Economy. Denmark Market Report Q Slow growth. Annual real GDP growth

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1 Denmark Market Report Q1 15 Economy Slow growth The Danish economy is experiencing an upturn, but growth is low. Statistics Denmark has not yet published the GDP growth rate for the whole of 1, but the annual growth rate for the first quarters of 1 was.9 %, and the total annual growth rate is also only expected to be close to 1 %. When talking economy at the present time, it is hard to avoid the sharp decline in oil prices in the autumn of 1. The decline in the oil prices stimulates the Danish economy through private consumption, which is increased due to higher disposable income of consumers, and through exports to consumers in other countries. Our exports are expected to increase, although our oil export income declines. The job market follows the growth of GDP in the sense that there is a slow recovery. The number of employees has grown since the spring of 13, so that there are now approx., employees more than in 13. In the same period, the unemployment rate fell from approx. 5. % to 5. % (full-time employees (seasonally adjusted)). Each month Dansk Jobindex publishes the number of new job advertisements posted on the Internet. The figure is an indicator of the future development in the job market. In November 1, 19, new job advertisements were posted on the Internet, which, despite small dips in the number, among others, in the early summer of 1, is significantly higher than in December 9 (1,5), when the bottom was reached. The figure is still much lower than in when the job market peaked with over 3, advertisements a month. In the owner-occupied housing market, prices are increasing in the Danish capital,, and the other large cities, while the prices are only increasing slightly nationwide. However, there are signs of progress in all parts of Denmark, as the number of house sales is rising everywhere, which gives reason for cautious optimism even outside the large cities. Interest rates continue to fall both in the Eurozone and in Denmark, where the ECB and the Danish central bank, respectively, are keen to ensure that deflation does not take a hold in Europe, and they seek to boost growth. There are no signs that interest rates will rise in the short term. Annual real GDP growth You may quote from this report provided the source is acknowledged. Decisions in relation to real estate should always be assessed thoroughly, and all parties should thus examine the market in detail. Notwithstanding that we have examined and reviewed the information in the report with great care, Colliers International Danmark disclaims any responsibility for losses based on information in this report Exchange rates (December 1) DKK per 1 units of foreign currency -5.1 EUR > 7 USD > 7 GBP > 9 SEK > NOK > and Danmarks Nationalbank Note: 1, 15 and 1 are based on estimates.

2 Investment Strong demand for prime properties The supply of capital from Danish and international investors is currently very large in the Danish real estate market, among others, due to the low interest rates. The demand is concentrated mainly on properties in prime locations, where the scarce factor is much more properties than capital at the moment for example in Strøget in the centre of there are many interested parties, when the properties are introduced to the market, why the prices are forced up. Also in the office and industrial segments, it is the lack of supply of prime properties that keeps the transaction volume low. The demand for residential rental properties, especially in the large cities, is still very strong. The demand comes from a broad base of investors, including property companies, private investors, foreign investors and institutional investors, but the latter two groups are primarily interested in large assets. Residential properties in the large cities are very popular, inter alia, because they are considered to be a fairly safe investment due to the population growth and the very limited risk of vacancy as a result of this growth. Furthermore, it is a segment, where financing is reasonably available. Properties in secondary locations are still lagging behind, but transactions are taking place. With continued economic growth, the high demand for properties in prime locations in the centre will probably extend to other locations, the first signs of which we are already seeing today. The sources of funding are no longer so reluctant when it comes to properties in prime locations, but are more cautious when it comes to properties in secondary locations. The total transaction sum seems to end close to the transaction sum in 13 or perhaps slightly higher. In addition to the number in the graph, there are also company transactions. Transactions DKK bn and Colliers Note: Transactions include office, industrial, logistics and retail properties as well as residential properties, but only residential properties with more than four apartments. Interest rate % month money market interest rate Bond rate 1-year government bond Denmark Market Report Q1 15 Investment Colliers International Danmark

