Norway : Oslo office marketMarch 2017
- Economic situation in Norway is penalizing the office market
- Office occupier market undergoing structural change
- Share of foreign investors dropped
Office occupier market undergoing structural change
2016 was characterized by low oil prices, cuts in oil investment and a staggered rise in house prices in Oslo. The downturn in the oil industry has created repercussions in the Norwegian economy and led to increased uncertainty among businesses. Negotiations now last longer as tenants take time to decide whether they should move or stay and companies search for more flexibility in the leases. For these reasons 2016 saw low take-up in the Oslo office market. Site combinations led to companies moving before end of lease and paying two rents. Thus a growing trend is seeing companies practicing subleasing, which is having a negative effect on the market in terms of rental values. Another trend is that given the competition of quality premises, owners of old property are very concerned to keep their tenants. Consequently incentive measures such as discounts and refurbishment funding are more and more common. A large share of vacant premises includes buildings that have been empty for a long while now. However, the strong increase in housing prices made the conversion of offices into apartments economically acceptable for landlords.
Share of foreign investors dropped
Low levels of investment in Norway in 2016 result from a wait-and-see attitude from investors who are concerned about main Norwegian macroeconomic indicators such as low oil prices, higher unemployment and slow GDP growth. This is particularly true for foreign investors that represented 43% of the investments in Oslo in 2015, but only 8% in 2016. The prime yield in Oslo is at 3.75%, down from 4.25% at the end of last year. Interest rates are expected to increase this year and the yield gap minimize so the prime yield is forecast to rise in 2017.