Development in retail properties

Development in retail properties

Focus on grocery anchored real estate & retail parks

The high uncertainty of recent years has led to a sharp decline in transaction volume, with retail transaction volume in 2024 year-to-date at only DKK 1.5 billion, representing 6% of total transaction volume. The decline is widespread, leading to significantly increased yield requirements.

There is still demand for grocery portfolios with geographic diversity, as grocery stores are seen as resilient to economic fluctuations. Additionally, grocery chains often lease on long-term contracts with long non-termination periods.

Consumer confidence remains negative but has generally improved since the low point in October 2022, reaching -7 in August 2024. Higher rent increases due to NPI (Net Price Index) adjustments have put pressure on tenants. However, not all landlords have implemented full NPI adjustments. Some landlords have taken into account tenants’ financial robustness or the risk of termination, as well as the risk of a Section 13 rent adjustment, which could lead to regulated rent exceeding market rent. The risk of high NPI adjustments has also raised tenants’ awareness of clauses in lease agreements regarding rent regulation, leading to increasing demands for maximum adjustment clauses in the future.

Retail vacancy has slightly increased over the past year, rising by 0.1 percentage points to 3.1% in Q3 2024. Yield requirements are generally expected to remain stable to slightly increase over the coming year, while there is some risk of declining market rents in certain areas.