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RED: investment in Danish real estate forecast to reach €8bn in 2019

Danish investment volumes in H1 were DKK 23 billion (€3.1 billion), compared to DKK 35.5 billion (c. €4.8 billion) in H1 2018, according to RED data, but the brokerage firm expects a stronger H2.

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

“Despite declining transaction volumes, in both Denmark and the rest of Europe, the level of activity is very high, and the very low interest rate means that real estate is still an attractive asset class. An asset that is partly protected against inflation and which generates a continuous return, unlike most other asset classes. Recent interest rate developments, [has made] lending [look] so attractive that we expect foreign investors in particular to increase their investments in the second half of 2019.

“Historically attractive loan conditions may affect the investment market We are currently experiencing historically low interest rates. The FED’s latest interest rate cut is historic and comes after more than 10 years without any cuts. The introduction of a 30-year loan at 0.5% interest rate speaks volumes about the current financing climate

“Foreign investor activity must, however, continue to rise in the coming quarters in order to reach the level of last year. International investors, however, still perceive the Danish property market attractive. Particularly the stable political environment, general economic growth and the low financing rate through the Danish mortgage credit system attracts investors. Therefore, we expect to see increasing activity from foreign investors – particularly in the Copenhagen prime markets.

Office investment volumes within Denmark reached DKK 3.2 billion (c. €430 million) in Q2, a 39% rise on the previous quarter but a 47% decrease on Q2 2018, according to RED data.

The first six months have seen steadily increasing activity, which RED said it expects will continue throughout the year. Copenhagen represents 81% of the market and remains the second largest segment accounting for 23% of transaction volume in Q2 2019. In Copenhagen, six transactions with a value exceeding DKK 100 million were completed.

The largest of these was Norwegian KLP Ejendomme’s acquisition of the IT company Visma’s future domicile, Emil Christian Hansen House in The Carlsberg City District. The domicile is 19,700 sq and traded for an estimated DKK 711 million, which significantly impacts the statistics.

RED also highlights:

  • a positive business environment has supported strong office space demand and helped to reduce vacancy rates in major cities, with strongest office space demand in the CBD and inner Copenhagen;
  • increasing demand for centrally-located office space, coupled with a limited amount of speculative new construction, is driving upward pressure on primary and secondary rental levels; and
  • within the residential sector, Q2 investment was DKK 6.9 billion (c. €925 million) in Q2, virtually double Q1’s DKK 3.5 billion (c. €470 million). The residential sector reflects more than half the Danish market, which was 57/43 weighted to foreign capital in H1. AXA, Heimstaden and Blackstone were the largest foreign investors in H1.

james.wallace@realassetmedia.com