Transcript
The Norwegian Commercial Property Market
Spring 2015
The Norwegian Commercial Property Market
This market report is intended to provide an overview of the Norwegian property market. The report highlights important trends and gives specific examples of transactions in the leasing and investment markets, important new property developments, etc. This report is intended for general information and is based upon our own material which we believe to be reliable or material supplied to us. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any guarantee that factual errors may not have occurred. Akershus Eiendom takes no responsibility for any damages or loss incurred owing to the inaccuracy or incorrectness of this report. This report was last edited on March 3rd 2015. For further information please contact Akershus Eiendom AS. Comments, suggestions or questions regarding the contents and presentation of this report are welcome at
[email protected]
Table of Contents
06
Main Points
08
Macro Economics The Norwegian Economy
12 14 18 20 24
The Oslo Office Market Overview of the Market Rent Levels Survey of Relocation Patterns Vacancy Development
30
The Investment Market
34
Regional Property Markets
40
International Office Markets
44
The Retail Market
48
The Hotel Market
52
The Logistic Market
56
The Residential Market
59
Definitions
60
Akershus Eiendom
Main Points
8
Main Points
• After a modest 2014 GDP growth at 2.1 %, expectations for 2015 have taken a toll from the oil marked decline and now stands at 1.6 % as a consensus estimate. Employment growth has been revised down and is now expected to be close to zero for the coming two years. • Office rents in Oslo have been stable or rising in 2014, but the outlook for 2015 is stable in the prime and CBD segments and somewhat declining in the fringe areas. The major trend has been a low volume of new contracts, although at solid rent levels. • The results from our annual survey of moving patterns across Oslo show similar trends as the average of earlier years: the West side retains almost all its tenants when they physically relocate, whilst the East side loses a significant share to the CBD. However, almost 40 % of moving CBD tenants moved to fringe areas
during 2014, the second-largest share registered in our 10-year study.
share of international investors, at more than one-quarter of investments.
• New office development in Oslo is at above-average volume for 2015, while the next couple of years have smaller confirmed volumes of new projects. Construction costs are expected to edge slightly down due to lower overall construction.
• Our prime yield estimate is now at 4.5 %. It is obvious that fringe office buildings also have experienced reduction in sales yields, in some instances even more than the CBD area. Thus, the difference between CBD and fringe yields is stable or decreasing.
• Oslo office vacancy is at 8 %, versus 7 % one year ago, due to the slowdown in new leases. As the employment outlook is stable, and the volume of conversion and demolition is still high, we do not expect vacancy to go any higher for the next two years.
• Stavanger, Bergen and Trondheim all now see a weaker leasing market compared to early 2014. For Stavanger especially, this is due to the reduced activity in the oil and gas sector; for Bergen and Trondheim. However, the market has a large volume of new office buildings for 2015-2016. The transaction volumes have exceeded expectations for all cities.
• There has been a record year in the property investment market, with close to NOK 59 billion in volume, plus the IPO of Entra at an additional NOK 28 billion. This has exceeded expectations, as has the
• The 2014 retail growth in Norway was close to 2.7 %, and expectations for future consumption growth have been reduced
along with the expected GDP growth. Retail properties was a small share of the transaction market, at lower volumes than 2011-2013, and there were no real portfolio deals such as seen in previous years. • Norwegian hotel guest night volume was 3.4 % higher in 2014 compared to 2013, while RevPAR increased by 1.1 %. The outlook is more uncertain due to an expected slowdown in business travel growth, but the volume of new hotels under construction is not high. • The logistics leasing market is still very stable with low vacancy and good demand. The logistics transaction market was the second best seen ever, with close to NOK 10 billion in property value, mostly bought by domestic investors; most were large units with long leases. • After several years of solid growth, residential prices are now uncertain; most expect 2-5 % price growth in a market
where new construction is falling, but most buyers see lower lending rates and thus are tempted to pay more. Overall sales are up after the temporary decline in late 2013 and early 2014, so construction is expected to rise somewhat in the short term.
Macro Economics
10
The Norwegian Economy
According to Statistics Norway, the Norwegian economy expanded by 2.2 % in 2014 with a growth in 4Q with 0.9 % up from 0.5 % in 3Q. Estimates for 2015 are 1.6 % growth of GDP, according to DNB and Statistics Norway. In the fall of 2014, the consensus forecast was for a 2015 growth of 2.1 %. Thus the expectations for growth are significantly reduced. Most economists now expect a slowdown lasting for two years, but it is very likely that the general growth in other industrialized countries is the main driver for future growth. Traditional export increased with 2.9 % in 2014. Expected traditional export growth for 2015 and 2016 is 3.2 %, with an increase to 3.4 % expected in 2017. The lower NOK exchange rate has contributed to competiveness and profitability for companies in all non-oil/gas export sectors. The 2014 household savings rate was 9.1 %, slightly up from 2013. The growth in debt was 6.5 % year over year in October 2014,
0.7 % lower than a year ago. The growth in debt is still higher than the growth in disposable income, but the growth slowed during the past year. In the second quarter of 2014 the ratio was 210 % at records high. Residential prices are expected to rise 2.1 % in 2015. The investments in the petroleum sector were even before the sharp fall in oil price in late 2014 expected to decline in 2015. The decline in oil investments over the coming three years is now estimated to a drop of 30 %, with half of the decline occurring during 2015. The oil investments will be 6 % of GDP, a 3 %-point drop from 2014. After the major decline in oil prices, the 2016-18 estimates have been revised the most. Norwegian unemployment has been mostly unchanged during 2014. The level of unemployed (AKU) in 2015 and 2016 are estimated by Statistics Norway to be 3.9 % and 4.3 %, respectively. Last year it was estimated that 2015 and 2016 would be 3.7 % and 3.6 %. The total employment is expected to stay flat for the coming two years.
Nominal wages are expected to increase by 3.1 % in 2015, last year’s increase was about 3.5 % with a price rise of 2 % the real wage growth was 1.5 %. The utilization of the capacity in the mainland economy has been slightly lower the past year and it has become easier to find qualified workers, according to Norges Bank. CPI adjusted for tax changes and excluding energy products (CPI-ATE) were in January 2.4 % and CPI before adjustments 2.0 %. Oslo Stock Exchange (OSEBX) has so far in 2015 (mid-February) increased by 6.4 %.
Macro Economics
01
Key Economic Indicators Gross domestic product GDP mainland Norway Consumption in households etc. General government consumption Gross fixed investment Exports Crude oil and natural gas Traditional goods Imports Traditional goods
11
Level NOKm 2014* 3,151,483 2,529,694 1,229,688 688,455 753,066 1,197,587 539,731 344,041 932,063 547,467
Prices CPI CPI-ATE Housing Prices Employment Unemployment rate (% of work force) Employed persons (percentage change) Participation rate (level) Interest rates 10-year Government Bond rate (%) (Feb. 6) Money market rate (level) (3M NIBOR)
3.5 2,619
6.feb. 2015 1,28 1,66
Annual Change(%) 2012* 2013* 2014F 2,7 0,7 2,2 3,8 2,3 2,6 3,5 2,1 2,1 1,6 1,7 3,1 7,6 6,8 1,3 1,4 -3,0 1,0 0,5 -7,6 -0,8 -0,2 1,0 2,9 3,1 4,3 2,8 2,6 3,2 0,8
2009 -1,6 -1,6 0,0 4,1 -6,8 -4,1 -1,6 -8,0 -10,0 -12,1
2010 0,6 1,8 3,8 2,2 -6,6 0,7 -6,9 3,3 8,3 9,2
2011 1,0 1,9 2,3 1,0 7,4 -0,8 -5,6 -0,1 4,0 4,6
2,1 2,6 1,9
2,5 1,4 8,3
1,2 0,9 8,0
0,8 1,2 6,7
2,1 1,6 4,1
3,2 -0,5 72,8
3,6 -0,5 71,9
3,3 1,5 71,4
3,2 2,1 71,5
3,95 2,5
3,73 2,5
2,51 2,9
2,13 2,2
2015F 1,0 1,4 2,5 -2,8 0,8 -0,8 3,1 1,8 -0,5
2016F 1,6 2,2 2,4 2,3 1,1 1,4 -0,5 3,9 2,0 3,3
2017F 2,1 2,7 2,6 2,0 3,5 1,9 -0,4 4,5 1,5 4,2
2,1 2,5 2,3
2,6 2,8 0,2
2,0 2,0 2,5
1,7 1,7 1,3
3,5 1,2 71,2
3,5 1,1 70,6
3,9 0,2 70,3
4,0 0,2 69,9
3,7 1,1 69,8
3,00 1,8
1,28 1,7
1,3
1,2
1,4
0,5
Source: Statistics Norway As of December 2014
Macro Economics
02
Key Interest Rates 2003–2015
12
8% 7% 6% 5% 4% 3% 2% 1%
NIBOR 3 months SWAP 10 years 10 year Gov. Bond Norges Bank, Sight deposit rate
