Colliers International | Denmark Colliers Internationaldenmark by Peter Winther,CEO, Partner, CRISIS ORCORRECTION? UPDATE:MARKET About Thehousingmarketdueto Up

DENMARK MARKET UPDATE PULS

QUARTER 4 | 2018

Market update: Property market Crisis or correction? Indicators

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Is traditional Sale of co-operative retailing housing societies facing extinction? yields high profits

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Why is transaction volume declining in the investment property market? 15 Q4 2018 | MARKET UPDATE PULS 2 Colliers International | Denmark Colliers InternationalDenmark By Peter Winther,CEO, Partner, CRISIS ORCORRECTION? UPDATE:MARKET about thehousingmarketdueto up. InDenmark,growingconcerns classes, andtheprice ofriskhasgone in onthemostliquidandstableasset result, investorsareagainzooming global recessionloomingahead.Asa months duetoconcernsofarenewed grown increasinglyjitteryinrecent The investmentproperty markethas at marketresilienceinvarious scenarios. properties. Inthisupdate, wetakealook of newbuildingresidentialrental have curbedinvestmentactivityinterms sustained highlevelsofnewbuilding transaction activitycombinedwith stagnant ownershipprices andslower corporate bondyields. into stockmarket declinesanddriven up Mounting riskaversion has translated tough on the financialmarkets. surprising that this autumnhasbeen of Italy, the riskofa trade war –itisnot the EUconcerning the financialpolitics sovereign debt,apotentialconflict with litical andother concerns –risingglobal stronger. Add to kindsofgeopo this all indications ofaslowdown are becoming economic trends remain favourable, very jittery inrecent months.Although Global financialmarkets have been market throughproperty tothe uncertainty isfeeding Growing financialmarket - Q4 2018 | MARKET UPDATE PULS 3 Colliers International | Denmark E21 17 E20 16 E19 Housing demand E18 15

17 14 16 15 13 14 12 13 Labour costs Labour Expected supply 11 12 11 10 10 Materials 09 09 08 08

Completions 07 Total 07 0 75 95 85 90 80 110 105 100 Source: Statistics Denmark Source: (index 100 = 2015) Sources: Statistics Denmark, Byggefakta and Colliers International and Colliers Byggefakta Denmark, Statistics Sources: FIGURE 2: INDEX, FLATS COST CONSTRUCTION Copenhagen in this context includes Frederiksberg Copenhagen in this FIGURE 1: FORECAST SUPPLY/DEMAND RESIDENTIAL (SQM) FOR COPENHAGEN 100,000 700,000 300,000 500,000 600,000 400,000 200,000 ------the construction sector would be high. would sector the construction growth in the number of building starts. the number in growth in residential a slowdown it not for Were in the risk of overheating newbuilding, offices and logistics and production fa production logistics and offices and These segments are cilities in particular. prices and rental uptrending witnessing very high and consumer spending rea high and consumer very demand for This fosters strong. sonably least cities like Aarhus and Aalborg. least cities like are levels time, employment the same At a sustained increase in demand, which, a sustained increase the housing term, will absorb longer seen in Copenhagen and not oversupply largely concentrated in and around high- in and around concentrated largely a and cities in Denmark, towns growth will support trend urbanisation continued Longer term, this will help to curb new this will help term, Longer has been activity As construction supply. Stagnant housing prices will cause a newbuilding, in residential slowdown years. which has been soaring in recent slowdown may fundamentally be consid fundamentally may slowdown a sign of health. ered Following several years of price hikes of price hikes years several Following and rates interest low by prompted a certain capital abundance, however, Property market market Property healthy fundamentals are banks adopting (slightly) tighter lending tighter banks adopting (slightly) transaction why reason policies, another has slowed. activity The prevailing uncertainty serves to serves uncertainty The prevailing cautious. a bit more investors make seen mortgage have we Moreover, see almost 6,000 residential comple residential see almost 6,000 12 months. the next tions within In addition, newbuilding activity is brisk: newbuilding activity In addition, to of Copenhagen alone expects The City increasing pressure, reflected in a reflected pressure, increasing transactions in slowdown pronounced units. commonhold residential involving In the Danish property market, uncer market, the Danish property In too. The Copen has been rising tainty under has come market hagen housing Q4 2018 | MARKET UPDATE PULS 4 Colliers International | Denmark wait-and-see attitudesome wait-and-see thatto This statementprecisely pinpoints the strong investors“ (our translation). opened upopportunities to financially late-cycle trend, whichsubsequently has previously turned out to signify a ly stated that „thecurrent situation property company JeudanA/Srecent Director Per Hallgren ofdomestic and waiting Investors are ready can get. sector, there isalimit to how bad things but alsoin the domesticinstitutional Jeudan andother property companies, to property investments, notonly at stantial capitalconcentrations allocated excessive rate. However, with very sub risen too fast andarguably ataslightly investors in the market. Priceshave extent prevails amongfinancially strong residential completionswithinthenext12months. The CityofCopenhagenaloneexpectstoseealmost6,000

- - rental priceshave beenrelatively stable, invest in the Danishmarket. Historically, quite rightly consider itattractive to Meanwhile, many European investors is therefore fairly resilient to notonly a value ratios andliquidity. Themarket financing, focusing onbothloan-to- in terms ofproperty anddevelopment banks are showing sufficientprudence Domestic mortgageinstitutionsand community. cial difficultiesin the property investor price correction givingrise to finan believe that there isnoriskofamarket yield corporate bondsfor financing, we opers relying on the market for high- Discounting afewinvestors anddevel financing available. the mostattractive form ofproperty ish mortgagesystem probably provides Danish economy isstrong, and the Dan - - - major correction in the market. more than sufficientcapital to avert a for atleastanother year, there be will in growth andastableinterest rate level visage, includingamoderate slowdown scale. Andin the basicscenariowe en default andforced salesonany large Even notresult suchscenarioswill in downtrending rental prices. levels, increasing vacancy rates and cession withincreasing unemployment where the economy relapses intore inflationary trends, butalsoascenario scenario withrisinginterest rates and - - 5 Colliers International | Denmark Q4 2018 | PROPERTY INDICATORS MARKET

PROPERTY MARKET INDICATORS

DEFINITIONS First year stabilised return on investment (less deposits, less transaction costs) based on rental income less operating costs.

