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Today the Danish long-term interest rate level is very low. As a result, the yield spread, that is, the gap between the net initial yield on prime office properties and the yield on 10-year Danish government bonds, has now reached a five-year high.
These developments have whetted investors’ appetite for up-to-date and well-located investment properties with secure cash flows. In addition, investment demand is fuelled by the prospects of positive trends in economic activity and employment, which will serve to stabilise the letting market longer term.
Nevertheless, transaction activity remains sluggish, in particular due to the limited supply of properties meeting institutional investors’ requirements in terms of security and returns.
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We believe, however, that transaction volumes will pick up considerably in the months ahead, primarily because an increasing number of prospective sellers will come to realise that they cannot expect any significant capital gains in the coming years, which will be characterised by relatively weak GDP growth and a financial sector averse to engaging in aggressive property financing.
In our NewsLetter June 2010 we also describe the latest trends in the commercial property market, including tenant demand in the office letting market.
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Get more information at www.sadolin-albaek.dk