Jan 15
Jul 14
Jul 13
Jan 14
Jul 12
Jan 13
2.2%
2.9%
1.1%
1.2%
1.1%
1.6%
1.3%
0.2%
0.2%
-0.5%
-0.4%
0.5%
0.4%
2%
1%
-1.2%
0.3%
0.9%
0.6%
-0.3%
1 600
0.7%
1 800
1.7%
2 000
3%
2.0%
1.9%
2 200
2.7%
2 600
3.3%
2 400
4.1%
Norway 1992–2017E
Change, % 4%
3.5%
Change in Total Employment
2 800
Jul 11
Source: DNB Markets
Employees, thousands
0%
1 400 1 200
-1%
1 000 -2%
National employment change %, right axis Employment change %, SSB forecast 10 year Total employed Norway, thousands, left axis Total employed, SSB forecast
Source: Statistics Norway
2017E
2016E
2015E
2013
2014E
2011
2012
2010
2009
2008
2007
2006
2005
2004
2003
2001
2002
1999
2000
1997
1998
1996
1994
1995
1993
800 1992
03
Jan 12
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jul 07
Jan 08
Jul 06
Jan 07
Jul 05
Jan 06
Jul 04
Jan 05
Jan 04
Jul 03
Jan 03
0%
Macro Economics
04
Main Indices Oslo and London
13
400 350
Index, 2004 = 100 300 250 200 150 100 50
Jul 14
Jan 15
Jan 14
Jul 13
Jan 13
125 120 115 110 105 100 95 90 85 80
USD/NOK EUR/NOK
Source: Norges Bank
Jan 14
Jul 14
Jan 14
Jul 13
Jan 13
Jul 12
Jan 12
Jul 11
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jan 08
Jul 07
Jan 07
Jul 06
75 Jan 06
Index, 2005 = 100
Source: Yahoo Finance/Oslo Børs
130
Jul 05
Exchange Rates 2005–2015
Jan 05
05
Jul 12
Jul 11
Oslo Stock Exchange (OSEBX) London Stock Exchange (FTSE 100)
Jan 12
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jan 08
Jul 07
Jul 06
Jan 07
Jan 06
Jul 05
Jan 05
Jul 04
Jan 04
0
The Oslo Office Market
14
Overview of the Market
The Oslo office building stock, including Lysaker/Fornebu, today stands at around 8.4 million m². Of the total volume, roughly 3.3 million m² are situated within the city centre, from Solli Plass in the west to Bjørvika in the east, marked in the map as seven areas/circles. Since 2007, the city centre has seen major urban redevelopment. Two new neighbourhoods at the waterfront, Tjuvholmen and Bjørvika, have been developed to become mixed residential and commercial areas. Bjørvika still has potential for further large development projects, and in the longer term, Filipstad just west of Tjuvholmen will be available for redevelopment. Generally, Oslo has a great deal of urban sprawl, and the built-up area covers a lot of land compared to its population size. Most of the office building stock is concentrated in densely built areas, and this is visible in the map. Office zones outside the Central
Business District are generally found along the outer ring road from Lysaker through Nydalen, Økern and Helsfyr-Bryn to Ryen. All areas have seen new development over the last 10 years, and Fornebu and Nydalen have seen the highest activity. The area between the CBD and the outer ring road (in the map, seen as the Inner City West, North and East) is mostly in use for residential, education and retail purposes. The west of Oslo contains highend residential areas with low density. The north-eastern corner of Oslo is the core area in all of Norway for logistical purposes, with many distribution centres for retail, wholesale and third-party logistics companies. Eastern and southern areas mainly consist of residential areas with varying degrees of density.
The Oslo Office Market
06
15
The Oslo Office Area
Sinsen Storo Kjelsås Grefsen Nydalen
Oslo Outer East
Ullevål
Oslo Outer West
Økern
Alna-Ulven
Inner City North Majorstuen
Skøyen
Inner City West
Helsfyr-Bryn
CBD Inner City East Ryen
Lysaker
Oslo Outer South Fornebu
500 000 m²
250 000 m²
50 000 m²
Source: Akershus Eiendom
The Oslo Office Market
16
Rent Levels
status The Oslo rental market has experienced an uneventful 2014 measured by volume, with fewer lease contracts and smaller tenants compared to previous years. The rents, however, have either stayed put or grown somewhat during 2014. The slowdown in new leases seems to be disconnected from most tenants’ current need for space. In short, many of the tenants in the pipeline seem to have extended their current contract for shorter periods in lieu of signing new space until the economic outlook becomes more stable. In December, the consensus rent estimates from Dagens Næringsliv for the second half of 2014 were released (see figure 09 and 10). This shows a relatively limited to flat annual development in rents in all segments. Prime, CBD and Skøyen has seen a growth between 1-2 %, whereas the remaining areas have seen limited to no growth over the past year. Despite the decrease in signed contracts, rent levels have not been significantly affected.
Since our last report, Skanska has signed a contract to move into 7,500 m² brand new offices in Lakkegata 55 in Oslo CBD, a development project it also owns 50 % of along with Entra. Bouvet is taking up 4,500 m² at Sørkedalsveien 8 located at Majorstuen (inner west fringe), and Google is moving into newly renovated premises owned by NPRO at Bryggegata 8, Prime CBD.
uncertainty has resulted in a slowdown in the oil and offshore industry, and employee cutbacks have already started happening. Thus, we believe we will see an increase in subletting in the west fringe areas where the oil & offshore clusters are located. Several large tenants have become more careful with regards to future need for space and when to move.
TRENDS As of February, around 325 companies are actively seeking just over 650,000 m² of office space in Oslo. The ten largest of these companies are seeking almost 150,000 m² of office space, equivalent to almost 25 % of the total active search. Of the top ten, 65 % are government or municipal agencies with contracts expiring within the next three years.
Also, a surplus of available sites and properties in the fringe areas in combination with falling yields has created some downward pressure, as lower yields are incentivising landlords to lower rents in order to fill their properties or new projects. As a result, we believe the rental market will reflect the business sector’s somewhat sober outlook for 2015.
The forecast for the rest of 2015 is that rent levels in the fringe areas will experience a drop of between 2 % and 10 % from today’s levels, while the CBD rents will remain at their current levels. The continuing oil price
The Oslo Office Market
07
17
Oslo Office Rents March 2015 The map shows office rent levels for high-standard units larger than 500 m² in different parts of Oslo, as of February 2015.
Sinsen Nydalen Storo Kjelsås Grefsen
Oslo Outer East
Ullevål
Oslo Outer West
Alna-Ulven
Økern Inner City North Majorstuen
Skøyen
Inner City West
Helsfyr-Bryn
CBD Inner City East Ryen
Lysaker
Oslo Outer South Fornebu
Rent, NOK/m²: General high standard / Top standard and new space 3,600 / 4,200 2,800 / 3,350 2,350 / 2,800 1,800 / 2,400
08
Source: Akershus Eiendom
1,600 / 2,150 1,400 / 1,950 1,000 / 1,650
Oslo Office Leasing Examples Property/location Haakon VII's gate 1 Bryggegata 8 Munkedamsveien 53 Torggata 5 Brugata 19 Fridtjof Nansens plass 4 Rosenkrantz gate 22 Schweigaards gate 16
Lakkegata 55 Verkstedveien 1 Verkstedveien 1 Karenslyst Allé 20 Sørkedalsveien 8 Essendrops gate 3 Fridtjof Nansens vei 17 Gullhaugveien 12 Lysaker torg 15 Smeltedigelen 1 Sandvika Business Center Grenseveien 92
Owner Blystad NPRO Aberdeen Asset Management Olav Thon DNB Livsforsikring ASA Eiendomsspar Lene AS Entra Eiendom Entra/Skanska NPRO NPRO Sparebank 1 Livsforsikring Blystad NRP Finans Furuholmen Eiendom AS NPRO Storebrand OBOS Attivo Eiendomsutvikling AS Entra Eiendom
Tenants HitecVision Google NæringsEiendom Økonor Viken Fiber Golar LNG AIG Dinamo Skanska Sektor Gruppen PA Consulting Group Capgemini Bouvet ASA Help Forsikring Samordna Opptak Oslo University Hospital Norwegian Broker Berendzen Regional Tax office, Sandvika Skala
Floor space m² 600 2,500 600 1,200 800 1,200 1,000 1,500 7,500 1,800 1,300 3,500 4,500 3,800 2,400 3,200 2,000 1,000 3,000 1,500
Area Prime Prime Prime CBD CBD CBD CBD CBD CBD Skøyen Skøyen Skøyen Majorstua Majorstua Majorstua Nydalen Lysaker Inner City East Sandvika Helsfyr
The Oslo Office Market
09
Year-End Rent Levels 2004–2014 The figure shows rent levels based on signed contracts; both new signings and renegotiations
18
Prime High std CBD Newer space CBD Good std CBD High std Skøyen High std west fringe High std east fringe Older, ineffective space
2004 1,950 1,550 1,700 1,250
2005 2,100 1,700 1,900 1,300
2006 2,700 1,900 2,000 1,400
2007 3,900 2,300 2,600 1 ,900
2008 3,750 2,300 2,600 1,900
2009 2,700 2,200 2,500 1,850
2010 2,850 2,350 2,550 1,900
2011 3,100 2,550 2,650 2,250
1,300 1,100 500
1,400 1,150 600
1,750 1,300 800
2,200 1,550 950
2,200 1,650 950
1,900 1,550 900
1,900 1,650 900
1,900 1,650 800
2012 3,400 2,850 2,850 2,250 2,450 1,900 1,700 800
2013 3,750 2,900 2,900 2,400 2,650 2,100 1,800 900
2014 3,800 2,900 2,900 2,450 2,700 2,100 1,800 900
Sources: Dagens Næringsliv Akershus Eiendom
NOK / m2 / year 4 500
Office Rents 1985–2014
4 000
Nominal NOK
3 500
The figure shows rent levels based on signed contracts, both new signings and renegotations.
