Copenhagen offices tipped to out-perform

Copenhagen's office market is set to become a star performer in terms of risk-adjusted total returns over the next five years.

Such a bounce-back would help put Copenhagen back on the wish list of both Nordic and cross-border office investors, Neil Blake, head of UK & EMEA research at CBRE told PropertyEU's latest Nordic Investment Briefing.

The event was hosted by CBRE in London on 27 March.

The Danish city’s office market has been hit by the sluggish growth of the eurozone in recent years, Blake said.

Copenhagen and Oslo, according to CBRE figures, were ranked eighth and ninth in terms of the top 10 European cities for property investment in 2012. Both cities captured 2% of total investment. Stockholm was in fourth place at 3.5%, trailing London (21%), Paris (10%) and Berlin (4%).

But forecast gross total returns in euros and risk-adjusted returns for the next five years point to a strong bounce-back for Copenhagen, an increase for Helsinki, and declines for Stockholm and Oslo.

Blake said Copenhagen experienced 6% negative growth in office-based employment between 2009-12. By contrast, employment in the main office-based sectors (financial, business services and public administration) grew by 4.5% in the Norwegian capital Oslo and by about 4% in Helsinki, Finland. The Swedish capital Stockholm saw slower growth of about 2.5%.

In his presentation (see link) Blake noted that Copenhagen's performance was not only the lowest in the Nordics but the contraction was bigger than that for the peripheral PIIGS eurozone counties - Portugal, Italy, Ireland, Greece and Spain (less than -4%).

Not surprisingly, prime office rents in Copenhagen have lagged behind the rest of the Nordics. Norway's capital Oslo is set to be the strongest performer between 2012 and 2014.

Blake said the forecast rebound for the Danish capital was dependent on the eurozone crisis not raising its 'ugly head' again. Another proviso was that surveys of business confidence and sentiment prove to be accurate in terms of improving GDP growth in Denmark and the eurozone over the next two to three years.

See the link below to Neil Blake's presentation.