DENMARK - Denmark, one of the few real estate markets to sustain positive total returns throughout the financial crisis, outperformed expectations once again last year, according to Investment Property Databank (IPD).
The IPD Danish Property index showed that total returns were 5.3% in 2010, higher than last year's 3.8% return and boosted by a return to capital appreciation.
Last year saw the end of a two-year decline of 3.5% in capital values, with a 30 basis point positive capital growth in 2010, while rental growth rose by 60bps.
At the IPD Denmark Annual Launch, held at Nordea Bank in Copenhagen last week, Torben Christensen, director of Property Federation Denmark, said the positive returns were stronger than he had hoped.
"It's a more positive result than the industry had dared hope for," he said. "Our latest expectations survey of industry investors showed an expected return in 2010 of 4.6%."
The office sector faired best, returning 6.2%, followed by industrial at 4.9% and retail at 4.4%. Residential was the weakest performing sector, delivering 2.5%.
Residential is the only property sector in Denmark that has suffered negative returns in recent years, but 2010 saw a return to positive territory.
Torben Damgaard, country manager for Denmark at IPD, said: "It was the office sector in particular that has bounced back after the crisis.
"We have to go as far back as 2000 to find a year when offices were the top-performing sector, which puts the sector's recovery into sharp focus."
Relative to other asset classes, property still underperformed in 2010. Danish equity markets rallied last year, returning 25.2%, while bonds delivered 12.3%.
However, over the longer term, real estate fared better, delivering 7.7% over five years and 9.1% over a 10-year annualised basis.
The IPD Denmark Annual Property index measures 1,004 properties worth DDK104.3bn (€14bn) and comprises 59.6% offices, 24.6% retail, 11.9% residential and 1.8% industrial, with the balance in miscellaneous assets.