3 000 2 500 2 000 1 500 1 000 500
Prime High std CBD Newer space CBD Good std CBD
Sources: Dagens Næringsliv Akershus Eiendom
2013 H2
2014 H2
2011 H2
2012 H2
2010 H2
2009 H2
2007 H2
2008 H2
2006 H2
2005 H2
2003 H2
High std Skøyen High std west fringe High std east fringe Older, ineffective space
2004 H2
2001 H2
2002 H2
1999 H2
2000 H2
1997 H2
1998 H2
1996 H2
1994 H2
1995 H2
1993 H2
1991 H2
1992 H2
1989 H2
1990 H2
1987 H2
1988 H2
1986 H2
0 1985 H2
10
The Oslo Office Market
20
Survey of Relocation Patterns
RELOCATION PATTERNS FOR 2014 Akershus Eiendom annually collects and analyses a representative sample of recently signed lease contracts to map tenants’ relocation patterns across Oslo. This year’s sample consists of 65 tenants occupying 163 000 m² (excluding renegotiated contracts and extensions), to produce the annual relocation statistics shown in figure 11, seen on the next page. Some of the largest individual contracts signed in late 2014 are listed in the recent market activity chapter. Total volume of signed leases is down compared to earlier years, and this is, as mentioned, due to the lack of large lease contracts and a generally slow leasing market in 2014. CONCLUSIONS FROM THE 2014 SURVEY Staying within the same greater area is still the typical trend for tenants relocating. During 2014 very few decided to move out of their area, with the share staying for all areas being 69 % of the total data sample. As earlier years, tenants located in the west-
ern part of Oslo decided to stay in the same area as opposed to moving elsewhere. The net effect for Oslo west is positive, and significantly higher than the other areas. Tenants who chose to relocate within the CBD areas have decreased slightly during 2014 compared to earlier years. 62 % of all relocating tenants in the area decided to stay, whereas the tenants relocating from CBD were quite equally divided between eastern and western parts of Oslo, however slightly favouring the western locations. The net effect for the CBD area is mildly negative for 2014. Based on historical behaviour, tenants relocating from eastern Oslo tend to favour western locations over Oslo CBD. This is mainly due to rent levels. Surprisingly this year, there is significantly more volume relocating to the CBD areas compared to western Oslo. This is driven by two larger lease contracts taking up almost 65 % of the total moving volume for the tenants relocating to Oslo CBD.
IMPLICATIONS FROM THE TEN YEAR RESULTS OF THE SURVEY Ten-year results of our relocation survey are shown in the bottom graphs. Tenants relocating from CBD to eastern areas seem to stabilize around its five year average of 20 %. However, the trend from the initiation of this survey in 2005 is positive. Western Oslo tenants are still reluctant to move eastwards, and the area continues to hold the highest percentage of tenants staying within the same area. Only 54 % of the eastern Oslo tenants chose to stay, whereas 36 % chose to relocate to CBD. This is the highest figure registered since 2010.
The Oslo Office Market
11
21
Relocation trends 2014 46 100 m² The map shows the moving patterns of tenants who signed new contracts for office space during 2014, as represented by their volumes.
Oslo
4 500 m
Staying 54%
Staying 94% 14 900 m
1600m²
The CBD is limited in the west at Solli plass and in the east at Bjørvika. The tenants will physically move between 2014 and 2017.
23 300 m
15 700 m
43 500 m² Staying 62% 1500 m
Oslo CBD
Oslo West
Oslo East
Oslo West Net effect: 16 500 m Oslo CBB Net effect: - 10 000 m Oslo East Net effect: - 6 500 m
100%
Share of office space
90%
From CBD, West and East
80%
All tenants included in the survey:
70%
Have signed a new lease contract, It is not a condition that the company has physically moved during the year.
60% 50% 40% 30% 20% 10% 0%
Moving from CBD Moving to CBD Moving to West Moving to East
Moving from West
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Will occupy more than 500 m² of office space in their new location.
Source: Akershus Eiendom
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Moving trends 2005-2014
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
12
12 100 m
Moving from East
Source: Akershus Eiendom
The Oslo Office Market
22
Vacancy
status Oslo office vacancy measured as floor space available now or within 3 months stands at 8 % as of January 2015, or 655,000 m². This is up 0.5 % since last quarter, and 1 % up from one year ago. Vacancy in the CBD areas is on average 6.0 %, slightly higher than the average 2014 level of closer to 5.0 %. More office space was converted into other purposes during 2014 compared to what was constructed and completed over the same period. As can be seen from the graph, net office supply was thus negative. Seen in isolation, this should suggest a decrease in vacancy. However, due to the low volume of new signed leases the past year, the demand of space did not keep pace with the new vacancies becoming available during the year. As employment has increased during 2014, this is mainly due to tenants' uncertainty about the future and the resulting reluctance to commit to new lease contracts. Lysaker, inner city east and Økern are the areas with the highest vacancy rates, all
above 13.5 %. The CBD areas’ vacancy currently stands at 6 %, whereas prime CBD is up from 4 % last January to 6.3 % this year. Despite this increase it is still considered being at a low level, as the demand for premises in this area is high. The largest vacant spaces as of January were Østre Aker vei 90 at Økern with 27,000 m² vacant and Nydalsveien 28 with 20,000m² vacant located in Nydalen. As of January, 13 premises larger than 10,000 m² were vacant. trends Our Oslo office vacancy forecast (see graph 14) is mainly based on future expected employment, our own surveys and estimates for new constructions and demand, as well as macro analysts’ forecasts for economic activity. Preliminary figures show that for the period 2016–2018, between 85,000 and 120,000 m² of new office space will enter the market each year.
Our estimate of office space being converted into other purposes still remains at 65,000 m² every year, which gives a very modest net supply of office space throughout the next years. A known volume of large lease contracts expiring during the years 2016-2019, as well as positive forecasts for long-term employment growth, are drivers for increased absorption of space over the coming years. Taking this into account, we believe future vacancy will decrease slightly after being stable throughout 2015. Vacancy for the CBD areas are expected to stay 2-3 % lower than the market average.
The Oslo Office Market
13
23
Oslo Office Vacancy, January 2015
Nydalen Ullevål
This map shows vacancy in the various office areas of Oslo in January 2015. Space counted is available at the latest by march 31.
Oslo Outer East
Sinsen Storo Kjelsås Grefsen
Alna-Ulven
Oslo Outer West Økern Majorstuen
Helsfyr-Bryn
Inner City West
Skøyen
Inner City North
Sentrum
Inner City East
Lysaker Ryen
Oslo Outer South Fornebu
1 000 000
Source: Akershus Eiendom
11.0%
Oslo Office Vacancy, 2002-2018E
900 000
300 000
7,5 %
8%
8%
8% 7.0%
6.5%
7.0% 4.5%
500 000
5.0%
600 000
400 000
8.0%
8.0% 7.0%
700 000
4.0%
200 000 100 000
Actual Forecast Vacancy level by the start of the year Net new office space added Change in demand (absorbed space)
Sources: Akershus Eiendom Various developers
2018E
2017E
2016E
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0 2003
The office vacancy will develop relatively flat for the coming years given today’s knowledge of supply and expectations of future demand..
9.0%
800 000 The columns show how vacancy changes due to demand. The forecasts of new demand and supply are based on knowledge about spesific office developments and the official estimates for employments growth.
2002
14
13.0%
m² office space
< 7,5 % <5% < 2,5 %
13.0%
< 17,5 % < 15 % < 12,5 % < 10 %
The Oslo Office Market
15
24
Vacancy risk, 2015-2017 The map shows the risk of future vacancy within each sub-area in Oslo in the coming two years until January 2017, based on known volumes of office space entering the market during the period, either through new vacant buildings or because the tenant has signed to move out. The analysis does not take into account the effects of tenants moving between sub-areas; it is solely a supply-side risk analysis.