Vacancy data based on supply statistics by Ejendomstorvet.dk and current market supply estimates.

Prime: Prime location and quality. Either a new, modern building, or refurbished so that it is up-to-date and configured to meet future requirements. Low vacancy risk relative to market conditions.

Secondary: Average location and condition. The vacancy risk is moderate and reflects current market conditions.

The number is expected to increase in a year

The number is expected to be unchanged in a year

The number is expected to be lower in a year

You may quote PROPERTY MARKET INDICATORS by providing a full source of reference. 6 OFFICE

2017 2018 Rent levels Q3 Q4 Q1 Q2 Q3 Q4 Forecast DKK/sqm/year excluding operating costs and taxes Copenhagen Prime 1,850 1,900 1,950 2,000 2,000 2,000 Secondary 1,200 1,250 1,250 1,300 1,300 1,300 Northern suburbs Prime 1,475 1,500 1,500 1,525 1,550 1,550 of Copenhagen Secondary 950 950 950 950 950 950 Southern and western Prime 1,050 1,050 1,100 1,100 1,150 1,150 suburbs of Copenhagen Secondary 600 650 650 650 650 675

Colliers International | Denmark International | Denmark Colliers Zealand Prime 1,100 1,100 1,100 1,100 1,100 1,100

PROPERTY MARKET INDICATORS PROPERTY Secondary 800 800 800 800 800 800

| Aarhus Prime 1,400 1,400 1,400 1,400 1,400 1,400 Secondary 800 850 850 850 850 900 Horsens Prime 1,100 1,100 1,100 1,150 1,150 1,150

Q4 2018 Secondary 600 600 600 600 600 600 Randers Prime 850 850 850 850 850 875 Secondary 500 500 500 500 500 525 Triangle Region(1) Prime 1,050 1,050 1,100 1,100 1,150 1,150 Secondary 550 550 550 550 575 600 Esbjerg Prime 1,100 1,100 1,100 1,100 1,100 1,100 Secondary 550 550 550 550 550 550 Aalborg Prime 1,000 1,000 1,000 1,000 1,000 1,000 Secondary 750 750 750 750 750 750 Northern Jutland Prime 800 800 800 800 800 700 Secondary 575 575 575 575 575 575 Odense Prime 1,100 1,100 1,100 1,100 1,100 1,125 Secondary 750 750 750 750 750 750 Funen Prime 900 900 900 900 900 900 Secondary 550 550 550 550 550 550 Net initial yields % Copenhagen Prime 4.00 4.00 3.75 3.75 3.75 3.75 Secondary 5.75 5.50 5.50 5.50 5.25 5.00 Northern suburbs Prime 4.50 4.50 4.25 4.25 4.25 4.25 of Copenhagen Secondary 6.25 6.25 6.00 6.00 5.75 5.75 Southern and western Prime 5.25 5.25 5.00 5.00 5.00 4.75 suburbs of Copenhagen Secondary 7.00 7.00 7.00 7.00 7.00 7.00 Zealand Prime 6.25 6.25 6.00 6.00 6.00 5.75 Secondary 8.25 8.25 8.25 8.00 8.00 8.00 Aarhus Prime 4.50 4.50 4.50 4.50 4.25 4.25 Secondary 6.00 6.00 6.00 6.00 6.00 5.75 Horsens Prime 5.75 5.75 5.75 5.75 5.50 5.50 Secondary 8.00 8.00 8.00 8.00 8.00 8.00 Randers Prime 6.75 6.75 6.50 6.50 6.50 6.50 Secondary 8.00 8.00 8.00 8.00 8.00 7.75 Triangle Region(1) Prime 5.00 5.00 5.00 5.00 5.00 5.00 Secondary 6.75 6.75 6.75 6.75 6.75 6.75 Esbjerg Prime 5.75 5.75 5.75 5.75 5.50 5.50 Secondary 7.25 7.25 7.25 7.25 7.25 7.25 Aalborg Prime 5.50 5.50 5.50 5.50 5.25 5.25 Secondary 6.50 6.50 6.50 6.50 6.50 6.50 Northern Jutland Prime 7.25 7.25 7.25 7.25 7.25 7.25 Secondary 8.25 8.25 8.25 8.25 8.25 8.25 Odense Prime 5.25 5.25 5.25 5.25 5.00 5.00 Secondary 6.75 6.75 6.75 6.75 6.50 6.50 Funen Prime 7.00 7.00 7.00 7.00 7.00 7.00 Secondary 9.00 9.00 9.00 9.00 9.00 9.00 Vacancy rates % Copenhagen proper 6.10 5.70 5.70 5.80 5.70 6.00 Greater Copenhagen 11.30 11.70 11.40 11.20 10.00 10.10 Northern Zealand 6.20 6.90 6.10 5.50 5.00 4.80 Eastern Zealand 4.00 3.70 3.60 3.40 3.80 3.90 Western and Southern Zealand 3.40 3.70 3.50 3.00 4.90 5.10 Funen 9.50 10.30 8.90 7.80 7.10 8.30 Southern Jutland 9.30 9.00 8.50 8.90 8.30 8.00 Eastern Jutland 7.80 7.70 7.70 8.50 8.10 8.40 Western Jutland 5.10 5.10 4.90 4.80 5.20 4.10 Northern Jutland 6.50 5.60 5.90 5.50 5.30 5.40

1. Triangle Region refers to Vejle, Kolding and Fredericia. 7 RETAIL Colliers International | Denmark Q4 2018 2017 2018 Rent levels Q3 Q4 Q1 Q2 Q3 Q4 Forecast

DKK/sqm/year excluding operating costs and taxes |

High Street Copenhagen Prime 24,000 24,000 24,000 24,000 24,000 24,000 PROPERTY INDICATORS MARKET Secondary 9,000 9,000 9,000 9,000 9,000 8,800 Copenhagen Prime 3,700 3,700 3,700 3,700 3,700 3,700 Secondary 2,500 2,500 2,250 2,250 2,250 2,200 Northern suburbs Prime 3,500 3,500 3,500 3,500 3,500 3,500 of Copenhagen Secondary 2,500 2,500 2,500 2,500 2,500 2,400 Southern and western Prime 3,000 3,000 3,000 3,000 3,000 3,000 suburbs of Copenhagen Secondary 1,800 1,800 1,800 1,800 1,800 1,800 Zealand Prime 2,800 2,800 2,800 2,800 2,800 2,600 Secondary 1,700 1,700 1,700 1,700 1,700 1,600 Aarhus Prime 6,750 6,750 7,000 7,000 7,000 7,000

