The significant loss of industry output in the years following the financial crisis has yet to be recovered in Denmark. The value of construction industry output in Denmark will not return to ---- levels until ---- (in US dollar terms). ...Somewhat to the rescue will be the housing market, which remains extremely robust, and residential construction will take up some of the slack from reduced fixed business investment. The environment is conducive to a surge in residential investment: interest rates set to remain at low (and in some cases, negative) levels through ----, housing supply remaining constrained, and real estate prices are rising fast (real house prices rose by over - in real terms in ----). According to Statistics Denmark, construction in Q--- grew -.- y-o-y. ...In H---, total building permits and starts declined by --.- and -.- y-o-y respectively. Within this only residential building saw positive growth, a -.- uptick in starts and - in permits granted, far below a level needed to meaningfully balance out the fall in starts and permits for public and commercial building.
...Across the three commercial real estate markets - office, retail and industrial - vacancy rates are shrinking, demand is rising, but supply is not responding. However, despite the low borrowing costs, property developers do not yet appear confident enough to build speculatively and appear satisfied to watch rental rates get higher as demand fights over the dwindling supply. Weak economic performance and deteriorating external factors will only contribute to low business investment confidence. As an upside risk, this will have to end at some point, as companies will dictate the need for new quality buildings and investors, particularly influential institutional investors, will seek greater returns, while also providing liquidity to the market and instilling developer confidence. A positive for retail development may unexpectedly come from the embattled consumer. ...This makes private consumption fairly sensitive to shock, which is a concern considering its importance to headline economic growth. Yet with a GDP per capita of around USD--,---, the Danish consumer is still
...The construction sector grew -.- in ----, in line with our forecast of -.- . ---- growth will retrench by -.- percentage points on the back of a weak economic outlook. ...
