we expect a more moderate increase in the

the vacancy rate was calculated. Therefore,

ing covid-19 and have now gained the nec-

rent levels in 2022.

the high vacancy rate cannot in its simplicity

essary finances to be able to open physical

be considered as an expression of a negative

stores, as well as from manufacturers of lux-

Overall, we thus have optimistic expectations

development on the high streets.

ury goods.

for both demand, vacancy and the rent level

In 2022, we expect that investors will once again turn their interest towards the retail market. This expectation is based on the fact that we expect to see a more secure and stabilized occupier market.” Nicholas Thurø Mananging Partner at RED

82 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW in 2022, and our investor survey shows that

stabilised occupier market, which reduces

see stable yield levels during the coming six

the investors highly agree with our expec-

investors’ re-letting risks. The expectation

months (

tations. While in the survey at the begin-

is also based on the fact that the investors

ning of 2021, there was not a single investor

can generate a relatively high total return by

RETAIL ASSETS’ PROFILES ARE CRUCIAL

who expected to see an increase in occu-

investing in retail properties compared with

For the shopping centres, it is crucial for the

pier demand, there are now 32% who expect

office properties, as the yield on office prop-

investor interest that the operator has man-

to see an increase in the occupier demand

erties has decreased so much in recent years

aged to create the right profile for the centre.

(

figure 52). Furthermore, the share of inve-

that the prime office yield today is lower than

For the regional destination centres, there

stors who expect to see a decreasing demand

for high street retail properties. Furthermore,

must be a good range of F&B, leisure and

has fallen significantly from 2021 to 2022.

all other things being equal, the tenancy

services, and for the local centres, it is crucial

churn is lower, and there will be lower own-

that there is a supermarket on a long lease.

THE INVESTMENT MARKET

RESIDENTIAL

figure 53).

er-paid refurbishment costs. Despite our expectations of increased

for the safest retail assets, such as grocery

In 2022, we expect that investors will once

investment activity, we expect the yield

stores with long leases and big-box proper-

again turn their interest towards the retail

level to remain stable. This is supported

ties, to continue in 2022. In contrast, inves-

market. This expectation is based on the fact

by our investor survey, which shows that

tor demand for secondary retail is expected

that we expect to see a more secure and

almost half of the investors also expect to

to remain low.

OFFICE

Finally, we expect investors’ high demand A MORE SAFE AND STABILISED MARKET

THE CUSHMAN & WAKEFIELD | RED INVESTOR CONFIDENCE INDEX

LOGISTICS

The index monitors 74 of the most active investors’ expectations for the Danish commercial real estate market during the coming six months. The broad coverage ensures that the findings are representative reflections of the investors’ confidence in the Danish market. By conducting the survey on a biannual basis, we are also able to track changes in the confidence.

Figure 52: Investor Confidence Index

32%

– Retail occupier demand During the coming six months, the demand

24%

on the retail occupier market will: Increase

49% 76%

19%

Remain stable Decrease

Q1 2022

RETAIL

Q1 2021

Figure 53: Investor Confidence Index

29%

– Retail yields for retail properties will: Decrease Remain stable Increase

18%

49%

41% 41%

22% Q1 2021

HOTEL

During the coming six months, market yields

Q1 2022

Retail | 83

RETAIL – TRANSACTIONS & KEY FIGURES RETAIL – TOP 30 TRANSACTIONS 2021 PROPERTY

CITY

DATE

BIG Shopping Center

Herlev

December

Kronen

Vanløse

Coop Portfolio

GROSS AREA

PRICE (DKK)

INVESTOR

VENDOR

39,138 m2 1,100,000,000

M&G Real Estate

CBRE GI

April

49,819 m2

680,000,000

NREP

Apollovej ApS under konkurs (bankruptcy estate)

