European Office Marketbeat Snapshots Q1 2012 - SPG Intercity

MARKETBEAT
OFFICE SNAPSHOT
DENMARK
A Cushman & Wakefield Research Publication
OVERVIEW
Following the slight economic decline
witnessed in the latter half of last year,
2012 has seen uncertainty prevail within
the office sector, primarily as a result of
the continuing instability within the
European market. Denmark witnessed negative GDP growth
over the quarter, albeit at minor levels, as consumer spending
and the export market both registered falls in activity. As a result,
office market conditions were largely unchanged in Q1, with
prime rents holding firm throughout the major city submarkets.
OCCUPIER FOCUS
Many tenants remain unsure about their future within the Danish
office sector; despite this, market conditions held firm. Indeed,
the majority of transactions that closed over the quarter were
new leases, which demonstrates a healthy occupier appetite to
enter into the Danish market. The largest deal that closed over
the quarter was in Copenhagen’s South Harbour submarket for
approximately 16,000 sq.m of occupied space.
Although vacancy has been steadily declining, the first quarter of
2012 saw vacancy begin to climb again, and the Copenhagen
region now has a rate of just over 10%. Additionally, the amount
of planned schemes and space under construction has grown, and
with multiple developments due for delivery in 2012, it is likely
that supply levels will continue to rise as the year progresses.
INVESTMENT FOCUS
After the large volumes witnessed in H2 2011, office investment
has dropped significantly in 2012. This is largely due to companies
seeking to lessen their exposure to commercial real estate, which
resulted in less investor demand and more properties being
brought onto market. Although investment activity is beginning to
shift towards Ørestaden and become less focused on South
Harbour, the effect of this has not reflected greatly in the market,
keeping prime yields across all markets unchanged.
OUTLOOK
Notwithstanding the shaky climate within the European market,
Denmark’s economy is anticipated to remain steady for the near
future. This stabilisation is expected to translate into solid office
market conditions, with prime rents holding firm for the
remainder of the year. A similar situation is expected for the
investment sector, with muted activity keeping yields at their
current rates. Despite these steady fundamentals, an uncertain
sentiment lingers as both occupiers and investors remain unsure
about the future state of the fragile market.
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MARKET OUTLOOK
Prime Rents: Prime rents are expected to remain unchanged
on the back of continued demand.
Prime Yields: Prime yields are anticipated to remain steady
throughout the year.
Supply: A rise in completions in 2012 is anticipated to
see supply levels grow.
Demand: Notwithstanding economic uncertainty,
demand should continue to hold firm.
PRIME OFFICE RENTS – MARCH 2012
MARKET (SUBMARKET) Dkr € US$ GROWTH % CAGR
SQ.M/YR SQ.M/YR SQ.FT/YR 5YR 1YR
Copenhagen (Harbour Area) 1,800 242 29.9 -3.9 -5.3
Copenhagen (City) 1,650 222 27.4 0.6 0.0
Copenhagen (Ørestaden) 1,200 161 20.0 n/a -4.0
Aarhus 1,200 161 20.0 1.8 9.1
Odense 875 118 14.6 -0.6 -7.9
PRIME OFFICE YIELDS – MARCH 2012
MARKET (SUBMARKET)
(FIGURES ARE NET)
CURRENT LAST LAST 10 YEAR
QUARTER QUARTER YEAR HIGH LOW
Copenhagen (Harbour Area) 5.00 5.00 5.00 6.50 4.25
Copenhagen (City) 5.25 5.25 5.00 6.50 4.00
Copenhagen (Ørestaden)* 6.00 6.00 6.00 6.75 6.00
Aarhus 5.75 5.75 5.75 7.00 5.25
Odense 6.50 6.50 6.25 7.75 5.75
NOTE: * 2 yr record
With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of
Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very
much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used
as a comparable for any particular property or transaction without regard to the specifics of the property.
RECENT PERFORMANCE
8.00%
7.00%
6.00%
5.00%
4.00%
Source: Cushman & Wakefield
Q1 2012
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
10.0%
-5.0%
-10.0%
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5.0%
0.0%
AVERAGE PRIME YIELDS (left) RENTAL GROWTH (right)