Secondary 3,000 3,200 3,200 3,200 3,200 3,400

Horsens Prime 3,000 3,000 3,000 3,000 3,000 2,800 Secondary 1,700 1,700 1,700 1,700 1,700 1,700 Randers Prime 1,800 1,800 1,800 1,800 1,800 1,800 Secondary 1,100 1,100 1,100 1,100 1,100 1,100 Triangle Region(1) Prime 3,050 3,100 3,100 3,150 3,200 3,300 Secondary 1,300 1,350 1,400 1,450 1,500 1,500 Esbjerg Prime 3,200 3,200 3,200 3,200 3,200 3,000 Secondary 1,750 1,750 1,750 1,750 1,750 1,650 Aalborg Prime 4,600 4,600 4,600 4,600 4,600 4,600 Secondary 2,000 2,000 2,000 2,000 2,000 2,000 Northern Jutland Prime 1,600 1,600 1,600 1,600 1,600 1,600 Secondary 750 750 750 750 750 750 Odense Prime 5,500 5,300 5,300 5,300 5,300 5,300 Secondary 2,500 2,500 2,500 2,500 2,500 2,500 Funen Prime 2,450 2,450 2,450 2,450 2,450 2,450 Secondary 750 750 750 750 750 750 Net initial yields % High Street Copenhagen Prime 3.00 3.00 3.00 3.00 3.00 3.00 Secondary 4.00 4.00 4.00 4.00 3.75 3.75 Copenhagen Prime 4.25 4.25 4.25 4.25 4.25 4.25 Secondary 5.00 5.00 5.00 5.00 5.00 5.00 Northern suburbs Prime 4.25 4.25 4.25 4.25 4.25 4.25 of Copenhagen Secondary 6.00 6.00 6.00 6.00 6.00 6.00 Southern and western Prime 5.75 5.75 5.50 5.50 5.50 5.50 suburbs of Copenhagen Secondary 6.75 6.75 6.75 6.75 6.75 6.75 Zealand Prime 5.75 5.75 5.50 5.50 5.50 5.50 Secondary 6.75 6.75 6.75 6.75 6.75 7.00 Aarhus Prime 4.00 4.00 4.00 3.75 3.75 3.75 Secondary 6.00 5.75 5.75 5.75 5.50 5.25 Horsens Prime 5.50 5.50 5.50 5.50 5.50 5.50 Secondary 6.75 6.75 6.75 6.75 6.75 6.75 Randers Prime 6.25 6.25 6.25 6.25 6.25 6.25 Secondary 7.25 7.25 7.25 7.25 7.25 7.50 Triangle Region(1) Prime 5.00 5.00 5.00 5.00 5.00 5.00 Secondary 6.75 6.75 6.75 6.50 6.50 6.50 Esbjerg Prime 5.25 5.25 5.25 5.25 5.25 5.25 Secondary 7.50 7.50 7.50 7.50 7.50 7.75 Aalborg Prime 5.00 5.00 5.00 5.00 4.75 4.75 Secondary 6.50 6.50 6.50 6.50 6.25 6.25 Northern Jutland Prime 6.50 6.50 6.50 6.50 6.50 6.50 Secondary 7.75 7.75 7.75 7.75 7.75 7.75 Odense Prime 5.00 5.00 5.00 5.00 4.75 4.75 Secondary 6.50 6.50 6.50 6.50 6.25 6.25 Funen Prime 6.00 6.00 6.00 6.00 6.00 6.00 Secondary 8.00 8.25 8.25 8.25 8.25 8.25 Vacancy rates % Copenhagen proper 4.00 3.50 3.60 4.40 4.60 4.00 Greater Copenhagen 4.90 4.10 2.90 3.30 3.70 3.90 Northern Zealand 3.60 4.50 4.40 5.10 6.00 5.00 Eastern Zealand 6.70 6.80 6.40 6.00 6.70 6.30 Western and Southern Zealand 4.60 4.90 4.70 5.70 6.10 6.50 Funen 5.30 5.60 5.30 5.40 5.80 9.70 Southern Jutland 8.40 8.50 7.50 8.20 8.80 9.70 Eastern Jutland 5.30 5.40 5.50 5.40 5.50 5.60 Western Jutland 5.80 6.40 6.10 6.20 6.90 6.30 Northern Jutland 6.50 6.50 6.70 7.80 7.30 8.20

1. Triangle Region refers to Vejle, Kolding and Fredericia. 8 INDUSTRIAL*

2017 2018 Rent levels Q3 Q4 Q1 Q2 Q3 Q4 Forecast DKK/sqm/year excluding operating costs and taxes Copenhagen Prime 575 575 600 625 650 650 Secondary 350 350 375 375 375 375 Northern suburbs Prime 450 450 450 475 500 500 of Copenhagen Secondary 350 350 350 350 350 350 Southern and western Prime 475 500 500 525 550 575 suburbs of Copenhagen Secondary 350 350 350 350 350 375

Colliers International | Denmark International | Denmark Colliers Zealand Prime 550 550 550 550 550 550

PROPERTY MARKET INDICATORS PROPERTY Secondary 300 300 300 300 325 325

| Aarhus Prime 450 450 475 475 475 475 Secondary 275 275 275 275 300 300 Horsens Prime 350 350 350 350 350 375