Across Nation

December

13,100 m2

324,000,000

W.P. Carey

Coop Danmark

Næstved Retail Park

Næstved

June

19,488 m2

315,000,000

NRP

Innovater & Daugaard Pedersen

Lille Torv 2

Aarhus

January

3,827 m2

158,000,000

Tækker Group

Private investor

Amagerbrogade 150

Copenhagen S

November

5,237 m2

150,000,000

Vision Ejendomme

Estate Amagerbrogade 150

Åboulevarden 21

Aarhus

June

5,138 m2

106,000,000

Høgh Invest 2005

Progressive Investments

Langelinie Allé 6

Copenhagen E

October

2,586 m2

106,000,000

Karberghus

Famkaa Invest

Diget 18

Glostrup

April

5,542 m2

91,000,000* AG Gruppen

Adelgade 39

Hobro

June

4,576 m2

84,000,000*

Jens Rasmussen Hobro Holding

Robert Benno Burchardt Nielsens Almen Velgørende Fond Anno 2006

Toldkammerbygningen

Copenhagen K

December

1,277 m2

84,000,000

Havnegade 44

RS Arving

Koldingvej 130

Viborg

July

4,341 m2

69,500,000

KFI Erhvervsdrivende Fond

P.S.V Ejendomme

Mølmarksvej 191

Svendborg

September

4,353 m2

66,750,000

Finn Ravn

FDP 2015 Holding

Gladsaxe Møllevej 25

Søborg

June

6,432 m

63,000,000

Oskar Jensen Gruppen

Pears

Østergade 15, st. 3

Copenhagen K

March

352 m

60,000,000

Oskar Group

Bien 3

Bredegade 18

Aalborg

June

1,603 m

54,000,000* Star Invest

Private investor

Nygårds Plads 1A

Brøndby

November

1,011 m

51,250,000

Aldi

Innovater

Rådhusstræde 4A

Randers

December

3,184 m2

50,000,000

SPI-Brødregade

KJ Invest

Arkaden Food Hall

Odense

November

3,122 m2

49,899,000* Rekom

Njalsgade 181

Copenhagen S

November

1,326 m2

49,138,229

ECE Project Management International

Bach Gruppen

Torvet 4-6

Dianalund

April

2,783 m2

47,000,000

Alma Property Partners

Propulus Real Estate

Københavnsvej 26

Roskilde

December

3,143 m

44,500,000

TAG Ejendomme

Private investor

Sankt Kjelds Plads 12

Copenhagen E

July

2,012 m

43,500,000

Thylander

12. juni 1976

Hjultorv 10

Næstved

February

3,790 m

43,250,000

Leva Ejendomme

DNP Ejendomme OM Finans

ASX 4078

Grønnegade 20

Næstved

September

2,022 m2

38,000,000

Sparekassen Sjælland-Fyn

Fiskerivej 12

Aarhus

January

1,040 m2

37,000,000

Tækker Group

Private investor

Frederiksberggade 17

Copenhagen K

December

424 m2

36,455,000

Jorcks Ejendomsselskab

Aberdeen Standard Investments

Anelystparken 11A

Tilst

June

2,751 m2

36,000,000

Scandinavian Investment Group

NRE Real Estate Denmark

Kamma Klitgårds Gade 47

Risskov

December

1,060 m2

35,750,000

ALDI Ejendomme

Ejendomsselskabet Skejbyvej 1 Erhverv

Lille Kongensgade 16

Copenhagen K

March

795 m2

34,000,000

Oskar Jensen Gruppen

Jeudan

* Estimated price

84 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

RED assisted Galleri K Retail ApS with the letting of 89 m² on Pilestræde 6 to Release.

Retail – Prime yield levels Q1 2022 YIELD LEVEL*

Copenhagen – Prime high street (Amagertorv, Købmagergade & Østergade)

3.25% - 3.75%

Copenhagen – High street (Vimmelskaftet, Nygade & Frederiksborggade)

3.50% - 4.00%

Copenhagen – Secondary high street (Frederiksberggade)

4.00% - 4.50%

Copenhagen – High street area (Kronprinsensgade)

3.75% - 4.25%

Copenhagen – Østerbrogade

4.50% - 5.00%

Copenhagen – Gl. Kongevej

4.50% - 5.00%

Copenhagen – Nørrebrogade

5.25% - 5.75%

Copenhagen area – Lyngby

4.50% – 5.00%

RESIDENTIAL

AREA

OFFICE

* In case of share deals, this will impact yields, due to deferred taxes

Retail – Prime rent and vacancy levels Q1 2022 VACANCY Q1 2022

CHANGE IN VACANCY 2021-2022 (%-POINT)

