Savills Investment Management (Savills IM), acting on behalf of its retail fund, Nordic III, has acquired two properties in Aarhus, Denmark for €32m. The first asset is a newly-constructed building and the second was constructed in 2009 with a lettable area of around 10,800m². The properties are fully leased on a long-term basis to six tenants, including Elgiganten, Silvan, Sport24, Carl's Junior, Sunset Boulevard and PetWorld.
Nordic III is a core retail fund that aims for sustainable income and growth. It aims to provide an annual total return of 7-9%, including income of at least 5.5%. Its focus is to identify inner-city commercial buildings with high earnings potential in prime locations. These include shopping centres, specialist stores and retail parks in Sweden, Denmark, Norway and Finland. Savills IM has identified significant opportunities for the fund in Scandinavia, which offers strong macroeconomic fundamentals. Robust economic and population growth in the region is all set to boost consumer spending, and therefore local retailing, which will provide strong tailwinds for the fund.
Growth forecasts for the next five years show that the Nordic economies are expected to outperform the Eurozone. Scandinavian retail real estate generates attractive and stable income due to long-term leases linked to inflation. The target size for the fund, which is open to further investors, is €500m.
Peter Brostrom, Head of Nordics at Savills IM, commented: "The growth of e-commerce is particularly disruptive for the retail sector. Nevertheless, we believe that the physical dimension will remain an important point of contact between retailers and consumers. The entire demographic spectrum prefers to shop in a physical store for social and entertainment reasons, eating and testing products on the spot. Physical and online shops will co-exist as the demand for omnichannel solutions and services grows.”
Sofia Sandh, Senior Investment Manager, Savills IM, added: "Aarhus is the second largest city in Denmark and, in addition to positive population growth, also has a large catchment area, which is why we regard these new assets as a perfect addition to the Nordic III fund. In particular, these properties benefit from their proximity to an IKEA store, which enjoys a high volume of customer traffic.”