Q4 2018 Secondary 225 225 225 225 250 250 Randers Prime 300 300 300 300 300 300 Secondary 200 200 200 200 200 200 Triangle Region(1) Prime 425 425 450 450 450 450 Secondary 275 275 275 275 275 275 Esbjerg Prime 300 300 300 300 300 300 Secondary 225 225 225 225 225 225 Aalborg Prime 325 350 350 375 375 375 Secondary 250 250 250 275 275 275 Northern Jutland Prime 275 300 300 325 325 325 Secondary 200 200 200 200 200 200 Odense Prime 350 350 350 350 375 375 Secondary 250 250 250 250 250 250 Funen Prime 300 300 300 300 300 300 Secondary 175 175 175 175 175 175 Net initial yields % Copenhagen Prime 6.00 6.00 6.00 5.75 5.75 5.50 Secondary 8.25 8.00 8.00 7.75 7.75 7.50 Northern suburbs Prime 7.25 7.00 7.00 7.00 6.75 6.50 of Copenhagen Secondary 8.25 8.25 8.25 8.25 8.25 8.25 Southern and western Prime 7.50 6.75 6.75 6.50 6.50 6.25 suburbs of Copenhagen Secondary 8.25 8.25 8.25 8.25 8.25 8.25 Zealand Prime 6.50 6.50 6.25 6.25 6.50 6.25 Secondary 8.25 8.25 8.25 8.25 8.25 8.25 Aarhus Prime 6.25 6.25 6.00 6.00 6.00 6.00 Secondary 8.50 8.25 8.00 7.75 7.75 7.75 Horsens Prime 6.75 6.75 6.50 6.50 6.25 6.25 Secondary 9.50 9.50 9.50 9.50 9.25 9.00 Randers Prime 7.00 7.00 7.00 7.00 7.00 7.00 Secondary 9.50 9.50 9.50 9.50 9.50 9.50 Triangle Region(1) Prime 6.25 6.25 6.00 6.00 6.00 6.00 Secondary 9.50 9.50 9.50 9.25 9.00 8.75 Esbjerg Prime 7.00 7.00 6.75 6.75 6.75 6.75 Secondary 9.50 9.50 9.50 9.50 9.50 9.50 Aalborg Prime 7.00 7.00 7.00 6.75 6.75 6.75 Secondary 8.75 8.75 8.75 8.50 8.50 8.50 Northern Jutland Prime 7.75 7.75 7.75 7.50 7.50 7.50 Secondary 9.50 9.50 9.50 9.25 9.25 9.25 Odense Prime 6.75 6.75 6.75 6.75 6.50 6.50 Secondary 8.00 8.00 8.00 8.00 8.00 8.00 Funen Prime 7.00 7.00 7.00 7.00 7.00 6.75 Secondary 9.00 9.00 9.00 9.00 9.00 9.00 Vacancy rates % Copenhagen proper 0.20 0.20 0.30 0.30 0.30 0.10 Greater Copenhagen 3.40 3.50 4.10 3.40 3.40 2.90 Northern Zealand 3.30 2.80 2.40 2.50 3.50 2.00 Eastern Zealand 2.00 2.40 2.60 2.40 2.90 3.00 Western and Southern Zealand 1.80 1.60 1.70 1.70 1.90 1.80 Funen 2.70 1.90 1.90 1.90 1.80 1.80 Southern Jutland 2.30 2.40 2.40 2.10 2.00 2.20 Eastern Jutland 3.40 3.10 3.10 2.70 2.50 2.30 Western Jutland 2.60 2.30 2.30 2.20 1.80 1.90 Northern Jutland 1.70 1.80 1.70 1.60 1.30 1.30

*) Industrial includes production, storage and logistics facilities, but not built-to-suit or airside logistics facilities 1. Triangle Region refers to Vejle, Kolding and Fredericia. 9 RESIDENTIAL** Colliers International | Denmark Q4 2018 2017 2018 Rent levels Q3 Q4 Q1 Q2 Q3 Q4 Forecast

DKK/sqm/year excluding operating costs and taxes |

Copenhagen Prime 1,950 1,950 1,950 2,000 2,050 2,100 PROPERTY INDICATORS MARKET Secondary 1,700 1,750 1,750 1,700 1,700 1,700 Northern suburbs Prime 1,775 1,800 1,825 1,850 1,850 1,850 of Copenhagen Secondary 1,375 1,400 1,425 1,425 1,425 1,425 Southern and western Prime 1,500 1,500 1,500 1,500 1,500 1,500 suburbs of Copenhagen Secondary 1,200 1,250 1,250 1,300 1,300 1,300 Zealand Prime 1,500 1,500 1,500 1,500 1,500 1,500 Secondary 1,200 1,250 1,250 1,300 1,300 1,300 Aarhus Prime 1,650 1,650 1,650 1,650 1,650 1,650 Secondary 1,500 1,500 1,500 1,500 1,500 1,500 Horsens Prime 1,100 1,100 1,150 1,150 1,200 1,200

Secondary 775 775 825 825 850 850

Randers Prime 1,100 1,100 1,150 1,150 1,200 1,200 Secondary 775 775 825 825 850 850 Triangle Region(1) Prime 1,250 1,250 1,250 1,250 1,300 1,300 Secondary 1,000 1,000 1,000 1,000 1,050 1,050 Esbjerg Prime 1,100 1,100 1,100 1,100 1,100 1,100 Secondary 800 800 850 850 850 850 Aalborg Prime 1,350 1,350 1,350 1,350 1,350 1,250 Secondary 1,075 1,075 1,075 1,075 1,075 1,075 Northern Jutland Prime 1,250 1,250 1,250 1,250 1,250 1,250 Secondary 775 775 775 775 775 775 Odense Prime 1,400 1,400 1,500 1,500 1,550 1,450 Secondary 1,150 1,150 1,200 1,200 1,250 1,100 Funen Prime 1,100 1,100 1,100 1,100 1,100 1,100 Secondary 850 850 850 850 850 850 Net initial yields % Copenhagen Prime 3.75 3.75 3.75 3.75 3.75 3.50 Secondary 4.00 4.00 4.00 4.00 4.00 4.00 Northern suburbs Prime 3.75 3.75 3.75 3.75 3.75 3.75 of Copenhagen Secondary 4.25 4.25 4.25 4.25 4.25 4.25 Southern and western Prime 4.00 4.00 4.00 4.00 4.00 4.00 suburbs of Copenhagen Secondary 4.50 4.50 4.50 4.50 4.50 4.50 Zealand Prime 4.25 4.25 4.25 4.25 4.25 4.25 Secondary 4.75 4.75 4.75 4.75 4.75 4.75 Aarhus Prime 3.75 3.75 3.75 3.75 3.75 3.75 Secondary 4.25 4.25 4.25 4.25 4.25 4.25 Horsens Prime 4.75 4.75 4.75 4.75 4.75 4.75 Secondary 5.75 5.75 5.75 5.75 5.75 5.75 Randers Prime 4.75 4.75 4.75 4.75 4.75 4.75 Secondary 5.75 5.75 5.75 5.75 5.75 5.75 Triangle Region(1) Prime 4.75 4.75 4.75 4.75 4.75 4.75 Secondary 6.00 6.00 6.00 5.75 5.75 5.50 Esbjerg Prime 4.75 4.75 4.75 4.75 4.75 4.75 Secondary 6.00 6.00 6.00 5.75 5.75 5.75 Aalborg Prime 4.00 4.00 4.00 4.00 4.00 4.00 Secondary 4.50 4.50 4.50 4.50 4.50 4.50 Northern Jutland Prime 4.50 4.50 4.50 4.50 4.50 4.75 Secondary 6.75 6.75 6.75 6.75 6.75 6.75 Odense Prime 4.25 4.00 4.00 4.00 4.00 4.25 Secondary 4.75 4.75 4.75 4.75 4.50 4.75 Funen Prime 5.25 5.25 5.25 5.25 5.25 5.25 Secondary 6.50 6.50 6.50 6.50 6.50 6.50