Nydalen Ullevål
Oslo Outer East
Sinsen Storo Kjelsås Grefsen
Alna-Ulven
Oslo Outer West Økern Majorstuen
Skøyen
Inner City West
Inner City North
Helsfyr-Bryn Sentrum Inner City East
Lysaker Ryen
Oslo Outer South Fornebu
High risk Medium risk Low risk
Source: Akershus Eiendom
The Oslo Office Market
26
Development
new office construction New office developments were completed in 2014. Only 43,000 m² of new office space entered the market, compared to 147,000 m² in 2013. New office space being finalised in 2015 is expected to be 160,000 m² and only 20 % of the new stock is speculative. For 2016 and 2017 the volume of known new supply is 82,000 m² and 44,000 m² respectively. The new projects’ locations and status are depicted in figure 16. There have been few new office buildings initiated since our last report. Dronning Eufemias gate 42 and Dronning Eufemias gate 6b are expected to be completed in 2016-2017. Both projects are speculative and contain about 4,000 m² office space each. Much of the ongoing development is concentrated to the area around the central station and the eastern part of the city centre. The largest project in this area is Sundt-kvartalet comprising nearly 28,000 m² office premises. It is a collaboration
between Entra Eiendom and Skanska, and Skanska will move into the new office building upon completion in the end of 2016. 70 % of the building is vacant. The new head office for Statoil Fuel and retail in Schweigaards gate 16 will soon be completed, and Entra Eiendom has recently signed a leasing contract with Dinamo for 1,500 m² of the vacant space.
office space. The two first construction stages will be completed in 2015 and the third will be finished in summer 2016.
Since the last report, Norwegian Property has signed a new leasing contract with Sektor Gruppen for one floor in Verkstedveien 1 at Skøyen. The project will be completed in September, and half of the floor space is still vacant. Schage Eiendom will soon start the demolishing of the existing building in Drammensveien 145-147 and are planning to finalize the zoning process and start the construction of 25,000 m² new office space in August.
Trends With a slowdown in the GDP growth, we do not expect to see much activity for opening up new areas for development in the coming couple of years. A number of large tenants might choose new buildings during 2015, for completion in 2016-18. As the price difference between the fringe areas in general and the CBD is now record high, the announcements of any new project will signal which area has an advantage, and whether the difference will stay or change.
Another large development site in Oslo is HasleLinje at Økern in the northeast, where it is possible to build a total of 100,000 m²
Construction of new space at Fornebu, except for the Fornebuporten project, is expected to slow down until the new metro line is ready, which is now expected to happen in 2021-22.
Construction costs As can be seen in graph 21, the order backlog
for the total construction industry has decreased by 5 % during the third quarter of 2014. While the reserve of orders in civil engineering decreased by 12 % during this period, the reserve of building orders increased by 1 %. Despite the decrease in the order backlog of the construction industry, it is still 2 % higher than in the third quarter of 2013. The backlog of residential projects has decreased significantly during the last year, and the activity is likely to decline somewhat in 2015. The activity within the commercial sector has increased in the same period. Akershus Eiendom’s estimated turnkey cost for new office buildings in Oslo, shown in graph 20, is currently at NOK 20,000 per m² office space, which is unchanged from our last report. Our estimate is changed from a flat development to a slight decline, about 5 %, in building costs over the next 12 months.
The Oslo Office Market
16
28
New office buildings 2015-2017 2015: 167,000 m² 2016: 94,000 m² 2017: 43,000 m²
American Embassy
The map shows the location, year of completion, leasing/vacancy situation and relative size of the ongoing or in other ways confirmed office construction projects in Oslo. The names are either the address, project name, or tenant name where the project has one major tenant.
Bymiljøetaten
Fr. Nansens vei 16
OCCI
Aller Media Cowi
Verkstedveien 1 Storgata 14–18 Silurveien 2 DEG 6B
Drammensvn 147 Lysaker Polaris
R.S Platou
Sundtkvartalet
SFR DEG 42
Diagonale
Fornebuporten Building B
17
Vacant
Occupied
Building A
New buildings 2015 New buildings 2016 New buildings 2017–2018
Source: Akershus Eiendom
Available Land Plots for Office Development in Oslo Potential size, floor space m²:
150 000 m²
75 000 m²
25 000 m²
10 000 m²
Available now or within 4 years Long-term development potential
Source: Akershus Eiendom
The Oslo Office Market
Developer Aker Norwegian Property OCCI AS NCC Property Development Höegh Eiendom Entra Eiendom Selvaag Höegh Eiendom Reimers family United States of America ROM Eiendom Aker Entra Eiendom / Skanska Höegh Eiendom Olav Thon Gruppen Oslo S Utvikling Schage Eiendom HAV Eiendom / Olav Thon Watrium
m2
250 000
200 000
150 000
100 000
50 000
Source: Akershus Eiendom
2018E
2017E
2016E
2015E
2014E
2012
2013
2011
2010
2009
2007
2008
2006
2005
2003
2004
2001
West East CBD Estimate (all areas)
2002
2000
0 1998
Completed new office space in Oslo (including Fornebu). Only certain new buildings is included in the 2015-2018 figures.
Area Completion Fornebu 2015 Skøyen 2015 Outer city west 2015 Lysaker 2015 Økern 2015 CBD East 2015 Outer city west 2015 Økern 2015 Majorstuen 2015 Outer city west 2015 Prime 2015 Fornebu 2016 CBD North-East 2016 Økern 2016 CBD North-East 2016 CBD East 2016 Skøyen 2017 CBD East 2017 CBD East 2017
300 000
1999
New office space
1997
19
Property/building Floor space m² Fornebuporten - building B 30,000 Verkstedveien 1 26,500 Ullernchausseen 56 20,000 Lysaker Polaris 18,000 Hasle Linje (City park/environment office) 16,000 Schweigaards gate 16 (Statoil Fuel & Retail) 13,000 Silurveien 2 9,500 Hasle Linje (Aller Media) 9,400 Fridtjof Nansens vei 16 8,100 American Embassy Huseby 5,000 Munkedamsveien 62 5,000 Fornebuporten - building A 29,500 Sundtkvartalet 27,600 Hasle Linje (Cowi) 12,500 Storgata 14-18 8,500 Dronning Eufemias gate 42 4,200 Drammensveien 145-147 25,000 Diagonale 15,200 Dronning Eufemias gate 6b 4,000
1996
New major Oslo office projects, 2015-2017
1995
18
29
The Oslo Office Market
30
NOK / m2 20
Estimated Turnkey Cost
24 000 22 000 20 000
Akershus Eiendom’s official estimate of turnkey cost is based upon information from recent initiated projects and input from valuations.
18 000 16 000 14 000 12 000 10 000
Estimated future construction cost Observed construction cost
Source: Akershus Eiendom
Value index for backlog
175 150 125 100 75 50
National index, all new and existing buildings incl rehab projects New residential buildings Other new buildings (mainly commercial)
Source: Statistics Norway
14 Q1
13 Q1
12 Q1
11 Q1
10 Q1
09 Q1
25 08 Q1
The graph shows the order back log for new buildings. The graph has been deflated by the total production index to remove effects of changes in building costs (basic component costs) and changes in margins to contractors
200
07 Q1
Quarterly index
225
06 Q1
Nationwide 2004–2014
250
05 Q1
Order Backlog New Buildings
275
04 Q1
21
Jan 16
Jul 15
Jan 15
Jul 14
Jan 14
jul 13
jan 13
Jul 12
Jan 12
Jul 11
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jul 07
Jan 08
Jan 07
Jul 06
Jul 05
Jan 06
Jan 05
8 000
The Investment Market
32
The Investment Market
Commercial property transactions totalled NOK 87 billion in 2014, a record-high volume in Norway and an increase of 133 % compared to 2013. Previous record was in 2006 with a volume of NOK 58 billion. However, the figures include the IPO of Entra Eiendom which counted for almost NOK 28 billion in total property value. The remainder, however, is still a record high volume at NOK 59 billion. After a relatively slow start of 2014, Akershus Eiendom observed very high activity from May/June throughout the rest of the year. Not since 2006/2007 have we seen similar activity in the investment market. The main reason for this is the steep decrease in long term interest rates over the last year, and the banks’ increased lending activity. At the beginning of 2014 10Y SWAP was 3.3 %. In February 2015 it is 1.8 %, a significant decline of 1.5 %-points. At the same time banks have lowered their margins for solid players making total funding costs for investors record-low.
Since our last report we have changed our Prime yield from 5.00 % to 4.5 % due to the reduction in both interest rates and margins, supported by transactions observed in the market. • City Finansiering has acquired Bolette Brygge 1 at Tjuvholmen from Union Eiendomskapital at a record low yield, 4.5 %. Bolette Brygge 1 was built in 2007 and has a total area of 3,969 m2. • KLP Eiendom bought Schweigaards gate 21-23 from Rom Eiendom. The properties are located in CBD east and have highly reputable tenants in Gjensidige and NSB (Norwegian railway). The sales price was NOK 1,750 million, corresponding to a yield of 4.75 %. • Starwood Capital Group, a global private investment firm, has agreed to purchase DnB NOR Eiendomsinvest I in Norway. In conjunction with the transaction, Starwood will also acquire
SveaReal Fastigheter in Sweden. The overall deal is valued at around NOK 11,000 million, which is the single largest property transaction in Scandinavia in 2014. • Another foreign investor, Meyer Bergman, acquired their first property in Norway when they bought Grensen 17 in Oslo for NOK 260 million (EUR 30 million) from a venture between Søylen and Madison International Realty. • Genesta Nordic Baltic Real Estate has sold Karl Johans gate 14 and Kirkegata 23-25 in Oslo to a subsidiary of AVA EiendomsPartner for NOK 782.5 million, corresponding to a yield of around 5 %. After having been almost absent for the last couple of years, several large logistics transactions took place in 2014 – details are given in the corresponding chapter. Total transaction volume for logistic properties in 2014 ended at more than NOK 10 billion, an increase of 176 % compared to 2013.
