Facts...
The Danish Property Market
August 2008
Property transaction costs and market liquidity Property transfer tax in international comparison
Sale of commerical real estate in Denmark
CBRE Real Estate Market Characteristics 2006
Statistics Denmark Excl. residential and mixed residential/commercial property sale. 2007 figures are preliminary.
Real estate market practices and procedures Area measurement
Gross external floor area in m.
Property transfer tax
Real estate transactions are taxed at 0.6% of purchase price as stamp duty.
Property tax
Property tax is 0.06%-2.4% of the official real estate value depending on municipality. Municipalities may also chose to tax the value of commercial buildings by up to 1%.
Rent
Usually quoted as annual net rent in DKK per m2. Rent is normally paid monthly or quarterly in advance. The rent is escalated annually by the net price index, often with a minimum annual increase of 2–3%.
Incentives
Rent free periods are normally not granted, but are negotiable.
Service charges and other costs
There is no standard as to whether the tenant or landlord is responsible for the payment of service costs. Often lease contracts are based on a net rent with the landlord recovering other costs from the tenant. Tenants will then pay separately for service charges, consumption costs and taxes as specified in the lease contract. However, this is normally negotiable.
Service charges
Often include insurance, common electric, maintenance, cleaning, security, management fees and property tax.
Consumption costs
Often include water, heating and electricity.
VAT
VAT of 25% is payable on rent and is for most companies fully recoverable by the tenant.
Security deposits
Usually equivalent to 3-6 months rent based on the mutual agreement stated in the contract.
Tenants obligations
To return premises in the same state, allowing for wear and tear.
Lease length and terms
A lease continues until either the tenant or the landlord terminates the contract. Consequently an initial non-termination period for the lease is agreed upon. Normally the period for the landlord is longer than for the tenant Once the initial period of non-termination has expired, the contract can be terminated by the tenant with usually 3-12 months’ written notice.
General
Wide remit to negotiate terms of lease. Sublease is usually permitted with the landlord’s consent.
The Danish Property Market The Danish commercial property market offers a wide variety of real estate for lease or purchase. Foreign companies will find that the costs of establishing in Denmark are competitive with regard to transaction costs as well as rental levels. The rental occupier market is well balanced. There are ample possibilities for development and also robust demand from occupiers. Stability is a general feature in the Danish market with moderate volatility in rents and other occupation costs. Commercial property transactions in Denmark are facilitated by a number of property consultancy agencies with local knowledge and international experience, many offering corporate real estate services in relation to location and relocation. This publication is a brief introduction to the Danish property market. Denmark offers
• • • • • • The practices and procedures are typical terms based on normal lease contracts. Transactions in specific cases should always be based on advise for that case.
A stable and flexible property market A wide variety of commercial real estate for lease or purchase Very competitive occupancy costs for high-quality offices Excellent infrastructure in relation to most industrial and logistics properties Good possibilities for expansion and relocation Low property transaction costs
Danish commercial rent levels in international comparison Prime office rent
EUR/m2 per annum
Prime industrial rents
London City, UK
Oslo, NO
Paris, FR
Helsinki, FI
Dublin, IE
Dublin, IE
Oslo, NO
Paris, FR
Stockholm, SE
Whether your company considers to relocate, consolidate, set up new production facilities, is on the lookout for new innovation partners or other strategic business solutions in Europe, Invest in Denmark is a good place to begin. We provide customised information and services free of charge and in full confidentiality.
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Frankfurt
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DE
Copenhagen, DK
Helsinki, FI
Amsterdam, NL
Amsterdam, NL Brussels, BE Hamburg, DE Berlin, DE
disclaim any and all liability for any loss or damage caused by such errors or omissions.
