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Denmark MarketBeat

Anne Sofie Christensen • 7/25/2022
Cushman & Wakefield MarketBeat reports analyse quarterly Denmark commercial property activity across office sector including supply, demand and pricing trends across the occupational and investment markets.

Office Market Denmark Q2 2022

In the current market, office tenants have realised that the hybrid is here to stay with a high level of activity expected to continue despite growing economic uncertainties. We do not expect tenants' relocation decisions will be driven by a desire to optimize or minimize the number of square meters, but rather by the right solution with the right interior and location. We continue to see an increasing focus on both location, flexibility and sustainability from the tenants. This will drive an increasing spread between prime and secondary rents where well located, modern and sustainable premises generate premium from stronger demand.

Download the Q2 2022 report.

Office Space Copenhagen

As expected, the office vacancy rate in Copenhagen increased by 0.5% point from Q1 to Q2 2021. 

The increase is primarily caused by the fact that many older properties have become vacant as many larger tenants have moved to newly developed offices in central Copenhagen. In the coming months, we expect this trend to continue.  

As a result, the office vacancy rate in Copenhagen is expected to increase further.  

Driven by COVID-19 and uncertainties regarding the future and new ways of working, we continue to see an increasing focus on flexibility from the tenants in the form of relatively short non-termination periods, break options before the end of the non-termination period, right to sub-let, and right to assign. 

Office Investment Denmark

The figures for Q2 2021 show that the transaction volume in the office sector reached DKK 3.4 bn, corresponding to a 30% decrease compared to Q1 2021.  

Despite this decrease investors' demand for prime office properties continues to be high, which is why we continue to witness record low yield levels.  

The decrease is not a due to decreasing demand but to a limited supply of prime office properties in Copenhagen.  

Another consequence of the limited supply is that the office sector was dominated by Danish investors who accounted for 76% of the transaction volume in the office segment in Q2 2021. 

Office Space Outlook Denmark

We are continuing to experience strong demand for office leases in central Copenhagen.   However, as vacancy rates are expected to increase in the coming months, there will be increased competition for the tenants, which is why we expect unchanged rent levels in the short term.  

For the next 5-10 years however, we expect significant increases in the office rent levels due to limited opportunities for new construction.  

Due to the increasing vacancy rate in the CBD and the expected adoption of mark-to-market taxation, the prime yield is expected to remain unchanged at around 3.25-3.50% for the rest of 2021.  

For the long term we expect that a strong occupier demand, limited opportunities for new construction, the fact that large sums of capital are currently accumulated, and a strong investor demand will result in decreases to the yield level. 

Current Marketbeats

Europa office building, Brussels
DENMARK Q1 2022 OFFICE DATA

The first quarter of 2022 has in general been characterized by a lower investment activity than Q1 of both 2020 and 2021 in all segments expect for the residential segment.

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Europa office building, Brussels
Denmark Q4 2021 office data

The last quarter of 2021 once again showed a significant investor interest and 2021 ended with the all-time highest transaction volume in the Danish real estate market with a total volume of DKK 120 bn.

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Europa office building, Brussels
Denmark Q2 2021 office data

There is still high demand for office space in central Copenhagen. However, as vacancy rates are expected to increase in the coming months, there will be increased competition for tenants, so we expect unchanged rent levels in the short term.

Download

Europa office building, Brussels
Denmark Q3 2020 office data

According to the preliminary figures, Danish CRE has experienced an overall increase in the transaction volume during the last quarter – the transaction volume has gone up from DKK 6,59 bn in Q2 to est. 8.56 bn in Q3 2020.

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