The Investment Market
The one segment with decrease in activity was retail; however, this was after several years when major players acquired key shopping centres and thus large volumes changed hands. A trend we have seen over the last years in the Norwegian commercial real estate market is that there are significantly more buyers than sellers. This trend, of course, drives the prices upwards. As a consequence of low interest rates, investors consider the return in commercial real estate as attractive relative to the risk. Even after the yield compression we have seen lately.
33
The Investment Market
22
Transaction Volume of Commercial Properties Only deals larger than NOK 50 million are incuded in the graph. Volume in 2014 ended close to NOK 87.5 billion.
34
90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000
Interest Rates and Prime Transaction Yields 2003–2015
2015
2014
Source: Akershus Eiendom
Residential projects Commercial land plots Logistics / industrial properties Hotels Retail properties Office buildings
7.50 % 7.00 % 6.50 % 6.00 % 5.50 % 5.00 % 4.50 % 4.00 % 3.50 % 3.00 % 2.50 % 2.00 % 1.50 %
Transaction Yield 10Y SWAP 10Y Gov. Bond
jan 15
jul 14
jul 13
Source: Akershus Eiendom
jan 14
Jul 12
Jan 13
Jan 12
Jul 11
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jan 08
Jul 07
Jan 07
Jul 06
Jul 05
Jan 06
Jul 04
Jan 05
Jan 04
1.00 % Jul 03
The curve indicates the 10-year government bond rate and the 10-year SWAP rate. The triangles represent time and sales yield for large Oslo office transactions since Jan 2003.
Jan 03
23
2013
2012
2011
2010
2009
2008
2007
2005
2006
0
The Investment Market
24
35
Sellers and Buyers of Commercial Property 2013–2014
11%
5%
6%
17%
6% 5%
2014
29%
41%
29%
2% 7%
7%
15%
14%
8%
13%
4%
7%
37%
10%
2013
13%
8%
35%
13%
12%
24%
22%
Buyers
Property companies Listed property funds Government Closed-end funds Insurance/Pension funds
25
Sellers
Property funds Foreign investors Private investors Owner occupier Remaining
Source: Akershus Eiendom
Oslo Office Transactions Property/location Sannergata 2 Grenseveien 95 Karl Johans gate 13 Haslevangen 45/47 Økernveien 94 Lysaker Polaris Karl Johansgt. 14 / Kirkegt. 23-25 Drammensveien 211 Bolette Brygge 1 Schweigaards gate 21-23 Økernveien 11-13 Økernveien 9 Lørenveien 37 Hans Møller Gasmanns vei 9 Lørenveien 68 Lilleaker veien 4A Haslevangen 15 Christian Kroghs gate 32
Floor space m²
Price NOK million
20,000 10,500 1,950 15,500 18,500 26,000 17,300 11,000 4,000 32,000 12,000 12,100 7,000 25,000 11,700 9,000 10,000 11,000
<700
Seller
Buyer
Closed-end fund (Pareto Project Finance) DNB Næringseiendom Aberdeen Norge II
Hemfosa Aberdeen Norge I Søylen Eiendom Closed-end fund (Platou Real Estate) Closed-end fund (Pareto Project Finance) Storebrand Eiendomsfond Norge KS AVA Eiendomspartner Closed-end fund (DTZ) City Finansiering KLP Eiendom Bergen Kommunale Pensjonskasse Closed-end fund (NRP) Ragde Eiendom Bulk Eiendom/Akershus Energi Oslo Pensjonsforsikring Mustad Eiendom Møller Eiendom Anthon B Nilsen Eiendom/OBOS Forretningsbygg
195 785 782,5
1,750 300 390 158 300 240 200 149
Nordisk Areal 1 AS NCC Property Development Genesta Nordic Baltic Real Estate Egil Stenshagen Closed-end fund (Union) ROM Eiendom Closed-end fund (DTZ) Closed-end fund (DTZ) Nortura SA Anthon B Nilsen Eiendom Storebrand Eiendomsfond Lilleakerveien 4 ANS Marienlyst Eiendom Aberdeen Property Nordic Fund I SICAV-FIS
Regional Property Markets
36
Regional Property Markets BERGEN
TRONDHEIM
STAVANGER
Total transaction volume in Bergen ended at approximately NOK 3 billion, which is among the highest volumes on record in the region. The high activity is expected to continue in 2015.
Total transaction volume in Trondheim for 2014 ended at about NOK 4 billion, and the active transaction market is expected to continue in 2015.
2014 was an active year in the transaction market, and total transaction volume in Stavanger ended close to 5 billion in 2014. The high activity in the transaction market is expected to continue going forward.
Prime yields are seen in the area 5.75 % - 6.0 % and up to 7.25 % for good objects. Vacancy at the end of 2014 was about 8.0 %, and is expected to increase in 2015 due to a challenging leasing market with several new office buildings, large moving processes and staff reductions, especially within the oil/offshore/engineering segment. Rent levels for new office buildings with CBD locations are seen at levels between NOK 2,200 – 2,500 per m², and are expected to be stable at these levels going forward. Existing office buildings with good standard are expected to experience a slight decrease. Older and inefficient office buildings are difficult to rent out, and might be converted to other purposes than office in the future. Sublease contracts can affect the rental level in the short and medium term.
Yield levels are stable, and prime yield is now between 5.5 % and 6.0 % while “normal” yield is in the area 7.5 % - 9.9 %. Office vacancy is today at about 7.1 %, which is an increase since the last report. The increase can mainly be explained by new buildings at Grilstad as well as subletting from Aker Solutions. Vacancy within the retail segment is still increasing, and even space with good location can stay vacant over a longer period of time. Office rent levels in Trondheim are stable at NOK 1,000 – 2,200 per m². About 44,800 m² of new office space is expected to enter the market during 2015. As of today, about 32,500 m² of new office space is planned in 2016-18.
Rent levels are still stable in the Stavanger region, but some areas and segments are experiencing some downwards pressure. The highest rent levels are seen in the Stavanger CBD area. Overall, vacancy is still low in this region and total vacancy is today at 4.3 %. This can mainly be explained by few available spaces within the retail and combination segments. Vacancy in office buildings has increased from 7 % to 8 %, which indicates an imbalance between supply and demand. The vacancy is expected to increase going forward, especially for office buildings. Yield levels for prime objects are unchanged at 6.5 % to 7.5 %, and are expected to stay at these levels going forward.
