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M i d y e a r M a r ke t Re p o r t N O R WAY || OSLO || 2017
Accelerating Success
COMMERCIAL REAL ESTATE MARKET REPORT NORWAY 2018
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Leading commercial real estate advisor in Norway since 1993
Accelerating Success Market Report Norway 2018
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INTRODUCTION 5 By Thor Bjørdal, CEO/partner || Norway
EXECUTIVE SUMMARY 7 By Aleksander Gukild, Head of Research || Norway
HIGHLIGHTS 8
Table of contents
MACRO ECONOMY || NORWAY 10 PREDICTIONS 2018 12 TRANSACTION MARKET || OFFICE || RECIDENTIAL
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LOGISTICS MARKET || TRANSACTION || LETTING
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RETAIL MARKET || TRANSACTION || LETTING
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OFFICE MARKET || LETTING 32 FORECAST 39 COLLIERS INTERNATIONAL || NORWAY CONTACTS
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ABOUT COLLIERS 41
COLLIERS INTERNATIONAL
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Market Report Norway 2018
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INTRODUCTION Colliers International AS is 25 years. In 1993 we started our office in Kongensgate 9 in a former record studio, my office was soundproof. I shared an assistant with a property developer owned by my partner, late Petter Raaholt. Now 25 years later we are a fully diversified property house with brokerage business in Oslo and Stavanger, property management office in Oslo and Moss and facility management office in BÌrum. Our fastest growing business is syndications of real estate. Colliers International in Norway is now counting 94 employees i Norway including facility management, and we are still growing. We will invest into new business lines and increase our position in existing business lines. However, we also have to admit that we are a bit cautious now. We are worried about the pricing of commercial real estate and believe the current yield levels are to low compared to the outlook of the interest market. Value growth the next 5 years will have to come from value add properties. For us that is interesting. We love to use our expertise to help our clients make the right investments in their existing and future properties, ensuring value growth. Colliers International; Accelerating Success Thor Bjørdal
CEO / Partner Colliers International Norway
COLLIERS INTERNATIONAL
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Market Report Norway 2018
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EXECUTIVE SUMMARY The transaction year of 2017 was indeed an interesting one. The amount of transactions that exceeded NOK 50 million,- was at an all-time high, with a considerable margin. One would perhaps expect that the total transaction volume would also be a record year, or at least close to it. However, it was not. Arguably, this had more to do with the standout year of 2015 and all the large deals that were completed that year which was remarkable. However, it does also show that the transaction year of 2017 was generally more about the quantity, rather than the quality, speaking in terms of transaction value. The “quality” of commercial real estate deals in this context are usually more up to chance. Large deals may happen even in a very negative marked, if the correct pieces falls into place. However, you need a very positive market in order to see an all-time high in terms of the amount of transactions that has taken place. With this in mind, we can maintain that 2017 have been the best year transaction year in the history of Norwegian commercial real estate in terms of transactions. This obviously suggest a very strong demand for commercial real estate in Norway at the moment. Additionally, the current outlook for the Norwegian economy is the most positive for several years after sluggish performance in the wake of the crisis in the petroleum sector. GDP growth is expected to increase, unemployment to decrease and employment to increase amongst other factors. This, in combination with a rather strong rental growth within the office sector that is widely expected, suggests that the strong demand is likely to continue as we now go into 2018. The picture is looking very promising, however, there are a few issues that might sour the situation. At the moment, the most probable problem is the residential market. Since the implementation of the most recent restrictions in the residential market. After a booming 2016, the residential prices has levelled in 2017 and showed a small decrease in prices al together. What is worrisome is that we could potentially see this restricting the development of the economy as a whole. We have recently seen below expected retail performance amongst other issues. However, we do believe, as a main scenario for the residential market, that 2018 will see a small increase in prices. The recent fall in housing prices is caused by political measures, which we believe is highly likely to be altered or removed altogether during the course of Q1 or Q2 2018. In terms of office rents, we do expect a rather strong rental growth in 2018. The rents in 2017 was however, rather stagnant, as they have been for several years. With the low influx of net office space in recent years, we strongly expect that 2018 will be a very solid year for rental growth. The vacancy rates has decreased steadily for the past two years and the landscape is increasingly moving towards a “landlord market”. We believe that the potential growth rate is up to 15 % for prime office property in 2018 with more levelled, but also strong, increases coming in the fringe areas. For the remaining sub markets, we expect a rental growth of 5-10 % in central locations and 0-5 % in secondary locations. For the retail and logistics sectors, 2017 went quite well in terms of transactions. Both sectors had an increased share of the total transaction volume compared to 2016 with close to 20 % for retail and 10 % for logistics. Overall 2017 has been a very positive year for Norwegian commercial real estate with a transaction volume of NOK 81 bn and the outlook for 2018 is more of the same. With the improving global economy in addition to the recovery of the Norwegian, we project a total transaction volume of NOK 90,- in 2018, which means we are likely going to have a good year, similar to the year that just passed. However, we are also entering the year a bit more cautiously compared to last year although the main scenario remains positive. While there was few dark clouds on the horizon at the beginning of 2017, there are some concerns as we enter 2018 Aleksander Gukild Head of Research
MOB +47 92 61 53 38
aleksander.gukild@colliers.com COLLIERS INTERNATIONAL
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HIGHLIGHTS
PRIME OFFICE RENT 2018 (NOK )
4 650
Market Report Norway 2018
PRIME YIELD
3,75
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OFFICE VACANCY 2017
7% TR ANSAC TION VOLUME 2017
81 BN.
ESTIMATED TR ANSAC TION VOLUME 2018
90 BN. COLLIERS INTERNATIONAL
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MACRO ECONOMY THE NORWEGIAN ECONOMY The Norwegian economy is finally showing signs of life and are recovering well from the effects of the oil downturn and the scarce growth in global demand and forecasts are currently more positive compared to one year ago. However, the Norwegian economy continues to be heavily reliant on the petroleum business and the “oil-fund” continues to support a growing portion of the Norwegian fiscal budget. The economic downturn has now lasted for the better part of the last three years. However, it is becoming increasingly apparent that the tide has turned and that Norway is set up for strong economic growth going forward. We are seeing more businesses looking to grow their businesses and consumers are generally more positive in regards to the future. The expected GDP growth for 2017 is 1.9 %. Going forward, the expectation is for further growth to 2,5 % in 2018 and this draws a very positive image for the Norwegian economy. 2016 numbers showed a growth of 0.9 % in comparison. Other sources and experts are frequently suggesting even higher growth in the coming years. This underpins the perception that the Norwegian Economy has picked up the pace and that the future is looking bright. CURRENCY The Norwegian NOK has in general been somewhat strengthened by the improving oil price and macro conditions. At year-end in 2016, the NOK was trading at roughly 9 against the € Euro and even below, which was for the first time in roughly 18 months. However, the NOK has decreased since and as of midJanuary, is currently trading at levels around NOK 9.6 per 1 € Euro. However, although it remains week against USD in a historical perspective, the NOK has strengthened strongly against USD in the last couple of months and is currently trading at around 7.75 %. Market Report Norway 2018
This is in part fueled by an increase in oil rates as well as a new toll imposed towards China by the US Government. Going forward we are expecting a further strengthening of the NOK due to increasing oil prices and an outlook of increased interest rates in Norway during the course of 2018. The uncertain residential market is however being closely viewed traders and might possibly affect the NOK going forward. CPI The CPI rate came down considerably in 2017 compared to 2016, as was expected. From as high as 3.6 % in 2016, the CPI rate is forecasted to be significantly lower in 2017 at around 1.8 %. The expectations for 2018 and beyond is that the CPI rate is going to remain stable within these levels of 1.5 % - 2 %. Consumer confidence has also rebounded quite significantly in recent months and reaching its’ highest since 2014 in Q4 of 2017. This is positive for the outlook in 2018. UNEMPLOYMENT The unemployment rate is as of mid of Januar 4,1 % which is a steady decline since the end of 2016. The overall trend is that the unemployment rate will continue to decrease going forward, although at a rather slow pace. This is due to factors such as a recovery in within the petroleum sector as it is expected that the investment within this sector bottomed out in 2017. Also, the cost of developing an oilfield has sunk by 40 % compared to 2014 and several petroleum companies are now hiring after years of cutbacks. Also, mainland Norway is projected to perform quite well in the year of 2018 in terms of investment and also a slight increase in exports. One short-term concern however is that recent data in the end of January suggests that employment is actually decreasing.
