Transaction volume in the Danish commercial property market increased by nearly 50% from 2020 to 2021, with the year closing at an all-time high.
Ketchup effects, substantial placement requirements and lenient monetary policies were the ingredients making the year the busiest year ever for property investors in Denmark.
Overall, properties worth DKK 105 billion were traded, with transaction volume for the first time ever exceeding the DKK 100 billion mark.
So says Partner and Executive Director Peter Winther, head of the Capital Markets team at Colliers, Denmark’s largest commercial property advisor.
“Already in early 2021, we sensed that we were in for an exceptionally busy year across the entire spectrum of property investments. Danish economy has recovered in terms of growth momentum and employment, interest rates have only edged up slightly and investors have been chomping at the bit to leave the starting boxes, having somewhat held off in 2020. As a result, activity has been brisk, involving both domestic, international and local property investors – and not only in Copenhagen.”
Peter Winther goes on to say, however, that mainly foreign investors have been leading the charge, snapping up many of the big transactions.
More specifically, they accounted for 52% aggregate investments in 2021, and for the same reason Colliers has established an International Client Desk to provide services exclusively to clients from abroad.
Double up on transactions in the industrial/logistics segment
As anticipated, residential properties, which are considered secure core investments, accounted for 55% of total transaction volume, being the preferred investor segment, ahead of office properties, accounting for approx 18%.
However, percentagewise, industrial and logistics properties made the biggest leap with a transaction volume of some DKK 13 billion, that is, double up on the level recorded in 2020.
In this segment, the pandemic and explosive growth in e-commerce further accelerated demand, but with no matching increase in supply.
And further records were broken: The number of transactions in the DKK 500+ million bracket increased by 150%. In this respect too, foreign investors fronted activity, accounting for exactly 77% of transactions.
“High-volume transactions are driven mainly by international investors. They have a long-term approach and focus on core investments. They are zooming in on Denmark because we continue to be considered a so-called safe haven with a stable economy and secure returns. In this context, it hardly matters that the net initial yield drops below 3% as was actually the case in several segments.”
He adds that all DKK 500+ million transactions in the industrial/logistics segment involved international investors on the buyside.
2022 will see sharper focus on green investment
Peter Winther expects socioeconomic conditions to provide a sustained favourable basis for brisk activity and capital inflows into property investments in 2022.
According to the findings of a survey conducted by Colliers EMEA in autumn 2021, we may also expect to see multiple new investment trends among the largest international investors.
In the survey, 75% of respondents reply that they intend to make green goals an integral part of their property investments, to some extent in alignment with their own strategies, but also to futureproof the investments of their clients.
At the same time, they expect to increase investments in new and contemporary office properties in major towns and cities, whereas dated and functionally obsolete office premises are to be eliminated from portfolios.
However, the rise in construction costs is the most important source of concern in the investor community.
In this respect, all of 80% respond that the higher costs will impinge on the supply of sustainable properties due to newbuilding and refurbishment schemes alike.