Regional Property Markets
26
Year-End Office Rents 2005–2014
38
Bergen Trondheim Stavanger - CBD Stavanger - Oil Kristiansand Tromsø
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1,100 1,225 1,400 1,550 1,475 1,475 1,475 1,475 1,475 1,475 1,200 1,350 1,650 1,650 1,600 1,600 1,650 1,700 1,700 1,750 1,300 1,500 1,650 1,700 1,600 1,600 1,700 1,900 1,950 2000 1,050 1,200 1,350 1,400 1,300 1,300 1,350 1,450 1,525 1,450 1,200 1,350 1,525 1,550 1,425 1,400 1,400 1,375 1,400 1,400 1,000 1,000 1,300 1,300 1,300 1,450 1,450 1,500 1,675 1,650
Source: Dagens Næringsliv
NOK/m2/year
Regional Office Rents 1989–2014
2 000
Nominal NOK
1 600
1 800
1 400 1 200 1 000 800 600 400 200
Bergen Trondheim Stavanger - CBD
Stavanger - Oil (Forus) Kristiansand Tromsø
Source: Dagens Næringsliv
2014 H2
2012 H1
2013 H2
1201 H1
2010 H1
2009 H1
2007 H1
2008 H1
2006 H1
2005 H1
2004 H1
2002 H1
2003 H1
2001 H1
1999 H1
2000 H1
1997 H1
1998 H1
1996 H1
1995 H1
1994 H1
1993 H1
1992 H1
1991 H1
1989 H1
0 1990 H1
27
Regional Property Markets
39
Office rent, NOK per m2 31
Office Rents February 2015
2 800
Bergen
2 600
Trondheim
Stavanger
2 400
2 200 The columns show lower and higher 2 000 rents for different areas within the three cities. Bergen rents are more 1 800 uniform than Stavanger and Trondheim. 1 600 1 400 1 200 1 000 800 600 400 200
Tananger
12%
10%
8%
6%
4%
2%
Bergen Trondheim Stavanger
15 Jan
14 Sept
14 Jan
13 Jan
13 Sept
12 Jan
12 Aug
11 Aug
11 Jan
10 Aug
10 Jan
09 Aug
09 Jan
08 Jan
08 Aug
07 Aug
07 Jan
06 Sept
06 Feb
05 Sept
05 Jan
04 Feb
0% 03 Oct
Regional Office Vacancy 2003–2015
Forus
Sources: Eiendomsmegler1 Midt-Norge Eiendomsmegler1 Rogaland Kyte Næringsmegling
Best rent levels Lower rent levels
29
CBD
South
East
Fringe CBD
CBD
Sandsli
Fyllingsdalen
Fringe CBD
CBD
0
Sources: Eiendomsmegler1 Midt-Norge Eiendomsmegler1 Rogaland Kyte Næringsmegling
Regional Property Markets
33
40
Leasing Property / location
Floor space m²
Rent / m²
3,900
n.a
3,500 Office / 3,000 Production 2,200 1,775
1,750
1,100 610 1,130
2,500 1,450 1,465
Stavanger Professor Olav Hanssens vei 10 Trondheim Grilstad Marina Beddingen 14 Kongens gate 2 Bergen Jonsvollskvartalet Kanalveien 105 Sandviksboder 66
31
n.a n.a
Tenant
Owner
Norwegian Mapping Authority
Entra
Kongsberg Maritime
Grilstad Marina
IF Forsikring BN Bank
Aberdeen Sparebank 1 SMN
Sparebanken Vest Expoline Swire Seabed
Jonsvoll Utleie AS Aberdeen Gjensidigegårde AS
Sales Proper ty / location Trondheim Residencekvartalet Sluppenveien 14 Haakon VIIs gate 13 Haakon VIIs gate 14 Bergen Kong Olav V's Plass 4 Olav KyrresgT 41/Vaskerelven 39 Damsgårdsveien 161-171 Torget 1 Stavanger Nykirkebakken 2 Verksgata 1 Apply HQ, Forus Tollboden Aker Solution, Hinna Park Fluid Controll, Sola Maersk, Forus
Floor
Price
space m²
NOK million
11,370 25,000 9,780
307 174 84 77
1,690 4,090 16,370 478
92 80 206 46
12,00 10,700
378 240 660 110 1,550 160 120
4,380 66,000 6,900
Buyer
Seller
PS Platou Heglund Holding NorInvest Koteng Bolig
Sparebank 1 Oslo Akershus Posten Norge Prora Eiendom Skifte Eiendom
Thore Arild Økland Invest
Bara EGD Aberdeen Kløver Eiendom
Union Union WP Carey Camar Eiendom NIAM DNB syndikat DNB Syndikat
Schibsted DNB Næringseiendom Apply Entra Several owners Stavangerske Investeringsselskap Base Property
32
New Building / Rehabilitation Floor space m²
Completion
Trondheim Sluppenveien 17BC Verftsgata 2 Bassengbakken 2 Vestre Rosten 69 Trondheim Maritime Senter Trapphuset Abels Hus
Developer
Tentant
12,500 15,300 7,000 1,000 n.a 4,500 15,000
2015 2015 2015 2015 2015 2016 2017
Kjeldsberg Eiendom AS Prora AS Kjeldsberg Eiendom AS Hent AS Trondheim Havn/Koteng ROM Eiendom KLP
Statkraft Adresseavisen Evry Hent AS Heimdal Eiendom
Stavanger Forus Vest Forus Vest Buøy Bjergsted Project Gullfaks - Hinna Park Sandes Sentrum
38,500 10,000 7,000 10,000 18,000 4,000
2014 2014 2014 2014 2016 2016
Forus parkering Vest Base/Håkull Buøy Invest Veritas
Various Proserv Bergen group Centrica Wintershall Sandnes Sparebank
Bergen Jonsvollskvartalet Bergen Stasjon Nygårdsgaten 112 Kokstadvegen 23 Nestunbrekka Næringspark Sandsliåsen 50 Kokstadflaten Haukås Langarinden (Åsane) Kronstadparken C. Sundtsgate (Grieg Gaarden) Marineholmen Fantoftvegen 14 Kronstadparken - "Vinkelbygget" Media City
19,400 14,800 14,000 15,000 10,500 14,900 19,000 4,000 10,000 14,000 5,000 8,000 18,500 13,300 40,000
2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016/2017 2017
Jonsvollskvartalet AS ROM Eiendom Odfjell Eiendom Ferd Backer EGD Odfjell Drilling Haukås Handelspark EGD Bara Grieg Property Marineholmen Helmers AS Bara Entra/OPF
Stavangerske Investeringsselskap
Sparebanken Vest et al KLP et al Statens vegvesen et al Aibel Various Choice Odfjell Drilling Kverneland Solberg & Andersen Grieg et al DNV GL Sweco et al T V2, NRK among others
International Office Markets
42
International Office Markets
International Office Markets During 2014, the vacancy rate in Stockholm CBD has increased, while it has decreased or remained unchanged in other Stockholm sub-markets. Overall, the vacancy rate in Stockholm has remained unchanged at 9.1 % during 2014, which is the lowest vacancy rate recorded since 2001. The total transaction volume in Stockholm during 2014 amounted to SEK 57.1 billion (approx. EUR 6 billion), including 12 cross-border transactions. Prime rents have remained stable in all sub-markets throughout 2014; however rents are expected to increase slowly going forward, due to increased demand for prime office space. Prime yield has remained unchanged at 4.25 %. The demand for prime office investments in Copenhagen has been a lot higher than the supply during 2014, thus the prime yield has decreased to 4.75 %, down 25 bps from 2013. Overall vacancy rates remain high at 10.3 %; however, the vacancy rate in and around the CBD have decreased. The demand for office space is focused on modern and efficient
properties, thus the prime rent has remained stable the last three years, while rents for less efficient office space has fallen. The prime rent currently stands at DKK 1,750 per m². The investment market experienced an upturn during 2014. This was mostly because of an increase in demand for office as an investment class due to reasonable return compared to assets such as stocks and bonds. Helsinki experienced a rental decline during the second half of 2014, as it did in the first half. The overall vacancy rate declined by 0.1 %, after having increased over the last two years. However, this was mostly due to conversion of modern office space for residential use. The Helsinki CBD has actually seen an increase in vacancy as tenants move to new office buildings outside the city centre. The Helsinki prime rent has been stable the last three years, while the prime yield has steadily declined since 2008, and is now at 5 %. European office markets The Jones Lang LaSalle “Office Clock” describes the European market situation by
plotting development in prime rents for major cities. The clock illustrates the market movements for the different cities over 6 months. The rental growth in Stockholm is still positive, but is moving towards a slower growth compared to 6 months ago, rents in Helsinki have peaked out and are now falling, while the rents in Copenhagen are unchanged during the 2nd half of 2014.
International Office Markets
33
43
JLL Office Property Clock Main European Cities Q4, 2014
Lyon Cologne Helsinki Berlin, Frankfurt, Gothenburg, Stuttgart, Hamburg, Oslo, Malmö
St.Petersburg
Moscow
Munich Rental Growth Slowing
Rents Falling
Dusseldorf London WE Stockholm, Dublin, London City Luxembourg
Rental Growth Accelerating
Rents Bottoming Out
Kiev Geneva, Zurich Warsaw
Manchester Edinburgh Amsterdam, Milan, Madrid
Athens, Brussels, Rome, Bucharest, Budapest, Prague, Copenhagen, Istanbul, Lisbon
Barcelona, Paris CBD
Source: JLL Akershus Eiendom
34
Key Information Nordic Cities Q4, 2014 Key Data Inflation 2014 (%) Prime Yield (%) (CBD) Yield grade B properties (%) (CBD) Prime Rent (Local Currency / Euro / m²) (CBD) B grade Rent (Local Currency / Euro / m²) (CBD) Office Space (m2) (Total) Completions - 2014 (m²) (Total) Completions - 2015 (m²) (Total) Vacancy rate (%) (Total)
Oslo 2 4.5 5.50-6.00 4,200 / 490 2,500 / 290 8.3 mil 60,000 167,000 7.5
Stockholm 0.2 4.25 6.00-6.50 4,500 / 475 2,500-3,100 / 265-330 11.6 mil 167,300 68,000 9.1
Copenhagen 0.6 4.75 5.75-6.50 1,750 / 235 1,200 / 240 11.8 mil 140,000 175,000 10.3
Helsinki 1.1 5 7.00-7.50 300 186-210 8.6 mil 65,000 90,000 11
Gothenburg 0.2 4.5 6.00-6.50 2,600 / 283 1,800-2,300 / 190-240 3.3 mil 24,800 60,200 5.9
Sources: JLL Akershus Eiendom
International Office Markets
44
€/m2/year 35
Nordic Office Rent Development
700
600
500
400
300
200
100
2013
2014
2013
2014
2012
2011
20% 18% 16% 14% 12% 10% 8% 6% 4% 2%
Oslo vacancy rate Helsinki vacancy rate Stockholm vacancy rate Copenhagen vacancy rate
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0% 1997
Nordic Vacancy Development
2010
Source: JLL Akershus Eiendom
Oslo prime rent Helsinki prime rent Stockholm prime rent Copenhagen prime rent
36
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
Source: JLL Akershus Eiendom
International Office Markets
37
Nordic Yield Development
45
7.50%
7.00%
6.50%
6.00%
5.50%
5.00%
4.50%
2013
2014 2014
2012
2011
2010
2013
Oslo prime yield Helsinki prime yield Stockholm prime yield Copenhagen prime yield
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
4.00%
Source: JLL Akershus Eiendom
€/m2
Prime Value Index
14 000
Prime rent/prime yield
12 000
10 000
8 000
6 000
4 000
2 000
Oslo value Helsinki value Stockholm value Copenhagen value
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0 1997
38
Source: JLL Akershus Eiendom
The Retail Market
46
The Retail Market
status Retail sales volumes have been good during 2014 after a longer period with consumption growth weaker than expected; lower interest rates appear to have worked against a weaker employment outlook. In December 2014, consumer confidence reached its lowest levels since 2008, but has risen marginally in January 2015. With consumer confidence at low levels, wages stagnating, and the savings rate increasing, most observers expect slow consumption growth going forward. Retail sales volume (excluding motor vehicles) is up by 2.7 % year-on year. Statistics Norway has reduced the estimate for future consumption spending based on the current economic situation, the weakening krone and reduction in real wage growth will hold consumption growth in households back. Going forward, an improved economic condition is expected to push consumption growth up from 2017 onwards.