The amount of jobs are increasing, however, not as quickly as the population growth and the employment rate was negative as a consequence in the first month of 2018. OILPRICE The oil price increased quite considerably during the course of 2017. In sum, the petroleum market seems appears much more positive compared to recent years. For the past weeks it has been hovering around $ 70 per barrel. . After OPEC and other major oil producing countries has engaged in several agreements as of late, the oil price is according to most experts within the field, likely to continue to increase slightly throughout 2018 and beyond. INTEREST RATE The Bank of Norway changed their expectations in December of 2017 and now expects the first rises in the interest rate to happen some time towards the end of 2018. However, given the cyclical position of the domestic economy, it is difficult to foresee any interact rate increases by The Bank of Norway until 2019. However, inflation and the housing market will be key factors in this development going forward. We are currently seeing that long interest rates are increasing and that
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Source: Statistics Norway
Macro Indicator
2013
2014
2015
2016
2017 (e´)
2018 (e´)
2019 (e´)
2020 (e´)
GDP, Mainland
2,3 %
2,20 %
1,10 %
1%
1,90 %
2,50 %
2,40 %
2,30 %
GDP
1,00 %
1,90 %
1,60 %
1,10 %
2,20 %
2,20 %
2,20 %
2,30 %
CPI (JAE)
1,60 %
2,40 %
2,70 %
3,00 %
1,50 %
1,80 %
1,80 %
1,80 %
Household Consumption
2,70 %
1,90 %
2,10 %
1,50 %
2,50 %
2,50 %
2,80 %
3,20 %
Public Consumption
1,00 %
2,70 %
2,10 %
2,10 %
1,90 %
1,50 %
1,70 %
1,60 %
Investments, Oil & Gas
19,3 %
-3,20 %
-15,00 %
-16,90 %
-3,40 %
7,20 %
8,40 %
3,00 %
Export
-1,70 %
3,10 %
3,70 %
-1,80%
2,50 %
2,10 %
2,60 %
3,00 %
Export, Oli & Gas
-5,50 %
1,90 %
3,2 %
4, 30 %
4,50 %
-0,50 %
-0,80 %
2,10 %
Export Traditional Goods
1,30 %
3,1 %
5,80 %
-8,20 %
2,60 %
4,20 %
3,60 %
3,40 %
Import
4,90 %
2,40 %
1,60 %
2,30 %
2,50 %
2,60 %
2,80 %
3,30 %
Import Traditional Goods
2,30 %
2,10 %
1,90 %
-0,40 %
3,70 %
3,20 %
3,80 %
4,10 %
Unemployment
3,50 %
3,50 %
4,40 %
4,70 %
4,20 %
3,90 %
3,80 %
3,70 %
71,2
71
71,2
70,7
69,9
69,8
69,9
70,0
3,80 %
2,70 %
5,20 %
-1,60 %
1,80 %
3,10 %
2,70 %
3,00 %
Household Savings Rate
7,6
8,2
10,40
6,90 %
6,10
6,90
7,00 %
7,20 %
Money Market Rate
1,8
1,70 %
1,30 %
1%
0,90 %
0,80 %
0,90 %
1,20 %
Consumer Price Euro Area
1,30 %
0,40 %
0,10 %
0,30 %
1,60 %
1,40 %
1,70 %
1,90 %
Salary
3,90 %
3,10 %
2,80 %
1,70 %
2,40 %
2,90 %
3,30 %
3,19 %
Residential Prices
4,00 %
2,70 %
6,10 %
7,00 %
4,60 %
-5,00 %
-1,60 %
3,10 %
CPI
2,10 %
2,00 %
2,10 %
3,60 %
1,80 %
1,90 %
2,00 %
2,00 %
Employment (Level) Household Disposable Income
COLLIERS INTERNATIONAL
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The prime office market rent will increase roughly 15 % in the CBD of Oslo. There is considerable potential upside in especially the prime rents in Oslo, which are due for a strong increase. Tenants, beware!
Market Report Norway 2018
The logistics sector will increase its´ share of the total transaction volume by 50 %.Granted, this prediction is somewhat “hit and miss” due to the nature of deals being possible. However, the interest within this sector is very strong and there are some portfolio deals which exists in the market that may come in to play. We believe that there is considerable upwards potential within the logistics sector when it comes to transaction volume.
The vacancy rate will fall be has not been this low in Oslo continue
After years of low net suppl will be the year demand
PREDICTIO
elow 6 %. The vacancy rate o for years and the trend will e in 2018.
ly of new office space, 2018 d really kicks in to gear!
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The residential market will have a positive development this year in terms of value.The current slump in the residential market is in our opinion mainly caused by political control and negative psychology amongst consumers. The political restrictions will highly likely ease during the course of 2018 which will in turn negate the deterrent psychology. We believe the residential market will increase by 5% nationwide in Norway in 2018.
ONS 2018
The first direct purchase by a Chinese company of a Norwegian real estate asset. We know that Chinese companies have been monitoring the Norwegian market for a while. Recently, we have seen a Japanese company buying property in Norway and we believe that 2018 will mark the entrance of Chinese companies as well with at least one direct purchase of a Norwegian asset.
COLLIERS INTERNATIONAL
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GDP Mainland
TRANSACTION MARKET
3,0 % 2,5 %
GDP Mainland
2,0 % 1,5 % 1,0 % 0,5 %
GDP Mainland 0,0 %
Unemployment 2013
2014
3,0 %
2015
2016
2017
2018 (e`)
2019 (e`)
2020 (e`)
5,0 % % Statistics Norway Source: 2,5 4,5 % 2,0 %
CPI 4,0 % 3,5 % 4,0 1,0 % 3,0 % 3,5 0,5 % 2,5 % 3,0 0,0 % 2,0 % 2,5
2013
2014
2015
2016
2017
2018 (e`)
2019 (e`)
2020 (e`)
Unemployment
1,5 %
Source: Statistics Norway 1,5 % 2,0
1,0 % 1,5
CPI
2013
2014
2015
2016
2017
2018 (e`)
2019 (e`)
2020 (e`)
1,0 % Source: Statistics Norway 4,0 % 0,5 % 3,5 % 0,0 %
Oil Price 3,0 %
2013
2014
2015
2016
2017
2018 (e`)
2019 (e`)
2020 (e`)
Source: 2,5 % Statistics Norway
CPI
2,0 % 1,5 % 1,0 % 0,5 % 0,0 % 2013
2014
Source: Statistics Norway Source: Statistics Norway Market Report Norway 2018 Source: CMC Markets
2015
2016
2017
2018 (e`)
2019 (e`)
2020 (e`)
The transaction market for Norwegian commercial real estate in 2017 was the best in history in terms of the number of transactions worth in excess of NOK 50 million. After our last count we have registered approximately 255 transactions throughout the year, compared to 200 in 2016 and 185 in 2015. For the purpose of registering portfolio deals in this context, we always register them as a single transaction. In terms of the transaction total, 2017 was the second best year we have every seen in Norway after 2015.
The total transaction volume was according to our database NOK 81 bn which surpasses the year of 2016 with NOK 8 bn. In sum, it is apparent that this has been one of the best years for commercial real estate transactions in history. The demand within all sectors of commercial real estate has arguably been strong throughout the year with the office and logistics sectors as the perhaps the most popular. Developments with public tenants in has been immensely popular and will continue to be so throughout 2018 as well. The perception is that these developments purveys very low risk. THE TEMPORARY DIMINISHING IMPORTANCE OF LOCATION In our logistics report from October of 2017, we wrote about the diminishing importance of location specific developments. In that, we meant that yield and rent levels in areas historically viewed as fringe and / or secondary areas were quickly approaching those of historically prime areas. Rather than specific locations, there is increased importance of a radius (typically 45 minutes drive) from the Oslo city centre. Most of the various logistics areas offers more or less the same qualities, and on that basis, this development should perhaps not be that surprising.