Frankfurt
Munich, DE
Copenhagen, DK
The information stated in this fact sheet may contain errors or omissions. Invest in Denmark and our co-operation partners
Munich, DE
DE
Warsaw, PL
Warsaw, PL Stockholm, SE Hamburg, DE Major provincial cities, DK
Aarhus, DK
Berlin, DE
Other major provincial cities, DK
Brussels, BE
CB Richard Ellis Cederholm
EUR/m2 per annum
Made in cooperation with
The Danish Property Market
Prime office rent trends in Copenhagen
Prime office rent and occupancy costs
The Danish Property Market
Industrial rent trends in Copenhagen
Prime industrial and logistics rent
Annual prime net rent
Annual prime net rent
Copenhagen
Aarhus
Other major provincial cities
DKK/m2
1,700-1,850
1,300-1,500
900-1,100
EUR/ m2
228-248
174-201
121-147
USD/ft2
34-36
26-30
18-22
Annual gross occupancy costs Copenhagen
Aarhus
Other major provincial cities
DKK/m2
2,000-2,250
1,500-1,700
1,100-1,300
EUR/ m2
268-302
201-228
147-174
USD/ft2
39-44
30-34
22-26
CB Richard Ellis Cederholm
The office property market
The Danish property market offers a wide variety of commercial real estate for lease or purchase. The office stock is 21.6 million m2 with a large concentration in Copenhagen. Almost half of the office stock in Denmark is located in the Copenhagen Capital Region. Major office markets outside Copenhagen include provincial cities such as Aarhus, Aalborg, Odense and ”The Triangle Area” of Vejle, Fredericia and Kolding. Since 2005 the demand for offices has been stimulated by high economic activity. As a consequence, office vacancy rates in Denmark are relatively low compared to most other European markets. For a potential tenant or purchaser it is usually not difficult to find suitable space. However, the current market situation means that it may take some time to find the right property with regard to desired location, quality, etc. An increasing number of companies relocate to new offices in newly developed areas. In Copenhagen a large number of offices are being developed in Ørestad and in the harbour areas. Most new developments are domiciles or on a pre-let basis. Office occupancy costs in Copenhagen are very competitive in a European context and are significantly lower than in other Scandinavian capitals. The net rents for high quality, well located offices in Copenhagen are DKK 1,7001,850 per m2 per annum. Rents are lower outside the prime office locations (the central business district and in the harbour areas) and in provincial cities. Rents have increased gradually since 2006, but generally the office market is characterized by relatively low volatility in rental trends. Some of the most significant Copenhagen office submarkets are: Central Business District: The historic city centre containing predominantly older low-rise buildings. Offices are typically 200-1,000 m2, but larger offices are available. Net rents are DKK/m2 1,300-1,750. Harbour North, Central & Tuborg: Locations along the waterfront have emerged as new prime office destinations. Modern high-quality buildings with efficient utilization of space have made premises along the waterfront popular. The area contains many development projects and offers opportunities for companies looking for large offices and domiciles. Net rents are DKK/m2 1,600-1,850. Ørestad: A new-town south of the city centre. Ørestad is currently the largest office and residential development area in Denmmark. Ørestad is popular for companies looking for large offices and domiciles. It also has an excellent infrastructure including a metro line, regional and international train connections, in the vicinity of Copenhagen Airport and Sweden. Net rents are DKK/m2 1,200-1,500.
Copenhagen
Major provincial industrial areas
DKK/m2
500-525
375-425
EUR/ m2
67-70
50-57
USD/ft2
10
7-8
CB Richard Ellis Cederholm
The industrial property market
The stock of industrial properties in Denmark comprises 94.1 million m2, which includes a wide variety such as manufacturing space, warehouses and distribution/logistics facilities. The transformation of the industrial sector from traditional production to high-productivity activities is reflected in the demand for industrial property and hence the stock. Many industrial occupiers with specific needs prefer newly developed build-to-suit facilities. At the same time rapid international growth in trade increases the demand for logistic space. The overall vacancy rate of industrial space is low and consists primarily of outdated factory buildings. The industrial and logistics sector is primarily based on the road network, and accessibility is an important parameter regarding the location of this type of real estate. Industrial parks and transportation centres are located in the outskirts of all major cities with good access to the highway system. “The Southern Corridor” south of Copenhagen is an important zone for industrial parks, distribution facilities and transport centres located around Køge, Greve Main, Høje Taastrup and Ishøj. Many high-tech production facilities are located north of Copenhagen in a cluster of international biotech companies. “The Triangle Area” in eastern Jutland has a large concentration of business parks. The area provides land for industrial and distribution/logistics use, and the development potential is facilitated by the ample availability of sites for sale. Rental levels for the state-of-the-art modern industrial and logistics properties with good access to the highway system are currently in the range of DKK/m2 450-525 outside Copenhagen, and DKK/m2 375-425 in major provincial industrial zones. Traditionally, there has been a preference for owner occupation among Danish companies. This is, however, changing as sale and lease back is becoming an increasingly attractive option for many Danish owner occupiers who want to focus on their core business. Also the profile of industrial occupiers is becoming more international. As a consequence, the overall liquidity of the industrial and logistics investment property market has improved during recent years. The number of properties transacted has increased, and so has the average price of industrial and logistics properties sold.
Sale of industrial and logistic real estate in Denmark 2002-2007 2002
2003
2004
2005
2006
2007
Sales turnover (DKKbn)
4.9
5.7
6.3
9.6
15.9
15.6
Average price per property (DKKmillion)
5.1
6.1
5.7
7.0
10.1
11.4
Number of properties sold (1,000)
1.0
0.9
1.1
1.4
1.6
1.4
Statistics Denmark 2007 figures are preliminary.
DISCLAIMER 2008 CB Richard Ellis Cederholm A/S Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis Cederholm clients, and cannot be reproduced without prior written permission of CB Richard Ellis Cederholm A/S.