Danish retail market is strong

Lagt online 16.05.08

Leasing activity is keeping high and unlikely to slow in the medium-term in the Danish retail market. Fashion and textile retailers in particular are creating more demand for quality space, as proved in strong clothing sales despite the overall decrease in consumer demand. Following the rise in prime rents Q3, prime high street rents remained stabile in last quarter. There was one exception of minor rent decline in Copenhagen, however not in the prime location. Shopping centre as well as retail warehouse prime rents remained stable in the forth quarter albeit an increase is likely to be seen in 2008, according to a report from Cushman & Wakefield - represented in Denmark by RED Property Advisers.

The high street market is characterized by tight supply, Planning restrictions continue to limit the level of retail stock, meaning high-quality, available stock is scarce. Three new shopping centres opened in 2007, bringing around 34,100 sq.m of shopping centre space to the market.

Denmark’s investment market activity is very high. In 2007, Denmark was one of Europe’s property investment hotspots, achieving another record level of investment volumes. The investment volume reached € 3.3 billion, up by 44% on 2006. Retail recorded significant growth in its share of total investment. Although Danish market is dominated by local players, foreign investment is increasing and the liquidity of the market is gradually improving.

Nevertheless, high street yields in Denmark are showing a softening tendency, noted particularly in the final quarter when the yields moved out across majority of locations. Meanwhile, shopping centre and retail warehouse yields followed suit in Q4. Outward yield shift was however expected due to the rising interest rate environment and global economy slowdown. Furthermore, such record low yield levels were difficult to maintain in the long run. Yield softening will create however better buying opportunities.

The outlook for Danish retail property remains positive, however, a certain degree of stabilization can be expected in 2008. Yields in some locations might soften slightly further, re-emphasizing the importance of property asset management opportunities. Nevertheless, the occupational markets will remain strong, with vacancy rates low. Overall activity may be affected by the higher cost of capital, but steady, moderate rental growth should help performance, points Cushman & Wakefield out.

Read more: www.red.dk or www.cushmanwakefield.com