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However, what is more surprising, and also more worrisome, is that we are seeing the same tendencies in the office markets as well, especially when it comes to yield levels. It is not yet as apparent concerning rents. Offices has vastly other requirements compared to logistics and location should be of the utmost importance. However, the gap in yield between CBD and fringe areas is at the moment very low, and also at very low levels. Our current estimate is that the yield level in the CBD is 3.75 %, while in fringe areas such as Bryn / Helsfyr and Lysaker, we have seen yield levels at around 4.5 %, and even lower. In these cases, investors are spending quite a lot of money for a perceived safe cash flow for 10 or 15 years. In reality, it is difficult to envision a drastically lower yield in the CBD areas and the common perception appears to be that we have more or less hit the floor.
Yields
All the while yield levels are steadily going downwards in fringe areas, especially for good tenants and contracts and yields are approaching CBD levels. We are skeptical as to this trend being sustainable. A solid contract is always attractive, however, lately it is increasingly seeming as though the yield is reflecting the contract, almost more so than the actual property and its’ location. Investors might possibly face issues when these good contracts are due to expire in buildings that will be 10 / 15 years old outside of the most desirable areas. However, it is important to note that most of these contracts appears to have favourable rental levels. With the expected increase in rents going forward in the next few years, there is likely to be positive potential in these rents. However, 10 / 15 years down the road is harder to predict.
COLLIERS INTERNATIONAL
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FOREIGN INVESTORS IN NORWAY For several years it has been spoken to lengths about foreign investors in Norway and the 10% strong interest this country has seen from international 2% players within the real estate 6% business. And several foreigners has obviously been very visible within the Norwegian commercial real estate market 3% with several marquee deals. I n 2018, the largest 17% transaction of the year 61% was again concluded with an international buyer in Swedish SBB when they bought the DNB Headquarter building in Bjørvika in Oslo for in excess of NOK 4 bn. However, in terms of actual deals which where international investors are present, in percentage of the total, is not close to as strong. Source: Colliers International
Of the 230 transactions we have in our database for 2017, 16 of them was bought by an international investor which is approximately 7 % of all transactions. This is in comparison to foreign buyers being involved in over 15 % of the transaction volume. In 2016 the same figures were 9.5 % for number of transactions and 18.5 % for share of transaction volume. These numbers are significantly higher compared to the historical average.
Nonetheless, the involvement of foreign investors in deals that came to fruition was lower in 2017 compared to the Area Vacancy two years preceding and it may be valuable to note that Office CBDthese investors has been record 5,24 % although the interest from Retail Sentrum 5,53 % high during the past few years, they are often “top heavy” Other Oslo deals. West 5,48 % and involved in high profile Development Oslo East 5,26 % MOST ACTIVE INVESTORS Hotel Nydalen 5,26 % Syndicates was highly active during the course of 2017 Logistics Skøyen 9,92 % and was behind a record number of transactions. In more Lysaker / Fornebu than 15 % of the transactions, financial syndicates11,51 were% Bryn / Helsfyr 10,50 the investment vehicle. Furthermore, syndicates were% Oslo 7,51 % also responsible for 20 % South of the total transaction buyers / Økern 4,90 % value last year. Lastly, Hasle we have never seen as many “intersyndicate” deals as weOslo saw Outer in 2017. East 10,23 % Oslo Outer West 4,59 % It is apparent, and natural, Total that syndicates are seeking 7,03 % profit for their investors, and with the current yield level and previous drop, many have chosen to liquidate their assets and secure profit. For newer syndicates, there are also various reasons to invest, perhaps most notably, an expectance of a strong increase in rents coming their way in 2018 and 2019.
Transaction volumes Transaction volumes (prices in NOK bn) (prices in NOK bn)
In addition to the increased activity of the syndicates, traditional property companies remains both the largest Vacancy Primereal Rent sellersTrend and buyers of commercial estate inForecast Norway.Rent Stablewere net sellers4650 Up However, they of property last year Stable 3600 Up Insurance companies on the other hand, while remaining Down have been far2700 Up significant players, less active during 2017. Open endedDown property funds were2600 also fairly active in Stable 2017 with transactions NOK 10 bn. Stable totaling well above 2400 Stable Down 3000 Stable FINANCING Down is continuing 2350 The bank margin to move sideways.Down The Up 2300 Up average margin for a 5 % loan with 65 % equity is now Stable 2.45 % thisDown is an increase of only1800 2 base points according Downsurvey. It also shows 2050 that higher loans Up to Union’s bank are punished by quite significantly higher Down 1900 margins as banks Stable require to beUp paid for a perceived 2000 higher risk. Stable Down The lowest margin which was offered during the past 3 months was 150 margins according to the survey. To be able to achieve this, the recipient of the loan has to be AAA+. The banks net margins has increased significantly during the past couple of years. Meanwhile, financing by bonds is at an all-time high. Buyer and Seller identity NOK millions NOK Millions
Open Ended Fund
2018
Sale Purchase
Own User
2017
Unknown 2016
Listed Property Company Property Company
2015
Property Developer
2014
Syndicate 2013
Insurance Company
2012
Closed Ended Fund 0
20
Source: Colliers International Source: Colliers International
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AS
Market Report Norway 2018
60
80
100
120
140
Source: Colliers International
-40 000
-30 000
-20 000
-10 000
-
10 000
20 000
30 000
40 000
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The banks own loan costs are close to an all-time low. The survey concludes that bonds has financed more than NOK 30 bn worth of real estate in 2017. This makes us suggest that traditional banks would be wise to review their practice going forward in order to not continue to lose market share to bond providers. Banks today requires approximately 38 % equity compared to 30 % in 2014 and 24 % in 2010 meaning a steady increase during the past 7 years. Meanwhile, no banks are expecting to decrease their loan total to commercial real estate going forward towards 2018. This means that we might see increased competition within this sector going into next year. This in turn might contribute to fuel the transaction market further. Our perception remains that most prime property is generally quite easily financed given an appropriate strength by the prospective buyer. However, fringe properties might be more troublesome. This naturally varies however given the strength or weakness of any buyer. We expect that this will continue going in to 2018. Margins might possibly come somewhat down as we are potentially moving close to a small hike in the interest rate. PROPERTY SECTORS In terms of property sectors, the office sector was as usual by far the largest sector with approximately 60 % of the total transaction volume. Retail followed with close to 20 % with logistics responsible for in excess of 10 % of the end total. It is apparent that the logistics sector is now far more popular compared to what is was 5-7 years ago. For 2018 we do expect the office sector to remain dominant, however, we expect that both the retail and logistics sectors will increase their shares of the total.
RESIDENTIAL MARKET 2017 was tumultuous for the Norwegian residential market. Since the turn of the financial crisis of the end of the last decade, residential prices in Norway has generally only gone upwards a part from a small period in 2013. At the start of the year, all indications pointed towards continuing price increase a part from one. In 2016, the Norwegian Government enforced, after a thorough process together with other experts and panels, a set of regulations aimed to “cool down” a highly heated residential market.
These set of regulations were set to be temporary until June of 2018. It remains to be seen which of these elements which will either be removed or remodeled. It is our opinion that the current state of the sluggish residential market is due Government interference which at the same of implementation made quite a lot of sense.
There was several elements within these regulations which had strong effect to the market. The consequence was that after more than a 20 % price increase in Oslo in 2016, the data for 2017 shows us a fall of more than 4 %.
However, the activity in the Oslo market has remained high and the amount of sold dwellings in 2017 is comparable to those of 2016. The Norwegian economy is improved compared to 2016 and the general economic climate would alone suggest a positive residential market. It is no secret that construction rates of residential development has been high over the past few years and contributed strongly to a more healthy pool of supply which we now currently have in Oslo. However, from 2010 – 2016, the letting prices in Oslo increased by less than 10 % while housing prices approximately doubled.
At present, there are approximately 200 % more marketed dwellings for sale compared, to one year ago in the Capital. Furthermore, nationwide, the increase is also highly significant.
10%
This contributed also to more negative psychology towards the market and the sense of “urgency” to enter the market has vanished.
