Market is reactive to changing demand
Supply in Copenhagen is characterized by a large proportion of efficient buildings thanks to the level of new developments. Meanwhile the share of older and less efficient buildings is reducing as many empty obsolete buildings are refurbished to be converted to housing. An emerging type of demand comes from small businesses and is heading towards modern office spaces located in well-established areas with infrastructure. As a consequence landlords are responding to the new demand by extensively renovating their properties to convert them to multi-user buildings.
From 2012 to 2014, the vacancy rate remained over 9% and after a drop in 2015, it stabilised just below 8%. Vacancy was at 7.2% at the end of 2016.
In 2016 demand for office premises was buoyant in central Copenhagen. It is not unusual to see several companies targeting the same property. These situations led to an upward pressure on rents. Prime rent at the end of 2016 stood at DKK1,900/m²/year (€255/m²/year).
Office investment is back to pre-crisis levels
The office investment in Copenhagen doubled in 2016 exceeding €1 bn transacted. The market is back to pre-crisis levels.
The high level of demand for property acquisition resulted in a downward pressure on the yields. Indeed the prime office yield lost 50 bp since 2015 to reach 4.25% at the end of 2016.