Amagertorv

38,000

5.32%

2.23%

Østergade

28,000

9.44%

3.53%

Købmagergade

25,000

35.00%

6.91%

Vimmelskaftet

20,000

13.14%

-3.54%

Nygade

18,000

13.66%

-1.40%

Frederiksborggade

14,000

17.91%

-7.34%

Frederiksberggade

14,000

18.84%

1.32%

Kronprinsensgade

11,500

Berlingske

8,000

Grønnegade

6,000

Østerbrogade

3,750

Gammel Kongevej

3,250

Nørrebrogade

2,500

Lyngby

8,000

LOGISTICS

BASE RENT ZONE A*

N/A

RETAIL

AREA

* DKK per m² per year excl. service charges Source: Cushman & Wakefield | RED

Methodology Zone A – Prime rent is estimated on the basis of ITZA guidelines and in this case indicates the value of the most expensive area in the model. However, properties in Denmark are rarely comparable 1:1, hence the depth of zone A (the area subject to generate the prime rent) may vary, but the value is typically determined to be between 6 m (20 ft) and 9 m (30 ft).

HOTEL

The vacancy rate is given by an observed amount of vacant square metres in the ground fl oor of high street properties relative to the total amount of square metres in the ground fl oor of properties in the respective street. Hence, retail areas on any other levels are not included in this assessment.

Retail | 85

RED carries out ongoing valuations of the newly renovated CPH Studio Hotel located on Amager in Copenhagen.

86 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Top 5 Transactions 2021

Pipeline

OFFICE

Interview: The Hotels Have to Fight for Their Success

LOGISTICS

RETAIL

The Hotel Segment in 2021

HOTEL

RESIDENTIAL

HOTEL

Hotel | 87

THE HOTEL SEGMENT IN 2021 TWO TRANSACTIONS DROVE

2021, a lack of travel activity among foreign

requires that the foreign tourists, to a

THE ACTIVITY

tourists meant that hotel stays in Denmark

greater extent, start travelling to Copenha-

Despite the major challenges that continued

were primarily made outside Copenhagen.

gen and that the conference market returns.

that there still was an investor demand for

Therefore, from April 2020, the occupancy

CONVERSIONS MAY BE THE SOLUTION

hotel properties when the right assets were

rate was higher outside Copenhagen than

IN THE SHORT TERM

offered on the market. However, the inves-

in Copenhagen in almost all months (

Due to the increasing tourism in the years

tors continued to be reluctant for the less

ure 56). This is in contrast to before covid-19,

before covid-19, many new rooms were

safe hotel properties. As a result, the trans-

where the occupancy rate in Copenhagen

added to the Copenhagen hotel market, and

action volume in the hotel segment reached

has historically been significantly higher than

at the same time, it was planned to add even

DKK 2.5bn in 2021 (

in the rest of the country. However, as people

more rooms (almost 6,500 new hotel rooms

were vaccinated towards the end of the year,

by 2028).

to affect the hotel industry in 2021, we saw

figure 55).

fig-

The investment activity in the hotel seg-

both the travel activity and the occupancy

ment in Denmark has historically been char-

rate at the Copenhagen hotels increased sig-

Therefore, in the short term, it must be

acterised by a few large transactions, and

nificantly, and in November 2021, the occu-

expected that the combination of reduced

2021 was no exception. The relatively high

pancy was again higher at the Copenhagen

tourism and the significant new supply of

investment activity was thus primarily driven

hotels than in the rest of Denmark.

hotel rooms may lead to an excess supply in

by Starwood Capital’s acquisition of hotel

the market. As it has already been seen with

Skt. Petri and Comfort Hotel Vesterbro at

THE SHARE OF FOREIGN TOURISTS

Gefion’s project at Engvej in Copenhagen,

a total price of DKK 1.7bn, which is equiva-

HAS HALVED

we expect that the excess may result in con-

lent to approx. 68% of transaction volume

When comparing the distribution of Dan-

versions to, e.g., studio apartments in the

in the hotel segment. Furthermore, the sales

ish and foreign guests visiting the Copen-

coming years.

of these two hotels were the primary reason

hagen hotels in 2021 with the distribution

why the hotel market was dominated by for-

from before covid-19, the absence of foreign

However, in the longer term, it is expected

eign capital.

tourists remain clear. Historically, approx.

that there will be a sufficiently great demand

two out of three guests were foreigners, but

for the occupancy rate in Copenhagen to

COPENHAGEN IS ON ITS WAY BACK

in 2021 the distribution was almost precisely

return to normal. Once the market has nor-

In Copenhagen, the annual number of visi-

the opposite, and two out of three guests

malized, and investors can be more con-

tors increased in all the years from the finan-

were Danes (

fident about the future of the hotels, we

figure 54).

cial crisis until 2020. However, covid-19

expect to see a higher and broader investor

stopped the growth, and in 2020 tourism

Therefore, in order for the market to return

was more than halved. In both 2020 and

to a completely normalized level, it both

demand for hotel properties.