Interest rate
2% 6%
Office Retail
3%
Other Development
17%
61%
Hotel Logistics
Retail
Logistics
Development
Office
Hotel
Other
Source: Colliers International AS
Source: Colliers International COLLIERS INTERNATIONAL
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RESIDENTIAL MARKET CONTINUE In 2017, the letting prices increased as much as it had done in the 6 years prior. Keeping this in mind, it is our suggestion that the vast increase in demand for rental apartments is at least in some part due to fiscal restrictions in the residential market. Softer restrictions in addition to more positive psychology in the residential market is going to contribute to turn this market around during the course of 2018. A substantial part of the aforementioned scenario relies on the relief of the current restrictions which are implemented in the residential market. The fact that more than 80 % of Norwegians are home owners and not renters which is amongst the highest ownership rates in Europe. This, in combination that Norwegians has one of the lowest saving rates in “traditional savings� such as stocks and bonds, envisages the importance of the Norwegian residential market for the Norwegian economy. Consequently, it would a peculiar measure by the Norwegian Government to contribute greatly to the poor performance of the residential market over an extended period of time. Keeping this in mind, we firmly believe these restrictions will be altered which will be positive for the residential market. In our previous market reports we have seen that sales prices has gone substantially over asking price as an average for several years. This time around it is quite different, as has been the case since the end of spring last year. However, things are looking slightly more positive compared to a short while ago. In the past three months, the average apartment in Oslo have been sold 0.4 % below asking price. For June 2017 to January 2018 the same number was -0,9. In the past two weeks, apartments has on average been sold to asking price. Other factors are also cautiously pointing towards a slightly more positive market, without being definite. As 2018 seems to have begun on a slightly positive note for the residential market, we believe it is imperative that the politicians address the self-imposed restrictions going forward. Interest rates are looking to increase and affect the market negatively. Therefore, it is vital that several of these restrictions are removed to in order to further facilitate a stable housing market and counter act the negative implications on the housing market by increasing interest rates.
Market Report Norway 2018
Colliers sold an average of 1.5 residential properties a month during 2017. St. Halvards gate (picutre) was one of them.
Monica Jacobsen Director Investments monica.jacobsen@colliers.com
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COLLIERS INTERNATIONAL
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Overall 2017 has been a very positive year for Norwegian commercial real estate with a transaction volume of NOK 81 bn. The outlook for 2018 is more of the same. With the improving global economy in addition to the recovery of the Norwegian, we project a total transaction volume of NOK 90 bn. in 2018.
�
Thor Bjørdal CEO / Partner
INVESTMENT TEAM OSLO
Market Report Norway 2018
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CLOSED TRANSACTIONS 2017 (SELECTION) NEDRE ULLEVÃ…L 11 OSLO
ADVISOR TYPE BUYER
HAGEGATA 32 OSLO
SELL SIDE ADVISOR RESIDENTIAL BOLIGBYGG OSLO KF
SELLER
SIO
ADVISOR
TYPE BUYER SELLER
RESIDENTIAL BOLIGBYGG OSLO KF
SELLER
SIO
ADVISOR
SELL SIDE ADVISOR PARKING KURT MOSVOLD/FEARNEYS PROFIER
ADVISOR
SELL SIDE ADVISOR
ADVISOR
RESIDENTIAL
TYPE
BUYER
RSV EIENDOM
BUYER
SELLER
SKB EIENDOM
SELLER
OSLO PORTFOLIO
SELL SIDE ADVISOR
ADVISOR
TYPE
DEVELOPMENT/OFFICE
TYPE
BUYER
APT DEVELOPMENT AS
BUYER
SELLER
SANDVIKA KINO
TYPE
ASTRIDS VEI
BEKKESTUA PARKING
ADVISOR
SELL SIDE ADVISOR
TYPE BUYER
TOLLBUGATA 11 OSLO
ROTO INVEST
SELLER
SELL SIDE ADVISOR CINEMA RAGDE EIENDOM AS NORTH BRIDGE AS
MUSEUMSVEIEN 16
BUY SIDE ADVISOR PORTFOLIO RAGDE EIENDOM AS STARWOOD
ADVISOR TYPE BUYER SELLER
BUY SIDE ADVISOR CAR DEALERSHIP ZURHAAR & RUBB AS BAVARIA EIENDOM G. AS
COLLIERS INTERNATIONAL
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LOGISITCS The market for logistics property is currently in very high demand. During the course of the last we years we have seen a significant demand for logistics property in Norway in general and the Oslo-region in particular. The transaction volume in the last few years has been high in a historical perspective and in 2017 they were at a record high level. Additionally, the share of logistics property of the total transaction volume has steadily increased during the past five years. This is a development which we expect to continue going forward. During the course of the last year there has been a significant drop in yield levels and comparatively more for logistics property compared with retail or office real estate. Prime yield for logistics property is now around 5 % which is an alltime low level. Furthermore, it is also a decrease of an entire percentage point compared to 2016.
All I&L leases signed in 2017 accumulate in excess of MNOK 32 in leasing value. The leases signed
Some of the primary factors for this massive interest is the fact that we often see both long contracts as well as few or single tenants within new logistics developments. This is strongly contributing to make the logistics market attractive, also to long investors.
where either 10 years or more.
Carl Fredrik Marti Senior Real Estate Broker carlfredrik.marti@colliers.no
Market Report Norway 2018
Especially international investors are triggered by these factors. Such a strong demand are putting pressure on potential sellers. We see that opportunistic sellers contributed to a strong end of 2017 within the logistics sector. investors. Especially international investors are triggered by these
23
Currently, the scarcity in this sector is of willing sellers, not willing buyers. There are only a few clouds on the horizon, which are not that dark either. However, in previous reports we have been focusing on how the residential market has worked as a hedge for many of the industrial and logistics areas outside of Oslo. This is due to increasing land values and that logistics and industry has been moved farther away from the city centre in order to make room for residential development and in some cases also office and retail. This is a development we have seen several examples of. However, with the recent setbacks in the residential market combined with the main scenario outlook, the hedge factor is not as strong as it has been. Nonetheless, a vast difference between logistics and residential prices remains and as such, this will continue to be a factor, unless we see a highly unlikely collapse within the residential market. The rents in the logistics market has on the other hand remained stable, which has been the case for several years.It is rather uncomplicated developing new logistics space, and most of the municipalities where there are already existing logistics hubs are generally positive towards more development and consequentially also towards regulations.
This is contributing to less pressure on rents and that these remains stable. Groruddalen maintains its’ position as the area with the highest rents at NOK 1 250,- per sqm. This is in line with our estimations in our previous report. In a few areas such as Lier and Gardermoen, we have seen a small increase from lesser levels. Going forward there are few indications that we will see large alterations in prime rents in the short term. The vacancy rate for logistics property in Oslo has decreased during the course of the past year. At the moment, we find the vacancy rate to be 8 %, which is the lowest rate we have seen for the three years we have produced our Logistics report. This is a decrease of two percentage points compared to our previous report. This indicates that demand is strong within the sector, although rents has not increased significantly. One clear development we are seeing in the market is that the location of the building has less significance concerning rents, however, even less significance when it comes to transactions. The yield compression has been broad in all logistics sub markets. However, we notice that it has been even larger in areas which has previously not been considered amongst the most attractive.
This has led to a development where the strength of covenant and length of contract has increased even further in terms of importance compared to location. The possibility of undertaking a new development with similar qualities is substantially higher within the logistics sector compared to that of office and retail. We are now seeing that location is increasingly viewed as a radius from Oslo city centre, rather than the necessity of being at exactly a given place. In Europe we are seeing a strongly increasing emphasis on environmental friendly transport to a degree we are far away from in Norway at present. Transport and logistics by sea and rail is becoming an increasingly important focal point. Most of the primary logistics hubs in the Oslo region are without proper access to railways. We are expecting increased attention on these issues also at home in coming years. This is also something to keep in mind in future evaluations of the various areas going forward in regards to where one wants to locate and invest.
The background for this is that most areas in and around Oslo offers more or less the same qualities in regards to logistics. COLLIERS INTERNATIONAL
24
Gardermoen
Kløfta
E6
E6
Berger Gjelleråsen Groruddalen E6
Oslo
Rud
Lørenskog
Skedsmo
LOGISTIC HUBS GRATER OSLO AREA Source: Colliers International AS AREA
Billingstad
MUNICIPALITY
PRIME RENT
VACANCY
PRIME
COLLIERS
(NOK / SQM.)
