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RED: Danish investment volumes slip 54% in H1 while foreign capital still dominates

Transaction volumes in Q2 was 45% above Q1, indicating that the significant Q1 decline will not be indicative of the entire 2019, according to RED, which is an affiliate of Cushman & Wakefield.

Nicholas Thurø Managing Partner, Cushman & Wakefield | RED, explains:

“The market has been quite active over the past six months – thus more transactions were completed in the first six months of 2019 compared to the same period in 2018, although they were smaller. In the first half of 2018 five properties with a value exceeding €100 million or approx. DKK 745 m were sold while we have not yet seen a single property transaction of this magnitude in 2019. The absence of the very large transactions, which usually drive the transaction volume obviously impacts the total transaction volume.

“However, we know of several significant properties which are expected to be sold during the last six months of the year. Therefore, we expect the second half of the year to end strongly. Residential transactions have seen a significantly better second quarter The Q1 decline in the sale of residential property has stagnated in Q2. Thus, the transaction volume for the residential segment in Q2 2019 is only 4% below the Q2 2018 level.

“If we compare the first half of 2019 with the first half of 2018, residential volumes have dropped a total of 28%, while industrial & logistics has dropped 23%, although it is a smaller market. The office transaction volume has dropped 43% and retail has dropped 58%. Consequently, the sale of residential rental properties is second least affected by the volume decline and remains the largest segment with 54% of total transactions.”

Within the residential sector, three foreign investors have dominated the activity with approximately one-third of Q2 investment volumes: AXA accounts for 14% of residential investments in Denmark, with the French insurer pushing Heimstaden to second place, after several quarters as the largest residential investor. Heimstaden and Blackstone represented 12% and 7%, respectively.

Foreign investors acquired DKK 8.8 billion (c. €1.2 billion) worth of Danish properties in H1, compared to DKK 13.6 billion (c. €1.8 billion) in the same period last year, including lower Q2 in 2019 relative to 2018. Regardless, foreign capital is still behind the largest transactions in the year to date: four of the five most active investors in Q2 2019 were overseas, top was again France’s AXA, followed by Norwegian capital in second and third with Heimstaden and KLP Ejendomme. The largest Danish investor was Industriens Pension in fifth place.

Nicholas Thurø, Managing Partner, Cushman & Wakefield | RED, added:

“There is more capital for real estate investment than ever before, but international investors still experience difficulties finding the right products in Copenhagen and Aarhus. This means that the capital [has] accumulated and some investors are hesitating. In Q2 2019, foreign investors represent 39% of total volumes.”

james.wallace@realassetmedia.com