The retail investment market Retail transactions amounted to close to NOK 5.7 billion in 2014 which is close to 7 % of the total transaction volume in Norway including the IPO of Entra, and close to 10 % excluding Entra. This is considered low compared to 2013 and 2012, when retail transactions amounted to about 20 % and 30 % of the total transaction volume, respectively. However, there have been a few interesting transactions with new, international players entering the Norwegian market during 2014. Oslo in particular is currently experiencing an inflow of foreign capital within the retail segment. Madison International Realty increased its exposure in Steen & Strøm Magasin by acquiring a 50 % equity stake from Schage Eiendom, Meyer Bergman purchased Grensen 17 in Oslo as their first acquisition in Norway, and Deka Immobilien, one of Germany’s biggest investment fund providers, entered the Norwegian market when they acquired
Bekkestua Senter located right outside Oslo. In addition, Swedish Genesta sold Karl Johans gate 14 and Kirkegata 23-25 to a subsidiary of AVA Eiendom Partners, and Aberdeen Eiendomsfond Norge II sold the shopping centre Jærhagen located at Klepp outside Stavanger to a company owned by Coop Klepp SA. In recent years, the investment market for retail property has been very selective with strong appetite for larger centres with good track record. The shopping centre segment has experienced a high degree of consolidation with few large players dominating the market. As a large share of the top 50 largest centres in Norway has been acquired by large players with continuous appetite, we expect few of the largest centres to enter the market in the near future.
The Retail Market
47
Retail volume index
Retail year-on-year growth Retail volume index
Source: Statistics Norway
Consumption volume index
Norwegian Consumption Volume Index 2005-2014
130
season adjusted volume index, 2005=100
115
Consumption year-on-year growth 15%
125 120
10%
110
5%
105 100
0%
95 90
-5%
85
Consumption year-on-year growth Consumption volume index
Jul 14
Source: Statistics Norway
Jan 15
Jan 14
Jul 13
Jul 12
jan 13
Jan 12
Jul 11
Jan 11
Jul 10
Jan 10
Jul 09
Jan 09
Jul 08
Jul 07
Jan 08
Jan 07
Jul 06
-10% Jul 05
80 Jan 06
Consumption of goods measured in volume has shown a positive trend and is up 2.9% over the last twelve months.
Jan 05
40
jan 15
-4% Jul 14
90 Jul 13
-2%
jan 14
95
jan 13
0%
Jul 12
100
Jul 11
2%
Jan 12
105
Jan 11
4%
Jul 10
110
Jul 09
6%
Jan 10
115
Jan 09
8%
Jul 08
120
Jul 07
10%
Jan 08
125
Jan 07
12%
Jan 05
Retail sales has increased lately and is up 2.7% year-on-year.
130
Jul 06
Season adjusted volume index, 2005=100
14%
Jul 05
Norwegian Retail Volume Index 2005–2014
Retail year-on-year growth
135
Jan 06
39
The Retail Market
48
m2/year
600 000
400 000
200 000
Permitted Norway Started Norway Completed Norway
Permitted Greater Oslo Started Greater Oslo Completed Greater Oslo
Source: Statistics Norway
14 Q1
13 Q1
12 Q1
11 Q1
10 Q1
09 Q1
08 Q1
07 Q1
06 Q1
05 Q1
0 04 Q1
Permitted retail construction have picked up in both Oslo and Norway as a whole. Started retail construction have picked up in Oslo while continued to decline in Norway as a whole.
800 000
03 Q1
Annual 4 quarter moving average. Q1 2001- Q4 2014
02 Q1
Retail Construction 2001–2014
1 000 000
01 Q1
41
The Hotel Market
50
The Hotel Market
hotel occupancy and room rates In 2014, the hotel market has performed slightly better than in 2013. According to Statistics Norway, the number of guest nights increased by 3.4 % to a total of 20.44 million guest nights for the year in total with revenues of NOK 12.53 billion, an increase of 2.7 %. Revenue per available room (RevPAR) also increased slightly to NOK 468, up by 1.1 % from 2013. The Oslo market had a positive development compared to 2013. The number of guest nights was MNOK 4.01 and the total revenue in NOK 2.52 billion, up 6.9 % and 3.4 % respectively. However, the average number of rooms in Oslo increased by as much as 9.5 % to 12,651. Thus, the average RevPAR for the year decreased by 0.8 % to NOK 599, down from an average of 604 in 2013. Hotel construction As can be seen from graph 44, there has
been a significant upswing in the number of permitted and completed hotel square meters in 2014, both in Oslo and Norway as a whole. On the other hand, the volume of started square meters are almost in line with the development we saw during 2013, a relatively low level. Hence, the completion rate should decrease for the coming couple of years. hotel transactions Hotel transactions during the second half of 2014: • Eiendomsspar acquired Karl Johans gate 33 (Magnusgården) in September, along with Rosenkrantz gate 11. The property houses Best Western Karl Johan which offers 114 rooms. The hotel was fully renovated in 2008 and 2009, and the price was NOK 460 million. • In September, Thon and Reitan acquired Britannia Hotel in Trondheim. The hotel
has 247 rooms and is run by Thon Hotels. The price was approximately NOK 400 million. • A hotel property in Lagårdsveien 61 in Stavanger was sold by KLP to an unknown buyer in December for NOK 160 million. The current tenant is Carlson Rezidor Hotel Group and the lease expires 08.31.2016. The property will then most likely be converted into apartments, due to the property’s location in the city center of Stavanger and the building’s renovation needs.
The Hotel Market
51
No. of guest nights per month in thousands (1 000) 42
Volume of Guest Nights in Norwegian Hotels 2003–2014 The graph shows the split between the volume of foreign and domestic guest nights in all hotels of Norway. Figures are seasonally adjusted.
1 400
1 200
1 000
800
600
400
200
14 Jan
15 Jan 15 Jan
13 Jan
14 Jan
Domestic guests Foreign guests
12 Jan
11 Jan
10 Jan
09 Jan
08 Jan
07 Jan
06 Jan
05 Jan
04 Jan
03 Jan
0
Source: Statistics Norway
RevPAR
Real RevPAR 2003–2014
1 000 900 800 700 600 500 400 300 200 100
Oslo Norway
13 Jan
12 Jan
11 Jan
10 Jan
09 Jan
08 Jan
07 Jan
06 Jan
05 Jan
0 04 Jan
The graph shows the development in real RevPAR in today’s values. All figures are seasonally adjusted.
03 Jan
43
Source: Statistics Norway
The Hotel Market
52
m2/year
Hotel Construction 2001–2014
250 000
annualized 4-quarter total
200 000
There has been a sharp increase in completed hotels in Norway and in the greater Oslo region.
150 000
100 000
50 000
Permitted Norway Started Norway Completed Norway
Permitted Greater Oslo Started Greater Oslo Completed Oslo
Source: Statistics Norway
14 Q1
13 Q1
12 Q1
11 Q1
10 Q1
09 Q1
08 Q1
07 Q1
06 Q1
05 Q1
04 Q1
03 Q1
02 Q1
0 01 Q1
44
The Logistics Market
54
The Logistics Market
The logistics property market Since our previous report published in October 2014, we have not changed our view on rent levels. The different rent levels can be seen in the map, where prime rent still stands at 1,200 NOK/m²/year. Observed rent levels are high from Berger to Vinterbro, as these hubs are very popular. Their closeness to effective intersections with the main highway E6, short driving distance to Oslo and the availability of vacant land plots make these hubs a good alternative to the relatively fully developed area around the Alnabru national cross dock terminal (Alna/Nyland). Vacancy in the greater Oslo region measured as floor space available now or within 3 months, stands at 4.5 % as of December 2014, down 1.0 %-points since our previous report. The different regions in the market have had a somewhat different development. The vacancy within the Oslo city limits has decreased with 2.0 %-points, and the vacancy level is at 6 %. This is due to substantially lower vacancy in the secondary geographi-
cal locations within the larger northeastern Groruddalen area. At the same time the vacancy level in the greater Oslo North and West region has decreased with respectively 1 %-point and 2.8 %-points, levels are now at 2.2 % and 3.8 %. The vacancy level has decreased within almost all smaller clusters. The Greater Oslo south region has had a somewhat different development. The vacancy rate has increased with 1 %-point to 6 %, due to increasing vacancy in the smaller Mastemyr-Sofienmyr cluster. The transaction activity has been very high in 2014, and the registered number of deals has been higher than what we have seen for the last three years. The transaction volume is thus almost at record high levels, coming in at just above NOK 10.1 billion. The only year the transaction volume has been higher was in 2006 with NOK 12.3 billion in volume. The transaction volume contains several A-grade investment properties, among others the Arcus production/storage facility at Gjelleråsen, the COOP logistics
complex at Gardermoen, a portfolio of seven newly constructed properties acquired from BULK Eiendom, and two properties on long leases in Ski Næringspark. Based on recent market activity, we have lowered our estimate for prime yield with another 25 bps and our estimate is now 6.0 % for a 10-year investment grade property. The yield estimate is relevant for properties within the prime and secondary areas, from Berger to Vinterbro. The yield estimate for investment grade properties with substantially longer leases, within the same geographical region, is slightly lower.
