Key takeaways

  1. The slowdown in commercial real estate investment activity that began in the second half of 2022 will continue in the first half of 2023. Investment activity 
    will likely decrease in the first quarter and then gradually improve. 
  2. Financing may be difficult to obtain as the cost of capital increases and lender appetite diminishes amid volatility in financial markets. CBRE expects lenders will become more active as the macroeconomic environment improves and interest rates stabilise. 
  3. Due to their relatively strong fundamentals and positive long-term demand outlook, multifamily and industrial properties are expected to remain the most favoured by investors. 
  4. Core and core plus strategies will remain sought-after among investors. However, interest in opportunistic acquisitions could surprise on the upside. 
  5. Copenhagen scored high in terms of city-level performance expectations in our 2023 European Investor Intention Survey, landing as number eight in the top 
    ten preferred European cities. 

2023 will see the new equilibrium being settled on among buyers and sellers 

Danish commercial real estate activity witnessed a setback in 2022, in line with the cost of capital increasing and lender appetite diminishing amid volatility in financial markets. Nevertheless, the 2022 full-year investment volume reached DKK 86bn, which is the third-best year on record. 

Capital availability will continue to be challenging, with lenders becoming more active as the macroeconomic environment improves and interest rates stabilise. Increasing borrowing costs will be highly relevant for re-financing the existing loans in light of the decline of collateral values and lower L TVs. 

As financing costs went up, yield widening started in 02 2022 across all sectors. Repricing of assets is a key issue in the current investment market, presenting both a challenge and an opportunity for investors. Discounts are expected across sectors, though probably most pronounced in some subsectors of retail and value­add office assets. 

Total investment volume in 2023 is projected to be below 2022. However, the second year half could surprise on the upside. Core and core plus strategies will remain popular among investors, supported by strong occupier fundamentals. On the other hand, opportunistic and value-add assets will offer the possibility to capitalise on pricing discounts. 
CBRE's European Investor Intentions Survey 2023 has shown that distressed properties remain sought-after across Europe. However, the availability of this type of investment product is expected to be limited in Denmark. 

Figure3

Different investment strategies will come to the fore in the Danish market 

High interest rates are impacting value 

The gap between the prime office yield and the 10-year government bond was closing really quickly in 2022. From an institutional investors' point of view, this meant that the additional return that could be secured if investing in real estate shrank quite rapidly. When the year-end valuations started to come in, the repricing became visible. With this in mind, the pace of change and the level of impact on property owners is very high. 

Since bottoming out in late 2021 and early 2022, prime yields are up by 50-100 bps across all property types, translating to a decline in values through 2022. Further expansion of prime yields, though limited, could be expected in 2023. 

Opportunities arise from market adjustments 

Danish investment assets are still viewed very favourably in a European context, underpinned by a robust economic outlook. 

Industrial/logistics and residential assets will likely continue to capture the most investor interest, given the tailwinds of e­commerce and demographic shifts. On the other hand, offices will continue to be sought-after, with investors being more strategic in selecting opportunities. Supermarkets and grocery-lead retail are also expected to stay in demand. 

Figure4