Article

1. Demystifying Denmark
Published: 07 December 2015
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The Nordic countries have earned a reputation as an attractive target for real estate investment. But while
Sweden dominates, Denmark should not be overlooked, says Jacob Kjær, head of Denmark at Leimdörfer,
part of Brunswick Real Estate.
The investment characteristics surrounding the Nordics are attractive on many levels when it comes to real
estate. However, many international investors’ knowledge of the Nordics is limited to Sweden, and often
principally Stockholm. While Sweden undeniably attracts a significant amount of investment attention, the
remaining Nordic countries should not be ignored. Denmark in particular provides growing investment
opportunities for those that know the difference between Aarhus and Aalborg and is a country quickly
emerging from the shadow of its popular neighbor.
Other advantages include the transparent, stable and high quality institutional environment within Denmark,
which makes the country a highly regarded place in which to do business. This reduces uncertainty, indirect
transaction costs and barriers to entry.
Crucially, direct transaction costs are lower in Denmark compared with many other jurisdictions in Europe.
For example, both stamp duty and the capital gains tax can under certain circumstances be avoided or at
least postponed by making share deals instead of asset deals.
Liquidity is certainly a major advantage with Denmark, offering investors great opportunities to realize their
assets. In this respect, it is on a par with markets like the UK and ahead of larger economies like France and
Germany. A recent study we undertook showed that on a 10-year basis, Denmark was the fourth most liquid
market in Europe with an average annual turnover of stock of 4.6 percent. This compares to the UK (5.8
percent), Germany (2.1 percent) and France (1.9 percent).
Liquidity also breeds liquidity, so with high transaction volumes sustained over a long period, this instills
confidence that investors can exit at a favorable moment, which is particularly important for international
funds and companies developing strategies in foreign regions.

2. Earlier this year, Denmark’s Novo, which is responsible for managing Novo Nordisk Foundation’s equity,
and TryghedsGruppen, the primary shareholder in the insurance company Tryg and the entity behind the
Tryg Foundation, acquired 49.2 percent in Danish property company DADES with a gross asset value of
DKK 16.9 billion (€2.65 billion; $2.82 billion).
This was the largest real estate transaction ever in Denmark and a significant deal for the domestic market
as it was an example of non-traditional investors looking at property as a sound asset class opportunity.
Any real estate investor with an interest in the Nordics and Denmark in particular should take note. This
trend is set to continue and more capital is expected to be deployed as a low-interest environment makes
Denmark an even more competitive marketplace. International interest is also expected to continue and
already the 11 deals completed by foreign companies in Denmark in 2015 has outstripped 2014 figures. In
fact, the total number of completed transactions year-to-date is set be among the highest since 2006 when
20 deals were transacted by international investors.
As investor interest in the country grows, however, Denmark could become a victim of its own success
which would impact rental yields if competition increases. Currently, the very high demand is primarily
focused on the two largest cities, Copenhagen and Aarhus.
So far, new transactions in those markets have not shown prices decoupling from fundamentals. Going
forward, it will be interesting to see whether new deal flow in the two cities will be available at a pace to
satisfy demand or if investors will look at other geographies in Denmark.
Either way, economic and social trends support the investment case to look beyond the primary cities. The
larger cities of Denmark are experiencing strong population growth and shifting demographics. The
government is investing heavily in infrastructure to support the growing population. The new metro line in
Copenhagen and the light rail in the country’s major cities, for example, have the potential to redefine the
current real estate landscape.
Additionally, as industrial real estate users move out of the cities, these areas are being redeveloped into
modern residential areas. These developments present opportunities that will allow both foreign investors as
well as local institutions to maintain large shares of the transaction market.
Naturally, when considering a capital allocation for the Nordics, investors should keep in mind that all
countries within the region have a role to play and should not be discounted. Getting the geographical and
portfolio balance is important, but with the right investment strategy, Denmark can be a key component of
any Nordics portfolio.
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