RATE ( % )
YIELD
RATING
E6 E6
(%)
E18 E18 E1 8 E18
Kolbotn/Mastemyr
Lier
Ski Drammen Vinterbro
K
OC ST
E6
MOSS
E18
Vestby
Market Report Norway 2018
M
L HO
Groruddalen
Oslo
1 250
9
5, 0
A
Ski
Ski
1 200
8
5, 2
A
Vinterbro
Ås
1 000
0
5, 8
B
Drammen
Drammen
1 000
7
5, 75
B
Lier
Lier
950
12
6, 1
C
Rud
Bærum
1 150
6
5, 75
B
Lørenskog
Lørenskog
1 150
4
5, 25
A
Skedsmo
Skedsmo
1 175
16
5, 25
A
Gjelleråsen
Nittedal
1 000
0
5, 60
B
Gardermoen / Kløfta
Ullensaker
1 100
2
5, 35
B
Vestby
Vestby
950
9
5, 80
C
Moss
Moss
800
23
6, 50
C
25
The I&L team at Colliers International Oslo have in the year of 2017 had a lease transaction volume totaling 25 246 SQM of logistic properties in the Greater Oslo Area.
Carl Fredrik Marti Senior Real EstateBroker carlfredrik.marti@colliers.no
COLLIERS INTERNATIONAL
26
RETAIL The interest for retail property in Norway remained high in 2017. The total transaction turnover increased slightly compared to 2016. The end total for the year was NOK 13.5 bn. However, these numbers was vastly down compared to 2015. However, this is in part due to circumstance. No large portfolios of retail properties swapped hands in 2017 as opposed to 2015 and to a certain extent 2016. The interest remains very strong, but the scarcity is within the supply. For 2018 we expect a few larger retail properties to be tested in the market regarding potential sales. Currently, there is a feeling in the market amongst many sellers that they are unwilling to sell unless a “crazy bid” comes in, which are at least halfway expected if one is to sell. It remains to be seen however, if these valuations based on sellers perception of “crazy” are to be met.
Coop Norge AS has chosen Colliers International AS as their Retail Consultant and Advisor responsible for search after suitable premises and land plots for new supermarkets between 800 – 10 000 sqm.
Jørn Andersen Senior Advisor Retail (Food & Beverage) jorn.andersen@colliers.com
Market Report Norway 2018
The traditional retail format is continuously under heavy scrutiny from the ever-growing e-commerce. Lately there has been several reports of shopping centres in the Unites States, which has been deserted in recent years due to new ways of doing and thinking of shopping. Al though generally not to the same extent as we see in the US, this is also taking place elsewhere in the world, such as Norway. In the context of the Norwegian shopping centre market, we are especially concerned for the small and medium sized shopping centres. While the larger shopping centres generally has more means and possibilities to expand and make shopping centres more of a destination, smaller shopping centres will struggle to do so to the same extent and to take part in the next generation of shopping centres. Admittedly, the smallest shopping centres
Admittedly, the smallest shopping centres which are often local, will continue to serve more of a purpose in more densely populated areas of the country. However, the medium sized shopping centres which to a larger degree are competing with the large regional centres, will struggle. We do believe that it will become something of “eat, or be eaten” in the shopping centre business going forward. What we mean by that is that medium sized shopping centres will in many cases need to expand in order to achieve appropriate size. If they are unable to do so, they will generally fail to attract customers and remain attractive for the public. We are already seeing this in a highly competitive area such as Bærum and Asker where shopping centres Trekanten and Rortunet are ready for considerable expansion in order to better compete within this market. We expect other shopping centres to make similar decisions going forward. Norway is currently one of the countries in the world with the highest density of shopping centres compared to inhabitants. This is due to several factors, such as the weather and Norwegians´ appetite for convenience being a few of several possible explanations. Consequently, the sheer amount of Shopping Centres and the strong competition because of that in the Norwegian market ensures that landlords has to address the issue of more e-commerce in order to survive. However, especially in Oslo, there is one factor that is aiding the shopping centres which are located outside of the city centre. The municipality of Oslo is currently removing and closing a very substantial amount of parking places for the public. Within next year, there will be close to no public parking places
27
left within the Ring 1 area (city centre). Combined with the Norwegian weather and the often necessity of transport while shopping, this could in many cases contribute to a preference for shopping centres compared to high street locations. In sum, we believe that it is a challenging situation for both shopping centres and retail. With the emergence of e-commerce, customers has endless options. The strongest will survive, those that are able to adapt and perhaps might to be able take advantage of the new situation. Those that are unable or unable to make adaptions will find themselves struggling in this market. Our market view is that the prime rents have remained quite stagnant during the course of the past year in the Oslo retail market. The highest prices are still found in Karl Johans Gate with recent contracts indicating a prime level of close to NOK 23 000 per sqm for the best retail space within this street. This is slightly down compared to previous levels of NOK 25 000 per sqm from a year ago. The drop in price is not dramatic, and we believe that we will see prime premises at Karl Johans gate let at NOK 25 000 per sqm within a not too distant future. The demand for these premises within these locations continues to remain strong. Furthermore, top locations in Oslo are gaining increasingly more attention from international retailers which are contributing to higher rental prices for landlords. One factor which is contributing to high rents in certain areas is the influx of international brands and retailers in to the Norwegian market. In Oslo, the entrance of high end international brands has
been especially noticeable and has in certain areas such as in the area around Akersgaten, Øvre- and Nedre Slottsgate contributed to high rents. New entrants to this market include Isabel Marant along with Rag & Bone which will soon open brand new stores and contribute to the further development of this area. The vacancy rate in the retail sector is low for properties located within the central Oslo region. In the most popular streets such as Karl Johans gate with adjacent streets and Bogstadveien is experiencing close to 0 % vacancy. When there are vacant premises in these streets, it is usually down to frictional vacancy, the time from the previous tenant has vacated the premises until the new tenant is able to move in as most premises in these areas has a high demand for retail space. As of the end of October, there are none advertised properties in any of the main high street locations in the Oslo city centre out side of 90 sqm available in Torggata. We believe that strong demand for prime high street locations in the larger cities in Norway generally, and Oslo specifically, will continue going forward. We see the same regarding centrally located shopping centres such as Oslo City, Sandvika and Strømmen Storsenter. We are also experiencing the same with large shopping centres outside of the other larger cities in Norway. These, and a few other shopping centres has an extended cue of prospective tenants that wants to move into premises that are left vacant in these locations. For secondary shopping centres and smaller local centres, the situation is different. We are increasingly seeing that medium to small sized shopping centres will struggle to compete with
larger shopping centres going forward. Consumers are increasingly favouring larger shopping centres which increasingly can attend to all consumer needs and is more and more regarding visiting shopping centres as “making a day out of it” and as an experience. Consequently, the letting process is far more challenging for small and medium sized shopping centres and landlords would be wise to expect a void period in order to obtain tenants. We believe that smaller and medium sized shopping centres outside of city centres will experience turbulent times going forward. Consumer growth is expected to grow steadily in 2017 and recent March figures are highly encouraging. Salary growth and increased employment is suggested to be the main sources behind this and the public is generally becoming increasingly confident regarding the Norwegian economy. The main risk currently is the housing market which is showing signs of slowing down. Norwegians has the highest portion of savings in real estate in Europe. A market decline in residential prices would have severe implications for the retail sector. RETAIL MARKET OUTLOOK Our market view is that the prime rents have remained quite stagnant during the course of the past year in the Oslo retail market. The highest prices are still found in Karl Johans Gate with recent contracts indicating a prime level of close to NOK 23 000 per sqm for the best retail space within this street. This is slightly down compared to previous levels of NOK 25 000 per sqm from a year ago.