**) Rent levels and net initial yields quoted for newly built residential units of 80-100 sqm, discounting ground-floor and penthouse units. Definitions: Copenhagen: City of Copenhagen and City of Frederiksberg. Northern suburbs of Copenhagen: Municipalities and cities north of Copenhagen in the Capital Region of Denmark, eg. Lyngby, Hillerød and Hørsholm, albeit excluding Hellerup, which is part of the Municipality of Gentofte but where data for Copenhagen are valid. Southern and western suburbs of Copenhagen: Municipalities and cities south and west of Copenhagen in the Capital Region of Denmark, eg. Hvidove, Glostrup, Herlev, Ballerup. Zealand: Large towns located on Zealand, eg. Slagelse, Ringsted, Næstved and Roskilde. Prime residential location: e.g. Langelinie and Havneholmen in Copenhagen; Lyngby and Rødovre in Copenhagen suburbs. Secondary residential location: e.g. Valby and Ørestad Syd in Copenhagen; Brøndby/Glostrup/Albertslund in Copenhagen suburbs. Note that residential vacancy rates are not included as units in residential properties subject to market rent are virtually fully let.

1. Triangle Region refers to Vejle, Kolding and Fredericia. Q4 2018 | MARKET UPDATE PULS 10 Colliers International | Denmark Colliers InternationalDenmark By Peter Winther,CEO, Partner, FACING EXTINCTION? IS TRADITIONALRETAILING in shopturnover. retailers andsectorssufferingaslump have beenstagnantatbest,withmany Meanwhile, salesintraditionalshops years. has grownby12-15%annuallyinrecent the tuneofDKK125billion,afigurethat projected tomakeonlinepurchases This year, Danishconsumersare increasing shareofconsumerspending. Online retailingaccountsforan irrespective offavourable trends inboth phenomenon. In the UnitedStates, This isby nomeansapurely Danish become redundant by 2030. stock ofsomeeleven sqmwill million sqm spaceoutofanoverall Danishretail up totwomillion estimates that ning) ICP Denmark (Institutefor Center Plan ther. Inaworst-case scenarioanalysis, rates are bound to increase even fur id rate in the years ahead, retail vacancy continues to accelerate at the samerap Provided that growth inonlineretailing prices. demand for retail spaceandrental Naturally, this trend hasimpactedboth rise Retailon the vacancies

- - - Q4 2018 | MARKET UPDATE PULS 11 Colliers International | Denmark - 18 - 18 17 17 Aarhus 16 16 15 15 Aalborg 14 14 13 13 one to rent a movie from e.g. Blockbust from a movie to rent one was hit. market theatre the movie er, predicted players market Indeed, some market. theatre the movie the death of a movie watch to to go out bother Why as just could you when theatre the at the same at home and watch well stay price? at a lower movie Block turned out otherwise. Today, It available are Movies is history. buster it has the Internet, and on streaming for in movies to watch easier even become do home – you own of one’s the comfort to a shop out venture to have not even out movies. that rents market theatre the movie Nevertheless, Up- before. is flourishing as never can provide theatres to-date movie Greater Copenhagen Greater - 12 12 - - Triangle Region Triangle 11 11 10 10 09 09 Copenhagen proper Odense 08 08

1 7 3 5 8 8 6 6 4 4 2 2 0

per cent per per cent per 12 10 complement its online platform. complement ago, when all households years Many set, and when television a had acquired every for possible became it suddenly view that growth in online retailing is in online retailing that growth view The retail unabated. to continue likely attentive increasingly is becoming sector tradi and online retailing that the fact to just alter than more tional shops are that but options and competitors, native potential and synergy offer actually they this context, In each other. complement that Amazon, a to note it is interesting the is in in online retailing, global leader to shops traditional up of setting process Traditional shops and online and online shops Traditional complementary shops are the to not subscribe do we However, - - -