Figure 54: Share of Danish and foreign guests in Copenhagen (jan-nov.)

AVG. 2015-2019

2021

Danish 36%

Danish 63%

Foreign 64%

Foreign 37%

Source: Statistics Denmark

88 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW

Figure 55: Hotel – Transaction volume 2012-2021

6 5.4 5

3.7 25%

3.0

2.6

24%

2.5 80%

1.7 64%

76%

36%

1.3

1.5

75%

45%

55%

45%

25%

2014

2015

2016

2.1

65%

26% 75% 74% 0.2 100%

35%

0 2012

2013

Danish

Source: ReData

2017

2018

2019

2020

OFFICE

BN DKK

RESIDENTIAL

20%

2021

Foreign

LOGISTICS

Figure 56: Hotel – Occupancy rate 2018-2021

100%

80%

RETAIL

60%

40%

20%

0% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

Copenhagen

Rest of Denmark

HOTEL

Source: Statistics Denmark

Hotel | 89

THE HOTELS HAVE TO FIGHT FOR THEIR SUCCESS The Danish hotel market has now been challenged by covid-19 for almost two years, and the challenges are far from over.

HORESTA Q&A

In the coming years, a continued reduc-

Where do you see the hotel market is

eyes to their own country to an even greater

tion in travel activity, as well as a signifi-

today, almost two years after it all closed

degree. In the capital, the hotels will con-

cant growth in hotel capacity, will mean

down in the spring of 2020?

tinue to be challenged by reduced travel

that hotels will have to fight for the guests in their struggle to survive.

activity for some years and also by intensi2020 led to a halving of the hotels’ turnover,

fied competition because the hotel capacity

and 2021 will also end with a significant loss,

has increased a lot in recent years.

As chief economist in the industry organ-

despite a strong second half-year. The vari-

isation Horesta, Jonas Kjær has a unique

ous compensation schemes have helped to

What do you think it will take to return

insight into the hotel market, and in the fol-

limit the deficit, but most hotels have added

to normal conditions in the hotel market,

lowing interview, he presents his views on;

significant amounts in a period that has

and do you expect the hotel market to

where the hotel market currently is, what

been incredibly difficult to navigate in due

return to a pre-covid-19 level?

it takes for us to return to normal condi-

to the unpredictability of the pandemic. The

tions, and what the market will look like in

positive is that the pandemic has been a cat-

The positive trends we saw in the autumn of

the future.

alyst for innovation and digitalisation.

2021 show that it is realistic to get back on track quickly. October and November 2021,

Fortunately, we have not seen a significant

there were few restrictions, and the infec-

increase in bankruptcies, but the hotels are

tion was low, were really good months for

undoubtedly less well-padded than before

the industry, even though the Copenhagen

the crisis, and it can be feared that there is

hotels lacked a large proportion of the for-

less room to develop and renovate the prod-

eign guests.

uct in the coming years. What is needed, of course, is the restrictions An incredible amount of time has been

to be lifted and for us as a society to start

spent dealing with the crisis; lockdowns and

behaving as we did before the crisis. And

reopenings, layoffs, restrictions, compensa-

then, of course, it is absolutely crucial that

tion packages, etc. Right now, I think most of

the business cycle is with us.

I also expect that there will be a

all, companies just want to be allowed to run

number of changes of ownership

their business the way they used to.

and acquisitions in the wake of

It is my impression that consumers – both private and businesses – long to travel, and this

the pandemic, just as there will be

However, in general, it is my impression

will happen when restrictions are lifted, and

a divestment of buildings.”

that the industry is looking positively to the

everyday life returns to normal. Experience

future. But the growth during the coming

has shown that holiday guests return faster

Jonas Kjær,

years will be experienced very differently.

than, for example, larger events and trade

Chief economist at Horesta

Outside Copenhagen, the hotels have had

fairs that have a longer planning horizon. So in

some really good summer seasons, and we

the short term, the guest composition may be

can hope that the Danes have opened their

a little different than the industry is used to.