COLLIERS INTERNATIONAL
28
The drop in price is not dramatic, and we believe that we will see prime premises at Karl Johans gate let at NOK 25 000 per sqm within a not too distant future. The demand for these premises within these locations continues to remain strong. Furthermore, top locations in Oslo are gaining increasingly more attention from international retailers which are contributing to higher rental prices for landlords. One factor which is contributing to high rents in certain areas is the influx of international brands and retailers in to the Norwegian market. In Oslo, the entrance of high end international brands has been especially noticeable and has in certain areas such as in the area around Akersgaten, Øvre- and Nedre Slottsgate contributed to high rents. The vacancy rate in the retail sector remains low for properties located within the central Oslo region. In the most popular streets such as Karl Johans gate with adjacent streets and Bogstadveien is experiencing close to 0 % vacancy. When there are vacant premises in these streets, it is usually down to frictional vacancy, the time from the previous tenant has vacated the premises until the new tenant is able to move in as most premises in these areas has a high demand for retail space. As of the start of November, there are only a handful of advertised properties in any of the main high street locations in the Oslo city centre. Of the few available, close to 50 % is located in the newly renovated Prinsens Gate which is an area expected to garner considerable attention going forward. We believe that strong demand for prime high street locations in the larger cities in Norway generally, and Oslo specifically, will continue going forward. We see the same regarding centrally located shopping centres such as Oslo City, Sandvika and Strømmen Storsenter. We are also experiencing the same with large Market Report Norway 2018
shopping centres outside of the other larger cities in Norway. These, and a few other shopping centres has an extended cue of prospective tenants that wants to move into premises that are left vacant in these locations. For secondary shopping centres and smaller local centres, the situation is quite different. Consumers are increasingly favouring larger shopping centres which increasingly can attend to all consumer needs and are increasingly viewing shopping centres as “making a day out of it” and as an experience rather than “just shopping.” Consequently, the letting process is far more challenging for small and medium sized shopping centres and landlords would be wise to expect a void period in order to obtain tenants. We believe that smaller and medium sized shopping centres outside of city centres will experience turbulent times going forward.
Colliers International AS assisted Lindex to establish a new fashion store in Kremmergaarden Ålesund..
Kari Gro Herrem Senior Advisor Retail karigro.herrem@colliers.com
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COLLIERS INTERNATIONAL
30
RETAIL PRIME RENTS Karl Johansgate and Bogstadveien/Hegdehaugsveien
se
n
Karl Johans gate is Norway's parade street and runs from the Central Station to the Royal Palace. In Karl Johans gate and surrounding streets you can find all the major chain stores, flagship stores and a wide range of luxury stores. Karl Johans Gate has the highest retail rents in the country and is an area where you find a large variety of shops.
rg ga to
ate lot
n
ate
se
ttsg
e
re S
l ler gat Mø
15 - 20 000
nok/sqm/year
nok/sqm/year
Market Report Norway 2018
e nn i Dro
keg Kir
12 - 15 000
gat
e gat ens Kon g
nok/sqm/year
Kar
l Jo
han
sg
ate
The upper part of Karl Johans gate has also in recent years undergone major transformations, Steen & Strøm Magazine has re-established itself as the leading fashion magazine, and along with fashion house Eger, this helps to create a more attractive center with a bustling urban environment. During the past year, Karl Johan has continued to strengthen its position as the most attractive shopping area in Oslo.
6 - 12 000
nok/sqm/year
ns
ate
nge
sg
keg
han
Kir
te sga lott re S Ned
l Jo
ata
te sga lott re S Øv
3 - 6 000
The best corner locations located in this street from Egertorget and westwards can be let for NOK around 25 000 per sqm for prime retail space (zone A). Due to the high rents, the stores present at Karl Johans Gate is not necessarily profitable, however, chains chose to locate to Karl Johan because they “have” to and use their store in this location as a show room and marketing tool.
a
Slo dre Ne
ta rsg a Ake
Kar
ata
gat
Øv
ns
Gr en
tsg
ga
oha
ers
lJ
Ak
Kar
ta
ta
Gr en
20 - 25 000 nok/sqm/year
New entransts such as Nike and also a new H&M flagship store. The latter is scheduled to open in 2018.
31
eie
n
ieg
adv
yr
gst
lk Va
Bo
at a Bo gs ta eie dv
The area of Hegdehaugsveien and Bogstadveien remain popular amongst retailers, however, are struggling to get back to the popularity in the years prior to the financial crisis. The pavement and tramlines in the street was recently updated after a couple of years of redevelopment.
n
For instance, the pavements now have under soil heating in an effort to make the street more attractive for prospective customers. We are now seeing that customers are returning to the area after being somewhat alienated from the prolonged development period. Both Bogtstadveien and Hegdehaugsveien has a high density of large chain stores, the former more so than the latter which has close to exclusively large chains present while Hegdehaugsveien has a larger influx of more exclusive shops. The prime rents in the area is rather stable, however, we are currently seeing some property owners struggling to recuperate their rent when the current contract expires. 6 - 8 000
nok/sqm/year
8 - 12 000
nok/sqm/year
The current prime rents for Bogstadveien and Hegdehaugsveien is currently NOK 12 000 – 13 000 per sqm which it has been for the past few years despite the completion of the new pavements. COLLIERS INTERNATIONAL
32
OFFICE RENTAL MARKET
The Oslo office market has truthfully performed quite average in 2017, especially in terms of rents achieved. For some time we have been waiting for the next big increase in rents. In the last ten-year period – rents has in general not increased in real terms. After the boom before the financial crisis, the following years we had year on year growth was from 2010 to 2013/14. However, this “growth” was only recuperating what was lost from 2008 – 2010. For the past three years, the rents has been in a status quo. We were anticipating that the increase in rents would become more apparent in 2017 than what we experienced with the year now passed. However, our expectation was always that 2018 will be the year we really see a makeshift in the trend and we will see a clear increase in rental prices during the course of 2018. The expectation of a strong rental increase in 2018 is chiefly generated by the scarcity of which new office developments has been completed over the past years. Additionally, existing stock has for years been removed from the market in large scale and converted into alternative use. The booming residential market has been the main reason as to why office developments has not taken place, and also been the primary factor behind several conversions. With the residential prices drastically increasing in recent years up until 2017, prospective developments has been more viable for residential use compared to office use. In addition to the aforementioned factors, the Norwegian economy is currently performing quite well. Market Report Norway 2018
The unemployment is trending down while employment is looking like increasing. Inflation is close to a desired level while GDP is expected to increase in coming years. More and more businesses is becoming increasingly inclined to invest in their current working stock. This is going to result in a rental price increase going forward and we firmly expect 2018 to be a really strong year. We expect the CBD area in Oslo to be the spearhead of the development with a prime rental increase of up to 15 %. Other areas in the city centre might look at an increase of around 10 % while we expect the fringe areas around the city to see an increase of 5 – 10 %. Additionally, it will be interesting to follow the development of Bjørvika which is increasingly perceived as “CBD East”. There is quite few new development projects taking place near the waterfront, and rents here will be highly interesting to monitor, especially as rents increases in the market in general. We are now starting to see tenants such as law firms increasingly interested also in the East, and also embracing the area such that law firm Ræder now deciding to move in to this area of Oslo. Our estimates for almost every area is increasing rents for 2018. The expectation however, is that some areas will increase more than others, such as Oslo City Centre (Sentrum) and the CBD. However, we still expect upwards growth in close to all subareas concerning prime rent. Unsurprisingly, the vacancy rates is following more or less the same pattern, only that they are decreasing rather than increasing.
The vacancy
rate has been steadily declining in the Greater Oslo office market since 2014 where the vacancy rate hit peak level at around 9 % following a boom in construction of new office developments. Since then, the development rate of new office space has been well below the average since the break of the new millennium which has, in combination with better economic performance and increasing employment rates in Norway, contributed to decreasing vacancy rates. Currently, the vacancy rate in Oslo stands at 7 % (7.03 %). This is a decrease of close to ¾ percentage points compared to our previous estimates from May 2017. We remain positive that this will be a continuing trend moving on into 2018 and 2019 as the economy is continuously improving while there has been little new build to cater for the new demand. The completion rate of new development is also looking fairly low for 2018 and 2019 in most areas, while a few areas such as Økern has several large projects in pipeline. The decrease in vacancy rates is broadly based throughout the various sub areas that constitute the Greater Oslo office market; CBD In the CBD the vacancy rates has been stable for the past year at close to 5 %. It is in the fringe areas of the CBD where we find most of the vacancy within this area. The development rate of new office space in this area is scarce with a considerable amount of new space developed 3-8 years ago and the outlook is that very little large scale development will be taking place outside of a few developments such as Ruseløkkveien 26.