Source: Ejendomstorvet.dk Source: in selected Danish locations. RETAIL VACANCY RATES RATES VACANCY RETAIL RISING ARE GENERALLY Movements in retail vacancies FIGURE 1: impair capital growth longer term. longer capital growth impair bearing on the long-term capital growth the long-term capital growth bearing on struc whereas property, of investment severely changes in demand may tural ties. Every investor knows that cyclical that cyclical knows investor ties. Every vacancy prices and rental fluctuations in phenomena with no transitory are rates Against this backdrop, it is hardly it is hardly this backdrop, Against think surprising that some investors proper in retail twice about investing for Chapter 11 bankruptcy. Chapter for vacancies are soaring. Most recently, soaring. Most recently, vacancies are one once chain Sears, department store has filed retailers, largest the world’s of consumer confidence and spending, the and spending, confidence consumer a substan is witnessing sector retail and retail of bankruptcies, tial number Q4 2018 | MARKET UPDATE PULS 12 Colliers International | Denmark menting eachother. competing againstbutindeedcomple ing and traditional shopsare notmerely traditional shops,and that onlineretail ers demandashopping experience in conceptsunderstandcustom that that platforms. Thewinners be will the retail notbeconfinedwill exclusively toonline However,retail the tradefutureof the Sears andToys’R’Us. States, asexemplified prominently by esteemed retail businesses in the United This hashappened to many highly vative behithard will by onlineretailing. The retail concepts that fail to beinno experience. purchase of the articleisjustpartof the shopping experience, and the actual They are looking to getanoverall are notjustlooking to buy anarticle. However,shoppingonline. thetourists could save alotof time andmoney by hagen to goshopping atStrøget, they metropolitanCopen When touristsvisit experiences. spend money onleisure activitiesand at home.Moreover, consumers like to when watching amovie on the screen gether different from theone they get cinemagoers withanexperience alto by onlineretailing. The retailconceptsthatfailtobeinnovative willbehithard ------residentials. building density, notleast in terms of plans are underway, aimingfor higher schemes. Inmany places,newlocal for investments inurbanrevitalisation that make any sense.Suchlocationscall shops are more or less the only shops locations, grocery andconvenience trade withspecialty goods.Inmany due to onlineretailing –lostalotof Copenhagen, have already –notonly located next to a train stationin Greater of major cities,including those typically Local shopping centres in the suburbs with stronger footfall. not merely survive, they prosper will an interesting shopping experience, will as the ability to beinnovative andcreate tion ofshopsandother activities, aswell strong catchment areas, abroad selec most attractive shopping centres with Well-functioning city centres and the effect on retail occupational demand. havebeing equal,will apositive spillover mographic trends other which,all things general are supported by favourable de mind that the markets oflarge citiesin this connection, itisworth bearingin some butby segments.In nomeansall causeariseinretailwill vacancies in There ishardly any doubt that the shift redundant retail space? with the do What to - - tentially seriously impactretail vacancy demographic developments may po online retailing andless than favourable Here, acocktail ofsustainedgrowth in urbancommunities.outskirts ofsmall shops, includingbigbox outlets,on the The biggest losers nodoubtbe will cally ifusedfor retail. facilities have beenable to fetch histori falls substantially below the rent such rentities todaycommanda thattypically bepainfulseeing will that logistics facil on inDenmark –although the process Longercatch term,thistrendmaywell bution facilities for onlinebusinesses. including “lastmilelogistics”, distri converted for storage andlogistics use, roads leadingintomajor citiesare being in attractive locationsalongarterial Abroad, multiplelarge-scale shopunits forcespreciselydo themto that. it seriously sofar. Onlineretailing now shops have nevertheless failed to take really notanewphenomenon,butmany to survive infuture retailing. Thisis a goodexperience bewell-equipped will innovative andprovide customers with of agoodlocationand that canbe understandimportance Shops that the extinction inretail isquiteimplausible. structural changes,butfurther mass All inall, the retail sector isfacing major retail properties for alternative uses. vious optionsofredeveloping redundant rates, assuchlocationsrarely offer ob

- - - - - Q4 2018 | MARKET UPDATE PULS 1313 Colliers International | Denmark - - -

tial rental properties are considered considered are properties tial rental to an exceptionally due assets low-risk therefore are risk. Investors vacancy low prices exorbitant even to pay prepared generated returns the stable income for housing co-operative these converted by societies. Investor demand is strong for old-stock for demand is strong Investor comprised properties rental residential con rent the rules of cost-regulated by type this the prices of As a result, trol. in recent has been surging of property has been one of trend This price years. the appetite to whet serving the factors housing societies for of co-operative the purpose of converting liquidation for into residen the societies’ properties have Such sales properties. tial rental business been quite a profitable typically the housing societies. for residen well-located Among investors,

many co-op members not only fetch a many co-op members not only fetch a from a sale, but also handsome profit stand to obtain favourable terms as future tenants. Is this a passing whim, or will more co-operative housing societies explore the possibilities of liquidation? An increasing number of co-operative An increasing number of co-operative housing societies are opting for liquidation for the purpose of divestment in the market for residential rental which continue to be in high properties, demand by investors. A new Colliers analysis reveals that individual co-op members stand to gain DKK 1.3 million on average in a sale. However,

By Peter Kaalund Højland Kaalund Peter By Associate, Senior Petersen, International Denmark Colliers SOCIETIES YIELDS HIGH PROFITS HIGH PROFITS YIELDS SOCIETIES SALE OF CO-OPERATIVE HOUSING HOUSING OF CO-OPERATIVE SALE Q4 2018 | MARKET UPDATE PULS 14 Colliers International | Denmark Source: Colliers International to property. Selling prices vary fromproperty co-operative housingsociety. for theliabilitiesofindividual residential spacelessdeductions selling price ofDKK23,000persqm estimated basedonanaverage Average equityperco-opunitis FOUNDATION SOCIETIES, BY YEAROF CO-OPERATIVE HOUSING PER UNITINCOPENHAGEN AVERAGE (DKK) EQUITY FIGURE 1: societies isprompted notonly by the liquidations ofco-operative housing The increasing number of voluntary societies liquidated? Why are co-operative housing DKK 1.3 onaverage. million could stand to free upequity ofsome in today’s market, eachco-op member fetch asresidential rental properties prices the properties are expected to co-operative housingsocietieswith the paring average liabilitiesof the analysed tax-exempt proceeds from asale.Com co-op members to achieve substantial property market make itpossible for that the prevailing dynamicsof the co-operative housingsocietiesindicates An analysisofabout30Copenhagen properties. involving liquidationofhousingsociety seen the highestnumber of transactions hardly surprising that Copenhagenhas situated inCopenhagen.Itis therefore in Denmark today, 56%ofwhichare are about203,000 housingsocieties AccordingDenmark, thereStatistics to

- proportionate taxation. ed, besubject the capitalgainswill to property inquestionhave been tenant co-op members. However, ifpartsof the tax-exempt capitalgainsfor the former co-operative housingsocietiesare propertiesselling formerly heldby In principle, the profits gainedfrom general housingmarket. lower than common rental pricesin the cost-regulated rent is typically much es for any improvements made.The owner (landlord) aswell asallowanc operating costs, arate ofreturn for the which isfixedon thebasisofproperty to pay rent basedoncost-regulated rent, bers (now future tenants) are therefore Regulation Act.Theformer co-op mem comprised by the rulesof the Housing verted intoaresidential rental property opts for voluntary liquidation,itiscon When aco-operative housingsociety titled to continue residence as tenants. Post-liquidation, co-op members are en prices. market have driven upobtainableselling fact that developments in the property 1,000,000 1,200,000 1,600,000 1,400,000 200,000 400,000 600,000 800,000 0 1,500,000 Pre -1900 - - - - - 1,400,000 demand isexpected to remain intact. of voluntary liquidation.And investor exploresocieties to possibilities the expect more co-operative housing many co-op members. We therefore favourable terms nodoubtappeals to to remain in their homeas tenants on possibility offormer co-op members of tax-exempt capitalgainsand the The above-mentioned combination calendar year. distribution must take placein the same exempt proceeds, liquidationandprofit ship period.Inorder to qualify for tax- place ofresidence during their owner the members havingused their flatas by the co-op members are subject to The tax-exempt capitalgainsobtained 1990 -2000 900,000 Post -2000