90 | RED – Danish Investment Atlas 2022

ANNUAL REVIEW JONAS KJÆR Jonas Kjær has been chief economist at Horesta since 2008. Jonas Kjær

RESIDENTIAL

has a master’s degree in Management and Technology from Copenhagen Business School and has been in Horesta since 2006. Horesta is an industry organization for the hotel, restaurant and tourism industry in Denmark with almost 2,000 members. Horesta consists of two independent associations; an industry association that works to ensure political influence and interest representation for the tourist and experience industry, and an employers’ association that looks after the

What structural changes do you expect us

biggest drop in demand ever does not make

If you look at the Copenhagen hotel

to see in the hotel market in the future?

the challenge any less.

market from an international perspective,

OFFICE

labour law interests of its members.

is in Copenhagen compared to the

demic will continue. I.e., we will see a con-

ity must be seen in connection with relatively

competing cities?

tinuing trend towards consolidation, where

few new rooms and a record high occupancy

hotel chains increase their market shares,

in a number of years after the financial crisis.

I think it is really good. In recent years, we

and the large chains will develop sub-

Traditionally, the new capacity has come in

have welcomed a range of new hotels rang-

brands and concepts that offer different

waves, which have been absorbed over time,

ing from innovative hostels to boutique and

experiences for different needs. There will

and I expect that to happen this time as well.

luxury hotels. Many new foreign hotel chains

still be room for individual players who can

have opened in the city, just as the Dan-

operate in the niches that the chains do not

But it is clear that it will be a challenge in

ish players are opening new hotels. We also

cover. I also expect that there will be a num-

the coming years, now that capacity has

have a well-functioning infrastructure and

ber of changes of ownership and acquisi-

increased significantly, and it is limited with

good flight connections to the rest of the

tions in the wake of the pandemic, just as

foreign guests, who usually make up over

world.

there will be a divestment of buildings.

60% of the guests. On the other hand, we can hopefully hold on to the Danish guests,

In Denmark, we are challenged by a high

The overarching drivers in recent years

of whom we have had a record number dur-

level of wages and VAT, which means that

have been digitalisation and sustainability,

ing the crisis.

we are rarely the cheapest. This places high

but the pandemic will also change the way

demands on the product we offer. But inter-

we work, hold meetings and go on vaca-

national competition is intensifying all the

tion. The big question is whether our habits

time, and many of our neighbouring coun-

have changed permanently or whether we

tries have helped the tourism and experi-

will return to our old consumption patterns.

ence industry through the crisis by lowering The big question is whether our

the VAT. This has weakened our compet-

those hotels that are able to adapt.

habits have changed permanently

itiveness further. Therefore, it is now par-

or whether we will return to our

ticularly crucial to focus on the competitive

What significance do you expect the

old consumption patterns. In any

situation. Otherwise, we risk losing market

coming years’ massive growth in hotel

case, there will be opportunities

share.

capacity in Copenhagen to have on the

for those hotels that are able to

hotel market?

adapt.”

Even before the pandemic, it was clear that

Jonas Kjær,

such large growth in Copenhagen would

Chief economist at Horesta

HOTEL

In any case, there will be opportunities for

RETAIL

However, the current large growth in capac-

LOGISTICS

how do you think the quality and supply Many of the trends we saw before the pan-

take time to absorb. That the opening of the many new hotels end up coinciding with the

Hotel | 91

HOTEL – TOP 5 TRANSACTIONS 2021 Photo: Skt. Petri

1. SKT. PETRI The largest hotel deal in 2021 was completed in January when the Norwegian company Strawberry Forever sold hotel Skt. Petri to the American investment fund Starwood Capital. The hotel is a 5-star

investor, Petter Stordalen, will continue as operator of the hotel.

Investor

1,100,000,000

Starwood Capital

Gross area (m²)

luxury hotel with 288 rooms located in the centre of Copenhagen. Strawberry Hospitality Group, which is owned by the Norwegian hotel

Price (DKK)

26,291 (hereof basement 5,333)

Vendor Strawberry Forever

Photo: Momondo

2. COMFORT HOTEL VESTERBRO Starwood Capital bought another one of Strawberry Forever’s Danish hotels in September 2021, as they acquired the 3-starred hotel Comfort Hotel Vesterbro with 400 rooms. As with Skt. Petri the strategy is that Strawberry Hospitality Group will continue with the operation of the hotel.

