In the first half of 2019, the transaction volume in the Danish market for commercial and investment properties was approximately DKK 19bn. By comparison, the volume was DKK 30bn during the same period last year.
A recent study shows that the Danish pension funds plan to increase their exposure towards investment properties by more than DKK 60bn. There is also registered a high demand from international investors. Nonetheless, the transaction volume has decreased by 40% compared to 2018 – a development that is registered in most European markets.
“There were different indicators that the volume would decrease, so we are not surprised. The slowdown has particularly been registered within the residential segment, as investors are worried about the high level of new build and hence, are a bit more reluctant to invest in projects. The uncertainty about a potential tightening of section 5, subsection 2 of the Danish Housing Regulation Act has also had a negative impact on the transaction volume, as several larger transactions have been put on hold.
Another explanation is that we have not seen as many major portfolio transactions this year, and these transactions can really make a difference. That said, we still look at the rest of the year with some optimism, even though we are convinced that we will not reach the same transaction volume as in recent years,” says Peter Winther, CEO Colliers International Denmark, and elaborates:
“With an interest rate level that is still very low, both Danish and international pension funds will continue to demand investment properties. The market is, however, challenged, as investors demand safe and low risk investments, and the supply of high-quality investment properties is limited”.
Peter Winther predicts that the net initial yield on core (absolute prime) properties will decline, and that investors will become even more selective in their search for quality. There are investors, who are looking for more risky investments, but lately the willingness to take risks has been decreasing among investors and in the financial sector alike.
Colliers is observing that foreign buyers are still looking towards Denmark. In the first half of 2019, they accounted for well over 40% of the total volume of transactions over DKK 100m.
“The German pension funds have been very active for several years. We do, however, see more and more investors from the Far East, primarily Korea and Japan. They see Denmark as a ‘safe-haven’ with an attractive yield in proportion to the interest rate level, and I estimate that we will see this particular group of buyers much more often in the future. They demand large single investments within housing, office and logistics”, ends Peter Winther.
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Photo, PR foto Colliers