Q4 2018 | MARKET UPDATE PULS 15 Colliers International | Denmark

decline in transaction volume, asking decline in transaction volume, asking also whether or not the ECB’s decision to has cease its bond purchase programme had or is likely to have any major effect this is not the on this decline. Most likely, case, as the decline in liquidity seen in market this year seems to the property be caused by something quite different. Rate hikes not expected to have any short-term prices and transaction volume. effect on to have a stronger appetite for added to have a stronger appetite for added We have exposure to real property. looked into the causes of the observed In recent years, the property market has market has In recent years, the property and persistent hikes seen unprecedented and transaction volumes, in both prices but for the first time in 7 years, we foresee a decline in transaction volume. This may seem paradoxical inasmuch as investors in recent years have professed

Senior Associate, Associate, Senior International Denmark Colliers PROPERTY MARKET? PROPERTY Emil Helmsøe-Zinck, By DECLINING IN THE INVESTMENT IN THE INVESTMENT DECLINING WHY IS TRANSACTION VOLUME VOLUME IS TRANSACTION WHY Q4 2018 | MARKET UPDATE PULS 16 Colliers International | Denmark estate priceindices. impact of variable liquidity incommercial real Source: Fischer etal.,2003,Controlling for the for Q4. transaction volumeestimate volume Q1-Q32018plus 2018 basedonactualtransaction Transaction volumeforecastfor DENMARK, DKKBN TRANSACTION VOLUME, FIGURE 1: LIQUIDITY PRICINGMARKET AND FORIS ADETERMINANT PRICE EXPECTATIONS SIDE ANDSELL-SIDE MATCH BUY- BETWEEN FIGURE 2: 1) expectations on the buy sideand side,respectively,the sell affectmarket liquidity andpricingmechanisms. In this context, liquidity ismeasured in terms of transaction volume price expectations on the buy sideand side,etc.the sell terms ofsalescosts andlaydays), number ofbuyers in the market and their investment appetite, matching including transaction volume, amountofcapitalallocated to property investments, saleability (measured in Property market liquidity may bedefinedinseveral waysandisin fact madeupofamultitude factors, LIQUIDITYMARKET Source: Colliers InternationalDenmark This definitionmayalsodenotethecapitalinflowintomarket. An increaseinliquidityrepresents anincreaseincapitalinflowintothemarket.

100 20 40 60 80 50 90 30 70 10

Market players 0 market, thuslagging behindadjustmentson thebuyside. their price expectations basedonsalescomparablesseeninthe ofsellersgradually adjusting supports ourmarketobservations versa (declineintransaction volume andprice levels).Thisalso and price levels) thanonthesellsideinmarketupturns,andvice rise atarelativelysteeperpace (increaseintransactionvolume are procyclical, implyingthatprice expectationsonthebuyside changes. Thereisempiricalevidencethatmarketmovements arenotstatic;forinstance,theywillmovewithcyclical curves sumption thateverything,intheory, isforsaleataprice. Thetwo be viewedasthesizeofoverallmarket,basedon as Representing thenumberofplayersin market,they-axismay

Liquidity/transaction volume Sellers Buyers 08 09 10 1) , andwe examine how changesinprice P0 11 12 13 Reservation prices 14 15 16 17 - E18 Q4 2018 | MARKET UPDATE PULS 17 Colliers International | Denmark - - Recent years’ monetary policies monetary years’ Recent have served to foster substantial to foster served have with an placement requirements,

Although a decline in capital allocations Although liquid reduces theory in property to real trends market two witnessing are we ity, the short in the opposite that support terms of prime markets term, at least in and cities: towns major in and around 1. ply is funnelled away from the property the property from away is funnelled ply a decline of DKK suggests this market, allocations,268bn in capital equivalent property 10% of overall to just above volume. transaction in property Is a sharp drop imminent? liquidity market is no. Seen in The short answer that a stop do not expect isolation, we will programme purchase the ECB’s to in prop into a significant drop translate term. the short in liquidity market erty that investors believe we Nevertheless, secondary in more in particular active the alert and should be on markets affect especially this could that aware these markets. in liquidity - - - of property transactions in Europe in Europe transactions of property get you DKK 2,390bn), (approximately scale the former good idea of at pretty Supposing programme. the purchase of bond sup in the increase that just 5% of institutional investors seeking to allocate seeking institutional investors the expense to bonds at funds more instance for classes, asset of other properties. de ECB’s the effect of The spillover quantifiable across cision is not easily comparing but by and markets, borders of bond purchases volume the annual DKK 5,350bn) in 2017 (approximately volume aggregate the same year’s with markets by injecting vast amounts vast injecting by markets Generally the system. of capital into this capital has been invested speaking, classes, asset in securities and other boosting liquidity property, including real markets. the respective in the stop to the pro purchase Following expected is supply market bond gramme, in the increase However, to increase. up by to be snapped is believed supply complete stop at year-end 2018. Until stop at year-end complete to as much as EUR amounting last year the massive basis, monthly 60bn on a kickstarted financial have purchases This is a topic that we that we topic This is a interesting. In June this year, the ECB the ECB this year, In June interesting. of its bond a 50% reduction announced a by followed programme, purchase By comparison, we find the ECB’s ECB’s the find we comparison, By its concerning announcement recent much more programme bond purchase ECB ceases bond purchase ceases bond purchase ECB programme material impact on pricing mechanisms market. in today’s context. dealt with in another have hikes in the years ahead. However, we we ahead. However, the years in hikes by driven hikes that rate do not believe any se have and inflation will per growth tied to monetary measures implemented measures to monetary tied is consensus The general the ECB. by signs of rate will see budding that we is ever-increasing. As Denmark has As Denmark is ever-increasing. a involving rate policy adopted a fixed are rates peg, Danish interest DKK-EUR interest rate level determined by both determined by level rate interest the ECB Nationalbank and Danmarks volume the policies and on monetary The focus Rate hikes not expected to expected not hikes Rate short-term effect any have transaction and on prices Q4 2018 | MARKET UPDATE PULS 18 Colliers International | Denmark LIQUIDITYMARKET EXPECTATIONS INHIBIT HIGH SELL-SIDE PRICE FIGURE 3: in these markets hasprompted sub Stronger competition for properties match demand. supply hasbeenaltogether unable to idential property inparticular,where for prime(first-class) officeand res implicitly causeddemand to surge These placementrequirements have increased property market exposure. proclaiming to have anappetite for including domesticpensionfunds, increasing number ofinvestors, whether they infact will achieve a to anincreasing extent are doubting now reached apointwhere investors priceexpectationsSell-side have driven mainly by yieldcompression. stantial pricehikes inrecent years,