The Logistics Market
45
55
Logistics/Industrial: Indicative Rents March 2015
Gardemoen
Kløfta
Berger
Lillestrøm Groruddalen
Other Oslo Oslo West Other
Regnbuen / Berghagan Ski
Vestby
Rent NOK/m² for prime standard and normal standard: 1 000–1 200 800-1000 700-800 -750
Source: Akershus Eiendom
The Logistics Market
56
NOK/m2/year 46
Prime Rent for Warehouse/Logistics
1 400
1 200
Greater Oslo region 2001-2014. 1 000 Prime rent, seen in the central parts of Groruddalen close to the Alnabru rail terminal, is still NOK 1,200 per m².
800
600
400
200
15 Q1
14 Q1
13 Q1
12 Q1
11 Q1
10 Q1
09 Q1
08 Q1
07 Q1
06 Q1
05 Q1
04 Q1
03 Q1
02 Q1
01 Q1
0
Source: Akershus Eiendom
m2/year
Logistics Construction 2001–2014
1 800 000 1 600 000 1 400 000
Annualized 4-quarter total 1 200 000 1 000 000 800 000 600 000 400 000 200 000
Permitted Norway Started Norway Completed Norway
Permitted Greater Oslo Started Greater Oslo Completed Greater Oslo
Source: Statistics Norway
14 Q1
13 Q1
12 Q1
11 Q1
10 Q1
09 Q1
08 Q1
07 Q1
06 Q1
05 Q1
04 Q1
03 Q1
0 02 Q1
There has been an increase in permitted and started projects nationwide over the last two years.
01 Q1
47
The Residential Market
58
The Residential Market
residential prices According to Real Estate Norway, the increase in the residential prices slowed down during the second half of 2014. However, on a year-on-year basis, prices are up 8.5 % from January 2014, where January 2015 contributed with an increase of 2.9 %. On average, prices in 2014 were 2.1 % higher than in 2013, and the prices so far in 2015 are 4.8 % higher than in 2014.
to Norges Bank’s projections, the key policy rate is expected to fall during 2015 before stabilising and slowly start to increase again towards the end of 2016. We expect the mortgage rates to follow this development, falling somewhat during 2015. This, combined with a low construction rate, might put even more upwards pressure on the housing prices going forward.
All the largest cities experienced increases in housing prices. Once again, Tromsø had the highest growth with prices, 16.9 % higher than at the same time last year. Larger cities also experienced strong growth with prices increasing 10.3 % in Oslo and Bergen, and 8.2 % in Trondheim. Moreover, prices in Kristiansand increased by 6.8 %, while the price increase in Stavanger was only 3.1 %. Stavanger might now see the beginning of a slowdown in the market due to the fall in oil related activity.
Residential construction The number of residential units under construction has been falling throughout 2014 and the construction volume is now almost 4 % down compared to the end of 2013. Most observers cite the slow sales in 2013 as the reason for this. As can be seen from the graph, the construction volume is still at solid levels compared to the last ten years, as the completion rate was at a similar level in 2006-2007, and the volume in production is still higher than the previous peak in 2008.
In recent years we have seen a negative trend in the money market rates. According
Meanwhile, the housing prices have increased during the same period, and total
turnover in the housing market for new units was 5 % higher in 2014 compared to 2013. This amounts to a growth of more than 4,000 dwellings per year and has continued into the first quarter. The expected volume of new units going into construction is expected to rise in 2015 compared to 2014 due to the increase in sales. This is likely to keep construction at a solid level throughout the year – although still a bit lower than 2013.
The Residential Market
59
Average sales price, NOK/m2
30%
25 000
25%
20 000
20%
15 000
15%
10 000
10%
5 000
5%
0
0%
Year-on-year change, by month, % Average residential price NOK/m²
Jul 14
Jan 15
Jan 14
Jul 13
Jan 13
Jul 12
Jul 11
Jan 12
Jan 11
Jul 10
Jan 10
Jul 09
Jul 07
Jan 09
-15% Jul 08
-15 000 Jan 08
-10%
Jul 06
- 10 000
Jan 07
-5%
Jul 05
- 5 000
Jan 04
Residential prices increased by an annual 8,1 % from December 2013 to December 2014.
30 000
Jan 06
Nominal values
35%
Jan 05
Residential Prices 2004–2015
% annual price change
35 000
Jul 04
48
Sources: Econ Pöyry Finn.no Norwegian Assosiation of Real Estate Agents (NEF)
Volume of residential units
Residential Construction in Norway 1993–2014
45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000
Residential units under construction Completed residential units, last 12 months
Source: Statistics Norway
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0 1995
Both units under contstruction and completed dwellings have declined slightly during the second half of 2014.
1994
49
Definitions
61
Definitions
Area definitions
BTA BRA P-rom BYA
Gross area Usable area Living area – residential Foot print of the building
Abbreviations
NAV CBD CPI NOK SSB
Norwegian Labour and Welfare Agency Central Business District Consumer Price Index Norwegian Krone Norwegian National Bureau of Statistics
Depreciation Document tax (stamp duty) Property tax
Office buildings 2% Warehouse/industrial 4% Shopping centres 2% Hotels 4% Investments 10% 2.5% of transaction value Depends on the county, many currently have a zero rate.
Taxes and depreciation
Akershus Eiendom
62
Akershus Eiendom AS
Akershus Eiendom AS is an independent property advisor focusing on commercial property; offices, warehouse facilities, shops/shopping centres, hotels, land, and related types of property. Akershus Eiendom advises its clients on sales, leasing, development, research, valuations and other areas of commercial property business. Akershus Eiendom has during the past five years handled sales transactions for properties of a total value of more than NOK 37 billion, and has handled leasing of more than 700 000 m² of office space. Akershus Eiendom is associated with Kyte Næringsmegling in Bergen, Eiendomsmegler1 in Trondheim and Stavanger, and JLL internationally.
Manager
Transactions
Research/valuation
Per Kumle
Petter Nylend Roar Sandnes Jørgen Haga Christian Valdem Rune Unsgård Knut Berget Jacob A. L'Orsa Cecilie Ragner Marte Overå Sofia Hariz
Leasing
Tenant representation
Ragnar Eggen Administration Erik André Bratt Karin Manengen Ole Fredrik Vartomten Birgitte Heskestad Ellingsen Andreas Egset Tor-Øyvind Skjelvik Board of directors Lasse Bjørndahl Adam Ingwall
Ole Christian Iversen Rune Arvesen Anders Heffermehl Ole-Jacob Leirskar Stig Basing Jonas Myhre Remi Olsen Morten Buøen Lise Kaupang
Vigdis Sundvoll Lars Føyen Kinserdal
Brith Hoel Vigdis Sundvoll Hilde Bang
Roar Sandnes Geir Saastad Jørgen Haga Ragnar Eggen Petter Nylend Per Kumle Ole Christian Iversen
Akershus Eiendom
In Cooperation with
63
Haakon VII’s gate 5 P.O. Box 1739 Vika NO-0121 Oslo Reg.no. 963.877.722
T: +47 22 41 48 00 F: +47 22 41 48 06 W: akershuseiendom.no
Lästmakargatan 20 P.O. Box 1147 SE-111 81 Stockholm
T: +46 8 453 50 00 F: +46 8 453 51 10 W: jll.com
Bankgaten 8 P.O. Box 7999 NO-5020 Bergen
T: +47 55 55 30 50 F: +47 55 55 33 54 W: kyte.no
Søndre gate 4 P.O. Box 433 Sentrum NO-7404 Trondheim
T: +47 73 89 06 00 F: +47 73 89 06 50 W: eiendomsmegler1.no
Petroleumsveien 6 P.O. Box 114 NO-4065 Stavanger
T: +47 51 95 65 75 F: +47 51 44 48 83 W: eiendomsmegler1.no
Photography: Sveinung Bråthen Design: Anti