92 | RED – Danish Investment Atlas 2022

Price (DKK)

Investor

606,000,000

Starwood Capital

Gross area (m²)

Vendor

13,560

Strawberry Forever

ANNUAL REVIEW Herman K, which is a 5-starred hotel with 31 rooms located opposite the department store Magasin in Copenhagen. The hotel was pre viously operated by Brøchner Hotels. However, due to covid-19, they were forced to cease operations of the hotel.

Investor

130,000,000

Ogilvy Capital

Gross area (m²)

Vendor

1,918

Dansk Ejendoms Management

(hereof basement 365)

Photo: Legoland Holidays

4. HOTEL PROPELLEN Hotel Propellen, located in Billund close to Billund Airport and Lego land, was sold in 2021 to K / S Atlantic, which also owns and operates hotels in Kolding and Aarhus. Hotel Propellen is a 4-starred hotel with 91 rooms, 14 meeting rooms and a conference room which can accom-

Price (DKK)

Investor

76,500,000

K/S Atlantic

Gross area (m²)

Vendor

8,318

SAS Pilot & Navigatør Pensionskasse

(hereof basement 1,548)

LOGISTICS

modate 150 guests.

Photo: Hotel Specials

5. HOTEL ANSGAR In 2021, the 3-starred Hotel Ansgar was sold to Go Hotels, which will also take over the operation of the hotel. Hotel Ansgar is located on Vesterbro near Copenhagen Central Station in an impressive 1880s property and consists of 83 rooms and a welcoming courtyard.

Est. price (DKK)

Investor

65,000,000

Go Hotels

2,491 (hereof basement 387)

Vendor

HOTEL

Gross area (m²)

RETAIL

Est. price (DKK)

RESIDENTIAL

In April 2021, the British asset manager Ogilvy Capital acquired Hotel

OFFICE

Photo: Brøchner Hotels

3. HOTEL HERMAN K

Private Investor

Hotel | 93

HOTEL – PIPELINE HOTEL – NEW DEVELOPMENTS IN COPENHAGEN 2022-2028 HOTEL

NO. OF ROOMS

Ibis Styles (Nest 45)

186

Scandic Nørreport

100

Scandic Spectrum

632

Total in 2022

918

JOYN Engholmene (Apartment hotel)

248

Drejervej 4

Holistic House (Expat Hotel) Residence Inn by Marriott CPH (Nordø) Nobis Hotel (Holmen) V360 Total in 2023 Ved Amagerbanen Syd (Apartment hotel)

450 95

100

Postbyen – Part II (Apartment hotel)

236

25 Hours Hotel Paper Island (Christiansholm)

128

Hotel Teglholmen

430

700

Den Franske Skole (Boutique hotel)

1,360 150

Radisson Blu Scandinavia (Expansion)

400

Enghave Brygge

350

Tivoli H.C. Andersen Hotel

500 350-400

Total in 2026-2028

1,750

Total in 2022-2028

6,489

Source: Byggefakta

94 | RED – Danish Investment Atlas 2022

2025

600

Fisketorvet

H. C. Andersen Adventure Tower

2024

1,224

Copenhagen Gate M-tower

Total in 2025

2023

1,237

350

Cabinn Apartments & Metro (Expansion)

2022

294

Jernbanegade Hotel

Total in 2024

OPENING YEAR

2026

2028

Pandox’s Danish hotels, where Scandic

HOTEL

RETAIL

LOGISTICS

OFFICE

RESIDENTIAL

in Kolding is one of the hotels.

ANNUAL REVIEW

RED carries out ongoing valuations of

Hotel | 95

ABOUT RED Cushman & Wakefield | RED provide advice within sales, leasing, tenant representation and valuation to the largest companies and players within real estate on the Danish real estate market. Our values in a complex and dynamic world consist of meticulousness, experience, and responsibility. Our goal is to deliver value-creating services with the highest possible professional quality in relation to the task. As professional advisers, we will meet and exceed customer expectations. We can do this because our combined organisational competencies consist of a strong community of dedicated, satisfied, and competent employees and partners.

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