- - real property. suggested by indicatedallocations to is expected to fall shortof the level in the investment property market result,2018 transaction the volume given property investments. Asa are more prone to simply discarding faced withhighaskingprices, buyers This ties inwith the fact that, when buyside. increaseon the thanthose eral instancesseenasteeper rate of side priceexpectations have insev that exceeds the present level, sell- supporta transactionments volume Although capitalplacementrequire um on their property investments. satisfactory riskandilliquidity premi

Market players volume. is precisely ahigherprice levelandadeclineintransaction this effectisillustratedinthe abovefigure,wheretheoutcome price expectations atahigherratethanbuyers.Theoretically, currently suggestthatsellers havebeenprone toincreasetheir and knowledge contradicts theeffect.Ourmarket observations price increasesincombinationwithreduced liquidity, which market liquidity. However, recentlywehavewitnessed minor relatively slowerrate.Thiseffectdrivesup prices andincreases as buyers,implyingthattheirprice expectations riseata sellers makeadjustments,butoftennotonthesamescale and existingmarketcompetitionforassets.Insuchascenario, Normally, property prices aredrivenbyunderlyingdemand

Liquidity/transaction volume Sellers Buyers

- - - P0 2. P1 prevalent in the past18-24 months, This trend hasbeenparticularly risk-adjusted returns. ments and the pursuit of the highest massive capitalplacementrequire to secondary markets, motivatedby caused capitalallocations overto spill in primemarkets have increasingly term. bearing onliquidity levels in the short property would therefore have little erty investments. Weaker demandfor amount ofcapitalallocated to prop cally feasiblelevel given the current belowbelievedbe thetheoreti to The transactionis therefore volume High sell-side priceexpectationsHigh sell-side Reservation prices

- - - Q4 2018 | MARKET UPDATE PULS 19 Colliers International | Denmark - - -

tors to monitor movements in market in market movements to monitor tors to get an understanding too and liquidity a to give serve this may as of its drivers balance and indication of market fairer under come not pricing may or whether pressure. seen as unrealistic based on risk-ad seen as unrealistic This has considerations. justed return the past 12 in levels inhibited liquidity months. weak how to understand It is important the investment affect could liquidity er a risk often this represents as market because of market today’s in overlooked rate the effect of on focus the prevailing that assessment on our Based hikes. low relatively will remain rates interest advise inves we time yet, some for - - - expectations in many instances may be instances may in many expectations ing year. Theoretically speaking, and Theoretically ing year. observations, a based on past market a herald may volume transaction in drop in prices – often with some downtrend to 24 instance a lag of 12 for delay, not have we however, months. So far, down of prices actually signs seen any stagnation to a decline or due trending volume. that This suggests in transaction is the market the amount of capital in determinant of liquidity. the current not that sell-side price argue Instead, we Unrealistic price expectations price expectations Unrealistic not lack of inhibit liquidity, capital seen a this year have As mentioned, we rela volume transaction slight decline in which was a record-break to 2017, tive - -

- -

not lack of capital. Unrealistic price expectations inhibit liquidity, inhibit liquidity, expectations Unrealistic price ment target. As a result, they are also are they As a result, target. ment the sec removing to start by expected short list. their from markets ondary that often investors in these markets these markets in that often investors their from shifted focus already have capabilities and original invest core ed by reduced capital placement reduced ed by the fact to This is due requirements. effect in secondary markets, these markets, effect in secondary a to be hit by expected are markets prompt shortfall liquidity possible obtain the required returns. the required obtain the spillover because of Similarly, Investors have turned out to be more to be more turned out have Investors having now than before, risk-tolerant to the risk curve out further moved tion volume in the secondary markets markets the secondary in volume tion property. retail e.g. office and for when we have seen a higher transac seen a higher have when we CONTACT COPENHAGEN Gammel Kongevej 11 RESEARCH EDITOR 1610 København V Peter Winther, CEO, Partner Lisbeth Kempel, CMO Mobile +45 28 19 66 76 Mobile +45 21 72 83 67 COPENHAGEN [email protected] [email protected] Palægade 2–4 1261 København K Peter Kaalund Højland Petersen Senior Associate AARHUS Mobile +45 61 71 14 10 Søren Frichs Vej 38 A [email protected] 8230 Åbyhøj

ODENSE Emil Helmsøe-Zinck Tagtækkervej 8 Senior Associate 5230 Odense M Mobile +45 30 23 96 41 [email protected] AALBORG Østre Havnegade 20 9000 Aalborg

VEJLE Den Hvide Facet 1 7100 Vejle

www.colliers.dk MARKET UPDATE PULS is produced by Colliers International. The information in this document is regarded as coming from reputable Tlf. 70 23 00 20 sources. Even though everything has been done to ensure its accuracy, this cannot be guaranteed. We are not liable for any inaccuracies. The reader is encouraged to consult with professionals before acting on the basis of the material in this report. You may quote MARKET UPDATE PULS by providing a full source of reference. Colliers International is by far the largest and most experienced commercial and investment property adviser in Denmark. In addition to property sales, commercial leasing, tenant representation and valuations, our services include market research and advisory services in respect of urban revitalisation and site development, property-related investment strategies, etc. Our team of Capital Markets specialists is market leading in the field of property consulting and advisory services regarding major investment properties, portfolios and property companies. Overall, we help facilitate property transactions worth close to DKK 25 billion annually. We offer national market coverage with some 150 professionals working from offices in Copenhagen, Aarhus, Aalborg, Odense and Vejle. We are part of Colliers International Group, the fastest-growing publicly listed real estate services company in the world, with 2017 consolidated revenues of USD 2.7 billion.