Leasing market

In spite of the bleak outlook internationally, the Norwegian economy continues to experience positive growth, and the rental market benefits from this. Newsec observes that office vacancy during Q2 remains stable for Oslo and Bergen, increases somewhat in Trondheim, while the absorption continues in Stavanger. In Oslo and Bergen, newer buildings with proximity to the public transit hubs/light rail system are highly sought after and are winning the battle for the larger contracts. In Oslo, this demand is pushing rent levels up in locations westward. In Bergen, many public properties are under rehabilitation, resulting in a somewhat artificial vacancy for the time being. Stavanger is seeing increased employment in line with the recent lift in oil price, but internal absorption of already leased premises dampens the overall effect on vacancy. Trondheim remains stable.

Newsec has available office spaces in Dronning Eufemias gate 6 (Oslo Atrium) at Barcode

As of the second quarter of 2019, the rental prices for office premises in Oslo continue to rise. According to Arealstatistikk AS, the average for Oslo is currently 2,410 NOK/sqm, up 6.5% when comparing four quarters rolling average. The market demands modern offices of a high standard, thus resulting in considerable interest in new builds downtown and in the large “office clusters”. Additionally, landlords need to refurbish existing office premises in order to attract tenants. The high willingness to pay for high-quality premises near the city centre is one factor in shaping the upward rental price trends found in downtown areas. Thus, we expect old rental records to be broken. This is supported by an increased focus on identity building, which in turn increases willingness to pay. This trend is spreading further towards Skøyen, while eastward there is still oversupply of new developments dampening the growth for a few years ahead. In summary, the Norwegian economy continues along at a good pace, which will benefit the rental market in the current year. Low unemployment and a high capacity utilisation rate are expected, which in turn increases employment and thus the need for office space. A somewhat diminished economic outlook for 2020 and 2021 will eventually dampen growth.

Co-working is generating a great deal of attention these days. In Norway, the concept is most widespread in Oslo, where in 2018, it occupied 30% of leased office space. 1.5%-2% of the office market in Oslo is now occupied by such entities as Mesh, Spaces (Regus), Startuplab and Epicenter, amounting to 100,000-150,000 sqm. WeWork is now also established in Oslo, with an entire 11,000 sqm in the CBD. Moreover, Huckletree (Pier X Venture Hub) has been established in NPRO’s building at Aker Brygge. The concept is also rising in Bergen, where inter alia Regus (International Workplace Group) has taken 2,500 sqm in Media City Bergen, and Spaces shall move into 4,000 sqm once the renovations at Vaskerelven 39/Olav Kyrres gate 41 have been completed. Newsec is convinced that the co-working trend is here to stay. The flexibility that the concept provides is undoubtedly something that is in demand and it will be very exciting to follow the development in the coming years. Time will tell exactly which format will take hold.

Newsec is letting-adviser on behalf of Lani AS for Dråpen 9

Forecast 2019

  • Increased employment with associated decrease in unemployment
  • Moderate amount of new construction activity in Oslo in 2019 and 2020, leading to modest fall in vacancy. An increase in new construction in 2021 will result in a mild increase in vacancy
  • For Bergen, Stavanger and Trondheim, a modest fall in vacancy is expected in 2019.
  • Continued rental price growth for central locations and collective hubs
  • The office market in the west corridor in Oslo, Kokstad Bergen and Stavanger are once again experiencing demand from oil-related industries  
  • Old rental records in the city centre are about to be broken
  • Tenants seated more efficiently, price per square metre increases
  • Newsec believes that co-working entities will be established in less central locations in Oslo, due to lack of available office space downtown
  • Entrepreneurs and freelancers have been the primary consumers of co-working spaces; however, we will also see more demand from medium-sized and large enterprises
  • Due to the increased demand from co-working users, demand from co-working operators will increase

Newsec is letting-adviser to Realkapital Investor for Fornebuveien 1-3 ("GROW") - an exciting rehabilitation project