Investors' harbor

Copenhagen's name is supposedly a corruption of the Danish word for “merchant's harbor.” So perhaps it comes as little surprise that real estate investors would take an interest in the city's commercial property sector, from offices to retail and warehouses, as a safe and profitable haven for their equity.

“Denmark is one of Europe's best economies,” says Tonny Nielsen, a managing director with Stockholm-based Aberdeen Property Investors, pointing to the country's GDP growth and low unemployment— and the effect this has on the office market. Nielsen says office vacancies are currently at 5 percent, down from a few years ago when vacancies reached 9 percent.

“The service sector is driving this [economy],” he adds.

Add to this the fact that the Copenhagen office market is relatively inexpensive, according to real estate advisor DTZ, which says prices rose 2.8 percent for the year; the firm also places the city at 51st in its list of the world's most expensive office markets.

Aberdeen's API Property Fund Denmark, an open-ended fund, hopes to take advantage of this low pricing and the strong economics currently found in the commercial property market. Nielsen says he feels the city's office market will outperform other markets in Denmark, which is why the firm is focusing 80 percent of its fund on investments in the office sector. The remainder of the fund will be put into the retail and logistics sectors. One of the firm's more recent investments is a group of office buildings and a parking structure in Holmen, a former military harbor in Copenhagen.

The vehicle, which was launched in June 2004, has attracted a total of DKK 900 million from 29 investors. Nielsen says that around 17 percent of the fund's LPs are charity foundations, while another 20 percent are high net worth individuals. The rest of the LPs are institutional investors.

And those LPs seem to be increasing in number. The Aberdeen fund recently received DKK 199 million (€27 million; $33 million) in additional commitments from three investors; two of the LPs had previously invested with the fund.

Of the limited partners, 61 percent are currently Danish and 39 percent are foreign—but that is a number Nielsen hopes will grow.

“We expect it will be split 50-50 between Danish investors looking to balance their portfolios and foreign investors who want the performance of the Danish market,” Nielsen says.