33
Consequently, we highly expect the demand for this area to be strong going forward and that the vacancy rate will remain or even decrease from the low level it is on currently. Furthermore, we expect the rents to increase quite significantly in this area during the course of the year. City Centre In the City Centre the vacancy rate has, as is the case for the CBD, remained stable and is currently just above 5 %. In terms of new developments there is development going on in the Bjørvika area in where some of the buildings also have some vacancy. Closer to the city centre, Kongens Gate 21 is in the process of a major overhaul and will offer increased supply going forward. Of the current pool of vacant premises, there are no one offering more than approximately 7000 sqm. The actual number of available premises is on par with the last few years although the really large offerings are currently lacking. Going forward, we anticipate that demand for premises within this area will remain high and that the vacancy rate will remain close to the low figure of 5 % Skøyen At Skøyen the vacancy rate has decreased during the course of 2017. With a current vacancy rate of 10 % it has declined from the previous rate of 11.5 %. The rents has stagnated somewhat at Skøyen in the last couple of years and has remained stable at around NOK 3000,- per sqm. Skøyen remains a highly attractive area for most businesses, however, this is also on of the areas that will see rather considerable new development in the next few years. Our expectation is that the vacancy rate at Skøyen will remain around 10 %, perhaps slightly below, during the course of the year.
Lysaker In the area of Lysaker and Fornebu the vacancy rate has actually slightly increased during the past 6 months. The vacancy rate was at our previous survey surprisingly low, something which was likely down to chance. The area was hit quite hard by the turmoil in the petroleum sector and is still recuperating. This sector are now performing better and increased employment is expected also at many businesses which is located within this area. We believe that the worst is over for Lysaker, which in turn should see increased demand in the area. However, there are also some vacancies coming during the course of 2018. In sum, we believe that both the vacancy rate and prime rent will remain stable at Lysaker at 11.5 % and NOK 2 400,- per sqm respectively. Oslo West In the Oslo West area the vacancy rate has decreased and the area has a very low vacancy rate of only 3,61 % which also marks a considerable decrease from H1 of 2017 when the vacancy rate was 5.5 %. Currently, there are no premises over the size of 2000 sqm for let in the area, meaning that the sheer number of vacancies is on par with our previous survey. A vacancy rate of only 3.61 % is low. However, this is an area that are used to quite low vacancy rates. We expect the vacancy rate to remain between 3.5 % and 5 % throughout 2018. The prime rent in this area is currently NOK 2.750, which is primarily found in the fringe areas to CBD and close to this level at Majorstuen. COLLIERS INTERNATIONAL
34
Oslo West In the Oslo West area the vacancy rate has decreased and the area has a very low vacancy rate of only 3,61 % which also marks a considerable decrease from H1 of 2017 when the vacancy rate was 5.5 %. Currently, there are no premises over the size of 2000 sqm for let in the area, meaning that the sheer number of vacancies is on par with our previous survey. A vacancy rate of only 3.61 % is low. However, this is an area that are used to quite low vacancy rates. We expect the vacancy rate to remain between 3.5 % and 5 % throughout 2018. The prime rent in this area is currently NOK 2.750, which is primarily found in the fringe areas to CBD and close to this level at Majorstuen. Oslo East The vacancy rate has fallen by nearly 3 percentage points in the area of Oslo East. It has dropped as low as 5.26 %, which is the lowest rate we have seen in this area for many years. Areas such as Schweigaards gate on the other side of the railway tracks from the Barcode area ensures that there is quite a high prime rent here at NOK 2.600 per sqm at present. We are positive that this rent will increase during the course of 2018 while the vacancy levels should remain somewhere from 5 % - 7 % at years end.
Market Report Norway 2018
Nydalen Nydalen has had a quite low vacancy rate for a few years now and the area is as popular as ever. The vacancy rate has remained stable at just over 5 %. However, Vitamin 4 as Storo just edges in to our vacancy list with close to 11 000 sqm remaining as the Norwegian Directorate of Health have already chosen to rent half the building from the fall of 2018. Had it not been for the remaining 11 000 sqm, the vacancy rate would have been significantly lower and there are fewer premises to let compared to our previous survey. As we expect the remainder of the area at Vitaminveien 4 to be addressed quite shortly, the vacancy rate may decrease further. We expect a vacancy rate of 3.5 % - 5 % in Nydalen at years end. Bryn / Helsfyr Bryn / Helsfyr was an area that had a high vacancy rate in our previous survey at more than 13.5 % while looking at it in a historical perspective. The vacancy rate is down in this area, quite significantly. The current vacancy rate is 10.5 %. Our perception is that the area is popular and that demand is quite strong. However, there are also new developments in this area and the supply is rather generous compared to many other areas in Oslo with three rather large developments currently looking for tenants in more than 6 months. With this in mind, the outlook for this area is a stable vacancy rate with the possibility of an increase going forward in 2018.at Majorstuen.
Oslo Outer West In the area of Oslo Outer West the vacancy rate is currently slightly below 5 %. This is a decrease from our previous 2017 report. This is a very small area, and the smallest in the Greater Oslo region. Consequently, a larger vacancy either for let or just rented out will make quite a large difference for this area. Nonetheless, this area has been surprisingly stable in the last couple of years despite this years´ minor decrease in vacancy rate. The vacancy rate has dropped by 4 percentage points from 8.6 % to 4,6 %. However, it is important to note that in terms of actual square meters, the difference is rather small. Hasle / Økern / Løren The area of Hasle / Økern / Løren is currently being fully transformed from an industrial area with a substantial of older developments into one of the most promising office areas in the Greater Oslo area. Currently, the vacancy rate has dropped significantly during the past 7-8 months. As it stands, several of the older developments in this area is being renovated / rebuilt and other new developments are already fully let. This effects the vacancy rate greatly. The drop in vacancy rate has been close to 10 percentage points, which is the single largest drop of all sub areas in the Oslo office market that we monitor. Going forward, we do expect an increase in rents going forward. Furthermore, we anticipate that the vacancy rate will stabilize at around 5 %, similar to the current rate of 4,9 %.
35
Oslo Outer East The area of Hasle / Økern / Løren is currently being fully transformed from an industrial area with a substantial of older developments into one of the most promising office areas in the Greater Oslo area. Currently, the vacancy rate has dropped significantly during the past 7-8 months. As it stands, several of the older developments in this area is being renovated / rebuilt and other new developments are already fully let. This effects the vacancy rate greatly. The drop in vacancy rate has been close to 10 percentage points, which is the single largest drop of all sub areas in the Oslo office market that we monitor. Going forward, we do expect an increase in rents going forward. Furthermore, we anticipate that the vacancy rate will stabilize at around 5 %, similar to the current rate of 4,9 %. Oslo South In the Oslo South area the vacancy rate is status quo compared to our 2017 report. At present, the vacancy rate remains at 7.5 %. Compared to 2017 however, there are more available properties to let. Last year, there was several larger developments with vacancies. Going forward, there are some likely developments taking place within in this sub area in the not too distant future. In the meantime, we expect the vacancy rate to remain quite stable at around 6 % – 8 %. found in the fringe areas to CBD and close to this level at Majorstuen.
New Development The new development rate of office space in Oslo has been low for several years in the wake of a building boom that culminated in 2012. Since then, the completion rate of new office space has been low, especially in the last couple of years. In the past two years, the amount of completed space has been less than 200 000 sqm combined in the Oslo region. Net added has been even lower due to conversions of old offices into mainly residential developments. For a while, it has been anticipated and seemed that the possible outlook for 2018 and 2019 have been more positive in this regard with a potential completion rate of in excess of 250 000 m² each year, well above the current 10 year average of around 150 000 m² annually. However, as we now are in 2018, we are seeing that the volumes will not be quite as high. We currently anticipate a completion rate of close to 150 000 m² for 2018 and close to 200 000 m² for 2019. Furthermore, it is important to note that only a small fraction of the potential for 2018 and 2019 is located within the city centre and much of the development will potentially take place in areas such as Skøyen, Bryn/ Helsfyr, Økern/Hasle/Løren and Nydalen. What is more is that considerable amounts of potential new development going forward is uncertain. Additionally, with the low addition of new office space in recent ears, the net amount added has been close to 0 due to conversion of old office buildings in to alternative use. years, the net amount added has been close to 0
However, with the recent dip in the residential market and the anticipated increase in market rents for offices, we do expect quite high completion volumes of office space in the next few years. As it stands, the lack of new office development in the past few years is going to contribute heavily towards higher office rents in the coming years until more new offices enter the market. In recent years, the yield has been the primary driver for valuations as the yield level has dropped significantly in the past few years. However, going forward, we foresee the actual increase as well as the anticipated increase of market rents to be a vital driver for real estate values.