3 Office Significant decline in the office vacancy rate The latest figures from Oline-ED Statistics show a significant decline in the office vacancy rate. The nationwide vacancy rate has declined by almost 1 percentage point since the previous quarter from 9. % to.9 %. In one year, the nationwide vacancy rate has declined by 1.3 percentage points. The vacancy rate has also declined in city. In one year, the vacancy rate has declined almost 3 percentage points from 1.1 % to 7. % vacant premises. Office vacancy rate, January There are several reasons for the decline in the vacancy rate. First, building and construction have been limited in recent years. This is true in general, but in particular speculative building has been very limited. Second, the job market continues to improve. Third, the activity of converting commercial properties to residential use is high due to the high demand for residential properties, especially in the large cities. TOTAL OFFICE VACANCY RATE (%) 1 1 city centre is characterised by many premises of limited size in the old building stock. The tenants include, for example, entrepreneurial businesses and tenants from, for example, the legal profession. There are a number of large, vacant offices at a relatively low rent in suburbs of. Although lettings are slowly gaining momentum in these areas, it is still relatively sluggish. The possibility of building new offices in the harbour areas will increase the supply of modern offices close to the city centre. In, new offices are also being developed in the harbour area. In the northern part of the city, the level of development activity is high, but slightly decreasing. The demand is driven, among others, by the construction of the new super hospital. In the southern suburbs, the vacancy rates are still relatively high and the possibility of letting space at a relatively low cost is good. In the past six months, the demand has increased. Employment,95,5,75,5 København 95 1, 1,3 1,1 1, Market rent for office space, January 15 1, Office yield, January 15 5.% 5.5%.% 5.5%, Trekantområdet.%.% Note: Modern and old properties in prime locations 3 Denmark Market Report Q1 15 Office Colliers International Danmark

4 Retail Increase in retail sales gives optimism The retail vacancy rate is stable. As at 1 January 15, the retail vacancy rate was.3 % nationally. For most parts of the country, the changes are also only marginal. However, the vacancy rate has fallen by percentage points in the eastern part of Jutland according to the statement from Oline-ED Statistics. The stable vacancy rate reflects the status quo of the Danish retail industry. Although retail sales have increased for the first time since (calculated for a full year), it is a limited increase of 1.1 % from 13. However, the increase still gives optimism in the retail trade after many years of first falling and then fairly constant sales. Retail vacancy rate, January A recent report from the Danish Chamber of Commerce shows that Danes made e-commerce transactions of DKK bn in 1, which corresponds to an increase of 1 % compared to 13. These figures also include travels, concerts, topping up of travel cards, etc. TOTAL RETAIL VACANCY RATE (%) 1 1 Consumer confidence also gives rise to optimism. In January 15, it was 9., which is a slight increase compared to the average of. of the last six months. The level is now significantly higher than in the years from to 13. The vacancy rates are very low in the prime locations in, for example, and and in the other successful commercial cities. The strong retail chains fight for the best locations, while many entrepreneurs want the slightly less expensive premises. Cafés and restaurants take up an increasing part of the space in the streets, among others, in line with the e-commerce moving some of the general sales away from the physical premises Market rent for retail space, January 15 The vacancy rates are higher in secondary locations, which include not so good locations in otherwise successful commercial cities as well as weak commercial cities. Again, e-commerce is an influential factor, but also the centralisation of the population is of importance as well as our increased mobility. 5,5,,5, 3,3 3,1 Consumer confidence Retail yield, January København Trekantområdet.5%.5% 5.5% 5.5% 5.5% 5.5% Note: Retail properties, for example, in pedestrian zones with premises suitable for durable consumer goods in prime locations Denmark Market Report Q1 15 Retail Colliers International Danmark

5 Industrial and logistics High user demand According to Oline-ED Statistics, the industrial and logistics vacancy rate is 3.5 % for the whole of Denmark. This has not changed since the last quarter, but has fallen half a percentage point since January 1. The low economic activity in recent years has implied that the prices of old production properties are quite low even very low in some areas. This fact combined with the fact that it seems to be easier to obtain financing for the purchase of user properties has resulted in increasing turnover in the segment. This applies to both small towns in the provinces and in the western region of. However, this does not change the fact that there are still production facilities in many areas which it is hard to imagine will be used for their purposes within the next years, among others, due to the fact that they are run-down. Some of these properties can be converted to other uses this applies especially if they are located close to the city. The supply of commercial land is very high in many municipalities, which also opens up for the possibility of building new facilities. Due to the continued relatively low construction activity, the construction costs are low, and consequently construction and building are often economically viable, also due to subsequent lower operating costs both because of energy savings and because the buildings have been customised for the purpose. The market rent is low in many places, but apparently no longer under pressure. According to Oline Statistics, the average asking rent for warehouse and production properties is approx. DKK per m exclusive of operating costs. The level was somewhat higher in -1, but it appears to have stabilised at this level. Industrial and logistics vacancy rate, January TOTAL INDUSTRIAL AND LOGISTICS VACANCY RATE (%) Market rent for industrial and logistics space, January Manufacturers' sales Industrial and logistics yield, January % 1 7.5%.% % % 7.75% Note: Modern properties in prime locations 5 Denmark Market Report Q1 15 Industrial and logistics Colliers International Danmark