High inflation and general economic uncertainty also leave their mark on the real estate business’s expectations for the future. The total return must cover inflation, financing costs, and property investment risk. The expectations for the total return for 2022 now fall to 4.5 per cent, which is the lowest level expected for 2022 in three years. This is shown by a new estimate from EjendomDanmark.
Halving of returns
Compared to the same time last year, the total return is expected to almost halve – this means that it could be up to DKK 45 billion this year, EjendomDanmark writes in a press release.
– The high inflation does not seem to disappear anytime soon. Therefore, the real estate players have once again had to lower their expectations. I fear that we are in a downward spiral, where the effects can be significant, says Peter Stenholm, CEO of EjendomDanmark.
Real crisis in 2023
He is concerned about whether what was previously described as a crisis of expectations could become a real crisis for the real estate industry as we look into 2023.
– A higher interest rate means a higher return requirement. When that happens, property values drop. We now clearly see that this is where the industry is less optimistic about the future, says Peter Stenholm.
Hard times for offices
There is an expectation of a fall in property values for offices, shops, industry and housing. Confidence in property values for offices is the lowest measured in 11 years.
– If there is an economic crisis with decreasing employment, it will also mean lower earnings on office properties, which in turn will cause property values to fall, says Peter Stenholm.
No crisis on Lolland-Falster
However, the Fehmarn construction site in Rødbyhavn makes Lolland-Falster an exception concerning a potential crisis in the real estate market. Here, there is an unusually long distance between the available office leases. And you also have to look for a long time for available rental properties.
Martin Skibsted from Skibsted Properties rents out both residential and commercial properties in Lolland-Falster. He shuts down any talk of a potential crisis on the southern Danish islands:
A lot happening
– A lot is happening on Lolland-Falster. There is a housing shortage, and the hotels are also fully occupied for the next three years. We have 44,000 floor meters at the Sakskøbing sugar factory, and everything is rented out, says Martin Skibsted.
Everything rented for the next three years
He unsurprisingly points to the Femernbyggeriet as the reason why it is difficult to find available square meters nearby. In July, Skibsted Properties sold the Hotel Factory Lodge in Holeby on Lolland to the Norwegian hotel group CIC Hospitality. At the time of the handover, all 60 rooms were rented out to employees at the Femern construction site for the next three years.