AREA
VACANCY
TREND
PRIME RENT
FORECAST
%
VACANCY
NOK/SQM
RENT
CBD
5, 24
STABLE
4 650
UP
SENTRUM
5, 53
STABLE
3 600
UP
OSLO WEST
5, 48
DOWN
2 700
UP
OSLO EAST
5, 26
DOWN
2 600
STABLE
NYDALEN
5, 26
STABLE
2 400
STABLE
SKØYEN
9, 92
DOWN
3 000
STABLE
LYSAKER/FORNEBU
11, 51
DOWN
2 350
DOWN
BRYN/HELSFYR
10, 50
UP
2 300
UP
OSLO SOUTH
7, 51
DOWN
1 800
STABLE
HASLE / ØKERN
4, 90
DOWN
2 050
UP
OSLO OUTER EAST
10, 23
DOWN
1 900
STABLE
OSLO OUTER WEST
4, 59
UP
2 000
STABLE
TOTAL
7, 03
DOWN
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CLOSED TRANSACTIONS 2017 (SELECTION) LEASING
Location: Storgata 5-7 Oslo Approx. 6 500 Sqm. Landlord: Fond New tenant: several
Camilla Bang Hoff Head of Landlord Representation camilla.bang.hoff@colliers.com
Market Report Norway 2018
37
Location: Strandveien 12 Approx. 3000 Sqm. Landlord: Wilhelmsen New tenant: several
Camilla Bang Hoff Head of Landlord Representation camilla.bang.hoff@colliers.com
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Market Report Norway 2018
39
FORECAST The outlook for commercial real estate in Norway remains very positive. There are many factors which have already been mentioned witch underpins this and especially with the strengthening of the Norwegian economy and the strong rental growth which we foresee. Although we might be approaching the bottom of the yield cycle, we do not anticipate a sharp increase of any sort. We anticipate somewhere between 200 and 250 transactions for 2018 which is less compared to 2017. However, we do expect a transaction volume greater than 2017 with NOK 90 bn at years end and consequently an increased amount of ‘large’ transactions. We expect that the general conditions for commercial real estate that we saw in 2017 will largely continue in to 2018. The main concern would be a collapse in the residential market and a sharp increase in interest rates, which might come rather quickly. Lastly, an increase in the NOK is expected going forward. Depending on how much of an increase we might see, this could have some effect to deter international investors from investing in Norway in 2018.
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RETAIL
INVESTMENTS
PROJECT FINANCE
Haakon Reed Larsen Head of Retail MOB +47 48 29 98 34 haakon.reed-larsen@colliers.com
Thor Bjørdal CEO/Partner MOB +47 40 20 17 00 thor.bjordal@colliers.com
Erik Dagslett Partner MOB +47 95 77 22 30 erik.dagslett@colliers.com
Jørn Andersen Senior Advisor Retail (Food & Beverage) MOB +47 93 46 97 29 jorn.andersen@colliers.com
Jørgen Ekker Head of Investments MOB +47 90 77 44 28 jorgen.ekker@colliers.com
Lasse Kristiansen Partner MOB +47 41 14 70 80 lasse.kristiansen@colliers.no
Stine Bjørdal Senior Advisor Retail (Fashion) MOB +47 92 88 10 75 stine.bjordal@colliers.com
Monica Jacobsen Director Investments MOB +47 91 88 08 52 monica.jacobsen@colliers.com
Lasse Bing Larsen Consultant MOB +47 90 53 73 27 lasse.binglarsen@colliers.com
TENANT REPRESENTATION
Carl Fredrik Marti Director Investments MOB +47 40 20 12 00 carlfredrik.marti@colliers.com
Christopher Bell Project Finance MOB +47 45 26 95 94 c.belll@colliers.com
Cecilie Eidslott Director Corporate Solutions MOB +47 90 85 83 45 cecilie.eidslott@colliers.com Christian Prebe Head of Tenant Representation MOB +47 95 87 10 39 christian.prebe@colliers.com Ruben Krantz Kringstad Business Developer MOB +47 98 05 72 62 ruben.krantz@colliers.no
LEASING Camilla Bang Hoff Head of Landlord Representation MOB +47 98 83 38 40 camilla.bang.hoff@colliers.com
Sondre Hybertsen Senior Advisor Investments MOB +47 93 45 19 22 sondre.hybertsen@colliers.com Tom Elliot Johnsen Senior Advisor Investments MOB +47 97 56 43 43 tomelliot.johnsen@colliers.com Kristine Haugen Advisor Investments MOB +47 90 84 77 58 kristine.haugen@colliers.com Bjørnar Myking Senior Advisor Investments MOB +47 91 39 83 10 bjornar.myking@colliers.no
Carl Fredrik Marti Senior Real Estate Broker MOB +47 40 20 12 00 carlfredrik.marti@colliers.com
RESEARCH/VALUATION
Kari Gro Herrem Senior Advisor Retail MOB +47 91 38 19 50 karigro.herrem@colliers.com
Aleksander Gukild Head of Research MOB +47 92 61 53 38 aleksander.gukild@colliers.com
Christoffer Bakken Real Estate Advisor MOB +47 40 55 50 99 christoffer.bakken@colliers.com
Petter Platou Head of Valuation MOB +47 91 3 18 115 petter.platou@colliers.com
Tobias Weidemann Voraa Real Estate Advisor MOB +47 91 70 03 70 tobias.voraa@colliers.com
Market Report Norway 2018
Nicolai Zurhaar Project Finance MOB +47 41 44 78 71 nicolai.zurhaar@colliers.com
MANAGEMENT SERVICES Geir Vinslid CEO MOB +47 99 00 77 77 geir.vinslid@colliers.com Jens Marius Andresen Director Operations MOB +47 92 46 12 09 jensmarius.andresen@colliers.com Fin Resch Director Business Development MOB +47 93 43 81 00 fin.resch@colliers.com
ADMINISTRATION Cato Hellvik CFO Colliers International Holding AS / REMS MOB +47 91 16 62 51 cato.hellvik@colliers.com Mia Nyberg Office Manager MOB +47 90 59 29 75 mia.nyberg@colliers.com
MARKETING
STAVANGER (INVESTMENTS/LEASING)
Jonna Alexandra Harding Head of Marketing MOB +47 47 34 92 89 jonna.harding@colliers.com
Thomas J. Middelthon General Manager / Partner MOB +47 90 13 45 75 thomas.middelthon@colliers.com
Midyear Market Report Norway 2015
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About Colliers International
Our Services
Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide.
The foundation of our service is based in the strength and depth of our specialists. Through careful listening and a system of uncovering client needs, we understand the subtle business drivers behind key real estate decisions. We design truly customised services to transform real estate - often one of the largest expenses for a business - into a competitive advantage. We do that as professionals who know our communities and industries inside and out. Wheter you are a local firm or a global organisation, we provide creative solutions and ease in managing all of your real estate needs.
Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more than any other real estate services firm. For the latest news from Colliers Norway, visit colliers.com/no or follow us on Twitter (@ColliersNorway) and LinkedIn (Colliers International Norway).
Logistics Report 2016
||| Brokerage and Agency || Landlord Representation || Tenant Representation || Retail ||| Corporate Solutions ||| Capital Market and Investment Sales ||| Project Management ||| Property Marketing ||| Real Estate Management Services ||| Research Services ||| Valuation and Advisory Services
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NOTES
Market Report Norway 2018
43
Leading commercial real estate advisor in Norway since 1993
Accelerating Success COLLIERS INTERNATIONAL
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OSLO
Wergelandsveien 7 0167 Oslo +47 22 06 62 80
STAVANGER
Nordbø gaten 4 4006 Stavanger +47 51 59 80 70 Copyright Š 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. colliers.com/no
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